Hawkesbrook Leisure v The Reece-Jones Partnership

For Part II of the Landlord and Tenant Act 1954, “business” is construed broadly and contextually. A corporate body may occupy premises for business purposes even where it cannot distribute profits to its members. The relevant question is whether it conducts a commercial or trading enterprise, including an enterprise operated to generate a surplus for reinvestment. The absence of distributable profit does not exclude protection. This differs from an activity conducted as public benevolence rather than as a trading activity.

The claimant company operated sports grounds and social clubs under leases from London Regional Transport. Its solicitors served notices under section 26 of the Landlord and Tenant Act 1954 but failed to apply for new tenancies within the period specified by section 29(3). The claimant brought negligence proceedings, alleging loss caused by that failure.

The preliminary issue was whether the claimant carried on a business and occupied the premises for its purposes within section 23, so as to qualify for the protection afforded to business tenants. The defendants contended that the claimant was not carrying on a business because its profits could not be distributed to members.

1. The preliminary issue was answered affirmatively in favour of the claimant. The claimant’s operation of the sports grounds constituted a business within section 23 of the Landlord and Tenant Act 1954.

2. The expression “business” is not a term of fixed legal meaning. Its scope depends on context. Town Investments Ltd v Department of the Environment demonstrated that the expression may receive a broad construction, and the claimant’s activities would plainly have amounted to business use under an ordinary restrictive covenant.

3. The claimant operated a commercial enterprise. It accepted bookings from the public, charged for facilities, sold food and drink at a profit, employed staff, advertised its services and generated substantial turnover. Its objective was to produce an accounting surplus for reinvestment in the enterprise.

4. The inability to distribute surplus to members did not prevent the activity from being a business. The reasoning in Re The Duty on the Estate of the Incorporated Council of Law Reporting for England and Wales supported the conclusion that an organisation may carry on a business despite constitutional restrictions on the distribution of profit.

5. The distinction identified in Secretary of State for Transport v Jenkins was material. A community free farm operated in a spirit of public benevolence and without a trading activity was materially different from the claimant’s commercial operation. The claimant’s activities were carried on with a view to making a profit or surplus and as a trading activity.

6. The defendants’ narrow construction of section 23 was artificial and unsupported by the statutory language or authorities. The claimant was therefore entitled, on the preliminary issue, to the protection afforded by Part II.