Chiltern Railway Company Ltd & Anor v Patel [2008] EWCA Civ 178

Case No B2/2007/1680[2008] EWCA Civ 178
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CENTRAL LONDON CIVIL JUSTICE CENTRE
(HIS HONOUR JUDGE COWELL)
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate Friday, 8 th February 2008
Before
LORD NEUBERGER OF ABBOTSBURYLORD JUSTICE MUMMERYLADY JUSTICE ARDEN
Between
THE CHILTERN RAILWAY COMPANY LTD & ANOTHERAppellantPATELRespondent
(DAR Transcript ofWordWave International LimitedA Merrill Communications Company190 Fleet Street, London EC4A 2AGTel No: 020 7404 1400 Fax No: 020 7831 8838Official Shorthand Writers to the Court)
Mr S Merali (instructed by Messrs Merali & Co) appeared for Appellant.Mr A Winter (instructed by Messrs Hollingworth Bissell) appeared for Respondent.
JudgmentLord Neuberger of Abbotsbury:
[1]This is an appeal against orders for possession made on 24 May 2007 in respect of two shops, by HHJ Peter Cowell in the Central London County Court. Those orders were made in the light of his conclusion that the leases of those shops granted to the appellant, Mrs Bella Patel by the respondent, Chiltern Railway Company Limited, were excluded from the protection of Part II of the Landlord and Tenant Act 1954.[2]The legal background is as follows. The Act applies to tenants who occupy business premises (see section 23). By section 24 such a tenant has the right to apply to the court for a new tenancy which can only be refused on specified grounds, some of which carry with them a right to compensation from the landlord. Section 24 also provides that a business tenancy shall continue past its contractual term date unless and until determined by a notice, which complies with the requirements of sections 25, 26 or 27. Section 38 generally renders void any agreement (which I shall call an “exclusion agreement”) which precludes a tenant of business premises from exercising her rights under the Act.[3]However, since 1969 the Act has included provisions whereby parties who are to be the landlord and the tenant under a tenancy of business premises can enter into a valid exclusion agreement. Certain formalities have always been required before such an exclusion agreement can be effective. Until 2003, the prior sanction of the court on the application of both parties was required. However, a different regime now applies. Section 38A(3) now provides that an exclusion agreement:
“…shall be void unless -- (a) the landlord has served on the tenant a notice in the form, or substantially in the form, set out in schedule 1 to the Regulatory Reform (Business Tenancies) (England and Wales) Order; and (b) the requirements specified in schedule 2 to that Order are met.”
[4]The form of notice in schedule 1 to the Order explains that the tenant is giving up the rights given by the Act and emphasises the importance of getting professional advice. The notice also states that, if it is received more than fourteen days before the tenant is committed to the lease, he or she must sign a declaration and (in bold type) that, if the notice is received later than that, the tenant must sign a “statutory” declaration, and for that purpose a visit to a solicitor (or someone empowered to administer oaths) will be required.[5]The principally relevant part of the Order for present purposes is schedule 2, and all references to paragraphs in this judgment are to paragraphs in that schedule. Paragraph 2 says that the notice referred to in section 38(A)3 must, subject to paragraph 4, be served “not less than fourteen days before the tenant enters into the tenancy”. Paragraph 3 which applies “if the requirement in paragraph 2 is met” stipulates that the tenant must, before entering into the tenancy, “make a declaration in the form, or substantially in the form, set out in paragraph 7”. Paragraph 4 applies “if the requirement in paragraph 2 is not met”: in other words if a notice is not served on the tenants at least fourteen days before the tenancy is granted. It states that before the tenancy is granted, the landlord must serve a notice on the tenant and the tenant must:
“make a statutory declaration in the form, or substantially in the form, set out in paragraph 8.”
Paragraph 5 provides:
“A reference to the notice, and, where paragraph 3 applies, the declaration, or, where paragraph 4 applies, the statutory declaration, must be contained in or endorsed on the instrument creating the tenancy.”
[6]In the form of declaration set out in paragraph 7, the tenant and the tenant’s address must first be stated. The tenant must then “declare” first, that he or she proposes to take a tenancy of the premises as identified from the landlord who must be named for a term whose commencement date must be stated; secondly, that the tenant proposes to agree the provisions of sections 24 to 28 of the Act are to be excluded from the tenancy; thirdly, that the landlord has, “not less than fourteen days before” the tenant is committed to the tenancy, served a notice; and fourthly, that the tenant has read the notice and accepts the consequences of the proposed agreement. The form ends:
“DECLARED This … day of …”
[7]The form of statutory declaration set out in paragraph 8 is very similar, but it has the following differences. First, the tenant must not merely declare but must “solemnly and sincerely declare”. Secondly, the service of a notice by the landlord is not stated to have been effective at any particular time. Thirdly, before the words “DECLARED … day of …” are the words “AND I make this solemn declaration conscientiously believing the same to be true and by virtue of the Statutory Declarations Act 1835”. And fourthly, after the words “DECLARED …day of …” are the words “before me,” (signature of person before whom declaration is made)” and then:
“A commissioner for oaths or A solicitor empowered to administer oaths or (as appropriate).”
[8]The relevant facts of the present case are as follows. On 15 March 2005 Chiltern granted Mrs Patel leases of two shops on the concourse of Marylebone Station in London. Each lease was for a term contractually expiring on 17 July 2006, and each lease was subject to an exclusion agreement. On 3 August 2004, long before the fourteen day period referred to in paragraph 2, Chiltern served a notice on Mrs Patel in respect of each lease. Those notices clearly comply with the requirements of section 1 to the Order.[9]On 10 March 2005, five days before the execution of each lease, Mrs Patel made a statutory declaration in respect of each lease in the form stipulated in paragraph 8. When the leases were granted, each of them contained --purportedly pursuant to the provisions of paragraph 5 -- in clause 8 a statement that the landlord, Chiltern, had served a notice under section 38A(3) on 3 August 2004 and a statement that the tenant Mrs Patel had made a statutory declaration in accordance with paragraph 8 on 10 May 2005. When the leases expired contractually in July 2006, Chiltern claimed possession of the two shops. Mrs Patel resisted the claims on the basis of two arguments. The first argument relied on an alleged estoppel; the second argument was that the requirements of section 38A(3)(b) had not been satisfied and so the tenancies were continuing under section 24. Both these arguments were rejected by HHJ Cowell. My Lady, Arden LJ, refused permission to appeal on the first argument, as she considered that the judge was plainly entitled to reject the contention that an estoppel had been established on the facts he had found. However, she granted permission to appeal on the second argument which raises a short point of law to which I now turn to consider.[10]Mrs Patel’s argument is, of course, the same in relation to each lease, and for the sake of clarity I shall deal with it by reference to one of them. She relies on the fact that the notice in the present case was served in accordance with the requirements of paragraph 2, i.e. more than fourteen days before the lease was entered into, that it follows that paragraph 3 applied, that she should therefore have made a declaration in accordance with paragraph 7, and that under paragraph 5 that declaration should have been recorded in the lease. As it is, however, she contends that no such declaration was entered into and no such declaration was recorded as having been entered into in the lease. Instead, she says, first, contrary to paragraph 3, she did not make a declaration pursuant to paragraph 7 but a statutory declaration purportedly pursuant to paragraph 8; and secondly, contrary to paragraph 5, there was no record in the lease of a declaration under paragraph 7 of having been made. Accordingly, her argument is that neither the requirements of paragraph 3 nor those of paragraph 5 have been met and consequently section 38A(3)(b) has not been satisfied, with the result that the exclusion agreement is “void” under section 38A(3), so that the tenancy has not expired, as no notice pursuant to section 25, 26 or 27 has been served.[11]In agreement with HHJ Cowell, and despite Mr Merali’s commendably concise and clear submissions to the contrary, I consider that this argument is not only unattractive in common sense terms, but that it is bad in law. It would, to use the judge’s words, be “bordering on the absurd” if a statutory declaration was held to be ineffective on the grounds that it differed from the prescribed form because a) it was both expressly and in law in a more solemn form than that form; and b) although it stated that notice was served before the lease was entered into, it did not state that it was served more than fourteen days before the lease was entered into. It would be equally unreal if, assuming the statutory declaration was effective, what was contained in clause 8.2 of the lease was ineffective, because it applied to a statutory declaration rather than a declaration and because it irrelevantly mentioned the wrong paragraph of schedule 2 to the order.[12]Of course, the statutory requirements in relation to a notice or a declaration could be so clearly and unequivocally expressed that strict compliance would be required and that any deviation, however insignificant, from those requirements would render a purported notice or declaration invalid. Sometimes, indeed, although it conflicts with common and commercial common sense, this may be the result because it is correct as a matter of law. However, this is not such a case.[13]It is clear that on the facts of this case that paragraph 3, and not paragraph 4, applied. However, the requirement of paragraph 3 is not that a declaration must be “in the form set out in paragraph 7,” but that it must be “in the form or substantially in the form set out in paragraph 7”. Accordingly, the first issue is whether the statutory declaration in paragraph 8, as used in this case, is substantially in the form of the declaration in paragraph 7. The answer to that question must, in my view, ultimately turn on whether the paragraph 8 form performs all the essential functions of the paragraph 7 form. After all, the purpose of the declaration under paragraph 7, like that of a contractual or statutory notice, is to convey information. In this case, the declarant must confirm certain facts and show that he or she has received and understands certain facts and their legal consequences. One must therefore look at the form prescribed by paragraph 7, in its statutory and commercial context, and see whether the departures, either individually or taken together, from that form, in the statutory declaration used in this case, result in any of the essential purposes of the prescribed form, being thwarted or even significantly blunted. To say that this test is one of substance rather than form may well be correct, but he should not mask the point that the style, even the layout in the prescribed form, may at least in some respects be of the essence.[14]It is unnecessary to develop or explore the application of the test further on the facts of this case. However, it is worth mentioning Davis v Burton [1883] 11 QBD 537, a decision of this court to which attention has been drawn by Arden LJ and which appears to endorse the test suggested. In that case the issue was whether a bill of sale complied with section 9 of the Bills of Sale 1878 Act 1882, which provided that a bill of sale would be void if it did not comply with section 9, which stated that a bill of sale should be “in accordance with the form in the schedule”. At page 540, having said that this “must mean that every bill of sale should be substantially like the form in the schedule”. The then Lord Brett, Master of the Rolls, observed that “nothing substantial must be subtracted from it and nothing actually inconsistent must be added to it”.[15]I turn then to apply this approach to the facts of this case. Despite the submissions to the contrary on behalf of Mrs Patel, I find it quite impossible to accept that the differences between the two documents justify the conclusion that a paragraph 8 statutory declaration is not “substantially in the form” of the paragraph 7 declaration. As my lord, Mummery LJ said in argument, those four words underline the intention of the legislature that mere technical defects, with no substantive effect, should not render invalid a document which performs the task which legislature requires.[16]The fact that a document is a statutory declaration obviously does not prevent it from being a declaration. The fact that, under paragraph 8, the declarant “solemnly and sincerely declares” rather than merely “declares”, the fact that the declaration is said to be made pursuant to the 1835 Act, and the fact that the form is witnessed by a solicitor or a Commissioner for Oaths, cannot in any way prevent a paragraph 8 declaration being substantially in the form of a declaration under paragraph 7. The paragraph 8 form carries the same message of the paragraph 7 form, but in more emphatic and solemn form. What the judge referred to, arguably a little extravagantly, as a general principle of our law that the greater includes the less does seem to me to be in point.[17]As to the fact that the paragraph 8 declaration refers to the notice having been served rather than to its having been served “not less than fourteen days before” the date of the lease, that does not seem to me to be close to representing a significant departure from the paragraph 7 declaration. It is an accurate statement. At worst it may be said to suggest that the tenant had been a little less-protected or informed than was in fact the case. However, in no way can any purpose in the statutory scheme embodied in section 38A(3) and the Order be said to be weakened, let alone thwarted, by that departure from the form of the paragraph 7 declaration. After all, the very fact that an exclusion agreement can satisfy section 38A(3)(b), even where the landlord serves notice less than fourteen days before the tenant became committed to the lease, demonstrates that the fact that whether or not the notice is served before those fourteen days is not an essential factor itself. Accordingly, it appears to me that the paragraph 8 statutory declaration is in the same form as the paragraph 7 declaration, save in the arid sense, that the wrong form of declaration was used, but that is precisely catered for by the words “or substantially in the form” in paragraph 3.[18]Permission to appeal was given in this case because the point is of some significance in relation to the statutory scheme, and indeed of potentially wider significance insofar as it applies to statutory forms generally. It may, therefore, be sensible to add that I find it very hard to see how it could be said, in a paragraph 4 case, that a simple paragraph 7 declaration would be “substantially in the form” of a paragraph 8 declaration. In other words, the converse of the conclusion I have reached in this case does not appear to me to apply. At least part of the thinking behind the two different declarations, as demonstrated by the contents of the notice in schedule 1 to the order, was that the prospective tenant should either be given at least fourteen days between receipt of the notice and being committed to the lease (paragraphs 3 and 7) or, where less time is given, the tenant should have access to a solicitor or Commissioner for Oaths and should have the consequences of the exclusion agreement emphasised before being committed to the lease (paragraphs 4 and 8). Clearly, the latter purpose is, at least on the face of the declaration, thwarted if a paragraph 7 declaration, rather than a paragraph 8 declaration, is used in a paragraph 4 case.[19]This leads to another argument raised on behalf of Mrs Patel, namely that, where legislature provides for two different forms appropriate for two different circumstances, one of the forms cannot logically be in substantially the same form as the other. I do not see why that is right. I can see that it would be surprising if the conclusion was that either form could be used in either circumstance, but that is not my view. As I have said, a paragraph 8 form will do in a paragraph 3 case, whereas a paragraph 7 form will not do in a paragraph 4 case.[20]Indeed, as Mr Winter for Chiltern says, the structure of schedule 2 supports the notion that a paragraph 8 statutory declaration will suffice in a paragraph 3 case. Paragraph 2 indicates that the notice should be served more than fourteen days before the tenant is committed to the lease, although the schedule as a whole clearly permits it to be served later. Accordingly, one would expect the provisions of paragraph 8 to give greater protection in a paragraph 4 case than the protection given by paragraph 7 in a paragraph 3 case. It would therefore be surprising if paragraph 8 protection was not good enough in a paragraph 3 case, and (I add) it would be equally surprising if paragraph 7 protection sufficed in a paragraph 4 case.[21]Mr Winter also made the valid practical point that, when the notice is served, in many cases the parties may not know whether or not the tenant will in fact be committed to the lease in the next fourteen days, either because the precise date of service of the notice on the tenant may not be known to the landlord or, even where it is known, neither party may know precisely when they would be committed to the lease. It could therefore represent something of an unfair trap, particularly for a landlord, if the parties were required to use a paragraph 7 form, and could not use a paragraph 8 form, in a case to which paragraph 3 applied. It would lead to practical difficulties, such as either preventing the parties from entering into the lease when they wanted to, having to delay for fourteen days, or the tenant being put to the rather absurd expense of having to execute a paragraph 7 declaration and a paragraph 8 statutory declaration, to wait to see whether more than fourteen days elapsed between the service of the notice and the tenant being committed to the lease.[22]That leaves the second point, namely that, even if the paragraph 8 statutory declaration satisfied the requirements of paragraph 3, it is said by Mr Merali that clause 8.2 of the lease did not satisfy the requirements of paragraph 5. Again that argument appears to me to fail once one identifies the alleged failure and considers it in the light of the statutory wording and purpose. A statutory declaration is a declaration, and as the contents of clause 8.2 were otherwise accurate, this argument stands or falls on whether the reference to paragraph 8 in clause 8.2 of the lease means paragraph 5(d) is not complied with because this was a paragraph 7 case, not a paragraph 8 case. Although paragraph 5 undoubtedly requires a reference in the lease to the declaration which was made, it does not state in that reference that the parties must identify the specific paragraph under which the declaration was made. I do not consider that the reference to paragraph 8 in clause 8.2 of the lease -- which was otherwise accurate and which otherwise complied with paragraph 5 -- means that paragraph 5 was not satisfied. Apart from the arid point that it refers to the wrong paragraph of schedule 2 to the Order, the only criticism that can be made of the reference to paragraph 8 is that it implies that Mrs Patel was given notice less than fourteen days before she became committed to the lease, whereas she was given more than fourteen days. Nobody would be confused by this in this case because clause 8.1 given the date when she was served with the notice.[23]But in any event, that point goes nowhere as, whatever is the case, the legal consequences are identical. If a successor to either party or another interested third party, read clause 8.2 of the lease, he or she would reach precisely the same conclusion as to the legal position, namely that there was a valid exclusion agreement whether the clause contained a reference to paragraph 7 or to paragraph 8, or to neither paragraph. The simple and, to my mind, conclusive point is that the essential information required by paragraph 5 -- namely that a notice and a declaration, as required by section 38(3)(b), had been respectably served and made -- was contained in the lease.[24]A shorter way of reaching the same conclusion on the second issue is that if (as I consider to be the case, for reasons already given) a paragraph 8 statutory declaration would satisfy the requirements of paragraph 3, then clause 8.2 records that an effective declaration for the purposes of paragraph 5 was made in any event.[25]Accordingly, for these reasons, which are essentially the same as those given by the judge, I for my part would dismiss this appeal.

Lady Justice Arden:

[26]I agree for all the reasons which Lord Neuberger has given. In particular, I agree with him that a simple declaration under paragraph 7 in schedule 2 to the Regulatory Reform (Business Tenancies) England and Wales Order 2003 would not suffice in a case to which paragraph 4 of that schedule applies. I would add that the appellant was unable to point to any policy interest that could possibly be served by accepting the appellant’s submission in this case. Mrs Patel received what Parliament, in the 2003 order, clearly regarded as superior protection for a prospective business tenant.

Lord Justice Mummery:

[27]I agree. The appeal is dismissed.

Order

Appeal dismissed

Cited in 3 later judgments