Dispute as to possession of a stadium used for stock-car racing and other activities — Question as to whether occupier was a tenant protected by the Landlord and Tenant Act 1954 or a mere licensee — Appeal from decision of assistant recorder refusing plaintiffs possession and granting defendant a declaration that he had a tenancy protected under 1954 Act — Negotiations had continued over a lengthy period with a view to the granting of a formal licence, but no such document was ever agreed — There was a good deal of correspondence which showed that the plaintiffs had been insisting on a ‘non-exclusive’ provision and the defendant had been resisting such a provision — However, it appeared that agreed terms were set out in a particular letter from the plaintiffs’ solicitors to the defendant’s solicitors and the question was whether these terms indicated the nature of the transaction — The assistant recorder placed great weight on exclusive possession and a power to grant sub-licences as indicating a tenancy — The Court of Appeal agreed that these factors had some weight but were not inconsistent with a mere licence — It was, however, the parties’ intentions which were paramount and it was clear that the plaintiffs (the present appellants) had throughout maintained the position that they did not wish or intend to create a tenancy; it was also clear that the defendant (the present respondent) must at all material times have been aware of this attitude — The only possible inference, in the absence of a formal agreement, was that the respondent was to occupy the stadium as a licensee and not as a tenant — Appeal allowed
This was an
appeal by Matchams Park (Holdings) Ltd and Nationwide Leisure plc, two
associated companies which, or one of which, owned Matchams Park Stadium at
Ringwood, Hampshire, against a decision of Mr Assistant Recorder Fay, at
Bournemouth County Court, dismissing the appellants’ claim for possession of
the stadium and declaring the respondent to be a tenant of the property.
Basil Yoxall
(instructed by Stephen Peltz & Co) appeared on behalf of the appellants;
Jonathan Fulthorpe (instructed by Jacksons, of Fordingbridge, Hampshire)
represented the respondent.
Giving the
first judgment at the invitation of Griffiths LJ, SLADE LJ said: This is an
appeal from a judgment of Mr Assistant Recorder Fay given at the trial of an
action in the Bournemouth County Court on November 3 1983. The plaintiffs in
the action were two companies respectively called Matchams Park (Holdings) Ltd,
which I will call ‘Matchams’, and Nationwide Leisure plc, which I will call
‘Nationwide’. The defendant was Mr Gerald Austin Dommett. Matchams, I
understand, is a wholly-owned subsidiary of Nationwide. In this judgment I will
from time to time use the phrase ‘the plaintiffs’ indiscriminately to include
one or other or both of the two plaintiffs, because I do not think anything
turns on the difference. The recorder held that in so far as Nationwide acted
in relation to the property which is in dispute in the proceedings it was
acting as agent for Matchams, and he had no doubt that Matchams were to be
treated as the grantor. There is no challenge to this finding.
In the action
the plaintiffs sought possession of some premises at Ringwood, Hampshire, known
as Matchams Park Stadium. They claim that the defendant occupied the stadium as
a licensee under a licence which had expired on January 2 1983. The property in
question, I understand, occupies some 133 acres. The defendant counterclaimed
seeking a declaration that he is a tenant of the property protected by Part II
of the Landlord and Tenant Act 1954. The recorder granted the defendant this
declaration and dismissed the plaintiffs’ claim for possession and mesne
profits.
The
substantial question on this appeal is whether the recorder was right in
holding that the defendant was a tenant as opposed to a mere licensee of the
premises. The recorder has set out the facts very fully in his careful
judgment. For present purposes I therefore think I can summarise them rather
more briefly. The defendant has, at all material times, been the owner of
substantial premises called Matchams House Country and Sporting Club which
immediately adjoin the stadium. He is a promoter of stock-car racing. In or
about 1980 he began to use the stadium under an arrangement with the plaintiffs
by which he was to have the use of it for the purpose of promoting motor sport,
such as stock-car racing and similar activities, up to May 25 1981. He paid
money for his occupation, and though he called this ‘rent’ it is common ground
that his rights, throughout this period, were simply those of a licensee and
not those of a tenant.
In July 1980
the plaintiffs entered into a further arrangement with a Mr Slack under which,
in effect, Mr Slack was granted a licence to run a Sunday market on the
stadium, but subject to the proviso that there was to be no interference with
the defendant’s stock-car racing activities.
In November
and December 1980 negotiations were still proceeding for the grant of a formal
licence by the plaintiffs to the defendant to cover the period from May 26 1980
to May 25 1981 inclusive.
The draft
licence, which had been submitted by the plaintiffs to the solicitors,
contained a clause providing that the licence should be ‘non-exclusive’, and
this provision was the subject of some correspondence. By a letter of November
12 1980 the defendant’s solicitors said this:
3. Our client
does not agree to the Licence being non-exclusive as specified in clause 2 as
this gives your clients the right to grant further licences of the Stadium
during the same period. Although we suspect that this may have been included to
avoid ‘exclusive possession’ as between landlord and tenant our client accepts
that he is obtaining a Licence only and not a tenancy.
On November 18
1980 the plaintiffs’ solicitors replied saying (in para 3):
We are glad
to see that your client accepts that this is a simple Licence and no tenancy
whatsoever is being granted. Whilst this was one of the reasons why the Licence
was to be non-exclusive, another reason was that, as your client, is well
aware, a certain amount of Sunday trading is carried out in the stadium. This
must remain although no doubt we could arrange some form of comfort letter to
your client regarding other Licences.
The plaintiffs’
solicitors thus, at that stage, made perfectly plain the plaintiffs’ intention
that no tenancy should be granted and the defendant’s solicitors had accepted
this position.
On December 15
1980 the plaintiffs’ solicitors submitted an amended licence to the defendant’s
solicitors which again included
We reiterate
that this Licence is to be non-exclusive for reasons that we have already
mentioned in previous correspondence.
I should
perhaps refer to one or two provisions of the amended draft licence which
accompanied that letter.
It was
described as a ‘licence.’ Clauses 1 and
2 read:
1. Subject as
hereinafter contained the Grantor will permit the Licensee to occupy and use
the premises known as Matchams Park Stadium (‘the Stadium’) more particularly
described in the Schedule hereto for the purpose of promoting motor sports.
2. This Licence
shall be non-exclusive and shall be granted for a consideration of £15,000.
This Licence shall subsist (unless previously determined in manner hereinafter
mentioned) during the period from 26 May 1980 until but not including 26 May
1981 (hereinafter called ‘the term’).
Clause 4
contained a provision on the part of the grantor undertaking to pay rates and
taxes in regard to the stadium. Clause 5 provided:
5. It is
hereby agreed and declared that this Licence shall not be assigned but a
sub-licence may be created therefrom PROVIDED THAT all the terms hereof are
incorporated in such a sub-licence save as to the Licence fee and term.
Clause 9 gave
the grantor a right to determine the licence ‘if the Licensee shall fail to
observe and perform any of the agreements and undertakings on the Licensee’s
part’ contained in it.
I should also
have mentioned clause 3(viii), which obliged the licensee to permit the grantor
to
enter on the
said premises to inspect the condition thereof and for all other reasonable
purposes for the purpose of ascertaining whether all or any of the provisions
of this Licence are being faithfully kept observed and performed.
The draft
‘licence’ thus contained some provisions which would be appropriate to a lease,
but not necessarily inappropriate to a licence.
The ‘licence,’
in fact, was never signed. The defendant told the recorder that he was not
prepared to sign a document containing a non-exclusive clause.
At some date
between December 15 and 22 1980 a meeting was held between Mr Farnsworth, the
chairman of Nationwide and a director of Matchams, Mr Gurnett, the managing
director of Matchams, and the defendant. An agreement of some sort was reached
at this meeting for a licence to cover an extended period from May 26 1980 to
January 1 1982. On December 22 1980 the plaintiffs’ solicitors wrote to the
defendant’s solicitors a letter purporting to record these arrangements. I will
read this letter omitting the last sentence, on which nothing turns:
Further to our
letter of the 15th inst our clients now advise us that they have agreed terms,
subject to formal agreement, whereby your Client will have licence to occupy
Matchams Park until January 1 1982. We understand that the terms are to be
similar to those already mentioned in our draft Licence with the following
amendments:
1. Your client is to bring his payments in
respect of the presence licence by equal payments on January 2 and April 1. At
the latter date the full £15,000 licence fee will have been paid by your
client. Your client is then to pay a further licence fee of £10,000 in respect
of the period May 26 1981 to January 1 1982 by a payment of £5,000 on May 26
1981 and a further £5,000 on October 2 1981.
2. As from January 1 1981 your client is to be
entitled to the revenue from the Sunday Market and to be responsible for such
activity in all respects.
3. Your client’s use of the premises the
subject of the Licence will not be restricted to that of Motor Sport.
4. Your client will be responsible for
indemnifying our clients against any diminution in the value of the premises as
a result of your clients operations.
We understand
that these are the basic terms which have been agreed between our clients and
in view of the fact that your client is responsible for our costs we would
suggest that, having taken further instructions from your clients, you submit
an amended licence to us. We think that this may benefit your client as no
doubt he has in mind the sort of operations he will be carrying out. We look
forward to hearing from you as soon as possible.
The defendant,
in evidence, accepted that this letter of December 22 1980 summarised well what
was agreed at the meeting. He did not accept that the arrangements had been
made ‘subject to formal agreement’ as stated in the opening sentence. But the
recorder found that the arrangements were in fact made subject to contract, and
I think he was plainly right so to hold. By a letter of February 27 the
defendant’s solicitors themselves implictly accepted that a formal licence was
to be granted.
On May 25 1981
the original one-year period of the first licence came to an end. No formal
agreement had, as yet, been executed, as had been envisaged by the
correspondence, but it does seem clear, on the evidence, that at least some of
the new arrangements set out in the letter of December 22 1980, which were to
operate as from May 26 1981, were put into effect straight away. As from that
date, as the recorder accepted, there was a marked change in the circumstances
of the occupation of the defendant.
Thereafter, by
arrangement with Mr Slack direct, he took the payments in respect of the Sunday
market. His activities were no longer confined to those of motor sport. He
conducted a music festival on the premises, for example; and while up to May
1981 a caretaker employed by Matchams, who had a caravan on the site, had
collected the money for people coming to the stadium for motor scrambling, the
defendant thereafter accepted, took and kept the money received from motor
scramblers. Although there was some evidence to the contrary from Mr Gurnett,
on behalf of the plaintiffs, the recorder did not accept his evidence in this
context, and found as a fact that after May 25 1981 the defendant obtained sole
possession of the property. His finding of fact in this context has not been
challenged.
On August 3
1981 Mr Gurnett wrote to the defendant drawing his attention to the fact that
he had not yet signed the licence agreement, that he was behindhand with
payments for occupation of the stadium, and asking him to return the copy of
the amended licence agreement.
It appears
that on August 4 a meeting took place between Mr Gurnett and the defendant at
which amendments to the draft licence were discussed. Following that meeting,
on August 5, Mr Gurnett wrote to the defendant another letter referring to the
meeting of the previous day and mentioning various proposed amendments to the
licence. In this letter he also said:
Our solicitor
is contacting Jacksons directly regarding the amendments to the licence.
Perhaps you could be kind enough in the meantime to send us a cheque for the
£5,000 licence fee as per the attached invoice as it is, in fact, well overdue.
This was the
£5,000 which had been due on May 26 under the arrangements agreed in December
1980. The £5,000 was duly paid by the defendant later in August and accepted by
the plaintiffs.
On November 23
1981, despite the request contained in Mr Gurnett’s letter of August 5, no
licence had yet been signed by the defendant. On that day, as the recorder
found, it was agreed that the defendant might continue in occupation for
another year — that is to say, up to January 1 1983 — at an increased
consideration of £25,000, but otherwise on the same terms as before. A draft
licence was sent on January 5 1982, but the recorder found that the parties
continued to be bound by the oral agreement of November 23 1981, which was not
subject to contract and could not afterwards be varied unilaterally. This
finding has not been challenged before us and I see no reason to doubt its
correctness.
On February 11
1983, the one year of this last arrangement having expired, the plaintiffs
issued proceedings claiming possession and £3,000 said to be due under the
arrangements made between them and the defendant.
The issue in
the proceedings before the judge, as before us, was whether the arrangements in
question gave rise to a lease, as the defendant asserted, or to a mere licence
as asserted by the plaintiffs.
The recorder,
in his judgment, having referred to the issues, summarised his conclusions thus
(in para G2 of his judgment and onwards):
Now that
payment
that is the
payment of £5,000
is clearly
referable to the occupation of Matchams Park Stadium; but the question is:
Occupation on what terms? The answer
must be: The terms agreed in December 1980, evidenced by the letter of December
22 1980. It did trouble me whether the terms were varied by para 1 of the
letter of 5 August: but both parties treated the payment as having fallen due
before any such variation had been suggested. In my view that £5,000 cannot be
for occupation divorced from the terms agreed because £5,000 was agreed as
consideration for those terms, neither more nor less. Those terms, as I find
and as they were in fact implemented, confer the whole right of occupation. H2.
The question then is: Is that a tenancy or a licence? I have to look at the transaction as a whole.
I include the terms of the draft licence, which is referred to in the agreement
as set out in the letter of December 22 1980. Applying Shell-Mex & BP
Ltd v Manchester Garages Ltd . . . I find that this is not a
personal transaction. The nexus between the parties is not ties of family or
friendship; it is not, as in Shell-Mex, the carrying on of trade between
the parties: it is the land itself.
12. Moreover,
one of the terms incorporated from the previous draft permits a sub-licence;
and I ask: How can that term be consistent with a mere personal
clause: but, even if that clause were not there, I would come to the same
conclusion: the substance of the transaction was a tenancy.
J2. the
difficulty I have is caused by the words ‘subject to formal agreement’. There
is, however, no evidence that at this time, that is, August 1981, the
Defendant intended any further formal agreement. The answer to the difficulty
is: that by demanding, paying and accepting rent (ie a demand by the First
Plaintiff, payment by the Defendant and acceptance by Nationwide on behalf of
the First Plaintiff) under the agreement of December 1980, the parties have
agreed that that December 1980 agreement is binding. It is inconsistent with
that series of transactions, and in particular the demand of rent, to say that
the previous agreement is still subject to contract. It was treated as an
effective agreement as soon as the rent was paid and accepted.
The Recorder
concluded that the parties did create a tenancy at that time and that the
subsequent arrangements remained those of a tenancy.
The
plaintiffs, in Mr Gurnett’s letter of August 5, had made it plain that they
still wished the formal agreement to be returned to them by the defendant,
signed. Nevertheless, I think that the recorder was right in concluding that by
August 1981 the arrangements under which the defendant occupied the stadium
were no longer subject to contract. The plaintiffs implicitly recognised these
arrangements as having contractual force by demanding the £5,000 due under
them. I also see no reason to doubt the correctness of the recorder’s
conclusion that the terms of this contract were those agreed in December 1980,
evidenced by the letter of December 22 1980, read in conjunction with the terms
of the draft licence which was referred to in that letter. But the real
question remains whether or not these contractual arrangements operated to give
the defendant a tenancy as he now asserts.
It is common
ground that the mere fact that the draft agreements which were circulated
between the parties described the arrangement as a ‘licence’ rather than a
lease does not determine this question. The decision of this court in Addiscombe
Garden Estates Ltd v Crabbe [1958] 1 QB 513 shows that the nature of
the relationship between the parties to an arrangement such as this is to be
determined by law, by reference to the substance of the matter rather than by
reference to the description which the parties have chosen to give to their
agreement.
The recorder,
in analysing the substance of the relationship between the parties, clearly
attached great weight to the fact that, as from May 1981, the defendant,
according to his findings of fact, was intending to obtain, and did obtain,
exclusive occupation of the premises. This, as Mr Fulthorpe submitted on behalf
of the defendant, is indeed a strong pointer towards the existence of a tenancy
when one is inferring the intention of the parties.
However, the
decision of this court in Cobb v Lane [1952] 1 All ER 1199 shows
that the mere fact of exclusive possession being enjoyed by the grantee is by
no means conclusive. The purport of this decision is, I think, adequately
summarised in the headnote, which I will read:
The fact of
the exclusive occupation of property for an indefinite period is no longer
inconsistent with the occupier being a licensee and not a tenant at will.
Whether or not a relationship of landlord and tenant has been created depends
on the intention of the parties, and in ascertaining that intention the court
must consider the circumstances in which the person claiming to be a tenant at
will went into occupation and whether the conduct of the parties shows that the
occupier was intended to have an interest in the land or merely a personal
privilege without any such interest.
We were also
referred to the decision of this court in Shell-Mex & BP v Manchester
Garages Ltd [1971] 1 All ER 841. Lord Denning MR summarised the relevant
test succinctly in the following words, at p 843:
I turn,
therefore, to the point: was this transaction a licence or a tenancy? This does not depend on the label which is
put on it. It depends on the nature of the transaction itself: see Addiscombe
Garden Estates Ltd v Crabbe. Broadly speaking, we have to see
whether it is a personal privilege given to a person, in which case it is a
licence, or whether it grants an interest in land, in which case it is a
tenancy. At one time it used to be thought that exclusive possession was a
decisive factor, but that is not so. It depends on broader considerations
altogether. Primarily on whether it is personal in its nature or not.
In the light of
what Lord Denning has said, Mr Fulthorpe, in argument, placed some reliance on
the fact that the relationship between the parties in the present case was of a
purely commercial nature and was not in any way founded on ties of family or
friendship.
Nevertheless,
I think that the judgment of this court in Somma v Hazlehurst
[1978] 2 All ER 1011 well indicates that a mere licence may exist in law, even
though the relationship between the parties is of a purely commercial nature
and exclusive occupation of the relevant property is given. Cumming-Bruce LJ,
at p 1020, delivering the judgment of the court, said this:
Counsel for
the respondents, basing himself on the judgment of Denning LJ in Facchini
v Bryson and the reasoning in Marchant v Charters, submits
that in a ‘Rent Act’ situation any permission to occupy residential premises
exclusively must be a tenancy and not a licence, unless it comes into the
category of hotels, hostels, family arrangements or service occupancy or a
similar undefined special category. We can see no reason why an ordinary
landlord not in any of these special categories should not be able to grant a
licence to occupy an ordinary house.
The learned
recorder also attached great weight to the fact that the draft licence in the
present case had given the defendant powers to grant sublicences. Such a
provision is perfectly consistent with a tenancy, but in my view by no means
inconsistent with the existence of a mere licence granting exclusive possession.
The same comment may be made in relation to the right of re-entry given to the
plaintiffs under the draft licence, on which Mr Fulthorpe placed some reliance,
and also the right given to the defendant to receive the payments from Mr
Slack. All these factors, coupled especially, of course, with the grant of
exclusive possession, are certainly pointers in the direction of a tenancy and
could well have led the court properly to infer an agreement for the grant of a
tenancy if there was no evidence as to the parties’ actual intentions. But the
fact remains that it is the parties’ intentions which are paramount. The
observations of Buckley LJ in Shell-Mex v Manchester Garages (at
p 845 of the report) are, in my opinion, apposite in the present case, where he
said this:
During the
course of his argument counsel for the defendants has taken us through the
detailed provisions of the document with which we are here concerned and has
pointed out that many of the clauses in it are clauses which could
appropriately find their place in a tenancy agreement. That I think is
perfectly true; but it is not to say that they do not equally appropriately
find their place in a licence. One must look at the transaction as a whole and
at any indications that one finds in the terms of the contract between the two
parties to find whether in fact it is intended to create a relationship of
landlord and tenant or that of licensor and licensee.
With all
respect to the recorder’s judgment and to Mr Fulthorpe’s powerful argument,
both seem to me to have overlooked the fact that the plaintiffs have, from the
very beginning in the present case, made it crystal clear that they did not
wish to intend to create a tenancy. Furthermore, the defendant, who, it is
worthy to note, is obviously an experienced businessman and throughout had the
benefit of solicitors’ advice, must, in my opinion, at all material times, have
been well aware that this was their intention. It is common ground that no
tenancy came into existence during the period of May 26 1980 to May 25 1981.
The plaintiffs had made it quite clear that though they were willing to grant
him a licence in respect of the period after May 25 1981 they were not willing
to grant him a tenancy: I refer, for example, to their letters of May 18 1980 and
December 15 1980, from which I have already quoted. Furthermore, the
defendant’s solicitors had unequivocally accepted that position. I refer to
their letter of November 12 1980, from which I have also already quoted.
I can find
nothing, either in the correspondence or the evidence, from which the defendant
could reasonably have inferred that the plaintiffs had changed their minds over
this crucial point, either at the meeting in December 1980 or in August 1981 or
November 1981 or at any other time. Although they were obviously content that
he should have a personal right to occupy the land as a licensee, they had made
it abundantly clear, in my view, that they did not intend him to take any
interest in the land as tenant. It is, I think, significant that, as we were
told, the first occasion on which any suggestion was made on his behalf in
correspondence that he had a tenancy, as opposed to a licence, was as late as
December 29 1982.
A quite
different legal position would have arisen if the terms agreed in December 1980
and evidenced by the letter of December 22 had been incapable, in law, of
giving rise to a mere licence as opposed to a tenancy but I do not think that
it could be or has been argued that this was so. As things are, any prima
facie inferences which one might otherwise have drawn from the arrangement
so agreed must yield to evidence as to the actual intentions of the parties. I
emphasise that this is not a case where the court is confined to the four
corners of a formal document for the purpose of ascerting the parties’
intentions because no formal document, signed by the parties, has ever come
into existence. In the absence of such a document their intentions have to be
inferred from their conduct, the correspondence and all the circumstances of
the case.
Mr Fulthorpe
has naturally submitted that the recorder who had seen the witnesses, had drawn
his inference as to the parties’ intentions and that this court should be very
slow to interfere with the inference which he had drawn. But in my judgment,
with all respect to the recorder, the only proper inference is that, in advance
of the execution of a formal agreement, the defendant was to occupy the stadium
as licensee and not as tenant, whether or not, as a matter of fact, he enjoyed
exclusive possession of the premises. The recorder, in my view, clearly drew
the wrong inference. I think ground 1 of the plaintiffs’ notice of appeal
really puts the matter in a nutshell, where it is submitted, in my opinion
correctly:
the learned
judge failed to apply the paramount test in deciding whether the defendant had
a licence or a tenancy. He ought to have asked: ‘What was the intention of the
parties?’ Instead he asked only: ‘Did
the defendant have exclusive possession and was this a personal transaction?’
Accordingly,
despite Mr Fulthorpe’s persuasive submissions, I, for my part, would allow this
appeal. If Griffiths LJ agrees, no doubt we will require further submissions as
to the precise form of order which should be made in consequence.
GRIFFITHS LJ agreed
that the appeal should be allowed for the reasons given by Slade LJ.
The appeal
was allowed with costs in the Court of Appeal and below. The appellants
consented to a deferment of possession until July 1 on the respondent
undertaking to make certain payments; if not made, order for possession within
seven days.
