Agricultural holding — Assignment of tenancy in breach of a restriction on assignment — Plea of estoppel by convention — Appeal from an order made by county court judge in favour of landlords — A tenancy granted in 1923 contained a provision that the tenant should not part with the possession of any part of the holding without the consent in writing of the landlords — An assignment of the tenancy took place with consent, as a result of which the tenancy came to be vested in a father and two of his sons jointly — Subsequently the 1923 tenancy agreement containing the restriction on assignment was lost sight of, so that arbitrations on rent took place in 1970 and 1974 on the basis, accepted by both parties, that there was no written tenancy agreement and no restriction on assignment — In 1980 the survivor of the three joint tenants assigned the tenancy to his nephew without seeking any consent from the landlords — The effect of such an assignment, being from an older to a much younger man, would be to reduce the value of the landlords’ reversion — When this assignment was notified to the landlords they claimed that it was in breach of the restriction in the 1923 agreement, that the breach was not remediable, and that it had materially prejudiced their interest — A notice to quit was given based on Case E in section 2(3) of the Agricultural Holdings (Notices to Quit) Act 1977 and the matter proceeded to arbitration — The arbitrator stated a special case for the opinion of the county court — The judge decided the questions raised in favour of the landlords and the tenant appealed — The Court of Appeal held that the restriction on assignment in the 1923 agreement continued to apply; that the assignment to the nephew in 1980 was in breach of the restriction (rejecting an argument that an assignment of the whole was not in breach of a covenant against parting with possession of a part); and that the breach was not capable of being remedied — But they held that the landlords were estopped from relying on the breach of the covenant against assignment — This was because the principle of estoppel by convention applied — During the negotiations and dealings between the parties, particularly during the rent arbitration proceedings in 1974, a convention was established, namely, a common underlying assumption by both parties that no written agreement containing a restriction on assignment was in existence — The landlords were therefore estopped from enforcing against the tenant a restriction in a tenancy agreement which both parties had assumed during the material times not to exist — The parties had gone to arbitration on the rent in the belief that there was no written agreement, an assumption which was to the detriment of the tenant as the absence of restrictions would tend to increase the rent — Among cases considered were Amalgamated Investment & Property Co Ltd v Texas Commerce International Bank Ltd, Field v Barkworth and Scala House & District Property Co Ltd v Forbes — Tenant’s appeal allowed
This was an appeal
against a decision of Judge Kellock at Worksop County Court on a case stated by
the arbitrator under the Agricultural Holdings Act 1948. The case raised
questions relating to the tenancy of a farm known as Manor Farm, Harwell
Everton, Nottinghamshire. The appellant Arthur Gibson was the present tenant of
the holding. The appellant Herbert Gibson was the uncle of Arthur Gibson and
the assignor of the tenancy to the latter. T Troop and G Troop were the
landlords, respondents to this appeal.
H W Burnett QC
and A de Freitas (instructed by Hayes Son & Richmond, of Gainsborough)
appeared on behalf of the appellants; Derek Wood QC and Wayne Clark (instructed
by Burges Salmon & Co, of Bristol) represented the respondents.
Giving
judgment, SIR JOHN ARNOLD P said: This is an appeal from an order made in the
Worksop County Court by His Honour Judge Kellock on November 5 1984.
The learned
judge had before him a special case stated by Mr G M Cooper for the opinion of
the county court. The case was stated under the Agricultural Holdings Act 1948
and raised a number of questions relating to the tenancy of a holding known as
Manor Farm, Harwell Everton, Nottinghamshire. The relevant history of this
holding is the following. By an agreement dated February 28 1923 and made
between Albert Smith Denton of the one part and Joseph Gibson of the other part
the holding was let on a tenancy which commenced on April 6 1923 and was made
terminable by either party giving to the other not less than six calendar
months’ notice to expire on April 6 in any year. The rent was £100 for the
first and second years of the tenancy and £130 for the third and following
years and it was provided that the tenant (Joseph Gibson) should reside upon
the holding and not part with the possession of any part thereof without the
written consent of the landlord (Albert Smith Denton), the subletting of the
cottages on the holding for short periods being excepted. In the year 1938 the
gates and the roof of a shed on the holding were in disrepair and the matter
was mentioned by Joseph Gibson to Henry Spencer & Sons, the landlord’s
agents, and by a letter dated November 8 1938 the agents wrote to Joseph Gibson
reporting on the result of their approach to the landlord’s solicitors. This
letter refers to the agreement of February 28 1923 and quotes therefrom an
extract of the repair obligations. Joseph Gibson had three sons and some time
in or before the year 1939 two of them, Walter Gibson and Herbert Gibson, were
taken into partnership by their father in the farming business carried on by
him on the holding. By an agreement endorsed on the tenancy agreement of
February 28 1923, it was agreed between Harry Arbuthnott Spencer, described as
the landlord, and Joseph Gibson, described as the tenant, that as and from April
6 1939 Messrs Walter Gibson and Herbert Gibson were to be joint tenants with
their father. This agreement was drafted in such a way as to provide for the
signatures of Walter Gibson and Herbert Gibson to be added, but it was not
signed by them but only by Harry Arbuthnott Spencer and Joseph Gibson. It is,
however, in my view entirely clear that the endorsed agreement constituted a
written consent of the landlord to an assignment by Joseph Gibson to himself
and Walter Gibson and Herbert Gibson for the purposes of the tenancy agreement.
By a
memorandum of agreement dated January 27 1940 between Joseph Gibson, Walter
Gibson and Herbert Gibson it was recited that the holding was held by Joseph
Gibson as tenant and that the
holding in partnership. This appears to me to provide convincing evidence that
there had by January 27 1940 been no devolution of the tenancy from Joseph
Gibson to the three partners.
On November 26
1946 there was an appointment of Tom Shearman as arbitrator under the
provisions of the Agricultural Holdings Act 1923 and the Arbitration Acts
1889-1934 to determine and award the amount of rent to be paid as and from
April 6 1947 in respect of the holding and this was signed by Willie Ward,
evidently as landlord, and Joseph, Walter and Herbert Gibson, evidently as
tenants, and an award was made by Tom Shearman on February 10 1948 determining
the annual rental as from April 6 1947 at £108.
It is evident
from the transactions in 1946 to 1948 that the tenants had by this time come to
be Joseph, Walter and Herbert Gibson. The matter was considered by the learned
judge in his judgment and he concluded that there was in the course of these
transactions a representation to the landlord that Joseph Gibson and his two
sons were joint tenants on the original terms contained in the tenancy
agreement of February 28 1923 and that all parties proceeded on this basis.
There has been some argument in this court as to the proper inference to be
drawn from the events of 1946 to 1948 as to the devolution of the tenancy down
to that time. In view of the endorsed agreement of May 6 1939 my view is that
there must have been an assignment of the tenancy from Joseph Gibson to himself
and Walter Gibson and Herbert Gibson at some time after May 6 1939 and before
November 26 1946, and not earlier than January 27 1940. I am therefore in
agreement with the learned judge in concluding that Joseph, Walter and Herbert
Gibson held the farm in 1946 on the terms set out in the tenancy agreement of
February 28 1923.
Provision was
made by section 8 of the Agricultural Holdings Act 1948 for arbitration of the
question what rent should be payable in respect of an agricultural holding as
from the next ensuing day on which the tenancy of the holding could have been
determined by notice to quit, and on reference the arbitrator was to determine
what rent should be payable. This section was amended by the Agriculture Act
1958 by section 2 of which there was inserted in section 8 of the Agricultural
Holdings Act 1948 a provision that the rent properly payable in respect of an
agricultural holding should be the rent at which having regard to the terms of
the tenancy (other than those relating to rent) the holding might reasonably be
expected to be let in the open market by a willing landlord to a willing
tenant. This amendment was effective from August 1 1958. There was a rent
arbitration as to this holding in 1970 between the executors of Willie Ward
deceased as landlord and Messrs Gibson and Sons, ie the partners Walter and
Herbert Gibson, as tenants in which Messrs Shearmans acted as agents for the
landlord. The arbitration hearing took place on April 29 1970 and Shearmans in
their statement of case on behalf of the landlord included under the heading
‘Facts’ the statement ‘Tenancy Agreement believed none’. This belief appears to
have been shared by the tenants and constituted the basis on which the
arbitration proceeded. The amendment effected in 1958 to the Agricultural
Holdings Act 1948 being in operation, it was of course a matter of importance
in the rent arbitration that any terms of the tenancy, other than in relation
to rent, should have been known to the arbitrator, and the events of 1970
suggest that by this time both landlord and tenant proceeded on the basis that
there were no special terms applicable to the tenancy of the holding.
The letter
dated November 8 1938 from Henry Spencer & Sons to Joseph Gibson had
evidently been retained by the latter and on January 14 1971 Clay Allison &
Clark, solicitors acting for the partnership, wrote to Henry Spencer & Sons
that their clients were anxious to get hold of a copy of the original tenancy
agreement, if one were available, and referred to the fact that Mr Gibson had brought
to them the letter dated November 8 1938 ‘which refers to the tenancy agreement
being in the hands of the trustees’ solicitors of Albert Smith Denton,
deceased’. Henry Spencer & Sons referred the Gibsons’ solicitors to
solicitors Broomhead Pye-Smith & Reed, who had acted for the Smith Denton
trustees, and the Gibsons’ solicitors made inquiry of them, stating in a letter
dated January 18 1971: ‘We are anxious to get hold of a copy of the tenancy
agreement as our clients have lost theirs and there is a possible sale of the
farm to be made shortly and they wish to refer to this agreement.’ There was no result from this correspondence
such as to produce the missing tenancy agreement. The present landlords, the
respondents to this appeal, purchased the holding in 1971 and on March 16 1972
their solicitors wrote to the Gibsons’ solicitors: ‘We are instructed by our
clients that they have agreed with Mr Gibson that there should be a written
tenancy agreement to commence on April 6 next’ enclosing a draft for approval.
This draft consisted of a printed form which included a provision:
the tenant
shall not without the written consent of the landlord during his tenancy assign
underlet or part with the possession of the said message, farm buildings,
cottages, land and premises or any part thereof and shall reside in the
farmhouse.
On March 22
1972 the landlords’ agents wrote to Herbert Gibson, by then the sole survivor
of the partners, demanding a reference to arbitration of the rent payable from
the next ensuing day on which the tenancy could be terminated by notice to
quit. On March 29 1972 Herbert Gibson’s solicitors wrote to the landlords’
solicitors that they had taken their client’s instructions on the draft tenancy
agreement which had been submitted and returned it amended and, after referring
to the notice of reference to arbitration received by Herbert Gibson, inquiry
was made whether it was worthwhile postponing the making of a fresh tenancy
agreement until the following year; and by a letter dated April 11 1972 the
landlords’ solicitors agreed to this course. In his judgment, the learned judge
said that, as Herbert Gibson had recently been willing apparently to sign the
new agreement with a non-assignment clause in it, it seemed likely that at the
time of the 1974 arbitration (to be mentioned shortly) he was assuming he was
bound by a similar term in the tenancy written or oral. The respondents to this
appeal have not attempted to justify this conclusion and in my view it is
plainly unsupportable. On February 13 1974 the respondent landlords by their
agents gave notice of a demand for a further arbitration under section 8 of the
Agricultural Holdings Act 1948 as to the rent to be paid for the holding as
from the next date on which the tenancy could be determined by notice to quit
and on this occasion Shearmans acted for the tenant and the landlords were
represented by Mr C W Thompson [FRICS] of Brackett Moon & Lee. The
arbitrator was Mr Colin Thomson [FRICS] and the hearing took place on December
6 1974. Mr Thomson’s note of the hearing is in evidence and it records that in
opening the landlords’ case Mr C W Thompson said that ‘there was no written
agreement’. This was accepted by the tenant and the arbitration proceeded on
that basis and the arbitrator made his award ‘in the absence of a written
tenancy agreement’.
The appellant
Arthur (usually known in the family as Peter) Gibson is the son of the third
son of Joseph Gibson, that is the son who was not a partner with his father and
his brothers. Arthur Gibson worked for the partnership for some time and in
1980 it was desired by Herbert Gibson and himself that he, Arthur Gibson,
should take over the farming business. Pursuant to this intention, on May 30
1980 Herbert Gibson assigned the holding to Arthur Gibson by an assignment
which recited that by an oral agreement the holding stood demised to Herbert
Gibson and Walter Gibson (since deceased) on an agricultural tenancy from year
to year and that the benefit of such tenancy was now vested in Herbert Gibson solely.
Notice of this assignment was given to the respondent landlords by letter dated
June 2 1980. On October 10 1980 the landlords’ solicitors wrote to the tenant’s
solicitors that they had been consulted by the landlords with regard to the
notice of assignment and continued: ‘There is a written tenancy agreement and
it would appear that your client’s assignment is a breach of covenant contained
therein.’ They intimated an intention
that the landlords would commence forfeiture proceedings and they enclosed a
copy of the tenancy agreement dated February 28 1923. On November 17 1980 in
reply to that letter Herbert Gibson’s solicitors wrote that he had absolutely
no knowledge of the tenancy agreement of 1923 and that he denied that he was in
any way subject to its terms and that he had always understood that he held the
farm under an unwritten tenancy agreement. Reference was made to the
arbitrations of 1970 and 1974 and to the statement made therein on behalf of
the landlords. By a letter dated August 19 1981 the landlords’ solicitors wrote
to the tenant’s solicitors contending that the breach constituted by the
assignment to Arthur Gibson was an irremediable breach and stating that they
had served a notice to quit on both the assignee and assignor. Counternotices
were served and the matter referred to arbitration. Mr G M Cooper [FRICS] was
appointed as arbitrator and on January 6 1984 he stated a special case for the
opinion of the county court. In that special case the arbitrator found (inter
alia) as follows:
Mr Tom
Shearman junior in his oral evidence stated that in the 1970 rental arbitration
he acted for the landlord and in the 1974 arbitration for the tenant. I accept
his evidence that in the course of these arbitrations he sought to determine as
far as reasonably possible whether or not there was a written
opinion the landlord also accepted this position. I admit as hearsay evidence
Mr Colin Thomson’s notes when he acted as arbitrator in 1974 and that he was
satisfied there was no written agreement. Mr Thomson was not called. I found as
a fact that whatever may have been the prior knowledge of the parties at the
arbitrations in 1970 and 1974 the position was at both dates that there was no
known or ascertainable agreement. I found that no one knew or could have known
whether the written agreement would be found if it still existed. It is clear
from Mr Shearman’s evidence (and I so hold) that he (and therefore his client
Herbert Gibson) relied upon the absence of any special terms in considering
whether to assign the tenancy and that the assignment of the tenancy in breach
(as it now appears) of the covenant against assignment is an action by Herbert
to Herbert’s detriment.
In the special
case the arbitrator submitted for the opinion of the court the following
questions of law:
(1) Whether Herbert Gibson ought to be regarded
as at any stage bound by the terms of the 1923 agreement (a) by reason of the
estoppel, (b) by reason of surrender and regrant.
(2) If the answer to either limb of question (1)
is in the affirmative, then whether the landlords were at the date of
assignment of the tenancy by Herbert Gibson to Arthur Gibson estopped from
relying upon the restriction upon assignment contained in the 1923 agreement.
(3) If the answer to question (2) is in the
negative, then whether the said assignment was made in breach of the 1923
agreement.
(4) If the answer to question (3) is in the
affirmative, then whether such a breach was or was not capable of remedy within
the meaning of Case E of section 2(3) of the Agricultural Holdings (Notices to
Quit) Act 1977.
Mr Cooper
referred to this in his findings, of which I have quoted a part, and stated
that in answer to question (2) ‘the court may require to consider whether it is
a fair and proper inference from the’ paragraphs in question ‘that the parties
regulated their arrangements on the footing at least that there were no special
terms unless and until established otherwise’ and he referred to Amalgamated
Investment & Property Co Ltd v Texas Commerce International Bank Ltd
[1982] QB 84. The arbitrator also found that the value of the landlords’
freehold interest in the holding subject to the tenancy of Herbert Gibson would
have been considerably more than the value subject to the tenancy of the
assignee Arthur Gibson. The learned judge in his judgment, after stating the
relevant facts and the questions which had been raised by the arbitrator in the
special case, concluded, first, that Herbert Gibson was at the time of the
assignment bound by the terms of the 1923 agreement and held, as is not in
dispute in this court, that the assignment was a breach of the provision
against parting with possession in the 1923 agreement. He also held that this
breach was not capable of being remedied and that the breach by means of the
assignment materially prejudiced the landlord, Arthur Gibson being a much
younger man than Herbert Gibson. He then turned to the question of estoppel and
proceeded as follows:
The first
question is whether the statements made in 1970 and on which the arbitrator
acted amounted to a clear and unequivocal representation that there were no
special terms. In my view the representation by the landlord that there was no
written agreement is not unequivocal. It may mean, as was the case, that the
written agreement cannot be found. In any event the tenant in 1971 had enquired
through his solicitor about the whereabouts of the written agreement and
therefore cannot at that time have been in any doubt as to the position.
Herbert Gibson in his written evidence states, in spite of this correspondence,
that he did not know of the written agreement and therefore seeks to rely on
the representations made in the 1974 arbitration. It is apparent that the
present landlord who by then had purchased the farm did not know of the written
agreement and the arbitrator’s hand-written note, admitted in evidence in the
present proceedings, shows that their representative put their case on the
basis of ‘no written agreement’ or ‘in the absence of a written tenancy
agreement’. Again in my view this is equivocal, especially when taken with the
recent correspondence. It may mean ‘in the absence of a written agreement being
available’ or ‘the letting was oral’. Even if it means that there was an oral
agreement it cannot be said to clearly negative special terms, such as a
limitation on assignment, when the specific question was not before the
arbitrator.
The learned
judge then held that the landlord was not estopped from relying on the 1923
agreement and answered the questions put by the arbitrator, (1) Yes. (2) No.
(3) Yes. (4) Not capable of remedy.
The tenant
appeals to this court pursuant to leave given by the learned judge. His first
ground is that there was no justification for the conclusion that the submission
to arbitration in 1946 estopped Herbert Gibson from contending that he was not
at that time a tenant jointly with his father and his brother Walter. In my
view this question does not arise, since the conclusion that Joseph Gibson was
such a tenant and was bound by the terms of the 1923 tenancy agreement does not
properly depend upon an estoppel but upon the inference that the benefit of
that tenancy had by 1946 been assigned to the father and the two sons. The
second ground, which has not been sustained by argument, was to the effect that
the assignment was not a breach, since the covenant contained only so far as
relevant an embargo against parting with possession. It has, however, been
argued that there was no breach in this case because the assignment was an
assignment of the whole holding and the covenant was against parting with
possession only of part of the holding. As regards this ground I am quite
unconvinced by it. The opposite was decided, in my judgment rightly, at first
instance in Field v Barkworth on October 23 1985.* The third ground was that the breach was not
incapable of being remedied and that accordingly the requirements of Case E in
section 2(3) of the Agricultural Holdings (Notices to Quit) Act 1977 were not
satisfied. This court is bound by the decision in Scala House & District
Property Co Ltd v Forbes [1974] QB 575 which, in my view, is
indistinguishable. The remaining ground concerns estoppel. The learned judge
dealt with the case exclusively as one of estoppel by representation, but it
was argued in this court, as it had been in his court, on the basis
alternatively of estoppel by representation and estoppel by convention. So far
as estoppel by representation is concerned, there has been extensive argument
as to the necessity for any representation upon which an estoppel is founded
being clear and unequivocal so that it will be reasonably understood as
amounting to the assertion relied upon by the claimant to the benefit of the
estoppel. In this connection reference has been made particularly to Marquis
of Bute v Barclays Bank Ltd [1955] 1 QB 202, Woodhouse AC Israel
Cocoa Ltd SA v Nigerian Produce Marketing Co Ltd [1972] AC 741, Bremer
Handelsgesellschaft mbH v Vanden Avenne-Izegem PVBA [1978] 2 Lloyd’s
Rep 109 and Bremer Handelsgesellschaft mbH v C Mackprang Jr
[1979] 1 Lloyd’s Rep 221, in relation to the issue whether the requirement is
satisfied if there be more than one reasonable interpretation of the words used
to make the representation, one of them being that relied upon by the party
claiming the benefit of estoppel, or whether this must be the only reasonable
interpretation. For my part I do not think that it is necessary to resolve this
question in the present appeal. In the first place I do not think that the representation
relied upon in this case is susceptible of more than one interpretation. Where
in an arbitration in which it is proper to take into account, as it was here,
by reason of the 1958 Act amendment to the Agricultural Holdings Act 1948, the
terms of a tenancy agreement between the parties to the arbitration, a
representation that there is no written tenancy agreement can, in my view, mean
only that there is no written agreement operating between those parties in
relation to the subject-matter of the arbitration. In the second place the
question does not arise, in my view, where the nature of the estoppel is that
of estoppel by convention, since this is of a consensual character and the
terms of the convention, just as those of a contract once the language is
established by the evidence, must be interpreted by the court and the only true
meaning is that decided upon by the court. In this case, for the reasons which
I have already indicated, the only true interpretation can be that they
embraced a convention that there was no written agreement operative to effect
the relations between them as landlord and tenant respectively of the holding.
It seems to me that the estoppel which arises in this case is truly of the
nature of an estoppel by convention, the convention being that there was no
written tenancy agreement in the sense that I have just mentioned. It is true
that that convention was initiated by a representation made on behalf of the
landlords and perfected when it was acquiesced in and accepted on behalf of the
tenant, but this does not affect, in my view, its fundamental character as an
estoppel by convention. The case does not seem to me to be distinguishable in
principle from Amalgamated Investment & Property Co Ltd v Texas
Commerce International Bank Ltd [1982] QB 84. In that case the doctrine of
estoppel which was applied by the Court of Appeal was variously indicated. It
is described by Lord Denning MR at p 121 in somewhat universal terms, but the
other two members of the court defined it more narrowly by adopting in effect
the passages from Spencer Bower and Turner on Estoppel by Representation,
cited by Eveleigh LJ at p 126 and by Brandon LJ at pp 130 to 131. It is argued
by the respondents that this principle can have no reference to the present
appeal both because there was no course of dealing between these parties in
which the convention was adopted and because the
transaction in which it was adopted. Neither of these distinctions is in my
view valid.
*Editor’s
note: Reported at p 46 post and (1985) 277 EG 193.
The ambit and
context of the 1974 arbitration constituted in my view a perfect course of
dealing between the parties to establish the convention for relevant purposes.
As regards the identity of the transaction the application of the doctrine in
the Amalgamated Property case illustrates in my view that the doctrine
extends to the kind of application which is relied upon in the present case.
The issue in the Amalgamated Property case was whether some money which
was in the possession of the respondent bank could properly be retained by it
as being subject to the charge which had been recognised as existing by
convention between the parties. The convention had been established, as
explained by Brandon LJ at p 129, by the conduct of transactions between the
parties from 1974 to 1976 in a common (but mistaken) belief as to the extent of
the relevant hypothecation, but it was in 1977, well after the adoption by the
parties of their conventional stance, that the chargee purported to appropriate
the money in question to the satisfaction of his relevant charge. Nevertheless
the chargor was held estopped from reversing that transaction. This was because
the inevitable consequence of the convention adopted in the earlier years was
that the bank would be entitled to act as it did. So in the present case the
parties proceeded in the 1974 arbitration by the convention that there was no
written tenancy agreement, the existence of which alone could have constituted
the 1980 assignment a cause of forfeiture, and the nexus between the two
transactions is in my judgment as close as that between the relevant
transactions in the Amalgamated Property case. Moreover, in my view the
finding by the arbitrator in para (xv) of the special case constituted a
finding, relevantly binding on the county court and on this court of a reliance
upon the convention sufficient to sustain the estoppel, since the absence of
any written tenancy agreement, testified by the convention, is altogether
sufficient in the circumstances of this case to exclude the existence of any
embargo upon assignment or parting with possession. I would therefore uphold
the estoppel as barring the respondent’s claim and allow this appeal.
I should add
that it is evident from the course of this litigation that the effect of the
convention is now altogether spent, with the consequence that no such estoppel
as I have upheld can continue to operate.
Agreeing that
the appeal should be allowed, PURCHAS LJ said: I agree on one only of the five
grounds upon which the appellants relied. The general background history of
this matter has already been described in the judgment just delivered and need
not be repeated. Since 1923 Harwell Manor Farm has been farmed by the Gibson
family as tenants. The relationship started by an agreement in writing of
February 28 1923 (‘the 1923 agreement’) which was made between one Denton and
Joseph Gibson (‘Joseph’). In January 1940 Joseph’s two sons, to whom I shall
refer as ‘Walter’ and ‘Herbert’, and Joseph himself signed a partnership
agreement which recited that the land on which the partnership was to farm was
held by Joseph as tenant on a yearly tenancy.
On November 26
1946 Denton’s successor in title, one Ward, agreed with Joseph, Walter and
Herbert as joint tenants to the appointment of an arbitrator for the purposes
of fixing a rent. One of the issues raised in this appeal is the manner in
which the three Gibsons had become joint tenants in place of Joseph as sole
tenant. Further arbitration proceedings took place in 1970 and between December
1974 and January 1975 in which the joint tenants were named as a partnership
entitled ‘J Gibson and Sons’ (Joseph Gibson in fact died in 1955). In May 1980
Herbert, being the sole survivor of the original partnership, assigned his
‘tenancy’ to his nephew Arthur Gibson (‘Arthur’) and on June 2 1980 notified
the landlords, Messrs Troop, who had become the reversioners. The landlords
served a notice under section 146 of the Law of Property Act 1925 (‘the 1925
Act’) on October 10 1980. This was served on Herbert. The landlords followed
this notice on August 19 1981 by a notice to quit pursuant to Case E of section
2(3) of the Agricultural Holdings (Notices to Quit) Act 1977 (‘the 1977 Act’).
This was dated to expire on April 6 1983 and was served on Herbert and Arthur.
As a result of counternotices served by Herbert and Arthur the arbitration from
which this appeal arises took place. The hearing was during November 1983. On
November 7 1983 the arbitrator produced a draft award as a result of which the
parties asked for a formal statement of case for the opinion of the county
court. This referred four questions to the county court and it is from his
answers to these questions that this appeal is brought.
Before coming
to the four questions I should remark that among the papers before us there was
included the draft award to which I have already referred. Although there are
no direct inconsistencies between the case stated and the draft award there are
differences in emphasis on certain aspects which promoted some discussion
during argument. It does not appear that the draft award was before the learned
judge, who correctly restricted his consideration of the questions to the
findings contained in the case stated. I have formed the firm conclusion that
this is the correct approach and that the draft award is not relevant for
consideration on this appeal. The term of the 1923 agreement upon which this
appeal turns is contained in clause 6, relevant parts of which for convenience
of reference I set out here:
THE Tenant
shall reside upon the holding and not part with the possession of any part
thereof without the written consent of the Landlord but nothing herein
contained shall preclude the tenant from subletting the said cottages on a
monthly or shorter tenancy.
Besides this
clause the agreement contained numerous other covenants and reservations to
which it is not necessary to refer in detail. It was, however, by no means a
simple letting of an agricultural holding.
The four
questions which were referred to the learned judge were:
(1) Whether Herbert ought to be regarded as at
any stage bound by the terms of the 1923 agreement (a) by reason of estoppel;
or (b) by reason of surrender and regrant.
(2) If the answer to either limb of question (1)
is in the affirmative, whether the landlords were at the date of the assignment
of the tenancy by Herbert to Arthur estopped from relying upon the restriction
upon assignment contained in the 1923 agreement.
(3) If the answer to question (2) is in the
negative, then whether the assignment was in breach of the 1923 agreement.
(4) If the answer to question (3) is in the
affirmative, then whether such a breach was or was not capable of remedy within
the meaning of Case E of section 2(3) of the 1977 Act.
The learned
judge answered these questions as follows: (1) Yes. (2) No. (3) Yes. (4) Not
capable of remedy. Mr Burnett, who appeared for the appellants, submitted that
the learned judge was in error in his answer to each of the questions. Although
the main discussion on this appeal has centred on the second answer, namely
estoppel, it is convenient to deal shortly with the other three points made by Mr
Burnett. On the first question Mr Burnett submitted that the learned judge was
incorrect in holding that it did not matter whether the tenancy enjoyed by the
partnership was created by assignment or the 1923 agreement or whether by a
subsequent informal oral agreement between the landlord and the partners
resulting from a surrender and regrant. Mr Burnett submitted that in the case
of a new oral tenancy no special clause removing the tenants’ basic right to
assign should be imported. In support of this contention it was submitted that
when Herbert came to assign he mentioned his ‘oral tenancy’. With respect to
the submissions made by Mr Burnett I cannot agree with them. I agree, for the
reasons given by the learned President, that at some time before 1946 but
subsequent to 1939 the brothers and the father had become joint tenants in some
form and that that tenancy must be assumed to contain a clause, if by
assignment the same clause or if by regrant a similar clause, restricting the
right to part with possession of the land. Mr Burnett sought to distinguish the
authority of Rodenhurst Estates Ltd v W H Barnes Ltd [1936] 2 All
ER 3 on the basis that the partnership agreement into which the brothers and
the father entered in 1940 ‘wiped the slate clean’ and, in considering the
terms of the joint tenancy which had been established by 1946, it was not
relevant to look back at the 1939 addendum as this was not signed by Herbert
and Walter. In my judgment, one effect of the addendum is that it is evidence
of the landlord’s, one Spencer, consenting to an assignment by Joseph to create
a joint tenancy by assignment including himself, Herbert and Walter. It must
also be inferred that any assignment to the partnership, as it would have been
with the consent of the landlord, would have included a term restricting the
right to part with possession. The same would apply to a new joint tenancy
created by surrender and regrant. The judge was, in my view, correct in holding
that the precise mechanics were not important.
On the fourth
question Mr Burnett courageously submitted that the court could distinguish the
case under consideration from the authority of Scala House & District
Property Co Ltd v Forbes [1974]
a construction of section 2(3), Case D and Case E of the 1977 Act. Case E,
under which the notice was served by the landlords in this case, provides:
Case E — at
the date of the giving of the notice to quit the interest of the landlord in the
agricultural holding to which the notice relates had been materially prejudiced
by the commission by the tenant of a breach, which was not capable of being
remedied, of any term or condition of the tenancy that was not inconsistent
with the fulfilment by the tenant of his responsibilities to farm in accordance
with the rules of good husbandry and it is stated in the notice that it is
given by reason of the matter aforesaid.
The submission
was that the words ‘not capable of being remedied’ in the 1977 Act could be
construed in a manner different from the construction placed upon the words of
section 146 of the 1925 Act ‘is capable of remedy’. If this were so, then the
court freed from the direct authority of the Scala House case to the
effect that a breach of a covenant not to assign was incapable of remedy could
construe the words of Case E in a far more restricted manner. Mr Burnett
submitted that for the purpose of Case E a breach would be capable of remedy if
as a matter of theoretical possibility the tenant could by some means,
including the co-operation of third parties obtained if necessary by financial
or other reward, restore the position. The test must, however, depend on the
nature of the covenant and its breach rather than the particular circumstances
of the case. Thus if an assignor could possibly induce the assignee to consent
to the revocation of the assignment then the breach could be remedied and a
notice in that event ought to have been served not under Case E but under Case
D of section 2(3) of the 1977 Act. In this case an undertaking to reassign the
tenancy was forthcoming from Arthur. But on a matter of pure construction Mr
Burnett was constrained to concede that his submission in fact involved the
proposition that in order for a breach to be irremediable, even if a breach of
a negative covenant, it would have to be shown that the breach was incapable of
remedy under any possible combination of circumstances even if this involved
obtaining the consent of an independent and free agent who might well be acting
contrary to his interests. I regret that, in my judgment, this submission
fails. I am unable to see any ground for distinguishing as a matter of
construction the effect of Case E of the 1977 Act and the words of section 146
of the 1925 Act. For the purposes of construing two statutes which are clearly in
pari materia I consider that we are bound by the authority of the Scala
House case and that, therefore, the breach of the covenant not to part with
possession is irremediable. Even if this were not so, I could not agree with Mr
Burnett’s submission as a matter of construction free from authority. The
construction for which he contended was in my view far too restricted.
The remaining
submission, apart from the issue of estoppel, involved an assertion that the
decision of Nicholls J (as he then was) in the case of Field v Barkworth
was wrong. There is no authority in point, probably because the matter is so
clear. Mr Burnett’s argument was based on the mirror-image proposition from
which stemmed the line of authorities which indicated that a covenant against
parting with possession of the whole of the property did not prevent an
assignment in part. In my judgment, this argument does not have any force. I
agree that the judgment of Nicholls J in Field v Barkworth is
correct.
I now turn to
the question of estoppel. Although the findings have already been described by
my lord it is convenient shortly to set out the crucial matters. The important
findings are (xiv) and (xv) in the case stated, which result in the finding in
(xvi):
(xiv) I find as a fact that whatever may have been
the prior knowledge of the parties at the arbitration in 1970 and 1974 the
position was at both dates that there was no known or ascertainable agreement.
I find that no one knew or could have known whether the written agreement would
be found if it still existed.
(xv) It is clear from Mr Shearman’s evidence (and
I so held) that he (and therefore his client Herbert Gibson) relied upon the
absence of any special terms in considering whether to assign the tenancy and
that the assignment of the tenancy in breach (as it now appears) of the
covenant against assignment is an action by Herbert to Herbert’s detriment, I
say this especially in view of the finding I made as to the consequences of
breach.
(xvi) Paragraphs (ix) to (xv) above inclusive raise
the second question upon which the opinion of the court is sought. In order to
answer this question the court may require to consider whether it is a fair and
proper inference from these paragraphs that the parties regulated their
arrangements on the footing at least that there were no special terms unless
and until established otherwise (see Amalgamated Investment & Property
Co Ltd v Texas Commerce International Bank Ltd [1982] QB 84).
Notwithstanding
the specific finding in the case stated and other references to the Amalgamated
Investment & Property Co Ltd case the learned judge seems to have
concentrated solely upon the requirement for a ‘clear and unequivocal
representation that there were no special terms’ such as would be required
under the authorities to establish estoppel by representation. To be fair to
the learned judge, he may have been induced into this attitude by the emphasis
placed by learned counsel on this particular aspect; but it is common ground
that the appellants did rely also upon estoppel by convention. There may not be
so much importance to be attached to the distinction between the two so-called
types of estoppel. The law as it has developed now tends against a series of
different estoppels in their own compartments but, as Mr Burnett submitted, it
is to the principle that the court should direct its attention. In certain
circumstances of estoppel by representation a clear and unequivocal statement
upon which the person relying upon the estoppel acted to his detriment may be
an important feature; but where both parties engage upon a course of
negotiations or transactions representing mutually the one to the other that a
certain state of affairs is accepted as regulating their conduct then the
necessity for clear and unequivocal statements becomes of less importance. The
crucial requirement for convention estoppel is that at the material time both
parties should be of a like mind. Thus the difficulties over ambiguity with
which their lordships were concerned in the case of Woodhouse AC Israel
Cocoa Ltd SA v Nigerian Produce Marketing Co Ltd [1972] AC 741 do
not arise where both parties enter into a course of negotiations under a common
and agreed assumption of fact.
The effect of
the two important cases Bremer Handelsgesellschaft mbH v Vanden
Avenne-Izegem PVBA [1978] 2 Lloyd’s Rep 109 and Bremer
Handelsgesellschaft mbH v C Mackprang Jr [1979] 1 Lloyd’s Rep 221 is
that where parties have conducted themselves so as to lead one reasonably to
believe that reliance will not be placed upon a defect in goods, whether known
at the time or not by the person making the representation or conducting himself
so as to give that impression, then that party cannot, thereafter, go back upon
the conduct or representation (see per Shaw LJ in Bremer v Mackprang
at p 230):
Accordingly,
so it seems to me, whether the conduct of a contracting party may amount to a
waiver must be determined by reference to all the prevailing circumstances. It
need not be such as to amount virtually to an express declaration that this or
that right is waived or surrendered. If in the prevailing conditions affecting
the position of the parties to a contract the conduct of one of them affords a
reasonable foundation for the inference that he is prepared to forgo any right
or rights he may have in a certain regard and the other contracting party does
draw that inference and persists in the residual contractual relationship upon
that basis, then whether it be regarded as waiver or estoppel the forgoing of
those rights cannot thereafter be gainsaid . . . Their counsel sought to
reinforce his argument against the implication of waiver by laying emphasis on
the buyers’ ignorance as to whether, on the facts if and when they became
known, the sellers could claim to be exonerated from liability for failing to
deliver as required by their contract. I see no reason, however, to limit the
effect of waiver to rights known to exist. It may be embracing enough, and so
intended, as to forgo rights which might exist in regard to a particular
contract or in a particular context.
The last
passage, cited from the judgment of Shaw LJ, seems to me to be particularly
apposite in the circumstances prevailing in the 1970 and 1974 arbitrations the
conduct of which took place against the common belief that there was no written
agreement and no special terms affecting the tenancy. It remains only to refer
to the speech of Lord Denning MR in the Amalgamated Property Co case at
p 122:
When the
parties to a transaction proceed on the basis of an underlying assumption —
either of fact or of law — whether due to misrepresentation or mistake makes no
difference — on which they have conducted the dealings between them — neither
of them will be allowed to go back on that assumption when it would be unfair
or unjust to allow him to do so. If one of them does seek to go back on it, the
courts will give the other such remedy as the equity of the case demands.
and per
Eveleigh LJ who cites a passage from Spencer Bower and Turner on Estoppel by
Representation at page 126B:
When the
parties have acted in their transaction upon the agreed assumption that a given
state of facts is to be accepted between them as true, then as regards that
transaction each will be estopped against the other from questioning the truth
of the statement of facts so assumed.
The limitation
on the broadness of the concept of estoppel mentioned by Eveleigh LJ at p126 F
is, in my judgment, important:
Estoppel
operates so as to prevent a party from denying a representation or an assumed
state of facts in relation to the transaction supported by that representation
or assumed state of facts. The estoppel does not go beyond the
not to be held irrefutable beyond the purpose for which the representation or
assumption was made. In the present context the representation is not made for
the purpose of establishing its own truth but as a part of the whole
transaction. An assumption is not to be treated as having the effect of an
assumpsit.
The finding
inferentially recorded by the arbitrator in the case stated at para (xvi) in
inviting the court to consider whether this inference is fairly drawn places
the basic finding firmly and clearly within the concept of estoppel by
convention as described in the authorities to which I have just referred. I am
firmly of the view that the primary findings of fact set out in the case
stated, to which my lord has already referred, justify such an inference. Over
this period of time the parties were content to and did negotiate the new rent
on the basis that there were no special terms controlling the tenancy. This
would increase the value of the holding and, therefore, the rent awarded and so
the tenant acted to his detriment in this respect. It is not clear at what
point in time the landlords became aware of the 1923 agreement. Whenever it
was, in my judgment they were not entitled to rely upon it for the purposes of
forfeiture for breach of the covenant not to part with possession while the
tenant was still conducting his affairs in the context of the assumption,
jointly made for the purposes of negotiations in the past, that there were no
such special terms and that the written tenancy did not exist. As Eveleigh LJ
emphasised, however, in his judgment, estoppel is of limited application. The
equitable relief afforded thereby will persist only so long as it is necessary
to protect a tenant who has altered his position on the basis of the common
mistake or common misrepresentation — however it may be put. Now that the
written tenancy has been declared and rediscovered, the effect of the estoppel
will no longer run and Arthur in his turn, now knowing the true state of
affairs, will not be able to avail himself of the equitable relief which has
protected the assignment from his uncle to himself. In my judgment, therefore,
this appeal succeeds on the ground of estoppel alone and I would concur that
the appeal should be allowed.
Agreeing,
RALPH GIBSON LJ said: I wish to add one comment upon the question as to the
degree of clarity and unequivocalness required of an estoppel if it is to be
the effective foundation of an estoppel by representation of fact, or of
promissory estoppel, or the origin of an estoppel by convention. I agree that
it is not necessary to resolve this question in this appeal because the
representation relied upon was, in my judgment, capable of only one meaning in
the context, namely that there was no written agreement operating between the
parties. That representation was the origin of the estoppel by convention in
this case. I agree further that where reliance is placed upon estoppel by
convention, where both parties have engaged upon a course of negotiation or
transactions representing mutually the one to the other that a certain state of
affairs is accepted as regulating their conduct, then the necessity for proof
of some clear and unequivocal statement becomes of less importance. The court
must determine what the state of affairs is which the parties have accepted and
decide whether there is sufficient certainty and clarity in the terms of the
convention to give rise to any enforceable equity. For my part I think that the
extent to which the importance of clear and unequivocal statements is reduced
in cases of estoppel by convention is probably small. In all cases the
representation or statement must be sufficiently clear; and, since the doctrine
of estoppel, when applied, deprives a party of the ability to enforce a legal
right for the period of time and to the extent required by the equity which the
estoppel has raised, the clarity required will seldom fall below what is
unequivocal for the relevant purpose. In this case I have no doubt that in
justice the landlord could not be permitted to enforce against the tenant the
terms of the written agreement in respect of an act done while the tenant, in
reliance upon the mutually accepted state of affairs, believed that no written
tenancy agreement regulated their relationship.
The appeal was allowed and the following answers
given to the questions raised before the county court judge:
Question (1): Yes, at every stage
since at least November 26 1946.
Question (2): Yes.
Questions (3) and (4) do not
arise.
The
appellants were awarded costs, as between party and party, in the Court of
Appeal and below. Common fund taxation was ordered for legal aid purposes.
Leave to appeal to the House of Lords was refused.
