Moreland Properties (UK) Ltd. v Dhokia & Ors

Tuesday, 21st October 2003

1. SIR MARTIN NOURSE: The primary question on this appeal from a decision of Her Honour Judge Mayer given in the Barnet County Court on 24th February 2003 is whether on the facts and in law a person who was a statutory tenant of a dwelling house, but had not occupied it as his residence for four or five years beforehand, was able "lawfully to sublet it" to another within section 137(2) of the Rent Act 1977. The judge answered that question in the affirmative and, having dealt with further questions, dismissed the landlord's application for possession as against the subtenants. She refused permission to appeal, but on 25th March 2003 Wright J granted it and directed that the appeal should be referred to this court.

2. The property is a flat at 9A Long Lane, Finchley, London N3. In about 1974 it was let by the then landlord to the first defendant, Dahya Dhokia, who until about 1986 or 1987 occupied it as his residence. He then left and went to live at 21 Stanhope Road, Finchley, taking with him all the furniture and carpets from the flat.

3. On 7th July 1987, at about the time that the first defendant left, the flat was purchased by the claimants, Moreland Properties (UK) Limited, who, until they discovered what the true position was in about September 2002, treated the first defendant as statutory tenant of the flat and accepted rent from him on that basis.

4. It appears that between the time when the first defendant left and November 1991 the flat was empty except for the occupation from time to time of a box room there by a nephew of the first defendant. In that month the first defendant purported to sublet the house to his brother-in-law, the third defendant, Mansukhlal Visavadia, who moved in with his wife and children. The family has lived there ever since. The second defendant is Mr Visavadia's wife, Divyalata Visavadia. The fourth defendant is their son, Rajesh Visavadia, and the fifth defendant, Shital Visavadia, is Rajesh's wife, who has lived there since their marriage in 1995.

5. The first defendant has not charged the third defendant a profit rent on the subtenancy. The third defendant has simply paid to the first defendant the registered rent for which the first defendant is liable to the claimants. Since 30th August 1995 that rent has been £275 per month.

6. It seems likely that the first defendant's contractual tenancy had come to an end well before November 1991. There was evidence before the judge which established that he had certainly become a statutory tenant by 1989. In any event, it was accepted by the second to fifth defendants at the trial that the first defendant could have been no more than a statutory tenant at the time that the subtenancy was granted. They contended that in that capacity the first defendant had been able lawfully to grant the subtenancy for the purposes of section 137(2). The claimants countered by saying that since the first defendant had, on the evidence, abandoned the flat as his home some four to five years beforehand, he had no status or interest in it out of which he could lawfully create a subtenancy.

7. At the trial the first defendant did not seek to defend the claim for possession against him and the judge duly made an order accordingly. As between the claimants and the second to fifth defendants, the judge stated the claimants' primary submission as follows:

"... on the basis that D1 was unarguably a statutory tenant when he sub-let the premises to D2-5, the claimants say, firstly, that section 2(1)(a) of the Rent Act 1977 applies and that because D1 was not in occupation, and had not been in occupation for some time when he granted the tenancy (he ceased being a tenant before 1991) he could not grant any interest to D2-5."

8. In relation to that submission, two provisions of the Rent Act 1977 are material. First, section 2, headed "Statutory tenants and tenancies", provides so far as material:

"(1) 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 so long as he occupies the dwelling-house as his residence, be the statutory tenant of it..."

9. Section 137 is headed "Effect on sub-tenancy of determination of superior tenancy". No reliance has been placed on subsection (1). Subsection (2) provides:

"Where a statutorily protected tenancy of a dwelling-house is determined, either as a result of an order for possession or for any other reason, any sub-tenant to whom the dwelling-house or any part of it has been lawfully sublet shall, subject to this Act, be deemed to become the tenant of the landlord on the same terms as if the tenant's statutorily protected tenancy has continued."

10. The judge rejected the claimants' primary submission. She relied on a passage in the judgment of Ormrod LJ in Trustees of Henry Smith's Charity v Wilson [1983] QB 316 at page 333 D-H. She quoted that passage in full. However, in my judgment, that decision, when properly understood, supports the claimants' primary submission and invalidates the judge's reasoning.

11. The first step is to establish what were the consequences of the first defendant's having left the flat four to five years before the subtenancy was granted. As to that, the judge's finding was expressed thus:

"The evidence, which I accept, is that D1 left Long Lane four to five years before 1991."

12. Mr Wynne-Jones, for the second to fifth defendants, has submitted that that was not a finding that the first defendant had abandoned the flat as his home. As I read the judgment, that submission is incorrect, but the evidence was all one way and a finding that there had been an abandonment was the only one the judge could reasonably have made. Mr Wynne-Jones has sought to make something of the nephew's occasional occupation of the box room, but that point was not put to the judge and it is, in any event, very difficult to see how that could have been a decisive factor against abandonment.

13. Mr Price, for the claimants, has submitted that the effect of section 2(1)(a) of the 1977 Act in this case was that once the flat had been abandoned as the first defendant's home, he would have been unable to assert a right to go back into occupation of it and, further, that, if that was so, he had no status or interest in it which enabled him lawfully to grant a subtenancy for the purposes of section 137(2).

14. Mr Price has relied on what he says is the clear wording of section 2(1)(a), namely that the former protected or contractual tenant shall "if and so long as he occupies the dwelling-house as his residence" be the statutory tenant of it. In other words, if he is no longer occupying the dwelling house as his residence, at any rate in circumstances where it has been abandoned as his residence, he can no longer be the statutory tenant of it.

15. I turn to Trustees of Henry Smith's Charity v Wilson . In that case the facts were that, as here, the landlord claimed possession of a flat from the first defendant, as head tenant, and from the second and third defendants on the ground that a purported subletting by the first defendant in favour of the third defendant was not a lawful subtenancy within section 137(2). The lease under which the first defendant had held the flat expired on 29th September 1979, whereupon he became the statutory tenant. On 6th June 1980 he purported to sublet the flat to the third defendant.

16. The leading judgment was delivered by Slade LJ, and it is to that judgment that reference must be made in regard to the facts of the case, the judge's findings and the grounds for possession on which the claimants relied.

17. At pages 321 to 322 Slade LJ referred to several of the judge's findings, including, first, that the first defendant gave up possession of the flat on 6th June 1980 and that on the same day the third defendant took possession of it with the second defendant; secondly, that the first defendant had no intention to return to the flat: "'... at least on or after June 6 1980, and the probability is he had formed such intention earlier than this and did not leave any visible signs of an intention to return'" (there Slade LJ was quoting the judge's own words).

18. At page 324 Slade LJ referred to the contention of the second and third defendants that there had been a lawful subletting. He referred to the three grounds on which counsel for the landlords had sought to refute that contention. The first was that on the evidence the first defendant had already lost his status as statutory tenant before he entered into the transaction with the third defendant because he had already abandoned the flat as his home. (It will be noted that that was precisely the same contention as is made by the claimants in this case. I will return to it later.) The second ground was that, even if the first defendant had not lost his status as a statutory tenant before he entered into the transaction, a statutory tenant could never grant an effective subtenancy of the whole of the demised premises. The third ground was that, even if the first two of those grounds were ill-founded, any subletting of the flat in favour of the third defendant was on any footing unlawful because it was in breach of clause 3(24) of the lease. That third ground does not arise in the present case.

19. At page 324D Slade LJ recorded that the judge had rejected the third submission having regard to the construction he had placed on the proviso to clause 3(24). He then read from the judge's judgment a passage which explained why he had nevertheless come to the conclusion that the third defendant and the second defendant would have to go. Having done that, Slade LJ said that it was not entirely clear to him whether the judge was relying on the first or second of the landlords' three grounds. He said that in relation to the first of them there was an element of ambiguity in the judge's findings.

20. He then went on to consider the second of the three grounds. He referred to authority, both in textbooks and in reported decisions, and to the conceptual difficulties involved in treating a person as deriving a valid title as subtenant from a statutory tenant when the tenant is giving up possession of the whole, as opposed to only part, of the premises. He did not seek to grapple with those conceptual difficulties because he thought there was another quite short and simple reason why, on any footing, a negative answer must be given to the crucial question whether the flat had been "lawfully sublet" to the third defendant within the meaning of section 137(2) of the 1977 Act. That answer was based on the different construction he put on clause 3(24) of the lease and the further ground that there had been no waiver of the landlords' right on the facts of that case.

21. In my judgment, it is implicit in Slade LJ's judgment that if the judge had made a clear finding that before the first defendant had entered into the transaction he had abandoned the flat as his home, that would have been an end of the case. Slade LJ does not refer to that point expressly, but it does seem clear that that would have been his view. When one comes to the judgment of Ormrod LJ, it is also clear that the passage on which Judge Mayer relied is related only to the second ground on which the landlords had been relying. There is nothing in it to suggest that, had the judge made an unequivocal finding as to the first ground, Ormrod LJ would in any way have disagreed with the proposition implicitly accepted by Slade LJ. Griffiths LJ agreed that the appeal should be allowed for the reasons given by the other two members of the court.

22. In my view, for the reasons advanced by Mr Price, the view implicitly taken by this court in Trustees of Henry Smith's Charity v Wilson is correct. It would be most extraordinary if someone who had abandoned the right to occupy the premises as his home more than four or five years before the purported subtenancy was granted was able either to get back into possession himself or to give anybody else the right to gain possession as against the landlord.

23. On that short ground, I would say that the flat at 9A Long Lane was not lawfully sublet within section 137(2) in the present case. That makes it unnecessary to consider the further questions dealt with by the judge and I do not propose to do so. I should add that we have not heard argument on those questions.

24. I would allow the claimant's appeal and make an order for possession of the flat against the second to fifth defendants.

25. LORD JUSTICE BROOKE: I agree.

Order: Appeal allowed. Order for possession against the second to fifth respondents within 28 days. Those Respondents to pay the appellants £4,000 on account of the costs below and an additional £4,000 on account of the costs in this court within 14 days, the balance to go to detailed assessment if not agreed.