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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Procter & Anor v Procter & Ors [2021] EWCA Civ 167 (12 February 2021) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2021/167.html Cite as: [2022] 1 WLR 2277, [2021] BTC 34, [2021] EWCA Civ 167, [2022] STI 39, [2021] 2 WLR 1249, [2021] Ch 395, [2021] EWCA Civ 1804, [2021] WLR(D) 97, [2022] STC 157, [2022] 1 All ER 358 |
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ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN LEEDS
PROPERTY TRUST AND PROBATE LIST
His Honour Judge Davis-White QC (sitting as a judge of the High Court)
C3OLS690
Strand, London, WC2A 2LL |
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B e f o r e :
LORD JUSTICE ARNOLD
and
LORD JUSTICE NUGEE
____________________
(1) PHILIP JOHN PROCTER (2) JAMES GEOFFREY PROCTER |
Appellants |
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- and - |
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(1) SUZANNE ELAINE PROCTER |
1st Respondent |
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(2) GEORGE KNOWLES |
2nd Respondent |
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(3) WOMBLE BOND DICKINSON (TRUST CORPORATION) LIMITED |
3rd Respondent |
____________________
MR BRUCE WALKER (instructed by Grays Solicitors LLP) for the 1st Respondent
The 2nd and 3rd Respondents did not appear and were not represented
Hearing date : 2nd February 2021
____________________
Crown Copyright ©
Lord Justice Lewison:
Introduction
i) At common law, it was not possible to create a tenancy where there was an overlap between putative landlords and putative tenants.
ii) There was no lease in writing, with the consequence that the grant was not validated by section 72 of the Law of Property Act 1925.
iii) If, contrary to the judge's view, there was a tenancy, it was not a tenancy granted for the best rent reasonably obtainable; and therefore took effect as a tenancy at will under sections 53 and 54 of the Law of Property Act 1925. The judge did not find it necessary to decide whether a tenancy at will attracted the protection of the Agricultural Holdings Act.
iv) If the arrangements amounted only to a licence, then because of the overlap in identity between licensors and licensees, the latter could not have had exclusive occupation as against the former. Since that is an essential ingredient in order for a licence to attract the protection of the Agricultural Holdings Act, the claim to protection failed.
Can A, B and C grant a lease to A, B, C, D and E?
"… the problem for a court of construction must always be so to balance matters that, without violation of essential principle, the dealings of men may as far as possible be treated as effective, and that the law may not incur the reproach of being the destroyer of bargains."
"(1) In conveyances made after [12 August 1859], personal property, including chattels real, may be conveyed by a person to himself jointly with another person by the like means by which it might be conveyed by him to another person.
(2) In conveyances made after [31 December 1881], freehold land, or a thing in action, may be conveyed by a person to himself jointly with another person, by the like means by which it might be conveyed by him to another person; and may, in like manner, be conveyed by a husband to his wife, and by a wife to her husband, alone or jointly with another person.
(3) After the commencement of this Act a person may convey land to or vest land in himself.
(4) Two or more persons (whether or not being trustees or personal representatives) may convey, and shall be deemed always to have been capable of conveying, any property vested in them to any one or more of themselves in like manner as they could have conveyed such property to a third party; provided that if the persons in whose favour the conveyance is made are, by reason of any fiduciary relationship or otherwise, precluded from validly carrying out the transaction, the conveyance shall be liable to be set aside."
"(1) Any covenant, whether express or implied, or agreement entered into by a person with himself and one or more other persons shall be construed and be capable of being enforced in like manner as if the covenant or agreement had been entered into with the other person or persons alone."
"Whenever a greater estate and a less coincide and meet in one and the same person, without any intermediate estate, the less is immediately annihilated; or in the law phrase, is said to be merged, that is, sunk or drowned, in the greater."
"… nothing is clearer than that a term which is taken in alieno jure is not merged in a reversion acquired suo jure."
"But they must come to one and the same person in one and the same right; else if the freehold be in his own right, and he has a term in right of another (en auter droit) there is no merger."
"… there was prior to the Judicature Act, 1873, a great difference between the Courts of Law and the Courts of Equity on the subject of merger. The rule of the former was rigid, that whenever a term of years and a freehold estate, whether for life or in fee, immediately expectant upon the term, vested in the same person in his own right, the term was merged in the freehold, whatever may have been the intention of the parties to the transaction which resulted in the union. The Courts of Equity, on the other hand, in many cases treated the interest which merged at law as being still subsisting in equity. They had regard to the intention of the parties, and, in the absence of any direct evidence of intention, they presumed that merger was not intended, if it was to the interest of the party, or only consistent with the duty of the party, that merger should not take place."
Rye v Rye
"At common law a person could not convey real or personal estate either to himself or to himself and another."
"Down to the Act of 1925 I take it that it would have been said without qualification that a man cannot make himself his own tenant. The contractual relationship which was the almost inescapable concomitant of a tenancy would have been regarded as precluding such a transaction. Terms of years for securing such things as jointures or portions could, I suppose, be created without covenants, but they were exceptional devices. There is nothing in the Act itself that removes this difficulty by making it possible for a man to enforce contractual obligations against himself. I do not feel sure that the same result would necessarily be reached in the case of two persons seeking to demise to themselves by deed, for section 72 (3) would, I think, be able to pass a legal interest by demise and it might be possible to express the required contractual obligations in the form of joint and several covenants, so that each single person covenanted separately with himself and the other. It seems that section 82 (1) of the Act would then convert such a covenant into an effective obligation. I should not like to put this possibility out of court in the disposal of the present case, for there is a practical advantage in allowing persons who own land as tenants in common to make a valid demise of it to themselves in another capacity."
"Is it possible for a person to grant a tenancy to himself? or for two persons to grant a tenancy to themselves? At common law it was clearly impossible. Nemo potest esse tenens et dominus. A person cannot be, at the same time, both landlord and tenant of the same premises: for as soon as the tenancy and the reversion are in the same hands the tenancy is merged, that is, sunk or drowned, in the reversion; see Blackstone's Commentaries (1766 edition), vol. II, p 177. Neither could a person at common law covenant with himself, nor could two persons with themselves. Neither could one person covenant with himself and others jointly. Such a covenant, said Pollock C.B., is "senseless," see Faulkner v Lowe."
"But what is the position when a person grants a tenancy by writing to himself (A lets to A), or two persons grant it to themselves (A and B let to A and B): and there are the usual express or implied covenants (A covenants with A: or, A and B jointly covenant with A and B jointly)? Such a tenancy does not come within section 72 (4): nor do the covenants come within section 82 (1): because both those subsections, as I read them, only apply where one of the persons, at any rate, is not on both sides. But in the tenancy we are now considering, the persons are the same on both sides. Such a tenancy, if it is to be valid at all, must be validated by section 72 (3): but the trouble is that there is nothing there to validate the covenants: because by no possibility can section 82 (1) be made to cover them." (Emphasis added)
"The tenancy must stand or fall with the agreement on which it is founded and with the covenants contained in it: and as they fall, so does the tenancy."
"And what about notice to quit? If A grants a tenancy to himself A, can he mutter a notice to quit to himself and expect the law to take any notice of it? Or, if A and B grant a yearly tenancy to themselves A and B, can there be a notice to quit unless both agree? Of course not. So that, instead of a yearly tenancy, it becomes a life-long tenancy determinable only by the agreement of both. Which is absurd."
The earlier common law
"These two reasons correspond to the dual character of a lease in English law as both contract and conveyance. A man cannot convey to himself; and he cannot contract with himself. But he can convey to a nominee for himself, and if he can contract with a nominee for himself there is no reason why he should not be able to grant a lease to a nominee for himself."
"In so far as a lease is a conveyance, that is to say in so far as it lies in grant, there is no difficulty in the proposition that a man can vest a term of years in a nominee for himself. There is no question of the same person being at the same time both landlord and tenant at law, for the two legal estates are vested in different persons; while the rule that a man cannot be both landlord and tenant does not apply in equity, which allows the question of merger to be governed by intention." (emphasis added)
"There was, therefore, in two partners, an ownership of the property and a right to receive rent, and in the three partners a possession for which rent was paid; and although the three used the possession for the purposes of the trade of the three, including the true owners, yet I think that the right of the two owners, to whom as landlords the rent became due, must be considered as real estate."
"[A], being assignee of the lease of the premises in question, and entering into partnership with his three sons, demises the premises to the partnership at will in undivided shares: and, though true it is that a man cannot become tenant to himself, so that his share would merge in the rest, I see no reason why the demise should not enure for the benefit of the others; and then the three sons (the claimants) would be tenants in common, and all (the value being sufficient) entitled to be registered as tenants within the 27th section of the Reform Act."
"I think it is impossible to avoid coming to the conclusion that the three sons of [A] had an interest in the mill and premises in question at the lowest as tenants at will to their father."
"It was clearly the intention of the parties that the three sons should be jointly and equally liable to the rent with the father: and it is found as a fact that the rent was regularly paid out of the partnership funds. There was, therefore, a tenancy of some sort; and, the value being sufficient to confer the franchise upon each of the partners under the 27th section of the Reform Act…"
"The result of the transaction between [A] and the claimants here is, that there was a sub-demise of the premises to the three sons as partners and tenants in common of undivided shares with their father."
"Sect. 50 of the Conveyancing Act, 1881, by virtue of the definition of conveyance applies to a lease of freehold land, but only enables such a lease to be made by one to himself jointly with another, and has no reference to a lease by two or more to one of themselves alone. What is the effect then at common law of such a demise as the present? The lessee is already seised in fee per mie et per tout, and the demise by himself can have no effect, for any term granted by himself would merge in the fee. The other two joint tenants could make an effectual demise of their two-thirds, but they would thereby sever the joint tenancy. I think that the effect must be that the joint tenancy is severed during the term, and that the lessee is entitled to the two-thirds of the land by virtue of the lease, remaining seised of his one-third for his original estate in fee. If this is the right view I can see many serious difficulties in the plaintiffs' way, but I prefer to dispose of the case on other grounds, and will, therefore, treat the matter as if there were no question arising on the form of the demise itself."
"Formerly the extinguishment of the tenancy by surrender also extinguished the reversion to any subtenancy, so that the remedy for the rent and the covenants attached to the reversion ceased with the reversion to which they were annexed. The subtenant held the property as tenant of the head landlord for the residue of the term of the extinguished tenancy but without privity of estate and accordingly without any obligation to pay the rent or perform the tenant's covenants: see Webb v Russell (1789) 3 Durn & E 393. This unsatisfactory state of affairs was remedied by statute in two stages."
"the common law rule [was] that a deed by A in favour of A plus B had the effect of vesting the legal estate in B alone…"
The two-party rule
"If a man were so fanciful as to grant a lease to himself of his own house, with a covenant that he should quietly enjoy, and a covenant that he should pay to himself a rent for his own house, and chooses to conduct it in the way of having two departments, that is, that he will draw cheques upon himself upon his own account for rent, and pay them into another account of his own at his bankers—it would be a mere whimsical transaction; but it would be futile and an abuse of language to say that it came within the law of contract, or within any fiscal regulation respecting stamps."
"The substance of the objection is that a man cannot make a contract with himself. One would have thought it only required to be stated to be self-evident that it makes no difference that he joins in that contract with himself some other person either as covenantor or covenantee, if the obligation on the one side, or, as the case may be, the right to enforce that obligation on the other side, is joint."
"Now the result of that case, I think, is plainly to determine that as a matter of substance an obligation by a man to pay himself, or to pay himself and another, is one which is in fact not an obligation in the eye of the law."
i) By A and B against C
ii) By C against A and B.
Exclusive possession
"The general rule, which English law has derived from the Roman law, is that only one person can be in possession at any one time. Exclusivity is of the essence of possession. The same rule applies in cases where two or more persons are entitled to the enjoyment of property simultaneously. As between themselves they have separate rights, but as against everyone else they are in the position of a single owner."
"If [B] had been the sole trustee the aspect of the case would have been very different, but here he was one of several; receiving rents and performing acts of ownership without the slightest reservation or indication of beneficial claim, and unless I am bound to regard the physical identity of the beneficial owner with one of the trustees as prevailing to the disregard of the facts and substance of the story, I must treat [B] the beneficial owner as excluded from possession for twelve years and upwards, notwithstanding that [B] the trustee took an active part in the management of the estate. Am I so bound? Trustees are not a corporate body; there is no aggregate existence independent of the individual members; but, on the other hand, they are joint owners of the trust property, and they cannot act otherwise than jointly, even though frequently and for many purposes one member of the body represents the others. It seems to me consistent with principle to hold that the joint possession excludes that of any one of the joint possessors on his own behalf, and no authority was cited or has occurred to me inconsistent with that view. My conclusion therefore, is that the accident of [B's] beneficial interest did not operate to defeat the title of the trustees which he intended to preserve."
Return to Rye v Rye
"… from the earliest times a yearly tenancy has been an estate which continued only so long as it was the will of both parties that it should continue, albeit that either party could only signify his unwillingness that the tenancy should continue beyond the end of any year by giving the appropriate advance notice to that effect. Applying this principle to the case of a yearly tenancy where either the lessor's or the lessee's interest is held jointly by two or more parties, logic seems to me to dictate the conclusion that the will of all the joint parties is necessary to the continuance of the interest." (Emphasis added)
Tenancy at will?
"(a) no interest in land can be created … except by writing signed by the person creating … the same, or by his agent…"
"(1) All interests in land created by parol and not put in writing and signed by the persons so creating the same, or by their agents thereunto lawfully authorised in writing, have, notwithstanding any consideration having been given for the same, the force and effect of interests at will only.
(2) Nothing in the foregoing provisions of this Part of this Act shall affect the creation by parol of leases taking effect in possession for a term not exceeding three years (whether or not the lessee is given power to extend the term) at the best rent which can be reasonably obtained without taking a fine."
Is a tenancy at will converted into a periodic tenancy?
"(1) An agreement to which this section applies shall take effect, with the necessary modifications, as if it were an agreement for the letting of land for a tenancy from year to year unless the agreement was approved by the Minister before it was entered into.
(2) Subject to subsection (3) below, this section applies to an agreement under which—
(a) any land is let to a person for use as agricultural land for an interest less than a tenancy from year to year, or
(b) a person is granted a licence to occupy land for use as agricultural land,
if the circumstances are such that if his interest were a tenancy from year to year he would in respect of that land be the tenant of an agricultural holding."
"Tenant at will is, where lands or tenements are let by one man to another to have and to hold to him at the will of the lessor, by force of which lease the lessee is in possession."
"A tenancy at will is of indefinite duration, but in all other respects it shares the characteristics of a tenancy."
"… not only for their own protection as an important section of the public …; it was for the protection of the nation itself."
Was the land an agricultural holding?
"(1) In this Act "agricultural holding" means the aggregate of the land (whether agricultural land or not) comprised in a contract of tenancy which is a contract for an agricultural tenancy, not being a contract under which the land is let to the tenant during his continuance in any office, appointment or employment held under the landlord.
(2) For the purposes of this section, a contract of tenancy relating to any land is a contract for an agricultural tenancy if, having regard to—
(a) the terms of the tenancy,
(b) the actual or contemplated use of the land at the time of the conclusion of the contract and subsequently, and
(c) any other relevant circumstances,
the whole of the land comprised in the contract, subject to such exceptions only as do not substantially affect the character of the tenancy, is let for use as agricultural land."
"[270] First, Mr Walker relies upon the AST of Wide Open Farm and the occupation of Moor Park Farm by Jamie alone who is not involved actively in the Partnership. As regards these matters there is clear authority that it is not simply a question of the value or income derived from respective portions of land which is determinative. Assuming no deemed surrender, I would not have held that these matters prevented AHA protection applying.
[271] The more difficult question is that of the Golf Course which, on Mr Walker's calculation amounts to approximately 27% in acreage of the land said to be held on the AHA tenancy. It is not suggested that the nature of a Golf Course is such that it would amount to agricultural use. With some hesitation I accept the submissions of Ms Shea that the following matters considered against the whole mean that any tenancy would not have lost AHA protection by reason of part of the land being used for a Golf Course, even though it is a substantial portion of the land in question: (a) the Golf Course has been loss making compared with the farm; (b) it was developed as being ancillary to the farmland and as a diversification of the farm business; (c) it is operated as part of the Partnership's business; (d) the vast majority of the land is used for farming. I would also have taken into account, as an overall consideration, the Golf Course and the overall farming land within the Family Inheritance as a whole so that the proportion of the Golf Course to that land as a whole in acreage terms is closer to 20%."
"93. The agricultural business is made up of about 500 acres of arable land plus an area of grassland, roads, buildings and ponds. Just over 100 acres of land is in set-aside and up to 35 acres per year is fallowed….
96. The area of land required for the proposed course is 120 acres and will utilise the set-aside land (100.5 acres) and take up most of the fallow land out of the rotation. The effect on the farm income will be very slight, being the reduced rate paid by set-aside land used for development compared with the permanent fallow. This is equivalent to £24 per acre. In addition there will be a one-off repayment of set-aside…[which] could amount to £1,612."
"… the standards applied by the law in different contexts vary a great deal in precision and generally speaking, the vaguer the standard and the greater the number of factors which the court has to weigh up in deciding whether or not the standards have been met, the more reluctant an appellate court will be to interfere with the trial judge's decision."
"… it is well settled that an appellate tribunal will not interfere with a first instance evaluative judgment of this kind unless that tribunal took into account matters it should not have taken into account or failed to take into account matters it should have taken into account or made some error or was otherwise wrong."
Result
Lord Justice Arnold:
Lord Justice Nugee: