The Humber Oils case explored the parameters of a landlord’s ability to rely on s. 30(1)(g) Landlord and Tenant Act 1954 (“ground (g)”). Ground (g) enables a landlord to oppose the renewal of a lease on the basis that on the termination of the current tenancy the landlord intends to occupy the premises for the purpose, or partly for the purpose, of carrying on its business. The case provides guidance on the operation of the two limbs of the statutory test and demonstrates a landlord-friendly approach to the issue being adopted by the courts.
The case centred on the renewal of leases of the Immingham Oil Terminal on the Humber Estuary. Humber Oil Terminals Trustee Ltd (HOTT) was the tenant and Associated British Ports (ABP) the landlord.
In 1995 lease renewal negotiations commenced but the parties could not agree terms and ABP subsequently decided that it wanted to take the property back itself and served a “hostile” section 25 notice on HOTT informing it of its intention to rely on ground g.
At first instance HOTT challenged the ability of ABP to rely on the ground due to the significant difficulties ABP would encounter in realising its intention. However this was rejected by the judge3 , who affirmed ABP’s right to oppose the grant of a new lease on the ground that it intended to occupy the premises. This decision was reached despite the inherent obstacles ABP would undoubtedly face implementing this intention to occupy, notably the absence of the necessary equipment and infrastructure to run its business, as HOTT asserted that this would all be removed by it when it vacated.
HOTT appealed. The Court of Appeal set out a two stage test that a landlord must satisfy in order to successfully rely on ground (g):
- Did the Landlord possess a fixed and settled desire to do that which it said it intended to do?; and
- Did the Landlord, in the view of a reasonable person, have a reasonable prospect of bringing about its desired result?4
HOTT argued that ABP had not satisfied the second (objective) limb of the test because it could not on a practical level implement its intention without HOTT’s assistance. HOTT had an entitlement to and ensure oil supplies were not disrupted. HOTT maintained that it would not assist ABP by reaching a deal to leave the infrastructure in place. The removal of that infrastructure would cost £10m and it would take ABP two years at a cost of £60m to re-establish it.
Despite HOTT’s protestations that it would not cooperate with ABP, the court remained sceptical of the commercial viability of its argument. The Court considered that in light of the economic circumstances HOTT would be likely to reach a deal with ABP to leave behind the equipment needed by ABP. The Court rejected HOTT’s appeal, ruling that the judge at first instance had correctly applied the statutory test in line with the case ofWestminster CC v BritishWaterways Board and that ABP had satisfied both limbs notwithstanding the need to obtain the relevant equipment from its departing tenant.
The Court’s approach in this case to assessing whether a landlord can establish ground (g) points to a less stringent assessment of the practicability of a landlord’s intention to occupy. The Court of Appeal’s judgment provides less certainty for tenants; as it concluded that the landlord intended to occupy despite the fact that there was a commercial negotiation relating to infrastructure that would have to be resolved in the landlord’s favour before the landlord could conduct business operations from the property.
From the perspective of tenants, a real risk arises from the fact that the Court of Appeal was willing to uphold a Landlord’s refusal to grant a new lease despite the fact that this was based on a commercial likelihood rather than certainty. The long-term outcome of the judgment remains unclear but we may see an upturn in the number of landlords using ground (g) to oppose lease renewals.
Latin Quarter –Expressio unius est exclusio alterius
The literal meaning of this phrase is “the expression of one thing excludes another”. It is a principle of construction used to ascertain the meaning of legislation and contractual documents.
The rule is usually applied where a contract lists a number of things – for example, in a list of the risks against which a landlord is obliged to insure in a lease. The fact that a detailed list of insurable risks has been made and agreed by the parties raises an inference that anything not on the list has been excluded from the contract by the agreement of the parties. The practical result of this is that many such clauses conclude with a “sweeper” category, such as “and any such further risks against which the Landlord considers it reasonably prudent to insure”.
It is important to remember that the expressio unius rule is only a rule of language, and it can be overridden by evidence that the parties did not intend it to apply; or if it can be shown that the list was meant to serve as an example, rather than a definitive list; or for some other reason such as the supposedly excluded thing not being in existence at the time of the contract (very few leases from the early 20th century would have included an obligation to insure against nuclear attack!)