Killick v Roberts

Rent Act 1977, section 2(1)(a) and Case 13 in Schedule 15 — Protected tenancy acquired by tenant’s fraudulent misrepresentation — Tenant, in order to induce landlord to let to him, falsely represented that he was having a house built for himself — Tenant did not vacate premises at end of an extended term — He then became a statutory tenant — Question as to whether a tenancy could be rescinded after it had become a statutory tenancy, rescission being a conception related to contract — Tenant’s fraud could not have been discovered until after the contractual tenancy had expired — Held, upholding recorder’s decision, that the tenancy could be rescinded — As a matter of principle it could not be the policy of the 1977 Act that a statutory tenancy which had sprung from a protected tenancy obtained by fraud should survive the rescission of the protected tenancy The tenancy in this case, of a bungalow in Devon, was granted for a fixed term which was extended by the exercise of an option — At the end of the extended term the tenant refused to leave and the landlord took proceedings for possession — The landlord had usually let the bungalow for holidays but she did not, as she could have done, give notice to the tenant under Case 13 in Schedule 15 to the 1977 Act that possession might be recovered — The recorder held that the plaintiff landlord could not rely on Case 13 and he rejected allegations of breaches of obligations by the tenant — He did, however, find that the defendant tenant had obtained the tenancy by fraudulent representation; that the plaintiff had sustained financial loss as a consequence and that she was entitled to have the tenancy agreement rescinded — He assumed that this would have the effect of terminating the defendant’s statutory tenancy of the premises — The recorder also gave orders for payment of damages and for costs, both of which were attacked on appeal The main issue on appeal was whether the rescission of the tenant’s tenancy agreement resulted in the termination of the statutory tenancy — Could a tenancy be rescinded after it had in fact expired by effluxion of time, so as to affect the statutory tenancy which, according to section 2(1)(a) of the Rent Act 1977, came into existence immediately upon the termination of the protected tenancy — It was clear that an order for rescission made before the protected tenancy expired would prevent a statutory tenancy from emerging, as there would no longer be a contractual tenancy from which it could spring — There was, however, an obvious difficulty about the position where the protected tenancy had already expired before the rescission took place — Had the statutory tenancy not sprung into existence before the act of rescission and was it then subject to rescission, which was a method of putting an end to a contract?  — The defendant’s counsel relied on this undoubted difficulty and on the special nature of a statutory tenant’s right — He also referred to section 98 of the 1977 Act — Section 98 prohibited a court from making an order for possession of a dwelling-house subject to a statutory tenancy except on familiar grounds which would have been available to the plaintiff in this case only if she had served a written notice under Case 13 While recognising the existence of the difficulty the Court of Appeal decided that the recorder had been right to decide this issue in favour of the plaintiff — The policy of the 1977 Act was to protect those who had been contractual tenants, not to protect someone who, having been deprived of his contractual tenancy, is adjudged not to have been entitled to occupy the premises in the first place — There was no reason in principle why a statutory tenancy should survive the rescission of a protected tenancy which had already expired — On this analysis there was no distinction between a rescission ordered on the ground of fraudulent misrepresentation by the tenant and one ordered on the ground of a common mistake of fact — Even if this view were not accepted, it could not on any footing be the policy of the 1977 Act that a statutory tenancy which had sprung from a protected tenancy obtained by fraud should survive the rescission of the protected tenancy The court rejected points made on behalf of the appellant in regard to the causation of the respondent’s financial loss and in regard to costs — As they agreed with the recorder’s decision on the main issue the appeal was dismissed The following cases are referred to in this report. Haberman v Westminster Permanent Building Society [1950] 2 KB 294; [1950] 2 All ER 16; (1950) 66 TLR 1068, CA Keeves v Dean [1924] 1 KB 685 Peters v Batchelor (1950) 100 LJ 718, CA Solle v Butcher [1950] 1 KB 671; [1949] 2 All ER 1107; (1949) 66 TLR 448 This was an appeal by Brian Henry Edmund Roberts, the tenant, against the order of Mr Recorder Newbold, at Plymouth County Court, whereby the landlord, the present respondent, Mrs Genevieve Rosemary Killick, was held to be entitled to recover possession of a bungalow known as Tremardy, Kiln Lane, Stokenham, Kingsbridge, Devon, and to other relief. Christopher Naish (instructed by Cornish & Co, of Totnes) appeared on behalf of the appellant; Stephen Lowry (instructed by Nash & Co, of Plymouth) represented the respondent. Giving judgment, NOURSE LJ said: This appeal raises a question under the Rent Act 1977. Does an order for the rescission of a protected tenancy by reason of a fraudulent misrepresentation on the part of the tenant bring to an end a statutory tenancy which has taken effect on the expiry of the protected tenancy? The landlord and the plaintiff in the action is Mrs Genevieve Rosemary Killick. She is the owner of a bungalow known as Tremardy, Kiln Lane, Stokenham, Kingsbridge, Devon. Since about 1986 she has usually let it as a holiday bungalow between Easter and the end of October in each year and, during the winter months, at a reduced rent to persons requiring short-term accommodation. By a written agreement dated November 30 1988 she let the bungalow to the defendant, Mr Brian Henry Edmund Roberts, from that date until March 1 1989, with the option of extending weekly for a further four weeks, at a rent of £40 per week. The agreement did not contain any covenants on the part of either party. As was later found to have been the case, the plaintiff did not, as she could have done, give notice in writing to the defendant that possession might be recovered under Case 13 in Schedule 15 to the 1977 Act. The other statutory requirements having been satisfied, it is agreed therefore that the tenancy was a protected tenancy for the purposes of the Act. By a letter addressed to the plaintiff dated February 6 1989 the defendant duly exercised his option to extend the tenancy for a further four weeks, ie until March 29 1989. He did not vacate the bungalow on that date. Thereafter he became the statutory tenant of it by virtue of section 2(1)(a) of the 1977 Act. On March 30 he wrote to the plaintiff asking her to extend the tenancy for a further four weeks. In a letter of April 3 she refused that request. On April 6 she issued a summons in the Plymouth County Court claiming possession of the bungalow on the ground that the tenancy had expired on March 29. On April 19 the defendant put in an informal defence raising points which were later abandoned. On May 26 1989 the defendant served an amended defence alleging that the plaintiff had not, prior to the commencement of the tenancy, given him written notice that possession of the bungalow might be required under Case 13 in Schedule 15 to the 1977 Act. He claimed the protection of the Act. On May 30 amended particulars of claim were served, in which it was alleged that prior to the commencement of the tenancy the plaintiff had given the defendant a written notice pursuant to Case 13. On October 20 1989 re-amended particulars of101 claim were served. They raised additional claims for breaches by the defendant of alleged obligations to keep the bungalow and its contents in good and tenantable repair and to occupy it for his sole occupation as a residence only and not to carry on any trade or business there. It was also alleged that, at the time of making the agreement and in order to induce the plaintiff to let the bungalow to him, the defendant falsely represented to her that he was having a house built for him elsewhere which would be ready for his occupation at the end of February 1989, that the plaintiff had acted on the faith of that representation in agreeing to let the bungalow to him. The trial took place before Mr Recorder Newbold in April and August 1990. At the outset he decided that the plaintiff could not rely on Case 13 and the trial proceeded on the other issues. In his judgment delivered on August 1 the learned recorder, while deciding that there had been no breaches of the alleged obligations as to repair and user, found as a fact that the defendant had made a fraudulent misrepresentation, as pleaded in the reamended particulars of claim, which had had the effect of inducing the plaintiff to enter into the tenancy agreement. He also found that she had sustained financial loss as a result thereof. Having referred to several authorities, he held that the plaintiff was entitled to have the tenancy agreement rescinded. He assumed, rather than decided, that that would have the effect of determining the defendant’s statutory tenancy of the bungalow. He also found that if the plaintiff had not let it to the defendant she would have let it to someone who would have caused no difficulty in ending the agreement at the appropriate date. Although the contrary was submitted in this court, I am satisfied that there was evidence on which that finding could properly be made. The recorder’s order dated August 1 1990 provided, first, that the tenancy agreement be rescinded; second, that the plaintiff should forthwith recover possession of the bungalow from the defendant; third, that the plaintiff should recover damages, ie mesne profits, in the sum of £4,870. It is agreed that £2,800 of that amount represented mesne profits at the rate of £40 per week, ie at the rate equivalent to the rent paid by the defendant, and that the balance of £2,070 represented the amount of the extra rent which the plaintiff would have got if she had been able to let the bungalow on holiday lettings during the summer months. As to costs, it was ordered that, save that the plaintiff should recover the costs of issue of process, there should be no order up to October 20 1989 (the date on which the reamended particulars of claim were served), but that thereafter the plaintiff should have her costs, to be taxed on scale 3. On his appeal to this court the defendant, through Mr Naish, has submitted, first, that the rescission of the tenancy agreement did not bring to an end his statutory tenancy of the bungalow; second, that the loss of extra rent on holiday lettings was caused by the plaintiff’s failure to serve a notice pursuant to Case 13; third, that the recorder erred in principle in not giving the defendant all his costs up to October 20 1989 and a proportion of them thereafter. Only the first of these submissions has raised a question of any substance. As to that question, it is clear that the plaintiff, having been induced to enter into the tenancy agreement by the fraud of the defendant, was entitled to have it rescinded. Although it may be unusual, and in a sense contradictory, for a tenancy to be rescinded after it has expired by effluxion of time, I do not doubt that the remedy remains available. The effect of rescission is, so far as practicable, to restore the parties to the position that they would have been in had the contract not been made. Moreover, being an equitable remedy, it is sometimes granted only on terms. On either count it may be appropriate for the rights of the parties to be adjusted even though the contract no longer subsists. What effect did the order for rescission have in this case?  In order to answer that question, I must start by supposing, contrary to the true facts, that the order was made at a time when the tenancy was still subsisting. It appears clear that in that state of affairs the right to a statutory tenancy would have perished with the protected tenancy: see Solle v Butcher [1950] 1 KB 671, where a subsisting lease of rent-protected premises was rescinded on the ground of a common mistake of fact, the landlord being put on terms to grant the tenant a licence and then a lease of the premises at the full permitted rent. At p 697 Denning LJ said: If the plaintiff does not choose to accept the licence or the new lease, he must go out. He will not be entitled to the protection of the Rent Restriction Acts because, the lease being set aside, there will be no initial contractual tenancy from which a statutory tenancy can spring. The observations of Asquith LJ in Haberman v Westminster Permanent Building Society [1950] 2 KB 294 at pp 301-302 are to much the same effect. It seems probable that a similar view was taken by yet another division of this court in Peters v Batchelor (1950) 100 LJ 718. However, the report is very brief and it does not specifically state that the rescission of the lease would necessarily bring to an end the tenant’s statutory right to remain in occupation. Accordingly, where a protected tenancy is rescinded while it is still subsisting the tenant does not become a statutory tenant of the dwelling-house because there is no longer any contractual tenancy from which it can spring. However, Mr Naish submitted that the position is different where the contractual tenancy has expired before it is rescinded. He pointed to the fact that here the plaintiff did not issue her proceedings until about a week after the tenancy agreement had expired, so that the defendant had already become the statutory tenant of the bungalow. He relied on section 2(1)(a) of the Rent Act 1977: 2.–(I)  Subject to this Part of this Act — (a)   after the termination of a protected tenancy of a dwelling-house the person who, immediately before that termination, was the protected tenant of the dwelling-house shall, if and as long as he occupies the dwelling-house as his residence, be the statutory tenant of it; . . . Mr Naish then relied on section 98, which provides that the court shall not make an order for possession of a dwelling-house which is for the time being subject to a statutory tenancy, except on familiar grounds which would have been available to the plaintiff here only if she had served a written notice under Case 13. Mr Naish emphasised that a statutory tenant’s right of occupation is personal to himself and incapable of transmission to a third party except in the special cases provided for by the Act: see, for example, Keeves v Dean [1924] 1 KB 685. Mr Lowry, for the plaintiff, pointed out that on facts such as we have here the defendant’s fraud could not have been discovered until after the tenancy had expired. It was only then that the plaintiff could know that the defendant was not going to give up possession and that what he had told her about having another house built for him elsewhere was false. Mr Lowry submitted that it would be an unjustifiable exception to the rule that fraud unravels everything if the statutory tenancy could survive when the protected tenancy could not. In my judgment, the submissions of Mr Lowry are to be preferred. A statutory tenancy cannot arise unless there is a protected tenancy from which it can spring. If the effect of the rescission of the protected tenancy is, so far as practicable, to restore the parties to the position that they would have been in had the tenancy not been granted, it would seem to follow that the statutory tenancy ought to come to an end on the rescission of the protected tenancy. Admittedly, the extinction of a statutory right is different from the extinction of a contractual right. In deciding whether there can be an extinction in the first category we must look at the policy of the statute under which the right arises. The policy of the Rent Act 1977 is to protect those who have been contractual tenants. It is not to protect someone who, having been deprived of his contractual tenancy, is adjudged not to have been entitled to occupy the premises in the first place. I therefore see no reason in principle why a statutory tenancy should survive the rescission of a protected tenancy which has already expired. On this approach no distinction is to be made between a rescission ordered on the ground of a fraudulent misrepresentation by the tenant and one ordered, for example, on the ground of a common mistake of fact. But if I were wrong in thinking that no such distinction ought to be made, I would nevertheless hold that it cannot on any footing be the policy of the 1977 Act that a statutory tenancy which has sprung from a protected tenancy obtained by fraud should survive the rescission of the protected tenancy. For these reasons I would decide the first question in favour of the plaintiff. The second and third questions must be decided in like manner. In regard to the second question, Mr Naish sought to argue that it was the plaintiff’s failure to serve a notice under Case 13 which caused the defendant to remain in possession. That point is unarguable. The remaining in possession and the consequential loss to the plaintiff of the extra rent on holiday lettings were directly caused by the fraudulent misrepresentation which procured the grant of the tenancy. As to the third question, it is true that the learned recorder, instead of making no order as to the defendant’s costs up to October 20 1989,102 might have ordered the plaintiff to pay his costs up to that date. However, I cannot say that he erred in principle in not making such an order, particularly when he had found that the plaintiff had had to go to the court only because of the fraud of the defendant. In regard to the period after October 20 1989 Mr Naish argued that, since the plaintiff had pursued the action on four different bases, on only one of which she succeeded, there ought to have been an apportionment of the costs between the successful and the unsuccessful claims. Again that was a matter well within the recorder’s discretion and his decision cannot be interfered with by this court. Having decided all three questions in favour of the plaintiff, I would dismiss this appeal accordingly. NEILL and MUSTILL LJJ agreed and did not add anything. The appeal was dismissed with costs, not to be enforced without the leave of the court; application for costs against the Legal Aid Fund adjourned; application for leave to appeal to the House of Lords refused; application for a stay of execution refused; liberty to apply. 103