Guestheath Ltd v Mirza

Rent Act 1977 — Rateable value limits for protected tenancy — Retrospective alteration of rateable values — Original values, which were above the limits for protection at the material times, admittedly arrived at by error — Tenancy would clearly have been protected if the correct values had been inserted originally in the valuation list — Alterations correcting figures taking effect much later than the ‘appropriate day’ — Strict construction of section 25(4) of 1977 Act — Merits entirely in favour of tenant but Act clearly adverse — Tenant unable to rely as an alternative on proprietary estoppel — Judgment for landlords 112 Owing apparently to a ‘surveying error’, incorrect rateable values (of £680 in April 1963 and £1,763 in April 1973) had been entered in the valuation list in respect of the subject property, thus excluding it from protection under the Rent Act 1977 — The ‘appropriate day’ for the property was March 23 1965 — The errors in the list were corrected by agreement, the figures being reduced to £576 and £1,347 respectively — Unfortunately for the tenant, the alterations took effect on April 1 1972 and April 1 1973, too late to satisfy section 25(4) of the 1977 Act, which required the alterations to take effect ‘not later than the appropriate day’ — Despite citations of authorities on similar phraseology in the Leasehold Reform Act 1967 and other arguments, Alliott J held that he would ‘exceed the proper bounds of statutory interpretation’ if he were to depart from the plain meaning of section 25(4) — The alterations to the list did not bring the tenant within the protection of the 1977 Act It was, however, submitted on behalf of the tenant that the principle of estoppel, in particular proprietary estoppel, could be invoked to prevent the landlords from asserting that the tenant was not protected — The landlords had over a long period ‘maintained an unequivocal approach that the tenancy was protected’ — Unfortunately again, for the tenant, there was a fatal defect in the case based on estoppel — There was no evidence at all that the tenant had acted to his detriment by reason of any encouragement or representations on the part of the landlords — He had not in fact been influenced by anyone in his confident belief that he was protected; he had all along been completely satisfied about his status — The judge accordingly, with reluctance in view of the merits, had to find that the landlords were not estopped from denying that the tenant was protected — There was nothing unconscionable or smacking of bad faith in the course they had taken The judge dealt also with subsidiary matters concerning insurance rent and a disputed service of notice of increase — Judgment for plaintiff landlords — Declaration and order for possession granted The following cases are referred to in this report. Amalgamated Investment & Property Co Ltd (in liquidation) v Texas Commerce International Bank Ltd [1982] QB 84; [1981] 3 WLR 565; [1981] 3 All ER 577, CA MacFarquhar v Phillimore [1986] 2 EGLR 89; (1986) 279 EG 584, CA Rendall v Duke of Westminster [1987] 1 EGLR 96; (1986) 281 EG 1197 The plaintiffs, Guestheath Ltd, owners of a property at 23 Launceston Place, London W8, claimed that their tenant, Mr Tafazul Hussain Mirza, the defendant, who occupied the property, was not protected under the Rent Act 1977 and they sought a declaration to that effect and possession. Paul Morgan (instructed by Pothecary & Barratt) appeared on behalf of the plaintiffs; David Neuberger QC and Nicholas Dowding (instructed by Borm-Reid & Co) represented the defendant. Giving judgment, ALLIOTT J said: There are two principal issues to be decided in this case: is the defendant protected by the Rent Act 1977 in his occupation of 23 Launceston Place?  If not, are the plaintiffs estopped from contending that he is not protected? The defendant’s occupation arose out of the assignment to him of an earlier lease which he surrendered when taking a new lease which ran from September 7 1971 to June 24 1981. It is the nature of his holding over after June 24 1981 that I have to determine. The history of the property’s rateable value is complex. It is common ground that the appropriate day in respect of the property is March 23 1965, when the rateable value above £400 excluded properties from the Rent Acts. As from March 22 1973 that ceiling figure became £600 and as from April 1 1973, £1,500. If the rateable value of the property exceeded those sums on the respective days, the defendant is not protected. If the rateable value of the property dipped below those figures on any one of those days, the defendant is protected. On the list at April 1 1963 the property was valued at £680. On March 23 1965 it remained at that level, as indeed it still did at March 22 1973. By that last date, the defendant had made a proposal dated November 19 1972 to reduce the rateable value of £680. In the new list for April 1 1973 the property was valued at £1,763 and on July 9 1973 the defendant made a further proposal to reduce that rateable value. Mr P R Woolway [FRICS], chartered surveyor and district valuer for Kensington and Chelsea since 1987, was called by the defendant upon subpoena duces tecum. It emerged from his evidence and the file he produced that both valuations of £680 and £1,763 were flawed by the same surveying error, although precisely what that error was he could not specify. As a result of that error coming to light, the valuation officer agreed two reductions of the rateable value of the property. By an agreement dated October 29 1973, £680 was reduced to £576, and by an agreement dated December 10 1973, £1,763 was reduced to £1,347. These agreements were implemented by two directions dated, respectively, February 5 1974 and June 4 1974. Pursuant to section 79 of the General Rate Act 1967, the two reductions took effect from the start of the rating year in which the proposals were served, namely April 1 1972 and April 1 1973 respectively. It is conceded that section 79 does not achieve protection for the defendant. I now have to decide, upon the rival submissions in law, whether, upon those agreed facts, the defendant enjoys Rent Act protection. Mr Morgan’s contention for the plaintiffs is simple: because this property was in existence at the time the Parliamentary Bill that became the 1965 Act was introduced the appropriate day for the property was March 23 1965. (That is section 25(3)(a) of the 1977 Act.)  As already rehearsed, the rateable value of the property on March 23 1965, as shown on the list, was £680. Section 25(1)(a) governs the rateable value for the purposes of the 1977 Act. It reads: 25.–(1) Except where this Act otherwise provides, the rateable value on any day of a dwelling-house shall be ascertained for the purposes of this Act as follows: (a)   if the dwelling-house is a hereditament for which a rateable value is then shown in the valuation list, it shall be that rateable value; . . . The only exception is provided by section 25(4) of the Act: Where, after the date which is the appropriate day in relation to any dwelling-house, the valuation list is altered so as to vary the rateable value of the hereditament of which the dwelling-house consists or forms part and the alteration has effect from a date not later than the appropriate day, the rateable value of the dwelling-house on the appropriate day shall be ascertained as if the value shown in the valuation list on the appropriate day had been the value shown in the list as altered. In the instant case the alterations took effect on April 1 1972 and April 1 1973, that is to say, days very substantially later than the appropriate day, and, contends Mr Morgan, the alterations cannot on the plain reading of the section give rise to protection which is determined by the rateable value shown in the list at the appropriate day. There is, he contends, no ambiguity, no scope for judicial construction of the statute to achieve a desired result. Parliament has geared retrospective alteration to the appropriate day and he submitted an historical rationale which may well be correct. In any event, he has the support of Sir Robert Megarry who, although happily alive and well, could not be regarded as other than massive authority. I read from the text of his book on the Rent Acts (11th ed) at p 119 under the heading ‘Appropriate day’: In relation to any dwelling-house which, on March 23, 1965, was or formed part of a hereditament for which a rateable value was shown in the Valuation List then in force, or consisted or formed part of more than one such hereditament, the appropriate day will be March 23, 1965. In relation to any other dwelling-house, the appropriate day will be the date on which a value is or was first shown in the Valuation List. If after the appropriate day the Valuation List is altered so as to vary the rateable value of the hereditament of which a dwelling-house consists or forms a part, and the alteration has effect from a date not later than the appropriate day, the rateable value falls to be ascertained as if the value shown in the Valuation List on the appropriate day had been the value shown in the list as altered. Effect is thus given to any retrospective alteration of the Valuation List that relates back to the appropriate day. But the rateable value for the purposes of the Rent Acts is not affected by an alteration that relates back to some date after the appropriate day, even if for rating purposes a refund of rates is made back to the appropriate date and earlier. Mr Neuberger begins by submitting that the merits are wholly on the defendant’s side. That I accept. Had not the original valuation been flawed, it seems clear that the property would have appeared in the list at the appropriate day at such a figure that would have given the defendant protection. Mr Neuberger recognises the difficulties113 presented by the clear wording of section 25(4), but contended if that section only applies to the appropriate day as a matter of strict construction then, divining Parliament’s intentions, I should look at sections 4 and 5 and see the purposes of them which involve considerations of value and rents at different dates and I should conclude Parliament must have intended retrospective amendment to apply to those different dates. He placed great reliance upon what, I must confess, I find to be difficult cases, MacFarquhar v Phillimore and Marks v Phillimore [1986] 2 EGLR 89, as illuminated (if that is the right word) by a remark of Dillon LJ in Rendall v Duke of Westminster [1987] 1 EGLR 96 at p 97K. Mr Neuberger accepts that the authorities cited can only be persuasive because the Court of Appeal was considering the Leasehold Reform Act 1967 but, in particular, relying on the judgment of Nicholls LJ, he points to the similarity of phraseology of section 5 of the Rent Act and section 1(6) of the Leasehold Reform Act and contends it would be absurd to have retrospective valuation for section 5 but not for section 4 in the Rent Acts in relation to the same date. Mr Neuberger urges me to find that the strict construction cannot be right and to follow him and, he would contend, the Court of Appeal in what Mr Morgan rather unkindly called a ‘crab-like’ approach to the legislation. Further, Mr Neuberger highlights the position at April 1 1973, when upon a strict construction of the Act there can be no correction of any error, however gross, save under section 80 of the General Rate Act 1967, which it is common ground is analogous to the slip rule and has no relevance to the instant case. Finally, Mr Neuberger contrasted the position under section 4(2) of the 1977 Act in which retrospection is impossible in Classes A and B but not in Class C, which he categorised as ludicrous. In summarising Mr Neuberger’s arguments, I have adopted the expression ‘strict construction’ which he had used more than once. Whether the epithet is appropriate or not, I have no doubt that, to adopt Nicholls LJ’s phrase at p 93C in the MacFarquhar case, I should exceed the proper bounds of statutory interpretation were I to hold other than that which section 25(4) plainly says. Retrospective cannot be effective later than the appropriate day and the two subsequent alterations to the valuation of the property cannot be relied upon to bring the defendant within the protection of the 1977 Act. I turn to estoppel. It would have been pleasant if, as in days of yore, equity had been able to remedy the injustice of the common law, but the concept of estoppel is governed by certain principles and it is with regret that I have come to the conclusion that the plaintiffs cannot be estopped from denying the plaintiff is protected. The estoppel relied upon is proprietary, admirably summarised in Snell on Equity, 28th ed, at p 558 as where: One, A, is encouraged to act to his detriment by the representations or encouragement of another, O, so that it would be unconscionable for O to insist on his strict legal rights. The relevant history of the matter starts in 1981, because Mr Neuberger accepts that nothing the landlords did before then can be relied upon by the defendant. The defendant had, however, decided that he had become protected by December 1973 and he told his solicitors so. In a letter at p 29 of the agreed bundle those solicitors write to the independent surveyor: With reference to the above matter, we are informed by our client that due to a recent revision of the rateable value of the premises his tenancy became regulated and he intends to apply to the rent officer for registration of his rent. That extract is the first of a number in which the solicitors express themselves in a similar way. It is not without significance as an indicator of the defendant’s unshaken and unshakable conviction from then until now (and, I am sure, beyond this judgment) that he was protected. Once the defendant’s view had been communicated to the landlords, they came to accept it and various negotiations for sale were conducted upon the basis that the defendant was a protected tenant. Mr Neuberger correctly contends that the landlords from 1981 to 1987, apart from a brief period in 1984, maintained an unequivocal approach that the tenancy was protected and that the mere fact that the initial belief in what I have held to be wrong lay in the defendant is no bar to an estoppel. Mr Neuberger further contends that the defendant was encouraged in the initial belief by the landlords and in reliance on that encouragement made his dispositions upon the basis that he was protected and expended money on the premises. Mr Neuberger stresses that if the plaintiffs are entitled to possession, they will be coming into a windfall because when they bought the property at auction on July 17 1986 it was advertised as let to a protected tenant. Mr Neuberger concluded by urging that the defendant had acted to his detriment upon the mistake common to both him and his landlords. I should add that, although on a reference to the rent assessment committee, the committee, at the instance of a committee member, had satisfied itself as to its jurisdiction, there was no suggestion of estoppel per rem judicatam. Similarly, although Mr Morgan, in opening, cited authority to defeat the contention that promissory estoppel in respect of the Rent Acts was possible, Mr Neuberger expressly disavowed reliance upon promissory estoppel. Mr Morgan relies upon two basic contentions to defeat proprietary estoppel. The first is succinctly summarised in a passage of Robert Goff J (as he then was) in Amalgamated Investment & Property Co Ltd v Texas Commerce International Bank Ltd [1982] 1 QB 84 at p 104G: Now, in my judgment, where an estoppel is alleged to be founded upon encouragement or representation, it can only be unconscionable for the encourager or representor to enforce his strict legal rights if the other party’s conduct has been influenced by the encouragement or representation. Later, at p 105A: . . . the question is rather whether his conduct was so influenced by the encouragement or representation . . . that it would be unconscionable for the representor thereafter to enforce his strict legal rights. Mr Morgan contends, and in my view the evidence particularly that of Mr Mirza himself amply bears out, that Mr Mirza was not influenced by the encouragement of anyone: neither the landlords, nor their advisers, nor indeed his own adviser, come to that. He was from first to last, and still is, entirely satisfied he was protected and whatever anyone else thought mattered not to him. Second, says Mr Morgan, there is nothing in the plaintiffs’ attitude in deciding to test the position at law as their predecessors in title had declined to do that was per se unconscionable or smacking of bad faith. Again, I am bound to say I agree with this second contention. Thus, with reluctance, I cannot find that the plaintiffs are estopped from denying that the defendant is protected. There are two subsidiary points for me to decide. Insurance rent was reserved by the lease, but the defendant says he agreed with his then landlords in 1984 that he would pay the premium for a wider cover than that which was prescribed under the tenancy. There is an exchange of letters at pp 175-179 in the bundle which supports this. The defendant has paid the premiums ever since, which the plaintiffs have duplicated. I find waiver by the plaintiffs’ predecessors in title binding upon them and the plaintiffs cannot recover under this head. Service of notice of increase was disputed by the defendant, who explained how the existence of three properties, 23, 23A and 23B Launceston Place, as depicted on a plan put in evidence, led to a good deal of postal confusion. The agreed documents at pp 298-306 cover the preparation of the notice, which itself appears at pp 299-300 and is dated June 12 1986. The attendance note at p 302 over Miss Sarah London’s name gives a detailed account of her serving the notice by hand that day. Understandably she could not recall the incident or the attendance note in the witness box and, perhaps to her credit, did not pretend she did. Mr Neuberger contended that there was thus no evidence of service to gainsay his client’s denial. I disagree. The documentary evidence, supported by Miss London’s evidence that she habitually served documents in the course of her employment, together with the attendance note, satisfied me, on the balance of probabilities, that the notice was served and I so find. I have given an advance indication of my findings to counsel in order to facilitate the drafting of an appropriate order and I will hear them on that topic.