Landlord and tenant – Unlawful eviction – Damages – Sections 27 and 28 of Housing Act 1988 – Appellant tenant claiming damages for unlawful eviction by respondent local authority landlord – Damages to be calculated by reference to difference between landlord’s interest subject to tenant’s right to occupy and that interest free from tenant’s rights – Hypothetical sale of landlord’s interest in open market – Whether valuation wrongly assuming that tenant’s secure tenancy converted into assured tenancy on sale to private landlord – Appeal allowed
The appellant claimed damages from the respondent council, under sections 27 and 28 of the Housing Act 1988, for unlawful eviction from a one-bedroom flat that he had held on a secure tenancy. It was common ground that such damages fell to be calculated by reference to the profit accruing to the landlord by reason of the eviction rather than the loss to the tenant. By section 28(1)(a) and (b), that sum was to represent the difference in value, immediately prior to the unlawful eviction, between the landlord’s interest in the building subject to the tenant’s rights and that interest free of those rights. By section 28(3)(a), the valuation was to be made on the basis of an open market sale to a willing purchaser.
The appellant contended that, in valuing the landlord’s reversion subject to his rights for the purposes of section 28(1)(a), the hypothetical purchaser should be deemed to take the building subject to an ongoing secure tenancy of the flat, which would depreciate the value of the building by £90,500. The respondents contended that, on a sale of the reversion to a private landlord, the rights of the tenant would be downgraded to an assured tenancy, the existence of which would not affect the value of the building. The county court ruled in favour of the appellant and awarded damages of £90,500 plus £9,000 for trespass to the appellant’s goods.
Reversing that decision, the Court of Appeal held that the assumption under section 28(1)(a), that the appellant continued to have “the same right to occupy the premises as before that time”, did not require it to be assumed that those rights were set in stone and immune from adverse change thereafter, whether by the landlord’s lawful action or by operation of law. It held that the valuer had to take into account the vulnerability of a secure tenancy to being downgraded to an assured tenancy by operation of law on a sale of a local authority’s interest to a private purchaser. It concluded that the difference between the two section 28 valuations was nil and awarded only £7,400 in damages at common law: see [2013] EWCA Civ 494; [2013] PLSCS 100. The appellant appealed.
Held: The appeal was allowed.
Although the principal target of sections 27 and 28 of the Housing Act 1988 was unscrupulous private landlords saddled with a tenancy protected by the Rent Act 1977, and while local authority landlords rarely perpetrated unlawful evictions of their tenants save occasionally through an honest mistake, the words of section 27 were wide enough to cover an unlawful eviction on the part of a local authority.
Section 28 of the 1988 Act required two valuations of the landlord’s interest as at the time immediately prior to the unlawful eviction, which were to be determined on different assumptions. The assumption under section 28(1)(a) was that the tenant continued to have the same “right to occupy” the premises as he had prior to his eviction. That included an assumption that the tenant continued to enjoy the benefit of the same restrictions on the landlord’s right to recover possession as he had enjoyed prior to the eviction.
That approach was unaffected by the further assumption to be made under section 28(3)(a), that the landlord was selling its interest on the open market to a willing buyer. The most likely buyer on an open market sale would be an ordinary private landlord seeking to generate a market rent for the flats, in whose hands the secure tenancies held by the tenants would cease to exist because the landlord condition of a secure tenancy under the Housing Act 1985 would no longer be satisfied. However, the exercise mandated by section 28 of the 1988 Act was more complicated than an identification of market value. The assumption of a sale on the open market was “for the purposes of” the valuations referred to in section 28(1), in which other assumptions were mandated, namely that the tenant “continues to have the same right to occupy the premises” as he had immediately prior to his eviction, or, alternatively, that the tenant “has ceased to have that right”. The right that the appellant had to occupy his flat immediately prior to the eviction was the right of a secure tenant. Although the consequence of a notional sale to a private landlord would be, in the real world, to convert that tenancy into an assured tenancy, the notional exercise mandated by section 28(3)(a) did not extend to making the consequential adjustments to the nature of the appellant’s right consequent on sale, since that was barred by the words of section 28(1)(a). Within that highly artificial exercise, regard to the effect of one assumption was halted by the terms of another.
Accordingly, the likely effect of a sale on the subsistence or otherwise of the secure tenancy should not be brought into the valuation exercise mandated by section 28. The order of the county court judge was restored accordingly: Wandsworth London Borough Council v Osei-Bonsu [1999] 1 WLR 1011; [1999] 1 EGLR 26 considered.
Per curiam: While all reasonable means should be in place to dissuade unlawful evictions, whether by misjudgement or otherwise, the respondents had realised no capital gain from their eviction of the appellant and had always intended to re-let the flat. In such circumstances, it seemed wrong that, through a calculation of the respondents’ notional gain, the law should require payment to the appellant out of public funds of an amount many times greater than his actual loss. Parliament might wish to re-visit the application of section 27 of the 1988 Act to unlawful evictions on the part of local authorities.
Jan Luba QC and Michael Paget (instructed by Hopkin Murray Beskine) appeared for the appellant; Andrew Arden QC and Desmond Kilcoyne (instructed by the legal department of Lambeth London Borough Council) appeared for the respondents.
Sally Dobson, barrister
