Agricultural holdings — Security of tenure — Scheme to exclude security of tenure for occupying farmer by device of nominee tenant granting subtenancy to occupier — Court of Appeal divided on validity of scheme and leave given to appeal to House of Lords — Wide implications of majority’s ratio decidendi if held to be correct — The late owner of a farm, whose personal representatives were the present respondents, decided in consultation with his solicitor on a scheme by which the present appellant should in effect become the tenant of the farm but without enjoying the statutory security of tenure of a protected agricultural tenant — The scheme, which was known to and acquiesced in by the appellant, was of a type much canvassed over the years since the Agricultural Holdings Act 1948 and was avowedly intended to avoid or circumvent the security of tenure provisions; although well known to those involved in the agricultural industry, this was the first time that it had become an issue before a court — The arrangement was that the late owner granted a tenancy of the farm to his wife, who on the same day granted a subtenancy to the appellant — The effect was that if the head tenancy was terminated by a notice to quit, the tenant taking no steps to contest it, the subtenancy would automatically perish with it — In fact, subject to the issue before the court, this is what happened — The owner died and his personal representatives served a notice to quit on his widow — She did not serve a counternotice under the relevant statutory provisions (then section 2 of the Agricultural Holdings (Notices to Quit) Act 1977) and her tenancy came to an end — The respondents (the personal representatives) then claimed possession of the farm, without having served any notice to quit, on the ground that the appellant’s subtenancy had come to an end on the termination of the superior tenancy under ordinary common law rules — The county court judge upheld the claim against the appellant, holding that the scheme, although admittedly intended with the appellant’s agreement to defeat the statutory security of tenure provisions, was valid and effective.
Russell LJJ held that the county court judge was wrong — Ralph Gibson LJ would
have upheld the judge’s decision — The majority and minority judgments reflect
a difference of approach not only to the specific agricultural holdings issue
but also to the extent to which a court should be influenced by broad
considerations of policy underlying the wording of the statute which is being
construed
of Dillon and Russell LJJ it was legitimate to look behind the agreements in
order to ascertain the true relationship of the parties — Although not a ‘sham’
in the sense explained by Diplock LJ in Snook v London & West Riding
Investments Ltd, it was an artificial transaction, attempting like the scheme
in Johnson v Moreton, but by a different route, to get round the statutory
security of tenure provisions — The object was to disguise what was in
substance the grant of an agricultural tenancy lacking an essential attribute
of such a tenancy, namely, security of tenure — It was analogous to the fiscal
devices struck down by the cases of W T Ramsay Ltd v Inland Revenue
Commissioners and Furniss v Dawson, which applied the principle that the consequences of a
preordained series of transactions, intended to operate as such, are generally
to be ascertained by considering the result of the series as a whole and not by
dissecting the scheme and considering each individual transaction separately —
Applying that principle to the two steps taken in the present case, by means of
the tenancy and subtenancy, the real substance was that an agricultural tenancy
stripped of the attribute of security of tenure was granted to the appellant, a
clear contravention of the Act
dissenting judgment, Ralph Gibson LJ said that there was nothing unlawful or
contrary to public policy for the owner of the farm to let to his wife so that
she might let it to the appellant — The courts have never claimed the power to
treat a transaction in private law between private individuals as something
other than it really is merely because the social purpose of some legislation
would be served by so treating it — The evidence here was that the parties did
not intend the appellant to become the direct tenant of the deceased owner; in
fact the evidence was clear that he was not to be in that position — Johnson v Moreton was
correctly distinguished from the present case by the judge — To decide in
favour of the appellant would be to say that the court is free, not only in
this but also in other contexts, to disregard real transactions and, after
looking into the parties’ intentions, to substitute quite different
transactions if the latter were in harmony with the assumed underlying social
purpose of the legislation — Ralph Gibson LJ would have dismissed the appeal —
However, in view of the opinion of the majority, the appeal was allowed, but
the court gave leave to appeal to the House of Lords
The following
cases are referred to in this report.
Antoniades v Villiers [1988] 3 WLR 139; [1988] EGLR 59; [1988] 17 EG
122, [1988] 1 EGLR 59; CA
S L Dando
Ltd v Hitchcock [1954] 2 QB 317; [1954] 3
WLR 76; [1954] 2 All ER 335, CA
Eilbeck v Rawling [1982] AC 300; [1981] 2 WLR 449; [1981] 1 All ER
865, HL
Featherstone v Staples [1986] 1 WLR 861; [1986] 2 All ER 461; [1986] 1
EGLR 6; (1986) 278 EG 867, CA
First
Cross Ltd v East West (Export/Import) Ltd 41
P&CR 145; [1980] EGD 380; 255 EG 355, [1980] 2 EGLR 85, CA
Furniss v Dawson [1984] AC 474; [1984] 2 WLR 226; [1984] 1 All ER
530, HL
Gladstone v Bower [1960] 2 QB 384; [1960] 3 WLR 575; [1960] 3 All ER
353; 58 LGR 313, CA
Hadjiloucas v Crean [1987] 3 All ER 1008; [1987] 2 EGLR 60; (1987) 284
EG 927, CA
Johnson v Moreton [1980] AC 37; [1978] 3 WLR 538; [1978] 3 All ER
37; (1978) 37 P&CR 243; [1978] EGD 21; 247 EG 895, [1978] 2 EGLR 1, HL
Quennell v Maltby [1979] 1 WLR 318; [1979] 1 All ER 568; (1978) 38
P&CR 1; [1979] EGD 363; 249 EG 1169, [1979] 1 EGLR 106, CA
W T
Ramsay Ltd v IRC [1982] AC 300; [1981] 2 WLR
449; [1981] 1 All ER 865, HL
Shell-Mex
& BP Ltd v Manchester Garages Ltd [1971]
1 WLR 612; [1971] 1 All ER 841, CA
Sherwood v Moody [1952] 1 TLR 450; [1952] 1 All ER 389
Short
Bros (Plant) Ltd v Edwards [1979] EGD 15;
(1979) 249 EG 539, [1979] 1 EGLR 5
Snook v London & West Riding Investments Ltd [1967] 2 QB 786;
[1967] 2 WLR 1020; [1967] 1 All ER 518, CA
Somma v Hazelhurst [1978] 1 WLR 1014; [1978] 2 All ER 1011; (1978)
37 P&CR 391; [1978] EGD 269; 246 EG 311, [1978] 1 EGLR 69, 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 Ronald Burton, defendant in an action for possession of Berrywood
Farm, Donhead St Mary, Wiltshire, from the decision of Judge Willcock QC at
Shaftesbury County Court, granting possession to the plaintiffs (present
respondents), Colin Henry Beaumont Gisborne and John Beckly, the personal
representatives of Dick Christopherson, deceased.
David Elvin
(instructed by Porter Bartlett & Mayo, of Sturminster Newton) appeared on
behalf of the appellant; Oliver Albery (instructed by Payne Hicks Beach)
represented the respondents.
Giving
judgment, DILLON LJ said: This appeal, by the defendant in the action, Mr
Burton, against a decision of Judge Willcock QC, given in the Shaftesbury
County Court on April 6 1987, raises issues of law of general importance and,
to my mind, of considerable difficulty in relation to the statutory provisions
which under successive statutes since 1948 have conferred security of tenure on
the tenants of agricultural holdings.
It will be in
mind that one of the more important provisions of the Agricultural Holdings Act
1948 (‘the 1948 Act’), and indeed the nub of the security of tenure provisions
of the 1948 Act, was section 24, which provided by subsection (1) that:
Where notice
to quit an agricultural holding or part of an agricultural holding is given to
the tenant thereof, and not later than one month from the giving of the notice
to quit the tenant serves on the landlord a counter-notice in writing requiring
that this subsection shall apply to the notice to quit, then, subject to the
provisions of the next following subsection, the notice to quit shall not have
effect unless the Minister consents to the operation thereof.
Subsection (2)
of section 24 then set out a limited number of cases where subsection (1) was
not to apply — ie where the tenant was not to be entitled to stay the operation
of a notice to quit by serving a counternotice — and section 25 set out a
limited number of grounds on which alone the minister could give his consent to
the operation of a notice to quit an agricultural holding or part of an
agricultural holding.
By a later
amendment by the Agriculture Act 1958, the powers of the minister were
transferred to a quasi judicial body, the agricultural land tribunal.
Sections 24
and 25 of the 1948 Act, as previously amended, were replaced by sections 2 and
3 of, and subsequent provisions in, the Agricultural Holdings (Notices to Quit)
Act 1977, which is the Act directly applicable to the present case. The
provisions of the 1977 Act have themselves in turn been recently replaced by
provisions in sections 26 and 27 of the Agricultural Holdings Act 1986. Though
details, however, have been altered and elaborated, the scheme of the three
Acts has remained the same, viz that, save in a limited number of cases in
which a tenant is not to be entitled to stay the operation of a notice to quit
by serving a counternotice, a notice to quit an agricultural holding or part of
an agricultural holding will not have effect, if the tenant serves a
counternotice, unless the tribunal consents to its operation on one or more of
certain specified grounds.
In Johnson
v Moreton [1980] AC 37 the House of Lords held, for reasons based on the
policy of the 1948 Act and the vital importance, both to the national economy
and security, that the level of production and the efficiency of farms in this
country should be maintained and improved, that a tenant of an agricultural
holding could not deprive himself in advance or contract out of his right to
give a counternotice under section 24 of the 1948 Act. The particular scheme
which the House had to consider in Johnson v Moreton, and held
ineffective to deprive the tenant of his statutory rights under section 24, was
the inclusion in a tenancy agreement of an agricultural holding, with the
tenant’s full knowledge and consent, of a covenant by the tenant not to serve
any counternotice under section 24. When the landlords in due course served a
first notice to quit on the tenant, the tenant served a counternotice. The
landlords accepted that the counternotice was effective, by the mandatory terms
of section 24, to stay the operation of the first notice to quit, but they
claimed — unsuccessfully — that the service of the counternotice was a breach
of a term or condition of the tenancy and that consequently the landlords were
entitled to serve a second notice to quit, by reason of that breach, to which
under section 24(2) of the 1948 Act no second counternotice could be given.
Lord Hailsham, at p 54C, regarded the relevant clause in the tenancy agreement
as an open, not to say brazen, attempt to get round the provisions of the
agricultural holdings legislation so far as they provided security of tenure to
the tenant; all their lordships held that the attempt failed.
In the present
case the court is faced with an equally open attempt to get round those
provisions, albeit by a different route. The question is whether this attempt —
however brazen — succeeds, as Judge Willcock held, or fails.
To understand
the present scheme it is necessary to appreciate that under the common law a
subtenancy comes automatically and simultaneously to an end, without the need
for any notice to quit or notice of termination, when the head tenancy, out of
which the subtenancy was carved, comes to an end by any means (other than
surrender by the head tenant to the head landlord). Consequently it was held by
Ormrod J in Sherwood v Moody [1952] 1 All ER 389 (which has never
since been doubted) that a subtenant of agricultural land has no protection,
and no power to serve a counternotice under section 24(1) of the 1948 Act, if
the tenancy of his immediate landlord, the head tenant, has been effectively
determined by the head landlord; in Sherwood v Moody the
determination of the head tenancy was by a notice to quit given to the head
tenant by the head landlord, to the operation of which the minister gave his
consent.
Unlike the
Rent Acts, the agricultural holdings legislation contains no special provision
for the protection of subtenants against head landlords. Section 26(1)(e)
of the 1948 Act gave the minister power to make regulations for making
provision for the purpose of safeguarding the interests of subtenants,
including provision enabling the minister or the agricultural land tribunal,
where the interest of a tenant is terminated by notice to quit, to secure that
a subtenant will hold from the landlord on the same terms as he held from the
tenant. That power was transferred from the minister to the Lord Chancellor by
the Agriculture Act 1958. When section 26 of the 1948 Act was repealed by the
1977 Act, a similar power was conferred on the Lord Chancellor by section 5(1)(d)
of the 1977 Act, and it is now to be found in section 29 of, and para 7 of
Schedule 4 to, the 1986 Act. But none of these powers has ever been exercised.
Accordingly,
on the advice of his solicitors, the owner of the land in question in the present
case set about constructing, if he could, a situation in which the defendant,
Mr Burton, would farm the land, but as a subtenant only in a situation in which
the subtenancy could be terminated by termination of the head tenancy whenever
the owner of the land wanted. The land in question is a farm known as Berrywood
Farm, at Donhead St Mary in Wiltshire, and at the relevant time in 1963 its
owner was a Mr Dick Christopherson. He died in February 1984 at the age of 90
and the plaintiffs in this action, respondents to the present appeal, are his
personal representatives. In and just before 1963 Mr Christopherson was having
difficulties over farming Berrywood Farm and the defendant, who owned another
farm in the neighbourhood, proffered his help and offered to take Berrywood
Farm off Mr Christopherson’s hands as his tenant. Mr Christopherson consulted
his solicitor, Mr Wilson of Francis & Crookenden. Mr Wilson’s proposals are
clearly set out in a letter of December 13 1962. The avowed object of the proposals
was that the defendant should not be entitled — if the scheme worked — to the
benefit of the security provisions of the Agricultural Holdings Act.
Mr Wilson
prepared the necessary documents and what was done was that on April 6 1963 Mr
Christopherson granted his wife Mrs Kathleen Christopherson a tenancy on
conventional terms of Berrywood Farm and on the same day she granted the
defendant a tenancy, which was therefore intended to be a subtenancy, of the
same land at the same rent. The evidence of Mrs Christopherson at the trial in
the county court was — whether relevant or not to any of the issues — that she
thought it was a straightforward tenancy between her husband and the defendant
and that she used to give her husband the cheques which the defendant gave her
for rent.
The artificial
nature of this tenancy/subtenancy arrangement is emphasised by the fact that
there was some other land in the locality
Watery Lane land happened, however, to belong to Mrs Christopherson and not to
her husband and so by a tenancy agreement, also of April 6 1963, Mrs
Christopherson granted her husband a tenancy of the Watery Lane land and on the
same day he granted the defendant a tenancy of the same land at the same rent.
The Watery Lane land is not itself the subject of this litigation, since it was
sold, subject to the defendant’s tenancy, many years ago.
So far as
Berrywood Farm is concerned, the plaintiffs, as personal representatives of Mr
Christopherson after his death, served notice to quit on Mrs Christopherson and
she — predictably — did not serve any counternotice. Her tenancy accordingly
expired and the plaintiffs then claimed possession from the defendant without
serving any notice to quit on him to which he could give a counternotice. The
judge upheld that claim, and the defendant now appeals to this court.
The judge
found, and this is not disputed, that at the time of the grant of his tenancy
of Berrywood Farm, the defendant was well aware of the details of the scheme
and that its object was that he should not enjoy the usual security of tenure
of an agricultural tenant. It is likely that he had, as the judge found, taken
advice from local solicitors and the correspondence shows that he negotiated
certain improvements in the terms to compensate him for not having security of
tenure. The tenant in Johnson v Moreton had also, however, known
perfectly well that the scheme adopted in his tenancy agreement was intended to
deprive him of the protection of the 1948 Act, and that did not prevent his
establishing that in law the scheme failed and he was entitled to security. The
question for us is not whether the defendant is acting as an honourable man in
reneging on a scheme to which he had agreed, and of which he has had the
benefit for over 20 years but whether the scheme is effective in law to deprive
him of the security of tenure a tenant of an agricultural holding would
ordinarily have. Does the scheme work?
I have no
doubt, for my part, that the scheme can properly be described, as Mr Elvin for
the defendant submitted, as an artificial device to prevent the defendant
having security of tenure. So indeed the judge concluded. That does not,
however, without more, lead to the conclusion that the device must fail.
The appeal has
been presented on two grounds which the judge dealt with separately but which,
to my mind, really run together. First, it is said that the two tenancy
agreements of April 6 1963 in respect of Berrywood Farm were a sham and the
true transaction was the grant of a tenancy by Mr Dick Christopherson to the
defendant. Second, it is said that even if the two tenancy agreements were not
strictly a sham, none the less, for the reasons of policy indicated in the
speeches in Johnson v Moreton and in the light of the approach of
the appellate courts in recent tax cases to artificial schemes for evading
mandatory statutory provisions, the agreements can have effect only as the
grant of a tenancy by Mr Dick Christopherson to the defendant.
Conversely, it
is argued for the respondents that the two tenancy agreements should have
effect according to their strict wording as the parties intended, and that if
the result is to throw a glaring spotlight on a fundamental flaw in the
security of tenure provisions in the 1948 Act and subsequent Acts, then any
corrective action that is thought appropriate is a matter for the Lord
Chancellor in the exercise of the rule-making power which I have mentioned, or
for Parliament, and not for the courts.
In relation to
‘sham’, reference is made, as usual, to the passage in the judgment of Diplock
LJ in Snook v London & West Riding Investments Ltd [1967] 2
QB 786 at p 802, where he said:
It is, I
think, necessary to consider what, if any, legal concept is involved in the use
of this popular and pejorative word. I apprehend that, if it has any meaning in
law, it means acts done or documents executed by the parties to the ‘sham’
which are intended by them to give to third parties or to the court the
appearance of creating between the parties legal rights and obligations
different from the actual legal rights and obligations, if any, which the
parties intend to create. But one thing, I think is clear in legal principle,
morality and the authorities . . . that for acts or documents to be a ‘sham’,
with whatever legal consequences follow from this, all the parties thereto must
have a common intention that the acts or documents are not to create the legal
rights and obligations which they give the appearance of creating.
That passage
has, of course, been often considered in relation to the more complex
tax-avoidance schemes. In relation to such schemes it has been held that the
documents were not a sham, because the parties intended to create, if they
could, the complex of rights and liabilities which the documents appeared
to create. So in the present case and, as I read his judgment, using the term
‘sham’ in that sense, the judge came unhesitatingly to the conclusion that the
arrangement in the present case, whatever it might be called, could not justly
be said to be a sham.
There is,
however, a slightly different aspect of sham which is exemplified by the case
of Somma v Hazelhurst [1978] 1 WLR 1014 as interpreted by Lord
Templeman in Street v Mountford [1985] AC 809 at p 825, where the
actual decision of this court in Somma v Hazelhurst was
disapproved. In Somma v Hazelhurst a landlord, being desirous of
avoiding certain statutory provisions in the Rent Acts in relation to furnished
lettings, required a young couple who wanted to occupy a particular room to
execute two separate forms of licence agreement. The young couple, who urgently
wanted accommodation, signed the agreements without query but, on the findings
of the judge, ‘understood what they were letting themselves in for’. It seems
clear that the landlord, at any rate, had the intention that the documents
would if that were at all possible create the legal rights and obligations
which they gave the appearance of creating, and the young couple went along
with that intention. None the less the documents were a sham because they did
not reflect what was actually happening; in essence the documents, and the
parties by entering into the documents, were trying to do what in law cannot be
done, viz to give the young couple exclusive possession of furnished
residential accommodation without the statutory protection for tenants of such
accommodation which are mandatory under the Rent Acts.
We have been
taken thoroughly by counsel through the recent tax cases which illustrate what
has been referred to as ‘the Ramsay principle’ from the case of W T
Ramsay Ltd v IRC [1982] AC 300. In these cases, the question has not
been whether the documents in question were a sham but whether on a proper
appreciation of the relevant taxing Act they could have the fiscal effect which
their authors desired. The Ramsay principle, as summarised by Lord
Fraser in Furniss v Dawson [1984] AC 474 at p 512 F-G, is that
the fiscal consequences of a preordained series of transactions, intended to
operate as such, are generally to be ascertained by considering the result of
the series as a whole and not by dissecting the scheme and considering each
individual transaction separately. In many of the tax cases the individual
transactions in the scheme have been self-cancelling, which no doubt makes it
easier to consider the result or effect of the series as a whole — cf the
reasoning of Templeman LJ in Eilbeck v Rawling [1980] 2 All ER 12
at p 21 g-i and of Lord Bridge in Furniss v Dawson at p 517 D-H —
but Lord Fraser’s comments in Furniss v Dawson at p 512 E-F show
that the fact that such a scheme has some enduring legal consequences and is
not wholly self-cancelling is not sufficient to render the Ramsay
principle inapplicable. It seems to me that a similar principle must be
applicable wherever there is a preordained series of transactions which is
intended to avoid some mandatory statutory provision, even if not of a fiscal
nature. You must look at the effect of the scheme as a whole, instead of
concentrating on each preordained step individually, and you do not, as it
were, blow the whistle at half-time.
If that
approach is made in the present case, the effect, or in the words of Lord
Bridge in Furniss v Dawson the substance, of what was done in
relation to Berrywood Farm on April 6 1963 is that by two preordained steps,
rather than a single step, Mr Dick Christopherson has granted an agricultural
tenancy to the defendant. This links up with the second aspect of the sham
argument, referred to above, in that I find in the tenancy agreement granted by
Mr Dick Christopherson to Mrs Christopherson agreements by Mrs Christopherson:
(3) To farm and cultivate the said land in
accordance with the rules of good husbandry as defined by the Agriculture Act
1947 and to keep and leave the same in good heart and condition.
(4) To keep all hedges, ditches, drains, water
courses, gates and things (if any) forming part of the demised premises trimmed
cut scoured cleansed and repaired,
and
(10) Not to assign charge under-let or part with
the possession of the said land or any part thereof without the previous
consent in writing of the Landlord.
when it was
perfectly clear that Mrs Christopherson was not going to farm the land at all,
because the farming had got too difficult for the Christophersons and the
defendant was going to take it over, and when it was equally clear that the
land was being sublet contemporaneously to the defendant. In such circumstances
the conclusion must be, in my judgment, that Mrs Christopherson was at
highest a mere nominee or agent for Mr Christopherson to grant a tenancy to the
defendant, and what actually happened was that Mr Christopherson granted such a
tenancy.
In Johnson
v Moreton Lord Salmon commented at pp 52H-53A in relation to the
particular clause, clause 27, there in question by which the tenant had
covenanted not to serve a counternotice under section 24 of the 1948 Act:
If any clause
such as clause 27 was valid landlords might well insist upon a similar clause
being introduced into every lease; and prospective tenants having no money with
which to buy the land they wanted to farm would, in reality, have had little
choice but to agree. Accordingly if clause 27 is enforceable the security of
tenure which Parliament clearly intended to confer, and did confer, upon tenant
farmers for the public good would have become a dead letter.
Lord Hailsham
of St Marylebone said, at p 61D:
At the end of
the day I feel convinced that to allow this appeal would be, adopting the
phrase used in some of the authorities, to permit section 24 of the Act of 1948
which was designed in the public interest to give the agricultural tenant
security of tenure, and for a generation has been thought appropriate to do so,
to become a dead letter. If the appellants are right there is no reason why a
clause 27 should not be written into every agricultural lease.
He went on to
cite from the Mikado in the Gilbert and Sullivan opera.
Lord Russell
of Killowen said, at p 72B-D:
It is in my
opinion inconceivable that Parliament should have intended that this tremendous
advance in protection of tenant farmers from the ordinary impact of the law as
to occupancy should be one of which the tenant should be at liberty to deprive
himself by advance bargain when the lesser advantages conferred by sections 3
and 23 were conferred notwithstanding any agreement to the contrary. The
contrary would introduce a ludicrously lopsided operation of the statute.
Secondly, I find it inconceivable that it was the intention in 1947 of Parliament
that the equivalent of sections 24 and 25 should bite on all existing tenancies
— in which of course there could be no equivalent of the present clause 27 —
but not on future tenancies. I say not on future tenancies, because would-be
tenant farmers in need of a tenancy, anxious to farm but unable to buy farming
land, would be at the mercy of landlords who could insist on agreement to a
clause 27. I do not doubt that tenants would be forthcoming prepared to so
agree, and if the agreement were sustainable the protection afforded by the
counternotice system would as farming tenancies fell in become a dead letter.
This reasoning
is fully applicable to the present case. If the present artificial scheme,
avowedly adopted for the sole purpose of depriving the defendant of statutory
security of tenure, is effective to that end, any owner of agricultural land
who is well advised will apply it and, instead of granting a tenancy to his
proposed agricultural tenant, will grant a head tenancy to his wife, his solicitor,
John Doe or Richard Doe, who will contemporaneously and by prearranged step
grant, as a subtenancy, the proposed tenancy to the agricultural tenant.
Security for tenants will thus be at the whim of the landlord. I cannot regard
this as consistent with the policy of the 1948 Act and the succeeding Acts.
Indeed, it is easy to adapt the words of Donaldson LJ in the tax case of Eilbeck
v Rawling, cited above, at p 24e: ‘. . . this is too good to be true,
even in a sophisticated and ingenious tax avoidance scheme’. Essentially the
scheme must fail because the Christophersons were trying to do by the documents
what, for the reasons given in Johnson v Moreton, the law does
not permit, viz to grant the defendant an agricultural tenancy without the
statutory protection.
It is said
that, none the less, if there is a lacuna in the Acts it is not for the court
to fill it, but for the Lord Chancellor in the exercise of his rule-making
power or for Parliament, and reference is made (as it was in Johnson v Moreton)
to Gladstone v Bower [1960] 2 QB 384. In that case a tenancy of
agricultural land had been granted for a fixed term of 18 months; it was held,
on the construction of the 1948 Act, that such a tenancy was outside the
protection of the Act, and it was also held that that result was probably due
to an oversight on the part of Parliament, but it was for Parliament to fill
the lacuna and not for the court. In fact Parliament has never done so, but
that may well be because an 18-month tenancy of farming land is inconvenient
and unpractical, and there has been no hint of any common practice developing
of landlords granting such tenancies to take advantage of the lacuna.
In the present
case, on the view I take of the effect of what was done on April 6 1963, there
is no lacuna to be filled; the defendant has a protected tenancy of
agricultural land. The Lord Chancellor’s rule-making powers can remain to be
exercised, if and when he thinks fit, in respect of the quite different, if not
very common, problem where there is genuinely a sub-tenancy which is quite
separate and independent from a head tenancy which has been terminated.
We have been
referred to many other decisions, particularly under the Rent Acts, but I do
not find it necessary to comment on them, since they were concerned with
different issues on different facts.
For the
foregoing reasons, I would for my part allow this appeal, set aside the order
of the judge, and dismiss the action.
Dissenting,
RALPH GIBSON LJ said: I have reached the opposite conclusion. I would dismiss
the appeal and uphold the order of the learned judge. The issues raised by this
appeal are of much importance and I, too, have found them difficult to decide,
the more so because I find myself with diffidence differing from my Lords, Dillon
LJ and Russell LJ.
The facts have
been stated and the relevant statutory provisions have been set out by Dillon
LJ in his judgment and I shall not repeat them.
The
defendant’s pleaded case was that the arrangement, by which Mr Christopherson
let the land to Mrs Christopherson, and Mrs Christopherson sublet to the
defendant, was a sham and, in the alternative, was an artificial transaction
the purpose of which was to deprive the defendant of statutory protection which
he would otherwise have enjoyed as the tenant of Mr Christopherson. It was
alleged that the true legal effect of the arrangement was that the defendant
was the direct tenant of Mr Christopherson. The learned judge held the two
transactions, which made up the arrangement, to be real; the arrangement was
not a sham and was exactly what it purported to be. The only real question
before the court, in the judge’s view, was whether that real transaction was
such a contrivance as would not be given effect to in our law. He held that the
transaction did validly avoid the operation of the Agricultural Holdings Act in
favour of the defendant after determination of Mrs Christopherson’s tenancy. In
my judgment, the judge has not been shown to be wrong in law in his approach to
the issues or in his conclusions.
The purpose,
to achieve which the form of the arrangement was derived, namely of preventing
the consequences in law which would follow if Mr Christopherson let his land
direct to the defendant, is not unlawful or against public policy. No law
prohibits the devising of an arrangement whereby Mr Christopherson lets his
land to his wife so that she may let it to Mr Burton. Although the law requires
the court to be ‘astute to detect and frustrate sham devices and artificial
transactions whose only object is to disguise the grant of a tenancy’ and to
evade statutory provisions, such as the Rent Acts (see per Lord Templeman, Street
v Mountford [1985] AC 809 at p 825) the courts have never claimed the
power to treat a transaction in private law between private individuals as
something other than it really is merely because the social purpose of some
legislation would be served by so treating it. Legislation might, of course, so
require, but this legislation does not. The problem raised by this case is by
what process and principles the court is to test what ‘a transaction really
is’.
Mr Elvin for
the appellants submitted that the judge was wrong not to treat the transaction
as ‘sham’ and cited the well-known passage from the judgment of Diplock LJ in Snook
v London & West Riding Investments Ltd [1967] 2 QB 786 at p 802 and
the phrase of Bingham LJ in Antoniades v Villiers [1988] 3 WLR
139 at p 147D that: ‘A sham exists where the parties say one thing intending
another’. Mr Elvin invited this court to be astute and to detect that the
transaction had ‘no purpose save avoidance’ and that, therefore, the parties
really intended that the land should be let to Mr Burton, the defendant, by Mr
Christopherson and that the subletting was a sham. There is no claim in the notice
of appeal that the learned judge was wrong on any finding of primary fact. But
this court was invited to find the transaction to be a sham, in the sense
conveyed by Diplock LJ in Snook’s case, because the note of evidence
before the court shows that Mrs Christopherson said in evidence that ‘she
thought it was a straightforward tenancy between my husband and Burton’ and
that she ‘used to give my husband the cheque which Burton gave me’; and because
of the judge’s finding that the purpose of the transaction was as stated above.
Reference was also made in argument to the fact that Mrs Christopherson was
clearly not going to farm the land herself as contemplated by the terms of the
tenancy granted to her by her husband. For my part, I find this submission to be
impossible of acceptance. The learned judge had the contemporary documents and
the evidence of Mrs Christopherson that she had gone along with what she was
advised to do; and the evidence of Mr Wilson, the solicitor, who had given the
advice. Mr Burton, indeed, gave evidence that he thought from the beginning
that it was an agricultural tenancy from Mr Christopherson and that he never
had any indication that it was a subtenancy, but the learned judge rejected his
evidence because it was not consistent with what was said and done at the time
according to the documents. It follows, in my judgment, inevitably that in the
ordinary meaning of the terms the parties did not intend that Mr Burton should
be the direct tenant of Mr Christopherson but they all intended that he should
not be. The statements in evidence of Mrs Christopherson as to what she thought
and as to what she did with the cheques are nothing to the point. What she
thought in 1987 was the effect of what was done in 1963, and what she did with
the cheques could not affect the reality of what was agreed to in 1963 as
recorded in the written agreements and explained in the contemporary documents.
It is, therefore, plain, in my view, that this was not a case of ‘sham’ in the
sense that the parties said one thing in the documents but meant another.
Having thus
settled what, in his view, the parties in reality intended to do, and what they
had done by their acts in law set out in the agreements, the learned judge
proceeded to the next question which he had described as the only real
question, namely, whether the law would give effect to what they had done. He
accepted — there was no issue about it — that the purpose of Mr Christopherson
in not granting a tenancy to Mr Burton and in granting a tenancy to his wife so
that she could grant a subtenancy to Mr Burton, was to avoid the consequence
which would follow if Mr Christopherson had granted the tenancy direct to Mr
Burton. The learned judge directed himself to be astute in the terms of the
Lord Templeman dictum in Street v Mountford; but he held that
there was no disguise of the grant of a tenancy; that the arrangement was not
an evading of the Agricultural Holdings Acts but an avoiding of them. He
distinguished Johnson v Moreton [1980] AC 37 as being a case of
‘tinkering with rules which apply to known categories such as a provision
prohibiting the proper service of a counternotice’. In my judgment, the case of
Johnson v Moreton was rightly distinguished by the learned judge.
That case does not justify a holding in this case that Mr Christopherson
granted a tenancy to Mr Burton when he did not. In Johnson’s case there
was the grant of a tenancy to which the provisions of the Agricultural Holdings
Act applied. The question was whether a term in the lease, by which the tenant
covenanted not to serve a counternotice, was valid and enforceable. It was
argued for the landlords that the tenant could validly contract not to exercise
the right to serve a counternotice because the tenant was entitled to renounce
a right which existed solely for his own use or benefit. Their lordships held
that on the true construction of section 24(1) of the 1948 Act the tenant could
not validly bind himself not to exercise the right to give a counternotice and
that that right was not given as a merely private right but in furtherance of
the policy of the Act to provide security of tenure to agricultural tenants.
The attempt there by the landlords was to deprive the tenant of an agricultural
holding of a right which Parliament intended such a tenant to have. But the
transaction which the parties in this case carried out was not a device to
deprive Mr Burton of any right which Parliament intended him to have in or
under the tenancy which he took. He has no right under the legislation until a
tenancy is granted. When the subtenancy, which all the parties intended him to
have, was granted, it secured to him all the rights under the legislation which
are given to a tenant of an agricultural holding who holds by a lawful
subtenancy from a head tenant: no more and no less. The reason that Mr Burton
has no right effective against the freeholders, under the real arrangement as
the learned judge held it to be, is because the legislation now in force
provides to him no such right. The power to make such provision has been
created by Parliament but not exercised. If this court is to exercise a power
to create such a right in this appellant by treating the arrangement made by
the parties as different from what it was according to their actual intentions
as found by the learned judge it must be derived, in my judgment, from a source
other than the authority of Johnson v Moreton.
Mr Elvin’s
alternative submission for the appellant was based upon what he called
‘artificial device’. If the device is shown to have no purpose other than the
evasion of the protection which Parliament intended the tenant of an
agricultural holding to have, then, pursuant to the public policy which the
court is enjoined to apply by the terms of the legislation, the court must
treat as void those parts of the device which serve only the purpose of
evasion; and the result is a direct tenancy between Mr Christopherson and the
appellant. The power of the court so to act was said to be derived from Johnson
v Moreton, cited above, and Featherstone v Staples [1986]
1 WLR 861. Support was said to be found in Street v Mountford
[1985] AC 809, Quennell v Maltby [1979] 1 WLR 318 and Hadjiloucas
v Crean [1987] 3 All ER 1008. It was submitted further that guidance is
to be found on how to treat artificial devices from the decisions of the courts
on tax avoidance such as Furniss v Dawson [1984] 1 AC 474.
As to Featherstone
v Staples [1986], this court applied the principle established in Johnson
v Moreton to a condition contained in a partnership agreement between
three cotenants of an agricultural holding. The tenants were two brothers who
were the active farmers and a company which was wholly owned by the freeholders
of the holding. The restrictive condition in the partnership agreement was that
no partner should serve a counternotice under the Agricultural Holdings Act
without the consent of the company. Slade LJ, with whose judgment Stocker LJ
and Sir Roualeyn Cumming-Bruce agreed, held that condition to be ineffective
and said, at p 881C:
If a
landowner chooses to grant other persons a tenancy of agricultural land
(whether or not including himself as a tenant) public policy (affirmatively)
requires that those other tenants should have authority, or be treated as
having authority, to serve an effective counternotice under section 2(1) of the
Act of 1977 on behalf of all the tenants without his concurrence and, thus
(negatively) requires the avoidance of any contractual condition . . . which
purports to deny those other tenants such authority.
Thus, as in Johnson
v Moreton, public policy was applied so as to ensure that the tenants
retained the rights which the legislation intended them to have by reason of
the tenancy which had in fact been granted to them. But in that case, despite
an acknowledgement that the agreements were not sham devices, a submission
based upon the artificiality of the transaction was put forward in
substantially the same terms as the submission made to this court and based
upon Lord Templeman’s dictum in Street v Mountford. Slade LJ said
that, whatever be the proper meaning to be attached to the word ‘artificiality’
in this context, it could not be applied to the transactions in question
because the suggestion had not been explored in oral evidence and there was no
finding to support it. He added that, if the suggestion had been explored in
evidence, it might have been borne out. Mr Elvin has rightly submitted that, at
least, Slade LJ was not dismissing the submission as impossible; but there is
no more support than that to be derived from that case.
So far as the
concept of artificiality is to be derived from Lord Templeman’s dictum in Street
v Mountford, it is not clear to me that there is any significant
distinction, for the purposes of this case, between a ‘sham device’, whose only
object is to disguise the grant of a tenancy and to evade the Rent Acts, and an
‘artificial transaction’ having the same sole object: see Hadjiloucas v Crean
[1987] 3 All ER 1008 per Mustill LJ at p 1022J. Each has the purpose of
disguising what is granted and making it appear to be other than what it is.
The rejection of the allegation by the learned judge that this transaction was
sham, which I would uphold, seems to me to require rejection also of the contention
that it was ‘artificial’ in this sense.
As to Quennell
v Maltby [1979] 1 WLR 318, Mr Elvin invited the court to find support
for his submission in that case and to hold that in reality Mrs Christopherson
was the agent of her husband to grant a tenancy on his behalf to the defendant.
In Quennell’s case, the owner of a house, who had mortgaged it to his
bank to secure a loan of £2,500, let the house to the defendants who, as
against him, were entitled to the protection of the Rent Acts. The house was
worth some £40,000 and the owner wished to sell with vacant possession. Since
the mortgage contained a term prohibiting any letting without the consent of
the bank as mortgagees, the tenancy of the defendants would not be effective
against the bank but the bank refused a request by the owner that the bank
should take proceedings for possession. The owner’s wife therefore paid off the
mortgage, took a transfer of the benefit of the mortgage and claimed
possession. On appeal by the defendants, against an order for possession, the
court (Lord Denning MR, Bridge and Templeman LJJ) allowed the appeal. Lord
Denning held that equity prevented a mortgagee from getting possession contrary
to the justice of the case. The mortgagee would be restrained from getting possession
except when it is sought bona fide and reasonably for enforcing the security.
The owner and his wife had in the transaction the ulterior motive of avoiding
the protection which the Rent Acts afford to tenants in their occupation.
Bridge LJ agreed and added that the purpose of the proceedings by the wife was
not to protect or to enforce the security but for the benefit of her husband:
‘In substance she is suing as his agent’. The essential difference between that
case and this, in my judgment, is that in Quennell’s case
had been granted to them. The court refused to permit the device, which the
owner and his wife had devised, to defeat those rights. It was not a case of
treating the defendants as entitled to rights under a tenancy which had not
been granted to them.
The problem in
this case has arisen from the use by the parties of a form of transaction
which, if upheld, reduces the nature and effectiveness of the statutory protection
enjoyed by Mr Burton as occupier of the agricultural holding from what he would
have had if the parties had used a different form of transaction. A similar
problem has, of course, arisen under other statutory schemes, namely the Rent
Acts for residential accommodation and the Landlord and Tenant Act 1954 for
business premises. Landlords seek to permit occupation of living accommodation
and of business premises on terms which cause the occupier to be a licensee
only and not a tenant. Once the real transaction has been proved, the court may
not allow the purpose of the landlord to avoid the consequences of statutory
protection to alter or influence the construction of the agreement: see Lord
Templeman in Street v Mountford [1985] AC 809 at p 825 and
Buckley LJ in Shell-Mex & BP Ltd v Manchester Garages Ltd
[1971] 1 WLR 612 at p 619. Still less, as it seems to me, can the court
disregard the real transaction which has been proved and treat the parties as
having made some other transaction, for the sole reason that the purpose of the
parties in making the transaction which they did, and not some other
transaction, was to avoid the consequences of statutory provisions which would
have attached to that other transaction.
A similar
problem has arisen under the Rent Acts in many cases. Under the Rent Acts a
limited company cannot be a statutory tenant of residential accommodation. In Firstcross
Ltd v East West (Export/Import) Ltd (1980) 255 EG 355, [1980] 2 EGLR
85 a flat was let to a company on terms that it was for occupation by a named
director only. The named director, who was in occupation, claimed to be the
statutory tenant on termination of the contractual tenancy. Stephenson LJ, with
whom Dunn LJ and Sir Stanley Rees agreed, held that it was impossible to hold
that the director became a statutory tenant without holding the tenancy
agreement to the company to be a sham, and that was impossible because such a
contention had been disclaimed before the county court judge. Stephenson LJ
continued (p 359):
. . . he [the
director] did not say that he understood that he was the tenant, though the
judge asked him a question which he might have so answered as to have supplied
evidence that the agreement was a sham and he was the real party to whom the
flat was being let. He could have told the judge, if it were true, that the
defendant company were merely his agent or nominee, and if the judge had
believed him he could and should have given effect to the real agreement and
dismissed the claim. But instead the second defendant told the judge that it
did not seem to matter that the tenancy was not in his name. I suspect it
mattered very much to [the landlords] that it was not, because if it had been
he would have had what the defendant company’s tenancy cannot give him — the
security of a protected statutory tenancy.
As already
mentioned above, in this case the defendant did say that he thought that what
he was getting was an agricultural holding from Mr Christopherson and that he
never had any indication that it was a subtenancy, but the judge rejected his
evidence. As in Firstcross Ltd, I cannot see how this court can accede
to the submission that the defendant had a direct tenancy from Mr
Christopherson without treating the subletting as a sham and, in addition, also
treating Mr Christopherson as having made the grant of a tenancy which he did
not make.
If the court
is to be free to accede to the submission made for this appellant, it will be
free, as I understand it, where there is the real grant of a tenancy of residential
accommodation to a limited company for occupation by a named person, and where
the landlord proves that he did not grant any tenancy to that person, to hold,
if the purpose of the landlord in making the transaction was to avoid the
obtaining by that person of the protection of the Rent Acts in his occupation,
that the tenancy was granted to that person and not to the company. So to hold
would be, as I understand it, contrary to the principles applied in such cases
as Firstcross Ltd.
As I said at
the beginning of this judgment, the essential question is by reference to what
principles the court must determine the ‘reality’ of a transaction which has
the effect of depriving an occupier of statutory protection which he would have
got if a different transaction had been made. As I understand the cases such as
Firstcross Ltd and the case of S L Dando Ltd v Hitchcock
[1954] 2 QB 317, which was considered by Stephenson LJ in Firstcross Ltd,
the reference to ‘the real party’ to whom and by whom property is let is a
reference to that party to and by whom upon the facts it was the intention of
the parties to the transaction that the tenancy be granted. There has been no
detailed attempt, so far as I know, to lay down tests dealing with such an
issue. If, however, it is proved, as it was in this case, that the nature of
the transaction was made clear to both sides, together with the consequences
which would follow by way of reduced statutory protection for Mr Burton as a
subtenant, and that there was thus informed assent and understanding by all
parties, then, as it seems to me, it has been proved that Mr Burton was the
real party to whom a subtenancy had been granted and that it was granted by Mrs
Christopherson. Such a test, of course, is not an effective weapon for
preventing the avoidance of the protection which would be provided to a tenant
if the transaction were made in a different way. It is possible for a landlord
to design the transaction in an effective manner and to ensure that it is
properly explained to the intended occupier, who will very frequently be in no
position to bargain or to obtain any significant alteration in the transaction.
But that, as I understand it, is the law. Bingham LJ in Antoniades v Villiers
[1988] 3 WLR 139, where the question was whether the occupier of residential
accommodation was a licensee or a tenant, said (at p 146F):
To stigmatise
these agreements as ‘artificial transactions designed to evade the Rent Acts’,
unless this amounts to a finding that the agreements were sham, is to leave
unanswered the question whether they succeed in their object. The task of the
court, where this issue arises, is to decide whether the owner has succeeded or
not.
I agree with
that observation and it seems to me to be equally applicable to a case
concerned with the Agricultural Holdings Acts.
It was said
that to uphold the validity of this transaction, as it was devised and carried
out, would be to provide the landlords a ready means of evading the provisions
for security of tenure contained in the legislation and thus of defeating the
policy of the legislation which Parliament has enacted. I do not know how
widespread such evasion has been or would be. The position in law of the tenant
of an agricultural holding who is a subtenant has long been known. If the
device were upheld, and the consequences were seen as damaging, the remedy is
at hand by use of the existing powers. But the answer to this point, in my
view, is that it is irrelevant. Such a consideration is relevant if it is open
to the court to prefer one course over another as a matter of policy. If I am
right, in this case, it is not. There is no basis in law upon which a court can
decline to give effect to the real transaction between the parties as it was
found to be.
Lastly, Mr
Elvin relied upon the decisions of the court in the tax avoidance cases such as
Furniss v Dawson. I am not persuaded that the principles there
stated are applicable to the construction and enforcement of a transaction in
private law between private citizens.
Agreeing with
Dillon LJ that the appeal should be allowed, RUSSELL LJ said: The facts of this
case and the legislative framework relating to agricultural holdings have been
set out in the judgment of Dillon LJ and I do not need to repeat them.
There is no
doubt that in 1963 Mr Christopherson wished to avoid the consequences of
granting a lease to Mr Burton. Both gentlemen were aware that such a lease
would give a measure of protection to Mr Burton that would not be enjoyed by a subtenant.
There is also
no doubt that Mr Christopherson’s solicitor drafted the lease to Mrs
Christopherson and the sublease to Mr Burton with the expressed intention of
avoiding the impact of the 1948 Act. As for Mrs Christopherson, her
understanding was encapsulated in a sentence she used during the course of her
evidence, the judge’s note of which reads:
I thought it
was a straightforward tenancy between my husband and Burton.
She was not
deceived, however, in any sinister sense, and if the true position had been
explained to her I have no doubt that she would readily have given her consent
to and co-operation in the exercise devised by the solicitor, Mr Wilson. He
acknowledged in evidence:
The object
was to let Burton have the land but to get it back if they (meaning Mr and Mrs
Christopherson) wished.
The question
for this court is whether we are entitled to have regard to the object of the
exercise or whether we should accept both the lease and sublease at their face
value as documents creating a valid tenancy (with protection to Mrs
Christopherson) and a valid subtenancy (with no protection to Mr Burton). Upon
their face there is nothing to indicate anything other than perfectly
straightforward transactions. No one was deceived. Hence, submits counsel for
the
& West Riding Investments Ltd [1967] 2 QB 786 at p 802. The documents
could have evidenced a perfectly straightforward arrangement whereby Mrs
Christopherson undertook the agricultural obligations to be found in her lease
by way of tenant’s covenants, while requiring the physical performance of those
covenants to be the responsibility of Mr Burton pursuant to the sublease.
The converse
argument advanced on behalf of the appellants is that it is to fly in the face
of reality not to look behind the agreements so as to ascertain what was the
true contractual relationship between the three parties. The relevant passage
in the judgment of Diplock LJ in Snook reads as follows:
As regards
the contention of the plaintiff that the transactions between himself Auto
Finance and the defendants were a ‘sham’, it is, I think, necessary to consider
what, if any, legal concept is involved in the use of this popular and
pejorative word. I apprehend that, if it has any meaning in law, it means acts
done or documents executed by the parties to the ‘sham’ which are intended by
them to give to third parties or to the court the appearance of creating
between the parties legal rights and obligations different from the actual
legal rights and obligations (if any) which the parties intend to create. But
one thing, I think, is clear in legal principle, morality and the authorities .
. . that for acts or documents to be a ‘sham’, with whatever legal consequences
follow from this, all the parties thereto must have a common intention that the
acts or documents are not to create the legal rights and obligations which they
give the appearance of creating (my emphasis).
It is
submitted by counsel for the appellants that deception of one of the parties is
not crucial. If the court can be given, by documents executed by the
parties, a false impression of legal rights and obligations different from the
actual legal rights and obligations (if any) which the parties intend to
create, then a ‘sham’ as defined by Diplock LJ is made out. Whatever pejorative
epithet is applied to this arrangement, the documents were never intended to be
that which they purported to be.
In my view,
one needs to look no further than the headlease to determine whether it can be
realistically claimed that Mrs Christopherson was the tenant of her husband. In
the very nature of things it was never intended or contemplated that Mrs
Christopherson would serve a counternotice in the event of her husband during
his lifetime, or his personal representatives after his death, serving a notice
to quit (as ultimately happened). Nor would Mrs Christopherson be concerned in
practice with whether she or her ‘subtenant’ were so farming the land as to be
in accordance with the rules of good husbandry. Mr Christopherson and Mr Burton
were the farmers not Mrs Christopherson. One asks rhetorically ‘what was the
purpose of introducing Mrs Christopherson into the arrangement?’ There was no predominant and no secondary
reason. The only reason was to enable Mr Burton to be created, on paper at
least, a subtenant. And the only reason for the ‘subtenancy’ when Mr Burton’s
occupation of the farm had all the characteristics of a full tenancy was to
avoid the consequences of the Act. In a different context in Street v Mountford
[1985] AC 809 at p 825 Lord Templeman said:
Although the
Rent Acts must not be allowed to alter or influence the construction of an
agreement, the court should, in my opinion, be astute to detect and frustrate
sham devices and artificial transactions whose only object is to disguise the
grant of a tenancy and to evade the Rent Acts.
I am firmly of
the view that the lease to Mrs Christopherson was an artificial device the only
object of which was to disguise the grant of a tenancy to Mr Burton and to
evade the Agricultural Holdings Act 1948. In striking down the lease to Mrs
Christopherson as an artificial device, I do not think the court is guilty of a
procedure which it is not entitled to take; on the contrary, in one sense it is
giving effect to the true intention of the parties, although in the process not
permitting the legal consequences to flow to which the parties were prepared to
accede.
For my part I
have not derived a lot of assistance from the tax avoidance cases to which we
were referred. But I gratefully acknowledge that the theme in those cases is
that where there are a number of transactions creating a composite whole the
court should be astute not to consider the individual transactions in isolation
but should look at the overall result of what is achieved. In the instant case
the lease to Mrs Christopherson and the sublease to Mr Burton should be looked
at together. They bear the same date and their drafting by the solicitor in the
circumstances described in the judgment of Dillon LJ confirms the view I have
formed of the composite nature of the two individual transactions.
Assuming
artificiality, there remains for consideration what course the court should
follow. Are there good social reasons for depriving the personal
representatives of Mr Christopherson of the right to possession in the absence
of a counternotice which a tenant would be entitled to serve? In Johnson v Moreton [1980] AC
37 at p 59 Lord Hailsham of St Marylebone dealt with the philosophy underlying
legislation involving agricultural holdings. The House of Lords held that a
tenant could not by agreement deprive himself of the option to serve a
counternotice and that any such agreement in advance was unenforceable. In my
judgment, although not in express terms, Mr Burton, by consenting to the
arrangement proposed, was effectively depriving himself and being deprived of
the option available to a tenant of an agricultural holding. The submission
that Parliament has not thought fit to grant the option to a subtenant is, in
my view, to beg the very question raised by this appeal. If Mr Burton had been
a genuine subtenant he would have no right to exercise the option. So long as
he remained in reality a tenant of Mr Christopherson and his successors in
title, there was no right, even by consent, to deprive Mr Burton of the
protection of the legislation. As Geoffrey Lane LJ commented in Short Bros
(Plant) Ltd v Edwards (1978) 249 EG 539 at p 542, [1979] 1 EGLR 5,
another case where there was an attempt to overcome provisions in the Act of
1948, ‘the farmer cannot bargain away in advance his statutory rights in this
way’.
Accordingly,
I, too, am of the opinion that the decision of Judge Willcock QC cannot be
sustained on the facts as found by him and such irresistible inferences as we
are entitled to draw from these facts.
I, too, would
allow this appeal and make the order proposed by Dillon LJ.
The appeal
was allowed; the order of the judge was set aside; appellant to have the costs
of the action and counterclaim and appeal; legal aid taxation of appellant’s
costs. Leave to appeal to the House of Lords was granted.
