Brighton & Hove City Council v Collinson & Anor

J U D G M E N T

1. LORD JUSTICE BROOKE: I invite Jacob LJ to give the first judgment.

2. LORD JUSTICE JACOB: This is an appeal by Brighton and Hove City Council from a decision of HHJ Kennedy QC given on 15th January 2004. The appeal is by permission from Auld LJ.

3. The Council are the landlords of a property consisting of part of the King Alfred Leisure Centre in Hove. The tenants are the respondents, the Collinson brothers. The Collinson brothers are directors of a company called Galaxi 3 Limited. The lease, the subject of this dispute, was granted in 1995, on 8th March. It contains the following recital, after reciting the names of the parties:

"HAVING BEEN AUTHORISED to do so by an Order of the Brighton County Court dated 11 June 1993 the Council and the Lessee agree to exclude the provisions of Sections 24-28 of the Landlord and Tenant Act 1954 in relation to the tenancy created by this Lease."

4. Shortly before the lease came to the end of its term, which I think was not quite ten years, the Collinsons indicated to the Council that they desired a new lease and contended that the recital in the lease about the order of the Brighton County Court was of no effect. That is indeed their principal point, namely that there has never been any contracting out of the provisions of the Landlord and Tenant Act 1954 ("the Act") authorised by the court.

5. Section 38 of the Act provides, as amended:

"(1) Any agreement relating to a tenancy to which this Part of this Act applies (whether contained in the instrument creating the tenancy or not) shall be void [(except as provided by subsection (4) of this section)] in so far as it purports to preclude the tenant from making an application or request under this Part of this Act or provides for the termination or the surrender of the tenancy in the event of his making such an application or request or for the imposition of any penalty or disability on the tenant in that event.

...

[(4) The court may-

(a) on the joint application of the persons who will be the landlord and the tenant in relation to a tenancy to be granted for a term of years certain which will be a tenancy to which this Part of this Act applies, authorise an agreement excluding in relation to that tenancy the provisions of sections 24 to 28 of this Act; and

(b)...

if the agreement is contained in or endorsed on the instrument creating the tenancy or such other instrument as the court may specify; and an agreement contained in or endorsed on an instrument in pursuance of an authorisation given under this subsection shall be valid notwithstanding anything in the preceding provisions of this section.]"

6. The events leading up to the grant of the lease were as follows. Back in September 1992 the Council had entered into negotiations with the company, Galaxi 3, through Mr Martin Collinson. On 9th September the Council wrote a letter indicating that it would grant a lease. The letter included the following passage:

"To safeguard the Council's position in connection with the future use and development of the King Alfred Leisure Centre it is intended that security of tenure under Part II of the Landlord and Tenant Act 1954 will be excluded and this will involve both parties making appropriate applications to the County Court. The entire scheme is subject to the Court issuing the appropriate exclusion order."

7. The solicitors for Galaxi 3 replied on 16th September asking as follows:

"We note that you seek to exclude the renewal provisions of the 1954 Act. Would it not be the case that the Council would only be likely to oppose renewal of a Lease if the Council had in mind using the premises for its own activities? In this situation would it not be in order for the 1954 Act to apply in the usual way? We look forward to hearing you on this point."

8. The Council's reply on 18th September said this:

"It is this Council's firm policy when leasing its commercial premises in the leisure field, usually along or near to the Hove seafront, to insist upon the exclusion of protection under the Act. That policy appears to have been recognised by the Court in issuing appropriate Orders when requested by my Council. I cannot say on which grounds the Council might wish to oppose any renewal of the proposed Lease, if indeed the Council would object at all at the given time. This point is not really open to discussion."

9. There was then no more debate about whether there should be exclusion or not. The administrative arrangements to make the application to the court went through. A draft lease was prepared in which Galaxi 3 were the tenants and the two Collinson brothers were the guarantors.

10. An application was made to the court. The plaintiffs were Galaxi 3 Limited and the two brothers. The application form said this:

"We, HOVE BOROUGH COUNCIL...and GALAXI 3 LIMITED...and DAVID JOHN COLLINSON and MARTIN ARTHUR COLLINSON...apply to the court for an order under s 38 of the said Act...authorising the inclusion in a lease to be made between the said HOVE BOROUGH COUNCIL...and GALAXI 3 LIMITED as lessee...and [the Collinsons] as sureties of the [identified premises] ...

The grounds upon which we claim to be entitled to the order are:

...

2. The said Galaxi 3 Limited and [the Collinson brothers] are desirous of entering into a lease of the said premises for a period of 10 years for the purposes of providing a Laser Gun game at the King Alfred Leisure Centre and the Council wish to reserve the right to use the premises at the end of the period for its own use."

11. A draft of the proposed lease was annexed. The court made an order in the usual way which is described in the notes to the White Book at paragraph 56.2.1 as "rubber stamping".

12. The order said as follows:

"BY CONSENT

IT IS ORDERED that the Court doth authorise the grant of a Lease by the Applicant to the Respondents in respect of part of the premises known as:-"

And they are there identified:

"which will exclude the provisions of Sections 24-28 of the Landlord and Tenant Act 1954."

13. Subsequent to the court order the Collinson's solicitors wrote, after some delay which is unexplained and does not matter, on 9th March 1994 saying as follows:

"Furthermore, and following advice from their accounts, our clients have indicated that they would prefer to complete the Lease in the personal names of David Collinson and his brother Martin Collinson. Before we give consideration to the necessary amendments arising from such a change, we should be grateful if you would confirm in principal as to whether or not your authority would have any objection to the matter concluding in this manner."

14. There appears to have been a telephone call and there is a second letter from the Collinson's solicitors saying, on 28th March 1994:

"You have indicated that there is no objection to these being taken in the personal names of Messrs. Martin and David Collinson and we therefore await the documentation to enable the matter to be concluded as soon as possible."

15. The Council then asked the Collinson's solicitors to let them have details of the proposed amendments to the lease; that was done. We have before us the draft amended lease. Someone has gone over it carefully making all the necessary alterations to make the Collinsons the tenants and to remove the provisions about sureties. The recital, which I have quoted, remained exactly in the form I have quoted, save for the date was blank at some point. It is not entirely clear who inserted the date, whether it was the Collinson's solicitors or the Council solicitors. To my mind makes no difference whatever. Plainly the parties entered into a lease which contained that recital and must have known what they were doing.

16. The judge held that, in effect, the court had no jurisdiction to make an order which excluded protection of a lease granted to the Collinsons. The reasoning which was advanced before us again is effectively this: the only application before the court for exclusion was an application for a lease to be granted to Galaxi 3. This lease is not granted to Galaxi 3. It follows that there has been no court order in respect of this lease.

17. The argument goes further. It necessarily involves the proposition that there was no point in the two brothers being parties to the application before the court. Sureties do not have to be parties and so it was therefore a waste of time having them there. Moreover, the argument implies that the court order that was actually made was made without jurisdiction. The order, it will be recalled, authorised the grant of a lease "to the respondents". It is said that one cannot make such an order if it is not proposed in the application that some particular respondents are not intended to be tenants at the time of the application.

18. The argument focuses on the language of subsection (4): "The court may - (a) on the joint application of the persons who will be the landlord and the tenant... " and then the provision goes on. It is said that the only application which was before the court was the application by the Council and Galaxi 3 because the only tenancy to be granted at that time was to Galaxi 3.

19. Mr Gatty submitted that the law of landlord and tenant is technical and there are technicalities to be observed otherwise what people intend to do will fail. He is, of course, right in some respects, but there are technicalities and technicalities. There is no need to construe the Act or indeed lease in an over-technical way when a perfectly sensible business reading can provide a more sensible result.

20. I see no reason why an application should not be made which includes those who may be the landlord and those who may be the tenant. This application was by people who, in the result, were both the landlord on one side and the tenants on the other. I see no reason why the court should not have made the order which it in fact made.

21. That the section need not be read in an over-technical manner is apparent from the judgment of this court in the Receiver for the Metropolitan Police District v Palacegate Properties Limited [2001] Ch 131. In that case the court had made an order excluding the provisions of the Act in relation to a draft lease which was not entirely complete. The date of the lease was not specified and most particularly there was no provision for the dates on which it would be paid. They were in due course agreed and put into the tenancy. It was later said that there was no court permission for exclusion for the particular lease which eventually emerged.

22. Pill LJ giving the only judgment, the other two members of the court agreeing with it, said as follows at page 138:

" Conclusion on section 38(4)(a )

I agree with Mr Lewison that the court hearing the joint application is neither empowered nor entitled to consider the fairness of the bargain, as such, which the parties propose to make. The subsection is not intended to empower the court to dictate to the parties to a lease what the terms of the lease should be. Had Parliament intended, under section 38(4), a court to investigate the fairness of bargains a more specific and detailed procedure would have been laid down. Such a procedure has been laid down, when a protected tenant requests a new tenancy, in Part II of the Act, including sections 33 to 35. I accept that the purpose of section 38(4)(a) is to enable [a] court to satisfy itself that the prospective tenant understands that he is forgoing the protection of section 24 to 28 of the Act. However, effect must be given to the words "in relation to that tenancy" in the subsection. Attractive though it may be, in terms of freedom of contract, to limit the effect of the subsection in the manner advocated by Mr Lewison, I do not consider that a section which provides that an agreement to waive protection needs the sanction of the court gives a green light to a landlord to make wholesale changes to the draft tenancy submitted to the court when approval was sought. The words "that tenancy" in section 38(4)(a) require its terms to bear a substantial similarity to that before the court when authority was given. In particular, changes material to the need for protection may nullify the authority granted. For example, the length of the term would be a material consideration in the case of a lease which contemplated substantial capital expenditure by the tenant. A court authorising an agreement excluding protection would be expected to make greater inquiry as to the proposed tenant's consent if the term is a short one than if the term is a long one and a change which substantially shortens the term would be material."

23. The court indicated what the purpose of the section was. The important thing is that the prospective tenant (who of course must be a party to the application) understands that he is foregoing protection. It indicated that wholesale changes to a draft tenancy would not do. Pill LJ said that the tenancy actually granted should bear a substantial similarity to that before the court when authority was given, and that, particularly, changes material to the need for protection could nullify the authority granted. He gave the instance of a different term.

24. With that guidance it seems to me apparent that the change here should be regarded as no more than a technical change for tax purposes, which is exactly the way the parties thought of it. There is a substantial similarly. Did the prospective tenant know that there was exclusion? The answer is: yes, the brothers knew that. Did the court have power to make an order excluding the provisions of the Act for a lease to be granted to the brothers? Yes, it did. In my judgment any other conclusion would be turning the necessary technical parts of landlord and tenant law into unnecessary over-technicality. I think the judge below erred in allowing that overtechnicality to prevail in the face of common sense. I would allow this appeal.

25. SIR MARTIN NOURSE: I agree. The agreed application to the county court dated 27th May 1993 was made by the Council, the company and the two Collinsons as joint applicants. The company and the two Collinsons were not separately described as respondents. However, in the subsequent order made by the court on 11th June 1993 they were so described, the Council being described as the applicant. What that order did was to:

" ... authorise the grant of a Lease by the Applicant to the Respondents in respect of part of the premises known as ...

which will exclude the provisions of Sections 24-28 of the Landlord and Tenant Act 1954."

26. So what was authorised was the grant of "a lease", in a form not specified, to "the respondents". If you read the latter words literally what was authorised was the grant of a lease to the company and the Collinsons jointly. Mr Gatty says that you cannot read those words thus; they mean the company alone. But why should they mean the company any more than the Collinsons? Mr Gatty seeks to answer that question by saying you must look at the application and, no doubt, the draft lease as well, both of which make it clear that the company was intended to be the lessee and the Collinsons the sureties. My answer to that argument is this. The documents before the district judge consisted of the application, the draft lease and a draft order in a form which may be assumed to have been in the same form as the order made. There is a conflict between the form of the first two documents and that of the third. But the order itself must be the governing document and for all we know it may have been deliberately intended that it should be in the wider form, thus authorising the grant of a lease to all three respondents or only one or two of them as the case might be. All Mr Gatty's arguments appear to me to go only to a possible case for correction of the order under the slip rule, but that is not the case that has been made.

27. Mr Gatty has also sought to argue that the terms of section 38(4) of the 1954 Act are such that the district judge had no jurisdiction to authorise the grant of a lease to the Collinsons. That argument, as I understand it, is based on the words in subsection (4)(a) "on the joint application of the persons who will be the landlord and the tenant in relation to a tenancy..." Mr Gatty says that the person "who will be the tenant" was the company and not the Collinsons. But that, as it seems to me, begs the question as to who was intended to be the tenant or tenants and that can only be ascertained from the application itself which, construed as a whole, can only, for the reasons I have given, be taken to have included the Collinsons as possible tenants as well as the company.

28. I recognise that the ground for our decision may be a technical one, but that is often so with questions of construction, and I comfort myself with the thought that the argument to the contrary is also technical and, moreover, unmeritorious.

29. For these reasons, as well as for those given by my Lord, Jacob LJ, I too would allow the appeal.

30. LORD JUSTICE BROOKE: I agree with both judgments. The appeal is therefore allowed.

ORDER: Appeal allowed. Counter claim dismissed. Possession order granted. The respondents to pay the appellant's costs of the appeal and the hearing below, to be subject to detailed assessment if not agreed. Permission to appeal to the House of Lords refused.