S Franses Limited v The Cavendish Hotel (London) Ltd [2018] UKSC 62

A landlord opposed a business tenant's renewal under section 30(1)(f) of the Landlord and Tenant Act 1954, proposing substantial but objectively useless works whose sole purpose was to evict the tenant. The Supreme Court held such conditional intention does not satisfy ground (f).

Facts

The appellant tenant, S Franses Ltd, occupied the ground floor and basement of 80 Jermyn Street, London, under a 25-year underlease from 2 January 1989, operating a textile dealership and gallery. The respondent landlord, The Cavendish Hotel (London) Ltd, held the head lease and managed the remainder of the building as a hotel. The premises were within a designated ‘special policy area’ for planning purposes.

On 16 March 2015, the tenant requested a new tenancy under Part II of the Landlord and Tenant Act 1954. The landlord served a counter-notice opposing renewal under section 30(1)(f), relying on an intention to carry out substantial works. The proposed scheme went through three iterations, the third being relied upon at trial. It included works such as artificially lowering part of the basement floor slab to create an impractical stepped floor, repositioning smoke vents for no reason, and demolishing and immediately replacing an internal wall.

HHJ Saggerson found that the works were ‘designed with the material intention of undertaking works that would lead to the eviction of the tenant regardless of the works’ commercial or practical utility and irrespective of the expense.‘ It was common ground that the works had no practical utility because their use depended on planning permission for change of use which the landlord did not intend to seek. The landlord candidly admitted the sole purpose of the works was to obtain vacant possession, and gave a written undertaking to carry them out if a new tenancy was refused. The judge found the landlord would not have carried out the works if the tenant left voluntarily or if a right of entry could be exercised.

Issues

The principal issue was whether a landlord may oppose the grant of a new tenancy under section 30(1)(f) where the works said to be intended have no purpose other than to evict the tenant and would not be undertaken if the tenant left voluntarily. The case turned on the nature or quality of the ‘intention’ required by ground (f).

Arguments

Landlord

Mr Fetherstonhaugh QC argued, relying on a line of authority including Cunliffe v Goodman, Fisher v Taylors Furnishing Stores, Betty’s Cafés v Phillips Furnishing Stores, and Turner v Wandsworth LBC, that ground (f) imposed only a two-part test: a genuine intention to carry out qualifying works and the practical ability to do so. Motive, reasonableness, and objective utility were said to be irrelevant save as evidence of genuineness. The works were ‘thoroughly intended because they are a way of obtaining possession.’

Tenant

Ms Wicks QC argued that the landlord’s intention was conditional and therefore not the firm and settled intention required. Alternatively, she argued that the apparent intention should be disregarded for want of any commercial purpose, by analogy with W T Ramsay Ltd v IRC.

Judgment

The Supreme Court unanimously allowed the appeal. Lord Sumption (with whom Lady Hale, Lady Black and Lord Kitchin agreed) accepted that the touchstone of ground (f) is a firm and settled intention to carry out the works, and that motive and purpose are generally irrelevant save as evidence of intention. However, he held that the case did not turn on motive or objective reasonableness but on the nature of the intention required.

Section 30(1)(f) presupposes that the landlord’s intention to demolish or reconstruct is being obstructed by the tenant’s occupation; this is reflected in the requirement that the landlord ‘could not reasonably do so without obtaining possession,’ and in section 31A. The landlord’s intention must therefore exist independently of the tenant’s claim to a new tenancy. Lord Sumption identified the ‘acid test’ as ‘whether the landlord would intend to do the same works if the tenant left voluntarily.’ On the judge’s findings, the landlord would not have carried out the works if the tenant left voluntarily or if a right of entry sufficed; this conditional intention was not the fixed and settled intention ground (f) requires.

Lord Sumption further indicated that where a landlord intends part of the works unconditionally and other (spurious) works only conditionally on needing possession, the tenant’s claim should usually be assessed only by reference to the unconditionally intended works.

Lord Briggs (with whom Lady Black and Lord Kitchin agreed) gave a concurring judgment addressing the practical difficulty identified by HHJ Saggerson that, by trial, the question whether the landlord would do the works if the tenant left voluntarily may be hypothetical or counter-factual. He held that examination of the landlord’s purpose or motive remains a legitimate forensic tool for testing the type or quality of the landlord’s intention. Where the underlying purpose is solely to remove the tenant, that demonstrates the disqualifying conditional character of the intention. He emphasised that a desire to remove the tenant will not ordinarily disqualify a landlord; redevelopment is often legitimately influenced by commercial considerations including the tenant’s departure.

Implications

The decision clarifies that, while motive and purpose are not freestanding tests under section 30(1)(f), the landlord’s intention must be unconditional in the sense that the works would still be carried out if the tenant left voluntarily. A landlord cannot defeat statutory security of tenure by devising works whose sole purpose is to evict the tenant.

The judgment preserves established principles, including that intention is assessed at the date of the hearing (Betty’s Cafés) and that the genuineness of intention is commonly tested by an undertaking to the court. However, it recognises that an undertaking does not itself reveal whether intention is of the disqualifying conditional kind. Examination of purpose may be necessary to apply the acid test.

The decision matters principally to commercial landlords and business tenants. It restricts a tactic by which landlords in high-value locations could spend on objectively useless works to extract vacant possession. Lord Briggs acknowledged this may introduce greater factual complexity and cost into county court proceedings, particularly in mixed-intention cases where the landlord would carry out some, but not all, of the works regardless of the tenant’s stance. The Court declined to address the tenant’s alternative Ramsay-style argument, leaving that question open.

Verdict: Appeal allowed. The Supreme Court declared that, on the facts found, the landlord did not intend, within the meaning of section 30(1)(f) of the Landlord and Tenant Act 1954, to carry out the works specified in the scheme relied upon to oppose the tenant’s application for a new tenancy.

Source: S Franses Limited v The Cavendish Hotel (London) Ltd [2018] UKSC 62