Analysis
The claimants occupied land at Falmouth in Cornwall (the property) initially pursuant to a written agreement for the grant of a 15-year lease from 1 January 1993 at a rent of £400 per annum. The agreement was never signed by the defendant’s parents, who were then the freehold owners, with the result that it did not qualify as a valid agreement for the grant of a tenancy of 15 years, due to failure to comply with the requirements of s2 of the Law of Property (Miscellaneous Provisions) Act 1989. After the expiry of the 15-year period, the claimants continued to pay, and the defendant to accept, rent (increased to £1,000 per annum in March 2011). The relationship between the parties was treated as a tenancy from year to year. In June 2014 the defendant served a notice to quit requiring the claimants to vacate by 24 December 2014. The defendant also gave notice that, if the tenancy was a business tenancy within the Landlord and Tenant Act 1954, the landlord intended to occupy the holding for the purposes of a business to be carried on by him therein.
The claimant issued proceedings claiming a declaration that the property was an agricultural holding within the meaning of the Agricultural Holdings Act 1986, and/or an order for a new tenancy pursuant to s24 of the Landlord and Tenant Act 1954 and/or a declaration that their tenancy of the property continued and/or that the claimants were entitled to such interest as the court thought fit by way of proprietary estoppel.
The defendant filed a defence and counterclaim including an allegation that, if there was otherwise a new tenancy under the 1954 Act, he intended to occupy the relevant holding for the purposes of his own business, and therefore objected to the grant of a new tenancy. He also counterclaimed for declaration that the claimants’ tenancy was not of an agricultural holding, and that he was entitled to possession, having served a notice to quit, together with notice of his intention to occupy the holding for the purposes of a business carried on by him therein.
The original proposition put forward by the first claimant to the defendant’s father in 1993 was that the claimants would, in return for the grant of a 15-year lease, restore a cottage and barn on the property, which could, following renovation, be rented out to give a return on his investment. However, he did not undertake to do the renovation work. But if he did do it, the advantage for the defendant’s father would be to obtain a renovated period house in a pleasant surroundings, without paying for it, at the end of the 15-year term.
The first claimant accepted in his evidence that he was actually trying to get some extra land for his own farming activities. The first claimant alleged that there was a common understanding that one day he and his wife (or alternatively his son) would buy the property and, in the meantime, could continue as tenants indefinitely. The claimants had carried out significant works of improvement to the property, including the renovation of the barn and cottage, which increased the value of the cottage by £185,000 to £195,000, and of the barn by £50,000. The claimants granted a sub-tenancy of the cottage to a company controlled by them which carried out a holiday letting business from the cottage.
Held:
1) The property was not an agricultural holding as defined by s1 of the Agricultural Holdings Act 1986 since it was not land comprised in a contract for an agricultural tenancy, where the whole of the land comprised in the contract is ‘agricultural land’ having regard to the terms of the tenancy, the actual or contemplated use of the land then and subsequently, and any other relevant circumstances. The letting was entered into by the parties for the purposes of considering whether to restore, and then if thought fit to restore, the ruined buildings and creating access thereto, so that they might be used for tourism. The letting was not for the purpose of the tenants carrying on any agricultural activity on the land. Even though the land had historically formed part of a farm, it consisted of land which, when it was let, was described as ‘unfarmable’. The claimants did not undertake any obligation to put it into a farmable condition.
2) The claimants had no right under the Landlord and Tenant Act 1954 to the grant of a new business tenancy in respect of the cottage since the protection under the 1954 Act is given only to the ‘holding’, ie that part of the demise occupied by the tenant. Section 23(1A) of the 1954 Act enables the tenant to be treated as carrying on a business in his premises when in fact it is being carried on there by a company in which he has a controlling interest. It does not enable the tenant to be treated as carrying on a business in the company’s own premises. In the present case, the company controlled by the claimants did not carry on business in the claimants’ premises. It did so in its own premises, namely the house the subject of the sub-tenancy granted to it by the claimants. Similarly, s23(1A) enables the tenant to be treated as occupying premises where he is carrying on business, when in fact those premises are being occupied by a company in which he has a controlling interest. It does not enable the tenant to be treated as occupying premises (the sublet cottage) where the company is carrying on the business. However, that was the present case. The claimant could, therefore, have no right to the grant of a new tenancy in respect of the cottage. In principle they could claim that right in relation to the rest of the land led to them. However, the defendant intended to carry on the business of holiday lettings in the premises and was, therefore, entitled, by virtue of s30(1)(g) of the 1954 Act, to oppose the application for a new tenancy.
3) With regard to the claim in proprietary estoppel, the first claimant was unable to point to any particular action or any words on the part of the defendant or the defendant’s father which demonstrated that they had given any assurance or shared any understanding that the claimants would one day be able to buy the property. The defendant and the defendant’s wife denied any such common understanding. It was found as a fact that they were not aware of the claimants’ ‘understanding’ that they could one day buy the property. Their expectation was that they could look forward to getting back the property with the benefit of the claimants’ renovations on the determination of the tenancy, exactly as foreseen at the original meeting. It was accepted that the defendant’s father on more than one occasion had entertained the possibility of selling, more out of politeness and neighbourliness than because he had decided to sell. However, it would be a retrograde step in the law to hold that, merely because there were overtures made by the first claimant, which were politely entertained but not taken further, that should count as encouragement of a belief in a common understanding that one day the first claimant would be able to acquire the property.
4) There was nothing in the documents that supported the claim to a common understanding, and even the second claimant did not share that understanding. Whether one looked at each individual act or statement of the defendant and his father or of the whole of the course of dealing, there was nothing that could amount to a promise or assurance by them to the claimant beyond what was agreed in December 1993. What had happened was that the first claimant had convinced himself that the claimants would be able to stay in the property beyond the initial 15 years of tenancy, and ultimately persuade the defendant and his family to sell the property to them for a price at which they (the claimants) wished to buy. The claimants bargained for a term of 15 years, and hoped and expected that it would be extended indefinitely, and that ultimately they would be able to buy the property.
5) Even having regard to the whole course of conduct between the parties, there was no promise or assurance beyond what was agreed in 1993. It was clear on the authorities that they can be a promise or assurance for the purposes of proprietary estoppel where X by words or conduct makes a positive promise or assurance. The question in the present case was whether this also applied in a negative sense where Y (without X’s positive words or acts) comes to believe that X will in the future give him some right or interest, and X either realises that this is Y’s belief and does nothing to disabuse him, or (even if he does not realise this) nonetheless positively encourages Y to act in ways only consistent with Y’s having such a belief (so that, objectively speaking, it should be obvious to X what is going on). However, an equity by way of proprietary estoppel cannot arise where a landowner ought to have realised, but did not realise, that the tenant believed that the landowner was promising an interest, and the landowner did nothing to encourage the tenant to act in the way that he did. The defendant did not know of the first claimant’s belief that he would be allowed to stay as long as he liked and ultimately to acquire the property, and did not encourage it. Nor did the defendant encourage the acts which the claimants carried out on the property. There was nothing that would indicate to a reasonable man that either the defendant or his father was promising any more than than that the claimants had the rights which they had purportedly been granted, ie a 15-year term and an annual tenancy thereafter. There was, therefore, no promise or assurance, even in the extended sense given for the purposes of proprietary estoppel where there is a duty to speak cast upon the landowner, and who does not do so.
6)There was not sufficient detrimental reliance. The expenditure on the property was all that which was contemplated at the beginning as part of the renovation process. The claimants were under no duty – as everyone was clear – to do anything at all. Any expenditure by the claimants on the property was prima facie at their own risk. It was not as a result of anything which the defendant or his family did or said. Moreover, the bulk of the work was completed by 2002. The claimants were letting the cottage from 1997 with the intention of recouping their expenditure. The expenditure after the refurbishment of the barn was caused by the need to make occasional improvements to an income-producing asset.
7) Even if there had been any detrimental reliance, it still would not be unconscionable for the defendant to rely on his strict legal rights by giving a notice to quit. The claimants had played a long game to try and get the ownership of the land from their neighbour without letting on that this was what they were trying to do. In the meantime, they thought they could recoup their expenditure – and, indeed, make a profit – from the refurbishment of the property and then letting it for holiday lets. The claimants had what they bargained for, and indeed more.
JUDGMENT HHJ PAUL MATTHEWS: Introductory [1] This is my judgment on a claim brought by the claimants in relation to a parcel of about 9.51 acres of land at Boswidjack Farm in Constantine, Falmouth Cornwall (the property). The parcel is generally known as Mellinzeath, or Mellanzeath, or sometimes Melanzeth. The claim form, issued on 26 …Continue reading "Smith-Tyrrell & anr v Bowden [2018] WTLR 987"