London Borough of Hackney v Findlay [2011] EWCA Civ 8

This was the Court of Appeal hearing of an appeal on the issues raised in Forcelux v Binnie [2009] EWCA Civ 854 [Our report here], specifically the Court’s ability to set aside a possession order under CPR 3.1(2)(m) as opposed to the more restrictive provisions in CPR 39.3.

Briefly, Mr Findlay was the secure tenant of Hackney. There were rent arrears, amounting to some £1,500 all in, primarily because housing benefit was not in payment for some periods. There are disputed accounts of how Hackney approached this. Hackney brought possession proceedings. Mr Findlay asserts that the only notification of the hearing date he received was a letter from Hackney saying that there would be a hearing, but he did not receive the Court’s notification that he should attend. Mr F did not attend the possession hearing.

At the hearing – the first hearing – the DJ took it that Mr F could apply under s.85(2) Housing Act 1985 to vary any order made. On the asserted rent arrears, the DJ made an outright possession order. He noted housing benefit was now in payment and stated that ‘the order has been made on discretionary grounds’, presumably meaning the court considered it reasonable to make an order.

Hackney applied for a warrant, after the date of possession. Mr Findlay had, in the interim been sent a coupe of letters but their significance and whether they constituted a referral to an officer responsible for assisting with HB was disputed. There was also an interview, also of disputed meaning. Hackney’s evidence was that a letter informing Mr F of the date of eviction had been hand delivered.

Mr F was evicted on 6 July 2009, ending his ability to apply to vary the possession order under s.85(2).

On 13 July 2009, Mr F applied for re-entry, amended on 21 July to include an application to set aside or vary the possession order. DJ Armon-Jones heard the application. He considered the application to set aside first, on the basis that if it succeeded, re-entry followed. He held that the application to set aside succeeded on the basis that the DJ at the possession hearing had not been told that HB had been re-instated and had proceeded wrongly on the basis that the court’s powers were restricted to making a possession order or dismissing the claim. The matter had not been dealt with justly, and CPR 3.1(7) was invoked, enabling him to set aside the order under CPR 3.1. DJ Armon-Jones also ordered that Mr F should be at liberty to re-enter and the hearing of the possession claim was adjourned to a later date.

On the basis of the transcript of the possession hearing, now available, it was clear that DJ Armon-Jones was wrong to say that the first instance DJ had not been told HB was re-instated and was well aware of Mr F’s ability to apply under s.85(2). For these reasons, the Court of Appeal found that DJ Armon-Jones’ decision couldn’t stand. We’ll come back to this.

Hackney appealed to the Circuit Judge, by which time the decision in Forcelux had been handed down. HHJ Birtles QC accepted that Hackney had not mis-stated the amount of rent at the first hearing, but rejected Hackney’s grounds of appeal.

He held that Forcelux did not mean that the Court had to apply the requirements of CPR 39.3 to the exercise of discretion under CPR 3.9 (relief from sanctions). It was a matter of the Court’s discretion. He also held that there was no principle that “the power to set aside orders should be exercised far more cautiously in cases where the warrant has been executed, rather than before that state of affairs has been reached”. Accordingly, the DJ was not required to take into account whether Mr F had shown that he acted promptly, or had a good explanation for not attending the first hearing, or that that he [Mr F] had a reasonable prospect of success at trial. The matter was remitted for a further hearing on the possession. In the interim, Hackney agreed to Mr F re-entering  on the basis that he would not rely on the subsequent period of occupation to make a fresh application to stay a warrant under s.85 Housing Act 1985

Hackney appealed to the Court of Appeal on the issues of whether the CJ was correct to hold that the CPR 39.3 factors could be left out of account and whether it was relevant that the warrant had been executed.

At the hearing, or indeed subsequently, Hackney were unable to confirm the position on the arrears ‘due to the complexity of the housing benefit history’, but there had been a back payment of £1,252.32 in January 2010. Hackney maintained Mr F’s previous application for a backdate had been refused and not appealed.

The first issue was a) whether Forcelux had been decided per incuriam and b) how should discretion under CPR 3.1 to set aside a possession order in the absence of a party be exercised.

Hackney submitted that Forcelux was decided per incuriam because it had not considered Roult v Strategic Health Authority [2010] 1 WLR 487, which – briefly – held that the power under CPR 3.1(7) might not be justifiably exercised where the order was a final one and there were no grounds for a proper appeal, as there was no power for a judge to effectively hear an appeal from themselves even on the basis of erroneous information or subsequent events.

The Court of Appeal – in Lady Arden’s sole judgment – held that there was a compelling factor in Forcelux for setting aside the possession order (the ‘windfall argument’) but that that line of cases up to and including Roult relied upon by Hackney did not go to the key question of whether a first hearing of a possession claim was a trial for the purposes of CPR 39.3. Forcelux was not per incuriam.

On the issue of how strongly the factors in CPR 39(3) should weigh in a set aside under CPR 3.1, Hackney argued that, as a matter of policy, the test for setting aside a possession order should be tougher than that in Forcelux, as otherwise local authorities would face substantial difficulties and a loss of certainty if tenants could choose not to come to court but still easily obtain the setting aside of a possession order, even after eviction.

The Court held that there was a clear difference between the facts of Forcelux and those of the present case. In Forcelux the discretion had been framed as wide and unfettered, but on the facts of that case the Court had had to go no further. The presence of CPR 39.3 indicates that in situations where the Defendant does not attend the hearing at which the order is made, a different approach applies to the situation.

In a normal case where a party fails to attend a hearing at which a possession order is made, the discretion vested in the court is not ‘wide and unstructured’. In s.85(2) HA 1985 there is an indication that “Parliament contemplated that save in unusual circumstances the execution of a possession order should bring to an end the tenant’s rights, including the right to apply for an order under that subsection’. Further, the finality of litigation has long been a principle of public policy. A possession order forms ‘” proper basis for execution unless that is the tenant makes an application under s.85(2) in the period allowed by that provision”. As a corollary, challenges to orders should be by way of appeals. Lastly, CPR 39.3 makes clear that:

where a final order is made the defendant should have to produce a good explanation for not attending the hearing, that he acted promptly on learning of the order which he seeks to set aside, and that he should show that he has a real prospect of success in his defence. These requirements support the policy considerations to which I have referred.

So, in the absence of compelling factors such as those in Forcelux, (forfeiture on the the basis of non-payment of small amount of ground rent on a lease in that case), a Court that is asked to set aside a possession order should:

in general apply the requirements of CPR 39.3(5) by analogy. This is in addition to, and not in derogation of, applying CPR 3.9 by analogy, as this court did in Forcelux, as that provision requires the court to have regard to all the circumstances in any event. However, in my judgment, for the reasons given above, in the absence of the unusual and compelling circumstances of a case such as Forcelux, this court should give precedence to the provisions of CPR 39.3(5) above those enumerated in CPR 3.9.

However, for a secure tenancy, s.85(2) shows Parliament’s intention that a tenant should have the right to persuade the court to modify an outright possession order. It follows that:

the requirements of CPR 39.3(5) need not be applied in such a case with the same rigour as in the case of a final order that does not have this characteristic. (It is only fair to Mr Findlay to make the point that DJ Manners expressly had the possibility of a subsequent application by him in mind when she made her order). Accordingly, the court should not decline to exercise its power to set aside a possession order if in consequence the statutory purpose in s 85(2) would be defeated. Moreover, in my judgment the court can have regard to the wider social context in which these cases come before the courts. Accordingly, in deciding whether the tenant has a good reason for non-attendance the court can in my judgment have regard to the provisions of the Rent Arrears Pre-Action Protocol and to best practice among social landlords. It may conclude that, while in the ordinary case a defendant might have had no proper excuse for not attending a court hearing at which the possession order was made, given best practice of social landlords and the provisions of that protocol, a tenant is in fact able to provide an appropriate explanation. [para 24]

Where a possession order has been executed, this is also a relevant circumstance for the court to consider on a set aside application. The weight will depend on the circumstances of the case, but will likely be ‘highly relevant’ if the property has been allocated to another tenant or refurbishment works undertaken.

The second issue was whether the order of HHJ Birtles QC should be set aside.

On the transcript of the first possession hearing, DJ Armon-Jones order on the set aside must itself be set aside. HHJ Birtles QC erred in not ordering that and in not re-exercising the discretion under CPR 3.1 in accordance with the guidance given above. So his order on first appeal must be set aside.

Hackney then submitted, among other points, that it would be possible for the Court of Appeal to make a suspended possession order under s.85(2) to vary the original possession order, despite the execution of the warrant. Mr F submitted that the s.85 powers only applied before execution of a warrant, so once the set aside order had been quashed there was no power for the Court of Appeal to make an order fir suspended possession under s.85.  Although the Court did not make any such order, Lady Arden considered that Mr F was wrong on this, but, [in a frankly bewildering fashion], bases this on her earlier statement that a set aside of a possession order also sets aside execution and revives s.85 powers.

[NL – With all respect, this has to be an error. The set aside of the possession order had itself been set aside. The outright PO stood and with it the warrant. Mr F had an undetermined application to set aside. He might be in occupation but this was on the basis of an agreement not to use that occupation for further s.85 applications. In short, he might be in the property, but the position, given the Court of Appeal’s findings was as if the warrant had been executed. Unless I’m really missing something? Kerry Bretherton – for Hackney – if you read this, illuminate me…]

In any event, the Court of Appeal declined to re-exercise the discretion to decide the set aside application, although this was indeed open to it. There were matters at issue to be decided before Mr F’s application to set aside could be determined – the various factual disputes referred to above amongst them and also Mr F’s application to set aside on the ground of oppression. The matter was to be remitted to a district judge for hearing.

No issues were raised in the appeal on Article 8 and any such issues if relevant would be for the district judge to hear. [That has to be right – I can’t see Article 8 issues involved in the substantive issues in this appeal].

Appeal allowed.

Comment

To be entirely honest, I was tempted to describe this as ‘small storm in teacup, no serious injury’. Forcelux itself described the CPR 39.3 factors as factors ‘to be taken into account’ in the exercise of the CPR 3.1 discretion in such cases. At the time of Forcelux, my assumption was that the effect was only to remove the CPR 39.3 factors from being absolute requirements for a set aside, not to remove them from consideration. (I actually said so in the comments to our post, thank heavens).

However, the terms in which HHJ Birtles QC apparently dealt with the relevance of the CPR 39.3(5) factors suggest that it was wrong to presume that this would be the general view, so taking this case out of teacup territory.

The Court of Appeal here has stated that the 39.3(5) factors will ‘in general’ be applied ‘by analogy’ and then gone on to say this will be in the course of a consideration of all the circumstances and ‘wider social context’ and less rigorously in pre warrant secure tenancy cases. In short – the 39.3 factors are relevant to the 3.1 discretion, even highly so, but not absolute requirements.

Hackney’s full frontal assault on Forcelux – via the per incuriam argument and the ‘it’s not fair on local authorities’ argument  – failed. Forcelux remains good law.

We might also note that Mr F did advance arguments for the reason for his non-attendance and for prospects of success at trial. Delay – on the reported arguments here – is less clear. Whether his arguments are any good is now up to the DJ who hears the remitted case, but I mention this solely to make the point that his application was not devoid of address to the 39.3(5) factors.

So, size of tempest and tableware debates aside, this is a significant decision for anyone looking to set aside a possession order following non-attendance of the Defendant at first hearing, particularly so for secure tenants. It is also useful in clarifying the position on pursuing such an order post eviction. One can and one can seek an order under CPR 3.1 powers. But it may be tricky…