Court of Appeal hands down judgment in Avondale Park Ltd v Miss Delaney’s Nursery Schools Ltd [2023] EWCA Civ 641

In this case, the Appellant Landlord was granted a lease of a large residential property by the freeholder in 2014 which was due to expire on 13^th September 2022. This lease was within the protection of Part II of the Landlord and Tenant Act 1954. The original permitted use was a residential accommodation. However, the Appellant then granted a written sub-lease to the Respondent on 9th September 2014 for a term expiring on 29^th August 2022 for occupation as a children's nursery. This sub-lease was contracted out of the 1954 Act.

The sub-lease contained an express term which provided that, if the Appellant did not provide a certificate to the Respondent sub-tenant by 14^th December 2014 stating that the freeholder had permitted a change of use under the head-lease, then the sub-lease “will be terminated immediately”. No certificate was produced but the Respondent went into occupation in late 2014, spent considerable sums refurbishing the property as a nursery and then traded there as such until August 2022. On the face of it, both parties accepted that the Respondent was in occupation under the written sub-lease.

However, in August 2022, disputes arose, and the Appellant's landlord sought to re-take possession. The Respondent then argued, for the first time, that because of the clause in the sub-lease set out above and the non-production of the certificate, the written sub-lease had automatically terminated on 14^th December 2014 and the Respondent's occupation since then had been under a periodic tenancy protected by the 1954 Act. The Respondent sought and obtained interim injunctive relief.

The landlord applied to the Court of Appeal contending that:

(1) the effect of the relevant clause was not automatically to terminate the lease but rather it gave an option to the tenant to do so which option had not been exercised;

(2) an estoppel by convention had arisen by which the Respondent was prevented from asserting that it occupied under anything other than the written sub-lease.

(3) Further, it asserted that, as the injunction would effectively decide the outcome of the case, the Judge should have applied a higher standard than the “normal” American Cyanamid test.

The Court of Appeal dismissed the appeal. It held that:

(1) on the correct construction of the relevant clause, it effected an automatic termination of the sub-lease;

(2) there was a serious issue to be tried on estoppel by convention, particularly as to whether the landlord could rely on estoppel at all, because, on one view, it was seeking to use it to circumvent what would otherwise be the statutory protection given to the tenant by the periodic tenancy under the 1954 Act;

(3) no matter what test the court applied, the case had to go to trial.

The judgment is available here.

David Holland KC acted for the Appellant instructed by Keystone Law LLP.