Smith & Anor v Jafton Properties Ltd

Mr Jourdan QC identifies the issue in this appeal as follows:

“If there is a lease of four flats, flats 1 to 4, and there are two assignments of part of the demised premises held under the lease, one to A of flats 1 and 2, and another to B of the remaining two flats, flats 3 and 4, then for the purposes of section 5 of the Leasehold Reform Housing and Urban Development Act 1993 (“the 1993 Act”):

(a)

is A the tenant of his two flats and B the tenant of his two flats, or

(b)

are A and B together to be regarded as the tenants of all four flats?

If (a) is correct, then A and B are qualifying tenants for the purposes of the 1993 Act. If (b) is correct then they are not.”

The facts are summarised in the lucid judgment of HH Judge Dight. In brief they are these. Jafton Properties Ltd is registered at HM Land Registry under title numbers 314960 and 314961 as the sole proprietor of the freehold interest in Newbury House, 10-13 Newbury Street, London EC1 (“the property”). The freehold of 10-12 Newbury Street is registered under title number 314961 and the freehold of 13 Newbury Street is registered under title number 314960. The property is a self-contained building which now consists of 4 flats, one on each floor, with a lower ground floor storage area and certain common parts.

On 26 January 1926 the then freeholder granted a lease of the property as a whole for a term of 99 years from 24 June 1924 at an annual rent of £85 payable quarterly in advance on the usual quarter days. The lease was registered at HM Land Registry under title number 318551. The lease contains a number of relatively usual covenants to be observed by the tenant but there are no express covenants against assignment or underletting.

In October 2004 Mr Smith and Mr Dennis bought the lease at auction and it was assigned to a company called City Apartments Ltd (“City”). Messrs Smith and Dennis own 75% of City's shares and have at all material times been its only directors. When City acquired the lease the property was in a dilapidated condition; but City carried out substantial works of refurbishment and created four separate flats, numbered 1 to 4.

Following completion of the works, and creation of the four flats, on 27 May 2008 City executed three transfers of separate parts of the property purporting to assign the property comprised in the lease in three parts by three separate instruments as follows:

It is common ground that (a) the landlord was not consulted about the assignment of parts of the lease, (b) it did not consent to the assignments, and (c) it has refused to accept rent from the assignees separately since the transfers came to its attention.

On 15 September 2008 the claimants were registered at HM Land Registry as proprietors of the leasehold interests which had been transferred to them as follows:

At entries number 2 in the property registers of EGL544839 and EGL544842 after the particulars of the lease are given there is a note which states “The lease includes other land”. At entries number 4 to each property registered there is reference to the transfers dated 27 May 2008 and a statement that the rent was thereby “informally apportioned”.

On 17 July 2009 Messrs Smith and Dennis served an initial notice under section 13 of the 1993 Act claiming the right of collective enfranchisement of the whole of the property pursuant to Part I of Chapter 1 of the 1993 Act; and naming themselves jointly as the nominee purchaser for the purposes of the intended acquisition. By a counter-notice dated 11 September 2009 Jafton did not admit that Messrs Smith and Dennis had the right to acquire the freehold of the property for three reasons. The first reason was that they were not qualifying tenants for the purposes of Chapter I of the 1993 Act. It is that reason that was the subject of a preliminary issue, which HH Judge Dight decided in the landlords’ favour.

The judge set out the relevant terms of the 1993 Act impeccably. I reproduce his summary of the key provisions. Chapter 1 of the 1993 Act “has effect for the purpose of conferring on qualifying tenants of flats contained in premises to which this Chapter applies on the relevant date the right, exercisable subject to and in accordance with this Chapter, to have the freehold of those premises acquired on their behalf… and that right is referred to in this Chapter as “the right to collective enfranchisement”.”

Section 3 of the 1993 Act provides that the right to enfranchisement “applies to any premises if (a) they consist of a self-contained building or part of the building; (b) they contain two or more flats held by qualifying tenants; and (c) the total number of flats held by such tenants is not less than two thirds of the total number of flats contained in the premises”. The property comprises four flats. Those flats are all held by the claimants. The question is whether such flats are held by the claimants as qualifying tenants.

The principal definition of qualifying tenants is to be found in section 5(1) as follows: “subject to the following provisions of this section, a person is a qualifying tenant of a flat for the purposes of this Chapter if he is a tenant of the flat under a long lease.” In this case the lease is a long lease.

Subsection (3) provides that “no flat shall have more than one qualifying tenant at any one time”. That provision is further explained by subsection (4) which states that “accordingly…(b) where a flat is for the time being let to joint tenants under a lease to which subsection (1) applies, the joint tenants shall (subject to… subsection (5)) be regarded that the purposes of this Chapter has jointly constituting the qualifying tenant of the flat.” Thus, insofar as the claimants are joint tenants of any flat they are to be regarded together as a single tenant of that flat. The defendant asserts that they are joint tenants of all four flats. The claimants assert that they are sole tenants of two flats each.

Section 5 (5) of the 1993 Act, which is the key provision, says that:

“Where apart from this subsection-

(a)

a person would be regarded for the purposes of this Chapter as being (or as being among those constituting) the qualifying tenant of a flat contained in any particular premises consisting of the whole or part of a building, but

(b)

that person would also be regarded for those purposes as being (or as being among those constituting) the qualifying tenant of each of two or more other flats contained in those premises,

then, whether that person is tenant of the flats referred to in paragraphs (a) and (b) under a single lease or otherwise, there shall be taken for those purposes to be no qualifying tenant of any of those flats.”

The judge considered that the issue was concluded in the landlord’s favour by the decision of this court in Lester v Ridd [1990] 2 QB 430. Before coming to that case, I will look at first principles and some of the older case law.

At common law a lease or tenancy can only be created by contract, express or implied. In addition it creates a relationship of landlord and tenant between the parties to the contract. This relationship is one of status; not contract: City of London Corporation v Fell [1994] 1 AC 458, 466. The creation of a tenancy also results in the creation of a legal estate in the land comprised in the tenancy. The legal estate created at the inception of the tenancy is a transmissible interest in land. At common law the contract remained in being notwithstanding any transmission of the estate in land. Thus at common law the landlord remained entitled to sue the original tenant on the contract, even if the latter had disposed of the estate in land created by the lease. At an early juncture in legal history the common law devised additional remedies for the landlord. The first of these was the right to distrain for rent. The common law regarded the rent as “issuing out of” the land. This meant that if the rent was in arrear the landlord could enter upon the land and (with some exceptions) seize any chattels that he found there. Until the intervention of statute the landlord had no right to sell the chattels that he seized. The seizure of chattels was simply a means of putting pressure on the tenant to pay the rent. Since the landlord had no way of knowing who owned any chattels that he found on the land, the common law permitted him (with some exceptions) to seize anything he found. However, if the seized chattels did not belong to the tenant then in practice the seizure put no real pressure on the tenant to pay the rent, and the landlord would soon release them. If the tenant disputed his liability to pay, or if he claimed that the distress was unlawful, he could bring an action in replevin. This enabled him to enjoy the chattels in specie pending resolution of the dispute; but in the meantime he had to provide security for the rent claimed.

The second remedy that the common law devised for the landlord was the right to sue an assignee of the lease on certain covenants contained in the contract by which the lease had been created. This was the result of the decision in Spencer’s Case (1583) 5 Co. Rep. 16a. In the traditional phrase the landlord was entitled to enforce against an assignee those obligations which “touched and concerned” the land demised. The common law had no need to concern itself with the position of a successor to the landlord, because statute had already intervened. When Henry VIII dissolved the monasteries and alienated their former lands the question whether a successor to an original landlord could sue the tenant on covenants contained in the lease remained undecided. So Parliament passed the Grantees of Reversions Act 1540 to give them that right. This statutory right survived through various manifestations; and made its way into section 140 of the Law of Property Act 1925.

The common law right of a landlord to sue a successor to the original tenant was founded on privity of estate. The vesting of the leasehold estate in the tenant carried with it the burden of covenants that touched and concerned the land. In the vivid phrase of Nourse LJ in City of London v Fell [1993] QB 589, 604 this category of covenant was “imprinted on the term”. It was because the transferee of the leasehold estate had the status of tenant vis à vis the landlord that he was subjected to this burden. Once the original tenant had assigned the property comprised in the lease, the contract of tenancy recorded the obligations that touched and concerned the land but, so far as the new tenant was concerned, was no longer the operative source of those obligations. The obligations bound him, not because of the contract but because of the status conferred upon him by holding the leasehold estate. The contract remained in force as between the original parties to it; but as regards their successors it was of little more than historical interest.

From a very early date, in a case where the original tenant assigned part only of the property comprised in the lease the common law was able to sever the obligations contained in the original contract of tenancy and apportion them between the several parts of the property comprised in the tenancy. Thus in Congham v King (1631) Cro. Car 221 the court held that an action in covenant would lie against an assignee of part of the land comprised in a lease for not repairing his part. The reason was that the covenant was divisible and followed the land. In Gamon v Vernon (1678) 2 Lev 231 the landlord sued an assignee of half the land for half the rent. He defended on the ground that he was not liable for any part of the rent because both privity of contract and privity of estate remained in the original tenant. The court held that the assignee had privity of estate in half the land, which was enough to make him liable to pay half the rent. Further cases in the eighteenth century applied the same principle. In the early nineteenth century in Stevenson v Lambard (1802) 2 East 575 the landlord brought an action in covenant against an assignee of the term claiming rent. The assignee pleaded (amongst other things) that he had been evicted from half the land by title paramount. The question for the court was whether, in those circumstances, the rent was apportionable so as to relieve the assignee from liability for half the rent. The court decided that it was. Lord Ellenborough CJ said that where the action was brought upon the original contract against the original tenant, the rent was not apportionable. He referred to older authority on procedural questions and continued (p. 580):

“So covenant will lie against the assignee of part of an estate for not repairing his part; “for it is dividable, and follows the land,” with which the defendant as assignee is chargeable by the common law, or by the stat. 32 H. 8, c. 37. Congham v. King, Cro. Car. 222. Upon the whole, therefore, we think that the condition of this assignee is in point of law different from that of a lessee chargeable on the privity of contract; and being chargeable on the privity of estate, and in respect of the land, his rent is upon principle apportionable as the rent of a lessee is, or as his rent would be in an action of debt or replevin.”

These and other cases are collected and discussed in the impressive judgment of Dodd J in the Kings Bench Division in Ireland: Dooner v Odlum [1914] 2 Ir R 411. He concluded (p. 421):

“The rent, according to the authorities I have cited, is divisible. There is absolutely no evidence and no presumption upon which to found an inference that she holds an undivided share in the lands jointly or as tenant in common, in the ordinary sense of the term, with others. In one sense, of course, it may be contended that a number of tenants, each holding a divided portion and each contributing to the entire rent, are tenants in common…. But the authorities recognize a divided share, and the inference here is overwhelming that it is a divided share that the defendant holds.”

The case was appealed; and Dodd J’s decision affirmed. Judgments on the appeal were given by Cherry LCJ and Kenny J. Cherry LCJ said (p. 425):

“The law is, I think, well settled that where a lessee of demised premises assigns portion of these premises to a stranger, the assignee is liable to the lessor upon the covenants contained in the lease only in so far as those covenants affect the lands in his possession; and, as regards rent, only for an apportioned part of the rent properly chargeable in respect of the land actually vested in him.”

He continued by explaining the rationale for this conclusion (p. 426):

“… the liability of an assignee to pay the rent, which the original lessee has covenanted to pay, arises, not from privity of contract, but from privity of estate. It is not because the lessee has entered into the covenant with the lessor, but because he has vested in him the lands which are charged with the rent, that the assignee becomes liable. The covenant to pay the rent, in addition to the personal liability which it imposes upon the lessee who enters into it, also affixes upon the land itself a liability to pay.”

In his concurring judgment Kenny J said (p. 430):

“… it will be found that throughout [previous cases] the principle was recognized that, in order to free the assignee of part of the lands from payment of the entire rent, he must hold the part in physical severalty. When he does so there is no privity of estate, as between him and the reversioner, in the entire of the lands. … The determination of the assignee’s liability depends on privity of estate, and I am unable to draw a distinction between a case where the act of severance is that of the covenantor and a case where the severance had taken place before the covenant was entered into. In neither case is there full privity of estate, and therefore, there is no liability on the part of the assignee for the whole rent.”

Dooner v Odlum was considered by Greer J in United Dairies Ltd v Public Trustee [1922] 1 KB 469. Having considered both that case and others he said (p. 472):

“Where the leased property has been physically divided amongst two or more assignees it is clear that the obligations of the lease, so far as they affect the assignees, become separate, and each of the assignees is liable, while he is assignee, to perform the covenants so far as they affect his divided part of the leased property.”

He referred also to the case of Holloway v Berkeley (1826) 6 B & C 2 which concerned heriots (an incident of manorial tenure such as copyhold). In that case Bayley J said that where a tenement is subdivided “each tenant holds his share in severalty”. In United Dairies Greer J concluded (p. 477):

“Where leased land is physically divided it is possible to say that the covenant imposed by law through privity of estate on the assignee is confined to the part of the land in respect of which there is privity of estate between the assignee and the landlord, but where the land is not physically divided, it is not possible to split the covenant into two covenants capable of enforcement.”

I must now refer to Curtis v Spitty (1835) 1 Bing (NC) 757 which features in a later case. The landlord sued the defendant for the whole of the rent. He pleaded that all the interest of the lessee in the lease and the demised land had been assigned to the defendant. The defendant denied that plea. Issue was joined on that question. At trial it was proved that the defendant was the assignee of only part of the land. According to the strict rules of pleading in those days, the defendant had succeeded on the pleaded issue and a verdict was entered for him. The question before the Court of King’s Bench was whether that verdict should be set aside. The Court decided that it should not because the landlord had decided to go to trial on the pleaded issue and had not amended his pleading. But in the course of his judgment Tindal CJ said that whether privity of estate in respect of the whole of the leased land exists by virtue of an assignment of part was “a nice and difficult question, not settled by any decision in the books, so far as we can ascertain”. I find it difficult to see that in this observation Tindal CJ was expressing a view one way or the other. Moreover, Stevenson v Lambard seems to me to be clear authority in favour of the proposition that the assignee of part only has privity of estate in the part of the leased property that has been assigned to him.

However that may be, by the mid 1920s there were two decisions, one in England and one in Ireland which had decided the question. The answer to the question was “No”. In Whitham v Bullock [1939] 2 KB 81 the Court of Appeal dealt with a case in which the assignee of part of the property comprised in a lease had paid the whole rent in order to stave off a threatened distress. He then sued the assignee of the other part for a contribution, which the Court of Appeal held that he was entitled to recover. In the course of his argument Mr Upjohn for the defendant submitted that on the severance of the term occasioned by the assignment the landlord ceased to be in a position to sue for the whole rent and could only sue the tenants of the severed parts for a proportion of the rent. The Court of Appeal did not have to decide that question; and did not. But they referred to authority which supported the proposition and then referred to the observation of Tindal CJ which I have quoted. They also referred to “the unquestionable fact” that the assignment of part of the land does not affect the landlord’s right to distrain on that part for the rent of the whole. Neither Dooner v Odlum nor United Dairies appears to have been cited in Whitham v Bullock which, in my judgment, diminishes the force of the court’s observations.

In my judgment the cases thus far establish the following propositions at common law:

If the assignee only has privity of estate as regards that part of the leased property that has been assigned to him, it must follow that the estate itself has been severed. That can be the only principle which would justify the conclusion reached by the Court of King’s Bench in Ireland and by Greer J that the obligations become separate.

I come now to Lester v Ridd. The issue in Lester v Ridd was whether the assignee of part of the leased property (which consisted of a house) was entitled to acquire the freehold under the Leasehold Reform Act 1967. The freeholder contended that he could not because the house was “comprised in an agricultural holding”; and thus excluded by section 1 (3) of the 1967 Act. The house had been part of the parcels demised by a lease granted in 1902. The entirety of the parcels consisted of 23 acres of land. In 1955 the term created by the lease passed to Alfred and William Burge. They were father and son; and farmed the land in partnership. On the dissolution of the partnership in 1963 the house and five acres of land were assigned to Alfred and the remaining 18 acres were assigned to William. The house and five acres ceased to be used for agricultural purposes in 1982; but the remaining 18 acres continued to be farmed.

The definition of an agricultural holding was contained in section 1 of the Agricultural Holdings Act 1986. It provided, so far as material:

“(1)

In this Act “agricultural holding” means the aggregate of the land (whether agricultural land or not) comprised in a contract of tenancy which is a contract for an agricultural tenancy.

(2)

For the purpose of this section, a contract of tenancy relating to any land is a contract for an agricultural tenancy if, having regard to - (a) the terms of the tenancy, (b) the actual or contemplated use of the land at the time of the conclusion of the contract and subsequently, and (c) any other relevant circumstances, the whole of the land comprised in the contract, subject to such exceptions only as do not substantially affect the character of the tenancy, is let for use as agricultural land.”

Thus the statutory focus of attention was on the contract of tenancy, rather than on the estate in land created by that contract or the status of the holder of the estate. Both Dillon and Slade LJJ gave reasoned judgments. Staughton LJ agreed with both. Dillon LJ began his discussion by saying (p. 437 F-G):

“One question to be considered is whether the effect of the partition, or of the partition and the subsequent assignment to the plaintiffs of their part of the land, is to create two separate tenancies of two separate holdings, each of which has to be looked at on its own. But if that is not the effect, it is still necessary, despite the partition, to look at the land comprised in the 1902 lease as a whole. If the land is looked at as a whole, the answer, in my judgment, must be … that the whole of the land, with an exception only which does not substantially affect the character of the tenancy, is still let for use as agricultural land. If the land comprised in the 1902 lease has to be looked at as a whole the plaintiffs must fail because, on that approach, the [house] assigned to them, of which they desire to have the freehold, is still comprised in an agricultural holding.”

The question whether two tenancies had been created was not strictly the statutory question. The statutory question was whether two contracts of tenancy had been created. If that is the question, then it must follow that no contract of tenancy could have been created unless the landlord was a party to the contract(s). However, Dillon LJ went on to consider the question that he had posed. In a passage quoted by Judge Dight he set out the effect of the assignment of part:

“The effect in law of the partition of the demised premises in 1963 by the assignment of part to A. J. Burge and the remainder to W. J. Burge for the residue then unexpired, in each case, of the term of the 1902 lease was, notwithstanding that the landlord did not concur in the partition to sever the covenants of the lease so as to follow the land. Thus after comparable assignments of parts to separate assignees an action on the covenant would lie against each assignee of part for not repairing his part: Stevenson v Lambard (1802) 2 East 575, 580, per Lord Ellenborough CJ. Moreover, established authority shows that under the covenant for payment of rent the landlord could only sue an assignee of part only of the premises for an apportioned part of the rent: see Gamon v Vernon (1678) 2 Lev 231 ; Hare v Cator (1778) 2 Cowp 766, a decision of Lord Mansfield, and Stevenson v Lambard. Some doubts as to these authorities were expressed by Tindal CJ in Curtis v Spitty (1835) 1 Bing NC 756, but he nonetheless followed the earlier authorities; his doubts are recorded in the judgment of this court in Whitham v Bullock [1939] 2 KB 81, but it was not necessary to resolve them. The law has continued to be stated in the text books on the subject as being that an assignee of part of the land cannot be sued for the whole of the rent, but only for a proportionate part thereof. However, the proportionate part which the landlord could recover from an assignee of part only of the land would be the part of the whole rent which the court thought fairly attributable to the part of the land in question, and not necessarily the part of the rent which the several assignees had agreed among themselves, without the concurrence of the landlord, to be attributable to that part of the land. More importantly, however, it is clear and undoubted law that after assignments of separate parts of the land demised to separate assignees, the landlord can still distrain upon any part for the rent which accrues due for the whole, because the rent for the whole is considered to become due out of each and every part of the land: Curtis v Spitty, 1 Bing NC 756, and Whitham v Bullock [1939] 2 KB 81.”

While it is true that the landlord can distrain on any part of the leased property for rent due, it is interesting to note that in Stevenson v Lambard Lord Ellenborough CJ was clear that in an action of replevin the obligation to pay rent was apportionable. I have already explained what replevin was (§ 16). In other words, the tenant could have his chattels back on paying an apportioned part of the rent into court pending resolution of the dispute with the landlord. If he had already paid his own apportioned rent to the landlord then it seems to me that at the end of any dispute with the landlord the tenant would have his money back. Thus the fact that the landlord could, in the first instance, distrain on any part of the land is not, to my mind, of great significance.

Dillon LJ went on to consider the earlier decision of this court in Jelley v Buckman [1974] QB 488. The question that arose in that case was whether the severance of the reversion had created two tenancies. The landlord relied on section 140 of the Law of Property Act 1925 as having that effect; but his argument was rejected. It is not difficult to see why a severance of the reversion would not, without more, amount to a severance of the term. But applied to a case like the present one, it is not argued that a severance of the term amounts to a severance of the freehold reversion. Dillon LJ pointed out (p. 439 E) that in the case of “severance of the leasehold interest” there is no relevant statutory provision equivalent to section 140. But that is because section 140 derives from the Grantees of Reversions Act 1540, whereas the law applicable to tenants’ obligations is a creation of the common law. However, what Dillon LJ seized on was the injustice to the tenant in Jelley v Buckman which the court was keen to avoid. By parity of reasoning he held that it would be unjust to the landlord in Lester v Ridd to have thrust upon him a separate tenancy of the house which carried with it the right to enfranchise. Thus he concluded that no “separate contract of tenancy” had come about by the assignment of part.

Slade LJ seems to me to have adopted a different approach more closely tied to what I have called the statutory question. He began by discussing what might have happened if the landlord had concurred in the apportionment of rent contained in the deed of partition and thought that that might have given rise to two contracts of tenancy by way of novation. But he made it clear (p. 441) that whether that would have been the result would have “depended on the manner and terms” of the landlord’s concurrence. In other words, Slade LJ was considering the case as one of contract. He pointed out that it had to be remembered that the statutory definition directed attention to the whole of the land comprised in the contract; and that so far as the landlord was concerned there had only been one contract, viz. the 1902 lease. Thus he concluded that the deed of partition did not have the effect of imposing on the landlord two new and distinct agricultural holdings with separate tenants of each holding and with all the other consequences attendant on the creation of two new distinct holdings.

In the course of his judgment Slade LJ did briefly consider the effect of an assignment of part of the leased property. He said (p. 442A-C):

“… an apportionment of rent effected without the landlord's consent on an assignment of part of the demised premises is not, at least in all respects, binding on the lessor. It does not affect the landlord's right to distrain on that part for the rent of the whole: see Whitham v Bullock [1939] 2 KB 81, 86, per Clauson L.J. On the authorities it is not entirely clear whether the landlord ceases to be in a position to sue any one except the original lessee (whom he can sue in contract) for the whole rent and can only sue the tenants of the severed parts in respect of a proportion of the rent. This court expressly left this question open in Whitham v Bullock. Nevertheless, I think it is clear that if the landlord can only sue the tenants of the severed parts in respect of a proportion of the rent, such proportion is a fair proportion to be determined by the court. It is not necessarily the proportion which the assignor and assignee may have agreed between themselves. The proportion thus agreed is not as such binding on the landlord.”

As I have said neither Dooner v Odlum nor United Dairies appears to have been cited in Whitham v Bullock. Nor was either of them cited in Lester v Ridd. Accordingly I do not consider that Lester v Ridd casts any doubt on the proposition that following a physical severance of the land comprised in a term of years, the tenant’s obligations are likewise severed; and are apportioned between the respective parts of the land. As Cherry LCJ pointed out in Dooner v Odlum (p. 427) the right to sue an assignee is an additional remedy given to the landlord by the common law, and does not deprive him of his contractual remedy against the original tenant. Thus the landlord “cannot complain if this additional remedy is not as complete as that which he stipulated for in his deed as against the lessee, and which he still retains.” Moreover if the landlord wishes to prevent an assignment of part, he has only to include a covenant to that effect in the original contract of tenancy. Mr Radevsky submitted that neither the covenants nor the leasehold estate could be severed or apportioned. He said that the landlord could sue either tenant for a breach of obligation committed on any part of the land originally comprised in the tenancy. Necessarily this entailed the submission that not only was Dillon LJ wrong in Lester v Ridd, but that Greer J and the Irish Court of King’s Bench were also wrong. In my judgment this submission runs counter to over 400 years of learning; and I reject it.

Accordingly, I conclude that at common law an assignment of part of the leased property by which the leased property is physically severed has the effect that the holder of each severed part has privity of estate with the landlord only as respects that severed part. In short, he is the tenant of that severed part only. At common law, therefore, I conclude that Mr Smith is the tenant of flats 1 and 2 only, and Mr Dennis is the tenant of flats 3 and 4 only. This is, in my judgment, entirely consistent with accepted legal parlance. As Nourse LJ put it in City of London Corporation v Fell (p. 604):

“To what, in ordinary legal parlance, do we refer when we speak of a “tenancy”? I think that we refer to a particular legal relationship between tenant and landlord under which land is held by the one of the other. A “tenant,” both by derivation and by usage, is someone who “holds” land of another, for which purpose it is immaterial whether he does so by contract or by estate. Although he may remain contractually liable to the landlord, an original tenant who has assigned the tenancy, equally with an assignee who has himself assigned, cannot properly be described as the tenant. He no longer holds the land. It is the assignee who now holds the land. It is he who has the tenancy.”

It follows in my judgment that if a person holds only part of the land, he is only tenant of that part.

This is not to cast any doubt on the result in Lester v Ridd. As I have said, the statutory question before the court was whether there were two contracts of tenancy. The decision that there was only one contract was, on the facts of that case, entirely correct. But of the two different routes to that conclusion I prefer that chosen by Slade LJ to that chosen by Dillon LJ. Whether the severance of the legal estate results in two separate tenancies is not a question that arises in the present case; and is one on which I express no opinion. I rather suspect that the common law would have regarded the question as irrelevant, although it may be of significance in interpreting statutory provisions. In such cases the answer to that question will depend on the context in which it is asked.

Does the 1993 Act mirror the position at common law? Would Mr Smith be regarded for the purposes of Chapter 1 as being (or as being among those constituting) the qualifying tenant of three or more flats? The answer to this question requires a consideration of some more of the definitions contained in the 1993 Act; and in particular those contained in section 101. Section 101 (1) says that “lease” and “tenancy” and related expressions are to be construed in accordance with section 101 (2). The other relevant parts of section 101 provide:

“(2)

In this Part “lease” and “tenancy” have the same meaning, and both expressions include (where the context so permits)—

(a)

a sub-lease or sub-tenancy, and

(b)

an agreement for a lease or tenancy (or for a sub-lease or sub-tenancy),

but do not include a tenancy at will or at sufferance; and the expressions “landlord” and “tenant” , and references to letting, to the grant of a lease or to covenants or the terms of a lease, shall be construed accordingly.

(3)

In this Part any reference (however expressed) to the lease held by a qualifying tenant of a flat is a reference to a lease held by him under which the demised premises consist of or include the flat (whether with or without one or more other flats).

(4)

Where two or more persons jointly constitute either the landlord or the tenant or qualifying tenant in relation to a lease of a flat, any reference in this Part to the landlord or to the tenant or qualifying tenant is (unless the context otherwise requires) a reference to both or all of the persons who jointly constitute the landlord or the tenant or qualifying tenant, as the case may require.”

The first point to make is that the 1993 Act uses “lease” and “tenancy” interchangeably. It is not, therefore, focussing on the written instrument by which the estate in land is created. Thus unlike the Agricultural Holdings Act 1986 the 1993 Act is not concerned with contract. Rather, in my judgment, it is concerned with the tenure (or status) of the holder of the leasehold estate. (The inclusion of agreements for lease in the definition also means that the 1993 Act is not exclusively concerned with legal estates, but that is irrelevant for present purposes). Accordingly in my judgment when sub-section (3) refers to “a lease held by him under which the demised premises consist of or include the flat” it refers to a tenancy by which the tenant in question holds an estate in land consisting of or including the flat. In his written submissions presented after the conclusion of the hearing at the request of the Master of the Rolls Mr Radevsky submitted that “lease” in section 101 (3) does not mean “leasehold interest”. In my judgment this submission overlooks section 101 (2). If “lease” does not mean “leasehold interest” what does it mean? It cannot mean the written instrument by which the leasehold interest was created because no assignee will hold that. It must mean the leasehold interest held by the assignee. For the reasons I have given at common law Mr Smith holds the leasehold interest in flats 1 and 2; and Mr Dennis holds the leasehold interest in flats 3 and 4. Second, in sub-section (4) which deals with joint tenants, the sub-section is, in my judgment, concerned with the position of persons jointly holding the same estate in the same land. Where the land in question has been physically separated and is severally held that sub-section has no application. Mr Radevsky submitted that section 101 (4) could cover the situation where the freehold was split between two or more persons. However, as Mr Jourdan QC pointed out the 1993 Act contains elaborate express provisions dealing with precisely that situation: see sections 9 (2A); 13 (2A) and Schedule 1 Part 1A. In effect one of several freeholders is selected to represent them all and conduct the claim. These provisions would be quite unnecessary if Mr Radevsky’s submission were correct.

I do not, therefore, find anything in the definitions in the 1993 Act which would displace the conclusion at common law that I have reached. Mr Radevsky also pointed to operational difficulties that he said would arise if Mr Smith were regarded as the tenant of flats 1 and 2 alone; and Mr Dennis were regarded as the tenant of flats 3 and 4 alone. The first of these was a perceived conflict between the right of the qualifying tenants to acquire the freehold and the potential rights of a business tenant of part of the property comprised in the lease. But as Mr Jourdan QC pointed out in reply the 1993 Act does not apply if the tenancy is a business tenancy, which it would be if it included property occupied by the tenant for business purposes. The second was the difficulty of applying section 14 (2) which applies where “the lease by virtue of which a participating tenant is a qualifying tenant” is assigned. Mr Radevsky pointed out that if only part of the tenancy is assigned, the section does not apply. The consequence would be that the assignee of part could not participate in the purchase. I am not convinced that this consequence would follow, since section 14 (3) allows a qualifying tenant of a flat to whom section 14 (2) does not apply to participate in the purchase with the consent of all the participating tenants. At any rate it seems to me that section 14 (3) contemplates that someone may be a qualifying tenant of a flat even if he is not the assignee of the whole of the property comprised in the original tenancy.

In addition in Howard de Walden Estates Ltd v Aggio [2008] UKHL 44 [2009] 1 AC 39 Lord Neuberger of Abbottsbury (with whom the other Law Lords agreed) said of the 1993 Act (§ 34):

“I accept that, as a matter of principle, it is legitimate to examine the operational provisions of a statute in order to decide whether they justify implying a restriction on the class of persons who can benefit from it, even though such a restriction cannot be gathered from the provisions which directly relate to the identification of such persons. However, it appears to me that it would normally only be right to imply such a restriction where it is plainly justified by the operational provisions, and where the nature of the restriction is clear.”

In my judgment the anomalies to which Mr Radevsky drew attention are not sufficiently compelling as to amount to an implied restriction.

It may be said that Parliament did not expressly contemplate the rather unusual factual situation that has arisen in this case. That may well be true. However, it is not uncommon for Parliament to fail to deal expressly with factual situations that arise; and in such cases the courts must interpret enactments in order to give effect to what Parliament’s intention must be taken to be. To give one example: for many decades Parliament did not provide expressly for joint tenants in statutes relating to security of tenure. The courts reached different answers to the question whether one of two joint tenants was entitled to security depending on the context and the statutory scheme under consideration. In the case of residential tenants the answer was “Yes” (Lloyd v Sadler [1978] QB 774). In the case of business tenants the answer was “No” (Jacobs v Chaudhuri [1968] 2 QB 470). Nowadays Parliament makes express provision for joint tenants, as the 1993 Act does.

In my judgment for the purposes of Chapter 1 Mr Smith would not be regarded as the tenant or among those constituting the tenants of flats 3 and 4. Conversely Mr Dennis would not be regarded as the tenant or among those constituting the tenants of flats 1 and 2. It follows that neither of them is excluded from being a qualifying tenant as the result of section 5 (5). Since they are both qualifying tenants, they are entitled in principle to exercise the right of collective enfranchisement.

I would allow the appeal and determine the preliminary issue in favour of Mr Smith and Mr Dennis.

I agree that this appeal should be allowed for the reasons given by Lewison LJ. It is clear from his pellucid analysis of the common law that Mr Smith and Mr Dennis must each be regarded, at common law, as tenants of only part of the whole leased property; in Mr Smith’s case flats 1 and 2 and in Mr Dennis’ case flats 3 and 4. They are so by reason of the assignment of a part of the leased property to each of them, which assignment results in the physical severance of the whole leased property.

The only doubt I have had is whether, given that status at common law, it automatically follows that each of them is, within section 5 of the 1993 Act, a “qualifying tenant of a flat under a long lease” so that, for the purposes of Chapter 1 of Part 1 of the 1993 Act, they are each “qualifying tenants” that can take advantage of the provisions of that Chapter. This raises a question of statutory interpretation. It might be argued that the wording of section 5, taken with the interpretation provisions in section 101(3) and (4) in particular, contemplated that the qualifying tenant had to hold “a lease” of the flat in question and that it was not enough that he was, at common law, a tenant of the flat by reason of the physical severance of the leased property resulting from the assignment of part of the leased property to Mr Smith and Mr Dennis respectively.

I strongly suspect that the Parliamentary draftsman did not have the present factual situation specifically in mind when settling on the wording of sections 5 and 101(2) to (4). However, I entirely agree with Lewison LJ’s analysis at [43] above. “Lease” and “tenancy” are expressly stated in section 101(2) to have the same meaning, so must be interchangeable. This makes it clear, as Lewison LJ states, that the 1993 Act is concerned with the status of the person. To ask: is he in the position of having a “tenancy” of the flat is to ask: does he have the status of one who holds an interest in that land from another? If, in section 101(3), the word “tenancy” is substituted for “lease”, then Mr Smith and Mr Dennis fit comfortably into the statutory wording. For the reasons Lewison LJ has explained, at common law they both hold “tenancies” under which the demised premises consist of or include the relevant flat (section 101(3)).

It must follow that both Mr Smith and Mr Dennis fall within the description of being tenants of a flat “under a long lease” for the purposes of section 5(1). The “long lease” in this case is that for the whole property created in 1926. They are “tenants” of their respective flats “under” that lease by reason of the common law analysis that Lewison LJ has so clearly expounded.

I agree with both judgments.