Housing Act 1957, section 9(1A) and section 39(2) — Definition of ‘owner’ — ‘Person having control of the house’ — Person who would receive the rack-rent ‘if the house were let at a rack-rent’ — Whether freeholders of a block of flats let on long leases to individual leaseholders at low rents were the ‘person having control’ so as to be the correct recipients of local authority notices to carry out repairs under section 9(1A) and of a notice of entry on default — Application of legislation to buildings divided into units let on long leases — Plaintiff freeholders (respondents to appeals to Court of Appeal and House of Lords) claimed that they did not constitute the ‘person having control’ and their claim was upheld on appeals by the defendant local authority — A subsidiary issue raised by the appellant authority, that the respondent freeholders’ failure to appeal under section 11 of the 1957 Act against the notices rendered the latter final and conclusive by virtue of section 37, was rejected by both the Court of Appeal and the House — A notice not served on the person having control of the house had no statutory force or effect at all — So far as the main issue was concerned, it was assumed that a modern purpose-built block of flats could be a ‘house’ within the meaning of the 1957 Act (there was no argument and no judicial opinion expressed on this point) — The appellant local authority contended that the respondent freeholders, being the only person entitled to dispose of any interest in the entire property which was assumed to constitute the house, must be considered to be the person who would receive the rack-rent of the house if it were let at a rack-rent — The respondents submitted that the definition applied only to a person whose interest in the property entitled him to dispose of the right of occupation — Thus in the case of a house divided into units let on long leases the definition must apply collectively to all the long leaseholders who between them would receive the rack-rents if the units were so sublet — Held, after reviewing the history of the legislation and the relevant case-law, that the respondents’ submission was correct and was supported by Truman, Hanbury, Buxton & Co Ltd v Kerslake and London Corporation v Cusack-Smith — Clackson v London Borough of Bromley was disapproved — Local authority’s appeal dismissed
The following cases are referred to in this report.
Bowditch v Wakefield Local Board of Health (1871) LR 6 QB 567
Clackson v London Borough of Bromley (1982) – unreported
London Corporation v Cusack-Smith [1955] AC 337; [1955] 2 WLR 363; [1955] 1 All ER 302; (1955) 5 P&CR 65; 53 LGR 209, HL
Truman, Hanbury, Buxton & Co Ltd v Kerslake [1894] 2 QB 774
Wright v Ingle (1885) 16 QBD 379
This was an appeal by the London Borough of Croydon from a decision of the Court of Appeal, who had dismissed an appeal from a decision of Harman J in favour of the respondents, Pollway Nominees Ltd. The respondents were the freehold owners of a block of flats known as Crown Point, Beulah Hill, Croydon. The proceedings had commenced by an originating summons by which the present respondents sought declarations that they were not the ‘person having control’ of the block of flats for the purpose of Part II of the Housing Act 1957 and that, accordingly, notices served on them under section 9 were a nullity. Harman J granted these declarations. The decision of the Court of Appeal was reported at [1985] 1 EGLR 249.
The provisions of section 9(1A), section 37(1) and section 39(2) of the Housing Act 1957 referred to in the speeches are now in respectively section 190(1)(a), section 190(4) and section 207 of the consolidating Housing Act 1985.
Michael Barnes QC and Robin Campbell (instructed by the Controller of Administration of the London Borough of Croydon) appeared on behalf of the appellants; John Colyer QC and Miss J M Gibson (instructed by Bernsteins) represented the respondents.
In his speech, LORD BRIDGE OF HARWICH said: The respondent company is the freehold owner of a block of flats known as Crown Point, Beulah Hill in the London Borough of Croydon. The appellants are the local authority. Crown Point comprises 42 flats in all. Under an agreement for a lease to be granted by the respondent company to an associated or subsidiary company, Halydene Ltd, 10 of the flats are let for 99 years from June 24 1979 at the current annual rent of £50 a flat. These 10 flats are occupied by tenants protected by the Rent Acts who pay the appropriate controlled rents, amounting in the aggregate to just under £10,000 per annum, to Halydene Ltd. The remaining 32 flats are occupied by lessees holding under 99-year leases. One such lease is in evidence. Presumably it is typical of the remainder. The term commences on June 24 1976. The annual rent is £25 rising to £75 during the term. The demised premises are so defined as to exclude both the common parts and the whole of the structure of the building. The lessor covenants to keep the structure in repair, but is entitled to recover a defined proportion of the cost from the lessee by way of service charge.
On December 8 1982 the local authority served on the respondent a notice under section 9(1A) of the Housing Act 1957 requiring it to carry out substantial repairs to the roof of the building and minor external repairs to the windows of one of the flats. Nothing having been done in response to this notice, the local authority on January 30 1984 served notice under section 10(2) of their intention to enter the premises and carry out the work themselves. This provoked the issue by the respondent of the originating summons instituting these proceedings and claiming declarations that the respondent was not the ‘person having control’ of Crown Point under Part II of the Act of 1957 and that accordingly the notice of December 8 1982 was a nullity. The declarations sought were granted by Harman J. An appeal from his judgment was dismissed by the Court of Appeal (Oliver and Mustill LJJ and Sir Roualeyn Cumming-Bruce). The local authority now appeal by leave of your lordships’ House.
The scheme of Part II of the Act of 1957, as originally enacted, was concerned with the maintenance of houses in a state of fitness for human habitation, their repair if they were unfit and could be|page:28| rendered fit at reasonable cost, their demolition or closure if they could not. The fasciculus of sections beginning with section 9 is headed ‘Unfit premises capable of repair at reasonable cost.’ But the ambit of compulsory repairs that can be required has been enlarged by the addition of section 9(1A) by section 72 of the Housing Act 1969. Under that subsection, if the local authority are satisfied that a house
is in such a state of disrepair that, although it is not unfit for human habitation, substantial repairs are required to bring it up to a reasonable standard, having regard to its age, character and locality, they may serve upon the person having control of the house a notice requiring him
to carry out specified repairs. The consequence of failure to comply is that the local authority may enter and carry out the works themselves and, following upon a demand, recover the expenses incurred from ‘the person having control of the house’: section 10. A ‘person aggrieved’ by a notice requiring the execution of works under section 9 or a demand for the recovery of expenses incurred by a local authority in executing work under section 10 has a right of appeal to the county court under section 11. Section 37(1) provides:
Any notice, demand or order against which an appeal might be brought to a county court under this Part of this Act shall, if no such appeal is brought, become operative on the expiration of twenty-one days from the date of the service of the notice, demand or order, and shall be final and conclusive as to any matters which could have been raised on such an appeal . . .
The crucial definition on which the main issue raised by this appeal turns is contained in section 39(2), which provides:
For the purposes of this Part of this Act, the person who receives the rack-rent of a house, whether on his own account or as agent or trustee for any other person, or who would so receive it if the house were let at a rack-rent, shall be deemed to be the person having control of the house.
In this subsection the expression ‘rack-rent’ means rent which is not less than two-thirds of the full net annual value of the house.
The main issue is whether the respondent falls within the definition of ‘the person having control of the house’. But the local authority raise a subsidiary point. The respondent failed to appeal under section 11 against the notice of December 8 1982. The question whether the respondent is the ‘person having control of the house’ is, it is submitted, a matter which could have been raised on such an appeal and accordingly the failure to appeal within due time renders the notice final and conclusive as to that matter under section 37(1). Neither court below had any hesitation in rejecting that submission. Nor have I. The statute requires that a notice under section 9 be served on the person having control of the house. A notice not so served has no statutory force or effect at all.
The main issue has been argued both in the Court of Appeal and before your lordships on the footing that Crown Point can properly be regarded as a ‘house’ within the meaning of section 9 of the Act of 1957. In so far as that may involve an admission of fact by the respondent, it is, of course, open to a party to make any admission of fact he chooses. But in so far as the matter proceeds upon a concession of law that a modern purpose-built block of flats is a ‘house’ to which the provisions we are considering apply, I am by no means prepared to accept it as necessarily correct. We have heard no argument on the point and I refrain from expressing any opinion on it one way or the other. I apprehend, however, that a building originally constructed as a single dwelling-house does not cease to be a ‘house’ under the Act if it is internally converted into a number of separate residential units which are then sold off on long leases, as commonly happens as an incident of a familiar form of contemporary property development. Accordingly, even if we may be addressing an artificial problem in relation to Crown Point, the question how the definition applies to a building which is undoubtedly a house where the separate residential units within the house are all let on long leases at ground rents is one that requires to be answered.
It is not disputed that the rack-rents of the 10 flats comprised within the letting to Halydene Ltd are received by Halydene Ltd, not by the respondent company. The remaining 32 flats are not sublet at rack-rents but, if they were, the individual sublessors would in each case be the persons entitled to receive them. The argument for the local authority is that the respondent company, being the only person entitled to dispose of any interest in the entire property which constitutes ‘the house’ must be the person who would receive the rack-rent of the house if it were let at a rack-rent. It matters not, according to the argument, that the respondent’s only interest is in reversion and that in the real world no one would pay a rack-rent for a reversionary lease of premises let at ground rents. Such a letting is theoretically possible and it therefore follows, the local authority submit, that the respondent is the ‘person having control of the house’ on the true construction of the definition.
The argument for the respondent is that the definition is only apt to apply to a person whose interest in the property entitles him to dispose of the right of occupation. It is for the right of occupation that rack-rents are paid. Hence the person entitled to grant that right will receive the rack-rent if the property is let at a rack-rent or would receive it if it were so let. In the case of a house comprising a multiplicity of residential units let on long leases at ground rents, there is either no person to whom the definition can apply or the definition applies collectively to all the long leaseholders who between them either receive the rack-rents of units sublet at rack-rents or would receive the rack-rents if the units were so sublet.
The formula which we find in section 39(2) of the Act of 1957 is one with a long statutory history. It has been used in a wide variety of legislative contexts most commonly for the purpose of identifying the person entitled to that interest in property upon whom Parliament thought it appropriate to impose some obligation to undertake work or in connection with the property required in the public interest or to meet a proportionate share of the cost of public works from which the property would derive the benefit. The language in which the formula is expressed is not always identical, but minor verbal differences do not, I believe, affect the essential concept which the formula is intended to embody. It would be tedious to embark on anything like a comprehensive review of statutory uses of the formula or of the obligations imposed on those to whom the formula applies. A few examples will suffice. Thus in the Towns Improvement Clauses Act 1847 section 3 provides that:
The word ‘owner’, used with reference to any lands or buildings in respect of which any work is required to be done, or any rate to be paid, under this or the special Act, shall mean the person for the time being entitled to receive, or who, if such lands or buildings were let to a tenant at a rack-rent, would be entitled to receive, the rack-rent from the occupier thereof.
In the series of Public Health Acts from 1848 to 1936 the definition of ‘owner’ has remained essentially unchanged and is stated in section 343 of the Act of 1936 as meaning:
. . . the person for the time being receiving the rack-rent of the premises in connection with which the word is used, whether on his own account or as agent or trustee for any other person, or who would so receive the same if those premises were let at a rack-rent.
A modern variant is found in section 329 of the Highways Act 1980, which provides that:
‘owner’, in relation to any premises, means a person, other than a mortgagee not in possession, who, whether in his own right or as trustee or agent for any other person, is entitled to receive the rack-rent of the premises or, where the premises are not let at a rack-rent would be so entitled if the premises were so let.
The series of Public Health Acts from 1848 to 1936 provide useful illustrations of the kind of obligations imposed by Parliament on the ‘owner’ of premises as defined by the formula. Thus it is the owner of premises abutting on a new street who is ultimately made liable, in proportion to his share of the frontage, for the cost of making up the street by sewering, levelling, paving etc: Act of 1875, section 150. If a building lacks satisfactory provision for drainage, it is upon the owner that the cost of making such provision falls: Act of 1936, section 39. If earth closets require to be replaced by water closets, the cost is to be shared equally between the local authority and the owner: Act of 1936, section 47. If a building or structure is in a dangerous condition, the local authority may require the owner to repair it or demolish it: Act of 1936, section 58.
In all these cases the rationale of the use of the formula to designate the person upon whom the relevant obligation is cast is surely plain. The owner of that interest in premises which carries with it the right, actual or potential, to receive the rack-rent, as the measure of the value of the premises to an occupier, is the person who ought in justice to be responsible for the discharge of the liabilities to which the premises by reason of their situation or condition give rise.
The authority most directly in point for present purposes is Truman, Hanbury, Buxton & Co Ltd v Kerslake [1894] 2 QB 774. That was a case arising under the Public Health (London) Act 1891, where the definition of ‘owner’ in section 141 was in identical terms to that used in section 343 of the Public Health Act 1936. The statute imposed liability to remedy a statutory nuisance on the ‘owner of the premises on which such nuisance arises’. Failure by the owner to
comply with the notice requiring him to abate such a nuisance was an offence. The appellants were convicted of failure to comply with a notice requiring abatement of a nuisance arising on premises of which they were the headlessees. The premises were sublet at less than a rack-rent. Delivering the judgment of the Divisional Court allowing the appeal, Kennedy J said, at pp 778, 779:
In our opinion the Court of Quarter Sessions was wrong in holding the appellants to be ‘owners’ within the meaning of this enactment. It appears to us to be impossible to treat as the person who would receive the rack-rent, if the premises were let at a rack-rent, persons who, at the time when the ‘owner’ of premises, as defined by the 141st section, has to be found, have not such an interest in the property that, if it was let at a rack-rent, they would receive such rack-rent. The words of the section in our judgment, in the case of there being no one who in fact receives a rack-rent from the actual occupier, designate as ‘owner’ the person who ‘rebus sic stantibus,’ that is to say, with the interests in the premises as they then are, would, if they were let to an occupier at a rack-rent, receive that rack-rent.
In this case, whilst the sublease to Aslett subsists, that is to say, for the next thirty and a half years and until a date only eleven days anterior to the expiring of the appellants’ own interests, the appellants could not let to any one. The only person who could let the premises at a rack-rent, the only person whose interest in the premises places him in a position to receive a rack-rent is Bishop, the assignee of the sublease to Aslett. His interest as assignee of that sublease gives him the power of so letting; and if the premises were so let, he is the person who would receive the rack-rent. He chooses, it is true, to occupy the premises himself; but we see nothing to prevent the same person being both occupier of the premises and the ‘owner’ within the meaning of this section.
The formula was considered by your lordships’ House in somewhat unusual circumstances in London Corporation v Cusack-Smith [1955] AC 337. There the appellants held a long lease at less than a rack-rent; the respondents were the freeholders. The building comprised in the lease had been destroyed by enemy action and applicable legislation relieved the lessees of liability to pay rent until the site was again built upon. Upon refusal of planning permission for rebuilding, the freeholders served a purchase notice under section 19(1) of the Town and Country Planning Act 1947 requiring the corporation, as local planning authority, to acquire their interest in the premises. The majority (Lord Reid, Lord Tucker and Lord Keith of Avonholm) held that the freeholders were not ‘owners’ within the definition in section 119(1) of the Act of 1947, which, save that it refers to ‘a person’ rather than ‘the person’, embodies the same formula as that which we have to construe. Lord Oaksey and Lord Porter dissented.
I say that the circumstances were unusual, since this was one instance where, on the majority holding, the formula used in the definition fell to be applied for the purpose of conferring a benefit, not of imposing a liability. Lord Oaksey based his dissent on the view that the definition in section 119(1) was excluded by the context from application to ‘any owner’ entitled to serve a purchase notice under section 19. Lord Porter concluded that both the freeholder and the leaseholder might be an ‘owner’ within the definition. But the reasoning of the majority affirms and follows the decision in Truman, Hanbury, Buxton & Co Ltd v Kerslake. Lord Reid said, at p 360:
one looks for the person who at the relevant date would be entitled to make a new lease at a rack-rent and supposes that he does so, and the only person entitled to make a new lease is the person in possession, in this case the appellants.
He added, at p 361:
Finally, it is, I think, important to observe that for a very long time the definition of ‘owner’ in the Public Health Acts has been in substantially the same terms as the definition in this Act, and in a case under the Public Health (London) Act 1891, Truman, Hanbury, Buxton & Co Ltd v Kerslake [1894] 2 QB 774, where there were a lease and a sublease both at rents less than rack-rents, it was held that the sublessee was the ‘owner.’ Where Parliament has continued to use words of which the meaning has been settled by decisions of the court it is to be presumed that Parliament intends the words to continue to have that meaning.
Lord Keith of Avonholm said, at p 369:
I cannot accept the view which commended itself to Denning LJ and Romer LJ that the definition can be divorced so far from actuality as to cover the case of a person who could have let the land in the past at a rack-rent, if he had not chosen to let it at less than a rack-rent. The natural way to construe the definition in its application to an actual case is, in my opinion, to ask, who is entitled to let the land at a rack-rent as things are today? I am strengthened in my view by the fact that this was the construction put upon a substantially similar definition in the case of Truman, Hanbury, Buxton & Co Ltd v Kerslake, and that, whereas an entirely different definition of owner was introduced into the Town and Country Planning Act 1944, and the Acquisition of Land (Authorisation Procedure) Act 1946, the legislature in 1947 reverted to a definition which has appeared repeatedly in earlier legislation. It must be assumed that Parliament knew of the judicial interpretation that had been put on the old definition.
Mr Barnes, for the local authority, has relied on the cases of Bowditch v Wakefield Local Board of Health (1871) LR 6 QB 567 and Wright v Ingle (1885) 16 QBD 379. Both these cases concerned the liability of frontagers to contribute to the cost of private street-works. In the first case the frontage property was held by trustees who, under the terms of the trust, could only use it as a school. In the second case the property was held on trust for use as a Wesleyan chapel. In neither case was the inhibition imposed by the trust on the use which could be made of the property held to exempt the trustees from liability as ‘owners’ within the relevant definition. These cases show, so it is argued, that an owner of premises may be the person who ‘would receive the rack-rent of the premises if the premises were let at a rack-rent’ notwithstanding some legal impediment which would prevent the premises being let at a rack-rent in fact. I cannot accept that these authorities throw any light on the application of the definition to the case where the freeholder has let the premises at less than a rack-rent, albeit in subdivided units, so that he no longer has any right in possession at his disposal.
The question raised by the instant appeal has, perhaps surprisingly, only once been previously considered by the courts in a case which, even more surprisingly, is not reported. In Clackson v London Borough of Bromley, decided on March 22 1982, McNeill J held that a dangerous structure notice under section 58 of the Public Health Act 1936 had been validly served on the freeholder of a block of 12 flats all let on 99-year leases at nominal ground rents. The judge, after extensive examination of the authorities, concluded that the freeholder alone was the person who would receive the rack-rent of the premises if the premises were let at a rack-rent.
I am afraid I cannot agree. It seems to me, as it did to the Court of Appeal, that the principle clearly embodied in the reasoning in Truman, Hanbury, Buxton & Co Ltd v Kerslake [1894] 2 QB 774 and London Corporation v Cusack-Smith [1955] AC 337 is applicable not only where the freeholder has let the entire premises under a single lease at less than a rack-rent, but equally where he has granted separate leases of all the separate units capable of occupation comprised within the building at rents which in the aggregate are less than the rack-rent of the building and thus retains only a reversionary interest which confers no right of occupation which he can either enjoy for himself or let to anyone else. Moreover, this conclusion is, in my view, entirely in accordance with the philosophy which underlies the formula used in the definition.
I appreciate that this conclusion may cause inconvenience for local authorities. But I imagine that normally the contractual rights of the owners of long leasehold interests in flats to enforce repairing obligations against their lessors will provide an adequate solution of the problem. This may be the explanation of the fact that, though the formula found in the definition has been in common use in statutes since at least 1847, it was not until 1982 that its application to buildings divided into units let on long leases had to be considered by the courts. The truth, I suspect, is that generations of parliamentary draftsmen have been content to use the time-honoured formula without ever contemplating its application to the circumstances presently under consideration. That must surely be true of section 39(2) of the Act of 1957, which simply re-enacts the formula first used in its present context in section 17(4) of the Housing Act 1930. That Act introduced the compulsory procedure which we now see in expanded and amended form in Part II of the Act of 1957 requiring ‘the person having control of the house’ to effect repairs to a house which was unfit for human habitation and which was ‘occupied or of a type suitable for occupation by persons of the working classes’. The draftsman in 1930 can hardly be blamed if it did not occur to him to make suitable provision for dealing with problems arising from flats let on long leases at low rents.
I would dismiss the appeal with costs.
Agreeing, LORD MACKAY OF CLASHFERN said: I have had the advantage of reading in draft the speeches prepared by my noble and learned friends Lord Bridge of Harwich and Lord Goff of Chieveley. Like Lord Goff, I was much attracted by Mr Barnes’ excellent argument. However, as Mr Colyer submitted in one branch of his argument, it appears that the intention of the Act was that there|page:29| should always be a person or persons having control of any relevant house so that the statutory machinery will be able to operate in relation to that house. It is fundamental to Mr Barnes’ argument that where there is no person who alone or jointly with other persons has an interest, whether as a leaseholder or freeholder, in the whole house, no person or persons have control of the house within the meaning of the Act. For this reason, in my opinion, his argument fails and this appeal should be dismissed. I also agree with the further reasoning given by my noble and learned friends for reaching this conclusion.
Also agreeing that the appeal should be dismissed, LORD GOFF OF CHIEVELEY said: I must confess to having been much attracted by Mr Barnes’ admirable argument. At first sight, it seemed so startling and unpractical a result that ‘the person having control’ of the house in the present case (assuming, as I do, that it is a house for the purposes of the Housing Act 1957) should be 43 persons having interests in different parts of the house, that such a result could not have been intended by Parliament. Moreover, strong support for Mr Barnes’ argument can be derived from the statute itself. It is common ground that the question which we have to decide is a question of construction of section 39(2) of the Act, read, of course, in its statutory context. It is also common ground that there are two limbs to the definition of ‘the person having control of the house’; and that it is necessary to identify that person by first looking for a person who falls within the first limb, ie is the person who receives the rack-rent of the relevant house, whether on his own account or as agent or trustee for any other person, and then, if there is no such person, to identify the relevant person by looking for the person who falls within the second limb, ie is the person who would so (ie whether on his own account or as agent or trustee for any other person) receive it (ie the rack-rent of the relevant house) if the house were let at a rack-rent. It is plain, moreover, that the rack-rent so referred to must be the rack-rent of the whole house. This is because the words used in the first limb are ‘the rack-rent of a house’. Those words cannot be read (even with the aid of the Interpretation Act) as meaning ‘the total of the rack-rents of all the constituent parts of a house’; if reinforcement for that view is needed, it is to be found in the fact that, in the final sentence of the subsection, rack-rent is defined with reference to ‘the full net annual value of the house’. On this basis, Mr Barnes was able to mount a formidable argument that the person having control of a house must have been intended to be a person having an interest in the whole of the relevant house; though this would obviously embrace a number of persons who together held a joint interest in the whole of the house. Such an interest could, of course, be freehold or leasehold; and if freehold and leasehold interests co-existed in the whole of the relevant house, a choice would have to be made. It was this latter problem that this House had to consider in London Corporation v Cusack-Smith [1955] AC 337.
As I have said, I found this argument to be most attractive. First of all, it seemed to me to provide a sensible answer in those cases where a freeholder had let off parts of the house in separate dwellings, while retaining part of the structure (eg the roof or a common staircase) which did not itself constitute a dwelling — a case which would not be solved by section 18 of the Act because, if the part of the structure retained by the landlord were to fall into disrepair, under section 18 the local authority could not treat it as a house. Second, there are strong indications in other parts of the Act which support the view that it was contemplated that the ‘person in control of the house’ should be a person (or persons) having a single interest in the house. In particular, the provisions for serving of notices under section 9 do not grapple with the problem of service where the person in control of the house consists of a number of persons having interests in different parts of the house; and, if the local authority itself expends money in carrying out work of repair, there is a significant silence in the Act as to whether a person having an interest in a part of the house unaffected by the repairs should be liable to pay, or as to how, if all persons having interests in different parts of the house are liable to pay, the expense is to be apportioned between them. In this connection, it is of interest that section 13 is drawn in terms which appear to contemplate that only a person having a single interest in the whole house should be held responsible. Such a conclusion would moreover, in my opinion, only conflict with the evident underlying purpose, stressed in the speech of my noble and learned friend Lord Bridge of Harwich, that the person enjoying, or capable of enjoying, the economic benefit of the house should be the person upon whom the burden of notices under section 9 of the Act should fall, to the extent that that policy must give way to a countervailing policy that there must be a clearly identifiable person upon whom the notice shall be served, especially as that person can always pass the economic consequences of the burden on to his lessees when they are responsible for the relevant repairs under the terms of any applicable lease.
Nevertheless, in the end, I feel driven by the words of section 39(2) itself to reach the same conclusion as that reached by the Court of Appeal. This is because I feel that it must have been the intention of the Act that there shall always be a person having control of any relevant house, so that the statutory machinery must operate in relation to that house. And the inevitable consequence of Mr Barnes’ argument is, as I see it, that upon his construction, the statutory machinery could never operate in a case where a house is in divided ownership — whether because of the existence of flying freeholds in different parts of the house, or because (as we are told may happen) the house is in divided ownership because constructed upon land belonging to two separate freeholders. In such cases, there can be no single interest in the whole house; and, on Mr Barnes’ construction, there can be no person having control of the house. This must, I consider, be inconsistent with the intention of the legislature. Furthermore, in agreement with the Court of Appeal, I consider that the words ‘the person who receives the rack-rent of the house’ in the first limb of section 39(2) can, with the aid of the Interpretation Act, be read as applicable to the case where a number of persons, having interests in different parts of the house which together comprise the totality of the house, join together to grant a lease of the whole house at a single rack-rent. Such a result may, in the circumstances of the present case, be exceedingly improbable; it may also create a considerable inconvenience for the local authority; but it is, as I read it, capable of falling within the statutory definition.
I am fortified in this conclusion by what appear to me to be two important considerations. First, although this solution can obviously create difficulties for local authorities in the serving of notices, those difficulties are not insuperable, especially having regard to the provisions of section 103 of the Housing Act 1964. Second, the difficulties so created are, in my opinion, far outweighed by the fact that, on Mr Barnes’ construction, well-advised landlords could so arrange their affairs as to ensure that their property escaped from the provisions of the Act, by simply providing that one part of the relevant house (eg the roof or the common staircase) was vested in a separate freehold owner, for example a subsidiary company of the landlord. This would be a most undesirable state of affairs, which cannot, I think, have been intended by the legislature.
The conclusion which I have reached is therefore consistent with both the decision and the reasoning of the majority of this House in London Corporation v Cusack-Smith. I wish, however, to say that, if I had been persuaded by Mr Barnes’ argument as to the construction of the statute, I would not have felt inhibited by that decision from accepting his argument, which was, I consider, focused upon a different question, viz how to choose between two persons who both hold a single interest in the whole house — a question which I regard as being not so fundamental as the question which we have had to consider in the present case.
For these reasons, I find myself to be in agreement with the decision of the Court of Appeal on the main point in the case. Since I, like the remainder of your lordships, am also in agreement with the conclusion of the Court of Appeal on the subsidiary point, I, too, would dismiss the appeal.
LORD BRANDON OF OAKBROOK and LORD BRIGHTMAN agreed that the appeal should be dismissed for the reasons given in the speech of Lord Bridge of Harwich and did not add any observations of their own.
The appeal was dismissed with costs.