Bretherton v Paton

Landlord and tenant — Rent Act — Application of principle of Street v Mountford — Parties entered into an arrangement by which the appellant was allowed into occupation of a dwelling-house with the ultimate intention that she should purchase the property — It was contemplated that she should do some repairs and later obtain a mortgage which would enable her to purchase — The respondent owner did not wish to grant a tenancy — No contract of sale was made and no purchase price was agreed — Appellant paid the rates and made a small weekly payment to the respondent, described as a contribution towards insurance — It was common ground that she had exclusive possession — After a time difficulties arose, appellant’s enthusiasm for the scheme waned, but she wished to continue in occupation — Respondent gave her notice to quit and, on her refusal to leave, brought proceedings for possession — Judge in the county court treated the transaction as an ineffective arrangement for the sale and purchase of land, within the exceptions to the creation of a tenancy mentioned by Lord Templeman in Street v Mountford, and granted the respondent possession — On appeal the appellant submitted that all the indicia of a tenancy identified in Street v Mountford were present, exclusive possession for a term at a weekly payment in the nature of rent, and it was conceded that if the appellant was a tenant she was protected by the Rent Act 1977 — Respondent argued that, although there was here no concluded contract of sale, there was an intention to enter into such a contract; that the whole flavour of the arrangement was one of sale and purchase; and that the occupation should be regarded as referable to a sale and so within a specific exception mentioned by Lord Templeman — Held, rejecting the respondent’s argument, that although a possible sale was ultimately in contemplation when the appellant went into occupation, the only intention which was relevant was that demonstrated by the facts of the transaction, namely, the grant of exclusive possession at a rent for a periodic term — That was, in this case, a tenancy protected by the Rent Act — Appeal allowed This was an appeal by Karen Lorraine Paton, defendant in an action for possession in Preston County Court brought by William Bretherton, the plaintiff and present respondent, in relation to a dwelling-house in Freckleton, near Preston. The appeal was from a decision of Mr Assistant Recorder Hegarty, giving judgment in favour of the respondent for possession and mesne profits. Jeremy Mark Nicholson (instructed by David Coupe & Co, of Kirkham, Lancs) appeared on behalf of the appellant; Mark Blackett-Ord (instructed by David Blank & Co, of Manchester) represented the respondent. Giving judgment, MAY LJ said: This is an appeal from the order of Mr Assistant Recorder Hegarty, made in the Preston County Court on July 9 1985 in possession proceedings between the plaintiff (the respondent in this court) and the defendant (the appellant). The assistant recorder gave judgment for the respondent for possession of a dwelling-house in Freckleton, near Preston, with certain mesne profits. The appellant now appeals against that order, contending that at the material time she had a tenancy which was protected by the provisions of the Rent Act and that accordingly the assistant recorder had no power to make a possession order. Briefly the facts of the case are as follows. The respondent has owned the dwelling-house for 35 years. For many years he let it to tenants. In so far as the most recent letting to a Mrs Foreman was concerned, not only did he have rent arrear problems with his tenant173 but also during her occupation of the property the condition of the premises deteriorated to a serious degree. At that stage, as the result of those experiences, the respondent decided that he did not in the future wish to lease the house, but instead determined to sell it. In about March 1982 the appellant, Miss Paton, heard that the property was about to become vacant. She got in touch with the respondent and pressed him to let the house to her. But for the reasons which I have given the respondent resisted her proposal and told her that he was not prepared to do so but he was willing to sell it to her in its then condition at a price of £17,000. For a period each of them maintained their respective stances. There then emerged another proposal, namely that Miss Paton should be given time to put the property into good condition, occupying it the while, so that once it was in good condition she would be able to obtain a mortgage and then buy it from the respondent. The learned judge held that in broad terms that was the arrangement which was made between the parties. He then went on to say: it is clear that for the purposes of this scheme [the appellant] was to be permitted to have possession of the property and, it would seem, to reside there. It was accepted on behalf of [the respondent] that as a result of the arrangement [Miss Paton] obtained the exclusive possession of the property. However, there were other aspects of the arrangement to which the parties came. It was common ground that, during the period of her occupation, Miss Paton made certain payments which were referable to her occupation of the premises. She paid the rates direct to the relevant authorities and in addition she paid the sum of £1.20 each week to the respondent. There was an issue of fact about the weekly payments of £1.20. The learned judge preferred the respondent’s evidence with regard to it, namely that they were contributions towards the insurance premium for insuring the property until the completion of the anticipated sale by the respondent to the appellant when the repairs had been done, as I have indicated. There was included in the £1.20 a small sum which, apparently at the behest of the respondent’s accountant for some reason which is unclear, represented the respondent’s costs of collecting the premium instalments. There was a dispute, or uncertainty, as to how much had from time to time been paid; thus an old rent book was used to record the payments. In preferring the respondent’s account of the arrangement in relation to these payments, the learned judge reached the conclusion that the respondent did not in the course of the discussions refer to them in any way as rent. Miss Paton went into possession. Some work was carried out to the property thereafter, but within a short space of time she began to realise that there might well be substantial practical problems, particularly from the point of view of obtaining the necessary finance in implementing the loose arrangement, especially in so far as doing the proper repairs was concerned. The learned judge, having so held, went on to find that in his view Miss Paton was quite happy to remain in occupation of the property but that her enthusiasm for the original scheme had waned after she had gained possession. The original period during which it was envisaged that Miss Paton would have to carry out the necessary repairs was about two years. Before the end of that time Miss Paton and her boyfriend, or fiance, had the property valued. It would seem that she was advised that subject to her occupation (I use for the moment a neutral phrase) the house was valued at £8,000 or thereabouts and at £14,500 with vacant possession. In consequence the appellant made various offers to the respondent to buy the property at sums lower than £17,000, but throughout the respondent was adamant that that was his price and not a penny less. Eventually, at the behest of the local authority — no doubt under the Housing Act or similar public health legislation — the respondent himself had to carry out certain repairs. There was some inconclusive discussion between the parties about an extension of time. Ultimately the respondent’s patience gave out and he served a notice to quit by his solicitors on December 4 1984, giving the appellant four weeks’ notice. That was a document in standard printed form, which is in our papers. It is to be noted that the first reference to a tenancy was deleted, as was the prescribed information in the notes to the form which the relevant legislation requires in relation to lettings and tenancies. The appellant did not vacate the premises pursuant to that notice to quit and accordingly the respondent brought his successful claim below for possession and mesne profits. As I indicated at the start of this judgment, it is common ground between the parties that, if the appellant is a tenant of the property, she is protected by the provisions of the Rent Act 1977. If that is the situation the claim for possession had to fail because no statutory grounds for possession were relied upon or shown. Thus, as the learned assistant recorder indicated below, the legal issue between the parties was whether, in the light of the facts to which I have referred, the appellant was a tenant of the premises. The learned judge considered that question in the light of the recent decision of the House of Lords in Street v Mountford [1985] 1 AC 809*. In that case Lord Templeman, who delivered the single speech with which the rest of their Lordships’ House agreed, discussed the legal effect of a document which regulated the relationship between the two parties in that case and in respect of which the issue was whether it created the licence it expressed to create, or whether in the circumstances a tenancy had arisen. In the event their lordships decided that a tenancy had been created. In the course of his speech Lord Templeman, at p 816, began by saying ‘there is no doubt that the traditional distinction between a tenancy and a licence of land lay in the grant of land for a term at a rent with exclusive possession’. He then considered and compared two cases in which the purpose of the transaction had been to cut timber and whether exclusive possession had been granted or not for that purpose. He then turned to the case of residential accommodation and said this: In the case of residential accommodation there is no difficulty in deciding whether the grant confers exclusive possession. An occupier of residential accommodation at a rent for a term is either a lodger or a tenant. The occupier is a lodger if the landlord provides attendance or services which require the landlord or his servants to exercise unrestricted access to and use of the premises. A lodger is entitled to live in the premises but cannot call the place his own. *Editor’s note: Also reported at [1985] 1 EGLR 128. Then, after a reference to a judgment of Blackburn J in the earlier case of Allan v Liverpool Overseers, the learned law lord continued with a passage which, as I read the speech as a whole, contains the ratio of their lordships’ decision. The passage reads in this way: If on the other hand residential accommodation is granted for a term at a rent with exclusive possession, the landlord providing neither attendance nor services, the grant is a tenancy; any express reservation to the landlord of limited rights to enter and view the state of the premises and to repair and maintain the premises only serves to emphasise the fact that the grantee is entitled to exclusive possession and is a tenant. In the present case it is conceded that Mrs Mountford is entitled to exclusive possession and is not a lodger. Mr Street provided neither attendance nor services and only reserved the limited rights of inspection and maintenance and the like set forth in clause 3 of the agreement. On the traditional view of the matter, Mrs Mountford not being a lodger must be a tenant. There can be no tenancy unless the occupier enjoys exclusive possession; but an occupier who enjoys exclusive possession is not necessarily a tenant. He may be owner in fee simple, a trespasser, a mortgagee in possession, an object of charity or a service occupier. To constitute a tenancy the occupier must be granted exclusive possession for a fixed or periodic term certain in consideration of a premium or periodical payments. The grant may be express, or may be inferred where the owner accepts weekly or other periodical payments from the occupier. Thereafter the learned law lord considered in detail a substantial number of the earlier cases in which the issue whether the relationship between the parties was a licence or a tenancy had arisen, in respect of some of which at least it is I think permissible to say that, having regard to the incidence of landlord and tenant legislation, the merits of certain cases may have had rather more effect upon the ultimate result than was perhaps warranted. In the course of his analysis of those earlier decisions Lord Templeman, at p 821, in referring to the case of Errington v Errington and Woods [1952] 1 KB 290, spoke of ways in which the intention to create a tenancy could be negatived in these terms: The intention to create a tenancy was negatived if the parties did not intend to enter into legal relationships at all, or where the relationship between the parties was that of vendor and purchaser, master and service occupier, or where the owner, a requisitioning authority, had no power to grant a tenancy. Finally, after further consideration of other cases, the learned law lord, towards the end of his speech, said: My Lords, the only intention which is relevant is the intention demonstrated by the agreement to grant exclusive possession for a term at a rent. Sometimes it may be difficult to discover whether, on the true construction of an agreement, exclusive possession is conferred. Sometimes it may appear from the surrounding circumstances that there was no intention to create legal relationships. Sometimes it may appear from the surrounding circumstances that the right to exclusive possession is referable to a legal relationship other174 than a tenancy. Legal relationships to which the grant of exclusive possession might be referable and which would or might negative the grant of an estate or interest in the land include occupancy under a contract for the sale of the land, occupancy pursuant to a contract of employment or occupancy referable to the holding of an office. But where as in the present case the only circumstances are that residential accommodation is offered and accepted with exclusive possession for a term at a rent, the result is a tenancy. Having considered that decision, in the instant case the learned judge concluded that the three indicia of exclusivity of possession, a term fixed or periodic, and the payment of rent, were satisfied on the facts of the case. He took the view that, subject to a point with which he then dealt, the necessary consequence was that the nature of the appellant’s occupation was a tenancy. But he then went on to consider the effect upon that prima facie result, applying the ratio in the case of Street v Mountford, of the loose arrangement for occupation by the appellant pending completion of repairs and thereafter the sale at an unspecified figure to which I have already referred. In connection with that, the learned judge said first: Miss Paton’s occupation of the property is referable to and forms part of an ineffective arrangement for the sale and purchase of land. It therefore seems to fall into or across two of the categories of exceptional circumstances recognised by Lord Templeman. That was a reference to the last passage from the speech of Lord Templeman which I have just quoted. Then on the following page in his judgment the learned judge said: In my judgment, therefore, the original arrangement between the parties did not make Miss Paton a tenant of the premises. Her occupation of the property is referable to an ineffective arrangement for the sale and purchase of land and the inference of a tenancy that would otherwise arise from the exclusive occupation of premises for a term at a rent is thereby rebutted. It was on that basis that he concluded that the appellant’s occupation of the premises was not a tenancy and not a tenancy protected by the Rent Act, and consequently made the order now appealed against. Before this court the argument for the appellant has been based fairly and squarely upon the decision in Street v Mountford. Counsel has submitted that, when one analyses the learned judge’s findings, there was a contract between the appellant and the respondent. There was clearly an intent to create legal relations, and indeed Mr Blackett-Ord, on the respondent’s behalf, accepted that that was the situation. In the course of his judgment the learned judge spoke expressly of ‘the legal relationship between the parties in the instant case’, and there seems little doubt that he found (as I think rightly on the material that was before him) that there was a legally enforceable relationship between the two parties. Clearly it was not a contract which embodied the somewhat vague scheme that I have outlined, because a number of the necessary incidents of that scheme at no time were agreed between the parties. The ultimate purchase price, to take only one example, was never agreed between Miss Paton on the one hand and the respondent on the other. That being so, counsel for the appellant submitted that that was a contract pursuant to which the appellant had, as the learned judge found, exclusive occupation of the premises and paid £1.20 per week periodic payment in respect of her occupation. That being the situation, and those being the circumstances of her occupancy, he submitted, when one applies the ratio of the decision in Street v Mountford the learned judge erred in concluding that there was no tenancy and consequently this appeal should be allowed. In reply Mr Blackett-Ord, on behalf of the respondent, has advanced two alternative arguments. The first was based upon what he submitted was the clear intention of the parties or (to put it another way) the absence of any intention on the part of the parties to grant a tenancy on the facts of the instant case; what was contemplated was no form of tenancy, but an ultimate sale and purchase. In those circumstances he submitted that the decision in Street v Mountford was irrelevant. At that stage, he contended, the fact that the intended contract for sale had never become sufficiently certain to be enforceable mattered not. The way he put it was that the whole flavour and colour of the arrangement was one of sale and purchase and it was therefore illogical and unjust to find that a tenancy had been created. He specifically relied upon what he described as the exceptions to the Street v Mountford principle, which I have already quoted from Lord Templeman’s speech. In the alternative, Mr Blackett-Ord submitted, the substance of the ultimate intentions of the parties had never been embodied in an enforceable contract and, although the appellant had entered into occupation and paid rent, it was not in law permissible to extract from an incomplete but potential contractual arrangement a term or terms and upon that term or terms to base the application of the principles adumbrated in Street v Mountford and hold that a tenancy was created. In so far as Mr Blackett-Ord’s submissions relating to intention are concerned, I think it only necessary to repeat the first sentence of the last quotation from Lord Templeman’s speech to this effect: My Lords, the only intention which is relevant is the intention demonstrated by the agreement to grant exclusive possession for a term at a rent. In so far as Mr Blackett-Ord’s alternative submission is concerned, in other circumstances and as a general proposition of law his submission might have some substance. But I do not think it is applicable to the particular circumstances of the present case. There seems no doubt that, although the ultimate sale and purchase of the premises never reached enforceable form, there certainly was a contract between the appellant and the respondent under which the appellant went into possession and for that exclusive possession, as it was found to be and was not disputed, she undertook to pay not merely the rates but also £1.20 per week to the respondent. That being the situation, the matter can be shortly disposed of. Those facts, as the learned judge below recognised, clearly fall within the principles reiterated by their Lordships’ House in Street v Mountford. There was exclusive possession. There was the payment of rent. There was exclusive possession for a periodic fixed term. In those circumstances, on the law, there must have been a tenancy between the appellant and the respondent, and a tenancy, we are told, just within the protection of the Rent Act. It is, I think, wrong to consider the circumstances referred to by Lord Templeman in the two passages that I have quoted as exceptions to the Street v Mountford principle. For my part I do not read that case as in any way making new law or requiring any hitherto unrecognised approach to this type of problem. Where a person is in occupation of land and the question arises between him and another who is alleging that that other is entitled to possession, the necessary inquiry is as to the nature if any of the occupier’s right to occupy, ie as to the nature of the occupier’s interest if any in the land. All that Street v Mountford decided was that, given the instance of the three indicia referred to, the answer to that inquiry is a tenancy. In other circumstances, such as a service occupancy, or an allowing into possession by a requisitioning authority, the situation will be different. The instant case is a clear case in which the ratio of Street v Mountford has to be applied. In those circumstances, with respect to the learned judge, I differ from the conclusion to which he came and I would allow this appeal. Agreeing, SIR GEORGE WALLER said: I would only add a word or two out of respect for the argument which Mr Blackett-Ord, on behalf of the respondent, put before the court. Taking the passage from Street v Mountford, quoted by my lord from p 826, where Lord Templeman had stated the essential requirements of a tenancy and then went on to deal with certain legal relationships which would not produce that result, Mr Blackett-Ord did not argue that there was no intention to enter into legal relations. But he did argue that, although arrangements made between the parties were far from agreement because each side intended a sale at some time, albeit at different prices, since occupation pursuant to a contract of sale would not give rise to a tenancy, as mentioned by Lord Templeman, a similar result would follow where there was merely an intention to enter into a contract. He submitted that, on the facts of this case, there was no general agreement and the amount of actual contractual agreement related only to the payment of £1.20 each week. He would therefore have brought this case within the second part of the paragraph of Lord Templeman’s speech. I do not find it possible to accept that argument. These parties entered into an arrangement with the ultimate intention of negotiating a sale. But, to quote the words of Lord Templeman, the intention which was demonstrated by the agreement was ‘to grant exclusive possession for a term at a rent’, and therefore this case comes clearly within the decision of Street v Mountford. I would also allow this appeal. The appeal was allowed with costs and the order below set aside. Legal aid taxation of the appellant’s costs was ordered.