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Cite as: [2003] NPC 78, [2003] 26 EG 179, [2004] 1 P & CR 11, [2004] 4 All ER 144, [2003] 1 WLR 2090, [2003] 2 EGLR 87, [2003] EWHC 1409 (Ch), [2003] WLR 2090

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Neutral Citation Number: [2003] EWHC 1409 (Ch)
CH/2002/PTA/0857

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
On Appeal from the Central London County Court
(Claim No. CL053222)
(HH Judge Green QC)
 

Royal Courts of Justice
Strand
London WC2A 2LL
June 18 2003

B e f o r e :

MR JUSTICE LAWRENCE COLLINS
____________________

Between:
IVORYGROVE LIMITED - Appellant/Claimant
and
GLOBAL GRANGE LIMITED - Respondent/Defendant
JUDGMENT
Approved by the Court for handing down

____________________

Mr Kelvin Rutledge (instructed by Barnes & Partners) for the Appellant/Claimant
Mr James Thom QC (instructed by Howard Kennedy) for the Respondent/Defendant

____________________

HTML VERSION OF JUDGMENT
APPROVED BY THE COURT FOR HANDING DOWN
HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

    Mr Justice Lawrence Collins:

    I Introduction

  1. Part II of the Landlord and Tenant Act 1954 contains provisions which give some security of tenure to tenants of business premises. The landlord must give notice of termination in accordance with section 25 of the Act, and the tenant may apply for a new tenancy. The grounds on which the landlord may oppose an application for a new tenancy are set out in section 30(1) of the Act, one of which is (section 30(1)(f)) that 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 ..." These proceedings have involved a question which has, on two occasions, been left open for decision by the Court of Appeal, namely whether section 30(1)(f) applies when the work, however extensive, does not involve the structure of the building in the sense of load bearing elements.
  2. Ivorygrove was incorporated in 1983, and is a family company. For about eighteen years it has been running a hotel called The Crichton Hotel, which consists of four Georgian houses at 34-37 Bedford Place, Bloomsbury, London WC1 built in about 1805. The Crichton Hotel caters for students and tourists on a low budget, and is close to University College London (and other parts of London University), and to Russell Square and the British Museum.
  3. The freeholders of the premises are the trustees of the Bedford Estates. On January 19, 1984 the Bedford Estates let the four houses to a predecessor in title of Ivorygrove for a term of 20 years, expiring on March 24, 2001. The next day the lease was assigned to Ivorygrove. Ivorygrove obtained permission from the Bedford Estates to convert the four houses into one hotel by making connections between them at all levels, from basement to third floor.
  4. Global is a substantial privately owned company whose business is to refurbish and run some eight or nine hotels in London and the southeast. Global was incorporated in 1980 and has been trading as a hotel company for over eighteen years.
  5. On April 21, 1999 the Bedford Estates entered into an agreement granting Global an option for a reversionary lease in relation to the four houses at 34-37 Bedford Place and also to three other hotels (which were run by other tenants of the Bedford Estates) consisting of 24-27, 31-32 and 39-40 Bedford Place. 24-27 Bedford Place (the St Margaret's Hotel run by Mr and Mrs Marazzi for some 50 years) was the subject of a decision by HH Judge Dean, and an appeal to Park J, to which I shall refer later. There were also proceedings in relation to 31-32 Bedford Place, which were adjourned to await the outcome of the trial before HH Judge Green QC, and which were subsequently settled.
  6. The lease of 34-37 Bedford Place was granted on April 30, 1999. Global paid a premium of £2,194,500, and the rent was to be £100 for fifteen years and thereafter a rent of £100,000 per year or 30% of open market value whichever was the less.
  7. The agreement of April 21, 1999 (schedule 2) required Global to carry out works of refurbishment to 34-37 Bedford Place (and the other properties) "in order that [it] shall have the characteristics of a three or four crown hotel being in general accordance with the current guidance for three or four crown hotels issued by the English Tourist Board" (clause 1.1). In default of completion by March 23, 2007 a penalty rent rising to £25,000 a year was to fall due. The cost estimates to be produced by Global were to demonstrate to the satisfaction of the Bedford Estates that the expenditure on 34-37 Bedford Place was to be (subject to adjustment) £2,600,000.
  8. On March 28, 2000 Global gave notice to Ivorygrove under section 25 of the Landlord and Tenant Act 1954, saying that it would oppose the grant of a new lease. On May 5, 2000 Ivorygrove served a counter-notice. On July 5, 2000 Ivorygrove made application to the court for a new tenancy proposing a new term of fourteen years with seven year reviews and a starting rent of £100,000. Global in its answer proposed that, if a new tenancy was granted, there would be a ten year term with a six month break clause after the first six months. It proposed a rent of £200,000 per annum.
  9. On September 19, 2001 the London Borough of Camden gave planning permission and listed building consent for a substantial part of the works proposed. On August 12, 2002 Camden gave planning permission and listed building consent for additional works. These works have been described in these proceedings as the "approved scheme" and the "revised scheme." The main element of the revised scheme was the enlargement of the lift and the construction of a hoist from street to ground floor level for the disabled.
  10. On November 13, 2001 Barclays Bank, Global's bankers, gave it a letter of comfort for facilities up to £10,600,000 for the works to all four hotels. By a letter of January 10, 2002 the Bedford Estates confirmed to Global that it consented to the works and alterations to 34-37 Bedford Place in accordance with the planning permission and listed building consent already obtained, and also in connection with the recently submitted revised planning application and listed building consent application.
  11. II Landlord and Tenant Act 1954 ("the 1954 Act")

  12. For present purposes the relevant provision of the 1954 Act is section 30(1)(f), which permits a landlord to oppose the grant of a new tenancy on the ground: 
  13. "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."
  14. The effect is that the landlord may oppose the grant of a new tenancy if he can show that he intends (which means not only a bona fide intention, but also a reasonable prospect of being able to bring about what he intends, including the obtaining of planning and listed building consent) one of the following: (a) demolition of the premises comprised in the holding; (b) reconstruction of the premises comprised in the holding; (c) demolition of a substantial part of the premises comprised in the holding; (d) reconstruction of a substantial part of the premises comprised in the holding; (e) substantial work of construction on the holding; (f) substantial work of construction on part of the holding: see Woodfall's Law of Landlord and Tenant, para 22.112.
  15. III The decision of HH Judge Green QC

    A. The issues
  16. Among the issues before the judge were whether Global had established, the burden of proof being upon it: (1) that it had the requisite intention under the 1954 Act; (2) that it had a reasonable prospect of being able to carry out that intention; and (3) that the works which it intended to carry out satisfied section 30(1)(f), namely that they were works of demolition or reconstruction of the whole or a substantial part of the premises and/or substantial works of construction on the whole of part of the holding.
  17. The judge found that Global satisfied the requirements of intention. In view of the letter from Barclays Bank and in view of the substantial income of Global, it had ample financial means to carry out its intention to do the works in the final scheme, and it had all the requisite consents.
  18. B. The judge's findings of fact
  19. The four houses were built in about 1805. They were Grade 2 listed Georgian buildings. The external walls and party walls between the four houses were of load bearing brick masonry. The internal walls were mainly of timber stud, supporting time floors and roofs. Each house retained its staircase with brick surrounds. The houses consisted of basement, ground, and three upper floors, all connected at each level. The staircases of each remained, and one had a lift. Internally the houses had been substantially altered upon conversion to hotel use. Some original features remained but the original rooms had been subdivided and partitioned.
  20. The hotel bedrooms mainly had either a washbasin only or no facilities. A few had en-suite bathroom or shower. The approved scheme had the following main elements. It would create forty-three bathrooms with en-suite facilities from seventy-three bedrooms. For this purpose doorways were to be blocked up and internal walls demolished. Some of the internal walls were originally load bearing. These were the minority of internal walls and occurred mainly in the basement. By deflection of the floors, which had occurred on the third floor and to a lesser extent on the second and first floor, some of the internal partitions had become load bearing. Floors would be strengthened. New partitions would be created with plywood stiffening. New doorways would be opened up. In the basement, the kitchen would be opened up with structural steel support. A second structural steel support would be inserted to the enlarged opening for the disabled lavatories. Excavations would be done to lay new drains and a connection to the sewer. A dumb waiter would be installed. Two conservatories would be built. Windows of the upper floors of number 34 would be replaced to match the remainder. On the first to third floors, large areas of partitioning would be removed.
  21. These were substantial walls which had to be knocked down with a sledgehammer, so disturbing skirting, walls and ceiling finishes. All the floorboards would be taken up so that plywood stiffening could be put in. That was structural work on any definition. The stiffening was necessary because of deflection. The internal walls, excluding the party wall, amounted to 2,587m2. Of these 1,275m2 (49%) would be demolished and 860m2 (33%) of new walls were to be built. The existing partitions were mainly of plasterboard though some were brick, particularly in the basement. The new partitions would not be like demountable office partitions, but substantial structures stiffened by plywood, insulated and plastered. Completely new services would have to be put in for the new bathrooms and generally.
  22. In order to run those services there would be numerous holes in both load bearing and non-load bearing walls and in the floors. The services would run both horizontally and vertically.
  23. The revised scheme had the following main additional elements: the lift shaft would be demolished and reconstructed, and a larger lift would be installed; the new lift would travel one floor further, to the basement; the lift motor room and roof overrun would be demolished and a new flat roof would be built below parapet level; a disabled hoist in number 36; lavatories in the basement and second floor bedrooms; an increase in the size of the first floor corridor and bedrooms on the first and second floors by demolishing and rebuilding eleven existing partition walls and alteration of stairs to rear extension rooms.
  24. As regards the final scheme, the drawings showed that there were no areas of the hotel which would be unaffected. Mr Bowles, the joint engineer, said that: "All parts of the interiors of all the buildings would be affected by the proposed works". The building services, including their distribution routes, were all to be renewed. The boiler room, kitchen, reception and administration areas were to be relocated. The quality of the finishes was to be upgraded throughout the buildings. The removal of redundant services was bound to cause damage to finishes. Moving walls and forming new openings in existing walls was bound to cause damage to adjacent finishes. New service distribution routes would be created both horizontally and vertically, which would involve chasing plaster in the walls and lifting floorboards and drilling or notching joists to conceal pipes and cables. There would be joinery work to doors, skirting and architraves. New manholes and buried drainage runs would be constructed in the basement. The reconstruction of the lift to larger plan extended down into the basement with a pit and overrun at the top. The walls of a few bedrooms were to be moved to accommodate wheelchairs and an external disabled hoist was to be introduced at ground floor level.
  25. The report of the jointly instructed engineer, Mr Bowles, was to this effect: (a) There were no structural problems in the houses, but the structure would be affected by the proposed works both because partition walls had come to be load bearing due to deflection on the upper floors and because building services needed to be routed through the structure, (b) the proposed works would affect all parts of the interior of the premises; (c) the proposed bathroom finishes which consisted of high quality but brittle tiling, required stiffening of the floors, but a client would be advised against these finishes because of the danger of cracking in spite of stiffening, but Mr Bowles accepted that if the client (as here) required them, he would accept the client's brief; (d) extensive opening up was not necessary before the work began on site, but extensive opening up would be necessary after work began; (e) the differences between the engineers as to the amount of stiffening and reinforcement needed was because they were adopting different approaches, neither of which was wrong in engineering terms but each of which was appropriate to the commercial objects of the party instructing him: for a client with the landlord's commercial objective Mr Redmond's proposed stiffening of the floor with plywood and plywood in the new stud partitions and additional reinforcements to beams would be reasonable and necessary; and (f) from an engineering point of view the works could be phased either in one or two houses at a time.
  26. The costs experts on both sides agreed as follows: with vacant possession of all four houses, the total estimated cost of refurbishment and upgrading the premises to three or four crown standard was £4,200,000. The length of time which that work would take was forty-four weeks. The engineers agreed the cost of works which the court might consider to be structural at £454,867, consisting of: (a) alterations to masonry walls; renewal of basement floor; reconstruction of lift shaft; new structural steelwork,; and structural wall reinforcement (£207,332); (b) joist strengthening and levelling (£72,801); (c) removal of non-load bearing walls (£24,205); (d) plywood flooring (£75,809); (e) construction of new conservatories (£25,007); (f) crack stitching to external walls (£13,765); and (g) construction of new partitions (£35,948).
  27. C. The judge's approach and conclusions

  28. The judge directed himself as follows: (a) it was not right to analyse each item of work and argue that it was neither demolition nor reconstruction of a substantial part; (b) for there to be "reconstruction" the work must involve the structure; (c) the structure could include internal and other non-load bearing walls, since there was no warrant for the view that "reconstruction" and "construction" required works to load bearing walls only; (d) the relevant parts of the premises amounted to a substantial part of the structure, although they were largely non-load bearing; (e) the partitions enclosing the hotel rooms were an essential part of the structure, and a jury would take that view being uninfluenced by any term of art which the word "structure" had acquired in the law of landlord and tenant; (f) the work must be looked at as a whole, including associated non structural works; and (g) if a non-load bearing wall was part of the structure then it was right to include plastering, stiffening and decoration as part of the work of construction.
  29. He found that the partitions defined the extent and perimeter of hotel rooms and bathrooms. The rooms were the raison d'etre of the hotel. The partitions were not the usual light weight demountable office partitions. They had to be knocked down with sledgehammers. Doing so would damage skirting boards and plaster on walls and ceilings to a substantial extent. They were then to be rebuilt in a different position, requiring substantial making good. A jury would consider that the demolition of the partitions and their rebuilding in a different position were works which came within both limbs of the section, and the works were substantial in the light of the physical quantity of the work, its cost and the time it took, of which the first was by far the most important.
  30. That view was a fortiori when there was taken into account the construction of the larger lift, the excavations and underpinning required, the construction of two steel beams, the openings made in an admittedly only limited number of load bearing internal walls, the amount of strengthening which was intended to the floor and laying of the new drains, the removal and insertion of services throughout the building. This was not a marginal case when properly considered.
  31. Accordingly, the vast bulk of the work was either construction or ancillary to construction and the items which were neither were a comparatively small part of the whole scheme. The landlord could show an intention to demolish and reconstruct a substantial part of the premises (namely most of the interior) and a substantial work of construction on the holding. If it were necessary for the works to effect "the structure" a large amount of work did so, given that "structure" for these purposes did not mean "load bearing".
  32. Even if the large majority of the works was excluded, there was a bedrock of undoubted work to the structure set out in the agreement between the engineers totalling £455,867, and those works were substantial in the absolute sense, even though they formed only 10% or 11% of the entire scheme.
  33. The undoubted structural works were: (a) the installation of the larger lift shaft and lift; (b) the excavation for and underpinning related to the new lift shaft; (c) the essential stiffening of the upper three floors to cope with the deflection; (d) the insertion of two steel beams in the basement; (e) the plywood flooring; (f) the construction of two new conservatories; (g) most of the demolition at basement level, which was masonry and possibly load bearing.
  34. Just as important, and probably more important than the undoubted structural works, were what he considered also to be structural, namely the substantial number of partitions to be demolished and reconstructed. Those partitions were part of the structure of the present and future hotel.
  35. All parts of the interior would be affected by the proposed works, there would be reinforcements to joists and beams and plywood reinforcement for the floors. The floors had to be stiffened, and plywood reinforcement would also be applied to the new and existing partition walls. Making good and decoration would be wide-spread if not universal.
  36. The total cost of the scheme would be £4.2 million which would take forty-four weeks to carry out, and a substantial proportion of that figure would qualify on the basis that they were works ancillary to the foregoing, and his estimate was something of the order of £3 million or so.
  37. Accordingly the scheme qualified under both limbs of section 30(1)(f). The works were works of demolition and reconstruction of a substantial part of the premises and were also a substantial work of construction on the holding.
  38. The judge refused permission to appeal. Neuberger J ordered that the application for permission to appeal be listed so that if permission were granted the appeal could be heard at the same time.
  39. IV The Marazzi case

    A. Decision of HH Judge Dean QC

  40. On January 25, 2002 HH Judge Dean QC gave judgment in relation to one of the other Bedford Place properties leased by Global from the Bedford Estates, namely Nos. 24-27, which is the St Margaret's Hotel, which had been run by Mr and Mrs Marazzi for about 50 years. The judge held that Global had established that it had a settled intention to carry out the proposed work, and a reasonable prospect of being able to do so, with regard to the approved scheme. But he also held (although it was not necessary for decision in the light of his finding that the work contemplated by the revised scheme did not fall within section 30(1)(f)) that Global had not satisfied him that it had reasonable prospects of obtaining the requisite consent to the revised scheme.
  41. He accepted that structure did not necessarily mean load bearing elements, but included the basic fabric of the building which gave it its essential form and character as a building. There were some works which could be said to involve demolition and reconstruction, notably the removal of the basement wall and its replacement by the steel beam, the installation of the lift involving floor timbers and the removal of part of the roof and the building of the overrun; the removal and restoration of part of the staircase in No.25 and the opening up of access in party walls. But the proposed work did not affect a substantial part of the premises, since the construction of the lift was limited to a small part of one basement, the trimming of a small area of timbers on each storey of one house and the removal and replacement of 9 sq.m of one roof and building of the overrun. The work, apart from a few party wall openings, was confined to single units and only to relatively limited areas within each unit. Some levelling of floors on two storeys with the incorporation of plywood, and the removal and replacement of non-original party walls, even when they may have acquired some non-designed load bearing qualities, was not demolition or reconstruction of a substantial part.
  42. The partitions were stud partitions, and while not so temporary or insubstantial as the partitions commonly found in office buildings, fulfilled an essentially similar function of making convenient divisions to enable use of the building to suit the particular requirements of the occupier or tenant rather than being part of the essential structure of the premises. Levelling of some areas of floor on two levels did not amount to reconstruction of a substantial part. Those two categories of work formed the major part of the proposed redevelopment in terms of extent. The renewal, modernisation, rearrangement and extension of utility services did not amount to structural work. The external hoist was plant and had minimal impact upon the structure. General decorative refurbishment and refurnishing were not works falling within section 30(1)(f).
  43. The more difficult question was whether, taken overall, the proposals could be said to be substantial works of construction. The cost and time involved suggested substantial work, but although time and money were relevant, the ultimate issue was the true character of the physical work. Even though some of the proposals included works of construction, i.e. in the basement kitchen, lift shaft, party wall openings, staircase restoration, opening and restoration of one external door and window, these were not substantial in the context of the physical extent of the premises and the overall proposals. He therefore came to the firm conclusion that Global had not satisfied him the proposals contained in either the approved or the revised scheme constituted work of demolition or reconstruction of a substantial part of the premises.
  44. B. HH Judge Green QC's treatment of the Marazzi decision

  45. The judge found that the Marazzi case was different. First, in the Ivorygrove case, planning permission had actually been obtained for the revised scheme, but in Marazzi Judge Dean did not consider that the landlord would succeed in obtaining planning permission and listed building consent. In Marazzi there was a stark contrast between the views of the parties' two engineers. Judge Dean found himself constrained to treat the views of the defendant's engineer, Mr Redmond, with circumspection. On the facts before him, Judge Green did not share Judge Dean's reservations about Mr Redmond's evidence. The conflicts between the engineers had very substantially been reduced by the views of the joint engineer, Mr Bowles. There was no such joint report before Judge Dean. Judge Green found that the criticisms of Mr Redmond and of Mr Lewis (Global's cost expert) were unjustified and should never have been made. Mr Lewis's figures were criticised at an earlier stage in Ivorygrove's reports as grossly unreasonable. Even without hindsight that criticism was baseless and extravagant.
  46. In Marazzi the planning experts on both sides hotly contested the probability of obtaining planning permission for the revised scheme. Judge Dean preferred the views of the tenants' experts that it would not be obtained.
  47. C. Appeal to Mr Justice Park

  48. Judge Green's decision was given on September 25, 2002, and it is unfortunate that this case, and the Marazzi case, were not dealt with in the County Court together. I was told that this was due, at least in part, to listing difficulties. There was an appeal to Park J in the Marazzi case, which was decided on December 20, 2002: Global Grange Ltd v Marazzi [2002] EWHC 3010 (Ch).
  49. Park J dismissed the appeal, as he put it (paras 7-8):
  50. "essentially on the ground that the decision which the judge reached was properly open to him. Thus I cannot say that his decision was wrong. It does not necessarily follow that if he had found that paragraph (f) did apply, that finding would have been wrong … I can well imagine that, if the question before me had been the question before Judge Dean, I might well have been persuaded that the conditions of paragraph (f) did apply."
  51. Park J said that the finding by Judge Dean that the levelling of the floorboards was not demolition or reconstruction was plainly open to him, and he would probably have made the same finding himself. Park J said that installing new partitions in the third floor was not reconstruction, but more in the nature of altering the internal layout, which was not the same thing as reconstructing the third floor. The same applied to any other area of the building in relation to which similar questions might be considered changes to the partitioning, which altered the layout but did not reconstruct it. But he accepted that there could be a question of degree. If the plans were to gut the whole interior of the hotel and rebuild the interior, that obviously would be reconstruction. But in the actual case the essence of the internal structure remained.
  52. V The application by Ivorygrove

  53. The grounds on which Ivorygrove relies are as follows: (1) the judge failed to make a sufficient finding on the critical issue of whether Global enjoyed a reasonable prospect of achieving the purpose behind its proposed scheme of works, i.e. the transformation of a budget hotel into one which would attract a three to four crown rating, and that issue was relevant to the question whether Global had established that it had the requisite intention under the ground in section 30(1)(f) of the 1954 Act; (2) the judge misdirected himself and/or erred in law in finding that Global's proposed removal and/or erection of partition walls would constitute works for the purpose of the ground in section 30(1)(f) and he ought to have directed himself that, for the purposes of this ground, some form of building upon the premises which involved the structure was required and that partition walls did not fall within the definition of "construction", or alternatively, the judge gave undue weight to this element of the proposed scheme; (3) the judge misdirected himself and/or erred in law in finding that general refurbishment works fell within section 30(1)(f), since for the purposes of this ground, it is not sufficient for a landlord to include in his scheme of intended works a core of construction work for virtually every other item comprised in the scheme to be taken into account, or, alternatively, the judge gave undue weight to the refurbishment element of the proposed scheme; and (4) no reasonable judge would have concluded that the scheme of works was substantial in either context in section 30(1)(f).
  54. The first point relates to the failure of the judge to deal with an argument that the scheme would not itself qualify for 3 to 4 crown standard rating by the English Tourist Board because there were not enough rooms of the required size to take king and queen size beds. There is nothing in this ground of appeal, which is essentially one on lack of adequate reasoning. The judge did not have to deal with every argument, and the point that the scheme would not have actually qualified with the English Tourist Board for three or four crown standard was an obviously bad one. Global had a contractual obligation to the Bedford Estates to carry out works of refurbishment in order that the properties "shall have the characteristics of a three or four crown hotel being in general accordance with the current guidance for three or four crown hotels issued by the English Tourist Board." The Bedford Estates had confirmed approval of Global's scheme for the purposes of the contract.
  55. On the second ground, Ivorygrove argues that partitions, however extensive, would not fall within the definition of "construction." Such works, whatever the nature or composition of the partition walls in question, cannot properly be described as structural. If a partition wall did not form part of the structure of the building, and therefore fell outside ground (f), then it was difficult to see how it could be brought back within that ground because its removal would involve consequential damage to the skirtings or adjoining plasterwork, or its re-positioning would involve substantial making good.
  56. Nor was it material that the partitions were arranged in such a way as to define the particular use of the building because ground (f) was concerned with the physical aspects of the building rather than the use to which it is put.
  57. Global's case on this ground is that there is not, and should be, any rule of law that the removal and replacement of timber and plaster stud partitions can never amount to demolition, reconstruction or construction, and indeed that the authorities show the contrary. The judge's decision on the broad jury question was correct or at least supportable and there is no real prospect of it being reversed.
  58. On the third ground Ivorygrove accepts that both works of preparation ancillary to qualifying works and works closely associated with the completion thereof may properly be taken into consideration for the purposes of ground (f). But ground (f) does not include such items as fittings, fixtures, tiling, decoration or internal reorganisation. Such work can be described as general refurbishment and does not fall with the ground. It is not sufficient for the landlord to include in his scheme of intended work a substantial core of construction work for every item comprised in the scheme to be taken into account for the purposes of ground (f). The judge regarded "the vast bulk" of the proposed works as works qualifying under ground (f) whereas, on his own analysis, only about 10% of the overall cost is attributable to structural works properly so-called. The judge therefore placed very heavy reliance on works which, at best, were ancillary to structural works and in may cases had nothing at all to do with the structure, including such items as making good damage to skirtings and decorations, bathroom tiling and redecoration, and redecoration of the walls. Had the judge restricted his consideration to items of structural works properly so-called, together with works necessarily ancillary or closely associated thereto, he would not have concluded that they were not substantial in either sense deployed in ground (f).
  59. On the fourth ground, substantiality, Ivorygrove argues that even if, contrary to its principal submission, the erection and/or removal of partition walls properly fall within the ambit of ground (f), it is submitted that no reasonable judge would have concluded that Global's scheme met the test for substantiality as it appears in that ground. A fortiori, if the partition walls are not taken into account there is very little that does qualify under ground (f).
  60. This ground has to be addressed separately on the basis of the judge's finding that (a) the large majority of the works fell within ground (f), and (b) that alternatively the bedrock works qualified. As regards (a) unless the judge's findings can be impeached, the finding that the relevant work of construction is "substantial" or that a "substantial part" of the property is affected is obviously right, let alone not appealably wrong. The question is whether, since structure includes non-load bearing elements, the walls are sufficiently substantial to be considered to be part of the structure. The judge's point that rooms are the raison d'etre of the hotel, does not confuse physical structure with purpose. The purpose clothes the physical structure with permanence and demands a degree of physical substance which other stud partitions might not have. He had seen the walls to be demolished and samples of what would replace them. As regards (b) the cost of the bedrock works was agreed at £454,867. The parties' contentions as to annual rent were £100,000 (Ivorygrove) and £200,000 (Global), and so the cost was 3 years' rent at the mid-point between those figures. The judge held (and there is no appeal against this finding) that by themselves these works would have taken "rather more than 23 weeks" - approximately half a year. The work referred to in the "bedrock" list affects every floor of the hotel. This was substantial, and a matter for the judge. On any view a scheme for 23 weeks' works costing over £400,000 was substantial, and there is no basis for interference with the judge's decision.
  61. Ivorygrove also argues that, in the interests of consistency, Judge Green should have followed the Marazzi decision unless there was good reason to the contrary. Judge Green's main reasons for differing from Judge Dean's decision were not compelling. Judge Dean had decided the substantive issues in Marazzi on the assumption that Global would obtain planning and listed building consent. Therefore, his subsequent finding that it probably would not obtain such consent was irrelevant and did not undermine his decision on the principal issue. At any event Judge Dean was right, to an extent, because planning permission was only granted in the present case after some modification of the proposals. Secondly, although Judge Dean had taken a dim view of Mr Redmond's evidence, such view cannot be said to have coloured his judgment generally.
  62. Ivorygrove also relies on the decision of Park J. On partition walls Park J said (a) that ground (f) refers to demolition or reconstruction of a "substantial part" of the premises; (b) Global's case had to be that partition walls were "part" of the premises; (c) however, by "part" the draftsman had in mind specific areas of the building, for example a particular floor; and (d) the erection of partition walls has more to do with altering the internal layout of the building, which is not the same thing as reconstruction: "changes to the partitioning alter the layout of the area but do not reconstruct it". Park J also indicated that the stiffening of floors was not work of "demolition or reconstruction" and that construction of a new, larger, drain did not fall within ground (f). On these points Ivorygrove argues that Park J's judgment undermines Judge Green's approach.
  63. Global's position is that the only matter before Park J, as he himself recognised, was whether Judge Dean's decision was outside the margin of appreciation available to him, and Park J recognised that "a different judge might have taken a different view." The decision provides no support for the view that removing and replacing partitions can never be demolition, reconstruction or construction, and on the contrary is persuasive authority for the view that they can be. In any event, even if the point is right, it only impeaches Judge Green's decision on demolition and reconstruction of "a substantial part" of the premises, but would leave unaffected the finding that the works constituted "a substantial work of construction." The highest that Park J put the "floor reinforcement" question was that it was open to the trial Judge to say that this was not demolition or reconstruction, and that he "would probably have made the same finding". This falls far short of suggesting that the contrary finding would have been wrong. As to the drain, Park J did not find that installation of a drain could not be viewed as construction, Cook v Mott [1961] EGD 294, at 296, being Court of Appeal authority which precludes such a finding. The question was whether the trial Judge's decision in the Marazzi case to exclude the drain was appealably wrong. Park J held that it was not. It does not follow that there would have been anything wrong with a contrary decision.
  64. Judge Green made two findings (para 30 of his decision): (a) that the large majority, but not the whole, of the intended works fell within the section; and (b) that the bedrock of work which the engineers agreed could be considered as structural was indeed structural work and fell within the section. It would have been wrong for the judge to seek to identify only those works which affected the "structure" (however defined) and to exclude all the others: the position has to be looked at as a whole. The effect of the authorities is that the judge has to decide what works fall within the section, and is directed to look at the whole picture. Here, there was a single scheme with a single purpose. It was open to the judge to find that it affected the structure because it affected the basement drains, floor and masonry walls, the partition walls and the floors on the ground floor and upwards and it affected the roof. Much of the redecoration was required in order to make good the damage which these works would do. Furnishing and fitting out would have to be excluded. The judge's decision that the bulk of the scheme qualified should not be interfered with on appeal. The judge's primary decision was a reasoned decision and well within his rights on the primary facts which he found. The secondary decision related to works which both parties' cost consultants thought affected elements which could reasonably be considered to be structural, and did not include works of general refurbishment. If that was their view, it is impossible to argue that the judge could not find that the works amounted to demolition/reconstruction/construction.
  65. VI Conclusions: legal principles and the judge's findings

  66. The test for review of a judge's decision on whether the works which the landlord intends to do are works of demolition or reconstruction of a substantial part of the premises, or is a substantial work of construction on the premises or part thereof, has been variously stated as being whether the judge came to a conclusion which was clearly wrong or to which no reasonable man could have come, or whether there was evidence upon which he could have arrived at such a conclusion, or whether there any wrong approach or wrong appreciation of the evidence or assessment of it, or omission to consider any evidence: see, among other decisions, Percy E Cadle & Co. Ltd. v Jacmarch Properties Ltd [1957] 1 QB 323; Romulus Trading Co Ltd v Henry Smith's Charity Trustees [1990] 2 EGLR 75; Global Grange Ltd v Marazzi [2002] EWHC 3010 (Ch). The reason is that the question is prima facie a question of degree and fact, and one which will not be reviewed in the absence of misdirection or of evidence to support the conclusion: Bewlay (Tobacconists) Ltd v British Bata Shoe Co Ltd [1959] 1 WLR 45, 48. "Ultimately, it is a jury question …": Romulus Trading Co Ltd v Henry Smith's Charity Trustees [1990] 2 EGLR 75, 78 per Mustill LJ.
  67. For there to be reconstruction, there must be substantial work of construction, and "reconstruct" means "rebuild": Percy E Cadle & Co. Ltd. v Jacmarch Properties Ltd [1957] 1 QB 323, 328. Demolition involves the physical act of destruction, and reconstruction is equivalent to rebuilding, and contemplates a state of affairs where there has been a measure of demolition falling short of total demolition: ibid at 329. "Reconstruction" connotes a physical reconstruction of the premises, and means a substantial interference with the structure of the premises and then a rebuilding of such part of the premises as has been demolished by reason of the interference with the structure: ibid. at 329-330, per Ormerod LJ at 329-330, approved in Joel v Swaddle [1957] 1 WLR 1094, at 1100.
  68. It is necessary to look at the whole of the work, and then decide as a matter of fact and common sense whether it amounts to demolition or reconstruction of a substantial part of the premises, or the carrying out of substantial work of construction on them: Joel v Swaddle [1957] 1 WLR 1094, 1099; Bewlay (Tobacconists) Ltd v British Bata Shoe Co Ltd [1959] 1 WLR 45, 49; Cerex Jewels Ltd. v Peachey Properties Ltd. [1986] 2 EGLR 65, 69.
  69. Work associated with demolition and reconstruction, such as works of preparation ancillary to such works, or re-plastering and rewiring, or the laying of cables and drains, may be considered when looking at the totality of the work to determine whether the work is construction or is substantial or is on a substantial part of the premises: Cerex Jewels Limited v Peachey Property Corporation Plc [1986] 2 EGLR 65; Romulus Trading Co Ltd v Henry Smith's Charity Trustees [1990] 2 EGLR 75; Cook v Mott [1961 EGD 637. Contrast Barth v Pritchard [1990] EGLR 109. But that does not mean that the landlord has only to include in his scheme of intended work a substantial core of constructional work for every item comprised in the scheme to be taken into account: Romulus Trading Co Ltd v Henry Smith's Charity Trustees [1990] 2 EGLR 75, 78. It is a matter of degree depending on the circumstances of each case: Cook v Mott [1961] EGD 637.
  70. There has been some discussion of the question whether the concepts of demolition and reconstruction inevitably involve load bearing structures. Section 30(1)(f) does not refer to the "structure," but several of the decisions refer to the demolition and reconstruction of the "structure": e.g. Percy E Cadle & Co. Ltd. v Jacmarch Properties Ltd [1957] 1 QB 323, 328, 329-330; Joel v Swaddle [1957] 1 WLR 1094, 1100.
  71. In Bewlay (Tobacconists) Ltd v British Bata Shoe Co Ltd [1959] 1 WLR 45 the proposal of the landlords included the removal of part of a non-load bearing wall. Lord Evershed MR said (at 49) "…I do not accept that first the removal of the wall is not 'demolition', and further that the replacement of the wall by screens cannot fairly be called in some real sense 'reconstruction.' "
  72. In Romulus Trading Co Ltd v Henry Smith's Charity Trustees [1990] 2 EGLR 75, 77, Farquharson LJ said:
  73. "For works to qualify as 'reconstruction' within para (f) it must be shown primarily that they are works of rebuilding involving a substantial interference with the structure of the building, but structure is not necessarily confined to outside or other load-bearing walls …"
  74. But in Barth v Prichard [1990] 1 EGLR 109, 111, Stocker LJ said:
  75. "I consider that whether or not works fall within the definition of 'construction' must depend upon the facts in each case in which the problem falls to be considered … If it is necessary to decide whether or not in any given case it is necessary for works to involve directly the structure of the building in some way, my own view would be that this is implicit in the generality of section 30(1)(f). In other words, that some form of building upon the premises which involves the structure is required. I would not consider wooden partitions however extensive, as falling within the definition of 'construction', but such a situation would have to be reviewed in accordance with the facts of any given case."
  76. In Graysim Holdings Ltd v P&O Property Holdings Ltd [1993] 1 EGLR 96, at 100, Mr Anthony Grabiner, QC, as a deputy judge of this division, applied Bewlay (Tobacconists) Ltd v British Bata Shoe Co Ltd and held that demolition and/or construction need not be confined to load bearing walls. It was appropriate to describe the removal of the existing interior of the market hall as an exercise in demolition followed by a reconstruction of a substantial part of the premises. It was equally appropriate to describe all of these proposed works as the carrying out of a substantial work of construction on the holding. They were very extensive works which would result in a brand new market hall. There was no appeal from his decision on this aspect: see [1994] 1 WLR 992 (CA) and [1996] AC 329.
  77. The most recent authority on this point is Pumperninks of Piccadilly Ltd v Land Securities plc [2002] EWCA Civ 621, [2002] Ch 332. It was decided in May 2002, but was not cited to Judge Green, or to Park J, or to me, and I invited written submissions on it following the oral hearing. In that case the tenant had an "eggshell tenancy," i.e. a tenancy in which the demise consisted of the internal skin of the part of the building occupied by the tenant, with all load-bearing parts excluded. It was held that nothing in the authorities justified the proposition that "premises" in section 30(1)(f) referred only to parts of a built structure which were load bearing and performed some structural function (at 632, per Charles J, and 636, per Chadwick LJ). But the Court of Appeal left open the question whether the same result would flow where the demised property included load-bearing or structural parts. After referring to City Offices (Regent Street) Ltd v Europa Acceptance Group plc [1990] EGLR 63 (a decision on the interpretation of the expression "reconstruction of the demised premises" in the case of an "eggshell tenancy", where the Court of Appeal left open the question whether, if the demise included structural parts of the building, the clause in question could only apply if there were some alteration to a load bearing part of the structure.), Charles J said (at para 68; [2002] Ch at 355-356):
  78. " … the cases referred to therein (and, in my judgment, the other cases relied on by the tenant) may be authority for the proposition that where the demised property includes structural parts of the building there can never be reconstruction (or demolition) unless there is some demolition or alteration to a load-bearing part of the structure (or, I would add, in agreement with the judge, enclosing walls, floor and ceiling even if not load-bearing or structural) included in the demised property … I[n] my judgment they go no further."
  79. Chadwick LJ said (para. 86, [2002] Ch at 360)
  80. "I agree, also, with the view expressed by Charles J …that there is nothing in the passages in the authorities upon which the tenant relies—Percy E Cadle & Co Ltd v Jacmarch Properties Ltd [1957] 1 QB 323, 328, 329, Joel v Swaddle [1957] 1 WLR 1094, 1099, 1100, 1101, Barth v Prichard [1990] 1 EGLR 109, 111d-e, j-k and Romulus Trading Co Ltd v Henry Smith's Charity Trustees [1990] 2 EGLR 75, 76-77—which compels, or even supports, the conclusion for which they were cited: that 'premises' in section 30(1)(f) of the Act is confined to parts of a built structure which perform some structural function. What is plain from those passages is that cases on the meaning of 'demolish' or 'reconstruct' for the purposes of section 30(1)(f) of the 1954 Act turn on their particular facts. In each case the relevant questions are: (i) what are the physical features of the property comprised in the tenancy; (ii) what, amongst those features, is capable of being demolished and reconstructed; (iii) is what is being done to those features which are capable of being demolished and reconstructed, taken as a whole, properly to be described as demolition or reconstruction of those features or a substantial part of them? It is, I think, wrong to start from the premise that physical features which are not load-bearing are incapable of being demolished and reconstructed, although it may well be that, in the particular case where there are load-bearing features, work which does not involve the demolition or reconstruction of any of those load-bearing features will not meet the test under (iii). But there is no reason why, in a case where there are physical features which are capable of being demolished and reconstructed, but none which are load-bearing, the test under (iii) should not apply, or should not be met in appropriate circumstances."
  81. There is plainly nothing in the wording of section 30(1)(f) which requires the demolition or construction of structural or load bearing features as a condition of its applicability. I am satisfied that no judicial authority binds the court to read into the section such a condition. To do so would treat the references in the authorities to "structure" in Percy E Cadle & Co. Ltd. v Jacmarch Properties Ltd [1957] 1 QB 323, 329 (as approved by Lord Evershed MR in Joel v Swaddle [1957] 1 WLR 1094, at 1100) as if they were statutes. It would be quite wrong to import into section 30(1)(f) not only the word "structure", which does not appear there, nor, still less, the case-law on the meaning of "structure" in other statutory contexts (such as section 11 of the Landlord and Tenant Act 1985). As Lord Evershed MR himself warned in Bewlay (Tobacconists) Ltd v British Bata Shoe Co Ltd [1959] 1 WLR 45, 49: "I prefer to avoid exegeses of the statutory language unless they are absolutely necessary; for the result would otherwise tend thereafter to substitute for the problem of construction of Parliamentary language the problem of the construction of the judgments of the court."
  82. It follows, in my judgment, that whether the relevant parts of the premises are load-bearing is simply one of the factors to be taken into account in determining the jury question of whether there is demolition or reconstruction, or demolition or reconstruction of a substantial part, or substantial work of construction on the holding or part of it, and not a pre-condition of the applicability of section 30(1)(f).
  83. It also follows that, where partitioning is concerned, it will be a matter of fact and degree whether their replacement and reconfiguration will be within either limb of section 30(1)(f). Plainly, as the judge recognised, section 30(1)(f) will not apply to demountable office partitioning. But I am satisfied that it was open to him to find that the nature of the work, and the role of the partitions, engaged section 30(1)(f). It was also open to him to find that view confirmed when there was taken into account the construction of the larger lift, the excavations and underpinning required, the construction of two steel beams, the openings made in some load bearing internal walls, and the amount of strengthening to the floors and laying of the new drains.
  84. In any event it was plainly open to him on the agreed evidence to find that there was a bedrock of work to the structure totalling over £450,000, which on any view was a "substantial work of construction." That work included the installation of the larger lift shaft and lift, and associated works; the stiffening of the upper three floors to cope with the deflection; the insertion of two steel beams in the basement; and demolition at basement level of masonry and possibly load bearing.
  85. The holding of the judge on the bedrock works is sufficient to dispose of the case, but I also consider that it was open to him on the evidence to find that the bulk of the work was so connected with the structural work that it could be taken into account in determining substantiality in both its aspects, namely that the relevant work of construction was "substantial" or that a "substantial part" of the property was affected.
  86. I was concerned about the difference of result between this case and the Marazzi case. It would not be an acceptable answer to this difficulty simply to say that, where the question is one of fact and degree, different judges can come to different conclusions on substantially similar facts, and the principles of review by an appellate tribunal mean that each will stand. That would not be an attractive result where the tenants, as here, have each operated similar, and almost adjoining, hotels for many years, and where the landlord's scheme is very similar in each case. But because the cases were not heard together, in this case Global had the benefit of additional expert evidence and was able to bring forward material to show Judge Green that Judge Dean's misgivings about the expert evidence in the Marazzi case were not justified.
  87. Moreover, it is clear from several passages in Park J's judgment that he was very mindful that his task was not to decide on the fulfilment of the conditions in section 30(1)(f), but to decide whether the judge had directed himself correctly and whether the decision was properly open to him. Park J also made it clear in several passages that if he had been the judge of fact he might well have been persuaded to come to a different conclusion himself, both as regards the work as a whole, and on the issue of the partition walls.
  88. My conclusion, therefore, is that the judge correctly directed himself on the legal principles and that the decision to which he came was open to him on the evidence. In the light of the way in which the case developed the appropriate order would be to grant the application for permission to appeal, and to dismiss the appeal.


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