Parc Battersea v Hutchinson
A tenant had assigned the remainder of his own lease and not created a subtenancy which would run beyond that term. Even though there was no written document, under s.53(1)(a) Law of Property Act 1925 an interest in land could be created or disposed of by operation of law and without writing and the assignment was therefore valid. Since the lease had excluded protection under Landlord and Tenant Act 1954, the assignee was not entitled to claim that protection under that Act.
Appeal by the plaintiffs ('P') against dismissal by a Master of their application for summary judgment in possession proceedings subject to determination of two issues of law in P's favour. In December 1997 P had granted a lease over land to expire on 31 March 1998 to a company called Monarun ('M'), which then by oral agreement agreed that the defendant ('D') should rent part of the land for his business and pay #300 per month to M. D had occupied the part of land in question ever since. He claimed that he was entitled to remain in occupation by virtue of a monthly periodic tenancy combined with the effect of an agreement that M would not serve notice to quit expiring before 31 March 1999. He also relied upon protection under Landlord and Tenant Act 1954 ('the 1954 Act'), although the effects of ss.24 to 28 of the 1954 Act had been specifically excluded in the headlease between P and M. P's case was that there was no subtenancy but had been an assignment of the balance of M's lease in relation to the relevant land. The two principal issues were whether: (i) the true nature of the tenancy was a term certain expiring on or after 31 March 1998; and if so, (ii) that tenancy operated as an assignment of M's lease insofar as it related to the premises comprised in the tenancy. It was also highly relevant to determine the effects of ss.52 and 53 Law of Property Act 1925, which concerned oral and written conveyances and the creation and disposal of interests in land, because D contended that no assignment could have occurred in the context of an oral agreement for a subtenancy.
(1) As to the first issue, the claimed monthly periodic tenancy with a fetter on notice to quit satisfied the requirement that all leases and tenancies must be for a term certain (see Prudential Assurance Co Ltd v London Residuary Body (1992) 2 AC 386).
(2) The agreement operated as an assignment and did not grant a subtenancy. Although it was in principle correct that, even though the headlease was excluded from the protection of the 1954 Act, a subtenancy in favour of D even if granted in breach of the terms of the lease would be capable of falling within the protection of that Act (see D'Silva v Lister House Development Ltd (1971) 1 Ch 17). Nevertheless the grant of a sublease for a period which was equal to, or exceeded, the remaining term of the lease under which the grantor himself held, took effect not as a sublease but as an assignment of the remainder of the grantor's lease (see Milmo v Carreras (1946) 1 KB 306). D had thus prima facie obtained the benefit of an assignment and not a subtenancy and would not be entitled to the protection which he claimed under the 1954 Act, having received an unprotected lease (see St Giles Hotel Ltd v Microworld Technology Ltd (1997) 2 EGLR 105).
(3) However, a further issue arose of whether an oral agreement of the kind concluded could operate in law as an assignment of a term. The court rejected D's claims, relying on ss.52 and 53 of the 1925 Act, that this was not possible and that a monthly periodic tenancy had therefore arisen by entry into possession and payment of rent. A general requirement that conveyances were to be by way of deed unless (inter alia) they were "conveyances taking effect by operation of law" was laid down by s.52. The present case however did not come within that section because the word "conveyance" could not carry the broad meaning claimed, and the section was referring to instruments in writing and not oral agreements (see Rye v Rye (1962) AC 196). On the other hand, s.53 was relevant, which concerned the creation or disposal of instruments in land by parol. Although in that section there was a general requirement for there to be a written instrument, s.53(1)(a) itself contemplated that an interest in land could be created or disposed of by "operation of law" and without a requirement for writing. In Milmo (supra) it was only the operation of the rule of law, which the court recognised and applied in that case, which enabled the conveyance represented by the parol tenancy agreement to take effect without being under seal. Overall, the effect of the two sections was that a person who sought to assign a lease must do so in one of two ways; he must either execute an assignment in the form of a deed, which would satisfy s.52, or he must execute a written instrument which was, or could be construed as, an enforceable contract to assign the lease which would satisfy the requirements of s.53 (and s.2 Law of Property (Miscellaneous Provisions) Act 1989, and so take effect in equity. Nevertheless, under s.53(1)(a) an oral agreement which would otherwise be effective in accordance with its terms could take effect by operation of the law in a manner different from that contemplated by the parties, without there being a deed or written instrument. Since the assigned lease was not subject to the protection of the 1954 Act, P were entitled to judgment.
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18 Mar 1999
LTL 9/4/99 :  L & TR 554 :  2 EGLR 33 :  EG 45 (CS) : (1999) 96(20) LSG 39 : (1999) 96(13) LSG 33 : (1999) 143 SJLB 142 : Times, April 9, 1999 : Independent, April 19, 1999
Timothy Dutton QC