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How Gratuitous is Your Licence

By D

Potter v Dyer [2011] EWCA Civ 1417

This is another rather sad and complex case with a fairly convoluted set of facts. Mr & Mrs Potter (senior) acquired a farm and farmhouse as a single unit in 1947. In 1966 they let the whole of the farm and farmhouse to themselves as a joint tenancy with their son Gordon Potter. In 1971 Mr & Mrs Potter and Gordon granted an oral tenancy of the farm (but not the farmhouse) to Mr & Mrs Potter’s other son Brian Potter. It is Brian Potter who is the claimant in this case. Brian Potter was residing with his parents in the farmhouse, but not as a tenant.

Mr & Mrs Potter (senior) died in 1978 and 1982 respectively. At that stage Gordon Potter became the sole owner of farmhouse and farm. It seems that Gordon and Brian Potter did not enjoy a particularly filial relationship. Gordon Potter took proceedings against Brian in 1985 and evicted him from the farmhouse although his tenancy of the farm continued.

By 1987 Brian was living in a shed on the farm in a along with a Christine Hallett who he was in a relationship with. In 1988 he assigned his oral tenancy of the farm to himself and Christine jointly but no notice of this assignment was given to Gordon. In August 1990 Christine Hallett ended her relationship with Brian in August 1990 and left the farm. It appears she subsequently moved to New Zealand and married there.

In November 1990 Gordon sold the farm and farmhouse to Mrs How. It was then agreed between Mrs How and Brian that he could occupy the farmhouse which was then in a very poor condition. He undertook works to it to make it habitable. There was extended negotiations through Mrs How’s solicitor around the granting of a tenancy to Brian. The proposed tenancy involved very generous repairing terms which allowed that both parties would have no responsibility for the condition or repair of the farmhouse but that Brian could repair and improve it if he chose. These negotiations never in fact concluded in the grant of a tenancy.

The Dispute Crystallises
In September 1995 Mrs How died. In early November 2006 the farm was purchased by Mr Dyer from the trustees of Mrs How’s estate. In May 2007 Mr Dyer served statutory notices on Brian requiring him to carry out repairs under the terms of the Agricultural Holdings Act 1986 (“AHA”). These were contested and the matter went to arbitration which is a statutorily enshrined route to resolving the majority of disputes under the AHA. During that process Brian, through his representatives, disclosed the oral assignment of his tenancy to Christine Hallett by way of an assertion that notices served on him in his own name alone were invalid. Mr Dyer then served a statutory notice requesting Brian and Christine to enter into a written tenancy agreement. He also then made contact with Christine in New Zealand and had a number of conversations with her on the phone.

The Notice to Quit
This is where things get very complex and disputed. Mr Dyer encouraged Christine by letter and in telephone conversations to enter into a notice to quit. He stated that he was doing this to relieve her of her responsibilities under the tenancy as otherwise he would have to pursue her jointly with Brian in respect of the disrepair. There was, of course, nothing wrong with this, especially as he also suggested that she should consider taking advice of her own. However, and this is where things are disputed it was suggested by Christine that he said on the telephone that the signing of the Notice to Quit would simply remove her liability and would not in any way affect Brian’s rights. Mr Dyer denies this. In any event Christine signed a 12 month notice to quit (AHA tenancies have very long notice periods to prevent farmers being turfed off their land before they can harvest their crops) and dated it 8 November 2007. Once he had the Notice to Quit Mr Dyer then wrote to Christine and stating that he accepted her notice which terminated the tenancy in March 2009 (12 months plus the remaining time until the end of the tenancy period). He also said that he could not release her from her obligations as he needed to preserve his course of action against Brian but that it was his intention to ensure she suffered no loss as a result. Mr Dyer’s solicitors then informed Brian that his tenancy had been terminated by notice to quit.

There had then been a number of exchanges of correspondence between Brian, Christine, their various representatives and Mr Dyer and his representatives. Suffice it to say that Christine maintained her position to Brian and his representatives that she had been mislef by Mr Dyer into signing the notice to quit as she had been informed that signing it would not damage Brian’s position but would simply remove her from the process and make Mr Dyer’s life easier.
In July 2009 proceedings were issued claiming possession of the farm and farmhouse, or alternatively that Mr Dyer was entitled to possession of both on expiry of the notice to quit, or alternatively an injunction preventing Brian from interfering with Mr Dyer’s right to access and inspect the farmhouse and carry out works to it. The particulars asserted that Brian had no tenancy but rather a gratuitous licence granted by Mrs How and this had been terminated by notice from Mr Dyer’s solicitors, that any tenancy had been terminated by Christine’s notice to quit, and that if an AHA tenancy was ongoing then there was a statutory right for Mr Dyer to access and inspect which he was entitled to enforce by injunction if necessary.
A defence was filed asserting that Brian and Mrs How had entered into an oral tenancy with no repairing obligations on either party and that at some stage he had signed a written tenancy on these same terms which had the effect of surrendering the joint tenancy by operation of law.
A “draft proposed amended defence” was then served. This alleged further that the tenancy between Mrs How and Brian took effect as a tenancy from year to year and that the notice to quit was defective as it had been procured by fraudulent misrepresentation. A witness statement from Christine in similar terms followed accompanied by notification that Brian would seek to rely on it even if she could not attend to give evidence. At this stage Mr Dyer’s solicitors wrote to Christine stating that if she was now stating that the notice to quit was invalid then she risked being drawn back into the proceedings as a tenant. She could, however, extricate herself from the situation by stating to them unequivocally that she considered the notice to quit to be valid irrespective of how it had been obtained. The “draft proposed amended defence” was then formally served (with permission having been given) in late May 2010 shorn of the allegation that the notice to quit was void.
By December 2010 Christine had changed her mind again and indicated that she was prepared to give evidence by telephone. On the strength of this Brian again sought to amend his defence to bring back the allegation of fraudulent misrepresentation in relation to the notice to quit.

The Trial
The trial was listed for five days. The application to re-amend the defence was opposed and disallowed. Christine has also now submitted another witness statement in which she accepted that the notice to quit was valid but only as against her as she had been misled by Mr Dyer as to its effects. A further series of amendments were then made to the defence by hand by Brian’s Counsel stating that the notice to quit was in fact a surrender of her component of the tenancy which Mr Dyer had accepted. The judge rejected all these efforts to amend the defence on the basis that they were ‘doomed to failure’ as they were excessively late and had an uncertain basis in law. Finally the judge found that there had been no written agreement and that no oral tenancy had been created and that, in fact, the best that could be said was that Mrs How had permitted Brian to reside at the farmhouse on a licence while final terms were agreed.

The Appeal
The appeal was lodged on the basis that the judge was wrong to dismiss the application for a further amendment to the defence and wrong to hold that there was no tenancy. The appeal Court was in some difficulty as it was not provided with key components of Brian’s case. There was no transcript of oral argument before the original judge. Given the ever-changing nature do the defence and the attempted manuscript alterations to it this was a serious error. This left the appeal court to look primarily at the defence that was submitted originally in the case and was, as they said, supported by a statement of truth.

Regarding the notice to quit the court was not prepared to accept that Christine could partially affirm her notice in respect of herself only. The notice was either valid or it was not. Christine’s several changes of mind on the issue of whether there had been a misrepresentation and what the nature of it was were not helpful to Brian’s position.

However, the truly fatal issue was the nature of the rights granted and here the issue of the defence was key. The pleaded defence was clear that no written tenancy had been signed because the one produced did not conform with what had been orally agreed. It was argued before the appeal court that this defence had, of course, been amended during the course of the trial but there was no clear evidence of that and the appeal court was not really prepared to entertain discussion on the issue. It therefore left Brian with his pleaded defence. It was also difficult to argue that there had been an agreement that nobody would have any repairing obligations in relation to the property. Again Brian was trapped with the statements in his own evidence and his defence which stated that Mrs How did not want to hold Brian liable for anything and that he was to have no obligations. The first instance court had clearly found, on evidence, that Brian was concerned to ensure that nobody else would benefit from work he did on the property and so he was not prepared to entertain any form of agreement which imposed a repairing obligation on him that might benefit another. The first instance court had also held that they were convinced that, had there been a dispute about the condition of the farmhouse, Brian would have asserted that he had no agreement in relation to it. This set of statements led the appeal court to agree that there was simply no intention to create legal relations between Mrs How and Brian and that there was, accordingly, no tenancy. Brian therefore held a gratuitous licence with no security of tenure. Therefore, appeal dismissed.

To some extent this case is one which turns on its facts. However, I am wondering if there is a deeper trend here. I have noticed a few times recently a willingness by the Courts to entertain the real possibility that a residential occupier for money’s worth with what appears to be exclusive possession is not a tenant. This is a thorny topic but one that I was always taught would be decided in the tenant’s favour. Now I find myself less certain of that. Doubtless many people will tell me that my suggestion of a new trajectory towards questioning tenancies is nonsense and there are as many decisions the other way. However, it seems to me that the Courts are becoming more nuanced about this issue and there is increasing scope for landlords to argue that they did not in fact grant a tenancy.

D is a solicitor specialising in landlord and tenant matters with a London firm.

1 Comment

  1. stephen gibbs

    Excelent Article and the many turns of the case make it very interesting reading.
    I do though hope the writer is wrong with reference to the Courts’ view on tenancies trending towards the Landlord.

    thank you


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