Erimus Housing Ltd v Barclays Wealth Trustees (Jersey) Ltd and Another (Respondents/Claimants)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Patten,Lord Justice Christopher Clarke,Lord Justice Longmore |
| Judgment Date | 18 March 2014 |
| Neutral Citation | [2014] EWCA Civ 303 |
| Docket Number | Case No: A3/2013/2203 |
| Court | Court of Appeal (Civil Division) |
| Date | 18 March 2014 |
[2014] EWCA Civ 303
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
CHANCERY DIVISION
John Jarvis QC
HC12D04636
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Longmore
Lord Justice Patten
and
Lord Justice Christopher Clarke
Case No: A3/2013/2203
Adam Rosenthal (instructed by Bond Dickinson LLP) for the Appellant
Emily Betts (instructed by Reed Smith LLP) for the Respondent
Hearing date : 4 March 2014
On 9 November 2004 the appellant, Erimus Housing Limited ("EHL"), was granted a lease of premises on the 4 th and 7 th floors, Centre North East, Albert Road, Middlesbrough ("the Premises") for a term of five years expiring on 31 October 2009. The rent was £170,209 per annum together with a service and insurance charge which were also reserved as rent. Under clause 3.1.1 of the lease EHL covenanted to pay the rents quarterly in advance on the usual quarter days throughout the term.
The lease was contracted out of the provisions of the Landlord and Tenant Act 1954 so that the contractual term came to an end on 31 October 2009. The respondent landlords ("BWT") had acquired the freehold reversion in 2005 and on 20 May 2009 Mr Andrew Arkle, EHL's land and property manager, wrote to the landlord's agent (Mr Gilroy of Storeys SSP) suggesting that discussions should begin about the terms on which BWT would be seeking to renew the lease. Mr Arkle said that although EHL would wish to take a lease of the existing accommodation, it wished to maintain flexibility by having a break clause as was included in the existing lease. He suggested a new three year term with annual breaks.
On 6 October 2009 after a meeting with Mr Arkle, Storeys wrote setting out BWT's proposals for a new lease. They suggested a six year term with breaks every two years. The initial rent was to be £173,764 per annum (a modest increase on the previous rent) which would be subject to an upwards only rent review at the end of the third year.
The next communication between the parties seems to have been on 15 January 2010 by which time the 2004 lease had expired and EHL had continued to occupy the Premises and to pay the rents reserved under that lease. In an e-mail of 15 January Mr Arkle made some counter-proposals about the terms of a new lease and the new rent and service charge. He proposed a six year term with breaks after two, three, four and five years; a rent of £165,000 reviewable after three years; and a service charge of £72,388. The new lease, like the old, was to be contracted out of the 1954 Act.
It looks from the evidence as if there was no immediate response to this from BWT which is very probably explicable by the level of rent which they continued to receive from EHL. The landlord's proposals of 6 October 2009 confirm that there had been no appreciable increase in rental values for the Premises and EHL was now proposing a lower starting rent under any new lease. Some delay may also be attributable to a change in BWT's managing agents. In August 2010 Storeys were replaced by Commercial Estates Group Limited ("CEG"). In any event on 16 November 2010 Mr Arkle sent an e-mail to Mr Richardson of CEG in which he said this:
"On the matter of our occupation, we are holding over under the terms of the original lease and continue to make rent, service charge and insurance payments on the due dates. When we met at John Irwin's offices some time ago we discussed the background to our occupation but that was just before legal completion of the building sale. We haven't received any specific proposals from you in terms of lease documentation and I was therefore wondering whether this is something that you will be progressing in the near future? In the meantime we assume that both sides are content for matters to continue as they currently exist."
Some further negotiations did take place, although they appear to have proceeded at a relatively leisurely pace. There are no further e-mails or letters (at least in evidence) until 15 June 2011 when Mr Arkle and Mr Richardson confirmed in an exchange of e-mails that the parties had agreed terms for the renewal of the lease. There was to be a three year term of the existing accommodation at a rent of £133,665 per annum with an option to break on 30 June 2013 on six months' notice. The target date for the execution of the new lease was 1 July 2011.
The lease was not executed on that date. Instead, on 26 August 2011, Mr Arkle confirmed to Mr Richardson what had already been communicated to BWT which was that EHL now wished to vacate the Premises having been given the opportunity to purchase another more suitable building. In his e-mail Mr Arkle said:
"Unfortunately this means we are unable to progress with the two year minimum commitment as originally expected in good faith. We are anticipating vacating Centre North East around March of 2012 and are therefore suggesting that we continue to hold over paying as we have to date, such payments being comparable with what was intended in terms of the sums involved."
Mr Richardson says in his witness statement that he had heard nothing further from Mr Arkle and so on 3 February 2012 he sent him an e-mail to find out if (and, if so, when) they anticipated vacating the Premises. Mr Richardson says that he was looking to be given a period of notice by EHL in order to arrange for a schedule of dilapidations and to organise the future marketing of the Premises. On 24 May 2012 Mr Arkle suggested 31 August 2012 as a suitable date and asked whether BWT wished to receive formal notice. On 30 May Mr Arkle sent a letter to CEG asking them to accept it as EHL's intention to vacate the Premises " and end our tenancy on 31 August 2012".
The dispute between the parties is whether that notice or the notice served by EHL's solicitor on 21 June 2012 was effective to bring to an end the tenancy of the Premises which continued after EHL held over at the end of the 2004 lease. If the legal effect of those arrangements was to create a tenancy at will on the same terms as to rent as the expired lease then it is common ground that the notice given on 21 June 2012 which expired on 28 September 2012 when EHL vacated the Premises was effective to terminate the tenancy. But BWT contend that EHL held over under a periodic yearly tenancy which could not be terminated except by at least six months' notice served to expire on 31 October 2013. By May 2012 it was too late for them to serve an effective contractual notice for 31 October 2012 or to comply with the 1954 Act which would, of course, have applied to a new periodic tenancy as opposed to a tenancy at will: see Wheeler v Mercer [1957] AC 416. Section 24(2) would have required EHL to have given the contractual period of notice.
To resolve the issue between the parties as to the requisite period of notice, BWT issued a Part 8 claim in the Chancery Division seeking a declaration that EHL had continued to occupy the Premises after 31 October 2009 under an annual tenancy. As with all Part 8 claims, the underlying facts were not in dispute and there was no cross-examination of any witnesses. Both sides' solicitors put in witness statements setting out the history and exhibiting the documents I have referred to. Mr Richardson dealt only with the sequence of events following Mr Arkle's e-mail of 26 August 2011. There was also a useful agreed chronology. The judge had therefore to decide whether, on the facts I have outlined, the parties agreed to create a yearly tenancy of the Premises to which the 1954 Act applied or only a tenancy at will. It is common ground that if a new periodic tenancy came into existence it was a yearly and not a quarterly tenancy because it was a tenancy at a yearly rent: see Richardson v Langridge (1811) 4 Taunt 128, 131.
Mr John Jarvis QC (sitting as a deputy judge of the Chancery Division) decided that the parties had created a new yearly tenancy of the Premises which could not therefore be terminated before 31 October 2013. The parties have subsequently agreed that any such tenancy came to an end on that date. EHL now appeals with the leave of Vos LJ. In granting leave he observed that it might be thought surprising that parties who were engaged even in desultory or stalled negotiations, as the judge seems to have treated them, should have intended to create a protected annual tenancy. EHL's case is that the judge's finding was both inconsistent with any reasonable objective view of the circumstances relevant to the period of holding over and with the authorities which govern the court's approach to what is a question of law.
I have to say at the outset, with respect to the judge, that it is far from clear as to when in his view the yearly tenancy came into existence. He accepted that prior to the end of the original term negotiations did begin about the renewal of the lease and BWT proposed terms. Further discussions were anticipated. The lease expired on 31 October 2009 by which time Mr Arkle had not responded in detail to Storey's letter of 6 October. But this was remedied by his e-mail of 15 January 2010 and BWT has not contended that any periodic tenancy came into existence during this period.
The judge described the negotiations as desultory and lacking any impetus:
"26. I have set out in some detail at the outset of this judgment the chronology of the negotiations. I said during the course of argument that I...
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