Lease – Oral agreement – Specific performance – Court granting declaration that respondents entitled to life tenancy of farm and ordering specific performance of oral agreement—District judge refusing to set aside decision – Whether appellant freeholders entitled to appeal — Permission to appeal granted — Appeal allowed
The appellants owned the freehold of a 60 acre livestock farm and had entered into discussions with the respondents about the terms on which the respondents might occupy the farm. In 1997, the respondents moved into the farmhouse and carried out repair works. There was no written agreement, lease or tenancy agreement.
In 2007, the respondents sought a declaration that they had a tenancy of the farm for their lives, taking effect as a term of 90 years at a rent of £200 per month pursuant to section 149(6) of the Law of Property Act 1925 s.149(6). In addition they sought an order for specific performance of the oral agreement and damages for breach of an implied covenant for quiet enjoyment.
The respondents claimed that they had orally accepted an oral offer made by the appellants that they should move onto the farm to secure it from trespassers and live on it for as long as they wished subject to payment of an agreed monthly rent. They also argued that it had been agreed that the appellants would reimburse them for the repair works carried out.
The appellants failed to attend any of the hearings in respect of the claim and the county court made a declaration that they were entitled to life tenancy of a property and specific performance of the oral agreement to that effect. The appellants applied to set aside that decision under CPR, r. 39.3 on the basis that they had acted promptly once they discovered the order made against them; had a good reason for not attending the trial; and had a reasonable prospect of success at trial. The district judge refused that application and an appeal against that refusal was dismissed.
The appellants applied to the Court of Appeal for permission to appeal. The court heard full argument on all the issues arising if permission were granted and considered the impact of the decision of the Court of Appeal in Bank of Scotland v Pereira [2011] EWCA Civ 241; [2011] 11 EG 102 (CS) on the relationship between an application to set aside an order under CPR 39.3 and the right of appeal under CPR 52.
Held: The application was granted and the appeal was allowed.
(1) The decision in Bank of Scotland gave rise to the following propositions: (i) The dismissal of an application under r 39.3 did not, of itself, give rise to an issue estoppel so as to preclude an appeal from the judgment which had not been set aside; and (ii) the fact that an application under r 39.3 had failed was a weighty, though not conclusive, consideration in determining an application for permission to adduce fresh evidence on appeal or for a retrial.
The overriding objective required the court to deal with the case justly. It was not the court’s function to penalise the appellants for failing to deal promptly and sensibly with their business affairs, nor should the court preserve the benefit of a judgment for respondents to which they were not entitled. Equally, the respondents should not be deprived of the benefit of a judgment obtained because the appellants had unreasonably failed to attend trial if, after a re-trial, it might be re-granted.
(2) On the facts and evidence, it was clear that the county court’s declaration and order for specific performance were wrong in law. The alleged terms of the oral contract were not consistent with the grant of any lease or tenancy as there was no term certain. Although those terms might have given rise to a life tenancy, there was no written disposition or contract. Accordingly, since the disposition sought to be effected did not comply with section 54(2) of the 1925 Act (creation of interest in land by parole) there was no disposition of an equitable interest in the land sufficient to satisfy section 53 nor any contract under section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989. Accordingly, there was no grant of a lease for lives to which section 149(6) of the 1925 Act could apply nor any contract in respect of which specific performance could be granted: Berrisford v Mexfield Housing Co-operative Ltd [2011] UKSC 52; [2011] 105 (CS) followed.
Christopher McNall (instructed by SFN Solicitors) appeared for the appellants; Elisabeth Tythcott (instructed by Lomax Geddes & Co) appeared for the respondents.
Eileen O’Grady, barrister
