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Cite as: [1985] 2 WLR 877, [1985] UKHL 4, [1985] AC 809

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JISCBAILII_CASE_NI_LAND_LAW
JISCBAILII_CASE_PROPERTY

    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.

    - 1 -

    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

    - 2 -

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

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

    2. 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.


    1. 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.

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

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

    4. 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.)

    5. 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

    - 3 -

    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

    - 4 -

    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

    - 5 -

    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:

    - 7 -

    "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

    - 8 -

    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

    - 9 -

    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

    - 10 -

    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

    - 11 -

    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.

    - 12 -

    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

    - 13 -

    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

    - 14 -

    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.

    - 15 -



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