IESC 52 · Supreme Court

THE SUPREME COURT

290/00

Murphy J.

Murray J.

Fennelly J.

BETWEEN

TWIL LIMITED

APPLICANT

AND

JOHN F. KEARNEY

RESPONDENT

JUDGMENT delivered the 28th day of June, 2001 by FENNELLY J.

The Court is asked by the Circuit Court, His Honour Judge John F. Buckley, in a Case Stated pursuant to section 16 of the Court of

Justice Act, 1947, to answer a number of questions which have arisen in the course of the hearing of an application for a new

business tenancy by virtue of the Landlord and Tenant (Amendment) Act, 1980. (the act of 1980)

THE FACTS

The relevant facts can be summarised as follows:

(a) the premises comprise an area of some 38,000 square feet at Sir John Rogerson’s Quay in the City of Dublin consisting of a

warehouse and ancillary yard space. The learned Circuit Court judge has found that, subject to the questions raised in the

case, they come within the definition of a “tenement” for the purposes of section 5 of the act of 1980;

(b) the premises were the subject of a lease dated the 12th March 1970 made between P. Donnelly and Sons Limited (Lessor)

(the predecessor in title of the Respondent) and Transport and Warehousing (Ireland) Limited (the Applicant under its former

name) for a term of twenty eight years form 1st February 1970. The lease thus terminated by effluxion of time on 31st January

1998, which I will call the termination date;

(c) the Applicant carried on, in the premises, the business of transport and warehousing, which includes the storage of goods

for customers; in some cases where parts of the premises were used for long-term storage, the customer entered a license

agreement with the applicant and had keys to a particular area of the store, which was subdivided into a number of units; it is

unnecessary to consider this aspect of the user of the premises, as I will explain;

(d) the questions posed in the Case Stated centre more particularly on two sub-leases in writing, which I will summarise, each

of which ended within the period of three years prior the termination date;

(e) in 1993, Unit 6 was sub-let for a term of two years and nine months, but this Unit was surrendered after one year; instead,

Unit 2 was sub-let to the same tenant for a term of two years and nine months from 1st April 1994 to 1st January 1996. It was

then handed back and was held on one of the forms of license agreement mentioned in paragraph (c);

(f) Unit 3 was sub-let for a term from 13th September 1993 to 12th June 1996;

(g) the following procedures were carried out pursuant to section 20 of the act of 1980:

- a notice of termination in the prescribed form was served by the respondent on the Applicant on 5th August 1999;

- a notice of intention to claim relief was served by the Applicant on the Respondent on 19th August 1999.

- on 31st January, 2000 the applicant gave notice of application to the Circuit Court to determine its right to relief.

At the hearing of the Application before His Honour Judge Buckley, it was accepted that the Applicant was entitled to a new tenancy

in respect of the parts of the premises which had been occupied by it for the period of three years prior to the termination date, but

the Applicant submitted that "at any time" in Section 13 means that, once the tenant has satisfied the specified qualifying period of 3

years business use, Part II of the Act applied. It was also submitted, in the alternative, that the expression "continuously in the

occupation of the person who was the tenant" included a person occupying as a sub-tenant and that so long as the applicant

occupied the premises for the purpose of its business at the date of termination of the lease it was entitled to relief under Part II.

The Respondent does not dispute that the Applicant should be considered as having carried on business in respect of the areas

covered by the license agreements mentioned in paragraph (c) above, although the first question in the Case Stated concerns that

issue.

The questions posed by the Learned Circuit Judge are as follows:

A. Does occupation of property by a licensee, in the circumstances outlined herein, constitute use by the tenant for the

purposes of carrying on a business within the meaning of Section 13(1)(a) of the 1980 Act.

B. In Section 13(1)(a), does the expression "at any time", when applied to the facts of this case, refer to:-

1. The date on which the Applicant first achieved occupation of the premises for business purposes for a period of three

years, prior or subsequent to the commencement of the 1980 Act,

2. The date of the expiry of the Lease, 31st January 1998,

3. The date of service by the Respondent of the Notice of Termination, 5th August, 1999,

4. The date of service by the Applicant of the Notice of Intention to Claim Relief, 19th August 1999,

5. The date of issue by the Applicant of the Notice of Application 31st January 2000,

6. The date of the hearing before me, or

7. any other relevant date.

C. If "at any time" means the date referred to at paragraph B.1. above, is the tenant entitled to a new tenancy in the entire of

the demised premises notwithstanding that portions were subsequently sublet and particularly during the last 3 years of the

term.

D. Does the occupation by a sub-tenant for a period of time constitute occupation by the person who was the tenant

immediately before that time in Section 13(1)(a).

E. Are there any other circumstances on the facts outlined in which the Applicant is entitled to a new tenancy under the

provisions of Section 13(1)(a) of the 1980 Act.

It is agreed, correctly in my view, that to the extent that the Applicant permitted certain persons or companies to store their goods

in certain designated areas of the store under license agreements, it was nonetheless carrying on a business there. Question A should

consequently be answered in affirmative.

THE LAW

All the remaining questions concern the interpretation of section 13(1)(a) of the act of 1980 and particularly the expression “at any

time.”

The act of 1980 repealed the Landlord and Tenant Act, 1931 ("the act of 1931") in its entirety. However, it retains the essentials of

the notion of the right to a new tenancy - “business equity”- in business premises established by the act of 1931. Business had to be

carried on in the premises by the occupying tenant for a minimum period of three years. It is helpful, for this case, to recall the

antecedents of the section under consideration. For the sake of clarity, I should emphasise that I will recall only those provisions

which relate to leases for terms of years certain, as only they are relevant. It is agreed that the facts of the present case occurred

at a time when they could not be affected by the Landlord and Tenant (Amendment) Act, 1994.

Section 19 of the act of 1931 provided:

"19(1) On the termination within the meaning of this section of a tenancy in a tenement, this Part of this Act shall apply to

such tenement if such tenement complies with any one of the following conditions, that is to say:-

(a) such tenement was, during the whole of the three years next preceding the termination of such tenancy, bona fide

used by the tenant for the time being thereof wholly or partly for the purpose of carrying on a business and,

immediately before such termination, either was held by the tenant thereof under a tenancy from year to year or under

a lease or other contract of tenancy for a term of not less than one year or a lease for a live or lives or had been for

not less than seven years continuously in the occupation of the person who was the tenant thereof immediately before

such termination or of his predecessors in title, or ..."

The troublesome feature of this provision was the special definition given by section 19(2) to the “termination of a tenancy.” For a

case like the present, of termination by the expiration of a term years, it was “the day which is three months before the expiration of

such term.” Thus, the conditions of the grant of the right to a new tenancy – in particular three years business user – could not be

satisfied where the lease was for a fixed period of three years. A Landlord and Tenant Commission was established in 1966 to inquire

into the workings of the law relating to landlord and tenant and, in particular, to furnish an Interim Report on the provisions relating to

grant of new tenancies in the Landlord and Tenant Act, 1931. The latter report dated (Pr. No. 9685) noted that the “artificial

meaning given to “termination” by section 19(2) was criticised” by witnesses who advocated a “meaning more in accordance with

realities.” The Commission recommended the amendment of the definition. For cases of termination by the expiration of a term of

years, it recommended that "termination" be defined as “the expiration of the term or period.” If that simple recommendation had

been followed, the difficulty which has arisen in the present case would have been avoided.

The legislative solution adopted was, however, to provide in section 13(1) as follows:

“This Part applies to a tenement at any time if -

(a) the tenement was, during the whole of the period of three years ending at that time, continuously in the occupation

of the person who was the tenant immediately before that time or of his predecessors in title and bona fide used wholly

or partly for the purpose of carrying on a business ...”

This provision has to be read with section 16 of the act of 1980 which reads:

"Subject to the provisions of this Act, where this Part applies to a tenement, the tenant shall be entitled to a new tenancy in

the tenement beginning on the termination of his previous tenancy, and the new tenancy shall be on such terms as may be

agreed upon between the tenant and the persons granting or joining in the grant of the new tenancy or, in default of

agreement, as shall be fixed by the Court."

The term, “tenant” is defined in section 3 as follows:

"'tenant' means the person for the time being entitled to the occupation of premises and, where the context so admits,

includes a person who has ceased to be entitled to that occupation by reason of the termination of his tenancy;"

Furthermore, section 5 defines the crucial term, “tenement.” One of the conditions of that definition (section 5(1)(a)(iii)) is that the

premises “are held by the occupier thereof under a lease or other contract of tenancy express or implied or arising by statute ..”

The act of 1980 made a number of other potentially relevant changes to the act of 1931 . Section 20 establishes a new procedure for

initiating the claim for a new tenancy. The statutory notice of intention o claim relief may be served by the tenant on any date

“before the termination of the tenancy.” In addition, it may be served “at any time thereafter but before the expiration three

months after the service ... on the claimant by the landlord of notice in the prescribed form of the expiration of the term or

period...” (Section 20(2)(a)) Under the former legislation, the tenant was required, in order to protect his right to a new tenancy, to

serve his notice at least three months before the expiration. The effect of the present provisions is to ensure that the right to a new

tenancy cannot be defeated unless the landlord serves this notice.

Section 21 deals with the giving of application to the court and creates a special difficulty. Sub-section (3) provides:

“An application under this section may be made, heard and determined either before and in anticipation of or after the

termination of the tenancy.”

Section 28 provides:

"Where an application is pending under this Part for a new tenancy or to fix the terms of a new tenancy and the pre-existing

tenancy was terminated otherwise than by ejectment or surrender the tenancy may, if he so desires, continue in occupation

of the tenement from the termination of the tenancy until the application is determined by the Court or, in the event of an

appeal, by the final appellate court, and the tenant shall while so continuing be subject to the terms (including the payment of

rent) of such tenancy, but without prejudice to such recoupments and readjustments as may be necessary in the event of a

new tenancy being granted to commence from such termination."

ARGUMENTS OF THE PARTIES

The first argument of the Applicant is that the expression “at any time” should be read literally: the tenant satisfies the requirements

for a new tenancy, if he can show three years continuous occupancy and business user terminating at any time during the currency

of the lease. At the end of any such three year period, the right to a new tenancy, in a familiar phrase "crystallises". As a matter of

fact, the Applicant says that it satisfied the necessary criteria as long ago as 1983. Counsel accepted at the hearing that this

submission would have the consequence that a tenant in that position could apply to the court and have his right to a new tenancy

determined and the terms fixed in reliance on that fact at a very early point during the term. Thus, he could obtain the grant of a

reversionary lease many years before the end of the current lease. The legislature, it is claimed in explanation of this, went further

than was intended by the Landlord and Tenant Commission. The concept of termination was dropped altogether. Section 21(3) is

cited in support of this point of view; it allows the application to be heard and determined at any time. The Applicant criticised the

High Court decisions in Mealiffe v Walsh [1987] ILRM and Baumann v Elgin Contractors [1973] I.R., while relying on the latter for the

proposition that the act should receive a purposive interpretation.

Secondly, the applicant has submitted that the expression, “continuously in the occupation of the person who was the tenant” in

Section 13(1)(a) includes the occupation of a person occupying as a sub-tenant. This argument turns on the contention that a

comma should be interpolated both before and after the expression, “who was the tenant.” This would separate this from the ensuing

qualification of the tenant as the person satisfying the condition “immediately before that time.” Thus, it would include any sub-

tenant, although counsel accepted at the hearing that a sub-tenant could not be a predecessor in title of the tenant, by reason of

the definition of the latter expression in section 3, where it includes only “all previous tenants under the same tenancy.”

Thirdly, it was submitted that the application of the notion, “at any time”, for consideration of the application continues beyond the

expiry of the term up to such time as the occupation of the tenant is lawfully terminated.

The respondent submits that section 5(1)(a)(iii) shows that the premises to be a tenement must be held by the occupier for the

entire of the relevant three-year period and the Applicant was not so in occupation of the sub-let parts and emphasises that the new

tenancy is to commence form the termination of the previous tenancy. The Respondent did not explicitly contest the literal

interpretation of the expression, “at any time” propounded by the Applicant or its extreme consequences. He says that the Applicant

has, in fact, relied in this particular case on the situation existing during the last three years of the lease and not on having satisfied

the statutory requirements as long ago as 1983.

CONCLUSION

This being a Case Stated, I believe that the Court is bound to provide an interpretation of the statutory provisions cited by the

Learned Circuit Court Judge, even if the solution proposed has not been explicitly advocated by any party. In Dublin Corporation v

Ashley [1986] I.R. 781 at 785, Finlay C.J. stated:-

"The purpose and effect of a consultative case stated by a Circuit Court judge to the Supreme Court is to enable him to

obtain the advice and opinion of the Supreme Court so as to assist him in reaching a correct legal decision. Having regard to

that purpose and the relationship which exists between the two courts, it would, in my view, be quite inappropriate for the

Supreme Court, for any reason of procedure, to abstain from expressing a view on an issue of law which may determine the

result of the case before the learned Circuit Court judge."

The language chosen to give effect to a desired reform has left an unintended uncertainty to be resolved by the Court. It would be

unfortunate if the Court were compelled to conclude that the legislature had replaced one anomaly with another.

The literal reading of the expression, “at any time,” would, in my view produce a serious anomaly. The conditions for the grant of a

new lease would be satisfied by reference to a date unconnected with the end of the previous tenancy and, thus, unrelated to the

date from which a new tenancy would commence. The termination of a tenancy is no longer the date at which to assess the concept

of "equity". This is well illustrated by the Applicant’s argument that it achieved the necessary status as long ago as 1983 and could

not lose it thereafter. Section 16 provides that “the tenant shall be entitled to a new tenancy ... beginning on the termination of his

previous tenancy..” (emphasis added). Consequently, there is no necessity, on the applicant's case, for there to be compliance with

the conditions of section 13(1)(a) at the time of termination of the tenancy. In particular, the logic of this argument appears to mean

that the act does not require that there be business user either for a continuous period of three years before termination or, indeed,

for any part of that period. Such a reading would, in my view, defeat one of the essential and fundamental purposes of the act,

carried through from the act of 1931, the protection of business equity. A tenant who had satisfied section 13(1)(a) could, if the

Applicant is correct, maintain his right to a new tenancy, though he had long abandoned business user. He would merely have to

ensure he was in occupation at the expiry of the lease.

The act of 1980, accords a right, originally created by the act of 1931, to a tenant in occupation of a tenement after defined periods

of actual occupation and business user, to a renewal of his existing tenancy. This has been justified historically as a socially

necessary encroachment on the rights of landlords. An occupying tenant who establishes and continues business in a premises has

contributed to the goodwill associated with it and hence has potentially enhanced its rental value. It would be unjust –inequitable-to

deprive such a person of the right to continued occupancy of a premises thus associated with him and his business; by the same

token, a landlord not in possession would acquire an uncovenanted gain if entitled to repossess the premises at the end of the term.

This is, as I understand it, the meaning of business equity. By parity of reasoning, however, it would be unjust to the landlord to

deprive him of his right to repossess his property in the interests of a tenant, who can no longer point to continuing business user at

the point when his tenancy comes to be renewed.

The Applicant relies also on the power given to the court by section 21(3) to hear and determine an application “either before and in

anticipation of or after the termination of the tenancy.” By implication, any hearing which takes place prior to termination is, in my

opinion, linked directly with the latter event by the word, “anticipation”. To anticipate is not merely to expect but to take into

account and act by reference to a future event. This qualifies the necessary implication flowing from the applicant’s argument that

the rights can crystallise “at any time,” that they can also be heard and determined at any time however early without any limit

before termination. In my view, any hearing before the termination of the term of the lease would have to be at a time when it was

possible to establish that the requirements of section 13(1)(a) would, without doubt or dispute, be satisfied at the date of

termination.

It has to be accepted that the words used are, to the say the least, not a model of clarity. In that situation, the Court should

consider the act as a whole. It should seek a meaning of the expression in question, which is most consistent with the aims of the

legislation. It is also entitled to take into account the legislative history including the act of 1931 the recommendation of the Landlord

and Tenant Commission and the mischief that it was intended to remedy.

Section 16 shows clearly and the applicant accepts that the beneficiary of the right to the new tenancy is the tenant entitled to the

occupation of the premises at the end of the previous term: “tenant” is defined by section 3 as “the person for the time being

entitled to the occupation of the premises...”

The term, “at any time,” must, in my view, be read as referring to the time from which a new tenancy can be granted. There is no

reason to believe that the Oireachtas intended to go against the wishes of the Landlord and Tenant Commission. It seems most likely

that the admittedly ill-chosen expression, “at any time”, was intended to relate the inquiry into whether a tenant had satisfied the

requirements of section 13(1)(a) to the termination of the tenancy. That is both the date recommended and the most logical date.

The report of the Landlord and Tenant Commission identifies the mischief to be remedied as the anomaly flowing from the artificial

meaning assigned to “termination” by the act of 1931. Section 13 of the act of 1980 aims to remedy that mischief. It is not possible

to discern any intention to abandon the date of termination as a date relevant to the determination of the rights of tenants. To allow

a tenant to “crystallise” his rights at any time of his choosing would not merely be unjust to landlords, for the reasons given above,

but would run counter to the long established notion of the nature and purpose of business equity.

Although my analysis of the terms of the act differs significantly from that of Murphy J, it is clear that I agree with his proposed

answer to Question B.

I would also reject the second argument of the Applicant. There is no warrant for the introduction into the text of punctuation not

provided by the legislator, particularly when that would alter the clear meaning of the provision. The expression “person who was the

tenant immediately before that time” is clear and unambiguous. It identifies the tenant as a single (legal) person and the subsequent

words extend the term to include “predecessors in title,” a term which does not, by virtue of section 3 include sub-tenants. The

intention to exclude sub-tenants from its scope is beyond dispute.

Section 13(1)(a) is, apart from the expression, “at any time,” clear and unambiguous in its existing form. It means that for the entire

period of three years in question, the person in occupation must be the same person as is the tenant at the end of the period or his

predecessor in title. In addition, business user must exist for the entire of that period. While the vagueness of the expression, “at any

time,” has presented a troublesome issue of interpretation in respect of the applicant's first argument, there is no warrant to seek

ambiguity where it does not exist.

Similarly, I would also reject the third argument of the Applicant. The Applicant has presumably continued in occupation of the

premises at least in part in exercise of his rights under section 28. However, for his occupation and business user during that time to

meet the requirements of section 13(1)(a), he must also be the tenant. The definition of “tenant” certainly includes “where the

context so admits, a person who has ceased to be entitled to that occupation by reason of the termination of his tenancy.”

(emphasis added) However, I do not believe this provision was designed to enable the over-holding occupier to establish rights to a

new tenancy which he would not otherwise have had. This would not accord with the “context” of section 13(1)(a). Section permits

a tenant, strictly speaking a former tenant, to continue in occupation while his application for a new tenancy is pending. The purpose

of the provision is to avoid the hardship of requiring a tenant to vacate a premises with obvious inconvenience, while his rights are

being established, a situation discussed by Finlay J, as he then was, in Baumann v Elgin Contractors Ltd [1973] I.R. 169. It is implicit

that the such a tenant has satisfied or, at least, claims he has satisfied the requirements of section 13(1)(a). It would be unjust to

the landlord to allow this protective provision enabling a tenant to remain occupation to be used to establish the rights themselves.

Although the Applicant points out that section 28 does not apply until the making of the Application to the court, I think analogous

considerations apply. I respectfully agree with the analysis of Finlay J of the issue in Baumann, in particular, his rejection of the

contention that a new tenancy by operation of law should be inferred merely from the fact that the tenant has remained in

occupation and continued paying rent. The facts of this case differ from those of Baumann, where notice of intention to claim relief

had been served before the end of the term. In the altered statutory circumstances, that was not necessary in this case. However,

the underlying reality was the same. It rebuts any implication of a new tenancy. Furthermore, as has been pointed out by the

Respondent, the definition of a “tenement” envisages an occupier who holds “under a lease or other contract of tenancy.” The

premises do not comply with this requirement during the statutory period of permissive or over-holding occupancy and that is

essential if that occupancy is to be relied on to satisfy section 13(1)(a).

I would propose answering the questions pose in the Case Stated as follows:

A. Yes.

B. The date of expiry of the lease, namely 31st January 1998.

C. Does not arise.

D. No.

E. No.