The Importance Of A Commercial Landlord Being Able To Establish “Intention” For The Purposes Of Contentious Lease Terminations

Macey v Pizza Express (Restaurants) Ltd [2021] EWHC 2847 (Ch)

In this case, Macey (Landlord) unsuccessfully appealed against a preliminary ruling by His Honour Judge Gore QC (Judge) that he had failed to make out his stated grounds of opposition for the grant of a new tenancy under Ground (g) of Section 30(1) of the Landlord and Tenant Act 1954 (Act).

Whilst the appeal judgment in Macey v Pizza Express is somewhat unremarkable (in the sense that it does not attempt to vary or re-state the settled law around the establishing of “intention”), it does provide some useful guidance as to what will be required (by way of evidence) to establish the intention to satisfy the Grounds.

Relevant laws

By way of re-cap, a commercial landlord may terminate a commercial tenancy under the Act via the service of a statutory notice under Section 25 (Notice).

The Notice itself will either be “friendly” (in the sense that it will propose terms for a new tenancy) or “hostile” (in the sense that it will oppose the grant of a new tenancy on any number of the Grounds within Section 30(1)).

Case background

In Macey v Pizza Express, the Landlord served a “hostile” Notice seeking to oppose the grant of a new tenancy under Ground (g) on the basis that they intended to occupy the premises themselves.

By order of Deputy District Judge Bennett, it was ordered that the trial as to whether or not Ground (g) was satisfied was to be heard as a preliminary issue.

At first instance, the Judge determined that preliminary issue against the Landlord and ordered that he pay Pizza Express’ costs. The Landlord then appealed which came before Smith J.

In his judgment, Smith J (rightly) declined to re-visit the factual conclusions reached by the Judge, the important parts of which (in terms of establishing the intention) may be summarised as follows:

1. The Judge did not regard the Landlord as a particularly satisfactory witness and was looking for independent information or “corroboration” of what the Landlord was telling the C
2. Contrary to the above, the Judge noted that the Landlord, in his written statements, made reference to many factual assertions and expressed opinions for which no independent evidence or corroboration was provided.
3. The Judge noted that the Landlord made “bald assertions” with a singular lack of particularity or analysis or explanation”. Indeed, in paragraph 19 of the first instance judgment, the Judge explained that:

4. After highlighting further concerns in the evidence that gave rise to a significant “index of suspicion”, the Judge went on to say that:

5. The Judge did not accept the Landlord’s assertion that “he had crossed as many bridges as he could without committing himself” and, importantly, reiterated the fact that he was not minded to accept the evidence of the Landlord unless it was confirmed from other evidence or sources and/or is undisputed.

Comment

The points highlighted above demonstrate the fact that where a landlord seeks to rely on Grounds (f) and/or (g), they must be able to demonstrate (as at the date of any Hearing) that:

1. They have independent information or corroboration for the statements they are making in any witness evidence in support of the Ground(s);
2. Whilst this may seem obvious, where reference is made to certain documents within witness evidence (in Macey v Pizza Express, the projections were contained within the business plans), they ought to say what the witness evidence is saying that they do. In other words, the Courts will be willing to review and challenge exhibits to witness statements as part of their enquiries as to whether or not a Landlord seeking to rely on such Grounds has “moved out of the zone of contemplation into the valley of decision”; and
3. Whilst evidence of certain preparatory acts will be relevant in determining the intention (such as, in this case, the procurement of licences, DBS checks, food hygiene certificates and so on), this in itself may not be sufficient due to the reasoning of the Supreme Court in S Franses Ltd v. Cavendish Hotel (London) Ltd. In Frances, the Supreme Court held that the marker of relevance in determining whether a proposal had moved out of the zone of contemplation into the valley of decision was the “incurring of substantial costs.” Whilst each case will of course turn upon its facts, landlords must be willing to have committed financially if they wish to terminate the outgoing tenant’s security of tenure.

By virtue of the above, expert advice must be taken before the service of any hostile Section 25 Notice. This is particularly the case since, as we have said, the landlord will be required to prove the intention, on balance, as at any Hearing date.

Tactically, of course, a tenant could choose to issue proceedings for a new tenancy very shortly after receipt of a hostile Section 25 Notice to put the landlord on the “back foot”. It is therefore essential that evidential matters are “in hand” prior to service being effected.