Agricultural holdings — Whether court has jurisdiction to order specific performance of repairing liability against defendant landlords — Whether plaintiff tenant entitled to damages representing cost of carrying out works falling within a notice to repair — Whether defendant landlords counternotice was valid
The plaintiff
holds a tenancy of Little Eaves Farm, Cheadle, Staffordshire. Holdings under an
oral agreement with the defendant landlords in respect of which the Fixed
Equipment Model Clauses set out in Schedule 1 to the Agriculture (Maintenance,
Repair and Insurance of Fixed Equipment) Regulations 1973 are deemed
incorporated. The farmhouse had fallen into serious disrepair and the costs of
doing essential repairs and replacements were in the order of £35,000. By
clause 1(1) of the model clauses, the landlord has the right and liability for
all repairs and replacements to certain defined parts of the farmhouse. By a
notice dated January 12 1990 the plaintiff requested the defendants to make the
specified necessary repairs or replacements. No works were done by the
defendants, but by a notice dated November 1 1990, issued after the
commencement of this action, the defendants claimed that the works required by
the tenant would constitute improvements the cost of which the defendants were
not liable for and requiring the question of liability to be determined by
arbitration. Contrary to model clause 12(3)(a) the defendants failed to serve
any counternotice in time. By model clause 12(2) if a landlord fails to execute
any repairs or replacements within three months of a notice the tenent may
execute such repairs and recover the cost from the landlord. Not being able to
afford the cost of repairs and replacements, the plaintiff commenced the
present action seeking specific performance and/or the payment of damages
representing the cost of such works. The defendants argued that the notice
served in November 1990 was an effective counternotice time not being of the
essence.
given, from receipt of the tenant’s notice, one month only to serve his
counternotice, and is given three months only to do the necessary works
himself. It cannot have been Parliament’s intention that a recalcitrant
landlord could have divested the tenant of his vested right by permitting a
late counternotice. The landlords did not exercise their right to contest
liability and could not do so now. There no longer remained any claim, question
or difference between the parties under the model clauses and accordingly the
court had jurisdiction to enforce the plaintiff’s right: see Grayless v
Watkinson. The plaintiff was entitled to pursue his claim for damages. The
court may, but will not necessarily, make an order for specific performance.
The following
cases are referred to in this report.
Goldsack v Shore [1950] 1 KB 708; [1950] 1 All ER 276; (1950) 66 TLR
(Pt 1) 636
Grayless v Watkinson [1990] 1 EGLR 6; [1990] 21 EG 163
Jeune v Queens Cross Properties Ltd [1974] 1 Ch 97; [1973] 3 WLR
378; [1973] 3 All ER 97; (1973) 26 P&CR 98; [1973] EGD 976; 228 EG 143
United
Scientific Holdings Ltd v Burnley Borough
Council [1978] AC 904; [1977] 2 WLR 806; [1977] 2 All ER 62; (1977) 33
P&CR 220; [1977] EGD 195; 243 EG 43 & 127, HL, [1977] 2 EGLR 61
This was a
claim by the plaintiff, Robert Keith Hammond, for the determination of certain
preliminary questions relating to a notice served on the defendants, George
Henry Allen, Graham Thomas Allen, George Allen and Barbara Mary Allen, his
landlords, under the model clauses in Schedule 1 to the Agriculture
(Maintenance, Repair and Insurance of Fixed Equipment) Regulations 1973.
David
Stockhill (instructed by Cowlishaw & Mountford, of Uttoxeter) appeared for
the plaintiff; Joanne Moss (instructed by Hacking Ashton Jervis & Co, of
Newcastle under Lyme) represented the defendants.
Giving
judgment, OWEN J said: The plaintiff is, and has been for over 30 years,
the tenant of Little Eaves Farm, Cheadle, Staffordshire. The defendants are his
landlords. The farm is an agricultural holding of some 23 acres. In addition,
the plaintiff farms another 40 acres. The plaintiff took and holds the tenancy
by an oral agreement. He lives in the farm house, which he holds under the
tenancy. Over the years the farm house has fallen into serious disrepair. It is
estimated that the cost of doing essential repairs and making essential
replacements will be about £35,000, that being the lowest tender obtained by
the tenant. The plaintiff does not have such a sum and cannot borrow that sum.
He contends that the repairs and replacements are the defendants’ obligation.
It is common
ground between the plaintiff and the defendants that by virtue of section 7 of
the Agricultural Holdings Act 1986 the Fixed Equipment Model Clauses set out in
Schedule 1 to the Agriculture (Maintenance, Repair and Insurance of Fixed
Equipment) Regulations 1973 (SI 1973, No 1473) are ‘deemed to be incorporated’
in the plaintiff’s contract of tenancy.
By clause 1(1)
of that schedule, the landlord has the right and liability for ‘all repairs and
replacements to the under mentioned parts of the farm house . . .’. The
undermentioned parts are extensive and are extended still further by subparas
(2) and (3). There is a proviso to subpara (1):
. . . That in
the case of repair and replacements to floor boards, interior staircases and
fixed ladders (including bannisters or handrails) doors and windows and opening
skylights (including frames) eaves — guttering and downpipes, the landlord may
recover one half of the reasonable cost thereof from the tenant.
In accordance
with his contention, and in accordance with the model clauses, the plaintiff
served a notice dated January 12 1990, requesting the defendants to make the
specified necessary repairs or replacements. The defendants have not in any way
complied with this notice. The only responses by the defendants have been to
issue a notice requiring the tenant to comply with his obligations relating to
hedges and fences — with which, I am told, the tenant has complied — and
eventually to issue a notice dated November 1 1990 (ie after the issue and
service of the writ in this action claiming that the works required by the
tenant would constitute improvements for the cost of which the defendants are
not liable and requiring ‘the question of
by arbitration under the provisions of the above Acts’.
Clause 12(1)
of the regulations provides that:
If the
landlord fails to execute repairs . . . which are his liability within three
months of receiving from the tenant a written Notice specifying the necessary
repairs and calling on him to execute them the tenant may execute such repairs
and, except to the extent to which under the terms of Part I hereof the tenant
is liable to bear the cost, recover . . . the reasonable cost from the landlord
forthwith.
Clause 12(2)
provides that:
If the
landlord fails to execute any replacements which are his liability within three
months of receiving from the tenant a written notice specifying the necessary
replacements and calling on him to execute them, the tenant may execute such
replacements and, except to the extent to which under the terms of Part I
hereof the tenant is liable to bear the cost, recover . . . the reasonable cost
from the landlord forthwith; provided that the tenant shall not be entitled to
recover in respect of the aggregate of the replacements so executed by him in
any year of the tenancy any sum in excess of whichever is the smaller of the
two following sums, that is to say, a sum equal to the rent of the holding for
that year or £500.
This clause
has been somewhat amended by later regulations. However, the amendment is of no
materiality for present purposes. Clause 12(3)(a) provides that:
If the
landlord wishes to contest his liability to execute any repairs or replacements
specified in a notice served upon him by the tenant under either of the last
foregoing subparagraphs he shall within one month serve a counternotice in
writing upon the tenant specifying the grounds on which and the items of
repairs or replacement in respect of which he denies liability and requiring
the question of liability in respect thereof to be determined by arbitration under
the Act.
Clause 12(3)(b)
provides that:
Upon service
of the counternotice on the tenant, the operation of the notice (including the
running of time thereunder) shall be suspended, in so far as it relates to the
items specified in the counternotice, until the termination of an arbitration
determining the question of liability in respect of those items.
Clause 12(3)(c)
provides that:
In this
subparagraph, ‘termination’ in relation to an arbitration, means the date on
which the arbitrator’s award is delivered to the landlord.
This must mean
the date on which the determination of liability is made.
As has been
stated, the landlords did not serve a counternotice in time, nor did they carry
out the repairs replacements. Accordingly, the tenant, after the three-month
period, became entitled to do the specified repairs and recover the reasonable
costs from the landlord forthwith.
Failing
payment forthwith, the tenant’s remedy would have been by an action in these
courts for the amount expended by him.
Similarly, in
respect of replacements, the tenant, after the three-month period, became
entitled to make the replacements and recover in these courts in accordance
with the model clauses which had become a part of the contract of tenancy.
Not being able
to afford the cost of repairs and replacements, the plaintiff has brought this
action. Before me there are three issues to be determined: (1) whether this
court has any jurisdiction to order specific performance against the defendant;
(2) whether the court has any jurisdiction to order the defendants to pay
damages, representing the cost of such works as the plaintiff may prove to fall
within the notice dated January 12 1990 and also within the defendants’
repairing and replacement obligations contained within the Agriculture
(Maintenance, Repair and Insurance of Fixed Equipment) Regulations; and (3)
whether the counternotice, served on behalf of the defendant, dated November 1
1990, is valid. It will, I think, be convenient to deal with the last of these
questions first.
The procedure
contemplated by clause 12(3)(a) is that if the landlord wishes to
contest his liability to execute any of the repairs or replacements specified
in the tenant’s notice, he ‘shall’ within one month serve a counternotice
asking that that liability should be determined. This was not done.
However, the defendants argue that their notice, served in correct form but
well out of time in November 1990, was an effective counternotice. As I
understand their argument, they contend that time is not of the essence despite
the use of the imperative ‘shall’. They argue that the status of the time-limit
is quasi-contractual.
I have been
referred to the decision of the House of Lords in United Scientific Holdings
Ltd v Burnley Borough Council [1978] AC 904. The House considered
two appeals concerning leases containing rent review clauses. These rent review
clauses indicated a timetable. Their lordships were unanimous in commending the
modern law in the cases of contracts of all types, as correctly summarised in Halsbury’s
Laws of England, 4th ed, vol 9, para 481, at p338:
Time will not
be considered to be of the essence unless: (1) the parties expressly stipulate
that conditions as to time must be strictly complied with; or (2) the nature of
the subject matter of the contract or the surrounding circumstances show that
time should be considered to be of the essence.
Although it
would be misleading to consider the problem in the United Scientific
case to be that of this case, nevertheless, in my judgment, some guidance may
be found. The surrounding circumstances, and the purpose and wording of the
Act, are all of some importance in considering whether time was of the essence.
The model
clauses place clear obligations on the landlord for the benefit of the tenant.
It is the tenant who will be — to use the words of the defendants’ counsel —
‘producing the nation’s food’. It is the tenant who needs protection. The model
clauses place clear liabilities on the landlord to repair and replace. Such
repairs and replacements should take place without any formal notice. If they
do not, the procedure provided is, in my judgment, intended and designed to
protect the tenant by avoiding the law’s delays and by providing a speedier
process. As I read and understand the procedure, the landlord is given, from
receipt of the tenant’s notice, one month and one month only to serve his
counternotice, and is given three months and three months only to do the
necessary works himself. At the end of the one-month period his liability is
conclusively presumed or found against him. At the end of the three-month
period, the landlord, who might be able to do the work more cheaply,
nevertheless has no right to do the work himself. The tenant’s entitlement to
do the work himself and recover the cost forthwith then comes into existence.
His right becomes vested. It is conceded by the defendants that here the tenant
became so entitled but, it is said, the defendants were entitled to terminate
that entitlement or vested right. In my judgment, this cannot be so. The tenant
might, and had he had the means would, have incurred substantial contractual
liabilities at the end of the three-month period. In my judgment, Parliament
cannot have intended that a recalcitrant landlord could have divested the
tenant of his vested right even less, as could well have been the case, could
have involved the tenant in further liability. Accordingly, I answer the third
preliminary issue by saying, ‘No’.
Next, I turn
to the first and second preliminary issues, which may be taken together. The
defendants, having taken no steps to comply with their obligations, even after
receipt of the tenant’s notice, argue that, even assuming the counternotice to
be invalid, although the tenant may do the repairs and then recoup from the landlord,
in the event that the tenant is impecunious and unable to borrow the money to
finance the repairs or replacements so that he is unable to do them, as is the
case here, the tenant is without remedy and cannot enforce his rights. The only
remedy available to the tenant, argues Miss Moss for the defendants, is for the
plaintiff to do the work himself and then claim the cost. This court, she
argues, has no jurisdiction to award any remedy now claimed by the plaintiff,
although presumably she would concede that if the plaintiff had done the works,
claimed the cost of doing them and had not been paid ‘forthwith’ he could then
have sued for that cost in this court.
Principally
the defendants say that their argument in favour of this somewhat surprising
contention — even more surprising in view of the legal truism expressed by Sir
Raymond Evershed MR in Goldsack v Shore [1950] 1 All ER 27 — that
the jurisdiction of the King’s courts must not be taken to be excluded unless
there is clear language in the statute which is alleged to have that effect —
is based on the decision and reasoning in Grayless v Watkinson
[1990] 1 EGLR 6*. I see no reason to refer to the facts of this case great
detail.
*Editor’s
note: Also reported at [1990] 21 EG 163, [1990] 1 EGLR 6.
There, at
first instance, the recorder purported to hold that an agricultural tenant had
remedies at common law in addition to his options conferred by para 12, and so,
the recorder held, the tenant having himself done the work, he could recover
the reasonable cost from the landlord at common law, without having to submit
to the restrictions on the landlord’s liability in the final proviso in para
12(2). This approach was rejected. The reasoning for the immediate decision in
that case is apparent. Further help for this case may be obtained from a
consideration of the judgments. At p9, Dillon LJ said:
The recorder
gave judgment for the respondent for the full amount of
for the respondent — foreshadowed, I apprehend in the reply — that, if the
landlord has a liability to the tenant under the 1973 regulations to replace
the roof of the barn, the tenant has remedies at common law in addition to his
option under para 12(2) and so, having himself done the work, can recover the
reasonable cost from the landlord at common law, without having to submit to
the restriction on the landlord’s liability in the final proviso in para 12(2).
One of the troubles about that argument, however, is that it would deprive the
final proviso in para 12(2) of all effect, except where the tenant, being
ill-advised, chose to agree to the landlord’s liability being limited by the
proviso.
The true
position, as I see it, is that para 12(2) is the sole source of the tenant’s
right to recover the cost of replacing the barn roof from the landlord, and the
tenant must accept para 12(2) as a whole, including the proviso. The only liability
of the appellant as landlord which is available for the respondent as tenant to
enforce where the respondent has carried out works after the appellant had
failed to do so is a liability qualified by the proviso.
At p8H, Ralph
Gibson LJ said:
I agree that
that part of the recorder’s judgment cannot be sustained. The Act and the
regulations made under it did not imply into the contract of tenancy a separate
or independent term that the landlord should replace the roof, or any other
part of the premises. The effect of the regulations is as stated in regulation
3:
‘The
provisions set forth in the Schedule . . . shall be deemed to be incorporated
in every contract of tenancy . . . except in so far as they would impose on one
of the parties to an agreement in writing a liability which under the agreement
is imposed on the other.’
The tenant,
therefore, acquires no contractual right and the landlord is subjected to no
contractual liability, by reason of incorporation of those provisions, save as
contained in the provisions in the Schedule. To the extent that the rights and
liabilities there described are qualified or limited, the tenant and the
landlord can neither acquire nor be subjected to any greater rights or
liabilities by reason of incorporation of the provisions. The provisions of the
Schedule do not, of course, reduce any rights or liabilities given or imposed
by the terms of the tenancy agreement itself. If the tenancy agreement had
contained an obligation under the landlord to replace the roof, the provisions
in the Schedule would not, as I understand the position, reduce the tenant’s
rights in that regard: both rights and obligations, those under the tenancy
agreement itself and those incorporated therein by the regulations, would
coexist.
At p9 Stuart-Smith
LJ said:
Three
questions arise for determination in this appeal.
The first is
whether the recorder was right in giving judgment for the whole amount expended
upon the replacement of the barn roof by the tenant, namely £7,992.50, without
regard to the limitation or restriction of liability imposed by the proviso to
para 12(2) of the Schedule to the 1973 regulations. In my judgment he was not.
I agree entirely with the reasons given by Dillon LJ for holding that the
tenant’s sole right derived from para 12(2), and he is bound by the restriction
imposed by the proviso.
It seems that
the Court of Appeal at least held that, when a tenant relies on the model
clauses, he must take those clauses for better or for worse. He must accept all
the clauses, since all of them, in the absence of agreement in writing to the
contrary, are deemed to be incorporated into the contract. Here, there was no
written agreement and the tenant had to rely on the model clauses. Accordingly,
in my judgment, he was obliged to follow the procedure set out in para 12 and
implied into his contract of tenancy. In other words, it was incumbent upon him
to serve his notice and, had the landlords served a counternotice in time, it
would have been incumbent upon him to go to arbitration to determine liability.
The position here, however, is that the landlords did not exercise their right
to contest liability and cannot now do so. It is nevertheless instructive to
see what would have happened had the counternotice been served in time. The
purported counternotice is at p19 of the bundle of documents. That notice may
be seen as a notice the question in which has been determined against the
landlords by their failure to serve a counternotice. In other words, the
question of their liability to execute such repairs or replacements has been
found against them.
Subject to one
further argument, I see no reason why that having been decided, as it happens
by default, the tenant should not now bring proceedings in these courts for the
consequences of that liability, ie the cost of doing the works for which the
landlords are liable. To do so would seem to be similar to the procedure in Grayless
and in accordance with the decision and reasoning of Knox J in Tustian v
Johnstone.
The one
argument which remains to be considered is based upon clause 15 of the model
clauses which provides that:
If any claim,
question or difference shall arise between the landlord and the tenant under
the foregoing provisions hereof, not being a matter which, otherwise than under
the provisions of this paragraph, is required by or by virtue of the Act or
section 19 of the Agriculture (Miscellaneous Provisions) Act 1963 (notice to
remedy Breach of Tenancy Agreement) or Regulations or Orders made thereunder or
the foregoing provisions hereafter be determined by arbitration under the Act,
such claim, question or difference shall be determined, in default of
agreement, by arbitration under the Act.
Miss Moss
argues that there is here a claim, question or difference between the landlord
and the tenant under the ‘foregoing provisions’. Clearly, she says, that is so,
since it is only as a result of those provisions and under the terms of them
that this claim is made. In these circumstances, she argues, there must be an
arbitration.
The plaintiff,
on the other hand, argues that his claim is in contract, the model clauses
having been incorporated into that contract and forming the basis of his claim.
Liability having been decided, he contends that he has the right to sue for the
reasonable cost of the repairs, for a declaration that he is entitled to the
reasonable cost and even for an order for specific performance.
The defendants
argue that the sole source of the tenant’s right to recover the costs of
replacing or repairing is clause 12 and not the contract. For myself, I do not
see the force of this argument, since clearly the whole of clause 12 must be
deemed to be incorporated into the contract, as indeed must be the whole of
regulation 15. As I see it, the question now is whether this present claim,
presented to this court by writ and statement of claim, is made under ‘the
foregoing provisions’ and, if so, what effect does regulation 15 have?
In my
judgment, no ‘claim, question or difference’ now arises between the landlords
and the tenant under ‘the foregoing provisions’. There could have been a
‘claim, question or difference’ as to liability — but no more, but that has
been decided by the defendants’ failure to serve a counternotice. The plaintiff
now has a right, the existence of which was to be decided either by arbitration
or by the defendants’ failure to act. The defendants not having sought
arbitration, that right has been established by default. Now, the plaintiff is
merely seeking to enforce that right in a manner similar to that in which Mr
Grayless sought to enforce and was held entitled to enforce his right in Grayless
v Watkinson. As I understand the purport of para 5 of the rejoinder,
the defendants do not argue to the contrary. Accordingly, and especially
bearing in mind the words quoted from Sir Raymond Evershed, I reject the
defendants’ argument that this court has no jurisdiction to right a patent
wrong.
Since the
contrary was argued before me with some enthusiasm, I add that, had it been
necessary for me to consider whether the defendants had conferred jurisdiction
upon the courts by taking steps in the action, I would not have found in favour
of the tenant’s contention.
In the
circumstances, in my judgment, the plaintiff tenant, relying upon the terms of
section 97 of the Act, in so far as it is necessary for him to do so, is
entitled to pursue his remedies in these courts.
As to specific
performance, no separate argument has been addressed to me. However, I note
that Knox J in Tustian v Johnstone cited Jeune v Queens
Cross Properties Ltd [1974] 1 Ch 97, a decision of Pennycuick V-C with
approval. In these circumstances, I answer the first question ‘Yes’. The court
‘may’ grant such relief. I do not say it will, since it is said to be ‘a
jurisdiction which should be carefully exercised’.
In my
judgment, the plaintiff is also entitled to pursue his claim for damages. The
plaintiff shall have an order for costs and there will be leave to appeal.
Declaration
accordingly. Leave to appeal.
