Grosvenor (Mayfair) Estates v Amberton and others

Rent Act 1977 — Whether two flats let by same demise were ‘let as a separate dwelling’ so as to attract Rent Act protection — Horford Investments Ltd v Lambert — At the date of subletting of the two flats one of the flats was occupied by licensees and there was at that time only the possibility, then fairly remote, that the two flats might be used as a single dwelling at a future date — Whether a contrary inference should be drawn from a covenant not to use the property demised except as ‘a strictly private residence’ — Held that the covenant did not displace evidence and inference from surrounding circumstances that the flats comprised in the demise were not ‘let as a separate dwelling’ — Judgment given in favour of head landlords for possession This was a summons under RSC Order 14, adjourned into court as a procedure summons. The plaintiffs, Grosvenor (Mayfair) Estates, were the freeholders of 109 Park Street, Mayfair, London W1. The first two defendants were Mr and Mrs Emberton — whose subtenancy of the first-floor and basement flats at 109 Park Street gave rise to the question in issue in these proceedings. The third defendants, Isomar Properties Ltd, were the assignees of the residue of a 90-year term in the property and had sublet the two flats to the Embertons. The head lease, which had become vested in Isomar, expired shortly before the commencement of the proceedings by the freeholders. Simon Berry (instructed by Boodle Hatfield) appeared on behalf of the plaintiffs; Murdoch Gair (instructed by Fremont & Co) represented the defendants. Giving judgment, MR LEONARD HOFFMANN QC said: This is a summons under Order 14 which has been adjourned into court as a procedure summons. The plaintiff is Grosvenor (Mayfair) Estates, an unlimited company, and the relief sought in the summons is a declaration that the plaintiff is entitled as against the first two defendants to possession of the first-floor flat at 109 Park Street, Mayfair, an order for possession of the front basement flat in the same house and mesne profits. The plaintiff is the freeholder of 109 Park Street. On August 4 1893 its predecessor in title, the first Duke of Westminster, granted a lease of the house for 90 years from December 25 1891. In about 1969 the residue of this term was acquired by the first two defendants, Mr and Mrs Amberton. At that time the first-floor and basement flats were occupied by a tenant and a caretaker respectively, but in 1974 the tenant left and Mr Amberton went into occupation of the first floor. His main residence is in Surrey but he spends a good deal of time in London. In 1978 the caretaker left and Mr Amberton began also to occupy the basement flat. He says that he regarded it as important to occupy both flats because his daughter had many friends working in London and he wanted them to be able to stay the night whenever they wished to do so. The daughter herself does not appear to have used either flat. The evidence is that at least until some period before April 1981 she occupied yet another flat in the house which is not the subject-matter of these proceedings. Mrs Amberton would also sometimes come up from the country and spend the night in the first-floor or basement flat at 109 Park Street. It is agreed that the two flats are physically separate and each entirely self-contained. On April 29 1981 Mr and Mrs Amberton assigned the residue of the 90-year term, which then had less than six months to run, to the third defendant, Isomar Properties Ltd. At more or less the same time, in fact on the two preceding days, Isomar had entered into agreements with two young ladies, Miss Susan Charles and Miss Shelly-Ann Bartlett-Claircourt, granting them each a non-exclusive licence to occupy the first-floor flat. Miss Bartlett-Claircourt was a friend of Mr Amberton’s daughter and had previously lived with her in the other flat in the house which I have already mentioned. The terms of the licences are contained in letters dated April 27 and 28 addressed to Miss Charles and Miss Bartlett-Claircourt respectively and signed by Mr Amberton as managing director of Isomar. I need read only a part of the letter addressed to Miss Charles: Dear Miss Charles, Flat No 2, 109 Park Street, W1. We are agreeable to your sharing the occupation of flat 2, 109 Park Street upon the following terms: 1. That you pay £100 per calendar month as a contribution towards the cost of the flat, such sum to be paid calendar monthly in advance on the first day of each month, the first payment to be due on May 1 next. 2. This arrangement is to be for a period expiring on July 31 next, and we anticipate that should you wish to continue in occupation after July 31 1981 for a further short period that this would be favourably considered. 3. We are to have the right to introduce not more than two persons at any one time to occupy the flat with you, such occupants to be approved by you upon the basis that you will not unreasonably withhold your approval. On June 11 1981 Isomar entered into a similar agreement with a Mr Fraser Parks. The terms of this letter were the same except that the licence was expressed to expire on September 30 1981. On June 30 1981 Mr Amberton wrote to Miss Charles on behalf of Isomar extending her licence until October 31 1981, and on July 30 1981 he wrote a similar letter to Miss Bartlett-Claircourt. Mr Amberton says that he wrote no letter to Mr Fraser Parks but notified him orally that he could stay until about Christmas. He does not say exactly when he did so. In fact all three stayed on in the flat, and on January 26 1982 Mr Amberton wrote offering them licences for a further three months. Meanwhile on September 28 1981 Isomar entered into a tenancy agreement with Mr and Mrs Amberton. This was executed in two parts, Mr Amberton signing the landlord’s part on behalf of Isomar. The property demised by the agreement was described as first-floor flat and part of basement (front), 109 Park Street in the London Borough of the City of Westminster. The term was three months from August 31 1981, so that the term effectively granted was two months and a few days. The only other relevant provision is clause 3(k) of what are described as the letting provisions incorporated as terms of the agreement by which the tenants covenanted not to carry on on the property any profession, trade or business or let apartments or receive paying guests on the property or place or exhibit a notice board or notice on the property or — and these are the significant words — use the property for any purpose other than that of a strictly private residence. On December 25 1981 the head lease expired, and on February 18 1982 the plaintiff issued a writ claiming, inter alia, the relief sought on this summons. The summons was issued on March 17 1982. It also included a claim for damages for breach of covenant, but this has been dealt with by the master and has not been adjourned into court. As the head lease has expired by effluxion of time the plaintiff is prima facie entitled to possession. The first two defendants say that as subtenants by virtue of the tenancy agreement dated September 28 1981 they are protected by the Rent Act 1977 and entitled therefore to retain possession of the first-floor and basement flats. This depends upon whether or not the two flats were ‘let as a separate dwelling’ in section 1(1) of the Act, and it is conceded that this means that the premises must be let as one dwelling and not two: see Horford Investments Ltd v Lambert [1976] Ch 39. The relevant date for determining whether the premises were let as a separate dwelling is the date when the tenancy was granted, that is to say September 28 1981. On this date it was not possible for Mr and Mrs Amberton to use the two flats as a single dwelling. The first-floor flat was lawfully occupied by three licensees and the earliest date upon which all three could be required to leave was October 31 1981 when the current licences of Miss Charles and Miss Bartlett-Claircourt would expire.97 It may be that the licence of Mr Fraser Parks had already been orally renewed in which case occupation of the flat could not have been regained until Christmas after Mr and Mrs Amberton’s subtenancy had expired. But we do not know exactly when the renewal took place, and it may be that on September 28 Mr Fraser Parks could still have been asked to leave on September 30. The fact that it is legally or physically impossible for premises to be occupied as one single dwelling at the very commencement of the tenancy is not in my judgment necessarily fatal to a finding that the premises were let as a separate dwelling. If, for example, the tenancy granted to Mr and Mrs Amberton had been for five years and the evidence showed that they and Isomar contemplated an early removal of the licensees and that thereafter Mr and Mrs Amberton would live in both flats, using them as one dwelling, the premises could I think be said to have been let as a single dwelling. Compare Langford Property Company Ltd v Goldrich [1949] 1 KB 511. It depends upon the intention of the parties. In this case Mr Amberton acted for the landlords, was indeed the alter ego of the landlords and was himself one of the tenants. He has sworn two affidavits stating what was in the contemplation of the parties when the tenancy was granted. As these are proceedings under Order 14 I think that for the purposes of this summons Mr Amberton’s statements as to his intentions both as landlord’s managing director and as tenant must be accepted as correct. In his first affidavit sworn on May 18 1982 Mr Amberton says in para 7: I accept that this subtenancy is in respect of property consisting of two physically separate and self-contained parts. However I am advised by my legal representatives and verily believe that there is nothing in law which prevents two such parts being let as a separate dwelling within the meaning and so as to attract the protection of the Rent Act 1977. It was certainly the purpose of the agreement to grant a subtenancy in respect of the two parts. The last sentence is of course borne out by the description of the demised property in the tenancy agreement but is consistent with that property being let either as one dwelling or as two. In para 8(i) of the same affidavit Mr Amberton goes on to say that he retained a key of the first-floor flat. This again is consistent with the two flats being either one dwelling or two. Para 8(ii) has been withdrawn, and in para 8(iii) Mr Amberton says: ‘The licences were deliberately created for short terms and then left open-ended to enable me to enjoy fuller occupation of the first-floor flat when I wanted it.’  This para is amplified in para 2 of Mr Amberton’s second affidavit sworn on July 13 1982, where after referring to the terms of the extended licences granted to Miss Charles and Miss Bartlett-Claircourt, he says: ‘In other words I still had the power to terminate their occupation at very short notice should I have wished at any time thereafter to enjoy the further occupation mentioned in para 8(iii) of my earlier affidavit.’ I take these statements to mean that at the time when the subtenancy was granted on September 28 1981 Mr Amberton did not intend to occupy the first-floor flat as part of his dwelling but that the licence arrangements permitted him to do so at very short notice if he should form such an intention in the future. As Mr Amberton was both tenant and managing director of Isomar this must have been the common intention of the parties. It follows in my judgment that the premises were not let as a single dwelling. They were let as two flats subject to the possibility that they might be used as a single dwelling at some unspecified future date. This possibility did not materialise at any time during the term granted by the tenancy, and I think it would be fair to assume that at the date when the tenancy was granted the possibility that it would materialise before the term expired was regarded as remote. It must however be recalled that clause 3(k) of the letting provisions in the tenancy agreement required Mr and Mrs Amberton not to use the property for any purpose other than that of a strictly private residence. Does this provision conclude the matter and preclude me from having regard to the evidence of the actual circumstances which made compliance with the covenant impossible at the date of the letting and the evidence of Mr Amberton as to what the parties actually contemplated would or might happen in the future?  I do not think that it does. In Wolfe v Hogan [1949] 2 KB 194 Denning LJ said at p 204: In determining whether a house or part of a house is ‘let as a dwelling’ within the meaning of the Rent Restriction Acts it is necessary to look at the purpose of the letting. If the lease contains an express provision as to the purpose of the letting, it is not necessary to look further. This dictum, for such it was, appears to have been applied by the Court of Appeal in Whitty v Scott-Russell [1950] 2 KB 32. On the other hand in Horford Investments v Lambert [1976] Ch 39, to which I have already referred, Scarman LJ said at p 52: The section affords protection to the tenancy of a house only if the house is let as a separate dwelling. The section directs attention to the letting, that is to say the terms of the tenancy. The courts have proceeded upon the basis that the terms of the tenancy are the primary consideration. See Wolfe v Hogan [1949] 2 KB 194. The words ‘primary consideration’ suggest that the words are not necessarily the only consideration, and in neither Wolfe v Hogan nor Whitty v Scott-Russell was it suggested that the terms of the document did not reflect the true intention of the parties as to the basis upon which they were contracting. In this case the covenant could not have been enforced by Isomar during the currency of the licences because Isomar had by its own acts put it out of the tenant’s power to comply until the licences had expired. Furthermore, as I have already said, the evidence of Mr Amberton shows that when the tenancy agreement was executed both parties knew that there was only a possibility, and in my judgment a remote possibility, that the covenant would be complied with at any time during the term. I bear in mind that it is a general principle of the application of the Rent Acts to have regard to the substance of transactions rather than the form. I cannot regard this clause in an agreement which Mr Amberton in effect made with his own alter ego as displacing his own evidence of intention and the inferences to be drawn from the surrounding circumstances. These are of course proceedings under Order 14 and the question is whether there is a triable issue. In my judgment there is no issue to be tried on the facts because the defendants’ own evidence shows that the premises were not let as a single separate dwelling, nor does this conclusion involve any difficult questions of law. I propose therefore to make an order in the terms sought in the summons. These are a declaration that the plaintiff is entitled as to the first and second defendants to possession of the first-floor flat and to receive the rents and profits thereof, and an order for possession of the basement flat. There will also be an order for mesne profits as from the expiry of the head lease, which was on December 25 1981.