Harvey v Stagg and others

Flat subject to Rent Acts–Landlord’s claim for possession on ground of arrears of rent and breach of obligations–Tenants’ contention that a new contractual tenancy had been granted on expiry of fixed term–County court judge’s decision upheld that no new contractual tenancy had been created despite an arrangement to increase the rent–Reference to established principle that in cases to which Rent Acts apply acceptance of rent by landlord after expiry of term does not by itself lead to inference that a new contract has been created–Tenants’ appeal dismissed This was an appeal by three defendants, the status of two of whom as joint tenants with the first defendant, John Stagg, was one of the issues in the county court, from the decision of Judge McIntyre in the West London County Court granting the plaintiff landlord, David Harvey, an order for possession. The action concerned a flat at 1 Owen Mansions, London W14. D M Altaras (instructed by Seifert, Sedley & Co) appeared on behalf of the appellants, defendants in the court below; A C Geddes (instructed by Wigram & Co) represented the respondent, plaintiff in the court below. Giving the first judgment at the invitation of Stephenson LJ, ORR LJ said: This is an appeal by the defendants, a Mr Stagg, a Mr Smith and a Mr Jones, to an action in the West London County Court against an order made by Judge McIntyre on February 10 1977 that the plaintiff, a Mr Harvey, should recover possession of a flat, 1 Owen Mansions, London W14. The flat in question was, by a written tenancy agreement of April 18 1975, let on a furnished tenancy by the plaintiff to a Mr Turner, a Mr Taylor and the first defendant, Mr Stagg, at a monthly rent of £195 for a six-month term commencing on April 20 1975 and expiring on October 19 of that year, subject to an express term that the tenant should not assign, underlet or part with the possession of the flat or any part of it and that no person in addition to the tenants and their wives and children or in substitution for the tenant should be permitted to occupy or share in the occupation of that flat or any part of it. By his particulars of claim dated September 9 1976 the plaintiff pleaded this tenancy, that it had expired by effluxion of time on October 19 1975, that the first defendant had thereafter remained in occupation as a statutory tenant and was in August 1975 in arrears with the rent in the sum of £425; that, in breach of the agreement, the three tenants had unlawfully sublet or parted with the possession of the premises to the second and third defendants, who were in occupation as trespassers, and on that basis he claimed69 possession of the premises under Case 1 of Schedule 3 to the Rent Act 1968, which deals with arrears of rent or breaches of obligations of a tenancy. Alternatively, he claimed possession under Case 10 of the same schedule on the ground that, having previously occupied the house as his home, he required it for his own occupation and had given notice of such requirement. He claimed that the tenants remained in occupation and he sought possession of the premises, arrears of rent and other relief. In the defence dated November 24 1976 the defendants alleged that about the date of the expiry of the tenancy agreement in October 1975, the plaintiff had agreed with the first defendant, Mr Taylor and Mr Turner–that is the original tenants–to a fresh tenancy or a continuation of the tenancy at a monthly rent of £205, that being an increase of £10 a month, and that tenancy had not been determined. They further alleged that on or about January 20 1976 the plaintiff and the first defendant had orally agreed that the second defendant, Mr Smith, should become a joint tenant in substitution for Mr Turner, and that he thereafter entered into possession of the premises as a joint tenant with the first defendant and Taylor. It was further alleged that about June 2 1976 the plaintiff also agreed with the first defendant that he (the first defendant) could find a suitable replacement for a Mr Robinson, who it was alleged had by agreement between the first defendant and the plaintiff entered into joint possession of the premises upon Taylor leaving in March 1976, and that accordingly the third defendant entered into possession of the premises as a joint tenant with the first and second defendants. At the hearing, evidence was given by the plaintiff and by the defendant. The plaintiff’s evidence in chief was that in early October of 1975 Stagg asked him if they could stay. He said yes, if they would pay jointly a further £10 per month. In cross-examination he said that it was about October 1975 when Stagg and he discussed the position and they discussed the end of the lease; there was no discussion about a new lease, but he did say that he wanted an increase. In further cross-examination he said that he did not say anything–only about increasing the rent. The defendant’s evidence in chief was that he suggested that a new lease should be signed. The plaintiff thought that there was no necessity for a new lease and suggested £10 a month increase to cover an increase of costs, and to that the defendant agreed. In cross-examination he said that there were no variations in the terms except for £10 a month rise in rent. That being in summary the evidence on this issue of whether there was an agreement for a new tenancy, the judge in his judgment said that the case raised two questions of fact. The first was whether the plaintiff agreed with the three tenants, or must be taken to have agreed, to a new contractual tenancy in October 1975, and the second was whether the plaintiff agreed to the second and third defendants entering into joint occupation of the flat with the first defendant. The judge answered both those questions adversely to the defendants; and with the second of those questions we are not concerned on this appeal, because the sole ground of appeal relied upon is that the judge was wrong to conclude that there was no new or renewed contractual tenancy in October of 1975. The judge, in the note before us of his judgment, referred on this point to the only variation that had been discussed between the plaintiff and the first defendant, being a variation of the rent. He said in the course of his judgment that it was clear that all that was agreed by the parties in law was that, as the tenants wanted to stay on and as costs had gone up, the rent should be increased by £10 a month and otherwise no attempt was made to vary the existing terms or make a new tenancy. That, in his view, was all that took place, and he concluded that it did not constitute the grant of a new contractual tenancy. The appeal before us, advanced in a very attractive argument by Mr Altaras, is that the judge was wrong in coming to that conclusion. We have been referred to a number of authorities, of which I need only refer to three. The first of them, Cole v Kelly [1920] 2 KB 106, involved a lease of a house not subject to the Rent Restrictions Acts and a subsequent agreement in correspondence that the tenant should, after expiry of the lease, continue in occupation as a quarterly tenant. The question at issue in the case was whether the repairing obligations contained in the lease were included in the new agreement. At p 125 of the report Bankes LJ said: In my opinion the expression ‘holding over’ is not properly applicable to a case like the present where terms have been arranged under which the tenant, after the expiration of her lease, continues in occupation of the premises. The distinction between a continuance in occupation on new terms agreed upon and a holding over where no new terms are agreed upon and the tenant remains in occupation with the consent of the landlord is pointed out by Lopes LJ in Dougal v McCarthy. He then goes on to quote what Lopes LJ had there said. He says: I will deal first with the case where there is merely a holding over by the tenant after the expiration of a tenancy for a year by consent of both parties, and nothing is said in reference to any terms of tenancy either by the landlord or the tenant. I think the proper direction to a jury in such a case would be that, there being such holding over, and nothing being said by either party as to terms, it follows from such holding over by implication of law that there is to be a tenancy from year to year on the same terms as those of the lease which has expired, so far as they are not inconsistent with such a tenancy; that they are bound, to use Lord Mansfield’s words, to imply a renovation of the old agreement. That is where the implication is of a tenancy from year to year and is an implication of law. He goes on to deal with the second case: I will now proceed to deal with the case where, after the expiration of the term, letters have passed or conversation has taken place between the parties, as in the present case. and I emphasise that in the case with which we are here concerned that is also the position. In such a state of things it will be a question for a jury whether there has been a consent by both parties to a continuance of the tenancy, and if so on what terms. The remaining two authorities to which I consider it helpful to refer are both cases involving the Rent Acts, the first of them is Morrison v Jacobs [1945] KB 577. The first paragraph of the headnote in that case reads as follows: Where the tenancy for a term of years of a dwelling-house, to which the Rent and Mortgage Interest Restrictions Acts apply, has expired by effluxion of time, and the tenant continues in possession of the house, the mere fact that the landlord accepts rent from the tenant at any time or times after the expiration of the contractual tenancy affords no evidence that the landlord has consented to a new contractual tenancy. In his judgment in that case, Scott LJ at p 580 said this: It is erroneous, I think, to hold, in the case of a dwelling-house to which the Rent Restrictions Acts apply, that where the tenant has remained in possession after a term of years and the landlord has accepted rent from the tenant, any such inference of a consensus ad idem between the parties to a new common law tenancy arises, because before the passing of those Acts, in certain circumstances such an inference could be drawn. The relevant consideration is that in the case of a dwelling-house to which the Rent Restrictions Acts apply, where a term of years has expired, the landlord cannot obtain possession of the house unless he brings himself within the terms of certain provisions of those Acts now contained for the most part in and he refers to the Rent Restrictions (Amendment) Act of 1933. A little lower down in the same judgment he says: 70 The sole question before the court is whether after the expiration of the contractual tenancy the mere fact of the landlord receiving rent for the dwelling-house from the tenant affords any evidence that the landlord had entered on a new contractual tenancy to take the place of the tenancy which had expired. In my opinion, it does not. The true view is that the landlord takes the rent, knowing that the tenant is granted a statutory tenancy by the Rent Restrictions Acts and that his right to gain possession of his dwelling-house depends entirely on his establishing that he brings himself within the conditions laid down by the Acts. The remaining authority is the case of Marcroft Wagons Ltd v Smith [1951] 2 KB 496 where the material facts were that a statutory tenant of a dwelling-house having died, his statutory tenancy devolved on his widow who for some time continued to live in the house in that capacity with her daughter. Then the daughter asked the landlords’ agent to have the tenancy transferred into her name, and that he refused to do, because he said the landlords would require the house for an employee, but he accepted a sum from the daughter amounting to two weeks’ rent and she continued thereafter to pay weekly the same sum as the widow had paid for rent. Then the landlords brought proceedings for possession, and the county court judge made an order holding that the landlords had not agreed to grant any estate in the land to the daughter; that no tenancy had been created, and that she was merely a licensee. In his judgment in that case Lord Evershed MR said (at p 500) of the county court judge’s judgment: It is plain that he, having seen the witnesses and heard their evidence and also having referred to the correspondence . . . . came to a conclusion of fact that there was here no intention on the part of either the landlords’ representative on the one hand or of the defendant on the other, to create a tenancy–no intention, indeed, to do otherwise than to allow the existing state of affairs (whatever in law it was) to continue for a limited time. He goes on to say: The most troublesome matter, speaking for myself, has been the length of time that elapsed between March and September before the landlords took any further step. There is no doubt that the intricacies of modern life, as reflected in the rent restriction legislation, have made, in many respects, the relationship between landlords and tenants assume an artificial and indeed unfriendly character, which is somewhat to be deplored. In particular, landlords, who may have ordinary human instincts of kindliness and courtesy, may often be afraid to allow to a tenant the benefit of those natural instincts in case it may afterwards turn out that the tenant has thereby acquired a position from which he cannot subsequently be dislodged. In the general interest, it may be necessary that the relationship should have to assume a much more formal character than would otherwise be necessary. Then he goes on to say that he would be sorry if anything which fell from the court were to have the effect that a landlord could never grant to a person in the position of the defendant any kind of indulgence. In the same report, at p 506, Denning LJ (as he then was) said, having referred to the Rent Restrictions Acts: In these circumstances it is no longer proper for the courts to infer a tenancy at will, or a weekly tenancy, as they would previously have done from the mere acceptance of rent. They should only infer a new tenancy when the facts truly warrant it. The test to be applied in Rent Restrictions Acts cases is the same test as that laid down by Lord Mansfield in cases of holding over: ‘The question therefore is, quo animo the rent was received, and what the real intention of both parties was?’  . . . If the acceptance of rent can be explained on some other footing than that a contractual tenancy existed, as, for instance, by reason of an existing or possible statutory right to remain, then a new tenancy should not be inferred. In the present case, had no question arisen as to the Rent Acts, it seems clear in my judgment that the only inference that could be drawn on the facts before us would be that there was a renewal of the contractual tenancy. But, in my judgment, the two latter authorities to which I have referred indicate clearly that the fact that there is a rent restriction background to what is done is a matter which both can be and ought to be taken into account. I bear in mind that this case differs from those cases, in that there was a question only of acceptance of rent. Here there had been a conversation between the parties. But, in my judgment, it is not possible to say, having regard to the Rent Restrictions Acts background, that the only inference as a matter of law which the county court judge could have properly drawn in the present case was that there had been an agreement to a renewal of a contractual tenancy. The fact of the flat being subject to the Rent Acts was a consideration which the judge was entitled, and in my view bound, to take into account. Doing so, it seems to me impossible to say that he erred in law and equally impossible to say that he came, as a matter of fact and of inference–since the matter was in this case really one of inference–to a wrong conclusion. For these reasons, in my judgment, it is impossible to fault the conclusion to which the judge came; and I would accordingly dismiss this appeal. STEPHENSON LJ gave a brief concurring judgment and BROWNE LJ agreed. Appeal dismissed with costs. Possession to be given in 28 days from Court of Appeal decision.