Security of Tenure
Cases
Tenement Case
Corr v. Ivers
[1949] IR 251
MAGUIRE C.J.:
19. Nov.
The applicant applied to the Circuit Court in Dublin for an order under Part III of the Landlord and Tenant Act, 1931, declaring her to be entitled to a new tenancy in the tenement consisting of a shop and room on the ground floor and other premises, forming part of larger premises, known as Number 56 Lower George’s Street, Dun Laoghaire, held by the applicant under a lease for twenty-one years from the 1st October, 1926.
The application was heard by Circuit Court Judge McCarthy who, on the application of the applicant, stated this Case for the opinion of this Court on certain questions that had arisen at the hearing. Although the applicant on the critical date held the premises in question under the lease mentioned, she was not in occupation of the whole of the premises, as portion of them were sub-let.
Sect. 20 of the Act provides:”Subject to the provisions of this Act, a tenant of a tenement to which this Part of this Act applies shall, on the termination of his tenancy in such tenement, be entitled to a new tenancy in such tenement on such terms as may be agreed upon between such tenant and his landlord or as shall, in default of such agreement, be fixed by the Court.” The word, “tenant,” is defined in s. 2 as “the person for the time being entitled to the occupation of a tenement . . . ” “Tenement” is defined in the same section as meaning land or premises complying with certain conditions, one of which is that “(c) it is held by the occupier thereof under a lease or other contract of tenancy express or implied or arising by virtue of a statute. . . . ”
The first and main question raised here is whether that part of the leasehold premises occupied by the applicant can be said to be held under a lease within the meaning of s. 2 (c). No help is to be got from decided cases. McManusv. Electricity Supply Board (1) was a case where the applicant was held not to be a tenant of the tenement in respect of which application for a declaration that she was entitled to a new tenancy was made. The ground of the decision was that she was not in occupation of the whole of the premises. The question whether she was entitled to a new tenancy in the part of the premises which she actually occupied was not considered and Murnaghan J., in his judgment, at p. 377, pointed out that “The Case Stated does not, in my opinion, state facts relevant to the right of the applicant to a new tenancy in the part of the premises which she actually occupied.” Reference was made to two decisions in the Circuit Court, that of Circuit Court Judge Davitt, no Mr. Justice Davitt, in Conlon v. Lambe (1) and that of Circuit Court Judge Shannon, now Mr. Justice Shannon, in MacLoone v. North (2). Each of these Judges took the view that where part only of premises comprised in and demised by a lease are in occupation of the lessee they cannot be treated as a tenement, within the meaning of s. 2. I am in agreement with this view. I am of opinion that it cannot be said that part of premises demised by a lease is, taken by itself, held under the lease. It is, of course, so held with other premises, but it cannot be treated as a separate holding. Rent is payable in respect of the whole of the demised premises, and cannot reasonably be said to be payable in respect of each part of the premises. Similarly, with the covenants and conditions in a lease, they, in my view, relate to the entity the subject-matter of the lease, which cannot be treated as being divisible. Furthermore, it seems to me that the provisions of Part III of the Act of 1931 which refer to the right to a new tenancy impliedly refer to a tenancy which replaces the old tenancy. I find it difficult to see how it can be shown that, in such a case as this, any tenancy existed in that portion of the premises. occupied by the applicant at the critical date.
Accordingly, I would answer the first question submitted by the learned Judge in the negative. Accordingly, if that view were accepted, the other questions would not arise.
MURNAGHAN J.:
The Landlord and Tenant Act, 1931, made important amendments in the law regulating the relationship of landlord and tenant. As it is drafted, it creates a special definition of the word, “tenement.” The sections involved in the case before the Court which use the word, “tenement,”deal with the right to a new tenancy, but the special definition of “tenement” is equally applicable to that part of the Act which deals with relief from oppressive covenants.
Sect. 19, sub-s. 1, of the Act gives a right to a new tenancy in a “tenement” in certain cases, e.g., where the “tenement was, during the whole of the three years next preceding the termination of such tenancy, bona fide used by the tenant for the time being thereof wholly or partly for the purpose of carrying on a business and, immediately before such termination, either was held by the tenant thereof under a tenancy from year to year or under a lease or other contract of tenancy for a term of not less than. one year or a lease for a life or lives or had been for not less than seven years continuously in the occupation of the person who was the
tenant thereof immediately before such termination or of his predecessors in title . . . ” By s. 2 “tenement” means land or premises complying with, inter alia, the condition”(c) it is held by the occupier thereof under a lease or other contract of tenancy express or implied . . .”
The applicant for a new tenancy in the case before the Court was the assignee of a lease, dated the 22nd September, 1926, for a term of twenty-one years from the 1st October, 1926. Her predecessors in title had sub-let portion of the premises comprised in the lease, viz., the upper portion, to persons who remained in occupation of that portion. The applicant was in occupation of the premises consisting of the ground floor, yard, etc., and can satisfy all the requirements of the Act if the portion which she occupies is a “tenement”;and it is admitted that this portion will be a tenement if it is “held by the occupier thereof under a lease.” It seems to me that in ordinary language the premises in the occupation of the applicant were held under a leaseas this is the applicant’s title to possession. The objection made against the applicant is that condition (c), quoted above, applies solely to premises where these premises are co-extensive with the parcels demised by the lease. I cannot find that any such limitation is anywhere expressed in language in the Statute, and I am, further, of opinion that any such supposed limitation would be contrary to the clear policy of the Act of 1931.
It has to be admitted that if premises are held under a lease and if portions of such premises are sub-let to persons in occupation who comply with the requirements of s. 19, sub-s. 1 (a), the sub-let portions are “tenements”; but it is sought to establish that the assignee of the original lessee in occupation of the remainder who complies with all the other requirements, cannot obtain a new tenancy by virtue of the definition of “tenement.” The parts which have been sub-let are tenements and there is a right to a new tenancy in these parts, and, if the part retained by the assignee of the lease had been sub-let, it would form a tenement. The policy of the Act was to give a right to a new tenancy to persons in occupation who complied with certain requirements. I can see nothing to suggest that an occupying tenant should be deprived of a right to a new tenancy because he had a legal right to premises more extensive than the premises in his actual occupation.
The notice of intention to claim relief required by s. 24 of the Act was, in fact, served. The notice served claimed relief in respect of the entire premises comprised in the lease, which were more extensive than the premises in the actual occupation of the applicant. Relief was, therefore, claimed in respect of a tenement and something in addition. The claim for such relief does not, in my opinion, make the notice bad, nor does the notice require to be amended, as included in the notice is a claim for relief in respect of the tenement.
Sect. 25 of the Landlord and Tenant Act, 1931, enables a person who has duly served a notice of intention to claim relief to make application to the Court, and the Court has, thereupon, jurisdiction to determine the applicant’s right to such relief. If the application to the Court in the present case had been as wide as the notice of intention to claim relief, the Court could, in my opinion, have determined the applicant’s right to relief in respect of the premises occupied by the applicant. The fact that the applicant in her application to the Court limited her claim to what she was entitled to, does not, in my opinion, lessen the power of the Court to give her what she is entitled to claim. Counsel for the respondent says that the applicant claimed in Court something different from what is stated in the notice of intention to claim relief. What is claimed is different, not in the sense that it is a distinct and separate premises, but only in the sense that the claim, while including the subject-matter of the application to the Court, also claimed something more. In my opinion, the application to the Court was in form correct.
GEOGHEGAN J.:
I agree with the judgment delivered by Mr. Justice Murnaghan.
O’BYRNE J.:
By indenture of lease, dated the 22nd September, 1926, and made between William Ivers and Timothy Delaney, of the one part, and Frances Godkin, of the other part, the entire premises, known as Number 56 Lower George’s Street, Dun Laoghaire, were demised to the said Frances Godkin for a term of twenty-one years from the 1st October, 1926, at the rent and subject to the covenants therein contained. The applicant, Phyllis Corr, was, at and prior to the expiration of the said term of years, entitled to the lessee’s interest in the said lease and in the premises thereby demised, subject, however, to the sub-lease hereinafter mentioned.
By agreement in writing, dated the 29th June, 1934, and made between Margaret Daft (in whom the lessee’s interest under the said indenture of lease was then vested) of theone part, and Agnes V. Hopper and Bridget T. Hopper, of the other part, the said Margaret Daft demised unto the said Agnes V. Hopper and Bridget T. Hopper portion of the premises comprised in the said indenture of lease for the term of ten years from the 10th February, 1935, at the rent and subject to the covenants therein contained.
From the month of February, 1944, until the expiration of the said term of twenty-one years, the applicant occupied the premises demised by the said indenture of lease, except the portion thereof sub-demised as aforesaid, as assignee of the said term of twenty-one years.
On the expiration of the said term of ten years Agnes V. Hopper and Bridget T. Hopper became tenants from year to year of the premises comprised in the sub-lease. In August, 1946, they assigned this tenancy to Anne Frances Murphy and Catherine Bergin and the said Anne Frances Murphy and Catherine Bergin thereupon went into, and were at all material times in occupation of, the premises comprised in the sub-lease.
On the 26th June, 1947, in purported pursuance of s. 24 of the Landlord and Tenant Act, 1931, the applicant served notice of her intention to claim a new tenancy, under Part III of the said Act, in the premises therein described as the entire of the premises comprised in the said indenture of lease of the 22nd September, 1926.
On the 28th November, 1947, the applicant served an originating notice of application for relief under s. 25 of the said Act. In this notice, relief was claimed only in respect of that portion of the demised premises of which the applicant was in occupation, i.e., the entire of the premises comprised in the said indenture of lease, save and except the portion comprised in the said sub-lease. On the hearing of this application the learned Circuit Court Judge stated and signed a Case for the opinion of this Court on certain questions which had arisen on the hearing of the said application.
The first question is as follows:”Is that portion of the premises, No. 56 Lower George’s Street aforesaid, mentioned in clause (e) of para. 4 hereof” (i.e., the portion in respect of which the applicant sought relief in the said originating notice of application) “a tenement as defined by s. 2 of the Landlord and Tenant Act, 1931?”
The right to a new tenancy is created by s. 20 of the Act, and that right is given to the tenant of a tenement to which Part III of the Act applies.
Tenement is defined in s. 2 of the Act. It is unnecessary to set out the definition in full. It is conceded by the
respondent that the premises in respect of which relief is sought satisfy all the requirements of the definition with the exception of one clause, viz., clause (c). That clause provides that, in order to constitute a tenement within the meaning of the Act, the premises must be held by the occupier thereof under a lease or other contract of tenancy, express or implied or arising by virtue of a statute. It is contended by the respondent that the premises comprised in the originating notice of application cannot properly be said to be held under the said indenture of lease, inasmuch as they are only portion of the demised property, and, accordingly, he contends that they do not come within the foregoing clause of the definition. It seems to me that this contention is clearly fallacious and that it seeks to put upon the words of the Statute a meaning which they do not normally bear. In my view, where a person holds premises under a lease, he holds, under that lease, not only the entire of the premises, but each and every part thereof. Take a simple case of a lease which demises two houses. If the lessee is asked how he holds one of these houses I consider that he answers the question with strict accuracy if he says that he holds it under the lease, even though it does not exhaust all the property comprised in that lease. Every word of the definition contained in this clause seems to me to be satisfied in this case. The contention by the respondent seems to me to involve not merely a straining of language, but the insertion, in the clause, of words which are not there, viz., the insertion after the word, “it,” at the commencement of the clause, of the words, “and it only,” or”and no other premises,” or some other words to this effect. In my opinion this question should be answered in the affirmative.
It is conceded that, if the first question be answered in the affirmative, a similar answer must be given to the second question.
The third question is as follows:”If the answers to questions (i) and (ii) are in the affirmative, is the said notice of intention to claim relief, as served, an effective notice of intention to claim relief relating to the said tenement, as required by the Statute, in that it claims a new tenancy in premises other than the premises in which the applicant seeks a new tenancy?” I cannot help thinking that the wording of this question is unfortunate. If the premises mentioned in the notice of intention to claim relief and those mentioned in the originating notice of application were quite different, I have little doubt but that the notice of intention to claim relief would be held to be ineffective,
That is not the position in this case. Up to a point the premises comprised in the two notices are the same. The difficulty arises by reason of the fact that the premises comprised in the notice of intention to claim relief are more extensive than those comprised in the originating notice of application, and I propose to deal with the question as though it asked whether the notice of intention to claim relief is an effective notice, having regard to the foregoing fact.
Sect. 24 of the Act provides that no claim for relief under the Act shall be maintained unless the claimant shall, within the time specified in the Act, have served on the person against whom the claim is intended to be made a notice in the prescribed form of his intention to claim relief. Sub-sect. 3 of the same section provides that every notice of intention to claim relief shall state the nature of the relief claimed and, where such relief is a new tenancy, such notice may include a claim in the alternative for compensation under the Act. No question has been raised as to the form of the notice; but it is said that it is a notice of intention to claim relief in respect of the entire of the premises known as Number 56 Lower George’s Street and, accordingly, that it is not an effective notice in respect of that portion of the said premises which constitutes a tenement of which the applicant is tenant, within the meaning of the Act, i.e., the portion of the premises occupied by the applicant.
I take it that the object of the notice is to give warning to the landlord that the tenant intends to enforce his rights under the Act. In a case, such as this, where the existing tenancy is terminated by the expiration of a term of years, the notice must be served not less than three months before the termination of the tenancy. This gives the landlord an opportunity of considering his position and the rights of his tenant under the Act. It is clear under the Act that no one is entitled to get a new tenancy save in respect of premises which he occupies. The facts in connection with the occupation of the premises mentioned in the notice of intention to claim relief, if not already within the knowledge of the landlord, can easily be ascertained by him, and I cannot see how the landlord would be in any way prejudiced by reason of the fact that, in the notice of intention to claim relief, the tenant asks for something more than he is entitled to get. I cannot say that my mind is entirely free from doubt on this point; but, on the whole, I am inclined to think that the notice which was served in this case substantially effectuates the purpose contemplated by s. 24 and should be held to be an effective notice within the meaning of that section. I am, accordingly, of opinion that the third question should be answered in the affirmative.
In the fourth question we are asked whether the originating notice of motion is a valid and effective notice of motion as required by the Statute, in that it claims a new tenancy in premises other than the premises set forth in the notice of intention to claim relief and not in all the premises set forth in the last-mentioned notice. To some extent the wording of this question is subject to the same criticism as the wording of the third question. The question it is intended to raise is whether the originating notice of motion is a valid and effective notice, inasmuch as it claims a new tenancy in part only of the premises set forth in the notice of intention to claim relief, and not in all the said premises.
The originating notice of motion in this case is precise and apt. It claims the precise relief to which the applicant, assuming that he adopted the correct procedure, is entitled under the Act. The notice, in itself, is beyond criticism. The real objection which has been raised against it is that it is bad because it is based upon an invalid notice of intention to claim relief. Having arrived at the conclusion that the latter notice is valid and effective, I am of opinion that there is no substantial objection to the originating notice of motion and that this question should be answered in the affirmative.
The fifth question is merely consequential and, the other questions having been answered in the affirmative, a similar answer should be given to this question.
BLACK J.:
The chief question before us comes down to this: Can a tenant who has sub-let a portion of his holding obtain a new tenancy under the Landlord and Tenant Act, 1931, of the portion which he has not sub-let? Not only has this point led to conflicting decisions in the Circuit Courts, but when the Town Tenants’ Tribunal, appointed by the Oireachtas, was sitting, a memorandum was submitted to it on behalf of the Bar Council by the present Mr. Justice Dixon and Mr. Justice Kingsmill Mooreauthors of the respective standard books on the Actin which this point was raised and its doubtful nature recognised. It is strange that a point of such practical importance to landlords and tenants alike in all the seventeen years since the Act was passed has never been settled until now.
If the answer to the above question is “No,” it will involve great possible hardship to many tenants. If it is answered “Yes,” it may involve like hardship to many landlords. That is an unsatisfactory situation, which only legislation can cure. Thus, if the answer is “No,” it means that a tenant who would otherwise be clearly entitled to a new tenancy will lose his entire right if he has lawfully sub-let any part of his holding. The object of this Act was really the same as that of the English Landlord and Tenant Act, 1927, though it goes much farther. That object was described by Mr. Justice Talbot in Hudd v. Matthew (1) as being “to prevent the appropriation by a landlord . . . for his own pecuniary advantage of something which owes its origin to the exertions and skill of the tenant.” Yet, if the answer to the question is “No,” the landlord may appropriate a valuable goodwill which his tenant may have built up, and which may have become adherent to the premises, without a penny of compensation, if at the end of the existing tenancy it is found that the tenant has sub-let even a back room or an office, though the room or office may not be worth ten shillings a week and the goodwill may be worth many thousands of pounds. I do not believe that that was the intention of the Legislature.
On the other hand, if the answer to the question is “Yes,”it means that the tenant at the expiration of his tenancy, can compel his landlord to sub-divide his premises, giving the tenant a new lease of such portion only as the tenant chooses to retain, and relieving him of the remainder. This may seriously depreciate the value of the portion the tenant insists on giving up; for, while many premises can be more profitably let by being sub-divided, in many other cases the contrary is the fact. Often a shop-keeper is glad to get premises where he can reside over his shop, regarding this as a valuable asset. In later years, with growing affluence, he sometimes prefers to move into a suburban villa, and, at the end of his term, seeks a new lease of the shop, leaving the now despised upper floors to the landlord to use as best he can. In such a case there might well be many potential competitors for the combined shop and residence who would gladly pay a rent for both together appreciably higher than the aggregate rent obtainable for the two portions separately. In other cases a tenant might pick and choose scattered portions of business premises, with the result of depreciating very substantially the value of the portions which he declined to retain. Looking at the equities of the matter, I doubt whether the Legislature, if it had foreseen such a contingency at all, would have failed to provide either that the tenant could not insist on a new lease of portion only of his holding to the exclusion of any part actually in his occupation at the end of his term, or, alternatively, that if he were allowed to insist on that, and the result would be to make the combined rents obtainable for the separate portions less than the rent that would be fixed if he got a new lease from the Court of the entire premises, the fair amount necessary to indemnify the landlord against this loss should be added to the rent which would otherwise be fixed for the new tenancy in accordance with s. 29 of the Act of 1931.
The omission of the Legislature to provide for either of the contingencies I have mentioned, the one involving hardship to tenants, and the other, hardship to landlords, and the framework of ss. 24 and 25, together with the wording of the compulsory Form VIII in the Schedule to the Landlord and Tenant Regulations, 1932, lead me to believe that the authors of the Act had only present to their minds the case of a tenant who was in occupation of the entire of his holding and who sought a new lease of that entirety; but, even if I am right in that, it does not follow that the authors of the Act had an intention to exclude a tenant who only sought a new lease of part of his holding. If the Legislature had no such tenant in its mind at all, it could hardly be said to have any intention either to include or to exclude him. Yet, if the language it has used is wide enough to include such a tenant, I must, I think, presume that the intention was to include him. It then becomes largely a question of grammar and the natural meaning of the words employed.
The right to a new tenancy is given by s. 20. To get this right, the applicant must be a tenant of a “tenement,” and the tenement must be one to which Part III of the Act applies. “Tenement” is defined in s. 2, and the present applicant’s holding admittedly answers all the requirements of that definition, except (as it is contended) that contained in clause (c), which requires that in order to be a “tenement”the premises must be held by the occupier thereof under a lease or other contract of tenancy. The landlord contends that while the whole of the tenant’s holding was held under a lease, the portion of that holding to which the claim for a new tenancy is confined was not held under a lease within the meaning of clause (c). I cannot follow that. The whole includes every part of that whole, and, if the entire premises are held under a lease, the portion of those premises of which a new lease is sought must also be held under the same lease. I have no doubt that the portion in question is a”tenement” within the meaning of s. 2.
Equally, I have no doubt that this portion is a tenement to which Part III of the Act applies. For that purpose it is enough if it fulfils any one of the conditions laid down in s. 19. It clearly does fulfil one of those-conditions in that during the whole three years next preceding the termination of the tenancy it was bona fide used by the tenant for the time being thereof wholly or partly for the purpose of carrying on a business, and immediately before such termination was held by the tenant thereof under a contract of tenancy for not less than one year.
The result of the foregoing is that I should answer Questions (i) and (ii) of the Case Stated in the affirmative.
Question (iii) asks whether the notice of intention to claim relief is an effective notice. This notice is required by s. 24, sub-s. 1, which says that it must be in the prescribed form, meaning Form VIII in the Schedule to the Regulations of 1932. The applicant’s notice complies in all respects with Form VIII. It is, therefore, good and valid, and cannot be rendered bad or invalid by any supposed retrospective effect of any originating notice of motion served subsequently. I should, therefore, answer Question (iii) in the affirmative.
Question (iv) asks whether the originating notice of motion claiming a new tenancy is valid, seeing that it claims a new tenancy in premises other than the premises set forth in the notice of intention to claim relief. This originating notice of motion is the method prescribed by s. 5, sub-s. 5, for bringing before the Court the application for a new tenancy authorised by s. 25, sub-s. 1. According to s. 25, sub-s. 1, the application so authorised is an application “to determine”the tenant’s “right to such relief,” and “such relief” plainly means the relief already previously specified in that section, namely, the same relief as the tenant has served his notice of intention to claim. This relief must, as I have said, be framed according to Form VIII, and must, therefore, be a claim for a new tenancy in the tenement of which the tenant’s tenancy has expired or is about to expire. This follows from the wording of Form VIII which makes the tenant recite that he is or has been tenant of a tenement (which he has to describe) under the tenancy then terminated or about to terminate, and which then makes him give notice that he intends to claim a new tenancy in the saidtenement.
I feel that the landlord here can object with much force that the originating notice of motion served is not an application to the Court “to determine his” (the tenant’s) “right to such relief”the phrase “such relief” meaning, as it clearly does, the relief specified in the previous notice of intention to claim relief, which is the application authorised by s. 25, that being the only section which authorises any application to grant or determine a right to a new tenancy.
It may very plausibly be said that this originating notice of motion is an application for a new tenancy in part only of the premises specified in the notice of intention to claim relief, and is, therefore, not an application to the Court to determine the tenant’s right to “such relief,” within the meaning of the phrase, “such relief,” in the section; for such relief means the relief specified in Form VIII and in the notice of intention to claim relief, namely, the grant of a new tenancy in the premises described in that form and notice, which are the whole premises in the tenancy about to expire. The patent answer, if it be a good one, is that s. 25, sub-s. 1, really authorises an application for a new tenancy in the whole premises held under the expiring lease, but that on general principles when a person is entitled to ask for a given relief, he is impliedly entitled to ask for any part of that relief and to confine his claim thereto; wherefore, being here entitled to claim, though not to obtain, a new tenancy in the entire holding, he may confine his claim to a part of that holding, and the Court may grant him a new lease of that part, just as one might claim £100 for money lent or paid to his use, and the Court might award him £50. But such a claim is really for the money’s worth, and not for the actual notes or coins lent or paid. It is not a claim for something in its specific physical identity. With a complex entity, like structural premises, it may be said that, on a claim for a lease of the whole, the grant of a lease of part only may not be a satisfaction of the claim pro tanto, since it is the grant of a lease of an essentially different entity from the entity claimed, and, in certain cases, might be of no value to the claimant at all. This idea may underlie the decision in Leslie & Co. v. Cumming (1) where Roche and MacKinnon JJ., on a certain claim by a landlord to recover possession of entire premises, upheld a judgment refusing him possession of a part of the premises, although he would have been entitled to get a judgment for possession of that part if he had claimed it alone, either as his sole claim or alternatively to his claim for the whole. At the same time, under the Rules of the Supreme Court (Ir.), 1905, Or. XII, r. 40, a person appearing to a writ for recovery of land for overholding or on the title may limit his defence to part only, in which case the plaintiff may recover all except that part by default. He, thus, may recover part of the land claimed. Further, I have always understood that, although one who sues for the recovery of land cannot recover more than he claims, he may get judgment for such part of what he claims as he may prove himself entitled to, as various cases quoted in Cole on Ejectment, at pp. 86, 285 and 306, show.
On the really disturbing and very technical point raised in the fourth question submitted to us, I have come to the conclusion that, notwithstanding such decisions as may have been given in a contrary sense by Circuit Courts, s. 25, sub-s. 1, may be treated as authorising the tenant to claim, and the Court to grant, any part of the relief specified in the notice of intention to claim relief, and further, that the grant of a new tenancy in part of the premises comprised in the expired or expiring tenancy may be regarded as a grant of part of the relief specified in the said notice of intention to claim relief, as indicated by the phrase, “such relief,”where it occurs in the said section. I should, therefore, answer the fourth question in the Case Stated also in the affirmative. I have enlarged on it and what underlies it, because of my feeling, be it right or not, that the difficulty actuating certain Circuit Court decisions, and what I happen to know have been the doubts of many lawyers, have not been caused by s. 2 or the definition of a tenement, but by the peculiar wording of s. 25, sub-s. 1, taken in conjunction with Form VIII, compliance with which is made compulsory by s. 24, sub-s. 1. I think it follows that the answer to Question (v) should be that the applicant is entitled to obtain a new tenancy in the tenement described in para. 4 (f)of the Case Stated and in the originating notice of motion.
Calarogal Limited v O’Keeffe
[1974] IR 450
KENNY J. :
In this action the plaintiffs seek to recover possession of the basement, ground floor and front garden of No. 190 Lower Rathmines Road. The first defendant is the trustee of one branch of the Fine Gael party and the second defendant has a similar position for another branch and they claim that they became tenants of the basement rooms of the premises in 1951 and that they are now entitled to a new tenancy in that part under the Landlord and Tenant Acts 1931-1967. They maintain that the premises which they occupy have been used for the purpose of carrying on a business since 1951. The rooms in the basement have been continuously used for constituency purposes since the letting was made and they have also been let for evenings to cultural organisations. The plaintiffs, who are the landlords, concede that the rooms in the basement have been used for business for the necessary period to entitle the tenants to a new tenancy but their right to this is disputed by the plaintiffs because, they say, the trustees never became tenants or sub-tenants of the entire interest in the basement rooms. The third and fourth defendants do not make any claim to any part of the property.
The first and second defendants brought an application in the Circuit Court for a new tenancy and, when this was dismissed, they appealed to this Court. On the 22nd July, 1970, the plaintiffs began proceedings in this Court for recovery of possession. The parties have agreed that the appeal from the Circuit Court decision and the High Court action should be heard together, and this judgment relates to both cases.
The evidence about many of the matters in issue is sparse because the relevant events occurred many years ago and the parties find it difficult to recall what happened. The first and second defendants seek a new tenancy of the basement and have emphasised that their claim to have acquired a statutory title to it is to be considered only if they fail in the first branch of their case.
By a written agreement made on the 7th May, 1913, the Reverend Joseph Fitzgibbon and others let the entire of the house (then known as 66 Rathmines Road) to Mr. James Heffernan as a monthly tenant. When the freehold interest in the property was conveyed in 1946 to the plaintiffs, the premises No. 190 Rathmines Road were described in the schedule to the deed as being let to Mr. J. Heffernan as monthly tenant at the monthly rent of £5 2s. 9d. James Heffernan, who lived in the premises, died intestate on the 19th February, 1946, and was survived by his widow, Johanna, and by at least one son, William. There was no evidence as to whether there were other children of the marriage alive when he died. On the 8th April, 1946, letters of administration of his personal estate issued to his widow. On the 20th July 1951, when the widow was alive, William Heffernan signed a contract of tenancy by which he let the basement portion of the property to the first and second defendants for one year at the weekly rent of £1; when this term expired the defendants remained in occupation and continued to pay the rent weekly. William Heffernan predeceased his mother and when she died on the 6th May, 1956, she left all her property to her niece, Sarah Mulligan. Probate of the will of Johanna Heffernan was granted on the 27th June, 1956, to the executor named in it. The fourth defendant had paid the rent for the basement sometimes to William Heffernan and at other times either to Johanna Heffernan or to Miss Mulligan; the last payment was made in 1955. No evidence has been given from which it could be inferred that Johanna Heffernan ever adopted or ratified the tenancy created by her son or that he made the letting as her agent.
When James Heffernan died, the legal interest in the tenancy created in 1913 became vested in his personal representative. On the evidence which has been given it is not possible to make a finding as to the extent of the beneficial interest which William Heffernan had in the property: whatever it was, it could not have exceeded a two-third share. This was not a sufficient interest to make the letting of 1951 valid in relation to all the interest in the basement rooms. The sub-lease which William tried to make in 1951 was not therefore valid in relation to all the interest in the basement and it follows that the first and second defendants never had a tenancy or sub-tenancy in the entire estate in the basement rooms. The word “tenant” is defined by the Landlord and Tenant Act, 1931, as “the person for the time being entitled to the occupation of a tenement,” andthe right to a new tenancy which is given by s. 19 of that Act is limited to those who satisfy this definition. Therefore, the first and second defendants were never the tenants of the rooms in the basement and so their claim, which was rejected by the Circuit Court judge, fails. There was no discussion during the argument as to when the tenancy which Mr. William Heffernan attempted to create in 1951 terminated.
In the year 1959 Miss Mulligan, who had been served with a notice to quit by the plaintiffs’ agents, surrendered the tenancy created in 1913 by handing over the keys of the property to the plaintiffs and, when this was done, that tenancy terminated. At the same time notices to quit were served on the first and second defendants and on other persons who were in the premises. The plaintiffs could not have brought successful proceedings against the first and second defendants for recovery of possession while the tenancy created in 1913 existed and so the Statute of Limitations, 1957, did not begin to operate against them until 1959. The plaintiffs’ right of action against the defendants to recover possession accrued in 1959: see s. 13 of the Act of 1957. As the plaintiffs brought these proceedings within 12 years from the date in 1959 when there was a surrender by act and operation of law of the tenancy created in 1913, the plaintiffs’ title has not been extinguished and they are entitled to an order for possession.
Baumann v. Elgin Contractors
[1973] IR 172
Finlay J. 172
This is an appeal by the applicant against the refusal of the Circuit Court judge of his application for a new tenancy in certain premises consisting of two houses and premises comprising two shops with apartments at the rear thereof and apartments over the shops and with yard and garages at the rear, known as Baumanns, Dublin Road, Stillorgan. By consent the matter was heard before me on an agreed statement of facts, and those facts are as follows.
The applicant was in possession and occupation of the premises until the 30th November, 1971, by virtue of a lease dated the 28th December, 1950, which expired by efflux of time on the 30th November, 1971. The termination of the tenancy within the special meaning of s. 19 of the Landlord and Tenant Act, 1931, occurred on the 31st August, 1971. During the whole of the three years next preceding the 31st August, 1971, and at all material times preceding the hearing of this application, the premises were bona fide used by the applicant for the purpose of carrying on a business. On the 19th June, 1971, the applicant, complying with the provisions of s. 24 of the Act of 1931, duly served on the respondents a notice of intention to claim relief under the Act of 1931. Upon the termination of the term on the 30th November, 1971, the applicant continued to pay to the respondents, and the respondents continued to accept from the applicant, rent of the amount and at the times stipulated in the lease of 1950. The payment by the applicant and the acceptance by the respondents of this rent was not accompanied by any agreement or any material communication between the applicant and the respondents.
On the 25th April, 1973, the applicant served his application to the Circuit Court for a declaration of his right to a new tenancy and to fix the terms thereof. The respondents at no time served on the applicant any demand for possession of the premises nor did they institute any proceedings for the purpose of ejecting the applicant from the premises. In reply to the applicant’s application for a new tenancy the respondents, inter alia, pleaded at para. (1) of their answer:”
“That the applicant holds the premises the subject of the application upon a yearly tenancy arising by implication of law upon the expiration of the lease dated the 28th December, 1950, referred to in the Notice of Application and that that tenancy is still existing.” And the respondents further pleaded that the applicant was therefore not entitled to a new tenancy under the Act. By notice dated the 8th day October, 1973, the respondents applied to this Court for an order amending the answer already filed by them by deleting from para. 1 the word”yearly” in the second line; they thus sought to constitute their defence to the application upon the basis that the applicant holds the premises upon a tenancy arising by implication of law”without specifying the type of tenancy. The applicant did not object to the amendment and I allowed it prior to the hearing of the appeal.
That paragraph of the respondents’ answer constituted their only defence to the application for a new tenancy which otherwise, as the respondents conceded, would be in order. It is based upon the decision of Judge Davitt (as he then was) in the case of Farrell v. Barron. 8 The submission made by Mr. Butler, on behalf of the respondents, was that the payment by the applicant and the acceptance by the respondents of rent after the termination of the fixed term created by the lease of 1950 necessarily and inevitably led to the implication by law of a tenancy which, for the purposes of his submission, might either be a yearly tenancy or a tenancy at will (the distinction being irrelevant) and that the applicant, being a contractual tenant in the premises at this time and at the time of his application for a new tenancy, could not exercise the right to a new tenancy because that right was confined by the Act of 1931 to a person whose tenancy had terminated and was inapplicable to a person who had a subsisting contractual tenancy. The reply of Mr. Sheridan, on behalf of the applicant, to this submission was twofold. First, he contended that the law should not imply any contractual tenancy either by way of yearly tenancy or tenancy at will between the applicant and the respondents, in the particular circumstances of the service, prior to the expiry of the fixed term created by the lease of 1950, of a notice of intention to claim relief coupled with the undoubted rights which at the time of the expiry of that fixed term the applicant had to a new tenancy under the Act of 1931. Secondly, he contended that, even if a tenancy is to be implied, such a tenancy is no impediment to the applicant enforcing his right to the new tenancy which vested in him under the provisions of the Act of 1931 as soon as the lease of 1950 expired, provided that within the appropriate time he has served a notice of intention to claim relief and has subsequently brought an application to the court.
Section 20 of the Act of 1931 provides9 that, subject to the provisions of the Act, a tenant of a tenement to which Part 3 of the Act applies shall, on the termination of his tenancy in such tenement, be entitled to a new tenancy in such tenement on such terms as may be agreed upon between such tenant and his landlord or as shall, in default of such agreement, be fixed by the court. The right created by this section would appear to be absolute in the sense that, subject to the qualifications imposed by the Act and, in particular, subject to the tenancy which has terminated having qualified under s. 19 and the appropriate notices having been served under s. 24, a tenant whose tenancy has terminated within the meaning of the Act shall be entitled to the new tenancy. Therefore, there appears to me to be nothing expressed in this or any other part of the Act of 1931 which can be construed as providing that a tenant at the time of his application for a new tenancy shall be out of occupation of the tenement or that he shall be in occupation of them without payment of rent and without any consent or agreement on the part of the landlord, or that he shall hold them merely by virtue of the provisions of s. 38 of the Act of 1931. That section grants to a tenant only as and from the time he serves an application to the Circuit Court the right to continue in occupation of the tenancy until his application is heard and determined.
For the proposition that the creation of a new contractual relationship by way of an implied tenancy defeats the right of an applicant to a new tenancy on the termination of a previous lease or tenancy, it is necessary to look outside the express terms of the Act of 1931. In Farrell v. Barron 10Judge Davitt (as he then was) found his reason for laying down this proposition in what he considered a situation which would otherwise arise. As I read the judgment in that case it is based, first, upon a contention that the Act of 1931 gave, as is undoubtedly true, substantial rights and protections to the tenant to the disadvantage of the landlord. Secondly, it is based on the contention that if a tenant, after the expiry of his contractual tenancy and notwithstanding the due service by him of a notice of intention to claim relief, could remain on paying the old rent and taking no step for a substantial or considerable period and then successfully apply to the Circuit Court for a new tenancy, it would be possible for the tenant to impose a further substantial hardship and disadvantage on his landlord, arising from uncertainty and delay, notwithstanding the fact that if his application for a new tenancy were successful the tenant would become liable for the payment of the newly-fixed rent from the date of the termination of his old contractual tenancy. With great respect for the view of Judge Davitt (as he then was), I cannot agree that this conclusion is an inevitable consequence of the contention. At all times prior, at least, to the service by the tenant of his application for a new tenancy, the landlord has a right to bring an ejectment civil bill for overholding and, if he does so, the tenant must immediately act to preserve his possession by serving his application in the hope that the Circuit Court will stay the ejectment proceedings pending the outcome of his application for a new tenancy. Therefore the landlord has a very clear-cut and definite sanction which he can impose upon a tenant who, merely by remaining in possession and paying his rent, seeks consciously to impose a disadvantage on the landlord.
From the point of view of the practical application of the Act of 1931, the consequence of following the decision in Farrell v. Barron 11 could be extremely harsh. Section 38 of the Act12 gives to a tenant a right to continue in occupation of his tenement commencing only on the date when he applies to the Circuit Court for a new tenancy, as distinct from the date on which he serves a notice of his intention to claim relief. Under the provisions of the Act of 1931 with regard to the time which must elapse between the service of a notice of intention to claim relief and the application to the Circuit Court, when taken in conjunction with the termination of a tenancy for the purposes of s. 19 of the Act, there are situations in which a tenant whose tenancy has expired and who has a clear and undisputed right to a new tenancy under the Act would be faced with a practical dilemma. If he wished to remain in occupation strictly in accordance with law, he must either vacate the premises until such time as he might succeed in serving an application to the Circuit Court or he must continue in occupation of the tenement under a contractual arrangement with his landlord by the payment and acceptance of rent which, according to the respondents, would destroy his statutory right to a new tenancy.
An example of such a situation is to be found in the case of a tenancy where the necessary notice to quit is less than two months and where, therefore, the contractual tenancy would terminate before the tenant could serve his application to the Circuit Court: see s. 25, sub-s. 1, of the Act of 1931. A further example is the case of a tenancy terminated by the fall of a life, or any other uncertain event, where the tenancy would terminate on the date on which such event should happen. The notice of intention to claim relief could only then be served but an application for a new tenancy could not be served for a period of two months: ibid.
In my view, it would require very compelling reasons for the Court to accept a construction of the Act which would make it necessary in such circumstances for the Court to hold that a tenant was put to the sort of choice which I have indicated. This seems to me particularly true having regard to the fact that the terms of s. 20 of the Act purport to give to a tenant a right to his new tenancy on the termination of his tenancy, and the fact that, over a long period, the practice has been to grant such renewed leases to date from the termination of the tenancy in respect of which they arise.
The main mischief which the judgment of Judge Davitt would appear to have been designed to avoid was a situation where a tenant, having served his notice of intention to claim relief and his contractual lease or tenancy having expired, was able to remain in occupation paying a previous rent and refusing to apply to the Circuit Court for a new tenancy so as to leave his landlord in a disadvantageous situation of instability and uncertainty. In such circumstances, it is clear that a landlord has the right to institute proceedings by way of ejectment for overholding and, the minute he does so, the tenant would be forced to issue his application to the Circuit Court in order to protect his position. That seems to me to be a valid and utterly reliable sanction in the hands of a landlord and, with all due respect for the judgment of Judge Davitt, I cannot conceive that the mischief to which he specifically referred in Farrell v. Barron 13 could really occur in the ease of a vigilant or anxious landlord.
Apart from these pragmatic considerations, however, I take the view that it is unreal for the respondents to assert that an implied contractual tenancy has arisen between them and the applicant. As I understand the legal principles applicable, the true origin of an implied tenancy is that the law implies from the conduct of the parties what is, in effect, a silent agreement that their relationship shall be arranged in a certain contractual fashion. In this case, prior to the expiry of the fixed term created by the lease of 1950, the applicant had served notice of his intention to claim relief and had thereby signified his intention of asserting and exercising his rights under the Act of 1931; the respondents, as landlords, lords, can have been under no real misapprehension as to the course which the applicant intended to take. It seems to me to be unreal to infer, from the payment of the first and succeeding gales of rent by the applicant to the respondents, that the parties must have been agreeing to create a new and different contractual relationship between them. The reality of the situation, to the knowledge of both parties, must have been that the applicant, as tenant, felt that he should continue to pay at least the old rent until a new rent and new terms of a tenancy were fixed either by agreement or by order of the Circuit Court and the respondents, as landlords, must have realised that this was only a temporary arrangement which they would wisely accept as a payment on account of the new, and probably larger, rent which would be fixed when the terms of the new tenancy were either agreed by the parties or fixed by order of the Circuit Court. This sort of understanding on the part of both parties, formed under the shadow of their respective statutory rights and obligations, seems to me to be clearly at variance with the sort of circumstances from which the Court should imply an ordinary contractual tenancy. Therefore, I conclude that on the facts of this case there was not an implied contractual tenancy between the parties running from the date of the expiry of the fixed term under the lease of 1950.
Further, I conclude as a matter of law that, even if such a contractual tenancy must be implied, there is nothing contained in the provisions of the Act of 1931 which necessarily makes that implied tenancy a bar or impediment to the right of the applicant to a new statutory tenancy arising upon the termination of his lease on the 30th November, 1971, and that in the absence of a clear statutory provision to that effect the obligation which the Court would ordinarily have in construing this Act and its application to the existing law to make it practical and workable would be against the creation of such an impediment or bar.
In these circumstances, I am satisfied that the applicant is entitled to a new tenancy in these premises and that the respondents’ only effective answer to it must fail. It has been agreed between the parties that this was the only issue brought before me on appeal and that, if I decided it in favour of the applicant, the terms of the new tenancy should be fixed by the Circuit Court judge in default of agreement. Therefore, I remit the matter to the Circuit Court judge for the purpose of fixing the terms of the new tenancy to which I have declared the applicant entitled.
Lynch v Simmons and Ors.
21 June 1953
[1954] 88 I.L.T.R 3
Haugh J.
Appeal from Circuit Court.
The applicant was the daughter of a tenant who, in 1904, took a fifty year lease of a country house situate in the suburb of Douglas, some two miles from the centre of the City of Cork. The premises consisted of a gentleman’s residence with outoffices together with lands laid out in gardens, pleasure grounds and pasture amounting in all to nineteen acres and twenty perches. As the lease was due to expire in September, 1954, the applicant applied to the Circuit Court for a new tenancy in the house and outoffices together with a portion of the land not exceeding one acre. It was stated in evidence that the original tenant, the applicant’s father, kept horses and for that purpose the pasture land was essential. On the father’s death, however, the horses were disposed of and the present applicant did not, therefore, require more than the one acre of land, in which, together with the house and outoffices, a new tenancy was now applied for. The acreage to be excluded from the new tenancy would embrace the lawn in front of the house, the tennis court, the entrance avenue and all but one acre of the land. A new entry to the house would be arranged from a laneway that passed along one side of the house. Expert evidence on behalf of the applicant purported to show that the lands to be excluded from the proposed new tenancy would form a suitable independent letting for dairy farming, for example; much of the land, it was stated, would be suitable for building.
Corr v. Ivers [1949] I. R. 245, 83 I. L. T. R. 9, was relied on as authority for the proposition that a new tenancy may be obtained under the Landlord and Tenant Act, 1931, in a portion of premises originally leased.
The landlord’s case was that any such splitting up of the premises as that contemplated by the tenant would radically alter the character of the premises which at present formed a well-recognised economic letting unit, with specially desirable characteristics and amenities much in demand. The value of the premises would be greatly diminished by the partition proposed and the residual land, denuded of buildings, would be difficult to let. The proposed carving up of the premises would, it was urged, be against the principles of good estate management and would be prejudical to the interests of the landlord.
Representation
James McMahon, S.C. and Edward Ryan, for the applicant.
John Gleeson, S.C. and Ralph Sutton, for the landlord.
Haugh J., in the course of his judgment, said that this was an unusual type of application. The house, a gentleman’s residence of the country house type, was held under a lease for fifty years expiring in 1954. The house had good gardens, a tennis court, good stabling and outoffices and there were nineteen acres and twenty perches of land.
The Landlord and Tenant Act, 1931, provided, as regards houses situate elsewhere than in an urban area, that the Act shall apply only to tenements in which the land *3 let with the house does not exceed one acre. In this case, said his Lordship, the Court was not dealing with a house and one acre; the Court was concerned with a house and nineteen acres. Prima facie, therefore, the Act did not apply at all.
It is true that before 1949 both Bench and Bar moved on the assumption that an application for a new tenancy applied, always, to the tenement in its entirety. Corr v. Ivers changed that. There, the premises consisted of a shop with dwellinghouse above. The tenant let the dwellinghouse and kept the shop for his own business. On an assignment of the premises the occupant of the shop applied for a new tenancy and it was held by the Supreme Court, by a majority decision, that the part of the premises occupied by the applicant was a tenement and that he was entitled to a new tenancy in it.
But there was a decisive distinction between that case and the present case. In Corr v. Ivers the premises were at all times a tenement within the Act. Here, the premises were never a tenement within the Act. The applicant merely makes an arbitrary selection of the house and one acre of the land and then claimed that she was within the Act and entitled to a new tenancy. Nobody could tell the Court at what point of time the portion of the original premises selected by the applicant became a tenement under that theory.
The applicant’s contention, if accepted, could have odd results. The tenant could select the acre of land farthest away from the house, or an acre in the centre of the holding. He would be at liberty to carve up the premises to suit his own needs without regard to the character of the premises or the interests of the owner. Here, the tenant selects the house and outoffices but abandons the avenue. She retains the gardens and the terrace, rejects the lawn, the tennis court and all the land in excess of one acre.
His Lordship was unable to see where the tenant could obtain such a right. If it existed it would permit the tenant of any country house, whether the land originally let with it amounted to one acre or five hundred, to claim a new tenancy under the provisions of the Act by the simple process of slicing off all the land in the “take” in excess of the prescribed one acre. Such an interpretation of the Act was entirely untenable and his Lordship must affirm the decision of the Circuit Court dismissing the application.
Commissioners of Public Works v. Kavanagh
[1962] IR 216
Supreme Court
The occupation of the Garda Siochana is not the occupation of the Commissioners. The premises are not a tenement because they are not occupied by the occupier under a lease or contract of tenancy, as required by the definition of tenement in s. 2 of the Landlord and Tenant Act, 1931. It is submitted that the applicants are not entitled to a new tenancy as they do not bring themselves within the provisions of s. 19, sub-s. 1 (b).
The conditions of s. 19, sub-s. 1 (b), do not apply to the present case even if the State is held to be the tenant, as the State cannot be a “person who was the tenant” of the premises within the meaning of that provision. It is submitted that “tenant” in this particular provision must be construed as meaning an individual and not a corporate body or a juristic person.
The Commissioners are the principals in the tenancy agreements under review and they are not acting as agents for any person; they are the tenants. If they are the principals in this transaction it is admitted by the applicants that the whole case fails. For the purpose of determining the position of the Commissioners the documents and agreements are most important. All the tenancy agreements were made with the Commissioners as such. There is no compulsion in any of the agreements on the tenants to use the premises as a Gárda station; they could use them for whatever purpose they wished. The Commissioners quite clearly have power to hold land for the purpose of their duties. There is no restriction on them making a sub-letting of the premises if they do not require them for their immediate purposes.
In all the pleadings and in the originating application the Commissioners are there setting out substantive rights in themselves. The Commissioners are under the control of the State, but they are independent contractors; they are merely performing a public service and are principals for that purpose. If the landlord found it necessary to sue for rent the only “person” he could sue would be the Commissioners. He could not sue the Attorney General as representing the State. If, however, the case put forward on behalf of the Commissioners is correct, the landlord should be able to sue the Attorney General, on the basis that the Commissioners are merely the agents of the State. Again, if the landlord wished to eject the premises for breach of covenant he must sue the Commissioners because they are the parties with whom he has made his contract.
As far as police stations are concerned, the Minister for Justice could have been the tenant: Garda Siochana (Acquisition of Sites and Retention of Premises) Act, 1948, ss. 3 and 4. If that had been the case, then the respondent would have had no argument to put forward as the Minister is clearly the agent of the State.
If the contentions so far put forward on behalf of the respondent are incorrect, it is submitted that if the Commissioners are acting only as agents of the State, then the State is not in occupation of the premises. It is suggested that the State is in occupation through its servants, the Garda Siochana, but s. 19, sub-s. 1 (b), does not justify that position. The section makes it plain that it applies to the tenant; it does not say, “the tenant, his servants or agents.”
It is provided in the sub-section that the tenement must be continuously in the occupation of the person who is the tenant for the time being. Therefore, every effort must be made to give some meaning to the word, “person,”and it is submitted that the word is intended to indicate an individual person. Under the Interpretation Act, 1923, the word, “person,” is defined in s. 1 (c). The introduction of this word in s. 19, sub-s. 1 (b), of the Act of 1931 shows a contrary intention within the meaning of s. 1 (c) of the Interpretation Act, 1923, in that otherwise the section is virtually tautological. In any event, it is submitted,”person” would not describe the whole people of Ireland.
B. Walsh , Senior Counsel , in reply.
O’Dalaigh J.
26. Nov.
This is a case stated by His Honour Judge Binchy under s. 16 of the Courts of Justice Act, 1947. The matter before him was an application by the Commissioners of Public Works under the Landlord and Tenant Acts, 1931 to 1943, for a new tenancy in the premises, consisting of the house in the village of Ballickmoyler, with the yard, garden and out-offices attached thereto as then in the occupation of the Garda Siochana, situate in the parish of Killabban, Barony of Slievemargy and County of Laois; and, in the alternative, there was a claim for compensation.
As the Case finds, since the 1st January, 1925, the premises have been continuously used and occupied by the Garda Siochana, and since the same date the applicants have been the tenants of the premises continuously under and by virtue of three successive agreements dated, respectively, 15th July, 1927, 27th October, 1948, and 11th April, 1951. It was conceded before the learned Circuit Court Judge that the premises comply with the definition of the word,”tenement,” in s. 2 of the Landlord and Tenant Act, 1931, save as to the requirement, para. (c) thereof, which is that the premises “is held by the occupier thereof under a lease or other contract of tenancy express or implied or arising by virtue of a statute.”
The right of a tenant to a new tenancy under the Act of 1931 is, by s. 20 of the Act, confined to tenements to which Part III of the Act applies; and the condition which the applicants relied upon as bringing the premises within Part III is that specified in para. (b) of s. 19, sub-s. 1, of the Act, viz., “such tenement was, during the whole of the period of thirty years next preceding the termination of such tenancy continuously in the occupation of the person who was the tenant thereof immediately before such termination or of his predecessors in title and such tenement was not acquired by such tenant or any of his predecessors in title by purchase for valuable consideration within such period of thirty years.”
Termination of a tenancy, in the case of tenancy terminated by notice to quit, is in s. 19 to be construed as referring to the date of the service of such notice to quit (sub-s. 2). The case does not furnish the date of service on the applicants of the respondent’s notice to quit, but the notice was dated the 14th December, 1956, and it would appear that it was served not later than three days afterwards, i.e., the 17th December, 1956.
The submission of counsel for the applicants before the learned Circuit Court Judge was that the applicants were entitled to a new tenancy on the ground that the occupation of the premises by the Garda Siochana constituted occupation thereof by the tenant. Counsel for the respondent contested this, and submitted that para. (b) of s. 19, sub-s. 1, of the Act of 1931 was not applicable
and that the premises did not constitute a “tenement”as defined in the Act, on the ground that the tenants of the premises, the Commissioners of Public Works, were not, and had not been, in occupation of the premises.
His Lordship at the conclusion of the hearing and submissions said that he was not disposed to hold that the occupation of the premises by the Garda Siochana was occupation by the applicants, the Commissioners for Public Works, but that he would refrain from giving his decision if a case stated were requested.
This request was made by counsel for the applicants. His Lordship thereupon stated this Case, upon the terms that the applicants should pay the respondent his costs of and incidental to the preparation and hearing of the Case Stated, and he adjourned the pronouncement of his judgment pending the determination by this Court of the following questions of law:”
1, Are the premises the subject-matter of the application a “tenement” within the meaning of the definition of such term contained in s. 2 of the Landlord and Tenant Act, 1931?
2, If the answer to question 1 is in the affirmative, are the applicants the tenant of the said tenement within the meaning of the word, “tenant,” as defined by the said section 2?
3, If the answers to questions 1 and 2 are in the affirmative, does such tenement comply with the conditions set out in s. 19, sub-s. 1 (b), of the Act of 1931?
4, Does the occupation by the Garda Siochana of the said premises constitute occupation by the Commissioners of Public Works within the meaning of the word,”occupation,” as used in the said Act?
In this Court counsel for the applicants opened his submission by conceding that the occupation of the premises by the Garda Siochana did not constitute occupation thereof by the applicants. That question, as we have seen, was the only question which arose before the learned Circuit Court Judge. The last of the four questions which his Lordship puts in the Case specifically asks that question. Counsel’s concession is very properly made: it is clear beyond argument that the occupation of the Garda Siochana is not the occupation of the Commissioners of Public Works. Question No. 4 should accordingly be answered, “No.”
The preceding questions in the Case Stated are clearly ancillary in character to the question 4.
The first question raises the issue of occupation in the context of the definition of the word, “tenement,” in s. 2 of the Act, more particularly that part of the definition contained in para. (c) of s. 2. The second question depends for its answer on the answer to the first question. If the premises are not a “tenement” as defined in s. 2 then the applicants, though tenant, are not tenant of a “tenement.” The third question again raises the question of occupation, but in the context of s. 19, sub-s. 1 (b), of the Act. In each case, however, the “occupation” is not different from the occupation referred to in question 4, and the answers to questions 1 and 3, like the answer to question 4, must also be “No.” It follows that the answer to question 2 should also be “No.”
At every step which they have taken the applicants have put themselves forward as tenant. They did so in their notice of intention to claim relief, dated the 1st January, 1957. They also did so in their application for a new tenancy, dated the 17th April, 1957. They followed this up with a notice, dated the 6th July, 1957, calling upon the respondent to admitinter alia that they had been and were tenant within the meaning of the Act of 1931 of the premises under the several tenancy agreements; and the respondent by his reply, dated the 11th July, 1957, admitted that the applicants were tenant of the premises under these several tenancy agreements but denied that they had been or were tenant within the meaning of the Landlord and Tenant Act, 1931, of the premises.
It will therefore be clear that the only case which the applicants made in the Circuit Court was that they were tenant of the premises. In this Court counsel for the applicants put forward a different case. Counsel submitted that the real occupier and tenant of the premises was and is the State, and that the applicants, the Commissioners for Public Works, had acted and were acting as agents for the State, and, upon that basis, counsel submitted that the applicants were entitled to a new tenancy. Counsel for the respondent, far from objecting to the course taken by counsel for the applicants, said he did not wish to rely upon the facts found in his favour in para. 2 of the Case Stated and this in particular referred, as I understood him, to the finding of the learned Circuit Court Judge that the applicants were tenant of the premises. Counsel for the respondent then argued seriatim against the submissions put forward on behalf of the applicants. In these circumstances while, as I have said, these new matters do not arise on the Case Stated by the learned Circuit Court Judge or on the application and answer filed in the Circuit Court, I propose, in deference to the argument of the counsel, to indicate briefly the views I have formed.
Mr. Walsh’s argument on behalf of the applicants consisted of four propositions:”(i) the State is a juristic person with capacity to hold property: Comyn v. Attorney General (1).
(ii) The Commissioners of Public Works have a dual capacity: they act as principals and they also act as agents on behalf of the State for the purpose of holding property. (He referred to In re Irish Employers Mutual Insurance Association Ltd. (2); Wheeler’s Case (3); Howley’s Case (4); Burke’s Case (5)).
(iii) In their transactions with the respondent they acted not as principals but as agent for the State, and the State therefore is tenant of the premises;
(iv) The State, like a limited company, can occupy premises only by its agents: the members of the Garda Siochana are agents of the State, and their occupation is the occupation of the State.
Mr. Ellis for the respondent did not seek to controvert Mr. Walsh’s first two propositions.
As to the second proposition, in further exemplification of the capacity of the Commissioners as agents, it is relevant to quote from the recital to the Public Works (Ireland) Act, 1869:””. . . it has been usual that lands in Ireland required for various departments of the public services should be and the same have been taken by the Commissioners of Public Works in Ireland . . .”
As to Mr. Walsh’s third proposition, it is clear from the contents of the first lease that the Commissioners took as agents and not as principals, and not merely as agents for the Minister for Justice, but as agents for the State. This appears by inference from the Commissioners’ covenant not to assign or underlet or use the premises otherwise than as a barracks for the Garda Siochana without the previous consent in writing of the landlord, which consent was not to be unreasonably withheld. The two subsequent leases did not contain any restriction on user. From the circumstances it is clear the Commissioners continued to act as agents and not as principals.
I have said the Commissioners took as agents for the State. The first lease was made in 1927. The State then was Saorstat Eireann . Comyn,’s Case (1), cited by Mr. Walsh, is a decision under the Constitution of Ireland. By parity of reasoning I am prepared to hold that Saorstat Eireann was a juristic person capable of holding land. It is enough to refer to Article 11 of the Constitution of Saorstat Eireann and to Article 10, 2, of the Constitution of Ireland. When in 1937 Saorstat Eireann was supplanted by the new State under the Constitution of Ireland the Commissioners continued to hold the then current lease as agents for the State.
Now, Mr. Ellis did not seek to controvert Mr. Walsh’s final proposition”that the State can occupy premises only by its agents and that the members of the Garda Siochana who have occupied the respondent’s premises did so as agents for the State (See Art. 61 of the Constitution of Ireland). He did however submit”and it was the substance of his argument ”that the right to a new tenancy under para. (b) of s. 19, sub-s. 1, of the Act of 1931 is a right conferred on individuals, a personal or family equity; and that the State cannot come within the meaning of the word, “person,” in the paragraph.
The submission is attractive. The phraseology of the paragraph is “in the occupation of the person who was the tenant thereof immediately before such termination” etc. It is insisted that it is to be gathered from the context that the word, “person,” here means a human person as distinct from a juristic person.
Mr. Ellis’s argument would exclude a limited company from the benefit of the paragraph. The word, “person,” in an Act of the Oireachtas of Sáorstát Éireann , “unless the contrary intention appears . . . includes any body of persons, corporate or incorporate.”
I am unable to discern any intention to exclude a body corporate. The use of the term “person” is, it seems to me, sufficiently explained when one considers what alternative word could have been employed. That word is “tenant”.The phraseology of the paragraph would then be “. . . continuously in the occupation of the tenant who was the tenant thereof immediately before such termination . . .” The use of the word, “person,” is, it appears to me, readily and adequately explained by the requirements of good style.
I may point out that the very same words are found in the final limb of para. (a) of s. 19, sub-s. 1. It would, I think, be an unreasonable limitation to construe this final limb of para. (a)so as to exclude a company holding under a lease for a lesser term than a year, and it would, moreover, I believe, be a wholly novel view of the paragraph.
In my opinion the word, “person,” should, therefore, be construed as not being limited to human persons, and the word is general enough to include the concept, new to our law, of the State as a juristic person.
I have not overlooked that the definition of “person” in the Interpretation Act, 1923, goes no further than saying the word shall include a body of persons, corporate or unincorporate, unless a contrary intention appears; and it is not necessary for me to say whether the State as a juristic person is to be looked upon as an abstract concept or viewed rather as the body of the citizens in a corporate capacity.
The Case Stated, as I said at the outset, must, however, be answered upon the basis of the pleadings and arguments in the Circuit Court and not otherwise.
Whether more can be said in the Circuit Court when the Case Stated is returned is a matter that need not now detain us.
MAGUIRE J. :”
I agree.
MCLOUGHLIN J. :”
I agree.
Dursley v Watters
[1993] 1 IR 224, Morris J
O’Hanlon J.
13th March 1986
The applicant became tenant to the respondent of a yard at Mary Street, Clonmel, in or about the year 1973. On a sketch put in evidence by the applicant, the premises are referred to as No. 6A, Mary Street. There was a derelict shed on the site at the time. From a document on the file of the court it would appear that the initial rent was a sum of £91 per quarter, but the original rent was varied upwards from time to time, and by a written memorandum of agreement dated the 12th January, 1981, the letting was continued for a period of 22 months at a weekly rent of £12, the term to expire on the first Monday in October, 1982. The applicant appears to have enjoyed unbroken occupation and use of the property from the time he was first allowed into possession in 1973.
On the expiration of the term of 22 months referred to in the said memorandum of agreement the respondent sought possession of the property, whereupon the applicant countered by applying for a new tenancy under the provisions of the Landlord and Tenant (Amendment) Act, 1980. I understand that it is accepted that the applicant complied with the requirements of the Act of 1980, as regards serving notice of intention to claim relief within the proper time, and his present application for relief under that Act is resisted by the respondent on the ground that the premises should not be regarded as a “tenement” within the meaning of that Act. If this submission is well founded then the applicant is not entitled to a new tenancy and the respondent is entitled to an order for possession in the ejectment proceedings which he has instituted against the applicant.
A “tenement” for the purposes of the Act of 1980 is defined in s. 5 as meaning
“(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;
(ii) if they consist of land covered in part only by buildings, the portion of the land not so covered is subsidiary and ancillary to the buildings . . .”
(The remainder of the section is not relevant to the issue which arises for consideration in the present case.)
The respondent contends that the structure or structures on the land should not be regarded as “buildings”, and secondly, that even if they were to be so regarded, it could not be said that the portion of the land not so covered is subsidiary and ancillary to the buildings.
The applicant testified that within a short time after he went into occupation of the premises in 1973, he refurbished the derelict shed which already stood in the yard with sheets of galvanised iron, and by putting in a door and window and restoring the roof, he made it fit for the purposes of his business. He then said that after about two years he put up a second structure, bigger than the first, which he also retained, but similar in character as regards the materials used. This second structure has an asbestos roof and a concrete floor, timber uprights and sheeting, a door and a window. He claimed to have installed a telephone, electric light, and all necessary equipment to enable the structures to be used as a workshop-cum-office.
His business from the outset has been concerned with the installation and repair of radiators. He deals with the cooling system of tractors, trucks, and agricultural machinery, and involves reconstruction, repair and assembly of these parts. He uses a gas-powered compressor for pressurising the radiators on which he works. He has laid on tap water by piping it in from an adjoining yard.
His method of work may be described as follows. Vehicles come into the yard, and the parts requiring attention are removed while they are standing in the yard. The parts removed are brought into one or other of the work-shops and the necessary work is carried out under cover, making use of the gear and equipment which the applicant has provided for the purpose. When this part of the work is completed the cooling system is restored in the vehicles in the yard. The paper-work involved in the running of the business is carried out in one of the structures already mentioned.
The photographs put in evidence show two rather ramshackle sheds, and the floor area covered appears to be about 400-500 square feet. The total area of the yard was given as about 1700 square feet, but a large part of that area comprises the entrance from Mary Street, 12 feet wide and extending back some 45 feet before the open, working area of the yard is reached. Therefor, a fairly significant part of the yard proper is occupied by the structures in question. No foundations were laid when they were being erected and it appears that no application was made for planning permission at the time.
The meaning to be attributed to the word “building” has been considered in a number of cases arising under different branches of the law. In Stevens v. Gourley (1859) 7 C.B. (N.S.) 99, it was accepted that a wooden structure intended to be used permanently as a shop, although not let into the ground, but merely laid upon timbers on the surface was a building; similarly, in O’Reilly v. Kevans & Ors. (1935) 69 I.L.T.R. 1, with reference to a one-storey shed originally roofed with corrugated iron sheeting, the roof being in a dilapidated condition. Conversely, in Dublin Corporation v. Irish Church Missions [1901] 2 I.R. 387, in a case involving a prosecution for an alleged breach of bye-laws made under the Public Health (Ireland) Act, 1878, the court declined to regard as a”building”, a wooden structure with a canvas roof, made up in sections, and capable of being put together or taken down in a few days.
However, in the case of the Landlord and Tenant Acts, the provisions dealing with the entitlement to claim a reversionary lease consequent upon the termination of a building lease refer to “permanent buildings” whereas, in contrast, the term “buildings” simpliciter is used when it comes to defining a “tenement” which may qualify for a new tenancy under the ordinary business or long-possession equity.
In Mason v. Leavy [1952] I.R. 40, it was held by the former Supreme Court that the question whether any particular structure is or is not a building within the meaning of that expression where used in the Landlord and Tenant Acts, and the question whether the remaining land included in the take is or is not subsidiary and ancillary to such structure, are questions of fact to be decided by the Circuit Court Judge. On an appeal by way of re-hearing the same function devolves on the High Court Judge hearing the appeal.
Apart from the evidence descriptive of the yard and the structures thereon, the respondent called expert evidence to show that while the yard per se was a valuable asset, having an estimated market value of £23,000 and an open market letting value of £65 per week, the structures which have been put up are worth at most a few hundred pounds and add little or nothing to the letting value of the yard or to its value as an asset for sale with vacant possession
Nevertheless, I have come to the conclusion that these are not the crucial questions which must be asked, but that regard should be had rather to the use made by the tenant of the property and to the significance of the structures for those purposes. I am of opinion that they should be regarded as “buildings” for the purposes of the Act, notwithstanding their ramshackle nature, and having regard to the evidence given as to the use of the yard and buildings over the past 12 years and upwards I have come to the conclusion that the yard should be regarded as subsidiary and ancillary to the buildings, such as they were.
No objection appears to have been taken by the respondent to the reconstruction or erection of the structures in question. If he wished to take steps to have them removed under the Planning Acts that course was open to him but he did not choose to avail of whatever remedy was afforded him by the Acts. I am not prepared at this stage to hold that the property should not be regarded as a “tenement” qualifying for relief under the Landlord and Tenant Acts because of a doubt now cast for the first time over the legality of the applicant’s building operations.
The respondent will continue to have whatever rights are given him by the Local Government (Planning and Development) Acts, and the applicant will also have the right given him by the legislation to apply for retention permission should it become necessary for him to do so.
In these circumstances, I propose to vary the orders made by the learned Circuit Court Judge, by substituting therefor the following orders:
(1) Declare the applicant entitled to a new tenancy under the provisions of the Landlord and Tenant (Amendment) Act, 1980, Part II, as claimed in the notice of application.
(2) Refer the matter back to the Circuit Court to fix the terms of the new tenancy in default of agreement between the parties.
(3) Make no order as to the costs of the landlord and tenant application in the Circuit Court, but allow the applicant his costs and witnesses’ expenses (if any) of the appeal in this case.
(4) Dismiss the ejectment proceedings brought by the respondent against the applicant, and declare the applicant entitled to continue in occupation of the premises until the application for a new tenancy is finally determined by the court, or, in the event of an appeal, by the final appellate court, subject to the terms (including payment of rent) of the pre-existing tenancy which expired on the 4th day of October, 1982, but without prejudice to such recoupments and readjustments as may be necessary in the event of a new tenancy being granted to commence from such termination.
(5) Make no order as to the costs of the ejectment proceedings in the Circuit Court, but allow the defendant in those proceedings his costs and witnesses’ expenses (if any) of the appeal to the High Court.
This is an application brought by the applicant pursuant to the Landlord and Tenant (Amendment) Act, 1980, seeking a declaration that he is entitled to a new tenancy under the provisions of the Landlord and Tenant (Amendment) Act, 1980, in what is described as “a car wash premises situate at Dublin Road, Castleblaney, County Monaghan”.The premises in question have been delineated on a map prepared by an engineer and produced in evidence on behalf of the applicant and the premises are outlined in red on this map. Basically the premises comprise part of the forecourt and surrounding area of the respondent’s garage premises and this area is used by the applicant for the purposes of carrying on a car wash business. The cars are washed not with the automatic rotating machinery one is accustomed to seeing in the forecourt of garages but manually using a pressure jet. The applicant claims, without contradiction, that he has carried on this business without interruption, as had his predecessor in title, ever since he acquired the premises on the 23rd April, 1988, and he has held them at the weekly rent of £60.
There are no significant issues upon the facts of the case which can be summarised as follows:
The area in question was originally let to a Mr. Eamonn Hanley in 1986. He occupied the premises as a weekly tenant. This tenancy was assigned to a Mr. Callan and in turn Mr. Callan assigned the tenancy to the applicant in April, 1988. The respondent was aware of this assignment and by letter of the 2nd April, 1988, confirmed that he agreed “to rent my car wash premises to Kenneth Dursley [the applicant] for one year for the rent of £60 per week from the date he takes over”. In fact the applicant took over the premises on the 27th April, 1988, and continued to work the car wash business thereafter.
A notice to quit was served on the 3rd August, 1991, to expire on the 17th August, 1991. A notice of intention to claim relief under s. 20 of the Act of 1980 was served on the 10th September, 1991, and a notice of application to the Circuit Court dated the 10th January, 1992, was duly served in accordance with the provisions of the Act.
Counsel for the respective parties have indicated that the applicant’s claim is being resisted on two grounds:
(a) That the land is not “covered wholly or partly by buildings or of a defined portion of a building.”
(b) That if the lands are covered in part by buildings then the land not so covered is not “subsidiary and ancillary to the buildings”.
The foregoing issues arise by reason of the definition of a “tenement”for the purposes of the Act. A tenement is defined in s. 5 of the Act as follows:
“(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;
[1993]
(ii) if they consist of land covered in part only by buildings, the portion of the land not so covered is subsidiary and ancillary to the buildings;€¦”
With regard to the first of these issues:
When the applicant went into possession and occupation of the premises he had available to him on site a cage similar to the cages one sees from time to time protecting gas cylinders on the forecourts of garages. This cage was used for the protection of his equipment when it was not in use. He also built a small shed for this equipment at a later stage but this he agreed was an extremely small unit and would appear to me from the drawings to have been approximately half the size of the office or garden shed referred to later on. There was also on site a pit or holding tank the object of which was to catch the water as it drained away from the cars and the mud and debris would be held in the tank. The liquid would drain away. The tank was emptied from time to time. The dimensions of this pit were eight feet by three feet by four feet deep. There was a grill over the pit. The only other construction on site was an office or garden shed which the applicant found he required on site to serve two purposes. The first of these was to house his books and ledgers and the second was to protect his machinery at night. The machine was stored in the office. The dimensions of this shed were seven feet by five feet. It was the type of shed seen in gardens and it arrived on site ready for assembly. This the applicant did in a couple of hours. He fixed it to the ground with screws. There was no telephone in the shed. Subsequently this shed was, without the applicant’s consent, moved to a different area by the respondent and was not re-affixed to the ground.
The remainder of the equipment on site was mobile and was in fact used from time to time by the applicant at customers’ homes.
Accordingly the submission made on behalf of the applicant is that the garden shed, the holding tank, the cage and the small lock-up shed or hut (which would appear to have the dimensions of approximately four square feet) constitute “buildings”.
As pointed out by O’Hanlon J. in Terry v. Stokes [1993] 1 I.R. 204, the term “buildings” simpliciter is used in the definition of a tenement and not “permanent building” as used in the Landlord and Tenant Acts dealing with a claim to reversionary lease consequent on the termination of a building lease.
Accordingly it appears to me that the fact that the office in this case was capable of being removed from a site and placed or erected elsewhere is not of relevance. Nor do I consider the fact that the office was delivered on site in a semi-prefabricated state to be of relevance. One can envisage, with modem building techniques and methods, substantial buildings delivered on site in this way. The fact that it arrived “flat packed”, as described by counsel for the respondents, does not appear to me to deprive it of the essential quality of being a building when erected. Nor do I consider the size of the building to be of significance when one is considering the dimensions in the present case of seven feet by five feet. In O’Reilly v. Kevans and Others (1935) 69 I.L.T.R. 1 it was held that a one storey building roofed in corrugated iron which roof at the date of the application was in a dilapidated condition, constituted a building and I can see no distinction which can validly be drawn between that type of structure and the present office. I accordingly hold that the office (or garden shed) constitutes a building for the purposes of the Landlord and Tenant (Amendment) Act, 1980.
Insofar as the holding tank is concerned the decision of Maguire C.J. in Mason v. Leavy [1952] I.R. 40 is of relevance. In that case the Court was considering whether certain 50 gallon oil storage tanks sunk in the ground surrounded by concrete foundations and walls could or might be regarded as buildings for the purpose of the Landlord and Tenant Act, 1931. Maguire C.J. stated at page 45:
“In the Case Stated the items of equipment installed are described as structures. They are, of course, artificial structures. They all have been built by the hand of man. A building which is the subject of a tenancy usually consists of walls and a roof. The concrete well for a petrol storage tank has walls. I do not think the fact that it is sunk beneath the level of the yard surface affects the question whether it is a building; nor does the fact that at present it is roofless prevent it from being regarded as a building. In my opinion, there is evidence which would support a finding that it is a building.”
Accepting as I do the judgment of Maguire C.J. I have come to the conclusion that the drainage pit in this case constitutes a building as it conforms with all the criteria which led Maguire C.J. to conclude that there was evidence to support a finding that the tanks and underground foundations constituted a building: and I so find.
I am likewise satisfied that both the small shed and cage constitute buildings.
Accordingly on the first of the two points I am of opinion that the applicant has satisfied me that the lands are partly covered by buildings.
It remains to consider whether in these circumstances the remaining land is subsidiary and ancillary to the buildings.
The evidence which the applicant gave is that upon his going into possession of the premises he had available to him one mobile unit. This was moved around the area of the premises so as to make its use convenient for the cleaning of the cars. As time went on and as the applicant acquired a second and third unit the cars were dealt with in sequence at different places in the premises so as to achieve a continuous throughput. It was only at the end of the working day that it became necessary to store the equipment away either in the cage or in the small shed. Later on when he acquired the garden shed the equipment was stored there. It appears to me that at most the garden shed or office was a convenience to the carrying on of the business. None of the actual work associated with the cleaning of the cars was carried on in the office or shed. The applicant said that as every car passed through and as payment was made a note was kept in a notebook of the receipt of the money and the number of the car washed. This information was later written up in more detail at the applicant’s home where proper ledgers were kept.
In my opinion the office contributed little or nothing to the overall business carried on at the premises. This business could have been carried on without the presence of the hut. No work as such was carried on in the hut and indeed it is significant that when the applicant advertised he used the telephone number of the respondent’s premises. He did not, for instance, suggest that customers should or could contact him at the office on site. There was no advertising placard attached to the shed and none of the work was done in the shed.
In Terry v. Stokes [1993] 1 I.R. 204 O’Hanlon J. considered what I perceived to be a completely different situation. In that case vehicles requiring to have their radiators repaired were driven into the yard, the radiators removed and the radiators were actually repaired in the sheds. The gear and equipment used for repairing the radiators was kept in the sheds. O’hanlon J. concluded on the evidence that having regard to the evidence as to the use of the yard and the buildings that the yard should be regarded as subsidiary and ancillary to the buildings. I see a fundamental difference between that case the present case. I hold that the shed and other buildings were in fact subsidiary and ancillary to the remainder of the premises.
With regard to the holding tank I have come to the same conclusion. Undoubtedly it was more convenient to carry on the work using the holding tank. However in my view the facts prove that the work was in no way dependent upon it. It appears that the respondent for his own purposes moved the holding tank from the original position and re-instated it elsewhere at a point where the applicant said he could not use it because it was too close to certain barriers. He nevertheless continued to work as usual. The only inconvenience which he suffered was that the water drained away out onto a shore or gutter adjacent to the road. I am therefore of the opinion that it could never be correctly stated that the uncovered lands were subsidiary and ancillary to the tank.
With regard to the remaining small shed or hut and the cage I am of the view that they were merely a convenience for the storage of the equipment when not in use and likewise it could never be said that the balance of the land was subsidiary or ancillary to them.
That being so I am of the view that the second point taken by the respondent is valid and it follows that the applicant is not entitled to the relief claimed and I accordingly dismiss his application.
Walsh v Hendron Bros. (Dublin), Ltd.
Circuit Court.
19 June 1947
[1948] 82 I.L.T.R 64
Judge McCarthy
Judge McCarthy, in delivering judgment, said: With regard to the store at 12½ Denmark Street, I must refuse the application. It is clearly not within the statute, and Hendron Bros, must have their costs.
With regard to No. 12 Denmark Street, the point has been taken by Hendron Bros., Ltd., that during the currency of the tenancy the two rooms over No. 12 ceased to exist. That being so they very properly allowed the applicant to occupy the portion, consisting of one room, over No. 11, in substitution for the two rooms that were pulled down. They permitted the applicant to occupy the portion over No. 11 before the rooms over No. 12 had ceased to exist, as was very proper and right. Mr. McCann argued for the respondents that because that demolition took place in 1940, less than seven years before this application was made, there was no such occupation within the Landlord and Tenant Act, 1931, as justified the bringing of this application. I am satisfied as a fact and so find that from the beginning to the end of this lady’s occupation there was only one tenancy and the portion of the premises over No. 11 was given to her in substitution for the portion over No. 12 which was taken away from her. It was an alteration of the parol contract made in 1912. Her occupation of No. 11 was unequivocally referable to the original contract of tenancy, and was in point of law the same occupation as that of the original contract of tenancy and that she had not lost any of her statutory rights in respect of the Landlord and Tenant Act, 1931, by reason of this alteration in the terms of her contract. That being so, I am satisfied from Mr. Munden’s evidence that the landlords are themselves within Section 22 of the Act, and therefore the only matter before me is the assessment of compensation for disturbance. On this matter the landlords have not given any evidence, and I, therefore, cannot refuse to accept the unchallenged evidence of the plaintiff, and will award £390 compensation *66 for disturbance, and £5 for removal expenses. The costs of this application to be set off against the costs in respect of 12½ Denmark Street.
occupation is mentioned in par. (a). If occupation as required in s. 2 were necessary, there would be no need to emphasise “continuous occupation” as is done in par. (a) of sub-s. 1 of s. 19. The Act is remedial and beneficial: McDonagh v. New Ross U.D.C. (1).
The Act is to apply to a tenement which complies with certain conditions; there is no mention of a tenant. It is submitted that the Legislature intended to draw a distinction between user which is sufficient to sustain an application under par. (a) of sub-s. 1 of s. 19, and occupation which is necessary in applications under pars. (b), (c), and (d). The words “immediately before such termination” in par. (a) are disjunctive and only govern the paragraph down to the words “life or lives”; they do not govern the entire clause.
The tenure referred to in the definition of tenant is only to describe the person entitled to relief; it does not mean that occupation is necessary. The words “by the occupier thereof” in the definition of a tenement in s. 2 are descriptive and point to the tenant to distinguish him from the landlord. Sect. 10 does not require occupation to entitle a person to claim compensation for improvements; a middle-man can, it is submitted, claim compensation for improvements if not in possession at the time the improvements were made.
[He was proceeding to discuss the meaning of the term”business” as used in the Act when he was stopped by the Court.]
J. A. Costello K.C. and J. Hooper for the respondents were not called upon.
SULLIVAN C.J. :
The applicant in this case applied to the Circuit Court of Dublin for an order under Part III of the Landlord and Tenant Act, 1931, declaring her entitled to a new tenancy of the premises, 18 Lower Fitzwilliam Street, or, in the alternative, awarding her compensation for disturbance. The application was heard by Judge Davitt, and, at the request of both parties, he stated this Case for the opinion of this Court on certain questions that had arisen at the hearing.
The applicant had held the premises in question under a lease, dated the 18th November, 1926, for a term of 14 years, which expired on the 25th March, 1940. She had originally used the premises as a private hotel, but she subsequently converted the premises into 5 flats and a basement. At the date of the hearing one of the flats was occupied by the applicant, another flat was temporarily vacant, and the three remaining flats and the basement were occupied by sub-tenants. On these facts it would seem to me that the applicant’s claim to be entitled to a new tenancy of the premises, 18 Lower Fitzwilliam Street, cannot be sustained.
Sect. 20 of the Act provides:
“Subject to the provisions of this Act, a tenant of a tenement to which this Part of this Act applies shall, on the termination of his tenancy in such tenement, be entitled to a new tenancy in such tenement on such terms as may be agreed upon between such tenant and his landlord, or, as shall, in default of such agreement, be fixed by the Court.”
The word “tenant” is defined in s. 2 to mean “the person for the time being entitled to the occupation of a tenement.”
On the facts that I have stated it is clear that the applicant was not entitled to the occupation of the tenement, 18 Lower Fitzwilliam Street, and she therefore was not the tenant of that tenement within the meaning of s. 20. That being so, she was not entitled to a new tenancy in that tenement, or, in the alternative, to compensation for disturbance under s. 22.
That is sufficient to dispose of her application and the questions raised in the Case Stated need not be determined by this Court.
MURNAGHAN J. :
I agree.
The right to a new tenancy arises under sects. 19 and 20 of the Landlord and Tenant Act, 1931, on the “termination . . . of a tenancy in a tenement.” This Act dealt with complex conditions varying in particular cases, and in s. 2, the expression “tenement” is defined by a number of characteristics, or conditions, one of which is “(c) it is held by the occupier thereof under a lease or other contract of tenancy express or implied or arising by virtue of a statute.”
The “tenement” sought to be dealt with in the case is the premises, 18 Lower Fitzwilliam Street, and in fact it appears that the applicant is not in occupation of these premises, a considerable portion having been let by her in flats. Part of the premises consists of a flat which the applicant occupies, but it is clear that she is not entitled to the occupation of the entire premises.
The house demised to the applicant was not, in the circumstances at the termination of the tenancy, within the meaning of s. 19 a “tenement” in accordance with the statutory definition and accordingly she has no right to a new tenancy in the premises demised to her. It is not, therefore, necessary to enter into any subsidiary questions.
The Case Stated does not, in my opinion, state facts relevant to the right of the applicant to a new tenancy in the part of the premises which she actually occupies.
MEREDITH J. :
The jurisdiction of the Circuit Court to state a Case is limited, and the jurisdiction of this Court on such a Case is correspondingly limited. In my opinion, the first question raised by the Case Stated is purely a question of fact, and, therefore, is not a question for this Court: the second question is made dependent on the particular answer to the first question and accordingly stands or falls with it.
Furthermore, the first question does not arise at all unless the premises demised by the lease of 1926 are a tenement within the definition in s. 2 of the Landlord and Tenant Act, 1931, and unless the applicant is a tenant of them within the meaning of s. 2 of the Act. The questions raised by the Case Stated are based on the assumption that both conditions are satisfied. But it does not appear either that these premises are a tenement or that the applicant is the tenant of them. Hence, in my opinion, the Court should decline to answer the questions raised by the Case Stated.
GEOGHEGAN J. :
I agree with the judgment of the Chief Justice and with the reasons given by him and desire to add nothing to what has been said.
O’BYRNE J. :
I also agree with the judgment of the Chief Justice, and have nothing to add.
Exception Cases
Peter J. Rosney v Aileen Maud Humphries and Hardwicke, Limited
[1954] 88 I.L.T.R. 44
Judge McCarthy
February 12th, 1953
Motion on Notice.
Clavin took a lease of premises from Aileen Humphries, the first-named respondent, comprising shop, dwellinghouse, messuage or tenement (situate at No. 8 Moore Street, Dublin) on the 9th of December, 1948, for four years from the 1st day of February, 1948, subject to a rent of £120 per annum, the tenant being responsible for all repairs and the payment of rates.
On July 3rd, 1951, Clavin filed a petition for arrangement with his creditors. On October 9th, 1951, notice was served on Aileen Humphries by registered post claiming relief under section 24 of the Landlord and Tenant Act, 1931, and this notice was signed by Clavin. On November 1st, 1951, Aileen Humphries, through her solicitors, served notice under section 33 of the Act that she had only a reversion of eleven months and extending the tenancy until the expiration of her reversion. On January 25th, 1952, the petition for arrangement by Clavin was dismissed. On February 19th, 1952, Clavin executed a deed of trust for the benefit of his creditors and the applicant was appointed the trustee. By this deed Clavin declared that he would hold all his leasehold property upon trust to deal therewith in such manner as the trustee might direct. On June 27th, 1952, Clavin, having been called upon to do so in pursuance of the provisions of the deed of trust, assigned all his interest in the premises, 8 Moore Street, to the applicant. On June 27th, 1952, the applicant served upon Aileen Humphries, the immediate landlord, notice of intention to claim relief in accordance with the provisions of section 24 of the Act and a duplicate of this notice was served upon the second-named respondent, the superior landlord. On October 27th, 1952, the originating notice of motion upon which the proceedings were based was issued on behalf of the applicant, and served on the respondents to which the second-named respondent filed an answer disputing the *44 applicant’s claim on the grounds that the Indenture dated the 9th of December, 1948, contained a proviso for re-entry in the event of the tenant, the said Clavin, becoming subject to the bankruptcy laws or making any composition or arrangement with his creditors and that on the 3rd July, 1951, Clavin filed a petition for arrangement with his creditors in the bankruptcy court and for the purposes of these proceedings assigned his interest in the said tenancy to the applicant as trustee for the creditors of the said Clavin (the said petition was dismissed on the 25th January, 1952). No answer was filed on behalf of the first named respondent, as she had no further interest in the premises, as from the date of the expiration of the lease under which she held. At the hearing, the applicant gave evidence that if a renewal of the lease was granted on such terms, as the court should direct, he intended to sell the premises on behalf of the creditors.
Hardiman v. Galway County Council.
[1966] 124
O’Dalaigh C.J. 124
Supreme Court.
O’Dalaigh C.J.:
3 March
This Case was stated by Mr. Justice Lavery, sitting as a Judge of the High Court on Circuit at Galway. The matter before him was an appeal from an order of His Honour Judge Durcan dismissing the applicants’ application, pursuant to the Landlord and Tenant Act, 1931, for a new tenancy in the premises, the Town and County Hall, Galway, and also dismissing the applicants’ alternative claim for compensation for disturbance.
By lease, dated the 16th July, 1945, the respondent County Council demised the premises (with the exception of certain rooms) to the applicants’ predecessors in title for a term of twenty years, which expired on the 29th September, 1964. The applicants are cinema operators, and they have been using the premises throughout the duration of the lease as a cinema.
The lease contained the following curious lessee’s covenant:”And the Lessee doth hereby for himself, his executors, administrators and assigns covenant with the Lessors that he . . . shall make no claim for compensation for disturbance nor for improvements under The Landlord and Tenant Act, 1931, nor any Act amending or extending same nor shall he attempt to register any improvements under the said Act nor shall he make any claim to a new tenancy under the said Act nor under the Increase of Rent and Mortgage Interest Restrictions Acts, 1923-1928, nor under the Order made by An Taoiseach on the 22nd day of January One Thousand Nine Hundred and Forty-four extending the into this Lease purely for the temporary convenience of themselves and of the Lessee and that they cannot as a local authority bind themselves by the provisions of the said Acts nor of any Acts that may be passed amending or extending same it being clearly understood that the terms of this Agreement can confer no tenant right on the lessee whatsoever.”
The lease concluded with this lessor’s covenant:”And the Lessors hereby further covenant and agree with the Lessee that the statement in this Lease that the letting is made for temporary convenience can never be construed as giving the Lessors the right to terminate this Lease before the expiration of the said term of twenty years for any cause other than the non-payment of rent or the breach of any of the covenants which the Lessee hereby covenants to perform.”
Mr. Justice Lavery found as a fact that the premises were not let for temporary convenience; but he was satisfied that the applicants nevertheless were not entitled to a new tenancy as the respondents had brought themselves within the terms of s. 22, sub-s. 1, of the Act of 1931. What then remained to be determined was the matter which is the subject of the question put by Mr. Justice Lavery in the Case, viz., “Having regard to the terms of the lease and to the provisions of the statute, are the applicants entitled to claim compensation for disturbance pursuant to s. 22, sub-s. 3, of the Act of 1931?”
Section 22, sub-s. 1 (a), of the Act provides as follows:
“Where it appears to the Court either
(a) that the landlord of a tenement to which this Part of this Act applies bona-fide intends or has agreed to pull down and rebuild or to reconstruct the buildings or any part of the buildings included in such tenement. . . . the tenant of such tenement shall not be entitled under this Part of this Act to a new tenancy in such tenement.”
This is the provision which, Mr. Justice Lavery has held, debarred the applicant from obtaining a new tenancy under the Act. Sect. 22, sub-s. 3, then provides, as follows, for the alternative relief of compensation for disturbance:
“Where the Court is satisfied
(a) that the tenant of a tenement to which this Part of this Act applies would, but for this section, be entitled under this Part of this Act to a new tenancy in such tenement, and
(b) that, during the whole of a period of three years expiring at or within three months before the termination of his tenancy in such tenement, such tenement was used by the tenant for the time being thereof wholly or partly for the purpose of carrying on therein a business,
such tenant shall, in lieu of a new tenancy under this Part of this Act, be entitled, on quitting such tenement on the expiration of such tenancy, to be paid by the landlord of such tenement compensation (in this Act referred to as compensation for disturbance) in accordance with this Act.”
Among the conditions which premises must comply with to satisfy the definition of “tenement” under the Act is that provided for in para. (d) of s. 2 of the Act, viz., that the lease or other contract of tenancy “is not a letting which is made and expressed to be made for the temporary convenience of the lessor or of the lessee and (if made after the passing of this Act) stating the nature of such temporary convenience.”
The Act also provides, at s. 42, that “A contract whether made before or after the passing of this Act, by virtue of which a tenant would be directly or indirectly deprived of his right to obtain relief under this Act or any particular such relief shall be void.”
The expression, “relief under this Act,” is defined in s. 2 by saying it “shall be construed as equivalent to the expression ‘compensation for improvements or a new tenancy under Part III of this Act.'” The expression,”compensation under this Act,” it may be noted, is also defined in s. 2: the expression “shall be construed as equivalent to the expression ‘compensation for improvements and compensation for disturbance or either of them.'”
Mr. Micks, for the lessors, submitted that the covenant not to claim compensation for disturbance is a binding covenant. His argument was this: first, it is competent for landlord and tenant to contract out of the provision for compensation for disturbance. The expression, “relief under this Act,” in s. 42 does not include compensation for disturbance. Sect. 2 requires that the equivalent expression therein provided be substituted in sect. 42. The substituted expression does not include compensation for disturbance. The intention to exclude compensation for disturbance from the scope of s. 42 is, it was submitted, made manifest when one contrasts the definition of “relief under this Act” with the definition of the “compensation under this Act.”Secondly, the covenant does attempt, contrary to s. 42, to exclude a claim for compensation for improvements and a claim for a new tenancy. That much of the covenant is invalid, but the covenant against claiming compensation for disturbance is severable and is valid and should be enforced.
Sect. 42 does not by the term, “contract,” mean the lease; it should be construed as referring only to that part of the lease which seeks to contract out of relief under the Act.
Mr. Gogarty, for the lessees, accepted Mr. Micks’s contention that “contract” in s. 42 does not mean the whole lease but only the offending clause. He submitted that relief under the Act includes “compensation for disturbance.”Compensation for disturbance is not expressly mentioned in s. 42 because the Act confers no right to it as an original relief. It exists as a relief to be awarded instead of a new tenancy where, because of the provisions of s. 22, sub-s. 1, the Court may not grant a new tenancy: see sect. 22, sub-s. 2. Alternatively he submitted that the Court should not enforce the covenant because it was expressed to have been entered into on a false basis and, in any event, the covenant which was clearly bad in part was so much a single provision as not to be proper to be enforced.
The covenant, to use a culinary term, is strange gallimaufry. It purports to state three reasons why it was entered into, the reasons being introduced with the words, “it being clearly understood and agreed that.” The first reason is that the lessors are entering into the lease for their temporary convenience. This reason would make sense if it were not contradicted by the final covenant on the part of the lessors, viz., that the statement that the letting was made for temporary convenience could never be construed as giving the lessors a right to terminate before the expiration of the term except for non-payment of rent or breach of covenant. The second reason is that a local authority could not bind themselves by the provisions of the Act. This is not so. If the lessees thought this, then the covenant was a mere formalitythey could not acquire any rights under the Act and they lost nothing by agreeing to it. The third reason is equally surprising: it is that the agreement confers no tenant right whatsoever. If the lessee entered into the covenant on the basis of this tripartite error, is he to be bound by the covenant? In effect, it is recited that the lessee has no rights under the Act, and, it being clearly understood that he has not, then he covenants not to enforce such rights. So far as the recitals goand the Court has nothing elsethis covenant was entered into by both parties on foot of a complete misunderstanding. The parties themselves laid the basis for this covenant. If the basis has crumbled, then it seems to me the covenant falls with it. But however this may be, there is in my judgment another and more fundamental reason why the covenant must fall: it offends against sect. 42. At first I was impressed by the argument that the expression, “relief under this Act,” as defined by substituting the expression, “compensation for disturbance and a new tenancy under Part III of this Act,” manifested a clear intention to exclude a claim for compensation for disturbance. I am no longer of this opinion. I can see nothing in the Act to show an intention to discriminate against this relief. I read s. 42 as prohibiting contracting out of relief under the statute, including compensation for disturbance. The equivalent phrase refers to the two original reliefs. Compensation for disturbance does not exist as an original relief. It is a substitute for the right to a new tenancy: it is given to the tenant in lieu of a new tenancy where the Court is satisfied he would be entitled to a new tenancy but must refuse it in the landlord’s interest: see paras. (a), (b) and (c) of s. 22, sub-s. 1. I might also call attention to the provisions of s. 22, sub-s. 4, where it is provided that if compensation for disturbance is awarded but not paid within the time limited the tenant may again apply for a new tenancy.
In my judgment therefore s. 42 prohibits contracting out of a claim for compensation for disturbance in prohibiting contracting out of a claim for a new tenancy. The former relief is merely a substitute for the latter, where the right to the latter is established but in the landlord’s interest it is not expedient to grant it.
For the reasons I have stated I would answer “yes” to the question put in the Case Stated.
WALSH J.:
I agree.
O’KEEFFE J.:
I agree.
Patrick J. Smith,v The Educational (Permanent) Building Society
[1946] 80 I.L.T.R 31
Davitt J.
1st March, 1946
Circuit Appeal:
The tenant—Patrick J. Smith—applied to the Circuit Court by notice of motion for an Order extending the period limited by the Landlord and Tenant Act, 1931, for service by a tenant on a landlord of notice of intention to claim relief under the Act. The following facts were deposed to in the affidavits of the parties: By an Indenture dated the 1st October, 1942, made between the landlord and the tenant the landlord agreed to let to the tenant the shop and basement and the offices thereto attached, portion of the premises No. 3. Lower Abbey Street, in the City of Dublin from the 1st October, 1942, for one year certain and afterwards from year to year, until determined as thereby provided, and it was provided by the agreement that the tenancy could be determined at the end of the first or any subsequent year by three months’ previous notice in writing by either party to the other. By notice to quit dated 15th March, 1945, and served on that day, and before the expiration of the 3rd year of the tenancy, the landlord requested the tenant to deliver up possession of the premises on 1st October, 1945. By letter dated the 28th March, 1945, the tenant suggested that certain adjustments could be made, this suggestion was stated to have been refused by the Society. A further letter was written to the landlord on the 24th September, 1945, renewing the suggestion of adjustments and the landlord replied on the 28th September, 1945, requiring possession on the 1st October, 1945. A further letter from the tenant dated the 2nd November, 1945, complained of the landlord’s attitude, and requested the landlord to permit the tenant to remain in possession of part of the premises. This request was finally refused on the 6th November, 1945, possession having been sought and refused on the 5th October, 1945.
There was some controversy in the affidavits of the landlord and tenant respectively as regards the delivery and receipt of the letter of 28th March, 1945. The tenant did not serve notice of intention to claim relief under the Landlord and Tenant Act, 1931, within the time limited by section 24, subsect. (2) (a) of the Act and stated in his affidavit that he could not have known that his suggestions to the landlord were finally refused until the 28th September, 1945, by which date the time limited by the section for service of the notice had expired. None of the affidavits filed on behalf of the tenant contained any averment that improvements had been done or made by the tenant. The arguments in the Circuit Court were the same as appear below. The Circuit Judge refused the application, rejecting the suggestion that there had been good and reasonable cause for the tenant’s failure to serve the notice, and further holding that the tenant was not entitled to the benefit of the Act, the tenancy having terminated, for the purposes of section 19 of the Act, on the 15th March, 1945, having commenced on 1st October, 1942. From this Order the tenant appealed.
H. J. Moloney, S.C. and Patrick McGilligan, for the tenant submitted that the Circuit Judge was wrong in holding that the facts of the case disclosed no justifiable reason for the tenant’s delay in serving the notice.
As regards the contention of Counsel for the landlord that the tenant was not entitled to the benefit of the Act, this was based on a reading of the Act which was never intended by the legislature. Section 19, subsection (1) (a) of the Act made the Act applicable where such tenement was during the whole of the three years next proceeding the termination of such tenancy bona fide used by the tenant for the time being thereof, etc. The landlord’s contention was that by reason of section 19, subsection 2 (a), the termination of the tenancy in the present case must be held to have been the date of the service of the notice to quit, and that accordingly the tenant could not come within the Act for the purpose of applying for a new tenancy. If this contention were correct the result would be that where there was a letting of premises for a term of years terminable by notice to quit at any time during the term, or if there were a letting from year to year terminable by notice to quit by either party during the currency of any year of the tenancy the landlord could prohibit the tenant from deriving the benefits of the Act by serving a notice to quit at any time prior to the expiration of the third year of the tenancy terminating the tenancy on the last day of the term, even though the term be for 10 years or in the case of the yearly tenancy by a notice to quit for any future date. This was not the intention of the Act and the words “next proceeding the termination of the tenancy” in subsection (1) (a) of the Act must be interpreted and construed as relating to the actual date of termination, and should be read in their *32 ordinary sense and not in the sense of the definition in subsection 2 (a) of section 19 of the Act. Counsel for the tenant further submitted that the landlord’s contention, whilst it could be raised by way of defence to the actual application for the new tenancy when the matter came before the Court, was not a matter which could be raised by way of objection to the extension of the time for service of a notice of intention to claim relief.
Alternatively it was submitted that in so much as the tenant intended to claim compensation for improvements, the Order sought should be made, the tenant being entitled to this relief in any event, and independently of three years occupation within the terms of section 19, subsection (1) (a).
J. Costello, S.C. (with him A. Corbett ) for the landlord submitted that—
I. The tenant had not disclosed any reasonable excuse for his failure to serve the notice of intention to claim relief in the affidavits served and filed on his behalf.
II. It was clearly open to the landlord to raise all points open to him under the Act which could be raised by way of defence, and it was open to the landlord on the present application to show that the tenant was not entitled to the relief which he intended to claim, and that if the Court were satisfied on the point the application for the Order now sought should be dismissed.
III. The tenant could not obtain a new tenancy under the provisions of section 19 of the Act. Subsection (2) of the section clearly defined the meaning of the words “termination of the tenancy” where same appeared in the section, and the subsection was comprehensive. Section 19, subsection 2(a) was clear and unambiguous in its terms, and clearly defined the date of the termination of a tenancy within the meaning of the section where a notice to quit was served. There was nothing to prevent a tenant from contracting in such a manner that a notice to quit could not be served before the periods set out in subsection (1) of the section, and thus preserving his rights. The words of the section must be read in their ordinary sense, unless such an interpretation would lead to an absurdity. The words of subsection 2 were clear and even if the section did leave a loophole open to a landlord by which he could defeat the right of a tenant to relief under the section, they were far from absurd in their ordinary interpretation. Section 42 of the Act did not in any way prohibit the parties to a lease from agreeing to a lease which would not come within the Act, but if they did agree to a lease or tenancy to which the Act applied they were prohibited from stipulating that the Act should not apply.
IV. The tenant was also relying on the fact that in the notice of intention to claim relief, the time for the service of which he now sought to have extended, it was stated that he intended to claim compensation for improvements as an alternative to a new tenancy. As regards that claim it would be noticed that there was not a single mention of improvements in any of the affidavits filed by the tenant and there was no evidence upon which the Court could exercise a Judicial discretion in this branch of the argument in favour of the tenant. By reason of the fact that he carried on business in the premises for the whole of the 3 years preceding the date of the service of the notice to quit, the tenant was not entitled to a new tenancy, and accordingly the Court could not extend the time for service of a notice of intention to claim a new tenancy.
Davitt, J. affirmed the Order of the Circuit Judge refusing the application.
Edward Lee & Co Ltd -v- N1 Property Developments Ltd
[2012] IEHC 494
Charleton J.
1 The plaintiff is part of the Dunnes Stores group of companies. The defendant operates the Northside Shopping Centre in Dublin. The plaintiff is the tenant of a retail unit in that shopping centre of which the defendant is landlord through succession in title. The plaintiff tenant has unwittingly entered into an extension for 36 years of a 36 year lease by failing to serve a notice of surrender of tenancy within a window of between a year and six months prior to the expiry of that lease. Such a notice was, in fact, served four days prior to the expiry of the original lease and was too late. At issue in this case is whether the relevant term of the lease is void by statute; whether equity can allow the notice to be served late by reason of time not being of the essence; and whether arrears of rent or mense rates are due to the defendant as landlord.
Background
2 The Northside Shopping Centre was developed in the 1970s. When the lease was first entered into in 1975 the rent reserved was £19,650 annually. There is no information as to by how much on the first rent review, six years later, the annual rent was increased. The usual term in leases from that period was to forbid any diminution in the rent on review. This lease has such a term. On the second six yearly rent review, in 1987, the rent had increased to £85,000; on the third, in 1993, the rent had increased to £125,000; then in 1999 to £175,000; and on the last relevant rent review, in 2005, the rent had become €336,840. Putting all sums into euros the increases are from €24,950 to €107,927 to €158,717 to €222.204 to €336,840, or an increase over 30 years of 1,250% or a multiplication of about 13.5. In 2005, at the last rent review, Dublin property prices, including retail letting, were at their height. Since then purchase price of property has dropped to about a third of its value for homes and retail rents have also been markedly affected. Many tenants have sought to escape from what once seemed to be wise bargains. No relief is available at law, however, to lower an agreed rent. A lease may be terminated by disclaimer by the liquidator of a corporation or repudiated under section 20 of the Company Law (Amendment) Act 1990 by an examiner. In the latter case the landlord usually has the rights for voting purposes on the scheme of arrangement of an unsecured creditor. Neither liquidation of a company nor any power of an examiner can force a revision of the sum to be paid in rent where the corporation requires to retain the premises, as opposed to disclaiming or repudiating it. Upward only rent reviews, in respect of any lease entered into from 2009, are now subject to statutory reform. That reform arises from section 132 of the Land and Conveyancing Law Reform Act 2009. This section was commenced on the 28th February, 2010, by the Land and Conveyancing Law Reform Act 2009 (Commencement) (Section 132) Order 2009 (S.I. 471 of 2009) and provides as follows:
(1) This section applies to a lease of land to be used wholly or partly for the purpose of carrying on a business.
(2) Subsection (1) shall not apply where –
(a) the lease concerned, or
(b) an agreement for such a lease,
is entered into prior to the commencement of this section.
(3) A provision in a lease to which this section applies which provides for the review of the rent payable under the lease shall be construed as providing that the rent payable following such review may be fixed at an amount which is less than, greater than or the same as the amount of rent payable immediately prior to the date on which the rent falls to be reviewed.
(4) Subsection (3) shall apply –
(a) notwithstanding any provision to the contrary contained in the lease or in any agreement for the lease, and
(b) only as respects that part of the land demised by the lease in which business is permitted to be carried on under the terms of the lease.
3 Since, in this case, had the plaintiff as tenant properly surrendered the lease on its expiry, by due notice given in 2010, it would have been entitled to a new tenancy under the s.16 of the Landlord and Tenant (Amendment) Act 1980, that new tenancy would have to have contained an upwards or downwards rent review clause. That would have provided significant relief, it might reasonably be predicted, from the very high rent. However, the terms of the lease make explicit that failing to serve the notice brings about a new term of 36 years under the same conditions as the old lease, thus allowing rent reviews for the next three decades to move only upwards. This is argued by the plaintiff tenant to be void under the Landlord and Tenant Act 1931, thus allowing the plaintiff tenant to serve notice claiming a new tenancy which will be fixed under the terms of the Landlord and Tenant (Amendment) Act 1980. The terms of such a new tenancy would, clearly, be more advantageous.
Terms of the lease
4 I will now set out the main terms of the lease. The indenture was made on the 1st December, 1975, between the predecessor of the defendant, as landlord, and by the plaintiff, as tenant. The rent reserved was £19,650, payable quarterly in advance; the term was for 36 years from the 1st February, 1975; there were to be six yearly rent reviews, under which the rent was never to fall; the premises were to be kept open for business during normal shopping centre hours; repairing and insuring the premises were specifically provided for; and there were the usual covenants in relation to peaceful occupation.
5 It is clause 4.03 VII which is at issue in this case. Just before the lease expired, in late January, 2011 a notice was sent by the plaintiff tenant stating that the lease would be surrendered on its expiry. The window of opportunity to do this had ceased, however, because that window operated only from the 1st February, 2010, to the 31st July, 2010. The relevant clause occurs beside a side note which reads “surrender and extension of lease” and is in the following form:
Not more than twelve months nor less than six months before the expiration of the term hereby granted:-
(a) the Lessee may serve upon the Lessor notice of his intention to surrender the premises, or
(b) the Lessor may serve upon the Lessee notice of his intention to refuse to extend the tenancy.
No such notice shall be served by the Lessor save for good and sufficient reason therein set forth which emanates from or is the result of or is traceable to some action or conduct of the Lessee and which in the opinion of the Lessor makes it desirable to refuse to extend the tenancy, or such extension would not be in accordance with good estate management or possession is required in connection with the scheme of rebuilding or re-development of the Northside Shopping Centre or any part thereof. In default of the servers of either such notice by either party the term hereby granted shall for all purposes be deemed to have been extended for the like term subject in all respects to the covenants and conditions provisos and stipulations herein contained including that provides over rent review every sixth year of the term as so extended and this proviso and for the purpose of removing any doubt IT IS HEREBY AGREED AND DECLARED that the intent of meaning and purpose of this proviso is that the Tenant shall be entitled to surrender the premises at the expiration of the term hereby granted or of any term for which the said term shall be deemed to have been extended and the Lessor shall be entitled to refuse to extend the Tenancy at the expiration of the said term or any such term as aforesaid under the provision in that behalf hereinbefore contained any of the reason is hereinbefore specified but that’s subject to such respective rights the Lessee should enjoy the ride indefinitely to extend its tenure and occupation of the premises nearby demise subject to the terms, conditions and provisos herein contained.
6 Key to any decision in this case is the concept of surrender of a lease. At clause 3.15 the tenant covenants with the landlord:
At the expiration or sooner determination of this demise decently and in good and substantial repair and condition as aforesaid (damaged by the insured risks only accepted subject as aforesaid) to surrender and yield up the demised premises onto the Lessor together with all fixtures and additions thereto PROVIDED HOWEVER that the Lessee shall be at liberty to remove … trade fixtures …
7 The core of the argument for the plaintiff tenant is that surrender of a lease disbars the surrendering tenant from obtaining a new tenancy under the Act of 1980. The clause as to extension of the tenancy is deliberately structured, it is claimed, so that the tenant has the choice either of, firstly, walking away from the premises after the term of 36 years has expired with the consequence that a new tenancy fixed by agreement or by the court under the Act of 1980 is not available because of that surrender or, secondly, accepting the continuation for a second term of 36 years of the precise terms of the first term of 36 years. Since this would include upwards only rent reviews, the continuation of an inflated rent and a term that might be too long to suit the purposes of the tenant, the contention is that the Act of 1980 has been unlawfully thwarted and that the entire clause is void for illegality.
Landlord and Tenant Acts
8 The Landlord and Tenant Act of 1931 was introduced in order to give security of tenure to a business which had rented premises, provided the tenancy there had subsisted for at least three years. Residents of homes and flats obtained such relief only after a period of 30 years. Under section 21 of the Act of 1931, restrictions were placed on those who had terminated their own tenancy, had been ejected or where the landlord had a scheme of redevelopment. Where a new tenancy was to be fixed by the court, the duration, of no less than 21 years was set, unless the tenant wanted less, and a gross rent was fixed. At a time of low inflation, the rent was set for the entire 21 years. It shortly became clear that such a scheme was unfair. Rents in the 1970s were set high for the first number of years, about right for the middle years and low for the last few. The Landlord and Tenant (Amendment) Act 1980 introduced rent reviews into tenancies that were to be fixed by the courts and made certain other changes including a clearer allowance for compensation for improvements and the reduction of the security of tenancy for residential leaseholders to 20 years. Neither of these Acts could be contracted out of. Section 42 of the Act of 1931 governs this lease since it is expressed to have immediate effect and was in force at the time when this lease was signed. I regard as unsustainable any argument to the effect that this situation is governed by legislation that was not then in force. That section reads:
A contract, whether made it before or after the passing of this Act, by virtue of which a tenant would be directly or indirectly deprived of his right to obtain relief under this Act or any particular such relief shall be void.
9 A similar provision is contained in section 85 of the Act of 1980 in the following terms:
So much of any contract, whether made before or after the commencement of this Act, as provides that any provision of this Act shall not apply in relation to a person or that the application of any such provision shall be varied, modified or restricted in any way in relation to a person shall be void.
10 It is noteworthy, reading the Act of 1931 that the circumstances disqualifying tenants from a new tenancy are all ones of misbehaviour whereby a landlord is forced to lose the economic benefit of the lease; see section 21. That model is maintained in the Act of 1980 whereby section 17(1)(a) provides:
A tenant shall not be entitled to a new tenancy under this Part if-
(i) the tenancy has been terminated because of non-payment of rent, whether the proceedings were framed as an ejectment for non-payment of rent, an ejectment for overholding or an ejectment on the title based on a forfeiture, or
(ii) the tenancy has been terminated by ejectment, notice to quit or otherwise on account of a breach by the tenant of a covenant of the tenancy, or
(iii) the tenant has terminated the tenancy by notions of surrender or otherwise, or
(iv) the tenancy has been terminated by notice to quit given by the landlord for good and sufficient reason, or
(v) the tenancy terminated otherwise than by notice to quit and the landlord either refused for good and sufficient reason to renew it or would, if he had been asked to renew it, have had good and sufficient reason for refusing.
11 All of these are situations where a tenant, through unacceptable behaviour, throws away his or her rights to a new tenancy. The relevant subsection also refers to termination by surrender “or otherwise”. What is that? Clearly, it encompasses walking away without saying anything. That is also a wrongful action. It is hard to see it as just acknowledging the end of a term of a tenancy. At the end of the tenancy, through efflux of time, no such wrong is involved and instead the term of the contract simply comes to an end. In those circumstances, a tenant is entitled to compensation for such improvements as have been made in the tenement.
12 At issue here is whether there has been a scheme to effectively force the tenant to surrender the tenement in advance of the term and thereby disbar the fixing of a new tenancy, and the terms thereof, by application to the court. Such a scheme would render the relevant clause void under the Act of 1931, which in all material respects is the same as the Act of 1980. The entire contract is not void, simply the offending clause: Hardiman v. Galway County Council [1966] I.R. 124 at 131 per Ó Dálaigh C.J. I do not believe that a court is entitled, however, to rewrite a clause by running a blue pencil through offending words so as to rewrite the meaning of what the parties intended into a meaning that they never intended. The law is strict. Direct and indirect attacks on rights under either the Act of 1931 or the Act of 1980 will not be tolerated. In Bank of Ireland v. Fitzmaurice [1989] I.L.R.M. 452 a lease was fixed with certain index-linked provisions that were tied to what was described as “the cost of living index”. These statistics had not been published by the Central Statistics Office since the 1953. Instead, and unfortunately, this index which measures the course of property and mortgages was replaced by a consumer price index that would have markedly increased in the decade up to 2008 had it included the cost of accommodation for families and business premises for firms. Instead, the people of Ireland were left with no statistic that would starkly state how bad huge increases in property prices were for the economy. Lardner J. struck down as void a clause in a lease providing an effective penalty against any tenant who sought to stay on past the first or second rent review. As a matter of ordinary contract law the relevant clause could have been struck down had it related to damages as it had nothing to do with genuinely pre-estimating loss. The clause provided that where the tenant stayed on beyond the term of a rent review of the rent firstly, increased by the non-existent index and then, secondly the next review, quadruple on that occasion and on the next. Lardner J., at p 460 of the report reasoned as follows:
I am satisfied that this rent was intended by the plaintiff and was designed to exercise a compelling pressure on the defendant to surrender his tenancy in order to escape liability for the increased rent. This pressure was likely to be increased by the provision that the increased rent will during the remainder of the term be subject to further fourfold multiplications viz for the two years ending on 31 May 1994 and for the period of one year ending on 31 May 1999. The position is that, if the defendant succumbing to this pressure, surrenders his lease he excludes himself from any right to claim a new tenancy under s. 17(1)(a)(iii) of the 1980 Act: any negotiations which may then take place between the plaintiff and the defendant in regard to a new lease will be free from the provision that in default of agreement the court will fix the terms of any new lease and will not be affected by the guidelines which should be applied by the court in fixing such terms. And lastly the compelling pressure to surrender exercised by the multiplier clause restricts and reduces the lessees security of tenure which is one of the purposes of the Act to confer.
13 It is also true that it should be noted that genuine entry by a tenant into a caretaker’s agreement, as opposed to a lease, may avoid the operation of the Act of 1931 since there is, in those specific circumstances nothing to which the legislation applies; Gatien Motor Company Limited v. Continental Oil Company of Ireland Limited [1979] I.R. 406.
14 A further argument of the plaintiff tenant whereby the tenant seeks to have the relevant clause declared void, and thus bypass the time limit for surrender, is that on going to court the terms of the new tenancy will already have been set. There is nothing, however, in the clause, once the surrender has been made within the six-month window provided for whereby the tenant and the landlord do not come before the court in the ordinary way because in the event that notice is served within that period there is no agreement of any kind as to the terms of any new tenancy. The parties are at large as to what may be agreed; the court is at large in the event that there is no agreement in fixing the terms that are suitable, including a term of less than the ordinary statutory period of 35 years; see section 23 of the Act of 1980.
15 Would the action of the tenant in surrendering the lease, as provided for in the clause, disbar the operation of the Act of 1980, in force when that would take place, by acting as a surrender and thus coming within one of the categories of section 17(1)? In my judgment, it would not.
Surrender
16 The lease must be construed in order to give the document business efficacy. If two possibilities are open in terms of the meaning of a clause, one of which is in conformity with the law and the other of which offends the relevant legislation, then a court is obliged to presume that the parties intended a lawful purpose. The court is not entitled to re-word an agreement in such a way as to ascribe to the parties an intention which they did not hold.
17 Modern authority confirms, firstly, that the intent of the parties as construed from the entirety of the document governs the construction of the agreement as opposed to any misuse of a technical term and, secondly, that the return of the tenancy to the landlord during the currency of the term of a demise with the consent of the landlord, is what is most properly referred to as a surrender in landlord and tenant law.
18 As to the first point, in PW and Co. v. Milton Gate Investments Ltd. (B.T. Property Ltd. and another, Part 20 defendants) [2004] Ch 142, Neuberger J. made it clear that in the construction of an agreement, substance should prevail over form. At pp. 178-179 he persuasively stated:
So far as the first limb of the argument is concerned, I accept that the law, particularly since equity prevails over the common law, is concerned with substance rather than with form. The law on this topic was discussed and applied in characteristically authoritative fashion by Wilberforce J in In re Stirrup’s Contract [1961] 1 WLR 449 at 452-453. He quoted at 453, Lord Mansfield CJ in Goodtitled Edwards -v- Bail (1777) 2 Cowp. 597, 600:
“The rules laid down in respect of the construction of deeds are founded in law, reason, and common sense: That they shall operate according to the intention of the parties, if by law they may: And if they cannot operate in one form, they shall operate in that, which by law will effectuate the intention.”
Wilberforce J then immediately went on to apply that approach to the case in front of him:
“[A]s a matter of general approach, once the court is satisfied that the intention of a document is to pass the legal estate …it should not allow that intention to be defeated by the fact that instead of the word ‘grant’ or ‘conveyance’, the word ‘assent’ is used.”
The words of Lord Mansfield C.J. are salutary, and I would not wish to derogate in any way from them; on the contrary. However, it would scarcely be consistent with what Lord Millett, in Barrett v Morgan [2000] 2 AC 264, 274G, called “the orderly development of the common law”, if those observations were interpreted so widely as to enable the court to give effect to whatever intention the parties expressed, provided that it did not infringe public policy or statute.
To construe a document, which on its face, plainly intends to effect a transfer of a property, as conveying the property, notwithstanding the fact that the parties have not used the appropriate language of “conveyance” or “grant”, but instead have used the word “assent”, is a long way away from the characterisation of the effect of the service of a notice pursuant to a break clause in a lease as a surrender. Indeed, it appears to me that, the proper characterisation of the relationship between the parties or the effect of an act permitted by contract, is ultimately a question of law, although the intention of the parties (particularly if expressed in the document concerned) may be a significant factor in some cases. As Mr Dowding says, that proposition is familiarly demonstrated in the landlord and tenant field by the decision of the House of Lords in Street -v- Mountford [1985] AC 809. In that case, because the agreement in question involved the grantor giving exclusive possession to the grantee in return for a periodic payment, the arrangement created a tenancy, notwithstanding the fact that it was plain from its terms that the parties intended it to create a licence.
In the present case, clause 5(6) permitted PW to determine the head lease on 24 June 2002 simply by serving a notice of requisite length, and nothing more was required to put an end to the term. To my mind, if the parties had characterised that arrangement as a surrender, they would have been attempting that which Lord Templeman said in Street v. Mountford [1985] AC 809 they could not effectively do. As he graphically observed, the parties can no more turn an agreement, which in law creates a tenancy, into a licence by calling it a licence, than they can turn a five pronged digging instrument, which as a matter of concept and language is a fork (albeit with a supernumerary tine), into a spade by calling it a spade. Clause 5(6) in the instant case is a provision which entitles the tenant thereunder to determine it simply by service of a notice: that is determination by notice, and not determination by surrender. A surrender, as a matter of law, involves some subsequent consensual act, such as execution of a deed of surrender or handing over and acceptance of the key, before the transaction is completed. The fact that there can be a unilateral aspect of surrender (in the sense that the landlord – or indeed the tenant – can commit himself in advance to execute or accept a deed of surrender) does not call that point into question, in my view.
19 It is clear to me, as clear as a spade is not a fork, as Neuberger J. puts the matter, that in referring in the relevant clause to a surrender, this should not be construed as a wrongful action putting the tenant outside the relief available under the Act of 1980.
20 As to the second point, the nature of what a surrender is remains clear from the earliest authority on the issue. The concept of surrender is classically dealt with in Thomas Harrison, The Law and Practice Relating to Ejectments in Ireland (Dublin, 1903) where at pp. 124 to 125, the learned author sets out the following:
The acts of the parties which constitute a surrender by operation of law may be classed under four heads. (“Cherry,” p.21.)
(1.) The delivery of possession of the demised premises to the landlord and his acceptance thereof. (Oastler v. Henderson, 2 Q.B.D. 575; O’Reilly v. Mercer, 10 I.J.N.S. 149.)
(2.) The adoption by the tenant, with the sanction of the landlord, of a position inconsistent with his position as tenant. (Lambert v. M’Donnell, 15 I.C.L.R. 136, 9 I. Jur., N.S., 371.)
(3.) The acceptance by the tenant of a new lease or of an agreement operating as a lease. (Lynch v. Lynch, 6 I.L.R. 131.)
(4.) The admission of a new tenant under a new letting made with privity and consent of the former tenant. (Doran v. Kenny, I.R. 3 Eq. 148.)
21 The author also comments, pertinently, that the tenancy may be brought to an end, where it is a periodic tenancy, as in from month to month, by either the landlord or the tenant serving a notice to quit that expires on the appropriate gale day. The author notes, at p. 123, that there is a distinction between yielding up a tenancy on the expiry of a term and of a notice to quit. He says:
A notice to quit served by a tenant is sometimes inaccurately called a surrender. The former is, however, a voluntary determination of a tenancy by the tenant upon the expiration of a definite period fixed by custom, statute, or mutual agreement whereas the latter is the re-vesting in praesenti by mutual agreement of the lessee’s interest in the lessor during the continuance of the lease or tenancy. A surrender is, in fact, an immediate transfer or conveyance of the lessee’s interest to the lessor. (Neville v. Harman. 17 I.L.T.R. 86.)
22 This remains the case. In Barrett and Others v. Morgan [2000] 2 AC 264 the House of Lords extensively discussed the nature of a surrender in contrast to the service of a notice to quit. Lord Millett gave this helpful exposition, at pp. 270 to 271:-
A lease or tenancy may also be surrendered at any time by the tenant to his immediate landlord. A surrender is simply an assurance by which a lesser estate is yielded up to the greater, and the term is usually applied to the giving up of a lease or tenancy before its expiration. If a tenant surrenders his tenancy to his immediate landlord, who accepts the surrender, the tenancy is absorbed by the landlord’s reversion and is extinguished by operation of law.
A surrender is ineffective unless the landlord consents to accept it, and is therefore consensual in the fullest sense of the term. In Coke’s Commentary upon Littleton (1832), vol. II, s. 636, p. 337b the nature of a surrender is described as follows:
“SURRENDER”, sursum redditio, properly is a yeelding up an estate for life or yeares to him that hath an immediate estate in reversion or remainder, wherein the estate for life or yeares may drowne by mutuall agreement betweene them” (my emphasis).
On its surrender the tenancy is brought to end prematurely at a time and in a manner not provided for by the terms of the tenancy agreement. In this respect it differs from the case where a tenancy is determined by notice to quit. It is because the landlord or his predecessor in title has not, by granting the tenancy, previously agreed that the tenant should have the right to surrender the tenancy prematurely that the landlord’s consent is necessary.
The destruction of the tenancy by surrender reflects the principle that a person cannot at the same time be both landlord and tenant of the same premises. Nemo potest esse tenens et dominus: see Rye v. Rye [1962] A.C. 496, 513 per Lord Denning.
23 Later in the judgment, at p. 272, four principles are set:-
First, when a tenancy is surrendered it is brought to an end prematurely otherwise than at the time and in the manner stipulated by the tenancy agreement. When it is determined by notice to quit it is determined in accordance with the provisions of the tenancy agreement and at a time and in the manner previously agreed between the parties or their predecessors in title.
Secondly, the landlord or his predecessor in title has not agreed in advance to accept the premature determination of the tenancy by surrender, and accordingly a surrender is ineffective without his consent. But by granting and accepting a periodic tenancy the parties or their predecessors in title have agreed in advance that the tenancy should be terminable by notice to quit served by either party on the other, and accordingly no further consent is necessary whether or not it is forthcoming in fact.
Thirdly, a subtenant holds a derivative title which cannot be prejudiced by the surrender of the head tenancy from which it is derived or any other agreement between the parties to the head tenancy which is later than the creation of his subtenancy. His title is, however, precarious, for it cannot survive the natural termination of the head tenancy in accordance with its terms agreed before his subtenancy was created.
Fourthly, when the head tenancy is surrendered, it is treated as continuing until its natural termination so far as this is necessary to support the derivative interest of the subtenant. That is all that is meant by saying that “the estate … hath . . . a continuance.” But when it is determined by notice to quit, it has come to the end of its natural life. There is no further period remaining during which the tenancy can have continuance.
24 In PW and Co v. Milton Gate Investments Ltd, an analysis to the same effect was applied by Neuberger J.
Relief in equity
25 Correspondence has been exchanged between the parties. From these letters it is difficult to discern whether the plaintiff tenant deliberately adopted a policy of not seeking a determination of the tenancy for negotiating purposes; whether a mistake was understandably made because of the passage of a generation since the lease was first signed; or whether someone genuinely decided that they could not surrender the lease because otherwise they would be debarred from a new tenancy under the Act of 1980. There is nothing by way of inference or evidence from which the first and the last possibilities could be preferred as an explanation. As a probability, it seems that the parties sleepwalked into this situation.
26 The balance of Irish authority is that time should not be of the essence of the performance of this clause in the contract. In Hynes Limited v. Independent Newspapers Limited [1980] I.R. 204 the plaintiff tenant sought a declaration that a notice requiring a rent review that was served by the defendant landlord six weeks late should be disregarded. That notice was to be served “before the first day of October in the seventh year of the term”. In the High Court, it was held by McWilliam J. that neither the subject matter of the contract nor the surrounding circumstances required that time should be considered of the essence. In the Supreme Court, the appeal was disallowed on the basis that in the absence of special circumstances, nothing in the lease of 1972 nor the surrounding circumstances constituted grounds for implying a condition that time was of the essence. In that case, the Supreme Court referred to the earlier decisions of the House of Lords in United Scientific Holdings v. Burnley Borough Council [1978] A.C. 904 where there was an adoption and application to a rent review clause of the following rule from Halsbury’s Laws of England, 4th Ed., volume 9, para. 481:
Time will not be considered to be of the essence unless: (1) the parties expressly stipulate that conditions as to time must be strictly complied with; or (2) the nature of the subject matter of the contract or the surrounding circumstances show that time should be considered to be of the essence…
27 O’Higgins C.J. emphasised that it was the weighing of the equities involved that would result in relief in equity or in the refusal of that relief, at p. 215 to 216:-
The result was that, in the absence of any contra indication in the lease itself, the House of Lords in the Burnley Case 1 [1978] A.C. 904. ruled that there is a presumption (stemming from the application of equitable principles) that in all rent review clauses time should not be regarded as essential to the initiation or operation of the rent review, even if the right to review is unilateral.
I have considered very carefully the reasoning which led to the decision in the Burnley Case.1 It is based on the assertion that such leases for long terms would not be granted or concluded without acceptance by the tenant of rent reviews and that, as a consequence, it would be unfair and inequitable that such a tenant should be allowed to repudiate an obligation he had accepted merely because, in carrying out what was agreed, a time clause was not observed. I find this reasoning compelling. I accept that there may be circumstances in which delay has been extreme or where, because of it, other factors have arisen which alter the equities. However, in the ordinary case where the payment of an increased rent is expressly envisaged and accepted, and where the failure to observe the requirements of a time clause is due to mere inadvertence and is not prolonged and in no way alters obligations already undertaken, I see no reason for saying that the equitable rule as to time in contracts should not apply. This is not to say that failure by the landlord to act in time may not be a breach of contract for which he may be liable in damages, if damage is caused. However, his failure in this respect should not be regarded as such a breach as would entitle the tenant to repudiate obligations which under the contract he has already accepted.
In Ireland the fusion of common-law and equitable rules was initiated by the Supreme Court of Judicature Act (Ireland), 1877, which contains similar provisions 2 in s. 28(7) to those already noted in the English Acts, and was completed by the Courts of Justice Act, 1924, and the Courts (Establishment and Constitution) Act, 1961.
In the circumstances existing in this appeal, it seems to me that the reasoning in the Burnley Case 1 applies. The wording of the reddendum indicates that the plaintiffs accepted an obligation to pay not only the initial rent but also “such increased rent as may from time to time be payable hereunder.” The lease contains no break clause or anything which would distinguish it from a lease under which the lessee accepts the normal obligation of periodic reviews of rent. It appears to me that the rent review clause amounts to machinery for the implementation of what was accepted from the commencement of the lease, that is to say, a review of the rent at the stipulated periods
28 In order to strike that balance it is necessary to look at the entirety of the obligations of the parties and as to whether the effect of delay is to cause disadvantage to the landlord at the expense of the tenant. At pp. 220 to 221 of the report Kenny J. laid particular emphasis on this point:
On many occasions counsel for the plaintiffs referred to the lessors’ option to serve a revised rent notice. In my opinion the use of the word “option” to describe the lessors’ right to serve such a notice is both incorrect and apt to mislead. In most cases the specified dates within which an option may be exercised are of the essence. An option gives a right to acquire property – usually at a specified price and within a named time. Its exercise creates the relationship of vendor and purchaser or of landlord and tenant. In the instant case neither the plaintiffs nor the defendants acquire any property by the service of a revised rent notice. When it is served, the plaintiffs continue to hold for the term created by the lease and on its terms: the only change is that a term of the lease (which is a contract) is altered. … I think that the nature of the clause in the lease shows that time is not of the essence for the purpose of the service of the revised rent notice. If the new rent is fixed after the 1st January, the plaintiffs will have the use of the money which represents the rent until the rent is determined – though when it is fixed they will have to pay it from the 1st January. They suffer no disadvantage if the rent is fixed after the 1st January and they get some advantage. However, if we hold that time is of the essence, the defendants will have to continue until 1985 to receive a rent which was fixed in 1972. During the last three years there has been an inflation of between 15% and 20% in each year and it is clear that one of the main purposes of the relevant clause in the lease was to prevent the rent remaining constant at the 1972 amount if the high rate of inflation continued.
29 In addition to this authority, much emphasis has been placed upon case law from England and Wales. In that regard, it is to be noticed that the approach to rent review clauses in that jurisdiction differs from the approach of the Supreme Court in Hynes Limited v. Independent Newspapers Limited in respect to the passing of a rent review option date. More significantly, the earlier cases make it clear that there is a basis in the rigidity of the law in that jurisdiction that is based on the unilateral nature of an option granted by contract to purchase property. In Hare v. Nicoll [1966] 2 Q.B. 130, a number of shares in a private company were sold to the defendant under an agreement which allowed for the repurchase of 50% thereof. That option was to be exercised by a particular date, with the payment by another specified date. The Court of Appeal held that the condition as to date had to be strictly complied with; failure to do so meant loss of the option. It was contended that time was not of the essence of this contract. That argument was rejected at p. 141 by Wilmer L.J.:-
It is well established that an option for the purchase or repurchase of property must in all cases be exercised strictly within the time limited for the purpose. The reason for this, as I understand it, is that an option is a species of privilege for the benefit of the party on whom it is conferred. That being so, it is for that party to comply strictly with the conditions stipulated for the exercise of the option. In the present case, clause 2 of the agreement prescribes two specific dates: (1) a date before which the plaintiff must give notice of his desire to repurchase the shares, and (2) another date before which he must make his payment of the purchase price. In these circumstances, I am of the opinion that the judge, in construing clause 2 of the agreement, rightly followed the reasoning of Kindersley V.-C. in Ranelagh (Lord) v. Melton [2 Drew. & Sm. 278]. The judge also relied on three other cases, namely, Brooke v. Garrod [(1857) De G. & J. 62], Davis v. Thomas [(1830) 1 Russ. & M. 506, L.C.], and Weston v. Collins [(1865) 12 L.T. 4, L.C.], as exemplifying the same principle. In this, too, I think he was right, for although the options in question in those cases arose in relation to circumstances quite different from those in the present case, the principle applied was one which is, I think, of general application.
30 In Benito di Luca v. Juraise (Springs) Limited and Others (2000) 79 P. & C.R. 193, under a written agreement the plaintiff was granted an option to purchase shares in land. That option was to be exercised within six years of the date of the agreement subject to planning permission being granted. Once planning permission was secured, the plantiff had two months to give notice in writing to the defendants exercising his option. The plaintiff became aware that planning permission had been granted somewhat late, and the notice was served out of time. Nourse L.J. held that time was of the essence both at common law and in equity in relation to options to purchase. This principle applied regardless of whether the party granting the option needed to know with certainty when the option period had come to an end. Equity would not relieve against contractual stipulations as to time, save only in cases established by the case law, as where there is a contract for the sale and purchase of land with a specified date for completion. He followed United Scientific Holdings v. the Burnley Borough Council where, at p. 929 of [1978] A.C. , Lord Diplock had said that a “practical business explanation why stipulation as to the time by which an option to acquire an interest in property should be exercised by the grantee must be punctually observed” was that the party granting this option was fettered in the exercise of the ordinary right of disposal of the property. Relief in equity was not to be extended even to cases where the party granting the option did not necessarily need to know with certainty the date when the option period had come to an end.
31 It is clear from the decision of the Supreme Court in Hynes Limited v. Independent Newspapers Limited that relief in equity against the passing of a date may be granted where the balance of the rights and obligations of the parties require an amelioration of the strict terms of the contract. That amelioration will benefit a landlord where a tenant claims not to be subject to a rent review clause simply because the date of the exercise of that option has passed. I find it impossible to approach this decision on the basis that such relief, established by the Supreme Court as applicable to options to review rent, should not be available where circumstances make it equitable to intervene in favour of a tenant.
32 The correspondence makes it clear that there is little objection by either the plaintiff tenant or the defendant landlord to an extension in the terms of the tenancy into another period. What is also clear is that under ordinary circumstances upon the determination of the tenancy a right is vested in a tenant to seek a new tenancy either on agreed terms, or if terms cannot be agreed, on terms to be set by the Circuit Court.
33 There is no right of a landlord, apart from any rights that might be established by agreement, to require a tenant to continue on in a tenancy beyond any term agreed. What is also clear is that what is crucial to the determination of the dispute between the parties is the rent review clause that is fixed by agreement so that it may never reflect the deflation in the property market by being revised downwards. Were there to be the fixing of a new tenancy by agreement or by the Circuit Court, that term could not possibly survive intact; whether as a matter of agreement or by virtue of the Act of 2009. Further, the defendant landlord expects the plaintiff tenant to pay rent at a level appropriate to the last rent review. Rent property prices were, as has been noted, markedly inflated. In effect, this case is about the cost of the tenancy. It is neither right nor fair to simply mark the passing of the date a generation after the lease was signed as establishing rights in favour of the defendant landlord to command a rent that is probably appropriate to another era.
34 Relief in equity being available, as established by the decision of the Supreme Court in Hynes Limited v. Independent Newspapers Limited, I propose to grant that relief as a matter of equity.
Result
35 In the result, the notice given by the plaintiff tenant to the defendant landlord that it did not wish to exercise the option of a new 36 year lease on the same terms as the previous 36 year lease is valid. Such notice does not disentitle the plaintiff tenant from statutory relief.
36 It is now clear that notices under the Landlord and Tenant (Amendment) Act 1980 may now be served.
Edward Lee & Co Ltd -v- N1 Property Developments Ltd
[2012] IEHC 494
Charleton J.
1 The plaintiff is part of the Dunnes Stores group of companies. The defendant operates the Northside Shopping Centre in Dublin. The plaintiff is the tenant of a retail unit in that shopping centre of which the defendant is landlord through succession in title. The plaintiff tenant has unwittingly entered into an extension for 36 years of a 36 year lease by failing to serve a notice of surrender of tenancy within a window of between a year and six months prior to the expiry of that lease. Such a notice was, in fact, served four days prior to the expiry of the original lease and was too late. At issue in this case is whether the relevant term of the lease is void by statute; whether equity can allow the notice to be served late by reason of time not being of the essence; and whether arrears of rent or mense rates are due to the defendant as landlord.
Background
2 The Northside Shopping Centre was developed in the 1970s. When the lease was first entered into in 1975 the rent reserved was £19,650 annually. There is no information as to by how much on the first rent review, six years later, the annual rent was increased. The usual term in leases from that period was to forbid any diminution in the rent on review. This lease has such a term. On the second six yearly rent review, in 1987, the rent had increased to £85,000; on the third, in 1993, the rent had increased to £125,000; then in 1999 to £175,000; and on the last relevant rent review, in 2005, the rent had become €336,840. Putting all sums into euros the increases are from €24,950 to €107,927 to €158,717 to €222.204 to €336,840, or an increase over 30 years of 1,250% or a multiplication of about 13.5. In 2005, at the last rent review, Dublin property prices, including retail letting, were at their height. Since then purchase price of property has dropped to about a third of its value for homes and retail rents have also been markedly affected. Many tenants have sought to escape from what once seemed to be wise bargains. No relief is available at law, however, to lower an agreed rent. A lease may be terminated by disclaimer by the liquidator of a corporation or repudiated under section 20 of the Company Law (Amendment) Act 1990 by an examiner. In the latter case the landlord usually has the rights for voting purposes on the scheme of arrangement of an unsecured creditor. Neither liquidation of a company nor any power of an examiner can force a revision of the sum to be paid in rent where the corporation requires to retain the premises, as opposed to disclaiming or repudiating it. Upward only rent reviews, in respect of any lease entered into from 2009, are now subject to statutory reform. That reform arises from section 132 of the Land and Conveyancing Law Reform Act 2009. This section was commenced on the 28th February, 2010, by the Land and Conveyancing Law Reform Act 2009 (Commencement) (Section 132) Order 2009 (S.I. 471 of 2009) and provides as follows:
(1) This section applies to a lease of land to be used wholly or partly for the purpose of carrying on a business.
(2) Subsection (1) shall not apply where –
(a) the lease concerned, or
(b) an agreement for such a lease,
is entered into prior to the commencement of this section.
(3) A provision in a lease to which this section applies which provides for the review of the rent payable under the lease shall be construed as providing that the rent payable following such review may be fixed at an amount which is less than, greater than or the same as the amount of rent payable immediately prior to the date on which the rent falls to be reviewed.
(4) Subsection (3) shall apply –
(a) notwithstanding any provision to the contrary contained in the lease or in any agreement for the lease, and
(b) only as respects that part of the land demised by the lease in which business is permitted to be carried on under the terms of the lease.
3 Since, in this case, had the plaintiff as tenant properly surrendered the lease on its expiry, by due notice given in 2010, it would have been entitled to a new tenancy under the s.16 of the Landlord and Tenant (Amendment) Act 1980, that new tenancy would have to have contained an upwards or downwards rent review clause. That would have provided significant relief, it might reasonably be predicted, from the very high rent. However, the terms of the lease make explicit that failing to serve the notice brings about a new term of 36 years under the same conditions as the old lease, thus allowing rent reviews for the next three decades to move only upwards. This is argued by the plaintiff tenant to be void under the Landlord and Tenant Act 1931, thus allowing the plaintiff tenant to serve notice claiming a new tenancy which will be fixed under the terms of the Landlord and Tenant (Amendment) Act 1980. The terms of such a new tenancy would, clearly, be more advantageous.
Terms of the lease
4 I will now set out the main terms of the lease. The indenture was made on the 1st December, 1975, between the predecessor of the defendant, as landlord, and by the plaintiff, as tenant. The rent reserved was £19,650, payable quarterly in advance; the term was for 36 years from the 1st February, 1975; there were to be six yearly rent reviews, under which the rent was never to fall; the premises were to be kept open for business during normal shopping centre hours; repairing and insuring the premises were specifically provided for; and there were the usual covenants in relation to peaceful occupation.
5 It is clause 4.03 VII which is at issue in this case. Just before the lease expired, in late January, 2011 a notice was sent by the plaintiff tenant stating that the lease would be surrendered on its expiry. The window of opportunity to do this had ceased, however, because that window operated only from the 1st February, 2010, to the 31st July, 2010. The relevant clause occurs beside a side note which reads “surrender and extension of lease” and is in the following form:
Not more than twelve months nor less than six months before the expiration of the term hereby granted:-
(a) the Lessee may serve upon the Lessor notice of his intention to surrender the premises, or
(b) the Lessor may serve upon the Lessee notice of his intention to refuse to extend the tenancy.
No such notice shall be served by the Lessor save for good and sufficient reason therein set forth which emanates from or is the result of or is traceable to some action or conduct of the Lessee and which in the opinion of the Lessor makes it desirable to refuse to extend the tenancy, or such extension would not be in accordance with good estate management or possession is required in connection with the scheme of rebuilding or re-development of the Northside Shopping Centre or any part thereof. In default of the servers of either such notice by either party the term hereby granted shall for all purposes be deemed to have been extended for the like term subject in all respects to the covenants and conditions provisos and stipulations herein contained including that provides over rent review every sixth year of the term as so extended and this proviso and for the purpose of removing any doubt IT IS HEREBY AGREED AND DECLARED that the intent of meaning and purpose of this proviso is that the Tenant shall be entitled to surrender the premises at the expiration of the term hereby granted or of any term for which the said term shall be deemed to have been extended and the Lessor shall be entitled to refuse to extend the Tenancy at the expiration of the said term or any such term as aforesaid under the provision in that behalf hereinbefore contained any of the reason is hereinbefore specified but that’s subject to such respective rights the Lessee should enjoy the ride indefinitely to extend its tenure and occupation of the premises nearby demise subject to the terms, conditions and provisos herein contained.
6 Key to any decision in this case is the concept of surrender of a lease. At clause 3.15 the tenant covenants with the landlord:
At the expiration or sooner determination of this demise decently and in good and substantial repair and condition as aforesaid (damaged by the insured risks only accepted subject as aforesaid) to surrender and yield up the demised premises onto the Lessor together with all fixtures and additions thereto PROVIDED HOWEVER that the Lessee shall be at liberty to remove … trade fixtures …
7 The core of the argument for the plaintiff tenant is that surrender of a lease disbars the surrendering tenant from obtaining a new tenancy under the Act of 1980. The clause as to extension of the tenancy is deliberately structured, it is claimed, so that the tenant has the choice either of, firstly, walking away from the premises after the term of 36 years has expired with the consequence that a new tenancy fixed by agreement or by the court under the Act of 1980 is not available because of that surrender or, secondly, accepting the continuation for a second term of 36 years of the precise terms of the first term of 36 years. Since this would include upwards only rent reviews, the continuation of an inflated rent and a term that might be too long to suit the purposes of the tenant, the contention is that the Act of 1980 has been unlawfully thwarted and that the entire clause is void for illegality.
Landlord and Tenant Acts
8 The Landlord and Tenant Act of 1931 was introduced in order to give security of tenure to a business which had rented premises, provided the tenancy there had subsisted for at least three years. Residents of homes and flats obtained such relief only after a period of 30 years. Under section 21 of the Act of 1931, restrictions were placed on those who had terminated their own tenancy, had been ejected or where the landlord had a scheme of redevelopment. Where a new tenancy was to be fixed by the court, the duration, of no less than 21 years was set, unless the tenant wanted less, and a gross rent was fixed. At a time of low inflation, the rent was set for the entire 21 years. It shortly became clear that such a scheme was unfair. Rents in the 1970s were set high for the first number of years, about right for the middle years and low for the last few. The Landlord and Tenant (Amendment) Act 1980 introduced rent reviews into tenancies that were to be fixed by the courts and made certain other changes including a clearer allowance for compensation for improvements and the reduction of the security of tenancy for residential leaseholders to 20 years. Neither of these Acts could be contracted out of. Section 42 of the Act of 1931 governs this lease since it is expressed to have immediate effect and was in force at the time when this lease was signed. I regard as unsustainable any argument to the effect that this situation is governed by legislation that was not then in force. That section reads:
A contract, whether made it before or after the passing of this Act, by virtue of which a tenant would be directly or indirectly deprived of his right to obtain relief under this Act or any particular such relief shall be void.
9 A similar provision is contained in section 85 of the Act of 1980 in the following terms:
So much of any contract, whether made before or after the commencement of this Act, as provides that any provision of this Act shall not apply in relation to a person or that the application of any such provision shall be varied, modified or restricted in any way in relation to a person shall be void.
10 It is noteworthy, reading the Act of 1931 that the circumstances disqualifying tenants from a new tenancy are all ones of misbehaviour whereby a landlord is forced to lose the economic benefit of the lease; see section 21. That model is maintained in the Act of 1980 whereby section 17(1)(a) provides:
A tenant shall not be entitled to a new tenancy under this Part if-
(i) the tenancy has been terminated because of non-payment of rent, whether the proceedings were framed as an ejectment for non-payment of rent, an ejectment for overholding or an ejectment on the title based on a forfeiture, or
(ii) the tenancy has been terminated by ejectment, notice to quit or otherwise on account of a breach by the tenant of a covenant of the tenancy, or
(iii) the tenant has terminated the tenancy by notions of surrender or otherwise, or
(iv) the tenancy has been terminated by notice to quit given by the landlord for good and sufficient reason, or
(v) the tenancy terminated otherwise than by notice to quit and the landlord either refused for good and sufficient reason to renew it or would, if he had been asked to renew it, have had good and sufficient reason for refusing.
11 All of these are situations where a tenant, through unacceptable behaviour, throws away his or her rights to a new tenancy. The relevant subsection also refers to termination by surrender “or otherwise”. What is that? Clearly, it encompasses walking away without saying anything. That is also a wrongful action. It is hard to see it as just acknowledging the end of a term of a tenancy. At the end of the tenancy, through efflux of time, no such wrong is involved and instead the term of the contract simply comes to an end. In those circumstances, a tenant is entitled to compensation for such improvements as have been made in the tenement.
12 At issue here is whether there has been a scheme to effectively force the tenant to surrender the tenement in advance of the term and thereby disbar the fixing of a new tenancy, and the terms thereof, by application to the court. Such a scheme would render the relevant clause void under the Act of 1931, which in all material respects is the same as the Act of 1980. The entire contract is not void, simply the offending clause: Hardiman v. Galway County Council [1966] I.R. 124 at 131 per Ó Dálaigh C.J. I do not believe that a court is entitled, however, to rewrite a clause by running a blue pencil through offending words so as to rewrite the meaning of what the parties intended into a meaning that they never intended. The law is strict. Direct and indirect attacks on rights under either the Act of 1931 or the Act of 1980 will not be tolerated. In Bank of Ireland v. Fitzmaurice [1989] I.L.R.M. 452 a lease was fixed with certain index-linked provisions that were tied to what was described as “the cost of living index”. These statistics had not been published by the Central Statistics Office since the 1953. Instead, and unfortunately, this index which measures the course of property and mortgages was replaced by a consumer price index that would have markedly increased in the decade up to 2008 had it included the cost of accommodation for families and business premises for firms. Instead, the people of Ireland were left with no statistic that would starkly state how bad huge increases in property prices were for the economy. Lardner J. struck down as void a clause in a lease providing an effective penalty against any tenant who sought to stay on past the first or second rent review. As a matter of ordinary contract law the relevant clause could have been struck down had it related to damages as it had nothing to do with genuinely pre-estimating loss. The clause provided that where the tenant stayed on beyond the term of a rent review of the rent firstly, increased by the non-existent index and then, secondly the next review, quadruple on that occasion and on the next. Lardner J., at p 460 of the report reasoned as follows:
I am satisfied that this rent was intended by the plaintiff and was designed to exercise a compelling pressure on the defendant to surrender his tenancy in order to escape liability for the increased rent. This pressure was likely to be increased by the provision that the increased rent will during the remainder of the term be subject to further fourfold multiplications viz for the two years ending on 31 May 1994 and for the period of one year ending on 31 May 1999. The position is that, if the defendant succumbing to this pressure, surrenders his lease he excludes himself from any right to claim a new tenancy under s. 17(1)(a)(iii) of the 1980 Act: any negotiations which may then take place between the plaintiff and the defendant in regard to a new lease will be free from the provision that in default of agreement the court will fix the terms of any new lease and will not be affected by the guidelines which should be applied by the court in fixing such terms. And lastly the compelling pressure to surrender exercised by the multiplier clause restricts and reduces the lessees security of tenure which is one of the purposes of the Act to confer.
13 It is also true that it should be noted that genuine entry by a tenant into a caretaker’s agreement, as opposed to a lease, may avoid the operation of the Act of 1931 since there is, in those specific circumstances nothing to which the legislation applies; Gatien Motor Company Limited v. Continental Oil Company of Ireland Limited [1979] I.R. 406.
14 A further argument of the plaintiff tenant whereby the tenant seeks to have the relevant clause declared void, and thus bypass the time limit for surrender, is that on going to court the terms of the new tenancy will already have been set. There is nothing, however, in the clause, once the surrender has been made within the six-month window provided for whereby the tenant and the landlord do not come before the court in the ordinary way because in the event that notice is served within that period there is no agreement of any kind as to the terms of any new tenancy. The parties are at large as to what may be agreed; the court is at large in the event that there is no agreement in fixing the terms that are suitable, including a term of less than the ordinary statutory period of 35 years; see section 23 of the Act of 1980.
15 Would the action of the tenant in surrendering the lease, as provided for in the clause, disbar the operation of the Act of 1980, in force when that would take place, by acting as a surrender and thus coming within one of the categories of section 17(1)? In my judgment, it would not.
Surrender
16 The lease must be construed in order to give the document business efficacy. If two possibilities are open in terms of the meaning of a clause, one of which is in conformity with the law and the other of which offends the relevant legislation, then a court is obliged to presume that the parties intended a lawful purpose. The court is not entitled to re-word an agreement in such a way as to ascribe to the parties an intention which they did not hold.
17 Modern authority confirms, firstly, that the intent of the parties as construed from the entirety of the document governs the construction of the agreement as opposed to any misuse of a technical term and, secondly, that the return of the tenancy to the landlord during the currency of the term of a demise with the consent of the landlord, is what is most properly referred to as a surrender in landlord and tenant law.
18 As to the first point, in PW and Co. v. Milton Gate Investments Ltd. (B.T. Property Ltd. and another, Part 20 defendants) [2004] Ch 142, Neuberger J. made it clear that in the construction of an agreement, substance should prevail over form. At pp. 178-179 he persuasively stated:
So far as the first limb of the argument is concerned, I accept that the law, particularly since equity prevails over the common law, is concerned with substance rather than with form. The law on this topic was discussed and applied in characteristically authoritative fashion by Wilberforce J in In re Stirrup’s Contract [1961] 1 WLR 449 at 452-453. He quoted at 453, Lord Mansfield CJ in Goodtitled Edwards -v- Bail (1777) 2 Cowp. 597, 600:
“The rules laid down in respect of the construction of deeds are founded in law, reason, and common sense: That they shall operate according to the intention of the parties, if by law they may: And if they cannot operate in one form, they shall operate in that, which by law will effectuate the intention.”
Wilberforce J then immediately went on to apply that approach to the case in front of him:
“[A]s a matter of general approach, once the court is satisfied that the intention of a document is to pass the legal estate …it should not allow that intention to be defeated by the fact that instead of the word ‘grant’ or ‘conveyance’, the word ‘assent’ is used.”
The words of Lord Mansfield C.J. are salutary, and I would not wish to derogate in any way from them; on the contrary. However, it would scarcely be consistent with what Lord Millett, in Barrett v Morgan [2000] 2 AC 264, 274G, called “the orderly development of the common law”, if those observations were interpreted so widely as to enable the court to give effect to whatever intention the parties expressed, provided that it did not infringe public policy or statute.
To construe a document, which on its face, plainly intends to effect a transfer of a property, as conveying the property, notwithstanding the fact that the parties have not used the appropriate language of “conveyance” or “grant”, but instead have used the word “assent”, is a long way away from the characterisation of the effect of the service of a notice pursuant to a break clause in a lease as a surrender. Indeed, it appears to me that, the proper characterisation of the relationship between the parties or the effect of an act permitted by contract, is ultimately a question of law, although the intention of the parties (particularly if expressed in the document concerned) may be a significant factor in some cases. As Mr Dowding says, that proposition is familiarly demonstrated in the landlord and tenant field by the decision of the House of Lords in Street -v- Mountford [1985] AC 809. In that case, because the agreement in question involved the grantor giving exclusive possession to the grantee in return for a periodic payment, the arrangement created a tenancy, notwithstanding the fact that it was plain from its terms that the parties intended it to create a licence.
In the present case, clause 5(6) permitted PW to determine the head lease on 24 June 2002 simply by serving a notice of requisite length, and nothing more was required to put an end to the term. To my mind, if the parties had characterised that arrangement as a surrender, they would have been attempting that which Lord Templeman said in Street v. Mountford [1985] AC 809 they could not effectively do. As he graphically observed, the parties can no more turn an agreement, which in law creates a tenancy, into a licence by calling it a licence, than they can turn a five pronged digging instrument, which as a matter of concept and language is a fork (albeit with a supernumerary tine), into a spade by calling it a spade. Clause 5(6) in the instant case is a provision which entitles the tenant thereunder to determine it simply by service of a notice: that is determination by notice, and not determination by surrender. A surrender, as a matter of law, involves some subsequent consensual act, such as execution of a deed of surrender or handing over and acceptance of the key, before the transaction is completed. The fact that there can be a unilateral aspect of surrender (in the sense that the landlord – or indeed the tenant – can commit himself in advance to execute or accept a deed of surrender) does not call that point into question, in my view.
19 It is clear to me, as clear as a spade is not a fork, as Neuberger J. puts the matter, that in referring in the relevant clause to a surrender, this should not be construed as a wrongful action putting the tenant outside the relief available under the Act of 1980.
20 As to the second point, the nature of what a surrender is remains clear from the earliest authority on the issue. The concept of surrender is classically dealt with in Thomas Harrison, The Law and Practice Relating to Ejectments in Ireland (Dublin, 1903) where at pp. 124 to 125, the learned author sets out the following:
The acts of the parties which constitute a surrender by operation of law may be classed under four heads. (“Cherry,” p.21.)
(1.) The delivery of possession of the demised premises to the landlord and his acceptance thereof. (Oastler v. Henderson, 2 Q.B.D. 575; O’Reilly v. Mercer, 10 I.J.N.S. 149.)
(2.) The adoption by the tenant, with the sanction of the landlord, of a position inconsistent with his position as tenant. (Lambert v. M’Donnell, 15 I.C.L.R. 136, 9 I. Jur., N.S., 371.)
(3.) The acceptance by the tenant of a new lease or of an agreement operating as a lease. (Lynch v. Lynch, 6 I.L.R. 131.)
(4.) The admission of a new tenant under a new letting made with privity and consent of the former tenant. (Doran v. Kenny, I.R. 3 Eq. 148.)
21 The author also comments, pertinently, that the tenancy may be brought to an end, where it is a periodic tenancy, as in from month to month, by either the landlord or the tenant serving a notice to quit that expires on the appropriate gale day. The author notes, at p. 123, that there is a distinction between yielding up a tenancy on the expiry of a term and of a notice to quit. He says:
A notice to quit served by a tenant is sometimes inaccurately called a surrender. The former is, however, a voluntary determination of a tenancy by the tenant upon the expiration of a definite period fixed by custom, statute, or mutual agreement whereas the latter is the re-vesting in praesenti by mutual agreement of the lessee’s interest in the lessor during the continuance of the lease or tenancy. A surrender is, in fact, an immediate transfer or conveyance of the lessee’s interest to the lessor. (Neville v. Harman. 17 I.L.T.R. 86.)
22 This remains the case. In Barrett and Others v. Morgan [2000] 2 AC 264 the House of Lords extensively discussed the nature of a surrender in contrast to the service of a notice to quit. Lord Millett gave this helpful exposition, at pp. 270 to 271:-
A lease or tenancy may also be surrendered at any time by the tenant to his immediate landlord. A surrender is simply an assurance by which a lesser estate is yielded up to the greater, and the term is usually applied to the giving up of a lease or tenancy before its expiration. If a tenant surrenders his tenancy to his immediate landlord, who accepts the surrender, the tenancy is absorbed by the landlord’s reversion and is extinguished by operation of law.
A surrender is ineffective unless the landlord consents to accept it, and is therefore consensual in the fullest sense of the term. In Coke’s Commentary upon Littleton (1832), vol. II, s. 636, p. 337b the nature of a surrender is described as follows:
“SURRENDER”, sursum redditio, properly is a yeelding up an estate for life or yeares to him that hath an immediate estate in reversion or remainder, wherein the estate for life or yeares may drowne by mutuall agreement betweene them” (my emphasis).
On its surrender the tenancy is brought to end prematurely at a time and in a manner not provided for by the terms of the tenancy agreement. In this respect it differs from the case where a tenancy is determined by notice to quit. It is because the landlord or his predecessor in title has not, by granting the tenancy, previously agreed that the tenant should have the right to surrender the tenancy prematurely that the landlord’s consent is necessary.
The destruction of the tenancy by surrender reflects the principle that a person cannot at the same time be both landlord and tenant of the same premises. Nemo potest esse tenens et dominus: see Rye v. Rye [1962] A.C. 496, 513 per Lord Denning.
23 Later in the judgment, at p. 272, four principles are set:-
First, when a tenancy is surrendered it is brought to an end prematurely otherwise than at the time and in the manner stipulated by the tenancy agreement. When it is determined by notice to quit it is determined in accordance with the provisions of the tenancy agreement and at a time and in the manner previously agreed between the parties or their predecessors in title.
Secondly, the landlord or his predecessor in title has not agreed in advance to accept the premature determination of the tenancy by surrender, and accordingly a surrender is ineffective without his consent. But by granting and accepting a periodic tenancy the parties or their predecessors in title have agreed in advance that the tenancy should be terminable by notice to quit served by either party on the other, and accordingly no further consent is necessary whether or not it is forthcoming in fact.
Thirdly, a subtenant holds a derivative title which cannot be prejudiced by the surrender of the head tenancy from which it is derived or any other agreement between the parties to the head tenancy which is later than the creation of his subtenancy. His title is, however, precarious, for it cannot survive the natural termination of the head tenancy in accordance with its terms agreed before his subtenancy was created.
Fourthly, when the head tenancy is surrendered, it is treated as continuing until its natural termination so far as this is necessary to support the derivative interest of the subtenant. That is all that is meant by saying that “the estate … hath . . . a continuance.” But when it is determined by notice to quit, it has come to the end of its natural life. There is no further period remaining during which the tenancy can have continuance.
24 In PW and Co v. Milton Gate Investments Ltd, an analysis to the same effect was applied by Neuberger J.
Relief in equity
25 Correspondence has been exchanged between the parties. From these letters it is difficult to discern whether the plaintiff tenant deliberately adopted a policy of not seeking a determination of the tenancy for negotiating purposes; whether a mistake was understandably made because of the passage of a generation since the lease was first signed; or whether someone genuinely decided that they could not surrender the lease because otherwise they would be debarred from a new tenancy under the Act of 1980. There is nothing by way of inference or evidence from which the first and the last possibilities could be preferred as an explanation. As a probability, it seems that the parties sleepwalked into this situation.
26 The balance of Irish authority is that time should not be of the essence of the performance of this clause in the contract. In Hynes Limited v. Independent Newspapers Limited [1980] I.R. 204 the plaintiff tenant sought a declaration that a notice requiring a rent review that was served by the defendant landlord six weeks late should be disregarded. That notice was to be served “before the first day of October in the seventh year of the term”. In the High Court, it was held by McWilliam J. that neither the subject matter of the contract nor the surrounding circumstances required that time should be considered of the essence. In the Supreme Court, the appeal was disallowed on the basis that in the absence of special circumstances, nothing in the lease of 1972 nor the surrounding circumstances constituted grounds for implying a condition that time was of the essence. In that case, the Supreme Court referred to the earlier decisions of the House of Lords in United Scientific Holdings v. Burnley Borough Council [1978] A.C. 904 where there was an adoption and application to a rent review clause of the following rule from Halsbury’s Laws of England, 4th Ed., volume 9, para. 481:
Time will not be considered to be of the essence unless: (1) the parties expressly stipulate that conditions as to time must be strictly complied with; or (2) the nature of the subject matter of the contract or the surrounding circumstances show that time should be considered to be of the essence…
27 O’Higgins C.J. emphasised that it was the weighing of the equities involved that would result in relief in equity or in the refusal of that relief, at p. 215 to 216:-
The result was that, in the absence of any contra indication in the lease itself, the House of Lords in the Burnley Case 1 [1978] A.C. 904. ruled that there is a presumption (stemming from the application of equitable principles) that in all rent review clauses time should not be regarded as essential to the initiation or operation of the rent review, even if the right to review is unilateral.
I have considered very carefully the reasoning which led to the decision in the Burnley Case.1 It is based on the assertion that such leases for long terms would not be granted or concluded without acceptance by the tenant of rent reviews and that, as a consequence, it would be unfair and inequitable that such a tenant should be allowed to repudiate an obligation he had accepted merely because, in carrying out what was agreed, a time clause was not observed. I find this reasoning compelling. I accept that there may be circumstances in which delay has been extreme or where, because of it, other factors have arisen which alter the equities. However, in the ordinary case where the payment of an increased rent is expressly envisaged and accepted, and where the failure to observe the requirements of a time clause is due to mere inadvertence and is not prolonged and in no way alters obligations already undertaken, I see no reason for saying that the equitable rule as to time in contracts should not apply. This is not to say that failure by the landlord to act in time may not be a breach of contract for which he may be liable in damages, if damage is caused. However, his failure in this respect should not be regarded as such a breach as would entitle the tenant to repudiate obligations which under the contract he has already accepted.
In Ireland the fusion of common-law and equitable rules was initiated by the Supreme Court of Judicature Act (Ireland), 1877, which contains similar provisions 2 in s. 28(7) to those already noted in the English Acts, and was completed by the Courts of Justice Act, 1924, and the Courts (Establishment and Constitution) Act, 1961.
In the circumstances existing in this appeal, it seems to me that the reasoning in the Burnley Case 1 applies. The wording of the reddendum indicates that the plaintiffs accepted an obligation to pay not only the initial rent but also “such increased rent as may from time to time be payable hereunder.” The lease contains no break clause or anything which would distinguish it from a lease under which the lessee accepts the normal obligation of periodic reviews of rent. It appears to me that the rent review clause amounts to machinery for the implementation of what was accepted from the commencement of the lease, that is to say, a review of the rent at the stipulated periods
28 In order to strike that balance it is necessary to look at the entirety of the obligations of the parties and as to whether the effect of delay is to cause disadvantage to the landlord at the expense of the tenant. At pp. 220 to 221 of the report Kenny J. laid particular emphasis on this point:
On many occasions counsel for the plaintiffs referred to the lessors’ option to serve a revised rent notice. In my opinion the use of the word “option” to describe the lessors’ right to serve such a notice is both incorrect and apt to mislead. In most cases the specified dates within which an option may be exercised are of the essence. An option gives a right to acquire property – usually at a specified price and within a named time. Its exercise creates the relationship of vendor and purchaser or of landlord and tenant. In the instant case neither the plaintiffs nor the defendants acquire any property by the service of a revised rent notice. When it is served, the plaintiffs continue to hold for the term created by the lease and on its terms: the only change is that a term of the lease (which is a contract) is altered. … I think that the nature of the clause in the lease shows that time is not of the essence for the purpose of the service of the revised rent notice. If the new rent is fixed after the 1st January, the plaintiffs will have the use of the money which represents the rent until the rent is determined – though when it is fixed they will have to pay it from the 1st January. They suffer no disadvantage if the rent is fixed after the 1st January and they get some advantage. However, if we hold that time is of the essence, the defendants will have to continue until 1985 to receive a rent which was fixed in 1972. During the last three years there has been an inflation of between 15% and 20% in each year and it is clear that one of the main purposes of the relevant clause in the lease was to prevent the rent remaining constant at the 1972 amount if the high rate of inflation continued.
29 In addition to this authority, much emphasis has been placed upon case law from England and Wales. In that regard, it is to be noticed that the approach to rent review clauses in that jurisdiction differs from the approach of the Supreme Court in Hynes Limited v. Independent Newspapers Limited in respect to the passing of a rent review option date. More significantly, the earlier cases make it clear that there is a basis in the rigidity of the law in that jurisdiction that is based on the unilateral nature of an option granted by contract to purchase property. In Hare v. Nicoll [1966] 2 Q.B. 130, a number of shares in a private company were sold to the defendant under an agreement which allowed for the repurchase of 50% thereof. That option was to be exercised by a particular date, with the payment by another specified date. The Court of Appeal held that the condition as to date had to be strictly complied with; failure to do so meant loss of the option. It was contended that time was not of the essence of this contract. That argument was rejected at p. 141 by Wilmer L.J.:-
It is well established that an option for the purchase or repurchase of property must in all cases be exercised strictly within the time limited for the purpose. The reason for this, as I understand it, is that an option is a species of privilege for the benefit of the party on whom it is conferred. That being so, it is for that party to comply strictly with the conditions stipulated for the exercise of the option. In the present case, clause 2 of the agreement prescribes two specific dates: (1) a date before which the plaintiff must give notice of his desire to repurchase the shares, and (2) another date before which he must make his payment of the purchase price. In these circumstances, I am of the opinion that the judge, in construing clause 2 of the agreement, rightly followed the reasoning of Kindersley V.-C. in Ranelagh (Lord) v. Melton [2 Drew. & Sm. 278]. The judge also relied on three other cases, namely, Brooke v. Garrod [(1857) De G. & J. 62], Davis v. Thomas [(1830) 1 Russ. & M. 506, L.C.], and Weston v. Collins [(1865) 12 L.T. 4, L.C.], as exemplifying the same principle. In this, too, I think he was right, for although the options in question in those cases arose in relation to circumstances quite different from those in the present case, the principle applied was one which is, I think, of general application.
30 In Benito di Luca v. Juraise (Springs) Limited and Others (2000) 79 P. & C.R. 193, under a written agreement the plaintiff was granted an option to purchase shares in land. That option was to be exercised within six years of the date of the agreement subject to planning permission being granted. Once planning permission was secured, the plantiff had two months to give notice in writing to the defendants exercising his option. The plaintiff became aware that planning permission had been granted somewhat late, and the notice was served out of time. Nourse L.J. held that time was of the essence both at common law and in equity in relation to options to purchase. This principle applied regardless of whether the party granting the option needed to know with certainty when the option period had come to an end. Equity would not relieve against contractual stipulations as to time, save only in cases established by the case law, as where there is a contract for the sale and purchase of land with a specified date for completion. He followed United Scientific Holdings v. the Burnley Borough Council where, at p. 929 of [1978] A.C. , Lord Diplock had said that a “practical business explanation why stipulation as to the time by which an option to acquire an interest in property should be exercised by the grantee must be punctually observed” was that the party granting this option was fettered in the exercise of the ordinary right of disposal of the property. Relief in equity was not to be extended even to cases where the party granting the option did not necessarily need to know with certainty the date when the option period had come to an end.
31 It is clear from the decision of the Supreme Court in Hynes Limited v. Independent Newspapers Limited that relief in equity against the passing of a date may be granted where the balance of the rights and obligations of the parties require an amelioration of the strict terms of the contract. That amelioration will benefit a landlord where a tenant claims not to be subject to a rent review clause simply because the date of the exercise of that option has passed. I find it impossible to approach this decision on the basis that such relief, established by the Supreme Court as applicable to options to review rent, should not be available where circumstances make it equitable to intervene in favour of a tenant.
32 The correspondence makes it clear that there is little objection by either the plaintiff tenant or the defendant landlord to an extension in the terms of the tenancy into another period. What is also clear is that under ordinary circumstances upon the determination of the tenancy a right is vested in a tenant to seek a new tenancy either on agreed terms, or if terms cannot be agreed, on terms to be set by the Circuit Court.
33 There is no right of a landlord, apart from any rights that might be established by agreement, to require a tenant to continue on in a tenancy beyond any term agreed. What is also clear is that what is crucial to the determination of the dispute between the parties is the rent review clause that is fixed by agreement so that it may never reflect the deflation in the property market by being revised downwards. Were there to be the fixing of a new tenancy by agreement or by the Circuit Court, that term could not possibly survive intact; whether as a matter of agreement or by virtue of the Act of 2009. Further, the defendant landlord expects the plaintiff tenant to pay rent at a level appropriate to the last rent review. Rent property prices were, as has been noted, markedly inflated. In effect, this case is about the cost of the tenancy. It is neither right nor fair to simply mark the passing of the date a generation after the lease was signed as establishing rights in favour of the defendant landlord to command a rent that is probably appropriate to another era.
34 Relief in equity being available, as established by the decision of the Supreme Court in Hynes Limited v. Independent Newspapers Limited, I propose to grant that relief as a matter of equity.
Result
35 In the result, the notice given by the plaintiff tenant to the defendant landlord that it did not wish to exercise the option of a new 36 year lease on the same terms as the previous 36 year lease is valid. Such notice does not disentitle the plaintiff tenant from statutory relief.
36 It is now clear that notices under the Landlord and Tenant (Amendment) Act 1980 may now be served.
37 In the absence of successful negotiation as to the duration, rent and conditions of the new tenancy, application may be made to the Circuit Court for the statutory relief that is ordinarily available to tenants as a matter of law on the determination of any business tenancy of more than three years duration.
38 I therefore propose to grant an appropriate declaration to that effect to the plaintiff tenant.
Harry O’Byrne v M50 Motors Ltd
High Court
1 November 2002
[2003] 1 I.L.R.M. 275
Ó Caoimh J
The applicant is a tenant of the respondent in the premises of Oatlands House, Casteknock, County Dublin and also further premises known as ‘The Mews’ at Oatlands. The agreed factual position is that the applicant has carried on a business in the said premises and on that basis he claims to be entitled to a new tenancy from the respondent in respect of each of these premises under the terms of the Landlord and Tenant (Amendment) Act 1980.
It has been indicated that Oatlands House is a substantial period residence and that the same has been listed under the development plan for the area.
The tenancy agreement in respect of Oatlands House in the instant case is dated 21 July 1988 and was made between the Knockmaroon Estate Co. of the one part and the applicant of the other part. This tenancy determined by effluxion of time on 30 March 1989. The tenancy agreement in respect of The Mews was dated 4 August 1989 and it appears that it determined on 3 August 1990. The applicant held over under the terms of these agreements up to the date of the expiry of notices to quit served on him by the respondent. It was an express term of the tenancy agreements in relation to Oatlands House that the tenant would use same ‘as a private residence only for his own use’. It is agreed that the subject premises were in fact used by the tenant in part for the purpose of *277 carrying on a business there.
S. 13 of the Landlord and Tenant (Amendment) Act 1980 provides, inter alia, as follows:
13.—
(1) This part applies to a tenement at any time if–
(a) the tenement was, during the whole of the period of three years ending at that time, continuously in the occupation of the person who was the tenant immediately before that time or of his predecessors in title and bona fide used wholly or partly for the purpose of carrying on a business.
It is agreed that the respondent was not aware of the business user of the subject premises at any time prior to seeking possession herein. The issue is whether it can be said that the same was bona fide used partly for the purposes of carrying on a business.
On behalf of the applicant it is submitted that in so far as the premises was used partly for the purpose of carrying on a business that the same must be considered to have been bona fide used for such purpose and that the term ‘bona fide used’ relates to the genuine nature of the business being carried on and that the same is not in any way qualified by the fact that the user may have been in express contravention of a covenant in the letting agreement.
In this regard counsel for the applicant has referred this court to the decision of O’Hanlon J in Plant v. Oakes [1991] 1 IR 185 where he held that the business user in question in that case was bona fide as it was genuine and not merely embarked upon as a subterfuge for the purpose of building up a ‘business equity’ as a basis for a claim for a new lease under the Act.
In that particular case the applicant claimed that the dining room in the house was set aside as an office as a necessary adjunct to a garage business carried on by him in the garage premises at the foot of the avenue leading to the Dublin Road at the premises of Kilcannon House, Enniscorthy, Co. Wexford.
O’Hanlon J indicated at p. 187 that having heard the evidence in the case he was ‘driven to the conclusion that the house was, in fact, being used partly for the purpose of carrying on the garage business and as a necessary adjunct to the operations carried on in the garage proper, at all relevant times and certainly for a period of three years and upwards prior to the termination of the tenancy.’
He then continued as follows:
With regard to the meaning to be attributed to the phrase ‘bona fide’ in the subsection I think these words are probably intended to exclude a claim based on purported business user which was not genuine but was merely embarked upon as a subterfuge for the purpose of building up a ‘business equity’ as a basis for a claim to a new lease under the Act of 1980.
*278 Later in his judgment O’Hanlon J stated at p. 188:
A nice question arises as to whether the tenant was under the obligation to apply for a ‘change of user’ permission before converting part of his residence to business purposes, under the Local Government (Planning and Development) Acts, but the respondent did not seek to rely on this failure in resisting the claim to a new lease, and as I had previously decided in Terry v. Stokes High Court, 13 March 1986 that I should not allow it to defeat a claim to a new tenancy, I would propose to adhere to that decision in deciding the present case.
On behalf of the respondent it is submitted that as the user in question in the instant case was in breach of an express term of the tenancy agreement and was not acquiesced in by the respondent, who in fact was unaware of the user at any relevant time until after the termination of the subject tenancy, that it cannot be said that the user is bona fide business user. It is submitted that it is inconceivable that the court would grant a tenancy on the basis of a use which the court would have restrained if an application had been made to it in that regard.
As against this it is submitted that the construction contended for by counsel for the respondent could lead to an avoidance of the terms of the Act of 1980. It is submitted that the character of the subject premises is not altered by reference to the particular business being carried on in the instant case. It is submitted that the relevant test is whether the business is genuine and not whether the character of the building has been altered. It is submitted that the business is such that planning permission would not have been required for a change of use.
In conclusion I am satisfied that the applicant has failed to establish a bona fide business user in so far as it was clearly in breach of an express term of the tenancy agreement. I am satisfied that the connotation of bona fide user addressed by O’Hanlon J in Plant v. Oakes (supra) was not intended to be the sole and exclusive connotation of the term and I am satisfied that where the user was knowingly in breach of a tenancy agreement it cannot be said to be bona fide user such as to entitle the applicant to a business tenancy under the Act of 1980. Accordingly, I am satisfied that the decision of the learned Circuit Court judge, appealed against in these proceedings, was correct and I propose to affirm the order made by him refusing the applicant a new tenancy in the premises and further his decision that the respondent is entitled to an order for possession of the said premises and I will so order.
Wigoder Ltd. v. Moran
[1977] IR 118
Henchy J.
Henchy J.
21st January, 1977
The first question put by Mr. Justice Finlay in this Case Stated is whether, in hearing this appeal from the order of the Circuit Court, he is entitled to substitute his discretion for that of the Circuit Judge. In my opinion he is. It is an appeal by way of a rehearing under the provisions9of s. 37, sub-s. 2, of the Courts of Justice Act, 1936. In fact new evidence was heard by consent. So the material on which he is required to exercise his discretion is different from that before the Circuit Court judge. Not alone is he entitled but he is bound to exercise his discretion on the basis of the whole of the relevant evidence adduced at the rehearing before him.
Even if the rehearing were based on the same affidavit evidence as was before the Circuit Court judge, the High Court judge hearing the appeal would be entitled to substitute his own discretion. Formerly the law was stated to be that in such cases the judge of appeal could interfere with the trial judge’s exercise of his discretion only if it was wrong in principle. That no longer represents the law. Modern decisions show that the judge of appeal may intervene if he is satisfied that the trial judge’s exercise of discretion was wrong; for example, because inadequate or excessive consideration was given to particular matters: see Ward v. James 10; In re Morelli, Vella v. Morelli 11; and In re O.12 Where all the necessary primary facts are admitted, or have been found by the judge of first instance, the court of appeal is no less qualified than he to exercise the requisite discretion on the basis of the facts so found or admitted.
The second question in the Case Stated is whether, if the applicant tenants are found to have taken all reasonable steps to protect their interest in the shop premises by giving proper instructions to their solicitor but he failed to do so because of a bona fide mistake of law, the discretion as to extension of time should be exercised in favour of the applicant tenants. Before dealing with this question it is necessary to refer to the relevant circumstances.
The applicants run a chain of shops in Dublin and one of the shops is at No. 59 Thomas Street. The applicants have carried on business there since 1964, having got a lease of the shop premises in that year for one year at the rent of £500 from Sax Estates Ltd. When the lease for one year expired, the applicants remained in possession and paid the rent reserved by the lease. The applicants thus became tenants from year to year. The interest of Sax Estates Ltd. in the premises was held under a lease of 1923 which was due to expire on the 29th September, 1973. In July, 1971, the fee simple reversion on the lease of 1923 was purchased by the respondents.
The shop was a tenement under the Landlord and Tenant Act, 1931, and by 1973 the applicants had acquired a business equity to apply for a new tenancy. The difficulty was that the leasehold interest of Sax Estates Ltd. was due to expire on the 29th September, 1973, and thereupon the applicants’ tenancy from year to year would come to an abrupt end. To protect their right to a new tenancy under the Act of 1931, it would have been necessary for the applicants to serve a notice of intention to claim relief not less than three months before the 29th September, 1973: see s. 24, sub-s. 2(b), of the Act of 1931.
On the 16th March, 1973, the applicants’ solicitor wrote to the solicitors for Sax Estates Ltd. The oral evidence (to the effect that the applicants’solicitor had been instructed that the lease of 1923 would run out in September, 1973, and that he should take all steps necessary to protect the applicants’ interest) is borne out by the following passage in that letter:”I understand that your client’s lease will come to an end in September of this year. I would appreciate if you could give me any information as to what the position would be at that time. Have your clients a right to a new lease? Any information on the matter would be appreciated.” The landlords’ solicitors replied on the 12th April saying that their client’s lease would expire in the following September, after which the landlords would have no further interest. They added the following comment: “It appears to us that your client would be entitled to a new lease of their tenancy should their tenancy be determined by the superior landlord.” That statement was incorrect and misleading. The applicants’ interest would expire (and did expire) with the expiration on the 29th September, 1973, of their landlords’ lease.
A notice of intention to claim a new tenancy should have been served by the applicants before the 29th June, 1973. Such notice was not served because the applicants’ solicitor, wrongly advised by counsel, considered that the applicants’ interest, being that of a tenant from year to year, could not be brought to an end without a six months notice to quit.
It seems clear from the evidence that the applicants’ managing director considered that there was nothing further for him to do in regard to the service of the appropriate notice after he had instructed the applicants’ solicitor in March, 1973. Unfortunately, because of the solicitor’s misinterpretation of the law, the necessary notice of intention to claim relief was not served. On the 30th October, 1973, the respondents’ solicitor wrote claiming possession. It was not until the 21st January, 1974, that a notice of motion was issued on behalf of the applicants’ seeking an order extending the time for serving the appropriate notice.
Section 45 of the Act of 1931 enables13 the Circuit Court to extend a period of time fixed by the statute for doing any act, but it is silent as to the circumstances in which the extension may be made. Therefore, the court must exercise its discretion on the basis of what is just and reasonable in the circumstances of the case. A mistake on the part of a legal advisermay be no impediment to the grant of an extension of time (see per Sir Wilfrid Greene M.R. in Gatti v. Shoosmith 14) but it should be treated otherwise if the grant of an extension of time would work an injustice on the other party; for instance, if the landlord has been misled into dealing with the property in the bona fide belief that the tenant’s inactivity was not due to error, and if it would be unfair or oppressive to require him to undo what he has committed himself to as a result of the tenant’s failure to serve the notice.
Where a question arises as to the grant of an extension of time in which to serve notice of intention to claim relief, there is no single rule or principle on which the court’s discretion under s. 45 of the Act of 1931 is to be exercised. Where discretion is given in such wide and general terms, all that can be done is to indicate the chief considerations on which the discretion might be exercised: see Blunt v. Blunt 15; Ward v. James 16; Bickelv. Duke of Westminster. 17 That is because of the wide variety of circumstances in which it will be necessary to apply for an extension of time. Each case must be decided on its own circumstances, and the improbability of any two cases falling under the same set of circumstances makes it unlikely that the decision in any one case will be anything more than a rough guide to the decision in another.
Section 24, sub-s. 1, of the Act of 1931 stipulates that no claim for relief shall be maintained unless notice of intention to claim the relief is served within the prescribed time. Therefore, when the notice has not been served in due time and an application is made under s. 45 for an extension of the time for serving the notice, the onus is on the person in default to satisfy the court that its discretion should be exercised in his favour. The question for the court in exercising that discretion is not simply whether the failure to serve the notice in time was excusable; in so far as the second question in the Case Stated postulates that test it is based on a wrong assumption. The failure to serve the statutory notice of intention to claim relief may be understandable and excusable in retrospect, but the question of extension of time must be decided in the light of the situation between the parties as it exists when the court has to give its decision.18
It is to be assumed that the primary reason for requiring a tenant, who wishes to get a new tenancy, to serve a notice on his landlord of his intention to claim such relief is to apprise the landlord in due time that such a claim will be made. If the notice is served within the prescribed time, the landlord has the option of contesting the tenant’s claim or of negotiating the terms on which the new tenancy will be granted. If the notice of intention to claim a new tenancy is not served within the prescribed time, the landlord may be led to believe that no such relief will be sought. In the bona fide assumption that he will be entitled to vacant possession he may sell the property, or he may lease it to someone else, or he may arrange to reside in it or to start business in it, or he may decide to reconstruct it, or to deal with it otherwise on the basis of having vacant possession. In such circumstancesand I instance only a few examples of the complications that may flow from a failure to serve the statutory noticethe original lapse in regard to service of the notice may be so compounded by subsequent or surrounding circumstances that it would be unjust to the landlord to allow an extension of time to enable the tenant to proceed with a claim for a new tenancy.
When an application is made for an extension of the time for serving a notice of intention to claim relief, the judge must bring into review all the relevant circumstances including the reason put forward for not serving the notice in time, the conduct of the parties, the nature of the tenement, the respective purposes for which the tenant is seeking to get a new tenancy and for which the landlord wants to have vacant possession; the judge should then decide as a matter of fairness and justice whether time should be extended, having particular regard to the consequences of his decision to both parties. And it is for the tenant, as the person in breach of the statutory requirement of serving the notice in the prescribed time, to discharge the onus of satisfying the court that the judicial discretion should be exercised in his favour.
The factors to be taken into account in the present case would seem to be these:
1. The applicants’ managing director acted with all due care and efficiency in putting the relevant circumstances as to a new tenancy before the applicants’ solicitor in due time.
2. Having done so, he had no reason to think that the solicitor would not take the necessary steps to apply for a new tenancy.
3. The applicants would have been prima facie entitled to proceed to seek a new tenancy if the necessary notice of intention to claim relief had been served.
4. The failure to serve notice of intention to claim relief was the fault of the applicants’ legal advisers in wrongly thinking that service of the notice was not required at the relevant time.
5. That misunderstanding of the law may have been contributed to by the opinion given by the landlords’ solicitors in their letter of the 12th April, 1973, suggesting that the question of a new tenancy would not arise until the freeholders determined the applicants’ tenancy.
6. The respondent freeholders have not incurred any expense, loss, or legal obligation in regard to the property following on the applicants’ failure to serve the notice of intention to claim relief.
7. If a new tenancy is granted, the result will be no more nor less than what the respondent freeholders must have anticipated when they purchased the fee simple in 1971. That purchase must have been made as an investment the return on which would become the increased rent which the purchasers could expect to receive when the landlords’ interest terminated and a new tenancy would be granted directly from the freeholders.
8. If the applicants are shut out from applying for a new tenancy, they will suffer heavy economic loss through having to vacate these premises in which they must have built up a valuable goodwill, while the respondent freeholders will be enriched (as a result of the unexpected windfall of vacant possession) beyond the expectations they must have entertained when they acquired the fee simple in 1971.
Giving due weight to those various considerations, I would deal with the second question in the Case Stated by advising that the judicial discretion would be properly exercised by making an order in favour of the applicants whereby time would be extended so as to enable a valid notice of intention to claim relief, in the form of a new tenancy, to be served now.
Kenny J.
By a lease made on the 17th October, 1923, between Elizabeth Margaret Evans of the first part, a number of consenting parties of the second part and Michael Fleming and Anna Fleming of the third part, the premises known as No. 59 Thomas Street in the City of Dublin were let to Michael Fleming and Anna Fleming for fifty years from the 29th September, 1923. This lease expired on the 29th September, 1973. The interest of the lessees under this lease was acquired by Sax Estates Ltd. before the 12th March, 1964.
By a sub-lease made on the 12th March, 1964, Sax Estates let No. 59 Thomas Street to the applicant company for a term of one year certain from the 1st December, 1964, at the yearly rent of £500. This sub-lease contained a clause in these terms:”And it is hereby agreed that on the expiration of the term hereby created the lessees shall have the option of renewing the tenancy hereby created for a term of three years on the same terms and shall have the option to purchase the entire premises number 59 Thomas Street . . . for the sum of £6500 such option to purchase to be for a period of one year from the date hereof.”
The applicant company remained in possession of the premises let by the sub-lease after the expiration of the one year, and since then have remained in and are now in possession of the premises sub-let to them. They did not exercise the option to purchase.
By a deed made on the 29th July, 1971, between Florence Evans of the one part and the respondents of the other part the freehold estate in No. 59 Thomas Street was conveyed to the respondents subject to the lease of 1923.
The interest of Sax Estates in the lease of 1923 expired on the 29th September, 1973, and so the applicants’ interest as sub-tenants expired on that day. In March, 1973, Mr. McIvor (the applicants’ managing director) learnt that the interest of Sax Estates under the lease of 1923 would expire some time in September, 1973, and in March he consulted Mr. Henry Kelly, a solicitor, and in April instructed him to serve any notices that were necessary to enable the applicants to get a new lease of No. 59 Thomas Street. On the 16th March, 1973, Mr. Kelly wrote to the solicitors acting for Sax Estates: “I act for Messrs. H. Wigoder and Co. Ltd. who hold the premises 59 Thomas Street under an agreement of the 12th of March, 1964, from Messrs. Sax Estates Limited. My clients would appear to be tenants from year to year at a rent of £500 per annum. I understand that your clients lease will come to an end in September of this year. I would appreciate if you could give me any information as to what the position would be at that time. Have your clients a right to a new lease? Any information on the matter would be appreciated.”
The reply of the solicitors for Sax Estates was written on the 12th April and it stated that the lease under which that company held the premises would expire in September, 1973, and that counsel for the company had advised that it had no rights in the matter and that the premises would revert. The last paragraph of the reply read:
“It appears to us that your client would be entitled to a new lease of their tenancy should their tenancy be determined by the superior landlord.”
The last paragraph of the letter of the 12th April was a completely inaccurate statement of the law as the applicants’ sub-tenancy would determine when the lease of 1923 terminated and not when any notice to quit was served on them. It was unnecessary for the respondents to serve any notice of any kind on the applicants to determine the sub-tenancy. The applicants’ solicitor consulted counsel (whose name is mercifully not mentioned in the Case Stated) and he confirmed that the applicants’ tenancy was one from year to year and that they would have rights under the Landlord and Tenant Act, 1931, when the yearly tenancy was determined.
Mr. Kelly and the counsel he consulted did not advert at all to the true legal position which was that the applicants’ tenancy from year to year would determine on the 29th September, 1973. This error was contributed to by the letter of the 12th April but its main cause was the mistaken view of Mr. Kelly, and of the counsel whom he consulted, that the applicants’ sub-tenancy had to be determined by a notice to quit. Mr. McIvor believed that he had nothing more to do in relation to the renewal of the sub-tenancy, as he had instructed Mr. Kelly to take all necessary steps and to serve all notices for the renewal of the tenancy.
On the 30th October, 1973, the respondents’ solicitor wrote to the applicants demanding possession of No. 59 Thomas Street and Mr. Kelly replied on the 18th December by saying that his clients had a yearly tenancy in the premises and that he wished to be informed how it was alleged that it had been determined. He went on to state that his clients were entitled to a new tenancy. The importance of this letter is that it shows that Mr. Kelly still believed that his clients’ sub-tenancy had to be determined by a notice to quit. On the 31st December the respondents’ solicitor wrote to Mr. Kelly pointing out that the applicants’ sub-tenancy expired on the 29th September, 1973.
The latest date for service of the notice of intention to claim relief was the 28th June, 1973 (see s. 24, sub-s. 2(b), of the Act of 1931) and, when Mr. Kelly realised this, he applied on behalf of the applicants to the Circuit Court in Dublin for an extension of time to serve the notice under s. 45 of the Act. The Circuit Court judge for the county borough of Dublin surprisingly refused this application, and the applicants appealed to the High Court on Circuit. The case was heard by the President of the High Court who, having considered the affidavits which were filed and having heard oral evidence (the hearing in the Circuit Court was based on the affidavits only) stated this Case for this Court in which he poses two questions.19 I have no doubt that the answers to both questions should be “Yes.” I may add that I think it would be grossly unjust in the circumstances of this case to refuse to extend the time for service of the notice of intention to claim relief.
Section 24, sub-s. 1, of the Act of 1931 provides: “No claim for relief under this Act shall be maintained unless the claimant shall, within the time hereinafter mentioned, have served on the person against whom such claim is intended to be made notice (in this Act referred to as notice of intention to claim relief) in the prescribed form of his intention to make such claim.”
Sub-s. 2 of s. 24, so far as relevant, reads: “Every notice of intention to claim relief shall be served within whichever of the following times is applicable, that is to say:(b) in the case of a tenancy terminating by the expiration of a term of years or other certain period or by any other certain event, not less than three months before the termination of the tenancy . . .”
Section 37 of the Courts of Justice Act, 1936, reads:
“(1) An appeal shall lie to the High Court sitting in Dublin from every judgment given or order made (other than judgments and orders in respect of which it is declared by this Part of this Act that no appeal shall lie therefrom) by the Circuit Court in any civil action or matter at the hearing or for the determination of which no oral evidence was given.
(2) Every appeal under this section to the High Court shall be heard and determined by one judge of the High Court sitting in Dublin and shall be so heard by way of rehearing of the action or matter in which the judgment or order the subject of such appeal was given or made, but no evidence which was not given and received in the Circuit Court shall be given or received on the hearing of such appeal without the special leave of the judge hearing such appeal.”
As the appeal from the Circuit Court judge is a rehearing of the action, the High Court judge when hearing an appeal from the Circuit Court under s. 37 should make up his own mind on all matters arising in the appeal. Even in applications for what are ambiguously called discretionary orders, the High Court judge should not regard himself as being bound to give any weight to the way in which the Circuit Court decided the case. There is said to be a rule that when the judge in a lower court makes a discretionary order, the court of appeal should not interfere with the exercise of his discretion unless it is shown that he acted on a wrong principle of law. The origin of this rule of practice is unknown. I deny that it exists. When the case is heard on affidavits only, the appellate court is in the same position as the trial judge to exercise its discretion and if the members of that court think that the discretion was wrongly exercised, they should not, in my view, hesitate to reverse it: In re Morelli, Vella v. Morelli. 20
There is a passage at p. 191 of the judgment in Hayes, Conyngham & Robinson Ltd. v. Kilbride 21 where Davitt P. stated: “I am bound by these authorities; and, in my opinion, they decide that an order made in pursuance of s. 45 of the Act is a discretionary order which should not be interfered with unless the Circuit Judge has erred in principle, as, for instance, by allowing his discretion to be influenced by something which it was unreasonable to take into account.” In my opinion that passage is plainly wrong and should not now be followed. In so far as O’Neill v.Carthy 22 and Bridgeman v. Powell 23 decided the same rule, they are also wrong and should not now be followed. It is significant, I think, that there is no reference to s. 37 of the Act of 1936 in the arguments or in the judgment in Hayes, Conyngham & Robinson Ltd. v. Kilbride. 24
It is impossible to state any general principle which a court should apply in every case to decide the issue whether the time for service of notice of intention to claim relief should be extended, except that the court should make the order when justice requires that it should. I do not think that the discussion is advanced in any way by saying that an applicant for extension of time must show the existence of special circumstances. Until one defines the sense in which the word “special” is used, the sentence seems to me to be almost meaningless. One can say that the time should not be extended when the only reason advanced for failure to serve the notice is that the tenant did not know that he had to serve it within the time prescribed if he wanted to get a new tenancy, or that he was unaware that he was entitled to a new tenancy, because in such cases the rule that ignorance of the law does not excuse applies. However, when the tenant knows or suspects that he is entitled to a new tenancy and instructs his solicitor, within the time prescribed for service of a notice, to serve the required notice and the solicitor does not do so because he is mistaken about the law then a different situation exists.
A solicitor is an officer of the court and is held out to the public by the Incorporated Law Society of Ireland acting under an Act of the Oireachtas as being competent to transact legal business. In my opinion, it would be unjust to penalise the client by refusing the extension in the circumstances I have described unless the landlord, relying on the absence of a notice of intention to claim relief, has agreed to sell or lease the property or has incurred expense in connection with its redevelopment. The case for extension is much stronger when the solicitor is misled by a colleague or gets wrong advice from a barrister who holds himself out not as being merely competent in legal matters but as being an expert in them.
It is no answer to say that the client may sue his solicitor for negligence, for this is the type of case in which damages are not an adequate remedy. The client loses the goodwill he has built up if the extension is not granted and the assessment of the value of this and of the profits which the tenant will earn is notoriously difficult to assess, particularly in a period of high inflation. In my opinion, the President should hold that the error of law made by the solicitor and counsel in this case is a sufficient reason for extending the time for service of the notice of intention to claim relief.
Parke J.
I concur with the view expressed in the judgments already delivered that time should be extended to allow the applicants to serve a notice of intention to claim relief under the provisions of the Landlord and Tenant Act, 1931.
I have no hesitation in answering the first question in the Case Stated in the affirmative. I agree with Mr. Justice Kenny that the passage which he quotes from the judgment of Davitt P. in Hayes, Conyngham & Robinson Ltd. v. Kilbride 25 is incorrect. However, I cannot answer the second question by a simple affirmative or negative, because this question is based on a false premise. That premise seems to be that the test to be applied in exercising the judicial discretion in such a case depends upon the steps taken, or not taken, by a tenant or his advisers. I regret that I cannot accept the view that the tenant ought to obtain relief under s. 45 of the Act of 1931 merely by giving appropriate instructions to his solicitor in time to enable the solicitor to serve a proper notice. The fact that such instructions were given, but not carried out, may (as in the present case) provide an explanation as to why no notice was served in time, but in my view it is not sufficient to enable a tenant to obtain a favourable exercise of the court’s discretion without having regard to all the other factors in the case.
Section 45 of the Act of 1931 permits the court to extend time “upon such terms as the Court thinks proper.” In my opinion, this means:”upon such terms as the Court considers just and equitable having regard to the interests of all parties concerned.” I entirely agree with the views expressed by Mr. Justice Henchy as to the principles upon which the court should act in exercising its discretion in such cases, and I equally agree with the manner in which he has applied them to the facts of the present case.
Therefore, I would order that time should be extended to enable a proper notice of intention to claim relief to be served by the applicants. made against the superior landlord and such relief (if awarded) shall be given by the superior landlord to the tenant.
The appeal was heard on the 23rd July, 1974.
O’Higgins J.
30th July 1974
By an indenture dated the 14th June, 1963, McMullen Bros. Ltd. let to Patrick M. Linders the Isolde Garage at Chapelizod in the City of Dublin. The letting was on a year-to-year basis at the rent of £450 p.a. and it commenced on the 1st September, 1962. On the 3rd November, 1962, Linders Garage (Chapelizod) Ltd. was incorporated and it carried on the garage business at the Isolde Garage. Mr. Linders was, and is, the managing director of this company. After the formation of the company it appears that no formal assignment of the interest created by the indenture of 1963 was made by Mr. Linders to the company. In his affidavit which was sworn on the 18th October, 1973, Mr. Linders says that, following the formation of the company, he held the garage premises in trust for the company and was re-imbursed for the premises by the issue to him of shares. In an affidavit sworn on the 25th February, 1974, he says that the rent of the premises was paid by the company and accepted from it by the lessors.
It appears that some time in April. 1972, Mr Linders learned from someone associated with the lessors that their interest in the premises was coming to an end. The result was that a notice of intention to claim relief pursuant to the Landlord and Tenant Acts, 1931 to 1971, was served on the lessors on the 27th April, 1972. This notice was served on behalf of the applicant company by their solicitors, and I must assume it was served pursuant to instructions received by the solicitors to safeguard the applicants’ or Mr. Linder’s rights in relation to the tenancy of the garage premises. No reply to this notice was received and a formal application for a new tenancy was served on the lessors on the 8th August, 1972; and on the 31st August the lessors served on the applicants a notice stating that the lessors had no reversion. The lessors’ notice was served pursuant to the terms of s. 31, sub-s. 1(a), of the Act of 1931 and apparently it did not contain the name of the superior landlord, as is required by sub-s. 1(a) and by regulation 16 of the Landlord and Tenant Regulations, 1932. From the 8th August until the 9th November, 1972, nothing happened in relation to the protection or establishment of the applicants’ rights under the Act; on the latter date the applicants’ solicitors requested the name and address of the superior landlord and were furnished with this information on the 13th November. On the 28th November, 1972, a notice of intention to claim relief was served on the superior landlords who are the respondents in this application.
It appears that the yearly tenancy created by the indenture of 1963 came to an end because of the cesser of the lessors’ interest; that interest appears to have been a term of years which expired on the 1st April, 1972. Section 24, sub-s. 1, of the Act of 1931 provides that no claim for relief shall be maintained unless the claimant has served a notice of intention to claim relief in the prescribed form. Sub-section 2 of s. 24 specifies the times for serving this notice in relation to the termination of different tenancies.
Sub-section 2 provides that “Every notice of intention to claim relief shall be served within whichever of the following times is applicable, that is to say . . . (b) in the case of a tenancy terminating by the expiration of a term of years or other certain period or by any other certain event, not less than three months before the termination of the tenancy, or (c) in the case of a tenancy terminated by the fall of a life or any other uncertain event, within one month after the happening of such event coming to the knowledge of the claimant . . .”
The applicants’ notice of intention to claim relief was clearly served out of time whether it ought to have been served under sub-s. 2(b) or under sub-s. 2(c) of section 24. For this reason the applicants have brought this motion for an order deeming the actual service good, or extending the time to serve such notice of intention. This motion falls to be considered under s. 45 of the Act of 1931 which provides as follows:”Where by or under this Part or any of the foregoing Parts of this Act a period is fixed for the doing of any act or thing, the Court may, either before or after the expiration of such period, extend such period upon such terms as the Court thinks proper.” The learned Circuit Court judge granted the relief sought4 and the respondents have appealed against his order.
It is first of all necessary to decide what was the period which applied in this case. On behalf of the applicants, Mr. Crivon has submitted that the case is covered by s. 24, sub-s. 2(c), of the Act of 1931 because the termination of the lessors’ interest was an uncertain event so far as the applicants were concerned since they did not, and would not, have known that this interest was about to or had expired. I cannot accept this submission. It seems to me that paragraph (c) covers the cesser of a tenancy as a result of a happening which is always unpredictable and therefore uncertain. To my mind the meaning of the paragraph is made clear by the words “the fall of a life or any other uncertain event.” In this case it was always certain and ascertainable that the tenancy from year to year created by the indenture of 1963 would not exist after the expiration of the lessors’ term of years; and in fact the tenancy terminated by the expiration of this term of years.
I find myself compelled to hold that the governing paragraph in relation to the service of the notice is paragraph (b) of sub-s. 2 of section 24. I accept as a fact that the applicants did not know, and probably were not entitled to inquire, about the nature of their lessors title and that, as a consequence, the statutory time limit expired before they were aware of the need to safeguard their rights. In my view, it is to meet cases such as this that s. 45 of the Act of 1931 gives specific powers to the court to exercise if justice so requires.
In April, 1972, Mr. Linders learned of the expiration of the lessors’ interest; he then consulted the applicants’ solicitors and instructed them to act for him and the applicants in relation to landlord and tenant rights. At this stage he was already over three months late. Would anyone doubt that an immediate application to extend the time would have been granted because it would be the just thing to do? I think this is the policy of the Court as set out in O’Neill v. Carthy 5; Bridgeman v. Powell 6 and Hayes Conyngham & Robinson Ltd. v. Kilbride .7 The fact is that the applicants, through their solicitors, then applied to the court. They were then met by a notice served pursuant to s. 31, sub-s. 1(a), of the Act of 1931 to the effect that their landlords had no reversion. Had this notice contained the name of the superior landlord with his address and had an application then been made to extend the time for the service of a notice of intention to claim relief, I would have little doubt that the Circuit Court would have regarded an extension of time to be just and appropriate in the circumstances. In fact this notice did not contain the appropriate information and a long and unexplained delay took place until the 9th November, 1972, when the applicants’ solicitors wrote asking for the required information which was immediately forthcoming. It is urged by Mr. Landy that here is evidence of inordinate delay, and that the applicants knew of the situation in relation to their landlords’ title from the previous April. I think there was some delay which was, perhaps, excusable in view of the time of the year in which it occurred; but I do not think the applicants are to be held accountable. Immediately they became aware of their need for legal assistance, the applicants instructed their solicitors; at that stage they were already out of time. The fact that notices were then served which, in retrospect, were unnecessary and that some delay supervened in following up these notices appears to me to be irrelevant.
The fundamental consideration is whether the interests of justice in the circumstances of this case require that the relief sought be granted. The Act of 1931 is entitled “an Act to make provision for the further improvement and amelioration of the position of tenants . . .” Under such an Act when the court is given powers to extend times provided by the Act for the service of statutory notices, I think the court should do so unless a clear injustice would be caused. In this case I have no doubt that not only is no injustice caused by the relief sought but that the interests of justice require that it be granted.
Mr. Landy, on behalf of the respondents, has raised the further objection that the applicants are not the tenants under the indenture of 1963. I cannot say whether the submission implied in this objection is well founded or not. All I am concerned with is the fact that the applicants claim to be entitled to a new tenancy under the Act of 1931. To establish their claim they must establish that they are “tenants” within the definition contained in s. 2 of the Act of 1931 and that they have one or other of the equities set out in s. 19 of the Act. Section 24 of the Act, with which I am concerned specifically, refers8 to the person seeking relief as “the claimant” which I hold covers both the tenant and the person who claims to be such. That the applicants claim to be the tenants is clear and, accordingly, I feel there is no substance in this objection.
Mr. Landy has further asked me to state a Case to the Supreme Court under the provisions of s. 38 of the Courts of Justice Acts, 1936. The stating of such a Case is a matter of discretion. Here I take the view that the point made by Mr. Landy will have the same validity at the hearing of the substantive application as it has now. This being so, I think it would be unjust to delay that hearing for the determination of an issue which can be dealt with fully at the same time. Accordingly, in the exercise of my discretion I refuse this application.
I will make an order deeming to be good the service of the notice of intention to claim relief made on the 28th November, 1972.
Patrick J. Smith, v The Educational (Permanent) Building Society
High Court.
[1946] 80 I.L.T.R 31
Davitt J.
Circuit Appeal:
The tenant—Patrick J. Smith—applied to the Circuit Court by notice of motion for an Order extending the period limited by the Landlord and Tenant Act, 1931, for service by a tenant on a landlord of notice of intention to claim relief under the Act. The following facts were deposed to in the affidavits of the parties: By an Indenture dated the 1st October, 1942, made between the landlord and the tenant the landlord agreed to let to the tenant the shop and basement and the offices thereto attached, portion of the premises No. 3. Lower Abbey Street, in the City of Dublin from the 1st October, 1942, for one year certain and afterwards from year to year, until determined as thereby provided, and it was provided by the agreement that the tenancy could be determined at the end of the first or any subsequent year by three months’ previous notice in writing by either party to the other. By notice to quit dated 15th March, 1945, and served on that day, and before the expiration of the 3rd year of the tenancy, the landlord requested the tenant to deliver up possession of the premises on 1st October, 1945. By letter dated the 28th March, 1945, the tenant suggested that certain adjustments could be made, this suggestion was stated to have been refused by the Society. A further letter was written to the landlord on the 24th September, 1945, renewing the suggestion of adjustments and the landlord replied on the 28th September, 1945, requiring possession on the 1st October, 1945. A further letter from the tenant dated the 2nd November, 1945, complained of the landlord’s attitude, and requested the landlord to permit the tenant to remain in possession of part of the premises. This request was finally refused on the 6th November, 1945, possession having been sought and refused on the 5th October, 1945.
There was some controversy in the affidavits of the landlord and tenant respectively as regards the delivery and receipt of the letter of 28th March, 1945. The tenant did not serve notice of intention to claim relief under the Landlord and Tenant Act, 1931, within the time limited by section 24, subsect. (2) (a) of the Act and stated in his affidavit that he could not have known that his suggestions to the landlord were finally refused until the 28th September, 1945, by which date the time limited by the section for service of the notice had expired. None of the affidavits filed on behalf of the tenant contained any averment that improvements had been done or made by the tenant. The arguments in the Circuit Court were the same as appear below. The Circuit Judge refused the application, rejecting the suggestion that there had been good and reasonable cause for the tenant’s failure to serve the notice, and further holding that the tenant was not entitled to the benefit of the Act, the tenancy having terminated, for the purposes of section 19 of the Act, on the 15th March, 1945, having commenced on 1st October, 1942. From this Order the tenant appealed.
H. J. Moloney, S.C. and Patrick McGilligan, for the tenant submitted that the Circuit Judge was wrong in holding that the facts of the case disclosed no justifiable reason for the tenant’s delay in serving the notice.
As regards the contention of Counsel for the landlord that the tenant was not entitled to the benefit of the Act, this was based on a reading of the Act which was never intended by the legislature. Section 19, subsection (1) (a) of the Act made the Act applicable where such tenement was during the whole of the three years next proceeding the termination of such tenancy bona fide used by the tenant for the time being thereof, etc. The landlord’s contention was that by reason of section 19, subsection 2 (a), the termination of the tenancy in the present case must be held to have been the date of the service of the notice to quit, and that accordingly the tenant could not come within the Act for the purpose of applying for a new tenancy. If this contention were correct the result would be that where there was a letting of premises for a term of years terminable by notice to quit at any time during the term, or if there were a letting from year to year terminable by notice to quit by either party during the currency of any year of the tenancy the landlord could prohibit the tenant from deriving the benefits of the Act by serving a notice to quit at any time prior to the expiration of the third year of the tenancy terminating the tenancy on the last day of the term, even though the term be for 10 years or in the case of the yearly tenancy by a notice to quit for any future date. This was not the intention of the Act and the words “next proceeding the termination of the tenancy” in subsection (1) (a) of the Act must be interpreted and construed as relating to the actual date of termination, and should be read in their *32 ordinary sense and not in the sense of the definition in subsection 2 (a) of section 19 of the Act. Counsel for the tenant further submitted that the landlord’s contention, whilst it could be raised by way of defence to the actual application for the new tenancy when the matter came before the Court, was not a matter which could be raised by way of objection to the extension of the time for service of a notice of intention to claim relief.
Alternatively it was submitted that in so much as the tenant intended to claim compensation for improvements, the Order sought should be made, the tenant being entitled to this relief in any event, and independently of three years occupation within the terms of section 19, subsection (1) (a).
J. Costello, S.C. (with him A. Corbett ) for the landlord submitted that—
I. The tenant had not disclosed any reasonable excuse for his failure to serve the notice of intention to claim relief in the affidavits served and filed on his behalf.
II. It was clearly open to the landlord to raise all points open to him under the Act which could be raised by way of defence, and it was open to the landlord on the present application to show that the tenant was not entitled to the relief which he intended to claim, and that if the Court were satisfied on the point the application for the Order now sought should be dismissed.
III. The tenant could not obtain a new tenancy under the provisions of section 19 of the Act. Subsection (2) of the section clearly defined the meaning of the words “termination of the tenancy” where same appeared in the section, and the subsection was comprehensive. Section 19, subsection 2(a) was clear and unambiguous in its terms, and clearly defined the date of the termination of a tenancy within the meaning of the section where a notice to quit was served. There was nothing to prevent a tenant from contracting in such a manner that a notice to quit could not be served before the periods set out in subsection (1) of the section, and thus preserving his rights. The words of the section must be read in their ordinary sense, unless such an interpretation would lead to an absurdity. The words of subsection 2 were clear and even if the section did leave a loophole open to a landlord by which he could defeat the right of a tenant to relief under the section, they were far from absurd in their ordinary interpretation. Section 42 of the Act did not in any way prohibit the parties to a lease from agreeing to a lease which would not come within the Act, but if they did agree to a lease or tenancy to which the Act applied they were prohibited from stipulating that the Act should not apply.
IV. The tenant was also relying on the fact that in the notice of intention to claim relief, the time for the service of which he now sought to have extended, it was stated that he intended to claim compensation for improvements as an alternative to a new tenancy. As regards that claim it would be noticed that there was not a single mention of improvements in any of the affidavits filed by the tenant and there was no evidence upon which the Court could exercise a Judicial discretion in this branch of the argument in favour of the tenant. By reason of the fact that he carried on business in the premises for the whole of the 3 years preceding the date of the service of the notice to quit, the tenant was not entitled to a new tenancy, and accordingly the Court could not extend the time for service of a notice of intention to claim a new tenancy.
Davitt, J. affirmed the Order of the Circuit Judge refusing the application.
Byrne v. Loftus
[1978] IR 214
Griffin J.
28th July 1977
This is a Case which was stated by Mr. Justice Murnaghan sitting as a judge of the High Court on Circuit at Cork. The applicant held a lock-up shop on the ground floor of No. 14 Springmount Terrace in the city of Cork from the respondent under an indenture of lease dated the 2nd July, 1956, for the term of 20 years from the 23rd April, 1956, subject to a yearly rent of £156. The premises held by the applicant constituted a tenement within the meaning of s. 2 of the Landlord and Tenant Act, 1931. The applicant carried on the business of a chemist in the said tenement, and used the same bona fide for this purpose during the whole of the three years next preceding the termination of the tenancy (within the meaning of s. 19 of the Act of 1931) on the 23rd April, 1976. Therefore, pursuant to s. 20 of the Act, the applicant was entitled to a new tenancy in the tenement “on such terms as may be agreed upon between such tenant and his landlord or as shall, in default of such agreement, be fixed by the Court.”
In compliance with s. 24 of the Act the applicant duly served a notice of her intention to claim a new tenancy in the tenement and, having failed to agree with the respondent upon the terms of the new tenancy, she applied to the Circuit Court at Cork pursuant to s. 25, sub-s. 1, of the Act to have her right to such new tenancy determined and to have the terms of such new tenancy fixed.
The Circuit Court declared the applicant to be entitled to a new tenancy by way of lease of the said shop and directed that the new lease was to be for 21 years from the 24th April, 1976, that the rent was to be £10 per week, and that the applicant was to be responsible for municipal rates on a valuation of £11; the Circuit Court declared that otherwise all the terms and conditions contained in the lease of 1956 should be terms of the new lease. The respondent appealed to the High Court on Circuit from the whole of the order of the Circuit Court but, on the hearing of the appeal, it was agreed that the applicant was entitled to a new tenancy and that the only term of the new lease which was then in dispute was the amount of the rent to be reserved thereby. The trial judge found as a fact that at the present time a landlord would not willingly make a lease of business premises in Cork for a term of 21 years without inserting in the lease a clause requiring a periodic review of the rent throughout the continuance of the term. He held that, in fixing the amount of the rent, he was not empowered to direct the insertion of such a clause in the new lease.
On the application of counsel for the applicant the trial judge submitted two questions of law1 for the determination of this Court.
As to the first question, where the relief claimed in an application to the court under the Act is a new tenancy in the tenement to which the application relates, then s. 27(a) of the Act provides that “if the Court finds that the tenant making the application is entitled to such new tenancy the Court shall fix the terms of such new tenancy and shall make an order requiring the landlord of such tenement to grant and such tenant to accept a new tenancy in such tenement accordingly.” As the trial judge is required by this section to fix the terms of the new tenancy to which the tenant is entitled, he not onlycan but must fix a rent, and so the answer to this question is “Yes.”
As to the second question, the rent to be fixed by the court in this case is”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 such tenement, in each case on the basis of vacant possession being given, and in such circumstances that the supply of similar tenements is sufficient to meet the demand and the competition therefor is normal and having regard to the other terms of such tenancy and to the letting values of tenements of a similar character to and situate in the vicinity of such tenement but without regard to any good will which may exist in respect of such tenement” see s. 29(f) of the Act.
When the Act of 1931 was passed, prices generally (including rents) were stable and continued to be so until the outbreak of the second World War in 1939. During that time, house property was readily available for letting, as landlords could then obtain a reasonable return on their capital. Therefore, there were plenty of willing lessors. During the war years, prices (including house property) increased appreciably and this trend continued for some years after hostilities ended. Owners of property were then less ready to let house property as they naturally preferred to sell rather than to let. The price of house property fell at the end of the 1940’s, and comparative stability returned in the early 1950’s and continued for some years. During that time, property was more readily available for letting at what then appeared to be reasonable rents, and the amount of such rents was reflected in orders made by the Courts when fixing the terms of new tenancies to which tenants became entitled under the Act of 1931. Inflation, as we now have come to know it, did not exist in those years nor could anyone reasonably have anticipated it. From the late 1950’s onwards, prices (including rents) rose, but at a comparatively slow rate. Although the gradual rise was then small by comparison with recent years, it became apparent during the late 1960’s that a rent reserved by a lease for a term of years, although reasonable when the lease was made, became less valuable to a landlord with the passage of time by reason of the rise in prices and the fall in the value of money. Consequently, within the past ten years, it became usual to insert in leases of business premises a rent-review clause which allowed for the periodic review of the rent during the currency of the lease.
At first, leases provided for a review every seven years but, as the rate of inflation increased more rapidly, review every five years became more usual. Within the last three years, new leases almost invariably have provided for a review every three years-the rent on such review being determined automatically by the rise in the Consumer Price Index. During the course of the hearing, we were informed by counsel that, in respect of leases for 21 years granted by the Courts by way of new tenancy, it has become the practice of some Circuit Court judges to increase by 10% the rent appropriate to the then present conditionsthe increase being intended to compensate for future inflation. On past experience such an increase would be entirely inadequate and would only perpetuate the hardship suffered by landlords since the rate of inflation started to increase so rapidly. Taking August, 1953, as the base of 100, the following extracts from “Economic Review and Outlook” (July, 1976) show the increase in Price Index Numbers in recent years:
August, 1953 100
1963 128.4
1970 186.1
1972 220.2
1975 346.9
May, 1974 282.0
May, 1976 407.9
It will be seen that in the two years between May, 1974, and May, 1976, the Price Index Numbers increased by 125.9 points. Again, taking November, 1968, as the base of 100, the Consumer Price Index (as taken from “Statistical Bulletin”) for the four years from November, 1972, to November, 1975, is as follows:
November, 1972 139.2
November, 1973 156.8
November, 1974 188.2
November, 1975 219.9
It goes without saying that the value of rents (in the absence of a rent-review clause in the lease) has been greatly eroded by inflation, particularly within the last eight to ten years. Therefore, the court should take account of inflation in fixing the rent to be reserved by a lease which is being granted by way of a new tneancy. One of the matters to which the court must have regard in fixing the rent under s. 29(f) of the Act is “the other terms of such tenancy.” In my opinion, the fact that the lease does not include a rent-review clause is one of the matters to which the court should have regard. Precisely how this is to be done is the problem in the present case.
On behalf of the respondent it was submitted to the trial judge that he should fix a rent which, in the aggregate over 21 years, would approximate, so far as possible, to the total rent which would be paid under a lease for 21 years if the lease included a clause providing for a periodic rent review. Although there might be difficulty in arriving at the appropriate rent if this method were adopted, it would nevertheless be possible to calculate the correct rent, provided that the rate of increase in the Consumer Price Index was uniform. If one were to assume a uniform rate of increase in the Consumer Price Index of 71/2% per annum over the next 21 years, and to assume a rent of £1,000 p.a. as being appropriate to present conditions in any particular case, and that a lease contained a clause providing for review of rent every three years, then by the use of compound-interest tables the rent which would be determined by the method submitted by counsel for the respondent would be the sum of approximately £2,100 p.a. But as the value of £1 received now would be much greater than that of £1 received in, say, 15 years’ time, the figure of £2,100 would not be a true figure and a further refinement would be necessary when the investment value of the rent is taken into account. At present investors can obtain 13% in the gilt market, and when this is taken into account the true rent would be in the region of £1,500 p.a. This example, however, presupposes a uniform rate of increase in the Consumer Price Index of 71/2%a rate which is less than half the average rate between 1968 and 1975. The rate of increase has in the past not been uniform, as appears from the figures already quoted, and it is unlikely to be uniform in the future.
It seems to me that no one can reasonably anticipate what the increase in the Consumer Price Index is likely to be within the next few yearslet alone within the next 21 years. It may very well be that prices will fall at some stage within the 21 years. In my opinion, therefore, it would be pure speculation to endeavour to estimate what rent a willing landlord would be likely to obtain over the next 21 years under a lease which contained a clause providing for periodic rent reviews. Although the trial judge, when fixing the rent to be reserved by the new lease in this case, would be legally entitled to increase the rent which he considers appropriate to present conditions, in my view he would not be entitled to do so for the reason or in the manner proposed in the specific question submitted to this Court. For the reasons aforesaid, therefore, the answer to the second question in the Case Stated should be”No” in my opinion.
As appears from paragraph 13 of the Case Stated, counsel for the respondent (as an alternative to the submission which is, in substance, the second question in the Case) submitted that, in the absence of a review clause in a lease, a willing landlord would be prepared to accept a higher rent than that which would be acceptable now if coupled with a review clause. This conflicts with the trial judge’s finding of fact. Notwithstanding this finding, if the trial judge is satisfied from the evidence of valuers or other appropriate witnesses that, in the present market situation, a willing landlord would be prepared to take and a willing lessee to give a rent higher than that which would be appropriate to present conditions, by reason of and to compensate for the fact that the lease did not contain a rent review clause, it seems to me that such evidence could and indeed should be taken into account in fixing the rent to be reserved by the lease.
In Great Britain, to overcome the difficulty created by inflation, s. 2 of the Law of Property Act, 1969, gives to the court, in granting a new tenancy, power to order a rent-review clause to be included in the new tenancy. Our Courts have no such power under the Act of 1931 and legislative intervention is obviously required.
Kenny J.
Where his tenancy in a tenement has terminated and the tenement complies with one of the statutory conditions then, subject to some exceptions, Part III of the Landlord and Tenant Act, 1931, gives an occupying tenant of a building, or part of it, the right to a new tenancy in the building, or the part of it which he occupies, provided he has served the necessary preliminary notices. However, there are some cases in which, if the landlord proves specified matters, the tenant is awarded compensation for disturbance instead of a new tenancy.
Part IV of the Act of 1931 deals with the powers of the court to enforce this right of the tenant. If the court finds that the tenant is entitled to a new tenancy it “shall fix the terms of such new tenancy and shall make an order requiring the landlord of such tenement to grant and such tenant to accept a new tenancy in such tenement” see s. 27(a) of the Act. When the court fixes the terms of the new tenancy it must order that the lease is to be for a minimum term of 21 and a maximum of 99 years, if the landlord has the necessary reversion. The rent to be paid by the tenant is the difference between the gross rent and the allowance for improvements. The formula for ascertaining the gross rent is contained in s. 29(f) and is of such importance in this case that it must be quoted:
“(f) 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 such tenement, in each case on the basis of vacant possession being given, and in such circumstances that the supply of similar tenements is sufficient to meet the demand and the competition therefor is normal and having regard to the other terms of such tenancy and to the letting values of tenements of a similar character to and situate in the vicinity of such tenement but without regard to any goodwill which may exist in respect of such tenement.”
Rarely can a draftsman have produced such an ill-framed paragraph. It contains one economic absurdity and a phrase (“a willing lessor”) whose literal meaning makes nonsense of the paragraph. It is not a justification for this paragraph that it was based on a corresponding section in England. The economic absurdity is that the court must assume that the supply of similar tenements is sufficient to meet the demand as part of the process of determining the rent. Supply and demand, however, depend upon the rent sought by the landlord. At one rent the supply may grossly exceed demand: at a much lower rent, the demand will exceed supply. Supply will be sufficient to meet the demand at a specific rent but, until this is known, one cannot assume that supply equals demand. To compel the court to fix a rent on the basis that supply equals demand necessarily assumes that the court knows the rent, although the whole purpose of the formula is to determine it. The judges of the High Court and the Circuit Court with their usual good sense have made the formula workable by ignoring this provision.
The phrase “a willing lessor” presupposes that a landlord is anxious to make a letting and not to get possession. Therefore, the phrase must be interpreted as meaning a lessor who is anxious to make a letting for a term of 21 years without a rent review clause, and paragraph (f) envisages a situation in which the parties will bargain and ultimately reach an agreed figure for rent payable for a minimum term of 21 years without a rent review clausehowever wildly improbable it is that such a landlord will be found today.
The Act of 1931 was passed at a time when money had a comparatively stable value, but the gradual inflation since 1951 and the very rapid one since 1973 have made the task of fixing a rent in accordance with the formula almost impossible: with an annual rate of inflation of about 18% each year since 1973, the rent will obviously be too low after five years of the term. The extent of the inflation is vividly shown in Table 61 at p. 76 of the Central Bank Report for the year which ended on the 31st December, 1976. If mid-August, 1953, is taken as a base of 100, the consumer price index was 409 in 1976; that was an increase of about 300% in 22 years. It is significant that on that basis the figure was 220 in 1972; so it rose by 189 points between 1972 and 1976. When mid-November, 1968, is taken as a base of 100, the figure is 265 in November, 1976, which is an increase of 165 points in eight years.
In fixing rents during the last seven years, this problem of the rapid decline in the value of money has been dealt with in freely negotiated leases by a clause stipulating that the rent is to be reviewed every three, five, or seven years; if the landlord and tenant cannot agree on a new figure, such clauses require that the amount of a reasonable rent shall be determined by an independent person who is skilled in assessing letting values. However, there is no power given to the court by the Act of 1931 to insert a rent review clause in any lease which it orders to be given. In some Circuit Court areas, the Circuit Court judge now fixes the rent in applications under the Act of 1931 in accordance with s. 29(f) and then adds 10% to that rent so as to compensate for future inflation. But this is to make provision for about one year’s inflation and is obviously not the amount which a willing lessor would take as the rent for a 21 year lease without a rent review clause.
This is a Case Stated by Mr. Justice Murnaghan, sitting as a judge of the High Court on Circuit, on the hearing of an appeal from a decision by a Circuit Court judge as to the amount of the rent which is to be reserved in a new lease of a lock-up shop on the ground floor of No. 14 Springmount Terrace, Commons Road, Cork. Mr. Justice Murnaghan found as a fact that the premises are very limited in the manner in which they can be used as a place of business, and that this restricts the amount of rent which a willing lessee would be prepared to give in the event of the premises being vacant and on the open market. He also found as a fact that, at the present time, a landlord would not be willing to make a lease for 21 years of business premises in the vicinity of the city of Cork without inserting a clause for the periodic review of the rent throughout the continuance of the term of years. He decided rightly that he had not power to direct the insertion of such a clause in the new lease. He then submitted two questions to this Court.
The first is whether he could now legally fix a rent in this case in view of his findings that, at the present time, a landlord would not willingly make a lease for 21 years of business premises in the vicinity of the city of Cork without inserting a clause for periodic reviews of the rent during the continuance of the term. The answer to this question must be “Yes” as s. 27 of the Act of 1931 provides that “the Court shall fix the terms of such new tenancy” if the court finds that the tenant who makes the application is entitled to a new tenancy.
The second question is whether, when fixing the rent to be reserved by the new lease, he is legally entitled, by increasing the rent which he would consider to be appropriate to present conditions, to endeavour, in so far as is possible, to provide an aggregate amount of rent over the term of 21 years equal to the total of the rents a willing landlord would obtain by granting a lease for 21 years with a clause providing for periodic rent reviews. The answer to this second question is “Yes” because he is certainly legally entitled to adopt this course provided that there is evidence on which he can base his finding.
Counsel for the applicant, who is the tenant of this tenement, argued that the judge is entitled to take some account of inflation when fixing the rent. By this counsel meant, I think, that the arbitrary and unjust practice of adding 10% to the amount of the rent fixed, in order to compensate for future inflation, should be adopted. I do not think that this is the correct way to deal with this matter.
When there is a finding of fact that a landlord would not willingly make a lease for 21 years of business premises without inserting a clause for periodic review of the rent, the critical matter, to which valuers must direct their evidence, is the amount of rent which would be agreed between a lessor who is anxious to make a letting of the premises for 21 years without a rent review clause and a tenant who is anxious to get them for that period. If the valuer’s evidence is that the landlord would not let the premises at a rent less than that which would provide an aggregate amount of rent over the term of 21 years which would be equal to the total of the rents that a landlord would obtain by granting a lease for 21 years with a clause providing for periodic rent reviews, the judge may act on it and fix the rent on that basis. In most cases such evidence could probably be given truthfully but not necessarily in all.
I would answer the second question by stating that the judge is legally entitled to increase the rent to the amount which he considers appropriate in present conditions so as to endeavour, in so far as is possible, to provide an aggregate amount of rent over the term of 21 years equal to the total of the rents a willing landlord would obtain by granting a lease for that period with a clause providing for periodic rent reviews, provided that there is evidence to support his finding.
Parke J.
I agree with the judgment which has been delivered by Mr. Justice Kenny.
Olympia Productions Ltd v Olympia Theatres Ltd
High Court, Circuit Appeal 1981
11 May 1981
[1981] I.L.R.M. 424
In this case Judge Ryan in the Circuit Court had to deal with an application for a new tenancy brought by the applicant as lessee of the entire premises known as the Olympia Theatre, Dublin. The notice of application to the Circuit Court was amended to make it clear that the application covered not only the theatre proper, but also ‘the bars refreshments and cloakrooms and including all the adjoining buildings and rooms used and occupied in connection with the said theatre as dressing property or wardrobe rooms situate in Dame Street in the City of Dublin and Number 1 to 8 Sycamore Street in the City of Dublin’.
In the event, different orders were made in relation to different parts of the said premises, and this appeal is concerned with the Order dated 19 December 1979, whereby a rent of £ 13,000 per annum was fixed for a 21 year lease of the premises ‘situate at 72 Dame Street and 1 to 8 Sycamore Street, Dublin 2’.
Although the order of the Circuit Court is silent in this respect, it is common case between the parties that the rent so fixed by the court was fixed on the basis of the covenants in the former lease relating to repairs and insurance remaining unchanged. The former tenancy ran from 1971 to 1978, and is stated in the notice of application to have expired on 1 November 1978, by efflux of time. It appears that that lease may never have been formally executed but the parties have treated the draft lease as being binding upon them. Clause 2 (i) of that document provides that the tenants agree ‘To keep the interior of the theatre (other than the walls and fabric) in good repair and condition, fair wear and tear and damage by fire alone excepted PROVIDED ALWAYS that nothing herein contained shall oblige the tenants to put the theatre into any better state of repair or condition than exists at present’.
Clause 2 (k) provides that ‘The Landlords shall insure the premises against fire property owners liability in the sum of £ 200,000 (Two Hundred Thousand Pounds) the tenants shall pay to the landlords the difference between the premium charged by the landlords insurers in respect of the above mentioned insurance when the theatre is closed and unoccupied and the rate charged by the landlords insurers when the theatre is opened to the public and carrying on business’.
I am informed that the outcome of the proceedings in the Circuit Court resulted in the fixing of a rent of £ 22,000 per annum in respect of the entire premises which were the subject-matter of the application, but that of that sum only £ 13,200 is attributable to that part of the premises with which the present appeal is concerned. This would suggest that 60% of the entire letting value of *426 the theatre and ancillary premises referred to in the notice of application is attributable to the premises now under review — a factor which has to be borne in mind when comparisons are sought to be made with other premises in accordance with the provisions of s.29(f) of the Landlord and Tenant Act, 1931. The rent payable in respect of the entire Olympia Theatre premises from 1971 to 1978 under the former letting was £10,000 per annum. The closest comparison, and arguably the only valid comparison, that was made in the course of the evidence on the hearing of the appeal, was with the Gaiety Theatre.
The history of the determination of the rents for the two theatres is somewhat complicated, but it appears that in the case of the Olympia Theatre the rent of £10,000 per annum was fixed under the provisions of the Landlord and Tenant Act, 1931, for a seven-year term from 1 May 1971, which was apparently extended by agreement to the 1 November 1978. In the case of the Gaiety there appears to have been a short-term letting for one year in 1972/73 followed by the granting of a new 21-year lease under the provisions of the Landlord and Tenant Act, 1931, from 1 September 1973, at £22,000 per annum. Of this sum a proportionate part which the valuers in the present case agreed would be of the order of £3,000/£4,000 was attributable to landlord’s fixtures, fittings and furnishings so that the reserved attributable to the theatre proper for the first seven years of that term would have been a sum of £18,000/£19,000 per annum. The said lease incorporated provisions for seven-yearly reviews of rent, by agreement between lessor and lessee. In respect of the short-term letting of the Gaiety Theatre during the 1972/3 period the rent was £17,000 for one year, including a sum of £3,000 for landlord’s furnishings, fixtures and fittings.
It is important to note that in the case of the letting made of the Gaiety Theatre, the lessee was made responsible for all repairs and insurance. There was no evidence of a seven-year review of the Gaiety Theatre rent having taken place as yet but the evidence of the valuers on the movement of rentals generally over the relevant period conveyed a picture of rapid rise in the period from 1971 to 1973 (the period which elapsed between the commencement of the seven-year term granted in the case of the Olympia Theatre, and the commencement of the 21-year term granted in the case of the Gaiety Theatre), followed by a period of stagnation from 1973 to 1975, and a further period of rapid growth in the years 1975 to 1978.
If one takes the figure of £22,000 fixed by the Circuit Court in 1975 as the appropriate rent for the Gaiety Theatre for a term to commence from 1 September, 1973, and one deducts from it a sum of £4,000 in respect of landlord’s furnishings, fittings and fixtures, it leaves a figure of £18,000 as a rent fixed under the Act for fairly comparable premises on the basis of the lessee assuming full liability for all outgoings on repairs and insurance.
It was argued that this figure would have been lower had the lease contained provision for five-yearly reviews (as will be provided in the new lease of the Olympia Theatre by agreement between the parties). There was evidence to the effect that landlords and tenants were not at all as conscious in 1973 as they are now of the need to frequent rent reviews to protect the landlord against inflation, but that the rent might have been reduced by some figure in the 7 to 16 per cent *427 range had five-yearly reviews been provied. I am prepared to take a sum of £16,000 per annum as the hypothetical rent for the Gaiety Theatre, on this basis as of 1973.
There was considerable conflict between the witnesses as to how the two theatres compared with one another for letting purposes, one side contending that the Olympia was by no means the equal of the Gaiety and the other claiming that in all important respects it should command at least the same letting value. I have the impression that by reason of its particular location in the Upper Grafton Street/St. Stephen’s Green area; its more impressive frontage onto the street; and certain features of the interior such as the absence of bench seating of the type that is found in the uppermost gallery in the Olympia, the Gaiety was in 1973 and still remains the more attractive proposition for letting as a theatre, and I would therefore take the sum of £16,000 hypothetical rent for the Gaiety as of 1973, as representing a rent of about £14,000 appropriate for the Olympia at that time and on like terms and conditions.
There was further conflict of evidence as to the progress of rents generally during the period 1973/78. Mr Paul Good, one of the valuers who gave evidence for the lessors, said that rents of commercial properties had risen by as much as 100 to 150% during that period. Mr Anthony Sherry for the lessee, put the figure a good deal lower, and stressed that theatre admission charges could never attempt to keep pace with cost of living advances and that this inevitably held back potential increases in the rents which could be obtained for such premises. I accept that this is a valid point, but applying a very conservative approach I think a percentage increase of not less than 50 should be applied to the hypothetical figure of £14,000 which I have taken for the Olympia as of 1973, and this would give a figure of £21,000 for a term commencing in the year 1978. If the premises the subject of the present application are to be taken as representing 60% of the letting value of the entire theatre premises, then this exercis would produce a figure of £12,600 attributable to that part.
The applicant is, however, starting from a much lower base than was applicable in the case of the Gaiety, and had the benefit of a lease which during the period from 1971 to 1978, imposed only a limited liability on the lessee in respect of necessary outgoings for repairs and insurance. Having regard to these factors I would propose to scale down still further the figure already arrived at by the method outlined above, and I would propose to fix a new rent under the provisions of the Landlord and Tenant Act, 1931, s. 29 (f), in respect of that part of the Olympia Theatre premises to which the present appeal relates, at IR£12,000 per annum, on the basis that the full liability for repairs and insurance will fall on the lessee under the new lease to be granted pursuant to the Act, by way of variation of the terms contained in the former lease.
The premises are the subject of a Preservation Order made by Dublin Corporation under the provisions of the Local Government (Planning and Development) Act, 1963, which would appear to preclude the use of the premises otherwise than as a theatre so long as that order remains in force. The evidence given in the course of the case made it abundantly clear that it is very difficult to carry on a theatrical business in Dublin at a profit, and it was argued that the rent ‘a willing *428 lessee not already in occupation would give’ (within the meaning of s.29(f) of the Act) would have to have regard to the maximum he could hope to pay while keeping the theatre open as a reasonably viable concern.
I feel, however, that the converse is also true and that the rent ‘a willing lessor would take’ would not be less than a sum which would give him some reasonably assured income every year over and above any outgoings he might have in relation to the premises. In the case of the Olympia Theatre a serious structural defect manifested itself in the mid—1970’s; the responsibility to make it good was ultimately found to be that of the lessor, and the cost involved was not far short of £200,000. Thus the entire income the lessor received under the previous seven-year letting was devoured by this one item of expenditure, leaving a substantial deficit to be met out of the lessor’s other resources. At the same time insurance charges were escalating and are likely to continue to do so in the future.
Bearing in mind that the provisions of the Landlord and Tenant Act, 1931, guarantee virtual security of tenure to a tenant of commercial property for so long as he or his successors in title wish to continue to remain in possession, it appears to me that in a case such as the present the burden of necessary outgoings for repairs and insurance should fall on the person who enjoys the beneficial use and occupation of the premises rather than on the lessor whose basic rights under the Act are confined to regarding the premises as a source of annual income and little else.
It would be a very sad day for the City of Dublin and indeed for the country as a whole if the Olympia Theatre should ever have to close its doors as a theatre because it could no longer be kept going as a viable, commercial proposition. I cannot accept, however, that the owners of the property who could probably make very lucrative lettings if allowed to develop the site for ordinary commercial purposes, should be required not merely to accept a much reduced income from their property by letting it as a theatre, but also to incur heavy and recurring financial losses so that the theatre may be able to continue as a centre of culture and entertainment for the theatre-going public of the metropolis.
It is a relief to know that the collapse of the proscenium arch which took place some years ago was followed by a careful examination of the structure of the entire building, and that all necessary work of repair and reconstruction which was found necessary was carried out under strict supervision. This should give some guarantee that the burden of the obligation to repair and keep in repair which is now to pass to the lessee should not be at all as onerous in the foreseeable future as it has proved to be in the recent past. Similarly, with regard to the obligation to insure, the new covenant should be drafted in reasonable terms, and can, if necessary, be referred back to the court for further directions when the draft of the new lease is in the course of preparation.
I therefore propose to allow the appeal from the order of the Circuit Court judge in the present case and to vary that order so as to provide that the respondents do grant and the applicants do accept a new lease in the premises situate at 72 Dame Street and 1 to 8 Sycamore Street, Dublin 2, at the rent of £12,000 per annum, with five-yearly rent reviews, and on the basis that the terms of the new lease shall impose on the lessee the full obligation to repair the premises and keep *429 them in as good repair as they now are, and the obligation to insure the premises against fire in the full value thereof from time to time.
The parties to have liberty to apply as they may consider necessary.
Options to Renew
Hughes v. Hughes, Dickson, & Co.
[1923 ]IR 121
ANDREWS L.J. , in delivering the judgment of the Court, referred to the summons, the leases of 23rd September, 1904, and 7th September, 1905, and the order of Wilson J. appealed from, and continued:
Mr. Brown contends on behalf of the plaintiffs that the covenants in question are not options for renewal, but only agreements to negotiate for new leases, and that as these agreements do not contain any terms for the new leases other than that of their duration, it is impossible to give any legal effect to them, and they must be held to be void. He suggests, alternatively, that the parties never intended that the new leases should be at the same rents as were reserved by the original leases; but that it was to be left to the parties to negotiate the new terms, and that at most the lessees had a first option for new leases. We do not accept either contention. These leases were business documents, made between business people. It is quite clear to our minds what the parties were aiming at. The business of the defendants was apparently a new one, and they were anxious that if it proved a success they should have a right to continue to carry it on after the tentative period of twenty-five years named in the leases for a further term, with all the goodwill and other advantages incidental to a continuance of the business in these premises.
We are of opinion that the meaning of the clauses in question is clear, namely, that the new leases should be made on the old terms save as regards their duration, and save also in so far as any of such old terms might possibly be inconsistent with the estate in fee-farm which the landlords possessed, and which they were bound by the covenants to grant to the lessees. There is no ambiguity. If the agreements were contained in documents other than and quite independent of the leases, there can be no doubt that Mr. Brown’s argument would be unanswerable, as it would be quite impossible to imply or read into the agreements all the essential terms to enable the Court to decree specific performance. But we consider that where the agreements, as in the present case, are contained in the leases of the premises, the necessary terms as regards subject-matter, rent, etc., can be read into the agreements from the other portions of the leases. They are, in effect, merely covenants for renewal for a different term.
If Mr. Brown be correct in saying that the parties were only agreeing to negotiate for new leases, it is obvious that the lessors could entirely defeat the lessees’ rights, and render the covenants nugatory by demanding and insisting upon unreasonable rents. This is a construction which the Court would only give to the agreements if absolutely coerced to do so. Thus in Austin v.Newham (1) Lawrence J. says: “It may be that what the parties contemplated was that during the twelve months they would come to an agreement as to the period for which the lease was to be granted. But whether that is so or not, I think it is an unreasonable construction of the agreement to suppose that the tenant meant to leave it in the power of his lessor to turn him out on the last day of the twelve months.”
We therefore approve of the answers given by Wilson J. to the several questions contained in the summons. As the defendants will, however, become entitled to an estate in fee-farm in each of the demised premises, we will add a declaration to our order to the effect that in case of difference between the parties as to what covenants, reservations, and other provisions of the leases to be executed in pursuance of the said order are not repugnant in law to the estate thereby granted, the drafts thereof be settled by the Chief Clerk at chambers
Jameson v. Squire.
[1948] IR 157
MAGUIRE C.J. :
4 March 1948
This is an appeal from a judgment in favour of the defendants, pronounced by the President of the High Court on the trial of the action.
The action was brought for a declaration that an option contained in an agreement, dated the 15th of October, 1941, was a valid and subsisting option, and for an order that, on payment of the sum of £1,720 by the plaintiff to the defendants, the defendants do execute to the plaintiff a proper sub-lease of the premises the subject of the option. There was also a claim for damages, but this part of the claim is not persisted in.
[He referred to the terms of the agreement and continued:]
After the expiration of the term of three years the plaintiff remained on in possession as a tenant, and on payment of rent, which was accepted by the defendants, he became a yearly tenant. On the 28th November, 1945, he gave notice to the defendants that he intended to exercise the option contained in the agreement. The defendants, through their solicitor, replied that the option was “not exercisable in the events which have happened.” Thereupon the plaintiff commenced these proceedings.
The President of the High Court held that, on the fair reading of the agreement, the option was a right given to the tenant conditionally on its exercise within the term of three years created by the agreement. Holding that the tenant’s attempt to exercise the option came too late, he dismissed the action.
I find myself unable to agree with the learned President in his interpretation of the agreement. The provision that the option might be exercised “at any time” after the expiration of two years, and the omission of words limiting the period during which it might be exercised, make it plain to my mind that the option was to continue as long as the relationship of landlord and tenant under the agreement lasted. Consequently I hold that, being a term of the original agreement which was not inconsistent with the yearly tenancy which arose after the expiration of the original lease it was carried into the yearly tenancy.
It is contended however that the option is rendered invalid by the rule against perpetuities. If the agreement is to be read as giving only an option to the plaintiff personally, or to his assignee, and is exercisable only during the life of the plaintiff, no question would arise as to the rule against perpetuities. This Court has not been asked to read the agreement in that way. The case has been argued on the basis that, provided it be held that the option to purchase is incorporated in the yearly tenancy, it is capable of being exercised beyond the period permitted by the rule. The appellant contends that, although the option is styled an option to purchase, the rule against perpetuities does not apply because the agreement is to grant a new lease on payment of a premium or fine. If the option was to purchase the fee, it is clear that it would be void for remoteness. Whether the exception of covenants to renew a lease from the rule against perpetuities can be justified on principle, (Romer J. in Woodall v. Clifton (1) expressed the view that it cannot) it is settled by a long series of decisions that they are outside the rule.
Can the option given here be regarded as a covenant for renewal of a lease? The lease to be granted is a new lease on completely different terms to the original lease. It is to commence at a date which overlaps the original lease. It is to be a sub-lease at a rent which appears to be but a portion of the head-rent reserved by the lease under which the defendants hold the premises. A very substantial purchase money is to be paid. The covenants which it is to contain are such covenants in the superior lease as are applicable to the premises. McGowan v. Harrison (1) was relied on by the respondents as showing that the transaction to be carried through on the exercise of the option is a sale and not a lease. It was argued that if it is to be regarded as an option to purchase the land it is against the rule against perpetuities. Rider v. Ford (2) was cited by counsel for the appellant. The facts there were that an agreement for a lease provided that a prospective tenant should “take the house for three, five, or seven years, and have the option of purchasing either the freehold . . . or a lease of ninety-seven years.” Russell J. held that the option to purchase the freehold was inoperative and invalid because of the rule against perpetuities. At p. 546 he says:”As to the right to call for a lease of the premises the position is different; it is not disputed that under the authorities a covenant for what is called a renewal of the lease is outside the rule against perpetuities. It was argued that this was not a covenant for the renewal of a lease because the agreement in terms describes it as a right to purchase. That is merely a question of language, and it is quite inaccurate to describe as a right to purchase a lease that which is really a right to call for a lease. It was further argued that although a right to renew a lease was outside the rule this was not such a right because it was a right to call for a lease on different terms from the original. But the right to renew is a right to call for a fresh lease. The new lease is the result of a fresh demise. Even if all the provisions in the fresh lease were the same as in the old lease it would none the less be a fresh demise, and a fresh term with fresh covenants. I am unable to see any reason why the position as regards the rule against perpetuities should be any different in the case of a right to call for a lease, even though the terms may not be in all respects the same as the terms of the original lease, and in the case of a right to call for a lease in which every provision may be word for word the same as in the old lease. In my opinion the right to call for the lease of ninety-seven years, to run from the expiration of the existing tenancy, is not invalidated by the rule against perpetuities and may be exercised by the defendant.”
It is said, however, that this decision, which is not binding on this Court, is in conflict with the decision of this Court in McGowan v. Harrison (1). I do not consider that there is a conflict. In McGowan v. Harrison (1) the ratio decidendiwas that the fact that a sale of a house was carried out by means of an under-lease did not suffice to establish that the purchaser was a tenant, holding under “a contract for letting for habitation of a dwelling-house,” within the meaning of s. 31, sub-s. 1, of the Housing (Miscellaneous Provisions) Act, 1931. The case is, in my view, clearly distinguishable from Rider v. Ford (2).
The important point is that although the option given here may be described as a sale by means of sub-lease, the question as to whether it is outside the rule against perpetuities depends upon the nature of the interest in the land which is to be granted, not on whether it is described as a sale. The new lease will, in its terms, differ greatly from those in the original lease. I accept the reasoning of Russell J. in Rider v. Ford (2) as sound. Applying it to this case I am of opinion that the plaintiff is entitled to the declaration which he seeks.
Since the case was argued my attention has been drawn by Mr. Justice Murnaghan to the case of the South Eastern Railway v. Associated Portland Cement Manufacturers (1900)Ltd (3), where it was held by the Court of Appeal, consisting of Cozens-Hardy M.R., Fletcher Moulton L.J. and Farwell L.J., affirming Swinfen Eady J., that as against the original covenantors the provision in an agreement was a personal contract and was not obnoxious to the rule against perpetuities. Swinfen Eady J. (at p. 25) says:”In the present case the plaintiffs themselves entered into the contract to grant and granted the easement of tunnelling and they are the very parties who now wish to restrain the defendants from exercising that easement. There is no question here as to the validity of the grant of an easement in futuro . . . Again I wholly fail to appreciate why the plaintiffs are not bound by their own personal contract, which has nothing whatever to do with the rule against perpetuities.” Cozens-Hardy M.R. (at p. 28) said:”I have listened with some amazement to the contention that the rule of perpetuities applies where the action is brought, not against an assign of the covenantor, but against the covenantor himself, . . .”Fletcher Moulton L.J. agreed with this view stating (at p. 32) that personal covenants do not fall within any rule against perpetuities. Farwell L.J. (at p. 33) took it to be “settled beyond argument that an agreement merely personal not creating any interest in land is not within the rule against perpetuities.”
If this is good law, as I am inclined to think it is, it rules the present case. The case was not cited in argument and accordingly I am content to rest my opinion on the grounds already stated in this judgment.
I have had an opportunity of reading the judgment of Mr. Justice Murnaghan. I have not considered the grounds upon which he rests his judgment. If he is right in his view as to the effect of Deasy’s Act upon the relationship of landlord and tenant, the reasoning upon which he bases his conclusion in this case seems unassailable. As, again, this line of reasoning was not developed so as to become the subject of critical discussion in argument, I prefer not to express an opinion upon it.
Accordingly, in my opinion, this appeal should be allowed. The plaintiff should have a declaration that the option contained in the agreement of the 15th October, 1941, is a valid and subsisting option and an order that, on payment of the sum of £1,720, the defendant do execute a sub-lease of the premises in accordance with the terms of clause IV of the agreement.
MURNAGHAN J. : [After referring to the facts as set out ante].
It appears to be common ground that on the 15th October, 1943, and until the 14th October, 1944, the tenant could have exercised the option. If he did so exercise it on the 15th October, 1943, it seems to me that the residue of the three years’ term would have ceased by merger in the sub-lease which he would acquire under the option.
At the end of the three years’ term Thomas H. Jameson remained on in possession and he subsequently paid rent which was accepted by the landlord. A tenancy from year to year arose by implication of law. On the 28th November, 1945, the tenant purported to exercise his option. The learned President of the High Court has ruled that he is not entitled to do so. He said: “I have reached the conclusion that on the fair reading of the tenancy agreement the option was a right given to the tenant conditionally upon its exercise within the third year of the term of three years created by the agreement, provided the tenancy still subsisted when the option was exercised. In my opinion, the tenant’s attempt to exercise the option came too late and this action fails.”
The argument for the appellant was mainly, if not altogether, based on the view that the option clause contained in the written agreement was a separate and distinct agreement and was not merely part of the terms of the three year tenancy. If this can be established, it seems to me impossible to limit the words “at any time after the expiration of two years of the term hereby granted and provided that the tenancy shall not have been determined in pursuance of the provisions of paragraph 3 hereof” to the period of the third year of the term. Clauses of this kind have been considered by Courts in England: see Moss v.Barton (1) and Buckland v. Papillon (2). In the latter case, where a term of three years had come to an end and a tenancy from year to year had been raised by implication of law, Lord Chelmsford held that the option clause was not part of the terms of the yearly tenancy so created, but he seems to have regarded the clause in the original agreement as subsisting as long as the relation of landlord and tenant remained. In England, the relation of landlord and tenant is based upon tenure, and it may be that Lord Chelmsford did not consider an option to purchase as in any way regulating the relation of landlord and tenant, and that it must be an independent agreement. In Lewis v. Stephenson (3)Bruce J. said: “As to the period within which the option is to be exercised when nothing is specified, I think I am doing no violence to the ordinary canon of construction when I say I think that must be taken to mean within a reasonable time before the expiration of the original lease.” This opinion was disapproved of by the Court of Appeal in Ireland in Allen v. Murphy (4), but in the present case the time is specified and it is merely a question of construction as to what this time may be. If the principle stated by Lord Chelmsford applied in Ireland, I should feel it impossible to limit the period of exercise of the option to the third year of the original tenancy.
In Ireland, however, under Deasy’s Act (23 & 24 Vict., c. 154), s. 3, it is expressly enacted that the relation of landlord and tenant shall be deemed to be founded on the express or implied contract of the parties and not upon tenure or service. This distinction is emphasised by FitzGibbon L.J. in his judgment in O’Connor v Foley (1) in the Court of Appeal in Ireland where he says: “Deasy’s Act, section 3, founds the relation of landlord and tenant in Ireland upon the express or implied contract of the parties, and, as at present advised, I think that possession of a tenancy, when acquired under the Statute of Limitations, carries with it terms oftenancyas distinguished from terms of personal contract the same as those on which the barred tenant held, and that, in Ireland, those terms are founded on contract.”
Apart, however, from the particular question dealt with by FitzGibbon L.J., the general principle stated in s. 3 of Deasy’s Act seems to me clearly to involve that the clause in the agreement of the 15th October, 1941, giving the option to purchase, is part of the contract of tenancy, and as much part of that contract as any other term of the agreement. The entire terms of the agreement were to govern the relations of the parties during the term and did not, in my opinion, extend to govern these relations after the end of the term. The plaintiff can, in my opinion, therefore, derive no help from the option contained in the agreement of the 15th October, 1941.
The case does not, however, end here. When the term of three years expired, the parties, by their conduct, created a new tenancya tenancy from year to year. In Meath v.Megan (2) in the Court of Appeal in Ireland, FitzGibbon L.J. says (at p. 479):”Where a tenant holds under a lease or agreement in writing, for a term which comes to an end, and he continues in possession without making any fresh agreement, there is a presumption that all the terms of the old agreement continue to apply, except so far as they are rendered inapplicable by the change in the duration of the tenancy.” In the third year of the old term one of the contractual terms of the tenancy was that the tenant had an option to purchase during the tenancy, and, in my opinion, this contractual term was applied and made applicable as a contractual term of the tenancy from year to year. I see no difficulty in the textual wording of the clause “at any time after the expiration of two years of the term.” In substance and in fact, the tenant had an option in the third year of the term, and this option was, I think, a term of the old agreement which continues to apply and there is nothing in the terms of the tenancy from year to year which renders this option inapplicable.
I am therefore of opinion that subject to the question of application of the rule against perpetuities the plaintiff is entitled, under the terms of his tenancy from year to year, to exercise the option.
It is not denied that the plaintiff, at the date of the notice of his intention to exercise the optionthe 28th November, 1945was in possession and in occupation of the premises as tenant from year to year.
There was considerable discussion whether the rule against perpetuities did or did not apply. This discussion can reasonably arise if the right depends upon a contract contained in the original agreement, but I can see no application for the rule if, as I hold, the option arises upon the terms of the tenancy from year to year. The option in such case lasts for one year only, and is renewed each time the tenancy is continued by the conduct of the parties for a further year. Either party can end the tenancy by giving due notice and thus put an end to the option applicable during the year. Of course the parties may not determine the tenancy from year to year and it may last for many years. But during no year can it be said that the option is entitled to be exercised at a time beyond that allowed by the rule against perpetuities. For this reason, in my opinion, the rule against perpetuities does not apply.
There is another aspect of the case which I think it right to mention, although it was not discussed in argument. In South Eastern Railway v. Associated Portland Cement Manufacturers(1900) Ltd. (1), the Court of Appeal in England emphatically laid down the proposition that no question of perpetuity arises where the original contractor is sued on his personal contract. Cozens-Hardy M.R. referred to London and South Western Railway Co. v. Gomm (2), which affirmed that the rule against perpetuities had the widest scope, but quoted Jessel M.R. in that case as stating that the rule against perpetuities had no application where the original contracting party was sued. Fletcher Moulton L.J. said (at p. 32):”They are bound by that agreement because, as the Master of the Rolls said, personal covenants do not fall within any rule of perpetuities and they are the actual covenantors.” Farwell L.J. stated his opinion that the rule against perpetuities has no application to a personal covenant. The learned authors of Gray on Perpetuities do not approve of the law as stated in South Eastern Railway v. Associated Portland Cement Manufacturers (1900) Ltd. (1) and consider this ruling as a newly created exception. It seems to me, however, that any action against the original contracting partyespecially a living personmust be brought within a life in being. It is interesting to observe that as far back as the year 1852, Romilly M.R. in Stocker v. Dean (1) intimated his opinion that a right of pre-emption “at all times thereafter” could be enforced during the life of the owner.
O’BYRNE J. :
I have read the judgment of Mr. Justice Murnaghan: I agree with it and have nothing to add.
BLACK J. :
Our problem in this case can, I think, be reduced to two net questions: 1, was the plaintiff’s option ever a valid right unaffected by the rule against perpetuities? and 2, if it was, had it ceased to be a live right at the date when the plaintiff sought to exercise it? These questions are capable of raising several points as abstruse as they are important.
The preceding judgments agree that the rule against perpetuties has no application, but differ as regards the reasons for that conclusion. When the judge appealed from, or a member of this Court, makes a certain reason part of his ratio decidendi, it is my principle not to ignore it, but if I cannot presently accept it, to explain why, both in deference to the learned judge and to prevent silence from being deemed to imply consent. I shall, therefore, state my position in regard to certain reasons which have been referred to.
The first is that the tenancy from year to year “lasts for one year only, and is renewed each time the tenancy is continued by the conduct of the parties for a further year.”As I understand this reason, it is that the option, like the tenancy into which it is supposed to be incorporated, ends each year, and therefore can never be exercised at a date later than one year from its creation or re-creation, and thus can never infringe the rule against perpetuities. This conception of a tenancy from year to year seems to be founded on Wright v. Tracy (2), where the Exchequer Chamber, by a bare majority of four to three, held that a tenancy from year to year is not greater in duration than a tenancy for a year certain, within the meaning of s. 69 of the Landlord and Tenant Act, 1870. Since the Exchequer Chamber was constituted by judges of the King’s Bench, Common Pleas, and Exchequer, it was possible for a minority of those judges to override the opinion of a majority of their number, if that minority happened to be sitting for the occasion, and to constitute a majority, in the Exchequer Chamber. That is what happened in Wright v. Tracy (2). Four judges in the Exchequer Chamber overbore the opinion, not only of their three colleagues sitting with them, but also of three judges of the Common Pleas. It was thus really a minority decision, taking the judges of equal status as a whole. It had other enfeebling factors also. First, in Lord Arran v. Wills (1)Lawson J. declared that he was not bound by Wright v.Tracy (2), suggesting that Palles C.B., one of the bare majority in that case, had since changed his view. I do not know whether this was so or not, but if it was, the decision should have been different. Next, another member of the majority, Whiteside C.J., in so far as he expressed any reasons of his own, relied on the decision of the Queen’s Bench in Gandy v.Jubber (3), ignoring, doubtless per incuriam, that the decision he thus relied on had been reversed unanimously by seven judges in the Exchequer Chamber (4).
Nevertheless, I do not say that the foregoing strange factors are reasons for rejecting Wright v. Tracy (2), but I do suggest that they are reasons for confining it to the irreducible minimum of what it actually decided. It was concerned with the nature of a tenancy from year to year within the meaning of s. 69 of the Landlord and Tenant Act, 1870 (33 & 34 Vict. c. 46) which made notice to quit necessary in all tenancies less than from year to year. It was held that “less” meant “less in duration,” and the majority thought that the Legislature meant to include only tenancies of which the duration was necessarily less than the definiteduration of a tenancy from year to year. Thus, Palles C.B. said (at p. 499) that s. 69 “constitutes a tenancy from year to year a standard of duration, . . . and the use of such a tenancy as a standard of time would appear to me, per se,to show that the Legislature regarded its duration as fixed and certain.” He added “We are thus driven to ascertain what is the necessary duration incident to such a tenancy. . . . We find that such duration is a term fixed and certainthe term of one year.” It will be noted that he spoke of such a tenancy’s necessary duration.
Fitzgerald B., another member of the majority, with whom Whiteside C.J. agreed, expressed the same idea. He said (at p. 496) that the words “lesser period” must mean “lesser definite period,” and that he knew of no “definite” period created by a tenancy from year to year greater than one year certain. Assuming the majority was right about the aim of the section; the language, just quoted, means no more than that, for the purposes of the particular section, the intention was to treat a tenancy from year to year as a standard of duration and, therefore, to regard only its definite and necessary duration. It does not seem to follow that, apart from that section and its purposes, a tenancy from year to year should not also, by its very nature, have an unnecessary and indefinite duration. To read the decision as meaning that every tenancy from year to year lasts for one year only, so that where there is neither surrender nor notice to quit, and the tenant remains on and pays rent, there is an implied recommencement or re-letting for another year and so on indeterminately would be to suppose that the majority in Wright v. Tracy (1) intended to reject the unanimous decision of the Exchequer Chamber in Gandy v.Jubber (2) which has been accepted uniformly as settled law for the last eighty years. If the majority intended to do that, I am sure they would have said so; yet although Dowse and Deasy BB. who were in the minority, both quoted and relied on Gandy v. Jubber (2), no member of the majority even mentioned it, except Whiteside C.J., who, as I have said, mistook the overruled decision for the final one. Indeed, this leading decision was anticipated in Ireland in Hayes v. Fitzgibbon (3) by Fitzgerald and Deasy BB., the former being one of the majority in Wright v. Tracy (1), though he also seems to have mistaken the overruled decision for the final one, and he therefore questioned it. Hence he would have approved of the final decision. With Deasy B. he quoted and approved of Mackay v. Mackreth (4) as holding that a tenancy from year to year does not end each year and then get re-created as a new letting, but is a continuing tenancy which leaves the tenant a reversion after a demise by deed for twenty-one years on which an action of covenant could be maintained. Gandy v. Jubber (2) has been quoted and applied to weekly and monthly tenancies in various cases such as Bowen v. Anderson (5), Mellows v. Low (6), Queen’s Club Gardens Estates, Ltd. v. Bignell (7) and Precious v. Reedie (8). In Jones v. Mills (9), Williams J. said (at p. 798): “It cannot be said that there was a new contract each week. . . . If it had been a tenancy from year to year, it would have undoubtedly subsisted until it was terminated by a proper notice.” As Furlong on Landlord and Tenant (2nd ed., vol. 1, at p. 224) expresses it:”a tenancy from year to year is a tenancy for a term; and the holding is considered a lease for so many years as the party shall occupy, unless in the meantime it shall be determined by notice to quit upon one side, or notice of surrender on the other; so that if the lessee occupy for ten years or more, such period by computation from the time past makes a lease for so many years; and either the landlord or the tenant may declare on the demise as having been made for such number of years.”
Nobody will deny that a tenancy from year to year is a continuing tenancy and may continue for many years. If, according to the proposition I am considering, “it lasts for one year only and is renewed each time the tenancy is continued,” it must surely follow that it comes to an end each year and recommences at once for another year. That is precisely what the Exchequer Chamber in Gandy v.Jubber (1) said that it did not do. Here are the relevant words of the judgment (at p. 18 of the report),”There is not in contemplation of law a recommencing or re-letting at the beginning of each year.” I have sought to show that the decision in Wright v. Tracy (2) is consistent with that pronouncement. In my opinion, the theory that the tenancy”lasts for one year only and is renewed each time the tenancy is continued” is not consistent with the said pronouncement. I cannot, therefore, agree that the present plaintiff’s tenancy from year to year, which supervened on the expiration of his three-year term and has lasted since for a number of years as one continuing tenancy, was ever a tenancy lasting for one year only, so as to make the option it is said to have incorporated an option for one year only, and on that account outside the rule against perpetuities.
A second reason for getting rid of the rule against perpetuities has been extracted from the decision of the English Court of Appeal in South Eastern Railway v. Associated Portland Cement Manufacturers (1900) Ltd. (3) to the effect that that rule does not apply where the action is brought against the covenantor himself. I do not think any previous authority was produced really supporting this proposition. It has evoked very outspoken criticism from the most reputed expert writers upon this subject. Thus in Gray on Perpetuities (4th ed., at pp. 366, 367, n) it is suggested that”the learned judges seem to have decided the case quasi in furore.” The learned author points out what he considers a vital oversight in the decision and cites American cases in which the Courts refused to follow it. His view seems to have been fully shared by another outstanding specialist in the law of real property. In an elaborately reasoned article in the Solicitors’ Journal (Vol. 54, pp. 471 and 501), Mr. T. Cyprian Williams subjects this decision to a criticism which appears to me, on the first reading, to be of the most devastating character. An earlier article in 42 Solicitors’ Journal, p. 650, is of equal interest. I shall confine myself to one summarising extract from the second article in 54 Solicitors’ Journal. The learned author writes:
“The Court” (in South Eastern Railway v. Associated Portland Cement Manufacturers (1900) Ltd. (1)) “declared that the rule laid down in London & South Western Railway Co. v. Gomm (2) has no application where the action is brought against the original contractor, but relates solely to actions against the original contractor’s assigns. The reader will remember that in Gomm’s Case (2) the Court of Appeal declined to enforce specifically . . . a contract giving an option to re-purchase a piece of land at any future time on the ground that if such a contract were specifically enforceable, it would in effect create an equitable interest in the land, which might arise at a time remoter than the end of the period allowed by the rule against perpetuities. . . . If the rule in Gomm’s Case (2) should indeed have no application where an action is brought against the original contractor, the result would be that a corporation (which enjoys immortal existence) could make a valid contract specifically enforceable against itself to make some executory limitation of land to take effect at any future time (however remote), notwithstanding that such limitation, if actually attempted to be made by deed at the time of the contract, would at once be void for remoteness. This appears to be an absurd conclusion. And yet (with the greatest respect be it spoken) this was the conclusion at which the Court of Appeal actually arrived in the South Eastern Railway’s Co’s Case (1); for if Lord Justice Farwell’s dictum be correct, an actual grant by that company . . . by deed (without any prior contract) of the right of future entry and future easement in question would have been void. . . . The true doctrine of Gomm’s Case (2) is that a contract to make some executory limitation of land, which may take effect at a future time more remote than the end of the period allowed by the rule against perpetuities, shall not operate to confer an equitable interest in that land,in whosesoever hand it may be.” The italics are in the original article. Mr. Williams respectfully suggests that this doctrine is properly applicable where the land remains in the original contractor’s hands as well as where it has been assigned over.
I do not express any final opinion on this controversy (3).The doctrine in South Eastern Railway v. Associated Portland
Cement Manufacturers (1) may be right. But, I make it a rule never blindly to accept any pronouncement other than that of a Court that binds me, if I happen to know that leading specialists in the branch of law involved have analysed and rejected it, unless I feel able to formulate a satisfactory answer to their criticism and to explain that answer in my judgment. That, I am at present unable to do in relation to the reasoned criticism of Mr. Cyprian Williams in the elaborate articles to which I have referred. If I should ever have to decide the matter ad hoc, I should hope to have the aid of an intensive argument by counsel and more time than I have thought necessary to employ on the present occasion to weigh and re-weigh that argument. Hence, I am not prepared to base any conclusion, in this appeal, on the doctrine enunciated in South Eastern Railway v. Associated Portland Cement Manufacturers (1).
There is, however, another reason quite different from those I have been considering which, in my view, does justify me in holding that the rule against perpetuities does not affect the plaintiff’s option in this case, assuming that that option is otherwise valid. It is a rule so well settled as not to require the citation of the authorities, namely, that the rule against perpetuities has no application to covenants for the renewal of a lease. I need not go into the several suggestions that judges and text writers have made to explain the existence of this somewhat anomalous exception. No lawyer, I think, questions its existence to-day. In my view, the plaintiff’s option here is, in reality and in substance, an option to call for the renewal of his lease. Two objections to this have been suggested: first, that the agreement, in terms, describes the option as an option for purchasing, and secondly, that the lease for which it entitled the appellant to call was a lease quite different, in its terms, from the original lease. However, both these factors were present in Rider v. Ford (2), and they did not prevent Russell J. from holding that the option in that case was for the renewal of a lease and unaffected by the rule against perpetuities. I think the reasons assigned by Russell J. were sound and that Rider v. Ford (2) is a good decision.
Then, a distinction is suggested between that case and the present one, because here the lessor reserved only a nominal reversion. In Rider v. Ford (2) the option was alternative, namely to purchase the fee or for a renewal. It would thus seem that the lessors were owners in fee, and if so, they would have had a valuable reversion after the expiration of the lease for which the lessee had an option to call. The suggestion is that the option in the present case is only colourably an option to call for a lease, and is substantially an option to purchase the fee. McGowan v. Harrison (1) was said to conclude the case on this point. I think it does not. There, as Sullivan C.J. pointed out, the lease was of the lessor’s entire interest. Here there was at least a nominal reversion. But, putting aside that point, McGowan v.Harrison (1) was decided on the presumed intention of the Legislature in the Housing Act, 1931, which, according to Meredith J., was that the relevant section, s. 31, sub-s. 1,”is to be restricted to lettings which are not sales” meaning which are not sales in substance. This Court did not say that a transaction might not be a sale and a lease at one and the same time, and thus in a sense dimorphous. The making of such a lease was held to be a valid exercise of a power of sale in In re Judd and Poland and Skelcher’s Contract (2), being, as was said, “a conveyancer’s expedient”and “a mere piece of machinery for carrying out a sale where the property was held with other property under one lease, the object being to avoid any difficulty about rent apportionment.” Again, in In re Webb, Still v. Webb (3) an under-lease was held a sale for a particular purpose, namely, preventing the solicitor from charging double costs for one and the same transaction. In neither case was it held that the lease was not a lease for any purpose or in any sense, though for a particular purpose it was treated as a sale. In the Housing Act, 1931, which imposed a serious burden on those making lettings, the Legislature may well have intended to confine that new burden to lettings which could not possibly be treated as sales in substance. There is no ground for supposing that the judges who evolved the principle which places renewals of leases outside the rule against perpetuities, had any analogous or other special reason for confining that principle to leases where the lessor retained a substantial reversion.
Having thus got rid of the rule against perpetuities, there remains the question whether the option had not ceased to exist before the appellant sought to exercise it. In the preceding judgments it is agreed that this option passed into the tenancy from year to year which supervened when the appellant continued to occupy and pay rent after his original three-year term expired, and he certainly did so continue up to and after the date on which he sought to exercise his option. I am afraid I am unable to feel so sure about this point. No doubt, both in England and in this country, when a tenancy from year to year supervenes in the way indicated upon the expiration of a lease, all the terms of the lease are carried into the tenancy from year to year so far as they are consistent with the character of such a tenancy. In the present case, after the first two years of his term the appellant had an option to get a new lease for 150 years save one day from the 1st May, 1939. His original three-year term commenced from 15th October, 1941. If, then, he exercised the option and got the promised lease during the currency of any year of the tenancy from year to year, the lessor would, thereupon, he deprived of his right to terminate the tenancy from year to year, at the end of the year in question, by notice to quit. The right to determine a tenancy from year to year by notice to quit is a necessary incident in such a tenancy. So it is expressed in Woodfall’s Landlord and Tenant (1934 ed., p. 429) and I think never disputed. The exercise of the option would thus take away from the tenancy from year to year “a necessary incident.”Would such an option be consistent with the nature of a tenancy from year to year? There are many express decisions which seem to make this, at least, doubtful. In Gray v.Spyer (1) there was an agreement which Younger L.J. held to create a tenancy from year to year. There was a stipulation in this which purported to give the tenant a right to get a perpetual renewal. Younger L.J. held that such a right would be repugnant to a tenancy from year to year; “for,”he said, “it cannot be a characteristic of such a tenancy that one of the parties to it shall have no right to determine it.” His decision that the tenancy in question was from year to year was reversed (2), but it was not doubted by the judges in the Court of Appeal that if the tenancy had been a tenancy from year to year, the stipulation for perpetual renewal would, as Younger L.J. had held, be repugnant to it. Lord Sterndale said (at p. 28):”I agree with the learned judge that the two things are inconsistent, and that there cannot be a tenancy from year to year, qualified by a right to perpetual renewal which deprives the tenancy of a necessary incident, that is to say, the right of the landlord to terminate it by a six months’ notice to quit.” Of course the parties might agree upon a shorter notice. But, then Lord Sterndale’s dictum would only be modified accordingly. An option, the exercise of which during the currency of a tenancy from year to year would deprive the landlord of a necessary incident of such a tenancy, namely his right to terminate it by notice to quit, would seem to be repugnant to that kind of tenancy. The principle asserted in Gray v.Spyer (1) found clear expression in Doe v. Browne (2); Browne v. Warner (3); Wood v. Beard (4); Cheshire Lines v.Lewis (5) and in this country in Holmes v. Day (6); for in this last case, although the Court was equally divided, no member of it disputed that, if the tenancy there was a tenancy from year to year, a clause which would prevent it from being determined by notice to quit would be repugnant to the nature of such a tenancy. If the agreement in the present case gave the tenant an option which might be exercised during the currency of the tenancy from year to year, then, if it was so exercised, the landlord could not determine that tenancy at the end of the current year or the following year by notice to quit.
Of course, if, notwithstanding the foregoing considerations, the appellant’s option was carried into the tenancy from year to year, the rule against perpetuities would not affect it. But, in view of my doubt on that point, I must consider the position on the assumption that the exercise of the option now must depend on the original three-year agreement alone. What then? In England there can, I think, be no doubt that the option would continue exercisable as long as the supervening tenancy from year to year continues. So it was held in Moss v. Barton (7); Buckland v. Papillon (8)and Rider v. Ford (9). The present appellant’s option could not be exercised until the end of the second year of his three-year term, but after that, no time whatever was specified within which it must be exercised. No doubt, in Ireland the relationship of landlord and tenant is based upon contract and not upon tenure, but I do not well see why this should prevent the option in the original agreement from being exercised now, seeing that this agreement provided that, after the first two years, the option should be exercisable”at any time.” The words “at any time” are, I think, plainly incompatible with a specification of a time limit. This view seems to be borne out by the decision of the former Irish Court of Appeal in Allen v. Murphy (10). In that case, a lease, originally for twenty-nine years, contained a covenant for renewal every thirty years during a period of 999 years, no time being fixed within which renewal might be demanded. Several renewals, each for thirty years, had been obtained. The last of these expired in 1904. After that, the then tenant remained on, paying rent to the original lessor’s successor in title, but sought no fresh renewal for a period of nineteen years. The tenant then sought and obtained a renewal for sixty years instead of thirty years. He then sold his interest and the purchaser objected to the title, alleging that the sixty-year renewal was inoperative, because it was granted ninteen years after the term granted by the last previous renewal had expired. The Court of Appeal held that this was not correct and expressly disapproved of the view of Bruce J. in Lewis v. Stephenson (1) that application for renewal must be made before the expiration of the lease. Sir Ignatius O’Brien C. adopted the statement in Fry on Specific Performance (5th ed., p. 541) that “where no time has been originally limited within which a tenant’s option to have a lease must be exercised, and the landlord has never called upon the tenant to declare his option, mere lapse of time will not preclude the tenant or his assign or legal personal representative from exercising it.” The Lord Chancellor said (at p. 488):”The landlord continues to receive the rents. If a renewal is made ten, twenty, thirty or forty years after the expiration of the lease, is it to be presumed that it is not effective?” His answer was in the negative. He also said (at p. 487) in commenting on the case of Lewis v.Stephenson (1):”If the case is an authority for the proposition that where no time is specified, the application for renewal must be made before the expiration of the lease, I dissent from that as a general proposition.”
Now, it seems to me that that proposition from which he dissented is the very proposition put forward in this case in support of the view that, unless the option was carried into the yearly tenancy, it must have been exercised during the term of the three-year lease and could not be exercised afterwards. In this three-year agreement, assuredly, no time was specified, to use the Lord Chancellor’s words. The words used were “at any time after the expiration of two years of the term.” We are asked to say that though “no time is specified within which the option must be exercised” nevertheless it must be exercised “before the expiration of the lease.” I am equally unable to reconcile that contention with the following words of Lora Justice Ronan (at p. 491):
“Where there is the exercise of a power of renewal. . .; where no time is fixed by the lease for applying for the renewal; where no notice has been served by the landlord calling upon the tenant to elect whether he will ask for a renewal or not, and where everything has gone on as if a renewal had been taken out, the reasonable presumption is that the parties had agreed to let the technicality of renewal lie over, and that neither party had any intention of raising any question as to the forfeiture of the tenant’s rights.” All the conditions postulated by Ronan L.J. exist here. There was a lease or letting for three years. It contained an option or right to get a renewal. No time was fixed for applying for the renewal. Everything went on as if a renewal had been taken out, the tenant continuing as tenant. Why then Lord Justice Ronan’s conclusion that the tenant’s right or option still remains does not clearly follow, I am unable to imagine. Moloney L.J. expressed his view to the same effect as the other judges.
The above pronouncements would seem to indicate that just as, on the facts of the present case, the English Courts following the principle of Moss v. Barton (1) and Buckland v.Papillon (2), would hold that the option did not expire with the original term, so our late Court of Appeal would have drawn the same conclusion in this country.
Accordingly, even if my doubts as to the option having been carried into the tenancy from year to year are not unjustified, I am of opinion that the appellant’s option, given him by the original agreement, is still exercisable and that his appeal should be allowed.
Jameson v. Squire.
[1948] IR 157
MAGUIRE C.J. :
4 March 1948
This is an appeal from a judgment in favour of the defendants, pronounced by the President of the High Court on the trial of the action.
The action was brought for a declaration that an option contained in an agreement, dated the 15th of October, 1941, was a valid and subsisting option, and for an order that, on payment of the sum of £1,720 by the plaintiff to the defendants, the defendants do execute to the plaintiff a proper sub-lease of the premises the subject of the option. There was also a claim for damages, but this part of the claim is not persisted in.
[He referred to the terms of the agreement and continued:]
After the expiration of the term of three years the plaintiff remained on in possession as a tenant, and on payment of rent, which was accepted by the defendants, he became a yearly tenant. On the 28th November, 1945, he gave notice to the defendants that he intended to exercise the option contained in the agreement. The defendants, through their solicitor, replied that the option was “not exercisable in the events which have happened.” Thereupon the plaintiff commenced these proceedings.
The President of the High Court held that, on the fair reading of the agreement, the option was a right given to the tenant conditionally on its exercise within the term of three years created by the agreement. Holding that the tenant’s attempt to exercise the option came too late, he dismissed the action.
I find myself unable to agree with the learned President in his interpretation of the agreement. The provision that the option might be exercised “at any time” after the expiration of two years, and the omission of words limiting the period during which it might be exercised, make it plain to my mind that the option was to continue as long as the relationship of landlord and tenant under the agreement lasted. Consequently I hold that, being a term of the original agreement which was not inconsistent with the yearly tenancy which arose after the expiration of the original lease it was carried into the yearly tenancy.
It is contended however that the option is rendered invalid by the rule against perpetuities. If the agreement is to be read as giving only an option to the plaintiff personally, or to his assignee, and is exercisable only during the life of the plaintiff, no question would arise as to the rule against perpetuities. This Court has not been asked to read the agreement in that way. The case has been argued on the basis that, provided it be held that the option to purchase is incorporated in the yearly tenancy, it is capable of being exercised beyond the period permitted by the rule. The appellant contends that, although the option is styled an option to purchase, the rule against perpetuities does not apply because the agreement is to grant a new lease on payment of a premium or fine. If the option was to purchase the fee, it is clear that it would be void for remoteness. Whether the exception of covenants to renew a lease from the rule against perpetuities can be justified on principle, (Romer J. in Woodall v. Clifton (1) expressed the view that it cannot) it is settled by a long series of decisions that they are outside the rule.
Can the option given here be regarded as a covenant for renewal of a lease? The lease to be granted is a new lease on completely different terms to the original lease. It is to commence at a date which overlaps the original lease. It is to be a sub-lease at a rent which appears to be but a portion of the head-rent reserved by the lease under which the defendants hold the premises. A very substantial purchase money is to be paid. The covenants which it is to contain are such covenants in the superior lease as are applicable to the premises. McGowan v. Harrison (1) was relied on by the respondents as showing that the transaction to be carried through on the exercise of the option is a sale and not a lease. It was argued that if it is to be regarded as an option to purchase the land it is against the rule against perpetuities. Rider v. Ford (2) was cited by counsel for the appellant. The facts there were that an agreement for a lease provided that a prospective tenant should “take the house for three, five, or seven years, and have the option of purchasing either the freehold . . . or a lease of ninety-seven years.” Russell J. held that the option to purchase the freehold was inoperative and invalid because of the rule against perpetuities. At p. 546 he says:”As to the right to call for a lease of the premises the position is different; it is not disputed that under the authorities a covenant for what is called a renewal of the lease is outside the rule against perpetuities. It was argued that this was not a covenant for the renewal of a lease because the agreement in terms describes it as a right to purchase. That is merely a question of language, and it is quite inaccurate to describe as a right to purchase a lease that which is really a right to call for a lease. It was further argued that although a right to renew a lease was outside the rule this was not such a right because it was a right to call for a lease on different terms from the original. But the right to renew is a right to call for a fresh lease. The new lease is the result of a fresh demise. Even if all the provisions in the fresh lease were the same as in the old lease it would none the less be a fresh demise, and a fresh term with fresh covenants. I am unable to see any reason why the position as regards the rule against perpetuities should be any different in the case of a right to call for a lease, even though the terms may not be in all respects the same as the terms of the original lease, and in the case of a right to call for a lease in which every provision may be word for word the same as in the old lease. In my opinion the right to call for the lease of ninety-seven years, to run from the expiration of the existing tenancy, is not invalidated by the rule against perpetuities and may be exercised by the defendant.”
It is said, however, that this decision, which is not binding on this Court, is in conflict with the decision of this Court in McGowan v. Harrison (1). I do not consider that there is a conflict. In McGowan v. Harrison (1) the ratio decidendiwas that the fact that a sale of a house was carried out by means of an under-lease did not suffice to establish that the purchaser was a tenant, holding under “a contract for letting for habitation of a dwelling-house,” within the meaning of s. 31, sub-s. 1, of the Housing (Miscellaneous Provisions) Act, 1931. The case is, in my view, clearly distinguishable from Rider v. Ford (2).
The important point is that although the option given here may be described as a sale by means of sub-lease, the question as to whether it is outside the rule against perpetuities depends upon the nature of the interest in the land which is to be granted, not on whether it is described as a sale. The new lease will, in its terms, differ greatly from those in the original lease. I accept the reasoning of Russell J. in Rider v. Ford (2) as sound. Applying it to this case I am of opinion that the plaintiff is entitled to the declaration which he seeks.
Since the case was argued my attention has been drawn by Mr. Justice Murnaghan to the case of the South Eastern Railway v. Associated Portland Cement Manufacturers (1900)Ltd (3), where it was held by the Court of Appeal, consisting of Cozens-Hardy M.R., Fletcher Moulton L.J. and Farwell L.J., affirming Swinfen Eady J., that as against the original covenantors the provision in an agreement was a personal contract and was not obnoxious to the rule against perpetuities. Swinfen Eady J. (at p. 25) says:”In the present case the plaintiffs themselves entered into the contract to grant and granted the easement of tunnelling and they are the very parties who now wish to restrain the defendants from exercising that easement. There is no question here as to the validity of the grant of an easement in futuro . . . Again I wholly fail to appreciate why the plaintiffs are not bound by their own personal contract, which has nothing whatever to do with the rule against perpetuities.” Cozens-Hardy M.R. (at p. 28) said:”I have listened with some amazement to the contention that the rule of perpetuities applies where the action is brought, not against an assign of the covenantor, but against the covenantor himself, . . .”Fletcher Moulton L.J. agreed with this view stating (at p. 32) that personal covenants do not fall within any rule against perpetuities. Farwell L.J. (at p. 33) took it to be “settled beyond argument that an agreement merely personal not creating any interest in land is not within the rule against perpetuities.”
If this is good law, as I am inclined to think it is, it rules the present case. The case was not cited in argument and accordingly I am content to rest my opinion on the grounds already stated in this judgment.
I have had an opportunity of reading the judgment of Mr. Justice Murnaghan. I have not considered the grounds upon which he rests his judgment. If he is right in his view as to the effect of Deasy’s Act upon the relationship of landlord and tenant, the reasoning upon which he bases his conclusion in this case seems unassailable. As, again, this line of reasoning was not developed so as to become the subject of critical discussion in argument, I prefer not to express an opinion upon it.
Accordingly, in my opinion, this appeal should be allowed. The plaintiff should have a declaration that the option contained in the agreement of the 15th October, 1941, is a valid and subsisting option and an order that, on payment of the sum of £1,720, the defendant do execute a sub-lease of the premises in accordance with the terms of clause IV of the agreement.
MURNAGHAN J. : [After referring to the facts as set out ante].
It appears to be common ground that on the 15th October, 1943, and until the 14th October, 1944, the tenant could have exercised the option. If he did so exercise it on the 15th October, 1943, it seems to me that the residue of the three years’ term would have ceased by merger in the sub-lease which he would acquire under the option.
At the end of the three years’ term Thomas H. Jameson remained on in possession and he subsequently paid rent which was accepted by the landlord. A tenancy from year to year arose by implication of law. On the 28th November, 1945, the tenant purported to exercise his option. The learned President of the High Court has ruled that he is not entitled to do so. He said: “I have reached the conclusion that on the fair reading of the tenancy agreement the option was a right given to the tenant conditionally upon its exercise within the third year of the term of three years created by the agreement, provided the tenancy still subsisted when the option was exercised. In my opinion, the tenant’s attempt to exercise the option came too late and this action fails.”
The argument for the appellant was mainly, if not altogether, based on the view that the option clause contained in the written agreement was a separate and distinct agreement and was not merely part of the terms of the three year tenancy. If this can be established, it seems to me impossible to limit the words “at any time after the expiration of two years of the term hereby granted and provided that the tenancy shall not have been determined in pursuance of the provisions of paragraph 3 hereof” to the period of the third year of the term. Clauses of this kind have been considered by Courts in England: see Moss v.Barton (1) and Buckland v. Papillon (2). In the latter case, where a term of three years had come to an end and a tenancy from year to year had been raised by implication of law, Lord Chelmsford held that the option clause was not part of the terms of the yearly tenancy so created, but he seems to have regarded the clause in the original agreement as subsisting as long as the relation of landlord and tenant remained. In England, the relation of landlord and tenant is based upon tenure, and it may be that Lord Chelmsford did not consider an option to purchase as in any way regulating the relation of landlord and tenant, and that it must be an independent agreement. In Lewis v. Stephenson (3)Bruce J. said: “As to the period within which the option is to be exercised when nothing is specified, I think I am doing no violence to the ordinary canon of construction when I say I think that must be taken to mean within a reasonable time before the expiration of the original lease.” This opinion was disapproved of by the Court of Appeal in Ireland in Allen v. Murphy (4), but in the present case the time is specified and it is merely a question of construction as to what this time may be. If the principle stated by Lord Chelmsford applied in Ireland, I should feel it impossible to limit the period of exercise of the option to the third year of the original tenancy.
In Ireland, however, under Deasy’s Act (23 & 24 Vict., c. 154), s. 3, it is expressly enacted that the relation of landlord and tenant shall be deemed to be founded on the express or implied contract of the parties and not upon tenure or service. This distinction is emphasised by FitzGibbon L.J. in his judgment in O’Connor v Foley (1) in the Court of Appeal in Ireland where he says: “Deasy’s Act, section 3, founds the relation of landlord and tenant in Ireland upon the express or implied contract of the parties, and, as at present advised, I think that possession of a tenancy, when acquired under the Statute of Limitations, carries with it terms oftenancyas distinguished from terms of personal contract the same as those on which the barred tenant held, and that, in Ireland, those terms are founded on contract.”
Apart, however, from the particular question dealt with by FitzGibbon L.J., the general principle stated in s. 3 of Deasy’s Act seems to me clearly to involve that the clause in the agreement of the 15th October, 1941, giving the option to purchase, is part of the contract of tenancy, and as much part of that contract as any other term of the agreement. The entire terms of the agreement were to govern the relations of the parties during the term and did not, in my opinion, extend to govern these relations after the end of the term. The plaintiff can, in my opinion, therefore, derive no help from the option contained in the agreement of the 15th October, 1941.
The case does not, however, end here. When the term of three years expired, the parties, by their conduct, created a new tenancya tenancy from year to year. In Meath v.Megan (2) in the Court of Appeal in Ireland, FitzGibbon L.J. says (at p. 479):”Where a tenant holds under a lease or agreement in writing, for a term which comes to an end, and he continues in possession without making any fresh agreement, there is a presumption that all the terms of the old agreement continue to apply, except so far as they are rendered inapplicable by the change in the duration of the tenancy.” In the third year of the old term one of the contractual terms of the tenancy was that the tenant had an option to purchase during the tenancy, and, in my opinion, this contractual term was applied and made applicable as a contractual term of the tenancy from year to year. I see no difficulty in the textual wording of the clause “at any time after the expiration of two years of the term.” In substance and in fact, the tenant had an option in the third year of the term, and this option was, I think, a term of the old agreement which continues to apply and there is nothing in the terms of the tenancy from year to year which renders this option inapplicable.
I am therefore of opinion that subject to the question of application of the rule against perpetuities the plaintiff is entitled, under the terms of his tenancy from year to year, to exercise the option.
It is not denied that the plaintiff, at the date of the notice of his intention to exercise the optionthe 28th November, 1945was in possession and in occupation of the premises as tenant from year to year.
There was considerable discussion whether the rule against perpetuities did or did not apply. This discussion can reasonably arise if the right depends upon a contract contained in the original agreement, but I can see no application for the rule if, as I hold, the option arises upon the terms of the tenancy from year to year. The option in such case lasts for one year only, and is renewed each time the tenancy is continued by the conduct of the parties for a further year. Either party can end the tenancy by giving due notice and thus put an end to the option applicable during the year. Of course the parties may not determine the tenancy from year to year and it may last for many years. But during no year can it be said that the option is entitled to be exercised at a time beyond that allowed by the rule against perpetuities. For this reason, in my opinion, the rule against perpetuities does not apply.
There is another aspect of the case which I think it right to mention, although it was not discussed in argument. In South Eastern Railway v. Associated Portland Cement Manufacturers(1900) Ltd. (1), the Court of Appeal in England emphatically laid down the proposition that no question of perpetuity arises where the original contractor is sued on his personal contract. Cozens-Hardy M.R. referred to London and South Western Railway Co. v. Gomm (2), which affirmed that the rule against perpetuities had the widest scope, but quoted Jessel M.R. in that case as stating that the rule against perpetuities had no application where the original contracting party was sued. Fletcher Moulton L.J. said (at p. 32):”They are bound by that agreement because, as the Master of the Rolls said, personal covenants do not fall within any rule of perpetuities and they are the actual covenantors.” Farwell L.J. stated his opinion that the rule against perpetuities has no application to a personal covenant. The learned authors of Gray on Perpetuities do not approve of the law as stated in South Eastern Railway v. Associated Portland Cement Manufacturers (1900) Ltd. (1) and consider this ruling as a newly created exception. It seems to me, however, that any action against the original contracting partyespecially a living personmust be brought within a life in being. It is interesting to observe that as far back as the year 1852, Romilly M.R. in Stocker v. Dean (1) intimated his opinion that a right of pre-emption “at all times thereafter” could be enforced during the life of the owner.
O’BYRNE J. :
I have read the judgment of Mr. Justice Murnaghan: I agree with it and have nothing to add.
BLACK J. :
Our problem in this case can, I think, be reduced to two net questions: 1, was the plaintiff’s option ever a valid right unaffected by the rule against perpetuities? and 2, if it was, had it ceased to be a live right at the date when the plaintiff sought to exercise it? These questions are capable of raising several points as abstruse as they are important.
The preceding judgments agree that the rule against perpetuties has no application, but differ as regards the reasons for that conclusion. When the judge appealed from, or a member of this Court, makes a certain reason part of his ratio decidendi, it is my principle not to ignore it, but if I cannot presently accept it, to explain why, both in deference to the learned judge and to prevent silence from being deemed to imply consent. I shall, therefore, state my position in regard to certain reasons which have been referred to.
The first is that the tenancy from year to year “lasts for one year only, and is renewed each time the tenancy is continued by the conduct of the parties for a further year.”As I understand this reason, it is that the option, like the tenancy into which it is supposed to be incorporated, ends each year, and therefore can never be exercised at a date later than one year from its creation or re-creation, and thus can never infringe the rule against perpetuities. This conception of a tenancy from year to year seems to be founded on Wright v. Tracy (2), where the Exchequer Chamber, by a bare majority of four to three, held that a tenancy from year to year is not greater in duration than a tenancy for a year certain, within the meaning of s. 69 of the Landlord and Tenant Act, 1870. Since the Exchequer Chamber was constituted by judges of the King’s Bench, Common Pleas, and Exchequer, it was possible for a minority of those judges to override the opinion of a majority of their number, if that minority happened to be sitting for the occasion, and to constitute a majority, in the Exchequer Chamber. That is what happened in Wright v. Tracy (2). Four judges in the Exchequer Chamber overbore the opinion, not only of their three colleagues sitting with them, but also of three judges of the Common Pleas. It was thus really a minority decision, taking the judges of equal status as a whole. It had other enfeebling factors also. First, in Lord Arran v. Wills (1)Lawson J. declared that he was not bound by Wright v.Tracy (2), suggesting that Palles C.B., one of the bare majority in that case, had since changed his view. I do not know whether this was so or not, but if it was, the decision should have been different. Next, another member of the majority, Whiteside C.J., in so far as he expressed any reasons of his own, relied on the decision of the Queen’s Bench in Gandy v.Jubber (3), ignoring, doubtless per incuriam, that the decision he thus relied on had been reversed unanimously by seven judges in the Exchequer Chamber (4).
Nevertheless, I do not say that the foregoing strange factors are reasons for rejecting Wright v. Tracy (2), but I do suggest that they are reasons for confining it to the irreducible minimum of what it actually decided. It was concerned with the nature of a tenancy from year to year within the meaning of s. 69 of the Landlord and Tenant Act, 1870 (33 & 34 Vict. c. 46) which made notice to quit necessary in all tenancies less than from year to year. It was held that “less” meant “less in duration,” and the majority thought that the Legislature meant to include only tenancies of which the duration was necessarily less than the definiteduration of a tenancy from year to year. Thus, Palles C.B. said (at p. 499) that s. 69 “constitutes a tenancy from year to year a standard of duration, . . . and the use of such a tenancy as a standard of time would appear to me, per se,to show that the Legislature regarded its duration as fixed and certain.” He added “We are thus driven to ascertain what is the necessary duration incident to such a tenancy. . . . We find that such duration is a term fixed and certainthe term of one year.” It will be noted that he spoke of such a tenancy’s necessary duration.
Fitzgerald B., another member of the majority, with whom Whiteside C.J. agreed, expressed the same idea. He said (at p. 496) that the words “lesser period” must mean “lesser definite period,” and that he knew of no “definite” period created by a tenancy from year to year greater than one year certain. Assuming the majority was right about the aim of the section; the language, just quoted, means no more than that, for the purposes of the particular section, the intention was to treat a tenancy from year to year as a standard of duration and, therefore, to regard only its definite and necessary duration. It does not seem to follow that, apart from that section and its purposes, a tenancy from year to year should not also, by its very nature, have an unnecessary and indefinite duration. To read the decision as meaning that every tenancy from year to year lasts for one year only, so that where there is neither surrender nor notice to quit, and the tenant remains on and pays rent, there is an implied recommencement or re-letting for another year and so on indeterminately would be to suppose that the majority in Wright v. Tracy (1) intended to reject the unanimous decision of the Exchequer Chamber in Gandy v.Jubber (2) which has been accepted uniformly as settled law for the last eighty years. If the majority intended to do that, I am sure they would have said so; yet although Dowse and Deasy BB. who were in the minority, both quoted and relied on Gandy v. Jubber (2), no member of the majority even mentioned it, except Whiteside C.J., who, as I have said, mistook the overruled decision for the final one. Indeed, this leading decision was anticipated in Ireland in Hayes v. Fitzgibbon (3) by Fitzgerald and Deasy BB., the former being one of the majority in Wright v. Tracy (1), though he also seems to have mistaken the overruled decision for the final one, and he therefore questioned it. Hence he would have approved of the final decision. With Deasy B. he quoted and approved of Mackay v. Mackreth (4) as holding that a tenancy from year to year does not end each year and then get re-created as a new letting, but is a continuing tenancy which leaves the tenant a reversion after a demise by deed for twenty-one years on which an action of covenant could be maintained. Gandy v. Jubber (2) has been quoted and applied to weekly and monthly tenancies in various cases such as Bowen v. Anderson (5), Mellows v. Low (6), Queen’s Club Gardens Estates, Ltd. v. Bignell (7) and Precious v. Reedie (8). In Jones v. Mills (9), Williams J. said (at p. 798): “It cannot be said that there was a new contract each week. . . . If it had been a tenancy from year to year, it would have undoubtedly subsisted until it was terminated by a proper notice.” As Furlong on Landlord and Tenant (2nd ed., vol. 1, at p. 224) expresses it:”a tenancy from year to year is a tenancy for a term; and the holding is considered a lease for so many years as the party shall occupy, unless in the meantime it shall be determined by notice to quit upon one side, or notice of surrender on the other; so that if the lessee occupy for ten years or more, such period by computation from the time past makes a lease for so many years; and either the landlord or the tenant may declare on the demise as having been made for such number of years.”
Nobody will deny that a tenancy from year to year is a continuing tenancy and may continue for many years. If, according to the proposition I am considering, “it lasts for one year only and is renewed each time the tenancy is continued,” it must surely follow that it comes to an end each year and recommences at once for another year. That is precisely what the Exchequer Chamber in Gandy v.Jubber (1) said that it did not do. Here are the relevant words of the judgment (at p. 18 of the report),”There is not in contemplation of law a recommencing or re-letting at the beginning of each year.” I have sought to show that the decision in Wright v. Tracy (2) is consistent with that pronouncement. In my opinion, the theory that the tenancy”lasts for one year only and is renewed each time the tenancy is continued” is not consistent with the said pronouncement. I cannot, therefore, agree that the present plaintiff’s tenancy from year to year, which supervened on the expiration of his three-year term and has lasted since for a number of years as one continuing tenancy, was ever a tenancy lasting for one year only, so as to make the option it is said to have incorporated an option for one year only, and on that account outside the rule against perpetuities.
A second reason for getting rid of the rule against perpetuities has been extracted from the decision of the English Court of Appeal in South Eastern Railway v. Associated Portland Cement Manufacturers (1900) Ltd. (3) to the effect that that rule does not apply where the action is brought against the covenantor himself. I do not think any previous authority was produced really supporting this proposition. It has evoked very outspoken criticism from the most reputed expert writers upon this subject. Thus in Gray on Perpetuities (4th ed., at pp. 366, 367, n) it is suggested that”the learned judges seem to have decided the case quasi in furore.” The learned author points out what he considers a vital oversight in the decision and cites American cases in which the Courts refused to follow it. His view seems to have been fully shared by another outstanding specialist in the law of real property. In an elaborately reasoned article in the Solicitors’ Journal (Vol. 54, pp. 471 and 501), Mr. T. Cyprian Williams subjects this decision to a criticism which appears to me, on the first reading, to be of the most devastating character. An earlier article in 42 Solicitors’ Journal, p. 650, is of equal interest. I shall confine myself to one summarising extract from the second article in 54 Solicitors’ Journal. The learned author writes:
“The Court” (in South Eastern Railway v. Associated Portland Cement Manufacturers (1900) Ltd. (1)) “declared that the rule laid down in London & South Western Railway Co. v. Gomm (2) has no application where the action is brought against the original contractor, but relates solely to actions against the original contractor’s assigns. The reader will remember that in Gomm’s Case (2) the Court of Appeal declined to enforce specifically . . . a contract giving an option to re-purchase a piece of land at any future time on the ground that if such a contract were specifically enforceable, it would in effect create an equitable interest in the land, which might arise at a time remoter than the end of the period allowed by the rule against perpetuities. . . . If the rule in Gomm’s Case (2) should indeed have no application where an action is brought against the original contractor, the result would be that a corporation (which enjoys immortal existence) could make a valid contract specifically enforceable against itself to make some executory limitation of land to take effect at any future time (however remote), notwithstanding that such limitation, if actually attempted to be made by deed at the time of the contract, would at once be void for remoteness. This appears to be an absurd conclusion. And yet (with the greatest respect be it spoken) this was the conclusion at which the Court of Appeal actually arrived in the South Eastern Railway’s Co’s Case (1); for if Lord Justice Farwell’s dictum be correct, an actual grant by that company . . . by deed (without any prior contract) of the right of future entry and future easement in question would have been void. . . . The true doctrine of Gomm’s Case (2) is that a contract to make some executory limitation of land, which may take effect at a future time more remote than the end of the period allowed by the rule against perpetuities, shall not operate to confer an equitable interest in that land,in whosesoever hand it may be.” The italics are in the original article. Mr. Williams respectfully suggests that this doctrine is properly applicable where the land remains in the original contractor’s hands as well as where it has been assigned over.
I do not express any final opinion on this controversy (3).The doctrine in South Eastern Railway v. Associated Portland
Cement Manufacturers (1) may be right. But, I make it a rule never blindly to accept any pronouncement other than that of a Court that binds me, if I happen to know that leading specialists in the branch of law involved have analysed and rejected it, unless I feel able to formulate a satisfactory answer to their criticism and to explain that answer in my judgment. That, I am at present unable to do in relation to the reasoned criticism of Mr. Cyprian Williams in the elaborate articles to which I have referred. If I should ever have to decide the matter ad hoc, I should hope to have the aid of an intensive argument by counsel and more time than I have thought necessary to employ on the present occasion to weigh and re-weigh that argument. Hence, I am not prepared to base any conclusion, in this appeal, on the doctrine enunciated in South Eastern Railway v. Associated Portland Cement Manufacturers (1).
There is, however, another reason quite different from those I have been considering which, in my view, does justify me in holding that the rule against perpetuities does not affect the plaintiff’s option in this case, assuming that that option is otherwise valid. It is a rule so well settled as not to require the citation of the authorities, namely, that the rule against perpetuities has no application to covenants for the renewal of a lease. I need not go into the several suggestions that judges and text writers have made to explain the existence of this somewhat anomalous exception. No lawyer, I think, questions its existence to-day. In my view, the plaintiff’s option here is, in reality and in substance, an option to call for the renewal of his lease. Two objections to this have been suggested: first, that the agreement, in terms, describes the option as an option for purchasing, and secondly, that the lease for which it entitled the appellant to call was a lease quite different, in its terms, from the original lease. However, both these factors were present in Rider v. Ford (2), and they did not prevent Russell J. from holding that the option in that case was for the renewal of a lease and unaffected by the rule against perpetuities. I think the reasons assigned by Russell J. were sound and that Rider v. Ford (2) is a good decision.
Then, a distinction is suggested between that case and the present one, because here the lessor reserved only a nominal reversion. In Rider v. Ford (2) the option was alternative, namely to purchase the fee or for a renewal. It would thus seem that the lessors were owners in fee, and if so, they would have had a valuable reversion after the expiration of the lease for which the lessee had an option to call. The suggestion is that the option in the present case is only colourably an option to call for a lease, and is substantially an option to purchase the fee. McGowan v. Harrison (1) was said to conclude the case on this point. I think it does not. There, as Sullivan C.J. pointed out, the lease was of the lessor’s entire interest. Here there was at least a nominal reversion. But, putting aside that point, McGowan v.Harrison (1) was decided on the presumed intention of the Legislature in the Housing Act, 1931, which, according to Meredith J., was that the relevant section, s. 31, sub-s. 1,”is to be restricted to lettings which are not sales” meaning which are not sales in substance. This Court did not say that a transaction might not be a sale and a lease at one and the same time, and thus in a sense dimorphous. The making of such a lease was held to be a valid exercise of a power of sale in In re Judd and Poland and Skelcher’s Contract (2), being, as was said, “a conveyancer’s expedient”and “a mere piece of machinery for carrying out a sale where the property was held with other property under one lease, the object being to avoid any difficulty about rent apportionment.” Again, in In re Webb, Still v. Webb (3) an under-lease was held a sale for a particular purpose, namely, preventing the solicitor from charging double costs for one and the same transaction. In neither case was it held that the lease was not a lease for any purpose or in any sense, though for a particular purpose it was treated as a sale. In the Housing Act, 1931, which imposed a serious burden on those making lettings, the Legislature may well have intended to confine that new burden to lettings which could not possibly be treated as sales in substance. There is no ground for supposing that the judges who evolved the principle which places renewals of leases outside the rule against perpetuities, had any analogous or other special reason for confining that principle to leases where the lessor retained a substantial reversion.
Having thus got rid of the rule against perpetuities, there remains the question whether the option had not ceased to exist before the appellant sought to exercise it. In the preceding judgments it is agreed that this option passed into the tenancy from year to year which supervened when the appellant continued to occupy and pay rent after his original three-year term expired, and he certainly did so continue up to and after the date on which he sought to exercise his option. I am afraid I am unable to feel so sure about this point. No doubt, both in England and in this country, when a tenancy from year to year supervenes in the way indicated upon the expiration of a lease, all the terms of the lease are carried into the tenancy from year to year so far as they are consistent with the character of such a tenancy. In the present case, after the first two years of his term the appellant had an option to get a new lease for 150 years save one day from the 1st May, 1939. His original three-year term commenced from 15th October, 1941. If, then, he exercised the option and got the promised lease during the currency of any year of the tenancy from year to year, the lessor would, thereupon, he deprived of his right to terminate the tenancy from year to year, at the end of the year in question, by notice to quit. The right to determine a tenancy from year to year by notice to quit is a necessary incident in such a tenancy. So it is expressed in Woodfall’s Landlord and Tenant (1934 ed., p. 429) and I think never disputed. The exercise of the option would thus take away from the tenancy from year to year “a necessary incident.”Would such an option be consistent with the nature of a tenancy from year to year? There are many express decisions which seem to make this, at least, doubtful. In Gray v.Spyer (1) there was an agreement which Younger L.J. held to create a tenancy from year to year. There was a stipulation in this which purported to give the tenant a right to get a perpetual renewal. Younger L.J. held that such a right would be repugnant to a tenancy from year to year; “for,”he said, “it cannot be a characteristic of such a tenancy that one of the parties to it shall have no right to determine it.” His decision that the tenancy in question was from year to year was reversed (2), but it was not doubted by the judges in the Court of Appeal that if the tenancy had been a tenancy from year to year, the stipulation for perpetual renewal would, as Younger L.J. had held, be repugnant to it. Lord Sterndale said (at p. 28):”I agree with the learned judge that the two things are inconsistent, and that there cannot be a tenancy from year to year, qualified by a right to perpetual renewal which deprives the tenancy of a necessary incident, that is to say, the right of the landlord to terminate it by a six months’ notice to quit.” Of course the parties might agree upon a shorter notice. But, then Lord Sterndale’s dictum would only be modified accordingly. An option, the exercise of which during the currency of a tenancy from year to year would deprive the landlord of a necessary incident of such a tenancy, namely his right to terminate it by notice to quit, would seem to be repugnant to that kind of tenancy. The principle asserted in Gray v.Spyer (1) found clear expression in Doe v. Browne (2); Browne v. Warner (3); Wood v. Beard (4); Cheshire Lines v.Lewis (5) and in this country in Holmes v. Day (6); for in this last case, although the Court was equally divided, no member of it disputed that, if the tenancy there was a tenancy from year to year, a clause which would prevent it from being determined by notice to quit would be repugnant to the nature of such a tenancy. If the agreement in the present case gave the tenant an option which might be exercised during the currency of the tenancy from year to year, then, if it was so exercised, the landlord could not determine that tenancy at the end of the current year or the following year by notice to quit.
Of course, if, notwithstanding the foregoing considerations, the appellant’s option was carried into the tenancy from year to year, the rule against perpetuities would not affect it. But, in view of my doubt on that point, I must consider the position on the assumption that the exercise of the option now must depend on the original three-year agreement alone. What then? In England there can, I think, be no doubt that the option would continue exercisable as long as the supervening tenancy from year to year continues. So it was held in Moss v. Barton (7); Buckland v. Papillon (8)and Rider v. Ford (9). The present appellant’s option could not be exercised until the end of the second year of his three-year term, but after that, no time whatever was specified within which it must be exercised. No doubt, in Ireland the relationship of landlord and tenant is based upon contract and not upon tenure, but I do not well see why this should prevent the option in the original agreement from being exercised now, seeing that this agreement provided that, after the first two years, the option should be exercisable”at any time.” The words “at any time” are, I think, plainly incompatible with a specification of a time limit. This view seems to be borne out by the decision of the former Irish Court of Appeal in Allen v. Murphy (10). In that case, a lease, originally for twenty-nine years, contained a covenant for renewal every thirty years during a period of 999 years, no time being fixed within which renewal might be demanded. Several renewals, each for thirty years, had been obtained. The last of these expired in 1904. After that, the then tenant remained on, paying rent to the original lessor’s successor in title, but sought no fresh renewal for a period of nineteen years. The tenant then sought and obtained a renewal for sixty years instead of thirty years. He then sold his interest and the purchaser objected to the title, alleging that the sixty-year renewal was inoperative, because it was granted ninteen years after the term granted by the last previous renewal had expired. The Court of Appeal held that this was not correct and expressly disapproved of the view of Bruce J. in Lewis v. Stephenson (1) that application for renewal must be made before the expiration of the lease. Sir Ignatius O’Brien C. adopted the statement in Fry on Specific Performance (5th ed., p. 541) that “where no time has been originally limited within which a tenant’s option to have a lease must be exercised, and the landlord has never called upon the tenant to declare his option, mere lapse of time will not preclude the tenant or his assign or legal personal representative from exercising it.” The Lord Chancellor said (at p. 488):”The landlord continues to receive the rents. If a renewal is made ten, twenty, thirty or forty years after the expiration of the lease, is it to be presumed that it is not effective?” His answer was in the negative. He also said (at p. 487) in commenting on the case of Lewis v.Stephenson (1):”If the case is an authority for the proposition that where no time is specified, the application for renewal must be made before the expiration of the lease, I dissent from that as a general proposition.”
Now, it seems to me that that proposition from which he dissented is the very proposition put forward in this case in support of the view that, unless the option was carried into the yearly tenancy, it must have been exercised during the term of the three-year lease and could not be exercised afterwards. In this three-year agreement, assuredly, no time was specified, to use the Lord Chancellor’s words. The words used were “at any time after the expiration of two years of the term.” We are asked to say that though “no time is specified within which the option must be exercised” nevertheless it must be exercised “before the expiration of the lease.” I am equally unable to reconcile that contention with the following words of Lora Justice Ronan (at p. 491):
“Where there is the exercise of a power of renewal. . .; where no time is fixed by the lease for applying for the renewal; where no notice has been served by the landlord calling upon the tenant to elect whether he will ask for a renewal or not, and where everything has gone on as if a renewal had been taken out, the reasonable presumption is that the parties had agreed to let the technicality of renewal lie over, and that neither party had any intention of raising any question as to the forfeiture of the tenant’s rights.” All the conditions postulated by Ronan L.J. exist here. There was a lease or letting for three years. It contained an option or right to get a renewal. No time was fixed for applying for the renewal. Everything went on as if a renewal had been taken out, the tenant continuing as tenant. Why then Lord Justice Ronan’s conclusion that the tenant’s right or option still remains does not clearly follow, I am unable to imagine. Moloney L.J. expressed his view to the same effect as the other judges.
The above pronouncements would seem to indicate that just as, on the facts of the present case, the English Courts following the principle of Moss v. Barton (1) and Buckland v.Papillon (2), would hold that the option did not expire with the original term, so our late Court of Appeal would have drawn the same conclusion in this country.
Accordingly, even if my doubts as to the option having been carried into the tenancy from year to year are not unjustified, I am of opinion that the appellant’s option, given him by the original agreement, is still exercisable and that his appeal should be allowed.
Jason Investments UnLtd Company v C&S Jewellery Ltd & Ors
[2020] IEHC 230
JUDGMENT of Ms. Justice Reynolds delivered on the 27th day of February 2020
1. The plaintiff is an unlimited company and the owner of a premises known as 7 Castle Market and 43 Drury Street, Dublin 2 (‘the property’). The plaintiff acquired the property on 23 January 2018 subject to a lease in favour of the first named defendant.
2. The first named defendant is in occupation of the property pursuant to a lease granted by the plaintiff’s predecessors in title, the term of which runs from 10 July 2014. The first named defendant runs a jewellery shop from the property.
3. The second and third named defendants are the guarantors under that lease.
4. In the within proceedings, the plaintiff seeks possession of the property on two grounds:
(a) The failure of the first named defendant to pay rent due and owing, and
(b) the plaintiff’s exercise of a break option contained in the lease.
Factual background
5. Pursuant to the terms of the lease granted by the plaintiff’s predecessor in title, rent was fixed at €65,000 per annum payable quarterly in advance.
6. Further, the lease contains a break option entitling the landlord to determine the lease at the end of the fifth year by giving not less than six calendar months’ prior notice thereof.
7. By letter dated 22 November 2018, the plaintiff gave notice of its intention to determine the lease.
8. It is common case that between 16 January 2019 and 7 June 2019, the first named defendant failed to pay any rent to the plaintiff.
9. By letter dated 22 May 2019, the first named defendant served a Notice of Intention to Claim Relief pursuant to s.20 of the Landlord and Tenant (Amendment) Act 1980.
10. Proceedings were commenced by the plaintiff in April 2019 by way of plenary summons seeking, inter alia, a declaration that the plaintiff had by letter dated 22 November 2018 validly exercised the break option contained in Clause 9 of the lease together with an order requiring the first named defendant to deliver up vacant possession of the property to the plaintiff in accordance with the terms of the lease.
11. In June 2019, the plaintiff issued a motion seeking interlocutory injunctive relief.
12. Prior to the hearing of the motion, all rent arrears were discharged. Further, by letter dated 5 July 2019 the first named defendant undertook to discharge the rent payable monthly in advance to the plaintiff and comply with all covenants in the lease pending the determination of the within application.
Failure to pay Rent/Forfeiture
13. Clauses 1 and 3 of the lease fixed the initial rent at €65,000.00 per annum payable quarterly in advance.
14. Clause 6 of the lease further provides as follows:
“FORFEITURE
Without prejudice to any other right, remedy, or power herein contained or otherwise available to the Landlord: –
(a) If the rents or any other sums reserved by this Lease or any part or parts thereof shall be unpaid for twenty-one (21) days after becoming payable (whether formally demanded or not) …
THEN, and in any such case, the Landlord may at any time thereafter re-enter the Premises or any part thereof in the name of the whole and thereupon the Term shall absolutely cease and determine but without prejudice to any rights or remedies which may then have accrued to the Landlord against the Tenant in respect of any antecedent breach of any of the covenants or conditions contained in this Lease”.
15. During the period January 2019 to June 2019, the first named defendant failed to pay any rent to the plaintiff with arrears for that period totalling €19,987.51. At the time the interlocutory application was issued, the balance due and owing in respect of rental arrears was €40,128.85.
16. By letter dated 15 March 2019, the plaintiff’s property manager wrote to the first named defendant advising that rent remained due and owing and further that failure to discharge same within seven days would result in court proceedings.
17. By letter dated 11 April 2019, the plaintiff’s solicitors wrote to the first, second and third named defendants demanding payment of all rent outstanding and enclosing draft proceedings which it advised would issue unless all rent arrears were discharged.
18. By reply dated 12 April 2019, the defendants’ solicitors acknowledged that the rent remained due and owing and advised that it would discharge same.
19. However, it is clear that the arrears of rent were not discharged until 7 June 2019 and the defendants accept the default in that regard.
Break Option
20. Clause 9 of the lease provides as follows:
“LANDLORDS BREAK OPTION
The landlord shall have the right to determine this Lease at the end of the fifth year only of the term (the ‘Break Option’) subject to the following conditions:-
(i) If the Landlord wishes to exercise his Break Option, he shall serve on the Tenant not less than six calendar months prior to the expiry of the fifth year of the Term written notice of the exercise of the Break Option and immediately on the expiration of such notice the said term hereby created shall thereupon cease but without prejudice to the remedies of either party and together in respect of any antecedent claim or breach of covenants.
(ii) The Tenant shall give vacant possession of the entire of the Demised Premises to the Landlord freed and discharged from all encumbrances and all rights of the third parties affecting same”.
21. By letter dated 22 November 2018, the plaintiff wrote to the first named defendant enclosing a notice seeking to exercise its break option under the lease and advised that the lease would “determine on 10 July 2019”.
22. Solicitors for the defendants in their letter dated 12 April 2019 indicated that as their clients had not executed any deed of renunciation in relation to the tenancy, their clients had acquired statutory rights. It was further indicated that they were happy to discharge arrears of rent and further called upon the plaintiff to carry out repairs to the property which had been overdue since September 2018.
23. On 22 May 2019, the first defendant served a Notice of Intention to Claim Relief under the Landlord and Tenant (Amendment) Act 1980 claiming a new tenancy under Part II on determination of the existing lease.
24. In the circumstances, the defendants claim an entitlement to a set-off and/or counterclaim against rent and asserts that the counterclaim/set-off may be relevant in assessing an entitlement to and terms of relief against forfeiture.
25. The plaintiff is eager to take possession of the property to expand its existing business and asserts that it will suffer a substantial loss of earnings if the reliefs sought are denied.
The Law on Forfeiture of Leasehold Interest and Non-Payment of Rent and Relief against Forfeiture
26. I have already referred to Clause 6 of the lease permitting the landlord to re-enter for non-payment of rent.
27. Section 14 of the Conveyancing Act 1881, as amended (‘the Act’) imposes restrictions on and relief against forfeiture of leases. However, s.14(8) exempts from notice any re-entry for non-payment of rent and provides:
“(8) This section shall not affect the law relating to re-entry or forfeiture or relief in case of non-payment of rent.”
28. In the circumstances, the plaintiff claims that the lease is now determined and cites a number of authorities in support of this contention.
29. In Rayan Restaurant Limited v. Keane [2012] IEHC 29 at para. 71-73, the High Court confirmed that the Conveyancing Act 1881 as amended had no application in the case of non-payment of rent but acknowledged that a tenant was entitled to claim equitable relief against forfeiture for non-payment of rent. Further, it was noted that “the normal way of proving a valid forfeiture was by an action for possession.”
30. In submitting that the defendants should not be granted relief against forfeiture, the plaintiff relies on the decision of the Supreme Court in Cue Club Ltd v. Navaro Ltd unreported, 23rd October, 1996. In that case rent arrears of €15,611.00 had accrued and the landlord took possession of the premises. Murphy J. noted as follows:
“The nature of the discretion exercised by the Courts of Equity in granting relief against forfeiture is hardly applicable or applicable to the same extent, at any rate where the Court is dealing with substantial commercial transactions in which the lessor and lessee are on equal terms”.
In considering the facts in that case, the court concluded as follows:
“…no court exercising its equitable jurisdiction would grant relief against forfeiture for non-payment of rent in the circumstances of the present case.”
31. In Campus and Stadium Ireland Development Limited v. Dublin Waterworld Limited [2006] IEHC 200 at 97, Gilligan J. in considering the approach to be adopted by the court stated as follows:
“I take the overall view that in order to exercise my discretion fairly, I must take into account the conduct of the parties, the wilfulness of any breach by the tenant, the general circumstances particular to the issue, the nature of the commercial transaction the subject matter of the lease, whether the essentials of the bargain can be secured, the value of the property, the extent of equality between the parties, the future prospects for their relationship, the fact that even in cases of wilful breaches it is not necessary to find an exceptional case before granting relief against forfeiture and then apply general equitable principles in reaching a conclusion.”
32. In refusing the claim for relief against forfeiture, the court concluded that having regard to the “wilful breaches of covenant” and the general circumstances of the case that it would be inappropriate for the court to grant the relief sought.
33. Counsel for the defendants highlights that the authorities on which the plaintiff seeks to rely in which relief against forfeiture was refused are the very cases that were specifically considered in Foley v. Mangan, High Court August 24 2009 in which relief against forfeiture was granted. Laffoy J. noted as follows:
“The lease at issue in the Cue Club case was a lease of unit in a shopping centre and the “commercial realities” adverted to by Murphy J. by reference to the judgment of Carroll J., were the implications for the commercial viability of a shopping centre of non-payment of rent and service charges by a tenant or tenants. The lease at issue in the Campus and Stadium Ireland case was a lease of a major national sports facility, which had been sponsored by the State.
34. In Foley the property concerned was a farm in North County Dublin. The plaintiffs sought a declaration that the lease between the parties had been terminated by forfeiture and sought an order for possession of the lands demised by the lease, together with arrears of rent and main mesne rates. The court concluded that the motivation of the landlord in seeking to forfeit the lease was for the purpose of denying the tenant rights under an option agreement which would have arisen had the lease continued for its full term. In applying equitable principles, the court granted the defendant relief against forfeiture on terms and conditions to “give redress for his conduct”.
35. In Leopardstown Club Limited v. Templeville Developments [2013] IEHC 529, Charleton J. granted relief against forfeiture to a tenant of substantial commercial premises at Leopardstown Race Course who was in arrears of rent to a very significant degree stating that:
“The general principle of relief against forfeiture is that the court will relieve a tenant from having its leasehold forfeited if, and only if, the tenant remedies the breach of covenant which lead to the forfeiture.”
Section 28 of the Landlord and Tenant (Amendment) Act 1980
36. Section 28 of the said Act provides as follows:
“Where an application is pending under this Part for a new tenancy or to fix the terms of a new tenancy and the pre-existing tenancy was terminated otherwise than by ejectment or surrender the tenant may, if he so desires, continue in occupation of the tenement from the termination of the tenancy until the application is determined by the Court or, in the event of an appeal, by the final appellate court, and the tenant shall while so continuing be subject to the terms (including the payment of rent) of such tenancy, but without prejudice to such recoupments and readjustments as may be necessary in the event of a new tenancy being granted to commence from such termination.”
37. The issue of whether relief against forfeiture should be granted to a tenant who has made a claim of rights under the Landlord and Tenant (Amendment) Act 1980 was considered by Finlay Geoghegan J. in Crofter Properties Limited v. Genport Limited [2007] 2 ILRM 528.
38. In that case, the plaintiff was the owner of a hotel which was occupied by the defendant pursuant to section 28 of the Act of 1980. The defendant held a 21-year lease which expired on July 31, 2001 and on that date served notice of intention to claim relief pursuant to section 20 of the Landlord and Tenant (Amendment) Act 1980. In January 2002 the defendant issued Circuit Court proceedings claiming a new tenancy under section 21of the 1980 Act.
39. In May 2005 the plaintiff issued proceedings in the High Court claiming possession of the premises for non-payment of rent and insurance. The expired lease contained provision for re-entry and forfeiture in the event of a failure to pay rent or breaches of other terms of the lease. At the hearing of the rent and covenant proceedings the plaintiff contended that breach of the terms of the lease automatically brought to an end the defendant’s entitlement to remain in occupation pursuant to section 28 of the 1980 Act.
40. The defendant contended that it had an absolute right pursuant to section 28 to remain in occupation pending the final determination of the application for a new tenancy in the Circuit Court and that the court had no jurisdiction to make any order for possession. In the alternative, each side contended that if the court had discretion to grant an order for possession such discretion should be exercised in its favour. During the hearing of the proceedings, undertakings were offered on behalf of the defendant in relation to the payment of rent, insurance and rates.
41. Finlay Geoghegan J. made an order restraining the defendant from continuing in occupation under section 28 but placed a stay on the order in the event of compliance by the defendant with its obligations in relation to the payment of rent, rates and insurance under the terms of the lease.
42. She held that, although a court retained a discretion to determine whether or not to terminate a right to remain in occupation under section 28, this right should only be terminated in exceptional circumstances where there appeared to be a risk of a serious injustice to the landlord if the tenant was permitted to remain in occupation whilst continuing to act in breach of the terms of the tenancy. If the plaintiff received the full amount outstanding for rent and insurance and continued to be paid rent and insurance, it would not suffer the type of injustice which would warrant bringing to an end the right of the defendant to continue in occupation under section 28 of the Act.
Exercise of break option
43. I have already referred to Clause 9 of the lease which deals with the landlord’s break option. It is clear that the landlord’s right to determine the lease at the end of the fifth year is subject to and “without prejudice to the remedies of either party”.
44. Section 13 of the 1980 Act provides as follows:
“(1) This Part applies to a tenement at any time if –
(a) the tenement was, during the whole of the period of five years ending at that time, continuously in the occupation of the person who was the tenant immediately before that time or of his predecessors in title and bona fide used wholly or partly for the purpose of carrying on a business.”
45. Section 16 of the Act further provides:
“Subject to the provisions of this Act, where this Part applies to a tenement, the tenant shall be entitled to a new tenancy in the tenement beginning on the termination of his previous tenancy, and the new tenancy shall be on such terms as may be agreed upon between the tenant and the person or persons granting or joining in the grant of the new tenancy or, in default of agreement, as shall be fixed by the Court.”
46. It is clear, therefore, that a tenant who is in continuous occupation of a property for a period of five years is entitled to a new tenancy.
47. It is accepted that the property at issue herein is a “tenement” for the purposes of the 1980 Act.
48. There is no dispute but that the Circuit Court has exclusive jurisdiction to hear applications for a new tenancy.
49. The plaintiff contends that the defendants were out of time to claim such relief having regard to the provisions of s.20 of the 1980 Act. Counsel for the defendants argue that s.20 is moreover subject to s.83 of the 1980 Act and that it is at all times open to the Circuit Court (which has exclusive jurisdiction) to grant an extension of time, if necessary.
Analysis
50. Clearly the provisions of the Landlord and Tenant (Amendment) Act 1980 were designed to afford protection to tenants who have built up their business in a certain location and for whom it would be unjust to have to endure forfeiture without recourse to equitable relief.
51. Section 28 gives a tenant an express right to continue in occupation until the application for a new tenancy is determined by the court. It further provides that the tenant whilst remaining in occupation shall be “subject to the terms (including the payment of rent) of such tenancy.”
52. The plaintiff’s claim that the failure of the first named defendant to pay rent due and owing automatically brings to an end its right to continue in occupation has to be viewed in the context of relief available under the 1980 Act.
53. The authorities relied upon by the plaintiff are clearly distinguishable on the facts from what is at issue in the instant case. In the Cue Club and the Campus and Stadium Ireland cases, the court was dealing with major commercial developments whereas the property at issue herein is a small shop unit. In any event, it is clear from the more recent decisions in Foley and Leopardstown Club Limited that the court, in applying equitable principles, will grant relief against forfeiture if the tenant remedies the breach of covenant which led to the forfeiture.
54. Further, it is clear from the principles laid down in Crofter that the right to remain in occupation under s.28 should only be terminated in exceptional circumstances where there appears to be a serious risk of injustice to the landlord if the tenant was permitted to remain in occupation.
Application for injunctive relief
55. In any application for injunctive relief, there is a duty on the parties to make full and frank disclosure to the court and to come before the court with “clean hands”. It is notable that in the within application the plaintiff failed to disclose that it has a subsidiary company which trades as “Weir & Sons” jewellers in the vicinity of the property. Whilst the plaintiff’s grounding affidavit makes reference to a desire on its part to expand its existing business, it did not disclose that it proposes to replace the first named defendant’s jewellery business with its own comparable business.
56. In addition, the plaintiff failed to disclose the ongoing issues in relation to the condition of the property which remain unresolved and in respect of which the first named defendant seeks to claim a set-off and/or counterclaim against rent.
57. Further, I can only conclude from the approach adopted by the plaintiff in its pursuit of interlocutory relief where all arrears of rent have been discharged and undertakings in place in respect of future rent, that its true motivation in seeking possession of the property is with a view to undermining and frustrating the intended application by the first named defendant to seek a new tenancy under the provisions of the 1980 Act.
58. In all the circumstances, I am not satisfied that the plaintiff has made out a prima facie case for possession.
59. Even if the plaintiff had satisfied this threshold, the balance of convenience clearly lies in favour of refusing the relief in circumstances where the arrears of rent have been discharged and undertakings furnished in respect of future rents and where the first named defendant is entitled to pursue its claim for a new tenancy in the Circuit Court.
60. Finally, the plaintiff has failed to establish, as a matter of probability, that damages would not be an adequate remedy.
Conclusion
61. I am satisfied that the status quo should be preserved pending the determination of the first named defendant’s application and will therefore refuse the reliefs sought.
Result: Relief sought refused.
Dolan v. Corn Exchange
[1973] IR 274
FitzGerald J.; Henchy J. 274
Supreme Court
FITZGERALD J. :”
I have read the judgment of Mr. Justice Henchy and I agree with it.
HENCHY J. :”
The applicant would appear to be entitled to a new tenancy unless precluded by s. 22, sub-s. 1 (b), of the Landlord and Tenant Act, 1931. That provision enacts that he shall not be entitled to a new tenancy “where it appears to the Court . . . that such landlord requires vacant possession of such tenement for the purpose of carrying out a scheme of development . . .”
The first question in the Case Stated asks whether that disentitlement must exist at the date of service of the notice of application to the Circuit Court or at the date of the hearing. In my opinion it must be at the date of the hearing. The use of the present tense makes it clear that the tenant is to be ruled out only when the matter is tested in court. If an earlier date was intended the section would have said so. It would have used the past tense and it would have provided for a specific earlier date. The double use of the present tense in “Where it appears to the Court . . . that such landlord requires . . .” plainly shows that the date of the court’s decision is the crucial date.
The second question in the amended Case Stated requires a decision as to whether sub-s. 1 (a) or sub-s. 1 (b) of s. 22 can operate in favour of a landlord who has applied for but has not received the necessary planning permission. The second respondents are the landlords for the purpose of the Act of 1931 and they have applied for the necesary planning permission, but it has been conditionally refused. However, the judge has found that, as a matter of probability, it will be given. In these circumstances can it be said, first as far as sub-s. 1 (b) is concerned, that “such landlord requires vacant possession of such tenement for the purpose of carrying out a scheme of development”?
Consider the implications of holding under paragraph (b)that a landlord requires vacant possession. Unless the tenant has rights under some other Act, he will be irretrievably ousted. The most he can hope for is to get compensation for disturbance if he has been using the premises for business purposes: see sub-s. 3 of section 22. Otherwise, even if it has been the family home for generations, possession must be given up without compensation.
Realising that a landlord might get possession for the purpose of carrying out a scheme of development and never carry it out, the legislature provided in sub-s. 2 of s. 22 that if the landlord does not do so within a reasonable time he shall be guilty of contempt of court and be punished accordingly. That is the only remedy which has been provided for dealing with a failure to carry out the development. But it has no application where the failure to develop is not the landlord’s fault, e.g., when he cannot get the necessary planning permission. In such circumstances he could not normally be held to be in contempt. So the tenant would have been dispossessed for a purpose which could not be lawfully attained, and his personal life or business would have been disrupted unnecessarily and irretrievably. Can the legislature have intended that such a futile and unfair upheaval should be permitted?
In my opinion, the answer must be “No.” Section 20 of the Act of 1931 enacts that, subject to the provisions of the Act, the tenant is to get a new tenancy on the termination of his tenancy. In the present case, he may be deprived of that right only if vacant possession of the tenement is required (i.e., is needed) for the purpose of development. The development involves pulling down the existing buildings and erecting new ones. But the landlord cannot begin that work until he gets planning permission. If and when he gets planning permission, he will then require vacant possession”but not until then. Although the
probability has been held to be otherwise, the planning authority could still refuse permission or grant it subject to unacceptable conditions, or the law could be changed so as to preclude the permission. At best, it can be said that vacant possession will be required sometime in the future for a scheme of development. At worst, vacant possessionmay never be required for that purpose. The test is not whether there will be, as a matter of probability or otherwise, a scheme of development. The only permissible test is whether the landlord, at the time of the court’s decision, requires vacant possession for that purpose. Until planning permission comes to hand, he could not possibly require vacant possession for that purpose. So, until then, the landlord cannot satisfy the court that he requires vacant possession for the specified purpose.
The answers I have given would apply equally if this case falls to be decided under sub-s. 1 (a) of section 22. The test under that provision is whether the landlord bona fide intends or has agreed to pull down and rebuild or reconstruct. The intention or agreement must exist at the time of the court’s decision and must be founded on a valid planning permission where such is a prerequisite to the carrying out of the work, otherwise the agreement would not be fully binding. As Asquith L.J. held in Cunliffe v.Goodman 8, an intention connotes a state of affairs which the person concerned “decides, so far as in him lies, to bring about, and which, in point of possibility, he has a reasonable prospect of being able to bring about, by his own act of volition.” The scheme of the statute, particularly the fact that contempt proceedings are the only remedy given for the landlord’s default, implies that the court should not give a landlord the benefit of sub-s. 1 (a) or sub-s. 1 (b) of s. 22 unless satisfied that nothing but his own exertions stand between him and the carrying out of the projected work within a reasonable time. Since the onus of proof is on the landlord, it is for him to satisfy the court that his agreement or intention is legally realisable, and that cannot be done until planning permission has actually been obtained”the law governing planning and development being what it is.
In cases where the landlord cannot adduce the necessary evidence in time for the hearing (of which the present case may be one), the landlord would be justified in applying for an adjournment because the tenant, being entitled to retain possession pending the decision of the court, would not normally be prejudiced by an adjournment.
I would answer the questions in the Case Stated as follows:”
1. In deciding whether the tenant is disentitled to a new tenancy under s. 22, sub-s. 1, of the Act of 1931, the court should have regard to the circumstances at the time of the hearing rather than at the time of service of the notice of application to the court to determine the tenant’s right to relief.
2. To succeed under sub-s. 1 (a) or (b) of s. 22 of the Act of 1931, the landlord must prove that he has obtained the necessary planning permission.
GRIFFIN J. :”
I agree.
Shanley v OPW
Patrick Shanley Plaintiff v. The Commissioners of Public Works in Ireland and The Attorney General, Defendants
[1990 No. 10012P]
High Court 31st October 1991
Carroll J.
31st October 1991
In this action the plaintiff seeks a declaration that s. 4 of the Landlord and Tenant (Amendment) Act, 1980, as amended by s. 14 of the Landlord and Tenant (Amendment) Act, 1984, is invalid having regard to the previsions of Article 40, s. 3 and Article 43 of the Constitution.
Section 4 of the Act of 1980 provides:
“(1) In this section the relevant date means the date on which a State authority acquires the interest of the lessor or immediate lessor of any premises.
(2) Subject to the following subsections, this Act shall not bind a State authority in its capacity as lessor or immediate lessor of any premises.”
Sub-sections 3 and 4 were deleted by s. 14 of the Landlord and Tenant (Amendment) Act, 1984, and the following subsection substituted:
“(3) Where a State authority acquires the interest of the lessor or immediate lessor of any premises after the commencement of this Act and neither that nor any other State authority had any previous interest in the premises as lessor or immediate lessor, section 13 shall apply as if the expressions “at any time” and”at that time” in subsection (1) thereof were references to the relevant date and Part II shall have effect accordingly, save that a tenant of the State authority whose tenancy of the premises is renewed under that Part as applied by this section shall not be entitled to a further renewal of his tenancy.”
Sub-section 5 provides as follows:
“(5) In a case to which subsection (3) applies, subsection (2) shall not apply so as to disqualify any person for payment of compensation for improvements in respect of such improvements as may have been carried out before the relevant date.”
In this case the plaintiff, a solicitor, became a tenant to the Minister for Finance under an agreement dated the 28th July, 1972, of two rooms on the ground floor of the annex to the Garda station in Westport, Co. Mayo for a term of six months from the 17th July, 1971, and for successive periods of six months, subject to determination as therein-after provided, at the yearly rent of £100 per annum payable on the first day of each six month term, the first half-yearly payment having become due on the 17th July, 1971. Clause 7 provided that the tenancy might be determined on any gale day after the date of the agreement by either party giving three months’ notice in writing. The rent was increased by agreement dated the 27th October, 1978, to £300 per annum as from the 17th January, 1979, and was further increased by agreement dated the 5th September, 1985, to £450 per annum as from the 17th July, 1985. While he moved his main office to another solicitor’s premises in the town without becoming a partner, the plaintiff kept on the rooms at the Garda station which he used for files and for interviewing certain clients. The plaintiff was served with a notice to quit dated the 3rd August, 1989, to terminate his tenancy as from the 17th January, 1990. This was followed by an ejectment civil bill for overholding dated the 23rd May, 1990. The plaintiff served notice of intention to claim relief under s. 16 of the Act of 1980. The Circuit Court proceedings stand adjourned to enable the plaintiff to bring these proceedings.
The plaintiff is only affected by s. 4, sub-s. 2 of the Act of 1980, since sub-ss. 3 and 5 do not apply to him.
The plaintiff’s case depends on the application of the Landlord and Tenant Act, 1931, to the tenancy granted to him in 1972, giving him rights which were taken away by s. 4, sub-s. 2 of the Act of 1980. The defendants make the case that the Landlord and Tenant Acts never applied to State property and that the provision in s. 4, sub-s. 2 of the Act of 1980 restated what was the law. If that is correct the constitutionality of s. 4, sub-s. 2 does not arise.
Mr. Fitzsimons for the defendants traced the history of State property since the foundation of the State.
Article 11 of the Constitution of Saorstát Éireann , 1922, first set out all the different kinds of State property and provided that it should be controlled and administered by the Oireachtas according to such regulations and provisions as should be from time to time approved by legislation. It then provided that it should not be alienated but might in the public interest be from time to time granted by way of lease or licence to be worked or enjoyed under the authority and subject to the control of the Oireachtas. There was a further proviso that no such lease or licence might be made for a term exceeding 99 years beginning from the date thereof and that no such lease or licence might be renewable by the terms thereof.
Mr. Brady submitted on behalf of the plaintiff that Article 11 of the Constitution of 1922 could not be used to limit the interpretation of the Landlord and Tenant Act, 1931, because the Constitution of 1922 could be amended by ordinary legislation. In R. (Cooney) v. Clinton [1935] I.R. 245, it was held that amendments to the Constitution of 1922 could under Article 50 be made by way of ordinary legislation. It was also held that a statute purporting to amend the Constitution of 1922 did not have to declare that it was so intending. A period of eight years in Article 50 was amended to sixteen by the Constitution (Amendment No. 16) Act, 1929. I did not hear any argument opposing that submission by Mr. Fitzsimons. However the State Lands Act, 1924, incorporated all the major points contained in Article 11 of the Constitution of 1922. The State Lands Act, 1924, is a short three section Act and was made, according to the long title, to authorise the making of leases and the granting of licences in relation to lands belonging to the State by virtue of Article 11 of the Constitution of 1922. Section 1 of the Act provided for the granting of leases and licences (excluding mines and minerals) for periods not exceeding 99 years if in the opinion of the Minister for Finance “it is in the public interest”. Sub-section 2 concerned the consideration. Sub-section 3 provided for such covenants, conditions and agreement (other than for the renewal of the lease or licence) as the Minister for Finance considered proper or desirable in the public interest or otherwise as might be agreed between the parties. Sub-section 4 excluded mines and minerals.
Section 2 provided for laying a statement with details for all proposed leases and licences before each House of the Oireachtas and generally for control by the Oireachtas. Section 3 provided for the short title.
Mr. Brady did not advance the proposition that the Landlord and Tenant Act, 1931, amended the State Lands Act, 1924. He said there was no conflict between the two.
It is in the context of the State Lands Act, 1924, that the Landlord and Tenant Act, 1931, must be considered. Mr. Fitzsimons submitted that a completely separate regime existed for State property as opposed to the Landlord and Tenant Act, 1931, which applied to tenements as defined by the Act. Part III of that Act gave a right to a new tenancy if at the termination of the tenancy certain conditions were fulfilled. There were four categories comprising business equity, long family possession, short reversion, and extensive improvements. Section 20 provided that in default of agreement the terms of the new tenancy should be fixed by the court. By virtue of s. 22 the lessee would not be entitled to a renewal if the landlord could prove that he bona fide intended to rebuild, or required possession for a scheme of development, or the creation of a new tenancy would not be consistent with good estate management.
Even that short summary shows that many features of the landlord and tenant regime were incompatible with the regime for State property. Under the State Lands Act, 1924, leases of State lands were to be controlled by the Oireachtas who could modify proposed provisions of leases. This is incompatible with the provision that the courts should fix the terms of the tenancy. Mines and minerals are not excluded under the Landlord and Tenant Act. The concept of public interest does not appear as a consideration to be taken into account under the Landlord and Tenant Act. Good estate management is not the equivalent to public interest. Under the State lands regime, while no lease could be renewable by the terms thereof, this did not preclude renewal but if a lease were renewed it had to satisfy the public interest requirement. There is no provision for public interest in the case of renewals under the Act of 1931.
I am satisfied as a matter of construction that the Landlord and Tenant Act, 1931, did not apply to State property.
A claim to a new tenancy which would have been made under the”business equity” provision of s. 19 of the Landlord and Tenant Act, 1931, now falls to be made under s. 16 of the Landlord and Tenant (Amendment) Act, 1980. But in this case since the plaintiff had no right as a State tenant to a renewal by virtue of s. 19 of the Landlord and Tenant Act, 1931, no right was taken away by s. 4, sub-s. 2 of the 1980 Act. Therefore the question of constitutionality does not arise.
The case of Byrne v. Ireland [1972] I.R. 241, dealt with the doctrine of sovereign immunity. But Walsh J. specifically said at p. 178 of the report that that case was not concerned with the construction of a statute or whether the State was bound by the restrictive provisions of some statutes. So the case does not impinge on the interpretation of the Landlord and Tenant Act, 1931.
Mr. Brady cited the Commissioners of Public Works v. Kavanagh [1962] I.R. 216, as an example of the Landlord and Tenant Acts applying to the State. In that case it was argued that a tenant under s. 19, sub-s. 1 (b) of the Act of 1931 had to be an individual person and not a corporate body or juristic person. The Supreme Court held that a person was not limited to a human person and was general enough to include the State as a juristic person. That case did not raise any question of whether the Act of 1931 applied to the State as a lessor. It does not appear to me that there is anything inconsistent in the State having statutory rights as a lessee under the Landlord and Tenant Act, 1931, if it fulfills the requirements for a lessee. However that point does not arise and was not argued.
Since the plaintiff fails on the first argument, none of the other arguments arise.