Agricultural holdings–Clause in tenancy agreement by which tenant undertook not to serve a counter-notice under section 24(1) of Agricultural Holdings Act 1948–Intention to exclude tenant’s security of tenure–Whether clause valid and enforceable in view of absence of express prohibition of contracting out of security of tenure provisions–Clause invalid both on construction of Act and on grounds of underlying policy–Tenant farmers’ security important for national food production–House of Lords agree with Court of Appeal on result, but some difference in reasoning–Effect of breach of clause, if it had been valid, in relation to a notice to quit given under section 24(2)(e) (the tenant having served a counter-notice) not discussed by the House–Appeal from Court of Appeal dismissed
This was an
appeal by the landlords, Henry Leslie Johnson and Miss Caroline Johnson, from a
decision of the Court of Appeal (reported in (1977) 243 EG 121), who had
allowed an appeal by the tenant, Samuel Moreton, from a decision of Judge
Harrison-Hall at Warwick County Court. Judge Harrison-Hall, on a special case
stated by the arbitrator, had held that a clause in the lease of Village Farm,
Offchurch, Warwickshire, by which the tenant had agreed not to serve a
counter-notice under section 24(1) of the Agricultural Holdings Act 1948, was
valid and enforceable. He found accordingly that a counter-notice served by the
tenant was in breach of this clause and that a second notice to quit under
section 24(2)(e) of the Act was effective to terminate the tenancy. The tenant
appealed to the Court of Appeal, who had allowed his appeal. The landlords now
appealed to the House of Lords.
Leolin Price
QC and Peter Langdon-Davies (instructed by Allen & Overy, agents for
Rotherham & Co, of Coventry) appeared on behalf of the landlords; G B H
Dillon QC and Derek Wood QC (instructed by Ellis & Fairbairn, agents for
Wright, Hassall & Co, of Leamington Spa) represented the tenant.
Giving the
first speech, LORD SALMON said: This appeal raises an important point of law
relating to the degree of security of tenure which the Agricultural Holdings
Act 1948, as amended by the Agriculture Act 1958, affords a tenant farmer.
By a lease
dated August 11 1967 the present landlords’ (the appellants’) predecessors in
title granted to the tenant (the respondent) a lease of Village Farm,
Offchurch, Warwickshire (a farm of some 236 acres) for a term of 10 years from
January 1 1967. The rent was £1,888 for the first three years of the term and
£2,360 for the remainder of the term subject to a rent review in respect of the
last three years of the term. Clause 27 of the lease reads as follows:
The Tenant
agrees to give possession of the whole of the farm to the Landlords immediately
upon the determination of the term hereby granted and not in any event to serve
a counter-notice under section 24(1) of the Agricultural Holdings Act 1948 or
to take any steps to claim the benefit of any statutory provision granting
security of tenure which may be in force at the time of the determination
thereof.
The clear
intention of this clause was to deprive the tenant of the security of tenure
afforded him by the Act of 1948 or any other Act which might be passed by
Parliament for the protection of tenant farmers.
I must now set
out the relevant parts of sections 3, 23 and 24 of the Act. The result of this
appeal depends entirely upon the true construction of section 24(1).
Section
3(1) A tenancy of an agricultural
holding for a term of two years or upwards shall, instead of terminating on the
expiration of the term for which it was granted, continue (as from the
expiration of that term) as a tenancy from year to year, but otherwise on the
terms of the original tenancy so far as applicable, unless, not less than one
year nor more than two years before the date fixed for the expiration of the
term, a written notice has been given by either party to the other of his
intention to terminate the tenancy.
(2) A notice given under the foregoing subsection
shall be deemed, for the purposes of this Act, to be a notice to quit.
(4) This section shall have effect
notwithstanding any agreement to the contrary.
Section
23(1) A notice to quit an agricultural
holding or part of an agricultural holding shall (notwithstanding any provision
to the contrary in the contract of tenancy of the holding) be invalid if it
purports to terminate the tenancy before the expiration of 12 months from the
end of the then current year of tenancy . . .
Section
24(1) 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 Agricultural Land Tribunal consents to the operation thereof.
(2) The foregoing subsection shall not apply
where: . . .
(e) at the date of the giving of the notice to
quit the interest of the landlord in the agricultural holding to which the
notice relates had been materially prejudiced by the commission by the tenant
of a breach, which was not capable of being remedied, of any term or condition
of the tenancy that was not inconsistent with the fulfilment by the tenant of
his responsibilities to farm in accordance with the rules of good husbandry,
and it is stated in the notice that it is given by reason of the matter
aforesaid. . . .
On November 27
1975 the landlords served the tenant with a notice under section 3(1) of their
intention to terminate his tenancy on December 31 1976. I will call this the
first notice to quit. On December 16 1975 the tenant served the landlords with
a counter-notice under section 24(1) requiring that the subsection should apply
to the first notice to quit so that that notice to quit should have no effect
unless the agricultural land tribunal consented to its operation.
On December 22
1975 the landlords served the tenant with a second notice to quit in precisely
the same terms as the first notice save that it added:
And further
take notice that this notice is given under section 24(2)(e) (of the Act of
1948) for the following reasons: that at the date of the giving of this notice
the interest of the landlords . . . has been materially prejudiced by the
commission by you of a breach, which is not capable of being remedied, of a
term or condition of the lease . . . namely serving a counter-notice contrary
to clause 27 of your lease.
On December 23
1975 the tenant served a notice on the landlords that he wished to contest the
reasons stated in their second
under the Act. An arbitrator was accordingly appointed; and the parties agreed
that he should state a special case for the opinion of the court. The question
of law propounded in the special case was whether the reasons stated in the
landlords’ notice of December 22 1975 were good or not. The special case was
argued before His Honour Judge Harrison-Hall, who in a full and careful
judgment held that the Act did not preclude the parties from agreeing to
exclude the operation of section 24(1); and that accordingly the tenant’s
counter-notice of December 16 1975, which was in breach of clause 27 of the
lease, fell within section 24(2)(e) and therefore the second notice to quit was
a valid notice which terminated the lease on December 31 1976. The tenant’s
appeal to the Court of Appeal was allowed and the landlords now appeal from
that decision to your Lordships’ House.
The case for
the landlords and for the tenant has been argued with outstanding ability by
both leading and junior counsel.
The first, and
by far the most important, question which arises is whether that part of clause
27 of the lease which purports to exclude the tenant’s right to serve a
counter-notice under section 24(1) is enforceable.
The second
question, which arises only if the answer to the first question is in the
affirmative, is (a) whether the landlord has been materially prejudiced by the
service of the counter-notice and (b) whether the tenant’s breach of clause 27
of the lease by serving the counter-notice is capable of being remedied.
As to the
first question, it has been rightly conceded on behalf of the landlords that
the first part of clause 27 of the lease, which provides that the tenant shall
give the landlords possession of the whole farm on December 31 1977, and the
third part of clause 27, which provides that the tenant shall take no steps to
secure the benefit of any future statutory provision granting him security of
tenure, are each unenforceable. The first part because it offends against
section 3 of the Act and the third part because it is contrary to public
policy. It has, however, been strongly argued that the second part of clause 27
of the lease which prohibits the service of a counter-notice is enforceable.
It, of course, does not always necessarily follow that, because one can see
that most of an apple is rotten, there is no part of it which may be sound and
severable from the rest.
The first
point taken on behalf of the landlords is that what I have called the second
part of clause 27 is sound because there is nothing in the Act of 1948 which
expressly prohibits an agreement between a landlord and tenant that the tenant
shall not serve a counter-notice under section 24(1). It has been pointed out
that sections 3, 11, 15, 23, 65 and 77 of the Act have expressly excluded
contracting out by some such words as ‘this section shall have effect
notwithstanding any agreement to the contrary.’
The argument is that if that had been the intention of the legislature
in relation to section 24(1), why had similar words been omitted from that
section? Sections 12 and 30(2), however,
expressly permit contracting out; and it might be argued why, if the
legislature intended to permit contracting out in relation to section 24(1) did
it not expressly say so? In my opinion,
neither of these arguments carries much weight: indeed, they cancel each other
out. For the reasons I will presently explain, I think the answer to the
argument formulated on behalf of the landlords is that the language of section
24(1) as it stands, coupled with the policy of the Act, makes it crystal clear
that prohibitory words, such as are incorporated in the six sections upon which
the landlords rely, would be entirely otiose if included in section 24(1).
The second
point taken on behalf of the landlords relates to the sanctity of the freedom
to contract and the sanctity of a contract once it has been made. I certainly
do not wish to cast any doubt upon this sanctity. It does not, however,
derogate from the power of Parliament to make certain contracts unenforceable;
and there are many well-known examples (which I need not recite) of statutes
which have done so. The question here is –does section 24(1) do so? We have been helpfully referred to all the
authorities which could throw any light on this question. I doubt whether any
of them except those which state or restate-the familiar principles to be
applied in construing statutes will further the argument very much one way or
the other, for none of them concerns section 24(1) nor any similar statutory
provision.
The relevant
principles of construction for construing section 24(1) are:
1. If the
language of a statute be plain, admitting of only one meaning, the legislature
must be taken to have meant and intended what it has plainly expressed, and
whatever it has in clear terms enacted must be enforced though it should lead
to absurd or mischievous results: Vacher and Sons Ltd v London
Society of Compositors [1913] AC 107, per Lord Atkinson at p 121.
2. The courts
have no power to fill in a gap in a statute, even if satisfied that it had been
overlooked by the legislature and that if the legislature had been aware of the
gap, the legislature would have filled it in. Gladstone v Bower
[1960] 2 QB 384; Brandling v Barrington 6 B and C 467 per Lord
Tenterden CJ at p 475.
3. If the
words of a statute are capable, without being distorted, of more than one
meaning, the courts should prefer the meaning which leads to a sensible and
just result complying with the statutory objective and reject the meaning which
leads to absurdity or injustice and is repugnant to the statutory objective, River
Wear Commissioners v Adamson [1877] 2 App Cas 743 per Lord Blackburn
at p 763; AG v Prince Ernest Augustus of Hanover [1957] AC 436
per Viscount Simonds at p 462; Stock v Frank Jones (Tipton)
Ltd [1978] 1 WLR 231 per Lord Simon of Glaisdale at p 236.
I reject the
argument that there is any gap in section 24(1) notwithstanding that there are
no words in the subsection expressly forbidding or permitting the parties to
enter into an agreement which provides that no counter-notice shall be served
by the tenant. In my opinion, the language of this subsection is capable of
only one meaning–the meaning for which the tenant contends; and that meaning
does not lead to any absurd or mischievous result but to a sensible and just
result which is consonant with the clear objective of the Act.
If you carve
out of section 24(1) the words:
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
you are left
with the words:
Where notice
to quit an agricultural holding or part of an agricultural holding is given to
the tenant thereof, then, subject to the provisions of the next following
subsection, the notice to quit shall not have effect unless the Agricultural
Land Tribunal consents to the operation thereof.
In my opinion,
these words are clearly mandatory and would make any agreement to the contrary
unenforceable. I cannot believe that the words relating to the counter-notice
were inserted into the subsection with the intention or effect of stripping it
of its mandatory character. They were, in my opinion, inserted, as Mr Wood so
ably argued, in order to save the time and money which would otherwise be
wasted if every notice to quit an agricultural holding had to be submitted to
the agricultural land tribunal for consent to its operation. It was obviously
foreseen that there might well be, as no doubt there are, a substantial number
of cases in which a tenant served with a notice to quit is willing to go. If,
however, he is unwilling to go, as I suspect he is in the large majority of
cases, he has only to serve a counter-notice within a month of the notice to
quit; and then he cannot be ejected without the consent of the agricultural
land tribunal. The Act gives him a statutory option to decide at the time when
he receives the notice to quit whether or not he wants to leave the land. By
that time he will probably have had considerable experience of working the land
and so will be able to judge how best to make up his mind.
I do not
consider that any question of implication arises in relation to section 24(1).
Its meaning is plain and unambiguous. It gives the tenant a statutory option to
be exercised within one month of receiving a notice to quit. The option is to
go voluntarily or to serve a counter-notice and remain in possession unless the
agricultural land tribunal exercises its very restricted powers of allowing the
notice to quit to become effective. The option cannot be exercised any sooner
or any later than the subsection prescribes. Nor can it, in my view, be
renounced by the tenant in advance. The language of the section makes this
plain. Moreover the statutory option was conferred on tenant farmers, not for
their personal protection alone, but for the public good.
I now pass to
the policy or objective of the Act of 1948. Sections 3 and 23 of that Act
(which I have recited earlier in this speech) introduced nothing new. They
reproduced, in substance, sections 23 and 25 of the Agricultural Holdings Act
of 1923 (which was also a consolidation Act). The protection afforded to
tenants by these sections was no doubt quite useful; but it was of no real
significance when compared with the immense protection conferred on tenant
farmers by section 31 of the Agriculture Act 1947, which in reality gave all
tenant farmers who farmed their land efficiently complete security of tenure
save in most exceptional circumstances. That section was, in substance,
reproduced by sections 24, 25 and the procedural section 26 of the Act of 1948.
Section 25 (as
amended) enacted that the agricultural land tribunal should consent to the
operation of any notice to quit any agricultural holding only if the tribunal
was satisfied that to consent would be in the interests of efficient farming,
sound estate management, agricultural research, education and the like, or, in
certain other circumstances, that greater hardship would be caused by the
tribunal withholding than by granting its consent. The proviso to section 25,
however, laid down that even if the tribunal was satisfied of the existence of
any of the foregoing reasons for consenting to the operation of a notice to
quit, it should nevertheless withhold its consent if, in all the circumstances,
it appeared to the tribunal that a fair and reasonable landlord would not
insist upon possession. I have not thought it necessary to set out section 25
in detail. It is, however, I think quite plain from a summary of the section
that, as a rule, a landlord would be faced with a most daunting task were he to
attempt to obtain the tribunal’s consent to the operation of a notice to quit.
During the
last war, the submarine menace was such that it would have been virtually
impossible to import into this country any more goods vital for our survival
than we, in fact, did. Accordingly, it is extremely doubtful whether we could
have survived had it not been for the food produced by our own farms. Even in
1947 when the Agriculture Act of that year was passed, food rationing was still
in existence. It must have been clear to all that it was then and always would
be of vital importance, both to the national economy and security, that the
level of production and the efficiency of our farms should be maintained and
improved. This could be achieved only by the skill and hard work of our farmers
and the amount of their earnings which they were prepared to plough back into
the land from which those earnings had been derived. A very large proportion of
those farmers were tenant farmers. They were tenants because they did not have
the necessary capital to buy land or they could not find any land which they
wanted that was for sale–or for sale at a price which they could afford. In spite
of sections 23 and 25 of the Act of 1923, which had put them in a somewhat
better position than did the common law, the sword of Damocles was always
hanging over their heads. If they were tenants for a term of years, they might
receive an effective notice to quit on the date when the term expired–and this
term was rarely for more, and usually for less, than 10 years. If they were
tenants from year to year, and very many of them were, they might in any year
receive an effective notice to quit at the end of the next ensuing year.
Accordingly there was no great inducement for these farmers to work as hard as
they could, still less to plough money back into land which they knew they
might well lose sooner or later.
The security
of tenure which tenant farmers were accorded by the Act of 1947 was not only
for their own protection as an important section of the public, nor only for
the protection of the weak against the strong, it was for the protection of the
nation itself. This is why section 31(1) of the Act of 1947, reproduced by
section 24(1) of the Act of 1948, gave tenant farmers the option to which I
have referred and made any agreement to the contrary void. 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.
There are two
other factors which support the proposition that the second part of clause 27
is clearly as unenforceable as the rest of that clause. Firstly, the Act of
1947 covered all leases whether made before or after the passing of that Act.
Those made before that date could not have contained any clause similar to
clause 27, unless landlords had the gift of prophecy, because no such thing as
a counter-notice to a notice to quit then existed. To my mind, it is not
feasible that Parliament intended to give any less security of tenure to
tenants who entered into a lease after the date upon which the Act of 1947 came
into operation than it gave to tenants who had entered into a lease before that
date. Moreover section 8 of the Act of 1948, as amended by the Act of 1958,
among other things, gave the landlords the protection of having a rent review
by arbitration should there be a rise in the open market rent of the land
during the continuance of the tenancy.
Secondly, it
has been acknowledged and indeed argued on behalf of the landlords that the
counter-notice served by the tenant on December 16 1975 was an effective
counter-notice under section 24(1), notwithstanding clause 27 of the lease; and
this was the cornerstone of their case. It would be strange indeed if a tenant,
by availing himself of a statutory provision obviously designed to give him
security of tenure, should be taking a step which gave his landlord the right
to eject him.
Having come to
the conclusion that clause 27 of the lease was wholly unenforceable, for the
reasons I have stated, it is unnecessary for me to express any opinion about
the arguments addressed to this House concerning the true meaning of section
24(2)(e) of the Act of 1948; and I shall refrain from doing so.
My Lords, I
would dismiss the appeal with costs.
LORD HAILSHAM
and LORD SIMON delivered concurring speeches, LORD EDMUND-DAVIES expressed
concurrence and LORD RUSSELL delivered a speech also concurring.
The appeal
was dismissed with costs.
