Landlord and tenant — Rent Acts — Fair rent — Rent Acts (Maximum Fair Rent) Order 1999 — Whether 1999 order ultra vires powers in the Landlord and Tenant Act 1985 — Whether 1999 order unlawful
The applicants were the
owners of a purpose-built block of flats containing 12 flats regulated by the
Rent Act 1977. On 11 January 1999 the respondent Secretaries of State,
concerned by the increases in the levels of registered fair rents following the
decisions in Spath Holme Ltd v Chairman of the Greater Manchester and
Lancashire Rent Assessment Committee [1995] 2 EGLR 80 and Curtis v London
Rent Assessment Committee [1998] 1 EGLR 79, made the Rent Acts (Maximum
Fair Rent) Order 1999. The order limited the increase in registered fair rents
by reference to increases in the retail price index since the last registration
plus a specified percentage. The order also modified certain provisions of the
Rent Act 1977. The applicants contended that the order was outside the powers
granted to the Secretaries of State by section 31 of the Landlord and Tenant
Act 1985 and was unlawful.
order. Although the power purportedly exercised was contained in the 1985 Act,
it was originally introduced by Counter-Inflation Act 1973, and then re-enacted
in the Housing Rents and Subsidies Act 1975, before its present enactment in
the 1985 Act. Looking at the legislative history, the scope of the power in
section 31 of the 1985 Act was limited to counter-inflationary purposes. The
1999 order did not come within such purposes. The order was therefore ultra
vires and had to be quashed.
The following cases are referred to in this report.
Associated
Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB
223; [1947] 2 All ER 680; (1947) 45 LGR 635, CA
Attorney-General
v Associated Newspapers Ltd [1994] 2 AC 238; [1994] 2 WLR 277; [1994] 1
All ER 556
Black Clawson
International Ltd v Papierwerke Waldhof-Aschaffenburg AG[1975] AC
591; [1975] 2 WLR 513; [1975] 1 All ER 810; [1975] 2 Lloyd’s Rep 11, HL
Curtis v London
Rent Assessment Committee [1999] QB 92; [1998] 3 WLR 1427; [1997] 4 All ER
842; [1998] 1 EGLR 79; [1998] 15 EG 120, CA
Director of Public
Prosecutions v Schildkamp [1971] AC 1; [1970] 2 WLR 279; [1969] 3
All ER 1640, HL
Farrell v Alexander
[1977] AC 59; [1976] 3 WLR 145; [1976] 2 All ER 721; (1976) 32 P&CR
292; [1976] 2 EGLR 69; [1976] EGD 343; 240 EG 707, HL
Hoffmann-La Roche
(F) & Co AG v Secretary of State for Trade and Industry [1975]
AC 295; [1974] 3 WLR 104; [1974] 2 All ER 1128, HL
Inland Revenue
Commissioners v Joiner [1975] 1 WLR 1701; [1975] 3 All ER 1050
Johnson v Moreton
[1980] AC 37; [1978] 3 WLR 538; [1978] 3 All ER 37; (1978) 37 P&CR 243;
[1978] 2 EGLR 1; 247 EG 895, HL
Julius v Bishop
of Oxford (1880) 5 App Cas 214
Maunsell v Olins
[1975] AC 373; [1974] 3 WLR 835; [1975] 1 All ER 16; [1975] 1 EGLR 7;
(1974) 233 EG 591, HL
McKiernon v Secretary
of State for Social Security (1989-1990) 2 Admin LR 133; (1990) 87(15) LSG
39
Metropolitan
Property Holdings Ltd v Finegold [1975] 1 WLR 349; [1975] 1 All ER
389; (1974) 29 P&CR 161; [1975] 1 EGLR 75; (1975) 233 EG 843, DC
Mountview Court
Properties Ltd v Devlin (1970) 21 P&CR 689; [1970] EGD 513; 215
EG 303; [1971] JPL 113, DC
Padfield v Minister
of Agriculture, Fisheries and Food [1968] AC 997; [1968] 2 WLR 924; [1968]
1 All ER 694, CA and HL
Palmer, decd (A
Debtor), In re [1994] Ch 316; [1993] 3 WLR 877; [1993] 4 All ER 812
Pepper (Inspector
of Taxes) v Hart [1993] AC 593; [1992] 3 WLR 1032; [1993] 1 All ER
42, HL
R v Her
Majesty’s Treasury, ex parte Smedley [1985] QB 657; [1985] 2 WLR 576;
[1985] 1 All ER 589
R v Heron;
R v Storey; R v Thomas; R v Santi [1982]
1 WLR 451; [1982] 1 All ER 993
R v Ministry
of Defence, ex parte Smith [1996] QB 517; [1996] 2 WLR 305; [1996] 1 All ER
257, CA
R v Secretary
of State for Social Security, ex parte Britnell [1991] 1 WLR 198
R v Secretary
of State for Social Security, ex parte Joint Council for the Welfare of
Immigrants [1997] 1 WLR 275; [1996] 4 All ER 385; (1997) 29 HLR 129
R v Secretary
of State for the Environment, ex parte Hammersmith and Fulham London Borough
Council [1991] 1 AC 521; [1990] 3 WLR 898; [1990] 3 All ER 589; 89 LGR 129;
[1990] RVR 188
R v Secretary
of State for the Environment, ex parte Berkshire Royal County Council
(1996) 95 LGR 249
R v Secretary
of State for the Home Department, ex parte Brind [1991] 1 AC 696; [1991] 2
WLR 588; [1991] 1 All ER 720, HL
R v Tower
Hamlets London Borough Council, ex parte Chetnik Developments Ltd [1988] AC
858; [1988] 2 WLR 654; [1988] 1 All ER 961; [1988] 2 EGLR 195; [1988] 26 EG 69,
HL
Spath Holme Ltd
v Chairman of the Greater Manchester and Lancashire Rent Assessment
Committee [1995] 2 EGLR 80; [1995] 49 EG 128; (1996) 28 HLR 107, CA
Stock v Frank
Jones (Tipton) Ltd [1978] 1 WLR 231; [1983] 1 All ER 948, HL
Tormes Property Co
Ltd v Landau [1971] 1 QB 261; [1970] 3 WLR 762; [1970] 3 All ER 653;
(1970) 21 P&CR 923; [1971] JPL 112
Westminster Bank
Ltd v Minister of Housing and Local Government [1971] AC 508; [1970]
2 WLR 645; [1970] 1 All ER 734; (1969) 21 P&CR 379, HL
This was the hearing of an application by Spath Holme Ltd for
judicial review of the Rent Acts (Maximum Fair Rent) Order 1999 and of the
decisions of the respondents, the Secretaries of State for the Environment,
Transport and the Regions, and for Wales, to make and lay the order and their
refusal to withdraw it, following the granting of permission to move the
application on 30 July 1999.
James Bonney QC and Jonathan Gavaghan (instructed by William
Bootland White) appeared for the applicant; Philip Sales and John Male
(instructed by the Treasurey Solicitor) represented the respondents.
Giving judgment, STUART-SMITH
LJ said:
Introduction
This is the judgment of the court. The applicant, Spath Holme Ltd,
seeks an order for judicial review of the Rent Acts (Maximum Fair Rent) Order
1999 [SI 1999 No 6] (the order) made on 11 January 1999, the decision of the
Secretary of State for the Environment and the Secretary of State for Wales to
make and lay the order before parliament and his refusal of the applicant’s
request to withdraw it. It seeks an order declaring that in making the order
and the decisions the Secretaries of State acted ultra vires the powers
conferred upon them by the Landlord and Tenant Act 1985 (the 1985 Act) and
therefore unlawfully. They ask the court to make an order of certiorari
quashing the order and decisions.
The application for leave to move for judicial review was refused
by Latham J at a hearing attended by both parties on 16 March 1999. But this
court granted permission to move on 30 July and directed that the hearing of
the application be before this court. We are therefore exercising an original
jurisdiction, but as the Court of Appeal and not as a divisional court.
Background
The applicant is the freehold owner of a purpose-built block of
flats in Manchester. The building was constructed in 1963. Twelve of the flats
are still currently regulated by the Rent Act 1977. Before 1965 rents of
dwellings were controlled by the Rent Acts dating back to the First World War.
The system was a rigid one, being related to the gross rateable value of the
property. This had resulted in artificially low rents compared with other costs
and prices in the economy; and, coupled with security of tenure, led to a
serious decline in the private rented sector. Landlords were unable to obtain a
reasonable return on investment and sometimes could not even cover the cost of
repairs. When, therefore, such properties became vacant, they would often be
sold with vacant possession rather than relet.
In order to revitalise the private rented market, in 1965
parliament introduced the concept of fair rents for regulated tenancies, and
the registration of these rents. The system was intended to introduce a new and
flexible method of fixing rents that would avoid the rigidities and anomalies
of the old control. The original provisions of the 1965 Act have remained
largely unchanged; they were consolidated into the Rent Act 1968, extended in
the Rent Act 1974 to furnished tenancies and again consolidated into the Rent
Act 1977, which is the current statute.
Fair rents were intended to be based on a market rent, although
this expression does not appear in the legislation, to be determined
objectively in all the circumstances, but eliminating any increase attributable
to housing shortage not derived from the amenity of the locality —
the scarcity element — and disregarding tenant’s disrepair and
improvements: see the Report on the Committee on the Rent Acts 1971 Cmnd 4609
and Mountview Court Properties v Devlin (1970) 21 P&CR 689*
at p691; Tormes Property Co Ltd v Landau [1971] 1 QB 261 at p267;
Metropolitan Property Holdings Ltd v Finegold [1975] 1 WLR 349†
at p352. In default of agreement between the parties, the fair rent is assessed
by the rent officers, and, on appeal by rent assessment committees. Once
assessed, it is registered. No more than the registered rent may be recovered
and no further application for registration of a different rent may be made for
two years.
* Editor’s note: Also reported at (1970) 215 EG 303
† Editor’s note: Also reported at [1975] 1 EGLR 75; (1975) 233 EG
843
The problem, however, was that there was no free market in private
domestic dwellings, because all new tenancies were regulated. The years
following the 1965 Rent Act were years of high inflation; but registered rents
as set by rent officers and rent assessment committees did not keep pace with
inflation. The result was that, by 1988, the situation was similar to that
which existed before 1965. The private rented sector was in serious decline. By
the Housing Act 1988 parliament reintroduced the free market into the private
rented sector. Tenancies created after the coming into force of the Act could
be assured and assured shorthold tenancies. Security of tenure depended on the
agreement of the parties and not statute. And, more importantly, rents were
also fixed by agreement between the parties, subject only to a right to refer
the rent to the rent officer during the first six months of an assured
shorthold tenancy. The Act did not affect existing regulated tenancies. But
there were to be no new regulated tenancies. In the case of new tenancies, the
subsidy that had previously been provided by landlords for all tenants was to
be removed; those on low incomes were able to obtain assistance with payment of
rent by means of housing benefit.
In the years following the Housing Act 1988, landlords sought to
use the evidence of rents on assured shorthold tenancies of comparable
properties to establish the market rents before rent officers and rent
assessment committees, as being the first stage in assessing a fair rent. It
appears that in some parts of the country this method was accepted; but in
others, notably in London and the North West (Manchester and Merseyside), it
was not. In those areas where this approach was rejected, rent officers and
rent assessment committees continued to use existing registered rents, with an
inflationary uplift, as comparables. Because open market rents rose
substantially, no doubt in part reflecting the rapid increase in house prices,
in those areas where assured shorthold tenancy comparables were not used there
was an increasing divergence between market rents and registered rents, such
that in many cases the latter were only about half the former, even where there
was little or no scarcity. The Housing Act 1988 had the desired effect of
reinvigorating the private rented sector, which grew from 1.5 million dwellings
in 1988 to 2.254 million in 1996.
Spath Holme and Curtis decisions
In Spath Holme Ltd v Chairman of the Greater Manchester
and Lancashire Rent Assessment Committee (1996) 28 HLR 107*, the Court of
Appeal reiterated that fair rents were based on market rents, less scarcity and
other disregards, and were not reasonable rents in any other sense including
their impact on tenants. The court gave general guidance to rent assessment
committees, making it clear that they were expected to follow market rent
comparables as the best evidence of the starting point for fair rents, to give
clear reasons and to explain their determinations with arithmetic if necessary.
Despite this, many rent assessment committees did not follow the guidance of
the court and continued to use existing registered rents rather than assured
shorthold rents as comparables. In Curtis v London Rent Assessment
Committee [1999] QB 92† this court again held that they were wrong to do so
and confirmed and clarified the Spath Holme decision. An appeal to the
House of Lords in Curtis was withdrawn on 1 June 1998.
* Editor’s note: Also reported at [1995] 2 EGLR 80; [1995] 49 EG
128
† Editor’s note: Also reported at [1998] 1 EGLR 79; [1998] 15 EG
120
Government’s reaction to the Spath
Holme and Curtis decisions
In the meanwhile, on 26 January 1998 the Minister for London and
Construction, Mr Nick Raynsford, told the House of Commons that the government
was very concerned about the disproportionate increases that some regulated
tenants had faced in recent years. He said that the government was looking to
see what could be done to help tenants who faced problems of anxiety and
hardship, and felt that there was a strong case for intervention to moderate
such increases. It was appreciated that the system of fair rent determinations
by rent officers and rent assessment committees and the criteria for
ascertaining a fair rent could not be altered without primary legislation. But
it was thought that the increases could be capped by reference to the retail
price index plus a modest percentage. It was envisaged that this might be
achieved by secondary legislation.
On 21 May 1998 the first respondent issued a consultation paper
entitled ‘Limiting Fair Rent Increases’ inviting responses by 24 July 1998. The
paper expressed the government’s concern about disproportionate increases in
fair rents in recent years since the Spath Holme and Curtis
decisions, and stated:
Most of these tenants, and indeed their landlords, could never have
anticipated increases of this magnitude under a fair rent system. Many
regulated tenants
that they would be able to remain in their present homes. Landlords have
generally acquired regulated tenancies in anticipation of substantial capital
gains when the tenancies come to an end. These tenancies have always traded at
a discount to vacant possession value: this is currently some 30% to 45% below
vacant possession value. They have been bought in the knowledge that the rents
were subject to fair rent controls and that rental yields would be lower than
those obtainable from assured tenancies.
Three possible options were canvassed in the paper. First, to do
nothing and leave fair rents to equiparate with market rents less scarcity and
other disregards. Second, to phase the increases over a period of time or,
third, to apply a maximum limit to the fair rent increases which could be
registered. The limit proposed was the retail price index, plus 10% for the
first such registration, and thereafter an increase of 5%. Thus, since there
has to be a minimum of two years between applications to register, the first
registration after coming into effect of the order would be the percentage
increase in the retail price index since the last registration, plus 10%. For
the second and subsequent registrations it would be the relevant difference in
the retail price index plus 5%. It was intended to effect the proposal by order
made under the reserve powers to limit rents contained in section 31 of the
Landlord and Tenant Act 1985 (the 1985 Act).
Not surprisingly, all the tenants and tenants associations that
were consulted approved of the third option, although they said that the first
increase should be 7.5%, and not 10%. The landlords and their associations
disagreed with this proposal and favoured the first, or, in default of that,
the second alternative. It will be necessary to refer to some of the arguments
advanced by the landlords in answer to the consultation paper when one
considers the question of irrationality, which is one of the grounds of
challenge.
The respondents adopted the tenants’ proposal. The order was made
on 11 January 1999 and laid before parliament that day. It was subject to the
negative procedure, but there was no resolution to annul it by 20 February
1999, when the time expired for doing so. On 21 January the applicant wrote to
the respondents asking them to withdraw the order on grounds substantially the
same as those advanced in this application. By a letter dated 29 January, the
respondents refused to do so. This application was made on 25 February 1999.
Before turning to the grounds of the application, it is necessary
to set out in more detail the statutory framework relating to fair rents and
the registration of them, contained in the Rent Act 1977, and also that
relating to the power under which the respondents acted or purported to act in
making the order.
Rent Act 1977
Part III of the Act is entitled ‘Rents under Regulated Tenancies’.
Section 44(1) provides:
Where a rent for a dwelling-house is registered under Part IV of
this Act, the rent recoverable for any contractual period of a regulated
tenancy of the dwelling-house shall be limited to the rent so registered.
There is a similar provision in respect of statutory tenancies
after the contractual tenancy has come to an end (see section 45(1)).
Part IV is entitled ‘Registration of Rents under Regulated
Tenancies’. The country is divided into areas (section 62). There is provision
for the appointment of rent assessment officers (section 63) and rent
assessment committees to which either party may appeal (section 65 and Schedule
10). A register of rents must be prepared and kept up to date (section 66).
Applications for registration of a rent may be made by the landlord, tenant or
jointly by both (section 67(1)). Where a rent has been registered, no
application by either tenant or landlord alone can be made within two years of
the registration (section 67(3)). This subsection also contains the first
reference to the expression ‘fair rent’. Section 67(7) provides:
the provisions of Part I of Schedule ll to this Act as modified by
the Regulated Tenancies (Procedure) Regulations 1980… shall have effect with
respect to the procedure to be followed on applications for the registration of
rents.
Section 70 defines the criteria for the determination of fair rent.
Subsection (1) provides:
In determining, for the purposes of this Part of this Act, what
rent is or would be a fair rent under a regulated tenancy of a dwelling-house,
regard shall be had to all the circumstances (other than personal
circumstances) and in particular to —
(a) the age, character, locality and state of repair of the
dwelling-house…
(b) is concerned with furniture and (c) with
treatment of premiums. Subsection (2) provides:
For the purposes of the determination it shall be assumed that the
number of persons seeking to become tenants of similar dwelling-houses in the
locality on the terms (other than those relating to rent) of the regulated
tenancy is not substantially greater than the number of such dwelling-houses in
the locality which are available for letting on such terms.
Subsection (3) provides for other matters to be disregarded,
including disrepair by the tenant and improvements carried out by him.
Section 74 confers power to make regulations. It is of importance
in the argument, although it was not the power under which the respondents made
the order. It provides, so far as material:
(1) The Secretary of State may make regulations —
…
(b) regulating the procedure to be followed —
(i) by rent officers under this Act; and
(ii) by rent assessment committees whether under this Act or
otherwise;
…
(2) Regulations under subsection (1)(b) above may contain
provisions modifying the following provisions of this Act —
…
(b) Part I… of Schedule 11;
…
(3) Regulations made under this section shall be made by statutory
instrument which, except in a case falling within subsection (2) above, shall
be subject to annulment in pursuance of a resolution of either House of
Parliament.
Schedule 11 Part I is entitled ‘Application unsupported by
Certificate of Fair Rent’. Paras 1-6 are under the rubric ‘Procedure on application
to rent officer’. Para 5 provides:
After considering, in accordance with paragraph 4 above, what rent
ought to be registered or, as the case may be, whether a different rent ought
to be registered, the rent officer shall, as the case may require —
(a) determine a fair rent and register it as the rent for
the dwelling-house; or
(b) confirm the rent for the time being registered and note
the confirmation in the register.
Paras 7-9 have the rubric ‘Determination of fair rent by rent
assessment committee’. Effectively, they have to conduct a similar exercise to
that done by the rent officer, but it is a rehearing. They either confirm the
rent assessed by the rent officer or make their own determination, which is
then registered.
Power under which the order was made
Although the power is contained in the 1985 Act, it is an essential
part of the applicant’s argument to look at the derivation and history of the
provision. The power was originally introduced in the Counter-Inflation Act
1973 (the 1973 Act), which, as its long title indicates, was an Act, inter
alia, ‘to afford powers of control over prices, pay, dividends and rents’.
Section 11(1) provided:
The Minister may by order provide for restricting or preventing
increases of rent which take place, or would take place, while this Part of
this Act is in force, or for restricting rent payable on new lettings which
take place while this Part of this Act is in force.
(2) The supplemental and incidental provisions that may be made by
an order under this section may include provisions excluding, adapting or
modifying any provision contained in, or having effect under, any Act (whether
passed before this Act or later) which relates to rent, and in the exercise of
any power to make regulations or other instruments under any such Act regard
may be had to matters connected with the operation of this section.
An order so made was subject to the annulment procedure: subsection
3.
It is common ground that the purpose of the power was to control
inflation in the economy by restricting or preventing rent increases. There are
similar provisions in respect of prices, pay, insurance premiums and dividends.
That Act came to an end on its expiring three years after it came into force, namely
on 22 March 1976. The power related to all rents, not just those of dwellings.
On 25 February 1975 the Housing Rents and Subsidies Act 1975 (the
1975 Act) came into force. As its name implies, it was concerned with housing
finance and subsidies, in addition to rents. The long title includes ‘to make
further provisions as to rents’. Section 7 and Schedule 2 introduced provisions
that effected phasing of rent increases over a period. This, say the
applicants, was necessarily effected by primary legislation because it modified
the provisions in the Rent Acts relating to fair rents; these provisions are
intended to provide some relief against large rent increases. These provisions
were consolidated into section 55 of the Rent Act 1977. Section 60(5)(c)
of the Housing Act 1980 gave the Secretary of State express powers to repeal
section 55 of the Rent Act by order, which he did by the Rent (Relief from
Phasing) Order 1987.
Under the heading ‘Reserve power to limit rents’, section 11(1)-(3)
of the 1975 Act substantially re-enacted the similar provisions of the 1973
Act, but restricted it to dwellings. Subsection (4) provided:
Upon the coming into force of this subsection, the power to make
orders under section 11 of the Counter-Inflation Act 1973 (general power to
make orders restricting or preventing increases of rent) shall cease to include
power to make orders relating to rent for dwellings; but the coming into force
of this subsection shall not affect the validity of anything done, whether
before or after the coming into force of this subsection, by virtue of any
order under the said section 11.
By subsection (5), two orders made under the 1973 Act were revoked
as from the coming into force of the 1975 Act, but certain provisions continued
to have effect (subsection 6).
The 1985 Act came into force on 1 April 1986. It dealt with a
number of different matters affecting landlords and tenants, including
information to be given to tenants about the identity of their landlords,
provision of rent books, implied terms as to fitness for habitation, repairing
obligations, service charges and insurance. Section 31 under the heading
‘Miscellaneous’ was entitled ‘Reserve power to limit rents’ provided as
follows:
(1) The Secretary of State may by order provide for —
(a) restricting or preventing increases of rent for
dwellings which would otherwise take place, or
(b) restricting the amount of rent which would otherwise be
payable on new lettings of dwellings;
and may so provide either generally or in relation to any specified
description of dwelling.
(2) An order may contain supplementary or incidental provisions,
including provisions excluding, adapting or modifying any provision made by or
under an enactment (whenever passed) relating to rent or the recovery of
overpaid rent.
By subsection (4), an order so made is subject to annulment in
pursuance of a resolution of either House of Parliament. ‘Dwelling’ is defined
in section 38 as a ‘building or part of a building occupied or intended to be
occupied as a separate dwelling together with any yard, garden etc’.
Order
Article 2(1) provides:
Where this article applies, the amount to be registered as the
rent of the dwelling-house under Part IV [of the Rent Act 1977] shall not,
subject to paragraph (5), exceed the maximum fair rent calculated in accordance
with the formula set out in paragraph (2).
The formula is set out in paras 2-5 of Article 2. It is best
explained by an example. On the first application for registration after the
order comes into effect, if the retail price index has increased by 5% over the
two-year period since the last registration, the permitted increase will be 5%
+ 7.5%, ie 12.5%. Thereafter, any subsequent increase over a two-year period
will be 5% plus the difference in the retail price index. The order only
applies where there is an existing registered rent when it comes into effect:
para 6. And it does not apply where, because of repairs or improvements carried
out by the landlord, the fair rent exceeds by at least 15% the previous
registered rent. Article 3 provides that the Rent Act 1977 shall be modified in
accordance with the Schedule, which inserts an additional para 9B to Schedule
11 to that Act. It provides as follows:
9B.– This Schedule has effect subject to article 2 of the Rent
Acts (Maximum Fair Rent) Order 1999 and accordingly —
(a) the rent officer, in considering what rent ought to be
registered, shall consider whether that article applies; and
(b) where a matter is referred to them, the committee shall
consider whether that article applies and, where it does apply, they shall not,
subject to paragraph (5) of that article, confirm or determine a rent for the
dwelling-house that exceeds the maximum fair rent calculated in accordance with
that article.
This somewhat opaque provision does not, at first sight, make it
entirely clear what the rent assessment committee in particular is required to
do, beyond considering whether the order applies. But it seems that they have
to give effect to Article 2(1), so that the rent that has to be registered must
not exceed that provided in the formula.
Grounds of the application
There are six grounds of application. It is convenient to consider
them in the order in which they were argued, rather than the order in which
they appear in form 86A, although we will refer to them by those numbers.
Scope of the power contained in
section 31 of the 1985 Act (Ground 4)
The order has not been made to further the purpose with which
section 31 of the 1985 Act was enacted, namely to counter general inflation
within the economy. The purpose of the order is to achieve an extraneous
purpose, namely to alleviate the perceived hardship or unfairness to one
comparatively small class of tenants produced not by general inflation but by
recent decisions prescribing the lawful and proper methods of determining fair
rents. This use of the order is wholly outside the intention with which the
reserve power was originally introduced into the Counter-Inflation Act 1973
section 11, continued into the Housing Rents and Subsidies Act 1975 section 11
and consolidated into section 31 of the 1985 Act.
This is by far the most important ground of the application.
In support of his argument, Mr James Bonney QC, on behalf of the
applicant, made a number of submissions of law. It is necessary to set out at
least some of these propositions.
Subordinate legislation is in a quite different category from
primary legislation. It represents the will of the executive, and, whether it
is subject to the negative or the affirmative procedure, it receives a much
briefer (if any) examination by parliament and cannot be amended. In either
case, it may be made only within limits expressed or implied in the enabling
Act, and the court has jurisdiction to determine that this has not been done,
in which event it is void and of no effect: F Hoffmann-La Roche & Co AG
v Secretary of State for Trade and Industry [1975] AC 295 at
pp365C-366B; R v Her Majesty’s Treasury, ex parte Smedley [1985]
QB 657 at pp666G-667B; McKiernon v Secretary of State for Social
Security unreported 26 October 1989*; R v Secretary of State for
Social Security, ex parte Joint Council for the Welfare of Immigrants
[1997] 1 WLR 275 at p292C-D.
* Editor’s note: Reported at (1989-1990) 2 Admin LR 133; (1990) 87
(15) LSG 39
Statutory power conferred for public purposes is conferred as it
were upon trust, not absolutely — that is to say, it can validly be used only
in the right and proper way in which parliament, when conferring it, is
presumed to have intended. Although the Crown’s lawyers have argued in numerous
cases that unrestricted permissive language confers unfettered discretion, the
truth is that, in a system based on the rule of law, unfettered governmental
discretion is a contradiction in terms: see
Developments Ltd [1988] AC 858* at p872B-D.
* Editor’s note: Also reported at [1988] 2 EGLR 195; [1988] 26 EG
69
The minister exceeds his jurisdiction where:
1. He acts outside the powers that, upon the true construction of
the enabling Act, are expressly or impliedly conferred as to the terms of the
subordinate legislation.
2. He seeks to achieve a purpose that, upon the true construction
of the enabling Act, is outside the express or implied object of the power.
3. He takes irrelevant considerations, or does not take relevant
considerations, into account in the exercise of the power: Associated
Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB
223 at pp228-231; Padfield v Minister of Agriculture Fisheries and
Food [1968] AC 997 at pp1030B-D, 1032H-1033A, 1046C-G, 1052E-F, 1054A,
1058B-G and 1061F; R v Tower Hamlets London Borough Council, ex parte
Chetnik Developments Ltd [1988] AC 858 at pp872B-873G; R v Secretary
of State for the Environment, ex parte Hammersmith and Fulham London Borough
Council [1991] 1 AC 521 at p597C-H; and R v Secretary of State
for the Home Department, ex parte Brind [1991] 1 AC 696 at pp756F-G and
761F.
So far as statutory construction is concerned, the court adopts a
purposive approach to statutory construction founded upon the mischief designed
to be remedied and the object of the Act. Accordingly, the surrounding
circumstances admissible to ascertain such mischief and object are taken into
account immediately, before starting to construe the words used, to make an
informed determination whether these words are ambiguous in this context,
whatever their literal meaning. If so, then the court proceeds to construe the
words in order to give effect to the intention of the legislature, whether
actual, so far as it is known, or, if not, presumed according to the
appropriate principles of construction: Pepper (Inspector of Taxes) v Hart
[1993] AC 593 at pp633D-F, 635E and 639H; Director of Public Prosecutions
v Schildkamp [1971] AC 1 at p23A-C; Maunsell v Olins
[1975] AC 373† at pp386E-F and 395B-D; Black Clawson International Ltd v
Papierwerke Waldhof-Aschaffenburg AG [1975] AC 591 at pp646C-G,
647D-648B and 650H; Stock v Frank Jones (Tipton) Ltd [1978] 1 WLR
231 at p236A-G; and Attorney-General v Associated Newspapers Ltd
[1994] 2 AC 238 at p258H.
† Editor’s note: Also reported at [1975] 1 EGLR 7; (1974) 233 EG
591
The materials that are admissible in order to determine the
statutory purpose include the legislative history of the Act or the sections
concerned, the legislative history of previous relevant enactments, white
papers, official committee reports and Law Commission reports. They also
include other parliamentary materials where: (a) the legislation is ambiguous
or obscure or leads to an absurdity; (b) the material relied upon consists of
one or more statements by a minister or other promoter of the bill, together,
if necessary, with such other parliamentary material as is necessary to
understand such statements and their effect; and (c) the statements relied upon
are clear. Moreover, in the case of judicial review, the practice that has
continued over a number of years is that Hansard has frequently been
referred to with a view to ascertaining whether a statutory power has been
improperly exercised for an alien purpose or in a wholly unreasonable manner: Pepper
(Inspector of Taxes) v Hart at pp620C-D, 634D-E, 635D-F, 638H-639C
and 640C.
In construing consolidation Acts, the principle is that the only
purpose of a consolidation Act is to re-enact existing provisions in a
convenient form (subject to any minor corrections or Law Commission
amendments). It is only where the language of the consolidation Act is itself
ambiguous that it is legitimate to have recourse to the repealed enactments to
see if their meaning is clearer. If so, this meaning may be ascribed to resolve
the ambiguity in the consolidation Act on the footing of a presumption that it
was not intended to change the law: Director of Public Prosecutions v Schildkamp
at p10B; Inland Revenue Commissioners v Joiner [1975] 1 WLR 1701
at pp1711C-H and 1715D-F; Johnson v Moreton [1980] AC 37* at
pp56H-57D; and R v Heron [1982] 1 WLR 451 at pp459E-460F.
* Editor’s note: Also reported at [1978] 2 EGLR 1; (1978) 247 EG
895
Parliament does not lightly take the exceptional course of
delegating to the executive the power to amend primary legislation. When it
does so, the enabling power should be scrutinised, should not receive anything
but a narrow and strict construction and any doubts about its scope should be
resolved by a restrictive approach: McKiernon v Secretary of State
for Social Security at pp6F-G, 8G-H and 10D-E; R v Secretary of
State for Social Security, ex parte Britnell [1991] 1 WLR 198 at p204B-F. A
reserve power is one that is to be used infrequently: R v Secretary
of State for the Home Department, ex parte Brind at p756G. Moreover, where
parliament has delegated the power to modify primary legislation, the
subordinate legislation itself should be construed restrictively. Any doubt
about whether it has been exercised should be resolved by a restrictive
approach. In particular, if it purports to operate contrary to a mandatory
requirement, it must explicitly amend this requirement and will not be
construed as having done so implicitly: McKiernon v Secretary of
State for Social Security at pp7A-B, 9D-G, 10D-E and 11F-12A; In Re
Palmer, decd (A Debtor) [1994] Ch 316 at p342E.
There is a presumption that parliament does not intend to take away
or prevent the exercise of any property rights without compensation unless
clear and unambiguous words are used: Westminster Bank Ltd v Minister
of Housing and Local Government [1971] AC 508 at pp529B-E and 535A-B.
Further, if a statutory provision is ambiguous there is a presumption that
parliament intended it to be construed in accordance with our international
treaty obligations.
Mr Bonney submits that the application of these principles leads to
the conclusion that parliament cannot have intended the Secretary of State to
have had an unfettered discretion to modify primary legislation, subject only
to Wednesbury principles of irrationality. The apparently wide terms in
which the power is conferred is therefore open to doubt, particularly having
regard to the provisions as to phasing and the limitation on changes of procedural
matters: section 74 of the Rent Act. No purpose can be discerned from the 1985
Act itself, which is a collection of heterogeneous provisions relating to
landlord and tenant. But the clear purpose can be traced in the 1975 Act,
namely the control of inflation; the provisions in that Act being themselves
clearly derived from the 1973 Counter-Inflation Act. If there is any doubt
about this, it is permissible to look at the debates in parliament recorded in Hansard,
from which it is clear, submits Mr Bonney, that the corresponding power in the
1975 Act was so limited. It is quite plain that the order was made to relieve
hardship and anxiety on the part of tenants who faced disproportionate rent
increases, and not for the purpose of containing inflation in the economy.
Mr Philip Sales, on behalf of the respondents, accepted all the
propositions of law that we have set out, but he submitted that they do not
touch the problem in this case and do not assist in ascertaining the scope of
the power in section 31 of the 1985 Act, which, on its face, is unfettered and
unrestricted. The authorities concerned with the interpretation of words and
phrases in statutes are not relevant and have no application when what is at
issue is the ambit of a power. Moreover, it is permissible to look only at the
1985 Act itself to see if there is any limit on the wide words of the power.
The words of section 31 of the 1985 Act were clear and admit of no ambiguity,
so too were those of the 1975 Act. It was not therefore permissible to look
back at the 1973 Act or the debates in parliament leading to the 1975 Act.
Mr Sales placed much reliance on the case of Padfield v Minister
of Agriculture, Fisheries and Food [1968] AC 997. That case was concerned
with the Milk Marketing Board scheme. The question was whether the minister was
under a duty to refer a complaint to a committee of investigation, even though
on its face the Act merely gave an apparently unfettered discretion whether to
do so or not. It was held that he was. At p1030 Lord Reid said:
Parliament must have conferred the discretion with the intention
that it should be used to promote the policy and objects of the Act, the policy
and objects of the Act must be determined by construing the Act as a whole…
At p1033D, Lord Reid, after referring to the case Julius v Bishop
of Oxford (1880) 5 App Cas 214, said:
Lord Penzance said that the true question was whether regard being
had to the person enabled, to the subject-matter, to be general objects of the
statute and to the person or class of persons for whose benefit the power was
intended to be conferred, the words do or do not create a duty, and Lord
Selborne said that the question was whether it could be shown from any
particular words in the Act or from the general scope and objects of the
statute that there was a duty. So there is ample authority for going behind the
words which confer the power to the general scope and objects of the Act in
order to find what was intended.
In Julius’ case no question was raised whether there could
be a discretion, but a discretion so limited that it must not be used to frustrate
the object of the Act which conferred it;
Lord Pearce, at p1052G, said, also referring to the Julius
case:
it made clear that in the context of an Act is to be found the
answer to the question how a power given by it is to be exercised.
Lord Upjohn said at p1060G that ministers:
in exercising their powers… must act lawfully and that is a matter
to be determined by looking at the Act and its scope and object in conferring
the discretion…
In Padfield the House of Lords was not facing the same
problem as we do in this case. Although the Agricultural Marketing Act 1958 was
a consolidating Act, it was perfectly possible to find the purpose for which
the power was conferred from that Act alone, because it contained the whole of
a comprehensive scheme. There is nothing in that case or in the Julius
case that justifies the conclusion that, where the purpose cannot be derived
from the Act itself or there is considerable doubt whether the apparently
unlimited power is intended to be so, ordinary principles of construction
cannot be prayed in aid. Nor can we find anything in these two authorities to
support Mr Sales’ submission that, when considering the scope of a power as
opposed to the meaning of a word or phrase, those principles are irrelevant. Mr
Sales submitted that the only purpose that could be derived from the context of
the 1985 Act was that the power conferred by section 31 should be exercised in
a manner that was fair to landlords and tenants. We do not understand how this
is so, and it is difficult to see that this adds anything to the ordinary Wednesbury
principles.
Both counsel relied on the speech of Lord Simon of Glaisdale in Farrell
v Alexander [1977] AC 59*. At p82B he said:
All consolidation Acts are designed to bring together in a more
convenient, lucid and economical form a number of enactments related in subject
matter (and often by cross-reference) previously scattered over the statute
book. All such previous enactments are repealed in the repeal Schedule of the
consolidation Act. It follows that, once a consolidation Act has been passed
which is relevant to a factual situation before a court, the ‘intention’ of
Parliament as to the legal consequences of that factual situation is to be
collected from the consolidation Act, and not from the repealed enactments. It
is the relevant provision of the consolidation Act, and not the corresponding
provision of the repealed Act, which falls for interpretation. It is not
legitimate to construe the provision of the consolidation Act as if it were
still contained in the repealed Act —
first because Parliament has provided for the latter’s abrogation; and
secondly, because to do so would nullify much of the purpose of passing a
consolidation Act.
* Editor’s note: Also reported at [1976] 2 EGLR 69; (1976) 240 EG
707
At p83E he said:
it is the consolidation Act itself which falls for interpretation.
The initial judicial approach is the same as with the interpretation of any
other statute. The judge places himself, as the saying goes, in the draftsman’s
chair. He will ascertain what facts were within the draftsman’s knowledge, and
what statutory objective he had both generally and as to the particular
provision to be construed. The facts available to the draftsman of a
consolidation Act will be all those which had been available to the draftsman
of the enactments to be consolidated. These facts and (closely related) the
statutory objectives will generally be obvious from the statute falling for
construction itself; but the court may, in default or by way of supplement or
confirmation, have recourse to matters of which judicial notice may be taken or
to official reports in the light of which any part of the legislation has been
framed: see Eastman Photographic Materials Co Ltd v Comptroller-General
of Patents, Designs, and Trade Marks [1898] AC 571 and Black-Clawson
International Ltd. v Papierwerke Waldhof-Aschaffenburg AG [1975] AC 591.
The judge will then ascertain and tune into the linguistic register of the
statute: see Maunsell v Olins [1975] AC 373, 391-392. Having done all
this the judge will be in a position to read the statutory language in the
primary and most natural sense which it bears in its context. Since the
draftsman will himself have endeavoured to express the parliamentary meaning by
words used in the primary and most natural sense which they bear in that same
context, the court’s interpretation of the meaning of the statutory words used
should thus coincide with what Parliament meant to say.
There is one rare situation in which it is permissible for —
indeed, incumbent on — the court to construe a consolidation Act at this
primary stage of construction by reference to a consolidated enactment. This is
where the purpose of a statutory word or phrase can only be grasped by
examination of the social context in which it was first used.
Mr Bonney submits that this exception is appropriate here.
And later:
It might be objected that the statutory objective of a
consolidation Act is merely to consolidate the previous law; so that it is
necessary to look back to the superseded legislation to ascertain its various
statutory objectives. But in vindicating the paramount objective of consolidating
the preceding statute law the consolidation Act is also furthering the
statutory objectives of the legislation which is consolidated. Apart from the
exceptional case I mentioned in the preceding paragraph, the various statutory
objectives will be apparent from a scrutiny of the provisions of the
consolidation Act itself (possibly aided by judicial notice and perusal of
official reports). The primary approaches to statutory interpretation (which I
have tried to summarise earlier) are therefore as appropriate for construction
of a consolidation Act as for any other type of statute. It is only on failure
of the primary aids to construction that the fact that the statute to be
construed is a consolidation Act permits any special approach: what it does
then is to provide an additional secondary canon of construction which will
sometimes be of service — namely, a presumption that a consolidation Act (in so
far as it merely re-enacts) does not change the law.
The relevant principles are also stated by other members of the
House somewhat more succinctly. Lord Wilberforce at p72H said:
it is quite wrong that, in every case where a consolidation Act is
under consideration, one should automatically look back through the history of
its various provisions, and the cases decided upon them, and minutely trace the
language from Act to Act — a process, which, incidentally, has led to an
argument of four days’ length in this House. In recent times, because modern
statutes have become so complicated, the courts myself included, (cf Inland
Revenue Commissioners v Joiner [1975] 1 WLR 1701) rather too easily
accept this process, whether under persuasion of counsel or from their own
scholarly inclinations. But unless the process of consolidation, which involves
much labour and careful work, is to become nothing but a work of mechanical
convenience, I think that this tendency should be firmly resisted; that
self-contained statutes, whether consolidating previous law, or so doing with
amendments, should be interpreted, if reasonably possible, without recourse to
antecedents, and that the recourse should only be had when there is a real and
substantial difficulty or ambiguity which classical methods of construction
cannot resolve.
At p97A Lord Edmund-Davies said:
If the ‘harking back’ approach were permissible as a guide to
construction, it may well be that one should arrive at the same conclusion as
my noble and learned friend, Lord Russell of Killowen, in regard to section
85(1), though I am far from being sure that this would also apply to section
85(2). But, however correct it is to describe as ‘patchwork’ the legislative
history before 1968, it has culminated in a consolidating statute which must
initially be regarded as standing on its own feet. On the decided cases, only
if its wording is ambiguous and its ambit obscure is one permitted to consider
its legislative ancestry.
The critical question, therefore, is whether it is clear and
unambiguous that parliament intended to confer an unlimited and unrestricted
power (other than the restraints involved in the application
in doubt, the court is entitled to look at the legislative history. In our
judgment, the matter is not clear; on the contrary it is doubtful. There are
the presumptions that parliament does not intend to confer wide and
unrestricted powers to amend primary legislation by means of delegated powers,
or to take away property rights without clear language. The provisions for
phasing rent increases both in the 1975 Act and incorporated in the Rent Act
1977, which are designed to ameliorate hardship in large rent increases,
suggest that it is unlikely that parliament intended that effect of the fair
rent provisions contained in section 70 of and Schedule 11 to the Rent Act 1977
could be modified by an order made under the reserve power. Moreover, the
provisions of section 74 of the Act, which require the positive approval of
parliament to the alteration of procedure contained in Schedule 11, suggest
that it is most unlikely that parliament intended that the far more important
and substantive provisions relating to fair rent could be effected by the
negative procedure.
Mr Sales submitted that not only was it impermissible to hark back
to the earlier Acts of 1975 and, particularly, 1973, but, if one did so, the
mere fact that the provisions found first in the 1973 Act dealing with
counter-inflation, were first re-enacted in the 1975 Act, dealing with housing
rents and subsidies, and then into the 1985 Act, dealing with landlord and
tenant matters, of itself enlarged the power involved. This would have the
remarkable consequence that if parliament decided that a power to limit prices,
wages or dividends were transferred from the counter-inflationary legislation to
consumer or sale of goods, employment or company’s legislation respectively,
there would be no limit to the power of the executive to interfere in these
matters simply by virtue of the reserve power. Mr Sales did not shrink from
submitting that this would be the effect. We do not accept his submission. On
the contrary, we cannot suppose that a power that is limited to a specific
purpose can be enlarged and made unlimited without express words, merely
because it is transferred from that Act to another dealing with a number of
heterogeneous topics relating to employment dividends, rents or whatever. It is
clear, in our judgment, both from the context of section 11 of the 1975 Act
itself (particularly section 11(4) and (5)), and its derivation from the 1973 Act,
that the purpose for which the power was conferred was limited.
If there is any doubt about this, and we do not think there is,
then it is permissible to look at the statements of responsible ministers when
the 1975 Act was going through parliament: see Pepper (Inspector of Taxes)
v Hart [1993] AC 593. Mr Sales submits this is not permissible, because
there is no doubt what section 31 of the 1985 Act means; therefore, he says
that the first condition in Pepper v Hart is not satisfied. For
the reasons that have already been given, we do not agree. But he also
submitted that the second requirement, namely that the statements themselves
should be clear and unambiguous, is not satisfied. We do not agree. We think
that anyone listening to the debates or reading them would clearly understand
from ministers that the power was so limited.
The bill, as originally drafted, related only to local authority
rents and not private rents. On 18 November 1974 Mr Crossland, Secretary of
State for the Environment, said at col 906:
But the general level of rents cannot be divorced from
counter-inflationary policy. So Clause 2 contains a reserve power of a general
counter-inflationary nature. This is not framed in such a way that the
Government could make an order controlling the rents of individual local
authorities, or individual dwellings. It is not the business of Government to
approve or disapprove the rent policies of district council X or Y. What is the
Government’s business, should it prove necessary, is to set broad limits beyond
which no authority may go in setting its rents.
On 5 December 1974 at col 165-166 in Committee, Mr Nelson, the
member for Chichester, referred to the Under-Secretary of State, Mr Kaufman,
having said on a previous occasion:
It is a fall-back power which we wish to retain in the event of
local authorities beginning to demonstrate that they are putting up rents at a
rate that would be unacceptable for counter-inflation purposes… there might be
circumstances in which it appeared that rent increases were becoming
disproportionate. We want this power to cover that circumstance.
At col 167 Mr Kaufman said:
I give the Hon Member for Chichester the assurance that he asks
for about the relevance of the word ‘disproportionate’. It is, of course,
disproportionate in counter-inflation terms. This is a reserve measure, as I
attempted to explain on Tuesday.
On 14 January 1975, when the bill was being amended to include
private rent, Mr Kaufman said at col 330:
The Government amendments and new clause would extend the
Government’s reserve order-making power to limit rents to private sector rents
as well as to rents in the public sector.
The power to make orders to restrict rents in the private sector
under the Counter-Inflation Act 1973 will come to an end when Part II of that
Act ceases to have effect in March 1976. The Government accept the arguments
that as we have an order-making power for public sector rents it would be
inconsistent not to have an order-making power for private sector rents too.
And a little later:
The order-making power continues for dwellings the power available
under section 11 of the 1973 Act.
On 27 January 1975 in the House of Lords, Lord Melchett said at col
321:
My Lords, Clause 2 gives the Secretary of State a reserve power to
limit increases in rents in both the public and private sectors. This power is
necessary on broad grounds of Government economic policy, and is similar to the
power in the Counter-Inflation Act under which the current rent freeze was
imposed.
In our judgment, these statements could not be clearer. We have
looked at the passages to which Mr Sales drew our attention, but we do not
think there is anything that detracts from these statements and assurances,
still less suggest that the power is wholly unlimited.
If the scope of the power in section 31 is limited to
counter-inflationary purposes, we do not think it can be argued that the order
comes within these purposes. Mr Sales did not address any oral argument to the
court to the contrary, and we cannot find anything in his skeleton argument to
that effect. This being so, the order is ultra vires the powers
conferred by section 31 of the 1985 Act and must be quashed. We can deal with
the remaining grounds of the application more shortly.
Provisions of Schedule 11 to the Rent
Act 1977 can only be modified by regulations made under section 74 of that Act
(Ground 3)
It is contended by the applicant that the order expressly seeks to
modify Part 1 of Schedule ll to the Rent Act 1977: see Article 3 and the
Schedule. This may be done by regulations only in respect of procedure [Rent
Act 1977 section 74(1)(b)] and, in order to modify Schedule 11 Part 1,
only if approved by both Houses of Parliament: section 74(2)(b). This
order is not purely procedural, and, in any event, is by section 31(4) of the
1985 Act subject only to the annulment procedure, so that, in the absence of
resolutions approving an order made under section 74(2)(b), this order
cannot have its purported effect upon Schedule 11 Part I.
In our judgment, regulations made under section 74(1)(b)
could only modify the procedure to be followed by rent officers on applications
for the registration of rents. That is what Schedule 11 Part 1 is concerned
with. That is clearly different from the fair rent, which is to be assessed in
accordance with section 67 and section 70 (and formerly section 68 and section
69 before they were repealed), which has to be registered. In our judgment, the
Secretary of State could not have used the machinery of regulations made under
section 74 to modify the effect of the fair rent or its recoverability laid
down in the primary provisions of the Act merely by altering the procedure as
to be followed on applications for a fair rent assessment. This requires
primary legislation, if it cannot, as we hold, be done under section 31 of the
1985 Act. The importance of section 74 is not that it provides alternative
machinery to achieve the Secretary of State’s aim, albeit subject to a positive
42, on the bearing it has upon the construction of section 31.
A dwelling subject to a particular
kind of tenancy is not a specified description of dwelling within section 31(1)
and section 38 (Ground 1)
Mr Bonney submits that the word ‘dwelling’ as defined in section 38
is to be distinguished from such words as ‘rent’, ‘lease’ and ‘tenancy’. This
is obvious enough. His next point is that the word ‘description’ means a verbal
portrait that conjures a picture in the mind’s eye, for example old/new,
house/flat, and is not apt to be applied to a particular sort of tenure. We do
not agree; this gives far too restricted a meaning to the word ‘description’.
Furthermore, it is apparent that parliament must have intended the word to
cover particular types of tenancies, because section 32(3) provides that the
power reserved in section 31 ‘does not apply to a dwelling forming part of a
property subject to a tenancy to which Part II of the Landlord and Tenant Act
1954 applies’. This clearly exempts a particular description of dwelling by
reference to the type of tenancy under which it is held. And this sheds light
on the meaning of the word ‘description’ in section 31(1).
Order is not a modification of the
Rent Act 1977 (Ground 2)
The order goes beyond the powers of section 31(2) of the 1985 Act
to include provisions excluding, adapting or modifying any provision made by or
under any enactment (whenever passed) relating to rent or recovery of unpaid
rent. Mr Bonney submits that the purported effect of the order is a radical
replacement of the existing flexible regime that was intended to and has now
become fair to landlords and tenants as a result of the Spath Holme and Curtis
decisions with a rigid regime, which is the opposite to that of a fair rent. It
was quite unnecessary, he submitted, to interfere with the whole structure of
fair rents and their registration; it would have been sufficient, had the power
existed, to modify Part III of the Rent Act simply to impose a cap on rents
recoverable.
Mr Bonney relied on a passage from the judgment of Kennedy LJ in R
v Secretary of State for the Environment, ex parte Berkshire Royal County
Council (1996) 95 LGR 249 at p256, where he appears to have approved Mr
Richards’ submission:
As to what amounts to a modification Mr Richards relied upon what
was said by Megarry J in Legg v Inner London Education Authority
[1972] 1 WLR 1245, 1257; 71 LGR 58, 72:
‘To some extent the matter must be one of impression…For one
proposal to be fairly regarded as a modification of another proposal, one must
be able to perceive enough in it of that other to recognise it as still being
that other proposal, even though changed.’
In relation to the statutory provisions which we are considering
Jowitt J said in Reg v Secretary of State for the Environment, ex
parte Lancashire County Council [1994] 4 All ER 165, 173; 93 LGR 29, 38:
‘although the Secretary of State has wide powers to modify the
Commission’s recommendations, he cannot transform them so that they become a
different animal. It is a question of degree.’
Mr Bonney submits that the regime introduced by the order,
reverting as it does to a rigid formula for rent increases, is a different
animal to the fair rent regime.
But section 31(2) has to be construed in the light of section
31(1), which contains the general power (on this hypothesis unlimited) to make
an order ‘restricting or preventing increases of rent for dwellings which would
otherwise take place’. This will inevitably involve a significant exclusion,
adaptation or modification of legislative provisions where rents are governed
by those provisions. Furthermore, Mr Sales is correct to point out that the
order does not have the effect of repealing section 70 of the Rent Act 1977 or
the provisions as to registration. It is only in those cases where the fair
rent exceeds the maximum permitted under the formula, that the latter is
registered instead of the former; although, in practice, it seems likely that
this will be so in most, if not all, cases, in theory it is not so. We do not
consider the ground made out.
Failure to take account of relevant
considerations and taking into account irrelevant considerations (Ground 5)
The applicant submits that the respondents’ decision to make the
order has been founded upon a misconception of the nature of a fair rent under
the Rent Act 1977, which has led the respondents to fail to take account of
relevant considerations and to take into account irrelevancies. It is said that
the respondents’ analysis of the situation is flawed because it fails to
recognise that any increases, as a result of the Spath Holme and Curtis
decisions, were corrective of earlier errors by rent assessment committees as
to the purpose and intention of section 70 of the Rent Act 1977 and, in
particular, that a fair rent is by definition a market rent less scarcity and
statutory disregards. It is submitted that this misconception is reflected in
the language of the Consultation Paper. In para 1.1 it is said that the
government is concerned that many tenants in private regulated tenancies ‘have
been facing disproportionate increases in rents in recent years, despite
[our emphasis] the statutory fair rent provisions which still apply to these
tenancies’. And at para 2.4 it is said, referring to the Spath Holme
decision, ‘the broad effect of the judgment was to give more weight to the
market rent less scarcity method of rent determination… changing to this method
has caused fair rents to rise steeply’.
There is some force in the criticism that these passages suggest
that the fair rents system was somehow intended to provide reasonable rents
that the tenant could afford, and that the second passage perpetuates the
error, rejected by the Court of Appeal in both its decisions, that the use of
market rents was a new and unacceptable change in method of assessing fair
rents. Be that as it may, whatever the precise analysis of the cause, the fact
is that many tenants were facing very substantial rises in rents, no doubt
because they had been kept too low by a misapprehension of the law by rent
assessment committees, but the immediate effect on tenants was the same, namely
to cause anxiety and hardship in some, perhaps many, cases by the size of the
increase. And it was in the avowed intention of alleviating this hardship that
the order was made. In the light of our conclusion on the scope of the power,
this ground adds nothing to the applicant’s case. If we are wrong on that
conclusion, we do not consider that this ground is made out as a separate
reason for quashing the order.
Order is unreasonable, unfair and
disproportionate (ground 6)
In form 86A, three matters are advanced in support of this ground;
a further one was canvassed in argument. The applicant also relies on the
European Convention on Human Rights. We will consider each of these matters.
The order applies to all regulated tenancies with registered rents,
irrespective of whether, in any individual case, the tenant is actually
suffering hardship or the fair rent had significantly increased over its
previous uneconomic level. There is no doubt that some, if only a relatively
small minority of tenants, could well afford the increase, and all have had the
advantage, over the years, of rents that have been lower than a proper
application of the fair rent provisions would have yielded. Some may even have
a regulated tenancy as well as another home, since there is no requirement for
continual residence for protection under the Acts. Equally, while most landlords
are doubtless better off than tenants, there are some small landlords whose
only asset may be one or a few properties subject to regulated tenancies. As we
have already indicated, evidence advanced in some of the landlords’ responses
to the consultation paper indicates that the practice of rent assessment
committees has varied throughout the country, so that in some areas fair rents
have approximated more nearly to market rents less scarcity, than in others. It
is unfair, submits Mr Bonney, that in those areas where, because of the
erroneous approach of rent assessment committees, there is greater leeway to
make up, the order will have the most impact.
Second, it is contended that the order ignores the impact of
housing benefit to provide assistance to those on low incomes and the ability
of rent officers to fix maximum rent levels for housing benefit purposes,
which, in turn, affects rents payable. Moreover, under the housing benefit
scheme, those in receipt of housing benefit can be required to
locality.
The third consideration, which links with the last, is that the
order passes the burden of subsidy to the extent that housing benefit is not
available from the community to private landlords, who, on the contrary, are
entitled to an economic return that is required for the management of their
properties in the interest of both parties. Since it is the error of public
officers, namely rent officers and rent assessment committees, that has for too
long delayed proper increases, and, hence, caused disproportionate increases in
some cases, it would be fairer, it is submitted, that the taxpayer should make
good the deficit, rather than that the landlord should be further penalised.
A further point advanced in oral argument is that the order only
applies to about 50% of regulated tenancies. There are no figures for 1999; but
there is no reason to suppose that those for 1996/7 are no longer broadly
relevant. In that year, there were 242,000 regulated private tenants (10% of
all private tenancies) of which 128,000 had a registered rent. The order
therefore does not apply to the remaining 114,000 regulated tenancies. Some of
these tenants may well face substantial increases, yet the order does nothing
for them; nor does it assist those whose rents have already been increased in
accordance with the Spath Holme decision before the order came into
force. This obviously can give rise to feelings of unjust and discriminatory
treatment between those occupying broadly similar accommodation. In effect, Mr
Bonney submits that the order is a sledgehammer, and an exceptionally blunt one
at that, to crack a nut. Mr Sales said that he was not prepared to deal with
this point as it was not raised in the form 86A. To a large extent the point
seems self-evident on the figures already provided. But had we thought the
question decisive, we would have felt it right to give Mr Sales time to take
instructions on it.
Finally, on this aspect of the case, Mr Bonney relied on Article 1
of Protocol 1 of the European Convention on Human Rights. This provides as
follows:
Every natural or legal person is entitled to the peaceful enjoyment
of his possessions. No one shall be deprived of his possessions except in the
public interest and subject to the conditions provided for by law and by the
general principles of international law.
The preceding provisions shall not, however, in any way impair the
right of a State to enforce such laws as it deems necessary to control the use
of property in accordance with the general interest or to secure the payment of
taxes or other contributions or penalties.
The proper approach to this question is to be found in the
judgments of this court in R v Ministry of Defence, ex parte Smith
[1996] QB 517. At p554E Sir Thomas Bingham MR adopted the test proposed by Mr
David Pannick, namely:
The court may not interfere with the exercise of an administrative
discretion on substantive grounds save where the court is satisfied that the
decision is unreasonable in the sense that it is beyond the range of responses
open to a reasonable decision-maker. But in judging whether the decision-maker
has exceeded this margin of appreciation the human rights context is important.
The more substantial the interference with human rights, the more the court
will require by way of justification before it is satisfied that the decision
is reasonable in the sense outlined above…
And at p558E, after referring to Article 8 of the Convention, he
said:
The relevance of the Convention in the present context is as
background to the complaint of irrationality. The fact that a decision-maker
failed to take account of Convention obligations when exercising an
administrative discretion is not of itself a ground for impugning that exercise
of discretion.
On the other hand, Sir Thomas warned of the need for caution before
the courts declare irrational a decision that is largely one of policy. He said
at p556B:
The greater the policy content of a decision, and the more remote
the subject matter of a decision from ordinary judicial experience, the more
hesitant the court must necessarily be in holding a decision to be irrational.
That is good law and, like most good law, common sense. Where decisions of a
policy-laden esoteric or security-based nature are in issue even greater
caution than normal must be shown in applying the test, but the test itself is
sufficiently flexible to cover all situations.
We accept that the right to receive a fair rent, as defined by
section 70 of the Rent Act 1977, is a possession within the meaning of Article
1 of the First Protocol. We also accept that the arguments advanced in paras
60-63 constitute cogent criticisms. On the other hand, the decision to make an
order is heavily policy-laden. It can properly be said that if, contrary to our
judgment, the power was wide enough to encompass the purpose for which it was
exercised, the balancing of hardship to tenants against unfairness to landlords
and the decision whether the taxpayer or the landlord should subsidise that
hardship, is essentially a political decision. The Secretary of State took the
view that many landlords had purchased properties subject to regulated
tenancies at a substantial discount from open market values with vacant
possession, in the expectation that the rent assessment authorities would
continue to restrict rents and in the hope that, at the conclusion of the
regulated tenancy, the value of the property would increase substantially.
Submissions were made to us by counsel on both sides as to the
effect of the consultation process. Mr Bonney did not go so far as to say that
it was a cynical exercise to give an air of impartiality by a government that
had determined on a course of conduct. He did submit, however, that it was
entirely predictable that tenants would approve and landlords disapprove of the
proposals, and that there were more tenants than landlords and therefore more
votes from them. Furthermore, that few, if any, of the landlords’ objections,
some of which were reflected in the matters we have just referred to, appear to
have attracted express consideration in the government’s response. Mr Sales
submitted that the consultation exercise was a genuine one; it was not simply a
question of going through the motions and although the landlords’ objections
find no place in the written response, there is no reason to suppose that they
were not considered. The respondents cannot be in any worse position for having
undertaken this exercise than if they had not done so at all. And it seems to
us that unless there is extrinsic evidence that the respondents have not taken
these representations into account or this is apparent from the response itself
or the making of the order, neither of which is the case here, we ought to
conclude that they have been taken into account, but as a matter of political
decision overruled. Notwithstanding the powerful criticisms made by Mr Bonney,
on the assumption that we make in considering this ground that the order was
within the respondents’ powers, we cannot say that the decision to make it was
unreasonable in the Wednesbury sense.
Finally, Mr Bonney drew attention to one of the shortcomings of the
negative procedure as it applied in this case. The matter is dealt with in para
7 of Mr Willan’s (the applicant’s solicitor) first affidavit. The order was not
debated in either House of Parliament. The Earl of Lytton tabled a debate on a
prayer in the House of Lords scheduled for 11 February 1999. However, the
prayer was withdrawn at short notice to allow parliamentary time for a
statement from the government on the situation in Kosovo, and the motion was
not retabled. On 21 January 1999 the leader of the opposition and a number of
colleagues had sought a prayer to annul the order; however, no parliamentary
time was given to this prayer. It is right to point out that the matter was
debated on 9 March 1999 in the House of Commons Standing Committee on Delegated
Legislation and in the House of Lords; but, by that time, the 28 days had
elapsed. None of this can affect the rationality of the decision. But it
illustrates quite vividly why both parliament and the courts are zealous to see
that powers to alter primary legislation are to be strictly and narrowly
construed.
For these reasons, we hold that the applicant has made out its main
ground for seeking judicial review, namely ground 4, and is entitled to an
order of certiorari quashing the order, but that the other grounds are
not made out.
Order for certiorari
granted.