Hughes v Borodex Ltd

Neutral Citation Number: [2009] EWHC 565 (Admin) Case No: CO/5529/2008 IN THE HIGH COURT OF JUSTICE QUEEN'S BENCH DIVISION ADMINISTRATIVE COURT Royal Courts of Justice Strand, London, WC2A 2LL Date: 25 March 2009 Before : Mr Justice Collins - - - - - - - - - - - - - - - Between : Appellant Respondent Cherry Sheila Hughes - and - Borodex Limited - - - - - - - - - - - - - - - (Transcript of the Handed Down Judgment of WordWave International Limited A Merrill Communications Company 190 Fleet Street, London EC4A 2AG Tel No: 020 7404 1400, Fax No: 020 7831 8838 Official Shorthand Writers to the Court) - - - - - - - - - - - - - - - Dr Victoria Williams (instructed by David Tagg & Co) for the Appellant Mr Christopher Heather (instructed by Forsters) for the Respondents Hearing dates: 5 March 2009 - - - - - - - - - - - - - - - Judgment Mr Justice COLLINS : 1. The appellant is the tenant of a flat on the ground and lower floors of premises in Tite Street, Chelsea. She appeals against the decision of a Rent Assessment Committee dated 7 May 2008 which determined the rent payable for the flat to be £2,340 per month with effect from 30 April 2008. For reasons which will become clear, because this amounts to more than £25,000 per year, the appellant suffers a serious disadvantage since she has lost security of tenure and the respondents have served a notice to quit on her. This appeal turns on whether improvements made by her to the flat some 17 years ago should be taken into account in her favour in assessing the rent payable. If they are, although the Committee has not indicated what discount it would have applied, she anticipates that the rent will not exceed the sum of £25,000 per year and so she will retain her assured status. 2. The salient facts can be set out shortly. The respondents hold the property on a head lease from the Cadogan Estate. On 25 March 1964 an under lease for a period of 39.25 years less 3 days of the flat was granted at a rent of £195 per year. This under lease was assigned to the appellant’s mother (now deceased) on 9 October 1977. It came to an end on 21 June 2003 whereupon the appellant became an assured tenant in accordance with the relevant provisions, to which I shall have to refer in some detail, of the Local Government and Housing Act 1989 (the 1989 Act). So long as she remained an assured tenant, it is common ground that she was entitled to the protection provided by the Housing Act 1988 (the 1988 Act) which includes security of tenure and the right to apply to a Rent Assessment Committee to fix the rent. By virtue of Paragraph 2 of Schedule 1 to the 1988 Act as amended a tenancy entered into after 1 April 1990 will not qualify as an assured tenancy if the annual rent exceeds £25,000 on applying the formula set out in Schedule 10 to the 1989 Act. It is to be noted that that figure has remained constant since 1990 and perhaps somewhat surprisingly there has been no increase to reflect the impact of inflation. 3. On the coming to the end of the long residential tenancy in 2003, the appellant became an assured periodic tenant by virtue of Section 186 of and Schedule 10 to the 1989 Act. The 1989 Act repealed Part 1 of the Landlord and Tenant Act 1954, which had given protection to tenants such as the appellant, and substituted for its provisions those contained in Schedule 10. S.186(1) provides:- “Schedule 10 to this Act shall have effect (in place of Part 1 of the Landlord and Tenant Act 1954) to confer security of tenure on certain long tenancies and in particular to establish assured periodic tenancies when such long tenancies come to an end.” 4. Schedule 10 is headed ‘Security of Tenure on Ending of Long Residential Tenancies’. Paragraph 1 provides:- “1(1). This schedule applies to a long tenancy of a dwelling house at a low rent as respects which for the time being the following condition (in the Schedule referred to as ‘the qualifying condition’) is fulfilled, that is to say, that the circumstances (as respects the property let under the tenancy, the use if that property and all other relevant matters) are such that, of the tenancy were not at a low rent, it would at that time be an assured tenancy within the meaning of Part 1 of the Housing Act 1988. (2) For the purposes only of determining whether the qualifying condition is fulfilled with respect to a tenancy, Schedule 1 to the Housing Act 1988 (tenancies which cannot be assured tenancies) shall have effect with the omission of Paragraph 1 (which excludes tenancies entered into before, or pursuant to contracts made before, the coming into force of Part 1 of that Act). ” 5. Paragraph 3 provides that the long residential tenancy continues in being until terminated and the landlord can achieve such termination by service of the requisite notice under Paragraph 4. The respondent served a notice bringing the long tenancy to an end and proposing a new assured tenancy to commence on 28 February 2004. Agreement on the rent payable was not achieved and so there was a reference to a Rent Assessment Committee which determined a rent of £1,668 per month. That figure was reached by disregarding in the appellant’s favour the improvements she had carried out. 6. Paragraph 9 of Schedule 10 so far as material provides that on the termination by a landlord’s notice of the long residential tenancy, the tenant remains in possession under an assured periodic tenancy arising by virtue of Paragraph 9. Paragraph 9(2)(d) specifies that the periods of the tenancy and the intervals at which rent is to be paid are monthly. The rent itself and the other terms are to be determined in accordance with Paragraphs 10 to 12 of the Schedule. 7. Assured tenancies were created by the Housing Act 1988. Inter alia, the right to possession was limited to specific grounds and, subject to some immaterial exceptions, disputes about the rent payable can be referred to a Rent Assessment Committee. Section 13 allows a landlord to serve an initial notice of increase after a minimum period of one month and thereafter after a year has elapsed (s.13(2), (3) and (3A)). Section 13(4) confers upon the tenant the right to refer a landlord’s notice of increase to a Rent Assessment Committee. Section 14 sets out the principles which a Committee must apply. Those relevant to this appeal are as follows:- “14(2). In making a determination under this section, there shall be disregarded - … (b) any increase in the value of the dwelling house attributable to a relevant improvement carried out by a person who at the time it was carried out was the tenant, if the improvement – (i) was carried out otherwise than in pursuance of an obligation to his immediate landlord ..,. 14(3). For the purposes of subsection 2(b) above, in relation to a notice which is referred by a tenant as mentioned in subsection (1) above, an improvement is a relevant improvement if either it was carried out during the tenancy to which the notice relates or the following conditions are satisfied, namely – (a) years before the date of service of the notice; and that it was carried out not more than twenty-one that, at all times during the period beginning (b) when the improvement was carried out and ending on the date of service of the notice, the dwelling house has been let under an assured tenancy; ….” 8. Since assured tenancies did not exist until the 1988 Act created them, it is obvious that s.14(3)(b) would on its face mean that tenants such as the appellant could not meet the condition leading to a disregard. Thus it is only if the 1989 Act, which conferred assured tenancies on those whose long tenancies at a low rent had come to an end, contained provisions which enabled those tenants to benefit from the disregard that the appellant could succeed. It is to be noted that Paragraph 1(1) and (2) of Schedule 1 to the 1989 Act is careful to limit the omission of Paragraph 1 of Schedule 7 to the 1988 Act to a determination whether the qualifying condition is met (Paragraph 1(2)) and that Paragraph 1(1) does not deem the long tenancy to be an assured tenancy. Again, it applies only to enable a tenant to take advantage of the security provided by the creation at the termination of the long tenancy of an assured tenancy. 9. The relevant paragraph of Schedule 10 is Paragraph 11. Sub-paragraphs (6) and (7) provide:- “(6) Subsections (2), [(3A),] (4) and (5) of section 14 of the 1988 Act shall apply in relation to a determination of rent under sub-paragraph (5) above as they apply in relation to a determination under that section subject to the modifications in sub-paragraph (7) below; and in this paragraph ‘rent’ shall be construed in accordance with subsection (4) of that section. (7) The modifications of section 14 of the 1988 Act referred to in sub- paragraph (6) above are that in subsection (2), the reference in paragraph (b) to a relevant improvement being carried out shall be construed as a reference to an improvement being carried out during the long residential tenancy …..” Section 14(3) of the 1988 Act is not applied by Paragraph 11(6). However, it is clear that it was intended that a ‘relevant improvement’ was to include one carried out during the long tenancy. Thus relevant improvement must mean an improvement carried out by a tenant during the long tenancy since, because s.14(3) does not apply, it is not otherwise defined. That at least seems to be the natural meaning of the provisions so that the 21 year limit is not applicable. But that is not a matter which I have to determine. All I need say is that neither counsel has sought to argue that pursuant to a reference to the Committee under Paragraph 10(2) of Schedule 10 (which will be the case on the service of a landlord’s notice following the termination of a long tenancy) tenants’ improvements during the long tenancy should not be disregarded. 10. Schedule 11 to the 1988 Act contains what are called ‘minor and consequential amendments’. These include (Paragraph 101) an addition to s.7 of the 1988 Act which provides for protection against eviction on various grounds for those holding under assured tenancies arising under Schedule 10 of the 1989 Act. This shows that the 1989 Act would have contained provisions which made clear whether or not a tenant under such an assured tenancy could continue to be able to benefit from the disregard in respect of any subsequent application to a Committee. That is because such subsequent application, and that made in September 2007 which led to the decision under appeal, is made under s.13(4) of the 1988 Act and not under Paragraph 10(2) of Schedule 10 to the 1989 Act. 11. The Committee had the benefit of hearing argument from counsel. It expressed sympathy with the appellant, noting that the apparent effect of the statutory provisions was that a tenant who had paid perhaps substantial sums to make improvements during the long tenancy would only have those improvements disregarded for as little as a year. But it felt unable to do other than apply the clear wording of s.14(3)(b) which applied to the application under s.13(4). 12. Ms Williams submits that to construe the provisions in that way is contrary to the purpose of the statutory provisions designed, as s.186 of the 1989 Act states, to give security to those whose long tenancies came to an end. She submits that the absence from the 1989 Act of provisions which gave an equivalent protection to those who had been tenants under a long tenancy as if they had been assured tenants throughout was an oversight and it is open to me to construe the provisions overall by reading in words which provide that protection. The 21 year limit in s.14(3)(b) is clearly prospective: it could only avail those who entered into assured tenancies after 1988. But, submits Ms Williams, the 1954 Act, which was repealed, provided a protection which was wider in that there was no 21 years or other limit and there is no reason to believe that Parliament intended in 1989 to remove protections and so security which existed. The whole purpose of Schedule 10 was to maintain security and not to reduce it. 13. If the long tenancy had come to an end before 1989, the tenant would have been protected by Part 1 of the Landlord and Tenant Act 1954. I do not need to set out the relevant sections in detail, but the effect was to create a statutory tenancy following the termination of the long tenancy, section 2 of the Act containing provisions mirrored in Paragraph 10(1) of Schedule 10 to the 1989 Act. Section 6 provided that the Rent Act should apply as if the former tenancy had been a regulated tenancy – see Rent Act 1977 s.18, which provided that a regulated tenancy followed by a statutory tenancy should be treated as constituting one regulated tenancy. Section 70(3)(b) of the 1977 Act provided for disregard of improvements carried out by ‘the tenant under the regulated tenancy or any predecessor in title of his’. Thus it is said that since the long tenancy was to be treated as if it were protected and was to be treated as a single regulated tenancy with the newly created statutory tenancy, a permanent disregard would apply. The 21 year limit was applied to business tenancies by s.34 of the 1954 Act but not to tenancies of dwellings. 14. The submission that the court should not apply the unambiguous provisions of an Act but should write in words to achieve the supposed purpose of those provisions is one which will rarely prevail and then only in a clear case. The authorities show that this power will normally only be exercised to prevent a provision being unintelligible, absurd or totally unreasonable, unworkable or totally irreconcilable with the rest of the statute. In Inco Europe Ltd v First Choice Distribution [2000] 1 W. L. R. 586, the House of Lords was concerned with an amendment to s.18(1) of the Supreme Court Act 1981 inserted by s.107 of the Arbitration Act 1996 which provided that no appeal should be to the Court of Appeal ‘except as provided by Part I of the Arbitration Act 1996, from any decision of the High Court under that Part’. Section 107 was dealing with Consequential amendments and it was decided that such an abolition of appeal rights could not be regarded as consequential: rather it was a radical and additional provision. Lord Nicholls said this at p.592C-H:- “I freely acknowledge that this interpretation of section 18(1)(g) involves reading words into the paragraph. It has long been established that the role of the courts in construing legislation is not confined to resolving ambiguities in statutory language. The court must be able to correct obvious drafting errors. In suitable cases, in discharging its interpretative function the court will add words, or omit words or substitute words. Some notable instances are given in Professor Sir Rupert Cross’s admirable opuscule, Statutory Interpretation, 3rd ed. (1995), pp. 93-105. He comments, at p.103: “In omitting or inserting words the judge is not really engaged in a hypothetical reconstruction of the intentions of the drafter or the legislature, but is simply making as much sense as he can of the text of the statutory provision read in its appropriate context and within the limits of the judicial role”. This power is confined to plain cases of drafting mistakes. The courts are ever mindful that their constitutional role in this field is interpretative. They must abstain from any course which might have the appearance of judicial legislation. A statute is expressed in language approved and enacted by the legislature. So the courts exercise considerable caution before adding or omitting or substituting words. Before interpreting a statute in this way the court must be abundantly sure of three matters: (1) the intended purpose of the statute or provision in question; (2) that by inadvertence the draftsman and Parliament failed to give effect to that purpose in the provision in question; and (3) the substance of the provision Parliament would have made, although not necessarily the precise words Parliament would have used, had the error in the Bill been noticed. The third of these conditions is of crucial importance. Otherwise any attempt to determine the meaning of the enactment would cross the boundary between construction and legislation: see per Lord Diplock in Jones v Wrotham Park Settled Estates [1980] A. C. 74, 105 - 106. In the present case these three conditions are fulfilled.” 15. The 1989 Act was undoubtedly intended by repealing the Rent Acts to tip the balance in favour of landlords and to try to encourage the expansion of letting of dwellings. It is thus difficult to be satisfied that the abolition of the previous protection provided for those whose long tenancies had come to an end was inadvertent. As has been shown by the provisions of Paragraph 101 (and also paragraph 102 – I need not expressly set it out) of Schedule 11 to the 1989 Act, amendments to ensure that the assured tenancy created following the termination of the long tenancy should contain protections regarded as desirable were included and others could have been. The background to the Inco decision was very different. Here, the relevant provisions are intended to deal comprehensively with the security to be provided for those who had had the advantage of long tenancies at low rents. 16. That the provisions were not by any means perfect is clear from the need for some adaptation. Ms Williams, relies on decisions which produced that result. I need, I think, refer only to one of them in any detail, R (Morris) v The London rent Assessment Committee [2002] EWCA Civ 276. The court approved and applied the reasoning of Kay J in R v London Rent Assessment panel ex p Cadogan Estates Ltd [1998] QB 398 that the Committee was not prohibited from assessing the rent of the assured tenancy arising on termination of the long tenancy in excess of £25,000. In Paragraph 18 of his judgment, Mummery LJ said this:- “In my judgment, the principal submissions are based on a misreading of the statutory provisions. There is nothing in the provisions establishing or supporting a statutory principle of “once an assured tenancy, always an assured tenancy”. The provisions of Schedule 10 relied upon do not set a ceiling of £25,000 on the amount of he annual rent which may be validly proposed or which the Committee ma validly determine. The case advanced by Mr Morris would, if accepted, produce the surprising conclusion that a tenant could remain in a high value property at less than the proper open market rent determined by the Committee. If the rent is determined by the Committee at a figure exceeding £25,000, the landlord is not prohibited by statute from recovering it: the result is that the tenancy will simply cease to qualify for protection as an assured tenancy. The alternative submission on the validity of the notice fails because the rent proposed in the notice was, as the judge held, a realistic rent based on valuation evidence.” While that involves at the very least, a strained construction of the statutory provisions to avoid the suggested need to keep the rent for an assured tenancy created by the 1989 Act below £25,000 per annum, it is otherwise unhelpful to the appellant’s case. The Court of Appeal made it clear that the protection could not prevent a proper market rent being determined even if that removed the protection which would otherwise be provided by an assured tenancy. 17. Mr Heather drew my attention to Trustees of Henry Smiths Charity v Hemmings (1982) PTCR 377. This, he submitted, showed that the court had not in the past strained to construe the provisions of s.70(3)(b) of the Rent Act 1977 to provide for a disregard for a tenant who on one view merited it. A Mr Ludovici in 1977 took an assignment of the residue of a lease granted in 1953 which had some 5 months to run. He agreed to do works in return for which he would be granted a fresh lease. This was later assigned to Mr Hemmings. He was neither the tenant under the regulated tenancy nor was Mr Ludovici his predecessor in title. The tenancy which became the regulated tenancy did not commence until July 1972, after the previous tenancy had come to an end. Ms Williams rightly points out the factual distinction in that under the then law someone in the appellant’s position might have succeeded, but that does not meet the point made by Mr Heather that this is an example of the court not being prepared to strain the words of the Act to meet apparent merits. In East Coast Amusement v British Transport Board [1965] A. C.58 the House of Lords applied a similar construction to s.34 of the Landlord & Tenant Act 1954 in that the benefit of improvements would only be obtained if carried out during the current tenancy. 18. The initial reference to a Rent Assessment Committee following the creation of an assured tenancy under Schedule 10 to the 1989 Act is made pursuant to Paragraph 10(2) of that Schedule. Since it is an application made under the Schedule, Paragraph 11 applies. But any subsequent application such as the one in issue in this appeal is made under s.13(4) of the 1988 Act. Thus Schedule 10 of the 1989 Act does not apply to it. Accordingly, the appellant cannot take advantage of the provisions of Paragraphs 11(6) and (7) since they do not affect her application. It is only if I am persuaded that there was an error in this omission that I could in effect redraft the provisions of the Act. 19. I have considerable sympathy with the appellant and I would have construed the provisions in her favour if I had been satisfied that there had been a draftsman’s error or that Parliament could not have meant to disadvantage tenants in her position. She stands to be evicted from the home she has occupied for a long time. But for the reasons I have given I am unable to justify such a radical amendment of the statutory provisions. I am afraid they mean what they say and I must dismiss this appeal.