Vesely v Levy & Ors

This is an appeal from that part of the order made by HHJ Faber in the Central London County Court on 8 September 2006 in which she declared that the appellant, Miss Jana Vesely, is, in respect of Flat 1, 8 South Hill Park Gardens, London NW3 (Flat 1), a statutory periodic tenant holding over after the expiry of an assured shorthold tenancy. The judge refused to make an order for possession of Flat 1.

An issue as to Miss Vesely’s status in Flat 1 (namely, whether she was an assured tenant or an assured shorthold tenant) arose in proceedings against her for an order for possession of Flat 1. It is common ground that the status of the tenancy turns on whether Miss Vesely was granted a tenancy by the respondents before 28 February 1997.

The agreed effect of the relevant statutory provisions is that, if an assured tenancy was granted before that date, Miss Vesely is an assured tenant, whereas, if an assured tenancy was granted after that date, she is, as was held by the judge, a statutory periodic tenant holding over after the expiration of an assured shorthold tenancy.

The relevant legislation is in section 96 of the Housing Act 1996 and in the Housing Act 1988 (as amended) sections 1, 5(2), 7, 19A, 21 and Schedule 2A paragraph 7. In view of their agreed effect it is unnecessary to set out the provisions in detail.

Miss Vesely’s case is that she is an assured tenant of Flat 1, as she became a tenant of the respondents before 28 February 1997. If this is correct, she would enjoy greater security of tenure than would be the case if she were holding over after the expiry of an assured shorthold tenancy.

The respondents, in whom the freehold of Flat 1 is vested upon the trusts of a settlement dated 19 January 1973 (the Marian Miller Trust), seek to uphold the judge’s ruling. In this judgment I shall henceforth refer to the respondents as “the trustees.” The trustees’ case is that they did not grant Miss Vesely any tenancy before 28 February 1997, that she paid no rent to them and that, at the relevant time, she was only a lodger in occupation of part of their property on the basis that she was making an agreed weekly contribution to the joint household expenses of sharing the flat with the beneficiary under the trust.

The judge gave Miss Vesely, for whom Mr Feldman appears, permission to appeal on the tenancy issue, on which she ruled in paragraph 22 of her judgment, but she refused to grant the trustees, for whom Mr Bragiel appears, permission to cross appeal from her order that they pay 95% of the costs of the entire action. The trustees apply to this court for permission to cross appeal against the costs order.

Miss Vesely was a friend of Mr Harold Miller. She used to work for him and she knew his daughter, Miss Marian Miller (Marian). Unfortunately, Marian has a history of mental health problems. Because of Marian’s disability Mr Miller set up a protective trust for her benefit in 1973. The current trustees of the settlement are the claimants in the action and the respondents to this appeal.

On 14 November 1994 the trustees, who regularly make significant payments to Marian, purchased Flat 4, 8 South Hill Park Gardens (Flat 4) for the purposes of the trust. It was to provide a home for Marian, who was at that time living at 28A Hampstead High Street. She continued to live there until May 1995 when she was admitted to the Royal Free Hospital under section 3 of the Mental Health Act. She remained in hospital until June 1996 when she was discharged. She then returned to live at 28A Hampstead High Street.

In the meantime between December 1995 and about March 1996 Miss Vesely had moved into Flat 4 with her belongings. Marian had given her the key. The trustees said that Miss Vesely moved in without their knowledge or permission. When they discovered in April 1996 that she was living in Flat 4, they started to take steps to recover possession, including serving a notice to quit by the end of May 1996 and instructing solicitors to prepare for possession proceedings.

During the latter part of 1996 the situation in Flat 4 began to change. No possession proceedings were issued. Instead, there was correspondence between the trustees, Marian and Miss Vesely. Meetings also took place. Miss Vesely hoped that a company for whom she then worked, Tectonica Properties Limited, would buy Flat 4. This came to nothing, as agreement could not be reached on the price and the trustees decided not to sell the flat.

Between about May and October 1996 Marian’s sister Pauline stayed in Flat 4 while on a visit to the UK from New Zealand for an eye operation. There was a proposal by Marian, Pauline and Miss Vesely that the trustees should buy a house in Golders Green, which was owned by Tectonica. The trustees decided against the purchase.

Towards the end of 1996 Marian herself began to spend more and more time in Flat 4, sharing it with Miss Vesely. Sometime before December 1996 Marian decided that she would prefer to live there rather than at 28A Hampstead High Street. She had no objection to Miss Vesely being in Flat 4. The trustees were particularly pleased to see an improvement in Marian’s health at that time.

In December 1996 there were discussions between the trustees and Miss Vesely about her occupation of Flat 4. The judge held that, contrary to the claim of Miss Vesely, the discussions did not result in the grant of a tenancy of Flat 4 in her favour. The judge held that the agreement reached was that Miss Vesely and Marian would continue to share Flat 4 and that Miss Vesely would make a weekly contribution of £65 to the joint household expenses of the two women. The payments were not intended to be rent. They were not denominated as rent nor were any payments made to the trustees. No tenancy of Flat 4 was intended to be created and none was created.

The judge found that Miss Vesely had exclusive occupation of 2 rooms at the rear and shared kitchen and bathroom facilities with Marian, who occupied a large bedroom at the front of the building. Miss Vesely paid £65 per week as her weekly contribution to the joint expenditure of the two women. She also paid to have utilities reconnected and she paid two electricity bills. She provided care to Marian by ensuring that she took her medication and was properly fed. These arrangements suited the trustees.

In September 1997 the trustees made an agreement with Miss Vesely regularising her position in Flat 4 under which she paid a rent, which she could recover as housing benefit from the Department of Social Security. The judge held that this agreement created an assured shorthold tenancy (but not an assured tenancy) of 2 rooms in Flat 4 at a rent of £65 per week.

In November 1998 the trustees purchased, at Miss Vesely’s suggestion, a second flat on the lower ground floor in the same building. When it came on the market Flat 1 was purchased by the trustees for the purposes of the trust because Flat 4 was too small for Marian and Miss Vesely to live in comfortably. Marian continued to occupy Flat 4, but, at the request of the trustees, Miss Vesely moved into Flat 1 in January 1999. Although she left possessions behind in the 2 rooms occupied by her in Flat 4, the judge held that Flat 4 ceased to be Miss Vesely’s only or principal home. She had no assured tenancy of any part of Flat 4.

On 28 August 2001 the trustees granted Miss Vesely a fixed term tenancy of Flat 1 and 2 rooms in Flat 4 for a term of 12 months commencing on 1 September 2001 and at a rent of £120 per week payable monthly in advance on the first day of each month. The tenancy was later extended on 28 December 2001 and it expired on 30 November 2002. The use of Flat 4 was extended to 31 March 2002.

This tenancy was entered into after the local authority discovered that Miss Vesely had moved to Flat 1 and was still receiving housing benefit in respect of Flat 4. The local authority advised her that she would need a tenancy agreement of Flat 1.

The judge held that this was an assured shorthold tenancy and that, after its expiration, Miss Vesely was a statutory periodic tenant holding over.

In October 2003 Miss Vesely ceased to be Marian’s carer. She had herself fallen ill.

On 21 April 2004 the trustees served a notice seeking possession on Miss Vesely, but they agreed to give her a 1 year rent-free period. They asked her to remove her belongings from the spare room in Flat 4, so a new carer could be accommodated there on a temporary basis.

Miss Vesely did not vacate the premises. After earlier proceedings were discontinued the trustees began the present possession proceedings on 13 October 2005.

Miss Vesely claimed that she was an assured tenant of 2 rooms in Flat 4 and of Flat 1. Her claim was based on the provisions of section 96 of the Housing Act 1996 (the 1996 Act) which came into force on the 28 February 1997 and section 19A of the 1988 Act. The effect of the provisions is that prima facie an assured tenancy entered into after that date was an assured shorthold tenancy. This was subject, however, to a number of exceptions, including an exception in Schedule 2A paragraph 7 of the 1988 Act. This exception applied to the case of an assured tenancy created after 28 February 1997 which replaced a tenancy between the same parties, which was not an assured shorthold tenancy. It is common ground that the exception applied, even if the old tenancy was of different premises.

Miss Vesely’s case was that, following the agreement with the trustees in December 1996, she had an assured tenancy of Flat 4 which pre-dated 28 February 1997 and that this old tenancy was replaced by the tenancy of Flat 1, into which she moved at the request of the trustees in January 1999, that this was an old assured tenancy when she was granted a tenancy on 28 August 2001 and that she therefore had an assured tenancy of Flat 1, not an assured shorthold tenancy.

The importance of the distinction between the two types of tenancy is that, in the case of an assured tenancy, possession can only be obtained on the grounds specified in Schedule 2 to the Housing Act 1988 Act (the 1988 Act, sections 5(2) and 7); whereas, in the case of an assured shorthold tenancy, security of tenure is more limited: possession may be obtained on service of a notice, which complies with section 21 of the 1988 Act.

The judge declined to make a possession order, holding that the notice was not valid, that Miss Vesely was not employed by the trustees so that the basis for possession under ground 16 failed, that it would not be just and equitable to dispense with service of a notice and that it would not have been reasonable to grant possession in any event.

The critical findings of the judge as to the 1996 position are in paragraphs 21 and 22 of the judgment. As between Mr Levy, who is one of the trustees, and Miss Vesely, the judge stated that she preferred the evidence of Mr Levy, which was corroborated, whereas Miss Vesely’s account of events was in some respects unlikely. The judge then stated-

Mr Feldman submitted that, after the meeting with the trustees in December 1996, Miss Vesely became a tenant of 2 rooms in Flat 4 paying £65 per week rent and that it was an assured tenancy; alternatively, there was an assured weekly tenancy, which was rent free. In the events which happened and by virtue of the applicable statutory provisions, she had become an assured tenant of Flat 1. As noted earlier, it is common ground that the relevant legislation applies, even if the earlier tenancy between the same parties was of different premises.

Mr Feldman made the following specific points on the judgment under appeal. In doing so he made it clear that he was not challenging the primary findings of fact made by the judge. His criticisms were of the inferences drawn by the judge from the uncontradicted evidence and from her findings on contested issues of fact.

First, the judge erred in holding that the payments of £65 per week made by Miss Vesely in about November and December 1996 did not constitute rent for the 2 rooms of which Miss Vesely had exclusive occupation in Flat 4 with shared use of the other facilities there.

Secondly, and alternatively, the judge erred in holding that, if no rent was payable by Miss Vesely in relation to Flat 4, she had no tenancy. This was contrary to the decision of the Court of Appeal in Ashburn Anstalt v. Arnold [1989] Ch 1.

Thirdly, the judge failed to consider whether in November and December 1996 there was an intention to create legal relations and/or consideration in return for her exclusive occupation of the 2 rooms in Flat 4 with the shared use of other facilities there.

Fourthly, if the judge did find that there was no intention to create legal relations at that time, her decision was wrong and was not supported by adequate reasons.

For the trustees Mr Bragiel submitted that this appeal, which is confined to the declaration as to the status of Miss Vesely first in Flat 4 and then in Flat 1, should be dismissed. The declaration made by the judge was the correct one because the trustees had not granted any tenancy of Flat 4 to Miss Vesely before 28 February 1997. Accordingly she had no assured tenancy of Flat 4 before that date. It followed that she had not become an assured tenant of Flat 1. Her assured shorthold tenancy of Flat 1 had expired. She is now a statutory periodic tenant of Flat 1.

Mr Bragiel contended that the question for this Court is whether or not there was any evidence on which the judge could find that, before 28 February 1997, Miss Vesely had a mere licence to occupy Flat 4: see the formulation of the question by Asquith LJ in Moss v. Brown [1946] 2 All ER 557 at 560 F and by Somervell LJ at 559H. That was relied on as another case, in which the parties to the disputed arrangements were friends at the time and where there was no intention by the parties to create the relationship of landlord and tenant, the issue being whether the persons in exclusive occupation of residential property were tenants or licensees. The Court of Appeal, by a majority, held that there was evidence to support the finding of the county court judge that the occupation of the flat in question was under a licence.

Mr Bragiel submitted that in this case there clearly was evidence from which the judge could infer and find that the arrangement made between the parties in November and December 1996 was not intended to create a landlord and tenant relationship and that Miss Vesely was a lodger, who agreed to make a contribution to joint household expenses.

In deciding whether the arrangement made in November and December 1996 created a tenancy of Flat 4 in Miss Vesely’s favour the purposes of the arrangement, its terms and the surrounding circumstances must be carefully considered: Street v.Mountford [1985] 1 AC 809 at 817E and G-H per Lord Templeman.

In this case the purpose of the arrangement relied on by Miss Vesely was, according to the evidence of Mr Levy which was accepted by the judge, “to allow the position to continue for some time in the hope that the Defendant could indeed become the carer for Marian” and “It was left that we [the trustees] reconsider the matter after a few months.” [see paragraph 14 of Mr Levy’s witness statement.]

What was the position that the trustees allowed to continue? It was, on the evidence accepted by the judge, that Flat 4 was acquired by the trustees for the purposes of the trust to provide a home for Marian as the beneficiary of the trust. It was not purchased by the trustees as an investment to produce income by letting it out to tenants. Marian would, of course, occupy the flat as a beneficiary and not under a tenancy granted by her trustees. Marian did not go to live there immediately, having been in hospital for a long time. On discharge from hospital she preferred at first to return to her flat in Hampstead High Street. Miss Vesely had already moved into Flat 4, but not under any arrangement made with the trustees, who took legal steps to have her evicted after they discovered that she was living there. As Marian spent more time in Flat 4 sharing with Miss Vesely the trustees were delighted to see the obvious improvement in her condition, which they attributed to the care and friendship of Miss Vesely. They were therefore willing by the end of 1996 to drop the idea of issuing possession proceedings against Miss Vesely and to allow the position to continue for some time.

The evidence also showed that there was some continuing uncertainty about the future occupation of Flat 4 from Miss Vesely’s and Marian’s point of view. During 1996 Miss Vesely was hopeful that the trustees would sell the flat to her employers Tectonica. Both women were urging the trustees to purchase a property from Tectonica in Golders Green.

Next, as to the terms of the arrangement, the focus of the argument was on two points: first, the finding of the judge that Miss Vesely had exclusive occupation of two rooms in Flat 4 at the time of the arrangement; and, secondly, the evidence about an agreed sum of £65 per week, in particular the fact that (as held by the judge in paragraphs 24 and 25 of her judgment) the trustees agreed a rent of £65 per week when they granted her an assured shorthold tenancy of the 2 rooms in Flat 4 in September 1997 (after the critical date of 28 February 1997).

Mr Feldman naturally emphasised the significance of the fact of exclusive occupation as evidence of a tenancy. However, as pointed out by Mr Bragiel, although exclusive possession is necessary for a tenancy, it does not necessarily mean that there is a tenancy: Street v. Mountford (see above) at p. 818E-F; Moses Toms v. Luckett (1847) 5 CB 23 at 38-39 per Maule J. A lodger may in fact have exclusive possession of his room or rooms in a house, but that does not necessarily turn him into a tenant.

As to the arrangements for payment by Miss Vesely, Mr Feldman accepted that there was no agreement that she should make any payments to the trustees, against whom she claims an assured tenancy of the premises vested in them. He submitted that it was not necessary for rent to take the form of payments of sums of money to the landlord: rent could be in kind, taking, for example, the form of the supply of goods or services, as long as the parties have agreed a quantification of the value of kind in terms of money: Montague v. Browning [1954] 1 WLR 1039 at 1044-1045 per Denning LJ. In this case the parties had quantified Miss Vesely’s contribution at £65 per week.

The difficulty facing Mr Feldman on this point is that the judge found that the arrangement was that Miss Vesely would make a weekly contribution to the two women’s joint expenditure: it was only intended to be that and it was not intended by either party to be rent. The judge’s statement that the contribution “was not denominated as rent” was criticised by Mr Feldman on the ground that it was not necessary for the parties to call something “rent” for it to be rent. Just as something which may be called “rent” by the parties does not bind the court to hold that it is rent, so payment for the use of premises in some other way, which is not called rent by the parties, may be held by the court to be rent. The court looks to the explanation or reason for the payment: see Bostock v. Bryant [1990] 2 EGLR 101 at 102. The relevant inquiry is whether the payment is for exclusive use and occupation of the premises.

In general terms Mr Feldman’s point is a valid one, but it does not get him very far in this case, as the judge did not make the fact that the contribution was not denominated as “rent” the ground of her decision. The ground of her decision was that the parties agreed on the sharing of household expenses of Flat 4 rather than agreeing that Miss Vesely should pay rent in return for the occupation of the two rooms. According to the evidence she had been paying some expenses, but other expenses were paid by Marian and others, such as gas and electricity bills and contents insurance which were paid by the trustees.

In my judgment, it was a sensible and proper arrangement for the trustees to seek. They were trustees for Marian. They were not trustees for Miss Vesely, who they considered should make some contribution to the expenses. They were naturally cautious at that stage of granting a tenancy of part of the trust property to a third party, as it was purchased for the benefit of Marian and might be needed either by her or by a person caring for her.

Mr Feldman’s alternative position was that, if the contribution to household expenses was not rent, this was not fatal to the existence of a tenancy of Flat 4, because a tenancy could be rent-free. He cited Ashburn Anstalt v. Arnold (see above) at pp.9-10 per Fox LJ, who said that the reservation of a rent is not necessary for the creation of a tenancy.

Mr Bragiel’s answer to this point, which I think is correct, is that a rent-free arrangement for the exclusive use and occupation of premises would not create a tenancy, if the correct inference from the purpose of the arrangement and the surrounding circumstances was that there was no intention to create the landlord and tenant relationship between the parties. The judge’s finding that the arrangement was for the continued sharing of the expenses of a joint household by two friends makes it very difficult, applying an objective test, to infer that there was an intention to grant a tenancy to one of them, the only other occupant neither having, nor being in need of, a tenancy, as she was a beneficiary under the trusts on which the entire flat was held.

In my judgment, both the purpose of the arrangement and its terms were entirely consistent with the conclusion that the trustees did not expressly or by implication grant a tenancy of Flat 4 to Miss Vesely before 28 February 1997. When I turn from the purpose and terms of the arrangement to consider the circumstances surrounding it I find nothing in them to support the contention that the judge was wrong in rejecting Miss Vesely’s claim that she was granted a tenancy of Flat 4 before 28 February 1997.

The special character of the trust administered by the trustees; the particular purpose for which the trustees acquired the flat in 1994; the circumstances in which Miss Vesely went into occupation of the flat early in 1996 and continued in occupation; the circumstances in which Marian moved into the flat later in 1996; the friendship between Miss Vesely and Marian and her family; the continuing uncertainty during 1996 about the future living arrangements of Miss Vesely and of Marian- these are all circumstances from which it is legitimate to infer that Miss Vesely was not granted a tenancy of the flat at the end of 1996.

In brief, there was ample evidence from which the judge was entitled to conclude that Miss Vesely’s exclusive occupation of two rooms at the rear of the building prior to 28 February 1997 was not as a result of a tenancy granted to her by the trustees. The judge gave adequate reasons for her conclusion and it has not been shown to be wrong. I would dismiss the appeal against the declaration as to Miss Vesely’s status in the premises.

The judge ordered the trustees to pay 95% of the costs and refused permission to appeal.

She said that the trustees’ primary case was that Miss Vesely was a licensee and that they were entitled to possession. This failed. No valid section 21 notice had been served. She refused to make an issues-based order for costs sought by the trustees in relation to the assured tenancy issue, which turned on the evidence of events pre-28 February 1997 and on which Miss Vesely lost.

The judge held that the vast majority of the costs were on issues on which the trustees were unsuccessful. Most of the pre-1997 facts were relevant to the possession claim. The costs in relation to the declaration granted in favour of the trustees on the assured tenancy point were minimal.

The trustees submit that, although they did not succeed in obtaining an order for possession because the notice to quit was invalid, they had substantially succeeded in the action: the status of Miss Vesely in Flat 4 and in Flat 1 were the main issues in the case, as demonstrated by the fact that Miss Vesely had brought this appeal solely on the assured tenancy point. As she lost on that issue, she should have been ordered to pay the costs incurred in relation to that issue.

Mr Feldman reminded the court of the width of the trial judge’s discretion on costs and of the limited grounds on which this Court is entitled to disturb the exercise of discretion. He submitted that it could not be said that the judge had exceeded the “generous ambit within which a reasonable disagreement is possible.” There was no error of principle nor was it plainly wrong to order the trustees to pay all but 5% of the entire costs.

On this point Mr Feldman correctly states the principles, but incorrectly states their application to the particular facts of this litigation. I cannot accept the submission in paragraph 4 of his skeleton argument that “the Respondents failed on every aspect of their claim.” As Mr Bragiel pointed out, his skeleton argument at trial (page 2) identified the trustees’ case as a claim that “this is the standard case of a tenancy granted after February 1997, ….which is therefore an assured shorthold tenancy which has been terminated by notice” while Mr Feldman’s skeleton argument at trial (paragraph 10) contained a summary of five issues, which focused on the status of Miss Vesely in Flat 4 prior to November 1996, her status after the meeting in November 1996, her status in Flat 1 and whether Miss Vesely was entitled to the declaration sought and, if not, whether the trustees were entitled to possession of Flat 4 and/or Flat 1. By her Part 20 claim Miss Vesely was seeking a declaration that she is the assured tenant of Flat 1 and/or of two rooms in Flat 4 with the shared use of facilities. This issue involved the question whether, as at 28 February 1997, Miss Vesely was a tenant or only a licensee in Flat 4.

At trial the judge refused to make the declarations sought by Miss Vesely and made contrary declarations in favour of the trustees to the effect that she was not an assured tenant of either flat. The appeal has been limited to the declaration regarding Flat 1. Miss Vesely has not appealed against the declaration that she was not an assured tenant of Flat 4 or any part of it from the time she moved out. The outcome is that Miss Vesely failed on her counterclaim.

The trustees failed on other points in the claim, which led the judge to refuse the order for possession: the invalidity of the notice, the refusal to dispense with the notice, whether an order for possession was reasonable in the circumstances and whether the tenancy of Flat 1 was a consequence of Miss Vesely’s employment (which was relevant to a ground for possession). There were other points which were not pursued: the trustees abandoned an estoppel point at the start of the trial and an allegation of misrepresentation relevant to a ground for possession was abandoned at the end of the trial. Miss Vesely abandoned at the end of the trial the claim that she was entitled to a tenancy of Flat 4 prior to November/December 1996.

In these circumstances I would grant permission to appeal against the costs order and I would allow the appeal. The judge was plainly wrong in ordering the trustees to pay all but 5% of the costs of the entire action, when they had succeeded on the most substantial point, namely Miss Vesely’s status in Flat 4 prior to 28 February 1997 and subsequently and her status in Flat 1 at the date of the issue of the proceedings. It also includes the only point on which she appeals to this court. The judge erred in principle in treating the trustees as liable for all but a fraction of the costs, because they had failed to obtain a possession order, and in not taking account of the fact that the real issue between the parties was whether Miss Vesely was an assured tenant on which point the trustees were successful.

In order to decide that issue it was necessary to focus on the events prior to 28 February 1997, which involved oral evidence from the trustees and Miss Vesely and significant documentary evidence. The evidence concerned such matters as whether Miss Vesely had asked the trustees for permission to move into Flat 4, what happened during 1996, what was said at the meeting in December 1996 and whether, as Miss Vesely alleged, she had paid for all the household expenses of Flat 4, when the trustees had in fact paid utility bills and advanced money to Marian, which she used to discharge household expenses. The judge was plainly wrong in saying that, if any costs had been incurred in relation to the declaration, they were so minimal that she should ignore them and in saying that only a small amount of costs were incurred in dealing with Miss Vesely’s position.

The trustees rightly accept that they must bear the costs of issues on which they failed, such as the validity of the notice and the employment point, or which they did not pursue, such as the employment point. Rather than make an issues based order on costs they submit that an award should be made of a proportion of the costs representing the level of success of each party in the case. On that basis it was submitted that Miss Vesely should pay 50% of the trustees’ costs and the trustees should pay Miss Vesely’s costs of the issues on which the trustees lost or did not pursue, which would not exceed 50 % of her costs. Overall this would be equivalent to making no order as to costs.

I agree that this would be a just and reasonable order in all the circumstances outlined above.

I agree.

I also agree.