Unlawful subletting by tenant — Head tenant serving notice to quit upon landlord — Whether landlord entitled to possession against subtenant — Arbitrator making award in favour of landlord — County court refusing to set aside award — Court of Appeal holding that tenant’s unlawful subletting occasioned no prejudice to landlord — Tenant’s appeal allowed
The tenant, the appellant, held Bridge Inn Farm, Grainthorpe, Louth, Lincolnshire, under a tenancy agreement granted in April 1971 on terms prohibiting him from subletting the farm without the landlord’s, the first respondent, consent. The farm comprised of 128 acres and included a dwelling-house. The tenancy was an agricultural holding within the Agricultural Holdings Act 1986. The Act provided security of tenure for tenants by restricting the circumstances in which an effective notice to quit could be given during the tenant’s lifetime.
In 1991 the tenant entered into a transaction with a company for the working of the land. That transaction was subsequently held by the arbitrator to amount to a subletting of the farm. On February 5 1992 the landlord served the tenant with a notice to quit expiring on April 6 1993, relying on section 26(2) and Case E in Schedule 3 to the 1986 Act. The tenant required arbitration on the efficacy of the notice to quit pursuant to article 9 of the Agricultural Holdings (Arbitration on Notice) Order 1987. An arbitrator found that the tenant’s agreement with the company in 1991 amounted to a subletting and that the landlord had suffered material prejudice within Case E as a result, on the basis that he might be forced into a direct relationship with the subtenant, a company which, unlike an individual, would never die. The tenant applied to the county court seeking to set aside the arbitrator’s award. The court dismissed the application, but the tenant appealed.
Held The appeal was allowed.
1. At common law the general rule was that when the head tenancy came to an end, any subtenancy derived out of it also automatically and simultaneously came to an end. That rule applied without question when the head tenancy came to an end by effuxion of time, by a landlord’s notice to quit or by forfeiture. However, it did not apply in cases of surrender and merger.
2. The exceptions to the general rule must be confined to surrender and merger where the headlease was, by agreement between landlord and tenant, determined altogether. The legal incidents of a termination of a periodic tenancy by an upwards notice to quit were different in character from those of termination by surrender. On surrender the lease was immediately extinguished; on notice to quit, only when the notice to quit expired. In the event of a joint tenancy, one joint tenant alone could serve an upwards notice to quit; all were required to join in a surrender.
3. In Brown v Wilson (1949) 156 EG 45 it was held that a lessee could not by a voluntary act put an end to his term and thereby impair or destroy the rights he had granted to his underlessee.
4. The considerations against allowing a tenant unilaterally to foist his subtenant upon the landlord were in total compelling. In the result, the tenant’s unlawful subletting had occasioned the landlord no material prejudice: Brown v Wilson over-ruled.
Paul Morgan QC and Martin Roger (instructed by Bridge McFarlane, of Louth) appeared for the tenant; Andrew Gore (instructed by Wilkin Chapman, of Louth) appeared for the landlord.
