England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
The Hon Mr Justice Etherton
HC03C04113

		Royal Courts of Justice Strand, London, WC2A 2LL
		09/11/2005

Lord Justice Jonathan Parker :

1. At issue in this appeal is the legal effect of a contract made between Clear Channel UK Ltd ("Clear Channel"), the claimant in the action, and Manchester City Council ("the Council"), the defendant in the action, pursuant to which Clear Channel erected and maintained 13 large advertising displays at various prominent sites in Manchester owned by the Council. The issue is whether the effect of the contract was to grant Clear Channel a tenancy or merely a licence.
2. In the action, Clear Channel contends that the contract created a tenancy, and it seeks declaratory relief to that effect. The Council counterclaims for declaratory relief in the opposite sense, contending that the contract granted merely a licence which has been validly terminated. On that basis, the Council seeks an inquiry as to damages in respect of the period following the alleged termination of the licence. The Council further contends that if (which it denies) the true effect of the contract was to grant a tenancy, the tenancy is not protected by Part II of the Landlord and Tenant Act 1954 ("the 1954 Act") since Clear Channel has not occupied, and does not occupy, the land the subject of it for the purposes of section 23 of the 1954 Act.
3. At trial, Etherton J held that the effect of the contract was to grant a licence. Accordingly by his order dated 14 December 2004 he dismissed Clear Channel's claim and ordered an inquiry as to damages on the Council's counterclaim. He refused Clear Channel permission to appeal, but permission was granted by Jacob LJ on the papers on 1 February 2005.
4. Also at issue in the action was the legal effect of a separate contract between the parties for the erection and maintenance by Clear Channel of an advertising display at another site in Manchester known as the Chester Road site. Etherton J held that that contract created a tenancy, and by his order he so declared. There is no cross-appeal by the Council against that part of the judge's order.
5. Thus the only issues which fall to be determined on this appeal are (a) whether, in relation to the 13 displays, the contract in question created a tenancy (as Clear Channel contends) or merely a licence (as the Council contends and as the judge held); and (b), if it created a tenancy, whether that tenancy is protected by Part II of the 1954 Act.
6. The facts are undisputed and can be shortly stated.
7. Clear Channel carries on the business of constructing and maintaining advertising displays. The 13 displays with which this appeal is concerned were erected in 2000 and 2001. They are all constructed to the same basic design. Each display consists of a substantial superstructure in the shape of a large 'M'. The superstructure is fixed to a rectangular concrete base which is embedded in the ground.
8. The project for the erection and use of the displays had been under discussion between Clear Channel and the Council since 1998. Planning applications were duly submitted by Clear Channel to the Council and the necessary permissions granted. Plans were attached to the planning applications, but for purposes of identification only. In October 1999 a detailed site survey was carried out by Clear Channel and in August 2000 the positions of the concrete bases on which the displays were to be erected were agreed between Mr Watson, Clear Channel's Operations Manager, and Mr Houghton on behalf of the Council and marked out on the ground with spray paint. In about September 2000 construction work began.
9. No formal agreement was ever concluded between Clear Channel and the Council relating to the erection and maintenance of the displays, but it is common ground that the parties' respective rights and obligations in that respect are contained in a draft agreement sent by the Council to Clear Channel in March 2001. I will accordingly refer to that draft agreement hereafter as "the Agreement".
10. In December 2002 the Council informed Clear Channel that it would be terminating the existing arrangements (that it so say, the arrangements contained in the Agreement), but that Clear Channel would be given the opportunity of tendering for a new contract. Clear Channel objected, claiming that it was a tenant of the land on which the advertising displays had been erected and that its tenancy was protected by Part II of the 1954 Act. The Council responded by serving notice purporting to determine Clear Channel's licence with effect from 10 November 2003. That led to the commencement of the present action.
11. There is no issue between the parties as to the applicable legal principles. In particular, it is common ground (a) that whether a contractual relationship governing the use and occupation of land creates a tenancy or a licence depends not on the label which the parties have applied to it but rather on their substantive rights and obligations under it; and (b) that for a tenancy to exist the occupier must have the right to exclusive possession of the land in question (see Street v. Mountford [1985] AC 809).
12. Mr John McGhee QC (for Clear Channel) accepts, as he must, that it is of the essence of a right of exclusive possession, and hence of a tenancy, that the area or areas of land over which the right is said to exist should be capable of precise identification at the date when the right is said to be created. He accordingly accepts that if the Agreement, on its true construction, does not sufficiently identify the land in respect of which a tenancy is said to have been created, the case for a tenancy must fail. He submits, however, that on its true construction the Agreement fulfils that requirement. Relying on the fact that by March 2001 the position of the concrete bases of the displays had been precisely marked out on the ground, Mr McGhee submits that on its true construction the Agreement created a tenancy of those areas: that is to say, a tenancy of the land occupied by the concrete bases.
13. For the Council, Mr Jonathan Brock QC contends that on its true construction the Agreement refers only to larger undefined areas of land owned by the Council – that is to say to the general location of the displays – and that one cannot spell out of it the grant of a right of exclusive possession over the specific areas of land occupied by the concrete bases.
14. Hence there is, in effect, a preliminary issue of construction as to whether the Agreement contains a sufficient definition of the land which is said by Clear Channel to be the subject of the alleged tenancy.
15. I accordingly turn straightaway to that issue, since it is potentially decisive of the case.
16. I begin by referring to those provisions of the Agreement which are relevant to that issue.
17. The Agreement recites (in recital 1.1) that the parties have agreed to enter into the Agreement "in respect of the Sites identified in the Schedule". The expression "the Sites" is defined in clause 2 of the Agreement as meaning:

"land and premises as specified in the Schedule which is owned by [the Council] on which [Clear Channel] is permitted to erect or maintain the Advertising Display under the provisions of this Agreement and shown on location plans attached hereto."

(It is common ground that in the event no plans were attached or annexed to the Agreement.)

18. "Advertising Display" is defined in clause 2 as meaning "the advertisements and advertising structures … to be erected on the Sites".
19. The Schedule to the Agreement lists 13 locations under the heading "The Sites". The locations are not precisely defined (viz. "Cheetham Hill Road/Queens Road", "Harpurhey Baths Rochdale Road", "Upper Brook Street" and so on). The Schedule also sets out the areas ("sheetage") of the advertising displays to be erected at the respective locations. Some locations were to have more than one display, some were to have a double-sided display, others were to have one single-sided display.
20. In order to render what follows more readily comprehensible, I should also note three further definitions. "The Holding" is defined as meaning "the complete holding of the Sites at any time during the Agreement"; "the Term" is defined as meaning the period from the date of the Agreement to 31 October 2002 subject to provisions for prior termination; and "the Payments" is defined as meaning the periodic sums payable under clause 9 of the Agreement (there described as "rent").
21. Clauses 3.1, 4.1 and 5,1 of the Agreement are in the following terms:

"3.1 In consideration of [Clear Channel] making the Payments [the Council] grants [Clear Channel] permission to erect and maintain the Advertising Display at the Sites for the Term subject to the provisions of this Agreement.

….

4.1 The Holding shall form the complete holding of the Sites to be available for use by [Clear Channel] for the purpose of this Agreement.

….

5.1 [The Council] may withdraw any Site from the Holding by giving 28 days notice to [Clear Channel] for any reason and in that event [Clear Channel] shall be required to reinstate the Site …."

22. Clause 7.8 obliges Clear Channel to "use each and every Site only for the purpose for which [the Council's] permission is granted and for no other purpose whatsoever". Clause 7.9.1 obliges it to "take each and every Site in its existing condition and bring it into line with [the Council's] specification and approval". Clause 7.9.2 obliges Clear Channel to bear "all costs connected with the laying out installation and maintenance of each and every Site …". Clause 7.10 prohibits Clear Channel from using "the whole or any part of each and every Site" for any purpose which creates or may create a nuisance. Clause 7.12.1 obliges Clear Channel to "maintain repair and keep in a clean and tidy condition and free from litter each and every Site … to the reasonable satisfaction of [the Council]". Clause 7.12.2 obliges Clear Channel to maintain (among other things) "any … fencing required by the Advertising Display".
23. Clause 7.18 obliges Clear Channel:

"[n]ot to impede or obstruct in any way the officers or servants of [the Council] in the exercise by them of [the Council's] interests in each and every Site and in particular give all reasonable assistance and facilities to the officers servants or agents in or about their entry into the Site in that connection."

24. Clause 14.1 provides as follows:

"This Agreement shall constitute a licence in respect of each Site and confers no tenancy on [Clear Channel] and possession of each Site is retained by [the Council] subject however to the rights and obligations created by this Agreement".

25. Finally, for present purposes, clause 17.1 provides (among other things) that "if [the Council] requires possession of any Site and withdraws the Site from the Holding [Clear Channel] shall not be entitled to any compensation in respect of the loss of the Site …".
26. The judge addressed what I have referred to as the preliminary issue in paragraphs 78 to 88 of his judgment, as follows (references to "MCC", "the March 2001 Draft Agreement" and "the Ms" being references to the Council, the Agreement and the displays respectively):

"78. It is clear, in my judgment, that "the Sites" mentioned in the 2001 Draft Agreement were not the areas of the concrete bases of the Ms, but larger undefined areas of land owned by MCC in which the concrete bases were placed. As I have said, there were no plans attached to the March 2001 Draft Agreement. There is no evidence that there were in existence, at the date the March 2001 Draft Agreement was agreed in principle, any plans identifying the precise location of the concrete bases of the Ms. The plans attached to the planning applications, on which Clear Channel relies, were drawn before all the concrete bases were constructed or their precise location agreed. In the words of Ms Griffiths, in cross-examination, they were "for identification only".

79. "The Sites" specified in the March 2001 Draft Agreement are expressly identified in that document only by reference to its Schedule. As I have said, the Schedule contains only general addresses, and not the specific locations of the concrete bases of the Ms.

80. Further, I reject Mr McGhee's submission that the provisions of the March 2001 Draft Agreement, particularly clauses 7.9.1, 7.9.2, 7.10 and 7.12.1, indicate that the Sites were the actual concrete bases of the Ms. Each of those clauses refers both to "every Site" and to the "Advertising Display". Mr McGhee accepted that the definition of "the Advertising Display in clause 2 of the March 2001 Draft Agreement included the concrete base. Unless the parties intended unnecessary duplication, the "Site" mentioned in each of clauses 7.9.1., 7.9.2, 7.10 and 7.12.1 must have been intended to refer to something other than the "Advertising Display", including its concrete base. Mr McGhee speculated that the reason for the mention of both the "Site" and the "Advertising Display" in each of those clauses was the belief of the parties, as shown by clause 10, that the Ms always belonged to Clear Channel. That, however, is pure speculation, unsupported by any other admissible evidence.

81. By contrast, giving to "the Site" in those clauses the meaning of the wider area of land on which each of the Ms was constructed, and giving to "the Advertising Display" the meaning expressly stated in clause 2 of the March 2001 Draft Agreement, not only avoids unnecessary repetition in the clauses to which Mr McGhee has referred, but makes perfect sense of clause 3.1, which grants Clear Channel "permission to erect and maintain the Advertising Display at the Sites".

82. Furthermore, it is telling, in my judgment, that the March 2001 Draft Agreement contains no express grant of any easement of way to and from "the Sites". Mr McGhee submitted that an easement of necessity would be implied. The omission of an express right of way to and from the Sites, for the purpose of erecting, maintaining, repairing and removing the Ms, would be an obvious and very surprising error, and very poor drafting, if the area of any demise was intended to be limited to the concrete bases of the Ms. The March 2001 Draft Agreement was negotiated over a period of time by Clear Channel's own solicitor, and there has been no suggestion, either by way of submission or in the evidence, that the solicitor would have been likely to have overlooked a point of such obvious importance to Clear Channel.

83. On the other hand, there is no problem of access to "the Sites" if that expression means the wider area of MCC's land under and surrounding the Ms. Clause 3.1 of the March 2001 Draft Agreement gave express permission to Clear Channel to come on to the Sites for the purpose of erecting and maintaining the Ms.

84. Mr McGhee sought to dispel part of the force of this point, which was skilfully developed by Mr Jonathan Brock QC, for MCC, by pointing out that the 2003 Draft Agreement, in respect of the Chester Road Site, did not include an easement of access, even though that document was expressly drafted in the language of a tenancy agreement and identified the actual site of the advertising station as the area of the demise. As I have mentioned, however, unlike the March 2001 Draft Agreement, the 2003 Draft Agreement was never the subject of negotiation or comment by Clear Channel.

85. Clear Channel is not assisted by the evidence of Mr Watson that, before the 2001 Draft Agreement, the precise location of the concrete bases of the Ms was discussed and agreed with Mr Houghton of MCC, and then marked out on the ground by Mr Watson with spray paint. That process of identifying the precise location of each M is perfectly consistent with the grant of a licence over a wider area than the concrete base itself. Furthermore, Clear Channel relies upon the provisions of the March 2001 Draft Agreement as governing the terms on which it was permitted to make use of "the Sites"; but that document does not contain any express provision for a process of discussing and agreeing the precise location of the demise in the manner in which Mr Watson described in his evidence.

86. Further, clause 7.18 of the March 2001 Draft Agreement makes little practical sense if "the Site" is confined to the concrete base of the M and the structure above it. It makes perfect practical sense, however, if "the Site" is a wider area of land on which the M was, or was to be, constructed.

87. If "the Sites" specified in the March 2001 Draft Agreement are undefined areas of land owned by MCC under and surrounding the Ms, it is clear that there was no intention to grant, and there never was a grant, of exclusive possession to Clear Channel. The contrary has not been argued.

88. For those reasons, I dismiss the claim by Clear Channel in respect of the M Sites."

27. I have no hesitation in reaching the same conclusion as the judge, for the reasons which he gave. He dealt with the issue fully and clearly, and he expressed his reasons in terms on which I could not improve. That being so, no purpose would be served by my attempting any further reasoning or analysis.
28. I venture to make one additional comment, however. I find it surprising and (if I may say so) unedifying that a substantial and reputable commercial organisation like Clear Channel, having (no doubt with full legal assistance) negotiated a contract with the intention expressed in the contract (see clause 14.1, quoted above) that the contract should not create a tenancy, should then invite the Court to conclude that it did.
29. In making that comment I intend no criticism whatever of Mr McGhee, who sought valiantly to make bricks without straw. Nor, of course, do I intend to cast any doubt whatever on the principles established in Street v. Mountford. On the other hand the fact remains that this was a contract negotiated between two substantial parties of equal bargaining power and with the benefit of full legal advice. Where the contract so negotiated contains not merely a label but a clause which sets out in unequivocal terms the parties' intention as to its legal effect, I would in any event have taken some persuading that its true effect was directly contrary to that expressed intention. In the event, however, as the judge so clearly demonstrated, the case admits of only one result.
30. I would dismiss this appeal.

Sir Christopher Staughton:

31. I agree.

Lord Justice Waller:

32. I also agree.