Procter v Procter [2022] EWHC 1202 (Ch)
Summary
The High Court held that a notice to quit served by a trustee should be rescinded where the notice was served in breach of a fiduciary duty.
The facts
This case follows an earlier claim, where the Court of Appeal determined that three siblings (two brothers and their sister) were joint tenants of a yearly periodic agricultural tenancy and were holding it on trust for a partnership which comprised just the two brothers. The sister had formerly been a partner but had retired from the partnership in 2010.
The sister then served a notice to quit, seeking to determine the periodic tenancy, against the wishes of the brothers.
The Court's decision
First, the Court had to consider if one joint tenant could validly serve a notice to quit. The Court referred to recent authorities on the issue, in which it is clear that, in the absence of contrary terms of a tenancy, one legal joint tenant could serve a valid notice to quit, because a periodic tenancy only continued so long as they all wanted it to continue. This is to be contrasted with positive acts, such as exercise of a break clause or exercise of an option to renew, which require the consent of all tenants.
Despite this, as the third sibling was not a co-owner of the land but rather a joint tenant holding on trust, the Court had to consider whether the sister owed fiduciary duties in connection with the tenancy as a trustee of the partnership and, if so, was service of such notice to quit against the wishes of the other trustees, a breach of fiduciary duty.
The High Court held that the sister did have fiduciary duties to act in the best interests of the partnership, not to act for a collateral purpose (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 service of a notice to quit was a breach of fiduciary duty as the sister “was not acting bona fide in the best interests of the Partnership and its partners”.
The Court decided that the appropriate remedy was to make an order for rescission of the notice to quit, as an equitable remedy, with the result that the periodic tenancy would continue.
Our comment
It is well-settled law that a tenant cannot withdraw or waive a served notice to quit and therefore it was not possible for the Court to order the withdrawal of the notice.
While rescission is a well known equitable remedy for breach of trust or fiduciary duty, this typically applies to contracts. It is interesting that such a remedy would also apply in these circumstances where there is no typical "transaction" to rescind.
