Landlord and tenant — Landlord and Tenant Act 1954, Part I — Joint tenancy — Whether one of two joint tenants entitled to protection of 1954 Act — Whether continuing tenancy held by joint tenants or tenant in occupation — Whether interest in continuing tenancy part of bankrupt’s estate
The plaintiff landlords are the owners of
residential property occupied by the first defendant. In 1982 the first
defendant and his wife, the second defendant, acquired by an assignment the
term of a 40‑year lease of the premises as joint tenants. The defendants
divorced in 1984. The contractual term of the lease expired on 25 December
1996. The first defendant was declared bankrupt in January 1997. The official
receiver disclaimed the lease in May 1997. The county court judge accepted the
first defendant’s contention that he was entitled to the protection of Part I
of the Landlord and Tenant Act 1954. The plaintiffs appealed.
allowed.
1954 Act protected persons and not legal concepts. Although the ‘tenant’
under the contractual tenancy was the defendants as joint tenants, the
residential occupation of the first defendant alone was sufficient to continue
the tenancy under Part I: see Lloyd v Sadler [1978] 1 EGLR 76.
premises sprang from his status as a residential tenant holding over, and not
as a joint tenant under the contractual tenancy that continued.
estate under section 283 of the Insolvency Act 1986 and therefore the
continuation tenancy was effectively disclaimed by the Official Receiver. The
first defendant had no right to possession.
The following cases are
referred to in this report.
City of London Corporation v Bown (1990) 60 P&CR 42; 22 HLR 32
Herbert v Byrne
[1964] 1 WLR 519; [1964] 1 All ER 882, CA
Howson v Buxton
(1928) 97 LJKB 749
Jacobs v Chaudhuri
[1968] 2 QB 470; [1968] 2 WLR 1098; [1968] 2 All ER 124; (1968) 19 P&CR
286, CA
Lloyd v Sadler
[1978] 1 QB 774; [1978] 2 WLR 721; [1978] 2 All ER 529; (1978) 35 P&CR 78;
[1978] 1 EGLR 76; [1978] EGD 291; 246 EG 479, CA
Nunn v Pellegrini
[1924] 1 KB 685
St Ermins Property Co Ltd v Patel [1997] 2 EGLR 61; [1997] 41 EG 156
Smalley v Quarrier
[1975] 1 WLR 938; [1975] 2 All ER 688; (1975) 30 P&CR 419; [1975] 2 EGLR
35; [1975] EGD 363; 235 EG 211, CA
Sutton v Dorf [1932]
2 KB 304; 30 LGR 312; 48 TLR 430
This was an appeal by the
plaintiffs, Sir Evelyn Robert Adrian de Rothschild and others, from a decision
of Judge Medawar QC dismissing their claim for possession against the
defendants, Russell Paul Bell and Mrs Shorrock.
Edwin Johnson (instructed by Radcliffes) appeared
for the appellants; Jacqueline Baker (instructed by Wedlake Bell) represented
the respondents.
Giving the judgment of the court, BUXTON LJ said:
Introduction
This is an appeal from a judgment of Judge Medawar
QC determining certain preliminary issues in a dispute between the plaintiff
landlords of premises at 11 Bryanston Mews East in Kensington and Chelsea Royal
London Borough (the premises), and the first defendant, whom I will describe,
without prejudice to what follows, as the tenant of the premises. Before
stating what those issues were, it will be convenient to set out the facts.
These were very helpfully agreed or conceded for the purposes of this appeal. I
should, however, record that some of these matters are in fact in dispute, even
though not in respects that affect the answers to the questions asked of the
court, and the following recital implies no concession by either party in
respect of those matters.
The facts
The premises were demised for a fixed term of 40
years with effect from 25 December 1956 to a Mrs Samuelson. On 6 January 1982
she assigned that lease to the defendants as joint tenants. The defendants were
then man and wife, but were divorced on 5 November 1984, the second defendant
not having resided in the premises or any part thereof since September 1983.
The contractual term expired on 25 December 1996 (the determination date), the
first tenant being then resident in the premises. He was declared bankrupt on
14 January 1997, and by section 306 of the Insolvency Act 1986 his ‘estate’ (a
term the meaning of which is in dispute in this case) automatically vested in
the Official Receiver. The Official Receiver disclaimed the lease on 22 May
1997.
The lease having determined by effluxion of time,
the only right of the first defendant to remain in the premises has to be found
in provisions for statutory protection. On the determination date the lease was
a tenancy at low rent as defined in section 5 of the Rent Act 1977 (the 1977
Act), and therefore was not a protected tenancy within the meaning of section 1
of the 1977 Act. Accordingly, he has no right to remain in the premises and is
a trespasser there, unless he can bring his case within the provisions as to
security of tenure for occupying tenants of residential property let at low
rents that are to be found in Part I of the Landlord and Tenant Act 1954 (the
1954 Act).
The issues
The judge’s order from which the appeal is brought
was in the form of a declaration that:
1. The lease did not determine for all purposes
on the determination date.
2. Neither the lease nor any interest therein was
capable of forming part of the bankrupt estate of the first defendant which
vested in the trustee.
3. Neither the lease nor any interest therein
subsequently formed part of the bankrupt estate of the trustee which vested in
the trustee.
However, in order fully to understand the case,
particularly as it was expanded before us by Mr Edwin Johnson and Miss
Jacqueline Baker in their admirable arguments, it is necessary to explain in
some little more detail what lies behind those declarations.
The case resolves itself into three questions.
They are:
1. Did the first defendant have any right to
remain in the premises after the determination date? The landlords say that
Part I of the 1954 Act does not apply to a case such as the present where the
contractual tenancy is held by joint tenants but only one of them is resident
at the premises when that tenancy expires by effluxion of time. If the
landlords are right on that point, they are entitled to possession without
more.
2. If the first defendant is given a right to
remain in the premises by Part I of the 1954 Act, what is the nature of that
right? Is it, as the first defendant claimed, simply a continuation of the contractual
tenancy, with the first and second defendants still both being joint tenants?
Or is it, as the judge held and the landlords contend under this question, a
right held by the first defendant alone?
The importance of this point for the first defendant
is that if his continuing right is in the nature of a joint tenancy, the first
defendant would argue that the tenancy is held by the tenants on the statutory
trusts for sale under the Law of Property Act 1925, and thus, being property
held on trust, was precluded by section 283(3)(b) of the Insolvency Act 1986
(the 1986 Act) from vesting in the trustee in bankruptcy. That conclusion was
challenged by the landlords. I shall not seek to resolve that latter dispute,
because, for reasons that I shall shortly explain below, I am satisfied that
the interest conferred on the first defendant by Part I of the 1954 Act is an
interest or right, whatever its actual nature may be, that is held by him
alone, and not by him as a joint tenant.
3. That makes it necessary to proceed to the third
question, which involves consideration of whether that interest is part of the
(bankrupt) first defendant’s property forming part of his estate for the
purposes of section 283(1)(a) of the 1986 Act. If so, it was thus vested in the
trustee in bankruptcy, and was available to be disclaimed by him.
I deal with those questions in turn. First,
however, it will be convenient to examine an issue that affects the
construction of Part I of the 1954 Act, and thus the answer to question 1, namely
the relationship between Part I of that Act, dealing with security of tenure
for residential tenants, and Part II of that Act, dealing with security of
tenure for business, professional and other tenants. It is inescapably
necessary to set out a substantial part of the statutory provisions, which I do
before addressing the issue of construction.
The immediately relevant parts of Part I of the
1954 Act are the following:
Protection of residential tenants on
termination of long tenancies at low rents
1.– On the
termination in accordance with the provisions of this Part of this Act of a
tenancy to which this section applies the tenant shall be entitled to the
protection of the Rent Act subject to and in accordance with those provisions.
Tenancies to which s1 applies
2.– (1) The
foregoing section applies to any long tenancy at a low rent, being a tenancy as
respects which for the time being the following condition (hereinafter referred
to as ‘the qualifying condition’) is fulfilled, that is to say that the circumstances
(as respects the property comprised in the tenancy, the use of that property,
and all other relevant matters) are such that on the coming
been one at a low rent, be entitled by virtue of the Rent Act to retain
possession of the whole or part of the property comprised in the tenancy…
Continuation of tenancies to which s1 applies
3.– (1) A tenancy
which is current immediately before the term date and is then a tenancy to
which section one of this Act applies shall not come to an end on that date
except by being terminated under the provisions of this part of this Act, and
if not then so terminated shall subject to those provisions continue until so
terminated and shall, while continuing by virtue of this section, be deemed
(notwithstanding any change in circumstances) to be a tenancy to which section
one of this Act applies.
(2) Where by virtue of the last foregoing
subsection a tenancy is continued after the term date, then —
(a) if the premises qualifying for
protection are the whole of the property comprised in the tenancy, the tenancy
shall continue at the same rent and in other respects on the same terms as
before the term date;
(b) if the premises qualifying for
protection are only part of the property comprised in the tenancy, the tenancy
while continuing after the term date shall have effect as a tenancy of those
premises to the exclusion of the remainder of the property, and at a rent to be
ascertained by apportioning the rent payable before the term date as between
those premises and the remainder of the property, and in other respects on the
same terms (subject to any necessary modifications) as before the term date…
Termination of tenancy by the landlord
4.– (1) The
landlord may terminate a tenancy to which section one of this Act applies by
notice given to the tenant in the prescribed form specifying the date at which
the tenancy is to come to an end (hereinafter referred to as ‘the date of
termination’), being either the term date of the tenancy or a later date.
Application of Rent Acts where tenant retains
possession
6.– (1) Where a
tenancy is terminated by a landlord’s notice proposing a statutory tenancy the
Rent Act shall apply, subject as hereinafter provided, as if the tenancy
(hereinafter referred to as ‘the former tenancy’) —
(a) had been a tenancy of the
dwelling-house, as hereinafter defined, and
(b) had not been a tenancy at a low rent
and, except as regards the duration of the tenancy and the amount of the rent,
had been a tenancy on the terms agreed or determined in accordance with the
next following section and no other terms.
Grounds for resumption of possession by
landlord
12.– (1) The
grounds on which a landlord may apply to the court for possession of the
property comprised in a tenancy to which section one of this Act applies are
the following —
(a) that for purposes of redevelopment
after termination of the tenancy the landlord proposes to demolish or reconstruct
the whole or a substantial part of the relevant premises;
(b) the grounds specified in the Third
Schedule to this Act (which correspond, subject to the necessary modifications,
to the Cases 1 to 9 in Schedule 15 to the Rent Act which specify circumstances
in which a court may make an order for possession under that Act.)
The references to the Rent Act are now to the 1977
Act, and the circumstances referred to in section 2(1) of the 1954 Act are
those that make a tenancy a protected tenancy under the 1977 Act, save for that
tenancy being, as was the lease of the premises, a tenancy at low rent. It is
therefore convenient here to interpolate the relevant parts of the 1977 Act:
Protected tenants and tenancies
1.– Subject to
this Part of this Act, a tenancy under which a dwelling-house (which may be a
house or part of a house) is let as a separate dwelling is a protected tenancy
for the purposes of this Act
Statutory tenants and tenancies
2.– (1) Subject to
this Part of this Act —
(a) after the termination of a protected
tenancy of a dwelling-house the person who, immediately before that
termination, was the protected tenant of the dwelling-house shall, if and so
long as he occupies the dwelling-house as his residence, be the statutory
tenant of it;…
The immediately relevant sections of Part II of
the 1954 Act are as follows:
23.– (1) Subject
to the provisions of this Act, this Part of this Act applies to any tenancy
where the property comprised in the tenancy is or includes premises which are
occupied by the tenant and are so occupied for the purposes of a business
carried on by him or for those and other purposes…
(3) In the following provisions of this Part of
this Act the expression ‘the holding’, in relation to a tenancy to which this
Part of this Act applies, means the property comprised in the tenancy, there
being excluded any part thereof of which is occupied neither by the tenant nor
by a person employed by the tenant and so employed for the purposes of a
business by reason of which the tenancy is one to which this Part of this Act
applies…
Continuation of tenancies to which Part II
applies and grant of new tenancies
24.– (1) A tenancy
to which this Part of this Act applies shall not come to an end unless
terminated in accordance with the provisions of this Part of this Act; and… the
tenant under such a tenancy may apply to the court for a new tenancy —
(a) if the landlord has given notice… to
terminate the tenancy, or
(b) if the tenant has made a request for a
new tenancy…
Subsequent sections provide for the termination of
a section 24 tenancy by notice by the landlord, the tenant’s request for a new
tenancy, and the resolution of disputes in relation to that request by the
court.
Part I and Part II of the 1954 Act
Mr Johnson argued that there was a substantial
degree of commonality between these two parts of the 1954 Act, and that
therefore we should assume that the same concepts were used throughout the two
parts, and that expressions used in the one part had the same meaning and
effect in the other part. The forensic importance of that submission is that in
Jacobs v Chaudhuri [1968] 2 QB 470, this court held that the
protection of Part II of the 1954 Act is not available where only one of two
joint tenants under a business lease remains in possession at the expiry of the
term. Mr Johnson said that by parity of reasoning, Part I simply should not
apply where, as in our case, only one of two joint residential tenants was in
occupation at the termination date.
Mr Johnson accepted that Part I and Part II had
different origins. He said, however, that their coming together in the 1954 Act
was no coincidence or mere convenience of drafting. Both parts adopted the same
scheme or approach, which in each case had the same characteristics: (i) the
continuation of the contractual tenancy beyond its term date; (ii) what might
be colloquially called a continuation period or tenancy, during which the
parties could, or according to their requirements were obliged to, take steps
to regulate their future relations; and (iii) according to the circumstances,
the creation by operation of law of a new tenancy relationship at the end of
the continuation period. I acknowledge the force of those arguments, but on reflection
I consider that the differences between Part I and Part II may be more
significant than their similarities.
First, what is continued under Part II is indeed
the contractual tenancy, even if part of the demised premises are not occupied
for the purposes of a business. Under Part I, while the terms of the tenancy
continue to be the same, the premises will not necessarily be the demised
premises, but only that part which qualifies for protection, that is, which is
occupied by the tenant as his residence, with consequent adjustments to the
rent: section 3(2)(a). Second, under Part II, the ‘new tenancy’ will
indeed be exactly that: a further tenancy in the same form, and subject to the
same legal regime, as a contractual tenancy, and indeed created, albeit under
order of the court, by contract between the landlord and the tenant: section 36
of the 1954 Act. That is not so in respect of Part I. When that part applies,
the tenant becomes entitled, as section 1 says, not to a new tenancy but to the
protection of the Rent Act; or, by an amendment that does not affect the issues
in our case, to the protection of the assured tenancy regime created by the
Housing Act 1988 and applied by section 186 of the Local Government and Housing
Act 1989. In either case, the result, at stage three of the process analysed
above, is a statutory, not a contractual, tenancy; that is, a Rent Act
tenancy like any other, to which the normal rules governing Rent Act tenancies
apply in full.
That difference is attributable to the purpose of
Part I of the 1954 Act, which is to bring persons occupying residential
property on long leases at a low rent within the regime of the Rent Acts: see per
Lord Denning MR in Herbert v Byrne [1964] 1 WLR 519 at p525,
cited by this court in St Ermins Property Co Ltd v Patel [1997] 2
EGLR 61. That is manifest from the structure of Part I itself, which: provides
that the protection that the tenant obtains is that of the Rent Acts (section
1); imposes the requirement of residential occupation in section 2(1)(a)
of the 1977 Act as the qualifying condition for that protection (section 2(1));
also imposes that condition as the test whereby the premises by the
continuation tenancy are delimited (section 3(2)(a)); and adopts the
criteria of the 1977 Act for determining the landlord’s right to possession
under a continuation tenancy (section 12(1)(b)).
In these circumstances, I consider that the
association of Part I of the 1954 Act with the Rent Act regime is likely to be
a better guide as to the meaning and extent of that part than is its presence
in the same Act as, and its structural resemblance to, Part II of the 1954 Act.
Question 1: did the first defendant have any
right to remain in the premises after the determination date?
The short point, as already noted, is that the
leaseholder was the two defendants as joint tenants. If at the end of the lease
‘the tenant’ did not qualify for the protection of the continuation tenancy
because one of the joint tenants was no longer a residential occupier, that
protection was not available in respect of that lease; and no other right could
exist in connection with the lease because it had determined by effluxion of
time.
That was the view of this court in respect of the
continuation tenancy provided by Part II of the 1954 Act. In Jacobs v Chaudhuri
[1968] 2 QB 470 partners took a lease of business premises as joint tenants.
They subsequently fell out and dissolved the partnership. The partner with sole
rights to the business applied to the landlord for a new tenancy under section
24(1) of the 1954 Act. The landlord’s argument, which prevailed with the
majority of this court, is set out in two passages from the judgments at p486:
The landlord, on the other hand, argued that the
tenant must be the person or persons to whom the lease was granted or their
successors in title. The landlord admits that the applicant is beneficially the
sole owner of the business and all its assets, including the lease, but he says
that this is irrelevant as Part II of the Act of 1954 is dealing with the legal
estate and not the equities behind it. The Act of 1954 made an inroad, so to
speak, on the common law rights of landlords to resume possession of their
property when a lease expired, and this ought not to be stretched. The landlord
knew when he made the demise that the persons to whom it was made might acquire
statutory rights of renewal, but not that one of them severally might have such
a right.
And per Winn LJ at p495D
It is clear, and is common ground in the appeal,
that on a literal reading those provisions do not give to one of two or more
joint tenants, albeit he is the only one occupying and using the premises for
business purposes, any right to require, subject to the exclusions set out in
section 30, that the court shall grant him a further tenancy. This statement is
nonetheless true even where in a given case, and the instant case is such a
case, the sole beneficial interest in the former or ‘current’ tenancy belongs
in equity to the applicant. He is not ‘the tenant’ (which may, of course, be
read as including the plural ‘tenants’) referred to in the relevant sections:
he is, as his own statutory notices accurately stated, ‘one of the tenants.’
In substance the argument for the applicant is
that the beneficial effect intended to be produced by the Act of 1954 is wide
enough to comprise and assist all occupiers of business premises under the
tenancy: the argument for the landlord is that there is no indication in the
statute of an intention on the part of Parliament to restrict the landlord’s
freedom of contract to any greater extent or in favour of any wider category of
persons than those to whom express reference is made in the sections to which I
have referred.
That case therefore clearly decides that for the
purposes of Part II of the 1954 Act, ‘the tenant’ is and must be the two joint
tenants. If both of them do not qualify for the protection of the continuation
tenancy, then neither of them individually can qualify.
Jacobs v Chaudhuri
was not followed in a further case in this court, Lloyd v Sadler
[1978] 1 QB 774, which addressed the provisions of the 1977 Act rather than
directly the requirements of the 1954 Act. A landlord let a flat to two joint
tenants, Miss Sadler and Miss Lunt, for a term expiring on 25 December 1976.
The tenancy was a protected tenancy under the then obtaining Rent Act 1968
(which was subsequently consolidated into the 1977 Act). On about 28 October
1976 Miss Lunt left the flat to get married; she did not intend to resume, and
did not in fact resume, occupation. Miss Sadler continued in occupation after
25 December 1976, and the landlord brought an action against her in the county
court for possession. She claimed the protection of the 1968 Act. The judge
refused to order possession, and his decision was upheld in this court.
In Lloyd v Sadler, as in Jacobs v
Chaudhuri, the issue could be expressed as turning on the meaning of the
term ‘tenant’, in this case as used in section 3(1)(a) of the Rent Act
1968 (now section 2(1) of the 1977 Act). Megaw LJ drew on the judgment of
Scrutton LJ in Howson v Buxton (1928) 97 LJKB 749, admittedly a
case on the different provisions of the Agricultural Holdings Act 1923 that
gave ‘the tenant’ certain rights to compensation, to hold that that expression
should be construed in the light of the overall statutory purpose of the
provisions relating to such tenancies. His approach can be gathered from two
passages in particular in his judgment at p783C:
I find the most helpful guidance in Howson
v Buxton. It appears to me to decide that, where an Act of Parliament
refers to ‘the tenant,’ and the letting is to two or more persons jointly, it
is permissible for the court to hold, if so to do makes better sense of the
relevant statutory provision in its particular context, that one of those
persons, by himself, may for certain purposes be treated as being ‘the tenant.’
So here Miss Sadler can be treated, and should on the facts be treated, as
having been ‘the protected tenant’ immediately before the termination of the
contractual tenancy, and as being ‘the statutory tenant’ thereafter. Hence she
has security of tenure under this Act.
And at p786G:
In my opinion, the judgment of Scrutton LJ in Howson
v Buxton shows that, where the strict application of the doctrine of
joint tenancy would lead to unreasonable results, or results which the
legislature is unlikely to have intended, it is permissible for the court to
conclude that the legislature did not so intend but that, instead, in such a
case, the phrase ‘the tenant’, where there is a joint tenancy, is to be read as
meaning ‘the joint tenants or any one or more of them.’ There is thus authority that the doctrine of joint
participation by joint tenants is not a sacrosanct or immutable doctrine of
statutory interpretation, where such phrases as ‘the tenant’ and ‘the tenancy’
are used.
Megaw LJ applied that approach to section 3(1)(a)
of the Rent Act 1968 because of the serious prejudice that any other conclusion
would have caused to Miss Sadler’s interests as a residential occupier. That
consideration was strongly emphasised by the other members of the court. Lawton
LJ said at p788E:
[Counsel] on behalf of Miss Sadler submitted that
section 3(1)(a) should be construed so as to follow what Denning LJ in
1952 called the guiding light through the darkness of the Rent Acts: see Feyereisel
v Turnidge [1952] 2 QB 29, 37. This lights up one of the main objects of
these Acts, which always has been and still is to give tenants a personal right
to security of tenure. Individuals are not to be turned out of their homes
without an order of the court, and courts are not to make orders having this
effect except on certain specified grounds. Further, the right to security of
tenure which tenants enjoy after the termination of their contractual tenancies
does not confer on them estates in land, as does a successful claim for relief
against forfeiture or for the grant of a new business tenancy… The only
individual making a claim to enjoy the rights of the statutory tenant was Miss
Sadler. Immediately before the termination of the protected tenancy she was one
of two joint tenants. Miss Lunt did not want the protection of the Act of 1968,
but Miss Sadler did, and the fact that Miss Lunt had already moved out did not
lessen her need for the security of tenure which the Act gave ‘the tenant.’ As
the Act gives protection to persons, not to legal concepts such as joint
tenants, I am entitled, in my judgment, to construe section 3(1)(a) so
as to allow one of two joint tenants to become ‘the statutory tenant.’
Shaw LJ said at p790E:
The answer to the question whether a joint tenant
is entitled independently to assert or to pursue a right which is conferred by
the joint tenancy or which develops from it must depend on the context in which
the question arises. It is only on this basis that the numerous authorities
cited in the course of the hearing of this appeal are to be reconciled.
Joint tenants do not constitute a collective
entity in law, but, since their respective interests in the subject matter of
their tenancy are identical and concurrent, they must in general concur in the
assertion and enforcement of rights which arise directly from that tenancy, for
those rights must reside in each of the joint tenants. It does not, it appears
to me, necessarily follow that this principle must apply to the assertion of
rights which are not founded on the grant itself but which are derived
collaterally from the operation of some enactment. In such a case the purpose
of the statutory provisions out of which the purported right emerges must be
taken into account. The nature of the right which the statute creates may
involve an individual or personal factor so that it would be apt to one joint
tenant but not to others. The identity of interest which subsists during the
term of the grant is not bound to persist in a statutory appendage to it.
Whether it does or not must depend on the benefit or relief or protection which
the statute confers or creates.
I would respectfully suggest that there can be
drawn from these observations the following principles with regard to the
protection conferred by Rent Act tenancies.
1. Regard must be had to the purpose of the
legislation, which is to protect the interests of residential occupiers.
2. The effect of the creation or continuation of
protection under the Rent Acts is not (in contrast to Part II of the 1954 Act)
to create a further contractual tenancy, but rather, as Shaw LJ puts it,
to create rights that are not founded on the grant but arise collaterally to it
by the operation of statute. As I have pointed out, and as, for instance, Winn
LJ emphasised in Jacobs v Chaudhuri, the effect of the Part II
scheme would have been, if that case had been decided differently, to force on
the landlord a contract with a different person from that with whom he had
chosen to contract. It does not follow from the fact that the latter result is
prohibited by the legislation that a residential occupier should be deprived of
statutory, non-contractual, protection because not all of the persons in
conjunction with whom he originally contracted are still occupying the
premises.
Turning to Part I of the 1954 Act, there are very
strong indications that the approach in Lloyd v Sadler rather
than that in Jacobs v Chaudhuri should be applied to determine
who, on the facts of our case, should be ‘the tenant’ protected by section 1 of
the Act. I have already indicated that I am not persuaded by arguments based on
the congruities between Part I and Part II. The point, however, goes further
than that. If, as this court held in St Ermins v Patel on the
basis of previous authority of high standing, the purpose of Part I is to
extend the protection of the Rent Act to tenants under the relevant types of
long leases, it must be the obvious course to interpret Part I, with its many
express references to the Rent Act, on the basis of Rent Act authority.
Further, the purpose of the continuation tenancy in Part I is to enable either
the creation of a protected tenancy or an application to the court for the
landlord to take possession, in the latter case under either the Rent Act
provisions or the special provisions in respect of redevelopment in section
12(1)(a): see section 4(3) of the 1954 Act. Once that protected tenancy
is created with joint tenants as its beneficiaries, its further continuation
will not be prevented by the removal of one of those tenants: Lloyd v Sadler.
It would seem very odd if that same protection did not obtain at the earlier
stage of the process, in the transitional stage between the long leasehold held
by tenants that the legislature intends to protect by means of the Rent Act and
the actual creation of the Rent Act tenancy.
All of these considerations are, in my view, only
reinforced by the fact that the continuation tenancy under Part I is not,
unlike under Part II, in truth, a continuation of the same tenancy, of the same
demised premises, but rather, under section 3, is, or at least may be, a
tenancy of only those parts of the demised premises that qualify for the future
protection: that is, as section 3(3) provides, the parts of the demised
premises that are occupied by a potential statutory tenant under the Rent Act.
That reinforces the reality of Part I that, despite the language that it uses
of continuation of the contractual tenancy, here, as in the Rent Act, what is
protected is, as Lawton LJ put it in Lloyd v Sadler, persons and
not legal concepts. Thus, section 2(1) of the 1954 Act only applies when the
Rent Act requirement of occupying a dwelling-house as a residence is fulfilled:
it is inept to say that joint tenants, rather than two people, reside in a
dwelling-house, whatever may be the nature of their legal relationship with
their landlord.
I have not overlooked that otherwise the terms and
incidents of the continuation tenancy are those of the contractual tenancy, a
point that is of importance in deciding question 3. That does not, however,
displace the overall consideration that the ambit and indeed very existence of
the continuation tenancy is determined by the personal right of the tenant to
Rent Act protection.
Finally, on this point, Mr Johnson pointed to the
fact that after Jacobs v Chaudhuri the legislature had intervened
to insert section 41A into the 1954 Act, in order to reverse that decision at
least in so far as it had applied in the case of partnerships. No such step had
been taken in respect of Part I. That distinction was present to the mind of
Megaw LJ in Lloyd v Sadler, and did not deflect him from his
conclusion as set out above. However, I cannot, with respect, agree with the
lord justice’s analysis that suggested that section 41A demonstrated that there
was a lacuna in the system of statutory protection as it applied, or did not
apply, to joint tenancies, and in those cases where parliament had not acted to
repair the deficiency, the courts should do so: see [1978] 1 QB 774 at p785A-F.
If parliament has not acted, that is, if anything, an indication that the
courts should not do so. In fact, however, if, as I conclude, it is proper to
extend the analysis in Lloyd v Sadler to Part I of the 1954 Act,
the problem does not arise. Reform of Part II did not give occasion for reform
of Part I because the two parts contain separate codes, which, despite
commonality of language, operate differently.
I am therefore of the opinion that the judge was
correct in his answer to issue 1. The lease did not determine for all purposes
on the determination date, in the sense that the effluxion of the contractual
lease did not give the landlords a right to possession of the premises.
Question 2: What is the nature of the first
defendant’s right to remain in the premises after the determination date?
I have already indicated that the first defendant
argues that he remains as a joint tenant under the continued contractual
tenancy; and the forensic reasons why he finds that contention attractive. The
contention must, however, be wrong, because it is entirely inconsistent with
the arguments on which the tenant must rely in order to succeed on question 1.
The first defendant’s right does not spring from
his legal status under the contractual tenancy but from his status as a
residential occupier holding over: as is made very clear, as a matter of ratio,
by Lawton and Shaw LJJ in the passages from their judgments in Lloyd v Sadler
cited above. If he were protected as the contractual tenant, then Mrs Shorrock,
who has not been near the premises since 1983, would equally be protected; or,
rather, would suddenly find that she was still in some way party to a lease
that determined in 1996. That that cannot be the case is demonstrated not
merely by common sense but also by the terms of Part I of the 1954 Act. By
section 2(1), the protected ‘tenant’ is he who would, apart from the rent and
term of his contractual tenancy, be a protected Rent Act tenant: which, by
section 2(1)(a) of the 1977 Act, requires him to be occupying the
premises as his residence. Mrs Shorrock is not doing that. It would be quite
anomalous if she could none the less obtain the statutory protection because
her contractual joint tenant qualifies for that protection. As the judge
concisely put it at p8C, ‘To be consistent with Lloyd v Sadler
the lease should continue in the name of the qualifying tenant only’. I
respectfully agree.
I fully accept that this means that ‘tenant’ in
respect of the continuation tenancy under Part I of the 1954 Act cannot be
given the meaning of tenant under the contractual lease. The status of the
residential occupier holding over is of a particular and hybrid nature, to
which the language of tenancy is applied because he remains in contractual
relations with the landlord, but which differs from his contractual relations
under the lease itself. That status is to be spelled
policy and requirements of the 1977 Act in the manner addressed under question
1 above. To that extent, to speak of the interim state under Part I, as opposed
to Part II, as one of a continuation tenancy may be to some extent misleading,
even though, as I have to recognise, that is the language adopted by
parliament. The status of that continuation tenant is, in truth, and despite the
literal terms of section 3(1) of the 1954 Act, a new and personal status,
which, while it depends for its origin on the contractual lease, does not
benefit all the parties to the contractual lease irrespective of their right to
statutory protection.
Question 3: Is the first defendant’s interest
under Part I of the 1954 Act part of his estate for the purposes of the 1986
Act?
This question covers issues 2 and 3 in the judge’s
declaration. I have in dealing with question 2 described the status of the
continuation tenant under Part I of the 1954 Act as a personal status: as
Lawton LJ in Lloyd v Sadler at p788G described the position of a
statutory tenant under the 1977 Act. Following such an approach, the judge held
that the first defendant’s right in the premises was ‘a mere personal right
dependent on the terms of the statute’. It therefore did not come within the
definition of bankrupt’s estate under section 283(1)(a) of the 1986 Act:
all property belonging to or vested in the
bankrupt at the commencement of the bankruptcy
and thus did not vest in the trustee in bankruptcy.
The judge found himself able to take the first
defendant’s interest outside the very wide words of section 283 by reference to
the fact that a statutory Rent Act tenancy cannot form part of a bankrupt’s
estate. That was decided in Sutton v Dorf [1932] 2 KB 304 at p306, on the footing that in Nunn v Pellegrini
[1924] 1 KB 685, the Court of Appeal held that:
the right of a statutory tenant is merely a
personal right to retain possession of the premises, and cannot be assigned.
That consideration was, in the judge’s view,
reinforced by the insertion into section 283, by the Housing Act 1988, of a new
section 283(3A), which specifically excludes from the bankrupt’s estate:
(a) a tenancy which is an assured tenancy
or an assured agricultural occupancy, within the meaning of Part I of the
Housing Act 1988, and the terms of which inhibit an assignment as mentioned in
section 127(5) of the Rent Act 1977, or
(b) a protected tenancy, within the
meaning of the Rent Act 1977, in respect of which, by virtue of any provision
of Part IX of that Act, no premium can lawfully be required as a condition of
assignment, or
(c) a tenancy of a dwelling-house by
virtue of which the bankrupt is, within the meaning of the Rent (Agriculture)
Act 1976, a protected occupier of the dwelling-house, and the terms of which
inhibit an assignment as mentioned in section 127(5) of the Rent Act 1977, or
(d) a secure tenancy, within the meaning
of Part IV of the Housing Act 1985, which is not capable of being assigned,
except in the cases mentioned in section 91(3) of that Act.
On the basis of those exclusions, the judge
accepted the argument that the policy of the 1986 Act, as amended, was:
to protect a bankrupt’s occupation of his home
where that right is pursuant to a right which is of no value to the trustee or
the creditors.
The judge considered that that conclusion was
consistent with the reasoning of Dillon LJ in City of London Corporation
v Bown (1990) 60 P&CR 42, where a secure periodic tenancy under
section 86 of the Housing Act 1985 was held not to form part of a bankrupt
tenant’s estate.
I shall have to return to that latter case. Mr
Johnson deployed two arguments against the judge’s rationale. First, he said
that the terms of section 283(3A), if anything, assisted the landlords’
argument, as they indicated, as had Sutton v Dorf, that the
criterion was that of assignability of the interest. Second, it was irrelevant
to whether an item of property formed part of the bankrupt’s estate that that
property was of no value to the trustee or creditors: as witness the provisions
for disclaimer themselves. Miss Baker, however, argued, in terms that had
attracted the judge in the second part of his rationale cited above, that the tenant’s
right, whatever it was, could only be made use of by the tenant himself, and
thus could not be turned into money for the creditors. It should therefore not
form part of his estate, since that would only produce the result that had
occurred in this case, of the right being disclaimed by the trustee, with no
benefit to the creditors, but loss of what was supposed to be his protected
occupation for the bankrupt himself.
Powerfully though those latter arguments were
advanced, I am satisfied that they are incorrect. First, and crucially, the
issue under section 283 is whether the interest or right is, in juristic terms,
‘property’. If the right is, in its legal nature, property, it only falls
outside the bankrupt’s estate by some specific exclusion. That in practical
terms the ‘property’, when held by a bankrupt, may be of no value to the
creditors, is nothing to the point. The issue is of the general nature of the
right created by Part I of the 1954 Act, and not of its value in particular
circumstances. I regard the continuation tenancy as having clear incidents of a
property nature, in particular because it retains from the contractual tenancy
the character of assignability: see the concluding parts of sub-subsections
3(2)(a) and 3(2)(b) of the 1954 Act. Second, even if the
criterion stated in the first point is not correct, and one does have to
consider the value of the right in the hands of a bankrupt, it is far from
being so clear that a continuation tenancy would never have value in the hands
of a trustee in bankruptcy as to disqualify the right from ever being a
component of the bankrupt’s estate.
These considerations are only reinforced by an
analysis of section 283(3A) of the 1986 Act. That subsection appears to have
been introduced in response to the decision of this court in Smalley v Quarrier
[1975] 1 WLR 938*, that where a Rent Act protected tenant became bankrupt
during the contractual term, the tenancy automatically vested in his trustee;
and, therefore, whether or not the trustee disclaimed the lease, he could not
become a protected tenant under what is now section 2(1)(a) of the 1977
Act because, per Sir John Pennycuick at p945D:
Where a tenant is adjudicated bankrupt during the
currency of a tenancy, the tenancy vests… in his trustee in bankruptcy. The
bankrupt thereupon ceases to be the tenant… It follows that if and when the
tenancy is subsequently terminated… the bankrupt is no longer the tenant and
accordingly obtains no security of tenure under the section;
*Editor’s note: Also reported at [1975] 2 EGLR 35
which section accommodates only the person who
immediately before the termination of the protected tenancy ‘was the
[protected] tenant’ of the dwelling-house.
The scheme adopted by section 283(3A) to address
that loss of protection by a bankrupt gives rises to the following comments
relevant to our case.
1. Section 283(3A) confirms that a tenancy
interest is ‘property’ in the sense used in the 1986 Act: if it were not, the
subsection would beat the air.
2. That a special rule is introduced for the
listed interests, but not for a continuation tenancy under Part I of the 1954
Act, strongly suggests that the latter was intended to remain in the bankrupt’s
estate: expressio unius exclusio alterius.
3. The unifying factor among the interests
excluded from the bankrupt’s estate is that they cannot be realised for the
benefit of the creditors and therefore have no value to the creditors.
4. That judgment as to value is, however, not made
ad hoc, but according to whether the interest in its juristic nature is
assignable.
These considerations strongly support the
landlords’ arguments in our case. I would add two further points. First, as to
general policy, whatever policy may be in housing terms, it is quite clearly
not the policy of the bankruptcy laws to protect the bankrupt’s occupation of
his dwelling-house. The limited nature of the section 283(3A) protection
demonstrates that; and such further exemptions as do exist,
of the bankrupt’s spouse or infant children, and not of the bankrupt’s own
occupation. Second, Smalley v Quarrier, having decided that a
protected tenant under the 1977 Act who is bankrupted during the contractual
tenancy does not retain his protection, it would be very odd indeed if a
continuation tenant under Part I of the 1954 Act who is bankrupted after the
end of the contractual tenancy did none the less retain protection: bearing in
mind that, as demonstrated above, his whole claim to retain any interest at all
must rest on analogies with the 1977 Act.
The issue as to section 283(3A) was not argued
before us in quite the manner just set out, and we were not shown Smalley v
Quarrier. That case and that argument, however, only reinforces the
conclusion that I had already reached on the basis of the other arguments in
the case.
I therefore conclude, differing from the judge,
that a continuation tenancy is part of the bankrupt’s estate under section 283
of the 1986 Act. That conclusion is not inconsistent with that reached by
Dillon LJ in City of London Corporation v Bown (1990) 60 P&CR
42 in respect of a secure periodic tenancy under Part IV of the Housing Act
1985. Having importantly emphasised that such a tenancy is not assignable, the
lord justice continued at p48:
I take the view the non-assignable secure
periodic tenancy of Mr Bown is a mere personal right dependent on the terms of
the statute. It is not an asset which the trustee in bankruptcy could realise
for the benefit of the creditors and I see no reason therefore why it should be
included in the property of the bankrupt which has vested, albeit without
assignment, under section 306 of the Insolvency Act in the trustee in
bankruptcy.
By that formulation, Dillon LJ was, I am quite
satisfied, not saying, as the first defendant’s argument suggested, that any
attempted realisation of the asset by the trustee would be of no value to the
creditors; rather, he was saying that because the interest was non-assignable,
it could not be realised at all. The continuation tenancy is not an interest of
that nature.
I should finally mention for completeness that Mr
Johnson also argued that the continuation tenancy was part of the bankrupt’s
property because it could found an application for enfranchisement under the
1967 Act. I found those provisions at best neutral on the present issue. That
issue turns on the juristic nature of the continuation tenancy, which, for the
reasons that I have set out, does consist of an item of property, and thus is
part of the bankrupt’s estate.
Conclusion
I have not found every aspect of this case easy,
and would respectfully echo the observation of Megaw LJ in Lloyd v Sadler
that the relationship of the system of statutory protection to joint tenancies
does not seem to have been fully worked out. I am, however, satisfied that, for
the reasons set out under question 3, the second and third declarations made by
the judge were incorrect, and should be replaced by a declaration that the
first defendant’s interest in the lease formed part of his estate under section
283 of the 1986 Act. The effect of that declaration in the events that occurred
is that the first defendant’s interest was lawfully disclaimed by his trustee,
and he therefore has no right to possession of the premises. I would allow this
appeal in those terms.
MUMMERY and HIRST LJJ
agreed and did not add anything.
Appeal allowed.
