Is it necessary for all the parties described as “the licensor” to join in a notice terminating a licence to occupy land if one of the licensors is also one of the licensees? The Court of Appeal answered this question in the affirmative in Fitzhugh v Fitzhugh [2012] EWCA Civ 694.
The grantors of the licence were brothers, who had been appointed to administer their father’s estate. The licence, in favour of one of the brothers and his partner, was terminable by notice given by “the licensor” if the licensees failed to remedy a grave or persistent breach of the licence. Did a termination notice for persistent non-payment of the licence fee, given on behalf of one of the brothers, but not also on behalf of or with the authority of the other, satisfy the terms of the licence?
The High Court took the view that it would be unsatisfactory were it to be impossible to terminate the licence. Consequently, the judge felt able to interpret the reference to “the licensor” in the termination provision as a reference to all the persons who together were “the licensor”, apart from any person who was also the licensee.
The Court of Appeal has overturned the decision. It was possible to foresee the potential for practical difficulty should it ever have become necessary to terminate the agreement. The brothers did not share the same interests and it was unlikely that the licensee would agree to take action against himself. None the less, the licence described both the brothers as “the licensor”.
The court found it impossible to believe that the defined phrase could have one meaning throughout a short, simple and professionally-drawn document, except in the termination clause, where it meant something different.
Furthermore, there was nothing on the face of the document to suggest any change in the meaning of the defined phrase in the termination provisions, or that something had gone wrong with the drafting, and the courts do not have any power to improve the terms of the documents that they are asked to construe.
Consequently, the notice to terminate was invalid. There was a solution to the problem, but it was cumbersome and expensive. The brothers’ duties as trustees required them both to subordinate their personal interests and to co-operate in serving a notice to terminate where the licensee was in default, albeit without prejudice to their own personal positions. In addition, if one of the licensors were to refuse, unjustifiably, to serve such a notice, he would be liable to be removed from office, leaving the other free to act in accordance with his duties.
The alternative, and more expedient, solution to the problem would have been to include an additional provision in the licence to avoid such difficulties. This could have been achieved by including a clause stating that any notice terminating the licence was to be treated as being valid “when given by all the parties described as the licensor other than any party who was for the time being a licensee”.
Allyson Colby is a property law consultant
