Agricultural holdings — Claim for compensation in respect of, inter alia, milk quota on termination of tenancy — Whether letter sufficient notice in writing for the purposes of section 83(2) of the Agricultural Holdings Act 1986 and/or para 11 of Schedule 1 to the Agriculture Act 1986
The following
cases are referred to in this report.
Amalgamated
Estates Ltd v Joystretch Manufacturing Ltd
[1981] EGD 84; (1980) 257 EG 489, [1981] 1 EGLR 96, CA
BSC
Pension Fund Trustees Ltd v Downing [1990] 1
EGLR 4; [1990] 19 EG 87
Buckinghamshire
County Council v Moran [1989] 3 WLR 152;
[1989] 2 All ER 225, CA
Deerfield
Travel Services Ltd v Leathersellers’ Company
(1982) 43 P&CR 143; 263 EG 254, [1982] 2 EGLR 39
Hallinan
(Lady) v Jones (1984) 272 EG 1081, [1984] 2
EGLR 20
Lees v Tatchell (1990) 60 P&CR 228; [1990] 1 EGLR 10: [1990]
23 EG 62
Mountford v Hodkinson [1956] 1 WLR 422; [1956] 2 All ER 17, CA
Nunes v Davies Laing & Dick Ltd (1985) 51 P&CR 310; [1986]
1 EGLR 106; 277 EG 416
Rush
& Tompkins Ltd v Greater London Council
[1989] AC 1280
Sheridan v Blaircourt Investments Ltd [1984] EGD 176; (1984) 270 EG
1290, [1984] 1 EGLR 139
This was a
special case stated by the arbitrator seeking an opinion on a question arising
under the Agricultural Holdings Act 1986 and the Agriculture Act 1986.
Martin Rodger
(instructed by Stephens & Scown, of Exeter) appeared for the first
respondent, John Derek Walker; Andrew Densham, solicitor (of Burges Salmon, of
Bristol) represented the second respondents, Ivor William Crocker, Thomas Stanbury
Hockin, Richard Henry Perraton, Norman George Preston, Dennis Arthur Robins and
Peter Ambrose Duncan Willis, trustees of the Charity Lands of Diptford.
An arbitration
had been conducted by John Wakeham [FRICS] under the provisions of the
Agricultural Holdings Act 1986 and the Agriculture Act 1986 between the second
respondents as landlords and the first respondent as tenant and was concerned
with the assessment of compensation upon the termination of the tenancy held by
the first respondent, of Blakewell Farm, Diptford, Devonshire. The arbitrator
had stated a special case seeking an opinion as to whether, on its true
construction, a letter written by the tenant’s solicitors to the landlord’s
solicitors on November 9 1987 was a sufficient notice for the purpose of
section 83(2) of the Agricultural Holdings Act 1986 and/or para 11(1) of
Schedule 1 to the Agriculture Act 1986.
The question
posed by the arbitrator did not expressly cover one of the submissions raised
in the case and argued before the judge by Mr Densham, namely whether the
letter of November 9 1987 was to be regarded as written ‘without prejudice’ and
to be treated as privileged, and therefore incapable of being a notice under
the Acts, or of being relied upon in the arbitration at all. Logically this
issue should be considered before other matters raised in the case.
The
requirements which must be met for a notice to be valid under section 83 of the
Agricultural Holdings Act 1986 and to entitle a tenant to claim compensation in
respect of improvements and tenant rights differ in one respect from the
similar requirements of para 11(1) of Schedule 1 to the Agriculture Act 1986,
which enable the tenant to claim in respect of his milk quota. Under the
Agriculture Act the notice must: (a) be in writing; (b) be given before the
expiry of two months from the termination of the tenancy; and (c) notify the
landlord of the tenant’s intention to make the claim. Under the Agricultural
Holdings Act there is an additional requirement, namely that the notice specify
the nature of the tenant’s claim. Section 83 of the Act provides, however, that
it shall be sufficient if the notice refers to the statutory provision, custom
or term of an agreement under which the claim is made. Because of the differing
requirements of the two Acts it follows that a notice may be valid for the
purposes of the Agriculture Act but fail to comply with the additional
requirements of the Agricultural Holdings Act and be invalid for the purposes
of that Act. Conversely, a notice which is invalid under the Agriculture Act
will also be invalid under the Agricultural Holdings Act. It is to be observed
that under earlier legislation either party giving notice of a claim for
compensation was required to include particulars of the claim in the notice:
see section 16 of the Agricultural Holdings Act 1927. Since 1948, however, the
relevant statutes have not been similarly worded.
Mr Rodger
submitted that the test of whether a notice under the Agriculture Act 1986 is
valid is whether the terms of the purported notice are sufficiently clear to
bring home to the ordinary landlord and/or his professional advisers that the
tenant intends to make a claim for compensation: see Nunes v Davies
Laing & Dick Ltd [1986] 1 EGLR 106 per Sir Nicolas
Browne-Wilkinson V-C at p 107 and the question in the present case is whether
the letter of November 9 1987 written by Stephens & Scown, the first
respondent’s solicitors, to Michelmores, the solicitors then acting for the
second respondents, satisfies that test. The crucial words of the letter are:
‘if your clients are successful on November 20 then our client expects
compensation for all his input into the farm including the value of the (milk)
quota’. November 20 1987 was, in fact, the date upon which the second
respondent’s claim for possession of the holding was due to be heard in the county
court. On that date, however, the first respondent was given leave to file a
defence to the claim and the action was adjourned generally. It was eventually
heard on May 6 1988, when an order was made by consent that, the tenancy having
terminated on September 29 1987, there should be an immediate order for
possession of the holding suspended, upon punctual compliance by the first
respondent with certain terms agreed, until March 25 1989.
Mr Rodger
submitted that the letter of November 9 1987 fully satisfied the requirements
of both section 83(2) of the Agricultural Holdings Act 1986 and para 11(1) of
Schedule 1 to the Agriculture Act 1986 and passed the test enunciated by the
Vice-Chancellor in the Nunes case by making clear that the first
respondent not merely hoped for but expected compensation both for his ‘input’
into the farm and for his milk quota and by specifying the nature of the input
he relied upon. Mr Rodger referred the judge to Deerfield Travel Services
Ltd v Leathersellers’ Company (1982) 263 EG 254, [1982] 2 EGLR 39, a
decision of the Court of Appeal on the provisions of the Landlord and Tenant
Act 1927, in which the court held that it was sufficient compliance with
section 3(1) of that Act if the notice required by the section notified to the
landlord the tenant’s intention to make improvements merely by implication.
Mr Densham
submitted that the letter of November 9 1987 contained no words indicating an
intention by the first respondent to make any claim and, in any event, did not
specify the nature of any such claim, leaving the second respondents with no
indication whether the compensation sought was for dilapidations only or for
tenant’s rights or as to the extent of the milk quota referred to. He drew the
judge’s attention to the fact that the letter relied upon in the Nunes
case, in contrast to that relied upon in the instant case, was stated expressly
to be a ‘formal notice’.
He submitted
further that the correspondence between the parties indicated that neither
party treated the letter of November 9 1987 as a notice under the Acts, as
shown by the subsequent letter from Gordon Vick & Partners (the first
respondent’s agents) to Luscombe Maye (the second respondents’ agents) dated
January 25 1989 enclosing a ‘formal statutory notice’ under sections 10 and 83
of the Agricultural Holdings Act 1986. Mr Densham further argued that any claim
made in the letter of November 9 1987 was conditional upon the second
respondents’ action for possession being successful on November 20 1987. On
that date, he says, the second respondents were not successful, since the first
respondent obtained an adjournment and a possession order was not obtained
until May 6 1988.
In the course
of his argument, Mr Densham cited a number of cases, namely Sheridan v Blaircourt
Investments Ltd (1984) 270 EG 1290, [1984] 1 EGLR 139, Lady Hallinan
v Jones (1984) 272 EG 1081, Lees v Tatchell [1990] 1 EGLR
10, BSC Pension Fund Trustees Ltd v Downing [1990] 1 EGLR 4 and Mountford
v Hodkinson [1956] 2 All ER 17. In Sheridan v Blaircourt
Investments Ltd the words relied upon as constituting a notice to apply for
the appointment of an independent valuer under a rent review clause in a lease
were: ‘I suggest it would be appropriate to make application to the RICS for an
independent valuer . . .’.
Nicholls J (as
he then was) held that a form of words ‘which is limited to the tenant’s agents
making a suggestion’ is not language appropriate to the exercise by a tenant of
an option. In the judgment of Judge Peck, however, the language of the letter
of November 9 1987 in the instant case was very far removed from that used in
the case cited. In Lady Hallinan’s case — a county court decision — the
words relied upon were: ‘We give you prior warning that it is our present
intention to serve a notice under section 70 of the Act (Agricultural Holdings
1948) in due course’. The learned assistant recorder held that this wording did
not constitute a sufficient notice under the section. The judge thought this
was clearly right; the words used in that case were totally inconsistent with
an intention to give actual notice. In Lees v Tatchell, a
decision of the Court of Appeal, Parker LJ referred with approval to the test
applied in Amalgamated Estates Ltd v Joystretch Manufacturing Ltd
(1980) 257 EG 489, [1981] 1 EGLR 96,
home to the ordinary landlord that the tenant is purporting to exercise his
right under the relevant section of the Act in question. In BSC Pension Fund
Trustees Ltd v Downing — Mr Andrew Blackett-Ord (sitting as a deputy
High Court judge in the Chancery Division) applied the same test. Finally, in Mountford
v Hodkinson — a tenant who had received from his landlord a notice to
quit replied: ‘I don’t intend to go. I shall appeal against it and take the
matter up with the AEC’. The Court of Appeal held that, although a
counternotice was not to be construed with great strictness, it must be so
expressed as to indicate a clear intention to invoke the right given by the
relevant Act and the tenant’s letter in that case did not show such an
intention.
The judge
thought it right, as Mr Densham suggested, to construe the letter of November 9
1987 in the light of the surrounding circumstances and the contemporary
correspondence. Nevertheless, it seemed to him, that letter did, on its face,
comply with the requirements of the Agriculture Act and satisfied both the test
adopted in the Nunes case and that applied in Amalgamated Estates
and similar cases. The words ‘our client expects compensation’ must have made
clear to the second respondents’ advisers that the first respondent was
claiming such compensation and that claim was on the basis that the second
respondents would obtain possession upon the termination of the tenancy. The
judge did not think that the second respondents would have been misled into
thinking that the claim depended upon possession being obtained by an order
made on a particular date. Nor did he consider that the subsequent formal
notice given by the first respondent’s agents on January 25 1989 affected the
matter. The particulars then provided were required for the arbitration to
proceed and the fact that they were said to be a formal statutory notice was,
he thought, irrelevant. No doubt when agricultural agents are dealing with
compensation claims they normally make use of pro forma notices but the
Agriculture Act does not require formality provided the landlord is informed in
writing of the tenant’s intention to make a claim. While it is true that the
notice in the Nunes case was stated in terms to be a ‘formal notice’, it
did not appear that this was itself the ratio decidendi of that case.
In Judge
Peck’s judgment, the letter of November 9 1987 made clear to the second
respondents that the first respondent intended to make a claim both under the
Agricultural Holdings Act and under the Agriculture Act in respect of his milk
quota and, in his judgment, therefore, the letter constituted a valid notice
under the latter statute. The judge had rather more difficulty in deciding
whether it complied with the requirement of section 83(2) of the Agricultural
Holdings Act that it specify the nature of the claim but on balance he thought
that, despite Mr Densham’s arguments to the contrary, the letter gave a
sufficient indication to the second respondents of the matters in respect of
which compensation was sought and he held, therefore, that the requirements of
this Act also were satisfied.
Finally, the
judge turned to consider whether the letter of November 9 1987 was privileged.
It was, on its face, an open letter but Mr Densham argues that it forms part of
a chain of privileged correspondence containing negotiations for a settlement
of the dispute between the parties.
The principles
governing the ‘without prejudice’ rule were considered by the House of Lords in
Rush & Tompkins Ltd v Greater London Council [1989] AC 1280.
Lord Griffiths, giving the opinion of the House, stated, at p 1299, that the
rule rests, at least in part, upon public policy, namely that parties should be
encouraged as far as possible to settle their dispute without resort to
litigation and should not be discouraged by the knowledge that anything that is
said in the course of such negotiations may be used to their prejudice in the course
of the proceedings. Later in the opinion, Lord Griffiths emphasised that
application of the rule is not dependent upon the use of the phrase ‘without
prejudice’. A letter genuinely aimed at settlement is therefore privileged even
if it is not described as being written ‘without prejudice’. Conversely,
however, a letter headed ‘without prejudice’ is not privileged, merely because
it is so described, if it is not genuinely intended to be part of negotiations.
If headed ‘without prejudice’ there is a presumption that it is so intended; if
not so headed it seems that the presumption is the other way; either
presumption may, however, be rebutted by the nature of the contents of the
letter. Once privilege is established, a letter covered by the privilege is inadmissible
in the current or any subsequent litigation about the same subject-matter.
The letter of
November 9 1987 was written by the first respondent’s solicitors in reply to
two letters from the second respondents’ solicitors both dated November 6 1987,
one of them being an open letter and one marked ‘without prejudice’. The first
respondent’s solicitors did not state specifically to which letter their reply
was addressed; it merely thanked the second respondents’ solicitors for their
two letters and noted their instructions. Therefore, it was important, in the
light of Mr Densham’s submission, to consider carefully the contents of the
letter of November 9 1987 and to have regard to the context in which it was
written and its place in the continuing correspondence. That correspondence, so
far as it is relevant, began on October 22 1987 with two letters from Stephens
& Scown to Michelmores, one of them an open letter and the other, the
second, headed ‘without prejudice’; the first of these letters merely indicated
an intention by their client to apply for legal aid and asked for agreement to
an adjournment of the hearing due on November 20 1987; the second contained a
proposal for settlement. Michelmores replied with an open letter on October 26
1987 without, however, indicating which of Stephens & Scown’s letters they
were answering. They stated that they would be discussing Stephens &
Scown’s letter (in the singular) with their clients. Stephens & Scown wrote
again on October 29 1987 by an open letter confirming that legal aid had been
applied for, ‘so that we can advise our client fully and protect (his)
interests in the best possible manner’. On November 6 1987 Michelmores wrote
two letters to Stephens & Scown; the first, an open letter refused agreement
to an adjournment of the possession action and expressed the intention to
proceed to obtain possession as quickly as possible; the second, ‘without
prejudice’, effectively rejected out of hand the offer of settlement put
forward in Stephens & Scown’s ‘without prejudice’ letter of October 22
1987. It seemed to the judge that Michelmores’ letter brought negotiations to
an end. The vital letter of November 9 1987 contained no new offer; it merely
set out the facts alleged by the tenant and asserted his rights to
compensation: see Buckinghamshire County Council v Moran [1989] 3
WLR 152 per Slade LJ. The correspondence ended there. On November 29
1987 the second respondents’ agents sent to the first respondent the landlords’
notice under section 83 of the Agricultural Holdings Act 1986. The
correspondence between the parties’ solicitors was not resumed until August 24
1989 and the subsequent letters are not relevant to the matter being
considered. In the circumstances being outlined, the judge did not regard the letter
of November 9 1987 as forming part of the negotiations between the parties
designed to achieve a settlement and he saw no reason why, as a matter of
public policy, it should be treated as privileged. If, as he believed to be the
case, the letter constituted a good notice, the landlords were not prejudiced
by its admission in evidence, a fortiori, if he had been mistaken in
this view. The judge held: (1) that the letter dated November 9 1987 written by
the tenant’s solicitors to the landlords’ solicitors was admissible in
evidence; and (2) that the letter was a notice for the purpose of section 83(2)
of the Agricultural Holdings Act 1986 and also of para 11(1) of Schedule 1 to
the Agriculture Act 1986.
