Petrol filling station — Licence agreements — Termination — Proceedings for possession under RSC Ord 113 — Possession order granted — Whether procedure valid — Whether agreement constituted lease or licence — Court of Appeal holding that licence agreement did not confer right to exclusive possession of premises
In September 1992 the plaintiff (Esso) granted the first defendant (Fumegrange) a three-year licence of Abbey Service Station, Ashby Road, Shepsted, expiring on September 30 1995. On November 1 1991 Esso granted Fumegrange a licence of Brookside Service Station, Nottingham Road, Melton Mowbray, for a period of three years from November 1 1991 to October 31 1994. The second and third defendants were directors of and shareholders in Fumegrange. In September 1993 Fumegrange defaulted in payment of sums due under both licences for the supply of petroleum products. The total amount due was £94,167.21.
On September 6 1993 Esso determined both licences by reason of the default. On October 4 1993 it brought proceedings under RSC Ord 113 and obtained possession of the premises. All three defendants appealed against the possession order on the ground that the judge was wrong in law in concluding that the agreements under which Fumegrange occupied the two service stations constituted licences and not leases. On March 11 1994 Fumegrange was compulsorily wound up and the liquidator withdrew from the appeal. The appellants claimed that: the true relationship between Esso and Fumegrange was that of landlord and tenant; the tenancy was protected under the Landlord and Tenant Act 1954 Part II; the procedure for recovery of possession of the premises set out in Ord 113 was not available to Esso; and the proceedings were invalid and should be struck out.
Held The appeal was dismissed.
1. Save in exceptional circumstances the enjoyment of exclusive occupation for a term in consideration of periodic payments created a tenancy: see AG Securities v Vaughan [1988] 2 EGLR 78.
2. If an agreement satisfied all the requirements of a tenancy then it produced a tenancy and the parties could not alter the effect of the agreement by insisting that they only created a licence: see Street v Mountford [1985] 1 EGLR 128.
3. The correct test to be applied was whether, on the proper construction of the licence agreements, exclusive possession of the service stations was granted to Fumegrange. The relevant agreements conferred on Fumegrange the exclusive right to use the premises for particular purposes. However, an exclusive right of that nature did not by itself suffice to create a tenancy.
4. The licence agreement referred to “Esso’s right of possession and control of the service station” and required Fumegrange not to impede in any way the exercise of that right. Esso could make alterations on the premises; it could install a car wash and change the layout of the shop. The rights and powers of Esso had to be looked at together and cumulatively. Those rights and powers were quite inconsistent with an exclusive right to possession of the service stations being vested in Fumegrange. The degree of physical control over the premises was very significant. In addition, account was to be taken of the degree of control over the conduct of the business at the service station.
5. On their proper construction the agreements did not confer on Fumegrange the right to exclude possession of the premises.
Peter Smith QC and Paul Chaisty (instructed by Peter W Marsh & Co, of Oakham) appeared for the appellants; Alan Boyle QC and Patrick Walker (instructed by Kershaw Tudor, of Sheffield) appeared for the respondents, Esso.
