Smyth-Tyrrell v Bowden

Having handed down my judgment today, a point has arisen in relation to the form of order which I should make, and in particular in relation to that part of the counterclaim which asks for possession and mesne profits.

The point arises in this way. I have held that tenancy conferred upon the claimants was not an Agricultural Holdings Act 1986 protected tenancy, and I held that the tenancy was within the Landlord and Tenant Act 1954 Part II. The defendant has established his opposition on grounds 30(1)(g) of the 1954 Act to the grant of a new business tenancy to the claimants. Accordingly, there is no right to a fresh tenancy for the claimants. However, the claimants have sublet the cottage which is the central part of the land originally let to them, leaving only the ambient woodlands in their own legal possession under the original tenancy. Possession of the cottage has therefore passed to the company which they own.

The point that has been raised by Mr Adams on behalf of the claimants is that, by S.64 of the Landlord and Tenant Act 1954, the tenancy granted originally granted to the claimants should continue until, in effect, three months after the final disposal of the application for a new tenancy, taking into account any appeals. He submits that under S.23(1) the business tenancy, with which the Landlord and Tenant Act 1954 Part II is concerned, includes premises where the business is carried on. Even though, therefore, the cottage itself has been sublet to the company, the rest of the land the woodlands remains in the possession of the claimants and that is property where the business is still being carried on. I will come back to what the business is in a minute.

Under S.26(5) of the Act, the current tenancy, that is the business tenancy and not the tenancy of the holding as defined, continues until terminated in accordance with Section 64 and, as I have said, S.64 continues the tenancy until three months after final disposal of the application. Accordingly, says Mr Adams, I cannot make an order for possession yet. What I can do, Mr Adams accepts, is to make a declaration as to the parties’ rights and perhaps give the defendant liberty to apply for possession once circumstances are established that the three months after final disposal of the application have actually elapsed. The question, therefore, is whether it can be said that the claimants are carrying on a business on the woodlands around the cottage even though the main part of the business that they were carrying on – a holiday letting – is now being carried on by the company to which they have sublet it.

We have had an interesting discussion this morning about circumstances in which a business is held to be carried on for the purposes of the business tenancy legislation, but Mr Adams has also referred me to three paragraphs in the judgment I have handed down, which he says are relevant to this question. The first such paragraph is paragraph 30, in which I say this:

Now it is clear to me on re-reading this that I have certainly made the assumption in paragraph 62 that the claimants would be in a position to maintain the existence of the business tenancy in relation to the woodlands surrounding the cottage. I have to confess that I had simply dealt with the matter in principle without looking at it in detail. What I had said in paragraph 52 for the purposes of the Agricultural Holdings Act was that the purpose of the claimants in working on the woodlands was to complement the holiday-lettings business to create an ambience, a rural ambience, for paying guests and not as ancillary to another agricultural purpose carried out on the land. I had not then focussed on the importance of that finding for the purposes of the 1954 Act.

It seems to me that there is a lacuna in my judgment as to what is the position and in particular whether the claimants are carrying on a business for the purposes of 1954 Act in creating the rural ambience for the paying guests on the woodlands, whereas the actual business in the later years was being carried on in the cottage by the company to which they had granted a sub-tenancy. It seems to me that it would be wrong for me in these circumstances to leave the matter as it is and (if this is what happens) simply allow the matter to go forward to the Court of Appeal. That court might well say that the judge should have made a finding on this point when it was drawn to his attention. It has now been drawn to my attention and I think that I should make a finding in relation to it. The question is whether the planting and regeneration of the woodlands surrounding the cottage, being carried on in order to create a rural ambience, can be treated as a business activity for the purposes of a business being carried on in adjacent land by a company belonging to the same people?

I have been referred to a section in Chapter 1 of Wayne Clark and Kirk Reynolds’ book Renewal of Business Tenancies, Fifth Edition,at paragraph 1.114:

The point here, of course, is that the tenants are individuals; that is to say the claimants, and not a corporate body. Paragraph 1.116 says:

“In relation to an activity carried on by an individual an activity must constitute a trade, profession or employment. Those three categories are exhaustive of the meaning of business in relation to an activity carried on by an individual’: Lewis v Weldcrest [1978] 1 WLR 1107 (digested in paragraph 118). The pursuit by a person gratuitously of a spare-time activity in his own home is not a trade, profession or employment: Abernathy v Kleiman Ltd (digested in paragraph 1.117). As Widgery LJ said in that case, the Act

‘was intended to pick up a very wide range of tenancies which previously had no sort of protection at all. Shops factories, professional offices, cinemas, tennis clubs and the like were all without protection before 1954 except for the very limited coverage provided by the Landlord and Tenant Act 1927, and, it being the intention of Parliament to give protection to this wide range of commercial activity, the definition of business had to be a wide one. But it certainly does not follow from that Parliament intended to push the tentacles of this Act into domestic lettings or the activities that a man carries on in his private rooms, as part of his hobby or recreation... By and large … what a man does with his spare time in his home is most unlikely to qualify for the description ‘business’, unless it has some direct commercial involvement in it, whether it be a hobby or a recreation or the performance of a social duty’.

In many cases the question whether the tenant is carrying on a trade, profession or employment is a question of degree. Thus, for instance whether the taking in of lodgers can be a trade, depends to a large extent to the number of lodgers, the size of the premises and the sort of sums and services which are involved.”

In the present case the position is that the claimants regenerated the woodlands partly because they were interested in the regeneration of woodlands as part of the project of refurbishment of a derelict property, but also in order to create an atmosphere in which it would be attractive for holiday lettings to take place. It is the case that the claimants were not being in any way remunerated as such for carrying on that work. In the one sense it was a hobby, but it was intended to make the business of their company carried on at the cottage more attractive and more lucrative. In that sense it was for the purposes of profit, although not directly to them, only indirectly. In these circumstances it seems to me that what the claimants were doing on the woodlands does constitute a business for the purposes of the definition of ‘business tenancy’ in the Landlord and Tenant Act 1954 Part II. I therefore hold that my statement in paragraph 62 that, in principle, they – that is the claimants – could claim that right in relation to the rest of the land let to them, is right, although without having thought it through, and that therefore in principle the 1954 Act applies to the tenancy.

That brings me to the question of what happens, therefore, as a result. It seems to me that Mr Adams is right that I cannot make an order for possession or mesne profits today in relation to this land, because the business tenancy – that is the whole tenancy – is continued by the statute under S.64 until the point fixed for the purposes of that section. That is to say until the expiration of three months, beginning with the date on which the application is finally disposed of. That reference to being “finally disposed of” is a reference to the earliest date by which the proceedings on the application, including any proceedings on or in consequence of an appeal, have been determined, and any time for appealing or further appealing has expired (and then there is a provision for cases where an application has been withdrawn). It seems to me that what I must do in relation to this case is to grant a declaration as to the rights of the parties which will take account of the continuation for the purposes of S.64, but give liberty to apply to the defendant to apply for possession in circumstances where that continuation has come to an end.