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By D
13/08/2010

What’s in a (Re)development

Somerfield Stores Ltd v Spring (Sutton Coldfield) Ltd [2010] EWHC 2084 (Ch) (04 August 2010)

This is an interesting case from the District Registry in Birmingham. Although it actually concerns a commercial lease and therefore the Landlord and Tenant Act 1954 it also has relevance for possession actions under the Housing Act 1988 and 1985.

The claim concerns the redevelopment ground (set out in section 30(1)(f)) by which a landlord can oppose the grant of a new tenancy to the tenant on the basis that he intends to demolish or substantially reconstruct the premises. It is settled law that the word ‘intend’ in the legislation must be construed as actually meaning rather more than merely intend, it must constitute a firm and settled desire and also an actual ability to carry through that desire. The crucial aspect of this desire and ability is that the point at which a judgement is to be made is by way of reference to the date of the hearing (per Viscount Simmonds in Betty’s Cafes Limited v Phillips Furnishing Stores Limited [1959] AC 20 @ 35). Where there is a preliminary hearing to determine this issue then the relevant hearing is that preliminary hearing because if the landlord should fail to prove the point at this stage then the preliminary hearing would be the final disposal of the matter of the landlord’s ability to oppose the grant of a new tenancy (Dutch Oven Ltd v Egham Estate and Investment Co. Ltd [1968] 1 WLR 1483).

The wording and interpretation applied to the redevelopment provisions in relation to the 1954 Act is applied equally to the analogous provisions in Ground 6, Schedule 2, Housing Act 1988 and Ground 10, Schedule 2, Housing Act 1985 (see, for example, Woodfall para 24.055, footnote 6).

In this case Spring had served notices on Somerfield in relation to three supermarket sites which it had acquired with a view to redeveloping them seeking to oppose the grant of a new lease. It was, unsurprisingly, relying on the redevelopment grounds. There were some negotiations between the parties but Spring went into administration along the way. Somerfield, rather cleverly, applied for a summary judgement to dismiss the grounds of opposition which would have left the way clear for them to be granted a new tenancy.

This is a crucial issue because at the date of summary judgement it was unlikely that Spring was able to carry out its redevelopment plans. Equally, where a landlord opposes the grant of a new lease on redevelopment grounds it normally does so in the anticipation of having a substantial period of time to obtain the necessary evidence of the desire and ability to redevelop (eg. surveyors reports, architects drawings, planning consents) as the matter moves towards a trial. By using the summary judgement process a tenant could effectively hijack the process and force a timetable on the landlord which will leave them unable to produce the necessary evidence at a summary judgement hearing to be able to show a settled desire and ability to redevelop. Due to the novelty of this argument Somerfield was granted permission to appeal by the lower Court when it dismissed their summary judgement application. Apparently, a number of hearings in the County Courts are now on hold pending the outcome of this appeal.

In a carefully reasoned, and rather clever judgement, HHJ David Cooke drew a clear distinction between a preliminary hearing which was specifically intended to be a final hearing to determine whether the landlord could oppose the grant of a new tenancy and a summary judgement hearing which could only be a final hearing of the landlord’s ability to oppose a lease if it was assumed in advance that the landlord would fail to demonstrate his right to oppose a new lease.

13. If the question is, as Mr Wonnacott submits, to be considered by reference to the date of the summary judgment hearing, what can be meant by the expression “real prospect of succeeding” in CPR 24.2? Either the court would be asked to determine whether the evidence available at the date of the summary judgment hearing was sufficient to show that the necessary intention already existed, or it would be required to ask itself whether at some future trial date the evidence by then produced would be likely to be sufficient to establish the existence of the necessary intention at the date of the earlier summary judgment hearing.

14. If the hearing proceeded along the former lines, the court would not be considering a “prospect” at all but making a finding of fact as to whether the requisite intention existed or not. Evidence at a summary judgment hearing is normally in written form and considered without cross-examination, which would not be a suitable method of making determinations of contested fact.

15. If the hearing proceeded on the latter basis, assuming the landlord got over the “real prospect” hurdle there would have to be a further hearing at which the landlord’s ground of objection would still be in issue, and at which witnesses would be called and cross-examined, and the question would then arise whether the evidence was required to show that the necessary intention existed at the date of the summary judgment hearing, or the later hearing. In this respect, the position would be different from that considered in Dutch Oven, because the trial of the landlord’s ground of objection as a preliminary issue, as considered in that case, would mean that barring any appeal there could be no further hearing at which that ground was still in issue.

16. At any such further hearing, if the court were considering whether the necessary intention was shown to have existed at the previous summary judgment hearing, that would mean that the substantive issue for determination by the court had changed merely by virtue of the fact that an application (necessarily unsuccessful) had been made for summary judgment. If the court were instead to consider whether the evidence then showed that the necessary intention existed at the date of the later hearing, that would mean that the substantive question being tried was no longer that on which the landlord had been required to demonstrate a real prospect of success at the summary judgment hearing.

17. In my judgment, much the preferable view is that the date of the hearing at which the necessary intention must be shown to exist is always the date of the substantive trial of the landlord’s ground of objection. This accords with the passages from the judgment in Betty’s Cafes that I have set out above; it seems to me plain that in all those extracts what is envisaged is a hearing at which evidence is tested and facts found for the purpose of a final determination one way or the other of the landlord’s ground of opposition. It is consistent with the decision in Dutch Oven because the hearing at which the landlord’s ground of objection is determined as a preliminary issue is a hearing of that nature. A summary judgment hearing on the other hand is not; no determination is made of any facts in dispute, and it can only result in the substantive issue coming to an end if the decision goes one way; e.g. if it is the tenant’s application, if that application is successful.

Ultimately, the question to be considered is whether, at the date of the anticipated hearing, the landlord will have a reasonable prospect of demonstrating the requisite intention and not whether he can do so at the date of the summary judgement application hearing. Therefore the decision of the District Judge was upheld and the appeal dismissed.

This decision stops the use of a slightly unfair tactical device in commercial lease renewals which already see an excess of tactical litigation. How often this sort of device is to used in residential leases is open to debate as the redevelopment grounds are usually of limited efficacy anyway.

Posted in: Possession
D is a solicitor specialising in landlord and tenant matters with a London firm.

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