England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM LAMBETH COUNTY COURT
HIS HONOUR JUDGE GIBSON
6LB40291/7LB00565

		Royal Courts of Justice Strand, London, WC2A 2LL
		01/12/2011

LORD JUSTICE CARNWATH :

Introduction

1. This is an appeal against the judgment of HH Judge Gibson in the Lambeth County Court, dismissing Mr Francis' claim for breach of statutory duty under the Right to Buy legislation.
2. Mr Francis had a secure tenancy of 159 Wooddene, a property within the Acorn Estate in the London Borough of Southwark, from 28 June 1992. The property was owned by the Council. He had a history of rent arrears, which led to various claims for possession during the life of the tenancy, but he was able to avoid eviction by reducing or clearing the arrears.
3. On 26 March 2003, he submitted a Right to Buy ("RTB") application for 159 Wooddene under section 118 of the Housing Act 1985 ("HA85"). At that time his maximum discount would have been £38,000. This application was rejected on 17 September 2003 by the Council, the notice stating simply "you have breached the terms of a possession order".
4. On the same date (26 March 2003) he also applied in existing possession proceedings for the revival of his secure tenancy, and for an order that he had been a secure tenant from 1 September 1999 onwards. The timing of these applications, as the judge suggested (para 20), may have been connected to the fact that from 27^th March 2003, the maximum discount was reduced to £16,000 by the Housing (Right to Buy) (Limits on Discount) (Amendment) Order 2003. On 23 March 2004 DJ Wilding found against him, but granted permission to appeal.
5. On 8 July 2004 he was granted an introductory tenancy of a property at 71 Winchester Close, as his block of flats which included 159 Wooddene was to be demolished. That tenancy commenced on 19 July 2004. On 15^th October 2004 he made an application for the RTB 71 Winchester Close which was accepted by notice dated 13^th December 2004, but he never proceeded to completion.
6. On 20 June 2005, HHJ Behar, sitting in the Lambeth County Court, allowed the appeal against the decision of DJ Wilding, declaring that Mr Francis had been a secure tenant of 159 Wooddene from April 2000 to 19 July 2004.
7. Mounting rent arrears on 71 Winchester Close led to possession proceedings against him on 14 February 2006. He counterclaimed for damages for breach of statutory duty for the previous failure by the council to grant the Appellant the RTB 159 Wooddene (which, by the time of the claim, had been demolished).
8. The authority's claim for possession and Mr Francis' claim for damages were heard by Judge Gibson in the Lambeth County Court. He recorded that, by agreement, judgment had been entered for £13,448.69 for arrears of rent at 71 Winchester Close, against which were set-off £3,000 damages for disrepair of 159 Wooddene. The issue for him was whether Mr Francis had a substantial damages claim in respect of the refusal of the RTB application for 159 Wooddene. On 12^th January 2010 he gave judgment deciding that issue in favour of the Council and he also made a possession order. He refused permission to appeal. Possession of 71 Winchester Close has been stayed, pending the outcome of this appeal.
9. Mr Francis' application to this court for permission was dismissed by Patten LJ on 17 September 2010. On 9^th May 2011, shortly before the date for the oral renewal before me, an opinion of Jan Luba QC was submitted to the court giving a new legal basis for supporting the damages claim. On 25^th May 2011, I indicated that there were arguable grounds of appeal, but raised the question whether the appeal was justified in financial terms, having regard to Judge Gibson's observations as to the likely amount of any damages award. I adjourned the application to enable to amended grounds of appeal to be submitted and for submissions on this point. Following submission of revised grounds on 21^st June 2011 I granted permission.

The statute

10. The right to buy (RTB) is conferred on a "secure tenant" by HA85 s. 118(1):

"118 The Right to Buy

(1) A secure tenant has the right to buy, that is to say, in the circumstances and subject to the conditions and exceptions stated in the following provisions of this Part -

(a) …

(b) if the landlord does not own the freehold, or if the dwelling-house is a flat (whether or not the landlord owns the freehold), to be granted a lease of the dwelling-house.

11. The landlord's corresponding obligation to give effect to the tenant's RTB is set out in s 138:

"(1) Where a secure tenant has claimed to exercise the right to buy and that right has been established, then, as soon as all matters relating to the grant . . . have been agreed or determined, the landlord shall make to the tenant—

(a) …

(b) if the landlord does not own the freehold or if the dwelling-house is a flat (whether or not the landlord owns the freehold), a grant of a lease of the dwelling-house,

in accordance with the following provisions of this Part.

…

(3) The duty imposed on the landlord by subsection (1) is enforceable by injunction."

12. The process is initiated by a notice by the tenant pursuant to HA 85, s. 122. On receipt of a tenant's notice, the landlord's duty is set out in HA 85, s. 124:

" 124 Landlord's notice admitting or denying right to buy

(1) Where a notice under s. 122 (…) has been served by the tenant, the landlord shall, unless the notice is withdrawn, serve on the tenant … a written notice either –

(a) admitting his right, or

(b) denying it and stating the reasons why, in the opinion of the landlord, the tenant does not have the right to buy.

13. The next step, if the RTB is established, is for the landlord to give notice of the proposed terms under s 125:

125 Landlord's notice of purchase price and other matters

(1) Where a secure tenant has claimed the right to buy and that right has been established (whether by the landlord's admission or otherwise), the landlord shall

(a) …

(b) within 12 weeks where the right is that mentioned in section 118(1)(b) (right to acquire leasehold interest),

serve on the tenant a notice complying with this section.

By s 125(2), the notice must describe the house and state the price at which "in the opinion of the landlord" the tenant is entitled to acquire the interest. By s 125(4A) the notice "shall contain a description of any structural defect known to the landlord…". Section 129 provides for the calculation of a discount on the purchase price. By HA 85, s. 181 a County Court has jurisdiction to entertain proceedings in respect of questions arising under HA 85:

181 Jurisdiction of county court

(1) A county court has jurisdiction-

(a) to entertain any proceedings brought under this Part, and

(b) to determine any question arising under this Part or under a conveyance or grant executed in pursuant of the right to acquire on rent to mortgage terms

but subject to sections 128, 128B, 155C and 158 (which provide for matters of valuation to be determined by the district valuer)

(2) The jurisdiction conferred by this section includes jurisdiction to entertain proceedings on any such question as is mentioned in subsection (1)(b)"

The proceedings below

14. Mr Francis' pleaded case was for damages for breach of statutory duty, of which particulars were given. The basis of the claim was that he had been deprived of his right to buy the Wooddene premises contrary to s118, and consequently had been deprived of the maximum discount under s 129 Housing Act 1985, and the opportunity to sell the premises at full market value.
15. Judge Gibson held that the claim was unfounded:

i) He rejected the contention that the authority acted unlawfully under section 124 merely because its decision was shown later to have been wrong. The test was one of reasonableness:

"…the statute makes it clear that the authority needs to form an opinion as to the applicant's right and to make a decision on the basis of that opinion. If by the decision it accepts the application then the right is established by the admission. If it does not, then the tenant has recourse to the County Court, which is given jurisdiction by [HA 85] s. 181." (para 12)

ii) At the time of its decision, the council had acted reasonably in treating Mr. Francis as not qualifying for RTB on the basis that he was no longer a secure tenant, even though the contrary was later established by the decision of Judge Behar (para 14)

iii) He rejected the submission that the Act created a remedy in damages for breach of section 118 or 124.

"My conclusion is that with one exception it [i.e. HA 85 Part V] enables a tenant who is ready, able and willing to accept the grant of a long lease, as well as being entitled to it, to achieve his aim, with the consequence of any delay on the landlord's part falling on the landlord and not on him. The exception is where the property is to be demolished, and in that case the tenant is compensated in respect of money which in any event has been wasted, but not in respect of any benefit which he could have gained if the property had not been demolished. I conclude that on balance Part V of the Act provides an applicant with all the remedies which he needs, and I infer that Parliament did not intend that there should be additionally a private law right to recover damages." (para 16)

The appeal

16. The Grounds of appeal, in summary, are that the judge:

i) erred in law by applying the incorrect test for breach of statutory duty;

ii) erred in finding there was no breach of statutory duty even if he did apply the correct test, which is denied;

iii) erred in saying there was no right to bring a private law damages action for such a breach of statutory duty;

iv) erred in concluding that if they had a good claim it would be worth very little.

17. At the opening of the appeal in this court, Mr Collard was pressed to define with precision the nature of the duty which he said had been breached. As I understood his reply there were in effect two relevant duties: (i) under s 118 an implied strict duty to permit Mr Francis to purchase the property if he was entitled to it under the RTB scheme; (ii) under s 124 a strict implied duty to get the answer right as to whether the tenant is or is not entitled under the RTB scheme, or alternatively to exercise reasonable care in reaching an opinion on his eligibility under the scheme.
18. He accepted that there was no direct authority to support the formulation of a duty in those terms, or for the right to damages for breach of it. For the proposition that they had a duty to get the answer right, he relied on an annotation to s 124 in the Encyclopaedia of Housing Law (1-0443):

" "Notwithstanding use of the words "in the (landlord's) opinion" entitlement to buy is a factual question, not dependent…on opinion-making by landlords, and it accordingly seems clear that a wrongful refusal can be challenged…"

19. As to the right to an action for breach of statutory duty, he relied on the classic statement of the principles in X (Minors) v Beds CC [1995] 2 AC 633, where Lord Browne-Wilkinson considered the circumstances in which a claim for damages for breach of statutory duty stands (at pp 730-741). Lord Browne-Wilkinson divided breach of statutory duty claims into four categories, the first of which ("breach of statutory duty simpliciter") arose where on the construction of the statutory provisions the duty was imposed for the protection of a limited class of the public and Parliament intended to confer on that class a private law right of action for breach of the duty.
20. In relation to the Housing Act 1985 Mr. Collard on behalf of the Appellant relied on a series of cases under other provisions in which the possibility of an action for breach of statutory duty had been accepted, or at least not excluded. These included Blake v Barking & Dagenham LBC (1996) 30 HLR 963, Payne v Barnet LBC (1997) 30 HLR 295, Malkin v Birmingham CC (2000) 12 January, CCRTF 98/1628/2 2000 WL 361; Rushton v Worcester CC [2002] HLR 9. He accepts that none is directly on point, since they turn on aspects of the scheme arising later in the RTB process, but they indicate that in principle a financial remedy may be available for breaches of the duties under the Act.
21. Of these, the most helpful to him seems to be Rushton v Worcester City Council where the claim was for damages resulting from the failure of the authority, contrary to section 125(4A), to give notice of a structural defect known to it. The judge found that there had been a breach of this duty and awarded damages for breach of statutory duty. That was upheld by this court, there being no challenge to the availability of such a remedy in principle.
22. In my view, with respect to Mr Collard's tenacious arguments, he is quite unable to establish the necessary foundation for his claim. The contrast with s 125(4A) is instructive. There the council were under an unqualified duty to disclose structural defects known to them. Accepting (without deciding) that there is a remedy in damages for breach of that duty, it does not assist the argument in this case. Section 118, as such, does not impose any duty, express or implied, on the council. It merely states the right of the tenant, which is to be established by the procedures under the Act, leading eventually to a duty to convey under s 138. Section 124(1) does impose a duty but it is qualified: the duty is to state their opinion. That has to be done in a relatively short time. As Peter Smith J said in Hanoman v LB Southwark [2004] EWHC 2039 (Ch):

"17.… The wording of s. 124(1) could not, in my mind be plainer: they shall give a decision which is either in favour of accepting or denying the right to buy. … If the application is such that the information leads them to conclude that there is a doubt as to the authenticity of the application, there is therefore sufficient material in their minds, for them to deny the right to buy."

In other words, they are entitled at that stage to "err on the side of caution" (para 57). The remedy for the tenant is provided by section 181, that is a claim in the county court for a declaration as to his rights.

23. In my view there is nothing in either of these sections to suggest that Parliament intended to create a remedy in damages. Mr Collard says that, on the facts of this case, the s181 remedy did not help him, because by the time he had established his right, the property had been demolished. (Later the Act was amended to create a right in such circumstances to repayment of abortive expenses: s 138C). However, the mere fact that, in some circumstances the remedy created by the Act is not complete, is not a justification for reading into it words which are not there. Mr Collard was unable to point to any authority which supports such an approach.
24. For these reasons, in my view, the judge was right to reject the claim. I would dismiss the appeal.

LORD JUSTICE LLOYD :

25. I agree that the appeal fails for the reasons given by Carnwath LJ.
26. Mr Francis' case in the county court was that Southwark was in breach of a statutory duty owed to him simply by virtue of the fact that it was wrong in not admitting that he was entitled to exercise a RTB in relation to 159 Wooddene. There was no allegation of lack of reasonable care. The case advanced on his behalf in this court was, primarily, that section 118 imposed on the landlord an absolute and strict duty to give effect to the tenant's RTB if he was entitled to it. Alternatively (though not so formulated in his pleading) the duty was said to arise under section 124 when responding to the tenant's notice, again as a strict liability duty, and alternatively as a duty to exercise reasonable care.
27. The proposition that section 118 itself gives rise to any duty on the landlord seems to me to be unarguable, for all that Mr Collard bravely sought to argue it. The position is made all the more clear by section 138, which is the section which imposes on the landlord a duty to give effect to a RTB if established and subject to all the various relevant provisions of that Part of the Act, including the other provisions of section 138 itself. It is to be noted that section 138(3) provides the sanction by which the obligation is to be enforced. There are also other express statutory remedies, such as for delay on the part of the landlord in certain cases, under section 153A. The case based on section 118 cannot succeed, given that section 138 does impose a duty on the landlord, and provides its own remedy.
28. The same can be said of a case based on section 124, in relation to which, moreover, it is highly relevant that, when responding within the specified 28 days to a tenant's notice, the landlord owes a duty, as custodian of its assets, not to agree to dispose of its property when it need not do so, and not at less than the market value unless it has to do so. Those duties are incompatible with the asserted duties owed to the tenant. I agree that the words of Peter Smith J quoted by Carnwath LJ at paragraph 22 above are very much in point. His judgment in the case mentioned shows that the landlord's position in responding to a tenant's notice is analogous to that of a landlord responding to applications by a tenant under other legislation, such as an application for a new tenancy of business premises under Part II of the Landlord and Tenant Act 1954, or a request to enfranchise a long lease, or for an extended lease, under the Leasehold Reform, Housing and Urban Development Act 1993.
29. If the landlord admits the claim, all well and good and the issue will then be as to valuation and terms. If the landlord does not admit the claim, then it is up to the tenant to prove that he is entitled to the right asserted. That is made clear by the terms of section 125(1) referring to the tenant's right having been established "whether by the landlord's admission or otherwise". Unless the right is admitted, the tenant may have to bring proceedings in the county court under section 181 to prove that he is entitled to the RTB. The landlord's service of a notice refusing to admit the tenant's right does not affect the tenant's rights as such in any way; it merely requires the tenant to prove that he has the right asserted. For that reason, the service of such a notice cannot be seen as causing the tenant any loss, and nor can the landlord properly be regarded as owing the tenant any duty when deciding whether or not to admit the right claimed.
30. In saying this, I do not disagree with the point made in the notes to the Encyclopaedia of Housing Law, quoted by Carnwath LJ at paragraph 19 above. The landlord's opinion is not conclusive. Whether the tenant is entitled to the right claimed is a matter of fact and law. The landlord's denial can be challenged, but it is to be challenged by proceedings for a declaration as to his entitlement, under section 181, not by an action for damages for breach of some supposed privately actionable statutory duty, nor, for that matter, by public law proceedings of any kind.

LORD JUSTICE TOULSON :

31. I agree with both judgments.