Landlord and tenant — Landlord and Tenant Act 1954 — Licence — Section 25 notice to terminate tenancy — Whether licensor estopped from denying tenancy
The respondent held a 20-year lease of premises
that contained an unqualified covenant against subletting. By an agreement
dated September 23 1994, the respondent granted a ‘licence for the use of
Business Premises’ to the appellant and another party of a room in the premises
for a licence period of one year. The agreement was renewed, and, as extended,
it expired in September 1997. The respondent sought confirmation that the
licensees would be vacating. The solicitor for the licensees then asserted that
they had a tenancy protected by Part II of the Landlord and Tenant Act 1954.
This was at first denied by the respondent. On 24 November 1997 a director of
the respondent wrote a letter stating that he accepted that the appellant was a
tenant holding over and enclosing a copy of a notice that had been served under
section 25 of the Landlord and Tenant Act 1954 seeking to determine a tenancy
of the room on the ground that the respondent required possession under ground
(g) of section 30(1).
The appellant served a counternotice and made an
application to the county court for the grant of a new tenancy. The
respondent’s answer did not deny the existence of the tenancy or that the grant
of a new tenancy would be in breach of the respondent’s lease; an interim rent
was sought. At hearings of a preliminary issue, the county court judge decided
that the agreement of September 1994 created a licence and not a tenancy, and
that the letter of 24 November 1997 did not estop the respondent from denying
the existence of a tenancy. The appellant appealed that part of the decision relating
to estoppel.
dismissed. The letter of 24 November 1997 could not have created a tenancy by
estoppel; it is a tenancy that creates an estoppel, not an estoppel that
creates a tenancy. There is a distinction between a representation that ‘the
Act shall apply’ and a representation that ‘I will treat you as having the same
rights as if the Act applied’. The letter did not contain any representation
that an application for a new tenancy would not be opposed; the most that could
be said of the letter and the section 25 notice, read together, was that any
opposition to a new tenancy would be founded only on ground (g) and
would not be founded on an argument that Part II of the Act had no application
at all. With regard to reliance, the appellant did not remain in occupation in
reliance on the representation contained in the letter; he did so as a result
of his solicitor’s advice. The service of the counternotice and the making of
the application for a new tenancy did not amount to the appellant acting to his
detriment in reliance on the representations. There was no material to support
any detrimental reliance by the appellant. The respondent had not elected
between two inconsistent remedies, nor did it seek to approbate and reprobate;
the most that could be said was that it made a procedural mistake in not having
raised the ‘lease/licence’ question earlier.
This was an appeal by Anthony Wroe against a
decision of Judge Uziell-Hamilton, sitting in West London County Court,
deciding a preliminary issue in proceedings by the appellant under Part II of
the Landlord and Tenant Act 1954 against the respondent, Exmos Cover Ltd.
Dominic Bevis (instructed by Ellis &
Fairbairn) appeared for the appellant; Paul Stagg (instructed by Sampson Wood)
represented the respondent.
Giving judgment, Chadwick LJ said: This is an appeal against an order made
on 10 September 1998 by Judge Uziell-Hamilton in West London County Court in
proceedings under Part II of the Landlord and Tenant Act 1954. The proceedings
were brought by the appellant, Anthony Wroe, for a new business tenancy of a
room at 85 Gloucester Road, South Kensington, London SW7. The judge determined,
on the hearing of a preliminary issue, that the appellant had held that room as
licensee and not as tenant, and, accordingly, she dismissed his application for
a new tenancy. The appeal is brought with the permission of this court (Sir
Anthony McCowan) granted on 28 January 1999.
The respondent, Exmos Cover Ltd, is the owner of a
leasehold interest, for a term of 20 years from 24 September 1984, of the
property known as Stern House, 85 Gloucester Road. The respondent’s lease
contains an unqualified covenant against underletting any part (as distinct
from the whole) of the demised premises. The appellant occupies a room (known
as the East Room) on the second floor of that property for the purpose of a
business that he carries on under the name ‘Telepower’. Until 30 September 1997
he occupied that room upon the terms of an agreement in writing dated 23 September
1994.
The agreement of 23 September 1994 is described on
its face as a ‘Licence for the use of Business Premises’. The agreement is
expressed to be made between Exmos Cover Ltd, described as ‘the Licensor’, and
Anthony Wroe and Susanna Wilson, of Telepower, described as ‘the Licensee’.
Clause 1 of the agreement is in these terms:
1. In consideration of the payment by the
Licensee to the Licensor of the LICENCE FEE set out below and the strict
acceptance of and compliance with the provisions of the attached schedule to
the LICENCE by the Licensee the Licensor shall permit the Licensee during the
LICENCE PERIOD to occupy and use respectively for the purposes of the
Licensee’s BUSINESS the ROOM(S) and available facilities at STERN HOUSE.
The agreed licence fee was £460 per calendar
month. The licence period was 12 months from 1 October 1994 ‘unless renewed in
writing by both parties on new terms as and if agreed’. The schedule to the
agreement required the licensor to provide heating, lighting and a telephone
message-taking service without charge and to be responsible for the payment of
rates. The agreement was expressed to be a licence personal to the licensee.
Clauses G and L of the schedule to the agreement were in these terms:
G. ‘LICENCE’ means only a temporary License (sic)
and no provisions in this Licence shall have the effect of creating any form of
tenancy or lease or otherwise.
L. The Licensee shall agree to perform and abide
by the terms of the Licensor’s lease and Superior Leases…
Whatever may have been the effect in law of that
agreement, it is plain that the respondent, at least, did not intend that it
should create any tenancy.
The agreement was renewed for 12 months from 1
October 1995 at an increased monthly payment; and, again, for a further six
months from 1 October 1996, the monthly fee being increased on that renewal to
£521. On 3 March 1997 the respondent wrote to Mr Wroe:
Your licence expires 31 March 1997 and please can
you let me know within the next 7 days please whether you wish to extend
at the same fee for another six months.
Although there appears to have been no written
response to that letter, it is common ground that the appellant and Miss Wilson
remained in occupation paying the same monthly amount. The agreement, as extended,
expired on 30 September 1997.
The parties reached no further agreement for an
extension of the occupancy of the East Room at 85 Gloucester Road. On 29
September 1997 the respondent wrote to Mr Wroe and Miss Wilson, pointing out
that the licence expired on the next day and that they should arrange to vacate
the room. That letter provoked a response from solicitor Ellis & Fairbairn.
It wrote on 30 September 1997:
Re: Second Floor Office 85 Gloucester Road –
Telepower Limited
We write to you on behalf of our above named
clients with regard to their tenancy of the above property and understand that
you are the landlord.
Our clients have contacted us today and informed
us that you have harassed them during the course of today’s business and
instructed them that you wish them to vacate the premises today.
We would put you on notice that our clients claim
a tenancy protected by the Landlord and Tenant Act 1954 and as such your
harassment and threats are in breach of the said Act.
If indeed you require possession of the premises
then the necessary Notices required by the Act must be served by you in the
normal way.
Any harassment of our clients or attempt to bar
them from the premises is a fundamental breach of the Act which I am sure you
will wish to avoid.
That was, I think, the first time that it had been
suggested by anyone that the East Room was held under a tenancy. The respondent
wrote back on the following day, 1 October 1997. That letter contained the
following paragraph:
2. We do not accept that the provisions of the
Landlord and Tenant Act apply to the arrangement we have with your clients and
perhaps you can refer us to the appropriate section, subject to our further
points.
The respondent went on to assert, in effect, that
the occupation of the East Room by Mr Wroe and Miss Wilson had been on the
terms of a licence and not a tenancy. The letter contained an offer of a
further short-term arrangement under a weekly licence at the rate of £164 per week.
The appellant remained in the property after 1
October 1997. He tendered a cheque in the amount of £521, described as ‘rent’.
The respondent returned that cheque for the reasons set out in a letter of 6
October 1997:
Thank you for your cheque which whilst we
appreciate the gesture we have already returned to you. We do not accept what
your solicitor says concerning in effect a tenancy and know that it is a very
grey area. We are seeking advice on this which may take time. However in the
meantime we accept that you are holding over on the existing terms but as your
solicitor said it should be at the current market value.
The appellant’s solicitor replied on 7 October
1997, repeating its assertion that its client (meaning, I think, Mr Wroe to the
exclusion of Miss Wilson) was entitled to hold over under the terms of a
tenancy agreement and to claim the protection of the 1954 Act. On 9 October
1997 the solicitor wrote to say that it understood from its client that the
terms of the new tenancy had been agreed. The respondent wrote back on 14
October 1997:
That the third sentence of that paragraph was
intended as a reference to the restriction in the respondent’s own lease is
made clear by a letter from the respondent to Mr Wroe dated 6 November 1997.
That letter contained the sentence:
Unfortunately the lease we own does not allow us
to grant tenancies within the Landlord and Tenant Act of individual rooms, and
I draw your attention to clause ‘L’.
The letter continued:
I am assuming that you will now be applying for a
tenancy (if only because it will give you several more months without our being
able to accept any monies!) but have heard nothing. Please appreciate therefore
that if you still do nothing there are, to my surprise and regret, absolutely
no legal steps for us to take other than to evict you, therefore the notice
will be enforced on 20th December without further notice.
The directors of the respondent company at the
relevant time were Mrs Sonya Trudgian, her father and her husband, Mr Tom
Trudgian. On 21 November 1997 Mrs Trudgian wrote again to Ellis &
Fairbairn. She returned a cheque that had been submitted as rent and pointed
out that the respondent company had made it perfectly clear that payment could
not be accepted on that basis. But some three days later, on 24 November 1997,
Mr Tom Trudgian wrote to Ellis & Fairbairn in these terms:
I want to be fair but it is now nearly eight
months since I told Anthony I wanted my old office back in 6 months. Anthony’s
motives are perfectly understandable of course, but without any response at all
I am left with no alternative but to get on. To do this apparently we have to
accept he is holding over under the Landlord and Tenant Act from 1st October
1997 as a tenant and now do so. We enclose a copy of the notice Sonya has
served on him today under section 25 of the Landlord and Tenant Act 1954 and
this gives him a further six months to make the permanent office arrangements I
should have thought are in his interests.
I return your cheque for £1226.06 for you to
clarify that it is on account of rent from 1st October 1997 at a market value
to be assessed effective 1st October 1997 on the basis of the terms and
services agreed in the agreement dated 23rd September 1994.
As that letter indicates, the respondent had
served on the appellant a notice under section 25 of the Landlord and Tenant
Act 1954. The notice is dated 24 November 1997. It is in the prescribed form,
addressed to the appellant trading as Telepower. It is expressed to be given
under section 25 of the Act and to relate to ‘the East Room on the second floor
of 85 Gloucester Road, London SW7 4SS of which you are the tenant’. The notice
purports to terminate ‘your tenancy’ on 31 May 1998. It indicates that, if
application is made to the court under Part II of the Landlord and Tenant Act
1954 for the grant of a new tenancy, that application will be opposed on the
grounds mentioned in para (g)
of section 30(1) of the Act.
Thereafter, until August 1998, the matter
proceeded on the basis that the room occupied by the appellant was held on a
tenancy to which Part II of the Landlord and Tenant Act 1954 applied.
Part II of the Act applies to any tenancy where
the property comprised in the tenancy is or includes premises that are occupied
by the tenant and are so occupied for the purposes of a business carried on by
him or for those and other purposes: see section 23(1) of the Act. A tenancy to
which Part II applies does not come to an end unless terminated in accordance
with the provisions of that Part: see section 24(1) of the Act. A landlord may
terminate such a tenancy by notice in the prescribed form, specifying the date
at which the tenancy is to come to an end, but such a notice shall not have
effect unless it is given not less than six months before the date of
termination specified therein: see section 25(1) and (2) of the Act. A notice
of termination shall not have effect unless it requires the tenant, within two
months, to notify the landlord whether or not the tenant would be willing to
give up possession of the property, and unless it states whether the landlord
would oppose an application to the court for the grant of a new tenancy, and,
if so, upon what ground: see section 25(5) and (6) of the Act. The grounds upon
which a landlord may oppose an application for a new tenancy are set out in
section 30(1) of the Act. They include, as ground (g), that, on the termination of the current tenancy, the
landlord intends to occupy the premises for the purposes or partly for the
purposes of a business that is to be carried on by him.
Where the landlord has given notice under section
25 of the Act to terminate the tenancy, the tenant may apply to the court for a
new tenancy: see section 24(1)(a) of the Act. An application for a new
tenancy, made in consequence of a notice given by the landlord under section 25,
cannot be entertained unless the tenant has notified the landlord that he is
not willing to give up possession and the application is made not less than two
nor more than four months after the giving of the landlord’s notice. The court
must dismiss the application if the landlord establishes one or more of the
grounds upon which he is entitled to oppose it: see section 31(1) of the Act.
But, subject thereto, on an application for a new tenancy the court shall make
an order for the grant of a tenancy comprising such property at such rent and
on such terms as are provided in sections 32 to 35 of the Act: see section
29(1) of the Act.
It was pursuant to that statutory framework that,
on 8 January 1998, the appellant’s solicitor gave notice on his behalf that he
would not be willing to give up possession of the property comprised in the
tenancy on 31 May 1998. On 20 March 1998, just within the four-month period
from the date of the landlord’s notice under section 25 of the Act, the
appellant made application to West London County Court for a new tenancy under
Part II of the Act. The particulars of the appellant’s current tenancy were set
out in the application in these terms:
(a) The Agreement is partly contained in,
alternatively evidenced by, a letter dated 3rd March 1997 from the Respondent
to the Applicant and an agreement in writing dated 23rd September 1994.
(b) The original parties to the Lease were the
Respondent as Landlord and the Applicant as Tenant who have remained the
parties to the Lease at all material times to date.
(c) The Lease was granted for a term of six
months from 1st April 1997.
(d) The rent originally reserved by the Agreement
was £521.73 plus VAT per month and at all material times to date has remained
such an amount.
(e) Under the terms of the Lease the term expired
on 30th September 1997.
(f) The whole of the premises demised by the
Lease is used for the purpose of a business carried on by the Applicant.
The appellant proposed a new tenancy for a period
of two years at a rent of £600 per month and otherwise upon the terms of the
present lease. It was stated in para 10 of the application that the appellant
had no knowledge of any other persons having an interest in the premises and
likely to be affected by the grant of a new tenancy other than the freeholder,
who was identified as Grand Metropolitan Estates Ltd.
That application for a new tenancy was, as it
seems to me, open to the criticism that it was made by one only of the two
persons who, if there were a current tenancy within Part II of the Act, held
under that tenancy as joint tenants. The agreement of 23 September 1994 had
been made between the respondent, Exmos Cover Ltd, and ‘Anthony Wroe and
Susanna Wilson of Telepower’. There is nothing in the correspondence between
1994 and the end of September 1997 that suggests that Miss Wilson had ceased to
be a licensee or tenant (whichever the case might be) of the East Room under
that agreement. She was treated as a joint licensee in the notice to quit dated
29 September 1997; and when, on 30 September 1997, Ellis & Fairbairn wrote
to the respondent asserting (for the first time) the existence of a tenancy, it
did so ‘on behalf of our above-named clients‘.
Be that as it may, the point was not taken by the
respondent company. The answer to the application, served on or about 6 April
1998, contains the statement, at para (4), that there is no person likely to be
affected by the grant of a new tenancy to the applicant alone. Nor, curiously,
did the answer take what might have been thought to be the obvious points: (i)
that the respondent denied the existence of a current tenancy; or (ii) that the
grant of a new tenancy would put the respondent in breach of the covenant
against subletting in its own lease. The opposition to a new tenancy was
confined to the ground stated in the notice given under section 25 of the Act —
namely, that, on the termination of the current tenancy, the landlord intended
to occupy the holding for the purposes, or partly for the purposes, of a
business that it was to carry on therein.
The application was fixed for a hearing on 11 June
1998. On 14 May 1998 Mrs Trudgian invited Ellis & Fairbairn to agree that
there be directions for ‘a preliminary hearing as to our opposition to the
granting of a new tenancy on the ground that we require the room for our own
occupation and the matter of the terms of any new lease and the interim rent be
dealt with at a later date’. There was no formal agreement to the directions
sought — because the parties were not agreed as to the need for witness
statements — but an order for a preliminary issue of whether the respondent
could make good its opposition to a new tenancy on ground (g) of section 30(1) of the Act was not
opposed. An order in those terms was made by the district judge on 11 June
1998. The hearing of that issue was fixed for 10 August 1998, with a estimate
of one day.
The parties, with solicitors and counsel
instructed by the appellant, attended court on 10 August 1998 in the
expectation that that preliminary issue would be heard on that day. The burden
on the preliminary issue lay on the respondent. Its case was opened by Mrs Trudgian
in person. We were told — and there is no reason to doubt — that, in the course
of her opening (or, it may be, after she had begun to give her evidence), the
judge took the point that, having regard to the terms of the agreement of 23
September 1994, she was concerned whether there was, indeed, any current
tenancy. For my part, I think the judge was right to have concern on that
point. The court’s jurisdiction to grant a new tenancy on an application under
section 24(1) of the Act of 1954 depends upon the applicant being a tenant
under a current tenancy to which Part II of the Act applies. Where, as in the
present case, the agreement on which the applicant relies purports, on its
face, to be a licence, it seems to me that the court must be entitled to satisfy
itself that that condition is met. Be that as it may, the judge took the view
that she ought to address the issue of whether the room was held under a
licence or a tenancy, and she adjourned the application for that purpose. She
directed that the ‘landlords’ — which, in context, must be a reference to the
superior landlord — be served with notice of the application. Again, it seems
to me that that was an appropriate direction. The respondent’s lease contained
a covenant against subletting and the superior landlord might well wish to be
heard on the question of whether or not there was an existing subtenancy.
Further, the superior landlord could be expected to have an interest in
opposing the grant of a subtenancy to a business tenant who would, or might,
obtain against the superior landlord the security afforded by Part II of the
Act of 1954.
The application came back before the judge on 4
September 1998. It appears that, on that occasion, the appellant’s counsel made
it clear that, whatever the effect of the agreement when made, he would contend
that the letter of 24 November 1997 created an estoppel that prevented the
respondent company from denying the existence of a tenancy. There was, I think,
insufficient time for the court to address that contention on 4 September 1997.
The judge gave a short judgment in which she held that (leaving any question of
estoppel on one side) the agreement of 23 September 1994 created a licence and
not a tenancy. There is no challenge to her conclusion on that point. She
adjourned the application to 10 September 1998 for further consideration of the
appellant’s contention that there was an estoppel.
At the hearing on 10 September 1998, the judge
held that the letter of 24 November 1997 did not create an estoppel that prevented
the respondent from denying the existence of a tenancy. She expressed her view
in these terms:
It is apparent from what I have read [from that
letter] that all the Respondent wants is for the Applicant to vacate the
premises and he is under the mistaken impression that he must proceed under the
Landlord and Tenant Act 1954.
In reaching that view, the judge placed emphasis
on the phrase ‘apparently we have to accept’ in the second paragraph of the
letter; which, as she thought, indicated that the respondent was doing no more
than selecting a procedural course that, as it thought, was the appropriate way
to achieve the expressed objective of recovering possession.
The appellant, in his grounds of appeal, advanced
the contention that the letter of 24 November 1997 created a tenancy by
estoppel. In my view, that contention has no foundation. As Millett LJpointed
out in First National Bank plc v Thompson [1996] Ch 231 at p237B,
the concept of tenancy by estoppel is the product of what he described as ‘the
fundamental principle of the common law which precludes a grantor from
disputing the validity or effect of his own grant’. The principle prevents both
the lessor and the lessee from denying that the grant was ineffective to create
the tenancy that it purported to create; notwithstanding that the lessor’s
title to the land was defective so that, as against third parties, he could
create no interest in it. The point was put, succinctly, by Lord Hoffmann in Bruton
v London & Quadrant Housing Trust [1999] 3 WLR 150* at p157G-H:
it is not the estoppel which creates the tenancy,
but the tenancy which creates the estoppel. The estoppel arises when one or
other of the parties wants to deny one of the ordinary incidents or obligations
of the tenancy on the ground that the landlord had no legal estate. The basis
of the estoppel is that having entered into an agreement which constitutes a
lease or tenancy, he cannot repudiate that incident or obligation.
* Editor’s note: Also reported at [1999] 2 EGLR
59; [1999] 30 EG 91
That principle has no application in the present
case. The question in the present case is not whether the landlord can deny
that an agreement that, properly construed and understood, does create a
tenancy is effective to do so. The question in the present case is whether one
party can deny that an agreement that, properly construed and understood, does
not create a tenancy must be treated, as between the parties to it, as if it
did have that effect.
The principle of estoppel upon which the appellant
must seek to rely, if he can — and which, in amended grounds of appeal, he
invokes — is illustrated by the decision of this court in Daejan Properties
Ltd v Mahoney [1995] 2 EGLR 75†. Miss Mahoney had lived for many
years with her father and mother in a flat in Maida Vale. The flat had been let
to her father on a contractual tenancy. When that contractual tenancy expired
in 1963, her father held over as a statutory tenant until his death in 1976.
Her mother then became a statutory tenant by succession. In 1991, following an
earlier refusal by the landlord to transfer the tenancy into the joint names of
mother and daughter, Miss Mahoney’s mother obtained confirmation from the
landlord’s agent that ‘the tenancy of Flat 20 is in the joint names of you and
your daughter and will continue to be so. All demands will be sent in your
joint names.’ Subsequently, in February 1992, the landlord sought to resile
from that position and to treat the mother as the sole tenant. The mother died
in August 1992. Miss Mahoney remained in occupation of the flat. The landlord
accepted that she was entitled to do so as an assured tenant by succession
under the provisions of the Housing Act 1988, but issued proceedings to
determine whether, as Miss Mahoney contended, she was entitled to a statutory
tenancy under the Rent Act 1977. This court rejected the contention that Miss
Mahoney had become entitled to a statutory tenancy by transmission under the
provisions contained in para 13 of Part II of Schedule 1 to the Rent Act 1977,
but accepted a submission based on estoppel and allowed the appeal on that
ground. The point is identified by Sir Thomas Bingham MR at p77F-G:
But have the landlords, by their representation
on which the appellant and her mother relied, estopped themselves from denying
that the appellant and her mother would be treated by them as if they were
joint tenants (and so joint statutory tenants, since a statutory tenancy was the
only tenancy in existence at the relevant time)? That seems to me to be a
natural and unstrained construction of what the landlords said, and this
construction is not subject to the vice already described [that the appellant
could not, in law, have become a statutory tenant because, on the facts, her
mother’s statutory tenancy had not been transmitted by the only means
sanctioned by Parliament] because it is implicit in it that the appellant and
her mother were not joint statutory tenants, but would be treated as if they
were.
† Editor’s note: Also reported at [1995] 45 EG
128
As Mr RE Megarry had put it, in an article in
(1951) 67 LQR 505, to which the Master of the Rolls referred, the relevant
distinction is between a representation that ‘the Act shall apply’ (which is
objectionable as an attempt to confer on the court a jurisdiction that goes
beyond the intention of the legislature) and a representation that ‘I will
treat you as having the same rights as if the Act applied’. In relation to
security of tenure and the restrictions on any increase in rent, at the least,
there is no reason why the landlord should not agree to treat the tenant as
having the same protection as he or she would have if the tenancy fell within
the Act, and so no reason why the tenant should not be able to rely on an
estoppel to the same effect — provided, of course, that the other requirements
for an estoppel are met.
In the present case, there is, as it seems to me,
an unequivocal representation in the respondent’s letter of 24 November 1997
that, at least in relation to the termination of the appellant’s right to
occupy the room at 85 Gloucester Place, he would be treated by the respondent
as if he were holding over under a tenancy to which Part II of the Landlord and
Tenant Act 1954 applied. The position as at 24 November 1997 may be summarised
as follows: (i) the parties were in dispute, the appellant asserting the
existence of a tenancy (which, if it existed, would be within Part II of the
Act) and the respondent asserting that the agreement created only a licence;
(ii) the respondent could not, in practice, recover possession of the room
without an order of the court — an attempt to re-enter without an order would
be met with an injunction (as did, in fact, happen between the judge’s order
and the hearing of this appeal); (iii) the appellant’s claim to be entitled to
a tenancy within Part II of the Act of 1954 would be raised in any proceedings
that the respondent might take to recover possession, so that the ‘licence or
tenancy’ issue would have to be resolved in such proceedings; (iv) it was
likely that proceedings in which that issue had to be resolved would not be
determined within less than about six months — in the event it took five and
half months to resolve that issue in the present proceedings; and (v), if that
issue were resolved against the respondent, it would be necessary, then, for
the respondent to give a notice under section 25 of the Act, and there would be
a further period of six months before the tenancy would determine pursuant to
that notice. In those circumstances, it was understandable that the respondent
might take the view that there was, in practice, no real chance of obtaining
possession of the room in less than about six months in any event, and that the
sensible course was to ensure that the period of six months that would be
required under the Act (if it turned out that there was a tenancy) had begun to
run against the appellant. There was, of course, always a chance that, faced
with a notice that opposed a new tenancy on a ground that (as the respondent
must have thought) the respondent would have no difficulty in establishing, the
appellant would accept that he would have to vacate the room at the end of six
months and would arrange his affairs accordingly. A more sensible course,
perhaps, would have been to give the section 25 notice without prejudice to the
contention that the agreement created a licence and not a tenancy, and to
commence proceedings at once to have that issue resolved.
Read in the context of the position as it was at
the time, the letter of 24 November 1997 contains a representation that the
respondent will accept that the appellant should have the period of six months’
notice to which he would be entitled if Part II of the Act of 1954 applied, but
that during that period he would be required to pay an interim rent based on
open market value; again, as he could be required to do if Part II of the Act
applied and the respondent made an application to the court under section 24A.
The letter does not contain any representation that an application for a new
tenancy will not be opposed. Indeed, when read in conjunction with the section
25 notice to which the letter refers, it is plain that any such application
will be opposed. The most that could be said, as it seems to me, is that the
letter and the notice, read together, suggest that opposition to a new tenancy
will be founded only on ground (g)
of section 30(1) of the Act, and will not be founded on an argument that Part
II of the Act has no application at all. The question, then, is whether the
appellant relied upon the representation, or representations, contained in the
letter of 24 November 1997 in a manner that caused him detriment. To put the
point another way, did the appellant take some step in reliance upon a
representation in that letter that would make it unfair, or inequitable, for
the judge to allow the respondent to contend, in August or September 1998, that
there had never been a tenancy. It is important to keep in mind that Miss
Mahoney succeeded in the Daejan Properties case only on the basis that
she had relied on the confirmation contained in the letters from the landlord’s
agent. She did so when she rejected an offer of alternative accommodation made
by Westminster City Council shortly after receipt of those letters. As this
court held, she rejected that offer because she thought that her position as a
statutory tenant had been accepted: see the observations of Sir Thomas Bingham
MR [1995] 2 EGLR 75 at p76D and of Hoffmann LJ at pp78K and 79K-L. The
representation alone, absent reliance to the detriment of the representee,
would not found an estoppel.
There can be no doubt that the appellant remained
in occupation of the room after 24 November 1997. But it is, to my mind,
impossible for him to say that he did so in reliance on the letter of that
date. His solicitor had made it clear, in its letter of 30 September 1997 and
in subsequent correspondence, that he was asserting the right to remain in
occupation until the expiry of the period specified in a valid notice given in
accordance with Part II of the Act of 1954. He did not remain in occupation in
reliance on the letter of 24 November 1997, nor in reliance on the section 25
notice that was served at the time of that notice. He remained in occupation
because, independently of the letter or the notice, he was advised by his
solicitor that he was entitled to do so. In any event, the respondent has not
sought to foreshorten the period of six months that, in the letter of 24
November 1997, it represented to the appellant that he should have in which to
make arrangements for other accommodation. Nor has the respondent yet sought to
obtain possession of the room, save on the basis that it requires that room for
use in connection with its own business.
It may be said that the appellant relied on the
section 25 notice, served by the respondent on 24 November 1997, as the basis
for the service of his own counternotice dated 8 January 1998 and as the basis
for his application to the court, on 20 March 1998, for a new tenancy. In the
circumstances of this case, the appellant could not have applied for a new
tenancy save in response to a landlord’s notice under section 25 of the Act,
because his current tenancy (if any) had been granted for a term certain that
did not exceed one year: see section 26(1) of the Act. But I find it impossible
to hold that, in serving a counternotice under section 25(5) and in applying
for a new tenancy under section 24(1)(a), the tenant was acting to his
detriment — or, at the least, was acting to his detriment in reliance on any
representation made to him. The appellant applied for a new tenancy because he
wanted a new tenancy. The landlord’s section 25 notice provided the opportunity
to make the application, but it did not, in any sense, encourage the appellant
to take that course. It was made clear to him in the notice itself that an
application for a new tenancy would be opposed. There was no evidence to
suggest that the appellant would not have made the application if he had not
been led by the respondent to think that it would be opposed only on the
section 30(1)(g) ground and
not on the ground that there was no current tenancy within the Act.
The point can, I think, be tested in this way. If,
after receipt of the counternotice on or about 8 January 1998, the respondent
had written to the appellant’s solicitor to the effect that any application for
a new tenancy would be opposed not only on the section 30(1)(g) ground but also on the ground, which
had been asserted consistently prior to 24 November 1997, that the agreement of
24 September 1994 had created a licence and not a tenancy, would the appellant
have decided not to apply for a new tenancy? If, in its answer to the
appellant’s application made on 20 March 1998, the respondent had asserted that
the agreement of 24 September 1994 had created a licence and not a tenancy,
would the application have been withdrawn? On the material before the judge,
those questions could only be answered in the negative. I can find nothing in
the submissions advanced in this court to suggest that there was any material
that could have been relied upon to suggest a different answer; and, given the
very positive assertions made by the appellant’s solicitor in correspondence,
to the effect that there was a tenancy within the Act and that any attempt to
interfere with its clients’ enjoyment of the premises would amount to
‘harassment’ and a ‘fundamental breach of the Act’, it seems to me most
unlikely that any such material could exist. And, if those questions could only
be answered in the negative, the further question ‘could the court have
refused, at any time before 11 June 1998, to allow an amendment to the
respondent’s answer in order to raise the ‘licence or tenancy’ issue must also
receive a negative response.
We were referred to the decision of this court in Keepers
and Governors of the Possessions Revenues and Goods of the Free Grammar School
of John Lyon v Mayhew [1997] 1 EGLR 88* as authority for the
proposition that the service of the section 25 notice, and the respondent’s
subsequent failure to take the point that the application for a new tenancy was
misconceived, precluded the respondent from asserting that there was no current
tenancy within Part II of the Act. In my view, that decision provides no
support for that proposition in the present case. In the John Lyon School
case, the landlords had served a section 25 notice that was not in the
prescribed form. The tenant knew that the notice was in the wrong form, but
served a counternotice and commenced proceedings for a new tenancy.
Subsequently, in proceedings by the landlords for a declaration that the tenant
was not entitled to rely on a notice served under the Leasehold Reform Act 1967
some two years after the service of the section 25 notice under the 1954 Act,
the tenant sought to assert that that section 25 notice was invalid. It was
held that he was estopped from doing so. By his conduct in treating the section
25 notice as valid, he had led the landlords to think that it would not be
challenged. Had he not led the landlords to think that there would be no
challenge to the formal validity of their section 25 notice, they could have
served another notice in the correct form. As Leggatt LJ put it at pp89M-90A:
Since the landlords refrained from doing so on
the faith of Mr Mayhew’s representation that he was treating the section 25
notice as valid, it would plainly be unconscionable for Mr Mayhew to take the
point thereafter that the section 25 notice was defective. Since Mr Mayhew knew
that the wrong form had been served, while it is evident that the landlords did
not, there is no unfairness in Mr Mayhew being bound by the consequence of
treating it as valid.
* Editor’s note: Also reported at [1997] 17 EG
163
Henry LJ said at p91E:
So the tenant clearly intended the landlords to
act upon his representation, and the landlords did so act, first, in not
examining the notice critically and so not amending it, and second, by
incurring expense on activities only relevant to the 1954 [Act] proceedings for
a new lease (ie predicated on acceptance of the notice as valid). And as Mr
Mayhew was aware of the defect, and was hoping to take advantage of the
landlords’ mistake, he lulled them into a sense of false security by not taking
this point. So there is nothing inequitable in holding him to the stance he
presented to the world: namely that the notice was effective.
I find no parallel between the facts in the John
Lyon School case and those in the present case. The respondent’s
representation in the present case was that the appellant should have the
period of notice that he would have had if he were a tenant. There was, as I
have already indicated, no representation that the respondent would not oppose
the grant of a new tenancy. It cannot be said that the appellant was lulled
into a false sense of security. There was nothing that he could or would have
done if he had not been led to think (if he was) that the grant of a new
tenancy would be opposed only on the ground under section 30(1)(g) of the Act. There would, in any
event, have been proceedings in which the ‘licence or tenancy’ issue would have
arisen for determination. Given the advice that, as appears from its letters to
the respondent, Ellis & Fairbairn had given to the appellant, the
litigation costs down to 11 June 1998 — or comparable costs of other
proceedings — would have been incurred whether or not the appellant was led, by
the letter of 24 November 1997, to think that the respondent had abandoned its
contention that the agreement of 23 September 1994 created a licence and not a
tenancy.
The significance of 11 June 1998, of course, is
that it was on that date that the court directed that the question of whether
or not the respondent intended to occupy the premises within the meaning of
section 30(1)(g) of the Act be
tried as a preliminary issue. The court made that direction at the invitation
of the respondent. The direction led to the costs of, and incidental to, the
hearing on 10 August 1998 being thrown away. It is plain that, if the
respondent intended to take the point that the court had no jurisdiction under
the Act to entertain an application for the grant of a new tenancy, on the
ground that there was no current tenancy, that point should have been taken, at
the latest, on 11 June 1998. To invite the court to direct a preliminary issue
that could arise only if there were jurisdiction to entertain the application
for a new tenancy is inconsistent with a contention that there is no such
jurisdiction. The judge recognised the inconsistency; and reflected her concern
in the order for costs that she made on 10 September 1998. She ordered that the
respondent pay the appellant’s costs of, and occasioned by, the wasted hearing
of 10 August 1998.
It was submitted that the judge failed to
appreciate that what had occurred was an abuse of the process of the court. I
find that a difficult submission to accept in the circumstances that it seems to
be common ground that it was the judge herself who took the point, in the
course of the hearing on 10 August 1998, that she needed to be satisfied as to
the existence of the jurisdiction that she was asked to exercise. I have
already indicated my view that she was entitled to consider the basis upon
which the jurisdiction under Part II of the Act had been invoked. It seems
bizarre to characterise as an abuse of process the respondent’s conduct in
taking the point that the judge had invited it to argue — albeit that, if the
respondent had been better advised, it would have taken the point earlier and
on its own initiative.
In support of the submission that it was an abuse
of process for the respondent to advance, or for the judge to entertain, an
argument that the agreement of 23 September 1994 fell outside Part II of the
Act, reliance was placed on the decision of this court in Benedictus v Jalaram
Ltd [1989] 1 EGLR 251. The tenant company had made a request, under section
26 of the Act, for the grant of a new tenancy. The landlords indicated that
they would oppose that request on the grounds available to them under section
30(1). On 25 April 1983, before any application had been made to the court by
the tenant under section 24(1), the landlords themselves commenced proceedings
under section 24A for the determination of an interim rent. The tenant made its
application for a new tenancy on 15 June 1983. In September 1983 the
applications were consolidated. Some three and a half years later, in April
1987, the tenant company informed the landlords that it was not in occupation
of the property and, in those circumstances, the tenant’s application for a new
tenancy was dismissed. The tenant then sought to put in an answer to the
landlords’ application for an interim rent, alleging that it had not had, at
any material time, a tenancy of the property to which Part II of the Act could
apply. The county court judge ordered that answer to be struck out. This court
dismissed the tenant’s appeal. Stocker LJ held at p255C-D that:
In my view, it would be an abuse of the process
of the court [for the tenants] to abandon their previous assertion and course
of conduct and to elect to aver that they have never had a tenancy to which
Part II of the Act applied and by these means to defeat the landlords’ claim
for interim rent, the existence of which they had been aware throughout the
whole course of the proceedings…They were, as the judge said, approbating and
reprobating and the assistance of the court should not be available in support
of such a course of action.
Bingham LJ expressed the principle in these terms
at p256 D-E:
If in the course of litigation a party (A)
accepts the truth of an assertion of fact expressly or impliedly made by his
opposing party (B) and founds on that fact formally to claim relief to which he
would not be entitled if that fact were not true (A knowing if the fact is true
or not, whether or not B knows), and if the litigation is thereafter conducted
on the basis of the truth of that fact, A may not thereafter assert the falsity
of that fact and retract his acceptance of its truth where the effect would be
both to deny B a remedy which would have been available to B had A asserted the
falsity of that fact from the beginning and to deny B a remedy to which A’s
acceptance of that fact would have entitled him.
In my view, the appellant gains no assistance from
the decision in Benedictus v Jalaram Ltd. Adopting the
formulation of principle in the judgment of Bingham LJ, and assuming (but
without deciding) that the question of whether or not the agreement of 23
September 1994 created a licence or a tenancy is a question of fact, rather
than a question of law, the assertion of fact made by the appellant (B) in the
present case, which the respondent company (A) could be said to have accepted,
was that there was a tenancy to which Part II of the Act applied. But, although
the respondent (A) founded a formal claim to relief on that fact, because it
made application for the determination by the court of an interim rent in para
(5) of its answer dated 6 April 1998, that claim was not pursued and the effect
of allowing the respondent (A) to retract his acceptance that there was a
tenancy is not to deny to the appellant (B) a remedy that would have been
available to him if the respondent (A) had asserted from the beginning that
there was no tenancy.
On a true appreciation of the position, this is
not a case in which it can be said that the respondent company has elected
between two inconsistent remedies, nor that it has sought to approbate and
reprobate. The most that can be said is that the respondent made a procedural
mistake. It should have raised the ‘licence or tenancy’ issue in its answer to
the appellant’s application for a new tenancy, and it should not have invited
the court to determine the section 30(1)(g)
point as a preliminary issue in advance of the question of whether or not there
was a current tenancy to which Part II of the Act could apply. The judge, in my
view, would have been correct to hold that the respondent was not precluded by
that mistake from raising the ‘licence or tenancy’ issue. A fortiori,
the judge was entitled to invite consideration of that question in the
circumstances that it went to the root of her jurisdiction.
For those reasons, I would dismiss this appeal.
Clarke
lj
agreed and did not add anything.
Appeal dismissed.
