IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CENTRAL LONDON COUNTY COURT
HHJ COLIN SMITH QC
Royal Courts of Justice
Strand, London, WC2A 2LL
Thursday 21st December 2000
LORD JUSTICE MANCE
MR JUSTICE CHARLES
(1) HUSSEIN WALJI
(2) ZULIKAR WALJI
(3) MOHAMMED IQBAL WALJI
(4) HUSSANAIN WALJI
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
– – – – – – – – – – – – – – – – – – – – –
David Lonsdale (instructed by Regan & Co for the Respondents)
1. This is an appeal from the decision of HHJ Colin Smith QC sitting at the Central London County Court that the Claimants in the proceedings before him had a quarterly periodic tenancy of a ground floor shop and basement at 39 Great Portland Street (the Shop Premises) which was protected by Part II of the Landlord and Tenant Act 1954 (the 1954 Act).
2. The issue whether the Claimants had a tenancy protected by the 1954 Act was dealt with as a preliminary issue.
3. The Claimants are four brothers who carry on business in partnership. A fifth brother may also be a partner. I shall refer to the partnership as the Walji partnership.
4. The Walji partnership carried on and, as I understand it, still carries on business from the Shop Premises using the name “Fads Boutique”.
5. The Defendant to the proceedings in the County Court and the Appellant before us, Mount Cook Land Limited, is the present landlord if, as found by the Judge, the Claimants have a periodic tenancy of the Shop Premises.
6. I set this out in numbered subparagraphs as follows:
(1) The headlease of 39 Great Portland Street is dated 30 October
1921 and is for a term of 999 years from 11 October 1920 (the Headlease)
(2) On a date prior to 10 February 1989 the Headlease was vested in a company called Romula Limited.
(3) By an underlease (the Underlease) dated 10 February 1989, Romula Limited granted an underlease of the Shop Premises for a term of seven years from 25 March 1989 to a company called Fads II (Holdings) Limited (Fads Limited). Two of the Claimants were sureties to the Underlease.
(4) The transcript of the oral evidence shows that prior to the grant of the Underlease the Walji partnership was in occupation of, and were trading from, the Shop Premises under the name Fads Boutique. It seems that they had taken an assignment of an earlier underlease. At the time the Underlease was granted it was the intention of the Walji partnership to transfer the assets and business of that partnership to Fads Limited.
(5) No details were given in the evidence of the shareholding in Fads Limited or who its directors were. However it is clear from the evidence that Fads Limited never traded and had no assets apart from its interest in the Underlease. I pause to comment that it seems to me that it is at least a possibility that Fads Limited held the Underlease as a nominee or trustee for the Walji partnership. This is not something that was raised below. In his witness statement Mr Hussain Walji (who described himself as the senior partner) said that the rent was paid on partnership cheques. It was paid in response to demands addressed to Fads Limited. It is clear from the evidence that throughout the term granted by the Underlease it was the Walji partnership that traded at and from the Shop Premises.
(6) On 21 August 1991 Fads Limited was struck off the register pursuant to s 652 Companies Act 1985.
(7) The parties and the Judge proceeded on the basis that as a result of Fads Limited being struck off the register the Underlease vested in the Crown as bona vacantia pursuant to s 654 Companies Act 1985. I accept that that may be correct. However, this would not have been the case if, as I believe to be at least a possibility, Fads Limited had held the Underlease as a nominee or trustee for the Walji partnership (see s 654 Companies Act 1985).
(8) On 18 February 1994 a company called Mount Eden Land Ltd (an associated company to the Defendant Mount Cook Land Ltd) acquired the freehold reversion in 39 Great Portland Street.
(9) In May 1995 Romula Ltd served notices under sections 25 and 40 of the 1954 Act in respect of the Underlease. Those notices were addressed to Fads Limited and were served with a letter dated 22 May 1995 which was sent by recorded delivery to Fads Limited at the Shop Premises.
(10) No acknowledgement or counter notice was served but a meeting took place between a Mr Sclare (the relevant director of Romula Ltd) and Mr Hussein Walji (Mr Walji), who was one of the sureties to the Underlease. He is one of the Claimants.
(11) The Judge made the following findings in respect of that meeting and events that followed it:
“Having heard the oral evidence of Mr Walji and Mr Sclare, both of whom were witnesses of truth, I make the following findings of fact with regard to their evidence. I am satisfied that shortly after Mr Hussein Walji had received the s 25 notice and the accompanying letter from Romula’s solicitors dated 22 May 1995 (see pages 149-153), he at once arranged a meeting with Mr Sclare to find out what it was all about. At that meeting Mr Walji informed Mr Sclare that the company no longer existed and had been struck off the register in 1991 and that he and his brothers wanted a new 7 year lease in their individual names as partners in Fads Boutique.
I find that Mr Sclare was in entire agreement with this proposition and was every bit as anxious to grant the Waljis individually new lease for a fixed term of 7 years as Mr Walji was to be granted one. I find that Mr Sclare was extremely anxious that the Waljis should remain as his tenants of the premises and was intent upon reassuring them in every way that they would be given a new 7 year lease once it had been arranged through Romula’s solicitors. I am quite satisfied that at this meeting all the proposed terms of the new lease were agreed in principle. Thus it was to be for a seven year term with the Waljis personally as the tenants on exactly the same covenants and terms as the lease to the company had been and at a rent which was to be at £26,000 increasing to £28,000 if and when the air conditioning was installed at the premises.
I find that nothing was expressly said by the parties at that time as to what the legal position was to be pending the legal formalities being concluded with regard to the new lease. However, I find it was the clear understanding of both sides that the Waljis would remain in exclusive possession and occupation of the premises just as before, and that they were to continue paying the rent quarterly in the same manner as it had been payable under the company’s lease. I am also quite satisfied that Mr Walji understood that from the time of the meeting he and his brothers were the tenants and there was no need to take any advice on the matter from their solicitors.
With regard to Mr Sclare, I find that he simply did not turn his mind to the question of whether the Waljis became his tenants as a result of the meeting in May 1995. As far as he was concerned, I find that it simply did not bother him who the tenant was. As he put it, “I was getting my money and that was it.” He agreed in cross examination, when asked to think about it later, between February and May 1997 in relation to the sale of the headlease to MEL, that it was not clear to him whether the Waljis were legally Romula’s tenants or not, although he added that he was clear that in the moral sense they were the tenants.
What happened thereafter was that Mr Sclare continued to send quarterly rent demands to the defunct company, which were thenceforth regularly paid by Mr Walji out of the partnership account. The relationship between the Waljis and Mr Sclare remained totally harmonious. On 1 May 1997 Romula’s solicitors wrote to the company offering a new 7 year lease subject to contract and lease commencing on 25 May 1997 (see letter at p 125). Thereupon I am satisfied that Mr Hussein Walji immediately got in touch with Mr Sclare to remind him as to what had been agreed in May 1995 with the result that Romula’s solicitors wrote their letter to the partnership dated 19 May 1997 at p 124. In my judgment this correspondence was entirely consistent with what I find had been agreed in May 1995.
Before I express my conclusions as to what I find to be the legal result of the discussions between Mr Walji and Mr Sclare in May 1995, I must refer to a series of documents which Mr Holland maintains are wholly inconsistent with there having been an oral agreement for a periodic tenancy between the parties in May 1995.
First, Mr Holland relies upon the fact that Mr Sclare continued throughout to address rent demands to the company. In my judgment, however, this was a pure matter of routine book-keeping and amounted to no more than a reflection of Mr Sclare’s indifference to the precise identity of the tenant provided the Waljis were in occupation and he was receiving his rental payments. It throws no light whatsoever, in my judgment, on the proper legal interpretation of the events of May 1995.
Next there are relied upon a series of documents created either by Mr Sclare or his solicitors arising from the enquiries of them by Langhams and Herbert Smith, who were acting for MEL, the purchasers of the headlease. I have considered particularly page 198, paragraph 4; pages 87 to 88; pages 92, 93 and 96; the response at page 96C, pages 97 to 100. In addition I have reconsidered the letters at pages 125 and 124 respectively.
In my judgment looking at these document in what is, I hope, a fair and sensible way, they do not support Mr Holland’s submission, powerfully made though it was, that they are inconsistent with a finding that the Waljis were occupying the premises as quarterly, periodic tenants with effect from May 1995. The most that they show, in my judgment, is that Mr Sclare was uncertain as to the legal effect of what had then taken place. However it is clear, particularly from his instructions to Romula’s solicitors at p 96C, that Mr Sclare was fully aware that the Waljis were trading as a non limited entity from the premises and that he was in the course of negotiating a new lease with the Waljis who were the present occupiers.
In my judgment there is nothing in those documents which in any way inhibits me, let alone preclude me, were I to think it appropriate otherwise so to do, from finding that the proper inference in all the circumstances is for there to be implied an agreement in May 1995 that the Waljis were to be in occupation as quarterly, periodic tenants.”
(12) There is no challenge to the findings of primary fact set out in the above quotation. Indeed, I add that it is clear that they accord with the transcript of the evidence that has been put before us. This transcript, for example, makes it clear that the terms of the new lease were to be the same as those of the Underlease save that the rent would be £26,000 and would go up to £28,000 if air conditioning was installed. The transcript of the evidence also makes it clear that in 1995 there was a “tenants’ market” and that if Mr Walji and Mr Sclare had not reached the agreement found by the Judge Mr Walji’s evidence was that he would have left the Shop Premises and because there were so may other premises available at the time the Walji partnership could have moved straight away. Mr Sclare’s evidence also indicates that after May 1995 the rent demands were sent out in the form that they were because they were on the computer and that as he and Mr Walji had come to an arrangement there was no immediate urgency to get on and deal with the drafting and granting of a new lease.
(13) In his witness statement Mr Walji said that:
“As I had agreed terms of our new lease of the premises with Mr Sclare, we did not serve any counter notice or apply to the court.”
As to that statement he did not come up to proof because in chief he said that he had not been to solicitors and that he would not have known what a counter-notice under the 1954 Act was.
(14) On 25 March 1996 the term of the Underlease expired.
(15) The letter at page 198 of the bundle referred to by the Judge is a letter written by Mr Sclare dated 25 February 1997 to Langham Estate Management Limited in respect of a proposed surrender of the Headlease by Romula Limited. It contains the following passage in respect of the Shop Premises:
The tenant occupying those premises is there by virtue of a lease that expired on 1/4/96. The currant (sic) rent being paid by the leasee (sic) is £26,000 pa. However once Air Conditioning is properly fitted and the other leases are finalised, we intend offering the presant (sic) tenants a new seven year Lease, from 25 March 1997 to 24 March 2004 with a review on 29 September 2000 at an initial rent of £28,000
The Underlease contained a rent review after three years.
(16) The correspondence in May 1997 referred to by the Judge (the first letter being dated 1 May and the second 19 May) referred to a lease for seven years commencing on 25 March 1997 (i.e. one year after the expiration of the term of the Underlease and almost two years after the service of the section 25 notice). In the letter dated 1 May 1997 addressed to Fads Ltd the solicitors for Romula Ltd assert that “you are holding over”. This letter, therefore, demonstrates that its writer did not go back and check the position either as to the fact that a section 25 notice had been served, or as to the fact that Romula Ltd had been told that Fads Ltd no longer existed. The letter dated 19 May 1997 is to Fads Boutique and thus as the Judge finds to the Walji partnership and states:
We act for Romula Ltd, who have agreed to grant to Messrs H, Z, M I, M R & H Walji a Lease of the above premises at a rental of £28,000 per annum for a term of 7 years commencing 25th March 1997.
We are currently drafting the necessary documentation ——
(17) The other letters and documents referred to in the passage quoted above from the judgment relate to enquiries that were made concerning the proposed surrender of the Headlease by Romula Ltd to Mount Eden Land Limited. The reply at p 96C was Mr Sclare’s response to the solicitors acting for Romula Limited to enable them to answer the following additional enquiry:
“1 Please confirm the tenant is holding over under the terms of the lease dated 10th February 1989;
2 Please provide details of any notices served in respect of the renewal of the Lease
3 Please confirm the rent currently payable and provide a rent review memorandum in this respect.”
The answer was in the following terms:
“1 The exact position is unclear see letter to Langham Estates 25.02.97. However the presant (sic) occupiers are Walji 1, 2, 3, 4, 5. They are trading under the name of Fads Boutique a non limited entity, we are now negotiating a new Lease similar to the proposed Leases for the 1st, 2nd and 3rd floors.
2 Solicitor to answer.
3 £26,000 increasing to £28,000 per annum if air conditioning is increased by 15 KUW.”
(18) By a letter dated 19 May 1997 (and therefore written on the same day as they wrote to the Walji partnership about the grant of a new lease) the solicitors for Romula Limited replied to the enquiries and additional enquiries before contract in slightly different terms.
(19) The surrender of the Headlease by Romula Ltd to Mount Eden Land Limited took place on 26 June 1997 for a price in excess of £1,000,000.
(20) On 23 September 1998 Mount Eden Land Limited transferred the freehold of 39 Great Portland Street to the Appellant, Mount Cook Land Limited.
The approach in law
7. The Judge was referred to a number of authorities. These were referred to again in the skeleton arguments. However it was not asserted that the Judge applied the wrong approach in law. The basis of the appeal was that he had erred and reached the wrong conclusion in applying the correct approach.
8. It was in my judgment correctly common ground that the approach and principle to be applied, and which was applied by the Judge, is set out in the judgment of Nicholls LJ (as he then was) in Javed v Mohammed Aqil  1 WLR 1007. This was the judgment of the court. The issue on the appeal in that case is identified at page 1011 D/F of that judgment where Nicholls LJ says:
The issue on this appeal
As already foreshadowed, the sole issue on this appeal is whether the tenant went into occupation as a tenant at will or as a quarterly tenant. This is the sole issue, because the parties have pleaded and presented their cases in this way. Thus, as to the landlord, his particulars of claim assert that at the tenant’s request the landlord allowed the tenant into possession of the property as a tenant at will pending the outcome of the negotiations. ———
As to the tenant, his case, as pleaded and presented at the trial, was that he held a periodic tenancy.
Nicholls LJ then identifies the arguments and what (at pages 1015H and 1018E) he refers to as the underlying principle to be applied in the following terms (at 1011H to 1013D):
Possession plus payment of rent
Much of the argument before us was directed at the legal consequence which follows from proof of possession and payment of rent by reference to a quarterly period. For the tenant it was submitted that proof of those facts raises a presumption in favour of a periodic tenancy which can only be rebutted, and the occupant be held to be a tenant at will, by an express agreement to that effect. Alternatively, this presumption is not rebutted by the fact that the grant of a lease is under discussion, in a case where a substantial sum has been paid over as rent in advance. Mr. Harvey relied on a brief passage in the judgment of Buckley J. in D’Silva v. Lister House Development Ltd.  Ch. 17, 31. For the landlord it was submitted that today there is no presumption in favour of an intention to create a periodic tenancy arising from possession with consent plus periodic payments of rent. At a later stage Mr. Challenger modified this submission so as to make it applicable only in cases where negotiations for the sale or lease of property were taking place. He prayed in aid observations by Ormrod L.J. in Longrigg, Burrough Trounson v. Smith (1979) 251 E.G. 847.
I cannot accept the tenant’s submissions. They are contrary both to principle and to authority. I shall consider first the position in principle. A tenancy, or lease, is an interest in land. With exceptions immaterial for present purposes, a tenancy springs from a consensual arrangement between two parties: one person grants to another the right to possession of land for a lesser term than he, the grantor, has in the land. The extent of the right thus granted and accepted depends primarily upon the intention of the parties.
As with other consensually-based arrangements, parties frequently proceed with an arrangement whereby one person takes possession of another’s land for payment without having agreed or directed their minds to one or more fundamental aspects of their transaction. In such cases the law, where appropriate, has to step in and fill the gaps in a way which is sensible and reasonable. The law will imply, from what was agreed and all the surrounding circumstances, the terms the parties are to be taken to have intended to apply. Thus if one party permits another to go into possession of his land on payment of a rent of so much per week or month, failing more the inference sensibly and reasonably to be drawn is that the parties intended that there should be a weekly or monthly tenancy. Likewise, if one party permits another to remain in possession after the expiration of his tenancy. But I emphasise the qualification “failing more.” Frequently there will be more. Indeed, nowadays there normally will be other material surrounding circumstances. The simple situation is unlikely to arise often, not least because of the extent to which statute has intervened in landlord-tenant relationships. Where there is more than the simple situation, the inference sensibly and reasonably to be drawn will depend upon a fair consideration of all the circumstances, of which the payment of rent on a periodical basis is only one, albeit a very important one. This is so, however large or small may be the amount of the payment.
To this I add one observation, having in mind the facts of the present case. Where parties are negotiating the terms of a proposed lease, and the prospective tenant is let into possession or permitted to remain in possession in advance of, and in anticipation of, terms being agreed, the fact that the parties have not yet agreed terms will be a factor to be taken into account in ascertaining their intention. It will often be a weighty factor. Frequently in such cases a sum called “rent” is paid at once in accordance with the terms of the proposed lease: for example, quarterly in advance. But, depending on all the circumstances, parties are not to be supposed thereby to have agreed that the prospective tenant shall be a quarterly tenant. They cannot sensibly be taken to have agreed that he shall have a periodic tenancy, with all the consequences flowing from that, at a time when they are still not agreed about the terms on which the prospective tenant shall have possession under the proposed lease, and when he has been permitted to go into possession or remain in possession merely as an interim measure in the expectation that all will be regulated and regularised in due course when terms are agreed and a formal lease granted.
Of course, when one party permits another to enter or remain upon his land on payment of a sum of money, and that other has no statutory entitlement to be there, almost inevitably there will be some consensual relationship between them. It may be no more than a licence determinable at any time, or a tenancy at will. But when and so long as such parties are in the throes of negotiating larger terms, caution must be exercised before inferring or imputing to the parties an intention to give to the occupant more than a very limited interest, be it licence or tenancy. Otherwise the court would be in danger of inferring or imputing from conduct, such as payment of rent and the carrying out of repairs, whose explanation lies in the parties’ expectation that they will be able to reach agreement on the larger terms, an intention to grant a lesser interest, such as a periodic tenancy, which the parties never had in contemplation at all.
I turn to the authorities —————–
9. The discussion and analysis of the authorities by Nicholls LJ is to support the underlying principle he identifies and thus that, for example, regard must be had to the particular circumstances of each case and the widespread intervention of statute in the landlord-tenant area that now exists (see 1014G) and caution must be exercised when the parties are in the throes of negotiation (see 1018A).
10. As Nicholls LJ makes clear the principle which he sets out falls to be applied where the parties have not “agreed or directed their minds to one or more fundamental aspects of their transaction” and that in such a situation the law, “where appropriate has to step in and fill the gaps in a way which is sensible and reasonable”. The law does this by implying “from what was agreed and all the surrounding circumstances, the terms the parties are taken to have intended to apply”.
The Appellant’s case
11. Both before us and before the Judge the heart of the Appellant’s case was that, as the parties were negotiating subject to contract or lease a new underlease to the Walji brothers, the possession of the Shop Premises and the payment of rent by the Walji partnership were based on, or referable to, those negotiations and this had the consequence that the law should not imply the creation of a periodic tenancy. It was argued that the differences between the circumstances in this case to those that existed in Javad v Mohammed Aqil did not found a different result to the conclusion in the Javad case that no periodic tenant was created.
12. Unsurprisingly counsel for the Appellant referred us in particular to the need for caution when parties are in negotiation before inferring or imputing to the parties an intention to give the occupant more than a limited interest or one that gives him statutory protection. I bear that need for caution well in mind.
13. Counsel for the Appellant also referred us to a short passage from the judgment of Ralph Gibson LJ in JT Development v Quinn & Another  2 EGLR 257 at 260M where he says that:
It is not open to the court to impose an agreement because it would have been reasonable for the parties to agree or because, if the importance of an immediate agreement had been more clearly understood at the time, the parties might well or probably have so agreed.
In my judgment that passage is not of assistance here because it is directed to the issue in that case whether the parties had orally entered into an immediately binding agreement for a lease (which it was said was enforceable by reason of acts of part performance) and there is no such allegation in this case. In other words that comment is not directed to the issue that exists here and thus to what the law should imply or impute applying the approach and principle enunciated by Nicholls LJ in Javad v Mohammed Aqil. In such a situation the law has to fill gaps in what was agreed in a way that is sensible and reasonable having regard to what was actually agreed and all the surrounding circumstances.
14. Additionally, whilst not disputing the findings of fact made by the Judge, counsel for the Appellant referred us to passages from the transcript of evidence and some of the documents to put the findings in their context and to support his submission that, on a proper analysis and application of the findings made by the Judge in the context of the undisputed background (including the documents), the Judge was wrong to conclude that a periodic tenancy had been created. In my judgment this exercise which, as counsel accepted, inevitably involved the isolation of particular passages which should be read in context did not advance, or detract from, the Appellant’s case.
The conclusion of the Judge that the Claimants have a periodic tenancy
15. In my judgment the conclusion reached by the Judge was correct. Thus in my judgment the inference sensibly and reasonably to be drawn from (a) what was expressly agreed, and (b) all the surrounding circumstances was that the Claimants have a quarterly periodic tenancy of the Shop Premises.
16. What was expressly agreed was that a new underlease for a seven year term at a rent of £26,000 increasing to £28,000 if and when air conditioning was installed at the premises and otherwise on the same terms as the Underlease would be granted to the Walji brothers. This was not an immediately binding agreement and was subject to contract or lease. It was an agreement in principle or a “gentleman’s agreement”. However after it the parties did not continue to negotiate and were not in the throes of negotiation. Indeed it was not until May 1997 that solicitors for Romula Ltd wrote about the grant of the new underlease. In the meantime the Walji partnership had been paying the rent (at the rate of £26,000 per annum which was the rate being paid immediately prior to May 1995) and had been in occupation.
17. At the time that agreement in principle was reached Romula Ltd were informed that Fads Limited (the company to whom the Underlease had been granted) no longer existed. It was therefore known to Romula Ltd that the Walji brothers were in, and were going to remain in, occupation and the agreement in principle was that the new underlease would be granted to them.
18. Additionally at and about the time that agreement in principle was reached it is apparent that neither of the parties to it gave thought to, or took advice on, the question what effect, if any, the fact that Fads Limited no longer existed had in law. As I have said before the Judge it was common ground that the Underlease had vested in the Crown bona vacantia. Neither this, nor the possibility that Fads Limited held the Underlease as a trustee with the consequence that a new trustee could be appointed and a counter notice for a new tenancy could be served under the 1954 Act (see sections 26 and 41 thereof) were considered.
19. The subjective positions of the parties to the agreement in principle were that Mr Walji thought that he and his brothers were the tenants and Mr Sclare did not turn his mind to the question whether the Walji brothers became the tenants as a result of the meeting in May 1995 but when asked about it later he was not clear whether they were legally the tenants of Romula Ltd or not. In evidence Mr Sclare added that he was clear that in a moral sense they were the tenants.
20. However in May 1995 both Mr Walji and Mr Sclare were clear that Fads Limited no longer existed and that the Walji brothers were in occupation of the Shop Premises. In my judgment it was inherent in their agreement in principle and flows from the circumstances in which it was reached that Romula Limited agreed, or accepted, that the Walji brothers would remain in occupation of the Shop Premises and would pay the agreed rent as the Judge puts it as “a non limited entity”. It was accepted and found that the rent demands continued to be sent out in the name of the company as a matter or routine.
21. The crucial gap in the agreement reached was therefore as to the legal nature of the occupation by the Walji brothers of the Shop Premises pending the grant of the new underlease.
22. Other circumstances were that:
(a) the Walji partnership had been in occupation of the Shop Premises trading as Fads Boutique throughout the term of the Underlease and it seems for a short period before it was granted,
(b) the Walji partnership were therefore not let into possession in contemplation of, or as a result of, the agreement in principle reached in May 1995 or negotiations based thereon, they simply remained in occupation, and
(c) the Walji partnership could easily have found alternative premises in the “tenants’ market” that existed in May 1995.
23. Although Mr Sclare and Mr Walji were aware that the Underlease still had a year to run, the acceptance by Mr Sclare of the points (i) that Fads Limited no longer existed, and (ii) that the Walji brothers were in occupation, together with the lack of thought concerning the effect of Fads Limited ceasing to exist, have the consequences that as a result of, or immediately following, the agreement reached in principle in May 1995 Romula Limited did not think (and it was not asserted that they thought) either:
(a) that the company (Fads Limited) occupied the Shop Premises or that the Walji brothers occupied them through or by virtue of the Underlease to Fads Limited, or
(b) that the occupation of the Walji brothers was, or at the expiration of the term of Underlease would be, by virtue of protection given by the 1954 Act in relation to Underlease.
The finding of the Judge that Mr Sclare did not turn his mind to the question whether the Walji brothers were tenants and the lack of any action from either side when the term of the Underlease expired in March 1996 also support this view.
24. In my judgment correctly it was not argued before us, as it had been before the Judge, that the point that the term of the Underlease did not expire until March 1996 was significant. In my judgment the reason why it is not significant is that the parties did not turn their minds to the effect of Fads Limited ceasing to exist and proceeded in the knowledge and on the basis that the Walji brothers were in occupation of the Shop Premises. Also neither side took any action on the expiry of the Underlease. In my judgment it follows that arguments that in law a periodic tenancy to the Walji brothers would be a concurrent tenancy until March 1996 do not found a conclusion that it would not be sensible and reasonable for the law to fill the gap in the agreement reached between the parties by implying a periodic tenancy from what they did agree and all the surrounding circumstances.
25. The fact that, in May 1997 (about two years after the agreement in principle was reached) in the correspondence and documents referred to by the Judge and in paragraphs (15) to (18) of the Background set out above (where parts of them are set out), reference is made to the Underlease as the basis for the occupation of the Shop Premises, to holding over and to the tenants does not in my judgment affect the points made in paragraphs 23 and 24 above.
26. In my judgment the comments made by the Judge in the passage I have quoted from his judgment on the effect of this correspondence and pre contract enquiries are correct. Further in my judgment this documentation demonstrates that, as was pointed out by the Judge, Mr Sclare (and therefore Romula Limited) were uncertain as to the legal position relating to the occupation by the Walji brothers of the Shop Premises. However as the Judge also points out that documentation confirms that they knew that it was the Walji brothers and not the company (Fads Limited) that were in occupation and paying the rent. Further in my judgment the references in such documents to the Underlease as the basis for the occupation of the Shop Premises, to “holding over” and to the “tenants” indicate that Romula Limited were not, and had not been, concerned to take steps to ensure that the Walji brothers did not obtain any statutory protection.
27. Like the Judge in my judgment the totality of the agreement reached between Mr Walji and Romula Limited and the above circumstances have the consequence that this is not a case like Javad Mohammed v Aqil where a person was let into occupation in anticipation of terms being agreed. In my judgment the position is closer, although not wholly analogous, to a tenant without statutory protection holding over at the end of a lease and paying rent on a quarterly basis.
28. In short in my judgment the points that (i) the Walji brothers had been in occupation and had been paying the rent for some time, (ii) in May 1995 Romula Limited were told that Fads limited (the tenant under the Underlease) no longer existed, (iii) with that knowledge and on that basis Romula Limited permitted the Walji brothers to remain in occupation and accepted rent from them, (iv) the terms of the proposed new underlease to the Walji brothers were agreed subject to contract or lease, (v) there were no continuing negotiations and neither side pressed for the grant of the lease and (vi) there is no indication that Romula Limited were concerned (as would often be the case where a landlord lets someone into possession during negotiations for a lease) that the Walji brothers should not be tenants with statutory protection, lead to and support the conclusion reached by the Judge that, applying the underlying principle confirmed and identified in Javad v Mohammed Aqil, the Claimants have a periodic tenancy of the Shop Premises.
The Respondents’ Notice
29. The Respondents argued before the Judge that if their primary contention that they had a periodic tenancy was found to be wrong the Appellant was nonetheless estopped from asserting that they were not tenants. The Judge rejected this alternative argument and by their notice the Respondents assert that he was wrong to do so. In view of our conclusion on the appeal this point was not argued and I express no view on it.
30. In my judgment this appeal should be dismissed.
LORD JUSTICE MANCE:
31. I agree
LORD JUSTICE ALDOUS:
32. I also agree.