Agricultural Holdings Act 1948, section 2 — Appeal by landlords from county court judge’s decision refusing a possession order against tenant of farm — Effect of grant of a tenancy expressed to be for more than one year but less than two (intended by landlords to exclude security of tenure on the Gladstone v Bower principle) but executed on a date when the tenancy had only a few days left to run — Was this a tenancy for less than a year which was converted by section 2(1) of the 1948 Act into a fully protected tenancy of an agricultural holding? — General principle, reiterated in
Roberts v Church Commissioners for England, that a grant cannot take effect retrospectively so as to confer an interest in land on the grantee before execution of grant — Various arguments submitted on behalf of landlords in an attempt to exclude this principle rejected, including an argument based on estoppel — It was suggested that as the tenant knew that the landlords were anxious not to grant a tenancy which would attract security of tenure, and would not have done so if they had appreciated the true legal effect of the transaction, the tenant was estopped from claiming a protected agricultural tenancy — No authority justifying so wide a proposition — Held accordingly, affirming county court judge’s decision, that the tenancy was protected and landlords were not entitled to possession — Important point to be noted, that the Gladstone v Bower principle will not apply unless the tenancy granted takes effect for more than one year (but less than two years) from the date of execution of the grant
This was an
appeal by the plaintiff landlords, Ernest David Keen and Robert Graham Hilary
Keen, from a decision of Judge Smithies at Bournemouth County Court refusing
them an order for possession against David George Holland, defendant and
respondent to this appeal. The case concerned the defendant’s occupation of
Lynes Farm, Ringwood, Hampshire.
Miss Hazel
Williamson (instructed by Arnold Cooper & Tompkins, of Chichester) appeared
on behalf of the appellants; Geoffrey Jaques (instructed by Burges Salmon &
Co, of Bristol) represented the respondent.
Giving the
judgment of the court, OLIVER LJ said: This is an appeal from an order made by
His Honour Judge Smithies sitting in the Bournemouth County Court on November
11 1982 whereby he dismissed the plaintiffs’ claim for possession of an
agricultural holding occupied by the defendant and known as Lynes Farm,
Ringwood, Hampshire. The ground upon which the learned judge felt bound to
dismiss the plaintiffs’ claim was that the defendant was a protected
agricultural tenant under the provisions of the Agricultural Holdings Act 1948
and that forms the first ground of the plaintiffs’ appeal to this court. There
is a second and alternative ground upon which the plaintiffs claim that the
learned judge’s judgment ought to be reversed, namely, that even if, as a
technical matter, the defendant qualifies as a person entitled to the
protection of the Act, he is nevertheless estopped from asserting that his
interest in the land was other than an interest which does not qualify for such
protection. This latter contention necessitates a rather fuller recital of the
background facts than might otherwise be necessary.
The plaintiffs
are and were at all material times the freeholders of the land concerned — in
fact one of the plaintiffs owns part of the land in severalty and they are
joint owners of the balance, but it is unnecessary to differentiate between
their separate interests. The land had previously belonged to their mother, Mrs
Phyllis Keen who, in 1966, had let it to a family friend, Mr Jeffery, on a
yearly tenancy from March 25 1966. The land was conveyed to the plaintiffs in
April 1966 subject to that tenancy. At some time between 1966 and 1972 Mr
Jeffery sublet the land to the defendant. In 1972 the plaintiffs were desirous
of resuming possession of the land and served Mr Jeffery with a notice to quit
which was limited to expire on March 25 1974. Mr Jeffery was willing to give up
possession. No counternotice claiming the benefit of the Agricultural Holdings
Act 1948 was served. On July 28 1972 Mr Jeffery served notice to quit on the
defendant expiring on September 29 1973. It is common ground that the defendant
was not within the protection of the Act and that as from the termination of Mr
Jeffery’s tenancy in March 1974 he would have had no answer to a claim for
possession at the suit of the plaintiffs.
In fact at
this time everything was being dealt with in the most friendly and co-operative
manner. The defendant was anxious to stay on on the land for the moment while
he looked for another farm and the plaintiffs were anxious to accommodate him
so far as they could. They were, however, quite adamant that they were not
prepared to grant him any interest which would attract the protection of the
Act and negotiations took place between them and Mr Jeffery, who was a
chartered surveyor, acting on behalf of the defendant, to find a way out of the
difficulty. Originally the possibility of granting a short tenancy with the
consent of the Minister of Agriculture, Fisheries and Food under the provisions
of section 2(1) of the Act was considered, but this was abandoned in favour of
the alternative suggestion of the grant of a tenancy for a term exceeding one
year but less than two years, which the decision of this court in Gladstone
v Bower [1960] 2 QB 384 had established as being an agricultural tenancy
not protected by the Act. Correspondence ensued from which it is quite clear,
as the learned judge found, first, that the plaintiffs’ intention was so to
deal with the land as not to attract the protection of the Act and, secondly,
that the defendant and those advising him clearly understood that the
plaintiffs would only grant him a tenancy if it could be done in such a way that
the protection of the Act did not apply to it.
The
negotiations in fact turned out to be protracted and the defendant meanwhile
held over, but without payment of any rent, while they continued. Provisional
terms for the grant of a tenancy for a period of 21 months from November 1 1974
were arrived at in November 1974 but it was not until March 1975 that a draft
tenancy agreement was submitted for approval and by June 1975 the plaintiffs
were pressing for the defendant either to agree or to vacate. Further delay
occurred, however, while a schedule of condition was prepared and agreed and it
was not in fact until January 2 1976 that a tenancy agreement was finally
signed. Under that agreement the defendant was granted a tenancy of the farm
retrospectively from November 1 1974 until October 1 1976.
No question
arose about the defendant’s position under this agreement, but upon its expiry
he still had not found anywhere to go and further negotiations took place for
the grant of a further tenancy to be likewise for a period of more than one but
less than two years. Again the preparation and approval of formal agreements
took some time and no new agreement was executed until June 29 1977, when a
tenancy was granted from October 1 1976 to November 1 1977. That tenancy
likewise expired without the defendant’s having found any alternative
accommodation. In October 1977 the second plaintiff wrote proposing yet a
further tenancy for 13 months — ie up to December 1 1978, but this seems not to
have been pursued and the suggestion was not in fact taken up again until the
summer of 1979. On September 4 of that year the second plaintiff wrote to the
defendant in these terms:
My brother Dr
E B Keen and I would be willing to let the above property to you on the same
terms as those contained in two several tenancy agreements dated June 29 1977,
the first between my brother and myself of the one part (hereafter referred to
as ‘the first agreement’) and the second between myself of the one part and
yourself of the other part (hereafter referred to as ‘the second agreement’)
except that
1. The term of your tenancy of the land
comprised in the first and second agreements shall be from September 1 1978 to
October 31 1979.
2. The rent for the before-mentioned period in
respect of the land comprised in the first agreement shall be £2,520.
3. The rent for the before-mentioned period in
respect of the land comprised in the second agreement shall be £480.
If you agree
to take the tenancies of the above property on the before-mentioned terms,
perhaps you would sign the duplicate of this letter and return it to me, with a
remittance for the rents of £3,000.
This formal
letter was accompanied by a personal letter in which the second plaintiff said:
If your
tenders for other farms are unsuccessful, I will ask Mr Willis to negotiate
with you on behalf of my brother and myself for one further term of a year and
a month from November I next.
I really do
need possession of the farm as I am seriously contemplating retiring from my
own job and I shall be looking to the farm to provide me with an income.
The formal
letter of agreement was in fact signed by the defendant and returned on October
19 1979, that is only a few days before the agreed term of the tenancy was due
to expire.
Thereafter, in
December 1979, the plaintiffs opened further negotiations for the ‘one further
term’ which had been referred to and it then transpired that the defendant was
claiming a protected tenancy under section 2(1) of the Act.
That is, of
course, the key section and it provides, for relevant purposes, as follows:
. . . where
under an agreement made on or after the first day of March nineteen hundred and
forty-eight, any land is let to a person for use as agricultural land for an
interest less than a tenancy from year to year . . . then, unless the letting .
. . was approved by the Minister before the agreement was entered into, the
agreement shall take effect, with the necessary
tenancy from year to year.
The effect of
that is that it then becomes subject to the restrictions on notices to quit
contained in sections 23-25 of the Act (now sections 1-3 of the Agricultural
Holdings (Notices to Quit) Act 1977).
Thus the way
in which the legislature has chosen to provide protection for agricultural
tenancies has been to impose restrictions on notices to quit agricultural
holdings and to put agricultural tenancies, whether for less than a year or for
two years or more, on the same footing as tenancies from year to year which, of
course, require to be determined by notice to quit. Interests for less than a
year are, as already noted, equated with tenancies from year to year by section
2(1) and tenancies for two years or more are, for relevant purposes, treated in
the same way by section 3(1). Parliament appears, however, to have overlooked
the case of a tenancy for a fixed term of more than one but less than two years
and such a term was held in Gladstone v Bower not to be a
protected tenancy. Although the provisions of sections 23-25 of the 1948 Act
were reenacted in 1977, no step was taken to bring such tenancies within the
Act and it must therefore be assumed that the legislature was content to permit
such tenancies to be created free from the restrictions on termination
applicable to other agricultural tenancies.
It is not,
therefore, in dispute that, if the tenancy created as a result of the letter
agreement had taken effect, as a matter of law and as was intended, as a
tenancy for a period of 13 months from September 1 1978, it would have
constituted a tenancy which did not require to be terminated by notice to quit
and would not have attracted the protection of the Act.
The
defendant’s contention that he is a protected tenant is, however, based on the
fact that the agreement which he signed was in fact signed on a date when the
term expressed to be granted by it had only a very few days to run. The
decision of this Court in Roberts v Church Commissioners for England
[1972] 1 QB 278 establishes — or, rather, reiterates — that a grant of land
cannot take effect retrospectively so as to confer an interest in land upon the
grantee before the execution of the grant. Accordingly, on October 19 1979,
when the defendant signed and returned the letter agreement the land (which is
clearly let for agricultural purposes) was let to him for an interest less than
a tenancy from year to year.
Thus, it is
argued, the agreement took effect as a tenancy from year to year which can only
be determined by a notice to quit given in accordance with the provisions of
section 1 of the Agricultural Holdings (Notices to Quit) Act 1977 and
enforceable only subject to the restrictions contained in section 2 of that
Act.
This was the
argument which found favour with the learned judge. He held that, however the
interest of the tenant may have been described in the agreement, what in fact
it created was an interest less than a tenancy from year to year which was
therefore statutorily converted into a tenancy from year to year and so
qualified for the protection conferred by the Act. In so holding, he followed
an unreported decision of Mervyn Davies J in Hoveringham Group Ltd v Scholey
& Sons Ltd on facts substantially indistinguishable from those in the
instant case.
On behalf of
the plaintiffs Miss Williamson argues that the learned judge (and, by necessary
implication, Mervyn Davies J) wrongly construed section 2(1). She accepts that
as a matter of strict legal analysis the defendant had no interest in the land
prior to October 19 1979 and that the agreement concluded on that date could
not, as a matter of law, create a term of years retroactively. She submits,
however, that the ‘interest’ which is referred to in section 2(1) is not to be
confined to the legal interest created by the particular agreement under
consideration but is to be construed according to the intention of the parties
and what is expressed in the agreement.
As an
alternative — although it is, we think, merely a different way of expressing
the same concept — she submits that where (as here) the tenant is already in
occupation before the formal grant of a tenancy, a tenancy agreement for a term
commencing from a prior date is to be treated as clothing him, as between the
parties, with the status of tenant under the agreement as from the agreed
commencement date. His ‘interest’ for the purposes of the Act is, therefore, to
be determined in accordance with that agreed status. Terms of a tenancy are
frequently negotiated well prior to the execution of a formal tenancy and it is
a commonplace that the tenancy when formally granted is expressed as creating a
term commencing on a date prior to the date of the instrument. While it is no
doubt true that no estate is created until the instrument is executed, the agreement
as to the duration of the term is effective for all other purposes, for
instance, as regards payment of rent and covenants in the lease. Miss
Williamson points out that in Gladstone v Bower itself the term
of 18 months expressed to be created was in fact a term of 13 months only as a
result of delay in execution of the agreement, but was nevertheless referred to
in the judgment of Pearson LJ as a term of 18 months.
We are,
however, unable to attach any significance to this. On any analysis the term
there was for more than one and less than two years and no point was taken on
the actual length of the term. Miss Williamson has, however, drawn the court’s
attention to Colton v Becollda Property Investments Ltd [1950] 1
KB 216 and in particular to the judgment of Denning LJ (as he then was) at p
231 where he observed:
It
continually happens that the tenant goes into occupation whilst the
negotiations are still pending and before the lease is executed, and then,
afterwards, when the lease is drawn up, it is expressed to start as from the
date the tenant went into occupation. In such cases, in point of law the legal
interest of the tenant starts from the date when the lease was executed . . .
But as between the parties it may start from the date stated in the lease,
because the parties, by their agreement, have related its commencement back to
the date when the tenant went into occupation. This relation back is not to be
regarded as a nullity; it may often mean that the conditions and covenants of
the lease relate back to that time also.
That case,
however, was concerned with a very different problem, the issue being whether
the defendants had demanded a premium in contravention of section 8(1) of the
Rent Act 1920 which prohibited (except in the case of a grant of a tenancy of
14 years or upwards) the landlord from ‘requiring’ a premium ‘as a condition of
the grant’ of a tenancy. The court accepted that the lease in that case (which
was dated some three months after the commencement of the term expressed to be granted)
was not a lease for the full period of 14 years, but found in the circumstances
that that was not necessarily determinative of the question whether the premium
had been ‘required as a condition of the grant’ of a 14-year term.
The court
found that there had been an antecedent agreement, albeit not yet confirmed by
the defendants’ full board, for the grant of a 14-year term and that the
plaintiff’s claim for the return of the premium therefore failed. We cannot see
that this case is of any assistance to Miss Williamson in the instant case,
where it cannot be claimed that there was, prior to the execution of the
tenancy, any agreement between the parties and where the only question is
whether, under the agreement in fact concluded, the land was let to the tenant
for ‘an interest less than a tenancy from year to year’. It seems to us, as a
matter of construction of the section, that it is looking simply to the
question of what, as a matter of law, the tenant’s interest in the land is
under the agreement for the relevant tenancy and that the parties cannot take
that actual interest, whatever it may be, out of the ambit of section 2(1) by
agreeing to treat it as an interest of some other length or type.
In our
judgment, therefore, it follows that Hoveringham Group Ltd v Scholey
& Sons Ltd was rightly decided and that the learned judge in the
instant case came to the right conclusion on the first point.
There remains
the issue of estoppel. As to this Miss Williamson bases her argument on the
decision of this Court in Amalgamated Investment & Property Co Ltd v
Texas Commerce International Bank Ltd [1982] QB 84 and contends that
there was what is now known as an estoppel by convention which precludes the
defendant from now alleging that the agreement concluded in October 1979 had
the effect which, in law, it clearly did have. She relies in particular on the
formulation by Lord Denning MR in the two following paragraphs:
When the
parties to a contract are both under a common mistake as to the meaning or
effect of it — and thereafter embark on a course of dealing on the footing of
that mistake — thereby replacing the original terms of the contract by a
conventional basis on which they both conduct their affairs, then the original
contract is replaced by the conventional basis. (p 121)
At p 122 he
states the general principle shorn of limitations as follows:
When the
parties to a transaction proceed on the basis of an underlying assumption —
either of fact or of law — whether due to misrepresentation or mistake makes no
different — on which they conducted the dealings between
would be unfair or unjust to allow him to do so.
It should
perhaps be added that Lord Denning was alone in expressing the proposition as
broadly as this.
Applying this
to the facts of the instant case, Miss Williamson submits that since it was
known to the defendant throughout (as the learned judge found) that the
plaintiffs were not willing to grant a tenancy other than one which did not
attract the protection of the Act and since both parties believed — at any rate
until after the expiry of the last of the three tenancies in fact granted —
that each of them effectively produced that result, it is unconscionable on the
part of the defendant either (i) now to claim that the tenancy did not as a
matter of law create the term of 13 months which both parties thought that it
effectively created or (ii) to rely upon a statutory protection which both
parties at the date of the grant of the tenancy intended that he should not
have. The learned judge rejected the plaintiffs’ case on estoppel on two
grounds. In the first place, he did not regard the defendant’s reliance upon
his statutory rights as unconscionable having regard to what he described as
the ‘unequal bargaining position’ as between landlord and tenant and having
regard to the purpose of the legislation. Secondly, whatever may have been the
position as regards the first two agreements between the parties, which were
the result of considerable prior negotiation, by the time the September letter
was sent the question of the defendant’s position had been left in abeyance for
over a year. The letter was put forward without any prior negotiation and the
defendant was asked to agree to a tenancy for a term which, however expressed
in the agreement, was due to expire in just over a month’s time. It would not,
therefore, be said that the creation of a term of more than one year did in
fact form the conventional basis upon which the parties were acting.
As regards the
first ground, Miss Williamson submits that there was no evidence that the
plaintiffs had sought to exploit their superior bargaining power as landlords
and that in relying, as he did, on the protective purpose of the Act, the
learned judge was unduly influenced by the decision of the House of Lords in Johnson
v Moreton [1980] AC 37, which was directed to a rather different
question and was, she submits, clearly distinguishable. That case established
that, although there is no specific provision in the Act against contracting
out of the provisions of section 24(1) (as there is in relation to certain
other sections), a contract by an agricultural tenant not to serve a
counternotice under section 24(1) is void as being, by necessary implication,
prohibited by the Act. Here, Miss Williamson points out, the parties were
seeking to enter into an agreement which, it is clearly established, is not
prohibited by the Act. If they can agree upon a term which does not attract the
protection of the Act, there is, she submits, no legal impediment to their
being estopped from denying that that is what they have done and it is no
answer to say that the Act is one for the protection of agricultural tenants,
for this is to beg the question. The Act is one for the protection only of
agricultural tenants under tenancies to which the Act applies.
Attractively
as this argument was put, it is not, in our judgment, sound. Once there is in
fact an actual tenancy to which the Act applies, the protection of the Act
follows and we do not see how, consistently with Johnson v Moreton,
the parties can effectively oust the protective provisions of the Act by
agreeing that they shall be treated as inapplicable. If an express agreement to
this effect would be avoided, as it plainly would, then it seems to us to
follow that the statutory inability to contract out cannot be avoided by
appealing to an estoppel. The terms of section 2(1) are mandatory once the
factual situation therein described exists, as it does here, and it cannot, as
we think, be overridden by an estoppel even assuming that otherwise the
conditions for an estoppel exist (see, for instance, the somewhat similar
though not wholly analogous position under the Rent Acts: Welch v Nagy
[1950] 1 KB 455). We agree with the learned judge that, having regard to the
purpose of the Act, it cannot be said to be unconscionable for the tenant who
is protected by it to rely upon the protection which the statute specifically
confers upon him. Once the protection attaches, the jurisdiction to grant
possession is exercisable only subject to the statutory provisions and it is a
little difficult to see how the parties can, by estoppel, confer on the court a
jurisdiction which they could not confer by express agreement.
That is
sufficient to dispose of the argument, but there seem to us to be other
insuperable obstacles to a successful plea of estoppel. This is not strictly a
case of the parties having established, by their construction of their
agreement or their apprehension of its legal effect, a conventional basis upon
which they have regulated their subsequent dealings as in the Amalgamated
Investment case. The dealing alleged to give rise to the estoppel is the
entry into the agreement itself in the belief that it would produce a
particular legal result. In fact, for reasons which had nothing to do with the
defendant, the plaintiffs got it wrong: and what Miss Williamson appears to us
to be contending for is a much wider conventional estoppel than has yet been
established by any authority, namely, that where parties are shown to have had
a common view about the legal effect of a contract into which they have entered
and it is established that one of them would not to the other’s knowledge have
entered into it if he had appreciated its true legal effect, they are, without
more, estopped from asserting that the effect is otherwise than they originally
supposed.
So broad a
proposition cannot be deduced from the actual decision in the Amalgamated
Investment case and although it may be supported on the basis of the very
wide proposition of Lord Denning referred to above, it cannot, in our judgment,
be right. If, for instance, the parties had been negligently advised by a
solicitor that a yearly tenancy was not protected by the Act and had entered
into one accordingly, it would, we should have thought, be an impossible
contention (quite apart from Johnson v Moreton) that the tenant
was estopped from invoking the protection which the Act confers on such a
tenancy. As the learned judge pointed out, nobody in the instant case can have
been under any illusions about the fact that at the time when the plaintiffs
tendered the agreement the term expressed to be granted had all but expired and
we share the learned judge’s difficulty in seeing how a mere erroneous belief
that the formality of signing this document would result in the defendant’s
obtaining an unprotected tenancy for a month or so can properly be described as
the ‘conventional basis’ for their dealings so as to give rise to an estoppel.
In our
judgment, the learned judge came to the right conclusion on this point also and
we accordingly dismiss the appeal.
The appeal
was dismissed with costs.
