Agricultural holdings — Case B notice to quit — Whether landlords estopped from serving notice to quit relying on planning permission — Whether notice served following severance of reversion valid
The plaintiff
held an agricultural tenancy of a 130-acre farm, which included certain farm
buildings. In 1990 the farm house and other buildings were badly damaged in a
storm and the repairs were estimated to cost £65,000 to £75,000. Because the
buildings (although not the house) were uninsured and the landlords were of
modest means, the plaintiff and Mr George agreed to explore the possibility of
selling the existing buildings and using the proceeds to erect new farm
buildings and a new bungalow. The proposal required planning permission for:
(a) the conversion of the existing buildings to a dwellinghouse; (b) the
erection of new farm buildings; and (c) the erection of a new bungalow.
Planning permission was granted on April 16 1991 for the conversion of the farm
buildings to a dwellinghouse and on July 23 1991 for the erection of new
buildings. But planning permission was not forthcoming for the new bungalow. On
November 5 1991 the then landlords, Mr and Mrs Charles George, conveyed the
reversion to that part of the holding consisting of the farm buildings by deed of
gift to the defendant trustees on trust for their infant daughter, Lucinda,
upon attaining 18 years or finishing full-time education. On January 30 1992
the defendants served notice to quit the farm buildings on the plaintiff
relying on Case B of Schedule 3 to the Agricultural Holdings Act 1986. The
plaintiff contended: (1) the defendants were estopped from relying on the
planning permission having regard to the conduct of Mr Charles George; and (2)
that the deed of gift did not sever the reversion for the purposes of section
140(1) of the Law of Property Act 1925, that provision being given a narrow
interpretation by the Court of Appeal in Persey v Bazley (1983)
47 P&CR 37.
promissory estoppel, as set out in James v Heim Gallery (London) Ltd (1980)
256 EG 819, were not satisfied. There was no promise in conduct or words not to
serve the notice to quit based on the planning permission and therefore no
reliance on the part of the plaintiff. Neither was there estoppel by
convention. There was nothing unconscionable in Mr George’s conduct and no
grounds in equity preventing Mr George’s successors in title from relying on
the planning permission. The trust in favour of Lucinda created a resulting trust
to Mr and Mrs George until Lucinda’s interest took effect in possession. The
conveyance on trust to the defendants resulted in a bona fide severance
of the reversion and Persey v Pazley did not apply.
The following
cases are referred to in this report.
Amalgamated
Investment & Property Co Ltd (in liquidation) v
Texas Commerce International Bank Ltd [1982] QB 84; [1981] 3 WLR 565;
[1981] 3 All ER 577; [1981] Com LR 236, CA
Coates v Diment [1951] 1 All ER 890
James v Heim Gallery (London) Ltd (1980) 41 P&CR 269;
[1980] 2 EGLR 119; 256 EG 819, CA
Persey v Bazley (1983) 47 P&CR 37; [1983] 2 EGLR 3; 267 EG 519,
CA
Taylors
Fashions Ltd v Liverpool Victoria Trustees Co
Ltd [1982] QB 133; [1981] 2 WLR 576; [1981] 1 All ER 897; [1979] 2 EGLR 54;
(1979) 251 EG 159
This was the
hearing of a claim by the plaintiff, Mr John, asserting the invalidity of a
notice to quit served by the defendants, Peter Owen George and Roger Walton.
Anthony De
Freitas (instructed by Thrings & Long, of Bath) appeared for the plaintiff;
Paul Morgan QC (instructed by Burges Salmon, of Bristol) represented the
defendants.
Giving
judgment, JUDGE HYWEL MOSELEY QC said: By virtue of the Agricultural
Holdings Act 1986, and its predecessor statutes, tenants of agricultural
holdings enjoy, with exceptions, security of tenure. The issue in this action
is whether one of those exceptions applies, enabling the landlords to terminate
the tenancy by a notice to quit.
The mechanism
whereby security of tenure is achieved is currently in section 26(1) of the
1986 Act. Under that section a tenant served with a notice to quit can serve a
counternotice requiring that the subsection shall apply to the notice to quit
and in that event the notice to quit does not have effect unless the
Agricultural Land Tribunal consents to its operation. In practice the tribunal
rarely consents. Thereby, in the general run of cases, security of tenure for
the tenant is achieved. Section 26(1) does not however protect the tenant when
the notice to quit is served under one of the cases in Part 1 of Schedule 3 to
the Act. The relevant case in the present action is Case B, which applies to a
notice to quit given on the ground that the land is required for a use other
than for agriculture for which planning permission has been granted. It is
common ground between the parties (who are tenant and landlords respectively)
that the requisite planning permission was granted on April 16 1991 and that a
notice to quit under Case B and relying on that planning permission was served
on the tenant on January 30 1992. The time for the delivery up of possession
under that notice to quit has long since expired. In such circumstances a
tenant has no defence to an action for the recovery of possession unless he can
attack the validity of the notice to quit on some other basis. In the present
action the tenant, Mr John, attacks the validity of the notice to quit on two
grounds: (a) on the ground that the defendants were not persons who could
validly serve a notice to quit on him. I shall refer to that line of attack as
the Persey v Bazley (1983) 47 P&CR 37 line of attack; (b) on
the ground that the defendants are estopped from relying on the planning
permission dated April 16 1991 as a planning permission enabling them to serve
a notice to quit under Case B. Before coming to the facts I shall need to say
more in outline about both lines of attack.
Persey v Bazley argument
Subject to
certain exceptions a landlord of demised premises cannot lawfully serve a
notice to quit in respect of part of the demised premises. One of those
exceptions (a notice to quit part of the demised premises served pursuant to
one of the terms of the tenancy) will be referred to in the course of the
narrative, but it is not an issue in the present action. If, as here, none of
the exceptions apply, a notice to quit can nevertheless be validly served if
the reversion is severed so that that part of the demised premises which is to
be the subject of the notice to quit becomes separate demised premises. In such
case the new landlord of the severed part can serve a valid notice to quit
relating only to that part because that part is then the whole of a new entity.
That procedure is enabled by section 140(1) and (2) of the Law of Property Act
1925, which so far as material reads:
(l)
Notwithstanding the severance by conveyance … of the reversionary estate in any
land comprised in a lease … every … right of re-entry … shall be apportioned,
and shall remain annexed to the severed parts of the reversionary estate as
severed … in like manner as if the land comprised in each severed part … had
alone originally been comprised in the lease.
(2) In this
section ‘right of re-entry’ includes a right to determine the lease by notice
to quit …
That procedure
was adopted in the present case. The premises, which are the subject of the
notice to quit dated January 30 1992, are farm buildings on Allt Isaf Farm,
Peterston Super Ely, South Glamorgan, a farm of about 130 acres. Prior to
November 5 1991 the buildings and the rest of the farm were comprised in a
tenancy of which the landlords were Mr and Mrs Charles George. The planning
permission I have referred to was for the conversion of the farm buildings into
a dwellinghouse. On November 5 1991 Mr and Mrs George conveyed the farm
buildings to the defendants as trustees for their infant daughter, Lucinda. The
notice to quit served on January 30 1992 was served by those trustees. The
first issue between the parties is whether that deed of gift achieved a
severance for the purpose of the 1925 Act, section 140(1). In Persey v Bazley
(1983) 47 P&CR 37 the Court of Appeal gave a narrow construction to
section 140(1), and Mr John argues that the ratio of that decision
applies to the deed of gift with the consequence that there is no ‘severance by
conveyance’ for the purposes of section 140, and that the notice to quit is
consequently invalid. I shall return to that issue after outlining and
analysing the facts.
Estoppel
The conduct
which is alleged to give rise to the estoppel is not the conduct of the
defendants, but that of one of their predecessors in title, Mr Charles George.
It is common ground however that the defendants cannot be in any better
position than Mr George would have been in if he had relied on the planning
permission dated April 16 1991 to round a notice to quit under Case B. He could
have put himself in that position by, for example, conveying away the rest of
the farm and retaining the reversion in the farm buildings. The estoppel
pleaded against him is estoppel by representation, promissory estoppel and
estoppel by convention. There was, however, no evidence of any representation
by Mr George of any existing fact and in those circumstances promissory
estoppel and estoppel by convention alone are in issue.
Facts
With one
exception the basic facts are not in dispute despite the length of time taken
by the evidence. I was satisfied that both the main witnesses (Mr John, the
tenant, and Mr Charles George, the person against whom the estoppel is alleged)
are honourable men who are unfortunately in dispute in consequence of events
which were largely outside their control. Both men gave a truthful account of
the facts within their own knowledge and with one exception I accept the
evidence of both of them. The exception relates to a conversation which Mr John
alleges he had with Mr Hall, the land agent acting for Mr and Mrs George, the
then landlords. I shall come to the details of that alleged conversation in due
course. For the present all I need say is that, in my judgment, the
recollection of Mr John concerning that conversation is faulty and that I
prefer the evidence of Mr Hall. With that exception the dispute between the parties
is not one of fact but of law and of the application of the legal principles to
facts which are largely not in dispute.
Allt Isaf Farm
is a farm of about 130 acres in the Vale of Glamorgan, a very attractive part
of South Wales. Prior to the events with which this action is concerned it
comprised the farm land, a range of stone and slated farm buildings and a large
traditional farmhouse. Mr John, the plaintiff, lives in the farmhouse with his
wife and farms the farm as a dairy unit. The farm house and farm buildings were
at all material times (and still are) in a dilapidated state through lack of
maintenance and repair. On January 25 1990 the farm buildings and the farmhouse
were badly damaged in a storm. The estimated cost of repair (which pending the
outcome of this action has still not been performed) is between £65,000 and
£75,000. Under the tenancy agreement (the date of which is illegible in my
copy, but which I am told is dated November 26 1956), clause 27, the obligation
to repair is on the landlords. At the date of the storm and thereafter until
the date of the deed of gift I have referred to (November 5 1991) the landlords
were Mr and Mrs Charles George. Mrs George in practice left matters concerning
the farm to her husband, who enjoyed authority to act on her behalf.
Consequently the problems created by the storm damage were dealt with between
Mr Charles George as landlord, acting for himself and as agent for his wife,
and Mr John as tenant.
Unfortunately
the January 1990 storm damage was not the first damage suffered to the
buildings. There had been a previous storm following which the landlords’
insurers refused to insure the farm buildings. Consequently, Mr George could
not resort to an insurance company for the cost of the repairs to the farm
buildings. As I understand the facts the farm house was insured, and my
understanding is that the cost of those repairs can be recovered from insurers.
Nothing however turns on that. Pending the outcome of this action the farm
buildings (in particular) have been temporarily repaired at Mr George’s
expense.
On the morning
of the storm Mr George was notified of the damage by Mr John the tenant and
together with Mr John viewed the damage. He was horrified by its extent and by
the potential cost of the repairs. His first reaction was that he would have to
sell the farm, being unable to afford the repairs: he was then and is now a man
of modest means. Almost immediately however a plan of action, which he
discussed with Mr John, occurred to him. The plan, initially, was that if
planning permission for the conversion of the farm buildings into a
dwellinghouse could be obtained, the farm buildings could be sold and the
proceeds of sale utilised to build new modern farm buildings on another part of
the farm. There were obvious attractions in that plan for both landlords and
tenant. From the point of view of the landlords the attraction of the plan was
twofold: there would be no need to repair the farm buildings, which could be
sold in their stormdamaged state, and the farm would be enhanced in value by
the new farm buildings. From the point of view of the tenant the plan would
provide him with new modern purpose built farm buildings instead of the old
outdated Victorian stone and slated farm buildings from which he had hitherto
conducted his farming business. Both men were therefore ad idem that the
plan was worth exploring further.
Mr George
investigated the possibilities of the plan by consulting his land agent Mr
Hall. It soon became apparent that the original plan was not economically
viable because the proceeds of sale of the old farm buildings, even with the
benefit of planning permission to convert them into a dwellinghouse, would not
suffice to pay for new farm buildings. By the following month (February 1990) a
modification of the plan had occurred to Mr George in consultation with Mr Hall
and an architect appointed by them, Mr Keith Evans. The modified plan was to
sell both the old farm buildings, with the benefit of planning permission to
convert them into a dwellinghouse, and the farm house and to utilise the
proceeds of both sales to build new farm buildings and a new bungalow for the
tenant. The modified plan was potentially viable financially, the reasoning
behind it being that the old farmhouse was large and attractive and likely to
produce more than enough cash to pay for the construction of a new bungalow.
The modified plan was put to the tenant soon after it was formulated. The date
is uncertain, but it was probably discussed in or about February 1990. The
modified plan was less attractive to the tenant, Mr John, than the original
plan because he and his wife liked the old farmhouse and were not keen on
moving to a new bungalow. However, since the modified plan made the provision
of new farm buildings economically viable Mr John agreed in principle that the
plan be further investigated.
Those
investigations, involving, inter alia, the design (by Keith
Evans) of new farm buildings and (in conjunction with the landlords and Mr and
Mrs John) the new bungalow, negotiations between landlords and tenant
concerning the equipping of the new buildings, a report from ADAS (the
Agricultural Advisory Service), preparations for the applications for planning
permission and the applications themselves, and negotiations between landlords
and tenant with a view to setting out their respective obligations in writing
were protracted. Work began in or about February 1990. The ADAS report and the
bungalow plans were ready in July 1990 and the planning applications were submitted
on January 18 1991. The negotiations between landlord and tenant continued
until April 1991, when the terms of an agreement subject to contract were
concluded. No contract however was ever entered into, because Mr John never
signed his part of the contract. The landlords did so on April 6 1991.
Relations between the parties eventually broke down in May 1991 when Mr John,
by his solicitor, insisted that the old farm buildings and the farmhouse be
repaired. There was then a period of comparative inactivity until October 1991
when the landlords, Mr and Mrs George, served a notice to quit, a notice which
is no longer relied on.
The reason for
the breakdown in relations was simply that the planning authority would not
grant planning permission for the construction of the new bungalow. It granted
permission for the conversion of the farm buildings into a dwellinghouse (the
important planning permission dated April 16 1991, important because the notice
to quit under Case B relies on it), and on a second application also granted,
on July 23 1991, planning permission for the new farm buildings. That was a
second application because the first application had been for permission to
construct both the new farm buildings and the bungalow; the planning authority
being opposed to the construction of the new bungalow refused permission for
either. I am satisfied that it was Mr George’s intention to try again for the
bungalow by making a third application based on the argument that the bungalow
would be infilling between the converted farm buildings and the new farm
buildings; but that application was never made because relations between the
parties broke down.
The events
between February 1990 and April/May 1991 were canvassed in great detail during
the course of the evidence but as I have mentioned there was by the end of the
hearing hardly any disagreement concerning the facts. I need not therefore
analyse the evidence in detail but can set out my conclusions as follows:
(1) The
negotiations between Mr and Mrs George, as landlords, and Mr John, as tenant,
with a view to concluding an agreement between them were at all times subject
to contract and never resulted in an enforceable agreement.
(2) That
failure to achieve an enforceable agreement was not the fault of the landlords,
who were at all material times anxious to conclude a contract as they viewed
the negotiations, the cost of pursuing the project fell on them, as landlords,
and in order to ensure that that expenditure was not wasted it was essential to
bind Mr John by an enforceable agreement to take the new buildings instead of
the old ones once the time for performance arrived. Viewed from Mr John’s
standpoint, however, a binding agreement was not important. No expense fell on
him and he could therefore bide his time pending the negotiation of as
favourable a deal to himself as could be achieved. He gave, in evidence, a
rather contradictory and unsatisfactory explanation of why he never signed the
engrossment which had been negotiated between solicitors and was ready for his
signature. Variously he said that he did not think the agreement important,
that he did not think it necessary to sign the agreement until the new
buildings had been built, and that he thought that he already had an agreement
and did not think it necessary to sign the engrossment. In my view, his
attitude was rather unrealistic in that it failed to take into account the need
for an agreement from the landlords’ point of view. It follows, in my view,
that the failure to reach agreement was the fault of Mr John. For present
purposes however it matters not whose fault it was. The important point is that
the agreement which the parties negotiated was at all times subject to
contract.
(3) Both
parties knew that the project could only proceed to a successful conclusion if
all three planning permissions sought were granted, because it was only if all
three permissions were granted that the scheme was economically viable for the
landlords.
(4) Both
landlords and tenant co-operated with one another to achieve those requisite
planning permissions. Mr John in particular co-operated with the drawing up of
the ADAS report (which was commissioned by the landlords), and made no
objection to the planning applications. Indeed he sent, at the request of Mr
George, a letter in support. He gave his co-operation because, despite his
initial reservations and despite his failure to sign the engrossment, he
appreciated that the project was for his benefit. Para 5 of the statement of
claim goes considerably further than the facts warrant by alleging that Mr John
was encouraged in the belief that if he did not oppose planning permission
certain advantages to himself would follow. I am
considered that the project as a whole was beneficial to himself and his
family.
(5) Both
landlords and tenant were optimistic that the requisite planning permissions
would be granted. They remained in that state of optimism until the meeting of
the planning committee on April 15 1991, which resulted in the refusal of
planning permission for the bungalow the following day. Mr George in particular
never applied his mind at any material time to the question what would be the
position if all three planning permissions were not granted. He assumed, rather
unrealistically in the light of the evidence, that they would be granted, that
the outcome of the negotiations would be successful and that consequently Mr
John would continue to be the tenant farming the holding as a dairy farm. The
thought that the granting of planning permission to convert the old farm
buildings into a dwellinghouse would enable him to serve a notice to quit under
Case B did not occur to him until the project had foundered and until relations
had broken down.
(6) There was
no promise by Mr George to Mr John that he would not rely on the grant of
planning permission for the conversion of the buildings as grounding a notice
to quit under Case B; that thought did not occur to him until well after that
planning permission had been granted. It was only after consulting planning
experts with a view to resubmitting an application for the construction of the
bungalow that he first appreciated that the grant dated April 16 1991 enabled a
Case B notice to quit to be served.
(7) There was
only one disagreement on the facts between the parties that being in relation
to the evidence of Mr John that during the course of his dealings with Mr Hall
he discussed what would happen if the plan did not succeed. His recollection is
that it was agreed between them that if the project did not succeed he would
remain in possession of the old buildings. As I have already mentioned, I
reject that evidence. It was contradicted by Mr Hall, whose recollection I
preferred. If Mr John ever gave any thought to the repercussions of not
obtaining all three planning permissions, it was only that the project would
not then proceed.
Law
applied to the facts — estoppel
Applying the
law to those facts is rather more straightforward than the very thorough legal
argument of both counsel would suggest. I have already explained that there was
no evidence of any relevant representation of existing fact and that
consequently estoppel in pais though pleaded was not established.
I take the law
concerning promissory estoppel from one of the decisions cited to me James
v Heim Gallery (London) Ltd (1980) 41 P&CR 269* (CA) and from the
judgment of Oliver LJ at p280 where he described the requirements of the
estoppel as follows:
*Editor’s note:
Also reported at [1980] 2 EGLR 119.
In order to
found a promissory estoppel, there has first to be found some clear and
unequivocal representation, either by words or conduct, that the party claimed
to be estopped will not rely upon his strict contractual rights. Secondly, the
representation must be made with the intention or at least the knowledge that
it is to be acted upon by the other party by altering his legal position; and
thirdly, he must so alter his legal position in reliance upon the
representation in such a way that it would be inequitable, or unfair, to permit
the party claimed to be estopped from departing from the representation.
In my
judgment, none of those requirements were satisfied in the present case. So far
as the first requirement is concerned the landlords are prima facie entitled
to serve a notice to quit, determining the contractual tenancy and are only
precluded from doing so if there is a clear and unequivocal promise that they
will not do so. There was no such promise in words and, in my judgment, nothing
in the conduct of Mr George clearly or unequivocally amounted to a promise by
conduct that he would not rely on the planning permission to ground a notice to
quit. Putting Mr John’s case at its highest the strongest complaint he could
possibly make about Mr George’s conduct was that Mr George gave no clue as to
his attitude concerning the service of a notice to quit based on the planning
permission to convert the old buildings. That is hardly surprising because Mr
George gave no thought to the matter at all at any relevant time. An objective
onlooker, considering Mr George’s conduct and addressing himself to the
question whether the planning permission might eventually be utilised to ground
a notice to quit would, in my judgment, have no idea what Mr George’s attitude
on the matter was. In those circumstances there was no unequivocal promise.
The second
requirement was also absent: since Mr George did not apply his mind to the
question at any relevant time he made no promise with the intention or
knowledge that Mr John would act upon it. The third requirement is also absent.
By calling a planning expert (Mr McDonic) Mr John persuaded me that any
objection by him to the granting of planning permission would have been taken
into account by the planning authority and might have persuaded the planning
authority to refuse planning permission for the conversion of the farm buildings.
That, however, is a far cry from evidence that Mr John altered his legal
position. However, even if that evidence amounted to evidence of an alteration
of Mr John’s legal position, that was not in reliance on any promise by Mr
George: Mr George made no promise, and it follows that Mr John did not rely on
any promise. Finally, the evidence did not persuade me that it would be
inequitable or unfair to allow Mr George to rely on the planning permission to
ground a notice to quit. Mr John’s case appears to me to have been a belated
attempt to shut the stable door after the horse had bolted. The appropriate
time to stop Mr George relying on the planning permission was before it was
granted and the appropriate method was to incorporate a term in the contract between
landlords and tenant preventing the landlords from relying on any planning
permission that might be obtained. Such a term was not negotiated because
neither party applied their minds to the problem, and in any event no contract
was ever concluded, that being as I have mentioned already, largely Mr John’s
fault. One can easily sympathise with Mr John who, having given his
co-operation to the obtaining of planning permission without protecting his
position, now finds himself in receipt of a notice to quit; the circumstances
causing one to feel sorry for Mr John do not however suffice to establish that
it would be inequitable or unfair to allow Mr George to rely on the planning
permission. So, in my view, the landlords as successors to Mr and Mrs George are
not precluded by promissory estoppel from proceeding with the notice to quit.
Mr John’s case
was put in the alternative on the basis of estoppel by convention. I take the
principles of that estoppel from a passage in Spencer Bower & Turner on
Estoppel by Representation 3rd ed 1977 at pp157 to 160, a passage which is
quoted with approval in the judgment of Brandon LJ in Amalgamated Investment
& Property Co Ltd (in liquidation) v Texas Commerce International
Bank Ltd [1982] QB 84 at p130H:
This form of
estoppel is founded … on an agreed statement of facts the truth of which has
been assumed, by the convention of the parties, as the basis of a transaction
into which they are about to enter. When the parties have acted in their
transaction upon the agreed assumption that a given state of facts is to be
accepted between them as true, then as regards that transaction each will be
estopped as against the other from questioning the truth of the statement of
facts so assumed.
On behalf of
the defendants, Mr Paul Morgan QC argued that the action in so far as it was
based on estoppel by convention was misconceived because the doctrine is
concerned with an agreed assumption concerning existing facts whereas Mr John
was attempting to rely on an agreed assumption concerning future facts or
conduct. Certainly the passage from Spencer Bower & Turner cited by
Brandon LJ is couched in terms which support Mr Morgan’s proposition, and none
of the cases cited to me concerned a common assumption concerning future
conduct. However, I need not decide that issue of law because the facts did not
established a common assumption at all. As I have mentioned already, Mr George
did not apply his mind to the question whether he could serve a notice to quit
under Case B based on the planning permission granted on April 16 1991. So
there was no
estoppel by convention fails therefore in limine.
Mr Anthony De
Freitas, counsel for Mr John, urged me to take a broad view of estoppel, and
criticised Mr Morgan’s meticulous argument on the basis that it was an old
fashioned view of estoppel given the landmark judgment of Oliver J in Taylors
Fashions Ltd v Liverpool Victoria Trustees Co Ltd [1982] QB 133*.
The exercise which I should undertake he said was to inquire whether in all the
circumstances it was unconscionable for the defendants to seek to take
advantage of the planning permission. Even if I accepted that argument I could
not reach a conclusion in Mr John’s favour. There is, in my view, nothing
unconscionable in Mr George’s conduct. To summarise the position he did not
apply his mind to the question whether he could rely on the planning
permission, made no promise to Mr John, did not encourage him to believe that
he would not rely on the planning permission, made no assumption on the matter,
and made no relevant representations. In my judgment, there are no grounds for
equity stepping in to prevent Mr George’s successors in title from relying on
the planning permission.
*Editor’s
note: Also reported at [1979] 2 EGLR 54.
Persey v Bazley issue
I turn to the
other issue, namely whether the notice to quit relates to the whole of the
demised premises, ie the issue which turns on section 140 of the Law of
Property Act 1925.
I have
mentioned in passing that in May 1991 relations between Mr George and Mr John
became sour. The breakdown in relations arose because of an unfriendly letter
written on Mr John’s behalf and on his instructions by his solicitor, Miss
Newman, insisting on the repair of the old farm buildings notwithstanding that
Mr John knew that Mr George was still working towards a successful conclusion
of the project. Following the souring of relations Mr and Mrs George served,
successively, two notices to quit under Case B. Neither of them is in issue in
these proceedings. The first dated October 10 1991 is acknowledged to be
invalid because it did not identify the premises. The second relied on a
contractual term in the tenancy permitting the landlords to serve a notice to
quit in relation to part of the holding. That is not relied on because of legal
difficulties arising from the case of Coates v Diment [1951] 1
All ER 890. In the light of those difficulties the course decided upon by Mr
and Mrs George in the light of advice they had received was to sever the
reversion under section 140, enabling their successors in title to serve a
notice to quit in relation to the severed part, being the old farm buildings.
The intended
severance by conveyance was achieved by a deed of gift dated November 5 1991
whereby Mr and Mrs George conveyed the old farm buildings to Mr Peter Owen
George (Mrs George’s son) and Mr Roger Walton, a solicitor who had been acting
for Mr and Mrs George in the negotiations with Mr John. The deed of gift
transferred the farm buildings to the trustees upon trust for sale and upon
trust to hold the beneficial interest for Mr and Mrs George’s infant daughter,
Lucinda, ‘upon attaining the age of 18 years or [finishing] full time
education’.
Mr and Mrs
George were unaware, until it was pointed out to them during the interlocutory
stages of this litigation, that that formula created a resulting trust in their
favour until such time as Lucinda’s interest vested in possession. That defect
in the deed of gift was eventually cured by a further assignment dated July 10
1992, but that was after the notice to quit, which is dated January 30 1992.
The issue is whether at the date of the notice to quit (January 30 1992) there
had been a severance by conveyance of the reversionary estate in the farm for
the purposes of section 140.
Putting Mr
John’s case at its highest, the most that can be said about the deed of gift
dated November 5 1991 is that it left an equitable interest outstanding in Mr
and Mrs George, that equitable interest being still outstanding at the date of
the notice to quit. It is not alleged that the conveyance of the legal estate
to the trustees was a sham: it is pleaded expressly in para 8 of the amended
statement of claim that the legal estate was transferred to the trustees upon
trust for Lucinda. However, notwithstanding that there is no pleading that the
transfer was a sham, Mr John’s case appeared to me to veer in that direction on
several grounds. The details of his case are set out in answer 13 to the
further and better particulars served on June 30 1993. Those answers raise the
following issues:
(i) It is
alleged there that the deed of gift was executed solely to circumvent the
objections raised by Mr John’s solicitors. In my judgment, that as an assertion
of fact is not correct. I was satisfied by Mr George’s evidence that there were
two reasons for the deed of gift, namely (a) to benefit Lucinda by creating a
trust fund in her favour and (b) to circumvent the difficulty arising from the
common-law rule, that a notice to quit may not be served in respect of part of
demised premises. However, that does not appear to me to matter. Even if the
deed of gift was executed solely to circumvent the common-law rule it would be
no less effective to convey the legal estate. I accept Mr Morgan’s argument
that the motive for a transaction is no guide to its legal effect, which is in
any case unequivocally pleaded in para 8 of the amended statement of claim.
(ii) It is
alleged that the deed of gift made no provision for a gift over in the event of
Lucinda not taking. It is not necessary to analyse the deed of gift in detail.
Whether that analysis is correct or whether there is merely a resulting trust
in Mr and Mrs George’s favour pending the vesting in possession of Lucinda’s
interest does not matter. In essence what is pleaded is that the whole of the
beneficial interest did not pass from Mr and Mrs George under the deed of gift.
That however does not appear to me to have any important repercussions. Lucinda
acquired a beneficial interest under the trust. It matters not what it was.
From the date of the deed of gift the trustees were bound to have regard not
only to Mr and Mrs George’s remaining beneficial interest, but also to
Lucinda’s beneficial interest.
(iii) It is
alleged that Mr and Mrs George retained effective control over the severed
part, with Mr Hall continuing to act as landlords’ agent. The evidence does not
appear to me to support that assertion. Following the deed of gift the rents
were apportioned, and a separate bank account, to which Mr George had no
access, was opened in the name of the trustees to accept the rent. In my view,
the most that can be said on Mr John’s behalf is that Mr George still took an
interest, which is hardly surprising considering his previous involvement and
the fact that his step daughter was to benefit under the trust. In so far as Mr
Hall was acting as landlord’s agent, he was acting on behalf of the defendants
not on behalf of Mr George.
(iv) It is
alleged that the defendants’ solicitors have been continuing to take
instructions directly from Mr Charles George. That seems to me to be a similar
point. There was some evidence that at a hearing in the county court (which I need
not explain further) Mr George appeared to be giving instructions to the
defendants’ solicitors. Given his relationship with his step daughter, his
involvement is unsurprising. It does not lead me to the conclusion that there
was no severance by conveyance of the reversionary estate.
(v) Finally,
it is alleged that the result of the trust was to relieve Mr and Mrs George
from the burden of paying Lucinda’s school fees. That does not to appear to me
to advance Mr John’s argument at all.
Mr De Freitas
sought to bring Mr John’s case within Persey v Bazley (supra).
That is a decision of the Court of Appeal by which I am bound however
surprising it may be to a real property lawyer. It was however a very different
case from the present, the alleged severance by conveyance being a conveyance
to nominees in circumstances where the conveying parties could at any time call
for a reconveyance: see at p40. The ratio of the decision is at p42 in the
judgment of May LJ:
In effect,
the trustee/transferees were mere agents for the transferors: they stood in the
shoes of the latter: thus there could not be said to be any true separation of
the reversionary estates in the individual parts.
That is not
the position in the present case. There was a bona fide transfer of the
legal estate in the farm buildings to the trustees and a
the reconveyance of the legal estate in the farm buildings to them. In my
judgment, it is unquestionably the case that the landlords of the old farm
buildings are now the trustees. The rents are payable to them, and the burden
of the landlords’ obligations falls on them. It follows, in my view, that Persey
v Bazley does not apply and that there was a bona fide severance
of the reversionary estate in the farm buildings by the deed of gift dated
November 5 1991.
It follows, in
my judgment, that I must dismiss the claim. The trustees are not estopped from
relying on the planning permission dated April 16 1991, nor is their notice to
quit invalid for lack of a severance by conveyance.
