England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CLERKENWELL COUNTY COURT
(HIS HONOUR JUDGE MARR-JOHNSON)

		Royal Courts of Justice Strand London, WC2
		21st January 2005

1. LORD JUSTICE PETER GIBSON: I will ask Mr Justice Blackburne to give the first judgment.
2. MR JUSTICE BLACKBURNE: This is a second appeal (brought with the permission of Mummery and Dyson LJJ, following a refusal on paper by Latham LJ) against an order dated 28th September 2004 of His Honour Judge Marr-Johnson, sitting in the Mayor's and City of London Court, dismissing an appeal against an order dated 22nd March 2004 of Deputy District Judge Samuels.
3. By his order, Deputy District Judge Samuels granted the claimant, the London Borough of Islington, possession within 14 days of 10 Cloudesley Road, London N1 against the second defendant, Gary O'Shea. He gave Mr O'Shea permission to appeal.
4. It is common ground between the parties that Islington (as I shall call the claimant) is the freehold owner of the property (as I shall call 10 Cloudesley Road), and that the property comprises a residential dwelling house. It emerged at the hearing before the Deputy District Judge that the first defendant, a Miss Tracey Green, had long since ceased to be in occupation of the property, leaving Mr O'Shea as the sole effective defendant. It was also common ground between the parties that in April 1987 Islington granted a licence to an organisation called Patchwork Community Housing Association ("Patchwork") to use the property as temporary housing accommodation. The licence, which is a very brief document and was in evidence before the Deputy District Judge, was in the following terms:

"The Council [Islington] offers the House [the property] to the Licensee [Patchwork] from the Commencement Date [14th April 1987] for use as temporary housing accommodation on the following terms and conditions:-

1. The Licensee shall -

(a) use the House as temporary housing accommodation only;

(b) be responsible for making arrangements for payment of all general and water rates and service charges in respect of the House;

(c) put and keep the House in a condition suitable for use as temporary housing accommodation;

(d) report to the Council immediately if the condition of the House once occupied is such that it is not suitable for use as temporary housing accommodation or if major items of disrepair are likely to affect the health and safety of any occupiers;

(e) ensure that the occupation of the House does not give rise to nuisance or annoyance to the public or to the occupiers of neighbouring premises;

(f) not obstruct any authorised employee or agent of the Council entering any part of the House at any reasonable time."

Then by clause 2:

"The licence may be terminated by either party at any time by giving to the other not less than 28 days written notice."

Clause 3 provided for the service of notices. By clause 4:

"On termination of the licence under (2) above, the Licensee shall ensure that the House is returned vacant to the Council.

5. The Council does not accept responsibility to rehouse any occupier of the House unless it has a legal occupation to do so.

If the Licensee wishes to accept this offer, please return the attached duplicate copy before the Commencement Date signed by its duly authorised representatives."

The licence is then signed and dated 14th April 1987 by representatives of Islington and Patchwork.

5. Over the years, it seems, Patchwork allowed a variety of persons to occupy the property including ultimately the defendants.
6. On 11th April 2003, as appears from a copy which was before the Deputy District Judge, Islington served Patchwork with written notice to terminate its licence of the property, expiring on 21st July 2003. The issue which the Deputy District Judge had to decide was whether a defence put forward by Mr O'Shea on the day of the hearing disclosed a defence in law to Islington's possession proceedings, which alleged that the effect in law of terminating Patchwork's licence was to terminate all inferior interests in the property, including that of the defendants, whether they were licensees or tenants of Patchwork.
7. So far as material Mr O'Shea, who admitted that he remained in occupation of the property, alleged as follows. First, that he and Miss Green had been granted an assured tenancy of the property by Patchwork. Secondly, the contract giving rise to that tenancy was authorised by the terms of Patchwork's licence with Islington and that the licence contemplated that Patchwork would enter into contracts with people such as the defendants which, as a matter of law, would amount to tenancies. Alternatively, Islington held Patchwork out as having authority to make contracts of this type by allowing Patchwork to manage its property. Thirdly, a principal is bound by a contract made by his agent if it is made within the actual or ostensible authority of the agent. Fourthly, in consequence Islington was bound by the tenancy granted by Patchwork to the defendants and, having terminated the licence, the defendants, effectively just Mr O'Shea (Miss Green having long since ceased to be in occupation), was now Islington's secure tenant.
8. The Deputy District Judge was of the view that these averments failed to disclose any defence to the claim and accordingly made the 14-day possession order which Islington was seeking.
9. When the matter came on appeal before Judge Marr-Johnson, the judge concluded that Mr O'Shea only ever had one landlord which was Patchwork, and that when Patchwork "dropped out of the picture" (as he put it) Mr O'Shea's interest, notwithstanding that it was a secure tenancy as against Patchwork, as Islington accepted for the purposes of the appeal that it was, "fell to the ground". He therefore dismissed the appeal. The question for determination on this appeal is whether that conclusion was correct.
10. Since the matter has been argued as one of principle, it is appropriate to set out certain well-established propositions of the common law in the field of landlord and tenant:

(1) A lease or tenancy is a contractually binding agreement, not referable to any other relationship between the parties, by which one person gives another the right to exclusive occupation of land for a fixed or renewable period or periods of time, usually in return for a periodic payment of money.

(2) The relationship of landlord and tenant is not dependent on whether the lease or tenancy creates an estate or other proprietary interest which may be binding on third parties. Whether a lease creates a proprietary interest in turn will depend upon whether the landlord has an interest out of which he has granted it.

(3) When a head tenancy comes to an end, whether by effluxion of time or by forfeiture or by notice given either by the head landlord or head tenant (and whether under a break clause in the case of a fixed-period tenancy or to quit in the case of a periodic tenancy), any sub-tenancy derived out of the head tenancy will also automatically and simultaneously come to an end. The only exception to this is where the head tenancy comes to an end by surrender or merger.

(4) It is irrelevant to proposition (3) that the sub-tenancy was lawfully created, in the sense that there was nothing in the head tenancy to prevent the head tenant from creating the sub-tenancy or, if there were restrictions on the consideration of the head tenancy, for example the need to obtain the head landlord's consent, those requirements were fully complied with

(see Bruton v London & Quadrant Housing Trust [2000] 1 AC 406, at pages 413 and 415, and Barrett v Morgan [2000] 2 AC 264).

11. Statute has made inroads into the operation of some of these propositions, for example, in relation to forfeiture where there are restrictions on exercising the right and where there is a right for the tenant or sub-tenant to apply for relief, and under section 18 of the Housing Act 1988 in the case of claims let on an assured tenancy where the landlord is himself a tenant under a superior tenancy. This case is not concerned with such inroads.
12. Against that background, it is clear that the defence raised by Mr O'Shea, as argued before the court below, could not succeed in law. The foundation for the defence, as was made clear in the skeleton argument lodged on his behalf on the hearing of the appeal to the County Court judge, was that in entering into the contract which gave rise to its assured tenancy with the defendants, Patchwork was acting as Islington's agent within the scope (or at the very least arguably within the scope) of the authority which Islington had given to it. But as was pointed out by Islington and accepted by the judge below, it did not follow that because the licence which Islington had granted Patchwork envisaged that Patchwork would grant rights of occupation to third parties such as the defendants, Patchwork was acting on behalf of Islington in making those grants. There was nothing in the licence which constituted Patchwork as Islington's agent.
13. Moreover, the defence itself asserted that the defendants were tenants of Patchwork, an averment which was inconsistent with the contention that Patchwork acted as Islington's agent. If Patchwork had acted as Islington's agent, as Mr O'Shea contended, the defendants would have been tenants of Islington and not Patchwork.
14. It was also clear, and for the same reasons, that there was no basis for the alternative defence which contented that because Islington allowed Patchwork to manage its properties, Patchwork had Islington's ostensible authority to act as its agent in creating rights of occupation in them. The mere fact that Islington allowed Patchwork to manage its properties, which is the sole matter relied on under this alternative pleading, did not without more confer ostensible authority on Patchwork to enter into occupation tenancies with third parties on Islington's behalf.
15. In Kay v Lambeth London Borough Council [2004] EWCA Civ 926, [2004] 3 WLR 1396, this court had to consider an arrangement similar to the licence between Islington and Patchwork, whereby "short life" properties were licensed by a local authority to a housing trust to provide temporary accommodation. Upholding the County Court judge, this court rejected an argument that the housing trust acted as the local authority's agent in granting tenancies to the occupiers, such tenancies being referred to in the judgment as Bruton tenancies following the decision in Bruton.
16. It is also to be noted that although the local authority entrusted the management of the "short life" properties to the housing trust, it was not suggested in that case that that somehow clothed the housing trust with authority to enter into Bruton tenancies on the local authority's behalf. Given the range of points that were argued in that case, I would have expected the point to have been taken by the very experienced counsel involved, had they thought that there was any merit in the point.
17. Accepting, especially given the decision in Kay, that an argument that Patchwork had acted as Islington's agent when granting Mr O'Shea his assured tenancy of the property (assuming that that is what it was) was destined to fail, Mr O'Shea, who appears by Mr Wonnacott, raises a different argument. It is an argument he says which the court in Kay was not asked to consider and on which it expressed no view. The argument assumes that Mr O'Shea's tenancy was granted by Patchwork and by no one else.
18. Mr Wonnacott submits that the grant by Patchwork to the defendants of a tenancy operated to encumber Islington's freehold interest in the property. The submission assumes the grant was made with Islington's permission. The proposition for which Mr Wonnacott contended was this. Where a fee simple owner gives a third party consent to create a tenancy in his own right, the fee simple owner is bound by the tenancy as a matter of property even though no privity of contract exists between the fee simple owner and the tenant. But this submission of course begs the question as to what it is that the freeholder is consenting to. If the freeholder is not consenting to any arrangement which might affect his freehold estate, then, as it seems to me, the submission does not get Mr Wonnacott very far.
19. The source of the supposed consent in the instant case is said to be the licence. But as was pointed out in a skeleton argument by Mr Gallivan on behalf of Islington, the licence did not authorise Patchwork, whether expressly or impliedly, to create a tenancy binding on Islington. On the contrary, it made clear, by clause 4, that on termination (as happened) of the licence by notice in accordance with clause 2, Patchwork should ensure that the property was returned vacant to Islington.
20. Mr Wonnacott argued that the position was similar to a case where a mortgagor -- at any rate prior to 1926 -- creates a tenancy with his mortgagee's consent. But the mortgagor in such a case has a sufficient interest in the land (the equity of redemption) out of which to create the tenancy. Here, by contrast, Patchwork had no estate or interest in the property. It also assumes that the mortgagee, whose interest would otherwise have priority to any subsequent dealing by the mortgagor with the mortgaged estate, was consenting to the subsequent dealing having priority over his own interest, if and to the extent that the dealing was not otherwise permitted by the terms of the mortgage. There is nothing remotely akin to this in Islington's willingness, as long so its licence should last, that Patchwork could use the property to provide temporary accommodation for others. That willingness, in my judgment, cannot be taken as permission to create tenancies which by some means are to be binding on Islington's interest in the property.
21. Mr Wonnacott also sought to draw support for his submission from a passage in a book entitled Modern Law of Personal Property in England and Ireland by Andrew Bell, where at page 482 the following is stated:

"Akin to the power of an agent is the power of a non-owner where the owner consents to the disposition but there is no intention that he should be a party to it. The owner's property rights are effectively transferred or encumbered, as in the case of agency, but the owner is neither personally liable on any contract nor does he obtain any rights under it."

That is all very well, but that, as it seem to me, begs the question as to what it is that the owner of the chattel is consenting to.

22. I should add that although the House of Lords in Bruton left open the question whether a tenancy granted by someone who (like Patchwork) has no more than a licence to use property as temporary accommodation, is binding on the licensor (in Bruton's case, as in the present, the local authority) this court in Kay found that it did not.
23. In Kay the defendants had taken up occupation of the properties in question under what were accepted to be Bruton tenancies at a time when the landlord, the housing trust, was no more than a licensee in respect of the properties. Subsequently the local authority granted the housing trust leases of the properties terminable on six months' notice. Following the decision of the House of Lords in Bruton, the local authority terminated the leases in accordance with their terms of termination by notice, and thereafter commenced proceedings against the defendants who claimed to be tenants under Bruton tenancies. One of the many arguments raised by counsel on behalf of the defendants was that the defendants' rights preceded the 1995 leases and therefore that those rights could not be prejudiced by termination of those leases. The court dealt with the matter in paragraph 85 of its judgment, where it said this:

"For like reasons, Mr Luba's argument [Mr Luba having appeared on behalf of the defendants] on the termination of the lease issue cannot succeed. ... Even though the defendants acquired their rights before Lambeth acquired its rights under the 1995 leases, the defendants' rights can only be as good when the 1995 leases were terminated as they were when they were granted. LQHT [the housing trust] could not grant them an estate in land and thus they acquired none at the point of grant. If they acquired rights after the 1995 leases were granted, those rights would have been subject to Lambeth's rights against LQHT: see Barrett v Morgan [2000] 2 AC 264, above. Accordingly, the defendants fail to show that they have the essential prerequisite in this case, namely an estate in land."

24. From that it seems to me to follow that the fact that the tenants held Bruton tenancies did not enable them to say that they had estates in the properties that they occupied. Likewise here. To resist Islington's claim to possession, Mr O'Shea must show that he has an estate in the property which is binding on Islington. As licensee of the property with no estate in it, Patchwork was not itself able to confer on Mr O'Shea an estate in it. Even if Patchwork had a sufficient estate and was entitled to carve out of it an estate by way of a sub-tenancy in Mr O'Shea's favour, that derivative estate was bound to terminate upon the termination by notice of Patchwork's estate. That is a straightforward application of what I earlier referred to as proposition (3).
25. Moving away from the field of landlord and tenant altogether, Mr Wonnacott seeks to argue that, notwithstanding that Patchwork had no estate in the property, in some way it was invested by Islington with power to encumber or otherwise deal with Islington's freehold interest in the property. Despite Mr Wonnacott's bold attempts, I am quite unable to see how on the basis of the licence agreement, no other matter being relied upon, this was possible.
26. In my judgment there is no merit in any of the points which Mr Wonnacott has urged, and I would therefore dismiss the appeal.
27. LORD JUSTICE LONGMORE: I agree. I would only add that Sir Brian Neill (who dissented in this court in Bruton v London & Quadrant Housing Trust and whose judgment was upheld in the House of Lords) had no doubt that the conclusion in that case, that as between the Housing Association and Mr Bruton there was a tenancy, did not affect the rights of the licensor London Borough, there the London Borough of Lambeth (see [1998] QB 834 at page 842E).
28. LORD JUSTICE PETER GIBSON: Despite the valiant and ingenious attempts by Mr Wonnacott to persuade us otherwise, I am in no doubt that the appeal must be dismissed for the reasons given by Mr Justice Blackburne.
29. Mr Wonnacott suggests that common sense is on his side and that most people would find it surprising that a landowner who has given consent to a licensee to create a tenancy could say that the tenant was a trespasser. If the facts were as stated, perhaps they would. But the facts are not are not stated by Mr Wonnacott fully or accurately. The council of course contemplated that Patchwork would provide temporary housing accommodation and was content with that and, as we now know from the House of Lords' decision in Bruton, the circumstances of which are similar to those present here, tenancies may be created as between the parties to that tenancy, that is to say the person allowing the premises to be used by another for temporary housing accommodation and that other person so accommodated. But it is plain from the licence in the present case that the council was not giving Patchwork permission to create interests beyond the period of the licence (see in particular paragraph 4, providing for the licensee to ensure that the house was returned vacant to the council on the termination of the licence).
30. I suggest that most people would find it surprising if the council as landowner, having terminated the licence, was bound by the Bruton tenancy extending beyond the period of the licence contrary to the licence terms. If Mr Wonnacott is right, the position of a Bruton tenant is stronger where the Bruton landlord has only a licence which has been terminated than where the Bruton landlord has a tenancy which is terminated. Despite Mr Wonnacott's argument to the contrary, I am not persuaded that the Bruton tenant has any estate in land.
31. For these as well as the reasons given by my Lord, I too would dismiss this appeal.

ORDER: Appeal dismissed with costs to be assessed; detailed assessment of the Appellant's Community Legal Service Funding costs.

(Order not part of approved judgment) ______________________________