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CASE B OR NOT TO B? NO LONGER A QUESTION? ARBITRATION APPEAL
Case: Rees v Windsor-Clive [2020] EWHC 2986 (Ch)
- Following the Second World War, the combined effect of the Agriculture Act 1947 and the Agricultural Holdings Act 1948 was to introduce a statutory code which was to ensure that farms were farmed and the most efficient standard was achieved in agriculture. The 1948 Act introduced extensive security of tenure for tenants of agricultural holdings, providing landlords with limited statutory grounds for recovering possession. One ground established at the outset was Case B, where a landlord required land for non-agricultural purposes after obtaining planning permission.
- The Courts have protected the public policy underlying the security of tenure that was created, particularly in a series of cases in the 1980s. In the House of Lords decision in Johnson v Moreton, Lord Salmon said that it was in the interests of the national economy and security that the level of production and the efficiency of farms should be maintained and improved. He continued: ‘The security of tenure which tenant farmers were accorded by the Act… was not only for their own protection as an important section of the public, nor only for the protection of the weak against the strong; it was for the protection of the nation itself’.
- Despite the enactment of the Agricultural Tenancies Act 1995, providing significantly less security of tenure for tenant farmers, the protection afforded to tenants by the 1948 Act still continues in the form of the consolidated statute, the Agricultural Holdings Act 1986 (‘the AHA 1986’), in relation to tenancies created before 30 September 1995. One of the fundamental reasons as to why that statutory regime continues is because of what is arguably the only piece of Welsh legislation.
- In 1976, as the price that Plaid Cymru required Jim Callaghan to pay for the party’s support for the Lib-Lab pact, a right to succession to tenancies under the 1948 Act was introduced. Although this was subsequently pared back by the Agricultural Holdings Act 1984, all agricultural tenancies created before July 1984 allow a group of eligible persons to apply to succeed to an existing tenancy. Two successions are allowed: two generations.
- It is that which provides the background to the case of Jenkin Rees v Windsor-Clive and Others, Trustees of the St.Fagans No.1 and No.2 Trusts (the Plymouth Estate).
- For more than 55 years Jenkin Rees (now aged 87) has been the tenant of the Plymouth Estate at a farm on the outskirts of Cardiff. Maesllech Farm continues to be in excess of 200 acres and is not only the home of Mr Rees and his wife, but the home of one of his sons, Phillip, who is aged 60 and farms in partnership with his father. Phillip would have been a guaranteed successor to the tenancy of his father, as probably one of his sons would have been to the tenancy after him. However, that is not to be.
- In August 2016 and March 2017, the Plymouth Estate obtained planning permission to build 7,000 houses on Maesllech Farm and other land. The response of Mr Rees was that he recognised the inevitable long-term loss of the farm, as the building was phased over a long period, but he hoped that he would be able to give up the farm on a piecemeal basis and that he would be paid fair compensation.
- Where a landlord obtains planning permission for non-agricultural use, he can rely upon Case B in order to seek to recover possession. Ordinarily, this only arises where a landlord wants to recover possession of part of the holding. The battleground is usually the ability to give notice to quit part; the period of notice that is required; etc. I have spent a great deal of my 40 year career in that battleground.
- What is much more rare is a case where a landlord seeks to recover possession of the entirety of the holding in reliance upon Case B.
- The compensation provisions under the AHA 1986 allow a tenant to be paid a multiple of the rent (adjusted rateably) in respect of land which has to be given up pursuant to a Case B notice to quit. There will also ordinarily be a rent reduction in respect of the remaining farm. What the legislation does not address is compensation for where a farmer is dispossessed of the entirety of the holding. There is nothing in the statutory regime to deal with the long-term loss of livelihood.
- From the outset in this case, battle lines were drawn because the Landlords (who Mr Rees has never met) decided to obtain an injunction to gain access to carry out works on the farm in order to advance planning. That injunction was subsequently found by the High Court to be unlawful and the Plymouth Estate has been ordered to pay compensation to Mr Rees. That matter remains to be resolved in the High Court.
- Meanwhile, in January 2018, the Landlords served 5 separate Notices to Quit which between them encompassed the entirety of the farm. In total 13 Notices to Quit have been served.
- Although there was no evidence that the Landlords required vacant possession of Maesllech Farmhouse, the home of Mr Rees and his wife and their son (because he had to vacate one of the farm cottages because it became uninhabitable as a result of the Landlords failing to deal with damp issues), it formed part of the Notices to Quit.
- The validity of the Notices to Quit was considered at an arbitration by a Rural Chartered Surveyor appointed by the RICS, Robert Hicks. A Hearing took place in February 2019. On 20 December 2019 the Arbitrator decided that three of the Notices to Quit were invalid and ineffective, but that two were valid and effective. A month later, after receiving representations from the Landlords, the Arbitrator decided to reverse his decision in relation to one of the Notices to Quit (in favour of the Plymouth Estate), issuing a ‘corrected’ award. The effect of his corrected award was to require Mr Rees to give up vacant possession of the entirety of the farm, including his home.
- The Arbitrator also decided that the Notices to Quit should expire on 20 August 2020, albeit not a recognised date in the farming year. Mr Rees still had wheat to be harvested in September 2020.
- Mr Rees appealed the decision of the Arbitrator to the High Court in Cardiff. It was heard on 29 October 2020. Judgment was delivered on 11 November 2020 by His Honour Judge Jarman QC (sitting as a Judge of the High Court). The central ground of the Appeal was that the Arbitrator had applied the wrong test, as a matter of law, in considering whether the Notices to Quit should be upheld.
- The material part of Case B provides:
‘the notice to quit is given on the ground that the land is required for a use, other than agriculture… for which permission has been granted on an application made under the enactments relating to town and county planning… and that fact is stated in the notice’.
- The key part of Case B in the Appeal was the phrase ‘is required’. The argument put on behalf of Mr Rees was that the land must be so required at the end of the period stated in a notice to quit or within a relatively short time thereafter, rather than in the more distant future or at some as yet unascertained time. Further, a landlord must show an intention to develop and a reasonable prospect of doing so.
- It was submitted on behalf of Mr Rees that in this case the Arbitrator did not apply this test and that had he done so, given that the vast majority of the proposed development was on the Landlords’ own evidence probably years away, he would not have upheld the Notices to Quit. Mr Rees invited the Court to provide guidance as to the law and to remit the case to Mr Hicks for him to reconsider the position.
- In an interesting twist, although in the preparation for the Hearing the Landlords had maintained that the ‘contention of law advanced by [Mr Rees] is a bad one’, in delivering his Judgment, the Judge determined that the legal test advanced on behalf of Mr Rees was ‘ultimately not in dispute’ before him. The Judge proceeded to analyse the position accepting the legal argument put on behalf of Mr Rees set out in paragraph 18 above.
- In order to establish that land is ‘required’, the case of Mr Rees was that two elements had to be satisfied:
- The landlord must demonstrate that, subjectively, there was a desire, and a genuine/bona fide, firm and settled intention that the relevant use will be implemented; and
- The landlord must also demonstrate that, objectively, there was a reasonable or realistic prospect of implementing that relevant use on the relevant land.
The test is whether the land ‘is’ required. The word ‘is’ connotes a present requirement for the land, not a future requirement.
- As recorded in the Judgment on the Appeal, the Arbitrator said, having taken advice from his legal adviser: “I was presented with voluminous evidence that the Landlords genuinely wished to take possession of this land for development. The site inspection showed me that the development is already occurring on various sites adjacent to Maesllech Farm which now stands as an island of undeveloped agricultural land within a sea of residential development…Whilst I accept that some of the land contained within this Notice to Quit will not be developed for a number of years and note the 20 year time limit on the planning consent, I take on board the advice given by Mr Blohm QC and note the evidence given by Mr Lawley and W Rees as to how they need availability and access to this land for earth moving and storage, together with the need for carrying out infrastructure works in respect of gas, water and roads etc. The test which I have to put on this are, does the Landlord require the land which I answer yes, does he genuinely intend the develop the land to which I answer yes, does he genuinely intend to develop the land to which I answer yes and is there a reasonable prospect of the land being developed to which I answer yes. Therefore I consider that the Landlord has a present and genuine requirement for this land in accordance with the planning consent to the extent that he satisfies the requirements of Case B and confirm that the Notice to Quite (sic) is valid and uphold it.”.
- The case on behalf of Mr Rees was that the Arbitrator had applied the wrong legal test in various respects as follows:
- He wrongly determined and proceeded on the basis that no objective assessment is required when ascertaining whether or not the land ‘is required’ for the relevant use, and that it is instead a purely subjective question for the landlord to determine whether or not he ‘requires’ the land for his stated purpose.
- He wrongly determined that Case B does not require the relevant land to be required for the relevant use at the expiry of the Notices to Quit or within a relatively short time thereafter, as opposed to at some point in the more distant future or at some as yet unascertained time.
- He wrongly determined and proceeded on the basis that Case B could be satisfied even ‘if the relevant work is to be carried at out some distant date in the future’, albeit that he could ‘have regard to’ that fact when considering whether the requirements of Case B were satisfied.
- As a result of setting and applying the wrong legal tests in that regard, the Arbitrator failed to consider and make the necessary determinations of fact concerning the evidence as to when the various different parts of the land which was the subject of the Notices to Quit might be required for the various different contended uses; and in particular as to whether or not those various different areas of land might be required for various different contended uses at the expiry of the Notices to Quit or within a relatively short time thereafter, as opposed to at some point in the more distant future or at some as yet unascertained time.
- He held that Case B was satisfied notwithstanding his own (very generalised) finding to the effect that ‘I accept that some of the land contained within this Notice to Quit will not be developed for a number of years’, in the context of a planning permission which (as the Arbitrator recognised) envisaged a 20 year period for the carrying out of all of the various different phases of the overall development.
- He placed considerable weight on his finding that the land would be needed for earth moving, storage and infrastructure works, but without making any of the necessary findings as to when the various different areas of land might be required for such purposes.
- It was contended on behalf of Mr Rees that Case B would only be satisfied if all of the land included in a notice to quit satisfies the requirements of Case B (as the Arbitrator himself accepted in his Award).
- There was ample evidence, including much evidence from the Landlords’ own witnesses, that the Landlords would not be carrying out any work within the scope of Case B on at least some (and probably the majority) of the land encompassed in the Notices to Quit until some indeterminate date in the future, years hence. The planning permission for the development envisaged that the development would be carried out in a number of phases, over a period of 20 years, and the Landlords own publicity material confirmed that timescale for the development would be a period of 20 years.
- Mr Michael Lawley of Cooke and Arkwright, one of the Landlords’ own witnesses, said candidly in cross examination: ‘as at today I could not tell you year by year what [land] we will need in each year, but in about 2 or 3 months we will have it pinned down to the year’. Mr Lawley accepted, as the Judge recorded in his Judgment, that the planning for the phasing and programming of the development was ‘embryonic’.
- What the Judge decided was that the Arbitrator had expressly had regard to whether there was a genuine intention to develop the land and a reasonable prospect of the land being developed. He also expressly had regard to whether there was a present requirement for the land. The Judge recognised that the land covers many acres (over 200 acres) and that the Arbitrator did not in his Award set out when the various parcels of land would be required. However, the Judge determined that it was unnecessary for the Arbitrator to do so ‘as he made a general finding that there was a present requirement for the land for earth moving, storage and infrastructure works. It has not been shown that that was a finding which was not open to the Arbitrator’. On that basis, the Judge declined to remit the matter to the Arbitrator to reconsider his Award applying the accepted legal test.
- Because the Judge decided that, notwithstanding the legal test advanced on behalf of Mr Rees being the correct legal test, the Appeal should fail for the reasons set out above, as that is a determination on the facts, it is not capable of further appeal.
- The effect of this is that, if a landlord obtains planning permission for the whole or a very substantial part of a farm let under the AHA 1986, notwithstanding the legal test set out above, if a landlord is able to show that there is a present requirement for the land for earth moving, storage and infrastructure works, even if a very substantial part of the land will not be developed in the foreseeable future, a Case B notice to quit may be upheld.
- Having established the correct legal test as to what ‘is required’ means, can it be right that, in the context of a planning permission to be phased over 20 years, and where it is clear that not of all of the land (or indeed the farmhouse) is required in the foreseeable future, an 87 year old tenant (or indeed any tenant) loses the entirety of the farm at the outset of the planning permission, including his home and his family’s livelihood? On the facts of this case, the Court said yes.
© P R Williams
16 November 2020
P R Williams, Ebery Williams – Author of Scammell, Densham & Williams Law of Agricultural Holdings