Patoner Ltd v Lowe

Rent Act 1977 — Tenant’s appeal against decision of assistant recorder that he was not a lawful subtenant and that, accordingly, head landlords were entitled to possession — The case turned on whether the appellant came within the protection given by what is now section 137 of the 1977 Act — The main point was whether the subtenancy was in breach of a covenant in the head tenancy that the subletting was to be ‘consistent with the letting of high-class furnished accommodation’ — The assistant recorder, having reviewed the evidence, including the opinions of two estate agents, decided this point against the appellant — It appeared that the flat in question was furnished, when granted in 1978, with all the items necessary to enable it to be lived in save for a table, that the furniture was secondhand, and that the armchairs provided were substandard — The assistant recorder interpreted the phrase ‘high-class furnished accommodation’ as meaning accommodation which was ‘of better than average quality’ — Held that there was no error of law in the assistant recorder’s decision — His test of ‘high-class furnished accommodation’ was in fact very favourable to the appellant — There was no evidence to support a contention by the appellant that he had become a direct tenant of the head landlords or that there had been any waiver of breach of covenants in the head lease — Appeal dismissed –155 Per Russell J: ‘In my judgment furnished accommodation, in order to qualify for the description ‘high-class furnished accommodation’ must be shown to have been not merely better than average but rather much better than average, or even very much better than average’ This was an appeal by the defendant, Mr A Lowe, from a decision of Mr Assistant Recorder Trench at West London County Court granting the plaintiffs, Patoner Ltd (present respondents), the head landlords, possession of a flat at 5 Emperor’s Gate, London SW7, occupied by the appellant under a subtenancy from Anro Ltd. The appellant appeared in person; Miss Erica Foggin (instructed by Pritchard Englefield & Tobin) represented the respondents. Giving judgment, KERR LJ said: This is an appeal from a judgment given by Assistant Recorder Mr Trench in the West London County Court on October 24 1984. He gave, if I may say so, an exemplary lengthy judgment in a somewhat complicated matter and took copious notes of evidence which we also have before us. What he had to decide was whether the defendant, Mr Lowe, had acquired the status of a rent protected tenant in relation to Flat E at 5 Emperor’s Gate, London SW7, or whether the plaintiffs, Patoner Ltd, the freeholders, were entitled to possession of that flat as against Mr Lowe. The background is as follows. Until the Rent Act 1974, furnished lettings were unprotected by the Rent Acts. Thereafter they could give rise to protected tenancies provided that certain conditions were fulfilled — in particular (and I am not quoting the wording of the statute because it is unnecessary to do so) if a substantial part of the rent could fairly be attributed to the furniture in the premises. The plaintiffs had granted a head lease of the whole building to a company called Anro Properties Ltd on June 14 1968 for a term of 14 years. At that time furnished lettings could not result in a protected tenancy, and it was no doubt in order to preserve that position that certain covenants were inserted in the head lease between the plaintiffs, Patoner Ltd, and the head lessees, Anro. The ones with which we are concerned appear in clause 2, subclause (xvii) of the head lease, and I read the three relevant terms. Subletting was not permitted unless such sublettings complied with these three terms: (1) a substantial part of the rent or licence fee was to represent payment for the use of furniture; (2) the letting had to be determinable within 12 months; and (3) (and this is the most important covenant for present purposes) the subletting had to be otherwise consistent with the letting of high-class furnished accommodation. Mr Lowe had originally been a tenant of Anro, since 1972, in a room or flat in Rowland Mansions, Rosary Gardens, SW5. Anro wished to sell that property and accordingly had to consider the position of their tenants in that property, of whom Mr Lowe was one. After some negotiations, together with three other tenants from Rowland Mansions, he moved into the building at 5 Emperor’s Gate. He did so under a new tenancy agreement with Anro dated May 1 1978. The rent was £60 per month, payable monthly, and, while no term was stated in the agreement, it is accepted on both sides that it is to be treated as a monthly tenancy. The agreement recites that the tenant, Mr Lowe, is to have the use of ‘the fixtures furniture and effects now in and upon the Property . . . specified in the Inventory thereof signed by the parties’. However, no such inventory was ever signed, and one of the problems about this case is that it has been necessary to reconstitute retrospectively what the furniture then was, and what its condition was, in the context of the covenants in the head lease to which I have referred. The reason is that Mr Lowe’s right to be treated as a protected tenant depends on whether or not the case falls within what is now section 137 of the Rent Act 1977. I need not read any part of that provision because it is common ground that the question whether the plaintiffs are entitled to possession or whether Mr Lowe is a protected tenant depends on whether Anro’s tenancy agreement with Mr Lowe concluded on May 1 1978 was lawful, in the sense of its compliance or failure to comply with the three covenants in the head lease to which I have referred. Nothing now turns on the second of those covenants — the question whether the tenancy was determinable within 12 months. It was held that it was, and there has been no appeal against that conclusion. So far as the first of the three covenants is concerned — in effect the proportion of the rent properly to be attributable to the value of the furniture — the assistant recorder concluded that that covenant had also been complied with. On his analysis he came to the conclusion that something of the order of 17% of the rent (which was then £60 a month, but which has since gone up) was properly to be attributed to the value of the furniture. There has been a cross-appeal by the plaintiffs against that conclusion and other matters which were decided in favour of Mr Lowe, but we have not found it necessary to hear Miss Foggin on that or any other matter. The question of the items of furniture and their quality and condition on May 1 1978 (the beginning of Mr Lowe’s tenancy agreement) has been complicated by the fact that Mr Lowe and the other tenants who moved from Rowland Mansions to Emperor’s Gate were evidently allowed to take with them whatever they wished of the furniture in Rowland Mansions, since Anro were proposing to sell that property. That has added a degree of complication to the investigation which, somewhat artificially, but inevitably under the law, has to be carried out retrospectively as to whether or not the letting to Mr Lowe in 1978 was in accordance with, or in breach of, the covenants to which I have referred. There is also a curious feature about an application made by Anro to the rent officer for an increase in the fair rent of the property. The judgment found that that was made in February 1982 and was supported by Anro, so far as the furniture on the premises was concerned, by a list which only included a cooker, a fridge, a carpet, two armchairs and three small chairs. That may be because what was then listed by Anro was only the furniture which had already been in Emperor’s Gate and did not include what Mr Lowe was allowed to take with him from Rowland Mansions. However, in favour of Mr Lowe, the assistant recorder did not treat that list as conclusive. At the end he found that, in addition to those items which I have mentioned, the furniture comprised in the letting or to be treated as having been comprised in it on May 1 1978, included the following other items: (a) a divan and mattress; (b) a chest of drawers; (c) a double wardrobe; (d) long curtains; (e) a gas fire; (f) a sink unit; (g) a wall cabinet; and (h) plates, cups and cutlery. He then dealt first with the question of the value to be attributed to that furniture as a proportion of the rent. I have already referred to that point, which he decided in favour of Mr Lowe. I then come to the main point, which he decided against Mr Lowe and which was the only point raised in the notice of appeal, though we have also allowed Mr Lowe to argue two other points without objection on behalf of the plaintiffs. The main point concerns the third of the covenants which I have mentioned — that the letting had to be of ‘high-class furnished accommodation’. What the assistant recorder said about that is this, and I am referring to p 11 of his judgment: Limb (iii) is not easy to construe, since the phrase ‘the letting of high-class furnished accommodation’ can mean different things to different people. As a matter of grammar, ‘high class’ qualified ‘furnished accommodation’ and does not qualify ‘letting’, with the result that in my opinion it is the accommodation and the furniture within the accommodation which are required to be ‘high class’. This epithet I construe as meaning ‘of better than average quality’. He went on to say that the furniture is properly to be considered in that context. He also stated that he placed no reliance on the following matters: ‘(a) the lack of central heating; (b) the lack of an inventory; (c) the obligation on the tenants to clean the windows and (d) the quantum of rent.’  The latter point — quantum of the rent — has been challenged on behalf of the respondents, but again we have not found it necessary to hear Miss Foggin on this. I first ask myself whether the test applied in the paragraph that I have just read is in any way erroneous in law. For myself, I would say that it is a very favourable test from the point of view of Mr Lowe and that it might well have been put higher than to say merely ‘of better than average quality’. So there is no error of law at that point. The assistant recorder then reviewed the evidence about the quantity and quality and condition of the furniture which, as a matter of reconstruction, was there on May 1 1978, including in it, in favour of Mr Lowe, what he was allowed to bring and did bring from Rowland Mansions. On that point he had before him evidence from a Mr Robin Kaye, a chartered surveyor and estate agent practising in the Old Brompton Road in Kensington with considerable experience of this type of property. Mr Kaye’s conclusion on what he was told by Mr Lowe and applying his own experience to that, and seeking to put himself back in time to May 1978, was that, taking everything into account, this was not the provision of what could be described as a high-class furnished letting at that time. On the other hand, on behalf156 of Mr Rowe, there was called a Mr Anthony Rickard, from the firm of David Dixon & Co in North End Road, London W14, who carried out a similar exercise. He concluded, though in somewhat guarded terms, that the unit occupied by Mr Lowe could properly have been termed ‘high-class furnished accommodation’ in May 1978. That was the evidence which faced the assistant recorder. He had already applied the correct test, and he then went on to review the evidence to which I have referred. The difficulty was of course that nobody had carried out an inspection earlier than 1982, and then had to project themselves backwards. He concluded this part of his judgment as follows: The defendant Mr Lowe said that all the furniture was secondhand, and that all of it, except the armchairs, were in a reasonable condition. It follows that the armchairs were not in a reasonable condition. On the findings which I have made concerning the amount of furniture provided there was no table. So the position was that this flat was furnished with all items necessary to enable it to be lived in save for a table, and the only armchairs which were provided were below the covenanted standard. I think that in the context of the letting of a studio, or one-roomed flat, the omission of a table and the provision of substandard armchairs are significant and such as to lead me to the conclusion that limb (iii) of the covenant was breached. He had to make the findings of fact and he saw the witnesses, and it seems to me impossible to criticise his conclusions; indeed, I think for myself that throughout this case he has shown considerable sympathy for Mr Lowe in the findings which he made. I must say that, if the matter had come before me on this evidence as a matter of first instance, I would have really no hesitation in concluding that this could not have been described as a high-class furnished letting in May 1978. Mr Lowe, who has conducted this appeal without legal assistance (if I may so so, with great clarity and moderation) said very fairly that he did regard it, by his standards, as being a high-class furnished letting. That may well be so, but what has to be applied is an objective standard on the evidence, including in particular the evidence of the expert witnesses who were called. I find it impossible, although one has some sympathy with Mr Lowe, to conclude that the judgment is open to any criticism, and accordingly I would hold that the main point of the appeal — the point raised in the notice of appeal — must fail. However, Mr Lowe has also argued another point, to the effect that he became a direct tenant of the freeholders, the plaintiffs, from about 1982 onwards. What he says about this is the following. Mr Arnold, who was in effect the landlord through the plaintiff company, began to take an interest in this property in 1981 because the head lease to Anro was due to come to an end in 1982. In that regard the assistant recorder found as a fact, on the evidence which he heard from Mr Arnold and Mr Lowe, that there was a conversation between them in what must have been early 1982. He deals with that at p 15 of the judgment when he says: Next, it was said that a fresh tenancy had been created by the plaintiffs direct to the defendant. I hold against such a contention. There is nothing in the conversation between Mr Arnold and the defendant either before or after the head lease expired which leads me to conclude that the parties agreed on a new tenancy. I accept Mr Arnold’s evidence that he made it perfectly clear to Mr Lowe that the plaintiffs were in litigation with Anro, that they could not accept him as a tenant, but that he could remain until the situation was clarified, provided he paid for his use and occupation. I do not think any tenancy was thereby created. Pausing there, what had happened (and Mr Lowe does not really disagree with this at all — very fairly so) was that, when Anro’s lease was about to expire, proceedings, no doubt principally about dilapidations, were instituted by the plaintiffs against Anro, and there evolved the sort of dispute which is very common indeed towards the end of a long lease. What Mr Arnold was saying to Mr Lowe was that he could stay on until that had been disposed of, but he could stay on only on the basis that he would pay for his use and occupation and not on any other basis. I must then refer to some of the correspondence which passed. In February 1982 Anro had given notice to quit to Mr Lowe, but on the basis that, so far as they were concerned, it was largely academic because they considered that he would become a statutory tenant. That, however, of course depended on whether the plaintiffs took the point, as they subsequently did, that Anro had let the property to Mr Lowe in breach of their covenants with the plaintiffs. After the conversation to which I have referred Mr Arnold then wrote a letter on June 8 1982 to Mr Lowe, on which Mr Lowe now relies, in which he said that the registered rent, which was by then £93.25 per month exclusive of rates, should be paid to his office. The first payment after these events was, however, not made until about September 1 of that year. In the interim the plaintiffs’ solicitors had come on the scene, and by a letter of July 7 they made it clear that unless Mr Lowe vacated the property he was obliged to go on paying not rent but the same amount for use and occupation by way of mesne profits. Mr Lowe says that ‘mesne profits’ is a term used in orders made by the court and, as I understand his argument, that there was no basis for an agreement of that kind without a court order. That is plainly untenable. The solicitors were making it clear that they would not treat him as a tenant or accept payments as payments of rent and, although Mr Lowe disputed their right to do so by a letter of July 15 and said that he would ask for legal advice, it seems to me that the assistant recorder was right in concluding that that correspondence, against the background of the conversation with Mr Arnold to which I have already referred, was incapable of creating a direct tenancy between Mr Lowe and the plaintiffs. If there had not been this conversation, then, on the basis of the letter of June 8 asking for rent, there might well have been an argument. But in the circumstances Mr Lowe was well aware of the position. It had been made clear to him that he was allowed to stay on, on sufferance, so to speak, as a favour to him, though of course he could have left if he had wanted to. Accordingly, that ground of appeal equally fails and I need refer only quite briefly to the final point which Mr Lowe sought to take and which was also decided against him. That was that the plaintiffs, who now say that Anro were in breach of their covenants of the head lease, had waived those breaches by accepting rent from Anro after Mr Arnold had become aware that this was not, or could not properly be described as, a high-class furnished letting. I am afraid there is simply no evidence whatsoever to support that Mr Arnold had any such knowledge at any time before he got into dispute with Anro. That is really the whole of the history until the plaintiffs started the present proceedings on September 19 1983 which resulted in the judgment now under appeal. Mr Lowe has at any rate been able to remain in the premises until now, but I can find no basis whatever for reversing the judgment. While it may seem hard on Mr Lowe, one must also look at it from the point of view of Mr Arnold, although he may have been lucky in being able to overcome the change in the law protecting furnished lettings. Accordingly, in my view this appeal must be dismissed. Agreeing, RUSSELL J said: The assistant recorder had the task of interpreting the phrase ‘high-class furnished accommodation’. Kerr LJ has read the passage from the judgment where the assistant recorder dealt with that aspect of the matter. I agree that the passage, if anything, strikes one as being too favourable to the defendant. In my judgment, furnished accommodation, in order to qualify for the description ‘high-class furnished accommodation’, must be shown to have been not merely better than average but rather much better than average, or even very much better than average. I also agree with my lord that the standard to be set must be an objective one, as the learned assistant recorder stated, and not simply the standard applied by the tenant, however genuine, as in this case it plainly was, that assessment happened to be. The assistant recorder, in a most careful judgment to which I would wish to add my own tribute, reviewed the facts as he found them and applied those findings to his interpretation of the covenant in the head lease. I do not think he can be faulted in those findings, nor, save to the very limited extent of the reservation I have expressed, do I think his interpretation of the covenant can be faulted. As to Mr Lowe’s arguments relating to the alleged creation of a fresh tenancy and as to waiver, I have nothing to add to what has fallen from Kerr LJ. For the reasons which he has given, I, too, would dismiss this appeal. The appeal was dismissed with costs.