Andrews & Anor v Cunningham

This appeal relates to the ways in which an assured non-shorthold tenancy is created under the Housing Act 1988 (“the 1988 Act”).

132 Marina, St Leonards on Sea is a house which has been divided into flats. This claim relates to the ground floor flat (“the Flat”).

The claimants (the respondents on this appeal) are the daughter and son-in-law, and joint executors of the estate, of the late William George Hodges (“Mr Hodges”). The Flat forms a part of a building that was owned by Mr Hodges and therefore, as a part of his estate, vested in the claimants on 20 January 2003. Mr Hodges occupied the basement flat.

Mr Cunningham, the appellant, has been the tenant of the Flat since moving in on 14 May 1999, under an oral agreement between himself and Mr Hodges. Before he took up residence, Mr Cunningham was given by Mr Hodges a Rent Book. On the cover it had the words “Assured Tenancy”.

Mr Hodges was 91 at the time that Mr Cunningham began occupation of the Flat. Mr Cunningham was in need of a home after his divorce. At that time, according to Mr Cunningham, Mr Hodges was still mobile, and Mr Cunningham was relied on to make his meals, clean his bedroom, help him to bed and drive him around. In 2000 Mr Hodges’ health and mental faculties deteriorated, and Mr Cunningham helped more. He was also given a joint power of attorney (with Mr Hodges’ daughter, the second claimant) and handled some of Mr Hodges’ financial affairs. In late 2000, Mr Cunningham purchased from Mr Hodges a car parking space at the back of the property for the sum of £1,500.

Mr Hodges died on 23 November 2001 at the age of 93.

On 10 June 2005, the respondents as executors of his estate served on Mr Cunningham a notice under section 21 of the 1988 Act purporting to end his tenancy as an assured shorthold tenancy. By a claim form issued on 3 September 2005, the respondents sought possession of the Flat on the basis that Mr Cunningham occupied the Flat under an assured shorthold tenancy and had been served with a notice seeking possession. By a defence dated 19 September 2005, the claim was defended on the sole ground that the tenancy was not an assured shorthold tenancy, but was a non-shorthold assured tenancy, and accordingly the notice seeking possession had no lawful effect.

The effect of sections 1(1) and (2) of the 1988 Act is that a tenancy under which a dwelling-house is let as a separate dwelling to a tenant who is an individual (or joint tenants who are individuals) and who occupies the dwelling-house as his only or principal home is an assured tenancy.

But a tenancy “cannot be an assured tenancy” (section 1(2)) if it falls within any paragraph of Part I of Schedule 1. Paragraph 10 includes the case of a tenancy of a part of building, where, as Mr Hodges did, the landlord occupies as his only or principal home a dwelling-house which is part of the building. Paragraph 20 provides that where such a tenancy becomes vested in the personal representatives of a deceased landlord, it is treated as being within paragraph 10 while it is so vested for a period not exceeding 2 years.

By section 5 (which is headed “Security of tenure”) an assured tenancy cannot be brought to an end by the landlord except by obtaining an order of the court: section 5(1). In summary, and at the risk of over-simplification, in the case of an assured tenancy which is not an assured shorthold tenancy, the court can only make an order for possession on one of the grounds set out in Schedule 2 (section 7(1)), whereas in the case of an assured shorthold tenancy the landlord can obtain possession on giving 2 months notice: section 21.

By section 19A (as amended):

Section 96 came into force on 28 February 1997, and therefore the tenancy in the present case is one to which section 19A applies.

Among the paragraphs of Schedule 2A stating the cases in which an assured tenancy is not to be an assured shorthold tenancy are the following:

On 30 June 2006, this matter was tried before District Judge Pollard sitting at Hastings County Court. He found that Mr Cunningham was an assured non-shorthold tenant. He said that Mr Cunningham “told Mr Hodges that he required security of tenure of a long- term nature … The late Mr Hodges agreed to that ... I do not find it unusual for the late Mr Hodges to have offered Mr Cunningham, the defendant, the security of tenure which Mr Cunningham required.”

What Mr Cunningham said (paras 19 and 26) in the evidence which the District Judge accepted was that Mr Hodges “assured me that I could stay there forever and I believed him … Before I moved in I told [Mr Hodges] that if I did move in, it would not be on a temporary basis. I wanted to settle down somewhere. I was forced to move after my divorce and was clear that I did not want to move again anytime in the near future. I made this very clear to [Mr Hodges] and he was happy to promise me that I would be able to live there as long as I liked.”

The District Judge decided that the Rent Book “reflected the agreement of the parties to give [Mr Cunningham] security of tenure on a long term basis” (para 10, and also para 11).

He decided that the Rent Book was a notice under paragraph 1 or paragraph 2 of Schedule 2A, which reflected the agreement of the parties to give Mr Cunningham security of tenure on a long term basis. The Rent Book clearly stated it was an assured tenancy. Mr Hodges was a man of business and was experienced in dealing with tenants and knew precisely what he was doing. The clear intention of Mr Hodges was to give Mr Cunningham security of tenure as an assured tenant and the rent book with the wording “Assured Tenant” sufficed. Mr Cunningham did not know the difference between an assured shorthold tenancy and an assured tenancy, but they had agreed that Mr Cunningham would have security of tenure. The surrounding facts supported the conclusion, in particular the fact that Mr Cunningham had agreed to purchase the car parking space for £1,500. That purchase would not have taken place if the intention was not to give Mr Cunningham security of tenure.

An appeal was allowed on 11 October 2006, when HH Judge Hayward determined that Mr Cunningham was an assured shorthold tenant, and made an order for the possession of the Flat.

His reasoning was that the Rent Book did not contain the required statement pursuant to paragraphs 1 and 2 of Schedule 2A, and it was not, nor was it intended to be, a notice directed at these provisions; the parties’ intentions as found could not overcome the lack of prescribed notice.

As for the (new) argument on behalf of Mr Cunningham that paragraph 3 applied, he held that its language clearly referred to a specific provision to the effect that the tenancy was not an assured shorthold tenancy in a written agreement, and there was no such agreement. In any event, even if it could refer to an oral agreement, the finding of fact that Mr Cunningham was offered long term security of tenure was not sufficient, and was insufficiently clear to justify a conclusion that the agreement between Mr Hodges and Mr Cunningham contained a provision to the effect that the presumption of a shorthold tenancy was to be excluded.

For Mr Cunningham it is said that it was always understood and agreed between himself and Mr Hodges that Mr Cunningham’s occupation was to be on a permanent, long term basis and, indeed, he would be able to live there as long as he liked. He would not otherwise have been interested in moving in.

The tenancy falls within paragraph 1 by reason of the fact that the Rent Book which Mr Cunningham was given was a notice showing that the tenancy he was to have was an assured one. Strict compliance with paragraph 1 is not necessary: Mannai Investment Co Ltd v. Eagle Star Assurance Co Ltd [1997] AC 749, 767 to 769. As the District Judge found, Mr Hodges was a businessman and had dealt with tenants and rented properties for many years. Mr Hodges wished to honour a gentleman’s agreement that Mr Cunningham should have a permanent interest in the Flat, he was an experienced landlord and he gave effect to his intention by the provision to Mr Cunningham of the Rent Book stating quite clearly that it was an Assured Tenancy.

The tenancy falls within paragraph 3 of Schedule 2A, because, as found by the District Judge, there was a clear agreement between the late Mr Hodges and Mr Cunningham that the tenancy to be granted to Mr Cunningham was to be of a long term nature and, indeed, to be an assured tenancy.

There is nothing in paragraph 3 to indicate that the necessary agreement must be in writing: paragraph 3 refers to “an assured tenancy which contains a provision to the effect that the tenancy is not an assured shorthold tenancy”. The words “to the effect” are an indication of informality.

Section 20A(1) of the 1988 Act, added by the 1996 Act, section 97, expressly provides that the tenant is to give notice “in writing” requiring the landlord to provide a written statement of the terms of the tenancy, and section 21(1)(b) was amended by section 98 of the 1996 Act to provide expressly that the landlord’s notice that he requires possession should be “in writing.”

By contrast with the original section 20(2)(a) of the 1988 Act which referred to a prescribed form, Schedule 2A omits the words “in writing” and does not provide for any prescribed form.

The respondents say that the cover of the Rent Book was not a notice which complied with paragraph 1 of Schedule 2A; and that HH Judge Hayward was right to reject the argument that there was a tenancy containing a provision to the effect that the tenancy was not an assured shorthold tenancy. Paragraph 3 required an agreement in writing, and in any event there was no provision to the effect that the tenancy was not a shorthold.

Proprietary estoppel has never been pleaded in these proceedings by Mr Cunningham, but it was first raised by Mr Speller on his behalf in closing submissions before District Judge Pollard, who ruled that because it had not been raised, he would not deal with it. In Mr Speller’s skeleton before HH Judge Hayward it was suggested that there had not merely been a clear agreement, but on the facts as found by the District Judge, a proprietary estoppel had arisen. The matter was not pursued before Judge Hayward, nor was it mentioned in the grounds of appeal to this court, but Mr Speller in his skeleton in this court repeated the formula which he had used before HH Judge Hayward. On the hearing of this appeal Mr Speller on instructions disclaimed any suggestion that Mr Cunningham had agreed to give Mr Hodges care in return for security of tenure. He did not, quite rightly, press the contention that there had been proprietary estoppel, except to support the argument that there had been an agreement that Mr Cunningham was to have long term security of tenure.

Before sections 96-104 of the 1996 Act came into effect on 28 February 1997, an assured tenancy could only be an assured shorthold tenancy if the provisions of section 20 of the 1988 Act had been satisfied. In particular, the person who was to be the landlord was required to serve a notice, in such form as might be prescribed, on the person who was to be the tenant, and which stated that the assured tenancy to which it related was to be an assured shorthold tenancy. Accordingly there was a presumption that an assured tenancy was a non-shorthold, unless a section 20 notice had been served.

The effect of section 104 of the 1996 Act was that section 20 of the 1988 Act would only apply to pre-1996 Act tenancies.

Section 19A of the 1988 Act was introduced by section 96, 1996 Act. By section 19A, the presumption was reversed with regard to post-1996 Act tenancies, whereby an assured tenancy would be an assured shorthold tenancy unless it fell within any paragraph of Schedule 2A to the 1988 Act (in which case it would be a non-shorthold assured tenancy).

The essential questions are: what does the statute require and has it been complied with? See Fernandez v McDonald [2003] EWCA Civ 1219, [2004] 1 WLR 1027, and the authorities referred to in that decision: Speedwell Estates Ltd v Dalziel [2001] EWCA Civ 1277, [2002] HLR 813; Burman v Mount Cook Land Ltd [2001] EWCA Civ 1712, [2002] Ch 256.

That was said in the context of a notice by a landlord to an assured shorthold tenant requiring possession under section 21(4)(a). Hale LJ emphasised that one of its purposes was to give the courts a clear and simple set of criteria which trigger their mandatory duty to order possession, and that for the court to accept the validity of a notice which did not comply with the statutory requirement “would leave room for all sorts of arguments, uncertainty and inconsistency up and down the country on a matter about which there should be no doubt at all.” Fernandez v McDonald [2003] EWCA Civ 1219, [2004] 1 WLR 1027, para 23.

Section 1(2) of the 1988 Act provides that where a tenancy falls within any paragraph in Part I of Schedule 1 “it cannot be an assured tenancy.” An important feature of this case is that Mr Hodges was living in the house until his death. It is common ground that the effect of section 1(2), in conjunction with Schedule 1, paragraphs 10 and 20, is that there was no assured tenancy – shorthold or otherwise – while Mr Hodges was alive as Mr Hodges was a resident landlord, nor for the period within 2 years of the date of the death of Mr Hodges.

It is also common ground that during the period that Mr Hodges was in residence, the tenancy was a common law tenancy, and since Mr Cunningham paid a monthly rent he held on terms which were consistent with a periodic monthly tenancy. While the period of the resident landlord condition was satisfied the tenancy was determinable by the service of a 1 month notice to quit. After 23 November 2003, it became an assured monthly periodic tenancy under the 1988 Act.

The relevant events took place in 1999. Consequently there is a formidable difficulty in applying section 19A and the paragraphs in Schedule 2A so as to give Mr Cunningham the benefit of an assured non-shorthold tenancy, because section 19A provides that a relevant “assured tenancy” is an assured shorthold tenancy “unless it falls within any paragraph in Schedule 2A …” The effect of section 1(2) and Schedule 1, paragraphs 10 and 20, is that the earliest date on which the tenancy could have been an assured tenancy, and therefore potentially an assured shorthold tenancy, was in November 2003.

Paragraph 1 of Schedule 2A has the following elements: (a) an assured tenancy (b) in respect of which a notice is served (c) which is “served before the assured tenancy is entered into” (d) which is served “by the person who is to be the landlord under the assured tenancy on” the proposed tenant and (e) which “states that the assured tenancy to which it relates is not to be an assured shorthold tenancy.”

A notice can of course be given by the landlord or proposed landlord after an existing tenancy ceases to be excluded under section 1(2), and it is possible to envisage cases in which a notice may be given to become effective under paragraph 1 or paragraph 2 after an existing tenancy ceases to be excluded. It is not necessary to decide what cases may be included, because in my judgement the use of the Rent Book in the form used in this case could not on any view be within paragraph 1 (or paragraph 2).

First, the statement on the cover “Assured Tenancy” is not a statement “that the assured tenancy to which it relates is not to be an assured shorthold tenancy” (para 1(2)(c)), because an assured shorthold tenancy is itself a type of an assured tenancy (see section 19A). Second, if there were any doubt about that, the schedule to the Rent Book contains a notice to the tenant that if the rent is payable weekly (which was not the case here) the rent book must contain the notice properly filled in: the significance of this notice is that it confirms that the expression “Assured Tenancy” on the first page is not confined to non-shorthold tenancies. It says: “if you have an assured tenancy, including an assured shorthold tenancy…” the rent book must contain the notice properly filled in.

Third, I am satisfied that the reference to “a notice” being “served” in paragraph 1(1) is a reference to the service of a written notice. I see no support for Mr Cunningham’s position in the changes made by the 1996 Act to add section 20A(1) or amend section 21(1)(b) to refer to notices in writing.

Nor is there anything in Mannai Investment Co. Ltd. v. Eagle Star Life Assurance Co. Ltd. [1997] AC 749, which involved the application of a contractual notice provision, to justify the disregard of specific statutory requirements. Fernandez v McDonald [2003] EWCA Civ 1219, [2004] 1 WLR 1027 considered the application of the Mannai approach to statutory notices. Hale LJ said (at [18] and [19]) that it was important to have well in mind the context of the evident purpose of the requirement of a notice in the prescribed form. If notwithstanding errors or omissions, the substance of the notice was sufficiently clear to the reasonable person reading it, the notice was likely to serve the purpose. If anything in the notice contained what appeared to be an error on its face, then it might be that there would be scope for the application of the Mannai approach, although this might depend upon the particular statutory provisions in question. See also Speedwell Estates Ltd v Dalziel [2001] EWCA Civ 1277, [2002] HLR 813; Burman v Mount Cook Land Ltd [2001] EWCA Civ 1712, [2002] Ch 256; Ravenseft Properties v Hall [2001] EWCA Civ 2034, [2002] HLR 624.

There is no suggestion here of any error. Mr Cunningham as the recipient of the purported notice was in any event unaware of the requirements of Schedule 2A. Mr Cunningham accepted in evidence that he was unaware of the difference between an assured shorthold tenancy and a non-shorthold assured tenancy. There was no suggestion that Mr Hodges had set out to comply with them by service of the rent book. It is not possible to infer that he did so simply by the fact that (as the District Judge found) Mr Hodges was a man of business, experienced in dealing with tenants, and knew precisely what he was doing. On the contrary, there is force in the submission for the respondents that, in those circumstances, Mr Hodges would not have sought to treat the Rent Book as a notice, but would have served a notice under Schedule 2A. The Rent Book was clearly intended and used to simply record the payment of rent.

The fact that Mr Hodges was a resident landlord also presents a difficulty in the application of paragraph 3, which refers to “an assured tenancy which contains a provision to the effect that the tenancy is not an assured shorthold tenancy.” The consequence of section 1(2) and Schedule 1, paragraph 10, is that at the time of the agreement between Mr Hodges and Mr Cunningham, there was no assured tenancy which could have contained a provision to the effect that the tenancy was not an assured shorthold tenancy. But apart from that point I am satisfied that, there was no such agreement as would satisfy paragraph 3.

Paragraph 3 is plainly directed primarily to written agreements with a provision that, or to the effect that, the tenancy is not an assured shorthold tenancy.

Does it require a written agreement, or at any rate a written record of an agreement? I see considerable force in the respondents’ argument that a written record is required if a non-shorthold assured tenancy has been agreed, because it removes the risk of opening the floodgates to claims based on easily made allegations of a landlord having orally agreed a non-shorthold assured tenancy. The vast majority of residential tenancies are assured shorthold tenancies, which entitle landlords to recover possession on expiry or termination under section 21. Accordingly, enabling a tenant to simply defend a claim for possession on the ground that it was orally agreed that the tenancy was not an assured shorthold tenancy would be contrary to the whole regime of assured shorthold tenancies, and would result in unfounded claims that there was an oral agreement that there should be a non-shorthold tenancy having to go to trial.

The structure of Schedule 2A and the place of paragraph 3 in that structure support the conclusion that paragraph 3 requires a document containing or evidencing a provision to the effect there stated. For the reasons I have given, even if the Rent Book evidences the oral tenancy agreement, it contains no such provision.

But we have not heard full argument on this important question, and it is therefore not necessary to decide it, because even if an oral agreement were sufficient to engage paragraph 3, I am satisfied that the finding by the District Judge that it was orally agreed that Mr Cunningham should have “security of tenure on a long-term basis” is not sufficient in the circumstances of this case to engage paragraph 3. That finding was made in the proceedings when paragraph 3 was not being relied on and when the context of the finding was an attack on Mr Cunningham’s honesty in relation to his exercise of the power of attorney, his purchase of the car parking space, and an alleged failure to pay rent.

At the time of the agreement, as is common ground, the tenancy was not an assured tenancy of any kind, because of the operation of section 1(2) and paragraph 10 of Schedule 1. It is also relevant (although not decisive) that the 1988 Act uses the expression “security of tenure” in relation to both an assured shorthold tenancy and a tenancy which is not an assured shorthold tenancy: see heading to section 5.

In order for what was agreed (especially the finding that the agreement was for security of tenure “of a long-term nature” or “on a long-term basis”) to be construed as a provision “to the effect that the tenancy is not an assured shorthold tenancy” under paragraph 3 it would have to be reformulated and expanded to mean an agreement by Mr Hodges that if he were to cease residing at the premises, or die, Mr Cunningham would have the security of tenure which exists in the case of a tenancy which is not an assured shorthold tenancy. I find it impossible to spell out such an agreement from the finding of the District Judge in a quite different context.

In my judgment, therefore, the appeal should fail.

I have no difficulty in agreeing that Mr Cunningham’s case under paragraph 1(1) of Schedule 2A to the Act of 1988 was wrongly upheld by the District Judge and rightly rejected by the Circuit Judge. The paragraph refers to an assured tenancy “in respect of which a notice is served”. The notion of “service” usually betokens that it should be of something in writing: R v. Shurmer (1886) 17 QBD 323. Indeed the reference in the paragraph to service not of “notice” but of “a notice” confirms the validity of the usual construction. On behalf of Mr Cunningham, Mr Speller has always conceded, in my view correctly, that paragraph 1(1) required service of a notice in writing. His argument was and is that the rent book qualified as a notice under the paragraph in that it was provided by Mr Hodges to Mr Cunningham before the tenancy was entered into and – so runs the argument – that it stated that the assured tenancy was not to be an assured shorthold tenancy. With great respect to the District Judge, Mr Speller’s argument is hopeless because the rent book was as apt to an assured shorthold tenancy as it was to an assured non-shorthold tenancy and it was not stated therein that the tenancy was of the latter rather than the former character.

I have found somewhat greater difficulty in addressing Mr Speller’s argument under paragraph 3 of Schedule 2A. Mr Otwal submits that the words “in writing” should be implied into the paragraph so that it should read “An assured tenancy which contains a provision in writing to the effect that the tenancy is not an assured shorthold tenancy”. I agree that we should leave this point – which I regard as difficult as well as important – as open for determination upon a future appeal in the light of fuller argument. I am not convinced by Mr Otwal that, were an oral provision of a tenancy to qualify under it, paragraph 3 would render nugatory the facility in paragraphs 1 and 2 for a landlord unilaterally to serve a written notice prior to or following entry into the tenancy. I note Mr Speller’s demonstration of Parliament’s capacity even in the Act of 1988 itself, for example in section 20A(1), to use the words “in writing” when it wishes to do so. And I am concerned that a tenant under an oral agreement for an assured tenancy, which contained a provision to the effect that the tenancy was not shorthold, should lose something as valuable as the long-term security of tenure, thus specifically agreed, by virtue of nothing more than the court’s implication into paragraph 3 of words not there expressed. On the other hand there are the countervailing arguments of public policy to which Lawrence Collins L.J. has referred at [45] above.

For I agree that Mr Cunningham’s belated invocation of paragraph 3 fails for a different reason. In that no argument under paragraph 3 was addressed to him, the District Judge did not have occasion to consider whether his finding that Mr Hodges had “agreed”, apparently prior to the grant of the tenancy, to Mr Cunningham’s requirement of “security of tenure of a long-term nature” should lead him to conclude that the case fell within the paragraph. In any such enquiry various questions would have confronted the District Judge. In my view Mr Cunningham might well have prevailed in establishing that the agreement of Mr Hodges was “to the effect that the tenancy is not an assured shorthold tenancy” (emphasis supplied). But was the agreement of Mr Hodges to such effect a “provision” which the tenancy “contains”? And, in particular, was the tenancy “assured”? The answer to the latter question is in my view clear: the tenancy was not assured because Mr Hodges occupied as his only home a dwelling-house which formed part of the same building: section 1(2) of, and paragraph 10 of Schedule 1 to, the Act of 1988. In my view it is insufficient for Mr Cunningham to point to the fact that in November 2003, some four and a half years after its inception, the tenancy became assured. During those four and a half years Mr Cunningham in truth did not enjoy long-term security of tenure, although, had Mr Hodges or his executors then sought to secure his eviction, he might have been able to raise an estoppel against them. And it is in my view unrealistic to construe the agreement of Mr Hodges in 1999 to Mr Cunningham’s requirement of long-term security as a provision whereby, if Mr Cunningham were still to remain in occupation either upon any cessation by Mr Hodges during his life of occupation of a flat in the same building or two years after his death, the assured tenancy then arising was not to be an assured shorthold tenancy.

It is for such a reason that I conclude that Mr Cunningham has no stronger a case under paragraph 3 than under paragraph 1 of Schedule 2A. Thus, with some reluctance, I concur in the dismissal of his appeal.

I agree that this appeal should be dismissed on the grounds in both judgments. I agree that since it is unnecessary to decide the question of whether paragraph 3 requires a written document it is better not to decide that issue in this case. There are clearly arguments both ways as my lords have demonstrated, and it would clearly be beneficial to have more extensive argument on the point than we had in this case before reaching a conclusion on such an important point.