Lord Justice Rix:
This appeal raises the question whether a local authority can lawfully bind itself by contract to subject its statutory power, to vary its tenancy agreements by notice, to the approval of tenants’ representatives. McCombe J has held that it cannot do so, and the appellant, Mr Maurice Kilby, a secure tenant of Basildon District Council, the respondent (the “Council”), submits that the judge is in error.
1. That question arises under the Housing Act 1985 and in particular its sections 21, 102(1) and 103.
The Housing Act 1985
“21. General powers of management
(1) The general management, regulation and control of a local housing authority’s houses is vested in and shall be exercised by the authority and the houses shall at all times be open to inspection by the authority.
(2) Subsection (1) has effect at all times subject to section 27 (management agreements).
102. Variation of terms of secure tenancy
(1) The terms of a secure tenancy may be varied in the following ways, and not otherwise –
(a) by agreement between the landlord and the tenant;
(b) to the extent that the variation relates to rent or to payments in respect of rates, council tax or services, by the landlord or the tenant in accordance with a provision in the lease or agreement creating the tenancy, or in an agreement varying it;
(c) in accordance with section 103 (notice of variation of periodic tenancy).
(2) References in this section and section 103 to variation include addition and deletion…
(3) This section and section 103 do not apply to a term of a tenancy which –
(a) is implied by an enactment, or
(b) may be varied under section 93 of the Rent Act 1977 (housing association and other tenancies: increase of rent without notice to quit).”
103. Notice of variation of periodic tenancy
(1) The terms of a secure tenancy which is a periodic tenancy may be varied by the landlord by a notice of variation served on the tenant.
(2) Before serving a notice of variation on the tenant the landlord shall serve on him a preliminary notice –
(a) informing the tenant of the landlord’s intention to serve a notice of variation,
(b) spec
(c) inviting the tenant to comment on the proposed variation within such time, spec
and the landlord shall consider any comments made by the tenant within the spec
(3) Subsection (2) does not apply to a variation of the rent, or of payments in respect of services or facilities provided by the landlord or of payments in respect of rents.
(4) The notice of variation shall spec
(a) the variation effected by it, and
(b) the date on which it takes effect;
and the period between the date on which it is served and the date on which it takes effect must be at least four weeks or the rental period, whichever is the longer.
(5) The notice of variation, when served, shall be accompanied by such information as the landlord considers necessary to inform the tenant of the nature and effect of the variation.
(6) If after the service of a notice of variation the tenant, before the date on which the variation is to take effect, gives a valid notice to quit, the notice of variation shall not take effect unless the tenant, with the written agreement of the landlord, withdraws his notice to quit before that date.”
2. Thus, section 21 sets out the local authority’s purpose, and duty, namely to manage its housing stock. Section 102(1) places limits on the local authority’s powers to vary its secure periodic tenancies, by providing that such variations should be either by agreement, or (
3. The need for such a unilateral method of varying tenancies can be readily acknowledged. A local authority may have thousands of housing units. Circumstances, or changes of policy, may require it to be able to vary the terms of its tenancies. If such variation had to be sought severally and bilaterally, the local authority’s housing stock could become impossible to manage, in breach of its duty under section 21.
The facts
4. I can take the facts straight from the helpful skeleton of Mr Nigel
5. Mr Kilby is the secure tenant of 53 Frettons, Basildon,
6. For many years Mr Kilby has served as an elected tenants’ representative. He was most recently re-elected in September 2004. He sits on the community panel for his area and is a deputy representative on the borough-wide tenants and leaseholders panel.
7. The Council has approximately 12,000 properties let on secure tenancies.
8. The Council’s standard tenancy agreement (whether in its 1995 or more recent 2000 version) contains a clause 11, as follows
“11. We can only change the terms of this agreement
9. In 2003 the Council wanted to change the terms of its tenancy agreements. The nature of the proposed changes is immaterial to the legal issue, save so far as it is illustrative of the kind of variations which a housing authority might wish to make to tenancy agreements. The proposed changes included: the introduction of a power to levy service charges for the cost of leasing equipment for space and water heating; extending the definition of “rechargeable works” to include the costs of responding to unjust
10. In short, the proposed variations covered a spectrum between relatively trivial changes and changes which could potentially have a major financial or non-financial impact on tenants. They included changes which appear sensible and non-controversial, and ones which have the potential to be controversial (and were so in some cases, especially in relation to service charges). The proposed removal of clause 11,
11. It is common ground that the Council consulted on the changes, but also that they did not obtain consent in accordance with clause 11. The Council ultimately resolved to adopt the changes. In doing so it was acting consistently with legal advice that it received, to the effect that clause 11 was invalid.
The judgment
12. Ultimately the judge decided the case on a short point of statutory interpretation. He said:
“16…In this case, what is purportedly agreed is a new machinery for variation of any terms of the tenancy, d
13. Essentially what the judge appears to me to be saying there is that the method of variation adopted by clause 11 was in conflict with the statutory prohibition on variation otherwise than by one of the three methods stipulated in section 102(1). However, the reference to unlawful fettering in the middle of that paragraph is perhaps an additional reason adopted by the judge, which he then developed in his next paragraph:
“17. Equally, I would be inclined to accept Mr Arden’s submission that the clause was void as an illegitimate fetter on the Council’s statutory powers under the Act…”
The submissions
14. On behalf of Mr Kilby, Mr G
15. Thus a public body does not act unlawfully merely and whenever it commits itself by contract to a particular course of action or forecloses some other course of action. Where pursuant to their statutory functions public bodies are required to enter into contracts, it requires a sensitive rather than a dogmatic analysis to distinguish between an acceptable contractual restriction and an illegitimate fettering of discretion. As Wade & Forsyth, Administrative Law, 9th ed, 2004, observed (at 334):
“But it is quite evident that the doctrine…will not be extended to the point where it can be invoked by a public authority as a pretext for escaping from obligations which it has deliberately and properly contracted.”
16. In this context, the principal authority relied on by Mr G
17. Relying on that authority, Mr G
18. On behalf of the Council, however, Mr Andrew Arden QC submitted that the judge had come to the right result as a matter of statutory interpretation, but that his reasons could well have been expanded by reference to fundamental doctrines prohibiting the fettering or delegation of a public body’s discretion. Clause 11 provided an absolute veto on the Council’s power unilaterally to vary the tenancies’ terms by notice. As such it was incompatible with sections 102/103, and amounted to both an illegitimate fetter on the Council’s discretion and to the delegation of its power (to vary) to the tenants’ representatives. He relied on well-known cases such as Ayr Harbour Trustees v. Oswald (1883) 8 App Cas 623, Birkdale District Electricity Supply Co Ltd v. Southport Corporation [1926] AC 355, British Transport Commission v. Westmoreland County Council [1958] AC 126, and Parker v. Camden London Borough Council [1986] 1 Ch 162. As for Beddowes, he submitted that it was to be explained on the basis relied on by the majority in that case, that there were overlapping or conflicting statutory powers, and that the restrictive covenant, even
Two authorities
19. In truth, there was no dispute about the relevant principles of public law applicable to such statutory bodies as the Council in the housing context, and in my judgment it is possible to proceed directly to Beddowes, which was relied on by Mr G
20. In Beddowes, Hammersmith & Fulham owned an estate consisting of blocks of rented flats which were in a bad state of repair. The council adopted a policy, permitted by the Housing Act 1980’s push in favour of owner-occupation, of selling the estate for development on that basis. However, it was not practicable to sell the whole estate at once (at 1066C). Therefore, in order to make both the instant sale and the ultimate development of the whole estate feasible, the council was willing to grant the purchaser of phase one a restrictive covenant relating to the retained estate, preventing the letting of its flats on other than long leases at a premium. In other words, the whole estate was to be destined in the long run for owner occupation. The issue was whether such a fetter on the council’s housing powers and functions was lawful. In a powerful dissent, Kerr LJ said that it was not. However, the majority of this court, Fox LJ and Sir Denys Buckley, upholding Schiemann J, ruled otherwise.
21. Fox LJ reasoned the matter as follows (at 1064/1066):
“In general, I do not understand it to be disputed that there was power in the council (as the judge held) to create restrictive covenants under the Housing Acts, or otherwise. Power to create restrictive covenants does not, however, resolve the question whether the covenants constitute an unlawful fetter…
It is clear that a local authority cannot, in general, make declarations of policy which are binding in future on the council for the time being. A council cannot extinguish statutory powers in that way. But it may be able to do so by the valid exercise of other statutory powers. If a statutory power is lawfully exercised so as to create legal rights and obligations between the council and third parties, the result will be that the council for the time being is bound, even though that hinders or prevents the exercise of other statutory powers…
What we are concerned with in the present case are overlapping or conflicting powers. There is a power to create covenants restrictive of the use of the retained land; and there are powers in relation to the user of the retained land for housing purposes. In these circumstances, it is necessary to ascertain for what purpose the retained land is held. All other powers are subordinate to the main power to carry out the primary purpose: see Blake v. Hendon Corporation [1962] 1 Q.B. 283, 302.
Now the purpose for which the
It seems to me that
We were referred to the decision in Ayr Harbour Trustees v. Oswald (1883) 8 App. Cas. 623. But that was a case where the trustees simply “renounced part of their statutory birthright.” There was an actual incompatibility between what they were proposing to do and the actual statutory purpose. In the present case, as it seems to me, the purpose of the contract is the same as the statutory purpose…
I can see that there is something to be said for the view that so long as the council retains Part V land it should retain all the powers which the statute gives in relation to that land. That is simple and logical. But I think it is too inflexible and takes insufficient notice of the practical d
In general, it seems to me that we are concerned with a rational scheme which the council could reasonably say that it was entitled to adopt as part of the housing policy of the borough. In saying that, I do not mean that a scheme for rented housing would have been irrational. Either would be defensible. But it is the function of politicians to choose policies. The court is not concerned with their merits but their legality.”
22. Sir Denys Buckley said (at 1076):
“I am clearly of the opinion that,
23. So, in the present case, Mr G
24. R v.
25. The tenant in that case was not, however, concerned with the substantive variations being wrought at that time, but rather with the absence for the future of the protection of clause 8(b). As Leggatt LJ said (at 324):
“It will be noted that the applicant does not complain of any present reduction in his rights of security of tenure. What he contends is that his tenure is, as he puts in his affidavit, “arguably” impaired because
26. On that basis, the critical issue in the case was Brent’s ability, in the face of clause 8(b), to vary the tenancy agreement by omission of clause 8(b).
27. The tenant’s application failed. Leggatt LJ said (at 325):
“Mr Watkinson [for the tenant] argues that it was open to the Council to agree not to exercise the power given by section 103. He says that that is what the Council did in 1981 as a result of negotiations with the tenants’ associations. He submits that the effect of including clause 8(b) in the old Agreement was to preclude the Council thereafter from varying the standard form by reducing the security of tenure of tenants under the Agreement. The respondents cannot, therefore, now reduce the quality of the security, as they have purported to do in the fashion complained of under the applicant’s first argument. Attractive as that argument is, especially as that is what the average tenant might expect the position to be, it cannot, in my judgment prevail over the language of the statute. Section 102 gives power to the Council to vary the terms of a secure tenancy by agreement with the tenants, or, alternatively, in accordance with section 103 by giving notice of variation of a periodic tenancy following compliance with statutory arrangements for a preliminary notice. In that way the respondents can in effect vary the terms of the tenancy unilaterally. Clause 8(b) is itself a term of the tenancy, so it can be varied by deletion. It does not, after all, contain or constitute a promise that it will not itself be revoked.”
28. Leggatt LJ then added (ibid):
“In truth, however, as I have earlier, indicated, this represents no substantial diminution in the tenants’ rights. Their basic protection is afforded by the statute, and such embellishments of that protection as were brought about by contract, would,
This does not leave the respondents in a very attractive light because they have reneged on the promise made in 1981 not to exercise their power to vary the tenancy agreements in relation to security of tenure. It is always hazardous, even in this sense, for a Council to seek to bind its successors. The present Council have thought it expedient to throw off that shackle.
For the reasons I have given, the respondents were entitled by statute to vary the tenancies as they affected to do by deleting clause 8(b), and since they were, there was in this respect no fault either in the explanation given to the tenants or in the advice acted on by the subcommittee.”
29. Owen J agreed, but said (at 326):
“I would only add that whilst not finding that it is possible I am far from convinced that it would be impossible for a local authority to contract out of the powers given by sections 102 and 103 of the Housing Act 1985. However,
30. Not altogether surprisingly, both Mr G
Discussion and decision
31. In my judgment, the critical fact about Beddowes was that there Hammersmith & Fulham had to choose as a matter of policy between two separate, and, as Fox LJ put it, “overlapping or conflicting powers”: either to let the remainder of the estate in the ordinary way, or to sell it on long leases to owner occupiers. Both functions and powers were legitimate under the statute, and it was for Hammersmith & Fulham to choose. If they chose in favour of owner occupation, then it would be necessary for them to exercise their powers accordingly. In the present case, however, the Council is exercising its management powers under section 21 for the single purpose of regulating secure periodic tenancies, and sections 102 and 103 in that context mandate that, in the absence of proceeding by agreement or pursuant to agreement, the Council was to have a unilateral right to vary conditions of a tenancy by notice, following consultation. However, clause 11 prevents such a unilateral right. Although the tenants, through their representatives, cannot initiate change, those representatives by means of clause 11 have an absolute veto over the outcome of the Council’s proposals. Their absence at a meeting at which the 25% quorum required by clause 11 is unfulfilled prevents any progress; and, secondly, any failure to obtain the approval of the majority of tenants’ representatives is destructive of the proposed variations. Such a clause therefore is simply incompatible with the Council’s statutory right and power to vary their tenancies unilaterally.
32. It seems to me that what Leggatt LJ said in Blatt is consistent with this conclusion. I do not found myself on that authority, first because Mr Arden relegates what Leggatt LJ said about the relationship of sections 102/103 and clause 8(b) in that case to mere dictum, and secondly because there is some uncertainty as to whether Owen J, although purporting to agree with Leggatt LJ, was in truth doing so. However, in my judgment, the first and decisive reason given by Leggatt LJ was that clause 8(b) could not survive the contrary effect of sections 102/103. As he said, the clause “cannot…prevail over the language of the statute…Clause 8(b) is itself a term of the tenancy, so it can be varied by deletion”. It is true that Leggatt LJ also said that the deletion of clause 8(b) did not amount to a substantial diminution in the tenants’ rights (sc on that occasion, because by concession the tenant was not otherwise complaining of the changes sought to be effected by the council). But Leggatt LJ thereafter immediately reverts to his primary reasoning, when he says that “For the reasons I have given, the respondents were entitled by statute to vary the tenancies as they affected to do by deleting clause 8(b)”. In my judgment, therefore, Leggatt LJ’s reasoning was entirely in line with what I would regard as the first and decisive d
33. That is simply a question of statutory interpretation. Section 102 states that the terms of a secure tenancy may be varied in three ways, which are set out, “but not otherwise”. One way is by agreement. That has not been achieved in the present case. The second way, but limited to variations relating to rent or payments in respect of rates, council tax or services, is pursuant to existing contractual arrangements. That is not relevant in the present case. The third way is by unilateral notice, following consultation (as set out in section 103). Mr Kilby’s argument is that section 103 cannot be given its statutory effect because of clause 11. But, because clause 11 requires the agreement of a majority of tenants’ representatives, that is simply to attempt to drive the third way into the path of one or other of the first two methods, namely to achieve a variation by agreement or pursuant to the terms of the existing agreement. That, however, is effectively to abrogate the statutory third way. In my judgment, the Council did not have the power to amend statute by these means, in other words to give up its power of unilateral variation. Sections 102 and 103 constitute a complete code governing the variation of the terms of a secure tenancy. It seems to me that that is what Leggatt LJ was saying in Blatt, and I respectfully agree. Owen J himself agreed with Leggatt LJ, but went on inconsistently to say that Brent could have bound itself by stronger language. I prefer the reasoning of Leggatt LJ.
34. It is therefore unnecessary to go into the doctrines concerning the prohibition on the fettering or delegation of a public body’s discretion. I would simply say that, not surprisingly, those doctrines would produce the same answer in this case. Clause 11 was a fetter on the Council’s statutory power, which had been given to it in support of its function of managing its housing estate for the public benefit, to effect unilateral variations in its tenancies by notice after consultation. It also amounted to a delegation to the tenants’ representatives of its statutory power of variation by notice. If the statute had not said that variation was to be effected in the manner stipulated and not otherwise, the question raised by these doctrines might have been more debatable. As it is, the sometimes d
35. I would therefore dismiss this appeal.
Lord Justice Moses:
36. I agree with the judgment of Rix LJ.
Lord Justice Buxton:
37. Part II of the Housing Act 1980 introduced a revolution, judged against previous assumptions about public housing, by creating private law rights of tenure through the mechanism of the newly-created secure tenancy. In contrast to the protection given to tenants of private landlords by the Rent Acts, the new regime operated by placing restrictions on the enforcement of the terms of the contractual tenancy, in particular in relation to the landlord’s ability to recover possession of the premises, rather than by creating new statutory rights that only arose after the contractual tenancy had terminated. On the other side of the coin, however, provisions that departed from normal contractual assumptions in favour of the public landlord had to be introduced in order to assist the landlords in their public duty of housing provision and management. Important amongst those was the power of the landlord unilaterally to vary the terms of the tenant’s contract, the power that is in issue in this appeal.
38. This power is phrased in sections 102 and 103 of the Housing Act 1985 (which consolidate the original section 40 of the 1980 Act) as
39. That is the background to my being unable to agree with the first, and I think principal, reason given by the judge in the passages set out by my Lord in §§ 13-14 above for holding clause 11 to be ineffective. The judge thought that clause 11 was adding a means of variation of the terms to those that are stated in the statute to be the only way in which the contractual terms could be varied. But as we have seen the object of the statutory scheme is to make available the section 103 procedure, which was introduced into the contractual relationship between landlord and tenant for the protection of, and to give increased powers to, the (public) landlord. Clause 11 does not seek to add to that protection, by adding to the landlord’s powers a still further route to the variation of the contractual terms. Rather, by clause 11 the landlord subtracts from his powers, by undertaking that he will only exercise those powers
40. All of this takes place within the framework of, and is only explicable in the context of, the section 103 scheme. If the relationship were that of landlord and tenant purely in private law there could be no question of clause 11 being outside the powers of the landlord, or of the clause introducing terms that the statutory scheme did not permit. But the relationship is not one governed purely by the norms of private law. The secure tenancy is limited, by the “landlord condition”, to tenancies granted by public bodies, which latter retain their public law obligations in addition to their role as landlords. The vice of clause 11 is therefore precisely that what is within the discretion of a private landlord, constrained only by the doctrines of freedom of contract, is not permitted to a public body, constrained by statute. As set out by my Lord in §35 above, and also mentioned by the judge, clause 11 unreasonably fetters the powers given to the local authority by Parliament in the interests of rational management of the housing stock which is a public asset subject to public interests that go beyond those of the immediate tenants. This was not a case where the contractual commitment that the local authority wished to give was necessary for the reasonable discharge of its business. Quite the reverse. Far from being facultative, clause 11 was a fetter on what can indeed be called the local authority’s statutory birthright, accepted by the local authority for no good reason that anyone was able to suggest at any stage of the proceedings.
41. I regard this as a clear case, and for that reason I also would dismiss the appeal.
