(2) Purchase and supply of all seeds, fertilizers and sprays, either direct from the merchants or your Partnership. The purchase of such to be to our mutual advantage.

(3) To carry out all acts of cultivation and harvesting as required, with all ancillary works to produce the best possible marketable products.

(4) All contract works to be invoiced at current market rates.

(5) All farm sales to be undertaken at the discretion of MMB Partnership and management works to be recompensed by a percentage on sales to be agreed, subject to profitability.
"Following our earlier discussions, a meeting of the Directors of this Company has been held and it was agreed that you be requested to carry out the following Contract Works on behalf of this Company:

(1) General Management and supervision of all farming works necessary.

(2) Purchase and supply of all seeds, fertilizers and sprays, either direct from the merchants or your Partnership. The purchase of such to be to our mutual advantage.

(3) To carry out all acts of cultivation and harvesting as required, with all ancillary works to produce the best possible marketable products.

(4) All contract works to be invoiced at current market rates.

(5) All farm sales to be undertaken at the discretion of MMB Partnership and management works to be recompensed by a percentage on sales to be agreed, subject to profitability.

(6) The directors reserve the right to cancel or amend this agreement on giving three months notice at any time."
The Arbitrator found that the second part of paragraph (5) was never operated but, by implication, that the other terms were.

The present tenancy in favour of the Tenant was entered into on 28th September 1989. It is a tenancy from year to year commencing on 11th October 1988 at an initial rent of £12,000 pa. The tenant was required to use the Holding for agricultural purposes only and to cultivate and manage it according to the rules of good husbandry. The full terms of the covenant in Clause 5.16 are -
"Not to assign underlet part with or share possession or occupation of the whole or any part of the Holding PROVIDED ALWAYS:
5.16:1 if the Tenant shall share occupation of the Holding with his wife or child or children that shall not operate as a breach of the terms of this clause.

5.16:2 the Tenant may permit any cottages and gardens comprised in this Agreement to be occupied under service agreements by agricultural workers employed by the Tenant full time on the Holding but not so as to create any tenancy of any of the cottages and gardens and only if the occupation of any of the cottages is necessary in order to enable the agricultural worker adequately to perform his duties under a service agreement and provided that each cottage is occupied by only one such agricultural worker and his family.

5.16: 3 the Tenant shall be entitled to grant a licence for a season to such person or persons and upon such terms as he may think fit to exercise some or all of the sporting rights referred to in paragraph 6 of the Second Schedule below without obtaining any of the consents required under this clause."

After the execution of that tenancy the operation of the farm continued as before in accordance with the terms of the letter agreement between the Partnership and the Tenant. The Arbitrator found that those operations were carried out by Michael Barratt and three employees of the Partnership. After September 1989 the seeds, fertilisers and sprays used on the Holding, as well as on the other land farmed by the Partnership, were bought in the name of the Partnership but no invoices for the purposes of VAT passed between the Tenant and the Partnership. The crops when harvested were taken from the Holding and stored in buildings on land within the control of the Partnership called Hollow Farm, whence they were sold and delivered in the name of the Partnership. The crops were insured in the joint names of the Tenant and the Partnership, but, as found by the Arbitrator, that was to protect the interests of both parties when such crops were stored on the Partnership's land. Twice a year, on 31st March and 30th June, the accounts between the Partnership and the Tenant were settled by debit and credit notes passing between them recording the sums received for the sale of the crops which were credited to the Tenant and the amounts spent for seed, fertilisers and sprays, labour and other services (calculated on an acreage basis) were credited to the Partnership. However, the balance in favour of the Tenant was not settled by payment; instead the Partnership put the Tenant in funds with which to make any direct payments as and when required.

On 2nd April 1992 the Landlord served on the Tenant a notice to remedy alleged breaches of the tenancy agreement consisting of failing to cultivate the Holding and parting with possession or sharing possession or occupation with the Partnership. In consequence the following day "a letter was drafted from the Tenant to the Partnership" terminating the arrangements agreed in the letter dated 26th March 1987. The Arbitrator made no finding whether the arrangements were thereby terminated but recorded that the farming activities on the Holding and the method of accounting for them continued to be carried out by the Partnership in much the same way. In addition the Tenant was credited with wayleave payments received by the Partnership in relation to the Holding but debited with £25,500 for general supervision and overheads (for example, the use of machinery owned by the Partnership) and £21,350 for gateways, drains and ditch and bank repairs carried out since 1989. The applications for the Area Aid Payments in respect of the Holding were made in April 1993 and 1994. They were completed by "Michael Barratt MMB Partnership" pursuant to express written authority from the Tenant.

The Arbitrator, who sat with a legal assessor, rejected the allegation of the Landlord that the Holding was farmed by a partnership consisting of the Tenant and the MMB Partnership. That contention was not pursued. But he also held that the relationship between the Partnership and the Tenant whereby the former carried out the farming operations on the Holding with the agreement of the Tenant did not involve the sharing of occupation of the Holding in breach of the covenant. He did not agree with the submissions of counsel for the Landlord that the covenant would be broken by the appointment of an agent to carry on the farming activities. At paragraph 27 he said:
"There seems to be nothing in the Tenancy Agreement which supports the suggestion that there is a breach of covenant if the Tenant appoints an agent to cultivate and manage the farm on its behalf, provided that the agent is retained to and does act solely on behalf of the Tenant in carrying out the activities on the farm i.e. any occupation by the agent is occupation on behalf of the tenant."
The Arbitrator referred to the judgments of Denning and Morris LJJ in Hills (Patents) Ltd v University College Hospital Board of Governors (1956) 1 QB 90, to which I shall refer later. The Arbitrator concluded in paragraph 29:
"In the present case, the arrangement between the Tenant and the MMB Partnership was such that all activities carried out on the land by the MMB Partnership through Michael Barratt and the employees of the MMB Partnership were carried out on behalf of the Tenant: the Tenant was debited for each farming operation carried out and the Tenant was credited for the crops removed from Low Farm and sold. Although the Tenant may well have shared occupation with the MMB Partnership of the land away from Low Farm where the crops were stored together with crops belonging to the MMB partnership harvested from other holdings, I conclude that the arrangement between the MMB Partnership was such that it did not carry out activities on Low Farm otherwise than on behalf of the Tenant and that the activities were not such that the Tenant could be said to be sharing occupation in breach of the covenant."
In paragraph 30 the Arbitrator added by reference to the submission of the Landlord that the business was conducted on Low Farm by the Partnership on its own account:
" ..... on the 35 to 40 days of the year on which people are to be found on Low Farm they are there carrying out activities on behalf of the Tenant, the Tenant being debited for the cost of the operations and credited for the benefit of the crop harvested ..... "

Paragraph 27 (2) of Schedule 11 to the Agricultural Holdings Act 1986 provides:
"Where the Arbitrator has misconducted himself, or an arbitration or award has been improperly procured, or there is an error of law on the face of the award, the county court may set the award aside."
Paragraph 28 contains various other provisions about what the county court can do in any of those events.

In his application to the Peterborough County Court pursuant to that provision the Landlord asserted that there was an error of law on the face of the award in that -
"the Partnership was carrying on its own farming business from the Holding and adjoining lands as principal and therefore the Tenant, which permitted the Partnership to carry on that business from the Holding but not to have any tenancy thereof, was sharing occupation of the Holding with the Partnership; or in the further alternative

that the Partnership was farming the Holding as agent for the Tenant but because the Partnership's management of the farming operations was so extensive and complete, its position as agent was analogous to that of the board of governors in Hills (Patents) Ltd v University College Hospital Board of Governors [1956] 1 QB 90 and of UCCA in Willis v Association of Universities of the British Commonwealth [1965] 1 QB 140, and therefore there was a sharing of occupation between the Tenant and the Partnership."
The Assistant Recorder disagreed. He considered the rival arguments and the authorities to which he had been referred. His conclusion is expressed on page 19 of his judgment. It is no disrespect to him if I refer merely to the final sentence which was:
"In my judgment in conducting that balancing exercise in making the Award, the Arbitrator was not plainly wrong in law on the face of the Award, and as a result I must, and do, dismiss the Landlord's application."

Counsel for the Landlord submits that there was an error of law on the face of the Arbitrator's award and that the Assistant Recorder was wrong not to have recognised it. He contends that occupation is an ordinary English word meaning physical presence with some degree of permanence. He points out that in certain contexts occupation may be shared by, for example, husband and wife, a brewery and its manager of an inn, the Ministry of Health and the Board of Governors of a hospital.

He contends that one consequence of that is that if an owner licenses an independent contractor to come on to his land and remain there with some degree of permanence both owner and licensee will share its occupation even though, if he were an employee, the occupation would be that of the employer alone. He acknowledged that his case involved the contention that if all the agricultural operations are carried out on behalf of the owner or tenant by one contractor then that contractor is in occupation of the land. In the alternative he relied on the facts that in this case the contractor, in the form of the Partnership, was also the banker to the Tenant and in practice enjoyed the net profit from the agricultural operations through its management charges.

The starting point must be the terms of the covenant. It was suggested that the provisos expanded the normal meaning of the word "occupation". I do not agree. It is quite plain from the first and second provisos that the draftsman gave no thought at all to the nature of the Holding. The only proviso which could have any application to the Holding is the third but that does not indicate any intention to give some special meaning to the word "occupation" rather than to make plain that such a licence as that postulated would not involve a breach of the covenant as a whole.

We were referred to a number of authorities on the nature of occupation and how it may be enjoyed or shared. I propose to refer to three only.

The first is Pegler v Craven [1952] 2 QB 69. The question there was whether commercial premises were occupied by the director of the company or by the company itself. The director was the tenant but the business carried on in the premises was that of the company. This court held that the company was in occupation.
Jenkins LJ, dealing with what he called vicarious occupation, said (page 74):
"I quite agree that the conception of ´occupation' is not necessarily and in all circumstances confined to the actual personal occupation of the person termed the occupier himself. In certain contexts and for certain purposes it obviously extends to vicarious occupation by a caretaker or other servant or by an agent. Clearly the tenant of a retail shop who through persons in his employment carries on business there for his own benefit under a tenancy with respect to which he was tenant, would properly be described as the occupier of the shop and the person carrying on business there, though not himself in actual personal occupation of it."
That quotation indicates, as one would expect, that in the ordinary case occupation by an agent is the occupation of the principal.

The second authority is Hills (Patents) Ltd v University College Hospital Board of Governors [1956] 1 QB 90. The question there was whether the premises would be occupied by the Board of Governors of a National Health Service hospital or by the Ministry of Health. The relationship between them was governed by the National Health Service Act 1946. It was decided by a majority that the Board of Governors of the hospital would occupy the premises. Denning LJ (as he then was) said (page 98):
"Mr Wilson would have us treat this as a parallel case so that the governors are but agents of the Minister, and cannot resist an application for a new lease, seeing that they require it, not for themselves, but for the Minister.

I cannot accept this argument, because, in my opinion, the board of governors of a teaching hospital are in a position far superior to that of an ordinary agent. They are a body corporate and are entrusted with the task of managing the hospital and of running it themselves. The Minister himself cannot take that task out of their hands. He is not allowed by the Act of Parliament to run the hospital himself. The board of governors are the people to do it. Furthermore, they appoint the officers and staff of the hospital, and under the wording of the Act of Parliament those officers then become the officers of the board of governors, not the officers of the Minister. The governors are, of course, accountable to the Minister for the way in which they carry out their task, and he can give directions to them in much the same way, I suppose, as the Minister of Transport can give directions to the British Transport Commission. But as I read this Act of Parliament, the Minister must leave the actual running of the hospital to the governors themselves.

Mr Wilson says that the Minister will occupy the premises. That may be true, but I think that the board of governors will occupy them also. Possession in law is, of course, single and exclusive; but occupation may be shared with others or had on behalf of others. I think that the board of governors are in such a responsible position in regard to this hospital that they are occupiers."
To the same effect is the judgment of Morris LJ (page 106) where he said:
"The last question, therefore, is whether the Board of Governors will be in occupation. It is said that it is the Minister who will be in occupation, and that the board of governors will be merely his agents, and Pegler v Craven is referred to. The position of the board of governors in the present case seems, however, to be entirely different from that of an agent for a limited company. Though the governors are subject to the directions of the Minister, they have a very special position. The decision in this case really depends on its own facts, and on an examination of the position and functions of a board of governors as prescribed under the Act of 1946. They manage and control the hospital. They maintain it. They do all the providing. They appoint officers and servants who may be their officers and servants. They are a body corporate."

In my view, this case confirms also that in the ordinary case
occupation by an agent is the occupation of the principal. It was
only the extrta-ordinary features of the statutory relationship between the Minister of Health and the Board of Governors which led to the conclusion that the Board of Governors would be the occupant. Those features were extra-ordinary in every sense and are not to be found in the instant case; it was, as Morris LJ observed, a decision on its own facts.

The third authority is Willis v Association of Universities of the British Commonwealth [1966] 1 QB 140. The question in that case was whether the Landlord, The Association for the Universities' Central Council for Admissions, was in occupation. The relevant circumstances and the conclusion are indicated in the judgment of Lord Denning MR (page 148 B-F) where he said:
"Accepting that the council is a separate entity, it seems to me that each of these bodies, the council and the landlords, carries on an activity at No. 29, Tavistock Square. The council carries on there the activity of a central organisation for admissions. The landlords carry on there the activity of providing accommodation, equipment and staff for all the detailed administration of the scheme. This activity of the landlords is, I think, an ´activity' within section 23 (2) of the Act of 1954. Each of them, the council and the landlords, occupies the lower floors of No. 29, Tavistock Square, for the purpose of its activity. Each of them wishes to occupy the top floor for its purpose. It is, I think, quite possible for two bodies to share accommodation in this way. As I said in Hills (Patents) Ltd v University College Hospital : ´Possession in law is, of course, single and exclusive; but occupation may be shared by others or had on behalf of others.'"
Pearson LJ agreed with the judgment of the Master of the Rolls. Salmon LJ put it slightly differently (page 153) where he said:
"Accordingly, though the council may be carrying on an activity on the premises, namely, the direction of policy, so are the landlord, since it is part of their business to supply all the necessary accommodation, staff, equipment, etc., necessary for the council's purposes. Having regard to all that the landlords do in relation to these premises it is in my judgment impossible to say that they do not occupy them even if they do so in conjunction with the council. To my mind the landlords and the council are in a sense partners, one concerned with administration, and the other with policy, and they both occupy and carry on their respective activities upon the premises."

For my part, I do not think that that case helps. Counsel for the Landlord sought to draw an analogy with this case by suggesting that the Partnership carried on a separate activity on Low Farm from that of the Tenant. But that submission is inconsistent with the facts as found by the Arbitrator. The services were not provided by the Partnership from Low Farm but from elsewhere. Although the services of the Partnership were undoubtedly used at Low Farm, they were so used by the Tenant's engagement of an independent contractor to do the farming. There was only one activity and that was the farming operation carried on by the Partnership as agent for the Tenant.

I can now state my conclusions relatively shortly. First, where, as here, the tenant is a limited company it can, of course, only operate through servants or agents. Thus the occupation of the farm and the execution of the necessary farming operations must be by servants or agents. No distinction is to be drawn in this respect between an employee and an agent. Second, where the farm in question is an arable farm, so that there is no stock, and it is without buildings, so that there is no human habitation, there is not necessarily any permanent physical presence. In those circumstances the court must examine the activities carried on on the land and decide by whom they are carried on. Activities carried on by an agent within the scope of his authority are, ordinarily, the activities of the principal just as much as if the agent were an employee. (See Pegler v Craven [1952] 2 QB 69 and Hills (Patents) Ltd v University College Hospital Board of Governors [1956] 1 QB 90.)

The primary facts as found by the arbitrator clearly show that the farming operations on Low Farm were carried on by the Partnership, not on its own account but as agents for the Tenant. Further, the individual members of the Partnership or its employees only went to and remained on the Holding for the purpose of carrying out the farming operations authorised by the Tenant and for so long only as those operations required. There was no presence, permanent or otherwise, save what was required to carry out the necessary agricultural operations as agent for the Tenant. The only proper conclusion in law from those facts is that Low Farm was occupied by the Tenant alone.

Thus, I agree with the Arbitrator that the engagement of a single agricultural contractor to carry out the farming operations on an arable farm could not ordinarily result in the farm being occupied by the contractor. The circumstances relied on in this case to
suggest that this was no ordinary agricultural contractor do not, in my judgment, dictate a different result. The Arbitrator rejected the suggestion that there was a partnership between the Tenant and the MMB Partnership. Whether originally suggested or not he made no finding that the letter of engagement dated 26th March 1987 or the various accounting documents were shams. There is no finding that the management or contracting charges were not in line with those charged by agricultural contractors to farmers to whom they were not related. Thus, it cannot be disputed that the farming operations on the Holding were carried out by the Partnership as agents for the Tenant.

The fact that the Partnership also financed the Tenant in the way found by the Arbitrator and reaped a benefit from the profits made on the Holding by the charge for its management fee cannot alter the physical relationship of the Tenant and the Partnership with the Holding. It follows that, in my judgment, there was no shared occupation and, therefore, no breach of covenant to support the notice to quit.

In my view the Arbitrator and the Assistant Recorder were both right and this appeal should be dismissed.







THE VICE-CHANCELLOR: I agree. The tenancy agreement dated 28th September 1989 contained a covenant by the tenant, "not to assign underlet part with or share possession or occupation of the whole or any part of the Holding". The Holding was Low Farm.

The only issue on this appeal is whether on the facts as found by the arbitrator, there has been a breach of that covenant.

The facts have been described by Lord Justice Morritt. I gratefully adopt them and need not repeat them. It is not in dispute that the tenant, C Brian Barratt & Son Ltd, entered into a contractual arrangement with the MMB Partnership (consisting of Mr Brian Barratt, his wife and his son Michael) under which the farming operations on Low Farm were to be carried out by the Partnership as agents for the tenant. Low Farm consists entirely of arable fields. There is no farmhouse. There are no farm buildings. There are no livestock. The crops planted on the fields are, we have been told, either cereals or beans. The farming operations carried out on the land consist, therefore, of ploughing, tilling, fertilising and sowing the land and of spraying and harvesting crops. There are, in addition, drains, banks, boundary fences and gateways to be maintained. Each and every one of these operations is an operation for which a farmer might employ an independent contractor. The arbitrator found that "there are about 22 farming operations in each year and there are only between 35 and 40 days in each year when there is any activity on the farm".

The case argued before us by Mr Driscoll on behalf of the appellant, the landlord of the farm, is that in arranging for the farming operations to be carried out by the Partnership, the tenant put itself in breach of the contractual obligation to which I have referred. It is not contended that there has been an assignment or an underletting or that the tenant has parted with or shared possession of the farm. But it is the case that the tenant has shared occupation of the farm with the Partnership.

Mr Driscoll began his submissions with three propositions, each of which I would readily accept, namely, (i) occupation requires physical presence on the land; (ii) occupation requires that the physical presence should have some sufficient degree of permanence, and; (iii) occupation may be shared.

It is not in dispute that the Partnership, in carrying out the 22 farming operations referred to by the arbitrator, had a presence on the land. It is not in dispute that the contractual arrangement between the tenant and the Partnership has been in place since 1987. But it does not follow that the relationship between the Partnership and the Farm has been one that is properly described as occupation by the Partnership.

The concept of "occupation" when applied to arable fields devoid of buildings is one that I find somewhat elusive. The ordinary indicia of occupation are bound to be absent. Mr Driscoll suggested that in such a case "occupation" of the fields would be demonstrated by use of the fields for agricultural purposes. He carried his thesis to the logical conclusion of submitting that an independent contractor engaged to harvest, say, a corn crop would be in occupation of the fields while the harvesting was in progress. But whether or not the word "occupation" would ever be apt to describe the relationship between the independent contractor and the cornfield, I am clear that the harvesting of the cornfield by the independent contractor would not be a breach of a tenant's covenant in an agricultural tenancy "not to part with or share occupation" of the cornfield. The ambit of that phrase in the tenancy agreement of 28th September 1989 is a matter of construction. The construction of any agreement must be undertaken in the context of the factual background known to the parties. The use of independent contractors to carry out specific farming operations on arable land on behalf of the farm owner is so common as, in my judgment, to make it impossible to attribute to the word "occupation" in the 28th September 1989 covenant a meaning that would prevent the tenant from engaging a contractor for that purpose.

For there to be a breach of the covenant something more must, in my judgment, be shown than that farming operations were carried out on the tenant's behalf by a contractor.

Mr Driscoll submits that, in the present case, much more can be shown. In the present case, it was not simply specified farming operations, but all farming operations that were to be carried out by the Partnership. As to this, however, the land is arable land. The farming of arable land lends itself to being broken down into a series of sequential operations. The farming operations do not involve or require the day to day attention required of, say, a dairy farmer or a sheep farmer. The fact that on only 35 to 40 days in each year is there any activity on the farm makes the point. The fact that on 35 to 40 days in each year the Partnership was present on the land in order, as agent for the tenant, to carry out the sequential farming operations does not, in my judgment, justify the conclusion that the tenant has parted with or was sharing occupation of the farm.

Mr Driscoll relied also on other responsibilities undertaken by the Partnership in connection with the farming of Low Farm. After harvest, the practice has been for the grain to be removed for drying and storing to other farming premises owned or controlled by the Partnership. The Partnership are responsible for selling the produce of Low Farm and for the purchase of seed, fertilisers and sprays. But these activities are not conducted physically on Low Farm and cannot, it seems to me, assist in constituting the Partnership as occupiers of Low Farm. Moreover, these activities, and indeed the farming operations on Low Farm themselves are all carried out by the Partnership as agents for the tenant. Such activities on Low Farm as the Partnership has carried out were carried out as agent for the tenant. In my judgment, an agricultural tenant who allows on to the agricultural holding an agent for the purpose of the agent carrying out farming operations on the land for the tenant does not thereby put himself into a shared occupation of the holding with the agent.

I agree, therefore, that this appeal must be dismissed.




Order: Appeal dismissed with costs.

© 1997 Crown Copyright