UK: Business Tenancies: Opposed Lease Renewals - Landlord’s Intention To Occupy

Humber Oil Terminals Trustee Limited v Associated British Ports [2011] EWHC 2043 (Ch) 1187

The facts

This case concerned four leases of properties forming part of the Immingham Oil Terminal in the Humber Estuary, the busiest port in the UK (by volume). Each year, about 20 million tonnes of oil and related products pass though Immingham to and from two local refineries, the Lindsay Oil Refinery and the Humber Oil Refinery, each owned and operated by a large oil company.

The owners of the refineries together operated a joint venture company known as Humber Oil Terminals Trustee Limited ("HOTT"), the tenant and claimant in these opposed business lease renewal proceedings.

The landlord's case

The landlord, Associated British Ports ("ABP"), served section 25 notices terminating the leases and indicating an intention to oppose any application by HOTT for the grant of new tenancies under section 30(1)(g) of the Landlord and Tenant Act 1954.

ABP explained that the Immingham Oil Terminal was the most advantageously located facility for deepwater access for oil tankers, that HOTT's exclusive use of the terminal was the only such arrangement within the Port of Immingham, and that it was not operating the terminal efficiently. ABP's case was that it wished to occupy and manage the Immingham Oil Terminal itself to maintain supply to the refineries and to open the oil jetty, demised to HOTT under one of the leases, to third party users. If the leases were renewed, the landlord proposed that the combined annual rents should increase from £4.2 million to £23.7 million.

The tenant's case

HOTT applied to the court for the grant of new tenancies under the 1954 Act. HOTT argued that ABP could not prove its required intention under section 30(1)(g) and pointed out that on termination of the leases, HOTT would be entitled to remove its complex system of pipes, equipment and infrastructure from the oil jetty, which would cost around £10 million. It would then cost at least £60 million and about two years to replace what had been removed.

Decision

The court found on the facts that ABP's intention was to occupy the Immingham Oil Terminal for the purposes, or partly for the purposes, of a business to be carried on by it at the Immingham Oil Terminal at the termination of the leases.

The court took the view that the parties would be guided only by economics and commercial reality and that it was not only possible, but quite probable, that the tenant would come to a commercial arrangement with the landlord to continue to use the Immingham Oil Terminal.

The court was convinced by ABP's evidence that it was motivated by the need to obtain value for its port facilities, to expand competition in the port and to attract third party customers. The suggestion that APB's plans were merely aspirational or embryonic might be relevant in a case where the landlord was impecunious or insubstantial, but ABP was a major port operator with substantial financial backing and a large port estate and would, on termination of the leases, be able to carry out its stated objectives.

It was not for the court to decide whether ABP's approach was a prudent business decision, provided that it had a reasonable prospect of being fulfilled. Even though there would undoubtedly be difficulties for ABP in achieving its objectives in maintaining continuity of supply to the refineries and widening access to the IOT, the Court found that this was its intention.

Comment

The decision in this case will be of interest to landlords seeking to oppose the grant of a new business tenancy under ground (g) and, to an extent, under ground (f) because of the useful reminder of the court's approach to the question of a landlord's "intention".

The following comments made by the Court in this regard may be helpful:

  • The question of intention must be determined at the date of the hearing.
  • It is not appropriate for the court to examine the financial wisdom of a landlord's genuinely held plans.
  • Section 30(1)(g) requires the court to look at the position at the termination of the current tenancy, i.e. when the landlord would be entitled to possession, and the court is not prevented from making findings of fact as to what will happen at the termination of the current tenancy.
  • In ground (g) cases, the court does not have to decide whether the landlord's business will be successful or whether it will run less efficiently under the landlord's management than it has under the tenant's management; all the court has to decide is whether the landlord intends to occupy the premises for the purposes of its business.
  • Whilst section 30(2) of the 1954 Act prevents a purchaser of the reversion within the previous 5 years from relying upon ground (g), the policy of the legislation is that landlords should be entitled to their land back, notwithstanding the tenant's security of tenure, if they genuinely wish to use the land for their own business purposes.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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