Town Investments Ltd v Department of the Environment (London County Freehold and Leasehold Properties Ltd v Department of the Environment, MEPC (Mayfair Properties) Ltd v Department of the Environment)

A lease granted to a Minister for and on behalf of Her Majesty, for use in carrying out governmental functions, is governed by public law. The Government, expressed in public-law terminology as the Crown, may therefore be both tenant and occupier.

In rent-control legislation directed against inflation, “business” takes its meaning from the statutory context and purpose. It is not confined to commerce or profit-making activity. It encompasses the serious occupation of conducting government through civil servants. The expression “a business” may accordingly include the single business of central government.

The landlords granted leases of two London properties to the Minister of Works, and subsequently to the Secretary of State for the Environment, “for and on behalf of Her Majesty”. The properties accommodated civil servants, government bodies and, in part, agencies of the United States Government.

Following substantial rent increases under new leases, the landlords sought declarations that the Counter-Inflation (Business Rents) Order 1972 and the Counter-Inflation (Business Rents) Order 1973 did not restrict the rents. Foster J granted relief. The Court of Appeal dismissed the Department's appeal, holding that the Secretary of State was the tenant, that he did not occupy the premises and that the premises were not occupied for a business.

The House considered who was the tenant, whether the tenant occupied the premises and whether that occupation was for a business carried on by the tenant.

1. Appeals allowed by a majority of four to one. Lord Diplock delivered the leading speech. Lord Simon of Glaisdale agreed and gave additional reasons. Lord Kilbrandon agreed with Lord Diplock's conclusions, and Lord Edmund-Davies agreed with his reasons. Lord Morris of Borth-y-Gest dissented.

2. Per Lord Diplock, the relationship between the Government, Ministers and civil servants was governed by public rather than private law. Executive acts performed by Ministers were acts of the Crown in the public-law sense. A lease accepted by the Minister responsible for government accommodation, for and on behalf of Her Majesty, therefore made the Government—or, in the terminology of public law, the Crown—the tenant. References to successors and assigns did not displace that conclusion.

3. Per Lord Diplock, Lord Simon and Lord Kilbrandon, occupation by government servants for governmental purposes constituted occupation by the Crown. Ministers and civil servants were not in a private relationship of master and servant with one another. They were servants, aspects or members of the Crown. The Crown was consequently both tenant and occupier.

4. Per Lord Diplock, “business” was not a legal term of art and derived its meaning from context. The object of the counter-inflation legislation was to restrain rent increases which added money to circulation without a corresponding increase in goods or services. That object required a broad construction. Governmental activity conducted by civil servants was a duty requiring attention and fell within “business”. The words “a business” included the single business of central government.

5. Lord Simon considered that statutory purpose made the same construction imperative. Excluding Crown tenancies would produce an anomalous immunity for landlords whose tenant happened to be the Crown. Lord Kilbrandon likewise regarded business as including a serious occupation which need not be commercial or profit-making.

6. Per Lord Diplock, language stating that an officer holds property “in trust” does not necessarily create a private-law trust. In a public-law setting it may denote an administratively enforceable duty. A private trust between a Minister acting officially and the Crown was inconsistent with their public-law relationship.

7. Lord Morris dissented. He considered that the leases made the Secretary of State, as a corporation sole, the tenant; that he did not occupy the premises; and that neither the Secretary of State nor the Crown carried on “a business” within the ordinary meaning of the orders. He would have dismissed the appeals.

1. House of Lords: By a majority of four to one, allowed the Department's appeals and reversed the Court of Appeal's conclusion.

2. Court of Appeal: Dismissed the Department's appeals. It held that the Secretary of State was the tenant, that he did not occupy the premises and that the premises were not occupied for a business.

3. High Court: Foster J granted the landlords' requested declarations. His principal ground, that the Crown could not take advantage of legislation which did not bind it, was rejected by the Court of Appeal and abandoned before the House of Lords.