Defendant holding subtenancy – Freeholder and head tenant wanting vacant possession – Freeholder serving notices to quit – Head tenant agreeing with freeholder not to serve counternotices – Whether scheme terminating subtenancy – Whether scheme constituting surrender – Notices to quit held to be invalid – Appeal allowed
Between 1984 and 1986 the title to the freehold reversion in land at Mordon, County Durham, became vested in the claimants. The defendant was a subtenant of the land. In 1991 the claimants and the head tenants wanted to obtain vacant possession of the land in order to sell it. Both the headlease and the subtenancy were protected by the provisions of the Agricultural Holdings Act 1986. Section 26 of the Act entitled the tenant of an agricultural holding, who was given notice to quit, to serve a counternotice on his landlord. If he did so within one month, the notice to quit had no effect unless confirmed by an Agricultural Land Tribunal. The section applied both to a notice to quit given to a subtenant by the head tenant and to a notice to quit given to a head tenant by the head landlord. However, a subtenant was given no protection from the automatic determination of his subtenancy at common law on the determination of the head tenancy, and there were no provisions in the Act to extend the subtenancy after the determination of the headlease.
In an attempt to take advantage of that lack of protection, a scheme was agreed whereby the claimants, as freeholders, would serve upon the head tenants notices to quit, whereupon the head tenants would not serve counternotices, with the result that the head lease would terminate and the subtenancy and the defendant’s right to possession would come to an end. On 1 April 1992 the notices to quit, expiring on 13 May 1993, were served and, as planned, no counternotices were served. Subsequently, the claimants applied for an order for possession. The judge dismissed the application holding that the notices were not effective to determine the defendant’s subtenancy since the scheme amounted to collusion, which vitiated the notices to quit. The claimants appealed. The Court of Appeal dismissed the appeal [1998] EGCS 107, holding that the scheme of serving a notice to quit on the footing that no counternotice would be served was tantamount to surrender, which did not result in the determination of the defendant’s subtenancy. The claimants appealed.
Held: The appeal was allowed.
1. The arrangement entered into by the parties was not tantamount to surrender, but was very different in character. The head tenants were willing to have the head tenancy brought to an end in accordance with its terms by notice to quit. In so far as the head tenants consented to the service of the notices to quit, their consent was unnecessary; the freeholders were only doing what they were entitled to do under the terms of the head tenancy. Once the notices to quit expired, the head tenancy came to its predetermined end in accordance with the terms of the tenancy agreement. The defendant’s derivative interest was determined not by any agreement between the freeholders and the head tenants, but by the natural expiry of the tenancy from which his interest was derived.
2. The decision of the Court of Appeal had the extraordinary result that the parties to a tenancy could not achieve together by agreement what either could achieve alone without it. It also produced the situation that a head tenant could determine a subtenancy he had himself created by the unilateral act of serving a notice to quit on the head landlord, but could not achieve the same result by telling the head landlord that he would not object to a notice to quit served by him. Such a result had no place in the orderly development of the common law. The proposition that a notice to quit served by pre-arrangement with the recipient was “a consensual transaction tantamount to a surrender” and was incapable of determining a subtenancy was unsupportable: Mellor v Watkins (1874) LR 9 QB 400 considered; Sparkes v Smart [1990] 2 EGLR 245 overruled.
Derek Wood QC and John McGhee (instructed by Burges Salmon, of Bristol) appeared for the claimants; Andrzej Kolodziej (instructed by Smith Roddam, of Bishop Auckland) appeared for the defendant.
Thomas Elliott, barrister
