S Franses Ltd v Cavendish Hotel (London) - Section 30(1)(f) of LTA 1954 explored

The case of S Franses Ltd v Cavendish Hotel (London) Ltd [2018] 3 WLR 1952 was a leap-frog appeal from the High Court to the Supreme Court. The issue was whether it was open to the Respondent landlord to oppose the grant of a new tenancy under Section 30(1)(f) of the Landlord and Tenant Act 1954 if the works which it intended to undertake had no purpose other than to obtain vacant possession, and which would not be undertaken if the Appellant tenant were to leave voluntarily. The appeal was allowed after finding that, on the facts, the landlord did not intend, within the meaning of Section 30(1)(f), to carry out specified works relied upon in the tenant’s application for a new tenancy. [Para 23]

Facts

The landlord had been candid in its approach: it had put forward several successive schemes said to represent works to be carried out. They were designed to be (i) sufficiently “substantial” to qualify under ground (f); (ii) to be too substantial and disruptive to be carried out by exercising a right of entry [thus defeating an argument under Section 31A]; and (iii) to avoid the need for planning permission, which would have enabled the tenant to argue that its likely refusal would make the project ineffective. The judge at first instance had found that the proposed scheme of works was “designed with the material intention of undertaking works that would lead to the eviction of the tenant regardless of the works’ commercial or practical utility and irrespective of the expense”. [Para 5] It was, further, common ground that the proposed works had no practical utility: it would be impossible to make use of the premises after the works had been completed without planning permission for change of use, and the landlord had no intention of seeking such permission. [Para 6]

The ultimate hope of the landlord – in its own evidence – was that the departure of the tenant would facilitate a more ambitious plan of works to add 28 bedrooms to the hotel in the building. [Para 6]

Law and analysis

The decision of the courts below was based upon a line of authority to the effect that the operation of the relevant subsection depended on a two-part test under which the landlord had to prove: (i) that it had a genuine intention to carry out qualifying works; and (ii) that it would practically be able to do so. The landlord’s case was that nothing else matters. [Para 8]

Lord Sumption (who delivered the leading judgment of the majority) accepted the landlord’s submission that “the touchstone of ground (f) is a firm and settled intention to carry out the works. The Landlord’s purpose or motive are irrelevant save as material for testing whether such a firm and settled intention exists. This is implicit in the abundant case law generated by the Act since Atkinson v Bettison [1955] 1 WLR 1127 and it is the plain meaning of “intention” in both ground (f) and ground (g)…

[It]… is also surely right [to say] that as a statutory interference with the landlord’s

proprietary rights, the protection conferred by the Act should be carried no further than the statutory language and purpose require. It confers no more than a qualified security on the tenant. Certain interests of the landlord override whatever security it was intended to confer on the tenant, and one of them is the right to demolish or reconstruct his property in whatever way he chooses at the expiry of the term” [Para 16, emphasis added]

The acid test

Lord Sumption went on to find that the appeal “turns on the nature or quality of the intention that ground (f) requires”, and not the landlord’s motive, nor his purpose, nor the reasonableness of his proposals. [Para 17] This signalled a departure from the line of authority which began with Atkinson v Bettison.

In answer to the question of whether an intention to carry out works conditional upon them being necessary to get the tenant out was sufficient, Lord Sumption found that it was not:

“The problem is not the mere conditionality of the landlord's intention, but the nature of the condition. Section 30(1)(f) of the Act assumes that the landlord's intention to demolish or reconstruct the premises is being obstructed by the tenant's occupation. Hence the requirement that the landlord “could not reasonably do so without obtaining possession of the holding”. Hence also the provision of section 31A that the court shall not hold this requirement to have been satisfied if the works can reasonably be carried out by exercising a right of entry and the tenant is willing to include a right of entry for that purpose in the terms of the new tenancy. These provisions show that the landlord's intention to demolish or reconstruct the premises must exist independently of the tenant's statutory claim to a new tenancy, so that the tenant's right of occupation under a new lease would serve to obstruct it. The landlord's intention to carry out the works cannot therefore be conditional on whether the tenant chooses to assert his claim to a new tenancy and to persist in that claim. The acid test is whether the landlord would intend to do the same works if the tenant left voluntarily.” [Paras 18 – 19; emphasis added]

He also found that the answer would be the same if the landlord proposed demolition rather than works. [Para 19] Further, he opined – obiter – that in a case where the landlord intended to undertake certain works unconditionally but other works only if it was necessary to obtain vacant possession, then the tenant’s claim for a new tenancy would normally fall to be resolved by reference only to the works which the landlord unconditionally intended, but each case would turn on its own facts. [Para 20]

Evidence

Lord Sumption gave guidance as to what might properly be considered in evidence:

“Just as the landlord's motive or purpose, although irrelevant in themselves, may be investigated at trial as evidence for the genuineness of his professed intention to carry out the works, so also they may be relevant as evidence of the conditional character of that intention. In both cases, the landlord's motive and purpose are being examined only because inferences may be drawn from them about his real intentions. Likewise, although the statutory test does not depend on the objective utility of the works, a lack of utility may be evidence from which the conditional character of the landlord's intention may be inferred.” [Para 21]

Lord Briggs delivered his own judgment (with which Lady Black and Lord Kitchin agreed), in which he agreed with Lord Sumption and largely appeared to repeat his observations on the relevance of an investigation into the landlord’s motive or purpose. [Paras 30 and 31]

In short

· The touchstone of ground (f) is a settled intention to carry out the works. The acid test is whether the landlord would intend to do the same works if the tenant left voluntarily.

· The landlord’s motive or purpose are irrelevant in themselves, but may be investigated at trial as evidence for the genuineness of a professed intention to carry out works, and as evidence of the conditional character of that intention.

· A lack of utility may also be evidence from which the conditional character of the landlord’s intention may be inferred, although it is not necessary for there to be an objective utility for the works in order to satisfy the Section 30(1)(f) test.