Humber Oil Terminals Trustee Ltd. v Associated British Ports

MR JUSTICE MORGAN: This is a pre-trial review in four actions where the claimant is Humber Oil Terminals Trustee Limited, sometimes referred to as HOTT, and the defendant is Associated British Ports, sometimes referred to as ABP. The claims are brought under Part 2 of the Landlord and Tenant Act 1954 for new leases in relation to premises which are the subject of four current leases. It is, I think, possible to deal with one of the four as an example of all four. The obvious example is the lease, the primary and most important lease, relating to the oil jetty.

It is relevant to refer to a little of the procedural history of this litigation. The term date in relation to the oil jetty lease was 31 December 2009. It is accepted that that lease created a tenancy within the security of tenure provisions of part 2 of the 1954 Act. On or about 2 January 2009, the lessor served a notice under section 25 of the 1954 Act to determine the current tenancy of the oil jetty on the term date, 31 December 2009. That notice stated that the lessor would oppose the grant of a new tenancy of the oil jetty and the ground of opposition relied upon was that stated in section 30(1)(g) of the 1954 Act.

In due course the lessee applied for the grant of a new tenancy of the oil jetty. The application was made on 21 December 2009 and was in a conventional form for such an application, raising no special or unusual issues. The lessor served a defence to that claim. The defence is dated 15 January 2010. The defence relied, as did the section 25 notice, on the ground of opposition in section 30(1)(g) of the 1954 Act. So far, matters were proceeding in an entirely conventional way. The claim started in the County Court before it was subsequently transferred to this court, and in the County Court on 16 March 2010, the District Judge made an order for the trial of a preliminary issue, the preliminary issue relating to the ground of opposition which had been relied upon.

I will, in case it is later material to refer back to it, read out the precise terms in which the preliminary issue was ordered. The order is as follows:

Up to that point, the case presented no unusual features. However, on 4 August 2010, Deputy Master Lloyd sitting in the High Court, in all four of these actions, gave to the claimant lessee permission to serve an Amended Particulars of Claim raising issues of competition law. That pleading was to be served by 1 October 2010. Somewhat unusually, the Master did not identify the scope of the permission by reference to a draft amended pleading, although that does not seem to have caused any real difficulty in the event.

The Amended Particulars of Claim were in due course served on 15 October 2010. Those Amended Particulars transformed in some respects the issues which had been raised in the litigation up to that time. Speaking very generally , the new issues which were introduced have been described as competition issues. In particular, it is alleged that the intended action, if that is what they do intend, of ABP will involve an abuse by ABP of its dominant position, and such action will be unlawful and, therefore, the intention to carry out that action is not an intention that can lawfully be implemented.

The competition issues are not confined to issues arising under section 30(1)(g). There are also competition issues as to the alleged charging of an excessive rent, whether under section 24A of the 1954 Act, interim rent, or section 34 of the 1954 Act in relation to a possible new tenancy of the premises. But as I indicated, amongst the matters put forward are allegations that the lessor’s reliance upon the ground of opposition in section 30(1)(g) will be unlawful as an abuse of a dominant position.

I need not quote in any detail from the detailed pleading. It is sufficient for present purposes to refer to the prayer for relief in this amended pleading. Paragraph 1 of that prayer seeks a declaration that the defendant may not rely upon ground (g) of section 30(1) of the 1954 Act to resist the claimant’s application for new tenancies pursuant to the provisions of section 24 of the 1954 Act. The second paragraph of the prayer for relief seeks a declaration that, amongst other things, any attempt by the lessor to rely upon ground (g) in section 30(1) would be an abuse of a dominant position.

As I have indicated, the Amended Particulars of Claim came in October 2010. The defendant lessor has not served a defence in relation to that amended pleading. Instead, the lessor applied to strike out the amendments, and that application to strike out came before the Chancellor in February of this year. He held a hearing on 1 and 2 February 2011 and gave a reserved judgment on 24 February 2011. His decision was to the effect that the amended paragraphs were to be struck out. He refused permission to appeal on the ground that the appeal had no real prospect of success. The lessee subsequently applied to the Court of Appeal for permission to appeal. That application came before Patton LJ at an oral hearing as recently as 17 June 2011 and the learned Lord Justice gave permission to appeal to the Court of Appeal.

So far as one can predict, and there is a fair measure of consensus from both sides on this, the appeal is likely to take two days. It may very well be heard in December of this year. Having regard to the issues raised by the appellant’s notice, it is an appeal where the Court of Appeal might well reserve their decision, and by the time that the decision has been drafted, released to the parties and handed it down, the date for judgment might be as far away as 1 February 2012.

In the meantime, whilst matters have been raised and pursued in the Court of Appeal, the actions have been continuing through certain procedural stages. I heard a case management conference in these matters in April of this year and I made an order giving directions in early May 2011. Paragraph 16 of the order that was made in that way said that there was to be a pre-trial review on 27 June 2011. The pre-trial review was to deal with the preliminary issue, which is the issue directed by the District Judge, and also an application for interim rent which I have not previously described. Paragraph 16 of the directions indicated that the purpose of the pre-trial review was to consider whether the interim rent application and the preliminary issue were both ready for trial and whether they could both properly be tried within the existing trial window. In May of this year, it seemed that the principal concern was whether both of those issues could be tried in a five-day trial period. I should say that the window for that trial opens on 18 July 2011.

Today, it seems to be common ground that a five-day trial period will not be sufficient to deal with both interim rent and the preliminary issue, and the lessor has submitted to me that the appropriate course is for the preliminary issue, with or without some drafting modifications, to go forward for trial in that trial window. The position taken by the lessee is that the grant of permission to appeal in recent days has transformed the character of this dispute so that it is no longer appropriate to have anything tried in July 2011. Instead, it is said that what must happen is that the case should effectively not make progress to a trial until after the decision of the Court of Appeal is known. After that decision is known, it will be appropriate to take stock afresh and consider how the matter should go forward thereafter.

Before I turn to the submissions which have been made and the difficulties which are said to arise in the event of a trial of the preliminary issue in July of this year, I ought to refer albeit briefly to certain statutory provisions. Section 24(1) of the 1954 Act permits a tenant to apply in certain circumstances to the court for the grant of a new tenancy. It is pursuant to that subsection that the lessee has made the four applications which are before the court. Section 25 provides for a landlord to terminate a tenancy by giving a notice under that section. It is when a lessee receives such a notice that a lessee is able to apply to the court for a new tenancy. Section 25 contemplates that the notice may oppose the grant of a new tenancy on certain grounds.

Section 29(1) provides that on an application under section 24(1), the court shall make an order for the grant of a new tenancy and for the termination of the current tenancy immediately before the commencement of the new tenancy. That is subject to section 30 and indeed section 31. Section 30(1)(g) identifies a ground of opposition that a landlord may put forward. I will read the statutory wording. It is as follows:

So in the ordinary case, when a ground of opposition is adjudicated upon at a trial, the trial judge knows there and then that he should either order a new tenancy under section 29(1) or not make an order for the grant of a new tenancy by reason of section 31(1). When reading paragraph (g), I referred to the words in it as follows, “on the termination of the current tenancy”. That brings in relevantly the provisions of section 64 of the 1954 Act. That is headed “Interim continuation of tenancies pending determination by the court”. In short, whilst an application for a new tenancy is taking its course through the courts, the current tenancy does not end. It does not end on the date in, for example, the landlord’s section 25 notice; it potentially continues thereafter until one is clear as to what is the fate of the application. Is the outcome of the application the grant of a new tenancy or the dismissal of the application?

The period of interim continuation continues past the date when the matter is disposed of. It continues for a period of three months, three months not from the date of the relevant judgment but from the date when the matter is finally disposed of. That brings in section 64(2) so that a matter is not finally disposed of until the time for appealing has expired. Thus, if a court dismisses an application for a new tenancy because the landlord has established a ground of opposition, the current tenancy continues past the date of judgment for three months plus the time for appealing, at present 21 days. Indeed, if there is an appeal, the period of interim continuation can be thereby lengthened. These provisions are well known and their operation well understood, although they are said to cause a particular difficulty in the circumstances of the present case.

The tenant’s submission is that in view of the fact that there are competition issues raised by the amended pleading, which pleading may be reinstated by order of the Court of Appeal some time later this year or early next year, it is simply not possible to try the preliminary issue which has been ordered. There are two particular points of principle raised as to the preliminary issue. The first is that the preliminary issue as drafted refers to the defendant intending to occupy the holding. No doubt, when the issue was drafted, it was contemplated that there would be a conventional inquiry into the state of the landlord’s intention and if, as a matter of fact, the landlord established its intention, then it would establish what was needed for the purpose of the preliminary issue. Mr Dowding QC, who appears with Mr Sefton on behalf of the tenant, says that the matter is now very much more difficult in view of the competition issues which have been raised. The tenant’s case is that it is unlawful to have the intention which this landlord asserts that it has. Therefore, when the court comes to address the preliminary issue, it must first consider the competition issues. If the tenant is right on the competition issues, the result must be that the landlord fails to persuade the court that it has an intention, namely a lawful intention to occupy the holding for the purposes of its business.

Mr Nugee QC, who appears with Mr Lindsay on behalf of the lessor, submits that this is not a difficulty. What is required, perhaps, is some minor drafting change to the preliminary issue so that it is made clear that the investigation at a trial in July of this year into the landlord’s intention is subject to the impact of the lessee’s arguments that the implementation of such an intention would be an abuse by the lessor of its dominant position. I accept that if the preliminary issue were modified in that way, it would be possible to have a trial of the factual matters which are very much in contention, as I understand them, as to the intention of the lessor. That trial, if it were to take place in July, would not go into the question of abuse of dominant position. There is no such plea at present in the pleadings, it having been struck out. If the Court of Appeal were to reinstate that plea, then there would be further pleadings and the matter on one outcome would have to be looked at at a later time.

The next suggested difficulty in trying the preliminary issue in July is that, as drafted, the preliminary issue refers to on the determination of the claimant’s current tenancy. If the fact of the landlord’s intention was the only issue arising as to this ground of opposition, the trial judge in July would know that three months and three weeks following an order dismissing the application for a new tenancy, the current tenancy would come to an end and the lessor would be entitled to possession. Mr Dowding says that if there were to be a trial in July against the background of an outstanding appeal to the Court of Appeal, the trial judge simply would not know when the current tenancy would determine. Even if the lessor established all the facts relevant to the purpose of paragraph (g), the court in July could not make an order under section 31(1) there and then dismissing the application for a new tenancy. The court would have to hold its hand until one knew rather more about the fate of the competition issues in the Court of Appeal and possibly at a subsequent trial if one became necessary.

Mr Nugee responds to that suggestion by saying that the preliminary issue as drafted is perfectly satisfactory. It refers to the determination of the current tenancy. Although one does not know today, and one would not know at a trial in July, when that date would arrive, one knows how the concept is given effect in section 64 and one can discuss the matter on various alternative bases. Indeed, Mr Nugee was prepared to accept that his case should be tested by reference to the earliest date at which the tenancy could conceivably end if the competition issues evaporated from the case, namely the usual date, three months and three weeks after the judge gives judgment on the preliminary issue.

The alternative to leaving the preliminary issue as it stands, is to have a minor modification of the preliminary issue so that instead of fixing the issue by reference to the determination of the current tenancy, something which is uncertain today and will be uncertain in July, instead the preliminary issue is modified so that it refers to the court trying the question whether the defendant intends to occupy the holding for the purposes or partly for the purposes of a business to be carried on by it therein, and if so, when and in what circumstances the landlord so intends. That could enable the court to make appropriate findings of fact reflecting its assessment of the evidence, which findings of fact can then be applied to the events as they later emerge.

The landlord’s case as presented by Mr Nugee is to the effect that a preliminary issue, with or without the modifications that I have identified, is a useful issue to have determined and have out of the way in July of this year. Mr Nugee makes a number of other submissions. He says that a trial in July will bring an element of certainty in one very important respect, the factual issues as to the ground of opposition. In other respects, the future is uncertain. One does not know for certain how matters will develop, and he accepts that I cannot make predictions as to the outcome of the various arguments. In those circumstances, it seems to me certainty and progress is desirable. He says the parties are ready for a trial in July. He says that the matter has taken a considerable time to get this far already, and he also importantly stresses that there is a considerable disadvantage to the lessor in this case, if the time when the current tenancy comes to an end is postponed.

In the course of discussion, counsel on each side have taken me through the timetable dependant on whether I direct the trial of the preliminary issue in July or whether I vacate the trial in July leaving matters to be refixed when the outcome of the Court of Appeal is known. It is clear that the landlord will be disadvantaged if I vacate the July trial date. In particular, if there will eventually come a point when the landlord recovers possession of the premises, and can use the premises for its own business producing an income to be received by the landlord, it is better from the landlord’s standpoint, that that point is arrived at sooner rather than later. Conversely, if there are to be new tenancies here, then the landlord would wish the period during which an interim rent is payable to be shorter rather than longer. When it ceases to be payable, it will be replaced by a rent under section 34 of the 1954 Act which is likely to be higher. I accept Mr Nugee’s submission that his client will be disadvantaged financially if the trial does not take place in July of the issue as modified as I have indicated.

Mr Dowding submits that a modification of the preliminary issue will simply be unworkable. It will not be possible for the trial judge to make meaningful findings which will be of assistance to the parties. I disagree. It seems to me that there are issues between the parties which will take some time to investigate and determine, and which will be determined by reference to the issue as I have described it.

The matter which has caused me some pause is on the trial of the preliminary issue, as I have identified it, and wholly unusually in cases of this kind, it will not be possible for the trial judge following the hearing in July to either definitely make an order to grant a new tenancy or definitely dismiss the application for a new tenancy, subject to this. If the landlord fails on the facts to establish any relevant intention to the purposes of paragraph (g), then the trial judge will be able to order the grant of new tenancies to the lessee. One would have thought that that would have been a very favourable outcome to the lessee which the lessee would wish to bring forward to the earliest time.

If the lessee fails on the facts on the preliminary issue as I have described it, then it will not be possible for the court to dismiss the applications for new tenancies. The court’s decision on that question would have to take into account the outcome of the Court of Appeal and any subsequent proceedings. For example, if the appeal were dismissed on, for the sake of argument, 1 February 2012, then the landlord would, one expects, have established enough to be entitled to have a dismissal of the application for a new tenancy. If conversely the appeal is allowed, there will have to be a process gone through determining the competition issues so far as they relate to paragraph (g). If the landlord loses those competition issues, then the tenant will be granted a new tenancy. If the landlord succeeds on those competition issues, then in the ordinary way one would expect the court to dismiss the applications for a new tenancy.

This point, namely that there will be a gap in time between the judge making his findings of fact in July 2011 and a subsequent date (depending precisely on what happens on and following the appeal) when the court is asked to make a final disposal of the proceedings gives rise to the difficulty which is stressed by Mr Dowding. For example, what would happen if there was reason to believe that between July 2011 and that subsequent date, the landlord somehow had changed its intention. One cannot predict the future. The landlord might be the subject of a takeover and the new owners of the landlord might take a different view as to the subject matter of this case. Another alternative is if the landlord got into difficulties with its competition arguments and it wished to trim its case so that it did not fail in relation to the competition arguments; there is a possibility that that might have an impact on its previous stated intention which had been identified in the findings of fact of the trial judge.

It seems to me that those possibilities can be accommodated in a way that is fair to both parties and also loyal to the statutory provisions. I will take the more straightforward example first. Assume that on or about 1 February 2012, the Court of Appeal dismisses the appeal; the competition issues in relation to paragraph (g) will, therefore, not go forward and not need to be determined. That means that the landlord has established in July 2011 that it has a relevant intention for the purpose of paragraph (g), and shortly after 1 February 2012, the court can be asked to make a final disposal order either dismissing the application for a new tenancy or granting the application for a new tenancy. If at that point the lessee wishes to put forward the case and can show grounds for so doing that the findings of fact made by the judge following the trial in July 2011 are no longer appropriate, then there will be an opportunity for the lessee to put forward that case, and if it is a good case, it will be upheld; if it is a bad case, it will be dismissed.

That is an unusual feature for an application under the 1954 Act. Should that feature cause me to abandon the attempt to have a trial of my modified preliminary issue in July, I think not. I am persuaded that real progress can be made in resolving the whole range of issues raised in this litigation by introducing certainty in a major respect in respect of a major area of contention, namely the facts as to the landlord’s stated intention to occupy for its business.

Mr Dowding raised one other point indicating it was undesirable to proceed in the way that I have indicated. He submits that at the trial in July, if it is to take place, there will be witnesses. In particular, witnesses from the landlord’s side who will be giving evidence as to the intention of the purposes of paragraph (g). If the Court of Appeal reinstates the competition issues into the pleading, then it may be necessary for that same witness, or those witnesses, to return and give further evidence in relation to competition issues. It seems to me that that is not a major disadvantage in the course that I have identified. It is entirely manageable. The issues which arise under paragraph (g) and the issues which arise as to competition law are different issues, and even if similar matters of fact are investigated, they will be investigated from a different point of view. If there were a single trial of all the issues, both of those matters would have to be investigated with the same witness. I do not see any real difficulty in a witness returning to give evidence of the further matter at the further hearing if that is what happens, and of course, it may never happen.

Standing back, my overall conclusion is that this trial should go ahead in the trial window in July and the issue should be the preliminary issue as modified as I have indicated. There is a need for progress to be made in this litigation. I find it unacceptable that a matter that is otherwise ready for trial should be put off for an indefinite period. There are disadvantages to the landlord in putting matters off. I do not regard the landlord as having contributed to the suggested delay. Matters might have been better handled if the competition issues had been pleaded at the outset. In all the circumstances, a trial of the modified issue is workable and worthwhile, and that is what I direct should happen following this pre-trial review.