Clear Channel UK Ltd v Manchester City Council

In these proceedings the Claimant, Clear Channel UK Ltd (“Clear Channel”), seeks a declaration that it has a tenancy from the Defendant, Manchester City Council (“MCC”), of 13 sites in Manchester on which it has erected advertising stations (“the M Sites”).

By its amended Defence and Counterclaim, MCC claims that Clear Channel was granted licences, and not tenancies, in respect of the M Sites, and that those licences were terminated by letter dated 9 October 2003.

MCC further alleges that, if Clear Channel has a tenancy of any of the M Sites, such tenancy is not protected by Part II of the Landlord and Tenant Act 1954 (“the 1954 Act”) because Clear Channel has not, and does not, occupy any of those premises for the purposes of section 23 the 1954 Act.

Further, MCC counterclaims for a declaration that, apart from the 13 M Sites, Clear Channel has erected and maintained an advertising hoarding on a site at Chester Road, Manchester (the Chester Road Site”) pursuant to a licence and not a tenancy.

MCC also counterclaims damages for use of the Chester Road Site from 1 January 2004, and for use by Clear Channel of the M Sites from the date of termination of the alleged licence.

By its amended Reply and Defence to Counterclaim, Clear Channel claims that MCC leased the Chester Road Site to Clear Channel for a term of 5 years from 15 June 2002; alternatively, Clear Channel has been and remains an annual tenant of the Chester Road Site from 15 June 2002. It denies that its right to occupation and possession of the Chester Road Site has been properly determined.

Master Bowman ordered on 16 March 2004 that there was to be excluded from the trial, which has taken place before me, MCC’s Counterclaim for damages for use by Clear Channel of the M Sites and the Chester Road Site.

Clear Channel was previously known as More Group UK Ltd trading as More O’Ferrall. It carries on business in the construction and maintenance of advertising hoardings and the use of those hoardings to carry advertisements.

Towards the end of 1998 MCC, as part of its regeneration of Manchester’s city centre, began the process of identifying sites, owned by MCC, for the erection of advertising stations to promote the image of Manchester and to promote various significant events in the city.

MCC and Clear Channel entered into discussions for the erection and maintenance by Clear Channel of advertising stations in the shape of giant Ms on various sites around the city.

Clear Channel commissioned a number of designs. One particular M design was ultimately approved by MCC in September 1999.

In about July 2000 MCC and Clear Channel reached an agreement in principle for the construction and erection by Clear Channel of M advertising stations (“the Ms”) on several sites. In return for a profit-sharing agreement, Clear Channel would sell advertising space on the Ms, subject to MCC being provided with free or “subsidised faces” on the hoardings for its own purposes.

Clear Channel submitted planning applications, where required, in July and August 2000. Consent was obtained shortly afterwards.

On 5 September 2000 Clear Channel was granted a licence to enter MCC’s land in order to erect the Ms. Clear Channel began placing concrete bases on the M Sites at the beginning of September 2000. The Ms were then bolted to those bases.

While the Ms were under construction, drafts of a written agreement setting out the terms of Clear Channel’s use of the Sites were prepared. Under cover of a letter dated 2 October 2000 MCC enclosed a draft in a form which was, broadly speaking, agreed (“the October 2000 Draft”).

The October 2000 Draft related to 13 sites. It provided for the payment of “rent” equal to the greater of 60% of the net revenue (as defined) received by Clear Channel for each of those sites and £220,000 per annum.

The term was expressed to be for a period from the date of the agreement to 31 October 2002, subject to the other provisions of the agreement.

In November 2000 Clear Channel paid MCC £210,000, being the amount due to MCC under the October 2000 Draft for the period to 31 December 2001.

Subsequently, minor amendments to the October 2000 Draft were discussed between MCC’s employee, Ms Gaynor Corfe, a Fellow of the Institute of Legal Executives, and the in-house solicitor acting for Clear Channel, Ms Selina Emeny.

Under cover of a letter of 13 March 2001, Miss Corfe sent Ms Emeny a further draft agreement (“the March 2001 Draft Agreement”). In a letter dated 22 March 2001 Ms Emeny confirmed that draft was in an agreed form.

The March 2001 Draft Agreement, like the October 2000 Draft, specified 13 sites. A fourteenth site was added in May 2001, but removed in October 2002. More recently, two of the original sites have been vacated by Clear Channel. None of those changes affects the determination of the points of principle in issue in the trial.

Notwithstanding the March 2001 Draft Agreement was never executed, it is common ground that Clear Channel has used and maintained the Ms on the M Sites and paid “rent” on the terms of that document.

On 22 January 2002 Clear Channel paid MCC a further £200,000 for the period from 1 January 2002 to 31 December 2002.

In December 2002 MCC informed Clear Channel that it would be putting the M Sites out to tender for future advertising, and would be terminating the existing arrangements, but Clear Channel would be given the opportunity to tender for the new contract. Clear Channel objected, and claimed that it had a tenancy of the M Sites protected by Part II of the 1954 Act.

In February 2003 Clear Channel submitted a tender, without prejudice to its contentions. In June 2003 MCC informed Clear Channel that it was not successful in the tender, and that a new contract was to be awarded to Maiden Outdoor Advertising Ltd, one of Clear Channel’s competitors.

On 9 October 2003 MCC served notices to determine Clear Channel’s rights to occupy the M Sites under any contractual arrangement. MCC also served notices under the 1954 Act s. 25, without prejudice to its primary contention that no tenancies had been granted. Counternotices under Part II of the 1954 Act have been served by Clear Channel, which has commenced proceedings in the Manchester County Court for the grant of new tenancies. By agreement, those proceedings have been stayed pending the outcome of the trial before me.

So far as concerns the Chester Road Site, in February 2001 MCC entered into discussions with Clear Channel for the grant of rights to maintain an advertising station at that Site.

By letter dated 19 July 2001 (“the July 2001 Letter”) from Mr Christopher Sheppard, the head of MCC’s valuation and property services department, to Clear Channel, Mr Sheppard confirmed that he would be recommending acceptance of Clear Channel’s offer in respect of the Chester Road Site “on the basis of the … main terms” set out in that letter.

At the conclusion of that letter, Mr Sheppard asked Clear Channel to confirm that those terms were acceptable, whereupon he would seek final approval and would instruct MCC’s solicitors to complete the legal formalities.

No such confirmation was given.

The July 2001 Letter was headed “without prejudice” and “subject to contract”. There never was, in fact, a formal contract relating to the Chester Road Site signed or executed by both parties.

Clear Channel produced a one-off design for the Chester Road Site, for which it obtained planning permission on 13 December 2001.

By March 2002 the principal terms of the agreement concerning the Chester Road Site were agreed.

Clear Channel erected the advertising structure on the Chester Road Site in about June 2002, and thereafter used and maintained it.

Clear Channel paid MCC at the rate of £220,000 per annum for use of the Chester Road Site for the period up to 31 December 2003.

In about June 2003 MCC sent Clear Channel a draft lease in respect of the Chester Road Site (“the 2003 Draft Agreement”). It arrived without prior notice. It appears to be common ground that the 2003 Draft Agreement was never the subject of negotiation or discussion between the parties. It was never executed.

Various notices have been served by MCC to terminate Clear Channel’s rights in respect of the Chester Road Site. It is sufficient, for the purposes of this judgment, to refer to a letter from MCC dated 27 January 2004. That letter gave notice, expressed to terminate any right that Clear Channel might have to erect and maintain an advertising hoarding on the Chester Road Site, expiring a reasonable time after the notice and, in any event, by 16 April 2004; alternatively, if Clear Channel occupied the Chester Road Site as a tenant, giving common law notice to quit to determine any such tenancy on 15 June 2004 or the anniversary date of the creation of any such tenancy falling at least six months from the date of service of the notice on Clear Channel. Recently, on 15 November 2004, a notice under the 1954 Act s. 25 was served by MCC on Clear Channel in respect of the Chester Road Site expiring in June 2005.

The Ms and the advertising station at the Chester Road Site are substantial structures.

The Ms stand some 7 metres high, 6.4 metres wide and have a depth of one metre. The M structure is attached to a concrete base, which is at least one metre in depth. The two end pillars of the M structure are attached to a bolt cage at either end of the concrete base. The middle part of the M structure is attached to a nib protruding above the surface of the concrete, and which is itself attached to a bolt cage embedded in the concrete below ground level.

There is a large rectangular advertising panel attached to the upper part of the M. Electricity is supplied to the M. The electricity allows the panel to be illuminated, and also powers revolving struts within the panel, which enables continuously alternating advertisements to be carried on the M.

Although the Ms are substantial structures, it is clear that everything above the concrete slab can be removed with relative ease by undoing the bolts attaching the Ms to the concrete base.

The advertising station on the Chester Road Site is even more substantial than the Ms. It stands in the middle of a large roundabout. It splays out in two directions, and stands on three concrete bases. It is 20 metres high at its highest point. The concrete bases are approximately one metre deep. There is gravel hard standing around the structure. The entire structure covers a significant area of land within the roundabout.

Unlike the Ms, the tubular supports for the structure on the Chester Road Site are themselves set in the concrete bases.

So far as material to the issues I have to decide, the provisions of the October 2000 Draft and the March 2001 Draft Agreement are identical. For economy and simplicity, I shall refer only to the provisions of the March 2001 Draft Agreement.

In the March 2001 Draft Agreement MCC was defined as the “the City Council” and Clear Channel was defined as “the Contractor”.

Clause 2 of the March 2001 Draft Agreement contained, among others, the following further definitions:

“The Advertising Display means the advertisements and advertising structures including hoardings whether illuminated or otherwise to be erected on the Sites.

Commencement Date means the date of this Agreement.

The Holding means the complete holding of the Sites at any time during the Agreement.

The Minimum Guaranteed Net Rental (“MGNR”) means the sum of TWO HUNDRED AND TWENTY THOUSAND POUNDS (220,000.00) per annum.

Net Revenue means the revenue received by the Contractor for each Site for each year of the Term less deduction of VAT where applicable and the normal outdoor specialist fees and sales house commissions.

The Payments means the payments described in Clause 9 of this Agreement.

The Sites mean land and premises as specified in the Schedule which is owned by the City Council on which the Contractor is permitted to erect or maintain the Advertising Display under the provisions of this Agreement and shown on the location plans attached hereto.

The Term means period from and including the Commencement Date and ending on 31 October 2002 subject to the provisions of the Agreement.

The Approved Documents means the plans elevations sections specifications detailed drawings and other documents previously approved by the City Council in writing ...”

Notwithstanding that definition of “the Sites”, no location plans were attached to the March 2001 Draft Agreement. The Schedule to the March 2001 Draft Agreement contained a list of 13 addresses of a very general nature, such as “Cheetham Hill Road/Queens Road”, “Hulme Hall Lane/Oldham Road”, “Upper Brook Street” and so forth.

Other material provisions of the March 2001 Draft Agreement were as follows:

“3.

GRANT

3.1

In consideration of the Contractor making the Payments the City Council grants to the Contractor permission to erect and maintain the Advertising Display at the Sites for the Term subject to the provisions of this Agreement.”

“4.

THE HOLDING

4.1

The Holding shall form the complete holding of the Sites to be available for use by the Contractor for the purpose of this Agreement.”

“5.

VARIATION OF HOLDING”

5.1

The City Council may withdraw any Site from the Holding by giving 28 days notice to the Contractor for any reason and in such event the Contractor shall be required to reinstate the Site in accordance with Clause 8.14.”

“7.

THE CONTRACTOR’S OBLIGATIONS

THE Contractor shall:

Erection of The Advertising Display

7.1

To erect the Advertising Displays in material accordance with the Approved Documents.

Payment

7.2

To pay and indemnify the City Council against:-

7.2.1

the rent as calculated in accordance with Clause 9 hereof at the times and in the manner hereinafter appointed and to pay and discharge all rates and other outgoings which shall during the continuance of this Agreement be charged upon the sites and the Advertising Display as a result of the Contractors user thereof.

7.2.2

Value Added Tax (“V.A.T.”) which may from time to time be charged on any monies payable by the Contractor under this Agreement and (except to the extent that the City Council can reclaim it) on any payment by the City Council where the Contractor agrees to reimburse the City Council.

…..

Annual Management Charge

7.4

For each and every Site pay the annual management charge to be levied for the continuing administration of this Agreement Such payment to be 2% of the MGNR.

…..

Full Market Prices

7.6

In respect of the exclusive advertising rights to use their best endeavours to sell and obtain the full market price for each and every Site.

…..

Construction and installation

7.9.1

Take each and every Site in its existing condition and bring it into line with the City Council specification and approval (such approval not to be unreasonably withheld or delayed). If an Advertising Display requires replacement for whatever reason the Contractor shall pay for its replacement and shall undertake the work in a manner satisfactory to the Authorised Officer.

7.9.2

bear all costs connected with the laying out installation and maintenance of each and every Site and any Advertising Display including (if the Advertising Display is illuminated) the installation of a separate electric meter for supplying electric current to illuminate the Advertising Display (all of which works and acts shall be carried out and done to the reasonable satisfaction of the Authorised Officer) and shall pay for all electric current consumed.

Nuisance

7.10

Not use or permit to be used the whole or any part of each and every Site or any Advertising Display for any purpose which shall or may be or grow to be a public or private nuisance.

Reinstatement on Termination

7.11

On the termination of the permission granted in respect of any Site in accordance with the provisions of this Agreement if so required by the City Council immediately remove from the Site the Advertising Display and all other works whatsoever and shall make good any damage caused by the removal and in default of such removal and restoration being effected within 5 days of the termination of the permission granted the City Council shall be entitled to do so at the Contractor’s expense and the City Council shall without prejudice to any other rights they may possess under this Agreement have a lien upon the Advertising Display until all sums due from the Contractor to the City Council under this Agreement have been paid.

Maintenance

7.12.1

During the continuance of the Agreement at its own expense maintain repair and keep in a clean and tidy condition and free from litter each and every Site and the Advertising Display to the reasonable satisfaction of the City Council in addition to complying with the standard conditions required by the Town and Country Planning (Control of Advertisements) Regulations 1992 or any amendment of or regulations replacing those regulations for the time being in force.

7.12.2

Maintain any paving, landscaping, fencing or screening required by the Advertising Display.

…..

7.12.4

Not to make any material structural alteration to the Advertising Display without the prior approval in writing of the City Council.

…..

Indemnity

7.15

Indemnify the City Council against all claims actions demands losses injuries costs charges expenses and liabilities whatsoever which the City Council may incur or which may arise by reason of a breach by the contractor of their obligation contained herein unless occasioned by any act negligence or default of the City Council its servants agents or employees.

Insurance

7.16

On the erection of any Advertising display to insure and keep the Advertising Display insured against third party risks.

…..

Not to impede Officers etc.

7.18

Not to impede or obstruct in any way the officers servants or agents of the City Council in the exercise by them of the City Council’s interests in each and every Site and in particular give all reasonable assistance and facilities to the officers servants or agents in or about their entry into the Site in that connection.

Calculation of rent

9.1

From and including the commencement Date to the expiry or sooner determination of the Term the rent due and payable in respect of the Advertising Display shall be equal to:-

9.1.1

60% of the Net Revenue received by the Contractor for each of the Sites or

9.1.2

the Minimum Guaranteed Net Rental

(Whichever shall be the greater)

9.2

On the date of this Agreement and the beginning of each anniversary of the Term (and proportionately for any period of less than a year) to pay to the City Council the Minimum Guaranteed Net Rental.

…..

10.

ADVERTISING DISPLAY NOT FIXTURE

Each Advertising Display shall remain at all times the property of the contractor free from any claim or right of the City Council except as otherwise provided by this Agreement.

11.

ADVERTISING BY CITY COUNCIL

THE Contractor shall:

11.1

make available to the City Council at any time during the Term on any of the sites as identified by the City Council eight advertising faces for its own use such faces to be made available at no cost to the City Council subject to the Council giving to the Contractor three months notice of its intention to use the Sites

11.2

make available to the City council the listed panels without agency or commission fees amounting to a 20% discount.

12.

TERMINATION BY CITY COUNCIL

12.1

The City Council shall be entitled to terminate this Agreement by giving 14 days written notice:

12.1.1

if the Payments remain unpaid for 28 days after the same shall have become due; or

12.1.2

if the contractor shall default in performing any stipulation or agreement herein contained with due diligence or in a proper skilful efficient and professional manner or to the entire satisfaction of the Authorised Officer; or

12.1.3

shall enter into liquidation (except for the purpose of reconstruction) or shall do any other proceeding in law having effects or results of or similar to those of bankruptcy.

13.

TERMINATION BY CONTRACTOR

13.1

Where the whole or any part of the Advertisement Display at a Site is obscured or rendered impossible from any cause or through circumstances outside the control of the Contractor so that the Contractor is prevented from enjoying the full benefit of the right granted then the Contractor may elect either:

(i)

to withdraw the Site from the Holding by giving 28 days notice in writing to the City Council to expire on any day; or

(ii)

with the consent of the City Council to reduce the MGNR for the Site in proportion to the degree of such interference during such time as such interference shall last.

14.

NO TENANCY CONFERRED

14.1

This Agreement shall constitute a licence in respect of each Site and confers no tenancy on the Contractor and possession of each Site is retained by the City Council subject however to the rights and obligations created by this Agreement.

14.2

Pursuant to the authorisation by an order of the Manchester County Court made on the 2000 (case number ) under the provisions of the Landlord and Tenant Act 1954 Section 38(4) (as amended by the Law of Property Act 1969 Section 5) the parties agree that the provisions of Sections 24-28 inclusive of the Landlord and Tenant Act 1954 should be excluded in relation to this Agreement.

15.

NO ASSIGNMENT OR SUB-CONTRACTING

The Contractor shall not assign or sub-contract any of its rights or duties under this Agreement without the consent in writing of the City Council save that the Contractor can assign this Agreement to any company within the same group of companies as the Contractor without consent.

…..

17.

COMPENSATION EXCLUDED

17.1

It is agreed and declared for the avoidance of doubt that if the City Council requires possession of any Site and withdraws the Site from the Holding the Contractor shall not be entitled to any compensation in respect of the loss of the Site save that where possession is required within six months from the date a site is added to the Holding or the Advertising Display is erected then the Council shall refund to the Contractor the cost of the erection of the Advertising Display and where possible offer an alternative site of equivalent advertising quality.

…..

24

. HEADINGS

Headings contained in this Agreement are for reference purposes only and should not be incorporated into this Agreement and shall not be deemed to be any indication of the meaning of the clauses to which they relate.”

The “main terms” set out in the July 2001 Letter, which Mr Sheppard said in the Letter were to be the basis of his recommendation that Clear Channel’s offer in respect of the Chester Road Site be accepted, were as follows:

“1.

More O’Ferrall will be responsible for obtaining all necessary consents and approval required including planning permission in respect of the proposed design which will incorporate 4 x 96 back illuminated units within the overall structure.

2.

The rental will be £200,000 p.a.

3.

The term of the agreement will be 5 years.

4.

More O’Ferrall will pay a lump sum figure of £500,000 (which represents the first 2½ years of the rental for the 5 year term) up front from the date upon which the structure is erected and advertising is posted upon it. After the first 2½ years the remaining rental will be payable quarterly in advance in the normal manner.

5.

(a) In the first year of the contract the 96 sheet which faces traffic coming into the City along and closest to Chester Road together with the adjacent 96 sheet will be available for the Councils usage free of charge for the 2 weeks prior to the Commonwealth Games and the 2 weeks of the Games themselves.

b)

One 96 sheet (facing traffic coming into the City along Chester Road) will be available to the Council free of charge for eight weeks during each of the remaining 4 years of the contract.

6.

The Commonwealth Games sponsors will get a 10% reduction on the cost of sheetage when purchasing direct from More O’Ferrall.

7.

At the termination of the contract the structure together with the back-illuminated units will become the property of the City Council.

8.

More O’Ferrall will indemnify the City Council and its officers, officials or representatives against all action, claims, loss, damage, expenses or liability whatsoever caused either director or indirectly by its use of the said property.

9.

More O’Ferrall will be responsible for the payment of rates and all other outgoings.

10.

More O’Ferrall will maintain the whole of the structure and equipment, other works and services, together with all additions, improvements and alterations thereto in good and substantial repair and condition and insure the same to the full replacement value thereof at all times.

11.

Access to the site for the purpose of the construction and maintenance thereafter will be subject to the approval of the City Council.

12.

More O’Ferrall will not assign sublet or part with possession of the structure. This wall of cause not preclude normal advertising lettings of the hoarding themselves.

13.

More O’Ferrall will be responsible for the City Council’s legal costs and surveyors fees in connection with the Agreement. Surveyors fees to amount to £3000.

14.

More O’Ferrall will sign a formal Agreement as provided for above to be prepared by the City Solicitor which will contain such other terms, clauses and conditions as may be considered appropriate.”

In the 2003 Draft Agreement relating to the Chester Road Site MCC was defined as “the Lessor” and Clear Channel was defined as “the Lessee”.

The 2003 Draft Agreement contained, among other things, the following further definitions:

“1.2

“the Lessor” includes the persons for the time being entitled to the reversion expectant on the determination of the term hereby granted

1.3

“the Lessee” includes the persons deriving title under the Lessee

1.4

“the Demised Premises” means the premises described in the Schedule hereto

1.5

“the Term” means 5 years from and including the 15^th June 2002

1.6

“Rent Commencement Date” means the 15^th day of June 2002

1.7

“the Rent” means the sum of Two Hundred and Twenty Thousand Pounds per annum (£220,000).”

Clause 2 of the 2003 Draft Agreement was as follows.

“2.0

Demise

The Lessor hereby demises to the Lessee the Demised Premises TO HOLD the Demised Premises to the Lessee for the Term SUBJECT to the Rights YIELDING AND PAYING to the Lessor from the Rent Commencement Date the Rent such Rent to be paid by equal quarterly payments in advance on the usual quarter days in every year and proportionately for any period of less than a year the first such payment to be paid on the date of this Lease.”

Clause 3 contained “covenants” by the “Lessee”, including a covenant (in clause 3.4) “Not to use the Demised Premises for any other purpose than as an advertising display”.

Clause 4.4 provided as follows:

“The advertising hoarding and any wires cables electrical or other equipment the Lessee may install is and shall remain at all times the Lessee’s property and only removable by the Lessee.”

Clause 10 provided as follows:

“Exclusion of Landlord and Tenant Act 1954

PURSUANT to the authorisation by an Order of the Manchester County Court made on the day of 2003 (Case Number ) under the provisions of the Landlord and Tenant Act 1954 Section 38(4) (as amended by the Law of Property Act 1969, Section 5) the parties agree that the provisions of Section 24-28 inclusive of the Landlord and Tenant Act 1954 shall be excluded in relation to the tenancy created by this Lease.”

Witness statements were made, on behalf of Clear Channel, by Geraldine Griffiths, who worked for Clear Channel from October 1997 to July 2000 and was involved in the Ms project between 1998 and July 2000; Andrew Watson, who was employed by Clear Channel as Operations Manager between 1998 and 2003 and became involved in the Ms project when Ms Griffiths left Clear Channel in July 2000; James Carter, who has been the Director of the Regions for Clear Channel’s Billboards division (“the Billboards Division”) (specialising in 48 sheet and 96 sheet outdoor advertising on billboards) since July 2000; Geoff O’Brien, who was formerly an Operations Executive for Clear Channel and has been the Northern Operations Manager of the Billboards Division since 2003; and Jonathan Lewis, who has been the managing director of the Billboards Division since early 2000. All those witnesses gave oral evidence at the trial.

Witness statements, on behalf of MCC, were made by Ms Corfe, Anthony Houghton, a valuer with the Valuation and Property Services Department of MCC, and Mr Sheppard.

Mr Houghton and Mr Sheppard gave oral evidence at the trial. There was no challenge to the evidence in Ms Corfe’s witness statement, and so she was not required to attend to give oral evidence.

At the request of both sides, I visited some of the M Sites and the Chester Road Site before the beginning of the trial.

It is common ground between the parties that whether or not Clear Channel’s use of the M Sites and the Chester Road Site is referable to the grant of a licence or the grant of a tenancy does not depend upon the labels by which the parties have described their relationship in any document, but on the substantive rights and obligations which it was intended should be conferred and imposed on Clear Channel. As Jenkins LJ said in Addiscombe Garden Estates Ltd v Crabbe [1958] 1QB 513, at p. 522:

“The whole of the document must be looked at; and if, after it has been examined, the right conclusion appears to be that, whatever label may have been attached to it, it in fact conferred and imposed on the grantee in substance the rights and obligations of a tenant, and on the grantor in substance the rights and obligations of a landlord, then it must be given the appropriate effect, that is to say, it must be treated as a tenancy agreement as distinct from a mere licence.”

The law in this area was fully reviewed by Lord Templeman in Street v Mountford [1985] AC 809. In his speech, with which all the other members of the Judicial Committee agreed, he said at pp. 819 and 821 as follows:

“Both parties enjoyed freedom to contract or not to contract and both parties exercised that freedom by contracting on the terms set forth in the written agreement and on no other terms. But the consequences in law of the agreement, once concluded, can only be determined by consideration of the effect of the agreement. If the agreement satisfied all the requirements of a tenancy, then the agreement produced a tenancy and the parties cannot alter the effect of the agreement by insisting that they only created a licence. The manufacture of a five-pronged implement for manual digging results in a fork even if the manufacturer, unfamiliar with the English language, insists that he intended to make and has made a spade.”

…..

“Parties cannot turn a tenancy into a licence merely by calling it one. The circumstances and the conduct of the parties show that what was intended was that the occupier should be granted exclusive possession at a rent for a term with a corresponding interest in the land which created a tenancy.”

As appears from that abstract, and elsewhere in Lord Templeman’s speech, the usual starting point, in a dispute as to whether the grantee was intended to be granted a licence or a tenancy, is to ascertain whether the intention was to grant exclusive possession for a term at a rent. If so, then, save where the right to exclusive possession is referable to a legal relationship other than a tenancy, a tenancy will have been created, whether or not the parties themselves so described it. As Lord Templeman said, at pp. 826-827:

“My Lords, the only intention which is relevant is the intention demonstrated by the agreement to grant exclusive possession for a term at a rent. Sometimes it may be difficult to discover whether, on the true construction of an agreement, exclusive possession is conferred. Sometimes it may appear from the surrounding circumstances that there was no intention to create legal relationships. Sometimes it may appear from the surrounding circumstances that the right to exclusive possession is referable to a legal relationship other than a tenancy. Legal relationships to which the grant of exclusive possession might be referable and which would or might negative the grant of an estate or interest in the land include occupancy under a contract for the sale of the land, occupancy pursuant to a contract of employment or occupancy referable to the holding of an office. But where as in the present case the only circumstances are that residential accommodation is offered and accepted with exclusive possession for a term at a rent, the result is a tenancy.”

Although Street v Mountford was a case concerning residential premises, it is not in dispute between the parties that the same principles apply to business premises.

Clear Channel’s claims were developed and refined by its counsel, Mr John McGhee QC, during the course of the trial. The principal elements of its case, so far as concerns the M Sites, may be summarised as follows.

Mr McGhee submitted that, by virtue of the allegations in paragraphs 1-3 of the re-amended Particulars of Claim, and the admission contained in paragraph 3 of the amended Defence, it is common ground between the parties that MCC agreed to permit Clear Channel to use the M Sites to erect and maintain advertising displays on the Sites on the terms of the March 2001 Draft Agreement and for a term originally expiring on 31 October 2002 (being the termination date specified in the March 2001 Draft Agreement).

The terms of the March 2001 Draft Agreement, and other admissible evidence, show, Mr McGhee submitted, that the intention of the parties was that Clear Channel should enjoy exclusive possession, and hence a tenancy, of the area of each of the M Sites occupied by the concrete base of each M.

So far as concerns the location and extent of the areas demised, Clear Channel relies upon the following. First, Clear Channel relies upon the planning applications which it made for consent under the Town & Country Planning Act 1990 and the Town & Country Planning (Control of Advertisements) Regulations 1992 in respect of the M Sites. Attached to each of the planning applications was a plan showing the intended location of the Ms. Second, Mr Watson gave evidence that, in about August 2000, he visited each of the agreed locations with Mr Houghton, and they discussed and agreed the position of each M. His evidence was that he marked out on the ground the agreed position of each of the concrete bases with spray paint. Third, Mr McGhee submitted that the terms of the March 2001 Draft Agreement indicate that, although no location plans were attached to that document, the parties had in mind that the Sites would be the areas delineated by the concrete bases. In this connection, he relied particularly on the provisions of clauses 7.9.1, 7.9.2, 7.10 and 7.12.1.

In relation to the concrete bases and the structure of the Ms above them, Mr McGhee submitted that Clear Channel was intended to enjoy, and did in fact enjoy, exclusive possession.

In this connection, he referred to J A Pye (Oxford) Ltd v Graham [2003] 1 AC 419. In that case the claimant brought possession proceedings against the defendants in respect of land used by the defendants for farming. The defendants successfully defended the proceedings on the basis that the claimant’s title had been extinguished by the defendants’ adverse possession. Lord Browne-Wilkinson, with whose speech the other members of the Judicial Committee agreed, said, at p. 435, that there are two elements necessary for legal possession: (1) a sufficient degree of physical custody and control (“factual possession”); and (2) an intention to exercise such custody and control on one’s own behalf and for one’s own benefit (“intention to possess”).

In relation to factual possession, Lord Browne-Wilkinson cited with approval the following passage in the judgment of Slade J in Powell v McFarlane (1977) 38 P&CR 452, at pp. 470-471:

“(3)

Factual possession signifies an appropriate degree of physical control. It must be a single and [exclusive] possession, though there can be a single possession exercised by or on behalf of several persons jointly. Thus an owner of land and a person intruding on that land without his consent cannot both be in possession of the land at the same time. The question what acts constitute a sufficient degree of exclusive physical control must depend on the circumstances, in particular the nature of the land and the manner in which land of that nature is commonly used or enjoyed…Everything must depend on the particular circumstances, but broadly, I think what must be shown as constituting factual possession is that the alleged possessor has been dealing with the land in question as an occupying owner might have been expected to deal with it and that no-one else has done so.”

Accordingly, Mr McGhee submitted, acts of possession must be judged by reference to the nature of the land in question and the manner in which it would usually be enjoyed.

Mr McGhee emphasised that the Ms are substantial structures, the base of each of them being concrete sunk into and forming part of the land, and the structure above the concrete being a significant structure occupying an substantial volume of space. He emphasised that the Ms are used continually by Clear Channel for carrying advertisements; those advertisements are changed about every two weeks; Clear Channel employs electrical and mechanical engineers to maintain the Ms; and Clear Channel occasionally employs specialist sub-contractors to clean the Ms (last done in about July 2002). Mr O’Brian’s evidence was that he inspects the Ms about once a week, usually by way of a visual check from his car, but sometimes getting out of his car and walking to the M itself.

Those acts of control and use, Mr McGhee submitted, satisfy the test of “factual possession” approved and applied in the Pye case.

Mr McGhee further submitted that the March 2001 Draft Agreement itself contained indications of an intention to grant exclusive possession. In this connection, he said that the definitions and provisions as to “the term”, “the rent”, user, compliance with planning requirements, assignment, maintenance and repair, and termination by MCC in the events specified in clause 12, are all of a kind usually to be expected in a lease. In addition, he relied on the right of Clear Channel to place fencing around the Ms pursuant to clause 7.12.2, and also the absence of any right reserved to MCC to enter the Sites. He submitted that clause 17.1 is a clear indication that possession was granted of each of the M Sites to Clear Channel. He further submitted that the presence of clause 14.2 is only explicable on the basis of the grant of a tenancy.

In the light of all of those matters, Mr McGhee submitted that, in accordance with the reasoning in Street v Mountford, the provisions of clause 14.1 of the March 2001 Draft Agreement are to be ignored, and the Court should declare that there was granted by MCC to Clear Channel a tenancy of each of the M Sites for a term ending, initially, on 31 October 2002, which was extended to 21 December 2002 by the payment of rent for a period ending on that date.

Notwithstanding the skill with which Mr McGhee presented the case of Clear Channel as to the M Sites, I have no hesitation in rejecting it.

As I have said, the starting point of Clear Channel’s case is the allegation in the amended Particulars of Claim, accepted in the amended Defence, that Clear Channel was granted rights to use the M Sites on the terms of the March 2001 Draft Agreement.

It is clear, in my judgment, that “the Sites” mentioned in the 2001 Draft Agreement were not the areas of the concrete bases of the Ms, but larger undefined areas of land owned by MCC in which the concrete bases were placed. As I have said, there were no plans attached to the March 2001 Draft Agreement. There is no evidence that there were in existence, at the date the March 2001 Draft Agreement was agreed in principle, any plans identifying the precise location of the concrete bases of the Ms. The plans attached to the planning applications, on which Clear Channel relies, were drawn before all the concrete bases were constructed or their precise location agreed. In the words of Ms Griffiths, in cross-examination, they were “for identification only”.

“The Sites” specified in the March 2001 Draft Agreement are expressly identified in that document only by reference to its Schedule. As I have said, the Schedule contains only general addresses, and not the specific locations of the concrete bases of the Ms.

Further, I reject Mr McGhee’s submission that the provisions of the March 2001 Draft Agreement, particularly clauses 7.9.1, 7.9.2, 7.10 and 7.12.1, indicate that the Sites were the actual concrete bases of the Ms. Each of those clauses refers both to “every Site” and to the “Advertising Display”. Mr McGhee accepted that the definition of “the Advertising Display in clause 2 of the March 2001 Draft Agreement included the concrete base. Unless the parties intended unnecessary duplication, the “Site” mentioned in each of clauses 7.9.1., 7.9.2, 7.10 and 7.12.1 must have been intended to refer to something other than the “Advertising Display”, including its concrete base. Mr McGhee speculated that the reason for the mention of both the “Site” and the “Advertising Display” in each of those clauses was the belief of the parties, as shown by clause 10, that the Ms always belonged to Clear Channel. That, however, is pure speculation, unsupported by any other admissible evidence.

By contrast, giving to “the Site” in those clauses the meaning of the wider area of land on which each of the Ms was constructed, and giving to “the Advertising Display” the meaning expressly stated in clause 2 of the March 2001 Draft Agreement, not only avoids unnecessary repetition in the clauses to which Mr McGhee has referred, but makes perfect sense of clause 3.1, which grants Clear Channel “permission to erect and maintain the Advertising Display at the Sites”.

Furthermore, it is telling, in my judgment, that the March 2001 Draft Agreement contains no express grant of any easement of way to and from “the Sites”. Mr McGhee submitted that an easement of necessity would be implied. The omission of an express right of way to and from the Sites, for the purpose of erecting, maintaining, repairing and removing the Ms, would be an obvious and very surprising error, and very poor drafting, if the area of any demise was intended to be limited to the concrete bases of the Ms. The March 2001 Draft Agreement was negotiated over a period of time by Clear Channel’s own solicitor, and there has been no suggestion, either by way of submission or in the evidence, that the solicitor would have been likely to have overlooked a point of such obvious importance to Clear Channel.

On the other hand, there is no problem of access to “the Sites” if that expression means the wider area of MCC’s land under and surrounding the Ms. Clause 3.1 of the March 2001 Draft Agreement gave express permission to Clear Channel to come on to the Sites for the purpose of erecting and maintaining the Ms.

Mr McGhee sought to dispel part of the force of this point, which was skilfully developed by Mr Jonathan Brock QC, for MCC, by pointing out that the 2003 Draft Agreement, in respect of the Chester Road Site, did not include an easement of access, even though that document was expressly drafted in the language of a tenancy agreement and identified the actual site of the advertising station as the area of the demise. As I have mentioned, however, unlike the March 2001 Draft Agreement, the 2003 Draft Agreement was never the subject of negotiation or comment by Clear Channel.

Clear Channel is not assisted by the evidence of Mr Watson that, before the 2001 Draft Agreement, the precise location of the concrete bases of the Ms was discussed and agreed with Mr Houghton of MCC, and then marked out on the ground by Mr Watson with spray paint. That process of identifying the precise location of each M is perfectly consistent with the grant of a licence over a wider area than the concrete base itself. Furthermore, Clear Channel relies upon the provisions of the March 2001 Draft Agreement as governing the terms on which it was permitted to make use of “the Sites”; but that document does not contain any express provision for a process of discussing and agreeing the precise location of the demise in the manner in which Mr Watson described in his evidence.

Further, clause 7.18 of the March 2001 Draft Agreement makes little practical sense if “the Site” is confined to the concrete base of the M and the structure above it. It makes perfect practical sense, however, if “the Site” is a wider area of land on which the M was, or was to be, constructed.

If “the Sites” specified in the March 2001 Draft Agreement are undefined areas of land owned by MCC under and surrounding the Ms, it is clear that there was no intention to grant, and there never was a grant, of exclusive possession to Clear Channel. The contrary has not been argued.

For those reasons, I dismiss the claim by Clear Channel in respect of the M Sites.

For the sake of completeness, and in deference to the arguments before me, I would add that, even if “the Sites” specified in the March 2001 Draft Agreement were confined to areas comprising the concrete bases of the Ms, I would still have held that there was no intention to grant exclusive possession of them to Clear Channel.

I do not accept Mr McGhee’s submission that the terms of the March 2001 Draft Agreement are more consistent with the grant of a tenancy than the grant of a licence. In my judgment, on the contrary, the provisions of the March 2001 Draft Agreement point strongly against an intention to grant Clear Channel exclusive possession, and hence a tenancy. I accept that the definition of “the Term”, and the provisions as to “rent”, user, compliance with planning requirements, assignment, maintenance and repair, fencing, and termination by MCC in accordance with clause 12, and also clause 17.1, are consistent with the grant of a tenancy. None of them, however, is inconsistent with the grant of a licence. The provisions of clause 17.1, for example, which exclude the right to compensation “if the City Council requires possession of any Site and withdraws the Site from the Holding”, is perfectly consistent with the grant of a licence if “possession” means “vacant possession” in that clause.

Several provisions of the March 2001 Draft Agreement point markedly in favour of the grant of a licence. Clause 3.1, which states precisely what it was that was intended to be granted to Clear Channel and is at the very core of the document (“permission to erect and maintain the Advertising Display at the Sites”), is expressed in the language of permissive use to place something on another’s land, and not as the grant of a proprietary interest in, and exclusive possession of, land.

That inference as to the parties’ intentions is supported by clause 10 of the Agreement (“Each Advertising Display shall remain at all times [my emphasis] the property of [Clear Channel]”). Such language indicates that, in the mind of the parties, what was being granted was a right to place and maintain on MCC’s land something which was, and always remained, Clear Channel’s personal property. That inference is unaffected by the conclusion that, as Mr McGhee submitted, the parties may have been mistaken in law in treating the whole of the M as a chattel, including the concrete base which was embedded in the ground.

As I have said earlier, the provisions of the March 2001 Draft Agreement indicate that the parties regarded “the Advertising Display” as being something different from “the Site”.

The uniform contractual treatment of 13 different “Sites”, which were unconnected and geographically wide apart, as one “Holding” and in a single document, would be a most unusual and unorthodox way of granting a tenancy in respect of each of them. It is much more consistent with a purely commercial agreement based on contract.

Mr Brock submitted that clause 7.2.2, which obliges Clear Channel to pay VAT “which may from time to time be charged on any monies payable” by Clear Channel under the March 2001 Draft Agreement, is unusually worded for a tenancy. I agree. If it is intended that the grantor of a tenancy should be able to charge VAT on the rent reserved, that would normally be given effect by reference to an election by the landlord to waive exemption from VAT. Mr McGhee acknowledged that point, but sought to meet it by drawing attention to the fact that clause 3.2.2 of the 2003 Draft Agreement is, for practical purposes, the same as clause 7.2.2 of the March 2001 Draft Agreement. As I have pointed out earlier, however, unlike the March 2001 Draft Agreement, the 2003 Draft Agreement was never discussed or negotiated between the lawyers for each of the parties. If they had done so, it could reasonably be expected that they would have noted the absence of any reference to the right of MCC to elect to waive exemption from VAT.

Mr Brock submitted, and I agree, that clause 7.18 is a clear pointer against the intention to grant Clear Channel exclusive possession and a tenancy. As he observed, a comparable provision in a lease would be expressed in the form of a reservation to the landlord of a right of re-entry: in other words, it would be expressed in a directly contrary way to clause 7.18 (which imposes an obligation on the grantee rather than conferring a right on MCC).

Clause 7.2.1 obliges Clear Channel to pay rent calculated in accordance with clause 9. The rent specified in clause 9.1 is payable “in respect of the Advertising Display”. There is no reference whatever to an obligation to pay rent in respect of “the Site”. This is in marked contrast to many of the other provisions of the March 2001 Draft Agreement which refer to both the Sites and the Advertising Displays. Accordingly, (save in so far as, technically, all or any part of the M formed part of the land as a fixture) the March 2001 Draft Agreement did not reserve any rent in respect of the land itself.

Mr McGhee relied, as I said, on the provisions of clause 15 as an indicator of a tenancy. I do not agree. The prohibition on assignment of Clear Channel’s rights or duties under the March 2001 Draft Agreement is equally consistent with the grant of a licence. The prohibition on sub-contracting its rights or duties is more consistent with the grant of a licence. In the case of a tenancy, the prohibition would have been against sub-letting.

Further, in relation to all the provisions to which I have referred, it is to be borne in mind that the parties to the March 2001 Draft Agreement were not of unequal bargaining power. The Agreement was negotiated between, and agreed in principle by, two powerful and experienced corporate bodies, advised by lawyers. Singly, and taken together, the provisions negotiated and agreed between the parties, and incorporated in the March 2001 Draft Agreement, point clearly in favour of the grant of a licence, and against any intention to grant exclusive possession and a tenancy.

Mr Brock, in the course of his submissions, referred to and relied upon many other provisions in the March 2001 Draft Agreement as indicating the grant of a licence rather than a tenancy. I do not, however, find those other provisions a helpful indicator of the intentions of the parties on this aspect.

Mr Brock also relied upon the design and construction of the Ms. In particular, he emphasised that there is nothing physically to prevent anyone from walking through the Ms and over the concrete bases. In this connection, he drew attention to evidence that some of the Ms have been vandalised. I do not regard the design and construction of the Ms, or the fact that some have been vandalised in the past, as clear or helpful pointers in favour of, or against, an intention to grant exclusive possession and a tenancy to Clear Channel.

Mr Brock also submitted that, whatever right Clear Channel might have under the March 2001 Draft Agreement to fence each of the Ms, it could never have been intended, in fact, that they should be fenced since that would be contrary to the intention that the Ms should be unobscured. The Ms appear to be located in locations, and on areas of land, on which it is unlikely that the general public, or any particular sector of it, might be expected to walk. There is, in fact, no evidence that anyone, other than Clear Channel and its agents and independent contractors have ever walked across the concrete bases of the Ms. I see no basis for inferring, merely by reason of the nature of the structure of the Ms and the absence of any fencing enclosing them, that it is inherently unlikely that the parties intended to grant Clear Channel exclusive possession and a tenancy.

Mr Brock also referred me to six reported decisions, in which the court has considered the nature of the rights granted to erect advertising hoardings. He relied on the fact that four of those cases were decisions that a licence, and not a tenancy, was granted. Those six cases were Taylor, Garnett, Evans & Co v The Overseers of the Poor of Pendleton [1887] 19 QBD 288, Wilson v Tavener [1901] 1 Ch 579, Provincial Bill Posting Co v Low Moor Iron Co [1909] 2 KB 344, King v David Allen & Sons, Billposting, Ltd [1916] 2 AC 54, Kewal Investments Ltd v Arthur Maiden Ltd [1990] EGLR 193, and Rochester Poster Services Ltd v Dartford Borough Council [1992] 1 EGLR 225. I have not found those cases to be of assistance. They all turn on their own particular facts, as does the case before me.

Section 23(1) of the 1954 Act provides that Part II applies to a tenancy:

“…where the property comprised in the tenancy is or includes premises which are occupied by the tenant and are so occupied for the purposes of a business carried on by him or for those and other purposes.”

In the light of my finding that MCC granted Clear Channel a licence to occupy, and not a tenancy, of the M Sites, it is not necessary for me to deal with MCC’s contention that the M Sites are not “occupied by” Clear Channel for the purpose of section 23 of the 1954 Act Part II. It is sufficient to say, for reasons analogous to those which I give in due course in relation to the Chester Road Site, that I would have rejected that contention.

In the course of final submissions, after the close of evidence, Mr Brock applied to re-amend MCC’s Defence and Counterclaim. The proposed re-amendments are to paragraphs 3 and 8 of the amended Defence. The proposed re-amendments are the addition of an allegation that the March 2001 Draft Agreement remained unexecuted; a denial that the October 2000 Draft and the March 2001 Draft Agreement gave rise to the grant of a tenancy and in particular to a tenancy for a term of two years certain; and an allegation that, in view of the parties’ agreement to clause 14.2 of the March 2001 Draft Agreement (which was the same as paragraph 13.2 of the October 2000 Draft) any tenancy could only have been a tenancy at will. A tenancy at will is not protected by Part II of the 1954 Act.

The purpose of the proposed re-amendments was to enable MCC to run an argument (if it was otherwise precluded from doing so by the admission in paragraph 3 of the amended Defence) that, because it was the intention of the parties that any tenancy of the M sites should be excluded from the protection of Part II of the 1954 Act and an application should be made to the County Court under section 38(4) of the 1954 Act for that purpose, any tenancy granted by MCC to Clear Channel could only have been a tenancy at will.

In support of that argument, Mr Brock relied on the decision of Knox J in Cardiothoracic Institute v Shrewdcrest Ltd [1986] 3 All ER 633. The landlord in that case hoped to redevelop a site. The defendant was in possession of the site as a business tenant pursuant to three successive leases in respect of which an order had been made under s.38(4) of the 1954 Act. After expiry of the last of those leases, the parties were involved in negotiations for a series of extensions. The defendant paid rent, mostly monthly in advance, in general accordance with the terms of the successive extensions. The negotiations were in each case conducted in the contemplation that the grant of a new tenancy would be excluded from the protection of the 1954 Act Part II by an order under s.38. The defendant then claimed that he was a tenant under a periodic tenancy protected by Part II of the 1954 Act.

Knox J said, at p.640:

“…there is, in my judgment, implicit in a condition that the tenancy agreement negotiated between the parties should be subject to the making of a court order under s 38(4) of the 1954 Act, a term that unless and until the court order is obtained no legally binding grant or acceptance of the tenancy should be made.”

Knox J went on to consider what was the effect, in those circumstances, of the giving and receiving of rent. He observed that the reservation of rent and its payment on a periodic basis did not prevent there being a tenancy at will.

He said that, in a typical case where the giving and receiving of rent leads the court to infer the existence of a periodic tenancy, it is on the footing that this is the interpretation which best fills the vacuum which the parties have left. He continued as follows, at p. 641:

“Thus, in what used to be the ordinary case of a tenancy unaffected by statutory prolongation or protection coming to an end and the parties giving and receiving rent but not expressly agreeing on the creation of a new tenancy, the preferred solution that the law has adopted is a periodic tenancy, on the footing that that is what the parties must have intended or be taken to have intended. Ultimately it is the intentions of the parties in all the circumstances that determines the result of the giving and acceptance of rent. Tenancies where there is no statutory protection of one sort or another are no longer the norm. Where statutory protection does exist, that has been treated as a significant factor in evaluating the parties’ intention in paying and receiving rent. The high water maker of that reasoning is to be found in Ormrod LJ’s judgment in Longrigg Burrough & Trounson v Smith (1979) 251 EG 847 at 849, where he is recorded as saying:

‘The old common law presumption of a tenancy from the payment and acceptance of a sum in the nature of rent dies very hard. But I think the authorities make it quite clear that in these days of statutory controls over the landlord’s right of possession, this presumption is unsound and no longer holds. The question now is a purely open question; it is simply: is it right and proper to infer from all the circumstances of the case, including the payments, that the parties had reached an agreement for a tenancy? I think it does not now go any further than that.’”

Knox J concluded, on the facts of the case, as follows, at p. 642:

“The tenant’s interpretation of a concluded grant of a tenancy protected by the 1954 Act seems to me less compatible with the intentions of the parties in agreeing on a tenancy subject to the approval of the court under s 38(4), and paying and accepting rent in accordance with the terms of those proposed tenancies before they came into force, than is a tenancy at will. It is clearly established that it is legitimate to have regard to relevant statutory protection in determining whether or not the acceptance of rent is a factor from which a new tenancy could be created (see per Scarman LJ in Longrigg Burrough & Trounson v Smith (1979) 251 EG 847 at 849). Once one takes into account the machinery of the 1954 Act and the parties’ knowledge of its operation it seems to me very clear that they did not intend to create a periodic tenancy pending the grant which both sides anticipated, of a tenancy approved by the court under s 38(4). Nor do I see any compelling reason why the court should impute such an intention to them, if as is factually perfectly possible, they gave no serious thought to the legal repercussions of the payment and acceptance of rent.”

In Javad v Aqil [1991] 1 All ER 243 Nicholls LJ, with whom the other members of the Court of Appeal agreed, said that he could see no signs that Knox J departed from established principle in his decision in Cardiothoracic.

Javad was a case in which the defendant was let into occupation of business premises owned by the plaintiff while negotiations proceeded to grant him a 10 year lease. He was there for some months with the plaintiff’s consent, during which time, on three occasions, he paid rent on a quarterly basis before negotiations broke down and the plaintiff told him to leave. The plaintiff contended that the defendant was a tenant at will, and so the tenancy was not within the protection of the 1954 Act Part II. The defendant maintained that he was a tenant under a quarterly periodic tenancy, and so enjoyed the statutory protection afforded to business tenants. The Court of Appeal upheld the decision of the first instance judge that the defendant was a tenant at will.

Nicholls LJ said as follows, at pp. 247-248:

“As with other consensually-based arrangements, parties frequently proceed with an arrangement whereby one person takes possession of another’s land for payment without having agreed or directed their minds to one or more fundamental aspects of their transaction. In such cases the law, where appropriate, has to step in and fill the gaps in a way which is sensible and reasonable. The law will imply, from what was agreed and all the surrounding circumstances, the terms the parties are to be taken to have intended to apply. Thus if one party permits another to go into possession of his land on payment of a rent of so much per week or month, failing more the inference sensibly and reasonably to be drawn is that the parties intended that there should be a weekly or monthly tenancy. Likewise, if one party permits another to remain in possession after the expiration of his tenancy. But I emphasise the qualification: ‘failing more’. Frequently there will be more. Indeed, nowadays there normally will be other material surrounding circumstances. The simple situation is unlikely to arise often, not least because of the extent to which statute has intervened in landlord-tenant relationships. Where there is more than the simple situation, the inference sensibly and reasonably to be drawn will depend on a fair consideration of all the circumstances, of which the payment of rent on a periodical basis is only one, albeit a very important one. This is so, however large or small may be the amount of the payment.

   To this I add one observation, having in mind the facts of the present case. Where parties are negotiating the terms of a proposed lease, and the prospective tenant is let into possession or permitted to remain in possession in advance of, and in anticipation of, terms being agreed, the fact that the parties have not yet agreed terms will be a factor to be taken into account in ascertaining their intention. It will often be a weighty factor. Frequently in such cases a sum called ‘rent’ is paid at once in accordance with the terms of the proposed lease: for example, quarterly in advance. But, depending on all the circumstances, parties are not to be supposed thereby to have agreed that the prospective tenant shall be a quarterly tenant. They cannot sensibly be taken to have agreed that he shall have a periodic tenancy, with all the consequences flowing from that, at a time when they are still not agreed about the terms on which the prospective tenant shall have possession under the proposed lease, and when he has been permitted to go into possession or remain in possession merely as an interim measure in the expectation that all will be regulated and regularised in due course when terms are agreed and a formal

lease granted.

   Of course, when one party permits another to enter or remain on his land on payment of a sum of money, and that other has no statutory entitlement to be there, almost inevitably there will be some consensual relationship between them. It may be no more than a licence determinable at any time, or a tenancy at will. But when and so long as such parties are in the throes of negotiating larger terms, caution must be exercised before inferring or imputing to the parties an intention to give to the occupant more than a very limited interest, be it licence or tenancy. Otherwise the court would be in danger of inferring or imputing from conduct, such as payment of rent and the carrying out of repairs, whose explanation lies in the parties’ expectation that they will be able to reach agreement on the larger terms, an intention to grant a lesser interest, such as a periodic tenancy, which the parties never had in contemplation at all.”

In dismissing the appeal, Nicholls LJ said, at p. 254:

“Entry into possession while negotiations proceed is one of the classic circumstances in which a tenancy at will may exist (see Scarman LJ in Hagee (London) Ltd v A B Erikson & Larson (a firm) [1975] 3 All ER 234 at 237, [1976] QB 209 at 217).”

Mr Brock, in advancing MCC’s case that any tenancy to Clear Channel of the M Sites would have been a tenancy at will only, relied not only on clause 14.2 of the March 2001 Draft Agreement, but also on the unchallenged evidence of Ms Corfe, in her witness statement, that it was the intention of MCC to exclude the provisions of section 24-28 of the 1954 Act, and the reason that the March 2001 Draft Agreement was never executed was because the application to Court to exclude those provisions was never made.

Mr Brock emphasised that the present case, like Javad is a case in which (if there was a tenancy at all) the tenant entered land, and paid rent on a periodic basis, while negotiations were proceeding on the terms of a lease intended to be granted, and where (as in Cardiothoracic) the parties were aware of the operation of the 1954 Act Part II and intended to excluded it in relation to a negotiated tenancy.

Mr McGhee submitted that such a line of argument was not open to MCC in the light of the admission in paragraph 3 of the amended Defence, the effect of which was to admit that Clear Channel was permitted to use the M Sites on the terms of the March 2001 Draft Agreement, including the provision for a term expiring on 31 October 2002. Mr McGhee told me that Clear Channel had come to Court for the trial on the assumption, and in the belief, as a result of that admission, that the only matters in issue were as to exclusive possession and as to occupation for the purposes of section 23 of the 1954 Act.

Mr McGhee said that, if Clear Channel had been aware that MCC intended to take the line of argument in Cardiothoracic and Javad, it would have contended that at some point after March 2001 the parties had abandoned any intention that any tenancy should be excluded from the protection of the 1954 Act Part II, and would have investigated, obtained and marshalled evidence to support that conclusion.

If the application to re-amend was allowed, Mr McGhee said that he would wish to apply for an adjournment for those reasons.

In my judgment, the interpretation placed by Clear Channel on the admission in paragraph 3 of the amended Defence is both reasonable and correct. It is not open to MCC, without the further proposed amendments, to raise the tenancy at will argument.

Further, I accept Mr McGhee’s statement that Clear Channel came to Court for the trial in the expectation, and the belief, that the only issues, so far as concerns the M Sites, were as to exclusive possession and as to occupation for the purposes of section 23 of the 1954 Act.

Mr Brock submitted that it was inconceivable that there would be any evidence which would assist Clear Channel in establishing that, at some point after March 2001, the parties had abandoned the intention that any tenancy granted to Clear Channel should fall outside the protection of the 1954 Act Part II. I reject that submission. I am not in a position to reach a firm conclusion as to what evidence might be available to support Clear Channel’s case in that respect.

In all those circumstances, I refuse the application by MCC to re-amend the Defence. The application to re-amend was made in the very last moments of the trial, and it would be unjust in all the circumstances, and not in accordance with the Overriding Objective, for the proposed re-amendments to be allowed. They could only fairly be allowed on terms of an adjournment to permit Clear Channel to consider its position, and to seek to obtain, marshall and present further evidence, and to make consequential amendments to its statements of case. Such a course would be extremely wasteful of resources and time, and would complicate and delay the resolution of this dispute.

MCC counterclaims for a declaration that the advertising station at the Chester Road Site has been erected and maintained by way of licence and not by way of tenancy, and that the right to maintain that station determined not later than 27 April 2004.

It would be fair to say that Mr Brock was relatively brief in his submissions relating to the Chester Road Site, as compared with his submissions on the M Sites.

In his skeleton argument Mr Brock contended that, as in the case of the M Sites, there was no identifiable area of land comprising the Chester Road Site, over which it was intended to grant Clear Channel exclusive possession: there was only a right to place chattels on an area of open land owned by MCC.

In this connection, Mr Brock noted in his skeleton argument that it did not appear to be in dispute that the structure on the Chester Road Site was a chattel at all times owned by Clear Channel.

Mr Brock makes the same observation as was made in relation to the Ms about the ability of anyone to walk through the advertising station at the Chester Road Site and cross its base.

In addition, I understood Mr Brock to be advancing the alternative argument, on the basis of the principles applied in Cardiothoracic and Javad, that, if any tenancy was granted to Clear Channel, it was a tenancy at will, and so unprotected by Part II of the 1954 Act.

MCC further contends that, if a periodic tenancy was granted to Clear Channel of the Chester Road Site, any such tenancy would not be protected by the 1954 Act Part II because the use made of the Chester Road Site by Clear Channel, and those acting on its behalf, has not been sufficient to amount to occupation for the purpose of section 23 of the 1954 Act. In support of that submission, Mr Brock referred me to Wandsworth LBC v Singh [1991] 2 EGLR 75, Graysim Holdings Ltd v P & O Property Holdings [1996] AC 329, Wallace v C Brian Barratt & Son Ltd [1997] 2 EGLR 1, and Customs & Excise Commissioners v Sinclair Collis Ltd [2001] All ER[D] 29.

By the conclusion of the trial, Clear Channel had abandoned its claim to a tenancy of the Chester Road Site for a term of 5 years from 15 June 2002, but was claiming to be an annual tenant of the Chester Road Site from that date.

In my judgment, Clear Channel has established its claim to an annual tenancy of the Chester Road Site.

Clear Channel constructed the advertising station on the Chester Road Site and began to pay rent in respect of that Site between the receipt of the July 2001 Letter and the receipt of the 2003 Draft Agreement.

The July 2001 Letter did not purport to delineate or define with any precision the land over which rights were to be given. On the other hand, Mr Watson’s evidence was that, prior to the erection of the advertising station on the Chester Road Site, the precise position of the structure was agreed at a meeting with Mr Houghton of MCC, and Mr Watson marked out with spray paint on the ground that agreed position.

Furthermore, the 2003 Draft Agreement shows clearly that it was the intention of MCC to grant a lease over the land occupied by the advertising station, rather than over some wider and ill-defined area of land. In this respect, there is a marked contrast with the terms of the October 2000 Draft and the March 2001 Draft Agreement relating to the M Sites.

Mr Brock accepted that, if the 2003 Draft Agreement had been executed, it would have been effective to grant a tenancy of the Chester Road Site, even though some of its provisions were similar to those in the March 2001 Draft Agreement on which he relied in support of his submission that there was no exclusive possession intended to be granted of the M Sites.

Moreover, clause 12 of the July 2001 Letter prohibited Clear Channel from assigning, sub-letting or parting with possession of the structure. It is clear from that reference to sub-letting or parting with possession that it was always the intention of MCC that Clear Channel would be granted a tenancy, rather than a licence, of the Chester Road Site.

Further, there is nothing in the July 2001 Letter or the 2003 Draft Agreement which indicates an intention to grant Clear Channel something less than exclusive possession of the Chester Road Site. In this connection, Mr McGhee was right to emphasise the scale of the advertising station on the Chester Road site, and the difficulty which would be encountered in removing it, bearing in mind that the supports for the hoardings were set in the concrete bases (again, unlike the Ms). It is to be observed, in that connection, that originally the July 2001 Letter provided for the structure to become the property of MCC (that term subsequently being changed following negotiation).

I conclude, for those reasons, that the erection and maintaining by Clear Channel of the advertising station on the Chester Road Site, coupled with the payment of rent, gave rise to a tenancy of the Chester Road Site in favour of Clear Channel.

I understood Clear Channel’s case to be that the land comprised within the tenancy extended to the area of gravelled hard standing around the structure, which provides suitable ground for the scaffolding towers used to change the advertisements from time to time. The area of that gravelled hard standing is shown on a plan attached to Mr Watson’s statement. I did not understand MCC to be taking any point that, if Clear Channel occupies the Chester Road Site under a tenancy, the land comprised within the tenancy is something less than the gravelled hard standing.

On the particular facts of the present case, I reject MCC’s alternative argument, that, if there was a tenancy, it was a tenancy at will on the basis of the principles set out and applied in Cardiothoracic and Javad. The following factors are of particular significance in relation to that conclusion.

MCC was keen for an advertising station to be created on the Chester Road Site, and, in effect, invited Clear Channel to put forward a proposal for that purpose. A planning development brief supplied by MCC to Clear Channel set out MCC’s intention to place a landmark advertising feature on the Site with the aim of adding value to, and promoting, the centre of Manchester. The July 2001 Letter set out the terms on which Mr Sheppard said he would recommend acceptance of Clear Channel’s proposal. All the principal terms were agreed by March 2002. Following receipt of the 2001 Letter, Clear Channel, as MCC well knew, incurred cost and expense in designing the advertising station, obtaining planning permission for its construction, and, in June 2002, erecting it. It was a substantial structure fixed in concrete. As I have said MCC was eager for the advertising station to be erected. MCC took from Clear Channel a very substantial rental payment in respect of a lengthy period ending on 31 December 2003, intended to be, and regarded by both parties as, in the nature of a periodic annual payment rather than a payment for a one-off fixed term.

The July 2001 Letter contains nothing to indicate that it was the intention of MCC to exclude any tenancy from the statutory protection for business tenancies. There is no evidence that, in any subsequent discussions prior to the 2003 Draft Agreement, MCC mentioned to Clear Channel anything about the need to exclude any tenancy of the Chester Road Site from the protection of the 1954 Act Part II. An intention to exclude any tenancy from the 1954 Act Part II appears from clause 10 of the 2003 Draft Agreement, but, as I have said, the evidence is that the 2001 Draft Agreement was sent by MCC without any prior warning, and its terms were never the subject of any discussion or negotiation. The oral evidence of Mr Lewis was that he was personally unaware of the 2003 Draft Agreement. So far as he was concerned, the important document was the July 2001 Letter.

Those facts distinguish the present case from Cardiothoracic and Javad.

I also reject MCC’s contention that the use by Clear Channel of the Chester Road Site has been insufficient to amount to occupation of the Site for the purposes of section 23 of the 1954 Act. Both sides are agreed that the correct approach of the Court to this issue is to be found in the following passage in the speech of Lord Nicholls, with which the other members of the Judicial Committee agreed, in Graysim Holdings, at pp. 334-335:

“…first I must consider a feature central to the statutory structure: the requirement that the property must be “occupied” by the tenant. As has been said on many occasions, the concept of occupation is not a legal term of art, with one single and precise legal meaning applicable in all circumstances. Its meaning varies according to the subject matter. Like most ordinary English words “occupied”, and corresponding expressions such as occupier and occupation, have different shades of meaning according to the context in which they are being used…

This is not surprising. In many factual situations questions of occupation will attract the same answer, whatever the context. A tenant living alone in a detached house under a residential lease would be regarded as the sole occupier of the house. It would need an unusual context to point to any other answer. But the answer in situations which are not so clear cut is affected by the purpose for which the concept of occupation is being used. In such situations the purpose for which the distinction between occupation and non-occupation is being drawn, and the consequences flowing from the presence or absence of occupation, will throw light on what sort of activities are or are not to be regarded as occupation in the particular context. In Part II of the Act of 1954 “occupied” and “occupied for the purposes of a business carried on by him” are expressions employed as the means of identifying whether a tenancy is a business tenancy and whether the property is part of the holding and qualifies for inclusion in the grant of a new tenancy. In this context “occupied” points to some business activity by the tenant on the property in question. The Act seeks to protect the tenant in his continuing use of the property for the purposes of that activity. Thus the word carries a connotation of some physical use of the property by the tenant for the purposes of his business.”

As I have said, Mr Brock, on behalf of MCC, also referred me to several other cases on this aspect.

Customs & Excise Commissioners v Sinclair Collis Ltd [2001] All ER(D) 29 concerned the operation and effect of Article 13B(b) of the EC Sixth Directive and the provisions of the United Kingdom Value Added Tax 1994 intended to give effect to Community law concerning exemption from VAT. The issue related to whether an agreement for the siting of cigarette machines by a tobacco company on a third party’s land could constitute “the leasing or letting of immovable property” within Article 13B(b). The decision of the House of Lords on the actual facts of the case was, by a three to two majority, to refer the question to the European Court of Justice. Further, there was a three to two split in the opinion of the members of the Judicial Committee as to the application of the exception from VAT on the particular facts of the case. As I have said, the case turned upon the proper interpretation of the European Directive, and, in particular, the correct approach to the interpretation of an exemption from VAT. All those particular facts and circumstances make it dangerous, in my judgment, to attempt to extract any general principle applicable to the case before me.

Wandsworth LBC v Singh [1991] EGLR 75 concerned the question whether a piece of open land, measuring about 75 ft by 75 ft used by local inhabitants for leisure and recreation, which had been leased to Wandsworth Borough Council, which had improved and maintained the site since 1977, was occupied by the Council within the meaning of section 23 of the 1954 Act.

Ralph Gibson LJ, with whom the only other member of the Court of Appeal agreed, said, at p. 79:

“If it is shown that the tenant, having possession of the premises and having given to no person the right to exclude the tenant from any part of the premises or to limit the tenant’s access thereto, is by himself, his servants or agents physically present on the premises to such extent and exercising control of them to such extent as would reasonably be expected having regard to the nature of the premises and the terms of the tenancy, and is so present and exercising control for the purposes of the business or activity carried on by the tenant, then for my part it would seem likely at least that an observer, knowing the facts and applying the ordinary and popular meaning of the phrase “occupation for the purposes of a business or activity”, would hold that tenant to be in occupation.

I accept, of course, that a tenant who has a right to possession may choose not to go into actual occupation, and, as set out above, the authorities show that “occupation” for the purposes of section 23 means actual occupation in the popular sense of that word. But if, as is clear from Eveleigh LJ’s judgment in Hancock & Willis v GMS Syndicate, the physical occupation need not be continuous provided the right to occupy continues, then the sort of occupation to which I have referred should in most cases qualify.

That which is a minimum sufficiency of physical presence or control cannot, in my view, be determined by the court independently of the facts of a particular case by reference to the number of visits per day or per week or per month. When the facts of a particular case are regarded, as they must be, I can see no standard for the judgment of the minimum sufficiency of physical presence or control in a case where there are no subtenants or licensees competing for the role of occupier other than that established by the nature of the premises in question regarded in the light of the statutory purpose, which is to enable tenants occupying property for business purposes to obtain new tenancies in certain cases, as enlarged by the provision to include an activity carried out by a body of persons.”

Ralph Gibson LJ expressed his conclusion, on the facts of the case as follows, at pp. 79-80:

“…I agree with Mr Craig’s submission that this was not a borderline case but a clear case. The council were physically present upon and exercised control over the piece of land by their servants or agents at least as much as would, in my judgment, be reasonably expected by the parties to the lease when it was made. If the ordinary man, knowing the facts, were asked: “Who is in occupation of this open space?”, I have no doubt whatever that, applying the ordinary and popular meaning of the word, he would answer “The council is”. No one else is. The council is there, as necessary, to do all that is required to maintain the place in decent order for use by the public.”

Although both Mr Brock and Mr McGhee relied upon that case, the decision, is, if anything, in my judgment, more supportive of Clear Channel’s claim, that it occupied the Chester Road Site for the purposes of section 23 of the 1954 Act, than the contrary position advanced by MCC.

Wallace v C Brian Barratt & Son Ltd [1997] EGLR 1 was concerned with the question whether the defendant company, which was the tenant under an agricultural tenancy agreement of land comprising arable fields, was in breach of a covenant in the tenancy not to assign, underlet, or part with or share possession or occupation of the whole or any part of the holding by virtue of farming the holding through a partnership. The individual partners were related and held most of the shares in the tenant company. The Court of Appeal held there was no breach of the covenant since, among other things, the partnership activities were carried out as agent for the tenant company. The facts and decision in that case seem to me to have no useful bearing on the facts with which I am concerned.

In the present case, the facts are that the Chester Road Site has been continually used by Clear Channel for the purpose of its business. It has used and maintained the land and the structure on it for advertising. Its employees have changed the advertisements every two weeks, repaired and maintained the structure as and when necessary, and inspected the site and the structure on a regular basis.

In my judgment, those acts of use, maintenance and control, for the purpose of Clear Channel’s business, manifestly amount to occupation for the purpose of section 23 of the 1954 Act, having regard to the purpose of the provisions of Part II of the 1954 Act and the nature of the Chester Road Site and the use to which it might reasonably be expected to be put.

For all those reasons, I find that Clear Channel is, for the purpose of s.23 of the 1954 Act, in occupation of the gravelled hard standing comprised in the Chester Road Site pursuant to a periodic annual tenancy.

Accordingly, I dismiss the Counterclaims for the declarations sought by MCC in relation to the Chester Road Site.

It is common ground that if, as I hold, Clear Channel has been in occupation of the Chester Road Site on an annual tenancy, that tenancy would not determine prior to 15 June 2005, pursuant to MCC’s notice dated 27 January 2004 and the notice under section 25 of the 1954 Act served on 15 November 2004. Accordingly, I also dismiss the Counterclaim for damages for use of the Chester Road Site from 1 January 2004.

For the reasons I have given, I dismiss the Claim. I also dismiss the Counterclaim for declarations and damages in relation to the Chester Road Site.