Tenancies: Joint tenant unilaterally ends tenancies

During the Summer the High Court decided in Procter v Procter [2022] that one joint tenant cannot take steps unilaterally to end a tenancy, on behalf of two or more joint tenants, where fiduciary duties are owed (eg within a partnership).

Just two months after that judgment, we now have a different decision based on similar facts from the High Court in Birmingham. This is the decision of Pile v Pile [2022] and it was heard as an appeal from the Birmingham County Court.

We consider this new decision and explain the difference.

Background

Frank Pile and his brother, Simon, were joint tenants of an agricultural tenancy of Fir Tree Farm near Banbury protected by the Agricultural Holdings Act 1986. They were also joint tenants of a commercial tenancy at Fir Tree Farm, which was protected with a right to renewal under Part II Landlord and Tenant Act 1954. John Stranks was the landlord.

In March 2021, Frank Pile, John Stranks and a company of which Frank and his wife were the sole directors and shareholders, FN Pile and Sons Limited, entered into an agreement under which:

1. Frank would serve notice to quit the agricultural tenancy.
2. John Stranks would serve notice to terminate the commercial tenancy, and Frank agreed not to serve a counter-notice to challenge the notice to quit.
3. John Stranks would then grant the company tenancies of both the agricultural and the commercial land.

Simon Pile was excluded from the new tenancies.

Following a telephone conversation between Simon and John Stranks, in which Mr Stranks explained the plan, Simon issued proceedings for an injunction preventing Frank from entering into the new tenancy agreements.

The claim

Simon argued that Frank’s actual or threatened conduct constituted a breach of trust in the relationship of joint tenants between them because Frank was seeking to profit at his brother’s expense by obtaining a new lease without involving his brother.

Simon also contended that Frank had a conflict of interest between himself and his duties as trustee of the joint tenancy and that he was seeking to profit from his trusteeship.

In the County Court HHJ Rawlings decided that the test for an injunction had been met. There was a serious issue to be tried to decide whether Frank was acting in breach of trust.

The Appeal

Frank appealed HHJ Rawling’s decision to the High Court and it was heard in July of this year.

Since the County Court’s decision, the High Court had released its decision in Procter v Procter [2022]. This was explained in our earlier article, Notices to quit: Court decision provides useful guidance.

In Proctor, the Court found that one joint tenant could not terminate the tenancy on behalf of other joint tenants, where the tenancy was held on trust for a partnership. This was because the joint tenant had a fiduciary duty to act in the best interests of the partnership, for no collateral purpose and to preserve the trust property.

In the Pile appeal, the Judge considered the Procter decision and found that the present case was distinguishable from Procter because there were no fiduciary duties in Pile. Simon and Frank were not in partnership together, nor were they holding the tenancy as trustees on behalf of a trust. They simply held the tenancies on behalf of themselves on a bare trust.

A trustee is obliged to hold an asset on behalf of the underlying trust and a trustee would be duty bound to obtain a renewal tenancy for the benefit of the trust.

The Judge found that where a party is a trustee, only by reason of their co-ownership with another joint tenant of a periodic tenancy, the arrangement only exists as a bare trust. In bare trusts there are no underlying obligations or duties, such as those between a trustee and a beneficiary or between partners in a partnership.

In these circumstances a joint tenant is neither precluded from serving a notice to quit, nor acquiring a new lease to benefit themselves.

The Judge concluded that there was no serious issue to be tried and that Judge Rawlings had erred, but understandably so, given that he was not referred to a number of authorities.

Comment

This decision could have a substantial impact on disputes concerning tenancies of all types, held by more than one person. Where there is no overarching partnership between joint tenants, this case gives freedom for one joint tenant to act unilaterally for their own benefit in terminating the tenancy, without reference to their fellow joint tenant.

In view of this, those holding a tenancy jointly should review their position, take advice and consider whether further action would be wise.