11
December 1997
COSTELLO
P:
INTRODUCTION.
These
proceedings relate to a site in the heart of the city of Cork of a little over
.7 acres. Entrance to the site is by means of an archway under a three storey
house on Grand Parade and from another access on South Main Street. On the left
of the site (as one enters it) is the River Lee. The site is presently, and has
for many years, been used as (a) a filling station and garage selling the
products of Irish Shell Ltd and (b) as a car park. Over the entrance to the
site on Grand Parade is a sign which displays Irish Shell's logo and the words
"City Car Park". By agreement of the 17 December, 1996 the plaintiffs agreed to
purchase the site from Irish Shell Limited and they intend to develop it by
constructing apartments and commercial units, purchasing it subject to a hiring
and license agreement dated the 1 October, 1994 made between Irish Shell
Limited and one Stephen Leonard, who is the first named defendant. Mr Leonard
sold his interest in the site on the 12 December, 1996 to Lecorn Limited who
are the second named defendants. Mr Leonard's agreement of the 1 October, 1994
with Irish Shell terminated on the 30 September, 1997 but by notice of the 30
September given pursuant to
section 20 of the
Landlord and Tenant (Amendment)
Act 1980 Lecorn Limited claimed that a monthly tenancy of #1,446 per month
(plus vat) had been created by the agreement of the 1 October, 1994 and the
grant of a new tenancy under Part II of the 1980 Act or, in the alternative,
#1m compensation. This was followed by an application for a new tenancy to the
Cork Circuit Court on 4 November, 1997. It claimed that the premises were a
"tenement" within the meaning of
the Act, that they were held under written
contract of tenancy made the 1 October, 1994 between Irish Shell Limited and Mr
Leonard, that they were in the occupation of the then tenant and had been
continuously in occupation of the then tenant and his predecessors in title for
upwards of 20 years or alternatively during the whole of three years preceding
the 1 October, 1994 and bona fide used by the tenant thereof for the purpose of
carrying on a business. By answer filed the 17 November, 1997 the plaintiffs
herein claimed inter alia that the premises were not "a tenement", and that the
contract of the 1 October, 1994 was not a contract of tenancy. In addition the
defendants pleaded that if the contract was a contract of tenancy they intended
to pull down or rebuild or reconstruct the buildings on the premises and
further that the creation of the tenancy would not be consistent with good
estate management.
These
proceedings had been commenced by summons in this court of the 6 October, 1997
and on the same day a motion for an injunction restraining the defendants, that
is Mr Leonard and Lecorn Limited, from trespassing on the plaintiffs lands at
the "City Car park", Grand Parade, Cork. It is now agreed that if the
plaintiffs are entitled to relief an order should be made against the
second-named defendant only. Affidavits were filed by the parties and
eventually it was ordered that this motion be tried as the trial of the action
on oral evidence.
Preliminary
Issue.
At
the hearing of the trial counsel on behalf of the defendants raised a
preliminary issue. It was submitted that the court had no jurisdiction to grant
an injunction because of the proceedings pending in the Cork Circuit Court
under the 1980 Act. It was urged that (a) exclusive jurisdiction was given to
the Circuit Court under the 1980 Act to determine Lecorn's right to a new
tenancy, (b) that this court had no jurisdiction to determine the issues
arising on that application, (c) that by virtue of
section 28 of the 1980 Act
Lecorn were entitled to retain possession of the premises pending their
application for a new tenancy, (d) that accordingly the injunction claimed
could not be granted. I disagreed with these submissions. I concluded that (a)
the Circuit Court had exclusive jurisdiction under the 1980 Act to hear and
determine claims for a new tenancy, (b) that the present proceedings were for
injunctive relief based on a claim that the defendants were trespassers (c)
that the 1980 Act did not deprive this court of jurisdiction to hear such a
claim, (d) that ordinarily, where a right to a new tenancy under the 1980 Act
was contested on the ground that a "tenancy" did not exist or that the premises
were not a "tenement" these issues should be determined in the Circuit Court
and this Court should stay proceedings in which these issues were raised, that
(e) because of the particular urgency in this case the court should not decline
jurisdiction, that (f) should the court decide that (i) the agreement of the 1
October, 1994 constituted a "tenancy" and (ii) the site constituted a
"tenament" within the meaning of
the Act then
section 28 of
the Act applied and
Lecorn would be entitled to retain possession pending the determination in the
Circuit Court of the application for a new tenancy, and I would accordingly
dismiss these proceedings. I therefore decided to hear oral evidence and
determine these two issues. Should I decide them in Lecorn's favour, the
Circuit Court would then be required to determine whether or not a new tenancy
should be granted in the light of the plaintiff's intended use of the site and
perhaps the issue of compensation.
The
Facts.
The
defendant Mr Stephen Leonard had two brothers, Jack and Christie. The three
brothers had worked on the site since 1960. At all times they occupied under
agreements made with Irish Shell with one or other of them. Initially these
agreements were yearly and later for three-yearly periods. They were firstly
made between Irish Shell Limited and Jack Leonard. After his death in 1988 they
were between Irish Shell and Christie Leonard. Christie died in 1992 and the
two final agreements were made with Stephen Leonard the first-named defendant
herein. The earlier agreements are not now available but Mr Leonard accepts
that they were in the same form as the three agreements which were proved in
evidence.
The
first agreement which was proved was dated the 28 June, 1990. It was made
between Irish Shell Limited and Christopher Leonard. It is entitled "Hiring and
License Agreement". It was an agreement by which Irish Shell hired the
equipment referred to in the agreement for three years from the 10 December,
1988 and granted him a license to be present at the filling station known as
"City Car Park" for this period. The second agreement was made with Mr Stephen
Leonard and was signed by him on the 25 November, 1992. It is similarly headed
and was an agreement for the hire of the equipment for three years from the 1
October, 1991 and the granting of a similar license. The third agreement is
also between Irish Shell Limited and Stephen Leonard. It was signed by him on
the 25 May, 1994 and is similarly entitled and is an agreement to hire the
equipment for three years from the 1 October, 1994 and to grant a similar
license for that period.
Over
the years the occupation of the site and its physical characteristics have
changed. In the 1960's it was used as a garage and petrol filling station and
initially consisted of petrol pumps, repair ramps, repair workshops and a car
washing unit. The business that was carried on was the sale of petrol and oil
and the carrying out of repairs and the painting and washing of vehicles. A
spray painting operation was initially carried on by a person who paid a rent
to the Leonard brothers. At one period there were 32 people working on the
premises. In 1969 the operator of the spray painting unit left and it and 12
workshops were closed down. There was then a letting made of this area to a Mr
Maher for two years from 1970 to be used by him as a public car park. Mr Maher
left and after 1972 the Leonard brothers took over the operation of the car
park and carried it on in conjunction with the garage and petrol filling
station. In 1972 larger petrol tanks and new petrol pumps were installed by
Irish Shell Limited and work was done on the canopies over the petrol pumps.
There were derelict buildings on other land adjacent to the site and these were
knocked down by Irish Shell in the 1970's. The car park area was extended and a
license to use the larger site was granted by Irish Shell.
There
are presently, as one enters from Grand Parade, 4 petrol pumps under a canopy,
then two petrol pumps under a canopy. There are two small offices between the
first set of pumps. There is a small car park office which is used to receive
payment and keys from users of the car park. There is a three storey building
over the entrance arch on Grand Parade, which for a time was used for storage
but now it is derelict. There are four large motor fuel tanks underground.
These are built under the area now used as a car park. There is a garage and
compressor house beyond the pumps as well as two garages which are derelict and
boarded up. A low wall divides the filling station area from the car park area.
There
are in fact two businesses being carried on on the site (a) the business of
supplying petrol and motor fuel to the public and (b) a car park business. In
considering the land which is associated with the first business I accept that
part of the land in the car park under which the tanks have been built and an
area around them must be considered as land associated with the first business.
I accept the evidence of Mr Ryan, a Chartered Surveyor called on behalf of the
plaintiffs, and hold that approximately one third of the site is associated
with the first business. Approximately two third's of the area of the site is
associated with the car park business. Quite clearly the land around this
office is not ancillary to the small office which receives payment and keys. On
the contrary, the office is ancillary to the business of parking cars. The
defendants case is that the area of the car park is ancillary to the business
of selling petrol and motor fuels and submit that the whole site is a
"tenement" within the meaning of the 1980 Act as (a) the land on the site is
ancillary to the buildings on it in which the business is carried on and (b) it
is held under a contract of tenancy. I will return to this point later.
Mr
Noel O'Reilly was the retail superintendent of Irish Shell in the Cork area
between 1982 and 1990 and negotiated contracts entered into between Irish Shell
and the Leonard brothers during that period. Mr Noel Coughlan carried out
similar duties since 1990 and negotiated the agreement signed by Mr Stephen
Leonard in November 1992 and the agreement signed by Mr Stephen Leonard on 2
May, 1995. There is a conflict of evidence between the testimony of Mr Noel
Reilly and Mr Noel Coughlan on the one hand and Mr Stephen Leonard on the
other. I think that the recollection of Mr Stephen Leonard is infirm and I
prefer the evidence of Mr Noel Reilly and Mr Noel Coughlan where it conflicts
with his. In particular I do not think that either Mr Noel Reilly or Mr Noel
Coughlan referred to the agreements which Mr Christie Leonard and later Mr
Stephen Leonard entered into as "leases" or that they referred to the sums
payable under the agreements as "rent". I am satisfied that at all times the
representatives of Shell referred to Shell's agreement with the Leonard
brothers as "licences" and the sums payable under the agreements as "licence
fees".
Major
repairs were carried out to the quay wall abutting the river Lee. The first
repairs were carried out by the Cork Corporation and the second repairs were
carried out by Irish Shell. The Leonard brothers were not required to make any
payment in respect of the works carried out.
The
agreement signed by Mr Stephen Coughlan on the 25 November, 1992 was for a
three year period from the 1 October, 1991. It would, accordingly, expire on
the 30 September, 1994. Prior to this date speculation had grown concerning the
future use of the site and particularly whether it might be sold by Irish Shell
for development. This was discussed between Mr Stephen Leonard and Mr Noel
Coughlan and Mr Leonard wrote on the 27 September, 1994 to confirm their
discussion. He went to his solicitor, Mr James Riordan, who had a discussion
about the situation with Mr Coughlan and Mr Riordan wrote to him on the 29
November, 1994. In the course of this letter he expressed the opinion that Mr
Leonard was a tenant and not a licensee and that he was making an offer to
purchase the site strictly without prejudice to his rights. On the 3 January
1995 Mr McDonagh, the retail network manager of Irish Shell, replied to Mr
Riordan pointing out that the site was not currently on offer for sale and
further pointing out that Mr Leonard held the property under a license
agreement which contained an express clause to the effect that the agreement
did not create the relationship of landlord and tenant between the parties. Mr
McDonagh wrote again on the 26 April, 1995 to Mr Leonard pointing out that the
license agreement of the 1 October, 1991 came up for renewal on the 1 October,
1994, that a new license agreement had been offered at the same fee which Mr
Leonard had refused to complete and stating that unless the attached license
agreement was completed recovery of Shell's property would have to be sought.
Mr Riordan replied on the 2 May, 1995 referring to certain "representations"
which it was said had been made to Mr Leonard and on the strength of these
representations Mr Leonard had signed the agreement "but strictly on the
understanding that his status as occupier of the premises would continue as
hitherto". Mr Fallon, the Corporate Services Manager replied to Mr Riordan on
the 26 June, pointing out that it was not accepted that the agreement created
the relationship of landlord and tenant, that the company had at that time no
intention of making any change in the "Cork City Car Park" and that one part of
the agreement was returned "on the strict terms outlined in the agreement with
no supplementary conditions attaching thereto".
The
Hiring and License Agreements.
I
must now refer in greater detail to the agreements which the parties entered
into. The three agreements proved in evidence are each headed "Hiring and
License Agreement". Each contained the same printed terms and allowed for
variation in certain of the conditions in accordance with the parties
agreement. The last agreement is dated the 1 October, 1994. It was signed by Mr
Leonard on the 2 May, 1995. It was made between Irish Shell Limited of the one
part and Mr Stephen Leonard (who is referred to throughout as "the hirer") of
the other part. Clause 1 provides that the company agrees to hire to the hirer
the tanks, pumps machinery, goods and articles described and sets out in the
schedule hereto which is referred to in the agreement as "said equipment" for a
period of three years from the 1 October, 1994. Clause 2 conferred a license on
the hirer to attend at the "City Car Park" at all times necessary for the care
of or the use thereon of the equipment. Clause 3 contained an agreement by
which the hirer agreed to pay for the first period of twelve months the sum of
#1,446 plus vat and during the second twelve months and the third twelve months
period "such fee as may be determined under normal review by the profitability
sharing basis for each twelve month period". The evidence establishes that
there was never any review of the monthly payments either under this or
previous agreements. Clause 4 provided that the purpose of the hiring and the
"ancillary license" was to enable the hirer to carry on the business of selling
the company's motor fuel. Clause 5(a) provided that agreement and the benefits
conferred on the hirer were a "personal privilege to the hirer". Clause 6
provided as follows:-
"It
is hereby agreed and declared and it is the intention of the parties hereto and
each of them that nothing in this agreement shall be, or ought to be construed
as granting any interest whatsoever in said site to the Hirer or giving rise to
the relationship of the landlord and tenant between the Company and the Hirer,
or as conferring on the Hirer any exclusive right to possession of the site or
any part thereof, or any right of possession at all therein, save to the extent
necessary to give effect to the hiring and to enable the provisions of this
agreement to be fulfilled".
Clause
7 contained a number of sub-clauses imposing obligations on the hirer during
the currency of the agreement. Clause 8 provided that the company would insure
the equipment and repair and replace it when necessary and would supply motor
fuel to the hirer. Clause 9 dealt with the termination of the agreement, and
inter alia, allowed the company to terminate on one month's notice the hiring
should the hirer reach the age of 65 during the continuance of the agreement.
Clause 10 provided that the agreement would not be, renewed, inter alia, should
the company require vacant possession for the purpose of redeveloping the site
or disposing of the interest therein or operating the site through an employee
of the company.
The
agreement dated the 1 October, 1994 contained no schedule of the equipment
hired. The previous agreement between the party did contain such a schedule and
in my opinion nothing turns on the fact that the parties failed to incorporate
a schedule in this agreement. It is clear that the parties were well aware of
the equipment to which the agreement related.
Conclusions.
The
first issue: Lease or License.
The
legal principles to be applied in relation to the first issue have been
established by the Supreme Court in Irish Shell and BP Limited v John Costello
Limited ([1981] ILRM 66). That was a case in which Irish Shell had hired
equipment on a site to the defendant from year to year from 1967 to 1974. A new
agreement gave the defendant a license to use the premises and the use of the
equipment. The new agreement omitted some clauses which had been present in the
original agreement including a clause whereby the defendant had covenant not to
interfere with the possession and use of the premises by Irish Shell. The issue
in the case was whether the agreement created a license or a tenancy. Giving
the judgment of the majority of the court Griffin, J pointed out that the court
should look at the transaction as a whole and at the terms of the contract
between the parties "to find whether in fact it is intended to create a
relationship of landlord and tenant or that of licensor and licensee" (p 70).
Having concluded that the agreement gave the right to exclusive occupation and
possession to the defendant Griffin, J pointed out that the right to exclusive
possession is no longer conclusive that a tenancy exists but that nevertheless
it is one of the important indicators in an agreement that a tenancy and not a
license is given. He then went on to detail further factors tending to
establish that a tenancy had been created in the instant case. These were;
"(i)
Provisions expressly prohibiting the defendants from doing what they would have
no right to do if they were licensees -- eg assigning or charging the benefit
of the agreement; close clause 4(q);
(ii)
Although the plaintiffs had erected the workshop for the defendant and intended
that they should use it as such, the purported "license" is only to use the
premises "for the use therein of the said equipment". If this were the true
intention and agreement of the parties, the defendants would not be entitled to
use the workshop or carry on the repair and maintenance of motor vehicles
notwithstanding that this was the sole purpose for which the workshop was
erected;
(iii)
Clause 6 is essentially a re-entry clause, even though the word re-enter is not
used and is much more appropriate to a tenancy agreement than a license --
indeed it would be inconsistent with a license;
(iv)
The proviso in Article 8 of the earlier agreements, whereby it was agreed that
nothing in the agreement would be deemed to create the relationship of landlord
and tenant between the parties, was omitted from the agreements with the
defendants. Its omission is in my view clearly of major significance in
determining whether a license or a tenancy was intended".
Griffin,
J concluded that;
"In
all the circumstances of this case, although some of the provisions of the
agreement appear to be personal in their nature (eg that in relation to the
sale of the plaintiffs products), in my opinion, what was given to the
defendants went far beyond the personal privilege given to the occupier of the
site, and was in the nature of a tenancy of the site" (p 71).
Applying
these principles established by that case I will firstly consider whether or
not, on an examination of the terms of the contract entered into, the parties
in fact intended to create the relationship of landlord and tenant rather than
that of licensor and licensee.
The
agreements entered into between the parties could not have been in clearer
terms. Quite explicitly the parties agreed (a) that the relationship of
landlord and tenant was not to be created and (b) that there would be a hiring
of the equipment referred to in the agreements and a license granted to occupy
the site. According to the agreements no exclusive possession of the site was
given by Shell to any of the Leonard brothers with whom they contracted. The
agreements were very different to those under consideration in Irish Shell
Limited v John Costello Limited In the present case the contracts contain no
re-entry clause but a termination clause; the parties did not delete a clause
to the effect that no landlord and tenant relationship would be created but in
fact retained such a clause throughout their relationship; there was no
provision expressly prohibiting the occupier for doing what they would have no
right to do if they were licensees; the user clauses were different.
I
turn then to the evidence relating to the transactions as a whole between the
parties. In my opinion the length of time during which the Leonard brothers
occupied the site does not assist the defendants case. The evidence establishes
that they occupied under agreements entered into under a regular basis, and
that these were described as "Hiring and License Agreements". The last three
agreements which were proved in evidence establishes that the agreements
explicitly stated that the relationship of landlord and tenant was not created
by them and accordingly the length of possession could not in itself effect the
relationship created by the successive agreements by which possession was
permitted.
Although
at all times the Leonard brothers held the keys of the site and Shell did not
have any duplicate keys this does not necessarily mean that the parties
intended that the possession of the Leonard brothers would be an exclusive one.
This practice was in fact adopted by Shell in respect of all their
company-owned sites in respect of which licenses were granted for their
operation. The agreements they entered into declared that the operators
occupied as licensees. To give effect to this agreement it was not necessary
for Shell to retain keys of the premises -- they had contractual rights over
the site which they could enforce at any time. In my opinion it is not to be
inferred that because Shell allowed the Leonard brothers to occupy the site for
many years the possession which they enjoyed was an exclusive one -- the
regular agreements which the parties signed establish otherwise.
Mr
Leonard stated that when he signed the agreements tendered to him by Shell he
did not read them. But even if this is so he is still bound by his signature
and he cannot rely on his own default to claim that he understood that he was a
tenant of the site when, by reading the agreements tendered, it would have been
clear that he was not.
Nor
do the circumstances surrounding the signing of the last agreement transform
the license contained in it into a tenancy. Shell denied the claim made by Mr
Leonard's solicitor that the previous agreements had created a tenancy and the
parties entered the new agreement, which expressly negatived a tenancy, without
reconciling their differences. If the plain meaning of the contract he signed
was that he took the site as a licensee Mr Leonard cannot now claim that,
merely because he had erroneously argued the contrary, a contract of tenancy
was created.
There
was an increase in the license fee as a result of negotiations carried on
between Mr Leonard and Mr Coughlan in November, 1992. I accept Mr Coughlan's
evidence of what occurred during these negotiations. Shell, of course, knew the
amount of fuel sold at the station and could accurately estimate the profits Mr
Leonard had earned from them. It would have estimates of future sales and so
could assess what in its opinion a reasonable fee should be. In addition it is
clear that it took into account the fact that Mr Leonard was carrying on
another business on the site. Shell did not request to see Mr Leonard's books
in relation to either the petrol filling station or the car-park business but
the estimated profit from the two businesses could be reasonably assessed. The
negotiations took place over a number of days and in the course of them Mr
Coughlan expressed a willingness to have the charges he was seeking for the
premises confirmed by an auctioneer. In my opinion what Mr Coughlan said did
not amount to an admission that Shell's charges were to be regarded as "rent"
and I do not think that Mr Coughlan in any way negatived the clear words of the
contract which the parties had entered into in the past and were proposing to
enter into in November, 1992. The evidence establishes that the license fee was
fixed not only by reference to the petrol filling business but also to the
car-park business and that permission to use part of the premises as a car-park
was also given. Accordingly the written agreements did not contain all the
terms agreed between the parties. But the inclusion of the Leonards car-parking
business in the transaction between the parties did not, in my judgment, effect
the legal relationship created by the written agreement.
I
hold, therefore, that the defendant, Mr Leonard, did not hold the site under a
lease or contract of tenancy and that accordingly neither he nor Lecorn have a
right to a new tenancy under the 1980 Act. The defendants Lecorn are now
trespassers on the site as
section 28 of the 1980 Act does not entitle them to
retain possession of the site. The plaintiffs are entitled to an injunction to
prohibit the continued occupation of the site.
Second
Issue: Are the premises a "tenement"?
A
new lease can only be granted if the premises in respect of which it is sought
is a "tenement".
Section
5 of the 1980 Act provides that "tenement" means premises complying with
certain conditions. Those relevant for the present case are the requirement
that the premises;
"(i)
. . . consist either of land covered wholly or partly by buildings or of a
defined portion of a building;
(ii)
if they consist of land covered in part only by buildings, the portion of the
lands so covered is subsidiary and ancillary to the buildings".
Here,
the premises the subject matter of Lecorn's application for a new tenancy
consists of land covered in part only by buildings and Shell have submitted
that the portion of the land not covered by building is not subsidiary and
ancillary to the building and accordingly the premises are not a tenement. The
right to a new tenancy only arises if the premises is a "tenement" and it is
submitted that even if Mr Leonard was a "tenant" within the meaning of the 1980
Act the premises in respect of which a new lease is sought is not a "tenement"
as therein defined and accordingly no right to a new tenancy exists.
Furthermore, it is submitted that Lecorn has no right to remain in occupation
of the premises pending the application of the Cork's Circuit Court because
under the 1980 Act as the right to remain in occupation is only given to a
tenant who occupies a "tenement".
As
I have said, it is accepted by the plaintiffs that the petrol storage tanks are
"buildings" within the meaning of the 1980 Act and that a small area of land
around these tanks (as well as the land over the tanks themselves) should be
included in the land which is ancillary to the filling station business. Mr
Ryan, the Chartered Surveyor called on behalf of Shell Limited and the map
which he produced showed the area of land on the site which is ancillary to the
buildings in which the filling station business is carried on.
In
fact only approximately one third of the land on the site is ancillary and
subsidiary to the buildings in which the filling station business is carried
on. This figure excludes the area of the site in which cars are parked. It was
submitted on behalf of the defendants that this area should be included and it
also is "ancillary and subsidiary" to those buildings because a great number of
persons who park their cars in the car-park also obtain petrol when arriving at
or departing from the car-park. But the evidence falls far short of
establishing this fact. The defendants must have the figures for the turnover
of the two businesses and it should have been possible to show what percentage
of the total turnover is attributable to each business. It would not have been
difficult to have kept a record of the number of persons parking who also
purchased petrol over a given period. In the absence of some convincing
evidence to support the defendants assertion I cannot hold that it has been
established that the parking area is ancillary and subsidiary to the buildings
associated with the filling station building. There is a small hut or kiosk at
the entrance to the car park and situated in the car park itself in which an
attendant takes the parking charges and the keys of parked cars. But the land
in the car park is not ancillary and subsidiary to this small building --
indeed this small structure is ancillary to the land used to park cars.
Because
the premises in suit are not " tenement" this means that Lecorn has no right to
a new tenancy under the 1980 Act and no right to retain possession of it
pending its application. This is an additional reason why the plaintiff's are
entitled to the relief they claim.
