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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Shaws (EAL) Ltd. v Pennycook [2004] EWCA Civ 100 (02 February 2004) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2004/100.html Cite as: [2004] 2 EGLR 55, [2004] 2 WLR 1331, [2004] EWCA Civ 100, [2004] L & TR 34, [2004] 18 EG 102, [2004] Ch 296, [2004] 2 All ER 665

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IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF
JUSTICE, CHANCERY DIVISION
(The Hon Mr Justice Pumfrey)

		Royal Courts of Justice Strand, London, WC2A 2LL
		2th February 2004

Lady Justice Arden :

1. This is an application for permission to bring a second appeal, with the appeal to follow if permission is granted and an extension of time against the order dated 28 November 2002 of Pumfrey J whereby he allowed an appeal against the order of HHJ Cox sitting in the Lambeth County Court.
2. The facts are very simple. The respondent to this appeal (whom I shall call the tenant) is the tenant of premises known as 130 Railton Road, Herne Hill, London. The tenancy was a tenancy to which Part II of the Landlord and Tenant Act 1954 applies. The tenancy was due to expire on 25 March 1999 and it continued after that date by virtue of section 24 of the 1954 Act. The appellant is the landlord of these premises and I shall refer to it as the landlord. On 4 July 2001 the tenant served an invalid notice under section 26 of the 1954 Act. Section 26(1) and (2) provide as follows:-

"26 Tenant's request for a new tenancy

(1) A tenant's request for a new tenancy may be made where the tenancy under which he holds for the time being (hereinafter referred to as "the current tenancy") is a tenancy granted for a term of years certain exceeding one year, whether or not continued by section twenty-four of this Act, or granted for a term of years certain and thereafter from year to year.

(2) A tenant's request for a new tenancy shall be for a tenancy beginning with such date, not more than twelve nor less than six months after the making of the request, as may be specified therein: …"

3. The notice under section 26 did not comply with section 26(2) since it required a new tenancy to be granted on 6 July 2001.
4. On 8 November 2001 the landlord served a notice under section 25 of the 1954 Act. Section 25(1) and (5) provide as follows:-

"25 Termination of tenancy by the landlord

(1) The landlord may terminate a tenancy to which this Part of this Act applies by a notice given to the tenant in the prescribed form specifying the date at which the tenancy is to come to an end (hereinafter referred to as "the date of termination"):

…

(5) A notice under this section shall not have effect unless it requires the tenant, within two months after the giving of the notice, to notify the landlord in writing whether or not, at the date of termination, the tenant will be willing to give up possession of the property comprised in the tenancy."

5. The landlord relied on certain breaches of covenant. On 4 December 2001 the tenant served a counter notice which, in response to that part of the landlord's notice which complied with section 25(5), stated in error that the tenant would be willing to give up possession of the property. I will refer to a counter-notice in this form as a "positive counter notice" and to a counter notice which states that the tenant is not willing to give up possession of the property as a "negative counter notice". This follows the classification used by Brightman J in Re 14 Grafton Street [1971] 1 Ch.935, to which I refer below.
6. The error in the counter notice was spotted before the two months for serving a counter notice had expired. On 4 January 2002, the tenant served a negative counter notice. He subsequently applied to the County Court for the grant of a new tenancy in pursuance of section 24(1) of the 1954 Act (as amended), which provides as follows:-

"24 Continuation of tenancies to which Part II applies and grant of new tenancies

(1) A tenancy to which this Part of this Act applies shall not come to an end unless terminated in accordance with the provisions of this Part of this Act; and, subject to the provisions of section twenty-nine of this Act, the tenant under such a tenancy may apply to the court for a new tenancy:

(a) if the landlord has given notice under section 25 of this Act to terminate the tenancy, or

(b) if the tenant has made a request for a new tenancy in accordance with section twenty-six of this Act."

7. The landlord applied to strike out the proceedings on the basis that they disclosed no prospect of success. On this application, HHJ Cox gave judgment in favour of the landlord.
8. Section 29(2) of the 1954 Act provides that, where the landlord has served a notice under section 25, the court cannot entertain proceedings for a new tenancy unless the tenant has duly given a negative counter notice:-

"29. Order by court for grant of a new tenancy

(1) Subject to the provisions of this Act, on an application under subsection (1) of section twenty-four of this Act for a new tenancy the court shall make an order for the grant of a tenancy comprising such property, at such rent and on such other terms, as are hereinafter provided.

(2) Where such an application is made in consequence of a notice given by the landlord under section twenty-five of this Act, it shall not be entertained unless the tenant has duly notified the landlord that he will not be willing at the date of termination to give up possession of the property comprised in the tenancy …"

14 Grafton Street

9. The leading authority on the question whether the tenant can serve a second counter notice in a different form is 14 Grafton Street above. The landlord's notice under section 25 was dated 27 September 1969 and it required possession to be given up on 1 April 1970. At that time, in order to claim compensation under section 37 of the 1954 Act, the tenant had to serve a negative counter notice and apply to the court for a new tenancy. On 13 October 1969, the tenant served a positive counter notice. Section 37 was amended by the Law of Property Act 1969 with effect from 1 January 1970 to remove the requirement that the tenant apply for a new tenancy. On 1 April 1970 the tenant vacated the premises and sought compensation. Two issues arose: first, whether the landlord acquired an indefeasible right to recover possession on 1 April 1970, without payment of compensation, before the amendment came into effect on 1 January 1970, and second, whether the amendment to section 37 of the 1954 Act had restrospective effect. Brightman J held that the landlord had acquired an indefeasible right to the property prior to 1 January 1970 and that accordingly the tenant had no right to compensation. It is to be noted that in this case there was neither the service of a negative counter notice nor the making of any application to the court. The landlord argued that the landlord acquired an indefeasible right to possession and that they acquired this right before the commencement of the Law of Property Act 1969 on 1 January 1970.
10. At pages 943 to 944, Brightman J reached a conclusion in favour of the landlord on two bases. The first basis was that the counter notice was irrevocable:-

"There was some discussion, unsupported by authority as I was told none existed, as to whether the tenants could, on or before November 27, have revoked their positive counter notice and given the negative counter notice required by section 29(2) to enable proceedings to be taken. In my view the purpose of section 25(5) is to introduce an element of certainty into the relationship between the landlord and the tenant. A tenant is not bound to serve a negative counter notice before the end of the two month period allowed to him. He may pause for that period of time while he makes up his mind. If however he does serve a positive counter notice during the two month period, I think that he must abide by what he has done. If that were not the case, the positive counter notice would serve no purpose whatever compared with complete inaction, for in either case the landlord would not know where he stood until the end of the two month period. If a positive counter notice is revocable the tenant serving the same would be able to serve a negative counter notice right up to the end of the two month period. If on the other hand the tenant does nothing, he may likewise serve a negative counter notice right up to the end of the two month period. It follows that a positive counter notice would be wholly devoid of any function, even that of courtesy, if it were revocable at the will of the tenant. I, therefore, conclude that a positive counter notice is irrevocable; and that in this case the tenants ceased to be able to serve a negative counter notice after October 13 1969, and that they then lost their right to apply to the court for an order for the grant of a new tenancy.

I have not overlooked the fact that the Act of 1954 is not expressed to impose on the tenant an obligation to serve a notice of either description within the two month period. All that the Act does is to impose on the landlord, as a condition of a valid section 25 notice, the obligation of informing the tenant that he is required to serve an notice one way or the other within the two month period, and to place the tenant under a disability if he fails to serve a negative counter notice. In my view, however, it is a necessary implication from section 25(5) that a tenant is under a statutory obligation to serve notice one way or the other within the two month period, although I accept that there is no sanction imposed on him for ignoring that obligation, except his inability to apply to the court.

In these circumstances the position in my view was as follows:

On October 14 1969, that is to say, about eight days before the Act of 1969 received the Royal Assent, the landlords had an indefeasible right to recover possession on April 1 1970, without payment of compensation, if I am correct in my conclusion that the tenants were precluded from withdrawing their letter of October 13, and from serving a negative counter notice.

Alternatively, on November 28, that is to say, just over a month before the Act of 1969 came into force, the landlords had an indefeasible right to recover possession on April 1 1970, without payment of compensation, if, contrary, to my view, the tenants were able, notwithstanding their letter of October 13, to serve a negative counter notice after that day."

11. In the later case of Bridgers & Hamptons Residential v Stanford (1991) 63 P&CR 18, this court had to consider whether a notice which did not comply with section 25 in several respects was nonetheless a valid notice. One of the defects in the notice was that it did not comply with the requirements of section 25(5) in that it only required the tenants to notify the landlord in writing within two months if they were not willing to give up possession. In other words it required the tenants to give a negative counter notice but it did not require them to give a positive counter notice if they were willing to give up possession. This court held that the notice was valid. It applied a purposive approach to the construction of the 1954 Act. It held that the object of the positive counter notice was to introduce certainty into the transaction for the benefit of the landlord alone, and accordingly the requirement to make a statement about a positive counter notice could be waived by the landlord. At page 22, Lloyd LJ, having set out part of the passage from the judgment of Brightman J in 14 Grafton Street set out above, held:-

"The importance of the passage for us lies in the judge's view that the only purpose of the positive counter notice is to introduce certainty into the transaction. By contrast, the negative counter notice serves another obvious purpose, since it links in directly with section 29(2) of the Act.

If that is right, as I believe it to be, I ask myself next, what was the object of introducing certainty into the transaction in the case of a positive counter notice? Was it for the benefit of the landlord or the tenant or both? The answer to that question must surely be that it was for the benefit of the landlord alone.

Mr Elvin sought to persuade us that certainty could also have been for the benefit of the tenant. But as Nourse LJ pointed out in the course of the argument, the tenant must know already if he is willing to give up possession. If he knows, how could the giving of a positive counter notice make him more certain of that fact? So far from being a benefit to the tenant, the only foreseeable consequence to him of giving a positive counter notice is prejudicial. Once given, the notice cannot be withdrawn, as the judgment of Brightman J demonstrates."

12. Nourse and Ralph Gibson LJJ delivered concurring judgments.
13. HHJ Baker QC, sitting as a Deputy Judge of the Chancery Division, in the case of Baglarbasi v Deedmethod Ltd [1991] 2 EGLR 71 also accepted the view that a counter notice once given was irrevocable. He took the view that once a positive counter notice was served, the landlord could proceed on the basis that the tenant was willing to give up possession. He referred to 14 Grafton Street.

The judgments below

14. In this case HHJ Cox followed Re 14 Grafton Street. In addition he rejected any argument based on section 3 of the Human Rights Act 1998 but he gave permission to appeal to the High Court on human rights grounds.
15. The appeal came before Pumfrey J. The judge did not decide the case on human rights grounds as anticipated. He took the view that the decision in 14 Grafton Street was distinguishable. He held that Brightman J had been unable to identify any practical function which was performed by a positive counter notice except to act as an act of courtesy to the landlord, and that on that basis it was, at first sight, surprising that the effect of serving a positive counter notice was to preclude the tenant from later serving a negative counter notice within the two month period.
16. With respect to the learned judge, it seems to me that his observation about the judgment of Brightman J overlooks the fact that Brightman J was satisfied that the effect of the serving of the first counter notice was to prevent the serving of a further different counter notice. That by implication this gave a positive counter notice the function that it would otherwise lack.
17. The crux, however, of the judge's conclusions on Re 14 Grafton Street follows on from the citation of most of the first complete paragraph of the judgment of Brightman J set out above, but stopping at the word "irrevocable" in the last sentence. The judge then said this:-

"16. I approach this passage with all the respect which is owing from me to a judge of great experience and authority in this field. I would, however, respectfully doubt whether the "therefore" in the words, "I, therefore, conclude that a positive counter-notice is irrevocable" in fact indicates a logical conclusion from the premises. It seems to me that it is a possible view that a positive counter-notice is not devoid of any function including that of courtesy if the tenant gives it, and thereafter it is acted upon by the landlord. If, however, there is no (to use a shorthand expression) "change of position" on the part of the landlord in reliance upon the serving of a positive counter-notice , I do not, as presently advised, understand why it is necessary to conclude that the counter-notice irrevocable. Mr Vickery, who appeared on behalf of the landlord in the present case, suggested a number of reasons why that should be so. He pointed to the symmetrical nature of the provisions of the statute relating first of all to landlord's notices under section 25 and secondly to the tenant's notice under section 26. He pointed out, correctly, that if a landlord gives a counter-notice, as is permitted under section 26(6), it is well settled that the grounds of opposition set out in such a notice are, like the grounds of opposition specified in the landlord's notice under section 25, unamendable and irrevocable. He submits that to treat the tenant's counter-notice under section 25(5), albeit it appears to have no other legal effect, as revocable, introduces an anomaly in the scheme of the Act which must be doubtful in view of the irrevocability of the other notices.

17. Mr Vickery submitted further that there is a good reason for treating a tenant's positive counter-notice as irrevocable. If the only question, he says, is whether in all the circumstances it is fair to allow the tenant to resile from a positive counter-notice, then an undesirable species of satellite litigation is introduced into a well understood, well circumscribed, kind of application made all the time in the county court and well understood by all involved. He says that it is thoroughly undesirable to introduce into this well understood system a possibility of satellite disputes as to the validity of tenants' negative notices if previous positive notices have been given and the tenant has for some reason or other changed its mind.

18. I see the force of these submissions. However, I am not satisfied that in point of fact the circumstances arising here are likely as a practical matter to arise at all frequently. There can be little doubt that there is no question of a change of mind here, but a simple error on the part of the solicitor. Second, I cannot see why, in the ordinary course, a tenant will give a positive notice unless quite satisfied that it does indeed intend to give up possession at the end of the notice period. I am not satisfied that positive counter-notices are such a common phenomenon in any event that it is necessary to consider the risks involved from the point of view of the proper administration of justice in permitting, in a proper case, a negative counter-notice to be substituted for a positive counter-notice already given. So although I freely accept the possibilities to which Mr Vickery referred, I doubt very much whether in point of fact they amount to a cogent objection to the construction of the relevant provisions which I prefer. The construction which I prefer is that section 29(2) is satisfied if in point of fact within the two-month period, thus giving proper emphasis to the word "duly", a notice stating that the tenant will not be willing at the date of termination to give up possession, has in point of fact been given.

19. I do not believe that this construction is precluded by the judgment of Brightman J, since in that case, although Brightman J held that the landlords had an indefeasible right to recover possession on 1 April 1970 without payment of compensation, in In re 14 Grafton Street, London W1 [1971] Ch 935 Brightman J is considering the indefeasible right of landlords having regard to the ability of the tenants to give a negative counter-notice after 13 October. It is to be observed that in that case no negative counter-notice was in fact given. The point, therefore, did not arise and the tenants took no steps to raise the question until after the expiry of the two-month period. I do not think it can be seriously contended that the two-month period is in any extensible, and it would follow, therefore, that after the expiry of the two-month period the landlord's right became indefeasible whether or not during the period from 13 October to 27 November there had been a contingent right in the tenants to revoke their original positive notice. Accordingly, it does not seem to me that this determination was essential to the decision of Brightman J, but if that is a wrong analysis I would, to the extent that I have indicated, very respectfully disagree with the generality of what he said.

20. It follows that in my view this appeal ought to succeed on the grounds that the tenant was entitled to give a second notice and that section 29(2) was potentially satisfied. However, it seems to me that in any case where the tenant has made a positive representation, it will be a question whether it is in fact entitled to resile from the positive notice which is given in answer to a section 25 notice given by the landlord. I say no more about that in this case, save to say that it must be open to the court of determine that in all the circumstances it is wrong for a tenant to seek to substitute a new statement of his intention for the purposes of section 29(2), but each such case must be dealt with on its own merits. I would accordingly allow this appeal on this ground. "

18. The judge accordingly concluded that a second counter notice could be served within the two month period allowed by the 1954 Act. He further concluded that the decision of Brightman J turned on the fact that there was no negative counter notice. Alternatively, if the judge was wrong on this, the judge disagreed with the judgment of Brightman J. In the final paragraph cited above, the judge held that a different result might be appropriate where the tenant had made a positive representation and it would be wrong for the tenant to be allowed to resile from his original position.
19. Unfortunately, as the appeal to the High Court was expected to turn on the human rights authorities, the decision of the Court of Appeal in the Bridgers case (above) was not cited to Pumfrey J. The judge was, therefore, led to believe that there was no authority binding on him. This case is regrettably a cautionary tale against deciding cases on points other than those on which the advocates are properly prepared to address the court. That course carries risks. It also demonstrates the reliance which the court must inevitably place on advocates to cite the relevant law. The judge mistakenly thought that he could decide the case without further citation and without dealing with the human rights issues.

Submissions

20. On this appeal, Miss Judith Jackson QC, who did not appear below, submits that the Bridgers case represents binding authority which precluded the judge from departing from the reasoning of Brightman J in Re 14 Grafton Street. She also submits that in any event the conclusion of Brightman J follows from the doctrine of election. Under the doctrine of election, once a party has made a clear choice between two inconsistent rights, with the knowledge of the facts that gave rise to those rights, he cannot reverse that choice. The paradigm example of election is the acceptance of rent from a tenant who is in breach of covenant. This constitutes an election not to forfeit the lease on the ground of the breach of covenant: see for example, Central Estates (Belgravia) Ltd v Woolgar (No.2) [1972] 1 WLR 1048. The doctrine of election was recently considered by Robert Walker LJ in Oliver Ashworth Ltd v Ballard Ltd [2000] Ch.12 at 27, who said this:-

"In his first judgment the judge considered Doe d.Cheny v Batten (1775) 1 Cowp.243, and the recent discussion of it by Knox J in Dun & Bradstreet Software Services (England) Ltd v Provident Mutual Life Assurance Association (unreported), 2 April 1996. But before any detailed consideration of those cases it is necessary to make some general observations about estoppel, election and waiver. All share a common foundation in a simple instinct of fairness, and in particular the perception that as between two parties to a transaction or a legal relationship it is or may be unfair for one party, A, to adopt inconsistent positions in his dealings with the other, B. As Lord Wilberforce said in Johnson v Agnew [1980] A.C. 367, 398: 'Election, though the subject of much learning and refinement, is in the end a doctrine based on simple considerations of common sense and equity.' Equitable, or promissory, estoppel applies only where there is an unequivocal representation, in words or conduct, by A and it is relied on by B. That does not arise here (the tenant's original pleading of estoppel was concerned with the identity of the landlord to which the notice was addressed, a point which is no longer live). In election, by contrast, A's words or conduct unequivocally evince a choice by A between inconsistent alternatives. In such a situation reliance by B on A's unequivocal words or conduct, as opposed to B's knowledge of what A has said or done, it not a necessary ingredient. But knowledge on the part of A that there is a choice to be made is a necessary ingredient. He must make an informed choice. But as Stephenson LJ said in Peyman v Lanjani [1985] Ch.457, 487: 'When a party has legal advice, he will be more easily presumed to know the law and evidence or special circumstances may be required to rebut the presumptions.' "

21. As Robert Walker LJ makes clear, it is not necessary for it to be shown that there was reliance on the choice made.
22. Mr William Geldart, for the tenant, seeks to uphold the judgment of Pumfrey J. He submits that there is no requirement for a positive counter notice and that the landlord does not obtain full certainty until the two month period has expired. He, therefore, challenged the first ground on which Brightman J decided Re 14 Grafton Street and did not press any challenge to the alternative ground of Brightman J's decision. On his submission, his interpretation gives the landlord some assurance and he can start to make some arrangements for the termination of the tenancy. As I see it, this is not certainty at all. It deprives the positive counter notice of any effect.
23. Mr Geldart also submits that a positive counter notice, if properly construed, is not unequivocal because there are very likely to be negotiations between the landlord and tenant. In my judgment, this is not a strong argument since the effect of a notice must turn on the Act rather than on what may or may not be happening outside the Act.
24. Mr Geldart further submits that the 1954 Act makes a specific reference to election in Part 1, section 13(1). This refers to a tenant electing to retain possession in the case of residential premises. In my judgment, this reference does not help Mr Geldart. Although there is no equivalent reference in Part II, the reference to election in Part I shows that election is the appropriate concept to use when a tenant makes a choice as to whether to stay in possession or give up possession.
25. Mr Geldart then submits that an elector must generally obtain a benefit from his election: see Halsbury's Laws, 4^th edition, volume 16(2), paragraph 962. But in this case, it cannot be said that there is no benefit to the tenant since when the notice takes effect he will be discharged from the covenants on the lease. Mr Geldart's answer to this is that the tenant could serve his own notice under section 27(2) of the 1954 Act but this only arises when the tenant is holding over.
26. Mr Geldart makes further submissions on the subject of human rights. He contends that the statutory right to renew is a form of property for the purposes of Article 1 of the First Protocol to the European Convention on Human Rights (the Convention) but that election would violate this right to property conferred by Article 1 of the First Protocol since it is disproportionate in its effect on the tenant. Moreover, he submits that the consequence of election would also be to give minimal benefit to the landlord who always retains the reversion. He submits that Parliament did not provide expressly for election, and that it did not have in mind the possibility that the tenant might be disadvantaged by serving the first notice under a mistake and then serving the second notice. Mr Geldart submits for similar reasons that the decision in Re 14 Grafton Street violates the tenant's right of access to court under article 6 of the Convention. On Mr Geldart's submission, the court is bound to reject the interpretation placed on section 25 by Re 14 Grafton Street by virtue of its interpretative obligation under section 3 of the Human Rights Act 1998.

Conclusions

27. In my judgment, Pumfrey J was bound by the decision of this court in the Bridgers case. In that case it is part of the ratio of the court's decision that the decision of Brightman J in Re14 Grafton Street was correct. The basis of the relevant part of the decision was that the counter notice brought about an irrevocable change in the relationship between the landlord and tenant. On that basis, it was not open to a tenant to serve a second counter notice. In the case of a positive counter notice, this gave the landlord (but only the landlord) an advantage, which he could decide to waive.
28. Miss Jackson has emphasised the doctrine of election. In my judgment, Brightman J reached his conclusion on the irrevocability of a counter notice once served on the basis that that was Parliament's intention, i.e. as a matter of statutory construction. The doctrine of election may well have supplied the inspiration for the construction, but Brightman J, rightly in my respectful view, does not say that. He was entitled to use the technique of election since Parliament is presumed to know the law. However that may be, the construction reached by Brightman J is a construction which has stood for over thirty years and has been followed in at least two reported cases.
29. In the circumstances, the decision of Pumfrey J cannot stand unless the flexible result which he held should apply is the construction now required to be placed on section 25 or 29(2) of the 1954 Act by reason of the court's duty under section 3 of the Human Rights Act 1998 to construe legislation whenever enacted compatibly with Convention rights so far as it is practicable so to do. I therefore turn to consider whether the interpretation of the 1954 Act adopted in Re 14 Grafton Street violates the tenant's Convention rights. Mr Geldart has relied on article 1 of the First Protocol to the Convention and article 6 of the Convention. It is to those rights that I now turn.

Article 1 of the First Protocol

30. Article 1 of the Convention provides in material part that:

"Each natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

The preceding provisions shall not, however, in any way impair the right of a state to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties."

31. The first question is whether the statutory right to renew a business tenancy conferred by Part II of the 1954 Act is a "possession" for the purposes of article 1 of the First Protocol: This question was not decided by this court in C.A. Webber (Transport) Ltd v Railtrack plc [2004] 1 WLR 320. In that case this court held that a notice under section 25 was served when it was put into the post rather than when it was received in the ordinary course of post, although Longmore LJ in effect expressed the view that the right was a right for the purposes of article 1 (see paragraph 60, c.f. paragraph 45 per Peter Gibson LJ). In Wilson v First County Trust Ltd (No.2) [2003] 3 WLR 568, an issue arose as to whether a statutory bar imposed by section 127(3) of the Consumer Credit Act 1974 on the right of a lender to enforce security obtained from the borrower engaged article 1, but the House was divided on this issue. Lord Nicholls considered that article 1 was engaged (paragraph 44). Lord Hope and Lord Scott came to the opposite conclusion (paragraphs 108 and 168). It was unnecessary for Lord Rodger to deal with the point as he was content to decide the appeal solely on the retrospectivity issue (paragraph 220), though in so approaching the case he may have proceeded on the basis that article 1 was engaged. Lord Hobhouse considered that article 1 would have been engaged if the transaction was one of pledge but not if the lender was seeking to enforce a right which it had never validly acquired (paragraphs 136 to 137).
32. There are important differences between section 127(3) of the Consumer Credit Act 1974 and the relevant provisions of the 1954 Act. Section 24 of the 1954 Act provides for business tenancies to which the Part II of the 1954 Act applies to continue unless terminated in accordance with the provisions of that Part. Accordingly, subject to the provisions of Part II, the tenant has a statutory right to the continuation of his tenancy. Moreover, again under section 24, he has a statutory right to a new tenancy if the landlord has served a notice under section 25. I have set out the material provisions of sections 24, 25 and 29 above.
33. For the tenant to succeed on its article 1 argument, it has to satisfy the court not merely that it has a right to renew the tenancy by serving a negative counter notice but also that it has a right to give that notice at any time within the statutory period of two months even if it has previously served a positive counter notice. It has to argue that the interpretation placed on Part II of the 1954 Act by Re 14 Grafton Street is not merely a limitation on the right to apply for a new tenancy but a deprivation of the right where a positive counter notice has been served first.
34. In my judgment, the speech of Lord Nicholls contains the most detailed guidance as to how the tenant's statutory right in this case should be analysed. He held:-

"39. … 'Possessions' in article 1 is apt to embrace contractual rights as much as personal rights. Contractual rights may be more valuable and enduring than proprietary rights. But, by virtue of the statute, the contractual rights acquired by First County Trust were enforceable only with the consent of the borrower pursuant to section 173(3).

40. The response of the Secretary of State and others is that all the rights acquired by First County Trust under the agreement were from their inception subject to the limitations prescribed by the Consumer Credit Act. A restriction on the scope of the rights acquired by a lender under a transaction is not within article 1 of the First Protocol. A person who acquires property subject to limitations under national law which subsequently bite according to their tenor cannot complain that his rights under article 1 of the First Protocol have been infringed.

41. I do not agree. This proposition is stated too widely and too loosely to be acceptable. Clearly, the expiry of a limited interest such as a licence in accordance with its terms does not engage article 1. That is not this case. Here the transaction between the parties provided for payment of the loan and for the car to be held as security. What is in issue is the "lawfulness" of overriding legislation. The proposition advanced by the Secretary of State would mean that however arbitrary or discriminatory such legislation might be, if it was in existence when the transaction took place a court enforcing human rights values would be impotent. A Convention right guaranteeing a right of property would have nothing to say. That is not an attractive conclusion.

42. There are of course many circumstances where statutes empower the executive or the courts to make orders depriving a person of some of his possessions. Compulsory acquisition, and property adjustment orders on divorce, are instances. The exercise of powers such as these prima facie engages article 1. This is so irrespective of whether the enabling statute was enacted before or after the property affected by the order was acquired. Hakansson and Sturesson v Sweden (1990) 13 EHRR 1 is an example where the law was in place before the property in question was acquired. The law providing for the compulsory resale of the applicants' land within two years existed when they bought the land. Thus a provision in the Consumer Credit Act empowering a court to refuse to enforce a regulated agreement may engage article 1 even though the Act was in force before the agreement was entered into.

43. In the present case the relevant statutory provisions are framed differently. They do not empower the court to refuse to enforce the agreement now in question. They go further. The court is compelled to refuse to make an enforcement order. Is this difference material? I think not. It would be passing strange if article 1 were engaged in the former case but not the latter. A law regulating the effect of a transaction between the parties in the public interest does not always escape review under article 1 if it creates an 'imbalance' between the parties which would result in one party being arbitrarily or unjustly deprived of his possessions for the benefit of the other: see Bramelid and Malmström v Sweden (1982) 5 EHRR 249, 256.

44. Thus the question in the present case is one of characterisation of the nature and effect of the relevant provisions of the Consumer Credit Act, considered as a matter of substance rather than form. In my view, consistently with the underlying objective of article 1 of the First Protocol, the relevant provisions in the Consumer Credit Act are more readily and appropriately characterised as a statutory deprivation of the lender's rights of property in the broadest sense of that expression than as a mere delimitation of the extent of the rights granted by a transaction. The rigid ban on enforcement of security and contractual rights prescribed by section 127(3) alone and in conjunction with sections 106 and 113 engages article 1 of the First Protocol. The lender's rights were extinguished in favour of the borrower by legislation for which the state is responsible. This was a deprivation of possessions within the meaning of article 1: see James v United Kingdom (1986) 8 EHRR 123, 140, para 38. Whether this statutory interference with First County Trust's peaceful enjoyment of its possessions was justified, and therefore not a breach of article 1, is a separate issue."

35. On this analysis the court must look at the substance of the claimed right to see whether the bar in this case to the exercise of the tenant's right is a delimitation of the right or whether it represents a deprivation of right. A relevant circumstance is that the bar is rigid, arbitrary or discriminatory. Lord Nicholls referred in terms to contractual rights, but a statutory right of the kind in issue in this case cannot be distinguished from a contractual right for article 1 purposes: a statutory right is an asset of the tenant in just the same way that a contractual right would be.
36. Lord Hope was the only other member of the House to consider in general terms the distinction between the delimitation of a right on the one hand and the deprivation of a right. He held:

"106 Article 1 of the First Protocol has a similar character [to article 6(1)]. It does not confer a right of property as such nor does it guarantee the content of any rights in property. What it does instead is to guarantee the peaceful enjoyment of the possessions that a person already owns, of which a person cannot be deprived except in the public interest and subject to the conditions provided for by law: Marckx v Belgium (1979) 2 EHRR 330, 350, para 50. Here too it is a matter for domestic law to define the nature and extent of any rights which a party acquires from time to time as a result of the transactions which he or she enters into. One must, of course, distinguish carefully between cases where the effect of the relevant law is to deprive a person of something that he already owns and those where its effect is to subject his right from the outset to the reservation or qualification which is now being enforced against him. The making of a compulsory order or of an order for the division of property on divorce are examples of the former category. In those cases it is the making of the order, not the existence of the law under which the order is made, that interrupts the peaceful enjoyment by the owner of his property. The fact that the relevant law was already in force when the right of property was acquired is immaterial, if it did not have the effect of qualifying the right from the moment when it was acquired.

107. The rights of property which are in issue in this case are those set in an agreement which is regulated by the 1974 Act. The Act subjects the rights of the creditor to restrictions in some circumstances. Section 65 declares that a regulated agreement which is improperly executed cannot be enforced by the creditor except by means of an order of the court, and section 127(3) declares that it is not to be enforceable at all except upon the condition which it lays down. The agreement which was entered into in this case was from the outset an agreement which was improperly executed. So it was always subject to the restrictions on its execution which sections 65(1) and 127(3) of the 1974 Act set out. I would hold that FCT's Convention rights under article 1 of the First Protocol are not engaged in these circumstances.

108. The Court of Appeal said that the effect of sections 65(1) and 127(3) was to deprive the pawnbroker of its ability to enjoy benefit from the contractual rights arising from the agreement or from the rights arising from the delivery of the pawn: paragraph 32. But the fact is that FCT never had an absolute and unqualified right to enforce this agreement or to enforce the rights arising from the delivery of the motor car. Article 6(1) of the Convention and article 1 of the First Protocol cannot be used to confer absolute and unqualified rights on FCT which, having regard to the terms of the statute by which agreements of this kind are regulated, it never had at any time under the improperly executed agreement which it entered into.

109. As I would hold that article 1 of the First Protocol is not engaged in this case, I do not need to examine the question whether section 127(3) is compatible with the rights guaranteed by that article. Had it been necessary for me to do so, I would have reached the same conclusion as Lord Nicholls has done for the reasons he gives."

37. Accordingly Lord Hope reached the opposite conclusion to that of Lord Nicholls on the question whether article 1 was ever engaged on the footing that the agreement in the instant case had from the outset been an agreement which was improperly executed. Section 127(3) of the Consumer Credit Act 1974 did not deprive him of anything to which he had ever been entitled.
38. Returning to the statutory scheme in the present case, I consider that the correct analysis is that the tenant had a right to apply to the court for a continuation of a tenancy if he served the requisite notice at any time within the period of two months from service of the landlord's notice (section 25(5)). The bar that arises if he first serves a positive counter notice is not apparent on the face of section 25(5) or section 29(2). In those circumstances I consider that it is more accurately analysed as a deprivation of a right rather than a delimitation of a right. That means that the court is obliged to scrutinise the interpretation placed on Part II of the 1954 Act in Re 14 Grafton Street to see whether it complies with article 1. It has not been argued that the conditions are not provided for by law. Moreover, given that Re 14 Grafton Street was decided over thirty years ago and has been applied since, I doubt whether that requirement could be successfully challenged.
39. The remaining issue is whether the restriction imposed by Re 14 Grafton Street is in the public interest and fairly balances the respective interests of landlords and tenants.
40. On this issue, too, Lord Nicholls' speech provides assistance. He held:-

"68. I turn now to consider whether section 127(3) of the Consumer Credit Act is compatible with the rights guaranteed by article 1 of the First Protocol. Inherent in article 1 is the need to hold a fair balance between the public interest and the protection of the fundamental rights of creditors such as First County Trust. It is common ground that section 127(3) pursues a legitimate aim. The fairness of a system of law governing the contractual or property rights of private persons is a matter of public concern. Legislative provisions intended to bring about such fairness are capable of being in the public interest, even if they involve the compulsory transfer of property from one person to another: see the leasehold enfranchisement case of James v United Kingdom (1986) 8 EHRR 123, 141, para 41. More specifically, persons wishing to borrow money are often vulnerable. There is a public interest in protecting such persons from exploitation.

69. There must also be a reasonable relationship of proportionality between the means employed and the aim sought to be achieved. The means chosen to cure the social mischief must be appropriate and not disproportionate in its adverse impact. Whether that relationship exists in the case of section 127(3) is the key issue.

70. In approaching this issue, as noted in R v Johnstone [2003] 1 WLR 1736, 1750, para 51, courts should have in mind that theirs is a reviewing role. Parliament is charged with the primary responsibility for deciding whether the means chosen to deal with a social problem are both necessary and appropriate. Assessment of the advantages and disadvantages of the various legislative alternatives is primarily a matter for Parliament. The possible existence of alternative solutions does not in itself render the contested legislation unjustified: see the Rent Act case of Mellacher v Austria (1989) 12 EHRR 391, 411, para 53. The court will reach a different conclusion from the legislature only when it is apparent that the legislature has attached insufficient importance to a person's Convention right. The readiness of a court to depart from the views of the legislature depends upon the circumstances, one of which is the subject matter of the legislation. The more the legislation concerns matters of broad social policy, the less ready will be a court to intervene."

41. It is evident in this case that the interpretation placed on the 1954 Act in Re 14 Grafton Street has the advantage that if the landlord receives a positive counter notice in response to his section 25 notice he can make arrangements for what is to happen on the termination of the tenancy. There are obvious economic benefits to both landlord and tenant in having certainty at this stage, if possible, and this is so even if it is rare for a positive counter notice to be given. The fact that in an exceptional case hardship occurs does not undermine that conclusion. It is difficult (though not impossible) to think of an exceptional case other than that where the tenant erroneously serves a positive counter notice as here. All such cases are probably rare, and the law could not produce certainty yet be flexible in this case. The need for certainty in the area of termination of business tenancies was also a consideration in this court's reasoning in the Railtrack case. In other words, I do not see that there is anything obviously wrong with the balance that Parliament has drawn with respect to the issue in this case. As Lord Nicholls said in Wilson v First County Trust, the role of the courts is a supervisory one. Moreover, in my judgment, the courts will be less ready to intervene where the legislation concerns matters of economic policy, as here, than in some other cases. Such other cases may include legislation which affects an individual's right to freedom of expression or his right to respect for his private life. There is no material difference for this purpose between matters of broad social policy, to which Lord Nicholls referred, and matters of economic policy. Accordingly, I conclude that, even though Article 1 is engaged it is not in the circumstances violated.
42. Miss Jackson has drawn our attention to the fact that as from 1 June 2004 sections 25(5) and 29(2) will no longer be in force and the tenant will be able to make an application for a new tenancy under section 24(1) at any time before the date specified in the landlord's section 25 notice (The Regulatory Reform (Business Tenancies) (England and Wales) Order 2003, (SI 2003/3096)). This indicates that Parliament has restricted the balance between landlord and tenant in this area. However, the amendment does not apply to the proceedings in this case: Parliament has not decided to apply the change retrospectively. Moreover, the repeal of section 25(2) and section 29(2) clearly forms part of a package of changes in the law, including power for the landlord to apply for an interim rent to be fixed at any time after he serves his section 25 notice. Mr Geldart has not suggested that the court should take this statutory instrument into account when considering the question of the proportionality of the construction imposed on the 1954 Act by Re 14 Grafton Street. In my judgment, he was right not to do so. Accordingly the prospective repeal of sections 25(5) and 29(2) does not affect the conclusion which I have reached above.

Article 6(1)

43. Article 6(1) of the Convention secures the right of access to court for the determination of civil rights and obligations. In my judgment, the right to apply for a new tenancy is a "civil right" for this purpose. However, article 6(1) does not guarantee the content of any particular civil right (see Wilson v First County Trust, at paragraphs 32 to 37, 103 to 105, 145, 165 to 166). Accordingly, on the basis that the interpretation on Part II of the 1954 Act in Re 14 Grafton Street does not violate article 1 of the First Protocol, it is difficult to see how it could violate article 6(1) even if that article applies. To apply it would have to be characterised as a procedural bar. Lord Nicholls, with whom Lord Scott and Lord Rodger agreed on this point (paragraphs 165 and 215), points out that it can be difficult to distinguish procedural and substantive bars:

"35. The distinction between the substantive content of a right and an unacceptable procedural bar to its enforcement by a court can give rise to difficulty in distinguishing the one from the other in a particular case. As a matter of drafting, a restriction on the scope of a right may be framed in several different ways. But the drafting technique chosen by the draftsman cannot be determinative of this issue. Human Rights conventions are concerned with substance, not form, with practicalities and realities, not linguistic niceties. The crucial question in the present context is whether, as a matter of substance, the relevant provision of national law has the effect of preventing an issue which ought to be decided by a court from being so decided. The touchstone in this regard is the proper role of courts in a democratic society. A right of access to a court is one of the checks on the danger of arbitrary power. In Matthews v Ministry of Defence [2003] 2 WLR 435, 477, para 142, Lord Walker of Gestingthorpe noted that article 6 is in principle concerned with the procedural fairness of integrity of a state's judicial system. Lord Hoffmann observed, at p 447, para 29, that it should not matter how the law is framed, provided one holds onto the underlying principle, which is to maintain the rule of law and the separation of powers.

36. In the present case the essence of the complaint is that section 127(3) of the Consumer Credit Act has the effect that a regulated agreement is not enforceable unless a document containing all the prescribed terms is signed by the debtor. In my view, thus framed, the complaint does not bring the article 6(1) into play. In terms of labels, that is a restriction on the scope of the rights a creditor acquires under a regulated agreement. It does not bar access to court to decide whether the case is caught by the restriction. It does bar a court from exercising any discretion over whether to make an enforcement order. But in taking that power away from a court the legislature was not encroaching in territory which ought properly to be the province of the courts in a democratic society.

37. In reaching the opposite conclusion the Court of Appeal focused on the exclusion of any meaningful consideration by the court of the creditor's rights under the agreement in a case where the document signed by the debtor does not include all the prescribed terms. The court held that the exclusion of any judicial remedy in such a case engages article 6(1): [2002] QB 74, 92-93, paras 31, 32. I am unable to agree. The inability of the court to make an enforcement order in such a case, whatever the circumstances, is a limitation on the substantive scope of a creditor's rights. It no more offends the rule of law and the separation of powers than would be the case if Parliament had said that such an agreement is void."

44. For my part, consistently with my conclusions on the article 1 issue, I do not consider that it has been shown that there is a good reason why in a democratic society a court should hear applications which fall to be dismissed on the interpretation of the 1954 Act in Re 14 Grafton Street. Thus the test set out by Lord Nicholls is not met. The bar in this case is more naturally seen as a bar on a substantive right rather than as a procedural bar, and in this respect it may be compared with the bar on enforcement in issue in the Wilson case. Accordingly, in my judgment, article 6(1) is not engaged in this case.
45. If article 6(1) were engaged, the bar in this case would violate article 6(1) if the essence of the right to apply for a new tenancy is destroyed, or the bar fails to meet the requirement of proportionality, or if the bar does not achieve a legitimate aim. However, the bar clearly does not destroy the essence of the right since the tenant could have applied to the court if he had served the right notice, and the same arguments as to proportionality as apply under article 1 would apply under this article also. The bar serves a legitimate aim as it forms part of a scheme of regulation for the renewal of business tenancies. Accordingly, if I had concluded that article 6 was engaged in this case, I would have concluded that it was not violated.

Extension of time

46. I must finally deal with the question of an extension of time. The appellant filed his appellant's notice on 17 March 2003, over three months' late. The delay was due to mistakes on the part of the appellant's former solicitors. The firm acting on the appeal before Pumfrey J merged with another firm. One of the constituent firms was involved in an office move. The solicitor involved in the matter was not aware of the time limit. The matter was then handed to a solicitor experienced in litigation within the new firm. He appreciated in January 2003 that the time limit for filing the appeal had been exceeded. However, he himself was caught up with a lengthy trial and that led to a delay in the filing of the appellant's notice.
47. However, the respondent was told on 23 January 2003 that the appellant was considering an appeal.
48. Mr Geldart relied on Sayers v Clarke Walker [2002] 1 WLR 309 for submission that this was not a complex case. Brooke LJ in that case considered that cases which were not complex could be dealt with on the basis of the information provided in the appellant's notice. I do not see how this point can assist Mr Geldart. In any event, in referring to non-complex cases Brooke LJ, in my judgment, was referring to cases where the reasons for delay rather than the underlying appeal were straight forward. In this case they are clearly not straightforward, and indeed, when the matter came before Mance LJ on paper for permission to appeal and an extension of time, he set the matter down so that the respondent could be heard on the issue of an extension of time.
49. However, having heard both parties, the crucial point in my judgment is that the tenant was not prejudiced because it continued to be in possession of the property and to be liable to pay rent on the same basis as before by virtue of section 64 of the Landlord and Tenant Act 1954. Moreover, the appeal was clearly one which had merit. In those circumstances, in my judgment, this was an appropriate case for the granting of an extension time. I would accordingly in principle allow the appellant's application in that respect. On the other hand, I would do so on the condition that the appellant is liable to pay the respondent's costs caused by the application for an extension on an indemnity basis and would wish to hear counsel as to the appropriate proportion of the costs of the appeal overall that should be allocated to the costs involved in the application for an extension of time.

Disposition

50. I would allow the application for permission to appeal and the appeal. I would extend time for the application for permission to appeal on the basis set out above.

Sir Martin Nourse :

51. I agree

Lord Justice Thorpe :

52. I also agree.
Order: Applications allowed; Appeal allowed; Further orders as set out in the draft orders agreed by counsel. (Order does not form part of the approved judgment)