England and Wales Court of Appeal (Civil Division) Decisions

Court of Appeal

		27 June 1989

1. Giving judgment, LORD DONALDSON OF LYMINGTON MR said: Secure tenant or insecure lodger? This is a problem which vexes large numbers of citizens who require living accommodation or who have accommodation available for occupation. It also vexes large numbers of lawyers who have to advise and county court judges who have to decide. In the hope of assisting all these groups, we decided to put into writing our reasons for holding that the defendants in these three appeals were tenants. We also decided to give those reasons in a single judgment to which we have all contributed in order to reduce the scope for argument as to whether we all mean the same thing - which in fact we do.

Summary

2. In Aslan v Murphy (No 1) and Duke v Wynne the plaintiffs sought possession upon the grounds that the defendants were insecure lodgers and obtained orders for possession. In Aslan v Murphy (No 2), which was heard by a different judge while Aslan v Murphy (No 1) was under appeal, the plaintiff sought a further order for possession of the same room on the grounds that the local authority had by then made a closing order. She succeeded in obtaining a further possession order. Having held in Aslan v Murphy (No 1) that Mr Murphy was a tenant, we concluded in Aslan v Murphy (No 2) that, in the light of the closing order, he did not enjoy the protection of the Rent Acts. However, we also concluded that, in the absence of an effective notice to quit, he remained a contractual tenant of his room, a situation which would no doubt be changed as soon as a notice to quit was served and had run its course. We granted Mr Murphy an immediate declaration as to his status in order to facilitate and expedite the local authority's consideration of his entitlement to be rehoused.

General principles

3. The status of a tenant is essentially different from that of a lodger and owners of property are free to make accommodation available on either basis. Which basis applies in any particular case depends upon what was the true bargain between the parties. It is the ascertainment of that true bargain which lies at the heart of the problem.

Labelling

4. The labels which parties agree to attach to themselves or to their agreements are never conclusive and in this particular field, in which there is enormous pressure on the homeless to agree to any label which will facilitate the obtaining of accommodation, they give no guidance at all. As Lord Templeman said in Street v Mountford [1985] AC 809 at p 819*:

The manufacture of a five-pronged implement for manual digging results in a fork even if the manufacturer, unfamiliar with the English language, insists that he intended to make and has made a spade.

Exclusive or non-exclusive occupation

5. This is the touchstone by which the 'spade' of tenancy falls to be distinguished from the 'fork' of lodging. In this context it is necessary to consider the rights and duties of the person making the accommodation available ('the owner') and the rights of other occupiers. The occupier has in the end to be a tenant or a lodger. He cannot be both. But there is a spectrum of exclusivity ranging from the occupier of a detached property under a full repairing lease, who is without doubt a tenant, to the overnight occupier of an hotel bedroom who, however upmarket the hotel, is without doubt a lodger. The dividing line - the sorting of the forks from the spades - will not necessarily, or even usually, depend upon a single factor, but upon a combination of factors.

Pretences

6. Quite apart from labelling, parties may succumb to the temptation to agree to pretend to have particular rights and duties which are not in fact any part of the true bargain. Prima facie the parties must be taken to mean what they say, but given the pressures on both parties to pretend, albeit for different reasons, the courts would be acting unrealistically if they did not keep a weather eye open for pretences, taking due account of how the parties have acted in performance of their apparent bargain. This identification and exposure of such pretences does not necessarily lead to the conclusion that their agreement is a sham, but only to the conclusion that the terms of the true bargain are not wholly the same as that of the bargain appearing on the face of the agreement. It is the true rather than the apparent bargain which determines the question 'tenant or lodger?'

Effect of the Rent Acts

7. If an occupier would otherwise be protected by the Rent Acts, he does not lose that protection by agreeing that he will surrender it either immediately or in the future and whether directly and in terms or indirectly, eg by agreeing to substitute a shared for an exclusive right of occupation should the owner so require (A G Securities v Vaughan and Antoniades v Villiers [1988] 3 WLR 1205 at p 1214)† .

Aslan v Murphy (No 1)

8. Mr Murphy was the occupier of Room 2A at 54 Redcliffe Gardens, London SW 10. It is a basement room measuring 4 ft 3 in by 12 ft 6 in. He occupied this room under an agreement which recited that 'the Licensor is not willing to grant the Licensee exclusive possession of any part of the Room hereinafter referred to' and that 'the Licensee is anxious to secure the use of the room 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 room', adding that 'this licence is entered into by the Licensor and the Licensee solely upon the above basis'.
9. The introduction to the operative part of the agreement was in these terms:

By this Licence the Licensor licenses the Licensee to use (but not exclusively) all the furnished Room known as Room No 2A (hereinafter referred to as 'the Room') on the Basement floor of the building situate and known as 54 Redcliffe Gardens (hereinafter referred to as 'the Building') on each day between the hours of midnight and 10.30 am and between noon and midnight, but at no other times, for the purpose of temporary accommodation for the Licensee's personal use only and for no other purposes whatsoever, and the Licensee shall also be entitled to use, in common with all other persons having the like right, the common parts of the Building. The Licensee shall pay the Licensor a licence fee of £ 25 per week for the use of the Room commencing on 15.5.1988.

Other clauses reflected the shared nature of the occupancy. Thus:

1. The Licensor shall at all times have the right to decide the use and occupancy of the Room and each part of the Room together with the positioning of the furniture in the Room.

. . .

3(a) The Licensee shall be personally liable for and shall pay for all services such as electricity, gas, telephone or whatever use by the Licensee in the room and will indemnify the Licensor against all such expenses.

(b) The Licensee agrees to share the expense of such services (apart from those services provided by the Licensor under Clause 4 of this Licence) as are used jointly with any other person occupying or using the Room or using the common parts of the Building.

(c) The Licensee shall use his best endeavour amicably and peaceably to share the use of the Room with the Licensor and/or with such other Licensees or Invitees whom the Licensor shall from time to time permit to use the Room and shall not interfere with or otherwise obstruct such shared accommodation in any way whatsoever.

10. In holding that Mr Murphy was a licensee, His Honour Judge McDonnell said:

The submission that the written agreement in the present case was a sham, designed to conceal the grant of exclusive possession and therefore the creation of a tenancy rested upon (i) the size of the room which made it impracticable for the landlord or anyone else to share occupation with the defendant, and (ii) the fact that the plaintiff said that he did not intend to put anyone else into the room or to object to the defendant using it between 10.30 am and noon. In my judgment the first submission fails because the plaintiff made it quite plain that he never intended to grant the defendant exclusive possession of the room for the very good reason that he had been advised that to do so might lead to the creation of a tenancy protected by the Rent Act and the defendant never suggested that there was any other agreement expressed or implied than that to which he had put his signature.

As to the second submission 'the Rent Acts must not be allowed to alter or influence the construction of an agreement' - Street v Mountford (supra) at p 825. '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' . . . 'Where a written agreement is not held to be a sham, the task of the court, as with any other agreement, is to construe it and give fair effect to its terms in the context of all relevant surrounding circumstances' - Bingham LJ in Antoniades v Villiers [1988] 3 WLR 139 at p 147. In this case the written agreement made it quite plain that exclusive possession was not to be granted and there are no surrounding circumstances to suggest that effect should not be given to it according to its terms. I am fortified in the conclusion because it is clear that the plaintiff was not prepared to grant any legal or enforceable right to exclusive possession or any right at all to occupy the room between 10.30 am and noon and the defendant realised this.

11. In fairness to the learned judge, it should be said that he gave judgment before the House of Lords reversed the decision of this court in Antoniades v Villiers and therefore without the benefit of the guidance contained in the speeches. In the light of that guidance, the learned judge's decision is unsupportable on this ground and no attempt was made to support it.
12. The learned judge was, of course, quite right to approach the matter on the basis that it is not a crime, nor is it contrary to public policy, for a property owner to license occupiers to occupy a property on terms which do not give rise to a tenancy. Where he went wrong was in considering whether the whole agreement was a sham and, having concluded that it was not, giving effect to its terms, ie taking it throughout at face value. What he should have done, and I am sure would have done if he had known of the House of Lords' approach to the problem, was to consider whether the whole agreement was a sham and, if it was not, whether in the light of the factual situation the provisions for sharing the room and those depriving Mr Murphy of the right to occupy it for 90 minutes out of each 24 hours were part of the true bargain between the parties or were pretences. Both provisions were wholly unrealistic and were clearly pretences.
13. In this court an attempt to uphold the learned judge's decision was made upon a different basis, namely, the landlord's right to retain the keys. The provisions relevant to this aspect of the agreement are as follows:

1 . . . . The Licensor will retain the keys to the Room and has absolute right of entry at all times for the purpose of exercising such control and (without prejudice to the generality of the foregoing) for the purpose of effecting any repairs or cleaning to the Room or Building or for the purpose of providing the attendance mentioned in Clause 4 hereof or for the purpose of removing or substituting such articles of furniture from the Room as the Licensor might see fit. The said right of entry is exercisable by the Licensor or his servants or agents with or without any other persons (including prospective future licensee of the Room).

. . .

4. The Licensor will provide the following attendance for the Licensee:

(1) Housekeeping

(2) Lighting of Common Parts

(3) Cleaning of Common Parts

(4) Window Cleaning

(5) Intercom

(6) Telephone coin box

(7) Cleaning of Room

(8) Collection of Rubbish

(9) Provision and laundering of bed linen

(10) Hot Water

(11) Provision of Household supplies

14. Provisions as to keys are often relied upon in support of the contention that an occupier is a lodger rather than a tenant. Thus in Duke v Wynne, to which we turn next, the agreement required the occupier 'not to interfere with or change the locks on any part of the premises, (or) give the key to any other than an authorised occupier of the premises'. Provisions as to keys, if not a pretence, which they often are, do not have any magic in themselves. It is not a requirement of a tenancy that the occupier shall have exclusive possession of the keys to the property. What matters is what underlies the provisions as to keys. Why does the owner want a key, want to prevent keys being issued to the friends of the occupier or want to prevent the lock being changed?
15. A landlord may well need a key in order that he may be able to enter quickly in the event of emergency - fire, burst pipes or whatever. He may need a key to enable him or those authorised by him to read meters or to do repairs which are his responsibility. None of these underlying reasons would of themselves indicate that the true bargain between the parties was such that the occupier was in law a lodger. On the other hand, if the true bargain is that the owner will provide genuine services which can be provided only by having keys, such as frequent cleaning, daily bed-making, the provision of clean linen at regular intervals and the like, there are materials from which it is possible to infer that the occupier is a lodger rather than a tenant. But the inference arises not from the provisions as to keys but from the reason why those provisions formed part of the bargain.
16. On the facts of this case, the argument based upon the provisions as to keys must and does fail, for the judge found that 'during the currency of the present agreement virtually 'no services' had been provided'. These provisions may or may not have been pretences, but they are without significance in the context of the question which we had to decide.

Duke v Wynne

17. Here the facts were very different from those in Aslan v Murphy. The accommodation comprised a house with three bedrooms, two reception rooms, a kitchen and a bathroom. The owner, Mrs Duke, had previously lived in it as the matrimonial home with her husband and four children of the marriage. Following various changes in her matrimonial and domestic circumstances, which it is unnecessary to particularise, neither she nor her husband or children continued to live there. Mrs Duke determined to refurbish it and did so, but then wanted to wait for about two years before reaching any decision on whether to dispose of it.
18. In those circumstances Mrs Duke was adamant that any occupation of the house by others must be on terms that would enable her to obtain possession of the house at or about the end of the two-year period. Mr and Mrs Wynne needed accommodation for themselves and their two sons. They had been living in other accommodation on the terms of an agreement which they believed, rightly or wrongly, did not give them security of tenure and they were willing to take the house without any such security.
19. Mrs Duke now wishes to emigrate to Canada and to sell the house with vacant possession, but Mr and Mrs Wynne are unwilling to give up occupation as they have nowhere else to go. No complaint is made about them, save this reluctance to leave, which is understandable. Negotiations did take place with a view to the Wynnes buying the house, but agreement could not be reached upon price and it is therefore necessary to determine their rights and status.

The agreement

20. Here again, the agreement under which the Wynnes entered into occupation contained recitals designed to affirm that they had no security of tenure. They were as follows:

A. WHEREAS

1. The owner wishes to obtain vacant possession on very short notice and the Occupier accepts as a fundamental term and condition of the Agreement that no tenancy is created but there is a mere right to occupy the premises as a bare licensee.

2. The Occupier wishes to take occupation on the terms set out which are understood and accepted.

3. This Agreement is not extended to provide security of tenure as set out in the Rent Act 1977 or any similar enactment.

4. There is no right of exclusive occupation in the premises or any part thereof.

This was buttressed by clauses 1, 2(8), 2(16), 3, 4 and 7, which were in the following terms:

B. NOW IT IS AGREED THAT:

1. The Owner shall permit the Occupier to have the non-exclusive occupation of the premises and reserves the right to place other person or persons in the premises.

. . .

2(8) Not to interfere with or change the locks on any part of the premises, give the key to any other than an authorised Occupier of the premises.

. . .

2(16) Visitors shall leave the premises by 12.00 p.m.

. . .

3. The premises shall not be occupied by any person or persons other than the Occupier or other person or persons selected by the Owner as hereinafter set out. The Owner reserves the right to place other Occupiers in the premises at their discretion at any time and the Occupier shall raise no objection thereto.

4. It is further agreed that the occupancy permitted by this agreement is an exclusive right to share the premises and confers upon the occupier no greater right, than a mere right to occupy the premises in conjunction with such other occupiers as is hereby provided and the absence of other occupiers whether permanent or otherwise shall in no circumstances be construed as the grant or creation of an exclusive right of occupation nor shall their presence in any circumstances whatsoever be so interpreted as to create the presumption of a tenancy and it is hereby particularly agreed and declared that such construction and interpretation is directly contrary to the intentions of the parties hereto.

. . .

7. The owner retains full control over the use of the premises at all times and reserves the right in particular to enter the premises with cleaners for the purpose of providing a cleaning service for the Occupier at the discretion of the Owner. For the avoidance of doubt it is declared that the Occupier being a mere licensee, the Owner has the right to enter the premises at any time and for any purpose and to authorise its agent or servants to do so on its behalf. The Owner also has the right to amend or add to the regulations set out in Clause 2 at its discretion on 7 days notice in writing to the Occupier.

21. There were other clauses, such as 2(7), which prohibited the carrying on of any profession, trade or business on the premises, which would be equally appropriate whether the Wynnes were tenants or lodgers and to them we need not refer. There was also a clause (2(6)) which prohibited allowing children to share or use the premises. Since the intention of all concerned was that the Wynne children should live in the house, this was a nonsense, as Mrs Duke readily accepted. It was not, however, a pretence. It was simply that an inappropriate standard form of agreement was used and no one thought to amend it.
22. Once again, the judge, in this case His Honour Judge Hunter, was led astray by the judgment of this court in Antoniades v Villiers (supra).

Tenants or lodgers?

23. Were the Wynnes tenants or lodgers? Unlike the facts in Aslan v Murphy it would have been possible for them to have shared the house with another occupant. There were three bedrooms. One could have been used by Mr and Mrs Wynne, one by the children and the third, which was a very small room, by a lodger. However, the evidence did not disclose any immediate intention on the part of Mrs Duke to make such an arrangement and she never in fact did so. Meanwhile, the Wynnes in fact occupied the whole house.
24. In cases such as this the court has to determine whether the true bargain is that the occupier is entitled to exclusive possession of the premises, unless and until the owner requires them to share, or whether the true bargain is that their entitlement is only to their share in the right to occupy, although, as there is currently no other occupant, it will be impracticable and unreasonable to seek to prevent their de facto occupation of the whole premises.
25. If the former is the case and, for the time being, they have an entitlement to exclusive occupation, they are tenants and their status cannot at some future date be unilaterally converted into that of lodgers by the owner's requiring them to share their occupation (Antoniades v Villiers). If the latter is the case, they never achieve the status of tenants.
26. In the instant appeal it is quite clear that the true bargain was that the Wynnes should be entitled to exclusive occupation unless and until Mrs Duke wanted to exercise her right to authorise someone else to move in as a lodger and she never suggested that this was a serious possibility. The provision about the key was no pretence in the sense that Mrs Duke retained a key and no doubt did not wish the Wynnes to change the locks without at least giving her new keys. But her wish to have a key was not dictated by any obligation to provide services or anything else from which it could be inferred that she was herself occupying the house as well as the Wynnes.
27. But the situation could have been different. If Mrs Duke had determined to have two couples as lodgers, she might not have been able to find them simultaneously. The first couple might have had de facto occupation of the whole house meanwhile, but could not have claimed to be tenants, since Mrs Duke would de jure herself have been a co-occupier until the second pair of lodgers arrived. Applying the test of what was the true bargain between the parties, the court would have wanted to know what steps (if any) were being taken by the owner to fill the vacancy. If the owner was not actively seeking another occupant, it would be inherently more likely that the first couple were entitled to exclusive possession of the whole in the meanwhile and so were tenants.
28. On the facts of this case and the law as now declared by the House of Lords, the Wynnes are clearly to be regarded as tenants, their appeal must be allowed and the order for possession set aside.

Aslan v Murphy (No 2)

29. Following the order for possession made by His Honour Judge McDonnell, the service of notice of appeal to this court and an order for stay of execution of the order for possession pending determination by this court of the appeal, the local authority, the Royal Borough of Kensington and Chelsea, on November 9 1988 served a closing order on the plaintiff relating to the room occupied by Mr Murphy under the provisions of the Housing Act 1985, section 266, on the grounds that the room was not fit for human habitation and was not capable of being rendered fit at reasonable expense. The order prohibited use of the room for any purpose other than a purpose approved by the council. That notice came to the attention of the appellant, Mr Murphy.
30. Without serving a notice to quit to terminate such contractual tenancy if any as might exist (on the basis that this court would hold, as in the event it has done, that the relationship between the parties was that of landlord and tenant), the respondent issued further proceedings in the West London County Court claiming possession of the room. The grounds for recovering possession were said to be the closing order. Before the county court judge it was contended on behalf of the respondent that the combined effect of sections 276 and 277 of the Housing Act 1985 conferred upon them the right to possession. The appellant contended that this was not the effect and that the contractual tenancy had to be determined before an order for possession could be made.
31. Section 276 provides:

Nothing in the Rent Acts prevents possession being obtained by the owner of premises in respect of which a closing order is in force.

32. Quite clearly, that section does not afford a ground of possession; it merely removes the statutory security of tenure which would otherwise protect the tenant from an order for possession being made.
33. Section 277 provides:

It a person, knowing that a closing order has become operative and applies to premises, uses the premises in contravention of the order, or permits them to be so used, he commits a summary offence and is liable on conviction to a fine not exceeding level 5 on the standard scale and to a further fine not exceeding £ 20 for every day or part of a day on which he so uses them or permits them to be so used after conviction.

34. Mr Ashe Lincoln QC submitted on behalf of the respondent that, once the closing order became operative, which unless there is an appeal is 21 days after service, both parties commit a criminal offence if the room is occupied by Mr Murphy; since a notice to quit has to be not less than 28 days, he submitted that Parliament must have intended a landlord to obtain possession without need of serving a notice to quit, otherwise he would be committing an offence, at least after the expiry of the 21 days from service of the notice.
35. In our judgment this contention is fallacious. First, the landlord commits an offence under section 277 only if he permits the tenant to occupy the premises. If he has served a notice to quit he does not permit the tenant to occupy the premises after the 28 days' expiry of the notice, and before that time he does not permit occupation if he does his best to persuade the tenant to leave, but is unsuccessful, since he has no power to evict him without an order of the court. Moreover, the tenant commits an offence only if he continues to occupy the premises as a place in which he lives; he may use it for other purposes, such as storing furniture, which would not involve the commission of a criminal offence. And in the present case Mr Murphy has ceased to live in the room.
36. Second, there is nothing in section 277 which expressly provides for the termination of a tenancy; and unless this occurs by operation of law, it will not do so. It was not suggested by Mr Ashe Lincoln QC that the mere fact that the landlord and tenant might both be committing a criminal offence if the one permitted and the other occupied the premises for living purposes frustrated the contract.
37. Mr Ashe Lincoln QC sought to rely on the case of Buswell v Goodwin [1971] 1 WLR 92. In that case it was held that the fact that the closing order had come about because the landlord was in breach of his repairing agreement did not prevent an order for possession being made. The local authority had a public interest and duty to see that premises that were not fit for habitation were not occupied for such purposes and the court would give effect to that interest irrespective of where the blame lay for the state of affairs that existed. That case does not assist; and it is to be noted that the landlord had served the appropriate notice to quit.
38. In our judgment, before the respondent can claim possession she must determine the contractual tenancy. There is nothing in the sections 276 or 277 of the Act which either directly or indirectly has this effect. It must be done by service of a notice to quit. If the tenant wishes to continue to be liable for the rent, notwithstanding that he cannot live in the room, he is entitled to maintain that his tenancy has never been determined. In this case it has suited him to do so, so that he can require the local authority to rehouse him.
39. In conclusion, we shall like to pay a special tribute to the assistance which we received from Miss L Pearce, counsel for Mr Murphy, in the context of this (No 2) appeal. It is in the nature of the new procedure under which the court has had an opportunity of reading the papers and skeleton arguments in advance that counsel will be confronted with questions from the court of which he or she has little or no notice. Accordingly, counsel has to be prepared to answer a wide variety of questions as to the facts and the law, many of which will not be asked in the event. Miss Pearce showed a complete mastery both of the facts and the law, including in the case of the law somewhat peripheral questions relating to Mr Murphy's entitlement to be rehoused which, we learned, arose under section 39 of the Land Compensation Act 1973. We are indebted to her for the assistance bred of her industry.

The appeals were allowed with costs.

The electronic text of this judgment was provided by Estates Gazette, whose assistance is gratefully acknowledged.