Factual and Procedural Background
Two appeals concerning possession orders for rooms in a house at 21 Cranley Gardens, London SW7, were heard together. The first appeal involved the Defendant challenging a possession order for room no 3 made by a judge on 17 September 1985. The second appeal involved two Defendants challenging a possession order for room no 12 made on 28 November 1985. Both possession orders were made under Order 113 of the Rules of the Supreme Court, which allows summary proceedings for possession of land occupied without licence or consent by persons who are not tenants.
The central factual issue in both appeals was the proper construction of written agreements, styled as licence agreements, between the then owner of the house and the occupants. The judges below held that these agreements granted licences to occupy (lodger status) rather than tenancies. The appellants contended that the agreements created tenancies or were sham agreements.
In the first appeal, the Defendant and a co-occupant signed a licence agreement dated 26 January 1985, permitting use of a furnished room intermittently each day for 26 weeks, with specified restricted hours of use. The agreement reserved to the licensor possession, management, control, keys, and rights of entry, including to remove or substitute furniture. The Defendant’s right expired on 26 July 1985. The landlord applied for possession on 4 September 1985, leading to a hearing on 17 September 1985 where the Defendant was represented by counsel but no affidavit evidence was tendered. The judge refused to remit the matter for trial or adjourn for evidence on sham and made the possession order.
In the second appeal, two Defendants signed a similar licence agreement dated 12 April 1985 for 26 weeks. Allegations of non-payment arose but became irrelevant as the licence expired by effluxion of time before the possession application made on 11 November 1985. The landlord’s successor company applied for possession supported by affidavit evidence. The Defendants filed a joint affidavit alleging an oral agreement varying the written terms and different services. The judge rejected the collateral agreement and sham submissions and made the possession order on 28 November 1985.
Legal Issues Presented
- Whether the written agreements granted licences or tenancies to the occupants.
- Whether the summary possession procedure under Order 113 was appropriate in cases where the nature of the agreement and factual disputes existed.
- Whether the agreements or certain terms therein were sham agreements, i.e., intended by the parties not to create the legal rights they purported to create.
- Whether evidence of collateral oral agreements could affect the characterization of the occupancy.
Arguments of the Parties
Appellants' Arguments
- The agreements should be construed in the factual context ("matrix of facts") to determine if exclusive possession was granted, indicating tenancies rather than licences.
- The appellants should have been allowed an adjournment to present evidence that the agreements were sham, especially given the unusual or arguably inconsistent terms such as restricted daily use and landlord’s right to remove furniture.
- In the second appeal, the appellants alleged a collateral oral agreement with the housekeeper which modified the written agreement and granted exclusive occupation.
- The failure by the landlord to provide services as stipulated and the non-enforcement of certain clauses supported the sham argument.
Respondents' Arguments
- The landlords submitted that the agreements were genuine licences granting lodger status, relying on the reserved rights of possession, control, and access retained by the landlord, which prevented exclusive possession.
- They contended that the summary procedure under Order 113 was properly used and that the appellants’ evidence did not undermine the landlord’s clear entitlement to possession.
- They argued that the alleged oral agreement lacked authority and was insufficient to vary the written agreement.
- They relied on established authorities to support that reserved control by the landlord negates exclusive possession and tenancy status.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Street v Mountford [1985] AC 809 |
Defines criteria distinguishing licences from tenancies; emphasis on exclusive possession and landlord’s provision of services requiring unrestricted access. |
Applied as the central authority to determine that the agreements granted licences (lodger status) rather than tenancies, subject to further inquiry on sham terms and factual disputes. |
| Snook v London & West Riding Investments Ltd [1967] 1 All ER 518 |
Defines the legal concept of a sham agreement as one intended to create a false appearance of legal rights. |
Used to analyze whether certain clauses of the agreements were sham and whether the agreements as a whole were sham. |
| Somma v Hazelhurst [1978] 1 WLR 1014 |
Considered sham terms inserted to disguise the true nature of an agreement to avoid Rent Acts protections. |
Referenced to illustrate how sham terms can be ineffective and how courts should be astute to detect sham devices. |
| GLC v Jenkins [1975] 1 WLR 155 |
Landlord entitled to summary possession proceedings if right is clear; no discretion to refuse merely because proceedings are rapid. |
Supported the proposition that summary proceedings under Order 113 are appropriate unless the claim is not sufficiently clear and straightforward. |
| Shah v Givert (1980) 124 SJ 513 |
Summary possession proceedings must be remitted for trial if substantial issues arise. |
Informed the court’s discretion on whether summary proceedings were appropriate. |
| Henderson v Law (1985) 17 HLR 237 |
Guidance on when summary proceedings should be continued, adjourned, or dismissed based on whether serious issues of tenancy arise. |
Guided the court’s approach to adjournment and trial remittance. |
| Bradley v Baylis (1881) 8 QBD 195 |
Distinguishes lodgers from tenants based on landlord’s control and provision of services. |
Supported the argument that landlord’s retained control and presence of a servant could negate tenancy despite exclusive use. |
| Addiscombe Garden Estates Ltd v Crabbe [1958] 1 QB 513 |
Agreement must be construed as a whole to determine if it confers tenant or licence rights. |
Applied to the construction of the licence agreements in question. |
| Errington v Errington [1952] 1 KB 290 |
Exclusive possession is not conclusive; the nature and quality of occupancy is relevant. |
Referenced to show that exclusive possession alone does not determine tenancy status. |
| Marchant v Charters [1977] 1 WLR 1181 |
Occupier receiving services such as cleaning and linen provision is a licensee, not a tenant. |
Used to support the conclusion that the occupants were licensees. |
| Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989 |
Factual matrix and genesis of agreement relevant to construction. |
Supported the view that the factual context is important but issues of sham require trial. |
| Shellmex & BP Ltd v Manchester Garages Ltd [1971] 1 WLR 612 |
Parties’ intention and label of agreement are relevant but do not override true nature of transaction. |
Referenced in relation to parties’ freedom to contract and the court’s role in construction. |
Court's Reasoning and Analysis
The court began by applying the principles established in Street v Mountford, which distinguishes licences from tenancies primarily by whether exclusive possession is granted and whether the landlord provides attendance or services requiring unrestricted access. The agreements in question were analysed clause by clause.
The court found that the agreements reserved possession, management, and control to the landlord, including unlimited rights of entry and the ability to remove or substitute furniture. The licences restricted the licensees’ use of the rooms daily between 10:30 am and noon, a highly unusual and arguably artificial provision. The landlord was obliged to provide attendance and services, but the extent and frequency were not specified, leading to a reasonable standard interpretation.
The court acknowledged that certain clauses—particularly the daily restriction on room use and the landlord’s right to remove furniture—appeared bizarre and potentially sham, suggesting they might not reflect the true intentions of the parties. The court emphasized the legal definition of a sham agreement as one intended by all parties to create a false impression of legal rights.
In the first appeal, the court found that the claim for possession was not sufficiently clear and straightforward for summary proceedings due to the presence of arguably sham terms and unresolved factual questions about the provision of services and the true nature of the agreement.
In the second appeal, the existence of an alleged collateral oral agreement with the housekeeper raised triable issues that could not be resolved summarily, especially without cross-examination of witnesses. The court expressed difficulty in accepting the lower judge’s rejection of the sham and collateral agreement arguments, given the unusual terms and evidence presented.
The court also considered established authorities emphasizing that the presence of landlord control and attendance generally negates exclusive possession and tenancy status, but it did not decide definitively whether exclusive possession must always be implied absent such services.
Ultimately, the court concluded that the summary possession orders should be set aside and the matters remitted for trial to resolve the factual and legal disputes.
Holding and Implications
The court ALLOWED BOTH APPEALS and set aside the possession orders made against the appellants.
The appeals were remitted to the county court for full trial to determine the true nature of the agreements and the rights of the parties, given the presence of sham terms and disputed factual issues. The court emphasized that this decision did not establish a new principle but reflected the necessity of proper trial where summary proceedings are inappropriate due to unclear or disputed claims.
The court also noted that the presence of sham allegations alone does not open the door to delaying possession orders; rather, the court must carefully examine the agreement and evidence to determine whether summary proceedings are appropriate.