Termination of lease for redevelopment

Business premises (security of tenure) – Application for new tenancy – Landlord requiring vacant possession on termination of lease for redevelopment – Tenant seeking purchase of adjoining site before expiry of lease – Whether tenant obliged to have genuine intention to take up tenancy – Landlord and Tenant Act 1954, s 26(3) Sun Life Assurance plc v Thales Tracs Ltd (formerly Racal Tracs Ltd) and Another

CA: Waller, Hale and Dyson LJJ: 10 May 2001 A tenant of business premises who made a request for a new tenancy, under section 26(3) of the Landlord and Tenant Act 1954, was not obliged to have a genuine intention to take up a new tenancy at the time he made the request, and evidence of his state of mind when he served the request was inadmissible because it was irrelevant.

The Court of Appeal so held in allowing the appeal of the defendants, Thales Tracs Ltd and Thales Properties Ltd, against the judgment of Mr Recorder Black QC, sitting as a deputy judge of the Technology and Construction Court on 1 December 1999, in favour of the plaintiff, Sun Life Assurance plc, in its claim for damages for breach of covenant to repair premises at 88, Bushey Road, Raynes Park, London SW20, and order for i?? 195,703i?? 50 plus interest in the sum of i?? 14,626i?? 83 and dismissal of the defendants' counterclaim for compensation under s 37 of the 1954 Act.

Before expiry of leases of business premises held by the defendant tenants the plaintiff landlord indicated it would resist any renewal of the tenancies on grounds of redevelopment. Before the defendants completed exchange of contracts for the purchase of a site adjoining the premises, they served requests for a new tenancy under section 26 in respect of each lease. The defendants rejected the plaintiff's offer at a later date to renew the leases, did not apply to the court for the grant of new tenancies and vacated the premises on the expiry date.

DYSON LJ said that there was no challenge to the finding that the defendants had no intention of taking up new tenancies when they served their requests. It was common ground that in a case under section 26 the right to compensation under section 37 depended on a request which was either valid or which the parties were estopped from contending was invalid. The words "request" and "proposal" in section 26(3) were ordinary English words. It was not meaningful to ask whether a request or proposal said anything about the state of mind of the person making it.

The meaning of the words was judged objectively by examining them. Considerable light was shed by Sidney Bolsom Investment Trust Ltd v E Karmios & Co (London) Ltd [1956] 1 QB 529, 539. The words should be given an unqualified objective meaning. That accorded with their ordinary meaning and was consistent with the law of contractual offers. Where the Act required an "intention" it expressly said so, for example section 30(1)(f) and (g). Cadogan v Morris [1999] 1 EGLR 59 was only of limited assistance in deciding the question of construction. Words should be read into a statute only if there was some necessity to do so.

The judge wrongly believed that it was inherently unlikely Parliament intended the words to be given their ordinary unqualified meaning. The inclusion of proposals in a request under section 26 was a statutory formality and did not require the tenant to have any particular intention. Evidence of the tenant's state of mind when he served his request was inadmissible because it was legally irrelevant. WALLER and HALE LJJ agreed. Appearances: Kim Lewison QC and Malcolm Sheehan (Catriona Cairns, Solicitor, Racal Group Services Ltd, Fleet) for the defendants; Hazel Williamson QC and Mark Wonnacott (Dibb Lupton Alsop) for the plaintiff.