London City Corporation v Fell and Others (Sub nom Herbert Duncan Ltd v Cluttons)
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE NOURSE,LORD JUSTICE EVANS,SIR MICHAEL KERR |
| Judgment Date | 25 November 1992 |
| Judgment citation (vLex) | [1992] EWCA Civ J1125-3 |
| Docket Number | 92/1137 |
| Court | Court of Appeal (Civil Division) |
| Date | 25 November 1992 |
[1992] EWCA Civ J1125-3
Lord Justice Nourse
Lord Justice Evans
Sir Michael Kerr
Lord Justice Nourse
Lord Justice Evans
Sir Michael Kerr
92/1137
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN/S BENCH DIVISION
(MR DESMOND PERRETT, Q.C., SITTING AS A DEPUTY JUDGE OF THE HIGH COURT)
Royal Courts of Justice
AND
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE QUEEN'S BENCH DIVISION
(MR JUSTICE TUDOR EVANS)
Royal Courts of Justice
MR ANDREW ARDEN, Q.C., and MR NOAH WEINIGER, instructed by A.J. Colvin, Esq., Solicitor, appeared for the Appellants (Plaintiffs).
MR DAVID NEUBERGER, Q.C., and MISS ERICA FOGGIN, instructed by Messrs Wilde Sapte, appeared for the Respondents (Defendants).
MR BARRY DENYER-GREEN, instructed by Messrs Wray, Smith & Co., appeared for the Appellants (Defendants).
MR JONATHAN BROCK, instructed by Messrs Forsyte Kerman, appeared for the Respondent (Plaintiff).
Introduction
Section 24(1) of the Landlord and Tenant Act 1954 provides:
"A tenancy to which this Part of this Act applies shall not come to an end unless terminated in accordance with the provisions of this Part of this Act…"
The well recognised effect of that provision is to continue a tenancy of business premises after the end of the contractual term. The principal question arising on these appeals is whether it also has the effect of continuing the contractual obligations, in particular the obligation to pay rent, of an original tenant who has assigned the tenancy before that date. In City of London Corporation v. Fell [1992] 3 All ER 224 Mr Desmond Perrett, Q.C., (as he then was) has answered the question in the negative. In Herbert Duncan Ltd v. Cluttons (1992) 1 EGLR 101 Mr Justice Tudor Evans has answered it in the affirmative. Now we have to say which of them was right.
It may be thought curious that this question, seemingly so fundamental to the working of Part II of the 1954 Act, has not earlier arisen for decision. A possible explanation is that the answer cannot before have been doubted. More probably, it has taken the effects of a serious recession on the solvency of assignees to make the question a live one.
Although both appeals were called on together, they were argued consecutively. It is convenient to follow the course adopted in argument by dealing first with City of London Corporation v. Fell, where the facts are simple and no subsidiary questions arise.
City of London Corporation v. Fell
By a lease dated 15th July 1977 and made between the plaintiffs, the City of London Corporation, as lessors, of the one part and the defendants and another, four partners in the solicitors' firm of Wilde Sapte, as lessees, of the other part, the plaintiffs demised business premises at Boston House, 63–64 New Broad Street in the City of London to the lessees for a term of ten years from 25th March 1976 (defined as "the term") "YIELDING AND PAYING therefor during the term unto the Lessors" the yearly rent of £27,500 in advance, subject to review as at the expiration of the fifth year of the term. Clause 2(1) of the lease contained a covenant by the lessees that they:
"Will pay the said yearly rents on the days and in the manner hereinbefore appointed for payment thereof".
From these provisions it is clear that the contractual liability of the lessees for rent was coterminous with the contractual term.
On 15th June 1979 the then lessees, with the licence of the plaintiffs, assigned the lease to a company called Grovebell Group Limited ("Grovebell"). The yearly rent was subsequently reviewed and increased to £38,500 with effect from 25th March 1981. After the expiration of the contractual term on 24th March 1986, Grovebell continued in occupation of the premises under the 1954 Act. There can be no doubt that the effect of section 24(1) was to continue the tenancy as between the plaintiffs and Grovebell. But on 1st December 1986 an order for its compulsory winding up was made in the Companies Court. The judge found that Grovebell remained in occupation of the premises until 23rd January 1987, when the lease was surrendered by its joint liquidators to the plaintiffs, who thereupon retook possession.
Grovebell failed to pay the quarterly instalment of rent due on 25th March 1986 and it paid no rent thereafter. It also failed to pay other sums payable as additional rent in respect of insurance and service charge. Having been informed by the liquidators of Grovebell that no significant assets had been recovered in the liquidation and that it was unlikely that there would be any dividend to unsecured creditors, the plaintiffs wrote to the defendants on 7th September 1989 stating that they would look to them, as original lessees, for payment of the amount outstanding. The defendants denied that they were liable for any sums due in respect of any period after the expiration of the contractual term. On 6th July 1990 the plaintiffs issued the writ in the action claiming payment of £33,460.64, together with interest amounting to £4,166.54. The action came on for trial before Mr Perrett on 19th and 20th June 1991, when he reserved judgment. On 10th July 1991 he gave judgment for the defendants. The plaintiffs now appeal to this court.
The principal question
Section 24(1) of the 1954 Act provides that the "tenancy" shall not come to an end unless terminated in accordance with the statutory provisions. That word is not defined in the Act. It must therefore be given its ordinary legal meaning. To what does it refer in a case where the original tenant has assigned the tenancy before the end of the contractual term? In order that that question may be answered, some elementary propositions in the law of landlord and tenant must be restated.
A lease of land, because it originates in a contract, gives rise to obligations enforceable between the original landlord and the original tenant in contract. But because it also gives the tenant an estate in the land, assignable, like the reversion, to others, the obligations, so far as they touch and concern the land, assume a wider influence, becoming, as it were, imprinted on the term or the reversion as the case may be, enforceable between the owners thereof for the time being as conditions of the enjoyment of their respective estates. Thus landlord and tenant stand together in one or other of two distinct legal relationships. In the first it is said that there is privity of contract between them, in the second privity of estate.
To what, in ordinary legal parlance, do we refer when we speak of a "tenancy"? I think that we refer to a particular legal relationship between tenant and landlord under which land is held by the one of the other. A "tenant", both by derivation and by usage, is someone who "holds" land of another, for which purpose it is immaterial whether he does so by contract or by estate. Although he may remain contractually liable to the landlord, an original tenant who has assigned the tenancy, equally with an assignee who has himself assigned, cannot properly be described as the tenant. He no longer holds the land. It is the assignee who now holds the land. It is he who has the tenancy.
It follows that where an original tenant has assigned the tenancy before the end of the contractual term the tenancy which section 24(1) provides shall not come to an end is, and can only be, the tenancy of the assignee. Since the contractual obligations of the original tenant form no part of the legal relationship between the landlord and the assignee, and since they are not independently continued by the subsection, they are in no way affected. If, as here, the original tenant has covenanted to pay rent only during the contractual term, the landlord cannot recover from him any rent payable in respect of a period after that date. Further elaboration of the principal question could only obscure the clarity of the answer. The defendants are entitled to succeed on this appeal.
The basic submission of Mr Arden, Q.C., for the plaintiffs, was that because a tenancy can only originate in contract its continued existence is dependent on continued contractual support. Accordingly, the effect of section 24(1) must be to continue, not only the obligations arising by privity of estate between the landlord and the assignee, but also those arising by privity of contract between the original landlord and the original tenant. For the reasons already stated, that submission, afflicted as it is by a confusion between the creation and the continuation of a tenancy, must be rejected. A tenancy needs a contract to create it. It does not need one to continue it. The contractual obligations which touch and concern the land having become imprinted on the estate, the tenancy is capable of existence as a species of property independently of the contract.
Mr Arden helpfully referred us to many other provisions of the 1954 Act. None of them provides any support for the view that "tenancy" in section 24(1) is to be given any other than its ordinary meaning. Indeed, by their exclusive concern with the tenant in occupation they affirm the contrary. Mr Arden also took us to all the previous authorities on section 24(1). They establish that the effect of...
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