Bacchiocchi v Academic Agency Ltd

For the purposes of compensation under Part II of the Landlord and Tenant Act 1954, business occupation is a context-sensitive concept. A tenant need not maintain permanent physical possession until the precise moment when the tenancy ends. A brief period during which the premises are empty may remain part of continuous business occupation where it is directly connected with winding down the business and preparing to give vacant possession on the statutory quitting date. The court should consider the purpose of the absence, the tenant’s intention, its duration and whether the thread of continuity remains intact. The same approach may apply to a short delay in commencing occupation. A strict requirement of exact coincidence between cessation of trading and the termination date is inappropriate.

The appellant operated a restaurant under a business tenancy governed by Part II of the Landlord and Tenant Act 1954. The lease excluded compensation for disturbance, subject to the statutory protection in section 38(2). After withdrawing his application for a new tenancy, the appellant was required to quit on 11 August 1994, but he closed the restaurant and vacated on 29 July because of a mistaken understanding of the termination date. The first-instance judge held that the appellant had not occupied the premises during the whole of the five years immediately preceding the quitting date. The central issue was whether the twelve-day period of vacancy prevented section 38(2) from making the contractual exclusion of compensation void.

1. The appeal was allowed. The contractual exclusion of compensation was void under section 38(2) because the premises had been occupied for business purposes during the whole of the relevant five-year period.

2. Simon Brown LJ treated “occupation” as an ordinary, context-sensitive concept. The authorities under section 23 showed that physical presence, use, control, the reason for absence, intention and continuity were relevant, but no rigid test applied. The purpose and consequences of the statutory distinction between occupation and non-occupation had to inform its meaning.

3. The section 23 authorities concerned renewal of a business tenancy. The present case concerned the end of the tenancy, when the tenant had to cease trading and give vacant possession. The statutory context therefore justified a broader application of the concept of continuing occupation.

4. A short closure connected with winding down the business and preparing to leave could be treated as part of continuous occupation. The tenant need not retain goods or make token visits. The relevant question was whether the absence was a normal incident of business life, whether there was a rival or other use of the premises, and whether the thread of continuity had been broken. A longer period of vacancy might produce a different result.

5. Ward LJ expressed the same conclusion through a fact-sensitive inquiry: whether the absence was linked to winding down and quitting, whether the tenant intended orderly departure rather than abandonment of the statutory right, whether the period was reasonably incidental to that process, and whether there remained an unbroken link between commencement and termination of the business occupation.

6. Moore-Bick J emphasised that a tenant obliged to give vacant possession will commonly cease trading and remove possessions before the contractual end date. A brief period of vacancy caused by the impending expiry of the tenancy should ordinarily be regarded as a normal aspect of carrying on the business. He considered Department of the Environment v Royal Insurance Plc [1987] 1 EGLR 83 wrongly decided.

7. The respondents’ cross-appeal on costs did not arise and was improperly brought without leave. The appeal was allowed with costs, the cross-appeal was dismissed with costs, and the respondent was ordered to pay three-quarters of the appellant’s costs below.

• Court of Appeal (Civil Division): appeal from the order of His Honour Judge Bursell QC in the Queen’s Bench Division on 21 February 1997. The Court of Appeal allowed the appeal and varied the order.