Agricultural Holdings Act 1986 — Notice to pay rent — Notice to quit — Summons for summary judgment under Ord 14 of the Rules of the Supreme Court seeking possession — Whether notice to quit contained a false statement — Whether arguable defence
North Thoresby Farms Ltd, is the tenant of Eastfield House Farm, North
Thoresby, Lincolnshire; the farm is a holding of 630 acres and occupied and
farmed by the second and third defendants, Mr and Mrs Popoff — The plaintiff,
Mrs Luttenberger, is the owner of the freehold as personal representative of
Miss Eva Robinson and Helen Batt (both deceased) — The first defendant failed
to pay the half-year’s rent of £15,264 on October 10 1989 — On November 17 1989
the plaintiff’s solicitor served the first defendant with a notice to pay rent
pursuant to the provisions of the Agricultural Holdings Act 1986, Schedule 3,
Part I, Case D — On November 24 1989 a statutory demand for the payment of the
rent was served on the first defendant — That was not complied with and a
petition to have the defendant company wound up was presented — On January 19
1990 the plaintiff’s solicitor served a notice to quit on the first defendant
alleging a failure to comply with the notice to pay rent and requiring
possession of the holding to be delivered up on April 6 1991 — On December 22
1989 the defendant’s then solicitors sent a cheque dated October 10 1989 to the
plaintiff’s solicitors for the sum of £14,805.60 being a half-year’s rent less
the drainage rate payable by the landlord — The cheque was not received until
January 19 1990 — Contrary to the bank’s mandate from the first defendant
company, the cheque did not have two signatures — The plaintiff alleged that
the bank stated the cheque would not be honoured — The defendant’s evidence was
that no such statement was made and the cheque was honoured later the same day
— On February 7 1990 the defendant’s then solicitors served a notice requiring
that the issue whether the rent had been paid be put to arbitration, but neither
they nor the defendant took any further steps in time or at all to agree to or
request the appointment of an arbitrator — The defendant did not give up
possession on April 6 1991 and the plaintiff issued proceedings claiming
possession — On the hearing of a summons for summary judgment under Ord 14 of
the Rules of the Supreme Court, the master granted the plaintiff an order for
possession — Mummery J allowed an appeal against that order, set it aside and
gave the defendants unconditional leave to defend — The plaintiff appealed from
that order
22 1989 is prima facie proof of payment of the rent subject to the
requirement that the cheque should be honoured — There was a series of disputes
of fact as to whether the cheque had been dishonoured or not — There was a
series of issues of fact which ought to be tried as to whether the plaintiff’s
solicitor knew or ought to have known that the rent had been paid by the cheque
and was only waiting at the Post Office — Those issues went to the allegation
that the statement in the notice to quit that the rent was unpaid had been made
recklessly and without honest belief in its truth — There was a triable issue
The following
cases are referred to in this report.
Beevers v Mason (1978) 37 P&CR 452; 248 EG 781, [1978] 2 EGLR 3,
CA
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 an
appeal by the plaintiff, Alexandra Helena Luttenberger, from a decision of
Mummery J given on July 1 1991 whereby he allowed an appeal from the decision
of Master Gowers, who had made an order for possession in respect of Eastfield
House Farm, North Thoresby, Lincolnshire, against the defendants, North
Thoresby Farms Ltd, Michael Dimitri Popoff and Mrs Lesley Popoff, on a summons
under Ord 14 of the Rules of the Supreme Court.
Christopher
Wilson-Smith QC and Olav Ernstzen (instructed by Prince & Co, of Malton)
appeared for the appellant; Robert Reid QC and John McGhee (instructed by H V
Beckett & Co, of Market Rasen) represented the respondents.
Giving
judgment, GLIDEWELL LJ said: This is an appeal against a decision of
Mummery J given on July 1 1991. The basic facts are summarised at the start of
the judge’s judgment with admirable clarity. I cannot do better than adopt what
he said and I therefore intend to incorporate his summary of the facts into
this judgment.
Eastfield
House Farm (to which I shall refer as ‘the farm’) is a holding of about 630
acres in North Thoresby, Lincolnshire. It has been occupied and farmed by the
second defendant, Mr Popoff, and his wife, the third defendant, Mrs Popoff, for
the last 30 years. The freehold was owned by two sisters who were great aunts of
Mr Popoff. There was Miss Eva Robinson, who died on January 7 1986, and Mrs
Helen Butt, who died on February 28 1987.
The
plaintiff, Mrs Luttenberger, is the personal representative of both sisters,
and she brings these proceedings in that capacity. She is also the sister of Mr
Popoff. It would be an understatement to say that Mr Popoff and Mrs
Luttenberger are not on good terms and it is sad to see that the relationship
between their respective solicitors is little better.
This
acrimonious dispute is about possession of the farm. On Mrs Luttenberger’s
application for summary judgment, Master Gowers made an order on June 14 1991
for possession of the farm. He refused a stay of execution. This is an appeal
from that order.
Mr Popoff was
originally the tenant of the farm. On September 28 1979, the first defendant
company, North Thoresby Farms Ltd (to which I shall refer as ‘the company’) was
formed. The company is owned and controlled by Mr and Mrs Popoff. On June 30
1982 the company entered into a tenancy agreement of the farm with Mr Popoff’s
two great aunts. The term was from April 6 1982 to April 6 1983 and thereafter
continued from year to year. It was determinable at the end of any year of the
tenancy by not less than 12 months’ notice in writing. The rent was payable by
equal half-yearly payments in arrears on April 6 and October 10. The rent was
originally fixed in the tenancy agreement at £17,000 pa. That was increased to
£24,500 pa as from April 6 1985 and to £30,528 pa as from April 6 1988.
On October 10
1989, the half-year’s rent due from the company to Mrs Luttenberger was
£15,264, subject to an adjustment I shall later mention. It
Luttenberger’s solicitor, sent a reminder to the company about the rent. The
rent was still not paid. On November 17 1989 Miss Prince served on the company
a notice to tenant to pay rent due. That notice required the rent to be paid in
two months. The notice was given pursuant to the provisions of the Agricultural
Holdings Act 1986, Schedule 3, part 1, Case D. The notice was in the form
prescribed by regulations made in 1987. On November 24 1989, a statutory demand
for payment of the amount of rent due was served on the company. That was not
complied with. On December 19 1989 a petition was presented by Mrs Luttenberger
to have the company wound-up on the grounds, inter alia, of deemed
insolvency. The hearing of the petition was fixed for February 7 1990. It has
not been finally disposed of. Indeed, I understand that it has been adjourned
generally.
At about 8.30
am on January 19 1990 — that is very soon after the expiration of the two-month
period referred to in the notice to pay dated November 17 1989 — Miss Prince,
on behalf of Mrs Luttenberger, served a notice to quit on the company. The
notice alleged a failure by the company to comply with the notice of November
17 requiring payment of rent due. The notice required possession of the farm to
be delivered on April 6 1991 that is, at the expiration of 12 months from the
end of the year of the tenancy then current.
Possession was
not delivered up on April 6 1991 and the plaintiff therefore alleges that the
defendants have since remained in possession of the farm as trespassers. A writ
claiming possession was issued on April 8 1991 and the statement of claim on
April 9. A summons for summary judgment under Ord 14 of the Rules of the
Supreme Court was issued on April 25. On that application Master Gowers granted
the plaintiff an order for possession. Mummery J allowed an appeal against that
order, set it aside and gave the defendants unconditional leave to defend. It
is against that decision that the plaintiff now appeals.
Before saying
any more about the facts, I propose to turn to the scheme of the Agricultural
Holdings Act 1986 as it is relevant to the situation in this case.
In Rous v
Mitchell, a decision of this court reported at [1991] 1 WLR 469*, I
attempted to deal with this matter in my judgment beginning at p 475B. I said
and I repeat:
Lettings of
agricultural holdings have for many years been controlled by statute. The Act
in force in relation to these proceedings is the Agricultural Holdings Act
1986. Section 2 of that Act provides, in general, that a letting of an
agricultural holding may not be for a lesser interest than a tenancy from year
to year.
*Editor’s
note: Also reported sub nom Stradbroke (Earl of) v Mitchell [1991]
1 EGLR 1.
By section
25(1) of the Act, the normal rule that a tenancy from year to year may be
terminated by at least six months’ notice is amended so that an agricultural
tenancy requires at least 12 months’ notice determining at the end of a year of
the tenancy.
Section 26 of
the 1986 Act places restrictions on the operation of notices to quit, which in
effect divide such notices into two classes. The difference between the two
classes is that notices to quit in the first class need not state or be based
upon the reason why the landlord seeks to recover possession of the holding,
whereas a notice to quit in the second class must be based upon such a reason
and must state the reason in the notice itself.
This case is
not concerned with notices in the first class. The second class is governed by
section 26 of the Act, which provides in effect that the consent of the
agricultural land tribunal is not necessary ‘in any of the Cases set out in
Part 1 of Schedule 3 to this Act’:
By Case D of
Schedule 3, one of the cases where the consent of the tribunal to the operation
of the notice to quit is not required is 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, or (b) [is irrelevant] and
it is stated in the notice to quit that it is given by reason of the said
matter.
Again quoting
from Rous v Mitchell at p 476D:
The combined
effect of section 29 of and paragraph 1 of Schedule 4 to the Act of 1986 is
that the Lord Chancellor may make an order ‘requiring any question arising
under the provisions of section 26(2) of, and Schedule 3 to, this Act to be
determined by arbitration under this Act’.
In exercise
of that power the Lord Chancellor made the Agricultural Holdings (Arbitration
on Notices) Order 1987. Article 9 of that Order provides:
‘Where it is
stated in a notice to quit an agricultural holding or part thereof that the
notice is given for one or more of the reasons specified in Case A, B, D or E
and the tenant wishes to contest any question arising under the provisions of
section 26(2) of, and Schedule 3 to, the 1986 Act relating to any of the
reasons so stated, he shall within one month after the service of the notice
serve on the landlord notice in writing requiring the question to be determined
by arbitration under the 1986 Act’.
Article 10
further provides:
A notice
under article 9 requiring arbitration under the 1986 Act shall cease to be
effective three months after the date of the service of that notice unless
before the expiry of those three months —
(a) an arbitrator has been appointed by agreement
between the parties, or
(b) (in default of such agreement) an application
has been made by the tenant or the landlord under paragraph 1 of Schedule 11 to
that Act for the appointment of an arbitrator,
for the
purposes of that arbitration.
In this case
the defendants’ former solicitors duly served, on February 7 1990, a notice
that they required the issue whether the rent had been paid within the
two-month period to be referred to arbitration. But thereafter neither they nor
the defendants themselves took any steps in time, or at all, to agree to or
request the appointment of an arbitrator.
Mummery J
approached his task on bases which were and are common ground between the
parties. First, it is for the defendants in Ord 14 proceedings to satisfy the
court that there is an issue or question in dispute which ought to be tried.
Second, despite the failure of the defendants or their former solicitors to
apply for the appointment of an arbitrator within three months of the notice
requiring arbitration, the defendants in these proceedings are entitled, if
they can, to prove that the notice to quit contained false statements
fraudulently made, in which case the notice will be invalid and of no effect.
That is derived again from the decision in Rous v Mitchell [1991]
1 WLR 469, in which, at p 487G, I summarised the authorities referred to in
that decision in this paragraph:
In my view
these authorities establish the proposition that a landlord’s counter-notice
under section 26(6) of the Act of 1954 is invalid and of no effect if the
statement contained in it of the landlord’s intention is fraudulent, not
honestly made. The notice with which we are here concerned is a notice of the
same sort as a notice under section 26(6). It is not a mere notice to quit. In
my view, a notice to quit which states that it is given for one of the reasons
set out in the various cases in Schedule 3 to the Act of 1986 is invalid and of
no effect if it contains a statement which is false and made fraudulently by
the giver of the notice, ie knowing the statement to be untrue, or reckless
whether it is true or false.
The third
basis upon which the learned judge approached this matter was that the
defendants accepted that, in order to establish that the notice to quit was
invalid, they must prove both of two separate facts: first, that the statement
in the notice to quit — that the defendants had not complied with the notice to
pay rent, dated November 7 1989 — was, when the notice to quit was served on
January 19 1990, false and, second, that that false statement was made by Miss
Prince, the solicitor for the plaintiff, on behalf of the plaintiff recklessly,
that is without any honest belief in its truth.
Mummery J held
that the evidence before him disclosed questions in dispute which ought to be
tried in relation to both issues. In this appeal, Mr Wilson-Smith for the
plaintiff argues that the judge was wrong to do so and that, on the evidence on
both issues, no court could properly reach a conclusion in the defendants’
favour. However, Mr Wilson-Smith needs only to persuade us that there is no
question which ought to be tried on either one of the issues in order to
succeed in this appeal. I therefore deal in turn with the evidence before the
court on each issue.
First, on the
question ‘Was the statement in the notice to quit that the rent due had not
been paid by January 19 1990 false at that date?’, the defendants’ case was
that the rent had in fact been paid on December 22 1989. The defendants’
evidence, which in this respect is not challenged, shows that the defendants’
solicitors posted on December 22 1989 by recorded delivery to the plaintiff’s
solicitors a cheque dated October 10 1989, drawn by the defendant company on
its bank for £14,805.60, being a half-year’s rent less the drainage rate, which
was payable by the landlord. In the past, rent had commonly been paid and
accepted by cheque in favour of the plaintiff’s solicitors sent by post.
The decision
of this court in Beevers v Mason (1978) 37 P&CR 452* is authority for two
propositions: first, that where, by reason of a previous course of conduct, a
landlord has accepted payment of rent by cheque sent by post, that method of
payment may be held to be a method agreed between the parties as acceptable;
and, second, when
proof of posting on December 22 is prima facie proof of payment of the
rent but subject to the requirement that it should be honoured, that is to say
the cheque should be honoured. Here the plaintiff’s case is that the evidence
shows that the cheque was not honoured. The cheque was not received at Miss
Prince’s office until the afternoon of January 19 1990, which was a Friday. The
reasons for the delay are relevant not so much to this issue as to the second
issue and I will return to consider them.
*Editor’s
note: Also reported at (1978) 248 EG 781, [1978] 2 EGLR 3.
When Miss
Prince received the cheque, she delivered it that same afternoon to the
Bridlington branch of the Yorkshire Bank (the bank with which her practice
banked) for special presentation. As I understand it, that process has no
effect on the procedure by which payment is made on the cheque until the cheque
itself arrives at the bank on which it is drawn. In this case the evidence
shows that the cheque arrived at the Louth branch of the Midland Bank (with
whom the defendant company banked) on the morning of Wednesday January 24 1991.
The cheque then received bore only one signature, that of Mrs Popoff. The
Midland Bank’s mandate from the defendant company required two signatures on
cheques drawn by the company.
What happened
thereafter is in dispute, the resolution of which, if we had to resolve it,
which we do not, is made more difficult by the fact that the deponents to
affidavits on either side dealing with this matter are not the persons who
could give first-hand evidence. Shortly, the plaintiff’s case is that on making
inquiry that morning a Yorkshire Bank employee was told by a Midland Bank
employee that the cheque was not being honoured. The defendants’ case in sum is
a denial that that was said.
According to
Mr Miller (of the Midland Bank) in an affidavit sworn on the defendants’
behalf, later on January 24 1990, that is to say after the first telephone
conversation between the employees of the two banks, Mr Popoff authorised
payment of the cheque despite the fact that it bore only one signature.
Moreover, Mr Miller deposes that despite having done so, Mr Popoff called at
the branch of the bank that same afternoon and signed the cheque. So the
Midland Bank on that same day honoured the cheque. A banker’s payment was sent
in the post that night which was received by the Yorkshire Bank and credited to
the Miller & Co account.
Mr
Wilson-Smith makes two points in relation to this issue. First, he submits that
a document bearing only one signature when the mandate between the bank and its
customer calls for two is not a cheque. Alternatively, what purports to be a
cheque with one signatory when the mandate requires two is not the same
document as the document which results from a second signature being added. Mr
Wilson-Smith refers us to sections 3(1) and 73 of the Bills of Exchange Act
1882. I intend no discourtesy to him in not quoting those sections because, in
my view, they do not assist his argument nor do they help us to decide this
issue. It is my view that a document with one signature which in other respects
appears to be a cheque is a cheque. But the result of a mandate requiring two
signatures may well be that the bank on which it is drawn is not under any
obligation to meet it.
Mr
Wilson-Smith’s second submission is that, assuming the document was a cheque,
it was dishonoured during the course of the telephone conversation on the
morning of January 24 between the employees of the respective banks. As to
this, the judge said that there were relevant disputes of fact which he could
not resolve on this application for summary judgment. Mr Wilson-Smith took us
carefully through the relevant affidavits. He sought to show that in certain
respects the affidavit on behalf of the defendants did not traverse directly
certain assertions made in the affidavit sworn on behalf of the plaintiff.
Despite that and despite the criticism which I have already made, that both
those affidavits were sworn by a gentleman who had no first-hand knowledge of
the telephone conversation or indeed the other conduct on January 24 1990, I
for my part am satisfied that the two affidavits do give a sufficiently clear
account to make it apparent that there is a series of disputes of fact such as
were referred to by the learned judge. On this issue I therefore entirely agree
with Mummery J’s decision.
The second
issue is: is there a triable issue on the question whether the assertion in the
notice to quit that the rent was unpaid was made by Miss Prince recklessly
without honest belief in its truth? The
evidence discloses a state of affairs to which I think one can at least refer
as extraordinary.
For some time
before December 1989 Miss Prince had been in dispute with the Post Office about
recorded delivery mail. She maintained that the Post Office was required to
deliver recorded delivery mail to her office without requiring a signature by
way of receipt. For some time, months I think, the Post Office refused to
deliver such mail without the signature of a receipt.
On a date late
in December 1989, I believe on the 28th, the envelope containing the cheque was
sought to be delivered by the Post Office to the offices of Prince & Co.
Either Miss Prince herself or somebody else in that office on her instructions
declined to sign the receipt. The Post Office declined thereupon to deliver. A
card was left, making it clear that the envelope would be available for collection
at a named Post Office upon somebody being willing to give a receipt; and there
the matter and the cheque both rested.
On January 12
1990, Miss Prince was told by the plaintiff herself that she had learned that
Mr Popoff had asserted that the rent had been paid by recorded delivery letter.
That date was still within the two-month period for payment of rent. On January
15 1990, Miss Prince wrote two letters to the defendant company and to Epton
& Co, who were then the solicitors for the defendants, referring to this
conversation. She caused those letters to be delivered by hand to their
addresses on the same day. In a letter to the defendant company she said:
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 £15,264.00 mentioned in the said Statutory Demand has ever been paid by
North Thoresby Farms Limited or by anyone else.
It is perhaps
noticeable that the letter makes no mention of the fact that the reason why the
recorded delivery letter had not been received was because of the dispute
between Miss Prince and the Post Office. But it is, of course, right also to
say that Miss Prince cannot have known for certain that the recorded delivery
letter which she knew existed did indeed contain the cheque.
Despite having
received those letters on the late afternoon or evening of January 15, neither
Mr Popoff nor anyone else on behalf of the defendant company, and certainly not
Epton & Co, made any response or did anything about the matter contained in
the letter. Since, as I have said, January 15 was still within the two-month
period for payment of rent, prompt action on behalf of the defendants would
have prevented these proceedings starting at all — none of us would have been
here. One can only assume, though we have not heard any explanation of this,
that there was some incompetence on the part either of the defendants or of
their solicitors.
According to
Miss Prince, on January 18, by which time the two months had elapsed, she
arranged for Post Office officials to visit her office to discuss the recorded
delivery dispute on the following day. They arranged to come on the afternoon
of January 19. Before they did so, on the morning of January 19 the notice to
quit asserting that the notice to pay rent had not been complied with was
served. On January 19, according to Miss Prince, there was a discussion at her
firm’s offices, not with her but with one of her employees or associates. The
envelope containing the cheque was handed over by the Post Office officials and
it was opened and it was found to contain the defendant company’s cheque.
Arrangements were then made between Miss Prince’s firm and the Post Office for
the future delivery of recorded delivery mail.
As I have
said, that cheque was then presented and I have rehearsed the history, or at
least the evidence as to the history, of the presentment of the cheque
thereafter.
The
defendants’ case in short is that Miss Prince, knowing from about December 28
1989 that a recorded delivery letter was waiting to be delivered to her firm,
knowing from January 12 1990 that Mr Popoff was asserting that the rent had
been paid by recorded delivery and knowing on January 18 1990 that the Post
Office intended to bring a recorded delivery envelope (the one she knew they
had) to the meeting the following day, deliberately decided to serve the notice
to quit alleging non-payment of rent before ascertaining what the recorded
delivery envelope contained.
Mr
Wilson-Smith in reply makes the following points. He submits that no court
could properly find that Miss Prince wilfully shut her
cheque for the following reasons: first, the defendant company has a history of
late payment; second, payment by recorded delivery, as opposed to ordinary post
without delivery being recorded, was a departure from the ordinary procedure;
third, the parties to this action were well aware that there had been problems,
which Mr Wilson-Smith described as irregularities, in relation to certain
previous rent cheques; fourth, there had been no acknowledgement of the demands
for payment in October and November 1989; next, the arrangement made on January
18 for the Post Office to attend for a discussion was accelerated at Miss
Prince’s specific request; next, at all times she was demanding her post and
being refused it only because its delivery was made contingent on a signature;
and last, because the letter of January 15, of the two letters, put the
defendants and their solicitors on notice. They having been put on notice and
no response having been received, Miss Prince was, it is submitted, entitled to
assume that the rent had not been paid.
In my view,
the matters to which Mr Wilson-Smith refers, if in the event they are proved,
are all factors to be taken into account by a court deciding the issue. It may
be that such a court will decide that on balance those factors should result in
a decision that Miss Prince was not recklessly fraudulent. But Mummery J
concluded, referring to the points made on behalf of the defendants to which I
have referred earlier, that there is a series of issues of fact which ought to
be tried. He expressed the fatality of that issue in these words at p 17C of
the transcript of his judgment:
That issue is
whether Miss Prince did deliberately abstain from inquiring into the contents
of that recorded delivery letter, and whether she sought to shut her eyes to a
fact she did not want to know and therefore acted recklessly.
The learned
judge concluded that there were issues that ought to be tried on both the
questions as to whether the notice to quit contained a false statement and, if
so, as to whether that false statement was made recklessly by Miss Prince on
behalf of her principal. I agree on this issue also. Indeed I go further.
Recognising
that the master thought it right to enter judgment under Ord 14, nevertheless,
in my view, this is an action to which it should have been obvious that the
provisions of Ord 14 had no real application. It is an action which bristles
with issues which should be determined as soon as possible.
I would
dismiss the appeal.
BALCOMBE and WOOLF LJJ agreed and did not add anything.
Appeal
dismissed with costs.
