Humber Oil Terminals Trustee Ltd v Associated British Ports

The claimant/appellant is Humber Oil Terminals Trustee Limited (‘HOTT’). The defendant/respondent is Associated British Ports (‘ABP’). HOTT appeals, with permission granted by Patten LJ, on a single ground (ground 1) against an order made by Vos J on 29 July 2011 in the Chancery Division. Also before the court is HOTT’s application, adjourned by Mummery LJ, for an extension of time for making a renewed permission application for a second ground of appeal (ground 4) in respect of which Patten LJ refused permission. HOTT has not sought to renew its applications in respect of grounds 2 and 3.

HOTT is ABP’s tenant of an oil depot comprising a jetty and associated premises held under four leases. HOTT’s claims in the Chancery Division (there were four, one in respect of each tenancy) were brought under Part II of the Landlord and Tenant Act 1954 and were for new tenancies of its holdings (which were treated in each case as co-terminous with the demised premises). ABP opposed the claims in relation to each tenancy in reliance on the ground in section 30(1)(g) of the 1954 Act, namely that ‘on the termination of the current tenancy the landlord intends to occupy the holding for the purposes, or partly for the purposes, of a business to be carried on by him therein’. Success by ABP in establishing that ground would require the court to refuse the grant of new tenancies (section 31(1)).

A preliminary issue directing a trial of ABP’s ground of opposition was ordered by Morgan J on 28 June 2011. Ignoring a reference to a now irrelevant competition law point, the issue it identified was:

That issue was tried before Vos J over five days in July 2011. He heard oral factual and expert evidence, which was tested by cross-examination. In his conspicuously comprehensive judgment delivered on 29 July, he directed himself carefully as to the law and made clear findings of fact. The outcome was that he held that ABP had established its ground (g) opposition and he made appropriate declarations. Ground 1 of HOTT’s appeal challenges the legal basis upon which he approached the issue before him. Ground 4 asserts that he made a crucial finding of fact for which there was no evidence.

I take these gratefully, in part verbatim, from the judge’s judgment and from the summary in the skeleton argument prepared by Mr Dowding QC and Mr Sefton.

The four leases under which HOTT is the tenant are as follows. The main one is that of the oil jetty, granted on 29 August 1970 for a term of 40 years expiring on 31 December 2009. The second lease, also granted on 29 August 1970, is of land upon which a tank farm and offices have been constructed and was for a term of just over 40 years, expiring on 1 January 2010. The third lease, of 10 acres of land to the east of the oil depot, was granted on 6 August 1980 for a term of just under 30 years expiring on 1 January 2010. The fourth lease, of 1.97 acres of land to the north of the depot, was granted on 16 November 1988 for a term of just over 20 years expiring on 31 December 2009.

The premises are on the south bank of the Humber estuary. They are collectively known as the Immingham Oil Terminal (‘IOT’). The IOT is within the Port of Immingham. ABP is the statutory harbour authority for the port. It also owns and operates another 20 ports; and its business (indeed its statutory duty: see section 9(1) of the Transport Act 1981) is to provide port facilities at its harbours. Each year, about 20 million tonnes of oil and related products pass through the IOT to and from the Lindsey Oil Refinery (‘LOR’) and the Humber Oil Refinery (‘HOR’), some five kilometres south of the IOT. Total UK Limited (‘Total’) owns and operates the LOR. ConocoPhillips UK Limited (‘CoP’) owns and operates the HOR. HOTT is a joint venture company owned and operated by Total and CoP.

The IOT was built in the late 1960s by the then publicly owned British Transport Docks Board (‘BTDB’), which was later reconstituted and privatised as ABP. It was constructed in conjunction with the building of the two inland refineries. It was designed and built to service their needs exclusively. Apart from the IOT, the Port covers an area of some 1,100 acres and comprises numerous facilities, including the Immingham Gas Jetty and the Eastern and Western Jetties serving a variety of customers.

The most important of HOTT’s four leases is that of the jetty. Clause 6(a) exempts HOTT from the payment of ships and cargo dues. The rent was worked out on the basis that over the term it would reimburse BTDB the capital costs of the construction of the IOT. The jetty extends into the estuary for about a kilometre. It has three seaward deep water berths, two of which are suitable for very large crude carriers, allowing partly loaded vessels of up to 290,000 deadweight tonnes to dock. Two of the berths were constructed in the late 1960s and one in the 1990s. The jetty also has a small finger pier, closer to the bank and in shallow water. This has four berths for smaller vessels such as barges and coasters. Most of what is carried over the jetty comes across the deep water berths rather than the finger pier. Total uses the jetty for all its imports of crude oil. CoP uses another facility for such imports, one further down the estuary. It does, however, use about 30% of the jetty’s capacity for import and export of finished product; and Total uses the other 70% of capacity. At present, the jetty is operating at or very slightly below full capacity.

The jetty is essentially a steel and concrete platform for carrying a complex system of plant and equipment (‘the infrastructure’) which is used to transfer crude oil and oil products between vessels at the berths and the manifolds of the two refineries. Although BTDB paid for the initial construction costs of the jetty, HOTT paid for and installed the infrastructure. Under clause 3(7) of the jetty lease, HOTT has the right to remove it at the end of the term. It would, however, cost about £10m to do so. It would also cost at least £60m, and take about two years, to replace what had been removed.

The infrastructure consists of hose rigs (in the case of two of the deepwater berths) and loading arms (in the case of the other deepwater berth and the four small berths on the finger pier). These are what connect to the manifolds of vessels berthed at the jetty; and they link the vessels to a system of pipework, manifolds and valves that run the entire length of the jetty to the south bank of the estuary. From the south bank of the estuary, the pipework continues inland for about 5 kilometres (over property not demised by any of the leases) where it meets an installation called the common pumping station (‘CPS’) (also not on land demised by any of the leases). The CPS contains a further system of valves and booster pumps. The CPS is used to control and boost the flow of crude oil or oil products between the refineries and the vessels: without the CPS, the IOT will not function. The CPS is connected to the buffer tank farms at the two refineries.

Also on the south bank of the estuary, near where the jetty meets land, there is a small tank farm. This is not of the scale that would be found with a merchant liquid bulk terminal. It is too small for those purposes, and is used by HOTT only for the short term storage of small quantities of oil products, in their passage from the refineries to barges and coasters berthed at the finger pier, and when changing products in the pipelines.

The operation of the IOT is carried out on behalf of the refineries by Associated Petroleum Terminals (Immingham) Ltd (‘APT’). APT, like HOTT, is jointly owned by Total and CoP. The operation of the IOT is a complex process and only functions by reason of (a) APT’s skilled and knowledgeable workforce, and (b) its bespoke software, operating systems, manuals and so on created and developed over the years. It is common ground that the IOT (specifically the three deepwater berths) is being used at or near maximum capacity. Third party traffic (ie vessels berthing at the IOT not in connection with the two refineries) could not be introduced (a) without disrupting the service to the refineries, or (b) without first incurring capital expenditure on the IOT to add a new berth and install additional infrastructure so as to reduce the length of time that vessels spend on the current berths (and there are also unresolved engineering concerns as to whether any of this is in fact technically feasible). So far as point (a) is concerned, the refining processes carried on by Total and CoP are continuous, in the sense that oil refineries cannot readily be shut down and then started up again; and, because the buffer tanks at the refineries are small, any disruption of the service provided to the refineries by the IOT is likely to interfere with the efficient operation of the refineries themselves. The two refineries together account for about 25% of the present oil refining capacity of the United Kingdom. For this reason, the Department of Energy and Climate Change has sought and obtained from ABP an assurance that, whatever else happens, the IOT will continue to provide an effective level of service to the refineries. The crude oil and oil products carried by Total and CoP over the IOT amount to about 20 million tonnes a year, being a significant proportion, by tonnage, of the entirety of what passes through the Port of Immingham.

That summary of the facts is probably a sufficient summary of the background to the short issue of law that is raised by ground 1 of HOTT’s appeal.

ABP’s amended Defence to HOTT’s claims for new tenancies of the IOT asserted that ABP:

The issue before the judge was whether ABP had established that intention. That was a question of fact for the judge which had to be answered by considering the two requisite elements making up the necessary intention: (a) did ABP have a fixed and settled desire to do that which it intended to do; and (b) did ABP have a reasonable prospect of being able to bring about its desired result: see Cunliffe v. Goodman [1950] 2 KB 237, at 253, per Asquith LJ; and Gregson and Another v. Cyril Lord Ltd [1963] 1 WLR 41, at 45, 46 per Upjohn LJ. The first element of the test is a subjective one. The second is an objective one. In the present case, the judge held that ABP did have the requisite subjective intention; he said, at [130], that he had no doubt that ABP had a genuine, firm, settled and unconditional intention to re-occupy the IOT at the termination of the leases; and, at [131]:

There is no challenge to those findings. What is challenged under ground 1 is that the judge was entitled, as he did, to find that the second element of the test, the objective part, was also satisfied. This part of the test has been variously described in the authorities. It is sufficient to refer to Upjohn LJ’s exposition of it in Gregson’s case, [1963] 1 WLR 41, at 48, where he explained it thus:

The issue in relation to the second element is that, as HOTT puts it in its skeleton argument, ABP cannot implement its intention without the complete assistance of HOTT. HOTT will be entitled to remove the infrastructure on the termination of the leases, but if ABP is itself to provide a continued service to the refineries it will need to acquire it, just as it will need HOTT to provide it with its expertise, personnel, proprietary software and systems manuals. ABP has recognised that and has sought to agree terms with HOTT for such acquisition. HOTT has, however, steadfastly refused to co-operate, nor will it be prepared to do so unless (1) ABP has first succeeded in its opposition to the grant of new tenancies under section 30(1)(g); and (2) Total and CoP do not reach a consequential decision to close down either both refineries, or at least the LOR.

The judge recognised the fact of what he called HOTT’s ‘posturing’ but made the following unchallenged findings of fact as to what would happen on the termination of the leases:

On that finding the judge concluded that ABP had also established the second element of the ‘intention’ that it had to prove, the objective element, and held that it had therefore proved for the purposes of section 30(1)(g) that ‘on the termination of [the current tenancies it] intends to occupy the holding for the purposes … of a business to be carried on by [it] therein …’. HOTT’s challenge to the soundness of that conclusion is that it involved an impermissible process of circularity. Its point, before the judge and before this court, was and is that the only way in which ABP was claiming to prove the requisite element of intention was by relying on a state of affairs that will only arise once it has succeeded in demonstrating that it has the requisite intention to entitle it to oppose the renewal of the tenancies. More shortly, it is not legitimate to consider the viability of ABP’s stated intention on the hypothesis that it has already succeeded in opposing the renewal of the tenancies. The correct, and prior, question is whether it is able to show the requisite intention that will entitle it to oppose their renewal.

Upon reading HOTT’s skeleton argument, and before looking more closely at the language of section 30(1)(g) and reading the most relevant authority (the Westminster City Council case), I admit to having had provisional sympathy for HOTT’s point. Having now considered the legislation and that authority with the benefit of full argument, I have come to the conclusion that the judge’s approach to the question was correct. In my judgment, the Westminster City Council case provides conclusive House of Lords authority against HOTT’s case.

In the Westminster City Council case, Westminster, the appellant, was the tenant of land around the Paddington Basin of the Grand Union Canal. The British Waterways Board (‘the BWB’) was its landlord. The BWB opposed Westminster’s application for a new tenancy on the section 30(1)(g) ground, its case being that on the termination of the tenancy it intended to occupy the premises for purposes ancillary to the use of the Basin as a marina. Walton J held that the BWB had failed to establish the necessary intention for success under section 30(1)(g). The Court of Appeal reversed that decision and dismissed Westminster’s application for a new tenancy. Westminster appealed to the House of Lords against the decision of the Court of Appeal but its appeal was dismissed.

The issue between the parties in that case turned on a planning point. The BWB’s intended use of the premises involved the making of a material change of use of the premises requiring planning permission under section 23 of the Town and Country Planning Act 1971. As it happened, Westminster was the local planning authority to whom it would fall in the first instance to decide whether to grant or refuse planning permission; and Westminster had made it clear in the proceedings that it would refuse permission. From any such refusal, the BWB would have a right of appeal to the Secretary of State under section 36 of the 1971 Act. No application for planning permission had in fact yet been made. Of direct relevance to the ability of the BWB to satisfy the objective element of its stated intention was the prospect of success that it would have in a notional planning appeal against Westminster’s refusal of a grant of planning permission.

Whereas it was central to Westminster’s argument on that issue that such prospect had to be assessed on the assumption that Westminster, as tenant, continued to remain in possession of the premises, the House of Lords rejected that as wrong. Lord Bridge said, [1985] AC 676, at 680 to 682:

In my judgment, exactly the same approach fell to be applied in the present case. The judge had to assess the objective element of ABP’s stated intention by making the required statutory assumption that it is ABP and not HOTT that is in possession of the premises; and, therefore, necessarily on the assumption that HOTT’s tenancies had determined. That is what he did and he made his findings of fact referred to above as to the probabilities of what would then happen. Those findings were, in my judgment, made on the correct statutory assumption and were findings that showed that the objective element of the required intention was met.

Mr Dowding submitted that the judge’s approach involved a misapplication of what was decided in the Westminster City Council case. He said it decided no more than that the correct statutory hypothesis upon which the landlord’s intention must be tested is that the tenant’s tenancy has come to an end and that the landlord has resumed possession. Whilst the assessment of the landlord’s claimed intention on that hypothesis can legitimately take into account its notional dealings in such circumstances with a third party (in that case, the Secretary of State), it cannot take into account its dealings with the former tenant. For myself, I do not accept that such a limitation on the application of the statutory hypothesis is supported by the Westminster City Council case itself or is otherwise justified as a matter of principle. The report of the Westminster City Council case at [1985] AC 677 records, at 677, that the unsuccessful argument of leading and junior counsel for Westminster was the same as that advanced to us by Mr Dowding, namely that:

I would dismiss HOTT’s appeal on ground 1.

Ground 4 challenges the judge’s findings of fact in [137] of his judgment, which were findings made on the hypothesis that, contrary to his primary findings, HOTT would decline to negotiate with ABP. The judge made these findings in dealing with HOTT’s submission that there were too many hurdles for ABP to cross for it to be able to claim that it had a reasonable prospect of implementing its decision to occupy the IOT. In order to set [137] in proper context, I shall also quote (and in part re-quote) from what the judge said in earlier paragraphs:

HOTT has not challenged the judge’s primary findings that it would be likely to negotiate a commercial arrangement with ABP. The judge made that assessment on the basis of what, as I would hold, was a correct assumption that ABP was in possession of the premises and that HOTT was not; and the judge’s finding in that respect was, as he noted in [138], sufficient to entitle ABP to succeed in its opposition to the grant of new tenancies. Mr Dowding conceded that, if HOTT fails on ground 1, its appeal as a whole must fail: any separate success it might achieve on ground 4 would avail it not at all.

It can therefore be said that there is no point in considering the arguments that were respectively advanced for and against the judge’s alternative findings in [137]. Moreover, in order to be entitled to invite us to do so, HOTT must first surmount an initial procedural hurdle. The judge’s order was made on 29 July 2011. The appellant’s notice, with four grounds of appeal, was filed in time. Patten LJ refused permission on (inter alia) ground 4 on 19 October 2011. Any application by HOTT to renew its application on that ground at an oral hearing had to be filed within seven days after the service of Patten LJ’s order, which was presumably shortly after 19 October, whereas HOTT’s application for an extension of time for renewing its application was not made until 23 December, over two months later (see CPR Part 52.3(4) and (5); and the Practice Direction to Part 52, paragraph 4.20 of which provides that any application for an extension of time should be made promptly). What prompted HOTT to make such application was a letter from ABP’s solicitors on 15 December 2011 pointing out that success on ground 1 alone would not be enough for HOTT. For reasons I have not fully understood, HOTT disagrees with that view, but it nevertheless chose to make its application – in case, presumably, it was wrong in its assessment as to its need also to succeed on ground 4.

I understood it to be agreed before us that the granting of an extension of time requires the court to consider the checklist in CPR Part 3.9, and Mr Nugee went through each point in submitting that there is here no proper case for granting an extension of time. He emphasised that the court ought to infer that, having received Patten LJ’s order, HOTT made a positive decision not to renew its application in respect of the three grounds on which permission was refused, and was only prompted to do so as belatedly as it did when ABP’s solicitors wrote to it mid-December 2011. Mr Dowding’s main response was that as there was anyway going to be an appeal on ground 1, there would be no prejudice to ABP if ground 4 was also considered and that it would therefore be just to extend time.

The bulk of the argument before us turned on the merits of ground 4, with which I will deal first. Mr Dowding’s point about paragraph 137 was to this effect. The hypothesis upon which the judge was proceeding was that HOTT walks away from the negotiations and might (but not would) remove the entirety of the infrastructure, as it would be entitled to do. The judge, in [137], recorded the evidence that ABP would not in those circumstances make an immediate investment by replacing the infrastructure: it would only do so once it had the committed support of sufficient customers to support it. Mr Dowding said that the judge was there correctly recognising that an intention on the part of ABP of that nature was too provisional and exploratory to amount to a sufficient intention for section 30(1)(g) purposes.

The judge, he said, however then went on in [137] to find that ABP would nevertheless make immediate use of the finger pier so as to enable it to offer port services to third parties, even if it would only do so at the beginning on a small scale. That finding was by itself sufficient to make good ABP’s stated intention to use the IOT for the purposes of its own business of running ports. Mr Dowding’s point was not that the finger pier could not in principle be used in the way that the judge found but that that there was no evidence that this was ABPs’ intention if its primary objective – that of reaching agreement with HOTT – ran into the buffers. That was not what the ABP witnesses said they would do. Moreover, if HOTT removed all the infrastructure, that would include the loading arms and pipe lines necessary for the loading and unloading at the berths on the finger pier. The evidence was that it might cost some £1.5m to replace them, whereas ABP’s evidence was that it would not incur expenditure of more than £750,000 unless it was underpinned by orders.

Mr Nugee’s response was that this submission involved a misreading of [137]. He admitted that ABP had not put a Plan B before the judge. Its case was that it expected to do a deal with HOTT, to which it had offered priority, an offer which precluded it in practice from going to other customers until such time as HOTT did finally walk away and which therefore also precluded it from advancing a Plan B. He accepted that there was no specific evidence from ABP that, in such event, it would immediately make use of the finger pier. That, however, is not what the judge found in [137]. What he there found was that, in such event, he had little doubt that ABP would make at least some use of the oil jetty, and his point about the use of the finger pier was simply his example of the type of use that ABP might make of it in the first instance. Mr Nugee emphasised that ABP is not a newcomer to the provision of port facilities. That is its business. During the currency of the leases, the oil jetty has been used exclusively for the refineries. What ABP wants to do on the termination on the leases is to come to an arrangement under which it can continue to provide the oil jetty facilities to the refineries, but also to third parties. There is no doubt, so the judge found, that if HOTT did walk away, ABP would carry out its intention to use the oil jetty for business purposes. Mr Nugee’s submission was that that finding was supported by the evidence that the judge heard; and that it was one that supported the justification of the judge’s conclusion as to the establishment by ABP of the requisite intention.

We were not taken through all the evidence relating to the ‘what if HOTT walks away’ point, but at the conclusion of the submissions of counsel I was left unimpressed that it was seriously arguable that, in [137], the judge was making findings as to ABP’s intention in relation to the use of the IOT for its own business purposes that were not justified by the evidence that he had read and heard. Mr Dowding did not satisfy me that HOTT had any real prospect of showing that the judge had made findings as to HOTT’s intention that were unwarranted by the evidence. Moreover, for reasons given, ground 4 has anyway become an academic one. In the circumstances, I would not extend HOTT’s time for seeking a re-consideration of its permission application in respect of ground 4.

I would therefore refuse to extend HOTT’s time in relation to ground 4 and would dismiss its appeal on ground 1.

I agree.

I also agree.