Agricultural Holdings (Notices to Quit) Act 1977, section 2(1) — Whether a counternotice under section 2(1) was valid when it was given by two only out of three joint tenants, the third joint tenant being a company wholly owned by the landlords — The plaintiffs in this action were the landlords; the defendants were the two individual joint tenants and the landlords’ company — There were three tenancy agreements whereby three areas of agricultural land were let to the defendants, the individuals and the company, who farmed the lands in partnership — The company in fact played no part in the farming business and had no interest in it save for a small entitlement to profits — Plaintiff landlords served notices to quit on the joint tenants and at the same time the company served on the individual partners notice of dissolution of partnership — The two individual joint tenants, but not the company, served counternotices on the landlords in purported accordance with section 2(1) of the 1977 Act — Plaintiff landlords brought an action claiming that the counternotices were invalid because given by two only of the three joint tenants, relying on the general rule of statutory construction that in the case of a joint tenancy ‘the tenant’ means all the joint tenants — Lloyd v Sadler and Newman v Keedwell considered — In the former case it was thought to be fairer to deprive the landlord of one source of rent than to deprive the occupying joint tenant of her protection — In the latter the decision went in favour of the landlord because the continuation of the joint tenancy would have been unfair to the joint tenant who wished that it should come to an end — Applying the principles which can be deduced from these authorities, Nourse J held that the purpose of section 2(1) of the 1977 Act was to give security to those who need it — In the present case, the individual joint tenants needed security; the company did not — If the counternotices were held valid and the tenancies continued, the company would still be liable to pay rent and perform other tenancy obligations, so that there would be no deprivation of the landlords; and, having regard to the ownership and control of the company, there would be no real burden on it — The case was therefore distinguishable on its facts from Newman v Keedwell and was one where the strict doctrine of joint proprietorship should not be applied — Held accordingly that the counternotices were valid and effective
The plaintiffs, trustees of the will of the late Col Hugo Meynell, were the freehold owners of three areas of agricultural land at East Ferry and Wildsworth in Lincolnshire, which had been let on yearly agricultural tenancies to the defendants. The defendants were two brothers, R H and J D Staples, and a company called Laughton Contracting Co Ltd. This company was in fact wholly owned by the plaintiff landlords, all the plaintiffs being shareholders in it and two of them being directors. Although the company was necessarily made a defendant to the present action, it did not, for obvious reasons, take any part in the proceedings.
Miss Joanne Moss (instructed by Waltons & Morse, agents for Pinsent & Co, of Birmingham) appeared on behalf of the plaintiffs; Peter Langdon-Davies (instructed by Hayes Son & Richmond) represented the first and second defendants, R H and J D Staples.
Giving judgment, NOURSE J said: The main question in this case is whether a counternotice under section 2(1) of the Agricultural Holdings (Notices to Quit) Act 1977 is valid where it is given by only two of three joint tenants and the third is a company wholly owned by the landlord.
The plaintiffs, as the trustees of the will of the late Colonel Hugo Meynell, are the freehold owners of three areas of agricultural land at East Ferry and Wildsworth in Lincolnshire of an aggregate size of about 210 acres. By three written agreements, the first dated November 23 1977 and the second and third dated October 6 1978, the plaintiffs let the land to the defendants on yearly agricultural tenancies in conventional form determinable at Michaelmas in any year by not less than 12 calendar months’ notice in writing given by either party to the other. The three defendants are Mr R H Staples, his brother, Mr J D Staples, and a company wholly owned by the plaintiffs called Laughton Contracting Co Ltd (‘Laughton’). All of the plaintiffs are shareholders in Laughton and they include two of its four directors. For reasons which will soon become clear, Laughton has taken no part in these proceedings.
The land was farmed by the two Staples brothers and Laughton in partnership together under two written agreements dated September 12 1977 and November 2 1978. The two agreements were for all material purposes to the same effect. Although it seems to have been intended that there should be two separate partnerships, one to farm two of the areas of land under the name ‘Staples Brothers’ and the other to farm the third under the name ‘Staples Brothers (Wildsworth)’, the accounts suggest that the two were treated as one. That is not a point of any importance.
I shall mention the material provisions of the two partnership agreements by reference to those contained in that dated September 12 1977. Clause 1 provided that any tenancy should form partnership property. Clause 3 provided that after September 29 1982 the partnership should continue unless and until dissolved by any partner giving to the others not less than 12 months’ written notice of dissolution, such notice to take effect on the first anniversary of September 29 next following the date of the notice, subject to a proviso that Laughton might not serve notice of dissolution except following a breach of the agreement by another partner ‘or if a notice to quit has been given in respect of the new tenancy or any extension thereof’. Clause 6 provided that Laughton should not be liable to contribute capital to the partnership. Clause 7 provided that profits should be computed on the same basis as that employed in the computation of the profits of the Staples for previous accounting periods, save that no item of expenditure on capital equipment in excess of a certain amount was to be debited to profit and loss account without Laughton’s consent in writing. The profits were to belong to the partners, as to an amount equal to the rent for the time being payable, to the Staples in such proportions as they might from time to time agree, and subject thereto to Laughton and the Staples in the proportions 7 1/2% and 92 1/2% respectively. Losses were to be borne by the partners in the same proportions as they were entitled to share profits. By clause 10 each of the Staples agreed diligently to attend to the partnership business, to devote a reasonable amount of time and|page:2| attention thereto subject only to annual and other holidays on a basis to be agreed between them, and to farm the land in accordance with the rules of good husbandry and to observe the terms of the relevant tenancy or tenancies. Clause 11 was in the following terms:
The Staples shall together have complete conduct of all negotiations leading to the grant of the new tenancy and thereafter in connection therewith, including any rent review (and the service of notice and settlement of compensation under section 34 Agricultural Holdings Act 1948 (‘the Act’) but after September 29 1982 no partner may serve a counter-notice under section 24 of the Act without the consent of Laughton).
Clause 12 provided that the Staples should have complete conduct of the business of the partnership. Clause 13 provided that on the death, bankruptcy or retirement of either of the Staples his share in the partnership should accrue to the other of them on payment as therein mentioned. Clause 14 gave the Staples certain rights to require Laughton to retire from the partnership in the event of its winding up, whereupon Laughton’s share would accrue to them without payment save for its share of undrawn profits. Clause 15 provided in effect for the provisions of the Partnership Act 1890 as to winding up to apply on a dissolution of the partnership, except that any surplus was to be divided between the Staples in the same proportions as they were entitled to share profits. These provisions can be summarised by saying that Laughton was to play no part in the partnership business and to have no interest in it save for its small share of profits.
The partnership accounts to September 29 1983 disclose that up to that date the partnerships either made a loss or did not make sufficient profits to exceed the amount of the rent for the time being payable in respect of the tenancies, with the result that no share of profits ever became payable to Laughton. It appears from the annual reports and accounts of Laughton that its only activity, if such it can be called, was trading in partnership with the Staples.
By three notices to quit dated September 26 1983 and served on the same day, the plaintiffs gave the Staples and Laughton notice to quit the three areas of land on September 29 1984. By two notices dated September 28 1983 and served on the same day, Laughton gave the Staples notice of dissolution of the two partnerships, also to take effect on September 29 1984.
On or about October 14 1983 the Staples served on the plaintiffs three counternotices purporting to require that section 2(1) of the 1977 Act should apply to the notices to quit. Each was headed ‘Agricultural Holdings (Notices to Quit) Act 1977’ and specified the area of land in respect of which it was given. The material part of each notice was in these terms:
Pursuant to the powers and provisions of the above Act WE HEREBY GIVE YOU NOTICE that we require that subs (1) of s 2 of the above Act shall apply to your Notice to Quit in respect of the above land served on us and dated September 26 1983. This Notice is not to be taken as any admission on our part as to the validity of your Notice to Quit and it is given without prejudice to any points arising thereon.
Each notice was dated October 14 1983 and signed by the two Staples on behalf of the relevant partnership, which was described as ‘tenant’.
The action was heard in the vacation court on September 5. No oral or affidavit evidence was adduced on either side. There was no agreed statement of facts. The only materials before the court were the pleadings and an agreed bundle consisting of the documents earlier referred to and two letters dated September 6 1977. At the end of the hearing judgment was reserved.
The plaintiffs seek a declaration that the three counternotices dated October 14 1983 are of no effect and that the three tenancy agreements accordingly determined on September 29 last. The Staples contend that the counternotices were valid and counterclaim for a declaration to that effect.
Mr Langdon-Davies, for the Staples, put their case in two alternative ways. First, he submitted that if the 1977 Act is properly construed in the light of its objects the giving of an effective counternotice under section 2(1) does not require the concurrence or authority of a corporate joint tenant which is wholly owned by the landlord. Secondly, he submitted that, notwithstanding the provisions of clause 11 earlier referred to, the Staples did have authority to give the counternotices on behalf of all three partners.
Section 2(1) of the 1977 Act, which re-enacted section 24(1) of the Agricultural Holdings Act 1948, is in these terms:
(1) Where — (a) notice to quit an agricultural holding or part of an agricultural holding is given to the tenant thereof; and (b) not later than one month from the giving of the notice to quit the tenant serves on the landlord a counternotice in writing requiring that this subsection shall apply to the notice to quit, then, subject to subsection (2) below, the notice to quit shall not have effect unless the Tribunal consent to its operation.
The general rule of statutory construction is well settled. In the case of a joint tenancy ‘the tenant’ means all the joint tenants and not just one or some of them. On this principle a counternotice served by only one of two individual joint tenants of an agricultural holding has been held to be of no effect; see Newman v Keedwell (1977) 244 EG 469, [1977] 2 EGLR 4. On the other hand, the Court of Appeal has twice departed from the general rule in cases where they thought that it would lead to unreasonable results which the legislature is unlikely to have intended; see Howson v Buxton (1928) 97 LJKB 749, a case on section 12 of the Agricultural Holdings Act 1923, and Lloyd v Sadler [1978] QB 774, a case on section 3(1)(a) of the Rent Act 1968. Mr Langdon-Davies relied on those two decisions, particularly on the latter, which was decided after Newman v Keedwell. He sought to distinguish Newman v Keedwell on the facts.
I need not refer to Howson v Buxton, because it was very carefully considered and, following Jacobs v Chaudhuri [1968] 2 QB 470 (CA), distinguished by Fox J in Newman v Keedwell. The principal ground of distinction and the basis of the learned judge’s own decision are to be found in the following passage in his judgment at (1977) 244 ESTATES GAZETTE 469 at p 472:
In the present case the effect of the service of the notice to quit by the landlord is that the tenancy will be determined unless a valid counternotice is given by the tenant. If a valid counternotice is given then the tenancy will continue (unless the tribunal consents to the operation of the notice to quit). Thus the subsisting position after the service of the notice to quit is that the tenancy was determined unless the counternotice is given. It seems to me that if the subsisting position is to be displaced the authority of both joint tenants is necessary because of the serious effect which it has upon their obligations. If the tenancy continues both joint tenants have a continuing liability in respect of the rent and the covenants in the agreement. It is difficult to see why one joint tenant should have these burdens forced upon him against his will when the position in law is that the tenancy cannot continue unless ‘the tenant’ serves a counternotice. It seems to me that the fair reading of ‘tenant’ in section 24(1) is, in the circumstances of this case, ‘the joint tenants’. What it may mean in other sections of the Act I need not consider.
In Lloyd v Sadler the leading judgment was delivered by Megaw LJ. He expressed the view, in which Lawton and Shaw LJJ may be taken to have concurred, that by reason of the nature of the issues in Newman v Keedwell it did not assist on the issue which the court had to decide in that case; see [1978] QB 774 at p 785G. The question in Lloyd v Sadler, which was recognised to be one of importance, was whether one of two joint tenants who remained in occupation after the determination of the contractual tenancy, the other having ceased to occupy before that date, was entitled to the protection of the Rent Acts. That question was answered in the affirmative. The following passages from the judgments demonstrate the ground of the decision. At p 786G Megaw LJ said this:
In my opinion, the judgment of Scrutton LJ in Howson v Buxton shows that, where the strict application of the doctrine of joint tenancy would lead to unreasonable results, or results which the legislature is unlikely to have intended, it is permissible for the court to conclude that the legislature did not so intend but that, instead, in such a case, the phrase ‘the tenant’, where there is a joint tenancy, is to be read as meaning ‘the joint tenants or any one or more of them’. There is thus authority that the doctrine of joint participation by joint tenants is not a sacrosanct or immutable doctrine of statutory interpretation, where such phrases as ‘the tenant’ and ‘the tenancy’ are used. Where, then, is the line to be drawn? When does a suggested exception become a heresy? In the present case I believe that, for the purposes of section 3(1)(a) of the Act of 1968, the freedom from strict doctrinal restraint should, as in Howson v Buxton, be held to apply.
At p 790B, Lawton LJ, who had earlier said that the 1968 Act gave protection to persons, not to legal concepts such as joint tenants, said this:
The object of the Act of 1968 was to give security of tenure to persons, and one of two joint tenants might have wanted it and the other not. The mischief for which Parliament provided a remedy was eviction for reasons other than those which the Act deemed good. If Miss Sadler has to leave the flat because Miss Lunt did not want to stay there any longer, that is not a reason which was specified in the Act. I am satisfied that section 3(1)(a) can be construed so that one of two joint tenants can become ‘the statutory tenant’. Any other construction would defeat one of the objects of the Act.
At p 791A, Shaw LJ said this:
As has been emphasised in the preceding judgments, the primary object of section 3(1)(a) of the Act of 1968 is to provide security of tenure after the term granted by a protected tenancy has expired. Such security is a matter of|page:3| personal and individual interest. Even though that interest is not shared by or common to all the erstwhile joint tenants, one or some of them may be in need of the security which the Act affords.
While all the members of the Court of Appeal were of the opinion that to have held that Miss Sadler was not protected by the 1968 Act would have defeated one of its primary purposes, they recognised the potential prejudice which would be caused to the landlord through a reduction in the number of those to whom he could look for payment of rent. Megaw LJ regarded that potential prejudice as being less serious than that which would be caused to the joint tenant who wished to continue in occupation; see [1978] QB 774 at p 782E. Lawton LJ regarded it as a minor matter compared with the restriction of the right to possession which the Act imposes on landlords; see p 790D-E. Shaw LJ observed that the landlord would in any event be deprived of a potential source of rent in the case of a joint tenant who died during the tenancy; see p 791C. Both he and Lawton LJ pointed to the landlord’s right to possession in the event of a breach of the tenant’s obligations.
In Lloyd v Sadler the Court of Appeal thought that it was fairer to deprive the landlord of one source of rent than to deprive the occupying joint tenant of her protection. In Newman v Keedwell the decision went in favour of the landlord because the continuation of the joint tenancy would have been unfair, not to him but to the joint tenant who wished that it should come to an end. I must now apply the principles which are to be deduced from these two authorities to the circumstances of the present case.
By serving notices dissolving the partnerships Laughton has elected not to continue in occupation of the land. Neither counsel suggested that the validity of those notices, which were duly served after the giving of the notices to quit, depends on whether the Staples’ counternotices are valid or not. I do not think that it does. I proceed on the assumption that the partnerships were dissolved on September 29 last and must now be wound up in accordance with the provisions of the partnership agreements. By virtue of their rights to any surplus the Staples can procure that the benefit of the tenancies will vest in them to the exclusion of Laughton. None of this will affect the tenancy agreements, whose provisions, if the counternotices are valid, will remain in full force and effect unless and until the agricultural land tribunal consent to the operation of the notices to quit.
Will a holding that the Staples are not protected by section 2(1) of the 1977 Act defeat its purpose? Mr Langdon-Davies submitted that its purpose is to give security of tenure to farmers rather than to tenants. Miss Moss, for the plaintiffs, submitted that it is to give security to those who are both farmers and tenants. I prefer the latter submission but think that it requires some refinement. The true purpose is to give security to those who need it. I can see no distinction in principle between the purpose of section 2(1) and that of section 3(1)(a) of the Rent Act 1968. The Staples, like Miss Sadler, need security. Laughton, like Miss Lunt, does not. In my judgment to hold that the Staples are not protected by section 2(1) would defeat its purpose.
If the counternotices are held to be valid and the tenancies continue, Laughton will remain liable to pay rent and to perform the tenants’ other obligations. That is no deprivation of the plaintiffs. Just as in Newman v Keedwell, the question is: will it be unfair to Laughton? To reproduce the words of Fox J, is the continuation of its obligations under the tenancies a burden which ought to be forced upon Laughton against its will? At first sight the answer to that question might seem to be in the affirmative, but it can only be answered by seeing to whom the obligations are owed. When I see that they are owed to those who own all the shares in Laughton and include two of its four directors I cannot think of them as being burdensome in any real sense at all. It is obvious that the plaintiffs would have nothing to gain by enforcing those obligations against Laughton. Even if they did, Laughton would no doubt have a right to be indemnified by the Staples. In the circumstances the continuation of the joint tenancy would not be unfair to Laughton.
I do not intend to fall into the error, common among those who are not lawyers and not unknown among those who are, of making no distinction between a wholly owned company and its owner. While asserting their separate legal personalities, I am nevertheless unable to ignore the reality of the relationship between them. It would be quite unrealistic to think that the plaintiffs would ever enforce Laughton’s obligations under the tenancy agreements.
In the circumstances, I am of the opinion that Newman v Keedwell is distinguishable on the facts. Like Mr Langdon-Davies I think that it may be significant that Fox J restricted himself to the fair reading of ‘tenant’ in section 24(1) in the circumstances of that case; see (1977) 244 EG 469 at p 472, [1977] 2 EGLR 4. I do not think that it is the fair reading in the circumstances of this case. Being unable to see any distinction in principle between the purposes of the two enactments, and being bound to apply the decision in Lloyd v Sadler, I find myself at a point at which I might not have been able to arrive without its guidance. Mr Langdon-Davies’ first submission succeeds. I hold that the three counternotices dated October 14 1984 are valid.
That makes it unnecessary for me to deal with Mr Langdon-Davies’ alternative submission, beyond saying that it seems to me to be one of far more dubious validity. I propose to make the counter-declaration which the Staples seek.
The plaintiffs’ action was dismissed and a declaration made, in accordance with the defendants’ (Staples) counterclaims, that the counternotices were valid and effective. The defendants (Staples) were awarded the costs of the action and the counterclaim; legal aid taxation was ordered.
