Appleton v Aspin and others

Rent Act 1977, section 98(1) — Whether a court is prohibited from making a possession order against a protected tenant who has agreed with the purchaser of the subject dwelling-house to join with the landlord, the vendor, in giving vacant possession on completion — Appeal from decision of Millett J, who held that a court was not so prohibited — The agreement by the protected tenant not to enforce any right of possession or occupation against the purchaser was contained in a special condition in the contract of sale, which the tenant signed (in addition to the other two parties) in order to bind herself to the purchaser — The tenant did not receive any monetary consideration — The tenant did not give possession to the purchaser after completion and the latter brought proceedings for specific performance — The tenant claimed that, as she was a protected tenant, the special condition was rendered inoperative by section 98(1) of the 1977 Act — Held by the Court of Appeal, reversing the decision of Millett J, that the case was covered by the general principle of Barton v Fincham that the agreement of a protected tenant to give up possession cannot be enforced against her if she is entitled under the Act to remain in possession and chooses to do so — Where the legislature has restricted the jurisdiction of the court, as section 98(1) does, the parties cannot by agreement give the court a jurisdiction which the statute says that it is not to have — The court distinguished the decision in Dudley and District Benefit Society v Emerson, upon which Millett J had relied, and rejected an alternative argument based on the suggestion that the tenant could be treated as having assigned her tenancy without monetary consideration to the purchaser, a transaction recognised by section 120 of the 1977 Act — Appeal by tenant allowed The following cases are referred to in this report. Barton v Fincham [1921] 2 KB 291 Dudley & District Benefit Building Society v Emerson [1949] Ch 707; [1949] 2 All ER 252; (1949) 65 TLR 444, CA Jenkin R Lewis & Son Ltd v Kerman [1971] Ch 477; [1970] 3 WLR 673; [1970] 3 All ER 414; (1970) 21 P&CR 941, CA R v Bloomsbury and Marylebone County Court, ex parte Blackburne [1985] 2 EGLR 157; (1985) 275 EG 1273, CA Stirrup’s Contract, Re [1961] 1 WLR 449; [1961] 1 All ER 805 This was an appeal by Mrs Ivy Charlotte Plane, the protected tenant of a freehold house at 7 Finch Way, Brundall, Norwich, from a decision of Millett J granting possession of the house to the purchaser, John Appleton, the plaintiff in an action for specific performance, in which the defendants were the vendor, Mrs Norma96 Ivy Maud Aspin, her husband, David Patrick George Aspin, and the tenant, Mrs Plane. J M Stevenson (instructed by Rogers & Norton, of Norwich) appeared on behalf of the appellant; David Iwi (instructed by Bazeley White & Co) represented the respondent (plaintiff). Giving the first judgment at the invitation of Purchas LJ, NOURSE LJ said: This is an appeal against a decision of Millett J given on April 15 1987 in a purchaser’s action for specific performance. The question in issue is whether section 98(1) of the Rent Act 1977 prohibits the court from making an order for possession against a protected tenant who has agreed with the purchaser to join with his landlord, the vendor, in giving vacant possession on completion. Millett J answered that question in the negative, and the tenant now appeals to this court. The numerous issues before the learned judge, including those raised in third party proceedings by the tenant against her former solicitor, made it necessary for him to state the facts at some length. For the purpose of determining the one question which is still in dispute, a short although possibly important question of law, they can be stated comparatively briefly. On September 23 1982 Mrs Ivy Charlotte Plane, then a widow of about 65 years, conveyed to her daughter, Mrs Norma Ivy Maude Aspin, a freehold house known as 7 Finch Way, Brundall, Norwich, Norfolk. On the same day the two ladies entered into what has been called an occupation agreement, by clause 5 of which Mrs Aspin undertook that Mrs Plane might for the rest of her life reside in the house subject to payment of a yearly rent of £725, if demanded. On June 11 1984 Mrs Aspin entered into an agreement for the sale of the house to the plaintiff, Mr John Appleton, the contractual date for completion being September 1 1984. By special condition B it was provided that the sale was with vacant possession on completion. Special condition M, which was addressed to the plaintiff, was in these terms: In consideration of your entering into a contract with my Daughter Norma Ivy Maude Aspin for the purchase of the property hereby contracted to be sold with vacant possession I Ivy Charlotte Plane undertake not to seek to enforce against you any right of possession or occupation whether arising by statute or by reason of any equitable interest or otherwise of which I may be or become entitled. The contract was signed by Mrs Plane as well as by Mrs Aspin, but it is clear that the former signed only in order to bind herself to the plaintiff in the terms of special condition M. The contractual date for completion passed without possession being given to the plaintiff, and on October 26 1984 he commenced an action for specific performance against Mrs Aspin and Mrs Plane, and also against Mrs Aspin’s husband, Mr David Patrick George Aspin. The action related also to another neighbouring property which was vested in Mr and Mrs Aspin, and a decree of specific performance was made in respect of that property before the commencement of the trial in regard to 7 Finch Way. At the trial the only substantive claim made in the action was for an order for vacant possession against Mrs Plane. To that claim the effective defence was (1) that the occupation agreement of September 23 1983 created a tenancy protected by the Rent Acts; and (2) that the agreement constituted by special condition M of the agreement for sale of June 11 1984 was rendered inoperative by section 98(1) of the Rent Act 1977. As to that defence, Millett J held, first, that the occupation agreement was not a sham and accordingly that it created a protected tenancy. That holding has not been questioned on this appeal. Second, he held, as a matter of construction, that special condition M, although negative in form, contained an implicit, positive undertaking by Mrs Plane to join with Mrs Aspin in giving vacant possession to the plaintiff on completion. In the court below, Mr Stevenson, for Mrs Plane, advanced a contrary argument of what the judge described as subtlety and ingenuity, but we have heard almost nothing of it in this court and the judge was clearly right to reject it. Third, and for present purposes most importantly, Millett J held that the agreement as he had construed it was not rendered inoperative by section 98(1) of the 1977 Act. It is to that question I now turn. I start by analysing the effect, so far as material, of the agreement for sale dated June 11 1984. It is accepted by Mr Stevenson, in my view correctly, that the particular agreement constituted by special condition M was an agreement between Mrs Plane and the plaintiff alone. It was not, and cannot be treated as having been, an agreement to which Mrs Aspin was also a party. On the other hand, it is impossible to ignore the fact that Mrs Aspin was a party to the agreement for sale, and that its provisions as a whole became operative between all three parties at one and the same time. Thus it is not in my view correct to say, as did Millett J, that at the date of the agreement with Mrs Plane the plaintiff was only an intending purchaser of Mrs Aspin’s interest. He was the actual purchaser. At the moment of time when Mrs Plane agreed with the plaintiff to join with Mrs Aspin in giving vacant possession to him on completion the plaintiff became contractually bound and entitled to acquire the freehold from Mrs Aspin. The equitable interest passed to him. In the eye of equity he became her landlord. He knew of course that she was in occupation. Section 98(1) is in these terms: Subject to this Part of this Act, a court shall not make an order for possession of a dwelling-house which is for the time being let on a protected tenancy or subject to a statutory tenancy unless the court considers it reasonable to make such an order and either — (a)    the court is satisfied that suitable alternative accommodation is available for the tenant or will be available for him when the order in question takes effect, or (b)    the circumstances are as specified in any of the Cases in Part I of Schedule 15 to this Act. It is agreed that this case does not fall within either of paras (a) and (b). And so the question is whether it falls within the general prohibition or not. On the wording of the subsection alone it appears clear that it does. No 7 Finch Road is a dwelling-house which either is let on a protected tenancy or is subject to a statutory tenancy, it matters not which. It would therefore appear that the court is prohibited from making an order for possession in relation to it. However, the question is not free from authority which shows that this simple approach is not necessarily correct. In Barton v Fincham [1921] 2 KB 291, which was decided on section 5(1) of the Increase of Rent and Mortgage Interest (Restrictions) Act 1920, it was held by this court that if the conditions upon which alone an order for possession could be made were not fulfilled, an order could not be made against the opposition of the tenant, even if he had freely and for good consideration agreed with the landlord that he would give up possession. In that case the agreement had been made so that the landlord could sell with vacant possession, although there was no evidence that he had actually entered into a contract for sale. It was emphasised that the statutory fetter had been placed not upon the landlord’s action but upon the court’s: see p 295, per Bankes LJ. At p 299 Atkin LJ said: The section appears to me to limit definitely the jurisdiction of the Courts in making ejectment orders in the case of premises to which the Act applies. Parties cannot by agreement give the Courts jurisdiction which the Legislature has enacted they are not to have. That decision, the authority of which has recently been recognised by this court in R v Bloomsbury and Marylebone County Court, ex parte Blackburne (1985) 275 EG 1273*, undoubtedly established a general rule that the court is prohibited from giving effect to an executory agreement between a protected tenant and his landlord for the former to give up possession to or at the direction of the latter. And it would have applied to this case if the agreement had been between Mrs Plane and Mrs Aspin. But in Dudley and District Benefit Building Society v Emerson [1949] Ch 707, another decision of this court, it was shown that the prohibition is not as far-reaching as the wording of section 98(1) would by itself suggest. *Editor’s note: Also reported at [1985] 2 EGLR 157. The material facts of the Dudley case, which I take from pp 708-709 of the report, were these. In 1946 the first defendant, Emerson, agreed to purchase a dwelling-house which was subject to the provisions of the Rent Acts. Immediately on completion of the purchase he charged the property by way of legal mortgage in favour of the Dudley and District Benefit Building Society. That was a mortgage under which principal and interest were repayable by instalments. It contained a provision that the mortgagor’s statutory power of leasing under section 99(1) of the Law of Property Act 1925 should not apply. It was alleged that the mortgage had been granted on the understanding that Emerson would personally occupy the premises, but there was no express provision to that effect. In fact Emerson never went into possession of the property and, unknown to the building society, he immediately granted a weekly protected tenancy to the second defendant, Goodlad, who went into possession and had remained in possession thereafter. Emerson got into arrear with the instalments payable under the mortgage. Its statutory power97 of sale having thus arisen, the building society took the familiar step of seeking an order for possession so that it could sell the property out of court. Emerson did not enter an appearance, but Goodlad defended the proceedings, claiming to be a tenant entitled to the protection of the Rent Acts. The leading judgment was given by Sir Raymond Evershed MR. Having considered the effect of the exclusion of section 99(1), he said that he was content to assume that Goodlad, the tenant, had a precarious title, good as between himself and the mortgagor Emerson, but liable to be defeated on the assertion by the building society of its paramount title: see p 714. He observed that apart from the Rent Acts there would have been no real defence to the claim for possession. Then he turned to the material provisions of the Rent and Mortgage Interest Restrictions (Amendment) Act 1933, in particular to section 3(1), which was for present purposes to the same effect as section 98(1) of the 1977 Act, Schedule I to the 1933 Act being the equivalent of Part I of Schedule 15 to the 1977 Act. At the bottom of p 715 the Master of the Rolls, having observed that section 3(1) was quite general in its terms, said: . . . But when you examine the terms of Sch I, I think it is quite plain that what the section and the schedule, which is read into it, must be taken to contemplate is a proceeding for possession against the tenant by somebody who may be fairly described — and I deliberately use that phrase for the moment — as a landlord. In other words, it appears to me that the general conception (which I of course entirely accept) that the Acts are designed to protect occupants of dwelling-houses within the Acts against eviction must be qualified to this extent — against eviction at the suit of persons who may fairly and properly be described as landlords of the occupants. In the next paragraph he buttressed those views by further reference to Schedule I to the 1933 Act and to the definition of ‘landlord’ in section 12 of the 1920 Act, and continued: Pausing for a moment at that stage, and turning to the facts of this case, it will at once be seen that the description cannot be fairly, as I think, applied to the mortgagees in their claim against Goodlad. They are not his landlords; they never have been. The evidence makes it, I think, tolerably clear that they have never accepted his tenancy as one which binds them, and it is quite clear that there is no contractual relationship between Goodlad and the plaintiffs, either imported by the statute or otherwise. Essentially for the reasons stated in those two passages, the learned Master of the Rolls held that the general prohibition in section 3(1) of the 1933 Act did not apply to proceedings by the mortgagee and that an order for possession should therefore be made against Goodlad. Somervell LJ delivered a reasoned judgment agreeing with the Master of the Rolls. His views can be taken as having been summarised in a sentence at p 721: It therefore seems to me that the Act is primarily one which enables tenants to assert certain rights, and to remain in possession, as against landlords who are seeking to obtain possession, and who would, but for the provisions of these Acts, be entitled to possession. Jenkins LJ also agreed, but without adding any further reasons of his own. In the present case Millett J, having read a passage from the judgment of Sir Raymond Evershed which included the second passage above quoted, said, at p 18E of the transcript: In my judgment, that applies equally to the present case. The plaintiff was not Mrs Plane’s landlord at the date when she signed the contract, and he never intended to become her landlord. The only contractual relationship between them was that contained in clause M of the contract, and its whole purpose was to prevent the relationship of landlord and tenant coming into existence between them. He then dealt with Mr Stevenson’s arguments for distinguishing the Dudley case and, having rejected them, made an order for possession against Mrs Plane. In the main Mr Iwi, for the plaintiff, has adopted the judge’s reasoning on the appeal to this court. In deciding whether the decision in the Dudley case applies to the present case, I start by observing that the facts there were very striking. A mortgagee had advanced money on the security of property which, if it was not actually to be occupied by the mortgagor personally, was subject to an agreement that he should not have the mortgagor’s statutory power of granting leases. Without the mortgagee’s knowlege or approval the mortgagor created a protected tenancy. The mortgagor then defaulted on the mortgage repayments and the statutory power of sale arose. He did not defend the mortgagee’s action for possession, but the tenant did. On those facts it would have been alarming, perhaps worse, if the mortgagee had been unable to obtain possession against the tenant in order to realise its security. This court clearly thought, in my respectful view correctly, that that cannot have been the intention of Parliament in framing the predecessors to section 98(1). But, in order so to conclude, they had to follow a route which may have led them into expressing views which were not only wider than was necessary for the decision of the case before them, but which should not be taken to be of literal application to other cases depending on other facts. The general question which arises is whether, before the prohibition can apply, the person seeking possession must be someone who, in the words of Sir Raymond Evershed, can fairly and properly be described as the landlord of the occupant. For a reason which will soon appear, I do not find it necessary to express a view on that general question in this case. I would merely say that I can think of circumstances, some of which have been canvassed in argument, where it might seem that the spirit of the decision in the Dudley case ought to prevail, even though the person seeking possession does not satisfy the description there propounded. However that may be, I think that here the plaintiff does satisfy the description and, moreover, that we are bound to apply it in this case. In the Dudley case importance was attached to the other provisions of the legislation, including the definition of ‘landlord’. By section 152(1) of the 1977 Act the expression ‘landlord’ is defined to include ‘any person from time to time deriving title under the original landlord’ and also, in relation to any dwelling-house, ‘any person other than the tenant who is, or but for Part VII of this Act would be, entitled to possession of the dwelling-house’. Those are two alternatives to which full effect ought, so far as possible, to be given. I would agree that at the time of the signing of the agreement of June 11 1984 the plaintiff in the present case could not properly be described as someone who, but for section 98(1), would have been entitled to possession of 7 Finch Road. Contractually, he was not entitled to possession until completion of the purchase. On the other hand, it seems to me that different considerations apply to the question whether the plaintiff was a person deriving title under the original landlord. Millett J dealt with Mr Stevenson’s submission to the effect that the plaintiff was such a person at p 19H of the transcript: . . . At the date of the agreement with Mrs Plane the plaintiff was only an intending purchaser of the landlord’s interest; he was not prepared to enter into a contract of purchase without first having Mrs Plane’s agreement to clause M. He never acquired any interest, even equitable, in the property without Mrs Plane’s agreement to vacate it; and although on completion he will derive title under Mrs Aspin, that is not the capacity in which he claims against Mrs Plane. As I have indicated, that is an analysis with which in two vital respects I respectfully disagree. First, the plaintiff was not an intending purchaser. He was an actual purchaser. Second, it is not, in my view, correct to say that he would only become a person deriving title under Mrs Aspin on completion. That is certainly true so far as the legal estate is concerned. But the equitable interest passed to the plaintiff under the contract at one and the same time as Mrs Plane agreed to join in giving him vacant possession. He had derived the equitable title from Mrs Aspin. I therefore conclude that at the date of the agreement the plaintiff was a person deriving title under the original landlord. Whether on that ground alone or on a general view of the relationship between the parties, I think that he was a person who may fairly and properly be described as Mrs Plane’s landlord within the views expressed in the Dudley case. In the end the correct view may well be that the fact that Mrs Plane’s agreement to give up possession was made with the plaintiff and not with Mrs Aspin was a mere technicality which ought not to take it outside the general rule established by Barton v Fincham. It remains for me to mention an alternative argument which has been advanced to us by Mr Iwi on behalf of the plaintiff. That argument was not, I think, put quite in the same way to Millett J as it has now been put to us. If it was, I would infer that the judge did not think much of it. Mr Iwi relies on section 120 of the 1977 Act, which recognises that an assignment of a protected tenancy is not in itself objectionable. It is objectionable only if there is a condition for the payment of a premium or the making of a loan. Mr Iwi accordingly submits that Mrs Plane could, had she wished, have assigned her tenancy, without monetary consideration, to the plaintiff before entering into the contract for sale or, at any rate, before completion of the purchase. He relies on the fact that Mrs Plane did not receive any monetary consideration from the plaintiff. In those circumstances, submits Mr Iwi, the transaction could not have been impugned. Then, in reliance on certain observations made by Russell LJ when delivering the judgment of this court in Jenkin R Lewis & Son Ltd v Kerman [1971] Ch 477, at p 496, and by Wilberforce J in Re Stirrup’s Contract [1961] 1 WLR 449, at pp 452-453, Mr Iwi submits that the court can properly treat the transaction as having been an agreement to assign the tenancy and not to surrender or extinguish it. I think that the observations relied on by Mr Iwi are of no assistance to him at all. Those of Russell LJ were directed only to a surrender by operation of law. The decision of Wilberforce J was to the effect that where a document under seal, which is expressed to be an assent, discloses a manifest intention to pass a legal estate in land, the estate will pass even though the document ought properly to have been expressed as a conveyance. That principle, which is no doubt very beneficial, has nothing at all to do with a case where a party has agreed to surrender or extinguish her tenancy and cannot therefore be treated as if she had entered into a completely different agreement, namely to assign her tenancy, being a transaction by which the tenancy is not surrendered or extinguished but preserved. Accordingly, I have no hesitation in rejecting Mr Iwi’s alternative argument. I would, therefore, distinguish the actual decision in the Dudley case and hold that section 98(1) applies to the agreement constituted by special condition M. I recognise that this may well be thought to work a hardship on the plaintiff, but I regret that that is not something which can be taken into account in defining the extent of the application of a provision such as section 98(1). For these reasons I would allow this appeal, dismiss the action as against Mrs Plane and grant her a declaration on her counterclaim in terms which can be discussed with counsel. PURCHAS and LLOYD LJJ agreed and did not add anything. The appeal was allowed with the costs of the appeal, no order being made as to costs below. Leave to appeal to the House of Lords was refused.