Abandonment of licence — Freehold sold at price below market value — Term of sale that sellers entitled to rent-free accommodation in property for life — Licensees leaving property after short time — Whether licence abandoned by implied or tacit agreement — Whether need for formality in bringing licence agreement to an end — High Court finding that licence not abandoned upheld
In 1946 W, the first defendant, became the tenant of the Old Rectory, Weeting, Norfolk. The property consisted of an early 19th-century house with nine bedrooms, a coach house, outbuildings and four acres of grounds. In 1951 W purchased the freehold and lived there with his wife, the second defendant, and their children. Their eldest son, J, the first plaintiff, was born in the house. In 1985 W and his wife, then aged 76 and 72 respectively, were thinking of retiring. They did not want to leave the Old Rectory and J was anxious to stay there too. It was agreed that J should purchase the property from W and continue to run his business from there.
W was advised informally that the property was worth £80,000 to £90,000. J agreed to pay a price of £35,000. J then found that he could manage only £30,000 of which £15,000 was to be raised on a building society mortgage. The balance of £15,000 was to be left outstanding on a second mortgage in favour of W with interest of £4,200 (representing interest on £15,000 for eight years at an annual rate of only 3.5%), the aggregate of £19,200 being repayable by monthly instalments of £200 over eight years. It was a term of the transaction that W and his wife should be granted a licence to continue to occupy their living quarters rent free during their joint lives and the life of the survivor.
The judge found as a fact that the sale was at an undervalue and the provision of living accommodation was an important part of the consideration. The action concerned the alleged abandonment of that licence when, on February 8 1987, barely a year after the licence had been granted, W and his wife moved out of their rooms in the Old Rectory and never returned. There having been no express agreement between the parties, the question for the court was whether the licence had been abandoned by an implied or tacit agreement between them. J put the house on the market at an asking price of £395,000. W and his wife registered land charges after a failure to agree on a figure for their surrender of the licence and a purported determination of the licence by J. J and his wife, P, the second plaintiff, then sought a declaration that the licence had been determined, an order for the vacation of the land charges and damages. Before the hearing, contracts for the sale of the Old Rectory had been exchanged at the price of £450,000. The High Court held that W had not abandoned his licence and awarded him damages in the sum of £70,000. J and P appealed against the decision. It was agreed that if an award of damages was appropriate, the figure of £70,000 should stand.
Held The appeal was dismissed.
1. The abandonment of a contractual licence to occupy land required no formalities, nor was it necessarily founded on estoppel. In particular, there was no necessity for someone who alleged an implied abandonment to have acted to his detriment on the faith of a representation made by the other party to the contract. It was enough that the parties had so conducted themselves that it ought to be inferred that they had mutually agreed to bring the contract to an end.
2. For the appellants to rely on an abandonment of the licence in this case, they had to show that W and his wife had so conducted themselves as to entitle the appellants to assume, and they did assume, that it was tacitly agreed to be abandoned: see per Lord Brightman in Paal Wilson & Co A/S v Partenreederei Hannah Blumenthal [1983] 1 AC 854.
3. The judge in the present case had not been referred to Lord Brightman’s test and in order to apply it, the Court of Appeal had to look at all the facts afresh and make the necessary inferences itself. For that purpose, the court could not make findings on any point where there was a conflict of evidence. But where the evidence was clear and unchallenged, the court could and must accept it as probative of the facts deposed to and draw from them such inferences as were appropriate.
4. In this case there was clear and unchallenged evidence that W and his wife were sent a deed of surrender of the licence, which on advice they refused to sign. From this and from other evidence before the court, the appellants were not entitled to assume that the licence was agreed to be abadoned. It was not reasonable to assume that simply by departing as they did, W and his wife were agreeing to abandon all their contractual rights under the licence, which not only provided for a formal method of determination but might have lasted for another 10 or 15 years and for which they had given a very substantial consideration and had so far received very little in return.
Elizabeth Gloster QC and Fay Stockton (instructed by Lloyd & Co, of Thetford) appeared for the appellants; Harvey McGregor QC and Nicholas Brooke (instructed by Greene & Greene, of Bury St Edmunds) appeared for the respondents.
