McHale v Daneham and others

Claim by owner for possession–‘Temporary Holiday Accommodation Hire Agreement’–Whether agreement a ‘sham’–Licence or tenancy–Rent Act 1977 section 9–Possession order made This was a claim by the plaintiff, Patrick McHale, who was the owner of the property at 81 Shirland Road, Maida Vale, London W9, for possession of the first- and second-floor flat at that address which he had allowed to be occupied by seven people from abroad by virtue of an agreement dated June 25 1977. The plaintiff claimed that the agreement was a licence. Alternatively, that it was for a holiday letting within section 9 of the Rent Act 1977. The defendants, who were three of the original signatories to the agreement and their ‘guests,’ claimed that the agreement conferred on the original signatories a protected tenancy and not a licence, and in so far as the agreement purported to be for a holiday it was a sham, as they were working in this country and had been at the time that the agreement was entered into, and that this fact was known at all material times to the plaintiff. John H Fox (instructed by Jack Bernstein & Co) appeared for the plaintiff; Andrew Arden (instructed by the Paddington Law Centre) represented the defendants. JUDGE EDWARDS, giving judgment, said that on or about June 9 1977, there was a meeting between the plaintiff Mr McHale and seven people, three of whom were among the present defendants. At this meeting it was arranged that the seven people could have the premises at 81 Shirland Road, Maida Vale, London, from June 25 1977. 120 On June 25 various people gathered at the premises and Mr McHale produced a written agreement dated June 25 1977. It is possible that one or two signed a day or two later, but nothing arose in connection with that. The agreement was for six months to December 25 1977. The agreement was obviously central to the case. It was headed ‘Temporary Holiday Accommodation Hire Agreement’ and it contained a number of clauses of the usual nature which were equally compatible with either a licence or a tenancy. However, one clause in particular, namely clause 12, recited that the agreement was for ‘temporary holiday accommodation only’ and the attention of the signatories was particularly drawn to that clause. The agreement also contained clauses requiring access to the premises to be given to Mr McHale and requiring possession to be given up peacefully at the expiry of the term. As regards the circumstances surrounding the signing of the agreement, what had happened was that Mr McHale had been introduced to seven people from abroad who he had been given to understand were on holiday in this country. There were two from South Africa, two from the United States and three from Australia. On June 25 all the parties gathered at the premises to be ‘let.’  The defendants said there was some discussion about the fact that the agreement was due to end on Christmas Day and also about their various jobs or occupations. There is certainly no doubt that they all read the agreement and signed it. Because the occupants had nowhere else to go, the agreement was extended firstly for one month to January 23 1978 and finally for two months to March 24 1978. By that date four of the original signatories to the agreement had vacated the premises, but three were left together with three or four of their guests. They refused to go and as a result the plaintiff had brought possession proceedings against all the occupants. It was argued by the counsel for the plaintiff first that the agreement was a licence and not a tenancy agreement. The learned judge was referred to Somma v Hazelhurst [1978] 1 WLR 1014 where Cumming-Bruce LJ had said, ‘We can see no reason why an ordinary landlord . . . should not be able to grant a licence to occupy an ordinary house.’  It was also argued on behalf of the plaintiff that the draftsman of the agreement had used the word ‘hire,’ rather than the word ‘tenancy,’ which was a much more common word in this context. Certainly the word ‘landlord’ or ‘tenancy’ did not appear in the agreement, but then neither did the word ‘licence.’  In His Honour’s judgment, however, having looked at the wording of the agreement and the oral evidence, the agreement on a broad basis was much more like a tenancy agreement than a licence. His Honour felt that in general an agreement for occupation was usually a tenancy and that only in exceptional circumstances would such an agreement be a licence. The draftsman had not really got down to constructing a licence. Counsel for the plaintiff’s second point, which in His Honour’s view was the real point in the case, was that this was a holiday letting within section 9 of the Rent Act 1977. That section read: ‘A tenancy is not a protected tenancy if the purpose of the tenancy is to confer on the tenant the right to occupy the dwelling-house for a holiday.’  Counsel for the defendants, on the other hand, argued that the agreement was a sham because all the ingredients of a sham were present, that is, the plaintiff wanted to let the premises, and he wanted to avoid the restrictions of the Rent Act, and counsel invited the court to find as a fact that the plaintiff well knew that the defendants were working in this country and could not therefore be on holiday. Furthermore, he argued, six, seven or nine months was too long for a holiday and Maida Vale was hardly a well-known holiday resort. The plaintiff’s counsel, on the other hand, submitted that even if the plaintiff knew that the defendants were working they could still be on holiday, because it was perfectly possible for a working holiday to be within section 9. The learned judge referred to Snook v London and West Riding Investments Ltd [1967] 1 All ER 518 at p 528 where Diplock LJ, as he then was, said that for there to be a ‘sham’ there had to be a common intention to deceive. If, therefore, only one side were shamming, so to speak, then the agreement was not a sham. The learned judge also referred to Buchmann v May [1978] 2 All ER 993, which was authority for the proposition that the onus of proof was on the defendants to avoid the provisions of the written agreement. His Honour stated that quite clearly in cases where a sham was pleaded, the court had a duty to look at the whole background of the whole matter. However, he was disposed as far as possible to accept to the greatest extent that he could the evidence of all the witnesses. He did not think that there had been any course of cheating by Mr McHale, the plaintiff, who had been faced by a number of young people all of whom were from abroad and all of whom he thought were on holiday. Mr McHale did not really pursue the question of their working at all. As to the question of whether there could be a ‘working holiday’ His Honour was prepared to accept Mr Fox’s submission in this respect notwithstanding the dictionary definition quoted in Buchmann v May that a holiday was a period of cessation from work or a period of recreation. His Honour could see no reason why a working holiday should not fall within the provisions of section 9 of the Rent Act. Although he did not place great reliance on the point, he thought that section 9 was enacted to encourage landlords to let their premises to holiday-makers. As to the extensions granted by Mr McHale, His Honour thought that they did not make any difference to the basic situation. Not without hesitation and thought but firmly in the end, in His Honour’s judgment the agreement was a holiday letting and did not confer a protected tenancy. Possession was ordered.