Landlord and tenant –– Assured tenancy –– Contracting-out –– Rent review to £25,000 –– Whether agreement a sham –– Whether an unlawful contracting-out –– Whether rent review repugnant to statutory purpose of assured tenancy incorporated in agreement
In February 1994 the appellant tenants were granted an assured tenancy of a flat by A plc, a business expansion scheme company, subject to provisions for the review of the rent. The initial rent was £4,680 pa, and the tenancy provided for modest reviews until February 1996; the rent was to be £25,000 pa as from the last review date. In June 1998 the respondent acquired the landlord’s reversion. In the county court, the judge found that £25,000 exceeded the market rent, but dismissed the tenants’ contentions that the rent review clause was a sham or an unlawful contracting-out of the Housing Act 1988. He gave judgment for arrears of rent, and granted possession of the flat to the landlord. The tenants appealed.
Held: The appeal was allowed.
Per ARDEN LJ: The tenants had signed the tenancy agreement and were bound by the rent review clause. The clause was not a sham as normally understood, as the appellants had not specifically agreed to it and were therefore not misled by it. However, it was clear from sections 5 and 7 of the Housing Act 1988 that parties to an assured tenancy may not agree to vary the statutory scheme for security of tenure so as to reduce the level of protection available to the tenant. The rent review clause was merely a device or provision that would enable the landlord to obtain possession of the premises. It was not, in substance, a provision for the payment of rent. It was introduced to enable the landlord to bring the assured tenancy to an end when it chose. The review clause was an unlawful contracting out of the Act, and a partial evasion of its mandatory provisions concerning the termination of assured tenancies.
Per PILL LJ: The parties were free to contract out of the Act. On its proper construction, the tenancy agreement was intended to grant an assured tenancy; the rent review clause was repugnant to that main purpose. A clause purporting to allow for an increase of rent to £25,000 pa was inconsistent with, and repugnant to, the statutory purpose that, in the circumstances, was incorporated into the agreement. That provision had to be ignored.
The following cases are referred to in this report.
AG Securities v Vaughan; Antoniades v Villiers [1990] 1 AC 417; [1988] 3 WLR 1205; [1988] 3 All ER 1058; (1989) 57 P&CR 17; [1988] 2 EGLR 78; [1988] 47 EG 193, HL
Aveling Barford Ltd v Perion [1989] BCLC 626; [1989] PCC 370
Belvedere Court Management Ltd v Frogmore Developments Ltd [1997] QB 858; [1996] 3 WLR 1008; [1996] 1 All ER 312; [1996] 1 EGLR 59; [1996] 05 EG 131
Bhopal v Walia (2000) 32 HLR 302; [1999] L&TR 461
Bridge v Campbell Discount Co Ltd; sub nom Campbell Discount Co Ltd v Bridge [1962] AC 600; [1962] 2 WLR 439; [1962] 1 All ER 385, HL
Duke of Marlborough, Re; sub nom Davis v Whitehead [1894] 2 Ch 133
George Inglefield Ltd, Re [1933] Ch 1
Gisborne v Burton [1989] QB 390; [1988] 3 WLR 921; (1989) 57 P&CR 192; [1988] 2 EGLR 9; [1988] 38 EG 129
Glynn v Margetson & Co; sub nom Margetson v Glynn [1893] AC 351
Hilton v Plustitle Ltd [1989] 1 WLR 149; [1988] 3 All ER 1051; [1989] 1 EGLR 119; [1989] 05 EG 94, CA
Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1989] QB 433; [1988] 2 WLR 615; [1988] 1 All ER 348
Jaques v Lloyd D George & Partners [1968] 1 WLR 625; [1968] 2 All ER 187; [1968] EGD 186; (1968) 205 EG 1207, CA
Johnson v Moreton [1980] AC 37; [1978] 3 WLR 538; [1978] 3 All ER 37; (1978) 37 P&CR 243; [1978] 2 EGLR 1; 247 EG 895, HL
Jones v Wrotham Park Settled Estates [1980] AC 74; [1978] 3 WLR 585; [1978] 3 All ER 527; (1978) 37 P&CR 289; [1978] 1 EGLR 58; 246 EG 223, CA
L’Estrange v F Graucob Ltd [1934] 2 KB 394
Laceys (Wholesale) Footwear Ltd v Bowler International Freight Ltd [1997] 2 Lloyd’s Rep 369
Ocean Chemical Transport Inc v Exnor Craggs Ltd [2000] 1 Lloyd’s Rep 446
Snook v London & West Riding Investments Ltd [1967] 2 QB 786; [1967] 2 WLR 1020; [1967] 1 All ER 518, CA
Street v Mountford [1985] AC 809; [1985] 2 WLR 877; [1985] 2 All ER 289; [1985] 1 EGLR 128; (1985) 274 EG 821, HL
Suisse Atlantique Société d’Armement Maritime SA v NV Rotterdamsche Kolen Centrale [1967] 1 AC 361; [1966] 2 WLR 944; [1966] 2 All ER 61; [1966] 1 Lloyd’s Rep 529
Watson, ex parte Official Receiver in Bankruptcy, Re; sub nom Watson, Re (1890) 25 QBD 27
Whyfe v Michael Cullen & Partners The Times 15 November 1993
This was an appeal by the tenants, Mr David Penfold-Dunsford and Mr Bryan Charles Leech, from a decision of Judge Kennedy QC, sitting in Brighton County Court, giving judgment to the respondent, Bankway Properties Ltd, in proceedings for arrears or rent and possession.
Stephen Knafler (instructed by Brighton Housing Trust) appeared for the appellants; Clare Padley (instructed by Triggs Wilkinson Mann) represented the respondent.
Giving the first judgment, ARDEN LJsaid:
Introduction
1. This is an appeal from the order, dated 18 August 2000, of Judge Kennedy QC, sitting in Brighton County Court. By this order, the judge granted possession to the claimant, Bankway Properties Ltd (Bankway) of flat 1, 54-55 Marine Parade, Brighton (the property), and gave judgment for outstanding arrears of rent in the sum of £12,261.25. The judge also gave the defendants permission to appeal, and certified the case as one suitable to be transferred to the Court of Appeal under CPR 52.14(a).
2. The facts as found by the judge are as follows. By an agreement in writing dated 15 February 1994 (the agreement), expressed to be an assured tenancy agreement made pursuant to the Housing Act 1988 (the 1988 Act), Artesian Competitor plc (Artesian) granted to Mr David Penfold-Dunsford and Mr Bryan Charles Leech (the appellants) a tenancy of the property from 15 February 1994 to 16 February 1995 at an initial rent of £4,680 pa, payable by equal monthly instalments of £390 per month. The rent payable under the agreement was subject to increase in accordance with clause 8(b) on “the review dates”, defined as 16 February 1995 and every 12 months thereafter. Clause 8(b) provided as follows:
(b) The rent which shall be payable under this Agreement shall be:–
(i) Until the first review date the initial rent
(ii) During each successive review period until (and inclusive of) the day prior to the last review date a rent (the new rent) equal to the greater of:–
i. The rent payable immediately prior to the relevant review date plus 10% thereof or
ii The rent payable immediately prior to the relevant review date plus the percentage increase in the Retail Price Index
a. In the case of the first review date between the Base Figure and the figure for the month preceding the first review date and
b. In the case of the second and subsequent reviews between the figure for the month preceding the previous review date and the figure for the month preceding the relevant review date
iii The then current open market rent for the Property to be agreed between the parties hereto or in the absence of agreement to be assessed by an independent surveyor appointed by the Landlord such surveyor acting as an expert and not as an arbitrator and whose decision as to the amount of the current open market rent for the property shall be final
(iii) From the last Review Date the sum of twenty five thousand pounds per annum
The last review date was defined as 11 February 1996.
3. The judge found that at the time of the grant of the tenancy the appellants were in receipt of housing benefit to the knowledge of the landlord, who knew and intended that the rent would be paid by way of housing benefit. In addition, he found, in effect, that the annual rent of £25,000 substantially exceeded what any tenant of this property could hope to pay.
4. The judge made the following findings as to the circumstances in which the appellants signed the agreement. They moved into the property on 15 February 1994. They received a letter of that date from the landlord in (so far as material) the following terms:
Re: 54/55 Marine Parade, Brighton — Flat 1
The enclosed Tenancy Agreement sets out the terms upon which Artesian Competitor plc is prepared to let the above property to you. It is an important document which imposes upon both parties certain contractual and legally enforceable obligations. It is therefore most important that you fully appreciate the terms of the Tenancy Agreement and, if you have any doubts, that you take legal advice BEFORE signing the Agreement.
In particular, we wish to draw your attention to clause 8 of the Agreement pursuant to which the rent will be increased and pursuant to which you may terminate the Tenancy by not less than one month’s written notice, such notice not to expire earlier than [15/8/1994].
Finally, we would ask you to note that it is a term of the Tenancy Agreement, and a condition of the Housing Act 1988, that a tenant occupying a dwelling house under an assured tenancy, occupies the property as his/her only or principal home, and that the property is not used for business purposes…
The letter did not, however, enclose the agreement. What happened was that the agent brought the agreement to the appellants at the property and invited them to read it. The judge accepted that Mr Penfold-Dunsford did not read the lease properly. Nobody on behalf of the landlord or managing agents ever explained the rent provisions in the agreement. By implication, the judge also accepted that Mr Leech did not read the agreement before he signed it. (He also explains in his witness statement that he has a reading impairment.)
5. By letter dated 14 January 1997, addressed to the appellants, an associated company, on behalf of the landlord, offered to vary the agreement. The terms that it offered were:
(1) the review date should be deferred indefinitely;
(2) the landlord should be entitled to specify a new review date but had to give at least five weeks’ written notice (“a review notice”);
(3) on the new review date the rent was to increase to £25,000 per annum;
(4) when the landlord gave a review notice specifying the new review date, the appellants were to be able to give 14 days’ written notice terminating the agreement;
(5) the landlord was to be entitled to a serve a review notice at any time it thought fit.
These terms were accepted by the appellants, who signed a copy of the letter on 17 January 1997.
6. Mr Penfold-Dunsford read the letter dated 14 January 1997, but did not note that rent was to increase to £25,000 pa. (He explains in his witness statement that he had a serious heart attack in 1992 and would have found it very onerous to have read the agreement and the letter of 14 January 1997). By implication, the judge also accepted that Mr Leech did not notice the proposal that rent should be increased to £25,000 pa.
7. In June 1998 the landlord changed to Bankway.
Judgment of Judge Kennedy QC
8. The judge referred to AG Securities v Vaughan [1990] 1 AC 417*, (to which I refer below under the name of Antoniades v Villiers, the conjoined appeal, in which the tenants were successful), but distinguished that authority on the grounds that, in that case, the landlord was purporting to do two different and inconsistent things. The judge also rejected a submission based upon Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1989] QB 433. In that case, there was an onerous and unusual condition that had not been drawn to the other party’s attention, and therefore did not become part of the contract. The judge held that that case did not assist because the appellant was given the contract to read, was asked to sign and did sign it. The judge also distinguished Whyfe v Michael Cullen & Partners The Times 15 November 1993, as that was a case where it was alleged that the defendant intended to deceive, and so to defraud, the plaintiff. (That case has not been cited on this appeal).
* Editor’s note: Also reported at [1988] 2 EGLR 78
9. The judge held that the Unfair Terms in Consumer Contracts Regulations 1994 were inapplicable because the agreement was entered into before 1 July 1995, the commencement date for the regulations. He did not think that the 1997 letter was a contract, but, at most, a waiver, and, accordingly, that letter was outside the regulations
.
10. The judge expressed the view that if it had been pointed out to the appellants that they had two clear years under the original rent, or a modest increase of it, he expected that they might have been prepared to say that they would take the two years and their chances thereafter. But this was surmise, not a finding. The judge accepted that the appellants would have been desperate to obtain accommodation.
11. The judge also rejected the submission by counsel (Mr Stephen Knafler) that clause 8(b)(iii) was an attempt to contract out of the Act of 1988, and therefore invalid. The judge held that the landlord was perfectly entitled to offer a contract that may have had the effect of
It was a perfectly clear agreement deliberately designed to have the potential for allowing the landlord to acquire possession under the Housing Act.
The judge added in the final paragraph of his judgment:
The only problem is that it is by a device, that is by arrears of rent which nobody ever expected to pay. That is the problem. It is a device. I do not for a moment say that there was anything devious or dishonest or concealed about it. It is a device. The real problem that I have is that if I find that these tenants recognised that there was a device and went along with it, then they would have a difficult job to persuade this court to help them. I do not see why they should be in any better position because they chose not to read it properly. I think that is a permissible device. That is the word I am going to use.
Statutory framework
12. The assured tenancy regime is found at Chapters I and II of the 1988 Act. At the relevant time, there were two types of assured tenancies: assured shorthold tenancies (in Chapter II), which did not have security of tenure; and assured tenancies (in Chapter I), which did have security of tenure.
13. To qualify as an assured tenancy, a letting must be of a dwelling let as a separate dwelling, and must satisfy section 1 of the 1988 Act and not be excluded by Schedule 1. Schedule 1, para 2(1) excludes tenancies granted after the 1 April 1990 at an annual rent exceeding £25,000.
14. The landlord cannot obtain possession save by obtaining an order of the court, which will be made only if the landlord proves the existence of certain prescribed grounds, found in Schedule 2 (divided into mandatory and discretionary grounds) (sections 5 and 7 of the 1988 Act). Rent arrears exceeding two months constitute a mandatory ground (ground 8), and the court has no discretion in such a case.
15. Section 6 provides that when a fixed-term assured tenancy ends, a statutory assured periodic tenancy arises, on terms analogous to those of the former fixed-term tenancy, and with the same security of tenure as any other periodic tenancy.
16. There is statutory machinery enabling landlords to increase the rent payable, subject to review by the rent assessment committee (sections 13 and 14). However, this machinery has no application to contractual rent or rent review clauses. In other words, if the landlord and the tenant have agreed upon the rent, or increased rent payable on review, or a procedure for review of the rent, the tenant cannot object to the rent or refer it to the rent assessment committee.
By contrast, assured shorthold tenancies have no security of tenure. Although the landlord must comply with statutory machinery and obtain a possession order (see sections 19A-21) and there is a form of rent control (see section 22), the landlord can recover possession by giving notice without having to prove that (for instance) there are arrears of rent (section 21).
Application to file new evidence
17. On the face of it, it may see odd that Artesian should have wanted to grant an assured tenancy as opposed to an assured shorthold tenancy, which does not confer security of tenure. Mr Knafler wishes to submit that, in this case, Artesian had a commercial motive to do so, because it was a business expansion scheme company that would obtain benefits if it entered into assured tenancies: see section 50 of the Finance Act 1988. At the trial, Mr Knafler sought to probe this matter in his cross-examination of the only witness called by Bankway, Miss Gold. She gave evidence to the effect that she did not know what the position was, and the respondent’s representatives were unable to clarify the position before the trial started.
18. On this appeal, Mr Knafler applies for an order admitting in evidence the published audited accounts for Artesian for the year ended 31 March 1995. The directors’ report annexed to those accounts states that Artesian’s “principal activity” from 1991 was “the renting of residential property under the Assured Tenancy provisions of the Housing Act 1988 and under the Business Expansion Scheme”.
19. In the result, for my part I do not consider that this information assists greatly in the disposition of this appeal. All the accounts show is that Artesian may have entered into the agreement as an assured tenancy to gain benefits as a business expansion scheme company. It is already clear from the agreement and the letter dated 15 February 1994 that Artesian intended to grant an assured tenancy. Its motive for doing so is not, as I see it, relevant. Moreover, I am concerned that costs should not be incurred by attempts to produce new evidence on appeal. On the other hand, in this particular case Artesian (having disposed of the property to Bankway) is not a party to the proceedings. Had it remained the landlord, the information would have been available at the trial. In addition, Miss Claire Padley very fairly concedes that it is possible that Artesian may have been acting in pursuance of a business expansion scheme and did not seek to adduce contrary evidence on behalf of Bankway. We are concerned only with one document, and, in the judgment of Pill LJ, greater significance attaches to it than is necessary for my analysis. In the circumstances, I am satisfied that it would be in accordance with the overriding objective to admit these accounts in evidence on this appeal.
Submissions
Appellants’ submissions
20. The principal submission of Mr Knafler, for the appellants, is based upon Antoniades v Villiers [1990] 1 AC 417. In that case, a landlord purported to give a licence to each of two parties who wished to share a flat in a house. By clause 16 of the agreements between the parties, the landlord reserved the right to allow third parties to occupy the premises as well. The landlord contended that since exclusive possession of the premises was not given to either of the parties, there was no tenancy, and the protection of the Rent Acts did not apply. The House of Lords held that the two agreements had to be read together. The House of Lords held further that parties could not contract out of the Rent Acts, that clause 16 did not reflect the true position and that, accordingly, clause 16 should be struck out.
21. Mr Knafler particularly relies upon the following passage from the speech of Lord Templeman at p462A:
Where a landlord creates a tenancy of a flat and reserves the right to go into exclusive occupation at any time of the whole or part of the flat with or without notice, that reservation is inconsistent with the provisions of the Rent Acts and cannot be enforced without an order of the court under section 98. Where a landlord creates a tenancy of a flat and reserves the right to go into occupation of the whole or part of the flat with or without notice, jointly with the existing tenants, that reservation also is inconsistent with the provisions of the Acts. Were it otherwise every tenancy agreement would be labelled a licence and would contract out of the Rent Acts by reserving power to the landlord to share possession with the tenant at any time after the commencement of the term.
Clause 16 is a reservation to Mr Antoniades of the right to go into occupation or to nominate others to enjoy occupation of the whole of the flat jointly with Mr Villiers and Miss Bridger. Until that power is exercised Mr Villiers and Miss Bridger are jointly in exclusive occupation of the whole flat making periodical payments and they are therefore tenants. The Rent Acts prevents the exercise of a power which would destroy the tenancy of Mr Villiers and Miss Bridger and would deprive them of the exclusive occupation of the flat which they are now enjoying. Clause 16 is inconsistent with the provisions of the Rent Acts.
There is separate and alternative reason why clause 16 must be ignored. Clause 16 was not a genuine reservation to Mr Antoniades of the power to share the flat and a power to authorise other persons to share the flat. Mr Antoniades did not genuinely intend to exercise the powers save possibly to bring pressure to bear to obtain possession. Clause 16 was only intended to deprive Mr Villiers and Miss Bridger of the protection of the Rent Acts. Mr Villiers and Miss Bridger had no choice in the matter.
22. Mr Knafler emphasises the sentence that “Mr Antoniades did not genuinely intend to exercise the powers save possibly to bring pressure to bear to obtain possession”. He submits that this applies to any term that it is impossible for the tenant to perform.
23. In Antoniades v Villiers, Lord Templeman refers to a transaction whose only object is to disguise the grant of a tenancy and to evade the Rent Acts as a “pretence” rather than a sham. Mr Knafler submits that a pretence is a variant of the type of sham considered in Snook v London & West Riding Investments Ltd [1967] 2 QB 786, where Diplock LJ held that both parties must have a common intention that the sham document is not to create the rights and obligations that it appears to create.
24. Mr Knafler relies also upon the following passage from the speech of Lord Bridge at p454D:
Here the artificiality was in the pretence that two contemporaneous and identical agreements entered into by a man and a woman who were going to live together in a one-bedroom flat and share a double bed created rights and obligations which were several rather than joint. As to the nature of those rights and obligations, the provisions of the joint agreement purporting to retain the right in the respondent to share the occupation of the flat with the young couple himself or to introduce an indefinite number of third parties to do so could be seen, in the relevant circumstances, to be repugnant to the true purpose of the agreement. No one could have supposed that those provisions were ever intended to be acted on. They were introduced into the agreement for no other purpose than as an attempt to disguise the true character of the agreement which it was hoped would deceive the court and prevent the appellants enjoying the protection of the Rent Acts. As your Lordships all agree, the attempt fails.
25. The other members of the House, Lord Ackner (at p466), Lord Oliver (at pp469-470) and Lord Jauncey (at pp476-477) came to the same conclusion as Lord Templeman and Lord Bridge.
26. Mr Knafler submits that the concepts of “pretence” and inconsistency are closely connected. In this case, there was no literal contracting-out of the 1988 Act, but, in effect, the landlord wished to recover possession without being hindered by the 1988 Act. Clause 8(b)(iii) was thus also inconsistent with the overall purpose of the agreement, which was to confer an assured tenancy. The 1988 Act does not provide that an assured tenancy may be entered into for a fixed period: it provides for indefinite security of tenure.
27. Mr Knafler submits that clause 8(b)(iii) is a pretence if it was not intended to create a real legal liability that was to be performed in the real world. Accordingly, for clause 8(b)(iii) to be enforceable, the landlord must know that the tenants could pay. Where there is no genuine belief that the term would be performed in the real world, it is just a device without commercial purpose. Mr Knafler submits that if the provision for the increase of rent to £25,000 pa is lawful, there are few limits to what can be imposed by contract. There could be a term that the tenant decorates the premises with gold leaf or builds a swimming pool in the basement. Mr Knafler submits that if clause 8(b)(iii) is not enforceable, the landlord cannot increase the rent, except in accordance with section 13 of the 1988 Act. In this case, the rent arrears flow entirely from the increase in rent.
28. Mr Knafler’s alternative submission was that Artesian’s letter dated 15 February 1994 was misleading because it did not say that the rent was to go up to £25,000. By the time the appellants saw the agreement, they had already moved into the premises. The judge found that the term was unreasonable. Mr Knafler submits that, in those circumstances, the term should have been brought to the appellants’ attention fairly and reasonably, and that the landlord did not do so.
29. In support of this submission, Mr Knafler relies upon Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd (supra). In this case, the plaintiff sought to recover a daily fee chargeable under its standard conditions for transparencies delivered to a customer on sale or return. The defendant knew that there were conditions on the delivery note, but did not read them. The Court of Appeal held that the condition in question was particularly onerous and unusual, and that it was not enforceable unless it had been fairly and reasonably brought to the attention of the other party. Mr Knafler submits that this principle was applied to contracts that a party had actually signed in Jaques v Lloyd D George &Partners [1968] 1 WLR 625* at p630 per Denning LJ; Laceys (Wholesale) Footwear Ltd v Bowler International Freight Ltd [1977] 2 Lloyd’s Rep 369; and in Ocean Chemical Transport Inc v Exnor Craggs Ltd unreported 15 December 1999†, per Evans LJ (obiter), with whom Henry and Waller LJJ agreed. Mr Knafler submitted that it was essential to modern life that no trader should not go beyond what it is reasonable for him to insert in standard agreements or conditions.
* Editor’s note: (1968) 205 EG 1207
† Editor’s note: Since reported at [2000] 1 All ER (Comm)
30. Mr Knafler submits that the right approach to an onerous condition is to ask whether the party seeking to enforce it has discharged the burden of showing that he brought the onerous term to the attention of the other party.
31. Mr Knafler did not pursue arguments based upon the Unfair Terms in Consumer Contracts Regulations, and the European Convention on Human Rights.
Respondent’s submissions
32. Miss Clare Padley, for the respondent, submits that this was not a case of contracting-out of the 1988 Act. The appellants here have the protection of an assured tenancy. She distinguishes Street v Mountford [1985] AC 809*. In that case, an agreement that was described as a licence was held to be a tenancy. However, it is clear that parties can, in an appropriate case, enter into a licence properly so called: see Street v Mountford at p819. Miss Padley submits that the parties are not limited in their freedom to agree rents. Section 13 of the 1988 Act is excluded where parties have contracted for a particular rent. Because clause 8(b)(iii) limited the rent to £25,000, the relevant provisions of the 1988 Act applied. Assured tenancies could cease to be such if the rent went above £25,000, or if, for some other reason, they cease to qualify under the 1988 Act.
* Editor’s note: Also reported at [1985] 1 EGLR 128
33. Miss Padley submits that clause 8(b)(iii) was not a pretence. This was not a lease pretending to be licence. It was not the intention of both parties to enter into a transaction to mislead a third party, as required by the test of “sham” to be found in Snook. An example of a lease that was a sham on this basis and of no effect was the lease in Bhopal v Walia [1999] L&TR 461, where the landlord and tenant (acting at the landlord’s request) entered into a written tenancy agreement that had been backdated and falsely showed the rent to be more than it in fact was. The reason why the agreement was executed was to enable the landlord to show it to his bank. By contrast, the agreement in this case was a genuine agreement.
34. Miss Padley also relies upon Hilton v Plustitle Ltd [1989] 1 WLR 149*, in which the landlord and “tenant” specifically agreed that the tenancy should be granted to a limited company formed by the tenant, which it was legitimate for them to do to avoid the Rent Acts. The landlord and tenant had agreed that the tenancy should be granted to a limited company, and the tenant had taken legal advice. The Court of Appeal held that, in these circumstances, the individual who had formed the company could not be a statutory tenant. It was not a sham in the Snook sense or an unlawful contracting out of the Rent Acts. Upon Miss Padley’s submission, in order for the appellants to succeed in this case, it has to be shown to be a sham in the Snook sense. It is not possible for the appellants to do this on the findings made by the judge.
* Editor’s note: Also reported at [1989] 1 EGLR 119
35. With respect to Antoniades v Villiers, Miss Padley relied upon a holding by Lord Templeman that clause 16, if genuine, was a reservation by the landlord of a power at some time during the currency of the tenancy to share occupation with a tenant (p461). So here, the landlord intended clause 8(b)(iii) to be legally binding, and, accordingly, the concept of pretence had no application. The landlord intended to rely upon clause 8(b)(iii) to recover possession of the premises, or to induce the tenant to leave.
36. Miss Padley also relied upon Belvedere Court Management Ltd v Frogmore Developments Ltd [1997] QB 858*, where the Court of Appeal upheld the trial judge’s finding that leases entered into by landlords with an associated company were not a sham, even though they were artificial devices designed to circumvent the effect of the Landlord and Tenant Act 1987, which gave tenants the right to acquire the reversion.
* Editor’s note: Also reported at [1996] 1 EGLR 59
37. There is nothing in the 1988 Act to restrict the rent that the parties could agree. Moreover, the tenants were free to enter into the lease and were free (upon giving 14 days’ notice) to leave the premises.
38. Miss Padley accepts that clause 8(b)(iii) was curiously worded. It referred to “successive” anniversaries of the rent review date, when only one was anticipated.
39. Miss Padley submits that the landlord had found a way through the 1988 Act. It was a matter for parliament to alter the law if it wished to prevent what landlords do: see Jones v Wrotham Park Settled Estates [1980] AC 74*. The “device” adopted by the landlord was therefore permissible.
* Editor’s note: Also reported at [1978] 1 EGLR 58
40. As regards the second issue, Miss Padley submits that a person who signed a contract was bound, whether he had read it or not: see L’Estrange v F Graucob Ltd [1934] 2 KB 394. The correct starting point is that a signed contract is binding. The only qualifications were where the Unfair Terms in Consumer Contracts Regulations applied (which they did not in the instant case), or in ticket cases. In Jaques v Lloyd D George, there was a clear misrepresentation that was not present in this case. The decision in Laceys Footwear was arrived at by the majority from a different perspective. In this case, the tenant had been invited to read the rent review clause. The decision in Ocean did not support the argument that clauses in a tenancy agreement could be held unenforceable. In this instance, the case could not be brought within the decision in Interfoto.
Conclusions
Was clause 8(b)(iii) effectively incorporated in the agreement?
41. I take, first, Mr Knafler’s alternative submission and the question of whether the appellants are bound by clause 8(b)(iii). The Interfoto case shows that a condition may not be enforceable or validly incorporated into a contract where the condition is onerous. However, the starting point here must be that since the appellants signed the agreement containing clause 8(b)(iii) they are bound by it. It is not, in my judgment, clear that the Interfoto doctrine applies to a contract that a party signs, but I need not express a view upon that point because, in my judgment, while clause 8(b)(iii) was an onerous and unusual clause, Miss Padley is right in her submission that the landlord did all that it needed to do when it drew the appellants’ attention to the rent review clause in the letter dated 15 February 1994. If they did not like the clause when they subsequently saw it, it was open to them to refuse to sign the agreement.
Is clause 8(b)(iii) of the agreement enforceable?
42. I now turn to Mr Knafler’s main submission. A special feature of this case is that the appellants did not specifically agree clause 8(b)(iii). This means that there was no common intention on the part of the appellants and Artesian to create some other obligation for the purpose of misleading third parties, who might include the court. Accordingly, clause 8(b)(iii) cannot be a sham as that expression is normally understood: see Snook v London & West Riding Investments Ltd (supra). In that context, a test of common subjective intention applies. In addition, the fact that clause 8(b)(iii) was not negotiated means that the appellants cannot say that they were misled when they signed the tenancy agreement. Nor do they say that they entered into the agreement under some mistake.
43. However, as Mr Knafler submits, there is a variant on the usual definition of sham where a question arises of whether an agreement is not intended to have the effect stated, but is intended to evade the operation of a statute out of which the parties cannot contract. This doctrine has been developed and applied by the courts not only in the context of the Rent Acts (see Antoniades v Villiers), but also in the context of: agricultural tenancies (Johnson v Moreton [1980] AC 37* and Gisborne v Burton [1989] QB 390†); the question of whether a hire purchase agreement is in fact an unregistered bill of sale (see, for example, Re Watson (1890) 25 QB 27); the question of whether a sale and repurchase agreement is an unregistered company charge (see, for example, Re George Inglefield Ltd [1933] Ch 1); the question whether an absolute conveyance is in fact a mortgage (see, for example, Re Duke of Marlborough [1894] 2 Ch 133); the question of whether a transaction is, in substance, an unauthorised reduction of share capital contrary to the Companies Acts (see, for example, Aveling Barford Ltd v Perion [1989] BCLC 626); and the question of whether a sum payable under a contract is a penalty (see, for example, Bridge v Campbell Discount Co Ltd [1962] AC 600). In these types of situations, as Lord Ackner put it in Antoniades v Villiers (supra) at p466, the question is: what was the substance and reality of the transaction entered into by the parties? The court is not bound by the language that the parties have used. It may, for instance, conclude, when it examines the substance of the transaction, that what the parties have in their agreement called a sale and repurchase of book debts is, in truth, a registerable charge over them.
* Editor’s note: Also reported at [1978] 2 EGLR 1
† Editor’s note: Also reported at [1998] 2 EGLR 9
44. For this purpose, the court can look at all the relevant circumstances, including the subsequent conduct of the parties (see per Lord Jauncey in Antoniades v Villiers at p475). There does not have to be a common intention to enter into other obligations or to deceive a third party: in Antoniades v Villiers, for instance, the “licensees” acknowledged in writing that their agreements with the landlord did not have the protection of the Rent Acts (see Antoniades v Villiers at pp457-8). Lord Templeman points out in Antoniades that the earlier case of Street v Mountford had established at p463 that: “where the language of licence contradicts the reality of the lease, the facts must prevail. The facts must prevail over language in order that parties may not contract out of the Rent Acts”. Or, as Lord Esher MR put it in Re Watson:
the Court ought never to let a sham document, drawn up for the purpose of evading an Act of Parliament prevent it from getting at the real truth of the matter…
45. Miss Padley invokes the doctrine of freedom of contract. But it is well established that legislation has interfered with that doctrine in the field of landlord and tenant. In Johnson v Moreton, Lord Simon of Glaisdale said at pp66G-67:
There was one economic and social relationship where it was claimed that there were palpably lacking the prerequisites for the beneficent operation of laisser-faire –– that of landlord and tenant. The market was limited and sluggish: the supply of land could not expand immediately and flexibly in response to demand, and even humble dwellings took more time to erect than those in want of them could spare. Generally, a man became a tenant rather than an owner-occupier because his circumstances compelled him to live hand-to-mouth; the landlord’s purse was generally longer and his command of knowledge and counsel far greater than the tenant’s. In short, it was held, the constriction of the market and the inequality of bargaining power enabled the landlord to dictate contractual terms which did not necessarily operate to the general benefit of society. It was to counteract this descried constriction of the market and to redress this descried inequality of bargaining power that the law –– specifically, in the shape of legislation –– came to intervene repeatedly to modify freedom of contract between landlord and tenant. Since Maine the movement of many “progressive” societies has been reversed. The holding of a statutory or a protected tenancy is rather a status than a pure creature of contract.
46. That brings me to the question of whether clause 8(b)(iii) is permitted by the 1988 Act. To answer this question, it is necessary to examine the 1988 Act and, if it is found to impose a mandatory and
47. The material provisions of the 1988 Act are summarised above. The material provisions of sections 5 to 7 in the fasciculus of sections headed “Security of Tenure” are expressed in mandatory terms. Section 5(1) contains a prohibition on termination by the landlord by notice:
5.–– (1) An assured tenancy cannot be brought to an end by the landlord except by obtaining an order of the court in accordance with the following provisions of this Chapter or Chapter II below or, in the case of a fixed term tenancy which contains power for the landlord to determine the tenancy in certain circumstances, by the exercise of that power and, accordingly, the service by the landlord of a notice to quit shall be of no effect in relation to a periodic assured tenancy.
Section 7 then confers added protection on the tenant by stipulating the circumstances in which the court can make an order for possession:
7.–– (1) The court shall not make an order for possession of a dwelling-house let on an assured tenancy except on one or more of the grounds set out in Schedule 2 to this Act; but nothing in this Part of this Act relates to proceedings for possession of such a dwelling-house which are brought by a mortgagee, within the meaning of the Law of Property Act 1925, who has lent money on the security of the assured tenancy.
(2) The following provisions of this section have effect, subject to section 8 below, in relation to proceedings for the recovery of possession of a dwelling-house let on an assured tenancy.
(3) If the court is satisfied that any of the grounds in Part I of Schedule 2 to this Act is established then, subject to subsections (5A) and (6) below, the court shall make an order for possession.
(4) If the court is satisfied that any of the grounds in Part II of Schedule 2 to this Act is established, then, subject to subsections (5A) and (6) below, the court may make an order for possession if it considers it reasonable to do so.
(5) Part III of Schedule 2 to this Act shall have effect for supplementing Ground 9 in that Schedule and Part IV of that Schedule shall have effect in relation to notices giving as mentioned in Grounds 1 to 5 of that Schedule…
48. Section 8 provides further protection to the tenant by stipulating the form of the notice of proceedings for possession, and section 9 gives the court power to adjourn proceedings for possession of a dwelling-house let on an assured tenancy, save where mandatory grounds for possession exist. Where an Act of parliament, like the 1988 Act, confers protection upon a person whose bargaining position may be disadvantaged when compared with that of the counterparty, it may be the duty of the court, in certain circumstances, to scrutinise critically a transaction that is onerous, like the one in this case, to see if it constitutes a sham. But this point has not been argued, and, accordingly, I express no view on it.
49. I note that the judge was anxious to emphasise that the judicial role is not one of “social engineering, nannyism or anything of that sort”. But it is, of course, the role of the court to interpret Acts of parliament and to give effect to the intention of parliament as expressed in the words that it has used. Hence, my approach is to examine the material provisions of the 1988 Act with a view to determining their true construction. In my judgment, it is clear from sections 5 and 7, upon their true construction, that parties to an assured tenancy may not agree to vary the statutory scheme for security of tenure so as to reduce the level of protection available to the tenant. Moreover, section 7 provides the only ways in which an assured tenancy may be terminated. Thus, to provide additional ways of bringing the agreement to an end would be an improper attempt to evade the provisions of section 7.
50. Accordingly, if clause 8(b)(iii) is properly to be regarded as a clause for the payment of rent, I would accept Miss Padley’s submission that it is binding upon the appellants, and does not amount to any evasion, or contracting-out, of the provisions of the Act of 1988. That Act does not provide any mechanism for reviewing rent that the parties have agreed.
51. If, however, clause 8(b)(iii) is not in substance or reality a provision for the fixing of rent, but a provision to enable the landlord to recover possession otherwise than in accordance with the mandatory scheme, either because the tenant voluntarily surrenders possession when asked to pay a sum purporting to be, but not in fact, rent, or because it facilitates the landlord relying upon a mandatory ground for possession when, in truth, he is not entitled to do so, then, in my judgment, the provision amounts to a contracting-out of the statutory scheme for assured tenancies and is not enforceable. The statutory scheme does not provide a mandatory ground for a possession order for non-payment of rent unless the rent is properly due as such.
52. The question of whether a document is a sham or a pretence or, in substance, an unlawful contracting-out or evasion of an Act of parliament is a pure question of fact. As regards the evidence, the judge, in effect, confined himself to the agreement and did not consider the surrounding circumstances, including subsequent conduct. In this regard, in my judgment, he fell into error for, as I have explained, all such evidence is relevant to the question of sham, pretence or whether, in substance, there was an unlawful contracting-out of the 1988 Act. I must therefore consider whether, in the light of the evidence as to the surrounding circumstances, the appropriate conclusion that the judge should have reached was that the agreement was, in substance, an unlawful contracting out of the 1988 Act.
53. I turn to the evidence as to the circumstances surrounding the fixing of the rent of £25,000 pa. My starting point is that there is no evidence that clause 8(b)(iii) was ever negotiated between the parties. That distinguishes this case from cases like Hilton v Plustitle. In addition, clause 8(b) is curiously drafted: it may be a small point, but it is clearly not drafted in a way that makes it clear that the security of tenure was for less than two years. Moreover, the landlord has never attempted, in these proceedings, to justify the rent fixed by clause 8(b)(iii) as being a market rent. That, in itself, is some indication that the landlord never expected that rent to be paid. Miss Padley properly accepts that the rent of £25,000 was above market rent. It was, of course, well above market rent and not, in my judgment, a sum that it could genuinely have been expected to be the market rent as at 11 February 1996 (the last review date).
54. If clause 8(b)(iii) was intended to have full effect, one would expect to find that, as from 11 February 1996, rent of £25,000 pa was demanded. There was no evidence of any such demand. When the date for enforcing clause 8(b)(iii) arrived, the landlord had either forgotten about clause 8(b)(iii) or taken the view that it would continue to accept the original rent. If the former was the case, one would expect the landlord to demand the rent of £25,000 pa as soon as it realised its mistake. It did not do that. Instead, it bound itself to defer the right to the increased rent by the letter of 14 January 1997 upon the basis there set out. Its inactivity from 11 February 1996 to 14 January 1997, and its reasons for writing its letter of 14 January 1997 are unexplained. Nor has the landlord put forward any reason for changing its mind and requiring the rent of £25,000 pa in March 2000. The appellants had paid to date the reduced rent then due from them as a result of an order compromising earlier proceedings for possession and breach of the landlord’s repairing obligations (the landlord issued the present proceedings on 8 May 2000). The proper inference from all the circumstances, in my judgment, is that the landlord never expected to receive rent of £25,000 pa and intended that it should invoke clause 8(b)(iii) only as a means of recovering possession.
55. In my judgment, when the facts of this case are examined as a whole, it is clear, that, as the judge found, clause 8(b)(iii) was merely a device. It was, in reality, a provision that would enable the landlord to obtain possession of the premises. As such, clause 8(b)(iii) masqueraded as a provision for an increase of rent: it was not in substance a provision for the payment of rent. It was introduced to enable the landlord to bring the assured tenancy to an end when it chose. In some cases, the tenant might be expected to leave voluntarily. In other cases such as this, the landlord would have to make an application to the court, but (subject to the outcome of this appeal) that would only be a formality, since the rent was much higher than a tenant could be expected to pay. The landlord, therefore, did not have to give the tenants the last opportunity, which they obtain in the usual way, to pay the rent arrears at the door of the court to avoid an order for possession. The landlord may, as Miss Padley submits, have intended to demand rent,
56. As I see it, the effect of the 1988 Act is that where a tenant is in a position to pay the sum genuinely reserved as rent at the time provided in the tenancy agreement or at such later date as parliament allows, he should be free to do so, and not lose possession. In my judgment, the effect of this agreement is that the tenant is prevented from paying the genuine rent by a provision for payment of a sum that was never expected to be paid and that is not, upon its true analysis, rent at all. That provision, in my judgment, offends against the mandatory scheme of the 1988 Act, and is unenforceable. I differ from the judge in that, in my judgment, this device (as he fairly called it) is not permissible.
57. I do not accept the judge’s distinction of Antoniades vVilliers from this case. The landlord here was doing two inconsistent things: letting the property on an assured tenancy, and trying to reserve to itself a right to obtain possession effectively on notice. Nor do I accept Miss Padley’s proposition that there was no contracting-out of the 1988 Act because even with a rent of £25,000 the agreement remained an assured tenancy. For the purposes of the doctrine against unlawful contracting-out, or evasion of a mandatory provision of an Act of parliament, it is not necessary to show that the whole of a statutory scheme is evaded. It is sufficient if part is evaded; here, the security of tenure provisions of the 1988 Act.
58. Since writing the first draft of this judgment, I have had the advantage of reading the judgment of Pill LJ. The approach of Pill LJ is different from my own. He expresses difficulty with the concept of an unlawful contracting-out of the 1988 Act, since the parties were free to create some other form of tenancy. However, Pill LJ reaches the same conclusion as myself on the basis of the inconsistency between clause 8(b)(iii) and the intention of the parties to grant an assured tenancy as a matter of the true construction of the agreement: see Glynn v Margets on & Co [1893] AC 351. The citations from the speeches of Lord Bridge and Lord Templeman set out above show that inconsistency (or repugnancy) and pretence are alternative bases for their decision in Antoniades v Villiers, and I accept that inconsistency is relevant and applicable in this case too. I further accept Mr Knafler’s submission that the two concepts are closely connected. In this case, however, where the sum reserved by clause 8(b)(iii) was not, as I see it, in substance as opposed to form, a true reservation of rent, I prefer to place primary reliance upon the basis that here is an improper attempt to evade the mandatory scheme for security of tenure in the Act of 1988. This conclusion does not depend solely upon the construction of the agreement or the intentions, subjective or objective, or the parties: indeed, the purported effect of clause 8(b)(iii) is not a result that, upon my analysis, the parties had freedom of contract to achieve. My approach is directed to qualifying and invalidating the effect of their agreement through recourse to the 1988 Act. I am content to say that there was inconsistency here, although that inconsistency is not, as I see it, mere internal inconsistency within the agreement, but inconsistency between clause 8(b)(iii), in the context of the agreement and taken with all the surrounding circumstances, and the mandatory provisions of the Act of parliament. The 1988 Act prescribed the relevant provisions of a tenancy that is to be an assured tenancy, and it is clear that an assured tenancy was the form of tenancy that the parties intended to create.
59. In the circumstances, the order for possession must, in my judgment, be set aside. It does not escape notice that this device has resulted in a substantial personal judgment against each of the appellants, which is a very serious matter for them. It could, for instance, lead to their bankruptcy. It follows that, in my judgment, this judgment, which represents arrears of rent over and above the rent reserved by clause 8(b)(ii), must also be set aside.
Agreeing, PILL LJ said:
60. I agree. I gratefully adopt Arden LJ’s statement of the facts. The lease had a heading in capital letters: “Assured Tenancy Agreement made pursuant to the Housing Act 1988”. The lease is dated 15 February 1994 and the initial annual rent was £4,680. The effect of clause 8(b)(iii) of the lease, read with clause 1(h), which stipulated the “last review date”, was, however, that, as from 11 February 1996, that is within two years of the agreement, the annual rent was to be £25,000. That level of rent permitted the tenancy to remain an assured tenancy within the Act (Schedule 1, para 2(1)) but was never expected to be paid. It was a figure well beyond the means of the appellants or anyone likely to rent this flat in this location. No tenant would sensibly fail to exercise his right to terminate the lease rather than pay that sum. If he could afford to pay that sum, he could obtain greatly superior accommodation for it. I agree with Arden LJ’s analysis of the circumstances. I also agree with her that clause 8(b)(iii) cannot be avoided by application of the Interfoto principle ([1989] QB 433).
61. The provision for rent of £25,000 was plainly included in the lease as a device. What the landlord hoped to do was to create a tenancy that would be treated, in law, as an assured tenancy, but, at the same time, permit him to obtain possession within two years. The respondents’ predecessors, who granted the lease, were commercial landlords. Their “principal activity”, as appears from the directors’ report annexed to their accounts, was “the renting of residential property under the Assured Tenancy provisions of the Housing Act 1988 and under the Business Expansion Scheme”. It is not disputed that, under the business expansion scheme, there was a financial advantage to a landlord who created an assured tenancy rather than an assured shorthold tenancy. They hoped to obtain that financial advantage while at the same time ensuring that they could terminate a lease within two years, thus depriving the tenant of the long-term security that is the essence of an assured tenancy.
62. While it was, as the judge found, a device, it was not a subterfuge. The increase in rent to £25,000 pa was clearly and plainly stated in the lease, and was a sum permitted, in the case of an assured tenancy, by statute. The distinctive feature of the present lease was that the landlord sought both a tenancy that would qualify as an assured tenancy and also a tenancy that they had an effective means of terminating after just under two years. The situation is somewhat different from that in Antoniades v Villiers [1990] 1 AC 417, where Lord Bridge stated at p454 that clauses had been introduced “as an attempt to disguise the true character of the agreement which it was hoped would deceive the court and prevent the appellants enjoying the protection of the Rent Acts”. The language involved a pretence that only a licence was created in a context where it was not permissible to contract out of the Rent Acts.
63. For the respondents, Miss Padley submits that the device in the present case is permitted by the 1988 Act, which leaves the parties free to agree a rent up to a figure of £25,000 pa. Nothing in the Act prevents the parties from agreeing that a greatly increased rent should be payable upon a review. The tenancy was an assured tenancy within the meaning of the Act, notwithstanding that, in practice, the tenant had no long-term protection. The Act did not require that all tenancies be assured, and left parties free to create a tenancy that was not an assured tenancy. That being so, they were entitled, it is submitted, to make the agreement set out in this lease.
64. Miss Padley relies upon the decision of this court in Belvedere Court Management Ltd v Frogmore Developments Ltd [1997] QB 858, where it was held that, although the leases in that case were an artificial device designed to circumvent the effect of the Landlord and Tenant Act 1987, that finding did not entitle the court to ignore or override apparently effective transactions that, on their face, conferred an interest in land in the transferee. The arrangements made in granting the leases involved no pretence, and did not constitute a sham. Accordingly, the court could not disregard the leases or strike them down. Sir Thomas Bingham MR stated at p876F:
Many transactions between group companies may be artificial. That does not entitle the court in ordinary circumstance to treat such transactions as null.
65. I do have difficulty with the concept that has featured in the proceedings, that there was an unlawful contracting-out of the 1988 Act when the parties were free to contract out of it. They could have entered into a shorthold assured tenancy, which did not confer security of tenure, without contravening the Act. They were free to agree the level
66. Since the parties were free to contract out of the Act, the answer depends upon an analysis of the terms of the contract. The lease contains the plainest indication that an assured tenancy agreement pursuant to the 1988 Act was intended. That is stated in capital letters in the heading to the lease. The statutory purpose of the assured tenancy is to give long-term security to the tenant, as explained by Arden LJ. There are other indications in the lease of an intention to achieve that purpose:
1. The landlord’s letter of 14 February 1994 underlined that the tenancy was to be within the statutory scheme:
“Finally, we would ask you to note that it is a term of the tenancy agreement, and a condition of the Housing Act 1988, that a tenant occupying a dwelling house under an assured tenancy occupies the property as his/her only or principal home and that the property is not used for any business purposes”.
2. In Clause 9 of the lease, the tenant declares that the property is to be his only or principal home.
3. Detailed drafting points in the same direction. Clause 1(g) provides for a review date, under a procedure consistent with long term protection, on February 16 1995 “and every twelve months thereafter” and Clause 8(b)(iii) provides for the fixing of rent after the first review date “during each successive review period”. The wording contemplates a lengthy lease and one which is inconsistent with the “last review date” (bringing into effect the rent of £25,000) on 11 February 1996, that is less than two years from the date of the lease.
67. The tenancy is to be construed as one intended to give effect to the statutory purpose of long-term protection for the tenant. That is “the main purpose of the contract” (Glynn v Margetson & Co [1893] AC 351 per Lord Halsbury at p357) or the “main intent and object” (per Lord Herschell at p355) or “the main object of the contract” (Suisse Atlantique Société d’Armement Maritime SA v NV Rotterdamsche Kolen Centrale [1967] 1 AC 361 per Lord Reid at p389G).
68. The intention of Clause 8(b)(iii) is, in my judgment, inconsistent with the statutory purpose that it was the main object of the agreement to achieve. In Glynn at p357 Lord Hailsbury stated:
Looking at the whole of the instrument, and seeing what one must regard,… as its main purpose, one must reject words, indeed whole provisions, if they are inconsistent with what one assumes to be the main purpose of the contract.
69. In Antoniades at p454, Lord Bridge also acknowledged the concept of a clause in a lease being rejected as “repugnant to the true purpose of the agreement”, although he did so in the context of what he regarded as an attempt to deceive by making a lease appear to be a licence.
70. A clause purporting to allow for an increase of rent to £25,000 is inconsistent with, and repugnant to, the statutory purpose that, in the circumstances, is incorporated into the agreement. To permit the enforcement of clause 8(b)(iii) would be to defeat the main purpose of the agreement. The landlord cannot defeat that purpose by reliance upon clause 8(b)(iii). The clause is inconsistent with the main object and intent of the agreement, and must be ignored.
71. I agree that the appeal should be allowed.
Appeal allowed. Leave to appeal to the House of Lords refused.
