Milmo v Carreras

Milmo v Carreras

LANDLORD AND TENANT; Leases

COURT OF APPEAL

LORD GREENE MR, MORTON AND BUCKNILL LJJ

24, 25 JANUARY 1946

Landlord and Tenant – Written agreement purporting to be a sub-lease – Sub-term expressed to extend beyond date of expiry of head lease – No reversion left

in head tenant – Head tenant not entitled to serve notice to quit – No contractual obligation on so-called sub-lessee to deliver up possession to head tenant.

M was the tenant of a flat under a lease which expired on 28 November 1944. On 25 October 1943, he entered into an agreement in writing with C, whereby

he purported to grant a sub-lease of the flat to C for one year from 1 November 1943, “and thereafter quarterly until such time as one of the said parties shall

give to the other 3 months’ notice in writing.” By reason of the provision for quarterly extension, the purported sub-lease thus extended beyond the date when

the head lease would expire. The argeement contained a covenant by the tenant to deliver up at the termination of the term. The covenant was expressed to be

with the landlord. Earlier in the agreement, M was called “the landlord” and the expression was defined as including “the person or persons for the time being

entitled to the reversion immediately expectant on the term hereby created.” On 27 April 1945, M served on C what purported to be a notice to quit on 1

August 1945. It was contended by C that the agreement of 25 October 1943, must be regarded as an assignment of the residue of M’s term under the head

lease, and therefore C had no power to serve the notice because the reversion was vested not in him but in the head landlord. On behalf of M, it was contended

that, since the agreement was not under seal, under the Law of Property Act, 1925, s 52(1), it could not take effect as an assignment of the residue of M’s term

and should, therefore, be regarded as a sub-lease. It was further contended that, if it did not operate as a sub-lease, the agreement established a contractual

relationship between M and C, under which M was entitled to determine the so-called term and C was under an obligation to deliver up possession to M:—

Held – (i) By the agreement of 25 October 1943, M had divested himself of his whole term under the head lease. He was not entitled to call for possession of

the flat, because the reversion was not in him and therefore the relationship of landlord and tenant could not exist between him and C.

(ii) the document of 25 October 1943, could only be construed as an agreement to assign the head term. Assuming that the transaction was not a

conveyance “taking effect by operation of law” within the meaning of the Law of Property Act, 1925, s 52(2)(g), and that sect 52(1) of the Act had the effect

of avoiding the document as a conveyance of the legal estate, the result would, nevertheless, be the same as if the agreement had effectively passed the legal

estate, because it would take effect in equity as an agreement of which specific performance could have been obtained.

(iii) even if the agreement had any contractual validity, (a) M could not give notice to determine a non-existing term; (b) the obligation on C to deliver up

possession could not be construed as a mere contractual obligation between M, as an individual, and C. The covenant to deliver up at the termination of the

term was expressed to be a covenant with the landlord, who was the person entitled to the eversion, and therefore, since M had divested himself of his entire

interest in the flat, C was bound to deliver up possession to the head landlord.

Notes

It is held that the existence of a reversion is vital to the existence of the relationship of landlord and tenant. Where, therefore, the landlord has disposed of the

premises for a term exceeding his own he cannot give a valid notice to quit, whether such disposition takes effect as the transfer of a legal estate or, by reason

of the absence of a deed, in equity only.

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Where a purported sub-lease, being in writing, is construed as an assignment, Woodfall suggests that this is a “conveyance taking effect by operation of

law” within the Law of Property Act, 1925, s 52(1)(g), and as such valid without a deed. The court, while not actually deciding the point, leans in favour of

the view expressed, although the phrase is generally regarded as applying to probates, adjudications in bankruptcy and the like.

As to an Agreement Purporting to Sublet for a Term Greater than the Head Lease, see Halsbury, Hailsham Edn, Vol 20, pp 83, 84, para 94; and 􀂭 288􀀉

for Cases, see Digest, Vol 30, pp 483–485, Nos 1435–1450.

Appeal

Appeal by the plaintiff from an order of His Honour Judge Hargreaves, made at the West London County Court, and dated 31 October 1945. The facts are

fully set out in the judgment of Lord Greene MR.

G Granville Sharp for the appellant.

M A B King-Hamilton for the respondent.

25 January 1946. The following judgments were delivered.

LORD GREENE MR. I cannot refrain from sympathising with the appellant in the unfortunate position in which he finds himself through no fault of his

own, but, in my opinion, this appeal must fail. The appellant was the tenant of a flat, No 4, in a building known as 29 and 30 Emperor’s Gate, Kensington. He

held under a lease from a company called the Haversham Estates, the lease being for seven years beginning on 29 November 1937. It expired, therefore, on 28

November 1944.

The appellant was an officer in the territorial army, and was called up and served throughout the war. On 25 October 1943, he entered into a written

agreement with the respondent, Colonel Carreras, who has also served in the army during the war. That document purports to be a sub-lease of the flat. It is in

the usual form of a sub-lease, and contains the provisions commonly found in such a document, but, unfortunately, the sub-term which it purports to create in

favour of Colonel Carreras extended in point of time beyond the date when the head lease from Haversham would expire. The term which this document

purports to grant to Colonel Carreras is for one year from 1 November 1943:

‘… and thereafter quarterly until such time as one of the said parties shall give to the other 3 months’ notice in writing to expire on Feb. 1, May 1,

Aug. 1, or Nov. 1, in any year.’

It is clear, therefore, that that so-called term would necessarily continue (by reason of the provision for quarterly extension) beyond 28 November 1944, when

the lease from Haversham Estates would expire. The document was apparently prepared by Messrs Row, who were the agents of Haversham Estates. They

acted as agent for Captain Milmo, the appellant, in connection with the preparation of the document, but unfortunately they misread an entry in their books, or

the entry by some unfortunate accident was incorrect—it does not matter which—because they got the impression from the book that the term which Captain

Milmo held under the head lease began in 1939 and not in 1937. If that had been the case, the so-called term granted by this so-called sub-lease would not

have extended beyond the term created by the head lease, but would have been for a less period, and the present difficulty would never have arisen. By reason

of that error of two years in relation to the record in the agents’ books, the sub-term which this document purports to grant in fact extended longer than the

term under the head lease.

It appears that Mr Lock, of Messrs Row, continued to receive the rent from Colonel Carreras, and, although, in the first instance, he credited it, in a book

which he kept, to Captain Milmo and paid over some portion of it to Haversham Estates, he subsequently, in order to save time and staff, paid it direct to

Haversham Estates. The amount of the rent was the sum of £140 a year. It was suggested by counsel for the appellant, in connection with one of his

arguments, that in some way Mr Lock must be regarded as having acted as the agent for the Haversham Estates in connection with the preparation and

execution of this document. There is no such finding, and, indeed, if there had been, it could not possibly have stood because there is no evidence whatsoever

to suggest that Mr Lock, or his firm, was acting as agents for Haversham Estates in that connection. He was agent for Captain Milmo in preparing the

document, in collecting the rent from Colonel Carreras and in crediting that rent to Haversham Estates, which he did in satisfaction of Captain Milmo’s then

supposed liability under the head lease which Mr Lock, and everybody else, assumed was still vested in Captain Milmo.

On 27 April 1945, Captain Milmo, desiring again to occupy the flat, served on Colonel Carreras what purported to be a notice to quit on 1 August 1945.

He had very good reasons for wishing to get back into the flat, and, so far as the point which might have arisen under the Rent Restrictions Acts is concerned,

the county court judge took the view that, as between him and Colonel Carreras, the hardship which would be caused to Colonel Carreras would be less, if an

order 􀂭 289􀀉 for possession was made, than the hardship to Captain Milmo, if an order for possession was refused. In view of the opinion which the judge

formed, and the conclusion to which I have come, the consideration of the Rent Restrictions Acts does not arise.

The main question, and the only question, to which I need direct my observations arises in this way. It is said that this document, which purports to

create a sub-tenancy, must, by the operation of a well known rule of law, be given the effect of an assignment of the residue of Captain Milmo’s term under

the head lease. That being so (it is said) Captain Milmo had no power to serve any notice; in fact, any such notice would merely be waste paper because, on

the true construction of the document, it would be a notice to determine a sub-lease which, according to the argument, was non-existent by reason of the fact

that the document operated as an assignment of the head term. It is said that nobody but the landlord in whom the reversion was vested would be entitled to

obtain an order for possession against Colonel Carreras, and such an action therefore, was maintainable (apart from the Rent Restrictions Acts) only by

Haversham Estates, their position being that of head landlords under a lease which had come to an end on 28 November 1944; as against them (apart from the

Rent Restrictions Acts) Colonel Carreras would have no title to remain when that term expired.

We have had a very interesting and careful argument from counsel for the appellant, who has referred us to a number of authorities bearing on the

question of what is the effect of a document purporting to be a sub-lease, which purports to create a sub-term equal to, or greater than, the residue of the head

term. There have been many cases in which the effect of such a document has been considered, and a controversy has existed as to whether such a document

must be described as an assignment, or whether it can properly be described as a sub-lease. I do not propose to examine those authorities; they are to be found

dealt with at length in all the text books, and perhaps the most convenient and authoritative reference that I can give with regard to them is to be found in Platt

on Leases, Vol 1, pp 9–19. There are ten pages of discussion of the earlier authorities. It is perhaps worth mentioning that in certain old authorities, which

suggested, and, indeed, held, that certain transactions could be described as sub-leases, the substantial point was this: if they were assignments, the Statute of

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Frauds, 1677, s 3, would have made them void, and the court was concerned to give some effect to such transactions, notwithstanding that they purported to

create a term which extended beyond, or was coincident with, the head term. The court was anxious to avoid the rigours of sect 3 of the Statute of Frauds. But

it is important to notice what effect was, in fact, given to the transactions considered in those decisions. I may say in passing that they have been very severely

criticised, and it is very doubtful whether they can be considered as law, in so far as they assert that a lease can exist where there is no reversion left under it in

the grantor. But they do not go further than this, I think. They accept the position that one of the most ordinary incidents of a lease, viz, the right to distrain

for rent, does not exist in such a case. There is no right of distress, but they say, for example, that the right to sue on the covenant to pay the so-called rent

exists. Some of them go further than that and affirm the right to sue on other covenants. I think I am right in saying that not one of them is based on the view

that, in the case of such a transaction, there is any reversion left in the so-called sub-lessor. Whether such a document can be called a sub-lease or not seems,

in these cases, to have been largely a matter of words, and I do not propose to discuss the question whether they are right or wrong. For the purposes of this

case, I think it is sufficient to say that, in accordance with a very ancient and established rule, where a lessee, by a document in the form of a sub-lease, divests

himself of everything that he has (which he must necessarily do if he is transferring to his so-called sub-lessee an estate as great as, or purporting to be greater

than, his own) from that moment he is a stranger to the land, in the sense that the relationship of landlord and tenant, in respect of tenure, cannot any longer

exist between him and the so-called sub-lessee. That relationship must depend on privity of estate. I find it impossible to conceive of a relationship of

landlord and tenant which has not got that essential element of tenure in it, which implies that the tenant holds of his landlord. He can only do that if the

landlord has a reversion. You cannot have a purely contractual tenure. Tenure exists by 􀂭 290􀀉 reason of privity of estate. This seems to be the effect of all

the decisions, and this position is recognised by them all.

We have, therefore, this position arising in the present case. After the execution of this document, subject to a point I will mention later, Captain Milmo

became a stranger to the land. He had no estate in the land, the whole estate which he had held under the head lease passed to Colonel Carreras, and from that

moment onwards, although some contractual relationship might still remain between him and Colonel Carreras, in the sense that perhaps he could have sued

for the so-called rent, he no longer had any connection with the flat in the capacity of landlord. His case is this: he says, “Under this document I had power to

bring the so-called term to an end.” That seems to me to be quite unarguable because there never was a term. All that the document did, and could do, was to

transfer to Colonel Carreras the whole of Captain Milmo’s then existing term under the head lease. The obligation to deliver up, in the so-called sub-lease,

cannot be construed to be a mere contractual obligation as between Captain Milmo personally, as an individual, and Colonel Carreras. I think that this is clear

when the document is examined. In it, Captain Milmo, by a definition clause, is called the landlord:

‘… which expression shall include the person or persons for the time being entitled to the reversion immediately expectant on the term hereby

created.’

Of course, the document did not create a term because in law it was incapable of doing so. The habendum is:

‘To hold unto the tenant from Nov. 1, 1943, for a term of one year and thereafter quarterly until such time as one of the said parties [the parties

being the landlord which includes Captain Milmo and the person entitled to the reversion] shall give to the other 3 months’ notice in writing to expire …

’

I ask myself: how could any document bring to an end at any time a non-existent term? It seems to me quite impossible to make that clause work in such a

way as to have any kind of contractual force, having regard to the effect which the law requires to be given to this document. Then there is a covenant by the

tenant to deliver up at the termination of the term, and that is expressed to be a covenant with the landlord, the definition of which I have read. The term never

existed, and to whom is he to deliver up? I can give no other construction to this covenant than that he should deliver up to a person having the reversion at

the time of the expiration of this alleged term, and whatever other thing may be said about the position of Captain Milmo, he was not a reversioner under this

lease. He was a stranger to the land once he had parted with the whole of the estate vested in him. In view of the effect which the law compels us to give to

this document, I cannot see how it is possible to find any right in Captain Milmo to have possession delivered up to him. The position would appear to be that,

when this document was executed, Colonel Carreras became the assignee of Captain Milmo’s term. He became, therefore, tenant of the Haversham Estates

under the head lease which expired on 28 November 1944. When that expired, subject to the Rent Restrictions Acts, he was bound to deliver up possession to

Haversham Estates. I have not seen the head lease, so I do not know what the exact terms of it are, but, apart from anything special, that, as it appears to me,

would be the position.

A question arose as to the precise position of Captain Milmo, and it became necessary to consider whether, in view of the Law of Property Act, 1925, s

52, this document could have effect as an assignment. Sect 52, which took the place of sect 3 of the Statute of Frauds, and sect 3 of the Real Property Act,

1845, provides:

‘(1) All conveyances of land or of any interest therein are void for the purpose of conveying or creating a legal estate unless made by deed.’

Then [in subsect (2)] there are certain exceptions, one of them being:

‘(g) conveyances taking effect by operation of law.’

It is said—and Woodfall on Landlord and Tenant, 24th Edn, appears to be inclined to take the same view, at p 841, note (d)—that that exception of

conveyances taking effect by operation of law would apply to such a case as this and that there would be no need for the document to be under seal in order

that it should operate as an assignment of the legal estate because that operation was given to it by a rule of law. It is not necessary, in my view, to say

whether that is right or wrong, although the argument seems to be an attractive one. 􀂭 291􀀉 Assuming that the exception does not apply—and none of the

other exceptions appear to apply—and that the words of subsect (1) alone are to be considered, all that they provide is that a conveyance is to be void for the

purpose of conveying the legal estate unless made by deed.

Giving that decision full force in the present case, it does not, of course, mean that this document would not operate in equity as an agreement to give to it

the effect which ought to be given to it. Having regard to the fact that, treated as an agreement, it is an agreement to create a so-called sub-term extending

beyond the length of the head term, it can be only construed, and given effect, as an agreement to assign the head term, and an agreement of which specific

performance could have been obtained. The position, therefore, would have been that Captain Milmo would have been trustee for Colonel Carreras of the

residue of the head term, and could have been compelled to assign it so as to give Colonel Carreras the legal term. It is obvious that, if that be the true

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position, Captain Milmo could not be in the position of landlord of Colonel Carreras. His position would be that of a person who has contracted to assign a

lease which is vested in him; in other words, he would be merely a vendor of the head lease and not the landlord under a sub-lease. Therefore, even assuming

that sect 52(1) does have the effect of avoiding this document as a conveyance of the legal estate, the result, in my opinion, is not different from what it would

have been if it had been effective.

I think I have covered all the points which arise in the case. In my opinion Captain Milmo by this unfortunate document divested himself of the entirety

of his interest in the flat, and he was thenceforward a stranger to it. He had neither power to give a notice to determine a non-existing term, and thereby confer

upon himself the right to resume possession, nor had he any right to call upon Colonel Carreras to deliver up possession to him. In any event, he was not the

person who, under the language of this document, was the person entitled to call for possession. Therefore, even if this document was to be regarded as having

some purely contractual validity, on its true construction I can find no contractual obligation on Colonel Carreras to deliver up possession to Captain Milmo.

The appeal must, therefore, be dismissed.

MORTON LJ. There can be no doubt that when Captain Milmo and Colonel Carreras signed the agreement of 25 October 1943, they both intended that, in

the circumstances which have in fact arisen, Captain Milmo should have possession of this flat. I share the sympathy which the Master of the Rolls has

expressed for Captain Milmo’s position. Having been for over five years on active service, he now desires to occupy the flat with his wife and child. It is

perhaps regrettable that this very technical point should have been taken by the respondent. However, as it has been taken, we merely have to decide whether

it is good in law or not. I entirely agree that it is a good point in law, and that this document has the effect which the Master of the Rolls has stated. I agree so

entirely with the judgment which has been delivered that I only desire to add two very short comments. I do not see how the relationship of landlord and

tenant can possibly exist unless the so-called landlord has a reversion. In so far as any of the cases cited to us suggest that this relationship can exist in those

circumstances, I do not think the decisions were well founded, and I agree with the comments which the Master of the Rolls has made upon them.

With regard to the provisions of the Law of Property Act, 1925, s 52, it is not necessary to express a concluded view as to whether the document in

question in this case did, or did not, operate to convey a legal estate. But, for my part, I am disposed to share the view expressed in Woodfall on Landlord And

Tenant, 24th Edn, that it did operate to confer a legal estate. Prima facie, it seems to me that this is a case in which a conveyance within the meaning of the

Law of Property Act, 1925, has taken effect by operation of law. I agree that the appeal must be dismissed.

BUCKNILL LJ. I agree.

Appeal dismissed with costs.

Solicitors: Powell, Skues & Graham Smith (for the appellant); King Hamilton & Co (for the respondent).

F Guttman Esq Barrister.

􀂭 292􀀉

[1946] 1 All ER 293