Certainty of Terms and Leases: Curiouser and Curiouser

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<ul><li><p>Certainty ofTerms and Leases:Curiouser and Curiouser</p><p>Kelvin F. K. Low*</p><p>The common law rule that requires leases to have a fixed terminus from the outset is one thathas been much criticised. In Berrisford v Mexfield Housing Co-operative Ltd, the Supreme Courtmanaged to blunt its effect by suggesting that most leases of uncertain duration can be transformedinto 90-year tenancies. However, it is suggested that their Lordships have possibly misunderstoodand overstretched an ancient common law rule and have not fully considered some of theimplications of their decision.</p><p>Begin at the beginning, . . . and go on till you come to the end; then stop.1</p><p>Beginnings and endings,particularly endings, feature no more prominently in thelaw than in the context of leases. In particular, the law requires that a leaseholdestate,or a term of years absolute,must from the outset have a fixed terminus.Thisrule of law would thus invalidate the grant of a fixed term lease until Englandwins theWorld Cup.Likewise,a periodic tenancy which forbids either party fromexercising its right to terminate unless England wins the World Cup would alsobe rendered void.Though much criticised, the courts seem resigned to deferringto the respectability this rule has built up simply through the passage of time.Itis far from clear, it has been said, that the historic rationales for the rule retaintoday the force which they may once have enjoyed.2 In Prudential Assurance CoLtd v London Residuary Body,3 (Prudential Assurance) although Lord Browne-Wilkinson joined in affirming the rule, his Lordship nevertheless described it asancient and technical, productive of bizarre outcome[s] and devoid of satis-factory rationale or useful purpose.4 The rule is said to be objectionable on theground that it frequently denies efficacy to perfectly sensible arrangementsderived from a process of conscious bargain between autonomous persons.5</p><p>In Berrisford v Mexfield Housing Co-operative Ltd,6 (Berrisford v Mexfield) a sevenmember panel of the Supreme Court echoed his Lordships views.Although therule was retained, their Lordships avoided the bizarre outcome which a straight-forward application of the rule to the facts of the case would have engendered bytransforming a lease of otherwise uncertain duration into a 90-year tenancy.</p><p>THE FACTS AND THE LOWER COURTS</p><p>Mexfield Housing Co-operative Ltd was founded by a bank as a fully mutualhousing association as part of a mortgage rescue scheme. In 1993, Mexfield</p><p>*School of Law, Singapore Management University.</p><p>1 L. Carroll, Alices Adventures in Wonderland (London: Macmillan, 1865) 85.2 K. Gray and S. F. Gray, Elements of Land Law (Oxford: OUP, 5th ed, 2009) 326.3 [1992] 2 AC 386.4 ibid, 396.5 Gray and Gray, n 2 above, 326.6 [2011] UKSC 52.</p><p>Kelvin F. K. Low</p><p> 2012 The Authors.The Modern Law Review 2012 The Modern Law Review Limited.401(2012) 75(3) MLR 387436</p></li><li><p>purchased 17 Elton Avenue, Barnet, from Ms Ruza Berrisford and let it back toMs Berrisford under an Occupancy Agreement. The premises were to be letfrom month to month until determined in accordance with the agreement.Whereas there was no restriction on when Ms Berrisford could determine thetenancy,Mexfields rights to bring the tenancy to an end were specifically limitedby clause 6 of the agreement.One of the limited instances under which Mexfieldsrights to determine the tenancy would become exercisable was upon MsBerrisfords failure to pay rent for 21 days. When Ms Berrisford did fall intoarrears, Mexfield served upon her a notice to quit, though without apparentlyrelying on its right to do so under clause 6. It argued that the OccupationAgreement could not create a valid tenancy as envisaged by the parties because,on the basis of the rule in Prudential Assurance,7 any fetter on the right of eitherparty to determine a periodic tenancy would render the period of the tenancyuncertain,which would have the effect of invalidating the lease. In its place,by MsBerrisfords actions in taking possession of the premises and paying a monthlyrent, would be a monthly tenancy without the offensive fetter.As such, Mexfieldwould have been perfectly entitled to determine the tenancy by serving a monthsnotice on Ms Berrisford for no reason at all.This is all trite law and it is no surprisethat Mexfield succeeded by way of summary judgment before Peter Smith J.8</p><p>This defeat came,however,when Ms Berrisford was unrepresented.On appealto the Court of Appeal,9 Ms Berrisford came to be represented by MrWonnacottwhose highly learnedyet cleverly economical10 arguments persuadedWilson LJof the merits of his clients case.</p><p>Three arguments were presented though one was abandoned midway throughthe hearing asan academic question too far.11 First,it was submitted that,althoughPrudentialAssurance had the effect of negating the offending clause at common law,nevertheless equity could intervene to prevent Mexfield,as an immediate party tothe tenancy agreement, from seeking possession as against Ms Berrisford, anotherimmediate party to the tenancy agreement. Secondly, it was argued that, to theextent that no effect could be given to the clause as a term of a tenancy, the partiesshould be taken to have entered into a licence for Ms Berrisford to occupy thepremises so that the clause could nevertheless constrain Mexfields right to recoverpossession.Although Wilson LJ was persuaded by the first submission, ingenuitynevertheless failed to prevail against authority and the majority of the Court ofAppeal (Aikens and Mummery LJJ) reluctantly ruled against Ms Berrisford.</p><p>MISGIVINGS BEFORE THE SUPREME COURT</p><p>On appeal to the Supreme Court, MrWonnacott presented even further reasonswhy his clients appeal should be allowed.There may be disappointment in some</p><p>7 n 3 above.8 Mexfield Housing Co-operative Ltd v Berrisford [2009] EWHC 2392 (Ch).9 [2010] EWCA Civ 811; [2011] 1 Ch 244,noted by K.F.K. Low,Leases and the maximum duration</p><p>rule yet again, but with a twist (2011) 127 LQR 31.10 ibid at [5].11 ibid at [12]. Mr Wonnacott had sought to argue that equity could provide relief against forfeiture</p><p>even in favour of non-owners of property rights.</p><p>Certainty of Terms and Leases</p><p> 2012 The Authors.The Modern Law Review 2012 The Modern Law Review Limited.402 (2012) 75(3) MLR 387436</p></li><li><p>quarters that a call was not made for the rule to be abandoned12 but there was inany event no inclination to effect such a dramatic change to a long-establishedrule.13 Not only was there a fear that such a change in the law might upset longestablished titles,14 such a change would be incompatible with the Law ofProperty Act 1925 which envisages only two estates in English law, the fee simpleand the term of years. Nevertheless, like Lord Browne-Wilkinson before them,some of their Lordships were equally vociferous in their criticism of the rule.Lady Hale described the rules as having an Alice in Wonderland quality aboutthem,15 a Carrollian characterisation reinforced by Lord Neuberger.16 Indeed,judicial criticism of the rule appears to have grown in strength since PrudentialAssurance. Whereas Lord Browne-Wilkinsons was a lone voice in PrudentialAssurance, Lord Dyson joined Lord Neuberger and Lady Hale in open criticismof the rules apparent irrationality.17 Given that the remaining Law Lords con-curred in Lord Neubergers leading judgment, it cannot be a stretch to imaginethat they share in some at least of his Lordships misgivings as to the rule.</p><p>Their Lordships misgivings are, however, arguably misguided, as are muchof the criticisms. Had the lease not left its roots in contract and evolved into aspecies of property rights, complaints about unnecessary interference with partyautonomy may well be valid. However, it has long been recognised that con-tracting parties may not create property rights willy nilly as they fancy whichthereafter bind their successors.18 However the numerus clausus principle is justi-fied, it no doubt exists and not simply in common law systems either.This doesnot mean, of course, that the rules relating to leasehold estates may not continueto evolve but a consideration of their Lordships actual decision will demonstratethat an abandonment of the rule on certainty of terms for leases has far-rangingimplications on our understanding of the law of property well beyond theimmediate concern of upsetting long established titles.</p><p>MR WONNACOTTS EVIDENCE</p><p>That a consideration of the abandonment of the rule was unnecessary in this casewas the result of Mr Wonnacotts impressive and scholarly research19 and con-spicuously clear and learned submissions.20 Three different arguments were put</p><p>12 n 6 above at [37].13 ibid at [35][37] per Lord Neuberger, [96] per Lady Hale and [115] per Lord Dyson.14 ibid at [37] per Lord Neuberger citing Lord Browne-Wilkinson in Prudential Assurance n 3 above,</p><p>397.15 ibid at [88].16 ibid at [34].17 ibid at [115].18 B. Rudden,Economic Theory v Property Law:The Numerus Clausus Problem in J. Ekelaar and J.</p><p>Bell (eds), Oxford Essays in Jurisprudence (Third Series) (Oxford: Clarendon Press, 1987) 239. Forspecific case law to this effect, see Keppel v Bailey (1834) 2 My &amp; K 517, 535 per Brougham LC;Hill v Tupper (1863) 2 Hurlst &amp; C 121 per Pollock CB;StockportWwks v Potter (1864) 3 H &amp; C 300,314 per Wilde B, 321 per Bramwell B. See also O.W. Holmes, The Common Law (Boston: Little,Brown &amp; Co, 1881) 407.</p><p>19 n 6 above at [116] per Lord Dyson.20 ibid at [11] per Lord Neuberger. See also [86] per Lord Walker.</p><p>Kelvin F. K. Low</p><p> 2012 The Authors.The Modern Law Review 2012 The Modern Law Review Limited.403(2012) 75(3) MLR 387436</p></li><li><p>before their Lordships. First, that the grant of leasehold estates of uncertaindurations were treated as grants of determinable freehold life estates by an ancientcommon law rule, which by the operation of section 149(6) of the Law ofProperty Act 1925, are transformed into determinable 90-year leasehold estates.A90-year tenancy with the same fetters would not fall foul of the certainty of termrule so that the fetters would remain valid and enforceable as between landlordand tenant. Secondly, if the Occupation Agreement did not create a valid lease, itnevertheless created a valid and enforceable licence as between the parties. Finally,the fetters,even if they were not enforceable in rem as a term of the tenancy,shouldnevertheless be enforced by the courts in personam as a matter of contract.</p><p>ITS ALWAYS 90 YEARS NOW</p><p>Over the course of her adventures inWonderland,Alice is informed by the Hatterthat, in retaliation for murdering the time,Time wouldnt do a thing he askedso that [i]ts always six oclock now.21 According to Berrisford v Mexfield, by aprocess of transmogrification and re-transmogrification, all grants of leaseholdestates of uncertain durations are always grants of 90-year leases now.As they nowhave a fixed terminus, the fetters would now be valid after all.The process takestwo stages, the first through the operation of a supposed ancient rule of thecommon law22 and the second via statutory intervention necessitated by Parlia-ments murder of the freehold life estate.23 Owing to its apparent pedigree inauthority, this argument demonstrated itself to be the path of least resistance totheir Lordships. As their Lordships explained, the absence of this argument inPrudential Assurance was explicable as it would not have made any difference inthat case.24 However, Lady Hale admitted that it was curiouser and curiouser.25</p><p>This conclusion is perhaps less curious than it is precarious.The rule identifiedin the first stage, traceable as far back at least as Bractons De Legibus et Consue-tudinibus Angliae,26 does not appear to have originated as a rule to rescue failedleases of uncertain duration at all. It is discussed in Bracton under the heading Ofthe Assize of Novel Disseisin, in which the author sought to discuss the rights oftenants of a disseisor should the disseisee recover his estate. It is not evident thatBracton regarded the rule as one of law.According to Thornes translation, thetext of Bracton reads:27</p><p>But if he says I give and grant to you so much land until you have taken thence fortypounds, because it cannot be known how long it may take for so many pounds tobe raised from so much land, because the term is uncertain and undetermined, it is evidentthat the tenement will remain a free tenement until so many pounds are raised, since it</p><p>21 L. Carroll, Alices Adventures in Wonderland n 1 above, ch 7 A Mad Tea-Party.22 n 6 above at [43][44] per Lord Neuberger and at [117] per Lord Dyson.23 Law of Property Act 1925, s 1.24 n 6 above at [92] per Lady Hale.25 ibid at [93].26 G. E. Woodbine (ed), Bracton on the Laws and Customs of England vol 3 (Cambridge, Massachusetts:</p><p>Belknap Press, S. E. Thorne trans, 1977).27 ibid at 50.</p><p>Certainty of Terms and Leases</p><p> 2012 The Authors.The Modern Law Review 2012 The Modern Law Review Limited.404 (2012) 75(3) MLR 387436</p></li><li><p>cannot be known or determined in how long a time they may be raised, in howmany years, as [may be done in the case] above of so many harvests, [where] a termcertain may be fixed, since each harvest has its year, one in each. (Emphasis added.)</p><p>The language is not self-evidently demonstrative of a rule of law. In Littleton,28</p><p>the rule is discussed in the chapter Estates Upon Condition. It appears that thepassage quoted by Lord Neuberger29 was once translated by Coke from theoriginal French as:30</p><p>[I]f an abbot make a lease to a man for yeares, to have and to hold to him during thetime that the lessor is abbot; in this case the lessee hath an estate for the term of hisown life: but this is upon condition in law, scilicet,That if the abbot resigne or bedeposed, that then it shall be lawfull for his successor to enter. (Emphasis added.)</p><p>This would prove, however, to be a problematic translation. Ritso commentsthat the emphasised words are an interpolation, and involve a contradiction interms.31 In a revised and corrected edition of Coke, Hargrave and Butler remarkthat it is observable that the original French does not warrant the insertion, in thetranslation, of the words in question.32 The emphasised words are omitted in theedition of Littleton edited by Wambaugh in 190333 nor do they appear in LordNeubergers quote from Littleton but it is not Cokes mistranslation34 that isinstructive but Ritsos criticism of the mistranslation. It demonstrates that the rulewas not regarded as one applicable where the conceived grant was that of a termof years.</p><p>The reference to Coke by Lord Neuberger likewise does not support theirLordships conclusion.The passage referred to by his Lordship provides:35</p><p>If a man grant an estate to a woman dum sola fuit, or durante viduitate, or quamdiu sebene gesserit, or to a man and a woman during the coverture, or as long as the granteedwell in such a house, or so long as he pay s l. &amp; c. or until the grantee be promotedto a benefice, or for any like incertaine time, which time, as Bracton saith, is tempusindeterminatum: in all these cases, if...</p></li></ul>