New Zealand Government Property Corporation v HM & S. Ltd
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE DUNN,LORD JUSTICE FOX |
| Judgment Date | 17 December 1981 |
| Judgment citation (vLex) | [1981] EWCA Civ J1217-1 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | 81/0495 |
| Date | 17 December 1981 |
[1981] EWCA Civ J1217-1
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 WOOLF)
Royal Courts of Justice.
The Master of the Rolls
(Lord Denning)
Lord Justice Dunn
and
Lord Justice Fox
81/0495
MR. RAYMOND SEARS, Q.C. and MR. ANTHONY PORTEN (instructed by Messrs. Allen & Overy) appeared on behalf of the Appellants.
MR. RONALD BERNSTEIN, Q.C. and MR. KIRK REYNOLDS (instructed by Messrs. Nicholson, Graham & Jones) appeared on behalf of the Respondents.
What rent is payable for Her Majesty's Theatre in the Haymarket? It gives rise to an interesting question of law about tenants' fixtures. But first for the story.
Her Majesty's Theatre is one of the most famous in London. It was built in 1898 by that great actor Sir Herbert Beerbohm Tree. The landlords were the Carlton Hotel Ltd. They leased it to him and his company, Playhouse Limited, for 72 years from the 10th October, 1898 to the 30th September, 1970, at a rent of £3,700 a year. The lessees covenanted to use it as and for a first-class theatre only, to keep the demised premises (including landlord's fixtures) in good repair and so to deliver it up at the end of the term.
Many years ago the lease became vested in a company called H.M. & S. Limited, of which the leading figure is Mr. Prince Littler. The ownership has become vested in the New Zealand Government.
The theatre was occupied "for the purpose of business". So the tenancy came within the Landlord and Tenant Act 1954. It meant that before the old lease came to an end, the lessees were entitled to, and did, apply for a new lease under that Act. The landlords conceded that the tenants were entitled to a new lease. The only question was as to the terms of it. There were negotiations between the parties about the terms. They started early in 1970 (before the old lease expired) and continued through the next two or three years. Meanwhile, pending all the negotiations under the statute, the old lease continued in existence automatically. It did not determine on the 30th September, 1970. It continued until the 8th February, 1973 when the parties executed a new lease.
It is under that new lease of the 8th February, 1973 that the question arises. It was for 21 years from the 1st October, 1970, at a rent for the first seven years of £25,000 a year: and for the next seven years at the "open market rental of the demised premises". That is the point at issue. What is the "open market rental" for the second seven years? The first seven years were to end on the 30th September, 1977. In anticipation of this, the parties negotiated for the new rental for the second seven years of the term. The landlord's surveyor put it at £55,000 a year. The tenants' surveyor did not agree. The matter went to arbitration before an official referee (Judge Lewis Hawser, Q.C), sitting as an arbitrator. In the course of the arbitration a point of law arose about tenants' fixtures. There were many of them in the theatre. The tenants had put them in over many years. Typical were the seats in the stalls and auditorium. Were they to be included as part of the "demised premises" on which the tenant was to pay rent? Was the tenant to pay rent for them on the basis that they belonged to the landlord? Or was he free from paying any rent on them because they belonged to him, the tenant?
Now, before I go any further, I must observe that it is clear law that a tenant has a right to remove "tenant's fixtures" before the term comes to an end. So the tenant here had a right to remove them, not only during the old lease itself, but also at any time before the old lease as extended came to an end on the 8th February, 1973. The old lease, as extended, was surrendered "by operation of law" on the 8th February, 1973, when the new lease was granted. (That has been clear for centuries, see Thurspean v. Trafford (1593) Popham 8).
WHAT WAS THE EFFECT OF THE SURRENDER?
What then was the effect of the surrender? The landlords say that, when the old lease was surrendered in 1973, the tenant lost his right to remove the tenant's fixtures. They became a gift to the landlord. They became part of the "demised premises". So that in 1977 the new rental was to be paid on the basis that they belonged to the landlord and the tenant was to pay rent for them just as if they were part of the structure itself.
But the tenants say that the surrender in 1973 did not have that effect. They say that so long as they continued in possession—whether under the old lease or an extension of it, or on a new lease—they retained their right to remove them.
TENANT'S FIXTURES AND LANDLORD'S FIXTURES
Before I go any further, I would describe the distinction between "tenant's fixtures" and "landlord's fixtures". The term "tenant's fixtures", for present purposes, mean those fixtures which the tenant himself fixed into the premises for the purpose of his trade, that is, for the business of the theatre, but which do not become part of the structure itself. Instances are the seats for the stalls, or auditorium, which are fixed by screws or bolts to the floor, wall-brackets for lights which are screwed on to the wall, electric transformers fixed on to the floor, and so forth. All these the tenant is entitled to remove when his term comes to an end. Whereas "landlord's fixtures" for present purposes means those fixtures which the tenant himself fixes into the premises so that they become part of the structure itself, see Boswell v. Crucible Steel Co. (1925) 1 King's Bench 119. Instances are improvements made by the tenant by putting in new doors or windows in place of those that were there before, or a new frontage or a new safety curtain. These improvements become part of the structure itself. The tenant cannot remove them when his term comes to an end. All this goes back to the time of Sir John Holt, C.J. In 1795 he had before him Poole's case. A soap-boiler was the tenant for years of a house in Holborn. For the convenience of his trade he put up vats and coppers and paved the back-yard. Sir John Holt, C.J. said:
"1st. That during the term the soap-boiler might well remove the vats he set up in relation to trade, and he might do it by the common law (and not by virtue of any special custom) in favour of trade and to encourage industry: but after the term they become a gift in law to him in reversion, and are not removeable.
"2dly. That there was a difference between what the soap-boiler did to carry on his trade, and what he did to complete the house, as hearths and chimney-pieces, which he held not removeable".
THE CORRECT RULE
In the present case the question arises: If the term expires by effluence of time or by surrender—and the tenant remains in possession by virtue of a new tenancy express or implied—can he still remove the "tenant's fixtures" during his extended time of possession? Or did he lose them irretrievably when his original term came to an end? There are many statements in the text books to the effect that the tenant loses them when his original term comes to an end. Mr. Justice Woolf quotes the text books at length. I think those text books are wrong. In my opinion the tenant remains entitled to remove the "tenant's fixtures" so long as he remains in possession. That was decided in Penton v. Robart (1801) 2 East 88. Robart was under-tenant of a yard and buildings at Battlebridge. During his sub-tenancy he erected a wooden shed for the purpose of making varnish. It had a brick foundation. The original term expired at Michaelmas 1800. He remained in possession for some time afterwards, and during that time he pulled down the wooden superstructure of the shed and carried away the utensils. The head landlord claimed that they belonged to him. The Court of King's Bench held that the tenant was entitled to remove them. Lord Kenyon, C.J. said (at page 90):
"The old cases upon this subject leant to consider as reality whatever was annexed to the freehold by the occupier: but in modern times the leaning has always been the other way in favour of the tenant, in support of the interests of trade which is become the pillar of the State. What tenant will lay out his money in costly improvements of the land, if he must leave everything behind him which can be said to be annexed to it…Here the defendant did no more than he had a right to do; he was in fact still in possession of the premises at the time the things were taken away, and therefore there is no pretence to say that he had abandoned his right to them".
That case was distinguished in Weeton v. Woodcock (1840) 7 M. & W. at page 14, but not doubted. The landlords let a cotton factory to Taylor for seven years. Taylor installed a steam engine boiler, firmly fixed to the floor and walls of the engine-house. Taylor became bankrupt. His property remove tenant's fixtures".
And in the case of a surrender by operation of law, there seems to be a decision by Mr. Justice Scrutton in Slough Picture Hall Co. Ltd. v. Wade & ors. (1916) 32 Times Law Reports 542.
To which I would add the dictum of Lord Justice Warrington in Pole-Carew v. Western Counties and General Manure Co. (1920) 2 Chancery at page 122:
"I think it is clear that after a surrender of the term in the land to which tenant's fixtures are attached and a subsequent lease to the same tenant, the latter can no longer remove the tenant's fixtures unless his existing right to remove them is reserved...
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