Michael Grant discusses the recent High Court decision in Procter v Procter and others  EWHC 1202.
This case involved a bitter dispute between family members over the ownership of both agricultural and non-agricultural land.
In relation to an earlier stage in the proceedings, a determination was made by the Court of Appeal that the three siblings (A, B and C) were joint tenants of a yearly periodic agricultural tenancy and were holding it on trust for a partnership which comprised just A and B.
Within minutes of the formal handing down of the Court of Appeal’s judgment, C served notice to quit to determine the periodic tenancy, contrary to A and B’s wishes.
The High Court was tasked with the duty of determining the notice’s validity, and to this end it was required to address four main questions:
1) Can one out of a number of joint tenants at law of a tenancy validly serve a notice to quit or is unanimity of the holders of the legal title required?
2) Did C owe fiduciary duties in connection with the tenancy as one of the trustees of the Partnership and did such duties extend to the service by her of a notice to quit?
3) If so, was service of such notice to quit a breach of fiduciary duty by C?
4) If so, can and should the Court “undo” the service?
The High Court
In relation to the first question, the High Court gave weight to recent authorities on this very issue, acknowledging that in principle a single joint tenant was capable of unilaterally terminating a tenancy. A periodic tenancy could only continue so long as all parties to the tenancy wished for that to be so, and therefore service of a notice to quit by one joint tenant would have the effect of destroying the unanimity of will between all parties. The service of a notice to quit was therefore seen as a “negative act”, which allowed for such unilateral determination. This is to be contrasted with certain “positive acts” which require the consent of all tenants, such as surrender, the exercise of a break clause, the exercise of an option to renew, and an application for relief from forfeiture.
In relation to both the second and third questions, as C was not a co-owner of the land but rather a joint tenant holding on trust (i.e. a trustee without co-ownership status), the High Court needed to ascertain the extent of C’s duties. On this point alone, it was found that the duties of a trustee in such a situation were different from those of a co-owner in equity. For example, whilst a co-owner has a right to refuse to take a new tenancy at the end of a period of the tenancy, no such right exists for a trustee without co-ownership status. The High Court said that C had a “fiduciary duty to act in the best interests of the Partnership, not to act for a collateral purpose (i.e. out of her own self-interest), to preserve the trust property which is in effect a periodic tenancy with an ability to prolong the same by not carrying out the step of serving a notice to quit, and to avoid a conflict between self-interest and duty.” Accordingly, it was held that C owed a fiduciary duty in connection with the tenancy, that such duties extended to the service of a notice to quit, and that such service was a breach of fiduciary duty as C “was not acting bona fide in the best interests of the Partnership and its partners when serving the notice to quit”.
In relation to the fourth question, this was not straightforward, bearing in mind that a notice to quit cannot be withdrawn once it has been served. The Court was invited to order C to withdraw the notice, or in the alternative to order non-reliance upon it, however such options were not seen to be appropriate under the circumstances and were therefore not adopted. Instead, the Court turned to a remedy which is found for both breach of contract and breach of trust/fiduciary duty, namely rescission. This had the effect of setting aside the notice to quit while allowing the periodic tenancy to continue uninterrupted.
Although the general rule is that notices to quit are incapable of being withdrawn once served, it would seem that they are not impervious to the remedy of rescission if served in breach of trust or fiduciary duty. As to whether rescission can be used as a remedy in the absence of any breach of trust/fiduciary duty remains to be seen, though there may now be attempts to rely on the same remedy where service of a notice to quit would be seen as inequitable/unconscionable under the circumstances. Time will tell.
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Michael Grant is a member of the Property and Housing teams at 42 Bedford Row and specialises in all aspects of residential and commercial property litigation.
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