Landlord and Tenant Act 1954, Part II, section 38(4) — Plaintiffs in this action, a medical organisation, sought possession of a freehold property against the defendants, a company which ran a hostel for students and claimed protection under Part II of the Act — Plaintiffs were contemplating redevelopment at some time in the future and it suited them to grant short leases without security of tenure — With this object both parties agreed to use the machinery for contracting out of such security provided by section 38(4) of the 1954 Act — Three leases for short terms amounting to no more than a year at a time had been arranged and approved by the court, the last such term ending on October 31 1983 — Subsequently a number of extensions took place by negotiation, the tenants remaining in possession and rent being paid and accepted — Knox J found that it was understood and accepted by both parties that until a court order was obtained under section 38(4) there would be no binding agreement and either party was at liberty to resile from the negotiations — In fact no further court order was obtained and eventually the present proceedings took place — The issue of law which arose in these circumstances was the status of the tenants’ possession after October 31 1983 when the last of the leases approved by court order terminated — Plaintiff landlords claimed that the defendants were tenants at will, while the defendants claimed that they were entitled to a tenancy protected under Part II of the 1954 Act — Held that this was a classic case of the circumstances which created a tenancy at will — This interpretation accorded best with the expressed intentions of the parties — The fact that rent had been paid and accepted was, on the authorities, compatible with the existence of a tenancy at will — There was no dispute that such a tenancy was outside the protection of the Act — Plaintiffs entitled to possession
The following cases are referred to in this report.
Clarke v Grant [1950] 1 KB 104; [1949] 1 All ER 768, CA
Doe d Cheny v Batten (1775) 1 Cowp 243
Doe d Bastow v Cox (1847) 11 QB 122; 17 LJQB 3; 11 Jur 991
Doe d Lord v Crago (1848) 6 CB 90; 17 LJCP 263; 12 Jur 705
Dougal v McCarthy [1893] 1 QB 736, CA
Hagee (London) Ltd v A B Erikson and Larson [1976] QB 209; [1975] 3 WLR 272; [1975] 3 All ER 234; [1975] EGD 139; (1975) 236 EG 479, [1975] 2 EGLR 61, CA
Hargreaves Transport Ltd v Lynch [1969] 1 WLR 215; [1969] 1 All ER 455; (1968) 20 P&CR 143; [1969] EGD 87; 209 EG 467
Longrigg, Burrough & Trounson v Smith [1979] EGD 472; (1979) 251 EG 847, [1979] 2 EGLR 42, CA
Strong v Stringer (1889) 61 LT 470
Swain v Ayres (1887) 20 QBD 585; (1888) 21 QBD 289, CA
Wheeler v Mercer [1957] AC 416; [1956] 3 WLR 841; [1956] 3 All ER 631; [1956] EGD 248; (1956) 168 EG 520, HL
In this action the plaintiffs, the Cardiothoracic Institute, sought against the defendant, Shrewdcrest Ltd, possession of the freehold property known as St Wilfrid’s Convent, Cale Street, London SW3.
Robert Pryor QC and Paul de la Piquerie (instructed by Norton, Rose, Botterell & Roche) appeared on behalf of the plaintiffs; Michael Rich QC and C J Lockhart-Mummery (instructed by Wood Winfield) represented the defendants.
Giving judgment, KNOX J said: This is an action brought by the plaintiff, the Cardiothoracic Institute, against the defendant, Shrewdcrest Ltd, for possession of a freehold property known as St Wilfrid’s Convent, Cale Street, London SW3 (I will call it ‘the convent’). There have been changes by way of succession on both the plaintiff’s and defendant’s side in the course of the history of this matter, but as neither party relied upon them it will suffice to say that the plaintiff in 1982 acquired the freehold of the convent, which had previously belonged to the Department of Health and Social Security, and the defendant company, Shrewdcrest Ltd, succeeded another company in the same group, Stowover Ltd, in the autumn of 1983. For the purposes of this judgment I propose to refer to the landlord (now the plaintiff) and the tenant (now the defendant) and ignore the changes of identity upon which it is agreed that nothing turns.
The tenant conducts a business providing students with hostel accommodation. The landlord is, as its name indicates, a medical organisation. At all material times there was a prospect of the landlord becoming able to redevelop the convent for its own purposes at some more-or-less uncertain time in the future. It therefore suited both the landlord and the tenant for the latter to become a tenant of the convent on a short-term basis. The tenant was thereby provided with premises upon which to trade and the landlord received income and had its property occupied and protected from trespassers. But it was always important to the landlord to be able to recover possession when its redevelopment plans matured. It has not been disputed that the tenant’s business was one which fell within the protection accorded to business tenancies by Part II of the Landlord and Tenant Act 1954. Advantage was therefore taken of the amendments introduced by section 5 of the Law of Property Act 1969, to section 38 of the Landlord and Tenant Act 1954, and on three successive occasions an order of the West London County Court was obtained on the joint application of the landlord and the tenant allowing them to enter into tenancy agreements which excluded the provisions of sections 24 to 28 of the Landlord and Tenant Act 1954 and therefore gave the tenant no security of tenure under that Act. First, pursuant to an order dated June 19 1980, there was an agreement dated June 27 1980 for the grant of a lease to the tenant of the convent from May 1 1980 till October 31 1981 at a rent of £10,000 per annum payable quarterly in advance on May 1, August 1, November 1 and February 1 of each year. Second, pursuant to an order dated March 31 1982 there was a lease dated April 6 1982 of the convent granting the tenant a term of one year from November 1 1981 to October 31 1982 at a rent of £30,000 per annum payable in advance at stated times in such a way that larger payments in July, August and September, the peak season for the tenant’s business, were required than in the earlier part of the one-year term. Third, and finally so far as court orders were concerned, pursuant to an order dated September 9 1982 there was a lease dated November 24 1982 of the convent granting the tenant a term of one year from November 1 1982 to October 31 1983 at a rent of £30,000, payable again in advance in the same manner, weighted towards the summer months as was|page:58| provided for by the immediately preceding lease, except that the preceding lease being granted well after the term began provided for an initial payment of £5,000 on execution whereas the third lease in the chain provided for two payments of £2,500 on November 1 1982 and February 1 1983. Although all three of these leases were granted after the term expressed to be granted had commenced it is common ground that even assuming that the tenant had the benefit of a protected tenancy before each grant any such protection would have ceased on the grant.
By the autumn of 1983 it was clear that the landlord was not going to wish to redevelop the convent at once after October 31 1983 and negotiations were started for a further tenancy to be granted to the tenant.
Three witnesses were called for the plaintiff, Brigadier Vernon, Mr Travis and Miss Carden. They were the persons who as estate managers acting for the landlord successively conducted the negotiations with the tenant for extensions of the tenancy. No oral evidence at all was called by the tenant, but there was a good deal of contemporary documentation evidence, mainly in the form of correspondence between one or other of the three persons I have named who gave evidence and either Mr Lofts or, particularly after October 1984 when Mr Lofts severed his connection with the tenant, Mr Rivers, both of whom at the material times were directors of the tenant.
Throughout the period between the end of October 1983 and September 1985, when a claim was advanced for the first time by the tenant to be entitled to a tenancy protected by the Landlord and Tenant Act 1954, Part II, the landlord and tenant were in a succession of negotiations for a series of extensions of the lease granted on November 24 1982 which determined on October 31 1983. The tenant remained in possession of the convent throughout and paid rent in general accordance with the terms of the successive extensions under which the rent was altered from time to time, from the £30,000 per annum reserved by the lease dated November 24 1982, and these rent payments were made, as to the great majority, monthly in advance. In particular, almost immediately after the expiration of the last of the three tenancies the subject of the court order on October 31 1983, that is to say on November 2 1983, a cheque was tendered and accepted, and later cleared, for £1,000, which was the rent payable under the negotiated first extension from November 1 1983 until June 30 1984, and it continued to be paid in this way until April 1984, when the payments increased to £1,666.66 monthly, the rate payable from November 1 1983 to September 30 1984 under the further extension negotiated in November 1983 from July 1 1984 to September 30 1984. Precisely why that increase came into force in April 1984 was not explained in evidence, but the most probable explanation is that it was demanded by the landlord’s finance department on the basis of information given to it by Mr Travis. Neither the monthly £1,000 nor the monthly £1,666.66 was the same as the rent reserved by the lease which expired on October 31 1983, which was payable quarterly, subject to weighting in the summer months.
The successive extensions thus negotiated were as follows: in October 1983 an extension from November 1 1983 to June 30 1984 was negotiated. In November 1983 a further extension, from July 1 1984 to September 30 1984, was negotiated. In July 1984 an extension from October 1 1984 to May 1 1985 was negotiated, although the precise rental and dates for payment remained undetermined until, on November 29 1984, the extension was agreed to run until June 30 1985 and the rental and dates for payment were agreed. In April 1985 a further extension was agreed until a date in September, which was left uncertain, until in June 1985 the date was fixed by the landlord at September 15 1985. Each of these extensions was, in my judgment, negotiated subject to a condition that the extension should be the subject of a tenancy agreement approved by the court, excluding the operation of sections 24 to 28 of the Landlord and Tenant Act 1954, and I find that it was understood and intended by both parties that until such order was obtained there would be no legally binding agreement between them, so that in principle at least both landlord and tenant were at any time free to resile from the negotiations.
I base this finding on the following considerations: until September 1985 the tenant was from time to time at pains to emphasise its lack of security of tenure, which both parties, who were fully aware of the relevant legislation, knew could only be the result of a court order under section 38(4) of the Landlord and Tenant Act 1954. Late in 1982 (that is while the third lease approved by court order was still current) Mr Lofts on behalf of the tenant solicited Brigadier Vernon’s help to fend off requirements from the local authority health inspector, who was threatening to enforce more strictly sanitary regulations and insist on the installation of a quantity of hand basins. Mr Lofts wrote on November 26 1982 to Brigadier Vernon as follows:
Dear Sir, Re: 76 Cale Street, SW3
Can you please help me? I had a meeting with Mr Sampson of the Public Health Department of the Royal Borough of Kensington and Chelsea at this building yesterday.
As our lease has been renewed for another year, the Public Health Department has to consider its position in respect of allowing us to continue without providing wash hand basins in all the rooms, or not.
Up until now, their attitude has been to adopt a recommendation not to enforce the Council’s standards because of the temporary nature of our tenure, however this situation is now rolling over into the fourth year!
I have explained to Mr Sampson that in all probability this is our last period of occupation of the premises because the hospital is now ready to take the building back and in such circumstances Mr Sampson has indicated to me that the Public Health Department will in all probability be able to adopt their previous recommendation.
My application to them requesting that they do, will be greatly assisted if it can be accompanied by a letter from you indicating that we are unlikely to be able to remain for another year after it presently expires in October, 1983.
I should therefore be grateful if you can write to me along such lines.
Brigadier Vernon replied on December 6:
This is to confirm that I have extended your Licence to occupy the Convent until October 31 1983. On that date your licence will be terminated as it is almost certain that the Convent will be required for use by the Cardiothoracic Institute.
Only in the very unlikely event of funding not being available for the upgrading (and we already have well over half of it) would there be any possible chance of extending your Licence.
That had the desired effect, since the borough environmental health officer wrote on December 20 1982 to Mr Lofts:
Dear Sir, I thank you for your letter dated December 7 1982, concerning the limited extension of your lease to October 31 1983.
As you are aware, the Health and Housing (Environmental Health and Housing Management) Sub-Committee’s decision not to enforce the Council’s standards with regard to wash hand basins expired on October 31 1982. This decision was based on written undertakings that hostel use would cease on the last day of October 1982. Given that your licence to occupy has been further extended, I am in this individual case only prepared to finally extend the waiver until October 31 1983. This decision is based on information received from my hotels inspector that the premises have been run in a clean and satisfactory manner.
Later on, when Mr Travis had taken over from Brigadier Vernon and the first extension was de facto current, a letter was written on March 26 1984 on behalf of Mr Lofts to Mr Travis which reads as follows:
Dear Bryan, I wish to enlist your help and advice!
The RBK&C Environmental Health Department have written to us informing us that in the very near future we will be issued with a Specification for works to be done for the updating of the means of escape in case of fire. A rough estimate of the works required is £20/25,000.
We would obviously like confirmation that our lease will indeed end on September 30 1984 or the latest news regarding any possible delay in the start of building works, and hence a possible extension.
The Council have indicated that we will only be given two or three months to complete the works once they have issued their Notice. This would mean finishing the proposed works just before the end of our lease. A ridiculous situation I’m sure you will agree, and one naturally that would seriously affect our decision on whether or not we could afford to stay once the Notice has been issued.
If the end of September is now definite would you be kind enough to confirm this in writing to me, and if not, let me know the latest position regarding a possible further extension.
That letter is explicable only on the basis that Mr Lofts appreciated and wished, as against the local authority, to rely on the fact that the tenant’s lease would be outside the protection of the Act. A renewed extension was in fact agreed upon in July of that year.
Next there were repeated occasions when one party or the other referred to instructions to solicitors or formalities, and it was understood by both parties that what the solicitors were to be instructed to do and what the formalities were to consist of was the preparation of necessary documentation for the application, necessarily a joint one, to the court under section 38 (4) of the Landlord and Tenant Act 1954. Thus, in relation to the first extension Mr Travis wrote on October 6 1983:
|page:59|
I have now received official confirmation from the Cardiothoracic Institute that the Finance Committee has given its approval to Shrewdcrest having a further 8-month period as an extension of your current lease to June 30, 1984, for a total exclusive rent of £8,000 based on £1,000 per month.
At the same time, consideration is being given to a further final extension to September 30, 1984 and it is hoped that the answer will be forthcoming in the next month or two.
Accordingly, I shall be informing the Hospital’s solicitors.
In relation to the second extension, from July 1 to September 30 1984, a particularly valuable one from the tenant’s point of view because it covered the peak tourist months, Mr Lofts wrote on March 9 1984 to Mr Travis:
We have still not received any documents from your solicitors in respect of the present period of lease.
As time is going by (we’re due to end the tenancy on September 30 next are we not?) perhaps the formalities should be hurried along!
I look forward to hearing from you
and he expressed himself similarly on March 21 when he wrote:
I have written to our solicitors today asking them to hasten this matter along and so hopefully the formalities will be concluded shortly.
In relation to the fourth extension, both Miss Carden, who had taken over from Mr Travis on the plaintiff’s side, and Mr Rivers, who had taken over from Mr Lofts on the defendant’s side, referred to instructions to solicitors in the same sense. On November 29 1984 Mr Rivers wrote to Miss Carden:
As discussed, I am confirming our telephone conversation of today.
You will be instructing your solicitors to prepare an agreement to cover the period to June 30 1985 at our current rental of £1,666.66 per month (£20,000 per annum).
Miss Carden’s letter the next day, which crossed that letter, read, so far as material, as follows:
Further to our telephone conversation yesterday, I confirm that, as we agreed, our solicitors will now proceed with an extension of your lease to June 30 1985 at the current rent of £20,000 pa payable monthly at the rate of £1,666 per month.
In fact the solicitors for the parties never did finalise the intended application to the county court. This was due to the conduct on the defendant’s solicitors’ side which can most charitably be described as supine. No explanation was offered in evidence for their repeated failure to answer letters. In relation to the extensions after October 31 1983 letters were written to them by the plaintiff’s solicitors on 15 occasions asking for confirmation of the agreement made between the parties or approval of documents for submission to the court for a joint application under section 38 (4). Four replies only were elicited, and they were as follows. On November 23 1983:
Thank you for your letter of November 16. I am checking my instructions and will revert to you as soon as possible.
On June 19 1984:
I am so sorry not to have dealt with your letters of May 9 and April 1.
In fact the letters they had received were dated April 9 and May 1, but nothing turns on that.
Our Client was away extensively earlier this year and I had not had a chance to get specific instructions on the proposals for the current year.
I will be away until the end of next week but hope then to be able to finalise this matter.
I regret to have to say that the statement in that second para is, in my judgment, untrue, in the light of the letter written by Mr Lofts on March 21 which I have already read saying that he had written to his solicitors that day asking them to hasten this matter along.
Next, on April 10 1985 the defendant’s solicitor wrote:
Thank you for your letter of April 1 with enclosure.
First, I apologise for my recent lack of communication due partly to pressure of work and partly due to the absence abroad at relevant moments of my Client.
The present position is that I am instructed to finalise the matter with you, but the relevant director was away last week, and I shall be away until next Monday April 15. Could you please bear with me and we will then try to get the matter finalised as soon as I can check the draft documents are in accordance with my Clients understanding (I have no reason to expect that they are not).
I have new instructions on one point. I understand that your Clients have agreed to extend the term to a date in September. Could you please check this point and I hope to be able to finalise the matter with you next week.
PS I am awaiting instructions as to the significance, if any, of the planning application.
Then finally on August 5 1985 the defendant’s solicitor wrote this:
I apologise for my recent lack of communication. I have reminded my Clients from time to time that I am awaiting clear instructions. I myself will be away for a very short holiday, but will renew my efforts to get this matter properly under discussion on my return.
The second sentence of that last letter was in my view disingenuous, but however that may be there is no evidence in any of these letters of anything inconsistent with a clear appreciation by the defendant’s solicitors that the agreements between the parties for extensions of the lease dated November 24 1982 beyond October 31 1983 were all conditional upon the grant of a court order under section 38(4) of the Landlord and Tenant Act 1954. I find that there was at all material times such a clear appreciation, and I reject any suggestion that the defendant’s solicitors were unable to deal with the matter because of lack of instructions for anything more than quite short periods of time.
Finally, so far as evidence is concerned, I accept Mr Travis’ evidence that when he first met Mr Lofts after taking over from Brigadier Vernon he (Mr Travis) made it clear that his negotiations with Mr Lofts could only be on the basis of the original transaction between the landlord and the tenant, and I find that he meant thereby that any tenancy would have to be approved by the court as excluding sections 24 to 28 of the Landlord and Tenant Act 1954, and that Mr Lofts understood and accepted this.
The expression ‘subject to contract’ was very seldom mentioned during the negotiations regarding extensions after October 31 1983. Mr Travis and Miss Carden accepted that they did not use those words. It was used in the plaintiff’s solicitors’ letters of November 16 1983 and December 3 1984, setting out their instructions as to what the parties had agreed and seeking, in vain, for confirmation or disavowal from the defendant’s solicitors. I find there was no express use of those words in any oral negotiation nor any express acceptance or indeed disavowal of the expression used in the two letters that I have mentioned. In my judgment the agreements between the parties did not have a separate ‘subject to contract’ term over and above the condition which I have found to exist regarding the obtaining of a court order. That condition in practice provided the same result as a ‘subject to contract’ stipulation in that the obtaining of an order under section 38(4) needed a joint application, and if either party had decided not to continue with the joint application it seems to me inevitable that specific performance could not have been obtained of any implied term that each party should use its best endeavours to obtain the relevant court order, because such a term would have fallen foul of section 38(1) of the Landlord and Tenant Act 1954. In this respect the position seems to me to have been different from a contract of sale subject to planning permission where a term that a party shall use its best endeavours to obtain such permission has been implied. See, for example, Hargreaves Transport Ltd v Lynch [1969] 1 WLR 215.
It was argued for the defendant that the agreements for extensions were agreements for tenancies to be granted to the tenant on the terms of the earlier leases approved by the court, and that this was an agreement at most that the provisions of sections 24 to 28 of the Landlord and Tenant Act 1954 should be excluded. Such an agreement, it was argued, not having itself been approved by the court, fell within the prohibition against contracting out in section 38 (1) of that Act and was therefore void. I see no reason to impute to two parties who had successfully operated the provisions of section 38 (4) of the Act such a stultifying form of agreement. The conditional agreement which I have found to have been made is quite capable of achieving the result which both parties desired, and I see no reason to find that these negotiating parties, represented on both sides by persons with professional estate management experience, made an agreement which produced a result which neither of them (assuming the tenant’s and its solicitor’s letters to be honest) desired to achieve.
Reliance was also placed by Mr Rich, for the defendant, on the argument which he put to Mr Travis in cross-examination, that security of tenure was needed by the tenant for outlay on fire precaution and other work which the tenant met, and that this was only consistent with the grant of a fixed term of some duration. In my judgment the tenant was perfectly content to take such risk as there was in laying out moneys on fire precaution works or other improvements, notwithstanding the possibility that the landlord could withdraw before a court order could be obtained and the relevant lease executed. The tenant evaluated that risk as minimal and was proved quite right in doing so. Moreover, the tenant was, as it well knew, in a position to secure a court order on the grant of a|page:60| lease in a very short space of time had it been in its interest to do so.
The issue of law which arises is what on those facts was the status of the tenant’s possession after October 31 1983. Mr Pryor, for the landlord, submitted that it was a tenant at will and therefore unprotected by the Landlord and Tenant Act 1954, Part II. If he is correct in this analysis of its status, as that of a tenant at will, the conclusion that it is outside the protection of the Act follows and is not disputed (Wheeler v Mercer [1957] AC 416; Hagee (London) Ltd v A B Erikson and Larson [1976] QB 209).
Mr Rich, for the tenant, submitted that the tenant was a tenant under a concluded agreement for the grant of a tenancy on the occasions of the agreements for the first and second extensions after October 31 1983 and, if that be rejected, then under a periodic tenancy which arose from the combination of its continued possession after October 31 1983, coupled with the payment and acceptance by the landlord of rent thereafter. If either of these is a correct analysis then it follows that the tenant is protected by Part II of the Landlord and Tenant Act 1954, since there was no relevant order in fact obtained under section 38 (4) of that Act.
Holding over and holding pending a negotiation were described by Scarman LJ in Hagee (London) Ltd v A B Erikson and Larson at p 217 as the classic circumstances in which a tenancy at will would exist. I have held that the landlord and the tenant were in a series of negotiations between October 31 1983 and September 1985 and that all the extensions that were from time to time agreed during that period were agreed subject to a condition that an order under section 38 (4) of the Landlord and Tenant Act should be obtained. The parties were therefore, in my judgment, throughout that period in one of those classic circumstances mentioned by Scarman LJ. Indeed, had the parties not given and accepted rent during this period the case would, in my judgment, have been effectively unarguable on behalf of the tenant. The absence of a separate specific ‘subject to contract’ condition makes no difference to this conclusion, for there is, in my judgment, implicit in a condition that the tenancy agreement negotiated between the parties should be subject to the making of a court order under section 38 (4) of the Landlord and Tenant Act 1954 a term that unless and until the court order is obtained no legally binding grant or acceptance of the tenancy should be made.
That leaves the question of what was the effect of the giving and receiving of rent. The reservation of rent and its payment on a quarterly basis does not prevent there being a tenancy at will. So much was decided as long ago as 1847 in Doe d Bastow v Cox, reported in (1847) 11 QB 122. Hagee (London) Ltd v A B Erikson and Larson took this one step further. There, rent was reserved quarterly in advance, and this was held not to be incompatible with the tenancy at will. Both those cases were cases of express tenancies at will. No case was cited to me of a tenancy at will being held to exist where there was a holding over after the end of the tenancy coupled with the payment and receipt of rent in advance under a proposed further tenancy under negotiation. Wheeler v Mercer was a case of holding over, but it appears from counsel’s argument in the Court of Appeal [1956] 1 QB 274 at p 278 that no rent was taken after the previous tenancy had expired. The giving and receiving of rent does not of itself necessarily import the existence of a tenancy. That was decided in Clarke v Grant [1950] 1 KB 104, where Lord Goddard CJ, after stating the facts, said this:
The county court judge has fallen into the error of confusing an acceptance of rent after a notice to quit with an acceptance of rent after notice that a forfeiture has been incurred. It has always been held that, if a landlord seeks to recover possession of property on the ground of a breach of covenant which entitles him to claim a forfeiture, acceptance of rent thereafter waives the forfeiture, for the reason that the landlord, where liability to a forfeiture has arisen, has the option of saying whether he will treat the breach of covenant as incurring a forfeiture or whether he will not. The breach makes the lease voidable; it does not make it void. It has always been held that if the landlord accepts rent after notice of forfeiture, he thereby acknowledges that the lease is continuing.
With regard to the payment of rent after a notice to quit, however, that has never been the law: if a notice to quit has been given in respect of a periodic tenancy such as a yearly tenancy, the result is to bring the tenancy to an end just as effectually as if there had been a term which had expired. Therefore, when a landlord has brought a tenancy to an end by means of a notice to quit, a payment of rent after that date will only operate in favour of the tenant if it can be shown that the parties intended that there should be a new tenancy. A new tenancy must be created. That has been the law ever since it was laid down by the Court of King’s Bench, presided over by Lord Mansfield, in Doe d Cheny v Batten (1775) 1 Cowp 243. I need not read the judgments in extenso, but Lord Mansfield said: ‘The question therefore is, quo animo the rent was received, and what the real intention of both parties was’.
In the typical case where the giving and receiving of rent leaves the court to infer the existence of a periodic tenancy it is on the footing that this is the interpretation which best fills the vacuum which the parties have left. Thus, in what used to be the ordinary case of a tenancy unaffected by statutory prolongation or protection coming to an end, and the parties giving and receiving rent but not expressly agreeing on the creation of a new tenancy, the preferred solution that the law has adopted is a periodic tenancy, on the footing that that is what the parties must have intended or be taken to have intended. Ultimately it is the intentions of the parties in all the circumstances that determine the result of the giving and acceptance of rent. Tenancies where there is no statutory protection of one sort or another are no longer the norm. Where statutory protection does exist, that has been treated as a significant factor in evaluating the parties’ intention in paying and receiving rent. The high-water mark of that reasoning is to be found in Ormrod LJ’s judgment in Longrigg, Burrough & Trounson v Smith (1979) 251 Estates Gazette 847 at p 849, where he is recorded as saying:
The old common law presumption of a tenancy from the payment and acceptance of a sum in the nature of rent dies very hard. But I think the authorities make it quite clear that in these days of statutory controls over the landlord’s right of possession this presumption is unsound and no longer holds. The question now is a purely open question. It is simply is it right and proper to infer from all the circumstances of the case, including the payments, that the parties had reached an agreement for a tenancy? I think it does not now go any further than that.
Mr Rich submitted that this went further than was necessary for the decision. Neither of the other two judges who concurred in the result in the Court of Appeal expressed such a view, and Mr Rich submitted it was contrary to very well-established authority, citing Doe d Lord v Crago (1848) 6 CB 90, and Dougal v McCarthy [1893] 1 QB 736. On the other hand, he accepted that the payment and acceptance of rent did no more, even under those authorities, than create a presumption, but it was, he submitted, evidence of a periodic tenancy which needed to be overcome. He also submitted that a distinction needed to be made between cases where the issue was, is there a tenancy at all or just a licence or trespass, on the one hand, and cases where, as here, the issue was, given that there is a tenancy, what sort of tenancy is it, tenancy at will or periodic? I reject this latter distinction as having any practical significance because the test enshrined in Lord Mansfield’s quo animo test is in my judgment applicable whenever one finds rent being paid and accepted without there being a clear lease or tenancy agreement in force to explain the payment. The inquiry is as valid and essential whether the landlord is claiming that the occupier is a trespasser as it is if he claims that he is a tenant at will. It may be that factually it is less likely that a claimed trespasser is paying rent pursuant to a periodic tenancy, but it goes no further than that in my judgment.
The tenant’s argument in this case seems to me to fall between at least two stools. On the one hand Mr Rich submitted that there was an agreement for letting for a term of eight months made by letter dated October 6 1983, in which Mr Travis wrote to Mr Lofts:
I have now received official confirmation from the Cardiothoracic Institute that the Finance Committee has given its approval to Shrewdcrest having a further 8-month period as an extension of your current lease to June 30 1984, for a total exclusive rent of £8,000 based on £1,000 per month.
And for a further three months by a letter dated December 2 1983 in a letter in which, so far as relevant, he said this:
At the same time I am pleased to confirm that agreement has been reached whereby your lease can be extended until September 30 1984 on a basis of a final total of £20,000. Accordingly I have today written to our solicitors confirming this final agreement.
On the other hand, he submitted that the payments of rent on or shortly after November 2 1983 created a periodic monthly tenancy. Those in my judgment are mutually exclusive possibilities.
Mr Rich pointed to various pieces of evidence tending to show that Mr Travis, Miss Carden and Miss Oddy, the secretary to the plaintiff, behaved as though there was a lease in existence. This indeed they did, but in my judgment it was by way of anticipation of the grant of the projected tenancies. I do not find that conduct necessarily inconsistent with the conception of a tenancy at will pending such anticipated grant of a tenancy after the necessary court order has been obtained.
The tenant’s interpretation of a concluded grant of a tenancy protected by the Landlord and Tenant Act 1954 seems to me less compatible with the intentions of the parties in agreeing upon a|page:61| tenancy subject to the approval of the court under section 38(4), and paying and accepting rent in accordance with the terms of those proposed tenancies before they came into force, than is a tenancy at will. It is clearly established that it is legitimate to have regard to relevant statutory protection in determining whether or not the acceptance of rent is a factor from which a new tenancy could be created (see per Scarman LJ in Longrigg, Burrough & Trounson v Smith at p 849). Once one takes into account the machinery of the Landlord and Tenant Act 1954 and the parties’ knowledge of its operation it seems to me very clear that they did not intend to create a period of tenancy pending the grant which both sides anticipated of a tenancy approved by the court under section 38(4). Nor do I see any compelling reason why the court should impute such an intention to them if, as is factually perfectly possible, they gave no serious thought to legal repercussions of the payment and acceptance of rent.
In the circumstances I find it unnecessary to express a view either, assuming it lay within my competence to do so, on Mr Rich’s submission regarding what Ormrod LJ said in Longrigg, Burrough & Trounson v Smith or on the several cases cited by Mr Pryor in support of the proposition that the onus of proof to establish a periodic tenancy lies on the tenant.
Mr Rich had another shot in his well-garnished locker and that was a decision of Kekewich J, Strong v Stringer (1889) 61 LT 470. The headnote in that case reads as follows:
A tenant was in possession of plots of land under an agreement for leases to be granted when he should have fulfilled certain conditions as to building. The intention of the parties was, in the view of the court, that the agreement should be regarded as a lease. The conditions were (to the landlord’s knowledge) not fulfilled within the appointed time, but after that date the landlord demanded rent as under the leases, and the tenant paid it.
Held, that the landlord could not, on receiving the rent, stipulate that it was received ‘without prejudice to any breaches of covenant made up to that time in the agreement for leases’.
The remainder of the headnote I need not read.
What the headnote only partially reveals is that Kekewich J held as a matter of law that, where under a building agreement which provided for leases to be granted as soon as six at least out of 10 houses agreed to be built had been covered in and drained into the main sewer the landlord demanded and accepted rent at a time when the lessee builder was in default of his covenant to build, the landlord could no longer rely, as a defence to an action for specific performance with compensation, on the breaches of covenant before the date when he accepted the rent. It was, however, specifically held that he could rely on any breaches of covenant later than the date of acceptance of rent as such a defence.
The only authority relied on in argument and referred to in the judgment was Swain v Ayres (1887) 20 QBD 585 and (1888) 21 QBD 289, which was concerned with relief against forfeiture under section 14 of the Conveyancing Act 1881, the predecessor of section 146 of the Law of Property Act 1925. In my judgment, Strong v Stringer is an authority on waiver of breach of covenant by the acceptance of rent and is not authority for the proposition that the payment of rent under a conditional agreement for the grant of a lease operates as a satisfaction of the condition. The ratio of Kekewich J’s decision is to be found in two sentences, the first at p 472, where he said:
Therefore to my mind the right to have the leases was finally established when that cheque was paid, that is to say, on January 13 1887, from that time the plaintiff was the tenant of the defendant just as much as if all the ten parchments had been drawn up and executed.
And on p 473 where he said:
By accepting the plaintiff as tenant, however, the defendant has admitted that he was entitled to the leases.
The reasoning is strongly reminiscent of the law laid down by Lord Goddard CJ concerning breaches of covenant in the passage which I read earlier from Clarke v Grant. The essential difference between Strong v Stringer and this case is that in the former the so-called condition was a term of an agreement to be performed by one of the contracting parties, whereas here the condition is a true suspensory condition dependent not on the actions or volition of one party alone but on the joint action of both parties plus the approval of the court. The point is perhaps yet another illustration of the ambiguity of the word ‘condition’. I find, therefore, that Mr Pryor succeeds in establishing a right to possession, and I propose so to order.
The court made an order for possession, with an inquiry as to damages, and costs.
