Boh Ltd & Anor v Eastern Power Networks Plc

Equitable merger of a leasehold estate with its reversion depends upon the intention of the person in whom both estates vest. Where there is no express or other evidence of intention, equity presumes that merger was not intended if merger would be against that person’s interests. The interests of other reversioners do not displace that presumption where the person owes them no relevant duty.

A court of appeal should not decide a fresh and hypothetical human-rights issue without a concrete factual basis and findings at first instance. The statutory continuation of a business tenancy under Landlord and Tenant Act 1954 Part II therefore remained effective where no merger occurred.

Eastern Power Networks operated an electricity sub-station on land held under a 1953 lease. The lease gave access and cable rights over neighbouring plots. It later acquired the freehold of the sub-station plot, while other parts of the reversion were owned by other persons.

BOH and Layhawk, owners of neighbouring plots, disputed the continuing access and cable rights. The High Court held that the tenancy had not merged with the acquired freehold and continued under Part II of the Landlord and Tenant Act 1954, and granted a declaration: [2009] EWHC 3193 (Ch).

On appeal, the appellants challenged the finding of no merger. They also advanced a new contention that section 44(1A) should be read compatibly with Article 1 of the First Protocol so as to exclude a tenant who was also a reversioner.

1. Appeal dismissed. Rimer LJ, with whom Black and Sedley LJJ agreed, upheld the declaration that the leasehold tenancy continued in respect of plots 2 and 26.
2. Although the common law would ordinarily treat a lease as merged when the leasehold estate and its immediate reversion vested in the same person in the same right, section 185 of the Law of Property Act 1925 gives effect to the equitable rule. Equity asks whether the person in whom the estates vest intended merger.
3. Where there is no direct or other evidence of intention, the relevant inquiry concerns that person’s own interests. If merger would be contrary to those interests, equity presumes that no merger was intended. Ingle v Vaughan Jenkins [1900] 2 Ch 368, as endorsed in Capital and Counties Bank Ltd v Rhodes [1903] 1 Ch 631, required that approach. The absence of merger preserved the tenant’s access and cable rights, whereas merger would have destroyed them.
4. The alleged interests of the other reversioners were irrelevant. The 1953 lease created no obligation owed by the tenant-reversioner to its co-reversioners, and their possible commercial advantage from merger could not justify presuming an intention directly adverse to the tenant-reversioner’s interests.
5. The court declined to determine the new human-rights argument. It concerned a hypothetical reading of section 44(1A) of the Landlord and Tenant Act 1954, unsupported by a pleaded factual case or findings at trial. The subsequently supplied section 25 notices did not cure that defect and did not appear to include the sub-station plot.

• Court of Appeal (Civil Division): appeal dismissed; the High Court’s declaration was upheld: [2011] EWCA Civ 19.
• High Court, Chancery Division: held that no equitable merger had occurred and declared that the continuing tenancy carried the relevant access and cable rights: [2009] EWHC 3193 (Ch); reported at [2010] L & TR 14.