LC-2023-000815 - [2025] EWCA Civ 971

As I have said, the owner argued that, assuming the invalidity of the Agreement, the judge ought to have inferred a yearly periodic tenancy from the start (as happened in Prudential), rather than holding that the Agreement constituted a contractual licence (as would have been held in Mexfield, had section 149(6) of the Law of Property Act 1925 not applied in that case, but not in this case). The occupier supported the judge in allowing the parties’ intentions, as expressed in the Agreement, to take effect as a contractual licence.

I have cited the relevant passages from Prudential and Mexfield above, because it seems to me that they are not entirely aligned on this point. The House of Lords in Prudential overruled the Court of Appeal that had given effect to the contractual term agreed by the parties prohibiting termination unless the land was required for road widening. The 7 judges in the Supreme Court in Mexfield replaced the void tenancy with a contractual arrangement on the same terms, including clause 6 restricting the landlord from terminating the arrangement save in specified circumstances.

Whilst acknowledging that the actual decision on this point in Mexfield was obiter, I believe we should follow the thrust of the court’s approach.

Lord Neuberger’s statement of the position at [67], supported by other members of the court, is entirely orthodox law. First, once a tenancy is void for want of a certain term, the court is faced with the choice of inferring a tenancy or giving effect to the parties’ intentions contractually. As Lord Neuberger said, the question is what a reasonable observer, knowing what the parties have communicated to each other, would consider that they are likely to have intended.

In this case, to infer that the parties intended an annual or daily periodic tenancy on 11 March 1997 is a real stretch. None of the express terms of the Agreement accord with that inference. As the occupier put the matter in submissions, the court must look for the “best fit”. A periodic tenancy from the outset on 11 March 1997 is not a good fit at all. It is inconsistent with many of the terms the parties agreed. It is inconsistent with clause 2.1 for the reasons I have given. It is inconsistent with the Payment Days and with the calculation of the Tariff from quite a different date than the inception date. It is only really consistent with the exclusive possession that was given and clauses A and 10.1 that do, I accept, imply that the parties thought they had agreed a tenancy.

Conversely, the inference of a contractual licence on the same terms as the Agreement respects almost all the terms that the parties agreed, including the termination provision in clause 2.1. I do not think that the court should be willing to disregard the intentions of the parties unless there really is no other possible course. Here, the course the judge adopted was a reasonable one in my view. I am conscious that the judge thought the outcome unsatisfactory. For my part, I am not sure that there is anything at this level that we can do about that. I am certain that the judge was right to follow Mexfield and to reach the conclusion he did as a matter of law, even if I have perhaps expressed my reasons more shortly.

I would, therefore, reject the owner’s inferred periodic tenancy argument, and hold that the judge was right to give effect to the Agreement as a contractual licence.