England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CLERKENWELL COUNTY COURT
DISTRICT JUDGE ARMON-JONES

		Royal Courts of Justice Strand, London, WC2A 2LL
		10/04/2006

Sir Martin Nourse :

1. This appeal raises two questions of construction on paragraph 6 of schedule 1 to the Housing Act 1985 ("the 1985 Act"). Answers are needed in order to know whether a sub-tenancy granted by a local authority was secure or not.
2. By a lease dated 4^th July 1996 and made between Vinayak Lallubhai Patel ("Mr Patel") of the one part and the claimants, the London Borough of Haringey ("the Council"), of the other part Mr Patel let and the Council took "with vacant possession" the second floor flat at 57B Muswell Hill Road, Muswell Hill, London N10 ("the premises") for a term of one year and nine months commencing on 19^th December 1995 and ending on 18^th September 1997 at a rent of £606.67 per month (£7280.00 per annum). That was not the first nor, as will appear, the last lease of the premises granted by Mr Patel to the Council. However, apart from the length of the terms granted and the rents, they were all, for present purposes, in the same form. I shall refer indiscriminately to each of them as "the head lease".
3. The other material provisions of the head lease were set out in the first schedule thereto. By clause 1 the expression "User" was defined to mean:

"Temporary housing accommodation in accordance with the provisions of paragraph 6 of Schedule 1 of the [1985 Act]".

By clause 3(6) the Council covenanted not to use or permit the premises to be used other than for the purposes of the User. By clause 4(10) Mr Patel covenanted to permit the Council to sub-let the premises to a person or persons requiring temporary accommodation on the understanding that any such tenancy would not benefit from the provisions relating to security within the 1985 Act by virtue of the exception cited in paragraph 6 of schedule 1 thereto. Clause 5(1) contained a common form proviso for re-entry for non-payment of rent or for breach of any of the Council's covenants. Clause 5(3) provided:

"In the event that the [Council] shall decide to terminate this Lease before the expiry of the Term then notwithstanding anything hereinbefore contained the [Council] may terminate this Lease by giving to [Mr Patel] not less than four weeks previous notice of the date of termination of this Lease (to expire at any time) …… "

(It is to be noted that no corresponding power to determine the head lease before the expiration of the term was reserved to Mr Patel.) Clause 5(9)(a) contained what was in effect a covenant by the Council at the end or sooner determination of the term peaceably to leave and yield up the premises to Mr Patel "with vacant possession".

4. On 14^th January 1997, during the currency of the head lease dated 4^th July 1996, the Council granted a sub-tenancy of the premises to the defendant, Julie Hickey, who was then 26 years of age and had two children aged 7 and 4 respectively. The sub-tenancy agreement consisted of a standard form front page with a second page containing standard sub-tenancy conditions, none of which is material for present purposes. The front page was headed:

"Private Sector leasing scheme

Form for non-secure sub-tenancy".

The premises were then described, the sub-tenancy commencement date was specified and the weekly rent and charge for water rates and standing charge (£193.26 or £10,050.00 per annum) were also specified. At the bottom of the front page was an agreement by the defendant to accept the sub-tenancy of the premises subject to the conditions overleaf. Immediately above her signature appeared the following:

"I have read the Council's Offer letter, and acknowledge that the sub-tenancy is not a secure sub-tenancy for the reasons stated in that letter."

5. Though we have not seen a copy of the actual offer letter sent to the defendant, the Council have provided us with a pro-forma letter in the same form as that which would have been sent to her. It starts by saying:

"Under Part VII of the 1996 Housing Act we are under a duty to offer you temporary accommodation. We now have a property available for you. This is a property which the Council has leased from a private landlord to try to meet the high demand for temporary accommodation."

The letter ends by saying:

"Please note that you cannot be offered a secure tenancy on this property. As the accommodation is on lease from a private landlord this tenancy can be terminated on 28 days notice."

6. The defendant's sub-tenancy of the premises continued undisturbed for a period of more than six years. In the meantime, Mr Patel granted the Council a further head lease (a copy of which we have seen), this time for a term of three years from 19^th September 1997 to 18^th September 2000, and it is agreed between both sides that we should proceed on the footing that there were one or more further head leases after that.
7. The Council have throughout proceeded on the footing that the sub-tenancy was not a secure tenancy. Arrears of rent having mounted up, on 28^th August 2003, during the currency of one of the subsequent head leases, the Council served on the defendant a common law notice to quit requiring her to deliver up possession of the premises on 29^th September 2003. Possession having been retained by the defendant, on 4^th December 2003 the Council issued a claim form in the Clerkenwell County Court. The claim made was for possession of the premises and arrears of rent, which were said to amount to £5,358.46. We understand that that amount is not accepted by the defendant.
8. It was either ordered or agreed that there should be the trial of a preliminary issue as to the application or not of paragraph 6 of schedule 1 to the 1985 Act. The proceedings came on for the trial of that issue before District Judge Armon-Jones on 26^th October 2004, when judgment was reserved. Judgment was delivered on 17^th June 2005, when it was ordered that the defendant should give the Council possession of the premises forthwith, but not to be enforced before 14^th July 2005. It was further ordered that the defendant should pay the Council damages for use and occupation of the premises of £831.50 up to and including 3^rd March 2005, with the balance of the Council's claim being adjourned generally. Although the district judge did not make a declaration to that effect, the basis of the order was that the defendant did not have a secure tenancy of the premises.
9. At the hearing on 26^th October the parties had jointly requested that the claim be allocated to the multi-track. The district judge acceded to that request and on 17^th June 2005 made a separate order to that effect. The consequence of the allocation was that any appeal would be made to this court. The district judge refused the defendant permission to appeal, but permission was granted by Lord Justice Mummery on consideration of the documents on 6^th September 2005.
10. The material provisions of the 1985 Act are in Part IV (headed "Secure tenancies and rights of secure tenants"). So far as material, section 79 provides:-

"(1) A tenancy under which a dwelling-house is let as a separate dwelling is a secure tenancy at any time when the conditions described in sections 80 and 81 as the landlord condition and the tenant condition are satisfied.

(2) Sub-section (1) has effect subject to –

(a) The exceptions in Schedule 1 (tenancies which are not secure tenancies) ……"

Section 80(1) provides that the landlord condition is that the interest of the landlord belongs to one of a number of specified authorities or bodies, which include a local authority. Section 81 provides that the tenant condition is that the tenant is an individual and occupies the dwelling-house as his only or principal home.

11. In the present case it is agreed that both the landlord condition and the tenant condition were satisfied, so that the question is whether the case is covered by any of the exceptions in schedule 1 to the 1985 Act. Two exceptions are in point. The first is contained in paragraph 4 (which I quote in its form as amended by the Housing Act 1996):

"A tenancy granted in pursuance of any function under Part VII of the Housing Act 1996 (homelessness) is not a secure tenancy unless the local housing authority concerned have notified the tenant that the tenancy is to be regarded as a secure tenancy."

The Council contend that this case is covered by paragraph 4, whereas the defendant contends to the contrary. Unfortunately, for some reason which has not been made clear to us, this question was not raised before the district judge. That means that if the exception in paragraph 6 is held not to apply, it will be necessary to go back to paragraph 4, and a further preliminary issue may be necessary.

12. Paragraph 6 (headed "Short-term arrangements") provides:

"A tenancy is not a secure tenancy if –

(a) the dwelling-house has been leased to the landlord with vacant possession for use as temporary housing accommodation,

(b) the terms on which it has been leased include provision for the lessor to obtain vacant possession from the landlord on the expiry of a specified period or when required by the lessor,

(c) the lessor is not a body which is capable of granting secure tenancies, and

(d) the landlord has no interest in the dwelling-house other than under the lease in question or as a mortgagee".

As to this paragraph, it is clear from the use of the word "and" at the end of sub-paragraph (c), that, if the exception is to apply, the requirements of all four sub-paragraphs must be satisfied. Further, it is agreed that the requirements of sub-paragraphs (c) and (d) are satisfied in the present case. The debate has turned on sub-paragraphs (a) and (b).

13. In regard to sub-paragraph (a) Mr Wonnacott, who has appeared for the defendant both here and below, while accepting that the premises were, by the head lease dated 4^th July 1996, leased to the Council "with vacant possession", argues that that was not the case when the head lease dated 25^th November 1997 and the subsequent head leases came to be granted, because the defendant was by then lawfully in possession of the premises. He submits that the relevant question is simply whether, at the date of the relevant head lease, a person was or was not lawfully in possession. If there was such a person, then it cannot be said that the premises have "been leased to the [Council] with vacant possession" within sub-paragraph (a).
14. Like the district judge, I have little difficulty in rejecting Mr Wonnacott's argument in regard to sub-paragraph (a). The district judge said:

"It is inappropriate to suggest that as the [Council's] tenant is already in possession at the date that a fresh lease is granted, that fact negates the condition that the lease must be with vacant possession…. as between [Mr Patel] and [the Council] the premises are let with vacant possession. I do not accept Mr Wonnacott's submission that vacant possession is not possible because of the defendant's tenancy."

I agree. It is clear that sub-paragraph (a), as applied to the present case, is concerned only with the position as between Mr Patel and the Council. You only have to look at the head lease in order to see that, as between the two of them, the premises have been leased to the Council with vacant possession. The actual occupation of the defendant at any given time is immaterial.

15. The construction of sub-paragraph (b) is more difficult. As applied to the present case, the requirement is that the terms on which the premises have been leased by the head lease include provision for Mr Patel to obtain vacant possession from the Council "on the expiry of a specified period or when required by [Mr Patel]". Mr Grundy, who has appeared for the Council both here and below, accepts that the head lease must include express provision to the effect stated. He also accepts, as is clear, that the head lease includes provision for Mr Patel to obtain vacant possession on the expiry of a specified period, i.e. at the end of the term. He further accepts, as is also clear (see paragraph 3 above), that the head lease does not include provision for Mr Patel to obtain vacant possession when required by him. The question then is: What is the provision that the head lease must include?
16. Two views are possible:

(1) The head lease must either include a provision for Mr Patel to obtain vacant possession on the expiry of a specified period or it must include a provision for Mr Patel to obtain vacant possession when required by him. On this view sub-paragraph (b) is satisfied because the head lease includes a provision for Mr Patel to obtain vacant possession on the expiry of a specified period.

(2) The head lease must include a single provision for Mr Patel to obtain vacant possession either on the expiry of a specified period or when required by him. On this view sub-paragraph (b) is not satisfied because the head lease only includes a provision for Mr Patel to obtain vacant possession on the expiry of a specified period.

17. Mr Wonnacott was disposed to accept that either view was grammatically possible. I think that that may well be so. But the opening words of sub-paragraph (b), sc. "the terms on which it has been leased include provision", are to my mind more suggestive of a single provision for obtaining vacant possession in either event than of two alternative provisions. Moreover, if there were two alternative provisions, the second would, as Mr Wonnacott submits, be otiose, since every lease effectively provides for the lessor to obtain vacant possession on the expiration of a specified period.
18. I have also had regard to Mr Wonnacott's argument based on the policy of the 1985 Act. He submits that paragraph 6, being an exception to the general policy that residential tenants of local authorities and similar bodies should have security of tenure, is there to encourage private landlords, who want to be able to get their properties back on short notice, to enter into temporary arrangements with such bodies. It would be contrary to the policy of the exception to prevent private landlords from obtaining vacant possession before the expiration of their leases and when required by them.
19. For these reasons I have come to the conclusion that sub-paragraph (b) of paragraph 6 is not satisfied in the present case. I should add that both counsel referred us to a passage in the judgment of Mann LJ in Tower Hamlets London Borough Council -v- Abdi [1993] 1EGLR 68, 71. That was a case where the facts were different. Having carefully considered the observations of Mann LJ, I am of the opinion that, while they are confirmatory of the views I have expressed in relation to sub-paragraph (a), they are not of assistance in relation to sub-paragraph (b).
20. I would allow the defendant's appeal, discharge the district judge's order for possession of the premises, and make whatever other order may be appropriate in the circumstances.

Lord Justice Laws:

21. I agree that the appeal should be allowed for the reasons given by Sir Martin Nourse. On what seems to me to be a narrow issue, I am particularly struck by the force of the point made in paragraph 17 of Sir Martin's judgment to the effect that "if there were two alternative provisions, the second would … be otiose, since every lease effectively provides for the lessor to obtain vacant possession on the expiration of a specified period".

Lord Justice Tuckey:

22. I also agree.