Swallow Securities Ltd v Isenberg and others

Landlord and tenant — Rent Act 1977 — Estoppel — Questions as to status of occupier of a flat — Whether she was a statutory tenant or a person whom the landlords were estopped by their conduct from ejecting — An arrangement had been made between the protected joint tenants of a flat and the present appellant whereby she was installed in occupation without the knowledge of the landlords — The rent continued to be paid in the name of the female joint tenant out of a joint bank account, set up in her name and that of the appellant, into which the appellant paid money to answer rent demands — There was, however, no documentation between the protected tenants and the appellant indicating the creation of a subtenancy — Having made this arrangement the female tenant left to join her husband in the USA, neither having apparently any intention of returning to the flat — Eventually the landlords served a notice of increase of rent under the Rent Act 1977 which would have made the tenants statutory tenants if they had been in residence at the flat, but as they had abandoned their residence no such statutory rights arose — In the meantime the appellant had caused works of a major and expensive kind to be carried out for the refurbishment of the flat, works which were known to the resident porter but not known at that time to the managing agents or the landlords — Held, affirming decision of the county court judge, who had granted the landlords possession, that there were no grounds for an inference that the appellant was a subtenant — Held also that the judge was correct in rejecting the submission that the landlords were estopped from asserting a right to eject the appellant — Although the resident porter was aware of the costly refurbishment works, there was nothing to put him on inquiry that they were being carried out on behalf of the appellant rather than on the order of the persons who were still assumed to be tenants — There was no evidence of any action on the part of the landlords, their servants or agents, inducing an expectation on the part of the appellant that she had rights more extensive than she actually had, which would make it unconscionable for the landlords to dispossess the appellant — Appeal dismissed This was an appeal from a decision of Judge Curtis-Raleigh, at Bloomsbury County Court, granting the landlords, Swallow Securities Ltd, the present respondents, possession of a flat occupied by Mrs Helen Woolf, the present appellant, at 38 Clifton Court, St133 John’s Wood, London NW8. The first and second defendants in the county court action, who had been tenants of the flat, were Benjamin Isenberg and his wife, Mrs Esther Isenberg. Jonathan Gaunt (instructed by Franks Charlesly & Co) appeared on behalf of the appellant; Kim Lewison (instructed by Harold Benjamin & Collins, of Harrow) represented the respondents. Giving judgment, CUMMING-BRUCE LJ said: This is an appeal on behalf of the third defendant against the judgment and order of His Honour Judge Curtis-Raleigh whereby it was adjudged and ordered that the third defendant should deliver up possession of the flat known as 38 Clifton Court, St John’s Wood, in six weeks and that the third defendant’s counterclaim be dismissed. The appellant seeks an order declaring that the third defendant, Mrs Woolf, is a statutory tenant, or alternatively that the plaintiffs are estopped from claiming possession of the flat belonging to the third defendant, who pays the registered or alternatively a reasonable rent and observes the terms of the tenancy agreement made on September 13 1968. The appeal raises three issues. Was the third defendant a subtenant of the first and second defendants, Mr and Mrs Isenberg? If she was, and that subtenancy was in breach of covenant, was there a waiver by the landlord, the plaintiffs, of the breaches of covenant? If there was no subtenancy, are the plaintiffs estopped from asserting their legal right to eject her by virtue of their acquiescence in circumstances that make it unconscionable for the plaintiffs to assert their legal remedy? The background of the matter is that at all material times the plaintiffs or their predecessors in title were the landlords of the relevant flat and up to the date of the issue of the proceedings the first and second defendants remained, pursuant to the tenancy agreement, tenants of the landlords on what became a quarterly tenancy up to the date when, a notice of increase of rent having been served, that increase came into operation. Thereafter, had the Isenbergs still been occupying the flat, they would have become statutory tenants. If they had ceased to occupy the flat, they had no statutory right to assert. In fact they had gone to America and stayed there, and the effective problem for determination by the learned judge was limited to the questions: (a) had the third defendant any legal right to stay in the flat pursuant to the Rent Act 1977 or otherwise, and (b) even if she did not have any right, contractual or statutory, are the plaintiffs estopped on the principle that I have shortly stated? The starting point is the tenancy agreement entered into in 1968 by the plaintiffs’ predecessors in title, when Mr and Mrs Isenberg became tenants of the landlords of the said premises. There is no dispute that in the circumstances that took place the tenancy of the Isenbergs became a periodical tenancy The tenants’ covenants which became material were the following: covenant 2(e) whereby the tenants covenanted: Not to pull down alter or in any manner interfere with the construction or arrangement of the said premises or to alter or injure any of walls partitions floors electric wiring plumbing or pipes of any kind or alter the colour of any panelled or painted woodwork walls or ceilings . . . without the written consent of the Landlords. By covenant 2(h) the tenants covenanted: Not at any time during the said term or any continuation thereof to carry on or permit to be carried on any manufacture trade profession or business that is not relevant . . . nor take in any lodgers or boarders or paying guests that is material. By covenant 2(j) the tenants covenanted: Not to assign underlet or part with possession or share occupation of the said premises or any part thereof . . . for all or any part of the term hereby granted or any continuation thereof . . . to or with any person without the previous consent in writing of the Landlords nor without first offering in writing to the Landlords to make an absolute surrender of the residue of the term from a date not less than three calendar months from the date of service of such offer. That covenant requiring the landlords’ consent has to be read in the light of the law as declared, so that it means consent not to be unreasonably withheld. There is a provision by clause 4(c) of the lease that: UNLESS either the Landlords or all of the Tenants jointly shall give to the other of them not less than one quarter’s notice in writing of their desire that the term of this Agreement shall cease and be determined on the said twenty-ninth day of September One thousand nine hundred and seventy-one the tenancy shall continue as a quarterly tenancy on the same terms and subject to the same conditions as are herein contained but subject to one quarter’s notice in writing. Such were the covenants binding upon the Isenbergs when they became tenants of the plaintiffs’ predecessors in title. The facts material to the issues raised on this appeal are to be collected from the judgment of the learned judge beginning at p2 thereof in the first main paragraph and continuing to p7 thereof. There is no point in my attempting to summarise, much less repeat, the judge’s findings in that part of his judgment. The transaction which led to the present dispute results from a curious arrangement perpetrated by Mrs Isenberg when she had made up her mind to discontinue permanently her occupation of the flat at 38 Clifton Court. Her husband had gone to live in Florida and she had decided to join him. Had she intended to comply with her obligations to her landlord, she clearly should have given notice of her intention to determine her tenancy in accordance with the provisions of the lease. She did no such thing, however. Behind the back of the landlords’ managing agents, she made an arrangement with a friend of hers, the third defendant. At this juncture I deliberately use the neutral term ‘arrangement’. The effect of the arrangement, as stated by the third defendant in evidence, was that without the landlords knowing anything about it by their managing agents, Mrs Woolf, who at that time was living with her husband, would stand in the shoes of the tenants, Mr and Mrs Isenberg. It emerges perfectly clearly from the evidence and the findings made by the judge that the intention of Mrs Isenberg and Mrs Woolf was a common intention that Mrs Isenberg should cease permanently to occupy the flat and that Mrs Woolf should occupy it. The financial arrangement was curious indeed. As Mrs Isenberg had evidently decided not to give notice to the landlords and was not seeking their consent to an assignment, she worked out machinery with Mrs Woolf whereby the landlords would continue to receive their rent in the name of Mrs Isenberg, so that there would be nothing at all calculated to disclose to the landlords’ managing agents that Mrs Woolf had for all practical purposes stepped into the place of the tenant. The mechanism was the opening of a joint account in the names of Mrs Isenberg and Mrs Woolf. The arrangement made between these two ladies appears to have been that from the date that Mrs Woolf moved in, Mrs Isenberg would never have to pay a penny herself in discharge of her contractual obligation for rent to the landlords, but Mrs Woolf would at appropriate intervals on receipt of rent demands addressed to Mrs Isenberg which continued to arrive at the flat pay money into the joint account, and the bank had a mandate from Mrs Woolf — I do not remember the detail, perhaps from Mrs Isenberg as well, though I may be wrong on that — to pay to the landlords the rent demanded by them from Mrs Isenberg. Another ingredient of the arrangement between these ladies was that Mrs Woolf paid £800 to Mrs Isenberg which, as I read the judgment, the judge thought might well have been explained as a kind of assurance to Mrs Isenberg, who remained liable to the landlords for the rent, for the due and proper payment thereon. The ladies having made those plans, Mrs Isenberg duly departed to Florida and Mrs Woolf, and I think at that time Mr Woolf, moved into the Isenbergs’ flat. There was no tenancy agreement between Mrs Woolf and Mrs Isenberg. There was no documentation at all, except a receipt by Mrs Isenberg for the £800. Evidently the arrangement was, as the landlords were by their managing agents wholly unaware of the abandonment by the Isenbergs of the flat, that the landlords’ communications would continue to be addressed to Mrs Isenberg at the flat and that Mrs Woolf would deal with them, which is how she got notice of the rent demands. There is no evidence, astonishing as it may seem, that either Mrs Woolf or anybody else on her behalf made any inquiry of the landlords of the terms of the tenancy agreement which regulated the rights and obligations of the landlords on the one side and the Isenbergs on the other. Mrs Woolf just moved in. On one occasion described in evidence and referred to by the judge, Mrs Woolf tried to pay the rent by a cheque in her own name, but the landlords’ managing agents returned it, and the rent continued to be paid out of the joint account, the money all being paid by Mrs Woolf into the bank account. The quarterly tenancy was determined by service of a notice of increase of rent taking effect in June 1982. Had the Isenbergs still been occupying the flat, their contractual tenancy would have ended and been succeeded by a statutory tenancy, but as they had abandoned the flat themselves, as far as I can see, from that moment, they had no rights at all. 134 The way in which it is put on behalf of the appellant on the issue of subtenancy is that there is really nothing more common in real life than totally informal formation of subtenancies, and in such situations the court has to find out the facts and then, taking a commonsense view, make the inferences which lead to the legal concepts which realistically give rise to determination of the legal rights of the parties concerned. It is submitted that the reality of the odd arrangement between Mrs Isenberg and Mrs Woolf, having all the ingredients of informality, is that Mrs Woolf became subtenant of Mrs Isenberg. There was a reversion because until the notional, and to my mind non-existent, statutory tenancy came into existence in favour of Mrs Isenberg, Mrs Isenberg could at any moment have given notice to the landlords and could have given notice to Mrs Woolf. The reversion between Mrs Woolf and Mrs Isenberg in that situation was probably only a day — it was notional, anyway. That was really what these two ladies were trying to achieve. Elegantly as Mr Gaunt struggled to build artistic bricks without any straw, I have no doubt that the judge was right in holding that Mrs Woolf was never intended to be a subtenant at all. There was never any intention by agreement or agreement between Mrs Isenberg and Mrs Woolf that Mrs Woolf would enter into privity as tenant of Mrs Isenberg. Nothing was further from their minds. The intention of Mrs Woolf (and Mrs Isenberg did not give evidence), which is to be collected from the evidence that she gave before the judge, was clearly that she was simply going to step into the place of the tenant. It was all being done behind the back of the landlords’ managing agents, but the obligation to inform the landlords what Mrs Isenberg was up to was the obligation of Mrs Isenberg. Thus it was possible for the judge to make his finding that although it is quite obvious that the managing agents were misled, it would not be right to make any finding of deception against Mrs Woolf. Therefore the judge was able to make this finding. I am not convinced that, if the joint account was created purely as a deceit, Mrs Woolf was not a willing participant in the deceit. However, it does not seem to me that it is necessary for me to decide that point. It is clear in any event that the joint account did in fact have the effect of persuading the landlords that the rent was being paid by Mrs Isenberg, whereas it was in reality being paid by Mrs Woolf. One feature of the history is thus clear. Whatever the landlords, by their managing agents or otherwise, should have got to know or to suspect, it is perfectly clear that at the inception of the arrangement between these two ladies and at the commencement of its operation, when Mrs Isenberg went to Florida and Mrs Woolf entered into occupation, the landlords were misled because they continued for years to believe by their managing gents that Mrs Isenberg was their tenant, which Mrs Isenberg formally was, but she was not in occupation, and Mrs Woolf was perfectly well aware that the only continuing function played by Mrs Isenberg was lending her name to the operation of the joint account, so that when Mrs Woolf paid the landlords, she did so in the name of Mrs Isenberg. In my view, the judge was clearly right in holding that it was quite impracticable as a matter of inference to draw the inference that on the formation of the arrangement between Mrs Isenberg and Mrs Woolf there were the elements necessary to give Mrs Woolf the contractual status or capacity of subtenant of Mrs Isenberg. That being so, Mrs Woolf never acquired any estate in the land. On those short grounds on which I would uphold the judge; there being no subtenancy, it is unnecessary to decide the question of waiver. I therefore come to the issue which emerged as the central issue on the appeal, which was whether the judge was right in rejecting the pleaded case that, having regard to all the circumstances, the landlords were estopped from asserting their legal right to eject Mrs Woolf. The relevant estoppel is the doctrine of acquiescence, classically formulated in slightly different terms by Lord Kingsdown and Lord Cranworth in Ramsden v Dyson (1866) LR 1 HL 129. This doctrine was developed and explained in many subsequent cases, of which the most important has commonly been regarded in modern times as Fry J’s judgment in Wilmott v Barber (1880) 15 ChD 96 followed by the judgments in this court in Crabb v Arun District Council [1976] Ch 179 and, more recently, by the judgment of Oliver J in Taylors Fashions Ltd v Liverpool Victoria Trustees Co Ltd [1981] 2 WLR 576, a judgment which subsequently received the approval of this court in the course of judgment in another case. The principles now can be concisely comprehended in the words of Oliver J in Taylors Fashions Ltd v Liverpool Victoria Trustees Co Ltd at p 596, when the learned judge said: The inquiry which I have to make therefore, as it seems to me, is simply whether, in all the circumstances of this case, it was unconscionable for the defendants to seek to take advantage of the mistake which, at the material time, everybody shared, and, in approaching that, I must consider the cases of the two plaintiffs separately because it may be that quite different considerations apply to each. Though that is the broadest statement of principle and has been declared following consideration by Oliver J of authorities since Ramsden v Dyson. The point of the way in which Oliver J put the principle is that it has been recognised that the court should regard the formulation by Fry J of the requirement of five probanda as being guidelines, which will probably prove to be the necessary and essential guidelines, to assist the court to decide the question whether it is unconscionable for the plaintiffs to assert their legal rights by taking an advantage of the defendant. The concept of ‘taking an advantage of the defendant’ arises because it is an essential ingredient of the equity that the conduct of the plaintiff in whom the legal right is vested must have been such as to induce in the defendant an expectation that the defendant’s rights are different from and more extensive than the defendant’s strict legal rights. I find it helpful to use the term ‘inducing an expectation’ rather than the nearly synonymous verb ‘encouraging’ by their conduct the defendant so to believe. I would therefore approach the facts found by the judge and ask whether the judge was wrong on those facts in rejecting the submission that the plaintiffs, by their conduct, or the conduct of their servants or agents, and having regard to the knowledge of the plaintiffs and of their servants or agents to be imputed to the plaintiffs, was such as to induce in the defendant an expectation that the defendant had legal rights more extensive than was in fact the case. The knowledge and conduct relied upon by the defendant is the knowledge of the landlords by their servant or agent, the resident porter, whose duty it was to play a porter’s role on behalf of the landlords on the spot. The detriment pleaded and sought to be relied upon by the defendant is the fact that after Mrs Woolf entered into occupation she and/or her husband set about major works in the flat, and the judge accepted that the cost thereof was probably of the order of £40,000, an enormous sum in 1974, and the porter knew all about the fact that the work had been procured and was taking place. Indeed the porter helped in useful ways such as making arrangements for a skip. It was the duty of the porter to keep the landlords’ managing agents informed of the relevant facts, and having regard to the tenant’s covenants in the Isenberg agreement, it certainly appears probable that it was the duty of the porter, when these substantial works of refurbishing began and/or when their scale became apparent, to notify the managing agents to make sure that the managing agents agreed and approved, because the tenants should have notified the managing agents and asked their consent, which had not been done. The porter never did anything about that, and on the evidence the managing agents themselves knew nothing at all about the massive refurbishing described in evidence and found by the judge. It is plain enough that the porter probably — certainly his knowledge is to be regarded as the knowledge of the landlords — should have informed the managing agents that major works were being undertaken. The next thing is this, and it is fundamental. As a matter of probability, on the evidence, the porter thought that Mrs Woolf had a connection with Mrs Isenberg. Mrs Woolf, to third parties, used to describe Mrs Isenberg in the terms ‘Aunty Esther’. The inception of this work followed very shortly as a matter of time sequence after the actual departure of Mrs Isenberg and the actual arrival of Mrs Woolf. Should the judge have held that there was on those facts, considering all the evidence, facts which should have put the porter on inquiry as to whether all this massive work which Mrs Woolf was evidently handling was a frolic of her own as compared to work procured initially by ‘Aunty Esther’, who had prudently gone away for the period in which the work was being done, which may have been something spread over nine months, or should the porter, on the facts, have been put on inquiry that Mrs Woolf, herself and on her own behalf, was spending a fortune on a flat which hitherto had been nothing to do with her? It was the time sequence that leads me to the view that on the evidence the judge was entitled to make the findings that he did. The judge said: 135 I do not think that the landlords knew that she (Mrs Woolf) was doing anything which she did not have a right to do. They knew, of course, that redecorations and refurbishment was being carried out, they knew that it required a skip and they knew that the decorations were extensive. They did not however know that Mrs Woolf was doing them on her own behalf. As a matter of fact, she was not doing them on her own behalf. They were being done, as far as I can tell, not by her at all but by her husband, although of course she was reaping the benefit of them. The Landlords, however, were ignorant of her position and at the time when they were being carried out, the Isenbergs had not left for a very long period. It was only a matter of months. She might well have been doing the work on the instructions of the lady whom they might well have thought to be her aunt, but who, if they did not believe her to be Mrs Woolf’s aunt, was at any rate her friend who had been responsible for putting her into the flat. This allegation, therefore, fails. In my view on the evidence the judge was entitled to hold that at the time the work was put in hand and carried out there was nothing to put the porter then on inquiry that Mrs Woolf had decided to carry out all these refurbishments on her own behalf, because he may very well have thought that it was part of an arrangement entered into by the tenants, the Isenbergs, and their friend or relation, and that the work was being done on the flat, which at that time the porter might well have expected the Isenbergs to return to some time. Of course the evidence is rather slender. There was no evidence from the Isenbergs and there was no evidence from Mr Woolf, who seems to have paid for the work, but on the material before the judge there was not, in my view, enough to make it right for this court to hold that his finding on this topic was wrong. Though it may well be that the porter should have told the managing agents that work was going on (and the managing agents had a right to interfere or put on their veto if they wanted to), I can see no reason to impute to the landlord as a matter of consideration of the knowledge of the porter the knowledge that Mrs Woolf was herself or by her husband spending large sums of money on her own account or on account of her husband on a flat which she had taken over, because on the time sequence it seems to me that it might well have been reasonable for the porter at that early stage to be totally unaware of the true fact, which was that the Isenbergs had lost interest in the flat and had decided to abandon it. I do not think that this judgment would be enhanced if I proceeded on an analysis and summary of the different ways in which the principle of acquiescence has been applied in what is now a large corpus of authority. I can see no reason for holding that the judge was wrong when he held that there was not enough in the evidence to lead to a finding that any action on the part of the landlords, their servants or agents induced in Mrs Woolf an expectation that she, Mrs Woolf, had legal rights more extensive than the rights that she actually had. There was an inducement of an expectation in Mrs Woolf, but it must have been the inducement of Mrs Isenberg, who apparently, taking the law into her own hands, gave the go-ahead to Mrs Woolf to enter into the flat as her successor as the landlords’ tenant subject to a bit of deceptive machinery designed to mislead the landlords. Mrs Isenberg also, apparently, gave her the go-ahead to do the sort of refurbishing of the flat that the landlords would obviously have been delighted about if it had been done on behalf of or at the instance of Mrs Isenberg, because it was all going to make the flat much better. If Mrs Woolf is now a victim, she is not a victim of the unconscionable behaviour of her landlords, but she is a victim of the belief of Mrs Isenberg that she could do Mrs Woolf a good turn by installing her in the flat behind the back of the landlords. For those reasons I would dismiss the appeal. LATEY J agreed and had nothing to add. The appeal was dismissed with costs.