Agricultural holdings — Whether a joint venture in the form of a share milking arrangement gave rise to the tenancy of an agricultural holding — Whether, despite an express statement to the contrary in the written part of an agreement, exclusive possession had been granted by the owner of the land subject to the share milking arrangement — Evidence for and against the conferment of exclusive possession — Discussion of the effect of Street v Mountford on the application of section 2(2)(b) of the Agricultural Holdings Act 1986 — Two possible explanations — Court of Appeal agreed with trial judge that exclusive possession had not been granted — No protected tenancy of an agricultural holding arose from the transaction
litigation developed from a share milking arrangement made between the
respondent to the present appeal, the owner of a farm of about 179 acres, and
the appellant — The respondent had apparently made similar arrangements with
other parties in respect of parts of his farm — Under the arrangement with the
appellant the respondent made available a suitable area of land with the
necessary buildings to the appellant for stocking by the latter with dairy
cattle — The agreement was for five years in the first instance and under it
the respondent remained the registered milk producer and sold the milk produced
— The appellant did the milking and received 85% of the proceeds — He was
allotted land at the rate of 1 1/3 acres per cow, but after the first year
additional land was made available at a rent of £40 per acre — The appellant
was made responsible for exercising good husbandry over the area allocated and
the written agreement included repairing and other obligations typical of
tenants’ covenants in an agricultural tenancy agreement — There was an express
statement by the respondent owner that the agreement ‘will not involve
exclusive occupation and I may alter the area of land and the fields available
from time to time but will not do anything thereby to prejudice the
arrangement’
relations deteriorated and, following the introduction of the milk quota, the
respondent claimed to reduce the area allocated to the appellant — The
appellant issued the writ in the present action and the respondent gave the
appellant a notice terminating the share milking arrangement and sought
possession — Tucker J granted the possession order and the appellant brought
the present appeal — The appeal turned on the question whether the appellant
had a tenancy of an agricultural holding or not — If he had, the respondent’s
notice terminating the milk sharing arrangement was ineffective
succeed, the appellant had to show either that he had a tenancy of identifiable
land which had been let to him as land used for agriculture or that he had been
granted a licence which, by virtue of section 2(2)(b) of the 1986 Act, had been
converted into a tenancy from year to year — In each case he must have been
granted exclusive possession of the land — The appellant’s difficulties were
the express negation of exclusive possession in the written agreement and the
fact that the respondent carried out a number of activities on the allocated
land which were incompatible with the appellant’s exclusive possession — The
appellant argued that the activities were de minimis and that the agreement
imposed on him good husbandry obligations and many of the typical liabilities
of a tenant — The Court of Appeal, however, looking at the picture as a whole,
came to the conclusion that the respondent never had the intention of granting
the appellant exclusive possession and did not do so — They accordingly upheld
Tucker J’s decision
of discussing an argument put forward on behalf of the appellant, Dillon LJ
referred briefly to the interesting question of the effect of the decision in
Street v Mountford on the type of licence which is converted into a yearly
tenancy by section 2(2)(b) of the 1986 Act — Does Street v Mountford mean
that the common law (as now revealed) already does that which section 2(2)(b)
is attempting to do by statute? Does it
leave anything for section 2(2)(b) to bite on?
Dillon LJ mentions two possible explanations but obviously without
taking a decided view of either
was dismissed and leave to appeal to the House of Lords was refused
The following
cases are referred to in this report.
Bahamas
International Trust Co Ltd v Threadgold
[1974] 1 WLR 1514; [1974] 3 All ER 881; [1975] EGD 1; (1975) 47 EG 233, HL
Harrison-Broadley v Smith [1964] 1 WLR 456; [1964] 1 All ER 867; [1964] EGD
293; (1964) 189 EG 513, CA
Street v Mountford [1985] AC 809; [1985] 2 WLR 877; [1985] 2 All ER
289; [1985] 1 EGLR 128; (1985) 274 EG 821, HL
This was an
appeal by the plaintiff, Patrick Pearse McCarthy, from the decision of Tucker J
granting to the first defendant, Roger Frederick Bence (the present
respondent), possession of land, part of Cobley Hill Farm, Alvechurch,
Birmingham, which had been the subject of a milk sharing arrangement between
the parties. The second and third defendants below, the Milk Marketing Board
and the Ministry of Agriculture, Fisheries and Food, took no part in the
appeal.
Diana Cotton
QC and Jonathan Harvey (instructed by Morton & Fisher) appeared on behalf
of the appellant; Geoffrey Jaques (instructed by Blake Lapthorn) represented the
respondent.
Giving
judgment, DILLON LJ said: This is an appeal by the plaintiff in the
action, Mr McCarthy, against a decision of Tucker J given on December 14 1987.
The judge’s judgment on that occasion was a reserved judgment given after the
trial of the action. The issues raised on the pleadings are fairly numerous,
but counsel very sensibly agreed that at the trial the judge should concentrate
on one fundamental issue, namely whether Mr McCarthy is entitled, as against
the first defendant, Mr Bence, to an agricultural tenancy,
which are part of Cobley Hill Farm at Alvechurch, near Birmingham. All monetary
claims as between Mr McCarthy and Mr Bence were referred to an official
referee. All outstanding claims of Mr McCarthy against the defendants other
than Mr Bence were stood over to a later date.
The judge
decided the issue before him in favour of Mr Bence and accordingly made a
declaration and an order for possession against Mr McCarthy. Mr McCarthy now
appeals to this court. Mr Bence is sole respondent to the appeals; the other
defendants are not concerned.
The dispute
arises out of a ‘share milking arrangement’ between Mr McCarthy and Mr Bence.
Share milking arrangements are apparently well known in New Zealand, but they
are not, as yet, very familiar in this country. Very basically, the idea is
that farmer A who has land allows farmer B, who has cows, to keep his cows on
farmer A’s land and to milk them in farmer A’s buildings on the basis that the
proceeds of sale of the milk from the cows are shared between the two of them
in agreed percentages. Instead of receiving rent as such for the use of his
land, buildings and milking equipment, farmer A receives a percentage of the
proceeds of sale of the milk. The proceeds of sale of the milk were in the
present case in the form of monthly cheques from the Milk Marketing Board. The
actual agreement in the present case was a good deal more complicated than the
basic outline of a share milking arrangement which I have just given, and the
outcome of this appeal depends, in my judgment, on the particular agreement the
parties have made rather than on any principles applicable to share milking
agreements generally.
Mr Bence has
been the owner since 1955 of Cobley Hill Farm, which amounts to some 179 acres.
He is by profession a certified accountant and has an accountancy and advisory
practice, but he has also for a very long time been interested in farming, and
for the first 12 years after he bought it he farmed Cobley Hill Farm himself.
More recently, however, he has allowed parts of Cobley Hill Farm to be used
under successive share milking arrangements with third parties (which do not
appear to have been very satisfactory), while other people were allowed to
graze horses in other fields of the farm. Mr Bence himself lived in the
farmhouse at Cobley Hill Farm.
Mr McCarthy
had considerable experience of dairy farming and had been a farm manager of a
large dairy unit in Worcestershire, but he did not own any farming land.
As a result of
an advertisement placed by Mr Bence in the Farmers Weekly very early in
1982, Mr McCarthy met Mr Bence at Cobley Hill Farm and they came to an
agreement to have effect for five years from and after March 31 1982, ie until
March 31 1987. That agreement was partly in writing and partly oral.
The written
part consists of the terms set out in a letter from Mr Bence to Mr McCarthy of
March 1 1982 which Mr McCarthy accepted in writing by a letter to Mr Bence of
March 2. Mr Bence’s letter (to which I will refer as ‘the written agreement’)
is as follows:
Dear Mr
McCarthy,
I confirm,
subject to your acceptance in writing within 14 days the terms of the share
milking contract as follows:
1 I will make available for stocking with dairy
cows and dairy followers only a suitable area of land together with the
necessary buildings at Cobley Hill Farm. This will not involve exclusive
occupation and I may alter the area of land and the fields available from time
to time but will not do anything thereby to prejudice the arrangement.
2 I will conduct negotiations with the Ministry
of Agriculture regarding the milk licence and continue as registered milk
producer. I will sell the milk produced, make necessary contracts and receive
the proceeds of sale. Within 24 hours of the receipt by me of the notification
of the proceeds of sale I will pay over 85% of such proceeds to you. This 85%
applies to all additions and deductions calculated on the volume of milk but
any deductions for charges relating to the management of, or the expenses of
maintaining the herd shall be wholly for your account.
3 This agreement shall continue until 31st
March 1987 and shall run for a further five years from that date unless either
of us shall have given notice in writing to the other not later than 31st March
1986 provided that in the event of any breach by one party of this agreement it
may be determined at any time by written notice by the other party.
4 You will be responsible for exercising good
husbandry over the area allocated, and shall be responsible for all expenses in
relation to such husbandry and for all expenses of the dairy herd you will also
be responsible for and bear the cost of:
A Leaving in good tenantable repair, order
and condition the cottage and farm buildings together with all fixtures and
fittings, drains, sewers, gullies, manholes, catchpits, inspection chambers,
electric supply systems and fittings, water supply and storage systems and
fittings both above and below ground including pipes, cisterns, tanks, sanitary
fittings, drinking troughs and pumping equipment, fences, hedges, stiles, gates
and posts, cattle grids, culverts, watercourses, ditches, roads and yards in
and on the area made available and keeping clean and in good order all roof
valleys eaves guttering and downpipes, wells, septic tanks and sewage disposal
systems.
B Replacing or repairing and treating with
effective preservative material as may be proper, all items of fixed equipment.
C Cleaning, papering, painting, creosoting
or otherwise treating with materials of suitable quality the interior of the
cottage and farm buildings and creosoting the exterior of the doors of the farm
buildings.
D Replacing all broken, cracked and slipped
tiles from time to time as the damage occurs up to a cost that shall not
exceed, for materials used, the sum of £25 in any one period ending on the 25th
March.
E Cutting, trimming and laying a proper
proportion of the hedges in each year of the agreement so as to maintain them
in good condition with the exception that while my tractor and mounted hedge
trimmer remain in working order I will trim such part of the hedges as can be
reached by and is within the capacity of that equipment.
F Digging out and cleaning all ponds,
watercourses, ditches, catchpits as may be necessary to maintain them at
sufficient width and depth and to keep clear from obstruction all field drains
and outlets.
G Maintaining by replacement or repair the
milking parlour equipment and dairy equipment including the milk vat and
refrigeration equipment vacuum pump and motor and to supply on termination of
the agreement a complete set of new rubbers, connectors and jetters.
In the event
of any failure to carry out these obligations or any one of them I reserve the
right to carry out any necessary work and either claim from you, or deduct from
moneys due to you, the cost thereof.
In the event
of the milk sales falling below 227,300 litres in any year ending the 31st
March, in addition to the monthly retention of 15% of the milk sales I shall
retain, or otherwise claim from you, 15% of the value of the shortfall in milk
sales.
The oral part
consisted, in particular, of agreement that the land to be made available by Mr
Bence to Mr McCarthy should be calculated on a ratio of 1 1/3 acres per cow
according to the estimated number of cows Mr McCarthy was going to put on the
land, and of agreement that the first land to be taken by Mr McCarthy should be
the fields shown for identification edged in blue and green on the site plan P1
prepared for the trial. They were the fields known as Big Meadow, Little
Meadow, Ash, Big Lye, Gorsty, Upper Bears, Cuckolds, Windmill, Pleck, Cobley
and Lower Bears. Also Mr McCarthy was allocated a cottage known as Six Bells,
Cobley Hill Farm and a number of buildings, with milking equipment, and a
wintering cattle yard in the vicinity of the main Cobley Hill farmyard. The buildings
allocated to Mr McCarthy seem to have been somewhat interspersed with
buildings, sheds or lean-tos retained by Mr Bence.
The
arrangement seems to have worked reasonably well for the first year, and in
March 1983 two further fields, Pathway and Clam’s Piece, shown edged in orange
on the plan P1, were allocated to Mr McCarthy. Also a further formula was
agreed that Mr McCarthy would pay rent at a rate of £40 per acre per annum on
the land allocated to him in so far as the area of that land exceeded 1 1/3
acre per cow calculated by reference to the average number of cows Mr McCarthy
had on the land over the year measured to March 31.
By March 1985,
however, the parties had fallen out. By the time the action came on for trial
the points of dispute had become legion, and the parties differed on
practically everything. It is unnecessary to go into details. But one important
issue arose because by March 1985 a milk quota system had been imposed on all
dairy farmers in this country as part of the EEC policy of curbing
over-production of milk. Mr Bence, therefore, claimed to reduce the area
allocated to Mr McCarthy by taking back the fields edged green and orange on
the plan P1 — Cobley, Lower Bears, Pathway and Clam’s Piece — and leaving Mr
McCarthy only with the fields edged in blue. Mr McCarthy strongly objected to
this and seems to have had it in mind that he would be able to increase his
quota. He also claimed that Mr Bence had agreed he could keep beef cattle. At
the time Mr Bence had his way on the ground, over protests by Mr McCarthy, and
the writ in this action was issued on June 3 1985.
In March 1986
Mr Bence gave Mr McCarthy formal notice under clause 3 of the written agreement
to determine the contract, ie the share milking contract, at March 31 1987. It
is now accepted by Mr McCarthy that that notice was valid, and effective to
require him to give up possession on March 31 1987, if he does not have
an agricultural tenancy protected by the 1986 Act. Conversely, it is
accepted by Mr Bence that the notice was not effective if Mr McCarthy does
have an agricultural tenancy protected by the 1986 Act. That is why the issue
of agricultural tenancy or not is so fundamentally important as between the
parties.
To establish
that he has an agricultural tenancy, Mr McCarthy has to show either that he has
a tenancy of identifiable land which has been let to him for use as
agricultural land or that, under section 2(2)(b) of the 1986 Act or its
statutory predecessor to the same effect, he has been granted a licence to occupy
identifiable land for use as agricultural land and the circumstances are such
that if his interest were a tenancy from year to year he would in respect of
that land be the tenant of an agricultural holding.
Both these
heads, tenancy or licence, raise the question whether he has been granted
exclusive occupation of the land. It is clear from Street v Mountford
[1985] AC 809 that exclusive occupation is the hallmark of a tenancy and if he
has not been granted exclusive occupation he cannot have a tenancy. As to
licence under section 2(2)(b), it is clear from Bahamas International
Trust Co Ltd v Threadgold [1974] 1 WLR 1514 that ‘there cannot be
such a licence without a right of exclusive occupation during the currency of
the licence in the licensee as against the licensor for that purpose’; see per
Lord Diplock at p 1527 H approving the statement in those terms by Davies LJ in
Harrison-Broadley v Smith [1964] 1 WLR 456 at p 470.
Mr McCarthy
thus at once comes up against clause 1 of the written agreement, which clearly
states: ‘This will not involve exclusive occupation and I may alter the area of
land and the fields available from time to time but will not do anything
thereby to prejudice the arrangement.’
It is not suggested in this court that the reference to not involving
exclusive occupation is a sham. That was suggested in the court below and the
judge rejected the suggestion. What is said in this court, however — and it is
a perfectly legitimate argument — is that, having regard to the nature of the arrangement
and in particular the formula fixing the area of land at 1 1/3 acre per cow,
and having regard to the obligation on Mr Bence not to derogate from his grant
or, as it is put, not to do anything to prejudice the arrangement, the
reference to not involving exclusive occupation cannot work, because Mr
McCarthy has in fact been granted exclusive occupation of the fields from time
to time allocated to him.
Several points
are freely conceded by Mr Bence. One concerns the power under clause 1 of the
written agreement for Mr Bence to alter the area of land and the fields
available from time to time. The object of this would appear to have been to
enable Mr Bence to have Mr McCarthy move his cows to other fields on the farm,
if that appeared appropriate in the overall management of the farm. But it is
conceded that the power could only be exercised reasonably and not arbitrarily.
Mr Bence could not take a field away from Mr McCarthy immediately after Mr
McCarthy had incurred a lot of expense in reseeding that field. Moreover, any
alternative field provided by Mr Bence in place of one originally allocated
would have had to be reasonably suitable for the needs of Mr McCarthy’s herd.
Moreover, Mr
Bence accepts that, during the currency of the arrangement Mr Bence could not
have put his own stock on the fields for the time being allocated to Mr
McCarthy and could not have ploughed up those fields. That, as Mr Bence said in
evidence, would have been contrary to clause 1 of the written agreement.
It is
therefore submitted for Mr McCarthy that there was really nothing that Mr Bence
or anyone else could do on the land allocated to Mr McCarthy and in truth Mr
McCarthy had exclusive occupation.
There were,
however, quite a number of things that Mr Bence did do on or in relation to the
land allocated to Mr McCarthy.
First, he gave
his friends permission to shoot over the land and keep what they shot. Mr Bence
had, I apprehend, told Mr McCarthy at the outset that he would be doing this.
Second, he had
dead elm trees in the hedges felled and had the timber from those trees, or any
other timber or firewood he found on the land allocated to Mr McCarthy, carted
to his own barn at Cobley Hill Farm.
He gave
permission from time to time to a television relay company to park vehicles in
a corner of the field known as Windmill — part of the land edged blue on P1.
He had scrub
and roots grubbed out from part of the land and burned. He had ditching and
also spraying for an infestation of thistles done on the land. This, it is said
for Mr McCarthy, very probably correctly, Mr Bence was authorised to have done
by the penultimate paragraph of the written agreement, whereby Mr Bence
reserved to himself the right to carry out any necessary work, in the event of
any failure of Mr McCarthy to carry out his obligations, and claim the cost
from Mr McCarthy or deduct it from moneys due to Mr McCarthy. From 1985
onwards, Mr Bence had very many complaints of the failure of Mr McCarthy to
farm land in accordance with his obligations; we have not had to consider how
far these complaints were justified.
Mr Bence also
trimmed hedges with his tractor and mounted hedge-cutter in accordance with
clause 4(E) of the written agreement. He also carried out other hedging work;
in particular, cutting out elder bushes. This cutting out of the elder bushes
produced complaint from Mr McCarthy, but the complaint was not that Mr Bence
ought not to have touched the hedges because Mr McCarthy had exclusive
occupation; the complaint was merely that Mr Bence had cut out too much and
left gaps.
Finally, it
seems that Mr Bence regularly walked the land with his dog, taking his thistle
spud in the thistle season to pull out thistles or doing any other minor
tidying up that caught his eye. As the judge put it: ‘I find that the first
defendant took a keen and possessive interest in the land occupied by the
plaintiff.’ Though there were very many
grounds of dispute, Mr McCarthy never challenged Mr Bence’s freedom to walk the
land.
It is said for
Mr McCarthy, correctly, that the obligations cast upon Mr McCarthy by clause 4
of the written agreement, including the initial obligation to exercise good
husbandry over the area allocated, are typical of tenant’s covenants in an
agricultural tenancy agreement. It is also said that all Mr Bence did in
relation to the areas allocated to Mr McCarthy was either de minimis or
at best neutral in that it could be covered by reservations to the landlord in
a tenancy agreement and was not inconsistent with Mr McCarthy having had exclusive
occupation of those areas. It is said also that the power to alter or
reallocate the area can be disregarded because as soon as land was allocated to
Mr McCarthy the statutory predecessor of the 1986 Act bit to protect Mr
McCarthy and the land so allocated could not be taken from him without his
consent.
Taking all
these various factors into account and looking at the case as a whole, I agree
with the conclusion of the judge that Mr Bence had no intention of granting
exclusive possession, and found that he did not do so. I get a clear picture of
an arrangement between these two men, who would be living almost in each
other’s pockets on the one farm and were to be engaged in a joint venture,
albeit not a partnership, of the share milking, which envisaged that the area
of the land used for share milking might be changed to other parts of the farm,
and which did not require that Mr McCarthy should have, and did not grant him,
exclusive occupation of any of the fields or buildings. There is also, incidentially,
the point that the main farmyard had necessarily to be used by Mr Bence also
for access to his sheds.
Miss Cotton
QC, on behalf of the appellant, has put forward a slightly more elaborate
alternative argument which I had some difficulty in following.
If exclusive
occupation is, as held in Street v Mountford, the hallmark of a
tenancy and a licence under section 2(2)(b) also requires exclusive
occupation, as held in the Bahamas case, it would seem that the licence
is itself a tenancy and there is nothing for section 2(2)(b) of the 1986
Act to bite on. The explanation of that may be that the wording used in section
2(2)(b) goes back well before Street v Mountford to the
Agricultural Holdings Act 1948 and has not been updated in recognition of Street
v Mountford. Another explanation may be that the wording of section
2(2)(b) is intended to catch licensees to use land for grazing or mowing
(or both) which are not, by being limited to some specified period of the year,
excluded from section 2 by subsection (3) thereof.
However, the
submission is that the licence under section 2(2)(b) does not, on a true
appreciation of the Bahamas case, have to entitle the licensee to
exclusive occupation of the land in question in a general sense but only to
exclusive occupation in the sense of an exclusive right under which the grantee
is entitled to prevent the grantor from making any use of the land ‘at any rate
for agricultural purposes’: see the Bahamas case at p 1527 G-H. To my
mind, the submission seeks to read too much into the words cited. The point
about the Bahamas case was that the licensee was not exclusive because
it was merely a licence for a fixed term to feed what was left of a particular
small herd on land. That might, in time if not at first, not
been free, so long as it did not derogate from its grant, to use the rest of
the land for agricultural purposes. I cannot see that it would have made any
difference if the landlord’s alternative use of the land, which did not
derogate from its grant, had been a non-agricultural use, such as storage on
the land of the products of a wheelwright’s shop. Apart from that, Mr Bence’s
activities in the present case were to a large extent concerned with
agriculture in maintaining, or improving, the quality of Cobley Hill Farm.
Finally, on a
separate point as to the terms on which Mr McCarthy was in occupation under the
share milking arrangement, Miss Cotton invited us to set aside certain findings
of fact of the learned judge, and particularly his findings that Mr Bence never
agreed to Mr McCarthy keeping beef cattle or a bull on the land allocated to
him — he was merely to keep dairy cows and followers. The point here is that
there were some letters written by Mr McCarthy to Mr Bence which the judge
found Mr Bence never received, or never read. Miss Cotton submits that on a
proper analysis of various documents the judge should have found that Mr Bence
had received and read those letters. She then submits that as Mr Bence did not
make any reply to the letters, the judge should also have found that Mr Bence
thereby admitted that Mr McCarthy’s complaints in the letters were justified
including a complaint that there had been a verbal agreement for Mr McCarthy to
keep barley-beef and that Mr Bence’s orders to remove the beef animals in March
1985 was a breach of contract. The submission that Mr McCarthy can rely on
tacit admissions does not follow even if I were satisfied that Mr Bence had
received the letters. I would not interfere with the judge’s findings; he saw
the witnesses and was very careful in selecting what parts of their evidence he
did and what he did not accept.
In summary,
therefore, for the reasons given, I would dismiss the appeal.
MUSTILL and BINGHAM LJJ agreed and did not add anything.
The appeal
was dismissed with costs, not to be enforced without leave. Application for
leave to appeal to the House of Lords was refused.
