Crown Estate Commissioners v Peabody Trust & Poplak [2011] EWHC 1467 (Ch) [link to PDF]

As we noted a while ago, the transfer of the Crown  Estates Commissioners social housing estates to the Peabody Trust had brought about a test case on the status of those tenants who had been regulated tenants (protected or statutory) under Rent Act 1977. This is that case in the High Court. It is also something like the ultimate rebuttal to anyone who suggests housing law is straightforward. Hold on to your amended statute, it is going to be a very bumpy ride.

It was common ground that these tenants ceased to be regulated tenants when the Crown Estates sold the reversionary interest to Peabody. The issue was whether the tenants became secure tenants (and housing association tenants under s.86 Part VI Rent Act 1977, so a regulated rent)  or assured tenants under Housing Act 1988. The tenants and the Crown Estates Commissioners argued for the secure tenant position, Peabody argued for assured tenancies.

The key issue was the interpretation of s.38 Housing Act 1988 and particularly s.38(5).

Prior to the introduction of HA 1988, there was no question that the tenants would have become secure (and ‘housing association’) tenants under HA 1985 and Part VI RA 1977.

Under HA  1988 (as HA 1980 and HA 1985) a housing association, like Peabody, could not be the landlord of a regulated (Rent Act) tenancy.  HA 1988 also amended HA 1980 to make it impossible for Housing Associations to be grantors of secure tenancies, although not affecting existing ones. S.35 dealt with transitional provisions, in particular where a tenancy granted on or after 15 January 1989 is not prevented from being a ‘housing association tenancy’ and where a tenancy granted on or after that date can be a secure tenancy even though the landlord does not fulfil the landlord condition under HA 1985. The purpose was to some extent to prevent existing regulated tenants and ‘housing association tenants’ from becoming assured tenants.

S.38 deals with the transfer of tenancies from public to private sector after 15 January 1989.  The issue in the case was whether the definition of ‘public body’ in s.38(5)(d) included where the interest of the landlord “belongs to Her Majesty in right of the Crown’.

S.38(5) provides

(5) For the purposes of this section, the interest of a landlord under a tenancy is held by a public body at a time when—

[…]

(d) it belongs to Her Majesty in right of the Crown or to a government department or is held in trust for Her Majesty for the purposes of a government department.

This, prima facie, included cases where the interest was managed by the Crown Estates. Taken literally, the effect of s.38 would then be that regulated tenants, on transfer to another landlord, would become assured tenants, even if the new landlord was a private one capable of granting a regulated tenancy under RA 1977.

In short, the Crown Estates regulated tenants would be in a worse position regarding security of tenure, rent regulation etc. than the regulated tenant of a private landlord where the landlord’s interest was transferred to another private landlord. S.38(1) provides that ss.(3) applies in relation to a tenancy “which was entered into before, or pursuant to a contract made before, the commencement of HA 88 if (a) at that commencement or, if it is later, at the time it is entered into, the interest of the landlord is held by a public body and (b) at some time after that commencement, the interest of the landlord ceases to be so held.” If the Crown Estates was a public body, this applied, as Peabody was not, in the terms of HA 1988, a public body.

So ss.3(a) appeared to apply – meaning the ‘new’ tenancy could not be a protected tenancy or ‘housing association tenancy’, as did ss.3(b) excluding a secure tenancy unless or until the landlord was once again a public body. ss.3(c) also excluded para 1 of Schedule 1 HA 1988, so s.1 HA 1988 applied – the ‘new’ tenancies were assured tenancies.

But all this followed only if the Crown Estates Commissioners were a public body under s.38(5)(d).

The Crown Estates and tenants contended that while this was the result of a literal reading of s.38, the result was something that Parliament could not have intended and a purposive reading should be adopted.

S.38 should not be considered to apply at all to regulated tenancies as the language in s38(1) & (3)  was more apt for contractual than statutory tenancies.

There was a conflict between s.38 and s.35(5) which should be resolved by giving precedence to s.35(5).

The Court noted that the introduction of HA 198 was not supposed to affect existing rights – as above prior to the HA 1988, the transferred tenancies would have been secure ‘housing association tenancies’ – only new rights. The literal effect of the Act was, effectively, to single out Crown Estate tenants for special treatment and inferior rights.

The HA 1988 was replete with drafting errors and labyrinthine to follow. This made a purposive interpretation tempting.

However, the draftsman had had no difficulty in inserting distinctions between the Crown and the Crown Estates in other Acts, e.g. the 1980 amendment to the RA 1977 or, in HA 1988, in para 11 of Schedule 1. It would make an ‘error’ in relation to s.38 unlikely where a form of words that would have achieved the result contended for by Crown Estates and the tenants was available and used elsewhere in the Act.

On Parliamentary intention and the Pepper v Hart [1993] AC 593 permission to rely on Hansard,

The principle applies where in the opinion of the court construing the enactment, it is ambiguous or obscure, or its literal meaning leads to an absurdity. The statement must be made by or on behalf of the minister or other person who is the promoter of the bill. The statement    must disclose the mischief aimed at by the enactment, or the legislative intention underlying its words. The statement must be clear.

Having read the passages from debates raised, it was right that Parliament did not intend to affect existing tenancies in HA 1988, but this was not enough for the proposition put by Crown Estates and the tenants. HA 1988 did not affect tenancies on land managed by Crown Estates Commissioners. But even before HA 1988, their tenants would not have necessarily enjoyed the same rights on transfer, particularly if the transfer was to a local authority of housing association who could not grant regulated tenancies, affecting the tenants’ security of tenure and conditions.

This principle, that a change of landlord could and did affect tenure and conditions, was established prior to HA 1988 and could be traced through the legislation. It meant that the outcome sought by Peabody – the prima facie reading of HA 1988 – did not seem unreasonable. The protection available would still be the highest available under HA 1988, an assured tenancy.

Additionally, the Crown Estates, as a body managing property for the Crown, could be expected to exercise care in the selection of successor landlord. And this was the case. The successor had been chosen carefully and indeed additional contractual conditions on dealing with those tenancies had been imposed on Peabody as successor landlord, enforceable by the tenants under Contracts (Right of Third Parties) Act.

On the Human Rights Act argument, the Crown Estates and tenants argued that legislation should be read as far as possible to be compatible with convention rights. At issue here were Art 8 and Art 1 Protocol 1 rights, as well as Art 14 (discrimination). The argument being that HA 1988 placed Crown Estates regulated tenants at a disadvantaged position compared to other regulated tenants, who would either have remained regulated or become secure tenants.

The facts fell within Art 8, and Art 1 Prot 1 (possessions). Also differences based on housing status has been held to be within Art 14 (Larkos v Cyprus 30 EHRR 597, R (RJM) v Secretary of State for Work and Pensions [2009] 1 AC 311).

If the arguments were right, it would affect many provisions of the Housing Acts and Rent Acts. The differences in transfer of tenancy to private or public landlords had already been noted. Did this in every case involve a breach of the HRA?

But in fact the HA 1988 did not alter rights (apart from succession) for tenants for as long as their landlords held the reversionary interest. But, as with previous legislation, it provided for changes in security of tenure following a change of landlord. In addition, it should be noted that the Crown’s tenancies (and those managed for the Crown) had always been treated differently to other tenancies.

The HRA did not assist the Crown Estates or tenants:

I do not consider it can fairly be said that tenants of the Claimant were discriminated against under HA 88, and if I am wrong on that, the scheme seems to me to fall readily within the margin of appreciation granted to Parliament. In any event, if the First Defendant‟s case is correct, the literal meaning of the statute reflects the actual intention of Parliament.

On s.35,  which provided for regulated tenancies to become secure (and ‘housing association’) tenancies, regardless of whether a housing association landlord fulfilled the landlord condition, the Crown Estates and tenants contended that it was in conflict with s.38.

However the conflict is only apparent if one looks at Chapter V of the Act alone. S.44 provides that Chapters I to IV do apply to the Crown but is silent about Chapter V. Unless the contrary intention appears, a statute does not bind the Crown (Bennion, Statutory Interpretation 5th ed Section 34, p206.).  Chapter V does expressly apply to the Crown but only to the limited extent to which ‘public body’ applies to the Crown in s.38(5)(d), but not otherwise. Thus s.35 and s.38 do not apply to the Crown save for the express term in s.38(5)(d). There is therefore no conflict between the provisions of s.35 and s.38 for Crown tenants.

On the issue of whether s.38 should be properly construed as referring to contractual rather than regulated tenancies, or that it does not refer to tenancies that were already regulated before 15 January 1989, s.38(1) does not support this distinction.

S.38(3)(a) referred only to ‘protected tenancies, protected occupancies or a housing association tenancy’. The Crown Estates and the tenants argued that the omission of  the term ‘statutory tenancy’ meant that a tenancy ceasing to be held by a public body would become both an assured tenancy (HA 1988 s.1) and a statutory tenancy, (because it was a statutory tenancy and was not prevented from remaining one by s.38(3)(a)). The absurdity of this shows that the point of s.38 was really to prevent tenants from obtaining greater security of tenure, not to curtail existing rights. Thus s.38(1) and s.38(3) were never intended to apply to regulated tenancies, including those held by the Crown.

While there was clearly a drafting problem in this section, this problem could not support the conclusion that s.38(1) was intended to exclude regulated tenancies. This could not be squared with the wording of s.38(1). The argument that the intention was to exclude regulated tenancies could not succeed on the basis of the drafting problem in this section.

So, in conclusion.

Despite drafting problems in HA 1988, the words of s.38(5)(d) were clear and the literal construction was not contrary to the intention of Parliament.

The regulated tenants of the Crown Estates became assured tenants of the Peabody Trust on the transfer of the landlord’s interest.