United Kingdom House of Lords Decisions

Parliamentary Archives,
HL/PO/JU/18/245

Street (Respondent)

v.
Mountford (A.P.) (Appellant)

JUDGMENT

Die Jovis 2° Mail 1985

Upon Report from the Appellate Committee to whom was
referred the Cause Street against Mountford, That the
Committee had heard Counsel on Monday the 4th, Tuesday the
5th and Wednesday the 6th days of March last upon the
Petition and Appeal of Wendy Mountford of Rooms 5/6, 5 St.
Clements Gardens, Boscombe, Bournemouth in the County of
Dorset praying that the matter of the Order set forth in the
Schedule thereto, namely an Order of Her Majesty's Court of
Appeal of the 18th day of April 1984, might be reviewed
before Her Majesty the Queen in Her Court of Parliament and
that the said Order might be reversed, varied or altered or
that the Petitioner might have such other relief in the
premises as to Her Majesty the Queen in Her Court of
Parliament might seem meet; as also upon the Case of Roger
Theodore Crispin Street lodged in answer to the said Appeal,
and due consideration had this day of what was offered on
either side in this Cause:

It is Ordered and Adjudged, by the Lords Spiritual and
Temporal in the Court of Parliament of Her Majesty the Queen
assembled, That the said Order of Her Majesty's Court of
Appeal of the 18th day of April 1984 complained of in the
said Appeal be, and the same is hereby, Reversed: and that
the Order of Mr. Recorder Rolf of the 21st day of September
1983 be, and the same is hereby, Restored: And it is further
Ordered, That the Respondent do pay or cause to be paid to
the said Appellant the Costs incurred by her in the Courts
below and also the Costs incurred by her in respect of the
said Appeal to this House, the amount of such last-mentioned
Costs to be certified by the Clerk of the Parliaments if not
agreed between the parties: And it is further Ordered that
the Appellant's Costs be taxed in accordance with Schedule 2
to the Legal Aid Act 1974: And it is also further Ordered,
That the Cause be, and the same is hereby, remitted back to
the Queen's Bench Division of the High Court of Justice to
do therein as shall be just and consistent with this
Judgment.

Cler: Parliamentor





HOUSE OF LORDS

ROGER THEODORE CRISPIN STREET
(RESPONDENT)




v.

WENDY MOUNTFORD
(APPELLANT)

Lord Scarman
Lord Keith of Kinkel
Lord Bridge of Harwich
Lord Brightman
Lord Templeman

LORD SCARMAN

My Lords,

I have had the advantage of reading in draft the speech to
be delivered by my noble and learned friend, Lord Templeman. I
agree with it, and for the reasons he gives I would allow the
appeal with costs here and below.




LORD KEITH OF KINKEL

My Lords,

For the reasons given in the speech of my noble and learned
friend, Lord Templeman, with which I agree, I too would allow the
appeal.

LORD BRIDGE OF HARWICH

My Lords,

For the reasons given in the speech of my noble and learned
friend Lord Templeman, with which I agree, I would allow this
appeal.

LORD BRIGHTMAN

My Lords,

I agree that this appeal should be allowed for the reasons
given by my noble and learned friend, Lord Templeman.

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LORD TEMPLEMAN

My Lords,

By an agreement dated 7 March 1983, the respondent Mr.
Street granted the appellant Mrs. Mountford the right to occupy
the furnished rooms numbers 5 and 6 at 5 St. Clements Gardens,
Boscombe, from 7 March 1983 for £37.00 per week, subject to
termination by 14 days written notice and subject to the conditions
set forth in the agreement. The question raised by this appeal is
whether the agreement created a tenancy or a licence.

A tenancy is a term of years absolute. This expression, by
section 205(l)(xxvii) of the Law of Property Act 1925, reproducing
the common law, includes a term from week to week in possession
at a rent and liable to determination by notice or re-entry.
Originally a term of years was not an estate in land, the lessee
having merely a personal action against his lessor. But a legal
estate in leaseholds was created by the Statute of Gloucester 1278
and the Act of 1529 21 Henry VIII c.15. Now by section 1 of the
Law of Property Act 1925 a term of years absolute is an estate in
land capable of subsisting as a legal estate. In the present case if
the agreement dated 7 March 1983 created a tenancy, Mrs.
Mountford having entered into possession and made weekly
payments acquired a legal estate in land. If the agreement is a
tenancy, the occupation of Mrs. Mountford is protected by the
Rent Acts.

A licence in connection with land while entitling the
licensee to use the land for the purposes authorised by the licence
does not create an estate in the land. If the agreement dated 7
March 1983 created a licence for Mrs. Mountford to occupy the
premises, she did not acquire any estate in the land. If the
agreement is a licence then Mrs. Mountford's right of occupation
is not protected by the Rent Acts. Hence the practical
importance of distinguishing between a tenancy and a licence.

In the course of argument, nearly every clause of the
agreement dated 7 March 1983 was relied upon by the appellant as
indicating a lease and by the respondent as indicating a licence.
The agreement, in full, was in these terms:

"I Mrs. Wendy Mountford agree to take from the owner
Roger Street the single furnished room number 5 and 6 at 5
St. Clements Gardens, Boscombe, Bouremouth, commencing 7
March 1983 at a licence fee of £37 per week.

I understand that the right to occupy the above room is
conditional on the strict observance of the following rules:

1. No paraffin stoves, or other than the supplied form of
   heating, is allowed in the room.

2. No one but the above-named person may occupy or
   sleep in the room without prior permission, and this personal
   licence is not assignable.

3. The owner (or his agent) has the right at all times to
   enter the room to inspect its condition, read and collect
   
   

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money from meters, carry out maintenance works, install or
replace furniture or for any other reasonable purpose.

4. All rooms must be kept in a clean and tidy condition.

5. All damage and breakages must be paid for or
   replaced at once. An initial deposit equivalent to 2 weeks
   licence fee will be refunded on termination of the licence
   subject to deduction for all damage or other breakages or
   arrears of licence fee, or retention towards the cost of any
   necessary possession proceedings.




6. No nuisance or annoyance to be caused to the other
   occupiers. In particular, all music played after midnight to
   be kept low so as not to disturb occupiers of other rooms.

7. No children or pets allowed under any circumstances
   whatsoever.

8. Prompt payment of the licence fee must be made
   every Monday in advance without fail.

9. If the licence fee or any part of it shall be seven
   days in arrear or if the occupier shall be in breach of any
   of the other terms of this agreement or if (except by
   arrangement) the room is left vacant or unoccupied, the
   owner may re-enter the room and this licence shall then
   immediately be terminated (without prejudice to all other
   rights and remedies of the owner.)

10. This licence may be terminated by 14 days written
    notice given to the occupier at any time by the owner or
    his agent, or by the same notice by the occupier to the
    owner or his agent.

Occupier's signature
Owner/agent's signature
Date 7th March 1983

I understand and accept that a licence in the above form
does not and is not intended to give me a tenancy protected
under the Rent Acts.

Occupier's signature."

Mr. Street gave 14 days' notice to determine the agreement
and sued Mrs. Mountford for possession. The Recorder in the
county court held that Mrs. Mountford was a tenant entitled to
the protection of the Rent Acts and dismissed the action. The
Court of Appeal held that Mrs. Mountford was a licensee not
entitled to the protection of the Rent Acts and made an order for
possession. Mrs. Mountford appeals.

On behalf of Mrs. Mountford her counsel, Mr. Hicks, Q.C.,
seeks to reaffirm and re-establish the traditional view that an
occupier of land for a term at a rent is a tenant providing the
occupier is granted exclusive possession. It is conceded on behalf



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of Mr. Street that the agreement dated 7 March 1983 granted
exclusive possession to Mrs. Mountford. The traditional view that
the grant of exclusive possession for a term at a rent creates a
tenancy is consistent with the elevation of a tenancy into an
estate in land. The tenant possessing exclusive possession is able
to exercise the rights of an owner of land, which is in the real
sense his land albeit temporarily and subject to certain
restrictions. A tenant armed with exclusive possession can keep
out strangers and keep out the landlord unless the landlord is
exercising limited rights reserved to him by the tenancy agreement
to enter and view and repair. A licensee lacking exclusive
possession can in no sense call the land his own and cannot be
said to own any estate in the land. The licence does not create
an estate in the land to which it relates but only makes an act
lawful which would otherwise be unlawful.

On behalf of Mr. Street his counsel, Mr. Goodhart, Q.C.,
relies on recent authorities which, he submits, demonstrate that an
occupier granted exclusive possession for a term at a rent may
nevertheless be a licensee if, in the words of Slade L.J. in the
present case, "there is manifested the clear intentions of both
parties that the rights granted are to be merely those of a
personal right of occupation and not those of a tenant." In the
present case, it is submitted, the provisions of the agreement
dated 7 March 1983 and in particular clauses 2, 4, 7 and 9 and
the express declaration at the foot of the agreement manifest the
clear intention of both parties that the rights granted are to be
those of a personal nature and not those of a tenant.

My Lords, there is no doubt that the traditional distinction
between a tenancy and a licence of land lay in the grant of land
for a term at a rent with exclusive possession. In some cases it
was not clear at first sight whether exclusive possession was in
fact granted. For example, an owner of land could grant a
licence to cut and remove standing timber. Alternatively the
owner could grant a tenancy of the land with the right to cut and
remove standing timber during the term of the tenancy. The
grant of rights relating to standing timber therefore required
careful consideration in order to decide whether the grant
conferred exclusive possession of the land for a term at a rent
and was therefore a tenancy or whether it merely conferred a
bare licence to remove the timber.

In Glenwood Lumber Co. Ltd, v. Phillips [1904] AC 405,
the Crown in exercise of statutory powers "licensed" the'
respondents to hold an area of land for the purpose of cutting and
removing timber for the term of 21 years at an annual rent.
Delivering the advice of the Judicial Committee of the Privy
Council, Lord Davey said at pp. 408-409:

"The appellants contended that this instrument conferred
only a licence to cut timber and carry it away, and did not
give the respondent any right of occupation or interest in
the land itself. Having regard to the provisions of the Act
under the powers of which it was executed and to the
language of the document itself, their Lordships cannot
adopt this view of the construction or effect of it. In the
so-called licence itself it is called indifferently a licence
and a demise, but in the Act it is spoken of as a lease, and



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the holder of it is described as the lessee. It is not,
however, a question of words but of substance. If the
effect of the instrument is to give the holder an exclusive
right of occupation of the land, though subject to certain
reservations or to a restriction of the purposes for which it
may be used, it is in law a demise of the land itself. By
[the Act] it is enacted that the lease shall vest in the
lessee the right to take and keep exclusive possession of the
lands described therein subject to the conditions in the Act
provided or referred to, and the lessee is empowered
(amongst other things) to bring any actions or suits against
any party unlawfully in possession of any land so leased, and
to prosecute all trespassers thereon. The operative part and
habendum in the licence is framed in apt language to carry
out the intention so expressed in the Act. And their
Lordships have no doubt that the effect of the so-called
licence was to confer a title to the land itself on the
respondent."

This was a case in which the court after careful
consideration of the purposes of the grant, the terms of the grant
and the surrounding circumstances, came to the conclusion that the
grant conferred exclusive possession and was therefore a tenancy.

A contrary conclusion was reached in Taylor v. Caldwell
(1863) 3 B. & S. 826 in which the defendent agreed to let the
plaintiff have the use of the Surrey Gardens and Music Hall on
four specified days giving a series of four concerts and day and
night fetes at the gardens and hall on those days, and the plaintiff
agreed to take the gardens and the hall and to pay £100 for each
day. Blackburn J said at p. 832:

"The parties inaccurately call this a 'letting,' and the money
to be paid a 'rent,' but the whole agreement is such as to
show that the defendents were to retain the possession of
the hall and gardens so that there was to be no demise of
them, and that the contract was merely to give the
plaintiffs the use of them on those days."

That was a case where the court after considering the
purpose of the grant, the terms of the grant and the surrounding
circumstances came to the conclusion that the grantee was not
entitled to exclusive possession but only to use the land for
limited purposes and was therefore a licensee.

In the case of residential accommodation there is no
difficulty in deciding whether the grant confers exclusive
possession. An occupier of residential accommodation at a rent
for a term is either a lodger or a tenant. The occupier is a
lodger if the landlord provides attendance or services which require
the landlord or his servants to exercise unrestricted access to and
use of the premises. A lodger is entitled to live in the premises
but cannot call the place his own. In Allan v. Liverpool Overseers
(1874) L.R. 9 Q.B. 180, 191-192 Blackburn J. said:

"A lodger in a house, although he has the exclusive use of
rooms in the house, in the sense that nobody else is to be
there, and though his goods are stowed there, yet he is not
in exclusive occupation in that sense, because the landlord is



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there for the purpose of being able, as landlords commonly
do in the case of lodgings, to have his own servants to look
after the house and the furniture, and has retained to
himself the occupation, though he has agreed to give the
exclusive enjoyment of the occupation to the lodger."

If on the other hand residential accommodation is granted
for a term at a rent with exclusive possession, the landlord
providing neither attendance nor services, the grant is a tenancy;
any express reservation to the landlord of limited rights to enter
and view the state of the premises and to repair and maintain the
premises only serves to emphasise the fact that the grantee is
entitled to exclusive possession and is a tenant. In the present
case it is conceded that Mrs. Mountford is entitled to exclusive
possession and is not a lodger. Mr. Street provided neither
attendance nor services and only reserved the limited rights of
inspection and maintenance and the like set forth in clause 3 of
the agreement. On the traditional view of the matter, Mrs.
Mountford not being a lodger must be a tenant.

There can be no tenancy unless the occupier enjoys
exclusive possession; but an occupier who enjoys exclusive
possession is not necessarily a tenant. He may be owner in fee
simple, a trespasser, a mortgagee in possession, an object of
charity or a service occupier. To constitute a tenancy the
occupier must be granted exclusive possession for a fixed or
periodic term certain in consideration of a premium or periodical
payments. The grant may be express, or may be inferred where
the owner accepts weekly or other periodical payments from the
occupier.

Occupation by service occupier may be eliminated. A
service occupier is a servant who occupies his master's premises in
order to perform his duties as a servant. In those circumstances
the possession and occupation of the servant is treated as the
possession and occupation of the master and the relationship of
landlord and tenant is not created; see Mayhew v. Suttle (1854) 4
El. & Bl. 347. The test is whether the servant requires the
premises he occupies in order the better to perform his duties as
a servant. "Where the occupation is necessary for the
performance of services, and the occupier is required to reside in
the house in order to perform those services, the occupation being
strictly ancillary to the performance of the duties which the
occupier has to perform, the occupation is that of a servant;" per
Mellor J in Smith v. Seghill Overseers (1875) L.R. 10 Q.B. 422,
428.

The cases on which Mr. Goodhart relies begin with Booker
v. Palmer [1942] 2 All E.R. 674. The owner of a cottage agreed
to allow a friend to install an evacuee in the cottage rent free
for the duration of the war. The Court of Appeal held that there
was no intention on the part of the owner to enter into legal
relationships with the evacuee. Lord Greene, M.R., said at p.677:

"To suggest there is an intention there to create a
relationship of landlord and tenant appears to me to be
quite impossible. There is one golden rule which is of very
general application, namely, that the law does not impute
intention to enter into legal relationships where the



- 6 -

circumstances and the conduct of the parties negative any
intention of the kind. It seems to me that this is a clear
example of the application of that rule."

The observations of Lord Greene M.R. were not directed to
the distinction between a contractual tenancy and a contractual
licence. The conduct of the parties (not their professed intentions)
indicated that they did not intend to contract at all.

In the present case, the agreement dated 7 March 1983
professed an intention by both parties to create a licence and
their belief that they had in fact created a licence. It was
submitted on behalf of Mr. Street that the court cannot in these
circumstances decide that the agreement created a tenancy
without interfering with the freedom of contract enjoyed by both
parties. My Lords, Mr. Street enjoyed freedom to offer Mrs.
Mountford the right to occupy the rooms comprised in the
agreement on such lawful terms as Mr. Street pleased. Mrs.
Mountford enjoyed freedom to negotiate with Mr. Street to obtain
different terms. Both parties enjoyed freedom to contract or not
to contract and both parties exercised that freedom by contracting
on the terms set forth in the written agreement and on no other
terms. But the consequences in law of the agreement, once
concluded, can only be determined by consideration of the effect
of the agreement. If the agreement satisfied all the requirements
of a tenancy, then the agreement produced a tenancy and the
parties cannot alter the effect of the agreement by insisting that
they only created a licence. The manufacture of a five pronged
implement for manual digging results in a fork even if the
manufacturer, unfamiliar with the English language, insists that he
intended to make and has made a spade.

It was also submitted that in deciding whether the
agreement created a tenancy or a licence, the court should ignore
the Rent Acts. If Mr. Street has succeeded, where owners have
failed these past 70 years, in driving a coach and horses through
the Rent Acts, he must be left to enjoy the benefit of his
ingenuity unless and until Parliament intervenes. I accept that the
Rent Acts are irrelevant to the problem of determining the legal
effect of the rights granted by the agreement. Like the professed
intention of the parties, the Rent Acts cannot alter the effect of
the agreement.

In Marcroft Wagons Ltd. v. Smith [1951] 2 K.B. 496 the
daughter of a deceased tenant who lived with her mother claimed
to be a statutory tenant by succession and the landlords asserted
that the daughter had no rights under the Rent Acts and was a
trespasser. The landlords expressly refused to accept the
daughter's claims but accepted rent from her while they were
considering the position. If the landlords had decided not to apply
to the court for possession but to accept the daughter as a tenant,
the monies paid by the daughter would have been treated as rent.
If the landlords decided, as they did decide, to apply for possession
and to prove, as they did prove, that the daughter was not a
statutory tenant, the monies paid by the daughter were treated as
mesne profits. The Court of Appeal held with some hesitation
that the landlords never accepted the daughter as tenant and never
intended to contract with her although the landlords delayed for
some six months before applying to the court for possession.
Roxburgh J. said at p. 507:

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"Generally speaking, when a person, having a sufficient
estate in land, lets another into exclusive possession, a
tenancy results, and there is no question of a licence. But
the inference of a tenancy is not necessarily to be drawn
where a person succeeds on a death to occupation of rent-
controlled premises and a landlord accepts some rent while
he or the occupant, or both of them, is or are considering
his or their position. If this is all that happened in this
case, then no tenancy would result."

In that case, as in Booker v. Palmer the court deduced from
the conduct of the parties that they did not intend to contract at
all.

Errington v. Errington and Woods [1952] 1 KB 290
concerned a contract by a father to allow his son to buy the
father's house on payment of the instalments of the father's
building society loan. Denning L.J. referred at p. 297 to the
judgment of Lord Greene M.R. in Booker v. Palmer [1942] 2 All
E.R. 674; 677 where, however, the circumstances and the conduct
of the parties negatived any intention to enter into legal
relationships. Denning L.J. continued at pp. 297-298:

"We have had many instances lately of occupiers in
exclusive possession who have been held to be not tenants,
but only licensees. When a requisitioning authority allowed
people into possession at a weekly rent: . . . when a
landlord told a tenant on his retirement that he could live
in a cottage rent free for the rest of his days; . . . when a
landlord, on the death of the widow of a statutory tenant,
allowed her daughter to remain in possession, paying rent
for six months: Marcroft Wagons Ltd, v. Smith; when the
owner of a shop allowed the manager to live in a flat above
the shop, but did not require him to do so, and the value of
the flat was taken into account at £1 a week in fixing his
wages: ... in each of those cases the occupier was held to
be a licensee and not a tenant. . . The result of all these
cases is that, although a person who is let into exclusive
possession is prima facie to be considered a tenant,
nevertheless he will not be held to be so if the
circumstances negative any intention to create a tenancy.
Words alone may not suffice. Parties cannot turn a tenancy
into a licence merely by calling it one. But if the
circumstances and the conduct of the parties show that all
that was intended was that the occupier should be granted a
personal privilege, with no interest in the land, he will be
held to be a licensee only."

In Errington v. Errington and Woods [1952] 1 KB 290 and
in the cases cited by Denning L.J. at p. 297 there were
exceptional circumstances which negatived the prima facie
intention to create a tenancy, notwithstanding that the occupier
enjoyed exclusive occupation. The intention to create a tenancy
was negatived if the parties did not intend to enter into legal
relationships at all, or where the relationship between the parties
was that of vendor and purchaser, master and service occupier, or
where the owner, a requisitioning authority had no power to grant
a tenancy. These exceptional circumstances are not to be found



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in the present case where there has been the lawful independent
and voluntary grant of exclusive possession for a term at a rent.

If the observations of Denning L.J. are applied to the facts
of the present case it may fairly be said that the circumstances
negative any intention to create a mere licence. Words alone do
not suffice. Parties cannot turn a tenancy into a licence merely
by calling it one. The circumstances and the conduct of the
parties show that what was intended was that the occupier should
be granted exclusive possession at a rent for a term with a
corresponding interest in the land which created a tenancy.

In Cobb v. Lane [1952] 1 T.L.R. 1037, an owner allowed her
brother to occupy a house rent free. The county court judge, who
was upheld by the Court of Appeal, held that there was no
intention to create any legal relationship and that a tenancy at
will was not to be implied. This is another example of conduct
which negatives any intention of entering into a contract, and does
not assist in distinguishing a contractual tenancy from a
contractual licence.

In Facchini v. Bryson [1952] 1 T.L.R. 1386, an employer and
his assistant entered into an agreement which, inter alia, allowed
the assistant to occupy a house for a weekly payment on terms
which conferred exclusive possession. The assistant did not occupy
the house for the better performance of his duty and was not
therefore a service occupier. The agreement stipulated that
"nothing in this agreement shall be construed to create a tenancy
between the employer and the assistant." Somervell L.J. said at
p. 1389:

"If, looking at the operative clauses in the agreement, one
comes to the conclusion that the rights of the occupier, to
use a neutral word, are those of a lessee, the parties cannot
turn it into a licence by saying at the end 'this is deemed
to be a licence;' nor can they, if the operative paragraphs
show that it is merely a licence, say that it should be
deemed to be a lease."

Denning L.J. referred to several cases including Errington v.
Errington and Woods and Cobb v. Lane and said at pp. 1389-1390:

"In all the cases where an occupier has been held to be a
licensee there has been something in the circumstances, such
as a family arrangement, an act of friendship or generosity,
or such like, to negative any intention to create a tenancy.
... In the present case, however, there are no special
circumstances. It is a simple case where the employer let
a man into occupation of a house in consequence of his
employment at a weekly sum payable by him. The
occupation has all the features of a service tenancy, and
the parties cannot by the mere words of their contract turn
it into something else. Their relationship is determined by
the law and not by the label which they choose to put on
it."

The decision, which was thereafter binding on the Court of
Appeal and on all lower courts, referred to the special
circumstances which are capable of negativing an intention to



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create a tenancy and reaffirmed the principle that the professed
intentions of the parties are irrelevant. The decision also
indicated that in a simple case a grant of exclusive possession of
residential accommodation for a weekly sum creates a tenancy.

In Murray Bull & Co. Ltd, v. Murray [1953] 1 Q.B. 211 a
contractual tenant held over, paying rent quarterly. McNair J.
found at p. 217 that "both parties intended that the relationship
should be that of licensee and no more. . . The primary
consideration on both sides was that the defendant, as occupant of
the flat, should not be a controlled tenant." In my opinion this
case was wrongly decided. McNair J. citing the .observations of
Denning L.J. in Errington v. Errington and Woods [1952] 1 K.B.
290; 297 and Marcroft Wagons Ltd, v. Smith [[1951] 2 K.B. 466
failed to distinguish between first conduct which negatives an
intention to create legal relationships, secondly special
circumstances which prevent exclusive occupation from creating a
tenancy and thirdly the professed intention of the parties. In
Murray Bull & Co. Ltd, v. Murray the conduct of the parties
showed an intention to contract and there were no relevant special
circumstances. The tenant holding over continued by agreement to
enjoy exclusive possession and to pay a rent for a term certain.
In those circumstances he continued to be a tenant notwithstanding
the professed intention of the parties to create a licence and their
desire to avoid a controlled tenancy.

In Addiscombe Garden Estates Ltd, v. Crabbe [1958] 1 Q.B.
513 the Court of Appeal considered an agreement relating to a
tennis club carried on in the grounds of a hotel. The agreement
was "described by the parties as a licence. . . the draftsman has
studiously and successfully avoided the use either of the word
'landlord' or the word 'tenant' throughout the document" per
Jenkins L.J. at p. 522. On analysis of the whole of the agreement
the Court of Appeal came to the conclusion that the agreement
conferred exclusive possession and thus created a tenancy. Jenkins
L.J. said at p. 522:

"The whole of the document must be looked at; and if,
after it has been examined, the right conclusion appears to
be that, whatever label may have been attached to it, it in
fact conferred and imposed on the grantee in substance the
rights and obligations of a tenant, and on the grantor in
substance the rights and obligations of a landlord, then it
must be given the appropriate effect, that is to say, it must
be treated as a tenancy agreement as distinct from a mere
licence."

In the agreement in the Addiscombe case it was by no means
clear until the whole of the document had been narrowly examined
that exclusive possession was granted by the agreement. In the
present case it is clear that exclusive possession was granted and
so much is conceded. In these circumstances it is unnecessary to
analyse minutely the detailed rights and obligations contained in
the agreement.

In the Addiscombe case Jenkins L.J. referred at p. 528 to
the observations of Denning L.J. in Errington and Errington and
Woods to the effect that "the test of exclusive possession is by no
means decisive." Jenkins L.J. continued "I think that wide



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statement must be treated as qualified by his observations in
Facchini v. Bryson (1952) 1 T.L.R. 1386, 1389; and it seems to me
that, save in exceptional cases of the kind mentioned by Denning
L.J. in that case, the law remains that the fact of exclusive
possession, if not decisive against the view that there is a mere
licence, as distinct from a tenancy, is at all events a consideration
of the first importance."

Exclusive possession is of first importance in considering
whether an occupier is a tenant; exclusive possession is not
decisive because an occupier who enjoys exclusive possession is not
necessarily a tenant. The occupier may be a lodger or service
occupier or fall within the other exceptional categories mentioned
by Denning L.J. in Errington v. Errington and Woods [1952] 1 K.B.
290.

In Isaac v. Hotel de Paris Ltd. [1960] 1 WLR 239 an
employee who managed a night bar in a hotel for his employer
company which held a lease of the hotel negotiated "subject to
contract" to complete the purchase of shares in the company and
to be allowed to run the nightclub for his own benefit if he paid
the head rent payable by the company for the hotel. In the
expectation that the negotiations "subject to contract" would ripen
into a binding agreement, the employee was allowed to run the
nightclub and he paid the company's rent. When negotiations
broke down the employee claimed unsuccessfully to be a tenant of
the hotel company. The circumstances in which the employee was
allowed to occupy the premises showed that the hotel company
never intended to accept him as a tenant and that he was fully
aware of that fact. This was a case, consistent with the
authorities cited by Lord Denning in giving the advice of the
Judicial Committee of the Privy Council, in which the parties did
not intend to enter into contractual relationships unless and until
the negotiations "subject to contract" were replaced by a binding
contract.

In Abbeyfield (Harpenden) Society Ltd, v. Woods [1968] 1
W.L.R. 374 the occupier of a room in an old peoples home was
held to be a licensee and not a tenant. Lord Denning M.R. at p.
376 said "the modern cases show that a man may be a licensee
even though he has exclusive possession, even though the word
'rent' is used, and even though the word 'tenancy' is used. The
court must look at the agreement as a whole and see whether a
tenancy really was intended. In this case there is, besides the one
room, the provision of services, meals, a resident housekeeper, and
such like. The whole arrangement was so personal in nature that
the proper inference is" that he was a licensee.

As I understand the decision in the Abbeyfield case the
court came to the conclusion that the occupier was a lodger and
was therefore a licensee not a tenant.

In Shell-mex and B.P. Ltd, v. Manchester Garages Ltd.
[1971] 1 W.L.R. 612 the Court of Appeal after carefully examining
an agreement whereby the defendant was allowed to use a petrol
company's filling station for the purposes of selling petrol, came
to the conclusion that the agreement did not grant exclusive
possession to the defendant who was therefore a licensee. At p.
615 Lord Denning M.R. in considering whether the transaction was



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a licence or a tenancy said that "Broadly speaking, we have to see
whether it is a personal privilege given to a person (in which case
it is a licence), or whether it grants an interest in land (in which
case it is a tenancy). At one time it used to be thought that
exclusive possession was a decisive factor. But that is not so. It
depends on broader considerations altogether. Primarily on
whether it is personal in its nature or not: see Errington v.
Errington and Woods."

In my opinion the agreement was only "personal in its
nature" and created "a personal privilege" if the agreement did not
confer the right to exclusive possession of the filling station. No
other test for distinguishing between a contractual tenancy and a
contractual licence appears to be understandable or workable.

Heslop v. Burns [1974] 1 W.L.R. 1241 was another case in
which the owner of a cottage allowed a family to live in the
cottage rent free and it was held that no tenancy at will had been
created on the grounds that the parties did not intend any legal
relationship. My noble and learned friend Lord Scarman then
Scarman L.J. cited with approval at p. 1252 the statement by
Denning L.J. in Facchini v. Bryson (1952) 1 T.L.R. 1386, 1389 that:

"In all the cases where an occupier has been held to be a
licensee there has been something in the circumstances, such
as a family arrangement, an act of friendship or generosity,
or such like, to negative any intention to create a tenancy."

In Marchant v. Charters [1977] 1 W.L.R. 1181 a bedsitting
room was occupied on terms that the landlord cleaned the rooms
daily and provided clean linen each week. It was held by the
Court of Appeal that the occupier was a licensee and not a
tenant. The decision in the case is sustainable on the grounds
that the occupier was a lodger and did not enjoy exclusive
possession. But at p. 1185 Lord Denning M.R. said:

"What is the test to see whether the occupier of one room
in a house is a tenant or a licensee? It does not depend on
whether he or she has exclusive possession or not. It does
not depend on whether the room is furnished or not. It
does not depend on whether the occupation is permanent or
temporary. It does not depend on the label which the
parties put on it. All these are factors which may
influence the decision but none of them is conclusive. All
the circumstances have to be worked out. Eventually the
answer depends on the nature and quality of the occupancy.
Was it intended that the occupier should have a stake in the
room or did he have only permission for himself personally
to occupy the room, whether under a contract or not? In
which case he is a licensee?"

But in my opinion in order to ascertain the nature and
quality of the occupancy and to see whether the occupier has or
has not a stake in the room or only permission for himself
personally to occupy, the court must decide whether upon its true
construction the agreement confers on the occupier exclusive
possession. If exclusive possession at a rent for a term does not
constitute a tenancy then the distinction between a contractual
tenancy and a contractual licence of land becomes wholly
unidentifiable.

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In Somma v. Hazlehurst [1978] 1 W.L.R. 1014, a young
unmarried couple H. and S. occupied a double bed sitting room for
which they paid a weekly rent. The landlord did not provide
services or attendance and the couple were not lodgers but tenants
enjoying exclusive possession. But the Court of Appeal did not ask
themselves whether H. and S. were lodgers or tenants and did not
draw the correct conclusion from the fact that H. and S. enjoyed
exclusive possession. The Court of Appeal were diverted from the
correct enquiries by the fact that the landlord obliged H. and S.
to enter into separate agreements and reserved power to determine
each agreement separately. The landlord also insisted that the
room should not in form be let to either H. or S. or to both H.
and S. but that each should sign an agreement to share the room
in common with such other persons as the landlord might from
time to time nominate. The sham nature of this obligation would
have been only slightly more obvious if H. and S. had been
married or if the room had been furnished with a double bed
instead of two single beds. If the landlord had served notice on
H. to leave and had required S. to share the room with a strange
man, the notice would only have been a disguised notice to quit on
both H. and S. The room was let and taken as residential
accommodation with exclusive possession in order that H. and S.
might live together in undisturbed quasi-connubial bliss making
weekly payments. The agreements signed by H. and S. constituted
the grant to H. and S. jointly of exclusive possession at a rent for
a term for the purposes for which the room was taken and the
agreement therefore created a tenancy. Although the Rent Acts
must not be allowed to alter or influence the construction of an
agreement, the court should, in my opinion, be astute to detect
and frustrate sham devices and artificial transactions whose only
object is to disguise the grant of a tenancy and to evade the Rent
Acts. I would disapprove of the decision in this case that H. and
S. were only licensees and for the same reason would disapprove
of the decision in Aldrington Garages Ltd. v. Fielder (1978) 37 P.
& C.R. 461 and Sturolson & Co. v. Weniz (1984) 272 E.G. 326.

In the present case the Court of Appeal held that the
agreement dated 7 March 1983 only created a licence and that Mr.
Street was entitled to possession. Slade L.J. accepted that the
agreement and in particular clause 3 of the agreement "shows that
the right to occupy the premises conferred on the defendant was
intended as an exclusive right of occupation, in that it was
thought necessary to give a special and express power to the
plaintiff to enter." Before your Lordships it was conceded that
the agreement conferred the right of exclusive possession on Mrs.
Mountford. Even without clause 3 the result would have been the
same. By the agreement Mrs. Mountford was granted the right to
occupy residential accommodation. The landlord did not provide
any services or attendance. It was plain that Mrs. Mountford was
not a lodger. Slade L.J. proceeded to analyse all the provisions of
the agreement, not for the purpose of deciding whether his finding
of exclusive possession was correct, but for the purpose of
assigning some of the provisions of the agreement to the category
of terms which he thought are usually to be found in a tenancy
agreement and of assigning other provisions to the category of
terms which he thought are usually to be found in a licence. The
Lord Justice may or may not have been right that in a letting of
a furnished room it was "most unusual to find a provision in a



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tenancy agreement obliging the tenant to keep his rooms in a 'tidy
condition.'" If the Lord Justice was right about this and other
provisions there is still no logical method of evaluating the results
of his survey. Slade L.J. reached the conclusion that "the
agreement bears all the hallmarks of a licence, rather than a
tenancy, save for the one important feature of exclusive
occupation." But in addition to the hallmark of exclusive
occupation of residential accommodation there were the hallmarks
of weekly payments for a periodical term. Unless these three
hallmarks are decisive, it really becomes impossible to distinguish
a contractual tenancy from a contractual licence save by reference
to the professed intention of the parties or by the judge awarding
marks for drafting. Slade L.J. was finally impressed by the
statement at the foot of the agreement by Mrs. Mountford "I
understand and accept that a licence in the above form does not
and is not intended to give me a tenancy protected under the
Rent Act." The Lord Justice said that "it seems to me that if
the defendant is to displace the express statement of intention
embodied in the declaration, she must show that the declaration
was either a deliberate sham or at least an inaccurate statement
of what was the true substance of the real transaction agreed
between the parties." My Lords the only intention which is
relevant is the intention demonstrated by the agreement to grant
exclusive possession for a term at a rent. Sometimes it may be
difficult to discover whether on the true construction of an
agreement, exclusive possession is conferred. Sometimes it may
appear from the surrounding circumstances that there was no
intention to create legal relationships. Sometimes it may appear
from the surrounding circumstances that the right to exclusive
possession is referable to a legal relationship other than a tenancy.
Legal relationships to which the grant of exclusive possession
might be referable and which would or might negative the grant of
an estate or interest in the land include occupancy under a
contract for the sale of the land, occupancy pursuant to a
contract of employment or occupancy referable to the holding of
an office. But where as in the present case the only
circumstances are that residential accommodation is offered and
accepted with exclusive possession for a term at a rent, the result
is a tenancy.

The position was well summarised by Windeyer J. sitting in
the High Court of Australia in Radaich v. Smith [1959] 101 C.L.R.
209, 222 where he said:

"What then is the fundamental right which a tenant has that
distinguishes his position from that of a licensee? It is an
interest in land as distinct from a personal permission to
enter the land and use it for some stipulated purpose or
purposes. And how is it to be ascertained whether such an
interest in land has been given? By seeing whether the
grantee was given a legal right of exclusive possession of
the land for a term or from year to year or for a life or
lives. If he was, he is a tenant. And he cannot be other
than a tenant, because a legal right of exclusive possession
is a tenancy and the creation of such a right is a demise.
To say that a man who has, by agreement with a landlord,
a right of exclusive possession of land for a term is not a
tenant is simply to contradict the first proposition by the
second. A right of exclusive possession is secured by the



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right of a lessee to maintain ejectment and, after his entry,
trespass. A reservation to the landlord, either by contract
or statute, of a limited right of entry, as for example to
view or repair, is, of course, not inconsistent with the grant
of exclusive possession. Subject to such reservations, a
tenant for a term or from year to year or for a life or
lives can exclude his landlord as well as strangers from the
demised premises. All this is long established law: see Cole
on Ejectment (1857) pp. 72, 73, 287, 458."

My Lords I gratefully adopt the logic and the language of
Windeyer 3. Henceforth the courts which deal with these problems
will, save in exceptional circumstances, only be concerned to
inquire whether as a result of an agreement relating to residential
accommodation the occupier is a lodger or a tenant. In the
present case I am satisfied that Mrs. Mountford is a tenant, that
the appeal should be allowed, that the order of the Court of
Appeal should be set aside and that the respondent should be
ordered to pay the costs of the appellant here and below.

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