Cabo v Dezotti

Housing – House in multiple occupation – Rent repayment order – Appellant owning freehold of house – Appellant appointing company as agent to manage property – Company granting respondent licence to occupy room – Respondent applying for rent repayment order against appellant – First-tier Tribunal finding property mandatory HMO requiring licence – Upper Tribunal dismissing appeal – Whether appellant landlord of respondent under Housing and Planning Act 2016 – Appeal dismissed In 2005, the appellant purchased a six-bedroom terraced house at 6 Bellamy Close, West Kensington, London. The former kitchen and living room had been repurposed as bedrooms to maximise the number of occupants. The appellant’s husband (G) was the sole director of a company specialising in short-term lettings. In 2016, the appellant appointed the company as her agent to manage the property for an annual renumeration of one peppercorn. In September 2016, the respondent signed an agreement allowing her to occupy one of the rooms in the property. The agreement was headed with the name and address of the company and stated to be a “licence to occupy a room as holiday let”. G signed the agreement on behalf of the company. The respondent initially paid her rent in cash to G but, from June 2018, she paid by bank transfer into an account in the name of the appellant’s brother. In June 2019, she moved out of the property and applied for a rent repayment order on the ground that it was an unlicensed HMO. The First-tier Tribunal (FTT) found that the property constituted a mandatory HMO which required a licence and ordered the appellant to repay the full amount claimed. On the appellant’s appeal, the Upper Tribunal concluded that she had been an undisclosed principal as regards the respondent’s agreement: [2022] UKUT 240 (LC); [2022] PLSCS 149. The appellant appealed.   Held: The appeal was dismissed. (1) An undisclosed principal might sue and be sued on a contract made by an agent on their behalf, acting within the scope of their actual authority. In entering into the contract, the agent had to intend to act on the principal’s behalf. The agent of an undisclosed principal might also sue and be sued on the contract. Any defence which the third party might have against the agent was available against their principal. The terms of the contract might, expressly or by implication, exclude the principal’s right to sue, and their liability to be sued. The contract itself, or the circumstances surrounding the contract, might show that the agent was the true and only principal: Siu Yin Kwan v Eastern Insurance Co Ltd [1994] 2 AC 199 applied. In the present case, the management agreement provided for the appellant to “cede all management rights” in respect of the property to the company for five years and for the company to manage the property exclusively for the appellant. The agreement explained that it was not intended to create any landlord/tenant relationship, nor any tenancy, licence or lease, or any joint venture but the company was to be able to “let” the property. The respondent’s occupation agreement was headed “Licence to occupy a room as holiday let”. (2) While, the appellant denied having received any financial benefit from the agreements which the company entered into with the respondent and others who had lived at the property, she did not disavow the agreements. The FTT found that neither the occupation agreement nor the management agreement was a fully reliable guide to what was intended. Contrary to what was said in the occupation agreement, the agreements with occupiers were not in fact intended to be short term lets and the occupation agreement was “something of a sham”. Further, the FTT found the arrangement depicted in the management agreement not to be credible. The possibility of the appellant having a reasonable excuse under section 72(5) of the Housing Act 2004 Act was not specifically raised by the appellant and was anyway rejected. Had the company entered into the occupation agreement without the appellant’s authority, she could have claimed to have a “reasonable excuse”, but did not do so. In all the circumstances, the Upper Tribunal was justified in concluding that the company had the requisite authority from the appellant to enter into the occupation agreement. (3) Where an agent had actual authority and entered into a contract with another party intending to do so on behalf of his principal, it mattered not whether they disclosed to the other party the identity of their principal, or even that they were contracting on behalf of a principal at all, if the other party was willing, or led the agent to believe that they were willing, to treat as a party to the contract anyone on whose behalf the agent might have been authorised to contract. In an ordinary commercial contract, such willingness of the other party might be assumed by the agent unless either the other party manifested their unwillingness or there were other circumstances which should lead the agent to realise that the other party was not so willing: Teheran-Europe Co Ltd v ST Belton (Tractors) Ltd [1968] 2 QB 545 considered. (4) The present case was closely analogous to Epps v Rothnie [1945] KB 562 where a tenancy agreement had been made in the name of the plaintiff’s brother, described as “the landlord”, although the house in question in fact belonged to the plaintiff. The court held that the agreement was an ordinary agreement in writing and even if the plaintiff was compelled to rely on it, evidence would have been admissible on ordinary principles applicable to any contract in writing, to prove that the person signing it as a contracting party, was acting for an undisclosed principal. An intention to exclude the involvement of an undisclosed principal could not be inferred from the mere fact that the company was described in the occupation agreement as “the licensor”. The reference to the plaintiff’s brother as “the landlord” in Epps v Rothnie did not prevent the plaintiff from relying on the tenancy agreement; no more should the occupation agreement’s description of the company as “the licensor” mean that the appellant could not be regarded as an undisclosed principal. Nor was there anything else in the occupation agreement or the surrounding circumstances which could warrant the conclusion that the company was the only principal. In all the circumstances, the Upper Tribunal was justified in concluding that the appellant was an undisclosed principal and the respondent’s “landlord” for the purposes of the Housing and Planning Act 2016. Zane Malik KC and Asad Maqsood (instructed by Lamptons Solicitors) appeared for the appellant; Justin Bates KC and George Penny (instructed by Hammersmith & Fulham Law Centre) appeared for the respondent. Eileen O’Grady, barrister Click here to read a transcript of Cabo v Dezotti