Samuel Lyle Wallace v C Brian Barratt & Son Ltd (First Respondent) George William Tudor Lock (Second Respondent)
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE MORRITT,THE VICE-CHANCELLOR |
| Judgment Date | 19 March 1997 |
| Judgment citation (vLex) | [1997] EWCA Civ J0319-2 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | No CCRTI 96/0718/E |
| Date | 19 March 1997 |
[1997] EWCA Civ J0319-2
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM ORDER OF DISTRICT JUDGE WHITEHURST
Royal Courts of Justice
Strand
London WC2
The Vice-Chancellor
Lord Justice Morritt
No CCRTI 96/0718/E
and
MR MICHAEL DRISCOLL QC (Instructed by Winters of Huntingdon) appeared on behalf of the Appellant
MR JONATHAN BROCK (Instructed by Borneo Martell & Partners of Bedford) appeared on behalf of the First Respondent
The Second Respondent was not represented and did not attend
Mr Wallace, the appellant, is the Landlord and the respondent, C. Brian Barratt & Son Ltd, the Tenant from year to year of an agricultural holding called Low Farm, Great Paxton, Huntingdon, Cambridgeshire pursuant to a tenancy agreement made on 28th September 1989.
By Clause 5.16 the Tenant agreed with the Landlord —
"not to assign underlet part with or share possession or occupation of the whole or any part of the holding".
The Landlord considered that the Tenant was in breach of that agreement and on 9th October 1993 served a notice to quit on the Tenant. The Tenant responded on 18th October 1993 with a notice under Article 9 Agricultural Holdings (Arbitration on Notice) Order 1987 referring the matter to arbitration.
On 12th February 1996 the Arbitrator determined that the notice to quit should not have effect. On the application of the Landlord to the Peterborough County Court under Schedule 11 para 27 (2) Agricultural Holdings Act 1986 District Judge Whitehurst, sitting as an assistant recorder, decided that there was no error of law on the face of the award and dismissed the application. This is an appeal of the Landlord, brought with the leave of the Assistant Recorder, from that decision.
The issue is whether on the facts found by the Arbitrator the Tenant had "parted with or shared occupation" of the holding or any part of it with a partnership, known as the MMB Partnership, between Mr and Mrs Brian Barratt and their son Michael Barratt. Those facts may be summarised as follows.
The MMB Partnership was constituted as a joint lives partnership to carry on the business of farming. It commenced business on 1st July 1986. Its business, as well as that of the Tenant and another company with which the Barratt family are connected, was and is conducted from Toseland Hall, Toseland, Huntingdon, Cambridgeshire, the home of Mr and Mrs Barratt. As the Arbitrator put it, "the Barratt Family ….. operate a number of agricultural parcels in varying ownerships".
The Holding is an arable farm comprising 299 acres on which there are no buildings. In any given year there are about 22 farming operations which are carried out over 35 to 40 days. In 1962 it was let to Mr Brian Barratt. In 1986 it was let to Mr and Mrs Brian Barratt and Michael Barratt, who on 3rd July 1986 assigned the tenancy to the Tenant.
The Tenant has an issued share capital of 120 shares of £1 each; 62 are held by Michael Barratt and 19 by each of his parents. The remaining 20 shares are held by third parties. The Tenant has no capital of any substance and depends on the Partnership for the necessary finance. The relationship between the MMB Partnership and the Tenant was and, in substance, still is regulated by the terms of a letter dated 26th March 1987 which states:
"Following our earlier discussions, a meeting of the Directors of this Company has been held and it was agreed that you be requested to carry out the following Contract Works on behalf of this Company:
(1) General Management and supervision of all farming works necessary.
(2) Purchase and supply of all seeds, fertilizers and sprays, either direct from the merchants or your Partnership. The purchase of such to be to our mutual advantage.
(3) To carry out all acts of cultivation and harvesting as required, with all ancillary works to produce the best possible marketable products.
(4) All contract works to be invoiced at current market rates.
(5) All farm sales to be undertaken at the discretion of MMB Partnership and management works to be recompensed by a percentage on sales to be agreed, subject to profitability.
(6) The directors reserve the right to cancel or amend this agreement on giving three months notice at any time."
The Arbitrator found that the second part of paragraph (5) was never operated but, by implication, that the other terms were.
The present tenancy in favour of the Tenant was entered into on 28th September 1989. It is a tenancy from year to year commencing on 11th October 1988 at an initial rent of £12,000 pa. The tenant was required to use the Holding for agricultural purposes only and to cultivate and manage it according to the rules of good husbandry. The full terms of the covenant in Clause 5.16 are —
"Not to assign underlet part with or share possession or occupation of the whole or any part of the Holding PROVIDED ALWAYS:
5.16:1 if the Tenant shall share occupation of the Holding with his wife or child or children that shall not operate as a breach of the terms of this clause.
5.16:2 the Tenant may permit any cottages and gardens comprised in this Agreement to be occupied under service agreements by agricultural workers employed by the Tenant full time on the Holding but not so as to create any tenancy of any of the cottages and gardens and only if the occupation of any of the cottages is necessary in order to enable the agricultural worker adequately to perform his duties under a service agreement and provided that each cottage is occupied by only one such agricultural worker and his family.
5.16: 3 the Tenant shall be entitled to grant a licence for a season to such person or persons and upon such terms as he may think fit to exercise some or all of the sporting rights referred to in paragraph 6 of the Second Schedule below without obtaining any of the consents required under this clause."
After the execution of that tenancy the operation of the farm continued as before in accordance with the terms of the letter agreement between the Partnership and the Tenant. The Arbitrator found that those operations were carried out by Michael Barratt and three employees of the Partnership. After September 1989 the seeds, fertilisers and sprays used on the Holding, as well as on the other land farmed by the Partnership, were bought in the name of the Partnership but no invoices for the purposes of VAT passed between the Tenant and the Partnership. The crops when harvested were taken from the Holding and stored in buildings on land within the control of the Partnership called Hollow Farm, whence they were sold and delivered in the name of the Partnership. The crops were insured in the joint names of the Tenant and the Partnership, but, as found by the Arbitrator, that was to protect the interests of both parties when such crops were stored on the Partnership's land. Twice a year, on 31st March and 30th June, the accounts between the Partnership and the Tenant were settled by debit and credit notes passing between them recording the sums received for the sale of the crops which were credited to the Tenant and the amounts spent for seed, fertilisers and sprays, labour and other services (calculated on an acreage basis) were credited to the Partnership. However, the balance in favour of the Tenant was not settled by payment; instead the Partnership put the Tenant in funds with which to make any direct payments as and when required.
On 2nd April 1992 the Landlord served on the Tenant a notice to remedy alleged breaches of the tenancy agreement consisting of failing to cultivate the Holding and parting with possession or sharing possession or occupation with the Partnership. In consequence the following day "a letter was drafted from the Tenant to the Partnership" terminating the arrangements agreed in the letter dated 26th March 1987. The Arbitrator made no finding whether the arrangements were thereby terminated but recorded that the farming activities on the Holding and the method of accounting for them continued to be carried out by the Partnership in much the same way. In addition the Tenant was credited with wayleave payments received by the Partnership in relation to the Holding but debited with £25,500 for general supervision and overheads (for example, the use of machinery owned by the Partnership) and £21,350 for gateways, drains and ditch and bank repairs carried out since 1989. The applications for the Area Aid Payments in respect of the Holding were made in April 1993 and 1994. They were completed by "Michael Barratt MMB Partnership" pursuant to express written authority from the Tenant.
The Arbitrator, who sat with a legal assessor, rejected the allegation of the Landlord that the Holding was farmed by a partnership consisting of the Tenant and the MMB Partnership. That contention was not pursued. But he also held that the relationship between the Partnership and the Tenant whereby the former carried out the farming operations on the Holding with the agreement of the Tenant did not involve the sharing of occupation of the Holding in breach of the covenant. He did not agree with the submissions of counsel for the Landlord that the covenant would be broken by the appointment of an agent to carry on the farming activities. At paragraph 27 he said:
"There seems to be nothing in the Tenancy Agreement which supports the suggestion that there is a breach of covenant if the Tenant appoints an agent to cultivate and manage the farm on its behalf, provided that the agent is retained to and does act solely on behalf...
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