AG Securities v Vaughan; Antoniades v Villiers

[1988] 3 All ER 1058
[1990] AC 417

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(Judgment by: Lord Jauncey of Tullichettle) Court:

Judges: Lord Bridge of Harwich
Lord Templeman
Lord Ackner
Lord Oliver of Aylmerton

Lord Jauncey of Tullichettle

Judgment date: 10 November 1988

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Judgment by:
Lord Jauncey of Tullichettle

My Lords, these two appeals which arise out of very different circumstances raise the question of whether arrangements permitting a plurality of persons to occupy furnished accommodation for a financial consideration constitute leases to which the Rent Acts would apply or licences to which they would not. The facts have been fully set out in the speech of my noble and learned friend Lord Templeman and it is therefore unnecessary for me to rehearse them in any detail.

AG Securities v Vaughan and ors

At the date of the commencement of the proceedings on 27 June 1985 each of the four respondents were in occupation of the flat by virtue of separate agreements dated as to one in 1982, two in 1984 and one in 1985. Each agreement stipulated a different monthly payment and a different starting date. In other respects the agreements were in identical terms. It is accepted that these agreements were perfectly genuine and were not intended in any way to cloak the intentions of the parties. The Court of Appeal (Fox and Mustill LJJ, Sir George Waller dissenting) ( [1988] 2 All ER 173 , [1988] 2 WLR 689 ) concluded that there was a joint tenancy created by a single implied agreement for the grant of exclusive possession to the respondents when the fourth respondent's agreement was signed. The Court of Appeal further concluded that in the event of one of the four occupants leaving the flat and being replaced by another who had entered into a similar agreement a new joint tenancy would arise by implied surrender and regrant.

During the course of argument a good deal was said about the recent decision in this House of Street v Mountford [1985] 2 All ER 289 , [1985] AC 809 . In that case it was, to quote the words of Lord Templeman ( [1985] 2 All ER 289 at 297, [1985] AC 809 at 823), 'clear that exclusive possession was granted and so much is [sic] conceded'. In the present case exclusive possession is the primary issue since without it there can be no joint tenancy. Street v Mountford establishes the legal consequences which may, in given circumstances, flow from an arrangement whereby the occupier of residential property has exclusive possession thereof, but it does not directly assist in determining whether or not he has such exclusive possession.

My Lords, the flat had four bedrooms and each agreement contemplated that up to four persons could share the flat at any one time. It would look very much as if the parties intended that each occupier would have his or her own bedroom and would share communal facilities with the others, and this is what happened in practice. However, this case is not concerned with whether each occupier had exclusive possession and hence a tenancy of a bedroom but with whether the four respondents together had exclusive possession and hence the joint tenancy of the flat as a whole.

When the first occupant alone is in the flat he may have de facto possession thereof but that possession is certainly not exclusive since he is bound in terms of cl 2(3) to share the flat with up to three other persons licensed by the owner. It is not without significance that there is no obligation on the owner to grant licences to other persons in terms identical to those contained in the first agreement. Thus the owner could allow a friend or relation to occupy the flat without payment or he could permit one of the occupants to keep a dog or a cat notwithstanding the prohibitions in cl 2(7) in the first agreement. Similarly, there is no exclusive possession in anyone when the second and third occupants move in. The conclusion that when the fourth occupant moves in a single agreement is implied to create a joint tenancy is somewhat startling when it is remembered that the individual occupants are not said to be connected in any way or to be in occupation as a result of any preconceived arrangement inter se. When the consequences of this conclusion are examined in detail I am, with all respect to the Court of Appeal, driven to the view that it is unsound.

Normal attributes of a lease to joint tenants include a demise for a specific period with exclusive possession at a single rent for payment of which each joint tenant is liable to the lessor in full subject to relief from his co-tenants. No one tenant can terminate the lease during its currency but, where the stipulated period has expired and the joint tenants hold over, due notice by one will terminate the lease, since the continuance of the springing interest requires the consent of all parties to the lease. There is, to say the least, a substantial interlocking of interests of the joint tenants. In the present case, as I have already remarked, each respondent arrived independently in the flat and there is nothing in any agreement to suggest that the right of one respondent to share the flat could be determined by anyone other than the owner or himself. Indeed, I have no doubt that each of the four respondents would have been horrified if he or she had thought that his or her right to remain in the flat after the expiry of the initial six-month period could be determined by the independent action of a fellow-occupant.

My Lords, if the arrival of a fourth occupant converted three persons occupying under licence agreements into joint tenants under a single implied agreement one must ask what is the rent payable and the duration of the lease. Each of the four respondents was paying a different monthly sum under their respective agreements and when the fourth respondent arrived the first, second and third respondents were occupying on a monthly basis, their initial six-month period having expired, whereas he was entitled to occupy for an initial period of six months. It has not been suggested that it would be possible to have a joint tenancy with different terms for each tenant. In these circumstances what would be the term for the implied joint tenancy resulting from the arrival of the fourth respondent? Would it be six months, thereby conferring on the first, second and third respondents rights which they did not possess under their own agreements or would it be simply one month thereby depriving the fourth respondent of rights which he demonstrably had under his own agreement?

I pose this question merely to demonstrate the problems created by the theory of a single implied agreement consequent on the arrival of a fourth occupant. The matter however does not end there because it follows that if there is no joint tenancy until the arrival of the fourth respondent there ceases to be a joint tenancy as soon as one occupant leaves unless there is a simultaneous insertion of a substitute in his place. If there is a gap in time between the departure of one occupant and the arrival of another the remaining respondents revert to the status of licensees. Thus the nature of the rights of three out of four of the occupants of this flat would depend not on the terms of their agreement with the owner but on whether or not at any one time there happened to be a fourth occupant in the flat.

The concept of surrender and regrant in leases and as it operated prior to 1707 in relation to resignations in favorem of Scots peerages involved the grantee surrendering his existing rights in exchange for new or altered rights. The implied surrender and regrant in this case would arise not because of any act on the part of the surrendering grantee but solely because of the chance advent of a stranger. I am not persuaded that this is a situation in which it would be appropriate to make such an implication.

I should be surprised indeed if a joint lease could be created by four separate documents of different dates in favour of four independent persons each paying a different rent and also for different periods of six months. Such an arrangement would, as Sir George Waller pointed out be notably deficient in the four unities of interest, title, time and possession (see [1988] 2 All ER 173 at 184, [1988] 2 WLR 689 at 703). My Lords, I have no doubt whatever that the appellants and the respondents intended that each respondent should have, under his or her agreement, certain rights of occupation in the flat and that such rights should be entirely independent of those of every other respondent. I have also no doubt that the parties have achieved this result and that the appellants are well founded in maintaining that there were four licence agreements relative to shared occupation of the flat which did not in aggregate confer exclusive possession thereof on the four respondents. It follows that there was no joint tenancy thereof.

I would therefore allow the appeal.

Antoniades v Villiers and anor

In this appeal the appellants entered into occupation together on the same day with the intention, which was known to the respondent, of living together as man and wife.

The appellants were only interested in occupying the flat together. The respondent made clear to them that he was not prepared to grant a lease which would be subject to the Rent Acts but would only grant individual licences. The appellants then signed separate agreements in identical terms in which they each undertook, inter alia, to pay one-half of the financial consideration required by the respondent. Two issues arise in this appeal, namely (1) whether the two agreements fall to be read together and constitute a single agreement between the respondent on the one hand and the two appellants on the other and (2) if so, what effect is to be given to the joint agreement having regard to its substance and reality.

My Lords, I do not doubt that the two agreements must be read together. The initial approach to the respondent was made by the first appellant, who indicated that he wanted the flat for himself and the second appellant. The two appellants visited the flat together with their references and at the request of the first appellant the respondent provided a double bed. There is no suggestion that the appellants asked to sign separate agreements and they only did so because of the anxiety of the respondent to avoid granting a lease. As I have already remarked, the agreements were in identical terms and it would in all the circumstances be quite unrealistic to treat them other than as a single agreement in favour of the two appellants.

What effect is then to be given to the agreements? If they are construed solely by reference to their terms and without regard to surrounding circumstances the conclusion must be that there was no intention to confer exclusive possession of the flat on the two appellants. The narrative in the preamble so states and cl 16 is unambiguous in its terms. However, it would not be right to look at the agreements without regard to the circumstances which existed at the time when they were entered into. Furthermore, the appellants maintain that so far as they purport not to confer exclusive possession on them they are a sham. Accordingly, although the subsequent actings of the parties may not be prayed in aid for the purposes of construing the agreements they may be looked at for the purposes of determining whether or not parts of the agreements are a sham in the sense that they were intended merely as 'dressing up' and not as provisions to which any effect would be given.

The agreements were clearly drawn up with the decision of the Court of Appeal in Somma v Hazlehurst [1978] 2 All ER 1011 , [1978] 1 WLR 1014 in mind. The agreements in that case were very similar to those in this appeal but they related to a bed-sitting room containing two beds rather than to a flat. The Court of Appeal held that the young couple were only licensees of the bed-sitting room but the decision was disapproved by this House in Street v Mountford [1985] 2 All ER 289 at 299, [1985] AC 809 at 825 wherein Lord Templeman concluded that the obligation on the couple 'to share the room in common with such other persons as the landlord might from time to time nominate' was a sham and that they were entitled jointly to exclusive possession of the room and were thus joint tenants.

The attic flat with which this appeal is concerned consists of a bedroom containing a double bed and other furniture, a sitting room containing, inter alia, a settee-bed, a table-bed and a chair, a kitchen, a bathroom and a hall. It was thus possible for someone else to sleep in the flat, and, indeed, for some five or six weeks a friend of the appellants' stayed there after permission had been obtained from the respondent. When the agreements are looked at in detail the operation of certain clauses produces bizarre results. Clause 2 imposes on the licensee responsibilities for payment of all gas and electricity consumed in the flat as well as in the entrance hall, staircase and vestibule of the building. Joint responsibility by each of the two licensees for power consumed in the flat would be an entirely reasonable arrangement so long as they alone were using the power but would become curious, to say the least, if others nominated by the licensor were sharing the flat and consuming power. The responsibility for power consumed by others in the hall, staircase and vestibule is of the latter character. Obligations in cll 4, 5, 6 and 7 anent the condition of the flat and the contents are again reasonable only so long as the two licensees are occupying the flat alone. Is it conceivable that the appellants assumed these obligations in the knowledge that the extent of their liability to the licensor might be measured not by their own actions but by the actions of others nominated to share the flat over whom they had no control? To answer this question it is necessary to consider cl 16, which is critical to the appeal.

If the clause is read literally the licensor could permit any number of persons to share the flat with the two appellants, even to the extent of sharing the joys of the double bed. The respondent, Mr Antoniades, in his powerful address to your Lordships, argued that the sole purpose of the clause was to enable him to use the flat if some disaster befell his own house and he had no roof over his head. Had the clause so specifically stated, different considerations might have applied. Unfortunately the clause is quite unlimited in its terms and purports to entitle the licensor to pack the flat with as many people as could find some sleeping space therein. The judge found as a fact that when the appellants' friend slept in the bed-settee the conditions in the flat were cramped. This can also be inferred from the plan which was made available to your Lordships and from which it appears that it would be quite unrealistic for anyone to sleep in the flat elsewhere than in the double bed in the bedroom and in either the table-bed or bed-settee in the small sitting room. In the latter event there would be little remaining room in the sitting room when the bed was up. This situation certainly does not suggest that the parties ever contemplated that other persons would be nominated to share the flat. When subsequent events are looked at the matter becomes even clearer. Although the respondent granted permission to the appellants to have the friend to stay for some weeks he made no charge therefor and during the 17 months which elapsed between the appellants' entry to the flat and service on them of notice to quit the respondent made no attempt to occupy the flat himself or through anyone nominated by him. In all these circumstances I am driven to the conclusion that the parties never intended that cl 16 should operate and that it was mere dressing up in an endeavour to clothe the agreement with a legal character which it would not otherwise have possessed. It follows that it should be treated pro non scripto.

If cl 16 is ignored and regard is had to the circumstances in which the appellants came to occupy the flat in the first place and to the size of the flat, cll 2, 4, 5, 6 and 7 all indicate an intention that the two licensees should have exclusive possession of the flat and this indication is confirmed by the remainder of the agreement notwithstanding the protestations of lack of exclusivity of possession in the narrative in the preamble. In my view the substance and reality of these agreements was to confer on the appellants exclusive possession of the flat for a term in consideration of periodical payments. Street v Mountford [1985] 2 All ER 289 , [1985] AC 809 establishes that in such a situation a tenancy is created. I would therefore allow the appeal.

Appeals allowed