Shaws (EAL) Ltd. v Pennycook

Under Part II of the Landlord and Tenant Act 1954, a tenant who serves a positive counter-notice under section 25(5) cannot ordinarily replace it with a negative counter-notice during the statutory two-month period. The positive notice creates an irrevocable change in the parties’ relationship, although the landlord may waive the resulting advantage. The rule is based on statutory construction; the doctrine of election may explain its rationale but is not the operative basis. The restriction engages Article 1 of the First Protocol, but is justified by the public interest in certainty and the fair balance drawn by Parliament. Article 6(1) is not engaged because the bar is substantive rather than procedural. Permission and the appeal were allowed, with an extension of time subject to indemnity costs.

The tenant occupied a protected business tenancy under Part II of the Landlord and Tenant Act 1954. After serving an invalid request for a new tenancy, the tenant received a section 25 notice from the landlord. He first served a positive counter-notice stating that he would give up possession, then corrected the mistake by serving a negative counter-notice within the two-month period.

HHJ Cox struck out the tenant’s proceedings. Pumfrey J allowed the appeal, holding that a second counter-notice could be served and that section 29(2) could thereby be satisfied. The Court of Appeal considered whether that conclusion was precluded by Re 14 Grafton Street and Bridgers & Hamptons Residential v Stanford, and whether Convention rights required a different construction.

Lady Justice Arden delivered the judgment, with Lord Justice Thorpe and Sir Martin Nourse agreeing. The application for permission to bring a second appeal, the extension of time and the appeal were allowed.

1. Binding authority. Pumfrey J was bound by Bridgers & Hamptons Residential v Stanford (1991) 63 P&CR 18. It was part of the ratio of that decision that Re 14 Grafton Street [1971] 1 Ch 935 was correct. A positive counter-notice under section 25(5) therefore brought about an irrevocable change in the relationship between landlord and tenant. The tenant could not serve a second, negative counter-notice within the two-month period. The resulting advantage was for the landlord alone and could be waived by the landlord.
2. Election. Brightman J’s conclusion was properly reached as a matter of statutory construction. The doctrine of election may have inspired that construction, but the statutory intention remained the operative basis. Reliance by the landlord was not required.
3. Article 1 of the First Protocol. The statutory right to continuation or renewal was an asset for Convention purposes. The bar was more accurately characterised as a deprivation than a delimitation of that right. Nevertheless, the rule pursued the legitimate public interest in certainty, maintained a fair balance and was proportionate. The court’s role was supervisory, particularly in an area of economic policy.
4. Article 6(1). The right to apply for a new tenancy was a civil right, but Article 6 did not guarantee the content of that right. The restriction was substantive rather than a procedural bar to a court deciding an issue within its proper province. Article 6 was therefore not engaged. Alternatively, the essence of the right remained intact and the restriction would not have violated Article 6.
5. Extension of time. Although the appellant’s notice was more than three months late, the tenant suffered no prejudice because he remained in possession and liable for rent under section 64. The appeal had merit. Time was extended on condition that the appellant pay the respondent’s costs caused by the delay on an indemnity basis.

• Court of Appeal (Civil Division): [2004] EWCA Civ 100. Permission for a second appeal was granted, time was extended and the landlord’s appeal was allowed.
• High Court of Justice, Chancery Division: Pumfrey J allowed the appeal from the County Court and held that the tenant could serve a second counter-notice within the statutory period.
• Lambeth County Court: HHJ Cox struck out the tenant’s proceedings on the basis that they disclosed no prospect of success.