England and Wales Court of Appeal (Civil Division) Decisions

Court of Appeal

		15 May 1990

1. Giving the first judgment at the invitation of Mustill LJ, NICHOLLS LJ said: This case turns on the distinction between a tenancy at will and a periodic tenancy. Shortly stated, a tenancy at will exists where the tenancy is on terms that either party may determine it any time. A periodic tenancy, on the other hand, is one which continues from period to period indefinitely until determined by proper notice: for example, from year to year, quarter to quarter, month to month, or week to week. Failing agreement to the contrary, the notice of determination required is half a period in the case of a yearly tenancy but a full period in other cases.
2. Given that a periodic tenancy can exist where the period is very short indeed, a layman could be forgiven for being surprised to find that the distinction between a periodic tenancy and a tenancy at will can be all-important for the purposes of the statutory protection afforded to business tenancies. But such, it is now established, is the effect of Part II of the Landlord and Tenant Act 1954: see Wheeler v Mercer [1957] AC 416 and Hagee (London) Ltd v A B Erikson and Larson [1976] QB 209. Hence the dispute in the present case. The defendant was let into occupation of business premises owned by the plaintiff while negotiations proceeded for the grant to him of a 10-year lease. For some months he was there with the plaintiff's consent. On three occasions he paid rent on a quarterly basis before negotiations broke down, and the plaintiff told him to leave. Was the defendant in occupation as a tenant at will, as contended by the plaintiff and as decided by the judge? If he was, then the judge was right to order him to give up possession. On that basis his tenancy, as a tenancy at will, was not within the protection of the 1954 Act. Or was he a quarterly tenant, as he contends? If so, he had the statutory protection afforded to business tenants.

The history

3. Unhappily the judge, Judge Stucley DSC, died shortly after the hearing. So counsel's note of the judgment was not approved by the judge. But, working from the available note and the contemporary correspondence, the salient facts are these. The plaintiff owned a property at 188 Brick Lane, London E1. On June 25 1985 he met the defendant for the first time. The defendant had lost his place of business and had nowhere to continue his business of manufacturing leather goods. The two of them discussed the terms for the grant of a lease of the property to the defendant. From the beginning there were difficulties. For instance, there was disagreement on whether the defendant should be free to sublet part only of the property.
4. The defendant was in an awkward situation. He had nowhere to go and he needed somewhere to leave his stock. The plaintiff took pity on him. The defendant paid the plaintiff £ 2,500, and the plaintiff gave him the keys. This was in anticipation that they would be able to agree the terms of a lease in due course. The plaintiff signed a receipt dated June 26 1985, in the presence of a witness, and handed it to the defendant. The receipt read:

To whom it may concern

I Mr S Javid of 188 Brick Lane, London E1 confirm that I have received £ 2,500 as rent for three months in advance for property 188 Brick Lane, E1 from Mr M Aqil of 30 Natal Road, Ilford, Essex.

5. The defendant moved in. But the plaintiff had workmen there, carrying out structural repairs. This led to serious disagreement between the parties. So much so that after about a fortnight the defendant walked out. At the outset each party had instructed a firm of solicitors to act for him in connection with the proposed lease. On June 27 a draft lease was sent by the plaintiff's solicitors, Suriya & Co, to the defendant's solicitors, Jennings Son & Ash. The draft was returned with amendments on July 2. When the defendant left the property his solicitors asked for 'the deposit' to be returned.
6. After a short while, the parties composed their differences sufficiently for the defendant to move back into the premises. The plaintiff agreed that the defendant could sublet the upper part of the building but not the shop downstairs. On August 4 the plaintiff's solicitors were once more in communication with the defendant's solicitors regarding the terms of the proposed lease. They stated that the defendant was to pay three months' advance rent as deposit and that the rent was payable three months in advance. As before, their letter was headed 'Subject to contract'. On September 9 the plaintiff's solicitors sent an engrossment of the lease to the defendant's solicitors, and asked for '3 months' deposit'. By September 30 matters had progressed to the stage of the plaintiff's solicitors sending to the defendant's solicitors an amended engrossment of the counterpart lease for execution together with a completion statement. The lease was for a term of 10 years, at a rent of £ 10,000 per year, reviewable after 12 months. The rent was payable quarterly in advance on the usual quarter days. In addition, the tenant was to reimburse the insurance premiums paid by the landlord. The completion statement was made up as at October 21. It provided for the defendant to pay on completion (1) a deposit of £ 2,500, (2) rent for the period, of less than a whole quarter, from October 21 to December 23 inclusive, in the sum of £ 1,753.60 (this equalled rent at the rate of £ 2,500 per quarter) and (3) the plaintiff's solicitors' costs of £ 230.
7. Eventually the plaintiff's workmen left the property. When this occurred is not clear. The defendant found the property still had many shortcomings. He spent £ 2,000 installing electrical wiring so that he could carry on the manufacture of leather garments, but the plaintiff did not know of this. I interpose: in reliance on this and other expenditure, a case founded on estoppel was put forward by the defendant in the county court. This was rejected by the judge, and no appeal was brought in respect of that part of the judge's decision.
8. Completion did not take place on October 21. The defendant was prepared to pay the rent quarterly in advance, but he objected to paying an additional £ 2,500 as a deposit in respect of potential damage to the property and arrears of rent. On November 11 he made a second payment to the plaintiff. The amount was £ 1,878.42. The difference, of about £ 125, between this sum and the amount of rent stated in the abortive completion statement seems to have represented the insurance premium.
9. The judge made no finding on why the second rent payment was calculated from October 21. Indeed, he thought that the money paid as rent did not add up to an annual amount of £ 10,000. However, before us it was accepted that on this the judge must be wrong, in that the explanation for the amount of the first two payments seems to be that they represented rent for approximately two quarters, from June 26 to Christmas 1985, plus the insurance premium, but less an allowance by way of a rent-free period of some three weeks or so agreed by the plaintiff, possibly covering the period when the defendant was out of possession in late July and early August.
10. By mid-December the plaintiff's solicitors were pressing for completion. On January 10 1986 the defendant paid another £ 2,500 to the plaintiff as the next quarter's rent in advance. The plaintiff's solicitors pressed again for completion to take place by January 14. But the parties were, it seems, unable to resolve their disagreement about payment of the deposit. On February 14 the plaintiff's solicitors wrote to the defendant's solicitors requiring the property to be vacated by the end of February. The defendant did not leave. On July 4 the plaintiff commenced proceedings in the county court for possession and mesne profits. Judge Stucley gave judgment in favour of the plaintiff on December 14 1987. It is from this decision that the defendant has appealed.

The issue on this appeal

11. As already foreshadowed, the sole issue on this appeal is whether the defendant went into occupation as a tenant at will or as a quarterly tenant. This is the sole issue, because the parties have pleaded and presented their cases in this way. Thus, as to the plaintiff, his particulars of claim assert that at the defendant's request the plaintiff allowed the defendant into possession of the property as a tenant at will pending the outcome of the negotiations. The trial was conducted on that basis. Before us the plaintiff sought leave to amend his pleading to put forward an alternative claim that the defendant went into occupation as a licensee. We refused this application, because had such a case been advanced before the judge it is likely that material points which were not canvassed at the trial would have been raised with the parties in the course of their evidence.
12. As to the defendant, his case, as pleaded and presented at the trial, was that he held a periodic tenancy. At one stage in the argument before us there was some suggestion that at the outset the defendant might have been granted a term certain of three months. Quite rightly, in view of the course of the proceedings in the court below, this possibility was not pursued.
13. Thus the court is restricted to deciding between these two alternatives. In particular, the issue of occupation as a licensee is not before the court. It is not profitable to consider whether this constraint may lead to an artificial conclusion in the present case, and I shall not attempt to do so.

Possession plus payment of rent

14. Much of the argument before us was directed at the legal consequence which follows from proof of possession and payment of rent by reference to a quarterly period. For the defendant it was submitted that proof of those facts raises a presumption in favour of a periodic tenancy which can be rebutted, and the occupant be held to be a tenant at will, only by an express agreement to that effect. Alternatively, this presumption is not rebutted by the fact that the grant of a lease is under discussion, in a case where a substantial sum has been paid over as rent in advance. Mr Harvey relied on a brief passage in the judgment of Buckley J (as he then was) in D'silva v Lister House Development Ltd [1971] Ch 17 at p 31. For the plaintiff it was submitted that today there is no presumption in favour of an intention to create a periodic tenancy arising from possession with consent plus periodic payments of rent. At a later stage Mr Challenger modified this submission so as to make it applicable only in cases where negotiations for the sale or lease of property were taking place. He prayed in aid observations by Ormrod LJ in Longrigg, Burrough & Trounson v Smith (1979) 251 EG 847, [1979] 2 EGLR 42.
15. I cannot accept the defendant's submissions. They are contrary both to principle and to authority. I shall consider first the position in principle. A tenancy, or lease, is an interest in land. With exceptions immaterial for present purposes, a tenancy springs from a consensual arrangement between two parties: one person grants to another the right to possession of land for a lesser term than he, the grantor, has in the land. The extent of the right thus granted and accepted depends primarily upon the intention of the parties.
16. As with other consensually based arrangements, parties frequently proceed with an arrangement whereby one person takes possession of another's land for payment without having agreed or directed their minds to one or more fundamental aspects of their transaction. In such cases the law, where appropriate, has to step in and fill the gaps in a way which is sensible and reasonable. The law will imply, from what was agreed and all the surrounding circumstances, the terms the parties are to be taken to have intended to apply. Thus if one party permits another to go into possession of his land on payment of a rent of so much per week or month, failing more the inference sensibly and reasonably to be drawn is that the parties intended that there should be a weekly or monthly tenancy. Likewise, if one party permits another to remain in possession after the expiration of his tenancy. But I emphasise the qualification 'failing more'. Frequently there will be more. Indeed, nowadays there normally will be other material surrounding circumstances. The simple situation is unlikely to arise often, not least because of the extent to which statute has intervened in landlord-tenant relationships. Where there is more than the simple situation, the inference sensibly and reasonably to be drawn will depend upon a fair consideration of all the circumstances, of which the payment of rent on a periodical basis is only one, albeit a very important one. This is so however large or small may be the amount of the payment.
17. To this I add one observation, having in mind the facts of the present case. Where parties are negotiating the terms of a proposed lease, and the prospective tenant is let into possession or permitted to remain in possession in advance of, and in anticipation of, terms being agreed, the fact that the parties have not yet agreed terms will be a factor to be taken into account in ascertaining their intention. It will often be a weighty factor. Frequently in such cases a sum called 'rent' is paid at once in accordance with the terms of the proposed lease: for example, quarterly in advance. But, depending on all the circumstances, parties are not to be supposed thereby to have agreed that the prospective tenant shall be a quarterly tenant. They cannot sensibly be taken to have agreed that he shall have a periodic tenancy, with all the consequences flowing from that, at a time when they are still not agreed about the terms on which the prospective tenant shall have possession under the proposed lease and when he has been permitted to go into possession or remain in possession merely as an interim measure in the expectation that all will be regulated and regularised in due course when terms are agreed and a formal lease granted.
18. Of course, when one party permits another to enter or remain upon his land on payment of a sum of money, and that other has no statutory entitlement to be there, almost inevitably there will be some consensual relationship between them. It may be no more than a licence determinable at any time or a tenancy at will. But when and so long as such parties are in the throes of negotiating larger terms, caution must be exercised before inferring or imputing to the parties an intention to give to the occupant more than a very limited interest, be it licence or tenancy. Otherwise the court would be in danger of inferring or imputing from conduct, such as payment of rent and the carrying out of repairs, whose explanation lies in the parties' expectation that they will be able to reach agreement on the larger terms, an intention to grant a lesser interest, such as a periodic tenancy, which the parties never had in contemplation at all.
19. I turn to the authorities. Of the earlier cases I refer first to the decision of the Court of King's Bench, in Doe d Cheny v Batten (1775) 1 Cowp 243, for a much-quoted observation of Lord Mansfield. There a tenancy at will of some warehouses was determined. After proceedings had been brought to recover possession, and while they were still pending, the landlord accepted payment of a quarter's rent. Lord Mansfield said (at p 245):

The question therefore is, quo animo the rent was received, and what the real intention of both parties was? If the truth of the case is, that both parties intended the tenancy should continue, there is an end of the plaintiff's title: if not, the landlord is not barred of his remedy by ejectment: . . .

20. Next I can go straight to the decision of the Court of Common Pleas in Doed Lord v Crago (1848) 6 CB 90. There Wilde CJ reviewed some of the earlier authorities. He did so in the context of an argument that from the payment of rent on a yearly basis the law presumes a tenancy from year to year, in the absence of evidence referring such payment of rent to some other contract. Thus the decision is of particular relevance having regard to the defendant's arguments in the present case. There a lease had been granted for a term of 99 years or until the earlier death of the survivor of three named persons. The assignee of the lease remained in possession for many years after the death of such survivor, paying the annual rent reserved by the lease. The assignee of the lease claimed that the lessor had known of the death for some years, that a new yearly tenancy had been created by the payment and acceptance of rent after the termination of the lease, and that the new tenancy had not been determined by notice to quit. Delivering the judgment of the court, Wilde CJ said (at p 98):

We are of opinion that the learned judge acted correctly in leaving to the jury the question of fact, whether the premises had been occupied by the defendant as under the old lease, in ignorance of its determination, or under some new agreement. And we think that it would not have been proper to have directed the jury that the law implied from the receipt of rent under the circumstances proved some agreement creating a yearly tenancy, which could not determine without notice to quit.

It is clear, that, upon proof of the payment of rent in respect of the occupation of premises ordinarily let from year to year, the law will imply that the party making such payments holds under a tenancy from year to year; and it was so ruled in Bishop v Howard. But it is equally clear that it is competent to either the receiver or payer of such rent to prove the circumstances under which the payments as for rent were so made, and by such circumstances to repel the legal implication which would result from the receipt of rent, unexplained.

The principle, that the payment of rent may be explained, for the purpose of protecting parties from the legal consequences which would otherwise follow from such payments, is recognised by Buller J, in Williams v Bartholomew, and was allowed in Rogers v Pitcher, and it is consistent with the general principles of the law.

In this case, if the receipt of rent by the lessor of the plaintiff had been unexplained, a tenancy from year to year ought to have been presumed, according to the decision of Bishop v Howard. But the plaintiff did not leave the receipt of rent unexplained; but gave evidence for the purpose of shewing that such receipt of rent had taken place under a mistake of fact in respect of the determination of the lease, which had improperly been concealed from him. Upon that explanation, the question in the cause was no longer, what was the legal presumption from the unexplained payment of rent; but, whether the evidence offered to explain the receipts on the part of the plaintiff did establish, that, in point of fact, the rent had been received in relation to the old lease, and not upon a new agreement. That was a question of fact, which we think was properly left to the jury. And we think that the jury were properly directed, that, if such rent had been received in relation to any new agreement, the verdict should be for the defendant; such direction being in conformity with the principle, that, from the payment of rent, unexplained, the law will imply a tenancy from year to year, with the incidents attached to it, namely, the necessity of a regular notice to quit, before the defendant's possession could be disturbed.

21. That case is clear authority for the proposition that regard must be had to the particular circumstances, whatever they may be, in which the rent payments were made. So far as I can see from the authorities, that principle, expressed well over a century ago, has never been doubted. That decision is inconsistent with the defendant's submissions in the present case. Of course, the circumstances in which the principle falls to be applied have much changed since those early Victorian days. But those changes have not invalidated the underlying principle. The shift in emphasis discernible in judicial observations in this field in recent cases is no more than a reflection of the same approach applied in the different circumstances which come before the court today. Because of the widespread intervention of statute in the landlord-tenant area, a typical case today invariably involves more than the simple facts of possession and an unexplained payment of rent.
22. I do not think that the slightly earlier decision, in Doe d Bastow v Cox (1847) 11 QB 122, on which Mr Harvey relied, is inconsistent with Doe d Lord v Crago. There a mortgagor retained possession pursuant to a mortgage which provided that he would hold the property as tenant at will, paying a specified yearly rent. The court held that, despite the payment of a yearly rent, the mortgagor was a tenant at will and accordingly was not entitled to six months' notice to quit. Lord Denman CJ said (at p 123):

The Courts are desirous to presume a tenancy from year to year, where parties do not express a different intention: but here they have expressed it. To hold otherwise would be going beyond any decided case.

To the same effect Coleridge J said:

Mr Lush says the rule has been to presume in favour of a yearly tenancy. But it is also a rule that documents shall be construed according to the apparent intention; which, in the present instance, clearly is to create a tenancy at will. Rent, at the rate of £ 25.4s. per annum, is to be paid quarterly; but that is, if the will continues undetermined: otherwise the reservation by quarters will not take effect.

There the court, not surprisingly, gave effect to an express provision that the tenancy was to be a tenancy at will. But that decision is not authority for the proposition that nothing short of an express provision is sufficient to displace the inference of a yearly tenancy.

23. Against that background I turn to the D'silva case (supra) which Mr Harvey submitted is indistinguishable from the present case. Dr D'silva went into possession, and paid rent, while negotiations for a lease were proceeding. In the action he claimed to be entitled to a lease, on several grounds. Buckley J held, in his favour, that the defendant company was bound by the lease to which its seal had been affixed. The judge next (at p 31) considered what would be the position if he were wrong in that view. He noted that the defendant's solicitors had asked for payment of a quarter's rent and that it was on payment of a quarter's rent that the doctor went into possession. Buckley J then said:

If I put out of mind for the moment the question of the effect of the execution of the lease and assume that there never has been any effective lease brought into existence then, in my judgment, the effect of that must be that the plaintiff became a quarterly tenant of the company.

As such he was entitled to protection as a business tenant.

24. I am unable to read that brief sentence in the judgment in the way contended by Mr Harvey. I am not persuaded that Buckley J was doing other than applying the established principle to the particular facts of that case. Whether, in carrying out that exercise, he reached the same conclusion as this court might have reached on those facts is neither here nor there for present purposes. What I am concerned to do is to identify the underlying legal principle.
25. It is not necessary for me to attempt to review all the more recent authorities, concerning the question now under consideration, to which we were referred. None of them supports the defendant's submissions. In the main, they are no more than examples of the application of the principle discussed above in differing factual circumstances. The nuances of the language used by the judges who decided them have to be understood having in mind the facts of the particular case and the arguments under consideration. But I must comment on three of them.
26. First, the case of Longrigg (supra) on which Mr Challenger placed much reliance in support of his submission that there is no longer any presumption arising from the mere facts of possession plus payment of rent. Longrigg was a holding-over case. The defendant was a dealer in antiques. For many years he carried on his business, and he and his wife lived in property let to them by the plaintiffs. After his final tenancy determined he refused to leave. He claimed to be entitled to the protection of the Rent Acts in respect of the living accommodation. He continued to pay rent quarterly. In an action by the plaintiffs for possession, the defendant asserted that a new periodic tenancy had been created. The Court of Appeal rejected this. Lord Scarman held that the inference to be drawn in the circumstances was that no contractual tenancy, periodic or otherwise, was agreed. He cited a passage from the judgment of Russell LJ in Lewis v MTC (Cars) Ltd [1975] 1 WLR 457 at p 462:

It is quite plain that if you find one person in occupation paying sums by way of rent quarterly or half-yearly to another person, ordinarily speaking it is a right conclusion that there is a relationship between them of contractual landlord and tenant; but, of course, the circumstances may show that there is no justification for such an inference.

Likewise Denning LJ in Marcroft Wagons Ltd v Smith [1951] 2 KB 496 at p 506:

If the acceptance of rent can be explained on some other footing than that a contractual tenancy existed, as, for instance, by reason of an existing or possible statutory right to remain, then a new tenancy should not be inferred.

Lord Scarman noted that counsel rightly relied upon that passage as showing that in many cases a common and reasonable inference from the acceptance of rent is the creation of a tenancy. He added (at p 847):

. . . but of course the law remains essentially this, that one must look at all the circumstances of the case and determine what is a fair inference to be drawn.

He added a cautionary note (at p 849):

Indeed, one would have thought that today, where tenants have in one respect or another the protection of the law for possession of premises to which they would have at common law no contractual entitlement, the courts would not be as quick to infer a new tenancy as in the old days they would have been where there was nothing to explain the presence of a defendant upon the premises or upon the land other than a trespass or a contract.

Ormrod LJ and Templeman LJ agreed that the inference to be drawn was that no agreement for a new tenancy was reached. Ormrod LJ observed (at p 849):

The old common law presumption of a tenancy from the payment and acceptance of a sum in the nature of rent dies very hard. But I think the authorities make it quite clear that in these days of statutory controls over the landlord's rights of possession, this presumption is unsound and no longer holds. The question now is a purely open question; it is simply: is it right and proper to infer from all the circumstances of the case, including the payments, that the parties had reached an agreement for a tenancy? I think it does not now go any further than that.

He added:

The question is whether the proper inference from all the circumstances is that the parties had agreed upon a new tenancy.

27. Ormrod LJ's statement of the relevant question does not differ from what I have sought to set out above. The thrust of his trenchant observation, that the authorities make it clear that the 'presumption is unsound and no longer holds', was, if I understand him aright, that the circumstances in which the presumption will operate will seldom, if ever, arise in present-day conditions. Whether the correct view is that having regard to the statutory controls the so-called 'old common law presumption' no longer exists, or is that the cases in which it will operate in practice are very few and far between, seems to me to be a peculiarly arid issue on which it is not necessary to express an opinion. At the end of the day it will always be for him who asserts he enjoys an interest in another's land to make good his claim.
28. To the same effect is the decision of the Court of Appeal in Sopwith v Stutchbury (1985) 17 HLR 50. That was a case of entry into possession of a dwelling-house while terms were being finalised. Of the several issues in that case the only one material for present purposes concerned the status enjoyed by the first defendant in the property between March 15 1975, being the date when he entered, and April 21 1975, when a lease was executed. The Court of Appeal held that he was a licensee. Stephenson LJ (at p 74) summarised the issue and the court's approach today in these words:

The question, of course, is, taking into account all the circumstances, what is the right conclusion to draw? Under what right, in what legal relationship, was this occupation of A's land by B? Many recent cases are opposed to a too facile assumption that because something called 'rent' is accepted, or even accepted as rent, by the party owning the land, that necessarily implies a tenancy. It is always a question of the intention of the parties, and in these days, where owners of property are unable to evict those who occupy their property under the statutory protection to which I have referred, it is not at all easy to infer, by the acceptance of rent from the protected tenant, the creation of a new tenancy: see Longrigg, Burrough & Trounson v Smith (1979) 251 EG 847, [1979] 2 EGLR 42. That, of course, is a consideration strongly applicable to the payment of rent by persons who are let into property and then staying on in it; it is not so strongly applicable to persons who are let into property for the first time. Nevertheless, it is something to be borne in mind in a case where, as here, a person is let into property for the first time, and let into property by a businessman acting through an obviously experienced manager.

Kerr LJ (at p 78) commented upon the surprising results which could follow if a party let into possession during a negotiation were to be held to have become a tenant.

29. Finally, I must mention Cardiothoracic Institute v Shrewdcrest Ltd [1986] 1 WLR 368*. This was another holding-over case. The landlord hoped to redevelop a site. The defendant was in possession of the site as a business tenant pursuant to three successive leases in respect of which orders had been made under section 38(4) of the 1954 Act excluding the operation of sections 24 to 28 of the Act. The last of the three leases expired on October 31 1983. Thereafter the parties were involved in a succession of negotiations for a series of
    extensions. The defendant paid rent, mostly monthly in advance, in general accordance with the terms of the successive extensions. In September 1985 the defendant advanced a claim that he was protected by Part II of the Act. Knox J rejected that claim, and accepted the plaintiff's submission that after the expiry of the third lease the defendant was a tenant at will. He held that once one took into account the parties' knowledge of the operation of the 1954 Act, it was clear that they did not intend to create a periodic tenancy pending the grant, which both sides anticipated, of a tenancy approved by the court under section 38. Nor was there any compelling reason why the court should impute such an intention to them if, as was factually perfectly possible, they gave no serious thought to the legal repercussions of the payment and acceptance of rent.
30. Mr Harvey submitted that that case was wrongly decided. I reiterate that, for present purposes, what alone is material is identifying the underlying principle applied in the particular case being considered. As to that, I can see no sign that Knox J departed from the established principle I have mentioned.

The judge's decision

31. Judge Stucley held that no periodic tenancy was created when the defendant moved his stock into 188 Brick Lane on June 26 1985, because there were too many outstanding differences between the parties. He mentioned, as an example, the disagreement over subletting. For good measure, he reached the same conclusion regarding the defendant's status when the defendant returned to the property and, eventually, the workmen went away and the defendant was left in sole possession. He said that the matter was so nebulous that there was nothing sufficiently material to grasp upon to find a periodic tenancy existing.
32. I can see no ground for disturbing the judge's conclusion. Upon a fair reading of the necessarily imperfect note of his judgment, it is clear that the judge approached the issue before him in the correct way. From the conclusions he expressed, it is apparent that the essential question to which he directed his attention was whether in all the circumstances it was right to infer the creation of a periodic tenancy. He noted the basis on which the defendant went into possession: it was on terms that the parties would eventually agree a lease. This was supported by the plaintiff's evidence. The judge's note of the evidence, in the relevant parts, reads: 'I let them in. Our agreement was subject to lease being agreed. If no lease should be agreed the premises should return to plaintiff.' In cross-examination: 'He [the defendant] took premises on basis that he would sign lease . . . I let defendant into premises because he was going to sign lease subsequently.' In fact, as already noted, the parties seem never to have reached agreement on all the terms. The defendant's evidence was to a different effect. He said that the plaintiff 'never said that if a lease was never finalised between us I would have to go. This matter was never raised . . . Nothing was said about my occupation being subject to my signing a lease'. In cross-examination the defendant went further: 'Javad said even if lease did not go through I could continue as a tenant.' From the judge's conclusions it is plain that on this he preferred the plaintiff's evidence.
33. The judge also had the payments of rent well in mind. His error over how the amounts were arrived at does not, in my view, vitiate his conclusion, given (1) the basis on which the defendant went into possession, (2) the extent to which, on important matters, the parties were not agreed over the terms of the proposed lease on June 26 1985 and (3) the fact that they never did reach overall agreement, even on a 'subject to contract' basis.
34. Mr Harvey sought to gain some assistance from the fact that when the defendant left the property in July 1985, the plaintiff did not wish to repay the £ 2,500. There is no weight in this point. The property was to be returned to the plaintiff if the parties were unable to agree terms. Whether, in that event, the defendant was to be entitled to repayment pro rata of the sums paid in advance as rent was an issue which arose briefly in July. But that issue was speedily overtaken by events, when the defendant returned to the property in August. When negotiations ultimately broke down, he did not quit. Indeed he is still there.
35. I would dismiss this appeal. Entry into possession while negotiations proceed is one of the classic circumstances in which a tenancy at will may exist: see Scarman LJ in the Hagee case, supra, at p 217. In my view the judge's conclusion was correct.
36. MUSTILL and RALPH GIBSON LJJ agreed and did not add anything.

The appeal was dismissed with costs; costs order not to be drawn up for two weeks to ascertain if appellant is legally aided; costs of September 1 1989 to be paid by appellant's former solicitors, Jennings, Son & Ash.

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