Bromley Park Garden Estates Ltd v George

Rent Act 1977 — Effect on subtenancy of surrender of superior tenancy — Argument based on section 137(3) of the Rent Act untenable in Court of Appeal in view of decision in Pittalis v Grant — Submission that decision in Cow v Casey was reached per incuriam having regard to section 139(1) of the Law of Property Act 1925 — Limited effect of section 139(1) — County court judge’s grant of possession order in favour of freeholders approved The facts so far as material to the questions of law involved in this case were as follows — The appellant occupied a flat on a regulated subtenancy granted by Barclays Bank plc in a building leased by the bank, of which the ground floor was used by the bank for its business and the upper two floors were divided into flats of which the appellant’s flat was one — The bank held a lease of the whole building which was due to expire on December 25 1989, but it assigned the residue of the term on April 12 1989 to F & H Services Ltd, who surrendered what little was left of the term on December 22 to the freeholders, the respondents to this appeal — Thus the appellant, whose regulated subtenancy had become a monthly subtenancy, and the respondent freeholders were brought into direct relationship — It was the precise nature and consequences of this relationship which gave rise to the legal problems involved in this appeal — The respondents served a notice to quit on the appellant, who held over claiming the benefit of the Rent Act 1977 — The county court judge decided in favour of the respondents, holding that the case turned solely on questions of law and expressing the view that they could be resolved in the appellant’s favour only by the House of Lords On appeal the appellant claimed to be entitled to the protection of the Rent Act and put forward two submissions in support of this claim — One of the submissions, based on section 137(3) of the Rent Act, was acknowledged by the appellant to be unsustainable in the Court of Appeal in view of the court’s decision in Pittalis v Grant and the earlier decision of the House of Lords in Maunsell v Olins (which remained authoritative except in relation to agricultural holdings, where it was specifically reversed by the last limb of section 137(3)) — The second submission, however, gave rise to argument The second submission involved the quite bold assertion that Cow v Casey had been decided per incuriam — The ground for this was the claim that the attention of the court in that case had not been drawn to section 139(1) of the Law of Property Act 1925 — It was submitted that the effect of section 139(1) was that the respondents’ estate in the present case must be deemed the reversion for the purpose of preserving the same incidents and obligations as would have affected the original reversion if there had been no surrender — Beldam LJ, however, pointed out that the preservation must be understood to be limited to the duration of the unexpired portion of the subtenancy only — The object was to preserve the same incidents and obligations as would have affected the original reversion if there had been no surrender or merger — The word ‘deemed’ in section 139(1) did not create the relationship of statutory landlord and tenant between the freeholders and the subtenant on the expiry of the contractual term — In support of the view that section 139(1) did not have the effect for which the appellant contended Beldam LJ not only cited a string of decisions in which Cow v Casey was approved but, interestingly, mentioned the fact that counsel of pre-eminence in landlord and tenant law as the tenant’s counsel in Cow v Casey (Lionel Blundell) had not put forward an argument based on the subsection In the result neither of the appellant’s arguments could succeed and the appeal was dismissed — Leave to appeal to the House of Lords was refused but a stay of the possession order was granted to allow for a petition to the House for leave to appeal The following cases are referred to in this report. Cow v Casey [1949] 1 KB 474; (1949) 65 TLR 84; [1949] 1 All ER 197, CA Critchley v Clifford [1962] 1 QB 131; [1961] 3 WLR 763; [1961] 3 All ER 288, CA Hobhouse v Wall [1963] 2 QB 124; [1963] 2 WLR 604; [1963] 1 All ER 701, CA Legge v Matthews [1960] 2 QB 37; [1960] 2 WLR 620; [1960] 1 All ER 595, CA Maunsell v Olins [1975] AC 373; [1974] 3 WLR 835; [1975] 1 All ER 16, HL Parker v Jones [1910] 2 KB 32 Pittalis v Grant [1989] QB 605; [1989] 3 WLR 139; [1989] 2 All ER 622; [1989] 2 EGLR 90; [1989] 28 EG 126 This was an appeal by the occupier, David Charles George, from the decision of Judge Dobry, at Bloomsbury County Court, holding that the freeholders, Bromley Park Garden Estates Ltd, the respondents to this appeal, were entitled to possession of the flat occupied by the appellant at 237C Brecknock Road, Tufnell Park, London N19. G W Roddick QC and Philip Reed (instructed by Bolt Burdon) appeared on behalf of the appellant; Robert Reid QC and Miss Karen Lord (instructed by Hamlin Slowe) represented the respondents. Giving the first judgment at the invitation of Farquharson LJ, BELDAM LJ said: The appellant, Mr David Charles George, appeals to the court against the order of His Honour Judge Dobry of May 21 1990 holding that the respondents, Bromley Park Garden Estates Ltd, were entitled to possession of the flat occupied by the appellant and known as 237C Brecknock Road, London N19. The learned judge also gave judgment for £202.50 mesne profits and ordered the appellant to pay the costs of the proceedings but directed that this order was not to be enforced without leave of the court. The appellant has occupied the flat for over 10 years. It is situated in a building which is on the apex of the corner of Fortess Road and Brecknock Road in the London Borough of Camden. The building is very close to Tufnell Park Station and has three floors. The ground floor was occupied by Barclays Bank plc and used in its banking business. The upper two floors were divided into four flats of which the appellant’s flat was one. The building as a whole was known as 156-158 Fortess Road and 235 Brecknock Road. In 1968 the owners of the freehold were St John’s College, Cambridge. By a lease dated January 17 1968 they let the whole of the building, including the four flats, to Barclays Bank for a term of 21 years from December 25 1968. On September 25 1978 St John’s College sold the freehold reversion to the respondents. On July 1 of the following year Barclays Bank plc sublet the flat 237C Brecknock Road to the appellant for a term of two years. The appellant’s sublease was renewed from time to time and on November 27 1985 it was again renewed for a period of two years and thereafter from month to month. The lease to Barclays Bank was due to expire on December 25 1989, but on April 12 1989 they assigned the remainder of the term to Folkard & Hayward Services Ltd, to whom I shall refer as F & H Services, who, in turn, on December 22 1989 surrendered their term to the respondents. On January 24 1990 the respondents served notice to quit on the appellant terminating his periodic tenancy on March 5 1990. The appellant held over, claiming to be entitled to the benefit of the Rent Act 1977. On March 13 1990 the respondents issued proceedings for possession in Bloomsbury County Court. The facts of the case as I have recited them are not in dispute and, as the learned judge held, the result of the case turned solely on questions of law. Those, he said, were beyond argument before him and could be resolved in the appellant’s favour only in the House of Lords. Accordingly, he found that the respondents were entitled to an order for possession. Before us Mr Roddick, for the appellant, advanced two arguments in support of his contention that the appellant was a statutory tenant under the Rent Act 1977 at the date of the hearing before the learned judge. The basis of the appellant’s first argument was that the periodic tenancy under which he held the flat, initially from Barclays Bank and subsequently from F & H Services, was a tenancy to which the provisions of the Rent Act 1977 applied; that on the surrender by F & H Services on December 22 1989 of the remainder of the 21-year term his periodic tenancy continued but with the rights and obligations under its terms being transferred to the respondents. There was, therefore, the relationship of landlord and tenant between the appellant and the respondent and to that relationship the provisions of the Rent Act 1977 applied. The basis of the appellant’s second argument was that the appellant could rely upon Part XI of the Rent Act 1977 and in particular section 137(3). When, therefore, F & H Services surrendered the superior tenancy and it came to an end, the terms of the Rent Act 1977 applied in relation to his flat as if there had been a separate tenancy of the part of the premises comprising his flat. Mr Roddick acknowledged that this second argument was untenable in this court, which is bound by the decision in Pittalis v Grant [1989] QB 605* and by the decision of the House of Lords in Maunsell v Olins [1975] AC 373. Mr Roddick further acknowledged that at first sight an earlier decision of this court in Cow v Casey [1949] 1 KB 474 required the court to reject his first argument, but he contended that the decision in that case was reached per incuriam and that this court should on that ground disregard it. Alternatively, he said that it was a decision by a court of two judges on an appeal in an interlocutory matter and so was not binding on the court. *Editor’s note: Also reported at [1989] 2 EGLR 90. It is common ground that the tenancy created by the grant of the lease for 21 years to Barclays Bank was not a statutory tenancy under the Rent Act 1977. It was excluded by virtue of section 24(3) as a tenancy to which Part II of the Landlord and Tenant Act 1954 applied. The property comprised in the tenancy included premises which were used by the bank for the purposes of its business. It was equally not in dispute that the appellant’s tenancy with Barclays Bank plc was a regulated tenancy. Mr Roddick, relying upon the case of Parker v Jones [1910] 2 KB 32, asserted that by voluntarily surrendering the remainder of their term F & H Services could not thereby prejudice the appellant’s tenancy. In those circumstances, at common law the appellant’s tenancy continued as a tenancy between the subtenant and the reversioner. As the tenancy of the appellant was a regulated tenancy, on surrender the respondents took subject to that tenancy. This argument, however, was rejected in the case of Cow v Casey (supra) on similar facts. It had been advanced on behalf of the appellant tenant in that case by Mr Lionel Blundell. At p 476 he submitted: Where, however, the head tenancy came to an end by surrender before the determination of the subtenancy, the subtenant became the direct tenant of the head landlord. The result is that on June 24 the defendant as subtenant became the direct tenant of a dwelling-house to which the Rent Restrictions Act applied under the plaintiffs, the head landlord. It was not until June 26 that the plaintiffs could claim possession. Then s3 of the Act of 1933 protected the defendant. This argument was dismissed by Lord Greene MR at p 479 as: . . . completely misconceived. Lord Greene referred to section 15(3) of the Increase of Rent and Mortgage Interest (Restrictions) Act 1920 dealing with the case of subtenancy. He said: In my opinion, it is impossible to rely on that section. It deals with the case of a tenant, whom I will call the head tenant, whose tenancy is determined either as the result of an order or judgment for possession or ejectment, or for any other reason. It would cover, therefore, quite clearly the case where the head tenancy is determined by a surrender. But the subsection is limited to a case where the tenant whose tenancy is determined, that is to say, the head tenant, is tenant of a dwelling-house to which the Act applies. I should have thought that is clearly what the Act means. The company was not a tenant of a dwelling-house to which the Act applies; it was tenant of a dwelling-house to which the Act did not apply, and the fact that they had granted a subtenancy of this flat could not alter that circumstance. And later in his judgment he said: If that was not the case, the position would be fantastic. It would simply mean that the tenant of a house to which the Act did not apply could grant a subtenancy of a part and then, his own tenancy having been brought to an end, could leave the landlord saddled with a statutory subtenant; in other words, it would put the head tenant in a position to foist upon the head landlord a statutory tenant by carving out of the house demised to him a small portion and subletting it. Subsection (3) permits nothing of the kind, in my opinion. Thus the court held that when the interest of the subtenant was determined, he became a trespasser in the premises and not entitled to the protection of the Rent Act. Mr Roddick argues that this decision was reached per incuriam. The court’s attention had not been drawn to section 139(1) of the Law of Property Act 1925 and he says that the respondent’s estate or interest is by that section to be deemed the reversion for the purpose of preserving the same incidents and obligations as would have affected the original reversion had there been no surrender by F & H Services of the term. I do not consider that section 139(1) has the effect claimed for it by Mr Roddick. I have no doubt that the purpose of the section is to preserve the ability to enforce the covenants and conditions of the sublease for the benefit both of the sublessee and the holder of the next vested right to the land, but for the unexpired portion of the sublease only, for the purpose is to preserve the same incidents and obligations as would have affected the original reversion had there been no surrender or merger. In my view, the use of the word ‘deem’ in this context is not apposite to create the relationship of statutory landlord and tenant between the freeholder and the sublessee on the expiry of the contractual term. Moreover, having regard to the pre-eminence of counsel for the tenant in Cow v Casey in the field of the law of landlord and tenant, I find it inconceivable that if the section had made any difference to his argument he would not have advanced it. It is equally extremely unlikely that the Master of the Rolls and Wynne-Parry J would have overlooked the point if it had a bearing on the case. But these are not the only difficulties which stand in the way of the appellant’s first argument. The decision in Cow v Casey (supra) has been referred to in subsequent cases without disapproval of the principle that in the circumstances of that case the subtenant ceased to have any residual right to possession after his existing right had been determined. In Legge v Matthews [1960] 2 QB 37 Pearson LJ, as he then was, referred to it without disapproval; in Critchley v Clifford [1962] 1 QB 131 at p 143 Willmer LJ also referred to the decision without disapproval and in Hobhouse v Wall [1963] 2 QB 124 Upjohn LJ, as he then was, at p 130 said: Where, therefore, the landlord of premises determined a tenancy by surrender, or where it expired, if part of those premises was subject to the Rent Restrictions Acts, the subtenant of that part could not plead the Rent Restrictions Acts against the head landlord although, of course, he had had that protection against his own immediate landlord. Finally, in Maunsell v Olins [1975] AC 373 Lord Reid, Viscount Dilhorne and Lord Wilberforce all considered the decision in Cow v Casey and appear to have accepted that it was rightly decided. In those circumstances I do not think it is open to this court to depart from the principle laid down in Cow v Casey. I am fortified in this view by the fact that to give effect to the argument for the appellant would, in Lord Wilberforce’s words in Maunsell v Olins (supra), be to give protection to subtenants of individual dwelling-houses in . . . complexes, industrial or business or in any large estate of any kind. To do this would represent a very great enlargement of the rights of subtenants . . . It would also substantially detract from the combined effect of section 23(1) of the Landlord and Tenant Act 1954 and section 24(3) of the Rent Act 1977. Accordingly, I would reject the appellant’s first argument. As Mr Roddick has conceded that his second argument cannot succeed in this court, it is not necessary for me to consider it. I would therefore dismiss the appeal. FARQUHARSON LJ agreed and did not add anything. The appeal was dismissed with costs; order for costs not to be enforced without leave of the court; application for leave to appeal to the House of Lords was refused; but stay of order for possession for six weeks provided petition for leave to appeal is filed within that time.