England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE CCRTF 96/1210/H

Royal Courts of Justice

Strand, London WC2

Thursday, 16th January 1997

B e f o r e :

LORD JUSTICE NOURSE

MR. JUSTICE CAZALET

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NEWLON HOUSING TRUST

Plaintiff/Respondent

-v-

RATEB ALSULAIMEN

First Defendant/Appellant

and

TONIE ALSULAIMEN Second Defendant

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MR. S. BUCKHAVEN (instructed by Messrs. Martin Shepherd & Co., Enfield) appeared on behalf of the Appellant First Defendant.

MR. O. CAMPBELL (instructed by Messrs. Devonshires, London EC2) appeared on behalf of the Respondent Plaintiff.

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J U D G M E N T

(As Approved by the Court)

Crown Copyright

Thursday, 16th January 1997

LORD JUSTICE NOURSE: In Hammersmith and Fulham London Borough Council v. Monk [1992] 1 AC 478 the House of Lords decided that a contractual periodic tenancy held by two or more joint tenants continued only so long as they all agreed to its continuation, so that, in the absence of any contrary term in the agreement, the tenancy was determinable by a notice to quit given by one joint tenant without the concurrence of the other or others. At p.491F, Lord Browne-Wilkinson, having prefaced his speech by observing that there were two instinctive reactions to that case which led to diametrically opposite conclusions, said:

"The first is that the flat in question was the joint home of [Mr Monk] and Mrs Powell: it therefore cannot be right that one of them unilaterally can join the landlords to put an end to the other's rights in the home. The second is that [Mr Monk] and Mrs Powell undertook joint liabilities as tenants for the purpose of providing themselves with a joint home and that, once the desire to live together has ended, it is impossible to require that the one who quits the home should continue indefinitely to be liable for the discharge of the obligations to the landlord under the tenancy agreement.

... The revulsion against Mrs Powell being able unilaterally to terminate [Mr Monk's] rights in his home is property based: [Mr Monk's] property rights in the home cannot be destroyed without his consent. The other reaction is contract based: Mrs Powell cannot be held to a tenancy contract which is dependant for its continuance on the will of the tenant."

In that case, Mr Monk and Mrs Powell being unmarried, there was no power in the court to impose a solution which would have both preserved Mr Monk's home and relieved Mrs Powell of her contractual liability in respect of it. Here we have a case where joint tenants under a contractual periodic tenancy were, when they ceased to live together, a married couple. In such a case the tenancy is a joint asset which the court can order to be transferred into the sole name of one or other party to the marriage under section 24(1)(a) of the Matrimonial Causes Act 1973, thereby relieving the other party of further contractual liability to the landlord; see Thompson v. Thompson [1976] Fam. 25. There must be many cases where such a tenancy is the most valuable asset, perhaps the only asset, available to the parties. It is natural that the court, while looking always to protect the landlord's interests, should be disposed to use every power available to it in order to prevent the unilateral destruction of such an asset by one party to the marriage.

By a written tenancy agreement dated 26th April 1994 the plaintiff, Newlon Housing Trust (a registered housing association), granted to the defendants, Mr Rateb Alsulaimen and his wife Mrs Tonie Alsulaimen, an assured weekly tenancy of a two-bedroomed flat on the second floor of 86 Hertford Road, London N9, the tenancy to begin on Monday, 2nd May 1994. By clause 3(12) of the agreement the defendants agreed:

"Not to assign the Tenancy except in furtherance of a court order made under Section 24 of the Matrimonial Causes Act 1973 or with the written consent of the Trust when exercising the right to exchange set out in 5(6) below."

The defendants, to whom for ease of reference I will refer as the husband and the wife, were married in November 1991. The husband is a Syrian by birth, who has no relatives in this country. The wife was born in Cyprus. They have two children, a daughter born on 6th September 1992 and a son born on 6th December 1995. In April 1995 the parties separated. The wife left the flat and went to live with her parents, taking the daughter with her. On 19th September 1995 a decree nisi of divorce was pronounced. On 1st November 1995 the wife gave a notice to the plaintiff in the following terms:

"I Mrs T. Sulaimen hereby give you NOTICE TO QUIT that I shall deliver up possession of [the flat] on 4 December 1995 or the day on which a complete period of the tenancy expires next after the end of four weeks from the service of this Notice."

4th December 1995 having been a Monday, it seems clear, first, that that notice was, by virtue of the decision in Monk's case, effective at common law to determine the tenancy on that date and, secondly, that it satisfied the requirements of section 5(1) of the Protection from Eviction Act 1977. The contrary has not been suggested. Thereafter the husband was technically a trespasser. Very properly, however, a further notice to quit was given to him in December 1995. By that time a decree absolute had been pronounced, on 22nd November.

On 28th March 1996 the plaintiff issued a summons for possession of the flat in the Edmonton County Court with a return date of 6th June. In addition to a claim for possession based on the notice to quit, the particulars of claim sought arrears of rent calculated to 4th December 1995 in the sum of £1,305.04, together with mesne profits from that date until possession was given. On or about 28th April 1996 all arrears of rent were paid off out of housing benefit available to the husband and since then the rent from time to time due has been paid from the same source.

It appears that the husband had first instructed solicitors to act for him in August 1995. However, on 3rd May 1996 his present solicitors took over, when they received the papers in the case from those who had previously acted. At that time they were also instructed in respect of his matrimonial affairs. They were unable to see the husband in connection with the possession action until 22nd May. On 24th May they wrote to the plaintiff's solicitors, enquiring whether, now that all arrears had been paid off, the plaintiff was intending to proceed with that action. On 28th May their enquiry was answered in the affirmative. On the same day they applied for legal aid to pursue an application under section 37 of the Matrimonial Causes Act 1973, a certificate being granted on 3rd June. On the same day the husband's solicitors wrote to the plaintiff's solicitors informing them of the husband's intention to make an application under section 37 and requesting them to consent to the adjournment of the possession hearing on 6th June until after it had been determined. On 4th June the plaintiff's solicitors wrote refusing consent. On 5th June the husband was granted legal aid in respect of the possession action.

It was in that state of play that the plaintiff's application came before His Honour Judge Tibber on 6th June. I will read counsel's note, as approved by the judge, of his judgment almost in full:

"This is a claim for possession of premises at flat 3, 86 Hertford Road to which there is no answer at all because this was a joint tenancy to Mr and Mrs Alsulaimen. Mrs Alsulaimen moved out and gave notice to quit to the Plaintiff and therefore there is no defence at all and these matters are admitted by the Defendant.

Miss Baum appears and asks me to adjourn the matter because Mr Alsulaimen intends to apply under the Matrimonial Causes Act for transfer of the tenancy to himself and seeks to set aside the notice to quit. I am not at all sure that a section 37 application would be successful but that is not a matter which I have to determine this morning.

I do have to determine whether it is right to grant an adjournment at the last minute. I understand that the reason [for the delay] is a change of solicitors and that there is now legal aid for an ancillary relief application. But the fact is that this summons was served on 9th April 1996 by posting on 2nd April 1996 and this application was made at the last minute. I have to consider fairness between the parties. The housing trust are entitled to an order today and I refuse the application for an adjournment."

The judge made an order for possession in 28 days and ordered the husband to pay the plaintiff mesne profits at the rate of £44.99 per week until possession was given. He refused the husband leave to appeal.

On 17th June the husband was granted legal aid for an application to this court for leave, and on 28th June an application was duly made. On 3rd July the husband went back to Judge Tibber and sought a stay of the possession order pending the determination of the application for leave to appeal. The judge refused to grant a stay, stating, correctly, that that was now a matter for this court. On 21st August 1996, a warrant of possession having been issued but not yet executed, a division of this court consisting of Russell, Saville and Aldous LJJ granted the husband leave to appeal and a stay on the warrant pending the outcome of the appeal, which they ordered to be expedited. The appeal now comes before us.

By his notice of appeal the husband seeks an order setting aside the order for possession and an order that the plaintiff's application for possession be adjourned generally, in other words until after the determination of his application under section 37. In support of the appeal Mr Buckhaven, for the husband, while recognising that it is a strong thing for this court to interfere with a judge's refusal to grant an adjournment, submits that this is an exceptional case where the judge erred in principle or gave a decision which was plainly wrong. He says that an adjournment was required in order that justice might be done to the husband. Although I can fully understand how it came about that the judge gave the decision that he did, I am satisfied that Mr Buckhaven's submission is made out.

The judge's first error was in thinking that the husband's prospects of success in an application under section 37 was not a matter which he had to consider at that stage. While I would accept that there may not have been the same opportunity for consideration as there has been today, it was essential that the judge should consider the merits of the claim, at least in a preliminary way. Had he done so, it is likely, for reasons to be given presently, that he would not have had the doubts as to the success of such an application that he appears to have had. Had he not had those doubts, it is likely that he would have been more favourably disposed towards the grant of an adjournment.

The judge's second error was in thinking that fairness between the parties required the plaintiff to be granted an order for possession there and then. Once the arrears of rent had been paid and the source of their future funding assured, I am unable to see what prejudice would have been suffered by the plaintiff from an adjournment, other than the uncertainties attendant upon having someone in possession who was under no contractual obligations and the delay in being unable to relet the flat. On the other side, Mr Campbell, for the plaintiff, has contended that the possession order made by the judge did not deprive the husband of his right to make an application under section 37. That is no doubt correct. It is, however, a point of minimal weight. Once the husband had been evicted from his home, it would have been no comfort to him to be told that he had a good chance of being able to resume possession at some indefinite date in the future. Once his home had gone, it would have gone.

The judge also attached weight to the lateness of the application for an adjournment. Further, in the judgment he delivered on 3rd July he pointed out that an application under section 37 had not been made at the time of the hearing on 6th June or indeed by 3rd July. I do not, with respect to the judge, think that either of those points was of sufficient substance to outweigh the injustice to the husband in refusing to grant an adjournment. As to the first, the summons had only been served on the husband on 9th April, it was the first hearing and the plaintiff's position in regard to rent was assured. As to the second, the mere fact that a section 37 application had not been issued was of minimal significance. The husband had already been granted legal aid for that application. The correct way of dealing with the point would have been to make it a condition of the adjournment that the application should be issued within a short period.

For these reasons, I am of the opinion that this is a case where this court can and must interfere with the judge's decision to refuse an adjournment. It is necessary, however, to explain my view, already intimated, that the husband has good prospects of success in an application under sections 37 and 24(1)(a) of the 1973 Act.

The marginal note to section 37 is "Avoidance of transactions intended to prevent or reduce financial relief". For present purposes its critical provisions are those contained in subsections (2)(b), (4), (5)(a) and (6). Shortly stated, and on the assumptions (1) that the notice to quit was a "disposition" and (2) that it was not given for valuable consideration, the effect of these provisions in this case is that if the court is satisfied, first, that the wife gave the notice to quit with the intention of defeating a claim by the husband for financial relief and, secondly, that if the notice were set aside the tenancy would be transferred to the husband, it may make an order setting it aside; further, if the court is satisfied that the notice would (apart from section 37) have the consequence of defeating the husband's claim, it will be presumed, unless the contrary is shown, that the wife gave the notice with the intention of defeating the claim.

As to the first assumption, Mr Campbell accepts, in my view correctly, that the notice to quit was a disposition. Section 37(6) provides that, with the exception of any provision contained in a will or codicil, that expression "includes any conveyance, assurance or gift of property of any description, whether made by an instrument or otherwise". Since the notice to quit operated to assign to the plaintiff the interest not only of the wife but also of the husband under the tenancy, it was clearly an assurance of property within that provision. Its effect was no different from that of a surrender of the tenancy by both husband and wife.

The second assumption also appears to be valid. Unlike Monk's case, here there was no agreement by the plaintiff to rehouse the wife. She simply went to live with her parents. Mr Campbell has sought to argue that the release of the wife from her contractual liability was valuable consideration for the purposes of section 37(4). That cannot be correct. The release flowed automatically from the giving of the notice to quit. It was not consideration for the giving of it. Accordingly, the plaintiff was a volunteer and the question whether it acted in good faith and without notice does not arise.

Two questions therefore remain. For convenience, they can be taken in the reverse of their natural order. First, if the notice were set aside, would the court make an order transferring the tenancy into the sole name of the husband? In my view the husband has good prospects of obtaining such an order. The wife, who is now in the process of seeking leave to take the children to live with her in Cyprus, has shown that she has no need to live in the flat, whereas the husband does. She has made no application for ancillary relief. Mr Campbell has submitted that the result of a transfer would be to force the plaintiff to accept the husband as sole tenant, which would be contrary to its policy not to have a single male in a two-bedroomed flat. In other cases such an argument might possibly have force. Here, in spite of Mr Campbell's submissions to the contrary, the plaintiff is precluded from relying on it by clause 3(12) of the tenancy agreement, which expressly allows an assignment pursuant to an order under section 24 to be made without the consent of the plaintiff.

The second remaining question is perhaps more arguable. It is said that the plaintiff was informed by the wife that she was serving the notice because the husband had been violent towards her and because she no longer wished to live with him. Those are Mr Campbell's instructions, although it must be said that the matter has not been deposed to in evidence. Accepting that to have been the wife's reason for serving the notice, I nevertheless believe that it does not at all follow that she did not give it with the intention of defeating the husband's claim. In Kemmis v. Kemmis [1988] 1 WLR 1307, at p.1326G, Lloyd LJ said that, in determining whether a spouse has the requisite state of mind, a court may have regard to the natural consequences of his act. At p.1330H, I thought it clear that it did not have to be the spouse's sole or even his dominant intention; it was enough if it played a substantial part in his intentions as a whole. Account must also be taken of the presumption in section 37(5), which would be all the more decisive if the wife did not oppose the application. In all the circumstances, and as at present advised, I think that the husband has good prospects of establishing that the wife did give the notice to quit with the intention required by section 37(2)(b).

The wife would have to be a party to the husband's application under section 37. For the reasons already given, it appears unlikely that she would, or could effectively, oppose it. The effective opponent would be the plaintiff, which would have to be given notice and, if not made a party, would be entitled to intervene. In the light of the views expressed on this appeal, the plaintiff will no doubt wish to give careful consideration to the question whether it ought to oppose the application.

The husband must now give an undertaking to issue an application under sections 37 and 24 of the 1973 Act within a short period. With that undertaking I would allow the appeal and make the order sought by him.

MR. JUSTICE CAZALET: I agree and would only add this. In the course of argument it became apparent that there may be two ways in which a sole tenancy held by one spouse or a joint tenancy held by two spouses may be transferred to the other or sole spouse. One route, in appropriate circumstances, may be pursuant to section 24(1)(a) of the Matrimonial Causes Act 1973, when a spouse or former spouse seeks an order for transfer of property against the other. Section 24(1)(a) provides as follows:

"On granting a decree of divorce, a decree of nullity of marriage or a decree of judicial separation or at any time thereafter (whether, in the case of a decree of divorce or of nullity of marriage, before or after the decree is made absolute), the court may make any one or more of the following orders, that is to say -

(a) an order that a party to the marriage shall transfer to the other party, to any child of the family or to such person as may be specified in the order for the benefit of such a child such property as may be so specified, being property to which the first mentioned party is entitled, either in possession or reversion;"

The other route may be through sections 1 and 2 of the Schedule to the Matrimonial Homes Act 1983. Section 1 and the relevant part of section 2 read as follows:

"1. (1) Where one spouse is entitled, either in his or her own right or jointly with the other spouse, to occupy a dwelling house by virtue of -

(a) a protected tenancy or statutory tenancy within the meaning of the Rent Act 1977, or

(b) a statutory tenancy within the meaning of the Rent (Agriculture) Act 1976, or

(c) a secure tenancy within the meaning of the Housing Act 1985, or

(d) an assured tenancy or assured agricultural occupancy within the meaning of Part I of the Housing Act 1988,

then, on granting a decree of divorce, a decree of nullity of marriage or a decree of judicial separation, or at any time thereafter (whether, in the case of a decree of divorce or nullity of marriage, before or after the decree is made absolute), the court by which the decree is granted may make an order under Part II below.

(2) References in this Schedule to a spouse being entitled to occupy a dwelling house by virtue of a protected, statutory or secure tenancy or an assured tenancy or assured agricultural occupancy apply whether that entitlement is in his or her own right, or jointly with the other spouse.

2. (1) Where a spouse is entitled to occupy the dwelling house by virtue of a protected tenancy within the meaning of the Rent Act 1977, or a secure tenancy within the meaning of the Housing Act 1985 or an assured tenancy or assured agricultural occupancy within the meaning of Part I of the Housing Act 1988, the court may by order direct that, as from such date as may be specified in the order, there shall, by virtue of the order and without further assurance, be transferred to, and vested in, the other spouse -

(a) the estate or interest which the spouse so entitled had in the dwelling house immediately before that date by virtue of the lease or agreement creating the tenancy and any assignment of that lease or agreement, with all rights, privileges and appurtenances attaching to that estate or interest but subject to all covenants, obligations, liabilities and incumbrances to which it is subject; and

(b) where the spouse so entitled is an assignee of such lease or agreement, the liability of that spouse under any covenant of indemnity by the assignee expressed or implied in the assignment of the lease or agreement to that spouse.

(2) Where an order is made under this paragraph, any liability or obligation to which the spouse so entitled is subject under any covenant having reference to the dwelling house in the lease or agreement, being a liability or obligation falling due to be discharged or performed on or after the date so specified, shall not be enforceable against that spouse."

In Thompson v. Thompson [1976] Fam 25, the Court of Appeal was concerned with an application for an order for the transfer of a local authority tenancy. The court held that a council tenancy was ´property' within the meaning of section 24 of the 1973 Act and that accordingly the court had jurisdiction under that section to order the transfer of a local authority tenancy. However, the court ought not to exercise its jurisdiction under that section in respect of such a tenancy where the order would be rendered ineffective by a covenant against assignment or where it would interfere with the statutory duties and discretions of a local housing authority.

In Hale v. Hale [1975] 1 WLR 931, a wife had applied for the transfer of her husband's sole tenancy in the former matrimonial home. There was no prohibition against assignment in the lease. In considering whether the husband should be granted leave to appeal on a different point, the Court of Appeal held that, in the absence of any contractual or statutory prohibition preventing the lease being transferred by the tenant himself, the court could, in an appropriate case, exercise its power under section 24(1)(a) of the Matrimonial Causes Act 1973 to make an order for its transfer. Accordingly, it follows that if there is a covenant against assignment, it must be extremely doubtful whether the court would make an order for transfer without the consent of the landlord since the court cannot derogate from the rights of third parties, in particular where the spouse, who seeks a transfer, has entered into a covenant with the landlord not to assign. This is, of course, to be contrasted with the instant case, where, although the plaintiff is a housing authority, the tenants are expressly permitted under clause 3(12) of the tenancy agreement to make an assignment in furtherance of a court order made under section 24 of the Matrimonial Causes Act 1973.

Accordingly, in my view, whilst it may well be that certain tenancies cannot be transferred under section 24(1)(a) of the 1973 Act because, for example, the lease contains a covenant against assignment or there is a special reason arising from the tenancy being a council tenancy, an order of transfer in such a case may nevertheless be available under the broader statutory provisions of the Schedule to the Matrimonial Homes Act 1983. Additionally, if a tenancy does not constitute "property" (and it may be open to question whether a statutory tenancy constitutes "property" within the meaning of the 1973 Act), such tenancy will fall outside the 1973 Act but may well still come within the wide range of tenancies referred to under Schedule I to the 1983 Act which expressly incorporates a statutory tenancy within section 1(1)(a).

Order: On the husband's undertaking to issue an application under sections 37 and 24 of the Matrimonial Causes Act 1973 within seven days, appeal allowed with costs; judge's order for possession dated 6.6.96 set aside and plaintiff's application for possession adjourned generally; legal aid taxation of the first defendant's costs.