Saleh v Robinson

Rent Act 1977, sections 119, 123 and 125 — Prohibition and recovery of premiums — Appeal from decision of county court judge — Claim for recovery of premium alleged to have been paid by plaintiff to the defendant, who was the sitting tenant, as a condition of a protected tenancy being granted to the plaintiff — Appeal by defendant from judge’s decision in favour of plaintiff and cross-appeal by plaintiff seeking a variation in amount recovered — Question as to payment in respect of furniture, fixtures and fittings — Part played by estate agent — Possibility of a claim for secret profit Plaintiff, who was looking for a new flat, was introduced to an estate agent, who was instrumental in making the subsequent arrangements — It appeared that the agent told the plaintiff that she would have to pay £12,000 for the flat, or for the curtains and carpets, which would give her the entree, and that he told the defendant occupier that all that could be obtained for the flat or for the curtains and carpets was £10,000 — Apparently £2,000 ‘stuck in the pockets’ of the agent — Plaintiff paid over the £12,000, defendant received the £10,000, defendant surrendered his tenancy to his landlords, the Church Commissioners, and the latter (after some initial difficulty) accepted the plaintiff as tenant, eventually granting her a lease for nine years The county court judge found that the defendant required the sum of £10,000 as a condition of surrendering his tenancy and vacating his flat — This was a sine qua non of the new lease granted by the Church Commissioners — On these facts, and relying on the decision of the House of Lords in Farrell v Alexander, the judge found that the payment was a premium within section 119(1) of the 1977 Act and recoverable under section 125 The Court of Appeal agreed — The case was in principle indistinguishable from Farrell v Alexander, in which it was held that ‘any person’ in the equivalent provision to section 119(1) in the Rent Act 1968 was wide enough to cover landlords, tenants, agents or middlemen — The court rejected an argument by the defendant that the payment condition was not a condition ‘of the grant’, although it might be a condition precedent to it — This argument was in effect the same as that which was rejected in Farrell v Alexander — As regards the plaintiff’s counterclaim, the judge was in error in127  depriving her of the additional £2,000 — The agent, acting apparently on the defendant’s behalf, required the sum of £12,000 (less £200 for carpets and curtains) as a condition of the grant of a new tenancy — Accordingly, the sum of £9,800 awarded should be increased to £11,800 — Appeal dismissed and cross-appeal allowed to the extent mentioned The following case is referred to in this report. Farrell v Alexander [1977] AC 59; [1976] 3 WLR 145; [1976] 2 All ER 721; (1976) 32 P&CR 292; [1976] EGD 343; 240 EG 707, [1976] 2 EGLR 69, HL This was an appeal by the defendant, John Emra Robinson, and a cross-appeal by the plaintiff, Charon Saleh, from a decision of Judge Pullinger, at Bloomsbury County Court. The defendant challenged the judge’s decision in favour of the plaintiff’s claim for the recovery of a premium alleged to be paid for the grant of a protected tenancy of Flat 196 Quadrangle Tower, Cambridge Square, London W2. The plaintiff sought an increase in the amount ordered to be recovered. William Adlard (instructed by Clare & Co) appeared on behalf of the appellant; A J Lydiard (instructed by William Heath & Co) represented the respondent. Giving judgment, MAY LJ said: This is an appeal and cross-appeal from a judgment of His Honour Judge Pullinger of September 8 1987. He had had before him a claim for £12,000, or alternatively £10,000, the return of a premium paid, it was alleged, as a condition of the grant of a protected tenancy by the plaintiff, Mrs Saleh, to the defendant sitting tenant, Mr Robinson, contrary to section 119 of the Rent Act 1977, the relevant premises being flat 196 Quadrangle Tower, Cambridge Square, London W2. The learned judge, after hearing all the evidence and the argument, gave judgment for the plaintiff, Mrs Saleh, for £9,800 as representing the difference between £10,000 and £200 for the value of certain carpets and curtains which the plaintiff took over. We now have before us an appeal by the defendant asking that the learned judge’s judgment should be set aside. We also have a cross-appeal by the plaintiff below asking that the judgment should be varied to one in the sum of £11,800 being, as will be apparent, the difference between the first figure of £12,000 and the figure of £200 for the carpets and curtains. If I may say so, the matter has been both courageously and cogently argued by counsel on both sides. The relevant statutory provisions are, first of all, section 119(1) of the Rent Act 1977, which provides: 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 . . . shall be guilty of an offence. Then by section 123 it is provided: Where the purchase of any furniture has been required as a condition of the grant, renewal, continuance or assignment — (a) of a protected tenancy . . . then, if the price exceeds the reasonable price of the furniture, the excess shall be treated, for the purposes of this Part of this Act, as if it were a premium required to be paid as a condition of the grant, renewal, continuance or assignment of the protected tenancy or, as the case may be, the rights under the restricted contract. Then by section 125(1): 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 the 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. In short, what was contended was that the plaintiff had paid either £10,000 or £12,000 as a condition of the grant to her of a tenancy of the relevant premises dressed up as a payment for furniture, fixtures and fittings, that the furniture, fixtures and fittings were worth nothing like that sum but only £200, and that accordingly, pursuant to the statutory provisions to which I have referred, the learned judge gave judgment for the difference. How it came to be the difference between £200 and £10,000 rather than £12,000 will appear when I deal with the facts in a moment. Briefly the facts are these. In the light of there being both an appeal and a cross-appeal, I shall refer to the parties as the plaintiff and the defendant. The plaintiff in early autumn 1984 agreed to surrender the lease of a flat she was then occupying. She received a consideration for that surrender of £14,000. As a result, she was looking for a new flat. She had dealt with a Mr Bennett in respect of the surrender of her lease and he introduced her to a Mr Griffiths, an estate agent who traded under the name of West Trend. There were negotiations between the two of them and ultimately a sum of £12,000 was agreed between her and Mr Griffiths. She understood on behalf of the defendant, ostensibly for fixtures and fittings, that is to say the fitted carpets and curtains. Of that £12,000, she expected £1,200 to be paid to West Trend by way of a deposit — the whole transaction to be financed out of the £14,000 which Mr Bennett was holding at that time on her behalf. The defendant came into the picture as a result of meeting Mr Griffiths, possibly at a cocktail party. The defendant told Mr Griffiths that he wanted to move out of his flat and obtain payment for the curtains and carpets. Mr Griffiths told him that he would do what he could and ultimately the defendant received a telephone call from Mr Griffiths, who told him that the plaintiff, the purchaser, would pay a maximum of £10,000, that his fees would be paid by the plaintiff and that he was acting as her agent. On the information at present before us, it seems to me at least a possible view of the whole situation that Mr Griffiths was not being straight either with the plaintiff on the one hand or the defendant on the other. He seems to have told the plaintiff that she would have to pay £12,000 for the flat or for the curtains and carpets that went with it and that this was merely to give her the entree to the flat; and he appears to have told the defendant that all that he could obtain for him for the flat or for the curtains and carpets was only £10,000. It may be that, if that is correct, the defendant may have a claim against Mr Griffiths for the secret profit of £2,000. Be that as it may, what happened was that at a meeting, into the details of which I need not go, after the defendant had given Mr Griffiths a letter to the Church Commissioners, who were his landlords at the flat at 196 Quadrangle Tower which he was occupying, surrendering his tenancy, the sum of £10,000 was paid over ultimately to the defendant. Two thousand pounds stuck in the pockets of Mr Griffiths and the plaintiff received a letter from the Church Commissioners’ agents, Messrs Chestertons, dated October 16 1984. That told her that with reference to her application for a tenancy they had now taken up her references and were prepared to offer to her subject to contract a new lease for nine years on particular terms in their standard form. Thereafter, it seems before the actual lease was granted by the Church Commissioners, the plaintiff moved into the flat and the defendant moved out. The Church Commissioners took exception to the transaction being carried out in that way and took proceedings against both parties — the plaintiff for being in possession and the defendant for breach of covenant — but ultimately the matter was settled between them all and the Commissioners granted the plaintiff a lease for a term of nine years from October 22 1984. It was against that background that the learned judge, in addition to the findings to which I have already referred, found that Mr Griffiths was the defendant’s agent for the purpose of marketing the flat. In the course of his judgment he went on to say: His purpose was to find a person who was prepared, not to buy the carpets and curtains, but to occupy the flat and to do this one would need to be accepted by the Church Commissioners as a suitable tenant. Mr Adlard, in the course of his forceful argument, relies upon that finding of the learned judge as supporting his submissions against any form of ostensible agency which would entitle the plaintiff to recover £12,000 less £200. But with all respect to the argument, all I think that the learned judge was doing there was to point out that Mr Griffiths was acting as agent for the purpose of marketing the flat. His purpose was not to find a purchaser for the carpets and curtains. That was only the means of obtaining a purchaser to occupy the flat and to take a new tenancy from the Church Commissioners. The learned judge then went on to find, and I quote now from his judgment: What the plaintiff did was to buy his surrender of his interest to his landlord and his act of vacating the premises. Was this a sine qua non to the grant of a new lease to the plaintiff by the Church Commissioners?  I find that it was. Then down at the bottom of the same page: I find that the defendant required the sum of £10,000 from the plaintiff as a condition of his surrender and that such requirement is a premium and a condition of the grant within the meaning of section 119 of the Act. There was no evidence to indicate that he was party to the agreement for payment of West Trend’s fees or that he had any sufficient knowledge of its terms. I also find that the purchase of the carpets and curtains was a condition of the surrender. The defendant could not have required the premium simpliciter and would not have vacated the flat without this payment. It was necessary to call it a purchase of fittings and fixtures. 128 On those facts and against that legal background, Mr Lydiard for the plaintiff in the court below relied upon the decision of the House of Lords in Farrell v Alexander [1977] AC 59. That was a case in which the facts were very much the same as the facts in the instant case. The defendant agreed to assign the remainder of her tenancy of an unfurnished flat, of which she was the protected tenant, to the plaintiffs for £4,000 to include certain fixtures and fittings. It was found that there was a clause in her lease — which also happened to be a lease from the Church Commissioners — requiring her to offer the lease to her landlords before seeking consent to an assignment. After consultation with the landlords, she negotiated a new form of agreement under which she was to surrender her lease to the landlords, who would then simultaneously grant a new lease to the plaintiffs, subject to their being approved. On completion of the new lease the plaintiffs were to pay the outgoing tenant the £4,000 ‘for the carpets curtains and chattels fixtures and fittings’. As the headnote to the report makes clear, there was no evidence that the landlords knew of the payment of the £4,000. The claim was brought for the repayment of the balance between £4,000 and the value of the fixtures and fittings transferred. The case, as I read the report, turned upon whether the words ‘any person’ in what was then section 85 of the Rent Act 1968 (precisely the same terms as the present relevant statutory provisions) were wide enough to include not merely landlords and potential landlords but also tenants, agents and middlemen. With Lord Russell of Killowen dissenting, their Lordships’ House decided that on their proper construction those words were wide enough for that purpose and accordingly the plaintiffs succeeded. We have been referred to a number of passages in the speeches of all of their Lordships. It is, I think, sufficient if I read briefly from part of the speech of Lord Dilhorne, beginning at the bottom of p 75. The respondent’s landlords, when approached for their consent to the proposed assignment, said that they would prefer the respondent to surrender her lease and then to grant the appellants a new lease. This was agreed to and the £4,000 of which £400 had been previously paid to the respondent’s agents as a deposit was paid not in connection with any assignment but in connection with the grant of a new lease to the appellants and, in my view, as a condition of that grant. It was on that basis that the learned law lord, with the rest of the House apart from Lord Russell, concluded that the plaintiffs were entitled to succeed. The learned judge in the instant case thought that the facts were indistinguishable from those of Farrell v Alexander. I for my part with respect entirely agree. The submission which Mr Adlard makes is that on the facts in the instant case the plaintiff has made her claim under the wrong subsection of section 119. He submits that having regard in particular to the presence of the word ‘of’ as the seventh word in subsection(1) of section 119, the relevant condition which must not be imposed must be one, as he puts it, belonging to or attached to the grant. The condition of the payment of £10,000 or £12,000 in the instant case may have been, he would be prepared to accept, a condition precedent to the grant of the new tenancy by the Church Commissioners to the plaintiff, but that, he submitted with respect, was not enough. One could and should distinguish the facts of the instant case in this way. On the facts of Farrell v Alexander it was clear that there was, as he put it, simultaneity between the payment of the money and the receipt of the new lease. That was not so in the instant case. Accordingly, one could not say that the payment of the £10,000 or £12,000 was a condition of — I emphasise the word ‘of’ — the grant of a protected tenancy. With respect to that argument, it seems to me to be really only another way of putting the argument which was before their Lordships’ House in Farrell v Alexander. It is only another way of submitting that one has to construe section 119(1) so that the words ‘any person who, as a condition of the grant, . . . requires . . . the payment of any premium’ mean a landlord or a potential landlord who can make the grant. That was clearly negatived by the decision of their Lordships’ House in Farrell’s case and I think the necessary consequence is that Mr Adlard’s argument based upon the proper construction of section 119(1) is just not sustainable. It was a valiant attempt, if I may say so, to distinguish a case which I think was clearly against him, but for the reasons which I have given it was an attempt which, in my judgment, must fail. I turn therefore to the cross-appeal. The way that was put on the plaintiff’s behalf was that Mr Griffiths was at least the ostensible agent of the defendant. He appeared as such to the plaintiff. He was asking the plaintiff for £12,000. That appeared to be the scope of his authority and what he was employed by his principal, the defendant, to do. It matters not, Mr Lydiard submitted, that there was in fact unknown to the plaintiff an expressed self-imposed restriction on Mr Griffiths’ authority in that the defendant understood and only authorised Mr Griffiths to ask for £10,000 for the purchase of the fixtures and fittings. That limitation on Mr Griffiths’ authority was unknown to the plaintiff. She was faced by an estate agent apparently acting on behalf of the tenant of the flat asking £12,000 — and I use general terms for these purposes — to arrange for the transfer of the tenancy to her. In those circumstances, submits Mr Lydiard, what was sought and indeed paid (albeit £2,000 of the amount paid got into the pockets of Mr Griffiths and only £10,000 got into the hands of the defendant) for the grant of the tenancy was in truth £12,000, less, of course, the value of the carpets and curtains which were taken over, and that accordingly the learned judge ought to have given judgment for £11,800 and not £9,800. In answer, Mr Adlard refers specifically to that passage in the learned judge’s judgment that I have quoted and explained, submitting, as I think with respect, unjustifiably, that there was a finding by the learned judge of the extent of Mr Griffiths’ authority, contrary to the submissions made by Mr Lydiard. On that approach, in my judgment, with respect to the learned judge, he erred in depriving the plaintiff of the additional £2,000. Mr Griffiths, acting on the defendant’s behalf, required and obtained for the defendant, or so it seemed to the plaintiff, the sum of £12,000 less the £200 for carpets and curtains as a condition of grant of the new tenancy following the decision in Farrell v Alexander. I would therefore dismiss the appeal but allow the cross-appeal to the extent of substituting for the judgment for £9,800 a judgment for £11,800. There will have to be appropriate alterations for interest figures and the like. There is one other error in the judgment as drawn to which we have drawn counsel’s attention. All those matters can no doubt be dealt with by agreement hereafter. I would dismiss the appeal and allow the cross-appeal, as I have said. WAITE J agreed and did not add anything. The appeal was dismissed with costs and cross-appeal allowed to the extent of substituting judgment for £11,800. Legal aid taxation for plaintiff’s costs.