§ Order of the Day for the Second Reading read.
§ THE LORD CHANCELLOR (VISCOUNT CAVE)
My Lords, the Bill to which I have now to ask your Lordships to give a Second Reading is one to which His Majesty's Government attach considerable importance. It is designed to remedy some grievances of long standing which are acutely felt by tenants of business premises in every part of this country. I would classify those grievances shortly under three heads. First, complaint is made when a trader or manufacturer who is a tenant has 308 spent money in improving his holding and fitting it for his trade or industry, and so has added to the value of the freehold, the whole of that added value is unexhausted at the end of the tenancy, passes to the landlord and is reflected in an addition to the rent required of that tenant if he continues, or from his successor. No doubt that result is in accordance with the law; but it is felt that the law is harsh and unjust. The point was considered by a Select Committee of the other House appointed in the year 1889. That Committee reported in favour of compensation being allowed in such cases. That Committee said thatno injustice would be involved in such an alteration of the law as would entitle the tenant of trade or business premises, on the expiration of his tenancy, to compensation for such improvements as he may have, bona fide made for the purpose of carrying on his work or business and as may have added to the permanent letting value of the premises.Since that time a feeling of injustice in cases such as I have described has grown, and the demand for a remedy has gathered force.
Secondly, complaint is made when a trader holding under a lease has by his energy and his expenditure built up a goodwill for his business, then, at the end of his tenancy, his landlord may, and sometimes will, use that goodwill which the tenant has produced, which is valuable to him and which he will lose if he goes elsewhere, as a lever for exacting a higher rent from the tenant on the renewal of his tenancy. I do not believe that any good landlord would do anything of the kind. There are some landlords—and some of them occupy seats in this House—who set an example of fairness in their dealings with their tenants and who would never raise, would never consent to raise, a tenant's rent on that tenant's own goodwill. But there are others who take a different view, and this form of unfairness has aroused deep and, I think, natural resentment in every part of the country. This point of view was discussed by the Select Committee and they reported in these terms:As regards goodwill, the Committee have come to the conclusion upon the evidence that, though there are exceptions, yet as a rule the value of the tenant's goodwill is not considered in fixing the rent on renewal, nor is it ordinarily used to extort from him more than the face value of the 309 premises. On the other hand it cannot be doubted that cases of hardship do occur in connection with goodwill and that landlords sometimes take an undue advantage of their tenants' position in such cases; and it is quite clear that when the renewal of a lease of business premises is under discussion, the fact of the tenant having created a valuable goodwill gives the landlord considerable power to settle the terms of such renewal in his own favour.That finding was confirmed by a later Select Committee, the Committee on Tenancies of Business Premises, appointed in the year 1920.
For the moment I am speaking of grievances. I will deal later with the remedies. The third category of grievances is connected with those restrictive covenants which we find in most leases of shops. I mean a covenant not to assign or underlet without the consent of the landlord, a covenant not to make alterations or improvements without that consent and a covenant not to carry on a different trade from that actually carried on at the time of the lease. All these are, I think, quite reasonable stipulations if they are fairly and reasonably used—used, that is, for the protection of the freehold against depreciation—but sometimes they are used for quite different purposes. It happens rather often that while the landlord has no objection to a change of use or an improvement of his property, he takes care to exact a fine for giving consent to that change, sometimes a fine of considerable amount. In other cases consent is refused without any reason being given, possibly for some prejudice or caprice or for some less worthy motive, and the trader of course suffers. These grievances which I have so summarised are not imaginary grievances put forward with a view to enabling a tenant to acquire someone else's property. They are genuine hardships injurious to trade and industry in this country, and hardships which a reasonable landlord will not impose.
Since the two Select Committees reported there has been a strong and growing demand for redress. Representations have been made by associations of traders, wholly non-political bodies, in all parts of the country. There have been deputations to Ministers again representing all Parties. As long ago as the year 1913 the late Lord Long, who was then Mr. Walter Long, referred to the matter, and put forward these same categories of 310 grievances and expressed his opinion that remedies ought to be provided. Bills for the purpose have been brought in year after year—I think every year during the last twenty years—and supported by members of all Parties. Last year the present Prime Minister promised at a public meeting to take the matter up and propose legislation. This Bill occupied a place in His Majesty's gracious Speech at the beginning of the present Session. I have heard it said that it is no part of the duty of the Conservative Government to make proposals of this character, that they should wait till others make them and then give their criticism. With that view I myself wholly disagree. The Party to which I have the honour to belong is slow, I think, to yield to mere agitation, but if a real grievance is found to exist it is ready to seek a remedy. I ask your Lordships only to consider, first whether there is such a grievance as I have described, and then to assist us in finding the right remedy.
Now what do we propose by this Bill? As to improvements, we propose in the first clause that, subject to certain conditions which I will mention in a moment, a tenant of any premises used for carrying on a trade or business or a profession shall be entitled on quitting the holding at the end of his tenancy to compensation in respect of any improvements made by him or his predecessor in title which at the termination of the tenancy add to the letting value of the holding. That is a kind of provision which has been long ago applied, on the proposal of a previous Conservative Government, to agricultural holdings throughout the country. Ever since the year 1875 compensation has been allowed for improvements in that class of holding, I think with success and to the general satisfaction. In Ireland some years ago a Town Tenants Act was passed containing provisions for compensation, and I am told that that Act also works well. The question is whether your Lordships will not apply the same principle of compensation to business holdings in this country.
The statutory right which we propose to give would be subject to certain definite conditions which are laid down in the Bill. First, as to the amount of the compensation, it is provided in Clause 1, that the amount of the compensation for any improvement shall not exceed either "the capitalised value of 311 the net addition to the letting value of the holding as a whole which may be determined to be the direct result of the improvement" or "the reasonable cost of carrying out the improvement at the termination of the tenancy," subject to certain appropriate deductions. It is added that to determine the capitalised value of such net addition "regard shall be had to the purposes for which it is intended that the premises shall be used after the termination of the tenancy." As to the amount, that is to be settled by a tribunal in the absence of agreement.
It is also made a condition by Clause 2 of the Bill that a tenant shall not be entitled to compensation in respect of any improvement made before the commencement of the Act. Obviously past improvements have been made without the landlord having notice, or having any chance of objecting, and reversions have been dealt with on the footing of the present law, so that it would not be fair to apply these provisions to improvements made before the commencement of the Act. Further, no compensation is to be allowed for improvements made under a statutory obligation or under a contract into which the tenant has entered. In those cases he is bound to improve and he should not be entitled to compensation for fulfilling his obligation. A tenant also is not to be allowed compensation in respect of improvements made less than three years before the end of the tenancy. The tenant will not be able in the last years of his term to improve his landlord out of his right. Lastly, the landlord will have the option, instead of paying compensation, to renew the tenancy upon such terms as the tribunal may determine to be reasonable.
Then there is a provision that the tenant, before making an improvement for which he proposes to ask for compensation, is to serve notice on his landlord of what he proposes, together with a proper plan and specification. If the landlord objects, the matter is to be referred to the tribunal, which I will describe later, and that tribunal can only sanction the improvement if it is satisfied that the improvement is of such a nature as to add to the letting value of the holding at the end of the tenancy, and is reasonable and suitable to the character of the holding and will not 312 diminish the value of any other property belonging to the same landlord. A further provision is to the effect that the landlord may claim to execute the improvement himself charging to the tenant a reasonable increase of rent. I think your Lordships will hold that these conditions are properly protective and provide against the risk of an unfair incidence of the Bill on the landlord. So much as to improvements.
As to goodwill, it is proposed that, subject to certain conditions, the tenant of premises used for carrying on a trade or business—we do not in this case include a profession—shall be entitled on quitting his holding to be paid by the landlord compensation for goodwill, if he proves that by reason of the carrying on by him or his predecessors at the premises of a trade or business for a period of not less than five years goodwill has become attached to the premises, by reason whereof the premises could be let at a higher rental than they would have realised had no such goodwill been attached to them. In other words, if he leaves goodwill behind him he is to be entitled to compensation. This right also is subject to certain conditions which will be found in Clause 4 of the Bill. For instance, if the landlord is going to pull down the house, or use it for a wholly different purpose, then regard is to be had to that fact. Again, the tenant is not to be entitled to compensation for goodwill if the landlord offers to grant him a renewal of his tenancy at a fair rent apart from the value of the goodwill. There is a provision that if the Government or some local or public authority or a charity or a public utility company have terminated a lease for public purposes, then compensation for goodwill is not to be payable.
There is another option to the landlord, to provide for the tenant alternative accommodation. There is, of course, a provision that there shall be no right to contract out of the Act, or rather, to put it more accurately, that a contract depriving a tenant of his right to compensation shall be void unless the tribunal, having regard to all the circumstances of the case, is of opinion that the contract was reasonable and, in the case of a contract made after the commencement of the Act, that the consideration for the deprivation of the right was adequate. 313 I should add that in certain cases Clause 5 of the Bill provides an alternative remedy in the case of a tenant who has created goodwill. It is proposed by that clause that, where the tenant alleges that the compensation would not compensate him for loss of goodwill if he moves and carries on his trade elsewhere, he may, in lieu of claiming compensation, claim a new lease of the premises at which the trade is carried on. Differences are to be settled in case of dispute by the tribunal, and that right again is guarded by a special condition, which will be found in subsection (3) (b), that if the landlord proves that he requires the premises for his own occupation or for that of a son or daughter over eighteen, or that he intends to pull down or remodel the premises, or that he requires possession for the purposes of a scheme of re-development, or that the grant of a new lease is not consistent with good estate management, then the tenant shall not be entitled to claim a renewal of his tenancy. So much as to goodwill.
I omit some of the machinery clauses and come to the third category of cases and the remedies which we propose to enact. As to covenants, I will first mention a point which has arisen under the covenant to repair. Your Lordships will, I think, know that there is often a covenant on the part of the lessee to leave the property in good repair at the end of the term. It sometimes happens that at the end of the term the landlord means to pull down the premises or to alter them and adapt them to a wholly different purpose, and that to have the original building restored and put in repair would be quite useless to him. It has been held that nevertheless the landlord may, under the covenant to leave in repair at the end of the term, recover from his tenant the whole cost of restoring the premises to their original condition and put that money in his own pocket. Although he does not want the premises restored for his own purposes, he may make the tenant pay the cost of restoring them and keep the money for himself.
That has been thought to be not a fair thing, and, following a proposal made a little time ago by the Surveyors' Institution, we propose to enact under Clause 17 that damages in such a case shall not exceed the amount by which the value of the reversion is diminished owing to the 314 breach of the covenant, and, in particular, that—no damage shall be recovered for a breach of any such covenant or agreement if it is shown that the premises, in whatever state of repair they might be, would at or shortly after the termination of the tenancy be pulled down, or such structural alterations made therein as would render valueless the repairs covered by the covenant or agreement.That provision is obviously a fair one.
As to the restrictive covenants against assigning, altering or improving premises or changing the use of them without consent, I have said that some landlords do make unreasonable use of those covenants and do exact fines for giving their consent. First there is the covenant against assigning or underletting without consent. There is already a statutory provision against exacting a fine for consent to an assignment or underletting. That has been the law since, I think, the year 1881. It is also common in well-drawn leases to provide that assent shall not be unreasonably withheld. We propose to read that condition, that consent shall not be unreasonably withheld, into every covenant of this kind, and in the case of building leases especially to say that consent shall not be withheld during the last seven years of the term. Then as to the covenant against making improvements without consent, we propose that similar conditions shall be implied, but we add the provision that the condition against unreasonably withholding consent shall not preclude the right of the landlord to require as a condition—payment of a reasonable sum in respect of any damage to or diminution of the value of the premises or any neighbouring premises belonging to him.With regard to covenants against improvements without consent, we propose simply to forbid the exaction of a fine for consent, whether by increase of rent or otherwise, and we add the proviso that I have quoted. That is the way in which we deal with these restrictive covenants.
I have explained these clauses as shortly as possible, and I have now to refer to only one other matter. It is obvious that under a Bill of this kind differences may arise and must, if necessary, be referred to some tribunal. For instance, there must be differences about the amount of compensation, about the length and terms of any new lease which may fall to be granted under the Bill, 315 about the sum which it is reasonable to pay for consent to improvements, and other matters of that kind. It is hoped that when the Act has come into working order and is well known the rule will be that landlord and tenant will agree about these things, but meanwhile we must have some proper tribunal to decide them in case of difference. We think it undesirable that all these matters should go to the Courts. Some of the differences will be small, most of them will be such as can be best solved by an expert who knows the value of the property. Even if we referred them to the Courts the probability is, judging by experience, that the Court would send them back to some special referee, and in the end you would get, substantially, arbitration.
We propose to allow arbitration by consent if both parties agree, but otherwise we follow the precedent of the Agricultural Holdings Act and the Defence of the Realm (Acquisition of Land) Act, 1916, and we propose that the differences shall go to a referee chosen from a panel of referees appointed by the Reference Committee, that Committee consisting of the Lord Chief Justice of England, the Master of the Rolls, the President of the Law Society, and the President of the Surveyors' Institution. That Committee is to form a panel of men from whom the referee shall be chosen, and is to make the rules providing for the manner in which the reference shall be managed. There are some matters coming before the referees obviously of great importance, and it is proposed in Clause 20, subsection (4), that—the tribunal may and shall, if the High Court so directs, state at any stage of the proceedings in the form of a special case for the opinion of the High Court any question of law arising in the course of the proceedings, and may state its award as to the whole or any part thereof in the form of a special case for the opinion of the High Court, and an appeal shall, with the leave of the High Court or the Court of Appeal … lie from any decision of the High Court to the Court of Appeal,and the decision of the Court of Appeal shall be final. The Crown has agreed to be bound by the Bill if it passes, and has put its properly at the disposal of Parliament in that respect. I should add that this Bill, although it was discussed at some length in another place, finally took such a form that it passed its Third Reading without a Division.
316 I have stated at, I am afraid, some little length, the main proposals to be found in this Bill. I do not doubt that it will be carefully examined in your Lordships' House, but I notice on the Paper a proposal to refer the Bill to a Select Committee. If that proposal is made we must, of course, ask the House not to accept it, because if it were carried it would be fatal to the passing of the Bill. The main questions involved have been examined already by two Parliamentary Committees. All of them are familiar to men who are conversant with the way in which business is carried on in this country, and I am confident that a Committee of the whole of this House would be able most effectively to criticise, and if need be to amend, our proposals, and we are quite willing to consider with an open mind any Amendments which may be proposed to that end. I hope, however, that your Lordships will recognise in this Bill a carefully considered attempt to remedy real and substantial defects in the law, and to give to the trading community in this country a relief which that community earnestly desires and is entitled to expect. I trust that this House will not inflict upon our traders the disappointment and the hardship which would follow if your Lordships, either directly or indirectly, prevented the passing of this Bill, and I cordially commend it to your acceptance.
§ Moved, That the Bill be now read 2a.—(The Lord Chancellor.)
§ LORD PARMOOR
My Lords, the noble and learned Viscount, the Lord Chancellor, has so lucidly explained both the principles and procedure of the Bill that I only desire to detain you a very short time on one or two points. Certainly I need not refer again to the history given us by the Lord Chancellor, because I cannot find any principle contained in this Bill which has not been both sanctioned and approved on previous occasions. My criticism would be of a rather different character—namely, that some at any rate of the provisions of the Bill are so complicated, and would be so complicated and costly in their practical application, that the gift given by one hand is almost withdrawn by the mass of detail by which it is accompanied, I suppose on the ground, and with the idea, that no interest 317 should be unjustly treated. Of course, we all desire that no interest should be unjustly treated, but the method of obtaining that result is a different question.
Might I deal briefly with the points to which the Lord Chancellor has referred, because I think I can do that in a comparatively short time. It is true, no doubt, that for a long time compensation for business improvements has been demanded by the tenants, and generally has been thought fair and justifiable, improvements being a matter not only between landlord and tenant, but obviously to the advantage of the community at large. The effect and general principle of this Bill, subject to certain notices to which I need not refer, is that in the future, where improvements have been made in business premises, and have had the result of increasing the capital value of those premises, for whatsoever purpose they might be used—not for the particular purposes—the tenant is to be entitled to recover the cost, subject to certain limitation, which I think is quite fair and which perfectly safeguards the landlord's point; of view. The limitation is that they "shall not exceed the capitalised value of the net addition to the letting value of the holding as a whole which may be determined to be the direct result of the improvements." Therefore you have an improvement made for busines reasons, an improvement desirable on general grounds as well as between the parties themselves, and should that improvement result in a direct increase in value the tenant is to be entitled to recover, provided the increase does not exceed the amount of the capital value of the addition to the letting value as a whole. Of course that is to be determined by the tribunal.
I am not quite sure as to the form in the case of agricultural leases, but I am aware of the practical use in a great many districts of a similar provision and similar guarantee. It appears to me to meet the case on both sides. But when we get further down into this Bill, to Clause 2, it appears to me that you introduce what is really an irrelevant and very different consideration. The position is this: A tenant in possession of premises worth £A, hands them back worth £A + B in their general letting value, he having spent the money which is represented by B. Surely the transaction 318 between the landlord and himself ends there. But there is a further provision that if the intention of the landlord in the future is to use these premises in a particular way, the tenant will not get the cost of the improvements to which he would otherwise have been entitled. It appears to me on the grounds of equity and justice that, although it is quite within the power of the landlord to do what he likes with these premises which have acquired an enhanced value, that ought not to deprive the tenant of his compensation, provided that the premises when handed back are worth for general letting purposes value A plus B—that is, the old value plus the value of improvements that have been made.
That brings me to a point regarding improvements in Clause 2. Generally I think I should agree that there ought not to be retroactive legislation in a matter of this kind; if it is retroactive you will not have had the various options and notices and things of that kind which have already been explained by the Lord Chancellor. But again the same principle should prevail. The fact that a tenant is carrying out his improvements now and finishes them this week, or that he began them about Christmas time and finishes them next January, ought not to make any difference in principle in cases of this kind. I do not see any reason why specific provisions could not be introduced into the Bill to meet that point. The landlord's right to object under Clause 3 appears to me to be exceedingly cumbersome. Any tenant of business premises who wanted to make some comparatively small improvement, perhaps costing only £50 or £100, would find himself immersed in the most difficult and complex procedure, a procedure that I think any one would be unwise to embark upon without legal assistance. I must say—and it has been my experience, too, in agricultural leases—that if you introduce a whole series of difficult considerations of this kind you to a very great extent militate against what I suppose we all want, that is, a fair payment for improvements which have enhanced the value of the property, without any undue difficulty as between the tenant and the landlord.
I admit that the compensation for goodwill, as provided for in Clause 4, 319 does create in my mind some difficulty. I have no doubt whatever that compensation should be paid, because that is a principle which is always expressed or implied whenever land is taken for public or other purposes and the goodwill is interfered with, and there seems to be no reason, given fair safeguards on the other side, why a tenant should be deprived of the value of his goodwill owing to a notice given by the landlord. It is not a question of the transfer of goodwill. Of course, the goodwill will remain with the tenant, but it may be deprived of all its commercial value. I have known, I am afraid, hundreds of compensation cases where the goodwill has been held not to be interfered with. Take the case of a man, for the sake of argument, who transfers his business next door. It has been held that the loss of the goodwill is equivalent to its total value, that is to say three or four years purchase of the net business profits, the exact amount depending on the particular facts in each case though the basis of compensation is always the loss to him.
Let me apply that principle to this clause. I do not understand it. First of all it says he is entitled to be paid compensation for goodwill. That must be compensation obviously for injury or damage or loss of goodwill. The goodwill itself is not transferable, but if that tenantproves to the satisfaction of the tribunal that by reason of the carrying on by him or his predecessors in title at the premises of a trade or business for a period of not less than five years goodwill has become attached to the premises …Well, goodwill is attached, in my opinion, to the business, it is a goodwill of the tenant. But then the clause goes on:by reason whereof the premises could be let at a higher rent than they would have realised had no such goodwill attached thereto.What does that mean? That may, no doubt, be some indication of—I will not say loss to the landlord, but of a reason for the diminution of the payment to the tenant. If you are to take that as a test I say that in ninety-nine cases out of a hundred you defeat the claim altogether.
A man goes out, we will say, who has got a business, the net return of which 320 brings him in £1,000 a year. The effect on that goodwill of his being turned out of the premises is that it has gone. That is a common case. But the capitalised value (this has often been ascertained by surveyors) will be somewhere between three and five years purchase, according to the nature of the business. Consequently the loss in this case would be at least £3,000, but there would be no corresponding gain to the landlord. Yet if the tenant is only to be compensated to the extent that there has been corresponding benefit to the landlord the tenant will get no compensation. I think the right principle is that he ought to get that compensation. Let us face up to it. As I understand the clause it does not give compensation in the ordinary sense to the tenant for interference with the goodwill or loss of the goodwill, because in ninety-nine cases out of a hundred there would be no corresponding benefit to the landlord, and where there is no corresponding benefit to the landlord the tenant would get no compensation at all. That is one of the matters that I hope will be further threshed out when we go into Committee.
There is a similar statement in Clause 4 (1) (d). It says that the tribunal shall disregard, in estimating the value of goodwill, any value that is attributable exclusively to the situation of the premises. I admit I do not understand that because, supposing you are to have compensation for damage owing to quitting premises, in most cases the value of which the tenant is deprived is attributable exclusively to the situation of the premises, that is to say, to local trade. I am speaking now from my own knowledge of compensation cases. The tenant says: "You are turning me out of a local trade. My customers are all around me and if I go, and only because I go, I shall lose the benefit which I now have." I do not want to dilate upon that except to point out that I cannot see how, although in terms compensation is given to the tenant, it would work out under these particular clauses.
Let me call attention to the language of Clause 6, to which the Lord Chancellor referred, and which appears to me to be perfectly accurate and to be language which would denote the principle of compensation to a tenant. The 321 clause contains words about the landlord granting to the tenant on such terms:—… as the tribunal may consider reasonable a tenancy of other premises which, in the opinion of the tribunal, would reasonably preserve to the tenant the goodwill of his business.That, of course, is the issue. I agree that if a landlord gives such other premises as will preserve to the tenant the goodwill of his business there should be no compensation. That is a matter of ordinary compensation law, because there is no damage; but that is a different test altogether and is a right test. You see whether the tenant has been injured in his goodwill and provide accordingly.
The Lord Chancellor pointed out—I have the reference to it here—in regard to the professions that there is not to be any compensation for goodwill. I think that is rather hard and I do not quite see why the distinction is drawn. If I may take an illustration which has been given to me, supposing a small doctor (I do not use the expression in any disparaging sense) with a local practice is turned out of his house and cannot find another within a reasonable distance, so that he can continue to have the goodwill of the practice he has been working up, why should he not have compensation? It is not a question whether the occasion will often arise or not. It appears to me that the goodwill of a doctor for this purpose (I am not talking about goodwill on business grounds) is as much entitled to consideration as the goodwill of a man who is selling jam or fruit or anything else.
I wish to pass by the question of covenants. I entirely agree with the Lord Chancellor and I think that in all respects the Bill introduces a great improvement, and one which is necessitated by what has been pointed out from time to time by many of our Judges. But I wish to say a word about the tribunal. It is perfectly clear, I think, that a tribunal of this character is needed. I think, further, that the method of appointing the referees through the Lord Chief Justice, the Master of the Rolls, the President of the Law Society, and the President of the Surveyors' Institution is in itself a correct method and that an impartial panel will be obtained in that way. As the Lord Chancellor has pointed out, if any question of law or difficulty arises—it is the same in all arbitrations—it may be brought before 322 the Courts for a direction during the course of the arbitration or the award may be stated in the form of what is known as a special case and so come before the Courts for further consideration.
But there is a third matter here which I think is an undue complication. There is, it seems to me, sufficient protection. There is a provision that on account of the magnitude of the claim and the questions of law involved a case may be brought directly to trial before the High Court. Cases of this kind are not conveniently tried before the High Court and so long as you protect the parties sufficiently to ensure that the law is properly administered, I must say it is preferable that all questions of fact should be left to the arbitration authority. If they are brought to the High Court it will entail considerable expense and they have still to go back to the arbitration authority. It is much better that the arbitration authority should deal with questions of fact and that the Court should not come in until a later stage. One of the largest arbitrations of modern times, that of the telephones, involving £13,000,000, was perfectly dealt with in that way and I do not know how otherwise it could have been dealt with. Those who are at my back will certainly not vote against the Second Reading of this Bill, nor will they vote for any proposal which would mean delay to the progress of the Bill and prevent it passing into law this Session.
§ VISCOUNT YOUNGER OF LECKIE
My Lords, I am sorry that the noble Marquess the Leader of the House is not in his place at the moment, but I wish to put to your Lordships a point in connection with the future procedure on this Bill, to avoid repetition and to prevent unnecessary waste of time. I think I am right in saying that in no section of the House is it at all desired to stop the Bill at this stage. I suggest that a Second Reading should be now granted to the Bill and that the general debate should be taken to-day and on Thursday on the Motion of my noble friend Lord Harris to refer it to a Select Committee. That would mean a very great shortening of our procedure and would be more convenient for everybody. I am authorised by the noble Marquess, Lord Salisbury, to whom I have mentioned the matter, 323 to say that he is quite agreeable to that course if other sections of the House are agreeable also.
§ On Question, Bill read 2a.
§ LORD HARRIS had given Notice to move, That the Bill be referred to a Select Committee. The noble Lord said: My Lords, I am very much obliged to the noble and learned Viscount on the Woolsack for the very clear explanation he has given of what I should have thought was a somewhat intricate measure. It seemed to me that my noble friend did protest too much. According to him the conception of the Bill is entirely benevolent and its action will be entirely beneficent; landlords and tenants will welcome its provisions and, without going to litigation, will seize the opportunity of agreeing whilst there is yet time. I have heard this Bill described as a thoroughly bad one. Obviously those with whom I am acting to-night do not agree with that and think there are decided merits about the Bill, and that something of the kind is necessary. But the criticisms which have been launched at the Bill, as it comes before your Lordships to-night, from very highly qualified quarters would lead one to suppose, having regard to the Amendments introduced in another place, which have certainly improved the Bill from what it was when it went there, that it was originally a thoroughly bad Bill. Those Amendments have not satisfied those who are expert and qualified to judge of its present provisions, and hardships may result upon well-managed estates and deserving landlords in the endeavour to exercise sympathy for the tenant without due regard to the rights of the landlord.
This subject has been under the consideration of Parliament for a great many years. A Committee sat from 1887 to 1892—at least the Report was not issued until 1892—and as your Lordships can imagine, it took a great deal of evidence. The Committee were very strong upon one point—namely, that any changes of a revolutionary character in the leasehold system could not apply to existing leases. I confess I do not understand from the Bill itself to what extent this Bill will apply to existing leases. As far as I can make out it will apply to them to some extent. I dare say the noble and learned Viscount will deal with that point later 324 and tell us to what extent existing leases are affected. That Committee was very definite in this, that it objected to statutory rights being given to existing leases to the value of improvements and goodwill. In fact they go so far as to say that would be unjust. In 1906 a Bill was passed entitled the Town Tenants (Ireland) Bill dealing, to a certain extent, with the same subject. That Bill said nothing about goodwill and it preserved the jurisdiction of the ordinary Courts. That Bill was very much less drastic than this one, but it did not meet altogether, as is apparent from the debates in the House of Commons, with the approval of the Lord President of the Council (the Earl of Balfour) who, I see, is here tonight.
Again, in 1920, a Committee of the House of Commons sat and came to the most decided conclusion that they could not recommend any legislation of a substantive character. What they suggested was that a Bill of a temporary character should be brought in, the operations of which should cease contemporaneously with the operation of the Increase of Rents Act, and that meantime these proposals for a revolution in leasehold law and practice should be examined by a committee of experts. That has never been done, for I hardly suppose the Grand Committee of the House of Commons would regard themselves as such experts as were evidently contemplated by the Committee of 1920. I observe that in the Third Reading debate of this Bill in the House of Commons the Minister in charge, the Under-Secretary of the Home Office, described the Bill as experimental. A Bill so fraught with the fortunes of estate owners and lease owners is to be tried as an experiment! That is somewhat of a qualification of the pæan of adulation which the noble and learned Viscount on the Woolsack gave to this meausre. Do your Lordships think that we are justified in hazarding an experiment in a matter so grave as this—an experiment on an established system which is full of intricacies as to which both custom and case law can ensure that the Courts of Law, which hitherto have tried these disputes between private individuals, can almost certainly prevent injustice being done?
We know there are bad and good landlords and that grave hardships, not necessarily 325 unjust, do result. I submit that we have to be extremely careful and give the most careful examination to these proposals to make sure that hardships are not inflicted on deserving landlords and well-managed estates. I may say that I have no personal interest whatever in the subject. I have not an acre of urban or, I think I may say, suburban land. I am purely actuated by an anxiety to see that in these matters of legislation in regard to real estate this House shall not make the blunder which the other House has made. I observe that one point criticised is the length of tenancies. I believe under this Bill action might be taken on a term of even less than one year. That seems very ridiculous. One cannot imagine that improvements would be effected during a term of that length, and to suppose that improvements would be made with such a term is somewhat ridiculous. Why then make the Act so wide sweeping that it can include tenancies of so short a tenure?
The noble and learned Viscount naturally did not attempt to define what is meant by an improvement. I am not surprised. I believe the whole ingenuity of the Home Office was directed to the task of trying to find a definition for an improvement or goodwill or both, and that they failed. But it is held by those who understand these intricate matters that it is quite inevitable that litigation must ensue in regard to what are improvements unless some restrictions are introduced. There is an admirable example of how that can be done in the Settled Land Act of 1925, where restrictions are included in one of the Schedules. For instance, an improvement may be claimed for buildings erected on land on which the tenant, under his contract, is restrained from building; or for alterations or additions of a peculiar or financial character, not necessarily useful to the tenant's business; for alterations useful for other classes of business but not for that of the tenant; or for alterations which may increase the rate of premium for insurance. In fact it seems to me quite possible, without great care, for property entirely to change in character on the decision of one person. I admit the matter has to go first of all to a tribunal, but it is the decision of a single individual and there is no appeal except on points of law. That individual 326 may have no judicial training whatever; at all events no expert training comparable to the judicial training which we are accustomed to find in those who preside over a Court of Law. I submit that upon that point very special examination is required.
Now I come to the question of goodwill, Reference has been made to the Agricultural Holdings Acts. You will not find anything about goodwill in those Acts. They are confined to improvements, and what are the improvements on agricultural holdings as compared in magnitude, cost, value, expense, with the class of buildings that may very possibly have to be valued under this Bill? They will be far more important than anything you have to deal with on an agricultural holding. It is held by those who have a right to express an opinion from their experience and knowledge that this will be more hazardous even than the matter of improvements. After all, what is goodwill? The noble and learned Lord opposite has dealt at some length with goodwill, and I will not attempt to define what he has touched upon, because his experience in all matters of goodwill is enormous.
But, generally speaking, what is goodwill? Is it attachable to the individual, or the premises, or the neighbourhood? The character of a neighbourhood may entirely change owing to the advent of something very useful and attractive—a railway, for instance—or the improvement may be due to the foresight of the landlord rather than to that of the tenant. Yet the tenant may claim that he has a goodwill in the improvement that has taken place in and about these premises, and may cause the landlord to be subjected to an inquiry and a decision, as I said before, by a solitary individual with no judicial training. As the noble and learned Lord opposite said, suppose it is attachable to the tenant himself and he goes away, he takes the goodwill with him, whatever it be. If something has happened to the property to improve it, it may be due to his activity or to his intelligence. He goes away and it goes with him and the property does not improve in value. Then there is a very grave suspicion that if these encumbrances are added to leasehold property capital may no longer be so ready to seek that particular channel of employment.
327 As regards the tribunal, the anxiety of the Government is to provide for a cheap means of decision, but I do not know whether it is going to be as cheap as is suggested, or whether counsel may be employed on both sides. But there it is—a tribunal consisting of one person. The Courts, which have hitherto decided these questions as between individuals, with all their knowledge of custom, practice and law, are to be ousted, and this solitary individual is to be put in to decide cases which may be of very great importance and value. I do not think that the noble and learned Lord referred much to mortgagees. What about their security? It seems to me that what might be claimed as improvements might so change the character of a property that they might not recognise it. It might also become a charge on the property on which the mortgage was secured and consequently the property might be depreciated. Suppose the mortgagor is unable to meet his obligation, the charge would remain on the property and it would be calculated to depreciate it. It also seems to me very possible that trustees may hesitate to recommend the investment of money in this class of property and may even be disposed to withdraw what already is invested in it.
One of the things which the Committee of 1887 specially laid down was that every care should be taken not to alarm the investment of capital. We have had one experience of these attempts to deal with our long-settled land customs, and I do think that it ought to be a warning to us not again, when we have the opportunity of giving a most careful scrutiny to these proposals, to run the risk of subjecting the country to the incalculable damage which was done by the land clauses of Mr. Lloyd George's Finance Act. I suppose that the injury done to the public, the suffering caused to many poor people and the damage to morality caused by the overcrowding which has been inevitable for the last ten or more years, are quite incalculable. Probably the dangers are not of the same character, but there is a risk, by revolutionising the present system of legal procedure in leaseholds, of harm being done—I do not know about injustice, but of hardship being inflicted on perfectly deserving people because they happen to have their investments in real estate.
328 There is one section of the Labour Party which is very fond of the colour red. It loses no opportunity of flaunting that colour. I venture to suggest to your Lordships that the land clauses of Mr. Lloyd George's Finance Act are the red lamp of caution, and we should take notice of it before venturing without very careful inquiry into a revolution of this character. I admit that if your Lordships support my Motion by a majority the Bill would have to wait for another year. I dare say you have noticed the peculiar characteristic of Ministers in charge of Bills. They always think that their particular Bill is absolutely necessary for the good of the world, and that unless it is passed the world is almost likely to come to an end and incalculable damage will be done. That is their theory, but in practice you know that very little damage results and that the world goes on, reconciled by long usage to the customs into which it has dropped. Do your Lordships not think that on the whole it is fairer to have an examination made of this Bill by men of expert experience rather than run the risk, of which your Lordships have been warned, of driving capital to take flight again away from real estate. I beg to move.
§ Moved, That the Bill be referred to a Select Committee.—(Lord Harris.)
§ VISCOUNT SUMNER
My Lords, in rising to support my noble friend's Motion, I recognise that it is extraordinarily difficult to explain in the case of so complicated a legal measure as this all the objections that exist to dealing with it in Committee of the Whole House in the usual way. I hope to be terse. I cannot hope to be lively, and perhaps I may require to be long. I ask your Lordships, before the debate closes, in the light of whatever may have passed this evening before the adjournment, to take this Bill, read it through carefully and make up your minds how little there is that any ordinary man can really understand, how much of it there is that must involve the parties in contentious litigation and how little chance there is for anyone to thread his way through it without incurring costs and being entangled in litigation.
It has been said that to pass this Motion will delay the passing of the Bill, to the great disadvantage of His Majesty's 329 subjects. There is a small point that I want to make in this connection. The Bill to which your Lordships have just given a Second Reading and which passed through all its stages in the House of Commons provides that it shall come into operation on September 30, 1927. If that is a misprint for "1928," obviously there will be no delay in providing the public with the bounties which the Bill is to give them, because there will be plenty of time in this House and, I hope, in the other House in the early part of next year to do whatever may be necessary. If, on the other hand, the Bill means what it says, then, for reasons for which the Government are responsible, these benefits have been already withheld for two months beyond the appointed time, and if we delay them rather longer the blame is hardly ours.
Before coming to the structure of the Bill, may I ask your Lordships to bear in mind two or three general considerations? It is perfectly true that considerable hardships, and even a considerable amount of extortion, have occurred from time to time in connection with repairing covenants and covenants to leave premises in repair or to restore them to the state in which they were originally entered upon, and also in connection with the advantage that the question of goodwill gives to a landlord as against the tenant of an expiring lease. It is also, so far as I know, perfectly true that these things are uncommon. The Lord Chancellor, in referring to the findings of the Committees of 1889 and 1920, told us, I am sure quite accurately, that they found that these engines were not ordinarily used for extortion; that there were such cases but that any good landlord would disdain to take undue advantage of the tenant in the matter of his goodwill. We do not know, and it may be impossible to calculate, what the numbers of such cases are, but it is by the number of those cases that you must measure the real necessity for this reform at all, because, with regard to the other things, the amendments of various ordinary covenants in Part II of the Bill, they are merely included because it has been considered that a measure to remedy these grievances is urgently called for.
Your Lordships will also recollect that, in all these cases where a man has made improvements for which there is no 330 authority in his lease and then is required either to leave them behind him without compensation or to pull them down and reinstate the old premises, he is only called on to fulfil a contract, that he has entered into with his eyes open. I do not suppose that there is a man now living who could make a claim of this kind who would be in a position to deny that, when he took his lease, whether it was an original lease or a lease by assignment, he either knew or had the means of knowing exactly what risk he ran if he improved the premises. If he did not know, then 13s. 4d. to the nearest solicitor would have informed his mind quite sufficiently, or even 1s. 6d. for any ordinary book on the law of landlord and tenant. One knows, as a matter of fact, that people do not do these things with their eyes shut. How many of your Lordships have improved the houses that you live in, knowing full well that you will never get a penny of it back when the lease expires, and must be thankful if you are not called upon to rebuild the walls that you have cut down or reinstate the chimney-pieces that you could not endure? Everybody runs those risks with his eyes open. I do not say that this is not a reason for providing some remedy, but it is not advisable to think too much of the tenant in these matters and too little of the landlord.
Then again, this Bill already touches an enormous number of persons and a most varied sphere of interests, and if it is passed it will most certainly be met with arguments for a prompt and extensive new enactment to carry it still further. Already the noble Lord opposite has complained that it does not include professional men, except for improvements made after the passing of this Bill, and already we have been shown—and indeed he suggested this—that whenever anything is introduced into this Bill, if a parallel or a pretended parallel can be found in some provisions of an Act like the Irish Town Tenants Act, it will be called a recognition of the principle involved and it will be said that this principle ought not to be challenged again when a further extension is proposed. I am quite sure that, as soon as this Bill is passed, there will be an agitation to extend it to private dwelling houses, and I do not really know upon what ground that can 331 be refused, except on the ground that there will be so little left to the landlord of a dwelling house by the continuation of Rent Restrictions Acts that he will hardly be worth powder and shot in any further enterprise.
Far be it from me to suggest that these grievances, to the extent to which they occur, ought not to be remedied, but it is a curious circumstance, which I believe to be true, that what has caused this question to become really acute and to boil over is the way in which the Department of Woods and Forests treated the rebuilding of Regent Street. I take that statement from a document prepared by the Incorporated Law Society which I happened to see, and I have such faith in that institution as to feel assured that no statement would be made by them without the greatest care and consideration, and that this is a matter in which they have stated nothing but the facts. Just think, if from Langham Place down to the Athenæum Club, the rebuilding that has taken place in Regent Street has rubbed all the tradesmen up the wrong way for the last three or four years, what an impetus this question has received—an impetus such as did not exist during the twenty or thirty previous years, when it merely simmered.
It is quite plain, I think, that the grievance that harsh uses are made of some of these ordinary provisions in leases is one that could be dealt with, without this great structure that the Bill contains, by entitling the tenant to apply to the Courts to be relieved from the harsh and unconscionable exercise of the rights of the landlord under the covenants of the lease. It would of course be an interference with the freedom of contract, but it is a simple way in which the ordinary Courts could give relief if somebody is saying: "I am going to make you pay every penny that is required to repair my wretched old house, and then, I will put the money in my pocket and pull the house down." It might not be a complete remedy, but you are not obliged to do what is done here, begin a wholly new scheme which brings landlord and tenant, and their relations in regard to trading and business premises, under the rigid machinery of a statutory regulation.
332 Your Lordships will appreciate that this Bill must apply to innumerable premises. Every little shop or place in which business is carried on, up and down the country, for it is a purely urban Bill, up to large institutions and largo factories, will be brought more or less under the provisions of this Bill. In the case of factories and great trading institutions, and in the case of huge shops, however, the tenants are very well able to protect themselves, and have done so already. If not already the freeholders, they have had the best advice, and their leases are almost necessarily modern, because premises have been rebuilt on a large scale in the last generation, and they have had opportunity, which I do not doubt they have taken, to protect themselves against many of the things which are hit by this Bill. It is in the case of small premises, and old premises with small and inexperienced people, and with poor landlords who cannot afford to be generous, that this Bill will prove to be needed.
Although there is a great deal in the Bill which does not deal with improvements there is a great deal which does. The policy of the Bill is to encourage the tenant to carry out what are called improvements, and for this the analogy—a false one, as I believe—of the Agricultural Holdings Act is cited in justification. It is a perfectly intelligible thing to say that agricultural improvements in the bulk are for the good of the country at large, because a man who improves the tillage of his land improves its fertility, and contributes to the national resources in that way; but in the case of business premises, one half of which are quite unfit for the purpose for which they are used, the only real improvement would be to pull them down; and in the case of improvements effected from hand to mouth by the sitting tenant, the improvements are constantly mere extensions or additions which do much less good to the premises than a properly planned improvement would do, but which, being all the tenant can afford to do, he carries out for his own purposes.
It is true that when he comes to claim compensation it is limited under the clause, and it is also true that he is required to furnish a specification and plans showing the improvements which he intends to carry out before he does them. 333 If they come to loggerheads, the tenant is entitled, under Clause 3, to go before the tribunal, and the provision is that the tribunal mayif satisfied that the improvement is of such a nature as to be calculated to add to the letting value of the holding at the termination of the tenancy, and is reasonable and suitable to the character thereof … certify in the prescribed manner that the improvement is a proper improvement.That, however, may not be by any means the best improvement, because all that is required is that it shall be "calculated to add," not calculated to add in the best way, "to the letting value"; and the landlord may say that it is an improvement which he does not want, and which he objects to pay for, one, which is really not the best improvement which could be effected. That cuts the ground from under the idea that it leads to the national good that business improvements should be effected. What national good is done by improving a fried fish shop, or a small hairdresser's shop? Yet there are scores of these which will come under this Bill, and in respect of which all these questions will probably be raised. My noble friend referred to the fact that "improvement" is not defined. It cannot be defined, and just because you cannot define it you ought to realise that as between landlord and tenant there may be wide differences of opinion as to what improvement is. And the decision is banded over to the tribunal without definition and without appeal.
In addition to the provisions as to improvements in the future, and goodwill, there are a number of other general amendments of the law of landlord and tenant which alter the contract as to repairs and as to user, and other matters, which the Lord Chancellor explained. If you look through the working of those provisions you will find that the pivot upon which the whole turns is the tribunal. This Bill, I am quite satisfied from internal evidence, is not the composition of the ordinary legal draftsman, although no doubt it has passed through skilful hands, but is conceived and framed by the bureaucratic mind. The notion of it is to lay down a code—not a complete code—of a very extensive and drastic character, which forces upon landlords and tenants, always in the interest of the tenant in the first 334 instance, a series of provisions difficult to be understood and about which agreement is still more difficult, and the pivot of the whole thing upon which it always turns is the decision of the tribunal—a favourite scheme amongst advanced statesmen, although I think the general experience of the country is that the less we have of tribunals the better. But if we must have tribunals let them be the old ones.
I want to call your Lordships' attention to the tribunal, and to attack it, not that I have any personal feeling about it. In fact there is one feature in it which I view with a kind of melancholy satisfaction. Subsection (4) of Clause 20 provides that if you do get into the High Court you are only to get as far as the Court of Appeal, and not to the House of Lords by any conceivable manner of means. There is, however, a loophole through which an application could in my opinion be brought to the House of Lords, but that is another story. The tribunal creates a body of judges—judges without limit to their money jurisdiction, who are the exclusive judges of the intricate questions of fact which arise under this Bill; and judges whose determinations will cause as much weal or woe as those of His Majesty's Judges in the King's Bench Division. I think there is a constitutional point on this which is worth mentioning, and that is that it is quite irregular that judges should be created for whom no Minister is responsible. The members of this tribunal are not created by the Lord Chancellor, nor is he responsible for their good or bad conduct. I do not know who is. They are not created even by the Reference Committee. What the Reference Committee do is this. They prepare a panel of referees appointed for the purpose of this Act, and they draw up rules, according to which the particular person to be the tribunal on a particular occasion is to be selected. Now, you cannot draw up rules which will enable the Committee of Reference to say: "This man is not much good, and therefore we will not appoint him if we can help it. This man is not to be trusted to be fair for that class of cases, we therefore set him aside." The rules must apply regularly, and it means that people will have to be selected, in substance, by rotation.
It is quite true that there is a provision that a person is to be selected, regard 335 being had to the knowledge of the locality possessed by such referee—which means, of course, that he is to be a witness in the case, as well as a judge: that is, he will bring his own knowledge of the locality to assist him in the determination of the matter before him. But, except for that, as far as I can see, if a referee once gets on the rota he stays on, and there is no provision for taking him off. Neither is it a whole-time job. There is nothing to show that he is not to be a person in practice, whatever his calling is—as a surveyor, or as a valuer, or as an architect—who is willing to serve on this panel and to be appointed and remunerated from time to time. Is that a perfectly satisfactory body of men? Appointed as, of course, it will be by the Lord Chief Justice, the Master of the Rolls, the President of the Incorporated Law Society for the time being and the President of the Surveyors' Institution, it will be chosen with care and intelligence and probity; but you cannot get more than that. You have no right to make these important persons responsible for fresh duties of this kind, and all that they can do is to formulate the rules and the procedure, and then fill vacancies in the panel, and let the machine work.
Then you are told that the decision of this tribunal is to be final upon questions of fact. The decision of the tribunal is also to be final and binding on questions of law, subject to the power of either stating a case themselves for the opinion of the High Court or stating one because they are ordered by the High Court to do so. But nobody who has had much to do, either with the arguing of a case or with, paying the costs of a case stated for the opinion of the High Court, will fail to know that one of the most difficult questions in the world is the drawing of a line between questions of fact and law; and, if there is a more difficult thing, it is to get a layman who can state his case in such a way as will distinguish what is fact and what is law. It is quite true that there is a provision that, if you can satisfy a Judge of the High Court that the case is one which ought to be tried in the High Court, it can be tried in the High Court. The reasons for that are "on account of the magnitude of the claim and the questions of law involved." Well, it is a little hard on people whose 336 claims, though they are very big for them, are not very big in the eyes of a Judge of the High Court, that they cannot qualify in that way; and the tendency, of course, must be to say it is only quite serious cases that they shall try in the High Court, because the whole meaning of Part III is that the tribunal shall stand first, and, as far as possible, shall stand alone. The power of this tribunal extends even to taxing costs and directing how and by whom they are to be taxed—an idea that, I perceive, has shocked the minds of solicitors at any rate.
Let us assume that the man on the panel is what is called an expert. The noble Lord opposite said these questions ought to be tried by experts. An expert is someone, who claims to know what other people do not know, and asserts his claim with sufficient confidence to impose upon other people. To say that a man is a fit person to try a case because he is an expert means that you are going to ask him to try a case about which his own business is concerned—the business, I suppose, that he will be carrying on from day to day, and in which he may have interests or prejudices, and is certain by one or other of the parties before him to be thought to have such interests. And the more expert he is the more certain he is to decide by his own notions, and to disregard the views of the witnesses called before him.
I suppose that is why there is a special provision here that, unless the expert tribunal allows, the parties are to be limited to one expert witness on each side. As the expert tribunal cannot find out whether more will be wanted or not till the case is heard, and as you cannot prepare a case with an expert witness or two in reserve, provided in advance, and as you cannot bring an expert even in advance without having instructed him, that provision will lead to the inevitable result that in nearly every case each side will call one expert, and the more important, the more majestic, the more experienced in the witness-box the expert is, the more he will carry the day. And, of course, when you are carrying on a business like this, I mean the business of litigation, the practitioner will say: "You get Mr. So-and-so; he always has a very good effect in cases of this kind." 337 I must say that, considering the injustice that can be done by that kind of out-of-doors investigation, it would have been very much better to have seen whether this whole matter could not be left to the ordinary Courts, who have their own means of referring difficult matters of fact to properly qualified and experienced officers, who can hear experts as well, and perhaps penetrate their inner mind rather better than the ordinary tribunal expert, and who at any rate know what the foundation of ordinary landlord and tenant law is upon which the superstructure of this novel legislation is built.
Before I conclude I should like to draw your Lordships' attention to some of the questions which these tribunals will have to decide. Under Part I, that is, compensation for improvements and goodwill, this is the kind of thing that the tribunal will have to decide unless the parties can come to an agreement—in which case none of this is wanted. It will have to settle the compensation to be paid by the landlord by enquiring whether it adds to the letting value of the holding, and how much. It will then have to ascertain the capitalised value of the net addition to the letting value—capitalised by what formula is not stated: and that limit must not be exceeded. It will also have to ascertain, as another limit which is not to be exceeded, the cost of carrying out the improvement at the termination of the tenancy. It will have to take into account in determining the capitalised value, whether it is intended that the premises should be used after the termination of the tenancy, or whether it is intended that they should be demolished, and matters of that kind. Then, having dealt with this intricate question which is generally solved by some rule of thumb or sheer guesswork, its decision will be final.
Then, again, if no compensation is paid, it may authorise a further application in the future for compensation if effect is not given to the intention to pull the premises down, and it may have to decide whether the landlord's alternative of offering the tenant an extension of the tenancy is one which the tenant must accept in lieu of compensation or not. For that purpose it will have to decide what rent in its opinion a willing lessee other than the tenant will agree to give and a willing 338 lessor will agree to accept irrespective of the value of the improvement. That is intelligible on paper, though I have never understood how anybody could take it upon himself to say what a couple of willing people would agree to. But when you consider the immense number of premises that are difficult to let for business purposes when they have once become vacant, I think you will realise what an uphill proposition that is for the tribunal to deal with. You have to remember that, if it authorises improvements to be made, which it is enabled to do under another part of the Bill, after the decision has been given the landlord is to pay for those improvements and has to reckon with the possibility that when he comes to let the improved premises he will not find anyone very much attracted by these improvements. In any case, if the improvements have been made, the rates upon the premises will be increased, and the new tenant will probably make difficulties about that; and so long, of course, as the premises with enhanced value because of improvements which he really did not want are vacant, he has to pay Income Tax upon the improvements as well.
With regard to goodwill the Bill reasonably confines itself to the goodwill which has become attached to the premises by reason whereof the premises could be let at a higher rent than they would have realised had no such goodwill attached thereto. Goodwill is generally a personal thing and if, as the noble Lord said, the tenant who went away took the goodwill with him, in that case he would not get any compensation. He may be very much dissatisfied but the tribunal will have to ascertain to what extent the goodwill attaches to the premises by reason of which they can be let at a higher rent, ex hypothesi to another tenant than the one who has gone away. Again, if I may use the old illustration, if a man keeps a fried fish shop at the same street corner for twenty years and goes away, the probability is that a fried fish shop well known in the neighbourhood and not too far off has an attraction to a succeeding tenant and that the landlord can let what is no longer the old corner shop, but the old corner fish shop, and is able to get a better rent for it than before. The old tenant is leaving because his contract has expired and, as a tenant, the new comer is fair game for 339 the landlord. I do not see why compensation should be given there, and though, as the noble and learned Lord, Lord Parmoor said, people will say that they want a great deal more for goodwill, I do not see that very much can be said for them when an amending Bill is brought in.
I think I have said enough to indicate that I regard this Bill as capable of very considerable improvement and definite alteration. I think that the scheme of the tribunal is particularly unsatisfactory. I think that this endeavour to create a class of private judges, who may be irresponsible and are not necessarily even judicially-minded men, or necessarily of much experience in their own calling, who, quite possibly, may be men who are falling out of work and ceasing to be in touch with recent developments, is not borne out by experience under the Acquisition of Lands Act or the Agricultural Holdings Act, which appear in their application and extent to be very different from this Bill. I certainly should greatly desire to have that matter fully investigated by a Select Committee with the opportunity of calling evidence of all kinds before, it, and of determining whether this Bill should be allowed to pass in its present frame and form.
So far as I am concerned, I should regret that this Bill, if it be so much demanded by the public, as I dare say it is, should be delayed. I have no desire that any one should suffer under a grievance any longer than is necessary. But it is not your Lordships' fault that the Bill comes before us now. It is not your Lordships' fault that you have no opportunity whatever of giving it any very extensive discussion, or of making a considerable amount of investigation into its details. As your Lordships' time is known to be pretty fully booked up for the rest of the Session, and whatever else is final, your Lordships cannot protract by one hour the predetermined length of the Session, I venture to say that it is not your Lordships' fault if you have to stand between the public and the Bill for what I imagine will be but a short time.
§ LORD BUCKMASTER
My Lords, it is always with feelings of sincere uneasiness and regret that I find myself opposed to the noble and learned Viscount 340 who has just resumed his seat. His conspicuous skill in dealing with such a Bill as this and his no less conspicuous accuracy and fairness are known to you all and they render him indeed a formidable advocate. The remarkable thing about his speech is that there was so much of it with which I agreed far more than I ever expected to do. But the conclusion which he reached is one that I sincerely hope your Lordships will reject.
The purpose of his speech was this: This Bill may remedy some undoubted grievances, it may be capable of being put into an effective and valuable form, but it is necessary that you should, to effect that object, refer it to a Select Committee and have an elaborate examination which must undoubtedly destroy the prospects of the Bill becoming law during this Session. I think that is a thing that would be very greatly to be regretted. Though I thoroughly accept the view that the noble Lord's idea is to make this Bill workable, his first step in making it workable is to kill it. There can be no doubt that people outside will not regard his action in the same light that we should regard it here, but that they would think that this House, having before them for the first time during this Session a Bill that affected landed interests, had acted in accordance with what they believe to be the traditional interests of this House and promptly thrown it out. I think that that would be a very regrettable conclusion to force upon the public and that it is quite unnecessary.
Let us see what it is that this Bill really does. The purpose of the Bill can be expressed in a very few sentences. It is that, in cases where a man has, at his own expense, in accordance with the provisions of the Act and by his own skill and industry, built up a business upon premises, when his lease ends the value of that improvement and of that skill should not be transferred to the landlord. That is the real purpose of the Bill, because if the landlord will consent to grant a renewal of the lease, disregarding these improvements and the goodwill, the question as to compensation does not arise. When the noble Lord, Lord Harris, taunted the noble Earl, the Lord President of the Council, by saying that he had objected to similar provisions some twenty years 341 ago, I should very much like to know whether the noble Lord thinks that the noble Earl, Lord Balfour, spends twenty years of his life without acquiring knowledge. I think it is highly creditable to the noble Earl and the other noble Lords who sit beside him that they have, with the course of years—the course of too many years, as I think—realised that here is an existing grievance which needs a remedy and boldly begin steps to carry that remedy into effect.
So far as the substance of the Bill is concerned it really does not go much further than what I stated. I think that what the noble and learned Viscount, Lord Sumner, says is accurate, that when you come to apply this to small businesses and small premises there may be complications and there may be hardships which it is very difficult, to avoid. I agree with him, too, that in numbers of cases this Bill will not be necessary, because some of the better and the larger ground landlords in London have acted on its principles already. That is perfectly true, but, if it be the case that the bigger and the better landlords have acted upon these principles, surely it is an additional argument why we should make the men who do not behave as they ought to behave in these circumstances, regulate their conduct by an example which has been set by others. Everybody knows that there are large estates in London into which tenants desire to get because they know that at the end of their term they are going to be fairly dealt with by the man on whose property their house stands. They also know that there are others who will not treat them in any such manner, but will remorselessly take everything of benefit which has been added to the premises without the least regard whatever to what their tenant has done. I have often thought it is difficult to understand how justice can be maintained consistently with such a scheme as that, and this Bill has at last made some effort, and I hope an effectual effort, to secure its remedy.
The noble Viscount, Lord Sumner, says: "Now then, if such cases may occur, and I admit they may be harsh, you ought always to remember that it is in accordance with contract." Yes, but see what that means. A man is going to start a business. It is absolutely 342 essential he should have a lease of the house he takes—a lease of the house which contains the ordinary covenant. He finds his business beginning to extend. He develops it and at the end of his lease he has a really fine business on the premises. He had been unable to do anything else. If he ever was going to succeed he had got to extend and spread. He had to do these very things. And what is to be the result? It is all to vanish. That cannot be just. It is obviously unfair that one man should reap what another man has sown, without paying anything for the seed he has scattered.
Then the noble Viscount says: "But even if the covenants are harsh, you might get a remedy by providing that the Courts could grant relief against them." I do not think he meant that the Courts could relieve in such a case as I suggest. I think the thing that was in hip mind was that the Courts could give relief against the exactions of these covenants where a landlord, taking the right to obtain reparation of the premises, sues, and he has sued in the Courts and recovered the total value of putting the premises in repair, though he was going to level them to the dust the day after he got his damages. That is the law at this moment. The Bill provides a remedy for it, and I think it was to that that the noble Viscount was directing his attention when he said the Courts could have powers to deal equitably with the matter as it now stands without all these elaborate provisions. But I do not think the Courts can deal with the other matters, and those other matters do require some more special consideration and, I think, a special tribunal for their determination.
The noble Viscount proceeded to make some criticism of the tribunal and I do not know that I do not myself dislike this particular tribunal equally as much as he does. But I am not at all sure that I do not equally dislike the method of determining questions of business value before a Judge instead of having an expert. When such a matter comes before a Judge you have rows of experts on each side, probably six on one side and six on the other, and they will all proceed to swear what their client's case is and in the end the Judge will be left to determine between the two sides. If he is a sensible man he will probably take 343 the middle course between the two opposing sets of statements. I do not think that is a satisfactory way of determining this matter. If you want to determine a question affecting the trade value of a business or the value of business premises, I do not know that it is not best to get the right man to go down and see the place. He will say: "I know about these things; I am accustomed to the letting of premises here in this district; I know their value and I say this-and-this is the value." If you can get that done I think it is the best way to accomplish what you seek. Whether you will get that done by this tribunal is another matter. I am not so sure you can, but surely that is eminently a matter which we could discuss here in Committee, and we could consider with the greatest care any proposals that the noble Viscount put forward for the purpose of amending and altering that tribunal.
I do not believe—though I do not really know—if such proposals were put forward, based on a reasonable foundation, that they would be likely to encounter very grave opposition. From what I have heard of this debate I do not gather that the Government are wedded to every word and every clause of this Bill, and that they would not be quite prepared to see improvements in the plan if they could be effected. But that can be done here just as well as it can be done in the Select Committee. Although I do most thoroughly agree with the noble Viscount, Lord Sumner, that it is a most unfortunate thing that Bills of great moment are brought before this House at a time when you feel yourself restricted in the period to be allowed for their discussion, although I wish this were earlier in the Session so that there could be no difficulty, nevertheless, having regard to all the circumstances and most especially those that I mentioned when I began to speak, I earnestly hope your Lordships will reject this Motion and in due course pass this Bill.
§ THE SECRETARY OF STATE FOR INDIA (THE EARL OF BIRKENHEAD)
My Lords, the noble and learned Lord who has just sat down said so much that I intended to say that I will not trespass for any undue period upon your Lordships' time. I do, however, associate 344 myself very closely with his observations upon this particular Motion. The noble and learned Viscount, Lord Sumner, unlike the Almighty who when He had created the world looked round and saw that it was good, has looked at this Bill which we created and, as far as I can discover, has not found in it anything that was not bad. We are unfortunate in the general impression which we have made on the noble and learned Viscount, and I hope to show that in some respects at least he has unintentionally been a little less than fair not only to the Government but to the proposals contained in this Bill.
The noble and learned Viscount made a complaint which is very common in this House, whatever Government is in power, to the effect, that this important Bill has been brought up late in the Session. He said, in effect, that if this Bill perished as the result of the action of your Lordships, that would not be the fault of the House of Lords. That is perfectly true in one sense, but only in one sense, and even in relation to that one sense it may perhaps be pointed out without irrelevance that it is not particularly the fault either of the Government or of the House of Commons. The noble and learned Viscount has never, I think, served in the House of Commons, and is not as familiar as some of us with the difficulty under which legislation is carried on in that Assembly, and with the strict limitation of time by which Governments, of whatever political complexion they may be, find themselves constantly confronted.
When it is said that there is not time to discuss this Bill, I have the misfortune once again to differ from the noble and learned Viscount. We are about three weeks now from the period of our adjournment. There are many days which are very incompletely occupied, and the night is, of course, always open to those of your Lordships who are unusually zealous. I remember in earlier days, when I sat upon the Woolsack, it was a very common, or at least not an uncommon, practice that we should devote ourselves sometimes after dinner to discussion on the Committee stage of Bills. That such a course, which I admit is an unappetising suggestion, would be necessary in this particular case, I do not for 345 a single moment believe. The real truth is that there are many more afternoons open for the discussion of the Committee stage and the Report stage of this Bill than your Lordships will over occupy, if we address ourselves to it from this moment in such spare hours as are available for this discussion. I do not believe there is one of your Lordships who is in any serious doubt, though it would have been preferable that the Bill should have been in this House at an earlier stage, that ample time is available.
Then I associate myself as forcibly as I can with what was said by the noble and learned Lord, Lord Buckmaster. He has pointed out that the course recommended by my noble friend Lord Harris, and supported by the noble and learned Viscount, will undoubtedly involve the loss of the Bill in the present Session. That is not all. Everybody knows that the next Session will bring us nearer a General Election. Everybody knows that the congestion of legislative business, much of it unquestionably necessary, which will exist next Session will make it highly disputable whether it would be possible to find time for carrying a Bill of this complication through the House of Commons. It may well be that such a decision, if your Lordships, as I think unhappily, were to reach it, would involve the loss of this Bill.
The noble and learned Viscount was pleased to be very sarcastic about the public demand for this Bill. He said—I do not recall his precise phrase—that those who are clamouring for this Bill, or longing for it, can perhaps wait for a longer period. Well, our sources of information upon this point, as to the existence of a grievance and the number of people who not only would desire to see it removed but who think that its survival involves them in unnecessary wrong—our sources of information are not likely to be inferior to those of the noble and learned Viscount. We believe, and this belief was the soil from which these proposals sprang, that there are in large numbers of cases very great injuries sustained which could be avoided and ought to be avoided. As to the method of their removal, I will say a word later. It is not long since a very representative deputation from the Town Tenants' League waited upon the Lord Chancellor and placed before him in great detail many reasons, supported by 346 illustrations, why these or some similar changes should be introduced, and it is not very long since a deputation from the Leasehold Reform Association waited upon the then Parliamentary Under-Secretary and gave him in the same way information of many of the grievances, and the scale of those grievances, which are attempted to be dealt with in this Bill.
The noble and learned Viscount was pleased to be excessively severe on the subject of experts. He spoke of them in a tone of almost calculated acidity, which would very nearly give the impression that they ought not to be tolerated in any decent society. I cannot remember the exact phrase in which he described an expert—it appeared to me as he spoke that the epigram rather missed fire—but he spoke of him as a man who knows, or is supposed to know, his own business. If I do injustice to the noble and learned Viscount he will hold me excused. That is all very well, but what is the noble and learned Viscount himself? What used I to be? The noble and learned Viscount is an expert. He is one of the greatest intellectual ornaments of a very highly specialised profession. His opinion upon points of law is given as the opinion of an expert, and while it may be quite arguable to say—I will deal with the argument in a moment—that as between two alternative forms of tribunal either of which might be adopted we have made the wrong decision, to disparage the expert's usefulness from the point of view of a technical inquiry, to disparage it with a degree of imaginative gloom which deepened as his speech proceeded, is frankly absurd.
There was no depressing hypothesis by which the noble and learned Viscount did not depress himself. In the first place he thought that the expert might be just ceasing from the practice of his own profession and therefore presumably past his best. Why should the noble and learned Viscount suppose that? Why should your Lordships suppose that when the Lord Chancellor makes selection he will select carefully the man just past the full exercise of his intellectual power? Then the noble and learned Viscount fears that the expert would take these cases or conduct these examinations between two or three others in which he was professionally engaged, and I suppose that the fear is that somehow or other his judgment 347 may be deflected in the jostling of cognate topics in his mind. The noble and learned Viscount also says that he can decide whether there are to be two expert witnesses only when the case comes before him, and therefore this provision will involve an adjournment or will be of no value at all. I should really have thought that anyone with the vast experience of the noble and learned Viscount would have conceived the inexpensive possibility of a preliminary informal application to the tribunal in which he would be told what was the amount of the claim and the nature of the case—the kind of procedure which in legal matters we describe as a summons in chambers—an application of which he would be perfectly competent to dispose in ten minutes after hearing the matter laid before him.
The noble and learned Viscount says that it would have been quite possible and much preferable to take these matters to the Law Courts. I again have the misfortune entirely to differ from him. I think he made plain his opinion, or at least intimated his apprehension, that the number of applications under this Bill was likely to be extremely large. I think there will be a considerable number of them. It is, of course, part of the case of the Government for holding that it is necessary and proper for us to deal with this matter that there are a good many provable cases of hardship. If, as seems to be agreed, the number of cases will be considerable, the proposal, if I may say so without the slightest discourtesy, made by the noble and learned Viscount is to overload the Law Courts, already so busily occupied that the noble and learned Viscount upon the Woolsack thinks it necessary to move the Resolution in relation to the creation of additional Judges which he has placed upon the Paper. We are to overload the Law Courts with cases for which I should have thought they were more unsuited than for any conceivable disputed area in recent legislation. They are to decide about improvements, they are to decide the complicated questions which the noble and learned Viscount read out at the conclusion of his speech in order to show how difficult the matter was for the expert who understood that particular trade—the implication, I suppose, being that it would be, for some unexplained reason, 348 particularly easy for a legal tribunal assisted by expert evidence.
My experience of the last thirty years has, I confess very frequently to my regret, taught me one thing in respect of legal procedure: not, indeed, that the public is losing in any degree its confidence in our admirable Law Courts, but that for a variety of reasons, in which the desire for simplicity, for rapidity and for finality plays a large part, litigants, even in cases of the highest consequence and affecting large sums of money, are being led to carry these matters before arbitrators. I detect that tendency very actively at work in many trading exchanges. If you take the Corn Exchange and the Cotton Exchange, cases affecting individuals very seriously because of the amounts involved, cases the determination of which may easily decide the fate of a firm, are very frequently in these days committed to arbitration. Who, as a rule, are these arbitrators? They are the experts to whom the noble and learned Viscount objects but to whom, on the whole, whether we are right or wrong, we have decided that these matters may usefully and safely be committed. I cannot believe that it would be an improvement to the Bill, that it would do anything but destroy the Bill in its effective administration, if it were proposed that these various matters, the unsuitability of which for the purpose suggested I will try to illustrate in a moment, were to be committed to the decision of the Law Courts.
I have dealt with some of the noble and learned Viscount's objections to the tribunal selected. I rather draw the inference—I may have been wrong—that the noble and learned Viscount was under the impression that cases arising under Part II of the Bill also come before the tribunal. I gather that I have misunderstood the noble and learned Viscount. I am sorry. Let me, however, correct one slight misapprehension. It is perfectly true that the date contained in the Bill was September. 1927, but I think that the noble and learned Viscount cannot fail to be aware that this kind of thing very frequently happens when there is miscalculation in the expectation as to the progress of a measure in the House of Commons, and the difficulty is quite commonly solved in a very simple fashion by an 349 Amendment inserted in the Committee stage of a Bill in this House. Should this Bill receive, as I hope it will, the consideration of your Lordships in Committee, that comparatively simple device will be resorted to.
I turn to a subject mentioned by the noble and learned Lord, Lord Buck-master. He is perfectly right in surmising that we do not take, and have not taken, the view that this Bill is the product of some drafting inspiration which would make it impossible to alter its nature or even, in an approved case, to affect its substance. The noble and learned Viscount who will be in charge of the Bill in Committee is in the habit, as your Lordships know, of exhibiting a courtesy and a patience which have become familiar to the House generally, and I need not say upon that point more than this: that any suggestion which does not disturb and disrupt the general principle upon which the Bill depends will receive the most respectful and careful consideration of the Government. But I claim with great respect that there are certain principles contained in this Bill which are Second Reading principles and upon which we can and ought to make up our minds, reserving other points for a more detailed discussion at later stages.
We say, in the first place, that the tenant of business premises or of premises occupied for professional purposes is entitled, at the termination of the tenancy and on quitting his holding, to compensation for any improvement which he has created and which adds to the letting value of his holding. That is a question of principle. I do not understand that the noble and learned Viscount dissented from that principle, although he thought our conception of the case was inadequate and our procedure bungling. That he dissented from the principle was not made plain to me. He was immensely preoccupied by the case which loomed, I thought, surprisingly large upon his mental horizon—the case of the fish shop. If it will in any way reassure my noble and learned friend, I have no reason whatever, nor have the Government or the experts of the Government any reason, to suppose that the operations of Clause I of the Bill will in practice be more frequently applied to fish shops than to any other kind of 350 business. I hope that will afford my noble and learned friend some satisfaction.
Nor was I able to understand why it should be supposed that the general operation of this Bill would be enormously more operative in dealing with small premises, lest the explanation be the old reply to the old riddle: "Why is there more white wool than black wool?—Because there are more white sheep than black sheep." Otherwise I rather dispute the conclusion of the noble and learned Viscount, and indeed he himself mentioned a case which, if established, seemed to afford one of the strongest reasons in favour of the Bill. He said that a public Department, namely, the Woods and Forests, had recently, or so it was alleged—I do not suggest that he vouched for the statement himself—that the Woods and Forests Department, by its impositions in the last thirty years, upon a large and important tract of valuable property, had been largely instrumental in producing this outcry. If this be true, so far from being a bureaucratic Bill it ought to recommend itself to him as being intended to curb the impositions of bureaucracy, and to prevent a Government Department from being in future capable of doing these wrong things. In the second place, the conclusion would seem to follow, if the motive power springs from the owners of larger properties in the area indicated, that it cannot be quite true to say that the operation of the Bill is likely to be specially limited to smaller properties.
I said, my Lords, there were three or four main principles. The second principle to which I would presume to ask the assent of the House, is that the tenant of business premises is entitled to compensation for goodwill attaching to the premises which he, during a period of occupation of not less than five years, has created, by reason of which the landlord can obtain a higher rent than he would have realised had no such goodwill been created. Can any one dispute that that is, on principle, a fair thing? Take the case in its simplest elements. It must be established, or conceded, first of all that the tenant has created a goodwill, and secondly, that the goodwill has enabled, or will enable, the landlord to gain a higher rent. I cannot imagine that any reasonable person would think that that is a case with which it is wrong 351 to deal. It is argued, as to both the first and the second principle, that there is no definition of the principal terms employed. I do not think that any expert will have the slightest trouble in deciding what is an improvement, Whether I could define it or not in an extempore speech I do not know, nor will I attempt it, but I know what an improvement is perfectly well, and if I applied that knowledge to buildings I should not find myself in the slightest practical difficulty, especially with the practical knowledge which may be expected of these tribunals
In answer to one special inquiry which I understood my noble and learned friend to put forward, I think if a change has been made in the character of a building, if, although it happened to please a particular tenant it would not please another tenant, possibly desiring a different occupation, or would not please the landlord, it would be, I should imagine, a question of fact, not very difficult of solution, whether taking all the circumstances into consideration it was or was not an improvement. So, in the second case, I cannot conceive that it would be very difficult to decide what was the meaning of goodwill, or whether in fact the landlord would be likely to obtain a higher rent than he would have done had the goodwill not been created. It is very easy to make these things seem difficult by reading them out, especially by reading them out in the words of an Act of Parliament, which is necessarily drawn up in a technical manner, although difficulties do not arise in practice. When you have experience and are familiar with the subject-matter with which you are dealing it is found at once that these anticipated difficulties are almost entirely imaginary.
Let me see whether there is any reasonable measure of agreement upon a third principle—namely, that a tenant who is able to show that the compensation for goodwill provided under the Bill will not compensate him for the loss which he will suffer if he removes from his premises and carries on his business elsewhere, should be able to obtain the grant of a new lease from his landlord. I confess that I can see nothing revolutionary in that proposal. The landlord who does not wish to relet to anyone is protected. There are a number of other cases excepted from the operation of the clause with which I need not deal, but if it is 352 intended to relet, why should the one tenant to whom the landlord is unwilling to relet be just the tenant who has made that expenditure upon the property, or devoted that attention to the business, which admittedly has been responsible for the increased value?
In all these circumstaiices—I do not deal at greater length with the proposals because they have been so fully explained by the Lord Chancellor—the Government most earnestly express the hope that your Lordships will not adopt the Motion before the House. I cannot conceive that this is a case in which it will be necessary, or even helpful, to examine witnesses, and that the Select Committee if it were appointed would examine witnesses upon any considerable scale I do not for a moment believe. There is available here, as to-day has shown us, a great variety of legal talent and experience. The question of the most appropriate form of tribunal, though one of extreme importance, is one upon which it will be very easy for noble Lords to make at least alternative suggestions which can be considered when we come to the Committee stage. There was, in fact, not much in the number of points so powerfully made by my noble and learned friend behind me (Lord Sumner) which could not be put forward and tested in the later stages of this Bill. I must admit that to refer to a Select Committee a Bill which has received so much attention in another place, upon which there was actually no Division when the Third Reading was taken, and thereby destroy—as everyone knows your Lordships would be destroying—its Parliamentary fortunes for the whole of this Session, would be to adopt a disastrous course which the Government very much hope your Lordships will not consent to take.
§ VISCOUNT BERTIE OF THAME
My Lords, the noble and learned Viscount on the Woolsack compared this Bill to the Acquisition of Land (Assessment of Compensation) Act, 1919.
§ THE LORD CHANCELLOR
The noble Viscount is mistaken. I compared the tribunal to that under the Act of 1916—not 1919.
§ VISCOUNT BERTIE OF THAME
I apologise to the noble and learned Viscount. There is, however, a very fundamental difference between this Bill 353 and Section 1 (4) of the Act of 1919, which says:There shall be paid out of moneys provided by Parliament to official arbitrators such salaries or remuneration as the Treasury may determine.Under this Bill the Reference Committee may make rules as to the manner of selection of the referee and for prescribing anything which under this Bill is to be prescribed, and, with the consent of the Treasury, for prescribing the fees to be paid in connection with applications. But I cannot see why the referees under this Bill are to be paid by the job, whereas under the Acquisition of Land (Assessment of Compensation) Act, 1919, the arbitrators receive a salary. Further, I do not think you will get many good people to accept these appointments when they do not know what fees they will get. There is another thing I do not understand. Clause 20 (5) states thatThe rules of the Reference Committee made under this subsection may provide for applying, subject to the necessary adaptations and exceptions, the provisions of subsections (1), (2) and (3) of section five of the Acquisition of Land (Assessment of Compensation) Act, 1919, relating to costs of proceedings under that Act.I do not know why this Bill does not do the adaptation itself. It savours too much of legislation by reference.
Then the noble and learned Viscount said that compensation was to be paid for unexhausted improvements, but paragraph (6) of the First Schedule reads as follows:—Where a charge may be made under this Schedule for compensation due under an award, the tribunal making the award shall, at the request and cost of the person entitled to obtain the charge, certify the amount to be charged and the term for which the charge may properly be made, having regard to the time at which each improvement or the goodwill in respect of which compensation is awarded is to be deemed to be exhausted.I do not understand that provision; it is contradictory. I think it is only a committee of experts who could interpret it, and I think this Bill really ought to go to a Select Committee.
§ LORD PHILLIMORE
My Lords, when I had finished the study of this measure I came to the conclusion that it was a meritorious attempt, to avoid some bad cases, and that at the same time it was a very melancholy fact that 354 once again bad landlords were likely to make bad laws, by which I do not mean that the object of the measure is not good, but the measure is so drafted that it will be a very bad Act of Parliament if it passes in anything like its present shape. Substantially I agree with the proposal of the measure that when a tenant makes improvements which really are improvements—not improvements for him, but improvements for the property—he ought to be compensated. With regard to goodwill, I was glad to hear the noble and learned Viscount on the Woolsack say that no good landlord would ever dream of making money out of the tenant's goodwill. I shall have a Word in a moment to say about the way in which the law is proposed to be expressed with regard to goodwill. As to covenants to repair and the other covenants which have been mentioned, there again there may be some case for reform.
As a London landlord, I have had often to consider this matter, and I ventured to express myself only the other day. I consider that the landlord is a trustee—a trustee for all the property on the estate, to see that no one tenant ruins the property by his or her particular action, and it is very doubtful whether any further restraints should be put upon landlords with regard to such matters as covenants not to use a property for a particular purpose, or covenants not to build in a particular way, than they are under now, because they really act as the guardians of the interests of the whole estate, and it would be a very great pity if their powers in that respect were curtailed.
Now with regard to goodwill I confess that I am puzzled. In the first part of the relevant clause the goodwill is spoken of as something which the man has earned in respect of his trade, and which the landlord is not to profit by if he wants to get a higher rent by reason of that trade having been improved. But when we get a little further on we find that there is a special provision which provides that the sum to be awarded as compensation for goodwill shall not exceed so-and-so. The tribunal in determining such addition shallif it is proved that the premises will be demolished wholly or partially, or used 355 for a different and more profitable purpose, have regard to the effect of such demolition.…What can that mean? Ex hypothesi there is no such goodwill as the Bill provides for, because it is a goodwill of the additional value of the premises for that particular purpose, gamed by the tenant's action. What can be meant by saying the tribunal shall "have regard to the effect of such demolition"? The effect of such demolition is to destroy the goodwill of the premises, not the goodwill which the tenant has taken away from him. There is another passage in the Bill, with which I will not trouble the House at this moment, where the words "have regard to" are used in a very remarkable sense, and I shall have a word to say upon that when I come to discuss the question of the tribunal which is to decide these matters.
After all, I think the greatest objection to this measure, besides its complication and its limitations and its provisos and its conditions, is the tribunal. If noble Lords have any doubt upon that subject I would recommend them to read the powerful speech of Sir Henry Slesser on the Third Reading of this Bill in the House of Commons. He points out there what a mistake it is to create these ad hoc tribunals. I am old enough to remember when we had a great many Courts of Justice in this country, each with its own peculiar ambit of jurisdiction, jealous of each other, and the more powerful ones stopping the others from hearing cases which they thought belonged to them. I practised under that system for some few years till the Judicature Acts, 1873 and 1875, brought into operation in 1875, at which time I had practised some six or seven years, brought about one uniform tribunal. We had hardly got so far as to create this one great supreme Court of Judicature for the High Court of Justice and the Court of Appeal before we began to establish over and over again new tribunals. And we are doing it every day—tribunals ad hoc, tribunals presided over by people who have not the position of Judges, who have not the security of tenure of Judges and who, probably, have not the emoluments of Judges—not that those emoluments since 356 the fall in the value of money are at all great.
What are these referees? Are they the cream of their profession? I hope they will be. How are you going to pay them? Not out of public funds but out of the fees of the suitors. Just imagine what the cost will be if you are to have really good men with salaries, say, of £4,000 or £5,000 a year. It will not be at all desirable that they should practise. They cannot be referees one day and advisers or witnesses the next. They must be referees invariably, I should say. If you are going to pay these men salaries of £4,000 or £5,000 a year, you can only do it by putting very heavy fees upon the various suitors who come before them. The noble and learned Earl who has just spoken made, I think, a very unfortunate allusion when he referred to the arbitral tribunals set up by various commercial bodies such as the Corn Exchange. We all know what happens. Directly any real point of difficulty arises somebody finds a point of law in the matter, and the commercial arbitrators are compelled to state a case. All or most of the expense of the arbitration is thrown away and the matter begins over again under the form of a special case in the Courts of Justice. It so happens that only a very short time ago your Lordships' House sat for days in its judicial capacity—I was present myself—hearing a Corn Exchange case stated by the arbitrators.
This measure proposes that whenever there is a point of law a case shall be stated. Every practitioner knows that whenever a case is stated the expense of the arbitration is almost entirely thrown away and that all the ordinary legal expenses are put on top of it. If this Bill can be turned in Committee into anything like a reasonable measure—and it will require enormous patience on the part of your Lordships and of the noble and learned Viscount on the Woolsack—let it by all means stay in your Lordships' House and not go to a Select Committee. But it seems to me that all the part about the tribunal must be altered. I should like to use classical language in regard to it and to say that it ought to be "hatched over again and hatched different."
§ VISCOUNT YOUNGER OF LECKIE
My Lords, on behalf of my noble friend Lord 357 Jessel, I beg to move the adjournment of the debate.
§ Moved, That the debate be now adjourned.—(Viscount Younger of Leckie.)
§ On Question, Motion agreed to, and debate adjourned accordingly to Thursday next.