Tenant fails in its bid for a new tenancy after Court confirms landlord's intention to occupy property for its own use is viable

Out-Law News | 15 May 2012 | 11:32 am | 2 min. read

The operator of an oil depot has been unsuccessful in its bid for a new tenancy after the Court of Appeal confirmed that its landlord's plans to occupy the property for its own business were viable.

Its ruling upheld the decision by the High Court last year that Associated British Ports (ABP) could oppose granting new tenancies to Humber Oil Terminals Trustees (HOTT).

The case concerned the Immingham Oil Terminal; an oil depot in the Humber estuary made up of a jetty and associated premises held under four leases. ABP had opposed HOTT's claim for new tenancies under the Landlord and Tenant Act 1954 on the grounds that it intended to occupy the oil terminal for its own business use. 

The 1954 Act gives a tenant an automatic right to renew their lease, unless their landlord can prove one of the statutory grounds of opposition. One such ground is where a landlord wants to use the premises for its own business use, an exception known as 'ground (g)' after the relevant section of the Act. In order to oppose a lease renewal under 'ground (g)' ABP had to be able to show not only that it had a "fixed and settled" desire to do so but also a "reasonable prospect" of being able to bring about its desired result.

HOTT was a joint venture owned by Total and ConocoPhillips, both of whom used the jetty for imports and exports of oil from their nearby refineries. HOTT owned a complex system of pipes, equipment and infrastructure at the oil terminal which it planned to remove, at a cost of £10 million, if it did not renew its leases. ABP, which owns and operates another 20 ports across England and Wales, planned to ensure continuity of supply to the two refineries as well as open up the terminal to the use of third parties. However, if HOTT did remove its equipment it would take ABP 2 years to replace at a cost of £60 million.

In the High Court, the judge said that ABP met both parts of the test because the intention was there "even though there will undoubtedly be difficulties for ABP" but that that as a result of "economics and commercial reality", the parties would likely come to a commercial arrangement regarding the infrastructure.

In the Court of Appeal Lord Justice Rimer said that the High Court judge had been correct to make that assumption stating "The judge had to assess the objective element of ABP's stated intention by making the required statutory assumption that it is ABP and not HOTT that is in possession of the premises; and, therefore, necessarily on the assumption that HOTT's tenancies had determined," he said. "That was what he did and he made his findings of fact referred to above as to the probabilities of what would then happen."

Property law expert Sarah Campey of Pinsent Masons, the law firm behind Out-Law.com, said that although the decision would be a disappointment for the tenant the Court of Appeal had provided some "useful guidance" on how it would consider both parts of the 'ground (g)' test.

"The facts of this case are unusual - this has been a battle between two giants and the decision is very specific to the facts and the probable negotiations that would ensue," she said. "The financial strengths and commercial nature of the parties is significant. ABP has the necessary resources to run the oil terminal and to acquire the equipment from HOTT, who were unlikely to remove this at huge cost and purely in spite."