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You are here: BAILII >> Databases >> United Kingdom House of Lords Decisions >> Prudential Assurance Co Ltd v London Residuary Body [1991] UKHL 10 (16 July 1992)
URL: http://www.bailii.org/uk/cases/UKHL/1991/10.html
Cite as: [1991] UKHL 10, [1992] 2 AC 386, [1992] 3 All ER 504

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    Parliamentary Archives,
    HL/PO/JU/18/252

    Prudential Assurance Company Limited (Respondents)

    v.
    London Residuary Body and others (Appellants)

    JUDGMENT

    Die Jovis 16° Julii 1992

    Upon Report from the Appellate Committee to whom was
    referred the Cause Prudential Assurance Company Limited
    against London Residuary Body and others, That the Committee
    had heard Counsel as well on Monday the 22nd as on Tuesday the
    23rd days of June last, upon the Petition and Appeal of Barron
    Investments Limited of Finsgate, 5-7 Cranwood Street, London
    ECl and of Alan Moss Bayes and Joan Estelle Bayes both of 61
    Wood Vale, London N10, 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 1st day of November 1991,
    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 Petitioners might have such other
    relief in the premises as to Her Majesty the Queen in Her
    Court of Parliament might seem meet; as upon the case of the
    Prudential Assurance Company Limited 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 1st day of November 1991 complained of in the
    said Appeal be, and the same is hereby. Set Aside and that the
    Order of Mr. Justice Millett of the 16th day of January 1991
    be, and the same is hereby, Restored: And it is further
    Ordered, That the Respondents do pay or cause to be paid to
    the said Appellants the Costs incurred by them in the Court of
    Appeal and also the Costs incurred by them 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 also further Ordered,
    That the Cause be, and the same is hereby, remitted back to
    the Chancery Division of the High Court of Justice to do
    therein as shall be just and consistent with this Judgment.

    Cler: Parliamentor:

    Judgment: 16.7.92

    HOUSE OF LORDS

    PRUDENTIAL ASSURANCE COMPANY LIMITED
    (RESPONDENTS)

    v.

    LONDON RESIDUARY BODY AND OTHERS
    (APPELLANTS)

    Lord Templeman
    Lord Griffiths
    Lord Goff of Chieveley
    Lord Browne-Wilkinson
    Lord Mustill


    LORD TEMPLEMAN

    My Lords,

    This appeal arises out of a memorandum of agreement dated
    19 December 1930 and said to have created a lease for a term
    which was not limited to expire by effluxion of time and cannot
    now be determined by the landlord.

    By the agreement, the London County Council let to one
    Nathan a strip of land with a frontage of 36 feet to Walworth
    Road, a thoroughfare in Southwark, and a depth of 25 feet at a
    rent of £30 per annum from 19 December 1930 "until the tenancy
    shall be determined as hereinafter provided." The only relevant
    proviso for determination is contained in clause 6 which reads as
    follows:

    "The tenancy shall continue until the said land is required
    by the Council for the purposes of the widening of Walworth
    Road and the street paving works rendered necessary
    thereby and the Council shall give two months' notice to
    the tenant at least prior to the day of determination when
    the said land is so required and thereupon the tenant shall
    give vacant possession to the Council of the said land . . ."

    By the agreement, the tenant was authorised to erect
    "temporary one storey shops or buildings of one storey and for the
    retention of such shops or buildings as temporary structures" until
    the land was required for road widening and he was then bound to
    remove the temporary structures and clear the land. The Council
    agreed to pay all the costs of road making and paving works. The
    agreement was clearly intended to be of short duration and could
    have been secured by a lease for a fixed term, say five or ten
    years with power for the landlord to determine before the expiry
    of that period for the purposes of the road widening.
    Unfortunately the agreement was not so drafted. Over 60 years

    later Walworth Road has not been widened, the freehold is now
    vested in the appellant second and fourth defendants, who
    purchased the property from the first defendant London Residuary
    Body after it had issued a notice to quit, the defendants have no
    road making powers and it does not appear that the road will ever
    be widened. The benefit of the agreement is now vested in the
    respondent plaintiffs, the Prudential Assurance Co. Ltd. The
    agreement purported to grant a term of uncertain duration which,
    if valid, now entitles the tenant to stay there for ever and a day
    at the 1930 rent of £30; valuers acting for both parties have
    agreed that the annual current commercial rent exceeds £10,000.

    A demise for years is a contract for the exclusive
    possession and profit of land for some determinate period. Such
    an estate is called a "term". Thus Coke on Littleton 19th ed.
    (1832), para. 45b said that:

    "'Terminus' in the understanding of the law does not only
    signify the limits and limitation of time, but also the estate
    and interest that passes for that time."

    Blackstone in his Commentaries, 1st ed. (1766), Book II,
    said, at p. 143:

    "Every estate which must expire at a period certain and
    prefixed, by whatever words created, is an estate for years.
    And therefore this estate is frequently called a term,
    'terminus', because its duration or continuance is bounded,
    limited and determined: for every such estate must have a
    certain beginning, and certain end."

    In Say v. Smith (1530) 1 Plowden 269 a lease for a certain
    term purported to add a term which was uncertain; the lease was
    held valid only as to the certain term. Anthony Brown J. is
    reported at p. 272 to have said that:

    "Every contract sufficient to make a lease for years ought
    to have certainty in three limitations, viz. in the
    commencement of the term, in the continuance of it, and in
    the end of it; so that all these ought to be known at the
    commencement of the lease, and words in a lease, which
    don't make this appear, are but babble . . . And these three
    are in effect but one matter, showing the certainty of the
    time for which the lessee shall have the land, and if any of
    these fail, it is not a good lease, for then there wants
    certainty."

    The Law of Property Act 1925, taking up the same theme
    provided that:

    "1(1) The only estates in land which are capable of
    subsisting or of being conveyed or created at law are -

    1. An estate in fee simple absolute in possession;

    2. A term of years absolute."
      Section 205(1)(xxvii) was in these terms:

    - 2 -

    '"Term of years absolute"' means a term of years . . .
    either certain or liable to determination by notice, re-entry,
    operation of law, or by a provision for cesser on
    redemption, or in any other event (other than the dropping
    of a life, or the determination of a determinable life
    interest); . . . and in this definition the expression 'term of
    years' includes a term for less than a year, or for a year or
    years and a fraction of a year or from year to year;"

    The term expressed to be granted by the agreement in the
    present case does not fall within this definition.

    Ancient authority, recognised by the Act of 1925, was
    applied in Lace v. Chantler [1944] K.B. 368. A dwelling house was
    let at the rent of 16s.5d. per week. Lord Greene M.R. (no less)
    said at pp. 370-371:

    "Normally there could be no question that this was an
    ordinary weekly tenancy, duly determinable by a week's
    notice, but the parties in the rent-book agreed to a term
    which appears there expressed by the words 'furnished for
    duration,' which must mean the duration of the war. The
    question immediately arises whether a tenancy for the
    duration of the war creates a good leasehold interest. In
    my opinion, it does not. A term created by a leasehold
    tenancy agreement must be expressed either with certainty
    and specifically or by reference to something which can, at
    the time when the lease takes effect, be looked to as a
    certain ascertainment of what the term is meant to be. In
    the present case, when this tenancy agreement took effect,
    the term was completely uncertain. It was impossible to
    say how long the tenancy would last. Mr Sturge in his
    argument has maintained that such a lease would be valid,
    and that, even if the term is uncertain at its beginning
    when the lease takes effect, the fact that at some future
    time it will be rendered certain is sufficient to make it a
    good lease. In my opinion that argument is not to be
    sustained. I do not propose to go into the authorities on
    the matter, but in Foa's 'Landlord and Tenant' 6th ed., p.
    115, the law is stated in this way, and, in my view,
    correctly: 'The habendum in a lease must point out the
    period during which the enjoyment of the premises is to be
    had; so that the duration, as well as the commencement of
    the term, must be stated. The certainty of a lease as to
    its continuance must be ascertainable either by the express
    limitation of the parties at the time the lease is made, or
    by reference to some collateral act which may, with equal
    certainty, measure the continuance of it, otherwise it is
    void . . ."'

    The Legislature concluded that it was inconvenient for
    leases for the duration of the war to be void and therefore by the
    Validation of War-time Leases Act 1944 Parliament provided that
    any agreement entered into before or after the passing of the Act
    which purported to grant a tenancy for the duration of the war:

    "1(1) ... shall have effect as if it granted or provided for
    the grant of a tenancy for a term of ten years,
    subject to a right exercisable either by the landlord

    - 3 -

    or the tenant to determine the tenancy, if the war
    ends before the expiration of that term, by at least
    one month's notice in writing given after the end of
    the war; ..."

    Parliament granted the fixed and certain term which the
    agreements between the parties lacked in the case of tenancies for
    the duration of the war and which the present agreement lacks.

    When the agreement in the present case was made, it failed
    to grant an estate in the land. The tenant however entered into
    possession and paid the yearly rent of £30 reserved by the
    agreement. The tenant entering under a void lease became by
    virtue of possession and the payment of a yearly rent, a yearly
    tenant holding on the terms of the agreement so far as those
    terms were consistent with the yearly tenancy. A yearly tenancy
    is determinable by the landlord or the tenant at the end of the
    first or any subsequent year of the tenancy by six months' notice
    unless the agreement between the parties provides otherwise. Thus
    in Doe d. Rigge v. Bell (1793) 5 Durn. & East 471 a parole
    agreement for a seven year lease did not comply with the Statute
    of Frauds but the tenant entered and paid a yearly rent and it
    was held that he was tenant from year to year on the terms of
    the agreement. Lord Kenyon C.J. said, at p. 472:

    "Though the agreement be void by the Statute of Frauds as
    to the duration of the lease, it must regulate the terms on
    which the tenancy subsists in other respects, as to the rent,
    the time of year when the tenant is to quit, etc. . . .
    Now, in this case, it was agreed, that the defendant should
    quit at Candlemas; and though the agreement is void as to
    the number of years for which the defendant was to hold, if
    the lessor choose to determine the tenancy before the
    expiration of the seven years, he can only put an end to it
    at Candlemas."

    Now it is said that when in the present case the tenant
    entered pursuant to the agreement and paid a yearly rent he
    became a tenant from year to year on the terms of the agreement
    including clause 6 which prevents the landlord from giving notice
    to quit until the land is required for road widening. This
    submission would make a nonsense of the rule that a grant for an
    uncertain term does not create a lease and would make nonsense
    of the concept of a tenancy from year to year because it is of
    the essence of a tenancy from year to year that both the landlord
    and the tenant shall be entitled to give notice determining the
    tenancy.

    In Doe d. Warner v. Browne (1807) 8 East 165 there was an
    agreement to lease at a rent of £40 per annum and it was agreed
    that the landlord W. Warner should not raise the rent nor turn out
    the tenant "so long as the rent is duly paid quarterly, and he does
    not expose to sale or sell any article that may be injurious to W.
    Warner in his business." The tenant duly paid his rent and did not
    commit any breach of covenant. The landlord gave six months'
    notice and it was held that the notice was good. These were the
    days when it was possible to have a lease for life. Lord
    Ellenborough C.J. asked, at p. 166:

    - 4 -

    "What estate the defendant was contended to have? And
    whether he were not in this dilemma; that either his estate
    might enure for life, at his option; and then according to
    Lord Coke such an estate would, in legal contemplation, be
    an estate for life; which could not be created by parol: or
    if not for life, being for no assignable period, it must
    operate as a tenancy from year to year; in which case it
    would be inconsistent with, and repugnant to the nature of
    such an estate, that it should not be determinable at the
    pleasure of either party giving the regular notice."

    Lawrence J. said:

    "If this interest be not determinable so long as the tenant
    complies with the terms of the agreement, it would operate
    as an estate for life; which can only be created by deed .
    . . The notion of a tenancy from year to year, the lessor
    binding himself not to give notice to quit, which was once
    thrown out by Lord Mansfield, has been long exploded."

    In Cheshire Lines Committee v. Lewis & Co. (1880) 50
    L.J.Q.B. 121 an agreement for a weekly tenancy contained an
    undertaking by the landlord not to give notice to quit until the
    landlord required to pull down the demised buildings. Lush J.
    after citing Doe d. Warner v. Browne (1807) 8 East 165 said of
    that case, at p. 124:

    "This reasoning applies with at least equal force to the
    present case. This is not a mere constructive tenancy as
    that was. It is as explicit as words can make it that the
    defendants are to hold 'upon a weekly tenancy at a weekly
    rental, and that the tenancy is to be determined by either
    of the parties on giving a week's notice to the other.'
    There is this difference between the two cases, that in Doe
    d. Browne v. Warner
    the lessor engaged not to turn out the
    tenant so long as he observed the conditions, and in this
    case Radcliffe engages that the tenant shall hold until the
    company require to pull down the buildings. But, as that is
    an event which may never happen, the distinction is merely
    between the contingency of the tenant breaking the
    conditions and the contingency of the company wanting the
    premises in order to pull them down. The restriction is as
    repugnant to the nature of the tenancy in the one case as
    is in the other. It is therefore no legal answer to the
    ejectment to say that the contingency provided for has not
    happened."

    These authorities indicate plainly enough that the agreement
    in the present case did not create a lease and that the tenancy
    from year to year enjoyed by the tenant as a result of entering
    into possession and paying a yearly rent can be determined by six
    months' notice by either landlord or tenant. The landlord has
    admittedly served such a notice. The Court of Appeal have
    however concluded that the notice was ineffective and that the
    landlord cannot give a valid notice until the land is required "for
    the purposes of the widening of Walworth Road" in conformity
    with clause 6 of the agreement.

    - 5 -

    The notion of a tenancy from year to year, the landlord
    binding himself not to give notice to quit which was once rejected
    by Lord Mansfield and exploded long before 1807 according to
    Lawrence J. in Doe d. Warner v. Browne (1807) 8 East 165 at 167
    was however revived and applied by the Court of Appeal in In re
    Midland Railway Co.'s Agreement
    [1971] Ch. 725. In that case a
    lease for a period of six months from 10 June 1920 was expressed
    to continue from half year to half year until determined. The
    agreement provided for the determination of the agreement by
    three months' written notice given by either party to the other
    subject to a proviso that the landlords should not exercise that
    right unless they required the premises for their undertaking. The
    successors to the landlords served a six months' written notice to
    quit under the Landlord and Tenant Act 1954 although they did not
    require the premises for their undertaking. The Court of Appeal,
    upholding Foster J., declared that the notice to quit was invalid
    and of no effect because the landlords did not require the
    premises for their undertaking. The Court of Appeal held that the
    decision in Lace v. Chantler [1944] K.B. 368 did not apply to a
    periodic tenancy and declined to follow Warner v. Browne (1807) 8
    East 165 or Cheshire Lines Committee v. Lewis & Co. (1880) 50
    L.J.Q.B. 121. Russell L.J. delivering the judgment of the court
    held that the decision in Lace v. Chantler [1944] K.B. 368 did not
    apply to a tenancy from year to year and said, at p. 733:

    "... we are persuaded that, there being no authority to
    prevent us, it is preferable as a matter of justice to hold
    parties to their clearly expressed bargain rather than to
    introduce for the first time in 1971 an extension of a
    doctrine of land law so as to deny the efficacy of that
    bargain."

    My Lords, I consider that the principle in Lace v. Chantler
    [1944] K.B. 368 reaffirming 500 years of judicial acceptance of the
    requirement that a term must be certain applies to all leases and
    tenancy agreements. A tenancy from year to year is saved from
    being uncertain because each party has power by notice to
    determine at the end of any year. The term continues until
    determined as if both parties made a new agreement at the end of
    each year for a new term for the ensuing year. A power for
    nobody to determine or for one party only to be able to determine
    is inconsistent with the concept of a term from year to year; see
    Warner v. Browne (1807) 8 East 165 and Cheshire Lines Committee
    v. Lewis & Co. (1880) 50 L.J.Q.B. 121. In In re Midland Railway
    Co.'s Agreement
    [1971] Ch. 725 there was no "clearly expressed
    bargain" that the term should continue until the crack of doom if
    the demised land was not required for the landlord's undertaking or
    if the undertaking ceased to exist. In the present case there was
    no "clearly expressed bargain" that the tenant shall be entitled to
    enjoy his "temporary structures" in perpetuity if Walworth Road is
    never widened. In any event principle and precedent dictate that
    it is beyond the power of the landlord and the tenant to create a
    term which is uncertain.

    A lease can be made for five years subject to the tenant's
    right to determine if the war ends before the expiry of five years.
    A lease can be made from year to year subject to a fetter on the
    right of the landlord to determine the lease before the expiry of
    five years unless the war ends. Both leases are valid because they

    - 6 -

    create a determinable certain term of five years. A lease might
    purport to be made for the duration of the war subject to the
    tenant's right to determine before the end of the war. A lease
    might be made from year to year subject to a fetter on the right
    of the landlord to determine the lease before the war ends. Both
    leases would be invalid because each purported to create an
    uncertain term. A term must either be certain or uncertain. It
    cannot be partly certain because the tenant can determine it at
    any time and partly uncertain because the landlord cannot
    determine it for an uncertain period. If the landlord does not
    grant and the tenant does not take a certain term the grant does
    not create a lease.

    The decision of the Court of Appeal In re Midland Railway
    Co.'s Agreement
    [1971] Ch. 725 was taken a little further in
    Ashburn Anstalt v. Arnold [1989] Ch 1 (Ashburn's case). That
    case, if it was correct, would make it unnecessary for a lease to
    be of a certain duration. In an agreement for the sale of land
    the vendor reserved the right to remain at the property after
    completion as licensee and to trade therefrom without payment of
    rent "save that it can be required by Matlodge [the purchaser] to
    give possession on not less than one quarter's notice in writing
    upon Matlodge certifying that it is ready at the expiration of such
    notice forthwith to proceed with the development of the property
    and the neighbouring property involving, inter alia, the demolition
    of the property". The Court of Appeal held that this reservation
    created a tenancy. The tenancy was not from year to year but
    for a term which would continue until Matlodge certified that it
    was ready to proceed with the development of the property. The
    Court of Appeal held that the term was not uncertain because the
    vendor could either give a quarter's notice or vacate the property
    without giving notice. But of course the same could be said of
    the situation in Lace v. Chantler [1944] K.B. 368. The cumulative
    result of the two Court of Appeal authorities In re Midland
    Railway Co.'s Agreement
    [1971] Ch. 725 and Ashburn's case would
    therefore destroy the need for any term to be certain.

    In the present case the Court of Appeal were bound by the
    decisions In re Midland Railway Co's agreement [1971] 1 Ch. 725
    and Ashburn's case. In my opinion both these cases were wrongly
    decided. A grant for an uncertain term does not create a lease.
    A grant for an uncertain term which takes the form of a yearly
    tenancy which cannot be determined by the landlord does not
    create a lease. I would allow the appeal. The trial judge, Millett
    J., reached the conclusion that the six months' notice was a good
    notice. He was of course bound by the Court of Appeal decisions
    but managed to construe the memorandum of agreement so as to
    render clause 6 ineffective in fettering the right of the landlord to
    serve a notice to quit after the landlord had ceased to be a road
    widening authority. In the circumstances this question of
    construction need not be considered. For the reasons which I have
    given the order made by Millett J. must be restored. The
    respondent must pay the costs of the appellants before the House
    and in the courts below.

    - 7 -

    LORD GRIFFITHS

    My Lords,

    For the reasons given by my noble and learned friend Lord
    Templeman I agree that this appeal should be allowed, and I hope
    that some action might follow from the observations made by my
    noble and learned friend Lord Browne-Wilkinson, with which I
    agree.

    LORD GOFF OF CHIEVELEY

    My Lords,

    I have had the advantage of reading in draft the opinion of
    my noble and learned friend, Lord Templeman, and for the reasons
    he gives I too would allow the appeal.

    LORD BROWNE-WILKINSON

    My Lords,

    I agree with the speech of my noble and learned friend Lord
    Templeman that this appeal must be allowed for the reasons he
    gives. However, I reach that conclusion with no satisfaction.

    Before 1930, Mr. Nathan owned shop premises, 263-5
    Walworth Road, with a frontage to the street. The agreement
    made in 1930 between the London County Council and Mr. Nathan
    was part of a sale and leaseback arrangement whereby a part of
    Mr. Nathan's land ("the strip") was sold to the L.C.C. for road
    widening. Mr. Nathan retained the freehold of the remainder of
    No. 263-5. By the agreement, the strip was leased back to Mr.
    Nathan for continued use, with the rest of 263-5 Walworth Road,
    until required for road widening. Up until today, the remainder of
    No. 263-5 together with the strip has been let and occupied as one
    single set of retail shop premises with a frontage to the Walworth
    Road. As a result of our decision Mr. Nathan's successor in title
    will be left with the freehold of the remainder of No. 263-5
    which, though retail premises, will have no frontage to a shopping
    street: the L.C.C.'s successors in title will have the freehold to a
    strip of land with a road frontage but probably incapable of being
    used save in conjunction with the land from which it was severed
    in 1930 i.e. the remainder of No. 263-5.

    It is difficult to think of a more unsatisfactory outcome or
    one further away from what the parties to the 1930 agreement
    can ever have contemplated. Certainly it was not a result which
    their contract, if given effect to, could ever have produced. If
    the 1930 agreement had taken effect fully, there could never have
    come a time when the freehold to the remainder of No. 263-5
    would be left without a road frontage.



    - 8 -

    This bizarre outcome results from the application of an
    ancient and technical rule of law which requires the maximum
    duration of a term of years to be ascertainable from the outset.
    No one has produced any satisfactory rationale for the genesis of
    this rule. No one has been able to point to any useful purpose
    that it serves at the present day. If, by overruling the existing
    authorities, this House were able to change only the law for the
    future I would have urged your Lordships to do so. But for this
    House to depart from a rule relating to land law which has been
    established for many centuries might upset long established titles.
    I must therefore confine myself to expressing the hope that the
    Law Commission might look at the subject to see whether there is
    in fact any good reason now for maintaining a rule which operates
    to defeat contractually agreed arrangements between the parties
    (of which all successors in title are aware) and which is capable of
    producing such an extraordinary result as that in the present case.

    LORD MUSTILL

    My Lords,

    For the reasons given by my noble and learned friend Lord
    Templeman, I too agree that the appeal must be allowed. I would
    however wish to associate myself with the observations of my
    noble and learned friend Lord Browne-Wilkinson as to the
    unsatisfactory nature of this conclusion.

    - 9 -



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