Agricultural holdings — Failure to pay rent — Whether notice to quit under Case D valid — Whether notice to quit fraudulently served
The freehold
of Eastfield House, North Thoresby, Lincolnshire, was owned by the plaintiff.
By an agreement
tenancy of the farm to the first defendant company, the shares of which were
owned by the second and third defendants, Mr and Mrs Popoff. By the agreement
the rent was payable half-yearly on April 6 and October 10 each year. On
October 10 1989 rent amounting to £15,264 became payable. On November 17 1989,
the rent not having been paid, the plaintiff’s solicitor, Miss Prince, served a
notice to pay requiring payment of rent within two months and a statutory
demand on the first defendant. On October 19 1989 a cheque drawn in the sum of
£14,805.60 on the company’s account, signed only by the third defendant, was
sent to the defendants’ then solicitor Mr Nutt. The defendants were entitled to
deduce drainage rates of £450 (not the £458.40 in fact deducted) from the rent.
On December 22 1989 Mr Nutt sent the cheque to Miss Prince and, by reason of a
dispute between Miss Prince and the Post Office about the delivery of recorded
mail and her refusal to accept an item of post on December 30 1989, the cheque
was not received by her until the afternoon of January 19 1990. Miss Prince
caused the service on the company on January 19 1990 of the notice to quit
under Case D before she was aware of the receipt of the cheque on that date. The
cheque was sent to Miss Prince’s bank with instructions for special clearance
and to be returned and not re-presented if payment was not met at once on
presentation. Because the mandate to the paying bank required two signatures on
the cheque, and it had only the third defendant’s, at the paying bank’s
request, the second defendant added his signature to the cheque before it was
paid on January 24 1990. On February 5 1990 Mr Nutt sent a cheque for £8.40
representing the overdeduction of drainage rates.
The plaintiff
sought an order for possession against the defendants following the expiration
of the notice to quit. On behalf of the second and third defendants it was
contended that the statement in the notice to quit concerning non-payment of
rent was false and that that false statement was made fraudulently.
v Mason that payment of rent by cheque relates back to the date of
posting of the cheque, and not the date when the cheque is honoured, does not
apply where the cheque is one which the paying bank, as between itself and its
client, was not bound to honour, because, for example, it lacked any signature.
In the present case the cheque lacked the necessary two signatures, and when
the second was added, and payment was made, that payment did not relate back to
the date of posting, but only to the date when the second signature was given.
(2) The second defendant’s willingness to add his signature constituted a fresh
mandate to pay on the cheque, this was given on January 24 1990; in these
circumstances the cheque posted on December 22 1989 was not ‘being honoured’
for the purposes of what was said in Beevers v Mason and the
payment of the cheque did not relate back to the date of posting under the
proposition in that case and the rent was paid only on January 24. (3) The de
minimis rule applies to the payment of rent and a notice to quit under case
D. Accordingly, the shortfall of £8.40 was, on the facts, de minimis and
would have been ignored had payment otherwise been made on time. Having regard
to the evidence, Miss Prince had reasonable grounds for believing that the
statement concerning non-payment of rent, which was contained in the notice to
quit, was a true statement when the notice was served. That was enough to rebut
the allegation of fraud.
The following
cases are referred to in this report.
Angus v Clifford [1891] 2 Ch 449
Beevers v Mason (1978) 37 P&CR 452; 248 EG 781, [1978] 2 EGLR 3,
CA
Derry v Peek (1889) 14 App Cas 337
Magdalen
College, Oxford v Heritage [1974] 1 WLR 441;
[1974] 1 All ER 1065; (1974) 27 P&CR 169; [1974] EGD 1; 230 EG 219, CA
Price v Romilly [1960] 1 WLR 1360; [1960] 3 All ER 429
Rous v Mitchell [1991] 1 WLR 469; [1991] 1 All ER 676; sub nom
Stradbroke (Earl of) v Mitchell [1991] 1 EGLR 1; [1991] 03 EG 128
& 04 EG 132
This was a
claim by the plaintiff against the first defendant, North Thoresby Farms Ltd,
and the second and third defendants, Mr and Mrs Michael Popoff, for possession
of Eastfield House Farm, North Thoresby, Lincolnshire, following the expiration
of a notice to quit under Case D for non-payment of rent.
Derek Wood QC
and Olav Ernstzen (instructed by Prince & Co, of Sherburn) appeared for the
plaintiff; Robert Reid QC and John McGhee (instructed by H V Beckett & Co,
of Market Rasen) represented the second and third defendants; the first
defendant did not appear and was not represented.
Giving
judgment, FERRIS J said: Eastfield House Farm is a substantial farm, some 630
acres in extent, at North Thoresby, Lincolnshire. In the events which have
happened the freehold is vested in the plaintiff, Mrs Alexandra Helen
Luttenberger, in her capacity as personal representative of two great aunts —
Mrs Helena Johanna Butt and Miss Eva Motley Robinson — who were sisters. In
this action Mrs Luttenberger seeks an order for possession of the farm against
North Thoresby Farms Ltd and against Mr Michael Dimitry Popoff and his wife Mrs
Lesley Popoff. The company was, and according to the Popoffs still is, the
tenant of the farm. Mr and Mrs Popoff between them hold 10 shares of £1 each in
the company, which represent its only issued share capital. At all material
times they have been the only directors of the company and Mrs Popoff has been
its secretary. Mr and Mrs Popoff are in occupation of the farm, pursuant to
arrangements with the company, the precise nature of which is unclear. The
company has taken no part in this action. It is, however, common ground that
the Popoffs are in no worse and, correspondingly, in no better position than
the company itself. In effect, therefore they have presented the case which the
company could have presented on its own behalf if it had defended this action.
The farm came
into the ownership of Mrs Butt and Miss Robinson many years ago. It appears
that some parts of it belonged exclusively to Mrs Butt and other parts of it
exclusively to Miss Robinson, the remainder belonging to them jointly. Some
time in or before the year 1979 they granted an oral tenancy of the farm as a
whole to Mr Popoff who is the brother of Mrs Luttenberger and thus himself a
great-nephew of the two ladies.
On November 15
1979 Mr Popoff assigned this tenancy to the company. Subsequently, by an
agreement in writing dated June 30 1982, Mrs Butt and Miss Robinson granted a
new tenancy to the company for one year from April 6 1982 until April 6 1983,
continuing from year to year thereafter until determined at the end of any year
of the tenancy by not less than 12 months’ notice in writing given by either
party to the other. The initial rent under this tenancy was £17,000 pa. By the
time of the events with which I am concerned this rent had been duly increased,
under the machinery applicable to agricultural tenancies, to £30,528 pa. This
rent was payable half-yearly in arrears on April 6 and October 10 in each year.
Miss Robinson
died on January 7 1986 and Mrs Butt died on April 28 1987. Mrs Luttenberger is
the sole executor of the will of each of them. She has not yet completed the
administration of either estate. In particular, I understand that some
pecuniary legacies under one or both wills remain unpaid. Subject to the due
completion of the administration of each estate, Mrs Luttenberger is the sole
residuary legatee under each will. For present purposes, however, it suffices
to say that the legal estate in the entirety of the farm is vested in Mrs
Luttenberger as personal representative of one or other of her two great-aunts.
Unfortunately,
Mrs Luttenberger and her brother Mr Popoff have been estranged for some years
and a state of considerable hostility has existed and continues to exist
between them. It seems that they are in litigation against each other in at
least four pending actions, in three of which Mrs Luttenberger is the
plaintiff. It was said on behalf of Mrs Luttenberger that the company has been
an irregular payer of the rent due under the tenancy. It does in fact appear
that the company has not paid its rent strictly on time, but a schedule of payments
which was not disputed shows that the delay in payment has been of the order of
two to six weeks. All the rent becoming due under the tenancy down to October
10 1989 was paid by the company to Mrs Luttenberger, the last payment in
respect of the rent due on April 6 1989 having been made by cheque dated April
21 1989. It is
were always for a sum rather less than the full amount of the rent payable.
This was because the company deducted from the rent, as it was entitled to do
under section 72 of the Land Drainage Act 1976, certain payments which it had
made in satisfaction of drainage rates payable by the landlord.
This action is
brought as a consequence of the company’s failure to pay in due time the
instalment of rent, amounting to £15,264, which became payable on October 10
1989. There is no doubt that this rent was not paid on the due date. Equally,
there is no doubt that Mrs Luttenberger received the greater part of this instalment
of rent on January 22 1990 and the balance, amounting to a mere £8.40, on
February 5 1990. The issue between the parties is whether the delay in payment,
coupled with the steps taken by or on behalf of Mrs Luttenberger, which I have
yet to mention, have the result that a notice to quit served on behalf of Mrs
Luttenberger on January 19 1990 was effective to determine the company’s
tenancy on April 5 1991. There is no doubt that, if that notice to quit was
effective, the termination of the company’s tenancy would have effect on the
latter date.
Before I
explore the facts of this case in greater detail, I propose to say something
about the impact on this tenancy of the Agricultural Holdings Act 1986 and
certain decisions made under it or its predecessor. This was not in dispute, so
I can take it quite shortly. The position may, I think, be summarised as
follows:
(1) By section 25(1) of the Act a notice to quit
an agricultural holding is invalid if it purports to terminate the tenancy
before the expiration of 12 months from the end of the then current year of the
tenancy. The contractual provisions of the company’s tenancy agreement which I
have referred to are consistent with this statutory requirement.
(2) By section 26(1) the ability of a landlord of
an agricultural holding to terminate a tenancy of that holding is severely
curtailed. Generally, the tenant has the right to serve a counternotice in
response to any notice to quit and, if he does so, the notice to quit is not to
have effect unless the Agricultural Land Tribunal consents to its operation
which it may do only in certain limited circumstances.
(3) However, by section 26(2), this general
curtailment does not apply in certain cases which are specified in Part I of
Schedule 3. One of these cases is Case D which, so far as material, is
applicable where:
at the date of
the giving of the notice to quit the tenant had failed to comply with a notice
in writing served on him by the landlord, being either:
(a) A notice requiring him within two months from
the service of the notice to pay any rent due in respect of the agricultural
holding to which the notice to quit relates.
Then there is
an alternative in (b), which does not matter. Then the case concludes:
and it is
stated in the notice to quit that it is given by reason of the said matter.
(4) Where a landlord serves a notice to quit, any
question whether it was within the exception to the general restriction on the
effect of notice to quit which is provided by section 26(2) is to be determined
by arbitration pursuant to para 1 of Schedule 4 and the regulations made
pursuant to section 29.
(5) The relevant regulations are those contained
in the Agricultural Holdings (Arbitration on Notices) Order 1987 (SI 1987 No
710). By article 9, where a tenant wishes to contest any question arising under
section 26(2), he must within one month after the service of the notice to quit
on him serve on the landlord a notice in writing requiring the question to be
determined by arbitration under the Act. By article 10 a notice requiring
arbitration ceases to be effective three months after it is given unless an
arbitrator has been appointed or an application has been duly made for the
appointment of an arbitrator.
(6) Arbitration is the only means by which a
tenant can challenge a landlord’s contention that a notice to quit falls within
the exception provided by section 26(2). Accordingly, if the tenant does not
duly require arbitration or if a notice requiring arbitration is rendered of no
effect by the failure in due course to obtain or apply for the appointment of
an arbitrator, the landlord’s claim that the case falls within section 26(2)
cannot be disputed by the tenant unless the notice on which the landlord relies
is tainted by fraud. This is, in substance, the effect of the decisions of the
Court of Appeal in Magdalen College v Heritage [1974] 1 WLR 441 *
and Rous v Mitchell [1991] 1 WLR 469† . In the latter of these
cases it was held, on the facts, that the landlord’s notice was tainted by
fraud.
*Also
reported at [1974] 230 EG 219.
† Also
reported at [1991] 1 EGLR 1.
As I have
already indicated, the underlying question in this case is whether a notice to
quit served on behalf of Mrs Luttenberger on January 19 1990 was effective to
terminate the company’s tenancy. That notice was expressed to be given on the
ground that the circumstances were within Case D. The company wished to
challenge that assertion and, in due time, it gave notice requiring the matter
to be determined by arbitration. However, it failed to apply for the
appointment of a arbitrator within the three-month period, with the result that
its notice requiring arbitration ceased to have effect and the company cannot
now seek arbitration. Mrs Luttenberger seeks an order for possession on the
ground that the company’s tenancy terminated on April 5 1991 by virtue of the
notice to quit. Mr and Mrs Popoff resist that claim on the ground that the
claim in the notice to quit that the requirements of Case D were satisfied was
false and that this claim was made fraudulently.
In order to
evaluate this contention it is necessary to explore the facts with some care.
The story which unfolds is a remarkable one.
I take it up
in October 1989. At that time, as I have said, all rent due from the company
under its tenancy had been received. But Mrs Luttenberger and Mr Popoff were on
the worst possible terms and were in litigation with each other on several
matters. Unfortunately, their personal hostility seems to have been mirrored by
a similar hostility on the part of their respective solicitors. These were, on
behalf of Mrs Luttenberger, Miss Prince, sole principal of Prince & Co of
Sherburn, near Malton, North Yorkshire, and, on behalf of Mr and Mrs Popoff, Mr
Kevin Nutt, a partner in the firm of Epton & Co of Lincoln. Such was the
hostility between these two solicitors that they were not willing even to speak
to each other over the telephone.
As the time
for payment of the rent due on October 10 1989 approached, Mrs Luttenberger was
very anxious to receive payment so as to enable her to pay money due to the
Inland Revenue and also to pay counsel’s fees for litigation between her and Mr
Popoff. On October 5 1989 Miss Prince, on behalf of Mrs Luttenberger, wrote to
the secretary of the company drawing attention to the fact that the half-yearly
instalment of rent amounting to £15,264 would fall due for payment on October
10 1989 and requesting that payment be made by cheque payable to Prince &
Co clients’ account. This reminder and the request for payment by cheque to
Prince & Co were, it seems, in accordance with the practice which Mrs
Luttenberger, through Miss Prince, had adopted for some time. The somewhat
pedantic reservation of position which Miss Prince inserted in the letter,
which I will not read, seems also to have been typical of Miss Prince’s general
style.
On October 25,
the rent not having been received by Miss Prince or Mrs Luttenberger, Miss
Prince sent a reminder to the company by recorded delivery post. Still the rent
was not received and, on November 17 1989, Miss Prince took two further steps.
First, she served on the company a formal notice of the kind referred to in
Case D in Part I of Schedule 3 to the Agricultural Holdings Act 1986, requiring
payment of the rent within two months. The notice was given in the prescribed
form. It referred to the relevant statutory provisions and drew the attention
of the tenant to the fact that non-compliance with the notice might be relied
on as a reason for service of a notice to quit under Case D. Second, Miss
Prince prepared and caused to be served on the company a statutory demand in
respect of the unpaid rent of £15,264. Miss Prince gave evidence, which I
accept, that she did this after obtaining Mrs Luttenberger’s express
instructions and because, in her experience, corporate debtors frequently
responded to a statutory demand when they failed to respond to other pressures
and because the 21-day period, after which a winding-up petition could be
presented, was shorter than the two-month period which must elapse before a
notice to quit could be served. When the rent remained unpaid after the
expiration of the 21-day period, Miss Prince prepared on behalf of Mrs
Luttenberger a petition for the winding up of the company founded upon the
outstanding rent and the company’s failure to satisfy the statutory demand. The
petition was presented to the High Court on December 19 1989 and was, in the
usual way, fixed to be heard on Wednesday, February 7 1990. The petition was
served on the company on December 20 1989, or thereabouts, and it immediately
came to the attention of Mr Popoff.
All these
steps had, so far as Mrs Luttenberger and Miss Prince were concerned, brought
forth no reaction of any kind from the company or Mr Popoff. In fact, as is now
known from the evidence of Mr Popoff, a number of relevant steps had been taken
by him. The company’s only significant asset appears to have been its tenancy
of
kept other accounts of his own. The company’s account was used only for the
purpose of paying rent due under the tenancy. In the middle of October 1989 the
balance standing to the credit of this account was only some £12. Mr Popoff
gave evidence that on or about October 10 1989 he wrote out a cheque in the
company’s cheque book for the sum of £14,805.60 payable to Prince & Co. The
cheque is dated October 10 1989 and was signed by Mrs Popoff. I accept the
evidence of Mr Popoff that this cheque was written and signed on October 10, or
thereabouts, and that it was intended to be in respect of the rent due from the
company on that date. Mr Popoff said, and I accept, that the cheque, when it
had been signed, was sent to Mr Nutt of Epton & Co. On October 18 1989,
which was about the earliest date on which the cheque could be expected to have
been presented for payment, Mr Popoff caused to be transferred from another
account of his into the company’s account at Midland Bank, Louth, an amount
exactly equal to the amount of the cheque. The company was thereafter in funds
to an extent sufficient to enable the cheque to be paid.
The reason why
the cheque was for the sum of £14,805.60 and not for the full amount of
£15,264, which was the rent due, was that Mr Popoff deducted from the latter
figure the sum of £458.40 which he calculated to be the amount of the
landlord’s drainage rate, which the company was entitled to deduct from the
rent.
Although the
cheque was, as I have said, sent to Mr Nutt, he did not immediately send it on
to Prince & Co. According to Mr Popoff, Mr Nutt advised that he should hold
on to the cheque for a while. His reasons for this advice are unclear. It seems
that Mr Nutt suffered a breakdown in April 1991. He and his firm have ceased to
act for the Popoffs and the company and he was not called to give evidence.
This piece of advice, and other advice which he is said to have given, and
actions which he took between this time and February 1990, seem inexplicable
and, to say the least, imprudent. But it is not necessary for me to make
findings about that. It will suffice to say that Epton & Co did, in fact,
retain the company’s cheque. This continued to be the case, notwithstanding
Miss Prince’s letter of October 25, the notice to pay dated November 19 and the
statutory demand of the same date, all of which, I accept, were passed on by Mr
Popoff to Mr Nutt soon after they were received.
The position
changed only on December 22 1990, after the winding-up petition had been
served. When the petition was drawn to Mr Nutt’s attention he decided to send
the cheque to Prince & Co. This he did by enclosing it in a plain white
envelope together with a covering letter dated December 22 1989. The envelope
was addressed to Prince & Co. It was stamped with ordinary adhesive postage
stamps. There was no franking or other wording on the envelope to indicate that
it had been sent by Epton & Co. Most important of all, for present
purposes, the letter was sent by recorded delivery post, not ordinary post. The
date of posting was December 22 1989.
It so happens
that, at this time and, indeed, since about the end of September 1989, Miss
Prince had been conducting an intemperate correspondence with the Post Office
about her experience of the recorded delivery service. Her initial complaint
was that the Post Office was not delivering letters sent by her firm by
recorded delivery service until such time as the addressee, or someone on his
behalf, was prepared to sign a receipt. This, Miss Prince complained, was
leading to delays which meant that in some cases vital dates for service were
passed and, so she claimed, unscrupulous recipients were enabled to avoid service.
Miss Prince’s assertion was that the obligation of the Post Office was to
effect delivery in due course, with or without a receipt, and, in cases where
no receipt was obtainable, to certify that delivery had been effected. In
successive letters Miss Prince expressed her complaint in unrestrained language
which did not shrink from alleging that a particular addressee was ‘on too
friendly terms with the Post Office official’ and to assert that the Post
Office had on one occasion ‘conspired to enable the addressee to evade
completely service of the Notice by Post’. In the same letter as that in which
the last assertion was made Miss Prince asked the District Head Postmaster at
York:
Can you
adequately ensure that Post Office officials carry out their duties honestly
and intelligently, or ought my Member of Parliament to take these matters up
with the Minister?
Although Miss
Prince’s initial complaints were made in respect of recorded delivery letters
sent by her firm, she extended it to apply to recorded delivery items addressed
to her. Her reasoning was that, if the Post Office was not delivering items
sent by her when a receipt was unobtainable, it might not be delivering items
addressed to her if, at the time of delivery, there was no one to give a receipt
on her behalf. As it would be inconsistent with her argument to accept that
recorded delivery mail should always be signed for by the recipient, Miss
Prince adopted the stance that she would not sign for recorded delivery mail
addressed to her or her firm.
Miss Prince
lives in a flat above her office in Sherburn, near Malton. Sherburn is served
by a subpost office, which is situated within a shop carried on by a company
named Sherburn Stores Ltd. The proprietor of the company, a Mr Holmes, is also
the subpostmaster.
On Saturday
December 30 1989 Miss Prince went out jogging which, she said, was her usual
custom on a Saturday. When she returned to her premises she found a note from
the postman to the effect that he had a recorded delivery letter addressed to
her firm, but had not been able to deliver it. The note stated that it was
available for collection by her at the post office in Sherburn. Miss Prince
went immediately to the post office and asked for the letter. The
subpostmaster, Mr Holmes, showed her the letter, but, as Miss Prince does not
wear her glasses when she goes jogging and the letter was shown to her only
very briefly, she could not discern anything special about it. Mr Holmes asked
Miss Prince to sign a receipt for the letter, but she declined to do so as a
matter of principle. When Miss Prince refused to sign a receipt Mr Holmes
refused to hand over the letter. It seems that, very shortly thereafter, the
letter was returned by Mr Holmes to his head office or to another department
within the Post Office Organisation.
On January 2
1990 Miss Prince wrote letters concerning her complaints about recorded
delivery mail to Mr Holmes, the subpostmaster at Sherburn, and to her Member of
Parliament. The letter to Mr Holmes was delivered by hand and he, it seems, at
once passed it on to his head office in York. On January 11 Miss Prince wrote
to the District Head Postmaster at York complaining, in her usual intemperate
way, about the lack of response to earlier letters which she had written to him
and to the letter to Mr Holmes.
On Thursday
January 11 1990 the petition to wind up the company was advertised in a local
newspaper, Grimsby Evening Telegraph. On the next day, Friday January
12, Mrs Luttenberger had a conversation with Mr Hewson who was the manager of
the farm on behalf of the company or on behalf of Mr and Mrs Popoff. Mr Hewson
told Mrs Luttenberger that he had seen the advertisement of the petition and,
being worried about his own position, had spoken to Mr Popoff about it, saying
that he understood that the petition was based on non-payment of rent for the
farm. Mr Popoff then told Mr Hewson that there was no need to worry about it
because the rent had in fact been sent by recorded delivery post. Mr Hewson
passed this response on to Mrs Luttenberger. Mr Hewson did not himself give
evidence at the trial. This account of what he told Mrs Luttenberger comes from
the evidence of Mrs Luttenberger. It is, however, consistent with Mr Popoff’s
own evidence and the accuracy of Mrs Luttenberger’s account of what she has
told was not challenged.
Mrs
Luttenberger passed on to Miss Prince by telephone on the evening of Friday
January 12 the information which she had received from Mr Hewson. Miss Prince
then mentioned to Mrs Luttenberger that she had been having difficulties with
the Post Office concerning recorded delivery mail. In my judgment, this must
have been because the thought crossed Miss Prince’s mind that the recorded
delivery letter for which she had declined to give a receipt nearly a fortnight
before might have contained a cheque for the rent of the farm. Miss Prince said
in evidence that this was the only recorded delivery letter addressed to her
which she had known about during the winter months of 1989-90. After discussion
with Mrs Luttenberger, Miss Prince prepared three letters during the weekend.
These are all dated January 15 1990, which was the Monday after the weekend,
but the evidence, which I accept, was that they were typed by the end of Sunday
January 14 and were brought by hand to Mrs Luttenberger and Mr Hewson by Mr
Boswell, Miss Prince’s part-time assistant, during the evening of Sunday
January 14.
The three
letters were addressed to Mr Hewson, the company (being stated to be for the
attention of Mr or Mrs Popoff) and to Epton & Co. The letter to Mr Hewson
does not matter much for present purposes. It relates only to arrangements for
service of the letter addressed to the company on Mr Popoff. Each side attaches
importance of the other two letters and I must deal with them in some detail.
The letter
addressed to the company was in the following terms:
Dear Sir
and/or Madam
Tenancy
Agreement, Eastfield House Farm, North Thoresby Petition to wind up North
Thoresby Farms Ltd
As you know,
we represent Mrs Alexandra Helen Luttenberger in her capacity of personal
representative of both Mrs Helen Johanna Butt (deceased) and of Miss Eva Motley
Robinson (deceased) and thereby as landlord of Eastfield House Farm, North
Thoresby.
As you know,
North Thoresby Farms Ltd was served on 24th November 1989 with a statutory
demand for the amount of £15,264. The period in which that money was to be paid
in order to comply with the statutory demand was 21 days. There can be no doubt
that the said sum was not paid within 21 days. Accordingly, on grounds arising
because of the failure of North Thoresby Farms Ltd to comply with the said
statutory demand and also on other grounds, a petition to wind up North
Thoresby Farms Ltd was presented on 19th December 1989 and was served upon
North Thoresby Farms Ltd on 20th December 1989, the said petition being served
at the registered office of North Thoresby Farms Ltd upon Mr M D Popoff as a
director of North Thoresby Farms Ltd.
Mrs
Luttenberger has been informed by Mr John Hewson of North Thoresby that,
because Mr Hewson saw the said winding up petition advertised last week, Mr
Hewson asked Mr M D Popoff what Mr Popoff was doing about it and that Mr Popoff
replied to Mr Hewson that the rent on Eastfield House Farm has recently been
paid up to date by recorded delivery. This letter serves to confirm that no
payment of such rent or such amount in any form has been received by our client
or by us, whether by recorded delivery or by any other means. No part of the
£15,264 mentioned in the said statutory demand has ever been paid by North
Thoresby Farms Ltd or by anyone else.
This letter
is being delivered by you today by hand in order to ensure that at the hearing
at the Royal Courts of Justice on 7th February 1990 of the petition to wind up
North Thoresby Farms Ltd you will not be able truthfully to deny that you
received this letter by way of notice that, as of this date, all of the amount
of £15,264 demanded in the above mentioned statutory demand remains unpaid. Our
client does not waive any of her rights nor any of the rules.
Yours
faithfully Prince & Co
The letter
addressed to Epton & Co enclosed a copy of the letter addressed to the
company which I have just read. It referred to the statutory demand, the
petition and Mr Popoff’s assertion to Mr Hewson that the company had recently
paid the rent. It then continued:
That claim by
Mr Popoff is untrue. However, because of that claim by Mr Popoff it seems
possible that there is an intention on the part of North Thoresby Farms Ltd to
oppose the petition to wind up North Thoresby Farms Ltd at the hearing on 7th
February 1990.
Because you
have represented North Thoresby Farms Ltd in the past, in case North Thoresby
Farms Ltd does intend to oppose the petition and to instruct your firm to act,
even though we have never heard to that effect from you as of this date, we
deem it advisable to ensure that you receive now this letter and the enclosed
photocopy of the letter to North Thoresby Farms Ltd, dated 15th January 1990.
The letter
concluded with a request for acknowledgement expressed in not very polite
terms.
There is no
doubt that the letter to the company was handed by Mr Hewson to Mr Popoff at
about 8.15am or 8.30am on the morning of January 15. The letter to Epton &
Co was delivered to that firm’s offices in Lincoln by Mrs Luttenberger herself
at about 10.35am on the same day. Soon after he received the letter addressed
to the company, Mr Popoff telephoned Mr Nutt about it and, on the afternoon of
January 15, he took the letter to Mr Nutt at his office and left it there for
Mr Nutt to deal with. Mr Nutt and Mr Popoff checked with Midland Bank at Louth
and found that the cheque for the rent had not been paid. Mr Popoff said that
they wondered where the cheque was. Neither of them made any attempt to
communicate with Miss Prince or Mrs Luttenberger.
Shortly before
this time, Mr Popoff had discovered that he had made a mistake in calculating
the amount of the owner’s drainage rates which the company was entitled to
deduce from the rent. He had erroneously included in the owner’s rates to be
deducted an amount of £8.40 in respect of land owned by an entity known as
Mapletoff Foundation, which was not the liability of Mrs Luttenberger. As a
result, Mr Popoff had deducted £458.40 from the rent instead of the correct
amount of £450. Having discovered this mistake, he asked the clerk to Louth
Drainage Board to confirm what was the correct amount of the owner’s drainage
rate. On January 16 1990 he collected from the clerk’s office a letter
confirming that the amount was £450. He mentioned this to Mr Nutt who,
according to Mr Popoff, advised that the amount was so small that it could be
dealt with later.
On January 16
1990 the expiry of the two-month period, referred to in the notice to pay
served on November 17, was imminent. Miss Prince, who had heard nothing in
response to her letters of January 15, prepared a notice to quit in proper form
relying on Case D in the following terms:
This notice
is given on and for the following ground and reason and pursuant to the
appropriate paragraphs set out in the Agricultural Holdings Act 1986, Schedule
3, Part I: Case D
At the date
of the giving of this notice you have failed to comply with a written notice,
dated the 17th day of November 1989, served on you by your landlord which
required you, within two months of service of the notice, to pay rent due in
respect of the whole.
On the same
day Miss Prince sent this notice to a process server with instructions to serve
it on Mr or Mrs Popoff on behalf of the company on Friday January 19 or so soon
thereafter as he was able to do so. Miss Prince heard nothing further about the
payment of rent before January 19 and did not countermand these instructions.
The notice to quit was duly served on the company on the morning of January 19.
During the
week beginning January 15 1990, probably some time on January 18,
representatives of the Post Office arranged to meet Miss Prince concerning her
complaints about recorded delivery mail. A meeting was arranged for the
afternoon of January 19. Before it took place Miss Prince had indicated to the
Post Office officials that it would serve no useful purpose unless they brought
with them the letter for which she had refused to sign on December 30, but,
according to Miss Prince, the Post Office officials indicated that that letter
could not then be found. When the officials arrived at Miss Prince’s office on
January 19, however, they did, in fact, bring the letter with them. I accept
that Miss Prince did not know, until it was produced to her at about 2.48pm on
that day, that the letter would be produced to her by these officials. The
envelope could then be seen to have been postmarked as having been posted in
Lincoln on December 22 1989. It had attached to it a Post Office sticker
indicating that delivery had been refused on December 30 1989. When the letter
was opened it was found to contain the letter from Epton & Co dated
December 22 and the company’s cheque for rent, which had already been drawn as
I have described.
Miss Prince
decided that the cheque should be specially presented for payment. She made a
photocopy of it and caused there to be typed on the page containing the
photocopy instructions to her bank, the Yorkshire Bank, Bridlington, in the
following terms:
The cheque
photocopied below is for special clearance at once. However, please note that,
if payment is not made upon the said cheque at once upon presentation, but the
cheque is returned to Yorkshire Bank for any reason, do not re-present this
cheque anywhere at any time. Instead, return it to us at once.
Those
instructions were signed by Miss Prince on behalf of her firm.
The Yorkshire
Bank at Bridlington stays open late on a Friday afternoon when Miss Prince
herself took the cheque, together with her typed instructions on the photocopy,
to the bank and at about 4.45 pm she personally gave it to the manager, Mr
Naylor.
There then
followed another strange series of events. I heard a number of banking
witnesses, all of whom agreed that, when a cheque is specially presented, the collecting
bank sends it by first-class post to the paying bank together with a note to
the effect that the collecting bank will telephone the next day to ascertain
whether the cheque has been paid or dishonoured. This process is described as
ascertaining the fate of the cheque.
In the present
case the company’s bank, which was the paying bank, was Midland Bank, Louth,
but the company’s bank account was not controlled within that branch, but by
the agricultural division of the corporate banking section of Midland Bank,
Lincoln. The officer responsible for the company’s account within the corporate
banking section was Mr Edwin John Rigby. Before the cheque was presented for
payment he already knew about it. This was because, on hearing about the
winding-up petition, he had telephoned Mr Nutt to ascertain what the position
was. Mr Nutt then informed Mr Rigby about the cheque having been drawn and he
emphasised to Mr Rigby that it was important that the cheque should be paid
immediately it was presented for payment. After checking the balance on the
company’s account and, presumably, satisfying himself about the impact of
section 127 of the Companies Act 1985, Mr Rigby informed the branch at Louth
that the cheque was to be paid when it was presented.
It seems unlikely
that the cheque was put into the post by Yorkshire
Bank, Louth, until the morning of January 24. Mr Purdie, who was then the
manager of the Louth branch, was involved in the opening the post at the
beginning of that day when he saw the cheque. He had previously received Mr
Rigby’s message and, shortly after 9 am on that day, the cheque was released by
him into the general office of the branch with instructions that it could be
met. A clerk in the general office then carried out certain routine checks in
the course of which it was discovered that the company’s mandate to the bank
required that cheques be signed by both Mr and Mrs Popoff. This cheque had been
signed by Mrs Popoff alone, as I have already mentioned. The same thing had
happened with the cheque for the rent paid in October 1988 and almost certainly
with other rent cheques as well and the bank had paid these cheques, probably
without realising the departure from the mandate. But when the absence of a
second signature was discovered within the bank on January 24 1990 it was
decided that the best thing to do would be to obtain the missing signature.
Either the Louth branch or the corporate banking section in Lincoln then
telephoned Mr Popoff and asked him to call in at the Louth branch in order to
sign the cheque.
A little later
on the morning of January 24, probably at about 10.30 am, the Yorkshire Bank
telephoned the Midland Bank, Louth, to discover the fate of the cheque. This
was done on behalf of Yorkshire Bank by a clerk named Michelle Smith. She spoke
to a clerk in the Midland Bank named Doreen Smith. The evidence of both of them
was to the effect that Doreen Smith told Michelle Smith that the cheque was not
paid at that stage. Michelle Smith said that she was told that it was not paid
because it required a second signature. Doreen Smith could not remember saying
this, but did not disagree that she might have said it, that being the reason
why the cheque was held up at that stage.
Michelle
Smith’s evidence was that, on receiving this information, she telephoned Miss
Prince who told her that if the cheque was not paid it must be returned
immediately. Michelle Smith said that within a few minutes she telephoned
Midland Bank, Louth, again and passed on this request. She could not remember
whether she spoke to the same person as before or precisely what reply she
received. Doreen Smith remembered being party to a second telephone
conversation. Her recollection was that the Midland Bank was being pressed for
an answer about the fate of the cheque, but she said that she could not give an
answer at that time. Doreen Smith said that she would not have replied that the
cheque was dishonoured because she knew that it was going to be paid. She could
not remember being asked for the cheque to be returned.
I have no
doubt that both Michelle Smith and Doreen Smith were, like the other bank
witnesses, witnesses of complete truth, doing their best to assist the court on
matters which happened nearly three years ago. On the only point of any
significance on which their evidence differed, namely whether Michelle Smith
asked that the cheque be returned, I prefer the evidence of Michelle Smith. I
accept that, by January 24, Miss Prince was not prepared to wait if the cheque
was not paid immediately upon being received by Midland Bank. I have no doubt
that she told Michelle Smith to ask for the cheque back if it was not paid and
I am sure that Michelle Smith passed on this request. It is equally clear,
however, that this request was not appreciated within Midland Bank or, if it
was appreciated, it was misunderstood or simply ignored. At about lunchtime on
January 24 Mr Popoff called in at the Midland Bank, Louth, and added his
signature to the cheque. Midland Bank then paid the cheque and informed
Yorkshire Bank by telephone that it had done so.
The subsequent
events which are relevant to this action can be shortly stated. On January 29
1990 Miss Prince wrote another long letter to Epton & Co and on February 5
1990 Epton & Co replied to that letter and to the earlier letter of January
15. In the last paragraph of their letter of February 5 Epton & Co referred
to the miscalculation of the owner’s drainage rate. They enclosed a copy of the
confirmatory letter from Louth Drainage Board and a cheque drawn on the
company’s bank account for £8.40, the amount remaining due in respect of the
November 1989 rent. This cheque was dated January 16 1990, which was the date
on which Mr Popoff received confirmation that he had made a mistake. In his
evidence, however, Mr Popoff frankly stated that the cheque must have been
drawn on or after January 24 1990 because it is signed by both himself and Mrs
Popoff and he said that it was only on that date that they were reminded that
two signatures were required. This cheque was paid by Midland Bank, Louth, on
February 13 1990.
The only other
relevant events are ones which I have already mentioned, namely the service of
a notice requiring arbitration and the subsequent failure of the company to
apply in due time for the appointment of an arbitrator.
It is accepted
that, on the facts, the company can resist Mrs Luttenberger’s claim for
possession only if it can establish, first, that the statement in the notice to
quit concerning non-payment of rent was false; and, second, that this false
statement was made fraudulently. On behalf of Mrs Luttenberger it is denied
that the company can establish either of these things, but it is emphasised
that the company must establish both of them if it is to succeed.
The statement
which is said to have been false is the part of the notice to quit which I have
already read, notably the assertion that:
At the date
of giving of this notice you have failed to comply with a written notice dated
the 17th day of November 1989 . . . which required you within 2 months of
service of the notice to pay rent due in respect of the whole.
The truth or
falsity of this statement has to be assessed as at January 19 1990 when the
notice to quit was served, that is to say, at a time before the recorded
delivery letter containing the company’s cheque was actually received by Prince
& Co. At that time the rent was certainly unpaid in the literal sense,
because money had not changed hands between the tenant and the landlord. But
the company relies on the reasoning contained in Beevers v Mason
(1978) 37 P&CR 452 as establishing that the rent is, in law, to be regarded
as having been paid before that time. Beevers v Mason was another
case concerning the validity of a notice to quit based on Case D. On the facts
it was found that, two days before the expiration of the two-month period
prescribed by the notice to pay, the tenant had posted a letter addressed to
the landlord containing a cheque for the unpaid rent. By a strange coincidence
the date on which the cheque was paid was December 22, the same day of the same
month as the posting of the cheque in this case, and by an equally strange
coincidence postage appears to have been effected in Sherburn, which I take to
be the very village in which Miss Prince has her office, but neither of these
facts is of any relevance. The Court of Appeal held — I read from p458:
On general
principles, the landlord should have the rent in cash in his hands by the due
date. This requirement may, however, be waived by express arrangement, or by
necessary implication where the facts are sufficiently strong to establish that
the landlord has shown that he is content to accept payment by cheque posted by
the due date of payment. Inferences of this nature are not to be too readily
drawn, but, where the facts support them clearly and emphatically, they are not
to be dismissed.
Such an
inference was made in Beevers v Mason and Mr Derek Wood QC, on
behalf of Mrs Luttenberger, accepts that it ought to be made here. On this
footing the Court of Appeal held at p460:
When the
cheque was put in the post, then, subject only to its being honoured, the rent
was paid.
In the present
case the Popoffs contend that the cheque was honoured when it was first presented
on January 24 1990 and that, accordingly, the rent must be regarded as having
been paid when the recorded delivery letter was posted on December 22.
Accordingly, it is argued that it was false to assert on January 19 1990 that
the rent had not been paid within the two-month period.
On behalf of
Mrs Luttenberger Mr Wood challenges this analysis on three grounds. First, he
contends that the analysis made in Beevers v Mason is applicable
only where the cheque is one which, as between the tenant and his bank, the
bank is bound to meet. Second, he says that on the facts the cheque was not
honoured on first presentation and was therefore not honoured within the
statement of the Court of Appeal which I have quoted. Third, he says that the
rent was not paid in due time because, on any view, £8.40 of it remained unpaid
until February 5 1990 (or, indeed, February 13 if actual payment of the second
cheque is the relevant event).
As to the
first of these points the argument is that Midland Bank was not bound to meet,
and in fact declined to meet, the company’s cheque, because the only signature
that it bore was that of Mrs Popoff. In so far as Mr Wood’s argument was as I
have stated it, namely that a cheque constitutes payment within the Beevers
v Mason analysis only when the bank is bound to honour it, I do not
accept the proposition. A bank is not bound to honour a cheque if its customer
will thereby exceed a permitted overdraft facility. If the bank does
nevertheless honour the customer’s cheque, the payee of the cheque cannot, in
my view, object on the ground that it was not bound to do so. In this case the
rent due in October 1988 was, it seems, paid by a cheque drawn on the company’s
account and signed by Mrs Popoff alone. On that occasion the Midland Bank honoured
the
the requirements of the mandate. If, as was the usual practice, the cheque was
sent by post, it would not, in my judgment, have been open to Mrs Luttenberger
afterwards to say that the Beevers v Mason analysis was
inapplicable and that payment of this instalment of rent was made otherwise
than on the date on which the cheque was posted.
Nevertheless,
I consider that Mr Wood’s contention would be correct if it were advanced in a
modified form. It seems to me that in saying ‘subject only to [the cheque]
being honoured’ the Court of Appeal in Beevers v Mason must have
been envisaging that the cheque would be honoured without further intervention
on the part of the tenant. If, for example, a tenant sends by post an unsigned
cheque which the landlord presents for payment, not noticing the absence of a
signature, it seems to me that that does not constitute any kind of payment on
any date. If, when asked to pay the cheque, the tenant’s bank notices the
absence of a signature and, instead of returning the cheque, contacts its
customer and gets him to sign the cheque, which it then pays, the resulting
transfer of money is undoubtedly a payment, but in my view it is a payment made
only when the tenant signs the cheque or when the cheque is then paid.
In the present
case the cheque was not wholly unsigned, but it lacked a signature without
which, on January 24 1990, Midland Bank was not prepared to pay the cheque.
That is how I interpret the evidence of Mr Purdie and, so far as material, Mr
Rigby in this case. It is possible that, if Mr Popoff had not called in to sign
the cheque during the day, the bank would have reconsidered the matter and
agreed to pay it at or just before the close of business. But I find that no
decision to this effect was ever made. The only decision which was made was
that the cheque would be paid if Mr Popoff came in and signed it. If he did
not, the matter might be reconsidered, but the bank would not be bound to pay.
In my judgment there is no valid distinction between these circumstances and
the case which I have postulated of a cheque which contains no signature at all
when presented for payment.
As to Mr
Wood’s second argument, there is no doubt, in my view, that when Michelle Smith
first telephoned to discover the fate of the cheque on January 24 the cheque
was not paid. The same remained the case when she telephoned a second time
after speaking to Miss Prince. In my judgment the cheque remained unpaid until
Mr Popoff signed it at about the middle of the day.
The question
of whether this amounts to the cheque ‘being honoured’ for the purpose of what
was said by the Court of Appeal in Beevers v Mason depends upon
what is banking practice in relation to special presentation. On behalf of the
Popoffs it was contended that, when a cheque is specially presented, the paying
bank has until the end of the day on which it is received in which to decide
whether or not to pay it. If that be right, the cheque was honoured in due
time. On behalf of Mrs Luttenberger it was said that when the collecting bank
telephones to discover the fate of the specially presented cheque the paying
bank must decide immediately whether or not to pay it. If it does not decide to
pay it the cheque is not honoured. The requirement for an immediate decision
would, of course, entitle the paying bank to carry out the normal checks, for
example, as to correspondence of words and figures, date, signatures and
customer’s balance, if it has not already done this when telephoned. But,
subject to this, the paying bank cannot have further time unless the collecting
bank agrees.
Each party
called an expert witness in support of its contention, Mr Oblein being called
on behalf of Mrs Luttenberger and Mr Luckhurst on behalf of the Popoffs. I do
not propose to review their evidence in any detail. It will suffice to say that
I found the evidence of Mr Oblein more convincing than that of Mr Luckhurst. In
his report Mr Luckhurst accepted that the paying bank would normally advise the
collecting bank as to the fate of the cheque upon receipt of the collecting
bank’s phone call, but he maintained that there were circumstances in which it
would be common for the paying bank to ask the collecting bank to call again later.
I found the particular circumstances put forward by Mr Luckhurst improbable, at
least in so far as Mr Luckhurst put them forward as giving the paying bank a
right to defer its decision. I can readily understand that in some of these
circumstances a paying bank might ask the collecting bank for more time to
consider the matter and I can also understand that in some circumstances the
collecting bank may agree to give extra time. But if the collecting bank does
not agree I do not see anything which enables the paying bank to defer its
decision. The position would, in my view, be straightforward. If it is not
prepared to pay the cheque when asked, it will dishonour it. Mr Oblein’s view
was, to my mind, more logically consistent than that of Mr Luckhurst and it was
in accordance with a statement on the very point contained in a publication
called Questions on Banking Practice, 1978 ed, issued by the Institute
of Bankers under the authority of its council. I do not accept that the banking
practice has changed since 1978, although, as I have indicated, I do accept
that it is not uncommon for the collecting bank to agree to a request from the
paying bank for more time in which to make its decision. However, that, in my
view, is entirely a matter for the collecting bank to decide.
In the present
case Midland Bank was not prepared to pay the cheque on January 24 1990 at the
time of Michelle Smith’s first telephone call on that day or at the time of her
second telephone call, made a short time after the first and after Miss Prince
had instructed her to ask for the return of the cheque. The Yorkshire Bank did
not agree to Midland Bank’s expressed or implied request to be allowed to
postpone its decision. On the contrary, as I find, it requested the return of
the cheque in the second telephone call. Midland Bank’s retention and
subsequent payment of the cheque was justified as between itself and its
customer, the company, but that justification was not attributable to the
mandate constituted by the cheque in its original form. It was attributable to
Mr Popoff’s expressed willingness to call in and sign the cheque, followed by
his implementation of that intention. That, in my view, constituted a fresh
mandate given on January 24. As between Mrs Luttenberger and the company, Mrs
Luttenberger was entitled to retain the money transferred to her on January 24
as a result of Midland Bank’s performance of this new mandate. But that
transfer of money was, in my judgment, a payment made on January 24 and not one
which dates back of December 22 1989 in accordance with the analysis made and
applied in Beevers v Mason.
As to Mr
Wood’s third ground of challenge of the applicability of the Beevers v Mason
analysis, Mr Wood relied on the fact that Case D applies where, at the date of
the giving of the notice to quit, the tenant has failed to comply with a notice
requiring him to pay ‘any rent due’ in respect of the relevant holding. He
argued that a notice to pay a specific sum representing all the rent due is not
complied with by payment of a lesser sum when there is no dispute that the
shortfall represents rent due. Mr Wood referred me to Price v Romilly
[1960] 1 WLR 1360, where Diplock J (as he then was) held, in relation to a
notice to quit based on a failure by the tenant to comply with a notice
requiring him to remedy breaches of covenant relating to matters other than
payment of rent, that substantial compliance with the notice was not enough for
the tenant. Diplock J said (at p1, 362):
[Counsel]
contended that it was sufficient if there was a ‘substantial compliance’ with
the terms of the notice. Those words are not in the Act, and I see no reason
for reading them into the Act. No doubt, of course, the de minimis rule
would apply, but the Act seems to me to be plain in its terms, and, if a tenant
fails to comply fully with the requirements set out in the notice, being
requirements for remedying breaches of terms or conditions of his tenancy which
are not inconsistent with the fulfilment of his responsibilities to farm in
accordance with the rules of good husbandry, the provisions of Section 24(2)(d)
of the Act are fulfilled.
On behalf of
the Popoffs, Mr Robert Reid QC did not question, in this court, that
substantial compliance would not be enough, although he reserved his position
on this point in case the matter should go further. But he relied upon the
dictum of Diplock J concerning the de minimis rule. Mr Wood pointed out
against this that it was only a dictum, made in relation to a different case
within what is now Part 1 of Schedule 3 to the 1986 Act. He argued that there
is no room for the de minimis rule in relation to failure to comply with
an obligation to pay rent, where what is required for compliance is known with
precision.
In my
judgment, the de minimis rule is applicable to Case D. In an Act which
is designed to give protection to agricultural tenants, I do not think that
Parliament can have intended to exclude this general rule and to entitle a
landlord to recover possession when a tenant has made only an insignificant underpayment
of rent.
There remains
the question of what underpayment will fall to be ignored under the de
minimis rule. In my judgment, this will depend upon the circumstances as a
whole, and not exclusively on the amount of the underpayment. An underpayment
of a tiny sum may not fall to be disregarded if it arises from a course of
conduct by a tenant deliberately designed to irritate the landlord. In this
case, however, I accept that the underpayment was made as a result of a bonafide
mistake on the part of Mr Popoff which he made good soon
judgment, this is, in all the circumstances, to be disregarded as being de
minimis.
Nevertheless,
it follows from what I have said concerning the first two grounds of the attack
on the application of the Beevers v Mason analysis that I find
that the statement, in the notice to quit, to the effect that the company had
failed to comply with the two-month notice to pay rent was not a false
statement. That is enough to determine the outcome of this action, but it would
be quite wrong for me not to state my conclusion on the second main issue,
namely that the statement, if false, was made fraudulently. That issue involved
an allegation of fraud made against a solicitor which, although presented by Mr
Reid with proper detachment, was made with equally proper resolution.
On the issue
of what constitutes fraud I was referred to the well-known passages in the
judgments in Derry v Peek (1889) 14 App Cas 337 and Angus
v Clifford [1891] 2 Ch 449 which were cited in Rous v Mitchell
[1991] 1 WLR 469, a case where, as I have remarked, a statement was held to
have been made fraudulently in a context akin to that which I have to consider.
In Derry v Peek Lord Hershell said at p374:
I think the
authorities established the following propositions: First, in order to sustain
an action of deceit, there must be proof of fraud and nothing short of that
will suffice. Secondly, fraud is proved when it is shown that a false representation
has been made (1) knowingly, or (2) without belief in its truth, or (3)
recklessly, careless whether it be true or false. Although I have treated the
second and third as distinct cases, I think the third is but an instance of the
second for one who makes a statement under such circumstances can have no real
belief in the truth of what he states. To prevent a false statement being
fraudulent, there must, I think, always be an honest belief in its truth and
this probably covers the whole ground, for one who knowingly alleges that which
is false has obviously no such honest belief. Thirdly, if fraud be proved, the
motive of the person guilty of it is immaterial. It matters not that there was
no intention to cheat or injure the person to whom the statement was made.
Lord Hershell
went on to state (at p375):
At the same
time I desire to say distinctly that when a false statement has been made the
questions whether there were reasonable grounds for believing it, and what were
the means of knowledge in the possession of the person making it, are most
weighty matters for consideration. The ground upon which an alleged belief was
founded is a most important test of its reality. I can conceive many cases
where the fact that an alleged belief was destitute of all reasonable
foundation would suffice of itself to convince the Court that it was not really
entertained, and that the representation was a fraudulent one. So, too,
although means of knowledge are, as was pointed out by Lord Blackburn in Brownlie
v Campbell, a very different thing from knowledge, if I thought that a
person making a false statement had shut his eyes to the facts, or purposely
abstained from inquiring into them, I should hold that honest belief was
absent, and that he was just as fraudulent as if he had knowingly stated that
which was false.
In Angus
v Clifford Bowen LJ said at pp471-2:
Now, whether
you take the inquiry in the one order, or in the other, whether you regard it
from the point of view which is indicated in the expressions which are well
known to the common law, and which have been used by Lord Hershell and Lord
Bramwell, that a man is bound to have some honest belief in a statement if he
makes it, or whether you treat the matter in the inverse order, with regard to
the necessity of finding at least some recklessness to truth, that is to say,
some indifference to truth which amounts to dishonesty, in either view it seems
to me the result is the same. A man ought to have a belief that what he is
saying is true.
Mr Reid
submitted that fraud, within these expositions of the expression, was made out
in this case by the following route. First, he said, Mrs Luttenberger clearly
has animosity towards Mr Popoff. This regretfully is the case, although it
appears to me that the animosity is mutual and thankfully I have not been
concerned as to its origin or justification. Second, it was said that Mrs
Luttenberger was and is on close terms with her solicitor, Miss Prince, with
whom she communicated up to three times a week during the relevant period.
This, too, I would accept although it is, I think, largely immaterial because
if Miss Prince had the requisite state of mind in relation to the statement in
the notice to quit there can be no doubt that her fraud affected Mrs
Luttenberger, however close or distant their relationship.
Third, it was
said that, by the evening of January 12 1990, when Mrs Luttenberger told her
what she had heard from Mr Hewson, Miss Prince must have had at least a strong
suspicion that the recorded delivery letter which she had refused to sign for
on December 30 and which she had not therefore received contained a cheque in
payment of the rent for the farm. If she did not have this suspicion then she
was closing her eyes to an obvious possibility. This, too, I would accept.
If, therefore,
Miss Prince had taken no further steps before causing the notice to quit to be
served, it might have followed that she would have been reckless to the extent
necessary to constitute fraud in making the statement contained in the notice
to quit without further inquiry.
However,
matters did not rest there. Miss Prince wrote the letters dated January 15 1990
to which I have referred and she went to some pains to ensure that these
letters reached Mr Popoff on behalf of the company first thing on January 15
and Epton & Co in good time the same morning. Mr Reid said that these
letters made matters worse, not better. He said they were verbose letters
written in Miss Prince’s provocative style. By the time that they were written
Mrs Luttenberger and Miss Prince had decided to seek to recover possession of
the farm if they could. They were no longer concerned merely to obtain payment
of the rent. Yet, complained Mr Reid, the letters, while reciting at some
length the statutory demand and the winding-up petition and anticipating an
attempt to resist the petition on the basis of a denial, made no reference at
all to the imminent expiry of the two-month period referred to in the notice to
pay, which, on Miss Prince’s own evidence, was the reason why she was anxious
to be sure that the letters were received as early as possible on January 15.
Miss Prince, it was suggested, was deliberately setting a trap by concealing
her real intentions. Reference was made to some of the allegations made, it was
said without justification, in Miss Prince’s intemperate correspondence with
the Post Office. It was suggested that Miss Prince is given to making reckless
allegations and that, in all the circumstances, the allegation that rent
remained unpaid was made recklessly without belief in its truth.
In my
judgment, it would not be right to bring the correspondence with the Post
Office into consideration of Miss Prince’s state of mind at the time when the
notice to quit was served. The allegations made in that correspondence have not
been pleaded as particulars of a propensity to recklessness and the existence
or non-existence of a justification for them has rightly not been explored in
any detail at the trial of this action. I entirely accept that Miss Prince has
a tendency, at least on some occasions, to write letters couched in intemperate
terms. These appear to me to be, at worst, somewhat unprofessional and probably
unproductive, but for the most part they are more aptly described as merely
silly. I do not regard them a sign of recklessness in the sense in which that
term is used in relation to fraud.
As to the
letters of January 15, I accept that by this date Mrs Luttenberger and Miss
Prince had decided to try to obtain possession of the farm if this was
possible. I do not think that they had any real belief that possession might be
obtained until this time or perhaps a few days earlier, because the dire
consequences make it extremely unlikely that an agricultural tenant will fail
to pay rent after a formal notice to pay has been served unless it is
hopelessly insolvent. When the notice to pay and the statutory demand were
served and the winding-up petition was presented, I consider that Mrs
Luttenberger and Miss Prince were concerned only to exert the maximum amount of
pressure in order to obtain payment of rent. As the two-month period referred
to in the notice to pay drew towards a close, I think that their attitude
changed and that they realised that, contrary to their earlier expectation,
possession might indeed be obtainable. I do not doubt that the omission of a
reference to the notice to pay and to the two-month period in the letters of
January 15 was deliberate, but I cannot regard this as recklessness. To hold
that it ought to have been referred to would be close to holding that Miss
Prince owed a duty of care to the company to warn of the possible consequences
of the action she was taking and to advise how these consequences could be
avoided. This would be manifestly absurd. Both letters of January 15 did make
it quite clear that, at that date, the rent had not been received. Both letters
frankly refer to the information which Mrs Luttenberger had received from Mr
Hewson to the effect that the rent had been sent by recorded delivery post. The
letter sent to the company stated:
This letter
serves to confirm that no payment of such rent or of such amount in any form
has been received by our client or by us, whether by Recorded Delivery or by
any other means.
The letter to
Epton & Co repeated this in that it enclosed a copy of the letter to the
company and it stated in terms that Mr Popoff’s assertion to Mr Hewson was
untrue. Up to a point, the letters had the effect that Miss Prince must have
intended. Mr Popoff took the letter to the company to Mr Nutt, who presumably had
received the letter to
check the state of the company’s bank account and to ascertain that the cheque
for rent had not been presented for payment. What Miss Prince could not have been
expected to anticipate was that, having received the letters and correctly
appreciated their impact to this extent, neither Mr Popoff nor Mr Nutt would do
anything to contact her and at least point out that a cheque had been sent but
appeared to have been lost in the post. They would, indeed, at that time have
had sufficient time to stop the apparently lost cheque and send the money by
telegraphic transfer, banker’s draft or, at the very least, a fresh cheque.
They took none of these steps. I am satisfied that, if they had done any of
these things before the two-month period expired, Miss Prince could and would
have arranged for the planned service of the notice to quit to be cancelled.
I accept Miss
Prince’s evidence that the reason why she went to some length to ensure that
her letters of December 15 were received early on that day was that she wanted
there to be as much time as possible between the time when the company and its
solicitors would know that the rent had not been received and the time when the
two-month notice to pay expired. When these letters brought forth no reaction
at all so far as Miss Prince was concerned, she was, in my judgment, entitled
to set at rest whatever doubts she might have had as to the contents of the
undelivered recorded delivery letter. In my judgment, she had reasonable ground
to believe that the statement concerning non-payment of rent which was
contained in the notice to quit was a true statement at the time when that
notice was served. That is more than enough to rebut the allegation of fraud by
recklessness. Accordingly, this branch of the Popoffs’ case fails as well.
I will hear
counsel as to the precise order which I ought to make.
After hearing
submissions as to costs, FERRIS J said: I will make an order for the
legal aid taxation of the costs of both parties for the periods that they were
covered by a legal aid certificate. As between the parties, it seems to me that
the plaintiff, Mrs Luttenberger, is entitled to an order for her costs against
all the defendants, that order not to be enforced against Mr and Mrs Popoff in
relation to costs attributable to any period when they were legally aided
without further order of the court.
As to the
scale of costs, I take the view that this was something of a desperate throw by
the defendants in which they, for reasons for which neither Mrs Luttenberger
nor her solicitor were in any way to blame, were in a position where they could
succeed only by alleging fraud. They did not shrink from making that allegation
which was an essential ingredient of their case. The impact of it is not
reduced by the fact that they also needed to establish matters other than fraud
in order to succeed. They played what I say I regard as rather a desperate
throw for high stakes. It involved serious allegations against Mrs Luttenberger
and her solicitor, which have failed. In my judgment, it is a case for
indemnity costs, so that the order which I make against the company and Mr and
Mrs Popoff, subject to the restriction that I have indicated in respect of
periods when they were legally aided, is that they shall pay Mrs Luttenberger’s
costs to be taxed on an indemnity basis.
