Berrisford v Mexfield Housing Co-Operative Ltd [2010] EWCA Civ 811
We reported on the High Court appeal in this case here. By the time it reached the Court of Appeal it had turned into quite a different case altogether. At the High Court, Ms Berrisford was unrepresented and summary judgment was given against her on Mexfield’s possession claim, on the basis that, as a tenant of a fully mutual housing co-op, her tenancy was outside Housing Act 1988 and was terminable on notice to quit. At first instance, Mexfield had been refused summary judgment on the basis that Ms B’s tenancy agreement said that possession proceedings would only be brought in specified circumstances, including rent arrears. There may also have been Human Rights issues raised at first instance, but these did not surface at the High Court (again, Ms B being unrepresented).
Ms B – now represented again, appealed to the Court of Appeal.
At the Court of Appeal, the central issue were clauses in the ‘occupancy agreement’; between Mexfield and Ms B (and according to Mexfield, many others) which stated that:
5. This Agreement shall be determinable by the Member giving the Association one month’s notice in writing.
6. This Agreement may be brought to an end by the Association by the exercise of the right of re-entry specified in this Clause but ONLY in the following circumstances:-
a) If the rent reserved hereby or any part thereof shall at any time be in arrear and unpaid for 21 days after the same shall have become due …
b) If the member shall at any time fail or neglect to perform or observe any of the stipulations conditions or provisions contained in this Agreement which are to be performed and observed by the Member
c) If the Member shall cease to be a member of the Association
d) If a resolution is passed under … the Association’s Rules regarding a proposal to dissolve the Association
THEN in each case it shall be lawful for the Association to re-enter upon the premises and peaceably to hold and enjoy the premises thenceforth and so that the rights to occupy the premises shall absolutely end and determine as if this Agreement had not been made (but without prejudice to any right of action or remedy of the Association).
These were the only clauses dealing with ending the agreement, which was otherwise for a monthly periodic tenancy.
The previous purported justification by Mexfield for serving notice – rent arrears – had fallen away. There was no suggestion before the Court of Appeal that Mexfield was entitled to possession for breach of the clause and the appeal proceeded on the basis that a bare notice to quit had been served.
The point of Ms B’s appeal was that these clauses were enforceable in contract or, if the clause had no effect in common law, it should be enforceable in equity.
Mexfield – perhaps surprisingly – argued that the occupancy agreement (and with it hundreds of other such agreements entered into since 1992) was entirely void. The House of Lords decision in Prudential Assurance Co Ltd v. London Residuary Body [1992] AC 386 meant that the purported grant of lease failed because the conditions in clause 6 meant it was for an uncertain term. What Ms B had was to be implied from the conduct of the parties because the express tenancy agreement was void. The implied tenancy could only be a tenancy subsisting month to month, determinable on Notice to Quit. (As noted before, Mexfield as a fully mutual housing co-op could not grant an assured or secure tenancy, so outside statutory protection).
BY a 2:1 majority, the Court of Appeal found for Mexfield, such that the hundreds of occupancy agreements it had granted after 1992 – the Prudential decision – were indeed void. Mummery LJ and Aikens LJ agreed that the effect of the Prudential decision was to render the agreement void. There could not be both a monthly periodic tenancy AND a contract for a tenancy for an uncertain period that could be mutually enforced between the parties, but this was the effect of Ms B’s argument. In any event, a contract that purported to grant a lease that failed could not be given effect:
What follows from the conclusion that the Occupancy Agreement failed, as a matter of law, to grant Ms Berrisford a lease on the terms set out in that agreement? Can effect be given to the Occupancy Agreement as a contract, bearing in mind that the aim of the Occupancy Agreement, on this first argument, is to grant Ms Berrisford an interest in land? Considering the matter in principle, in my view if the object of the original contract between the parties is to create an interest in land and that object is not achievable at law because the interest of land created would be of an uncertain term, then neither law nor equity should be able to enforce the contract between the original parties. It seems to me that, as a matter of principle, it is both illogical and unsound to suggest that a contract which aims to grant an interest in land, which grant fails because it is of uncertain term, can nevertheless survive as a separate and free-standing contract, which can be enforced as if it were the lease which cannot be made because of an uncertain term. [Aikens LJ at 56]
This was the case in law, but also in equity. On review of the (venerable) precedent cases raised, none found that a contract for a tenancy was enforceable as to its terms in equity, although it may give rise to a form of proprietary estoppel, not pleaded in this case. Of the precedents:
none support the bare proposition that if two parties enter into a contract by which A purports to agree to grant to B a tenancy of premises for an uncertain term (e.g. “for as long as you continue to pay the rent”) which is therefore void as a lease, and B enters possession and pays rent on a monthly basis, then, as between A and B, equity will enforce that contract by granting B an injunction against A when A attempts to obtain possession from B having given a valid notice to quit. I accept, of course, that B may be able to retain possession on such grounds as equitable or proprietary estoppel, but those arguments are not relied on in this case. [Aikens LJ at 70.]
Nor did the occupancy agreement take effect as a contractual licence. Per Lace v Chantler [1944] IKB 368
The court is not then justified in treating the contract as something different from what the parties intended and regarding it merely as a contract for the granting of a licence. That would be setting up a new bargain which neither of the parties ever intended to enter into. The relationship between the parties must be ascertained on the footing that the tenant was in occupation and was paying a weekly rent. Accordingly, it must be the relationship of weekly tenant and landlord and nothing else.
Mummery LK concurred with Aikens LJ
Wilson LJ’s dissent takes a different view of the argument that Ms B could rely on the Occupancy Agreement in equity. He notes that:
Following the decision in the Prudential case, however, Mexfield does not appear to have considered its impact on the validity of this form of agreement in general and on clause six in particular; nor is there evidence that any lawyer advising a prospective member/tenant did so. So, for the next 18 years, Mexfield and its prospective members/tenants, such as Ms Berrisford, continued to enter into agreements in the same form; and one assumes in Mexfield’s favour that, until a very late stage (possibly at around the time of issue of the present proceedings), it understood, as no doubt its members/tenants understood, that clause six constituted a valid term of the tenancy.
He considers that five authorities: Warner v. Browne (1807) 8 East 162 and (1807) 14 Ves Jun 156; Parker v. Taswell (1858) 27 LJ (Ch) 812; In re King’s Leasehold Estates (1873) LR 16 Eq 521; Zimbler v. Abrahams [1903] 1 KB 577; and Siew Soon Wah v. Yong Tong Hong [1973] AC 836 established a line of equity upholding specific performance of agreements for leases that the parties had mutually intended, albeit that they were void for term uncertain. (These are the same cases that Aikens LJ considers and rejects as establishing anything more than a potential estoppel).
For that reason, Wilson LJ found:
Ms Berrisford had a right to specific performance of the Occupancy Agreement, in particular of clause six. Although it may be, for example, that in 1993 she agreed to rent the property only as a result of the security of tenure afforded to her by clause six (or, for example, agreed to pay a rent as high as that stipulated therein in light of the security afforded to her thereby), Ms Berrisford did not need to establish detrimental reliance upon the clause. Having provided consideration for the agreement, equity would, subject to the scrutiny which it generally applies to applications for the exercise of its discretion, have ordered specific performance of clause six. Where the obligation to be enforced is, as in clause six, of a negative character, the equitable remedy will generally take the form of an injunction; but where, more particularly, the obligation to be enforced is, as in clause six, not to take proceedings save in specified circumstances, the remedy will take the form of a dismissal of any proceedings taken in breach of it.
Comment
I would have to confess to finding myself in the minority on this decision. Although the counter argument that there cannot be a concurrent (implied) tenancy and a (failed but enforceable) agreement for a tenancy for the same parties has some strength, so does Wilson LJ’s view that, given both parties clear intention, the agreement that Ms B entered into should remain enforceable in equity, for all that it was not in law.
However, there is also a point in the argument that what is established in the (failed) agreement is a proprietary estoppel. And, given that this is the Court of Appeal’s decision, anyone with a similar case (housing co-op tenant or other contractual tenancy void for term uncertain), would be well advised to consider pleading a proprietary estoppel.
Human Rights arguments don’t get a look in here and, unless or until there is an expanded view of the Court’s own duty as a public body, rather than a reliance on landlords being a public authority, housing co-ops – for all that they are creatures of statute – are unlikely to face a credible Art 8 or Art 1 Protocol 1 challenge. The fact remains that fully mutual Housing Co-op tenants have less security of tenure than any other tenant with a rent under the ‘Assured’ annual rent limit (£25K now, £100K from 1 October 2010).