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Avondale v Miss Delaney’s [2023] EWCA Civ 641

The Court of Appeal has recently handed down judgment in the case of Avondale Park Limited v Miss Delaney’s Nursery School Limited [2023] EWCA Civ 641.

William Moffett, instructed by Hunters Law LLP, represented the successful respondent.

The factual matter in dispute was the threatened eviction of a nursery school in Holland Park, West London (Miss Delaney’s) by its commercial landlord (Avondale).

The legal issues on which this case turned were wide-ranging, including: the creation of periodic tenancies; the operation of estoppel by convention and its interaction with statute; the approach to construction of a contract (in this case a lease) and the rule that a party to an agreement may not profit from its own wrong; and the merits test to be applied on an interim application where it was said that the grant of an injunction would effectively dispose of the case.

On 26 August 2022, shortly before the start of the new school year, Avondale had sought to exclude Miss Delaney’s from its nursery school premises. Avondale subsequently accepted that its purported forfeiture by re-entry was unlawful, but argued that Miss Delaney’s lease expired in any event just 3 days later on 29 August 2022. Avondale relied upon a written sublease dated 9 September 2014 granted by Avondale’s predecessor to Miss Delaney’s for a term of nearly 8 years.

Miss Delaney’s, however, relied upon an automatic termination provision in the written sublease by which it was provided that the term would come to an end immediately if by 14 December 2014 no deed of variation had been produced by which the head landlord (the Royal Borough of Kensington and Chelsea) had consented to the change of use to a nursery school. No deed of variation was so produced.

Having subsequently entered into possession and paying rent, Miss Delaney’s contended that it occupied under a periodic tenancy, which attracted security of tenure under Part II of the Landlord and Tenant Act 1954, and which tenancy had not been terminated.

Last summer William Moffett had appeared for Miss Delaney’s on its urgent application for an interim injunction to be restored to the premises. Miss Delaney’s was successful on that application, which was heard on 5th and 8th September 2022 before Meade J and Leech J respectively.

On Avondale’s appeal from those decisions it contended that the automatic termination provision in the written sublease should be construed as rendering the lease voidable (rather than void) at the election of the tenant (alternatively either party), relying upon a line of cases dating back to Doe d Bryan v Bancks (1821) 4 B & Ald 401, and the principle of construction that a party should not take advantage of its own wrong.

Alternatively, Avondale contended that the parties had conducted themselves since December 2014 on the common basis that the written sublease was subsisting, and that Miss Delaney’s should be estopped from denying that mistaken assumption by reason of an estoppel by convention; and that the court ought to have applied a higher threshold than the American Cyanamid test of ‘serious issue to be tried’ on this issue because the grant of the injunction would effectively dispose of the proceedings.

The Court of Appeal (Lewison, Carr and Nugee LJJ) dismissed Avondale’s appeal, having undertaken an extensive review of the authorities and arguments on the issues raised.

The Court of Appeal described Miss Delaney’s contention that it had a periodic tenancy as representing the ‘conventional result’ where a tenant enters under a void lease but pays rent calculated by reference to a year.

Avondale’s construction argument failed: the language of the termination clause in the written sublease made it plain that its effect was automatic. The principle that a party to a contract may not benefit from its own wrong had no application in this case: the termination clause had not been introduced solely for the benefit of one of the parties, and indeed Miss Delaney’s was not at fault for the non-production of the required deed of variation.

The argument based upon estoppel by convention faced several difficulties.

Firstly, there was an objection of principle. Estoppel by convention cannot operate to undermine a statute: see Keen v Holland [1984] 1 WLR 251. Here, Avondale sought to employ the estoppel in order to deprive Miss Delaney’s, if it were a periodic tenant, of the security of tenure which the Landlord and Tenant Act 1954 had conferred upon it.

Furthermore, when applying the requirements of estoppel by convention as set out by the Supreme Court in Tinkler v HMRC [2021] UKSC 39 to this case, Avondale’s claim to an estoppel would face considerable further obstacles.

The evidence of Avondale’s director regarding his state of mind as to whether the written sublease subsisted (and if he did so believe, whether that belief was somehow induced or affected by anything Miss Delaney’s said or did), was considered to be unsatisfactory in several respects.

Furthermore there were significant difficulties in showing that Avondale might have suffered any detriment, as would be required for an estoppel to arise. At the time of the hearing before Leech J on 8 September 2022 Avondale’s headlease from the Borough had only 5 days left to run. Avondale’s evidence that it would have operated its own nursery business in that time, so that it could itself invoke business tenancy protection as against the Borough, was found to be ‘to say the least, thin’. Avondale was a professional landlord with no previous experience of operating a nursery school and had taken no substantial steps to do so. The Court of Appeal approached Avondale’s evidence in this respect ‘with a fair degree of scepticism’ and concluded that there ‘was ample reason to believe, as Mr Moffett submitted, that this [Avondale’s professed intention to run a nursey] was a last minute expedient concocted for tactical reasons after the dispute had arisen.’