John Dudley Brett (Plaintiff v (1) The Brett Essex Golf Club Ltd (Defendant (2) The National Westminster Bank Plc
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE SLADE,LORD JUSTICE CROOM-JOHNSON,SIR JOHN MEGAW |
| Judgment Date | 07 May 1986 |
| Judgment citation (vLex) | [1986] EWCA Civ J0507-4 |
| Date | 07 May 1986 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | 86/0423 |
[1986] EWCA Civ J0507-4
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(HIS HONOUR JUDGE FINLAY QC, SITTING AS
A JUDGE OF THE HIGH COURT)
Royal Courts of Justice
Lord Justice Slade
Lord Justice Croom-Johnson
and
Sir John Megaw
86/0423
CH 1983 B No. 2447
and
MR. R. PRYOR QC and MR. T. JENNINGS (instructed by Messrs. Bazley White & Co, Solicitors, London) appeared on behalf of the Plaintiff (Appellant)
MR. A. STEINFELD (instructed by Messrs. Leonard Kasler & Co, Solicitors, London EC4V 3DX) appeared on behalf of the First Defendant (Respondent)
This is an appeal by Mr. John Dudley Brett, the plaintiff in an action, from a judgment of His Honour Judge Finlay, sitting as a judge of the Chancery Division, which was delivered on 19th October 1983. This judgment concerned the construction of a rent review clause in a lease granted in 1978, and in particular the construction and effect of a reference in that clause to s.34 of the Landlord and Tenant Act 1954.
I think it will be convenient to begin this judgment by explaining briefly the statutory background to the two leases which will fall to be considered. S.34 of the Landlord and Tenant Act 1954 is comprised in Part II of that Act, which gives security of tenure to business tenants. In its original form, so far as material, it read as follows:
"The rent payable under a tenancy granted by order of the court under this Part of this Act 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 to be that at which, having regard to the terms of the tenancy (other than those relating to rent) the holding might reasonably be expected to be let in the open market by a willing lessor, there being disregarded—
(a) any effect on rent of the fact that the tenant has or his predecessors in title have been in occupation of the holding,
(b) any goodwill attaching to the holding by reason of the carrying on thereat of the business of the tenant (whether by him or by a predecessor of his in that business),
(c) any effect on rent of any improvement carried out by the tenant or a predecessor in title of his otherwise than in pursuance of an obligation to his immediate landlord….."
There is a paragraph (d), but I do not think I need read it.
Paragraph (c) of this section, in its original form, gave rise to certain problems of interpretation, as was illustrated by the decision of the House of Lords in the case of In Re "Wonderland" Cleethorpes, which is reported under the name of East Coast Amusement Co. Ltd. v. British Transport Board, [1965] Appeal Cases, 58. In that case the appellant company had carried out certain works or improvement in 1926 under a lease granted in 1912 and subsequent leases. In 1938 the landlord granted to the company a new lease for 21 years from a date in 1939. Shortly before this lease expired the company served on the landlord a request for a new tenancy under s.26 of the 1954 Act. There was no counter-notice. The question arose whether by virtue of s.34 (c) of the 1954 Act, the work done in 1926 should be disregarded for the purpose of determining the rent payable under a new tenancy. The House of Lords held that it should not. It held that s.34 (c) referred only to improvements carried out by the tenant who was making the application for the tenancy, and effected during the term of the tenancy current when the application was made, or by a predecessor in title of his to the same tenancy.
A few years later, presumably having regard to this decision, s.34 of the 1954 Act was amended by the Law of Property Act 1969. S.l (l) of that Act substituted an entirely new paragraph for paragraph (c) and added to s.34 an entirely new sub-section (2), by providing:
"In section 34 of the act of 1954 (rent under new tenancy) the following paragraph shall be substituted for paragraph (c) (improvements to be disregarded):—
'(c) Any effect on rent of an improvement to which this paragraph applies'
and the following subsection shall be added (the present section, as amended by the foregoing provisions, becoming sub-section(1)):—
'(2) Paragraph (c) of the foregoing sub-section applies to any improvement carried out by a person who at the time it was carried out was the tenant, but only if it was carried out otherwise than in pursuance of an obligation of his immediate landlord, and either it was carried out during the current tenancy or the following conditions are satisfied, that is to say,—
(a) that it was completed not more than twenty-one years before the application for the new tenancy was made; and
(b) that the holding or any part of it affected by the improvement has at all times since the completion of the improvement been comprised in tenancies of the description specified in section 23 (1) of this Act; and
(c) that at the termination of each of those tenancies the tenant did not quit".
Against this statutory background, I now revert to the facts of the present case. By a lease dated 13th August 1973 (p.B 12 et seq of our bundle) the plaintiff let certain parcels of land forming part of Clapgate Farm, Little Warley, Essex, which were defined in the lease as "the demised premises" to The Brett Essex Golf Club Limited, the first defendant in these proceedings (which I shall call "the company") for a term of 50 years from 9th July 1973. It appears that at the time when the lease was granted the plaintiff held 750 out of the 1,000 issued £1 shares in the company, while a Mr. Greene held the remaining 250 shares. The yearly rent payable under the lease was expressed by clause 1 to be £2,000 for the first two years of the term, £5,000 for the next five years, and for each successive five years, up to and including the 46th year, a rent to be agreed by the parties, or in default of agreement to be determined in accordance with the provisions of clause 2. The first period during which a reviewed rent would be payable would thus begin in July 1980.
Clause 2, so far as material, provided for such rent to be determined in accordance with the following formula, that is to say:
"…..such rent shall be the rent (but not less than the rent reserved in the period of five years immediately expired) at which the demised premises might reasonably be expected to be let in the open market by a willing Landlord by a lease for a term equal to the residue of the term unexpired at the end of the period of five years immediately before expired with vacant possession on the same terms and subject to the same incidents in all other respects as this present demise and upon the supposition (if not a fact) that the Tenant had complied with all the repairing covenants herein imposed on the Tenant (but without prejudice to the rights and remedies of the Landlord in respect thereto) and there being disregarded (if applicable) those matters set out in paragraphs (a), (b) and (c) of Section 34 of the Landlord and Tenant Act 1954".
Clause 3 (4) of the lease contained a covenant by the company
"To lay out the demised premises as a golf course and not to erect at any time thereon any dwellinghouse or other building except such buildings as are authorised by Clause 4 (2) (hereinafter referred to as 'the permitted buildings') for the use of the club and the members and servants thereof and to make no other alteration in the character and general arrangement of the demised premises save as may be necessary or desirable for laying out and maintaining the same as a golf course and as may be approved for that purpose by the Landlord or his surveyor".
Clause 4 (2) contained a covenant by the landlord with the tenant
"that the Tenant shall be at liberty to erect at its own expense on the demised premises at the point marked 'A' on the said plan a club house with all necessary offices and outbuildings for the use of the members and servants of the club".
I think there is nothing in the 1973 lease to suggest that there were any buildings on the land at the date when it was granted.
After this grant the company not only laid out an 18 hole golf course on the demised land, but built a clubhouse which was completed in about July of 1975. It also laid out a 9 hole golf course on some nearly adjoining land, not included in the 1973 demise. That was completed at about the end of 1977.
In January 1978 or thereabouts, negotiations took place between the parties with regard to the proposed sale by the plaintiff of his 750 shares in the company to Mr. Greene. At about the same time there was also negotiated a project for the prolongation of the term granted to the company and for the enlargement of the premises comprised in its demise by the inclusion of the 9 hole golf course. Eventually the sale of the shares was completed by a transfer of the plaintiff's shareholding to Mr. Greene on 17th February 1978. In the meantime, on 14th February 1978, the plaintiff duly granted to the company an entirely new lease (p.B 26 et seg in our bundle).
In that lease the company was defined as "the Tenant", which expression was stated to include, where the context so admitted, its successors in title. Clause 1 defined the subject matter of the lease as
"ALL THOSE parcels of land (hereinafter called 'the Demised Premises') forming part of Clapgate Farm aforesaid as the same are for the purpose of identification only delineated on the plan annexed hereto and thereon edged red...
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