Case No: B5/2011/0026
Neutral Citation Number: [2011] EWCA Civ 1613
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE SWANSEA COUNTY COURT
(CLAIM OZM00037)
Cardiff Civil Justice Centre.

Date: 21 December 2011 

Before :
THE RIGHT HONOURABLE LORD JUSTICE LAWS,
THE RIGHT HONOURABLE LORD JUSTICE PITCHFORD
and
THE HONOURABLE MR. JUSTICE LLOYD JONES
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Between :

	Gordon Keith Brumwell	Appellant	
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	Powys County Council	Respondent	
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Leslie Blohm QC (instructed by Bevans) for the Appellant
Mr. Graham Walters (instructed by Powys County Council) for the Respondent
Hearing date: Tuesday 29th November 2011
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Judgment
MR. JUSTICE LLOYD JONES : 
1.	Mr. Brumwell appeals with leave of this court against the order of His Honour Judge Jarman QC made on 14th October 2010 on the trial of a preliminary issue in proceedings in the Swansea County Court.   In those proceedings Mr. Brumwell applied under Part II of the Landlord and Tenant Act 1954 for the grant of a new tenancy of the Wyeside Camping and Caravan Park, Llangurig Road, Rhayader, Powys (“the Park”).  
2.	The land in question is a strip of land, 2.26 hectares in total area, on the east bank of the river Wye as it flows to the west of the town of Rhayader.  Since the 1960s the site has been used as a site for touring and static caravans and as a camping ground.  This business was carried on initially by the Radnorshire District Council and then, following local government reorganisation in 1996, by its successor, Powys County Council (“the Council”). At the material times the Park comprised three parcels of land.  The central part was owned by Radnorshire District Council and, since April 1996 has been owned by the Council as its successor. That land is used as a caravan park. It has an access point from the adjoining road, the A 470, which serves all three parcels of land.  On this central part stand a warden’s bungalow at the entrance and a main toilet block.  To the north is a parcel of land owned by Salop Caravan Centre (Sites) Limited which, under a lease dated 10th February 1981, was leased to the Radnorshire District Council for a term of 21 years from the 13th September 1980.  That land has been used over the years as an ancillary caravan site.   The southern part of the Park is a field used for camping.  It was owned by Evan and Mary Thomas.  By an agreement dated 6th June 1979 Evan and Mary Thomas let that land to Radnorshire District Council for use as part of the Park.  Following the death of Evan and Mary Thomas, under the will of the latter, that land was left to Radnorshire District Council on the condition that it be used for camping and caravan purposes only. 
3.	Before he first became involved with the Park Mr. Brumwell was employed by Powys County Council in its Property Care and Cleaning Division.  At that time Powys County Council provided cleaning services as contractors to Radnor District Council.  In April 1995 Mr. Brumwell first came to the Park to perform cleaning and caretaking duties.  Later Mr. Brumwell was appointed to the position of warden. At that stage he was an employee of Radnor District Council.  In April 1996 his employment was automatically transferred from Radnor District Council to Powys County Council, the new unitary authority. In his evidence Mr. Brumwell described his duties as warden at that time as including taking bookings, collecting fees from customers, weekly banking, cleaning, grounds maintenance and other basic maintenance tasks.  Mr. Brumwell explains that the Defendant had control of the finances of the park and the business generally.  He did not pay bills but passed bills directly to the Finance Department of the Council.  He did not make any decisions in relation to the rates charged at the Park.  He lived in the warden’s bungalow and paid a rent to Powys County Council of £40.00 per week.  He was paid the basic Grade 3 wage and was classed as a Grade 3 manual worker.  On top of his basic wages he received a 10% bonus, 10% of the static caravan fees and 15% of all takings, such as sales of gas and “rentals” from campers and touring caravans.
4.	On 2nd May 1997, following local government reorganisation, the Radnorshire Community Leisure and Recreation Committee of the Powys County Council received a report from the Director of Community Leisure and Recreation, Mr. Hill, concerning the Park.  The report explained that a new warden had been appointed on the basis that he would be resident on the site.  Although he was paid a basic salary he received a significant part of his income from commission on letting and other fees.  Fees and charges had progressively been raised and arrangements introduced for selling and letting caravans that reflected commercial practice in the area.  As a result the income from the site had grown and apparently exceeded expenditure by a useful margin.  When the Department of Leisure Services had been set up it had been decided, for an experimental period, to administer the facility from headquarters.  This had proved to have both advantages and disadvantages.  It had allowed for the operation of the site to be directly supervised.  However it had also created administrative difficulties because the headquarters was not staffed, nor were the staff briefed, to deal with the day to day administration requirements of operating such a facility.  The report continued:
“The fundamental question is why should the Department be engaged in the operation of what is essentially a commercial facility.  The answer might well be that the Department in theory should not be so engaged.  The way forward could then be to lease or sell the site.  Whenever, however, this line of action is explored the question arises of the complexity of site ownership.  Trying to externalise the site, for this reason, could create many difficulties and turn out to be far less profitable that might be expected.  After all, the site is at present bringing a useful income to the Department.  The need therefore seems to be to find some way of introducing a delegated or franchised type of management, taking the Department away from the day to day administrative operations.  
After some consideration and in the light of the performance of the current warden the best way forward would seem to be a franchise arrangement with that individual on a year by year basis.”

The proposal then set out a number of proposals for possible agreements.  I note that many of these features are not contained in the agreements which were eventually entered into between Mr. Brumwell and the Council.

5.	By 1998, Mr. Brumwell had been the warden for a period of three years and he and the Defendant entered into a new arrangement which comprised three agreements.  The first was an operator agreement dated 24th August 1998 under which the Council appointed Mr. Brumwell as the operator to manage the undertaking for a period of two years from 1st April 1998 (“the Operator Agreement”).  Secondly, a service occupancy agreement dated 21st September 1998 granted Mr. Brumwell a residential lease of the bungalow, which was said to be “for the better performance of his duties as an employee” (“the Bungalow Agreement”).   The third agreement was a contract of part-time employment to provide security at the site, the terms of which were set out in a letter dated 24th August 1998 from Mr. Brumwell to the Council (“the Service Agreement”). 
6.	In late 1999 Mr. Brumwell and Mr. Ian Hill began to discuss the future of the Park and its ongoing management.  It was Mr. Brumwell’s evidence that he had been given the distinct impression by the Council that he would be granted a formal lease of the Park.  However in April 2000 Mr. Ian Hill died.  Thereafter negotiations between Mr. Brumwell and the Council for a grant of a lease continued intermittently but did not result in the grant of a lease.   During this time Mr. Brumwell continued to manage the site.  
7.	By letter to Mr. Brumwell date 1st May 2002 the Council confirmed that the Operator Agreement had been extended for a further three years until 31st March 2003. However, the letter also stated that the Council’s tenancy of the camping field had now terminated following the death of the freeholder, Miss Evans.  Accordingly, notice was given in accordance with Cl. 5 of the Operator Agreement that, following the termination of the tenancy of the camping site, the Operator Agreement dated 24th August 1998 would come to an end with the expiration of the current quarter.  The letter also raised the possibility that Mr. Brumwell might wish to continue to operate the site as manager on behalf of the Council after 1st June 2002.  A meeting between the parties took place on 15th May 2002.  By letter dated 16th May 2002 to Mr. Brumwell the Council stated its position that the previous agreement had come to an end by virtue of the change in the status of the land occupied by the camping site and that the parties now needed to make a new agreement. Thereafter, Mr. Brumwell continued to manage the Park.
8.	In late August 2007 the Council wrote to Mr. Brumwell inviting him to a meeting with a view to discussing “the termination of the Management Agreement with you dated 24th August 1998 with a termination of your employment as a part-time security officer and your consequential vacation of the Warden’s Lodge in accordance with the Service Occupancy Agreement dated 21st September 1998”.  
9.	By notice served on the Council on 25th September 2009 pursuant to section 26, Landlord and Tenant Act 1954, the Claimant requested a new business tenancy of the Park.  By notice served on Mr. Brumwell on 24th November 2009 the Council opposed the application for a new tenancy on the ground, inter alia, that he was not a tenant of the premises.   On 22nd March 2010 Mr. Brumwell commenced proceedings in the County Court.  
10.	Section 23(1), Landlord and Tenant Act 1954 provides:
“(1) Subject to the provisions of this Act, this Part of this Act applies to any tenancy where the property comprised in the tenancy is or includes premises which are occupied by the tenant and are so occupied for the purposes of a business carried on by him or for those and other purposes.”
11.	In the court below it was Mr. Brumwell’s case that since the Operator Agreement had come into force, he had carried on the business of the Park on his own account and that, therefore, he occupied the Park for the purposes of a business carried on by him.  The Council opposed the application on three main grounds.  First, it maintained that Mr. Brumwell did not carry on his own business but carried on the Council’s business as its agent. Secondly, it maintained that he did not occupy the site as a tenant.  Thirdly, the Council maintained that it was otherwise entitled to oppose the application on ground (g) of section 31 of the Act, in that the Council intended to occupy and carry on a business itself at the site.  
12.	On 14th July 2010 District Judge Lloyd Davies directed that the court should try the issue of Mr. Brumwell’s entitlement to a new tenancy as a preliminary issue.  It was agreed between counsel that there were a number of sub-issues as follows:
(1)	Was and is the Claimant running a business on the site, and accordingly did he have a tenancy of the site by reason of the operator agreement?
(2)	If not – 
(a)	Has he held over as tenant after 1st May 2001;
(b)	Is the operator agreement a sham agreement; or
(c)	Is the Defendant estopped from denying that the Claimant occupies the site as a tenant and is entitled to a new lease?
(3)	Has the Defendant had established ground (g) in Section 31 of the Act?
13.	In a detailed judgment dated 14th October 2010 Judge Jarman QC held: 
(1)	The effect of the Operator Agreement was that Mr. Brumwell was appointed to manage the business which was to be retained by the Council.  The judge was not persuaded that the agreement on its proper construction showed an intention of the parties that that business, and hence exclusive possession of the site, should pass from the Council to Mr. Brumwell.
(2)	The correspondence in May 2002 was sufficient to terminate the agreement and Mr. Brumwell, not having a tenancy beforehand, did not thereafter hold over as such a tenant.
(3)	Neither the Bungalow Agreement nor the agreement under which Mr. Brumwell was employed as a part-time security guard was a sham.
(4)	  The representations made on behalf of the Council did not amount to a clear representation that Mr. Brumwell already had a tenancy.  In the light of the documents, the judge considered that it was likely that Mr. Brumwell understood what the position was. Mr. Brumwell was anxious to ensure that a lease was entered into but in the event it was not.  Furthermore the vast majority of the expenditure relied on by Mr. Brumwell was expenditure he was either required to make under the Operator Agreement or under the obligation to use best endeavours to maximise the use of the site.  Accordingly, the judge was not satisfied that the reliance was such as to make it unconscionable for the Council to deny that the Claimant was a tenant.
(5)	The Council had adduced no evidence in support of its reliance on ground (g) in section 31.  The judge did not consider that the Council had the intention or the capability of occupying the site for itself.
14.	On this appeal the only live issues are whether the arrangements entered into in 1998 create a tenancy and whether the Bungalow Agreement and the Service Agreement are, in fact, a sham.
The 1998 Agreements.
The Operator Agreement.
15.	The Operator Agreement is a deed under seal made on 24th August 1998.  Mr. Brumwell is referred to in the agreement as “the Operator”.  The fourth recital states:
“The Council wishes to appoint the Operator to manage the said caravan site and the camping site (hereinafter together called “the Undertaking”) upon the terms and conditions hereinafter appearing.”
The deed then provides:
“1. The Council hereby appoints the Operator and the Operator hereby accepts the appointment to manage the Undertaking for a period of two years (hereinafter called “the terms”) from the 1st day of April 1998 but terminable as hereinafter contained and upon the terms and conditions hereinafter contained.
…
4. The Parties hereby agree that the Council shall be paid by the Operator the sum of £32,890.00 for the first year of the term such sum to be paid by four equal instalments…and the Council shall be paid in respect of the second year of the term such sum as shall be agreed between the parties before the commencement of the second year of the term and which in any event shall not be less than the sum paid in the first year of the said term such sum to be paid by four equal payments in similar manner to the previous year.
5. In the event of the tenancy of the camping site being terminated before the expiration of this agreement it is hereby agreed that this agreement will cease on the date of termination of the said tenancy without prejudice to the obligations of the parties under the terms of the agreement up to such date.
6. This Agreement may by agreement between the parties be extended by a further term of three years upon such terms and conditions as the parties hereto shall have agreed before the expiration of the term of this Agreement subject to the Council at that time having a tenancy of the camping site and having a leasehold interest in the part of the caravan site which is held under the lease.”
16.	The obligations of the Operator are set out in the First Schedule.  Paragraph 1 states:
“1. To manage the Undertaking as an independent contractor under the name or style of “The Wyeside Caravan and Camping Park.”
There are then set out various obligations relating to the running and maintenance of the Park and its facilities.  The Schedule setting out the obligations of the Operator then continues:
“(7) Subject to the prior approval of the Director of Community Leisure and Recreation to set the fees and charges for the use of the facilities at the Undertaking.
(8) To collect all fees and charges as they become due and payable.
(9) To pay all energy charges water rates and other recurring charges in respect of the Undertaking other than those agreed to be paid by the Council.
(10) To be responsible for marketing and promoting the Undertaking including all advertising relating thereto and at all times to use his best endeavours to maximise the use of the Undertaking.
(11) To be responsible for all lettings of pitches and to have the sole rights for the sale of caravans and other equipment to the occupiers of the sites and to charge such commission to the users as he considers appropriate for such services.
(12) To charge for any services he renders to the users of the Undertaking.
(13) To keep properly written up books of accounts in respect of all financial transactions relating to the Undertaking and to use the accounting services of the County Treasurer (which shall be provided free of charge).
(14) To make available to the County Treasurer and to the Director of Community Leisure and Recreation the books of account at all reasonable times upon request.
(15) To employ such staff as he requires to assist him in carrying out his functions under this Agreement.
(16) To comply with all licences regulations and planning permissions relating to the Undertaking and the terms of the lease and tenancy agreement.
(17) To ensure that he complies with the obligations of a person in control of the Undertaking within the meaning of the Health and Safety at Work Etc Act 1974 and as the occupier of the premises within the meaning of the Occupiers Liability Act 1957 to the intent that the Council may not at any time be in breach of its obligations (if any) under these two Acts.
(18) At all times throughout the term of this Agreement to keep the Council indemnified against all claims actions damages and loss in respect of the operation of the Undertaking arising from actions or omissions on the part of the Operator.
(19) Within four weeks of the end of each year of the term hereby granted to produce to the County Treasurer such accounts as shall be required to show the income and expenditure and net profits of the Undertaking in the preceding year.”
17.	The obligations of the Council are set out in the Second Schedule in the following terms:
“(1) To pay the non-domestic rates on the Undertaking.
(2) To maintain all appropriate insurance policies in respect of the Undertaking and to pay the premiums thereof on demand.
(3) To repair and keep in repair the roads, footpaths, buildings and services on the sites
(4) To comply with the terms and conditions of the Lease and tenancy agreement.
(5) To provide free of charge to the Operator an accountancy service and all legal services required in connection with the operating of the Undertaking.
(6) To pay the rent under the Lease and Agreement.”
Paragraph 4 of the Second Schedule refers to the leases of the northern and southern portions of the site to the Council.
The Bungalow Agreement.
18.	A further agreement between the Council and Mr. Brumwell is dated 21st September 1998.  The recitals state:
“(1) The Employee is in the part-time employment of the Employer as The Caretaker and Security Officer at Wyeside Caravan and Camping Site Rhayader in the County of Powys.
(2) The Employee’s contract of employment requires him to occupy the dwelling-house hereinafter described for the better performance of his duties.”  
Clause 1 provides that the employee “whilst in the said employment and for the better performance of his duties in the said employment” is required during the term of such employment to occupy the warden’s bungalow.  Clause 2 provides that the employee shall in respect of such occupation of the bungalow pay the annual sum of £1,000 or such other sum as shall from time to time be agreed between the employer and employee, such sum to be paid by 12 equal instalments each year by deduction from salary.  
The agreement further provides:
“(6) Nothing herein contained shall create the relationship of landlord and tenant between the parties hereto and the benefit of this Agreement shall be personal to the Employee and shall not be assignable by him.
(7) The occupation of the premises by the Employee is a condition of his employment with the Employer and the right of the Employee to occupy the premises shall cease upon the termination of the Employee’s said employment or upon the Employee being transferred to another place of business of the Employer.”
The Service Agreement.
19.	By letter to Mr. Brumwell dated 24th August 1998 Mrs. Marilyn Heard, on behalf of the County Personnel Officer of the Council, wrote to Mr. Brumwell in the following terms:
“I write to confirm that with effect from the 1st April 1998, it has been agreed with you to vary the terms of your employment contract from that of a full-time Caretaker at the above site to that of a part-time Security Officer of the caravan and camping site.
 The duties of this post are to be responsible for the security of the Wyeside Caravan and Camping Site, Rhayader, Powys.
It will be a condition of employment that you will occupy the Warden’s bungalow situated on the caravan site throughout the term of your employment for the better performance of your duties.   
The revised annual salary will be £1,000 and payment will be monthly.  The hours of employment will be such as is required to properly carry out the above duties.  There will be no paid holiday allowance, and any holidays must be taken outside the period from Easter to the end of October in each year.
You will continue to be paid during any sickness period up to a maximum of six months.  Your continuous service will be taken into account for statutory employment rights.  You will be subject to Powys County Council disciplinary and grievance policies.”
20.	Although the copy of this letter before the court has not been countersigned by Mr. Brumwell, it is common ground between the parties that they made this agreement.
A sham?
21.	On behalf of Mr. Brumwell, Mr. Leslie Blohm QC submits that the Bungalow Agreement and the Service Agreement are a sham.  However he submits that the Operator Agreement is not a sham and that its effect was to grant a lease of the Park to Mr. Brumwell.  
22.	A “sham” was defined by Diplock L.J., as he then was, in Snook v London and West Riding Investments Limited [1967] 2 QB 786 as:
“acts done or documents executed by the parties to the “sham” which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create.”  (at p. 802D).
He emphasised, however, that:
“for acts or documents to be a "sham," with whatever legal consequences follow from this, all the parties thereto must have a common intention that the acts or documents are not to create the legal rights and obligations which they give the appearance of creating.”  (at p. 802E-F).
23.	It was common ground before us that in considering whether an agreement is a sham and in ascertaining the parties’ true intention, it is permissible to examine external evidence including the parties’ explanations and circumstantial evidence such as evidence of the subsequent conduct of the parties.  (See Stone v Hitch [2001] EWCA Civ. 63, per Arden L.J. at para. 65).
24.	Mr. Blohm points to a number of features of the Bungalow Agreement and the Service Agreement which, he submits, bear the hallmarks of artificiality.  He points to the split of functions between the Operator Agreement and the Service Agreement under which Mr. Brumwell was required to be a part-time employee for the specific purpose of providing security.  Mr. Blohm points to the fact that both the Operator Agreement and the Bungalow Agreement deal with the bungalow but in different terms.  Under the Operator Agreement the bungalow is part of the freehold land which Mr. Brumwell is to manage; Mr. Blohm submits that that is inconsistent with a separate agreement in respect of the bungalow.  Furthermore, it is said that setting the rent of the bungalow at a round figure of £1,000 per annum and the netting of rent against wages so as to leave a perpetual nil balance show that the value of occupation of the bungalow and the value of work performed were not valued on their own account and that the set off is simply a device.  Mr. Blohm says that these are not obvious or natural things for the parties to do.  However, as he accepts, these matters of themselves, even if they may be regarded as unusual, do not necessarily mean that the two agreements are a sham.  
25.	In this regard Mr. Brumwell relies, in particular, on his contention that the Bungalow Agreement was entered into for the purpose of preventing him from acquiring the right to buy the bungalow under the Housing Act 1985.  In his letter to the Council dated 15th June 1998, enclosing signed copies of the Operator Agreement, Mr. Brumwell stated :
“I have not signed as yet the service occupancy agreement of the Warden’s bungalow or the contract of employment as it was agreed that the amount you paid me was to cover the bungalow rent, so in effect I would be paid nothing.  You will recall it was a legal loophole you wanted to cover so that I could not exercise my right to buy under council housing law.”
He enclosed the unsigned copy of the Bungalow Agreement and the Service Contract so that they could be “amended to balance”. 
26.	In this regard Mr. Blohm also points to the evidence of Mr. Brumwell that he believed that the Service Agreement was created by the Council to stop him obtaining a right to buy the bungalow and that it was never the intention of the Council or Mr. Brumwell that he should be the Council’s employee.   In addition, Mr. Brumwell stated in his witness statement that he did not have a line manager, was not supervised by the Council and did not have any contact with the Council about his employment other than the receipt of wage slips.  He also referred to the fact that he did not receive such Council benefits as sick pay or paid holiday.  However, I note that when Mr. Brumwell raised this with the Council, the Council replied by letter dated 2nd September 1999 pointing out that it assumed that he had taken that into account when he entered into the agreement.  
27.	This was undoubtedly an unusual transaction.  However, I am not persuaded that the parties entered into the Bungalow Agreement and the Service Agreement with a common intention that the documents they executed were not to create the legal rights and obligations which they give the appearance of creating.
28.	I accept that the Council, in structuring the agreements in the way it did, was motivated by a desire to prevent Mr. Brumwell from acquiring a right to buy the bungalow under the right to buy provisions of the Housing Act 1985.  It was perfectly legitimate for the parties to enter into agreements the substance of which was designed to prevent that legislation from applying.  That is a very different matter from producing documents which do not reflect the true intention of the parties in entering in to an agreement in order to conceal the reality of the transaction.  The fact that the parties may have been motivated by the desire to avoid the right to buy does not demonstrate that the documents were not intended to take effect in accordance with their terms. 
29.	So far as the nature of the employment is concerned, the letter dated 12th June 1998 from the County Secretary enclosing the Operator Agreement and the Bungalow Agreement also enclosed a letter dated 11th June 1998 from the Personnel Officer of the Council relating to “your terms of part-time employment”.  Mr. Brumwell was asked to sign a copy of that letter and return it to the Council.  That letter was not before the court.  Although Mr. Brumwell has subsequently maintained that he did not consider himself in truth to be an employee, it is significant that in his letter of 15th June 1998, responding to the Council’s letter of 12th June 1998, he took issue on the amount payable in rent for the bungalow and pointed out that there was intended to be a set off between the rent and his pay under the contract of employment, but did not object to the contract of employment in principle or to its other terms.  
30.	The judge, in addressing the question of whether the employment contract was a sham, drew attention to the fact that the Operator Agreement did not require Mr. Brumwell to be responsible for security.  This, he considered, was a matter which had been left to be dealt with under the part-time contract of employment.  Mr. Blohm is critical of this reasoning which, he suggests, is founded on an incorrect finding of fact that Mr. Brumwell was responsible for security at the site prior to 1998.  In fact, it is not entirely clear from the description of Mr. Brumwell’s duties in a document dated April 1995 whether security duties would have been within “all the duties of a Warden” which he was required to carry out, the following list not being exhaustive.  However, be that as it may, the parties were entitled to make provision for security by Mr. Brumwell undertaking the part-time employment as a security man and undertaking to reside in the bungalow for the better security of the site.  
31.	Mr. Blohm placed reliance on the fact that the salary was never increased after 1998, notwithstanding the fact that local government salaries generally increased with inflation in the years after 1998.  However, as the judge observed, this is not surprising given that the salary in respect of Mr. Brumwell’s work as a part-time security man was intended to be equivalent to the rent which would otherwise be charged in respect of occupation of the bungalow.  No doubt, that too would have increased over the years.  The clear intention was that one should cancel the other out.  
32.	While the courts will be vigilant to detect sham devices and artificial transactions whose object is to disguise the substance of an agreement, I am not persuaded that the intention of the parties in the present case was anything different from that expressed in the agreements. 
33.	In the light of this conclusion it is not necessary to address the question whether, if the Bungalow Agreement and the Service Agreement were held to be a sham, Mr. Brumwell might nevertheless rely on the Operator Agreement as creating a lease and, thereby, giving rise to rights under the 1954 Act.
The effect of the agreements.
34.	The three agreements were intended by the parties to be part of the same transaction and accordingly, in ascertaining their effect, they should be read together. The central issue, both below and before us, was whether Mr. Brumwell was the agent of the Council in running the business on the Site. It was common ground between the parties that if Mr. Brumwell ran the business as agent of the Council he could not have exclusive possession of the Park. Mr. Blohm submitted that Mr. Brumwell carried on the business under the agreements in his own right and that therefore he had exclusive possession of the Park, was a tenant of it and was entitled to a new tenancy. On behalf of the Council, Mr. Graham Walters submitted that under the new arrangements set in place in 1998 Mr. Brumwell ran the business on behalf of the Council and that therefore he did not have exclusive possession of the land. Alternatively, pursuant to a Respondent’s notice dated 1st July 2011 he argued that, independently of the conclusion on the issue of agency, there was no lease and no exclusive possession. 
35.	These issues are to be determined on the construction of the three agreements considered in the light of the surrounding circumstances and the purpose to be served by the agreements but not, as the judge observed, by reference to pre-contract negotiations. In construing the agreements the language and legal terminology employed by the parties are not conclusive in determining the legal incidents of the relationships; it is the substance of the agreements which matters. 
36.	Under the Operator Agreement the Council appoints Mr. Brumwell “to manage the Undertaking” which is defined as the caravan site and the camping site.  This language is used consistently throughout the agreement.  (Recital (4); Clause 1; First Schedule, paragraph 1).  The Undertaking to be managed is the existing business carried on at the Park, which up to this point has been the business of the Council.  The terminology employed is, as I have indicated, certainly not conclusive.  However, although the words used could be consistent with an intention that Mr. Brumwell should manage the business in his own right, to my mind they are more apt to describe a situation in which he manages the existing business on behalf of the Council.
37.	In support of his submission that the substance of the agreement was that Mr. Brumwell should manage the business in his own right, Mr. Blohm places particular reliance upon the payment provisions of the Operator Agreement.  Under Clause 4 the parties agree that Mr. Brumwell should pay the Council the sum of £32,890 for the first year of the term payable in four equal quarterly instalments.  It provides that Mr. Brumwell shall pay to the Council in respect of the second year of the term the sum to be agreed between the parties before the commencement of the second year which shall not be less than the sum paid in the first year and which, once again, is to be paid in four equal quarterly instalments. Mr. Blohm submits that these payment obligations are in substance a payment of rent for the occupation of land and, accordingly, strongly support the view that the Council has granted Mr. Brumwell a lease of the land to enable him to carry on the business in his own right.
38.	It is, indeed, notable that Mr. Brumwell was required to pay a fixed sum which was not related in any way to the profitability of the undertaking.  This was not a profit sharing arrangement.  Nor was it an arrangement under which Mr. Brumwell paid to the Council all of the receipts up to a fixed sum.  On the contrary, the business was carried on at Mr. Brumwell’s risk.  His obligation was to pay a fixed sum in any event.  If the business was profitable he would make money; if it was not he would bear the loss.  While such an arrangement is not necessarily incompatible with status of Mr. Brumwell as agent, I accept that the fact that a business is carried on by an individual at his own financial risk is normally indicative of his acting as a principal and not as an agent.  
39.	The obligation on Mr. Brumwell to pay all energy charges, water rates and other recurring charges in respect of the undertaking other than those agreed to be paid by the Council (paragraph 9 of the First Schedule), while not necessarily inconsistent with agency, does to my mind provide some further support for the view that Mr. Brumwell is carrying on the business in his own right. Mr. Blohm further submits that the Council’s contractual obligation to pay the non-domestic rates on the Park is only explicable on the ground that Mr. Brumwell is the principal, because if the Council were the principal it would be liable to pay rates in any event. However, another possible view of this provision is that it is the result of a cautious approach to drafting which is apparent elsewhere in this agreement.
40.	A number of other features of the Operator Agreement are, to my mind, neutral in the sense that they provide little support for either of the competing submissions as to the true characterisation of the transaction.
(1)	Paragraph 1 of the First Schedule provides that Mr. Brumwell shall manage the undertaking “as an independent contractor”.  This may have been included by the parties to distinguish the role performed by Mr. Brumwell under the Operator Agreement from that which he performs as an employee under the Service Agreement.  The fact that he runs the business under the Operator Agreement as an independent contractor is, to my mind, equally consistent with his acting as principal or agent.
(2)	Mr. Brumwell is responsible for all lettings of pitches and has the sole rights for the “sale of caravans and other equipment to the occupiers of the site and to charge such commission to the users as he considers appropriate for such services.” (Paragraph 11 of the First Schedule)  Mr. Blohm accepted that the reference to the sale of caravans is a reference to the selling of rights to occupy caravans.  I accept Mr. Blohm’s submission that the statement that Mr. Brumwell is responsible for all lettings of pitches carries the implication that the Council is not.  However, this casts little light on the question as to the capacity in which Mr. Brumwell does so.  He can be responsible for doing so while at the same time acting on behalf of the Council. It seems to me that this obligation is equally consistent with Mr. Brumwell acting in his own right and with his acting as agent for what may well be an undisclosed principal.  On the other hand, the fact that Mr. Brumwell was entitled to retain the profits of this operation, if it was profitable, is a factor in favour of his acting as principal, as noted above.        
(3)	Mr. Brumwell undertakes an obligation (paragraph 17 of the First Schedule) to ensure that he complies with the obligations of a person in control of an undertaking under the Health and Safety at Work Act 1974 and of the occupier of premises under the Occupiers Liability Act 1957. This is similarly equivocal.  While, at first sight, this provision might be seen to support the view that Mr. Brumwell acts as principal, it would, as Mr. Blohm accepted, be possible for a person in control of an undertaking or occupying land to be acting as an agent for another.  The stated intention of this provision is “that the Council may not at any time be in breach of its obligations (if any) under these two Acts.”  The inclusion of the words “if any” may be said to support the view that the Council would not be in control of the undertaking or the occupier of the premises because Mr. Brumwell is performing these functions in his own right.  However, I consider that this is equally consistent with prophylactic drafting.
(4)	Mr. Brumwell undertakes (paragraph 18 of the First Schedule) to keep the Council indemnified against all claims and actions damages and loss in respect of the operation of the undertaking arising from actions or omissions on his part. This makes equal sense whether Mr. Brumwell is running the business on behalf of the Council or on his own behalf.
41.	There are, however, many features of the Operator Agreement which point strongly to the conclusion that Mr. Brumwell carries on the business on behalf of the Council.  
(1)	It is a striking feature of the Operator Agreement that Mr. Brumwell undertakes detailed obligations as to what he must do in running the Park. The Council retains a high degree of control. For example, he undertakes to ensure that all refuse bins are emptied at suitable intervals and the areas surrounding such bins are kept tidy and free from refuse.  (Paragraph 2 of the First Schedule).  He undertakes to ensure that the owners and tenants of caravans and the users of the camping site keep the Park in a clean and tidy condition and that all refuse is deposited in the appropriate receptacles.  (Paragraph 3 of the First Schedule).  He undertakes to keep the toilets and showers on the sites in proper working order and at all times clean and tidy.  (Paragraph 4 of the First Schedule).  If Mr. Brumwell were running the Park in his own right, it would be a matter for him as to precisely how he ran the Park. The fact that the Operator Agreement spells out these duties in such detail is a strong indication that he is carrying on the business of the Council as its agent.  
(2)	Mr. Brumwell undertakes to be responsible for marketing and promoting the undertaking, including all advertising relating thereto, and he undertakes at all times to use his best endeavours to maximise the use of the Undertaking. (Paragraph 10 of the First Schedule).  In other circumstances, the fact that an individual is responsible for marketing and advertising might well be taken as an indication that he is acting in his own right.  However, in the present case the fact that Mr. Brumwell undertakes an obligation to the Council to perform these functions has, to my mind, precisely the opposite effect.  Similarly, if Mr. Brumwell is running the Park in his own right its promotion might be thought to be a matter for him and it is odd that he should be contractually bound to the Council to promote it.   I accept that the force of this consideration may be diminished to a certain extent by the fact that it was clearly contemplated that the business would return to the Council at the end of the arrangement.  The Council would therefore have an interest in the state of the business at the end of the agreement.  An obligation to promote the undertaking may therefore be explicable even if the business is Mr. Brumwell’s business for the duration of the agreement.  Nevertheless, it is a consideration which I consider tends in favour of Mr. Brumwell acting as agent for the Council.
(3)	The Operator Agreement imposes an obligation on Mr. Brumwell to employ such staff as he requires to assist him in carrying out his functions.   (Paragraph 15 of the First Schedule).  It is difficult to see why such an obligation should be included if Mr. Brumwell is running his own business.  Rather, it appears that this obligation is imposed so that the Council can be satisfied that the business will be properly run.  This again points towards the business being the business of the Council.  
(4)	If Mr. Brumwell operates the Site in his own right it is a curious feature of the Agreement that he is required to do so under the name or style of “the Wyeside Caravan and Camping Park”.  (Paragraph 1 of the First Schedule).  A possible explanation is that the Council will eventually get the business back and therefore benefit from the goodwill built up in that name.  If that is the case then this provision is neutral.  However, I tend to the view that this requirement supports the agency analysis. 
(5)	Mr. Brumwell undertakes (Paragraph 7 of the First Schedule) to set the fees and charges for the use of the facilities on the Site, subject to the prior approval of the Council.  Mr. Blohm submits that the fact that fees and charges are not set by the Council is an indication that Mr. Brumwell runs the business in his own right.  However, if that were the case, Mr. Brumwell might be expected to have an unfettered right to set fees and charges.  Even if, as Mr. Blohm submits, the prior approval of the Council is not to be unreasonably withheld, to my mind this provision reflects the retention by the Council of a degree of control over the business which is incompatible with the result for which Mr. Brumwell contends  
(6)	Mr. Brumwell is obliged to charge for any services he renders to users of the Park (paragraph 12 of the First Schedule) and to collect all fees and charges as they become due  (paragraph 8 of the First Schedule). These are further examples of detailed provision governing the way in which Mr. Brumwell runs the Park and provide further support for agency.
(7)	The First Schedule to the Operator Agreement imposes a series of obligations on Mr. Brumwell in respect of accounts.  He is obliged to keep properly written-up books of financial transactions relating to the undertaking and to use the accounting services of the County Treasurer, which are to be provided free of charge  (paragraph 13).  The books of account have to be made available to Council officials’ at all reasonable times upon request (paragraph 14). Within four weeks of the end of each year Mr. Brumwell is required to produce to the County Treasurer such accounts as shall be required to show the income and expenditure and net profits of the Undertaking in the preceding year (paragraph 19).  Furthermore, the Second Schedule imposes an obligation on the Council to provide an accountancy service to Mr. Brumwell free of charge (paragraph 5). As the judge observed, the fact that Mr. Brumwell may not have used the accountancy services of the Council, as he was required to do, and may have instructed his own accountant is nothing to the point.  It is difficult to see why such provisions should be included in an agreement if the intention is that Mr. Brumwell carry on the business in his own right. If that were the case, the agreement might be expected to include some provision in relation to the provision of financial information but the Council would have no justification for maintaining such a tight control over such accountancy matters. However, these provisions make eminent sense if the business remains the business of the Council, notwithstanding the fact that the Council is not sharing in the profits.
(8)	In addition to the free provision of accountancy services, the Council undertakes to provide to Mr. Brumwell free of charge “all legal services required in connection with the operation of the Undertaking”.  (Paragraph 5 of the Second Schedule).  To my mind this is totally inconsistent with the suggestion that Mr. Brumwell is running the Park as his own business.  If that were the case, there could be no possible justification for the Council undertaking to meet all his legal expenses.  
(9)	The Council undertakes to maintain “all appropriate insurance policies in respect of the Undertaking and pay the premiums thereof on demand”.  (Paragraph 2 of the Second Schedule).  This would appear to include the insurance of the buildings and installations on the Site.  Mr. Blohm submits that there is nothing to prevent a landlord from insuring his interest in property.  However, “all appropriate insurance policies in respect of the Undertaking” would be wide enough to include public liability insurance for the operation of the Site.  If Mr. Brumwell were operating the business in his own right, there could be no possible reason for the Council to provide such public liability cover at its expense.  
42.	At each step of the preceding analysis of the terms I have considered whether the fact that it was contemplated that the business would revert to the Council might explain the degree of control by the Council over the operation of the business by Mr. Brumwell. However, to my mind, this cannot explain the remarkable intensity of control retained by the Council over the business. Similarly, I have considered whether the Council’s interest as a public authority in promoting tourism in mid-Wales could provide an explanation for its retention of control in the respects identified. However, I agree with the judge that the terms of the Operator Agreement go considerably beyond what is reasonably explicable by reference to any responsibilities the Council may have as a public authority for the promotion of tourism.
43.	The cumulative effect of these provisions leads me to the clear conclusion that Mr. Brumwell undertook to manage the undertaking as the agent of the Council.
44.	The Operator Agreement forms one part of a single transaction given effect by three agreements. When the Operator Agreement is considered in this context I am fortified in my conclusions by two further considerations. First, as the judge observed, if the Operator Agreement transferred the business to Mr. Brumwell so as to give him exclusive possession of the site, there would have been no need for the Bungalow Agreement. Secondly, if the Operator Agreement resulted in Mr. Brumwell operating his own business on the Park, he would be responsible for the security of the Park and there would be no reason for the Council to enter into a further agreement under which he was employed as a part-time security man.
45.	In the light of these conclusions it is not necessary to consider the issues raised by the Respondent’s notice.
46.	For the reasons set out above I consider that the judge was correct in his conclusion that under the Operator Agreement Mr. Brumwell ran the business as agent for the Council and, accordingly, has no entitlement to the grant of a new tenancy under the Landlord and Tenant Act 1954. I would dismiss the appeal.
Lord Justice Pitchford: 
47.	I agree.
Lord Justice Laws: 
48.	I also agree.