England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(Mr Jack Beatson QC)

		Royal Courts of Justice Strand London WC2 Tuesday, 31st January 2001

1. LORD JUSTICE CHADWICK: This is an appeal from the order made on 6th July 2000 by Mr. Jack Beatson QC, sitting as a Deputy Judge of the High Court in the Queen's Bench Division, on an application for judicial review of a decision, conveyed by letter dated 26th May 1999, of a rent officer for the West Sussex Registration Area. The judge dismissed the application and refused permission to appeal. The appeal is brought with the permission of this court (Laws LJ) granted on 22nd September 2000.
2. The appellant, Haysport Properties Limited, is the landlord of premises known as 41, Parklands Road, Hassocks, West Sussex. The premises have been occupied as a dwelling house since 1956 by Mr Dennis Wakeford as tenant. It is common ground that Mr Wakeford's tenancy is a regulated tenancy within the meaning of the Rent Act 1977. Accordingly, the provisions of Part III of that Act, which limit the rent that can be recovered in respect of a regulated tenancy to the amount registered under Part IV of the Act, apply to this tenancy.
3. On 29th April 1998 the landlord applied under section 67(1) of the Rent Act 1977 for the registration of a fair rent in respect of the premises. Following an inspection on 16th June 1998, the rent officer determined the fair rent of the premises at an amount of £3,224 per annum exclusive of rates. The rent was registered on 8th July 1988 with effect from that date. The tenant was notified a few days later on 14th July 1998.
4. The tenant objected to the rent which had been registered by the rent officer. The matter was referred to a rent assessment committee as required by paragraph 5A of Schedule 11 to the Act of 1977. On 16th February 1999 the Southern and South Eastern Rent Assessment Panel reached a decision that the rent registered on 8th July 1998 was too high; and that a fair rent for the premises was £1,820 per annum. In the course of their reasons for that decision they referred to a repair notice issued by the Mid-Sussex District Council on 24th June 1998. They expressed their decision in these terms:

"Having considered all of the evidence and taking all of the matters into account, the Committee feels that the rent of £3,224 set by the Rent Officer is too high and reduces it to £1,820 per annum. Once the matter of the urgent repairs and requirements of the Local Authority have been complied with the Landlord could re-apply for the rent to be re-assessed. The Committee have valued the property in the condition it was in at the date of the inspection and hearing."

5. Following the determination of a fair rent by the rent assessment committee, the rent officer - as he was bound to do under the provisions of paragraph 9(3) of Schedule 11 to the Act - registered the amount of £1,820 as the fair rent for the premises. That rent was registered on 8th March 1999, and was to have effect from 16th February 1999.
6. Although the reference in the rent assessment committee's reasons is to a repair notice issued on 24th June 1998, the relevant notice is, I think, a notice issued by the local housing authority on 17th September 1998 under section 189(1) of the Housing Act 1985. Be that as it may, it appears from an invoice dated 14th April 1999 that works of repair were carried out at a cost to the landlord of £3,829. On receipt of that invoice the landlord immediately applied for the registration of a fair rent for the premises in an amount of £90 per week - equivalent to £4,680 per annum. The landlord did so on a Rent Act Form - (Form No 5 in the Rent Act 1977 (Forms etc)(Amendment) Regulations 1984 - dated 19th April 1999. The form was sent following an earlier letter, dated 14th April 1999, addressed to the rent officer in these terms:

"Further to your letter of the 12 March, and the rent determination which you made an appeal was made to the Rent Assessment Panel, and the required works were all carried out and have now been completed, and therefore, as part of the outstanding appeal, we request that the rent should be determined at £90."

7. The implication there that the application was part of an outstanding appeal to the rent assessment committee is plainly misconceived. By re-applying on Form No 5 the landlord was plainly making a new application for the registration of a fair rent.
8. On 26th May 1999 the rent officer wrote to the landlord to convey the decision which is now the subject of challenge. He referred to earlier letters of 29th April and 14th May 1999 (which have not been put before us) and to a further visit which he had made to the premises for the purposes of inspection. He went on:

"As I explained in my previous letters, I can only proceed to register a fair rent within the two year period if I am satisfied in these circumstances that there has been such a change in the condition of the dwelling house (including the making of any improvement therein) as to make the registered rent no longer a fair rent.

I regret that I am not satisfied that there has been such a change as to make the registered fair rent no longer a fair rent and therefore I shall not be proceeding to register in response to your application."

9. The inhibition against proceeding to register a fair rent within the two year period - to which the rent officer refers in that decision letter - is imposed by section 67(3) of the Rent Act 1977 as amended by the Local Government Finance (Housing) (Consequential Amendments) Order 1993 (SI 1993/651). The section as amended is in these terms:

" . . . where a rent for a dwelling house has been registered under this Part of this Act, no application. . . by the landlord alone for the registration of a different rent for that dwelling house shall be entertained before the expiry of two years from the relevant date. . . except on the ground that, since that date, there has been such a change in

(a) the condition of the dwelling house (including any improvement therein), or . . .

(d) any other circumstances taken into consideration when the rent was registered or confirmed, so as to make the registered rent no longer a fair rent."

10. In that context, the "relevant date" means the date from which the most recent registration took effect. In the present case that date was 16th February 1999. So, unless there had been a change in the condition of the dwelling house, or in some other circumstance taken into consideration by the rent assessment committee, which had the effect that the rent registered in pursuance of their determination was no longer a fair rent, the rent officer was, indeed, precluded from entertaining the application for a further determination made some two months later.
11. The decision letter of 26th May 1999 does not explain why the rent officer took the view that the works which had been carried out pursuant to the local housing authority's notice under section 189(1) of the Housing Act 1985 did not give rise to a change in the condition of the dwelling house such as to make the registered rent no longer a fair rent. Prima facie, at least, works carried out pursuant to a notice under section 189(1) of the 1985 Act may be expected to have the effect of changing a dwelling house which was not fit for human habitation into a dwelling house which is fit for human habitation - see section 189(2)(b) of that Act. But it was submitted before the judge, and before this court, that the basis of the rent officer's decision is that works of repair do not of themselves constitute a change in the condition of the dwelling house.
12. The reason, it is said, lies in the words in parenthesis which appear in paragraph (a) of section 67(3) of the 1977 Act "(including the making of any improvement therein)". "Improvement" is defined by section 75 of the Act. Save where the context otherwise requires, "improvement" includes

"structural alteration, extension, or addition and the provision of additional fixtures or fittings, but does not include anything done by way of decoration or repair."

13. It is submitted that that definition of "improvement" must be read into section 67(3)(a) of the Rent Act 1977; so that the pre-condition for a review of the registered rent within the two year period is that there should have been a change "in the condition of the dwelling house (including structural alteration, extension or addition and the provision of additional fixtures and fittings, but not including anything done by way of decoration or repair)".
14. The landlord sought and obtained permission to apply for judicial review of the rent officer's decision that there had been no change in circumstances so as to make the registered rent no longer a fair rent. The application itself was made by notice dated 8th October 1999. The grounds of the application were (i) that the decision was perverse and unreasonable; (ii) that the rent officer failed, contrary to section 70 of the Rent Act 1977, to determine a fair rent according to law, and (iii) that the rent officer failed, contrary to section 70 of the Act, to have regard to all the relevant circumstances and in particular the age, character, locality and state of repair of the premises.
15. The application was heard by Mr. Beatson QC in the Crown Office List on 6th July 2000. For the reasons given in a judgment delivered on that day he dismissed the application. He observed that it was common ground in the present case that the only "change" - whether that could be described as a change in the "condition of the dwelling house" within paragraph (a) of section 67(3) or as a change in "other circumstances taken into consideration" within paragraph (d) - was the change attributable to and consequent upon the repairs carried out in March or April 1999. He accepted that the word "condition" in paragraph (a) of section 67(3) had a meaning that was wider than the word "improvements". But he rejected the submission, advanced on behalf of the landlord, that, although repairs could not be treated as "improvements" (by reason of section 75 of the Act), they were, nonetheless, within the wider meaning of "condition". He did so for two reasons. First:

" . . . because the purpose of the two year limit is an administrative limit, administrative limits are necessary for the sensible administration of a system to provide for reviews at manageable intervals, and because if, in fact, any repairs triggered a change in condition, then the purpose of the administrative limit which regulated the intervals could easily be avoided. See London Housing and Commercial Properties Ltd v Cowan [1977] 1 QB 148, and in particular the judgment of Lord Widgery CJ at page 153 at C to D."

16. Secondly, because the determination of a fair rent takes account not only of the state of repair of the dwelling house, but of the landlord's repairing obligations. The judge pointed out that the fact that courts take account of both the state of repair and of the landlord's repairing obligations was illustrated by the decision of this court in Sturolson & Co v Mauroux [1988] 1 EGLR 66 - see, in particular, page 67L. He rejected the landlord's contention that the effect of carrying out works of repair - which had had the result that the dwelling house was no longer unfit for human habitation - was a change in "other circumstances which had been taken into consideration when the rent was registered following determination by the rent assessment committee. He said this:

"'Other circumstances' are circumstances other than the condition of the dwelling- house in determining what can be taken into consideration. It would have been extraordinary if one was prohibited from taking repair into account as a change in condition but was allowed to treat it as 'any other circumstances'".

17. In my view the judge reached the wrong conclusion as to the meaning and effect of section 67(3)(a) of the 1977 Act. I am in no doubt that the change from a dwelling house which was unfit for human habitation to a dwelling house which is fit for human habitation must be regarded as a change in the condition of that dwelling house; notwithstanding that the change is the result of works of repair carried out by the landlord and whether or not the works of repair were works which the landlord was obliged to carry out, either under the terms of the tenancy or in order to comply with a repair notice served under section 189(1) of the Housing Act 1985.
18. Section 67(3) of the Rent Act 1977 must be construed in conjunction with section 70 of that Act. So far as material the latter section is in these terms:

"(1) In determining, for the purposes of this Part of this Act, what rent is or would be a fair rent under a regulated tenancy of a dwelling house, regard shall be had to all the circumstances (other than personal circumstances) and in particular to -

(a) the age, character, locality and state of repair of the dwelling house,...

(b)...

(3) There shall be disregarded -

(a) any disrepair or other defect attributable to a failure by the tenant under the regulated tenancy or any predecessor in title of his to comply with any terms thereof;

(b) any improvement carried out, otherwise than in accordance with the terms of the tenancy, by the tenant under the regulated tenancy or any predecessor of his;..."

19. Section 70 of the 1977 Act makes plain that the state of repair of the dwelling house is a factor to be taken into account when determining a fair rent, notwithstanding that any disrepair may be attributable to a failure by the landlord to comply with his or its repairing obligations. It is only where the disrepair is attributable to the tenant's failure to comply with the terms of the tenancy that the disrepair is to be disregarded - see section 70(3)(a) of the Act.
20. It is plain, also, that in determining a fair rent, regard should be had to the terms of the tenancy; and, in particular, to the fact that - as will usually be the case where the tenancy is a regulated tenancy - the tenant may have the benefit of the obligations to keep the dwelling house in repair which are imposed by section 11 of the Landlord and Tenant Act 1985 - see the observations of Glidewell LJ in Sturolson v Mauroux [1988] 1 EGLR 66, at page 67L, to which the judge referred. But as Glidewell LJ pointed out in that case, although the rent for a property in disrepair with the benefit of the landlord's repairing covenant will be greater than the rent for such a property where there is no repairing covenant, "obviously the rent of a property in disrepair is less than that of a property in repair, even with a repairing covenant in the lease." So, although, when making a determination of fair rent under section 70 of the 1977 Act, the rent officer (or the rent assessment committee, as the case may be) should take account of the landlord's repairing obligation - and, where the property is out of repair, the likelihood of that obligation being performed and the time within which it will be performed - it does not follow that that will lead to the determination of a fair rent for a property which is out of repair (but with the benefit of the landlord's repairing obligation) at the same level as that which would be a fair rent for the same property in repair. Indeed, save in a case in which it is virtually certain that the works of repair are about to be carried out forthwith, it is probable - or, as Glidewell LJ observed, obvious - that a fair rent for the property out of repair will be less than a fair rent for the property in repair. Insofar as the judge based his conclusion that the legislature could not have intended to include a change in the condition of a dwelling house consequent upon repairs carried out by the landlord pursuant to a repairing obligation within the scope of section 67(3)(a) of the Act - on the premise that the determination of the fair rent would already have taken account of that obligation - he fell into error. He failed to appreciate that a change in the condition of a dwelling house consequent upon repairs having been effected would - if those repairs were substantial - be likely to lead to the conclusion that the registered rent was no longer a fair rent.
21. In London Housing and Commercial Properties Ltd v Cowan [1977] 1 QB 148, Lord Widgery CJ, (with whom the other two members of the Divisional Court agreed) explained the purpose of section 44(3) of the Rent Act 1968 - which was the statutory predecessor of section 67(3) of the 1977 Act - in these terms, at page 153C-D:

"... all that is happening when a reassessment in mid-term is made is that the tenant in question is having his rent brought up to a fair rent somewhat earlier than he would otherwise have done. The three year limitation generally applied is not in my view intended to give the tenant a right to live on less than a fair rent for the better part of three years;its purpose is to supply an administrative limit within which in normal circumstances an application for a rent review cannot be made."

22. The administrative limit which, following the amendment is 1993, is now two years rather than three years is imposed in order to restrict repetitive applications for review where there has been no change in the circumstances taken into account on the last determination of a fair rent. For example, there is to be no further application within the period of two years in circumstances where all that the landlord seeks is an increase to reflect a rise in rent levels generally. The fact that rent levels are likely to rise generally over time is a factor which the rent officer may be expected to have taken into account when determining a fair rent on the last occasion. The administrative limit was not intended to enable the tenant to take the benefit of a rent which has become artificially low or to enable the landlord to receive a rent which has become artificially high as a result of some change in circumstances which falsifies the basis on which the earlier determination was made. There is no reason in principle, as it seems to me, why the tenant should occupy the dwelling house at a rent which is below a fair rent or why the landlord should receive a rent which is above a fair rent - when the differential has arisen from some change in circumstances which has not already been foreseen and taken into account.
23. With these considerations in mind I turn to the argument based on the words in parenthesis in section 67(3) of the 1977 Act. Those words are "including the making of any improvement therein".
24. The first and obvious point to note is that the words are inclusive. The most likely explanation for the parenthesis is that the legislature thought it necessary to make clear that the expression "a change in the condition of the dwelling house" did include some alteration which might otherwise have been thought not to be included. There is, I think, some historical reason why it might have been thought that it was necessary to make it clear that an alteration in the condition of the dwelling house which was the result of improvements ought to be taken into account as a reason for prompting a mid-term review. The historical basis lies in the special treatment of improvements (not including repairs) which was first introduced into rent control legislation by the Increase of Rent and Mortgage Interest Restrictions Act 1920 and which continued, in one form or another, until the introduction of the Rent Act 1965. It is unnecessary to explore further why the words are there. What is plain is that they are there in order to include something which might not be included if they were not there.
25. But, as a matter of logic, if the legislature has provided that A shall include B, and that B is not to be taken to include C, it does not follow that A will not include C. All that follows is that if A does include C, it is not because C is an element within B. The question whether C is included within A on other grounds if left open.
26. In my view, it is plain, in this case, that repairs is included within the condition of the dwelling house for the two reasons to which I have already adverted: first, that a construction of the phrase "a change in the condition of a dwelling house" which did not include a case in which the repairs had transformed a dwelling house which was not fit for human habitation into a dwelling house which is fit for human habitation, would, to my mind, rightly be regarded as bizarre. Secondly, that the state of repair of the dwelling house is a factor which has to be taken into account for the determination of a fair rent, and so it would be likely to follow that a change in the state of repair of the dwelling house was a matter which prompted an opportunity for an early review under section 67(3). It is perhaps worth noting that the furniture provided for use under the tenancy is a factor to be taken into account under section 70(1)(b); and a change in the quality, quantity or condition of the furniture provided for use is a factor which gives rise to the right to apply for a review under section 67(3)(b). Legislation which provided a right to have an early review in circumstances in which the furniture in the house had been changed; but did not provide a right to have a review in circumstances where the roof of the house had been replaced, would properly be regarded as capricious. I see no reason to give the legislation that interpretation in the present case.
27. The position, therefore, as it seems to me, is that if the rent officer proceeded upon the basis suggested - namely that there was no change in the condition of the dwelling house such as to enable him to consider whether any change had made the registered rent no longer a fair rent - he was in error in law. If, on the other hand, he had accepted that the works done in accordance with the section 189(1) notice under the Housing Act 1985 did constitute a change in the condition of the dwelling house, then a decision that the conversion of a dwelling house from a state of unfitness for human habitation to a state of fitness for human habitation was not such as to make the registered rent no longer a fair rent was plainly a perverse decision.
28. For those reasons I would allow this appeal.
29. LORD JUSTICE KEENE: Using the normal meaning of words as a starting point, there can be little doubt that the phrase "a change in the condition of the dwelling house" in section 67(3), taken by itself, would include a change brought about by works of repair to the fabric of the dwelling. Mr. Rodger for the respondent appears to accept that, since he regards a falling into disrepair as capable of amounting to such a change. Consequently, the putting back into repair would logically also constitute such a change in condition. But he advances two points to support a narrower construction which would exclude works of repair. The first is that, where there is a repairing obligation on the landlord, works done in performance of that obligation should be disregarded for the purpose of section 67(3). Nothing in the subsection provides, expressly or impliedly, that that should be so, but it is said that it follows from the fact that the existence of the obligation will have been reflected in the original assessment of the fair rent, and so it is unnecessary to allow for its performance when providing for changes in circumstances. In my judgment, that does not follow. In market terms there will normally be a distinct difference between the rent payable for a property in good repair and that payable for one in disrepair but with a repairing covenant by the landlord. The uncertainties attaching to the time of performance and the potential inconvenience of getting the landlord to perform the obligations make the latter a much less attractive situation to any tenant. I cannot, therefore, accept this first argument.
30. The second contention relies on the words in parenthesis in section 67(3)(a), "including the making of any improvements therein". Reliance is placed by the respondent on the definition of "improvement" in section 75(1) of the 1977 Act. Certainly, that definition of an improvement excludes anything done by way of repair to the property. But that is merely a restriction on the meaning of the word "improvement" and has no wider effect. It in no way cuts down the meaning of the words "a change in the condition of the dwelling" since the phrase in parenthesis begins with the word "including". It is a phrase, therefore, intended to include certain works within the concept of a change in condition, not to exclude any works therefrom. The mere fact that works of repair are not an improvement does not take them outside the scope of section 67(3)(a). That second argument does not stand up to scrutiny.
31. In short, nothing justifies a construction of the words "condition of the dwelling house" narrower than their normal meaning. In terms of policy, ample protection against a flood of ill-founded applications within the two year period is provided by the requirement that any change must have rendered the registered fair rent no longer fair. Works of a trivial nature will not enable such an application to be made.
32. For these reasons and for those given in the judgment of Chadwick LJ, with which I agree, I would allow this appeal.
33. LORD JUSTICE PETER GIBSON: This appeal turns on a short point of construction of the Rent Act 1977. Can the effecting by the landlord of repairs, pursuant to an obligation to repair, amount to "such a change in - (a) the condition of the dwelling-house (including the making of any improvement therein), . . . . or (d) any other circumstances taken into consideration when the rent was registered or confirmed, as to make the registered rent no longer a fair rent"?
34. There is no doubt that, on the facts of this case, the state of disrepair, and, in particular, the fact that about half the rooms in the dwelling-house were regarded by the Rent Assessment Committee as uninhabitable, was a major factor in the Committee's reduction of the fair rent, which reduced rent was registered. In so assessing the fair rent, the Committee properly took into account section 70(1)(a) and (3)(a) whereby regard is to be had to the state of repair of the dwelling- house if any disrepair or other defect is not attributable to a failure by the tenant under the regulated tenancy or any predecessor in title of his to comply with the terms thereof. When the condition of the dwelling-house is changed by the landlord effecting repairs rendering habitable those rooms which were uninhabitable, so that, one infers from the reasoning of the Committee, the rent which it assessed may no longer be the fair rent, what is there in the Act to take that change outside the scope of section 67(3)? The answer given by Mr Rodger for the respondent, and accepted by the judge, is the words in parenthesis in paragraph (a) of section 67(3), by reason of the exclusion by section 75(1) from the meaning of "improvement" of anything done by way of decoration or repair. Mr. Rodger suggested that, when one reads the meaning given in section 75(1) for "improvement" into the parenthesis, section 67(3)(a) requires, as a pre-condition of a mid-term review, that there should have been such a change in the condition of the dwelling house, including structural alteration, extension or addition and the provision of additional fixtures and fittings, but not including anything done by way of decoration or repair, as to make the registered rent no longer a fair rent. But that impermissibly makes the exclusion of anything done by way of decoration or repair directly qualify a change in the condition of the dwelling-house, whereas it only qualifies "the making of any improvement". The words in parenthesis, if the section 75(1) meaning is included, should read "including the making of any improvement, which term is to include structural alteration, extension or addition but is to exclude anything done by way of decoration or repair". Of course, it is correct that in this case there has been no improvement, within the statutory meaning, of the dwelling-house, but paragraph (a) of section 67(3) significantly is not limited to a change in the condition of the dwelling- house which is effected by the making of any improvement therein. I therefore do not think that the words in parenthesis help Mr. Rodger.
35. Mr Rodger submitted that the purpose of the section was administrative convenience by providing limited circumstances in which there can be an application for the registration of a different rent within two years. He said that the language should be construed restrictively. But the governing criterion is a change in the matters specified in paragraphs (a) to (d), and if Parliament had wanted to exclude a change brought about by repairs, it could so easily have said so. It is to be borne in mind that either the landlord or the tenant can make an application under section 67(3). Mr Rodger accepts that a change, in the form of a deterioration, in the condition of a dwelling-house through disrepair, for the repair of which the landlord is responsible, making the registered rent no longer fair, would allow the tenant to apply under section 67(3), but he submits that a change in the form of an improved condition, effected by the performance by the landlord of his repairing obligations would not allow the landlord to apply. As Chadwick LJ pointed out in the course of argument, on that basis section 67(3) would operate as a disincentive to the landlord to perform his obligations promptly and as a punishment for the landlord. I can see no justification for such disparity of treatment between landlord and tenant in the language of the subsection.
36. Mr Rodger further submitted that, when regard is had to all the circumstances in accordance with section 70(1), the existence of a repairing obligation on the landlord must be taken into account, as this court held in Sturolson & Co v Mauroux [1988] 1 EGLR 66, 67E-L. He suggested that, if the appellant is right, the tenant would be required to pay twice, once when the repairing obligation was taken into account on the initial assessment of the fair rent, and a second time when the landlord had complied with his obligations. The answer to that was given by Glidewell LJ in Sturolson at page 67K, when he said that the rent of a property in disrepair is less than that of a property in repair, even with a repairing covenant in the lease. There is no injustice in the tenant being required to pay the difference between the fair rent of the property in disrepair (but account being taken of the repairing obligation) and the fair rent of the repaired property, when the landlord has effected the repairs. It is not entirely clear whether the Committee took into account, as an appreciatory factor in the assessment of the fair rent for the dwelling-house in disrepair, the landlord's obligation to repair. The Committee's decision recorded both the tenant's complaint that the landlord failed to repair and the repair notice served by the local housing authority, but the Committee did not say that the obligation increased the rent which it found to be the fair rent. On this appeal we are not concerned with whether the committee was right or not in its assessment.
37. I found no assistance from the examination by Mr. Rodger of the antecedent legislation. It did not serve to throw light on the meaning of the relevant section in the Rent Act 1977, which is a consolidation Act.
38. For these reasons, as well as those given by my Lords, I respectfully disagree with the conclusion of the judge. I, too, would allow the appeal.
Order: Appeal allowed with costs here and below; order of mandamus in the terms sought granted; application for permission to appeal to House of Lords refused. (Order not part of the judgment of the court)