Frank Pile v Simon Pile
| Jurisdiction | England & Wales |
| Judge | Mr Justice Zacaroli |
| Judgment Date | 29 July 2022 |
| Neutral Citation | [2022] EWHC 2036 (Ch) |
| Docket Number | Case No: CH-2022-BHM-000009 |
| Court | Chancery Division |
[2022] EWHC 2036 (Ch)
Mr Justice Zacaroli
Case No: CH-2022-BHM-000009
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN BIRMINGHAM
CHANCERY APPEALS (ChD)
ON APPEAL FROM THE COUNTY COURT AT BIRMINGHAM
ORDER OF HHJ RAWLINGS dated 28 April 2022
County Court Case Number: J30BM026
Kerry Bretherton QC and Katie Gray (instructed by Loxley Solicitors Limited) for the Appellant
George Woodhead (instructed by Nelsons Solicitors Limited) for the Respondent
Hearing Date: 26 July 2022
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
This appeal raises the question whether one of two brothers, being joint tenants of a periodic tenancy, can be restrained from serving a notice to quit, in order to acquire a new lease for himself, on the basis that to do so would constitute a breach of trust (as between the two joint tenants).
Background
The appellant, Frank Pile (“Frank”) and the respondent, his brother Simon Pile (“Simon”), are joint tenants under the following tenancies of which a Mr John Stranks (“Mr Stranks”) is the landlord;
(1) An agricultural tenancy of farm land at Fir Tree Farm (the “Agricultural Land”), dated 11 February 1989, the term under which commenced on 25 March 1988 and has continued thereafter from year to year as a periodic tenancy, protected under the Agricultural Holdings Act 1986 (the “Agricultural Tenancy”); and
(2) A commercial tenancy of land at Fir Tree Farm (the “Commercial Land”), dated 9 December 2005, initially for a term of 12 years, but continued thereafter as a periodic tenancy, protected under the Landlord and Tenant Act 1954 (the “Commercial Tenancy”).
Simon and Frank are also both co-owners of agricultural land known as Part Camp Barn Farm and Part Hoggins Farm (the “Sale Land”). This is the subject of an order for sale by HHJ Kelly dated 1 November 2021.
On 23 March 2021 Frank, Mr Stranks and a company of which Frank and his wife were the sole directors and shareholders, F N Pile and Sons Limited (the “Company”), entered into an agreement (the “New Tenancy Agreement”) under which:
(1) Frank would serve a notice to quit under the Agricultural Tenancy;
(2) Mr Stranks would serve a notice to terminate the Commercial Tenancy, and Frank agreed not to serve a counter-notice; and
(3) Mr Stranks would grant the Company tenancies of the Agricultural Land and the Commercial Land on expiry of the notices under the respective tenancies.
As it happened, while Frank served a notice to quit the Agricultural Tenancy, Mr Stranks did not serve a notice to terminate the Commercial Tenancy. Simon commenced proceedings against Frank in October 2021 to set aside the New Tenancy Agreement. Those proceedings were concluded when HHJ Johns QC, in the County Court at Central London, gave judgment by consent, setting aside the New Tenancy Agreement and the notice to quit served by Frank pursuant to it.
The present proceedings were brought by Simon following a telephone conversation with Mr Stranks in which Mr Stranks said that he had resumed negotiations with Frank for a new tenancy of both the Agricultural Land and the Commercial Land.
The claim
Simon's claim against Frank is based on the contention that Frank's actual or threatened conduct constitutes a breach of trust. In the particulars of claim Simon contends that he and Frank hold the Agricultural Tenancy and the Commercial Tenancy as trustees for themselves as beneficial tenants in common in equal shares. The particulars of claim do not identify any basis for the trust relationship other than the fact of co-ownership of the tenancies.
The entry by Frank into the New Tenancy Agreement is said to have constituted a breach of trust, in that he sought to profit at his brother's expense by obtaining a new lease in his own name of the Agricultural and Commercial Land.
Simon also contends that Frank, by entering into further negotiations with Mr Stranks, is committing a further breach of trust. Specifically, it is contended that Frank has placed himself in a position of conflict of interest between himself and his duties as trustee; that he has sought to profit from his trusteeship; and that he has breached the well known rule in Keech v Sandford.
Simon sought an interlocutory injunction to restrain Frank, in essence, from entering into negotiations with Mr Stranks, or anyone else, for the surrender or sale of the Agricultural Tenancy or the Commercial Tenancy or for the grant of a new tenancy to Frank, without Simon's consent.
The Judge's judgment
The Judge applied the American Cyanamid test, concluding that there was a serious issue to be tried as to whether Frank would be acting in breach of trust if he unilaterally entered into an agreement, for some personal benefit to himself, the consideration for which is Frank cooperating in the termination of the Agricultural or Commercial Tenancies. This is the only part of the Judge's judgment in issue on the appeal.
The Judge went on to conclude that there was a real risk of Frank bringing about the termination of the Tenancies, that damages would not be an adequate remedy and that the balance of convenience favoured the grant of an injunction. There is no appeal against these conclusions.
Before the Judge, Ms Bretherton QC, who appeared below and on appeal on behalf of Frank, relied principally on the decision of the House of Lords in Hammersmith LBC v Monk [1992] 1 AC 478 (“ Monk”). That case concerned the validity, as between joint tenants of a council flat and the local authority landlord, of a notice to quit given by one joint tenant without the concurrence of the other. At p.493C-F, Lord Browne-Wilkinson addressed the possibility that the service of the notice might constitute a breach of trust, but noted that seemed “very dubious” and that, even if it did, it could not affect the validity of the notice as against the landlord.
Mr Woodhead, who appeared below and on appeal for Simon, relied before the Judge on Harris v Black [1983] 83 PNCR 466. That case involved two solicitors who had practised in partnership together from leased premises of which they were joint tenants. After dissolution of the partnership, each of the partners carried on their separate business from the same premises. The landlord served a notice to quit. One of the former partners wished to remain in the premises, the other did not. The question was whether the reluctant partner could be required to join the other in serving a counter-notice and applying to the court for a new tenancy. The Judge at first instance refused to grant an injunction. That decision was upheld on appeal, but Mr Woodhead relies on the fact that the Court of Appeal recognised that there was jurisdiction, in an appropriate case, to make such an order: see the judgment of Slade LJ (with whom Robert Goff LJ agreed) at p.373.
The Judge concluded, at §41 of his judgment, that although Frank was free to serve a notice to quit in respect of the Agricultural Tenancy, and free to agree not to serve a counter-notice in respect of the Commercial Tenancy, there was at least a serious issue to be tried that he would be acting in breach of trust if he did so in order to obtain a personal benefit for himself. I set out his conclusions in this regard in full:
“(a) Frank is using the extinguishment of a trust asset, that is the periodic tenancies, in respect of which he owes duties as trustee to Simon, as the consideration for obtaining a personal benefit to the detriment of the trust. This is not a case of Frank simply choosing to no longer incur the liabilities or obligations that go with the continued existence of the relevant tenancy;
(b) my conclusion is, I consider, consistent with the rule in Keech v Sandford. It is wrong to talk, as the Particulars of Claim do, in terms of Frank “breaching the equitable rule in Keech v Sandford” (because Keech v Sandford provides for automatic consequences regardless of whether there is a breach of trust or not, it is not therefore a rule that can be breached) but one of the reasons for the rule in Keech v Sandford is to avoid conflicts of interest for a trustee in deciding whether to terminate a lease where the trustee may be considering taking a new lease on the same premises in their own name. The rule provides that, regardless of whether the trust could itself have continued the lease, or obtained a new lease itself, any new lease obtained in the name of the trustee after termination of the lease held by the trust is automatically held upon trust on the terms of the original trust. The rule is a strict one, and clearly, in my judgment, aimed at ensuring that beneficiaries do not lose out as a result of any such conflict of interest on the part of the trustee. It would be strange to my mind if, given the rule in Keech v Sandford, Frank were to be taken not to be acting in breach of trust if he deliberately obtains a personal benefit for himself (other than a new lease over the same land, which Simon cannot share in) by destroying the trust asset; and
(c) whilst I note the comment of Lord Browne-Wilkinson in Monk that he was “dubious” about whether the cohabitee in that case would have been taken to have acted in breach of trust by serving the notice to quit, first the comments were both obiter and he gave no reasons for being “dubious” and second, those comments can only have applied to the particular facts of Monk. Here, Simon appears to be specifically seeking to negotiate away trust assets in order to obtain a personal benefit for himself. That appears to me to be a clear breach of trust.”
Grounds of Appeal
Frank seeks to appeal that decision on two...
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