Brumwell v Powys County Council

For a business-tenancy claim under the Landlord and Tenant Act 1954, the substance of the arrangements is decisive. An operator who runs the owner’s existing business as agent lacks exclusive possession and is not a tenant entitled to a new tenancy. Fixed payments and financial risk may indicate principal status, but detailed operational, financial and insurance controls may cumulatively establish agency. Agreements forming one transaction must be read together. Labels are not conclusive. A structure intended to prevent right-to-buy legislation applying is not a sham where the parties genuinely intend the documents to operate according to their terms.

Gordon Keith Brumwell appealed from an order of His Honour Judge Jarman QC in the Swansea County Court, made after trial of a preliminary issue. He sought a new business tenancy of Wyeside Camping and Caravan Park under Part II of the Landlord and Tenant Act 1954.

The County Court held that the Operator Agreement retained the business in Powys County Council, that Mr Brumwell therefore had no tenancy, and that the Bungalow Agreement and Service Agreement were not shams. The appeal concerned whether the 1998 arrangements created a tenancy and whether the latter agreements were shams.

1. Appeal dismissed. The Court of Appeal unanimously upheld the conclusion that Mr Brumwell was not entitled to a new tenancy under Part II of the Landlord and Tenant Act 1954.
2. Sham agreements. Applying the definition in Snook v London and West Riding Investments Limited [1967] 2 QB 786, a sham requires a common intention by all parties that the documents should not create the rights and obligations they appear to create. External evidence, including the parties’ explanations and subsequent conduct, could be considered, as recognised in Stone v Hitch [2001] EWCA Civ. 63. The agreements were unusual, but the parties intended them to operate according to their terms. The Council’s desire to prevent application of right-to-buy provisions under the Housing Act 1985 did not itself establish a sham.
3. Construction and agency. The three agreements formed one transaction and had to be read together. Their legal character was determined by substance, surrounding circumstances and contractual purpose. Labels such as independent contractor were not conclusive, and pre-contract negotiations were not relevant to construction. If Mr Brumwell operated the Council’s business as its agent, he lacked exclusive possession and could not be a tenant for the statutory scheme.
4. Cumulative assessment. The fixed annual payment, financial risk, retention of profits and responsibility for recurring charges pointed towards principal status. However, those matters were outweighed by the Council’s detailed control over operations, approval of fees, requirements concerning staffing, accounts and reporting, and provision of legal, accountancy and insurance services. The bungalow and security agreements further supported agency, since they would have been unnecessary if Mr Brumwell had obtained exclusive possession and operated his own business.
5. The Respondent’s alternative arguments did not require determination. Lords Justice Laws and Pitchford agreed with Lloyd Jones J’s judgment.

1. Court of Appeal (Civil Division) — In [2011] EWCA Civ 1613, the appeal was dismissed.
2. Swansea County Court — His Honour Judge Jarman QC, on 14 October 2010, decided the preliminary issue against Mr Brumwell, holding that the Operator Agreement did not create a tenancy and that the Bungalow Agreement and Service Agreement were not shams.