Archive

Second time around

Published
by
J
on 23 October 2008
in Housing law
. 0 Comments

Truro Diocesan Board of Finance Ltd v Foley [2008] EWCA Civ 1162

In March 1987 Mr Foley became the tenant of a property owned by the predecessor in title of the Board. In 2000, the Board sought possession of the property. They contended that Mr Foley was a protected shorthold tenant (within the meaning of s.52 Housing Act 1980). Mr Foley resisted the proceedings and contended that he was in fact a Rent Act tenant.

The proceedings were settled on 20 September 2001. It was agreed that Mr Foley was a protected shorthold tenant. It was further agreed that Mr Foley would give up possession of the property within 6 days, spend a minimum of 24 hours out of possession and, on 27 September 2001, that he would be granted an assured shorthold tenancy of the same property. That assured shorthold tenancy would be for a fixed term of 5 years. This agreement was contained in a deed. Mr Foley duly gave up possession.

In April 2006, the Board served a notice under s.21 Housing Act 1988, seeking possession on the last day of the five year term. Mr Foley again defended the proceedings and, again, claimed that he was a Rent Act tenant. His defence failed in the county court and he appealed to the Court of Appeal.

Mr Foley argued that in general terms, it has not been possible to create new Rent Act tenancies since 15 Jan 1989, when the assured tenancy provisions of the Housing Act 1988 came into effect. However, this general rule is subject to exceptions. One of those exceptions is found in s.34(1)(b) Housing Act 1988. That provides that:

(1) A tenancy which is entered into on or after the commencement of this Act cannot be a protected tenancy unless…

…

(b) it is granted to a person… who, immediately before the tenancy was granted, was a protected tenant or a statutory tenant and is so granted by the person who at the time was the landlord… under the protected or statutory tenancy

Mr Foley relied on s.45 Housing Act 1988. This provides that, except where the context otherwise requires, a tenancy includes an agreement for a tenancy. Hence, the settlement order of 20 September 2001 was, actually a grant of a new tenancy and, by virtue of s.34(1)(b), it was a protected tenancy.

The Court of Appeal, with some reluctance, did not accept this argument. They took the view that the “context otherwise require[d]” that, in s.34, a tenancy could not include an agreement for a tenancy. The language of s.34 as a whole suggested that it was dealing with tenancies which had actually been granted and not merely agreed.

Mr Foley had a second string to his bow though. He argued that the settlement of 20 September 2001 was itself a tenancy, following Walsh v Lonsdale (1882) 21 Ch D 9. At this time, he satisfied the requirements of s.34(1)(b).

The Court of Appeal was similarly reluctant to reject this argument, but reject it they did. One had to consider the actual intentions of the parties at the time that they entered into the settlement on 20 September 2001. They intended that the new tenancy arise on 27 September 2001, not 20 September 2001. Hence this point failed as well.

Mr Foley then sought to argue that the 24 hours between the surrender of his old tenancy and the grant of his new tenancy were irrelevant when considering whether or not “immediately before the [new] tenancy was granted” he was a protected tenant. The Board relied on Dibbs v Campbell (1988) 20 HLR 374 and Bolnore Properties Lrd v Cobb (1996) 29 HLR 2002, as authority for the proposition that the 24 hr break between the tenancies was sufficient to mean that the new one did not follow immediately after the old one. Again, the Court of Appeal rejected Mr Foley’s argument (albeit by 2 to 1 - Sir John Chadwick dissented on this point).

The Human RIghts Act 1998 did not help him either. Kay v Lambeth LBC [2006] 2 AC 465 made clear that it was only an exceptional case where domestic law would not provide sufficient protection for Art. 8 purposes. Although Kay was about social housing, the logic applied equally to the private sector. McCann v UK (App. No. 19009/04) took matters no further and, in light of the criticism of that case by Lords Scott and Hope in Doherty v Birmingham CC [2008] UKHL 57, it added nothing to the general law as set out in Kay.

So - a clean sweep for the Board. There probably isn’t much of lasting value in this case - the facts are so unusual and there are so few protected tenants left. However, the discussion of Kay, Doherty and McCann might have some wider impact. This was the first time that the Court of Appeal grappled with Doherty and they’ve clearly decided that it adds nothing to Kay. Landlord lawyers will no-doubt seize on paras 33 and 34 to do down human rights arguments but I don’t think anyone would seriously contend that this is the end of the road for McCann based arguments.

Andrew Arden QC and Iain Colville, instructed by Michelmores LLP for the Board

David Watkinson, instructed by Cartidges for Mr Foley

Mortgage possessions protocol

Published
by
Dave
on 23 October 2008
in Housing law
. 10 Comments

The Civil Justice Council has finally published the “Pre-action Protocol for Possession Claims based on Mortgage or Home Purchase Plan Arrears in in Respect of Residential Property” and have done so with an array of press releases (CJC here, HM Treasury here). It comes into effect on November 19. The PM heralded it at question time in the Commons (as to which, see further below). It has considerable potential to go well beyond what has already been announced in terms of support for home owners (eg new rules on support for mortgage interest), but, unless my printer hasn’t printed it out correctly and my computer says no, it doesn’t match that potential. The suspicion must be that, behind the scenes, the parties were playing a lobbying game to reduce its significance - the final version bears little resemblance to the original consultation draft. It’s a toothless dragon.

Why was a protocol needed? Anybody who has acted for a borrower will know anecdotally that lenders have been notoriously slow and unwilling to make arrangements with borrowers, which could go some way to ameliorating the borrowers’ predicament. That chimes with what is “known” more generally about lenders’ practices.

The protocol sets out a set of pre-action principles to be followed prior to bringing a possession action. Importantly, it applies not just to first mortgagees but also second charge mortgagees and the much-maligned sale-leaseback schemes where no interest is paid (para 4.1). So, coverage is broad, which is good. The parties must “act fairly and reasonably with each other in resolving any matter concerning … arrears” (para 2.1(1)) and, as expected, the protocol encourages more pre-action contact between the parties to reach an agreement or to use the court’s time more effectively (para 2.1(2); also para 7.1). There are the usual information sharing requirements and requirements on lenders to advise borrowers to go to the local authority housing department. Additionally, there are provisions requiring lenders to consider reasonable requests from the borrower for a change of payment date (para 5.4); to respond promptly to (but notably not a requirement to consider) a borrower’s proposal for payment (para 5.5) and, if it issues a counter-proposal to give the borrower sufficient time and detail to enable it to be considered and understood (para 5.6). The parties should

take all reasonable steps to discuss with each other, or their representatives, the cause of the arrears, the borrower’s financial circumstances and proposals for repayment of the arrears. (para 5.2)

The lender “should consider” not commencing proceedings where the borrower has applied for mortgage insurance, has a “reasonable expectation of eligibility”, and can cover the excess (para 6.1). The protocol reflects existing CA learning by suggesting that lenders should hold off proceedings if the borrower has taken steps to try and sell the property (paras 6.2-4; and see eg Bristol & West BS v Ellis (1996) 73 P&CR 158). The lenders should also consider holding off proceedings for possession where the borrower has made a claim to the FOS (although it does not need to do so in theory: Mobil Oil v Rawlinson (1981) 43 P&CR 221). where it does not do so, it “should give” notice to the borrower with reasons.

Well, all of this is so hedged around that its practical enforcement is likely to be rather difficult. Even so, it is the silences as always which are significant. And the particular silence concerns the effect of non-compliance. At para 9.1, the following sanction applies:

Parties should be able, if requested by the court, to explain the actions that they have taken to comply with this protocol.

There are, no doubt, gasps at the horror of such a sanction from a lender (more likely from their representative at court) but the sanctions in the consultation draft have been written out of the final version. There is no specific costs sanction as in other pre-action protocols. There is no suggestion that the court can adjourn, strike out, or dismiss the claim as a result of non-compliance, as in the pre-action protocol on rent arrears. There are, of course, the usual general sanctions for non-compliance with protocols in CPR 3.1 and the practice direction on protocols, but it should be remembered that the lenders’ entitlement to costs is most often contractual and not subject to the discretion of the court other than in amount. It has been pointed out to me by another member of the team that it is possible to challenge the lender’s contractual entitlement through the Unfair Terms in Consumer Contracts regs, which, if successful, would bring you within the court’s discretion on costs.

Gordon Brown, in PMQs, said:

New guidance will be given to the judiciary to halt or adjourn court action on repossessions unless alternative options that help the home owner, including extending the terms of the mortgage, changing the mortgage type and deferring payment, have first been fully examined. We are determined to do everything that we can to help home owners avoid repossessions.

I don’t see it, though, in the pre-action protocol (even the Guardian correctly reports the pre-action protocol: here) - maybe he’s referring to the statutory powers under the AJA or perhaps other judicial guidance. Indeed, taken as a whole, the requirements on lenders in the pre-action protocol are not particularly significant as suggested above. The press releases certainly don’t go as far as Brown, noting generally that possession proceedings should be a last resort and that claims shouldn’t normally be made when a settlement is being explored. The CJC press release makes the following point about the purpose of the protocol:

It is designed to encourage parties to exchange information at an early stage, to encourage early settlement of cases or where that cannot be avoided, more efficient case management. It does not alter parties existing rights and obligations.

This effectively repeats the FSA’s Mortgage Code of Business rule 13.3, concerning dealing with customers fairly which deals with pretty similar requirements to those in the pre-action protocol (note 13.3.2(1)(f), which suggests that, where a repossession occurs before all reasonable steps have been taken, this will be evidence of a contravention of the rule of fair dealing in 13.3.1).

I wouldn’t want to suggest that those acting for borrowers in mortgage possession proceedings can’t seek to use the pre-action protocol in their favour, but they will have to be creative in so doing, perhaps also using the MCOB as the basis for a legitimate expectation challenge (although pursuing that will have its own challenges).

One basic question remains: why should lenders be treated differently?

A cautionary tale

Published
by
NL
on 22 October 2008
in Housing law
. 0 Comments

Or the story of the warrant request that wasn’t there.

Hallam-Peel & Co v London Borough of Southwark [2008] EWCA Civ 1120 is a second appeal from a wasted costs order against Hallam-Peel, a legal aid housing firm, made during stay of warrant proceedings at Lambeth County Court.

Hallam-Peel were acting for the applicant. Before and at the first hearing, an question was raised about whether the warrant had been applied for within 6 years of the date of the possession order (hence not needing permission). Counsel for the applicant was apparently told or shown (not clear) that the request for the warrant was made within time. The hearing was adjourned due to lack of time. Hallam-Peel amended the application, with no issues about the validity of the request for the warrant raised. They also requested disclosure of a number of documents from Southwark, including any Southwark intended to rely on. Southwark provided disclosure, which didn’t include the request for the warrant, which had not been specifically requested.

At the adjourned hearing Counsel for the applicant (the same counsel) apparently had a rush of blood to the head and, for unexplained reasons, demanded to see the request for issue of the warrant (which he may or may not have seen at the first hearing). On seeing it, Counsel decided that the fact that it showed a wrong (lesser) figure for the outstanding arrears meant that he wished to include an additional point in the application - that the request was defective for this reason. He therefore requested a further adjournment to allow the application to be amended again. Counsel for Southwark raised the point that at any adjourned hearing, Hallam Peel should attend to show cause why they should not pay the costs of the adjourned hearing. This appears to have been purely on the basis that the applicant was legally aided and so protected from costs in person. DJ Eastman took this point and, apparently blind to any conflict of interest raised, told Counsel for the applicant to seek instruction on whether to pursue the validity of the request for the warrant and with it a show cause to Hallam Peel as to why they should not pay the wasted costs of the hearing if it were to be adjourned. Credit to Hallam-Peel, the instructions were to go ahead. (Although frankly, I don’t think Counsel had hit on a particularly good point - a wrong figure lower than the actual one is not going to attract the wrath of a DJ, let us be honest).

The matter was settled in the meantime, leaving the hearing of the show cause on the wasted costs. At the hearing in front of DJ Jacey, Southwark argued that Hallam-Peel, by failing to request the disclosure of the request for a warrant at the same time as the other disclosure, had acted unreasonably by then demanding a further adjournment to amend the application on the basis of that request. Hallam-Peel argued, perhaps not wonderfully, that evidence reagrding th warrant has been raised at the first hearing abd Southwark had been told to disclose relevant documents. They admitted they had not specifically requested the document in the interim.

DJ Jacey found they had acted unreasonably and made the wasted costs order, on the basis that the issue of the details on the request should reasonably have been taken up at an earlier stage. it was a breach of duty to the Court not to ensure that “all matters are properly raised before the court and in good time so that everybody can deal with the matter and the court itself has sufficient time to deal with them.”

On appeal HHJ Welchman found DJ Jacey’s decision to be reasonable with no error of law.

If by this point, your jaw has hit the floor, hurray for the Court of Appeal. Hallam-Peel were granted permission for a second appeal and made a somewhat different argument via Counsel (not the same counsel!), resisted by Southwark on the basis that it had not been raised before. This time H-P argued that

The only charge against Hallam-Peel was that they could and should have asked for the production of the request for the warrant earlier than 14 July 2005 but had failed to do so. The answer is that they did not ask for it before then because they had no reason to do so. It is not suggested that there was anything in the material they had seen to suggest that the request was irregular. They therefore had no reason to assume or even suspect that it was or might have been [...] There was therefore strictly no basis upon which Hallam-Peel could properly have sought its production; or at least it could not be said that it was unreasonable for them not to have done so. In unexplained circumstances – and the evidence suggests that not even Hallam-Peel know them – counsel for Mr Dubois asked at the hearing of 14 July 2005 for the production of either the request or Southwark’s file. Having seen the request, he then raised the new point based on the irregularity in it, which resulted in the adjournment. No-one has suggested that counsel acted unreasonably by doing what he did. The sole villains of the piece are Hallam-Peel, who have been held vicariously liable for its costs consequences. They have been punished for not anticipating counsel’s thought process. Since, for reasons submitted, there was strictly no basis on which they might reasonably have earlier pressed for the production of the request, there was no basis for a charge of unreasonableness sufficient to sustain a wasted costs order.

Thankfully, the Court of Appeal agreed. While noting this was a new argument, not raised in the courts below (where H-P had actually dug themselves into a bit of a hole), they could not fail to find that DJ Jacey and HHJ Welchman were in error. Neither judge below had actually asked why it was said that H-P had acted unreasonably. They simply found that, in view of the adjournment and amended application, it was unreasonable not to have requested the document earlier. However, if the why was examined, there was no unreasonable behaviour (and thus no breach of duty to the court) because before Counsel had a lightning flash at court, there was no issue on the validity of the warrant and no reason to suppose there was one. So:

The point about the present case is that it does not appear to have occurred to Hallam-Peel that a sight of the request might open up a new avenue of argument. Even if that is to be regarded as a shortcoming on their part, and I do not decide that it was, I refuse to accept that such a shortcoming can or should fairly be castigated as “unreasonable” conduct on their part, involving a breach of duty to the court, such as to justify a wasted costs order against them.

There are a few observations to be made here (not least that there is one counsel that I doubt receives many instructions from H-P anymore, having dropped them in this mess in order to pursue what looks like a pretty iffy point on the spur of the moment). But perhaps the main one is that if this had been upheld, litigation in these matters would have become ridiculous. Defendant solicitors would demand disclosure of absolutely everything from the local authority, just to avoid the prospect of a wasted costs order if something turned up in an unrequested document later on, with an inevitable adjournment request. Local Authorities, already pretty bad at disclosure in a timely manner, would stagger under the demands and end up adjourning even more hearings for time to disclose.

Southwark, or counsel for Southwark, rather short-sightedly chose to pursue a wasted costs order and this was clearly, as the Court of Appeal found, simply because the applicant was legally aided and this was the only way to retrieve costs. But a precedent for a wasted costs order simply because counsel on the spur of the moment spotted something in a previously unrequested document, (let alone a superhuman standard of perfection in the conduct of the solicitors) would undoubtedly have bitten the local authority side badly all too often as well.

Social Housing Problem Solved! (not really)

Published
by
NL
on 20 October 2008
in whatever
. 7 Comments

There are supposed to be, currently, 1.6 million families (or 4 million people) waiting for social housing. This is expected to rise.

But, in an unexpected perk of the crisis of global capitalism, 335 of those families might get somewhere thanks to the buyout of unsold developers’ stock by HMG. This is a £13 million pound tranche of what is apparently a £200 million fund to buy up unsold private built stock for social housing. So far this has bought up 2000 homes, we are told (1665 before this announcement, then).

I’m a little curious about the figures. 335 homes for £13 million equates to about £39,000 per site.  Where are these sites?

But in any case, while this may help out a few builder/developers (and brickmakers, scaffolding leasers etc.), it is just a drop in the ocean of demand. Still, now Keynes is being discussed again, perhaps returning rent income to local authorities to allow them to build new stock could be pitched as an employment creation and business support policy.

Addiction, relapse and priority need

Published
by
NL
on 17 October 2008
in Housing law
. 2 Comments

Simms v London Borough of Islington [2008] EWCA Civ 1083 is Court of Appeal case from a s.204 appeal.

The issue was vulnerability, the Pereira test, and the use of medical evidence.

Mr Simms was homeless,sleeping in his car, having lost his home after losing his job. He had an addiction to crack, asthma and suffered from depression and panic attacks. He applied to Islington as homeless, with support from Addaction Hackney, which pointed out the dangers of homelessness for his progress in drug treatment. His doctor first reported moderate depression and drug use.

At s.184 Islington found not vulnerable, following the recommendation of their medical advisor, who had not seen Mr Simms.

A further medicial report from Mr Simms doctor was submitted for the s.202 review. This report and the solicitor’s submissions highlighted the risk of relapse into drug use if Mr Simms was street homeless, the solicitors arguing that this was a clear injury or detriment.

Islington’s s.202 upheld the s.184, on the basis that his depression was not enough to make him vulnerable and that drug addiction was not a medical problem. The review letter mentioned the doctor’s second report. No further advice from the Council’s medical advisor was sought.

Mr Simms appealed, on the basis that:

(1) that the reviewing officer had not properly taken into account whether, having regard to the risk of a relapse, the appellant was vulnerable as a recovering drug addict for some “other special reason”;

(2) that the reviewing officer had not properly taken into account all the medical evidence bearing in mind that the council’s medical assessment adviser had neither seen the appellant nor consulted with his advisers. Moreover she had not been given the opportunity to consider Dr Anantha’s second report of 2nd May;

(3) that the reviewing officer had not properly considered how street homelessness would impact on the appellant’s psychiatric condition.

The s.204 appeal failed and was taken to the Court of Appeal on those grounds.

Held:

On the s.202 decision letter, the decision-maker had not overlooked the risk of relapse. The Council were well aware that Mr Simms was receiving assistance for his addiction and this had clearly been a factor in finding he was not Pereira vulnerable.

On the medical evidence, the decision-maker stated, correctly, that it was the LA’s duty to determine vulnerability. They were entitled to prefer the evidence of their medical adviser and there was no requirement in every case to refer any further medical reports to the advisor (Shala distinguished). The differences between the first and second report from Mr Simms’ doctor were not so great as to require a second opinion from the advisor. The review letter as whole did not give any reason to think that the decision-maker was not aware that the medical advisor had not seen Mr Simms or consulting his doctor.

The question of the impact on Mr Simms’ psychiatric condition was not arguable if the appeal otherwise failed. In any case, it was clearly considered by the review officer in the s.202 decision letter and she was entitled to decide it did not render Mr Simms vulnerable.

Overall, not a happy case, but evidence, if more were needed, that the Shala conditions on use of medical reports and advice is concerned with specialist advice and reports from those qualified in the field. Where it is clear that an adviser has not seen the homeless applicant, by itself this does not render their advice of no or limited value.

The issue of danger of relapse into addiction as vulnerability is not closed off. What was upheld here was that the decision-maker was entitled, on the evidence before her,to take the view that she did. The view that although a self induced drug alcohol problem was not a reason for vulnerability, the risk of relapse may be, suggested by Crossley v Westminster CC [2006] EWCA Civ 535, [2006] H.L.R. 26, remains open.

Aweys v Birmingham in the Lords date

Published
by
NL
on 15 October 2008
in Housing law
. 2 Comments

The hearing of Birmingham’s appeal to the Lords from this Court of Appeal judgment is listed for 26 January 2009. No news yet on what it is that Brum are actually appealing and on what grounds.

Gentoo in the news (again)

Published
by
Dave
on 14 October 2008
in whatever
. 4 Comments

Gentoo Group Ltd and Peter Walls v Hanratty [2008] EWHC 2328 (QB) is the latest case in the unfortunate saga which comes from the LSVT of Sunderland’s entire housing stock to Sunderland HA, now known as Gentoo. When Gentoo took the housing stock, they did so in the knowledge that it was in substantial need of re-development and the price paid for the stock reflected that. Subsequently, Gentoo engaged in a much wider programme of housing and urban renewal than had previously been planned but the renewal has potentially left Sunderland with a social housing stock deficit because of the number of homelessness applications and more general demand for social housing (Sunderland accepted 418 households as statutorily homeless in 2007/08; and until 2005 at least CLG stats show that there were around 16,000 households on the waiting list, although by 2007 this fell to 1799). Additionally, around the time of the transfer, Sunderland were one of the pioneers of choice-based lettings.  Some locals - tenants and owners - have not been particularly happy about Gentoo’s management of the process.  A BBC report can be accessed here.  A December 2005 Audit Commission inspection, by contrast, was positive about the improvements to the stock, and potential for further improvements (access and customer care, as well as its capital programmes were said to be strengths, at paras 27 & 60).

Now, the case: it is the latest in a line of cases in which Gentoo and their CE (who also transferred from the council) are seeking damages and an injunction against Mr Hanratty (and others, but they had compromised a settlement of damages) for defamation and harassment. Over a few years, it is alleged that Mr Hanratty contributed to a website, Dadsplace and its associated chatroom, which has given rise to the claim.  Mr Justice Eady earlier exercised his discretion to disapply the statutory limitation period in respect of such claims broadly because it now appeared that Mr Hanratty, who had previously denied all responsibility (and had his costs paid by Gentoo), may have been at least partly responsible (judgment here).  Mr Justice Eady noted that “It has proved difficult, time-consuming and expensive for the Claimants to pin down responsibility for the relevant activities, which were carried on anonymously over a period of approximately two years between the summer of 2004 and the summer of 2006.”(para 3). Hanratty was represented at that hearing. This new judgment concerns an application by the Claimants to dispense with jury trial. They are represented by a QC and a junior (as they were at the earlier hearing).  Mr Hanratty is now representing himself. Mr Justice Eady accepted the Claimant’s submission, given the nature and scale of the evidence, as well as the fact that Mr Hanratty is representing himself and could be assisted by the judge in shaping his case, and that a reasoned judgment would assist in formulating grounds for appeal. The trial is listed for 5-8 days.

And here’s the rub. The Claimants are unlikely to see any cash from this application; there apparently haven’t been any website allegations for a while; and the evidence against Mr Hanratty is circumstantial at this stage; so what’s the point? I can readily understand why the organisation and its CE would wish to defend their reputation and halt wrongful publications, of course, but is this the best way to do it?

Belated and in brief

Published
by
NL
on 13 October 2008
in Housing law
. 0 Comments

Also with thanks to Legal Action for this one I had missed (my fault because it dates back to before my illustrious co-bloggers joined NL)…

Littlejohn v City of Westminster [2007] EWCA Civ 1562. Court of Appeal permission to appeal on vulnerability.

A person’s propensity to lose accommodation that they have managed to obtain does not render them vulnerable. The correct context for the test of vulnerability is a person who is actually homeless. But it may be that an ability to obtain accommodation will not contradict vulnerability if the obtaining accomodation proves illusory because of an inability to maintain it.

Intentional homelessness and badly behaved children

Published
by
NL
on 13 October 2008
in Housing law
. 16 Comments

This is somewhat belated - I’d missed these and the court of appeal isn’t on Bailii to link to - so thanks to Legal Action for the heads up.

White v Southwark LBC [2008] EWCA Civ 792 was an application for permission for a second appeal from a s.204 appeal. Ms White was excluded from her mother’s home when she was 15. her mother said she had behaved unreasonably and broken house rules. Ms White later applied as homeless (apparently when over 18 with no settled interim accommodation - I may be wrong here). She was found intentionally homeless for her actions that resulted in her being excluded from the mother’s home.

The second appeal was on the basis that her acts while a dependent child should not have been considered as the statutory regime did not envisage consideration of either homelessness of dependent children or applications by them.

Held - permission refused. Neither statute nor authorities prevented the consideration of the deliberate acts and omissions of children even at 13, 14 or 15. This conduct can be taken into account in applications by those now non-dependent.

N v Allerdale BC Carlisle County Court 4/08/2008, on the other hand, concerned a finding of intentional homelessness based on the behaviour of the applicant’s child. Ms N was given notice to leave her private rented accommodation due to the behaviour of her son, then 14. The landlord was quite clear it was not a problem with her conduct personally.

Allerdale decided she was intentionally homeless, upheld on review. On s.204 appeal HHJ Peter Hughes allowed the appeal and varied the decision to not intentionally homeless.

  • The s.184 was silent on the acts or omissions of the applicant that had rendered her homeless.
  • The reviewing officer had failed to identify this fundamental flaw, triggering the requirements of reg 8(2) of Allocation of Housing and Homelessness (Review procedures) Regs 1999. SI no 71.
  • The correct question was not whether the applicant could show she had not acquiesced in her son’s misconduct, but whether, on assessment of the all the available material, was there material that indicated she had not acquiesced.
  • The reviewing officer should make clear that the applicant was being held responsible for the acts of another and give clear cogent reasons for this finding.
  • Where credibility was at issue, fairness meant that the reviewing officer should have personally interviewed the applicant.

(Counsel, instructed by Shelter, was my new crush, James Stark of GCN)

Mortgages, sale of property and human rights

Published
by
J
on 12 October 2008
in Housing law
. 6 Comments

Horsham Properties Group Ltd v (1) Paul Clark (2) Carol Beech and GMAC RFC Ltd (Third Party) and The Secretary of State for Justice (Intervener) [2008] EWHC 2327 (Ch)

Now this is a complicated little case which, I suspect, will give rise to more questions (and litigation) than it answered.

Mortgages: a very short introduction

Prior to 1970, if A granted B a mortgage over A’s land then, unless the mortgage contract provides otherwise, B was entitled to recover possession of it at any time. There is no need for A to default under the terms of the contract or do anything like that. B’s right to possession arose immediately and the court had no power to refuse B’s claim for possession, save for a very limited discretion to adjourn to allow A to sell the property or otherwise raise the money to pay off the mortgage - see, for example, Citizens Permanent Building Society v Caunt [1962] Ch 883.

This, as will be immediately apparent, is not a good thing. Unless borrowers could negotiate some contractual protection, it left them at the mercy of (unscrupulous) lenders and it made a mortgage a very unattractive method of financing the purchase of property. The Payne Committee of 1968 recommended giving the court powers to adjourn or suspend possession proceedings on terms relating to the repayment of the mortgage by installments.

This report gave rise to the Administration of Justice Act 1970 (and, indirectly, the Administration of Justice Act 1973.) The effect of those Acts is that, in respect of residential property, where possession is sought by a lender, then the court has the power to suspend the possession order on terms that the defendant pay the mortgage plus a sum off the arrears. The court has a very wide discretion at this stage and should ask itself whether the arrears can be repaid over the remaining term of the mortgage (see Cheltenham & Gloucester Building Society v Norgan [1995] EWCA Civ 11). In practice, this is the most significant right available to borrowers who find themselves in financial difficulties and, in most cases, is sufficient to keep a borrower in their home.

The facts

Mr Clark and Ms Beech had purchased a property with the benefit of a loan from GMAC, which was secured on the property as a mortgage in the usual way. During the course of the mortgage, Mr Clark and Ms Beech fell into arrears.

The mortgage provided that, if the mortgage fell into arrears, GMAC could appoint a receiver, which they duly did. Then, again pursuant to the mortgage contract, the receiver sold the property at auction. (Although GMAC appeared to be relying on their contractual powers, it should be noted that s.101 Law of Property Act 1925 would have provided another way of achieving a similar result. This becomes important later on.)

The property was purchased by Horsham Properties Group Ltd (”Horsham”).

At this stage (a) the sale of the property had raised sufficient monies to discharge the mortgage and (b) Mr Clark and Ms Beech were still in occupation of the property.

Having purchased the property, Horsham then issued trespasser proceedings against Mr Clark and Ms Beech, seeking to recover possession of the property. The effect of this was to bypass all the protections contained in the Administration of Justice Acts, something which had been found to be perfectly lawful by the Court of Appeal in Ropaigealach v Barclays Bank [2000] QB 263.

The arguments

Ms Beech argued that the Ropaigealach decision had to be re-examined in light of the Human Rights Act 1998. In particular, she argued that:

(a) the power to appoint a receiver and / or sell the property should be interpreted as arising only once the court had sanctioned such a step; or

(b) the protection of the Administration of Justice Acts should continue to apply even where the claim for possession is brought by someone who has purchased the property from a mortgage company.

She framed these arguments in the light of Article 1 of the First Protocol (”A1P1″) to the European Convention on Human Rights (right to peaceful enjoyment of possessions) and argued that, if they were rejected, there should be a declaration of incompatibility.

The decision

The Court (Briggs J) had no difficulty in accepting that, in losing the right to pay off the mortgage, one had lost a “possession” within the meaning of A1P1. However, he did not find that there had been any deprivation of that possession by the State. He gave two reasons for this:

(a) the current situation had arisen because of the contractual provisions (and an admitted default by Mr Clark and Ms Beech) and not because of any State action; however

(b) the position would have been no different if GMAC had relied on its various statutory powers (s.101 Law of Property Act 1925) since those statutory powers did not interfere with any right, but merely created a ‘default’ position which the parties were free to alter as they saw fit.

In case he was wrong about this, Briggs J went on to consider whether the ability of GMAC to sell the property without a court order was in the public interest. He found that it was - the power to sell without a court order was an integral part of the economic basis for mortgage lending, without which, the mortgage market would not exist. There was no need for an individual assessment of the proportionality of exercising this power in any given case because the appropriate bargain had already been struck and relied, by analogy, on Lord Scott in Quazi v LB Harrow [2004] 1 AC 983.

The suggestion that the protection of the Administration of Justice Acts should apply, regardless of who was bringing the possession claim, was dismissed in very short order. Those powers could only apply so long as a mortgage remained in force. The sale of the property at auction had raised sufficient monies to discharge the mortgage. If there was no mortgage then there was no scope for the Acts to apply.

A possession order was made.

The good, the bad and the ugly

There is some (but not much) good news in this case. It is very encouraging that no-one seemed the slightest bit surprised to be dealing with a Human Rights Act 1998 argument in the context of a dispute between private parties under a private contract. If this case encourages practitioners to raise more HRA arguments in such cases then it can only be a good thing.

Briggs J was also heavily influenced by the fact that it was common ground that Mr Clark and Ms Beech had been in arrears and had broken the terms of their mortgage agreement. He expressly left open the possibility that he would come to a very different conclusion if the powers of receivership and sale had been used without such default having occurred.

The bad news is more obvious. This is quite a loophole for any lender who wants to get around the protections of the Administration of Justice Acts and in the current market, the temptation to do so will, one suspects, lead many more lenders to use this route. The importance of scrutinising your mortgage terms and conditions is plain.

As to the ugly nature of this case. Sadly, the discussion of the law of proportionality was some 4 years out of date. The idea that proportionality simply cannot arise on the facts of an individual case because it is presumed that all questions of proportionality have been dealt with at a higher level (whether in statute or in the market place) is, to put it mildly, one of hot topics in current human rights thinking.

The European Court of Human Rights has made clear in Connors v UK (2005) 40 EHRR 9 and McCann v UK (19009/04), that each person faced with eviction proceedings should be able to have a court assess the proportionality of the proposed eviction and, whilst the House of Lords haven’t quite gone as far as this yet, in both Kay v LB Lambeth [2006] UKHL 10; [2006] 2 AC 465 and Doherty v Birmingham CC [2008] UKHL 57, they made clear that the approach of Lord Scott in Quazi could not stand.