England and Wales High Court (Administrative Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT

		Sitting at: Manchester Civil Justice Centre 1 Bridge Street West Manchester M3 3FX
		27th April 2009

Mr Justice Langstaff:

1. This is an appeal against a decision of the Lancashire Valuation Tribunal reached on 11 June 2008. By that decision, the Valuation Tribunal ("the Tribunal") determined that Mr Watts, the owner and landlord of 19 Jemmett Street in Preston, was responsible for the council tax on it. He submits that the Tribunal made an error of law in reaching this determination.
2. Liability to council tax in respect of premises is imposed by the Local Government Finance Act 1992, under section 8. That section refers, by subsection (6), to regulations which prescribe a class of chargeable dwellings, in respect of which council tax will be paid not by the occupant of the dwelling but by somebody else; in this case, the suggestion is that the house is one in multiple occupation, and that the landlord is then responsible for the council tax and not those who are in multiple occupation of it.
3. The regulations made which prescribe the provisions to which section 8 refers were originally set out in the Council Tax (Liability for Owners) Regulations 1992, SI 1992/551, and subsequently amended by the Council Tax (Liability for Owners and Additional Provisions for Discount Disregards) (Amendment) Regulations 1995, SI 1995/620. It creates classes of dwellings. The wording in respect of Class C is now this, in its relevant respects:

"A dwelling which

a) was originally constructed or subsequently adapted for occupation by persons who do not constitute a single household; and

b) is inhabited by a person who, or by two or more persons each of whom either, -

i) is a tenant of, or has a licence to occupy, part only of the dwelling; or

ii) has a licence to occupy, but is not liable (whether alone or jointly with other persons) to pay rent or a licence fee in respect of, the dwelling as a whole."

4. Although Mr Watts, who appears in person to pursue this appeal, tells me that he had anticipated, from documentation prior to the Valuation Tribunal sitting, that the point at issue would be under (a), it being said that 19 Jemmett Street had been adapted for multiple occupation because of the presence of locks on bedroom doors, thereby locking off each bedroom as a separate unit from the whole. In fact, at the Tribunal, Preston Council changed tack. Now, it argued that the case was one to which Class C (b)(ii) applied.
5. In its decision the Tribunal set out the facts, but at page 4 gave its decision in these words:

"The task before the Tribunal was to determine whether 19 Jemmett Street, Preston should be classed as an HMO with effect from 9 September 2007… [that date was the date given on a written tenancy agreement as the starting date of the tenancy].

The Tribunal was impressed with the extensive research undertaken by Mr Watts to support his case, but after considering all the evidence presented, it was decided that the Billing Authority had correctly designated the property as an HMO.

The Tribunal believe that the property qualified as a HMO under part 2 Class C(b)(ii) of [the Regulations"

Then this follows:

"The Tribunal did not believe that the tenants were liable to pay the rent for the dwelling as a whole, and this was supported by Mr Watts' statement that one of the tenants left, but he was still paying his share of the rent. The property therefore qualified as a HMO, as the remaining tenants were not liable to pay the rent as a whole; if the tenants were liable to pay the rent for the dwelling as a whole, then if a tenant left, the remaining tenants would become liable for that share also."

6. The Tribunal dealt in the next two and concluding effective paragraphs with Mr Watts' case that he had let the property on a joint tenancy. It records that he presented a copy of the tenancy agreement to the Tribunal and appeared, in the words which follow, as I read them, to accept that the tenancy agreement was one genuinely entered into, which, at the time it was entered into, was intended by Mr Watts and by those who entered into it as tenants to provide, and was understood as providing, that they would together be jointly responsible for the rent. The Tribunal went on to comment:

"If all of the tenants had remained as students, then liability for the tax would not have arisen, as an exemption would have been awarded [that refers to an exemption to council tax, student occupants being exempt from the imposition of such a charge]. However, when two of the tenants ceased to be students, the exemption was no longer applicable."

Then this:

"Although Mr Watts had created a joint tenancy agreement, each tenant was only liable for their own share of the rent; collectively, they were all liable to pay the rent, but they were not jointly and severally liable for the rent as a whole."

On that basis, the Tribunal accepted the Billing Authority's decision.

7. The decision is said to be wrong in law for these reasons. First, it is said that a joint tenancy agreement, which the Tribunal accepted had been created, must inevitably, as any such description implies, involve liability of each tenant for the whole of that which is occupied jointly; it cannot do otherwise. The point was made clear beyond doubt, if it were possible to put it in doubt, by the very terms of the written tenancy agreement itself. That was before the Tribunal. It is dated 27 June 2007. It is signed by each of the four students who were to take occupation on 9 September. Under section 3 at paragraph 3, it is said in terms:

"The tenants are jointly and severally liable under this agreement. This means if any money is owing due to any provision or breach of this contract, the landlord has the right to recover the full amount outstanding from each or all of the tenants."

8. Nothing could be clearer. As it happens, the information before the Billing Authority was that that was exactly what the students understood: see at page 30, when a student seeking the payment of housing benefit was asked "Are you liable for paying the rent on the whole property?" and answered "Yes." It is argued, therefore, that, having recognised a genuine joint tenancy agreement, the Tribunal would be bound to conclude that liability for the payment of a licensee for rent would follow from the terms of the agreement itself; that is the purpose of such an agreement. The focus has to be on liability for rent, not necessarily upon the precise factual arrangement by which that liability is discharged.
9. For the Billing Authority, Preston City Council, Mr Kasivali (?) referred me to a principle, which he said was to be derived from The UHU Property Trust v Lincoln City Council. That was a case which came before Sullivan J in 2000, otherwise unreported, CO/134/1999. It was an unusual case. That fact was recognised by Sullivan J when he refused permission to appeal (see the concluding words of the transcript). He indicated that the case turned very much on its own facts, and it is plain to me that it did. Nonetheless Mr Kasivali says that the principle of law which is to be derived from that case is that a Valuation Tribunal is entitled to have regard to the whole of the factual matrix underlying the entry into an agreement. He takes me, at page 28 in the bundle before me, to what may well be the 32^nd paragraph in an otherwise unnumbered transcript. Unhelpfully, because of the copying software which was available to Mr Kasivali, the paragraphs are not numbered except by the same number, 50, throughout. But at what appears to be the 32^nd paragraph beginning "At the end of the day", Mr Jeffries (?) set out the principle which he says is to be derived: the Tribunal was not limited to looking at a written agreement where there was one, and could conclude, as a matter of fact, that the liabilities set out by such an agreement were not necessarily the true extent of the liabilities of those who occupy the property. The true liability in that case, notwithstanding the terms of such an agreement, was to pay rent for their rooms (that is, their individual rooms) and not for the property as a whole.
10. Mr Kasivali supports this by suggesting that a written agreement may not contain the whole of the terms of the relationship between parties so far as liability to rent is concerned, and it may be that in practice those terms are varied by agreement, whether formally or informally reached between the parties, so that one can, summarising his argument, in effect tell what the true agreement is by what the parties do. An agreement may evolve from one in which the liabilities are clearly set out in a written agreement to one in which they may be dependent upon circumstances that arise thereafter. Thus in the present case, when the agreement was reached, all four intended occupants were then students. By the time liability for council tax came to be determined, two were not. At the start, rent was taken on a three-monthly basis, coinciding with the receipt of student grants. The fact that two failed their exams and were no longer in receipt of student grants meant that the arrangements as to the payment of rent by each changed. This gives a sufficient difference in fact from one situation to another as to suggest that, whatever the original written agreement may have been, it had in fact been varied or altered in practice.
11. Mr Kasivali points to certain matters which were in evidence before the Tribunal, in paragraph 23 of his skeleton argument, as providing a basis by which a Tribunal could, if it was so minded, conclude that the written agreement did not in fact represent the true liabilities as between the parties. Thus he argues that the information provided by the applicant for housing benefit, a man called Scott Tyrrell, who was one of the original students but who was no longer a student, confirmed that he shared facilities within the property and paid £55 a week; that would represent his commensurate share of the total rental paid by the four. Second, that there had been a weekly retainer fee of £15; this was apparently paid in advance of occupation as students, pending occupation and pending indeed the start date of the tenancy agreement. Third, that the tenants had come to pay rent separately, the ex-students paying on a monthly basis, whereas the two students paid their share as envisaged by the tenancy agreement originally. And fourth, when one of the tenants had left, the tenant himself still went on paying his share of the rent rather than have his rent covered in payment by the remaining tenants.

Discussion

12. In my view, where the parties set out liability for rental payment in a written agreement which is not a sham, it would be an exceptional case that those liabilities should not be the liabilities recognised by a Tribunal. That there may be such exceptional circumstances is demonstrated by the facts of the UHU case. The UHU case, however, was, as Sullivan J accepted, truly an exceptional one. It appears from the extempore judgment which he delivered that there were conflicting documents signed by the landlords and tenants. There was said to be a tenancy agreement never in fact shown to the tribunal in that case, which imposed a liability on a joint basis, but there were forms returned to the council separately by the landlord and by the tenant dealing with the rental payment for which each was liable. The landlord's form identified a particular individual as renting a particular room, and not the whole of the property. It identified the individual as paying a rent which was a quarter of the total rent. When an individual left, as many did, because the tenants there were not students but were homeless, needy people, usually unemployed, who represented a fluctuating population within the property, no attempt was made to recover rent either from him or from the remaining occupants. Each occupant was simply, in practice, responsible for his own share of the rent.
13. The Tribunal read the documentation as showing the rents were charged on an individual basis in respect of each tenant, as opposed to in respect of the property as a whole. Although Sullivan J does not express it this way, it does appear that the documentary material signed by both parties and relating to the property was conflicting. Where there is a conflict of documentary evidence setting out the right and responsibilities of the parties, it might be expected that regard would be had to what is happening as demonstrating which of the documents represents the true position.
14. Next, it is plain that there could have been no expectation at the outset that any of those tenants in that case would have been in any position to be responsible for the payment of the whole on a joint basis. That is because each was a needy, homeless, unemployed person, whose sole source of income so far as occupation was concerned was housing benefit. It is this which, I understand, is referred to in paragraph 34 (assuming it is that paragraph) as representing the background factual matrix. It is well understood that the true wording or intention of a document may, in part, be elucidated by reference to the background factual matrix at the time that it was made. It is also well-established that an agreement, once made, cannot change its meaning as between the parties in the light of subsequent events. It may be varied; gaps within it may be filled in by practice; but it is trite law that such a document, once entered into, means on Day 1 what it means on Day 100 or, for that matter, five years later. It could not be otherwise. But the point I take Sullivan J to have been making here was that at the outset there could have been no actual intention that the tenants would be responsible for the whole of the rent of the premises. Given the circumstances, there is much to be said for that view.
15. None of that, however, applies to the present case. Here, the tenants were intending students. They were, on the face of it, not necessarily incapable of paying the whole of the rent for the property. The UHU case does not, as it seems to me, help in a situation in which there is a written agreement purporting to set out the whole of the liabilities between the parties, at a time when there is no reason to suspect the contractual intention was any different from that which is set out in that document. Moreover, there was no evidence here of any different understanding as between the tenants, under that agreement, and Mr Watts, as to liability for the rent; see that passage at page 30, to which Scott Tyrrell as tenant gave his signature. It is thus a very different case, as it seems to me, from the UHU case.
16. The Tribunal give one reason, and one reason only, in the section of its decision entitled "Decision and Reasons". That reason, as Mr Watts points out, bases its decision that tenants were liable only for their own aliquot part of the rent and not for the entirety, contrary to the tenancy agreement and the documented understanding, on the fact that one had left the property and still paid his share of the rent. Mr Kasivali fell shy, as it seemed to me, in his submissions of saying this was conclusive evidence to the contrary of the written tenancy agreement. It was not necessarily inconsistent with the tenancy agreement. His argument was rather that there were a number of indications, none of which was conclusive as such, those being referred to in his paragraph 23, by which the Tribunal could, as a matter of fact, have been entitled to come to the conclusion they did.
17. The difficulty, as it seems, with this argument is that the Tribunal in fact focussed upon this one fact, which seems to me entirely equivocal. I bear in mind that tribunal decisions are not to be read as though they were statutes; they are not to be read as though they are speeches of members of the House of Lords and carefully crafted legal documents. The Tribunal had earlier set out a number of facts. But it is, nonetheless, at the end of the day difficult for me to see what basis, other than that which is stated at the last page, page 5, of its decision, the Tribunal selected as the basis for contradicting the tenancy agreement in writing.

Conclusions

18. The issue under Class C (b) (ii) is a legal one. Is the tenant liable to pay a rent or licence fee in respect of the dwelling as a whole? Where there is a joint tenancy agreement which is not a sham, and which is entered into on a basis of fact which demonstrates that it was, or was probably, entered into as a genuine agreement at the time, the terms of it will regulate the liability as between tenant and landlord for the payment of rent. They will cease to do so if the Tribunal is in a position to determine that those provisions have been varied. Variation requires the agreement of the parties. It is not simply to be inferred by practices which are not necessarily inconsistent with the terms of the agreement. It is not, for instance, necessarily inconsistent with the terms of the agreement that the tenants who had ceased to be students, in the present case, should pay rent monthly, because it does not of itself lead to a finding that they thereby were being relieved of responsibility for payment of the whole rent on the whole property to the landlord for the period of the tenancy agreement.
19. Similarly, I cannot understand the leaving of the property but continued payment on his part, as it were, of the rent by one of the students as determining the issue of liability. As Mr Watts pointed out in his skeleton argument, if an issue had arisen as to whether he had been paid the full amount of the rent by the students and ex-students, they would have had no proper defence in court to any claim, given the circumstances of this case. Although to an extent that may beg the question, it seems to me to indicate the answer here to which the Tribunal could have, but did not, come; namely, that here the liability was that of the tenants and not of Mr Watts.
20. It is not open to a tribunal, as a matter of law, to reach a conclusion upon a belief, which is expressed as such, without setting out the grounds for that belief, so that an appellate court, such as this court of review, can see whether or not it has taken into account any considerations which it should not have done or left out of account considerations it should have borne in mind. Here, if the proper approach is, as I have indicated, that the court, faced with one written agreement, apparently endorsed by the landlord and tenants, had no material evidence from which it could conclude that the agreement had been varied or had ceased to be the effective agreement between the parties, as to which there was nothing to support that view, they would be bound, it would seem to me, to have come to a conclusion different from that which they did.
21. The approach the Tribunal took was, in my view, in error. It may have owed much to being seduced by regard to the UHU case, which does need to be understood as relating to its particular circumstances. If guidance is needed for councils applying these provisions in other cases, then in my view they would be wise to regard the UHU case as arising most usefully in those cases in which property is let for occupation by those whose only source of income is housing benefit where often the landlord can have no expectation at the outset that they would ever be able to pay for more than the limited amount which the housing benefit gives, and for those cases in which the tenant is specifically allocated to a specific room. Neither of those features were present in this instant appeal.
22. It follows that, the Tribunal being in error of law, I have to quash the decision which is reached. Mr Kasivali invites me, if I am of that mind, to remit the case to the Tribunal for it to reach a determination upon whether the building was constructed or adapted for use as a house in multiple occupation under Class C(a). Mr Watts argues that the council nailed their colours to the mast in choosing to argue C(b)(ii), against a background in which they had initially suggested they would rely upon (a) and did not fully do so. He accepts, however, that evidence as to the existence of locks was given; he accepts that the argument was raised; he accepts that he responded; and he accepts that the Tribunal reached no decision either upon the material facts or as to a conclusion upon it.
23. In those circumstances, it seems to me that the Tribunal has reached no decision upon a matter which was in issue between the parties and which might be decisive of the issues. It should, therefore, be remitted. I would, however, say this. Mr Watts, rightly in my view, draws attention to the fact that, although the wording "constructed or subsequently adapted for occupation by persons who do not constitute a single household" suggests that the focus must be not upon the state of the premises and not upon the intention of the landlord in letting them, underlying these provisions is a distinction between those houses which are genuinely in shared occupation by those who have a link between them so as to constitute a single household, as contrasted with those who have no real link between them, as for instance in the example of the UHU case, effectively a hostel for the homeless. He points to the helpful observations in the case of Rogers v Islington (2000) 32 HLR 138, which came before the Court of Appeal on 30 July 1999. In that case, Nourse LJ in his judgment reviewed the different approaches that there had been in the past to determination of the question when a property was or was not in occupation by a single household. He said of the example of students living together that, where they join together:

"to occupy a house or flat for the period of an academic year, they would usually form a single household, notwithstanding that they may not all have known each other beforehand, and they may pay rent individually for their occupation. Their reason for living together may be taken to be a sharing of the comradeship, no less than the expenses, of university life. There is from the start a sufficient relationship between them for them to form a single household."

Mr Kasivali's response to this is that that may be so at the outset, but where two cease to be students it may no longer be the case.

24. It is not for me to resolve those issues, save to say that it does seem to me that the judgment of Nourse LJ provides at least strong indicative support for Mr Watts' position here, which a tribunal may wish to bear in mind in determining whether truly this property was or was not constructed or adapted for multiple occupation. It may well be that, having reflected upon these observations, and those which I have made during the course of the hearing to Mr Kasivali, the Council determines not to pursue the remission; but that must be, as it seems to me, a matter for them.
25. The formal order which I make is thus as follows. This appeal will be allowed. The decision made under C(b)(ii) is set aside. The issue under C(a) is remitted for final determination by, I will simply say, the Lancashire Valuation Tribunal.

(Discussion on costs)

26. I order for costs by summary assessment. There is no schedule of costs, which you are entitled to insist upon, Mr Kasivali, but I imagine that there is unlikely to be any dispute as to the amount in the event. I will say this: costs are £200; liberty to restore on 14 days' notice on the question of costs if any issue arises. So that leaves it to you to sort it out. What it means is, Mr Watts, if you discover it is not £200 or something different, the Council has said they will be reasonable, but just in case you do not think they are being reasonable, you have the right to come back to court and argue about the costs further. I do not encourage it, but it is there as a safety measure.

Order: Appeal allowed. Claimant's costs in the sum of £200 to be paid by the Defendant, liberty to restore on 14 days's notice if any further issue arises as to costs.