Compton Group Ltd (Plaintiffs) (Respondents) Estates Gazette Ltd (Defendants) (Appellants)
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE STEPHENSON,SIR JOHN PENNYCUICK,LORD JUSTICE BROWNE |
| Judgment Date | 27 May 1977 |
| Judgment citation (vLex) | [1977] EWCA Civ J0527-2 |
| Court | Court of Appeal (Civil Division) |
| Date | 27 May 1977 |
| Docket Number | 1975 C. No 2971 |
[1977] EWCA Civ J0527-2
In The Supreme Court of Judicature
Court of Appeal
On Appeal from the High Court Of Justice
Chancery Division
Group B
(Mr. Justice Goulding)
Lord Justice Stephenson
Lord Justice Browne
and
Sir John Pennycuick
MR. JOHN COLYER Q.C. and MR. K. LEWISON (instructed by Messrs. Lovell, White & King, Solicitors, London) appeared on behalf of the Defendants (Appellants).
MR. JEREMIAH HARMAN Q.C. and MR. MARK POTTER (instructed by Messrs. Courts & Co., Solicitors, London) appeared on behalf of the Plaintiffs (Respondents).
I shall ask Sir John Pennycuick to give the first judgment.
This is an appeal from an order made by Mr. Justice Goulding on 13th April 1976. The parties to the action are Compton Group Ltd, as plaintiff, and Estates Gazette Ltd, as defendant. The learned judge decided the case in favour of Compton Group; the appeal is brought by Estates Gazette.
Summarily Estates Gazette is the reversioner under an under-lease of part of certain premises, 147 to 149 Wardour Street, Westminster, dated 26th October 1967. Compton Group is the tenant under that underlease. The issue is as to the amount of rent payable under a review provision taking effect in 1974 at a date when the Counter-Inflation (Business Rents) Order, 1973, was still in force.
At 26th October 1967, Regalis Holdings Ltd, was the leasehold owner of these premises. By the underlease of that date, Regalis granted a 21-year lease of the premises to Compton Group. I will set out the material provisions of that underlease.
It is made between Regalis Holdings Ltd, called the lessors, and Compton Group Ltd, called the lessees. Then clause 1 reads: "In consideration of the rents and covenants on the part of the lessees hereinafter reserved and contained the lessors hereby demise unto the lessees all those the premises" - and it describes them - "together with" certain rights, and subject to a certain exception and reservation - "to hold the same unto the lessees from the 29th day of September 1967 for a term of twenty-one years next ensuing (determinable as hereinafter provided) YIELDING AND PAYING therefor unto the Lessors (a) during the first seven years of the said term the yearly rent of FIVE THOUSAND FIVE HUNDRED POUNDS (£5,500) (b) during the next seven years thereof the yearly rent of FIVE THOUSAND FIVE HUNDRED POUNDS (£5,500) or if theLessors shall serve written notice on the Lessee at least four months prior to the expiration of the first seven years requiring the rent payable for the demised premises to be reviewed such yearly rent as the respective surveyors of the Lessors and the Lessees shall within two months prior to the expiration of the first seven years agree in writing as being a fair rack rent as between a willing Landlord and a willing Tenant which would be payable for the demised premises if the same were then to be let as a whole for a term of seven years with vacant possession upon the terms of this Lease mutatis mutandis (save as regards rent…". Then two matters are to be disregarded and there follows a corresponding provision to take effect at the expiration of the second seven year period.
Then come the words: "AND in default of agreement as aforesaid as to the yearly rent payable for the demised premises at the times such rental reviews shall be made or required the said rent shall be valued on the basis aforesaid by a surveyor to be appointed on the application of the Lessors by the President for the time being of the Royal Institute of Chartered Surveyors whose valuation shall be made as an expert and not as an arbitrator and whose decision both as to rent and costs of such valuation shall be final and binding upon the Lessors and the Lessees". Then there is a provision for further rent by reference to insurance premiums. Clause 2 reads: "The Lessees for themselves and its assigns to the intent that the obligations may continue throughout the term hereby granted HEREBY COVENANT with the Lessors as follows:- (1) To pay the said reserved rents (9) Not to use or suffer or permit the demised premises or any part thereof to be used otherwise than for the purpose of the trade or business of the Lessees namely as offices and workrooms appertaining to the production sale and distribution of cinema and television films and for no other purpose or for any other trade or businessof a kind or kinds to be from time to time approved in writing by the Lessors and the Superior Lessors such approval not to be unreasonably with held which latter consent the Lessors will at the request and cost of the Lessees use their best endeavours to obtain".
Subclause (19): "At all times during the term hereby demised to comply in all respects with any licence consent permission and conditions relating to the Town and Country Planning Act 1962 or any statutory modification or re-enactment thereof for the time being in force and any Regulations or Orders made thereunder in respect of the demised premises", I say at this stage that the live issue in this case turns wholly on the rent review provision in clause 1 of the underlease. We were taken through the underlease, very properly, in some detail, but I do not think any significant light is thrown on the construction of clause 1 by any of the other terms in the underlease.
Estates Gazette is the assignee of the leasehold reversion under the underlease. I shall henceforward refer to Estates Gazette as the lessor, and Compton Group Ltd. as the lessee.
It will be observed that the first review date under the underlease was 29th September 1974. At that date the Counter. Inflation (Business Rents) Order 1973 was in force. That order had superseded a previous order made in 1972. I should read certain clauses from the 1973 order: "(1) This order may be cited as the Counter-Inflation (Business Rents) Order 1973 and shall come into operation on 29th April 1973".
"(2) In this Order, unless the context otherwise requires … 'Business tenancy' means 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 purpose of a business carried on by him or for those and other purposes butdoes not include a tenancy of or a right to occupy land used for agriculture or a building lease".
"'Standard rate' has the meaning assigned to that expression in Article 4".
Then: "(4) (1) Subject to paragraph (2) of this article and to articles 6, 7 and 8, the standard rate in relation to any premises means - (a) where a business tenancy was subsisting on 5th November 1972, the rate at which rent was payable (whether or not than determined as to amount) under that tenancy at that date".
Paragraph 10 (1) "Subject to paragraph (3) of this article, where a tenant has paid on account of rent any amount which by virtue of this order he is not liable to pay, he shall be entitled to recover that amount from the landlord who received it".
Finally, paragraph 14: "Nothing in this order shall render unlawful or invalid any agreement, determination or notice relating to a rent to which this order applies but, subject to the provisions of this order, where any such agreement, determination or notice provides for an increase of rent in respect of any part of the time during which this order is in force, the amount of that increase shall not be payable in respect of that period". It is not in dispute that the underlease created a business tenancy for the purpose of that order.
On 25th July 1974 - that is, before the review date - the Business Rents (Transitional) Order 1974 was made, that order being due to come into force on 1st November and providing for a limited relaxation of the freeze under the 1973 Order. I mention in parenthesis that in the event the freeze was removed altogether by an order made shortly afterwards.
The lessor duly gave a review notice pursuant to the rent review provision in the underlease. The lessee contends that onthe proper construction of the review provision, the "fair rack rent" mentioned in the review provision must he treated as meaning the existing frozen rent of £5,500. The lessor contends that at the same date the expression "fair rack rent" means the market rental value at that date, disregarding the freeze. The surveyors of the respective parties were unable to come to terms; indeed, the difference between them was evidently a very wide one and the difference in money was very considerable indeed.
On 25th March 1975 the lessees issued the summons which commenced this action. The summons as amended and reamended asks four questions. The main, and almost the only live, question for the present purpose is No. 3, which reads as follows: "Whether a surveyor determining the fair rack rent of the premises … (3)ougiht to take into account and apply the provisions of the Counter-Inflation (Business Rents) Order 1973 ('the freeze') and in particular article 5 thereof so that the yearly rent assessed as payable under the said rent review provision should not exceed £5,500.00". I shall refer later on shortly to the other questions raised by the summons.
The summons came on for hearing before Mr. Justice Goulding in April 1976 and he gave his judgment on 13th April. Mr. Justice Goulding in his judgment made the procedural objection that the summons was wholly concerned with giving directions to the surveyors, whose function was to value the rent as experts, and that it was not appropriate for the court to give any direction at all. He considered that the jurisdiction of the court was being somewhat strained when the court was asked to make any declaration as asked by the summons. I am to a considerable extent in agreement with...
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