Landlord and tenant — Licence or tenancy — Street v Mountford again considered and other cases reviewed — Appeal by owner of house against decision of county court judge in possession action holding that respondent occupants were tenants entitled to the protection of the Rent Act — The subject flat, of which the appellant was the freehold owner, comprised four rooms, a bedroom, a bed-sitting room, a kitchen and a bathroom — Appellant made a practice of granting what he described as licences with the clear intention of avoiding the difficulties attendant on letting properties on tenancies, including the application of the Rent Act — The present occupants, respondents to the appeal, were a young man and his girl friend who wished to share the flat and live as husband and wife — They each signed an identical agreement, of an extremely detailed nature, which provided that it conferred a personal licence only and expressly negatived the grant of exclusive possession — It also provided that the licensor would be entitled to use the rooms in common with the licensees and would be entitled to permit other persons to do so — The appellant made it plain that the flat was intended for single persons sharing and that if the respondents got married they would have to go — He also explained that the Rent Act protection would not apply, although it was evident that the respondents were ignorant of the Act and did not understand the expression ‘exclusive possession’ — Despite the express provision in the agreement the appellant made no attempt to put other occupiers into the flat or to occupy it himself — After a time some difficulties arose in regard to the rent and the respondents were given notices to quit — They took advice and then claimed to be protected tenants — A rent officer accepted this claim and registered a rent which was lower than the sum of the two separate payments of £87 each per calendar month to which the occupants had agreed — The agreements, which were made in February 1985, were clearly modelled on those in Somma v Hazelhurst
court judge in the present case, believing that he was following the guidance
of Lord Templeman’s speech in Street v Mountford, which had disapproved Somma v Hazelhurst,
concluded that the present agreements were bad as ‘artificial transactions
designed to evade the Rent Acts’ — He therefore found that the respondents had
a protected tenancy
Court of Appeal that the judge had fallen into error in his application of
Street v Mountford — The court formulated a new ‘broad approach’ in five
propositions which are summarised briefly as follows — 1. The court must be
astute to frustrate sham devices and artificial transactions designed to evade
the Rent Act — 2. A ‘sham’ is as defined in Snook v London & West Riding
Investments Ltd or, more shortly, where parties say one thing while really
intending another — 3. It is not a crime or contrary to public policy for a
property owner to license occupiers to occupy property on terms which do not
give rise to a tenancy — 4. The Rent Acts must not be allowed to alter or
influence the construction of an agreement — 5. Where an agreement is held to
be a sham the task of the court is to give effect to the true bargain; where it
is not held to be a sham the task is to construe it and give fair effect to its
terms in the context of all relevant surrounding circumstances
present case the written agreements could not
could succeed only by showing that they were a sham — The respondents argued
that they were a sham and that the reality was the grant of a joint tenancy,
with each occupant jointly and severally liable for the whole monthly payment
of £174 — The facts, however, did not support this allegation and the judge was
wrong in having accepted it — The agreements set out the true bargain — Somma v
Hazelhurst was distinguishable from the present case; apart from other points,
Somma concerned a single room with two beds, so that the right reserved by the licensor
to use the room herself (in addition to the two licensees) could well be
regarded as physically impracticable, while here there was a bed-sitting room
in addition to the bedroom used by the occupants — Appeal allowed and
possession ordered
The following
cases are referred to in this report.
Aldrington
Garages Ltd v Fielder (1978) 37 P&CR
461; [1978] EGD 347; 247 EG 557, CA
Brooker
Settled Estates Ltd v Ayers [1987] 1 EGLR
50; (1987) 282 EG 325, CA
Donald v Baldwyn [1953] NZLR 313
Hadjiloucas v Crean [1987] 3 All ER 1008; [1987] 2 EGLR 60; (1987) 284
EG 927, CA
Shell-Mex
& BP Ltd v Manchester Garages Ltd [1971]
1 WLR 612; [1971] 1 All ER 841, CA
Snook v London & West Riding Investments Ltd [1967] 2 QB 786;
[1967] 2 WLR 1020; [1967] 1 All ER 518, CA
Somma v Hazelhurst [1978] 1 WLR 1014; [1978] 2 All ER 1011; (1978)
37 P&CR 391; [1978] EGD 269; 246 EG 311, CA
Street v Mountford [1985] AC 809; [1985] 2 WLR 877; [1985] 2 All ER
289; [1985] 1 EGLR 128; (1985) 274 EG 821, HL
This was an
appeal by the owner of the top flat at 6 Whiteley Road, Upper Norwood, London
SE19, Agis Antoniades, against the decision of Judge Macnair, at Lambeth County
Court, rejecting the owner’s application for possession against the occupants
of the flat, William Robert Villiers and Sharon Bridger.
The appellant,
Agis Antoniades, appeared in person; James Harris (instructed by A L Hughes
& Co) represented the respondents.
Giving
judgment, BINGHAM LJ said: This appeal raises the familiar question whether
residential accommodation was let to occupiers as tenants or licensees.
Mr Antoniades
is the freehold owner of a house at 6 Whiteley Road, Upper Norwood, London
SE19. He let Mr Villiers and Miss Bridger, a young man and a young woman, into
occupation of the top flat in the house. In due course he gave each of them
notice to vacate the flat. Neither did so, and he sought an order for
possession in the Lambeth County Court. Mr Villiers and Miss Bridger (‘the
occupants’) resisted the claim, contending that they were tenants and so
entitled to protection under the Rent Acts. Mr Antoniades (‘the landlord’)
contended that they were licensees, not entitled to protection. His Honour
Judge Macnair upheld the occupants’ contention. The landlord appeals.
The top flat
comprises four rooms: a bedroom, a room described as a bed-sitting room, a
kitchen and a bathroom. The facts found by the learned judge are these.
The landlord
had considerable experience in the management of properties. He was fully aware
of the disadvantages of letting out property on tenancies and so had made a
practice of granting licences. He was approached by Mr Villiers in about
November 1984. The landlord told Mr Villiers that he dealt only in licences.
The landlord in the course of a telephone call asked Mr Villiers whether he
wanted a double bed or a single and Mr Villiers said a double. Before an
agreement was signed, Mr Villiers made it clear that the flat was for him and
his girlfriend. The landlord appreciated (so the judge inferred) that the
occupants would share the flat and live as husband and wife. They looked at the
flat and approved it in December 1984. They gave references showing that each
of them was in employment.
On February 9
1985 the landlord with his wife and a daughter (who is a solicitor) attended at
the flat. The occupants waited outside the house and were then let in and each
of them signed an identical agreement. The occupants read the terms of the
agreement and the landlord explained that these were licences, that the Rent
Acts did not apply, that he had the right to put other people in and that no
exclusive possession was given to the occupants. No finding is made whether the
occupants read the agreement and the landlord gave his explanation before the
occupants signed or after, but it appears to have been common ground in the
evidence that the occupants read the agreement before signing and the
landlord’s evidence suggests that the explanation was also given before
signing. The occupants knew nothing about the Rent Acts but signed because they
were thankful to find somewhere to live. They did not understand the term
‘exclusive possession’. The landlord made it plain that they had to go if they
got married and that the flat was only for single people sharing. On July 7
1986 (after difficulties over the monthly payments) the landlord gave each of
the occupants one month’s notice to vacate. No effort was made by the landlord
to put other occupiers into the flat or to occupy it himself. The occupants
asked the landlord if a friend could stay with them in the flat and he agreed.
The friend slept on a sofa bed for a period in cramped conditions. From time to
time the landlord came and knocked on the door. On one occasion he entered
without knocking to show people round the flat. After receiving notice the
occupants took advice. They then claimed to be tenants. The rent officer upheld
that claim and registered a rent substantially below the total of the payments
the occupants had agreed to make.
The agreement
signed by Mr Villiers on February 9 1985 was in these terms:
This licence
is made the 9th day of February 1985 One thousand nine hundred and eighty five
between A Antoniades of 152 Croydon Road, London SE20 (herein-after referred to
as the ‘licensor’) of the one part and William Roberts Villiers of 30 Dynewood
Close, Bexley Kent (hereinafter referred to as the ‘licensee’) of the other
part.
Whereas the
licensor is not willing to grant the licensee exclusive possession of any part
of the rooms hereinafter referred to.
And whereas
the licensee is anxious to secure the use of the rooms notwithstanding that such
use be in common with the licensor and such other licensees or invitees as the
licensor may permit from time to time to use the said rooms.
And whereas
this licence is entered into by the licensor and the licensee solely upon the
above basis.
By this licence
the licensor licenses the licensee to use (but not exclusively) all those rooms
(hereinafter referred to as ‘the rooms’) on the Top flat (One bedroom one
bedsitting room, kitchen and bathroom) of the building known as and situate at
6 Whiteley Road SE19 (hereinafter referred to as ‘the building’) together with
the use of the entrance hall and the staircase outer door and vestibule, of the
building (shared with the other occupants in the house) and together with the
use of the furniture fixtures and effects now in the rooms (more particularly
set out in the schedule of contents annexed hereto) from 14/2/1985 for the sum
of £87 per calendar month on the following terms and conditions:
1) The licensee agrees to pay the said sum of
£87 (on the 14th of each month) monthly in advance.
2) The licensee shall be responsible for the
payment of all gas electric light and power which shall be consumed or supplied
in or to the rooms and shared parts of the house used by the licensee during
the licensee’s occupation thereof.
3) The licensee shall use his best endeavours
amicably and peaceably to share the use of the rooms with the licensor and with
such other licensees or invitees whom the licensor shall from time to time
permit to use the rooms and shall not interfere with or otherwise obstruct such
shared occupation in any way whatsoever.
4) The licensee shall keep the interior of the
rooms and all fixtures and fittings therein and all other shared parts of the
house used by the licensee in good and clean condition and complete repair
(fair wear and tear and damage by accidental fire only excepted) and
immediately replace all broken glass.
5) The licensee shall preserve the furniture
and effects in the said rooms from being destroyed or damaged and make good pay
for the repair of or replace with articles of a similar kind and of equal value
such of the furniture and effects as may be destroyed lost broken or damaged
(fair wear and tear thereof only excepted).
6) The licensee shall leave the furniture and
effects at the expiration or sooner determination of this licence in the rooms
or places in which they were at the commencement thereof.
7) On notice in writing being given to the
licensee by the licensor of all wants and repairs cleansings amendments and
restorations to the interior of the rooms and of all such destruction loss
breakage or damage of or to the furniture and effects as the licensee shall be
bound to make good found therein the licensee shall repair cleanse amend
restore or make good the same within three weeks of the giving of such notice.
8) The licensee shall not remove any furniture
and effects from the rooms without the previous consent in writing of the
licensor and neither will move in other furniture.
9) The licensee shall not carry on or permit
to be carried on in the rooms any profession trade or business whatsoever.
10) The licensee shall not do or suffer to be
done in the rooms any act or thing which may be a nuisance cause of damage or
annoyance to the licensor
adjoining premises or which may vitiate any insurance of the building against
fire or otherwise or increase the ordinary premiums thereon.
11) The licensee shall not hang or allow to be
hung any clothes or other articles on the outside of the rooms or the building
but can install a washing line properly supported for this purpose in the back
garden.
12) The licensee shall not keep any combustible
or offensive goods provisions or materials in the rooms and will not use the
rooms in any illegal or immoral way.
13) The licensee shall not cause or permit any
damage spoil or destruction to the rooms or to the building (including gardens,
fences and gates).
14) The licensee shall not pull down alter or add
to or in any way interefere with the locks construction or arrangements of the
rooms and the house without the previous consent in writing of the licensor.
15) The licensee shall not keep any animals or
birds in the rooms nor shall the licensee permit any child or children to
reside or stay in the rooms.
16) The licensor shall be entitled at any time to
use the rooms together with the licensee and permit other persons to use all of
the rooms together with the licensee.
17) This licence is personal to the licensee and
shall not permit the use of the rooms by any person whatsoever and only the
licensor will have the right to use or permit the use of the rooms as described
in clause 16. The licensee under no circumstances will have the right to allow
any other people of his choice to use the rooms in any way.
18) The deposit held of £30 (Thirty pounds) will
be returned on vacation if no damages or losses occur and if the flat and
shared parts are left clean and no such dispute about the deposit will entitle
the licensee to remain on the premises.
19) The licensee will inform the licensor
immediately by recorded delivery in case of any damage or losses to the rooms
buildings and contents.
20) The licensee having inspected the rooms and
the shared parts of the building and the furniture and fittings declares that
he found them in good order and satisfactory.
21) Upon the licensee being in breach of any of
the conditions referred to above this licence shall immediately determine
without prejudice to any other remedies of the licensor and the licensee shall
immediately cease his use of the rooms and the building as permitted hereunder.
22) The licensee (occupier) declares that he is
over 18 years old and understood this licence and found flat and shared parts,
furniture and fittings all in good state of repair, tidy, clean and
satisfactory.
23) The real intention of the parties in all
surrounding circumstances is to create this licence which is not coming under
the Rent Acts and is binding as written.
24) This licence represents the entire agreement
of the parties and no oral or other agreements were made and no different
explanations or representations were made and only agreements in writing will be
legally binding.
25) The licensee read and understood this licence
and received copy and the licensee understands that all rooms and all parts of
the dwelling will be shared and no exclusive possession of any part or the
whole will be allowed to the licensees by the licensor under any circumstances.
Schedule of furniture:
1 Wardrobe, 1 Dressing table, 1
Double-bed with mattress and mattress cover, 1 Tablebed, 1 Electric Cooker, 1
Kitchen cabinet, 1 Fridge, 1 Sink unit, 1 Sinkheater, 1 Table, 4 chairs, 1 Bed
settee, 1 Armchair, 1 Sideboard, 2 Double-bar Electric fires, 1 Bathroom suite,
1 Bath heater electric, Carpets, Lampshades, Bulbs, Curtains, Net curtains
everywhere, 2 keys.
26) Subject to clause 21 this licence may be
terminated by one months notice in writing given by either party at any time
and the licensor reserves the right of eviction without court order.
There was an
addendum, which Mr Villiers signed on the same date and at the same time:
The
undersigned Mr Villiers hereby agrees that the licence signed on the 9 2 1985
does not come under the Rent Acts and the flat is for single people sharing and
if Mr Villiers marries any occupier of the flat then Mr Villiers will give
notice and vacate the flat at 6 Whiteley Road, London SE19. The owner Mr Antoniades
did not promise any other accommodation in any way. No person will have
exclusive possession of above flat as agreed.
The documents
signed by Miss Bridger were, save for her name, in identical terms.
The judge held
that the main agreement was drawn up with the Court of Appeal decision in Somma
v Hazelhurst [1978] 1 WLR 1014 in mind.* That is plainly so. When the terms of the
present agreement are compared with those of the Somma agreement (see pp
1017 E — 1019 F of the report of that decision), it is plain that most of the
terms of the present agreement have been closely modelled (subject to some
modifications, additions and omissions) on the Somma agreement. The
reason for this is obvious. The Court of Appeal held that the Somma
agreements created licences not tenancies. That decision stood as good law when
these agreements were made in February 1985. That was the result the landlord
wanted to achieve. So he based his form of agreement on the Somma
agreement to gain the protection of the Court of Appeal ruling, no doubt taking
advantage of his daughter’s legal knowledge.
*Editor’s
note: Also reported at (1978) 246 EG 311.
A month after
the landlord and the occupants signed these agreements, Street v
Mountford [1985] AC 809 was argued before the House of Lords. In his
leading speech delivered in May 1985, with which the other members of the House
concurred, Lord Templeman stressed that the letting of residential
accommodation with exclusive possession for a term at a rent ordinarily gives
rise to a tenancy.
In Street v
Mountford it was accepted by the landlord (Mr Street) that Mrs Mountford
was entitled under her agreement to enjoy exclusive possession of the premises
and the case was not complicated by the presence of other occupiers. But in the
course of reviewing the authorities Lord Templeman said:
In Somma
v Hazelhurst [1978] 1 WLR 1014, a young unmarried couple H and S
occupied a double bedsitting room for which they paid a weekly rent. The
landlord did not provide services or attendance and the couple were not lodgers
but tenants enjoying exclusive possession. But the Court of Appeal did not ask
themselves whether H and S were lodgers or tenants and did not draw the correct
conclusion from the fact that H and S enjoyed exclusive possession. The Court
of Appeal were diverted from the correct inquiries by the fact that the
landlord obliged H and S to enter into separate agreements and reserved power
to determine each agreement separately. The landlord also insisted that the
room should not in form be let to either H or S or to both H and S but that
each should sign an agreement to share the room in common with such other
persons as the landlord might from time to time nominate. The sham nature of
this obligation would have been only slightly more obvious if H and S had been
married or if the room had been furnished with a double bed instead of two
single beds. If the landlord had served notice on H to leave and had required S
to share the room with a strange man, the notice would only have been a
disguised notice to quit on both H and S. The room was let and taken as
residential accommodation with exclusive possession in order that H and S might
live together in undisturbed quasi-connubial bliss making weekly payments. The
agreements signed by H and S constituted the grant to H and S jointly of
exclusive possession at a rent for a term for the purposes for which the room
was taken and the agreement therefore created a tenancy. Although the Rent Acts
must not be allowed to alter or influence the construction of an agreement, the
court should, in my opinion, be astute to detect and frustrate sham devices and
artificial transactions whose only object is to disguise the grant of a tenancy
and to evade the Rent Acts. I would disapprove of the decision in this case
that H and S were only licensees and for the same reason would disapprove of
the decision in Aldrington Garages Ltd v Fielder (1978) 37
P&CR 461 and Sturolson & Co v Weniz (1984) 72 EG 326.
Against that
background of authority the learned judge considered the present case. He asked
himself whether in truth this was a licence or a tenancy. He acknowledged Street
v Mountford as the clear authority on the question whether an
occupation is by virtue of a tenancy or a licence. He said that one of the
essential features of a tenancy is exclusive possession. He referred to Lord
Templeman as making it clear that the question of exclusive possession is a
question of fact not necessarily to be determined by what is in an agreement
between the parties. Then, according to the approved note of the judgment,
which is no doubt a truncated version of what was actually said, the judge
concluded:
Mr Antoniades
insists he has made a Licence. House of Lords tell me to ignore the assertions
in the document that it is a licence. What difference does it make here that
this is a sharing agreement. It seems clear to me that apart from a few visits
by Mr Antoniades no one shared with them during period of occupation, they had
exclusive possession (Street v Mountford comments) (reads re Somma
v Hazelhurst). Hold that these licences are artificial transactions
designed to evade the Rent Acts. Finds that there is a tenancy — claim for
possession dismissed.
Making (I
hope) fair allowance for the abbreviated note of the judgment and for the
circumstances in which the judgment was probably given, I none the less
conclude that the judge has in this passage fallen into error:
(1) The House of Lords has not, I think, held
that assertions in a document that it is a licence should be ignored. It has
held that the true legal nature of a transaction is not to be altered by the
description the parties choose to give it. A cat does not become a dog because
the parties have agreed to call it a dog. But in deciding whether an animal is
a cat or a dog the parties’ agreement that it is a dog may not be entirely
irrelevant.
(2) Court of Appeal authority since Street v
Mountford shows that sharing agreements do raise rather different
questions: see, for example, Hadjiloucas v Crean (1987) 284 EG
927.*
*Editor’s
note: Also reported at [1987] 3 All ER 1008; [1987] 2 EGLR 60.
(3) The judge has, I think, overlooked the
fundamental rule of construction that it is not legitimate to use as an aid in
the construction of the contract anything which the parties said or did after
it was made. Subsequent actions are therefore inadmissible except as evidence
of a new agreement or as the basis of an estoppel, neither of which is
suggested here: see Chitty on Contracts, 25th ed, vol 1, p 447, para
825.
(4) To stigmatise these agreements as ‘artificial
transactions designed to evade the Rent Acts’ (unless this amounts to a finding
that the agreements were a sham) is to leave unanswered the question whether
they succeed in their object. The task of the court, where this issue arises,
is to decide whether the owner has succeeded or not.
I do not,
therefore, think that the judge’s reasons are enough to support his decision.
But that does not mean that his decision is wrong, still less that the contrary
decision is right.
The broad
approach to be adopted in resolving a question of this kind is, I think, well
settled:
(1) The court should be astute to detect and
frustrate sham devices and artificial transactions whose only object is to
disguise the grant of a tenancy and to evade the Rent Acts (Street v
Mountford at p 825H). The court has to be especially wary and especially
careful to see that things like premiums are not being used to conceal payments
of rent and so on (Aldrington Garages v Fielder (1978) 37
P&CR 461* at p 499 per Geoffrey Lane LJ as he then was).
*Also
reported at (1978) 247 EG 557.
(2) A written agreement is a sham where it
incorporates clauses by which neither party intends to be bound and which is
obviously a smokescreen to cover the real intentions of both contracting
parties (Hadjiloucas supra at p 929 per Purchas LJ). The accepted
definition of a sham is that given by Diplock LJ, as he then was, in Snook v
London & West Riding Investments Ltd [1967] 2 QB 786 at p 802C:
As regards
the contention of the plaintiff that the transactions between himself, Auto
Finance and the defendants were a ‘sham’, it is, I think, necessary to consider
what if, any, legal concept is involved in the use of this popular and
pejorative word. I apprehend that, if it has any meaning in law, it means acts
done or documents executed by the parties to the ‘sham’ which are intended by
them to give to third parties or to the Court the appearance of creating
between the parties legal rights and obligations different from the actual
legal rights and obligations (if any) which the parties intend to create. But
one thing, I think, is clear in legal principle, morality and the authorities
(see Yorkshire Railway Wagon Co v Maclure and Stoneleigh
Finance Ltd v Phillips), that for acts or documents to be a ‘sham’,
with whatever legal consequences follow from this, all the parties thereto must
have a common intention that the acts or documents are not to create the legal
rights and obligations which they give the appearance of creating.
Put more
shortly, a sham exists where the parties say one thing while really intending
another (Donald v Baldwyn [1953] NZLR 313, at p 321 per F
B Adams J).
(3) ‘There is no reason why, if it is possible
and properly done, agreements should not be entered into which do not fall
within the Rent Acts, and the mere fact that those agreements may result in
enhanced profits for the owners does not necessarily mean that the agreements
should be construed as tenancies rather than as licences’ (Aldrington
Garages, supra, per Geoffrey Lane LJ at p 468); ‘. . . persons are entitled
to arrange their affairs to their best advantage so long as the law allows it.
That has long been the position in tax cases, and equally long been the
position in landlord and tenant and Rent Acts cases’ (ibid, per Roskill
LJ, as he then was, at p 473). It is not a crime nor is it contrary to public
policy for a property owner to license occupiers to occupy property on terms
which do not give rise to a tenancy.
(4) The Rent Acts must not be allowed to alter or
influence the construction of an agreement (Street v Mountford, supra
at p 825G). As Buckley LJ said in Shell-Mex & BP Ltd v Manchester
Garages Ltd [1971] 1 WLR 612 at p 619:
It may be
that this is a device which has been adopted by the plaintiff company to avoid
possible consequences of the Landlord and Tenant Act 1954, which would have
affected a transaction being one of landlord and tenant; but, in my 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.
(5) Where a written agreement made between the
parties is held to be a sham, the task of the court is to identify and give
effect to the true bargain between the parties which the written agreement was
intended to conceal. Where a written agreement is not held to be a sham, the
task of the court, as with any other agreement, is to construe it and give fair
effect to its terms in the context of all relevant surrounding circumstances (Shellmex
& BP, supra, at p 619; Aldrington Garages, supra, at pp 463, 467
and 473).
I am not quite
sure whether the learned judge in this case intended to hold that the
agreements were a sham. He describes them as ‘artificial transactions designed
to evade the Rent Acts’, thus adopting part of Lord Templeman’s language in Street
v Mountford when he referred to ‘sham devices and artificial
transactions whose only object is to disguise the grant of a tenancy and to
evade the Rent Acts’. I do not know whether the words omitted are significant
or whether they simply represent a defect in the note of the judgment. What the
judge said was undoubtedly true. The agreements certainly were the produce of
considerable artifice. The landlord’s object certainly was to give the
occupants the rights of licensees and not the rights of tenants in order that
the transaction should not be subject to the Rent Acts. But the words which the
judge omitted — if he did omit them — are very significant because they involve
a finding that what had in truth been granted was a tenancy, and such a finding
is essential to the occupants unless the agreements themselves, properly
construed, create a tenancy.
This last
point can be disposed of shortly. The written agreements cannot possibly be
construed as giving the occupants (jointly or severally) exclusive possession
of the flat or any part of it. They stipulate with reiterated emphasis that the
occupants shall not have exclusive possession. The lack of exclusive possession
is fatal to any claim of tenancy. The occupiers can therefore succeed only by
showing that the agreements were a sham. It may be that this is what the judge
held, even though he did not use the word. Certainly it was the case expressly
pleaded by the occupants.
Before us
counsel for the occupants urged that the written agreements were a sham and
that there was a joint tenancy granted to the occupants, each of whom was
jointly and severally liable for the whole monthly payment of £174. He relied
in particular on:
(1) the conversation about the bed. (The landlord
told us that there was already a double bed in the flat so that he had not had
to put one in specially. There is no finding to this effect. We have no reason
to disbelieve him. But I do not think it much matters.);
(2) the fact that the occupants, a young man and
a young woman, approached the landlord together, making it plain they intended
to occupy the accommodation jointly;
(3) the fact that the occupants attended to sign
the documents together and that they signed identical documents.
If the issue
had been whether the landlord appreciated that the occupants proposed to live
together as husband and wife, no possible fault could be found with the judge’s
conclusion that he did. But that was not the issue. The issue was whether (the
written agreements apart) the landlord agreed to give the occupants, jointly or
severally, exclusive possession of the flat or any part of it. He plainly did
not so agree in express terms. It is not suggested that he did. I do not think
the facts relied on could be held to give rise to an implied agreement,
particularly having regard to the facts (a) that the flat contained two rooms
(apart from the kitchen and bathroom), (b) that there were two beds in the flat
(apart from the double bed), and (c) that the landlord orally insisted on his
right to put other people in.
The occupants’
contention can be tested by considering two hypothetical situations:
(1) Suppose that the occupants had quarrelled and
one had left the flat. Suppose further that the landlord had sought payment of
the full monthly rent of £174 from the survivor and that that claim had been
resisted. It seems to me that any court would have been bound to uphold the
survivor’s plea that he or she had agreed to pay £87 monthly in advance and not
a penny more.
(2) Suppose that the landlord had proposed to
introduce a third occupant into the flat to occupy a bed in the bed-sitting
room. Suppose further that the occupants had moved for an injunction to
restrain him on the ground that such conduct would be a breach of the agreement
between them. Would they have succeeded?
In my view they plainly would not. The written agreements gave him that
right. I do not see how the occupants could begin to show any contrary
agreement on his part.
If the written
agreements are to be discarded as a sham, it must be shown not only that the
occupants intended to enjoy a right to exclusive possession but also that the
landlord shared that intention. In my view, he plainly did not. He was
determined that they should not enjoy that right. Doubtless his determination
was conditioned by his desire that the relationship between himself and the
occupants should not be governed by the Rent Acts, but that consideration must
be understood as fortifying rather than undermining his intention that the
occupants should have no right to exclusive possession.
If, as the
House of Lords held in Street v Mountford (at p 825F), and the
Court of Appeal in Hadjiloucas (at p 929) agreed, the agreements in Somma
v Hazelhurst were an obvious sham, I was at first inclined to think
that the same result must follow here. But there are significant differences. Somma
concerned a single room with two beds in it. In that situation the right
reserved by Miss Somma to use the room herself (in addition to the two
licensees) could well be regarded as physically impracticable. Here there was a
bed-sitting room and two beds in addition to the double bed and the bedroom
which the occupants used. The introduction of an additional sharer would not
have been physically impracticable, as the sojourn of the occupants’ guest
(however uncomfortably) shows. The landlord in argument drew attention to
various differences in the agreements: for example, he pointed out that his
clause 16 (unlike Somma clause 19) contained no limit on the number of
licensees; he relied on his clause 24, which had no parallel in the Somma
agreement; and he relied on his clause 25, which had no exact parallel in the Somma
agreement. He also relied on the marriage agreement (the public policy
implications of which we were not asked to consider). I do not, however, think
that these textual points are of major significance. But the facts found by the
judge did not, in my judgment, justify him in finding, if he did find, that
these agreements were a sham designed to disguise or conceal the true bargain
between the parties.
It follows
that, in my judgment, the landlord should have obtained an order for
possession. I would accordingly allow the appeal, set aside the judge’s order
and make an order that the occupants give up possession of the flat in 28 days
from today.
This order
will affect the sum payable by the occupants to the landlord as at the date of
the judge’s order. I invite the parties to tell us what sum was properly
payable in the light of this judgment.
The landlord
complained that the learned judge had not made an order in his favour for
payment of interest on the sum in court which was ordered to be paid out to
him. I do not know the reason for the judge’s decision, but I am not prepared
to assume that he exercised his discretion wrongly and I would not therefore
disturb his order. The landlord may address us concerning interest on any
additional sum which may now be payable to him.
The landlord
complained of the judge’s order concerning costs, but this was not raised in
the notice of appeal and I can see nothing whatever wrong with the order made
in the light of the judge’s decision as it stood.
Agreeing that
the appeal should be allowed, MANN LJ said: I gratefully adopt and endorse the
statement of the facts which are relevant to this appeal contained in the
judgment of Bingham LJ.
The issue in
the appeal is simply stated. The appellant contends that the respondents are
each licensees of the top flat at 6 Whiteley Road, London SE19. The respondents
contend that they are joint (and protected) tenants of that flat with a joint
and several liability to pay the rent. His Honour Judge Macnair decided in
favour of the respondents’ contention. The approved note of his judgment leaves
me in doubt as to the basis or bases of his decision. The relevant passage is
as follows:
House of
Lords tell me to ignore the assertions in the document that it is a licence.
What difference does it make here that this is a sharing agreement. It seems
clear to me that apart from a few visits by Mr Antoniades no one shared with
them during period of occupation, they had exclusive possession . . . Hold that
these licences are artificial transactions designed to evade the Rent Acts.
Finds that there is a tenancy . . .
If the
consequence in law of a transaction is the avoidance of the application of the
Rent Acts, then that is not a ground on which the transaction can be flawed
(see Shell-Mex & BP Ltd v Manchester Garages Ltd [1971] 1 WLR
612 at p 619). Accordingly, if, and I emphasise ‘if’, the learned judge based
his decision on a design to avoid the application of the Rent Acts, then that
basis could not be sustained. A licence to occupy is as legitimate as the grant
of exclusive possession.
The critical
question in any case must be what is the transaction? The judge had before him the two licences of
February 9 1985 and regarded the House of Lords’ decision in Street v
Mountford [1985] AC 809 as directing him to ignore the assertions in the
documents that they were licences. He seems to have regarded himself as subject
to such a direction because the documents were modelled upon the documents
which this court in Somma v Hazelhurst [1987] 1 WLR 1014 had
decided to be licences but which decision was disapproved in Street v
Mountford at p 825H. The disapproval was because the arrangements between
the owner of the single room and the unmarried but cohabiting couple, whereby
each licensee was obliged to share with such other person as the owner might
nominate, demonstrated that the arrangement was a sham to disguise the
conferment of exclusive possession upon the licensees ‘in order that H and S
might live together in undisturbed quasi-connubial bliss’ ([1985] AC at p
825G).
Mr James
Harris for the respondents submitted that the transactions here were a sham to
disguise the conferment of a joint tenancy (ie of a right of exclusive
possession), and that the learned judge had so found. There are two important
passages in the authorities which deal with ‘sham’. In Snook v London
& West Riding Investments Ltd [1967] 2 QB 786 at p 802C, Diplock LJ, as
he then was, said:
As regards
the contentions of the plaintiff that the transactions between himself, Auto
Finance and the defendants were a ‘sham’, it is, I think, necessary to consider
what, if any, legal concept is involved in the use of this popular and
pejorative word. I apprehend that, if it has any meaning in law, it means acts
done or documents executed by the parties to the ‘sham’ which are intended by
them to give to third parties or to the court the appearance of creating
between the parties legal rights and obligations different from the actual
legal rights and obligations (if any) which the parties intend to create. But
one thing, I think, is clear in legal principle, morality and the authorities
(see Yorkshire Railway Wagon Co v Maclure and Stoneleigh
Finance Ltd v Phillips) that for acts or documents to be a ‘sham’,
with whatever legal consequences follow from this, all the parties thereto must
have a common intention that the acts or documents are not to create the legal
rights and obligations which they give the appearance of creating.
In Hadjiloucas
v Crean (1987) 284 EG 927 at p 931* Mustill LJ said:
By way of
preface it is necessary to distinguish between three situations in which, aside
from any question of rectification, the court may take an agreement otherwise
than at its face value. The first exists where the surrounding circumstances
show that the arrangement between the parties was never intended to create any
legally enforceable obligation. The second is the case of the ‘sham’, in the
sense in which that word has been used in numerous cases, including Snook v
London & West Riding Investments Ltd [1967] 2 QB 786, 802. Correctly
employed, this term denotes an agreement or series of agreements which
deliberately are so expressed with the object of deceiving third parties as to
the true nature and effect of the legal relations between the parties. The
third situation is one in which the document does precisely reflect the true
agreement between the parties but where the language of the document (and in
particular its title or description) superficially indicates that it falls into
one legal category, whereas when properly analysed in the light of the
surrounding circumstances it can be seen to fall into another.
*Editor’s
note: Also at [1987] 2 EGLR 60 at p 65.
I suspect that
Mr Harris would have suggested, had he not been economic in the citation of
authority, that the instant case was an example of Mustill LJ’s second
situation. I suspect that he would probably say the same of Somma v
Hazelhurst and Street v Mountford. If my suspicions are
correct, then I would agree with him. Whether or not a case is a second
situation is a question of fact. In Street v Mountford there was
a concession that exclusive possession had been conferred; in Somma v
Hazelhurst the inference was irresistible from the surrounding
circumstances at the time of the arrangements. That the matter is one of fact
is to be derived from the speech of Lord Templeman in Street v
Mountford at p 826H and from the judgment of O’Connor LJ in Brooker
Settled Estates Ltd v Ayers (1987) 19 HLR 246† at p 252 and of
Purchas and Mustill LJJ in Hadjiloucas v Crean at pp 930 and 932.
†Editor’s
note: Also at [1987] 1 EGLR 50; (1987) 282 EG 325.
I regret that
I do not think the learned judge addressed himself to the factual question of
whether the apparent corresponded to the real. He seems rather to have assumed
that the condemnation of the arrangements in Somma v Hazelhurst
was fatal to the appellant’s cause regardless of any difference in the factual
matrix. He also seems to have had regard to the fact that the respondents’
enjoyment of the flat was not in the event disturbed by the appellant or by any
other licensee. However, subsequent conduct, or its absence, cannot assist in
the identification of the terms of a transaction.
I cannot, with
respect to him, sustain the learned judge’s decision on any basis which I can
identify. What then is to be done? To
remit the matter for a fresh hearing would not reveal any novelty, for none was
suggested. In my judgment, on the evidence which we have
apparent transaction which the parties voluntarily entered into. There was here
neither concession of exclusive occupation nor inference to be drawn from the
grant of one twin-bedded room. Here was a flat with beds in separate rooms; a
table, bed and a bed-settee could have been occupied without embarrassment to
the two licensees in their separate double-bedded room. Indeed a friend of the
respondent (‘Angela’) did sleep on the bed-settee for a time, albeit in a
cramped condition but with the consent of the appellant.
I would allow
this appeal and hold that the respondents were each licensees of the premises
and that their licences were each effectively determined by notices in writing
dated July 7 1986. I agree with the orders proposed by Bingham LJ.
Mr Antoniades
asserts that he has a claim in respect of the general rate and water rate. No
such claim is before the court and I say nothing about it.
The appeal
was allowed with costs, not to be enforced without leave of the court.
Possession to be given in 28 days, but stay of execution ordered pending
application for leave to appeal to the House of Lords. Legal aid taxation of
the defendants’ costs ordered.
