England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CENTRAL LONDON COUNTY COURT
(MR LEIGHTON WILLIAMS QC)

		Royal Courts of Justice Strand, London, WC2A 2LL
		29th January 2010

Lord Justice Lloyd:

1. This is an appeal, with permission granted by Mummery LJ, against an order of Mr Leighton Williams QC, sitting as a deputy judge on 3 March 2009. Although he was sitting at the Royal Courts of Justice, the proceedings were in the Central London County Court. At all events, on 3 March he gave judgment, following a trial which had started the previous day, on a claim and counterclaim, the claim being for damages under section 27 of the Housing Act 1988, for unlawful eviction, and the counterclaim being for damages in respect of the diminution of value of the property, arrears of rent and other matters.
2. The claimant, the former tenant Mr Kalas, had been an assured tenant of the defendant, Mr Farmer, otherwise known as Mr Sandom. That landlord and tenant relationship started in about 1996. It appears that at first the premises were in a somewhat dilapidated and poor state and he did some improvements to the premises. After a while he started paying a rent of £130 a week, which no doubt went up from time to time. The order records that by 2004 the rent was due at £260 a week.
3. In 2003 the claimant went to Cyprus to see his mother. Whilst he was away, under a warrant dated 1 April 2003, police broke into the premises and searched them and no doubt took away some items as a result of their search. This led to the arrest of the claimant when he returned to England. He was kept in custody for some nine days and was then released on bail. On 20 May 2003, on that release, he returned to the premises and he found that the locks had been changed and that the defendant was using part of the premises as his own. I need not say a great deal about this episode in the history, but he was able to get back into the premises. The defendant left, and later the possessions of the claimant which the defendant had removed from the premises were returned to him.
4. Before this the defendant had issued proceedings against the claimant for unpaid rent, to which the claimant counterclaimed for damages for the unlawful eviction in May 2003. Those proceedings came to trial in March 2004. We have not seen any documents relating to those proceedings, but the judge in the proceedings under appeal saw at least some documents. I think he saw the order, which showed that there was no order for possession; there was an order for arrears of rent, but in a relatively modest sum, due no doubt to a set-off; and the present defendant was ordered to pay costs on an indemnity basis, from which one can reasonably infer that in substance the tenant won that round of litigation.
5. The arrest following the search led to the prosecution of the claimant for theft. The claimant was on bail after May 2003 and, so far as we know, he was on bail until the day of the trial, which was 10 May 2004. It seems that the criminal trial took a fairly expeditious course, because although Mr Kalas pleaded not guilty he was convicted and was sentenced to two years' imprisonment, all within the one day. Although he was sentenced to a term of two years' imprisonment he was in fact released, it seems under a home curfew regime, in November 2004, having served six months of his sentence. From what I gather that was a reasonably foreseeable outcome.
6. It seems from some evidence given in the witness statements before the judge that the claimant may have feared that, if convicted, he would be subjected to a longer sentence but also that he had expected that the trial would take somewhat longer. He had asked a friend, Mr Zannetos, to look after his flat and his car including paying utility bills and collecting mail. After the criminal trial Mr Zannetos went to the premises on one occasion and collected post, but on a second or possibly on the third occasion on which he did so he found that the locks of the flat had been changed and that a for sale sign was up. By the end of May, soon after the trial, although (on his own evidence) not knowing of the trial and conviction, the defendant re-entered the premises and he put the property up for sale. Later in the summer he sold the premises with vacant possession for a substantial sum of money.
7. As I say, the claimant came out of prison in November 2004. By then he knew from what Mr Zannetos had told him that the premises had been put up for sale and possibly he may have known they had been sold. He was therefore unable to go back to the property. By these proceedings, not brought until July 2007, he sued the defendant claiming damages, as I say, for unlawful eviction.
8. In the defence and counterclaim it is said that in May 2004 the defendant did not know of the claimant's arrest and imprisonment; that rent was not paid for May 2004 or June 2004; that the defendant went to the premises and found the claimant's room apparently abandoned and containing only small possessions of low value, which appeared similarly abandoned, and that thereafter the defendant heard no more of the claimant and by the summer of 2004 believed and had reasonable cause to believe that he had ceased to reside at the premises and it was said that the premises did not by then constitute the claimant's only or principal home. It is further said, in paragraph 6 of the defence, that the claimant having ceased to reside, he had abandoned the premises and/or surrendered the tenancy and the sale of vacant possession was not an eviction.
9. In response to the claim for damages he said the claimant's possession of the premises had ceased well prior to the sale, and the difference in value between the premises, with or without vacant possession, was nil, because the claimant's rights of occupation had already determined and, it was said, such possessions as were left in the premises had no value. Issue was taken, properly, with any entitlement to aggravated or exemplary damages.
10. There was a counterclaim for rent and for damages of £32,000 in respect of diminution of value of the property due to acts of the claimant, which was said to have been caused by structural alterations and damage to the garage and (perhaps a relatively minor item) to the fact that the claimant's criminal conduct had led to the police breaking down the front door. It was also said that, in breach of an obligation under the tenancy agreement to refrain from using the premises for any immoral or illegal activity, the claimant had stored or permitted to be stored at the premises items stolen from third parties. So that led to a claim for damages, a claim for arrears of rent and the like, and issue was joined on that in a reply and a defence to counterclaim.
11. At trial the judge heard evidence from the claimant and the defendant and from Mr Zannetos. He had some reservations about the claimant. He said he was not altogether reliable. He said in terms that he found the defendant not reliable as a witness. He did not criticise Mr Zannetos so much. He said that he would not accept his evidence readily in isolation.
12. The judge recorded the rival cases in his judgment. The claimant's case was put as being that he never intended to abandon the premises, but that the defendant had taken advantage, in his absence, to get rid of him once and for all by selling the premises, something that he said the defendant had wanted to do for some time.
13. Then at paragraph 21 the judge set out the defendant's case. I will read that because it contains some of the passages that are relevant to the issues on this appeal:

"The defendant's case is that the claimant had abandoned the premises in the expectation he was going to receive a sentence which could be as long as four years. His case is that when he called at the premises in late May, there was nothing in the property except rubbish. He also relies on this in support of his assertion that he believed and had reasonable grounds to believe that the claimant had ceased to reside at the premises. His case is that the claimant had cleared all his own goods out of the premises. The defendant claims he did not know at that time that the claimant had been sentenced to imprisonment. He said with no rent having been paid he re-entered the property, left a note for the claimant and then when that note was not answered he decided the best course of action was to sell the property given the difficulty he had and his disability. He produced some photographs which he claimed showed the property in an abandoned state. From my part, I do not regard the photographs as going that far. A bed, furniture, nets and curtains are shown. The bed has no linen on it. Otherwise there is no sign in the photograph that the property had been abandoned. He points out the delay before the proceedings were issued and suggests that the claimant has belatedly seen an option to claim monies he is not entitled to."

14. Then the judge referred to the witnesses and it is perfectly true that he said the claimant was not an entirely reliable witness. "I am quite sure", the judge said, "he painted the best picture he could to support his case." He referred to Mr Zannetos and then at paragraph 23 he said:

"I do not regard the defendant as a reliable witness. Clearly his evidence was not accepted by Judge Dean. Before me he played his cards very close to his chest. He had to accept that his past conduct in dealing with the claimant hardly showed respect to the principles of legality he claimed to follow."

15. The judge then considered the rival cases, and I will read paragraphs 24 to 26:

"24. I accept that the claimant had not abandoned the premises when he was sentenced to imprisonment. His correspondence with his solicitor bears that out even though it may not be conclusive on the point because it may be said that the correspondence suggests only that the claimant wanted to sue the defendant to gain some monies from him, but the correspondence does make it clear that the claimant would want an address to put down when he came out from prison."

That, as I understand it, was because he had to have an address which he could state for the purposes of home curfew. Continuing the judgment :

"I conclude that he did not abandon the premises, if only for the reason that he knew full well he had an asset which was of value to him. The fact that he had not paid the rent for some time would not I suspect, have concerned him. I do not regard him as a man of principle. I consider he is someone who is well able to look after his own interests and that he would not have considered it to be in his own interests to abandon the premises."

25. I am afraid I regard the defendant as quite ruthless. His admitted past conduct shows a willingness to take the law into his own hands. From the earlier proceedings he knew, as he admitted, the importance of taking proceedings for possession. Mr Dencer [who was his counsel below] points out that if someone has abandoned the premises, you do not have to have a possession order before you re-enter the premises; but good practice would suggest that to be safe, a landlord would. Yet the defendant repeated the conduct for which he had been found at fault by HHJ Dean. When being questioned, he remained cool and displayed no emotion until confronted with clear evidence. I am quite satisfied that he took a calculated risk in re-entering the premises and I do not accept for one minute that he believed the claimant had ceased to reside there. How could he have had reasonable grounds for such a belief some 10 or 11 days after the claimant was sentenced when he did not know, so he said, that the claimant had been sentenced to imprisonment.

26. I do not accept that the claimant had removed all his property from the premises."

16. On that basis he held for the claimant on the claim and he ordered damages of £49,500 under sections 27 and 28 of the Housing Act 1988 for unlawful eviction, a sum which had been agreed. He also awarded £3,200 for the value of goods of the claimant taken by the defendant and his property not being returned.
17. There was to be a set-off. There was unpaid rent for the period to the end of May 2004 and that, as it seems, was to be set off against a sum of some £2,500-odd that was still due from the defendant to the claimant from the previous proceedings. He also awarded indemnity costs to the claimant.
18. The defendant put forward his grounds of appeal in what I have to say is a confusing series of documents. There is one document headed Grounds of Appeal, not, I should say, settled by Mr Bogle who appears for the defendant today. That does identify some grounds of appeal but for my part I find it a good deal more helpful to look at the skeleton argument on behalf of the appellant dated July of last year, which was settled by Mr Bogle. This addresses the points in a considerably more focussed way.
19. As set out there and as elaborated in his oral submissions this morning, Mr Bogle took in essence four points. First, the judge was wrong to hold that the tenancy had not come to an end before, or at any rate in a lawful manner as a result of, the landlord's re-entry on the premises. He submitted that the claimant had vacated the premises and that, by vacating the premises, not having paid the rent, he was in effect offering to surrender the premises to the landlord, and that the landlord accepted that surrender by taking possession. That is the first point and, if it is right, then there was no unlawful eviction and the landlord's conduct was entirely lawful. Secondly, he argued that the landlord had a proper defence under section 27(8) of the Housing Act 1988 because he believed and had reasonable cause to believe that the residential occupier had ceased to reside at the time that he went in; that was a point that was taken at trial and rejected. Thirdly, he argued that the judge was wrong not to consider the mitigation of damages under section 27(7) of the Act due to the claimant's conduct. Fourthly, he challenged the judge's award of indemnity costs.
20. I take, first, the point on surrender. What Mr Bogle said is that the judge's finding, set out in the paragraphs in the judgment I have already read, that the claimant had not abandoned the premises was a finding that was not open to him because there was no evidence before the judge which justified his rejecting the defendant's case, which was that the claimant had removed all his property except for rubbish. I have to say that that seems to me to be an impossible contention. I have read the relevant passages in the judgment. I have seen the photographs which are in the appeal bundle. Mr Bogle contended that it was possible that what were left at the property, which was described by the defendant as rubbish, were items that did not belong to the claimant but rather to the defendant. The defendant never put forward any assertion, either in his witness statement, his correspondence, his pleadings or his oral evidence, that any of the items that were left in the property had belonged to him. It seems to me, given the terms of the defence and counterclaim and the absence of any assertion by the defendant at any stage of a claim that he owned any of the items left in the premises, that this is a proposition that can simply be ignored. Accordingly, the judge proceeded on the sound basis that the claimant owned what was left in the premises and that the evidence of the photographs showed that the defendant's case for saying that the claimant had cleared the premises all except for rubbish was simply wrong. That, accordingly, seems to me to be an impossible ground of appeal. The judge made his finding of fact, and there was a perfectly adequate evidential basis for it. There is no other basis on which it could be suggested that the claimant did anything of his own part which could amount to determining the tenancy. Certainly he gave no notice to determine the tenancy and, as the judge said, he does not appear to have had any intention to do so. Therefore if the tenancy had come to an end it can only have been by surrender, and there is no act on the tenant's part identified in the evidence and proved before the judge that could possibly amount to an offer to surrender. That ground of appeal therefore fails.
21. So far as the defence under section 27(8) is concerned, I have referred to the essence of it. It requires the landlord to prove that he believed, and had reasonable grounds for believing, that the former tenant had ceased to reside. What I have read from paragraph 25 of the judge's judgment shows that he rejected in terms the proposition that the defendant did believe that the claimant had ceased to reside. The basis for that rejection is really the same evidence as I have already referred to, namely that when he went into the premises he saw the property which, disregarding for reasons that I have mentioned any possibility that the items of property belonged to the defendant himself, was clearly the claimant's property. He saw that and that did not, as the judge held, show that the claimant had abandoned the premises. Accordingly, the defendant cannot have believed that he had ceased to reside. The judge goes on to say that he had no reasonable grounds for that belief, but, as it seems to me, the judge is making the more serious finding that the defendant did not believe that which he said in evidence he did believe. As I quoted from the judgement, he regarded the defendant as quite ruthless and taking a calculated risk, and the judge clearly took the view that he saw that opportunity, not believing that the claimant had ceased to reside but seeing that he had an opportunity, just as he may have thought he had before in April 2003 or May 2003, but as it turned out that was not an opportunity truly open to him.
22. Accordingly the defence under section 27(8) was simply not made good on the facts. The defendant did not have the relevant belief and would not have had the grounds for such a belief. That ground of appeal fails too.
23. Mr Bogle's next point was that the damages ought to have been reduced or at any rate that the judge ought to have considered reducing the damages by virtue of section 27(7)(a) of the 1988 Act. That is in the following terms:

"If, in proceedings to enforce a liability arising by virtue of subsection (3) above, it appears to the court—

(a) that, prior to the event which gave rise to the liability, the conduct of the former residential occupier or any person living with him in the premises concerned was such that it is reasonable to mitigate the damages for which the landlord in default would otherwise be liable…"

Then, passing over (b), which is irrelevant:

"…the court may reduce the amount of damages which would otherwise be payable to such amount as it thinks appropriate"

24. Mr Bogle showed us a decision of this court, Regalgrand Ltd v Dickerson & Wade 29 HLR 620 in which the judgment was given by Aldous LJ. (The report at page 622 represents him as being Mr Justice Aldous but that is not correct.) Those were proceedings in which the claim for damages was made under section 27 but was introduced into the proceedings at a very late stage before trial without any formal application for permission to amend being made (I think there was a draft amendment). The trial proceeded on the footing that such a claim was made by the counterclaim. There was no consequential amendment to the landlord's defence to counterclaim.
25. The point was, however, taken as to whether and if so to what extent the damages otherwise due ought to be reduced under section 27(7)(a) of the Act. The judge, HHJ Davies, had dealt with this in her judgment and held that there was reason to mitigate the damages for particular reasons that she mentioned, and the former tenant challenged that on a number of grounds. Aldous LJ said at page 625 of the report:

"I have no doubt that Mr McCormick [counsel for the tenant] is correct that a claim that damages under the Housing Act should be mitigated should be pleaded and particularised. In this case it was not. However, the claim for Housing Act damages was only incorporated into a proposed pleading three weeks before trial. That could have been the reason why the respondents did not amend their reply. It is accepted that mitigation was not mentioned in counsel's opening submissions before the judge, but from the passage in her judgment, which I have read, it seems likely that it was mentioned by counsel in his closing submissions. That cannot be verified as nobody concerned with the case has an appropriate note nor can they remember what happened. In any case no objection was taken at trial nor after judgment."

26. There was argument as to whether the point was open, whether it was fairly taken, and whether an opportunity was missed to investigate. Aldous LJ said:

"I believe that the [respondents] were partly to blame for the failure of the appellants to plead the mitigation. In any case I am not convinced that the respondents have suffered any material difficulty in dealing with the issue. I would therefore reject this ground of appeal."

27. In the present case, as I have indicated in my recital of the pleadings, there was no mention at all of mitigation. Mr Bogle said that there were matters in the counterclaim which could have been relevant to a claim that the damages should be mitigated, and that is a fair point. However, it is perfectly plain that counsel then appearing for the defendant did not raise a point under section 27(7)(a). That may have been for a number of reasons, possibly because he thought it was a bad point, possibly because it did not occur to him. In the course of the opening of the case, of which we have a transcript, a point was taken about damages, and Mr Dencer had the opportunity of pointing out towards the end of the opening that the Particulars of Claim included a claim for aggravated and exemplary damages. He pointed out that neither of those is legitimate in the case of section 27 because, as he says, section 27 damages are exemplary; to which the judge said that they are meant to be punitive. Then there is this passage:

"You cannot get aggravated damages. Aggravated damages are affront to the tenant's dignity when he is evicted. Of course in this case Mr Kalas was residing in Wormwood Scrubs or whatever prison. He was not actually there at the time of the eviction. So I do not think either of those would be controversial so that if Mr Kalas wins he gets section 27 value of £49,500 and a matter to which my friend is just coming, just over £3,200 for loss of possessions but that appears to be all the law."

28. Shortly before that, when he got up to assist the judge, he referred to a skeleton which we have not seen, and he made a point that the landlord could contend that the tenant has in fact ceased to reside and sections 27 and 28 do not bite at all and he then referred in terms to the defence under section 27(8) that although the defendant has not ceased to reside, the landlord believes and on reasonable grounds that he has done so, so he raised in terms the 27(8) point. He did not raise in terms the 27(7) point and, as I say, he gave the judge to understand that there was no issue as to quantum. Damages under section 27 were agreed at £49,500 and damages for possessions were agreed at £3,200 or thereabouts, and so it was a question of liability, including the defence under section 27(8), and nothing else.
29. Mr Bogle submitted that the points taken in the pleading and the counterclaim were relevant to a mitigation case under section 27(7) and that some of them, at any rate, were proved in the evidence such as the breaking-down of the door by the police and the use of the premises to contain and to store stolen goods. Other matters were not, so far as we can see, but the essential point is that the point was not taken at trial, it was not taken in defence, it was not taken in counterclaim. It was not even alluded to in any fashion in the defence or counterclaim. Although we have not seen Mr Dencer's skeleton I think we can proceed on the basis that it was not in the skeleton. It was not mentioned by counsel to the judge. It was not on the agenda, so that in preparing for the trial Mr Kalas and his team would have had no reasons to suppose that this was a point they had to meet. In those circumstances it seems to me impossible to contend that the judge was in error in not referring to it.
30. Regalgrand shows that if the point is raised at trial, with the opportunity for the person claiming damages to meet the point, then it may not matter that it was not pleaded. That gets Mr Bogle one step off the ground, but even though matters which could have been relevant to it were pleaded at the counterclaim, since the point itself was not taken in the defence or counterclaim or in correspondence or at the trial, or anywhere at any time before the appeal, it seems to me that this ground of appeal, which contends that the judge was wrong not to mitigate damages, is simply unsustainable.
31. That leaves one remaining point, which is that Mr Bogle complained of the award of indemnity costs and submits that that could only be justified if there has been misconduct in the litigation and that the award of indemnity costs is not a justifiable sanction in relation simply to a judge disapproving of the relevant party's conduct generally. The judge dealt with this in the course of argument after he gave judgment, and he said this, which is at page 28 of the transcript:

"Well I shall award costs on an indemnity basis. My reason for doing so is that I consider here that the defendant took a calculated risk. He took the view that either he could go by the formal route and seek a possession or he can go about the illegal route and he did so deliberately and if he takes that course he must run the consequences of it. There is no reason why someone to protect his position should have to subsidise his own litigation."

32. That is in the context where he had disbelieved the defendant's evidence that he honestly believed the claimant to have abandoned the premises. It seems to me in those circumstances there was ample justification for the judge to award indemnity costs.
33. For those several reasons I would dismiss this appeal.

Lord Justice Stanley Burnton:

34. I entirely agree.

Lord Justice Jacob:

35. I also agree

Order: Application granted