David Wilde. The Decision. The Facts

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1 David Wilde The House of Lords decision on certainty of leasehold term in Prudential Assurance Co Ltd v London Residuary Body1 has proven controversial.2 This was only to be expected of an important case implicitly raising fundamental issues concerning the relationship between contract and property; especially since a majority of their Lordships themselves expressed reservations about the state of the law as it was found to be, and called for consideration of ref~rm.~ However, whatever the various views on the merits of the law as pronounced in the case, it appears so far to have gone unquestioned that the House of Lords formulation of the law was at least well reasoned and coherent. To the contrary, this note seeks to argue, with great respect, that there is a fundamental logical flaw in their Lordships reasoning, and that the case leaves the law in a very uncertain state. The Facts In 1930 the owner of a strip of land sold it to the London City Council, which contemporaneously purported to lease it back to him on certain terms. These terms provided that, the tenancy shall continue until the... land is required by the council for the purposes of [road widening] and the council shall give two months notice to the tenant at least prior to the day of determination when the... land is so required. A rent of f30 per annum was stipulated. The agreement was evidently intended to be of comparatively short duration. However, all road widening plans were subsequently abandoned, and the lease and reversion passed to successors in title over a period of decades. In 1988 the landlord purported to give six months notice to quit, treated as a common law notice. The tenant sought a declaration that the tenancy could only be determined upon the land s being required for road widening. An appropriate commercial rent for the land by this time would have been in the order of f 10,OOO per annum. The declaration sought by the tenant was refused. The Decision The House of Lords re-established, in the face of more recent derogation^,^ the old common law rule that, to be valid, a lease must, at its commencement, have a certain (or ascertainable) maximum possible duration. The agreement between the original parties was therefore void. If it had provided forfive years, but with the landlord having power to determine earlier on the land s being required for road *Department of Law, University of Reading. 1 [I AC 386, noted by Stuart Bridge at [1993] CLJ Contrast the views of Susan Bright, Uncertainty in Leases - Is It a Vice? (1993) 13 LS 38 and Peter Sparkes, s (1993) 109 LQR Lords Griffiths, Browne-Wilkinson and Mustill; Lords Templeman and Goff evinced no disquiet. 4 Most notably Ashburn Anstalt v Arnold [1989] Ch 1 (CA). 0 The Modern Law Review Limited

2 The Modern Law Review [Vol. 57 widening, that would have been valid; but a lease simply until the land is required for road widening was invalid. Nevertheless, from the fact of possession and the payment of a yearly rent, their Lordships held that the law should infer the existence of a periodic annual tenancy, on the terms of the void agreement, so far as these were consistent with an annual tenancy. Counsel for the tenant argued that this should include a term whereby the landlord was not entitled to give notice until the land was required for road widening. Again by reference to old cases, but at the expense of some more modern case law,5 the House of Lords decided that no such implied provision could be accepted, because in a periodic tenancy a restriction upon the power of either party to give notice can only be valid if, from the commencement of the tenancy, the restriction is of a certain (or ascertainable) maximum possible duration. Their Lordships said that a lease from year to year could validly be subject to a restriction upon the right of the landlord to give notice forfive years, unless the land is required for road widening ; but an unlimited restriction upon the right of the landlord to give notice unless the land is required for road widening could not be valid. This proposition was equated with, or at least represented as a facet of, the requirement of certainty of leasehold term. Criticism The reasoning of the House of Lords in relation to fixed term leases seems unexceptionable. However, the reasoning of their Lordships in relation to periodic tenancies appears questionable. This must be a matter for some concern. Such tenancies are commonly created, and they will also now arise more often by implication of law as a result of the House of Lords return to the old axiom of the need for certainty in respect of fixed term leases. It is important to bear in mind the reasoning by which an ordinary periodic annual tenancy is itself saved from being of uncertain maximum possible duration. The law initially views the tenancy as for a certain one year term; and should the tenancy not be determined by notice at the end of that year, views the tenancy as continuing by agreement of the parties for a further certain one year term; and so on. Thus - notwithstanding that the tenancy may subsequently be extended beyond any year currently agreed to, by the parties assenting to continuance, so that at its commencement it is impossible to say how long the tenancy, as distinct from any individual one year term within it, will last - the parties are regarded as only agreeing to a certain one year term at any single point of creation or continuation, and since each one year term within the tenancy is, at its commencement, of certain maximum possible duration, this provides sufficient certainty at law. Does the insertion into a periodic annual tenancy of a stipulation that the landlord may not give notice unless the land is required for road widening detract from the lease s certainty of term, established according to such reasoning, as the Prudential case purports to decide? It is suggested that if an ex facie temporally unlimited provision restricting the landlord s freedom to give notice is inserted into such a lease, therefore being made temporally coextensive with the lease, ex hypothesi, the restriction must be seen as lasting for a sequence of discrete certain one year periods, like every other part of the tenancy. The restriction, in common 5 In particular, In re Midland Railway Co s Agreement [I9711 Ch 725 (CA). 6 For the periodic tenancy as a series of distinct leasehold terms making up a single tenancy, see Hammer.smith and Fulham London Borough Council v Monk [1992] 1 AC 478 (HL) The Modern Law Review Limited 1994

3 with the other undertakings in the lease, would be for a certain period of one year, and no more, at any one point in the tenancy: The landlord may not give notice this year [necessarily implicit in the fact that the tenancy and any stipulations it contains are only agreed to for one year at any one time] unless the land is required for road widening ; an annual restriction, to continue year upon year until the tenancy s end, just as the other obligations in a periodic tenancy do, but never amounting to more than a one year commitment at any time. The covenant would do nothing to violate the boundaries of certainty of term, any more than any other exfacie temporally unlimited covenant of the type commonly found in a periodic tenancy agreement. It is true that the hypothesised restriction would make it more likely that the tenancy would continue, by limiting the right of one side to withhold consent to continuance; but this would in no way alter the fact that the tenancy would at all times remain of certain term, according to the law s traditional perception of a periodic annual tenancy : the one year initially and periodically agreed to under the lease. Put another way, it is suggested that any restriction in a periodic tenancy upon the power to give notice, whether specified to last for a limited time, or stating no limitation in point of time and therefore temporally coextensive with the lease, will always be of a certain maximum possible duration. The supposed rule that such a restriction is required to have certainty of duration is therefore devoid of substantial content (save to the limited extent that it merely restates the general rule that any contractual provision must have sufficient certainty, so that a restriction expressed to last for a time which was contractually uncertain could not form the basis of a valid contractual agreement). The supposed rule adds nothing to the rule that there must be certainty of leasehold term; and indeed proceeds from a confused misunderstanding of that rule. Focusing upon the true requirement of the rule that there must be certainty of leasehold term, it is suggested that in a periodic annual tenancy the term at any given moment is always one year certain; and restrictions upon the right of either party to give notice have nothing whatever to do with certainty of term. As a test of their Lordships reasoning on certainty of term in Prudential, it is perhaps instructive to consider three situations. Firstly, a simple periodic annual tenancy with no restrictions upon the right to give notice. Is there certainty of term? Yes, there is no dispute, for one year. Secondly, a periodic annual tenancy with the landlord precluded generally from giving notice unless the land is required for road widening. Is there certainty of term? Yes, according to the argument presented here, for one year; no according to the House of Lords. Thirdly, a periodic annual tenancy with the landlord precluded from giving notice unless the land is required for road widening for five years. Is there certainty of term? Yes, according to the argument presented here, for one year; and yes according to the House of Lords. But viewing the stipulation for five years as relevant to certainty of term, what is the certain term? Is it five years, taking matters from the landlord s standpoint, because he is not entirely free to give notice for that period, or is it one year, taking matters from the tenant s standpoint, since he is entirely 7 Lord Templeman, delivering the leading speech in the Prudential case, perhaps went some way to suggesting - as some others certainly have - that it is the power to give notice that makes a periodic tenancy of certain term: the term can be rendered certain at any point by notice. On this view, the hypothesised restriction on the landlord s freedom to give notice would pose a problem of certainty. But freedom to give notice cannot be an adequate explanation of certainty in periodic tenancies. The requirement of the law is that a lease be certain from the outset, not that it be capable of being made certain at some later date; otherwise a purported lease (not periodic) to continue until stipulated notice by either side would be valid, which it plainly is not. 0 The Modern Law Review Limited

4 The Modern Law Review [Vol. 57 free to give notice; and if the term is five years, how then is it correct to describe the lease as a yearly tenancy? What, temporally, is the tern; and how is the limitation for five years relevant to it?8 It is suggested that it follows from the essential nature of a periodic annual tenancy that in all three examples there is a certain one year term. Repugnancy There are some dicta in Lord Templeman s leading speech which, taken in isolation, suggest that his Lordship felt that, irrespective of uncertainty of term, the limitation upon the landlord s right to give notice argued for could not anyway be accepted because it was repugnant to the nature of a periodic tenancy, which presupposes freedom to give notice. However, if it is accepted that the ground of decision relating to uncertainty of term was untenable, it would surely be wrong to seek instead to justify the decision in the case by interpreting it as based upon repugnancy. This is simply not what the House of Lords said, when read as a whole. Indeed, as counsel for the tenant foreshadowed in argument, their Lordships were apparently prepared to recognise as valid a limitation that no notice may be given for one million years, unless the land is required for road widening, which hardly suggests respect for freedom to give notice as a ground of decision. Moreover, it would be undesirable anyway to infer an unexpressed ratio decidendi, thus denying the House of Lords the opportunity to articulate a clear formulation of its limits where they would otherwise be wholly indeterminate, especially in relation to such an important question, potentially affecting numerous titles. For the present we should take it that the law on repugnancy remains that a limitation upon the right of the landlord to give notice under a periodic tenancy is not void as inimical to the nature of such a tenancy (and indeed it will run with the land), unless it denies the landlord the right to give notice absolutely and for ever: Breams Property Investment Co Ltd v Strougler and Others9; Centaploy Ltd v Matlodge Ltd.I Justice Thus, the decision of the House of Lords seems unsustainable. The facts of the case are not sufficiently reported for any worthwhile attempt to be made at suggesting what the most just solution was. However, possibilities existed in the view of Millett J that the notice limitation should have been construed to last 8 Lord Templeman said in his leading speech in Prudential [ AC 386, 395A: A lease can be made from year to year subject to a fetter on the right of the landlord to determine the lease before the expiry of five years unless the war ends. [The lease is] valid because [it creates] a determinable certain term of five years. But this does not resolve the difficulty. With respect, it merely exposes the confusion. How can there be a lease from year to year for a term of five years? Is the yearly tenant really bound for five years? Does the yearly lease really come to an end after five years, even though no notice has been given on either side? According to the argument here, in such a case there is the usual initial and then periodic certain one year term; with the limitation upon the right to give notice an annual one, not continuing beyond the expiry of five years from the date of the lease s initial commencement, should the lease extend beyond five years. [I KB 1 (CA). [1974] Ch 1, Whitford J [I ECLRW The Modern Law Review Limited 1994

5 Pinekerry v Needs: A Conflict Between Law and Practice only for so long as the landlord continued to be a highway authority, with a possible limitation upon the landlord's right to assign to a non-highway authority; and in the view of the Court of Appeali2 that the notice limitation might only have been valid for so long as it was still possible that the land might be required for road widening, and then have become invalid if that ever became impossible, for example because the relevant road ceased to exist, because effectively an absolute bar to the right to give notice. Conclusion If the argument made here is accepted, then the Prudential case poses a problem for conveyancers and property lawyers - and for judges. Can this House of Lords decision be simply disregarded on the ground that its ratio decidendi is plainly wrong, because logically inconsistent with the established and necessary understanding of periodic tenancies? Or is the decision to be regarded as right, but the reasoning not to be followed because untenable; and, if so, what other interpretation of the case is to be imposed over the more obvious one? Or must the case be adhered to despite its apparent shortcomings? All that can be said by way of conclusion is that there is no easy answer here. Pinekerry v Needs: A Conflict Between Law and Practice Jean Howell" The Court of Appeal decision in Pinekerry Ltd v Needs (Kenneth) (Contractors) Ltdl illustrates the gap that can exist between law and practice, in this case between land registration law and land registration practice. Pinekerry: the Facts, the Decision and the Issues By a conveyance of 18 January 1989 ('the Monogram conveyance'), the plaintiff, Pinekerry Ltd, obtained the legal title to freehold unregistered land. As the land was within an area of compulsory registration at the date of the Monogram conveyance, it was necessary for Pinekerry to make an application to register the title under section 123(1) of the Land Registration Act No application was made within the two month period allowed by the section and, under its terms, Pinekerry lost legal title to the land, which reverted to the original vendor, Monogram.2 Pinekerry was thus unable, after 18 March 1989, to convey a legal title. 12 [1992] 1 EGLR 47. *Faculty of Law, University of Manchester. I (1992) 64 P & CR The section does not in fact say anything about the destination of the legal estate. in these circumstances, but it is always assumed that it reverts to the original vendor who holds it as bare trustee. 0 The Modern Law Review Limited