Agricultural Holdings Act 1948 — Appeal by tenant from decision of county court judge on a case stated by an arbitrator under the 1948 Act — Construction of an agricultural tenancy agreement and a letter from the landlord (which it was agreed must be read together) — Question whether, on the true construction of these documents, the landlord’s agreement not to seek an increase of rent before October 1 1983 stood by itself or was conditional on the completion of certain arrangements for the occupation of a coach house, including the obtaining of planning permission and the carrying out of works — The county court judge held that it was conditional and that, as the condition had not been fulfilled, the landlord was not prevented from increasing the rent (if otherwise entitled to do so) before October 1 1983 — (The arrangements for occupation of the coach house had not proceeded) — Held by the Court of Appeal that the judge had taken too narrow a view of the construction of the provision restricting an increase of rent — He regarded the performance of the occupation arrangements as the consideration for the promise as to the rent, so that on the consideration failing the landlord was not bound by the rent restriction — In fact the lease as a whole contained ample consideration on both sides to support all the obligations contained in it — The landlord’s undertaking not to increase the rent before October 1 1983 was part and parcel of the whole transaction and was effective — The court made some comments on the construction of documents and the fashionable doctrine of the ‘factual matrix’ — The latter was only a current name for the old rule that in construing a document one must look at all the circumstances surrounding the transaction when it was entered into — ‘Factual matrix’ might encourage the idea that the subjective intentions of the parties were being sought, whereas the correct exercise is to determine objectively the intent of the parties from the words of the document in the light of the surrounding circumstances — Appeal allowed
This was an
appeal by the tenants, Dolmac (Agriculture) Ltd, from a decision of Judge Wild
at Cambridge County Court on a case stated by an agricultural arbitrator, Peter
J W Perks FRICS, which concerned the construction of documents relating to a
field in Cambridgeshire of which the respondents, Plumb Brothers, were the
landlords.
Richard L
Davies (instructed by Charnley & Co, of Bishop’s Stortford) appeared on
behalf of the appellants; A Norris (instructed by Wild, Hewitson & Shaw, of
Cambridge) represented the respondents.
Giving
judgment, MAY LJ said: On April 20 1983, His Honour Judge Wild, sitting in the
Cambridge County Court, had before him for answer a number of questions
submitted for the opinion of that court by an arbitrator acting pursuant to the
Agricultural Holdings Act 1948, the Agricultural Holdings (Notices to Quit) Act
1977 and associated regulations. There was also before the learned judge on
that occasion a supplemental special case which dealt more fully with one or
two matters which had been referred to briefly in the original case, and of
which I shall have to make mention in a moment.
In so far as
the learned judge answered the questions, and in particular one primary
question, against the interests of the tenant in these agricultural holdings
proceedings, that tenant now appeals from the order made by the learned judge.
Before dealing
with the substance of this appeal, there was a preliminary point which arose,
namely whether the tenant seeking to appeal the judge’s order required the
leave of either the learned judge or this court to prosecute his appeal.
It is
unnecessary for us, I think, to express any concluded view on this point
because, in the light of the circumstances of this case, we thought that in any
event this was a matter in which leave ought to be granted.
The point is
very briefly this. Under section 108 of the County Courts Act 1959 a general
right of appeal is given from a county court subject, inter alia, to the
subsequent provisions of the section and to such conditions as may be provided
by the Rules of the Supreme Court. Subsection (2) enables the Lord Chancellor
by order to prescribe classes of proceedings under which there shall be no
right of appeal without the appropriate leave. Those regulations have been
made, and they are the County Court Appeals Order 1981 (SI 1981 No 1749). By
article 2(b) of that order leave is required where the determination sought to
be appealed from was made by the judge acting in an appellate capacity. Mr Norris,
on behalf of the respondent landlord, said that that was the position in this
case.
In view of the
modern approach to appeals from final awards of arbitrators and questions which
arise in the course of an arbitration before a final award, exemplified by
sections 1 and 2 of the Arbitration Act 1979, I for my part would be minded to
agree with Mr Norris’ submission and hold that the learned judge was in this
case acting in an appellate capacity when answering the questions in the
special case from the arbitrator under the Agricultural Holdings Act. However,
as I have already indicated, as the court was minded to grant leave in the
circumstances of this case in any event, it is unnecessary to go further than
that.
Shorn of
unnecessary detail, this case concerns the letting of a field in Cambridgeshire
in May 1978. By a lease of May 15 1978 made between a Mr Lindsey and the
continuing present tenant appellants, Dolmac (Agriculture) Ltd, the field,
which was OS 130, was let to that tenant from August 1 1977 to March 31 1978
and thereafter from year to year determinable on March 31 in any year by 12
months’ prior notice in writing. The rent reserved by the lease was one of £80
a year payable annually in advance. I need only refer to one other provision in
the lease itself, and that is clause 3(i), by which the tenant agreed to pay
the rents reserved by the lease or any rent substituted therefor by agreement
or arbitration under the provisions of the Agricultural Holdings Act 1948 on
the days and in the manner set out in the lease.
On the same
day as the lease, Mr Lindsey wrote a letter to the managing director of Dolmac
(Agriculture) Ltd which contained six clauses. The letter was clearly intended,
as the opening words show, to clarify the position between him and the tenant
concerning rights, compensation, improvements and other matters.
It is now
accepted on both sides that the relationship between landlord and tenant has
since May 15 1978 and now remains that which is to be obtained from the terms
of the lease and of the letter of the same day read together.
I should add
that after May 1978 Mr Lindsey sold the property subject to the tenancy to a
firm of builders known as Plumb Brothers (Builders) Ltd. That company in their
turn on April 14 1981 sold the land to a partnership known as Plumb Brothers,
who are the present landlords and the respondents to this appeal.
Before going
further, I refer in a little more detail to the terms of the letter of May 15
itself. As I have said, it contained six clauses or paragraphs. The first of
those related to a plan for the division of the land into separate paddocks
with certain other improvements, and provided that the tenant company would
deal with all the necessary planning applications, and then let the landlord
have copy invoices showing all amounts spent for the purposes of appropriate
compensation under the agricultural holdings legislation.
Para 2
provided for the mode of calculation of the compensation for improvements
carried out by the tenant in the course of the tenancy, a mode of compensation
which it will be seen — it is unnecessary to go into detail — is special to
this particular relationship and does not follow entirely the provisions of the
agricultural holdings legislation.
In para 3
there was reference to a ditch between the field and the road, a statement that
it is a public drain, and a provision that if the tenant cared to clear it and
erect a fence on the road side of that drain it might do so, and that the
landlord would charge no extra rent for whatever small amount of additional
land so moving the fence would accrue.
For the time
being I omit para 4 and move to para 5. That contained an agreement on the part
of the landlord that if the tenant’s rare-breeds breeding programme was
successful — precisely to what that refers I know not and it does not really
matter — and the tenant decided to operate a farm zoo, then the landlord agreed
to help as far as he could. He further accepted that if a zoo on those lines
should be opened to the public, he would nevertheless still only charge an
agricultural rent, and not what might be described as a commercial rent on the
basis that there was a zoo open to the public.
Then I go back
to para 4 and on to para 6, and I think it necessary to read the two paragraphs
in full. Para 4 provided:
I also agree
that I will not seek to increase the rent for a period of 5 years from October
1 1978.
That would, on
its face, take the embargo on any increase in rent to October 1 1983. Para 6
provided:
The
consideration for the above is Dolmac
that is, the
tenant
agreeing
that, if planning permission for the conversion of the Coach House to a
residence is obtained and the property be converted at Dolmac’s expense Dolmac
will permit Anne
‘Anne’, as we
understand it, was Mrs Lindsey, the wife of the then landlord
and her
family to live in the Coach House
which appears
to be on the opposite side of the road from the land the subject matter of the
lease
rent and rate
free so long as she wishes and is able to arrange the day to day management of
the holding at its present level. Obviously, if it becomes necessary to
employ people, Dolmac will foot the bill.
In relation to
para 6, and after the matter had been to the Cambridge County Court on an
earlier occasion, in para 14 of the supplemental case the arbitrator, to whom I
shall refer in a moment, wrote:
I also find
as a fact that the reason not to increase the rent for five years as set out in
para 4 of the letter was that it was proposed that Mr & Mrs C J N Lindsey
would live in the Coach House referred to in para 6 of the letter but that they
did not in fact do so.
This then was
apparently the background to para 6 of the letter, and it is to that which I
shall have to come back in a moment.
That then was
the lease and the contemporaneous letter. The events thereafter can be taken
quite shortly. On January 23 1981 the landlord served notice pursuant to
section 8 of the Agricultural Holdings Act 1948 demanding arbitration with a
view to an increase of the rent from March 31 1982, that being the first
anniversary thereafter from which it would have been possible to increase the
rent under the relevant provisions.
Pursuant to
that demand, on March 25 1982 Mr Perks, a Fellow of the Royal Institution of
Chartered Surveyors, was appointed the appropriate arbitrator. He held a
hearing first on April 30 1982 and signed a special case for the opinion of the
county court on August 20 1982. On October 8 1982 His Honour Judge Garfield
sent the matter back to the arbitrator for further findings of fact. These the
arbitrator made in his supplemental special case, which was dated January 24
1983, as also was an amended special case: it seems that after the matter had
been to the county court and back to the arbitrator, in addition to signing the
supplemental case, he also amended his original special case. That special case
in para 11 asked a number of questions for the opinion of the country court.
The first question does not now arise. It was effectively whether the lease and
letter were to be read together. As I have said, it is now common ground that
they have to be.
In subpara (a)
of para 11 of the special case the arbitrator asked:
If it
that is, the
letter
is
supplementary to the tenancy agreement can para 4 thereof be construed in
isolation or is it conditional on the tenant incurring expense of carrying out
some or all of the works specified in paras 1 and 3 and/or obtaining planning
permission in accordance with paras 1 and 5?
And under
subpara (b):
If it is
conditional do the terms of the tenancy agreement apply until there has been
specific performance of the matters contained in the letter?
The decision
of the learned county court judge was, as I have said, dated April 20 1983. In
effect, the issue before him came very shortly to this. Did para 4 of the
letter of May 15 1978 preclude the landlord from seeking to obtain any increase
of rent until October 1 1983 in any circumstances or, alternatively, was para 4
to be coupled with para 6 and was the landlord precluded from increasing the
rent before October 1 1983 only if the planning permission and consequent works
and occupation by Mrs Lindsey of the Coach House, referred to in para 6 of the
letter, had actually taken place?
The learned
judge’s conclusion — and again I take the matter shortly — was that paras 4 and
6 of the letter of May 15 1978 went together, and the effect of para 4 as a
stop upon the landlord’s right to apply under the Agricultural Holdings
legislation to increase the rent was subject to the condition which was
contained in para 6 of the letter of May 15. It is against that finding by the
learned county court judge that the tenant now appeals.
The matter is
thus one, as I think, of the proper construction of, in particular, paras 4 and
6 of the letter of May 15 1978 alongside the lease of the same date in the
circumstances which obtained at the time.
In my view one
has to be careful about the extent to which one uses the finding of fact in para
14 of the supplemental special case, to which I have referred, to assist in the
construction point which arises in this appeal. There has grown up a tendency
in recent times to speak about construing contracts or documents in or against
what is described as the ‘factual matrix’ in which the contract or documents
first saw the light of day. In truth that is only, I think, a modern way of
saying what has been the rule for a long time that, in construing a document,
or documents or a contract, one must look at all the circumstances surrounding
the making of the contract at the time it was made. There is the danger, if one
stresses reference to ‘the factual matrix’, that one may be influenced by what
is in truth a finding of the subjective intention of the parties at the
relevant time, instead of carrying out what I understand to be the correct
exercise, namely determining objectively the intent of the parties from the
words of the documents themselves in the light of the circumstances surrounding
the conclusion of the relevant transaction. It is not permissible, I think, to
take into account a finding of fact about what the parties intended a document
to achieve when one is faced with the problem some five, 10 or many years later
of construing it. In deciding what the document did in fact achieve, all that
one can look at are the general circumstances surrounding the making of the
document and in which it was made, and deduce the intention of the parties from
the actual words of the document itself. The contract between the parties is
what they said in the relevant document. It is not for this or any court to
make a contract for the parties different from the words that the documents
actually use merely because it may be that the parties intended something different.
The learned
judge’s decision that the operation of the limitation
with the conditions set out in para 6 of the letter was set out in this way in
his judgment, of which we have a note. Referring to the paras in the letter, he
said this:
Paras 1 and 2
to my mind go together. Para 3 to my mind stands alone and para 5 also. Each of
those paras is capable of standing on its own with its own obligations and
consideration, but para 4 of the letter is a bare statement unsupported by
anything else until one comes to para 6.
He then quoted
para 6 and, after a little consideration of the wording of that para, said
this:
In this case
I am not dealing with questions of fact and I know not whether planning
permission was granted. It is quite clear in my judgment that these are
conditions precedent and until performed, there is no consideration to support
the statement that rent will not be increased for five years.
With all
respect to the learned county court judge, whatever may be the ultimate correct
answer to the question raised in this case, he was in any event wrong, I think,
to base his decision on the question of consideration, and the consideration
for para 4 of the letter of May 15 alone, as he did. There was ample
consideration on both sides in the lease and the letter to support each and
every obligation in both of them, and to suggest that without the performance of
the conditions precedent, as the judge described them, in para 6 there was no
consideration to support the promise in para 4 was, in my respectful view,
wrong in law.
Mr Norris, on
the respondent’s behalf, no doubt realising his difficulty in seeking to support
that view, adopted a slightly different approach, but one which was certainly
raised before the learned county court judge. His argument was to this effect.
When one looks at the lease, as I have already said, clause 3(i) provided that
the rent payable under it should be assessed and paid pursuant to the relevant
legislation, principally the Agricultural Holdings Act 1948. Clause 4 of the
letter undermined that primary obligation in clause 3(i) of the lease, and
thus, at the least, one must look at the letter a little more carefully to see
whether that limitation of the primary obligation under clause 3(i) of the
lease is referable to anything else in the letter. What he submits is that the
lease contains the basic obligations between the parties. The letter contained
a number of specific modifications to those basic obligations, the relevant one
in the present case being the basic obligation to pay rent pursuant to the
relevant legislation under clause 3(i).
Starting from
that foundation, Mr Norris submitted that when one looks at the letter, it
comprises a number of conjoint clauses which are as he described it in the form
— ‘if such and such is done, then so and so will happen’. Under para 1, if
certain improvements are made, then under para 2 the compensation will be such
and such. Under para 3, if work is done to the drain, then no rent extra will
be charged for any additional land taken in. Under para 5, if a farm zoo is
started and the public are allowed in, then this notwithstanding no additional
rent will be payable.
If that, as he
submitted, is the proper approach to the construction of the lease and the
letter, then he contended that clauses 4 and 6 read together fall easily into a
similar pattern. If under para 6 the conditions precedent referred to by the
learned county court judge are complied with, then under clause 4 the rent will
not be increased for a period of five years. He sought to support that
construction of paras 6 and 4 (I think one has to put them in that order)
together by a reference to para 14 of the supplemental case, to which I have
already referred. I only repeat the caveat that I have earlier expressed in
this judgment about that paragraph.
Mr Davies in
support of the appeal submitted, first, that the learned judge’s approach based
upon the consideration point, to which I have referred, was wrong; and,
secondly, that there is no justification for, as it were, the conditional
approach to the construction of the letter of May 15 for which Mr Norris
contends. The letter set out a number of matters relating to rights,
compensation, improvements and similar matters. There was in para 4 a clear
undertaking that for five years the landlord could not increase the rent. There
were other undertakings in the letter, but there is no ground for saying that
the tenant’s entitlement to prevent the landlord increasing the rent for five
years from October 1978 is in any way to be tied to the performance of the
conditions precedent in para 6.
In my
judgment, a construction following the successive conditional line contended
for by Mr Norris is an artificial one, and one which I for my part would be
prepared to consider only if there appeared to me to be any ambiguity in the
letter of May 15 1978 or any inconsistency between it and the provisions of the
lease of the same date. I do not think that there is. This was obviously a
composite transaction between the parties. It comprised the grant of a lease on
certain terms, but with certain ancillary agreements between the parties about
various other things — improving a field, improving a ditch, possibly starting
a farm zoo, possibly getting planning permission to make a residence out of the
Coach House — but in addition, as part and parcel of the whole transaction,
there was a clear undertaking by the landlord in para 4 of the letter of May 15
that he would in any event not seek to increase the rent for five years from
October 1 1978.
In those
circumstances, I for my part would allow this appeal. Precisely what order the
court makes in sending the matter back to the arbitrator or to the county court
judge will be a matter, I think, for argument at the conclusion of our
judgments, but in effect I would send the matter back with an indication that
para 4 of the letter of May 15 is not to be read in any way as subject to the
provisions of para 6 of the letter, and that consequently the landlord’s notice
of January 23 1981 was ineffective and the rent under this particular tenancy
could not be increased until October 1983.
For those
reasons and to that extent, subject to further argument, I would allow this
appeal.
Agreeing,
PURCHAS LJ said: The issues, which were very succinctly and ably place before
the court by both counsel, have been isolated now to a straightforward question
as to an interpretation of a letter, dated May 15 1978, and in particular para
4 of that letter, which reads:
I also agree
that I will not seek to increase the rent for a period of 5 years from October
1 1978.
There was a
finding in the form of a supplemental case stated which related to that para,
and which read in para 14 of the supplemental special case:
I also find
as a fact that the reason not to increase the rent for five years as set out in
para 4 of the letter was that it was proposed that Mr & Mrs C J N Lindsey
would live in the Coach House referred to in para 6 of the letter but that they
did not in fact do so.
There are
obviously some background facts with which the court is not fully familiar
arising out of the occupation by the Lindsey family and the management of the
holding envisaged in para 6 of the letter which my lord has already read. It
refers to her continuing there as long as she is able to arrange the day-to-day
management of the holding.
The learned
judge, who referred the matter back to the arbitrator for the supplemental
case, merely invited further findings of fact about the letter itself, but
certainly did not invite further findings about the subjective intentions of
the parties. But the arbitrator has accepted that invitation to find as a fact
the subjective intentions at the time the lease was made and the agreement made
which would appear to connect para 6 and para 4 of the letter.
The learned
judge, whose finding and answer are now the subject of this appeal, does not in
fact refer to the supplemental finding. His judgment was based on a reading of
the letter itself in conjunction with the lease. It is not necessary,
therefore, in this judgment to comment as to whether or not the learned judge
was affected in any way by the evidence of the subjective intention of the
parties and whether or not that can properly be taken into account. With
respect, I agree with my lord that, in considering what is known as ‘the
factual matrix’ against which contracts are made, one is entitled to look at
the objective evidence of intention to be derived from such facts, but one is
not entitled to take into account the subjective intentions, however they may
be expressed, in carrying out the exercise of construction of the document.
Mr Norris’
submissions before us really amounted to an interpretation of the letter in
conjunction with the terms of the lease. He referred to clause 3(i) of the
lease itself, which places upon the tenant the obligation ‘to pay the rents
hereby reserved or any rent substituted therefor by agreement or arbitration
under the provisions of the Agricultural Holdings Act 1948’. That is a general
provision in the lease. Mr Norris said: why should the landlord give away
anything from the protection granted to him by that clause and by the
Agricultural Holdings Act 1948? He
supported that submission by referring to the other paras of the letter and
indicating that, apart from para 4 and para 6, each of
adjustment or recognition of improvements and so forth.
Clause 3(vi)
of the lease restricts totally the use to which the land can be put by the
tenant to the rearing of livestock and farming purposes only. So far as paras 1
and 2 of the letter are concerned, it is fair, I think, to assume that the
improvements, which were already the subject of a plan which had been submitted
by the tenant to the landlord, were within clause 3(vi). Para 3 of the letter
deals with something entirely different, and that is the privilege or otherwise
of clearing a drain which belonged to the local authority. If the tenant
decided to do that, and indeed enclosed an extra area of land in so doing, then
the improvements would count under para 2 — incidentally not solely associated
with para 1 of the letter — for compensation within the terms of para 2 of the
letter, permission would be granted and no extra rent charged for the
additional land enclosed.
Para 5
envisages a total departure from clause 6(iii) of the lease, and the landlord
promises that he will not stand in the way of a departure, but will agree to
it, as long as the tenant takes all the formal steps to obtain the planning
consents; and again the landlord indicates that he will not alter the basis of
computation of the rent.
Para 6, Mr
Norris says, can only be associated with para 4 and vice versa, para 6 being
the position which did not in fact arise where the Coach House would be adapted
for occupation by the landlord’s family.
With respect
to Mr Norris’ able argument, I am wholly unable to follow this. Para 6 itself
is ambiguous in the use of the words ‘consideration for the above’. Mr Norris
justifiably submitted that of course this letter was not drawn by a lawyer; it
is a collateral letter written between the parties to the agreement of the
lease. But nevertheless that does not mean to say that one should not look at
it to apply normal interpretation. In doing that and reading it, one must ask
oneself the question: if, in fact, para 6 was to be considered in the same way
as para 3 or para 5 of the letter, then why on earth did para 6 not contain
within it the restriction not to increase the rent for five years? Why was that put in a separate paragraph?
In my judgment
on the clear meaning of the letter, when one looks at the whole context of the
letter, bearing in mind that the subjective intention disclosed in the
supplemental case merely indicates a reason for para 6 as might be held by one
or other or even both of the parties, this is not the natural construction of
the documents. Looking at this letter in the whole context of the agreement,
there was benefit flowing in more than one direction in nearly every one of its
paras and certainly benefits to be enjoyed by the landlord overall: the
maintenance of the ditch, the improvement in a substantial way under para 1 of
the area itself — and bearing in mind that it could be determined under the
terms of the lease within two years — the erection of sheds and farrowing
houses, concrete bases at the entrance of the fields. Those are all
long-standing capital improvements which would accrue to the landlord if he
chose to exercise his right to determine the tenancy. That, of course, would be
subject to the protection given to the tenant under the general legislation
dealing with agricultural tenancies; I am not overlooking that. But there was a
good deal of benefit flowing from this collateral agreement as contained in the
letter.
That being so,
I cannot agree that one is driven to the strange interpretation for which Mr
Norris contends, that para 4 of the letter should operate only in conjunction
with para 6, but in my opinion stands on its own as a para in a letter which is
collateral to the lease into which the parties entered.
For those
reasons I agree that it has that effect, that there is consideration for it and
that therefore this appeal should be allowed.
The appeal
was allowed with costs in the Court of Appeal and the court below. The costs of
the arbitration were reserved to the arbitrator.
