Overriding interest — Bank having charging order over premises — Builder moving in to premises in lieu of payment by owner — Whether builder having periodic tenancy — Whether tenancy void for uncertainty — Appeal by builder against possession order allowed
B was the owner of a house at 85 Ashburnham Road, Kensal Rise, Willesden, London NW10, which was the subject of a charging order in favour of the bank. M was a builder who agreed to carry out refurbishment of the house, which was to be paid for progressively. When B failed to make the payments, it was agreed that M should take over the property and to use it as he wished until he had been paid in full. Under that agreement M completed the refurbishment, furnished the house and moved in during August 1988, having heard nothing from B after June 1988.
The bank brought proceedings seeking a possession order in respect of the property which it wished to sell to settle B’s indebtedness to the bank. M appealed against the granting of the order claiming that he had an overriding interest under the Land Registration Act 1925. An issue arose whether M was in fact a tenant of the house.
Held The appeal was allowed.
1. In Ashburn Anstalt v Arnold (No 2) [1988] 1 EGLR 64, the Court of Appeal held that a valid tenancy could exist even though there was no certainty as to duration, because in that case the arrangement in question could be brought to an end by both parties in circumstances which were free from uncertainty (ie in the sense that there would be no doubt whether the determining event had happened). There was no reason why the court should not hold the parties to their agreement and the mere absence of a formula referring to a periodic tenancy should not alter the position.
2. In Prudential Assurance Co Ltd v London Residuary Body [1991] EGCS 111, the Court of Appeal had found difficulty in reconciling Ashburn with Lace v Chantler [1944] KB 368, where it was held that a purported tenancy for the duration of the war was not a certain tenancy because of the uncertainty of the term. However, the court distinguished the facts in Prudential from those in Ashburn in that the tenant could bring the term to an end in Ashburn on the occurrence of an event that was within the control of the landlord. The court had granted leave to appeal to the House of Lords in the Prudential case.
3. In the present case, the arrangement between B and M could be terminated either by M if, having moved in he wished to leave the property at any point, or by B if he paid M for the work done. It was not possible to distinguish the termination arrangement from that in Ashburn in that the termination of the term of uncertain duration was in control of both parties. As Ashburn was binding on the court the only conclusion was that M had a tenancy of the house.
James Dingemans (instructed by Rowe & Maw, for M R Stephenson, of Bedford) appeared for the appellant builder; and Mary Cook (instructed by Allen & Overy) appeared for the respondent bank.
