Mobile Homes Acts — Dispute between owners of mobile home site and owner of one of the mobile homes as to pitch fee — Agreement provided that in determining amount of pitch fee regard should be had to (1) the Retail Price Index, (2) sums expended by site owner for benefit of occupiers of homes, and (3) ‘any other relevant factors including the effect of legislation applicable to the operation of the park’ — The 1983 Act, unlike the 1975 Act, did not provide for arbitration on disputes but for questions to be determined by the county court — The home-owner, dissatisfied with a proposed increase in the pitch fee from £564 per annum to £705.12, applied to the county court — The judge increased the fee only in accordance with the increase in the Retail Price Index of 3.7 per cent, making the fee £584.88 — Site owners appealed to the Court of Appeal — County court judge had rejected a submission that the court should not determine actual figures but consider only whether the appropriate factors had been taken into account — He had construed the words ‘applicable to the operation of the park’ as referring to the whole of the phrase quoted above — He had ruled that evidence as to pitch fees on other sites was not relevant and that he was not required to determine a ‘fair market rent’ — Held by the Court of Appeal that the judge had approached the matter correctly and that his decision should be upheld — He had dealt with all the factors and the only one which provided scope for an increase was the Retail Price Index, which he applied — The case of Beer v Bowden, where the term ‘fair’ was implied, was distinguishable — Appeal dismissed
The following
case is referred to in this report.
Beer v Bowden [1981] 1 WLR 522; [1981] 1 All ER 1071; (1976) 41
P&CR 317, CA
This was an
appeal by Weir Associates Ltd, leasehold owners of a mobile home site at
Havenwood Park, near Arundel in Sussex, from a decision of Judge Slot at
Chichester County Court in favour of George Albert Stroud, the present
respondent, in a dispute mainly concerning the pitch fee in respect of the
pitch occupied by the respondent.
R J F Gordon
(instructed by Davies, Thomas & Cheale, of Littlehampton) appeared on
behalf of the appellants; Charles S Taylor (instructed by Hubbard & Co, of
Chichester) represented the respondent.
Giving the
first judgment at the invitation of O’Connor LJ, GLIDEWELL LJ said: The present
appellants, Weir Associates Ltd, are the lessees of a mobile home site called
Havenwood Park, which is near Arundel in Sussex. The freehold is owned by Mr
and Mrs Weir. Mr Weir is a director of and shareholder in the company, which
holds under a lease, originally held by him and then assigned to the company in
1982, which was a 25-year lease and thus runs until the year 2007.
Mr Stroud is
the owner of one of the mobile homes on that site. He has lived in that home on
a pitch at Havenwood Park since August 1978. At that time the company had not
been formed and Mr and Mrs Weir themselves were the operators of the site. Mr
Stroud at that time occupied the pitch under a written agreement between him
and Mr and Mrs Weir.
At that time
the relevant legislation governing residential mobile home sites was the first
legislation of its kind, the Mobile Homes Act 1975. Among other matters, that
agreement (ie the 1978 agreement) provided for arbitration as to disputes, and
clause 8(b), the arbitration clause, contained the following provisions:
If an
arbitrator is called upon to determine the amount of the annual pitch fee he
shall take into account in determining the same:-
(a) the Index of Retail Prices
(b) sums expended by the Owner for the benefit of
the occupiers of Mobile Homes on the Park
(c) any other factors which he shall consider
relevant.
The 1978
agreement provided for annual review of the pitch fee, which I shall from now
on call the rent. Generally the evidence given and accepted was that until 1983
the rent was increased by a percentage equal to the increase in the Retail
Price Index in the preceding year. In May 1983 the 1975 Act, which had always
been intended by Parliament as an interim measure, was repealed and replaced,
save as to certain ancillary provisions, by the Mobile Homes Act 1983. The 1975
Act had for the first time introduced some security of tenure for the occupiers
of pitches on mobile homes sites. Generally speaking, that Act provided for
security of tenure for five years with the opportunity to extend for a further
three.
The 1983 Act
gives greater security. Part I of Schedule 1 to the Act contains a number of
implied terms which the Act incorporates into all agreements from the time when
the Act comes into force. In so far as those implied terms are in conflict with
express terms they override those express terms. The effect of those implied
terms so far as security of tenure for the pitch occupier is concerned is that,
provided he continues to pay his rent and complies with the other terms of his
agreement and provided that he is occupying the mobile home as his main or
principal residence, and finally that the condition of the home is not such as
would be detrimental to the amenities of the site, he has security which is
either indefinite or lasts until the end of the owner’s interest, which in this
case, as I have already said, means until the year 2007.
Under the 1975
Act the home-owner could sell his mobile home to another potential occupier
with the right to assign the right to occupy the pitch. That required the
consent of the site owner, but the 1975 Act provided that such consent should
not be unreasonably withheld. Moreover, under the 1975 Act, if a home-owner
wished to sell his home he had first to offer it to the site owner, who was
entitled to purchase it at a discounted price of 85 per cent off the market
price. Alternatively, if the site owner did not buy it and it was resold to
another person, the site owner was entitled to a commission on the sale which,
under the agreement in force in this case, was 15 per cent.
Almost
identical provisions apply under the 1983 Act, but with this important
practical alteration. The commission which the site owner may take is at a rate
which is to be fixed by a statutory instrument made by the Secretary of State.
It has been fixed at 10 per cent, so the percentage which the site owner was
allowed to take was reduced as a result of the coming into force of the 1983
Act: a benefit, of course, to the pitch occupier. The pitch occupier thus
gained two major benefits
gave him an intangible but important benefit but also increased the value of
his home itself; and second, as I have said, his right to assign, if he wished
to do so, was subject to a reduced maximum commission payable to the site
owner.
The 1983 Act
also requires that the site owner shall, within six months of the Act coming
into force in relation to existing occupiers or three months in relation to new
occupiers of pitches, serve upon the pitch occupier a written statement which
shall specify a number of matters. It has to set out the terms implied under
Schedule 1, Part I, to the Act, and then it has to set out the express terms of
the agreement. From that recital of the legislation and its effect I go back to
the facts.
The lease
under which Weir Associates Ltd hold this site commenced on November 30 1982,
ie before the 1983 Act came into force. At some date after May 1983 (the
precise date is not clear), Weir Associates served on Mr Stroud a written
statement in accordance with the 1983 Act in a form provided by the National
Federation of Site Operators and the National Caravan Council, neither of whom,
we are told, though it may not be strictly relevant, is a body representing
pitch occupiers. The Federation of Site Operators represents site owners — as
the name makes clear.
The written
statement, as it was required to do, contained, among other things, the express
terms of the agreement between the parties. The statement said at its
commencement that the agreement commenced on August 7 1978, so in terms it was
referring back to the original agreement between Mr Stroud and Mr Weir. In my
view, the express terms set out should then have been the terms of the 1978
agreement. That is what the statute provides, subject only to the alterations
made by those terms which were required to be implied under the 1983 Act.
Nevertheless,
Mr Stroud accepted the new agreement in so far as it differed from the old one
(I will come in a moment to one way in which it differed) and did not, as he
might have done, object, by going to the court, about the alteration of the
terms of the new agreement, so nothing turns on that so far as these
proceedings are concerned.
The
differences that are relevant to these proceedings between the 1978 and the
1983 agreements are these: first, in the 1983 agreement there is no arbitration
clause. The effect of that is that by section 4 and section 5(1) of the 1983
Act questions arising under the agreement are to be determined by the county
court. Second, there is an alteration in the matters to which regard is to be
had when the pitch fee is reviewed. The relevant clause in the 1983 agreement
is clause 7(a). It does not talk about what the arbitrator is to have regard to
because, of course, there is no provision for arbitration. It reads:
On the review
date namely the first day of January in each year the amount of the annual
pitch fee shall be reviewed and in determining the amount of the reviewed pitch
fee regard shall be had to:
(i) the Index of Retail Prices
(ii) sums expended by the owner for the benefit of
the occupiers of mobile homes on the park
(iii) any other relevant factors including the
effect of legislation applicable to the operation of the park.
It will at once
be seen that the first and second of those factors are exactly the same as the
factors to be taken into account by the arbitrator under the 1978 agreement.
The third factor has been altered in two ways which may be significant: first,
by adding the words ‘including the effect of legislation’ and, second, by
adding the words ‘applicable to the operation of the park’.
In 1983 the
rent for Mr Stroud’s pitch was £564 per annum or, to be very precise, £47.01
per month, plus £66 in round figures for water and sewerage. On August 9 1983
Weir Associates served on Mr Stroud a notice of increase of rent from January 1
1984 to £705.12 per annum, or £58.56 per month. Mr Stroud objected to that by a
letter of December 6 1983 in which he said:
I refer to
your statement dated August 8 1983 as to the proposed pitch fee for the above
payable with effect from January 1 1984. I do not agree with the pitch fee and
consider it excessive.
Following
past practice, ie, using the Retail Price Index of June 1983 of 3.7%, the pitch
fee would be £48.74 per month. However, as a gesture of goodwill and to avoid
possible costly and lengthy court action, I would agree, in this instance, to a
pitch fee increase of double the June 1983 figure, that is 7.5% in which case
the monthly pitch fee would be £50.53. I am, of course, prepared to discuss the
matter with you.
In the event
of our failing to reach agreement, the County Court is empowered to consider
your written statement to me dealing with such matters as the pitch fee.
Mr Gordon for
Weir Associates sought to argue that in that open letter Mr Stroud was in some
way committing himself to paying more than the figures for the increase in the
Retail Price Index would dictate. I do not take that view: albeit this was an
open letter, it was clearly an open letter seeking to compromise the dispute in
order to try to avoid the litigation which led the parties to this court. The
offer was not accepted, and that really is the end of the matter.
In reply to
that letter Mr Weir, on January 14 1984, wrote a general letter to all the
residents (it was addressed to ‘Dear Resident’) on the site. He set out the
reasons which he was suggesting justified the increased pitch fee for which he
was asking. In the second paragraph of that letter he said:
The first
point I think to make clear is that by virtue of the provisions in the Mobile
Home Act 1983 reducing the commission payable upon the sale of Mobile Homes the
site is no longer economically viable at the rent for 1983. Naturally, as a
businessman I seek to run the site at a viable profit and to assist me in
ensuring that I achieve this, I naturally take specialist advice from
accountants.
Then he went on
to say that he was in fact asking for less than the accountants had advised.
In the
meantime on December 30 1983 Mr Stroud had applied to the county court by
originating application ‘for an Order in such terms as are just and equitable
varying or deleting the following express terms of an agreement offered to the
Applicant’. The first of the matters dealt with is that the ‘pitch fee of
£705.12 payable from the 1st day of January 1984 as demanded by the Respondent
in the letter is excessive’. The application further asked that para 7 of the
1983 agreement should itself be altered so as to make provision for
determination of the review of the pitch fee, and one other matter is referred
to. So far as that is concerned the learned judge found against the applicant
and, there being no cross-appeal on that, no issue now arises about it. The
sole issue before this court was as to the judge’s determination in relation to
the rent.
The judge
determined, at the conclusion of a lengthy hearing (he, as he said, was
starting his judgment at 7 o’clock on the evening of the second day of the
hearing), that the rent should only be increased to take account of the
increases in the Retail Price Index. The evidence before him is that that
increase had been some 3.7 per cent, so he simply added 3.7 per cent to the
1983 rental in order to arrive at a figure of £584.88. It is against that
decision that Weir Associates now appeal.
In his
judgment the judge set out the three factors which under clause 7 had to be
taken into account. He then looked at them and commented as follows: ‘Item
(1). The RPI increase . . . went up by 3.7%. So this rent must go up by at
least that amount.’ Mr Gordon submits
that in so saying the learned judge was wrong, and strictly I think that
comment is justified. I think that the rent is not required to go up by the
increase in the Retail Price Index, however large or small that may be: it is a
factor to be taken into account. But if the judge is to be understood as saying
that with a relatively small rate of inflation in the relevant year it is right
that the rent should go up by at least that amount, that remark would be
understandable and I would agree with it.
The second
item related to sums expended by the owner for the benefit of the occupiers of
the park. The judge found against Weir Associates on that issue and nothing now
turns on it.
One therefore
comes to the third factor, ‘any other relevant factors including the effect of
legislation applicable to the operation of the park’. The first matter to be
decided was, ‘What is the proper interpretation of that clause?’ and, second,
having decided that, ‘What falls under it?’
The judge
construed clause 7 as meaning ‘any other relevant factors applicable to the
operation of the park, including the effect of legislation applicable to the
operation of the park’. In other words, he expressly applied the phrase
‘applicable to the operation of the park’ to the whole of the clause. He said:
I think that
the words ‘Any other relevant factors’ must be read in the context of the whole
of clause 7(a). I think that these words mean that I must take into account any
other relevant factors applicable to the operation of the park, including the
effect of legislation applicable to the operation of the park. In addition I
think that the draftsman must be deemed to be intending to limit those factors
by reference to the context of the whole clause. The principle of noscitur
a sociis applies. Factors which are not applicable to the operation of
the park should not be taken into consideration. If there is any ambiguity
about this clause, it should be construed contra proferentem: and that
means that it should be construed in favour of the applicant.
Before I come
to express my own view about that, I think it right to say a word or two about
this whole exercise of reviewing a pitch fee and how a dispute as to the review
of pitch fee is to be dealt with where there is no arbitration clause in the
agreement. The 1983 Act provides in effect that an agreement may contain an
arbitration clause but if it does not, in England and Wales, the issue shall be
determined by the county court. It is to my mind clear that when an agreement,
as this one does, talks about ‘determining’ the pitch fee, the determination is
not a unilateral process. Mr Gordon I think was inclined to argue that the word
‘determination’ means simply ‘determination by the site owner’. I believe that
to be wrong. It is clear to my mind that determination involves the agreement
of the parties or an order of the court. Clause 7(c) reads:
A note of the
reviewed pitch fee shall be endorsed hereon in the form set out in the Second
Schedule.
As my Lords
pointed out during the course of argument, if one looks at the Second Schedule
the form in which the reviewed pitch fee is to be recorded provides:
On
such and such
a date
the annual
pitch fee payable hereunder was reviewed in accordance with express term 7
hereof and it was agreed by the owner and the occupier that the annual pitch
fee payable during the review period would be. . . .
So the
agreement itself envisages, as one would expect, that the pitch fee should be
agreed between the parties.
If there is no
agreement the disagreement may be as to either or both of two matters. The
dispute may be as to whether the site owner has taken into account factors
which fall within clause 7 of the agreement, or it may be as to whether, taking
into account those factors, he has arrived at fair and appropriate figures.
Whichever it is, such a dispute is in my view ‘any question arising under any
agreement’ to which the 1983 Act applies and it is therefore a dispute within
section 4 of the Act.
Mr Gordon argues
that the task of the court when faced with such a dispute is merely to decide
whether the fee fixed by the site owner is or is not in accordance with the
terms of the agreement: in other words, he argues that if it becomes apparent
that the site owner has taken appropriate factors into account the court is not
concerned to go into the actual figures. However, if the site owner had not
taken into account appropriate factors or had taken into account a factor which
did not fall into the agreement, the figure would have to be altered and the
court would have to decide what then was an appropriate figure. In my view, Mr
Gordon’s argument on this point is wrong. There is nothing, so far as I can
see, in either the agreement or the Act itself which trammels the court once it
has before it a dispute as to the review of a rent or pitch fee. In my view,
the court cannot merely decide whether relevant factors have been taken into
account but it can also decide the figures themselves: in other words, in this
respect the court is acting as an arbitrator would do if there were an
arbitration clause in the agreement.
I come back to
the major issue between the parties, that is to say, ‘What is the proper
interpretation of clause 7(a)(iii) of the 1983 agreement?’ As I have already said, the change from the
1978 agreement is that instead of the phrase, ‘Any other factors which he’, ie
the arbitrator, ‘shall consider relevant’, the clause now reads, ‘Any other
relevant factors including the effect of legislation applicable to the
operation of the park.’
The judge
interpreted ‘applicable to the operation of the park’ as applying to the whole
phrase. For myself I think he was right to do so. Grammatically there is no
break, no comma or any other indication to show that the phrase ‘applicable to
the operation of the park’ is intended only to include the effect of
legislation. The words make sense read as a whole, and for myself I would so
interpret them. Whether it is necessary to look at neighbouring words in order
to arrive at that conclusion I rather doubt, but if it were I apprehend that
what the judge had in mind was that the immediately preceding subclause
relating to sums expended by the owner for the benefit of occupiers related to
this park and this park only, and he was suggesting other relevant factors
which were to be taken into account. For myself I simply base this
interpretation on what I believe to be the clear meaning of the phrase itself.
How does that
support the judge’s decision? Mr Taylor
for Mr Stroud reminded us that the evidence which really is in issue here, that
is to say the evidence put before the judge as to rents or pitch fees at
various other mobile home sites, was not at first apparently the basis upon
which Mr Weir sought to support his increased pitch fees. In the letter of
January 14 to which I have referred he relied upon his loss of commission as
being a major factor, together with subsequent loss of viability of the site.
The judge held (in my view he was right to do so) that the loss of commission
was a relevant factor applicable to the operation of the site, but he also held
that it was in effect counterbalanced by the greater sale value of the homes:
in other words, although Mr Weir would get commission at a lesser percentage
the actual amount would not be appreciably affected. The judge of course did
not have any precise figures in front of him, but he said that one balanced out
the other so there was no increase to take account of that factor. There is no
appeal so far as that part of his decision is concerned.
So far as
improvements made to the site are concerned, that was examined and it was found
that the evidence did not justify the suggestion. Reference to what has been
called ‘fair market rent’, Mr Taylor submits, was really something of an
afterthought, though it became a main issue when the matter came to court. It
is not entirely clear from the documents before us when this issue was first
raised, but it appears to be the case that it must have been raised some time
before July 1984 and certainly not at the initial stages of the dispute between
the parties.
The judge,
having reached the conclusion which I have already recited as to the meaning of
clause 7(a)(iii) of the agreement, ruled that evidence as to pitch fees on
other sites was not a relevant factor applicable to the operation of this park.
Again I agree with him. However, he went on to say what he might have done had
he come to a different conclusion on the interpretation of clause 7(a)(iii). He
said this:
The
difficulty which I find, in trying to assess a fair market rent, is that Mr
[Peter D] King
a chartered
surveyor who gave evidence on behalf of Weir Associates Ltd
has isolated
18 characteristics which he says are important on a site: and, according to his
schedule, this site is much better than most of the others on the basis of
these 18 characteristics. No doubt this site is a very attractive site. I have
considered everything that Mr King and Mr Stroud have told me; and, from what
they have told me, I find it just about impossible to determine what a fair
market rent would be. The position is wholly different from the problems which
arise in assessing a fair market rent for, for example, shops in a parade.
There is not that sort of similarity or comparability.
A little further
on he said:
Looking at
the schedule, I would be inclined to take the view that £705 is on the high
side, whereas £564 is on the low side. It looks as though a fair market rent
would be somewhere between these figures: but the sites are not truly comparable
with one another, so that the use of comparables is very difficult.
The judge was
asked by the site operators to say that taking into account a fair market rent
was a relevant factor, and for the reasons I have already explained he decided
that it was not. The phrase ‘a fair market rent’ is not to be found in the
agreement or the legislation. It is of course a phrase borrowed from the Rent
Acts. In my view, the real question the judge was determining was not whether
‘a fair market rent’ or indeed a market rent was a relevant consideration or
not: it was whether evidence of the pitch fees or rents charged at other sites
was a relevant factor applicable to the operation of the park within clause
7(a)(iii). I believe that that is the real question the judge was deciding, and
he has in effect answered that question, ‘No, it is not a relevant factor’. I
think that he was right so to do. The parties say that this case is in effect a
test case to give guidance to courts in the future who are confronted with this
sort of problem. If that be right, the guidance I would give would be that the
exercise of putting before the court detailed evidence of rents on allegedly
comparable sites does not provide, in relation to agreements in similar terms
to this (of course it all depends on the terms of the agreement), evidence of
relevant factors applicable to the operation of the park which the court can
properly take into account.
That is really
the end of the matter. We did have some discussion about whether evidence as to
the rent charged on a new letting of a pitch on the same site would be
relevant. That question does not arise in relation to this appeal and I am not
to be thought therefore to be deciding it, because that question may very well
arise at some time in the future and no doubt it will then be fully argued. For
myself I would merely say that I can see that within the interpretation which
the judge has given, and which I would give, to clause 7(a)(iii) of this form
of agreement, such evidence could be considered to be relevant. But it would
not, of course, present anything like the difficulties
confronted.
There is one
other point which I should make. It may well be that if some evidence is given
as to a relevant factor which is applicable to the operation of the park, that
evidence may conflict with the increase in the Retail Price Index. If that be
the case, the judge will simply have to decide what weight to give to each
factor. Whether it will happen in practice remains to be seen. So far as the
question which this appeal raises is concerned, my judgment is that the learned
judge was right in determining that evidence of rents or pitch fees at other
mobile home sites were not relevant factors within clause 7(a)(iii) of the
agreement. He was therefore right to disregard that evidence. Having dealt with
all the other matters, the only factor that did provide scope for an increase
was the Retail Price Index, and he applied that. I would therefore uphold his
judgment and dismiss the appeal.
Agreeing,
LLOYD LJ said: I add only a word on Beer v Bowden [1981] 1 WLR
522, the case on which Mr Gordon relied. That was an ordinary rent review case.
The lease provided for a rent of £1,250 per annum until March 24 1973, and
thereafter ‘such rent as shall . . . be agreed between the landlords and the
tenant’. The court held that you must imply the word ‘fair’ between the words
‘such’ and ‘rent’. Mr Gordon argued that by the same token you should imply
some reference to fair market rent in clause 7 of the 1983 agreement. I do not
agree. In Beer v Bowden there was no basis for arriving at the
new rent should the parties fail to agree. There was a blank — a hiatus. Some
implication, therefore, had to be made in that case. There were only two
alternatives: one was that the rent should continue at £1,250; the other was to
imply a fair market rent. This court very naturally preferred the second of
those two alternatives.
Buckley LJ, in
a very short judgment, put the point as follows:
It appears to
me that the introduction by implication of a single word in the clause in the
lease relating to the rent to be payable solves the problem of this case; that
is, the insertion of the word ‘fair’ between the words ‘such’ and ‘rent’. If
some such implication is not made, it seems to me that this would be a
completely inoperative rent review provision, because it is not to be expected
that the tenant would agree to an increase in the rent if the rent to be agreed
was absolutely at large. Clearly the parties contemplated that at the end of
five years some adjustment might be necessary to make the position with regard
to the rent a fair one, and the rent review provision with which we are
concerned was inserted in the lease to enable such an adjustment to be made.
The suggestion that upon the true construction of the clause it provides that
the rent shall continue to be at the rate of £1,250 a year unless the parties
otherwise agree would, in my opinion, render the provision entirely
inoperative, because, as I say, one could not expect the tenant voluntarily to
agree to pay a higher rent.
Here there is
no problem such as there was in Beer v Bowden. There is no need
to imply any term: indeed there is no room to imply any term, for clause 7
provides for the factors which are to be taken into account. Beer v Bowden
does not therefore help Mr Gordon. For the reasons which my Lord has given I,
too, would dismiss the appeal.
O’CONNOR LJ
said: I agree with both judgments that have been delivered. The appeal must be
dismissed.
The appeal
was dismissed with costs.
