Hanoman v Southwark London Borough Council

Housing – Local authority – Lease – Appellant tenant claiming right to buy – Rent paid out of housing benefit – Whether lease price taking account of housing benefit used to pay rent as if rent paid out of appellant’s own money – Appeal allowedThe appellant was the secure tenant of a one-bedroom flat owned by the respondent local authority. The rent was in whole or substantially paid out of housing benefit rather than by the appellant personally. The appellant notified the respondents that he wished to exercise his right to buy the lease of his flat pursuant to Part V of the Housing Act 1985. The respondents initially challenged the authenticity of that application, however, the High Court held that the claim was valid and consequently the respondent was obliged to deal with it: [2004] EWHC 2039 (Ch); [2004] 27 EG 129 (CS).The premium payable by the appellant to exercise his right to buy was £17,000, which represented the then market value of the flat of £55,000 less a discount of £38,000. Since the respondents had failed to reply to the initial notice in the time allowed, the appellant served several notices of delay alleging that the premium payable on the grant of the lease should be reduced to nil, under sections 153A(5) and 153B of the 1985 Act. The appellant completed the purchase. However, he reserved the right to question in the county court, inter alia, whether the price payable for the lease fell to be reduced by reference to the housing benefit used to pay off the rent in the same way as the reduction the appellant would have received if he had paid the rent out of his own money. The county court subsequently ruled against the appellant on that question for three reasons. First, the collateral contract that the appellant alleged arose out of correspondence with the respondents went no further than to elicit their agreement to his initial proceedings in the county court and they had not prevented him from doing so. Second, the collateral contract was rendered unenforceable because it would contradict the provision in the lease for the payment of the premium. Third, a reduction in the premium could not, in any event, be obtained where the rent was paid by way of housing benefit. The purpose of sections 153A(5) and 153B was to prevent a tenant being prejudiced by the payment of rent because of the local authority’s delay and that prejudice could not apply where the rent had been paid by housing benefit. The appellant appealed.Held: The appeal was allowed.For the purposes of section 153A(5) of the 1985 Act, the payment of housing benefit is to be treated in the same manner as if the payment of rent had been by the tenant. Where an enactment referred to a person, it had to be taken to include a reference to that person’s agent unless that principle had been excluded. There was no express or implied exclusion of that principle in sections 153A or 153B. The natural meaning of those provisions was that rent paid encompassed all rent duly paid whatever the source of payment and there was nothing to suggest that the purpose of those sections could only be sensibly achieved by restricting the payment of rent to the payment of rent by the tenant otherwise than with housing benefit: Movitex Ltd v Bulfield [1988] BCLC 104 applied; R v Secretary of State for the Environment, Transport and the Regions, ex parte Spath Holme Ltd [2001] 1 EGLR 129 considered. A collateral contract existed between the appellant and the respondents. The contract enabled the appellant to proceed to completion on the basis that he would be able to enforce any rights to have any dispute about the exercise of his right to buy to be determined by the county court after completion: Inntrepreneur Pub Co v East Crown Ltd [2000] 3 EGLR 31; [2000] 41 EG 209 applied. The collateral contract had not been rendered unenforceable by section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, which required all the terms for the lease to be in one document. A collateral contract should, so far as possible, be interpreted in this situation in order to avoid unenforceability under section 2 and, on its true interpretation, the collateral contract did not contain a term that formed part of the lease. Since the appellant proposed to abandon his claim for rectification, the remedy available under the contract did not involve rewriting the terms of the lease, but the giving of a personal remedy against the respondents in consequence of what the lease wrongly contained. It operated in parallel to the lease: Business Environment Bow Lane Ltd v Deanwater Estates Ltd [2007] EWCA Civ 622; [2007] 2 EGLR 51; [2007] 32 EG 90 applied. Dominic Preston (instructed by Glazer Delmar) appeared for the appellant; Christopher Heather (instructed by the legal department of Southwark London Borough Council) appeared for the respondents.Eileen O’Grady, barrister