England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CENTRAL LONDON CIVIL JUSTICE CENTRE
(HER HONOUR JUDGE FABER)
Claims Nos: 6B053113 & 6B053115

		Royal Courts of Justice Strand, London, WC2A 2LL
		29th July 2008

Lord Justice Rimer:

Introduction

1. These two appeals are against orders made by Her Honour Judge Faber in the Central London County Court on 12 December 2007. They were made in two separate claims. The defendant in both was Mrs Ngozi Thomas-Van Staden, the appellant. The claimant in both was the London Borough of Newham ("Newham"), the respondent.
2. The judge heard the claims consecutively. She heard first the claim relating to premises at 4/4A Rathbone Market, Canning Town ("No 4/4A"), which occupied the court from 26 November to 3 December 2007. The appellant was represented in that claim by Mr Patrick Ground QC. He withdrew from the proceedings on 3 December after making his closing speech and after also making certain observations in relation to the other claim. The trial of that claim, relating to 1A Rathbone Market, then took place. Upon Mr Ground's departure, the appellant represented herself in it, assisted by her husband. Ms Naomi Hawkes represented Newham in both claims.
3. The judge gave a single judgment, dealing first with the claim in relation to No 4/4A. I deal first with the appeal against her order in that claim. Before us the appellant has appeared in person and Ms Hawkes represented Newham.

The appeal in relation to 4/4A Rathbone Market

4. The premises at No 4/4A  are commercial premises that were formerly occupied by the appellant under a lease that Newham granted her. She carried on business there as a dealer in the sale of digital televisions, digital cameras, other IT products and digital services. The lease was dated 9 January 2004 and (subject to a special provision in it to which I shall come) was for a fixed term from 1 January 2003 to 28 September 2004. The background to its grant was, as the appellant knew, that Newham was going to redevelop Rathbone Market as part of a regeneration plan for the area and it was not therefore prepared to grant tenancies which enjoyed the security of tenure provided by sections 24 to 28 in Part II of the Landlord and Tenant Act 1954 ("the Act"). The redevelopment is currently due to commence in 2009. Because of Newham's wish to be able to recover possession of the premises in order to carry out the development, an order of 11 December 2003 was obtained from the Watford County Court whereby the provisions of sections 24 to 28 were excluded in relation to the tenancy created by the lease. The annual rent payable under the lease was £7,500 (inconsistently described in clause 1 as payable both monthly and quarterly in advance). Clause 5(10) entitled Newham to terminate it at any time on 28 days' prior written notice to the appellant.
5. The fixed term created by the lease expired on 28 September 2004 but the appellant remained in occupation. On 15 July 2005 Newham served a notice on her, purportedly under clause 5(10), requiring her to give up possession within 21 days. She did not do so and on 14 June 2006 Newham issued its claim in the county court for possession against her, claiming that its notice had terminated her right of occupation. Newham also advanced an alternative claim for possession based on her failure punctually to pay the rent due under the lease. Clause 3(1) provided for such payment and clause 5(3) contained the usual proviso for re-entry in the event of rent being unpaid for 21 days. Newham claimed that over the period 1 April 2003 to 13 June 2006 rent arrears of £17,332.80 had accrued due and that the appellant's tenancy was forfeited. In addition to possession, Newham claimed arrears of rent and mesne profits.
6. The appellant admitted that the rent claimed was due but advanced a counterclaim for £211,500, being her alleged lost profit for the period June to December 2002 when she claimed she was wrongfully prevented from trading from the premises. That was a period preceding the commencement of the term created by the lease. Her case was that Newham had breached an agreement to grant her a lease of the premises from June 2002. If well-founded, the amount of her counterclaim would have exceeded the rent arrears and would or might have enabled her to resist the forfeiture claim.
7. The appellant also admitted the giving of 21 days' notice in July 2005 but her defence to the claim for possession in reliance on that was that, following the expiry of the initial fixed term on 28 September 2004, she continued to occupy the premises under a periodic tenancy protected by the provisions of Part II of the Act. Her argument was that any such tenancy was a business tenancy and that the provisions of the order dated 11 December 2003 (if valid at all, to which I shall come) applied only to the fixed term created by the lease, not to the successor periodic tenancy.
8. The judge rejected the appellant's case. She dismissed the counterclaim, made an order for possession of the premises by 7 January 2008, ordered the payment of £27,246.92 arrears of rent and of mesne profits until possession was given up and refused permission to appeal.
9. The appellant made a renewed application to this court for permission on several grounds, including a challenge to the dismissal of the counterclaim. Lloyd LJ, on her oral application, refused permission on all grounds bar one, which was that the judge was wrong to hold that when the appellant remained in occupation after 28 September 2004, paying rent which Newham accepted, she did so under a tenancy excluded from protection under Part II of the Act. That is the only point on the appeal. Before coming to how the judge dealt with it, I should refer to the material provisions of the lease and to how the issue was raised on the pleadings.

The lease

10. Clause 1 described its term and the rent payable as follows:

"… from and including [1 January [2003] to [28 September 2004] (hereinafter called "the term" which expression shall include any period of holding over or extension of it whether by statute or at common law or by agreement) YIELDING AND PAYING therefor monthly and proportionately for any part of a month the following rents:-

(a) For the first three months of the term the rent of five pence (if demanded)

(b) For the remainder of the term the rent of [£7,500] per annum payable quarterly in advance

(c) For the last two days of the term a rent to be agreed by the Parties or in default of agreement to be determined in accordance with the provision in that behalf hereinafter contained and for the avoidance of doubt the review date will be [26 September 2004]"

11. I shall refer to the words in round brackets in the opening part of clause 1 as "the words of extension". Clause 1 reflects the inconsistent "monthly" and "quarterly" point which I have mentioned. Newham recognised that inconsistency and in about July 2004 a rent account was established under which the appellant was to pay rent monthly. Apart from clause 5(10), to which I have also referred, the only other provision I need mention is clause 4(11), which reads:

"PURSUANT to an Order made by the
Watford County Court on [11 December 2003] under the provisions of Section 38(a) of the Landlord and Tenant Act 1954 the Corporation and Lessee hereby agreed that the provisions of Section 24 to 28 (inclusive) of that Act shall be excluded in relation to this Agreement."

The pleadings

12. Newham's stance in its Particulars of Claim was that after 28 September 2004 the appellant "… remained in occupation as a tenant on sufferance alternatively under a periodic tenancy upon the same terms and conditions as those contained under the Lease." The appellant's stance in her Defence was that if she remained in possession under a periodic tenancy, the terms and conditions of the lease continued. In its Reply, Newham asserted that the effect of clause 1 was that the term created included any period of holding over (a reference to the words of extension) and that the entire term was contracted out of sections 24 to 28 of the Act.

The judge's judgment

13. The judge dealt with the relevant issue in paragraphs [40] to [44] of her judgment. She found that the appellant made a payment of rent on 14 September 2004, which was 14 days before the expiry of the initial fixed term, and that after its expiry on 28 September 2004 the appellant paid, and Newham accepted, rent on six occasions up to 14 October 2005. She referred to the words of extension in clause 1. Her finding was that the parties did not enter into any new periodic tenancy agreement after 28 September 2004. All that happened was that the appellant held over on the terms of the lease. Her conclusion was that as the appellant's original fixed term tenancy was not protected under Part II of the Act, neither was her continued occupation after the expiry of that term. The judge's reasoning appears to have been that as the words of extension in clause 1 provided that any such period of holding over was part of the term created by the lease, the order excluding the term from the protection of the Act applied equally to the period of holding over. She expressed her conclusion thus:

"[44] It is a question of fact whether the parties had agreed a new tenancy. I have to ask myself whether it is right to infer from all the circumstances including the payment and acceptance of rent that the parties agreed to enter into a new tenancy on the expiry of the original lease. Clause 1 of the contract, as I have said, makes it plain that they intended that if the Defendant remained in the premises after the expiry of the lease it was to be a continuation of the term and would be on the same terms. I find there was nothing in the circumstances at the time of acceptance of rent that could have indicated to the Defendant that a new agreement was being entered into. In the light of all the evidence I find and hold that after the expiry of the lease the Defendant held over on the same terms and that as the original tenancy was not protected under the Landlord and Tenant Act 1954 neither was it protected when it was held over on the same terms. As she was holding over on the terms of the tenancy, the twenty one day notice was effective to terminate her interest."

The appeal

14. The single issue before us is whether, contrary to the judge's conclusion, following the termination of the initial term on 28 September 2004 the appellant remained in occupation of the premises under a tenancy to which the provisions of sections 24 to 28 in Part II of the Act applied.
15. The essence of the appellant's primary argument before us was that following the expiration of the initial fixed term of the tenancy on 28 September 2004, she continued in occupation as a tenant paying rent monthly, albeit somewhat irregularly, and that therefore the ordinary inference that should be drawn was that she was a monthly periodic tenant. The appellant was, however, conscious that the basis on which the judge had rejected this argument was that (1) there was no question of the parties having in fact agreed upon a new monthly tenancy, (2) all that had happened was that she had held over on the terms of the tenancy, and (3) "as the original tenancy was not protected under the Landlord and Tenant Act 1954 neither was it protected when it was held over on the same terms." She therefore enjoyed no security of tenure and it was open to Newham to terminate her occupation by the 21-day notice that it gave pursuant to clause 5(10), that provision being one of the terms on which she held over.
16. The appellant, in her skeleton argument, questioned the correctness of the judge's decision in this respect. In paragraph 7 she said that "If the court of appeal finds that HHJ Faber ruled that the lease continued by virtue of clause 1, the court of appeal is invited to set aside HHJ Faber's judgment on the basis that a lease containing a holding over clause is inconsistent with the nature of the contracted out lease agreement." As I read that submission, it was implicitly making the point that if the lease had continued as Judge Faber had ruled, it could not have been contracted out of sections 24 to 28 at all.
17. Ms Hawkes, for Newham, did not seek to uphold the judge's reason for her conclusion. She pointed out that, also in paragraph [44], Judge Faber found as a fact that no new tenancy agreement was entered into: all that happened was that the appellant was holding over on the terms of the lease. If there was no new tenancy, there was no tenancy to which Part II of the Act could apply, and she submitted that the appellant must at most have been occupying as a tenant at will. A tenancy at will may be determined at any time, and Part II of the Act affords no protection to it (see Wheeler v Mercer [1957] AC 416 and Hagee (London) Ltd v A B Erikson and Larson (a firm) [1976] QB 209).
18. It appeared to the court that it was not possible to approach a consideration of the parties' primary arguments without first considering the correctness or otherwise of the basis on which the judge actually decided the case. As to that, it is perhaps not surprising that the judge came to the conclusion that she did. First, I have said that in its Reply Newham asserted that the effect of clause 1 was that the term created by the lease included any period of holding over -- a reference to the words of extension -- and that the entire term was contracted out of sections 24 to 28. Second, the judge recorded in paragraph [9] of her judgment that on the fifth day of the trial Mr Ground QC, for the appellant, conceded that the lease was so contracted out. Third, the judge was fully conscious of the words of extension in clause 1, to which she referred in paragraph [41] of her judgment, going on to refer to the parties' intention that the lease should be contracted out and to the making of the order dated 11 December 2003 by the Watford County Court. The end result was that she held that the period of holding over was, by virtue of the words of extension, part of the term created by the lease; and that the entire term, including the period of extension, was contracted out of sections 24 to 28.

Discussion and conclusion

19. There is no doubt that both sides entered upon the original lease on the basis that the tenancy it created was excluded from the security of tenure provisions in sections 24 to 28 and that the consequence of the order of the court in December 2003 was that it achieved that result. Those provisions could, however, only have been excluded if the term created by the lease was "a term of years certain". That is because what was then section 38(4) of the Act only permitted a contracting out in relation to a tenancy for such a term.
20. The complication in this case arises from the definition of "the term" created by the lease as including "… any period of holding over or extension of it whether by statute or at common law or by agreement." The first possible meaning of those words of extension is that the term so created was the term certain expiring 28 September 2004, plus any such indefinite period of holding over or extension. If that is the correct interpretation, it would follow that the term created was not, or might not be, a "term of years certain" at all. If so, the December 2003 order was bad on its face and a nullity and, contrary to what the parties believed at the time, the tenancy created by the lease was not contracted out of the provisions of sections 24 to 28 at all (compare the decision of this court in Nicholls v Kinsey [1994] QB 600). To the extent that Newham sought in its Reply to assert that the contracting out applied not just to the initial contractual term but also to any such extension, it was advancing a case whose logic involved a fatal own goal. If the contracting out did purport so to extend, it was invalid in its entirety and the appellant at all times enjoyed security of tenure, with the consequence that her tenancy continued after 28 September 2004 under section 24 of the Act.
21. An alternative view is that, as at the date of the grant of the lease, any purported extension to the initial fixed term by any holding over or extension was a matter of uncertainty and that in principle the appellant would be entitled to vacate the premises as of right on the expiration of the term on 28 September 2004. It might then be said that the lease should be read as granting no more than a term of years certain, namely one expiring on 28 September 2004, and that the effect of the December 2003 order was to achieve the successful contracting out of that term from the provisions of sections 24 to 28. If that is the right interpretation, there would still remain the question as to the basis on which the appellant occupied the premises after 28 September 2004; although if the terms of that occupation were such as to give her a tenancy, any such tenancy was (if more than a mere tenancy at will) plainly not contracted out of sections 24 to 28.
22. Ms Hawkes' submission to us was, in effect, that we should disregard the words of extension as meaningless surplusage which, read in the context of the lease as a whole, was inconsistent with other provisions in it which, she said, indicated that the term created by the lease was no more than the initial fixed term. Perhaps the best provision she was able to enlist in support of that argument was clause 3(27), which imposed a tenant's covenant in relation to "…the last six months of the said term whether the same shall expire by effluxion of time or by Notice given in manner hereinafter provided …." I agree that that form of words appears to focus naturally on the fixed term expiring on 28 September 2004. But I nevertheless find it difficult to conclude, as Ms Hawkes invited, that we can and should simply ignore the words of extension as meaningless. They were plainly included deliberately; they were intended to achieve a legal effect and a meaning must be attributed to them.
23. As between the alternative views as to the true sense of the words of extension, I favour the view that they had the effect of defining the term as including any period of holding over or extension. If they do not mean that, I find it difficult to see what else they could mean. One possibility is that they were doing no more than to provide that, during any period of holding over or extension, the parties were to be regarded as continuing to be bound by the provisions of the lease. But if that is their sense -- and it is obviously part of it -- it is but a short step to the further conclusion that their essential effect was to define the term as including any such period of holding over or extension. In my view that was their effect. The lease created a tenancy for a term of years certain until 28 September 2004 plus, by the words of extension, any further period of holding over or extension of it on one or other of the bases referred to. We heard no argument on whether that made the lease void for uncertainty, on which I express no view. But I cannot see how a term of that nature can be regarded as a tenancy for a "term of years certain". The consequence was that the term created by the lease was not contracted out of sections 24 to 28 at all. That being so, the appellant's tenancy continued after 28 September 2004 under section 24 and it has not been determined by Newham by a notice served under section 25.
24. Once that conclusion is arrived at, it appears to me that the appellant's appeal must succeed. The judge's decision to different effect was wrong. There is, in these circumstances, no need to consider the rival arguments advanced to us as to whether, assuming that only the initial fixed term was contracted out, the appellant continued in occupation as a monthly tenant or a tenant at will. I would merely say that the argument that she would have been a tenant at will appeared to me to be unpromising. At the very least, the words of extension must mean that she held over on the terms of the lease so far as applicable. One of those terms, as Newham accepted, was that she was entitled to 21 days' notice terminating her occupation. That means she could not have been a tenant at will because it is the essence of such a tenancy that the tenant can be removed at will.
25. I would therefore allow the appellant's appeal and set aside paragraph 1 of the judge's order whereby she ordered the giving up of possession of No 4/4A to Newham. If my Lords agree, I would wish to hear the parties as to how we should deal with Newham's outstanding claim for forfeiture, with which the judge did not deal, and as to what further consequences our order has on the remaining parts of the order that the judge made.

The appeal in respect of 1A Rathbone Market

26. I turn to the second appeal. This claim concerned 1A Rathbone Market, a storeroom on the upper level of the market. Newham claimed possession on the basis that the appellant was a tenant at will under a tenancy agreement dated 1 January 2004. Rent was payable at an agreed rate of £750 a year, and on 29 March 2006 Newham served a notice on the appellant terminating her tenancy, she not having paid any rent. In her initial judgment, the judge held that that notice was short and she was disposed to refuse to order possession. The following morning, when the form of the order was being considered, the judge was persuaded that she had been in error in holding that the notice given was short -- the tenancy being a tenancy at will -- and she accepted that it was sufficient. She recalled her proposed order, which had not yet been drawn, and made one that instead ordered possession by 7 January 2008. She gave judgment against the appellant for mesne profits of £2,929.06 (continuing at the rate of £2.06 a day until possession) and dismissed the appellant's counterclaim.

The background

27. The factual background of this case is that on 22 December 2003 the appellant and Newham signed "Heads of Agreement for Lease" in relation to a proposed letting to the appellant of No 1A for a term of three years from 1 April 2004, contracted out of sections 24 to 28 of the Act. The lease was to include a break clause exercisable by either party, under which either could terminate the lease on three months' notice. The rent was to be £750 a year, payable quarterly in advance. The premises were to be used for storage purposes only. A crucial feature of the signed heads of agreement is that they were expressly stated to be "subject to contract". In the context of the proposed grant of a lease, that meant that neither side was to be committed to the other unless and until a formal lease and counterpart were exchanged (see Derby  and  Co  Ltd  v  ITC  Pension  Trust  Ltd [1977] 2 AER 890, at 895f to g, per Oliver J).
28. Following the signing of those heads of agreement, the appellant went into possession of No 1A. On 22 March 2004 Mr Cochran of Newham sent her a draft lease, claim form and draft court order. The latter two documents related to the proposed application to the county court for an order excluding the application of sections 24 to 28. The letter advised her to obtain legal advice. On 26 March Mr Rowe of Newham, who had replaced Mr Cochran, wrote further to her telling her to ignore the draft lease Mr Cochran had sent, and he sent her a different form of lease for signature and return. The appellant did not return any of the documents and on 12 May Mr Rowe chased her for a response.
29. On 1 June 20094 there was a change in the law enabling business leases to be contracted out of sections 24 to 28 without the need of a court order, although the new section 38A prescribed a particular procedure that had to be followed. On 6 July Mr Rowe sent to the appellant a third form of lease, a Schedule 1 notice and a form of statutory declaration, being the documentation required under the new procedure. The appellant did not respond to that letter either. On 16 July she wrote to Mr Mukadaya of Newham, opting to pay rent monthly in respect of No 1A as well as in relation to No 4/4A. On 19 August Mr Rowe sent her a plan for insertion to the lease he had previously sent her and chased for a response. Still there was none.
30. Matters did, however, move on in the autumn. On 20 September Mr McGivern of Newham sent a further set of like documentation to the appellant and also an engrossed tenancy at will that Newham had, as the judge found, already executed. He asked her to sign the documents and explained that the tenancy at will covered the period since the appellant had first gone into possession (which was January 2004) until the time when the proposed three-year lease was completed. He said that once Newham had received back from her the documents necessary to complete the contracted out lease, Newham would cancel the tenancy at will and forward to her the completed lease. He said the reason for this was that the lease could not be contracted out of sections 24 to 28 because its commencement date pre-dated the Schedule 1 notice and the execution of the statutory declaration. Mr McGivern asked the appellant to sign, date and return the statutory declaration and notice.
31. The appellant did not respond to that letter, and Mr McGivern sent her a reminder on 1 November. This time she did sign and return the documents, but Newham took the view that she had not executed them properly. It returned them to her on 15 November so that she could re-execute them and it explained the deficiencies it wanted remedied. It repeated that once it had received the executed documents back from her it would send her a letter cancelling the tenancy at will and forward the completed lease.
32. There was a meeting on 10 February 2005 between the appellant and Mr Pownall of Newham. At the meeting the appellant handed Mr Pownall the documents she was required to execute, by now correctly executed. In particular, she had signed the tenancy at will. That is a document called a "Tenancy Agreement" between Newham and the appellant and described, wrongly, as made on 1 January 2004. By clause 2 Newham let, and the appellant took, No. 1A, on a tenancy at will commencing on the date of the agreement. The rent was £62.50 a month, or £750 a year, to be paid in advance on the first day of the month. Clause 4 specifically excluded the creation of any periodic tenancy. There appears to have been no question that the tenancy agreement was also executed by Newham and that a valid tenancy at will was created.
33. The completion of the proposed three-year lease would require an exchange of the executed lease and counterpart. There was no such exchange at the meeting of 10 February 2005. The only evidence about that meeting was in paragraph 11 of the appellant's witness statement of 9 April 2007, in which she said that "On 10/02/2005 I attended a meeting at [Newham's] premises with Mr J Pownall. Both parties agreed that there were no outstanding matters, and that the lease be completed within a matter of weeks."
34. It looked as if matters were, therefore, about to reach finality. But on 28 February Mr Pownall wrote to the appellant pointing out that there were arrears on her rent account and that she also owed Newham its legal fees, which were to be payable on completion. He asked for a cheque to cover those sums. They were not paid and on 16 May Mr Rowe wrote to the appellant again asking her to pay the outstanding sums and threatening that, if they were not paid, steps would be taken to remove her from the property. There was then a leisurely pause during which nothing happened, until on 26 March 2006 Newham gave the appellant notice terminating her tenancy at will on 13 April 2006 and warning her that if she failed to pay the charges due in respect of her use and occupation since 1 January 2004, none of which she had paid, they would take proceedings for possession. At length they did just that.
35. The appellant resisted the claim on the basis that she entered into possession under the terms of an agreement under which Newham promised her a lease for a term of three years. Her case was that it had failed to grant her such a lease and that she held a tenancy from year to year to which Part II of the 1954 Act applied. However, the judge recorded that before Mr Ground QC departed from the proceedings he had conceded that the appellant did not enjoy the protection of Part II in relation to No. 1A. As that concession was inconsistent with the case that the appellant had a tenancy from year to year, Newham asked the judge to rule on the nature of her status in the premises.
36. The appellant admitted that, subject to a defence of set-off, she owed rent at the rate of £750 a year, saying it was due quarterly in advance from April 2004. The claimed set-off was based on an alleged breach of warranty by a Newham representative to put right a blocked drain outside No. 1A, the complaint being that, following rain, access to No. 1A was impeded by flooding.

The judge's judgment

37. In paragraph [53] of her judgment the judge recorded certain rulings she had made in the course of the trial. These included that she had permitted the appellant to make a fourth amendment to her Defence to plead that her tenancy could only be terminated by a notice of not less than three months. The judge identified the issues before her. One issue, flowing from the amendment just mentioned, was whether three months' notice was required to terminate the tenancy. A further issue arising on the appellant's much amended Defence was that she claimed that Newham's letter of 20 September 2004 amounted to a binding contractual offer to the effect that if she signed and returned the tenancy at will, Newham would send her a letter cancelling it and a duly executed three-year lease. The appellant complained that although she signed and returned the tenancy at will, Newham breached its promise by failing to send her an executed lease. Newham's argument in response to that was that there was no commitment on its part to send her any such lease. The letter of 20 September was simply part of the "subject to contract" negotiations opened with the December 2003 Heads of Agreement; and the appellant's status in No. 1A was never more than as a tenant at will.
38. The judge held that the formalities for a binding agreement for a lease in section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 did not apply to leases of three years or less. She held that the December 2003 Heads of Agreement were clearly "subject to contract". She held that the letter of 20 September 2004 was no more than the first step of formalising the relationship between the parties following the appellant's entry into possession and that it too was impliedly "subject to contract". That conclusion, if correct, provided a complete answer to the appellant's pleaded case that the letter of 20 September amounted to a contractual offer that she had accepted by conduct.
39. However, the judge did not stop there. She went on to hold as follows:

"[66] … but whether or not [the letter of 20 September 2004] was or was not subject to contract is irrelevant if, subsequently, the parties did reach a final agreement that the appellant was to have a lease on [sic] the premises contracted out of the 1954 Act and subject to a three month notice provision. There is no evidence to contradict what the [appellant] said happened at the meeting at 10 February 2005 [I have quoted above what the appellant said about that] although, because of the content of the attendance note of 9th February 2005, it is possible that there was discussion at that meeting concerning the outstanding rent. I find and hold however that if the agreement for the lease had been conditional on such pre-payment it is inconceivable that the pre-condition would not have been recorded in the lawyer's letter of 28th February 2005, and in those circumstances I find and hold that on 10th February 2005 the parties reached a binding agreement for a lease for three years contracted out of the 1954 Act with a term that notice of three months should be given to the [appellant]."

40. As a result of that finding, the judge concluded that although, following 10 February 2005, the appellant was still in possession as a tenant at will, it was implicit that she had to be given a reasonable notice to terminate that tenancy, which the judge fixed at three months. Her initial view was therefore that the appellant had been given short notice and so Newham was not entitled to possession. She was then persuaded to revise that view when it was explained to her that it is of the essence of a tenancy at will that a tenant can be removed at will. She therefore made the order for possession.

The appeal

41. Before us the appellant repeated her argument that the letter of 20 September 2004 amounted to a contractual offer that she had accepted by signing and returning the tenancy at will. It is unclear to me where she considered that success in that argument might take her, because one thing she did not claim in her much amended Defence was specific performance of the alleged agreement. In my judgment, however, the judge was plainly right to regard the letter of 20 September 2004 as being impliedly "subject to contract". That was the express basis of the December 2003 Heads of Terms. The letter of 20 September was directed towards the maturing of those Heads into a final and binding lease, and it is implicit that it was also "subject to contract". It would only have ceased to have been so subject if there were evidence that Newham and the appellant had, either expressly or impliedly, agreed that the "subject to contract" qualification should be expunged: see Cohen v Nessdale Ltd [1982] 2 All ER 97, at 103f to 104c, per Cumming-Bruce LJ. There was, however, no question of having there been any express such agreement; and in my view it is equally plain that there was no basis on which such an agreement could be implied.
42. It might, however, be said that the judge's subsequent finding that a binding agreement for the grant of a three-year lease was made on 10 February 2005 would lend considerable help to the appellant. If she was in possession of No. 1A with the benefit of such an agreement, might that not give her an arguable equitable defence to a claim by Newham to remove her at will?
43. It seems to me that it might. But Newham raised a fundamental, if late, objection to that finding by the judge. Ms Hawkes' point was that it had been no part of the appellant's pleaded case to allege that any such agreement was made on 10 February 2005. The appellant had also said no more about that meeting than she did in the very short paragraph in her witness statement that I have quoted. Whether or not a binding contract was then made was simply not an issue between the parties on the pleadings and Newham had not come to court to meet an argument that a contract was then made. In those circumstances Ms Hawkes submitted that the judge should not have purported to make any such finding in relation to the meeting of 10 February 2005.
44. Ms Hawkes has, it seems to me, the support of the judge herself in advancing that complaint. In paragraph [57], and before making the finding about the meeting, the judge had earlier said this:

"At the end of her closing speech to me Miss Hawkes said that the [appellant] had not claimed specific performance nor was any equitable interest or estoppel pleaded but that it may be possible to argue that the letter of 24th September [sic: she meant 20th September] to which I make reference below did give rise to an equitable right and indeed in his closing speech the [appellant's] husband has asked me to order [Newham] to enter into a lease as promised. However, I stated in response to Miss Hawkes that I was not trying any such issue, the [appellant] having been represented all the way through to start of the trial by Queen's Counsel who had not pleaded any such claim even when obtaining permission to amend the statement of case on the first day of the trial."

45. That, therefore, was a clear acceptance by the judge that she was not prepared to entertain any claim by the appellant on the basis that she was entitled to specific performance of an agreement to grant her a lease, or to some equitable interest in No. 1A, by reason of the negotiations relating to the grant of a proposed lease, the point being made by the appellant in particular in relation to her case based on the letter of 20 September 2004. Of course the judge then knocked that letter out on "subject to contract" grounds. But she then, in paragraph [66], made a finding and arrived at a conclusion that can be said to be quite contrary to the stance that she had declared in paragraph [57]. She first made a finding that a binding contract for the grant of a lease was entered into on 10 February 2005. She then went on to find, although she was later persuaded to change her mind, that the benefit of that contract gave the appellant an interest in No. 1A that entitled her to be given at least three months' notice before her occupation could be terminated.
46. In my judgment, with respect to the judge, she took at that point a wrong turn. First, there was no pleaded case that any binding agreement had been made on 10 February 2005. Newham had not come to court to meet such a case and it therefore did not even find it necessary to cross-examine the appellant on the very short paragraph in her witness statement relating to that meeting. Put bluntly, therefore, the judge simply had no business to make any such finding in relation to that meeting. Second, the significance of the finding in the judge's mind was that it meant that the appellant was in possession of No. 1A with the benefit of a contractual right to the grant of a three-year lease including a three-month break term. By a process of reasoning that I do not wholly follow, the judge went on to conclude that that contractual right somehow fed into the terms of the appellant's tenancy at will and entitled her to three months' notice before it could be terminated. But what I consider was really the substance of the judge's finding was that the appellant was in possession with the benefit of an agreement for a lease including a three-month break clause and was therefore entitled to three months' notice under that equitable lease. To proceed down that route was, it seems to me, to embrace not only an unpleaded case but also one which the judge had in paragraph [57] rejected as not being before her.
47. Ms Hawkes sought the court's leave to serve a late Respondent's Notice objecting to the making by the judge of the finding in relation to the meeting of 10 February 2005. We allowed the notice to be put in and I would have no hesitation in accepting Ms Hawkes' submission that the judge should not have made the finding she did in relation to the meeting of 10 February 2005. The case that a binding contract was then made was simply not a pleaded issue.
48. The appellant will no doubt feel aggrieved about our taking this course. If it is any comfort to her, I should perhaps add that, whilst we received no argument on the point, I am not myself convinced that there was any factual basis on which the judge could properly have made the finding that a binding contract was concluded on 10 February 2005. The brief evidence that the appellant gave about that meeting did not make good the point that a binding contract was then made; and the ordinary inference is that, just as the letter of 20 September 2004 -- as the judge correctly held -- was impliedly "subject to contract", so likewise were the events of 10 February 2005. There was no evidence that the parties had expressly agreed that their negotiations were no longer to be regarded as so subject and no evidence on the basis of which any such agreement could be implied.
49. It follows in my view that the end result is that there is no substance in the appellant's appeal. She occupied No. 1A as a tenant at will, her tenancy was determined and Newham was entitled to the possession order that the judge made.
50. The only other matter I need to deal with is that, although I understand the judge to have refused the appellant permission to appeal against the rejection of her claim in respect of the blocked drain, the appellant renewed before us her application for permission to appeal against the judge's conclusion in that respect. The judge dealt with that claim in paragraphs [69] to [73] of her judgment. I need say no more than that the judge found the appellant to be an inconsistent and unreliable witness and that on the facts her case wholly failed, for reasons that the judge explained. There is no prospect of this court arriving at a different view from the judge on what was a pure question of fact.
51. I would therefore refuse permission to the appellant to appeal in relation to her blocked drain case and dismiss her appeal.

Sir John Chadwick :

52. I agree with the order proposed in relation to each of these appeals.

Lord Justice Moore-Bick :

53. I also agree. So the appeal in relation to 4/4A will be allowed and the appeal in relation to 1A will be dismissed.

Order: 0034: Appeal dismissed; 0035: Appeal allowed