England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CENTRAL LONDON COUNTY COURT
His Honour Judge Bailey
5LB00314

		Royal Courts of Justice Strand, London, WC2A 2LL
		07/11/2007

Lord Justice May:

1. On 5^th June 2001, Mr Dennett, then a secure tenant of the London Borough of Southwark, gave written notice to Southwark under s. 122(1) of the Housing Act 1985 claiming to exercise the right to buy a long lease of his flat at 48 Lockyer Estate, London SE1. On 11^th July 2001, Southwark served notice admitting his right to buy. On 23^rd July 2001, Southwark's Valuation Service valued the premises for the purpose of this transaction at £145,000. Southwark should then have served on Mr Dennett a notice under section 125 of the 1985 Act proposing a purchase price and other matters by early October 2001. They did not in fact do so until 25^th February 2002. Thus began a catalogue of delay, in large part the result of inactivity and incompetence by Southwark, such that by 30^th January 2007, some 5½ years after Southwark admitted Mr Dennett's right to buy, when HH Judge Bailey gave judgment in the Central London County Court upon Mr Dennett's counterclaim in these proceedings, this routine and straightforward transaction was still not completed. The result is that Mr Dennett has been paying rent under his tenancy for upwards of 5 years longer than he would have paid it, if the transaction had been completed expeditiously.
2. In July 2003, Mr Dennett stopped paying rent in protest at the delay, and these proceedings started as Southwark claiming arrears of rent. Mr Dennett quickly paid the rent arrears and the proceedings continued on his counterclaim. Not all the delay is attributable to Southwark. In 2002, Mr Dennett requested a redetermination of the value by the District Valuer, who eventually made a determination confirming the £145,000. There was a problem about the assessment of capital repair costs which was eventually resolved. However, on 8^th April 2003, Mr Dennett accepted Southwark's offer under section 128 of the 1985 Act, and the matter should have proceeded speedily after that.
3. Towards the end of 2003, Southwark came upon a problem. Apparently the boundary between Mr Dennett's flat at 48 Lockyer Estate and the next door flat at 47 Lockyer Estate as shown on the Ordnance Survey plan submitted with his application conflicted with the same boundary as shown on the Land Registry plan by which the property at No. 47 was registered. Southwark wrote to Mr Dennett on 11^th December 2003 announcing an intention to call at No. 48 in the afternoon of 23^rd December 2003 "in order to rectify the problem". This was not convenient to Mr Dennett, who wrote on 18^th December 2003 saying that the plan he had submitted was correct and that there was no justifiable reason for Southwark to have access to his flat. In any event, the proposed date was inconvenient – unsurprisingly, it being the afternoon before Christmas Eve.
4. Mr Dennett eventually, much later, was shown to be right about the correctness of his plan. In a letter dated 3^rd June 2004, Southwark acknowledged that it was more likely that the plan at the Land Registry for No. 47 was incorrect. On 14^th July 2004, Mr Jackson of Southwark also reckoned that the plan for No. 47 was likely to be defective, and he told Mr Dennett two days later that the person who carried out the survey for No. 47 was not that good and had generated a number of problems with other properties that he had surveyed. On 22^nd July 2004, Mr Jackson informed Mr Dennett that he had resurveyed No. 47 and identified the problem. He was preparing a new plan for a Deed of Rectification. But it was not until 29^th April 2005 that Mrs Thompson, the tenant of No. 47, executed a Deed of Rectification. She was in poor health and with limited mobility and had initially been unable to find a solicitor to act for her for the £250 Southwark had offered to pay. Mr Dennett's transaction had understandably stalled while the Deed of Rectification remained unexecuted.
5. On 3^rd August 2004, immediately after Mr Jackson's survey of No. 47 had identified the boundary problem, Southwark had sent Mr Dennett documents including an engrossment of the proposed counterpart lease. The letter said that Southwark would not consider amendments to the lease other than minor ones. Mr Dennett and his solicitors did not respond to this until after Mrs Thompson had executed the Deed of Rectification. On 20^th July 2005, his solicitors wrote saying that the draft lease did not transfer any parking rights. Clause 3(11) of the draft was a lessee's covenant not to park any vehicle on the estate or the building save as authorised by the lease or by the council. This was, as it turned out, a try on by Southwark. As Mr Dennett's solicitors pointed out, Southwark's valuation of £145,000 had explicitly taken account of the fact that Mr Dennett's property enjoyed the use of the communal car park as a "major asset". Furthermore, by section 151 of the 1985 Act and paragraph 13 of Schedule 6, Mr Dennett was entitled, unless he agreed otherwise, to a lease which included rights equivalent to those for the use in common with others of any premises, facilities or services which he enjoyed under his secure tenancy; and under his secured tenancy he enjoyed parking rights. I am clear that the parking rights to which he was entitled under the right to buy legislation were those which he enjoyed at "the relevant time", which is the date in 2001 on which he served his notice claiming to exercise his right to buy – see section 122(2). The "relevant time" is, for instance, the time as at which the District Valuer may have to determine the value of the dwelling house – see section 128(1) – and the same date must apply to the Schedule 6 paragraph 13 rights.
6. Southwark contended up to the door of the court and beyond either that Mr Dennett was entitled to no parking rights as in their draft lease, which they said was their standard lease settled by counsel; or that he was only entitled to parking rights equivalent to those under the secure tenancy as it had become in January 2007. They had, they said, altered the parking rights under section 103 of the 1985 Act in 2004. However, Southwark conceded these points in the early stages of the hearing.
7. Thus two major causes of the appalling delay were the incorrectness of the Land Registry plan for No. 47 and the impasse about parking rights. The second of these appears to have been one of the main reasons why what should have been a simple transaction came to court.

Notices of Delay

8. Section 153A of the 1985 Act has a rather cumbersome procedure to enable a tenant claiming to exercise the right to buy to deal with inactivity or delay by the landlord. It involves the service of notices, which have to be in prescribed form. The relevant procedure for present purposes is as follows. The tenant may serve an initial notice of delay, for which the prescribed form is unexcitingly known as RTB6, where the tenant considers that delays on the part of the landlord are preventing him from exercising expeditiously his right to buy – section 153A(1). This notice has to specify a response period of not less than one month within which the service by the landlord of a Counter notice will have the effect of cancelling the initial notice of delay. The landlord may, within the period specified in the initial notice or at any time thereafter, serve a Counter notice, for which the prescribed form is known as RTB7, if there is no action under Part V of the 1985 Act which, at the beginning of the response period, it was for the landlord to take in order to allow the tenant to exercise his right to buy – section 153A(3). If the response period expires and the landlord has not served a Counter notice, the tenant may serve an operative notice of delay, for which the prescribed form is known as RTB8, stating that section 153B will apply to payments of rent made by the tenant on or after the date of service of the notice – section 153A(5). Section 153A(6) provides that, if the landlord serves a Counter notice, the tenant may serve a further initial notice of delay and the whole procedure starts again. There is thus the opportunity for ping pong and also for disagreements as to whether the circumstances entitling the landlord to serve a Counter notice truly prevailed when he may have done so.
9. In Guinan v Enfield London Borough Council (1996) 29 HLR 456, there was a dispute between a tenant claiming to exercise the right to buy and the council landlord as to the reasonableness of terms proposed by the council for inclusion in the lease. The tenant served a RTB6 notice and the landlord served a RTB7 Counter notice relying on the reasonableness of the terms proposed. The tenant served a RTB8 operative notice of delay contending that the RTB7 Counter notice was invalid because there was action for the landlord to take, that is to agree reasonable terms. This court held that some of the proposed terms were reasonable, but others unreasonable. As to the validity of the Counter notice, the court held that a Counter notice is valid if the landlord in good faith believes that he has in law the right to insist on the terms he is offering, the county court being at hand to settle disputes under section 181. The reference to good faith here seems to me to have arisen from the nature of the dispute in that case, in which there was a genuine disagreement as to the reasonableness of terms. In cases where it is a hard edged question of fact whether there is any action for the landlord to take in order to allow the tenant to exercise expeditiously the right to buy, it does not seem to me that good or bad faith enters into it.
10. Section 153B provides that rent paid by the tenant on or after the service of an operative notice of delay and up to the service by the landlord of a Counter notice under section 153A(3) or the completion of the right to buy transaction shall be treated, not only as payment of rent, but also as payment on account of the purchase price. If the operative delay extends more than 12 months, a further 50% of the amount of the rent payments is deducted from the purchase price.

The notices served

11. On 11^th February 2004, Mr Dennett served an initial notice of delay in form RTB6 asserting that delays on the part of Southwark were holding up the sale under the right to buy. The factual situation then was that in December 2003 Southwark had asked for access to Mr Dennett's flat to sort out the boundary problem and had been refused access by Mr Dennett who correctly claimed that his plan was accurate. Southwark had taken no further step to resolve the matter. It subsequently transpired that a simple comparison of the plans for Nos 47 and 48 would show that the error was in the plan for No. 47. Further, Southwark had not progressed the conveyancing side of the transaction.
12. On 19^th February 2004, Southwark served a Counter notice in form RTB7 saying that they were being denied access and that there was no action for them to take. Mr Dennett asserted vigorously in correspondence that Southwark were wrong about this, but he did not at this stage serve an operative notice of delay in form RTB8, nor anything which purported to be such a notice. He claimed in these proceedings that Southwark's RTB7 was invalid and served in bad faith because, he said, Southwark's employees had express knowledge that Southwark had no right to serve such a notice.
13. The judge held that Southwark were not entitled to serve the RTB7 on 19^th February 2004. First, they had yet to forward conveyancing documents which the unresolved difficulty with the plans should not have delayed. There was no personal animus against Mr Dennett, but Southwark's stubborn refusal to give the matter any proper attention and their insistence that no progress was possible until Mr Dennett gave them access to his flat showed a callous disregard for his interests and a complete indifference to the impact of their actions upon him. They were acting with an absence of good faith. Second, they had not taken steps to resolve the difficulty with the plans. It subsequently took Mr Jackson less than 2 weeks to resolve the problem and this should have happened in the Autumn of 2003.
14. The judge found that Mr Dennett did not give an RTB8 notice because he understandably took the view that the statute did not allow it. I suppose this to have been because the landlord had at least purported to serve a Counter notice, and section 153A(2)(b) says that the service of a Counter notice will have the effect of cancelling the initial notice of delay. The judge was however satisfied that, if the RTB7 Counter notice had not been served, Mr Dennett would have served an RTB8 immediately at the conclusion of the response period, that is on 11^th March 2004. The judge considered that the court should treat Mr Dennett as having served an operative notice of delay on 15^th March 2004, allowing 2 additional days for the service of each notice. As a result of this decision and subsequent decisions, the judge directed that all payments of rent from 15^th March 2004 were to be treated as part payment of the purchase price; and that from 15^th March 2005 this should be at 1½ times the amount of the rent paid. The judge further declared that the period during which Mr Dennett was liable to repay any part of the discount in the purchase price under section 155 was to start on 15^th March 2004.
15. Mr Dennett served a further initial notice of delay in form RTB6 on 11^th February 2005. The factual situation then was that Southwark had served draft conveyancing documents with their letter of 3^rd August 2004, but they had yet to secure a Deed of Rectification from Mrs Thompson. They did not serve a Counter notice within the response period, and Mr Dennett served an operative notice of delay in form RTB8 on 12^th March 2005. Mrs Thompson executed the Deed of Variation on 29^th April 2005, and on 22^nd June 2005, Southwark served an RTB7 Counter notice saying they were ready to complete on receipt of the required 14 day notice. On 20^th July 2005, Mr Dennett's solicitors wrote saying that the draft lease did not transfer any parking rights, and the parking rights argument continued up to the hearing before the judge.
16. The judge held that Southwark's assertion in their 22^nd June 2005 RTB7 that they were ready to complete was illusory. Their draft lease excluded communal car parking rights as a matter of deliberate policy. This was entirely unacceptable. The judge regarded this as surreptitious and a matter of serious bad faith. Southwark should have raised the matter openly when they had relied on the existence of communal parking as a valuable right to increase the price paid for the lease. For this reason, the judge decided that the 22^nd June 2005 RTB7 was invalid. Southwark were only prepared to grant the lease on terms which excluded an important right to which Mr Dennett was entitled. They continued this approach to the door of the court. They offered no valid reason for this attitude.

Misfeasance in Public Office

17. Mr Dennett claimed damages for misfeasance in public office. The judge upheld this claim. He referred to Three Rivers District Council v Governor and Company of the Bank of England (No. 3) [2003] 2 AC 1 and applied the test for this tort as articulated by Lord Millett at page 237C. He referred to Lord Steyn's formulation at page 196B. He noted with reference to Lord Hutton's opinion at 227F-228A that bad faith is an essential ingredient of the tort. He said that there will often be bad faith whenever an official deliberately fails to act when he knows he should be acting and is aware that injury is the natural and probable consequence of his failure. It was difficult to see how a decision not to act in such circumstances could be made in good faith. He referred to Lord Hobhouse's observation at 230E that the official concerned must be shown not to have had an honest belief that he was acting lawfully; this is sometimes referred to as not having acted in good faith. The judge held that all the various officials at Southwark were aware of and understood Southwark's duty to progress Mr Dennett's application expeditiously; and that they decided consciously over periods of time that they would not do so (a) by not sending out documentation or agreeing the terms of the lease until Mr Dennett gave access for the purpose of reinspection, and (b) by not agreeing the terms of or proceeding to grant the lease unless Mr Dennett agreed to give up his parking rights. The judge then said at paragraph 48(4) of his judgment:

"These conscious decisions not to act in accordance with their duty were not taken honestly in good faith but were taken in bad faith because:

(a) the officials knew perfectly well that there was no need for a reinspection to take place before draft documentation was sent out or the terms of the lease were agreed. Indeed, it goes further, for they knew that in all probability there was no need for a reinspection at all and when after long delay they did take steps to check the position they did indeed discover that there was no need for a reinspection. In this respect they acted with reckless indifference towards Mr Dennett.

(b) they knew that Mr Dennett was entitled to parking rights but sought deliberately to deprive him of those rights as a matter of "policy", and to do so surreptitiously."

Southwark further knew that their failure to act would injure Mr Dennett in depriving him of the rights of ownership of his flat. The elements of the tort of misfeasance in public office were all present. In short Southwark acted in bad faith with subjective reckless indifference.

18. Having decided that Mr Dennett was entitled to have his rent payments from 15^th March 2004 treated as part of the purchase price and taking account of this, the judge awarded him damages for misfeasance in total of £6168.00, apparently calculated at the rate of £2000 a year from November 2003 to the date of trial allowing 3 months to agree the terms of the lease with a small additional amount for 2 months before the end of the period during which any disposal would attract an obligation to repay the whole or part of the discount.
19. The judge further ordered Southwark to complete the conveyance by 26^th February 2007 including a term appropriately providing for Mr Dennett's parking rights.

Grounds of appeal

20. It is convenient to take Southwark's challenge to the judge's finding of bad faith and misfeasance in public office first.
21. Mr Heather, for Southwark, accepts that the judge correctly summarised the law about misfeasance in public office, but he submits that he was wrong to find that unnamed and unspecified officials of Southwark acted in bad faith. In Society of Lloyds v Henderson [2007] WL 2817792, Buxton LJ emphasised that for misfeasance in public office the public officer must act dishonestly or in bad faith in relation to the legality of his actions. The whole thrust of the Three Rivers case was that knowledge of, or subjective recklessness as to, the lawfulness of the public officer's acts and the consequences of them is necessary to establish the tort. Mere reckless indifference without the addition of subjective recklessness will not do. This element virtually requires the claimant to identify the person or people said to have acted with subjective recklessness and to establish their bad faith. An institution can only be reckless subjectively if one or more individuals acting on its behalf are subjectively reckless, and their subjective state of mind needs to be established. To that end, they need to be identified. As Buxton LJ said at paragraph 49:

"In this analysis I leave aside the further difficulty that if a case of subjectively reckless failure to act were to be made good, it would have to be demonstrated who took the decisions not to act and with what knowledge. Nothing in those terms has been demonstrated, or sought to be demonstrated, even with the assistance of the proposed fresh evidence. That is no doubt why the case falls back on objective recklessness, which could be demonstrated by inference: but such demonstration is not enough for the tort of Misfeasance in Public Office."

22. Mr Dennett did not seek to demonstrate, nor did the judge find, who on behalf of Southwark acted in bad faith and what subjectively was their state of mind. Mr Knox QC, for Mr Dennett, says that this could not be done without Southwark calling appropriate people to explain themselves, and Southwark did not do this. But it was for Mr Dennett to establish the serious allegations of bad faith which his pleaded cause of action required. Apart from this, a critical examination of the facts does not, in my judgment, sustain the judge's findings of bad faith in either of the critical respects. As to the events leading up to the service by Southwark of the RTB7 on 19^th February 2004, I agree with the judge for reasons which I shall shortly explain that Southwark were not in a position to serve that notice. But it is, in my view, an unsustainable inference and a step too far to deduce without reference to evidence or individuals that the officials knew perfectly well that there was no need for reinspection to take place and that there was no need for reinspection at all. It is true that much later the problem with the plans was sorted out quite speedily with reference to plans and without an inspection of Mr Dennett's flat. But it does not follow that the writer of the letter of 11^th December 2003, or whoever decided that it should be written, knew that inspection of Mr Dennett's flat was quite unnecessary, but wrote the letter out of reckless indifference; nor that the RTB7 was served in bad faith even though Mr Dennett had by then asserted that this Ordinance Survey plan was correct. Subjective reckless indifference is a possibility but not a necessary inference. There are other possibilities of which the strain of overwork or incompetence are two. Further, inspection of Mr Dennett's flat could have helped resolve the problem by establishing positively that Mr Dennett was correct about the accuracy of his plans, although this was in fact subsequently established by other means.
23. As to Mr Dennett's car parking rights, there is again the problem that neither Mr Dennett nor the judge identified the person or persons who are said to have acted in bad faith with reckless indifference. Southwark took a stand from which they eventually backed away. When it came to it, Mr Dennett was entitled to parking rights equivalent to those under his secure tenancy as it was in 2001. But paragraph 13 of Schedule 6 of the 1985 Act expressly envisages that the landlord and tenant may agree otherwise, and there is no necessary inference of bad faith because Southwark included clause 3(11) in the draft lease. They did not draw attention to it in August 2004 when they sent the draft lease, but these and other matters are for a purchaser to take care about. Bad faith cannot be found, I think, in the assertion in the letter of 3^rd August 2004 that the writer was unable to consider amendments to the draft, nor in Southwark's attempt, prolonged though it was, to negotiate a more favourable lease from their point of view. When they got round to it, Mr Dennett's solicitors spotted the point and advanced Mr Dennett's case, eventually in this respect successfully.
24. For these reasons, in my view the judge was wrong to find in favour of Mr Dennett on his claim for misfeasance in public office and I would allow the appeal in that respect.
25. Southwark appeal on a number of aspects relating to the various notices. They say in particular that the judge was wrong not to find that their RTB7 notice of 19^th February 2004 was valid and effective; that he was wrong to give Mr Dennett the benefit of an RTB8 notice in March 2004 which he did not serve; and that he was wrong to hold that their RTB7 notice of 27^th June 2005 was invalid.
26. In my view, the judge correctly held that the RTB7 notice of 19^th February 2004 was ineffective. It is a question of fact whether on 11^th February 2004, the date of Mr Dennett's RTB6 notice, there was no action for Southwark to take in order to allow Mr Dennett to exercise his right to buy expeditiously. The invalidity of the notice does not depend on Mr Dennett establishing bad faith. The reference in Guinan to the Counter notice being valid "if the landlord in good faith believes that he has in law the right to insist upon the terms he is offering" concerned an element of the factual judgment in that case where the landlord was arguably entitled to take the stand he did. In the present case, the judge was, in my view, correct to hold that on 19^th February 2004 there were at least two matters for Southwark to attend to, that is sending out the draft conveyancing documents and sorting out the discrepancy in the plans. The fact that Mr Dennett had correctly asserted that access to his flat was unnecessary for the second of these did not mean that there was no action for Southwark to take. There were other means of resolving the problem.
27. However, in my view, the judge was wrong to hold that the invalidity of Southwark's February 2004 RTB7 notice entitled Mr Dennett to the benefit of a RTB8 notice which he did not in fact serve. Accepting the unchallenged finding of the judge that Mr Dennett would have served a RTB8 notice if Southwark had not served their ineffective RTB7 notice, I nevertheless do not consider that he can be deemed to have done something which he did not do. The statute is silent as to what happens if a landlord serves an RTB7 notice which is ineffective. But the operative notice for these purposes is the RTB8 notice which the tenant may or may not serve. A RTB8 notice has to be in prescribed form – see section 176. Although section 177 provides that a notice served by a tenant is not invalidated by an error in, or omission from, the particulars which are required by the regulations, the critical statement that section 153B will apply to payments of rent made by the tenant on or after the date of the service of the notice is a requirement of section 153A(5) itself, not of the regulations. This important statement puts the landlord on notice as to the consequences of further delay. No amount of benevolent deeming can supply its absence. This is also fatal to the point advanced by Mr Knox in the Respondent's Notice that Mr Dennett's long letters following the service of the RTB7 can be construed as comprising a RTB8 notice. Mr Dennett did assert forcefully that the purported RTB7 was invalid. But his letters do not themselves purport to be notices. They are not in the prescribed form and they do not contain a statement such as section 153A(5) requires. Accordingly, in my view, the absence of an RTB8 notice in March 2004 is fatal to the judge's incorrect finding that Mr Dennett was entitled to set off payments of rent against the purchase price from 15^th March 2004. I would allow the appeal in this respect.
28. The facts relating to the RTB7 notice which Southwark served on 22^nd June 2005 are reasonably close to those in Guinan. Southwark had served the draft conveyancing documents on 3^rd August 2004 and Mrs Thompson had executed the Deed of Rectification on 29^th April 2005. Southwark were waiting for a response to their August 2004 letter, which did not appear until Mr Dennett's solicitor's letter of 20^th July 2005. The term in the draft lease as to car parking rights did not reflect the terms of Mr Dennett's 2001 secure tenancy. But this did not disentitle Southwark from proposing different terms for agreement.
29. I have already indicated that in my view the evidence does not properly sustain a finding of bad faith by Southwark in this respect. They were pursuing a policy which, although they could not insist on it for Mr Dennett, it was open to them to attempt to negotiate. Southwark were at least therefore entitled to make the proposal which they did, and they were not disentitled from doing so because Mr Dennett had earlier (but not in the interval between August 2004 and June 2005) insisted in maintaining his car parking rights when Southwark were reacting to his withholding of rent. Southwark were, I think, properly able to take the view in June 2005 that the ball was in Mr Dennett's court and that there was no action for them to take until he responded. Accordingly I would hold that Southwark's June 2005 RTB7 notice was validly served, and that the judge was wrong to hold otherwise. Mr Dennett did not subsequently serve a RTB8 notice, so that events after 22^nd June 2005 do not bear on this question. In the result, I would hold that the period during which Mr Dennett is entitled to set off payments of rent against the purchase price is that between 12^th March 2005, when he served his RTB8 notice, and 22nd June 2005 when Southwark served their second RTB7 notice.
30. Southwark's second ground of appeal is insubstantial. They say that the judge was wrong to grant an injunction under section 138(3) of the 1985 Act requiring them to grant Mr Dennett the lease, when there were matters relating to the grant of the lease which were not agreed or determined, that is the extent of Mr Dennett's car parking rights, when the proceedings started. The judge duly determined the car parking rights and, having done so, was entitled to grant the injunction. I would dismiss this ground of appeal and also the third ground, which contends (wrongly as I have indicated) that the judge should have held that Mr Dennett was entitled to parking rights equivalent to those subsisting under his secure tenancy agreement as they became in 2004. Ground 6, which contends that the judge was wrong to award duplicating damages for delay for misfeasance in public office in addition to the statutory remedy of setting off the rent against the purchase price, does not arise since I have held that the claim for misfeasance in public office should fail.

Conclusion

31. I would allow the appeal to the extent that I have indicated.

Lord Justice Longmore:

32. Section 153A(1) of the Housing Act 1985 provides that the tenant may serve on his landlord an initial notice of delay in any of five situations including

"(e) where the tenant considers that delays on the part of the landlord are preventing him from exercising expeditiously his right to buy …".

Sub-section 3(b) then provides that if there is no action "which at the beginning of the response period, it was for the landlord to take in order to allow the tenant expeditiously to exercise his right to buy and which remains to be taken", the landlord may serve a counter notice. Sub-section 5 then provides that if the proposed period has expired and the landlord has not served a counter notice under sub-section 3, the tenant may serve an operative notice of delay which will have the consequences set out in section 153B of the statute.

33. The judge found that Mr Dennett was entitled to (and did) serve an initial notice of delay; he further found that Southwark served a counter notice but they were not entitled to do so since there was action which it was for the landlord to take namely, sending a draft lease to Mr Dennett for his agreement and sorting out the discrepancy in the plans. Mr Dennett formed the view that once a counter notice had been served he could not serve an operative notice of delay, so did not serve one.
34. I agree with my Lord that in the absence of an operative notice of delay, the consequences of such a notice as set out in section 153B of the Act cannot take effect. The judge held that if Southwark had refrained from serving a counter notice (as they ought to have done) Mr Dennett would have served an operative notice of delay. I am sure that he is right but it does not follow that, in such circumstances, the court can deem that such a notice has been served so that the consequences set out in section 153B can be deemed to follow. That seems to me to be contrary to the express terms of the statute which only permits those consequences where the tenant has served on his landlord an operative notice of delay.
35. If, of course, a counter notice is served in bad faith by the Council in circumstances where the relevant officer knew that such counter notice could not lawfully be served, it could then be argued that the relevant officer was liable for the tort of misfeasance in public office and the council would be vicariously liable for that tort. But I agree with my Lord that the circumstances of the case did not justify the holding of the judge that there was such misfeasance. The service of the counter notice may well have been an act of incompetence but the high burden of showing of bad faith on misfeasance in public office has not, in my judgment, been discharged.
36. But this conclusion does not leave a person in Mr Dennett's position without any remedy. If the Council serve a counter notice in circumstances when they are not entitled to, it seems to me that they have not "served a counter notice under sub-section (3)". Sub-section (3) contemplates a counter notice which correctly states that there is no action for the landlord to take. If there is action for the landlord to take, a counter notice cannot be served and any counter notice actually served will not be a "counter notice under sub-section 3". In these circumstances, a tenant is in my judgment, entitled to serve an operative notice of delay as the tenant did in Guinan. If there is a dispute about whether there remained actions for the landlord to take, that will have to be determined at trial. But the fact that there is (or maybe) a dispute does not prevent the tenant from serving an operative notice of delay which will have the relevant consequences if the dispute is decided in his favour.
37. In any event I agree that this appeal should be allowed to the extent (and for the reasons) given by my Lord.

Lord Justice Carnwath:

38. Subject to one possible reservation, I agree entirely with the reasoning and conclusions of May LJ. I do so with some regret, because the case reveals maladministration of a high order. The Local Government Ombudsman might have been able to provide a remedy, but the answer was not to be found in the law of misfeasance in public office.
39. My reservation relates to the question whether the RTB7 counter-notice, served by Southwark on 19th February 2004, might have been treated as invalid by Mr Dennett, so as to enable him to serve an RTB8 notice, thus triggering the special regime applying to payments of rent under section 153B (judgment para 9, 26). The issue does not affect the result of this case, since I agree with May LJ that no effective RTB8 notice was served by Mr Dennett at that time. However, it may be relevant in other cases.
40. May LJ has summarised the statutory provisions. Section 153A provides that the RTB7 counter notice may be served "if… there is no action under the Part… which it was for the landlord to take…" In Guinan v Enfield London Borough Council (1996) 29 HLR 456, the issue was not simply whether there was further action to be taken by the landlord, but involved a genuine dispute about the reasonableness of the terms proposed. It was held that such a counter-notice was valid if put forward in good faith, even if certain parts of the council's proposals were subsequently varied by the judge. Staughton LJ noted that, on the wording of the section, it might have been argued that there was some action for the landlord to take, that is, to make the amendments which the judge subsequently required. However, he observed that this group of provisions had "a confiscatory effect" upon the landlord's rights, and should not therefore be construed "too strictly" against the council. He said:

"A counter-notice is in my judgment valid if the landlord in good faith believes that he has in law the right to insist upon the terms that he is offering." (p463).

41. Both May and Longmore LJ, as I understand it, take the view that Guinan is distinguishable because of the nature of the dispute in that case; and that it is sufficient to invalidate the RTB7 notice, if it is subsequently decided that there was in fact action which the landlord needed to take, however reasonable the landlord's view at the time. I see the force of that view on the literal wording of the section. However, it seems to me at least arguable, adopting a less "strict" approach against the authority, that the notice should only be treated as invalid, if the authority had no reasonable basis (in public law terms) for serving it. For my part I would prefer to leave open that issue for a case in which it arises for decision, and we have had fuller argument.