Landlord and tenant — Construction of agreement — Clause providing for tenancy of land to continue until the landlord, being the LCC in their capacity as highway authority, required it for road widening — Reversion passed to the GLC, then to the London Residuary Body and then to the second, third and fourth defendants in the present case, who had purchased the land from the London Residuary Body — Effect of a notice to quit served on the tenants before the purchase — Was the clause as to the continuance of the tenancy repugnant to its nature? — Held, after discussion of authorities, that the notice to quit was valid
the plaintiffs, the Prudential Assurance Co Ltd, raised issues as to the true
construction of a tenancy agreement and the effect of a notice to quit
purporting to determine it — By a memorandum of agreement in 1930 the LCC
granted a tenancy, on a leaseback basis, to a tenant subject to a provision in
clause 6 that the tenancy was to continue until the land in question was
required by the council for the widening of Walworth Road, when it was
terminable on two months’ notice — As mentioned above, the reversion became
vested in the London Residuary Body and then in the three other defendants to
the present proceedings — The tenancy had become vested in the plaintiffs, the
Prudential Assurance Co Ltd, who had sublet to the London Electricity Board —
The GLC was a highway authority but the London Residuary Body was not — At some
stage before the sale by the London Residuary Body they had served a notice
purporting to terminate the tenancy under section 25 of the Landlord and Tenant
Act 1954 — This notice was ineffective under the 1954 Act, but it was accepted
that it was capable of taking effect as a common law notice, provided that such
a notice could be given by the London Residuary Body
judge’s view the agreement created a yearly tenancy, subject by clause 6 of the
agreement to a restriction that it was to ‘continue until the land was required
by the council for the purpose of the widening of Walworth Road’, when at least
two months’ notice had to be given prior to the date of determination — The
question then arose as to whether this restriction or condition was repugnant
to the nature of a yearly tenancy — After considering a number of authorities
the judge came to the conclusion that clause 6 did not exclude the tenants’
right to determine the tenancy by notice and that the restriction placed on the
landlords’ right was not repugnant to such a tenancy — It was true that once
the reversion had been transferred to the London Residuary Body, which was not
a highway authority, it was no longer possible for the landlord to require the
land for the purposes mentioned in clause 6 — What was the effect of that? It was clear that the council referred to in
clause 6 must be both a highway authority, which required the land for the
named purpose, and the landlord, which was capable of obtaining vacant
possession by serving the requisite notice — The clause predicated a situation
in which the landlord and the highway authority were one and the same — In the
judge’s opinion, once they were different bodies clause 6 ceased to have any
effect
this construction was that the London Residuary Body had served a valid notice
to quit and the second, third and fourth defendants, who had purchased from the
Residuary Body, were entitled to possession
The following
cases are referred to in this report.
Ashburn
Anstalt v Arnold [1987] 2 EGLR 71; (1987)
284 EG 1375, CA
Breams
Property Investment Co Ltd v Stroulger
[1948] 2 KB 1; [1948] 1 All ER 758; (1948) 64 TLR 292, CA
Lace v Chantler [1944] KB 368
Midland
Railway Co’s Agreement, Re: Clay (Charles) & Sons Ltd v British Railways Board [1971] Ch 725; [1971] 2 WLR 625;
[1971] 1 All ER 1007; (1971) 22 P&CR 360, CA
Warner v Browne (1807) 8 East 165
In this case
the plaintiffs, Prudential Assurance Co Ltd, raised a number of questions on
the true construction and effect of a memorandum of agreement relating to land
fronting 263-265 Walworth Road, London SE17, of which the plaintiffs were now
the tenants and of which the reversion had been transferred from the first
defendants, the London Residuary Body, to the second, third and fourth
defendants, Barron Investments Ltd, Alan Moss Bayes, and Joan Estelle Bayes.
Paul de la
Piquerie (instructed by the solicitor to the Prudential Corporation) appeared
on behalf of the plaintiffs; Stephen Lloyd (instructed by Clifford Watts
Compton) represented the defendants.
Giving
judgment, MILLETT J said: This case raises a number of questions on the
true construction and effect of a memorandum of agreement dated December 19
1930 between the London County Council of the one part and Mr Samuel Nathan of
the other part, which purported to grant a lease or tenancy of a piece of land
fronting 263-265 Walworth Road. It appears that immediately prior to December
19 1930 Mr Nathan owned land fronting the Walworth Road and wished to redevelop
the site, or part of it, by putting up a building upon it. The LCC, being the
highway authority, contemplated the possible widening of Walworth Road and
accordingly, on December 19 1930, acquired part of Mr Nathan’s Land, consisting
of the frontage of the premises to the Walworth Road, and on December 30 1930
leased it back to Mr Nathan, together with a right to put up a temporary
building upon it. Without prejudging the questions I have to determine, it
appears from the internal evidence of the document itself that the intention
was that Mr Nathan should have the right to put up a temporary building on the
frontage and to occupy it until such time as the LCC should determine to
proceed with their proposal to widen the Walworth Road, whereupon he would have
to give up possession. The new and permanent building which he intended to
erect behind the temporary one would then have a frontage to the widened
Walworth Road.
It is not in
evidence whether similar transactions were entered into with adjoining premises
on either side of the subject premises or further along Walworth Road.
Clause 1 of
the memorandum of agreement is in the following terms:
The Council
hereby let to the Tenant and the Tenant takes from the Council the land
(hereinafter called ‘the said Land’) described in the Schedule hereto from 19th
December 1930 at the rent of £30 per annum payable quarterly on the usual
quarter days until the tenancy shall be determined as hereafter provided . . .
Clause 6
reads:
The tenancy
shall continue until the said Land is required by the Council for the purposes
of the widening of Walworth Road and the street paving works rendered necessary
thereby and the Council shall give two months’ notice to the Tenant at least
prior to the day of determination when the said Land is so required and
thereupon the Tenant shall give vacant possession to the Council of the said
Land as hereinbefore provided.
The interest
granted to the tenant by that document has become vested in the plaintiff, the
Prudential Assurance Co Ltd, and in 1975 it sublet the premises subject to the
memorandum of agreement, together with the freehold land behind it, to the
London Electricity Board, which is still in occupation, at a substantial rent.
The proposal
to widen the Walworth Road was never carried into effect and must, I apprehend,
have been abandoned many years ago. In the course of time the LCC’s rights and
obligations became vested in their successor body, the Greater London Council,
and a further statutory vesting occurred on the dissolution of the Greater
London Council when its property, rights and interests were vested in the first
defendant, the London Residuary Body. The LCC had, rightly or wrongly,
conceived that it was not open to them to review the rent of £30 a year for the
subject premises, which was fixed in 1930, or to determine the tenant’s
interest thereunder. The LCC and their successor, the GLC, were each the
highway authority. The London Residuary Body, however, is not a highway authority.
After taking advice they concluded that they could deal with the reversion on
the footing that the interest created by the memorandum of agreement was
terminable. Accordingly, on July 21 1988 the London Residuary Body sold the
subject land to the second, third and fourth defendants, and the land was
transferred to them by a transfer dated August 25 1988. Since that date the
reversionary interest expectant on the determination of the interest created by
the memorandum of agreement has been vested in the second, third and fourth
defendants and, of course, ever since it became vested in the London Residuary
Body it has been vested in a party other than a highway authority.
The question I
have to decide is whether the memorandum of agreement created an interest which
still subsists and which is not capable of being determined by the London
Residuary Body or a successor in title not being a highway authority. Prior to
the auction sale, the London Residuary Body purported to serve a notice under
section 25 of the Landlord and Tenant Act 1954 determining the interest on
December 19 1988. The notice was served on March 31 1988. It would have been a
perfectly good notice if Part II of the Landlord and Tenant Act 1954 applied to
the interest. However, since the plaintiff had sublet the whole of the land to
the London Electricity Board and was not in possession of any part of it, it is
plain that the land was not within Part II of the Landlord and Tenant Act 1954
at all. It is now common ground that the notice was not effective as a section
25 notice. The plaintiffs in fact served a counternotice claiming a new
tenancy. Those proceedings have been transferred to the High Court and are
before me, but it is common ground that they are a nullity and must be
dismissed.
It is also
common ground that the section 25 notice is capable of taking effect as a
common law notice to quit and was apt to terminate an ordinary yearly tenancy
if such a notice could be given by the London Residuary Body. The defendants
rely upon it as a good common law notice. The parties are agreed as to the
financial consequences which would ensue should I come to the conclusion that
the notice was a valid common law notice to quit.
The defendants
assert that the notice is a good notice to quit upon three alternative grounds.
First, they submit that on its true construction the memorandum of agreement
purported to demise the land for a fixed but uncertain term and that
accordingly it created no legal estate in the land. Second, they submit that if
a periodic tenancy was created, either by the memorandum of agreement itself or
by Mr Nathan’s entry into possession and payment of rent, then any restriction
on either party’s right to serve a notice determining the tenancy is void as
repugnant to the nature of a periodic tenancy. They submit that it was possible
to envisage a situation, even in 1930, when it would become impossible for the
landlord to serve such a notice, and that came about once the reversionary
interest was vested in a body other than a highway authority. They submit also
that in any event, on its true construction, clause 6 of the memorandum of
agreement excludes any right of the tenant to give a notice determining the
tenancy. Third, the defendants submit that on its true construction clause 6 restricts
the landlord’s right to serve notice to quit only if and so long as they are
the relevant highway authority, and that any restriction on the right ceased
when the land vested in the London Residuary Body.
The first
question I must decide is whether, on its true construction, the memorandum of
agreement created a tenancy for a fixed term for, if it did, it is common
ground that it infringes the requirement that the maximum duration of a tenancy
for a fixed term must be known at its inception. If it created instead a
periodic tenancy, it was obviously a yearly tenancy. Mr Lloyd, who appears for
the defendants, submits that the structure and language of the memorandum of
agreement are inconsistent with the creation of a periodic tenancy. The document
does not purport to create a periodic tenancy and the words which it employs
are not appropriate for that purpose. He points to the fact that the period of
the demise is expressed as being from one given date until another: ‘from
the 19th day of December 1930 until the Tenancy shall be determined as
hereinafter provided’. Moreover he points out that clause 6 itself expressly
provides that the tenancy shall continue until the said land is required by the
council for the purposes of widening the Walworth Road: an express statement
that the tenancy shall continue until a stated event. Mr Lloyd submits that the
addition of the requirement that the council shall give two months’ prior
notice is merely machinery for enabling the date to be fixed by which possession
shall be given.
I see the
force of those submissions but I do not accept them. In my judgment, on its
true construction, the memorandum of agreement was apt to create a periodic
tenancy subject to a modification of the landlord’s right to serve notice to
quit. My ground for this conclusion is that the determining event is not, as it
was in Lace v Chantler [1944] KB 368, outside the control of
either party. The determining event is the expiry of a notice to quit. Clause 1
of the memorandum of agreement so provides, ‘until the tenancy shall be
determined as hereinafter provided’, thus incorporating clause 6; and although
clause 6 opens with the words, ‘The tenancy shall continue until the said land
is required by the council for the purposes of the widening of Walworth Road’
(which is also now outside the control of the landlord), it is apparent that in
fact the tenancy continues until the requisite notice has been given and
expires. It is not enough that the council should require the land for the
stated purpose; they must state the fact in an appropriate notice, and then the
tenancy continues until the notice expires. What brings the tenancy to an end
is the expiry of the notice.
I am persuaded
by Mr de la Piquerie that on the true construction of the memorandum of
agreement it created a yearly tenancy subject nevertheless to determination by
at least two months’ notice by the landlord if, and only if, the land was
required by the landlord ‘for the purposes of the widening of Walworth Road and
the street paving works rendered necessary thereby’. As he points out, clause 1
begins by granting a tenancy at a rent of £30 per annum payable on the usual
quarter days. Had it stopped there, with nothing more, it would have created an
express periodic tenancy. Had it stopped there and had clause 6 provided for
the mode of determination, the words ‘the tenancy’ in clause 6 would be
construed as meaning ‘the yearly tenancy hereby created’. The addition of the
words ‘until the tenancy shall be determined as hereinafter provided’ which
link the
my judgment there is nothing inconsistent with the language of the document to
read it as if the word ‘yearly’ appeared between ‘the’ and ‘tenancy’ wherever
they appear. The fact that at first sight it appears to be determinable only by
notice served by the landlord does not affect the matter for reasons which I
shall consider in a moment.
If I am wrong
about that and the memorandum of agreement creates a tenancy for a fixed term,
it is agreed that the term is uncertain and that the document infringes the
rule that the maximum duration of a fixed term of years must be known at the
date of its creation. It would follow that any such fixed term was void, but there
would still be a yearly tenancy which came into existence when Mr Nathan
entered into possession of the land and paid the rent. That tenancy would be
upon all the terms of the memorandum of agreement capable of applying to a
periodic tenancy, and in so far as clause 6 modifies the rights of each party
to give notice to quit and is not repugnant to a periodic tenancy it would
continue to apply. Accordingly, in my judgment, the question whether this was a
fixed-term tenancy which was void, thus letting in a periodic tenancy, or
whether on its true construction the memorandum of agreement created an express
periodic tenancy, does not determine the validity of the notice to quit, which
has been served.
I therefore
proceed on the basis that the memorandum of agreement created a periodic
tenancy, the landlord’s right to serve notice to quit being modified by clause
6.
The next
question I have to decide is whether clause 6 is repugnant to the nature of a
yearly tenancy. The first question that arises is whether the tenant’s right to
determine the tenancy by notice is thereby excluded. It is plain from the
decision in Warner v Browne (1807) 8 East 165 that one cannot
have a periodic tenancy in which one party is precluded from giving notice to
terminate. Such a restriction is repugnant to the inherent nature of a periodic
tenancy. As Mr Lloyd pointed out, clause 6 expressly provides that the tenancy
‘shall continue until the land is required by the Council for the purposes of
the widening of Walworth Road’ and the relevant two months’ notice has expired.
He invites me to read that clause, which does not provide for any corresponding
notice on the part of the tenant, as excluding the tenant’s right to serve a
notice. A similar point came before the Court of Appeal in Ashburn Anstalt
v Arnold [1987] 2 EGLR 71, where the language of the document was not
dissimilar from the present in many respects. The agreement in that case
contained the following provision:
From and
after September 29th 1973 Arnold shall be entitled as licensee to remain at the
property and trade therefrom on the like terms save that it can be required by
Matlodge Ltd to give possession on not less than one quarter’s notice in
writing upon Matlodge certifying that it is ready at the expiration of such
notice forthwith to proceed with the development of the property and the
neighbouring property involving inter alia the demolition of the
property.
Until
September 29 1973 it appears that Arnold had a tenancy at will or a licence at
will on the payment of no rent, and thereafter was granted the rights I have
quoted. The Court of Appeal held that Arnold had a tenancy and not a licence.
The question arose whether Matlodge could bring Arnold’s interest to an end by
a notice to quit without desiring to develop the property. Having come to the
conclusion that the agreement created a periodic tenancy, the Court of Appeal
had to consider the question of repugnancy. The Court of Appeal dealt with the
question of the tenant’s right to determine the tenancy in this way:
The
plaintiffs say, however, that in this case . . . there is no provision for
determination by Arnold & Co. It was said, therefore, that in the absence
of notice by Matlodge, the term was uncertain in duration. We do not agree with
that. As a matter of construction of the document, the possibilities are as
follows: (i) Arnold & Co were not entitled to determine the arrangement at
all. We reject that entirely. Bearing in mind that Arnold & Co were not
required to pay any rent, such a construction is quite unreal in business
terms; Arnold & Co were not obliged to occupy the premises and, if they did
not occupy them, the outgoings would be nil or negligible, so there was no
benefit to Matlodge in continuing the relationship.
In the present
case there was a rent of £30, which may well have been a commercial rent in
1930, the time at which this document falls to be construed, and I cannot
approach the matter in quite the same way. However, in my judgment, once one
arrives at the conclusion that the document creates a periodic tenancy, the
tenant’s right of occupation as a periodic tenant must carry with it all the
incidents of a periodic tenancy, and all the inherent rights, including the
rights of either party to terminate the tenancy by giving the appropriate
notice, save and in so far as they are expressly excluded by the document
itself. In my judgment it is not a question of construing clause 6 in order to
discover whether it confers a right of termination upon the tenant, but of
construing the document as creating a periodic tenancy and considering whether
the tenant’s inherent right to terminate the tenancy by notice to quit has been
excluded either expressly or by necessary implication. The landlord’s right has
been modified. The tenant’s right has not and, in my judgment, it continues to
subsist.
The next
question is whether the restriction placed upon the landlord’s right to
terminate the periodic tenancy is repugnant to the nature of a yearly tenancy.
As I have said, Warner v Browne is authority for the proposition
that an absolute prohibition upon either party from giving notice to quit is
repugnant to the nature of a periodic tenancy. Breams Property Investment Co
Ltd v Stroulger [1948] 2 KB 1 is authority for the proposition that
one can nevertheless suspend the right of one or other party from giving notice
to quit for a fixed term certain, and that that is a valid condition which may
be attached to a periodic tenancy without being repugnant to the nature of the
periodic tenancy. In Re Midland Railway Co’s Agreement [1971] Ch 725 the
Court of Appeal went further and held that a fetter can be placed upon the
right to determine a periodic tenancy for an uncertain period. In that case the
agreement was for a half-yearly periodic tenancy. Clause 2 of the agreement
provided for the termination by either party giving three months’ written
notice to quit to the other, subject to a proviso that the agreement should not
be terminated by the landlord ‘until they should require the premises for the
purposes of their undertaking’. The Court of Appeal applied Breams Property
Investment Co Ltd v Stroulger without distinguishing it. The Court
of Appeal said at p 733:
In Breams
Property Investment Co v Stroulger . . . a curb on the lessors for
three years unless they required the premises for their own use was upheld in
this court, notwithstanding the earlier cases of Warner v Browne
. . . and Cheshire Lines Committee v Lewis & Co . . . It
follows that in a periodic tenancy a similar curb for 10, 20 or 50 years should
not be rejected as repugnant to the concept of a periodic tenancy: and once the
argument based on uncertainty is rejected we see no distinction in the present
case.
I am bound by
that decision to disregard any such distinction as may be derived from the fact
that in the present case, as in that case, the period of suspension of the
right to serve notice to quit was for an uncertain and indefinite period.
Mr Lloyd
submits that in the present case, however, it must have been apparent from the
outset that circumstances might occur by which it would be altogether out of
the power of the landlord to serve a notice. That is a feature which is capable
of distinguishing the present case from all previous cases. In every previous
case where the landlord’s right to serve a notice to quit has been suspended it
has been suspended either for a fixed period or for an uncertain period, which
the landlord himself could bring to an end by deciding to redevelop the
property or use it for his own occupation and then serving the appropriate
notice. In the present case, it is pointed out, it was always possible that the
reversion could become vested in a body other than a highway authority and
that, it is submitted, distinguishes the present case. A provision capable of
depriving the landlord of the right to determine the tenancy, it is submitted,
is repugnant to the nature of a periodic tenancy.
Before dealing
with this submission it is, in my judgment, necessary to construe clause 6 and
see how it applies on the transmission of the reversion to a third party. Breams
Property Investment Co Ltd v Stroulger is authority for the
proposition that a restriction on the landlord’s right to serve a notice to
quit runs with the reversion and accordingly it would, if valid, continue to
bind successors in title to the LCC. It is not therefore submitted that the GLC
was in any different position from the LCC. But when the land was transferred
to the London Residuary Body it became impossible for the landlord, which was
not a highway authority, themself to require the land for the purposes of
widening the Walworth Road. It was not impossible, as Mr de la Piquerie
submits, that one day the land would once again come into the ownership of a
highway authority, which would then be again capable of serving a notice. But
the circumstances in which the land should come again into the ownership of a
highway authority which wanted the land for the purposes of road widening,
without a compulsory purchase order which would extinguish the tenancy, rather
than going through the
my part, disregard it.
The real
question, in my judgment, is whether on its true construction the restriction
imposed upon the landlord’s right to serve a notice to quit by clause 6 endures
once the landlord and the highway authority are no longer one and the same. It
is clear that the council referred to inclause 6 must be both the highway
authority which requires the land for the purpose of widening the Walworth Road
and the landlord capable of obtaining vacant possession by serving the
requisite notice. The clause predicates a situation in which the landlord and
the highway authority are one and the same and, in my judgment, once they are
different bodies, then clause 6 ceases to have any effect. Mr de la Piquerie
submits that, if that were the case, Mr Nathan would have obtained no security
for his interest and for the building which he proposed to erect upon it, since
the very next day the council could have rendered his interest terminable by
the simple device of transferring the reversion to a third party. But that only
raises a further question which has not been argued before me: whether there
should be an implied term that the landlord would not assign the reversion to
any party other than a highway authority. I can see the force of such a
submission but, without deciding it, I have reached the clear conclusion that
clause 6 is limited to the period during which the landlord and the highway
authority are one and the same. It predicates a situation which no longer
exists.
Accordingly,
in my judgment, the London Residuary Body served a valid notice to quit and the
remaining defendants are entitled to possession.
Declaration
accordingly.
