Landlord and tenant — Landlord and Tenant Act 1954 — Dwelling-house let to school trustees and occupied by school caretaker — Whether school trustees occupying dwelling-house for purposes of a business under Part II of the 1954 Act — Whether if school trustees carrying on a business in the dwelling-house they were doing so in breach of a prohibition against use for business purposes — Whether landlord consented or acquiesced in breach
The appellants
are the trustees of the Methodist Secondary Schools Trust Deed 1903 and ran
Kent College, a school in Canterbury. By a lease dated May 24 1974 the
respondent landlord demised a dwelling-house, Greengates, Whitstable Road,
Canterbury, Kent, a property immediately adjacent to the boundary of Kent
College, to the trustees for a term of 15 years from June 1 1974 at an initial
annual rent of £350 with provisions for rent reviews. By clause 2(X) of the
lease the tenants covenanted ‘to use the demised premises for the purposes of a
private residence in single occupation only’. On July 20 1977 a Mr Lester was
offered employment as a resident caretaker by the trustees and for the proper
performance of his duties, he was required to live at the property on a service
occupancy. Mr Lester’s duties included building security at night and during
holidays; he was provided with a telephone in the dwelling-house and the
trustees installed an alarm system connected to the school buildings. On
October 13 1988 the respondent gave notice to the trustees under section 25 of
the Landlord and Tenant Act 1954 terminating the tenancy on June 1 1989. On
October 26 1988 the trustees’ solicitors served a counternotice under section
29 of the Act stating that they would not be willing to give up possession and
on February 7 1990 the trustees issued an application in the country court for
the grant of a new tenancy under Part II of the 1954 Act. At the trial of a
preliminary issue, Judge James Scarlett, sitting in Canterbury County Court,
found that the board of management set up the trust deed of 1903 and the local
administrative governers (standing in the shoes of the trustees) were in
occupation of the property at all material times by the occupation of Mr
Lester, and that the occupation was partly for the purpose of the business
carried on by the board of management and local administrative governers, and
for other purposes. The occupation of the dwelling-house for that purpose was
in breach of clause 2(X) of the lease; the respondent neither consented to nor
acquiesced in the use of the dwelling-house for such purposes. Accordingly, the
tenancy was not one to which Part II of the 1954 Act applies. The trustees
appealed on the grounds that there was no breach of clause 2(X) of the lease,
but if there had been a breach the respondent had acquiesced to it.
covenant to use the demised premises for the purpose of a private residence in
single occupation only. The insuperable obstacle facing the trustees was the
judge’s finding that ‘the property was used for the purposes of rendering Mr
Lester available to hear the alarm and to receive messages and from the nearest
point available to the school to react promptly’. Mr Lester was using the
property partly for the purpose of carrying out duties of his employment as
caretaker, which had to be performed in the property, that is to say by
continuously being on call and making himself available. The alarm and the
telephone being mechanisms available to enable him to receive and respond to
the calls. Accordingly, there was a breach of clause 2(X) of the lease
prerequisite of acquiescence. The respondent could not be said to have
acquiesced in the continuing breach of clause 2(X) of the lease unless he
knew the facts which gave rise to the breach. The fact which gave rise to
the breach was the continuing use of the property by the school’s caretaker, in
part, for the purpose of being available on call during the ordinary
non-working hours. The judge had found that the respondent thought that Mr
Lester was one of the school’s maintenance staff and that he did not know of
the use to which the premises were in part being put. On those findings of fact
the respondent had not acquiesced in the breach. Section 41 of the 1954 Act did
not apply to make the trustees occupiers of the dwelling-house. It was the
board of management, through Mr Lester, who were in occupation of the property.
It was unlikely that the trustees could point to a sufficient degree of control
over the property. The interposition of the board of management, which has the
power to give directions to the trustees, renders this a special case.
Accordingly, the trustees had not established that they were in occupation of
the property for the purposes of section 23 of the 1954 Act.
The following
cases are referred to in this report.
Bell v Alfred Franks & Bartlett Co Ltd [1980] 1 WLR 340;
[1980] 1 All ER 356; (1979) 39 P&CR 591; 253 EG 903, [1980] 1 EGLR 56, CA
Chapman v Freeman [1978] 1 WLR 1298; [1978] 3 All ER 878, CA
Cheryl
Investments Ltd v Saldanha [1978] 1 WLR
1329; [1979] 1 All ER 5; (1978) 37 P&CR 349; 248 EG 591, [1978] 2 EGLR 54,
CA
Commissioner
of Valuation for Northern Ireland v Fermanagh
Protestant Board of Education [1969] 1 WLR 1708; [1969] 3 All ER 352;
[1969] RA 475, HL
Frish Ltd
v Barclays Bank Ltd [1955] 2 QB 541; [1955]
3 WLR 439; [1954] 1 All ER 901, CA
German v Chapman (1877) 7 ChD 271; 47 LJCh 250; 37 LT 685; 42 JP
358; 26 WR 149, CA
Groveside
Properties Ltd v Westminster Medical School (1983)
47 P&CR 507; 267 EG 593, [1983] 2 EGLR 68, CA
Linden
v Department of Health and Social Security [1986]
1 WLR 164; [1986] 1 All ER 691; (1985) 51 P&CR 317; [1986] 1 EGLR 108; 277
EG 543
This was an
appeal by the trustees of the Methodist Secondary Schools Trust Deed from the
judgment of Judge James Scarlett, sitting at Canterbury County Court, on June
12 1991, who had decided a preliminary issue as to whether the trustees held a
tenancy within the meaning of Part II of the Landlord and Tenant Act 1954 from
the respondent, Mr H D O’Leary.
Jonathan
Ferris (instructed by Pothecary & Barratt) appeared for the appellants;
Robert Jay (instructed by Furley Page Fielding & Pembrook, of Canterbury)
represented the respondent.
Giving
judgment, SIR CHRISTOPHER SLADE said: This is an appeal by the trustees
of the Methodist Secondary Schools Trust Deed (‘the trustees’) from a judgment
of Judge James Scarlett, at Canterbury County Court, delivered on June 12 1991,
after the hearing of a preliminary issue in a landlord and tenant dispute. The
appeal has been well argued on both sides.
The trustees
are tenants of a dwelling-house known as ‘Greengates’, Whitstable Road,
Canterbury, Kent (‘the property’). The caretaker of a school, Kent College,
Canterbury, lives in the property. The respondent, Mr O’Leary, is the landlord.
On October 13 1988, the landlord’s solicitors gave notice to the trustees under
section 25 of the Landlord and Tenant Act 1954 (‘the Act’) terminating the
tenancy on June 1 1989. Para 5 of the notice stated:
If you apply
to the Court under Part II of the Landlord and Tenant Act 1954 for the grant of
a new tenancy, we will not oppose your application.
At the trial
of the preliminary issue, counsel for the trustees accepted that this statement
did not estop the landlord from contending that Part II of the Act did not
apply to the tenancy.
On October 26
1988 the trustees’ solicitors served a counternotice under section 29 of the
Act stating that they would not be willing to give up possession of the
property on June 1 1989.
On February 7
1990 the trustees issued an application to the county court for the grant of a
new tenancy under Part II of the Act. Para 4 of the application, as
subsequently amended by leave at the trial, describes the nature of the
business carried on at the property as being ‘residential accommodation for
school caretaker’.
Section 23 of
the Act, so far as material, provides as follows:
(1) Subject to the provisions of this Act, this
Part of this Act applies to any tenancy where the property comprised in the
tenancy is or includes premises which are occupied by the tenant and are so
occupied for the purposes of a business carried on by him or for those and
other purposes.
(2) In this Part of this Act the expression
‘business’ includes a trade, profession or employment and any activity carried
on by a body of persons, whether corporate or unincorporate.
. . .
(4) Where the tenant is carrying on a business,
in all or any part of the property comprised in a tenancy, in breach of a
prohibition (however expressed) of use for business purposes which subsists
under the terms of the tenancy and extends to the whole of that property, this
Part of this Act shall not apply to the tenancy unless the immediate landlord
or his predecessor in title has consented to the breach or the immediate
landlord has acquiesced therein . . .
On October 19
1990, the landlord filed an answer to the trustees’ application in which he
stated that he opposed the grant of a new tenancy on the grounds that the
tenancy to which the application related was not one to which Part II of the
Act applied. Particulars of these grounds, drafted with section 23 of the Act
in mind, were given as follows:
(a) The Lease dated 24th May 1954 is a lease
whereby the Respondent demised a dwelling-house to the Applicants and under
which the permitted use of the Premises was in Clause 2(X) provided to be ‘for
the purposes of a residence in single occupation only’.
(b) The Premises are neither occupied by the
Applicants nor are they occupied for the purposes of a business carried on by
them or for those and other purposes pursuant to section 23(1) of the Act.
(c) The Premises are occupied by a caretaker
employed by Kent College, Canterbury (a school).
(d) If, which is denied, the Premises are
occupied by the Applicants for the purposes of their business, the said use for
business purposes is in breach of a prohibition of use for business purposes
under the said Clause 2(X) of the Lease.
Mr Registrar
Nicholson, by consent, on December 12 1990 ordered that the landlord’s
allegation that the tenancy was not one to which Part II of the Act applied,
should be dealt with as a preliminary issue.
In the light
of the landlord’s answer, and of a further point raised by the trustees
relating to acquiescence, the judge at the trial correctly identified four
questions as requiring an answer:
(1) Was the property occupied by the trustees?
(2) If it was occupied by the trustees, was it
occupied by them for the purposes of a business carried on by them or for those
and other purposes?
(3) If the trustees were carrying on business in
all or any part of the property comprised in the tenancy, were they doing so in
breach of a prohibition however expressed for use for business purposes which
subsisted under the terms of the tenancy and extended to the whole of the
property?
(4) If there was such breach, has the landlord
consented or acquiesced in it?
Before turning
to these questions, I must summarise the relevant facts as found by the judge
in his full and careful judgment.
The facts
The trustees
are the trustees of the Methodist Secondary Education Trust Deed 1903. The
prefatory note to this trust deed shows that Kent College, Canterbury, is one
of the Methodist schools held upon the trusts set out in the deed and that the
‘Board of Management for Methodist Residential Schools’ is the legal governing
body of the school, but that, with certain exceptions, it has delegated to a
body of ‘local administrative governors’ all matters concerning the school.
These matters include the appointment of staff other than the headmaster.
The recitals
to the trust deed stated (inter alia) that the Methodist Conference
proposed to apply certain moneys to the establishment of secondary schools and
annually to appoint a board of management for the control and management of
such schools and ‘to confer and impose upon such Board divers powers and duties
for the control and management of such schools as the conference may think
fit’.
The trust deed
itself contained the following provisions:
1. Any lands
hereditaments or other property which shall be purchased leased or otherwise
acquired by the Conference for the purposes of these Presents may by the
direction of the Conference be conveyed to and vested in the trustees or any
number of them not less than two.
2.(a) The trustees shall hold the lands or other
property so vested in them as aforesaid (hereinafter called the School
property) in Trust for the purposes of Secondary Schools or for other
educational purposes including but without prejudice to the generality of the
foregoing the provision of bursaries whether in connection with the purposes of
Secondary Schools or otherwise until the Conference shall otherwise by
resolution determine and thereafter for such purposes either for the
advancement of Secondary Education or otherwise for such purposes in connection
with the promotion of the charitable objects of the Methodist Church as the
Conference shall from time to time by resolution direct.
2.(b) While the School property is held for the
purposes of Secondary Schools, the Schools shall be administered and managed by
the Board of Management yearly to be appointed by the Conference as the
Governing Body thereof which Board shall have full control over the education
given in the Schools, the School property, and all other matters relating to
the Schools.
2.(c) The Board of Management may delegate to a
body of local Administrative Governors all or any part of their functions. The
constitution powers and duties of such Administrative Governors shall be set
forth for each School in an ‘Instrument of Government’ drawn up by the Board of
Management . . .
3. The
trustees shall by the direction of the Board of Management from time to time
sell mortgage lease let exchange or otherwise deal with all or any part of the property
for the time being subject to the trusts of these Presents . . . as the Board
of Management may from time to time direct.
Clause 14 of
the trust deed expressly limited the application of the trust property and its
income to charitable purposes.
The property
is immediately adjacent to the western boundary of Kent College. On May 24 1974
the landlord demised to the then trustees of the Methodist Secondary Schools
Trust Deed of 1903 the property, together with its garage, outbuildings, yard
and garden for a term of 15 years from June 1 1974, at an initial annual rent
of £350 with provisions for rent reviews at the end of the third, sixth, ninth
and 12th years of the term. By clause 2(X) of the lease the tenants covenanted
‘to use the demised premises for the purposes of a private residence in single
occupation only’.
The judge
found that at the time of the demise the landlord understood from the then
bursar of Kent College, Mr Woodroffe, that the property would be used for
residential purposes only and that Kent College would use it for occupation by
anyone the school wished. The first occupant was a school caterer.
There are six
boarding-houses at the school accommodating 260 pupils. The total number of
pupils is about 600. The classrooms are extensive and science laboratories and
some of the other classrooms contain very valuable equipment, which has to be
safeguarded. On July 20 1977 Mr Lester was offered by the school’s assistant
bursar, acting on behalf of the local administrative governors, employment as a
resident caretaker upon the terms set out in a letter of that date. For the
proper performance of his duties, he was required to live at the property on a
service occupancy. The letter stated expressly that no tenancy would be created
by the arrangement. He has occupied
caretaker’s duties was prepared by the then bursar of the school and agreed
with Mr Lester. It set out in particular the caretaker’s duties with regard to
security, boiler operation and reaction to emergencies. Among the ‘general
responsibilities’ listed was ‘school security and emergency repair and
maintenance out of normal school hours’. Among the duties listed were ‘building
security at night and during holidays ensuring doors are opened before
breakfast and locked at night . . .’ and ‘out of normal working hours or during
normal working hours if a painter is not quickly available ensure that broken
windows are immediately made safe . . .’.
In order to
provide for quick communication between the school authorities and the
caretaker, a telephone was rented for Mr Lester by the school and installed in
the property and he was provided with a pager. In order to ensure that the
sounding of any alarm in the school could be heard by him a second alarm was
installed in the property. These arrangements were still in operation when the
present proceedings began.
The
judge’s judgment
In relation to
the first two of the four issues which he had to determine the judge rightly
pointed out that, to satisfy the provisions of section 23(1) of the Act, it is
the tenant who must both ‘occupy’ the relevant premises and ‘occupy them for
the purposes of a business carried on by him or for those and other purposes’,
but that section 23(2) contemplates the activity carried on by a corporate or
unincorporated body of persons as providing a qualifying purpose within section
23(1). (I pause to say that the activity of running a school clearly
constitutes a ‘business’.)
The judge
continued:
I am
satisfied first that Mr Lester, the school caretaker, is employed by the local
administrative governors of Kent College, the contract of employment having
been made with Mr Lester through their agent, the then bursar of the school. In
making that contract the local administrative governors acted under powers
delegated to them by the board of management for Methodist Residential Schools.
The tenants under the lease dated May 24 1974 are the trustees of the Methodist
Secondary Schools Trust Deed of 1903 as named in the Schedule to the Lease, and
not the board of management for Methodist Residential Schools or the local
administrative governors. That, however, is not the end of the inquiry, because
the provisions of section 41 of the Act may render occupation by the board of
management and the local administrative governors, and the carrying on of a
business by them, equivalent to occupation by and the carrying on a business by
the tenants, the trustees.
Section 41(1)
of the Act, so far as material, provides:
Where a
tenancy is held on trust, occupation by all or any of the beneficiaries under
the trust, and the carrying on of a business by all or any of the
beneficiaries, shall be treated for the purposes of section 23 of this Act as
equivalent to occupation or the carrying on of a business by the tenant; and in
relation to a tenancy to which this Part of this Act applies by virtue of the
foregoing provisions of this subsection —
(a) references (however expressed) in this Part
of this Act . . . to the business of, or to carrying on of business, use,
occupation or enjoyment by, the tenant shall be construed as including
references to the business of, or to carrying on of business, use, occupation
or enjoyment by, the beneficiaries or beneficiary; . . .
The judge held
that the effect of clauses 2(b) and 3 of the 1903 trust deed (together with
clauses 4 and 5, which it is unnecessary to quote) was to constitute the board
of management ‘as persons whose interest under the trust are such as to give
them the right as against the trustees to occupy the school property as defined
by clause 2(a) [of the trust deed] and are such that the trustees may properly
let them into possession’. He held that they were accordingly ‘beneficiaries’
within the provisions of section 41(1) of the Act in relation to the trustees’
interest under the lease. Furthermore, he said, the board of management were in
a position to enforce the provisions of the trust in their favour and for that
reason also were ‘beneficiaries’. He concluded:
Accordingly,
the board of management, and by virtue of the delegated powers, the local
administrative governors also, stand in the shoes of the trustees under the
provisions of section 41 subsection (1) for the purposes of determining whether
the trustees, as tenants under the lease, occupy Greengates and occupy it for
the purposes of a business carried on by them.
The judge went
on to hold that the trustees were in occupation of the property because the
board of management and the local administrative governors, ‘standing in the
shoes’ of the trustees, did occupy the property by their employee, Mr Lester,
whom they required to occupy the property as a term of his employment.
The
circumstances in which occupation by a servant is deemed in law to be the
occupation of his master are set out in the speech of Lord Diplock in Commissioner
of Valuation for Northern Ireland v Fermanagh Protestant Board of
Education [1969] 1 WLR 1708 at pp1721F-1731F. In the light of this
guidance, the judge concluded that, in relation to Mr Lester’s occupation, the
test was satisfied because his obligation to reside in the property was
attributable to and formed an integral part of the relationship with his
employers created by the contract of employment and his residence in the property
was of material assistance to his employers in the carrying out of their
activities.
Having decided
that the board of management and the local administrative governors (standing
in the shoes of the trustees) were in occupation of the property at all material
times, the judge went on to consider whether they were in such occupation ‘for
the purposes of a business carried on by them or for those and other purposes’,
within the meaning of section 23(1) of the Act.
I interpose a
brief reference to two earlier authorities relating to cases where it has been
said that residential property was occupied for the purposes of a business, in
addition to its residential use. In this context it has been common ground
between counsel on the present appeal that a distinction is to be drawn between
cases in which: (1) the tenant is himself a residential occupier; and (2)
others are residing in the property, but the tenant nevertheless claims to be
in occupation for the purposes of a business. The judgment of Lord Denning MR
in Cheryl Investments Ltd v Saldanha [1978] 1 WLR 1329 at p1337
illustrates that in the first case business activity must be ‘a significant
purpose’ of the tenant’s occupation if the case is to fall within section
23(1). In the second case, however, the test is rather different.
In Chapman v
Freeman [1978] 1 WLR 1298 the tenant of a cottage used it to
provide accommodation for staff employed at his nearby hotel. The Court of
Appeal held that the cottage was not ‘occupied for the purposes of business’
within the meaning of section 23(1), because the occupation of the cottage for
the purpose of housing hotel staff was merely for the convenience of the
business and not for a purpose necessary to the furtherance of the business. As
Lord Denning MR put it (at p1300H):
Speaking
generally, the test is whether it is necessary for the individual to
live in the house in order to perform his own particular duties properly; or
whether it is just for convenience that he should live there in
connection with his duties.
Geoffrey Lane
LJ, applying a slightly less strict test, put the matter thus (at p1301):
It was merely
a matter of convenience that the Andrews should be housed in this particular
cottage. That, to my mind, is not enough. The tenant must go beyond mere convenience
and show that the occupation was in furtherance of his business activities — in
other words, that it was for business reasons that he was occupying the cottage
and not merely for reasons of convenience.
In the present
case, the judge expressed his conclusion on the second issue before him as
follows:
It is
important to determine what was, and is being done by Mr Lester in Greengates,
as opposed to what work he does outside his house under the contract of employment.
Plainly what Mr Lester is doing in Greengates for much of the time is residing
there with his family. Save for one important area of his employment, he does
not do his work in Greengates. That important area of his employment is being
available as near as possible to the school to react to any emergency as I have
earlier described, whether brought to his attention by the alarm in the house,
or by a message received by telephone there.
In relation
to this second question, the inquiry is, is it necessary for Mr Lester to
reside in Greengates to perform that part of his duties: see Lord Denning’s
judgment in Chapman v Freeman (1978) 3 All ER 878, and does he
occupy Greengates to further the activity of the people called Methodist in
providing secondary school education. See the judgment of Lord Justice Geoffrey
Lane, as he then was, in the same case. Moreover, it must be established that
this area of Mr Lester’s employment, that is being available to react to
emergencies outside normal school hours, is a significant purpose of that
employment: see Cheryl Investments v Saldanha . . .
Having
considered all the evidence, I am satisfied that it was necessary for Mr Lester
to reside in Greengates to perform his duties under the contract of employment,
and that he did so in order to further the activity of the people called
Methodist in providing secondary education, and that being available in
Greengates to react to emergencies outside normal school hours was a
significant purpose of that employment.
Accordingly,
I find that the board of management and the local administrative governors,
standing in the shoes of the trustees, occupied
other purposes.
In view of the
distinction between the two classes of case mentioned above, it is common
ground that the judge’s references in this context to Cheryl Investments
v Saldanha and to ‘significant purpose’ were inapposite. However, in my
judgment, these references do not by themselves invalidate the judge’s decision
on the second question.
The judge
dealt with the third question succinctly as follows:
. . . were the
applicants carrying on a business in all or any part of Greengates in breach of
the prohibition, however expressed, for use for business purposes, which
subsisted under the terms of the tenancy and extended to the whole of
Greengates.
Clause 2 (X)
of the lease is subsisting and extends to the whole of Greengates. The phrase
‘to use the demised premises for the purposes of a private residence in single
occupation only’, by the addition of the word ‘only’, impliedly confines the
use of the premises to use for the purposes of a private residence in single
occupation. To the extent that the house was used for the purposes of rendering
Mr Lester available to hear the alarm and to receive messages, and from the
nearest point adjacent to the school, to react to any emergencies promptly,
there was a breach of Clause 2 (X). It was a significant breach, in that the
availability of Mr Lester in Greengates, was a significant area of his
employment, to which his employers attached great importance.
Finally, in
relation to the fourth question the judge concluded:
I am
satisfied first that the respondent was unaware that Greengates was being used
by the trustees for any purpose other than as a private residence in single
occupation. He did not know of the terms of Mr Lester’s employment as expressed
in the letter of July 20 1977, the job description of 1980, and the letter of
the June 27 1988, nor of the importance placed by Mr Lester’s employers on his
availability in Greengates to react to emergencies. At most, he assumed that
the school either wanted or required Mr Lester to live in Greengates, but he
did not know of the use to which the premises were in part being put. I am
satisfied that he neither consented to nor acquesced in the use of Greengates
for such purposes; he did not know of such use.
In the result,
the judge declared that the tenancy was not one to which Part II of the Act
applies and dismissed the trustees’ application for a new tenancy. The trustees
now appeal from his judgment essentially on the grounds that he went wrong on
the third and fourth issues. The landlord has put in a respondent’s notice
contending that the judge’s decision should be affirmed on additional grounds.
Those grounds are in substance that the judge erred in his conclusions on the
first two issues. The third issue, relating to breach, was the one first argued
before us and I propose to deal with it first.
If the trustees
were carrying on business in all or any part of the property, were they doing
so ‘in breach of a prohibition (however expressed) of use for business purposes
which subsists under the terms of the tenancy and extends to the whole of the
property’?
Mr Jay, for
the landlord, pointed out the words of section 23(4) of the Act quoted above
are widely drafted. As his first submission in this context he contended that
they pose an inescapable dilemma for the trustees. If (contrary to the
landlord’s contention) the judge was right in holding that the trustees,
through persons standing in their shoes, occupied the property ‘for the
purposes of a business carried on by them or for those and other purposes’
within the meaning of section 23(1), then (it was submitted) it must inevitably
follow that the trustees were using the property in breach of clause 2(X) of
the lease which obliged the tenant:
to use the
demised premises for the purposes of a private residence in single occupation
only.
A covenant in
these terms, in Mr Jay’s submission, by necessary implication prohibits use of
the property for the purposes of a business. He referred us in this context to German
v Chapman (1877) 7 ChD 271, in which the Court of Appeal held that the
erection of a building to be used for the education and lodging of 100 girls in
connection with a charitable institution for the daughters of missionaries,
supported by voluntary contributions, was a breach of a covenant that ‘no house
or other building to be erected or built upon the land shall be used or
occupied otherwise than as and for a private residence only, and not for any
purpose of trade’. There is, in Mr Jay’s submission, a ‘symmetry’ between
section 23(1) and section 23(4) which leads inevitably to the conclusion that
the trustees in the present case must fall foul of section 23(4) if they can
bring themselves within section 23(1).
I cannot, for
my part, accept that this neat symmetry exists. As Mr Ferris, for the trustees,
pointed out, a tenant does not have to satisfy the court that he is actually
carrying on a business on the premises in order to bring himself within
section 23(1). All he has to show is that he is occupying the premises ‘for the
purposes of a business carried on by him or for those and other purposes’.
Though they
may perhaps be rare, it is possible to conceive cases where a tenant occupies
premises ‘for the purposes of a business carried on by him or for those and
other purposes’, within the tests explained in Chapman v Freeman
(supra) without actually carrying on a business on the premises. To
postulate a hypothetical case, let it be supposed that a hotelier employs a
chef at a very high wage, but for exceptionally long hours, and requires him,
as a condition of his employment, to live in a cottage situated very near the
hotel, of which cottage the hotelier is tenant, because this is the only
practical way to ensure that the chef will be able to perform properly his
onerous duties in the hotel. Applying the Chapman v Freeman test,
I see no reason why the hotelier-tenant should not be able to assert that the
chef is occupying the cottage for the purposes of his business. On the other
hand, I would see no grounds for saying that that hotelier is carrying on his
business in the cottage, because the chef himself would be using the premises
solely as his own private residence and would not be performing any of his
chef’s duties in the cottage.
Mr Ferris,
rightly alive to this distinction, more than once submitted that, on the facts
of the present case, Mr Lester’s occupation of the property was ‘necessary for
the better performance of duties discharged elsewhere‘ (emphasis
supplied). The case, he submitted, is for example analogous to that of a
shopkeeper who lives in a flat above his shop, because this is necessary for
the better performance of his duties in the shop itself; an arrangement of this
kind does not involve the carrying on of any business in the flat itself. In
his submission, it was the judge’s conclusion that Cheryl Investments v Saldanha
required that the availability of Mr Lester to react to emergencies outside
normal school hours had to qualify as a ‘significant purpose’ of his
employment, which led him to conclude that the breach involved in use of the
property for this purpose was ‘a significant breach’.
I take this
last point and regard the sentence in the judgment which refers to ‘significant
breach’ as adding nothing material to the judge’s essential reasoning.
Nevertheless, it does not destroy it and I am unable to accept the shopkeeper
analogy, and other similar analogies suggested by Mr Ferris, as applicable on
the facts of the present case. The insuperable obstacle facing the trustees in
this context is the judge’s finding that ‘the property was used for the
purposes of rendering Mr Lester available to hear the alarm and to receive
messages and from the nearest point available to the school to react promptly’.
This finding is, I think, incapable of challenge.
The job
description of 1980, and the letter of 1988, make it clear that Mr Lester had
to hold himself available during non-working hours. Mr Cotes, the bursar of
Kent College, said in the course of his oral evidence-in-chief: ‘When the
caretaker is off duty, he is only off duty with the approval of the school
after adequate notice. He is on call seven days and seven nights a week.’
Under
cross-examination, Mr Cotes said: ‘The school requires Mr Lester to be on
call.’ These two citations by themselves
show how far removed the present case is from the hypothetical example of the
hotelier and chef to which it is referred above. The essential difference is
that in the present case Mr Lester is using the property partly for the purpose
of carrying out duties of his employment (as caretaker), which have to be
performed in the property, that is to say by continuously being on call
and making himself available — the alarm and the telephone being mechanisms
available to enable him to receive and respond to the calls. On his finding of
fact quoted in the preceding paragraph, the judge was, in my judgment, right in
holding that a breach of clause 2(X) had been and was being committed.
Has the
landlord acquiesced in the breach?
As was pointed
out by this court in Bell v Alfred Franks & Bartlett Co Ltd
[1980] 1 WLR 340, in the context of section 23(4) of the Act the word ‘consent’
is inserted in plain antithesis to ‘acquaintance’. ‘Acquiescence’ in the
relevant breach on the part of an immediate landlord, such as the landlord in
the present case, will suffice to render section 23(3) inapplicable.
Mr Ferris
pointed out that, in the present case, the landlord has accepted rent for the
entire contractual term of the lease and thereafter during the statutory
continuation. He has never
the tenancy as a ‘business tenancy’ by serving the section 25 notice, and
indeed going so far as to say in the note to that notice that the landlord
would not oppose an application for a new tenancy under Part II of the Act.
I accept that
if, before the proceedings began, the landlord had the requisite knowledge,
there could scarcely be a more obvious case of acquiescence. Knowledge,
however, is a prerequisite of acquiescence. In the words of Shaw LJ in the Bell
case (supra) (at p346):
What is meant
by acquiescence? It may involve no more
than a merely passive attitude, doing nothing at all. It requires as an
essential factor that there was knowledge of what was acquiesced in.
It is, I think,
clear that in the present case the landlord could not be said to have
acquiesced in the continuing breach of clause 2(X) of the lease unless he
knew the facts which gave rise to the breach. If the foregoing analysis of
the legal situation is correct, the fact which gave rise to the breach was the
continuing use of the property by the school’s caretaker, in part, for the
purpose of being available on call during ordinary non-working hours.
Early in his
judgment, the judge found the following facts. The landlord was aware of Mr
Lester’s occupation of Greengates shortly after July 1977. The landlord is a
prison officer currently serving in HM prison at Rochester and residing in his
own home there. However, having some of his family in Canterbury, he frequently
visits this city and passes the property. He has met Mr Lester about three
times. He believed him to be one of the school maintenance staff and assumed
that the school would either want or require him to live at the property. Later
in his judgment, when he came to answer the third question, he made the further
findings quoted above.
The judge did
not find that the landlord knew that Mr Lester was employed as the school’s
caretaker or that he was using the property in part for the purpose of being
available on call. On the contrary, he found that the landlord thought that Mr
Lester was one of the school’s maintenance staff and that he did not know of
the use to which the premises were in part being put.
Mr Ferris
invited us to overrule these findings. He drew our attention in particular to a
letter dated October 19 1981 written by Mr Cotes, the school bursar, to the
landlord, inviting him to consider the possibility of extending the lease of
the property. In one sentence this letter referred to ‘our resident caretaker’
(sic), though in the next sentence, somewhat confusingly, it referred to
our resident ‘caterer’ (sic). Mr Ferris also relied on a letter dated
June 28 1988, written by the trustees’ surveyors to the landlord’s surveyor, in
which reference was made to ‘alternative arrangements to house the caretaker
and his family’. He also referred us to the judge’s notes of the landlord’s
oral evidence and to letters written by the landlord’s solicitors in which
initially it was implicitly accepted that the tenancy was subject to the Act. In
all the circumstances, in his submission, the landlord must have known of the
use to which the property was being put.
I see the
force of Mr Ferris’ submissions on this point. It is, perhaps, at first sight
surprising that the landlord had not, during the course of eight years or so,
acquired a closer knowledge of Mr Lester’s job and duties than the judge found.
Nevertheless, the judge had the great advantage of seeing and hearing the
landlord (as well as Mr Cotes) give evidence. The landlord’s oral evidence, as
noted by the judge, was that ‘I did not believe Mr Lester was a caretaker. I
thought he was more of the maintenance staff’. The letter of October 19 1981
was specifically put to the landlord in cross-examination. The judge had all
the relevant correspondence before him. I see no sufficient grounds on which
this court would be justified in disturbing the judge’s findings of fact on
this point; he was entitled to accept the landlord’s evidence, and did accept
it.
Accordingly,
in my judgment, the landlord has not acquiesced in the breach.
Did the
trustees occupy the property, and if so did they occupy it for the purposes of
a business carried on by them and for those and other purposes?
If the answers
to the third and fourth questions above are correct, it must follow that the
trustees’ appeal must be dismissed and that it is not strictly necessary to
consider the issues raised by the landlord’s respondent’s notice. Nevertheless,
in this judgment it has so far been assumed in favour of the trustees that the
judge was right in deciding that they are in occupation of the property. Since
this issue has been argued before us and is of some general interest, I will
make a few obiter observations on it. As has already appeared, the judge
held that the board of management were ‘beneficiaries’ within the provisions of
section 41(1) of the Act in relation to the trustees’ interest under the lease.
He treated the words ‘beneficiaries under the trust’ in the context of section
41 as including persons whose interests under the relevant trust are such as to
give them the right as against the trustees to occupy the relevant property or
are such that the trustees may properly let them into possession. This was the
route by which he held that the trustees, rather than the board of management,
were in occupation of the property.
The judge’s
interpretation of the phrase ‘beneficiaries under the trust’ appears to have
been derived from an explanation of its meaning given in very similar terms by
Sir Raymond Evershed MR in Frish Ltd v Barclays Bank Ltd [1955] 2
QB 541 at pp548-549. However, in the immediately succeeding sentence, Sir
Raymond continued:
In other
words, the words ‘beneficiaries under the trust or any of them’ in that context
must be limited to persons occupying by virtue of their interest as
beneficiaries.
Similarly, (at
p554 ibid) Jenkins LJ said:
I think that
the interest of the beneficiary must be an interest under the trust on the
strength of which he intends to occupy.
If, as I am
disposed to think, the phrase ‘beneficiaries under the trust’ in section 41(1)
is limited to persons occupying by virtue of their interest as beneficiaries, I
find it difficult to see how the board of management can be said to fit the
description, bearing in mind that, under the trust as constituted, they are not
intended to take any personal benefit. I incline therefore to the view that Mr
Jay is right in submitting that in truth section 41 has no application
whatsoever on the facts of this case, and that it is the board of management,
through Mr Lester, who are in occupation of the property.
In Groveside
Properties Ltd v Westminster Medical School (1983) 47 P&CR 507,
which was followed by Scott J in Linden v Department of Health and
Social Security [1986] 1 All ER 691, the Court of Appeal held that a
medical school, which was a body corporate with the object of carrying on
Westminster Medical School for the purposes of education of students of
medicine or research, was in occupation of a flat for the purpose of section
23(1) by virtue of the substantial degree of control which it exercised over
it. On the facts of that case occupation was established without any reliance
on section 41. I think it unlikely, however, that on the facts of this case the
trustees could point to a sufficient degree of control over the property to
bring themselves within the ambit of that decision. The interposition of the
board of management, which has the power to give directions to the trustees,
renders this a special case.
I,
accordingly, incline to the view that the trustees have not established that
they are in occupation of the property. If this were right, their appeal would
have to be dismissed on this ground, if no other. However, the operation or
otherwise of section 23 of the Act in cases such as this where the tenanted
property is held by trustees on trust not for individuals but for public
charitable purposes, may give rise to knotty problems on which I think it
unnecessary to elaborate in this judgment.
Conclusion
As things are,
I prefer to base my decision on the third and fourth issues dealt with by the
judge on which, in my judgment, his conclusions cannot be disturbed. For these
reasons, I would dismiss this appeal.
ROSE and GLIDEWELL LJJ agreed and did not add anything.
Appeal
dismissed with costs.
