Landlord and tenant — Landlord and Tenant Act 1954 — Possession — Landlord granting short fixed-term tenancy — Term expiring — Tenant holding over — Tenant subletting on purported long-term leases — Landlord obtaining possession order — Whether landlord entitled to terminate tenancy as tenancy at will — Whether contractual periodic tenancy created so as to attract protection of 1954 Act — Whether sublessees entitled to grant of leases by virtue of proprietary estoppel
The respondent was the freeholder of business premises on the site of a former petrol filling station that it had purchased in 2004 with a view to developing it for social housing. It anticipated that the planning process might take some time, so it granted a short-term tenancy to a business tenant for a fixed term of three months from November 2004. The parties did not exclude the tenancy from Part II of the Landlord and Tenant Act 1954; a tenancy for less than six months certain was, in any event, an excluded tenancy under section 43 of that Act. Clause 2.2 of the tenancy agreement acknowledged that the three-month tenancy would terminate at the end of the term and provided that, should the tenant hold over at the end of the term, the tenancy would be terminable by either party giving not less than one week’s notice, regardless of how the rent payable in respect of the occupation was calculated or paid.
In late 2004 or early 2005, the tenant allowed the appellants into occupation of parts of the premises, purporting to grant long leases to them. The tenant continued to pay the rent under the 2004 tenancy agreement until 2006, when he disappeared. Subsequently, the respondent brought possession proceedings. Defending the claim, the appellants contended that the tenancy enjoyed the protection of the 1954 Act. They submitted that the tenancy at will that had come into existence at the end of the three-month fixed term had been converted into a contractual periodic tenancy either: (i) by virtue of clause 2.2; or (ii) by implication from the payment and acceptance of rent. They further argued that they were entitled to leases of the property under the principles of proprietary estoppel. Rejecting those arguments, the county court judge held that the effect of clause 2.2 was merely to continue the tenancy at will. He made a possession order accordingly. The appellants applied for permission to appeal and a stay of execution of the possession order.
Held: The application was dismissed. (1) By clause 2.2 of the 2004 tenancy agreement, the parties had confirmed that the three-month tenancy would terminate on the expiry of that term. The provisions relating to holding over did not reflect any agreement that there should be any holding over, but merely provided that if the tenant were permitted to remain in occupation, it would be on the basis of a tenancy term of one week’s notice. Those provisions were not inconsistent with the continuation of a tenancy at will, that being the position assumed by the law on the end of a fixed-term tenancy. On the evidence, the respondent had wanted to keep the position as fluid as possible to enable the property to be developed as and when it obtained planning permission. That supported the trial judge’s conclusion that no more than a tenancy at will had been intended. An appeal on that issue would have no real prospect of success. Therefore, the protection of the 1954 Act did not apply to the tenant’s tenancy or to the subtenancies of the appellants. (2) Furthermore, the appellants were not entitled to assert a right in equity, based on proprietary estoppel, to compel the respondent to grant them new tenancies. To establish an equity against the respondent, it would be necessary to show that the respondent knew that the appellants were spending money on their business in the belief that they were entitled to enjoy the property for the full term granted by the tenant and that it had acquiesced in that knowledge. The evidence did not support such a finding. In the absence of any evidence that the respondent had been aware of the terms on which the appellants had been allowed into occupation, it had been entitled to assume that any subtenancies granted by the tenant were no more extensive than the tenant’s own.
The following cases are referred to in this report.
Crabb v Arun District Council [1976] Ch 179; [1975] 3 WLR 847; [1975] 3 All ER 865; (1976) 32 P&CR 70, CA
D’Silva v Lister House Development Ltd [1971] 1 Ch 17; [1970] 2 WLR 563; [1970] 1 All ER 858; (1970) 21 P&CR 230; 213 EG 373
Javad v Aqil [1991] 1 WLR 1007; [1991] 1 All ER 243; (1991) 61 P&CR 164; [1990] 2 EGLR 82; [1990] 41 EG 61, CA
This was an application by the appellants, Arben Katana and Dan Abraham, for permission to appeal from a decision of HH Judge Powles QC, sitting in Brentford County Court, allowing a claim by the respondent, Catalyst Communities Housing Ltd, for possession of business premises; and for a stay of execution of the possession order.
Rosanna Bailey (instructed by CL Law Solicitors, of Heston) appeared for the appellants; Ben Maltz (instructed by Prince Evans Solicitors) represented the respondent.
Giving judgment, Patten LJ said:
[1] This is an application by Mr Arben Katana and Mr Dan Abraham, who were respectively the third and sixth defendants in the county court proceedings, for permission to appeal and, if granted, a stay of execution in respect of an order for possession made against them by HH Judge Powles QC, sitting in Brentford County Court on 16 December last year.
[2] The respondent is the freeholder of business premises at 342-355 Staines Road, Hounslow. The property in question is the site of an old filling station. The respondent purchased it early in 2004 with a view to developing it as social housing, but, because the property lies under the flightpath to Heathrow airport, it was necessary to make a detailed planning application and, having regard to the fact that the site had been used for semi-industrial purposes, and in particular as a filling station, there were also environmental issues that had to be resolved before planning permission could be granted. That all was going to take time and although the planning procedures were being |page:22| gone through, the respondent decided to grant a short-term tenancy of the property to a Mr Roberts, who had traded as Heathside Cars. It entered into an agreement with him on 26 November 2004, under which he was granted a tenancy of the property for a fixed term of three months from the date of the agreement. The tenancy was not excluded from the provisions of Part II of the Landlord and Tenant Act 1954 (the 1954 Act), presumably because the landlord had in mind that a tenancy for a term of less than six months certain is an excluded tenancy under section 43 of the 1954 Act.
[3] However, the agreement contains, in clause 2.2, a further provision that after acknowledging that the three-month tenancy will terminate at the end of the term goes on to provide that if the tenant were to hold over at the end of the term this tenancy would be terminable by the giving of not less than one week’s notice by either party, regardless of the way in which the rent payable in respect of their occupation was either calculated or paid.
[4] One of the issues before the judge and on this appeal is whether the effect of that clause was to convert the tenancy at will, which came into existence at the end of the fixed three-month term, into a contractual periodic tenancy, either weekly or monthly in nature. Alternatively, it is said that the continued occupation by Mr Roberts, after the end of the three-month term in February 2005, which subsisted until a date in 2006, of itself gave rise by implication to a new contractual periodic tenancy by the payment and acceptance of rent.
[5] The factual position is that there was no further tenancy agreement entered into between the respondent and Mr Roberts, and he continued to pay the rent provided for under the 2004 agreement until he disappeared some time during 2006.
[6] The relevance of all this is not in respect of Mr Roberts’ security of tenure or otherwise because although a defendant in these proceedings, he has taken no part in them, and the judge has made, so far as necessary, an order for possession against him. The relevance is that either at the very end of 2004 or some time during 2005, he had allowed into occupation of various parts of the premises a number of other individuals, including Mr Katana and Mr Abraham, to whom he purported to grant long leases of the parts that they occupied.
[7] The evidence before the judge was that Mr Abraham had been let into possession at the end of 2004, but on 20 May 2005 was granted a lease of the premises at 349 Staines Road for a term of eight years. The tenancy agreement is in the standard Law Society form and contains, among other things, covenants on the part of the tenant to repair and maintain the property as well as to pay the rent reserved by the lease. In the case of Mr Abraham, that was a rent of some £1,100 per month. He has occupied the premises at 349 Staines Road since then, where he runs a car sale and repair business. It is part of his evidence that, during the period since then, he has both paid his rent to Mr Roberts as per the agreement and carried out significant works of repair and maintenance to the premises. It also goes without saying that, having run his business there for that period of time, it is an established business with a valuable goodwill.
[8] In the case of Mr Katana, who occupies premises at the front of the site at 353 Staines Road, there is more controversy concerning the precise terms on which he was allowed to occupy the premises. At the stage of disclosure in the proceedings, Mr Katana’s solicitor produced a lease in writing dated in 2007, but, at the trial, that document was said to relate only to some residential part of 353 and, instead, his brother, who was called to give evidence, produced an agreement dated in 2005, which was said to have been the agreement originally entered into between Mr Roberts and Mr Katana. That, I believe, was for a period of some 10 years and again included provisions in the agreement for the payment of rent and for the repair of the premises.
[9] Mr Katana’s case is that in addition to rent of some £18,000 pa, he also paid to Mr Roberts some £35,000 in order to acquire the goodwill of the business.
[10] The relevance of all this to the 2004 agreement and to the basis on which Mr Roberts occupied the premises himself is that the judge found that the effect of clause 2.2 of the 2004 agreement was simply to continue in operation the tenancy at will that came into existence in February 2005 at the end of the three-month fixed-term tenancy. On established principles, which the judge refers to in his judgment (see the decision of the Court of Appeal in Javad v Aqil [1991] 1 WLR 1007*, at p1012), the law presumes the creation of a tenancy at will following the expiry of fixed-term tenancy. The question in every case is whether that arrangement is displaced by some alternative contractual arrangement between the parties amounting to a periodic or some other form of tenancy.
—————————————————————————
* Editor’s note: Also reported at (1990) 2 EGLR 82
—————————————————————————
[11] In this case, as I have already indicated, there was no further tenancy agreement entered into between Mr Roberts and the respondent, and the case in favour of there having been a periodic contractual tenancy has to be based either on the effect of clause 2.2 itself or on the payment and acceptance of rent after the February date.
[12] If the effect of these arrangements was that, from February onwards, Mr Roberts was no more than a tenant at will, it follows necessarily that the leases that he granted in 2005, or perhaps in 2007, to Mr Abraham and Mr Katana were not capable, whatever their terms may have been, of creating anything more than a tenancy at will in their favour. On that basis, neither Mr Roberts nor the two appellants before me would have obtained protection under Part II of the 1954 Act in respect of their tenancies, the tenancy at will not being included within the protection afforded by Part II. If, on the other hand, the effect of the arrangements was to create a periodic contractual tenancy in favour of Mr Roberts from February onwards, the effect of the 2005 or 2007 tenancy agreements would, by the same process, have been to have given the subtenants periodic tenancies of the same kind that although entered into in breach of a covenant in the 2004 agreement not to assign or to let or part with possession without consent, would none the less have been protected under Part II of the 1954 Act: see D’Silva v Lister House Development [1971] 1 Ch 17†.
—————————————————————————
† Editor’s note: Also reported at (1970) 213 EG 373
—————————————————————————
[13] That is the first issue on this application: was the judge entitled to find on the evidence before him that the arrangements that I have outlined amounted to no more than tenancies at will?
[14] There are two other issues that I will come to shortly. The first is if the judge was arguably wrong about that and the tenants do have a realistic case for contending that they had in fact obtained periodic tenancies in respect of their properties was the respondent able to bring those tenancies to an end by the service of a section 25 notice? So far as that is concerned, it is common ground that, in March 2008, the respondent, through its solicitor, served section 25 notices by leaving them at the site in a kiosk on the forecourt in part of the premises that were occupied by Mr Katana as part of his car-wash business. Mr Best’s evidence to the judge was that he had stuck copies of the various notices on the window of that kiosk and put copies through a letter box in the kiosk itself.
[15] The issue, therefore, is whether that constituted good service within the provisions of section 66 of the 1954 Act, which themselves incorporate by reference the provisions of section 23 of the 1927 Act. If service has been carried out in compliance with those provisions, there is deemed service regardless of whether the notices did in fact reach the tenants to whom they were directed. However, over and above that, it is possible for the respondent to succeed in the proceedings if the court can be satisfied that, whatever may have been the position in respect of deemed service under section 23, the notices did in fact come to be received by the tenants in question. The judge made various findings of fact about that, including one in terms that the third and sixth defendants received the notices, but that finding is challenged on this application.
[16] The third point on the appeal is a point based on an argument of proprietary estoppel. If Ms Rosanna Bailey is successful in respect of the points that I have already mentioned, this point really adds nothing to an appeal. She relied on it, I think, in circumstances where she is otherwise unsuccessful as a matter of law in order to found an argument that, as a result of the landlord’s conduct vis-à-vis these appellants in the period between 2005 and the present time, the landlord is estopped |page:23| from asserting its legal rights against them and is required, as a matter of equity, to vest in those tenants leases equivalent to the ones that Mr Roberts granted to them. It is clearly possible for the equity to be satisfied in other ways short of the grant of full leases for those terms, but Ms Bailey’s submission, I think, is that the minimum that would be required in order to satisfy the equity in this case would be the grant of a lease lasting for a reasonable period of time.
[17] Dealing with the three points in that order, the first question, therefore, is whether the judge was entitled to come to the conclusion that he did in respect of the question of whether there was a tenancy at will. It needs to be emphasised that the question of what legal relationship subsisted between the landlord and Mr Roberts as from February 2005 falls to be determined by looking at the evidence of the dealings between the parties up to, but no later than, the expiry of the three-month tenancy in February 2005. If the question turns on how one construes clause 2.2, that is something that has to be determined by reference to the position as at the date of the agreement; but if the argument is that the payment and acceptance of rent itself created a new periodic tenancy, that, as I say, has to be looked at having regard to the position in February 2005.
[18] The judge, of course, heard no evidence from Mr Roberts, who, as I have said, did not participate in the proceedings, but did hear evidence from a Mr Nathan, on behalf of the respondent, in respect of the factual background at the relevant time. His evidence and this is not really in dispute in these proceedings is that the landlord wanted to develop the property once it had obtained planning permission but envisaged that there would be a period of time before that was achieved. His evidence, which the judge accepted, was that it was clearly in the landlord’s interest not to create a tenancy to which Part II protection would apply, and indeed that is evident from the terms of the agreement of November 2004, which clearly granted a term of only three months in order to take advantage of the provisions of section 43 of the Act. The judge is criticised by Ms Bailey for his construction of clause 2.2 and for appearing to rely on the contra proferentem principle in construing that clause of the agreement. For my own part, I think that the contra proferentem rule, so far as it is relevant at all, is very much a matter of last resort and is not a necessary aid to construction in this case. It is clear that, from the first sentence of clause 2.2, the parties were confirming that the three-month tenancy would end as at 26 February 2005. The words “should there be any holding over by the tenant at the end of the term” make it clear that they were not agreeing that there would be any holding over, but merely that were the tenant to be allowed to remain in occupation after the February date it would be on the basis of a tenancy term of one week’s notice.
[19] Those provisions are not, in my view, inconsistent with the continuation of a tenancy at will, which, as I have already indicated, would be the position that the law would assume on the end of a fixed-term tenancy. It is perfectly true that the clause does not in terms say that any subsequent holding over would be as a tenant at will, but, equally, it does not say that it would be as anything more than one, and in order to give substance to the clause one has to look at all the relevant background circumstances, which is what the judge did.
[20] As far as I can see, the judge had no evidence before him that would have led him to conclude that it was right to infer that the parties were intending to grant Mr Roberts anything more than a tenancy at will. There was, as I have said, no evidence by him, and there was evidence by Mr Nathan, that the landlord wanted to keep the position as fluid as possible to enable the property to be developed as and when it obtained planning permission.
[21] The test for this court on an appeal is not what view it would have taken of the evidence at the trial, but whether the judge was entitled on the evidence that was before him to reach the conclusion that he did. In my judgment, the judge did have evidence that supported the conclusion that these arrangements gave rise to no more than a tenancy at will, and I do not consider that an appeal on that issue, which is essentially a challenge to the judge’s findings of fact, would have any real prospect of success.
[22] It follows from that that the protection afforded by Part II of the 1954 Act, as the judge found, would not apply in this case either to Mr Roberts’ tenancy or to the subtenancies in question.
[23] In those circumstances, I can deal with the second issue, which concerns the section 25 notices, relatively shortly. It is, I think, common ground again that section 23 of the 1927 Act deems good service to be effected if the section 25 notices are left at the tenant’s business premises, although section 23 refers in terms to the tenant’s last-known place of abode. So the issue, therefore, is whether they were left at Mr Abraham’s and Mr Katana’s premises. So far as that is concerned, it is difficult to see how it can sensibly be said that the section 25 notices were not served by being left at Mr Katana’s premises, although it is true, as Ms Bailey has told me, that there was an office on the forecourt with a letterbox. The kiosk through which the notices were posted and on which they were stuck was clearly part of the car-wash premises, and the Act does not seem to me to make any distinction between one part of the premises and another for the purposes of deemed service. There was therefore deemed service of the section 25 notice, in any event in respect of Mr Katana.
[24] The position, so far as concerns Mr Abraham, is, however, different. Access to his premises lies through a gate to the side of the building that is not open except during business hours. When Mr Best went there, which was after close of business, the gate was locked and it was not physically possible to get round to Mr Abraham’s property. In those circumstances, it seems to me that there is a real argument as to whether leaving Mr Abraham’s section 25 notice in the kiosk at the front in Mr Katana’s part of the property could properly be regarded as deemed service on Mr Abraham, and, my own view, for what it is worth, is that it could not. Therefore, in respect of Mr Abraham, the case, if it depended on the service of the section 25 notice, could succeed only if the judge was able to find that the notice had in fact been received by Mr Abraham, notwithstanding that it was put and left on Mr Katana’s premises.
[25] As far as that is concerned, I have been provided with a note of the judgment in which, in [25], the judge finds as a fact that there were discussions between Mr Abraham and the other tenants about the notices, and also finds that all the occupants knew what was going on. The note records that the judge found as a fact that the third and sixth defendants received the section 25 notices, but this is not a precise transcription of the judge’s own words and, having heard from Mr Ben Maltz as to what the judge actually enquired into and what Mr Abraham was cross-examined about, I am not presently satisfied that the judge in fact made a finding that the physical document comprising the section 25 notice was necessarily ever handed to Mr Abraham and received by him. Therefore, if the question of the legal tenancy and its termination had turned in respect of Mr Abraham on whether there had been service of the section 25 notice, my own view is that there would have been an arguable ground of appeal in respect of that particular finding. In the light, however, of my view concerning the tenancy at will point, that issue does not assist Mr Abraham.
[26] The position of the appellants in respect of an appeal therefore depends on whether they can satisfy the Court of Appeal that, whatever may be the position at common law and in respect of the 1954 Act, they would be entitled to assert a right in equity based on proprietary estoppel to compel the landlord to grant to them new tenancies in satisfaction of the equity.
[27] As far as this ground of appeal is concerned, the judge gave it relatively short shrift by saying that, in his view, silence on the part of a landlord could not amount to either a representation or encouragement to the tenant absent an obligation on the part of the landlord, so to speak, to make its position known in respect of the legality of the appellants’ occupation of the premises.
[28] The argument, however, before me has been put on a slightly broader basis, which is that the appellants have a case based not merely on acquiescence (where the duty to speak is undoubtedly a critical part of the conditions required) but on proprietary estoppel, which is perhaps a more flexible rule. Ms Bailey relied on the line of authority that can |page:24| be found in cases such as Crabb v Arun District Council [1976] Ch 179 and that is summarised in the terms of the following proposition:
When an owner of land stands by when another person incurs expenditure or detriment and he knows that the other person believes that he is, or will be, entitled to an interest in the land, the court, with equitable jurisdiction, may require the owners to give effect to that belief by not asserting inconsistent rights or even by transfer of legal title. This equity has sometimes been described as proprietary estoppel. It arises only if the parties have so acted that it would be unconscionable for the owner to assert the inconsistent rights and not to transfer title, as the case may be, and hence not only the circumstance of standing by on the one hand and of reliance on the other but also general considerations, such as fairness and which is relevant.
[29] It is clearly right that there may be cases where merely standing by does undoubtedly cause the person seeking to assert the estoppel to change his or her position to his or her detriment, thereby giving rise to the equity. The obvious case is where somebody begins to build on somebody else’s land and the landowner, knowing that the person is acting in the belief that he or she has a right to build on the land and in the expectation that he or she would be entitled to remain there, none the less remains silent. However, in my judgment, those principles are difficult to apply to the present case. The position on the ground was that, from 2004, the entire site had been let to Mr Roberts under the terms of the 2004 agreement. It is perfectly true that that agreement contained an absolute covenant against underletting; it is also true that there was evidence before the judge that the respondent was aware, at least from 2005 onwards, that the appellants were occupying various parts of the premises and were carrying on their own businesses there. It is clear from those facts that the respondent must have appreciated that if those appellants had tenancies or subtenancies, they had been granted in breach of covenant.
[30] However, what the landlord did not know or, rather, there was certainly no evidence before the judge that it knew, were the terms on which the various appellants had been allowed into occupation of the property. In those circumstances, it seems to me very difficult to say that the landlord should be taken to have known that, by being permitted to remain there, the appellants believed that the landlord was in some way affirming, not merely their right to be there as subtenants but their right to be there under terms of eight and 10 years respectively. The landlord was entitled to assume that even if subtenancies had been created, they would have been no more extensive than the one enjoyed by Mr Roberts. The reality of this case is that the appellants had been put in a difficult position, not by the landlord but by Mr Roberts, who has effectively deceived them into believing that he was capable of granting them the long leases that they had received and for which they had paid. However, for those facts to be allowed to set up an equity against the landlord, it would be necessary, in my judgment, to show that the landlord knew of that position, knew that the tenants were spending money on their business in the belief that they would be entitled to enjoy the property for the full term granted by Mr Roberts and acquiesced in that knowledge. As I have already said, the evidence was not before the judge that could justify that kind of finding.
[31] In those circumstances, it seems to me that the defence based on proprietary estoppel is not realistically arguable.
[32] So, much as I sympathise with the appellants’ position, the law, I am afraid, is clear. They are not entitled to protection under Part II of the 1954 Act and an appeal against the judgment would not have any real prospect of success.
[33] So, for those reasons, the applications fail.
Applications refused.