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IN
THE SUPREME COURT OF JUDICATURE
CCRTF
98/1462/2
COURT
OF APPEAL (CIVIL DIVISION)
ON
APPEAL FROM THE TELFORD COUNTY COURT
(His
Honour Judge Nicholas Mitchell
Royal
Courts of Justice
Friday,
19th March 1999
Before:
LORD
JUSTICE HIRST
LORD
JUSTICE MANTELL
-
- - - - - - -
ARTESIAN
RESIDENTIAL INVESTMENTS LIMITED
Appellant
-v-
MR.
NICK BECK
Respondent
-
- - - - - - - -
(Computer
Aided transcript of the stenograph notes of
Smith
Bernal Reporting Limited
180
Fleet Street, London EC4A 2HD
Tel:
0171 421 4040 Fax: 404 1424
Official
Shorthand Writers to the Court)
-
- - - - - - -
MR.
E. DENEHAN
(instructed by Messrs Finers, London, W1) appeared on behalf of the
Appellant/Plaintiff.
MR.
JAN LUBA
(instructed by Messrs R. Gwynne & Sons, Shrewsbury, Shropshire) appeared on
behalf of the Respondent/Defendant.
-
- - - - - - -
J
U D G M E N T
(As
approved by the Court
)
Crown
Copyright
HIRST
LJ:
This
case raises an important point of principle, namely whether a tenant is
entitled to invoke the relief provided for by section 138 of the County Courts
Act 1984 in relation to an order for possession validly made against him as an
assured tenant of the demised premises within the meaning of section 1 of The
Housing Act 1988.
On
23rd October 1998 His Honour Judge Mitchell in the Telford County Court held
that he is so entitled, and consequently set aside the orders made on 29th June
1998 and 5th August 1998 that the respondent tenant, Mr Nick Beck, should give
the plaintiff, Artesian Residential Investments Ltd, possession of 42, The
Hobbins, Bridgnorth, Shropshire WB15 5HH.
These
two orders had been made respectively by District Judge Garrett and District
Judge Schroeder, and the latter, while expressing sympathy for Mr Beck,
expressly held that the court had no such power.
It
is against Judge Mitchell's order that the landlord presently appeals, and
there is also a respondent's notice.
The
facts are not in dispute, and I gratefully adopt the summary in the judge's
judgment which is as follows:-
"The
facts which lead to this matter are not in dispute. The plaintiffs are
freehold reversioners of a property known as No. 42, The Hobbins, Bridgnorth,
Shropshire (which I will refer to as ´the property'). By a written
agreement the plaintiffs' predecessors in title demised the property to the
defendants for a fixed term of ten years from 1st December 1989. The initial
rent payable under the terms of the tenancy agreement was at the rate of
£2,700 per annum, but that rent is subject to review by means of an index
linking provision. The rent is payable monthly in advance. The tenancy
agreement incorporated letting terms which include [as clause 4(a)(i)] a
proviso for re-entry and determination if the rent is at any stage 14 days in
arrears.
The
defendants have throughout occupied the property and continue to do so as their
only principal home. The tenancy accordingly is an assured tenancy within the
provisions of the Housing Act 1988.
The
defendants duly paid the rent and performed the terms of the tenancy until some
time in around 1996 they encountered financial difficulties when the first
defendant was made redundant. By this time the monthly rent payable had
increased to a rate of £313 a month. By April 1998 the arrears of rent
amounted to £2,239.92 and no payment at all had been made since December
1997.
On
15th April 1998 the plaintiffs served notice on the defendants pursuant to the
provisions of section 8 of the Housing Act 1988 of their intention to seek
possession on the grounds numbered 8 and 10 in the second schedule to the Act.
Proceedings were then issued on 14th May 1998, and on 29th June 1998 those
proceedings came on for hearing before Mr District Judge Garratt who made an
order for immediate possession together with judgment for the arrears of rent
in accordance with County Court Form N.26.
On
7th July the defendants applied for a suspension of that order saying that with
the aid of a friend they would be able to clear the arrears in full within a
matter of days. On 10th July 1998 they did indeed clear those arrears fully by
means of a banker's cheque. Since that time the monthly rent has been paid on
the due date and is now up to date.
On
5th August the defendants' application for suspension came on for hearing
before Mr District Judge Schroeder. ......"
The
case turns almost entirely on the construction of the relevant sections of the
Housing Act 1988, and its inter-relation with section 138 of the County Courts
Act 1984.
It
is common ground that the defendant's tenancy was an assured tenancy within the
meaning of section 1 of the 1988 Act, which is the opening section of Part 1
Chapter 1 of the Act, the Chapter being headed "Assured Tenancies". Section
5(1), which is headed "Security of Tenure", provides as follows:-
"5(1).
An assured tenancy cannot be brought to an end by the landlord except by
obtaining an order of the court in accordance with the following provisions of
this Chapter ..... or, in the case of a fixed term tenancy which contains
power for the landlord to determine the tenancy in certain circumstances, by
the exercise of that power and, accordingly, the service by the landlord of a
notice to quit shall be of no effect in relation to a periodic assured tenancy."
Section
7, headed "Orders for Possession", which is one of the key sections for present
purposes, provides as follows so far as relevant:-
"7(1).
The court shall not make an order for possession of a dwelling house let on an
assured tenancy except on one or more of the grounds set out in Schedule 2 to
this Act; but nothing in this Part of this Act relates to proceedings for
possession of such a dwelling-house which are brought by a mortgagee, within
the meaning of the Law of Property Act 1925, who has lent money on the security
of the assured tenancy.
(2)
The following provisions of this section have effect, subject to section 8
below, in relation to proceedings for the recovery of possession of a
dwelling-house let on an assured tenancy.
(3)
If the court is satisfied that any of the grounds in Part I of Schedule 2 to
this Act is established then, subject to subsections (5A) and (6), the court
shall make an order for possession.
.................
(6)
The court shall not make an order for possession of a dwelling-house to take
effect at a time when it is let on an assured fixed term tenancy unless -
(a) the
ground for possession is Ground 2 or Ground 8 in Part I of Schedule 2 to this
Act or any of the grounds in Part II of that Schedule, other than Ground 9 or
Ground 16; and
(b) the
terms of the tenancy make provision for it to be brought to an end on the
ground in question (whether that provision takes the form of a provision for
re-entry, for forfeiture, for determination by notice or otherwise)."
Section
8, headed "Notice of proceedings for Possession", provides so far as relevant
as follows:-
"8(1).
The court shall not entertain proceedings for possession of a dwelling-house
let on an assured tenancy unless -
(a) the
landlord or, in the case of joint landlords, at least one of them has served on
the tenant a notice in accordance with this section and the proceedings are
begun within the time limits stated in the notice in accordance with
subsections (3) to (4B) below, or
(b) the
court considers it just and equitable to dispense with the requirement of such
a notice.
(2)
The court shall not make an order for possession on any of the grounds in
Schedule 2 to this Act unless that ground and particulars of it are specified
in the notice under this section; but the grounds specified in such a notice
may be altered or added to with the leave of the court.
(3)
A notice under this section is one in the prescribed form informing the tenant
that -
(a) the
landlord intends to begin proceedings for possession of the dwelling-house on
one or more of the grounds specified in the notice; and
(b) those
proceedings will not begin earlier than a date specified in the notice [in
accordance with subsections (4) to (4B) below], and
(c) those
proceedings will not begin later than twelve months from the date of service of
the notice."
Ground
8 in schedule 2 part 1 which is headed "Grounds on which Court must order
Possession" is in the following terms:-
"Both
at the date of the service of the notice under section 8 of this Act relating
to the proceedings for possession and at the date of the hearing -
(a) if
rent is payable weekly or fortnightly, at least eight weeks rent is unpaid;
(b) if
rent is payable monthly, at least two months rent is unpaid;
(c) if
rent is payable quarterly, at least one quarter's rent is more than three
months in arrears; and
(d) if
rent is payable yearly, at least three months' rent is more than three months
in arrears;
and
for the purpose of this ground ´rent' means rent lawfully due from the
tenant."
Section
45(4) of the Act provides as follows:-
"For
the avoidance of doubt, it is hereby declared that any reference in this Part
of this Act (however expressed) to a power for a landlord to determine a
tenancy does not include a reference to a power of re-entry or forfeiture for
breach of any term or condition of the tenancy."
Section
138 of the County Courts Act 1984, under the heading "Provisions as to
Forfeiture for non-payment of Rent" provides, so far as relevant, as follows:-
"(1).
This section has effect where a lessor is proceeding by action in a county
court (being an action in which the county court has jurisdiction) to enforce
against a lessee a right of re-entry or forfeiture in respect of any land for
non-payment of rent .
(2)
If the lessee pays into court not less than 5 clear days before the return day
all the rent in arrear and the costs of the action, the action shall cease, and
the lessee shall hold the land according to the lease without any new lease.
(3)
If -
(a) the
action does not cease under subsection (2); and
(b) the
court at the trial is satisfied that the lessor is entitled to enforce the
right of re-entry or forfeiture,
the
court shall order possession of the land to be given to the lessor at the
expiration of such period, not being less than 4 weeks from the date of the
order, as the court thinks fit, unless within that period the lessee pays into
court all the rents in arrear and the costs of the action.
(4)
The court may extend the period specified under subsection (3) at any time
before possession of the land is recovered in pursuance of the order under that
subsection.
(5)
If
(a) within
the period specified in the order; or
(b) within
that period as extended under subsection (4) the lessee pays into court -
(i)
all the rent in arrear; and
(ii)
the costs of the action,
he
shall hold the land according to the lease without any new lease."
The
judge expressed the view that it required very careful consideration before a
decision is arrived at that the provisions of the Housing Act 1988 should
"remove by a sidewind" protection which is afforded to any other tenant or
lessee for a term of years, all the more so because of the exclusion of the
discretion to adjourn, stay or suspend any order or proceedings pursuant to
section 9(6).
He
then went on as follows:-
"It
would be odd indeed, and I would for my part say repugnant, anomalous, and
unjust, that one class of tenant should be excluded from the right to relief
from forfeiture; and, even more so, where, as here, there is a blameless
tenant who has performed satisfactorily for many years but is then faced with
losing his entire tenancy for what may be a long term of years yet remaining
(not as it happens in this case, but as it may well be, particularly where one
is considering, as has been observed by the editors of the Encyclopedia of
Housing, a term which would be likely to be attractive to a mortgagee) and that
in these circumstances the tenant would lose that long term of years and find
himself forfeited and expropriated as the result of a temporary difficulty in
payment of the rent which was beyond his control, and which might indeed be a
very temporary difficulty - only two months' arrears being required to meet the
conditions of Ground 8."
In
the upshot, he held that section 138 of the 1984 Act did apply stating:-
"In
my judgment, it cannot be gainsaid that what the plaintiff in substance is
seeking to do here is to enforce a right of re-entry for non-payment of rent.
That is a right to which section 138(1) of the County Courts Act expressly
applies. Without that right the plaintiffs would not arrive at all at the
provisions of subsection 7(6)(b) of the Housing Act 1988 if, ...... subsection
7(6)(b) does apply to the provisions for re-entry or forfeiture in standard
form, notwithstanding the provisions of subsection 45(4). As I say, in my
judgment, in substance the landlord is seeking to enforce a right of forfeiture
or re-entry."
He
concluded as follows:-
"The
appropriate form of order, it being undoubtedly just and equitable to grant the
tenants relief in these circumstances and in any event being mandatory under
section 138, would have been an order in form N.27 of the County Court Forms.
That form of order would, in the circumstances of the Housing Act, be
sufficient to resolve both the contractual tenancy and also the statutorily
governed assured tenancy under the 1988 Act. If the tenants pay within the
stipulated period, the intermediate stage of termination of the contractual
tenancy is in those circumstances not passed. But, if they do not pay within
the stipulated period, the contractual tenancy is then struck down, together
also with the security of tenure of an assured tenant under the Housing Act
1988."
The
plaintiff's particulars of claim are contained in the appropriate County Court
form headed "Summons for Possession of Property", and, having alleged that the
property was let under an assured tenancy agreement, and that the defendant was
currently in arrears of rent totalling £2552.92, claimed possession inter
alia under ground 8.
There
were other entries on the summons on which Mr Luba relies in one of his
additional grounds, to which I will refer in due course.
At
the outset of his submissions on behalf of the landlord, Mr Edward Denehan
submitted that the hub of the appeal was that section 138 had no application in
the present case, because the plaintiff was not proceeding to enforce against
the defendant a right of re-entry or forfeiture in respect of the premises for
non-payment of rent, which under Section 138(1) is the prerequisite of the
operation of the section. Otherwise section 138 does not come into play at
all, and consequently it is a legal impossibility for the tenant to succeed on
the basis of that section.
The
starting point in the 1988 Act, he submitted, is section 5(1) which expressly
provides that an assured tenancy cannot be brought to an end by the landlord
except by obtaining an order of the court or (which has no application in the
present case) in the case of a fixed term tenancy by the exercise of a power
for the landlord to determine the tenancy in certain circumstances. The
important aspects of those words, he submitted, were twofold, viz:-
(a)
the order for possession in itself ipso facto brings the tenancy to an end.
(b)
any other means of bringing the tenancy to an end, (e.g. forfeiture) is excluded.
This
second aspect was, he submitted, underlined by section 45(4) which declared,
for the avoidance of doubt, that the power for a landlord to determine the
tenancy does not include a reference to a power of re-entry or forfeiture.
Section
7(1), he contended, precludes the court from making an order for possession of
a dwelling house let on an assured tenancy except on one or more of the grounds
set out in Schedule 2. Section 7 then proceeds to spell out this requirement
in the ensuing subsections, section 7(3) rendering it mandatory to make an
order for possession if any of the schedule 2 part 1 grounds is established,
subject to inter alia section 7(6). At this point Mr Denehan placed particular
emphasis on the word "shall" in subsection (3).
Section
7(6) lays down two further limitations:-
(a)
that the ground for possession is ground 8 (the only relevant one for present
purposes).
(b)
that the terms of the tenancy make provision for it to be brought to an end on
the ground in question (whether that provision takes the form of a provision
for re-entry, for forfeiture, for determination by notice, or otherwise).
Pausing
at this juncture, Mr Denehan drew attention to the terms of clause 4(a)(i) of
the lease, which prescribed:-
"The
landlord may re-enter on the property and immediately thereupon this agreement
shall absolutely determine without prejudice to other remedies of the landlord
(i)
if the rent or any monies payable under the agreement shall be in arrears or
unpaid for at least fourteen days after the same shall have become due (whether
demanded or not)" .......
It
is, he submitted, very important to appreciate that section
7(6)(b)
does no more than require provision for e.g. forfeiture to be included in the
terms of the tenancy (as it was here by clause 4(a)(i)), and does not, he
stressed, set up forfeiture as an independent ground for terminating the tenancy.
Nothing
turned on section 8, since it was common ground that the notice served on 15th
April 1998 complied with its requirements.
In
a nutshell, he submitted that the judge had been right in his interpretation of
the 1988 Act, but wrong in applying section 138 of the 1984 Act, since the
requirements of section 138(1) were not met, there being no proceedings to
enforce a right of re-entry or forfeiture.
Mr
Jan Luba's submissions fell into two parts, first as to the general principles
addressed by Mr Denehan, and, secondly, by reference to the two points raised
in his respondent's notice, which turn not on general principles but on the
particular terms of the tenancy agreement and of the summons in the present
case. I propose first to consider and give my conclusions on the general point
of principle, before returning at the end of this judgment to the points raised
in the respondent's notice.
Mr
Luba submitted that, as a matter of principle, a claim for possession under the
1988 Act and a claim for forfeiture operated in parallel and against the same
factual background, with the latter opening the door to a section 138
application.
A
claim for forfeiture, he pointed out, inevitably takes the landlord into the
County Court, since by virtue of section 2 of the Protection from Eviction Act
1977, the landlord is required in such circumstances to bring proceedings in
the County Court. In order to bring the lease to an end under its contractual
terms, he submitted, it was incumbent on the landlord to invoke the forfeiture
provisions under clause 4(a)(i), otherwise the lease would continue in being,
with mutual contractual obligations continuing in force, even though an order
for possession had been made pursuant to the 1988 Act. This approach was in
full conformity with section 7(6)(b), which he portrayed as, in effect,
hallmarking forfeiture as a parallel ground in any case where the lease is
still in being when the 1988 Act proceedings for possession are brought.
Mr
Luba frankly recognised that section 45(4) presented him with a problem, but he
submitted nonetheless that section 7(6)(b) was the dominant provision. In the
result, he submitted, the judge's approach in applying section 138 was correct.
I
am unable to accept Mr Luba's argument substantially for the reasons advanced
by Mr Denehan.
In
my judgment, the problem which Mr Luba poses as to the termination of the
contractual tenancy is met by the express words of section 5(1) itself, which
make it abundantly clear that the order for possession ipso facto brings the
assured tenancy to an end. This construction is also borne out in another
provision of the Act (section 7(7)). This provides that when the court makes
an order for possession on grounds relating to a fixed term tenancy which has
come to an end, any ensuing statutory periodic tenancy which has arisen on the
ending of the fixed term tenancy shall end (without any notice or regardless of
the period) on the day on which the order takes effect, thus bringing the
situation where the contractual tenancy has come to an end into line with my
interpretation of section 5(1) as just described.
This
construction of section 5(1) removes the main foundation of Mr Luba's argument
that a parallel claim for forfeiture is necessary in order to avoid the
contractual tenancy continuing after the granting of the order for possession
under the 1988 Act.
Next,
I am quite satisfied that the terms of the 1988 Act expressly rule out a claim
for forfeiture, firstly by virtue of section 5(1) itself, which provides the
only route for bringing an assured tenancy to an end (i.e. by obtaining a 1988
Act order for possession), and, secondly, by virtue of section 45(4) which
makes an express declaration to this effect for the avoidance of doubt.
Furthermore,
section 7(3) is explicit, obliging the court mandatorily to make an order for
possession if the court is satisfied that any of the grounds in Schedule 2 Part
1 is established, subject inter alia to section 6: this same stringency is
reflected in the heading to Part I (Grounds on which the court
must
order possession).
Section
7(6) itself provides, in my judgment, two stepping stones which the landlord
must traverse in order to achieve his goal of an order for possession, with
section 7(6)(b) itself requiring no more than that there be provision in the
terms of the tenancy itself for it to be brought to an end on the ground in
question, (e.g. by forfeiture). Mr Luba's submission as to the construction of
subsection (b), i.e. treating it as in effect a separate ground, seems to me
wholly untenable in the light of both section 5(1) and section 45(4).
Thus,
as a matter of principle, I am satisfied that there was no room for applying
section 138 of the 1984 Act, since the requirements of section 138(1) were not
met.
I
can well sympathise with the judge's anxiety, as expressed in his very clear
judgment, as to the consequences of this interpretation upon a tenant's
position under an assured tenancy as contrasted with other types of tenancy.
But I am driven to the conclusion I have reached by the express terms of the
1988 Act as I have analysed them above.
The
stringency of the scheme laid down in the Act is exemplified not only by the
mandatory requirement of section 7(3), but also by the provision in section
9(6) of the Act (to which the judge referred), which provides that the extended
discretion of the court to adjourn, stay, or suspend proceedings for
possession, as set out in section 9(1) to (5), does not apply if the court is
satisfied that the landlord is entitled to possession of the dwelling house on
any of the grounds of part 1 of schedule 2 of the Act (including of course
ground 8).
I
now turn to the two points raised by Mr Luba in his respondent's notice.
First, he contends that the compilation of the summons, when read with
reference to the side notes for guidance on the summons form, indicates that
this was a claim for forfeiture as well as for possession under the 1988 Act.
This was a somewhat tenuous argument in view of the express reliance on the Act
in the plea which I quoted earlier in the judgment, but in any event the
argument cannot stand in the light of my conclusion that the Act itself debars
a claim for forfeiture in the case of an assured tenancy.
The
second point raised is that clause 4(a)(i) in the tenancy agreement did not
meet the requirements of section 7(6)(b) because it did not spell out precisely
the requirements of ground 8(b) in a case such as the present where the rent is
payable monthly. However, in my judgment, the notification by reference to the
rent being in arrears or unpaid "for at least 14 days" was sufficient for this
purpose.
I
cannot leave this case without expressing my admiration and gratitude for the
admirable arguments addressed by Mr Denehan and Mr Luba, both in their skeleton
arguments and in their crisp and persuasive oral submissions.
For
all these reasons I would allow this appeal.
LORD
JUSTICE MANTELL:
I agree.
Order:
Appeal allowed with costs not to be enforced without leave of the court;
orders as per page 1 of notice of appeal; application for leave to appeal to
House of Lords refused.
(Order
not part of the judgment of the court)
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