LC-2023-000815 - [2024] UKUT 263 (LC)

The three hallmarks of a lease, as identified by Lord Templeman in Street v Mountford, are (i) the grant of exclusive possession, (ii) for a term, (iii) at a rent. In the present case it is not in dispute, as I understand the position, that the tariff payable under each of the Agreements was capable of functioning as the rent, if the other hallmarks of a lease were present. It is also not in dispute that the 2002 Agreement was entered into for a term, namely 20 years, which satisfied the requirement for a term. In the case of the 1997 Agreement there is the Term Issue. I shall set out the law relating to the requirement for a term, in the context of a lease, when I come to the Term Issue.

This leaves the requirement for exclusive possession. In the present case, subject to the Term Issue, this was, as is usually the case in lease/licence disputes, the battleground between the parties. In these circumstances I should explain, as briefly as possible, what is meant by exclusive possession. In their summary of the general principles which apply, when considering whether an agreement creates a lease or a licence, APW’s counsel included their explanation of exclusive possession. This was not wrong, but I prefer to separate out my explanation of exclusive possession, given that it is central to the dispute between the parties.

The concept of possession was considered by the House of Lords in JA Pye (Oxford) Ltd v Graham [2002] UKHL 30 [2003] 1 AC 419. The issue in that case was whether title to land had been acquired by adverse possession, but the explanation of the concept of possession which is to be found in this case is of wider application. In his speech in this case Lord Browne-Wilkinson made extensive reference to the judgment of Slade J (as he then was) in Powell v McFarlane (1977) 38 P&CR 452. At [40] Lord Browne-Wilkinson drew upon the judgment of Slade J in order to identify the two basic elements of possession:

“40.

In Powell's case 38 P & CR 470 Slade J said, at p 470:

"(1)

In the absence of evidence to the contrary, the owner of land with the paper title is deemed to be in possession of the land, as being the person with the prime facie right to possession. The law will thus, without reluctance, ascribe possession either to the paper owner or to persons who can establish a title as claiming through the paper owner. (2) If the law is to attribute possession of land to a person who can establish no paper title to possession, he must be shown to have both factual possession and the requisite intention to possess ('animus possidendi')."

Counsel for both parties criticised this definition as being unhelpful since it used the word being defined—possession—in the definition itself. This is true: but Slade J was only adopting a definition used by Roman law and by all judges and writers in the past. To be pedantic the problem could be avoided by saying there are two elements necessary for legal possession: (1) a sufficient degree of physical custody and control ("factual possession"); (2) an intention to exercise such custody and control on one's own behalf and for one's own benefit ("intention to possess").”

There are therefore two elements necessary for a party to have legal possession of premises. The first is factual possession; meaning a sufficient degree of physical control and custody. The second is an intention to possess; meaning an intention to exercise such custody and control on one’s own behalf and for one’s own benefit.

In relation to factual possession Lord Browne-Wilkinson, at [41], quoted further from the judgment of Slade J:

“41.

In Powell's case Slade J said, at pp 470-471:

"(3)

Factual possession signifies an appropriate degree of physical control. It must be a single and [exclusive] possession, though there can be a single possession exercised by or on behalf of several persons jointly. Thus an owner of land and a person intruding on that land without his consent cannot both be in possession of the land at the same time. The question what acts constitute a sufficient degree of exclusive physical control must depend on the circumstances, in particular the nature of the land and the manner in which land of that nature is commonly used or enjoyed ... Everything must depend on the particular circumstances, but broadly, I think what must be shown as constituting factual possession is that the alleged possessor has been dealing with the land in question as an occupying owner might have been expected to deal with it and that no-one else has done so."

I agree with this statement of the law which is all that is necessary in the present case. The Grahams were in occupation of the land which was within their exclusive physical control. The paper owner, Pye, was physically excluded from the land by the hedges and the lack of any key to the road gate. The Grahams farmed it in conjunction with Manor Farm and in exactly the same way. They were plainly in factual possession before 30 April 1986.”

It is to be noted that the question of what acts constitute a sufficient degree of “exclusive physical control” must depend on the circumstances, in particular the nature of the relevant land and the manner in which land of that nature is commonly used or enjoyed.

One other, rather older case is also worth citing in the present context. The case is Seddon v Smith (1877) 36 LT 168. This case was cited by the Judge, at Paragraph 37, as part of his consideration of the position in relation to fencing, both in respect of the Sites and in respect of the obligations to fence in the Agreements. The case was concerned with a claim in trespass and conversion relating to the alleged wrongful abstraction of minerals from land previously vested in the lord of the manor. The plaintiff claimed title to the land by adverse possession and, on that basis, claimed title to the mines and minerals as against the successor in title of the lord of the manor. The plaintiff’s claim was upheld by the Court of Appeal in respect of three quarters of the land, on the basis that there had been sufficient acts of adverse possession in respect of that part of the land. These acts had not extended to actual enclosure of the relevant part of the land, but the Court of Appeal were satisfied that the plaintiff’s actions had been sufficient to constitute adverse possession, even in the absence of enclosure. For present purposes the relevance of the case lies in the stress which the Court of Appeal laid upon enclosure, as evidence of adverse possession. As Cockburn CJ stated, at page 169 of the report:

“Enclosure is the strongest possible evidence of adverse possession, but it is not indispensable.”