Landlord and tenant — Licences or tenancies — Two appeals heard together in which the House of Lords reversed the decisions of the Court of Appeal and restored the county court judges’ orders — In the one case separate licences were wrongly determined to constitute a joint tenancy and in the other a joint tenancy was wrongly treated as separate licences — Review of Street v Mountford and other authorities
Securities v Vaughan and Others
the Court of Appeal had held that a joint tenancy of a flat had come into
existence where four individual occupants each had a short-term licence
agreement granting a right to use the flat in common with others with a like
right and expressly negativing a right to exclusive possession of any part of
the flat — The accommodation consisted of four bedrooms, a lounge and a
sitting-room, in addition to a kitchen and bathroom — The licence agreements
began at different dates, were for different periods and varied to some extent
in the rents charged — The four occupants concerned in the present proceedings
had replaced earlier ones when
had determined a rent on the basis of a joint tenancy, the matter came before
the county court judge, who held that the occupants were licensees under
separate licence agreements — On appeal, reversing this decision, the Court of
Appeal held that, despite different commencement dates, different rents, and
some difference in interests, the occupants, at the date of the notices to
quit, were entitled jointly to exclusive possession of the flat for a term at a
rent, ie were entitled to a joint tenancy on the principles of Street v Mountford — Fox
LJ in his judgment described the ‘legal alchemy’ (Lord Bridge’s words) by which
this result was achieved — Sir George Waller, dissenting, seriously doubted
whether the ‘four unities’ required for a joint tenancy had in fact been
satisfied
Lords held that there were a number of fallacies in this interpretation — The
assertion of an exclusive possession assumed what it sought to prove; the
overlap of periods of occupation did not create a single term by an amalgam of
the individual periods; there was no single sum of money payable for use and
occupation; and the conception involved the ‘strange and unnatural theory’ that
as each occupant terminated his tenancy there was an implied surrender by the
other three and an implied grant of a new tenancy to them together with the new
incumbent — Sir George Waller was correct in being unable to discover the ‘four
unities’ — The reality here was four separate licences — Appeal allowed
Another
the occupants were a young man and his girl friend who wanted to live as
husband and wife — The accommodation consisted of a bedroom, a
bed-sitting-room, a kitchen and a bathroom — The couple had each signed a
detailed agreement which stated that it conferred a personal licence only and
expressly negatived the grant of exclusive possession — It 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 agreements were in
fact modelled on those in Somma v Hazelhurst — The county court judge, believing (as it eventually
turned out, correctly) that he was following the guidance in Street v Mountford, held
that the agreements were bad as artifical transactions designed to evade the
Rent Acts and found that the occupants had a protected joint tenancy — The
Court of Appeal, distinguishing Somma v Hazelhurst, held that the judge was in error;
the agreements were not a sham but genuine licence agreements which set out the
true bargain between the parties; hence the occupiers had no Rent Act
protection and the landlord was entitled to possession
Lords held that the Court of Appeal had erred — The two agreements here were
interdependent — It was unreal to regard them as separate and independent
licences — The couple had applied jointly to rent the flat and sought and
enjoyed joint and exclusive occupation of the whole of the flat — The result was
a joint tenancy protected by the Rent Act — A clause in the agreement reserving
to the owner power to go into the flat jointly with the couple was inconsistent
with the provisions of the Act and was a ‘pretence’ as defined by Lord
Templeman (see below) — This appeal must also be allowed and the trial judge’s
order restored
of his speech Lord Templeman discussed both Street v Mountford (the three
principles of which he restated) and a number of previous and subsequent cases
— He suggested substituting the word ‘pretence’ for his references in Street v Mountford to
‘sham devices’ and ‘artificial transactions’ — He gave reasons for the view
that in each of the cases disapproved in Street v Mountford there was a grant
of a joint tenancy
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, [1978] 2 EGLR 70, CA
Cole v Harris [1945] KB 474
Crancour
Ltd v Da Silvaesa [1986] 1 EGLR 80; (1986)
278 EG 618, [1986] 18 HLR 265, CA
Curl v Angelo [1948] 2 All ER 189, CA
Hadjiloucas v Crean [1987] 3 All ER 1008; [1987] 2 EGLR 60; (1987) 284
EG 927, CA
Neale v Del Soto [1945] KB 144; [1945] 1 All ER 191
Somma v Hazelhurst [1978] 1 WLR 1014; [1978] 2 All ER 1011; (1978)
37 P&CR 391; [1978] EGD 269; 246 EG 311, [1978] 1 EGLR 69, 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
Sturolson
& Co v Weniz [1984] EGD 524; (1984) 272
EG 326, [1984] 2 EGLR 121, CA
In the first
case A G Securities (an unlimited company) appealed against the decision of the
Court of Appeal that the respondents, Nigel Vaughan, Roderick Lyons, Simon
Russell and Christopher Cook, were joint tenants of Flat 25, Linden Mansions,
Hornsey Lane, London N6.
In the second
case William Robert Villiers and Sharon Bridger appealed against the decision
of the Court of Appeal that they were licensees, not protected joint tenants,
of a flat at the house of the respondent, Agis Antoniades, at 6 Whiteley Road,
Upper Norwood, London SE19.
Michael Rich
QC and John Furber (instructed by Landy Laufer) appeared on behalf of the
appellants, A G Securities; Stephen Sedley QC and David Watkinson (instructed
by Bindman & Partners) represented the respondents, Roderick Lyons, Simon
Russell and Christopher Cook (Nigel Vaughan did not take part).
John Stuart
Colyer QC and James Harris (instructed by A L Hughes & Co) appeared on
behalf of the appellants, William Robert Villiers and Sharon Bridger; the
respondent, Agis Antoniades, appeared in person.
In his speech,
LORD BRIDGE OF HARWICH said: I gratefully adopt the full account given in the
speech of my noble and learned friend Lord Templeman of the facts on which
these two appeals depend.
A G
Securities v Vaughan and Others
The four
respondents acquired their contractual rights to occupy the flat in question
and undertook their relevant obligations by separate agreements with the
appellants made at different times and on different terms. These rights and
obligations having initially been several, I do not understand by what legal
alchemy they could ever become joint. Each occupant had a contractual right,
enforceable against the appellants, to prevent the number of persons permitted
to occupy the flat at any one time exceeding four. But this did not give them
exclusive possession of the kind which is distinctive of a leasehold interest.
Having no estate in land, they could not sue in trespass. Their remedy against
intruders would have been to persuade the appellants to sue as plaintiffs or to
join the appellants as defendants by way of enforcement of their contractual
rights.
The
arrangement seems to have been a sensible and realistic one to provide
accommodation for a shifting population of individuals who were genuinely
prepared to share the flat with others introduced from time to time who would,
at least initially, be strangers to them. There was no artificiality in the
contracts concluded to give effect to this arrangement. On the contrary, it
seems to me, with respect to the majority of the Court of Appeal, to require
the highest degree of artificiality to force these contracts into the mould of
a joint tenancy.
Antoniades v Villiers and
Bridger
Here the
artificiality was in the pretence that two contemporaneous and identical
agreements entered into by a man and a woman who were going to live together in
a one-bedroom flat and share a double bed created rights and obligations which
were several rather than joint. As to the nature of those rights and
obligations, the provisions of the joint agreement purporting to retain the
right in the respondent to share the occupation of the flat with the young
couple himself or to introduce an indefinite number of third parties to do so
could be seen, in all the relevant circumstances, to be repugnant to the true
purpose of the agreement. No one could have supposed that those provisions were
ever intended to be acted on. They were introduced into the agreement for no
other purpose than as an attempt to disguise the true character of the
agreement which it was hoped would deceive the court and prevent
agree, the attempt fails.
I would allow
both appeals.
In his speech,
LORD TEMPLEMAN said: In each of the two appeals now under consideration, the
question is whether the owner of residential accommodation granted a tenancy or
granted licences.
In the first
appeal, the appellant company, A G Securities, owned a block of flats, Linden
Mansions, Hornsey Lane, London N6. Flat no 25 consists of six living-rooms in
addition to a kitchen and bathroom. The company furnished four living-rooms as
bedrooms, a fifth as a lounge and a sixth as a sitting-room. In 1974 furnished
lettings became subject to the Rent Acts. If the company granted exclusive
possession of the flat to one single occupier or to two or more occupiers
jointly in consideration of periodical payments, the grant would create a
tenancy of the flat. If the company granted exclusive possession of one bedroom
to four different occupiers with joint use of the lounge, sitting-room, kitchen
and bathroom, each of the four grants would create a tenancy of one bedroom.
Exclusive possession means either exclusive occupation or receipt of rents and
profits.
The company entered
into separate agreements with four different applicants. Each agreement was in
the same form, and was expressed to be made between the company as ‘the Owner’
and the applicant as ‘Licensee’. The agreement contained, inter alia,
the following relevant clauses:
1. The Owner
grants to the Licensee the right to use in common with others who have or may
from time to time be granted the like right the flat known as 25 Linden
Mansions, Hornsey Lane, N6 but without the right to exclusive possession of any
part of the said flat together with the fixtures, furniture, furnishings and
effects now in the said flat for six months from the day of 19 and thereafter
until determined by either party giving to the other one month’s notice in
writing to take effect at any time.
2. The
Licensee agrees with the Owner as follows:
(1) To pay the sum of £ per month for the right
to share in the use of the said flat such sum to be payable by equal monthly
instalments on the first day of each month . . .
(3) To share the use of the said flat peaceably
with and not to impede the use of the said flat by such other persons not
exceeding three in number at any one time to whom the Owner has granted or
shall from time to time grant licence to use the said flat in common with the Licensee
and not to impede the use by such other persons of the gas, electricity and
telephone services supplied to the flat provided that each shares the cost of
such services.
(4) If at any time there shall be less than three
persons authorised by the Owner to use the said flat in common with the
Licensee upon reasonable notice given by the Owner to meet with any prospective
licensee nominated by the Owner at the flat to provide an opportunity to such
prospective licensee to agree terms for sharing the cost of services in
accordance with clause 2(3).
(5) Not to assign this agreement nor permit any
other person except as licensed by the Owner to sleep or reside in or share
occupation of the said flat or any part of it at any time.
The flat was
kept fully occupied; whenever one agreement was terminated the company invited
applications to fill the vacancy. The company’s agent produced a draft of the
agreement to an applicant. The monthly sum payable by the applicant was not
necessarily the same as the monthly sum payable by any of the continuing
occupiers of the flat because inflation and other factors caused the value of
an agreement to fluctuate. The company and its agent gave no directions or
explanations about the manner in which the applicant and other persons, not
exceeding three in number, would use the flat in common. The applicant was sent
off to the flat to agree terms with the three continuing occupiers. There he
would be offered a vacant bedroom and the use of the lounge, sitting-room,
kitchen and bathroom with the other occupiers each of whom had his own bedroom.
It was the practice that whenever a bedroom fell vacant upon termination of an
agreement, each of the three continuing occupiers, in order of seniority,
decided whether to change his bedroom. The applicant for the vacancy was then
offered the bedroom which the other three least coveted. The applicant, if
content, signed his agreement and moved into his bedroom. If he were unable to
share the use of the common parts of the flat peaceably he could terminate his
agreement, or the other three occupiers could terminate their agreements or
prevail upon the company to terminate the agreement of the unpopular occupier.
The
respondent, Mr Vaughan, signed an agreement in 1982 to pay £86.66 per month.
The respondent, Mr Lyons, signed an agreement dated March 2 1984 to pay £99 per
month. The respondent, Mr Russell, signed an agreement dated August 1 1984 to
pay £125 per month, and the respondent, Mr Cook, signed an agreement dated
January 28 1985 to pay £104 per month. From January 28 1985 onwards, each of
the four respondents occupied one bedroom and shared the use of the lounge,
sitting-room, kitchen and bathroom.
The
respondents claim that under and by virtue of the four agreements signed by
them respectively, they became tenants of the flat. The company contends that
each respondent is a licensee.
In the second
appeal, the appellant, Mr Antoniades, is the owner of the house, 6 Whiteley
Road, Upper Norwood. The attic was converted into furnished residential
accommodation comprising a bedroom, a bed-sitting-room, kitchen and bathroom.
The furniture in the sitting-room consisted of a bed-settee, a table-bed, a
sideboard and a chair.
The
appellants, Mr Villiers and Miss Bridger, spent three months looking for a flat
where they could live together. In February 1985 they were shown the attic
flat. The bedroom lacked a bed; the appellants expressed a preference for a
double bed which Mr Antoniades agreed to provide. Mr Antoniades and Mr Villiers
entered into an agreement dated February 9 1985. The agreement was described as
a licence, Mr Antoniades was described as ‘the licensor’ and Mr Villiers was
described as ‘the licensee’. The agreement recited that ‘the licensor is not
willing to grant the licensee exclusive possession of any part of the rooms
hereinafter referred to’ and that ‘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’. The material provisions of the agreement were as follows:
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 (1
bedroom, 1 bed-sitting-room, the kitchen and bathroom) of the building . . . 6
Whiteley Road SE19 . . . 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 February 14 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 . . .
(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 . . .
(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 and the other occupiers or users of the rooms . . .
(12) The licensee . . . will not use the rooms in
any illegal or immoral way . . .
(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 . . .
(22) The licensee (occupier) declares that he is
over 18 years old and understands this licence . . .
(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 of the
whole will be allowed to the licensees by the licensor under any circumstances.
There then
followed the schedule of furniture and then a new clause as follows:
(26) Subject to clause 21 this licence may be
terminated by one month’s notice in writing given by either party at any time
and the licensor reserves the right of eviction without court order.
That agreement
was signed by Mr Villiers in five places and each of his signatures was
witnessed.
Either then or
thereafter, Mr Villiers signed an addendum to the agreement whereby Mr
Villiers:
Agrees that
the licence signed on February 9 1985 does not come under the Rent Acts and the
flat is for single people sharing and if Mr Villiers marries
at 6 Whiteley Road London SE19. The owner Mr Antoniades did not promise any
other accommodation in any way. No persons will have exclusive possession of
the above flat as agreed.
Mr Antoniades
entered into a separate agreement and a separate addendum with Miss Bridger.
The agreement and the addendum were in the same form, bore the same date, were
executed on the same day and were signed and witnessed in the same way as the
agreement and addendum entered into by Mr Villiers.
Thereupon Mr
Villiers and Miss Bridger entered into occupation of the rooms comprised in the
agreement. Mr Antoniades has never attempted to use any of the rooms or
authorised any other person to use the rooms.
The
appellants, Mr Villiers and Miss Bridger, claim that they became tenants of the
whole of the attic flat. Mr Antoniades contends that each appellant is a
licensee.
My lords, ever
since 1915 the Rent Acts have protected some tenants of residential
accommodation with security of tenure and maximum rents. The scope and effect
of the Rent Acts have been altered from time to time and the current
legislative protection is contained in the Rent Act 1977. Section 1 of the Act
of 1977, reproducing earlier enactments, provides that:
Subject to
this Part of this Act, a tenancy under which a dwelling-house (which may be a
house or part of a house) is let as a separate dwelling is a protected tenancy
for the purposes of this Act.
Parties to an
agreement cannot contract out of the Rent Acts; if they were able to do so the
Acts would be a dead letter because in a state of housing shortage a person
seeking residential accommodation may agree to anything to obtain shelter. The
Rent Acts protect a tenant but they do not protect a licensee. Since parties to
an agreement cannot contract out of the Rent Acts, a document which expresses
the intention, genuine or bogus, of both parties or of one party to create a
licence will nevertheless create a tenancy if the rights and obligations
enjoyed and imposed satisfy the legal requirements of a tenancy. A person
seeking residential accommodation may concur in any expression of intention in
order to obtain shelter. Since parties to an agreement cannot contract out of
the Rent Acts, a document expressed in the language of a licence must
nevertheless be examined and construed by the court in order to decide whether
the rights and obligations enjoyed and imposed create a licence or a tenancy. A
person seeking residential accommodation may sign a document couched in any
language in order to obtain shelter. Since parties to an agreement cannot
contract out of the Rent Acts, the grant of a tenancy to two persons jointly
cannot be concealed, accidentally or by design, by the creation of two
documents in the form of licences. Two persons seeking residential
accommodation may sign any number of documents in order to obtain joint
shelter. In considering one or more documents for the purpose of deciding
whether a tenancy has been created, the court must consider the surrounding
circumstances including any relationship between the prospective occupiers, the
course of negotiations, the nature and extent of the accommodation and the
intended and actual mode of occupation of the accommodation. If the owner of a
one-bedroomed flat granted a licence to a husband to occupy the flat provided
he shared the flat with his wife and nobody else and granted a similar licence
to the wife provided she shared the flat with the husband and nobody else, the
court would be bound to consider the effect of both documents together. If the
licence to the husband required him to pay a licence fee of £50 per month and
the licence to the wife required her to pay a further licence fee of £50 per
month, the two documents read together in the light of the property to be
occupied and the obvious intended mode of occupation would confer exclusive
occupation on the husband and wife jointly and a tenancy at the rent of £100.
Landlords
dislike the Rent Acts and wish to enjoy the benefits of letting property
without the burden of the restrictions imposed by the Acts. Landlords believe
that the Rent Acts unfairly interfere with freedom of contract and exacerbate
the housing shortage. Tenants on the other hand believe that the Acts are a
necessary protection against the exploitation of people who do not own the
freehold or long leases of their homes. The court lacks the knowledge and the
power to form any judgment on these arguments which fall to be considered and
determined by Parliament. The duty of the court is to enforce the Acts and in so
doing to observe one principle which is inherent in the Acts and has been long
recognised, the principle that parties cannot contract out of the Acts.
The enjoyment
of exclusive occupation for a term in consideration of periodical payments
creates a tenancy, save in exceptional circumstances not relevant to these
appeals; see Street v Mountford [1985] 1 AC 809; 826, 827. The
grant of one room with exclusive occupation in consideration of a periodic
payment creates a tenancy, although if the room is not a dwelling, the tenant
is not protected by the Rent Acts: see Curl v Angelo [1948] 2 All
ER 189. The grant of one room with exclusive occupation as a dwelling creates a
tenancy but if a tenant shares some other essential living premises such as a
kitchen with his landlord or other persons, the room is not let as a separate
dwelling within the meaning of section 1 of the Rent Act 1977: see Neale
v Del Soto [1945] KB 144 and Cole v Harris [1945] KB 474.
Section 21 of the Act of 1977 confers some rights on a tenant who shares
essential living premises with his landlord, and section 22 confers protection
on a tenant who shares some essential living premises with persons other than
the landlord.
If, under an
agreement, the owner of residential accommodation provides services or
attendance and retains possession for that purpose the occupier is a lodger and
the agreement creates a licence. Under an agreement for the exclusive
occupation of a room or rooms consisting of a dwelling for periodic payments
then, save in the exceptional circumstances mentioned in Street v Mountford
[1985] AC 809, a single occupier, if he is not a lodger, must be a tenant. The
agreement may provide, expressly or by implication, power for the owner to
enter the dwelling to inspect or repair but if the occupier is entitled to the
use and enjoyment of the dwelling and is not a lodger he is in exclusive
occupation and the agreement creates a tenancy.
Where
residential accommodation is occupied by two or more persons the occupiers may
be licensees or tenants of the whole or each occupier may be a separate tenant
of part. In the present appeals the only question raised is whether the
occupiers are licensees or tenants of the whole.
In the first
appeal under consideration the company entered into four separate agreements
with four separate persons between 1982 and 1985. The agreements were in the
same form save that the periodical sum payable under one agreement did not
correspond to the sum payable pursuant to any other agreement. The company was
not bound to make agreements in the same form or to require any payment. The
agreement signed by Mr Vaughan in 1982 did not and could not entitle or compel
Mr Vaughan to become a joint tenant of the whole of the flat with Mr Cook in
1985 on the terms of Mr Vaughan’s agreement or on the terms of Mr Cook’s
agreement or on the terms of any other agreement either alone with Mr Cook or
together with any other persons. In 1985 Mr Vaughan did not agree to become a
joint tenant of the flat with Mr Cook or anybody else. In 1985, in the events
which had happened, the company possessed the right reserved to the company by
clause 2(3) of Mr Vaughan’s agreement to authorise Mr Cook to share the use of
the flat in common with Mr Vaughan. In 1985 Mr Vaughan orally agreed with Mr
Cook that if the company authorised Mr Cook to use the flat in common with Mr
Vaughan, then Mr Vaughan would allow Mr Cook to occupy a specified bedroom in
the flat and share the occupation of the other parts of the flat excluding the
other three bedrooms. Mr Vaughan’s agreement with the company did not prevent
him from entering into this oral agreement with Mr Cook. Under the standard
form agreement the company did not retain power to allocate the four bedrooms
but delegated this power to the occupiers for the time being. If the occupiers
had failed to allocate the bedrooms the company would have been obliged to
terminate one or more of the agreements. The respondents claim that they are
joint tenants of the flat. No single respondent claims to be a tenant of a
bedroom.
The Court of
Appeal [1988] 2 WLR 689* (Fox and Mustill LJJ, Sir George Waller dissenting)
concluded that the four respondents were jointly entitled to exclusive
occupation of the flat. I am unable to agree. If a landlord who owns a
three-bedroom flat enters into three separate independent tenancies with three
independent tenants each of whom is entitled to one bedroom and to share the
common parts, then the three tenants, if they agree, can exclude anyone else
from the flat. But they do not enjoy exclusive occupation of the flat jointly
under the terms of their tenancies. In the present case, if the four
respondents had been jointly entitled to exclusive occupation of the flat then,
on the death of one of the respondents, the remaining three would not be
entitled
the remaining three would not be entitled to joint and exclusive occupation of
the flat. They could not exclude a fourth person nominated by the company. I
would allow the appeal.
*Editor’s
note: See also [1988] 1 EGLR 36; [1988] 06 EG 112.
In the first
appeal the four agreements were independent of one another. In the second
appeal the two agreements were interdependent. Both would have been signed or
neither. The two agreements must therefore be read together. Mr Villiers and
Miss Bridger applied to rent the flat jointly and sought and enjoyed joint and
exclusive occupation of the whole of the flat. They shared the rights and the
obligations imposed by the terms of their occupation. They acquired joint and
exclusive occupation of the flat in consideration of periodical payments and
they therefore acquired a tenancy jointly. Mr Antoniades required each of them,
Mr Villiers and Miss Bridger, to agree to pay one half of each aggregate
periodical payment, but this circumstance cannot convert a tenancy into a
licence. A tenancy remains a tenancy even though the landlord may choose to
require each of two joint tenants to agree expressly to pay one half of the
rent. The tenancy conferred on Mr Villiers and Miss Bridger the right to occupy
the whole flat as their dwelling. Clause 16 reserved to Mr Antoniades the power
at any time to go into occupation of the flat jointly with Mr Villiers and Miss
Bridger. The exercise of that power would at common law put an end to the
exclusive occupation of the flat by Mr Villiers and Miss Bridger, terminate the
tenancy of Mr Villiers and Miss Bridger, and convert Mr Villiers and Miss
Bridger into licensees. But the powers reserved to Mr Antoniades by clause 16
cannot be lawfully exercised because they are inconsistent with the provisions
of the Rent Acts.
When Mr
Antoniades entered into the agreements dated February 9 1985 with Mr Villiers
and Miss Bridger and when Mr Antoniades allowed Mr Villiers and Miss Bridger to
occupy the flat, it is clear from the negotiations which had taken place, from
the surrounding circumstances, and from subsequent events, that Mr Antoniades
did not intend in February 1985, immediately or contemporaneously, to share
occupation or to authorise any other person to deprive Mr Villiers and Miss
Bridger of exclusive occupation of the flat. Clause 16, if genuine, was a
reservation by a landlord of a power at some time during the currency of the
tenancy to share occupation with the tenant. The exclusive occupation of the
tenant coupled with the payment of rent created a tenancy which at common law
could be terminated and converted into a licence as soon as the landlord
exercised his power to share occupation. But under the Rent Acts, if a
contractual tenancy is terminated, the Acts protect the occupiers from
eviction.
If a landlord
creates a tenancy under which a flat is let as a separate dwelling the tenancy
is a protected tenancy under section 1 of the Rent Act 1977. After the
termination of a protected tenancy the protected tenant becomes a statutory
tenant under section 2 of the Act. By section 3(1):
So long as he
retains possession, a statutory tenant shall observe and be entitled to the
benefit of all the terms and conditions of the original contract of tenancy, so
far as they are consistent with the provisions of this Act.
By section 98
a court shall not make an order for possession of a dwelling-house which is
subject to a protected tenancy or a statutory tenancy unless the court
considers that it is reasonable to make such an order and is satisfied either
that alternative accommodation is available or that certain other conditions
are satisfied. The landlord cannot dispense with an order of the court and
enter into possession in exercise of his common law powers.
Where a
landlord creates a tenancy of a flat and reserves the right to go into
exclusive occupation at any time of the whole or part of the flat with or
without notice, that reservation is inconsistent with the provisions of the
Rent Acts and cannot be enforced without an order of the court under section
98. Where a landlord creates a tenancy of a flat and reserves the right to go
into occupation of the whole or part of the flat with or without notice,
jointly with the existing tenants, that reservation also is inconsistent with
the provisions of the Acts. Were it otherwise every tenancy agreement would be
labelled a licence and would contract out of the Rent Acts by reserving power
to the landlord to share possession with the tenant at any time after the
commencement of the term.
Clause 16 is a
reservation to Mr Antoniades of the right to go into occupation or to nominate
others to enjoy occupation of the whole of the flat jointly with Mr Villiers
and Miss Bridger. Until that power is exercised Mr Villiers and Miss Bridger
are jointly in exclusive occupation of the whole of the flat making periodical
payments and they are therefore tenants. The Rent Act prevents the exercise of
a power which would destroy the tenancy of Mr Villiers and Miss Bridger and
would deprive them of the exclusive occupation of the flat which they are now
enjoying. Clause 16 is inconsistent with the provisions of the Rent Acts.
There is a
separate and alternative reason why clause 16 must be ignored. Clause 16 was
not a genuine reservation to Mr Antoniades of a power to share the flat and a
power to authorise other persons to share the flat. Mr Antoniades did not
genuinely intend to exercise the powers save possibly to bring pressure to bear
to obtain possession. Clause 16 was intended only to deprive Mr Villiers and
Miss Bridger of the protection of the Rent Acts. Mr Villiers and Miss Bridger
had no choice in the matter.
In the notes
of Judge Macnair, Mr Villiers is reported as saying that:
He [Mr
Antoniades] kept going on about it being a licence and not in the Rent Act. I
didn’t know either but was pleased to have a place after three or four months
of chasing.
The notes of
Miss Bridger’s evidence include this passage:
I didn’t
understand what was meant by exclusive possession or licence. Signed because so
glad to move in. Had been looking for three months.
In Street
v Mountford [1985] AC 809, 825, I said that:
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.
It would have
been more accurate and less liable to give rise to misunderstandings if I had
substituted the word ‘pretence’ for the references to ‘sham devices’ and
‘artificial transactions’. Street v Mountford was not a case
which involved a pretence concerning exclusive possession. The agreement did
not mention exclusive possession and the owner conceded that the occupier
enjoyed exclusive possession. In Somma v Hazelhurst [1978] 1 WLR
1014 and other cases considered in Street v Mountford, the owner
wished to let residential accommodation but to avoid the Rent Acts. The
occupiers wished to take a letting of residential accommodation. The owner
stipulated for the execution of agreements which pretended that exclusive
possession was not to be enjoyed by the occupiers. The occupiers were obliged
to acquiesce with this pretence in order to obtain the accommodation. In my opinion
the occupiers either did not understand the language of the agreements or
assumed, justifiably, that in practice the owner would not violate their
privacy. The owner’s real intention was to rely on the language of the
agreement to escape the Rent Acts. The owner allowed the occupiers to enjoy
jointly exclusive occupation and accepted rent. A tenancy was created. Street
v Mountford reasserted three principles. First, parties to an agreement
cannot contract out of the Rent Acts. Second, in the absence of special
circumstances, not here relevant, the enjoyment of exclusive occupation for a
term in consideration of periodic payments creates a tenancy. Third, where the
language of licence contradicts the reality of lease, the facts must prevail.
The facts must prevail over the language in order that the parties may not
contract out of the Rent Acts. In the present case clause 16 was a pretence.
The fact that
clause 16 was a pretence appears from its terms and from the negotiations.
Clause 16 in terms conferred on Mr Antoniades and other persons the right to
share the bedroom occupied by Mr Villiers and Miss Bridger. Clause 16 conferred
power on Mr Antoniades to convert the sitting-room occupied by Mr Villiers and
Miss Bridger into a bedroom which could be jointly occupied by Mr Villiers,
Miss Bridger, Mr Antoniades and any person or persons nominated by Mr
Antoniades. The facilities in the flat were not suitable for sharing between
strangers. The flat, situated in an attic with a sloping roof, was too small for
sharing between strangers. If clause 16 had been genuine there would have been
some discussion between Mr Antoniades, Mr Villiers and Miss Bridger as to how
clause 16 might be operated in practice and in whose favour it was likely to be
operated. The addendum imposed on Mr Villiers and Miss Bridger sought to add
plausibility to the pretence of sharing by forfeiting the right of Mr Villiers
and Miss Bridger to continue to occupy the flat if their double-bedded romance
blossomed into wedding bells. Finally, and significantly, Mr Antoniades never
made any attempt to obtain increased income from the flat by exercising the
powers which clause 16 purported to reserve to him. Clause 16 was designed only
to disguise the grant of a tenancy and to contract out of the Rent Acts. In the
report of this case in the
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 occupant shall not have exclusive possession.
*Editor’s
note: See also [1988] 1 EGLR 59 at p 62(H).
My lords, in Street
v Mountford [1985] AC 809, this House stipulated with reiterated
emphasis that an express statement of intention is not decisive and that the
court must pay attention to the facts and surrounding circumstances and to what
people do as well as to what people say.
In Somma
v Hazelhurst [1978] 1 WLR 1014, a young unmarried couple applied to take
a double bed-sitting-room in order that they might live together. Each signed
an agreement to pay £38.80 per month to share the use of the room with the
owner and with not more than one other person at any one time. The couple moved
into the bed-sitting-room and enjoyed exclusive occupation. In terms the owner
reserved the right to share living and sleeping quarters with the two
applicants. If the couple parted and the youth moved out, the owner could
require the damsel to share her living and sleeping quarters with the owner and
with a stranger or with one of them or move out herself. The couple enjoyed
exclusive occupation until the owner decided to live with them or until one of
their agreements was terminated. The right reserved to the owner to require the
applicants or one of the applicants to share with the owner or some other third
party was contrary to the provisions of the Rent Acts and in addition was, in
the circumstances, a pretence intended only to get round the Rent Acts.
In Aldrington
Garages Ltd v Fielder [1978] 37 P&CR 461, Mr Fielder and Miss
Maxwell applied to take a self-contained flat in order that they might live
together. Each signed an agreement to pay £54.17 per month to share the use of
the flat with one other person. The couple moved into the flat and enjoyed
exclusive occupation. In terms if the couple parted and Mr Fielder moved out,
the owner could require Miss Maxwell to share her living and sleeping quarters
with a stranger or move out herself. Mr Fielder and Miss Maxwell enjoyed
exclusive occupation unless and until one of their agreements was terminated.
The right reserved to the owner to require Miss Maxwell to share with a third
party if Mr Fielder’s agreement was terminated and to require Mr Fielder to
share with a third party if Miss Maxwell’s agreement was terminated was
contrary to the provisions of the Rent Acts and in addition was, in the
circumstances, a pretence intended only to get round the Rent Acts.
In Sturolson
& Co v Weniz [1984] 17 HLR 140, the defendant and a friend
applied to take a self-contained flat for the occupation of the defendant, his
wife and the friend. The defendant and his friend signed agreements to pay £100
per month to share the flat with such other persons as might be nominated or
approved by the owner from time to time. The defendant, his wife and the
friend, moved into the flat and enjoyed exclusive occupation. In terms the
defendant and the friend paid between them £200 per month for a flat which
could be invaded by one or more strangers at any time. The owner’s agent gave
the game away by saying that the owner was happy so long as he received £200
per month from the flat. The defendant and the friend enjoyed exclusive
occupation. The right reserved to the owner to require them to share with
others was contrary to the provisions of the Rent Acts and was in any event a
pretence intended only to get round the Rent Acts.
In Street
v Mountford [1985] AC 809 at p 825, this House disapproved of the
decisions of the Court of Appeal in Somma v Hazelhurst [1978] 1
WLR 1014, Aldrington Garages Ltd v Fielder [1978] 7 HLR 51 and Sturolson
& Co v Weniz [1984] 17 HLR 190, which held that the occupiers
were only licensees and not tenants.
In Crancour
Ltd v Da Silvaesa [1986] 18 HLR 265, 276† in which leave was given to defend
proceedings under RSC Ord 113, Ralph Gibson LJ referring to the disapproval by
this House in Street v Mountford [1985] AC 809, 825 of the
decision of the Court of Appeal in Somma v Hazelhurst said:
As I
understand the reference to the ‘sham nature of the obligation’, namely that of
sharing the room in common with other persons nominated by the landlord, the
House of Lords is there saying, first, that the agreement in that case constituted
the grant of exclusive possession; secondly, that the written obligation to
share the room was not effective to alter the true nature of the grant; and
thirdly, that, on the facts of the case, it should have been clear to the Court
of Appeal that the landlord cannot have intended the term as to sharing
occupation to be a true statement of the nature of the possession intended to
be enjoyed by the ‘licensees’.
† Editor’s
note: See also [1986] 1 EGLR 80 at p 83(J).
I agree with
this analysis.
In Hadjiloucas
v Crean [1988] 1 WLR 1006, two single ladies applied to take a
two-roomed flat with kitchen and bathroom. Each signed an agreement to pay £260
per month to share the use of the flat with one other person. The two ladies
moved into the flat and enjoyed exclusive occupation. In terms, if the
agreement of one lady was terminated, the owner could require the other to
share the flat with a stranger. The county court judge decided that the agreements
created only licences. The Court of Appeal ordered a retrial in order that all
the facts might be investigated. Since, however, the two ladies applied for and
enjoyed exclusive occupation unless and until one of their agreements was
terminated, the ladies acquired a tenancy protected by the Rent Acts. The
reservation to the owner of the right at common law to require one of the
ladies to share the flat with a stranger was a pretence.
My lords, in
each of the cases which were disapproved by this House in Street v Mountford
[1985] AC 809, and in the second appeal now under consideration, there was, in
my opinion, the grant of a joint tenancy for the following reasons:
(1) The applicants for the flat applied to rent
the flat jointly and to enjoy exclusive occupation.
(2) The landlord allowed the applicants jointly
to enjoy exclusive occupation and accepted rent. A tenancy was created.
(3) The power reserved to the landlord to deprive
the applicants of exclusive occupation was inconsistent with the provisions of
the Rent Acts.
(4) Moreover in all the circumstances the power
which the landlord insisted upon to deprive the applicants of exclusive
occupation was a pretence intended only to deprive the applicants of the
protection of the Rent Acts.
The Court of
Appeal [1988] 3 WLR 139 (Bingham and Mann LJJ) decided in the second appeal
under consideration that Mr Villiers and Miss Bridger were licensees. I would
restore the order of Judge Macnair who declared that Mr Villiers and Miss
Bridger were tenants protected by the Rent Acts.
In his speech,
LORD ACKNER said: Each of these appeals raises essentially the same question —
what was the substance and reality of the transaction entered into by the
parties?
In the first
appeal, each of the respondents commenced his occupation of the flat on
different dates, each of their agreements covered different periods and each
agreement provided for different payments for that occupation. In such
circumstances there could not have been a grant of a joint tenancy to all four
respondents. At no stage in the litigation was it suggested that the particular
facts justified the conclusion that each respondent had, by virtue of his
agreement, exclusive possession and therefore a tenancy of the room which he in
fact occupied, together with the right to share the rest of the accommodation
in the flat with the other occupants, thereby achieving the protection provided
by section 22 of the Rent Act 1977.
Thus by the
simple process of elimination, it is apparent that the substance and reality of
the transaction was that each respondent achieved by virtue of his agreement no
more than a licence to share the flat and he must therefore give up possession
following the lawful termination of that licence.
In the second
appeal it is clear, when reality is brought to bear, that the agreements relied
upon by the respondent created a tenancy of the flat, although he sought
vigorously to disguise them as mere licences to occupy the flat.
Accordingly,
for the reasons given by my noble and learned friends, Lord Templeman and Lord
Oliver of Aylmerton, I would allow both these appeals.
In his speech,
LORD OLIVER OF AYLMERTON said: Since lettings of residential property of an
appropriate rateable value attract the consequences of controlled rent and
security of tenure provided by the Rent Acts, it is not, perhaps, altogether
surprising that those who derive their income from residential property are
constantly seeking to attain the not always reconcilable objectives on the one
hand of keeping their property gainfully occupied and, on the other, of framing
their contractual arrangements with the occupants in such a way as to avoid, if
they can, the application of the Acts. Since it is only a letting which
attracts the operation of the Acts, such endeavours normally take the form of
entering into contractual arrangements designed, on their face, to ensure that
no estate is created in the
from a personal and revocable permission granted by way of licence. The
critical question, however, in every case is not simply how the arrangement is
presented to the outside world in the relevant documentation but what is the
true nature of the arrangement. The decision of this House in Street v Mountford
[1985] AC 809 established quite clearly that if the true legal effect of the
arrangements entered into is that the occupier of residential property has
exclusive possession of the property for an ascertainable period in return for
periodical money payments, a tenancy is created, whatever the label the parties
may have chosen to attach to it. Where, as in that case, the circumstances show
that the occupant is the only occupier realistically contemplated and the
premises are inherently suitable only for single occupation, there is,
generally, very little difficulty. Such an occupier normally has exclusive
possession, as indeed she did in Street v Mountford, where such
possession was conceded, unless the owner retains control and unrestricted
access for the purpose of providing attendance and services. As my noble and
learned friend, Lord Templeman, observed in that case, the occupier in those
circumstances is either a lodger or a tenant. Where, however, the premises are
such as, by their nature, to lend themselves to multiple occupation and they
are in fact occupied in common by a number of persons under different
individual agreements with the owner, more difficult problems arise. These two
appeals, at different ends of the scale, are illustrations of such problems.
The relevant
facts have been fully set out in the speech of my noble and learned friend,
Lord Templeman, which I have had the advantage of reading in draft, and I
reiterate them only to the extent necessary to emphasise the points which
appear to me to be of critical importance.
Antoniades v Villiers and
Bridger
The appellants
in this appeal are a young couple who at all material times were living
together as man and wife. In about November 1984 they learned from a letting
agency that a flat was available in a house at 6 Whiteley Road, London SE19,
owned by the respondent, Mr Antoniades. They inspected the flat together and
were told that the rent would be £174 per month. They were given the choice of
having the bedroom furnished with a double bed or two single beds and they
chose a double bed. So, right from the inception, there was never any question
but that the appellants were seeking to establish a joint home and they have,
at all material times, been the sole occupants of the flat.
There is equally
no question but that the premises are not suitable for occupation by more than
one couple, save on a very temporary basis. The small living-room contains a
sofa capable of being converted into a double bed and also a bed-table capable
of being opened out to form a narrow single bed. The appellants did in fact
have a friend to stay with them for a time in what the trial judge found to be
cramped conditions, but the size of the accommodation and the facilities
available clearly do not make the flat suitable for multiple occupation. When
it came to drawing up the contractual arrangements under which the appellants
were to be let into possession, each was asked to and did sign a separate
licence agreement in the terms set out in the speech of my noble and learned
friend under which each assumed an individual, but not a joint, responsibility
for payment of one half of the sum of £174 previously quoted as the rent.
There is an
air of total unreality about these documents read as separate and individual
licences in the light of the circumstance that the appellants were together
seeking a flat as a quasi-matrimonial home. A separate licensee does not
realistically assume responsibility for all repairs and all outgoings. Nor in
the circumstances can any realistic significance be given to clauses 16 and 17
of the document. It cannot realistically have been contemplated that the
respondent would either himself use or occupy any part of the flat or put some
other person in to share accommodation specifically adapted for the occupation
by a couple living together. These clauses cannot be considered as seriously
intended to have any practical operation or to serve any purpose apart from the
purely technical one of seeking to avoid the ordinary legal consequences attendant
upon letting the appellants into possession at a monthly rent. The unreality is
enhanced by the reservation of the right of eviction without court order, which
cannot seriously have been thought to be effective, and by the accompanying
agreement not to get married, which can have been only designed to prevent a
situation arising in which it would be quite impossible to argue that the
‘licensees’ were enjoying separate rights of occupation.
The conclusion
seems to me irresistible that these two so-called licences, executed
contemporaneously and entered into in the circumstances already outlined, have
to be read together as constituting in reality one single transaction under
which the appellants became joint occupiers. That of course does not conclude
the case because the question still remains, what is the effect?
The document
is clearly based upon the form of document which was upheld by the Court of
Appeal as an effective licence in Somma v Hazelhurst [1978] 1 WLR
1014. That case, which rested on what was said to be the impossibility of the
two licensees having between them exclusive possession, was overruled in Street
v Mountford [1985] AC 809. It was, however, a case which related to a
single room and it is suggested that a similar agreement relating to premises
containing space which could, albeit uncomfortably, accommodate another person
is not necessarily governed by the same principle. On the other hand, the trial
judge found that apart from the few visits by the respondent (who, on all but
one occasion, sought admission by knocking on the door) no one shared with the
appellants and that they had exclusive possession. He held that the licences
were ‘artificial transactions designed to evade the Rent Acts’, that a tenancy
was created and that the appellants occupied as joint tenants.
His decision
was reversed by the Court of Appeal [1988] 3 WLR 139 on, broadly, the grounds
that he had erred in treating the subsequent conduct of the parties as
admissible as an aid to construction of the agreements and that in so far as
the holding above referred to constituted a finding that the licences were a
sham, that was unsupported by the evidence inasmuch as the appellants’
intention that they should enjoy exclusive possession was not shared by the
respondent. The licences could not, therefore, be said to mask the real
intention of the parties and fell to be construed by reference to what they
said in terms.
If the
documents fall to be taken seriously at their face value and to be construed
according to their terms, I see, for my part, no escape from the conclusion at
which the Court of Appeal arrived. If it is once accepted that the respondent
enjoyed the right — whether he exercised it or not — to share the accommodation
with the appellants, either himself or by introducing one or more other persons
to use the flat with them, it is, as it seems to me, incontestable that the
appellants cannot claim to have had exclusive possession. The appellants’ case therefore
rests, as Mr Colyer frankly admits, upon upholding the judge’s approach that
the true transaction contemplated was that the appellants should jointly enjoy
exclusive possession and that the licences were mere sham or window-dressing to
indicate legal incidents which were never seriously intended in fact, but which
would be inconsistent with the application to that transaction of the Rent
Acts. Now to begin with, I do not, for my part, read the notes of the judge’s
judgment as showing that he construed the agreement in the light of what the
parties subsequently did. I agree entirely with the Court of Appeal that if he
did that he was in error. But though subsequent conduct is irrelevant as an aid
to construction, it is certainly admissible as evidence on the question of
whether the documents were or were not genuine documents giving effect to the
parties’ true intentions. Broadly what is said by Mr Colyer is that nobody
acquainted with the circumstances in which the parties had come together and with
the physical lay-out and size of the premises could seriously have imagined
that the clauses in the licence which, on the face of them, contemplate the
respondent and an apparently limitless number of other persons moving in to
share the whole of the available accommodation, including the bedroom, with
what, to all intents and purposes, was a married couple committed to paying
£174 a month in advance, were anything other than a smoke-screen; and the fact
that the respondent, who might be assumed to want to make the maximum profit
out of the premises never sought to introduce anyone else is at least some
indication that that is exactly what it was. Adopting the definition of a sham
formulated by Purchas LJ in Hadjiloucas v Crean [1988] 1 WLR
1006, 1013, Mr Colyer submits that the licences clearly incorporate clauses by
which neither party intended to be bound and which were obviously a
smoke-screen to cover the real intentions of both contracting parties. In the
Court of Appeal [1988] 3 WLR 139, 149, Bingham LJ tested the matter by asking
two questions, viz: (1) On what grounds, if one party had left the premises,
could the remaining party have been made liable for anything more than the £87
which he or she had agreed to pay, and (2) On what ground could they have
resisted a demand by the respondent to introduce a further person into the
premises? For my part, however, I do not
see how this helps. The assumed negative answers prove nothing, for they rest
upon the assumption that the licences are not sham documents, which is the very
question in issue.
If the real
transaction was, as the judge found, one under which the appellants became
joint tenants with exclusive possession, on the footing that the two agreements
are to be construed together, then it would follow that they were together
jointly and severally responsible for the whole rent. It would equally follow
that they could effectively exclude the respondent and his nominees.
Although the
facts are not precisely on all fours with Somma v Hazelhurst
[1978] 1 WLR 1014, they are strikingly similar and the judge was, in my
judgment, entitled to conclude that the appellants had exclusive possession of
the premises. I read his finding that, ‘the licences are artificial
transactions designed to evade the Rent Acts’ as a finding that they were sham
documents designed to conceal the true nature of the transaction. There was, in
my judgment, material on which he could properly reach this conclusion and I,
too, would allow the appeal.
A G
Securities v Vaughan and Others
The facts in
this appeal are startlingly different from those in the case of Antoniades. To
begin with the appeal concerns a substantial flat in a mansion block consisting
of four bedrooms, a sitting-room and usual offices. The trial judge found, as a
fact, that the premises could without difficulty provide residential
accommodation for four persons. There is no question but that the agreements
with which the appeal is concerned reflect the true bargain between the
parties. It is the purpose and intention of both parties to each agreement that
it should confer an individual right on the licensee named, that he should be
liable only for the payment which he had undertaken, and that his agreement
should be capable of termination without reference to the agreements with other
persons occupying the flat. The judge found that the agreements were not shams
and that each of the four occupants had arrived independently of one another
and not as a group. His finding was that there was never a group of persons coming
to the flat altogether. That has been challenged because, it is said, the
evidence established that initially in 1977 and 1978 there was one occupant who
was joined by three others who, although they came independently and not as a
trio, moved in at about the same time. Central heating was then installed, so
that the weekly payments fell to be increased and new agreements were signed by
the four occupants contemporaneously. Speaking for myself, I cannot see how
this can make any difference to the terms upon which the individuals were in
occupation. If they were in as licensees in the first instance, the mere
replacement of their agreements by new agreements in similar form cannot
convert them into tenants, and the case has, in my judgment, to be approached
on the footing that agreements with the occupiers were entered into separately
and individually. The only questions are those of the effect of each agreement
vis-a-vis the individual licensee and whether the agreements collectively had
the effect of creating a joint tenancy among the occupants of the premises for
the time being by virtue of their having between them exclusive possession of
the premises.
Taking first,
by way of example, the position of the first occupier to be let into the
premises on the terms of one of these agreements, it is, in my judgment, quite
unarguable, once any question of sham is out of the way, that he has an estate
in the premises which entitles him to exclusive possession. His right, which
is, by definition, a right to share use and occupation with such other persons
not exceeding three in number as the licensor shall introduce from time to
time, is clearly inconsistent with any exclusive possession in him alone even
though he may be the only person in physical occupation at a particular time.
He has no legal title which will permit him to exclude other persons to whom
the licensor may choose to grant the privilege of entry. That must equally
apply to the additional licensees who join him. None of them has individually
nor have they collectively the right or power lawfully to exclude a further
nominee of the licensor within the prescribed maximum.
I pause to
note that it has never been contended that any individual occupier has a
tenancy of a particular room in the flat with a right to use the remainder of
the flat in common with the tenants of other rooms. I can envisage that as a
possibility in cases of arrangements of this kind if the facts support the
marking out with the landlord’s concurrence of a particular room as the exclusive
domain of a particular individual. But to support that there would, I think,
have to be proved the grant of an identifiable part of the flat and that simply
does not fit with the system described in the evidence of the instant case.
The real
question — and it is this upon which the respondents rely — is what is the
position when the flat is occupied concurrently by all four licensees? What is said then is that since the licensor
has now exhausted, for the time being, his right of nomination, the four occupants
collectively have exclusive possession of the premises because they can
collectively exclude the licensor himself. Because, it is argued, (1) they have
thus exclusive possession and, (2) there is an ascertainable term during which
all have the right to use and occupy, and (3) they are occupying in
consideration of the payment of periodic sums of money, Street v Mountford
[1985] AC 809 shows that they are collectively tenants of the premises. They
are not lodgers. Therefore they must be tenants. And because each is not
individually a tenant, they must together be joint tenants.
My lords,
there appear to me to be a number of fallacies here. In the first place, the
assertion of an exclusive possession rests, as it seems to me, upon assuming
what it is sought to prove. If, of course, each licence agreement creates a
tenancy, each tenant will be sharing with other persons whose rights to be
there rest upon their own estates which, once they have been granted, they
enjoy in their own right independently of the landlord. Collectively they have
the right to exclude everyone other than those who have concurrent estates. But
if the licence agreement is what it purports to be, that is to say, merely an
agreement for permissive enjoyment as the invitee of the landlord, then each
shares the use of the premises with other invitees of the same landlord. The
landlord is not excluded for he continues to enjoy the premises through his
invitees, even though he may for the time being have precluded himself by
contract with each from withdrawing the invitation. Second, the fact that under
each agreement an individual has the privilege of user and occupation for a
term which overlaps the term of user and occupation of other persons in the
premises, does not create a single indivisible term of occupation for all four
consisting of an amalgam of the individual overlapping periods. Third, there is
no single sum of money payable in respect of use and occupation. Each person is
individually liable for the amount which he has agreed, which may differ in
practice from the amounts paid by all or some of the others.
The
respondents are compelled to support their claims by a strange and unnatural
theory that, as each occupant terminates his agreement, there is an implied
surrender by the other three and an implied grant of a new joint tenancy to
them together with the new incumbent when he enters under his individual
agreement. With great respect to the majority in the Court of Appeal, this
appears to me to be entirely unreal. For my part, I agree with the dissenting
judgment of Sir George Waller in finding no unity of interest, no unity of
title, certainly no unity of time and, as I think, no unity of possession. I
find it impossible to say that the agreements entered into with the respondents
created either individually or collectively a single tenancy either of the
entire flat or any part of it. I agree that the appeal should be allowed.
In his speech
LORD JAUNCEY OF TULLICHETTLE said: These two appeals which arise out of very
different circumstances raise the question of whether arrangements permitting a
plurality of persons to occupy furnished accommodation for a financial
consideration constitute leases to which the Rent Acts would apply or licences
to which they would not. The facts have been fully set out in the speech of my
noble and learned friend Lord Templeman and it is therefore unnecessary for me
to rehearse them in any detail.
A G
Securities v Vaughan and Others
At the date of
the commencement of the proceedings on June 27 1985 each of the four defendants
were in occupation of the flat by virtue of separate agreements dated as to one
in 1982, two in 1984, and one in 1985. Each agreement stipulated a different
monthly payment and a different starting date. In other respects the agreements
were in identical terms. It is accepted that these agreements were perfectly
genuine and were not intended in any way to cloak the intentions of the
parties. The Court of Appeal [1988] 2 WLR 689 (Fox and Mustill LJJ; Sir George
Waller dissenting) concluded that there was a joint tenancy created by a single
implied agreement for the grant of exclusive possession to the defendants when
the fourth defendant’s agreement was signed. The Court of Appeal further
concluded that in the event of one of the four
similar agreement a new joint tenancy would arise by implied surrender and
regrant.
During the
course of argument a good deal was said about the recent decision in this House
of Street v Mountford [1985] AC 809. In that case it was, to
quote the words of my noble and learned friend Lord Templeman, at p 823, ‘clear
that exclusive possession was granted and so much is (sic) conceded’. In the
present case exclusive possession is the primary issue since without it there
can be no joint tenancy. Street v Mountford establishes the legal
consequences which may, in given circumstances, flow from an arrangement
whereby the occupier of residential property has exclusive possession thereof,
but it does not directly assist in determining whether or not he has such
exclusive possession.
My lords, the
flat had four bedrooms and each agreement contemplated that up to four persons
could share the flat at any one time. It would look very much as if the parties
intended that each occupier would have his or her own bedroom and would share
communal facilities with the others, and this is what happened in practice.
However, this case is not concerned with whether each occupier had exclusive
possession and hence a tenancy of a bedroom but with whether the four
defendants together had exclusive possession and hence the joint tenancy of the
flat as a whole.
When the first
occupant alone is in the flat he may have de facto possession thereof
but that possession is certainly not exclusive since he is bound in terms of
clause 2(3) to share the flat with up to three other persons licensed by the
owner. It is not without significance that there is no obligation on the owner
to grant licences to other persons in terms identical to those contained in the
first agreement. Thus the owner could allow a friend or relation to occupy the
flat without payment or he could permit one of the occupants to keep a dog or a
cat notwithstanding the prohibitions in clause 2(7) in the first agreement.
Similarly there is no exclusive possession in anyone when the second and third
occupants move in. The conclusion that when the fourth occupant moves in a
single agreement is implied to create a joint tenancy is somewhat startling
when it is remembered that the individual occupants are not said to be
connected in any way nor to be in occupation as a result of any preconceived
arrangement inter se. When the consequences of this conclusion are examined in
detail I am, with all respect to the Court of Appeal, driven to the view that
it is unsound.
Normal
attributes of a lease to joint tenants include a demise for a specific period
with exclusive possession at a single rent for payment of which each joint
tenant is liable to the lessor in full subject to relief from his co-tenants.
No one tenant can terminate the lease during its currency but where the
stipulated period has expired and the joint tenants hold over due notice by one
will terminate the lease since the continuance of the springing interest
requires the consent of all parties to the lease. There is, to say the least, a
substantial interlocking of interests of the joint tenants. In the present
case, as I have already remarked, each defendant arrived independently in the
flat and there is nothing in any agreement to suggest that the right of one
defendant to share the flat could be determined by anyone other than the owner
or himself. Indeed I have no doubt that each of the four defendants would have
been horrified if he or she had thought that his or her right to remain in the
flat after the expiry of the initial six-month period could be determined by
the independent action of a fellow-occupant.
My lords, if
the arrival of a fourth occupant converted three persons occupying under
licence agreements into joint tenants under a single implied agreement one must
ask what is the rent payable and the duration of the lease. Each of the four
defendants was paying a different monthly sum under their respective agreements
and when the fourth defendant arrived the first, second and third defendants
were occupying on a monthly basis, their initial six-month period having
expired, whereas he was entitled to occupy for an initial period of six months.
It has not been suggested that it would be possible to have a joint tenancy
with different terms for each tenant. In these circumstances what would be the
term for the implied joint tenancy resulting from the arrival of the fourth
defendant? Would it be six months,
thereby conferring on the first, second and third defendant rights which they
did not possess under their own agreements or would it be simply one month
thereby depriving the fourth defendant of rights which he demonstrably had
under his own agreement?
I pose this
question merely to demonstrate the problems created by the theory of a single
implied agreement consequent upon the arrival of a fourth occupant. The matter,
however, does not end there because it follows that if there is no joint
tenancy until the arrival of the fourth defendant there ceases to be a joint
tenancy as soon as one occupant leaves unless there is a simultaneous insertion
of a substitute in his place. If there is a gap in time between the departure
of one occupant and the arrival of another the remaining defendants revert to
the status of licensees. Thus the nature of the rights of three out of four of
the occupants of this flat would depend not on the terms of their agreement
with the owner but on whether or not at any one time there happened to be a
fourth occupant in the flat.
The concept of
surrender and regrant in leases and as it operated prior to 1707 in relation to
resignations in favorem of Scots Peerages involved the grantee
surrendering his existing rights in exchange for new or altered rights. The
implied surrender and regrant in this case would arise not because of any act
upon the part of the surrendering grantee but solely because of the chance
advent of a stranger. I am not persuaded that this is a situation in which it
would be appropriate to make such an implication.
I should be
surprised indeed if a joint lease could be created by four separate documents
of different dates in favour of four independent persons each paying a
different rent and also for different periods of six months. Such an
arrangement would, as Sir George Waller pointed out [1988] 2 WLR 689, 703, be
notably deficient in the four unities of interest, title, time and possession.
My lords, I have no doubt whatever that the plaintiffs and defendants intended
that each defendant should have, under his or her agreement, certain rights of
occupation in the flat and that such rights should be entirely independent of
those of every other defendant. I have also no doubt that the parties have
achieved this result and that the plaintiffs are well founded in maintaining
that there were four licence agreements relative to shared occupation of the
flat which did not in aggregate confer exclusive possession thereof upon the
four defendants. It follows that there was no joint tenancy thereof.
I would
therefore allow the appeal.
Antoniades v Villiers and
Bridger
In this appeal
the defendants entered into occupation together on the same day with the
intention, which was known to the plaintiff, of living together as man and
wife. The defendants were interested only in occupying the flat together. The
plaintiff made clear to them that he was not prepared to grant a lease which
would be subject to the Rent Acts but would grant only individual licences. The
defendants then signed separate agreements in identical terms in which they
each undertook, inter alia, to pay one half of the financial
consideration required by the plaintiff. Two issues arise in this appeal
namely:
(1) Whether the two agreements fall to be read
together and constitute a single agreement between the plaintiff on the one
hand and the two defendants on the other; and
(2) If so, what effect is to be given to the
joint agreement having regard to its substance and reality.
My lords, I do
not doubt that the two agreements must be read together. The initial approach
to the plaintiff was made by the first defendant who indicated that he wanted the
flat for himself and the second defendant. The two defendants visited the flat
together with their references and at the request of the first defendant the
plaintiff provided a double bed. There is no suggestion that the defendants
asked to sign separate agreements and they did so only because of the anxiety
of the plaintiff to avoid granting a lease. As I have already remarked, the
agreements were in identical terms and it would in all the circumstances be
quite unrealistic to treat them other than as a single agreement in favour of
the two defendants.
What effect is
then to be given to the agreements? If
they are construed solely by reference to their terms and without regard to
surrounding circumstances the conclusion must be that there was no intention to
confer exclusive possession of the flat upon the two defendants. The narrative
in the preamble so states and clause 16 is unambiguous in its terms. However,
it would not be right to look at the agreements without regard to the
circumstances which existed at the time when they were entered into.
Furthermore, the defendants maintain that so far as they purport not to confer
exclusive possession upon them they are a sham. Accordingly, although the
subsequent actings of the parties may not be prayed in aid for the purposes of
construing the agreements they may be looked at for the purposes of determining
whether or not parts of the agreements are a sham in the sense that they were
intended merely as ‘dressing up’
The agreements
were clearly drawn up with the decision of the Court of Appeal in Somma
v Hazelhurst [1978] 1 WLR 1014 in mind. The agreements in that case were
very similar to those in this appeal but they related to a bed-sitting-room
containing two beds rather than to a flat. The Court of Appeal held that the
young couple were only licensees of the bed-sitting-room but the decision was
disapproved by this house in Street v Mountford wherein my noble
and learned friend Lord Templeman concluded [1985] AC 809, 825 that the
obligation on the couple ‘to share the room in common with such other persons
as the landlord might from time to time nominate’ was a sham and that they were
entitled jointly to exclusive possession of the room and were thus joint
tenants.
The attic flat
with which this appeal is concerned consists of a bedroom containing a double
bed and other furniture, a sitting-room containing inter alia a
bed-settee, a table-bed and a chair, a kitchen, bathroom and hall. It was thus
possible for someone else to sleep in the flat and indeed for some five or six
weeks a friend of the defendants stayed there after permission had been
obtained from the plaintiff. When the agreements are looked at in detail the
operation of certain clauses produces bizarre results. Clause 2 imposes on the
licensee responsibilities for payment of all gas and electricity consumed in
the flat as well as in the entrance hall, staircase and vestibule of the
building. Joint responsibility by each of the two licensees for power consumed
in the flat would be an entirely reasonable arrangement so long as they alone
were using the power but would become curious, to say the least, if others
nominated by the licensor were sharing the flat and consuming power. The
responsibility for power consumed by others in the hall, staircase and
vestibule is of the latter character. Obligations in clauses 4, 5, 6 and 7
anent the condition of the flat and the contents are again reasonable only so
long as the two licensees are occupying the flat alone. Is it conceivable that
the defendants assumed these obligations in the knowledge that the extent of
their liability to the licensor might be measured not by their own actions but
by the actions of others nominated to share the flat over whom they had no
control? To answer this question it is
necessary to consider clause 16 which is critical to the appeal.
If the clause
is read literally the licensor could permit any number of persons to share the
flat with the two defendants, even to the extent of sharing the joys of the
double bed. Mr Antoniades, in his powerful address to your lordships, argued
that the sole purpose of the clause was to enable him to use the flat if some
disaster befell his own house and he had no roof over his head. Had the clause
so specifically stated, different considerations might have applied.
Unfortunately the clause is quite unlimited in its terms and purports to
entitle the licensor to pack the flat with as many people as could find some
sleeping space therein. The judge found as a fact that when the defendants’
friend slept in the bed-settee the conditions in the flat were cramped. This
can also be inferred from the plan which was made available to your lordships
and from which it appears that it would be quite unrealistic for anyone to
sleep in the flat elsewhere than in the double bed in the bedroom and in either
the table-bed or bed-settee in the small sitting-room. In the latter event
there would be little remaining room in the sitting room when the bed was up. This
situation certainly does not suggest that the parties ever contemplated that
other persons would be nominated to share the flat. When subsequent events are
looked at the matter becomes even clearer. Although the licensor granted
permission to the defendants to have the friend to stay for some weeks he made
no charge therefor and during the 17 months which elapsed between the
defendants’ entry to the flat and service upon them of notice to quit the
licensor made no attempt to occupy the flat himself or through anyone nominated
by him. In all these circumstances I am driven to the conclusion that the
parties never intended that clause 16 should operate and that it was mere
dressing up in an endeavour to clothe the agreement with a legal character
which it would not otherwise have possessed. It follows that it should be
treated pro non scripto.
If clause 16
is ignored and regard is had to the circumstances in which the defendants came
to occupy the flat in the first place and to the size of the flat, clauses 2,
4, 5, 6 and 7 all indicate an intention that the two licensees should have
exclusive possession of the flat and this indication is confirmed by the
remainder of the agreement notwithstanding the protestations of lack of
exclusivity of possession in the narrative in the preamble. In my view the
substance and reality of these agreements was to confer upon the defendants
exclusive possession of the flat for a term in consideration of periodical
payments. Street v Mountford [1985] AC 809 establishes that in such
a situation a tenancy is created.
I would
therefore allow the appeal.
