England and Wales Court of Appeal (Civil Division) Decisions

Morris, R (on the application of) v The London Rent Assessment Committee & Anor [2002] EWCA Civ 276 (7th March, 2002)

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN’S BENCH DIVISION
ADMINISTRATIVE COURT
Mr Justice HOOPER

		Royal Courts of Justice Strand, London, WC2A 2LL
		7th March 2002

Lord Justice Mummery :

1. This is an appeal by Mr David Morris from the dismissal by Hooper J on 4 May 2001 of his application for judicial review of (a) the decision of the London Rent Assessment Committee (the Committee) on 8 June 2000 to proceed to determine the rent of his Chelsea flat under the provisions of section 186 of the Local Government and Housing Act 1989 (the 1989 Act); and (b) the subsequent determination of the rent by the Committee on 21 September 2000 at £2,708 per month (£32,496 per annum).
2. The main dispute concerns the status of Mr Morris’s tenancy of his flat. That is a matter of direct concern to his landlord, the Earl Cadogan and Cadogan Estates Limited (Cadogan). Cadogan have been joined as interested parties. The critical issue is whether, following the expiration of a long lease at a low rent, Mr Morris became, as he contends, a statutory tenant of the flat (within the meaning of the Rent Act 1977) under Part I of the Landlord and Tenant Act 1954 (the 1954 Act); or whether he became, as Cadogan contends and as the Committee has held, an assured tenant under the 1989 Act. If he is a statutory tenant, the Committee had no power to determine the rent of the flat under the 1989 Act. If he is an assured tenant, the Committee had power to determine the rent, subject, however, to a challenge by Mr Morris to its power to determine an annual rent in excess of £25,000, that being the qualifying limit for an assured tenancy.
3. The resolution of the principal issue of status turns on the validity of Cadogan’s 1954 Act notice dated 21 April 1995 terminating the tenancy of the flat on 23 October 1995 and, if possession was not given up, proposing continuation as a statutory tenancy of the flat on stated terms. By virtue of section 186(3) of the 1989 Act, the relevant provisions of the 1954 Act ceased to apply after 15 January 1999, provided that the landlord had not served a notice under section 4 of the 1954 Act prior to that date stipulating a termination date prior to 15 January 1999. A notice was given prior to that date stipulating such a termination date, but section 4 requires the notice to be given “ to the tenant in the prescribed form.” The short point raised on the validity of this notice is whether, on the facts of this case, it was effectively given “ to the tenant.” Unusually for a landlord and tenant dispute, it is the landlord who contends that his notice is invalid and the tenant who contends that it is valid. Mr Morris asserts that the notice by Cadogan proposing the creation of a statutory tenancy on the termination of the long lease was a valid notice, even though it did not correctly name the tenant of the flat at the material time (21 April 1995). On the other hand, Cadogan asserts that the notice was defective and that in consequence no statutory tenancy was created. Instead the flat is subject to an assured tenancy, in respect of which the Committee had power to determine the rent at a figure in excess of £25,000 per annum.
4. In a clear and careful judgment, setting out a helpful overview of the intricacies of the statutory regime and its underlying policy, Hooper J held that the notice was invalid. So Mr Morris appeals.

Factual Background

5. The flat occupied by Mr Morris is Flat 2, 69 Cadogan Place, London SW1. It was subject to a long lease at a low rent carved out of a head lease also granted in 1962 by Cadogan to Dean Investments Limited. The underlease was dated 17 July 1962. It was for a term of 34 years less 10 days from 29 September 1961. The original tenant was Mr HG Barnby. He assigned the underlease to Mr CA Fry in 1979. In 1987 Mr Fry also acquired the headlease. The contractual term expired on 19 September 1995, but the lease continued by virtue of section 3(1) of the 1954 Act. Mr Morris had taken an assignment of the lease on 6 June 1995 from Mr Fry. Cadogan’s notice dated 21 April 1995 proposing a statutory tenancy of the flat was not, however, addressed to Mr Fry, who was the tenant of the flat at the relevant date, but was only mentioned in the notice as a person living at a different address having an interest superior to the tenancy of the addressee. The notice was in fact addressed to the original tenant of the flat in the following terms:

“TO HG Barnby, tenant of premises known as Second Third and Fourth Floor Flat Cadogan Place London SW1.”

6. Although there was no direct evidence before the judge as to the service of the notice, the case has throughout proceeded on the basis that the notice had been served on Mr Fry. (This court refused an application by Mr Morris to adduce fresh evidence on the issue of service of the notice.) Cadogan’s case here and below was that the notice was invalid in consequence of the failure to name the tenant rather than by reason of non-service of the notice on the tenant. There is no doubt that by one means or another Mr Morris got to know of the notice. He had in fact been living in the flat since 17 April 1990 as Mr Fry’s tenant. Soon after the assignment to him by Mr Fry, Mr Morris wrote from the flat to Cadogan on 12 June 1995 pointing out that any notice under the 1954 Act should now be re-addressed to him directly so that he could reply accordingly.
7. Although the primary question on the appeal concerns the validity of the 1995 notice, Mr Morris has an alternative argument, should he fail on that question and be held to have an assured tenancy. The secondary case arises from the service of a notice dated 11 June 1999 on him by Cadogan under the provisions of paragraph 4 of Schedule 10 to the 1989 Act, proposing an assured monthly tenancy of the flat at a rent of £3,900 per month (£46,800 per annum). As the parties could not agree upon the rent, the matter was referred to the Committee on 4 October 1999 under paragraph 10 of Schedule 10. On 21 September 2000 it determined a rent of £32,496 per annum. Mr Morris challenges the validity of the notice and of the determination of the Committee on the ground that the sums initially proposed and subsequently determined by way of annual rent exceeded £25,000, that being the statutory cap on the annual rent if a tenancy is to qualify as an assured tenancy.

A. Validity of 1995 Notice.

8. I would uphold the decision of Hooper J that the 1995 notice is invalid, that Mr Morris is not a statutory tenant of the flat and that the Committee had power to determine the rent.
9. In his concise submissions Mr Simon Berry QC relied on the principles laid down by the House of Lords in Mannai v Eagle Star [1997] AC 749 for the construction of landlord and tenant notices and on the decision of this court in York v Casey [1998] 2 EGLR 23, recently followed in Ravenseft Properties Limited v Hall, White v Chubb and Kaasseer v Freeman (19 December 2000), holding that those principles apply to the construction of statutory, as well as to contractual, notices. He relied on the context of Regulation 4 of the Landlord and Tenant (Notices) Regulations 1957, which stipulates that a notice which is to be given “in the prescribed form,” as a notice under section 4 of the 1954 Act is required to be, may be in a form “substantially to the like effect.” So, he submitted, when judged objectively at the time of service, this notice would have been quite clear to a reasonable tenant reading it. It would have been clear to a reasonable tenant in the position of Mr Fry that the name “HG Barnby” was a misnomer of the tenant and that the notice was really intended by Cadogan to be a valid notice addressed to the actual tenant of the flat. That was Mr Fry, who knew that he was the tenant of the flat and that Mr Barnby was not the tenant. So a reasonable tenant with that knowledge would realise that there was a mistake and would not be misled by it. A reasonable tenant could not think that the notice was intended for Mr Barnby, who had ceased to be the tenant many years previously. The mention in the notice of “tenant of premises” could only sensibly refer to Mr Fry. Only he fitted the description of “tenant” of the flat. The notice complied with section 4 of the 1954 Act being in the prescribed form or in a form “substantially to the like effect”, even though Cadogan had got the name of the tenant wrong.
10. In support of his submissions Mr Berry also cited Garston v.Scottish Widows’ Fund and Life Assurance Society [1998] 1 WLR 1583; Keepers and Governors of John Lyon Grammar School v Secchi [1999] 3 EGLR 49; Morrow v Nadeem [1986] 1 WLR 1381; Bridgers v Stanford [1991] 2 EGLR 265; Speedwell Estates Limited v Dalziel [2001] EWCA Civ 1277; Burman v Mount Cook Land Limited [2001] EWCA Civ 1712; and Sun Life Assurance plc v Thales Tracs Limited [2001] 2 EGLR 57.
11. I agree with Hooper J that the Committee reached the right conclusion on this issue. The notice was not addressed to the tenant, Mr Fry, either expressly by name or implicitly by status as tenant. It was expressly and unambiguously addressed by name to an altogether different person, Mr HG Barnby. That was not a minor error or slip. Mr Barnby was not Mr Fry, and he was not, and had long ceased to be, tenant of the flat. The reaction of the reasonable tenant receiving the notice addressed to Mr HG Barnby (or receiving an envelope so addressed) would be to think that the notice or the envelope and its contents were meant for Mr Barnby. The notice cannot be construed as a notice given to Mr Fry. As a result of that error the notice did not accomplish the statutory objective of serving a notice under section 4 of the 1954 Act: and it is impossible to say that the notice was in the prescribed form or in a form substantially to the like effect.
12. The status of Mr Morris in the flat concerns private law rights as between Mr Morris and Cadogan. They would normally be determined in private law proceedings in the County Court. This was recognised by the Committee when it adjourned an earlier hearing to give Mr Morris an opportunity (which he failed to take) of bringing declaratory proceedings in the County Court. There is no doubt, however, that the Committee had power to determine the validity of the notice: it was a matter going to its jurisdiction to set the rent.
13. A point was canvassed in argument as to whether the decision of the Committee created an issue estoppel preventing Mr Morris from now taking County Court proceedings against Cadogan to re-open the question of the validity of the notice. Mr Munro, behalf of the head landlord, made it clear that he would contend that any such proceedings would be an abuse of process. It is not necessary to express a view on that point and I prefer not to do so.

B. Validity of 1999 Notice.

14. I would also uphold the decision of Hooper J that both this notice and the subsequent determination of the Committee on the rent of the flat were valid for the reasons given. He applied the reasoning of Kay J in R v London Rent Assessment Panel, ex parte Cadogan Estates Limited [1998] QB 398 on similarly worded legislation (section 14(1) of the Housing Act 1988) and held that the Committee was not prohibited from assessing the rent of the flat held on an assured tenancy at a figure in excess of the qualifying limit of £25,000 per annum. The rent under an assured tenancy is to be determined by the Committee without any reference to that limitation and, if the determination exceeds that limitation, the assured tenancy would come to an end.
15. Mr Berry submitted that the court should hold that both the notice and the determination were invalid, on account of the proposed rent and the determined rent exceeding £25,000 per annum. It was common ground that, if the tenancy was not protected as a statutory tenancy, it was an assured tenancy, as the rateable value was less than £1,500 (£1,305). If a tenancy is to qualify for protection as an assured tenancy, the annual rental is subject to a ceiling of £25,000. This feature of an assured tenancy formed the basis of Mr Berry’s argument that the notice was invalid, as it proposed an annual rent exceeding that figure and, he submitted, thereby failed to propose a rent in accordance with paragraph 4(5)(a) of Schedule 10 to the 1989 Act which provides that the landlord’s notice shall not have effect unless

“it proposes an assured monthly periodic tenancy of the dwelling house and a rent for that tenancy (such that it would not be a tenancy at a low rent”).

Mr Berry emphasised that the rent proposed in the notice must be for “that tenancy”, meaning an assured monthly periodic tenancy, and that an annual rent in excess of £25,000 is not such a rent. This notice did not therefore have effect.

16. Alternatively, the proposed figure was unrealistic and incompatible with Mr Morris’s status as an assured tenant: see Cadogan v Morris [1999] 1 EGLR 59.
17. As for the jurisdiction of the Committee, Mr Berry relied on the reference to an “assured tenancy” in paragraph 11(5) of Schedule 10 to the 1989 Act:

“… the committee shall determine the monthly rent at which … the committee consider that the dwelling house might reasonably be expected to be let in the open market by a willing landlord under an assured tenancy (not being an assured shorthold tenancy) [on prescribed terms].”

He submitted that the Committee cannot determine an annual rent in excess of £25,000, because paragraph 11(5) provides a composite valuation formula, which prescribes that the notional letting is to be by a willing landlord “under an assured tenancy” and, if a landlord is willing to grant an assured tenancy, he cannot recover an annual rent in excess of £25,000.

18. In my judgment, the principal submissions are based on a misreading of the statutory provisions. There is nothing in the provisions establishing or supporting a statutory principle of “once an assured tenancy, always an assured tenancy”. The provisions of Schedule 10 relied upon do not set a ceiling of £25,000 on the amount of the annual rent which may be validly proposed or which the Committee may validly determine. The case advanced by Mr Morris would, if accepted, produce the surprising conclusion that a tenant could remain in a high value property at less than the proper open market rent determined by the Committee. If the rent is determined by the Committee at a figure exceeding £25,000, the landlord is not prohibited by statute from recovering it: the result is that the tenancy will simply cease to qualify for protection as an assured tenancy. The alternative submission on the validity of the notice fails because the rent proposed in the notice was, as the judge held, a realistic rent based on valuation evidence.

Result

19. This appeal should be dismissed.

Sir Murray Stuart-Smith:

20. I agree that this appeal should be dismissed for the reasons given by my Lords.

Lord Justice Brooke:

21. I agree. On the first point Mr Munro observed that as a long lease of one of his client’s properties draws to an end, and they are anxious to take steps to protect their position when the lease does in fact end, they often do not know (because they are not told and they have no control over assignments) who the occupying tenant is at that time. In the present case they had evinced themselves willing to propose a statutory tenancy for the original tenant of the flat who they believed to be still the occupying tenant. If Mr Barnby had indeed still been living there, he would have occupied the flat for more than 30 years. Mr Munro submitted that they should not be taken, by an application of the rules of interpretation set out in the Mannai case, to have served the notice on whoever turned out to be the tenant at the time the notice was served. Once they ascertained the true position on the ground, they might well decide to adopt a different approach. Mr Munro observed that they might wish to gain possession from one tenant but be content to remain in privity of estate with another. Much would depend on the attributes of the particular tenant, as seen through the landlords’ eyes.
22. I accept the logic of these submissions. For this reason I agree with the conclusion reached by Mummery LJ, whose judgment I have read in draft, in paragraph 11 of his judgment.
23. I also agree with his conclusion on the second point (see paragraph 18 of his judgment). The duty of the committee was to assess a proper open market rent. If that rent exceeded £25,000 per year, then it is Parliament’s intention that the tenant should no longer enjoy the protection of tenure afforded to assured tenants. I can see no good reason why we should interpret this statutory scheme as one which was intended to peg the rent for all time at a rent lower than £25,000 per year. I can detect no Parliamentary intention, either in Part I of the 1954 Act or in the 1989 Act, to protect tenants of high value properties, whether the value of their property is assessed with reference to its rateable value (as in the former statutory scheme) or its rental value (as in the latter).
24. I therefore agree that this appeal should be dismissed.