Landlord and Tenant Act 1954, Part II — Section 30(1)(g) and section 41(2) — Trust for sale affecting landlord’s interest — Meaning of ‘beneficiaries under the trust or any of them’ — Difficulty caused by position of one of the beneficiaries under the trust for sale, who was not concerned with occupation of the premises for the purpose of a business — Proposal to grant a lease to overcome the difficulty — A beneficiary under a trust who wishes to rely on the provisions of section 41(2) must establish entitlement to occupy the property by virtue of his interest under the trust — That condition not satisfied in the present case
present case the tenant appealed against the dismissal of his application for a
new tenancy by the county court judge, who held that the landlords had
established the ground mentioned in section 30(1)(g) of the 1954 Act — The
landlords, respondents to the present appeal, held the premises as joint
tenants under the statutory trusts, ie on trust to sell the premises, with
power to postpone the sale, and to hold the net proceeds on trust for
themselves as tenants in common in equal shares — Two of the joint tenants
intended to occupy the premises for the purpose of a business carried on by
them in partnership with other persons — The third joint tenant, Mrs Naylor,
was the odd one out — She was entitled to a third share in the proceeds of
sale, which had to be safeguarded, but she did not intend to occupy the
premises for purposes of business — The trouble in this case was due to a lack
of complete identity between the persons interested as beneficiaries under the
trust for sale and the persons interested in going into occupation for the
purpose of a business to be carried on within the meaning of section 30(1)(g) —
It was not possible to rely simply on the words ‘or any of them’ in section
41(2) and ignore the position of Mrs Naylor
Mrs Naylor’s third share, the other two joint tenants were unable to occupy the
premises merely by reason of their beneficial interests under the trust for
sale — It was therefore necessary to find some other means of giving effect to
their intention to carry on a business on the premises — This was achieved by a
lease by which all the joint tenants (including Mrs Naylor) granted a lease of
the premises to four partners in the firm of solicitors of Mayo & Perkins,
of which two were the joint tenants (other than Mrs Naylor) — Unfortunately,
there was a fatal flaw in this device — The lease meant that the two joint
tenants became entitled to occupy by virtue of the lease and not by virtue of
their position as beneficiaries under a trust — It was clear from the decision
in Frish Ltd v Barclays Bank Ltd that, if a beneficiary under a trust is to rely
on the provisions of section 41(2) of the 1954 Act, he must establish that he
is entitled to occupy the property by virtue of his interest under the trust
and not otherwise
was that the tenant’s appeal succeeded — The county court judge was in error in
deciding that the landlords had established the grounds set out in section
30(1)(g) as amplified by section 41(2) of the 1954 Act — Appeal allowed
The following
cases are referred to in this report.
Carshalton
Beeches Bowling Club Ltd v Cameron (1978)
249 EG 1279, [1979] 1 EGLR 80
Frish
Ltd v Barclays Bank Ltd [1955] 2 QB 541;
[1955] 3 WLR 439; [1954] 1 All ER 901, CA
This was an
appeal by Graham Meyer, tenant of premises at 11 Gildredge Road, Eastbourne,
Sussex, from a decision of Judge Hammerton, at Eastbourne County Court,
dismissing the tenant’s application for a new tenancy of the premises and
holding that the landlords, Hubert Riddick, Ronald Naylor and Mrs Yvonne
Naylor, had established the grounds of opposition set out in section 30(1)(g)
of the 1954 Act.
Robert Pryor
QC and Wayne Clark (instructed by Winter & Co, of Eastbourne) appeared on
behalf of the appellant; Graham Platford (instructed by Mayo & Perkins, of
Eastbourne) represented the respondents.
Giving
judgment, FOX LJ said: This is an appeal from a decision of His Honour
Judge Hammerton given at the Eastbourne County Court concerning the effect of
the provisions of section 30(1)(g) of the Landlord and Tenant Act 1954.
The appellant,
Mr Graham Meyer, occupies premises on the ground floor of 11 Gildredge Road,
Eastbourne. He occupies for the purposes of his business, and he occupies under
a lease of February 22 1975, granted to himself and another, for a term of 12
years. He has been the sole tenant since January 27 1980.
On March 11
1981 the reversion expectant on the lease was assigned to the present
landlords, Mr Hubert Riddick and Mr and Mrs Naylor, as joint tenants.
On March 23
1987 the landlords gave notice to the tenant under section 25 of the Landlord
and Tenant Act 1954, terminating his tenancy on September 25 1987 and opposing
the grant of a new tenancy on the grounds specified in section 30(1)(g)
of the Act. That provision entitles a landlord to oppose the grant of a new
tenancy:
subject as
hereinafter provided, that on the termination of the current tenancy the
landlord intends to occupy the holding for the purposes, or partly for the
purposes, of a business to be carried on by him therein, or as his residence.
By section
41(2) of the Act it is provided:
Where the
landlord’s interest is held on trust the references in paragraph (g) of
subsection (1) of section 30 of this Act to the landlord shall be construed as
including references to the beneficiaries under the trust or any of them; . . .
In May 1987
the tenant gave notice of unwillingness to give up possession, and in July 1987
the tenant applied to the court for a new tenancy under the 1954 Act. The judge
dismissed that application on the ground that the landlords had established
that the case came within section 30(1)(g) of the Act. The decision
proceeded on the basis that upon the termination of the tenancy, Mr Riddick and
Mr Naylor intended to occupy the premises for the purposes of a business to be
carried on by them in partnership with a number of other persons under the name
of Mayo & Perkins. Mrs Naylor, as I understand it, carried out part-time
work for that firm but is not a partner.
The judge
found that if the application was dismissed, the landlords would grant a lease
of the premises to four partners in the firm of Mayo & Perkins — two of the
former being Mr Riddick and Mr Naylor. That lease would be at a commercial
rent.
The basis of
the landlords’ case for the application of section 30(1)(g) is that the
premises are held by the landlords as joint tenants upon the statutory trust
for sale and to hold the net proceeds of sale upon trust for the three of them
as tenants in common in equal shares.
trust are Mr Riddick and Mr and Mrs Naylor.
Therefore, as
a matter of language, Mr Riddick and Mr Naylor come within the words ‘or any of
them’ in subsection (2) of section 41, to which I have referred.
It is clear on
the authorities that the words ‘beneficiaries under the trust or any of them’
in section 41(2) of the Act cannot be given their literal meaning. To do so
could produce absurd results, such as, for example, a mere discretionary
object, or an annuitant or a reversioner, or one of a number of reversioners,
being able to claim as such the protection of para (g) of section 30(1)
of the Act.
In Frish
Ltd v Barclays Bank Ltd [1955] 2 QB 541, the Court of Appeal decided
that there must indeed be a limitation upon the wide words ‘beneficiaries under
the trust or any of them’ in section 41(2).
At p 548 Sir
Raymond Evershed MR said:
And I think
they [the words] must be given, as a matter of fair interpretation of the
language, a limitation in this respect; that only those beneficiaries are
referred to whose interest under the trust (putting it quite broadly and
generally) is such as to give them the right, as against the trustees, to
occupy the property, or is such that the trustees may properly within the terms
of their trust let them as beneficiaries into possession.
Then at p 552
he said:
. . . if the
intended occupation is to be that of a beneficiary, it must be shown that it is
the intention that he should so occupy by virtue of his quality or right as a
beneficiary.
At p 554
Jenkins LJ said:
I think that
the interest of the beneficiary must be an interest under the trust on the
strength of which he intends to occupy.
In the Frish
case the beneficiary was merely an object of a discretionary trust of income
who had entered into an agreement with the trustees to take a tenancy of the
premises at a rent which was in excess of that paid by the applicant/tenant in
that case. Thus, the beneficiary, being merely the object of a discretionary
trust, had no right, as a beneficiary, to occupy the premises. He would occupy them
purely by virtue of the lease which the reversioner landlord would grant. The
lease was itself not an interest under the trust to which he was entitled as a
beneficiary.
In Carshalton
Beeches Bowling Club Ltd v Cameron (1978) 249 EG 1279, [1979] 1 EGLR
80, the landlords were two of the executors of a previous owner. They were
entitled in equity to the property in equal shares. One of the two wished to
occupy the premises for the purposes of a business to be carried on by him. He
intended to purchase, from his co-beneficiary, her equity share in the
property. He would thus become the absolute owner in equity. The Court of
Appeal held that the case did not come within section 30(1)(g) of the
Act. In general they accepted and followed the views expressed in the judgments
of the Master of the Rolls and Jenkins LJ in Frish.
Bridge LJ (as
he then was) said at p 1280:
. . . but
here on the evidence the only inference we can draw is that the interest of Mr
Henry in the property as a beneficiary under the will extends only to half his
total interest and the other half of his interest is to be acquired by purchase
from Lady Cameron who was his co-beneficiary.
Bridge LJ
continued:
Looking at
the expression used in the Frish case, it does not seem to me it could
possibly be sufficient to satisfy the principle which the court regarded as the
governing principle by which section 41(2) of the Act has to be construed.
In addition,
in the Carshalton case, the court took the view that the landlord would
be prevented from relying on para (g) of section 30(1) because of the
proviso to that paragraph which excludes a case where the landlord’s interest
was created in a period of five years ending with the current tenancy.
In the note of
his judgment which is before the court, the judge said:
I go back to
the section.
— the judge
read section 30(1)(g) —
It does not
say he must occupy in pursuance of a particular right or provision. He must
occupy. It does not debar him if he occupies jointly with another. If so, the
section must predicate that in order to enable him to occupy there may be the
interposition of another legal document entitling him to occupy. If the Act had
wished to preclude that it would not have referred to occupation, but to
possession. For that reason, I am bound to say with diffidence I uphold Mr
Platford’s submission and say that in this case the issue is the trust and not
the right to occupation. Messrs Riddick and Naylor have the right under the
trust as beneficiaries. The fact that they occupy by virtue of a device which
is suitable to their particular business seems to me consistent with and not
destructive of that.
Mr Pryor, for
the tenant on this appeal, submits that where the intended occupation is by a
beneficiary under a trust, the beneficiary must be in a position to occupy by
virtue of his interest as a beneficiary, without the need for any other
interest being granted to him. Mr Riddick and Mr Naylor cannot (so Mr Pryor
submits) do that in this case because of Mrs Naylor’s absolute entitlement to a
third share of the proceeds of sale of the property arising under the statutory
trust for sale. Therefore he says that the judge was wrong.
Mr Platford
submits that in this case Mr Riddick and Mr Naylor are (1) intending to occupy
the premises for the purposes of a business to be carried on by them, and (2)
entitled to occupy the premises. The entitlement to occupy, Mr Platford says,
comes from the fact that, as joint tenants at law, they are entitled to go into
possession of the property. He submits, further, that all they have to do, in
order to effectuate their intention to carry on a business in partnership with
others at the termination of the present tenancy (if the application is
dismissed) is to make some suitable provision for non-occupation of the property
by the third joint tenant, Mrs Naylor. He says that is effected by the lease,
and no new interest in the trust is created or is necessary.
For myself, I
do not feel able to accept that submission. It seems to me that on the
authority of Frish and Carshalton, the opposing landlord, who is
relying upon an interest under a trust, must show that he intends to occupy the
premises and that he is enabled to occupy them by virtue of his interest under
the trust for the purposes and in the manner in which he intends to occupy.
What the
position would be if, in this case, Mr Riddick and Mr Naylor are simply relying
upon a bare consent or tolerance by Mrs Naylor to their carrying on the
proposed business on the property, once the present lease is determined, I need
not examine. Whether it would make any difference, I do not know. It does not
arise in this case and it is not necessary to consider that matter further. It
is sufficient to say that that is not what is going to happen.
In order to
secure to Mrs Naylor the commercial value of her interest in one-third of the
proceeds of sale, it has evidently proved necessary to obtain the grant of a
lease by the three existing trustees for sale — that is to say Mr Riddick and
Mr and Mrs Naylor. That I think emphasises that Mr Riddick and Mr Naylor are
not able to occupy the premises merely by reason of their beneficial interest
under the existing trust for sale. There is no doubt that they are entitled to
occupy or go into possession (which for present purposes may be regarded as the
same thing), but they cannot exclude Mrs Naylor from also exercising her right,
as a joint tenant, to go into occupation if she wishes. They have, therefore,
to secure an additional right or interest in order to enable them to effectuate
their intention to carry on a business on the premises.
That is
achieved by the lease and by the commercial transaction which is incorporated
in the lease. In short, the position is that Mr Riddick and Mr Naylor are
entitled to go into possession of the property, but they cannot exclude Mrs
Naylor and if they wish to make a particular use of the property, they have in
effect to acquire the consent of Mrs Naylor. They do that, as I say, by the
expedient of the lease. That is a perfectly effective way of achieving it, but
the result is, as it seems to me, that Mr Riddick and Mr Naylor are not
entitled to occupy for the purposes for which they intend as beneficiaries
under a trust; they will be occupying under the lease. They have never had any
exclusive right of occupation themselves, to which they could give effect, to
enable them and their co-partners in the business (which they wish to carry on)
to occupy the premises to the exclusion of Mrs Naylor. Their power to
effectuate that intention is severely limited by the existence of the rights of
Mrs Naylor.
The Frish
decision, as it seems to me, proceeds upon the basis that if a beneficiary is
to rely upon the provisions of section 41(2) of the Act, he must establish that
he is entitled to occupy the property by virtue of his interest under the
trust, and the short answer I think to the landlord’s case in the present
appeal is that Mr Riddick and Mr Naylor are not so entitled; their rights under
the trust are limited and are not adequate to enable them to do what they want,
so that a lease is necessary to give effect to Mrs Naylor’s rights.
I accept that
Mr Riddick and Mr Naylor have substantial interests under the trust — they have
two-thirds of the beneficial interest — and they are entitled to occupation,
but the rights they have of occupation do not satisfy the test laid down by
this court in Frish and accepted by this court in Carshalton, that
the right to occupation must be by virtue of the trust.
Mr Platford,
in his argument before us, emphasised the fact that
doubt, as a matter of language, Mr Riddick and Mr Naylor come within the words
‘or any of them’. That, however, is not sufficient; one cannot just take the
words of the statute in isolation; that is evident from the authorities. It is
necessary to go further and to demonstrate that their right as beneficiaries is
such as to give them the right to occupation which they need to effectuate
their intention. It seems to me that they cannot do that in the present case,
and the result, in my view, is that the appeal succeeds.
NICHOLLS LJ agreed and did not add anything.
The appeal
was allowed with costs in the Court of Appeal and below. Leave to appeal to the
House of Lords was refused.
