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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ON APPEAL FROM THE CENTRAL LONDON COUNTY COURT
B e f o r e :
MR JUSTICE JAY
Ms Joanne Wicks QC (instructed by David Cooper & Co) for the Appellant
Mr Nicholas Taggart (instructed by Maples Teesdale LLP) for the Respondent
Hearing dates: 19th and 20th June 2017
HTML VERSION OF JUDGMENT
Crown Copyright ©
MR JUSTICE JAY:
- The Appellant ("the Tenant") appeals with the permission of Nicol J against the Order of HHJ Saggerson dated 24th February 2017 on a determination of a preliminary issue, dismissing the Tenant's claim under the Landlord and Tenant Act 1954 ("the 1954 Act") for a new tenancy of premises at 80 Jermyn Street, London W1 ("the premises") on the basis that the Respondent ("the Landlord") had made out its ground of opposition under s.30(1)(f). This provides:
"(f) that on the termination of the current tenancy the landlord intends to demolish or reconstruct the premises comprised in the holding or a substantial part of those premises or to carry out substantial work or construction on the holding or part thereof and that he could not reasonably do so without obtaining possession of the holding."
- The Appellant relies on nine grounds of appeal. The Respondent resists the appeal on the reasoning set out in the judgment below, and has filed a Respondent's Notice relying on different and additional grounds.
- The parties have been represented both here and below by Ms Joanne Wicks QC for the Tenant and Mr Nicholas Taggart for the Landlord. I am grateful for their detailed and careful submissions.
Essential Factual Background
- Most of the essential facts I can derive from the judgment.
- 80 Jermyn Street lies at the corner of Duke Street and opposite Fortnum & Masons. Westminster City Council, the local planning authority, has designated St James' as a "Special Policy Area" in which it seeks to protect and promote private members' clubs, art galleries and niche retail outlets. The Tenant is a textile dealership and consultancy, with specialisms in antique tapestries and textile art. It occupies premises on the ground floor and basement of 80 Jermyn Street as a retail art gallery, showroom and archive for materials relating to its core business. The remainder of the building is occupied and managed by the Landlord as a luxury hotel, including car parks at basement and sub-basement levels, as well as retail outlets. For planning purposes the subject premises are recognised as having a specific sui generis use, namely "mixed use comprising retail, depository, research centre, archive library, consultancy, publishing and conservation for historic tapestries, textile art and carpets". Plainly, planning permission would be required for any change of use; and all relevant applications would fall to be considered in line with the designation as a Special Policy Area.
- The Tenant's occupation is pursuant to two underleases: (i) a principal underlease of most of the ground floor and basement areas dated 2nd January 1991 (for a fixed term expiring on 2nd January 2016), and (ii) a supplemental underlease of a storage area in the ground floor and basement dated 19th January 1998 (for the residue of the principal term).
- Clause 2.6 of the principal underlease contains a right of re-entry in very wide terms:
"At all reasonable times during the daytime (or forthwith in case of emergency) to permit the Landlord or its Surveyor or Agents or any person authorised by it with or without workmen or contractors to enter the demised premises for the purpose of examining the state of repair and condition thereof and also for the purpose of executing any improvement it may wish to execute or for the purpose of repairing, maintaining, cleansing, rebuilding, altering or examining the demised premises or any adjoining or neighbouring premises or the remainder of the said building
The user covenant at clause 2.10.1 reflects the nature of the Tenant's business. Clause 4.1 contains a standard covenant of quiet enjoyment which it is unnecessary to set out.
- On the same date as the principal underlease, the then landlord granted a licence to the Tenant to carry out certain alterations and works at the premises, including enlargement of shop frontages, removal of internal partitioning etc. The underlease and the licence must have been part and parcel of the same commercial package; for example, the underlease plan assumes that the works of demolition permitted in the licence will have taken place.
- Ms Wicks drew my attention to various provisions in the underleases and licence, including relevant plans and drawings. The principal purpose of her doing so was to set the scene for her first appeal ground, in particular the lack of commercial viability inherent in the Landlord's current scheme to redevelop the premises, and the vacillation which has accompanied its proposals. I bear these points in mind but it is unnecessary for the purposes of this judgment to examine all the minutiae, and I summarise the position as follows.
- On 16th March 2015 the Tenant served notices under section 26 of the 1954 Act in relation to both holdings, specifying a commencement date for a new tenancy as 3rd January 2016. On 15th May 2015 the Landlord served counter-notices. Proceedings were instituted in the Central London County Court, and in its Defence served on 29th July 2015 the Landlord averred that it intended to implement a scheme ("Scheme 1") which involved incorporating the former bar of the hotel into the ground floor of the premises to create an enlarged single retail unit.
- In November 2015 the Landlord abandoned Scheme 1 and put forward (in the form of a planning application to Westminster City Council) a new scheme ("Scheme 2") entailing subdivision of the premises into two new retail units, incorporating part of the hotel, and related external works. The witness statement of Mrs Hollants Van Loocke for the Landlord addressed the merits of this scheme. In November 2016 the Landlord withdrew its planning application for Scheme 2 after the local planning authority had recommended it for refusal.
- Before this happened, in September 2016 the Landlord sent to the Tenant its first version of what became known as Scheme 3. This was revised on a number of occasions, the last being on the final day of the hearing in January 2017. Scheme 3, having been the subject-matter of a board resolution on 23rd November 2016, was relied on by the Landlord in its Amended Defence and in the second witness statement of Mrs Hollants Van Loocke. The essential feature of Scheme 3 was that it removed from scope the external works which were located within Scheme 2 (for which planning permission was required), and as Ms Wicks put it "beefed up" the internal works in a number of respects. A useful description of Scheme 3 may be borrowed from paragraph 4 of the judgment, which was itself based on Ms Wicks' narrative summary:
"In broad terms, Scheme 3 comprises works to ready the premises for conversion into two units, described as "Retail Units 1 and 2". It involves the demolition of the current single staircase and the creation of two new staircases/lift shafts, the building of a wall dividing the two new units; the removal of a wall (and the building of a new wall) so as to incorporate part of the hotel's bar into Retail Unit 2 at ground floor and the removal of a wall (and the building of a new wall) so as to incorporate part of the premises into the hotel's car park at basement level. The services are to be divided between the two new units."
- Planning permission was not required for these internal works as such, but if they were to have any practical utility such permission would be required for the material change of use: i.e. from hotel use to sui generis use (or, possibly, such other use that the local planning authority were to allow, in line with its policies); and vice versa. Further, the development could not be used unless additional external works were carried out (Scheme 4), for which planning permission was also required. This had been applied for on 7th November 2016, the application had not been determined by the date of the hearing, and expert evidence was before the court as to the prospects of success. That said, the Landlord's resolve to carry out Scheme 3 was not dependent on obtaining planning permission for Scheme 4.
- Ms Wicks also mentioned Scheme 5, which was the Landlord's plan conceived as early as 2012 to expand the hotel by constructing new bedrooms.
- The judge noted that it was the Tenant's case that "some aspects of the intended works have been contrived only for the purposes of ground (f)". In my view, it was clear on the evidence that this was so; and also tolerably clear that the judge accepted the Tenant's case in this regard. The judge listed these elements in his judgment, and Ms Wicks took me through the plans to ensure that I too understood the position: they comprised the artificial lowering of part of the basement floor slab; the repositioning of smoke vents; the demolition of an internal wall at ground floor level and immediately replacing it with a similar wall. I have already touched on the planning issues, but I should add that the factitious character of Scheme 3 was compounded by the fact that the new central wall dividing the two units would stop 2 metres short of the shopfront at ground floor level (to avoid the need for planning permission), and there would be no lawful access to Unit 2 from the street other than through Unit 1.
- Mrs Hollants Van Loocke accepted in cross-examination that the Scheme 3 works would not be undertaken if the Tenant left voluntarily (she said, "that is potentially true, yes"), and she also accepted that if the court ruled against the Landlord on ground (f) the works would not be undertaken at all. She clearly stated that if vacant possession on ground (f) were ordered, the entirety of the works would be carried out; and she gave in her capacity as director of the Landlord a written undertaking to commence the works "as soon as vacant possession
has been obtained and thereafter shall diligently proceed to complete these specified works". It followed from Mrs Hollants Van Loocke's evidence that the Landlord's predominant purpose in devising Scheme 3 was to obtain vacant possession of the premises under ground (f).
- Other evidential aspects of the case I will deal with at a later stage. It is now convenient to set out the Tenant's nine grounds of appeal.
The Grounds of Appeal
- GROUND 1: given that the Landlord's intention to carry out Scheme 3 was conditional on these works being necessary in order to satisfy ground (f), this was not a sufficient intention within the meaning of this provision.
- GROUND 2: the judge was wrong to place reliance on the Landlord's undertaking to carry out Scheme 3, because this merely confirmed, and added nothing to, the conditionality of its intention as previously specified.
- GROUND 3: the judge misunderstood uncontroversial evidence about the consideration given by the Respondent to other schemes, leading him into error when assessing the credibility of Mrs Hollants Van Loocke.
- GROUND 4: the judge applied the wrong legal test in holding that a reasonable time for commencing the Scheme 3 works was within 12 months of obtaining vacant possession.
- GROUND 5: the judge was wrong to hold that the Scheme 3 works (save in two specific respects) would constitute a derogation from the grant of the current tenancies and/or a breach of the covenant of quiet enjoyment.
- GROUND 6: the judge erred in failing to consider the terms of the new tenancies or tenancies of the holdings which would be granted under the 1954 Act in determining whether the Scheme 3 works could reasonably be carried out without obtaining possession.
- GROUND 7: in considering whether the Scheme 3 works fell within the scope of ground (f), the judge failed to exclude from account those works which could be carried out under the Landlord's right of entry.
- GROUND 8: in carrying out the foregoing exercise, the judge failed to take into account the fact that one half of each of the party walls fell outside the holding in any event.
- GROUND 9: in accepting the Respondent's undertaking, the judge erred in principle by refusing to make an order enabling the Appellant to have access to the premises to verify compliance with the undertaking.
- To the extent appropriate, I will summarise the judge's findings and analysis in relation to each of these grounds when I come to address them in turn. Further, to the extent that the grounds raise points of fact and evaluation (including points of mixed law and fact), I remind myself of the legal test on appeals: namely, that an appeal may only be allowed if the judge was "wrong". As I explained in paragraph 62 of my judgment in Shaw v Logue  EWHC 5 (Admin), this means "plainly wrong". I note that in paragraph 203 of her judgment in Re B (A Child)  1 WLR 1911 Baroness Hale stated that she did not believe that the adverb "plainly" added anything helpful. Perhaps what it does, in an elliptical way, is to emphasise the point that the trial judge's assessment of the credibility and reliability of witnesses leading to findings of primary fact may only be impugned in limited circumstances, viz: no evidence; a misunderstanding of the evidence; irrationality (see Lord Neuberger at paragraphs 53, 93 and 94 of Re B (A Child)).
- Mr Taggart referred me to a mass of authority on this point, and reminded me too of the legal test in relation to sufficiency of reasons. For what it is worth, I had covered the ground in Shaw v Logue, in the admittedly different context of decision-making in disciplinary tribunals; and in that case I had mentioned Lord Phillips MR's exposition of the extent of a judge's duty in English v Emery Reimbold & Strick Ltd  1 WLR 2409, at paragraphs 17-21. Essentially, a judge does not have to cover every point, but his or her reasons must be set out in sufficient detail to enable the parties and an appellate court to understand the principles on which s/he has acted and why s/he has reached a particular conclusion.
- The judge accepted the evidence of Mrs Hollants Van Loocke, and assessed her to be a "convincing, realistic witness and a professional woman of integrity". He did not believe that the Landlord would renege on its undertaking to carry out the Scheme 3 works. He concluded that the Landlord's current intention (i.e. as at the date of the hearing) was firm, settled and unconditional; and that this was not vitiated or undermined by the various schemes which have been proposed over time. The judge considered both the subjective and the objective elements of the legal test for the purposes of ground (f). In my view, he made two critical factual findings for present purposes:
"Mrs Hollants Van Loocke has been transparently candid about the Landlord's motives in devising Scheme 3 which she accepts has been designed with the material intention of undertaking works that would lead to the eviction of the Tenant regardless of the works' commercial or practical utility and irrespective of the expense. However, the underlying motive is irrelevant unless it be such that it undermines the protestation of the Landlord that it has a genuine and settled intention to proceed."
"The Landlord's current intention is in one sense conditional. It is conditional on the termination of the current tenancy. Mrs Hollants Van Loocke accepted in her oral evidence that had the Landlord obtained vacant possession from the Tenant voluntarily, then Scheme 3 would not have been adopted; neither will it be adopted if the application for a new tenancy succeeds. This, it is submitted, suggests that the Landlord's intentions are at best "inherently conditional" and the proposed undertaking at best "neutral" and of little, if any, impact in the context of what the landlord is really intending. The whole project of Scheme 3, it is submitted, is an elaborate charade. I do not accept those submissions. I do not regard the fact that in other non-applicable circumstances, or on a counterfactual landscape, the Landlord would have made different decisions as vitiating its present intention." [judge's emphasis]
- Ms Wicks' fundamental objection to this conclusion was two-pronged: first, that the judge has mischaracterised the nature of the Landlord's intention; and, secondly, that once correctly characterised it is or ought to be clear that its conditional intention cannot in law be sufficient to satisfy the statutory test. The correct analysis is not that the Landlord's intention is conditional "on the termination of the current tenancy" but rather that it was conditional upon the works being necessary in order to satisfy ground (f). Once the issue has been correctly defined, submits Ms Wicks, it becomes clear that the Landlord's conditional intention is insufficient for these purposes because it has not made an unqualified decision to carry out the works in line with the judicial glosses placed on the concept of intention in the relevant authorities. Put another way, the question of intention, Ms Wicks submitted, should be assessed "in an Act-free world", as if the 1954 Act had not been enacted.
- Ms Wicks squarely based her case on conditionality of intention, not on an exploration of the Landlord's motives. She accepted that it was not open to her to submit at this judicial tier that a landlord's motives (as she put it, "brazenly so as only to get rid of the tenant") could be examined, although she reserved her position on that point. On my understanding of her submissions in reply, Ms Wicks was pointing out that the authorities dealing with motive are addressing the issue at a later temporal stage, namely what would happen after the landlord has carried out the works, rather than before. I take that point, although I do not understand Ms Wicks to be resiling from her earlier acceptance that stare decisis precludes her at this judicial step.
- Ms Wicks further submitted that her ground 1 raised a point of statutory construction, not of fact. In this respect consideration must be given to the policy and objects of the 1954 Act, as prefigured in the recommendations of the Jenkins Committee report of June 1954 (Cmd 7982) and as vouched by relevant authority. As the point was encapsulated in her skeleton argument:
"It is submitted that, by enacting ground (f), Parliament intended that the protection of business tenants should not be a barrier to buildings and land being improved and modernised, so as to be put to their most beneficial and efficient use, which is in the public interest. However, it is inconceivable that it was Parliament's intention to allow wealthy landlords to simply subvert the protection which it was conferring on business tenants, by promising to do works for the sole purpose of getting the court to make an order under the Act dismissing the tenant's claim for a new tenancy, with the effect of sterilising buildings and rendering them unusable."
I do not understand Ms Wicks to be submitting that the court should be examining as a matter of fact and evaluation whether proposed works secure the most beneficial and efficient use of land, as a precondition to the fulfilment of ground (f). She was making the more limited point that the policy and objects of the 1954 Act militate against contrived schemes serving no useful or commercial purpose being within the scope of ground (f).
- I did not require oral submissions from Mr Taggart on this ground. However, I had read his skeleton argument more than once; and, despite the tenacious and effective way in which the submissions were advanced by Ms Wicks, I am unable to accept them. My reasons are as follows.
- I agree with Ms Wicks that (a) the issue she has raised is one of law (or, more exactly, of statutory construction), (b) the judge has mischaracterised the nature and quality of the Landlord's intention (and that her formulation is correct), and (c) nothing is to be gained by examining predecessor legislation on different wording (here, she was knocking down one of Mr Taggart's points). Thus, the Landlord proposes to implement Scheme 3 because, unless the Tenant leaves voluntarily, this is the only way (it believes) that the Court might find in its favour on ground (f). In the circumstances of this case, the proposal of Scheme 3 is a precondition to obtaining vacant possession but only through the mechanism of 1954 Act. I would add that the judge's reasoning hereabouts is quite scanty, and I would question the value of his references to "non-applicable circumstances" and "counterfactual landscape". But given that this is a point of law, and that the evidence is not in dispute, nothing turns on this.
- Ms Wicks was unable to refer me to any authority which directly supported her conditionality argument. However, she drew my attention to three authorities. She submitted that these support the propositions that, as regards the subjective element of the Landlord's intention, there are two related considerations: first, that the intention must be genuine; and, secondly, it must be fixed, settled and unconditional as at the time of the hearing. I agree that these propositions may be derived from the authorities to which I was referred, but I would add that the epithet "unconditional" will require closer examination.
- Thus, in the locus classicus of Cunliffe v Goodman  2 KB 237, Asquith LJ stated in famous passages:
"An "intention" to my mind connotes a state of affairs which the party "intending" I will call him X does more than merely contemplate: it connotes a state of affairs which, on the contrary, he decides, so far as in him lies, to bring about, and which, in point of possibility, he has a reasonable prospect of being able to bring about, by his own act of volition.
X cannot, with any due regard to the English language, be said to "intend" a result which is wholly beyond the control of his will
If there is a sufficiently formidable succession of fences to be surmounted before the result at which X aims can be achieved, it may well be unmeaning to say that X "intended" that result.
Not merely is the term "intention" unsatisfied if the person professing it has too many hurdles to overcome, or too little control of events: it is equally inappropriate if at the material time that person is in effect not deciding to proceed but feeling his way and reserving his decision until he shall be in possession of financial data sufficient to enable him to determine whether the project will be commercially worth while.
In the case of neither scheme did she form a settled intention to proceed. Neither project moved out of the zone of contemplation out of the sphere of the tentative, the provisional and the exploratory into the valley of decision."
- I do not believe that anyone has improved, or added to, this analysis. Denning LJ addressed similar questions in his characteristically pithy, pellucid style in Reohorn v Barry Corporation  1 WLR 845 (at 849); and in Patel v Keles  Ch 332 a strong Court of Appeal addressed a rather different issue in the context of ground (g) (sc. the landlord proposes to occupy the premises for the purposes of its business): whether a landlord which was highly likely to sell the subject premises after two years could possess the requisite intention for these purposes. On my reading of Arden LJ's judgment, ground (g) could not be relied on by a landlord who, as at the date of the hearing, had already formed an intention to sell. However, if the evidence was that it was possible, or even probable (as it was on the facts of Patel) that the landlord would sell within a given period of time, that was a factor was relevant, and could be highly relevant, to the genuineness of the landlords' professed intention to occupy for his own commercial ends. In the circumstances of Patel, the trial judge had not erred in his evaluation.
- Although Patel was a case on ground (g), I see no reason why the essential thread of its reasoning should not apply to ground (f) in the context of an assessment of the genuineness or otherwise of a landlord's professed intention. However, on the facts of Patel, the question was would the landlord sell within the foreseeable future? On the facts of the instant case, the question cannot be posed in the same straightforward way, and this is a matter to which I will have to return.
- Mr Taggart referred me in his skeleton argument to a number of authorities which indicate that the court is not concerned with the wisdom or long-term viability of the project, or with the landlord's choice of works, or with questions of underlying motive. The issue of intention is to be judged as at the date of the hearing. The strongest authority for Mr Taggart's purposes is the decision of the House of Lords in Betty's Cafes Ltd v Phillips Furnishing Stores Ltd  AC 20. The principal issue in that case was whether a late-formed intention, extant as at the date of the hearing but not as at the date of the landlord's notice, could suffice for the purposes of ground (f); and the House of Lords held by a majority that it did. However, Lord Morton addressed another point (at pages 44-45):
"A further argument submitted on behalf of the appellants was stated by Mr. Russell somewhat as follows: Even if the requirements of the Act are satisfied by an "intention" formed just before judgment is given, these requirements are not satisfied if the landlord's only intention is to carry out works necessary to enable him to occupy the premises. Counsel referred to certain cases bearing upon this matter, in particular Atkinson v Bettison and Fisher v Taylors Furnishing Stores. I need only say that I can find no ground for this submission in the Act of 1954 and I would adopt the language of Parker L.J. in the latter case. After referring to the relevant sections of the Act of 1954, Parker L.J. continued as follows: "From the scheme of the Act as there laid down I should have thought that it was clear, apart from authority, that if any of those grounds of objection is established, the tenant's application for a new lease must fail. Each ground is entirely separate and independent, and each, if proved, entitles the landlord to succeed. Thus, if ground (f) is proved to the satisfaction of the court, it matters not to what use the landlord ultimately intends to put the holding. He may intend to let it when the work is done to a third party. He may intend ultimately to occupy it himself for his own business; or he may not have made up his mind at all. To suggest that, if his intention is ultimately to occupy it himself and he cannot by reason of subsection (2) of section 30 rely on ground (g), he is thereby debarred from relying on ground (f), is to apply a proviso to the operation of ground (f) which is not there and for which there is no warrant. Of course, if he finds himself debarred from relying on ground (g) and is forced to rely on ground (f), his task will not be an easy one; it will at once be suspected that his alleged intention is not genuine, and that it is merely put forward to circumvent his inability to rely on ground (g). But assuming that he satisfies the court that the intention is genuine I can see no reason why he should be debarred from relying on ground (f).""
I do not read Lord Morton as addressing the same conditional intention argument relied on by Ms Wicks in the instant case. In Betty's Cafι, the intention was said to be conditional because at some later date the landlord wished to occupy the premises for its own commercial purposes. The argument was being run on the basis that the landlord could not rely on ground (f) because it was precluded from relying on ground (g). Lord Morton was merely stating that, providing that the requisite intention was honest, genuine and existed as at the date of the hearing, the fact that a case could not be brought within (g) did not remove it from the ambit of (f).
- In my judgment, Ms Wicks' point of statutory construction falls to be determined on the express language of ground (f), recognising that no authority bears directly on the point. However, it does need to be tethered to the circumstances of this particular case. Section 30(1)(f) requires that a landlord should intend to carry out the works "on the termination of the current tenancy". The effect of section 64 is that the date of termination will be 3 months and 21 days after the judge's order. That intention must be honest and genuine, as well as being fixed, settled and unconditional. For this statutory interpretative exercise, it is this last adjective which gives rise to any difficulty.
- There may be conditions subsequent, in the temporal sense, which rob the landlord's intention of possessing the necessary unconditional quality. These are some of the fences mentioned by Asquith LJ. By a similar process of reasoning, there could be conditions anterior to the hearing which have the same effect: for example, board resolutions which need to have been made. If the fences have not been properly installed and surmounted, the chess pieces not nicely lined up, the court will conclude that the landlord does not intend as at the date of the hearing to carry out the works on the termination of the tenancy.
- As at the date of the hearing, it was clear that the Tenant was not going to leave voluntarily. The judge found that the Tenant was prepared to put up with almost anything in order to secure a new tenancy. The Landlord well knew that, and its intentions were predicated or tailored accordingly. It follows, in my judgment, that although the Landlord would not have intended to carry out the works if the Tenant had left or was going to vacate the premises voluntarily, that was not in fact the position that the judge was examining at the relevant date. By the relevant date, whatever the position at any earlier stage, the Landlord had decided that it was essential for its purposes to proceed along the path of Scheme 3 because there was no other way of securing vacant possession. Its decision was conditional only in the sense that the decision-making process had to reflect the real world that the Tenant was adamant that it was staying put. The point I am making is that, if the focus (as it must be) is on the date of the hearing, issues which were relevant when the Landlord was in the zone of contemplation had ceased to be so. The valley of decision was predicated on the fixity of the Tenant's stated intention to remain in situ, if it could.
- This analysis is not undermined by the point that the Tenant could, at least in theory, voluntarily decide to move out before the date of termination of the tenancy. This theoretical possibility would not, without more, convert a fixed and settled intention into something conditional. The position would be different if there was a sound evidential basis for believing that the Tenant would leave without losing this case; but there was none.
- As I have said, it was also clear that the Landlord would not carry out the works if it lost this case. The logic of Ms Wicks' submission is that the Landlord should lose this case because it does not intend to carry out the works in the event that it loses this case. This, to my mind, achieves a full circle, but too much of one. In practice, the Landlord could not carry out the works in the event that it lost this case because the only basis for doing so would be under the right of entry; and that right would not be wide enough (see below). Moreover, it is for the court to decide whether the Landlord's intention is sufficiently fixed, settled and unconditional; and in my judgment to contend that the court's judgment amounts to the sort of "formidable fence" mentioned by Asquith LJ seems to me to erect an illusory obstacle. Subject always to the scope of arguments about derogation from grant, covenants of quiet enjoyment and rights of entry, it is an obstacle which would often thwart even the most genuine landlord planning major works of redevelopment.
- I appreciate that in most cases a landlord will have resolved to undertake works for independent commercial reasons, whereas in the present case the Landlord is only doing to because it understands that this is necessary to establish ground (f). Thus, in the paradigm case a landlord is deploying ground (f) as the means of achieving his separate commercial objectives, whereas in the present case the Landlord's sole or predominant commercial objective is to undertake the works in order to fulfil ground (f). The distinction between means and ends collapses entirely: the works are an end in themselves, because they secure, or purport to secure, compliance with the law.
- However this point is put, it seems to me that it faces two principal difficulties. The first is that the 1954 Act does not contain what would have to be by necessary implication any anti-avoidance provision. Ms Wicks mentioned an Act-free world, but the court must consider the real world. I do not accept that the policy of the 1954 Act is to secure the most beneficial and efficient use of land. Ground (f) is more tightly and specifically worded, and although it may be predicated on the assumption that market-forces will usually generate commercially viable projects, that is not a hard substratum of legislative policy. The second is that this aspect of Ms Wicks' argument does, in my view, entail an examination of the Landlord's motives for putting forward this project; and that is impermissible. The general trend of the authorities, albeit perhaps not a decisive trend, is that questions of motive are irrelevant to the issue posed within the frame of ground (f). This is because the paragraph refers to intention, not motive, and the law traditionally recognises a distinction between the two. In my judgment, ground (f) mandates an examination of what the Landlord intends to do and whether he intends to do it, not of why he may intend to do it. There is an evidential bridge between these questions, to which I will be reverting in a moment, but not a conceptual one.
- In my judgment, section 30(1)(f) of the 1954 Act requires the court to consider the nature and quality of the landlord's intention at the termination of the tenancy, including (by definition) the prolongation of the contractual term by force of section 64. As will be made clear under the rubric of ground 4, the courts have interpreted ground (f) to include a period of reasonable time after the end of the tenancy, and I think that the court's consideration of the landlord's intention must cover that period notwithstanding the use of the present tense, "intends", in ground (f). The landlord's intention is assessed on the evidence available at the date of the hearing (the court has no other way of proceeding). To that extent the landlord's intention is current, but as I have said regard must also be had to the future: what does the landlord intend to do once he obtains vacant possession, including any period of reasonable time thereafter? In other words, the court must be satisfied that the landlord will remain steadfast to that intention over the period I have identified.
- Of course, the why question may be highly relevant to the what and whether question(s), because it is capable of illuminating the issue of intention. The more commercially unviable or synthetic the project, the closer the court will wish to examine the genuineness of the landlord's professed intention to do the work. Furthermore, if a landlord says that he is only doing the work because without doing so he could not obtain vacant possession of the premises, the court is entitled to be sceptical about the genuineness of his intention to deliver the project. This is because common-sense, and commercial reality, teaches us that in such a situation there must be a real and inherent risk that such a landlord's protestations are ephemeral and evanescent: later decisions apparently justified on the ground that there has been a "change of mind" are, in fact, merely part and parcel of the continuing intention, properly understood. That said, I am not to be understood as holding that this real and inherent risk necessarily translates into a certainty: were that my conclusion, I would be upholding the first ground of appeal. What I am saying is that it is a factor which must be considered, and carefully tested against the evidence of the relevant witness.
- I have stated that the consideration of the unconditionality of a landlord's intention requires account to be taken of all relevant circumstances; and these, in the instant case, include the Landlord's undertaking. At paragraph 9 of his judgment the judge placed significant weight on this, referring to its "serious nature". Undertakings of this sort are capable of being compelling, and I did not understand Ms Wicks to be submitting in the event that she was wrong about her second and ninth grounds that the judge's approach was incorrect in principle. Romer LJ in Espresso Coffee Machine Co Ltd v Guardian Assurance Co Ltd  1 WLR 250, at 257 held:
"It was an undertaking which the judge was prepared to accept, and which he did accept; and in regard to such an undertaking I would only quote a passage from
the second Betty's Cafιs case, in which [Dankwerts J] said: "The undertaking seems to me to compel fixity of intention". I know of no better way of describing it
it is perfectly decisive of the fixity of intention which I agree is a requisite element."
- A breach of undertaking is a contempt. Further, as paragraph 103 of Mr Taggart's skeleton argument reminds me, an application can be made to the court for an order that the Landlord files evidence of its compliance with the undertaking.
- Previously, I have referred to the scepticism the court would be entitled to possess when confronted by an artificial scheme of this sort. In my judgment, that scepticism was capable of being significantly allayed by the undertaking given by the Landlord in the instant case: this, no doubt, explains why it was offered in the first place. To some extent that cuts both ways; but ultimately the judge's assessment of the value of the undertaking was for him.
- Ground 1 proceeds on the basis that the judge's findings of fact should be respected. It follows that the forensic matters to which I have just alluded do not logically arise at this stage. The judge held in terms that the Landlord's underlying motive does not serve to undermine its protestation that it has a genuine and settled intention to proceed. In addressing that issue, although the judge did not cover the ground in quite the way I have sketched out under paragraph 47 of this judgment, he plainly did look to the future. Subject to Ms Wicks' third ground, these findings are sufficient to defeat her first ground.
- For the reasons I have given, ground 1 fails.
- Ms Wicks accepted in oral argument that her second ground added little to her first ground, and in my judgment it adds nothing. However, turning the point against Ms Wicks, even though the undertaking would no longer apply if the Landlord's objection to a new lease failed, in the event that it succeeded the Landlord would remain bound by its obligation to carry out the Scheme 3 works.
- Ms Wicks seeks to assail two failings in the judgment, which she submits are highly relevant to the judge's assessment of the credibility and reliability of Mrs Hollants Van Loocke. At paragraph 10 of his judgment, the judge said this:
"I do not regard the fact that there were discussions (as I find in June 2016) with Mr Edgecliffe-Johnson and a little later Scheme 2 was produced (which envisaged a single larger retail unit in the Tenant's premises as opposed to the two retail units that are intended as part of Scheme 3)
as being any indication that the Landlord (by opting in Scheme 3 for two smaller units) is not genuinely intending to proceed with Scheme 3."
Against "Scheme 2" the judge footnoted that this scheme was annexed to the Amended Defence, and that a planning application had been lodged in respect of it in November 2015.
- Although Mr Taggart tried to persuade me that this passage contained trifling errors of a largely typographical nature, I cannot agree. It is true that the planning application for Scheme 2 was lodged in November 2015. However, it was for two retail units and it never formed part of the Amended Defence. The conversation the judge refers to involved Mrs Hollants Van Loocke, the Landlord's property adviser and Mr Edgecliffe-Johnson, and took place on 14th June 2016, which was well after Scheme 2 had been produced. Mr Edgecliffe-Johnson's read evidence was to the effect that, in return for surrendering his first-floor workroom in the hotel, he would be offered space to run his business in the existing basement. It is unclear how much space was offered, and I also note that after June 2016 this witness heard nothing more about this proposal from the Landlord; but I agree with Ms Wicks that the making of the proposal was inconsistent with Scheme 2. I can see from pages 15 and 16 of the Transcript of Day 2 of the trial that this was the very point that Ms Wicks was putting to Mrs Hollants Van Loocke. I also accept Ms Wicks' submission that the judge does not appear properly to have understood this.
- The second failing upon which Ms Wicks placed reliance was not covered in the judgment at all. On 7th November 2016 the Landlord made a planning application to Westminster City Council for "elevational amendments to the ground floor frontage" of the premises: this was for Scheme 4. The planning drawing marked "proposed shopfront and detail" shows the proposed shopfronts onto Jermyn Street as well as an interior layout which is inconsistent with Scheme 3. Specifically, the layout does not depict the Scheme 3 proposal for two retail units.
- Mrs Hollants Van Loocke was cross-examined on this topic, but did not accept that there was any inconsistency. As I have said, the judge did not address it. Upon reflection, I do not agree that Ms Wicks' point is a strong one. From the Landlord's perspective, Scheme 4 was being run in tandem with Scheme 3, and would be effectuated subject to planning permission being obtained. The application had not been determined by the day of trial, and on my understanding still has not been. The Landlord intends to carry out Scheme 3 even if Scheme 4 does not go ahead. Furthermore, the drawing under consideration states "interior layout for illustrative purposes only". Although it did not show the internal wall, planning permission was not required for the interior layout. The drawing was not as straightforwardly upfront as it might have been, but I would not draw the inference that the Landlord was attempting to deceive the local planning authority, still less the inference that Mrs Hollants Van Loocke was involved in any impropriety or lack of candour.
- The issue arises of whether the judge's misunderstanding of the sequence of events in relation to Scheme 2, and the significance of Mr Edgecliffe-Johnson's evidence, is capable of vitiating his conclusion that Mrs Hollants Van Loocke was an honest, reliable and professional witness.
- I have pondered this issue carefully, not least for the following reasons. The judge appears readily to have accepted Mrs Hollants Van Loocke's evidence, including her undertaking, that the Landlord would carry out Scheme 3 after vacant possession was obtained. He did so because he thought that Mrs Hollants Van Loocke was a convincing and reliable witness on what he believed were the essential points in relation to Scheme 3. The judge did address the evidence relating to the June 2016 conversations, although made clear that the evidence under this rubric was not "indicative of very much". Further, although the judge clearly thought that the issue of motive illuminated the issue of intention, he did not proceed explicitly on the basis of the scepticism I have mentioned under paragraph 48 above.
- However, I am compelled to remind myself of the limitations inherent in the appellate review process. Ms Wicks attacked Mrs Hollants Van Loocke's credibility under cross-examination, and the judge was well-placed to assess the tone and demeanour of her answers. The June 2016 conversations were capable of being indicative of more than the judge has ascribed to them, but they were not central to the issue before him. Furthermore, the concerns I have expressed under paragraph 48 above should not be read as amounting to the statement of any legal principle; they are merely what I believe to be a sensible backdrop or starting-point for the determination of the core question of intention, as well as the assessment of the evidence bearing on that question including the probabilistic inferences which could well be drawn in the unusual circumstances of this case. Despite the language and tone of paragraph 9 of his judgment, there is nothing to suggest that the judge was naοve to the obvious concerns. As I have said, these concerns were capable of being significantly allayed by the Landlord's undertaking. The judge must also have had in mind Ms Wicks' robust cross-examination of Ms Hollants Van Loocke and her various assaults on the witness' credibility. I have carefully considered the transcript of the cross-examination, but have concluded that it is difficult to judge how hard, if at all, Ms Wicks' points were striking home. I must respect the judge's sovereignty in this respect. Nor do I believe that the judge's reasoning on this topic was inadequate to the extent that the parties are left with insufficient notion of how and why he reached the conclusions he did.
- Overall, albeit not without some hesitation, I am forced to reject Ms Wicks' third ground.
- In order to set the scene for the fourth ground, I need to identify the judge's salient findings of fact.
- At paragraph 8 of his judgment he stated that the phrase "on the determination of the current tenancy" means "within a short time of the tenancy terminating under s.64 of the 1954 Act" (i.e. he notionally included the 3 months and 21 days the parties accept should be accounted for, and added to it a short time). At paragraph 12 of his judgment he held that the outstanding planning issues relevant to Scheme 3 were "likely to be resolved in a reasonable time in the Landlord's favour or at the very least there is a real prospect of this result being achieved". By implication, he reached a similar conclusion in relation to obtaining the consent of the superior landlord. Then, at paragraph 15, the judge said this:
"I am satisfied that the Landlord has proved that it has, in good faith, a firm, settled and unconditional intention to proceed immediately on the termination of each tenancy with the works described in Scheme 3 (as qualified) and I am satisfied that the Landlord can reasonably expect to do so within a reasonable time (12 months) of obtaining vacant possession, with real prospects of overcoming such modest planning and licence problems as there are."
- Ms Wicks advances two separate points under her fourth ground. The first is that, having regard to section 31(2) of the 1954 Act, it is wrong in principle to accord to a landlord so generous a period as 12 months from the date of vacant possession. Secondly, the judge has failed to explain why 12 months is a reasonable period of time in the circumstances of this case and/or has reached a wholly unreasonable conclusion. It would be fair to say that this second point did not appear in the Tenant's grounds of appeal or skeleton argument, but emerged during oral argument probably in response to judicial interest in it. However, paragraph 56 of the Landlord's skeleton argument did address the point, and Mr Taggart did not raise a pleading objection.
- Section 31(2) provides:
"Where the landlord opposes an application under section 24(1) of this Act, or makes an application under section 29(2) of this Act, on one or more of the grounds specified in section 30(1)(d) to (f) of this Act but establishes none of those grounds, and none of the other grounds specified in section 30(1) of this Act, to the satisfaction of the court, then if the court would have been satisfied on any of the grounds specified in section 30(1)(d) to (f) of this Act if the date of termination specified in the landlord's notice or, as the case may be, the date specified in the tenant's request for a new tenancy as the date from which the new tenancy is to begin, had been such later date as the court may determine, being a date not more than one year later than the date so specified
(a) the court shall make a declaration to that effect, stating of which of the said grounds the court would have been satisfied as aforesaid and specifying the date determined by the court as aforesaid, but shall not make an order for the grant of a new tenancy;
- Section 31(2) could not apply in the instant case because the trial was taking place in January 2017. But Ms Wicks invited me to consider her submission with reference to some relevant dates, some actual others hypothetical. The Tenant's section 26 notice was given on 16th March 2015 specifying the date of the proposed new tenancy as 3rd January 2016. Imagine that the trial was in December 2015 (a likely scenario in 1954 albeit not now). If the judge were to find that ground (f) could not be established as at that date, but would have been established by, at the latest, December 2016, then s/he would be empowered under section 31 to specify the date in the Tenant's notice as December 2016. If the hypothetical trial were significantly later, then the maximum period of 12 months would naturally reduce.
- I see the general point that Ms Wicks was making but it seems to me that she may have misread the section. The maximum period of 12 months relates to the period specified in the notice, whatever it happens to be. If the court is examining the position in, say December 2015, then the period could be as long as 13 months, because the 12 months expires in January 2017. If the court is examining the position in November 2016, the extension period is limited to a maximum of 2 months.
- Section 31(2) was enacted at the same time as section 30(1). Ms Wicks' submission was that it would entail an anomaly inimical to the statutory purpose if a judge in a section 30(1)(f) case could hold that a reasonable time was as long as 12 months (plus the 3 months and 21 days) in circumstances where, pursuant to section 31(2), the maximum extension is 12 months.
- Regardless of the vicissitudes of court listing, Ms Wicks submits that the effect of the judge's ruling on reasonable time is to afford the Landlord very much longer than anything contemplated by section 31(2). 12 months plus 3 months plus 21 days is nearly 16 months, and would take the Landlord well into 2018.
- Counsel are in disagreement as to whether Ms Wicks' point on section 31(2) is covered by Court of Appeal authority, in particular Method Developments v Jones  1 WLR 168. That was a case on ground (g), not ground (f), and the point is made that section 31(2) does not cover ground (g). In any event, the Court of Appeal's reasoning did not address any possible interaction between section 30(1) and section 31(2). In my view, Ms Wicks' point has not previously received judicial consideration, and I must approach it unadorned by authority.
- The point is not free from difficulty, but ultimately I cannot accept Ms Wicks' submission that the effect of section 31(2) is to prevent a court from holding that a reasonable time for the purposes of section 30(1)(f) is limited to 12 months. In any event, that submission cannot avail her on the facts of this case, because (as Mr Taggart pointed out) the judge's 12 months does not in fact exceed the period specified as the maximum in section 31(2), assuming it to be the same period.
- In fact, section 30(1)(f) and section 30(2) are not necessarily looking at the same period. The tenant's notice under section 26(2) does not have to specify a date which begins with the expiry of the current tenancy, although I would imagine that it usually does. The court's power under section 31(2) is tied to the relevant notice (be it a tenant's notice or a landlord's notice) and enables the period specified to be extended. Section 31(1)(f) is looking at a different period, namely a reasonable time after the termination of the tenancy. There are two points here. First, a "reasonable time" may be a judicial construct but that is how the provision must be construed. Secondly, this wording takes effect in conjunction with section 64, which extends the period beyond the expiry of the contractual term (assuming the lease to be for a fixed term).
- Accordingly, in my judgment, there is no direct comparison of like with like under section 30(1)(f) and section 31(2) respectively. I cannot accept the submission that section 31(2) directly fetters the court's powers when ascertaining the length of the reasonable period the common law has engrafted onto this provision. Although I recognise that section 31(2) does not apply to section 30(1)(g), I also struggle with an outcome which potentially achieves different results in ground (f) and ground (g) cases notwithstanding that their circumstances are otherwise identical.
- Turning to the second issue on ground 4, in London Hilton Jewellers Ltd v Hilton International Hotels Ltd  1 EGLR 112, the Court of Appeal in what appears to have been a ground (g) case rejected the tenant's submission that "a month or so" was unreasonably long. In Edwards v Thompson  60 P & CR 526, the Court of Appeal allowed an appeal in circumstances where it was clear that the landlord might have to wait "a matter of months or even longer" for land to be sold. In Method Development the Court of Appeal allowed an appeal in circumstances where the landlord would enter into occupation on a rolling or incremental basis over the course of a year.
- In Method Development Fenton Atkinson LJ stated that the length of a reasonable time must be very much a matter of impression for the trial judge. I understand from Counsel that the judge did not receive from them detailed submissions on this issue. I take Mr Taggart's point that the fixing of a reasonable time is largely impressionistic; it does not lend itself to much substantiation and reasoning. Ms Wicks accepted that, had the judge alighted on 3 months and given no further explanation, she would have no justifiable complaint. However, it is a more than reasonable inference that the judge considered that the Landlord would need up to 12 months to surmount the practical issues he alluded to. The judge described these issues as "modest", but he was recognising that they were unlikely to be capable of speedy resolution. I appreciate that the question is very much fact-sensitive, but it involves consideration not just of how long is reasonably required to initiate the works, but also of what is reasonable in all the circumstances of the case in the context of these underleases. In no other case has a court been so generous to a landlord as the judge has been in the present case, and I would apply the principle that the more unusual or heterodox a finding, the greater the duty must be on the court to explain it: see, for example, R v Civil Service Appeal Board, ex parte Cunningham  ICR 816. The judge has not done that.
- Ms Wicks did not submit that I could decide the length of a reasonable time in these circumstances, and she was right not to do so. The issue has this additional layer of complexity. If the court were to decide that in all the circumstances of the case a reasonable time should be X weeks or months, and that the practical difficulties mentioned by the judge could not be surmounted within that period, the consequence would be that the Landlord could not prove an intention to begin the works of demolition etc. "on the termination of the current tenancy", a reasonable period thereafter being included. On this hypothesis, the objection to a new lease under ground (f) would fail. Thus, it is not simply a question of my fixing a reasonable time doing the best I can on what I know. That would not be a satisfactory exercise, but it is rendered wholly unsatisfactory by the fact that proper consideration needs to be given to the objective elements of the Landlord's intention.
- In these circumstances I can readily reject Mr Taggart's submission that I should simply hold the Landlord to its undertaking, namely to commence these works "immediately". I agree with the judge that this deals with the aspects of the subjective element of the Landlord's intention as mandated by the authorities. However, it does not deal with the objective element, as to which further findings of fact must be made.
- For these reasons, I would uphold the appeal on the fourth ground.
- The judge correctly observed that the principal underlease contains a wide right of entry the terms of which I have set out at paragraph 7 above. He also correctly observed that the reservation of a right of entry is limited by the principle that a landlord must not derogate from his grant or breach the covenant of quiet enjoyment. He recorded the Tenant's submission that there was no derogation because Scheme 3 can be completed under the terms of the right of entry, during the currency of the works it could still occupy a small part of the premises, and once completed the premises could be used very much as before.
- At paragraph 18 of his judgment the Judge concluded that the undertaking of the Scheme 3 works will "objectively constitute a derogation from grant and a breach of the covenant of quiet enjoyment". Then, in the same lengthy paragraph, he stated his conclusions on that topic, alternatively his reasons for the overall conclusion about derogation from grant. These included the following:
(1) derogation is a matter of objective fact in no way contingent on what the Tenant was prepared to put up with (viz. almost anything).
(2) the end result here is that different holdings will be created.
(3) the right of entry is not wide enough in these circumstances: in the light of (2) above and the fact that the premises will be substantially less fit for the purpose for which they were originally let.
- The judge wrapped up his paragraph 18 conclusion(s) as follows:
the evidence reflects the almost heroic lengths he is prepared to go to minimise the impact and effect of the Scheme. I found his evidence in this respect unrealistic and indeed suggestive of the fact that the impact of Scheme 3 on the Tenancy and the business will be extreme such that the premises will be substantially less fit for the purpose that was intended before. In my judgment, by the implementation of Scheme 3, the Tenant's rights are reduced below the irreducible minimum implicit in the original grants themselves."
- At paragraph 19 the judge said:
"My conclusions are based on the fact that Scheme 3 will (amongst other things)
and then itemised four categories of work on which he placed reliance. Mr Taggart accepted before me that some of the works the judge itemised could be carried out within the ambit of the right of entry. Ms Wicks' submission was that all the Scheme 3 works bar the removal of two party walls (namely, the wall separating the premises from the hotel bar at first floor level, and the wall separating the premises from the car park at basement level, to the east side of the premises) were within the right of entry. Mr Taggart agreed with Ms Wicks about the party walls, and ultimately the contest between the parties on this topic focused on paragraph 19.2 of the judgment. The provision of a new fire escape is agreed to be an improvement, but Mr Taggart's position was that the removal and reconstruction of staircases could not be so characterised. Ms Wicks' riposte was that these should be envisaged as works of alteration or rebuilding, and I would agree.
- At paragraph 20 of the judgment, the judge proceeded to consider the scope of the works falling within ground (f), and in my view this is relevant to Ms Wicks' ground 7.
- In developing her argument on ground 5, Ms Wicks accepted that even a wide right of entry was impliedly limited by the principle that a landlord may not derogate from his grant or breach the covenant for quiet enjoyment (in practice, these amount to the same). Thus, a landlord cannot in purported exercise of such a right change the demised premises such that they are permanently unfit for the use for which the lease has been granted. Separately, if an express right of entry ousts the principle of derogation of grant in its entirety, it is repugnant to the lease and should be struck down. If it is not repugnant in that way, it is to be construed as to be consistent with the irreducible minimum implicit in the grant itself.
- Subject to these constraints, Ms Wicks submitted that rights of entry are capable of conferring on landlords extremely wide powers, including (depending on the facts) carrying out works which render it impossible for the tenant to occupy the premises at all for significant periods. It is always a question of construing the right and then the grant. On the facts of the present case, the only works on the Tenant's case which were without the right of entry related to the two party walls. The Landlord's case went slightly further, but I have already pointed out that it is incorrect.
- Ms Wicks submitted that the judge misapplied these principles at paragraphs 18 and 19 of his judgment. Specifically:
(1) he mischaracterised the Tenant's case in relation to the right of entry.
(2) his paragraph 19 reasons are substantially incorrect, because the majority of the works he has itemised are within the reservation.
(3) his paragraph 19(5) reason is also incorrect, because it ignores relevant authority.
(4) in the result, the judge has denuded the right of entry of any effect.
- Mr Taggart accepted in oral argument that the judgment was "not as clear as it might be", and that there was a tendency to conflate or elide points. Mr Taggart pointed out that it was common ground before the judge that if the Landlord's proposed works could be undertaken pursuant to the right of entry, then ground (f) could not be established. This was because ground (f) predicates that the subject works could not be performed without obtaining the legal right to possession of the holding. He submitted that the concept of derogation from grant is clear and well-established by authority, and that in order to identify a derogation from grant, the nature, extent and purpose of the grant must be considered. Here, we are considering a high-class, expensive property with very specific users and incidents.
- Essentially, submitted Mr Taggart, the judge concluded as he was entitled to that Scheme 3 would have such an adverse impact on the Tenant's use of the premises that the works would constitute a derogation from grant regardless of the entry clause. In other words, Mr Taggart placed particular emphasis on paragraphs 18 and 19(5) of the judgment, rather than on the remainder of paragraph 19. He submitted that the paragraph 18 conclusions, repeated in paragraph 19(5), amount to findings of fact and evaluative assessments which this court should not disturb on appeal.
- It is convenient to begin my examination of ground 5 with the relevant legal principles. These are well-established, but a point of difficulty exists in the interrelation between the principle that the landlord must not derogate from his grant, and the rights he may well have under a right of entry. One sentence in paragraph 63 of Mr Taggart's skeleton argument is capable of leading to confusion:
"The existence of a right of entry in a lease is a reduction in the scope of the grant, rendering lawful incursions onto the demised premises which would be a derogation, but for the reservation."
- This is not incorrect, but it requires a measure of qualification or refinement. There are limits beyond which a widely drawn right of entry cannot go without derogating from the grant, and Mr Taggart naturally accepted that before the judge. If a right of entry were always to be given complete effect, however widely it be drawn, then there would be no limits upon its effectiveness.
- When examining the authorities to which I was referred, and I do not propose to review all of them, it is necessary to bear in mind which cases involved rights of entry and which did not.
- Southwark LBC v Mills  1 AC 1 considered the issue of derogation from grant (what Lord Millett called "the implied obligation", broadly mirroring an express covenant of quiet enjoyment) in the context of a case where there was no right of entry. In order to ascertain whether there is a derogation or breach, regard must be had to the grantor's obligations in terms of the subject-matter of the grant. Here, the nature, extent and purpose of the grant must be considered. Any substantial interference with the tenant's title or possession or lawful enjoyment of the demised premises will amount to a breach. Mr Taggart referred me to paragraph 45 of the judgment of Charles J in Pumperninks of Piccadilly Ltd v Land Securities Ltd  Ch 332 which is on similar lines.
- It is clear from the judgment that the judge did not apply the "substantial interference" test. It could not be applied in a case where there was a right of entry in wide terms. This indicates that the judge cannot have ignored the right of entry (and he made express reference to it), but the question nonetheless arises of whether he took the correct approach.
- The leading authority on rights of entry remains Heath v Drown  AC 498. In that case the landlord enjoyed a wide right of entry "for the purpose of carrying out any necessary repairs to the building". It was conceded that the works that the landlord wished to undertake fell within the reservation. During the currency of the works, which would last between 4-9 months, physical occupation of the demised premises would be impossible. The House of Lords held, by a majority of three to two, that the landlord did not require legal possession of the holding for the purposes of ground (f) because it could perform the works within the terms of the existing lease, which terms were deemed to continue in similar form under the new lease. On my reading of their Lordships' Opinions, no express consideration was given to any issue of derogation from grant, and how significant the repair works would need to be before the right of entry would have to yield to that principle. Lord Kilbrandon gave a sole reasoned Opinion for the majority and dealt with the case solely on the basis of the concepts of legal possession and the breadth of the right of entry. I think that it is arguable that Lord Reid's strong dissent, which I must regard as not representing the law, did impliedly acknowledge this principle without articulating it.
- In Price v Esso Petroleum  2 EGLR 58 the landlords proposed to demolish and reconstruct a petrol station. The number of pumps and the layout would be slightly different, and one of the bays would disappear; but at the conclusion of the work which would take 16-18 weeks to carry out, during which period the tenant would be unable to continue his business at the premises the configuration of the premises would be such that, as the Court of Appeal held, it would be essentially the same business. The Court of Appeal held that all the works were covered by the terms of the relevant right of entry, and that the tenant's inability to conduct business from the premises during the currency of the works was scarcely decisive: the works were also for his benefit. On my reading of the three reasoned judgments of the court (Megaw and Templeman LJJ; Sir Patrick Browne), the case turned on the true construction of the right of entry and on the meaning of "without obtaining possession of the holding" within ground (f). The principle of non-derogation from grant was not mentioned, because it could not apply.
- In Leathwoods Ltd v Total Oil (Great Britain) Ltd  EGLR 237, another petrol station was subject to redevelopment proposals, although on this occasion the outcome would be more radical from the tenant's perspective. A showroom, a workshop and various lubrication bays would be removed and not replaced. The landlords relied on ground (f), and contended that the proposed redevelopment fell within the terms of a right of entry which related to "any improvement or addition to or alteration of the premises". However, on the Court of Appeal's analysis (Oliver LJ giving the leading judgment) it was clear that the carrying out of these works would involve a breach of the covenant of quiet enjoyment, and a derogation from grant, because the lease permitted the tenant to deal in and sell motor vehicles: these activities could no longer continue. It followed that the landlords required legal possession of the premises in order to carry out these works.
- The factual differences between these brace of petrol filling station cases is clear enough: in the first, the tenant's business could continue in substantially the same manner as before; in the second, it could not. Although it might be said both cases raised questions of fact and degree, it is clear from Leathwoods case that the ability to undertake core aspects of the tenant's business was being precluded. It followed that the landlord could not rely on the reservation clause. It also follows, in my view, that the issue of derogation from grant cannot be answered just by construing the clause: it is a question of construing the clause in the light of the grant.
- In Platt v LUL Ltd  2 EGLR 121, Neuberger J helpfully brought together the principles on derogation from grant in the context of the reservation of a right of entry. In my view, four of those principles are germane to the present case:
"5. The terms of the lease will inevitably impinge on the extent of the obligation not to derogate. Express terms will obviously play a part, possibly a decisive part, in determining whether a particular act or omission constitutes a derogation. An express term should, if possible, be construed so as to be consistent with what Hart J. called "the irreducible minimum" implicit in the grant itself. However, as he went on to say, a covenant relied on by the landlord "if construed as ousting the doctrine in its entirety is repugnant
and should itself be rejected in its entirety" see Petra Investments Ltd. v. Jeffrey Rogers plc (2000) Landlord and Tenant Reports 451 at 471.
7. One test which is often helpful to apply where the act complained of is the landlord's act or omission on adjoining land is whether the act or omission has caused the demised premises to become unfit or substantially less fit than the purpose for which they were let see Brown v. Flower (1911) 1 Ch 219 at 225, as per Parker J., and also Aldin v. Latimer Clark Muirhead & Company (1894) 2Ch 437.
9. The circumstances as they were at the date of the grant of the lease are very important. Thus, in Southwark  1 AC 1, the claim failed because it was based on an alleged defect in the demised premises which existed as at the date of the grant see, for instance, at pages 455 to 456 per Lord Hoffman, and at 467 to 468 per Lord Millett.
10. However, given that a lease is essentially prospective in operation, the central issue, where the complaint is of activities on the neighbouring premises owned by the landlord, is not merely "the use to which the adjoining premises are put at the date of the tenancy", but also "the use to which they may reasonably be expected to be put in the future", per Lord Millett at 468J in Southwark. See also per Lord Hoffmann to the same effect at 456C, who, like Lord Millett, relied on Lyttleton Times Company Ltd v. Warners Ltd (1907) AC 436."
- The judge did not expressly mention any relevant authority, although he said at the start of his judgment that the principles are clear and not substantially in dispute. Maybe my copious reference to authority will therefore be regarded as supererogatory or excessively cautious, borne out of an incomplete familiarity with this area of the law. That aside, the real point must be that the absence of express reference to authority matters not if the principles underpinning the judge's reasoning are correct.
- It is clear from paragraph 18 of his judgment that the judge had in mind the two petrol station cases and the seminal judgment of Neuberger J in Platt. In his view, "the holdings will be so altered by Scheme 3 that what results will be different holdings and where this happens the works are not such that the Landlord can reasonably carry them out without obtaining possession". This reflects what fell from Oliver LJ in Leathwoods. Further, the reasoning about the premises being substantially less fit for the purpose for which they were originally let reflects proposition 7 in Platt. Finally, the final sentence of paragraph 18 "the Tenant's rights are reduced below the irreducible minimum implicit in the original grants themselves" is clearly a reference to proposition 5 in Platt.
- Thus far, I have not examined paragraph 19 of the judgment, but I pause at paragraph 18 to address two further matters. First, it might have been argued that reference to the "substantially less fit" question is to take proposition 7 of Platt out of context: there, Neuberger J was addressing the issue of the landlord's activities on adjoining premises, which is not the issue here. However, Ms Wicks did not expressly criticise that sentence. Secondly, the way in which the judge dealt with the irreducible minimum question is somewhat compressed: to my mind, it is a matter of construing the reservation so as to be consistent with the irreducible minimum inherent in any grant. The judge did not hold that the reservation could be so construed, but on balance it is implicit from the final sentence of paragraph 18 that that was his view.
- The primary focus of Ms Wicks' attack was on paragraph 19 of the judgment, which she submitted supplied the reasons for the paragraph 18 conclusions. Here, she submitted that the judge has failed properly to identify which works could be carried out under the right of entry and which could not.
- There is considerable force in that submission, but I am not persuaded that paragraph 19(1)-(4) constitutes an essential plank of the judge's reasoning on the derogation from grant issue. I entirely agree that paragraph 19(5) appears to refer back to the paragraph 18 analysis, albeit raising a separate point about length of disruption which in my view should have been weighed more carefully in the light of the petrol station cases. I confess that I have struggled with locating a proper place for paragraph 19 in the scheme of the judge's reasoning and conclusions. He has not identified to which conclusions the paragraph 19 findings are relevant. Paragraph 18 could be read as free-standing, and not as requiring paragraph 19 at all. On this approach, paragraph 19 is the prelude to the separate analysis on the scope of works in the context of ground (f). On the other hand, paragraph 19 could be envisaged as having some relevance to the derogation from grant issue; but, if so, it is unclear what.
- Ground 5 is solely concerned with the issue of derogation from grant. The fact that paragraph 19 is unclear (and, as I will soon be holding in the context of ground 7, incorrect) cannot avail the Landlord in the final analysis; but the narrow question for present purposes is whether the judgment is supportable on the derogation from grant issue without reference to paragraph 19: i.e. by notionally excising it. In my judgment, paragraph 18 is both a free-standing and sufficient basis for the judge's conclusions on the derogation from grant issue. The judge has made a qualitative assessment of the overall impact of Scheme 3 on the holding in the context of the purpose of the lettings and the user covenants in the underleases, having visited and seen the premises for himself. I have alluded to aspects of the paragraph 18 reasoning which might be criticised, but (a) Ms Wicks did not address me on that basis, and (b) even had she done so, the upshot would be the same. The judge should be given a considerable degree of latitude on an appeal, subject to his reasoning and conclusions being plainly wrong.
- I reach the same conclusion even if paragraph 19(5) cannot be supported. Even if the judge should have concluded that 6 months' disruption simpliciter was not a derogation from grant (assuming that he was finding that it was), I think that it was not an essential part of his reasoning on this topic.
- Finally, I should address Ms Wicks' submission that the judge has denuded the right of entry of having any effect. In the context of this submission she observed that no one was arguing before the judge that the right of entry contradicts the grant.
- In this regard it is necessary to re-examine proposition 5 in Platt. There are two separate points. First, a right of entry should be construed so as to give effect to the "irreducible minimum" inherent in the grant. Secondly, if it cannot be so construed, and has the effect that it renders the grant nugatory, it must be struck down. Ms Wicks is correct in observing that the second point was not taken. However, my reading of page 65 of the transcript of the hearing on 19th January 2017 is that Mr Taggart was taking the first point. The judge's implicit acceptance of that submission is revealed by paragraph 18 of the judgment. Furthermore, the upshot is not that the right of entry was denuded; but rather that it could not be prayed in aid because it went too far.
- I will be returning to paragraph 19 in the context of ground 7. For the reasons I have given, I reject Ms Wicks' fifth ground of appeal.
- Ms Wicks submitted that, for the purposes of deciding the ground (f) question of whether the Landlord could carry out the Scheme 3 works "without obtaining possession of the holdings", the judge should have considered whether the alteration covenants of the underleases could have been varied under section 35 of the 1954 Act, permitting the Tenant to create partitions dividing the premises from the space which could only be lawfully used for hotel use. If such a variation were made, the Tenant could effectively repartition the premises so as to occupy them separately from the hotel.
- The judge did not consider this submission. Indeed, the inference must be that he ignored it, otherwise he would not have referred to Mr Frances' evidence relating to the installation of an alarmed curtain between the internal wall of the premises and the old hotel bar as making the "best out of a bad job".
- Mr Taggart's riposte was that section 35 did not fall to be considered by the judge because he was being required to determine a preliminary issue, namely whether the Landlord had made out its ground of opposition under ground (f). Consideration of the terms of any new lease presupposed that the Landlord had failed in making out its objection; and arose at a subsequent stage in the process.
- Approaching the issue unadorned by authority, I would hold that Mr Taggart's submission is obviously right. Section 35 questions cannot arise unless and until the court is considering the terms of a new tenancy, as opposed to whether or not to dismiss a landlord's objection to the grant of a new tenancy.
- However, Ms Wicks submitted that the Pumperninks case is authority for the proposition that section 35 issues can arise at this stage. In that case the trial judge, on what I infer to be the determination of the same preliminary issue which arises here, held that the landlord's case under ground (f) had been made out on the facts; and he also held that the tenant was not entitled to rely on section 31A(1)(a) of the 1954 Act. Under that provision, the court must not uphold the landlord's objection under ground (f) "if the tenant agrees to the inclusion in the terms of the new tenancy of terms giving the landlord access and other facilities for carrying out the work intended" and the landlord could reasonably carry out its ground (f) works accordingly. The Court of Appeal held that section 31A(1)(a) was not applicable in these particular circumstances, because pursuant to the landlord's scheme of redevelopment the holding would no longer exist, although there was no reason in principle why the tenant could not seek to avail itself of the benefit of this provision at this stage: see the judgment of Charles J, paragraphs 47-49. At the end of paragraph 49, Charles J did mention section 35 of the 1954 Act in the same context.
- In my judgment, Pumperninks is an authority on section 31A(1)(a) of the 1954 Act and not on section 35. It is clear from the language of section 31A(1)(a) that the tenant's agreement to the inclusion of new terms forms an integral part of the court's consideration of whether or not to uphold the landlord's objection under ground (f): thus, it forms part of the preliminary issue. As I have already said, I do not think that section 35 can be read and applied in the same way. To the extent that Charles J mentioned section 35 in passing, it seems to me that this was not part of the Court of Appeal's ratio.
- It follows that I must reject Ms Wicks' sixth ground of appeal.
- Ms Wicks' submissions under this ground were simple and straightforward. She said that it was incumbent on the judge to divide or partition the works into two categories: viz. those which could be effected under the right of entry, and those which could not be. The metaphor she adopted in oral argument was "funnelling". Works which could be carried out under the right of entry fell outside ground (f) because they could be performed without obtaining possession of the holdings. I would have thought that the correctness of Ms Wicks' submission on the law is clearly demonstrated by briefly examining the terms of section 30(1)(f) itself, but if supporting authority were required she relied on Cerex Jewels Ltd v Peachey Property Corporation Plc  P & CR 127, at 134-135 (Slade LJ's analysis is directed to section 31A(1)(a), but the principle is the same) and Romulus Trading Company Ltd v Trustees of Henry Smith's Charity (No 1)  60 P & CR 52, at 67 (directly on point).
- Ms Wicks submitted that the judge failed to do this. First, paragraph 19 of his judgment is relevant to the derogation of grant issue, not to the separate question of ascertaining those works which are relevant to ground (f). Secondly, and in any event, paragraph 19 wrongly includes works which are clearly within the right of entry. Thirdly, and in any event, the judge's analysis of the ground (f) question performed under paragraphs 20-26 of his judgment takes account of all the Scheme 3 works, save for those which were excluded from the demise.
- Mr Taggart struggled valiantly to uphold the judge's ruling in this regard, but he was completely unpersuasive. Paragraph 94 of his skeleton argument appeared to resile from what was common ground before the judge, namely that those works which could be carried out under the right of entry should be excluded. In support of that submission, he relied (as had the judge) on dicta of Lawrence Collins J in Ivorygate Ltd v Global Grange Ltd  1 WLR 2090, paragraphs 57-58, but in my view he has taken these out of context. In oral argument, he rightly reverted to the common ground, and sought to persuade me that Ms Wicks was seeking to have two bites of the cherry: given that the judge had already identified those works which would be a derogation from grant, the necessary "funnelling" had already taken place, and did not need to be performed twice.
- I unhesitatingly prefer Ms Wicks' submissions on this issue. It is quite clear from paragraphs 20-28 of his judgment that the judge was considering the entirety of the Scheme 3 works for the purposes of the exercise of determining whether or not they qualified under ground (f). He expressly excluded from account works falling outside the demise altogether (by necessary implication, including everything else); and there are numerous references in these paragraphs to the whole of the Scheme 3 works. It is not arguable that the judge has excluded from account any works which could be undertaken pursuant to the right of entry.
- This brings me back to paragraph 19 of the judgment. I have already observed that this paragraph is Janus-faced in that it is unclear whether it is directed to the derogation of grant issue or the ground (f) "funnelling" issue. However, the Landlord cannot have it both ways, recognising that I am not applying my classical allusion strictly. In oral argument Mr Taggart sought to persuade me that the two issues are really mirror images of each other, but I cannot agree. I have addressed this point under ground 5. The right of entry must always be construed; but there is a point at and beyond which its literal meaning cannot confer effective rights because that would be a derogation from grant. In any event, even if paragraph 19 may properly be recruited for the purposes of identifying which parts of Scheme 3 are outside the right of entry (and, consequently, amount to a derogation from grant), the obvious riposte is that (i) the judge has erred because he has included within paragraph 19 works which are clearly within the reservation (see my paragraph 83 above) and (ii) the exercise the judge has conducted under paragraphs 20-28 of his judgment has been performed on a different basis altogether namely, all the works have been included.
- Finally, Mr Taggart submitted that the Tenant's case involves the reduction ad absurdum of reducing the Scheme 3 works to a demolition of the premises brick by brick. A broader, holistic view is required. I reject that submission. In my judgment, the logic of Ms Wicks' argument does not drive her into that uncomfortable territory. What she does submit, as she is entitled to, is that the works have to be apportioned or divided up to the extent necessary to determine whether or not the Landlord needs possession of the holding. This is the approach which the authorities commend.
- I have had little difficulty in upholding Ms Wicks' seventh ground of appeal.
- The point that Ms Wicks makes under this ground is that the judge was disloyal to his own finding that the interior walls of the premises adjoining the hotel are party walls. Whereas the judge proceeded on the basis that the whole of each wall fell within the holding (see paragraphs 24.6 and 27 of his judgment), the position must be that half of each wall fell outside the holding.
- Strictly speaking that is right, but to borrow from Mr Taggart's skeleton argument in a different context, this objection is pettifogging. The walls will be demolished, and for practical purposes there can be no real difference between the whole of a demolished wall and half of a demolished wall. The analysis for the purposes of the ground (f) exercise, if otherwise correctly undertaken, will be the same.
- I must reject the eighth ground of appeal.
- By this ground the Tenant complains that the judge was wrong to accept an undertaking which contained no effective mechanism for monitoring compliance, and that he should have acceded to the Tenant's submission advanced at the disposal hearing on 24th February 2017 that such a mechanism should be included: effectively giving the Tenant reasonable access to the premises to check.
- It seems to me that this ground possesses two limbs. The first concerns the judge's approach in his judgment to the undertaking offered to him at trial; the second concerns whether, after handing down his judgment, he should have acceded to a submission that the undertaking needed "teeth".
- From my reading of the transcript of her closing submissions to the judge, Ms Wicks did not expressly submit in the alternative that her client should be given a right of access in order to police the undertaking. Accordingly, I take the view that the judge was entitled to consider the undertaking on its terms, placing whatever weight on it he deemed fit. Had Ms Wicks submitted to the judge that he should accept the undertaking only if the Landlord agreed to permit the Tenant access, then the position might have been different. There are forensic reasons why Ms Wicks did not make that submission, not least being that it was capable of undermining her principal objection to the undertaking that the judge should ignore it.
- By the time the issue was raised on 24th February 2017, the judgment had been handed down and the undertaking had been accepted by the judge as being worth more than the paper it was written on. I have already concluded that the judge was entitled to reach that conclusion. In my judgment, it was then too late for Ms Wicks to raise the point. In effect, she was asking the judge to revisit his judgment in the knowledge that, contrary to her case at trial, he had accepted the evidence of Mrs Hollants Van Loocke and the integrity of the undertaking.
- It follows that I must reject Ms Wicks' ninth ground of appeal.
- I have upheld the Tenant's fourth and seventh grounds of appeal. I have rejected the remainder of its grounds. In those circumstances, I invite submissions from Counsel as to the form of order, including the terms of my remission of this case to the County Court.
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