Inclusive Technology v Williamson

Factual and Procedural Background

This opinion concerns a claim for compensation under section 37A of the Landlord and Tenant Act 1954, which provides compensation to a tenant who quits a holding due to misrepresentation or concealment of material facts by the landlord. The tenancy involved business premises let by the landlord to the tenant, with the original lease term ending on 31 January 2007. The landlord served a notice under section 25 indicating an intention to oppose a new tenancy on the ground of proposed refurbishment work requiring vacant possession.

Initially, the landlord genuinely intended to carry out refurbishment works necessitating possession and communicated this intention to the tenant. However, by around October 2006, the landlord changed position and no longer intended to carry out the works within a reasonable time of the tenancy ending, but did not inform the tenant of this change. Relying on the landlord's earlier representations, the tenant vacated the premises and leased alternative premises. Subsequently, the tenant discovered that the refurbishment works had not been carried out and initiated proceedings for compensation under section 37A.

The lower court found there had been neither misrepresentation nor concealment by the landlord and dismissed the claim. The tenant appealed this decision.

Legal Issues Presented

1. Whether the landlord made a representation, by way of the section 25 notice and accompanying letter, that he intended to carry out refurbishment works requiring vacant possession.
2. Whether such representation was continuing and, if so, whether it became false to the landlord's knowledge by reason of his change of intention.
3. Whether the landlord had a duty to inform the tenant of the change in intention, and if failure to do so constituted misrepresentation or concealment under section 37A.
4. Whether the tenant was entitled to compensation for loss sustained as a result of quitting the holding based on the landlord's misrepresentation or concealment.
5. The appropriate amount of compensation to be awarded if the tenant succeeded.

Arguments of the Parties

Appellant's Arguments

• The landlord's letter accompanying the section 25 notice amounted to a clear representation of intention to refurbish requiring vacant possession.
• This representation was continuing and became false when the landlord changed his mind but failed to inform the tenant.
• The tenant relied on this continuing representation and was induced to vacate the premises.
• The failure to disclose the change of intention constituted concealment or misrepresentation under section 37A.
• The compensation should be based on the difference between the market rent of the former premises and the rent paid for alternative accommodation, rather than the lower negotiated rent figure.

Respondent's Arguments

• The section 25 notice alone does not amount to a representation of present intention to carry out refurbishment works.
• The accompanying letter was no more than a restatement of the notice and did not amount to a continuing representation.
• The landlord had no duty to inform the tenant of a change of mind regarding the works since there was no deliberate concealment or misrepresentation.
• The tenant did not prove reliance on any false representation as the tenant could have made inquiries.
• The compensation, if any, should be limited to the reasonable negotiated rent figure rather than market rent because the tenant was willing to pay £45,000 and the landlord was not obliged to accept less.
• Costs related to the claim and counterclaim should be apportioned accordingly, taking into account dilapidations and overpayments.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by interpreting section 37A, noting it provides compensation where a tenant quits possession due to misrepresentation or concealment by the landlord. The court emphasized that the terms “misrepresentation” and “concealment” should be given their ordinary meaning in context, requiring deliberate conduct for concealment.

The landlord had initially made clear and genuine representations of intention to refurbish requiring vacant possession, as evidenced by prior warnings, conversations, and the section 25 notice with an accompanying letter. The letter was found to be more than a restatement of the notice; it was a clear representation of present intention, thus amounting to a continuing representation.

However, by October 2006, the landlord had decided to defer the works indefinitely and no longer intended to carry them out within a reasonable time after the tenancy ended. Despite this, the landlord did not inform the tenant of the change in intention.

The court found that the landlord's failure to disclose the change of intention constituted concealment because the original representation was continuing and became false to the landlord’s knowledge. The landlord’s explanation that he assumed the notice was irrevocable was accepted but did not excuse the failure to update the tenant given the duty arising from the continuing representation.

The court rejected the respondent’s argument that the tenant should have made further inquiries, holding that the landlord’s continuing representation imposed a duty to correct the false impression.

On the issue of compensation, the court accepted the judge’s approach that the tenant would likely have negotiated a new tenancy at a rent around £45,000 rather than the market rent figure of £38,000, given the circumstances and the tenant’s willingness to pay. The court found no error in this reasoning and upheld the judge’s assessment of compensation, subject to adjustment for immediate receipt of rent over the six years.

The court also addressed costs, ordering that the costs of the appeal be awarded to the tenant with summary assessment, reversing the previous order on costs below, and directing detailed assessment for costs of the claim and counterclaim respectively.

Holding and Implications

The court ALLOWED THE APPEAL IN PART, holding that the landlord made a continuing representation of intention to refurbish the premises requiring vacant possession, which became false when the landlord changed his mind but failed to inform the tenant. This failure amounted to concealment under section 37A, entitling the tenant to compensation.

The court affirmed the judge’s approach to the quantum of compensation based on a realistic negotiated rent rather than market rent and ordered appropriate adjustments.

The decision underscores the importance of fair dealing and good faith in landlord-tenant relations, particularly where statutory rights depend on the landlord’s stated intentions. It clarifies that a landlord’s continuing representation of intention must be corrected if it becomes false to avoid liability for misrepresentation or concealment. However, the court did not establish a broad new precedent beyond the facts of this case.

The order on costs reflects the mixed success of the parties and the complexity of the proceedings, with detailed assessment directed for costs below and summary assessment for the appeal costs.