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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Pumperninks of Piccadilly Ltd. v Land Securities Plc & Ors  EWCA Civ 621 (10th May, 2002)
Cite as:  EWCA Civ 621,  3 WLR 898,  3 All ER 609,  Ch 332,  1 P & CR 14
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CENTRAL LONDON COUNTY COURT
(HHJ Rich QC)
London, WC2A 2LL
B e f o r e :
LORD JUSTICE CHADWICK
MR JUSTICE CHARLES
| PUMPERNINKS OF PICCADILLY LIMITED||Appellant|
|- and -|
|LAND SECURITIES PLC|
SHAFTESBURY (PICCADILLY) (No 1) LIMITED
SHAFTESBURY (PICCADILLY) (No 2) LIMITED
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
M Driscoll QC (instructed by Nabarro Nathanson) for the Respondents
AS APPROVED BY THE COURT
Crown Copyright ©
Mr Justice Charles :
“One must first look at the apparent policy of the Act. I think that this was to give security of tenure to business tenants so far as that was thought to be reasonably practicable. Security of tenure was no new idea. [He then refers to other examples when security of tenure has been given] In every case one has to examine the relevant Act to find the limits of the security.”
“In consideration of the respective rents and covenants by and on the part of the Lessee hereinafter reserved and contained the Lessors HEREBY DEMISE unto the Lessee ALL THAT shop and premises situate on the ground floor of the Building … including the shopfront and fascia thereof and pavement lights (if any) or such interest as the Lessors may have therein TOGETHER with the Lessors fixtures or fittings therein or thereon and the appurtenances thereunto appertaining … but there shall be excluded from the demise hereby made the excluded parts of the said premises (hereinafter called “the excluded parts”) defined in the First Schedule hereto AND which said premises (less the excluded parts) are hereinafter referred to as the “demised premises.”
The first schedule provided that:
“the excluded parts” shall mean the main structure of the Building of which the demised premises form part (but not the internal or external surfaces claddings finishes thereto or thereon within or contiguous to the demised premises) which main structure comprises without prejudice to the generality of the foregoing …”
and it then particularised that general description. I use the term “demised premises” in this judgment to refer to the demised premises as defined in the lease.
“(19)(i)(a) Not without the consent in writing of the Lessors and Superior Lessors (such consent in the case of the Lessors not to be unreasonably withheld) at any time during the said term to make or suffer to be made any external projection from the demised premises or make or change the existing design or appearance of the external decorative scheme of the demised premises
(b) Not to cut maim injure or alter any of the excluded parts
(ii) Not at any time during the said term to make any alterations or addition whatsoever either externally internally or otherwise in or to the demised premises or any part thereof without first submitting to the Lessors and (where necessary) the Superior Lessors and receiving their consent in writing to the plans erections drawings elevations and specifications of the proposed alteration or addition such consent in the case of the Lessors not to be unreasonably withheld
(iii) If the Lessee shall carry out any works which are prohibited by sub-clause (i) hereof or without such consent as is required under the provisions of sub-clause (ii) hereof or build erect construct or place or permit or suffer to be built erected constructed or placed any new or additional buildings or erections or works on the demised premises, the exterior of the demised premises and/or the Building or any part or parts thereof then the Lessee shall immediately upon notice in writing from the Lessor and/or the Superior Lessors requiring them so to do remove all such new or additional buildings erections works alterations or additions and make good and restore the demised premises and/or the Building to the state and condition thereof existing before the breach by the Lessee of subclauses (i) and/or (ii) of this clause and if the Lessee shall neglect to commence so to do for the space of seven days after such notice them it shall be lawful for the Lessors and their servants contractors agents and workmen to enter upon the demised premises and to remove such new or additional buildings erections works alterations or additions and to make good and restore the same to the state and condition existing before the breach by the Lessee of the provisions of subclauses (i) and/or (ii) hereof. …”
The works the Landlord intends to carry out
“I turn first to the question of whether the intended work satisfies s. 30 (1)(f). It is essential in order to determine whether the nature of the works proposed involve the demolition of the premises comprised in the holding for the purpose of that paragraph to identify carefully the scope of the proposed works and the extent of the premises so comprised. I should say at the outset that save in respect of one piece of work, to which I shall return, the landlords rely on an intention to demolish - and only an intention to demolish. There is no difficulty about the works which they identify through the evidence of Mr Mortimore, their architect. They involve the complete stripping out of all the ducts and services within the shop; the cutting back of the surfaces of the walls which contain the shop to the underlying brickwork and, in the case of the wall between numbers 9 and 11 (the adjoining shop) the removal of 60 to 70 per cent of the wall; replacing the support that wall gives to the upper floors by a steel column to be positioned outside the area of the demise; the removal of the roller shutter which forms the shop’s frontage and its replacement by a show window extending in front of all four shops with the entrance into no. 13; the removal of the existing floor and ceiling and the replacement of the load bearing floor supporting the shop floor at a level ten inches below the existing floor; the structural floor of the mezzanine will be replaced at a different level. As Mr Driscoll QC for the landlords puts it, every physical built thing in the demise will be removed. The issue is however joined as to whether these built things are part of the premises comprised in the holding.”
The work to which the judge said he would return concerned the removal of a roller shutter and the runners to either side of it at the front of the shop. The judge returned to this when setting out his overall conclusion on whether the intended works satisfied the first part of s. 30(1)(f), he said:
“The case with which I am concerned, of course, is a case in which there is no load bearing element and it is a matter for consideration under the 1954 Act. I do not think that in the case of an eggshell demise, which includes no load bearing element, there are for that reason no premises capable of demolition. The structure is the fabric which encloses the demise in so far as it is itself demised, in my judgment the physical boundaries of the demise, be they constituted by walls, ceiling or floor, or only their surfaces, are premises within the meaning of the paragraph at least if they are of such physical quality as to be sensibly capable in ordinary language of being constructed or part of the construction, or of being demolished. I think in the present case that the tile work which lines the wall, the wooden floorboards covered by a metallic surface which constitute the demised floor and the roller shutter which provides the enclosure of the fourth side of the shop are all capable of being described as having been constructed or at least meaningfully of being demolished, and they constitute the premises which I hold that the landlord has proved he is intending to demolish; and, in the case of the roller shutter, to reconstruct by inserting a new shop front. I take this view of the roller shutter notwithstanding that it appears to be removable from within the runners on each side, which are no doubt affixed to the building at least in part because it is a replacement of the shop front which itself constituted the envelope of the demise. It is in that sense, therefore, part of the fabric or structure of the demise.
On the other hand I would not regard its replacement, as proposed, by a shop front consisting of glass within an aluminium frame which would be a day’s work costing some £4,200, as ‘substantial work of construction’ within the second limb of s. 30(1)(f). The work of demolition and reconstruction, however, is to the whole of what constitutes the premises so that for the reasons set out in Housley’s Limited v. Bloomer-Holt Limited the works intended are within the first limb of the paragraph.”
“… The works which the landlord intends include the substitution for the roller shutter of a new shop front, continuous across the whole frontage. If that were carried out the tenant would immediately alter the work done by substituting a new front with an access and would be entitled to expect consent so to do. The work to the floor would involve the laying of a floor of continuous level through the four shops. If the landlord carried out that work, the tenant would rely upon it although below the tenant’s own demise to provide support for a new floor at the level of the existing floor. The work includes opening up the wall between numbers 9 and 11. If the landlord carried out that work the tenant would construct a new wall within its own demise to obstruct the opening and be entitled to expect consent to do so.”
It is to be noted that the findings that the Tenant could expect consent to carry out works do not extend to the reinstatement of a floor at the existing level.
i) the removal of the existing floor (there was evidence but no finding that the joists underneath the floor did not form part of the main structure and were thus excluded from the “demised premises”) with the result that after the works have been done to provide a floor to stand on at the present level it would have to be provided with support from outside the area contained in the demised premises, and this is so whether that support is from the new floor or from joists,
ii) the removal of about 60% of the dividing wall with the result that to provide a partition the Tenant would have to build a partition wall within the area of the existing demise or a wall in the same place as the one to be removed would have to be constructed,
iii) the removal of the roller blind at the front of the shop and its replacement with a plate glass window part of which would have to be removed if the Tenant is to be able to gain access from the street, which is the only access at present,
iv) the removal of the existing ceiling, with the result that a new ceiling would have to be put in which would have to be suspended or supported from outside the present demise, and
v) all the existing wiring and all the existing plaster and tiling on the other two walls will have been removed.
“… They agreed that if the works were carried out as proposed in the s.31A terms ‘in one continuous operation’ they would take between 17 and 23 working days during which the tenant would have to vacate the holding and could not use it for the purposes of its business. On the other hand, if the landlord’s works were carried out in the order which their architect, Mr Mortimore, would propose such that all necessary demolition began at the beginning of the landlord’s contract and no access to the building was permitted until after all the works at the building had been completed, the tenant would have to vacate for over 40 weeks. Even total vacation, which is of course the maximum possible interference with the tenant’s use of the holding, if limited to 17 to 23 working days (say up to four weeks) does not appear to me to be interference for such a substantial time as to prevent the tenant relying upon s. 31A if it is willing to grant the landlord appropriate rights.”
The most relevant provisions of the 1954 Act
30 Opposition by landlord to application for new tenancy
(1) The grounds on which a landlord may oppose an application under subsection (1) of section 24 of this Act are such of the following grounds as may be stated in the landlord’s notice under section 25 of this Act or, as the case may be, under subsection (6) of section 26 thereof, that is to say:-
(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 of construction on the holding or part thereof and that he could not reasonably do so without obtaining possession of the holding
31A Grant of new tenancy in some cases where section 30(1)(f) applies
(1) Where the landlord opposes an application under section 24(1) of this Act on the ground specified in paragraph (f) of section 30(1) of this Act the court shall not hold that the landlord could not reasonably carry out the demolition, reconstruction or work of construction intended without obtaining possession of the holding if -
(a) 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 given that access and those facilities, the landlord could reasonably carry out the work without obtaining possession of the holding and without interfering to a substantial extent or for a substantial time with the use of the holding for the purpose of the business carried on by the tenant; or ….”
“23 Tenancies to which Part II applies
(1) Subject to the provisions of this Act, this Part of this Act applies to any tenancy where the property comprised in the tenancy is or includes premises which are occupied by the tenant and are so occupied for the purposes of a business carried on by him or for those and other purposes.
(3) In the following provisions of this Part of the Act the expression ‘the holding’, in relation to a tenancy to which this Part of this Act applies means the property comprised in the tenancy, there being excluded any part thereof which is occupied neither by the tenant nor by a person employed by the tenant and so employed for the purposes of a business by reason of which the tenancy is one to which this Part of this Act applies.
32 Property to be comprised in new tenancy
(1) Subject to the following provisions of this section, an order under s. 29 of this Act for the grant of a new tenancy shall be an order for the grant of a new tenancy of the holding; and in the absence of agreement between the landlord and the tenant as to the property which constitutes the holding the court shall in the order designate that property by reference to the circumstances existing at the date of the order.
(3) Where the current tenancy includes rights enjoyed by the tenant in connection with the holding, those rights shall be included in a tenancy ordered to be granted under section 29 of this Act except as otherwise agreed between the landlord and the tenant or, in default of such agreement, determined by the court.
35 Other terms of new tenancy
(1) The terms of a tenancy granted by order of the court under this Part of this Act (other than terms as to the duration thereof and as to the rent payable thereunder) shall be such as may be agreed between the landlord and the tenant or as, in default of such agreement, may be determined by the court and in determining those terms the court shall have regard to the terms of the current tenancy and to all relevant circumstances.
“intends to demolish or reconstruct the premises comprised in the property comprised in the tenancy there being excluded any part thereof which is neither occupied by the tenant ….”
i) “property” is a word which, as its definition in s. 205 Law of Property Act 1925 shows, is capable of a wider meaning than the extent of the “demised premises” and thus the eggshell, and
ii) “occupied” is also a word with a breadth of meaning.
The definition of “property” in s. 205 Law of Property Act 1925 is that it: “includes any thing in action, and any interest in real or personal property”. Naturally that definition does not apply but in my judgment it reflects the natural breadth of meaning of the word and provides a pointer to the extent of its meaning when used to describe the subject matter of a tenancy. Leading counsel for the Tenant pointed out that normally a person does not “occupy” a right or an easement; I agree. Further it seems to me that this is reflected and catered for by s. 32(3) which recognises the possibility of there being “rights enjoyed with the holding” and that they need to be included in the new tenancy which s. 32(1) requires to be a new tenancy of the holding.
“Looking at the terms of s.30 (1)(f) it seems clear that what the respondent proposes to do is not demolition, which would have caused the holding to cease to exist physically, nor is it properly described as reconstruction of the premises, since at the end of the operation the premises will exist exactly as they existed before, with the holdings now occupied by the tenant continuing to be capable of being leased out of the premises. Conceding that the work is a “substantial work of construction,” that is not inconsistent with its being, what it has always been accepted as being, a necessary repair for the carrying out of which the landlord was entitled to access in terms of the leases. If the respondent is correct in his submission that the work proposed falls under s. 30 (1)(f) an inexplicable situation has arisen, namely, that although the appellant could have been obliged to tolerate a substantial amount of construction, irreconcilable with her occupation of the premises for the purposes of her business, being carried out over a substantial period during the currency of the present leases, she is nevertheless disentitled from the statutory security of renewed leases, containing similar derogatory terms, on the ground that the respondent would not be able to do under the new leases what he concedes he could have done under the old.
I do not think that s 31A enters into this question. It was suggested in the Court of Appeal that, if the appellant’s construction of s. 30 (1)(f) is correct, she is in a better position under the earlier statute than under the later, which was no doubt passed for the additional security of tenants. In my view, however, it is the reservation of the landlord’s right of entry in the old leases which is recognised by s. 35 as being capable of importation into the new leases, that make it unnecessary for the appellant to rely on the new s. 31A. The history of the later Act seems to show that it was passed for the protection of tenants whose original leases had contained no such term, and in order to authorise the court to incorporate a term of this kind in the new lease, which would otherwise have been doubtfully competent under s. 35 in default of agreement by the landlord. It seems likely that this doubt arose from the contrasting decisions of the Court of Appeal in Little Park Service Station Ltd. V Regent Oil Co. Ltd.  2 QB 655 and in Fernandez v Walding  2 QB 606. In the former case the tenant succeeded in his contention that the case did not fall within s. 30 (1)(f). It is clear from the judgments in that case that the current lease contained a clause under which the landlord could have carried out the intended work of reconstruction; and it is implicit in the reasoning of Russell LJ  2 QB 655, 673, when he paraphrased the final words of the paragraph “without obtaining possession of the holding” as meaning “if a new tenancy is granted,” that he was contemplating a new tenancy incorporating similar terms as respects the landlord’s right of entry for the purpose of reconstructing the premises as were contained in the current lease. In the latter case, Fernandez v Walding 2 QB 606, the current tenancy was oral. It reserved no right of entry to the landlord, and the tenant failed. It appears to have been tacitly assumed that in these circumstances there was no power under s. 35 to incorporate in the new lease a right of entry adequate for the landlord’s purposes. One can see that, in such circumstances, a term which substantially and for a substantial time interfered with the use of the holding by the tenant would be inappropriate, since that interference would have been inconsistent with the very security of tenure which it is the policy of the statutory code to promote. But it is not possible to say that such a term would be thus inconsistent, or that it would be so anomalous as to be outside a reasonable relationship of landlord and tenant, when it is merely a repetition of a term, and having the same practical incidents as that term, which had been freely negotiated between the parties when the relationship was originally entered into.” (515F to 516F)
Where I differ from the Court of Appeal is upon the crucial question of construction of the words “without obtaining possession of the holding.” I have already indicated the inherent improbability, upon a purposive construction of the Act as whole, that Parliament should have intended to deny security of tenure to a tenant because the landlord intended to carry out the work upon the premises which he was entitled to do under the terms of the existing tenancy. That such was not the intention of Parliament appears to me to be plain from an analysis of the actual words of section 30(1)(f) themselves.
The “holding” referred to in s. 30 (1)(f) is ex hypothesi one in respect of which there is a subsisting tenancy, since s. 24 (1) extends the current tenancy until the tenant’s application for a new lease has been finally disposed of. ‘Obtaining possession of the holding’ (s.c. by the landlord) must, in my view, mean putting an end to such rights of possession of the holding as are vested in the tenant under the terms of his current tenancy. This is the ordinary meaning of “obtaining possession” in the context of the relationship of landlord and tenant. Moreover, an examination of the Act shows that when the word “possession” is used it means the legal right to possession of the land.” (517B/F).
i) a consideration of the effect of the relevant terms of (a) the new lease, whether they are introduced therein pursuant s. 31A or s. 35, and (b) the existing tenancy (as continued by s. 24 of the 1954 Act), and
ii) the statutory phrase “obtaining possession of the holding” in both ss. 30(1)(f) and s. 31A.
Indeed the contrary was not argued.
My approach on this appeal
i) the works on which the Landlord relied were works of demolition or reconstruction of the premises comprised within the holding; and further or alternatively
ii) the Tenant was not entitled to rely on s. 31A.
Obtaining possession of the holding
“It is also true that, if section 31A of the Landlord and Tenant Act 1954 is construed in the manner indicated in Redfern v Reeves, the legislature may, in large part, have given away, in the last portion of paragraph (a), that which they have conferred on tenants by the first part.”
In my view this remark was also prompted by the point that s. 31A was introduced to give further protection to tenants (see Redfern v Reeves  2 EGLR 52 at 53F) by, for example, adding a term to the lease such as that which existed in Heath v Drown, and Price v Esso to enable the landlord to enter to carry out the intended work but then cutting down the protection it gives by the second part of s. 31A(1)(a). It follows that a landlord is, or is arguably, in a better position if the term to enter and carry out improvements or repairs is introduced into the new lease through s. 31A than he is if it is contained in his existing lease. Indeed this is shown by the decision in Esso v Price because in that case the effect of the decision of the Court of Appeal was that the tenant lost on the application of s. 31A in accordance with the approach in Redfern v Reeves which had not been referred to the judge (see p 60 A/D) but won because the landlord could carry out the intended work under a term of the existing lease (see pp 60 F/H, 60 K/L, 62D and 62 H/M).
i) Lord Kilbrandon makes it clear that he is considering premises that after the works were completed would exist precisely as they did before,
ii) Lord Kilbrandon was of the view that s. 31A did not enter into the question and recognised the existence of the problem identified later by Templeman LJ in Esso v Price and in a slightly different form by the Court of Appeal in Heath v Drown and answered it on a purposive approach by reference to the difference between a mere repetition of a term and the introduction of a new term in the new tenancy, and
iii) argument as to whether Lord Kilbrandon’s purposive approach (and thus the approach of the majority of the House of Lords) fits with the decision in Redfern v Reeves was not advanced before us and does not arise on this appeal.
“The first is that given that access and facilities, the landlord could reasonably carry out the work without obtaining possession; the second is that it could carry out the work ‘without interfering to a substantial extent or for a substantial time with the use of the holding for the purposes of the business carried on by the tenant.’”
He found that the second condition was satisfied on the basis of a finding that the works could be done as a continuous operation in 17 to 23 working days (see paragraph 17 hereof). However he found that the first condition was not satisfied. As to this he said:
“I return, however, to the question whether the landlord could reasonably carry out the works given access and facilities without obtaining possession. Mr Lewison says I must do no more than consider the intended works and ask myself only whether the landlord could do those works without undue disruption. That is the question which I have just answered in the tenant’s favour. The decision in Decca, says Mr Lewison, turning that authority to the tenant’s advantage, is that it is no part of the enquiry of the court whether that which the landlord proposes is or is not reasonable.”
The judge then sets out the headnote in Decca Navigator Co Ltd v Greater London Council  1 WLR 748 and continues:
“It seems to me to be a far cry from questioning whether the landlord could reasonably carry out those works which he intended if the absence of possession meant that their being carried out would be rendered useless”
He then describes the works in the terms quoted in paragraph 15 hereof and continues:
“I do not say that because some part of the work which the landlord intends to carry out would be undone by the tenant after it is done, it necessarily becomes unreasonable for the landlord to carry out the work which he intends without the legal possession which would enable him to preserve it. Indeed, I am inclined to think that work such as installation of the shop front might be carried out and then replaced without its being unreasonable to carry out the work in the first place. I would, in this case, have wanted some evidence perhaps as to the aesthetic considerations before founding myself on this part of the work alone. Again, I accept that sometimes the doing of structural work to the building as a whole may reasonably be carried out even if the individual tenants do work to adapt the results to their particular needs. That could be the case with the floor or even the wall between numbers 9 and 11. Considered individually therefore it may be that the landlord not only could physically carry out each item of that work which he intends, but also he could reasonably carry out that intention without having possession. There must, however, in my judgment, come a point where the necessity of permitting the tenant to undo what the landlord intends would leave so little purpose in the landlord’s doing what he intends that he could not reasonably do that which he otherwise intends without possession. As a matter of fact and degree I think that that point is reached in this case and the tenant is not entitled to rely on s. 31A as precluding a finding that the landlord could not reasonably carry out the works which I have held are within s. 30 (1)(f) without obtaining possession.”
In taking this approach the judge had earlier stated and concluded that:
“The terms which the tenant proposes should be included in the new tenancy (‘the s. 31A’ terms) are as follows.
‘The right on reasonable notice to enter the demised with workmen and others to carry out the scheme of works described in the reports of Mr Graham Mortimore dated 15th December 2000 and 9th May 2001 and 31st May 2001 (“the intended works”) in so far as the intended works cannot be carried out without such entry provided that
(a) this right shall only be exercisable if the intended works in so far as they affect the demised premises are carried out in one operation ....
(c) the exercise of this right shall not prejudice the exercise of the lessee of any easement including, for the avoidance of doubt, the easement of support enjoyed by the floor of the demised premises.”
The tenant also offers in the form of what had been paragraph. (B) of the original draft of such terms an undertaking as follows:
“The lessee shall indemnify the lessor against the reasonable additional costs incurred by the lessor in carrying out the intended works in so far as they affect the demised premises in one continuous operation.”’
Mr Lewison QC for the tenant provided the court with five other proposed modifications to the terms of the current tenancy, not being terms giving the landlord access or other facilities for carrying out the work - that is to say not being s. 31A terms. These are modifications which the tenant would seek if this preliminary issue were determined in the tenant’s favour. I think on any of the bases advanced by Mr Lewison for the tenant to succeed on the preliminary issue they would be intended to secure that if the works were carried out under the terms of any new tenancy, the tenant could reinstate the premises in such a manner as would enable it to carry out its existing business. They are not, however, a matter for consideration on this preliminary issue and if I do order, on determination of the preliminary issue, that the tenant is entitled to a new tenancy (whether upon the inclusion of the 31A terms or otherwise) the other terms of the tenancy would be for later determination. If the court then refused the modification of which Mr Lewison has given notice, the tenant may apply for revocation of the order under s. 36(2) of the Act.”
“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 given that access and those facilities, the landlord could reasonably carry out the work:
(1) without obtaining possession of the holding (the first condition), and
(2) without interfering to a substantial extent or for a substantial time with the use of the holding for the purpose of the business carried on by the tenant (the second condition).”
Additionally this conclusion has strong support from the statement of Templeman LJ in Price v Esso set out in paragraph 32 above.
i) the judge erred by asking himself the question whether it was reasonable for the Landlord to carry out the intended work at all,
ii) the correct question is that given that the Landlord intends to carry out the work, can he do so in a reasonable way which does not interfere to a substantial extent or for a substantial time with the use of the holding by the Tenant, and
iii) the judge was wrong to look beyond the programme of works and the correct approach was to look only at the effect on the tenant’s use of the holding whilst the works intended by the Landlord were carried out.
I do not accept any of these points.
“The question for the court is not, were the landlords reasonable in intending to do the particular work defined in the drawing? But, were they, having genuinely formed that intention, reasonable in dispossessing the tenants completely in order to carry it out? Could they in common sense and in reason have carried out that substantial work of construction – not some different work answering to that general description – without obtaining possession of the whole holding, or could they have carried it out while leaving the tenant in possession of the 15ft. wide strip?”
In this case it is accepted that the Landlord has a genuine intention to carry out the works and there was no issue that it had been tailored to enable the Landlord to obtain possession. In those circumstances the above passage from the judgment of Stephenson LJ (and the other judgments in the Decca case) show that for the purposes of s. 31A the court is to look at the work the Landlord intends to do and not some other work which might be said to achieve the same object, or additional work that the Landlord might have carried out to make the ground floor ready for re-letting.
i) the premises demised by the lease (i.e. the eggshell) and rights enjoyed with it and thus the holding will no longer physically exist and be capable of occupation, and
ii) before the Tenant can occupy the holding under the new tenancy it seeks (i) some of the works carried out by the Landlord will have to be undone, and (ii) additional work will have to be carried out.
This was not the position in any of the cases to which we were referred. Further, as I have pointed out in Heath v Drown Lord Kilbrandon mentioned that after the works had been completed the premises would exist precisely as they had before. To my mind this provides support for the view that if after the intended works are carried out the premises would not exist precisely as they had before this would be a relevant factor in deciding whether those works could be carried out without obtaining possession.
i) some of the works carried out by the Landlord being undone, and
ii) additional work being carried out so that the Tenant can occupy and trade from the holding,
in my judgment it is clear that the Landlord cannot reasonably carry out the intended works without obtaining possession in the sense of putting an end to the Tenant’s legal right to possession under the new tenancy. This is because whether through the covenant for quiet enjoyment, or the principle that a landlord cannot derogate from his grant, an aspect of the Tenant’s legal right to possession includes the ability to occupy the holding and thus to enjoy as part of it, or ancillary to it, rights of support and access that enable the Tenant to enter upon, use and occupy the holding.
“That is sufficient to dispose of the issue arising on this appeal, but it was also submitted on behalf of the appellant that section 31A did not really arise at all, because it cannot have contemplated an agreement which involved the destruction of the subject-matter of the original holding. Were it otherwise it would involve a tenant being able to say: “I agree to the destruction of the subject-matter of the original holding, but I demand that, it having been destroyed, I am granted a new tenancy, not of my holding, but of some entirely different entity.
Without finally deciding the matter, I should say that I accept that there is great force in that contention and that for my part I do not, as presently advised, accept that it is possible for a tenant by any such agreement to avoid the plain meaning of section 30(1)(f)”
i) the court is not limited to considering only whether the intention of the landlord is genuine (although this would be a relevant consideration - see the judgment of Stephenson LJ in the Decca Navigator case), and
ii) when, as here, the landlord has a genuine intention the court should consider the terms giving the landlord access and facilities to carry out the intended works together with the other relevant terms of the new lease.
i) the findings made by the judge as to (i) the works intended by the Landlord, and (ii) the effect of those works and thus the work that would have to be done to recreate the holding and to enable the Tenant to use and trade therefrom,
ii) the finding of the judge when he concluded that the Landlord could not carry out the intended works under clause 2(14) of the lease when he said:
“In my judgment, the circularity of the position which would arise from the exercise of the rights under clause 2.14 means that the landlord could not reasonably carry out any work permitted thereby without having legal possession if the absence of such possession required him to reinstate as soon as he had done the work.”
iii) the overall finding by the judge that in this case as a matter of fact and degree the point had been reached that the Tenant is not entitled to rely on s. 31A
have the result that it is clear that having regard to ss. 32 and 35 of the 1954 Act the Tenant would not be able to persuade the court to include further terms in the new lease which would enable it to argue successfully that having regard to those terms (and other offers made by the Tenant) it could rely on s. 31A.
i) the point that s. 32(3) provides for rights enjoyed by the tenant in connection with the holding to be included in the new tenancy and thus that if terms which enabled the Tenant to reinstate the floor (and the remainder of a new eggshell) could be included they would “carry with them” rights of support, and
ii) the views of the judge, quoted in paragraph 15 hereof as to the Tenant getting consent to do some of the works it would wish to carry out, which as I pointed out did not include the reinstatement of a floor at the existing level.
I add that I have some doubt whether the views expressed by the judge concerning the giving of consent for the replacement of part of the plate glass window and the erection of a partition within the area of the existing demise are correct if they are considered in the context of s. 35, and the intention of the Landlord to create a letting space which incorporates other units on the ground floor. However for present purposes I shall assume that these views are correct and could lead to terms being introduced into the new tenancy that allow such works to be done, or a finding that consent should be given for them under clause 2(19) of the existing lease.
i) is not within the ambit of the work for which it can seek consent (not to be unreasonably withheld) under clause 2(19) of the existing lease (see paragraph 12 hereof), and
ii) is likely to involve work that is prohibited by clause 2(19)(i)(b).
Further I do not see why (i) reinstatement of a floor at the existing level would be regarded as an improvement, or (ii) a court would agree to a term being included in the new lease that enabled the Tenant, or compelled the Landlord, to install a floor at the existing level because what the Tenant is seeking is reinstatement of a substantial part of the holding (together with support for it if such support is not included within the holding as defined) in a manner which “undoes” a substantial part of the work carried out by the Landlord and undermines its purpose.
Further arguments on obtaining possession of the holding
“the court must look to the physical effects of the work and not to the consequences of the work from a business point of view. He submitted that this must be so from the use of the words ‘use of the holding’”
This focuses on the issue in that case and does not address the question whether the physical effects of the work when completed can be taken into account. Indeed to my mind both the language of this submission and the phrase “the use of the holding” in the section favour the conclusion that the physical effects of the landlord’s intended works after they have been completed, and thus whether at that stage and without doing more works the tenant could occupy the holding, can be taken into account.
“ … requires the court to consider whether the landlord could reasonably carry out those intended works given the facilities which the tenant offers. That so clearly indicates that the landlord may have to adjust his method or sequence of work in order to carry out his intended works, as compared with that which he would adopt if he had possession instead of merely access and facilities, that I feel bound to say that this dictum is clearly wrong and I should not follow it”
As appears in paragraph 49 above I agree that as a matter of law the overall test of reasonableness gives the court this flexibility. As the judge recognises this conclusion gives rise to issues of fact and degree which have to be considered in the light of the decision in the Decca Navigator case that the works to be considered are those that the landlord intends and not some other works (see the citation in paragraph 40 above from the judgment of Stephenson LJ in the Decca Navigator case).
Section 30(1)(f) – the works
i) as found by the judge they involve the demolition of the eggshell that was demised, or
ii) they involve the demolition of that eggshell together with the rights of support which render the eggshell demised capable of occupation and use by a tenant.
For the purposes of deciding this appeal it does not matter which.
Lord Justice Chadwick:
“(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 of construction on the holding or part thereof and that he could not reasonably do so without obtaining possession of the holding.”
“(1) Where a landlord opposes an application under section 24(1) of this Act on the ground specified in paragraph (f) of section 30(1) of this Act the court shall not hold that the landlord could not reasonably carry out the demolition, reconstruction or work of construction intended without obtaining possession of the holding if –
(a) 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, given that access and those facilities, the landlord could reasonably carry out the work without obtaining possession of the holding and without interfering to a substantial extent or for a substantial time with the use of the holding for the purposes of the business carried on by the tenant; ...
“… there must come a point where the necessity of permitting the tenant to undo what the landlord intends would leave so little purpose in the landlord’s doing what he intends that he could not reasonably do that which he otherwise intends without possession. As a matter of fact and degree I think that that point is reached in this case …”
“The question is not: is it reasonable for the landlord to carry out the work which he says he intends to carry out? Rather, the question is: given that the landlord intends to carry out the work, can he carry them (sic) in a reasonable way which does not interfere to a substantial extent or for a substantial time with the use of the holding by the tenant?”
The respondent seeks to support the judge’s conclusion in relation to element (A) of the condition in paragraph (a) of section 31A(1) on other grounds (in addition to those which the judge gave). It also seeks to challenge the judge’s conclusion in relation to element (B) of that condition. The scope and effect of section 31A(1) of the Act in the circumstances of the present case is the second issue raised on this appeal.
The first issue: are there any premises capable of being demolished?
“… this Part of this Act applies to any tenancy where the property comprised in the tenancy is or includes premises which are occupied by the tenant and are so occupied for the purposes of a business carried on by him ….”
In Bracey v Read  Ch 88, Mr Justice Cross held that, in that context, “premises” was synonymous with “property comprised in the tenancy”- although “premises occupied by the tenant . . . for the purposes of a business” would not, of course, necessarily include all the property comprised in the tenancy. He rejected the argument that Parliament must have intended, by the use of the words “property” and “premises” in juxtaposition, to confine premises to what he described as its popular sense or meaning – that is to say “buildings or buildings with land immediately adjoining them” –see (ibid) at page 92. But he seems to have accepted that “premises” might have the more restricted or popular meaning in the context of section 30(1)(f) of the Act – see (ibid) at page 93.
“It is, I think, plain, on the true construction of paragraph (f) that “the premises” there referred to must be limited to that part of the holding which is capable of being demolished and capable of being reconstructed.”
Lord Justice Russell agreed. He said this, at page 1253:
“It seems to me that what is proposed is the demolition of the whole premises comprised in the holding. The county court judge said that there was to be “no demolition of a substantial part of the premises”. This seems to me to confuse the premises comprised in the holding with the holding. . . . I would allow the appeal on this one ground. It has escaped the notice of the county court judge that the proposal involves demolition, not of a part, let alone an insubstantial part, of the premises, but of the whole of the premises.”
“The structure is the fabric which encloses the demise in so far as it is itself demised. In my judgment the physical boundaries of the demise, be they constituted by walls, ceiling or floor, or only their surfaces, are premises within the meaning of the paragraph at least if they are of such physical quality as to be sensibly capable in ordinary language of being constructed or part of the construction, or of being demolished. I think in the present case that the tile work which lines the wall, the wooden floorboards covered by a metallic surface which constitute the demised floor and the roller shutter which provides the enclosure of the fourth side of the shop are all capable of being described as constructed or at least meaningfully of being demolished, and they constitute the premises which I hold the landlord has proved he is intending to demolish; and, in the case of the roller shutter, to reconstruct by inserting a new shop front.”
“It is apparent from the plan and the terms of the definition clause that the leased property excludes the load-bearing structure of the building, in particular the steel framework structure in the walls and the floor and ceiling slabs. Essentially the demise is of an airspace with a thin enclosing skin.”
The works which the landlord proposed to carry out to the building of which the property comprised in the lease formed part did not differ in any material respect from those which are proposed in the present case – see (ibid) at page 64D-E. The arguments advanced on behalf of the tenant by Mr Michael Rich QC (as he then was) were substantially the arguments advanced in this case. Two of the authorities cited to this Court - Percy Cadle & Co v Jacmarch  1 QB 323 and Joel v Swaddle  1 WLR 1094 – were cited in that case; the others not having been decided at that date.
“In short, as the works proceed, the demolition work will involve the physical demolition of most of the eggshell as well as part of the larger scheme and the rebuilding of something significantly different.”
Lord Justice Nicholls went on to say this, (ibid) at page 65E-F:
“In my view the judge was correct in deciding that works having this far-reaching physical effect on the state of the leased property satisfied the requirement of ‘reconstruction of the demised premises’ in clause 8 [of the lease].
I do not think that this conclusion is inconsistent with either of the two authorities I have mentioned. It is a sufficient ground of distinction to note that in both those cases the demised property seems to have included structural parts of the building in question. Whether, in the case of such leases, there can never be reconstruction unless there is some alteration to a load-bearing part of the structure is not a point which calls for decision in the present case. I make no comment either way on that point. Even assuming (but without deciding) in the defendant’s favour that in such cases an alteration to a load-bearing part of the structure is required before the work can constitute reconstruction, that is not this case. Here, as I have already indicated, the demise is in terms which make it plain that the load-bearing structure is not included. Clause 8 envisaged that, despite this, the resultant unit could be the subject of reconstruction. In that context, in agreement with the judge, I am in no doubt that works as extensive as those I have described qualify as ‘reconstruction of the demised premises’. Indeed those works will change the identity of the leased property, and they will make the leased property wholly unusable while being carried out. But the works involve far more than that, as I have sought to indicate.”
The second issue: the scope and effect of section 31A(1) of the Act
“Where the current tenancy includes rights enjoyed by the tenant in connection with the holding, those rights shall be included in a tenancy ordered to be granted under section twenty-nine of this Act except as otherwise agreed between the landlord and the tenant or, in default of such agreement, determined by the court.”
That section has to be applied in the assumed circumstances that the tenant has agreed to the inclusion of terms in the new tenancy which give the landlord access and facilities for removing the floor, the existing surface covering on the walls and the suspended ceiling; and which impose no obligation on the landlord to reinstate. In those circumstances it is difficult to see any basis for the inclusion of rights of support in the new tenancy. Its terms are inconsistent with the need for such rights. Put shortly, once the landlord has carried out the permitted works and in the absence of reinstatement, there will be nothing to support.
“… may be determined by the court; and in determining those terms the court shall have regard to the terms of the current tenancy and to all relevant circumstances.”
The terms of the current tenancy are those contained in the lease under which the appellant holds the property. Clause 2(19)(i) contains, at sub-paragraph (a), a covenant by the tenant not without the consent in writing of the landlord to make any external projection from the demised premises; and, at sub-paragraph (b), a covenant not to cut, maim, injure or alter any of the excluded parts. In that context “the excluded parts” means the main structure of the building of which the demised premises form part and the main walls, beams, floors and ceilings which run under or over the demised premises – see the first schedule to the lease. Clause 2(19)(ii) of the lease contains a covenant by the tenant not to make any alterations or additions to the demised premises without the consent of the landlord.
“… it was also submitted … that section 31A did not really arise at all, because it cannot have contemplated an agreement which involved the destruction of the subject matter of the original holding. Were it otherwise it would involve a tenant’s being able to say: ‘I agree to the destruction of my holding, but I demand that, it having been destroyed, I am granted a tenancy, not of my holding, but of some entirely different entity’.
Without finally deciding the matter, I should say that I accept that there is great force in that contention and that for my part I do not, as presently advised, accept that it is possible for a tenant by any such agreement to avoid the plain meaning of section 30(1)(f).”
I accept that it is possible to decide this appeal on the basis that (if section 31A(a) had any application) the landlord could not reasonably carry out the proposed works without obtaining possession of the holding – and I do not hold that the judge was wrong to take the view that he did on that point - but for my part I prefer to base my conclusion that section 31A(1)(a) of the Act can be of no assistance to the tenant on the ground that, whether or not it would be possible for the landlord to carry out the work without obtaining legal possession of the holding, it would be a necessary consequence of carrying out the work that the holding would become unusable, indefinitely, for the purpose of the tenant’s business. In my view section 31A(1)(a) cannot have been intended to have any application in such a case.
Lord Justice Simon Brown: