Enfranchisement Cost
Cases
A O’Gorman & Co Ltd v JES Holdings Limited
unreported, Peart J., May 31, 2005; [2005] I.E.H.C. 168
This matter comes before the Court by way of an Appeal (by way of rehearing) from the Order of His Honour Judge Hogan made in the Circuit Court on the 24th July 2000 by which the learned judge, on appeal from the determination of the County Registrar, determined as follows:
1. That the determination that the applicant, A. O’Gorman & Company Limited has a right, as incident to his existing interest in premises known as Carrick house, Main Street, in the town of Carrickmacross, County of Monaghan, to
enlarge that interest into a fee simple, and for that purpose, to acquire by purchase the fee simple in the said dwellinghouse and premises, and to acquire from the Respondent the Lessor its estate and interest in the said premises be and the same is hereby affirmed.
2. That the purchase price to be paid by the Applicant for the unencumbered fee simple in the said premises be and the same is hereby varied to the sum of twenty thousand pounds (£20,000).
3. That the only incumbrances on the property or any charges or mortgages thereon only affect the interest of the Applicant in the said premises.
4. That the person or company entitled to the fee simple in the said dwelling is A. O’Gorman & Company Limited.
5. That JES Holdings Limited be hereby ordered and directed to assign all its estate and interest in the fee simple in the aforesaid premises to A. O’Gorman & Company Limited.
6. That there be no order as to costs.”
For convenience, I shall refer to the Respondent/Applicant, A. O’Gorman & Company Limited as “the tenant”, and to the Appellant/Respondent, JES Holdings Limited, as “the landlord”.
On the 2nd March 1998, the tenant, pursuant to s. 4 of the Landlord & Tenant (Ground Rents) Act, 1967 (“the 1967 Act) served Notice of Intention to Acquire the Fee Simple in lands therein described as:
“ALL THAT AND THOSE the premises together with garden and outhouses occupied in connection therewith which said premises are situate at Main Street in the Town of Carrickmacross, Barony of Farney and County of Monaghan which premises are more particularly the subject matter of a Lease dated the 11th day of October 1945, Evelyn Charles Shirley of the One Part to Violet Daly of the Other Part.”
The 2nd March 1998 is therefore the relevant date for assessing the entitlement to acquire the fee simple.
In the said Notice, particulars of the tenant’s Lease or Tenancy were set forth as follows:
“Lease dated the 11th day of October 1945 and made between Evelyn Charles Shirley of the One Part and Violet Daly of the Other Part for the residue of the unexpired term of thirty two years from the 1st day of May 1919 subject to the covenants and conditions therein contained together with the further term of 50 years from the 1st day of May 1951 subject to the payment of fifty five pounds (£55.00) per year by equal half yearly payments on the 1st day of May and the 1st day of November in every year the first payment being due on the 1st day of November 1951 together with an Agreement made the 12th day of October 1970 between John Evelyn Shirley of the One Part and Margaret Mary Rennick of the Other Part wherein the said rent was increased to Seventy Five Pounds (£75.00) for the residue of the said term.”
Outline of the statutory scheme:
The general right to acquire the fee simple interest is contained in s. 8 of the Landlord and Tenant (Ground Rents)(No.2) Act, 1978 (“the 1978 Act”). That section provides:
“8.—A person to whom this Part applies shall, subject to the provisions of this Part, have the right as incident to his existing interest in land to enlarge that interest into a fee simple, and for that purpose to acquire by purchase the fee simple in the land and any intermediate interests in it and the Act of 1967 shall apply accordingly.”
The persons referred to in s. 8 and to whom the right to acquire the fee simple attaches are those described in s. 9(1) of that Act, as follows:
>”9(1) – This Part applies to a person who holds land under a lease of the following conditions are complied with:
(a) there are permanent buildings on the land and that the portion of the land not covered by those buildings is subsidiary and ancillary to them;
(b) that the permanent buildings are not an improvement within the meaning of subsection (2);
(c) that the permanent buildings were not erected in contravention of a covenant in the lease; and
(d) one of the alternative conditions set out in section 10.”
The alternative conditions in s. 10, one of which must be fulfilled for the purpose of s.9(1)(d) above are set out in s. 10 as follows:
“10. – ………
1. that the permanent buildings were erected by the person who at the time of their erection was entitled to the lessee’s interest under the lease, or were erected in pursuance of an agreement for the grant of the lease upon the erection of the permanent buildings;
2. that the lease is for a term of not less than fifty years and the yearly amount of the rent or the greatest rent reserved thereunder (whether redeemed at any time or not) is of an amount that is less than the amount of the rateable valuation of the property at the date of service under section 4 of the Act of 1967 of notice of intention to acquire the fee simple, or the date of an application under Part III of this Act, as the case may be, and that the permanent buildings on the land demised by the lease were not erected by the lessor or any superior lessor or any of their predecessors in title; provided that it shall be presumed, until the contrary is proved, that the buildings were not so erected.
For the purposes of the condition provided for in s.9(1)(b) of the 1978 Act as set forth above, the term “improvement” is defined in s.9(2) as follows:
“9(2) – In subsection (1) (b) ‘improvement’ in relation to buildings means any addition to or alteration of buildings and includes any structure which is ancillary or subsidiary to those buildings, but does not include any alteration or reconstruction of the buildings so that they lose their original identity.”
Section 9(5) of the Act is important in relation to the condition to be fulfilled under s. 9(1)(c) namely that the permanent buildings were not erected in contravention of a covenant in the lease. Section 9(5) provides:
“9 (5) – The arbitrator may declare a person to be a person to whom this Part applies notwithstanding that the buildings were, in whole or in part, erected in contravention of a covenant, if he is of opinion that it would be unreasonable to order otherwise.”
The above statutory provisions embrace conveniently the various hurdles which the tenant must successfully clear in order to be entitled to require the landlord to convey the fee simple interest in the premises to him. I will in due course set forth the provisions of the legislation which deal with the method by which a consideration for that conveyance is arrived at. Those of course do not come into play until such time as the tenant has been found to enjoy the right to acquire the fee simple.
Some general factual background:
The land and premises the subject of this application are situated on a small part of a very large area of land in County Monaghan which was, I understand from the evidence, originally granted to the 1st Earl of Essex in about 1576 by Queen Elizabeth I of England. The premises in suit are situated on the west side of what is today the main street in Carrickmacross in County Monaghan, a town which in the past few years has experienced significant growth in population terms, as well as in economic terms. It could reasonably be described as a thriving rural town.
For the purpose of this case, it suffices to say that certain of that granted property, including that situated on the west side of Main Street passed by inheritance to the ancestors of the present Shirley family in about 1646 and has remained in the ownership of that family in the broad sense ever since. Today, what remains of it, including these premises, are owned by JES Holdings Limited, a company registered in the Isle of Man in 1984. It has emerged from the evidence that in about 1977 Mr John Shirley, the then owner of the Shirley properties, moved from County Monaghan to live in the Isle of Man for reasons of tax avoidance following, or perhaps in anticipation of, the introduction here of a wealth tax. He transferred the properties in question to JES Holdings Limited by Deed of Conveyance dated 2nd July 1984.
The premises referred to in these proceedings as Carrick House, being on the lands in suit, date back to the late 18th century according to the Report of Mr.David Semple, Consulting Engineer and Architect, and to the late 18th or early 19th century according to the Report of Mr. David Freeman, Chartered Valuation Surveyor. In his evidence to the Court, Mr Semple dated the house between 1790 and 1810. Nothing turns on the precise dating of the building.
According to a photograph from the Lawrence collection of photographs, and thought to date from about 1880, the building at that date comprised one of what seems to have been two adjoining buildings across which has been erected a parapet front with an arched front doorway, having two windows to south side of the door and a shop frontage of equal length, to the north of that doorway. On the first and second floors there are five windows across, the additional one on each floor being over the centre arched front doorway described. Running from the south edge of the parapet wall at ground floor level is a single storey wall, with a doorway which would appear to give access from the street into ground behind, and at least one small building.
Another later photograph which is thought to date from the 1930s and which is taken from an elevated position in the garden within that wall and looking eastwards, shows the south elevation of the house together with a garden in which there is also a small single storey building on the southern margin of the property. From that inside vantage point it would appear that the wall along the street front which I described from the earlier photograph appears to have been replaced by a high hedge, or possibly the hedge has grown up inside that wall.
It is certainly clear, if the dating of this photograph is in any way accurate, that by the 1930s Carrick House was a significant and substantial house on the Main Street, in Carrickmacross, with a large garden adjoining same, as well as outhouses of various kinds. From the evidence which I have heard and the Historical Rateable Valuation Certificate and some copy deeds which have been provided, it appears that certainly by the end of the 19th century and well into the 20th century this house was the residence of various medical doctors who serviced an adjoining surgery. In a Lease dated 27th May 1919 made between Evelyn Charles Shirley of the One Part and Edward Phelan of the Other Part for example, there is a reference in the description of the premises to same being “lately in the occupation of Doctor McCaul”. Edward Phelan is described in that Indenture as a “solicitor”. Clearly the premises were considered to be a suitable residence for a professional person, even though there is amongst the copy documents of title provided, a copy of a “Schedule of Improvements and Renovation of Premises…for Edward Phelan” dated April 1919 which sets out a considerable quantity of repair work to be carried out to the premises. I am not clear whether Mr Phelan, solicitor or the Lessor was to carry out these works, but one way or another Edward Phelan assigned the premises to one Ann Jane Daly “wife of Michael Daly” on the 31st October 1919 for the consideration of the sum of Two thousand Five hundred pounds for the residue of the term of years created by the 1919 Lease.
An Indenture of Lease dated 11th October 1945 between Evelyn Charles Shirley of the One Part and Violet Daly, spinster of the other part records the fact that by this date the said Violet Daly was entitled to the lessee’s interest under the 1919 Lease. It is pure speculation but it is certainly a possibility that she was the sister of the Michael Daly referred to in the Assignment by Edward Phelan dated 31st October 1919. Nothing turns on it however.
In any event, this Indenture granted a Lease to Violet Daly for the term of fifty years from the 1st May 1951 subject to the annual rent of £55. This Lease contained a number of covenants, including the usual covenants as to payment of rent and repair of the premises. There are also two covenants which have a relevance to the present Appeal, namely one that restricted use to that of a private dwelling-house, and another in the following terms:
“…[the tenant] will not at any time during the said term without the previous license in writing of the landlord erect any new building walls or other erections on the premises hereby demised or make any alteration or addition in or to the said messuage and premises without such license as aforesaid.” (my emphasis)
The Lease provided a power of re-entry to the landlord in the event of the tenant failing or neglecting to perform or observe any of the covenants conditions or agreements therein contained, so that the landlord could thenceforth hold and enjoy the re-entered premises “as if these presents had not been made” and “without prejudice to any right of action or remedy of the landlord in respect of any antecedent breach of any of the covenants by the tenant…”
By May 1969 the lessee’s interest in the premises had been assigned to one Margaret Mary Rennick, and relevantly to these proceedings, and by Variation Agreement dated 12th October 1970, John Evelyn Shirley, in exchange for an increase in the yearly rent to the annual sum of seventy five pounds (£75.00) removed “all restrictions on the user of the premises demised by the Lease (other than the restriction on the Lessee using the premises in a manner which would be or cause a nuisance)”
The next important and significant happening in the interesting history of these premises is that by Deed of Assignment dated 16th August 1972, Ms. Rennick assigned the premises to Michael Connolly for the residue of the term of years granted by the Lease of 1945.
It appears that thereafter Mr Connolly set about developing the premises into a supermarket and operated as such until by Indenture dated 1st July 1974 he assigned the premises to A. O’Gorman & Company Limited (“the tenant” in this Appeal), for the consideration of Twenty Five Thousand Pounds (£25,000), including therein a covenant on his part that he and his successors in title “will not carry on the business of retail grocer within a radius of one mile of the property presently being disposed of for a period of three years.”
Mr O’Gorman bought the premises with the benefit of a tenancy in respect of the butcher’s shop on the ground floor of Carrick House.
Developments by the tenant 1974 onwards:
From photographs taken of the premises after purchase by the tenant in 1974, it is apparent that on what was in the 1930s an attractive garden at the south side of Carrick House, there had been constructed a single storey supermarket premises stretching back some distance from the main street. It is also apparent that the two ground floor windows in Carrick House to the south of the front door of Carrick House, which I described already, had been replaced also with a shop front window and entrance door leading into a butcher’s shop.
Evidence has been given of the various developments which have taken place since 1972 with the benefit of appropriate planning permissions.
1. Application dated 16th May 1972 – T.P.193 – Michael Connolly:
Permission was granted to convert “the existing residential property” to a butcher’s shop and to erect a supermarket premises. The plans accompanying this application show in great detail the extent of the works to be undertaken. It first involved the demolition of the small building at the southern extremity of the garden as shown in the 1930s photograph to which I have referred. Then a single storey supermarket premises was constructed so as to cover the area previously covered by the demolished building as well as what had been the garden between it and the southern gable of the house. The newly erected supermarket therefore adjoined the southern gable of the house. What had been the lounge room in Carrick House on the ground floor was converted into a butcher’s shop with its own street entrance. These works involved the demolition of the original side entrance into Carrick House with its glass porch area, as well as the demolition of certain sections of the southern wall of Carrick House at ground floor level to make way for the rere part of the supermarket premises which was to occupy what had been the kitchen and dining-room area of the former residence. In addition, the supermarket itself would extend considerably beyond the back wall of the house, so that what had been obviously part of the rere garden of the house was now to be covered by the rere part of the new supermarket premises in which there was a storage, toilet area and cold-room located. On the eastern wall of the new supermarket there is a goods entrance into the storage area which also served as a fire exit from the premises, according to the plans.
The area at this time covered by the new supermarket and storage area at the rere is shown to be 3970 sq. feet, and the area of the butcher’s shop is shown to cover 368 sq. feet.
I have set out the detail of this first development of the premises in some detail as I regard it as important in the context of an argument put forward by the landlord in these proceedings that the works which have been carried out constitute an “improvement” for the purpose of s. 9(2) of the 1978 Act, and are not such as to have caused the premises to “lose their original identity” for the purpose of that section. There has of course been significant further development of the premises since then by virtue of works carried out pursuant to further planning permissions as further set forth hereunder.
1. Application dated 3rd July 1979 – T.P. 434/79 – A. O’Gorman:
Having bought the premises in 1974, Mr O’Gorman carried out certain alterations and extensions to the premises at the rere after planning permission was granted in August 1979. These works involved the construction of a much larger store and loading bay area at the rere of the premises, the relocation of the toilets to the southern side, as well as the creation of a canteen adjacent to the news toilets. There were certain other internal alterations.
2. Application dated 3rd May 1982 – T.P. 11/82 – A. O’Gorman:
In this application, the tenant applied for a change of use permission in respect of the dwelling accommodation on the first and second floors of Carrick House, so that these areas could be converted into flats. All necessary works appear to have been internal.
3. Application dated 22nd February 1985 – T.P. 7/85 – A. O’Gorman:
In this application, the tenant applied for permission to further and significantly extend the store facility and to provide some car-parking, all at the rere of his supermarket premises. In fact from the plans it appears that this extension at least doubled the stores area at the rere of the supermarket. This application was granted with, inter alia, a condition that none of the extended store area would be used as retail space.
4. Application dated 14th March 1990 – T.P. 9/90 – A. O’Gorman:
The next application was for permission to alter the appearance of the front of the supermarket by the erection of a new first floor level façade and new shopfront and sign. This work gave the front of the premises a pitched roof and an appearance of a having ground and first floor, but in fact internally it was still a single floor premises, the works creating what could best be described as an atrium type interior at the front of the supermarket. But when seen from the street outside, there are windows at first floor level.
5. Application dated 7th July 1994 – T.P. 29/94 – A. O’Gorman:
Finally, in 1994 the tenant made application to further alter the front of the premises. What had been the butcher’s shop earlier referred to was now to be accessible from within the supermarket by the creation of an internal entrance, so that this premises could operate as an off-licence, having also a separate entrance off the street. From the style and colour scheme of the new frontage, covering now the entire front, including the off-licence premises, it is obvious to anyone looking at it that this ground floor area is now part of the one premises, whereas previously, the butcher’s shop was clearly and distinctly in appearance a separate premises. By now the floors above what was the butcher’s shop and now the off-licence consist of one room which has been converted into an office used by Mr O’Gorman in connection with the supermarket business, and there are two other rooms converted into flats, one on the first floor and one on the second floor. There was then a further area within Mr O’Gorman’s ‘take’ under the 1945 Lease, which extended at first floor level only over the premises adjoining Carrick House and which comprised a third flat. Nobody seems to be sure quite how it happened that the ‘take’ under the 1945 Lease included this extra space on the first floor of the adjoining premises, but there is apparently no dispute that it does. It will later be referred to as a “flying freehold” in the event of the acquisition of the freehold by the tenant.
Mr O’Gorman stated during his evidence that these flats were let out for a short period, after which members of his own family accommodated themselves there while waiting for a houses of their own. It is apparently about ten years since these flats were let out.
As of the present time, these supermarket premises are now closed, but the off-licence remains open. It appears that the tenant has in fact moved his supermarket business to a premises in another part of the town in 2003.
Tenant’s Expenditure:
I have received evidence that between the years 1979 and 1996, the tenant has expended a total sum of £327,835 in developing these premises to their present state. In evidence he stated also that he would not have expended this amount of money if he had any doubt about whether or not he was entitled to acquire the freehold in due course. Whereas the building when he bought it had an area of some 283 sq. metres, this has now been extended to some 1339 sq. metres – almost a fivefold increase.
He thinks that a number of years before applying to acquire the freehold he had consulted his solicitor for advice in that regard, but he could not say exactly when, and neither was his then solicitor called to give evidence in this regard.
Mr O’Gorman also gave evidence that the area now at the rere of the building is used for the emptying of empty pallets, containers and storage, and for staff car parking. Some incineration of rubbish also took place in this area. He described this area as being necessary and useful for the shop.
The western boundary of the entire property consists of a river, and the land slopes very steeply down to the water level after the rubbish and parking area which I have just described.
Landlord’s consent to alterations to the premises:
When the tenant took the assignment of the premises from Michael Connolly in 1974, the consent to that assignment was obtained although in fact such consent was not required under any term of the 1945 Lease.
But as I have already set forth, there is a covenant requiring the tenant to obtain prior written consent from the landlord in respect of any works to be carried out to the premises. This is relevant because, as I have already set forth, one of the conditions set forth in s. 9(1)(c) of the 1978 Act is “that the permanent buildings were not erected in contravention of a covenant in the lease” (my emphasis)
It is not in dispute that in fact there was no such prior consent obtained by the tenant prior to the works that were carried out up top 1990. In evidence he stated that it was his belief at the relevant times that any consents required to be obtained for the works were obtained by his then solicitor. Mr Owens questioned him closely in this regard and sought to cast doubt on this evidence by pointing to the fact that when his architect, Mr White was lodging the various applications for planning permission, the premises were described in the application form as being held in freehold, and it was suggested that the tenant must have so instructed his architect. Mr O’Gorman denied instructing anybody that the premises were freehold. It was also put to him that since he was spending a considerable amount of money on these premises he would have been anxious to make sure that any necessary consents were obtained. Mr O’Gorman stated that in this regard he relied at all times on his solicitor to do what was necessary. Mr Owens asked him whether he could be wrong about having asked his solicitor to obtain the necessary consents, but Mr O’Gorman stated that his solicitor had always told him that he needed consents and that he thought then that he would have proceeded to obtain them. His then solicitor was not called to give evidence. But Mr Owens referred to a letter dated 10th September 1990 which was written by his then solicitor to the landlord’s solicitor and this letter refers to the fact that under the lease the prior consent was required, but that his client was not aware of the covenant, and went on to state that had his client been aware of the need to obtain the prior consent he would have done so. The letter went on to request the necessary consents to the completed works in order to regularise matters. Mr O’Gorman was not really able to account for the contents of that letter, and relied on his solicitor at all times to do anything necessary in relation to these matters. One way or another the consent was not sought when it ought to have been sought, but retrospective consent was obtained.
Mr Owens sought to cast further doubt on what Mr O’Gorman stated in this regard by referring to the fact that even in respect of the planning permission obtained in 1995 (ref: T.P. 29/94) there was no prior request to the landlord for his consent to the proposed works, even though given the retrospective consent which had been obtained in 1990 he must have been aware of the need to obtain it. Mr O’Gorman accepted that after 1990 he was aware of the need to obtain prior consent, but said also that what they were doing in 1995 involved only a change of use and nothing structural. But Mr O’Gorman accepted that some works were required in relation to the shop-front and also an entrance into the off-licence from inside the supermarket.
It is an undoubted fact that it was not until 1990 that consent was sought retrospectively to the alterations which had been made up to that point. There is however a written consent executed under the seal of JES Holdings Limited and dated 15th February 1990 in respect of developments already carried out in respect of Planning Permission refs: 434/79, 11/82, 7/85 and 8/90. It is also undoubted at this stage that no consent, prior or retrospective, was obtained for the work carried out in 1995/96.
I will return to this matter when dealing with the submissions made in relation thereto.
The point has been reached where enough background facts and evidence in relation to this part of the case has been set out. I will no doubt refer to additional pieces of evidence as I go through the legal submissions which have been made.
Legal Submissions:
The tenant’s hurdles:
There is no controversy between the parties as far as the premises being held under a lease is concerned, nor that there are permanent buildings thereon. That much is clear. There is however considerable dispute between the parties as to whether other requirements are met by the tenant in this case so as to bring him within the statutory scheme under which he would be entitled to acquire the fee simple interest from the landlord. I will examine each of the requirements in turn.
1. That there are permanent buildings on the land and that the portion of the land not covered by those buildings is subsidiary and ancillary to them – s.9(1)(a) of 1978 Act:
Mr O’Neill has submitted that the question arising under this subsection is whether the relatively small area of what the tenant describes as waste ground between the rere of the supermarket premises and the river which acts as the western boundary of the property is “subsidiary and ancillary” to the permanent buildings. I have already set out briefly the evidence of Mr O’Gorman that this area is used for the assembling of empty pallets, containers and rubbish of one kind or another in connection with the supermarket business, and he has also said that some incineration of rubbish takes place here also, as well as part of the area being used for the parking of cars by his staff. He said this area was necessary and useful the business which he carried on in the premises.
Mr O’Neill submits that the permanent buildings for the purpose of this subsection are the original Carrick House, as well as the additional structures constructed from time to time by the tenant, and that the area of ground not built upon at the rere of the premises themselves is “ancillary and subsidiary”. That phrase is not defined in the Landlord and Tenant legislation, but Mr O’Neill referred the Court to the judgment in the Circuit Court of Judge Shannon in Killeen v. Baron Talbot de Malahide [1951] Ir. Jur. Rep. 19. In that case a reversionary lease had been applied for to the respondent in respect of a substantial house built by the lessee of the land, as well as in respect of a small grass plot in front of that house and a field which lay beyond a wire fence dividing it clearly from that grass plot. It appears that the lessee had for some 30 years previously let out that field for agricultural purposes. It was held that while the grass plot was ancillary and subsidiary to the house, the field beyond it was not. The judge prefaced his conclusions with a cautionary note as follows at p.21:
“I do not think it possible in any given case to lay down exact meanings for these two words which will enable anyone to say in another case that upon my definition he will either win or lose his case. The terms must be interpreted having regard to the facts in each case.”
He went on to conclude:
“On examination of the words, it seems to me that the word “ancillary” is stronger against the applicant than the word 2subsidiary”, but by reason of the draughtsmanship of the Act, I need do no more that decide that either of the words is inapplicable to the particular facts……… I think that “ancillary” means ministering in an active way, whereas “subsidiary” means suggests a mere passive addition to the building………the words “ancillary and subsidiary” require the giving or doing of something actively benefiting the house and are not satisfied by proof that the land is aesthetically advantageous to the building.”
Given the cardinal rule of statutory construction that words contained in a statute must be given their ordinary meaning, it is helpful to refer to the meaning of these words as set forth in The Concise Oxford Dictionary of Current English, [Clarendon Press Oxford 1990].
The word “ancillary” when followed by the word “to” is defined as “subordinate, subservient”. The former in turn being defined as “of inferior importance or rank; secondary, subservient”, and the latter as “subordinate”. Clearly there is considerable overlap in these dictionary definitions.
The word “subsidiary” is given the meaning “serving to assist or supplement”.
I find it helpful to regard “ancillary” as meaning “of lesser importance or subordinate” and “subsidiary” as “serving to assist or supplement”. These meanings seem to me to accord with one’s ordinary usage of the terms.
Mr O’Neill has set out a number of reasons for his submission that the area of ground between the rere of the supermarket and the river is ancillary and subsidiary to the permanent buildings:
(a) part of it is used for car-parking for staff in conjunction with the business, and in this regard he refers to the judgment of Lardiner J. in Fitzgerald v. Corcoran [1991] ILRM 545 in which that learned judge held in relation to Castleknock Tennis Club that the car-park was subsidiary and ancillary to the clubhouse premises, while the hard tennis court was not.
(b) That this area, along with the other land adjacent to Carrick House has since 1919 been regarded as part of the curtilage of Carrick House. In this regard it will be recalled that with the exception of the area on which the small house (demolished by Mr Connolly in the early 1970s) stood, the remainder of the ground was the garden and outhouses forming an amenity to or enjoyed by Carrick House.
(c) The unbuilt portion is both small in area, as well as being small relative to the remainder of the area.
(d) The unbuilt area is within the physical boundary of the property.
(e) The unbuilt area is incapable of any independent use, and do not serve any other lands.
Mr Owens on behalf of the landlord has submitted that there is no evidence that this waste ground area has in any way actively benefited the building on the land, and therefore cannot be regarded as being ancillary and subsidiary to same. He has pointed to the evidence that rubbish has been burned in that location and that there has been some parking of staff cars, but that the area has not been developed in any way for parking, and that for the most part the area is simply an area of waste ground incapable of benefiting the building.
My conclusion is that in the light of the evidence of Mr O’Gorman, and I accept his evidence in this regard, that the area has been used in connection with the business of the supermarket for the parking of cars, and also for the collecting and incineration of rubbish, it is an area which comes within the definition of “ancillary and subsidiary”. It is clearly “of lesser importance or subordinate” and it has also been an area “serving to assist or supplement” the premises in the sense of being of assistance to the business run out of the premises. An important factor in my consideration of the point has been the certain fact that at all relevant times this small area has been within the boundary of the property, is not of sufficient size or character to be capable of any independent use, and that, accordingly it is of an entirely different character to the field beyond the grass plot in front of the house, which was the subject of the judgment of Judge Shannon in Killeen v. Baron Talbot de Malahide [supra].
2.That the permanent buildings are not an improvement within the meaning of subsection (2) – s.9(1)(b) of the 1978 Act:
For the purposes of this condition provided for in s.9(1)(b) of the 1978 Act, the term “improvement” is defined in s.9(2) as follows:
“9(2) – In subsection (1) (b) ‘improvement’ in relation to buildings means any addition to or alteration of the buildings and includes any structure which is ancillary or subsidiary to those buildings, but does not include any alteration or reconstruction of the buildings so that they lose their original identity.”
I have already set out in considerable detail the history of development at this property, both in terms of what changes took place within Carrick House itself, as well as on the area formerly comprising the garden and outhouses and on which the supermarket was erected by Michael Connolly, and which was significantly added to by Mr O’Gorman after he purchased same. The first thing to note is that the subsection defines what is meant by an improvement as being “any addition to or alteration of the buildings”. The new building erected first of all by Mr Connolly, and so greatly expanded by Mr O’Gorman in the years since 1974 must be regarded as an “addition”, and the works carried out within the original Carrick House itself must be regarded as an “alteration” to that building.
So, were it not for the saving clause at the conclusion of ss.(2) (“but does not include any alteration or reconstruction of the buildings so that they lose their original identity”), it would be very difficult to argue that these works would not immediately take this property outside the category of lease entitling the tenant to acquire the fee simple interest.
The interesting question remains as to what precisely is caught by this saver. The word “addition” is excluded from the saver clause, whereas “addition” constitutes “improvement” in the definition. It would appear therefore that the additional buildings erected by the lessee at various times cannot avail the tenant in order to come within the saver. In other words, the additions cannot be called in aid in order to satisfy the Court that the improvements done to the premises as a whole have caused the original building to lose its original identity. It seems to be to inevitably mean that when seeing whether the original identity of Carrick House has been lost, the Court must have regard only to work which impacted directly upon that original structure by way of “alteration or reconstruction”.
Prior to the purchase of Carrick House by Mr Connolly, this was a significant private residence. The main entrance into the house itself was at the southern side of the house in the garden, and took the form of a curved front entrance door. There was an entrance into that part of the garden from the Main Street. After that purchase, this entrance was removed, and thereafter entrance to the house was gained directly from the Main Street. In addition, Mr Connolly also applied for and obtained planning permission to install a butcher’s shop on the ground floor of Carrick House. I have already set out in the history of this property that the landlord, in exchange for an increase in the annual rent to £75 had removed the restriction as to user only as a private dwelling. This no doubt enabled or at least assisted Ms. Rennick to dispose of the property to Mr Connolly whose intention clearly was to use the property as a commercial property. As we have seen, he erected a supermarket premises on the property adjacent to the house, and let out the ground floor of the house itself to a sub-tenant to operate it as a butcher’s shop, access to which was gained through a new and separate front door on the street.
Thereafter, as far as Carrick House is concerned, the kitchen at the rere of the house as well as the dining room of the house became part of the supermarket premises. Certain changes to the southern wall of the house were also required in connection with the erection of the supermarket. I have detailed these matters earlier. Internally within Carrick House, the stair return was demolished although the original staircase remains in situ to this day, as do a number of other original features of which evidence has been given.
In addition, within Carrick House itself, there have been major changes upstairs so that there are now three separate flats which have been rented out or used by O’Gorman family members as dwellings. There is also an office in that building which Mr O’Gorman has used in connection with his business.
Mr Owens submits that the original identity of Carrick House has not been lost. He has adduced evidence to the effect that reinstating Carrick House to its original state would not be impossible and in fact that it would be a relatively easy task once the supermarket was demolished. That evidence has highlighted such matters as the retention within Carrick house of the original staircase, some original cornicing and plasterwork, the retention of the original roof structure. Mr Semple on behalf of the landlord stated that he did not think it would require much structural alteration to restore Carrick House to its original state as being a separate self-contained building as it had been originally. He did not consider that upstairs there had been much alteration of a structural nature, but that the ground floor area had been altered to an extent as shown, but he felt that the various partition walls which had been put up in order to facilitate the development of the supermarket could be removed so that the southern wall of the house could be reinstated to its former state. As far as the ground floor was concerned he stated that two things would be necessary. Firstly, replace the front with two windows as before, and secondly leave various Reinforced Steel Joists (RSJs) in place, and build up the walls again in concrete block.
My conclusion is that the subsection does not speak in terms of how easy it might be to return the building to its original state. It speaks of whether the building, as a result of alterations carried out to it has lost its original identity. The question in my mind seems to be reduced to whether in the light of the works carried out within the original house, and the change of use on the ground floor and the creation of rented flats on the two floors above, as well as the loss of the garden and outhouse, this property is no longer identifiable as the house that it was before 1972. The answer to that question as far as I am concerned is quite obviously that it has lost that original identity. By no stretch of anybody’s imagination could it be said that this is still the same premises as the rather attractive private residence with garden and outhouses which one can see in the photograph taken in the 1930s. It is, like it or not, now a commercial premises – a change to which the landlord in effect consented to by the removal of the restriction as to user as a private dwelling in exchange for an increased rent. The character of the building is so completely altered from what it was that one would be forced to conclude that its original identity has been lost, and in saying that I am closing my mind to the additional buildings, for the reason that I am of the view that they are not caught by the saver in the section.
As to the meaning of identity, it is worth resorting to the definition of that word to be found in the Concise Oxford Dictionary of Current English [op. cit.] in order to consider the ordinary meaning of the word. The word is defined as “the quality or condition of being a specified person or thing………the state of being the same in substance, nature, qualities, etc; absolute sameness”. This embraces far more in my view than the physical structure, and can therefore include or embrace a change of character, such as referred to by Lavan J. in the passage of his judgment as provided to the Court in unapproved form in Crosbie v. Dublin Port and Docks Board, unreported, October 1993.
It is worth also looking at the description of the premises as described in the 1945 lease:
“ALL THAT dwellinghouse and premises known as Carrick House in the Main Street, Carrickmacross at present in the occupation of the tenant together with the garden and outhouses occupied in connection therewith ………”
If a solicitor was preparing a contract for sale now of what is contained within the original structure of Carrick House, one might usefully ask rhetorically how different the description of the premises would be.
As I have already stated, I do not think that it is correct to look at the loss of identity from the perspective of what would be involved in restoring the premises to its original identity. It is a question simply as to whether that identity, in the sense which I have outlined, has been lost by the alterations made.
3. That the permanent buildings were not erected in contravention of a covenant in the lease – s.9(1)(c) of the 1978 Act:
As I have already set forth there is no doubt that the alterations to Carrick House were carried out without the prior consent in writing of the landlord. It is also a fact that the additional buildings erected on the property were erected in similar breach of the covenant in that regard. However, as I have set forth, the landlord gave his retrospective consent in 1990 to the works which had been carried out up to that point. The work carried out subsequent to that date do not appear to have received consent, retrospective or otherwise, although Mr O’Gorman expressed the view that there was nothing of a structural nature involved, but merely change of use. I do not think he was quite accurate about that, and he accepted as much when cross-examined about it. Mr Owens was at pains to demonstrate that Mr O’Gorman was being less than honest or forthright as to his knowledge as to the need to obtain prior written consent to any work he was carrying out. Mr O’Gorman says that he simply relied on his solicitor to keep him right on all such matters. I have to say that I do find it somewhat extraordinary that after 1990 when retrospective consent was obtained for a whole raft of works carried out over many years, that nobody seems to have thought to approach the landlord again after 1990 in respect of the later works, especially when there does not appear to have been any reluctance on the part of the landlord to consent, or any difficulty about it.
I think that while Mr O’Gorman has stated that he simply relied on his solicitor to keep him right about these matters, there is a certain old-fashioned naivety about placing such blind faith in his solicitor, no matter how reputable and previously reliable that solicitor has proven to be. As the client, Mr O’Gorman bore the responsibility to ensure that in his dealings with the property he was not acting in breach of his covenants. I have heard no evidence from his then solicitor, but a reasonably prudent client in this case after 1990 would have ensured not only that he had asked his solicitor to obtain the prior consent to the proposed work, but would have gone further in that regard, and made sure that this step was in fact taken on his behalf. As I have said I have heard no evidence about this from the solicitor concerned, and therefore I do not wish to be taken as accepting that the solicitor was instructed to obtain the consent, either expressly or by any implied instruction, but on an assumption that a solicitor was so requested, and if a solicitor failed to carry out that instruction, there are remedies which the client might be forced to pursue in order to seek redress for any loss arising from what may be regarded as negligence and/or breach of contract. Any arbitrator or Court would in my view be entitled to weigh in the balance when considering whether it would be unreasonable not to exercise the s.9(5) discretion in favour of the tenant, the fact that the section was not designed to prevent a solicitor from being sued.
If I was satisfied that Mr O’Gorman deliberately and consciously set about ignoring his obligations under the covenant because he thought that the landlord would refuse his consent, or was otherwise badly motivated towards the landlord in this regard, I would be obliged to take that into account in my consideration of whether it would be reasonable to exercise the discretion contained in section 9(5) of the 1978 Act which, as I have set forth above already, provides:
“9 (5) – The arbitrator may declare a person to be a person to whom this Part applies notwithstanding that the buildings were, in whole or in part, erected in contravention of a covenant, if he is of opinion that it would be unreasonable to order otherwise.”
I have come to the view that it would be unreasonable not to so order in view of the fact that the landlord was clearly aware, and indeed in effect consented, to the fact that the premises were changing from being a private dwelling and being turned into a significant commercial property after 1970. He accepted a higher rent in exchange for that concession. In 1990 he consented without any apparent demur on his part to a significant amount of development on the property which had already taken place in breach of the covenant. I do not feel, given these facts, that the landlord has been prejudiced by any sort of creeping, clandestine and callous disregard by the tenant of his obligation to seek prior consent, thereby wandering into the area of mala fides. Indeed, I have little, or in fact no doubt in my mind in this case that had consent been sought after 1990 for the later works in advance, these too would have been consented to. It would seem entirely unreasonable that the failure to obtain the consent to the post 1990 works should debar the tenant from his entitlements, inspite of the fact that there has been a breach of the covenant.
Mr Owens has also submitted that even though the landlord consented retrospectively to the work up to 1990, that did not imply, and should not be considered to be a waiver by him of any other entitlements which might arise due to the failure by the tenant to observe that covenant, such as the benefit that the tenant might have taken himself outside the statutory scheme for the acquisition of the freehold.
Reference has been made to the fact that these developments which were carried out without consent gave rise to an increase from time to time in the rateable valuation of the property, and of course, an effect of that is that over time the rateable valuation came to exceed the amount of the annual rent – a requirement under s.10(2) to which I shall be referring in due course. However, it appears that in 197o the landlord gave his consent to the removal of the user restriction covenant in the lease in exchange for an increased rent. The premises were developed by Mr Connolly into a butcher’s shop on the ground floor of Carrick House and a supermarket to the south thereof. Following this development, and before any assignment to Mr O’Gorman the rateable valuation of the entire premises had been increased to £76.50. In due course the landlord gave a retrospective consent to the works done by Mr O’Gorman up to 1990, and while strictly speaking this does not cover the work done by Mr Connolly, still I believe that it was intended to be a consent to all that had occurred up to that point.
I believe that it would be unreasonable not to exercise the discretion in s.9(5) of the 1978 Act on that account, since the landlord clearly knew what had taken place and raised no objection to it. He cannot now be seen to gain an advantage in another way. I do not want to call it an estoppel, but it certainly is of similar effect in my view.
Matters may well have been different for the tenant had he not in 1990 sought and obtained retrospective consent. The subsection places the onus on the tenant of satisfying the arbitrator (and in this case the Court) that it would be unreasonable not to make the order, and not simply showing that it would be reasonable to do so. The Court must have some rational basis for the exercise of any discretion, and without the demonstration of some good faith in the matter of the covenant, the Court may well have had no basis for rescuing the situation by reference to s. 9(5) of that Act. But I am of the view that the purpose of subsection (5) is to prevent an injustice otherwise arising in an appropriate case such as the present one.
4. That one of the alternative conditions set out in section 10 is satisfied – s.9(1)(d) of the 1978 Act:
1. that the permanent buildings were erected by the person who at the time of their erection was entitled to the lessee’s interest under the lease, or were erected in pursuance of an agreement for the grant of the lease upon the erection of the permanent buildings;
or
2. that the lease is for a term of not less than fifty years and the yearly amount of the rent or the greatest rent reserved thereunder (whether redeemed at any time or not) is of an amount that is less than the amount of the rateable valuation of the property at the date of service under section 4 of the Act of 1967 of notice of intention to acquire the fee simple, or the date of an application under Part III of this Act, as the case may be, and that the permanent buildings on the land demised by the lease were not erected by the lessor or any superior lessor or any of their predecessors in title;
provided that it shall be presumed, until the contrary is proved, that the buildings were not so erected.
I will consider each of these conditions in turn and decide which if any the tenant satisfies, or indeed whether he in fact, as submitted by Mr O’Neill on his behalf, satisfies both conditions.
1. that the permanent buildings were erected by the person who at the time of their erection was entitled to the lessee’s interest under the lease, or were erected in pursuance of an agreement for the grant of the lease upon the erection of the permanent buildings:
In his written submissions to the Court, Mr O’Neill has stated that “while it seems likely that Carrick House was built by some previous lessee, cogent evidence of the same is not available. However, clear evidence is available that substantial additional permanent buildings were erected by the Lessee and its predecessors in title under the 1945 Lease. These additional buildings have resulted in nearly a fivefold increase in the size of buildings on the site.” However, s. 10(1) refers to “the permanent buildings” being erected by the lessee, and not to just some of the permanent buildings. As Mr O’Neill has said, there is no cogent evidence as to who built Carrick House itself at the end of the 18th century. Neither could ant lessee be reasonably expected to be in a position to adduce any such evidence some two hundred years later.
This difficulty perhaps accounts for what Prof. Wylie has stated about this condition in his work Irish Landlord and Tenant Law, Butterworths, [1996].at page 1003 in footnote 78, as follows;
“This covers the typical building lease, i.e. where the permanent buildings on the land were erected by the lessee or were erected by a person in pursuance of an agreement to grant a lease upon erection of the building………”
The evidential difficulty which confronts the tenant in these proceedings obviously do not present themselves to a tenant who has built pursuant to a covenant to build contained in his lease, or pursuant to an agreement to grant a lease upon the erection of the building, and I believe that it is reasonable to interpret that condition as not being applicable to the instant case. I do not take the view that it can be satisfied in the present case by establishing or at least satisfying the Court that the works carried out to Carrick House by the tenant are of such a nature as to have caused Carrick House to have lost its original identity, and that in that sense the present Carrick House structure has been erected by the lessee. That seems to me to be straining the meaning of s. 10(1) of the Act. Therefore I hold that condition 1 is not satisfied in this case.
2. that the lease is for a term of not less than fifty years and the yearly amount of the rent or the greatest rent reserved thereunder (whether redeemed at any time or not) is of an amount that is less than the amount of the rateable valuation of the property at the date of service under section 4 of the Act of 1967 of notice of intention to acquire the fee simple, or the date of an application under Part III of this Act, as the case may be, and that the permanent buildings on the land demised by the lease were not erected by the lessor or any superior lessor or any of their predecessors in title;
provided that it shall be presumed, until the contrary is proved, that the buildings were not so erected.
There is no difficulty with the first parts of this condition, namely that the lease is for a term of not less than fifty years, and that the rent is not greater than the rateable valuation at the date of service of the notice under section 4. Those matters cannot be in dispute, since the term of years granted is fifty years, and the rent, as adjusted, is £75 per annum, whereas the Rateable Valuation as of the 2nd March 1998 was, and in fact remains £211.50. What gives rise to controversy is the final requirement that the permanent buildings on the land demised by the lease were not erected by the lessor or any superior lessor or any of their predecessors in title.
Under the latter part of condition 2 the onus is clearly on the landlord to rebut the presumption that the permanent buildings, and for this purpose this must mean the original Carrick House and its outhouses as demised in the 1945 lease, were not erected by the lessor or any superior lessor or any of their predecessors in title.
If he is unsuccessful in discharging this onus upon him, the Act clearly works in the tenant’s favour. Some very interesting work has been undertaken by the landlord in assembling estate records from the late 18th century onwards in order to try and satisfy the Court that the probability is that these buildings on the land were erected by the landlord. It is perhaps a pity that many of the estate records no longer exist, but a great deal of work has been put into the task of trying to piece together the history of the occupation of this particular house and property over the past two hundred years or so.
Mr O’Neill has submitted that in order to discharge this onus the landlord must first of all establish that the substantial additional buildings erected on the property (increasing the built-on area almost fivefold) and which essentially comprise the supermarket building, albeit linked into portion of the ground floor of Carrick House, are mere “improvements” to Carrick House, rather than an addition. Otherwise the landlord cannot begin to satisfy the Court that “the permanent buildings” (meaning all the permanent buildings) were erected by the lessor or any superior lessor or any of their predecessors in title. It is worth recalling that already, albeit in a different context I have decided that the “additions” which resulted in the supermarket building are not such as to take them out of the definition of an “improvement” for the purpose of s.9(1)(b) of the 1978 Act. However, that definition is expressly confined to the context of s.9(1)(b) by the wording of s.9(2), as can be seen.
Therefore I am not, in my view, confined or restricted in my consideration of whether the more recent structures erected on the property by the tenant are merely an “improvement” to Carrick House, or whether they constitute a permanent building erected by the tenant for on of the legislation. Indeed, Prof. Wylie in his work already cited has a footnote on p.1132 in relation to s.45 of the Landlord and Tenant (Amendment) Act, 1980 in which he states “In view of the different senses in which the concept of ‘improvements’ is used in the Landlord and Tenant Acts, it is crucial to note the definition given by s. 45………”
If the “additions” to the property (i.e. the supermarket structure) as opposed to the “alterations or reconstruction of Carrick House can be regarded as themselves being permanent buildings, and not simply improvements to Carrick House, then clearly the landlord has an impossible task in attempting the rebut the presumption expressed in s. 10(2).
As already seen, the definition of “improvement” for the purpose of s.9(1)(b) of the 1978 Act is “any addition to or alteration of buildings”, but it goes on to state that this “includes any structure which is ancillary or subsidiary to those buildings”. Given my conclusion already expressed as to the meaning of “ancillary or subsidiary”, it is hard to see how the additional buildings erected on this property are “ancillary or subsidiary” to Carrick House, given the fact that the additions in question are so much greater in size and importance in the present day context of the property than the original building. In fact I am satisfied that the reality now is the reverse, namely that Carrick House is ancillary and subsidiary to the additional structure, given that a small portion of the original house is used as office space for the supermarket, and that some of the original ground floor is taken up now with the business of the supermarket. Upstairs, of course there are the flats which are not linked to the supermarket business in any way. But that reversal of roles, as it were, clearly for present purposes, and outside the context of s.9(1)(b), takes the additions beyond consideration as improvements to Carrick House.
There is also definition of “improvement” contained in s. 45 of the Landlord and Tenant (Amendment) Act, 1980 in the context of the Part IV provisions therein relating to compensation by a landlord to a tenant for improvements, and which provides as follows:
“45. — For the purposes of sections 46 to 57, ‘improvement’ in relation to a tenement means any addition to or alteration of the buildings comprised in the tenement, and includes any structure erected on the tenement which is ancillary or subsidiary to those buildings………”
Again in another footnote to this section on page 1133 of his said work, Prof. Wylie states:
” ‘addition to or alteration of ‘ : it must be an addition to or alteration of the ‘buildings’, not the ‘land’ as distinct from ‘buildings’. Therefore it does not include erection of a new building unless it can be regarded as ancillary or subsidiary to the existing buildings”
Reference is made in that footnote to the helpful judgment of Kingsmill Moore J. in O’Neill v. Murphy [1948] IR 72 in which the learned judge held that in order to constitute an improvement within the meaning of the Landlord and Tenant Act, 1931 the improvement must be an improvement to the existing building, and not an improvement to the land by the erection of other buildings, and furthermore that the erection of a building is not an improvement unless it is ancillary or subsidiary to the existing building.
In my view therefore the buildings erected on the land subsequent to 1972 by Mr Connolly and later by Mr O’Gorman are not simply improvements to Carrick House, but are additions and are as a consequence to be regarded as permanent buildings. These buildings cannot be regarded as having been erected by the lessor or any of his predecessors in title. Therefore in my view the condition required to be met by the tenant, as appearing in s. 10(2) of the 1978 Act is satisfied by the tenant in this case.
It is accordingly not necessary to go further and deal with the submissions skilfully presented by Mr Owens in relation to the attempt to rebut the presumption in relation to the original Carrick House. But I want to say, without going into the evidence such as it is in full detail, that I would not be satisfied that the records and old maps and drawings which have been produced in evidence go further than suggesting a possibility that Carrick House is a building which was erected by the Shirley estate.
A very interesting attempt has been made to show by reference to these old records that a building referred to by different numbers at different times and by reference to certain other numbering appearing on an old estate map is one and the same as Carrick House. That may or may not be so. But even if it is does succeed in so showing, and I am not completely convinced that the evidence goes beyond informed and careful speculation in this respect, it cannot be conclusive evidence that it was not the tenant at a particular time who paid for the building or erected it. Certainly the rent appears to have been very low at any time, but at this temporal remove it is impossible to say with any necessary certainty or even probability whether the rent charged a couple of hundred years ago was a rent appropriate to a situation where the tenant had erected the building.
In my view, given the wording of s.10(2) of the 1978 Act, and of the proviso, it would be necessary for the landlord to show conclusively, and certainly as a matter of almost inescapable probability, that the lessor or his predecessors in title erected the building, given that the proviso is clearly intended to be in ease of the tenant who has no manner or means of establishing the situation one way or another in relation to buildings which are so old. The evidence in this case, while interesting and carefully put together, does not go sufficiently far to rebut the presumption.
Now, Mr Owens has also made elaborate submissions based on a wide interpretation of the term “predecessor in title” appearing in s.10 (2) so that the term should embrace also lessees whose leases expired resulting in the lessor regaining possession of Carrick House before creating a new lease or tenancy in favour of another tenant. If he is successful in that submission, it would mean that if it can be shown that at any stage prior to the erection of the new buildings by Mr Connolly or Mr O’Gorman, Carrick House came back into the possession of the Shirley estate, then it would not matter one way or the other whether it was the Shirley estate or any lessee who erected Carrick House, since such a lessee whose lease expired would come within the wider definition of a “predecessor in title” and the landlord would succeed in his task of rebutting the presumption that “the buildings were not so erected”.
Given the nature of the conclusion which I have reached in relation to the satisfying by the tenant of condition in s.10(2) I prefer to express no view in relation to the carefully crafted submission made by Mr Owens in which he urges the Court to adopt a purposive and wide interpretation of the term “predecessor in title”. Part of his submission in that regard is that were the Court not to accede to this purposive and wide interpretation of the term, the narrower and literal interpretation of the term would involve an arbitrary transfer of benefit from the lessor to the lessee, and it is submitted that this cannot have been the statutory intention, and furthermore that it would cause the condition in s.10(2) of the Act to operate in a way which constitutes an unjust attack on the property rights of the lessor in a way which is repugnant to Article 40.3.2 of the Constitution. Given the existence of the challenge to constitutionality of the statutory scheme as appearing in the plenary proceedings before the Court and yet to be fully heard and determined, it is undesirable that I express any view on these particular submissions since it is unnecessary for the purpose of my determination of the issues on the facts of this Appeal. Even if I were to find in favour of these submissions, it would not avail the landlord in this Appeal.
The “flying freehold” argument:
Mr Owens has argued that the area on the first floor in the building immediately to the north of Carrick House, and which for some reason has come to form part of the lessee’s take under the 1945 lease, cannot be regarded as coming within the definition of “permanent buildings on the land” as this area consists simply of a physical space above a permanent building below which is in contact with the ground, and defined in height by the presence of another structure above it. It is a space sandwiched between what is above and below it, and Mr Owens submits that this cannot therefore be regarded as a permanent building, and I shall refer to this space hereafter as a flying freehold, since that is a phrase which has been generally adopted to describe it.
In making this submission, Mr Owens has referred to the wording of s.9(1) of the 1978 Act and there is no need to set that out once more. He refers to the fact that the Interpretation Act, 1937 defines “land” as including “messuages, tenements and hereditaments, houses and buildings of any tenure”. He submits that it is necessary for the tenant to show that the land on which any permanent building exists has been demised to that tenant, and that in the present case, it is not sufficient for the tenant to show merely that he holds part of a permanent (i.e. the flying freehold) if the land itself below the ground floor beneath him was not demised to him. The question arising is whether the term “land” can be interpreted to include the flying freehold, since s.9(1) requires that the tenant holds “land” under a lease and that there are permanent buildings on the land.
Interestingly, s.1 of Deasy’s Act, 1860 defines “land” as “houses, messuages and tenements of every tenure whether corporeal or incorporeal”. There is no reference to “hereditaments” as appears in the Interpretation Act, 1937, and of course that term denotes some property which can be inherited. If the area consisting of the flying freehold was held by A in fee simple, and it is clear that such a thing is legally permissible these days, one could never say that A could not make a devise of that flat by will to whomsoever he/she may choose. Equally, the term “tenement” while generally defined in the Concise Oxford Dictionary of Current English [op.cit.] as “a room or set of rooms forming a separate residence within a house or block of flats………any kind of permanent property, e.g. lands or rents, held from a superior”, has a specific meaning given to it, as far as its physical aspects are concerned in s.5(1) (a)(i) of the Landlord and Tenant ( Amendment) Act, 1980 as follows:
“5. — (1) In this Act “tenement” means —
(a) premises complying with the following conditions:
(i) they consist either of land covered wholly or partly by buildings or of a defined portion of a building;”
Interestingly, the word “covered” has been held not to be confined to what is above the ground, but can include some area which is underground, such as an underground well for a petrol storage tank – see Mason v. Leavy [1952] IR 40.
Mr Owens has submitted that where there is a building underneath the area demised to the lessee (as in the present case) such an area, a flying freehold, is not “land” held by the lessee or capable of being acquired for the purposes of s.9(1) of the 1978 Act, even though in other circumstances it may be possible to convey the fee simple in horizontal elements of a building.
It seems clear to me that the definition of “land” in the Interpretation Act, 1937 is sufficient to embrace the flying freehold, even though such a concept may not have been within contemplation of the legislators at the time that Act was drafted. Neither can I see any reason in principle why it should not be so, nor can I discern any contrary intention in the 1978 Act, which might override the definition in the Interpretation Act, 1937.
The concept of a flying freehold has achieved complete recognition as a legitimate means of holding freehold land, even though it is recognised that there can be problems as between the different owners of the various horizontal layers in the building concerned, such as in relation to right of support from those owning the portions below, or in the area of nuisance – see, for example, Lyall, Land Law in Ireland, 2000, Roundhall, Sweet & Maxwell at p.38 et seq. But these difficulties have not lain in the way of the very existence of the flying freehold concept.
There is also specific provision in the Land Registration Rules, 1972 at Rule 30(1) (a) and (b) thereof for the registration, in relation to registered land, of the ownership of “a flat or floor, or part of a flat or floor, of a house, or a cellar or tunnel, or mines and minerals, or an underground space apart from the surface”.
Prof Wylie in Irish Conveyancing Law, 1996 ed. Butterworths at p. 702 discusses the sometimes proffered notion that the entire concept of flats “particularly where a building is divided horizontally, so that all flats, other than those at ground level, exist ‘in the air’ offends against the basic principles of our land law.”
He goes on:
“….this view now seems to be discredited, for it seems clear that, that while this maxim [cuius est solum, eius est usque ad coelum et ad inferos] states the general rule that a person owning land also owns the vertical column of air space above it, there is no reason at common law why the owner of the land cannot convey horizontal slices of the air space above it to others, whether by way of lease, or by conveying the freehold interest in it. In other words there can be separate ownership of the air space above the surface of the land just as much as there can be such ownership of the subterranean area below the surface, which is also mentioned in the maxim and which may contain valuable assets such as minerals. And the fact is that the English courts seem to have recognised the validity of such a division of the air space as occurs through flat developments for many decades.”
The learned author refers in that regard to Dalton v. Angus [1881] 6 App Cas 740, and to other English cases of the late 19th century, noting that they predate the English Law of Property Act, 1925 which specifically contained, within the definition of land, the inclusion of horizontal divisions of buildings.
Reference has been made to the obiter comments of O’Flaherty J. in Metropolitan Properties Ltd v. O’Brien [1995] 1 IR 467 at p. 482 in relation to whether a horizontal slice of a building such as what is being described as the “flying freehold” can be the subject of a right to acquire the fee simple under the 1978 Act. The other members of the court felt that it was preferable to make no comment on the question as to do so was unnecessary for the purpose of their decision. But O’Flaherty J. expressed the view that in 1978 the concept of conveying horizontal slices of buildings would have been “a fairly new concept” and he stated: “I believe that if the legislature had intended that this could be done it would have provided for it in more explicit terms.”
For my own part, and since they are not binding comments upon me, I would take a different view with the greatest possible respect for the views of such a learned judge of the Supreme Court. I find it to be somewhat anomalous, if not inequitable, that there could be a situation within one building where those who perhaps by some pure chance only, find themselves in occupation under a lease of part of the ground floor, can be entitled to acquire the fee simple interest in their property, whereas those on the floor or floors above have no such entitlement even though they are in occupation on precisely the same terms as the ground floor occupants.
I appreciate that there could be difficulties arising, for example in relation to implied easements of support or repair and suchlike, but these difficulties ought not to be so insuperable as to present a principled objection to the concept. In fact it is a matter perhaps more properly the subject of regulation by statute, as appears to have happened in some other jurisdictions, such as Australia.
Perhaps I am missing some fundamental point, but for the purposes of the present case, I would not be prepared to hold that the ‘flying freehold’ part of these premises is such as to take this tenant outside the statutory scheme for the acquisition of the fee simple interest in the property demised by the Lease.
Having so found, and without prejudice to any benefit the landlord may yet gain resulting from the determination of the constitutional challenge in the plenary proceedings, it remains to deal with the appeal related to the fixing of the price for the acquisition of the freehold. I reiterate that I am concerning myself only with what is to be regarded as the appropriate price under the scheme as statutorily provided. There is a difference of opinion between the valuer called to give evidence on behalf of the tenant, Mr Good, and Mr Freeman, and indeed Mr Murtagh who were called to give evidence in that regard on behalf of the landlord. All are respected and reputable expert valuers, and the fact that the Court must at some point come down in favour of one view rather than another, or arrive at a middle ground, must not be taken as any diminution or dilution of that respected, reputable and expert status.
Determination of the price to be paid by the tenant for the fee simple interest:
The starting point is clearly s. 7 of the Landlord & Tenant (Amendment) Act, 1984 (“the 1984 Act”). Under subsection (1) of s.7 thereof, the relevant date for the purpose of the valuation is the date of service of the notice on the landlord, i.e. the 2nd March 1998 in the present case.
Section 7(3) of the Act provides for what shall be the purchase price, subject to the other provisions of s.7, and sets out a number of matters which the arbitrator shall have regard to. One of those other provisions is ss. (9) which refers to a situation where at the relevant date the lease will expire within fifteen years, and in effect provides that in such a case the arbitrator shall have regard to, inter alia, the mechanism for assessment of price set out in s.7(4) of the Act. It is really those provisions which are the relevant ones for the purpose of this appeal, and which have been principally addressed by the parties in this appeal.
Section 7(4) of the Act sets out the mechanism by which the Arbitrator or, as in the present case, the Court, is to determine the price. That section provides as follows:
“7(4) (a) Where at the relevant date, the land is held under a lease that has expired or is held at a rent which, whether under the terms of the lease or by operation of a statute, is subject to a review which is due but has not been made, the purchase of the fee simple shall, subject to the other provisions of this section, be a sum equal to one-eighth of the amount which, at that date, a willing purchaser would give and a willing vendor would accept for the land in fee simple free of all estates, interests and incumbrances, but having regard to any covenant which continues in force by virtue of section 28 of Act (No.2) of 1978, and assuming that the lessee has complied with any other covenants or conditions in his lease that could affect the price.
(b) Deduction shall be made from that amount equal to the value of the goodwill, if any, in the premises of the person acquiring the fee simple.
(c) A deduction shall also be made from that amount equal to any addition to the value of the premises resulting from such works as would qualify for the special allowance mentioned in section 35 of the Act of 1980.
(d) In determining the amount referred to in paragraph (a) any addition to value deriving from contemplation of substantial rebuilding, or a scheme of development (such as are mentioned in section 33(1)(b)(i) and (ii) of the Act of 198 shall be disregarded.”
As regards the “special allowance” referred to in (c) above, section 35(2) of the 1980 Act provides as follows:
“35.–(2) The special allowance for the purpose of subsection (1) shall be such proportion of the gross rent as, in the opinion of the Court, is attributable to works of construction, reconstruction or alteration carried out by the lessee or any of his predecessors in title which add to the letting value of the land, other than works carried out wholly or partly in consideration of the grant of the lease or repairs and maintenance during the currency of the lease.”
The rationale for the deduction of the special allowance is to protect the lessee from a situation in which he would be paying rent in respect of his own works to the premises, which he has already paid for.
Some valuation evidence:
Mr Freeman is instructed on behalf of the landlord. In approaching the task of arriving at the correct assessment of price on the basis of a stand-alone Carrick House, given the requirement under s.7(4)(d) to disregard any potential development value, as well as giving credit for the “special allowance”, Mr Freeman first of all looked at the rateable valuation of the entire premises, and he calculated that the rateable valuation for a stand alone Carrick House nowadays would be in the region of €48.
He calculated the total area of Carrick House as it originally stood to be in the region of 1188 sq. feet.
He considered that s.7 was open to a number of possible interpretations as to the basis of valuation, and accordingly he came to a separate valuation based on each of these possible interpretations. The three different bases for valuation were said to be as follows:
1. Valuation on an assumption that the value of the supermarket buildings erected by the tenant are to be included in the calculation;
2. Valuation based solely on the premises as originally demised;
3. Valuation on the basis that the property might have potential for use, other than development or reconstruction.
Basis 1:
He placed a rental value on Carrick House, as a stand alone building, on the basis of €20 per sq. foot. It will be recalled that he calculated that the area in question is 1180 sq. feet. He felt that it was a clearly identifiable unit in its own right, and that the small floor area of that until alone meant that a rent of €20 per sq. foot could be justified.
As far as the rental value of the supermarket premises is concerned Mr Freeman stated that the area in question was about 5700 sq. feet and that a rental value of €10 per sq. foot was appropriate.
The total annual rental value on this basis according to Mr Freeman’s figures was therefore in the order of €89,000 per annum. He stated that the rental value was the basis for arriving at the capital value of the premises, which he calculated to be €1,200,000. He accepted that Mr Good on behalf of the tenant may have some issue with a 6.5% rate which he used for this calculation, but felt that even if he used Mr Good’s 8% rate, the valuation figure arrived at would be in the region of €975,000. There is a considerable disparity between the value placed by Mr Freeman on the property and that given by Mr Good, which is in the region of €300,000. Mr Good does not accept that the rental values taken by Mr Freeman would have been achievable for these premises in 1998 in Carrickmacross, but I will come to his evidence in due course. Mr Freeman in turn cannot accept the rental value of €20,000 per annum for the entire premises, since as far as he could calculate, this reduced the rent per sq. foot to €2, and he felt that this was simply unrealistic. In his evidence under this heading of valuation, Mr Freeman explained that while the buildings erected by Mr O’Gorman had a value in themselves, they in fact in his view did not add anything to the value of the overall property, because, as he explained, the supermarket building is a fairly basic industrial building with low headroom, which may not be much use for any alternative use, and therefore somebody buying the site in the open market would probably pay the same price whether those buildings were there or not. He went on to express the view that the real capital value of the site as a whole is in its development potential, but that this is not something which can be regarded when valuing for the purpose of s. 7 of the Act.
Mr O’Neill put it to Mr Freeman that while he is saying that the added buildings do not add to the market value of the premises, they must on the other hand add to the rental value. Mr Freeman accepted that this was so, and in this regard Mr O’Neill pointed to the wording of s.35(2) of the 1980 Act in relation to the special allowance, and which specifies that it is such proportion of the gross rent as is attributable to works carried out by the lessee “which add to the letting value of the land”.
In my view, Mr Freeman’s acceptance that the tenant’s works have added to the letting value of the premises, undermines fatally the basis on which the proposition under Basis 1 is put, namely that because the tenant’s works have added nothing to the market value of the premises they ought not to be disregarded for the purpose of the valuation. The Court proposes therefore to ignore that submission, in favour of Basis 2 which appears below, since Basis 3 is not really relied upon at all any longer by Mr Freeman, as it is a somewhat novel approach if it is acceptable at all, which I doubt.
Basis 2:
For this purpose, Mr Freeman excluded completely the supermarket building, so as to value the property as originally demised. His valuation on this basis was arrived at by taking a value of €330,000 for the property as originally demised, dividing it by eight, and deferring it. He explained in his evidence that he valued what he described as the free standing unit (that was the original butcher’ shop to the south of the main house and which Mr Connolly demolished to clear the site for the first supermarket development) at €20 per sq. foot, which gave him a rent of €6500 per annum. He then capitalised that figure which produced a value on that structure of €100,000. He then took what he called a guess at the value of the then three storey dwellinghouse with large garden, which he described as a high quality house and one of the most important houses on that street, and placed a value of €230,000 on it, thereby producing an overall value for the premises as originally demised of €330,000. Dividing that amount by 8, he arrived at €41,250, and having deferred that figure for three years until expiry, he concluded that the valuation figure, under this heading, taking account of passing rent for three years, was €35,732.
Mr Good in his evidence gave his evidence of having carried out a similar exercise to that carried out by Mr Freeman under Basis 2. He took the value of the originally demised premises on the basis of a vacant freehold possession in good order, and ignored any tenant works (the special allowance), as well as any goodwill factor or development potential. He carried out his valuation on the basis of an expired lease and on the basis that therefore s.7(4) of the Act applied. The formula he used was to value the premises at “between 150,000 and 180,000” ( I presume he is referring to IR£s), then take one eighth of that figure, and defer it as Mr Freeman had done. This gave him a value of IR£20,000 or €25,400. Mr Good said that he had taken account of the area which projects over the adjoining building, namely that referred to earlier as the flying freehold. While it is not apparent from his direct evidence or his valuation that he had taken into account the value of the separate building which stood to the south of the premises, which had been a butcher’s shop and which was demolished around 1971 by Mr Connolly, and on which Mr Freeman had placed a value of €6500 for the purpose of his calculations, Mr Good stated when cross-examined about it, that he had taken that structure into account in his valuation.
In his evidence, Mr Good had also stated that as of March 1998 he would value the supermarket premises, excluding goodwill and so on, at about IR£300,000. Mr Owens cross examined him about this valuation on the basis that it was far too low by reference to certain other specified sales in the area, but Mr Good stated that in relation to the comparators referred to, it was the business turnover in the premises which determined the higher prices gained, and that the purchasers were in effect buying a business rather than a premises. Mr Good stated his opinion that there was no chance that the supermarket premises in this case could be worth €1.2 million, as suggested by Mr Freeman.
Mr Peter Murtagh, another valuer called to give evidence on behalf of the landlord, gave his opinion that the 1998 market value of the property, disregarding tenant’s improvements, and presumably taking no account of goodwill or development potential, was €320,000.
He valued the property, including the tenant’s improvements at €1.3 million as of 1998; and if one added to that any development potential, he valued the premises at 1998 at €1.4 million.
Basis 3:
There really is no need to deal with this basis as, and I think that Mr Freeman in fairness accepted this to be the case, that there is no room within the statutory scheme, for a valuation to be made on the basis of this potential, nuanced as it may be.
All valuers gave quite extensive evidence relating to comparative sales to which they had regard when reaching their conclusions as to both rental and capital values. There is no need for me to set that evidence out in any detail for the purpose of my decision on price. There is so much variation from one comparator to another, and of course each premises compared is unique, and will have elements to itself which may explain any apparent anomaly appearing in the price achieved on sale or on price negotiation, or rental value.
Conclusion:
I am satisfied that under the scheme as provided in s. 7 of the 1984 Act, the only basis for arriving at the price to be paid for the purpose of acquiring this freehold is as set forth in s. 7(4) of that Act, given that at the 2nd March 1998 there was only a matter of three years to run, and bearing in mind the provisions of s.7(9) of the 1984 Act.
It is necessary therefore to assess the purchase price on the basis of what I have referred to as Basis 2, namely by taking the open market value, as of the 2nd March 1998, of the premises then on the ground, free of incumbrances, and deducting therefrom any element of that value attributable to goodwill, if any, and further deducting therefrom the ‘special allowance'(as defined in s.35 of the 1980 Act), and taking no account in the value of the premises derived from any substantial rebuilding or a scheme of development, and then dividing the result by eight.
Prof. Wylie has described the mechanism at arriving at the price in the following way in footnote 94 on page 1264 of his work already referred to:
“The correct procedure is to ascertain the ‘amount’ having taken into account the directions in paras (b), (c) and (d), and then divide the result by eight. One does not ascertain the amount first, then divide by eight and adjust the result in accordance with those directions.”
In the present case, this mechanism results in the relevant premises for the purpose of the valuation, being confined effectively to the premises as originally demised, since I am satisfied, as accepted by Mr Freeman, that all the additions and alterations made by the lessee since 1971 result in an increase in the rental value of the premises; and therefore, by reason of the fact that such works are within the meaning of the ‘special allowance’ referred to in s. 35 of the 1980 Act, the amount by which they add value must be deducted.
This mechanism results in the valuers having to imagine or pretend that all the works whether by way of demolition of part of the original buildings, alterations/extensions to the original buildings on the site, or the erection of new structures on the site by the tenant or Mr Connolly, had never taken place, and attempt to arrive at an estimate of what such premises, in their unaltered state as originally demised in 1945, would have fetched on the 2nd March 1998.
That must be a somewhat difficult task, especially given the scale of the works in this case which have in fact taken place, and which for all practical purposes has transformed the originally demised premises from being a significant professional person’s residence with a large garden, outhouses and so on, into a substantial supermarket premises and off-licence, with some residential flat accommodation on two floors above the ground floor of part thereof. As I have already stated, the original identity has been lost.
It is of relevance in this task of valuation that by 2nd March 1998, the Main Street in Carrickmacross had become a busy commercial street, and it is reasonable to infer from that fact, that residential accommodation may not attract the sort of price which the quality of the house might have otherwise achieved, relatively speaking, in former times, since persons might not wish as much to reside at this location in 1998. However, that is the valuers’ task, and I am satisfied that all the valuers in this case have gone about their task, albeit instructed by opposing parties whose interests differ for obvious reasons, in a responsible and professional manner. Opinions between professionals constantly differ, and it is frequently the experience of the Courts in a variety of different types of litigation, that in the absence of agreement between the valuers as to a value or a price, the Court is left either to choose between the two differing values, or to find a basis for accepting neither, while at the same time arriving at its own opinion of the right price.
Mr Good, as I have outlined already has placed assessed the purchase price to be IR20,000 (€25,400), based on a open market value of what he stated in evidence to be between £150,000 – £180,000.
Mr Freeman’s price, arrived at on the same basis is about €37,500. There is no meaningful distinction between that and the value arrived at by Mr Murtagh.
The difference in the overall result is relatively small, given the division of each of the values by a factor of eight.
I have decided to take a pragmatic route to the resolution of the issue of price, given the relatively small disparity. I am in effect splitting the difference, due to the fact that having heard the valuation evidence, I am left with a feeling that perhaps while Mr Good was being somewhat pessimistic about the 1998 value of the original Carrick House, albeit as a stand alone residence with garden and outhouses at that date, while perhaps Mr Freeman and Mr Murtagh were at the optimistic end of the value spectrum.. By taking an unspecified middle ground figure I hope to have reached a just figure based on the statutory criteria, and I assess the purchase price to be €30,000.
As I stated to the parties after submissions had closed last Thursday, these findings which I have made are subject to further arguments which I will be hearing in relation to the constitutional challenge ordered to be heard simultaneously with this Circuit Appeal. Having discussed the logistics of this with Counsel for all parties, it is my understanding that all are agreed that in so far as any final decision on that challenge may impact on what I have decided thus far in the Circuit Appeal, the benefit or detriment, as the case may be, of such ultimate decision will be available to this case, even though my findings in the Appeal have pre-dated the decision in that challenge.
Approved: Peart J.
Sean Gilsenan v Foundary House Investments Ltd and Rathmines Properties Ltd
1980 No. 79
Supreme Court
14 November 1980
[1980] I.L.R.M. 273
(O’Higgins CJ, Henchy, Griffin, Kenny and Parke JJ)
O’HIGGINS CJ
(Kenny and Parke JJ concurring) delivered his judgment on 14 November 1980 saying: This is a case stated by Mr Justice Neylon, the President of the Circuit Court, under the provisions of s. 16 of the Courts of Justices Act, 1947, for the determination of this Court of certain questions of law arising in a matter pending before him.
The matter pending before Mr Justice Neylon is an appeal from the determination by the County Registrar of the purchase price of the fee simple in a chemist’s shop at 220 Lower Rathmines Road which is held by the applicant from the respondents for a term of 147 years expiring in 1982 at the yearly rent of £16. The determination was made by the County Registrar under the provisions of s.17 of the Landlord and Tenant (Ground Rents) Act, 1967 following the service by the applicant of a notice of intention to acquire the fee simple pursuant to s.4 of that Act. The County Registrar determined the purchase price to be £10,000 and against that determination the respondents appealed to the Circuit Court.
The Landlord and Tenant (Ground Rents) Act, 1967 (which I will hereinafter refer to as the Act of 1967) has been amended by the Landlord and Tenant (Ground Rents) (No. 2) Act, 1978 (which I will hereinafter refer to as the Act of 1978).S.17 of the Act of 1978 contains the provisions which apply to the determination of the purchase price of a fee simple by arbitration whether under the Act of 1967 or under this later Act. Among the matters to which, under this section, regard must be had, subs. 2(b) includes:
Where the land was held by the person acquiring the fee simple under a lease which has expired or is held by him under a lease which will expire less than fifteen years after the date of the service of the Notice under s. 4 of the Act of 1967 or of the application of Part III of this Act, the rent which, in the opinion of the arbitrator, would be reserved by reversionary lease under the Act of 1958 of the land granted for a term commencing on the expiration of the first-mentioned lease.
S. 18 of the Landlord and Tenant (Reversionary Leases) Act, 1958 (hereinafter referred to as the Act of 1958) provides for the determination of the rent of a reversionary lease on the basis that such lease shall be for a term expiring 99 years after the expiration of the lease to which it is reversionary (subs. (2)). By subs. (4) it is provided:
Subject to subsection (3) of this section the rent to be reserved by the reversionary lease shall be one-eighth of the gross rent as defined by subsection (5) of this section.
Subs. (5)(a) provides as follows: *275
The gross rent shall be the rent which, in the opinion of the Court, a willing lessee not already in occupation would give and a willing lessor would take for the land comprised in the reversionary lease in such circumstances that the supply of similar lands is sufficient to meet the demand—
(i) On the basis that vacant possession is given and that the lessee pays rates and taxes in respect of the land (other than the lessor’s proportion of income tax) and is liable to insure against fire and to keep the premises in repair;
(ii) Having regard to the other terms of the reversionary lease and to the letting value of land of a similar character to and situate in the vicinity of the land comprised in the reversionary lease but without having regard to any goodwill which may exist in respect of the land comprised in the reversionary lease.
By reason of the fact that the applicant’s lease is due to expire in 1982 the provisions just quoted by the Act of 1958 apply in the determination of the purchase price of the fee simple. It appears from the case stated that the following matters are accepted by the President of the Circuit Court as established by the evidence.
(1) The sum of £10,000 determined by the County Registrar as the purchase price was so determined without regard to inflation.
(2) If inflation is to be ignored this sum is reasonable.
(3) Over the past ten years inflation has shown an average increase of 12.2%.
(4) The respondents would not be willing to grant a 99 year lease of the premises without a provision for rent reviews.
(5) A 99-year lease of premises similar to the subject matter of the application is something which would now be unknown in the property world.
(6) It would be impossible to predict the rate of inflation for a 99-year period.
On these facts, and having regard to the statutory provisions which apply, the President of the Circuit Court submits the following questions for the determination of this Court.
1. Whether — in view of the evidence that the respondents would not willingly make a lease for 99 years of the premises without inserting a clause for periodic reviews of rent during the continuance of the term — I, for the purpose of assisting me to decide upon the appropriate purchase price of the fee simple of the said premises pursuant to s. 17 of the Landlord and Tenant (Ground Rents) (No. 2) Act 1978 can now determine the rent which would be reserved by a reversionary lease of the said premises granted pursuant to the Landlord and Tenant (Reversionary Leases) Act 1958 for a term commencing on the expiration of the lease in 1982.
2. Whether, when determining the rent which would be reserved by a reversionary lease of the said premises granted pursuant to the Landlord and Tenant (Reversionary Leases) Act 1958, I am legally entitled to endeavour in so far as possible to provide for inflation in view of the evidence that freely negotiated 99-year leases in respect of premises of the type the subject matter of the application are unknown in the property world and in view of the evidence that it would be pure speculation to try and endeavour to determine the inflationary trends (if any) over a 99-year period.
In the course of the argument the court was, of course, referred to its previous decision in Byrne v Loftus [1978] IR 211. The question is whether this decision can apply to the facts of this case. Byrne v Loftus dealt with the fixing of the rent to be reserved by a new lease for 21 years under the provisions of the Landlord and Tenant Act, 1931, it having been found as a fact that the lessor was unwilling to grant such a lease without a clause providing for rent reviews. The formula *276 for determining the gross rent contained in s. 29(f) of the Landlord and Tenant Act, 1931 is, subject to slight and irrelevant exceptions, the same as the formula contained in s. 18(5)(a) of the Act of 1958 for the determination of the gross rent under that Act. In Byrne v Loftus the court held that despite the difficulty raised by the finding of fact the court was nevertheless bound to fix the rent under s. 27 of the Landlord and Tenant Act and in doing so could, if there was evidence to support such a course, fix a rent which would provide an aggregate amount of rent over 21 years equal to the total of the rent a willing landlord would obtain by granting a lease for 21 years with a clause providing for rent reviews. In this case a similar problem arises. The purchase price must under s. 17 of the Act of 1978 be the sum which, in the opinion of the arbitrator, a willing purchaser would accept for the fee simple but, by reason of the fact that the lease has less than 15 years to run, such sum must be determined ‘having had regard to’ what rent would be reserved by a reversionary lease determined under the Act of 1958 for a term commencing on the expiration of the present lease. It is to be noted that the words ‘having had regard to’ are used. These indicate, to my mind, not that such a hypothetical rent shall determine the sum to be fixed, but that such sum may not be fixed without first considering what such rent would be. Here the problem emerges. Under s. 19 of the Act of 1958 the terms of a reversionary lease must be settled by the court on the basis of a term of 99 years commencing on the expiration of the lease to which it is reversionary. The rent to be reserved by such lease is to be one-eighth of the gross rent and the gross rent is to be such rent as, in the opinion of the court, a willing lessor would take and a willing lessee would give on the assumption of the other circumstances, set out in the section, existing. On the wording of the section it is clear that only one ‘gross rent’ may be considered and that there is no power to have regard to a possible initial rent subject to periodic revisions. As in Byrne v Loftus there is the positive finding in this case that the lessor would not be willing to grant a lease for the term required without provision being made for rent reviews. There is in addition the further finding that freely negotiated 99-year leases of premises of the type the subject matter of the application are now unknown in the property world. In Byrne v Loftus the High Court judge, who stated the case, raised the question whether he could fix such a rent as would over 21 years provide an aggregate amount equal to the total produced by an initial rent subject to periodic reviews. In fact such a possibility had been suggested to him and must have had some basis in the evidence before him. Here no such question is raised. I would find it difficult, if not impossible, to imagine credible evidence being adduced which would indicate a likely or possible rent to be determined now which would, on aggregation over more than 99 years, equate to what an imaginary lessor would be willing to take and an equally imaginary lessee would be willing to give for a 99-year lease subject to rent reviews. It seems to me that what was regarded as permissible in Byrne v Loftus was so regarded because the lease was only for 21 years and because the possibility of supporting evidence existed. Here the lease to be considered is a lease for 99 years and as I have indicated the possibility of credible evidence to support aggregation does not exist. In my view, therefore, what was possible and regarded as permissible in Byrne v Loftus is neither possible nor permissible in this case.
It follows, in my view, that, on the facts as found by the learned President of the Circuit Court, it is simply not possible to have regard to a rent which would be reserved by a reversionary lease of the premises the subject matter of this application. This, in my view, means that s. 17 of the Act of 1978 cannot be operated. This section requires for its operation, on the particular facts of this case, that the rent to be reserved on a reversionary lease under the Act of 1958 be considered in the fixing of the appropriate sum for the purchase of the fee simple. As the consideration of such a rent is not possible, in my view it is not possible on the evidence for the arbitrator or the Circuit Court judge to determine the purchase price of the fee simple. I would, accordingly, answer the first question No.
As to the second question it seems to me that the question contains material for its own answer. The question refers to the fact that on the evidence it would be pure speculation ‘to try and endeavour to determine the inflationary trends (if any) over a 99 year period’. I can see no basis under the statutory provisions which apply which would entitle or permit the Circuit Court judge to have regard to what would be pure speculation. In this regard I have considered the wording of s. 17 of the Act of 1967 which authorises the County Registrar in the event of a dispute, question or difficulty arising in regard to the acquisition of the fee simple to make an award as to the purchase price ‘as justice shall require’. While this phrase seems to give some flexibility to the amount of the award which the County Registrar may make. I am satisfied that his determination is governed by the statutory requirements contained in s. 17 of the Act of 1978. If these statutory requirements cannot be fulfilled it does not seem possible that he can make an award. I would, accordingly, answer the second question also in the negative.
HENCHY J:
This case stated does not present any question of statutory interpretation. The pertinent statutory provisions are clear and unambiguous. Nobody has suggested otherwise. Applied to this case they require that in fixing the price which the tenant must pay the landlord in order to buy out the ground rent and thereby get the fee simple, the County Registrar (or the Circuit Court judge on appeal) must, inter alia, have regard to the rent which would be reserved by a reversionary lease granted under the Landlord and Tenant (Reversionary Leases) Act, 1958, and commencing on the expiration of this tenant’s lease in 1982. An amendment of the 1958 Act made by the Landlord and Tenant (Ground Rents) Act, 1967 means that the rent would be one-eighth of what the 1958 Act calls the gross rent. S. 18(2) of the 1958 Act requires this gross rent (which is to be determined on the basis of certain specified factors) to be for a term of 99 years after the expiration of the lease to which it is reversionary. That means in this case that it is to be the rent for a term of 99 years from 1982.
It is this requirement, that the gross rent shall be a pre-determined constant rent for a period of 99 years commencing in 1982, that has led to this case stated. The difficulty is that a computation of the purchase price of the fee simple related to the gross rent is now an impossibility, because such a gross rent is no longer a practical proposition. The undisputed evidence is that such an exercise in rent *278 fixing would be pure speculation and that a letting of premises such as this for 99 years, using the statutory method of computing the gross rent, is now unknown in practice. Such lettings nowadays have invariably written into them provision for periodic adjustments of the rent. This has been found to be the only way to seek to keep the rent in line with changing monetary and other values.
The first question, therefore, in this case stated asks in effect whether it is possible to fix the purchase price of the fee simple when it has to be related, inter alia, to a gross rent which the vicissitudes of the market place and the uncertainties of the future have made obsolete, unquantifiable and no more than a hypothetical speculation. Those charged with determining the gross rent cannot themselves make the computation, and an expert witness cannot be found to help them to do so. The relevant statutory provisions were passed in the belief that the gross rent would be an ascertainable prerequisite to jurisdiction. Now that the gross rent is no longer within the bounds of reasonable computation, all computations necessarily referable to it have passed outside the legislative intendment. This means that the statutory scheme for the assessment of the purchase price of a ground rent has become a dead letter.
The method devised by this Court in Byrne v Loftus [1978] IR 223 for the computation of the amount of a fixed rent for a new tenancy granted under the Landlord and Tenant Act, 1931 (i.e. a yearly rent equivalent to a division by 21 of the aggregate of the rents that would be payable over the term of 21 years if the new tenancy contained a provision for periodic rent reviews) obviously cannot be used in a case such as this. The Byrne v Loftus method (the operation of which has been superseded by the provisions of ss. 23 and 24 of the Landlord and Tenant (Amendment) Act, 1980) assumed that evidence would be obtainable as to what such rent reviews would amount to over a period of 21 years ahead. Assuming that expectation to be justified for a period of 21 years, it is clear that the amounts resulting over the next 100 years from the operation of periodic rent reviews cannot be forecast. Long-term economic forecasts of that kind are beyond human capacity. They are in the realm of the unknown and unknowable. The Byrne v Loftus method of computation, therefore, cannot be applied in this case because it depends on an assumed evidential factor which is not obtainable in this case.
If computation by reference to the gross rent were merely directory, the position would be different. But it is a prerequisite to the exercise of jurisdiction to fix the purchase price. The rule to be applied, therefore, is that stated as follows in Maxwell on The Interpretation of Statutes , 12th ed., p. 328:
Where an act or thing required by the statute is a condition precedent to the jurisdiction of a tribunal, compliance cannot be dispensed with and, if it be impossible, the jurisdiction fails. It would not be competent to a court to dispense with what the legislature has made the indispensable foundation of its jurisdiction.
The negative answer I give to the first question in the case stated makes it unnecessary for me to answer the second question. But in case my answer to the first question be found unacceptable, I would answer the second question by holding that inflation should not be brought into the reckoning in the *279 estimation of the gross rent. There are no known principles or rules of economics, no art or technique or prescience, no science or technology of prediction, which would enable anybody to chart, even roughly, the effect which inflation, or the absence of it, is likely to have on rents over the next 100 years. There are too many unknown and imponderable factors involved. The question of inflation over a period as far ahead as 100 years from now falls into the category of the unfathomable. It cannot, therefore, be imported into the operation of the statute.
The way out of the unfortunate impasse disclosed by this case stated is for Parliament to enact, in place of the existing method of ascertaining the purchase price of a ground rent, a method which will not depend on an unworkable element. It is unfortunate that, pending such a statutory change, a ground rent can be bought out by a tenant only when the parties agree on the amount of the purchase price.
GRIFFIN J:
I agree with the Chief Justice and Henchy J that the answer to the first question in the case stated by the learned President of the Circuit Court should be No.
The difficulty which has arisen in this case is created by the definition of ‘gross rent’ in s. 18(5) of the Landlord and Tenant (Reversionary Leases) Act, 1958. That subsection has been set out in full in the judgment of the Chief Justice. Under the 1958 Act, the rent to be reserved for a term of 99 years by a reversionary lease granted by the court was one-sixth of the gross rent (s. 18(4)). The rent is now to be fixed at one-eighth of the gross rent (s. 26 of the Landlord and Tenant (Ground Rents) Act, 1967).
The 1967 Act for the first time gave the right to acquire the fee simple in his land to, inter alia, a person holding under a building lease, or under a proprietary lease, or to a person who held under a building lease or proprietary lease which had expired and who was entitled to be granted a reversionary lease under the 1958 Act. In the case of a dispute as to the purchase price to be paid for the fee simple, the price was to be determined by the arbitration of the County Registrar (s. 17) with a right of appeal to the Circuit Judge (s. 22). The factors to be taken into account when the price was to be determined by arbitration were provided for in s. 18 of the Act, but that section was repealed by the Landlord and Tenant (Ground Rents) (No. 2) Act, 1978, and was replaced by s. 17 of the 1978 Act. Under this latter section, where the purchase price is determined by arbitration it shall be the sum which, in the opinion of the arbitrator, a willing purchaser would give and a willing vendor would accept for the fee simple having had regard to certain factors therein specified. These include:
(a) the rent payable for the land by the person acquiring the fee simple;
(b) in the case of land held by the person acquiring the fee simple under a lease which will expire less than 15 years after the date of giving the appropriate notice to the landlord under the Act, the rent which, in the opinion of the arbitrator, would be reserved by a reversionary lease under the Act of 1958 of the land granted for a term commencing on the expiration of the lease.
It is therefore a necessary prerequisite that the arbitrator must have regard to *280 such of the matters specified in s. 17(2) of the 1978 Act as are material to the purchase in question. In the case of a lease in respect of which not less than 15 years are unexpired, there is no difficulty in ascertaining the purchase price, as the rent actually payable under the lease is the factor to which the arbitrator must have regard. Where, however, as in this case, there is less than 15 years of the term unexpired, the arbitration must first ascertain the rent which, in his opinion, would be rent reserved by a reversionary lease under the 1958 Act at the date when the existing lease would be due to expire.
As there is no provision for periodic review of the rent reserved by a reversionary lease under the 1958 Act (such as is now provided for in s. 24 of the Landlord and Tenant (Amendment) Act, 1980, in the case of a new tenancy under part II of that Act), the rent which the arbitrator must ascertain is a fixed rent which will remain unaltered and be unalterable throughout the entire period of the term of 99 years reserved by a reversionary lease. This rent must be one which ‘a willing lessee not already in occupation would give and a willing lessor would take’ for the land.
The evidence at the hearing in the Circuit Court established that, nowadays, there is no such ‘willing lessor’, and that a 99-year letting of premises similar to those in this case is unknown in the property world and exists only as a creature of statute. Indeed, this is quite understandable in view of the high rate of inflation which has obtained in recent years with the result that rents, under leases granted 25 or more years ago, which when fixed were quite inadequate in what were times of comparative financial stability, were seriously eroded. The evidence of the expert witnesses in this case was that the average increase in the Consumer Price Index in the past ten years was 12.2%, that it would be impossible to determine or predict over a 99-year period what the inflationary trends might be and that any such prediction would be pure speculation.
In my opinion, therefore, there is no basis on which the learned President of the Circuit Court can, within the restrictions imposed by the relevant statutory provisions ascertain the rent to which he ‘must have had regard’ before fixing the purchase price for the fee simple in the premises in question in this case. As a necessary consequence, he cannot determine the purchase price of the fee simple under s. 17(2) of the 1978 Act. This unfortunate result would be avoided if there was provision for periodic rent reviews in a reversionary lease.
In view of the answer to the first question in the case, the second question is of academic interest only. However, as the expert evidence accepted by the Circuit Judge is that any prediction of the rate of inflation over the next 99 years would be pure speculation, he would not in my opinion be entitled to take future inflation into account in determining the rent which would be reserved by a reversionary lease, and the answer to the second question is the case would therefore be No.
Fenlon v. Keogh
High Court, February 10, 1997,
O’FLAHERTY J:
1. The background facts to this matter are that by indenture of lease dated 31 December, 1973, between Anna Keogh, now unfortunately deceased, as landlord and Michael Fenlon as tenant the landlord let to the tenant premises consisting of what is described in the lease as a large hay-barn with a tarmacadam forecourt and market garden adjoining the said hay-barn, forming a portion of the premises known as Waterpark House, Poddle Park, Kimmage in the City of Dublin.
There was the usual obligation on the part of the tenant that if the premises, or any additional buildings or any part thereof, should at any time during the term of the lease be destroyed or damaged by fire the monies received from the fire insurance cover should be expended in repairing and reinstating the demised premises to the satisfaction of the landlord, or the landlord’s agents.
It appears that there was a very cordial relationship between Mr Fenlon and Mrs Keogh over the years. He took over this hay-barn and made many improvements to it, I am satisfied. There were few electric lights in it and it had a gravel floor, perhaps some concreting, and there was no plumbing. He put in a concrete base, he rewired the whole place, he installed plumbing and he improved the tarmacadaming of the forecourt.
Then, in 1990, there was a fire and the premises were totally destroyed. Mr Fenlon’s business was that of a car repairer and he had certain dealings in relation to the buying and selling of cars and so forth in the actual place where the building had been. Obviously, it was hard for him to carry on his business after the building was destroyed. However, he set about to reconstruct the place. His original intention was to restore the building more or less as it was. He ran into difficulty with the planning authority in getting approval for it. Then he gradually came around to the idea of erecting a more grandiose building (a photograph of which I have seen) and which is what one would call a custom built garage. Attached to that is a building that looks more like a dwellinghouse than a workshop, but it has office accommodation on the top floor. It blends very well into the environment and Mr Fenlon did this by direct labour and I am satisfied that he has done a very good job.
As regards what it cost, he has estimated that he spent in or about £80,000. I think that is correct, and there may be something more to be spent in regard to fencing and tarmacadaming and so forth. He is probably going to be looking at a total outlay of in or around £90,000. I am satisfied that he is a perfectly truthful witness; he has been very frank and open in his evidence. He has not concealed anything and I have been very impressed with him.
I have been impressed, too, with the relationship that he had with Mrs Keogh. He did consult her at all stages and kept her informed as to what he was about to do. She would have been advised by her solicitor largely. I am sure that the solicitor explained to her, and wanted to make clear to the other side as well, that she would be anxious to have the terms of the lease observed: which was to have the building that had been burned down reinstated. As I say, it has been reinstated on a much more grandiose scale than the old hay-barn and on a different site, but of course on the take demise. I have no doubt that all has been done with the approval of the landlord.
The question that has been presented in a very net form for me, with the able and diligent assistance of counsel on each side, is a consideration of whether we have a situation where Mr Fenlon is entitled to a reversionary lease.
It is agreed that he comes within s 30(2) of the Landlord and Tenant (Amendment), 1980. We have to find out then, by reference to s 9 of the Landlord and Tenant (Ground Rents)(No 2) Act, 1978, whether those conditions have been complied with. They are:-
(a) that there are permanent buildings on the land and that the portion of the land not covered by those buildings is subsidiary and ancillary to them;
— I am satisfied that is so;
(b) that the permanent buildings are not an improvement within the meaning of subsection (2);
— I am satisfied of that as well;
(c) that the permanent buildings were not erected in contravention of a covenant in the lease;
— I am satisfied about that, and
(d) one of the alternative conditions set out in s 10 must be satisfied
— and I think it is agreed by counsel that Mr Fenlon comes within condition number 1:-
1. that the permanent buildings were erected by the person who at the time of their erection was entitled to the lessee’s interest under the lease or were erected in pursuance of an agreement for the grant of the lease upon the erection of the permanent buildings;
But here is the rub: it is contained in s 9(4) of the Landlord and Tenant (Ground Rents)(No 2) Act, 1978, which provides as follows:-
Permanent buildings erected by a lessee in pursuance of a covenant in his lease to reinstate the buildings comprised in the lease in the event of their destruction by fire or otherwise shall be deemed to have been erected by the person who erected the original buildings.
Now there is no doubt that Mr Fenlon had an obligation to reinstate the building that had been comprised in the original lease. That is what he set out to do and he was frustrated to a degree by the planning system. So with the agreement of everyone he puts there a much better building. Mrs Keogh, and her solicitor I am sure, were delighted that there should be a better building. The hay-barn was not going to be any loss from that point of view.
On the other hand what is Mr Fenlon’s situation? I have come to the conclusion that he had an obligation under the lease to reinstate the building and that in a sense there was no way out for him and what he did was a form of reinstatement. I think some support has to be got from that concept in the one case that was cited to me: Keating v Carolin [1968] IR 193. Chief Justice O Dalaigh recounts in that case at p 200:-“The term ‘reinstate,’ it is said, is a wide term. The lessee rebuilt and, though the new building was not identical with the old one, what was done was done pursuant to the covenant and it was open to the lessor and lessee to agree as to the manner in which the lessee might discharge his obligations under the covenant. ‘In pursuance of,’ it is submitted, does not mean ‘in accordance with’ but means ‘because of.’ The lessee’s answer to this is that the buildings were not erected pursuant to the covenant in the lease of 1904 but in pursuance of an arrangement reached between the parties in 1918. Reinstatement, it is said, involves keeping the premises as a single entity, but here the lessors, it is said, agreed with the lessee that a completely different premises should be put up.”
The learned Chief Justice then goes into the particular facts of the case, which need not detain us now.
This case is somewhat the same. There is no doubt that the new premises are completely different to the old. Yet, the building has been erected in pursuance of the tenant’s obligation to provide at least as good a building under the tends of the lease. I am satisfied that that is what the parties achieved and that the correct legal result is to hold that in all the circumstances s 9(4) of the 1978 Act does apply. The building is deemed to be the property of the lessor. This means that Mr Fenlon will not be entitled to a reversionary lease but he will be entitled to an ordinary renewal of his lease which is a 35 year lease.
I want to put it on record that I hold that he did spend, or is about to spend, not less than £80,000 and probably nearer to £90,000 on the building, iewith the additional works that he proposes. However, I do not accept that he could have put up much of a building for the estimate he got at £18,000 to replace the hay-barn. As a person who lives in the real world, to some degree, I know that it would simply not be possible to get anything done nowadays for £18,000 in the way of any form of substantial building. If a replacement of the hay-barn had been a viable proposition I think more realistically it would have cost £30,000 to £40,000. I hold that certainly he has improved this site to a figure in the region of £40,000 to £50,000. What help that will be to anyone in estimating the rent, I do not know.
Digital Hub Development Agency v Keane
[2008] I.E.H.C. 22
JUDGMENT of O’Neill J. delivered on the 31st day of January, 2008
This is an appeal from the order of the Circuit Court (Her Honour, Judge Linnane) made on the 23rd April, 2004 whereby the Circuit Court affirmed the order of the County Registrar made on 26th day of September, 2003. By her order as aforesaid the County Registrar, determined, awarded and directed that the respondents in this appeal (the applicants before her) had a right as incident to its existing interest, to enlarge that interest into the fee simple and for that purpose to acquire by purchase the fee simple and all intermediate interests therein for the sum of €40,600, in the premises known as:
“ALL THAT AND THOSE the heraditaments and premises known as Nos. 10, 11 and 12 Rainsford Street in the Parish of St. Catherine and City of Dublin and more particularly described in an indenture of lease dated the 8th of October, 1958 and made between Arthur Guinness & Son and Company (Dublin) Ltd of the one part and A Millar & Co Ltd of the other part.”
By her said order she further directed that the sum of €40,600 be apportioned as to €40,000 to be paid to the respondents Martin Keane and Gerry O’Reilly (the appellants herein) in respect of their freehold interest in the premises and the balance of €600 to be lodged in court to the credit of the matter in respect of all intermediate interests which are unknown and ascertained. She further directed that the appellants join in a deed of conveyance to the respondents in respect of their interest in the premises.
The background to this matter is as follows. By a lease made on the 20th day of July, 1860 between Edward Corles as lessor and Adam Millar as lessee, the said lessor, described as being from the City of Harcester in England demised to the lessee, described as a merchant of Thomas Street in the City of Dublin, certain premises at Rainsford Street in the City of Dublin for a term of ninety nine years from the 1st of May, 1860 at the yearly rent of £55. Six premises were thus let namely Nos. 22, 23, 24 Rainsford Street in the City of Dublin and also the premises the subject matter of these proceedings, Nos. 10, 11 and 12 Rainsford Street in the City of Dublin. The rent of £55 was in respect of all of these premises.
The lease in question has not survived and evidence of it is to be found in a Memorial of the indenture of lease and pursuant to s. 2 of the Vendor and Purchaser Act, 1874 the recital of facts as set out in this Memorial, insofar as there is no evidence to the contrary, is to be taken as sufficient evidence of the truth of the facts stated in the Memorial.
The description of the Nos. 10, 11 and 12 Rainsford Street in the Memorial is as follows:
“…all that and those two dwelling houses or tenements together with the ground in the rear thereof known as Nos. 10 and 11 Rainsford Street formally in the possession of the said James Vose together with the liberty of the gateway on the Westside of said houses bounded on the East by the late widowed Downes holding on the West by the late Michael Bardins holding on the North by Goldmans Brook on the South by Rainsford Street containing in breadth in front exclusive of said gateway 37 feet 9 inches and in rear 44 feet and in depth from front to rear 141 feet be the same several admeasurements more or less which said several houses were lately in the tenure or occupation of George Eastwood and also all that and those the dwelling house, tenement and premises known as No.12 Rainsford Street with the liberty of the gateway on the East side of said house, bounded on the East side by the late Thomas Mitchells Holding, on the West by Church ground, on the North by Goldmans Brook and on the South by Rainsford Street containing in breadth in the front to Rainsford Street 25 feet exclusive of the gateway and in the rear 25 feet 6 inches and in depth from front to rear 138 feet be the said admeasurements or any of the more or less which said last mentioned house and premises were formally in possession of Michael Bardin and lately in the occupation of Patrick Adams Dairyman all of which said premises are situated lying and being in the liberties of Thomas Court and Donore in the Parish of St. Catherine in the City of Dublin together with the appurtenances and all rights of way, rights of passing and easements whatsoever belonging thereto or enjoyed therewith…”
By a Deed of Conveyance and Assignment dated the 28th June, 1895 between William Millar and Fitzadam Millar of the one part and A Millar & Company Ltd of the other part, the lessee’s interest in the premises the subject matter of the lease dated the 20th July, 1860 was assigned to A Millar & Company Ltd. The lessor’s interest under the said lease was by a deed of the 29th April, 1936 conveyed to Arthur Guinness Son & Company Ltd.
The term of ninety nine years granted in the aforesaid lease of the 20th July, 1860 expired on the 30th day of April, 1959. By a lease dated the 8th October, 1958 Arthur Guinness Son & Company (Dublin) Ltd. as lessors demised to A Millar & Company Ltd as lessee the premises knows as ALL THAT AND THOSE the heraditaments of premises know as Nos. 10, 11 and 12 Rainsford Street for term of ninety nine years computed from the 1st day of May, 1959 at the yearly rent of £150.
By a Deed of Conveyance and Assignment dated the 22nd of February, 1988 Adam Millar & Company Ltd (in receivership) assigned to Lee & Company (Dublin) Ltd the lessee’s interest under the said lease of the 8th day of October, 1958 in Nos. 10, 11 and 12 Rainsford Street in the City of Dublin.
By a Deed of Confirmation and Waiver dated the 28th August, 2000 made between Arthur Guinness Son & Company (Dublin) Ltd (“AGSD”), Guinness Ireland Group (“GIG”), DIAGEO plc (“DIAGEO”) and Lee & Company (Dublin) Ltd, DIAGEO, AGSD and GIG confirmed granted and demised to Lee & Co. (Dublin) Ltd the premises the subject matter of the lease of the 8th October, 1958 for the balance of the term created by the lease and also waived compliance with clause 2(c) of the lease insofar as it related to the demolition already carried out of certain buildings on the demised premises.
By a Deed of Assignment dated the 17th August, 2001, Lee & Company (Dublin) Ltd assigned to the Commissioners of Public Works in Ireland the lessee’s interest under the lease of the 8th October, 1958 in Nos. 10, 11 and 12 Rainsford Street in the City of Dublin.
By a Deed of Conveyance dated the 21st June, 2001, Guinness Ireland Group Ltd conveyed to Martin Keane the first named respondent, the lessor’s interest held under an indenture of Fee Farm Grant dated the 27th of February, 1866, in Nos. 10, 11 and 12 Rainsford Street, for the sum of IR£25,000. Thereafter the first named appellant conveyed that interest to himself and the second named appellant jointly.
By a notice dated the 14th day February, 2003 being a notice of intention to acquire the fee simple, pursuant to s. 4 of the Landlord and Tenant (Grounds) Rent Act of 1967, the Commissioners of Public Works in Ireland served a statutory notice on the first and second named appellants of its intention to acquire the freehold interest in the lands held on foot of the lease of the 8th October, 1958, in the premises at Nos. 10, 11 and 12 Rainsford Street in the City of Dublin.
On the 21st July, 2003 by virtue of the Digital Hub Development Agency Act, 2003 (Establishment Day) Order (SI No.23 of 2003), the Digital Hub Development Agency was established pursuant to s. 7 of the Digital Hub Development Agency Act, 2003 [the Act of 2003]. By virtue of s. 41 of the Act of 2003 all rights and property held or enjoyed before the establishment day by the Commissioners of Public Works in Ireland in respect of the “Digital Hub” as defined in the Act were transferred to the Digital Hub Development Agency. As Nos. 10, 11 and 12 Rainsford Street are situated within the “Digital Hub” as defined in the Act, these premises were included in this transfer.
The first and second named appellants by its notice of opposition opposed the claim of the respondents to the fee simple of these properties; their grounds of opposition being as follows:
“(1) Objection: these respondents claim that the applicant does not hold under a lease as the lease relied upon has been forfeited for breach of covenant by re-entry by the issue and service of proceedings for ejectment.
(2) These respondents await proof that the applicant has succeeded to the tenants’ interest in the lease dated the 8th October, 1958.
(3) The applicant has no legal entitlement to acquire the lesser’s interest by virtue of s. 4 of the Landlord and Tenant (Ground Rents) (No. 2) Act, 1978.
(4) The applicants are not entitled to acquire the fee simple as they do not comply with the conditions of ss. 9 and 10 of the Act of 1978…”
As indicated earlier when the matter came on for hearing before the County Registrar, she upheld the claim of the appellants to the fee simple and directed and awarded accordingly and determined the purchase price to be €40,600.
On this appeal three issues were litigated as follows.
1. That the appellants were by virtue of s. 4 of the Landlord and Tenant (Ground Rents) (No.2) Act, 1978 precluded from availing of the provisions of that Act and hence the Notice of Intention to Acquire the Fee Simple dated the 14th February, 2003 was invalid.
2. That the appellants did not comply with the conditions of ss. 9 and 10 of the Landlord and Tenant (Ground Rents) (no 2) Act, 1978 [the Act of 1978] and hence were not entitled to acquire the fee simple.
3. That in the event that the court should hold that the appellants were entitled to acquire the fee simple that the County Registrar had erred in the computation of the purchase price in failing to have regard, pursuant to s. 7(3)(d) of the Landlord and Tenant (Amendment) Act, 1984, [the Act of 1984] to the development value or potential of the premises.
I propose to deal with each of these issues in the order in which they are set out above.
FIRST ISSUE
Section 4 of the Act of 1978 is in the following terms:
“4. – This Act shall not bind a Minister of the Government, the Commissioners of Public Works in Ireland or the Irish Land Commission.”
Mr. Ó Dúlacháin, SC for the appellants submitted that a correct construction of this provision led to the conclusion that the provisions of the Act of 1978 in general did not apply to the organs of State mentioned in the section. It was submitted that the phrase “shall not bind” given its natural and ordinary meaning, meant that these organs of State were outside the ambit of the provisions of the 1978 Act and thus in the capacity of lessor could not be compelled to convey the fee simple or such interest as it had, and in the capacity of lessee could not avail of the provisions of the Act to compel a lessor or the holder of a superior interest to convey the fee simple to them.. It was further submitted that the different formulation i.e. “this Act shall not bind a State Authority in its capacity as lessor” used in s. 4 (2) of the Landlord and Tenant (Amendment) Act, 1980 indicates an intention on the part of the lessor in s. 4 of the 1978 Act, to remove from the scope of this Act the entirety of the Landlord and Tenant relationship where any of the State organs mentioned, is a party to such a relationship. It was further submitted that, had it been intended by the Oireachtas, merely to exclude any liability to the provisions of the Act on the part of State organs as lessors, that this would have been provided for in s. 16 (2) of the Act of 1978 where that type of provision is made in respect of the Commissioners of Irish Lights and Harbour Authorities within the meaning of the Harbour Acts, 1946.
For the respondents in this appeal it was submitted by Ms Whelan SC that the phrase “shall not bind” in its natural and ordinary meaning, means shall not impose a liability on, and does not exclude the State Organs mentioned from availing of the benefits provided for in the 1978 Act, namely the right to acquire a fee simple provided that the conditions stipulated in the Act are fulfilled.
Attention was drawn to the fact that s. 2 of the Landlord and Tenant (Ground Rents) Act, 2005 [the Act of 2005] adheres to the same formulation used in s. 4 of the Act of 1978. Section 2 of the 2005 Act reads as follows:
“2. – The following section is substituted for section 4 of the Act of 1978:
4. – (1) This Act shall not bind –
(a) a Minister of the Government,
(b) the Commissioner of Public Works in Ireland,
(c) Industrial Development Agency (Ireland),
(d) Shannon Free Airport Development Company, or
(e) Udarás na Gaeltachta.
(2) Subsection (1) is in addition to any other enactment imposing a restriction on the application of this Act.”
It was submitted that the intention of the Oireachtas in these types of provision was clear and was the same in all cases, namely to exclude from the provisions of the Landlord and Tenant Acts both claims to the fee simple under the 1978 Act and claims to new tenancies under the 1980 Act, where the lessor was an organ of the State, and the additional language used in s. 4(2) of the 1980 Act did not add to or alter this underlying provision.
In my opinion, it is well settled (see Howard v. The Commissioner of Public Works [1994] 1 I.R. 101), that there is no principle derived either from the Constitution or the common law in Ireland to the effect that a general statute does not apply to the State or State agencies. Neither is there any presumption of exemption of the State from statutory provisions, nor is there any presumption derived from the Constitution of a special position for the executive in regard to legislation.
Thus the question of whether s. 4 of the Act of 1978 precludes the respondents in this appeal from availing of the statutory right to acquire the fee simple, is one of statutory construction in the ordinary way.
The appropriate cannon of construction applicable is that which requires, that the words used be given their natural and ordinary meaning.
The phrase “shall not bind” means that the organs of the State mentioned cannot have imposed upon them a liability in respect of the provisions of the Act of 1978. The language used cannot be held to connote or imply any more than that because to do so, would be, to add language which has not been used. If it had been intended to exclude the organs of State mentioned from availing of the provisions of the Act as a lessee, to acquire the fee simple, in my opinion, additional language would have been necessary to achieve that particular purpose. The fact that a different formulation was used in s. 4(2) of the Act of 1980, does not in my opinion affect the proper construction of s. 4 of the Act of 1978, which must be determined by reference simply to the language actually used in s. 4, ascertaining the true intent of Parliament solely by reference to the natural and ordinary meaning of the words actually used.
It is submitted for the appellants that if the phrase “shall not bind” were to be construed as permitting the respondents to avail of the provisions of the Act, that would create an anomalous situation in that, notwithstanding the fact that the respondents had opted to avail of the provisions of the Act, they could then claim not to be bound by various conditions which must be fulfilled such as ss. 9 and 10 of the Act and could perhaps claim not to be bound by the terms of the award of the County Registrar.
In my opinion the apprehension inherent in this submission is not well founded. Manifestly, in my view if one of the State organs mentioned in s. 4 avails of the provisions of the Act to claim a fee simple they could only be so entitled if they demonstrate compliance with the conditions set out in the Act for entitlement to a conveyance of the fee simple. It must also be borne in mind that whilst every lessee claiming a fee simple must satisfy the conditions set out in the Act to succeed in the claim, no lessee is bound by the process set out in the legislation and can withdraw from it at any point up the conveyance of the fee simple. Thus a lessee who was dissatisfied with the terms of the award of a County Registrar could abandon the claim and withdraw from the process at that stage.
I have come to the conclusion therefore that s. 4 of the Act of 1978 does not exclude the respondents in this appeal from availing of the provisions of the Act of 1978, so as to claim a conveyance of the fee simple of the premises at issue in these proceedings.
SECOND ISSUE
Is there compliance by the Respondents with ss. 9 and 10 of the Act of 1978
The relevant parts of s. 9 are as follows:
“9. – (1) This Part applies to a lessee who holds land under a lease, if the following conditions are complied with:
(a) that there are permanent buildings on the land and that the portion of the land not covered by those buildings is subsidiary and ancillary to them;
(b) that the permanent buildings are not an improvement within the meaning of subsection (2);
(c) that the permanent buildings were not erected in contravention of a covenant in the lease; and
(d) one of the alternative conditions set out in s. 10.
(2) In subsection (1)(b) “improvement” in relation to buildings means any addition to or alteration of the buildings and includes any structure which is ancillary or subsidiary to those buildings, but does not include any alteration or reconstruction of the buildings so that they lose their original identity…”
The relevant parts of s. 10 are as follows:
“10. – The following are alternative conditions one of which must be complied with in a case to which section 9 relates:
1. that the permanent buildings were erected by the person who at the time of the erection was entitled to the lessee’s interest under the lease or were erected in pursuance of an agreement for the grant of the lease upon the erection of the permanent building;
2. that the lease is for a term of not less than fifty years and the yearly amount of the rent or the greatest rent reserved thereunder (either redeemed at any time or not) is of an amount that is less than the amount of the rateable valuation of the property at the date of services under section 4 of the Act of 1967 of notice of intention to acquire the fee simple or the date of an application under Part III of this Act, as the case may be, and that the permanent buildings on the land demised by the lease were not erected by the lessor or any superior lessor or any of their predecessors in title:
provided that it shall be presumed until the contrary is proved, that the buildings were not so erected;
…
5. that the lease was granted, either at the time of the expiration or surrender of a previous lease or subsequent to such expiration or surrender –
(a) at a rent less than the rateable valuation of the property at the date of the grant of the lease, or
(b) to the person entitled to the lessee’s interest under the previous lease,
provided that the previous lease expired or was surrendered before the 31st day of March, 1931 and that it would have been a lease to which this Part applied had this Act then been in force and provided that it shall be presumed, until the contrary is proved, that the person to whom the lease was granted was so entitled;
6. that the lease is a reversionary lease granted on or after the 31st day of March, 1931 to a person entitled thereto under Part V of the Act of 1931 or the Act of 1958, whether granted on terms settled by the Court or negotiated between the parties;…”
Before considering compliance with either s. 9 or any of the relevant conditions set out in s. 10, I should consider the history of the buildings on these premises. In the course of the hearing several days of evidence were concentrated on the provenance of these buildings with particular controversy focused on the portion of No. 12 Rainsford Street which adjoins Rainsford Street itself. The thrust of the evidence adduced by the appellants, i.e. from Mr. Myles, an archaeologist, was that the building which now stands fronting onto Rainsford Street at No.12 was constructed well in advance of the grant on the 20th day of July, 1860 of the lease from Edward Corles to Adam Millar. The significance of this controversy was that if the appellants were correct, it would mean that at least one of the buildings now on the site was constructed by the lessor rather than the lessee and hence it would at the very least deny compliance with conditions 1 and 5 as set out s. 10.
A starting point in an analysis of the history of the buildings that stood on the lands demised as Nos. 10, 11 and 12 Rainsford Street is the recital in the Memorial of the Deed of 1860. Insofar as No.12 is concerned as, quoted above this premises was described as “ALL THAT AND THOSE the dwelling house, tenement and premises”. Nos. 10 and 11 are similarly described in the Memorial.
The 1847 ordinance survey map was put in evidence. Although this map is dated as of 1847 the evidence was that it described the picture on the ground as of 1838. The earliest reliable survey of property in this part of the city was agreed in evidence to be John Rocques Survey of 1756. The picture demonstrated on this map insofar as the buildings at Nos. 10, 11 and 12 Rainsford Street now fronting onto the street are concerned is by and large similar to that shown in the 1847 Ordinance Survey. Undoubtedly there are changes towards the rear of these properties. A feature of the 1847 Ordinance Survey map is it that it shows steps leading to the fronts of Nos. 10 and 11 but no steps at the front of No. 12. The valuation records for 1853 for these properties described No. 10 as house and yard in common, no. 11 as house and rooms over gateway and no. 12 as house and yard. There is a no. 11a which is described as a dairy yard.
It is apparent thereafter that significant change occurred in the nature of these properties. As of November 1863 the valuation record describes No. 10 as dilapidated and Nos. 11 and 12 as offices and yards. It is clear from the later Ordinance Survey Maps, that is to say the 1864 map, the 1887 map and the 1908 map, that considerable development took place on the site of these three properties thereafter. The 1864 map shows a long building where No. 12 was, extending right to the back of the site and indeed continuously on towards Thomas Street. Behind Nos. 10 and 11 there is also a new structure extending a considerable way back into the site. An L-shaped structure which is present on the 1847 map behind Nos. 10 and 11 and partially behind No. 12 has been removed. The 1887 map demonstrates that the building behind Nos. 10 and 11 has been extended back further into the site and part of a building extending back from Thomas Street encroaches into the site. The 1908 map demonstrates further development with the filling in of a gap between a long building at No. 12 and Nos. 10 and 11. The 1926 Ordinance Survey shows no change to that of the 1908 survey. The 2007 Ordinance Survey map demonstrates considerable change with a removal of all of the buildings where Nos. 10 and 11 stood and the presence of a new building, apparently built after 1979, a corner of which extends into the site occupied by 10, 11 and 12.
All of this development was carried out by Adam Millar or his Company who engaged in the business of rectifying distillers, together with other commercial enterprises over many years. This business would appear to have been conducted primarily from premises which fronted onto Thomas Street and the buildings developed on the site of Nos. 10, 11 and 12 Rainsford Street appear to have been developed as part of the enterprises conducted by Adam Millar or his Company.
The buildings which now stand on this site are, for convenience, divided into four parts described as A, B, C, and D. Building A is that part of No. 12 which fronts on to Rainsford Street. Building B is the block immediately behind this and building C is the block immediately behind building B. Building C extends onwards beyond the site and is part of the buildings extending backwards from Thomas Street. Building D is at the corner of a structure which was built post 1979 and is a warehouse type building used by Lee and Company for the purposes of a cash and carry business.
As far as the provenance of building C is concerned there was little or no controversy. I am satisfied from the evidence that this building was built between 1900 and 1910. The structure of this building is supported by RSJs and the brickwork is built into the supports and it was uncontested that this type of steel structural arrangement did not become available in Ireland until towards the end of the nineteenth century. More particularly the joinery work used in this building is typical of that used in the period in question, i.e. 1900 to 1910.
Building B can be reliably dated to not earlier than 1880. This is because the building is supported on cast iron columns which bear the manufacturers name, namely “J. Sharkey, Church Street”. This manufacturer was not in business prior to 1879. It is apparent from the evidence that these columns were an integral part of the construction of this building and as a matter of probability if not certainty were part of the original construction of the building rather than some later addition.
All the controversy in the evidence centred on building A.
Before dealing in particular with this I should observe that it was clear from the evidence, and indeed there was no contest on this, buildings A, B and C were part of an integral whole, in that the floors ran uninterrupted between all three and were all at the same level and the load bearing capacity of the floors was roughly similar throughout and this load bearing capacity was significantly greater than normal domestic loading but was well below normal industrial warehousing capacity, but may have been adequate and suitable for the particular enterprise carried on there.
I am satisfied from the records mentioned above that when the lease of this building was granted in 1860 No. 12 Rainsford Street was a dwelling house. There may indeed have been some form of lean-to structure in the rear garden of it but no more. It is quite clear from the evidence that the structure which is there now could never have been used as a dwelling and has absolutely none of the attributes of a dwelling house.
The façade of No. 12 onto Rainsford Street is particularly interesting. Mr. Myles, the expert witness called by the appellants, was adamantly of the view that this façade was built well before 1860. He placed particular emphasis on a finding by him of bricks at the side of No. 12 where the archway into the rear was, which he said, dated from an earlier period. He also compared the unusual appearance of the façade to some older buildings in that area of Dublin. He was of the view that the brick pattern used, namely the English Garden Wall Pattern, was commonly used in the early part of the nineteenth century.
Mr. Stewart, a conservation architect, gave evidence for the respondents, was of an entirely different view. His evidence was that the façade of No. 12 as it now stands had not been altered or interfered with since its original construction, save that the top storey was added on later, in his opinion after the construction of the Vat house next door by Arthur Guinness and Company. It was his opinion that the brick pattern used, namely the English Garden Wall Pattern, began to be used only in the later part of the nineteenth century and he was of the opinion that the bricks used in the construction of building A were similar to those used in building B. He was also of the opinion that because of the thickness of the walls in building A and in particular of the party wall with the Vat house next door, that building A was built after the Vat house was constructed in or about 1864 or 1865. In general it was his opinion that the thickness of the walls reflected a later period of building rather than early nineteen century or an eighteen century form of construction.
As said earlier the buildings as demonstrated on Rocques map of 1756 broadly correspond with the buildings depicted at Nos. 10, 11 and 12 fronting onto the street in the 1847 Ordinance Survey map. The evidence from Mr. Myles was that Rainsford Street was first laid out in the early years of the eighteenth century and thereafter plots were sold off and developed speculatively.
In my view it is probable that the buildings at Nos. 10, 11 and 12 which were depicted in 1847 were the same buildings as were shown on Rocques map. As indicated earlier when the lease was granted in 1860, Nos. 10, 11 and 12 were described as dwelling house tenements. It is highly probable, in my view therefore, that the buildings which stood on these premises when the lease was granted were old tenement dwellings. Valuation records confirm this insofar as in November 1863 No. 10 is described as dilapidated. It is clear also from these records the use of Nos. 11 and 12 had by then changed from being that of dwellings to office and yard.
It would seem to me to be improbable that the lessor of these premises, Mr. Corles who lived in England, undertook any development of them before granting the 1860 lease. On the other hand, the lessee, Adam Millar, had a substantial business based in Thomas Street and was clearly in expansion mode when he took this lease in 1860. On the balance of probabilities I would be quite satisfied that it was he who undertook all of the redevelopment that occurred on the sites of Nos. 10, 11 and 12 Rainsford Street.
I accept Mr. Stewart’s evidence that the façade of No. 12 on Rainsford Street, that is still there, was never constructed as the façade of a dwelling house and that this façade has not been interfered with since its original construction. It is quite clear that this façade simply bears no relation to that of a dwelling house. The apertures in it at the ground and first floor level are wholly inconsistent with it being a dwelling house. The fact that similar brick was used in construction of building A and building B suggests to me that it is probable that building B was built soon after building A.
I have come to the conclusion that it is probable that the dwelling structure which was on the site of No. 12 in 1860 was at some stage between 1860 and 1880 demolished and replaced with the structure that stands there to-day and that this new structure was built for the purposes of Mr. Millar’s business. It is not entirely clear exactly what was the original use of this building A. The openings to the side of it do suggest that it may have been used for the stabling of horses. This use is further suggested by the rendering on the walls at the lower level. What is absolutely clear, however, is that building A was never a dwelling house, could never have been a dwelling house.
I have come to the conclusion therefore that all of the permanent buildings now on the sites of Nos. 10, 11 and 12 were constructed by the person who was entitled to the lessee’s interest in the property.
This brings me to a consideration of compliance with ss. 9 and 10 of the Act of 1978.
It is quite clear that for the purposes of s. 9(1) that there are permanent buildings on the land and it was not seriously contested but that the portion of the land not covered by buildings was subsidiary and ancillary to these buildings.
The only alteration or addition is building D. Building D is the corner of a much larger warehouse building which extends considerably beyond the boundaries of the sites of Nos. 10, 11 and 12. This building was built after 1979 and a cash and carry business was carried out in it. On the evidence adduced in this case there is no way that this brand new substantial building could be regarded as subsidiary or ancillary to buildings A, B or C. When I speak of the terms “subsidiary and ancillary”, I accept the definition of them set out by Peart J. in the case of A. O’Gorman & Co. Ltd. v. JES Holdings Ltd. (judgment delivered 31st May, 2005) where he says:
“The word ‘ancillary’ when followed by the word ‘to’ is defined as
‘subordinate, subservient’. The former in turn being defined as ‘of inferior importance or rank; secondary, subservient’, and the latter as ‘subordinate’. Clearly there is considerable overlap in these dictionary definitions.
The word ‘subsidiary’ is given the meaning ‘serving to assist or supplement’.
I find it helpful to regard ‘ancillary’ as meaning ‘of lesser importance or subordinate’ and ‘subsidiary’ as ‘serving to assist or supplement’. These meanings seem to me to accord with one’s ordinary usage of terms.”
Neither in my view can the corner of building D which is on this site be regarded as “an improvement” within the meaning of s. 9(2). Building D is not an alteration or addition to any of the other buildings on site, namely buildings A, B and C. Building D is part of a large modern warehouse building which in turn was part of the complex of buildings which fronted onto Thomas Street and cannot in any sense be considered an addition to or alteration to buildings A, B or C or as ancillary or subsidiary to them.
It remains to consider whether the respondents have satisfied any one of the conditions set out in s. 10. The respondents contend that they satisfy four of these conditions, namely conditions 1, 2, 5 and 6.
Condition 1
For the purposes of a consideration of the applicability of this condition, s. 35 of the Landlord and Tenant Act, 1931 is of crucial importance. It reads as follows:
“35. – Whenever a tenancy is continued or renewed or a new tenancy is created under this Act, in a tenement, such continued renewed or new tenancy shall for the purposes of this Act be deemed to be a continuation of the tenancy previously existing in such tenement and shall for all purposes be deemed to be a graft upon such previously existing tenancy and the interest of the tenant thereunder shall be subject to any rights or equities arising from it being such a graft.”
It is apparent that condition 1 is confined to the person who “was entitled to the lessee’s interest under the lease…”. The lease under which the respondents hold their interest is the 1958 lease. Manifestly the permanent buildings were not built during the currency of that lease except for building D. Buildings A, B and C were built during the currency of the 1860 lease. However, in my opinion, and I will deal with this later in greater detail, when the 1958 lease was granted the lessee under the 1860 lease was in my view, entitled to a reversionary lease under the Landlord and Tenant Act, 1931 which was negotiated between the parties and hence the tenancy created in the 1958 lease became by virtue of s. 35 of the Landlord and Tenant Act, 1931 a graft upon the tenancy existing under the 1860 lease.
The importance of this is that for the purposes of condition 1, the reference to “the lease” in condition 1 includes also the 1860 lease both tenancies being grafted.
As I have held that buildings A, B and C were erected by the person entitled to the lessees interest under the 1860 lease and building D was built by the person entitled to the lessee’s interest under the 1958 lease, it necessarily follows therefore that all of the permanent buildings were erected by the person who was entitled to the lessee’s interest. Hence in my view, condition 1 has been amply satisfied.
Condition 2
Manifestly the term of the 1958 lease is for not less than 50 years and the rent at £150.00 is, on the face of it, less than the rateable valuation as of the 14th February, 2003. The certificate of valuation put in evidence shows that the rateable valuation as of that date was €761.84.
The appellants contend that the certificate of valuation demonstrates that the rateable valuation of €761.00 is in respect of several properties, including Nos. 10, 11 and 12 Rainsford Street. The evidence of the appellants was that the true valuation of Nos. 10, 11 and 12 at the relevant date was €40.00.
It was submitted by the appellants that the onus rested on the respondents to establish precisely the rateable valuation of the premises. The respondents submit that they were entitled to rely upon a certificate of valuation as prima facie evidence of the valuation and if that was disputed by the appellants or any other parties, they were entitled to apply to the Commissioners of Valuation under s. 3, subs. (5)(b) of the Landlord and Tenant (Ground Rents) Act, 1967 [the Act of 1967] for an apportionment of the rateable valuation. The subsection reads as follows:
“(b) where land demised by a lease or held on a yearly tenancy does not on a particular day bear a separate rateable valuation, the Commissioner of Valuation shall have power for the purpose of this subsection to apportion the rateable valuation or valuations of the properties in which the land was comprised on that date and to charge a fee for the apportionment….”
Furthermore it was submitted that the appellants did not in the course of the arbitration before the County Registrar seek to rely upon s. 20(1) of the Act of 1967 which reads as follows:
“20. – (1) A county registrar conducting an arbitration under this Act may and, if so requested by any party concerned, shall cause to be sent to the Commissioner of Valuation a request for a valuation, estimate or statement in respect of any particular matter relevant to the determination of the purchase price of the fee simple in land being acquired under this Act or to the apportionment of a rent under this Act and may for the purpose adjourn the arbitration.”
It was submitted that the appellants failed to rely on either of these two provisions which would have enabled them either independently of the arbitration or as part of the arbitration to have established a separate valuation for Nos. 10, 11 and 12 Rainsford Street and having failed to do this, the rateable valuation as established in the certificate of valuation cannot be disturbed.
Valuations are determined by the Commissioner of Valuations. There are procedures there as set out above for seeking an alteration or apportionment of the same.
Where there are established statutory procedures for seeking separate valuations as provided for in s. 3(5)(b) and also in s. 20(1) of the Act of 1967 and where no recourse was had to the Commissioners of Valuation under these statutory procedures which were available to the appellants, in my view this Court should not go behind the certificate of valuation so as to in effect usurp the statutory function of the Commissioners of Valuation to determine the correct valuation.
The determination of valuations is a function which requires expertise. That function has, for over 150 years, reposed by virtue of statute, in the Commissioners for Valuations who, in my opinion,, are to be regarded for that purpose as an expert Tribunal, to whom the courts should accord curial deference. This is entirely appropriate having regard to the fact that the Oireachtas has made provision for recourse to the Commissioners, where that is necessary or appropriate, as mentioned above.
In these circumstances therefore, I have come to the conclusion that this Court must accept the valuation as stated in a valid and subsisting certificate of valuation and accordingly must conclude that the respondents were entitled to rely upon condition 2 in that the rent of the property as of the 14th February, 2003 was £150.00 which manifestly is much less than the certified rateable valuation as of that date.
Condition 5
The 1860 lease expired on the 30th April, 1959. The lease of 1958 commenced on the 1st May, 1959, i.e. only on the expiry of the 1860 lease. The rateable valuation in 1958 was £550.00, both in respect of Nos. 10, 11 and 12 Rainsford Street and of the other properties. This valuation was never separately apportioned to any of these properties individually and having regard to what I have previously said it has to be taken as the operative rateable valuation for the purposes of s. 10 of the Act of 1978. Accordingly on that basis alone condition 5(a) is satisfied.
Insofar as condition 5(b) is concerned, there was the same lessee under both 1860 lease and the 1958 lease, the latter becoming a graft upon the former and in my opinion had the 1978 Act being in force in 1958, clearly the 1860 lease was a lease to which Part II of the Act of 1978 would have applied.
I am satisfied therefore that the respondents in this appeal comply with condition 5.
Condition 6
The question here is whether or not the lease of 1860 is to be regarded as a “building lease” within the meaning of s. 46(1) of the Landlord and Tenant Act, 1931 thereby entitling the lessee to a reversionary lease under s. 41(1) of that Act.
Section 46(1) is in the following terms:
“46. – (1) In this part of the Act the expression ‘building lease’ means a lease in respect of which all the following conditions are complied with, that is to say: –
(a) the land demised by such lease is situated wholly in an urban area;
(b) there are permanent buildings on such land and the portion of such land not covered by such buildings is subsidiary and ancillary to such buildings;
(c) such permanent buildings are not an improvement within the meaning of this Act;
(d) such permanent buildings were erected by the person who at the time of such erection was entitled to the lessees interest under such lease;
(e) such permanent buildings were not erected in contravention of a covenant, condition or agreement contained in such lease.”
For the reasons already stated above, in my opinion the lessee on the expiration of the 1860 lease satisfied all of the conditions (a) to (e) inclusive set out above.
Section 47(1) of the Act of 1931 provides as follows:
“47. – (1) At any time within seven years before the expiration of a building lease, any person in possession of the land or any part of the land comprised in such lease and holding the same under such building lease or under a proprietary lease shall, subject to the provisions of this Part of this Act and obtaining the consent (if any) required by this section, be entitled to obtain from the person in receipt (otherwise than as agent for another) of the rent reserved by such building lease, a reversionary lease on the terms fixed by or under this Part of this Act of the said land so possessed held for him as aforesaid.”
It is clear, in my view, that from 1952 onwards the lessee, under the 1860 lease, was entitled to seek and obtain a reversionary lease of these premises.
There is no evidence of the lessees having applied to Court to fix the terms of such lease and it would seem to me to be probable that the granting by the lessor of the 1958 lease was by virtue of the entitlement of the lessee to a reversionary lease and accordingly the granting of the lease and the terms thereof were probably fixed by agreement.
That being so, it is my view that the respondents herein satisfy condition 6.
Thus I have come to the conclusion that the respondents have satisfied the requirements of ss. 9 and 10 of the Act of 1978 and are entitled to a conveyance of the fee simple.
THIRD ISSUE
Computation of Purchase Price
The determination of the purchase price is now governed by s. 7 of the Landlord and Tenant (Amendment) Act, 1984, and in particular s. 7(3) thereof. This subsection reads as follows:
“(3) Subject to the provisions of this section, the purchase price shall be the sum which, in the opinion of the arbitrator, a willing purchaser would give and a willing vendor would accept for the fee simple or other interest at the relevant date having had regard to—
( a ) the rent payable for the land by the person acquiring the fee simple,
( b ) where, at the relevant date, the land is held under a lease which provides for an increased rent payable within fifteen years after that date, the amount of that increase and the time when it becomes payable,
( c ) the current interest yields on securities of the Government issued for subscription in the State,
( d ) if the land is used for the purposes of business, or exceeds one acre in area and is not used for the purposes of business, the area and nature of the land, its location and user and the state of repair of any buildings or structures thereon,
( e ) the price paid for the fee simple or any other interest in the land on a sale taking place on or after the 22nd day of May, 1964,
( f ) any mortgage or other charge on the interest in the land of any person from whom, mediately or immediately, the person acquiring the fee simple holds the land,
( g ) the costs and expenses which, in the opinion of the arbitrator, would be reasonably incurred by the persons from whom, mediately or immediately, the person acquiring the fee simple holds the land, in investing the purchase money payable in respect of the acquisition of the fee simple,
( h ) the costs and expenses which, in the opinion of the arbitrator, have been incurred by a person acquiring the fee simple who holds the land under a lease by reason of the failure of the lessor to maintain any amenities which he is required to maintain under a covenant in the lease,
( i ) the current price of the immediate lessor’s interest in land held under leases or yearly tenancies similar to the lease or yearly tenancy, as the case may be, under which the land is held by the person acquiring the fee simple, and
( j ) such other matters as are, in the opinion of the arbitrator, relevant to the determination of the purchase price.”
As is readily apparent (b), (f), (h), and (i) have no relevance to the computation of the purchase price in this case.
The case made by the appellants on the question of valuation, supported by the evidence of Mr. Ffrench O’Carroll, a valuer, was that the premises in question were ripe for redevelopment; that the buildings on the site, by and large, had reached the end of their natural life and were fit only for demolition and added nothing to the value of the property; that the inclusion of the site in the Digital Hub area meant that the premises had a very favourable zoning for development purposes; that having regard to the time left to run on the 1958 lease, i.e. a fifty six years from the service of the statutory notice, the lessee would not be in a position to develop the premises and offer marketable titles. Thus, in the context of a conveyance of the fee simple from a willing vendor to a willing purchaser, the purchaser i.e. the lessee would be willing to pay a significant portion of the potential development value, in order to achieve the uplift in that value which the acquisition of the fee simple would contribute. Without that acquisition, it was contended, it would not be possible to market the redevelopment of the premises.
It was submitted that the development potential of the site was a factor which should have been taken into account by the County Registrar under subpara. (d) of
s. 7(3).
Against this it was submitted by the respondents that subpara. (d) did not have any application because the premises in question have not been used for the purposes of business since the Commissioners of Public Works in Ireland purchased the leasehold interest in 2001, and the site does not exceed one acre in area. In this regard reference was made to the evidence of Mr. Ffrench O’Carroll who regarded the premises as a disused or brown field site. It was further submitted that having regard to the time left to run on the lease i.e. fifty six years from the service of the notice of intention to acquire the fee simple, that the fee simple interest carried with it no development potential as the right to occupy and develop was too far into the future to attract any development value.
In this regard reference was made to s. 7(4) which deals with the computation of purchase price where a lease has expired and where there is specific provision that the development plans of the lessor or the party from whom a conveyance is sought, are to be disregarded for the purposes of computation of the price to be paid.
Achieving a full understanding of subpara. (d) is not easy, particularly in the context of a brown field site.
On the one hand, it could be said that, in the situation where the permanent buildings on the land have by and large reached the end of their life and contribute little or nothing to the overall value of the premises that the intrinsic value contributed by the ground and in particular potential development value should be a weighty factor in determining price.
However, the initial phrase in subpara. (d) “if the land is used for the purpose of business” militates against such an approach in the sense that when the buildings reach this stage of dilapidation and disuse, it is likely that they are no longer used for the purpose of business and hence, unless the area exceeds one acre the factors set out in subpara. (d) would have to be disregarded.
If one places a very broad construction on the phrase “used for the purposes of business” so as to permit the application of subpara. (d), one is still left with the operation of the governing principle, namely, what would a willing purchaser pay a willing vendor, for the interest being sold. In this case the interest being sold is the fee simple in circumstances where there will be no occupation by the fee simple owners for at least fifty six years but in reality, assuming the existence of statutory rights to a new lease similar to those currently existing, the right of the fee simple owner to resume possession is postponed well beyond the 56 years.
If subpara. (d) applies, the factors to which regard must be had under it, must be given due weight. Thus, whereas in this case, the buildings on site contribute little intrinsic value and the real value of the premises is contributed by the ground, regard must be had to this and due weight given. Necessarily however, if the right to repossess is remote in the future the ultimate weight to be attached to these factors in terms of the purchase price will have to be greatly attenuated.
Mr. Ffrench O’Carroll estimated the value of the site at approximately €4.6 million. Mr. Goode, the valuer who gave evidence on behalf of the respondents disagreed with this valuation. If one were to accept that the actual value of the site was in the region of €3.5 million euro because of its development potential as part of the Digital Hub area, giving fair weight to the contribution of the ground to that value but bearing in mind the remoteness of the fee simple owners right to possess and thereby enjoy that development potential, only a very small portion of the full value of the premises enhanced by that development value should be reflected in the purchase price. In my view this should not exceed five per cent of this. In this case I would estimate that to be approximately €17,500.
I am inclined to the view that the court should adopt a broad approach to the question of whether or not the premises were used for business purposes. Although the premises were acquired by the Commissioners of Public Work in Ireland in 2001, the photographs which were put in evidence illustrate that after the service of the notice on the 14th February, 2003, some kind of business activity was going on there. This appears to have been concentrated in building D and the car park appears to have been well used. On that basis, therefore, I would be inclined to the view that these premises were used at the relevant time for the purposes of business and therefore subpara. (d) does apply.
The purchase price fixed in this case of €40,600 represents some uplift on the price paid by the appellants for this site namely £25,000 in the year 2001, but it would not in my view appear to reflect any sum in respect of the factors set out in subpara. (d) as discussed above.
In order to give application to the factors set out in subpara. (d) which are in my view relevant in this case having regard to the nature of the premises as of the date of service of the notice to acquire the fee simple in February, 2003, a sum in the order of that I have mentioned above should have been added to the purchase price so that due regard can be said to have been given to these relevant factors.
Therefore I would alter the purchase price by the addition thereto of the sum of €17,500 bringing the purchase price to €58,100.