Evans v Engelson

Rent Act 1977–Appeal by tenant against possession order–House purchased by respondent in name of company in which he held all the shares–Possession sought by respondent under Case 9 in Schedule 15 to 1977 Act–Complicated series of transactions between respondent and company ending in deed of gift of house from company to respondent–Object to enable respondent to claim that he was not a ‘landlord by purchase’–Court of Appeal brushed aside these transactions and decided case on reality of the matter and commonsense–Corporate veil could be pierced–Company a mere nominee of respondent–Premises in effect purchased by respondent in 1964–Accordingly respondent did not become landlord by purchase after March 23 1965 and application of Case 9 was not excluded–Warning that circumstances were special–Tenant’s appeal dismissed This was an appeal by the tenant, Miss Kari Engelson, from a decision given in the Cambridge County Court in favour of the present respondent, Mr Gordon Page Evans. The judge made a possession order against Miss Engelson in respect of the house occupied by her as a statutory tenant at 2 Lingholme Close, Cambridge. Mr Evans claimed possession on the ground that he required the house for occupation as a residence for himself and relied on Case 9 in Schedule 15 to the Rent Act 1977. P Salsford (instructed by Royds Barfield, agents for Crossman & Co, of Cambridge) appeared on behalf of the appellant; J Malius (instructed by Mole, Metters & Forster, of Reigate) represented the respondent. Giving the first judgment at the invitation of Ormrod LJ CUMMING-BRUCE LJ said: In about 1952 Mr Gordon Page Evans acquired a leasehold interest in a flat in Gerald Road, London SW1, the landlord being the Grosvenor Estate. At the time of that transaction the lease on the premises was held by a corporate body, F C Property Co, which had been formed I think at the instance of executors. The technique whereby Mr Evans acquired his leasehold interest in Gerald Road was that, instead of himself buying the lease, he bought all the shares in F C Property Co, whose only asset was the leasehold interest in the flat in Gerald Road. So the situation then was that he acquired the lease but acquired it in the name of F C Property Co, being a company in which he and his wife held all the shares. The next stage is that in 1964 he wanted to buy another place, 2 Lingholme Close in Cambridge, because he wanted to have it available for himself and his wife when he retired and left London. He paid £3,000 to the vendor, but arranged that 2 Lingholme Close should be conveyed into the name of F C Property Co. In 1973 unfortunately his wife died whereupon, as her successor, he held all the shares in F C Property Co. On November 20 1973 2 Lingholme Close, Cambridge, was let to Miss Engelson and, as that house when Mr Evans bought it had been put into the name of F C Property Co, the agreement in writing which gave rise to the lease was an agreement between F C Property Co and Miss Engelson. It is perfectly clear, however, that she knew that she was dealing with Mr Evans at all material times. In 1976 Mr Evans surrendered his remaining interest in his lease in Gerald Road to the Grosvenor Estate in consideration fall upon him at the end of his term. On the surrender of that lease he arranged with Grosvenor Estate to become their tenant in a little flat in Pimlico for a term of five years. That tenant in a little flat in Pimlico for a term of five years. That is where he has been living ever since. In 1978 he decided to give Miss Engelson notice to quit and to go and live in 2 Lingholme Close, Cambridge, which was his house, the registered owner whereof, pursuant to the conveyance, was F C Property Co. The lady did not go and so became a statutory tenant under the Rent Act. There was then a negotiation between Mr Evans and Miss Engelson with a view to Mr Evans buying her out by paying £1,000 in consideration of which she would surrender her interest. But although those negotiations reached an advanced stage, they never culminated in an enforceable agreement. Thus he found there was a tenant who was claiming the protection of the Rent Act. Against that background he started these proceedings in the Cambridge County Court, claiming possession of the house at 2 Lingholme Close and putting as the ground on which he claimed possession Case 9 of Schedule 15 to the Rent Act 1977, that the dwelling-house was reasonably required by him, the plaintiff, for occupation as a residence for himself and his future wife and stepson. The particulars of claim which were initially put on the court file dated November 24 1978 were amended on April 2 1979. By the amended particulars of claim a series of transactions are pleaded which occurred in 1978, being transactions between Mr Evans personally and the F C Property Co. In the particulars he pleaded that, after Miss Engelson on October 12 1978 decided to go ahead with an agreement to leave the premises in consideration of the receipt of £1,000, on the very next day, October 13 1978, there was a transaction at a time when Mr Evans still expected Miss Engelson to agree to leave voluntarily if he paid her a specified sum. The F C Property Co then purported to sell 2 Lingholme Close to Mr Evans for the sum of £3,500. Of course that was a sum which was then far below the market price of the property. So at that stage, as a result of that transaction, he appears to have purchased Lingholme Close from F C Property Co. Then Miss Engelson decided not to go on with her agreement to depart voluntarily from the house. As a consequence of that, on November 17 Mr Evans purported to sell the premises back to F C Property Co for the same sum as he had originally bought it from them. In the final stage, the last November transaction was on November 20 1978 when F C Property transferred the premises to Mr Evans by way of deed of gift. The object of that final exercise of a deed of gift was to enable Mr Evans to claim that, for the purposes of the Rent Act, he did not become a land-63 lord by purchase on any date after March 23 1965, because he had acquired the premises as a gift. So the stage was set for the proceedings in the county court, which took the form of the question of possession arising under section 98 of the Rent Act 1977 and in particular the relevant application of Case 9 of Schedule 15 thereto. The learned judge in a judgment of some length (which I regret to say I find far from easy to follow) appears to have decided the case in Mr Evans’ favour on the ground that the transactions in November were all genuine and the result was that on November 20 1978 Mr Evans acquired 2 Lingholme Close from the F C Property Co by way of gift. Therefore, the judge held on that ground that Mr Evans did not become landlord of Miss Engelson by purchasing the dwelling-house after March 23 1965, that the dwelling-house was reasonably required by Mr Evans for occupation as a residence, and it was reasonable to make an order for possession. Many arguments have been addressed to this court and a substantial number of authorities have been cited in order to assist the court with the analysis of the transactions between Mr Evans and the F C Property Co in the month of November 1978. If it were necessary to decide the case on such an analysis, it would be right for me to review the interesting submissions made on both sides and to examine the authorities. From the view of this case that I have formed, the answer to the question posed by the proceedings, namely, whether Mr Evans is or is not a landlord who became a landlord by purchasing the dwelling-house after March 23 1965, should be decided by an analysis of the events years before when 2 Lingholme Close was acquired in a transaction the ingredients of which were these. He paid £3,000, which came out of his own pocket, and it is relevant to observe that that purchase money did not represent the proceeds of sale of the flat in Gerald Road which had previously been acquired on the purchase of all the shares in F C Property Co by Mr Evans and his wife. The purchase price for 2 Lingholme Close was put up by Mr Evans as cash which he possessed without any reference to the interest of F C Property Co or himself in the Gerald Road flat. When he put up the money, he asked the vendor to convey Lingholme Close to F C Property Co, all the shares in which were held by himself and his wife. So much for the first question. In my view the last question is what was the effect, for the purposes of the Rent Act, of that acquisition of 2 Lingholme Close?  The contention of the parties can be simply stated. Counsel for the appellant, Miss Engelson, submits that for the purposes of the Rent Act F C Property Co became the owner of 2 Lingholme Close. When Miss Engelson became tenant of that hereditament, her landlord was F C Property Co and F C Property Co was the only party entitled to collect rent from her; and for the purposes of the Rent Act the court should not look behind the legal character of the conveyancing transaction and the legal form of the lease on which Miss Engelson held from F C Property Co. Therefore, on behalf of the appellant it is submitted that when the Cambridge house was acquired, it was acquired by F C Property Co and counsel goes on to make his submissions about the transactions in November 1978, which he submits make no difference at all. For the respondent it is contended that for the purposes of the Rent Act it is right for the court to look at the reality of the transaction when Mr Evans put up £3,000 and bought 2 Lingholme Close as a nest to which he and his wife would retire in due course when they left London. The conveyance of those premises into the name of F C Property Co, a company in which Mr Evans and his wife held all the shares, was an accidental event which did not, for the purposes of the Rent Act, divest him and his wife of the Cambridge house. He put up the money. If the matter is considered in terms of equity, he and his wife were the only beneficiaries. There was a trust held by F C Property Co but, without invoking equity, it is contended on behalf of Mr Evans that the true nature of the transaction was that F C Property Co was simply a nominee for himself and his wife. After the death of his wife, when her interest and her shares in F C Property Co devolved on Mr Evans, from that moment F C Property Co was merely a nominee for himself, Mr Evans, so that the reality of the matter is that Mr Evans acquired the property with his wife when he bought it and that the company has never been anything except a mere shell, irrelevant for the purposes of analysis of the Rent Act rights and of litigation. In my view that contention is right. I take the view that the court ought to analyse the transaction when 2 Lingholme Close was bought and discover the reality of the transaction, which can be discovered by looking at the form of the conveyancing in the context of the purchase and the payment of the purchase price. For my part I regard F C Property Co in relation to 2 Lingholme Close as a mere nominee. The landlord, for the purposes of the Rent Act and Miss Engelson, was–and has been at all material times–Mr Evans. He acquired the dwelling-house before March 23 1965 because he acquired it in December 1964. When he became landlord through the medium of F C Property Co of Miss Engelson, he did not become her landlord by purchasing the dwelling-house, because he had it already. If that is right, then it is unnecessary for me to analyse the rather tortuous goings-on about the house from November 1978, and it becomes unnecessary for me to decide what the consequence, if any, of those transactions is. I permit myself, however, to say that after hearing the argument, if one accepts the learned judge’s finding of fact that those transactions were real, then there was a stage in those transactions when Mr Evans did acquire the house from F C Property Co by purchase. Having done so, what has been called in one of the cases the ‘clog’ on his interest remains a ‘clog’ on the subsequent successor in title. However, it is unnecessary, on my analysis of the events in 1964, to decide the case on that ground and I would expressly refrain from doing so. I would dismiss this appeal on a ground very different from those which appear to be the grounds on which the learned county court judge founded his decision, and the ground on which I would decide the case and dismiss the appeal is that Mr Evans in 1964 acquired the premises by purchase, but did not become landlord of Miss Engelson by purchase after March 23 1965. I would add that the facts of this case are very unusual. The unusual feature is that F C Property Co was from Mr Evans’ point of view a mere accident which he accepted because the vendors of his leasehold interest in Gerald Road wanted for some reason of their own to sell him the shares in the company which owned the lease instead of the lease simpliciter. This accident seems to explain his decision to put 2 Lingholme Close into the name of the same company instead of into his own name or the joint names of himself and his wife. It is this circumstance which in my view makes it commonsense to pierce the corporate veil when answering the question whether he as owner was seeking possession of the house as a residence for himself within the meaning of Case 9. So this decision is certainly no authority for any proposition that ownership by a corporate body is commonly to be disregarded for the purposes of Case 9 situations. It is also important to take note that the tenant never raised any suggestion of estoppel at the time when the contract was formed; she relied upon the fact that her landlord was a corporate body as compared to Mr Evans personally. Had the facts given rise to such a defence Mr Evans could not have succeeded. For these reasons I would dismiss the appeal. Agreeing, SIR DAVID CAIRNS said: I too would dismiss this appeal. Two lines of argument were put forward here on behalf of the appellant. One might be described as the legalistic one and the other as the commonsense one. If the legalistic approach is adopted on the construction of Case 9 of Schedule 15 to the Rent Act 1977, then one gets into the realm where attempts are made by divers transactions to escape from the part of the case which restricts the right of the landlord to get an order for possession. That was what was attempted to be done here. Whether it could have succeeded it is unnecessary, as my Lord has already said, to decide, so like him I decline to do so. In my view, however, the commonsense approach is the right approach. Support for that is to be found in the judgment of Lord Donovan sitting in the Court of Appeal in Thomas v Fryer [1970] 1 WLR 845 at p 852, where Lord Donovan approved of the question being put in this form: Would the ordinary and reasonable person call this transaction a purchase and sale of the house? It appears to me that the learned judge who heard this action did in fact adopt this approach in one part of his judgment. I quote from it: The question is as to whether the landlord became a landlord by purchase or is a landlord by purchase for the purpose of this act, would be to ask him ‘When did you purchase the premises?’  Well, if that were put in the wide application of the matter ‘When at any time did you purchase the premises?’  I have no doubt that Mr Evan’s reply would be ‘Well. I first really purchased it in 1964 and I purchased it then with my money and had it put into the name of F C Property Co.’ Whether or not that was the ultimate ground (or one of them) on which the learned judge reached his conclusion, it is unnecessary to say. If it was, I think that it was the right ground and on that ground I, too, would dismiss this appeal. Also agreeing, ORMROD LJ said: The only point on which I wish to comment is that the pleadings in this case are not satisfactory in any way. Mr Malins is not in any way responsible for them, but the particulars of claim as originally filed were manifestly inaccurate and inadequate and when they were amended in April this year the contention that the property was originally purchased in fact by Mr Evans and not by F C Property Co was not pleaded. No objection seems to have been taken in the court below and it is clear that the learned judge had this very point directly before him because, as my Lord pointed out, it was the first point to which he referred in his judgment. He continued to discuss the situation in 1964 over the first two or three pages of his judgment and it plainly formed an important part of his consideration in this case. No question of the pleadings was raised in this court. I merely mention this in case someone hereafter says that the point was not pleaded. We have not asked Mr Malins to amend the particulars of claim because there was no real need to do so. The case as put in argument below and here is sufficiently plain. I agree with the reasoning expressed in both the judgments which have just been given and do not wish to add anything further of my own. I, too, would dismiss this appeal. The appeal was dismissed with costs. The appellant’s liability was determined at nil. An order nisi was made against the legal aid fund. The appellant was ordered to vacate the premises by January 1 1980. Leave to appeal to the House of Lords was refused.