Landlord and tenant — Whether occupier of workshop and store a tenant or licensee — Refinement of principles formulated in Street v Mountford — Successful appeal by owners from decision of county court judge that occupier was a tenant — The relevant document throughout described itself as a licence, emphasised that exclusive occupation was not conferred and even provided that the licensees could be moved from time to time to other premises in the owners’ adjoining property — There were, however, a number of provisions normally found in tenancies and the express grant of a limited right for the owners to enter for the purpose of carrying out work, which pointed to a tenancy — Addiscombe Garden Estates Ltd v Crabbe, Shell-Mex & BP Ltd v Manchester Garages Ltd and Street v Mountford considered and the passage in Halsbury’s Laws of England approved which stated that the decisive consideration was the intention of the parties — Street v Mountford was itself a decision in regard to residential premises and the suggested restriction of the inquiry to whether the occupier is a tenant or a lodger has no application to business premises, as there is no such person as a lodger in relation to the latter — There was a conflict in the present case between provisions suggesting a tenancy and provisions suggesting a licence, but the judge had come down on the wrong side — Looking at the agreement as a whole, the indications were in favour of a licence — In particular, the provision by which the occupier could be required to move to other premises was wholly inconsistent with a right to exclusive possession during the continuance of the agreement, and consequently wholly inconsistent with a tenancy — Owners’ appeal allowed — Warning against reading this decision as a way round Street v Mountford
The following
cases are referred to in this report.
Addiscombe
Garden Estates Ltd v Crabbe [1958] 1 QB 513;
[1957] 3 WLR 980; [1957] 3 All ER 563, CA
Allan v Liverpool Overseers (1874) LR 9 QB 180
Errington v Errington and Woods [1952] 1 KB 290; [1952] 1 All ER 149,
CA
Shell-Mex
& BP Ltd v Manchester Garages Ltd [1971]
1 WLR 612; [1971] 1 All ER 841, CA
Street v Mountford [1985] AC 809; [1985] 2 WLR 877; [1985] 2 All ER
289; [1985] 1 EGLR 128; (1985) 274 EG 821, HL
This was an
appeal by the plaintiffs, Dresden Estates Ltd, from a decision of Judge Kenneth
Taylor, at Stoke-on-Trent County Court, holding that the defendant (the present
respondent), Mr A Collinson, held premises at Sneyd Hall Works, Burslem,
Stoke-on-Trent, under a tenancy and refusing the appellants an order for
possession.
C J Coveney
(instructed by Breton Deacon & Co, of Stoke-on-Trent) appeared on behalf of
the appellants; Peter Rank (instructed by Leslie Moon & Co) represented the
respondent.
Giving the
first judgment at the invitation of Lloyd LJ, GLIDEWELL LJ said: This appeal
from the judgment of His Honour Judge Kenneth Taylor, sitting at Stoke-on-Trent
County Court on June 2 1986, raises the familiar but difficult question: does
the occupier of premises occupy as a tenant or as a licensee? I am tempted to say that answering the
question in some ways has been made easier and in other ways more difficult by
the admirable way in which it has been argued on both sides. For myself, my
mind swung back and to during the course of the argument.
The
appellants, Dresden Estates Ltd, own property at Sneyd Hall Works, Sneyd Hill,
Burslem, Stoke-on-Trent. We are told it was formerly a pottery. The respondent,
Mr Collinson, is a builder and scaffolder. In 1985 he required accommodation in
which to store his plant and equipment. He therefore entered into a written
agreement dated September 6 1985 with Dresden Estates Ltd to which I must refer
in some detail.
It commences
with the words ‘Licence dated 6th September 1985’ and throughout the agreement
is referred to as a ‘licence’. It begins by defining a number of terms. It
identifies the parties, Dresden Estates Ltd and Mr Collinson. It describes the
premises as:
Ground Floor
Unit at Sneyd Hall Works, Sneyd Hill, Burslem, Stoke-on-Trent, Staffs, as shown
on attached Plan and subject to a right of way to First Floor
It defines the
use to which the property was to be put as a workshop and store, and the
commencement date of the licence. Then it defines the licence fee as:
£200 per
calendar month payable monthly in advance. The first payment of the Licence Fee
to be the sum of £154 in respect of the period from the Commencement Date to
30th September, 1985 and thereafter on the first day of each succeeding month
by Bankers Order.
It defines ‘the
Required Notice’, and this is a matter upon which there has been some
discussion, as:
Not less than
3 months notice in writing to be served before the first day of any month.
There is then
a reference to a deposit. It then provides:
The Licensors
hereby grant to the Licensee a licence to use and occupy the Premises from the
Commencement Date upon the terms and conditions set out in the Terms and
Conditions.
Those terms
and conditions are upon the next sheet of the document, and they start with an
agreement by Mr Collinson — who is throughout described as ‘the Licensee’ and
Dresden Estates are described throughout as ‘the Licensors’ — ‘. . . to pay the
Licence Fee on the dates and in manner specified’.
Clause 2 then
contains, if this is a tenancy, what are effectively covenants by the tenant,
but are described as ‘agreements’ by the licensee, to pay the general and water
rates, to pay charges in respect of gas and electricity, and
(c) To permit the Licensors with necessary
workmen and contractors and equipment to enter on the Premises to carry out any
work deemed necessary by the Licensors to the premises or to adjoining premises
or services.
And there
follow another six subclauses of a kind familiarly found in tenancy agreements
relating to not carrying on noisy, offensive or dangerous trades, not making
alterations to the premises, not doing anything that would affect the owners’
insurance policy, an agreement ‘to keep the interior of the Premises and the
decorations and fittings of the Premises in good repair and condition . . .’,
and two others of a somewhat similar type.
Clause 3
grants to Mr Collinson the right to use shared facilities such as delivery
areas and parking areas. Clause 4 then contains important provisions, to most
of which I must refer:
It is agreed
between the Licensors and the Licensees as follows:
(a) this Licence is personal to the Licensees
and the licensees shall not transfer this interest in the same in any manner
whatsoever.
(b) this Licence confers no exclusive right for
the Licensees to use and occupy the Premises and the Licensors shall be
entitled from time to time on giving the Required Notice to require the
Licensees to transfer this occupation to other premises within the Licensor’s
adjoining property.
(c) this Licence does not constitute any tenancy
or lease of the Premises.
(d) concerns the deposit and I do not need to
read it.
(e) this Licence may be determined by either
party giving to the other the Required Notice to terminate on a stated date and
may be determined forthwith by the Licensors if the Licensees are in breach of
any of its obligations set out in this Licence.
(f) the Licensors may by giving the Required
Notice to the Licensees increase the Licence fee to such amount as may be
specified in such notice.
I do not need
to read (g).
Mr Collinson
having entered into occupation of the premises under that agreement within a
very short time, namely on December 20 1985, Dresden Estates Ltd purported to
give him notice to terminate the agreement under clause 4(e), and that notice
was expressed to terminate on March 31 1986. The notice itself, I should say,
is not among the documents put before us or presumably before the learned
judge, but those facts are apparently accepted on both sides.
Mr Collinson claims
that the agreement created a tenancy and that that tenancy is subject to the
provisions of the Landlord and Tenant Act 1954. If, as the learned judge has
found, that contention is correct, he has the protection of that Act. The
appellants, Dresden Estates Ltd, contend that the agreement created a mere
licence terminable in accordance with its terms, which, therefore, came to an
end on March 31 1986. That is the issue which has to be determined on this
appeal.
As a matter of
fact, I understand that Mr Collinson is still in occupation of the premises, or
certainly was at the time of the hearing before the learned judge, and that he
has paid the rent or licence fee, whichever it is, up to date.
We were
referred to three authorities which are relevant to this issue among the very
considerable number of authorities which bear upon this or similar questions.
In Addiscombe
Garden Estates Ltd v Crabbe [1958] 1 QB 513 this court was concerned
with a tennis club which occupied tennis courts and a pavilion under an
agreement described as ‘A Licence’. The agreement was for a term certain of two
years. It contained what, if it were a tenancy, was a covenant for quiet
enjoyment and a repairing covenant. This court held that it was a tenancy. The
passage upon which Mr Rank particularly relies in that authority is in the
judgment of Jenkins LJ at p 522 at the very top of the page:
As to the
first question–whether the so-called licence of April 12 1954 in fact amounted
to a tenancy agreement under which the premises were let to the trustees — the
principles applicable in resolving a question of this sort are, I apprehend,
these. It does not necessarily follow that a document described as a licence
is, merely on that account, to be regarded as amounting only to a licence in
law. The whole of the document must be looked at; and if, after it has been
examined, the right conclusion appears to be that, whatever label may have been
attached to it, it in fact conferred and imposed on the grantor in substance
the rights and obligations of a tenant, and on the grantor in substance the
rights and obligations of a landlord, then it must be given the appropriate
effect, that is to say, it must be treated as a tenancy agreement as distinct
from a mere licence.
I note that
Jenkins LJ did not say that the description of the document in the document
itself as ‘a licence’ is irrelevant: nor did he say that no account was to be
taken of it. What he did say, in effect, was that it was not conclusive.
The next
authority in point of time was also a decision of this court, in Shell-Mex
& BP Ltd v Manchester Garages Ltd [1971] 1 WLR 612. The petrol
company made an agreement described as ‘a licence’ with Manchester Garages Ltd
under which the latter company occupied a petrol filling station. The agreement
contained a specific agreement by Manchester Garages Ltd not to impede
Shell-Mex & BP Ltd in their right of possession and control. It was held
that the agreement did what it said it did, that is to say, it constituted ‘a
licence’. At p 615 Lord Denning MR, giving a judgment with which Sachs and
Buckley LJJ agreed, said, at D:
I turn,
therefore, to the point: was this transaction a licence or a tenancy? This does not depend on the label which is
put on it. It depends on the nature of the transaction itself: see Addiscombe
Garden Estates Ltd v Crabbe [1958] 1 QB 513. Broadly speaking, we
have to see whether it is a personal privilege given to a person (in which case
it is a licence), or whether it grants an interest in land (in which case it is
a tenancy). At one time it used to be thought that exclusive possession was a
decisive factor. But that is not so. It depends on broader considerations
altogether. Primarily on whether it is personal in its nature or not: see Errington
v Errington and Woods [1952] 1 KB 290.
Then he turned
to the facts of that particular case. Over the page at p 616 at F he said:
It seems to
me that when the parties are making arrangements for a filling station, they
can agree either on a licence or a tenancy. If they agree on a licence, it is
easy enough for their agreement to be put into writing, in which case the
licensee has no protection under the Landlord and Tenant Act 1954. But, if they
agree upon a tenancy and so express it, he is protected. I realise that this
means that the parties can, by agreement on a licence, get out of the Act. But
so be it. It may be no bad thing. Especially as I see that the parties can now,
with the authority of the court, contract out of the Act, even in regard to
tenancies: see section 5 of the Law of Property Act 1969.
Finally, the
recent decision of the House of Lords in Street v Mountford [1985]
AC 809 was much cited to us. That was a case concerning the occupation of
residential as opposed to business premises. Mrs Mountford occupied two
furnished rooms as her residence under an agreement, and it was held, all the
members of the committee of the House agreeing, that the agreement constituted
a tenancy, although it was described as a licence. The leading speech was that
of Lord Templeman. He said, at p 817H:
In the case
of residential accommodation there is no difficulty in deciding whether the grant
confers exclusive possession. An occupier of residential accommodation at a
rent for a term is either a lodger or a tenant. The occupier is a lodger if the
landlord provides attendance or services which require the landlord or his
servants to exercise unrestricted access to and use of the premises. A lodger
is entitled to live in the premises but cannot call a place his own.
Then he quoted
a passage from the judgment of Blackburn J in Allan v Liverpool
Overseers (1874) LR 9 QB 180. At p 824B he came to consider Shell-Mex
& BP Ltd v Manchester Garages Ltd. Having referred to that case
and quoted the second of the passages from the judgment of Lord Denning MR
which I have quoted, Lord Templeman said this, at p 824E:
In my
opinion, the agreement was only ‘personal in its nature’ and created ‘a
personal privilege’ if the agreement did not confer the right to exclusive
possession of the filling station. No other test for distinguishing between a
contractual tenancy and a contractual licence appears to be understandable or
workable.
I make two
comments about that last authority. First, both counsel are agreed, and for my
part I agree, that in the circumstances of this case, although one has to look
at all the circumstances, certainly the most important factor is that of
exclusive possession. Did the agreement give Mr Collinson an exclusive right to
the possession of the premises which he occupied? Second, Street v Mountford, as
I have said, was concerned with residential premises. Mr Coveney
between the law applicable to residential premises and the law applicable to
business premises. As a broad, general proposition that may be right, but I am
not sure that his concession may not have gone too far in this respect, that
the attributes of residential premises and business premises are often quite
different.
The passage
that I have already quoted from the speech of Lord Templeman, where he says in
effect that all you have to decide in relation to residential premises is
whether the occupier is a tenant or a lodger, is, of course, of itself not
applicable to business premises because there is no such person as a lodger in
relation to business premises. For myself, I think that the indicia, which may
make it more apparent in the case of a residential tenant or a residential
occupier that he is indeed a tenant, may be less applicable or be less likely
to have that effect in the case of some business tenancies.
To my mind,
the law generally is accurately summarised in Halsbury’s Laws of England,
vol 27 (4th ed) at para 6, which reads:
In
determining whether an agreement creates between the parties the relationship
of landlord and tenant or merely that of licensor and licensee the decisive
consideration is the intention of the parties. The parties to an agreement
cannot, however, turn a lease into a licence merely by stating that the
document is to be deemed a licence or describing it as such. The parties’
relationship is determined by law on a consideration of all relevant provisions
of the agreement, and an agreement labelled by the parties to it as a ‘licence’
will still be held to create a tenancy if the substance of the agreement
conflicts with that label. Similarly, the use of operative words (‘let’,
‘lessor’ etc) which are appropriate to a lease will not prevent the agreement
from conferring only a licence if from the whole document it appears that it
was intended merely to confer a licence. Primarily the court is concerned to
see whether the parties to the agreement intend to create an arrangement
personal to its nature or not, so that the assignability of the grantee’s
interest, the nature of the land and the grantor’s capacity to grant a lease
will all be relevant considerations in assessing what is the nature of the
interest created by the transaction.
The first
sentence of the next paragraph is:
The fact that
the agreement grants a right of exclusive possession is not in itself
conclusive evidence of the existence of a tenancy, but it is a consideration of
the first importance, although of lesser significance than the intention of the
parties.
I return to
apply the law so stated to the terms of this agreement. To my mind, clause 2 of
the agreement, which I have already said, if this is a tenancy, really contains
tenant’s covenants, contains a number of provisions which are wholly
appropriate to and some of which are certainly indicative of this agreement
creating a tenancy. In particular, as counsel pointed out, the agreement by
which Mr Collinson permitted Dresden Estates Ltd to enter with workmen and
contractors to carry out any work on the premises or adjoining premises is one
which would not be necessary if this agreement constituted a mere licence not
reserving exclusive possession to Mr Collinson. But the provisions of that
clause seem to me to be in conflict with many of the provisions of clause 4,
and the real difficulty in this case, and the difficulty that confronted the
learned judge, is to resolve that conflict. To my mind, the opening words of
clause 4:
This licence
is personal to the Licensees and the Licensees shall not transfer this interest
in the same in any manner whatsoever
cannot be
disregarded and are of importance.
What is even
more important is to decide what clause 4(b) and also clause 4(f) mean. Clause
4(b) is the clause that starts by saying in terms:
This Licence
confers no exclusive right for the Licensees to use and occupy the Premises.
It then goes
on to give Dresden Estates Ltd the right
. . . from
time to time on giving the Required Notice to require
Mr Collinson
to transfer
this occupation to other premises within
Dresden’s
adjoining
property.
Clause 4(f)
entitles Dresden Estates Ltd by giving the required notice to increase the
licence fee to such amount as the notice may specify. Both those clauses, if
they have their apparent meaning, are inconsistent with there being a tenancy.
You cannot have a tenancy granting exclusive possession of particular premises
subject to a provision that the landlord can require the tenant to move to
somewhere else. The landlord can do that only by terminating the tenancy and
creating a new one in other premises. So, too, with regard to the rent and
licence fee. It is axiomatic that unless there is a rent review clause a
landlord cannot for the duration of the tenancy alter the rent unilaterally.
All he can do is to terminate the tenancy and then enter into a new agreement
for the letting of the same premises at a new rent. Of course, the whole thing
can be done by agreement. The tenancy agreement itself cannot give a landlord
the power to alter a rent unilaterally.
Mr Rank says
that this agreement, properly read, does not. All that it really does is to say
that the landlord (Dresden Estates Ltd) can, if it wishes to require Mr Collinson
to move to some other part of the total premises or if it wishes to raise rent,
give notice to terminate. He claims that the phrase the ‘Required Notice’ in
the definition clause of the agreement means ‘notice to terminate’.
Mr Coveney
argues, I think correctly, that that is not so. This agreement carefully
defines the phrase ‘the Required Notice’ simply in relation to the length of
notice —
Not less than
3 months’ notice in writing to be served before the first day of any month.
It then uses
the phrase in relation to three different concepts: giving notice to terminate
the agreement; giving notice to move out of the particular premises and move to
other accommodation; and giving notice to increase the rent. Mr Coveney says
(and I conclude that he is right in this) that this agreement entitles Dresden
Estates Ltd to take either of those other steps unilaterally, the remedy which
Mr Collinson had, if he did not like it, being himself then to serve three
months’ notice to terminate, as the agreement provided that he could.
If, as I
believe, that is right, then clauses 4(b) and 4(f) militate very strongly
against this agreement creating a tenancy. I should say that there is some
difficulty in Mr Coveney’s way, because it is difficult to see how clause 4(b) could
allow Dresden Estates Ltd to require Mr Collinson to move to some other part of
the wider premises which was wholly unsuitable for him. Mr Coveney says, and I
think he is right, that clause 4(b) must be read as relating to alternative
premises that were reasonably comparable and reasonably suitable. But that
comment apart, those two clauses do seem to me to permit what Dresden Estates
Ltd wish to achieve to take place within the context of the agreement and
without terminating. If that is so, Mr Coveney argues that it means that there
is strong evidence that Mr Collinson did not have exclusive possession of these
premises during the period of the agreement, because he could be required to go
out of these premises while the agreement subsisted and go into other premises.
That argument,
I think, is right; and though it does conflict with clause 2, I think on
balance the considerations set out in clause 4, added to the express terms of
the agreement which refer to it time and again as ‘a licence’, outweigh the
considerations based upon clause 2.
In the note of
his judgment that we have, and I accept that it is an abbreviated note, the
learned judge is recorded as saying:
As to clause
4(b), one must look at what it says. It refers to the right of the Plaintiff to
move the Defendant to alternative accommodation in the same building if the
‘Required Notice’ is given. The Required Notice is defined in the agreement as
3 months.
Clause 4(b)
has no meaning which is inconsistent with the grant of a tenancy.
That last
sentence, with the greatest respect to the learned judge, can only be right if
clause 4(b) is interpreted as doing no more than giving the right to Dresden
Estates Ltd to terminate by three months’ notice. If clause 4(b) is interpreted
in the sense in which I interpret it, then clause 4(b) does have a meaning
which is inconsistent with the right of grant of a tenancy.
For these
reasons, I would allow the appeal and hold that the agreement was effective to
constitute a licence and, thus, that Mr Collinson does not have and did not
have the benefit of the Landlord and Tenant Act 1954.
I make one
last observation. In my experience, this is an unusual form of agreement. That
may be because these are somewhat unusual premises. If it be right that the
owners are seeking to put to good use an old pottery, which is no longer needed
for its former use, there are no doubt practical difficulties in achieving that
objective and it may be (I know not) that the agreement was tailored to achieve
that. But I want to make it clear that, for my part, my decision is based upon
the particular facts of this agreement; it is not intended to be read and
should not be read as laying down any guidelines for the future going outside
agreements containing these unusual provisions. Subject to that, as I say, I
would allow the appeal.
Agreeing,
LLOYD LJ said: Clause 2 of the agreement looks like an agreement for a tenancy,
despite the numerous references to ‘Licence’, ‘Licensor’ and ‘Licensee’. In
particular, the grant of a limited right to the licensor to enter for the
purpose of carrying out work is consistent only with a tenancy. The grant of an
unlimited right of entry would be consistent with a licence, even
superfluous. But the grant of a limited right would seem to have no
place at all in a licence.
But when one
comes to clause 4 the agreement wears a different complexion. Clause 4(b)
confers on the licensor the right to require the licensee to transfer to other
premises. Mr Coveney argues that that is a right which the licensor can
exercise during the continuance of the licence. It is a right which is wholly
inconsistent with a right to exclusive possession during the continuance of the
agreement and is therefore wholly inconsistent with a tenancy.
Mr Rank meets
that argument in this way. He submits that a notice under clause 4(b) must, in
reality and of necessity, bring the old agreement to an end. There is no way in
which the existing agreement can be made to apply to the new premises. The
parties must, therefore, have contemplated that, on the exercise of the right
under 4(b), they would enter into a new agreement. In support of that argument,
Mr Rank says it is significant that the period of notice required under clause
4(b), namely three months, is the same as the period of notice to terminate the
agreement under clause 4(e).
If that
argument of Mr Rank’s be correct, then it would undermine the basis of Mr
Coveney’s argument that the licensor can require the licensee to move to other
premises during the continuance of the agreement.
Mr Coveney
replies by drawing attention to the words of clause 4(b), ‘this occupation’. He
suggests that that means that the agreement was indeed to be capable of
continuing after the transfer to new premises. No doubt the parties could have
reached the same result by giving notice to terminate and then entering into a
new agreement. But that is not what clause 4(b) contemplates.
I was nearly
persuaded by Mr Rank’s submission, and, like Glidewell LJ, I would pay tribute
to his excellent argument, as indeed to the arguments on both sides. But Mr
Rank’s construction of the agreement does not, in my judgment, do full justice
to clause 4(b). That means that clause 2 points in one direction and clause 4
points in another. Looking at the agreement as a whole, I agree with Glidewell
LJ that clause 4 must prevail. If that be right, then the appeal must be
allowed.
I would only
add, like Glidewell LJ, that our decision today should not be regarded as
providing away round the decision of the House of Lords in Street v Mountford
[1985] AC 809. It will be in only a limited class of case that a provision such
as is found in clause 4(b) would be appropriate. If it is included in an
agreement where it is not appropriate, then it will not carry the day.
The appeal
was allowed, possession being ordered within 28 days.
