Licence or tenancy — Nature of occupation of ‘shop space’ — Street v Mountford considered and distinguished — Appellants, whose business was that of selling signs, were initially co-occupiers with a third party of the shop space, which was part of the ground floor of a building in Camden Lock Market — Although the appellants and the third party carried on their different businesses on different sides of the space it was not claimed that this indicated the existence of separate interests — After a time the third party left and the appellants occupied the whole of the space, paying double the previous weekly amount — There was no agreement in writing and the only evidence of an oral agreement was that the male appellant indicated that they wished to take the whole of the shop space and did not want anyone else there, to which the respondents assented so long as the rent was paid — Subsequently, however, the legal basis of the occupation became a critical issue when the appellants were given notice to leave within seven or eight days — The appellants claimed that they had not merely taken over the space previously occupied by the third party but had obtained an exclusive right of occupation good against all the world, including the respondents — The county court judge rejected the claim to exclusive possession, but held that the appellants’ licence was not properly terminated by a notice of seven or eight days and decided that the reasonable period in this case was one month — The appellants appealed against the decision on the nature of their interest and the respondents cross-appealed on the question of the length of notice — Held by the Court of Appeal that there was no evidence indicating an agreement for exclusive possession; there was merely an arrangement to have no replacement for the departed third party — The circumstances were different from those in Street v Mountford, which involved the construction of a written agreement — As regards the cross-appeal, the judge here was entitled to conclude that the notice of seven or eight days was not a proper notice and that a month was reasonable; the payment period of a week was not necessarily the appropriate test in the case of a licence — Appeal and cross-appeal both dismissed
The following
case is referred to in this report.
Street v Mountford [1985] AC 809; [1985] 2 WLR 877; [1985] 2 All ER
289; [1985] 1 EGLR 128; (1985) 274 EG 821, HL
This was an
appeal by the occupiers, Richard Andrew Smith and Susan Mary Gent, and a
cross-appeal by the owners, Northside Developments Ltd, and their manager, Eric
G Reynolds, of Unit 17, Camden Lock Market, London NW1, from a decision of
Judge Mota Singh at Bloomsbury County Court.
P M Kremen
(instructed by John Photiades & Co, of Luton) appeared on behalf of the
appellants; M J Douglas (instructed by Lee Bolton & Lee) represented the
respondents.
Giving
judgment, SIR JOHN ARNOLD P said: This is an appeal from a decision of His
Honour Judge Mota Singh, sitting in the Bloomsbury County Court, which he made
on January 15 1987. It raises an interesting, not wholly unfamiliar, question
whether the occupation by the appellants of what substantially can be described
as shop premises, belonging to the first defendant and managed on behalf of the
first defendant by the second defendant (they being the respondents to the
appeal), had the nature of a licence or the nature of a tenancy.
The history of
the matter may be briefly recounted. In about 1982 the appellants went into
occupation of the shop space in question, which was a place known as Unit 17,
Camden Lock Market, for the purpose of carrying on their business, which was
that of selling signs, in circumstances in which the co-occupier of the shop
space was a Mr Sheward, who carried on a different sort of business. In fact,
the shop space was part of the ground floor of a building. The other part of
the ground floor, separated from the shop space by a wooden partition, was
simply an empty space which was used by a number of persons for warehousing
purposes. The part of the premises which was occupied by the appellants and Mr
Sheward was the front, ie the part between the partition and the front door.
It is common
ground in this case that the initial occupation by the appellants and Mr
Sheward had none of the characteristics of a tenancy but was constituted by
licence granted by the respondent company separately to the appellants and to
Mr Sheward, which catered for no more than a common occupation by those various
licensees of the shop space between them. The circumstance that in fact Mr Sheward
carried on his business on one side of the shop space and the appellants
carried on their business on the other side of the shop space is not relied
upon as indicating two separate tenancies of the two separate parts to the
appellants and Mr Sheward respectively.
The time came,
around the end of June 1983, when Mr Sheward went out of occupation, and at
that time a change came over the position of the appellants in relation to the
premises in that from then onwards they were the only trading occupiers of that
part of the premises which lay between the front door and the partition, ie the
shop space. This took place as a result of a conversation between the male
appellant, representing the two appellants, and the second respondent, Mr
Reynolds, representing the first respondent company, which is recorded in the
evidence in these terms:
Sheward left
June or July 1983. There was not any discussion with Sheward. He assumed we
would be going to the boat shed with him.
The ‘boat
shed’ is a sort of code word used to indicate the business premises of the
respondent company.
We weighed
the thing up as a commercial possibility.
‘We’ there
means the two appellants between them.
We decided to
take the whole of Unit 17 and pay the extra £17 a week.
The payment
had been £17 by Sheward and £17 by the appellants respectively up to that
point.
On Sunday I
went to Reynolds to confirm the arrangement with him. I went to the boat shed
to see him. Very little discussion about the terms. All I said (was) I was
against the idea of moving and would take Unit 17 on my own as I did not want
anyone else there. (Mr Reynolds) said, ‘Fine, as long as you can pay the
rent.’ No discussion as to what rent. We
paid the whole rent £34 for one or two weeks.
Then he goes on
to describe how the rent was increased.
It is said
that that conversation conferred on the appellants, or recognised as belonging
to the appellants, a right of occupation exclusive of the whole world,
including the respondents to the appeal. It is upon that proposition that the
appellants base their contention, which, as I shall indicate in a moment, is,
in my judgment, essential to their case, that they had a right of occupation of
the premises exclusive of, among others, the landlords or the respondents. But
I am bound to say that, looking at that conversation as there recorded in the
context in which the conversation took place, I do not draw that conclusion
from it. When the appellant said that he would take Unit 17 ‘on my own’ he was,
as it seems to me naturally in the context, thinking of an occupation exclusive
of any co-trader, for it was the departure of his co-trader, Mr Sheward, that
provided the context in which that conversation took place; and, when he went
on to say that he did not want anyone else there, in the context in which that
conversation took place, what he was voicing was his desire not to have any new
replacement, in the place of the departed Mr Sheward, sharing it with him. It
does not seem to me that that conversation, properly understood, had included
within its ambit any contemplation whatever of the position of the owners of
the property, namely the respondent company or its representatives, and,
therefore, I do not regard that conversation as amounting to an agreement for
exclusive possession.
It is the
fact, as the cases establish, and in particular the case of Street v Mountford
[1985] 1 AC 809 in the House of Lords, that, where there is a doubt as to
whether an occupation is by way of tenancy or by way of licence, one has to be
guided in the resolution of that conflict by the finding that one makes as to
whether there was in the occupier a right of possession exclusive of the
landlord or licensor, whichever he may be. That was the foundation of the case
of Street v Mountford [1985] AC 809 in the House of Lords, that,
rejected and disapproved of certain earlier authorities in inferior courts
which had indicated that there were other criteria than that of exclusive
possession by which the court should be guided in resolving a comparable
dichotomy.
But the
particular circumstances and method of decision which was appropriate in the
case of Street v Mountford are not the same as the comparable
material in the present case. That is because the method of decision available
to the House of Lords in Street v Mountford in resolving the
question whether there was or was not a right to exclusive possession was that
of the construction of a written agreement, whereas in the present case there
is no written agreement at all, nor the defined terms of an oral agreement
except to the extent that I have already indicated. In this case one has to
draw one’s conclusion as to whether there was or was not a right of exclusive
possession from the circumstances and facts of the case in order to see whether
the proper inference is that such a term was included by means of, and derived
from a history of, such a right being recognised.
In Street
v Mountford itself there was a reservation by the landlord or licensor
of a right of entry and, that being the case, it is easy to conclude that quoad
ultra the right of exclusive possession passed to the tenant or licensee.
In the present case, except in so far as such a conclusion might have been
derived from the conversation to which I have referred, there is no indicium
whatsoever in the history of the case upon that matter. All that is to be
observed from the facts is that, both before and after the departure of Mr
Sheward, there was no invasion by or on behalf of the respondents of that part
of the premises (what I have called the shop premises) which was being used for
the trading activities initially of Mr Sheward and the appellants and
subsequently of the appellants alone. The circumstance that there was factually
no invasion by the respondents of those premises, in the absence of that being
tested by means of an attempt to invade, does not, as it seems to me, throw any
light upon the question whether they were, as a matter of right, excluded from
the premises.
There is the
additional question whether, even if the conversation which took place around
the end of June or the beginning of July 1983 was, as a matter of the
construction of the words used, properly to be regarded as conferring a right
of exclusive occupation, by which I mean occupation exclusive of the
respondents, on the appellants, that circumstance would, on the particular
facts of this case, serve to found the conclusion that the rights of the
parties inter se were those of landlord and tenant rather than those of
licensor and licensee, the particular circumstance which is relevant being that
there was, admittedly immediately before that conversation, in existence a
licence agreement between the parties under which the appellants occupied the
property. It is one thing to say, as was said in effect in Street v Mountford,
that, if one starts with a tabula rasa, one can infer the nature of the
arrangement between the parties from observing the facts of the case and their
behaviour inter se; but it may well be a different thing to say, where
there is admittedly a licence in existence, that the supervening of an
arrangement for occupation by the occupier exclusive of the owner changes the
character of what admittedly was antecedently a licence and converts it into a
tenancy. I, for my part, would not wish to conclude that the answer to that was
necessarily in that direction.
At all events,
in the present case, having regard to what I regard as the proper
interpretation of that conversation, there was not, as it seems to me, the
supervening of any such new circumstance, and I would not therefore be disposed
to hold that what was admittedly previously a licence was ever converted into a
tenancy at all.
That is not
the end of the case because a further point arises on the cross-appeal. The
learned judge concluded, though not perhaps in quite the same way as I have
concluded, that there was here a licence arrangement between the occupier
appellants and the owner respondents. The fact of the matter is that there was
a purported termination of the appellants’ right to occupy by means of a notice
given by the respondents to the appellants requiring them to move out within
seven or eight days. The learned judge concluded that that was not a proper
notice, having regard to the terms of the licence, he having held in accordance
with the proper approach to such a subject-matter that the reasonable period
for termination of this licence in this particular case was one month, with the
consequence that there was an eviction, or at least the threat of an eviction,
of the appellants in too short a period. The respondents to this appeal are
anxious lest, that constituting an issue estoppel between the respondents and
the appellants as to the terms of the licence, it may give rise to a claim for
damages by the appellants against the respondents; and they are, therefore,
anxious to reverse, and that is the purpose of the cross-notice of appeal, the
decision of the learned judge as to the proper period of notice under the
licence. What they say is, if this had been (contrary to what the learned judge
decided) a tenancy, then the proper period of notice for the determination of
the tenancy would have been one week, in accordance with the principle of the
law of landlord and tenant that a periodic tenancy is determinable by notice
given for the rent period, in this case a week, and that it would not be
reasonable, but unreasonable, to afford a longer period of notice to a
licensee, if that is his proper character, when he is paying for his licence a
periodic payment, equally of course of one week, and that, therefore, the
proper period of determination of the licence was no more than a week, with the
result that their notice would have been effective.
It does not
seem to me that that argument is justified. The test in relation to the period
of the notice of termination of a licence is: what is the reasonable period in
all the circumstances of the case? It
does not seem to me to follow that the period which is reasonable is
necessarily that of the payment period where the cost of the licence is a
periodic payment. Nor does it seem to me to make that any the more an
efficacious test by reference to the circumstance that, if it had been a
tenancy and not a licence, then the period for determination of the tenancy
would have been the period of the payment of the rent. A licence is not the
same as a tenancy and in particular is not the same in relation to those
matters by which the reasonableness of the period of removal has to be tested.
That is because, with admittedly certain exceptions in relation to short
holdings, the law provides a large degree of protection for a tenant which it
withholds from a licensee in the case of a trading tenant under the Landlord
and Tenant Act 1954. While it is perfectly true that, during the initial short
period of the tenancy, that protection is not afforded to the tenant,
nevertheless, after a not very long time, it does come to be part of his rights
in law, and that must be a factor which enters into a consideration of the
reasonableness of the period of notice. It seems to me, looking at the thing
from the point of view of the nature of the trading of the appellants, the
learned judge must have been entitled to come reasonably to the conclusion that
a month was the requisite reasonable period of notice, and I would reject an
appeal against that conclusion.
Agreeing,
PARKER LJ said: I have nothing to add with regard to the length of notice. With
regard to the main issue, it must be remembered that these appellants were
traders in a market. They
Sheward being the other occupant. The front part of Unit 17 was joined to the
rear part by a door or opening between the front part and the rear part, which
were otherwise divided by a studwork partition. At that stage each of Sheward
and the appellants had a right to occupy part of the premises of the shop, and
those other persons who were entitled to use the rear for storage could reach
it only by going through the front part of the unit, there being at that stage
no separate means of access to that part of the unit which lay behind the stud
partition. Each of Sheward and the appellants were, before June 1983, paying
the sum of £17 per week in respect of their occupation. When Sheward left,
according to the evidence which has already been read, the appellants decided
to take the whole Unit 17 and pay the extra £17 per week; and that is what they
did for a very short period. The conversation which took place was very short,
but to spell out of it an intention that the appellants should take over and
acquire rights other than such rights as Sheward had previously had and for
which he had paid £17 appears to me to be quite impossible.
After the
appellants had extended their occupation, the owners, apparently without prior
notice or request for permission, put in a door at the rear of Unit 17,
providing separate access to the rear part of the premises. The male appellant
gave evidence that he was not there but remembered that there were builders’
materials stored behind the partition. He said he asked Mr Reynolds about it
and thought he wanted to sell it. He went to see Mr Reynolds in the office and
Mr Reynolds had said that either he would lose the space behind the partition
or he could have the whole of it and pay for it. Until then he was paying only
for the front portion. The partition was taken down and the payment increased.
In the period
between the removal of the partition and the appellants’ initial occupation of
the whole of the front of the shop the position was confirmed by the owners’
actions. Realising the difficulty caused by this fact Mr Kremen initially began
to argue this appeal on the basis that he did not contend for the licence which
initially admittedly existed being converted into a tenancy until the second of
the two conversations after which the appellants occupied the whole of Unit 17.
But that presented certain difficulties and, with admirable forensic agility,
he moved his stance, I think, on two further occasions thereafter and
concluded, rightly in my view, that the best horse to run was the conversion of
the licence into a tenancy in June 1983 and its subsequent extension from a
tenancy of the front part of the shop only to the rear also.
But that horse
would not run; and the other horse cannot run either. Street v Mountford
was a very different case where there was a specific agreement which fell to be
construed. Lord Templeman at pp 826 and 827 recognises that there may be
exclusive possession without a tenancy in certain circumstances. He concludes
his speech in their Lordships’ House with the observation:
My Lords, I
gratefully adopt the logic and the language of Windeyer J. Henceforth the
courts which deal with these problems will, save in exceptional circumstances,
only be concerned to inquire whether as a result of an agreement relating to
residential accommodation the occupier is a lodger or a tenant.
Here there is
no agreement to which one can look. What one has to do is to decide whether
what was initially admittedly a licence was converted into a tenancy and one
has to do it on the barest possible facts. The learned judge concluded that
exclusive possession was not in existence as a fact and had not been granted.
Criticism is made that he took into account material which he should not have
taken into account. That criticism is, in my judgment, well justified, but it
does not assist the appellants because, if that material is excluded, there
remains, in my view, an absence of evidence sufficient to show that the initial
licence ever became, either in June 1983 or in the summer of 1984, converted
into a tenancy.
Accordingly, I
would, although for slightly different reasons, come to the same conclusion as
the learned judge and as my Lord and I would dismiss the appeal and also the
cross-appeal.
The appeal
and cross-appeal were dismissed. The possession of Unit 17 was to be delivered
up on or before May 18.