Agricultural holding – Defendant holding subtenancy – Scheme agreed between freeholders and tenant – Service of notice to quit not to be followed by counternotice – Whether scheme terminating subtenancy – Whether scheme constituting surrender
In March 1970 E, as freeholder, granted to himself and his two sons, J and S, an annual tenancy of agricultural land at Mordon, County Durham. On his death the freehold vested in executors and the annual tenancy vested in the two sons as surviving joint tenants. Between 1980 and 1983 the defendant became a subtenant. Between 1984 and 1986 the title to the freehold reversion became vested in the first and second plaintiffs, a solicitor and a land agent, as trustees for S’s children, and in Mrs S, the third plaintiff. There was a close family connection at all times between the freeholders for the time being and the headlessees. Both the headlease and the subtenancy were protected by the Agricultural Holdings Act 1986 (the Act). By 1991 the plaintiffs wanted to obtain vacant possession of the land so that they might sell it with vacant possession to raise capital for S’s children. To achieve this result, a scheme originating from the first two plaintiffs was agreed whereby the plaintiffs, as owners of the severed parts of the reversion to the headtenancy, would serve upon the headtenants a notice to quit; the tenants would not serve a counternotice and, so it was believed, the statutory regime of the Act would be circumvented and the subtenancy, and with it the defendant’s right to possession, would come to an end with the termination of the headlease. On April 1 1992 the notices to quit, expiring on May 13 1993, were served. No counternotices were served. The plaintiffs applied for an order for possession. The judge decided that the notices were not effective to determine the defendant’s subtenancy . He held that the “scheme” amounted to collusion which vitiated the notices to quit and that its effect was the same as the voluntary surrender of the headlease. The plaintiffs appealed contending, inter alia, that the facts did not amount to collusion and that the judge’s conclusion had not been supported by Sparkes v Smart [1990] 2 EGLR 245, upon which he had relied.
Held The appeal was dismissed.
1. The act of a landlord or tenant serving on the other a notice to quit was a unilateral act, the effect of which was to end both the tenancy and any subtenancy arising out of the tenancy: see Pennell v Payne [1995] QB 192. By contrast, surrender was not a unilateral act. A surrender by a tenant to the landlord brought to an end the existence of the tenancy, but did not thereby bring to an end any subtenancies already granted: see Law of Property Act 1925, section 139. The mechanism employed by the plaintiffs of serving a notice to quit on the footing that no counternotice would be served was tantamount to surrender.
2. The judge had concluded, and there had been no challenge to this conclusion, that the freeholders and tenants had agreed prior to the service of the notice to quit to adopt the scheme for the purpose of bringing to an end the defendant’s subtenancy. The court was bound by Sparkes v Smart (supra). Where there was an agreement to serve a notice to quit, but that service of a counter-notice would not follow, the court would treat it as if it were a surrender. The action of the plaintiffs was not a unilateral act, but a consensual surrender which did not result in the determination of the defendant’s subtenancy.
3. Leave to appeal to the House of Lords was granted.
Derek Wood QC and John McGhee (instructed by Burges Salmon, of Bristol) appeared for the appellants; Andrew Kolodziej (instructed by Smith Roddam, of Bishop Auckland) appeared for the respondent.
