Farrell and another v Alexander

Money paid to outgoing tenant of rent-protected premises by person to whom landlords undertook to grant tenancy held a premium and recoverable by virtue of section 90, Rent Act 1968 This was an appeal by Mrs Colette Denise Gina Farrell and her daughter, Miss Suzanne Deidre Farrell, from a majority judgment of the Court of Appeal rejecting their claim to recover from the respondent, Mrs Jacinth Marian Alexander a sum of money paid to her as part of a transaction by which they obtained the tenancy of Flat 20f, Randolph Crescent, London W9. The decision of the Court of Appeal was reported at (1975) 235 EG 825, [1975] 2 EGLR 69. W Blum and N Wood (instructed by Braby & Waller, agents for Hutchings, Hutchings & Plum, of Torquay) appeared for the appellants, and R G Furber and D M Barnes (instructed by Theodore Goddard & Co) represented the respondent. In his speech, LORD WILBERFORCE said: The appellants, Mrs Farrell and her daughter, have brought an action to recover from the respondent, Mrs Alexander, a sum of money which was paid to her in order to obtain the tenancy of a flat. They claim that this money was a premium which it was illegal for the respondent to require or to receive and that they have the right to recover it by virtue of section 90 of the Rent Act 1968. The respondent had a protected tenancy of this flat with some four years unexpired from the Church Commissioners. There were negotiations with the appellants with a view to an assignment of it, and the appellants were asked for a sum of £4,000 for the fixtures and fittings. Though the actual value of70 these fixtures and fittings has not been determined, it was certainly less than £4,000, so that the balance was a premium for the proposed assignment. In asking for it, the respondent may have committed an offence under section 89 of the 1968 Act. But the matter was not carried through by assignment, because the Church Commissioners, in accordance, it seems, with their normal practice, and in accordance with a clause in the existing lease, required the respondent to surrender the lease with a view to the grant of a new tenancy to the appellants. The transaction proceeded in this way. A formal agreement was drawn up under which the respondent agreed to surrender the lease subject to acceptance of the surrender by the landlords and to the simultaneous grant by them of a new lease to the appellants. On completion the new lessees were to pay to the respondent the sum of £4,000 for fixtures and fittings, and this money was in fact paid. It seems to have been suggested at one time that the transaction might be regarded as in substance an assignment, in which case the respondent would have had no answer to the appellants’ claim, but in my opinion this is not a maintainable contention. It cannot be said that the surrender and grant was a sham or a subterfuge: it was what the landlords required for reasons, understandable enough, of their own. They had, of course, no interest in the ‘premium.’  So the question to be decided is whether it is illegal for a lessee to require or to receive a premium as a condition of surrendering her lease, and in order that a new lease may be granted to the payer of the premium. The directly-relevant sections of the Act are sections 85 and 90 (1). The former contains the following: (1)  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 or the making of any loan (whether secured or unsecured) shall be guilty of an offence under this section. (2)  Any person who, in connection with the grant, renewal or continuance of a protected tenancy, receives any premium in addition to the rent shall be guilty of an offence under this section. Section 90 (1) provides: 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 that 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. Section 92 says that in Part VII of the Act, in which the above sections are, ‘premium’ includes any fine or other like sum and any other pecuniary consideration in addition to rent. I must say that in relation to the facts which I have stated, these sections are to me, if not transparently clear, at least unambiguous in the legal sense. They refer to ‘any person,’ words wide enough to include landlords, tenants, agents or middlemen. They apply to what was done here because the respondent required the premium as a condition of the grant of a protected tenancy (see the words ‘subject to . . . the simultaneous grant’ mentioned above). The words ‘any person’ which are common to subsections (1) and (2), and also to section 86 (1) and (2) and to section 87 (2), are words of wide generality and fit, without any strain whatever, the present facts. I am unable to follow the argument that the words ‘in addition to the rent’ or ‘in addition to rent’ which appear in section 85 and in the interpretation section 92, and which on any view are used with some surplusage, have the effect of limiting ‘any persons’ to ‘persons in receipt of rent.’  The words are descriptive of the character of the payment and not of the recipient. Is there any reason why the general words should be restricted, and what restricted meaning can be found which would exclude this transaction?  What is argued by the respondent quite simply is that ‘any person’ in section 85 means, or more exactly should be confined to, ‘any landlord or lessor’ or ‘any potential landlord or lessor,’ and this restricted meaning is said to be imposed by the history of this legislation and by authority. Before I attempt to deal with this argument I must say something as to the correct method, as I see it, of interpreting this Act, the key to which, in my opinion, lies in the proposition stated above that what we are called upon to construe is section 85 of the Rent Act 1968. This proposition, apparently ingenuous in fact, contains within it the reasoning which follows. The Rent Act 1968 is a consolidation Act of a comprehensive character built up after a process of enactment, amendment, addition and repeal of a number of statutes starting with an Act of 1915. The respondent’s argument depends, for any plausibility, upon a process which involves starting from that wartime Act–which had a very limited scope and whose language shows that it was referring only to landlords–and tracing the development through an Act of 1920 (re-enacting the 1915 provision in different language) and Acts of 1949 and 1965 (both adding further provisions and re-arranging the sections) and asking at each stage the question, did Parliament extend the reach of the prohibition beyond landlords?  To reinforce a negative answer to this, the respondent is able to rely on a decision of the Court of Appeal in 1921 (Remmington v Larchin [1921] 3 KB 404) in which it was held that the word ‘person’ in the Act of 1920 (section 8 (1)) meant ‘landlord.’  This holding is sought to be extended to the present Act through a recent decision of the Court of Appeal (Zimmerman v Grossman [1972] 1 QB 167). The judge and the majority of the Court of Appeal in the present case followed, as they were clearly bound to follow, Zimmerman v Grossman, but your Lordships are free to reconsider that case. On this argument it is necessary to decide what consequences follow from the fact that the Rent Act 1968 was a consolidation Act. This question has already concerned this House: see Maunsell v Olins [1975] 1 All ER 16, which, I must regret to say, contains more discussion than conclusion. I will try to clarify the latter. The case was concerned with the meaning of the word ‘premises’ in another section of the Act, and led to sharp differences of view. There were those who thought that the meaning of this word was clear (Lord Diplock and Lord Simon of Glaisdale) and there were those who thought it ambiguous (Lord Reid, Viscount Dilhorne and myself). It was because I thought that the word has no primary or certain meaning, except perhaps in a conveyance or lease, and that the section in question ‘admits, almost invites, opposing constructions’ (p 20), that I found it necessary to look at the antecedents of the section, and Lord Reid and Viscount Dilhorne took the same view. Lord Diplock and Lord Simon of Glaisdale, on the other hand, thought that the word was clear and for that reason considered that it was not legitimate to go back into the legislative history. If I may say so, on that hypothesis I would agree with them. I would agree and endorse the principle that it is quite wrong that in every case where a consolidation Act is under consideration, one should automatically look back through the history of its various provisions, and the cases decided upon them, and minutely trace the language from Act to Act–a process, which, incidentally, has led to an argument of four days’ length in this House. In recent times, because modern statutes have become so complicated, the courts, myself included (cf IRC v Joiner [1975] 3 All ER 1050), rather too easily accept this process, whether under persuasion of counsel or from their own scholarly inclinations. But unless the process of consolidation, which involves much labour and careful71 work, is to become nothing but a work of mechanical convenience, I think that this tendency should be firmly resisted; that self-contained statutes, whether consolidating previous law, or so doing with amendments, should be interpreted, if reasonably possible, without recourse to antecedents, and that the recourse should only be had when there is a real and substantial difficulty or ambiguity which classical methods of construction cannot resolve. This is particularly true of Acts such as the Rent Act 1968 which have to be applied by county courts and to be understood by, or at least explained to, great numbers of citizens. In this field of capital payments in relation to changes of occupation, we find that in this Act there are provisions about the grant, renewal or continuance of protected tenancies–prohibiting the requiring of a sum as a condition and the receiving of a sum in connection (section 85); similar provisions about assignments of protected tenancies (section 86); similar provisions about grants, renewals, continuance or assignments of certain furnished lettings (section 87), in which ‘any person’ indisputably covers all who may be concerned with any of these things; similar provisions about offering furniture at an excessive price (section 89); provisions as to payments asked or received as a condition of giving up statutory tenancies (section 13), payments required as consideration for changes by agreement of statutory tenancies (sections 14, 15). All of this, coupled with the width of expression of section 85 itself, points towards a general interpretation covering the requiring or receipt of capital sums. In my opinion this process of interpretation should lead to a conclusion that section 85 (1) covers the kind of tripartite arrangement we have here. This brings me to the question of judicial authority. Remmington v Larchin was decided upon section 8 (1) of the Act of 1920 which followed and modified section 1 (2) of the Act of 1915. Section 8 (1) was as follows: A person shall not, as a condition of the grant, renewal, or continuance of a tenancy or subtenancy of any dwelling-house to which this Act applies, require the payment of any fine, premium, or other like sum, or the giving of any pecuniary consideration, in addition to the rent, and where any such payment or consideration has been made or given in respect of any such dwelling-house under an agreement made after the twenty-fifth day of March nineteen hundred and twenty, the amount of value thereof shall be recoverable by the person by whom it was made or given. . . . The case was decided by a Court of Appeal of great eminence, any of whose judgments I would have the strongest disposition to accept as correct. I do not think there is any need to differ from it. It is certain that all three Lords Justices felt great difficulty about the case, and that what ultimately weighed with them were three things: first, that the Act of 1915 looked to be confined to landlords, second, that the Act of 1920 was penal in character, third, that it contained no provision against the requiring of a premium on an assignment of a tenancy. Atkin LJ is explicit on this point (p 411). This was an argument of considerable strength against bringing tripartite arrangements under the prohibition. I am quite content to leave this decision there. It was followed by the appeal of Zimmerman v Grossman upon the Act of 1968, by which time the prohibition against requiring premiums on assignments, as well as other prohibitions, had been added and the form and structure of the enactment had been changed. The Court of Appeal, again finding difficulty in their decision, followed Remmington v Larchin and reached the same result. It is not necessary to decide whether the court was in fact bound by the earlier decision–the judges concerned were clearly entitled to follow it, but I think that we should take a different view. There are three other points which I must mention. First, it was said in Zimmerman’s case, and the argument was repeated in this House, that there was some Parliamentary endorsement of the decision in Remmington v Larchin by reason of the fact that in 1949, and later in 1965, Parliament, having the opportunity to reverse it, had in substance re-enacted the section on which Remmington v Larchin was based, and so must be taken to have validated Remmington v Larchin. Widgery LJ in his judgment cited the well-known passage from the judgment of James LJ in Greaves v Tofield (1880) 14 ChD 563, at 571, and reliance was duly placed upon such cases as Barras v Aberdeen Steam Trawling & Fishing Co Ltd [1933] AC 402 and Webb v Outrim [1907] AC 81, and in the opposite sense R v Bow Road Justices (Domestic Proceedings Court) ex parte Adediga [1968] 2 QB 572. I have never been attracted by the doctrine of Parliamentary endorsement of decided cases: it seems to me to be based upon a theory of legislative formation which is possibly fictional. But if there are cases in which this doctrine may be applied, and I must respect the opinions of those judges who have so held, any case must be a clear one. James LJ must have thought so when he used the words ‘well-known words upon which there have been well-known decisions’ (1c). This case is certainly not such a case. It really cannot be said, if our reasoning is to have any contact with reality, that the draftsman of the Act of 1949 (a) must have had in mind a decision of 1921, whose reported headnote opens with the words ‘that section 8 (1) was reasonably capable of two constructions’ and all of the judgments in which underlined the ambiguity and obscurity of the enactment; (b) decided to perpetuate this ambiguity while removing one of the grounds of the decision; and (c) should have committed Parliament to the continued existence of a lacuna or loophole which had no merit to commend it. To impute such a process of thought to the architect of the new section and to those who voted it into existence really strains credibility. Secondly, I have given careful thought to the question whether it is right for this House to overrule, in effect, a decision which has stood for 55 years. Not forgetting that Remmington’s case was referred to without disapproval in this House in 1960 (Elmdene Estates Ltd v White [1960] AC 528), I have reached the conclusion that it is. To do so does not involve upsetting titles or, except as to the present respondent, any expectations. The respondent was willing to proceed by an assignment, which on any view was contrary to the Act, and there is no suggestion that she proceeded as she did on some view of the law which made it safer to do so. Thirdly, there is the point that the section is a penal section–not one of great criminality, but still, if infringed, one liable to attract prosecution and some degree of discredit. But this consideration only has weight where ‘after full inquiry and consideration one is left in real doubt’ (R v Ottewell [1970] AC 642, 649 per Lord Reid). I do not agree with Widgery LJ (as he then was) in Zimmerman v Grossman when he said that a principle of resrictive application should be considered when a penal provision is framed ‘in such wide and therefore necessarily ambiguous language’ (p 179). On the view which I take, the Act is wide, and deliberately so, and this is not ‘ambiguity’ which attracts the principle. I would allow the appeal with costs. The case must be remitted to the county court at Wandsworth to determine the excess of the sum of £4,000 over the real value of the fixtures and fittings. The appellants are entitled to have this sum repaid. Agreeing, LORD DILHORNE said that he did not regard subsections (1) and (2) of section 85 as ambiguous. Though they might have been better phrased, he thought their meaning and effect clear. Their object was to protect tenants of premises within the Acts by making it impossible to extract from them, as a condition of the grant, renewal, continuance or assignment of a tenancy or in connection72 with such grant etc, any sum over and above the rent. That being so, he (his Lordship) could see no valid reason why, as a matter of policy, Parliament should have intended the section to apply only to landlords, though it might have been thought that they were the most likely offenders. As for the argument based on the history of the legislation, he (Lord Dilhorne) thought that the language of section 8 (1) of the 1920 Act, contrasted with that used in the Act of 1915, showed it to have been Parliament’s intention that anyone who paid a premium of the kind in question should be entitled to recover it from the person to whom it was paid, whether or not he was the landlord. That conclusion was contrary to the decision of a strong Court of Appeal in Remmington v Larchin, but he (his Lordship) agreed with Scarman LJ below that a wrong turning had been taken in 1921. He recognised the force of the contention that if Parliament had wished the decision in Remmington not to apply, it should have made that clear by express words, but in his view its omission to do so did not justify the conclusion that in later legislation it had endorsed the principle laid down in 1921. Possibly in 1949 the Remmington case had escaped the notice of the draftsman when it should not have done, and when the subsection was redrafted in 1965 the draftsman was content to model his work on the 1949 Act. Also agreeing, LORD SIMON said that the primary approaches to statutory interpretation were as appropriate for construction of a consolidation Act as for any other type of statute. It was only on failure of the primary aids that the fact that the statute to be construed was a consolidation statute permitted any special approach through use of the presumption that a consolidation Act did not change the law. As a matter of literal construction, he (his Lordship) thought that the words ‘Any person who . . . requires, in addition to the rent, the payment of any premium’ in section 85 (1) of the Act of 1968 must be a counterpart of the words ‘Any person who . . . receives any premium in addition to the rent’ in section 85 (2). He would therefore read ‘in addition to the rent’ in section 85 (1) as qualifying the payment rather than the requirement, and thus the character of the payment rather than the character of the recipient. He thought that Remmington’s case was wrongly decided, for the reasons given by Lord Dilhorne, and that it would be an absurd fiction to hold that in 1949 Parliament had endorsed the decision in derogation of the known general objective of rent legislation, giving specific statutory sanction to another loophole in the controls. Nevertheless he (Lord Simon) thought that the majority in the Court of Appeal in the present case were right in holding themselves bound by the decision in Zimmerman v Grossman, though that case must now be regarded as overruled. Also agreeing, LORD EDMUND-DAVIES said that his ultimate conclusion was that no room for doubt existed that section 85 did catch the transaction in the present case. He for his part thought that Remmington’s case was correctly decided, but that in Zimmerman the court should have held that the 1965 provision was not directed solely against landlords. Dissenting, LORD RUSSELL expressed the view that Parliament had proceeded in a patchwork way when dealing with the problem before the House, and that the words it had employed should not be taken as extending a penal sanction more widely than was fairly required by the language used, having regard to the general context of this legislative field. The appeal was allowed and the case remitted to Wandsworth County Court.