B e f o r e :
|VILLIERS AND ANOTHER|
This licence is made the 9th day of February 1985 One thousand nine hundred and eighty five between A Antoniades of 152 Croydon Road, London SE20 (herein-after referred to as the 'licensor') of the one part and William Roberts Villiers of 30 Dynewood Close, Bexley Kent (hereinafter referred to as the 'licensee') of the other part.
Whereas the licensor is not willing to grant the licensee exclusive possession of any part of the rooms hereinafter referred to.
And whereas the licensee is anxious to secure the use of the rooms notwithstanding that such use be in common with the licensor and such other licensees or invitees as the licensor may permit from time to time to use the said rooms.
And whereas this licence is entered into by the licensor and the licensee solely upon the above basis.
By this licence the licensor licenses the licensee to use (but not exclusively) all those rooms (hereinafter referred to as 'the rooms') on the Top flat (One bedroom one bedsitting room, kitchen and bathroom) of the building known as and situate at 6 Whiteley Road SE19 (hereinafter referred to as 'the building') together with the use of the entrance hall and the staircase outer door and vestibule, of the building (shared with the other occupants in the house) and together with the use of the furniture fixtures and effects now in the rooms (more particularly set out in the schedule of contents annexed hereto) from 14/2/1985 for the sum of £ 87 per calendar month on the following terms and conditions:
1) The licensee agrees to pay the said sum of £ 87 (on the 14th of each month) monthly in advance.
2) The licensee shall be responsible for the payment of all gas electric light and power which shall be consumed or supplied in or to the rooms and shared parts of the house used by the licensee during the licensee's occupation thereof.
3) The licensee shall use his best endeavours amicably and peaceably to share the use of the rooms with the licensor and with such other licensees or invitees whom the licensor shall from time to time permit to use the rooms and shall not interfere with or otherwise obstruct such shared occupation in any way whatsoever.
4) The licensee shall keep the interior of the rooms and all fixtures and fittings therein and all other shared parts of the house used by the licensee in good and clean condition and complete repair (fair wear and tear and damage by accidental fire only excepted) and immediately replace all broken glass.
5) The licensee shall preserve the furniture and effects in the said rooms from being destroyed or damaged and make good pay for the repair of or replace with articles of a similar kind and of equal value such of the furniture and effects as may be destroyed lost broken or damaged (fair wear and tear thereof only excepted).
6) The licensee shall leave the furniture and effects at the expiration or sooner determination of this licence in the rooms or places in which they were at the commencement thereof.
7) On notice in writing being given to the licensee by the licensor of all wants and repairs cleansings amendments and restorations to the interior of the rooms and of all such destruction loss breakage or damage of or to the furniture and effects as the licensee shall be bound to make good found therein the licensee shall repair cleanse amend restore or make good the same within three weeks of the giving of such notice.
8) The licensee shall not remove any furniture and effects from the rooms without the previous consent in writing of the licensor and neither will move in other furniture.
9) The licensee shall not carry on or permit to be carried on in the rooms any profession trade or business whatsoever.
10) The licensee shall not do or suffer to be done in the rooms any act or thing which may be a nuisance cause of damage or annoyance to the licensor and the other occupiers or users of the rooms or the building or of any adjoining premises or which may vitiate any insurance of the building against fire or otherwise or increase the ordinary premiums thereon.
11) The licensee shall not hang or allow to be hung any clothes or other articles on the outside of the rooms or the building but can install a washing line properly supported for this purpose in the back garden.
12) The licensee shall not keep any combustible or offensive goods provisions or materials in the rooms and will not use the rooms in any illegal or immoral way.
13) The licensee shall not cause or permit any damage spoil or destruction to the rooms or to the building (including gardens, fences and gates).
14) The licensee shall not pull down alter or add to or in any way interefere with the locks construction or arrangements of the rooms and the house without the previous consent in writing of the licensor.
15) The licensee shall not keep any animals or birds in the rooms nor shall the licensee permit any child or children to reside or stay in the rooms.
16) The licensor shall be entitled at any time to use the rooms together with the licensee and permit other persons to use all of the rooms together with the licensee.
17) This licence is personal to the licensee and shall not permit the use of the rooms by any person whatsoever and only the licensor will have the right to use or permit the use of the rooms as described in clause 16. The licensee under no circumstances will have the right to allow any other people of his choice to use the rooms in any way.
18) The deposit held of £ 30 (Thirty pounds) will be returned on vacation if no damages or losses occur and if the flat and shared parts are left clean and no such dispute about the deposit will entitle the licensee to remain on the premises.
19) The licensee will inform the licensor immediately by recorded delivery in case of any damage or losses to the rooms buildings and contents.
20) The licensee having inspected the rooms and the shared parts of the building and the furniture and fittings declares that he found them in good order and satisfactory.
21) Upon the licensee being in breach of any of the conditions referred to above this licence shall immediately determine without prejudice to any other remedies of the licensor and the licensee shall immediately cease his use of the rooms and the building as permitted hereunder.
22) The licensee (occupier) declares that he is over 18 years old and understood this licence and found flat and shared parts, furniture and fittings all in good state of repair, tidy, clean and satisfactory.
23) The real intention of the parties in all surrounding circumstances is to create this licence which is not coming under the Rent Acts and is binding as written.
24) This licence represents the entire agreement of the parties and no oral or other agreements were made and no different explanations or representations were made and only agreements in writing will be legally binding.
25) The licensee read and understood this licence and received copy and the licensee understands that all rooms and all parts of the dwelling will be shared and no exclusive possession of any part or the whole will be allowed to the licensees by the licensor under any circumstances.
Schedule of furniture:
1 Wardrobe, 1 Dressing table, 1 Double-bed with mattress and mattress cover, 1 Tablebed, 1 Electric Cooker, 1 Kitchen cabinet, 1 Fridge, 1 Sink unit, 1 Sinkheater, 1 Table, 4 chairs, 1 Bed settee, 1 Armchair, 1 Sideboard, 2 Double-bar Electric fires, 1 Bathroom suite, 1 Bath heater electric, Carpets, Lampshades, Bulbs, Curtains, Net curtains everywhere, 2 keys.
26) Subject to clause 21 this licence may be terminated by one months notice in writing given by either party at any time and the licensor reserves the right of eviction without court order.
There was an addendum, which Mr Villiers signed on the same date and at the same time:
The undersigned Mr Villiers hereby agrees that the licence signed on the 9 2 1985 does not come under the Rent Acts and the flat is for single people sharing and if Mr Villiers marries any occupier of the flat then Mr Villiers will give notice and vacate the flat at 6 Whiteley Road, London SE19. The owner Mr Antoniades did not promise any other accommodation in any way. No person will have exclusive possession of above flat as agreed.
The documents signed by Miss Bridger were, save for her name, in identical terms.
In Somma v Hazelhurst  1 WLR 1014, a young unmarried couple H and S occupied a double bedsitting room for which they paid a weekly rent. The landlord did not provide services or attendance and the couple were not lodgers but tenants enjoying exclusive possession. But the Court of Appeal did not ask themselves whether H and S were lodgers or tenants and did not draw the correct conclusion from the fact that H and S enjoyed exclusive possession. The Court of Appeal were diverted from the correct inquiries by the fact that the landlord obliged H and S to enter into separate agreements and reserved power to determine each agreement separately. The landlord also insisted that the room should not in form be let to either H or S or to both H and S but that each should sign an agreement to share the room in common with such other persons as the landlord might from time to time nominate. The sham nature of this obligation would have been only slightly more obvious if H and S had been married or if the room had been furnished with a double bed instead of two single beds. If the landlord had served notice on H to leave and had required S to share the room with a strange man, the notice would only have been a disguised notice to quit on both H and S. The room was let and taken as residential accommodation with exclusive possession in order that H and S might live together in undisturbed quasi-connubial bliss making weekly payments. The agreements signed by H and S constituted the grant to H and S jointly of exclusive possession at a rent for a term for the purposes for which the room was taken and the agreement therefore created a tenancy. Although the Rent Acts must not be allowed to alter or influence the construction of an agreement, the court should, in my opinion, be astute to detect and frustrate sham devices and artificial transactions whose only object is to disguise the grant of a tenancy and to evade the Rent Acts. I would disapprove of the decision in this case that H and S were only licensees and for the same reason would disapprove of the decision in Aldrington Garages Ltd v Fielder (1978) 37 P & CR 461 and Sturolson & Co v Weniz (1984) 72 EG 326.
Mr Antoniades insists he has made a Licence. House of Lords tell me to ignore the assertions in the document that it is a licence. What difference does it make here that this is a sharing agreement. It seems clear to me that apart from a few visits by Mr Antoniades no one shared with them during period of occupation, they had exclusive possession (Street v Mountford comments) (reads re Somma v Hazelhurst). Hold that these licences are artificial transactions designed to evade the Rent Acts. Finds that there is a tenancy - claim for possession dismissed.
(1) The House of Lords has not, I think, held that assertions in a document that it is a licence should be ignored. It has held that the true legal nature of a transaction is not to be altered by the description the parties choose to give it. A cat does not become a dog because the parties have agreed to call it a dog. But in deciding whether an animal is a cat or a dog the parties' agreement that it is a dog may not be entirely irrelevant.
(2) Court of Appeal authority since Street v Mountford shows that sharing agreements do raise rather different questions: see, for example, Hadjiloucas v Crean (1987) 284 EG 927.*
(3) The judge has, I think, overlooked the fundamental rule of construction that it is not legitimate to use as an aid in the construction of the contract anything which the parties said or did after it was made. Subsequent actions are therefore inadmissible except as evidence of a new agreement or as the basis of an estoppel, neither of which is suggested here: see Chitty on Contracts, 25th ed, vol 1, p 447, para 825.
(4) To stigmatise these agreements as 'artificial transactions designed to evade the Rent Acts' (unless this amounts to a finding that the agreements were a sham) is to leave unanswered the question whether they succeed in their object. The task of the court, where this issue arises, is to decide whether the owner has succeeded or not.
(1) The court should be astute to detect and frustrate sham devices and artificial transactions whose only object is to disguise the grant of a tenancy and to evade the Rent Acts (Street v Mountford at p 825H). The court has to be especially wary and especially careful to see that things like premiums are not being used to conceal payments of rent and so on (Aldrington Garages v Fielder (1978) 37 P & CR 461* at p 499 per Geoffrey Lane LJ as he then was).
*Also reported at (1978) 247 EG 557.
(2) A written agreement is a sham where it incorporates clauses by which neither party intends to be bound and which is obviously a smokescreen to cover the real intentions of both contracting parties (Hadjiloucas supra at p 929 per Purchas LJ). The accepted definition of a sham is that given by Diplock LJ, as he then was, in Snook v London & West Riding Investments Ltd  2 QB 786 at p 802C:
As regards the contention of the plaintiff that the transactions between himself, Auto Finance and the defendants were a 'sham', it is, I think, necessary to consider what if, any, legal concept is involved in the use of this popular and pejorative word. I apprehend that, if it has any meaning in law, it means acts done or documents executed by the parties to the 'sham' which are intended by them to give to third parties or to the Court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create. But one thing, I think, is clear in legal principle, morality and the authorities (see Yorkshire Railway Wagon Co v Maclure and Stoneleigh Finance Ltd v Phillips), that for acts or documents to be a 'sham', with whatever legal consequences follow from this, all the parties thereto must have a common intention that the acts or documents are not to create the legal rights and obligations which they give the appearance of creating.
Put more shortly, a sham exists where the parties say one thing while really intending another (Donald v Baldwyn  NZLR 313, at p 321 per F B Adams J).
(3) 'There is no reason why, if it is possible and properly done, agreements should not be entered into which do not fall within the Rent Acts, and the mere fact that those agreements may result in enhanced profits for the owners does not necessarily mean that the agreements should be construed as tenancies rather than as licences' (Aldrington Garages, supra, per Geoffrey Lane LJ at p 468); '. . . persons are entitled to arrange their affairs to their best advantage so long as the law allows it. That has long been the position in tax cases, and equally long been the position in landlord and tenant and Rent Acts cases' (ibid, per Roskill LJ, as he then was, at p 473). It is not a crime nor is it contrary to public policy for a property owner to license occupiers to occupy property on terms which do not give rise to a tenancy.
(4) The Rent Acts must not be allowed to alter or influence the construction of an agreement (Street v Mountford, supra at p 825G). As Buckley LJ said in Shell-Mex & BP Ltd v Manchester Garages Ltd  1 WLR 612 at p 619:
It may be that this is a device which has been adopted by the plaintiff company to avoid possible consequences of the Landlord and Tenant Act 1954, which would have affected a transaction being one of landlord and tenant; but, in my judgment, one cannot take that into account in the process of construing such a document to find out what the true nature of the transaction is.
(1) the conversation about the bed. (The landlord told us that there was already a double bed in the flat so that he had not had to put one in specially. There is no finding to this effect. We have no reason to disbelieve him. But I do not think it much matters.);
(2) the fact that the occupants, a young man and a young woman, approached the landlord together, making it plain they intended to occupy the accommodation jointly;
(3) the fact that the occupants attended to sign the documents together and that they signed identical documents.
(1) Suppose that the occupants had quarrelled and one had left the flat. Suppose further that the landlord had sought payment of the full monthly rent of £ 174 from the survivor and that that claim had been resisted. It seems to me that any court would have been bound to uphold the survivor's plea that he or she had agreed to pay £ 87 monthly in advance and not a penny more.
(2) Suppose that the landlord had proposed to introduce a third occupant into the flat to occupy a bed in the bed-sitting room. Suppose further that the occupants had moved for an injunction to restrain him on the ground that such conduct would be a breach of the agreement between them. Would they have succeeded? In my view they plainly would not. The written agreements gave him that right. I do not see how the occupants could begin to show any contrary agreement on his part.
House of Lords tell me to ignore the assertions in the document that it is a licence. What difference does it make here that this is a sharing agreement. It seems clear to me that apart from a few visits by Mr Antoniades no one shared with them during period of occupation, they had exclusive possession . . . Hold that these licences are artificial transactions designed to evade the Rent Acts. Finds that there is a tenancy . . .
If the consequence in law of a transaction is the avoidance of the application of the Rent Acts, then that is not a ground on which the transaction can be flawed (see Shell-Mex & BP Ltd v Manchester Garages Ltd  1 WLR 612 at p 619). Accordingly, if, and I emphasise 'if', the learned judge based his decision on a design to avoid the application of the Rent Acts, then that basis could not be sustained. A licence to occupy is as legitimate as the grant of exclusive possession.
As regards the contentions of the plaintiff that the transactions between himself, Auto Finance and the defendants were a 'sham', it is, I think, necessary to consider what, if any, legal concept is involved in the use of this popular and pejorative word. I apprehend that, if it has any meaning in law, it means acts done or documents executed by the parties to the 'sham' which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create. But one thing, I think, is clear in legal principle, morality and the authorities (see Yorkshire Railway Wagon Co v Maclure and Stoneleigh Finance Ltd v Phillips) that for acts or documents to be a 'sham', with whatever legal consequences follow from this, all the parties thereto must have a common intention that the acts or documents are not to create the legal rights and obligations which they give the appearance of creating.
By way of preface it is necessary to distinguish between three situations in which, aside from any question of rectification, the court may take an agreement otherwise than at its face value. The first exists where the surrounding circumstances show that the arrangement between the parties was never intended to create any legally enforceable obligation. The second is the case of the 'sham', in the sense in which that word has been used in numerous cases, including Snook v London & West Riding Investments Ltd  2 QB 786, 802. Correctly employed, this term denotes an agreement or series of agreements which deliberately are so expressed with the object of deceiving third parties as to the true nature and effect of the legal relations between the parties. The third situation is one in which the document does precisely reflect the true agreement between the parties but where the language of the document (and in particular its title or description) superficially indicates that it falls into one legal category, whereas when properly analysed in the light of the surrounding circumstances it can be seen to fall into another.
The appeal was allowed with costs, not to be enforced without leave of the court. Possession to be given in 28 days, but stay of execution ordered pending application for leave to appeal to the House of Lords. Legal aid taxation of the defendants' costs ordered.
The electronic text of this judgment was provided by Estates Gazette, whose assistance is gratefully acknowledged.