Agricultural holdings — Validity of notice to pay rent due and of notice to remedy breaches of a term or condition of the tenancy, with consequential question as to validity of notice to quit — Tenant was liable under the contract of tenancy, as varied by agreement, to pay a rent of £3,800 per annum, payable in arrears in two instalments on Lady Day and Michaelmas, and to pay interest on the landlord’s capital expenditure on improvements, again in two instalments on the same dates as the rent — Improvements consisted of a water supply and a lean-to cattle yard — Tenant had sent cheques to the landlord for two instalments of rent (although without payment of interest on the improvements) but these had not been presented for payment, the landlord fearing that acceptance of rent might prejudice a notice to quit which was the subject of a pending arbitration — (In fact an award in favour of the landlord in this arbitration was later set aside, so that it had no effect on the tenancy) — Subsequently, the unpresented cheques having become out of date, the landlord demanded payment of three half-years’ rent and interest, and, on non-payment, levied distress — Tenant obtained a court order restraining landlord from proceeding with the distress on condition of payment into court of £3,800 on account of sums due — At this point, disregarding the unpresented cheques, but taking account of the £3,800, the tenant owed one half-year’s rent plus accumulated interest on the improvements — Landlord then served a notice to pay rent due and a notice to remedy based on alleged breach of the obligation to pay interest — No payments having been made in response to either notice, landlord served a notice to quit under Case D(a) and (b) of section 2(3) of the Agricultural Holdings (Notices to Quit) Act 1977 — A new arbitration thereupon took place and, on a case stated, the judge held that the notice to quit was good, as the tenant had failed to comply with the notice to pay rent, but that the notice to remedy had not been in proper form — Tenant appealed to the Court of Appeal and landlord cross-appealed in regard to the notice to remedy — Two main questions arose on the appeal, the effect of the delivery of a cheque in payment to a creditor and the application of the rules as to the appropriation of payments — The court rejected a submission by the tenant that once the cheque had been delivered to the landlord in the ordinary way, and subject to the cheque not thereafter being dishonoured when presented for payment, the tenant had paid the rent represented by that cheque and it was no longer ‘due’ — This argument failed to distinguish satisfactorily between tender and payment — The case of Beevers v Mason and other authorities cited were clearly distinguishable — Tenant’s alternative argument, based on appropriation of the £3,800 paid into court, also failed — The principle was clear, that a debtor in making payments may appropriate the money as he pleases, but, if he does not, the right passes to the creditor — In paying the £3,800 into court the tenant did not make any express or implied appropriation of the sum to particular rent instalments; he was merely complying with the conditions of a court order — Nor was any inference justifiable as to appropriation of the £3,800 to any particular instalments when it was paid out — But the creditor, the landlord, did appropriate the £3,800 to instalments other than the one which was the subject of the notice to pay — Hence tenant’s contention that rent had been paid in compliance with the notice to pay failed — As to the notice to remedy, an argument that the agreements to pay interest were not terms or conditions of the tenancy was rejected and criticisms of the wording of the notice as containing inaccuracies or insufficiency of particulars were dismissed as insubstantial; it was admitted that the tenant could not have been misled by them — The notice to remedy passed the strict test applied by Pickard v Bishop and Dickinson v Boucher — Held, accordingly, that the notice to quit was good — Tenant’s appeal dismissed and landlord’s cross-appeal on the notice to remedy allowed
The following cases are referred to in this report.
Beevers v Mason (1978) 37 P&CR 452; 248 EG 781, [1978] 2 EGLR 3, CA
Brimnes, The: Tenax Steamship Co v Owners of the Brimnes [1975] QB 929; [1974] 3 WLR 613; [1974] 3 All ER 88; [1974] 2 Lloyd’s Rep 241, CA
Carradine Properties Ltd v Aslam [1976] 1 WLR 442; [1976] 1 All ER 573; (1975) 32 P&CR 12
Cory Brothers & Co Ltd v Owners of the Turkish Steamship ‘Mecca‘ [1897] AC 286; [1895-9] All ER Rep 933, HL
Dickinson v Boucher [1984] EGD 19; (1983) 269 EG 1159, [1984] 1 EGLR 12, CA
Dixon v Clark (1848) 5 CB 365
Germax Securities Ltd v Spiegal (1978) 37 P&CR 204; 250 EG 449, [1979] 1 EGLR 84, CA
Leeson v Leeson [1936] 2 KB 156; [1936] 2 All ER 133
Nash v Hodgson (1855) 6 de GM&G 474
Pickard v Bishop (1975) 31 P&CR 108; [1975] EGD 24; 235 EG 133, [1975] 2 EGLR 1, CA
Tankexpress A/S v Compagnie Financiere Belge des Petroles SA [1949] AC 76; [1948] 2 All ER 939, HL
This was an appeal by the tenant, John Derek Thomas, from a decision of Judge Chope at Truro County Court holding that a notice to quit given by the landlord, the Official Solicitor to the Supreme Court, in respect of the tenancy of a farm known as Colan Barton and Penhill Farm, Cornwall, was a good and sufficient notice. The judge had held that the tenant had failed to comply with a notice to pay rent. A notice to remedy was held to be defective in form, but this did not affect the validity of the notice to quit based on the notice to pay rent. The landlord cross-appealed against the decision on the notice to remedy.
Michael Barnes QC and John Male (instructed by Foot & Bowden, of Plymouth) appeared on behalf of the appellant, the tenant; Derek Wood QC and Joanne Moss (instructed by Robbins Olivey & Blake Lapthorn, agents for Burges Salmon, of Bristol) represented the respondent, the landlord.
Giving the first judgment at the invitation of Slade LJ, NICHOLLS LJ said: This is an appeal from a decision of His Honour Judge Chope sitting in the Truro County Court on April 3 1985 on a case|page:2| stated by an arbitrator under the Agricultural Holdings Act 1948 (‘the 1948 Act’).
The case concerns the validity of notices to pay rent and to remedy breaches of a term or condition of an agricultural tenancy. The appellant, Mr John Derek Thomas, is or was the tenant of a 335-acre farm known as Colan Barton and Penhill Farm, at Colan, near Newquay, Cornwall. The Official Solicitor is the respondent landlord. If neither of the notices was valid, a notice to quit the farm subsequently served by the landlord in May 1982 and expiring at Michaelmas 1983 was itself invalid.
The Facts
To understand the issues raised by this appeal it is necessary to set out some of the facts reasonably fully. The tenancy agreement between the parties is dated January 22 1975 and created a yearly Michaelmas tenancy. Rent was payable half-yearly in arrears on Lady Day and at Michaelmas, save that the last payment of rent was to be made on the Midsummer Day preceding the termination of the tenancy. At all times material to this appeal the annual amount of the rent was £3,800. In 1979 the landlord made improvements to the farm, installing mains water and constructing a lean-to cattle yard. In respect of the water supply the tenant agreed to pay, as interest on the landlord’s capital outlay, the annual sum of £173.20, by two instalments of £86.60 each on the rent days, commencing Michaelmas 1979. For the cattle yard the agreed annual payment was £236, payable similarly by two equal instalments on the rent days. This sum was to be charged from Christmas 1979. Thus the payment due at Lady Day 1980 would be for one quarter only (£59), and on subsequent rent days the payment due would be £118. Summarising, the total sum due for rent and interest charges on September 29 1979 was £1,986.60; on March 25 1980, £2,045.60; and on September 29 1980 and subsequent rent days, £2,104.60.
From the inception of the tenancy the practice of the landlord was to send the tenant a rent demand each half-year, and for the tenant to pay by cheque about two or three weeks late. This practice was followed at Lady Day 1980: the landlord sought payment of £2,045.60, and the tenant sent his cheque for this amount on April 11 1980.
In August 1980 the landlord served on the tenant a notice to quit expiring at Michaelmas 1981, on the ground that the tenant had unlawfully sublet part of the farm (Case E in section 2(3) of the Agricultural Holdings (Notices to Quit) Act 1977, which I shall refer to as the ‘1977 Act’). The tenant challenged the validity of the notice (‘the Case E notice to quit’) and referred the matter to arbitration. That was the first arbitration. The landlord or his advisers were concerned that the demand for or acceptance of further payments of rent might prejudice that notice to quit and so no demand was made for payment of rent on September 29 1980.
Nevertheless, on October 17 1980 the tenant wrote to the landlord, sending a cheque for £2,045.60 and commenting that from the absence of a rent demand he could only conclude that the landlord’s agents were continuing in their attempt to obtain vacant possession. This sum was the same as that demanded and paid at the preceding rent day, but (as explained above) it was £59 short of the total sum due for rent and interest charges at September 29 1980. In answer, the landlord’s solicitors, Burges Salmon & Co, wrote to the tenant’s then solicitors, Foot & Bowden, on October 27. They explained the reason for the absence of a rent demand. They stated, in short, that they would accept the cheque and advise their client to present it for payment provided the tenant acknowledged that acceptance of the rent proffered would not prejudice the landlord’s rights and would be without prejudice to the parties’ existing rights pursuant to the notice to quit and generally. Foot and Bowden acknowledged receipt and said they would contact Burges Salmon again when they had their client’s instructions. They did not get in touch again. The October 1980 cheque remained with the landlord or his advisers, unpresented, until it was produced at the arbitration in March 1983.
On February 4 1981 the tenant sent the landlord a further cheque, for £2,045.60, in respect of the half-year ending Lady Day 1981. It was not disputed that, as with the previous cheque, the landlord retained this cheque but did not present it for payment.
On July 17 1981 the arbitrator made his award in respect of the Case E notice to quit, finding in the landlord’s favour. On the basis of that award, the tenancy was due to determine on September 29 1981. That award having been made, the landlord’s advisers felt that the landlord could safely demand and accept rent. The cheques sent in October 1980 and February 1981 were now out of date. So on August 6 1981 the landlord’s solicitors wrote to the new solicitors acting for the tenant, Bennett & Co, demanding payment of, among other sums, the two half-years’ rents falling due at Michaelmas 1980 and Lady Day 1981, and also the half-year’s rent for the period ending Michaelmas 1981 (which, assuming the notice to quit took effect, was payable at Midsummer 1981 as the last half-year’s rent payable under the tenancy agreement). Also demanded were three half-years’ interest payments of £204.60 each, due at Michaelmas 1980, Lady Day 1981 and Michaelmas 1981, the arbitrator’s costs, and rent due on another farm. The landlord’s solicitors said that they would not take steps to distrain for the rent due for 14 days, since the landlord had refused to accept payments of rent during the currency of the arbitration. In answer the tenant’s solicitors wrote on August 10, stating that they had an appointment to see the tenant on August 18 and they would write again immediately thereafter. A month later, having heard nothing further from the tenant or his solicitors, on September 14 Burges Salmon informed Bennett that they were taking steps to levy distress. A reminder, concerning this and also the conduct of the proceedings which the tenant had started to set aside the arbitrator’s award, was sent on October 5.
On November 17, there still having been no response, the landlord levied distress. Bennett at once telephoned Burges Salmon, disputing the validity of the distraint warrant on several grounds. These included the following: under the 1948 Act distress could not be levied for more than 12 months’ rent; in view of the notice to quit it was doubtful whether a landlord and tenant relationship still existed in respect of the farm; and rent had been tendered and refused. The dispute was resolved temporarily by the parties agreeing that a walking possession agreement should be entered into.
The events which then happened are of crucial importance on one of the issues arising on this appeal. On December 7 Bennett applied ex parte to the county court for an order restraining the landlord from distraining upon any of the chattels at the farm. That order was made for a period ending on December 15, provided that the tenant paid into court ‘the sum of £3,800 on account of any moneys due from the (tenant) to the (landlord)’ by noon on December 10. Bennett told Burgess Salmon of the order over the telephone and by a letter dated December 8. They also sent a copy of the order when it had been sealed. On December 9 the sum of £3,800 was duly paid into court. On December 14, which was the day before the tenant’s application was due to come before the court again, the parties’ solicitors reached an agreement in the following terms:
The terms of the settlement are that we, on behalf of the plaintiff, agree to the sum of £3,800 being paid out of court to the defendant’s solicitors and the defendant’s solicitors on behalf of the defendant agree to withdraw the bailiff forthwith and not to re-instruct him for the balance.
The sum in court was then paid out to the landlord’s solicitors, and the bailiff was withdrawn.
Disregarding the two unpresented cheques already mentioned, the position then was that in respect of the period of one and a half years ending Michaelmas 1981, the tenant had paid two half-years’ instalments of rent and no sums in respect of interest charges: still outstanding was £1,900 in respect of one half-year’s rent and £613.80 in respect of three half-years’ interest charges. On December 29 1981 Burges, Salmon wrote to the tenant’s agents, Lodge & Thomas, suggesting that they should remind the tenant of his outstanding liabilities.
More importantly, on January 14 1982 Burges Salmon wrote to Bennett saying that they had instructions to serve notices to pay and remedy in respect of the arrears of rent and interest. Burges Salmon mentioned that they were unable to understand why the tenant persisted in his contention that his tenancy would survive when he acknowledged that there were substantial arrears of rent but he would not pay them. The letter also mentioned that the tenant already had experience of non-compliance with a notice to pay at another farm, and that he must be taken to be aware of the consequences of non-compliance.
On January 18 1982 a notice to pay and a notice to remedy were served on the tenant. The terms of both these notices are of importance on this appeal. At this time no form was prescribed for a notice to pay rent, and as served the notice, under a heading referring to the 1977 Act and to the farm, was addressed to the tenant and read:
As solicitors for and on behalf of your landlord The Official Solicitor to the Supreme Court, we hereby give you NOTICE REQUIRING YOU TO PAY within two months from the service of this Notice the rent due in respect of the above holding as set out below:
Half year’s rent due on the 29th day of September 1981 £1,900.00.
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It was dated and signed by the landlord’s solicitors.
The notice to remedy was or purported to be in the form prescribed by the Agriculture (Forms of Notices to Remedy) Regulations 1978. Para 1 required the tenant to remedy within two months the breaches, particulars whereof were given below, of the terms or conditions of the tenancy. The particulars given below were, in the left-hand column under the heading ‘Term or condition of tenancy’, the words ‘Supplemental agreement for the payment of interest on landlord’s improvements’, and, in the right-hand column under the heading ‘Particulars of breach’, the words ‘You have failed to pay the interest due on the’ followed by the three dates of September 29 1980, March 25 1981 and September 29 1981. Against each date was specified the sum of £204.60, with a total given of £613.80.
No payments having been made pursuant to either notice, four months later a further notice to quit the farm was served, on May 20 1982, expiring at Michaelmas 1983, this notice to quit being based on the tenant’s failure to comply with the notices to pay and to remedy. The tenant, through his solicitors (by now the tenant had returned to Foot & Bowden), disputed the validity of the notice to quit on the grounds that neither the notice to pay nor the notice to remedy were served on the tenant, that the half-year’s rent due on September 29 1981 referred to in the notice to pay was not outstanding at the date of that notice, and that the amounts specified in the notice to remedy were incorrect. The tenant requested arbitration, and on August 19 1982 Mr L J Stagg BSc FRICS CAAV was appointed arbitrator in this (second) arbitration.
Meanwhile, on June 28 1982, Judge Chope had set aside the arbitrator’s award in the first arbitration (which had upheld the Case E notice to quit) on the ground, so we are informed, that the arbitrator’s failure to accede to a request by the tenant for an adjournment of the hearing in circumstances I need not mention amounted to misconduct. On October 28 this court dismissed an appeal against that order*. It was common ground before us that for all practical purposes that notice to quit is now dead.
*Editor’s note: Reported at (1982) 265 EG 601, [1983] 1 EGLR 1.
On March 3 and 4 1981 a hearing took place before the arbitrator, Mr Stagg, in the second arbitration. The parties asked the arbitrator to inform them of his proposed rulings on matters raised by them, and this he did at the end of May 1983. The landlord’s solicitors then asked the arbitrator to state a case for the opinion of the court on the issues of law arising. He did so, and in the stated case, after setting out the facts as found by him to the same effect as I have set them out above, he stated as the question of law for the opinion of the court whether, upon those facts, the notice to quit dated May 20 1982 was a good and sufficient notice and whether either or both of the reasons stated in the notice to quit had been made out.
The matter came before Judge Chope, and by his order dated April 3 1985 he declared that the notice to quit was a good and sufficient notice. He held that the tenant had failed to comply with a valid notice to pay rent (Case D(a) in section 2(3) of the 1977 Act), but that the notice to remedy (Case D(b)) was not in proper form. With the leave of the judge, the tenant appealed, and the landlord cross-appealed in respect of the adverse decision on the notice to remedy. The appeal and cross-appeal are now before us.
The notice to pay
In summary form, the tenant’s challenge to the notice to pay is as follows. On its true construction, the notice required payment of the half-year’s rent falling due for payment on September 29 1981 (which I shall call ‘the September 1981 rent’); when the notice to pay was served, the tenant had already discharged his obligation to pay that rent, because either (a) by then he had paid all the rent due up to September 1981, the rent due on September 29 1980 (‘the September 1980 rent’) having been paid by the cheque sent on October 17 1980, and the two subsequent rental instalments having been discharged by the sum of £3,800 paid out of court to the landlord in December 1981, or (b) even if the receipt of the cheque in October 1980 did not amount to payment of the September 1980 rent, still the September 1981 rent had been paid by the payment out of court, the sum of £3,800 comprised therein having been appropriated to the two half-years’ instalments of rent of £1,900 each due on March 25 1981 and September 29 1981.
I shall consider first the construction of the notice to pay, the material part of which I have already quoted. For the landlord, Mr Wood submitted that in the notice ‘due’ means ‘owing’, and that the notice had been carefully drafted so as to make it clear that the rent being demanded was rent which had accrued by September 1981, and not later. The importance of the date was that the landlord was concerned not to demand rent accruing due after the date on which, under the Case E notice to quit, the tenancy had determined. In the notice, he submitted, the landlord was stating the rent position as at Michaelmas 1981.
I am unable to accept this submission. Whether demanding payment of one particular instalment of rent which had been paid would lead to the invalidity of the notice, when to the knowledge of both parties an earlier instalment still remained unpaid, is a separate question (upon which I express no view) from the question of construction now being considered. Upon the latter question, I think that the natural reading of the notice is that the landlord was requiring payment of £1,900 as the half-year’s rent which became due on September 29 1981. I consider that to read this notice as requiring payment of a half-year’s rent which fell due earlier than September 29 1981 but which was still outstanding on that day would be to give the wording a strained interpretation for which I can see no justification.
I am fortified in this conclusion by the wording of the notice to remedy which was served at the same time. In that notice failure to pay interest ‘due on’ September 29 1980, March 25 1981 and September 29 1981 was asserted. Plainly in that notice the phrase ‘due on’ was being used in the sense of ‘which became due on’ and not in the sense contended for by the landlord regarding the notice to pay.
I turn next to the tenant’s submission that the September 1980 rent had been paid by his sending and the landlord’s receiving the cheque for £2,045.60 in October 1980. The context in which this submission was made was Case D(a) in section 2 of the 1977 Act. Section 2(3) of that Act sets out the cases in which the restrictions in subsection (1) on the operation of notices to quit do not apply. Case D(a) is where:
at the date of the giving of the notice to quit the tenant had failed to comply with a notice in writing served on him by the landlord, being . . . (a) a notice requiring him within two months from the service of the notice to pay any rent due in respect of the agricultural holding to which the notice to quit relates.
Thus to fall within Case D(a) there must have been a failure to comply with a notice requiring the tenant to pay ‘rent due’ in respect of the agricultural holding.
As I have mentioned, the October 1980 cheque was never paid or presented for payment. The tenant has not sought to assert that at any stage he mistakenly believed that the cheque had been presented or honoured, or that the landlord’s position is any different from what it would be if, instead of retaining the cheque, the landlord’s solicitors had returned it to the tenant with their letter of October 27 1980.
For the tenant Mr Barnes advanced the argument, which was nothing if not bold, that once the tenant’s cheque had been delivered to the landlord through the post in the ordinary way, and subject to the cheque not thereafter being dishonoured when presented for payment, the tenant had paid the rent, and for ever thereafter there was no longer any rent ‘due’ in respect of the half-year ending September 29 1980. By getting the cheque into the landlord’s possession the tenant had done all he was obliged to do, and all that he could do. He could not compel the landlord to present the cheque. If the landlord chose not to present the cheque but decided, for example, to return it or retain it for so long that it became out of date, the landlord’s only remedy when he changed his mind and sought to obtain the money was to sue the tenant on the cheque. He could not sue for the rent, or exercise any of the other rights possessed by him in respect of unpaid rent, because once the landlord received the cheque the rent (subject as I have just mentioned) had been paid and the tenant’s obligation under the lease discharged. In support of this argument, Mr Barnes urged that if the law were not so, a creditor, by refusing to accept payment, could by his own act put himself in the position of being able to exercise the rights which, under the lease or contract in question, became exercisable if the debtor failed to make payment by the due date.
On this line of argument I should first mention two matters which are not in dispute. First, it was common ground between counsel that, although a debtor is prima facie obliged to make payment in legal currency, the parties may agree otherwise, either expressly or impliedly. Not surprisingly, it was not disputed that from the course of conduct in the present case the landlord was to be taken as having agreed impliedly that (at any rate, without giving reasonable prior notice) he would not insist on payment in cash but would accept payment by a different mode, viz by cheque (subject to the cheque|page:4| being duly met).
Second, it was common ground that a tender does not discharge a debt. If a debtor makes an unconditional offer to the creditor of the sum due in cash or (in the present case) by cheque, and that tender is refused by the creditor, that does not discharge the debt, although in appropriate circumstances it will provide the debtor with a defence of tender when subsequently sued. That defence had consequences so far as interest, damages and costs are concerned. In Dixon v Clark (1848) 5 CB 365, Wilde CJ said this, at p 377, regarding a plea of tender:
In actions of debt and assumpsit, the principle of the plea of tender, in our apprehension, is, that the defendant has been always ready (toujours prist) to perform entirely the contract on which the action is founded; and that he did perform it, as far as he was able, by tendering the requisite money; the plaintiff himself precluding a complete performance, by refusing to receive it. And, as, in ordinary cases, the debt is not discharged by such tender and refusal, the plea must not only go on to allege that the defendant is still ready (uncore prist), but must be accompanied by a profert in curiam of the money tendered. If the defendant can maintain this plea, although he will not thereby bar the debt (for that would be inconsistent with the uncore prist and profert in curiam), yet he will answer the action, in the sense that he will recover judgment for his costs of defence against the plaintiff, — in which respect the plea of tender is essentially different from that of payment of money into court.
For my part I am unable to accept the tenant’s argument on this point. This argument would distinguish between tender (where there is admittedly no discharge of the debt) on the one hand and payment (where the debt is discharged) on the other hand, not according to whether the proffered cheque has been accepted or not, but according to whether the tenant has failed to get or succeeded in getting the cheque into the landlord’s possession. If he has so succeeded, the argument runs, it matters not that this was achieved without the landlord’s knowledge or consent. To make this the touchstone for distinguishing a tender from a payment seems to me to be nothing short of absurd.
Mr Barnes did not shrink from the consequences of his argument. He accepted that if the tenant had walked into the Official Solicitor’s office and offered a cheque for the rent, which had been refused, that would not have discharged the debt. If the tenant had then left the office but slipped the cheque back into the landlord’s office through the letter box as he was leaving, that would have been payment and the debt would have been discharged. Likewise if he had posted the cheque back and the letter had been duly delivered to the landlord’s office. Mr Barnes accepted that would have been so even though at the time of slipping the cheque through the letter box or into the post the tenant knew that the landlord was not willing to accept payment of rent for the time being, whether in the form of cash or by way of cheque.
This cannot be right. The need for the law to protect a debtor against a creditor seeking to take advantage of his own, self-induced non-payment (viz where he refuses to accept payment from the debtor) exists as much in the case where a creditor is proffered a cheque which he refuses to accept as in the case where a creditor receives a cheque through the post but refuses to accept it. I did not understand Mr Barnes to contend otherwise. Yet the tenant’s argument recognises that in the first of these two cases there will have been only a tender and the debt will not have been discharged.
Thus whatever is the principle by which the law protects a debtor by preventing a creditor taking advantage of his own wrong, in refusing to accept a proffered payment, it cannot be the principle contended for by the tenant in this case.
Given, then, that this suggested justification for the tenant’s argument fails, for my part I think that one looks in vain for any principle which would draw the dividing line between tender and payment at the point contended for.
Before turning to the authorities relied upon by Mr Barnes, I should mention that this is not a case where, in my view, any need arises to protect a tenant against a landlord seeking to take advantage of non-receipt of money brought about by his own act. It might have been otherwise if and so long as the landlord’s attitude had remained as expressed in Burges Salmon’s letter of October 27 1980: that he would accept the proffered cheque if (but implicitly only if) the requested assurance was given by the tenant. But, in the event, the landlord became willing to accept rent again after the arbitrator had made his award in the first arbitration, and by the letters of August 6 1981, December 29 1981 and January 14 1982, the tenant’s solicitors and agents were left in no doubt on this score. So that long before the notice to pay was served on January 18 1982 fresh demands for payment had been made, and for some months the tenant had failed to come forward with a replacement cheque.
The authority upon which Mr Barnes principally relied was the decision of this court in the landlord and tenant case of Beevers v Mason (1978) 37 P & CR 452.* There a notice to pay rent of an agricultural holding within two months was served on a tenant on October 22 1975. On Saturday December 20 the tenant posted a letter enclosing the cheque. The letter was postmarked Monday December 22 and it was delivered to the address of one of the landlords on December 24. The question for decision was whether the tenant had complied with the requirement to pay the rent within the two-month period, expiring on December 22, by posting the letter by that date, although the letter was not received by the landlord until two days later. The court held that the tenant had so complied, because on the facts the accepted mode of payment had been for the tenant to send a cheque by post to the landlords, and it was common ground that the post was properly to be regarded as agent of both landlord and tenant with regard to the transmission of the rent. In this context, Shaw LJ said this at p 460:
When the cheque was put into the post, then, subject only to its being honoured, the rent was paid.
*Editor’s note: Also reported at (1978) 248 EG 781, [1978] 2 EGLR 3.
Earlier, at p 458, he said:
It is clear from the findings of the arbitrator in the present case that, over the years, the accepted mode of payment had been for the tenant to send a cheque by post to their landlords. So long as the cheque had come into their hands and been duly met, the rent had been paid.
In my view, properly understood, that decision and those passages from the judgment of Shaw LJ do not establish or support the proposition contended for by Mr Barnes. In that case there was no question of the landlord refusing to accept the rent. The court inferred that the cheque had been presented and paid, so the question related not to whether there had been payment of the rent but to the time at which the admitted payment was to be regarded as having been made in the light of the facts of that case. Shaw LJ’s remarks were made in the context of that question, and I can see no reason for supposing that, when making them, he had in mind the situation which would have arisen if the landlords had refused to accept the cheque. Had the landlords so refused, I do not doubt that they would have been unable to rely on that refusal as a ground for saying that the tenant had not complied with the notice, but I do not think that it follows from what Shaw LJ said in that case that if the landlords had so refused, the rent would for all purposes and forever be regarded as paid and the tenant’s obligation to pay the rent discharged.
Likewise with two further authorities — Tankexpress A/S v Compagnie Financiere Belge des Petroles SA [1949] AC 76 and The Brimnes [1975] QB 929. In the Tankexpress case, the accepted mode of payment of hire under a charterparty, although not that provided for in the charterparty, had been for a cheque to be placed in the post in sufficient time for it to reach the owners by the due date. A cheque posted in Brussels on September 25 1939 was delayed by the outbreak of war and did not reach the owners of the ship until October 3. A claim by the owners to cancel the charterparty because of non-payment of the hire by September 27 failed.
Lord du Parcq said (at p 103):
One who has plainly manifested his willingness to accept a substituted method of performance cannot, when payment is made in the accepted manner, take advantage of some provision in the contract which gives him a remedy in default of payment. It is true that in the present case your lordships are concerned not with a single payment but with payments which fell due monthly over a long period, but I think it can hardly be disputed that, where periodical payments have to be made, a substituted method of payment which has been ‘accepted between the parties’ from the beginning must be regarded as fully satisfying the requirements of the contract until timely notice is given by one or other of the parties that he withdraws his acceptance of it. That such notice might be given effectively I do not doubt. The distinction between varying a contract and acceding to a variation of the mode of performance of it is well established in our law and, as I have said, there was no variation of the contract in the present case. I conclude, therefore, that if the charterers, when the time came to make the payment due in September 1939, in fact acted in accordance with the ‘accepted method,’ the owners were not entitled, on the ground that, through no fault of the charterers, receipt of the payment was delayed, to exercise a remedy which was open to them only ‘in default of’ the payment stipulated by the contract.
Mr Barnes submitted that that passage applied to this case if one substituted a reference to ‘legislation’ for ‘contract’ in the first|page:5| sentence. I am unable to accept this. The passage might well apply to this case if, immediately after receiving and failing to present the October 1980 cheque, the landlord had served a notice to pay rent. In that event he could not be heard to say that, for the purpose of serving such a notice, rent was due. But that is not this case. Much water was to flow under the bridge before the notice to pay was served in January 1982. By then the tenant had been given ample further opportunity to pay the rent pursuant to further requests, and he had not done so. I cannot find in the speech of Lord du Parcq or in any of the other speeches in that case any indication that if a cheque had been refused the obligation to pay would have been discharged.
The Brimnes was another charterparty case, where the question was whether a banker’s telex instruction amounted to payment in the context of the owners having the right to withdraw the vessel ‘failing . . . punctual . . . payment.’ Mr Barnes pointed out that the court accepted that delivery of a cheque would have been payment but held that the telex message was not to be equated to a cheque. Edmund Davies LJ (at p 949) pointed out that, unlike a cheque, the telex message gave rise to no cause of action. Here again, for the same reason as I have sought to state regarding the Tankexpress case, this decision does not assist on the point with which this appeal is concerned.
In my view, therefore, neither principle nor authority supports the tenant’s argument that mere receipt of the cheque in October 1980 discharged the tenant’s obligation to pay the September 1980 rent. Receipt of that cheque by the landlord, and its retention by him, might have had other legal consequences. That receipt and retention might well have given rise to a defence of tender, or have precluded the landlord from asserting that rent was due for the purposes of serving a notice to pay unless and until, the October 1980 cheque having become out of date, he had asked the tenant for a further cheque and given him reasonable opportunity to send one. But the obligation to pay rent was not discharged, and when the notice to pay was given in January 1982, the September 1980 rent was still unpaid and due. That conclusion, I venture to think, has the merit of according with commonsense. No money in respect of the September 1980 rent ever left the tenant’s bank account and passed to the landlord (or his assigns) before the notice to pay was given, and thus in no ordinary sense was that rent paid.
I turn, then, to the tenant’s alternative contention that whether or not receipt of the cheque in October 1980 amounted to payment of the September 1980 rent, the rent of which payment was demanded by the notice to pay (the September 1981 rent) was paid when the sum of £3,800 was taken out of court in December 1981. This contention gives rise to a question of appropriation. Counsel were agreed on the applicable law, which is conveniently summarised in the following passage from the speech of Lord Macnaghten in Cory Brothers & Co Ltd v Owners of the Turkish Steamship ‘Mecca’ [1897] AC 286 at p 293:
When a debtor is making a payment to his creditor he may appropriate the money as he pleases, and the creditor must apply it accordingly. If the debtor does not make any appropriation at the time when he makes the payment the right of application devolves on the creditor.
I need not pursue the question of the method by which a creditor may make an appropriation, because it was accepted by Mr Barnes that if the tenant had not appropriated the sum of £3,800 in payment of particular instalments of rent when that sum was paid out of court, the landlord did appropriate that sum to the September 1980 and March 1981 instalments when he served the notice to pay, demanding (as I have construed the notice) payment of the September 1981 instalment. So the only question is whether the tenant as debtor made an appropriation.
Counsel were also agreed that in this case the tenant made no express appropriation, and that for appropriation to be implied there must have been more than an uncommunicated intention by the tenant to make such an appropriation. As Greer LJ said in Leeson v Leeson [1936] 2 KB 156 at p 161:
The appropriation by a debtor must take the form of a communication, express or implied, of his intention to the creditor so that the creditor may know that his right of appropriation as creditor cannot arise.
Similarly, Greene LJ, in the same case, said at p 162:
When, however, he does not notify the creditor of his intention, and when the circumstances are such that the creditor receives the payment merely in satisfaction of the debts and the payment is not more appropriate to the payment of the one debt than to that of the other the creditor is entitled to make the appropriation. When it is said that there need not be an express appropriation of a payment, but that the appropriation can be inferred, that does not mean that appropriation of a payment can be inferred from some undisclosed intention in the mind of the debtor. It is to be inferred from the circumstances of the case as known to both parties. Any other view might lead to injustice, as the creditor’s right to appropriate a payment would be defeated.
Applying that approach, it is evident that payment of the sum of £3,800 into court on December 9 1981 did not amount to an appropriation by the tenant of that sum to any particular rent instalments. Payment of that sum into court was in satisfaction of the condition imposed by the court when granting the injunction sought. It is, I think, a reasonable inference that when deciding upon that condition the learned judge had in mind the statutory restriction which limits a landlord’s right to distrain for rent of an agricultural holding to rent which became due not more than one year before the making of the distress (see section 18 of the 1948 Act). Thus the sum of £3,800 fixed by the judge was the maximum amount of rent for which, on any view, the landlord could lawfully distrain, that sum representing the March 1981 and the September 1981 instalments of rent. But, however the sum was arrived at and whatever was its justification, the order merely required the payment into court of the sum of £3,800 ‘on account of any monies due’. The tenant then paid that sum into court to fulfil the condition imposed by the judge. In due course the landlord, who knew nothing of the ex parte application at the time it was made, was told of the payment in, and he received a copy of the order.
From those circumstances, and pausing there in the chronology, I do not think an appropriation by the tenant of the payment into court to the March 1981 and September 1981 rent instalments is to be inferred. The required sum had merely been paid into court on account of any moneys due, and its destination remained undetermined.
So I come to the payment out. If I am right in my conclusion regarding the payment in, I think that it must follow that, from the circumstances of the case as known to both parties regarding the payment out, no appropriation by the tenant of the sum of £3,800 to any particular instalments of rent is to be inferred. I have already quoted the terms of the agreement reached between the two firms of solicitors regarding the payment out. To my mind, those terms leave wholly open the question of the particular rent instalments in respect of which the payment out was being made. For the landlord, Mr Wood submitted that the agreement to withdraw the bailiff forthwith and not to reinstruct him ‘for the balance’ would have been unnecessary if the payment was being appropriated to the two 1981 rent instalments, because if the payment was being so appropriated the bailiff could not have lawfully remained or been reinstructed. Although the logic of this is faultless, documents such as this often contain terms which are not strictly necessary, and I would not be inclined to attach more weight to this argument than this: the inclusion of these terms made the identification of the particular outstanding rental instalments in respect of which the sum of £3,800 was being paid a matter of indifference to the tenant. That being so, and since the language used was quite neutral, in my view no appropriation by the tenant of the sum of £3,800 to any particular rent instalments is to be inferred, because I do not think that, from the terms of the agreement, the landlord could or should reasonably have inferred that his tenant was intending to appropriate the sum of £3,800 to any particular rent instalment.
Mr Barnes sought to draw an analogy with the position existing where a payment is made by a debtor owing several sums, one or more of which is statute barred. There, it was submitted in reliance on Nash v Hodgson (1855) 6 de GM & G 474, there is a presumption that the payment is to be taken as having been appropriated by the debtor to the debts which are not statute barred. Here, it was said, distress was available as a remedy in respect of two of the rental instalments (which totalled the sum paid out) but not the third, earlier, instalment. I agree that the position regarding distress is an important matter to be taken into account as one of the surrounding circumstances known to both parties. But, as I have endeavoured to show, under the express terms agreed between the parties’ solicitors, appropriation became a matter of indifference to the tenant in this case.
In my judgment, therefore, the tenant’s alternative contention that the rent demanded by the notice to pay had been paid in December 1981 fails. Accordingly, I would uphold the learned judge’s decision that the notice to pay was valid.
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The notice to remedy
I turn now to the notice to remedy. For the tenant Mr Barnes accepted that the period of two months stated in the notice was reasonable, but he advanced four arguments against the validity of this notice: (1) that the agreements to pay interest were not terms or conditions of the tenancy; (2) that the notice to remedy did not give sufficient or wholly accurate particulars of the term or condition alleged to have been broken (this was the ground on which Judge Chope held that the notice was invalid); (3) that the sum demanded was in excess of that contractually due, because part of the sum demanded related to the half-year ending September 29 1980, and receipt by the landlord of the cheque for £2,045.60 in October 1980 discharged part of the sum then due for interest, in addition to the rent; and (4) that even if the landlord’s receipt of that cheque did not discharge part of the sum due, the tenant having sent that cheque was not in breach of any obligation requiring to be performed by him.
I will deal first with arguments (3) and (4). Argument (3) is the same argument as that considered above concerning discharge of the obligation to pay rent by mere receipt of the cheque, and I have set out my reasons for rejecting that argument. Argument (4), it seems to me, is the same as argument (3) but dressed in different apparel. If I am correct in holding that receipt of the cheque did not discharge the tenant’s obligation to pay the rent, so that the tenant still remained obliged to pay that sum, then, whatever may have been the position prior to receipt of the landlord’s solicitors’ letters of demand of August 6 1981, it seems to me that after receipt of those letters the tenant was in breach of his obligations if he failed to give to the landlord, in place of the outdated October 1980 cheque, another cheque or cash in the requisite amount. I do not think that argument (4) adds materially to argument (3).
As to argument (1), the agreements to pay interest were made in this way. It seems that on March 31 1978 the landlord and the tenant executed a memorandum which either was, or was intended to be, attached to the tenancy agreement. Clauses 4 and 6 of that memorandum read as follows:
4 As and when mains water is extended by the South West Water Authority to Colan a scheme for the extension of mains water to Colan Barton and Penhill Farms will be discussed between the landlord and the tenant. The tenant agrees to pay interest at the rate of 10% on the net cost of such agreed scheme on the completion of the work.
6 In consideration of the premises all the terms and conditions of the within written agreement varied as aforesaid shall remain in full force and effect.
The ‘within written agreement’ was the tenancy agreement.
Subsequently, in November 1978, the tenant approved a particular mains water extension scheme. The work was then done, and (so it seems) completed by Lady Day 1979. In September 1979 the tenant was informed of the cost and of the amount that, from March 25 1979, he would be required to pay under the agreed 10% formula. To my mind it is really indisputable that an agreement so reached constituted a term or condition of the tenancy. From clause 6 it is evident that the terms of the memorandum were understood to be variations of the terms and conditions of the tenancy agreement. Thereafter, all that happened was that the landlord and the tenant agreed on a scheme, as contemplated in clause 4 of the memorandum.
As to the lean-to cattle yard, this matter was raised, apparently for the first time, by the landlord’s agents with the tenant in a letter dated May 4 1979. The agents asked if the tenant would be interested in the landlord erecting such a building on terms that the landlord was paid interest from the date of completion of the erection at the rate of 10 per cent on the landlord’s net cost. A reminder was sent in August 1979. Thereafter the work was done, and the building seems to have been in use by Christmas 1979. By a letter dated March 6 1980, the landlord’s agents informed the tenant of the amount of the final net cost, and said that interest would be charged from December 25 1979. The agents said that ‘in accordance with normal practice the interest will be demanded half-yearly in arrears in addition to the rent’. Before the arbitrator, there was a dispute whether agreement to pay interest on this building was ever reached, but he found that there was such an agreement. Here again, although the position in this instance is not so clear cut as with the mains water scheme, in my view the proper conclusion is that the parties must have intended that this agreement was to be a term or condition of the tenancy. The payment related to work done by the landlord on the farm, and the tenant’s obligation to pay must have been intended to be conterminous with the tenancy agreement: it was to be as much one of his obligations as tenant as his obligation relating to the mains water scheme.
Accordingly, this argument fails.
That leaves argument (2). The criticisms of the wording of the notice to remedy were confined to the description, in the left-hand column of the particulars, of the ‘term or condition’ of the tenancy which it was said the tenant had broken. The criticisms were that the inserted particulars were inaccurate and insufficient. The inaccuracy was that, as appears from the summary given above, the arrangements whereby the tenant agreed to pay the interest charges consisted of two supplemental agreements, not one. So the particulars should have read ‘supplemental agreements’ in the plural, and not ‘supplemental agreement’. The insufficiencies complained of were twofold. First, that the location of the agreements should have been identified by a reference to the memorandum and the correspondence (although it was not suggested that each letter needed to be identified separately). Second, that the rate of interest should have been stated, together with a short description of the nature of the improvements.
Mr Barnes very frankly accepted that the tenant, as a reasonable tenant, could not have been misled by the wording in the notice. In Carradine Properties Ltd v Aslam [1976] 1 WLR 442, where a landlord served a non-statutory notice on a tenant under a break clause, the criterion employed by the court in deciding whether the notice was sufficiently clear was whether it could be said that any reasonable tenant reading it would have been misled by it. The same test was applied by this court in Germax Securities Ltd v Spiegal (1978) 37 P & CR 204* in considering the validity of a notice under section 25 of the Landlord and Tenant Act 1954. But in two decisions of this court, the need for strict compliance with the statutory requirements has been emphasised in the context of notices to pay rent served pursuant to the 1948 Act or the 1977 Act. In Pickard v Bishop (1975) 31 P & CR 108,† ) a notice to pay rent was held bad because the wrong person was named as landlord. In Dickinson v Boucher (1983) 269 EG 1159, [1984] 1 EGLR 12, a notice to pay rent failed because the sum demanded (£650) was in excess of that due (£625).
*Editor’s note: Also reported at (1978) 250 EG 449, [1979] 1 EGLR 84.
† Editor’s note: Also reported at (1975) 235 EG 133, [1975] 2 EGLR 1.
Oliver LJ, having quoted a passage from the judgment of Buckley LJ in the Germax Securities case, said this at p 1164:
There again, of course, we were not dealing with a strict requirement of a section such as the present, which is designed to operate on non-compliance by the tenant with a notice containing a particular formula. It seems to me that the approach of this court in Pickard v Bishop is one which, albeit in that case applicable to a misdescription of the landlord, must equally be applicable to the misstatement of the requirement with which the tenant is notified that he must comply.
Mr Barnes submitted that the particulars given in this notice failed to pass the strict test applied in Pickard v Bishop and Dickinson v Boucher. I cannot accept this submission. The area of complaint is limited to the sufficiency and accuracy of the description of the term of the tenancy which the landlord is notifying the tenant has been broken. The intended purpose of that part of the notice is that the tenant should have drawn to his attention what is the source of the obligation which the landlord is saying the tenant has failed to fulfil in the respects particularised in the right-hand column. The achievement of that purpose requires the identification of the source with reasonable particularity. Normally the source will be a specific clause, readily identifiable, in a written tenancy agreement. In other instances, as here, it will not be. In either case the adequacy of the description is a question of degree, to be answered in the light of all the circumstances.
I cannot accept the tenant’s submission to the effect that any inaccuracy in this description, however trivial or immaterial or however obviously a slip, and regardless of whether the tenant may be misled by it or not, is necessarily fatal. So to decide, with regard to the part of the notice with which this appeal is concerned, would be to carry the need for strict compliance with the statutory requirements to an absurd length, and for no apparent purpose. In the present case the description was terse, but it did identify the source as a supplemental agreement (which, plainly, was being contrasted with the tenancy agreement itself) and the essential subject-matter of that agreement (payment of interest on the landlord’s improvements). The only inaccuracy relied on is the omission of the letter ‘s’ after the phrase ‘supplemental agreement’. Given that it is accepted for the tenant that, despite the inaccuracy and the terseness, this tenant could not reasonably have been misled, in my view the particulars given were good enough.
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For these reasons, in my view the notice to pay and the notice to remedy were valid notices. It is not disputed that at the date of the giving of the notice to quit the tenant had not complied with either the notice to pay or the notice to remedy or, hence, that if either of those two notices was valid the notice to quit took effect, pursuant to the provisions of section 2 of the 1977 Act. Accordingly, I would dismiss the tenant’s appeal and allow the landlord’s cross-appeal, and in answer to the question raised in the stated case declare that upon the facts found by the arbitrator the notice to quit dated May 20 1982 was a good notice to quit upon both of the grounds stated therein.
SLADE LJ agreed and did not add anything.
The appeal was dismissed and the cross-appeal allowed; the judgment below was set aside. In answer to the question raised in the stated case the court declared that, upon the facts found by the arbitrator, the notice to quit of May 20 1982 was a good notice to quit upon both the grounds stated therein. An order nisi was made against Legal Aid Fund for respondent’s costs and an order for legal aid taxation of appellant’s costs. Leave to appeal to the House of Lords was refused. Petition for leave to appeal to the House of Lords was refused on November 5, 1986.
