Landlord and tenant — Right to buy — Housing Act 1985 — Tenant making right-to-buy application — Suspended possession order made against tenant — Terms of order breached — Right to buy ceasing to be exercisable under section 121 — Secure tenancy revived upon discharge of rent arrears — Whether right-to-buy application reviving — Whether tenant entitled to mandatory injunction under section 138(1) requiring landlord to convey long lease
The appellant applied, under the Housing Act 1985, to exercise her right to buy the property of which she was a secure tenant. The respondent landlords admitted the right under section 124 and the purchase price was fixed at £137,000 for a 125-year lease. However, completion was delayed. In 2002, the respondents obtained a possession order against the appellant, suspended on terms that the appellant pay the rent and arrears. The appellant failed to make the required payments and her secure tenancy came to an end so that she became a tolerated trespasser. Although the possession order was later discharged and the secure tenancy was revived, the appellant again fell into arrears in 2005.
In further possession proceedings, the appellant counter-claimed, under section 138 of the 1985 Act, for a mandatory injunction requiring the respondents to convey a long lease to her in accordance with her previous right-to-buy application. That injunction was granted in the county court by way of summary judgment in the appellant’s favour. The respondents’ appeal against that decision was allowed in the court below. Nelson J held that: (i) the right to buy had ceased to be exercisable in 2002 on the making of the possession order, by virtue of section 121(1) of the 1985 Act; (ii) the right-to-buy application had fallen at the same time; and (iii) the revival of the tenancy had not revived that application. He further concluded that no injunction could be made under section 138 owing to outstanding rent and certain matters remaining undetermined regarding the extent of the demise following the appellant’s complaints concerning the encroachment of a neighbour’s fence.
The appellant appealed. She contended that the wording of section 121(1), which provided that the right to buy “cannot be exercised” if a possession order is in force, imposed a bar only for so long as the order remained in existence; it did not mean that a tenant had to begin the right-to-buy process all over again once the tenancy revived.
Held: The appeal was allowed.
(1) A tenancy and its covenants revived with retrospective effect when a possession order was discharged. In that respect, no distinction could be made between the expressly agreed covenants and those implied by statute; both revived and were to be treated as having been continuously in existence, even during the period of limbo. An accrued right to buy that had been established by the landlord’s admission of the right under section 124 revived, together with the tenancy and its covenants. The prohibition in section 121(1) related only to the taking of a step exercising the right to buy while a possession order was extant. No further step in the process could be taken during that time. However, should the secure tenancy be revived by a court order before possession was relinquished, the accrued steps taken before the period of limbo would revive along with the tenancy. Accordingly, the tenant did not need to begin the process again by serving a fresh section 122 notice. However, given that that could confer a substantial and surprising benefit upon a tenant, it might be open to the court in an appropriate case, in the exercise of its broad discretion in respect of possession orders under section 85, to impose a condition making the revival of the tenancy conditional upon the tenant not pursuing the existing right to buy but instead starting afresh. (2) It was appropriate to grant an injunction under section 138. It had not been open to the judge to refuse an injunction on the ground of outstanding rent when that point had not been taken before him and the relevant facts had not been established. Nor did the appellant’s complaints regarding the encroachment of a neighbour’s fence put the area of the demise into doubt so as to leave “matters related to the grant” of the lease still to be agreed or determined. The matter should be remitted to the county court.
The following cases are referred to in this report.
Ainsbury v Millington [1987] 1 WLR 379; [1987] 1 All ER 929, HL
Bristol City Council v Lovell [1998] 1 WLR 446; [1998] 1 All ER 775; (1998) 30 HLR 770; [1998] RVR 133, HL
Burrows v Brent London Borough Council [1996] 1 WLR 1448; [1996] 4 All ER 577; [1997] 1 EGLR 32; [1997] 11 EG 150; (1997) 29 HLR 167
Enfield London Borough Council v McKeon [1986] 1 WLR 1007; [1986] 2 All ER 730; (1986) 18 HLR 330; (1987) 85 LGR 24, CA
Greenwich London Borough Council v Regan (1996) 28 HLR 469
Lambeth London Borough Council v Rogers [2000] LGR 191; [2000] 1 EGLR 28; [2000] 03 EG 127; (2000) 32 HLR 361, CA
London & Quadrant Housing Trust v Ansell [2007] EWCA Civ 326; [2007] HLR 37
Porter v Shepherds Bush Housing Association [2008] EWCA Civ 196; [2008] 2 EGLR 125
This was the hearing of an appeal by the appellant, Manelva Honeygan-Green, from a decision of Nelson J, sitting in the Queen’s Bench Division, allowing an appeal by the respondents, Islington London Borough Council, from a decision of HH Judge Marr-Johnson, sitting in Shoreditch and Clerkenwell County Court, granting summary judgment to the appellant on a claim for an injunction under section 138 of the Housing Act 1985.
Adrian Jack (instructed by Wilson Barca Solicitors) appeared for the appellant; Iain Colville (instructed by the legal department of Islington London Borough Council) represented the respondents.
Giving the first judgment, Keene LJ said:
Introduction:
[1] What is the effect upon a secure tenant’s right to buy under Part V of the Housing Act 1985 (the 1985 Act), and upon any progress |page:134| made under Part V towards acquisition, of the “revival” of the tenancy as a result of the court discharging an order for possession under its section 85(4) powers?
[2] Under Part V, a secure tenant, in certain circumstances, enjoys the right to buy the freehold of his dwelling-house or, in some cases, such as those where the dwelling-house is a flat, a lease. A series of steps or stages in the process of acquisition is prescribed by the 1985 Act, beginning with the tenant serving a written notice on the landlord under section 122, proceeding (if appropriate) to the ascertainment of the purchase price and culminating eventually in a conveyance of the freehold or the grant of a lease. However, by section 121, the right to buy “cannot be exercised” in a number of situations. One of those is where the tenant is or will be obliged to give up possession at a specific date under a court order: see section 121(1). Indeed, the tenancy by virtue of section 82(2) “ends on the date on which the tenant is to give up possession in pursuance of the order”, with the result that a failure to make payments as required by the possession order, if it is to remain suspended, will normally terminate the tenancy.
[3] The termination, however, is not final. The court has the power, under section 85(4), even after the order has become effective but before its execution, to discharge or rescind the order for possession. If it does so, the tenancy and its covenants revive “Lazarus-like” (per Ward LJ in Greenwich London Borough Council v Regan (1996) 28 HLR 469) and the tenancy is treated as having merely been in limbo prior to the revival. There is no dispute between the parties to this appeal that a tenant’s right to buy likewise revives in such a case and that his “qualifying period” under section 119(1) is to be assessed on the assumption that the tenancy has continued throughout. The substantive issue in this appeal is whether: (i) on such a revival, the tenant has to begin the Part V process afresh, with a new notice under section 122; or (ii) the stages previously accomplished before the possession order temporarily terminated the tenancy, such as the ascertainment of the purchase price, revive along with the tenancy and its covenants. Depending upon what has happened to the housing market in the interim, the answer to the question may mean a significant difference in the price to be paid by the tenant.
[4] This is the substantive issue, which arises on an appeal from a decision of Nelson J dated 25 May 2007, which was itself made on an appeal from HH Judge Marr-Johnson at Clerkenwell and Shoreditch County Court. There is also a “procedural appeal” concerning the destination of the appeal from Judge Marr-Johnson. That procedural appeal comes to this court from a decision of Sir Michael Wright dated 19 January 2007. The facts of that appeal are complicated and have no relevance to the substantive appeal, which I shall deal with first.
Statutory context
(a) Right to buy
[5] The right of a secure tenant to buy the freehold or a lease is to be found in section 118 of the 1985 Act, subject to a qualifying period as tenant and to certain exceptions that are irrelevant for present purposes. Section 118(1) provides:
118 The right to buy
(1) A secure tenant has the right to buy, that is to say, the right, in the circumstances and subject to the conditions and exceptions stated in the following provisions of this Part —
(a) if the dwelling-house is a house and the landlord owns the freehold, to acquire the freehold of the dwelling-house;
(b) if the landlord does not own the freehold or if the dwelling-house is a flat (whether or not the landlord owns the freehold), to be granted a lease of the dwelling-house.
[6] By section 122(1):
A secure tenant claims to exercise the right to buy by written notice to that effect served on the landlord.
Unless that notice is subsequently withdrawn, the landlord must then serve, within a specified period, written notice on the tenant either admitting the right to buy or denying it and giving reasons for such a denial: see section 124(1).
[7] The next stage concerns the purchase price and related matters. By section 125(1):
(1) Where a secure tenant has claimed to exercise the right to buy and that right has been established (whether by the landlord’s admission or otherwise), the landlord shall —
(a) within eight weeks where the right is that mentioned in section 118(1)(a) (right to acquire freehold), and
(b) within twelve weeks where the right is that mentioned in section 118(1)(b) (right to acquire leasehold interest),
serve on the tenant a notice complying with this section.
Such a notice must state, among other things, the price at which, in the landlord’s opinion, the tenant is entitled to buy: see section 125(2). Once such a notice has been served by the landlord, the tenant must, under section 125D(1), within a specified period serve a notice on the landlord, stating either that he intends to pursue his claim “to exercise the right to buy” or that he withdraws the claim. Alternatively, he may serve a notice claiming to exercise the right to acquire on “rent to mortgage terms”. If the tenant fails to serve a notice under section 125D(1) within the required time, the landlord is entitled to take certain steps that may result in the deemed withdrawal of the section 118 notice: see section 125E.
[8] If the tenant is unhappy with the price stated by the landlord, he may seek a determination by the district valuer. Completion of the transaction is dealt with by section 138. That provides as follows:
(1) Where a secure tenant has claimed to exercise the right to buy and that right has been established, then, as soon as all matters relating to the grant… have been agreed or determined, the landlord shall make to the tenant —
(a) if the dwelling-house is a house and the landlord owns the freehold, a grant of the dwelling-house for an estate in fee simple absolute, or
(b) if the landlord does not own the freehold or if the dwelling-house is a flat (whether or not the landlord owns the freehold), a grant of a lease of the dwelling-house,
in accordance with the following provisions of this Part.
(2) If the tenant has failed to pay the rent or any other payment due from him as a tenant for a period of four weeks after it has been lawfully demanded from him, the landlord is not bound to comply with subsection (1) while the whole or part of that payment remains outstanding.
(3) The duty imposed on the landlord by subsection (1) is enforceable by injunction.
The landlord is also entitled to require the tenant to complete, by serving notices under sections 140 and 141, the sanction for non-completion then being the deemed withdrawal of the notice claiming the right to buy.
[9] It will be seen that the statutory scheme follows a familiar pattern of notices and counternotices, taking the parties through a process step by step until, if all is in order, completion is ultimately achieved. This is the context in which the provision central to this case, section 121(1), is to be seen. Section 121 in full reads as follows:
121 Circumstances in which the right to buy cannot be exercised
(1) The right to buy cannot be exercised if the tenant is obliged to give up possession of the dwelling-house in pursuance of an order of the court or will be so obliged at a date specified in the order.
(2) The right to buy cannot be exercised if the person, or one of the persons, to whom the right to buy belongs —
(a) has a bankruptcy petition pending against him,
(b) …
(c) is an undischarged bankrupt, or
(d) has made a composition or arrangement with his creditors the terms of which remain to be fulfilled.
(b) Orders for possession:
[10] Part IV of the 1985 Act contains provisions defining secure tenancies and regulating their termination. In particular, section 82(1) provides that a secure tenancy of the kind with which this appeal is concerned cannot be brought to an end by the landlord without a court order. Section 82(2) states: |page:135|
Where the landlord obtains an order for the possession of the dwelling-house, the tenancy ends on the date on which the tenant is to give up possession in pursuance of the order.
The court is empowered to make a possession order in such cases only on certain grounds. One of those, relevant in the present cases, is the non-payment by the tenant of rent, but in such a case the court shall not make an order for possession: see section 84(2)(a):
unless it considers it reasonable to make the order.
[11] Section 85 confers a wide discretion in such cases on the court to adjourn the proceedings for such period or periods as it thinks fit. Subsections (2), (3) and (4) of that section are important. They read as follows:
(2) On the making of an order for possession of such a dwelling-house on any of those grounds, or at any time before the execution of the order, the court may —
(a) stay or suspend the execution of the order, or
(b) postpone the date of possession,
for such a period or periods as the court thinks fit.
(3) On such an adjournment, stay, suspension or postponement the court —
(a) shall impose conditions with respect to the payment by the tenant of arrears of rent (if any) and rent or payments in respect of occupation after the termination of the tenancy (mesne profits), unless it considers that to do so would cause exceptional hardship to the tenant or would otherwise be unreasonable, and
(b) may impose such other conditions as it thinks fit.
(4) If the conditions are complied with, the court may, if it thinks fit, discharge or rescind the order for possession.
[12] There has been some significant case law on the effect of these provisions in Part IV. In Greenwich (ante), the landlord authority had taken possession proceedings against a secure tenant for non-payment of rent and had obtained a possession order against him, which was not to be enforced for so long as he paid the current rent plus £1.75 per week. He failed to comply, but the parties subsequently agreed that he would pay off the arrears at a rate of £10 per week. Again, he breached the terms of the agreement. The landlord applied for a warrant for possession, but the tenant sought a stay of execution of the warrant on the basis that his original tenancy had come to an end when he breached the terms of the suspended possession order and that, as a result of the subsequent agreement, a new tenancy had come into existence that could be terminated only by a fresh court order.
[13] The Court of Appeal rejected that analysis. It held that although the original tenancy had determined “on the date on which the tenant is to give up possession” (section 85(2)), the court’s powers to postpone the date of possession or suspend the execution of the order could be exercised after that date since possession had passed and the tenancy had apparently ended. Millett LJ put it in this way, at pp475-476:
3. At first sight one might suppose that the court would only postpone the date of possession, and hence the date on which the tenancy is to determine, during the currency of the tenancy, ie by an order made before the relevant date has arrived. Thereafter, the tenancy being at an end, it would confine itself to staying or suspending enforcement of the order.
4. That is, not, however, the way in which the statutory provisions operate. Section 85(2) is quite explicit. The court may exercise either power at any time before the execution of the order. Since the order cannot be executed until after the date on which the tenant is to give up possession, ie after the date on which the tenancy has determined, it follows that the section expressly contemplates the possibility that the court may postpone the possession date, and hence the date on which the tenancy is to come to an end, even after the tenancy has already determined.
5. Accordingly, the statutory provisions contemplate the possibility that the court may revive or reinstate the existing secure tenancy which must thereafter be treated as having continued throughout without interruption.
6. This construction is confirmed by the terms of section 85(4). The order which that subsection authorises the court to rescind or discharge must be the order which is subsisting at the date when it is rescinded or discharged and that the court’s power to rescind or discharge it is not excluded by the fact that during some previous period earlier forms of the suspended possession order and earlier conditions imposed had not been complied with. Once the order for possession which brings the tenancy to an end is rescinded or discharged, however, the tenant’s right to remain in occupation must be referable to the original tenancy which, ex hypothesi, has never been determined.
The Act, therefore, contemplates the possibility that the terms of a suspended possession order may not be complied with, bringing the secure tenancy to an end; that thereafter the court may reinstate or revive the secure tenancy by postponing the date of possession; that the conditions of the later order may be complied with; and that the order may then be discharged or rescinded. This is in conformity with the clear object of suspending a possession order which is to give the tenant an opportunity to remedy his default. If he does so, the order will be rescinded or discharged, and this secure tenancy will continue without termination. This is the case even if in the meantime there have been breaches of the terms of the order which have led to the making a fresh possession order suspended on different terms. A secure tenancy may, therefore, be determined and revived as a result of the orders of the Court.
Ward LJ agreed, saying, at p482, that the effect of an order under section 85(4) to discharge or rescind the order for possession was “that the old tenancy revives”.
[14] This interpretation of the effect of the statutory provisions was endorsed by the House of Lords in Burrows v Brent London Borough Council [1996] 1 WLR 1448*. There, the facts were not dissimilar to those in Greenwich. Lord Browne-Wilkinson, with whom the rest of the House of Lords agreed, accepted Millett LJ’s analysis in Greenwich (at p1453 D-E) and then said, at pp1454H-1455A:
A secure tenancy protected by Part IV of the Act of 1985 is not like an ordinary tenancy. It can only be terminated by an order of the court ordering possession to be given on a particular date or in a particular event. But even determination by order of the court is not final. Until the possession order is executed, the court can by variation of its order change the date on which possession is to be given and thereby revive a secure tenancy which has already been terminated. During the period between the date specified by the order for the giving of possession and the date on which the order is executed there is a period of limbo: the old tenancy has gone but may yet be revived by a further order of the court varying the date for possession.
It was made clear that if the court later made an order varying the date upon which possession was to be given, the old secure tenancy retrospectively revived, together with its covenants: see at p1455E-F. Lord Jauncey of Tullichettle, concurring in the only other reasoned speech, observed of Part V of the 1985 Act, at p1459C-D, that:
The whole scheme of that Part is to afford protection to the secure tenant and that is achieved in section 85 by conferring on the court flexible powers to continue an existing secure tenancy, to revive a determined secure tenancy or to create a state of statutory limbo which will afford to a defaulting tenant an opportunity to have restored to him all the benefits of the secure tenancy when he has complied with stipulated conditions.
Lord Jauncey also held that the court’s power to revive the determined secure tenancy enabled it to require compliance by the tenant with “any stipulated conditions” if the tenancy were to revive: see at p1457H.
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* Editor’s note: Also reported at [1997] 1 EGLR 32; [1997] 11 EG 150
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[15] It seemed to be implicit in the speeches in Burrows that although a tenant could not sue for breach of a landlord’s covenant while the tenancy was in the state of limbo, if and when the secure tenancy revived its covenants likewise revived and were to be treated as having been in existence during the limbo period. Thus, it would follow that the tenant could bring an action after such revival for breaches of covenant that had taken place during the limbo period. Certainly, that was how this court understood the position when it came to decide Lambeth London Borough Council v Rogers (2000) 32 HLR 361†. There, the tenant successfully sued for damages for breach of the repairing covenant that had occurred during the limbo period. The court recognised that the local authority landlords were being held liable retrospectively for breach of covenant at a time when no tenancy of the premises existed, but it emphasised that the earlier termination of the tenancy had not been final: see per Mummery LJ, at p367: |page:136|
That was not, however, a final or irreversible situation. The possession order had not been executed. That makes all the difference to the statutory protection of [the tenant] under section 85.
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† Editor’s note: Also reported at [2000] 1 EGLR 28; [2000] 03 EG 127
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[16] Mummery LJ went on to say, at p268:
It is also clear from Burrows that the effect of a court order postponing the date for possession under section 85(2)(b) is that, unless the court otherwise directs, the secure tenancy is revived and that the revival applies retrospectively to the covenants, as well as to the tenancy itself. See 1455D-F.
Otton LJ and Simon Brown LJ agreed, with the latter saying in terms, at p371, that:
a section 85(2)(b) order is fully retrospective in effect.
He also added (with Otton LJ’s agreement) that the court’s discretion under section 85 was sufficiently wide for it to have made the revival of the tenancy conditional, if it thought fit, upon the damages claim, or part of it, not being pursued by the tenant: see at p370. That was possible by virtue of the power under section 85(3)(b) to “impose such other conditions as it thinks fit”.
Facts of the present case
[17] Mrs Manelva Honeygan-Green, whom I shall call the appellant, became a secure tenant of a flat at 73B Crouch Hill, in North London, in July 1990. By a notice served on the respondent landlords on 23 May 2000, she made a claim, under section 122 of the 1985 Act, claiming to exercise the right to buy a lease of the flat. The respondents served notice on 26 October 2000, under section 124, admitting her right to buy. On 12 February 2001, the price was fixed at £137,000, that being for a 125-year lease.
[18] Completion was then delayed, apparently for two reasons. According to the appellant, it was discovered that the tenants in the ground-floor flat had encroached upon her part of the garden and the respondents had failed to produce an accurate plan of the property. In addition, she said that a wall in the back garden had collapsed and the respondents had not completed the necessary repairs. It is not clear that the respondents accepted the accuracy of the complaints, but, whatever the reason, there is no doubt that completion was delayed. The appellant served notices of delay on 24 June and 26 July 2002.
[19] She was, however, in arrears with her rent and, on 14 July 2002, the respondents issued proceedings in the county court seeking possession. The appellant sought to pay off the arrears and by 3 October 2002 she had reduced them from £1,887 to £482. A court hearing was due to take place the following day in the possession proceedings, but according to the appellant an officer of the respondents agreed that, because of the amount of arrears paid, the respondents would ask for those proceedings to be adjourned. The respondents do not accept that account of events and the true position has never been established. In any event, what happened was that on the following day, 4 October 2002, a hearing took place at Clerkenwell County Court at which the respondents sought and obtained an order that the appellant give the respondents possession of the property on or before 1 November 2002, pay £482.25 rent arrears plus £120 costs, the order not to be enforced for so long as the appellant paid the current rent together with £50 per week off the arrears.
[20] However, the appellant failed to pay her rent on 7 October 2002 and failed to pay the first sum of £50 on 18 October 2002, the next payment being made by her on 5 November 2002. She was evidently in breach of the suspended order for possession and, in March 2003, the respondents wrote to her solicitor to say that this meant that she had forfeited her secure tenancy. However, on 8 May 2003, she applied to set aside the order of 4 October 2002. The application was successful: by an order of the county court dated 8 July 2003, the possession order was discharged, the appellant by then having paid off all her arrears.
[21] The proceedings of which this substantive appeal forms part began in February 2005, when the respondents again sought possession for arrears of rent and the appellant counter-claimed for, among other things, a mandatory injunction ordering the respondents to convey to her the long lease of the flat in accordance with her application in 2000 asserting her right to buy. She then applied for summary judgment on her counter-claim.
Proceedings below
[22] That application to enforce her statutory right to buy came before Judge Marr-Johnson in the county court on 28 April 2006. He found in the appellant’s favour, concluding that the tenant’s previously accrued right to buy must be deemed retrospectively to have continued throughout the limbo period. Referring to the decision in Burrows, the judge said:
If all the other incidents of a secure tenancy must be deemed retrospectively to have survived the limbo period, I see no logical reason why the right to buy should be treated differently. It seems to me that it should be treated in the same way as any other incident of a statutory tenancy, such as, for example, the right to complain about defective drains or a leaking roof.
[23] He also noted that section 121(2)(a) provided that the right to buy cannot be exercised by a person who has a bankruptcy petition pending against him. Since such a petition might be unfounded, it would be curious if that event had the draconian effect of defeating an accrued right to buy and thus sending the tenant back to the beginning of the process, to apply afresh. That he saw as an indication that parliament had intended, by section 121, to impose a temporary bar on the exercise of the right to buy that would be removed if and when the order of the court were removed. Consequently, for all these reasons, he gave summary judgment for the appellant on her counter-claim, granting her the injunction that she sought on the discharge by her of all arrears of rent.
[24] The respondents’ appeal was heard by Nelson J, who gave judgment in favour of the respondents on 25 May 2007. He noted that the issue was whether the revival of the secure tenancy revived the earlier right-to-buy application and its acceptance or whether the tenant had to make a fresh application and so lose the earlier favourable valuation. Referring to statements in several authorities that, under section 121, the right to buy “ceases to be exercisable” if a possession order is made, the judge observed that the authorities did not directly determine what happens to an existing application when the tenancy is revived retrospectively. However, he concluded, in [47], in effect, that section 121(1) imposes a permanent not a temporary restriction on the exercise of the right to buy:
Section 121(1) cannot be properly interpreted so as to be restricted to the time during which the tenant was obliged to give up possession.
[25] Nelson J regarded the same approach as being applicable to cases where section 121(2) applied, such as where a bankruptcy petition had been presented. The right to buy could not be exercised until the petition was dismissed. If it were, the right to buy would be revived but not an application in existence when a bankruptcy petition occurred. The judge commented, in [48]:
The disadvantages of a wholly unjustifiable bankruptcy petition being brought against a tenant are stark but the wording of section 121(2) is clear and does not permit the question of hardship to be taken into account.
He also saw policy reasons why a tenant who had broken the conditions of a suspended possession order should not be allowed to retain the advantage of an accrued right-to-buy process. Thus, he concluded that the revival of the tenancy did not revive the earlier application to buy and subsequent steps.
[26] In addition, Nelson J found in favour of the present respondents on what he described as “the narrower ground”, namely that an injunction was in any event inappropriate because the terms of section 138 had not been met. Rent due from the tenant had not been paid for more than four weeks after lawful demand (section 138(2)) and the area to be demised had not been determined, so not “all matters relating to the grant” of the lease had been agreed or determined: section 138(1). Consequently, the respondents’ duty to grant the lease had not arisen. |page:137|
Submissions
[27] It is contended on behalf of the appellant that Judge Marr-Johnson was right to treat section 121(1) as imposing a bar on any exercise of the right to buy only for so long as a possession order is in existence. Mr Adrian Jack argued that the words “cannot be exercised” in that subsection are consistent with a “pro tem” ban, which merely prevents any step in the acquisition process from taking place during the period in which the possession order is in force. He pointed to the evident injustice of allowing the making of a possession order permanently to undo all steps that have taken place under the right to buy. If a suspended possession order is appealed and the appeal is heard after the date specified for possession, a limbo period would still exist if the appeal were allowed. Yet, Nelson J’s interpretation of section 121(1) would mean that the tenant had to begin the right-to-buy process again, which surely cannot have been parliament’s intention. In the same way, Mr Jack replied upon the bankruptcy petition parallel drawn by Judge Marr-Johnson.
[28] It is submitted on behalf of the appellant that each step in the process set out by Part V of the 1985 Act is an “exercise” of the right to buy, as is shown by Enfield London Borough Council v McKeon [1986] 1 WLR 1007. Therefore, the effect of section 121(1) is to prevent any such exercise of the right while a possession order is in being, but once such an order has been discharged the process under Part V can be continued from the stage previously reached.
[29] As for the “narrower ground” of Nelson J’s decision, it is argued that that was not an issue raised in the respondents’ notice of appeal to the High Court and so was not an issue properly before the judge. In any event, the fact that a neighbour has encroached does not prevent the grant of a lease. As for the arrears of rent point, the respondents had been protected by the county court order that made the grant conditional upon the tenant paying off any arrears, which have not been quantified. Judge Marr-Johnson had declined to make any finding as to arrears.
[30] The respondents submit that a distinction should be drawn between a tenant’s contractual rights and his or her statutory rights. Covenants may revive and damages for breach thereof revive retrospectively, but the present issue concerns statutory rights, and section 121, properly interpreted, means that an existing claim of a right to buy is lost when a possession order is made. Mr Iain Colville, for the respondents, argued that this construction of the statutory language is supported by the decision in Enfield. He accepted, however, that if he is right, it means that an unfounded bankruptcy petition would kill off an established right to buy and send the tenant back to the starting point when the petition was dismissed.
[31] Mr Colville also relied upon section 121A(5), inserted by the Housing Act 2004 and dealing with tenants who engage in anti-social behaviour or in the use of premises for unlawful behaviour. That provision was not in force at the time of the appellant’s application, but Mr Colville emphasised that it states that where a “suspension order” under section 121A is made, any existing claim to exercise the right to buy “ceases to be effective as from the beginning of the suspension period”. It is submitted that this parliamentary intention can be attributed also to cases where a more conventional possession order has been made. Furthermore, if the discharge of a possession order revived the right-to-buy process, it could be that the tenant was enabled to buy many years after the price had been fixed, which would be a remarkable outcome.
[32] On the narrower ground, the respondents submitted that the issue of the area to be demised had properly been before Nelson J because he had raised it when seeking written submissions after the hearing. No injunction should be granted until that issue has been resolved.
Discussion
[33] I do not accept the distinction sought to be drawn by the respondents between a tenant’s contractual rights under the tenancy and his statutory rights. In the case of tenancies such as those now under consideration, many of the tenant’s rights are covered by statute, and, in any event, the claim for damages in Lambeth for retrospective breach of repairing covenants was based both on express repairing obligations under the tenancy agreement and on those implied by virtue of section 11 of the Landlord and Tenant Act 1985: see at p364. So when it is said that the tenancy and its covenants revive with retrospective effect when a possession order is discharged, that means that both the expressly agreed covenants and the statutorily implied ones revive and are to be treated as having been continuously in existence, even during the limbo period.
[34] It is to be observed that the courts, when dealing with the revival of a secure tenancy, have used language suggesting that, upon revival, one should regard the tenancy as having never undergone a limbo period. Thus, Millett LJ in Regan said, at p475, that the tenancy:
must thereafter be treated as having continued throughout without interruption.
In Rogers, Simon Brown LJ stated, at p371, that:
a section 85(2)(b) order is fully retrospective in effect.
This seems to me to be the point from which one should start in considering the present issue.
[35] Given the retrospective nature of the revival of the secure tenancy, even to the extent of allowing a claim for damages for a breach of covenant occurring during the limbo period, it seems right to approach the present issue by asking whether there is any reason why an accrued right to buy — for example, one that has become established by the landlord’s admission of the right under section 124 — should not be revived along with the tenancy and its covenants. I do not find any assistance in section 121A(5) in dealing with cases of anti-social behaviour and the like. The wording used in that provision is different from that in section 121, presumably deliberately so, and one can see reasons why parliament may have chosen to treat tenants who behave in such a fashion or who use the premises for unlawful purposes in a harsher manner.
[36] To a limited extent, some assistance can be found in the decision in Enfield, a case that concerned an earlier version of section 121, namely section 2(4) of the Housing Act 1980. In effect, that subsection, when read with Part II of Schedule 1, provided that the right to buy “cannot be exercised” if the tenant was obliged to give up possession under a court order or would be so obliged at a date specified in the order. In Enfield, the landlords issued proceedings claiming possession, those proceedings starting after the tenant had served notice claiming the right to buy and the landlords admitting that right. The tenant contended that she had both exercised and established her right to buy, with the result that the landlords were obliged to convey the freehold and that this obligation overrode any claim that they had to possession. The landlords argued that the then equivalent of the present section 121 meant that if and when the court made an order for possession in their favour, the tenant could no longer exercise her admitted right to buy by insisting upon completion of the purchase. The Court of Appeal agreed with the landlords, Slade LJ saying, at p1015A, that the right to buy is “exercised” each and every time the tenant takes any step towards the implementation of his right to purchase.
[37] The present respondents rely upon a passage in Slade LJ’s judgment, where he said that if any of the circumstances set out in Part II of Schedule 1 (now section 121(1) and (2) of the 1985 Act) subsist at any time between the originating notice of claim and completion, the tenant’s right to buy “ceases to be exercisable.”: see p1015H. Mr Colville has argued that, by this phrase, Slade LJ meant that the right ceased for all time to be exercisable, save via a fresh notice of claim. I do not accept that. The court in Enfield was not having to apply its mind to the present issue or indeed to a situation in which a secure tenancy had revived because of the discharge of a possession order. Indeed, that decision antedates the series of cases beginning in 1996 with Greenwich, which established the concept of such a tenancy reviving. In my judgment, Slade LJ was doing no more in the passage relied upon than making the point that the existence of a possession order or one of the events now referred to in section 121(2) prevents the tenant from taking any step in the right-to-buy process and so |page:138| “exercising” that right. The same is true of a similar phrase used by Lord Hoffmann in Bristol City Council v Lovell [1998] 1 All ER 775, at p781J. What is significant in Enfield is that it holds that each step or stage in the statutory process set out in Part V of the 1985 Act involves an “exercise” of the right to buy. It follows that no such step can be taken while one of the statutory barriers in section 121 is in being. That makes good sense, but it in no way implies that the emergence of one of those barriers wipes out for all time the steps that have already been taken.
[38] The respondents’ case depends upon interpreting section 121 as having that radical effect. I refer to section 121 and not just to its first subsection dealing with possession orders because what is striking about the statutory language, as Mr Colville recognised, is that the same phrase, “the right to buy cannot be exercised if…”, appears in both section 121(1) and (2). Counsel, like Nelson J, accepted that the same interpretation must be adopted in respect of both subsections. It follows that if the respondent is correct in its construction of the statutory language, not only the making of a possession order but also the lodging of a bankruptcy petition (section 121(2)(a)) would wipe out any steps already taken in the right-to-buy process. That would be the consequence even if the petition turned out to be unfounded and was eventually dismissed.
[39] The harshness of such a result has been acknowledged by both sides and by Nelson J, and, to my mind, it is an indication that the respondents’ construction of section 121 is not that which parliament intended. I can see no reason why it should have been intended that the existence of a pending bankruptcy petition should have such a potentially grave effect upon a tenant. In the same way, I accept the force of Mr Jack’s argument about the making of a possession order that is then reversed on appeal. The potential injustice of sending the tenant back to square one in such a situation is evident. However, if that is so, and if one would strive to prevent such a consequence in that situation, why should the discharge or rescission of a possession order under section 85(4) be treated differently?
[40] I accept that there could be situations in which the revival of a secure tenancy, if accompanied by the revival of an established price under the right to buy, could give the tenant a substantial and perhaps surprising benefit, particularly if there had been a long period during which the tenancy was in limbo. The court, however, has a very broad discretion under section 85, including the power, under section 85(3)(b), to impose “such other conditions as it thinks fit”. One notes that, in Lambeth, at p370, Simon Brown LJ made the point that the court’s order reviving the secure tenancy could have been made subject to a condition that the tenant’s damages claim should not be pursued. It is unnecessary to decide the point in the present case, but it seems to me that it would be open to the court in an appropriate case to make the revival of the tenancy conditional upon the tenant not pursuing the existing right-to-buy claim but starting afresh, if the court regarded that as a necessary and just condition in all the circumstances. The respondents have argued that that would be to deprive the tenant of a statutory right, but it must be borne in mind that the damages claim in Lambeth was in part based upon a statutory right as to the repair of the premises.
[41] For the reasons that I have indicated, I conclude that the prohibition contained in section 121(1) relates only to the taking of a step exercising the right to buy while a possession order meeting the terms of that subsection is in existence. No step or further step in the Part V process can be taken during that time. However, if the secure tenancy is revived by a court order before possession is given up, the accrued steps taken before the limbo period ensued revive with the tenancy, subject to any contrary decision of the court. The tenant does not need to restart the process under Part V by serving a fresh section 122 notice. On this main issue in the substantive appeal, therefore, I would reverse the decision of Nelson J.
[42] The narrower issue is essentially a question of whether relief by way of injunction was appropriate, given a decision in favour of the tenant on the main issue. There were two aspects to this narrower issue, as dealt with by Nelson J, both arising under section 138, the terms of which I have set out in [8] of this judgment. The first point that found favour with the judge arose under section 138(2), whereby the duty on the landlord to complete by granting a lease does not exist while rent is outstanding for a period of four weeks after lawful demand. This was not a defence raised by the respondents in their defence to the counter-claim for an injunction and Judge Marr-Johnson made no finding as to what rent, if any, was still outstanding. The respondents had averred that the appellant was in arrears, but she had denied that any arrears were due. Nor was this point taken in the respondents’ grounds of appeal from the county court or in their skeleton argument on appeal, whether in its original form of June 2006 or in its revived version of January 2007.
[43] The point was one raised by Nelson J by way of a note after oral argument had been completed, although in fairly general terms. Even then, the respondents, in their written response to that note, did not argue that there was no duty to grant a lease because of non-compliance with section 138(2). They did raise an argument concerning the extent of the demise, the second aspect of this narrower issue, but did not rely upon section 138(2). It seems to me, with all due respect to Nelson J, that it was not open to him to refuse to grant an injunction on a ground that had not been taken before him and, moreover, on which the facts had not been established. There obviously were some rent arrears, but Judge Marr-Johnson had allowed for that in the form of the injunction he had granted.
[44] The respondents did rely, in their response to Nelson J’s note, upon an argument that the extent of the property to be demised had not been determined. That point seems to have arisen because at some time back in around 2001, the appellant had complained to the respondents that the tenants of the neighbouring flat, flat A, at 73 Crouch Hill, had erected a fence that encroached upon part of her garden. The respondents’ housing department appeared to accept that that had happened, since it wrote to the occupiers of flat A on 2 May 2002 asking them to remove the fence. Nothing seems to have happened as a result of that letter, but it did not stop the respondents’ legal department drawing up a plan to go with the counterpart lease as and when completion was achieved: see the letter dated 7 May 2002. The respondents clearly remained of the view that the neighbour’s fence encroached because another letter was written dated 20 January 2004 to the occupiers of flat A, again seeking the removal of the fence and threatening a possible injunction. The extent of the encroachment was put at some 9ft. At no stage do the respondents seem to have suggested that the appellant was wrong in the view she had expressed as to the extent of the garden covered by her tenancy, and the respondents appear to have been well aware throughout of the area to which her right to buy related.
[45] In those circumstances, I can see no justification for finding that this matter “relating to the grant” remained unagreed or undetermined. It follows that the respondents were under a duty, by virtue of section 138(1), to make a grant of a lease. That duty was enforceable by injunction, as the statute says. There is no basis for refusing such an injunction on the terms set out by Judge Marr-Johnson.
[46] In summary, therefore, I would allow the substantive appeal against the decision of Nelson J.
Procedural appeal
[47] This appeal, against the decision of Sir Michael Wright on 19 January 2007, arises from a dispute as to the appropriate court to hear the substantive appeal from Judge Marr-Johnson. The first order made by Judge Marr-Johnson was one dated 19 May 2006, which granted permission to Islington London Borough Council (Islington) to appeal but did not state to which court the appeal should go. In that respect, the order did not comply with CPR 40.2.4.
[48] We have had the advantage of a transcript of the discussion between counsel and the judge after his judgment had been given on 28 April 2006, from which it is sufficiently clear that all parties at that stage contemplated the appeal going to the Court of Appeal rather than to the High Court, although without the reason for that being made express. In any event, on 8 June 2006 Judge Marr-Johnson approved an amended order, which granted to Islington permission to appeal, |page:139| “such appeal to be heard by the Court of Appeal (if that court will agree to hear it)”. There were other amendments to the original order, but of a minor drafting nature. Some of the changes made in manuscript by the judge make it apparent that he had the original order of 19 May 2006 before him at the time of approving this amended order.
[49] Islington had in fact by the time of the amended order lodged an appellant’s notice in the High Court, an understandable act since that would be the normal destination of an appeal from summary judgment: see CPR 52 PD 3.2A.2. In this situation, counsel for both parties asked for the matter to be listed for a mention before Judge Marr-Johnson. This took place on 20 July 2006, but it seems that the county court failed to inform counsel for Islington of the date for that mention. Only Mr Jack was present. None the less, the judge proceeded to explain his actions. He described his first order, that of 19 May 2006, as “an act of sheer aberration”, and added, according to the transcript that we have:
I have no idea at all why I initialled the first order, but it must have been done in a state of near unconsciousness and in the course of a heavy load of box work.
He went on to say that the second order represented the order of the court and that he had taken the view that the point in the (substantive) appeal was of sufficient importance for the Court of Appeal to be involved:
It seemed to me that since it was a point which could arise in other cases [it] was of wider interest than this case alone, the Court of Appeal might think it was fit for their consideration.
[50] An order was then issued, dated 26 July 2006, declaring “for the avoidance of doubt” that the form of the order of the 19 May was issued in error and that the true order of the court was that dated 8 June 2006. Islington were dissatisfied with this outcome and applied to set aside this order of 26 July. Unfortunately, this application did not come before Judge Marr-Johnson, who had retired before it could be heard. The matter was dealt with by two other circuit judges, involving several days of argument and culminating in a judgment by Judge Birtles dated 23 October 2006.
[51] Regrettably, Judge Birtles was not provided with copies of the transcripts of the post-judgment discussion of 28 April 2006 and the hearing on 20 July 2006. He took the view, in those circumstances, that Judge Marr-Johnson must have had “second thoughts” about his original decision as to the appropriate appeal court and, in the light of a number of well-known authorities, he held that neither the “slip-rule” (CPR 40.12.(1)) nor the court’s powers under CPR 3.1(7) to vary an order enabled Judge Marr-Johnson to make the order of 8 June 2006. Therefore, Judge Birtles set aside the declaratory order of 26 July 2006 and made an order declaring that the original order of 19 May 2006 was the only valid order, with any appeal against it lying to the High Court. Judge Birtles granted the present appellant permission to appeal against his decision, but made a costs order against her.
[52] Thus, it was that Sir Michael Wright was faced with an appeal against Judge Birtles’ decision. It is evident from Sir Michael’s judgment that he took the view, having the advantage of the transcripts to which I have referred, that it had always been Judge Marr-Johnson’s intention for the appeal to go straight to the Court of Appeal. I share that view. However, Sir Michael was informed, entirely accurately, that after the appeal to him had been filed a direction had been made by Tuckey LJ that the substantive appeal should be heard by the High Court. In the light of that direction, Sir Michael decided that the appeal to him had become academic. He made no order on it, but simply gave directions for the hearing of the substantive appeal, which in due course was dealt with by Nelson J.
[53] I have had to spell out the tortured history of this matter in some detail, but ultimately the issues for this court on the appeal against Sir Michael Wright’s decision are narrow. Mr Jack, for the appellant, contended that the judge was wrong to regard the appeal against Judge Birtles’ decision as being academic. Very substantial costs had been incurred in the hearings leading to that decision and it was therefore necessary to determine whether Judge Birtles had been right. Reliance is placed upon a passage from the well-known case on “academic” issues, Ainsbury v Millington [1987] 1 WLR 379, at p381C, where Lord Bridge of Harwich observed that:
litigation may sometimes be properly continued for the sole purpose of resolving an issue as to costs when all other matters in dispute have been resolved.
The courts have sometimes declined to adjudicate where costs alone were in issue, but Mr Colville accepted in the course of argument that this was not such a case. I agree.
[54] The other issue that then falls to be determined is whether Judge Birtles had been right in deciding that Judge Marr-Johnson had no power to make the order of 8 June 2006 and, therefore, that the declaratory order of 26 July should be set aside. It seems to me to be quite clear that Judge Marr-Johnson was not having second thoughts when he made the order of 8 June. The transcripts, which Judge Birtles did not have, show that he was simply seeking to ensure that the court order properly reflected his original intention that the appeal should go to the Court of Appeal, subject to that court’s direction. That was particularly necessary, given that the earlier order of 19 May failed to state the appeal court as it should have done under the CPR. In my judgment, he had the power to amend the terms of the original order both under CPR 3.1(7) and CPR 40.12(1), the slip-rule, so as to make those terms accord with the court’s intention.
[55] In those circumstances, I have concluded that Judge Birtles was wrong in his decision, as indeed Sir Michael Wright appears to have thought. I would allow this procedural appeal. No order beyond that is required, so far as I can see, beyond an order for costs in respect of the various hearings in this procedural litigation. That is no doubt a topic upon which the parties may wish to make written submissions.
Overall conclusions
[56] For the reasons given, I would allow both these appeals.
Maurice Kay LJ said:
[57] I agree.
Giving the second judgment, Pill LJ said:
[58] I also agree that both appeals should be allowed and for the reasons given by Keene LJ.
[59] Property values may fluctuate wildly. It is submitted that to permit the revival of an earlier application to exercise the right to buy under Part V of the 1985 Act to a tenant who for years has been failing to pay rent regularly may permit an unjust windfall. That may be so, but I agree with Keene LJ that the statute is to be construed so that a fresh application by the tenant under section 122 is not required upon a revival of the secure tenancy under Part IV, section 85 of the 1985 Act.
[60] Section 85 of the Act, the material parts of which are set out in [11] of Keene LJ’s judgment, has proved difficult to construe and apply (see, for example, the recent cases of London & Quadrant Housing Trust v Ansell [2007 EWCA Civ 326; [2007] HLR 37 and Porter v Shepherds Bush Housing Association [2008] EWCA Civ 196*) and a point has been raised on the construction of section 85(3)(b) and (4). Once the court has construed the right-to-buy provisions in Part V of the 1985 Act in the way it has, I do express a reservation as to whether the exercise of the tenant’s statutory right to buy, clearly an important right, can be defeated by the imposition of a condition under section 85(3)(b) of Part IV. As Keene LJ has stated, in [40], it is unnecessary to decide the point in the present case and I should wish to leave open the question of whether such a condition, which does not arise out of the tenancy, is within the contemplation of the word “conditions” in section 85(3)(b) and (4). |page:140|
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* Editor’s note: Reported at [2008] 2 EGLR 125
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[61] Respectfully, I see the force of Simon Brown LJ’s observations in Lambeth London Borough Council v Rogers (2000) 32 HLR 361 in respect of the waiver of the tenant’s claim to disrepair in the circumstances of that case. I should, however, wish to hear further argument as to whether the exercise of the tenant’s quite separate right to buy provided by Part V of the 1985 Act, now found to be capable of revival, can be defeated in that way.
Appeal allowed.
