Nearly Legal: Housing Law News and Comment

Rent arrears, transfers and Weaver in operation

McIntyre & Anor, R (on the application of) v Gentoo Group Ltd [2010] EWHC 5 (Admin)

This was the judicial review of North Sunderland Housing Company’s refusal to permit an exchange of homes by the Claimants, joint assured tenants, with another NSHC assured tenant. NSHC are a subsidiary company of Gentoo and no points were taken on whether Gentoo were the proper Defendant. NSHC had refused to permit the exchange unless Mr McIntyre paid off an historic debt for rent arrears accrued when he lived at another property as a tenant of Sunderland City Council. Originally Mr & Mrs were joint tenants of Sunderland City Council in the property, prior to a stock transfer to what became NSHC in 2001. It is quite a complex and significant case, involving the disputed conjunction of private and public law and the first significant test of the application of the Court of Appeal Judgment in L&Q v Weaver [2009] EWCA Civ 587 on the status of RSLs as exercising a public function in their housing function. Apologies for length, but there is a lot in this judgment, with wider implications for all sorts of challenges, not just exchanges or challenges to RSLs.

The brief facts:
Mr & Mrs M were the joint secure tenants of Sunderland CC from 1984. In 1996, while Mr M was separated from Mrs M, he lived at another Sunderland CC property and accrued rent arrears. In 1998, the Council obtained a judgment against him for £597.80 plus £133.75 in respect of costs. The Council attempt to enforce that judgment by warrant on no less than 5 occasions, but no response or bailiff entry was achieved in respect of that property.

In 2001 the original property was sold to NSHC’s precursor, in a package of 36,000. Mr and Mrs M were granted an assured tenancy from March 2001.

The tenancy agreement provided that:

You have the right to exchange your home with another tenant, providing you meet certain conditions. Please refer to the Tenants’ Handbook for further details of the right to exchange and the circumstances in which it applies.

The Tenant’s Handbook stated that there was a right to exchange properties with another tenant of the same RSL provided that:

You both have your local Housing Company’s written consent.
• You make sure that neither of you is in breach of any of your tenancy conditions or obligations. You must also comply with any reasonable condition attached to your local Housing Company consent relating to the payment of outstanding rent, the remedying of any breach or performing any obligation of the tenancy agreement.
• The exchange does not result in any property either becoming overcrowded or under occupied.

And:
Your local Housing Company will not unreasonably withhold permission. It will not withhold permission on any grounds except those in Schedule 2 to the Housing Act 1988

The agreement for the transfer of housing stock between Sunderland CC and NSHC’s precursor stated that:

All arrears of rent due as at the Completion Date from existing and former tenants of the Property [which included all the freehold and leasehold property the subject of the housing stock transfer]….(the “Arrears”)…together with all rights to recover the same shall be assigned by the Council to [SHCL].

The rights to existing possession orders and money judgments were assigned.

In April 2007, Mr & Mrs M applied for consent to an exchange with another NSHC assured tenant. NSHC responded that consent was refused “as there were rent arrears and court costs outstanding”. The M’s solicitors responded and “an offer was made that, if consent was granted, Mr McIntyre would pay the amount outstanding by instalments. They also wrote to NSHC asking it to reconsider its decision contending that it was unreasonable to withhold consent to an exchange based on an irrecoverable debt; that it meant punishing Mrs McIntyre for a matter not of her own making; and that a strict policy of refusing an exchange on the basis of historical rent arrears was prima facie unreasonable.”

NSHC replied that consent “was conditional on Mr McIntyre clearing the Former Tenant Rent Arrears owed to the Sunderland Housing Group before any move; that it was entirely reasonable to require him to pay monies which were outstanding before permitting him to exchange; and that, given the Group’s historic dealings with him with respect to the arrears, the offer to pay by instalments after the exchange was not acceptable.” The JR claim was issued.

Issues
The MacIntyres argued that:
i) the decision not to consent until payment of Mr McIntyre’s historic and unenforceable rent arrears in respect of another tenancy was amenable to JR
ii) it was one no reasonable person could have taken in the circumstances
iii) Gentoo had simply applied a blanket policy with no consideration of individual circumstances

Gentoo argued that:
i) the decision was not amenable to JR
ii) if it was, the claim should be dismissed as there were alternative remedies available
iii) the decision was not unreasonable
iv) the complaint that a policy had simply been applied with no consideration of the Claimant’s circumstances was not raised the Claimant’s original grounds.

Amenability to JR

Gentoo argued that R (Weaver) v London & Quadrant Housing Trust [2009] EWCA Civ 587 could be distinguished:

(i) that a decision to refuse consent to the mutual exchange of a tenancy does not result in the individuals who may be concerned becoming homeless which a decision to terminate a tenancy may do; (ii) that assignment of a secure tenancy by way of exchange falls outside the cases governed by Part VI of the Housing Act 1996 dealing with the allocation of housing accommodation; and (iii) that registered social landlords are not obliged by any enactment to deal with applications for mutual exchange on any particular basis, unlike local housing authorities who must deal with applications for such exchanges in accordance with section 92 of the Housing Act 1985.

Held, that while each of these points was correct in itself:

they do not serve, either individually or collectively, to distinguish this case from Weaver. Whether an exchange of social housing should be permitted involves a decision to be taken in the discharge of what the majority in the Court of Appeal regarded as the public function of managing and allocating social housing. This is not merely because (as the Tenants’ Handbook in this case recognises) such an exchange may result in a property becoming overcrowded or under-occupied. It may also involve questions about how best to meet not only the need for social housing of those tenants wishing to exchange and their families but also the need of others for it. Like a decision to terminate a tenancy, in some cases it may also engage an individual’s right to respect for his or her private and family life.

Thus the fact that registered social landlords may have greater freedom than local housing authorities have in responding to applications for mutual exchange does not mean that such applications do not require them to take decisions in the discharge of what the Court of Appeal regarded as their public function of managing and allocating social housing. Nor did the majority of the Court of Appeal intend to limit that function to the doing of those things that are governed in the case of a local housing authority by Part VI of the Housing Act 1996 which regulates the allocation of housing by such an authority. Indeed a decision to terminate a tenancy by a local housing authority is not governed by those provisions: see section 159(2) of the 1996 Act. The fact that such a decision may result in an individual becoming homeless was not the basis for regarding that decision in Weaver as not constituting an act of a private nature. The decision was so regarded because it was one taken in the discharge of what the Court of Appeal regarded as a registered social landlord’s public function of managing and allocating social housing. That explains why it also was considered susceptible to a claim for judicial review. Such a claim is one to review the lawfulness inter alia of “a decision, action or failure to act in relation to the exercise of a public function”: see CPR Part 54 rule 54.1(2)(a)(ii).

For this reason, the attempt to distinguish Weaver failed.

Gentoo also argued that the condition in the Tenant’s Handbook on mutual exchange was a purely contractual condition. NSHC’s decision whether to hold to that condition or not was a private decision.

Held: Even if this were so, the decision about whether or not to implement the condition was a discretion which fell under the function of managing and allocating housing stock, so under Weaver.

The relation of public and private law

Gentoo’s argument appeared to rest on the ground that “public law makes no difference when considering the lawfulness of an exercise of a contractual right, particularly one that must be exercised reasonably. However, that a right is exercised under contract does not necessarily that may not be invalid under public law. The private law decision may be unfettered, but that does not exclude public law controls – for example terminating a local authority tenancy at the time before they had statutory security of tenure, Cannock Chase DC v Kelly [1978] 1 WLR 1.

While a contractual right that has to be exercised reasonable under the contract – as here -may more plausibly appear to be outside the ambit of JR. However, even if the private and public law requirements and consequences were identical, this would not mean that only private law would be applicable:

i) First there may be a difference in what matters fall to be assessed as reasonable or unreasonable. Thus public law may affect the process by which a decision is reached to exercise such a right (including the considerations taken into account and the purpose for which the right may be exercised) as well as requiring the result not to be objectively unreasonable. In private law by contrast the objective reasonableness of what is done may be the only relevant matter. In other cases the reasons why that result was in fact chosen may also be material. There is, therefore, no necessary identity in what matters falls to be assessed as reasonable or unreasonable in public and private law.

ii) Secondly the perspective from which the reasonableness or unreasonableness of what is done falls to be assessed may be markedly different. Normally the functions which are vested in a public authority, and the rights which it may acquire in discharging them, fall to be exercised in the public interest for the purpose for which the function was conferred having regard to the consequences of their exercise for others. The reasonableness of their exercise does not normally fall to be assessed purely by reference to the interests of the public authority itself since functions are not normally vested in such a body for its own benefit. By contrast the reasonableness of the exercise of some rights in private law may fall to be assessed simply by reference to the particular legitimate interests of the person having that right. In such a case a right might be exercised reasonably (or not unreasonably) as a matter of private law but unreasonably as a matter of public law.

iii) Thirdly the onus of proof and the standard of reasonableness to be deployed in resolving any dispute about the exercise of the right may vary. In public law, for example, the onus is on a claimant to show that a public authority’s decision was one no reasonable person could have made in the circumstances. In private law the onus may instead be on the person exercising a right to show that what he has done is reasonable.

iv) Finally the persons who may be able to challenge the reasonableness of what is done may be different. In public law anyone with a sufficient interest may do so. In private law it is normally only another party to the contract who may do. In this case, for example, the person with whom the Claimants wished to exchange tenancies might have challenged NSHC’s decision to grant the Claimants a conditional consent to that exchange if that decision was unlawful in public law even though as a matter of private law that person may not have been able to do so.

These elements need to be considered and addressed in a dispute over whether a public or private law right or remedy is involved. Where a public authority is exercising a contractual right, the public authority may take factors into account matters which would be irrelevant in private law when deciding whether to exercise that right as a matter of public law. Conversely, ” a contractual right may be exercisable as a matter of private law in a manner which it would not be capable of being exercised in public law as the considerations which a public body may take into account in exercising its public functions may be narrower than those which a person not exercising such functions may do”.

Nonetheless, when a public authority decides whether or not (and, if so, how) to exercise any contractual right it may have, it must consider whether it can do so lawfully as a matter of private law. No reasonable public authority would do otherwise. Of course failure to do so may be immaterial if there is a contractual right to do what the authority may decide to do. However, if a public authority simply assumes, or decides to act on the basis, that it has a contractual right to do what it decides to do or, when doing so, takes into account something that it may not do as a matter of private law, then it has equally misdirected itself in law or taken into account what in the circumstances is a legally irrelevant consideration when discharging the public function in question and it has thereby erred in public law. In such a case the other contracting party will no doubt have an alternative remedy available in private law and it may well find that permission to apply for, and any relief sought on, a claim for judicial review will be refused. But it is possible that there may be some occasions in which others adversely affected may have sufficient standing to apply for judicial review if a decision taken in relation to the discharge of a public function is thus erroneous in law (as indicated above) or the question of its lawfulness may arise in other proceedings. The fact that such a decision is taken in relation to the discharge of a public function makes it likely that there will be others who may be adversely affected by it, including those who may be required to help finance the authority’s activities. [para 36]

So, did the JR claim in this case bring anything more than the Claimants may have in a private law complaint? And should relief be refused if there was an alternative private law remedy open to them?

Against Gentoo, the Court found that clause on exchange of tenancies in the tenant’s handbook was one that was subject to which section 1 of the Landlord and Tenant Act 1988 applied. This meant that when the tenant serves a written application for consent, the landlord must serve a written notice on the tenant within a reasonable time specifying the reasons for withholding that consent (if it is withheld) and the conditions imposed (if it is granted subject to conditions). The landlord also owes a duty to give consent, except in a case where it is reasonable not to give it, and that duty is not satisfied if consent is granted subject to any condition that is not a reasonable condition. The tenant has claim if the landlord is in breach of these conditions.

Following Ashworth Frazer Ltd v Gloucester City Council [2001] UKHL 59, any condition imposed by the landlord must be something affecting the subject matter of the contract which forms the relationship between the landlord and the tenant. However, the landlord’s obligation is to show that his conduct was reasonable, not that it was right or justifiable, and it is only in exceptional cases that a landlord may be required to take into account anything beyond his own interests – something of the order of gross unfairness, or a clear disproportion between benefit and detriment.

This then would be the private law basis for the claimant’s claim. It would appear that there may well be factors that would weigh in a public law decision that would not in a private law one, such that the two could not be said to be identical. This issue of the application of s.1 Landlord and Tenant Act 1988 is key to this case and we’ll come back to it below.

On the public law challenge

The MacIntyres contended that the amount involved was one that NSHC never had any right to, as it was not incurred in respect of the current property. On the evidence is was hard to be clear whether the property for which the arrears were incurred was included in the assignment by Sunderland CC to NSHC. However, the benefit of any orders for money judgments obtained by the City Council against former tenants of premises comprised in Clause 9.1 of the stock transfer were assigned, and that certainly included the money judgment against Mr M.

On the MacIntyres’ argument that the sums were irrecoverable by virtue of the time elapsed, this was mistaken. Although as a simple debt, the Limitation Act 1980 would apply, there is no limitation on a judgment debt, simply on bringing a second action on that debt. An application writ of execution may require the Court’s permission, CPR Schedule 1, RSC Order 46 r2(1)(a), CPR Schedule 2 CCR Order 25 r5(1)(a), but none of that bars recovery of a judgment debt by other means, e.g. winding up petition, after 6 years. Accordingly, the Judgment debt in this case could not be considered as necessarily irrecoverable. Further, a statued barred debt does not, in any event, cease to be a liability – just unenforceable.

The MacIntyres contended that the sum could not be considered to be related to the payment of outstanding rent, as per the Tenant’s Handbook. However, the Tenant’s Handbook referred to ‘outstanding rent’, without a ‘lawfully due’ condition. Plus the Handbook did not limit the possible conditions the landlord may set to ‘outstanding rent, so in the end the question was simply whether the condition set was one no reasonable landlord of social housing could have imposed in the circumstances.

In view of the history of the debt, “it cannot be said that no reasonable landlord of social housing could have made payment of any amount due from Mr McIntyre a condition of its consent to a mutual exchange of his joint tenancy merely on the ground of the lapse of time since the order was made by Sunderland County Court.”

So, these elements of the claim failed. However, and key to the case, the debt was not incurred in relation to the property on which the exchange of tenancies was proposed. In a private law, contractual, situation, recovery of a debt owed in relation to another property would not be considered a reasonable condition for consent to assignment. It has “nothing whatever to do with the relationship of landlord and tenant in regard to the subject matter of the lease”. Gentoo’s arguments that it was a matter ‘not extraneous to the lessee’ was dismissed – that something (e.g. hair colour) might be related to the proposer assignor did not make it relevant.

Gentoo then argued that the condition was expressly set out in the Tenancy Agreement. This was not so. The natural meaning of the term in the tenancy agreement, ‘outstanding rent’, was that it referred to rent for the tenancy involved. This was particularly so when a joint tenancy was involved, as the condition would have to alert someone entering a joint tenancy that they may be frustrated in an exchange by the other joint tenant’s unrelated debt. In any event, the parties agreeing a term wouldn’t make it reasonable in Amzworth Fraser terms, unless a ‘qualifying lease’ under Landlord and Tenant Act 1927, which was not relevant here.

Gentoo’s construing of s.92(5) Housing Act 1985 to allow local authorities to recover rent due on another tenancy before consenting to an exchange was also in error. S.92(5) refers to ‘rent lawfully due’, which is here held to mean rent due on the tenancy at issue in the exchange. The attempted extension by comparison with HA 1985 failed.

In this case, also, the exchange was between NSHC’s tenants. Gentoo argued it was entitled to set the condition in view of Mr McIntyre being the prospective tenant of the exchanged property. But this would be a condition on the other person in the exchange, not the MacIntyres, and that was not what was done. In any event, the MacIntyres were not in arrears with their rent on the current property.

As a result:

The condition imposed by NSHC was thus not one in my judgment that it could impose on any consent to an assignment by the Claimants which was not to be unreasonably refused as a matter of private law. NSHC plainly proceeded on the assumption that it could do so and in that respect erred in law and took into account something, namely the amounts outstanding in respect of 78 Rockingham Road, that was irrelevant to its decision to impose that condition. It thereby erred as a matter of public law. [para 90]

If the condition had been a viable one at private law, none of the Claimants’ arguments would have succeeded:

Had the condition been one capable of being imposed as a matter of private law, however, there is no reason in my judgment why it would have been unreasonable to do so as a matter of public law subject to the other arguments which Mr Paget advanced. Recovering what is owed to a registered social landlord to assist in the provision of social housing is patently not an unreasonable objective in itself for such a landlord. Indeed it might well be thought not to be acting reasonably, other things being equal, if it does not do what it reasonably can do to obtain what it is owed by others, including those who occupy its social housing.[para 91]

In mopping up the remaining arguments: it was not unreasonable that Mrs MacIntyre was being penalised as a joint tenant. In any such exchange situation someone would end up being penalised for the fault of another in that the exchange did not go ahead; The size of the amount was not relevant – and would have the odd effect of saying that NSHC should have been stricter and sought the court costs as well as the arrears debt; it was not unreasonable for NSHC not to accept an offer of payment in instalments, as there was no evidence the amount could not be paid off at once and there was no particular detriment in not being able to exchange now.

The argument on a blanket policy had not been raised in the claim. No evidence was brought, just an assertion, and permission would have been refused to amend. The Defendant had not had the opportunity to deal with the contention. In any event the appearance was that NSHC had at least been prepared to consider instalments, which went against a ‘blanket policy’.

Overall:

In considering any claim that a decision is one no reasonable registered social landlord could have taken in discharging its function of managing and allocating its social housing stock, it is necessary to look at the position overall rather than point by point (although each point needs to be considered). Moreover it is also necessary not to overlook the fact that such a decision is one taken in the discharge of that function by a body not conducting its activities for profit and one which has experience in discharging that task that this court does not have. Its discretionary decisions in the discharge of that function which do not engage any Convention right are ones to which considerable respect should be given.

It was not for the fact that the sums involved arose from a different tenancy, there was nothing that would make this an unreasonable decision by the landlord.

On relief:
Gentoo contended that the Claimants had a private law claim under Landlord and Tenant Act 1988 and/or could have applied to the Independent Housing Ombudsman, so relief should be refused. While the availability of an alternative remedy would be a reason to refuse permission, permission had been granted and the issue of alternative remedies had not been raised by Gentoo at that stage.

On the overlap of public and private law claims:
The existence of a private law claim did not invalidate a public law claim on the same facts, Boddington v the British Transport Police [1999] 2 AC 143. In fact the two should be brought in one claim to further the overriding objective. However, had the question of alternative remedy been raised when permission to make this claim was sought, permission would no doubt have been refused. Once permission had been granted, refusal of a remedy was a matter of discretion.

A remedy was refused in this case, certainly the order sought quashing the decision NSHC took in May 2007. The other dwelling involved in the exchange had been let to someone else in 2008, so the order sought that that NSHC consent to the exchange was impossible. Any further exchange application would have to be considered on its own merits. Any right to damages under s.4 Landlord and Tenant Act 1988 would have to be determined by a claim under that act, assuming there was any loss.

In the circumstances, and having regard to the fact that an alternative remedy in respect of the condition imposed was and is available to the Claimants by way of an ordinary claim, the relief sought in respect of NSHC’s decision on this claim for judicial review is refused. The Claimants’ claim for judicial review is accordingly dismissed.

In future claims concerning any decision to refuse permission to assign or exchange, or to grant such permission only on conditions, to which section 1 of the Landlord and Tenant Act 1988 applies should normally be brought by ordinary claim, even if they also include claims that the decision of the registered social landlord involved was unlawful as a matter of public law. [para 115-116]

The claim for judicial review was accordingly dismissed.

Comment
This is a complex decision on what was, if we are honest, not really a viable case by the time it reached hearing (what is the remedy, always think, what is the remedy!). It covers some complex problems, particularly in the relation of public and private law claims, and indeed the lawfulness of ‘contractual’ decisions. As far as I can see the following are the major points, may there may well be some I have missed…

1. Weaver will be taken broadly in terms of ‘housing function’.
2. Conditions on exchange will be taken broadly, save were they have no private law basis – RSLs and indeed LAs take note.
3. The simple existence of an alternative private law claim will not invalidate bringing a public law claim, but…
4. where there is a coterminous private law remedy, permission should be refused (or, under the discretion, at substantive hearing)
5. Conditions on exchange of tenancy, where they relate to the performance of the tenancy, will not usually be considered to be unreasonable, assuming they have private law validity (i.e. relate to the tenancy proposed to be exchanged).
6. Assertions of a blanket policy -and fettering of discretion – must be made an an early stage and evidenced if they are to be sustained.
7. What is the detriment, even in an unlawful and unreasonable decision?

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