England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ON APPEAL FROM
CLERKENWELL & SHOREDITCH COUNTY COURT
SITTING AT THE MAYOR'S AND CITY OF LONDON COUNTY COURT
HHJ MARR-JOHNSON
CLAIM NO 5CK10768

		Royal Courts of Justice Strand, London, WC2A 2LL
		25/05/2007

Mr Justice Nelson :

1. This appeal against the decision of His Honour Judge Marr-Johnson of 28^th April 2006 raises an interesting question under the Housing Act 1985 which has not yet been directly determined by the Court of Appeal. The issue which arises is whether the determination of a secure tenancy by the granting of a possession order, brings to an end an existing application which has established the right to buy at a particular time and at a particular price, or whether such an application is capable of being revived once the tenancy itself has been revived. If the existing application cannot be revived, but a new one must be made, there may be a significant effect upon the discounted purchase price of the house in a rising or falling housing market.

The Facts.

2. On 2 July 1990 Mrs Honeygan-Green became a secure tenant of 73B Crouch Hill, London N4. She made an application to buy the property in 1996 which was accepted by the Council but as the application was not completed in time by the tenant it was deemed to have been withdrawn. She made a fresh application which was received by the Council on 23 May 2000 and admitted under section 124 of the Act on 26 October 2000. The property was valued at £175,000, with a discount of £38,000 pursuant to section 125 of the Act, making the purchase price for a 125 year lease of the property £137,000.
3. Mrs Honeygan-Green had been late in paying her rent on the property on several occasions during the tenancy. It is said on her behalf that this was at least in part due to the failure of the Council to administer housing benefit properly. Possession proceedings were taken against her in 1996, and in 1998 when a suspended possession order was obtained. There were breaches of that order in 1999 as a result of which eviction was set for April 2000 but that was suspended and eventually cancelled in November 2001 when Mrs Honeygan-Green cleared the arrears.
4. A notice seeking possession was served in January 2002 and again on 10 May 2002. The latter notice sought possession because of rent arrears of £1,887.66p and possession proceedings were issued on 14 July 2002.
5. In the meantime completion in respect of the admitted application to buy was delayed apparently because of two reasons, firstly because the tenants on the ground floor of the property had encroached on part of Mrs Honeygan-Green's garden which necessitated repositioning of the fence by the neighbours and an accurately drawn plan by the Council for the execution of the lease, and secondly because of the collapse of a wall in the back garden which the Council needed to repair. As a consequence of these delays Mrs Honeygan-Green served an initial notice of delay upon the Council (RTB 6 under section 153A of the Act) on 24 June 2002 and an operative notice of delay (RTB 8 under section 153A of the Act) on 26 July 2002. The RTB 6 referred to the need to have a new drawing of the back garden. The landlord did not serve any counter notice alleging that there was no action for the landlord to take under section 153A(3). It did however write to the owners of the ground floor of the property on 25 February 2003 requesting them to move the fence.
6. After the possession proceedings were issued in July 2002 Mrs Honeygan-Green sought to pay off the arrears. She had discussions with Miss Tina Annor, the Council's housing officer and by 3 October 2002 she had reduced her arrears to £482. There was due to be a hearing the following day in the county court in respect of the possession proceedings but as Mrs Honeygan-Green had paid £1,100 into her rent account she said that Miss Annor agreed that the Council would ask for the possession proceedings to be heard on 4 October to be adjourned. The Council do not accept that to be the case and that issue remains to be resolved.
7. The Council did in fact attend at Clerkenwell County Court on the following day, 4 October 2002 and obtained an order that the Defendant give the Council possession of the property on or before 1 November 2002, pay £482.45 rent arrears, and costs of £120, the order not to be enforced so long as Mrs Honeygan-Green paid the rent arrears and the amount of £50 per week for use and occupation in addition to the current rent. The next payment of current rent was due on 7 October 2002 and the first payment of £50 on 18 October 2002. Upon payment of the arrears in full the claim was to stand dismissed. This suspended order for possession was in standard County Court Form N28.
8. Mrs Honeygan-Green failed to pay her rent on 7 October 2002 and failed to pay the first sum of £50 on 18 October 2002, the next payment being made by her on 5 November 2002.
9. By letter dated 26 March 2003 the Council wrote to Mrs Honeygan-Green's solicitors stating that their client's breach of the suspended possession order meant that she had forfeited her secure tenancy, become a tolerated trespasser, and in the circumstances was no longer able to exercise the right to buy. On 23 July 2003 the Council wrote to Mrs Honeygan-Green stating that her application had been treated as withdrawn by the Council's legal department.
10. Mrs Honeygan-Green issued an application to set aside the order of 4 October 2002 on 8 May 2003. This was eventually heard on 8 July 2003 by which time Mrs Honeygan-Green had paid off all her arrears. The possession order was discharged.
11. Mrs Honeygan-Green fell into arrears again with her rent and in February 2005 the Council commenced proceedings against her for possession. In her defence and counterclaim Mrs Honeygan-Green alleged that the Council was in breach of its contractual duties and guilty of negligence by failing to remove the collapsed wall and failing to ensure that her neighbour removed the fence which wrongly encroached upon her land. In her counterclaim she asserted that the collapse of the wall and the encroachment by the neighbours caused the delay of the 2000 application of the right to buy. She counterclaimed a mandatory injunction ordering the Claimant to convey the long lease of her property to her in accordance with the 2000 application and relied, inter alia, upon a letter of 2 August 2005 in which the Claimant accepted that the Defendant was entitled to exercise her right to buy in accordance with the 2000 application. She also counterclaimed damages.
12. Mrs Honeygan-Green applied for summary judgment on her counterclaim and this was heard on 28 April 2006 at Clerkenwell County Court by His Honour Judge Marr-Johnson. The Judge granted Mrs Honeygan-Green her injunction upon the discharge by her of all arrears of rent. It is that decision which forms the subject matter of this appeal. Problems arose in the drawing up of the order and further orders of the County Court but a secondary appeal relating to those matters has already been dealt with and I am solely concerned with the appeal against the granting of the injunction.

The statutory framework.

13. The right to buy is a creature of statute. That right is currently given to secure tenants such as Mrs Honeygan-Green under section 118 of the Act. There are exceptions to the right to buy, where for example the landlord is a certain type of housing association, none of which apply here. The main area of dispute between the parties as to statutory interpretation arises out of sections 121 and 138 though it is necessary to consider various other sections together with the consequences of the termination of a secure tenancy and its revival.
14. Section 121 sets out the circumstances in which the right to buy cannot be exercised. It states as follows:-

"(1) The right to buy cannot be exercised if the tenant is obliged to give up possession of the dwelling house in pursuance of an order of the court or will be so obliged at a date specified in the order.

(2) The right to buy cannot be exercised if the person, or one of the persons, to whom the right to buy belongs –

(a) has a bankruptcy petition pending against him

(b) …

(c) is an undischarged bankrupt, or

(d) has made a composition or arrangement with his creditors the terms of which remain to be fulfilled.

(3) The right to buy cannot be exercised at any time during the suspension period under an order made under section 121A in respect of the secure tenancy."

15. Section 121A which was inserted by the Housing Act 2004 enables a court to make a suspension order in respect of a tenancy where the tenant has engaged or threatened to engage in anti-social behaviour or the use of the premises for unlawful purposes. Under section 121A(5) where a suspension order is made:-

"(a) Any existing claim to exercise the right to buy in relation to the dwelling houses ceases to be effective as from the beginning of the suspension period, and

(b) Section 138(1) shall not apply to the landlord, in connection with such a claim, at any time after the beginning of that period.."

16. The claim to exercise the right to buy is made by a written notice under section 122. Such a notice may be withdrawn by notice in writing. Once a notice under section 122 has been served by the tenant the landlord must serve a written notice either admitting or denying the right. Here, the Council admitted Mrs Honeygan-Green's right to buy by a section 124 notice dated 26 October 2000.
17. Where, as here, the right to buy has been established by the landlord's admission, the landlord must, under section 125, serve a notice stating the price at which the lease may be granted to the tenant giving the value at the relevant time and the discount to which the tenant is entitled. The Council served a section 125 notice here specifying the value as at 23 May 2000 at £175,000 and the discount at £38,000. Where such a notice under section 125 has been served the tenant must serve a notice under section 125D stating whether he intends to pursue his claim to exercise the right to buy or whether he withdraws that claim. Under section 125E the landlord may serve a notice on a tenant who fails to serve the appropriate notice under section 125D requiring him to serve such a notice within 28 days. If the tenant does not comply with the landlord's notice in default under section 125(4)E "the notice claiming to exercise the right to buy shall be deemed to be withdrawn..". Here, the parties are agreed that Mrs Honeygan-Green did state her intention to pursue her claim to exercise the right to buy.
18. The Act imposes a duty on the landlord to convey the freehold or grant the lease where certain conditions are satisfied, and that duty is enforceable by injunction. Thus, section 138 of the Act provides:-

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

(a)..

(b).. a grant of a lease of the dwelling house,

in accordance with the following provisions of this Part.

(2) If the tenant has failed to pay the rent or any other payment due from him as a tenant for a period of four weeks after it has been lawfully demanded from him, the landlord is not bound to comply with section (1) while the whole or part of that payment remains outstanding.

2(A) Subsection (2B) applies if an application is pending before any court -

(a)…

(b) for a suspension order to be made in respect of the tenancy

2(B) The landlord is not bound to comply with subsection (1) until such time (if any) as the application is determined without:

(a)..

(b) a suspension order being made in respect of the tenancy,

or the application is withdrawn

…

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

19. Section 138 2(A) and 2(B) were inserted by the Housing Act 2004 and hence, like section 121(A) were not in force when the 2000 application was made by Mrs Honeygan-Green nor when it was treated by the Council as withdrawn. I have recited these amendments so as to set the whole of the current Act in context to see whether this gives any assistance on interpretation.
20. Once the lease is granted to the tenant the secure tenancy comes to an end (section 139(2)). A landlord may serve a notice to complete under section 140 and a second notice to complete under section 141, and if the tenant does not comply with the second notice his notice claiming to exercise the right to buy shall be deemed to be withdrawn. No such notices were served by the landlord here.
21. A tenant may serve a notice of delay under section 153A where he or she considers that delays on the part of the landlord are preventing him or her from exercising expeditiously his or her right to buy. (Section 153A(1)(e)). Such a notice, described as an initial notice of delay was served here by Mrs Honeygan-Green. A landlord may respond by stating that there is no action which it was for the landlord to take in order to allow the tenant expeditiously to exercise his right to buy, but no such notice was served here. Where the landlord has failed to respond to an initial notice of delay the tenant may serve an operative notice of delay. (Section 153(A)(a) (b)). Such a notice was served here by Mrs Honeygan-Green.
22. Where the tenant has served an operative notice of delay any payment of rent made on or after the default date shall be treated not only as payment of rent but also of payment on account of the purchase price. (Section 153(b).)

Case Law.

23. A secure tenancy can only be bought to an end by an order of the Court. Where the landlord obtains an order for possession of the dwelling house the tenancy ends on the date on which the tenant is to give up possession in pursuance of the order. (Section 82(2) of the Housing Act 1985). Where an order for possession is suspended in standard form (County Court form N28) with a tenant required to give possession on or before a particular date, the tenancy ends on that date even though the order was suspended (Harlow DC v Law [2006] HLR 27). It would only be if the order was postponed or if no date was inserted in the order that the tenancy would not come to an end when the order was made. The decision in Harlow DC has now been applied to assured tenancies as well in White v Knowsley Housing Trust [2007] EWCA Civ 404. On the facts of the present case Mrs Honeygan-Green's secure tenancy ended on the date specified in the order of 4 October 2002, namely 1 November 2002. Any debate about the precise date is however academic as there is no doubt that Mrs Honeygan-Green was in breach of the order of 4 October 2002 by failing to pay her current rent on the due date and by failing to pay the £50 a week on the due date. Those breaches both occurred before 1 November 2002 and there is no dispute that such breaches determine a secured tenancy.
24. It is also agreed between the parties that once her secure tenancy was determined Mrs Honeygan-Green became a tolerated trespasser. At any point prior to the execution of the possession order however the court can vary its order under section 85(2) of the Housing Act 1985 and either discharge the order or change the date on which possession is to be given, thereby reviving the secure tenancy that had been terminated. In Burrows v Brent LBC [1996] 1 WLR 1448 Lord Browne-Wilkinson said at 1455D-F:-

"Once the effect of section 85 is appreciated the absurdities which lead the Court of Appeal not to accept Miss Burrows could be a tolerated trespasser disappear. Technically the old secure tenancy is, during the limbo period, no longer in existence and therefore neither the repairing covenant in the tenancy nor the Defective Premises Act 1982 applies. But the tenant can at any time apply to the court for an order varying the date on which possession is to be given and thereby retrospectively revive the old secure tenancy, together with its covenants. If the tenant has complied with the agreed conditions, there can be little doubt that the court would make the required order.. if the tenant were in breach of any of the covenants in the old secure tenancy, Brent could apply to vary the order so as retrospectively to revive the old tenancy together with its covenants."

25. Between 1 November 2002 and 8 July 2003 when Mrs Honeygan-Green successfully applied for the discharge of the possession order, she was a tolerated trespasser. After 8 July 2003 however her old secure tenancy was retrospectively revived together with its covenants. The central issue between the parties in this case is what is the effect of the tenancy being revived. It is accepted here that the right to buy still existed but did the 2000 application survive the possession order and determination of the tenancy, or was it abrogated so that the tenant must make a fresh application under section 122 and hence lose the favourable 2000 valuation?
26. In Bristol City Council v Hassan & others [2006] 1 WLR 2582 it was accepted that the status of tolerated trespasser was unsatisfactory to both landlord and tenant because it meant, for example, that he or she could not enforce any covenant to repair or any other contractual term of the former tenancy including statutory rights contingent on tenant status such as the statutory right to buy. The effect of the termination of a secure tenancy and the tolerated trespasser period was considered in Lambeth LBC v Rogers [1999]32 HLR 361. It was there confirmed that during the 'limbo period' the tenant could not enforce the repairing covenant against the council as she was not then a tenant, there being no tenancy in existence. The council could have applied to the court to strike out the claim that she had made against them for breach of the repairing covenant which she had commenced whilst still a tenant. The council's repairing obligations were however retrospectively revived by the order of the court and the judge had rightly held them liable in damages for breach of that covenant.
27. The authorities also establish that there does not have to be a possession order in existence at the time when the right to buy is admitted for section 121 or its equivalent to have any effect. In Enfield London Borough Council v McKeon [1986] 1 WLR 1007 Lord Justice Slade said at 1015 that the Housing Act of 1980, the precursor of the 1985 Act:-

"..treats a tenant as purporting to exercise his right to buy at any time and from time to time when he takes steps towards implementation of that right, up to and including completion of the purchase. If, therefore, any of the circumstances set out in part 2 of schedule 1 (the equivalent of section of 121) subsist at any time between the time when he serves his section 5 notice and completion, his right to buy ceases to be exercisable."

This decision was expressly approved by the House of Lords in Bristol City Council v Lovell [1988]1 AER 775. There the tenant had served the appropriate notices for exercising the right to buy, which were admitted but the council then took possession proceedings against him on the grounds that he was using the house as a shop to sell drugs thereby creating a nuisance and annoyance to his neighbours. In deciding whether an injunction had to be granted or whether a court could exercise its discretion to hear the possession action first Lord Hoffman said at 781J:-

"..the right to buy would cease to be exercisable if the court made an order for possession. Section 121(1) reads:

'The right to buy cannot be exercised if the tenant is obliged to give up possession of the dwelling house in pursuance of an order of the court or will be so obliged at a date specified in the order'

This means that if an order for possession were made, Mr Lovell would no longer be entitled to an injunction."

In the London Borough of Sutton v Swan [1985] 18 HLR 140 the Court of Appeal had decided that the status of secure tenant has to exist, not only at the time when the claim to buy is made, but also at the time when the grant comes to be made. If during the period between claim and grant the tenant has ceased to be a secure tenant, he is not entitled to that grant. That case concerned a tenant who in fact no longer occupied the premises as a secure tenant but had bought another property and permitted his daughter, her partner and two children to move into his council flat. This decision was followed in the Muir Group Housing Association Limited v Thornley [1992] 25 HLR 89 where the policy underlying the legislation was also considered. Lord Justice Glidewell said at 98:-

"If, however, I had any doubt about the meaning of the statutory provisions, I should take into account the fact that the statutory regime gives this secure tenant considerable benefits – not merely to require his landlord to sell him the freehold, but also to sell it to him at a discount – which result in corresponding disadvantages for the landlord. It would follow, therefore, that the provisions of the statute should be strictly construed so as to preclude a person who has, for whatever reason, ceased to be a secure tenant from being able to claim the advantages."

28. The question of policy was also considered by Lord Bingham in Taylor v Newham London Borough Council [1993] 1 WLR 444 where it was held that if the conditions specified in section 138(1) had been satisfied a secure tenant was entitled to an injunction to enforce the landlord's duty to convey the property to him. This decision was upheld upon its facts by the House of Lords in Bristol City Council v Lovell. Lord Bingham said in Taylor at 452B that the history of the legislation showed that:-

"It was introduced for the first time in 1980 at a time when a number of local authorities strongly resisted parting with the ownership of publicly owned accommodation to those who then lived in it, and it seems to me that we should be doing great violence to the obvious intention of Parliament if we did not recognise that it was Parliament's intention to block to the maximum the opportunities open to reluctant landlords to obstruct the acquisition of title by their tenants."

These two statements of policy do not run easily together thought the facts which gave rise to them were somewhat different.

29. In White v Knowsley Housing Trust Lord Justice Buxton in commenting upon the policy of the legislation said at para 39:-

"Mr Luba argued that the court should strain to avoid the creation in the case of assured tenancies of the same class of tolerated trespassers as now exists in the case of (former) secure tenancies: see §§ 16-18 above. Such arguments cannot withstand contrary indications from the statutory language; but in any case it is far from clear, and despite the view apparently adopted by this court in Bristol CC v Hassan, that the arguments are all one way. If Mrs White's assertions are correct, she retains all of the powers and privileges of a tenant, including succession rights and, as she contends, the right to buy the premises at a substantial discount from the market price, even though she has not only defaulted on her own obligations as a tenant, but also has failed to respect the terms on which she was relieved from the immediate consequences of that default. And in the case of a non-profit-making registered social landlord, such as Knowsley, such default on the part of one tenant means, as Mr Bartley Jones pointed out, that she is supported, and retains her privileges as a tenant, at the expense of other tenants who do pay their rent. I would say no more than that the merits of the outcome sought by Mrs White are not immediately obvious in policy terms."

30. It can be seen from the above that whilst the authorities establish that a secure tenant must remain such throughout the period from his application to the grant of the freehold or the lease, they do not directly determine what occurs to an existing application where the tenancy is revived retrospectively as happened on the facts of the present case.

The submissions of the parties.

The Appellant's submissions.

31. The right to buy, Mr Iain Colville submits, can only be established by a particular claim being made and admitted in accordance with the procedure laid down by the Act. If the right to buy 'cannot be exercised' in the words of section 121 or 'ceases to be exercisable' in the words of Lord Justice Slade in McKeon, because the tenant is obliged to give up possession, then the application which establishes that right to buy must cease to be exercisable. Section 138 makes it clear that 'that right' is the right which has been established by the application made. It must therefore refer to the right to buy actually claimed by the tenant. When this is read together with section 121 it becomes clear that the application must cease to be exercisable or 'lapse' or be 'abrogated', on the making of a possession order by the court.
32. The right to sue under the Defective Premises Act or for breach of repairing covenants in the tenancy is lost during the tolerated trespasser period (Burrows) and the right to buy cannot be enforced during the tolerated trespasser period. (Bristol City v Hassan) The revival of the old tenancy revives the statutory right to buy, but not a previous application lost by virtue of the operation of section 121 obliging the tenant to give up possession of the dwelling house at a date specified in the order. The same is true with the provisions of section 121(2). A bankruptcy petition, whatever its merits, pending against the tenant means that the right to buy cannot be exercised, though if such bankruptcy petition were subsequently dismissed the right to buy could then be exercised but only by a new application.
33. This interpretation is supported by what Lord Hoffman said in the case of Lovell, namely that if a possession order were made the tenant would no longer be entitled to an injunction.
34. During the 'limbo period', when the tenant is a tolerated trespasser, Mr Colville submits that the tenant could not enforce a claim for breach of covenant, and on the authority of Lambeth BC v Rogers an existing claim for breach brought before the tolerated trespasser period could be struck out. It is important to distinguish, which the judge failed to do, between the revival of a right to buy and the revival of a lost application. These are fundamentally different matters. As Lord Clyde said in Bristol City Council v Lovell at 787 the creation of the duty is to be distinguished from the performance of it. The right to buy is revived but not a previous application to exercise that right which became non exercisable and hence determined by virtue of the statutory scheme.
35. Policy reasons should also require a strict construction of section 121. Parliament cannot have intended a tenant who does not pay rent the benefit of an earlier application and hence what may be a more favourable purchase price if the housing market is rising. There is no injustice to the tenant arising from this interpretation as a payment of the arrears would cause the dismissal of the possession action.
36. Section 142 of the Act, relating to the deferring of completion has now been repealed but it needs to be noted that the power to defer completion pending the revival of an existing right to buy was never included within the section.
37. The interpretation placed upon section 121 by the judge effectively ignores the operation of section 121 and the tolerated trespasser period save as a temporary bar. The judge should have found that once the tenancy was determined the right to buy, as already exercised, and hence the claim which established it, lapsed or died.
38. The judge also erred in his interpretation of section 121(2)(a). Parliament cannot have intended a local authority to assess the merits of a pending bankruptcy petition and permit an application to proceed because it considered the petition was without merit or in bad faith. A separate remedy against the petitioner in costs and damages exists if the petition is dismissed on the grounds that it had no basis.

The tenant's submissions.

39. The effect of the tenancy being revived retrospectively is, Mr Jack submits, to render the tenant a secure tenant throughout. It is as if there was no period when she was a tolerated trespasser or when section 121 applied. Alternatively the terms of section 121 have to be considered as at the time when the tenant reaffirms her application after her tenancy has been revived. If at that time the tenant is not obliged to give up possession and will not be so obliged at a date specified in any possession order, section 121 does not apply. In other words it is only a temporary bar. A tenant can rely on breaches in the 'limbo period', not merely by bringing a new action but by an action which was started beforehand and remained extant during the 'limbo period'.
40. McKeon is a very narrow decision. It is merely authority for the proposition that when a tenant tries to obtain completion he must, at that time, have all the necessary conditions in place and no exclusions under section 121. In other words it is consistent with the thrust of the tenant's submissions.
41. There is no prejudice to the landlord by virtue of the fact that there are arrears of rent as Mrs Honeygan-Green could offset any payment of rent against the purchase price under section 153B. In any event she was obliged to clear the arrears before completion under the judge's order and under section 138(2). She would however be prejudiced if she had to make a new application as the discount was now lower and the price of the dwelling house much higher. It should also be noted that completion did not occur in 2000 because of the landlord's fault in relation to the repair of the wall and the encroachment of the neighbour. It was the Council who failed to comply with the delay notices served by the tenant and it was the landlord who failed to administer the housing benefit scheme properly which led to some of the arrears in rent. The admission of the landlord that the tenant had the right to pursue her 2000 application is also relevant.
42. Although Dance v Welwyn Hatfield District Council [1990] 1 WLR 1097 has now been over ruled by the House of Lords in Lovell the authority of Taylor still supports the notion of the tenant having an equitable interest or equivalent right under section 138(1).
43. The judge was correct in his analogy with section 121(2)(5). It would be grossly unfair if the presentation of a bankruptcy petition which was wholly unjustified could result in the termination of a right to buy application. McKeon does not deal with what would occur to an existing application were an unjustifiable petition dismissed.
44. Once the tenancy is revived, so too is the right to buy as applied for. The fact that the revival of the tenancy is retrospective, means that all applications made by the tenant remain extant throughout.

Conclusions.

45. I am satisfied that this appeal should be allowed both upon the basis of the statutory interpretation of section 121 of the Housing Act 1985 and on the some what narrower basis that the requirements of section 138 of the Act were not satisfied and it was therefore inappropriate for an injunction to be granted.
46. I deal firstly with the narrower ground. Mrs Honeygan-Green had, at the time of the hearing of her application for summary judgment on the counterclaim failed to pay the rent due from her as a tenant under her revived tenancy for a period of much longer than 4 weeks after it had been lawfully demanded from her. The whole or part of that payment remained outstanding. Under section 138(2) until the whole of that payment had been made the landlord was not bound to comply with subsection (1). It was not therefore under the duty to grant the lease and hence that duty could not be enforceable by injunction at that stage. Furthermore the grant of a lease could only be made "as soon as all matters relating to the grant…have been agreed or determined." The area to be demised had not however at that stage been determined and this was clearly a matter which 'related to the grant' (see Lord Clyde in Lovell at page 787j and 788A-B.) Although this matter remained in the hands of the landlord one of the requirements under section 138(1) was not established and hence the injunction was inappropriate.
47. More fundamentally however I have concluded that the landlord's submissions as to the interpretation of section 121 and the circumstances applicable to this case are correct. Mrs Honeygan-Green was obliged to give up possession of her property in pursuance of the order of 4 October 2002. Indeed her tenancy was terminated by the order requiring her to give up possession on the 1^st November. At that time the right to buy which she had claimed could not be exercised. This is the clear intention of the statute. The right to buy, as established by the 2000 application ceased to be exercisable, to use the words of Lord Justice Slade in McKeon. I agree with Mr Colville's submission that the right to buy which cannot be exercised is that right which has been established by a particular application. That is the correct interpretation of section 138(1) and is consistent with the decision of McKeon. Section 121(1) cannot be properly interpreted so as to be restricted to the time during which the tenant was obliged to give up possession. Had that been the intention of the legislature the section could have been so drafted but it was not. It simply states "if the tenant is obliged to give up possession.."
48. Nor does the drafting of section 121(2) support the tenant's contention. The wording is clear; if the person to whom the right to buy belongs "(a) has a bankruptcy petition pending against him, the right to buy cannot be exercised." The same applies if he is an undischarged bankrupt ((c)) or if he has made a composition or arrangement with his creditors the terms of which remain to be fulfilled ((d)). If any of those conditions apply the right to buy cannot be exercised until the bankruptcy petition is dismissed or the bankrupt discharged or the terms of the composition or arrangement fulfilled. In such circumstances the right to buy would be revived but not any application in existence where a bankruptcy petition or other matters under 121(2) occurred. The disadvantages of a wholly unjustifiable bankruptcy petition being bought against a tenant are stark but the wording of section 121(2) is clear and does not permit the question of hardship to be taken into account.
49. Section 121 lays down certain circumstances in which the right to buy "cannot be exercised" or ceases to be exercisable. The right to buy can only be exercised through a particular application and if the right to buy falls, so does that application. I note that the right to buy cannot be exercised at any time during a suspension period under the later inserted section 121A and that where a suspension order is made any existing claim to exercise the right to buy "ceases to be effective" as from the beginning of the suspension period. (section 121A(5)). This was not in force and is not relevant to Mrs Honeygan-Green's application but the effect of section 121 as originally drafted is in my view the same as that set out in section 121A(5) namely to cause any existing claim to exercise the right to buy in relation to the dwelling house to cease to be effective. Section 121A(5) is confirmatory of the correct interpretation of section 121(1) and (2).
50. The Court of Appeal in White v Knowsley Housing Trust declined to determine whether or not the tenant had lost her right to buy where she had failed to pay her rent and had a possession order made against her. The court did not however appear to look favourably upon the recasting of the order, if that would assist the tenant in her right to buy application as that would be "unfair to Knowsley by, at the least, moving the date of assessment of the acquisition price" (paragraph 51). This did not form part of the decision of the court, but Lord Justice Buxton did make his views upon policy clear in paragraph 39. His comments are applicable to the facts of this case. Mrs Honeygan-Green defaulted on her own obligations as a tenant and failed to respect the terms on which she was relieved from the immediate consequences of that default. If she were to retain all her privileges as a tenant including her 2000 application of the right to buy she would do so at the expense of other tenants who pay their rent. The Council would be obliged, in spite of her default, to permit her to obtain the property at less than the relevant market value thereby failing to obtain a larger sum of money for the benefit of other tenants. It is doubtful that Parliament intended section 121 to have that effect.
51. I do not consider that the revival of the tenancy revives the 2000 application. Once the order for possession had been made Mrs Honeygan-Green was no longer entitled to an injunction (see Lovell).
52. Nor do I consider that the tenant acquired any proprietary interest in the property as a result of her application for the right to buy. Until the grant of the freehold she acquired no proprietary interest but remained until then a secure tenant. (Lovell at 784)
53. The key to the interpretation of section 121 however is that the right to buy is only exercisable through an application or claim under the statutory scheme. If the right to buy cannot be exercised or ceases to be exercisable, then the application or claim which established that right to buy must also cease to be exercisable.
54. The above conclusion does not however deal with issues of fact which remain to be determined when considering the claim for possession and defence and counterclaim in the action. Thus for example the tenant may wish to contend that Miss Annor on behalf of the Council agreed to adjourn the possession proceedings on 4 October 2002 and acted in breach of that agreement thereby effectively preventing Mrs Honeygan-Green from attending and arguing that in the circumstances no possession order should be made. It might further be arguable that had the judge been informed that the Council would seek to rely upon section 121 and argue that the 2000 application ceased to be exercisable, no possession order would have been made. These matters, whether by amendment of the proceedings or not, may fall to be determined by the County Court. In such circumstances it seems to me that, as Mr Jack suggests, the matter should be remitted to the County Court for their further consideration. I will hear the parties as to the appropriate route to be followed if they do not agree that the case should be remitted. I shall also hear submissions on the issue of costs.