Hughes v Borodex Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Rimer,Lady Justice Arden,Lord Justice Patten,The Chancellor of the High Court |
| Judgment Date | 27 April 2010 |
| Neutral Citation | [2009] EWCA Civ 1356,[2010] EWCA Civ 425 |
| Docket Number | Case No: C1/2009/0809 |
| Court | Court of Appeal (Civil Division) |
| Date | 27 April 2010 |
[2009] EWCA Civ 1356
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
(QUEEN'S BENCH DIVISION)
ADMINISTRATIVE COURT
(MR JUSTICE COLLINS)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Rimer
Case No: C1/2009/0809
Mr Martin Rodger QC (instructed by Messrs David Tagg & Co) appeared on behalf of the Appellant.
THE RESPONDENT DID NOT APPEAR AND WAS NOT REPRESENTED.
(As approved)
Lord Justice Rimer:
This is a renewed application for permission to pursue a second appeal, Patten LJ having refused permission on the papers on 29 June 2009. He gave short reasons for his view that an appeal would have no real prospect of success. As it is a proposed second appeal, permission will anyway not be given unless the court is satisfied that the appeal would surmount one or other two hurdles posed by CPR Part 52.13. Mr Martin Rodger QC, for the applicant, recognises that and his position is that the grounds of appeal both have a real prospect of success and raise an important point of principle.
In 2003 the term of the applicant's long tenancy of her flat expired and the respondent landlord then served a notice terminating her continuation tenancy under the provisions of Schedule 10 to the Local Government and Housing Act 1989 and proposing an assured monthly periodic tenancy. A disagreement as to the level of rent under the new assured tenancy was referred to a Rent Assessment Committee ('RAC'), which in September 2004 fixed the initial rent at £1,668 per month, a figure which disregarded the improvements to the flat that the applicant had carried out during the long tenancy. That disregard was correct, and reflected provisions in paragraph 11(7) of Schedule 10.
In 2007 the respondent sought an increased rent, and the applicant exercised her right to refer it to the RAC. The RAC fixed an increased rent of £2,340 a month, a level of rent which did not disregard the improvements. Rent at that increased level totalled more than £25,000 a year, as a result of which the respondent claimed the tenancy ceased to be an assured tenancy and served a notice to quit.
By her appeal to Collins J in the Queen's Bench Division, the applicant challenged the RAC's refusal to disregard the improvements when fixing the reviewed rent, asserting that it was wrong to do so and, had it not done so, that the reviewed rent would have been less than £25,000 a year and the applicant's security of tenure as an assured tenant would have continued. Collins J held that the RAC had been correct to disregard the improvements and dismissed the appeal.
By the proposed second appeal, the applicant wishes to argue otherwise. Mr Rodger, in his succinct written argument prepared for the purposes of this application, has advanced a cogent case for saying that the apparent failure of Schedule 10 to require a disregard of improvements in the assessment of a reviewed rent payable by an assured tenant, whereas such a disregard is required when fixing the initial rent, reflects an anomaly that is exceptional in landlord an tenant legislation. It is said that the anomaly was probably a drafting error and that a purposive interpretation of the relevant provisions will enable its correction. To that end, all that is required is an interpretative extension of the scope of paragraph 11(7) of Schedule 10.
The effect of the claimed anomaly upon the applicant is obvious and serious. It can be said to be particularly odd because, as the RAC noted in its decision, the tenant's protection as regards the disregard of improvements could be lost as soon as one year after the fixing of the initial rent, when the landlord could impose an increase. Collins J expressed sympathy for the applicant in paragraph 19 of his judgment but was not satisfied that there had been a draftsman's error in the drafting of schedule 10. If there had been, he said he would have construed the relevant provisions in the applicant's favour.
The proposed appeal against that conclusion is obviously of particular importance to the applicant and also raises an issue of wider general importance. Patten LJ was not satisfied that an appeal would have a real prospect of success, his main focus being on the point that paragraph 11(7) of Schedule 10 applies only to the reference to the RAC for the purpose of fixing the initial rent under the assured tenancy whereas the subsequent position is governed by section 14(3) of the Housing Act 1988. Mr Rodger's point is, however, that no modification to section 14 is required. All that is required is a purposive interpretation of paragraph 11(7).
Mr Rodger has satisfied me that an appeal on this point would have a real prospect of success, although I use that phrase as reflecting the relatively low threshold that must be traversed in order to obtain permission to appeal. For the reasons I hope I have sufficiently indicated, I also regard the appeal as raising a point of principle that is important, not just to the applicant but also more generally.
I give permission for a second appeal.
Order: Application granted.
[2010] EWCA Civ 425
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
Royal Courts of Justice
Strand, London, WC2A 2LL
Collins J
Before: The Chancellor of the High Court
Lady Justice Arden
and
Lord Justice Patten
Case No: C1/2009/0809
Mr Martin Rodger QC & Dr. Victoria Williams (instructed by Messrs David Tagg & Co.) for the Appellant
Mr Philip Rainey QC & Mr Christopher Heather (instructed by Messrs Forsters) for the Respondent
Hearing date: 11 February 2010
Lady Justice Arden:
1. This appeal, which is from the judgment of Collins J dated 25 March 2009, concerns the potentially harsh results of a recent change in legislation governing long residential tenancies within Part I of the Landlord and Tenant Act 1954 (“the 1954 Act”). This change was brought about by the Local Government and Housing Act 1989 (“LGHA 1989”). A long residential tenancy fell within Part I of the 1954 Act if it was a long tenancy at a low rent and met the qualifying conditions for protection in the Rent Act 1977, save for the fact that it was at a low rent. As from the commencement of the LGHA 1989, tenancies of this kind were to be phased out as they expired: on expiry, the tenant would in general remain in possession under an assured periodic tenancy under the Housing Act 1988 (“the HA 1988”). No new tenancy under Part I of the 1954 Act could be created.
2. This appeal is concerned with the determination of the rent under the new assured periodic tenancies. The question is whether the improvements, which the appellant, Mrs Cherry Sheila Hughes, made to her flat, Flat A, 25 Tite Street, London SW3 4JR, in the early 1990s while she was a tenant under a long residential tenancy within Part I of the 1954 Act, must now, on the expiry of that tenancy and the grant to her of an assured tenancy of the same premises, be taken into account in fixing her rent. If they must be taken into account for this purpose, then the rent for her flat, which has now been determined on this basis by the rent assessment committee (“RA committee”), will be increased because of the improvements to the premises for which she paid. In addition, on the facts of this case, her rent will exceed £25,000 per annum, which is the current statutory maximum for protection as an assured tenant. She loses that protection, and her landlord (“Borodex”) can accordingly serve a notice to quit.
3. This statement of the problem, to some extent at least, invites the immediate response: “surely not”. While the common law did not lay down any general rule that prevented a landlord and tenant from agreeing that improvements could be taken into account in fixing the rent even if the tenant had paid for them, such improvements are often excluded from contractual rent reviews. They are also often excluded where the tenancy is a residential tenancy and the tenant has some statutory protection. Thus, under section 70(3)(b) of the Rent Act 1977, which also applies to long residential tenancies which are subject to Part I of the 1954 Act, improvements made by the tenant under the regulated tenancy or his predecessor in title are to be disregarded. It is presumptively unfair to the tenant that he should have to pay an increased rent when he paid for the improvements in the first place.
Factual Background
4. Until 21 June 2003, Mrs Hughes was in occupation of her flat as the assignee under an underlease for a term of 39 1/4 years less 3 days from 25 March 1964. That underlease expired on 21 June 2003. On 24 October 2003 Borodex gave her notice (“the first notice”) under paragraph 4(1) of schedule 10 to the LGHA determining her long residential tenancy and proposing a new assured periodic tenancy commencing on 28 February 2004 at a rent of £2,600 per month. Mrs Hughes gave a counter-notice proposing a rent of £1,300 per month and the matter was referred to the RA committee to determine the rent.
5. On that occasion, the rent fell to be determined under paragraph 11 of schedule 10 to the LGHA 1989 and under those provisions the RA committee disregarded the improvements and determined the rent at £1,668 per month commencing...
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