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You are here: BAILII >> Databases >> United Kingdom House of Lords Decisions >> AG Securities v Vaughan [1988] UKHL 8 (10 November 1988)
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Cite as: [1990] AC 417, [1988] UKHL 8, [1990] 1 AC 417, [1988] 3 All ER 1058

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    Parliamentary Archives,
    HL/PO/JU/18/248

    A. G. Securities (An unlimited company) (Appellants) v.
    Vaughan
    and others (Respondents)

    JUDGMENT

    Die Jovis 10° Novembris 1988

    Upon Report from the Appellate Committee to whom was
    referred the Cause A. G. Securities against Vaughan and
    others, That the Committee had heard Counsel on Monday the
    10th and Tuesday the 11th days of October last, upon the
    Petition and Appeal of A. G. Securities (an unlimited company)
    of 22, Little Russell Street, London, WC1, praying that the
    matter of the Order set forth in the Schedule thereto, namely
    an Order of the Court of Appeal of the 21st day of December
    1987, 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
    Roderick Lyons, Simon Russell and Christopher Cook 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 21st day of December 1987 complained of in the
    said Appeal be, and the same is hereby, Set Aside and that
    the Order of His Honour Judge Owen of the 16th day of February
    1987 be, and the same is hereby Restored: And it is further
    Ordered, That the First, Second, Third and Fourth Respondents
    do pay or cause to be paid to the said Appellants the Costs
    incurred by them in the Court of Appeal up to the 14th day of
    October 1987 and that the Second, Third and Fourth Respondents
    do pay or cause to be paid to the said Appellants the costs
    incurred by them in the Court of Appeal after the 14th day of
    October 1987 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 Clerkenwell County Court to do therein as
    shall be just and consistent with this Judgment.

    Cler: Parliamentor:

    Judgment: 10.11.88

    HOUSE OF LORDS

    A.G. SECURITIES (AN UNLIMITED COMPANY)
    (APPELLANTS)

    v.

    VAUGHAN AND OTHERS
    (RESPONDENTS)

    ANTONIADES

    (RESPONDENT)

    v.

    VILLIERS (A.P.) AND ANOTHER (A.P.)
    (APPELLANTS)

    Lord Bridge of Harwich
    Lord Templeman
    Lord Ackner
    Lord Oliver
    of Aylmerton
    Lord Jauncey of Tullichettle


    LORD BRIDGE OF HARWICH

    My Lords,

    I gratefully adopt the full account given in the speech of
    my noble and learned friend Lord Templeman of the facts on
    which these two appeals depend.

    A. G. Securities v. Vaughan and Others

    The four respondents acquired their contractual rights to
    occupy the flat in question and undertook their relevant obligations
    by separate agreements with the appellants made at different
    times and on different terms. These rights and obligations having
    initially been several, I do not understand by what legal alchemy
    they could ever become joint. Each occupant had a contractual
    right, enforceable against the appellants, to prevent the number of
    persons permitted to occupy the flat at any one time exceeding
    four. But this did not give them exclusive possession of the kind
    which is distinctive of a leasehold interest. Having no estate in
    land, they could not sue in trespass. Their remedy against
    intruders
    would have been to persuade the appellants to sue as
    plaintiffs or to join the appellants as defendants by way of
    enforcement of their contractual rights.

    The arrangement seems to have been a sensible and realistic
    one to provide accommodation for a shifting population of
    individuals who were genuinely prepared to share the flat with
    others introduced from time to time who would, at least initially,
    be strangers to them. There was no artificiality in the contracts
    concluded to give effect to this arrangement. On the contrary, it
    seems to me, with respect to the majority of the Court of Appeal,

    to require the highest degree of artificiality to force these
    contracts into the mould of a joint tenancy.

    Antoniades v. Villiers and Bridger

    Here the artificiality was in the pretence that two
    contemporaneous and identical agreements entered into by a man
    and a woman who were going to live together in a one-bedroom
    flat and share a double bed created rights and obligations which
    were several rather than joint. As to the nature of those rights
    and obligations, the provisions of the joint agreement purporting to
    retain the right in the respondent to share the occupation of the
    flat with the young couple himself or to introduce an indefinite
    number of third parties to do so could be seen, in all the relevant
    circumstances, to be repugnant to the true purpose of the
    agreement. No one could have supposed that those provisions were
    ever intended to be acted on. They were introduced into the
    agreement for no other purpose than as an attempt to disguise the
    true character of the agreement which it was hoped would deceive
    the court and prevent the appellants enjoying the protection of the
    Rent Acts. As your Lordships all agree, the attempt fails.

    I would allow both appeals.

    LORD TEMPLEMAN

    My Lords,

    In each of the two appeals now under consideration, the
    question is whether the owner of residential accommodation
    granted a tenancy or granted licences.

    In the first appeal, the appellant company, A.G. Securities,
    owned
    a block of flats, Linden Mansions, Hornsey Lane, London.
    Flat No. 25 consists of six living-rooms in addition to a kitchen
    and bathroom. The company furnished four living-rooms as
    bedrooms, a fifth as a lounge and a sixth as a sitting-room. In
    1974 furnished lettings became subject to the Rent Acts. If the
    company granted exclusive possession of the flat to one single
    occupier or to two or more occupiers jointly in consideration of
    periodical payments, the grant would create a tenancy of the flat.
    If the company granted exclusive possession of one bedroom to
    four different occupiers with joint use of the lounge, sitting-room,
    kitchen and bathroom, each of the four grants would create a
    tenancy of one bedroom. Exclusive possession means either
    exclusive occupation or receipt of rents and profits.

    The company entered into separate agreements with four
    different applicants. Each agreement was in the same form, and
    was expressed to be made between the company as "the Owner"
    and the applicant as "Licensee." The agreement contained, inter
    alia, the following relevant clauses:

    "1. The Owner grants to the Licensee the right to use in
    common with others who have or may from time to time be

    - 2 -

    granted the like right the flat known as 25, Linden
    Mansions, Hornsey Lane, N.6 but without the right to
    exclusive possession of any part of the said flat together
    with the fixtures furniture furnishings and effects now in
    the said flat for six months from the - day of - 19 - and
    thereafter until determined by either party giving to the
    other one month's notice in writing to take effect at any
    time.

    "2. The Licensee agrees with the Owner as follows:

    (1) To pay the sum of £- per month for the right to
    share in the use of the said flat such sum to be
    payable by equal monthly instalments on the first day
    of each month . . .

    (3) To share the use of the said flat peaceably with
    and not to impede the use of the said flat by such
    other persons not exceeding three in number at any
    one time to whom the Owner has granted or shall
    from time to time grant licence to use the said flat
    in common with the Licensee and not to impede the
    use by such other persons of the gas electricity and
    telephone services supplied to the flat provided that
    each shares the cost of such services.

    (4) If at any time there shall be less than three
    persons authorised by the Owner to use the said flat
    in common with the Licensee upon reasonable notice
    given by the Owner to meet with any prospective
    licensee nominated by the Owner at the flat to
    provide an opportunity to such prospective licensee to
    agree terms for sharing the cost of services in
    accordance with clause 2(3).

    (5) Not to assign this agreement nor permit any other
    person except as licensed by the Owner to sleep or
    reside in or share occupation of the said flat or any
    part of it at any time."

    The flat was kept fully occupied; whenever one agreement
    was
    terminated the company invited applications to fill the
    vacancy. The company's agent produced a draft of the agreement
    to
    an applicant. The monthly sum payable by the applicant was
    not necessarily the same as the monthly sum payable by any of
    the continuing occupiers of the flat because inflation and other
    factors caused the value of an agreement to fluctuate. The
    company and its agent gave no directions or explanations about the
    manner in which the applicant and other persons not exceeding
    three in number would use the flat in common. The applicant was
    sent off to the flat to agree terms with the three continuing
    occupiers. There he would be offered a vacant bedroom and the
    use of the lounge, sitting-room, kitchen and bathroom with the
    other occupiers each of whom had his own bedroom. It was the
    practice that whenever a bedroom fell vacant upon termination of
    an agreement, each of the three continuing occupiers, in order of
    seniority, decided whether to change his bedroom. The applicant
    for the vacancy was then offered the bedroom which the other
    three least coveted. The applicant, if content, signed his

    - 3 -

    agreement and moved into his bedroom. If he were unable to
    share the use of the common parts of the flat peaceably he could
    terminate his agreement, or the other three occupiers could
    terminate their agreements or prevail upon the company to
    terminate the agreement of the unpopular occupier.

    The respondent, Mr. Vaughan, signed an agreement in 1982
    to pay £86.66 per month. The respondent, Mr. Lyons, signed an
    agreement dated 2 March 1984 to pay £99 per month. The
    respondent, Mr. Russell, signed an agreement dated 1 August 1984
    to pay £125 per month, and the respondent, Mr. Cook, signed an
    agreement dated 28 January 1985 to pay £104 per month. From
    28 January 1985 onwards, each of the four respondents occupied
    one bedroom and shared the use of the lounge, sitting-room,
    kitchen and bathroom.

    The respondents claim that under and by virtue of the four
    agreements signed by them respectively, they became tenants of
    the flat. The company contends that each respondent is a
    licensee.

    In the second appeal, the appellant, Mr. Antoniades, is the
    owner of the house, 6, Whiteley Road, Upper Norwood. The attic
    was converted into furnished residential accommodation comprising
    a bedroom, a bed sitting-room, kitchen and bathroom. The
    furniture in the sitting-room consisted of a bed-settee, a table-bed,
    a sideboard and a chair.

    The appellants, Mr. Villiers and Miss Bridger, spent three
    months looking for a flat where they could live together. In
    February 1985 they were shown the attic flat. The bedroom
    lacked a bed; the appellants expressed a preference for a double
    bed which Mr. Antoniades agreed to provide. Mr. Antoniades and
    Mr. Villiers entered into an agreement dated 9 February 1985.
    The agreement was described as a licence, Mr. Antoniades was
    described as "the licensor" and Mr. Villiers was described as "the
    licensee." The agreement recited that "the licensor is not willing
    to grant the licensee exclusive possession of any part of the rooms
    hereinafter referred to" and that "the licensee is anxious to secure
    the
    use of the rooms notwithstanding that such use be in common
    with the licensor and such other licensees or invitees as the
    licensor may permit from time to time to use the said rooms."
    The material provisions of the agreement were as follows:

    "By this licence the licensor licences the licensee to use
    (but not exclusively) all those rooms (hereinafter referred to
    as 'the rooms') on the top flat (1 bedroom, 1 bed-sitting-
    room, the kitchen and bathroom) of the building ... 6,
    Whiteley Road S.E.19 . . . together with the use of the
    furniture fixtures and effects now in the rooms (more
    particularly set out in the schedule of contents annexed
    hereto) from 14 February 1985 for the sum of £87 per
    calendar month on the following terms and conditions:

    (1) The licensee agrees to pay the said sum of £87
    (on the 14th of each month) monthly in advance . . .

    - 4 -

    (3) The licensee shall use his best endeavours
    amicably and peaceably to share the use of the rooms
    with the licensor and with such other licensees or
    invitees whom the licensor shall from time to time
    permit to use the rooms and shall not interfere with
    or otherwise obstruct such shared occupation in any
    way whatsoever ....

    (10) The licensee shall not do or suffer to be done in
    the rooms any act or thing which may be a nuisance
    cause of damage or annoyance to the licensor and the
    other occupiers or users of the rooms ....

    (12) The licensee . . . will not use the rooms in any
    illegal or immoral way ....

    (16) The licensor shall be entitled at any time to use
    the rooms together with the licensee and permit other
    persons to use all of the rooms together with the
    licensee ....

    (17) This licence is personal to the licensee and shall
    not permit the use of the rooms by any person
    whatsoever and only the licensor will have the right
    to use or permit the use of the rooms as described in
    clause 16. The licensee under no circumstances will
    have the right to allow any other people of his choice
    to use the rooms in any way ....

    (22) The licensee (occupier) declares that he is over
    18 years old and understands this licence ....

    (23) The real intention of the parties in all
    surrounding circumstances is to create this licence
    which is not coming under the Rent Acts and is
    binding as written.

    1. This licence represents the entire agreement of
      the parties and no oral or other agreements were
      made and no different explanations or representations
      were made and only agreements in writing will be
      legally binding.

    2. The licensee read and understood this licence and
      received copy and the licensee understands that all
      rooms and all parts of the dwelling will be shared and
      no exclusive possession of any part of the whole will
      be allowed to the licensees by the licensor under any
      circumstances."

    There then followed the schedule of furniture and then a
    new clause as follows:

    "26. Subject to clause 21 this licence may be terminated by
    one month's notice in writing given by either party at any
    time and the licensor reserves the right of eviction without
    court order."

    - 5 -

    That agreement was signed by Mr. Villiers in five places and each
    of his signatures was witnessed.

    Either then or thereafter, Mr. Villiers signed an addendum
    to the agreement whereby Mr. Villiers:

    "Agrees that the licence signed on 9 February 1985 does not
    come under the Rent Acts and the flat is for single people
    sharing and if Mr. Villiers marries any occupier of the flat
    then Mr. Villiers will give notice and vacate the flat at 6,
    Whiteley Road London S.E.19. The owner Mr. Antoniades
    did not promise any other accommodation in any way. No
    persons will have exclusive possession of the above flat as
    agreed."

    Mr. Antoniades entered into a separate agreement and a
    separate addendum with Miss Bridger. The agreement and the
    addendum were in the same form, bore the same date, were
    executed on the same day and were signed and witnessed in the
    same way as the agreement and addendum entered into by Mr.
    Villiers.

    Thereupon Mr. Villiers and Miss Bridger entered into
    occupation of the rooms comprised in the agreement. Mr.
    Antoniades has never attempted to use any of the rooms or
    authorised any other person to use the rooms.

    The appellants, Mr. Villiers and Miss Bridger, claim that
    they became tenants of the whole of the attic flat. Mr.
    Antoniades contends that each appellant is a licensee.

    My Lords, ever since 1915 the Rent Acts have protected
    some tenants of residential accommodation with security of tenure
    and maximum rents. The scope and effect of the Rent Acts have
    been altered from time to time and the current legislative
    protection is contained in the Rent Act 1977. Section 1 of the
    Act of 1977, reproducing earlier enactments, provides that:

    "Subject to this part of this Act, a tenancy under which a
    dwelling-house (which may be a house or part of a house) is
    let as a separate dwelling is a protected tenancy for the
    purposes of this Act."

    Parties to an agreement cannot contract out of the Rent
    Acts; if they were able to do so the Acts would be a dead letter
    because in a state of housing shortage a person seeking residential
    accommodation may agree to anything to obtain shelter. The Rent
    Acts protect a tenant but they do not protect a licensee. Since
    parties to an agreement cannot contract out of the Rent Acts, a
    document which expresses the intention, genuine or bogus, of both
    parties or of one party to create a licence will nevertheless create
    a tenancy if the rights and obligations enjoyed and imposed satisfy
    the legal requirements of a tenancy. A person seeking residential
    accommodation may concur in any expression of intention in order
    to obtain shelter. Since parties to an agreement cannot contract
    out of the Rent Acts, a document expressed in the language of a
    licence must nevertheless be examined and construed by the court
    in order to decide whether the rights and obligations enjoyed and
    imposed create a licence or a tenancy. A person seeking

    - 6 -

    residential accommodation may sign a document couched in any
    language in order to obtain shelter. Since parties to an agreement
    cannot
    contract out of the Rent Acts, the grant of a tenancy to
    two persons jointly cannot be concealed, accidentally or by design,
    by the creation of two documents in the form of licences. Two
    persons seeking residential accommodation may sign any number of
    documents in order to obtain joint shelter. In considering one or
    more documents for the purpose of deciding whether a tenancy has
    been created, the court must consider the surrounding
    circumstances including any relationship between the prospective
    occupiers, the course of negotiations and the nature and extent of
    the accommodation and the intended and actual mode of
    occupation of the accommodation. If the owner of a one-
    bedroomed flat granted a licence to a husband to occupy the flat
    provided he shared the flat with his wife and nobody else and
    granted a similar licence to the wife provided she shared the flat
    with the husband and nobody else, the court would be bound to
    consider the effect of both documents together. If the licence to
    the husband required him to pay a licence fee of £50 per month
    and the licence to the wife required her to pay a further licence
    fee of £50 per month, the two documents read together in the
    light of the property to be occupied and the obvious intended
    mode of occupation would confer exclusive occupation on the
    husband and wife jointly and a tenancy at the rent of £100.

    Landlords dislike the Rent Acts and wish to enjoy the
    benefits of letting property without the burden of the restrictions
    imposed by the Acts. Landlords believe that the Rent Acts
    unfairly interferes with freedom of contract and exacerbate the
    housing shortage. Tenants on the other hand believe that the Acts
    are a necessary protection against the exploitation of people who
    do not own the freehold or long leases of their homes. The court
    lacks the knowledge and the power to form any judgment on these
    arguments which fall to be considered and determined by
    Parliament. The duty of the court is to enforce the Acts and in
    so doing to observe one principle which is inherent in the Acts and
    has been long recognised, the principle that parties cannot contract
    out of the Acts.

    The enjoyment of exclusive occupation for a term in
    consideration of periodical payments creates a tenancy, save in
    exceptional circumstances not relevant to these appeals; see Street
    v. Mountford
    [1985] 1 A.C. 809 826, 827. The grant of one room
    with exclusive occupation in consideration of a periodic payment
    creates a tenancy, although if the room is not a dwelling, the
    tenant is not protected by the Rent Acts: see Curl v. Angelo
    [1948] 2 All E.R. 189. The grant of one room with exclusive
    occupation as a dwelling creates a tenancy but if a tenant shares
    some other essential living premises such as a kitchen with his
    landlord or other persons, the room is not let as a separate
    dwelling within the meaning of section 1 of the Rent Act 1977:
    see Neale v. Del Soto [1945] K.B. 144 and Cole v. Harris [1945]
    K.B. 474. Section 21 of the Act of 1977 confers some rights on a
    tenant who shares essential living premises with his landlord, and
    section 22 confers protection on a tenant who shares some
    essential living premises with persons other than the landlord.

    If, under an agreement, the owner of residential
    accommodation provides services or attendance and retains

    - 7 -

    possession for that purpose the occupier is a lodger and the
    agreement creates a licence. Under an agreement for the
    exclusive occupation of a room or rooms consisting of a dwelling
    for periodic payments then, save in the exceptional circumstances
    mentioned in Street v. Mountford [1985] AC 809, a single
    occupier, if he is not a lodger, must be a tenant. The agreement
    may
    provide, expressly or by implication, power for the owner to
    enter the dwelling to inspect or repair but if the occupier is
    entitled to the use and enjoyment of the dwelling and is not a
    lodger he is in exclusive occupation and the agreement creates a
    tenancy.

    Where residential accommodation is occupied by two or
    more persons the occupiers may be licensees or tenants of the
    whole or each occupier may be a separate tenant of part. In the
    present appeals the only question raised is whether the occupiers
    are licensees or tenants of the whole.

    In the first appeal under consideration the company entered
    into four separate agreements with four separate persons between
    1982 and 1985. The agreements were in the same form save that
    the periodical sum payable under one agreement did not correspond
    to the sum payable pursuant to any other agreement. The
    company was not bound to make agreements in the same form or
    to require any payment. The agreement signed by Mr. Vaughan in
    1982 did not and could not entitle or compel Mr. Vaughan to
    become a joint tenant of the whole of the flat with Mr. Cook in
    1985 on the terms of Mr. Vaughan's agreement or on the terms of
    Mr. Cook's agreement or on the terms of any other agreement
    either
    alone with Mr. Cook or together with any other persons. In
    1985 Mr. Vaughan did not agree to become a joint tenant of the
    fiat with Mr. Cook or anybody else. In 1985, in the events which
    had happened, the company possessed the right reserved to the
    company by clause 2(3) of Mr. Vaughan's agreement to authorise
    Mr. Cook to share the use of the flat in common with Mr.
    Vaughan. In 1985 Mr. Vaughan orally agreed with Mr. Cook that
    if the company authorised Mr. Cook to use the flat in common
    with Mr. Vaughan, then Mr. Vaughan would allow Mr. Cook to
    occupy a specified bedroom in the flat and share the occupation of
    the other parts of the flat excluding the other three bedrooms.
    Mr. Vaughan's agreement with the company did not prevent him
    from entering into this oral agreement with Mr. Cook Under the
    standard form agreement the company did not retain power to
    allocate the four bedrooms but delegated this power to the
    occupiers for the time being. If the occupiers had failed to
    allocate the bedrooms the company would have been obliged to
    terminate one or more of the agreements. The respondents claim
    that they are joint tenants of the flat. No single respondent
    claims to be a tenant of a bedroom.

    The Court of Appeal [1988] 2 W.L.R. 689 (Fox and Mustill
    L.JJ., Sir George Waller dissenting), concluded that the four
    respondents were jointly entitled to exclusive occupation of the
    flat. I am unable to agree. If a landlord who owns a three-
    bedroom flat enters into three separate independent tenancies with
    three independent tenants each of whom is entitled to one
    bedroom and to share the common parts, then the three tenants, if
    they agree, can exclude anyone else from the flat. But they do
    not enjoy exclusive occupation of the flat jointly under the terms

    -8-

    of their tenancies. In the present case, if the four respondents
    had been jointly entitled to exclusive occupation of the flat then,
    on the death of one of the respondents, the remaining three would
    be entitled to joint and exclusive occupation. But, in fact, on the
    death of one respondent the remaining three would not be entitled
    to joint and exclusive occupation of the flat. They could not
    exclude a fourth person nominated by the company. I would allow
    the appeal.

    In the first appeal the four agreements were independent of
    one another. In the second appeal the two agreements were
    interdependent. Both would have been signed or neither. The two
    agreements must therefore be read together. Mr. Villiers and Miss
    Bridger applied to rent the flat jointly and sought and enjoyed
    joint and exclusive occupation of the whole of the flat. They
    shared the rights and the obligations imposed by the terms of their
    occupation. They acquired joint and exclusive occupation of the
    flat in consideration of periodical payments and they therefore
    acquired a tenancy jointly. Mr. Antoniades required each of them,
    Mr. Villiers and Miss Bridger, to agree to pay one half of each
    aggregate periodical payment, but this circumstance cannot convert
    a tenancy into a licence. A tenancy remains a tenancy even
    though the landlord may choose to require each of two joint
    tenants to agree expressly to pay one half of the rent. The
    tenancy conferred on Mr. Villiers and Miss Bridger the right to
    occupy the whole flat as their dwelling. Clause 16 reserved to
    Mr. Antoniades the power at any time to go into occupation of
    the flat jointly with Mr. Villiers and Miss Bridger. The exercise
    of that power would at common law put an end to the exclusive
    occupation of the flat by Mr. Villiers and Miss Bridger, terminate
    the tenancy of Mr. Villiers and Miss Bridger, and convert Mr.
    Villiers and Miss Bridges into licensees. But the powers reserved
    to Mr. Antoniades by clause 16 cannot be lawfully exercised
    because they are inconsistent with the provisions of the Rent Acts.

    When Mr. Antoniades entered into the agreements dated 9
    February 1985 with Mr. Villiers and Miss Bridger and when Mr.
    Antoniades allowed Mr. Villiers and Miss Bridger to occupy the
    flat, it is clear from the negotiations which had taken place, from
    the surrounding circumstances, and from subsequent events, that
    Mr. Antoniades did not intend in February 1985, immediately or
    contemporaneously, to share occupation or to authorise any other
    person to deprive Mr. Villiers and Miss Bridger of exclusive
    occupation of the flat. Clause 16, if genuine, was a reservation
    by a landlord of a power at some time during the currency of the
    tenancy to share occupation with the tenant. The exclusive
    occupation of the tenant coupled with the payment of rent created
    a tenancy which at common law could be terminated and
    converted into a licence as soon as the landlord exercised his
    power to share occupation. But under the Rent Acts, if a
    contractual tenancy is terminated, the Acts protect the occupiers
    from eviction.

    If a landlord creates a tenancy under which a flat is let as
    a separate dwelling the tenancy is a protected tenancy under
    section 1 of the Rent Act 1977. After the termination of a
    protected tenancy the protected tenant becomes a statutory tenant
    under section 2 of the Act. By section 3(1):

    - 9 -

    "So long as he retains possession, a statutory tenant shall
    observe and be entitled to the benefit of all the terms and
    conditions of the original contract of tenancy, so far as
    they are consistent with the provisions of this Act."

    By section 98 a court shall not make an order for possession
    of a dwelling-house which is subject to a protected tenancy or a
    statutory tenancy unless the court considers that it is reasonable
    to make such an order and is satisfied either that alternative
    accommodation is available or that certain other conditions are
    satisfied. The landlord cannot dispense with an order of the court
    and enter into possession in exercise of his common law powers.

    Where a landlord creates a tenancy of a flat and reserves
    the right to go into exclusive occupation at any time of the whole
    or part of the flat with or without notice, that reservation is
    inconsistent with the provisions of the Rent Acts and cannot be
    enforced without an order of the court under section 98. Where a
    landlord creates a tenancy of a flat and reserves the right to go
    into occupation of the whole or part of the flat with or without
    notice, jointly with the existing tenants, that reservation also is
    inconsistent with the provisions of the Acts. Were it otherwise
    every tenancy agreement would be labelled a licence and would
    contract out of the Rent Acts by reserving power to the landlord
    to share possession with the tenant at any time after the
    commencement of the term.

    Clause 16 is a reservation to Mr. Antoniades of the right to
    go into occupation or to nominate others to enjoy occupation of
    the whole of the flat jointly with Mr. Villiers and Miss Bridger.
    Until that power is exercised Mr. Villiers and Miss Bridger are
    jointly in exclusive occupation of the whole of the flat making
    periodical payments and they are therefore tenants. The Rent Act
    prevents the exercise of a power which would destroy the tenancy
    of Mr. Villiers and Miss Bridger and would deprive them of the
    exclusive occupation of the flat which they are now enjoying.
    Clause 16 is inconsistent with the provisions of the Rent Acts.

    There is a separate and alternative reason why clause 16
    must be ignored. Clause 16 was not a genuine reservation to Mr.
    Antoniades of a power to share the flat and a power to authorise
    other persons to share the flat. Mr. Antoniades did not genuinely
    intend to exercise the powers save possibly to bring pressure to
    bear to obtain possession. Clause 16 was only intended to deprive
    Mr. Villiers and Miss Bridger of the protection of the Rent Acts.
    Mr. Villiers and Miss Bridger had no choice in the matter.

    In the notes of Judge Macnair, Mr. Villiers is reported as
    saying that:

    "He [Mr. Antoniades] kept going on about it being a licence
    and not in the Rent Act. I didn't know either but was
    pleased to have a place after three or four months of
    chasing."

    The notes of Miss Bridger's evidence include this passage:

    "I didn't understand what was meant by exclusive possession
    or licence. Signed because so glad to move in. Had been
    looking for three months."

    - 10 -

    In Street v. Mountford [1985] AC 809, 825, I said that:

    "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."

    It would have been more accurate and less liable to give
    rise to misunderstandings if I had substituted the word "pretence"
    for the references to "sham devices" and "artificial transactions."
    Street v. Mountford was not a case which involved a pretence
    concerning exclusive possession. The agreement did not mention
    exclusive possession and the owner conceded that the occupier
    enjoyed exclusive possession. In Somma v. Hazelhurst [1978] 1
    W.L.R. 1014 and other cases considered in Street v. Mountford, the
    owner wished to let residential accommodation but to avoid the
    Rent Acts. The occupiers wished to take a letting of residential
    accommodation. The owner stipulated for the execution of
    agreements which pretended that exclusive possession was not to
    be enjoyed by the occupiers. The occupiers were obliged to
    acquiesce with this pretence in order to obtain the accommodation.
    In my opinion the occupiers either did not understand the language
    of the agreements or assumed, justifiably, that in practice the
    owner would not violate their privacy. The owners real intention
    was to rely on the language of the agreement to escape the Rent
    Acts. The owner allowed the occupiers to enjoy jointly exclusive
    occupation and accepted rent. A tenancy was created. Street v.
    Mountford
    reasserted three principles. First, parties to an
    agreement cannot contract out of the Rent Acts. Secondly, in the
    absence of special circumstances, not here relevant, the enjoyment
    of exclusive occupation for a term in consideration of periodic
    payments creates a tenancy. Thirdly, where the language of
    licence contradicts the reality of lease, the facts must prevail.
    The facts must prevail over the language in order that the parties
    may not contract out of the Rent Acts. In the present case
    clause 16 was a pretence.

    The fact that clause 16 was a pretence appears from its
    terms and from the negotiations. Clause 16 in terms conferred on
    Mr. Antoniades and other persons the right to share the bedroom
    occupied by Mr. Villiers and Miss Bridger. Clause 16 conferred
    power on Mr. Antoniades to convert the sitting-room occupied by
    Mr. Villiers and Miss Bridger into a bedroom which could be jointly
    occupied by Mr. Villiers, Miss Bridger, Mr. Antoniades and any
    person or persons nominated by Mr. Antoniades. The facilities in
    the flat were not suitable for sharing between strangers. The flat,
    situated in an attic with a sloping roof, was too small for sharing
    between strangers. If clause 16 had been genuine there would
    have been some discussion between Mr. Antoniades, Mr. Villiers
    and
    Miss Bridger as to how clause 16 might be operated in
    practice and in whose favour it was likely to be operated. The
    addendum imposed on Mr. Villiers and Miss Bridger sought to add
    plausibility to the pretence of sharing by forfeiting the right of
    Mr. Villiers and Miss Bridger to continue to occupy the flat if
    their double-bedded romance blossomed into wedding bells. Finally
    and significantly, Mr. Antoniades never made any attempt to

    - 11 -

    obtain increased income from the fiat by exercising the powers
    which clause 16 purported to reserve to him. Clause 16 was only
    designed to disguise the grant of a tenancy and to contract out of
    the Rent Acts. In the report of this case in the Court of Appeal
    [1988] 3 WLR 139, 148, Bingham L.J. said that:

    "The written agreements cannot possibly be construed as
    giving the occupants, jointly or severally, exclusive
    possession of the flat or any part of it. They stipulate with
    reiterated emphasis that the occupants shall not have
    exclusive possession."

    My Lords, in Street v. Mountford [1985] AC 809, this
    House stipulated with reiterated emphasis that an express
    statement of intention is not decisive and that the court must pay
    attention to the facts and surrounding circumstances and to what
    people do as well as to what people say.

    In Somma v. Hazelhurst [1978] 1 W.L.R. 1014, a young
    unmarried couple applied to take a double bedsitting-room in order
    that they might live together. Each signed an agreement to pay
    £38.80 per month to share the use of the room with the owner
    and with not more than one other person at any one time. The
    couple moved into the bedsitting-room and enjoyed exclusive
    occupation. In terms the owner reserved the right to share living
    and sleeping quarters with the two applicants. If the couple
    parted and the youth moved out, the owner could require the
    damsel to share her living and sleeping quarters with the owner
    and with a stranger or with one of them or move out herself.
    The couple enjoyed exclusive occupation until the owner decided to
    live with them or until one of their agreements was terminated.
    The right reserved to the owner to require the applicants or one
    of the applicants to share with the owner or some other third
    party was contrary to the provisions of the Rent Acts and, in
    addition was, in the circumstances, a pretence intended only to get
    round the Rent Acts.

    In Aldrington Garages Ltd, v. Fielder [1978] 37 P. & C.R.
    461, Mr. Fielder and Miss Maxwell applied to take a self-contained
    flat in order that they might live together. Each signed an
    agreement to pay £54.17 per month to share the use of the flat
    with one other person. The couple moved into the flat and
    enjoyed exclusive occupation. In terms if the couple parted and
    Mr. Fielder moved out, the owner could require Miss Maxwell to
    share her living and sleeping quarters with a stranger or move out
    herself. Mr. Fielder and Miss Maxwell enjoyed exclusive
    occupation unless and until one of their agreements was
    terminated. The right reserved to the owner to require Miss
    Maxwell to share with a third party if Mr. Fielder's agreement
    was
    terminated and to require Mr. Fielder to share with a third
    party if Miss Maxwell's agreement was terminated was contrary to
    the provisions of the Rent Acts and in addition was, in the
    circumstances, a pretence intended only to get round the Rent
    Acts.

    In Sturolson & Co. v. Weniz [1984] 17 H.L.R. 140, the
    defendant and a friend applied to take a self-contained flat for
    the occupation of the defendant, his wife and the friend. The
    defendant and his friend signed agreements to pay £100 per month

    - 12 -

    to share the flat with such other persons as might be nominated
    or approved by the owner from time to time. The defendant, his
    wife and the friend, moved into the flat and enjoyed exclusive
    occupation. In terms the defendant and the friend paid between
    them £200 per month for a flat which could be invaded by one or
    more strangers at any time. The owner's agent gave the game
    away by saying that the owner was happy so long as he received
    £200 per month from the flat. The defendant and the friend
    enjoyed exclusive occupation. The right reserved to the owner to
    require them to share with others was contrary to the provisions
    of the Rent Acts and was in any event a pretence intended only
    to get round the Rent Acts.

    In Street v. Mountford [1985] AC 809 at p. 825, this House
    disapproved of the decisions of the Court of Appeal in Somma v.
    Hazelhurst
    [1978] 1 W.L.R. 1014, Aldrington Garages Ltd, v.
    Fielder [1978] 7 H.L.R. 51 and Sturolson & Co. v. Weniz [1984] 17
    H.L.R. 190, which held that the occupiers were only licensees and
    not tenants.

    In Crancour Ltd, v. Da Silvaesa [1986] 18 H.L.R. 265, 276 in
    which leave was given to defend proceedings under R.S.C. Ord.
    113, Ralph Gibson L.J. referring to the disapproval by this house
    in Street v. Mountford [1985] AC 809, 825, of the decision of the
    Court of Appeal in Somma v. Hazelhurst, said:

    "As I understand the reference to the sham nature of the
    obligation,' namely that of sharing the room in common with
    other persons nominated by the landlord, the House of Lords
    is there saying, first, that the agreement in that case
    constituted the grant of exclusive possession; secondly, that
    the written obligation to share the room was not effective
    to alter the true nature of the grant; and thirdly, that, on
    the facts of the case, it should have been clear to the
    Court of Appeal that the landlord cannot have intended the
    term as to sharing occupation to be a true statement of the
    nature of the possession intended to be enjoyed by the
    'licensees.'"

    I agree with this analysis.

    In Hadjiloucas v. Crean [1988] 1 W.L.R. 1006, two single
    ladies applied to take two-roomed flat with kitchen and bathroom.
    Each signed an agreement to pay £260 per month to share the use
    of the flat with one other person. The two ladies moved into the
    flat and enjoyed exclusive occupation. In terms, if the agreement
    of
    one lady was terminated, the owner could require the other to
    share the flat with a stranger. The county court judge decided
    that the agreements only created licences. The Court of Appeal
    ordered a retrial in order that all the facts might be investigated.
    Since, however, the two ladies applied for and enjoyed exclusive
    occupation unless and until one of their agreements was
    terminated, the ladies acquired a tenancy protected by the Rent
    Acts. The reservation to the owner of the right at common law
    to require one of the ladies to share the flat with a stranger was
    a pretence.

    My Lords, in each of the cases which were disapproved by
    this House in Street v. Mountford [1985] AC 809, and in the

    - 13 -

    second appeal now under consideration, there was, in my opinion,
    the grant of a joint tenancy for the following reasons:

    1. The applicants for the flat applied to rent the flat
      jointly and to enjoy exclusive occupation.

    2. The landlord allowed the applicants jointly to enjoy
      exclusive occupation and accepted rent. A tenancy was
      created.

    3. The power reserved to the landlord to deprive the
      applicants of exclusive occupation was inconsistent with the
      provisions of the Rent Acts.

    Moreover in all the circumstances the power which the
    landlord insisted upon to deprive the applicants of exclusive
    occupation was a pretence only intended to deprive the
    applicants of the protection of the Rent Acts.

    The Court of Appeal [1988] 3 WLR 139 (Bingham and
    Mann L.JJ.) decided in the second appeal under consideration that
    Mr. Villiers and Miss Bridger were licensees. I would restore the
    order of Judge Macnair who declared that Mr. Villiers and Miss
    Bridger were tenants protected by the Rent Acts.

    LORD ACKNER

    My Lords,

    Each of these appeals raises essentially the same question -
    what was the substance and reality of the transaction entered into
    by the parties?

    In the first appeal, each of the respondents commenced his
    occupation of the flat on different dates, each of their agreements
    covered
    different periods and each agreement provided for
    different payments for that occupation. In such circumstances
    there could not have been a grant of a joint tenancy to all four
    respondents. At no stage in the litigation was it suggested that
    the particular facts justified the conclusion that each respondent
    had, by virtue of his agreement, exclusive possession and therefore
    a tenancy of the room which he in fact occupied, together with
    the right to share the rest of the accommodation in the flat with
    the other occupants, thereby achieving the protection provided by
    section 22 of the Rent Act 1977.

    Thus by the simple process of elimination, it is apparent
    that the substance and reality of the transaction was that each
    respondent achieved by virtue of his agreement no more than a
    licence to share the flat and he must therefore give up possession
    following the lawful termination of that licence.

    In the second appeal it is clear, when reality is brought to
    bear, that the agreements relied upon by the respondent created a
    tenancy of the flat, although he sought vigorously to disguise them
    as mere licences to occupy the flat.

    - 14 -

    Accordingly, for the reasons given by my noble and learned
    friends, Lord Templeman and Lord Oliver of Aylmerton, I would
    allow both these appeals.

    LORD OLIVER OF AYLMERTON

    My Lords,

    Since lettings of residential property of an appropriate
    rateable value attract the consequences of controlled rent and
    security of tenure provided by the Rent Acts, it is not, perhaps,
    altogether surprising that those who derive their income from
    residential property are constantly seeking to attain the not always
    reconcilable objectives on the one hand of keeping their property
    gainfully occupied and, on the other, of framing their contractual
    arrangements with the occupants in such a way as to avoid, if
    they can, the application of the Acts. Since it is only a letting
    which attracts the operation of the Acts, such endeavours normally
    take the form of entering into contractual arrangements designed,
    on their face, to ensure that no estate is created in the occupant
    for the time being and that his occupation of the land derives
    merely from a personal and revocable permission granted by way
    of licence. The critical question, however, in every case is not
    simply how the arrangement is presented to the outside world in
    the relevant documentation, but what is the true nature of the
    arrangement. The decision of this House in Street v. Mountford
    [1985] AC 809 established quite clearly that if the true legal
    effect of the arrangement entered into is that the occupier of
    residential property has exclusive possession of the property for an
    ascertainable period in return for periodical money payments, a
    tenancy is created, whatever the label the parties may have
    chosen to attach to it. Where, as in that case, the circumstances
    show that the occupant is the only occupier realistically
    contemplated and the premises are inherently suitable only for
    single occupation, there is, generally, very little difficulty. Such
    an occupier normally has exclusive possession, as indeed she did in
    Street v. Mountford, where such possession was conceded, unless
    the owner retains control and unrestricted access for the purpose
    of providing attendance and services. As my noble and learned
    friend, Lord Templeman, observed in that case, the occupier in
    those circumstances is either a lodger or a tenant. Where,
    however, the premises are such as, by their nature, to lend
    themselves to multiple occupation and they are in fact occupied in
    common by a number of persons under different individual
    agreements with the owner, more difficult problems arise. These
    two appeals, at different ends of the scale, are illustrations of
    such problems.

    The relevant facts have been fully set out in the speech of
    my noble and learned friend, Lord Templeman, which I have had
    the advantage of reading in draft, and I reiterate them only to the
    extent necessary to emphasise the points which appear to me to
    be of critical importance.

    Antoniades v. Villiers and Bridger. The appellants in this
    appeal are a young couple who at all material times were living

    - 15 -

    together as man and wife. In about November 1984 they learned
    from a letting agency that a flat was available in a house at 6,
    Whiteley Road, London S.E.19, owned by the respondent, Mr.
    Antoniades. They inspected the flat together and were told that
    the rent would be £174 per month. They were given the choice
    of having the bedroom furnished with a double bed or two single
    beds and they chose a double bed. So, right from the inception,
    there was never any question but that the appellants were seeking
    to establish a joint home and they have, at all material times,
    been the sole occupants of the flat.

    There is equally no question but that the premises are not
    suitable for occupation by more than one couple, save on a very
    temporary
    basis. The small living-room contains a sofa capable of
    being converted into a double bed and also a bed-table capable of
    being opened out to form a narrow single bed. The appellants did
    in fact have a friend to stay with them for a time in what the
    trial judge found to be cramped conditions, but the size of the
    accommodation and the facilities available clearly do not make the
    flat suitable for multiple occupation. When it came to drawing up
    the contractual arrangements under which the appellants were to
    be let into possession, each was asked to and did sign a separate
    licence agreement in the terms set out in the speech of my noble
    and learned friend under which each assumed an individual, but not
    a joint, responsibility for payment of one half of the sum of £174
    previously quoted as the rent.

    There is an air of total unreality about these documents
    read as separate and individual licences in the light of the
    circumstance that the appellants were together seeking a flat as a
    quasi-matrimonial home. A separate licensee does not realistically
    assume responsibility for all repairs and all outgoings. Nor in the
    circumstances can any realistic significance be given to clauses 16
    and 17 of the document. It cannot realistically have been
    contemplated that the respondent would either himself use or
    occupy any part of the flat or put some other person in to share
    accommodation specifically adapted for the occupation by a couple
    living together. These clauses cannot be considered as seriously
    intended to have any practical operation or to serve any purpose
    apart from the purely technical one of seeking to avoid the
    ordinary legal consequences attendant upon letting the appellants
    into possession at a monthly rent. The unreality is enhanced by
    the reservation of the right of eviction without court order, which
    cannot seriously have been thought to be effective, and by the
    accompanying agreement not to get married, which can only have
    been designed to prevent a situation arising in which it would be
    quite impossible to argue that the "licensees" were enjoying
    separate rights of occupation.

    The conclusion seems to me irresistible that these two so-
    called licences, executed contemporaneously and entered into in
    the circumstances already outlined, have to be read together as
    constituting in reality one single transaction under which the
    appellants became joint occupiers. That of course does not
    conclude the case because the question still remains, what is the
    effect?

    The document is clearly based upon the form of document
    which was upheld by the Court of Appeal as an effective licence

    - 16 -

    in Somma v. Hazelhurst [1978] 1 W.L.R. 1014. That case, which
    rested on what was said to be the impossibility of the two
    licensees having between them exclusive possession, was overruled
    in Street v. Mountford [1985] AC 809. It was, however, a case
    which related to a single room and it is suggested that a similar
    agreement relating to premises containing space which could, albeit
    uncomfortably, accommodate another person is not necessarily
    governed by the same principle. On the other hand, the trial
    judge found that apart from the few visits by the respondent (who,
    on all but one occasion, sought admission by knocking on the door)
    no one shared with the appellants and that they had exclusive
    possession. He held that the licences were "artificial transactions
    designed to evade the "Rent Acts," that a tenancy was created and
    that the appellants occupied as joint tenants.

    His decision was reversed by the Court of Appeal [1988] 3
    W.L.R. 139 on, broadly, the grounds that he had erred in treating
    the subsequent conduct of the parties as admissible as an aid to
    construction of the agreements and that in so far as the holding
    above referred to constituted a finding that the licences were a
    sham, that was unsupported by the evidence inasmuch as the
    appellants' intention that they should enjoy exclusive possession
    was not shared by the respondent. The licences could not,
    therefore, be said to mask the real intention of the parties and
    fell to be construed by reference to what they said in terms.

    If the documents fall to be taken seriously at their face
    value and to be construed according to their terms, I see, for my
    part, no escape from the conclusion at which the Court of Appeal
    arrived. If it is once accepted that the respondent enjoyed the
    right - whether he exercised it or not - to share the
    accommodation with the appellants, either himself or by
    introducing one or more other persons to use the flat with them,
    it is, as it seems to me, incontestable that the appellants cannot
    claim to have had exclusive possession. The appellants' case
    therefore rests, as Mr. Colyer frankly admits, upon upholding the
    judge's approach that the true transaction contemplated was that
    the appellants should jointly enjoy exclusive possession and that the
    licences were mere sham or window-dressing to indicate legal
    incidents which were never seriously intended in fact, but which
    would be inconsistent with the application to that transaction of
    the Rent Acts. Now to begin with, I do not, for my part, read
    the notes of the judge's judgment as showing that he construed the
    agreement in the light of what the parties subsequently did. I
    agree entirely with the Court of Appeal that if he did that he was
    in error. But though subsequent conduct is irrelevant as an aid to
    construction, it is certainly admissible as evidence on the question
    of whether the documents were or were not genuine documents
    giving effect to the parties' true intentions. Broadly what is said
    by Mr. Colyer is that nobody acquainted with the circumstances in
    which the parties had come together and with the physical lay-out
    and size of the premises could seriously have imagined that the
    clauses in the licence which, on the face of them, contemplate the
    respondent and an apparently limitless number of other persons
    moving in to share the whole of the available accommodation,
    including the bedroom, with what, to ail intents and purposes, was
    a married couple committed to paying £174 a month in advance,
    were anything other than a smoke-screen; and the fact the
    respondent, who might be assumed to want to make the maximum

    - 17 -

    profit out of the premises, never sought to introduce anyone else
    is at least some indication that that is exactly what it was.
    Adopting the definition of a sham formulated by Purchas L.J. in
    Hadjiloucas v. Crean [1988] 1 W.L.R. 1006, 1013, Mr. Colyer
    submits that the licences clearly incorporate clauses by which
    neither party intended to be bound and which were obviously a
    smoke-screen to cover the real intentions of both contracting
    parties. In the Court of Appeal [1988] 3 WLR 139, 149,
    Bingham L.J. tested the matter by asking two questions, viz.: (1)
    On what grounds, if one party had left the premises, could the
    remaining party have been made liable for anything more than the
    £87 which he or she had agreed to pay, and (2) On what ground
    could they have resisted a demand by the respondent to introduce
    a further person into the premises? For my part, however, I do
    not see how this helps. The assumed negative answers prove
    nothing, for they rest upon the assumption that the licences are
    not sham documents, which is the very question in issue.

    If the real transaction was, as the judge found, one under
    which the appellants became joint tenants with exclusive
    possession, on the footing that the two agreements are to be
    construed together, then it would follow that they were together
    jointly and severally responsible for the whole rent. It would
    equally follow that they could effectively exclude the respondent
    and his nominees.

    Although the facts are not precisely on all fours with
    Somma v. Hazelhurst [1978] 1 W.L.R. 1014, they are strikingly
    similar and the judge was, in my judgment, entitled to conclude
    that the appellants had exclusive possession of the premises. I
    read his finding that, "the licences are artificial transactions
    designed to evade the Rent Acts" as a finding that they were
    sham documents designed to conceal the true nature of the
    transaction. There was, in my judgment, material on which he
    could properly reach this conclusion and I, too, would allow the
    appeal.

    A.G. Securities v. Vaughan and others

    The facts in this appeal are startlingly different from those
    in the case of Antoniades. To begin with the appeal concerns a
    substantial flat in a mansion block consisting of four bedrooms, a
    sitting-room and usual offices. The trial judge found, as a fact,
    that the premises could without difficulty provide residential
    accommodation for four persons. There is no question but that
    the agreements with which the appeal is concerned reflect the
    true bargain between the parties. It is the purpose and intention
    of both parties to each agreement that it should confer an
    individual right on the licensee named, that he should be liable
    only for the payment which he had undertaken, and that his
    agreement should be capable of termination without reference to
    the agreements with other persons occupying the flat. The judge
    found that the agreements were not shams and that each of the
    four occupants had arrived independently of one another and not as
    a group. His finding was that there was never a group of persons
    coming to the flat altogether. That has been challenged because,
    it is said, the evidence established that initially in 1977 and 1978
    there was one occupant who was joined by three others who,
    although they came independently and not as a trio, moved in at

    - 18 -

    about the same. Central heating was then installed, so that the
    weekly payments fell to be increased and new agreements were
    signed by the four occupants contemporaneously. Speaking for
    myself, I cannot see how this can make any difference to the
    terms upon which the individuals were in occupation. If they were
    in as licensees in the first instance, the mere replacement of their
    agreements by new agreements in similar form cannot convert
    them into tenants, and the case has, in my judgment, to be
    approached on the footing that agreements with the occupiers were
    entered into separately and individually. The only questions are
    those of the effect of each agreement vis-à-vis the individual
    licensee and whether the agreements collectively had the effect of
    creating a joint tenancy among the occupants of the premises for
    the time being by virtue of their having between them exclusive
    possession of the premises.

    Taking first, by way of example, the position of the first
    occupier to be let into the premises on the terms of one of these
    agreements, it is, in my judgment, quite unarguable, once any
    question of sham is out of the way, that he has an estate in the
    premises which entitles him to exclusive possession. His right,
    which is, by definition, a right to share use and occupation with
    such other persons not exceeding three in number as the licensor
    shall introduce from time to time, is clearly inconsistent with any
    exclusive possession in him alone even though he may be the only
    person in physical occupation at a particular time. He has no
    legal title which will permit him to exclude other persons to whom
    the licensor may choose to grant the privilege of entry. That
    must equally apply to the additional licensees who join him. None
    of them has individually nor have they collectively the right or
    power lawfully to exclude a further nominee of the licensor within
    the prescribed maximum.

    I pause to note that it has never been contended that any
    individual occupier has a tenancy of a particular room in the flat
    with a right to use the remainder of the flat in common with the
    tenants of other rooms. I can envisage that as a possibility in
    cases of arrangements of this kind if the facts support the
    marking out with the landlord's concurrence of a particular room
    as the exclusive domain of a particular individual. But to support
    that there would, I think, have to be proved the grant of an
    indentifiable part of the flat and that simply does not fit with the
    system described in the evidence of the instant case.

    The real question - and it is this upon which the
    respondents rely - is what is the position when the flat is occupied
    concurrently by all four licensees? What is said then is that since
    the licensor has now exhausted, for the time being, his right of
    nomination, the four occupants collectively have exclusive
    possession of the premises because they can collectively exclude
    the licensor himself. Because, it is argued, (1) they have thus
    exclusive possession and, (2) there is an ascertainable term during
    which all have the right to use and occupy, and (3) they are
    occupying in consideration of the payment of periodic sums of
    money, Street v. Mountford [1985] AC 809 shows that they are
    collectively tenants of the premises. They are not lodgers.
    Therefore they must be tenants. And because each is not
    individually a tenant, they must together be joint tenants.

    - 19 -

    My Lords, there appear to me to be a number of fallacies
    here. In the first place, the assertion of an exclusive possession
    rests, as it seems to me, upon assuming what it is sought to
    prove. If, of course, each licence agreement creates a tenancy,
    each tenant will be sharing with other persons whose rights to be
    there rest upon their own estates which, once they have been
    granted, they enjoy in their own right independently of the
    landlord. Collectively they have the right to exclude everyone
    other than those who have concurrent estates. But if the licence
    agreement is what it purports to be, that is to say, merely an
    agreement for permissive enjoyment as the invitee of the landlord,
    then each shares the use of the premises with other invitees of
    the same landlord. The landlord is not excluded for he continues
    to enjoy the premises through his invitees, even though he may for
    the time being have precluded himself by contract with each from
    withdrawing the invitation. Secondly, the fact that under each
    agreement an individual has the privilege of user and occupation
    for a term which overlaps the term of user and occupation of
    other persons in the premises, does not create a single indivisible
    term of occupation for all four consisting of an amalgam of the
    invidual overlapping periods. Thirdly, there is no single sum of
    money payable in respect of use and occupation. Each person is
    individually liable for the amount which he has agreed, which may
    differ in practice from the amounts paid by all or some of the
    others.

    The respondents are compelled to support their claims by a
    strange and unnatural theory that, as each occupant terminates his
    agreement, there is an implied surrender by the other three and an
    implied grant of a new joint tenancy to them together with the
    new incumbent when he enters under his individual agreement.
    With
    great respect to the majority in the Court of Appeal, this
    appears to me to be entirely unreal. For my part, I agree with
    the dissenting judgment of Sir George Waller in finding no unity of
    interest, no unity of title, certainly no unity of time and, as I
    think, no unity of possession. I find it impossible to say that the
    agreements entered into with the respondents created either
    individually or collectively a single tenancy either of the entire
    flat or of any part of it. I agree that the appeal should be
    allowed.

    LORD JAUNCEY OF TULLICHETTLE

    My Lords,

    These two appeals which arise out of very different
    circumstances raise the question of whether arrangements
    permitting a plurality of persons to occupy furnished
    accommodation for a financial consideration constitute leases to
    which the Rent Acts would apply or licences to which they would
    not. The facts have been fully set out in the speech of my noble
    and learned friend Lord Templeman and it is therefore unnecessary
    for me to rehearse them in any detail.

    A. G. Securities v. Vaughan and Others

    - 20 -

    At the date of the commencement of the proceedings on 27
    June 1985 each of the four defendants were in occupation of the
    flat by virtue of separate agreements dated as to one in 1982, two
    in 1984, and one in 1985. Each agreement stipulated a different
    monthly payment and a different starting date. In other respects
    the agreements were in identical terms. It is accepted that these
    agreements were perfectly genuine and were not intended in any
    way to cloak the intentions of the parties. The Court of Appeal
    [1988] 2 W.L.R. 689 (Fox and Mustill L.JJ.; Sir George Waller
    dissenting) concluded that there was a joint tenancy created by a
    single implied agreement for the grant of exclusive possession to
    the defendants when the fourth defendant's agreement was signed.
    The Court of Appeal further concluded that in the event of one of
    the four occupants leaving the flat and being replaced by another
    who had entered into a similar agreement a new joint tenancy
    would arise by implied surrender and regrant.

    During the course of argument a good deal was said about
    the recent decision in this House of Street v. Mountford [1985]
    A.C. 809. In that case it was, to quote the words of my noble
    and learned friend Lord Templeman, at p. 823, "clear that
    exclusive possession was granted and so much is (sic) conceded."
    In the present case exclusive possession is the primary issue since
    without it there can be no joint tenancy. Street v. Mountford
    establishes the legal consequences which may, in given
    circumstances, flow from an arrangement whereby the occupier of
    residential property has exclusive possession thereof, but it does
    not directly assist in determining whether or not he has such
    exclusive possession.

    My Lords, the flat had four bedrooms and each agreement
    contemplated
    that up to four persons could share the flat at any
    one time. It would look very much as if the parties intended that
    each occupier would have his or her own bedroom and would share
    communal facilities with the others, and this is what happened in
    practice. However, this case is not concerned with whether each
    occupier had exclusive possession and hence a tenancy of a
    bedroom but with whether the four defendants together had
    exclusive possession and hence the joint tenancy of the fiat as a
    whole.

    When the first occupant alone is in the flat he may have de
    facto
    possession thereof but that possession is certainly not
    exclusive since he is bound in terms of clause 2(3) to share the
    flat with up to three other persons licenced by the owner. It is
    not without significance that there is no obligation on the owner
    to grant licences to other persons in terms identical to those
    contained in the first agreement. Thus the owner could allow a
    friend or relation to occupy the flat without payment or he could
    permit one of the occupants to keep a dog or a cat
    notwithstanding the prohibitions in clause 2(7) in the first
    agreement. Similarly there is no exclusive possession in anyone
    when the second and third occupants move in. The conclusion that
    when the fourth occupant moves in a single agreement is implied
    to create a joint tenancy is somewhat startling when it is
    remembered that the individual occupants are not said to be
    connected in any way nor to be in occupation as a result of any
    preconceived arrangement inter se. When the consequences of this
    conclusion are examined in detail I am, with all respect to the
    Court of Appeal, driven to the view that it is unsound.

    - 21 -

    Normal attributes of a lease to joint tenants include a
    demise for a specific period with exclusive possession at a single
    rent for payment of which each joint tenant is liable to the lessor
    in full subject to relief from his co-tenants. No one tenant can
    terminate the lease during its currency but where the stipulated
    period has expired and the joint tenants hold over due notice by
    one will terminate the lease since the continuance of the springing
    interest requires the consent of all parties to the lease. There is,
    to say the least, a substantial interlocking of interests of the joint
    tenants. In the present case, as I have already remarked, each
    defendant arrived independently in the flat and there is nothing in
    any agreement to suggest that the right of one defendant to share
    the flat could be determined by anyone other than the owner or
    himself. Indeed I have no doubt that each of the four defendants
    would have been horrified if he or she had thought that his or her
    right to remain in the flat after the expiry of the initial six
    month period could be determined by the independent action of a
    fellow-occupant.

    My Lords, if the arrival of a fourth occupant converted
    three persons occupying under licence agreements into joint tenants
    under a single implied agreement one must ask what is the rent
    payable and the duration of the lease. Each of the four
    defendants were paying a different monthly sum under their
    respective agreements and when the fourth defendant arrived the
    first, second and third defendants were occupying on a monthly
    basis, their initial six month period having expired, whereas he
    was entitled to occupy for an initial period of six months. It has
    not been suggested that it would be possible to have a joint
    tenancy with different terms for each tenant. In these
    circumstances what would be the term for the implied joint
    tenancy resulting from the arrival of the fourth defendant? Would
    it be six months, thereby conferring on the first, second and third
    defendants rights which they did not possess under their own
    agreements or would it be simply one month thereby depriving the
    fourth defendant of rights which he demonstrably had under his
    own agreement?

    I pose this question merely to demonstrate the problems
    created by the theory of a single implied agreement consequent
    upon the arrival of a fourth occupant. The matter however does
    not end there because it follows that if there is no joint tenancy
    until the arrival of the fourth defendant there ceases to be a joint
    tenancy as soon as one occupant leaves unless there is a
    simultaneous insertion of a substitute in his place. If there is a
    gap in time between the departure of one occupant and the arrival
    of another the remaining defendants revert to the status of
    licencees. Thus the nature of the rights of three out of four of
    the occupants of this flat would depend not on the terms of their
    agreement with the owner but on whether or not at any one time
    there happened to be a fourth occupant in the flat.

    The concept of surrender and regrant in leases and as it
    operated prior to 1707 in relation to resignations in favorem of
    Scots Peerages, involved the grantee surrendering his existing
    rights in exchange for new or altered rights. The implied
    surrender and regrant in this case would arise not because of any
    act upon the part of the surrendering grantee but solely because

    -22-

    of the chance advent of a stranger. I am not persuaded that this
    is a situation in which it would be appropriate to make such an
    implication.

    I should be surprised indeed if a joint lease could be created
    by four separate documents of different dates in favour of four
    independent persons each paying a different rent and also for
    different periods of six months. Such an arrangement would, as
    Sir George Waller pointed out [1988] 2 W.L.R. 689, 703, be notably
    deficient in the four unities of interest, title, time and possession.
    My Lords, I have no doubt whatever that the plaintiffs and
    defendants intended that each defendant should have, under his or
    her agreement, certain" rights of occupation in the flat and that
    such rights should be entirely independent of those of every other
    defendant. I have also no doubt that the parties have achieved
    this result and that the plaintiffs are well founded in maintaining
    that there were four licence agreements relative to shared
    occupation of the flat which did not in aggregate confer exclusive
    possession thereof upon the four defendants. It follows that there
    was no joint tenancy thereof.

    I would therefore allow the appeal.

    Antoniades v. Villiers and Bridger

    In this appeal the defendants entered into occupation
    together on the same day with the intention, which was known to
    the plaintiff, of living together as man and wife. The defendants
    were only interested in occupying the flat together. The plaintiff
    made clear to them that he was not prepared to grant a lease
    which would be subject to the Rent Acts but would only grant
    individual licences. The defendants then signed separate
    agreements in identical terms in which they each undertook, inter
    alia, to pay one half of the financial consideration required by the
    plaintiff. Two issues arise in this appeal namely:-

    1. Whether the two agreements fall to be read together
      and constitute a single agreement between the plaintiff on
      the one hand and the two defendants on the other, and

    2. If so, what effect is to be given to the joint
      agreement having regard to its substance and reality.

    My Lords, I do not doubt that the two agreements must be
    read together. The initial approach to the plaintiff was made by
    the first defendant who indicated that he wanted the flat for
    himself and the second defendant. The two defendants visited the
    flat together with their references and at the request of the first
    defendant the plaintiff provided a double bed. There is no
    suggestion that the defendants asked to sign separate agreements
    and
    they only did so because of the anxiety of the plaintiff to
    avoid granting a lease. As I have already remarked, the
    agreements were in identical terms and it would in all the
    circumstances be quite unrealistic to treat them other than as a
    single agreement in favour of the two defendants.

    What effect is then to be given to the agreements? If they
    are construed solely by reference to their terms and without

    - 23 -

    regard to surrounding circumstances the conclusion must be that
    there was no intention to confer exclusive possession of the flat
    upon the two defendants. The narrative in the preamble so states
    and clause 16 is unambiguous in its terms. However, it would not
    be right to look at the agreements without regard to the
    circumstances which existed at the time when they were entered
    into. Furthermore, the defendants maintain that so far as they
    purport not to confer exclusive possession upon them they are a
    sham. Accordingly, although the subsequent actings of the parties
    may not be prayed in aid for the purposes of construing the
    agreements they may be looked at for the purposes of determining
    whether or not parts of the agreements are a sham in the sense
    that they were intended merely as- "dressing up" and not as
    provisions to which any effect would be given.

    The agreements were clearly drawn up with the decision of
    the Court of Appeal in Somma v. Hazelhurst [1978] 1 W.L.R. 1014
    in mind. The agreements in that case were very similar to those
    in this appeal but they related to a bedsitting room containing two
    beds rather than to a flat. The Court of Appeal held that the
    young couple were only licensees of the bedsitting room but the
    decision was disapproved by this house in Street v. Mountford
    wherein my noble and learned friend Lord Templeman concluded
    [1985] AC 809, 825 that the obligation on the couple "to share
    the room in common with such other persons as the landlord might
    from time to time nominate" was a sham and that they were
    entitled jointly to exclusive possession of the room and were thus
    joint tenants.

    The attic flat with which this appeal is concerned consists
    of a bedroom containing a double bed and other furniture, a sitting
    room containing inter alia a settee bed, a table bed and a chair, a
    kitchen, bathroom and hall. It was thus possible for someone else
    to sleep in the flat and indeed for some five or six weeks a friend
    of the defendants stayed there after permission had been obtained
    from the plaintiff. When the agreements are looked at in detail
    the operation of certain clauses produces bizarre results. Clause 2
    imposes on the licensee responsibilities for payment of all gas and
    electricity consumed in the flat as well as in the entrance hall,
    staircase and vestibule of the building. Joint responsibility by
    each o± the two licensees for power consumed in the flat would be
    an entirely reasonable arrangement so long as they alone were
    using the power but would become curious, to say the least, if
    others nominated by the licensor were sharing the flat and
    consuming power. The responsibility for power consumed by others
    in the hall, staircase and vestibule is of the latter character.
    Obligations in clauses 4, 5, 6 and 7 anent the condition of the flat
    and the contents are again reasonable only so long as the two
    licensees are occupying the flat alone. Is it conceivable that the
    defendants assumed these obligations in the knowledge that the
    extent of their liability to the licensor might be measured not by
    their own actions but by the actions of others nominated to share
    the flat over whom they had no control? To answer this question
    it is necessary to consider clause 16 which is critical to the
    appeal.

    If the clause is read literally the licensor could permit any
    number of persons to share the flat with the two defendants, even
    to the extent of sharing the joys of the double bed. Mr

    - 24 -

    Antoniades, in his powerful address to your Lordships, argued that
    the sole purpose of the clause was to enable him to use the flat
    if some disaster befell his own house and he had no roof over his
    head. Had the clause so specifically stated, different

    considerations might have applied. Unfortunately the clause is
    quite unlimited in its terms and purports to entitle the licensor to
    pack the fiat with as many people as could find some sleeping
    space therein. The judge found as a fact that when the
    defendants' friend slept in the settee bed the conditions in the flat
    were cramped. This can also be inferred from the plan which was
    made available to your Lordships and from which it appears that it
    would be quite unrealistic for anyone to sleep in the flat
    elsewhere than in the double bed in the bedroom and in either the
    table bed or bed settee in the small sitting room. In the latter
    event there would be little remaining room in the sitting room
    when the bed was up. This situation certainly does not suggest
    that the parties ever contemplated that other persons would be
    nominated to share the flat. When subsequent events are looked
    at the matter becomes even clearer. Although the licensor
    granted permission to the defendants to have the friend to stay
    for some weeks he made no charge therefor and during the 17
    months which elapsed between the defendants' entry to the flat
    and service upon them of notice to quit the licensor made no
    attempt to occupy the flat himself or through anyone nominated
    by him. In all these circumstances I am driven to the conclusion
    that the parties never intended that clause 16 should operate and
    that it was mere dressing up in an endeavour to clothe the
    agreement with a legal character which it would not otherwise
    have possessed. It follows that it should be treated pro non
    scripto.

    If clause 16 is ignored and regard is had to the
    circumstances in which the defendants came to occupy the flat in
    the first place and to the size of the flat, clauses 2, 4, 5, 6 and
    7 all indicate an intention that the two licensees should have
    exclusive possession of the flat and this indication is confirmed by
    the remainder of the agreement notwithstanding the protestations
    of lack of exclusivity of possession in the narrative in the
    preamble. In my view the substance and reality of these
    agreements was to confer upon the defendants exclusive possession
    of the flat for a term in consideration of periodical payments.
    Street v. Mountford [1985] AC 809 establishes that in such a
    situation a tenancy is created. I would therefore allow the appeal.

    - 25 -



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