Landlord and tenant — Assignment — Whether grant of subtenancy operated as assignment of term — Whether assignment arose on oral agreement — Whether section 53 of the Law of Property Act 1925 satisfied — Whether section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 applied
In December 1997 the plaintiff freeholders granted
a lease of premises to M Ltd for a term expiring on 31
lease was excluded from the operation of sections 24 to 28 of the Landlord and
Tenant Act 1954. In December 1997 the defendant went into occupation of part of
the land under an oral agreement, paying a monthly rent. On the expiration of
the contractual term held by M Ltd, the defendant claimed a tenancy that
included a term that M Ltd would not serve notice to quit expiring before 31
March 1999. The plaintiffs commenced proceedings for possession against the
defendant, and issued a summons seeking the determination of two issues of law
relating to the effect of the tenancy agreement. It was their case that the
grant of the tenancy took effect in law as an assignment to the defendant of
the balance of M Ltd’s lease (in relation to that part of the premises to which
it related) and that he did not have a tenancy protected by the 1954 Act.
for the plaintiffs. The oral agreement between M Ltd and the defendant was
effective to create a legal tenancy in favour of the defendant; section 54(2)
of the Law of Property Act 1925 was satisfied. The principle in Milmo v Carreras
[1946] KB 306, that the grant of a subtenancy for a term expiring after the
date of the term held by the grantor operates as an assignment, was also
satisfied. The oral agreement took effect by operation of law as an assignment
of M Ltd’s lease relating to that part of the premises. The oral tenancy fell
within section 53(1)(a) of the 1925 Act because it took effect as an
assignment by operation of law. That subsection covers the position where an
oral transaction, which would otherwise be effective in accordance with its terms,
takes effect by operation of law in a manner different from that contemplated
by the parties. Further, the agreement did not fall within section 2 of the Law
of Property (Miscellaneous Provisions) Act 1989.
The following cases are
referred to in this report.
Barrett v Rolph
(1845) 14 M&W 348
Botting v Martin
(1808) 1 Camp 317
D’Silva v Lister
House Development Ltd [1971] 1 Ch 17; [1970] 2 WLR 563; [1970] 1 All ER
858; (1970) 21 P&CR 230; [1970] EGD 60; 213 EG 373
Grosvenor Estate Belgravia v Cochran [1991] 2 EGLR 83; [1991] 44 EG 169; (1991) 24 HLR
98
Henry Smith’s Charity Trustees v Willson [1983] QB 316; [1983] 2 WLR 77; [1983] 1 All ER
73; (1983) 45 P&CR 105, CA
Milmo v Carreras
[1946] KB 306
Palmer v Edwards
(1783) 1 Doug KB 187n
Poultney v Holmes
(1720) 1 Stra 405
Preece v Corrie
(1828) 5 Bing NC 24
Prudential Assurance Co Ltd v London Residuary Body [1992] 2 AC 386; [1992] 3 WLR 279;
[1992] 3 All ER 504; [1992] 2 EGLR 56; [1992] 36 EG 129, HL
Rye v Rye [1962]
AC 496; [1962] 2 WLR 361; [1962] 1 All ER 146, HL
St Giles Hotel Ltd v Microworld Technology Ltd (1998) 75 P&CR 380; [1997] 2
EGLR 105; [1997] 27 EG 121
This was the hearing of a
summons issued by the plaintiffs, Parc Battersea Ltd and Mountwood Holding Ltd,
in proceedings for possession against the defendant, Tom Hutchinson.
Timothy Dutton (instructed by Cameron McKenna)
appeared for the plaintiffs; Thomas Jefferies (instructed by Payne Hicks Beach)
represented the defendant.
Giving judgment, MOORE-BICK J said: The plaintiffs in this action are
freehold owners of certain land and premises in Battersea, London. On 4
December 1997 they granted a lease over part of that land to a company called
Monarun Ltd for a fixed term expiring on 31
granting of the lease the parties took the necessary steps to exclude it from
the operation of sections 24 to 28 of the Landlord and Tenant Act 1954. On 8
December 1997 there was a meeting between Mr Sherman, a director of Monarun,
and the defendant, Mr Hutchinson, in the course of which it was agreed that
Mr
purpose of his business, paying Monarun £300 per month. That agreement was
never reduced to writing, but Mr
premises on 18
From the outset, Monarun sent Mr
the sum of £325, and although that was a slightly higher sum than had
originally been agreed, Mr Hutchinson paid it without demur. Eventually, on 31
March 1998, Monarun’s lease expired by effluxion of time. When the plaintiffs
sought to take possession of the property they discovered that Mr Hutchinson
was in occupation of part of the land, and correspondence between the parties’
solicitors soon followed. It then became apparent that Mr Hutchinson was
asserting that Monarun had granted him a tenancy that was protected under the
Landlord and Tenant Act 1954, and that he was therefore entitled to remain in
occupation.
On 6 July 1998 the plaintiffs began this action in
order to obtain possession of the property. In their statement of claim they
allege that the lease granted to Monarun expired on 31 March and that
Mr
served on 17 August 1998, Mr Hutchinson alleges that he is in possession under
a monthly periodic tenancy granted to him by Monarun, and is therefore
protected by the Landlord and Tenant Act. In response to a request for further
particulars of the terms of the tenancy, he said that, in addition to the terms
pleaded in para 4 of the defence, it was expressly agreed that Monarun would
not serve notice to quit expiring before 31 March 1999. In the light of that,
the plaintiffs issued a summons on 30
the summary determination of two issues of law relating to the effect of the
tenancy agreement that Mr Hutchinson had pleaded in his defence, namely:
(a) whether the true nature of the tenancy was a
term certain expiring on or after 1 March 1998; and if so
(b) whether that tenancy operated as an
assignment of Monarun’s lease in so far as it related to the premises comprised
in the tenancy.
Subject to the determination of those questions in
their favour, the plaintiffs also sought summary judgment on their claim. It is
the plaintiffs’ case that the grant of a tenancy on the terms pleaded by
Mr
Monarun’s lease in relation to that part of the premises to which it relates,
and that he does not therefore occupy under a tenancy that is subject to the
protection of the Landlord and Tenant Act.
The plaintiffs’ summons came before Master
Moncaster on 17
with the issues of law raised by the application in the absence of evidence
from both Mr
which he considered was necessary to enable the court to determine the precise
terms of the tenancy. He therefore dismissed the application. The matter now
comes before me on appeal against his order.
Although the issues of law raised by this
application are by no means straightforward, there is really little or no
dispute about the facts, all of which lie in a very small compass and none of
which have been the subject of any serious argument before me. Moreover,
although the terms of the tenancy agreement between Monarun and Mr Hutchinson
lie at the heart of the case, Mr
unchallenged. In a letter to the plaintiffs’ solicitors dated 17 April 1998 his
solicitors give his account of the meeting with Mr
of which he was granted the tenancy, and set out the terms on which he says it
was granted. At a later stage, his case was set out formally in the pleadings
to which I have already referred. There is no inconsistency between the letter
and the pleadings, although it is probably fair to say that certain ambiguities
in the letter have been clarified in the pleadings.
The most
obvious of these concerns the agreement on the part of Monarun not to serve
notice to quit expiring before 31 March 1999. The account of the meeting given
in the letter of 17 April does not make it clear whether it was part of the
agreement that Monarun would not serve notice to quit before that date, but the
position is left in no doubt in the further and better particulars. The truth
of the account given in the letter of 17 April and the accuracy of the
pleadings, in so far as they set out the terms of the tenancy, are both
expressly confirmed by Mr
9
see no reason to approach this application otherwise than on the basis that the
defence correctly states the terms of the agreement between Mr
and Mr
otherwise.
The first step in the plaintiffs’ argument is that
the true nature of the tenancy pleaded by Mr Hutchinson is a tenancy for a term
certain expiring on 31 March 1998. That depends essentially on two things: (a)
the terms of the agreement; and (b) whether a purely oral agreement is capable
of creating an interest in land in the nature of a tenancy. As far as the first
of these questions is concerned, the further and better particulars make it
clear that it was an express term of the agreement that, although the tenancy
was expressed to be a monthly periodic tenancy, Monarun would not serve notice
to quit expiring before 31
tenancies must be for a term certain in order to be valid was considered and
confirmed by the House of Lords in Prudential Assurance Co Ltd v London
Residuary Body [1992] 2 AC 386*. Lord Templeman, with whom the other
members of their lordships agreed, gave examples of agreements that would, and
would not, satisfy that requirement. Having earlier pointed out that a tenancy
from year to year is saved from being uncertain because each party has power by
notice to determine at the end of any year, Lord Templeman said at p395A:
A lease can be made for five years subject to the
tenant’s right to determine if the war ends before the expiry of five years. A
lease can be made from year to year subject to a fetter on the right of the
landlord to determine the lease before the expiry of five years unless the war
ends. Both leases are valid because they create a determinable certain term of
five years.
*Editor’s note: Also reported at [1992] 2 EGLR 56
By parity of reasoning, a tenancy from month to
month subject to a fetter on the right of the landlord to determine it before
31 March 1999 satisfies the requirement of certainty.
In general, by virtue of section 53(1)(a)
of the Law of Property Act 1925, interests in land can only be created or
disposed of by an instrument in writing. An exception is, however, made in the
case of leases taking effect in possession for a term not exceeding three
years. By section 54(2) of the Law of Property Act 1925, such a lease, if made
at the best rent that can reasonably be obtained without taking a fine, may be
created by parol. There is little or no evidence before me as to the market
rent for premises of the kind occupied by Mr
terms of the agreement between himself and Monarun and the fact that he paid a
slightly higher amount each month, £325 rather than £300, when that was demanded.
However, it is implicit in Mr Hutchinson’s case that he was granted a legal
tenancy on the terms and in the manner set out in his pleadings, and that the
rent that he agreed to pay represented the best rent reasonably obtainable at
the time the agreement was made. That has not been challenged by the
plaintiffs, and both parties have approached this application on the footing
that it was. In these circumstances, the evidence now before the court is, in
my view, sufficient to justify the finding that this requirement of section
54(2) is satisfied, and that the agreement was effective to create a legal
tenancy in favour of Mr Hutchinson.
This brings me to the issue at the heart of this
application. It was common ground that, even though the lease between the
plaintiffs and Monarun was itself excluded from the protection of the Landlord
and Tenant Act, a subtenancy in favour of Mr Hutchinson, even if granted in
breach of the terms of that lease, would be capable of falling within the
protection of the Act: see D’Silva v Lister House Development Ltd
[1971] 1 Ch 17. Mr Timothy Dutton submitted, however, that, by a well‑established
rule of law, the grant of a sublease for a period that is equal to or exceeds
the remaining term of the lease under which the grantor himself holds takes
effect not as a sublease but as an assignment of the remainder of the grantor’s
term. Accordingly, what Mr
protected by the Landlord and Tenant Act but an assignment of Monarun’s
unprotected lease in relation to that part of the premises.
The principal authority on which Mr Dutton relied
was Milmo v Carreras [1946] KB 306. The plaintiff in that case
was the tenant of a flat under a lease for seven years expiring in November
1944. In October 1943 he agreed to sublet the flat to the defendant for one
year from 1 November 1943 and thereafter quarterly until either party should
give three months’ notice. Because of the quarterly extension the subterm would
necessarily extend beyond the expiry of the headlease. In April 1945 the
plaintiff served a notice to quit on the defendant, who refused to give up
possession, and, accordingly, the plaintiff began an action for possession. The
court held that he was not entitled to recover possession of the flat because,
having transferred to the defendant the whole of the remaining term under the
headlease, he retained no reversion and had no remaining right to possession.
Lord Greene MR described the position as follows at p310:
For the purposes of this case, I think it
sufficient to say that, in accordance with a very ancient and established rule,
where a lessee, by a document in the form of a sub-lease, divests himself of
everything that he has got (which he must necessarily do if he is transferring
to his so-called sub-lessee an estate as great as, or purporting to be greater
than, his own) he from that moment is a stranger to the land, in the sense that
the relationship of landlord and tenant, in respect of tenure, cannot any
longer exist between him and the so-called sub-lessee. That relationship must
depend on privity of estate. I myself find it impossible to conceive of a
relationship of landlord and tenant that has not got that essential element of
tenure in it, and that implies that the tenant holds of his landlord, and he
can only do that if the landlord has a reversion. You cannot have a purely
contractual tenure. Tenure exists by reason of privity of estate. That seems to
me to be the effect of all the decisions, and that position is recognized by
all the decisions.
The result was that the defendant became not a
subtenant but the assignee of the unexpired part of the plaintiff’s term.
Morton and Bucknill LJJ agreed with that
conclusion. Morton LJ said at p314:
I do not myself see how the relationship of landlord
and tenant can possibly exist unless the so-called landlord has a reversion. In
so far as any of the cases cited to us suggest that that relationship can
exist, in other circumstances, I do not think the decisions were well founded…
These statements of principle have been adopted
and applied in a number of subsequent cases. In Henry Smith’s Charity
Trustees v Willson [1983] QB 316 Slade LJ said that, at least in
relation to a contractual tenancy, the rule is that stated by Lord Greene in Milmo
v Carreras, and continued at p326E:
I am doubtful whether a transaction entered into
by a statutory tenant, under which he purports to make what is in substance an
outright disposition of his interest in favour of another, reserving no
reversion to himself, can accurately be said to constitute a ‘subletting’
within the ordinary meaning of words.
The same rule underlies the decision in Grosvenor
Estate Belgravia v Cochran [1991] 2 EGLR 83. In that case, the
appellant obtained the subtenancy of a flat from a company which itself held
the whole of the building under a headlease from the landlord. Shortly before
the expiry of the headlease the company sublet the flat to the appellant for a
term of three years, and the appellant thereafter spent a large sum of money on
refurbishment. When the landlord sought possession of the flat the appellant
contended that the agreement that purported to grant her a subtenancy of her
flat took effect as an assignment of the residue of the headlease, and that, as
a result, she had obtained a protected tenancy under the Landlord and Tenant
Act 1954. However, to qualify as a protected tenancy it was necessary, inter
alia, for the flat to have been let under a tenancy agreement as a separate
dwelling. If the agreement between the company and the appellant, which related
to the basement flat alone, took effect as a subtenancy, that requirement would
have been satisfied. However, because the period of the agreement exceeded the
remainder of the term of the headlease, it operated as an assignment of the
headlease in relation to that part of the building, and since the headlease
related to the whole building, the flat was not protected. Ralph Gibson LJ
explained the position in the following way at p84D‑E:
This state of affairs has come about, if the
judge was right, because of the working of a long-established principle of the
common law relating to landlords and tenants upon the provisions of statutes
intended to protect tenants in the occupation of their homes. The principle to
which I refer is that where there is a grant of a subtenancy for a term equal
to or in excess of the remainder of the term vested in a mesne landlord the
subtenancy operates as an assignment by operation of law of the lease vested in
the mesne landlord: Milmo v Carreras [1946] KB 306. If the
appellant had been a lawful subtenant in occupation of the flat as her home she
would have had a right to remain in it. As an assignee of the headlease as to
the basement flat she had no right to remain, according to the decision of the
judge, even if she were resident in it as her home at the material date.
In my judgment, for the reasons which follow, the
learned judge was correct in his view of the law and this appeal must fail.
And at p85L he said:
The submission based upon sections 1, 2 and 22(3)
of the 1954 Act fails, in my judgment, for the following reasons. The
appellant, at the end of the headlease, was not tenant of the basement flat on
a protected tenancy because the flat was not let as a separate dwelling within
the meaning of that phrase in section 1 of the 1977 Act. The flat was not let
to the appellant or to anyone else as a separate dwelling: it was let under the
headlease with the rest of the premises at 15-16 West Halkin Street. If the appellant
was in occupation of the flat at the material time she clearly occupied it as a
separate dwelling, but that is not the test.
Nourse LJ at p86H-J described the position as
follows:
The so-called tenancy agreement of November 16
1987 did not create a subtenancy of the basement flat. It operated as an
assignment of the lease dated February 28 1925 [the headlease] so far as it
related to that flat.
And at p86K-L:
You cannot describe a transaction as a lease
unless it creates some lesser estate out of a greater one. The 1987 tenancy
agreement having taken effect as an assignment of the 1925 lease so far as it
related to the flat, that is to say as an assurance of the totality of an
existing estate, it cannot be said that the flat was leased by that agreement.
The only lease or letting of the flat was that effected by the 1925 lease and
at this point Miss Cochran is faced with the insuperable objection that it was
not thereby let as a separate dwelling…
This decision is of significance not only because
it provides another example of the application by the Court of Appeal of the
principle set out in Milmo v Carreras but also because it
provides an example of the rule in operation in circumstances where the court
would plainly have preferred to give effect to the agreement as a subtenancy,
if that had been possible. However, it was the very fact that the subtenancy
was granted for a period that exceeded the company’s reversion under the
headlease that caused it to take effect as an assignment, and thereby defeated
the appellant’s claim.
If these authorities cover the present case there
can be no answer to the plaintiffs’ claim for possession of the property,
because, by virtue of the assignment, Mr
unprotected lease: see St Giles Hotel Ltd v Microworld Technology Ltd
[1997] 2
apply, for the simple reason that the agreement between Mr Hutchinson and
Mr
not possible to assign a term otherwise than by a written instrument, and that
therefore an oral agreement for a subtenancy that extends for the whole of the
remainder of the term, even if it satisfies the requirements of section 54(2),
cannot operate as an assignment of the grantor’s term. However, since the
relationship of landlord and tenant depends on privity of estate, which cannot
exist unless the landlord retains a reversion, an oral agreement for a
subtenancy that is to last for the remainder of the landlord’s term is equally
ineffective to create a subtenancy. Accordingly, he submitted, such an
agreement is without any effect at all in law, and Mr
present case, became a monthly tenant simply as a result of entering into possession
and making payment of rent.
At the outset of his argument, Mr Jefferies drew
my attention to a number of authorities that pre-date the Law of Property Act
1925, namely Poultney v Holmes (1720) 1 Stra 405, Botting
v Martin (1808) 1 Camp 317, Preece v Corrie (1828) 5 Bing
NC 24 and Barrett v Rolph (1845) 14 M&W 348, which he relied
on as supporting the proposition that, before 1925, an oral tenancy agreement
was regarded as incapable of operating as an assignment because of section 3 of
the Statute of Frauds 1676. The position in his submission remained the same
after the provisions of the Statute of Frauds were re‑enacted with slight
modifications in the Law of Property Act 1925.
In Poultney v Holmes the plaintiff
who held premises under a lease sublet them to the defendant for the remainder
of his term. When he sought to re-enter for non-payment of rent, the defendant
objected that the agreement was void because it amounted to an assignment of
the lease and was not in writing as required by section 3 of the Statute of
Frauds. The court appears to have accepted that the plaintiff had lost his
reversion and therefore his right to distrain, but held that the agreement none
the less took effect as a lease and that the plaintiff could sue on the
covenant for his rent. The explanation for this decision is probably to be
found in the court’s reluctance, when faced with the Statute of Frauds, to
accept that the agreement was of no effect: see the explanation given in Palmer
v Edwards (1783) 1 Doug KB 187n. The correctness of this decision was
subsequently doubted in Barrett v Rolph.
Botting v Martin
concerned an oral assignment of a term of less than three years granted by
parol. It is of interest only for the fact that the court held that an
assignment of a parol lease had to be made in writing in order to comply with
the Statute of Frauds, but does not otherwise carry the matter any further.
In Preece v Corrie the tenant sublet
the premises orally for the remainder of his term. Best CJ held that agreement
should be considered as a lease, even though the tenant had lost his right to
distrain, and not as an assignment. However, he also appears to have taken the
view that, if it had been treated as an assignment, it would have been
effective as an assignment by operation of law within the exception to section
3 of the Statute of Frauds.
In Barrett v Rolph the question was
whether an oral agreement under which a tenant had agreed to transfer his
interest in a parol lease could take effect as a subtenancy. Parke B held that
it could not. He felt unable to accept that an agreement that was clearly
intended to take effect as an assignment could be construed to create a lesser
interest.
In the end, I do not obtain a great deal of
assistance from these earlier authorities. They were all cited to the court in Milmo
v Carreras together with the commentary to be found in Platt on
Leases (1847), to which I was also referred. Lord Greene MR considered that
many of the decisions had been influenced by the courts’ anxiety to avoid the
rigours of section 3 of the Statute of Frauds and did not find it necessary to
examine them in detail, preferring to base his judgment on the principle that
the relationship of landlord and tenant cannot exist in the absence of a
reversion and privity of estate. In so far as cases such as Poultney v Holmes
and Preece v Corrie suggest that a lease may exist although the
grantor retains no reversion, they no longer represent the law. None of them,
on the other hand, really examines in any detail the question of whether an
oral subtenancy can operate in law as an assignment of the term, although in Preece
v Corrie Best CJ appears to have considered that to be a possibility.
The main debate between the parties centred on
sections 52 and 53 of the Law of Property Act 1925. Section 52 provides as
follows:
(1) All conveyances of land or of any interest
therein are void for the purpose of conveying or creating a legal estate unless
made by deed.
(2) This section does not apply to —
…
(g) conveyances taking effect by operation
of law.
The word ‘conveyance’ is capable of being used as
meaning the act of creating or transferring an interest in property as well as
in the narrower sense of an instrument in writing by which an interest in
property is created or transferred. Mr Dutton submitted that I should construe
the word ‘conveyance’ in section 52 in the wider of these two senses, thereby
excluding from the general rule in subsection (1) all transfers taking effect
by operation of law. That, he submitted, is an apt expression to include the
transfer by assignment of a lease in circumstances such as those that existed
in Milmo v Carreras. If that were right, it would not matter
whether the parol lease was made orally or in writing; in either case it would
fall outside the scope of the section and take effect as a conveyance of the
grantor’s term by operation of law.
On its face this is an attractive submission, but
I think that Mr
take sufficient account of section 205(1)(ii) of the Act, by which, unless the
context otherwise requires, ‘conveyance’ is defined as meaning every assurance
of property or of any interest therein by any instrument, except a will. In the
ordinary way, therefore, the word is to be understood as meaning a written
instrument rather than the transaction itself. It could be read as having its
wider meaning in section 52, but only if the context so requires.
In Rye v Rye [1962] AC 496 the House
of Lords had to decide whether, under the Law of Property Act 1925, two persons
who were freehold owners of property could demise the property to themselves.
This required consideration of the meaning of the word ‘convey’ in section
73(2) of the Act, and naturally gave rise to a wider discussion of the meaning
of the words ‘convey’ and ‘conveyance’ as found elsewhere in the legislation.
Lord MacDermott at pp508-509 considered at some length whether the particular
context in which the word ‘conveyance’ is found in section 52 requires it to be
given the broader meaning for which Mr Dutton contended. He concluded that it
does not, and that section 52 is therefore dealing with instruments in writing
that, if they are to be effective, must be under seal. Viscount Simonds and
Lord Radcliffe expressed similar views at p504 and pp511-512 respectively.
Faced with these powerful statements of judicial opinion, I do not think that
the word ‘conveyance’ in section 52 can be given the wider meaning for which Mr
Dutton contended, and it must follow, therefore, that an oral agreement for
lease does not fall within the exclusion contained in subsection (2)(g).
Accordingly, this part of Mr
Mr Dutton’s alternative argument was based on
section 53 of the Act, which provides as follows:
(1) Subject to the provisions hereinafter
contained with respect to the creation of interests in land by parol —
(a) no interest in land can be created or
disposed of except by writing signed by the person creating or conveying the
same, or by his agent thereunto lawfully authorised in writing, or by will, or
by operation of law;
He submitted that an oral tenancy for a period
that exceeds the remainder of the grantor’s term falls within section 53(1)(a)
because it takes effect as an assignment by operation of law. Mr Jefferies, on
the other hand, submitted that nothing in the Law of Property Act permits the
assignment of an interest in land by parol, so that the position is the same as
it was before 1925. It is impossible for any purely oral agreement, including
an oral tenancy agreement falling within section 54(2), to have that effect.
I fully accept that a person who seeks to assign a
lease must do so in one of two ways: he must either execute an assignment in
the form of a deed, in which case the instrument will satisfy the requirements
of section 52 and be capable of transferring the legal estate, or he must
execute a written instrument, which is, or can be construed as, an enforceable
contract to assign the lease that will satisfy the requirements of section 53
(and now also section 2 of the Law of Property (Miscellaneous Provisions) Act
1989) and so take effect in equity. However, section 53(1)(a) itself
contemplates that an interest in land may be created or disposed of by
operation of law. In Milmo v Carreras Lord Greene, who was, of
course, dealing with a written tenancy agreement, albeit not under seal, was
attracted to the argument that section 52(2)(g) could apply in that case
because the conveyance took effect as an assignment by operation of law, and
Morton LJ said that he was disposed to take that view. The importance of these
observations for the present case lies in the fact that it was only the
operation of the rule of law that the court recognised and applied in that case
that enabled the conveyance represented by the parol tenancy agreement to take
effect without being under seal.
In the present case, Monarun did not set out to
assign its term to Mr
as such nor was there any agreement to assign. The agreement between Monarun
and Mr
because Monarun had no reversion and there could therefore be no privity of
estate between them. If the agreement had any effect at all it could only be as
an assignment of Monarun’s term, but that could only occur by operation of the
rule of law recognised in Milmo v Carreras. In my judgment,
section 53(1)(a) is apt to cover the position where an oral transaction,
which would otherwise be effective in accordance with its term, takes effect by
operation of law in a manner different from that contemplated by the parties.
As I have already pointed out, in Preece v Corrie, Best CJ was of
the opinion that even if the oral tenancy in that case were to be regarded as
an assignment, it would be an assignment by operation of law only and would
therefore fall within the exception to section 3 of the Statute of Frauds.
Mr Jefferies’ answer to this was that the
agreement cannot be treated in equity as a contract by Monarun to assign its
lease unless it satisfies all the requirements that are necessary for it to be
the subject of a decree for specific performance, one of which, since the
passing of the Law of Property (Miscellaneous Provisions) Act 1989, is that it
must be in writing. This is an attractive argument, but, in my judgment, it
must be rejected. Section 2(5) of the 1989 Act excludes from the operation of
section 2 contracts for leases that fall within section 54(2) of the Law of
Property Act 1925. Such contracts remain enforceable even though not in
writing. Neither party in a case such as the present needs to seek specific
performance of the agreement in order for it to have the effect that the law
attributes to it. In the present case, the parties intended to create a legal
tenancy, and, but for the fact that the period for which it was granted
exceeded the remaining term under Monarun’s lease, their agreement would have
been effective as it stood to achieve that end. It is the very fact that the
tenancy agreement would otherwise be effective in law to create a legal estate
in the premises in favour of Mr
that brings into operation the rule of law in Milmo v Carreras.
In the present case, the court is required to recognise the legal effect of an
enforceable agreement, which, by operation of an established rule of law, has
the effect of assigning Monarun’s lease to Mr
involve any infringement of the principles contained in section 2 of the 1989
Act, which is directed to contracts, other than contracts for short leases,
that have as their express object the sale or other disposition of an interest
in land. Mr Jefferies submitted that it would be anomalous if the assignment of
a lease, which would ordinarily require writing, could be effected orally in
this way; but an assignment by operation of law in this manner can only occur
in limited circumstances, and is, in my view, no more anomalous than the fact
that an agreement for a short lease can itself be made orally.
For these reasons, I consider that Mr Dutton is
correct in his submission that the agreement takes effect by operation of law
as an assignment of Monarun’s lease relating to that part of the premises
occupied by Mr
protection of the Landlord and Tenant Act 1954, the plaintiffs are entitled to
judgment.
Judgment for the plaintiffs.
