Aldrington Garages v Fielder

Rent Act–Separate but identical agreements made with two occupiers of same flat at same time–Agreements framed as licences and so as not to confer exclusive possession–Recital that the agreement was entered into to avoid creation of a tenancy–Whether agreements could be read together to create a joint tenancy–One of the occupiers terminated her occupation under a clause in agreement and left flat–Whether remaining occupier could claim to be a tenant–Held that the agreements created separate non-exclusive licences–The fact that they enabled the operation of the Rent Act to be avoided did not prevent effect being given to them if, as the court held, the documents truly created licences–Somma v Hazelhurst considered This was an appeal by Aldrington Garages from a decision of His Honour Judge Dewar at Clerkenwell County Court on December 22, when they were refused a possession order of flat no 3, 16-18 Hornsey Lane, Highgate, London N6, against Robert George Fielder. The defendant contended that he and a former co-occupant, Miss Sylvia Maxwell, were joint tenants; that the agreements which they entered into with the plaintiffs gave rise to joint tenancy, not to separate licences, and that after Miss Maxwell’s departure from the flat, the defendant was entitled to exclusive possession. Michael Rich (instructed by I A Landy, Laufer & Co) appeared for the plaintiffs (appellants); Lord Gifford (instructed by North Islington Law Centre) represented the defendant (respondent). GEOFFREY LANE LJ, giving the first judgment at the invitation of Stephenson LJ, said that the agreement entered into71 by the defendant with the plaintiffs recited that the agreement was entered into to avoid the situation where a tenancy was created, that the occupier should not part with possession to persons not approved by the owners, and that he should have no right to grant a licence or to control the owners’ choice of person ‘to whom we may grant a licence to share with you.’  Miss Maxwell, who also occupied the flat, had signed an agreement in identical terms. It was also plain from the agreements that each could independently determine his or her respective agreement within seven days, and it was also clear that there was no clause which on the face of it was inconsistent with the grant of a licence rather than a tenancy. There was no doubt that Mr Fielder, and possibly to a lesser extent Miss Maxwell, were somewhat reluctant to sign. Mr Fielder said he knew that the flat had previously been allocated at a registered rent, and, though he was obviously somewhat confused as to its precise legal effect, he seemed to have assumed that that entitled him to be what he himself called a registered rent tenant. The owners’ agent with whom he was dealing made it plain that, although Mr Fielder could sign the agreement relating to flat 3, or could return to the smaller flat which he and Miss Maxwell had just vacated, or could remove himself from the premises altogether, the agreement which he (the agent) was proffering was not caught by the Rent Act in his view, and that the registered rent was irrelevant to the considerations then facing the parties. In the end, as a concession, he added clause 6 to enable the occupier to determine the agreement at any time on seven days’ prior written notice. Mr Fielder and Miss Maxwell stayed in flat 3 until on June 1 1977 Miss Maxwell, having duly terminated her agreement by written notice under clause 6, departed, having had her £30 deposit returned to her pursuant to the agreement. Thereafter Mr Fielder remained in occupation, paying £54.17p a month in respect of the months of June and July 1977. The learned judge, in a detailed and well-thought-out judgment, weighed the pros and cons of the ‘tenancy’ view and the pros and cons of the ‘licence’ view, and then stated his conclusion. If, on a proper view of the agreements, neither Mr Fielder nor Miss Maxwell had exclusive possession, neither could be a tenant; their liability would be several and not joint. The learned judge concluded that the joint signing of document P3 (a letter) in the presence of a director of the plaintiff company, and the simultaneous signing of documents P1 and P2 in such presence, meant that P1 and P2 constituted in substance and in fact one single agreement made between the plaintiffs on the one hand, and the defendant and Miss Maxwell jointly on the other. Mr Rich agreed that it was true that neither agreement would have been signed without the other, and the joint signature of the letter reinforced that point, but in his submission that did not make them one single agreement, nor did it make them a joint agreement, if there was any difference between those two concepts. In his submission what happened afterwards did not help in construing the nature of the agreement, and the learned judge reached his conclusion–that this amounted to a joint tenancy, and not to separate licences–only by looking at extraneous matter. Was that a right conclusion?  Lord Gifford wished to repeat the arguments he advanced in Somma v Hazelhurst (1978) 246 EG 311, [1978] 1 EGLR 69 that, in considering questions arising under the Rent Acts, the court must look to the substance and reality of the transaction rather than merely to the form. The court was entitled, indeed bound, to look back at the documents and the surrounding circumstances. One could not alter the nature of a document by giving it a wrong label. Apart possibly from matters of emphasis, his Lordship would find little to quarrel with in that submission. But Lord Gifford finally submitted that the court must have regard to the policy of the Rent Acts and should be astute to prevent their evasion. With that his Lordship did not go–at least, not to the extent that Lord Gifford would wish. It seemed to his Lordship that if the parties succeeded in producing an agreement which, in all the circumstances of the case, was in fact a licence and not a tenancy, they should not be prevented from that course by the courts bending over backwards to ensure that landlords did not manage to avoid the provisions of the Rent Act. The mere fact that an agreement which did not fall within the Rent Act might result in large profits for the owners did not necessarily mean that agreement should be construed as a tenancy and not as a licence. Lord Gifford cited Samrose Properties Ltd v Gibbard [1958] 1 WLR 235, a case where a sum paid by the occupier was held to be commuted rent; Elmdene Estates Ltd v White [1960] AC 528, where a premium was masquerading as a sale at an undervalue; and Regor Estates Ltd v Wright [1951] 1 KB 689, another premium case. As his Lordship saw it, the most one could derive from those decisions was that in Rent Act cases the court had to be specially wary, and specially careful to see that the wool was not pulled over its eyes, and specially careful to see that things like premiums were not being used to conceal payment of rent, and so on; but in the present case there seemed to his Lordship to be nothing disguised as a licence, no one was disguising exclusive possession to make it look like something else. Either exclusive possession did exist on the agreement, and the facts against which it had to be read, or it did not. Lord Gifford had drawn their Lordships’ attention to the judgment of His Honour Judge McDonnell, reported in the Legal Action Group Bulletin for October 1977, at p 230, a judgment which had been praised by Cumming-Bruce LJ in Somma (supra). Whether the result arrived at by Judge McDonnell was correct was a matter into which their Lordships did not have to delve. There were obvious differences between that case and this. The main point in Lord Gifford’s submission was that it was possible and necessary in the circumstances of this case to read those two agreements together, so that they formed a composite unit granting a joint tenancy to Mr Fielder and Miss Maxwell. Finally, he submitted, in circumstances such as this, where the learned county court judge had considered the facts of the case, the Court of Appeal should not, even if it would not have come to the same conclusion, interfere with that judgment. There was a temptation to strain the facts or the law in favour of the occupier because the owner was obviously trying to avoid the provisions of the Rent Act, in order, inter alia, to increase his profits. But there seemed to be nothing wrong in trying to escape onerous provisions, or increase one’s profits, if one could legitimately do so. If there was here truly a licence, and not a tenancy dressed up in the verbiage or trappings of a licence, the landlord was entitled to succeed. It was not a situation where the court should allow itself to be influenced one way or the other by its sympathies. In Shell-Mex & BP Ltd v Manchester Garages Ltd [1971] 1 WLR 612, Buckley LJ said at p 619 that it might be that the plaintiff company in that case had adopted a device to avoid the possible consequences of the Landlord and Tenant Act 1954 which would have affected a transaction being one of landlord and tenant, but that in his judgment ‘one cannot take that into account in the process of construing such a document to find out what the true nature of the transaction is.’  See also per Lord Evershed MR in Foster v Robinson [1951] 1 KB 149, and Scott LJ in Maclay v Dixon [1944] All ER 22, which cases are collated in the judgment of Morris LJ in Samrose Properties Ltd v Gibbard [1958] 1 WLR 235, at p 244. Mr Fielder must show that the two agreements must be72 read together and, being so read, were effective to create a joint tenancy between himself and Miss Maxwell on the one hand, and the owners on the other. It was here that his case faltered. If the two agreements were separate, there was no exclusive possession and no tenancy. If joint, how was the obligation upon each occupier to pay his consideration of £54.17 per month to be construed?  In order to find the intention of the parties to be to create a joint tenancy, it would be necessary to read the agreements as making Mr Fielder and Miss Maxwell jointly and severally liable for the total consideration of £108.34 per month, as opposed to the several liability under the agreement of £54.17 each. As Cumming-Bruce LJ said in Somma, this would not be construing the agreement between the parties, but re-writing it in the absence of any claim for rectification or any allegation of fraud. That passage was one of the rationes decidendi in the Somma case, and their Lordships were accordingly bound by it. That, in his Lordship’s view, concluded the litigation, and there was no need to enter upon an examination of all the difficulties which might arise over notices to quit if these documents were to be construed as one joint tenancy. Miss Maxwell had now departed, but it seemed that if there were to be a joint tenancy her notice to quit and her departure would not absolve her from liability to pay the full rent herself should Mr Fielder fail to do so. His Lordship would allow the appeal. Roskill LJ, agreeing, said that ultimately it was a question of construction, and his approach was identical to that of Geoffrey Lane LJ. No doubt the agreements in this case could be used as a device to avoid the operation of the Rent Act 1968, but this did not mean that the court must refuse to give effect to those agreements, properly construed against the factual background, and prevent them from having the effect which the property owner sought to achieve. His Lordship did not think it right to approach the question of construction with any prejudice one way or the other. The court was concerned to see that those vulnerable to pressure were not subjected to it, but it was important that the court should hold a balance fairly between the two, and his Lordship would respectfully adopt the phrase of Geoffrey Lane LJ, that the court should be specially careful to see that no wool was being pulled over its eyes. His Lordship thought it a legitimate approach to remember that at the same time another agreement was entered into with Miss Maxwell. He was quite unable to take the view that the agreement entered into could be condemned as a sham. When construed against the factual background, did it represent the bargain as made?  His Lordship did not think that in every case where documents of this kind were used, it must necessarily follow that the court would reach the conclusion that a licence was involved and not a tenancy. It must in every case depend on the factual background against which the agreement had to be construed. STEPHENSON LJ, also agreeing, said that he concurred that what was granted and obtained was not a tenancy masquerading as a licence. The document, in its natural meaning, was an unambiguous licence to occupy. The appeal was allowed, and an order made for possession in 28 days. The plaintiffs were awarded the costs of the appeal, but not of the hearing in the court below, because a condition of their leave to appeal out of time was that they would not seek to disturb that order. Their Lordships made an order that the defendants’ costs be paid out of the Legal Aid Fund unless the Law Society objected within 14 days.