M approached MVDC with a view to letting her property in Dorking under the local authority’s rent deposit scheme. M was accepted for the scheme and she was introduced to a prospective tenant, Lisa Alexander. The property was let to Ms Alexander on 26th March 2007 and the property was repossessed on 9th June 2008, Ms Alexander having left a trail of devastation in her wake. M in evidence described the state of the property as disgusting: white goods and kitchen units were damaged, there were maggots in the wheelie bins, the shower room contained excrement and the carpets smelled of urine. In addition, Ms Alexander had left behind arrears of £2180.33. M calculated her out-of-pocket expenses to be £4860.27.

M’s case against MVDC was that the council had negligently misstated the worthiness of Ms Alexander as a prospective tenant. M described how she overheard a housing officer saying to Ms Alexander in a separate room: “we don’t want another Abinger.” Although M did not realise the significance of this at the time, it emerged that this referred to the condition in which Ms Alexander had left a previous property at 18 Abinger Close. This indicated that MVDC was well aware that Ms A was a problematic tenant.

The judge accepted M’s evidence that the council had given assurances to M that it would vet prospective tenants when she subscribed to the scheme, which meant M was entitled to assume that Ms Alexander would be a suitable tenant. The council had also misrepresented the state of Ms Alexander’s previous property in a letter of 8th April 2008, where they stated (falsely) that she had not left it in a filthy state. Despite the council’s claims of Ms Alexander’s confidentiality and data protection, the judge found that had they asked Ms Alexander for permission to disclose further details of her history, any refusal on Ms A’s part would have influenced M when deciding whether to let the property to her.

The judge found that it was reasonable to impose a duty of care on MVDC towards M, that MVDC had negligently misrepresented Ms A’s suitability as a tenant and that it was reasonable for M to be compensated for her losses, totalling £4860.27 plus interest of £1153.21 and small claims expenses.

Comment: although this is an uncommon case on its facts, the prospects of similar claims being made in the future are higher in the light of the enactment of the Localism Act and the ability of local authorities to discharge their homelessness duties by means of a private sector offer. I am not aware of any other local authorities who undertake to vet the suitability of accepted homelessness applicants-this would surely be too onerous a task even if they wanted to do it. However, the case may raise the stakes slightly when dealing with applications from the intentionally homeless.

Finally, many thanks must go to Matthew Hearsum of Morrisons Solicitors, who advised Ms Minter and kindly provided a transcript of the hearing.

 Saxon Weald Homes Ltd v Chadwick [2011] EWCA Civ 1202

Mr Chadwick had been given an AST by Saxon Weald as a ‘probationary tenancy’ on 11 August 2008. The tenancy agreement stated that if no steps for possession had been taken within 12 months, including service of notice requiring possession or notice seeking possession, it would automatically become an assured periodic  tenancy at that time. Otherwise, it would remain a periodic AST. THe clause also stated “if the tenancy converts to a fully assured tenancy, we will send you a letter confirming the change in status of your tenancy”.

There were allegations of anti social and aggressive behaviour against Mr C, who, it should be noted suffered from depression and mental health problems. His mother acted as his litigation friend in all subsequent proceedings. Despite attempts to address Mr C’s behaviour, there were further allegations. On 5 August 2009, solicitors for Saxon served both a notice seeking possession under s.8 and a notice requiring possession under s.21(4)(a) Housing Act 1988. Both notices were dated 7 August 2009 and required possession after 11 October 2009. The notice seeking possession was on grounds 12 and 14 HA 1988 and made clear that it was “served on the footing that the tenancy was an assured tenancy and that it did not apply if possession was sought on the “shorthold” ground under section 21″, so an alternative to the s.21 notice.

On 11 August 2009, Saxon (by a housing officer with authority) sent a further letter to Mr C. This letter said “I am pleased to inform you that following the successful completion of your one year starter tenancy, you are now an assured tenant” and listed the additional rights of an assured tenant.

ON 11 December 2009, Saxon began a possession claim, on the alternative grounds that Mr C had an AST and the S.21 Notice, or that he was an assured tenant and the s.8 Notice, grounds 12 & 14. Mr C, by his mother, defended on the basis that he was an assured tenant by way of the letter of 11 August, s.19A and Schedule 2A Housing Act 1988, and denying the alleged breaches and pleading reasonableness.

Mr C argued that the letter of 11 August constituted notice under Schedule 2A, which states:

1.(1) An assured tenancy in respect of which a notice is served as mentioned in sub-paragraph (2) below.E+W
(2) The notice referred to in sub-paragraph (1) above is one which—
(a) is served before the assured tenancy is entered into,
(b) is served by the person who is to be the landlord under the assured tenancy on the person who is to be the tenant under that tenancy, and
(c) states that the assured tenancy to which it relates is not to be an assured shorthold tenancy.
2. (1) An assured tenancy in respect of which a notice is served as mentioned in sub-paragraph (2) below.E+W
(2) The notice referred to in sub-paragraph (1) above is one which—
(a) is served after the assured tenancy has been entered into,
(b) is served by the landlord under the assured tenancy on the tenant under that tenancy, and
(c) states that the assured tenancy to which it relates is no longer an assured shorthold tenancy.
3. An assured tenancy which contains a provision to the effect that the tenancy is not an assured shorthold tenancy.

At the first instance trial, the DDJ found that the letter of 11 August 2009 had been sent in error and in ignorance of the notices served by the solicitors. He found that the AST could not automatically convert to an assured after 12 months by operation of the clause as notice requiring possession had been served. The letter of 11 August was not a notice but a ‘confirmation’ of an event which had not in fact occurred, so was of no effect. A possession order was made. The DDJ also found that if the alternative ground was required he would have made an outright possession order.

On appeal to the Circuit Judge, Mr C’s appeal was allowed. The Judge:

rejected the landlord’s argument that the letter of 11th August 2009 was of no effect. He found that it was a notice for the purpose of paragraph 2 of schedule 2A to the 1988 Act (as amended). He said that the letter was “quite plain on its face” and there was no room for another construction in the broader context. Accordingly, notwithstanding it had “not been the intention of other parts of the landlord’s operation”, the assured shorthold tenancy had been converted into an assured tenancy.

The Judge also ruled that the DDJ had given insufficient reasons for his decision to order possession as the alternative ground and remitted that part of the decision to the DDJ for further consideration. That was not part of this further appeal.

Saxon appealed. They were given permission on a number of grounds, of which the strongest was said to be mistake – that the 11 August letter was sent in error and was of no effect. However, at the full hearing Saxon did not rely on this ground (which had not been pleaded before the DDJ).

Saxon argued that

the Judge was in error in failing to give any, or any sufficient, weight to the context and background in which the letter of 11th August 2009 was sent. The Judge, he said should have asked in accordance with the test propounded in Mannai Investment Co. Limited v. Eagle Star Life Assurance Co. Limited [1999] AC 749 what that letter, set in context, would have conveyed to a reasonable recipient: and had he done so he should have found that the letter was not a notice under the 1988 Act (as amended) but simply an incorrect acknowledgement of a state of affairs that had never existed: because there never had been successful completion of the probationary one year tenancy. He submitted that, given the background, a reasonable recipient would at least have been in doubt as to what the letter intended to convey and so it was insufficient as a notice.

Mr C argued that the Judge was right, the letter was plain on it face and was clearly a notice satisfying the requirements of Schedule 2A. No process of construction under Mannai could come to a different conlcusion.

Held:
The Judge below was right. While the notice of 7 August may have had the effect of preventing the AST automatically becoming an assured tenancy, that did not mean that the 11 August letter did not make it an assured tenancy, by way of para 2 of Schedule 2A.

The letter of 11 August “naturally and objectively read” was clearly a notice for such a purpose, confirmed by the setting out of the rights acquired. The words “following the successful completion of your one year starter tenancy” in the letter of 11 August could not properly be read as linking back to the preceding history and notices so as to contravene the plain meaning of the letter.

Mr Glen [for Saxon] in fact seemed to assume that this tenant, and any reasonable recipient, would have taken it, given the background, that the letter could not have been intended to convert the assured shorthold tenancy into an assured tenancy. But a tenant ordinarily is not to be expected to enquire into, or think about, a landlord’s reasons for serving an otherwise unambiguous notice in connection with a lease. In any event, as Dame Janet Smith observed in argument, a tenant here might well think that the landlord had simply changed its mind from its previous indicated intention.

The case of Mannai involved an identifiable internal ambiguity within the notice itself. It is wholly different from the present case, where there is no such ambiguity. As the Judge below crisply pointed out, the mistake is not in the wording: the mistake is in the fact that the letter was sent at all.

Mannai endorsed the objective test of the validity of a notice set out in Carradine Properties Limited v Aslam [1976] WLR 442: “Is the notice quite clear to a reasonable tenant reading it? Is it plain that he cannot be misled by it?”

While Mannai held that “The fact that the words are capable of a literal application is no obstacle to evidence which demonstrates what a reasonable person with knowledge of the background would have understood the parties to mean, even if this compels one to say they used the wrong words”, this was of no assistance to Saxon, as there was no ‘alternative’ meaning to be found.

Neither were Saxon helped by Barclays Bank plc v Bee [2001] EWCA Civ 1126. In that case two notices had been sent in the same envelope, one (defectively) opposing a new tenancy and one ostensibly agreeing a new tenancy. In those circumstances, there would indeed be a doubt as to the landlord’s intentions in the mind of the reasonable recipient. But here the 11 August letter was sent separately and subsequently.

In addition, Bee had held that an ostensibly valid notice cannot be invalidated by reference to extraneous material, as a matter of interpretation. But that was what Saxon were seeking to do, effectively arguing that a prior statement of intention, even oral, could defeat a subsequent and unambiguous notice. As a matter of interpretation this could not be argued (save for viable arguments on estoppel) and would lead to unacceptable uncertainty. In any event, Saxon were not seeking to use the factual history to clarify the notice, but to try to make it unclear, which is where their argument failed.

Appeal dismissed.

The Court noted a further issue:

I should add that Mr Glen’s position [for Saxon] was that, by reference to the Tenancy Agreement in this case, an assured shorthold tenancy was capable of automatic conversion into an assured tenancy without the need for any further notice to that effect: he said that the provisions of this Tenancy Agreement complied with paragraph 3 of Schedule 2A for this purpose. Mr Living [for Mr C] disputed that: his position was that this Tenancy Agreement of itself could not give rise to such a result under the 1988 Act (as amended), and a subsequent notice under paragraph 2 of Schedule 2A was needed. There is room for debate here. Since, in my view, it is clear that a notice under paragraph 2 was given in this case it is neither necessary nor appropriate to enter into that debate on this appeal.

That strikes me as an interesting issue which may well crop up again, particularly given the increasing numbers of ‘starter’ ASTs.

Anyway, cut to the chase, HHJ Behrens again is the judge in Purdie and Bellwood v Miller, in the Newcastle Upon Tyne county court but he’s sitting there as a High court judge, I think.  We have the solicitor for Ms Miller, Diane Hall, to thank for the transcript in this case.  It is of an altogether different hue from the deep property law of the NEPB litigation; the arguments for Ms Miller are essentially seeking to unravel the contractual foundations of the agreement between herself and Purdie/Bellwood.  And they do so successfully, so for anybody interested (or obsessed like me) with this area of litigation, it is useful.  Somewhat unusually it also has to be said, Purdie was found to be an honest witness, who had continued to pay the mortgage on the property, and his evidence was preferred on three points of factual dispute at the trial.

So, the transaction was this.  Ms Miller couldn’t afford to pay her mortgage and ran up a couple of months’ arrears.  She found Purdie/Bellwood, trading as Dolphin Finance on that powerfully inadequate tool: the internet.  They agreed to a sale and rent back arrangement.  This was Dolphin’s first such arrangement and they “tailor made” it for Ms Miller.  In essence, Dolphin agreed to buy the property at market value (£82.5k); they would repay the mortgage and arrears; they would install full central heating in the property and redecorate it; they would pay all legal costs and pay Ms Miller £4k on completion; Ms Miller would get a three year AST at a below market rent of £228 which Ms Miller could afford, with an option to repurchase at the end of the three year period (having read the customer service agreement, I wasn’t entirely sure about the certainty of that term, but pass over that point) with a “gifted deposit” from Dolphin.

In a different document, Dolphin put: “We charge a £4,000 mortgage packaging fee payable to ACM Mortgage packaging [another of Purdie/Bellwood's companies], plus an additional fee of approximately £41,000 for property related costs”.  The £4k was to be repaid if Ms Miller decided not to exercise the option to purchase.  The £41k (which morphed into £41,200) was to be held in Dolphin’s bank account to cover the (undefined) deposit, all legal costs and other disbursements for property related maintenance.  Purdie and his dad (who appears also separately be involved in sale and rentback) were arrested by the cops.  That put paid to the partnership between Purdie and Bellwood, and they divided the assets of the partnership between them including the bank account (oops)

The matter proceeded to completion, Ms Miller being referred to a firm of solicitors who acted for her on the transaction (loosely speaking, as their initial letter “contained no advice about the nature of and effect of the transaction”, which seems odd to me, and the completion statement was, as HHJ Behrens noted, incorrect in three respects).  Most documents seem to have been prepared by Mr Purdie on the instructions of Ms Miller and sent to those solicitors.  The matter proceeded to completion.  The central heating was subsequently installed, although the allegation was that it had not been done properly (Category 1 and 2 hazards were found at the property) together with other defects.  After a kerfuffle, Ms Miller signed the tenancy agreement.

Subsequently, Ms Miller only paid one month of rent.  The first year’s rent was taken from the completion proceeds (and Ms Miller’s argument that this was supposed to be a rent free period was found against her).  The claim began as a simple possession claim on the basis of Grounds 8, 10, 11, but it was obviously more complicated than that.  Mr Purdie represented himself and Ms Miller was represented by counsel.  Her arguments were based on three grounds: misrepresentation; unconscionable bargain; breach of contract.  the misrepresentation line never got off the ground – it was clear that Purdie/Bellwood had properly explained the transactions to her and, as the sale had been at a market value, the unconscionable bargain line was never a runner.

It’s the breach of contract point which was, however successful.  first, as Ms Miller was not in a position at the end of the three years, she was entitled to the £4k payment to ACM Mortgage Packaging back.  As they say on that annoying ad, “simples”.  But what of the £41,200 retained for “property related costs”.  In HHJ Behrens view, it was implicit in the arrangement that if Ms Miller did not exercise her option, the balance would be repaid to her, so he implied a term to that effect on ordinary contractual principles.  Further, Ms Miller was entitled to an account of what happened to that money; Mr Purdie, on the back foot, was only able to provide one bill for £1800 for the central heating, and the heart of HHJ Behrens assessed that he had probably spent around £3k (if he had spent more, “he has only himself to blame for not keeping proper accounts”).  Dolphin had failed to keep the money in their bank account, so a breach of contract arose when it was distributed between Purdie and Bellwood.  Ms Miller was, therefore, entitled to £38,200, which was set off against the rent arrears, meaning that, in the absence of arrears, Ground 8 wasn’t a runner.

The sting in the tail was that Purdie brought the proceedings and was invited by HHJ Behrens to file a statement saying that Bellwood consented to the claim but he did not do so.  It was not necessary to express a view on the point, but HHJ Behrens’ view was that the lack of authorisation would have proved to be fatal to the claim.

This, and please bear with me here, was an application for leave to appeal a Circuit Judge’s trial judgment. It was also an application for an injunction to restrain enforcement of the trial judgment, originally made in the High Court. It resulted from a possession claim and disrepair and personal injury counterclaim that had, at some stage, involved a claim for judicial review and an application for permission to appeal the refusal of permission for review. All this out of what should have been a fairly straightforward claim and counterclaim.

The actual appeal deals with non-attendance at trial, the status of expert’s reports that don’t conform with CPR PD 35.3 requirements and the attention to be paid to an absent party’s evidence at trial.

Williams had let a house to Hinton on an assured shorthold tenancy for 6 months in April 2005. In August 2007 W issued a claim for possession. H counterclaimed, alleging disrepair under s.11 Landlord and Tenant Act 1985, s.4 Defective Premises Act 1972 and consequential personal injury. As the claim went on, H left the property so that the possession claim dropped away and the case proceeded on the counterclaim alone.

It is fair to say it did not proceed smoothly. W, in person not represented, defended on the basis that H had abused the property and any personal injury was nothing to do with W’s responsibilities. There were numerous abortive hearings, and a directions hearing in April 2009 following W presenting a medical certificate for non-attendance. There was also, somewhat astonishingly, an application for judicial review of the proceedings of the claim by W, issued in September 2008. That was refused in October 2008 and a renewed application for permission went to the High Court. This was apparently refused, but didn’t stop W sending to the County Court what was claimed to be an order of stay of execution (although of what as there had been no trial yet is not clear). This wasn’t actually a stay of execution. As the trial Judge noted:

What in fact the Williamses appear to have done is that they have certainly filed a Notice of Appeal and a further reconsideration of their application for permission to judicially review the original proceedings. So far as I am aware, there has been no stay of execution granted by any superior court. The last correspondence I have seen from the Civil Appeals Office of the Court of Appeal, which is dated 26th May, indicates that the Williamses made an application on 19th May seeking permission to appeal the decision to refuse permission to claim for judicial review and a stay of execution and an extension of time, and a reminder that they were to supply their documents to the Civil Appeals Office by 9th June. There is not, so far as I have seen…..a stay of execution which has been granted

This was in the context of the trial judge deciding to go ahead with the trial that had been listed for 29 June 2009. W had been notified of the hearing, but failed to attend. The Judge decided to go ahead in their absence as it was without explanation, there were no outstanding applications or stay orders.

The judge referred to witness statements by the Ws and three witnesses. He considered the Hs’ witness evidence, verified on oath at the hearing, and the report of a ‘single joint expert’, a surveyor and medical evidence on the injury alleged. He found breach of the repairing duty under s.11 and further that the personal injury was consequential. Damages plus interest of £12,096.71 were awarded, and costs to the Hs.

It was enforcement of this damages and costs order that the Ws sought to stay. But this was secondary to the appeal.

The Ws grounds of appeal were:

The Judge erred in deciding to determine the Respondents’ Counterclaim in the Appellants’ absence. In doing so, the Judge acted in breach of natural justice and/or contrary to Art. 6.1 of the European Convention on Human Rights (“ECHR”) and/or made findings no reasonable Judge could have reached on the facts. (“Ground I”)

Having decided to hear the case in the Appellants’ absence, the Judge erred in failing to ensure that the Appellants’ evidence and case was fully considered, contrary, inter alia, to Art. 6.1 ECHR and Van de Hurk v The Netherlands (1994) 18 EHRR 481, at [59]. (“Ground II”)

The Judge erred in treating Mr. Evans as a single joint expert and/or in permitting Mr. Evans’ report (“the report”) to be admitted in evidence despite the fact that the report did not contain a declaration in the form prescribed by the CPR in 35PD.3 (“the PD”). (“Ground III”)

They sought an order under to CPR 52.10.2 (a) setting aside the order of the Judge, together with an order pursuant to CPR 52.10.2(c), directing a new hearing.

On ground I, the Ws (now represented) argued that the Judge was wrong to exercise the CPR 39.3(1) discretion to proceed in the Ws absence. The correspondence before the court and the Ws past conduct of the claim should have shown the Judge that the Ws would intend to attend. Mr W had been gravely ill and this was known to the Court.

On ground II, the only reference in the Judgment to the Ws’ evidence was perfunctory and did not suggest a proper consideration. Even if the Ws’ witness statements did not constitute ‘evidence’ for the purposes of CPR 32.5 it was incumbent on the Judge to give it a proper consideration. Article 6 was engaged – pace Van de Hurk:

The effect of Article 6(1) is, inter alia, to place the ‘tribunal’ under a duty to conduct a proper examination of the submissions, arguments and evidence adduced by the parties, without prejudice to its assessment of whether they are relevant to its decision……

On ground III, Counsel for the Ws accepted during the hearing that the expert had indeed been appointed as an SJE by the Court. But the declaration was “not strictly in accordance with the prescribed and mandatory form, set out in the PD. The declaration contained in the report did not say that the report was his “true and complete professional opinion”. Accordingly, the Judge should have excluded Mr. Evans’ evidence; instead it had been central to his decision.”

The Court of Appeal held in Gross LJ’s sole judgment:

As a premliminary issue, the Ws had appealed, but had not made an application under CPR 39.3(3) to set aside the Judgment. CPR 39.3(3) reads

Where a party does not attend and the court gives judgment or makes an order against him, the party who failed to attend may apply for the judgment or order to be set aside.

The relationship between an appeal and an application under CPR 39.3(3) is not straightforward. It was recently considered in Bank of Scotland v Pereira [2011] EWCA Civ 241 where guidelines were set out.

Following that decision, the present case would appear to be a paradigm example where an application under CPR 39.3(3) should have been made.

The Ws argued that the appeal should still be considered and that it was not an abuse to have appealed rather than applying to set aside and the appeal had been made before Pereira. There were no ‘backdoor’ advantages to an appeal, if anything adducing further evidence would be easier via 39.3(3) and the Ws had been litigants in person.

The Hs argued that being a litigant in person was not a ‘get out’ clause and the Ws were experienced litigants. The Ws should not have appealed and had lost the opportunity to apply to set aside.

Held: This was a paradigm case for a 39.3(3) application. There were no special facts. Grounds I and II of the appeal fell naturally under 39.3 and while ground III didn’t, it was a very weak ground. However, given that the appeal had been made before Pereira had been decided, it would be considered on its merits, rather than procedurally ruled out. However:

i) It does not at all follow that in subsequent cases the decision (to entertain an appeal when the correct course was to apply by way of CPR 39.3) would be the same (as Lord Neuberger MR observed in Pereira, at [37], in the passage already cited). I take this opportunity of underlining the importance of Pereira in providing guidance for a litigant unhappy with a decision reached in his/her absence.

ii) I am firmly of the view that the mere fact that a litigant is a litigant in person (“LIP”) would not, at least ordinarily, constitute an “unusual fact” (within Lord Neuberger MR’s observations in Pereira at [37]), warranting this Court entertaining an appeal when the correct course was to proceed by way of CPR 39.3. It is one thing to make even generous allowances, as the Court invariably does, for LIPs; but there should not be one rule for LIPs and a different rule for those legally represented.

iii) There is nothing in the materials before this Court to support the submission that greater familiarity with the Welsh language, rather than English, gave rise to any difficulty in the present case; as Mr. Moffat in effect submitted, the Appellants betrayed ample familiarity with English in their various dealings with the court system. I should add that I am far from saying that a want of familiarity with English would or should, at least ordinarily, constitute an “unusual fact” for present purposes; the scope for abuse would be manifest not to mention the extra costs that would be entailed.

On Ground I of the appeal: The Ws had been informed by a letter from the the Judge 3 weeks before the trial date that what they had said was a stay notice was simply a notice of application and of no effect. Although the Ws had subsequently again written to the court about the claimed stay pending appeal, they had been sent clarification that it was no such thing. The Judge had done everything he could to inform the Ws that the hearing was going ahead and the Ws demial of having received the Judge’s letter was not plausible. The Judge was entitled to exercise his discretion to continue in the absence of the Ws. That the Court hadn’t answered the Ws’ letter sent after the Judges’ letter to them was neither here not there. The position was clear.

It was also an issue of policy, that the Court should be able to exercise case management powers robustly to bring a case to its conclusion. “neither the requirements of natural justice at common law nor Art. 6.1, ECHR, precluded [the Judge] from doing so. Were it otherwise, a recalcitrant litigant could stymie proceedings”. Ground I dismissed.

On Ground II: The Ws’ statements did not constitute evidence under CPR 32.5 as witnesses were not present and no hearsay notices had been served. The Judge was only obliged to consider evidence, but had in any event had considered the Ws’ statements and those of their witnesses, doing more than he was obliged to do.

There was no requirement on the Judge to set out in detail his view of the evidence of a party who had not attended, but he clearly had paid it attention.

Nothing in Article 6.1 suggests otherwise. The Judge had paid more than adequate regard to the “submissions, arguments and evidence adduced by the parties”. Ground II dismissed

On Ground III: while the expert had not used the precise phrasing in CPR PD 35, neglecting to say that the report was his “true and complete professional opinion”, there was a substantial declaration that he understood his duty to the Court and of his independence. While strict compliance with the PD was important, the expert’s declaration “substantially complied with the essence of the PD, even if he did not follow the precise wording”. The Judge was therefore not wrong to give weight to his report. Ground III and the appeal dismissed.

As thr appeal fell, so likewise the claim for an injunction preventing enforcement.

The question concerns the position of someone lacking capacity under the Mental Capacity Act 1985 when an independent tenancy is sought. There is conflicting guidance and threatening case law to deal with.

The starting point is that someone lacking capacity cannot enter into a binding contractual agreement, including a tenancy.

The frequent advice of local authorities and others used to be to say to, for instance, parents of adult children with learning disabilities, ‘sign on their behalf’. This was, of course, always bad advice – it would have resulted in an instant breach of the primary or principle residence requirement of an assured shorthold tenancy. But since the Mental Capacity Act 2005, it would be dreadful advice, as under the Act nobody is vested with the authority to enter into a contract on somebody else’s behalf unless a) they have a lasting power of attorney; b) they are appointed a property/affairs deputy by the court; c) the Court of Protection authorises the contract.

But none of these are easy options.A person without capacity can’t usually enter an LPA, and either of the other two options require a £400 fee, legal costs and a time consuming application to the Court of Protection. In a situation where a tenancy may only be briefly available, or someone has had to leave home or is leaving institutional care and needs a tenancy urgently, there may not be time. And of course, the fee and costs may not be affordable.

To add to the difficulties, there is competing guidance. The Court of Protection guidance on tenancy agreements from June 2011 states, pretty categorically:

If a person lacks the mental capacity to sign the tenancy agreement or terminate it, then anyone intending to sign on the person’s behalf can only do so if they are authorised to do so by the Court of Protection (unless the person had capacity to make a power of attorney and has done so)

While clearly this would be the most authoritative route, the problems with pursuing it have already been noted.

On the other hand, there is Department of Health guidance from March 2011 which states (at page 21/22)

In law, a tenancy taken on by someone whose lack of capacity is known by landlord is “voidable”. The person has the same rights as any other tenant and the same obligations unless the tenancy is voided. Only the tenant or someone acting on behalf of the tenant with the legal authority to do so (an attorney or a person / deputy appointed by the Court of Protection) can void a tenancy by showing that at the time the tenancy was taken on, the tenant did not have the capacity to make the decision and the arrangement was not in their best interests, When the tenancy is voided the tenant is no longer bound by the terms of the contract. Voiding a tenancy for lack of capacity is therefore possible at law, but it is rare that a tenant or their attorney, person / deputy appointed by the Court will decide to do this unless they wanted to stop the arrangement because if they did they would not have any right to remain in the property and would in practice simply be giving notice in the normal way. Therefore, the fact that the tenancy is voidable is unlikely to have any practical impact if the tenant is receiving proper support to manage their tenancy. They are entitled to Housing Benefit to pay their rent in the usual way regardless of their capacity.

My first thought was that this DoH guidance is right. It is pretty much given that a tenancy agreement, as with any contract, if entered into by someone who at the time lacked capacity is a voidable (not void) contract. It would only be voidable by the person who lacked capacity to enter the contract, thus the landlord could not use the tenant’s lack of capacity as a device to end the tenancy. Until such time as it is voided, the contract (or tenancy) continues with the obligations on both parties, including the rent liability, so housing benefit should be paid.

However, a 2011 decision of the Upper Tribunal on a housing benefit appeal makes this less straightforward. Wychavon District Council v EM [2011] UKUT 144 (AAC) (29 March 2011) concerned a profoundly mentally and physically disabled 20 year old adult. He rparents cared for her and had had a home specially constructed for her. This, with round the clock care had deeply stretched their financial position. They made a claim for housing benefit for the daughter for the home, in respect of rent which would in turn cover the mortgage. There was no Court of Protection authority in place at the time.

While the Upper Tribunal rightly found against a submission from the LA that a written tenancy agreement was required, the key finding was that:

A tenancy agreement requires two parties – the landlord and the tenant. Here the claimant was not, and was incapable of being, a party to any agreement. Regardless of her capacity to consent, she could not and did not communicate any agreement to the tenancy and I infer that she could never have been asked to. There simply was no such agreement, and therefore no liability to pay rent.

Following Hart v O’Connor [1985] AC 1000, the Tribunal found that

even if on the face of it there has been a contract, it is void if the one contracting party knew that the other contracting party lacked sufficient mental capacity to reach such an agreement, because the first contracting party would have been aware that the other party was not consenting to the agreement.

Commissioner Mesher’s decision in CH/2121/2006, and that of Commissioner Henty in CH/663/2003 distinguished as having, however problematically, been decided on the basis that there was a voidable contract, rather than a void one.

The real problem here is that Wychavon states that if the landlord is aware of the prospective tenant’s lack of capacity at the point the tenancy is entered into, it would be void rather than voidable. If it is, then no housing benefit would be paid. The difficulty the UT had in distinguishing the earlier Commissioners’ decisions is clear – falling back on the ability of the person without capacity to attend the hearing and ‘communicate to a degree’ to suggest that somehow they must have indicated willingness to enter a tenancy agreement that they actually had no power to enter and that the parents had entered on their behalf. Whether Wychavon is correct or not (see below) it has undone what appears to have been a discreet policy-based approach/nod and a wink to housing benefit for those lacking capacity.

Wychavon would therefore appear to present a real practical problem for those lacking capacity, their carers and landlords otherwise prepared to enter a tenancy agreement, but who face potential non=payment of housing benefit. Unless the landlord is unaware of the prospective tenant’s lack of capacity, the threat is a void agreement, not a voidable one.

I briefly toyed with some alternative arrangements, including a form of trust, but could come up with nothing that wouldn’t fall foul of the requirements of an AST.

This falls – to some degree – outside my practice and knowledge. I’m also, frankly, a bit too busy and knackered to head off to educate myself. But it is clearly a serious issue for many, including some of the most vulnerable individuals of all. I understand from Small Places that there are some anxious organisations trying to make sense of the situation.

So – questions:
1. Is Wychavon rightly decided? I suspect that it is – that knowingly entering a contract with someone who lacks capacity makes the contract void rather than voidable – but haven’t dug any deeper yet.
2. If it is, are there alternative arrangements that would give rise to a viable tenancy, but would not require an order of the Court of Protection?

Over to you…

[Update: 8/10/11.
Since the initial post and the comments below. I have now had a chance to work through the case law, in particular Hart v O'Connor and Imperial Loan Co v Stone [1892] 1 QB 599. I’ve also taken a look at CH/2121/2006 and CH/663/2003.

My view is that Wychavon is wrongly decided.

The position in common law and equity arising out of the Privy Council decision in Hart v O’Connor is that a contract with someone lacking capacity to enter such a contract is voidable (not void) by the person lacking capacity if the other party was aware of their lack of capacity.

If the other party was not aware of the person’s lack of capacity, the contract is not voidable on that basis, but only on the usual equitable grounds (fraud, misrepresentation etc,).

Judge Mark’s interpretation of Hart v O’Connor is in error in confusing ‘void’ and ‘voidable’. This leads to the great difficulty evident in the Judge’s efforts in distinguishing CH/2121/2006 and CH/663/2003.

To this extent, I agree with the DoH guidance and the advice the DWP received set out in Alicia’s comment below.

This was a renewed application for permission to appeal to the Court of Appeal on a second (or perhaps first- see below) appeal from the granting of a possession order. The ground of appeal was that the appellant tenant had a defence of proportionality which had not been considered by the District Judge and not considered adequately by the Circuit Judge in dismissing the first appeal.

Mr H had a starter tenancy (or AST) from West Kent Housing Association, an RSL/PRPSH. In January 2010, the RSL had a meeting, described as a re-hearing – at which it was decided not to extend or renew the tenancy, but instead serve notice. This was in the context of a complaint by a neighbour about ‘an act’ by Mr H that she saw through her door. The meeting notes suggested that it was difficult for the RSL review panel to reach a decision about what had happened, but on the balance of probability, they went with the neighbour. Mr H had and continues to deny the event occurred.

Thus possession proceedings cane before the Dartford County Court. At first instance, which was before either Manchester City Council v Pinnock [2010] UKSC 45 or Hounslow London Borough Council v Powell [2011] UKSC 8 were handed down, the District Judge did not consider proportionality at all and a possession order was granted.

There was then an appeal to HHJ Simpkiss.

Mr H “is a young man of 21 years old. He is insulin dependent and he is now married and has a child. Because of his insulin dependence, which has been with him since birth, he is vulnerable and it is said that he has suffered certain cognitive and comprehension difficulties. The result of the possession proceedings will be that he will become homeless and will therefore have to apply to the local authority for housing on the basis that he is homeless, and an issue will then arise as to whether he has become intentionally homeless.”

This was raised before the Circuit Judge. There had been no public law challenge to the review decision-making process, but it was raised that the decision was flawed.

The Circuit Judge held that there was no prospect of a successful challenge to the review process. The only signficant points raised were that Mr H denied the allegations and that the police had not considered them proveable to the criminal standard. However, these were not the issues that the RSL faced.

On proportionality, the CJ acknowledge that Mr H was vulnerable.

He noted that allegations had been made about his conduct in fact on several grounds, indecent exposure, intimidation of a neighbour and affray, and he also noted that the appellant denied all these allegations. The judge then referred to the speech of Lord Hope [in Powell] in which Lord Hope held that in relation to proportionality there was a high threshold before it could be argued, and it had to be seriously arguable before it could be raised before the judge. Proportionality in this context means a proportionate means of achieving a legitimate aim, and the court had to recognise that the local authority was likely to be in a better position than a court to assess whether there were good management review reasons for seeking the order. Ordinarily the local authority did not have to explain or justify its reasons for seeking a possession order to which it was entitled.

The CJ futher noted Lord Neuberger’s statement in Pinnock that it would only be in the exceptional case that Art 8 proportionality would be even arguable. Further, the local authority (here RSL) should be assumed to be acting in accordance with its duties.

The judge held that it was not necessary for the court to investigate whether the allegations relied on were correct. There had to be something put forward on behalf of the defendant to raise issues as to whether the decision to take possession was one which could stand and was lawful. In the present case there was a disagreement about the internal appeal process, but at the end of the day the judge was satisfied that, even though the events had occurred earlier in the tenancy, they were material which the local authority could take into account. There was an internal procedure and that procedure was followed.

There were no serious arguments to be determined before making a possession order and this was not an exceptional case. He dismissed the appeal.

Permission to appeal on the papers was denied. On renewed permission to appeal, Arden LJ accepted that arguably this should be treated as a first appeal, the DJ having reached a decision before the relevant judgments in Pinnock and Powell, so that the CJ’s decision was the first on proportionality.

Mr H submitted that this case was analogous to that of Powell in Powell v Hounslow. Ms Powell was facing possession from temporary accommodation due to rent arrears, apparently due to issues with or failure to make housing benefit claims. She was given permanent accommodation before the Supreme Court hearing, but Lord Hope stated that, if there had been a live issue it would “have been preferable for her to be given an opportunity for the proportionality of the order to be considered in the light of her personal circumstances”. If evicted Ms Powell would have been homeless and entitled to make a homeless application. There would have been a duty because of her children [For some reason, intentional homelessness was not raised by counsel for Mr H, or at least it is not referred to by Arden LJ]. Mr H would be similarly vulnerable and in priority need but would be found intentionally homeless if evicted.

Arden LJ found that the case was not particularly analogous to Powell. There had been a review in this case and, unlike this case, there was the potential solubility of Ms Powell’s rent arrears through HB. Further, the landlord in this case was not a local authority with a prospective Part VII duty.

Further, the Court must star from the postion that the landlord had fulfilled its duties when it concluded that the evidence of the neighbour was to be preferred and that it had to take into account its duties to other tenants.

The CJ had considered proportionality, but his decision should be considered on the basis of a first appeal.

The decision at the appeal hearing did not seem to me to consider Mr Haycock’s conduct since the incident complained of or his vulnerability and allied personal circumstances. It must be arguable whether a registered social landlord is to be treated as in a different position from a housing authority under a housing duty. Therefore those issues seem to me one which can properly be considered as at the second stage. In other words it seems to me, in the particular circumstances of this case, that it is just about arguable that the proportionality of the making of a possession order should have been considered by the judge because there were factors which had not been taken into account, namely whether his conduct since the start of the tenancy had been of a different order and the question of whether given that he would be likely to be homeless and might be intentionally homeless as a result of the finding on disputed allegations.

Permission reluctantly given.

Comment
The ‘interim’ decision to effectively treat this a first appeal, given the timing of Pinnock etc. is interesting, but surely now of limited applicability.

Still, this one will be worth watching. Partly because the landlord is an RSL and it wil be interesting to see how the Court of Appeal approach housing management in an RSL rather than a local authority, prima facie. Also because – as should be clear from the passages cited above (and there were more) – both the CJ and Arden LJ seem to get themselves into a terrible tangle over whether the fact that a landlord body might have a Part VII housing duty would make any difference to a proportionality defence. I can’t see why it would or indeed should, but this may be unfair on the basis of what was clearly an ex tempore judgment.

As to the defence, it is hard to say on the brief basis of this permission judgment.

Certainly it would have been stronger with a combined public law defence to the decision to seek possession – and this appears to have been confused by Arden LJ and perhaps the CJ with a challenge to the review procedure on standard public law grounds (flawed, considering irrelevant info or not considering relevant info, irrationality etc.).

From this brief permission decision it is impossible to tell if a full gateway b challenge was raised below (i.e. the decision to evict being one no reasonable person would consider justified in the circumstances, including Mr H’s personal circumstances). But as this appeal is now proceeding on proportionality alone, this is an all or nothing defence, as we noted in discussing Hounslow v Powell.et al

First, in the High Court:
Suurpere v Nice & Anor [2011] EWHC 2003 (QB)

Ms Suupere was an assured shorthold tenant of the Defendant, of part of a house. The tenancy began on 6 January 2009. Rent was £300 per month, with a deposit of £500 paid to the landlord. The landlord was described by the Judge as ‘inexperienced’.

Relations between Ms S, other tenants and the landlord became difficult. On 11 May 2009, Mr N served a ‘notice to quit’ on Ms S.  This was invalid, not being in the prescribed s.21 form or providing two months notice. On 18 May 2009 a further notice was served, giving two months, but back dated to 11 May 2009. On 12 June 2009, Mr N fixed a ‘notice of eviction’ to the front door, which was, of course, no such thing. On 15 July 2009, Mr N brought possession proceedings in Guilford County Court, relying on the backdated notice. This claim was later stayed.

On 20 July 2009, following a letter from the CAB, Mr N transferred the deposit to the DPS scheme, but no prescribed information was sent to the tenant (nor was the need to do so mentioned in the CAB letter). Ms S did receive information from the DPS about the deposit having been protected.

On 10 August 2009, Ms S issued proceedings claiming for return of the deposit and the 3 x penalty, as well as, later,  unlawful eviction (unsuccessful) and breach of quiet enjoyment (successful). On 14 August, she left the property, allegedly after harassment.  The deposit was returned to her in full on 1 September 2009. Mr N defended the claim saying that the deposit was protected and ‘required information provided’ once they had been told about the requirements of the scheme by Guildford BC. The deposit had been returned in full and there was only ‘an innocent technical breach’.

At the hearing in June 2010, the Circuit Judge relied on Draycott & Draycott v. Hannells Letting Limited (trading as Hannells Letting Agents) [2010] EWHC 217(QB) and found that, as the deposit had been protected prior to the commencement of proceedings, s.214(4) Housing Act 2004 penalties did not apply.

On appeal, Ms S argued that, while the deposit was protected prior to the issue of proceedings, the prescribed information which was required to be provided under s.213(5) & (6)(a) had not been complied with prior to issue or before the hearing of the claim. The Claimant’s claim raised non compliance with s.213(6)(a) so s.214 was enagegd and the penalty order should have been made. Tiensia v. Vision Enterprises Limited(Trading as Universal Estates): Honeysuckle Properties v. Fletcher and Others [2010] EWCA Civ. 1224 relied upon – para 37.

The Respondents argued that:

they transferred the deposit on 20 July 2009; that they gave the Appellant full details of registration of the deposit on 21 July, confirming the deposit reference number and providing details of the DPS website; and that they had complied with their duty to provide information as required by the Act and the 2007 Order. Alternatively, if they are wrong about that and they did not comply, then they contend that they were not required to supply the Appellant with the prescribed information after they had returned the deposit to her on 1 September. They state that the purpose of these statutory provisions is to protect tenants from unscrupulous landlords. They argue that a tenant who has had information provided about the deposit and has then had the deposit returned in full does not require protection. It would have been futile for them to have given particulars of the scheme to the Appellant between 1 September 2009 and 1 June 2010, the date of the hearing of the Appellant’s claim under s. 214, by which time the deposit was no longer in the scheme.

The High Court, Mrs Justice Cox DBE, held:

Following Sharp J in Potts v Densley and Pays [2011] EWHC 1144 (QB), it will make no difference to the landlord’s statutory obligation to provide the prescribed information if, by the date of the hearing, the tenant’s deposit has been repaid.

The letter from the DPS that the claimant/appellant had received did not provide all the information required by the 2007 prescribed information order and it was not enough for the Defendants to say that the information was available on the DPS site. The landlord was obliged personally under the Housing Act 2004 to provide the information.

On representations made after the hearing but once Gladehurst Properties Ltd v Farid Hashemi (on behalf of himself and Matthew Johnson [2011] EWCA Civ 604 had been handed down, the Defendants/Respondents argued that the tenancy had ended when Ms S left the property on 14 August 2009, so, following Hashemi, it was not open to the Court to make an order under s.214.

However, it was not at all clear that the tenancy had ended at that time [paras 61-62]:

there is no evidence to support the submission that the tenancy came to an end when the Appellant left. It was not in dispute in Gladehurst that the tenancy had terminated. However, the Appellant in the present case did not accept that her tenancy had been determined because she brought a claim for wrongful eviction, claiming that she was forced to vacate as a result of the Respondents’ harassment.

Nor is there any evidence to show that she had surrendered the tenancy. The Respondents issued and pursued a claim for possession, which was stayed by Judge Reid pending determination of the Appellant’s claim for damages, and which therefore remained outstanding as at the date of the hearing. In fact, Judge Reid found that the Notice to Quit was defective in this case because it did not provide the Appellant with two months’ notice, as required by s.21(1) of the Housing Act 1988. It is perhaps unfortunate in the circumstances that he did not deal with both claims together and decide the issue of determination of the tenancy before going on to consider the Appellant’s claim in respect of the deposit.

In short, the Appellant’s tenancy had not been lawfully determined as at the date of the hearing. So Hashemi did not apply.

The Judge below should have ordered the payment of the 3 x penalty under s.214(4). Payment of £1,500 ordered.

We only have a short note from the Garden Court Housing Bulletin on the second case, which was a refusal of permission to appeal to the Court of Appeal. I’ve not been able to find a transcript.

Owolabi v Bello [2011] EWCA Civ 881
29 June 2011

The claimant landlady sought possession and arrears of rent. The defendant assured shorthold tenant counterclaimed for damages for unlawful eviction and harassment and for a penalty of three times the deposit (which had not been protected). At trial the judge gave judgment for £2500 rent arrears but on the counterclaim awarded £13,000 damages and repayment of the deposit (£220) and a penalty of three times that amount (£660). The Court of Appeal dismissed the landlady’s renewed application for permission to appeal because it simply amounted to an attack on the judge’s findings of fact based on his having taken a dim view of the landlady’s credibility.

Selective licensing is, in short, a mechanism whereby authorities can require landlords to obtain licenses before being allowed to let property. Before making a designation, the authority must take reasonable steps to consult persons likely to be affected (s.80(9), Housing Act 2004) and (as the law stood at the relevant time), obtain the consent of the Secretary of State. The Secretary of State has published guidance on the level of consultation that should take place and what he would expect authorities to do before bringing in a designation. For a full review of the background, see our previous posts, where David Smith sets it all out in rather more detail.

Anyway, back to the case – in 2008, Hyndburn decided to introduce a selective licensing scheme. Their consultation exercise consisted of a questionnaire about local problems (do you have a problem with noisy neighbours, should bad things happen to bad people, etc) and didn’t, for example,

(i) contain any firm details of the boundaries of the proposed designation;

(ii) contain any details of the proposed license conditions or fee structure;

(iii) give any reasons why the authority considered that selective licensing was a good idea.

There was about an 11% response rate to that questionnaire which (unsurprisingly, given the vanilla nature of the questions) indicated broad support for anything that would stop bad things happening (really, it is as bad as that).

The authority then applied to the Secretary of State for approval of the designation. Sadly, the information provided to the SoS was, to put it neutrally, somewhat less than wholly accurate. The SoS was told that the consultation results were published online (they weren’t) and that various methods of consultation had been used in addition to the questionnaires (which wasn’t true). The SoS then confirmed the designation and, in response, six landlords issued proceedings seeking to quash it.

The arguments were threefold. Firstly, it was said that there simply had been no consultation within the meaning of s.80(9) and the guidance – that required there to be a specific proposal, with boundaries, a fee structure, etc which was consulted on. Secondly, it was said that the passage of time between the 2008 consultation and the designation was so long that the results had become stale. Finally, the authority were said to have misled the SoS.

The claim was allowed on all three basis. Section 80(9) did require much greater detail than had been provided; the boundaries of the scheme, the licence conditions, the reasons for considering it necessary were all matters that should be put to consultees for their comment. Whilst the ‘stale’ point might not have got anywhere itself, when seen in context, it was clear that the limited consultation exercise that was actually carried out might have had only a limited shelf-life and the authority should have had regard to this fact. Finally, the misleading information provided to the Secretary of State further undermined confidence in the consultation exercise.

The designation was therefore quashed.

Quite a useful little case, I suspect, as it puts some flesh on the bones of s.80(9), 2004 Act, and now tells authorities what sort of information needs to be provided during the consultation process. And, of course, reminds them of the need to tell the truth…

This is an appeal concerning s1(3A), Protection From Eviction Act 1977. This subsection was inserted by the Housing Act 1988 and was intended to fix a problem with s1(3). S1(3A) reads:

Subject to subsection (3B) below, the landlord of a residential occupier or an agent of the landlord shall be guilty of an offence if—
(a)he does acts likely to interfere with the peace or comfort of the residential occupier or members of his household, or
(b)he persistently withdraws or withholds services reasonably required for the occupation of the premises in question as a residence,
and (in either case) he knows, or has reasonable cause to believe, that that conduct is likely to cause the residential occupier to give up the occupation of the whole or part of the premises or to refrain from exercising any right or pursuing any remedy in respect of the whole or part of the premises.

The new subsection dealt with the difficulty in s1(3) that it contained a requirement that the prosecution show an intent by the accused to make the occupier give up possession or refrain from exercising a right. It had proven difficult to demonstrate the necessary intent in practice. S1(3A) resolved the issue by simply removing the intent component of the offence.

The facts of this case were simple. Q or his niece owned a property. The exact ownership was unclear but Q was the landlord and had control of the premises. It was subdivided into bedsit style accommodation, one of which was let to a couple. A two month notice to quit was served which was defective, however on expiry of the notice Q’s son visited the property with 5 other men and demanded that the occupiers leave. One of the men had a knife and various threats and racially abusive comments were made. Without going into detail the harassment continued despite the intervention of the local authority’s housing options team who explained the occupiers rights in a letter.

Crucially, there was no evidence offered that Q himself had actually carried out any of the actions himself, they had all been carried out by his son or other members of the family. There was also no evidence offered that Q had procured the harassment or encouraged it to continue. It was this that became fatal for the prosecution case.

The case was dismissed in the Peterborough Crown Court at the conclusion of the prosecution evidence on the basis that it disclosed no case to answer. The prosecuting local authority appealed and the case came before the Court of Appeal.

Laws LJ gave judgement on behalf of all three justices.

Essentially the question before the Court was whether s1(3A) allowed a landlord to be “vicariously liable” for the actions of others. It was held that s1(3A) specifically stated that the offence was committed by “the landlord … or his agent”. This wording implies that Parliament intended a separation between the two parties and that if the agent committed the offence then the landlord would not be guilty. Additionally, the wording of s1(3A)(a) uses the phrase “does acts” which implies a direct action by a party as opposed to by another. Finally, the offence requires knowledge, or at least a “reasonable cause to believe” which implies a state of mind by the accused.

The Court was at some pains to stress that their decision did not mean that a landlord could not be found guilty if there was evidence of joint enterprise or incitement or he was a co-conspirator. However, no evidence of that had been offered in this case and the appeal was dismissed.

This is a frustrating case as it now gives landlords a potential way out of unlawful eviction and harassment claims where they get someone else to do the dirty work. However, it should never really have happened and probably would not have done if the prosecutor had properly applied his basic legal training, properly deconstructed the offence, and set about proving each element.

It now falls to Parliament to reconsider the Act if this loophole is to be closed. In the meantime everyone should be aware that a landlord is potentially only liable for unlawful eviction and harassment claims and prosecutions if evidence is adduced which actually fixes him or her as a party to the actions complained of.