Cameron Ltd v Rolls-Royce Plc

Where occupation is granted pending completion of an agreement for the grant of a lease, the presence of exclusive possession, a term and rent does not necessarily create a tenancy. The court must examine the substance and structure of the parties’ transaction. A purported licence may remain a licence where occupation is ancillary to the parties’ wider agreement for the acquisition of an interest in land. The crucial distinction is between an independent, stand-alone occupation arrangement and occupation referable to the larger transaction. Labels and stated intentions are relevant but are not determinative.

Cameron sought summary judgment for specific performance of two agreements for lease concerning premises at the Atlantic Industrial Complex. Rolls-Royce had remained in occupation after earlier contracted-out subleases expired. The agreements provided for immediate occupation as a licence pending the grant of contracted-out leases.

Rolls-Royce argued that the occupation arrangements were leases protected by Part II of the Landlord and Tenant Act 1954. It contended that entering into the contracted-out leases would involve surrender by operation of law and that the obligation to do so was void under section 38. The central issue was whether the agreements created tenancies or licences pending the grant of the leases.

1. Nature of the occupation. The court approached the issue on the assumption that exclusive possession, a term and rent were present. Those features are not conclusive in every case. Under Street v Mountford [1985] 1 AC 809, the surrounding legal relationship may show that occupation is referable to something other than a tenancy.
2. Ancillary occupation. Occupation pending the acquisition of an interest in land may be a licence even though it exhibits the ordinary badges of a tenancy. There is no material distinction, for this purpose, between occupation pending a contract for the sale of land and occupation pending the grant of a lease. Essex Plan Ltd v Broadminster (1988) 56 P&CR 353 supported that approach.
3. Application. The licence provisions and the provisions requiring the grant and acceptance of the leases formed one integrated transaction. They were not severable. The licence governed the interim position while Rolls-Royce awaited the grant of the larger interest. It was therefore ancillary to the acquisition of the leases and did not create a tenancy.
4. The contractual labels and the parties’ apparent intentions were relevant but could not determine the legal character of the transaction. The court also referred to Queen on the Application of National Car Parks Limited v Trinity Development Company (Banbury) Ltd, CA unreported, 18 October 2001, for that principle.
5. Since the occupation was a licence, the argument based on section 38 of the Landlord and Tenant Act 1954 did not arise. The court did not decide the alternative argument based on section 28. There was no other defence to specific performance. Judgment was given for Cameron and specific performance was ordered.