A Value Judgement

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

The Message:

Being excessively litigious could prevent a tenant being granted a statutory renewal lease.

The Case:

Horne & Meredith Properties v Cox and Billingsley [19 March 2014] concerned the renewal of a business tenancy under the Landlord and Tenant Act 1954 and the landlord's opposition to its renewal under a rarely encountered ground contained in section 30(1)(c) of the Act.

Cox and Billingsley were business tenants, whose lease was protected by the Act, potentially, giving them the right to a renewal lease. When the lease came up for renewal, the landlord, Horne & Meredith Properties, opposed a new lease on the ground specified in s30(1)(c). This stated that "the tenant ought not to be granted a new tenancy in view of other substantial breaches by him of his obligations under the tenancy or for any other reason connected with the use or management of the holding". The "holding" is the area let (excluding certain parts) and includes rights of way.

The county court decided that this ground had been established and ordered that the tenants' tenancy be terminated. Key to the decision was the fact that for at least 16 years the landlord and the tenants had been in frequent litigation over alleged obstructions to a right of way granted to the tenants. The landlord maintained that it had been subjected to a remorseless campaign of the tenants issuing proceedings against it. The landlord faced 10 separate sets of proceedings over, in the judge's words, "very spurious or exaggerated legal infringements" of the tenants' right and involving wholly baseless fraud allegations. The cost to the landlord had been huge, its own legal costs for just one proceedings being £300,000. A limited civil restraint order was imposed on the tenants.

The court considered that those reasons legally justified the refusal of the grant of a new lease to the tenants. The tenants appealed against that decision. The issue for the Court of Appeal was whether the judge was right in his conclusion that the sorry history of litigation, which destroyed the landlord and tenant relationship, was capable of being a "reason connected with the use or management of the holding" such as to ground the refusal of a new lease.

The Court held that it could form the basis for refusal. There did not need to be a breach of obligation for a landlord to rely on ground (c). The judge was right to decide that the existence of extensive litigation between a landlord and tenant could amount to a reason connected with the tenant's use or management of the holding.

Where, as in this case, the litigation was concerned with vindicating rights granted under the lease, that litigation was connected with the tenant's use and management of the holding. The mere fact that there is such litigation will not necessarily lead to the refusal of a new tenancy. Ground (c) requires the trial court to ask itself the question whether, as a result of the litigation and the tenant's conduct, the tenant "ought not" to be granted a new lease. Would it be fair to the landlord, having regard to the tenant's past behaviour, for him to be compelled to re-enter into legal relations with the tenant? That is a value judgment on the court's part. The lower court had concluded that the tenants' conduct had grotesquely exceeded any reasonable balance and that was a value judgment, to which the judge was entitled to come.