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

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand London WC2A 2LL
		28th January 2010

1. MRS JUSTICE NICOLA DAVIES: This is an appeal by the appellant, Martin Lynch, against an order for possession made by His Honour Judge Matheson QC on 17^th September 2009 in respect of the appellant's occupation of Room 4, 109 Upper Tullington Park, London N4.
2. The appeal is brought on two grounds.

1. The learned judge misdirected himself in law in finding that the appellant was not granted an assured tenancy of Room 5 of 109 Upper Tollington Park from 20^th February 1997.

2. The learned judge misdirected himself in law by holding that the appellant's tenancy of Room 5 did not commence until after 27^th February 1997. The judge failed to have regard to the definition of "a tenancy" contained within section 45 of the Housing Act 1988.

The facts

3. The respondent is the freehold owner of 109 Upper Tollington Park. The respondent lets out rooms in the property. It is not in dispute that the appellant moved into Room 5 of 109 Upper Tollington Park on 20^th February 1997 and thereafter enjoyed exclusive occupation of the room. A year later the appellant moved from Room 5 in the property to Room 4. The judge made the following findings of fact:-

(a) The appellant entered into exclusive possession of Room 5 from 20^th February 1997.

(b) On that date the appellant and the respondent completed and signed a pre-tenancy determination form.

(c) The judge found that the respondent did not intend to accept the appellant as a tenant unless he was awarded housing benefit. The respondent permitted the appellant to take up occupation in the property until such time as his housing benefit was approved, because he was aware that the appellant had friends in the property.

4. The findings of fact made by the judge represented uncontested evidence given by the parties. Evidentially, there were few areas of factual dispute. The central factor issue was when the intention to create legal relations arose. It was not contested that, on 20^th February 1997, the appellant submitted a claim for housing benefit. The appellant gave oral evidence. He produced a document from Haringey Council which included the information that the claimant had submitted a form for housing benefit on 20^th February 1997 and his entitlement to benefits commenced on 24^th February 1997.

Submissions before His Honour Judge Matheson QC

5. It was the appellant's case that he became an assured tenant of Room 5 on 20^th February 1997 by reason of paragraph 7 Schedule 2A of the Housing Act 1988. On behalf of the appellant, it was contended that it was standard practice for tenants to move into possession of premises and then claim housing benefit. The appellant submitted that the intention to create legal relations arose on 20^th February 1997 when he was granted exclusive possession of Room 5 and a pre-tenancy determination was signed by both parties.
6. It was the respondent's case that the appellant had been granted a bare licence of Room 5 pending a determination by the local authority of the appellant's entitlement to housing benefit. The respondent alleged that any agreement entered into by the parties took place on or after 7^th March 1997. Further, it was contended on behalf of the respondent that there was no intention to create legal relations until housing benefit was awarded. The learned judge held:

(a) the tenancy was not granted until the respondent told the appellant that housing benefit had come through;

(b) before that time the appellant had exclusive possession as a licensee pending determination of his housing benefit claim;

(c) the tenancy of Room 5 did not commence until after 27^th February 1997:

(d) prior to receipt of housing benefit it was on an entirely conditional and almost charitable basis that occupation by the appellant was permitted by the respondent. Such backdated housing benefit as may have been made had to be treated "not as being rent gap but as mesne profits for use and occupation of the property".

The law. Statute.

7. The Housing Act 1996 came into force on 28^th February 1997, amending the Housing Act 1988. The Housing Act 1996 made all assured tenancies granted after its commencement assured shorthold tenancies save where a notice was served in advance notifying the tenant that it was to be an assured tenancy. This general rule was subject to exceptions, including that an assured tenancy created after 28^th February 1997, which replaced a tenancy between the same parties which was not an assured shorthold tenancy, is an assured tenancy. The importance of the distinction between the two types of tenancies is that, in the case of an assured tenancy, possession can only be obtained on the grounds specified in Schedule 2 to the Housing Act 1988 – see sections 5(2) and (7), or, as in the case of an assured shorthold tenancy, security of tenure is more limited, possession may be obtained on service of a notice which complies with section 21 of the Housing Act 1988. A section 21 notice was served in this case.

1. Section 1(1) of the Housing Act 1988 provides that a tenancy of a dwelling house is an assured tenancy if and so long as the tenant is an individual and occupies the property as his only or principal home and it is not an excluded tenancy.

2. The tenancy in section 1 includes an agreement for a tenancy – section 45 of the Housing Act 1988, the interpretation section of Part 1 of the Housing Act 1988.

3. An assured periodic tenancy cannot be brought to an end by a landlord except by obtaining an order in accordance with the provisions of Chapter 1 or 2 or the Housing Act 1988. Accordingly, the service by the landlord of notice to quit has no effect in relation to a periodic assured tenancy – section 5(1) of the Housing Act 1988. The court has no jurisdiction to hear proceedings for possession of a property let on an assured tenancy unless notice has been served which complies with section 8 of the Housing Act 1988, or it is just and equitable to dispense with such a notice – section 8(1) of the Housing Act 1988.

5. Prior to the commencement of the Housing Act 1996, if a residential tenancy was to be an assured shorthold tenancy, it had to be (a) a grant of a tenancy for a fixed term of not more than six months; (b) a section 20 notice in the prescribed form had to be served – section 20 of the Housing Act 1988.

The authorities

8. As between the appellant and the respondent, there was no dispute as to the relevant case law. The following authorities were cited:

1. Street v Mountford (House of Lords) [1985] 1 AC 809. In that case the House of Lords held:

"If…residential accommodation is granted for a term at a rent with exclusive possession, the landlord providing neither attendance nor services, the grant is a tenancy" – see 818C.

"The intention to create a tenancy was negatived if the parties did not intend to enter into legal relations at all" – see 821B.

"The only intention which is relevant is the intention demonstrated by the agreement to grant exclusive possession for term at rent" – see 826H.

2. The reservation of a rent is not necessary for the creation of a tenancy – Ashburn Anstalt v Arnold [1989] Ch 1, [1988] 2 WLR 706 at 714B-C.

3. The law does not impute intention to enter into legal relations where the circumstances and the conduct of the parties negative any intention of the kind – Booker v Palmer [1942] 2 AER 674 (CA). This was a case where exclusive occupation of a cottage was granted to the appellant, whose own house had been destroyed by a bomb during the War, the grant of occupation being a wholly charitable act on the part of the owner of the cottage.

4. In assessing the issue of contractual intention, the court's task is to review what the parties said and did and, from that material, to infer whether the parties' objective intentions, as expressed to each other, were to enter into a mutually binding contract. The court is not concerned with what the parties may subjectively have intended – Pagnan SpA v Feed Products Limited [1987] 2 Ll R 601 at 610, per Bingham J.

5. This general contractual principle extends to the issue of whether a tenancy has been created. The intentions of the parties, their understanding or even express declaration as regards the effect of the agreement which they enter into are all irrelevant. The most critical test is whether the occupier has exclusive possession of the premises – Leadenhall Residential 2 Limited v Sterling [2002] 1 WLR 499 (CA) paragraphs 15 to 19.

6. An agreement for a lease may be a conditional agreement. A conditional agreement may be one in which no enforceable obligation comes into existence until a condition precedent is satisfied. The term "condition precedent" includes a condition which allows a binding contract to be made but suspends performance of it until the condition is satisfied.

9. I now turn to the submissions.

Appellant's submissions – ground 1.

10. The learned judge misdirected himself in law in finding that the appellant was merely the licensee of Room 5 from about 20^th February 2007 until housing benefit payments commenced. On the findings of fact made, the judge was bound to find that the appellant had been granted an assured tenancy of Room 5. The judge found expressly or by inference that there were the three hallmarks of a tenancy in existence as at 20^th February 1997, in particular:

(a) the appellant had entered into exclusive possession of Room 5 on or about 20^th February 1997 – paragraph 6 of the transcript;

(b) the pre-tenancy determination form showed that the parties were in agreement that a rent should be paid. The form states at question 4(iii)(1): "How much is the rent?" The reply is "£85";

(c) the judge accepted the evidence of the respondent that he was prepared to accept the appellant as a tenant if he had confirmation that he was getting housing benefit and would be able to pay the rent – paragraph 8 of the transcript;

(d) the pre-tenancy determination form also showed that the tenancy was a weekly periodic tenancy;

(e) the housing benefit when payments commenced was paid in respect of weekly periods;

(f) the intention of the parties must be viewed objectively. The intention to enter into a legal relationship to create a tenancy was not negatived by the circumstances or the words used by the respondent;

(g) the factual matrix points towards the creation of a tenancy relationship: (a) the respondent allowed the appellant into exclusive possession prior to the determination of his housing benefit claim; (b) the parties agreed that a weekly rent would be paid for Room 5; (c) the parties understood from the first meeting that the appellant had no money and that he would need to claim housing benefit in order to pay rent; (d) the respondent facilitated the application for housing benefit by signing the relevant pre-tenancy determination form; (e) a housing benefit claim was made on 20^th February 1997; (f) housing benefit was not paid until five to six weeks after 20^th February, but the printout from Haringey Council states that the appellant's entitlement to housing benefit arose from 24^th February 1997.

11. The learned judge erred by taking into account the subjective expressed intention of the respondent, which was irrelevant. Given that the hallmarks of the tenancy were present, a tenancy was created – see Street v Mountford at page 818C. The only intention which was relevant was that demonstrated by the agreement granting exclusive possession for return at rent. Even though the respondent was found to have acted generously by allowing the appellant into occupation prior to payment of any rent, or confirmation of housing benefit, this does not, by itself, negative the intention to create a tenancy. The facts in the present case are distinguishable from those cases where acts of generosity have negatived the intention to create legal relations. The respondent did not take the appellant in wholly or mainly as an act of generosity; he charged a rent for Room 5. He took a commercial risk by allowing the appellant into occupation.

The respondent's submissions

12. The following submissions were made.

1. This is not a typical case. There was no express agreement, written or otherwise. There was no agreement for a tenancy in any typical sense.

2. If there was an agreement, the respondent did not intend to be bound by it.

13. On behalf of the respondent, Mr Eaton relied on various terms contained in the pre-tenancy determination which included (1) an intention on the part of the respondent to provide breakfast and other services; (2) the tenancy was described as an assured shorthold tenancy. In respect both of the provision of services and the assertion of an assured shorthold tenancy, there was no evidence to support the existence of the alleged services, or the relevant statutory notice.
14. Mr Eaton accepted that, save for the pre-tenancy determination, there was no other written document evidencing the agreement between the parties. It is significant that the rent that was paid was paid at weekly intervals following acceptance by Haringey Council of the claimant's application for housing benefit and the pre-tenancy determination. Further, Mr Eaton sought to distinguish the authority of Ashburn on the grounds that the tenancy agreement in that case was express. I do not accept the distinction. There was an agreement to pay rent, which was met when housing benefit was granted.

Conclusion

15. Having considered the evidence in this case, I find that, on 20^th February 1997, there was an intention on the part of the appellant and the respondent to create legal relations. That is evidenced by the signed pre-tenancy determination form and the exclusive possession of Room 5 granted by the respondent to the appellant. Pursuant to the intended agreement, the appellant on the same day applied for housing benefit. The objective indicia were present. I find that the learned judge erred in taking account of the subjective intention of the respondent. The court's task is to review what the parties said and did, and from that material infer whether the parties' objective intentions, as expressed to each other, were to enter into a mutually binding contract – see Pagnan SpA v Feed Products Limited. I also find that the respondent was doing no more than taking a commercial risk in allowing the appellant to enter the property.
16. Accordingly, I find that an assured tenancy within the provisions of the Housing act 1988 was created on 20^th February 1997. This appeal is allowed on the grounds set out in ground 1 of the application to appeal. It is unnecessary to consider the second ground. The claim for possession is dismissed.