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 –
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An estate in fee simple absolute in possession;
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A term of years absolute.”
Section 205(1)(xxvii) was in these terms:
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– 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:
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“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.
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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
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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.
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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.
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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.
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