Gill v Lees News Ltd

Factual and Procedural Background

This appeal concerns a landlord's opposition to the grant of a new tenancy under Part II of the Landlord and Tenant Act 1954 (the "Act"). The procedure for granting a new tenancy is initiated either by the landlord serving a notice under section 25 terminating the current tenancy or by the tenant requesting a new tenancy under section 26. The landlord may oppose the grant of a new tenancy by serving a notice or counter-notice stating the grounds of opposition, which are limited and cannot be amended. The grounds relevant in this case include breaches related to repair and maintenance obligations, persistent delay in paying rent, and other substantial breaches connected with the tenant's use or management of the holding.

The tenant, Company A, held two business leases of premises in The City. The landlord, acting as trustee of a pension scheme (Company B), opposed the grant of new tenancies following Company A’s request under section 26. The landlord relied on grounds including disrepair caused by the tenant’s breach of repairing covenants, persistent rent payment delays, and other substantial breaches. After a trial, the judge found that although the premises were in substantial disrepair at the date of the landlord’s counter-notices and there had been persistent delays in rent payment, the disrepair had been remedied by the hearing date and the rent delays were minor and unlikely to recur. The judge concluded the landlord had not established that the tenant "ought not" to be granted a new tenancy and ordered new tenancies to be granted. The landlord’s first appeal was dismissed, leading to this second appeal focusing on the trial judge’s decision.

Legal Issues Presented

1. By reference to what date or dates must the grounds for opposing the grant of a new tenancy be established?
2. What is the scope and nature of the value judgment implicit in the phrase "the tenant ought not to be granted a new tenancy"?

Arguments of the Parties

Appellant's Arguments

• The landlord argued that the court is not restricted to a single point in time when assessing grounds of opposition but may consider the tenant’s conduct over the entire tenancy period.
• The landlord contended that the tenant’s conduct during litigation, including concealment of repair works and misleading the court, undermined the landlord-tenant relationship and justified refusal of a new tenancy.
• It was submitted that the question whether the tenant "ought not" to be granted a new tenancy should be approached solely from the landlord’s perspective, disregarding hardship to the tenant.
• The landlord sought to introduce an additional ground relating to the manner in which repairs were conducted, but permission to raise this on appeal was refused.

Respondent's Arguments

• The tenant argued that the material date for assessing grounds of opposition, particularly disrepair, should be the date of the hearing, allowing the tenant to remedy breaches before the court’s decision.
• The tenant maintained that the landlord’s concerns about breaches by predecessors were irrelevant and that the landlord’s grounds must relate to the tenant’s own conduct.
• The tenant emphasized that the landlord had a "hands-off" approach and that the tenant’s business was their livelihood, which supported the judge’s conclusion that a new tenancy ought to be granted.
• The tenant denied that the relationship with the landlord had irreparably broken down despite the litigation conduct concerns.

Table of Precedents Cited

Court's Reasoning and Analysis

The court undertook a detailed analysis of the statutory grounds of opposition under section 30(1) of the Act, focusing primarily on grounds (a), (b), and (c). It examined the appropriate material time for assessing the grounds, concluding that the court must consider the tenant’s conduct and the state of the premises both at the date of the landlord’s notice or counter-notice and at the date of the hearing. This approach aligns with the majority view in the House of Lords decisions and avoids limiting the court to a single snapshot in time.

The court rejected the tenant’s argument that only the state of repair at the hearing date matters, recognizing that the tenant’s past breaches remain relevant to the "ought not" discretion. The court emphasized that the grounds of opposition are fault-based and the overall tenant conduct during the tenancy is material.

Regarding the interpretation of "ought not," the court agreed with authorities that this phrase entails a discretionary value judgment by the court, balancing the landlord’s interests against the tenant’s past behaviour and future prospects. The court acknowledged that the Act interferes with freedom of contract to protect tenants but that discretion to refuse a new tenancy is narrow and focused on fairness to the landlord.

The court considered the landlord’s submission that the tenant’s litigation conduct, including concealment and misrepresentation about repairs, justified refusal of a new tenancy. However, the trial judge had taken this conduct into account under ground (c) and found it insufficiently serious to deny the tenancy. The appellate court found no basis to disturb that assessment.

The court preferred a holistic approach to grounds (a), (b), and (c), rejecting the compartmentalized approach advocated in some cases, and endorsed the trial judge’s cumulative consideration of breaches and conduct. It also refused to allow new grounds relating to the manner of repairs on appeal, consistent with procedural fairness principles.

Finally, the court found no error in the trial judge’s balancing of the landlord’s and tenant’s interests, including the landlord’s "hands-off" approach and the tenant’s business livelihood, which supported the conclusion that the tenant "ought" to be granted a new tenancy.

Holding and Implications

The court DISMISSED THE APPEAL, affirming the trial judge’s decision to grant new tenancies to the tenant.

The direct effect of this decision is to uphold the tenant’s right to new tenancies despite past breaches and litigation conduct, provided the breaches have been remedied or are not substantial enough to justify refusal. The ruling confirms the court’s discretion to consider the tenant’s overall conduct and circumstances up to the hearing date and to exercise a value judgment focused on fairness to the landlord. No new legal precedent was established, but the judgment reinforces the existing framework for assessing landlord opposition grounds under the Landlord and Tenant Act 1954.