Hutchison & Ors v B & DF Ltd

This is the judgment arising out of the trial of the Claimants’ claim for:-

The Claimants provided a revised schedule at the opening of the trial reflecting the fact that the Claimants had let units 1, 11, 12 and 15 to other tenants thus mitigating the losses they claim they have suffered by the refusal of the Defendant to take up the various leases of the units in the Premises. The claim for those units therefore is for rent due, service charges and interest up until the date of the demise to the Third Parties. In respect of the remaining units the claim is for what the Claimants contend are arrears of rent, service charges, management fees and interest together with the orders that the Defendant execute leases in respect of those premises which the Claimants have been unable to re–let.

The Claimants are the freeholders of the Estate. The Defendant carries on a business as an industrial caterer supplying food to the Airline industry. The Defendant vacated the units the subject matter of the dispute on 31st December 2006. In addition it occupied two other units after that date (unit 2 until March 2007 and unit 5 which it continues to occupy). Those units are not the subject matter of this dispute.

The Defendant occupied unit 1 pursuant to an assignment of a lease dated 26th March 1985 for a term of 21 years from 8th March 1985 and occupied units 3 and 4 pursuant to an assignment of a lease dated 27th March 2002 for a term of 4 years from 1st March 2002.

The Claimants contend that notices under section 25 Landlord & Tenant Act 1954 (“L&T 1954”) were served by letter dated 7th September 2005 terminating the lease of unit 1 on 8th March 2006 and units 3 and 4 on 24th March 2006. The Defendant denies that it received the notices. This is one of the several documents which the parties respectively contend they never received.

In the case of units 11, 12 and 15 the Defendant had not previously been in occupation of those units. It is admitted it went into occupation and paid a rent as agreed. The rent was paid quarterly by reference to an annual rent in respect of each unit.

The Claimants contend that oral agreements were made for 3 year terms for all of the units in dispute save unit 15 where they contend that the term was 5 years. The Claimants contend that the 3 year terms created immediate leases and being 3 year terms at the best rent payable without taking a fine with immediate possession became legal leases by virtue of section 54 (2) Law of Property Act 1925. Such a lease constitutes an immediate legal lease and therefore is not affected by the requirement for a contract for sale of land to be made in writing by section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. Furthermore an agreement to create such an interest is also not required to be made in writing (ibid section 2 (5) (a)).

The Claimants contend that the agreements for units 1, 3 and 4 were agreed in or around 15th February 2006 for a new term of 3 years at a rent of £8,000 per annum with all the other terms the same as the existing lease of unit 5.

During the course of the same conversations the Claimants contend that the Defendant agreed to take a lease of unit 11 for a 3 year term at a rent of £8,000 per annum with the same provisions applicable.

The Claimants contend that in the week commencing 15th August 2005 the Defendant agreed to take a new lease of unit 12 for a term of 3 years with an annual rent of £7,500 commencing on 1st October 2005 with all other terms on the same terms as the existing units.

Finally after numerous discussions it is contended the Defendant agreed to take a lease of unit 15 on or around 15th April 2006 for a lease of 5 years commencing on 7th May 2006 at a rent of £8,000 per annum.

As I have said above the Defendant took possession of all of the units comprised in the Premises or remained in occupation of the same and paid the higher rent for each of them until they vacated on 31st December 2006 pursuant to a series of notices served simultaneously dated 28th September 2006. The notices purported to give 3 months notice terminating the Defendant’s occupation expiring on 31st December 2006.

The Defendant denies it has entered into any agreement as alleged by the Claimants. First it denies receiving any section 25 notices in respect of the existing leases; it contends that those tenancies continued under section 24 L & T Act 1954 until terminated on 31st December 2006 by the above notices. The Defendant contends those notices were given under section 27 of L&T Act 1954.

The Defendant’s case is that during all of the negotiations which led to the occupation or continued occupation which took place between Mr Coates the Second Claimant and Mr Davis the Defendant’s Managing Director it was made clear that whilst the Defendant wished to continue to occupy the existing units and take the further units it could not agree any lease of them until planning permission had been obtained for a new odour control system.

The Defendant contends that they occupied the new units as tenants at will. In summary therefore the Defendant’s contentions are that their existing leases were statutorily continued under section 24 L&T Act 1954 (although an increased rent was paid) and that the new units were occupied as tenants at will. All occupations the Defendant contends were terminated by the above mentioned notices.

The Defendant’s food preparation activities apparently gave off smells which certain local residents objected to. Those difficulties had started in 2002. A system was installed which provided a carbon based odour abatement system but it failed to alleviate the problems. In early 2003 the Environmental Health Department became involved and through a Senior Environmental Health Officer the Defendant was advised to remove the system and install a short chimney. It did not solve the problem. I accept Mr Davis’ evidence that the Defendant had doubts all along about whether the solution proposed by the Environmental Health Officer (Mr Hawes) would work but went along with the suggestion (at a cost of about £7,500) in order to keep on side with the local Environmental Officers. The Defendant obtained planning permission to erect this small chimney in August 2005. It failed to address the problem; indeed the Defendant’s case (which is not in dispute) is that the problem was made worse.

The Defendant was introduced by the Local Authority Environmental Department to a specialist organisation Netcem. The suggestion was by a Mr Bell who had replaced Mr Hawes (the previous Officer) who had retired on the grounds of ill health. He had suggested the existing chimney was not sufficient to control the odour problem. Netcem were commissioned at a cost of £7,000 and recommended a chimney of 25 metres in height. The Defendant claims that it kept the Claimants fully informed about the problems. That is not seriously disputed although a letter to that effect sent to Mr Hutchison by Mr Davis dated 15th February 2006 is disputed. The significance of that letter from the Defendant’s point of view is the sentence “however unless we do get it sorted then [the Environmental Health Department] will take enforcement action which will stop us “dead in the water””.

The Defendant submitted an application for the new chimney which was supported by both the Planning Officer and the SEHO of the Local Authority. Netcom obviously believed that it would provide a solution to the problem.

Unfortunately there were a number of vociferous residential objectors. On 20th April 2006 the Defendant organised a meeting with the residents to discuss the proposals. It provided mock up photographs at a cost of £1,700. Mr Davis tried to get Mr Coates to attend the meeting but he declined to do so.

The meeting went very badly. The Defendant’s board meeting of 25th April 2006 reported Mr Davis saying a professional presentation had been provided to what was described as a hostile crowd of 80 people. It turned out that the Defendant believed its planning use was under class B2 when it was actually classed under B1. The Senior Planner (Karen Philips) reported back to Mr Davis (board minute 13th June 2006) that this made a real difference in the obligation the Defendant would have to make to mitigate the loss. I am not sure what the difference is. Despite the apparently disastrous nature of the meeting the Defendant sent a circular letter to the residents on 28th April 2006.

Nevertheless it decided that in view of the difficulties of the opposition that it should consider alternative premises. Accordingly in May 2006 it entered into a subject to contract agreement (ironically) to take a lease of a factory 68 Castleham Road St Leonards on Sea from the Council. Initially it was to occupy as a tenant at will. The term was to be 9 years with a tenants break clause at a rent of £37,500 per annum subject to review.

As anticipated on 11th July 2006 the residents provided a “partition” (sic) opposing the application. It was clear however as I have said that the Defendant had professional advice which suggested the 25 metre chimney would solve the problem and it was supported as I have said by the Officers of the Local Authority.

The tenancy at will of the alternative premises at a weekly rate for use and occupation at £1 was confirmed (letter dated 18th July 2006).

The planning application was presented to the planning board on 19th July 2006 but was deferred pending a visit by the Members. It was considered on 13th September 2006 and the plan was rejected on the grounds that its excessive height and scale would be an alien feature within the landscape and would be detrimental to the visual amenity and character of the locality. The Defendant was advised that decision was appealable. Instead it decided to proceed with its other alternative premises. They too were the subject of an application for planning permission which was granted on the same day. On 22nd September 2006 an engrossed lease was sent to the Defendant by the Local Authority’s legal department for execution. That was executed and as I have said the Defendant gave notices purporting to terminate the occupation of the disputed units in the Premises on 28th September 2006.

I have doubt and so find that the Defendant’s primary wish was to remain in the Premises. It could only do so however if it could address the odour problem. I also accept that the Claimants were aware of the difficulties. I also accept and determine that the Defendant after the disastrous meeting with the residents on 20th April 2006 decided that it was essential to obtain fall back premises and entered into negotiations as above mentioned in May 2006. Despite that I determine that the Defendant believed that the proposal for the larger chimney had very good prospects of success despite the opposition from the residents. The fall back alternative premises were in my view a sensible precaution taken by the Defendant but I do not believe that it had any doubts based on their professional advice and the support of the Local Authority Officers that they would obtain the requisite planning permission. Indeed its board minutes the day after the refusal (14th September 2006) records that they were all stunned that the planning permission had been refused and that they had been advised that it was an unreasonable decision and that there were strong grounds for appeal. They also referred to Mr Bell’s comments to the council “that in all of his experience he had not had a company acting so proactively to resolve issues like this”. The problem however was the vociferous local residents who clearly persuaded the Members to decide otherwise. It will be seen that the refusal had nothing to do with the adequacy of the chimney as a solution to the problem. Fortunately the Local Authority itself was able to address the problem by providing alternative accommodation for the Defendant.

Whilst it is accepted as I have said that the Claimants were kept informed about the difficulties and the Defendant’s attempts to resolve them the key issue is whether or not in relation to the units in the Premises Mr Coates for the Claimants in those negotiations agreed renewals that would enable the Defendant to have a temporary occupation of the units pending solving the problem. He denies it. The Defendant’s case is that in those negotiations Mr Davis raised that with Mr Coates and he agreed the temporary solution that the Defendant contends occurred.

Thus both parties acknowledge that the determination of the dispute turns on the negotiations. Both parties also acknowledge that there is no question of a mistake in the evidence of Mr Coates or Mr Davis. One of them is lying. Both were called as witnesses. In addition other witnesses were called but they are peripheral to the fundamental issue.

Neither Mr Coates nor Mr Davis kept any notes of their discussions. The discussions appear to have occurred in three stages. First there were discussions in August 2005. Second there were discussions in February 2006 and finally there were discussions in April 2006.

It is sometimes useful to assess the credibility of witnesses by reference to the consistency of the evidence when compared with contemporary documents.

The contemporary documents in this case consist of the correspondence that passed between the parties following the agreements and the Defendant’s internal documentation.

On 19th August 2005 Mr Hutchison the First Claimant sent a draft lease in respect of unit 12 to Ann Milne the Defendant’s solicitor in the firm DMH Stallard. It is possible from the Defendant’s board meeting minute dated 16th August 2005 to see that the discussions between Mr Davis and Mr Coates had taken place before 16th August 2005 as the discussions are referred to. The Defendant’s board minute resolved to go ahead with the extra units but only on a temporary basis and until the problem could be sorted out no formal lease should be signed. It is clear that the Defendant had reservations about the solution (see its board meeting minute of 26th July 2005).

The terms of Mr Hutchison’s letter are as follows:-

“I gather that your client has agreed to take another unit on our estate on exactly the same terms as the other unit it occupies for a term of 3 years from 1st October 2005 at a rent of £7,750 per annum. I have treated the term as expiring on 28th September 2008 for obvious reasons.

I enclose the draft lease in duplicate. If approved please treat one copy as an engrossment and have it executed. As usual, once received from you, your client can have the keys….

I can confirm that this draft is in exactly the same terms as the other leases which you have approved for the client”

Mr Hutchison in his evidence said that Mr Coates told him that a binding agreement had been concluded.

Three points arise out of the letter. In the first paragraph Mr Hutchison refers to “agreed” relationship between the Claimants and the Defendant. Second he encloses a draft lease but that is subject to approval. It is said by the Defendant that the fact that the lease is sent in draft form for approval shows that there was no agreement of a binding nature at that time. Third the letter states that when the lease is received back the Defendant can have the keys. That did not happen. The Defendant took occupation but never signed the lease.

I was much pressed by both sides that this letter and the subsequent letters supported their case. The Claimants said that it reflected an agreement. It was not marked subject to contract which would have been Mr Hutchison’s practice if that was the state of affairs. I should say he is a solicitor with over 30 years experience in property transactions. In addition the fact that the Defendant was let into possession shows there was an agreement; the Claimants would not have allowed them into possession unless there was a binding agreement. That point of course begs the question as to the nature of the binding agreement and does not take the matter any further.

For the Defendant it is contended that the fact that the lease is sent for approval is suggestive of the agreement being not binding until all the terms can be agreed and the lease and counterpart exchanged in the normal way.

It is quite possible to have a binding agreement until a further binding agreement is concluded. Equally the fact that there is an agreement to lead to a formal agreement can suggest there be no binding agreement. It is a question of construction of the documents. The Courts have held such correspondence to be subject to contract or binding (contrast Winn v Bull [1877] 7 Ch.d.29 with Rossiter v Miller [1873] 3 APP. C cas 1124 and Branca v Cobarro [1947] KB 854. I reviewed these cases in London and Region Investments Ltd v TBI PLC a judgment I did in March 2001 (upheld by the Court of Appeal on 22nd March 2002).

In my view I derive no clear assistance from the form of the letter. The same applies to Mr Hutchison’s later letters of 17th February 2006 and 7th April 2006.

Equally I was pressed by the Defendant that the wording of its minutes was significant. Thus the minute of the meeting of 15th September 2005 (item 4) has Mr Davis reporting that the landlord was happy for us to take on additional units on a temporary basis he also stated that he discussed renewal of the leases on units 1, 3, and 4 as these are due to expire in March 2006….. The Board agreed [Mr Davis] could take on units 12 and 15 on an informal temporary basis. Similarly the meeting on 4th October 2006 has Mr Davis reporting back that Mr Coates was happy for them to take others on that basis with unit 12 now being occupied. It was submitted with some force by Miss Shea who appears for the Defendant that it is unlikely that it would create false minutes in 2005 when there was no dispute.

None of the leases was executed. The Defendant was allowed into possession in each case. There was some chasing by Mr Hutchison but it was desultory. A significant exchange took place however in 2006. Mr Hutchison wrote to Ann Milne on 21st June 2006 referring to the Defendant’s troubles and their application to erect the 25 metre high flue. He reminded her that the leases should have been completed by then (an understatement). At this time of course the Defendant was negotiating with the council for the alternative premises. Mrs Milne did not reply to that letter (she not having replied to any of the other ones either). He sent her another chaser on 9th August 2006. She replied on 14th August 2006 where she stated “my understanding is that my client will be in direct contact directly if he has not already done so…” On 23rd August 2006 Mr Hutchison sent Mrs Milne an email. Mr Hutchison reported back that Mr Coates had spoken with Mr Davis and told him that he could not understand why the leases were not being completed. On 30th August 2006 Mrs Milne wrote to Mr Davis. Curiously the letter is headed in respect of 68 Castleham Road. In the first paragraph she said “I am being chased by David Hutchison in relation to various lease renewals. He says that his partner has spoken with you and that you say that you do not understand why the leases are not being completed!” she also sought an update on the position as regards the council as “they have also gone quiet on me”. Her postscript however showed that she had received a letter from the council. She replied to Mr Hutchison saying that she had referred to her client and hoped to be able to get back to him.

Mr Davis denied in cross examination that Mr Coates had chased him.

There was an initial dispute between the parties as to whether or not the Defendant’s conveyancing file with Mrs Milne was disclosable. Ultimately the above documents only were disclosed. Mrs Milne did not give evidence and the Defendant chose not to waive privilege. No inference can be drawn from that decision; the Defendant is perfectly entitled to maintain privilege.

It can be seen from the above that the Defendant’s solicitors never wrote back setting out in correspondence that the occupation of the units was to be on a temporary basis. The Claimants chasing of the Defendant was as I have said desultory. The Claimants also let the Defendant into possession without any of the documents being returned. In my view the Claimants took this relaxed view because they trusted the Defendant because of their pre-existing relationship and unlike new tenants thus felt able to let them in possession. I accept the Claimants’ evidence that they would not have let them in possession had there not been a binding agreement. I also accept that the Claimants would not have allowed the Defendant into possession solely on the basis of a tenancy at will. That does not make commercial sense for them which I accept. It would have a large number of units in the development that would be occupied on a temporary basis. That would have given them a large number of voids that could have been created at short notice. This is of course precisely what happened.

It is equally significant in my view that Mr Davis was evasive when Mr Coates spoke to him as recounted in the email referred to above. I am quite satisfied that such a conversation occurred. Mr Davis also gave evidence which I reject that he had never received any draft leases from his solicitor. The pattern of correspondence in my view shows an avoidance on the part of the Defendant to address the issue of the leases and an avoidance of setting out what it contends was the true position namely the tenancy at will. In my view they did this because that was not their genuine position.

Thus Mrs Milne when she writes to Mr Davis concerning both sets of properties knows full well why the leases have not been completed. That is why there is an exclamation mark at the end of the first paragraph of her letter. If the position was that the leases had not been signed for the reasons the Defendant contends namely that it was occupying only as tenancy at will and that was understood by the Claimants it would have been simple. Mrs Milne would have written back to Mr Hutchison saying that “as you know the arrangements between our respective clients is that these leases are not to be taken up until the problem is resolved and until then they have agreed that the Defendant can occupy the units as a tenant at will”. No such letter was sent and the inference is obvious in my view that there was no agreement as the Defendant contends.

The final point supporting this is Mr Davis’ give away in cross examination. It was suggested to him that he was keeping his cards close to his chest about their future intentions. His answer was telling. He said “we didn’t sign anything, we were allowed to continue”. He was asked if he believed the agreements needed to be in writing and his answer was “I wish I knew what I know now”.

In my view Mr Davis then believed that he could make an agreement orally and because it was not in writing it was not enforceable. This is of course a mistake that many lay people make. He therefore believed that the agreement he made covered the temporary position because the Defendant could walk away from it. Whether or not he always maintained that belief I do not know and it does not matter. Nevertheless having seen Mr Davis in evidence I am of the firm view that he agreed terms orally as the Claimants contend.

This is reinforced by a letter Mr Davis sent on 6th April 2006. At this time Mr Davis was in negotiations with Mr Coates about securing unit 15. I accept Mr Coates’ evidence that the Claimants were concerned at this stage about giving another unit to one tenant. Their concerns were quite sensible. If that tenant went into liquidation there would be a large number of voids arising simultaneously. To comfort Mr Coates Mr Davis by that letter of 6th April 2006 sent him details of the Defendant’s income. He also sought to assure Mr Coates that they had a long term presence there. Thus the letter said :-

“We are happy on the estate, we help our fellow tenants with our forklift and many with simple business advice. We all get on very well.

I (sic) short we are not about to up and leave “en masse” far from it….”

He suggested a shorter rolling lease a rolling 6 month arrangement. Mr Davis’ evidence of course is that Mr Coates agreed a tenancy at will like all the other premises. That is actually a lesser termthan Mr Davis was offering. I cannot believe commercially the Claimants would accept an arrangement less than was being offered. I reject such a suggestion. It is plain in my view that Mr Coates is correct (and I so find) that he had further discussions with Mr Davis afterwards and agreed a 5 year term. The five year term was a longer term so as to provide the Claimants with some protection against simultaneous voids occurring.

The Defendant’s contention is that their primary wish at that time was to stay at the premises. However the letter in my view was not fully frank. In my view Mr Davis believed he had non binding agreements but did not wish to come out into the open and say that the arrangements were non binding. If he believed that the arrangements were as he contends the letter is extremely deceptive. I do not see how it can be suggested that it was far from the proposition that the Defendant was about to up and leave en masse. As I have said I do not believe that was its then intention. That only occurred in my view with the refusal of planning permissions. Nevertheless it was not a frank letter and certainly became less frank in the light of the Defendant’s actions subsequent the tenants meeting on 20th April 2006.

The Defendant contends that there was a compliment slip enclosed with that letter (and the samples that were sent) it is said that the compliment slip revealed the true position “obviously all of this is subject to us being allowed to sort our odour problems out”.

The Claimants deny they received the compliment slip. Having seen Mr Hutchison and Mr Coates I accept their evidence. There is some support for this proposition. The compliment slip has a fax date on it of 23rd November 2006. By that time the Defendant had given notices attempting to terminate the leases on 28th September 2006 its solicitors in earlier correspondence suggested that they were occupying as tenants at will in advance of negotiations and there was no concluded agreement. The Claimants wrote on 7th November 2006 a detailed letter setting out their position having had an opinion from Mr Bernard Wheatherill QC in my view and I so determine Mr Davis created the compliment slip then to provide evidence to suggest that the premises were occupied temporarily. This was to counter the statement in Mr Hutchison’s letter of 7th November 2006 “Counsel advises your client cannot now contend that there was no intention to create the leases because circumstances now make it convenient so to do. The leases continue as intended by your client. To substantiate this view the landlord will refer to discussions between John Davis and John Coates and to the fact that the landlord had requests from others to take one or more of the vacant units which were overlooked in favour of your client…”

I regret to say therefore that in my view Mr Davis has told an untruth when he said that the compliment slip was sent with the letter of 6th April 2006. It is such an important point that it would be set out in the letter. Further it is so contrary to the letter that it would have caused the Claimants concern.

Nor is the Defendant assisted by the letter of 15th February 2006. I accept that the letter was sent and received by the Claimants. I reject the Claimants evidence that they did not receive it therefore. However it must be appreciated that in all cases of evidence rejection of evidence does not necessarily lead to rejection of evidence as a whole. Whilst I disbelieve the Claimants on this point it does not follow I disbelieve them on other points. Equally whilst I believe Mr Davis on this point it does not lead to the conclusion that I accept his evidence on other points. In my view the letter means nothing more than as it says. Unless the Defendant sorts out the problem the Planning Authority will take enforcement action and that will stop it dead in the water.

However it must be borne in mind that the letter was written in the context of a need to obtain a bigger chimney and it was nothing more than an approach to Mr Hutchison to start the process of obtaining the landlord’s consent to the proposal. It does not however in my view necessarily lead to a conclusion that because the Claimants were aware of the problems (which they admitted) they would agree to a tenancy at will for this large number of units until the problem was sorted. It would not for the reasons I have set out above make commercial sense for them so to do. They accepted in any event that the letter does not say anything more than they already knew elsewhere.

The Defendant at this time whilst it had a problem and whilst it believed (wrongly) that it had negotiated temporary tenancy was in my view confident in the light of the advice that it obtained and the support from the Local Authority Officers that the 25 metre chimney would resolve the problem. Its previous doubts related to the inferior proposal which they had gone along with emanating from Mr Hawes. The letter therefore is not significant.

I should also deal with the section 25 notices although they are of peripheral importance. Having heard Mr Hutchison I accept his evidence that he posted them. He did not send them recorded delivery but by virtue of section 7 of the Interpretation Act 1978 they are deemed to have arrived unless the contrary is shown. However having heard Mr Davis on this and more significantly his assistant Mrs Dot Turner I am of the view that the letters did not arrive. This does not actually matter. Any statutory continuance of any of the leases under section 24 will have been overturned by the new agreements.

I have already set out above the view I formed of the primary dispute. I prefer Mr Coates’ evidence to that of Mr Davis. Apart from the points that I have referred to above there was nothing in the evidence of either of them which would have enabled me to determine who was telling the truth. Both gave their evidence confidently but the factors and evidence that I have set out above lead me unhesitatingly to conclude that Mr Coates’ evidence is to be preferred and that the discussions led to an agreement which as regards all units save unit 15 was a binding oral agreement for the grant of 3 year terms at the best rent obtainable without taking a fine. Those agreements do not need to satisfy the 1989 Act as they ripen into legal leases by virtue of section 54 (2) LPA 1925 when possession is taken.

I should say something about the other witnesses. Mr Hutchison gave evidence and save in respect to the section 25 notice his evidence was of peripheral relevance in determining the fundamental issue.

In addition to Mr Davis the Defendant called a Mr Crouch. Mr Crouch was the Defendant’s accountant. He gave evidence to a meeting he had for a number of hours to discuss the Defendant’s accounts with Mr Davis on 5th April 2006. During the course of that long discussion he recalled overhearing a conversation Mr Davis had with Mr Coates about the proposed renewal of unit 15. The discussion also stretched to discussions about whether or not Mr Coates would come to the meeting with the residents. He recounted recalling hearing Mr Davis tell Mr Coates if the planning permission was not granted then the Defendant would have to move away. Mr Crouch was a patently honest witness trying to do the best to recall part of lengthy discussions that took place nearly two years before he was asked to recall them. Given the lengthy period that he was there discussing matters with Mr Davis I was of the view that he was confusing private discussions that took place between him and Mr Davis after the call and what Mr Davis told Mr Coates on the telephone. I am afraid I am unable to accept his evidence that he correctly recounted the telephone conversations. I find that he is actually recounting conversations that took place between him and Mr Davis after the telephone conversations. This of course addresses the Defendant’s private position that it intends to depart if the question of the chimney is not resolved.

I have already commented on Mrs Dot Turner’s evidence which I accepted.

Mr Barker is the Defendant’s Operations Director. I found him to be glib and unreliable. He did not appear to take his case or the evidence seriously and he was plainly intent on supporting the Defendant’s case. As the Claimants say in their closing submissions (a point I noticed also) he pretended to buy time when dealing with difficult questions by reading documents and then asking for the question to be repeated. His evidence was not spontaneous and he kept having to look at his witness statement to remind himself of what he was supposed to say. His evidence about the number of conversations was extremely vague and he appeared in my view to be simply determined to repeat at every possible occasion in evidence that there had been frequent discussions about the arrangements and they were always to be of a temporary nature. I do not believe him when he said he overheard a conversation between Mr Davis and Mr Coates a few weeks before the residence meeting. It is an identical form of discussion as that overheard by Mr Crouch. I cannot believe two identical conversations took place within such a close timeframe. More significantly in paragraph 12 of his witness statement he conflates together 3 separate negotiations in one sentence. He gives the impression that there was one negotiation for units 11, 12 and 15 yet they took place respectively in February 2006, August 2005 and April 2006. This is really the glib nature of his evidence. He was equally evasive about the letter of 6th April 2006. He was asked by Mr Davis apparently to review it but failed to explain why it made no reference to the conditionality of the arrangements. He then denied that he was asked to review the letter but could not then explain why he was shown it. He declined to answer the question as to why it would have been a problem if the agreement was temporary. I therefore do not accept any of Mr Barker’s evidence.

Accordingly I determine that the leases were agreed as the Claimants contend.

The agreement for unit 15 is void because it falls foul of the provisions of section 2 of the 1989 Act.

The Claimants addressed this in two ways. First they submit that the Defendant is estopped from denying that the agreement is void. Its reliance on this is set out in paragraphs 44-48 of the Particulars of Claim. It asserts that the Claimants relied upon the oral and written assurances before allowing the Defendant in possession of unit 15, acted to its detriment in allowing it into possession by not insisting on the lease being executed and by reason of the fact that the Defendant has paid and the Claimants have accepted the rent as if it had been executed. This area has been recently considered by the House of Lords in Yeoman’s Row Management Ltd & Anr v Cobbe [2008] UKHL 55 after I reserved judgment I gave the parties an opportunity to submit further representations addressing this decision; only the Defendant chose to do so.

In my view I do not see the Claimants as being any less experienced in the art of property law than Mr Cobbe was (see paragraph 27 of the judgment of Lord Scott which says as follows:-)

“27.

My Lords, I can easily accept that a subject-to-contract reservation made in the course of negotiations for a contract relating to the acquisition of an interest in land could be withdrawn, whether expressly or by inference from conduct. But debate about subject-to-contract reservations has only a peripheral relevance in the present case, for such a reservation is pointless in the context of oral negotiations relating to the acquisition of an interest in land. It would be an unusually unsophisticated negotiator who was not well aware that oral agreements relating to such an acquisition are by statute unenforceable and that no express reservation to make them so is needed. Mr Cobbe was an experienced property developer and Mrs Lisle-Mainwaring gives every impression of knowing her way around the negotiating table. Mr Cobbe did not spend his money and time on the planning application in the mistaken belief that the agreement was legally enforceable. He spent his money and time well aware that it was not. Mrs Lisle-Mainwaring did not encourage in him a belief that the second agreement was enforceable. She encouraged in him a belief that she would abide by it although it was not. Mr Cobbe’s belief, or expectation, was always speculative. He knew she was not legally bound. He regarded her as bound “in honour” but that is an acknowledgement that she was not legally bound.”

Further he said this at paragraph 29:-

“29.

There is one further point regarding proprietary estoppel to which I should refer. Section 2 of the 1989 Act declares to be void any agreement for the acquisition of an interest in land that does not comply with the requisite formalities prescribed by the section. Subsection (5) expressly makes an exception for resulting, implied or constructive trusts. These may validly come into existence without compliance with the prescribed formalities. Proprietary estoppel does not have the benefit of this exception. The question arises, therefore, whether a complete agreement for the acquisition of an interest in land that does not comply with the section 2 prescribed formalities, but would be specifically enforceable if it did, can become enforceable via the route of proprietary estoppel. It is not necessary in the present case to answer this question, for the second agreement was not a complete agreement and, for that reason, would not have been specifically enforceable so long as it remained incomplete. My present view, however, is that proprietary estoppel cannot be prayed in aid in order to render enforceable an agreement that statute has declared to be void. The proposition that an owner of land can be estopped from asserting that an agreement is void for want of compliance with the requirements of section 2 is, in my opinion, unacceptable. The assertion is no more than the statute provides. Equity can surely not contradict the statute. As I have said, however, statute provides an express exception for constructive trusts. So to Mr Cobbe’s constructive trust claim I must now turn.”

As he said that question was not necessary for the decision and was therefore obiter. However I agree with and accept and follow his “present view” that an estoppel cannot be used for asserting that an agreement void for want of compliance with section 2 of the 1989 Act. Therefore for that ground alone the Claimants’ claim to enforce the void 5 year term on estoppel grounds would fail.

I do not believe for one minute that Claimants (including an experienced property lawyer and an experienced surveyor) believed that there was a enforceable agreement for a 5 year term made orally. They cannot say that they allowed the Defendant into possession in a mistaken belief that there was a binding agreement.

I cannot see that the estoppel case is made out and I reject it.

However the Claimants in the alternative submit that by entering into possession under a void agreement and paying rent by reference to a period a periodic tenancy arose. Miss Bahloo who appears for the Claimants in her closing submissions referred me to paragraph 1.007 and paragraph 6.038 of Woodfull “Landlord & Tenant”. Where a person enters into possession a person becomes a tenant at will and when he expressly agrees to pay any part of an annual rent his tenancy at will changes into a tenancy from year to year upon the terms of the intended lease so far as they are applicable to and not inconsistent with a yearly tenancy. Equally where there is entry under a void lease the same principle applies. That is to be contrasted where there is an entry into possession pending finalisation of the terms of an intended lease. Payment of rent under that scenario does not usually lead to the creation of a periodic tenancy see Javid v Aquil [1991] 1 All ER 243. As that case reinforced the important point is “quo animo” the possession payment of rent was received. It cannot be right that a tenancy is created merely by taking a possession payment of money when the parties are not agreed on what the terms of the lease are.

That was not the dispute in this case. The dispute is over what terms were agreed. There was no further element of negotiation required; it was merely a question of dispute as to what terms were agreed. I have preferred the Claimants’ version.

It follows therefore that in the case of unit 15 the Defendant entered into possession under a void lease and has paid rent by reference to the yearly rent. It therefore became a yearly periodic tenancy. The Defendant accepts that if it was a yearly periodic tenancy (or even a quarterly tenancy which is the other possibility) the notice in respect of unit 15 was ineffective because it did not expire on a quarter day.

It follows therefore that the Claimants are entitled to the relief that they seek in this action.

Given my findings it is not necessary for me to consider what would have been the position if I had found that there were no agreements as claimed by the Claimants. In that eventuality it would be necessary to analyse the nature and occupation of the Defendant. It seems to me that their occupation once again was that of a tenant at will which would ripen into a periodic tenancy by payment of rent. There would be no negotiations such as would give rise to a tenancy at will only in accordance with Javad. Once again the Defendant’s case is that the terms of the lease were agreed; not that there remained further negotiations. It follows therefore that even if the Defendant’s version of events is correct it occupied the units as a tenant at will of the Claimants but that such tenancy at will ripened into a periodic tenancy when rent was payable by reference to a period. Once again the Defendant accepts that if it was a periodic tenant and not a tenant at will it notices are invalid. This echoes Mr Davis’ answers in cross examination that he always understood that the occupation was quarterly. Miss Shea in a valiant attempt in her closing tried to suggest that that was an error by a lay person who would not understand the significance of 3 months as opposed to quarterly. I do not accept that. I determine that Mr Davis believed that the rent payment was quarterly. It follows therefore that the periodic tenancy was more probably a quarterly tenancy than an annual one so that it would have to give a quarters notice to expire on one of the quarter days. No such notice had been given so the periodic tenancy continues. It follows therefore that even if the Defendant’s position is correct it would still be liable to rent until it determined its quarterly tenancy. That determination has not yet occurred.