Tenancy of agricultural land — Landlords reserving right to possession of five acres for non-agricultural purposes — Planning permission for development — Notice to quit specifying area larger than that for which planning permission obtained — County court refusing possession order — Holding notice to quit vitiated by fraud — Majority of Court of Appeal allowing landlords’ appeal against refusal
The case concerned a tenancy of Burn Hall Farm, Burn, near Selby, North Yorkshire, which was part of an agricultural holding for the purposes of the Agricultural Holdings Act 1986. By clause 2 of the tenancy agreement, “The landlord reserves the right, on giving the tenant at any time not less than three calendar months notice, to resume possession of any portion of the holding not exceeding five acres in any one year … required for building, … or any other purpose other than for use as agricultural land paying the tenant compensation …”. Purporting to exercise that contractual right, the landlords served a notice to quit in respect of certain buildings and some surrounding land, after having obtained planning permission in November 1990 to convert the buildings into three houses. The land was to provide gardens. A plan was attached to the notice which in fact showed an area which was larger than that for which planning permission had been granted. The tenant sought arbitration (section 26(2) of, and Schedule 3 to, the 1986 Act), but when no arbitrator had been appointed within three months, the notice to quit took effect. The landlords issued county court proceedings for possession. The tenant asserted that the notice to quit was invalid as it contained misrepresentations which were not only untrue but fraudulent in that the area shown for purported planning permission was larger than that for which permission had in fact been granted. The court refused the landlords’ claim stating that the notice was vitiated by fraud.
Held The landlords’ appeal was allowed by a majority.
1. The court had jurisdiction to hold that a notice to quit given under section 26(2) of and Schedule 3 to the 1986 Act was vitiated by fraud if the statement contained in it of the landlords’ intention was fraudulent. It was immaterial that the misrepresentation in the notice did not deceive the recipient: see Rous v Mitchell [1991] 1 WLR 469.
2. Fraud was proved if it was shown that a false representation had been made knowingly, without belief in its truth, or recklessly: Derry v Peek (1889) 14 App Cas 337.
3. Mere carelessness was not fraud: Angus v Clifford [1891] 2 Ch 449.
4. In determining whether a statement was made fraudulently the question was whether the person who made it honestly believed the statement to be true in the sense which he understood it when it was made: see Akerhielm v De Mare [1959] AC 789.
5. The evidence here showed that the landlords had prepared the notice to quit on the understanding that it did not matter if the plan to the notice to quit showed a greater area of land than that drawn on the plan to the planning application. The notice to quit included a reference to the land being required for a non-agricultural use for which planning permission had been obtained in so far as planning permission was deemed requisite. The landlords had been at most careless. They were not fraudulent in any sense of the word.
6. Per Hobhouse LJ, dissenting: The clarity of a notice to quit was essential for the purpose of enabling the landlords to rely upon section 26(2). The notice contained a statement which was not true. The county court was entitled to make the finding it did on the evidence. It involved no error of law and the judgment should be upheld.
Michael Michell (instructed by Tallents Godfrey & Co, of Nottingham) appeared for the landlords; Rosslyn Lee (instructed by Myers & Co, of Harrogate) appeared for the tenant.
