Material change of use — Greater London Council (General Powers) Act 1973 section 25(2)(a) — Whether short term accommodation provided for employees a material consideration
In April 1987
the respondent council granted conditional planning permission for the
conversion of a property into flats, subject, inter alia, to a condition
that these flats were not to be used for any purpose specified in section 25 of
the Greater London Council (General Powers) Act 1973. Section 25 provides that
any use as temporary sleeping accommodation of any residential premises in
Greater London involves a material change of use. In July 1996 the council
served two breach of condition notices on the company in respect of two flats
owned by them which were being used to provide short term free accommodation to
overseas employees. The company’s application for judicial review of the two
notices was granted by the court below. The council appealed against that
decision contending that the accommodation had been provided for a consideration
arising by reason of the occupant’s employment within the meaning of section
25(2)(a).
The wording of
section 25(2)(a) of the 1973 Act is eccentric and its effect
unprincipled. Before a case can fall within limb (i) the provider of the
accommodation must provide it by way of trade. If there is no trade, limb (i)
does not apply, even though the provision of the accommodation may be equally
objectionable on planning grounds. The council’s contention is correct, that the
words ‘by reason of the employment of the occupant’ must have been taken from
the provisions of the income tax legislation which treats the value of benefits
in kind provided by an employer as part of the employee’s emoluments for
Schedule E purposes. What is meant by ‘a consideration arising by reason of the
employment of the occupant’ is that the provider of the accommodation must
receive a consideration from the occupant for providing it. The only necessary
characteristic is that it should arise by reason of the occupant’s employment.
Such a consideration could take one of three forms: a payment in cash; a
deduction from the occupant’s wages; or the performance of services by the
occupant. The council’s submission that the better performance of the group of
employees, which flows from the goodwill fostered by the provision of the
accommodation, was a benefit accruing to the company
grounds that there was no identifiable consideration which could be called
consideration in its correct legal sense: see pp112G–113. The most that can
properly be inferred is that a group of employees at the appropriate managerial
level would have had an expectation that they would be considered for an
invitation to make a visit. On that footing, no consideration within section
25(2)(a) was established. The judge in the court below was entitled to
hold that consideration was not given by the employees: see p114H.
to in the judgments
Currie v Misa (1875) LR 10 Ex 153
Appeal against
the decision of Mr Robin Purchas QC
This was an
appeal against the decision of Mr Robin Purchas QC, sitting as a deputy judge
of the Queen’s Bench Division, allowing Lawrie Plantation Services Ltd’s
application for judicial review quashing two breach of condition notices issued
by Kensington and Chelsea Royal London Borough Council.
(instructed by the solicitor to Kensington and Chelsea Royal London Borough
Council) appeared for the appellant council.
Alesbury (instructed by Travers Smith Braithwaite) represented the respondent
applicant, Lawrie Plantation Services Ltd.
following judgments were delivered.
NOURSE LJ: This appeal against a decision of Mr Robin Purchas QC, sitting as
a deputy judge of the Queen’s Bench Division, raises a question on the
definition of ‘use as temporary sleeping accommodation’ contained in section
25(2)(a) of the Greater London Council (General Powers) Act 1973 as
amended. Shortly stated, the question is whether two leasehold flats in Chelsea
owned by Lawrie Plantation Services Ltd (the company) have been used as
sleeping accommodation which is provided ‘for a consideration arising by reason
of the employment of the occupant’. In proceedings for judicial review brought
by the company against Kensington and Chelsea Royal London Borough Council (the
council) the question was answered by the learned deputy judge in the negative
and in favour of the company. With the leave of the judge, the council appeal
to this court.
On April 2
1987 the council granted a conditional planning permission for the conversion
of a property then known as Wray House, 12 Elystan Street, London SW3, into a
block of 130 self-contained flats, together with ancillary works. So far as
material, condition 11 provided:
The premises
subject of this permission shall not be used at any time for any purpose
specified in Section 25 of the Greater London Council (General Powers) Act,
1973 …
The reason for
the imposition of that condition was stated to be: ‘To ensure the permanent
retention of the accommodation for normal residential purposes’.
In 1989 and
1993 respectively the company acquired long leases of flats 8 and 9 in the
block, which is now known as Crown Lodge. On July 12 and 16 1996 respectively the
council issued breach of condition notices in respect of the two flats under
section 187A of the Town and Country Planning Act 1990. The notices stated that
the council considered that condition 11 in the planning permission had not
been complied with and compliance was required within six months. The company
did not accept that the condition had been breached. There being no right of
appeal against the notices, the company sought and obtained leave to apply for
judicial review, the principal relief claimed being orders of certiorari
to quash them. The judge’s order granting that relief was made on February 28
1997.
Section 25(1)
of the Greater London Council (General Powers) Act 1973 provides that, for the
purposes of what is now section 55(1) of the Town and Country Planning Act
1990, the use as temporary sleeping accommodation of any residential premises
in Greater London involves a material change of use of the premises and of each
part thereof which is so used. Section 25(2)(a) as amended provides that
in section 25:
‘use as
temporary sleeping accommodation’ means use as sleeping accommodation which is
occupied by the same person for less than ninety consecutive nights and which
is provided (with or without other services) for a consideration arising either
—
(i) by way of trade for money or money’s
worth; or
(ii) by reason of the employment of the
occupant; whether or not the relationship of landlord and tenant is thereby
created;
The question
for decision, as stated by the judge and as presented to this court, is whether
the company’s use of the flats as sleeping accommodation for occupation by its
employees and those of other companies in the group of which it is a member for
less than 90 days has involved a breach of condition 11. As stated at the
outset, on the facts of this case that question depends on whether the
accommodation has been provided for a consideration arising by reason of the
employment of the occupants.
The evidence
before the judge must be carefully considered and evaluated. The material facts
which thus emerge can be taken mainly from his judgment.
The company is
a subsidiary of the Lawrie Group plc, which has extensive interests overseas
including large scale tea plantations in the Indian subcontinent. The flat
allocation forms produced by the company for 1994 and 1995 show regular use of
the flats by different occupiers for periods of up to two weeks in each case,
usually for about 10 days, between February or March at one end of the year and
September or October at the other, with a free day for cleaning between each
occupation.
that the large majority of the occupants were described as from head office or
of a managerial grade.
In his
affidavit sworn on April 7 1996, Steven James McNaught, the company’s
solicitor, explains on instructions that the flats provide accommodation for
three categories of persons. Category (a) comprises employees of the companies
in the group, mostly from the Indian subcontinent and generally with their
wives or partners and children. That is by far the largest category. It
comprised 203 out of a total of 224 entries in the two years. In para 7 Mr
McNaught says of this category:
They come to
London on holiday and the directors of the Applicant company invite them to
stay at one or other of the two flats. No tenancy is created and they have no
contractual right (by virtue of their terms of employment or otherwise) to be
accommodated in this way. They pay nothing for the accommodation. It is
provided to them for no consideration on their part. I am informed that during
their visit such visitors with their families usually call in to visit
colleagues in the Applicant company’s offices, but that such visits are largely
social. In terms of their use of the flats this category of visitors is in
precisely the same position as those visitors falling into Category (c) who are
not employees of the Applicant’s group companies.
Category (b)
are employees of the company. Their visits are a small proportion of the use
and have been for social purposes. There were only seven entries in that
category. Category (c) are those who are not employees. They are mostly friends
of the directors of the company. There were 14 such entries. Many of the
foregoing details are given in an affidavit of Peter Hill, a director of the
company, sworn on December 23 1996. Mr Hill has also confirmed the contents of
Mr McNaught’s affidavit.
The judge’s
essential findings are not challenged by Mr Mark Lowe QC, for the council. They
are expressed at p19B1 of the transcript:
1 (1997) 74 P&CR 270 at p278.
On the
evidence as a whole I conclude that these flats were provided for the short
term accommodation of employees in the majority of category A and in category B
as part of a deliberate policy of the applicant and its group. As an inference
I conclude that the object was for the benefit of the applicant and its group
in fostering goodwill and, no doubt, better performance on the part of its
employees.
How then does
section 25(2)(a) of the 1973 Act stand in relation to those findings? I
find the wording of that provision eccentric and its effect unprincipled. Thus,
before a case can fall within limb (i) the provider of the accommodation must
provide it by way of trade. If there is no trade, limb (i) does not apply, even
though the provision of the accommodation may be equally objectionable on
planning grounds. It is very difficult to perceive a principle behind such a
distinction.
Turning to
limb (ii), I think that Mr Lowe is right in suggesting that the words ‘by
reason of the employment of the occupant’ must have been taken from those
provisions of the income tax legislation which treat the value of benefits in
kind provided by an employer as part of the employee’s emoluments for Schedule
E purposes. He instanced in particular the provision now found in section 145
of the Income and Corporation Taxes Act 1988, which accords that treatment to
living accommodation provided for an employee. In that context the words are no
doubt appropriate and entirely comprehensible. Their collocation with the words
‘a consideration arising’ has caused a difficulty of interpretation which is
central to the present case.
What then is
meant by ‘a consideration arising by reason of the employment of the occupant’?
In my view, it means that the provider of the accommodation must receive a
consideration from the occupant for providing it. But the accommodation does
not have to be provided by way of trade and the consideration need not be in
money or money’s worth. Its only necessary characteristic is that it should
arise by reason of the occupant’s employment; in other words, as I understand
it, that his employment should be a cause of the occupant’s furnishing the
provider of the accommodation with some consideration in exchange.
Such a
consideration could take one of three forms: a payment in cash; a deduction
from the occupant’s wages; or the performance of services by him. It is only
the third which can be relied on here. The council say that the great majority
of the occupants of the two flats at 8 and 9 Crown Lodge performed services to
the company or other members of the group in exchange for the provision of the
accommodation.
Like the
judge, I am unable to accept that view of the matter. I start by observing that
in section 25(2)(a) the words ‘a consideration arising’ apply to both
limbs (i) and (ii) and that, since it is clear that the consideration referred
to in limb (i) is a consideration in the correct legal sense, it must equally
be so in limb (ii). For that sense both sides, both here and below, have been
content to adopt the words of Lush J in delivering the judgment of the majority
of the Exchequer Chamber in Currie v Misa (1875) LR 10 Ex 153, at
p162:
A valuable
consideration, in the sense of the law, may consist either in some right,
interest, profit, or benefit accruing to the one party, or some forbearance,
detriment, loss, or responsibility, given, suffered, or undertaken by the other
…
The essence of
Mr Lowe’s submissions is that the better performance of the group employees
which flows from the goodwill fostered by the provision of the accommodation is
a benefit accruing to the company for that purpose.
The judge’s
reason for rejecting that submission was stated in a passage immediately
following the essential findings I have already read:
However, I am
not persuaded that there was an identifiable benefit given for
a valuable consideration for the purposes of section 25 of the 1973 Act. In my
judgment, the mere hope or expectation of goodwill or better performance (even
if in the circumstances reasonable) is not sufficient for that purpose.
Earlier, in a
passage relied on by Mr Alun Alesbury, for the company, the judge had expressed
the view that the subsection required that there should be some identifiable
consideration for the provision of accommodation arising by reason of the
employment of the occupant. He continued, at p278:
That could,
as was conceded by Mr Alesbury, consist of the performance by the employee of
his duties while occupying the accommodation. That would not have to be
supported by a written term in the contract of employment, so long as there was
evidence that in fact the accommodation was provided in consideration for the
performance of those duties. I do not, however, accept that the provision of
accommodation as a gratuitous reward for past performance would constitute
valuable consideration for the purpose of the section, unless in a particular
case there was evidence that the earlier work or service was carried out in
consideration for the future provision of accommodation.
Reading those
passages together, I think that the substance of what the judge meant by saying
that there was no identifiable consideration was that there was really nothing
which could be called consideration in its correct legal sense. That, at all
events, is how I view the matter on the evidence which was before him. As often
happens in cases of this kind, we could, with hindsight, have wished that the
evidence had been fuller than it was. In particular, it did not explain the
system by which invitations came to be made to individual employees in the
group. All we know is that the invitations were not made in writing. Complaint
was made below that the company had not disclosed inter-company communications
in respect of the visits, in spite of a formal request that it should do so.
However, the judge did not consider that the company had deliberately concealed
information of that kind from the court and drew no inference in that respect.
Mr Lowe, correctly in my opinion, has not asked this court to take a different
view.
Mr Alesbury
has accepted that if it had been established that it was a term of an
employee’s contract that he should be entitled to make a visit to Crown Lodge
at some time or times during his employment, or even that he should be
considered for an invitation to make such a visit, then the necessary
consideration would have been made out. However, on the evidence as it stands,
in particular that contained in para 7 of Mr McNaught’s affidavit, I am of the
opinion that the most which can properly be inferred is that group employees at
the appropriate managerial level would have had an expectation that they would
be considered for an invitation to make a visit. On that footing, I cannot hold
that a consideration within section 25(2)(a)(ii) has been established.
For these
reasons, I think that the decision of Mr Robin Purchas was correct and I would
accordingly dismiss the council’s appeal.
PILL LJ: The case turns upon the construction of section 25(2)(a) of
the Greater London Council (General Powers) Act 1973. Applying the relevant
words of the section to the facts in the case leaves the question whether there
was use of accommodation provided ‘for a consideration arising by reason of the
employment of the occupant’. Other difficulties may arise upon the construction
of section 25, but the issue in the present case is whether, on the evidence,
the occupants gave ‘consideration’. I agree that the word must be given the
meaning it bears in the law of contract.
Mr Lowe QC
submits that, upon the judge’s own finding, consideration was given. The judge
stated that the company’s object in providing accommodation was for the benefit
of the company and its group in fostering goodwill and better performance on
the part of its employees. That, submits Mr Lowe, is an acknowledgment of a
‘benefit accruing to the Company’, as contemplated in the classic definition of
consideration by Lush J in Currie v Misa (1875) LR 10 Ex 153, at
p162. However, the judge went on to state:
I am not
persuaded that there was an identifiable benefit given for the provision of the
accommodation in any of these cases that would constitute a valuable
consideration for the purposes of section 25 of the 1973 Act.
Bearing in
mind the judge’s earlier reasoning cited by Nourse LJ, I do not read the
sentence relied on by Mr Lowe as concluding the case in his favour. I regard
the judge’s use of the words ‘identifiable benefit’ not as revealing a failure
on his part to understand that the benefit to the company may be made up of small
benefits from individual occupancies, as Mr Lowe contends, but as a conclusion
that, on the evidence in this particular case, no consideration was given. I
agree with Nourse LJ’s analysis of the judge’s reasoning.
Mr Alesbury
concedes that if there is an entitlement under a contract of employment to use
temporary sleeping accommodation, the necessary consideration is present. The
employee is giving his services in return for that entitlement, among other
things. I would go further and say that consideration may be given if it is
established that there is a reasonable expectation under the contract of
employment that such accommodation will be offered.
On the
evidence in this case, however, the judge was, in my view, entitled to hold
that consideration was not given by the employees. There was evidence that the
management of the flats was systematically and carefully organised, as the
judge found. Indeed, there was a regular pattern of 10-day occupancies of both
flats in London from March to October of the two relevant years. It is said
that no payments were made by occupants for the use of accommodation and there
is no reason to suspect otherwise. There was, however, insufficient evidence to
compel the inference that the use of the London accommodation was a feature of
the contracts of employment of managers in the sense I have indicated. There
was no evidence as to what proportion of managers was invited to use the
accommodation or as to the basis upon which invitations were issued or their
frequency. There was no evidence that managers were entitled to use, or had a
reasonable expectation that they could use, the accommodation. The evidence did
not require the inference that, in performing their services for their
employers, the occupants of the accommodation were giving consideration for the
accommodation provided.
I reach that
conclusion with regret on the ground that the information as to the
circumstances of the occupancies before the court is far from complete. The
company declined the council’s request by letter for documents showing the
basis on which visits were arranged, stating only that it had never been the
practice to issue written invitations to visitors to the flats. Notwithstanding
that journeys by managers and their families from India to England were
involved, it was apparently arranged orally. I may, of course, be wrong, but I
regret that I am left with the impression that there could be further relevant
information. Upon a full consideration, there might or might not be a
contractual arrangement or practice beyond the grace and favour regime
advocated on behalf of the company.
I do not
regard this case as establishing a point of principle in the company’s favour,
but only, on the limited evidence before the court, that the inference that consideration
was given should not be drawn.
I agree that
the appeal should be dismissed.
THORPE LJ: The issue in this appeal is agreed. It is the issue defined by the
judge at p3 of his judgment thus: was the sleeping accommodation provided for a
consideration arising by reason of the employment of the occupants? So the
essential question is whether the users provided consideration in relation to
their employment for the occupation of the flats.
That question
has to be answered on the evidence before the judge, which, considering its
importance to outcome, seems to me to be surprisingly perfunctory. The
company’s solicitor exhibited the visitors books but said that they were not a
complete record because not all visitors might sign. He said that the occupants
were invited by a director of the company and that they paid nothing. By a
letter of September 6 1996 the local authority sought from the solicitor
further and better particulars under three numbered headings. The questions
were only partially answered by a director of the company. He accepted that the
outgoings of the flats were borne by the company. He said that invitations to
occupants were never in writing. He ignored the request for disclosure of any
inter-company communications in respect of occupations. The council’s evidence
dealt with policy in the main and did not offer a rival account of the
company’s use.
In these
circumstances, it seems to me that the issue must be decided on the company’s
presentation of their use of the premises. There is, of course, an obvious
suspicion that behind the company’s grace and favour
of charge is a perquisite of employment, but I do not consider that such an
inference can be drawn in the light of the limited content of the two relevant
affidavits. It is too speculative. The alternative speculation might emphasise
that the British developed the tea estates of the subcontinent and that until
independence they were run by British managers. Since independence, those
British companies maintaining their investments in tea plantations would
naturally consider providing hospitality in the United Kingdom to Indian
managers in order to foster and preserve ties fundamental to commercial
success.
So I proceed
on the basis that the company maintains two Chelsea flats in order to offer
hospitality to favoured recipients, some, but not all, of whom are employees.
In the same way a company might maintain a box at Ascot or at the Albert Hall
in order to confer sought-after experiences on those by whom it wishes to be
esteemed. If they are employees, it cannot be said that they have any right to
an invitation or perhaps even any expectation of an invitation. A company as
well as an individual may maintain social relationships, although no doubt such
relationships are often either tinged by, or indivisible from, commercial
relationships. But neither the recipient of hospitality who is a customer nor
the recipient who is an employee can be said to furnish consideration for the
treat.
Mr Alesbury
was, in my judgment, obviously right to concede that if the employment
contracts of the occupants provided them with the entitlement to holiday
accommodation in Chelsea free of charge, then the company would be caught by
section 25. For the service of the employee occupants would constitute
consideration for the holiday accommodation as well as for salary. I doubt he
was wise to make the same concession in respect of employees accommodated only
for the purposes of the duration of work in London. In that instance, service
is the consideration for salary alone. The accommodation is not a perquisite
but the facility to enable the employee to render a service when posted from
his ordinary place of work.
I agree with
the judge that it is impossible to spell out of the evidence any consideration
sufficient to satisfy the terms of the section. I, too, would dismiss this
appeal.
Appeal dismissed with costs. Leave to appeal
was refused.
