Farrell v Alexander

The appellants, Mrs. Farrell and her daughter, have brought an action to recover from the respondent, Mrs. Alexander, a sum of money which was paid to her in order to obtain the tenancy of a flat. They claim that this money was a premium which it was illegal for the respondent to require or to receive and that they have the right to recover it by virtue of section 90 of the Rent Act 1968 ("The Act").

The respondent had a protected tenancy of this flat with some four years unexpired from the Church Commissioners. There were negotiations with the appellants with a view to an assignment of it and the appellants were asked for a sum of £4,000 for the fixtures and fittings. Though the actual value of these fixtures and fittings has not been determined, it was certainly less than £4,000 so that the balance was a premium for the proposed assignment. In asking for it, the respondent may have committed an offence under section 89 of the Act. But the matter was not carried through by assignment because the Church Commissioners, in accordance, it seems, with their normal practice, and in accordance with a clause in the existing lease, required the respondent to surrender the lease with a view to the grant of a new tenancy to the appellants. The transaction proceeded in this way. A formal agreement was drawn up under which the respondent agreed to surrender the lease subject to acceptance of the surrender by the landlords and to the simultaneous grant by them of a new lease to the appellants. On completion the new lessees were to pay to the respondent the sum of £4,000 for fixtures and fittings, and this money was in fact paid.

It seems to have been suggested at one time that the transaction might be regarded as, in substance, an assignment, in which case the respondent would have had no answer to the appellants' claim, but in my opinion this is not a maintainable contention. It cannot be said that the surrender and grant was a sham, or a subterfuge: it was what the landlords required for reasons, understandable enough, of their own. They had, of course, no interest in the "premium". So the question to be decided is whether it is illegal for a lessee to require or to receive a premium as a condition of surrendering her lease, and in order that a new lease may be granted to the payer of the premium.

The directly relevant sections are section 85 of the Rent Act 1968, which contains the following:

"(1) Any person who, as a condition of the grant, renewal or continuance of a protected tenancy, requires, in addition to the rent, the payment of any premium or the making of any loan (whether secured or unsecured) shall be guilty of an offence under this section.

(2) Any person who, in connection with the grant, renewal or continuance of a protected tenancy, receives any premium in addition to the rent shall be guilty of an offence under this section".

and section 90(1), which provides:

"Where under any agreement (whether made before or after the commencement of this Act) any premium is paid after the commencement of this Act and the whole or any part of that premium could not lawfully be required or received under the preceding provisions of this Part of this Act, the amount of the premium or, as the case may be, so much of it as could not lawfully be required or received, shall be recoverable by the person by whom it was paid."

Section 92 says that in Part VII of the Act, in which the above sections are, "premium" includes any fine or other like sum and any other pecuniary consideration in addition to rent.

My Lords, I must say that, in relation to the facts which I have stated, these sections are to me, if not transparently clear, at least unambiguous in the legal sense. They refer to "any person", words wide enough to include landlords, tenants, agents or middlemen. They apply to what was done here because the respondent required the premium as a condition of the grant of a protected tenancy (see the words "subject to … the simultaneous grant" mentioned above). The words "any person" which are common to subsections (1) and (2), and also to section 86(1) and (2) and to section 87(2), are words of wide generality and fit, without any strain whatever, the present facts. I am unable to follow the argument that the words "in addition to the rent" or "in addition to rent" which appear in section 85 and in the interpretation section 92 and which on any view are used with some surplusage, have the effect of limiting "any persons" to "persons in receipt of rent". The words are descriptive of the character of the payment and not of the recipient.

Is there any reason why the general words should be restricted, and what restricted meaning can be found which would exclude this transaction? What is argued by the respondent quite simply is that "any person" in section 85 means, or more exactly, should be confined to "any landlord or lessor" or "any potential landlord or lessor" and this restricted meaning is said to be imposed by the history of this legislation and by authority.

Before I attempt to deal with this argument I must say something as to the correct method, as I see it, of interpreting this Act, the key to which, in my opinion, lies in the proposition stated above that what we are called upon to construe is section 85 of the Rent Act 1968. This proposition, apparently ingenuous in fact, contains within it the reasoning which follows.

The Rent Act 1968 is a consolidation Act of a comprehensive character built up after a process of enactment, amendment, addition and repeal of a number of statutes starting with an Act of 1915. The respondent's argument depends, for any plausibility, upon a process which involves starting from that wartime Act—which had a very limited scope and whose language shows that it was referring only to landlords—and tracing the development through an Act of 1920 (re-enacting the 1915 provision in different language) and Acts of 1949 and 1965 (both adding further provisions and re-arranging the sections) and asking at each stage the question, did Parliament extend the reach of the prohibition beyond landlords? To reinforce a negative answer to this, the respondent is able to rely on a decision of the Court of Appeal in 1921 ( Remmington v. Larchin[1921] 3 K.B. 404) in which it was held that the word "person" in the Act of 1920 (section 8(1)) meant "landlord". This holding is sought to be extended to the present Act through a recent decision of the Court of Appeal ( Zimmerman v. Grossman[1972] 1 Q.B. 167). The judge and the majority of the Court of Appeal in the present case followed, as they were clearly bound to follow, Zimmerman v. Grossman, but your Lordships are free to reconsider that case.

On this argument it is necessary to decide what consequences follow from the fact that the Rent Act 1968 was a consolidation Act. This question has already concerned this House, see Maunsell v. Olins [1975] 1 All.E.R. 16, which, I must regret to say, contains more discussion than conclusion. I will try to clarify the latter. The case was concerned with the...