Service occupier: what if the relevant work began after the employment contract commenced?

In Norris v Checksfield ([1991] 1 W.L.R. 1241, CA (Eng)) N employed C as a semi-skilled mechanic. A little later N asked C whether he would like to live in N’s bungalow. The conditions were that he would drive coaches for N. He would live in the bungalow so as to be available for this work at short notice. N dismissed C and sought possession of the bungalow. One of the questions was whether C was a licensee or a tenant. In particular, the English Court of Appeal had to consider whether it made any difference that the arrangement concerning the bungalow and the driving duties arose after the commencement of the employment. The Court of Appeal held that this made no difference and that C was a licensee and not a tenant.

Service occupancy: requirement arising from terms of service

In Langley v Appleby ([1976] 3 All E.R. 391) the question (for tax purposes) was whether police officers were ‘occupiers’ of rent-free accommodation provided by the police force. There was no express requirement that the officers should live in a police house and not all officers did. Officers understood, when joining the force, that they would have to live in property indicated by the chief constable. The court found that this was for reasons that were for the better performance of their duties (was integral to the contract of employment). The officers were not the occupiers.

Fox. J. reviewed the authorities and said:

‘[T]he authorities lead me to the following conclusions. First, the correct formulation is that of Lord Upjohn in Northern Ireland Comr of Valuation v Fermanagh Protestant Board of Education ([1969] 3 All ER 352 at 359, [1969] 1 WLR 1708 at 1722), namely that it must be established either (a) that it is essential to the performance of the duties of the servant that he should occupy the particular house or (b) that it is an express term of the employment that the servant shall occupy the premises, and that by doing so he can better perform his duties as a servant to a material degree.

Secondly, it does not seem to me that the employer’s entitlement to move the servant out of the premises is a factor of much consequence in favour of representative occupation. If the servant only has a licence he can be required to move out whatever his status (beneficial or not) for present purposes. Indeed, it is only if the servant is a representative occupier that it might not be possible for the employer to require him to move out, since it might then constitute repudiation of the contracts in a case where it is essential for the servant to reside on the premises to perform his duties.

Thirdly, I agree with counsel for the taxpayers that in order to constitute representative occupation the premises need not be the only suitable premises for the employee to occupy in order to perform his duties. That, I think, is accepted by Lord Reid in Glasgow City Corpn v Johnstone ([1965] 1 All ER 730 at 735, [1965] AC 609 at 621) and in Fox v Dalby ((1874) LR 10 CP 285 at 293, 295) by Lord Coleridge CJ and by Denman J. But I think that this limitation must be placed on that proposition. If it is asserted that it is essential for the servant to occupy the house in order to perform his duties, it seems to me that the servant must establish affirmatively that for the performance of his duties he must live in that house and in no other.

Fourthly, counsel for the taxpayers contends that benefit to the servant by occupation of the premises is not inconsistent with representative occupation. That, I think, is correct. Fifthly, counsel for the taxpayers contends that the premises need not be part of or physically connected with the premises of the employer. That is correct, but it is not, I think, of much significance. The fact that the premises do form part of other premises belonging to the employer may, I think, be a circumstance in determining how far the residence is essential for or assists in the performance of the servant’s duties. This circumstance is not, however, it seems to me, of consequence in the present case.’ (413)

The fact that residence was advantageous to the officers was irrelevant if they had been required to live in the houses as a result of their terms of service and this was a material advantage to them in performing their duties.

Service occupancy: tenancy or not?

In Fox v Dalby ((1874 – 75) L.R. 10 C.P. 285) D was a sergeant in the army. He was required by army rules to live in a house near stores where ammunition and equipment were kept if his commanding officer so required. This was so that he could look after the stores. Not everyone with his job was required to live near the stores and those who did not could still properly perform their duties. The question was whether he was a tenant or whether he was in possession on behalf of his employer. It was held that he was not a tenant since (i) he was required to live in the house, and (ii) this was for the better performance of his duties.

Lord Coleridge C.J. said:

‘[I]f either ingredient exists, – if the occupation be necessary for the better performance of the duties required to be performed by the party, or if, though it be not necessary for their performance, he is required by the authority by which he is appointed to reside there in order to perform them, the occupation is not an occupation as tenant.’ (294)

Brett J. said:

‘[W]here a person situate like the respondent is permitted (allowed if so minded) to occupy premises by way of reward for his service, or as part payment, his occupation is that of tenant; but … , where he is required to occupy them for the better performance of his duties, though not specifically required, his occupation is not that of tenant.’ (295)

Service occupancy: meaning of ‘for the better performance’ of duties

In Wragg v Surrey County Council ([2008] EWCA Civ. 19, CA (Eng)) W was a countryside ranger employed by the Council to carry out duties relating to the management and conservation of areas of common land in Surrey. His employment contract required him to live in a house provided by the council and declared that this was for the better performance of his duties. W sought to exercise the right to buy under the Housing Act 1985. Whether he could do so or not depended on whether the arrangement fell within an exception that applied to tenancies where the tenant’s contract of employment required him to occupy the dwelling-house for the better performance of his duties.

On its face, the contract clearly did fall within the exception but the English Court of Appeal held that one had to look at the substance and not merely the terminology employed. Although the judgment arises in a particular statutory setting, it gives guidance on the meaning of ‘for the better performance of his duties’ that is rooted in more general authorities and helps to explain those authorities.

The phrase, ‘for the better performance of his duties’  invites a consideration of the parties’ intentions when including the express term in the contract. The intention is an objective intention: there is a need for a real, objective link between the requirement and the better performance of the duties ([40] per Richards L.J).

‘Better’ does not mean ‘efficient’. It is a true comparative. The question is whether the inclusion of the term rests on a reasonable judgment that performance of the duties would be materially assisted by the occupation (better with the occupation than without it) ([48] per Richards L.J.). Richards L.J. gives guidance on relevant considerations at [46]. The test is not necessity: the fact that the duties can still be performed without the occupation does not settle the matter.

The arrangement was for the better performance of the ranger’s duties and so fell within the exception ([55]).

Licence of houses on school grounds: necessary to performance of teacher’s duties?

In Commissioners of Valuation for Northern Ireland v Fermanagh Protestant Board of Education ([1969] 1 W.L.R. 1708, HL) school teachers had licences of houses in the school grounds. There was no express term of their employment requiring them to live in the houses. Thus, following Glasgow Corporation, it was a question as to whether an obligation to occupy the houses could be implied on the basis that this occupation was necessary for the performance of their duties. In the majority of the cases considered by the House of Lords in this decision, there was no such necessity. Accordingly, the occupation was that of the teacher and not of the school. One of the arrangements being considered, however, concerned the vice-principal of a school. Living on school grounds was necessary for the performance of his duties. Accordingly, the house was occupied by the school and not the vice-principal.

Lord Diplock said that:

‘[T]he servant’s residence on the premises must constitute a part of the consideration from him to the employer for which he is paid his salary or wages.’ (1730).

It is not enough, for the employer to be in occupation, that the employment agreement contain an express obligation to reside in the property. Even then, living in the property must materially assist the employee in the performance of his duties under the employment contract.

Terms of agreement meant that there was no exclusive possession

In Westminster City Council v Clarke ([1992] 2 A.C. 288, HL) the council and C entered into an agreement that gave C the right to occupy a room in a hostel for homeless, single men. Some of the occupants had personality disorders or physical disabilities. The agreement provided that C did not have exclusive possession. The council could change the accommodation or require C to share his room. C had to be back in his room by 11 pm and any visitors had to leave by then. C had to comply with the directions of the warden or his staff. The question was whether C had exclusive possession of his room (and, therefore, a tenancy).

The House of Lords held that he did not have exclusive possession. It looked at the purposes underlying the agreement: these could not be achieved if C had exclusive possession. The restrictions imposed on C were incompatible with exclusive possession.

Lord Templeman said:

‘From the point of view of the council the grant of exclusive possession would be inconsistent with the purposes for which the council provided the accommodation at Cambridge Street.’ (300 – 01)

and later:

“The conditions of occupancy support the view that Mr. Clarke was not in exclusive occupation of room E. He was expressly limited in his enjoyment of any accommodation provided for him … These limitations confirmed that the council retained possession of all the rooms of the hostel in order to supervise and control the activities of the occupiers, including Mr. Clarke. Although Mr. Clarke physically occupied room E he did not enjoy possession exclusively of the council.’ (301 – 02)

Leases: certainty of term

In Say v Smith ((1563) 1 Plowden 269, 75 E.R. 410) one of the questions was as to the validity of an agreement under which a tenant was to have a right (subject to paying the rent at the end of each ten year term) to a perpetual series of ten year leases. The court decided that this was not valid since there was no certainty of term:

‘[E]very contract sufficient to make a lease for years ought to have certainty in three limitations, viz. in the commencement of the term, in the continuance of it and in the end of it: so that all ought to be known at the commencement of the lease, and words in a lease which don’t make this appear are but babble … And these three are in effect but one matter, shewing the certainty of the time for which the lessee shall have a land, and if any of these fail, it is not a good lease for then there wants certainty.’

The arrangement was invalid since the understanding that the renewals would continue in perpetuity meant that there was no certainty of term.

Lease? Intention to create a legal relationship?

In Chan Yeung Kei v Chan Yeung Fai ([1998] 2 HKC  491, LT) B1 was the periodic tenant of a flat. When he moved out, his brother (B2) remained with his mother and sisters. B2 moved out after his mother and sisters had done so. The question was whether B2 had been the sub-tenant of B1. On the facts of this case, there had been no intention to create a legal relationship between B1 and B2. B2 had paid the rent while his mother remained at the property as a result of an internal arrangement of the family.

Lease: did the parties agree on exclusive possession for a term?

In Radaich v Smith (101 CLR 209) S had entered into an agreement that allowed R to occupy a lock-up shop for a five year term to carry on a business. R applied for a fair rent to be determined. R argued that the agreement gave rise to a licence, rather than a lease, so that there was no jurisdiction to determine a fair rent. The High Court of Australia held that whether there was a lease or a licence depended entirely on whether, properly interpreted, the agreement conferred exclusive possession for a term. If it did then a lease had been created. Any label applied by the parties was irrelevant (for example Windeyer J. at 222). The court held that the agreement in this case did give rise to a lease.

Lease? Did parties intend there to be exclusive possession?

In Best Sharp Development Ltd v Lucky Shoe Repairing & Key Duplication Centre ([1988] HKEC 223, CA) BS were the tenants of a shop. They entered into an agreement that allowed LS to occupy part of the shop for its own business. The question was whether LS had a lease or a licence. This depended on whether LS had exclusive possession. Kempster J.A. pointed out that the label applied by the parties was irrelevant: the court had to look at the legal effect of the parties’ actual intention. In this case, there were several terms pointing to the fact that this was a licence (BS could enter at any time and for any purpose, it could remove items brought there without its consent and BS could not change any of the door locks). This was a licence.