Landlord and Tenant Act 1954 — Order under section 38(4) purporting to exclude security of tenure — Lease for one year then year to year containing agreement excluding sections 24 to 28 — Where tenancy not a term certain whether tenant bound by agreement to exclude Act
On November 19
1979, and following a joint application by both parties, an order was made in
the county court under section 38(4) of the Landlord and Tenant Act 1954
authorising the exclusion of sections 24 to 28 in relation to a proposed
tenancy for a term of one year and to continue thereafter from year to year. On
the same date the respondent landlord granted a tenancy to the appellant
tenant; the tenancy recited the court order and was endorsed with the parties’
agreement excluding sections 24 to 28. On December 10 1992 the tenant issued
proceedings in the country court seeking the grant of a new tenancy under
section 26 of the Act. On the hearing of a preliminary issue, the learned
assistant recorder held that the tenancy
Act, but rejected the tenant’s contention that the agreement excluding the
protection of the Act was a nullity and of no effect. The tenant appealed.
anti-avoidance provision rendering all agreements as there defined void unless
they escape through section 38(4). Section 38(4) is itself carefully and
narrowly prescribed and renders such agreements valid provided only that there
is a prospective tenancy for a term of years certain, the court authorises an
agreement excluding the relevant provisions of the Act in relation to that
tenancy and the agreement is made pursuant to such authorisation. The agreement
fell outside section 38(4) because the tenancy was not for a term certain and
consequently there was no authorisation; section 38(1) therefore applied and
the agreement-excluding the Act was void.
The following
cases are referred to in this report.
Barton v Fincham [1921] 2 KB 291
Inland
Revenue Commissioners v Hoogstraten [1985]
QB 1077; [1984] 3 WLR 377; [1984] 3 All ER 25, CA
Isaacs v Robertson [1985] AC 97; [1984] 3 WLR 705; [1984] 3 All ER
140, PC
Joseph v Joseph [1967] Ch 78; [1966] 3 WLR 631; [1966] 3 All ER
486, CA
Smith v East Elloe Rural District Council [1956] AC 736; [1956] 2
WLR 888; [1956] 1 All ER 855; (1956) 54 LGR 233; 6 P&CR 102, HL
This was an
appeal by the tenant, William John Nicholls, from an order of Mr Assistant
Recorder Bush, sitting at Macclesfield County Court, who held on the hearing of
a preliminary issue that a tenancy granted by the landlord, William Nield
Kinsey, was excluded from the protection of the Landlord and Tenant Act 1954.
Martin Rodger
(instructed by Burges Salmon, of Bristol) appeared for the appellant; Paul
Lowenstein (instructed by Rigby Stringer & Holmes, of Sandbach) represented
the respondent.
Giving the
first judgment at the invitation of Mann LJ, HIRST LJ said: This is an
appeal against the order of Mr Assistant Recorder Bush made in Macclesfield
County Court on July 26 1993, whereby it was determined that a tenancy
agreement dated December 19 1979 made between the appellant tenant, Mr William
John Nicholls, and the respondent landlord, Mr William Nield Kinsey, is not an
agreement to which sections 24 to 28 in Part II of the Landlord and Tenant Act
1954 (‘the Act’) apply.
The appeal
raises a short, but important, point as to the construction and application of
section 38 of the Act.
The background
facts are that on December 19 1979 the respondent landlord granted to the
appellant tenant a business tenancy of a field at Windy Ridge, London Road,
Cranage, Chester. The tenancy was expressed to be for a period of 12 months
from December 19 1979, and to continue thereafter from year to year, but
determinable by the landlord giving to the tenant 12 months’ notice in writing
of his intention to terminate the agreement.
As is very
well known, the purpose of Part II was to provide security of tenure for
business tenancies. Section 24 lays down the provisions for the continuation of
such tenancies; section 25 lays down a procedure for the termination of such
tenancies by the landlord; section 26 prescribes the procedure for a business
tenant’s request for a new tenancy and sections 29 to 37 lay down the
procedures for court applications within the ambit of the Act.
Section 38,
which is the critical section for the purposes of this case, provides so far as
relevant as follows:
(1) Any agreement relating to a tenancy to which
this Part of this Act applies (whether contained in the instrument creating the
tenancy or not) shall be void (except as provided by subsection (4) of this
section) in so far as it purports to preclude the tenant from making an
application or request under this Part of this Act or provides for the
termination or the surrender of the tenancy in the event of his making such an
application or request or for the imposition of any penalty or disability on
the tenant in that event.
. . .
(4) The Court may–
(a) on the joint application of the persons who
will be the landlord and the tenant in relation to a tenancy to be granted for
a term of years certain which will be a tenancy to which this Part of this Act
applies, authorise an agreement excluding in relation to that tenancy the
provisions of sections 24 to 28 of this Act; and
(b) on the joint application of the persons who
are the landlord and the tenant in relation to a tenancy to which this Part of
this Act applies, authorise an agreement for the surrender of the tenancy on
such date or in such circumstances as may be specified in the agreement and on
such terms (if any) as may be so specified;
if the
agreement is contained in or endorsed on the instrument creating the tenancy or
such other instrument as the court may specify; and an agreement contained in
or endorsed on an instrument in pursuance of an authorisation given under this
subsection shall be valid notwithstanding anything in the preceding provisions of
this section.
Subsection (4)
was not contained in the statute as originally enacted, but was added by
section 5 of the Law of Property Act 1969.
On December 10
1992 the tenant issued proceedings in Macclesfield County Court seeking the
grant of a new tenancy under section 26 of the Act. That claim was met by the
landlord’s answer dated March 4 1993, which contended that there was no
jurisdiction under section 26 to grant a new tenancy, because, by an order made
in the same county court on December 19 1979 under the provisions of section 38
of the Act, it had been ordered that the tenancy in question should exclude
certain provisions of the Act, including sections 24 to 28 inclusive.
As a result,
on March 25 1993 Mr District Registrar Tynas ordered the trial of the following
preliminary issue:
Whether or
not by virtue of the order of this court dated 19th December 1979 the tenancy
dated 19th December 1979 made between the parties is a tenancy agreement which
falls inside the statutory protection of Part II of the Landlord and Tenant Act
1954.
The course of
events in December 1979 was that, on a joint application of the two parties to
the proposed lease, the district registrar (Mr Tynas) made the following order
dated December 19 1979:
UPON the
joint application of the applicants, IT IS ORDERED pursuant to Section 38 (4)
of the Landlord and Tenant Act 1954 (as amended by Section 5 of the Law of
Property Act 1969) that the applicants be at liberty to enter into an agreement
in the form of the draft annexed to the Originating Application herein
excluding the provisions of sections 24 to 28 of the Landlord and Tenant Act
1954 in relation to a tenancy of the premises intended to be created by a Lease
to be granted by William Nield Kinsey to William John Nicholls in the draft
form annexed to the Originating Application herein and that such agreement be
endorsed on the Lease.
Following upon
this authorisation, on the same day, the parties entered into the following
agreement which was endorsed on the tenancy agreement:
WHEREAS:
By an Order
of the Macclesfield County Court dated the nineteenth day of December One
thousand nine hundred and seventy nine in proceedings in which the Lessor and
the Tenant were Joint Applicants this Agreement was duly authorised pursuant to
Section 38(4) of the Landlord and Tenant Act 1954 (as amended by section 5 of
the Law of Property Act 1969) and it was ordered that this Agreement should be
endorsed on the attached Lease
NOW THIS
AGREEMENT WITNESSETH:
That the
Landlord and Tenant HEREBY AGREE AND DECLARE that the provisions of section 4
to 28 of the said Act of 1954 (as amended) shall not apply to the attached
Lease
The first
issue before the assistant recorder was whether the prospective tenancy to
which the district registrar’s order and the above quoted agreement applied was
for ‘a term of years certain’, within the ambit of section 38(4)(a),
seeing that the term, as already noted, was for a period of 12 months and to
continue thereafter from
resolved in the tenant’s favour, the assistant recorder holding that it was not
for a term of years certain, and this conclusion is not now challenged by Mr
Paul Lowenstein on behalf of the landlord. It follows, to put it for the time
being as neutrally as possible, that the district registrar was plainly not
entitled to make the order he did under section 38, though I stress that he is
open to no criticism on this count, since the point was never drawn to his
attention. The learned recorder then proceeded to consider the submission from
the tenant that the order was a nullity and the agreement consequently void; he
held that it was not a nullity, but a valid and effective order under section
38(1) which, unless and until set aside in the proper procedural fashion,
remained in force. Mr Martin Rodger, on behalf of the appellant, submits that
the case turns entirely on a question of law, namely the proper construction of
section 38, which he submits is clear and unambiguous and renders the agreement
in the present case void. His chain of reasoning is as follows:
(1) Section 38(1) is a declaratory anti-avoidance
provision rendering all agreements as there defined void unless they can escape
through the loophole provided by section 38(4). This, he submits, is apparent
not only from the clear wording of section 38(1) itself but also having regard
to the decision of the Court of Appeal in Joseph v Joseph [1967]
Ch 78 (Lord Denning MR, Diplock and Russell LJJ) where the Court of Appeal
unanimously held that the word ‘purported’ in section 38(1) means ‘has the
effect of’; and that, in the words of Diplock LJ (at p90) section 38(1):
. . . does
render void any provision of an agreement between landlord and tenant whereby
the tenant undertakes to do in the future any act which will have the effect
under the statute of disqualifying him from applying for a new tenancy.
Joseph’s case was decided at a time prior to the insertion of section 38(4)
by the Law of Property Act 1969.
(2) The section 38(4) loophole is itself
carefully and narrowly prescribed and renders such an agreement valid provided
only that:
(a) there is a prospective tenancy for a term of
years certain; and
(b) the court authorises an agreement excluding
the relevant provisions of the Act in relation to that tenancy; and
(c) the agreement is made in pursuance of such
authorisation.
(3) In the present case the prospective tenancy
was not for a term of years certain; consequently there was no authorisation by
the court in relation to such a tenancy, and the agreement was not made in
pursuance of an authorisation given under the subsection.
(4) The agreement therefore fell outside the
ambit of section 38(4) and was not valid under the terms of that subsection.
(5) The loophole thus having closed, section
38(1) applied with its full rigour, and the agreement was void.
Mr Rodger
further submitted that since the jurisdiction of the county court has been
expressly defined by section 38 the general principles as laid down by the
Court of Appeal (Bankes, Scrutton and Atkin LJJ) in Barton v Fincham
[1921] 2 KB 291 applied; Atkin LJ stated as follows in relation to a similar
provision in the Increase Rent and Mortgage Interest (Restrictions) Act 1920
(p299):
The section
appears to me to limit definitely the jurisdiction of the Courts in making
ejectment orders in the case of premises to which the Act applies. Parties
cannot by agreement give the Courts jurisdiction which the Legislature has
enacted they are not to have . . . A Court of limited jurisdiction cannot
increase its jurisdiction by a pleading rule, and is bound itself to take
notice of a defect of jurisdiction appearing on the face of the proceedings.
Mr
Lowenstein’s principal submission is that unless and until the registrar’s 1979
order is set aside, it remains in force and the court has no jurisdiction to
entertain the tenant’s application under section 26 of the Act. Consequently,
the judge was correct when he held that the order remained effective until such
time as it was set aside.
In support of
that argument he cited two leading authorities in very different fields. In Isaacs
v Robertson [1985] AC 97 the Privy Council had to consider a case where
a court granted an injunction notwithstanding the fact that under the RSC of
the West Indies Associated States the action had been deemed ‘altogether
abandoned’ as a result of delay beyond the prescribed period. Giving the
judgment of the board, Lord Diplock held that the order of the court granting
the injunction was not a nullity (p101):
upon the
short and well-established ground that an order made by a court of unlimited
jurisdiction, such as the High Court of St Vincent, must be obeyed unless and
until it has been set aside by the court.
A similar
conclusion was reached by the Court of Appeal in the case of Inland Revenue
Commissioners v Hoogstraten [1985] QB 1077 in relation to a
sequestration order imposed by a High Court judge which should not have been
made, but none the less remained valid unless and until set aside (at p1089 per
Dillon LJ with whom Stephenson LJ and Sir Roger Ormrod agreed).
With all
respect to Mr Lowenstein’s able argument, these two cases, which are fully
authoritative in their own sphere, have, in my judgment, no bearing on the
present case. The jurisdiction of the county court is entirely and exclusively
statutory, for present purposes in the terms of section 38, and it follows that
any departure from the criteria there laid down renders the authorisation of
the court as given by the registrar in the present case inherently invalid.
As a
subsidiary argument, Mr Lowenstein submitted that, even if the 1979 order were
invalid, the agreement itself was nevertheless valid because it was entered
into by the parties at a time when the 1979 order was a subsisting order of the
court. This, in my judgment, is a hopeless argument, since, under the express
terms of the subsection itself, the agreement can only be valid if it is made
pursuant to an authorisation given under subsection 38(4), which this one was
not; in any event, this approach would fatally undermine the whole purpose of
section 38 as an anti-avoidance provision and render section 38(1) a virtual
dead letter, since the signing of an agreement will, as in the present case,
almost certainly take place immediately following the grant of an
authorisation.
Returning to
Mr Rodger’s admirable argument, I am satisfied and I hold that every link in
his chain of reasoning, which I do not need to repeat, is sound and is
furthermore fully in accordance with the principles laid down in Barton’s
case.
In a nutshell,
the registrar’s order was invalid and as a result the agreement was not made
pursuant to an order under section 38(4) and therefore falls within and is
declared void by section 38(1).
For these
reasons I would allow this appeal, and would answer the question posed by the
preliminary issue in the affirmative, and declare that the tenancy agreement
dated December 19 1979 is a tenancy agreement which falls within the statutory
protection of Part II of the Landlord and Tenant Act 1954.
Agreeing, SIR
MICHAEL KERR said: This appeal should be allowed for the reasons stated in
the judgment of Hirst LJ. The only question before this court, which at first
sight appeared to present difficulty, was whether the order made on December 19
1979, although now seen to have been made without jurisdiction, was valid
unless or until set aside, or whether it was always a nullity. The assistant
recorder, Mr Bush, took the former view, but after hearing the argument before
us I have no doubt that the latter is correct. We have not had to grapple, as
he did, with the issue whether a tenancy for a period of 12 months and
thereafter from year to year is one ‘granted for a term of years certain’. The
appellants now accept that this was correctly answered in the negative. The
arguments and citations before us have therefore concentrated on what was a
secondary issue below.
One of the
cases not cited below which we have seen and to which Hirst LJ has already
referred is Barton v Fincham [1921] 2 KB 291 (CA). This shows
that Mr District Registrar Tynas, who also formulated the present preliminary
issue, is not to be criticised in any way for the order which he had made in
1979. In that case a landlord and tenant purported to conclude an agreement
which was in contravention of a precursor of the Rent Acts and which was then
unwittingly enforced by a county court. In agreeing with the
Atkin LJ said at p299:
If the
parties before the Court admit that one of the events has happened which give
the Court jurisdiction, and there is no reason to doubt the bona fides of the
admission, the Court is under no obligation to make further inquiry as to the
question of fact; but apart from an admission the Court cannot give effect to
an agreement, whether by way of compromise or otherwise, inconsistent with the
provisions of the Act.
However, in
that case no question arose about the validity of the order between the time when
it purported to be made and when it was set aside. In dealing with that issue,
the learned assistant recorder said in the present case:
The question
of whether or not the court had jurisdiction is a matter which requires careful
consideration of law and careful investigation and examination of the terms of
the tenancy agreement. In my judgment, to characterise the order which Mr
Registrar Tynas made on the material placed before him, about which I make
clear I know nothing, as being a nullity and as having no effect or being void,
would be quite wrong. In my judgment, that order is a perfectly valid order of
the court under section 38(4) which, unless and until it is set aside in the
proper procedural fashion, remains in force. I cannot embark upon a rehearing
on the basis of different evidence and on the basis of different, or it may be
additional, submissions of law, and set myself up as a Court of Appeal against
the decision of Mr Registrar Tynas, that is, unless I were invited to do so by
a proper procedural device.
I am bound to
say that, in my view, this approach is untenable in the circumstances of the
present case. The jurisdiction of Mr District Registrar Tynas was restricted by
statute in a double sense. First, the jurisdiction of all county courts is
limited by statute, though this plays no direct part in the present case.
Second, however, no court could make such an order unless it complied with
section 38(4) of the Landlord and Tenant Act 1954. But the order in question (I
omit the use of words such as ‘purported’ for brevity) was on its face in
conflict with subsection (4). It stated that it was made in relation to ‘an
agreement in the form of the draft annexed to the Originating Application
herein’. But that draft agreement referred on its face to a tenancy for 12
months and thereafter from year to year, and therefore not to a tenancy ‘for a
term of years certain’ as required by the subsection. No question of ‘evidence’
arises, as mentioned by Mr Bush. In effect, therefore, the order expressly incorporated
its own death sentence. Or, to adapt the colourful language of Lord Radcliffe
in Smith v East Elloe Rural District Council [1956] AC 736 at
p769, it bore the brand of invalidity upon its forehead.
This, I think,
is the fundamental distinction between the present case and cases such as Isaacs
v Robertson [1985] AC 97 and Inland Revenue Commissioners v Hoogstraten
[1985] QB 1077, to which Hirst LJ has also already referred. In such cases the
invalidity of the order in question is not intrinsic, as here, but dependent
upon the establishment of extrinsic facts, which may then reveal that the order
had been made without jurisdiction. Thus, in the former case the determination
of the status of the order required the investigation and ascertainment of facts
showing that the action in question was deemed to have been already ‘altogether
abandoned’. Similarly, in the latter case, the invalidity of the sequestration
order in question could be determined only after an investigation which showed
that the defendant had ceased to be in contempt of court by the time when it
was made: see per Dillon LJ at p1086-87.
The present
case was treated by the assistant recorder as falling into the same category,
because the validity or invalidity of the 1979 order required the determination
of the legal issue which he had to resolve: is a tenancy for a period of 12
months and thereafter from year to year, a tenancy for a term of years
certain? That, however, is an issue of
law, not of fact, and one which arose on the face of the order. In my view,
that is a crucial distinction. The fact that it may have been a difficult issue
of law makes no difference. In law, and on its face, the order was there and
then either good or bad, without the need for any further investigation. It was
intrinsically bad. Therefore it was always a nullity.
What we do not
have to decide on this appeal is whether the position would be any different if
the 1979 order had been made in the High Court, being a court of unlimited
jurisdiction, to use the phrase of Lord Diplock in Isaacs v Robertson
(supra). The position in that case was, of course, not the same as
here, since the validity or invalidity of the order did not depend, as here,
upon an intrinsic issue of law which was apparent on the face of the order
itself, without recourse to any extraneous factors. However, the generality of
the passage from p102G to 103E of the judgment purports to cover all High Court
cases. But, since cases such as the present raise no issue which is relevant to
the limited statutory jurisdiction of the county courts, but fall to be
determined solely by reference to the intrinsic statutory jurisdiction relating
to the particular order, it is difficult to see any logical difference between
the two jurisdictions, assuming that we are right in our conclusion on the
present appeal. However, that is an issue which I gladly leave for argument and
decision on another occasion.
MANN LJ agreed and did not add anything.
Appeal
allowed with costs; declaration that the tenancy agreement is a tenancy
agreement which falls within the statutory protection of Part II of the
Landlord and Tenant Act 1954; leave to appeal to the House of Lords refused.
