Barrett and Others v Morgan

JurisdictionEngland & Wales
JudgeTHE VICE-CHANCELLOR,LORD JUSTICE PETER GIBSON,LORD JUSTICE JUDGE
Judgment Date30 June 1998
Judgment citation (vLex)[1998] EWCA Civ J0630-9
CourtCourt of Appeal (Civil Division)
Docket NumberCHANF 97/0353/
Date30 June 1998

[1998] EWCA Civ J0630-9

IN THE SUPREME COURT OF JUDICATURE

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

NEWCASTLE UPON TYNE DISTRICT REGISTRY

(MR PETER SMITH QC (Sitting as a Deputy High Court Judge))

Royal Courts of Justice

The Strand

London WC2

Before:

The Vice-Chancellor

Lord Justice Peter Gibson

Lord Justice Judge

CHANF 97/0353/

(1) Robert Asheton Barrett
(2) Philip Adrian Scrope (The trustees of SP Scott Children)
(3) Mary Isobel Scott
Appellants
and
Robert Cecil Morgan
Respondent

MR D WOOD QC and MR J MCGHEE (Instructed by Messrs Burgess Salmon, Bristol BS1 4AH) appeared on behalf of the Appellants

MR AJ KOLODZIEJ (Instructed by Messrs Smith Rodham, Bishop Auckland, Co. Durham DL14 7PG) appeared on behalf of the Respondent

1

Tuesday 30th June, 1998

THE VICE-CHANCELLOR
2

This appeal raises an interesting point on the law relating to agricultural sub-tenancies. The plaintiffs, appellants in this court, are the freehold owners of agricultural land in Co. Durham. The land was subject to a tenancy held by two individuals but was farmed by the defendant, Mr Morgan, who is the respondent in this court. Mr Morgan held a sub-tenancy from the two individuals, who were tenants under the head-tenancy. The two individuals and the plaintiffs, whose relationship to one another I will explain in a moment, wanted to obtain vacant possession of the land in order to sell it with vacant possession. They agreed that the freeholders would serve notice to quit on the two tenants and that the two tenants would not serve any counternotice invoking the relevant provisions of the Agricultural Holdings Act 1986. The purpose of this agreement was so as to enable the freeholders to obtain possession against the sub-tenant.

3

On the expiry of the notice to quit the head-tenancy, so it was believed, would come to an end and, with it, the sub-tenancy. The scheme, although put into effect by the notice to quit served by the freeholders, originated, according to the facts as found by the judge, from the two tenants, or from the advice given to them by their land agent. The two tenants, it was appreciated, could not themselves, by serving notice to quit on their sub-tenant, bring about the desired state of affairs in which vacant possession could be obtained against the sub-tenant. A notice to quit served on Mr Morgan would, as they knew, have led to the service of a counternotice invoking the protection of the 1986 Act. Nor, so the two tenants believed, could a notice to quit served by them on their head landlord, the freeholders, have achieved the desired result either. According to the case law as it then stood (it has since changed), a tenant could not by putting an end to his own tenancy impair or destroy the interest which he had granted to his sub-tenant (see Brown v Wilson [1949] 208 LT 144). So the solution, the freeholders and the tenants concluded, was for the freeholders to serve the notice to quit. The tenants would naturally refrain from serving a counternotice invoking the statutory protection.

4

The short point on this appeal is whether the scheme works. The judge below, Mr Peter Smith QC, sitting in Newcastle as a Deputy Judge of this Division, held that it did not. He held that a notice to quit served pursuant to what he described as a collusive agreement between freeholders and their tenants could not by itself destroy a sub-tenancy held from the tenants. The deputy judge relied particularly on Sparkes v Smart [1990] 2 EGLR 245, a decision of this court on facts comparable to the facts of the present case.

5

On this appeal Mr Derek Wood QC, counsel for the appellants, has in effect submitted that Sparkes v Smart was wrongly decided, decided per incuriam. He has relied on two other Court of Appeal decisions, Harrison v Wing [1988] 2 EGLR 4 and Pennell v Payne [1995] QB 192, as constituting soundly based authority justifying a different conclusion from that reached by the deputy judge. The deputy judge's order was made on 18th October 1996. He refused leave to appeal but leave to appeal was given by this court on 6th March 1997.

6

I will state the facts as shortly as possible for the point of issue to be comprehensible. The case, of course, involves agricultural land. The land is at Mordon in Co. Durham and belonged in 1970 to the Fourth Earl of Eldon. On 1st March 1970 the Fourth Earl granted a tenancy of the land to himself and his two sons. The elder of his two sons is now the Fifth Earl. His younger son is Mr Simon Scott. So the Fourth Earl and his two sons became tenants of the Fourth Earl. The tenancy comprised over 900 acres. It was a tenancy from year to year from 1st March 1970 with an annual rent of £3,350. Under Clause 3 of the tenancy agreement, the tenancy was terminable by 12 months' notice to quit given by either landlord or tenants expiring on 13th May in any year. That is the tenancy in respect of which the notice to quit that has led to the present proceedings was given.

7

The Fourth Earl of Eldon died on 20th October 1976. His two sons were his executors. On 1st April 1977 probate was granted to the two of them. A number of transactions or dispositions relating to the freehold land comprised in the 1st March 1970 tenancy agreement were entered into or made. First, on 3rd April 1984, 3.2 acres of land were vested in the first and second plaintiffs in this action as trustees for Mr Simon Scott's children. The first plaintiff is Mr Barrett, a partner in the firm of solicitors, May, May & Merrimans; the second plaintiff is Mr Scrope, a partner in the firm of land agents, Smith Goreham.

8

On 25th July 1984 the two executors assented to 387-odd acres of land vesting in Mr Simon Scott. On 30th July 1984 Mr Simon Scott transferred 23.58 acres of the land that had been vested in him to his wife, who is the third plaintiff in this action, Mrs Mary Scott. Finally, on 23rd July 1986 Mr Simon Scott transferred 331-odd acres of land, are comprised in the 1st March 1970 tenancy agreement, to the first and second plaintiffs, Mr Barrett and Mr Scrope. Here again the first and second plaintiffs were to hold as trustees for Mr Scott's children.

9

The position from 1970 to 1980 was that the tenants under the 1st March 1970 agreement farmed the land. They had originally been the Fourth Earl and his two sons but after the death of the Fourth Earl in 1976 the tenants farming the land were the Fifth Earl and Mr Simon Scott. But, apparently, by 1980 the land was becoming somewhat dilapidated and in bad condition and a local farmer, a Mr Morgan, began farming the land under an arrangement made with the tenants. An attempt was made to produce an arrangement under which Mr Morgan would not have the benefit of the protection afforded to agricultural tenants by the relevant statute. In 1970 it was the Agricultural Holdings Act 1948, now it is the Agricultural Holdings Act 1986. The arrangement involved the creation of a so-called partnership between the Fifth Earl, Mr Simon Scott and Mr Morgan under which the partners would pay a rent of an agreed sum for the land.

10

On 5th December 1980 Mr Morgan accepted the proposed terms and began farming the land, ostensibly under this partnership arrangement. But it was held by the deputy judge in this present litigation that the partnership was no more than a pretence. That is now accepted by the other parties. The Fifth Earl and Mr Simon Scott accept that Mr Morgan became—as a result of his going into occupation of the land, farming it and paying a rent for it to them—their sub-tenant.

11

So from December 1980 Mr Morgan has been farming the land under what is accepted to be, although it was never formally prepared as, a sub-tenancy from the two surviving tenants, the Fifth Earl and Mr Simon Scott. The freeholders, from whom those two tenants held the 1970 tenancy, were the first and second plaintiffs in respect of the land they held as trustees for Mr Simon Scott's children, and in relation to a small parcel of land, the 23-odd acres, Mr Simon Scott's wife, Mrs Mary Scott.

12

By 1991, with Mr Morgan still farming the land under the arrangement I have described, Mr Simon Scott was anxious to raise capital for the benefit of his children. He had some discussions about how to do this with Mr Scrope, the family land agent, and one of the trustees holding the freehold interest in the land for the benefit of his children. Mr Simon Scott's brother, his co-tenant the Fifth Earl, sympathised with Mr Simon Scott's desire to raise capital for the benefit of his children and supported him in his proposals. There were negotiations for the sale to Mr Morgan of the land which he was farming. Mr Morgan was, it seems, a willing purchaser but there was a dispute as to the price. The family, including the freeholders, the trustees of the family settlements and Mrs Scott, and the tenants under the 1970 tenancy, the Fifth Earl and Mr Simon Scott, wanted to sell the land at its vacant possession value. Mr Morgan, farming the land with, as he thought, the protection of the statutory scheme under the 1986 Act, was willing to purchase at a price which took account of his protected possession. The deputy judge's recital of the facts suggests that the value of the land subject to the occupancy of an agricultural tenant would have been something like 30 per cent less than the vacant possession value of the land. The 30 per cent reduction would have been a substantial sum.

13

So Mr Simon Scott consulted Mr Scrope as to what might be done. Mr Scrope was a land agent. Mr Scrope consulted solicitors, Burgess Salmon, about what could be done. The upshot of these consultations was that advice was given to Mr Simon Scott, and...

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3 cases
  • EDWARD LEE & Company Ltd v N1 PROPERTY DEVELOPMENTS Ltd
    • Ireland
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    • November 12, 2012
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    • United Kingdom
    • House of Lords
    • January 27, 2000
    ...the sub-tenancy as well as the head tenancy. 7The facts are set out at length in the judgment of the Vice-Chancellor reported in [1999] 1 W.L.R. 1109, and I need not repeat them in full. The Respondent Mr. Morgan has farmed a holding of several parcels of farmland in County Durham since No......
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