Protected tenant adjudicated bankrupt during currency of contractual tenancy–Tenancy rests in trustee, tenant becomes trustee’s licensee, no interest left in him which the statute could turn into a statutory tenancy–Rule in Reeves v Davies (1921) unaffected by later developments of the law–Landlord entitled to possession on trustee’s disclaimer of tenancy
This was an
appeal by Mr Iain Quarrier, tenant of a first-floor flat at Old Church Street,
Kensington, from a judgment of Judge McIntyre at West London County Court
granting the respondent, Mrs Clytie Smalley, an order for possession of the
premises.
Mr J P
Wadsworth (instructed by Elborne, Mitchell & Co) appeared for the
appellant, and Mr S Waine (instructed by Wedlake Bell & Co) represented the
respondent.
Giving the
first judgment, STEPHENSON LJ said that in 1969 the tenant took a lease of the
flat in question for a term of six years at a rent of £666 a year. The term was
limited to expire on March 25 1975. The rent was paid in full in advance by a
lump sum of £4,000 in 1969. In August 1974 the tenant was adjudicated bankrupt.
There was no clause in the lease forfeiting his tenancy on bankruptcy, and the
tenancy thereupon vested in the official receiver, his trustee in bankruptcy.
On August 23 1974 the landlord, in ignorance of the bankruptcy, began
proceedings for possession based on other grounds. On September 5 the trustee
disclaimed the lease. On October 23 the landlord began the present proceedings
for possession, alleging that the lease had vested in the trustee. By his
defence the tenant contended that he was entitled to the statutory protection
of the Rent Acts 1968-74. It was admitted that the tenancy under which the flat
was let to the tenant was a protected tenancy for the purpose of section 1 of
the Act of 1968. On November 12 1974 the county court judge granted the
landlord leave to discontinue the first action and proceeded to hear the
second. On November 21 he gave the landlord an order for possession in 28 days,
and on December 4 the Court of Appeal granted a stay pending hearing of the
appeal.
Mr Wadsworth
conceded that there was no material difference between the facts of the present
case and the facts in
decision in Reeves’ case was inconsistent first with the reasoning of
the House of Lords in Moodie v Hosegood [1952] AC 61 and secondly
with section 3 (1) (a) of the Rent Act 1968. Counsel’s argument on the first
point ignored the distinction between the position of a bankrupt tenant who on
adjudication ceased to be tenant and whose tenancy vested by operation of law
in his trustee, and a tenant who ceased by death to be tenant and whose tenancy
vested by operation of law in his legal personal representative with an express
statutory right conferred on his widow to protection if she satisfied the
statutory conditions. There was no reason to suppose that Parliament had
provided protection for a tenant who was adjudicated bankrupt unless he
qualified for protection by himself satisfying the statutory conditions. The
question whether he did so qualify could only be answered by considering, not a
decision such as Moodie by judges who were not thinking of the position
of a bankrupt tenant, but the statutory provisions now governing the creation
of a statutory tenancy. Moodie’s case showed that a house might be the
subject of a suspended contractual tenancy in one person and a statutory
tenancy in another at one and the same time, but did not show that that anomaly
extended to the facts of the present case. That brought him (his Lordship) to
counsel’s second point and the words of section 3 (1) (a) of the Act:
(a) After the termination of a protected tenancy
of a dwelling-house, the person who, immediately before that termination, was
the protected tenant of the dwelling-house shall, if and so long as he occupies
the dwelling-house as his residence, be the statutory tenant of it.
What was the
impact of this provision on the facts before the court? He (Stephenson LJ) thought that the correct
approach was that put forward by Sir John Pennycuick in the course of the
argument. The protected tenancy was not terminated by the tenant’s
adjudication, but remained vested in the trustee, and subsisted until he
disclaimed it. Section 3 (1) (a) did not therefore have the effect of turning
the tenant into a statutory tenant, for he had lost all interest in the
premises before the protected tenancy came to an end. Faced with this argument,
Mr Wadsworth had contended that though the adjudication did not terminate the
tenancy, it did deprive it of its status as a protected tenancy, so that
section 3 (1) (a) still operated in the appellant’s favour. But that submission
ignored the definition of protected tenancy in section 1 of the 1968 Act. That
section made it clear that a protected tenancy was merely shorthand for a
tenancy of a dwelling-house which qualified for inclusion by being let as a
separate dwelling and having a rateable value within the limits laid down by
the Act: and a protected tenant was simply the contractual tenant of such a
dwelling-house. The tenancy of a dwelling-house within those limits did not
lose the protection of the Act because it was transferred by assignment,
whether that assignment was by operation of law or bankruptcy, or on death to
the legal personal representative. In the present case, therefore, the
protected tenancy continued until disclaimer. Immediately before its
termination on disclaimer, the protected tenant was not occupying the flat by
virtue of a tenancy or by virtue of the Rent Acts. Apart from his interest as a
beneficiary under the trust created by his adjudication, which was irrelevant
in this connection, he had no more interest in the flat than a passer-by in the
street, and he continued in occupation merely under licence from the trustee.
He never was, and was not now, a statutory tenant. So Reeves’ case was
rightly decided, and the court was bound to follow it, as the county court
judge had done, and to dismiss the appeal.
MEGAW LJ and
SIR JOHN PENNYCUICK agreed. The appeal was dismissed, and an order made for
possession within 28 days. Leave to appeal to the House of Lords was refused.