In which we discover what happens when an RSL serves a notice confirming an assured tenancy after serving a s.21 notice on an assured shorthold tenant.

 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.