Potter v Dyer

A notice to quit served by one of two joint tenants ordinarily ends the tenancy. A representee induced by fraudulent misrepresentation has a binary election: rescind the transaction or affirm it in full. The representee cannot affirm it only to the extent of the representation and thereby preserve the tenancy for another joint tenant. A gratuitous licence to occupy agricultural land is outside the statutory conversion mechanism for creating a tenancy from year to year. Whether a contractual licence would be converted where statutory model clauses impose radically different repair obligations was left undecided. The appeal was dismissed.

The appeal arose from an order of the Exeter County Court requiring Brian Potter to give possession of a farm and farmhouse to Stephen Dyer and to pay mesne profits.

Mr Potter sought to amend his defence to allege that a joint tenant’s notice to quit had been procured by fraudulent misrepresentation and should affect only her interest. He also argued that his occupation of the farmhouse under a licence had become a tenancy from year to year under the Agricultural Holdings Act 1986. The central issues were whether the proposed misrepresentation case had a real prospect of success and whether the licence was contractual and capable of statutory conversion.

1. Appeal dismissed. The refusal to permit the late re-amendment was upheld because the proposed partial-affirmation argument had no real prospect of success.
2. A person induced by fraudulent misrepresentation may elect to rescind the induced transaction or affirm it. The election must be communicated clearly and unequivocally. There is no intermediate election by which the representee affirms only the aspect of the transaction described by the misrepresentation. Rescission and damages aim to restore the position that would have existed without the misrepresentation; treating the representation as a contractual promise would be conceptually different.
3. The court applied those principles by reference to China National Foreign Trade Transportation Corporation v Evlogia Shipping Co S.A. of Panama (The “Mihalios Xilas”) [1979] 1 WLR 1018, Motor Oil Hellas (Corinth) Refineries S.A. v Shipping Corporation of India (The “Kanchenjunga”) [1990] 1 Lloyd’s LR 391 and Watson v Burton [1956] 3 All ER 929. No contractual promise had been pleaded, and any such contract would have involved the non-party joint tenant.
4. Under section 2 of the Agricultural Holdings Act 1986, a gratuitous licence does not become a tenancy from year to year. The judge was entitled to find that there was no concluded written or oral agreement on specific terms and no intention to create legal relations. Evidence that Mr Potter carried out works to make the farmhouse habitable did not establish a contractual obligation to do so.
5. The court did not decide whether a contractual licence would be incapable of conversion where the Model Clauses incorporated by section 7 imposed radically different repair obligations. It also did not decide whether occupation of the farmhouse as a residence fell outside section 2(2). The order for possession and mesne profits therefore stood.

• Court of Appeal (Civil Division) — dismissed the appeal and upheld the order for possession and mesne profits: [2011] EWCA Civ 1417.
• Exeter County Court — ordered Mr Potter to give possession of the farm and farmhouse and to pay mesne profits.