Housing Act 1957, section 9 and section 39(2) — Notice under section 9 requiring works of repair served on owners of a block of flats let on long leases — Some of the flats (10) were the subject of a single letting for 99 years at a small ground rent, the occupying tenants of the individual flats being protected by the Rent Act — The remaining flats (32) were each let on a lease for 99 years at a progressive ground rent which was, however, in no danger of even approaching two-thirds of the net annual value — The local authority appealed against a decision of Harman J who held that the owners were not ‘the person having control of the house’ for the purpose of section 9 — Harman J had also ruled that the omission of the owners to appeal to the county court under section 11 of the Act did not make the notice final and conclusive against them under section 37 since the notice was a nullity, not being served upon ‘the person having control’ — Held by the Court of Appeal that the decision of Harman J was correct on both points — The more difficult of the points was in regard to the validity of the notice in the light of section 39(2) of the Act and in particular as to the application of the second limb of that subsection, which defined the person in control as the person who would receive the rack-rent if the house were let at a rack-rent — It was submitted by the appellant local authority that the owners of the block came within this definition as they had an interest in the whole of the property and were the only ‘person’ who, if it were let at a rack-rent, could create a single rack-rent for the whole property — (It was accepted, at any rate for the purpose of the appeal, that the block could properly as a whole be styled a single ‘house’) — This argument was, however, in conflict with the decision of the House of Lords in London Corporation v Cusack-Smith — Although the second limb of section 39(2) is concerned with a hypothetical letting, it is necessary to look at the actual estates in the property which subsist at the relevant time — Thus where the freeholder has let the property to an occupying tenant on a long lease at a ground rent the person who would receive a rack-rent would be the occupying tenant and not the freeholder — Accordingly the owners in the present case were not the ‘person’ having control — Appeal dismissed
This was an
appeal by the London Borough of Croydon from a decision of Harman J in favour
of the respondents, Pollway Nominees Ltd, who had issued an originating summons
claiming declarations for the purpose of establishing that they were not liable
to carry out work required by a repair notice under section 9 of the Housing
Act 1957.
Michael Barnes
QC and Robin Campbell (instructed by the Controller of Administration, London
Borough of Croydon) appeared on behalf of the appellants; John Colyer QC and
Miss Jill Gibson (instructed by Bernstein & Co) represented the
respondents.
Giving
judgment, OLIVER LJ said: This is an appeal from an order made on May 11 1984
by Harman J declaring that the respondent, Pollway Nominees Ltd (to which I
shall refer as ‘Pollway’), is not the person having control of certain premises
known as Crown Point, Beulah Hill, London SE19, for the purpose of section 9 of
the Housing Act 1957 and that a notice served by the appellants on Pollway on
December 8 1982 under section 9A of the Act was for that reason a nullity.
The premises
with which the case is concerned consist of a substantial block of 42 flats. Of
these 10 are let under a single agreement for a lease to a subsidiary or
associated company of Pollway for a term of 99 years from a date in 1979 at a
small ground rent, the occupying tenants of the individual flats being tenants
protected by the Rent Act. Each of the remaining 32 flats is let for a term of
99 years from some date in 1976 at a ground rent which rises progressively as
the term progresses but which is in no danger ever of approaching two-thirds of
the net annual value. The leases are in a somewhat unusual form in that they
except from the demise even the central structure of the internal partition
walls, confining the demise to the depth of the plaster. Thus the freeholder
remains, technically at least, in possession of the whole structure, internal
and external, of the building, which it assumes the burden of repairing, the
costs of repairs being recovered, as one would expect, by an annual service
charge calculated by reference to the lessor’s expenditure. The ground rents
which Pollway (the successor in title to the original lessor) receives amount
to only £1,025, whereas the full rental value of the entire block would be
somewhere of the order of £41,000. The net annual value of the flats for rating
purposes is in excess of £10,000.
In 1982 the
appellants, who are the local authority for the area, formed the opinion that
the structure of the block (and, in particular, the roof) was out of repair in
various respects and they accordingly, on December 8 1982, served on Pollway as
the freeholder notice under section 9(1) of the Housing Act 1957 calling upon Pollway
(inter alia) to:
strip out all
defective and unsound material from the main roofs over flats 1 to 42 Crown
Point and replace with sound and suitable material properly fixed to render the
roofs weatherproof.
The section
referred to empowers a local authority, where it considers that any ‘house’ is
unfit for human habitation, to serve upon ‘the person having control of the
house’ a notice requiring him to carry out specified work. Under section 10,
they can, if the work is not done, themselves enter and do it and recover the
expense as a civil debt owed by the person having control and also by means of
a charge. A notice of entry was served on Pollway on January 30 1984. The
provisions of section 11 are important. That provides that ‘any person aggrieved’
by (inter alia) a notice may within 21 days of the service of the notice
appeal to the county court. That has to be considered in conjunction with
section 37, subsection (1) of which provides that:
Any notice .
. . against which an appeal might be brought to a county court under this Part
of this Act shall, if no such appeal is brought, become operative on the
expiration of twenty-one days from the date of the service of the notice . . .
and shall be final and conclusive as to any matters which could have been
raised on such an appeal . . .
Other material
provisions are section 39(2), which defines the ‘person having control’ and the
expression ‘rack-rent’ (defined as a rent of ‘not less than two-thirds of the
full net annual value of the house’) and section 18. Section 39(2) provides
that for the purposes of Part II of the Act (in which section 9 is contained):
the person
who receives the rack-rent of a house, whether on his own account
house were let at a rack-rent, shall be deemed to be the person having control
of the house.
Section 18, so
far as material, enables a local authority to take under the provisions of Part
II:
the like
proceedings in relation to . . . any part of a building which is used, or is
suitable for use, as a dwelling . . . as they are empowered to take in relation
to a house.
There is no
very useful definition of a ‘house’ for the purposes of Part II of the Act.
Section 189 contains a general definition by inclusion of a ‘house’ for the
purposes of the Act (a) as including yards, gardens and appurtenances etc and
it goes on to include in the definition (b):
for the
purposes of any provision of this Act relating to the provision of housing
accommodation
which section
9 is not
any part of a
building which is occupied or intended to be occupied as a separate dwelling.
Para 7 of the
2nd Schedule (which relates to demolition orders) defines a house as including
‘any building constructed or adapted wholly or partly as, or for the purposes
of, a dwelling.’
In the instant
case, Pollway did not appeal to the county court against the notice served on
them. They simply ignored it. However, stimulated no doubt by the notice of
entry, they issued an originating summons on February 7 1984 claiming the
declarations subsequently made by Harman J and thereafter moved for an
injunction restraining the appellants from entering to do the specified
repairs.
The hearing of
the summons before Harman J was argued on two points. First it was contended by
the appellants that, there having been no appeal to the county court under
section 11, the matter was concluded against Pollway by section 37 and the
court had no jurisdiction to consider the validity of a notice which had thus,
under the statute, become final and conclusive. Second it was contended by
Pollway that the notice was, from the inception, a nullity and its service
ineffective, because they were not ‘the person having control’ of the premises
within the meaning of the statute. As to the first point, it was accepted that,
in the case of a notice which was bad on the face of it and therefore a
nullity, section 37 could not be relied upon as concluding the matter, for the
simple reason that such a notice was not a notice under the Act at all, so that
the necessary foundation for an appeal to the county court was never laid. That
point had been the subject-matter of express decision by Walton J in Graddage
v Haringey LBC [1975] 1 WLR 241, but the submission of the appellants
was that that applied only to a notice irregular on the face of it — for
instance, because it was unsigned or something of that nature.
Where, it was
argued, the essential invalidity of the notice could be ascertained only by a
consideration of evidence as to, for instance, the status of the recipient, the
recipient, if he wished to challenge it at all, must either appeal to the
county court to have the notice declared null or carry out the work specified,
even though he may be quite incapable, both in law and in fact, of doing so.
Harman J found himself unable to accept that submission and, speaking for
myself, I agree with him. I cannot read section 37 as applying to validate a
notice which never in fact was a notice under the Act at all. The Act
authorises only a notice which is served on the person in control and which
calls upon him (and not some other person) to carry out the work specified. A
notice which does not comply with this requirement is, in my judgment, simply
not a notice upon which the provisions of section 37 can bite. To take the
learned judge’s example, suppose that a notice, apparently regular in form, is
served upon a person having no present connection with the house at all — for
instance, a previous owner who had sold years before — it cannot, in my
judgment, be right that if he simply ignores it (as he is entitled to do) the
local authority then becomes unassailably entitled to enter upon the premises
and to recover the costs of repair from the person having control of them who
may have known nothing at all about the notice. An appeal to the county court
is, no doubt, an appropriate — indeed the only appropriate — procedure for
challenging, for instance, whether a case has arisen justifying the service of
a notice, but for my part I find myself unable to accept the submission that
where the essential validity of the notice is in question the jurisdiction of
the High Court to consider the question at all is ousted because the recipient
has done exactly what he is entitled to do, that is to say, to ignore a
document which never had any validity at all.
The more
difficult question, however, is the critical one of whether in fact this was a
valid notice. Pollway’s argument is a very simple one. Although there is, as I
have already noted, no very satisfactory definition of what is a ‘house’ for
the purposes of Part II of the Act, it is accepted, at any rate for the
purposes of the present appeal, that a block of purpose-built flats such as the
one in question here can properly as a whole be styled a single ‘house’. What
is submitted, however, is that although you may be entitled to treat a
multiple-occupation building as a single house, it does not follow that there
will always be a single person ‘in control’ of that house within the meaning of
the statute. Section 39(2) postulates two possible situations. The first is
that the house is in fact let at a rack-rent. If it is, then the only inquiry
is: who is in receipt of that rent?
That does not
apply here where the majority of the flats are occupied by tenants who have
bought their leases in consideration of premiums and are paying only ground
rents and where the only rack-rents are those paid by the Rent Act-protected
tenants of flats within the block letting. One has, therefore, to look at the
alternative formulation and find the person who, if the whole house was let at
a rack-rent, would be in receipt of that rent. There is, argues Mr Colyer on
behalf of Pollway, no such single person. If you postulate that there is now to
come into being a lease of the whole ‘house’ to an occupying tenant who pays a
rack-rent, the landlord (ie the reversioner) under that lease could only be a
collective one consisting of the long-leaseholders of the flats, the protected
tenants and the freeholder. Thus ‘the person having control’ might include
Pollway, but Pollway cannot itself and alone be the person having control.
Apart from an
unreported decision of McNeill J to which I shall refer a little later, there
is no reported case directly covering the position of a ‘house’ consisting of
multiple units separately let. The case of the single unit let as a whole is,
however, clear. It is clear from Bowditch v Wakefield Local Board of
Health (1871) LR 6 QB 567, a case which concerned a school vested in
trustees, that, when one is considering the second limb of the definition one
is concerned with a purely hypothetical letting which takes no account of the
reality that the particular tenement may not in fact be capable of being, or in
the least likely to be, let. Nevertheless, it seems clear from London
Corporation v Cusack-Smith [1955] AC 337 that it is only to this
extent that reality is ignored and that when one comes to inquire who would be
receiving the (perhaps improbable) hypothetical rack-rent one is to look at the
actual estates in the property which exist at the relevant time. Thus, where
the freeholder has let the property to an occupying tenant on a long lease at a
ground rent, the person who would receive the rack-rent if the premises were
let at a rack-rent would be the occupying tenant and not the freeholder. The Cusack-Smith
case was concerned with the definition (substantially in the same terms as in
section 39(2)) of ‘owner’ in section 119 of the Town and Country Planning Act
1947 and the majority of their lordships specifically rejected the contention
that the effect of the definition was simply to substitute the hypothetical
rack-rent for the ground rent actually payable and so make the freeholder the
‘owner’. Lord Reid at p 361 stated in terms:
In my
judgment, a freeholder who lets at less than a rack-rent is excluded by the
definition both in cases where his tenant does not sublet and in cases where he
does sublet either at a rack-rent or at less than a rack-rent.
Lord Keith at
p 368 is to the same effect:
If the land
is not let at a rack-rent there is no room, in my opinion, for more than one
owner at a time . . . In my opinion . . . the person who would be entitled to
receive the rack-rent of the land if it were let at a rack-rent would be the
person in possession under a lease or underlease.
And at p 369
he observes:
I cannot
accept the view . . . that the definition can be divorced so far from actuality
as to cover the case of a person who could have let the land in the past at a
rack-rent, if he had not chosen to let it at less than a rack-rent. The natural
way to construe the definition in its application to an actual case is, in my
opinion, to ask, who is entitled to let the land at a rack-rent as things are
today?
Of course, the
freeholder who has granted a lease at less than a rack-rent is entitled to
create a further term in the same land to someone else taking effect in
reversion on the existing lease and, as a matter of law, such term could be at
a rack-rent, but he could not grant an occupation lease, and it is clear from
the speeches of the majority in Cusack-Smith that this limb of the
definition is contemplating a rack-rent paid by the occupying tenant. In no
circumstances, at the material time, was Pollway capable of granting a lease of
the block to
could not be the ‘person having control’ within the second limb of the
definition. The Interpretation Act tells us that, in the absence of a contrary
intention, the singular includes the plural and there is no compelling context
for reading the ‘person having control’ as necessarily restricted to a single
person, nor for reading ‘rack-rent’ as necessarily restricted to a single
rack-rent.
Take, for
instance, the case of a house divided into an upper and a lower flat and where
the freeholder has disposed of the entire premises to different tenants under
long leases, retaining himself no interest in possession in any part of the
premises, because the lease of the upper flat includes in the demise the roof
and upper walls of the building. Plainly, even assuming a hypothetical
occupying tenant of the whole structure at a rack-rent, the freeholder would
not be the person to receive that rent and the only ways in which you can
convert him into such a recipient are either by ignoring altogether the actual
existing outstanding terms (which Cusack-Smith directs that you cannot
do) or by assuming the rack-rent to be paid by a tenant intermediate between
the existing tenants and the freeholder (for which there is no warrant in the
terms of the definition).
Mr Barnes, for
the appellants, submits otherwise. On its true construction, he submits, the
second limb of the subsection postulates a single person having control and a
single rack-rent for the whole of the premises. Thus, if the freeholder had let
all the flats in the block at rack-rents, the first limb of the definition
would, on this construction, be inapplicable and the freeholder would be the
person having control not because he was actually in receipt of the existing
rack-rents but because, if there were a single letting at a single rack-rent,
he would be the person to receive it. You have got, he suggests, to look for a
person who has an interest in the whole of the property, for he is the only
person who can let the whole property and thus the only person who can create a
single rack-rent for the whole property.
This is, no
doubt, simple and convenient, but the difficulty, as it seems to me, is
two-fold. In the first place, it really attributes no importance to the
expression ‘rack-rent’; you are merely to look for the person who receives rent
for the whole of the premises. But, second and more importantly, it involves
doing what Cusack-Smith teaches us cannot be done, that is, ignoring the
actual estates which exist in the property.
In the example
given above, for instance, of flats all let at rack-rents, if one postulates a
single occupying tenant of the whole paying a rack-rent, the persons entitled
to receive it in fact would be not the freeholder alone but the freeholder and
his occupying tenants who, for this purpose, would have to be assumed not to be
in occupation but to hold their interests in reversion on the hypothetical
lease of the whole under which the hypothetical rack-rent for the whole arises.
Mr Barnes says, not so. It would be unlikely, perhaps, that anyone would pay a
rack-rent for property already let at a ground rent, but we are here concerned with
a purely hypothetical rack-rent and, hypothetically, there is no reason in law
why a lessor should not grant a lease at a rack-rent in reversion on an
existing lease. That of course is true, but then one has to assume that in
postulating the hypothetical rack-rent the legislature is contemplating a rent
payable by someone other than the tenant in occupation. That seems to me highly
improbable, but it is, in any event, also contrary to the way in which
definitions incorporating the same formula have been construed over many years.
Truman Hanbury Buxton & Co Ltd v Kerslade [1894] 2 QB 774 is
a good example. That was a decision of a divisional court which was concerned
with the definition of ‘owner’ in section 141 of the Public Health (London) Act
1891 — again a definition using this well-tried formula of the alternatives of
an actual and a hypothetical rack-rent. Kennedy J, in giving the judgment of
the court, observed (at p 778):
It appears to
us impossible to treat as the persons who would receive the rack-rent, if the
premises were let at a rack-rent, persons who, at the time when the ‘owner’ of
the premises . . . has to be found, have not such an interest in the property
that, if it was let at a rack-rent, they would receive such rack-rent. The
words of the section in our judgment, in the case of there being no one who in
fact receives a rack-rent from the actual occupier, designate as ‘owner’ the
person who ‘rebus sic stantibus‘, that is to say, with the interests in
the premises as they then are, would, if they were let to an occupier at a
rack-rent, receive that rack-rent.
Now if that be
right — and the decision was approved both by Lord Reid and Lord Keith in the Cusack-Smith
case — Mr Colyer asks: What is there in section 39 which leads to the conclusion
that, when the premises concerned are let to two or more persons, their actual
estates are to be ignored, although, if they are let to one person, his estate
is not to be ignored?
I confess
that, for my part, I can see no logical answer to this. There is, of course, a
strong argument based upon the inconvenience to local authorities of having to
serve numerous notices where they are dealing with premises in multiple
occupation. But can that justify a quite different construction being applied
to the definition merely because the actual circumstances regarding a
particular building happen to produce an inconvenient result? Mr Barnes submits
that it can and does, and he cites in support of that proposition an unreported
decision of McNeill J on the very similar provisions of section 58 of the
Public Health Act 1936. Section 343 of that Act defines the ‘owner’ of premises
in terms which are, in substance, indistinguishable from the definition in
section 39(2) of the Housing Act 1957 of a ‘person having control’. McNeill J
gave his decision in a case of Clackson v London Borough of Bromley
on March 22 1982 and, since it was a decision of some importance both to local
authorities and to building owners, it is a matter of some surprise that it
appears nowhere to have been reported.
The facts of
the case were startlingly similar to the present, the appellant in that case —
it was an appeal from magistrates — being the freeholder of a building
consisting of 12 flats, all of which had been let by his predecessor in title
to lessees under long leases at nominal rents. The local authority had served a
dangerous structure notice on the appellant and the question was whether he had
been properly ordered, as the ‘owner’, to carry out the necessary repairs or to
demolish the building. It was a case in which Mr Barnes, who then appeared for
the appellant, was advancing substantially the same arguments as those advanced
before us by Mr Colyer. McNeill J rejected them. Having reviewed the
authorities he concluded that the principles laid down in the Cusack-Smith
case did not apply where there was a multiple letting of premises. The actual
existence of multiple leases, he held:
goes only to
capability, in Lord Esher’s words, and does not go to the hypothetical
situation, again in his words and the words of the statute ‘if they were let’.
With that I
respectfully agree, but McNeill J seems, if I may respectfully say so, to have
misunderstood the thrust of what I understand to have been Mr Barnes’
submission, which was not that the existence of the multiple lettings would, as
a matter of actuality, have prevented the letting of the whole to an occupying
tenant at a rack-rent, but that their existence had, in accordance with the Cusack-Smith
case, to be taken into account in determining who, if there were in fact an
occupying tenant paying a rack-rent, would actually be entitled to receive it —
or, to put it another way, in whom is vested the immediate reversion on the
hypothetical lease at a rack-rent?
McNeill J does
not appear to have considered that question. Having concluded that there was
nothing in the existence of the multiple intermediate lettings to preclude the
existence of the hypothetical lease to a single occupying tenant, he assumed
without further consideration that the freeholder must be entitled in reversion
immediately upon that letting, despite the intervening estates, because he was
the person who could, had he not previously let the property at low rents, have
created such a letting. The condition of the building was, he said:
essentially a
matter for the owner in the sense I define it, that is to say the freeholder
who would, if he let the whole, receive the rack-rent for the whole and indeed
it seems to me to accord with common sense that the freeholder of the whole
building, who has chosen to let out the flats on terms which he may now see as
disadvantageous, nevertheless chose in that way to arrange his affairs.
This is not
altogether easy to follow but, if I interpret the learned judge correctly, he
was saying that you must, when applying the statutory limb of the definition,
ignore what the freeholder has actually done in the way of creating existing
estates in the land and consider only what he could have done if he had not
created those estates. That, with respect, appears to me to be restating the
very fallacy which was exposed by Cusack-Smith. It seems that, in saying
this, McNeill J was much influenced by the inconvenience to local authorities
of any other approach. He said:
I do not
think that Parliament can have intended, where this type of development was set
up, that it should be necessary for the local authority to go to twelve or
thirteen separate juridical persons to require the carrying out of works, or,
indeed, at the end the possibility of penalty by way of fine may
any of the twelve tenants to elect to demolish the building.
I can, indeed,
appreciate the inconvenient result that the learned judge envisaged, but it
seems not significantly more absurd than that the recipient of a number of
ground rents should be accorded an election to demolish a building the
substantial interest in which is vested in someone else and where he has
himself retained no interest in possession of any part of the structure. In the
end, it seems to me, the only reliable guide to parliamentary intention is to
be found in the words which Parliament has chosen to use as construed by the
courts over many years and as re-enacted by Parliament in the presumed
knowledge of that construction. The legislature plainly, when enacting the
provisions with which the instant appeal is concerned, had in mind the
possibility of ‘houses’ which formed part of a larger structure, otherwise
section 18 is inexplicable. Clackson v London Borough of Bromley
was not, as I understand it, cited in the court below and Harman J dealt with
the point as res integra and came to the opposite conclusion to that
reached by McNeill J. He said:
Here the
house is already let and, in my view, cannot be deemed to be lettable at a
rack-rent again by the freeholder who has already disposed of long terms in the
premises.
Speaking for
myself, I am compelled to the conclusion that this view is to be preferred, the
crucial words being ‘lettable again by the freeholder‘, for it seems to
me that the hypothetical letting postulated by the second limb of the
definition must be one to a tenant in possession.
In my
judgment, therefore, Harman J’s decision was correct and I am, for my part,
unable to accept the reasoning of Clackson v London Borough of
Bromley, which I would hold to have been wrongly decided.
Accordingly I
would dismiss this appeal.
MUSTILL LJ and
SIR ROUALEYN CUMMING-BRUCE agreed and did not add anything.
The appeal
was dismissed with costs. Leave to appeal to the House of Lords was refused.
