Pointon York Group Plc v Poulton

This appeal arises out of section 23(1) of the Landlord and Tenant Act 1954 (“the 1954 Act”) which provides as follows:

There are two issues of law:

In my judgment, both questions should be answered in the affirmative for the reasons given below.

I can take the central facts from the judgment of the judge:

On the first issue, the judge held that both as a matter of language and common sense a parking space could be occupied (judgment paragraph 21). He therefore concluded that, though the right to occupy the parking spaces might be described as an incorporeal hereditament, it was also property which could be occupied for the purposes of a business. He further found that the parking spaces could be premises, that they were comprised in the tenancy and that they were in fact occupied. He therefore concluded that the office tenancy was a protected one. No point is taken by the appellant that the respondent was using the parking spaces for business purposes albeit that the business use was not that of the business being carried on in the offices.

On the second issue the judge held that at the material time the respondent had the right to exclude others from occupation. He noted that it was conceded that, if in the three days between the expiry of the two leases Mr Pointon of the respondents had moved in a desk and made calls from it, business occupation would have been established. He held, however, on the basis of Bacchiocchi v The Academic Agency [1998] 1 WLR 1313 that it was unnecessary that there should be any physical presence in the premises provided the premises were being used in connection with a business activity. If physical presence had been necessary he would have held that that was satisfied by the existence of the carpet layer and Mr Pointon. Although the carpet layer had been engaged by Bray & Bray the work he was doing was providing carpets which the respondent wanted and needed for business purposes as well as for their own compliance with the duties to their own landlord should they go out of possession. He held that the activities of the carpet layer and Mr Pointon, who was “invigilating progress towards readiness to commence work, and planning what it would be necessary to install”, were activities which could “without straining language, be properly described as incidental and necessary to the running of the business.”

The judge therefore made an order that the respondent was in occupation of the property for the purposes of section 23 of the 1954 Act so that the tenancy was continuing by virtue of Part II of the 1954 Act and so that the respondent’s notice dated 8 July 2005 was a valid notice.

I have set out this issue above. In my judgment the right conferred by the lease dated 7 August 1990 to use the seven parking spaces specified in the lease constituted “premises” which could be “occupied” by the respondent for the purpose of section 23 of the 1954 Act and on the facts found by the judge were in fact occupied by the respondent. The appellant does not seek to disturb this latter finding of fact. I set out my reasons below. In summary my reasons for this conclusion are:

Mr De La Piquerie, for the appellant, accepts that an incorporeal right constituted “premises” for the purposes of section 5 of the Landlord and Tenant Act 1927 (“the 1927 Act”) but submits that this is not the position under the 1954 Act. The 1927 Act was repealed and replaced by the Landlord and Tenant Act 1954. Section 32(3) of the 1954 Act now provides that, when a new tenancy is ordered, the rights included in the original tenancy are included. Mr De La Piquerie submits that this sub-section would have been unnecessary if Parliament had intended to include incorporeal hereditaments in the definition of “premises” in section 23.

Mr De La Piquerie also relies on Jones v Christy which is reported very briefly at (1963) 107 Sol Jo 374. Lord Denning MR in his judgment in that case doubted whether the mere letting of an incorporeal hereditament could be occupation so as to be the subject of a new tenancy within the 1954 Act.

Mr De La Piquerie also relies on Land Reclamation Co Ltd v Basildon District Council [1979] 1 WLR 767. In this case this court held that a right of way could not be “occupied” for the purpose of section 23(1). Mr De La Piquerie submits that it also follows from this case that no incorporeal hereditament can be “premises” which are “occupied” for the purposes of the 1954 Act.

Mr Wonnacott for the respondent submits that the appellant’s submissions as to the purpose and effect of section 32(3) are misconceived. He submits that section 32(3) was included in the 1954 Act on the basis that incorporeal rights could be premises which were occupied for the purposes of the 1954 Act. A statutory provision was necessary in case the landlord sought to avoid the grant of a new tenancy by selling the property subject to the rights. If he did this by the date of the hearing, the new owner would not be bound by the grant of the new tenancy unless statute so provided. Thus without section 32(3) the court would have no power to create a new tenancy with the incorporeal rights previously enjoyed with it. By virtue of section 32(3) an order for the grant of a new tenancy with the rights contained in the old tenancy will bind third parties.

Mr Wonnacott submits that the Land Reclamation case on its true analysis applies the Stumbles case (referred to below). It was concluded that the right of way was not “premises” “occupied” for the purposes of the 1954 Act because the right of way itself was not occupied. It does not follow from the Land Reclamation case that no incorporeal hereditament can be occupied. What this court held was that a right of way could not be occupied, save in exceptional circumstances. In particular he refers to the judgment of Buckley LJ at page 775A to D. Mr Wonnacott submits that the parking spaces were capable of being occupied in business hours and that they were for the exclusive use of the tenant. On the true interpretation of the lease the landlord’s only right was to substitute other spaces. That however did not deprive the respondent’s use of the parking spaces of the quality of occupation because the landlord did not in the material period exercise that right.

Mr Wonnacott submits that the question of what can be occupied is a question of fact and degree: Graysim Holdings Ltd v P & O Property Holdings Ltd [1996] 1 AC 329. He accepts that the respondent could only occupy the parking spaces during business hours, but he submits that there is nothing to prevent a person occupying property for discontinuous periods. He cites the example of agreement for a time share of a property. Such a case falls to be distinguished from the situation where two persons claim to occupy the same piece of property at the same time. This, he submits, is not such a case.

Mr Wonnacott submits that the facts must be taken to amount to occupation of the right to use the parking spaces and that that right was capable of being premises which are occupied in law. This is because, on the basis of an admission in the defence that parking spaces were occupied, the judge made a finding to that effect in his judgment to which there is no challenge. It is no answer for the appellant to say at this stage that the word “used” should have been used in preference to the word “occupied” in the defence (which was not signed by Mr De La Piquerie).

In my judgment, the submissions of the respondent are to be preferred. In Whitley v Stumbles [1930] AC 544, the House of Lords held that an incorporeal hereditament constituted “premises” for the purpose of section 17 of the 1927 Act. That case concerned an incorporeal right of fishing. It was demised with a lease of a hotel. Section 17 defined the holdings to which the relevant part of the 1927 Act applied as “any premises held under a lease … and used wholly or partly for carrying on thereat any trade or business…”. The House held that there was no reason for supposing that the expression “any premises held under a lease” in section 17 of the 1927 Act did not include “not merely the actual buildings in which trade is carried on, but also the land surrounding them, the easements granted as appurtenant to them, and any other incorporeal hereditaments which may form part of the premises in the strict legal sense of the term which are the subject matter of the habendum.” Viscount Hailsham held that any other construction would defeat the plain purpose of the Act, which was to provide in the circumstances defined in the Act the tenant should have the right to continue to carry on his trade or business in the premises in the legal sense in which he was carrying them on under the lease for which he seeks that renewal.

Mr De La Piquerie submits that the Stumbles case is distinguishable on the basis that section 32(3) of the 1954 Act was a new provision not appearing in the 1927 Act. Section 32(3) provides:

The question then is whether the meaning of “premises” in section 23 is the same as that given to that expression in section 17 of the 1927 Act. Mr De La Piquirie submits that the answer to this question is no and that this can be deduced (solely) from section 32(3) of the 1954 Act. But Mr Wonnacott has provided another explanation for that subsection namely that it was inserted so as to enable the court to make an order for the grant of a new tenancy in cases where the tenant had previously enjoyed rights such as an incorporeal hereditament in connection with the holding but the property to which the rights related had been sold to a third party.

Mr De La Piquirie correctly observes that section 23 (1) is drafted on the basis that not all property comprised in a tenancy is “premises”; otherwise the material words could have read simply: “all or part of the property is comprised in the tenancy” etc. This factor on its own would seem to indicate that Parliament intended that the word “premises” should exclude some part of the property comprised in the lease.

Did Parliament intend to change the clock back and depart from the meaning of premises applied by the House of Lords in the Stumbles case in favour of the stricter conveyancing meaning? That meaning would include only the property comprised in the demise. In this case the demised property is the office suite. The House of Lords in the Stumbles case distinguished the conveyancing meaning.

It is important to observe that the tenor of the 1954 Act was in favour of enlarging the rights of business tenants. Thus one of the changes brought about by the 1954 Act was that a business tenant could obtain the renewal of a tenancy in a wider set of circumstances. Under the 1927 Act, to obtain an order for the grant of a new tenancy, the tenant had to show that the compensation awarded to him under section 4 of that Act for goodwill which increased the rent the landlord could obtain would not compensate him for the loss of goodwill due to having to give up the tenancy and that the grant to him of a new tenancy was reasonable. Under the 1954 Act, where section 23 applies and the tenant holds a tenancy for a term of years or other period specified in section 26 of the Act and gives notice in accordance with section 26(3) of the Act, the court must grant a new tenancy unless the landlord serves a counter-notice which complies with section 25 of the 1954 Act.

In those circumstances it seems to me unlikely that Parliament intended to depart from the meaning given to “premises” in the Stumbles case. Parliament could have used the expression “premises” in contradistinction to “property” because there is some property, such as a right of way, which can be “property comprised within a tenancy” yet not be capable of being occupied However, such a distinction would be unnecessary since such property would in any event be excluded because it was not in fact occupied.

Mr De La Piquirie relies on section 32(3), set out above. Although section 23 refers to “premises”, section 32(3) uses the word “holding”. The definition of “holding” is in section 23(3). That definition is centred round the phrase “property comprised in a tenancy” and its principal effect is to exclude parts of the demised premises occupied neither by the tenant or a person employed by him for the purposes of the business by reason of which the tenancy is within section 23(1). This then is the definition carried forward to section 32(3). Incorporeal rights are property and there is nothing in section 23(3) to exclude property of this form. A new tenancy must be of the holding at the date of the order for a new tenancy. Section 32 however would expressly ensure that rights could nonetheless be included in the new tenancy if they had been used in connection with the holding. Mr Wonnacott may be right as to why section 32(3) was inserted, but I do not consider that I need to decide this. In the Land Reclamation case Buckley LJ, with whom Brandon LJ agreed, put forward another explanation for section 32. He held that section 23(3) would exclude rights (by implication rights enjoyed by the tenant) which were incapable of being occupied but that they could nonetheless be included in a new tenancy by virtue of section 32(3) (see page 774 F to G). The appellant’s argument is bound to fail if there is an explanation for section 32 which does not depend on what seems to me the unlikely scenario of Parliament having used the word “premises” in a different sense from that which House of Lords had construed it as having in section 17 of the 1927 Act.

There is nothing in section 23(1) to suggest that “premises” must be being used in some other sense. Moreover section 17 of the 1927 Act and section 23 of the 1954 Act serve similar purposes. There was no obvious reason to reduce the scope of operation of the legislation in this field by giving the expression “the premises” the less extensive meaning proposed by the appellant. These factors are in my judgment enough to reject the argument that “premises” has a different meaning from that which was given to it by the House of Lords in the Stumbles case. Accordingly I reject the submission that an incorporeal hereditament cannot constitute premises for the purposes of section 23.

That conclusion may in some cases lead to the conclusion that a tenancy may qualify under section 23 even though only the incorporeal hereditament is occupied for business purposes. But I do not see why in such a case that should not be possible if the incorporeal hereditament is capable of being occupied. It is possible to have a business use of the incorporeal hereditament alone, such as where a house is let with right to use garages or stables which are occupied used for business purposes. It is difficult to see why this business use should not be protected even though the house is not used as part of the business. Section 23 expressly applies where only part of the premises is occupied for business use.

Jones v Christy, cited by Mr De La Piquirie, contains the expression of doubt by Lord Denning MR as to whether the mere letting of fishing rights could be “occupation” for the purpose of the 1954 Act. His observation referred to the letting of fishing rights on their own since he goes on to say that, since the fishing rights had been used for the purposes of a business in connection with a room that was also let by the same lease, the letting of the fishing rights could in fact be the subject of a new tenancy within the 1954 Act. This case therefore deals with occupation of a particular type of incorporeal hereditament let on its own. It does not establish that no incorporeal hereditament can be occupied, still less that it cannot form part of “the premises” for the purposes of section 23(1) if enjoyed in connection with land.

The court then has to ask whether a right to occupy a parking space can be “occupied”. The lease states that the easements and rights specified in the second schedule are demised “in common with the landlord and its tenants and the occupiers of the premises adjoining or near to the demised premises and other persons at any time having like rights”. The second schedule refers to both parking spaces and other easements such as the right to pass on foot over the common parts. It further states that the right to use parking spaces, which is limited in time by the qualifying words “during normal business hours”, is “subject to the right of the landlord to substitute equivalent alternative parking spaces as hereinbefore provided”. In those circumstances, in my judgment, the right to use the parking spaces was conferred (during normal business hours) to the exclusion of the landlord and other persons deriving title under him unless the landlord chose to substitute equivalent spaces. Thus during normal business hours the respondent could as I see it use the parking spaces and exclude other people from them. It was in effect, in relation to the parking spaces, a right to occupy the parking spaces for discontinuous periods of parts of a day but occupation of a property can occur notwithstanding that the property is to be occupied for discontinuous periods: Smallwood v Sheppards [1985] 2 QB 627.

Mr De La Piquirie also relies on Land Reclamation Co v Basildon DC. In this case, there was a grant of a lease of a right of way and no other premises. It was held that even though the right of way was used for business purposes it was not “occupied” and therefore could not constitute “premises” for the purpose of section 23(1) of the 1954 Act. This case is not authority for the proposition that an incorporeal hereditament can never be “occupied”. In particular at page 775C to D, Buckley LJ accepts that an exclusive right of way might be capable of being occupied.

A right to use a parking space is not like a right of way leading from one place to another which members of the public or persons other than the tenant might wish to use. In those circumstances, I take the view that a parking place can be “occupied” for the purpose of the 1954 Act.

As to whether there was occupation, the House of Lords has provided guidance in Graysim Holdings v P & O Property Holdings [1996] 1 AC 329. Lord Nicholls, with whom the other members of the House agreed, held that “As has been said on many occasions, the concept of occupation is not a legal term of art, with one single precise meaning applicable in all circumstances. Its meaning varies according to the subject matter.” (page 334). Later in his speech, Lord Nicholls held that “Where a landowner permits another to use his property for business purposes, the question whether the landowner is sufficiently excluded, and the other is sufficiently present, for the latter to be regarded as the occupier in place of the former, is a question of degree. It is moreover a question of fact in the sense that the answer depends upon the facts of the particular case.” (page 336). On the facts as found by the judge in this case, the parking spaces were indeed occupied during business hours. There is no challenge to that finding of fact. In those circumstances I consider that the judge came to the correct conclusion on issue 1.

I have set out Issue 2 above. It raises the question whether the decision of this court in Bacchiocchi v The Academic Agency Ltd applies for the purposes of section 23 of the 1954 Act. The Bacchiocchi case is a decision of this court which establishes that, in order to “occupy” premises for the purpose of sections 37 and 38 of the 1954 Act, a tenant need not be physically present in the premises if he is using them in some other way as an incident in the ordinary course or conduct of business life, provided that the premises are occupied by no other business occupier and are not used for any non-business purpose. Section 37 provides that a tenant is entitled to compensation if the grant of a new tenancy is precluded in certain circumstances but he must satisfy certain conditions, including a condition that the premises were occupied for business purposes “during the whole of the fourteen years immediately preceding the termination of the current tenancy” (section 37(2)(3)). Section 38 provides that in certain circumstances an exclusion of the right to claim compensation under section 37 is void but for this purpose the premises must have been occupied for the whole of the five years immediately preceding the date on which the tenant is to quit the holding

In my judgment, for the reasons given below, this meaning must apply also for the purposes of section 23, and, on the facts as found by the judge, the occupation of the respondent during the period 21^st to 23^rd June 2005 amounted to occupation of this kind.

Mr De La Piquerie submits that the meaning given to occupation in the Bacchiocchi case is not applicable to the situation where the tenant has not yet started to carry on business in the premises. He relies particularly on the judgment of Moore-Bick J (as he then was) in which he holds that the word “occupy” in sections 37 and 38 of the 1954 Act may bear a “rather broader meaning” than in section 23 (page 1328H). Mr De La Piquerie further submits that where a tenant has not yet started to carry on business the quality of occupation is different. However, he accepts that it would be sufficient for the respondent to have a desk in the premises and to make business calls. He also submits that for a business to be “carried on” for the purpose of section 23 it is not sufficient that it is a business which has not yet been carried on in the premises.

Mr Wonnacott submits that the other members of this court in the Bacchiocchi case, namely Simon Brown and Ward LJJ, considered that the interpretation of the word “occupy” in cases concerning section 23 provided some assistance in the interpretation of section 38. Those authorities enabled a tenant to continue in occupation of premises even though it had had to vacate them because of (say) a fire. This court approached the interpretation of that section is a purposive way. He points out that Mr De la Piquirie accepts that this is not a “thread of continuity” case, as in Morrisons Holdings Ltd v Madners Properties (Wolverhampton) Ltd [1979] 1 WLR 533.

In my judgment, the submissions of the respondent are to be preferred. On well established principles of statutory interpretation, unless the context otherwise requires, the word “occupy” must bear the same meaning in section 23 as it does in section 38. No reason has been shown why it should not do so.

The decision in Bacchiocchi is of course binding on this court. In that case this court took a welcome, practical approach to occupation. In particular, this court overruled the decision of Falconer J in Department of the Environment v Royal Insurance PLC (1986) 54 P&CR where the court held that tenants under a 14 year lease who had entered into occupation of the premises one day after the term began had not occupied the premises for the whole of the 14 years for the purposes of section 38 of the 1954 Act. It meant that they were entitled to only basic rate compensation when at the end of the 14 year term they left the premises.

It is not necessary to set out the judgments of this court in the Bacchiocchi case at length. The tenant had ceased to occupy the premises shortly before the termination of his lease because he had by then wound up his business. Simon Brown LJ held this:

The second judgment was given by Ward LJ. In the course of his judgment he held that “Being in the same part of the Act, the words in section 23 and 38 should bear an allied meaning” (page 1324C). In his conclusions, Ward LJ held that “the thread of continuity has the degree of elasticity to it and it has that elastic quality at the end as well as the middle of the thread.”(page 1326A). He went on to hold that “To insist, as the application of the Department of the Environment v Royal Insurance PLC would require, that there be precise coincidence of time between cessation of all activity and the moment when the obligation to quit arises will produce commercial absurdity. It is an affront to common sense to require a pot and pan to be left on the premises until the clock strikes midnight on the last day. Common sense surely dictates that there be an allowance for considerable leeway.” (page 1326C).

On the findings of the judge in the present case, the activities of Mr Pointon were clearly incidental to his business. He was checking that the premises were properly equipped and suitable for the business he wished to carry on there.

The distinction drawn by the appellant is of a technical nature. The appellant accepts that the presence of a desk and making of business calls would be sufficient to constitute occupation. In conformity with the approach in the Bacchiocchi case, I do not consider that the application of section 23 should depend on drawing such fine lines. Moreover I agree with the judge that there is no reason why, if physical presence is not required at the end of a lease, the same common sense approach should not apply at the start of a lease.

The judge made a finding of fact that the use by the respondent of the premises during the period 21 to 23 June 2005 was occupation for business purposes on the basis that the Bacchiocchi case applied. He was entitled in my judgment to find that the carpet layer was performing an activity for the purpose of Mr Pointon’s business even though he was employed by Bray & Bray for the purpose of their fulfilling their conveyance under the sub-tenancy. Mr Pointon had decided that the carpet being laid by the carpet layer was suitable for the purposes of his business.

In the circumstances, I consider that the judge came to the right conclusion on the second issue.

In the circumstances, I would dismiss this appeal.

I agree.

I also agree.