Barrett v Morgan

A sub-tenancy is not automatically destroyed where a head landlord and head tenant agree to use a notice to quit to obtain possession from the sub-tenant. Although a notice to quit ordinarily operates unilaterally and determines the sub-tenancy with the head tenancy, an agreed scheme designed to defeat the sub-tenancy is consensual in substance. The resulting termination is treated like a surrender, which cannot prejudice the sub-tenant’s interest.

The decision in Pennell v Payne concerns a different situation: a head tenant’s own notice to quit to the head landlord. It does not displace the rule in Sparkes v Smart concerning collusive arrangements.

The appellants were freeholders of agricultural land. The respondent occupied it under a sub-tenancy granted by the head tenants. The freeholders and head tenants agreed that the freeholders would serve notices to quit on the head tenants, who would not serve counternotices under the Agricultural Holdings Act 1986. The purpose was to obtain vacant possession from the respondent without serving notice on him.

The deputy judge held that the arrangement could not destroy the sub-tenancy, relying particularly on Sparkes v Smart [1990] 2 EGLR 245. The freeholders appealed, arguing that Sparkes v Smart was wrongly decided and relying on Harrison v Wing and Pennell v Payne. The central issue was whether the agreed use of notices to quit terminated the sub-tenancy.

1. Appeal dismissed. The notice to quit could determine the head tenancy, but it did not determine the respondent’s sub-tenancy.
2. Per the Vice-Chancellor, the essential distinction is between a unilateral notice to quit and a consensual surrender. A sub-tenancy ordinarily ends when the head tenancy is determined by a unilateral notice to quit. A surrender, being consensual, cannot prejudice an interest previously granted by the tenant.
3. Where a head landlord and head tenant agree that the landlord will serve a notice to quit and that the tenant will refrain from serving a counternotice, for the purpose of defeating a sub-tenancy, the arrangement is consensual in substance. The resulting determination is therefore treated as tantamount to a surrender, leaving the sub-tenant as tenant of the landlord.
4. Sparkes v Smart was binding authority. The absence of developed argument on the legal consequence of collusion did not deprive it of authority because that consequence was a main issue before the court.
5. Pennell v Payne was binding on the separate point that a head tenant’s notice to quit to the head landlord can determine both the head tenancy and the sub-tenancy. It did not decide the effect of a collusive arrangement between landlord and tenant. Brown v Wilson had been overruled on that separate point.
6. The statutory powers referred to in section 29 and paragraph 7 of Schedule IV to the Agricultural Holdings Act 1986 did not require a different result. The appeal was dismissed with costs, with leave to appeal to the House of Lords.

• Court of Appeal: Appeal from the decision of Mr Peter Smith QC, sitting as a deputy High Court judge in the Chancery Division, dismissed with costs.
• High Court: Held that the agreed notice-to-quit scheme could not destroy the agricultural sub-tenancy.