England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIS HONOUR JUDGE GIBSON
LAMBETH COUNTY COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		29th October 1999

LORD JUSTICE MUMMERY:

The Issue

The principal point on this appeal is this : in what circumstances is a local authority liable to a former secure tenant, against whom it has obtained, but not enforced, a possession order, for disrepair of the premises in the tolerated occupation of the former tenant ?

In this case an action for damages for disrepair was started against the local authority landlord by a former secure tenant who had become a "tolerated trespasser". The action was brought in the statutory "limbo period" between (a) the determination of the secure tenancy as a result of non-compliance with the terms of a possession order and (b) the date when the court discharged the original possession order. Did the discharge or variation of the possession order by the court (or an agreement between the parties in similar terms) make the local authority retrospectively liable to a claim for breach of covenant at a time when no tenancy of the premises existed ?

The resolution of these questions turns on the application to the facts of this case of section 85 of the Housing Act 1985, as interpreted by the House of Lords in Burrows v Brent London Borough Council [1996] 1 WLR 1448. The practical problems posed by the questions are likely to confront many local authorities and their advisers up and down the country.

Section 85 provides:

" (1) Where proceedings are brought for possession of a dwelling house let under a secure tenancy [for non-payment of rent] the court may adjourn the proceedings for such period or periods as it thinks fit. (2) On the making of an order for possession of such a dwelling-house on any of those grounds, or at any time before the execution of the order, the court may - (a) stay or suspend the execution of the order, or (b) postpone the date of possession, for such period or periods as the court thinks fit. (3) On such an adjournment, stay, suspension or postponement the court - (a) shall impose conditions with respect to the payment by the tenant of arrears of rent (if any) and rent or payments in respect of occupation after the termination of the tenancy (mesne profits), unless it considers that to do so would cause exceptional hardship to the tenant or would otherwise be unreasonable, and (b) may impose such other conditions as it thinks fit. (4) If the conditions are complied with the court may, if it thinks fit, discharge or rescind the order for possession...."

THE FACTS

On 17 February 1992 Miss Hawa Rogers became a secure tenant of premises belonging to the Council in South Brixton at 22, Hardham House, Tulse Hill Estate, SW2 . The weekly rent was £30.14. In the Tenancy Conditions the Council expressly agreed to keep in good repair the structure and outside of the premises.

Miss Rogers fell into arrears with the rent. The Council took out a summons for possession in the Lambeth County Court. 0n 13 October 1992 the court made a suspended order for possession. It ordered that the Council recover possession of the premises and the sum of £871.70 for arrears of rent and £130 for costs. It was ordered that judgment for possession should not be enforced for 28 days in any event and for so long thereafter as Miss Rogers punctually paid to the Council the arrears of rent and mesne profits by instalments of £5 per week in addition to the current rent, which was £33.78 per week. The money judgment for the total of £1001.70 was not to be enforced for so long as she punctually paid the instalments of £5 per week.

By 21 December 1992 Miss Rogers was in breach of the terms of the order. She later failed to comply with the terms of an agreement made with the Council on 31 May 1994. She remained in occupation. She continued to make erratic payments, funded by housing benefit.

On 12 September 1996 she started proceedings against the Council claiming breach of the express repairing obligations under the tenancy agreement and as implied by virtue of section 11 of the Landlord and Tenant Act 1985. She complained of poor insulation, condensation, dampness, mould and fungus. She claimed damages, including special damages totalling almost £1,000. She sought an order for specific performance to carry out repair works set out in a schedule.

In its defence served in March 1997 the Council denied liability, disputed the extent of disrepair and quantum and expressly pleaded that, as Miss Rogers had not complied with the terms of the order of 13 October 1992, she had ceased to be a tenant of the premises as from the date of that breach (21 December 1992) and was not entitled to enforce the repairing covenant.

By April 1997 the Council had in fact done the repairs to the premises. The proceedings continued. On 12 September 1997 Miss Rogers issued an application seeking orders under section 85 of the Housing Act 1985 that the 1992 possession order be rescinded or discharged or that the date of possession under the 1992 order be postponed on the grounds that she had adhered to an agreement made with the Council on 31 May 1994.

On 20 April 1998 Miss Rogers made an agreement with the Council to pay off rent arrears. The agreement is contained in a standard form printed document prepared by the Council acting through a Mr Thatcher. The form is divided into 5 sections.In section 2 (Arrears details) Miss Rogers stated that she owed the Council £2051.32 in rent arrears. In section 3 (Agreement details) she agreed to pay all her current rent charges plus £16.27 off the arrears every week, making a weekly total of £69.23 to be paid monthly by a standing order of £300.

Section 5 is important. It is headed "What you need to know" and provides as follows-

"1. We will not take you to court for rent arrears so long as you keep to this agreement and your financial circumstances do not change.

2. We will take you to court if you miss one payment.

3. You must tell us if your financial circumstances get better or worse.

4. We will still take you to court if we have already taken legal action against you for rent arrears.

5. If we already have a possession order against you, we will go back to court to evict you if you break this agreement."

Section 6 (Tenant's statement) states above the signature of the tenant that-

"I understand this agreement and what will happen if I break it."

The agreement is silent on both the pending claim for damages and the pending application under section 85 to discharge the possession order or to postpone the date for possession.

On 2 September 1998 the application to postpone the date in the possession order was amended to ask that, should Miss Rogers be successful in that application and recover damages for disrepair in excess of the current rent arrears, the possession order should be rescinded or discharged under section 85(4) of the 1985 Act.

The Judgment

The claim for damages and the application under section 85 of the 1985 Act were heard by HHJ Gibson at the Lambeth County Court on 23 November 1998. The judge discharged the 1992 possession order, gave judgment for £4742.82 on the damages claim, ordered that the judgment be satisfied in part by the cancellation of the debit balance on the rent account and gave liberty to apply as to the amount of the balance. The Council appeals against that order.

The Judge's findings and reasoning may be summarised as follows:-

(1) Miss Rogers failed to make payments to the Council in accordance with the 1994 agreement.

(2) She had made the agreed payments under the agreement of 20 April 1998 and there was "no reason at least in the near future to expect any failure to maintain payments.."

(3) The April 1998 agreement did not bind the Council to treat the 1992 possession order as having been discharged.

"At most it is an agreement by the [Council] to continue to treat Miss Rogers as a tolerated trespasser and not take steps to evict her as long as she maintains payments under the agreement. As was stated in Burrows the status of tolerated trespasser carries with it the opportunity to apply to the court for a variation of the original suspended possession order with a view in a proper case that the court may order that the secure tenancy be restored retrospectively together with the rights and obligations arising under it."

(4) The extent to which Miss Rogers had complied with the agreement was sufficient for him to exercise his discretion in her favour under section 85(2) (b). He held that not much should be made of antecedent failures ; that there was evidence that Miss Rogers had a regular income; that the probabilities were that continued compliance with the arrangement "is not vulnerable"; and that if she was restored to the status of a secure tenant there was every prospect that she would comply with her obligations as a tenant. He concluded that

" If there was no disrepair claim ....I would order that the possession order...be varied by providing for possession within 28 days from today suspended on payment of £300 per calendar month together with increases to take effect when the current rent increases..."

(5) That conclusion entitled him to entertain the disrepair claim. He found that the claim was established on the evidence. He assessed the general and special damages in a sum which exceeded the rent arrears. He then exercised his discretion under section 85 (4).

The Grounds of Appeal

The Council submits that the judge should have dismissed the application to vary or discharge the possession order and the claim for damages on the following grounds:-

(1) The status of Miss Rogers was that of a tolerated trespasser after her failure to comply with the suspended possession order at the end of 1992.

(2) As she had failed to comply with the terms of that order and a further agreement made prior to 20 April 1998 he wrongly exercised his discretion to discharge or vary the possession order in her favour. The effect of his order was to restore the secure tenancy to Miss Rogers before her arrears of rent were cleared and to treat her as now able to maintain her disrepair claim. It was wrong to exercise discretion in favour of a person who had not discharged the rent arrears identified in the April 1998 agreement and without regard to the fact that the effect of his order was to impose on the Council a retrospective liability to pay substantial damages to her.

(3) The Council was then held liable for disrepairs in the period from the end of 1992 until April 1997. Throughout that period it was under no contractual or statutory obligation to Miss Rogers as a tolerated trespasser. A burdensome liability was retrospectively imposed on the Council by the court merely on the basis that at some future possible time Miss Rogers would apply for and obtain a variation of the original suspended possession order. That liability did not arise under the April 1998 agreement , as the parties did not intend to produce a situation in which the Council would be retrospectively liable for repairs and the liability set off against the arrears of rent. Further, the order of the judge did not accurately reflect the April 1998 agreement. If an order was made it should have been under section 85(2)(a) rather than an order with retrospective effect under section 85(2)(b). That retrospective liability should not have been used to wipe out the entirety of the rent arrears of over £2,000 which had given rise to the agreement. It cannot have been intended by Parliament to impose on a tolerant local authority landlord a contingent liability for the consequences of a failure to repair in circumstances where the occupier was a trespasser and where no issue of disrepair had arisen at the time when the original possession order was made.

Permission to appeal had been refused by the judge, but was granted by the Court of Appeal on a paper application. Permission was also given at the hearing to serve a Respondent's Notice seeking to affirm the decision on the further ground that the effect of the April 1998 agreement was to waive previous breaches of the suspended possession order so that (a) they must be treated as if they had not occurred ; (b) the tenancy must be treated as if it had not determined ; and (c) Miss Rogers is to be treated as a tenant entitled to claim damages for past breaches of covenant.

The Legal Position

An odd feature of the appeal is that both sides argued that the judge had not correctly applied the reasoning of the House of Lords in Burrows. Detailed submissions were made by Mr Lewison QC for Miss Rogers and by Mr Tager QC for the Council on the speeches of Lord Browne-Wilkinson and Lord Jauncey in the House of Lords and on parts of the judgment of Millett LJ in Greenwich London Borough Council v Regan (1996) 28 HLR 469 which were approved in Burrows.

This appeal raises a significant point on the retrospective impact of the revival of secure tenancies on the obligations and rights of the parties. Although this particular point did not arise for decision in the earlier cases, the legal outcome is clear on the authorities and on the facts of this case. This appeal should be dismissed.

Termination of the Tenancy

The secure tenancy of Miss Rogers came to an end on the date when she failed to comply with the terms of the suspended order of 13 October 1992. This occurred at the latest by the end of December 1992, possibly earlier when she failed to make the first stipulated payment. If she had found difficulty in complying with the terms of suspension she could have applied to the court to vary them. She did not do so.

After the end of 1992 Miss Rogers was in occupation of the premises as a tolerated trespasser. The secure tenancy had come to an end. So had the covenants, including the Council's repairing covenant. That was not, however, a final or irreversible situation. The possession order had not been executed . That makes all the difference to the statutory protection of Miss Rogers under section 85. As was pointed out in Burrows at 1454H

"A secure tenancy protected by Part IV of the Act of 1985 is not like an ordinary tenancy. It can only be terminated by an order of the court ordering possession to be given on a particular day or in a particular event. But even determination by order of the court is not final. Until the possession order is executed, the court can by variation of its order change the date on which possession is to be given and thereby revive a secure tenancy which has already been terminated. During the period between the date specified by the order for the giving of possession and the date on which the order is executed there is a period of limbo: the old tenancy has gone but may yet be revived by a further order of the court varying the date for possession."

During the "limbo period" Miss Rogers could not enforce the repairing covenant against the Council. She was not a tenant. There was no tenancy in existence. The Council could have applied to the court in late 1996 to strike out her claim against it. But it did not do so. Nor did it enforce the possession order. Instead it made an agreement with her on 20 April 1998 tolerating her continued occupation of the premises. This case turns mainly on the legal effect of that agreement and its relevance to the exercise of the discretion of the court under section 85.

Agreement 20 April 1998

It was accepted by Mr Lewison that the agreement did not create a new tenancy of the premises. That was ruled out by the decision in Burrows. In the absence of special circumstances, the parties to an agreement not to evict a former tenant, against whom a possession order has been made but not executed , do not intend in fact and do not in law create a new secure tenancy under Part IV of the 1985 Act in favour of the former tenant. See 1455H-1456A. Pending the possible revival of the old secure tenancy and while the agreed conditions are being complied with, the presence of the former tenant in the premises is tolerated by the landlord Council. If, however, the old secure tenancy is revived or reinstated the former tenant becomes a secure tenant once more.

There are three key questions.

(1) Was the old secure tenancy of Miss Rogers revived by the agreement of 20 April 1998 without the need for any court order ? In my judgment, "No."

(2) If a court order was necessary, did the judge correctly exercise his discretion under section 85 in making his order of 23 November 1998 ? In my judgment ,"Yes."

(3) What was the effect of the order on the liability of the Council to Miss Rogers for disrepair of the premises during the "limbo period "? In my judgment , the Council's repairing obligations were retrospectively revived by the order and the Council was rightly held liable in damages for breach of covenant.

According to the terms of the April 1998 agreement the Council would not enforce the 1992 possession order to evict Miss Rogers for so long as she kept to her agreement for the payment of current rent and payment off of arrears; and the date for possession was to be postponed until she failed to comply with its terms. Miss Rogers kept to that agreement. The possession order was not executed. She was still a tolerated trespasser in the premises when she came before the court with her application for orders under section 85 and her claim for damages for disrepairs occurring in the "limbo period." The court had power to make an order on her application under section 85(2)(b) to postpone the date of possession for such period and on such conditions as to payment of rent and other conditions as it thought fit. Indeed , as Lord Browne-Wilkinson said in Burrows at 1455E, there was little doubt as to how the court would exercise that discretionary power in these circumstances-

"If the tenant has complied with the agreed conditions, there can be little doubt that the court would make the required order."

It is also clear from Burrows that the effect of a court order postponing the date for possession under section 85(2)(b) is that, unless the court otherwise directs, the secure tenancy is revived and that the revival applies retrospectively to the covenants, as well as to the tenancy itself. See 1455D-F

Because the validity of the court order was challenged by the Council as a flawed exercise of judicial discretion, Mr Lewison attempted to decouple the April 1998 agreement from the court's statutory discretion under section 85 by contending that the agreement was in itself effective, without the necessity for any further court order, to revive and reinstate the old secure tenancy and to make the Council retrospectively liable to Miss Rogers for past breaches of the repairing covenant. Although he accepted that the agreement could not itself vary the terms of the possession order of 13 October 1992 (see Burrows at 1453G), he contended that by the agreement the Council had consented to compliance with the agreement as sufficient compliance with that order; that, as between the parties, the previous breaches of the terms by Miss Rogers were waived by the Council and should be treated as if they had not occurred; that the new agreed terms replaced the original terms of the court order; that the original possession order was accordingly superseded; that this prevented the secure tenancy from being brought to an end, or, if it had already been determined, it prevented it from being regarded as determined; that Miss Rogers's rights as tenant, including the repairing obligations, are treated as having continued by virtue of the agreement; and that she is entitled to maintain her action against the Council, even in the absence of a valid court order under section 85 (2) (b).

Mr Lewison based this part of his case on the lucid analysis of the legal position by Millett LJ in Regan conveniently summarised at 478. That analysis was approved by Lord Browne-Wilkinson in Burrows at 1453D. The context of the analysis of Millett LJ and the approval of it in Burrows is crucial. The analysis was not simply contractual. It was made in the setting of and for the purpose of explaining the very broad discretionary powers exercisable by the court under section 85 at any time before the execution of the order for possession. The powers were summarised by Millett LJ at 475 and 476 where he concluded that a secure tenancy may be determined and revived as a result of the orders of the court, even in cases where there have been breaches of the terms of the order which have lead to the making of a fresh possession order suspended on different terms. He considered the specific question whether the parties could by agreement revive or reinstate the tenancy without obtaining a court order to that effect. He held that it was a question of fact in every case whether past breaches had been waived and whether the terms of the existing order had been modified by agreement, so that the tenancy continued as if there had been no breach and the tenancy is treated as if it had not been determined. Millett LJ expressed the view that, if that is the case on a particular set of facts , then

"If at any time after such agreement the [former tenant] had applied to the court under section 85 to postpone the date for possession in order to accommodate the agreement reached with the local authority, the court would in practice have had no alternative but to accede to the application" (page 480)

In Burrows the House of Lords accepted Millett LJ's analysis as relevant "to the effect of section 85." See 1453D-H .

In practice the position is that, if the parties are at one on the effect of the terms of the agreement not to enforce the possession order, there is no need for them to go through the formalities of an application to the court simply to obtain an order under section 85 to give effect to their understanding of their agreement. That would be what Millett LJ described at 477 as an "unnecessary formality". Applications in agreed cases would clutter up the County Court for no good reason. See also Burrows at 1454E-F and 1459D-E.

The practical position is different, however, where the parties are in dispute, for example, about the effect of their agreement on their rights and obligations in the "limbo period". An application to the court would be necessary to resolve that dispute. The court could then be asked to exercise its discretionary powers under section 85. As Lord Browne-Wilkinson said in Burrows at 1455E, there is little doubt that, in the case of a tolerated trespasser who has complied with the agreement, the court would make the required order.

The important point is that the court ultimately retains an overriding discretion under section 85 to make what order it considers fit. Mr Lewison's contention that the agreement of the parties, if analysed in the sense explained by Millett LJ, is necessarily determinative of the result should be rejected. Such an agreement would no doubt provide the court with cogent material for the exercise of the discretion under section 85, but it would not be effective to oust the statutory regime of an overriding discretion relating to the protection of secure tenancies.

Discretion

In any event the "agreement point " is unnecessary for Miss Rogers to succeed in resisting this appeal.

There is no error of principle in the judge's exercise of his discretion nor can it be said that it was plainly wrong. The parties had made an agreement that Miss Rogers would not be evicted if she kept to the agreement. She kept to the agreement which was treated as compliance with the terms of the order of 13 October 1992. The Judge took that agreement into account. He was entitled to treat the terms of it and Miss Rogers's compliance with it as justifying the exercise of the power to postpone the date of possession under section 85(2)(b). He also took into account the fact that the secure tenancy would be revived by an order under section 85(2)(b) and that in consequence the Council would become retrospectively liable to her under the repairing obligations. The judge did not leave any relevant factor out of account.

Mr Tager cited the case of Routh v. Leeds City Council (Court of Appeal 97/7723-12 March 1998) in which the Court of Appeal declined permission to appeal from the refusal of the judge to exercise his discretion to postpone the date of possession. The Court saw no possible ground for interfering with the exercise of his discretion when, on the facts of that case, it was unjust to the Council to reinstate the tenancy retrospectively, so that they would have obligations to a tenant thrust upon them, "although the tenant was one who had never consistently discharged her obligation to pay rent to them." The tolerated trespasser in that case had failed to comply with the terms of the agreement. The decision neatly illustrates both the breadth of the judge's discretion under section 85 and the proper limits on the power of the Court of Appeal to disturb the exercise of it.

I would dismiss this appeal.

LORD JUSTICE OTTON:

I have had the benefit of reading both judgments in draft and I agree for the reasons given that the appeal should be dismissed.

LORD JUSTICE SIMON BROWN:

I too agree with Mummery LJ's judgment and for the reasons he gives would dismiss this appeal. Having regard to the importance of the case, however, and the skilful argument of counsel on both sides, I would add a short judgment of my own.

The critical question facing the Judge below - a question which had simply not arisen in the earlier cases - was whether or not to allow Miss Rogers to claim damages in respect of the disrepair of the premises between December 1992 and April 1997 i.e. during the "limbo period" when she was a "tolerated trespasser".

The 1985 Housing Act provides mechanisms whereby either result could have been achieved. By making the unconditional order he did under s.85(2)(b) of the Act, the Judge revived the previously determined secured tenancy (determined through breach of the terms of the suspended possession order by virtue of s.82(2) of the Act) with retrospective effect. He could, however, have made that order subject to a condition (see. s.85(3)(b)) that Miss Rogers' damages claim (or part of it) should not be pursued, or he could instead have made an order under s.85(2)(a) which would have left Miss Rogers as a tolerated trespasser and, therefore, unable retrospectively to enforce the repair covenant.

I agree with Mummery LJ that the answer to this critical question was not to be found in the April 1998 agreement. That agreement was to my mind equally consistent with the Council consenting merely to a stay of execution of the possession order as with their agreeing to postpone the date of possession. Nor is it necessarily implicit in the terms of the agreement either that Miss Rogers' outstanding damages claim would be waived or that it would not. True it is, as the Council points out, that the acknowledged debt of £2,051 in respect of rent arrears was silent as to any claim to set off for damages for non-repair. But there was no express agreement by Miss Rogers to waive that claim as, of course, there could have been.

Can the Judge, then, be criticised for deciding to allow Miss Rogers' claim as he did? I confess that at one stage of the argument I had been attracted to the Council's case. They had, after all, no need to have entered into the April 1998 agreement: they could simply have set in train the execution of their long outstanding possession order, the terms of which (and of the subsequent agreement of 31 May 1994) Miss Rogers had consistently breached - a course of action which would have left Miss Rogers unable to claim damages for disrepair during the limbo period. And I was further struck by the fact that from April 1994 to March 1997 (throughout, that is, much of the period of disrepair) Miss Rogers was in receipt of housing benefit which paid her rent in full save only for water rates of some £3 per week. Given that she was a tolerated trespasser during those years and, therefore, strictly liable only for mesne profits (the value of her use and occupation of the premises), one might have thought that her "rent" should have been reduced or extinguished to take account of the disrepair, and the housing benefit fund thus spared, rather than Miss Rogers should in fact be paid (as in effect she has been) for her years of trespass in the premises.

I am persuaded, however, first, that the housing benefit dimension to this case is strictly immaterial: its outcome cannot depend on who paid the weekly rent. Second, the Council really cannot complain of being held liable retrospectively under their repair covenant; after all, they continued to debit Miss Rogers for her full "rent" during the whole period of her trespass and it is difficult to see why this should have been payable unless only she was inhabiting premises in a proper state of repair. Third, the solution to the problem lay in the Council's own hands. I repeat, they could have insisted, had they thought it right to do so, upon Miss Rogers waiving her claim for disrepair as a condition of entering into the April 1998 agreement. She could, of course, have refused and still returned to court and sought to persuade the Judge to make a s.85(2)(b) order. But without the benefit of the agreement and, indeed, several months' satisfactory compliance with it, she could hardly have expected to succeed upon such an application. And this point surely is the answer to Mr Tager's complaint that, as a result of this case, local authorities will not in future allow defaulting tenants a second chance lest they are thereby held liable for breach of back-dated obligations.

I make one further point. On any view it seems to me appropriate that the Council should have been subject to their covenanted repair obligation since the April 1998 agreement. Had Mr Tager's submissions been accepted, however, this would not have been so: no such obligation would have arisen until the court first made an order under s.85(2)(b) (or, indeed, on his most extreme submission, until all the arrears had been discharged so that an order could be made under s.85(4)).

In short, two matters now seem to me clear: first, that a s.85(2)(b) order is fully retrospective in effect; second, that the Judge was entitled to make such an order in the circumstances of this case.

The appeal is therefore dismissed.

Order: Appeal dismissed. Applicant to pay respondent's costs. Detailed assessment and legal aid assessment. Permission to appeal to the House of Lords refused.