Basildon District Council v Wahlen [2006] EWCA Civ 326

[2006] EWCA Civ 326Case No B2/2005/2219
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM BASILDON COUNTY COURT
District Judge Chandler
5BQ01377
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 28/03/2006
Before
LORD JUSTICE NEUBERGERLORD JUSTICE MOSES
Between
BASILDON DISTRICT COUNCILAppellantWAHLENRespondent
Mr J Easton (instructed by Basildon District Council Legal Services) for AppellantMr J Summers (instructed by Messrs Newman & Maxwell) for RespondentHearing Hearing dates : 3 rd March 2006
Judgment
[1]This appeal raises a point under the Housing Act 1985 (“the 1985 Act”), and all references to Parts, sections and schedules are to provisions of that Act. The question raised on the appeal is how the court should resolve the conflict which arises when it has before it simultaneously(a) a landlord’s claim for possession of a residential property pursuant to section 82, and(b) a tenant’s application to exercise his right to buy the same property pursuant to section 118.

The statutory provisions

[2]Subject to certain specified exceptions, where a local authority lets a property for residential purposes, the tenant becomes a secure tenant of the property pursuant to Part IV. Where a secure tenant occupies the property with members of his or her family, then, on the death of the secure tenant, Part IV contains provisions whereby one or more of such members may succeed to the tenancy.[3]Section 84 precludes the local authority from obtaining possession against a secure tenant, unless it can establish to the Court’s satisfaction one or more of the grounds set out in schedule 2. As a prerequisite to seeking possession under any of those grounds, the local authority must normally first serve, pursuant to the provisions of section 83, a formal notice on the tenant indicating its intention to do so, and setting out the basis on which it will seek possession. One of the grounds upon which a local authority is entitled to seek possession is contained in ground 16 of schedule 2. The relevant statutory provisions in this connection are fully set out in paragraphs 5, 12 and 13 of the judgment of Lindsay J in Kensington and Chelsea Royal London Borough Council –v- Hislop [2004] 1 All ER 1036, and I shall not set them out here.[4]In summary, a local authority can only obtain possession under ground 16 if all the following conditions are satisfied: i) The original tenant must have died between 6 and 12 months before the section 83 notice relying on this ground is served on the successor tenant; ii) The property concerned must be “more extensive than…reasonably required by the [successor] tenant”; iii) Suitable alternative accommodation is available to the successor tenant, and, in order to be suitable, that accommodation has to satisfy certain requirements with regard to the successor tenant’s needs and means, place of work, proximity to family etc; iv) It must be reasonable in all the circumstances (which specifically include the age of the successor tenant, the period he has resided in the property, and the extent, if any, to which he supported financially the original tenant) to make an order for possession.[5]Part V gives a secure tenant, subject to certain exceptions, the right to buy his or her property from a local authority, provided that the secure tenant (or, where the secure tenant is a successor, his or her predecessor) has been in occupation of the property as a tenant for at least five years. In general, where the property is a flat, the tenant can acquire a long lease, whereas, where it is a house, the tenant can acquire the freehold. The relevant statutory provisions are set out in paragraphs 6, 8 and 10 of the judgment in Hislop’s case, and once again it is unnecessary to set them all out here.[6]Section 121 provides that the “right to buy cannot be exercised” if the tenant is subject to an order for possession which requires him or her to give up possession of the property either now or in the future. Section 138(1) states that “as soon as all matters relating to the grant have been agreed or determined”, “the local authority shall make a grant” of the freehold or leasehold interest, as the case may be.[7]This statutory right to buy is not merely of value to the tenant in itself, but it has various further advantageous aspects, perhaps the most important of which is that the tenant can acquire the freehold or long leasehold interest at a price lower than its market value (albeit that the tenant will have to reimburse the benefit of that discount he or she sells the property within a specified period of its acquisition).

The facts of this case

[8]In July 1978, Basildon District Council (“the Council”) let a three bedroom house, 3 Pattocks, Vange, Basildon, (“the house”), on a weekly tenancy to Jean Wahlen (“Mrs Wahlen”), who was then aged about 39. She moved in with her son, Trevor Wahlen (“Mr Wahlen”) who was then about 8 years old. They lived there together until Mrs Wahlen’s death on 13 June 2004. Mr Wahlen then succeeded to the tenancy.[9]On 17 August 2004, the Council wrote to Mr Wahlen, accepting that he had succeeded to his mother’s tenancy, but intimating that possession would be sought pursuant to ground 16, on the basis that he was living on his own in a three bedroom house. A week later, on 24 August 2004, Mr Wahlen notified the Council, pursuant to section 118, that he wished to exercise his statutory right to buy – i.e. to purchase the freehold of the house. Negotiations as to the price then followed.[10]On 13 January 2005, two things happened. First, Mr Wahlen accepted the Council’s offer to sell him the freehold of the property for £94,000; secondly, the Council made an offer of alternative accommodation to him which he refused. The latter offer was repeated, and Mr Wahlen persisted in his refusal, essentially because he wished to buy the house. On 7 March 2005, the Council served a formal notice on Mr Wahlen pursuant to section 83, indicating that possession of the house would be sought pursuant to ground 16.[11]Thereafter, in early April 2005, the Council issued proceedings in the Basildon County Court seeking possession of the house pursuant to ground 16. Meanwhile, in late May 2005, Mr Wahlen informed the Council that he had received a satisfactory mortgage offer to fund his purchase of the house, and the Council instructed its legal department to deal with the conveyancing formalities. On 24 June 2005, Mr Wahlen served his defence in the possession proceedings. Although he did not accept that the alternative accommodation put forward by the Council was suitable, or that it would be otherwise reasonable to make an order for possession against him, his centrally relevant defence (at least for present purposes) was contained in his counterclaim, in which he sought to enforce his right to buy the house by means of an injunction.[12]On 25 July 2005, the proceedings, that is the Council’s claim for possession and Mr Wahlen’s claim for an injunction to enforce his right to buy, came before District Judge Chandler. Having heard brief evidence and rather fuller argument, the District Judge reserved judgment. On 6 September, he gave a reasoned decision, dismissing the Council’s claim for possession and granting Mr Wahlen his injunction.[13]There were two important features of the decision of the District Judge. First, as he said in paragraph 4 of his judgment, he decided to hear the Council’s claim for possession at the same time as Mr Wahlen’s claim for possession. Secondly, in paragraphs 8 and 9, he concluded that because the statutory requirements identified in section 138 had been established, the Council was under a duty to make the grant of the freehold estate in simple to Mr Wahlen. He gave no other reason for ruling in Mr Wahlen’s favour. He made no reference to the Council’s grounds for seeking possession. The District Judge gave the Council permission to appeal, and that appeal now comes before us.[14]There was no dispute before us but that the District Judge was correct to order both claims to be heard at the same time. It is the second feature of his judgment which gives rise to the issue in the instant appeal. For the Council it is contended that the judge was bound to balance the competing claims and that he failed to do so. On behalf of Mr Wahlen, it is argued that, in the circumstances of the instant case, no balancing exercise was required, or, that if it was, it so overwhelmingly required a decision in Mr Wahlen’s favour that any reference to the Council’s competing claim was unnecessary.

The correct procedural approach

[15]It is the statute itself which gives rise to the clash of the completing claims. Section 121 (1) provides no warrant for giving precedence to the Council’s claim for possession; and section 138(1) is silent as to the effect of an outstanding claim for possession on the obligation of the landlord to grant interest in the dwelling-house. The decision of the House of Lords in Bristol City Council v Lovell [1996] 1 All ER 775 establishes that the conflict is not to be resolved by a race to judgment or to execution of judgment. The error of the courts below in that case lay in concluding that once the conditions identified in Section 138 were satisfied, a court was bound to accede to the tenant’s claim for an injunction. But Lord Hoffmann explained that the court’s task, at the first stage, was to determine which of the two competing claims should be heard first, or whether they should be heard at the same time. – see at 782J-783H.[16]The court’s approach to this logically prior exercise of administrative discretion is one that must be guided by the words of Lord Woolf MR in the Court of Appeal in a passage expressly approved by Lord Hoffmann at 785C:
“If a judge before whom the matter comes, was able to conclude having heard an outline of the circumstance, that having regard to the nature of the local authority’s case, it would not be proper to make an order for possession, then there is no purpose in hearing the claim for possession and the matter could be dealt with on the claim for an injunction. However if the judge took the view that the case is one which notwithstanding that the tenant may have an established right to buy, he considers that it could still be proper to make an order for possession, then he should be able to adjourn the claim for an injunction until he has determined the claim for possession. If the judge was in doubt as to which side of the line the case falls, it would be necessary to hear both claims and only then make the determination as to which is the more appropriate order to make.”
[17]As pointed out by Moses LJ during argument, it would seem very unfair to one party or the other if the Court did not adopt the third option put forward by Lord Woolf, unless satisfied that either the local authority’s claim for possession or the tenant’s claim for an injunction was hopeless, for one reason or another. Once the Court is satisfied that each of the two claims is at least arguable and, even more, if it is satisfied that each of the two claims is, in the absence of the other, very likely to succeed, it would appear to me to be unjust, at least in the absence of special circumstances, to hear one claim first without hearing the other. If each claim is arguable, it would seem right to investigate the merits as a whole, which would involve considering both cases at the same time, and then deciding which should prevail.[18]Accordingly, it seems to me that the cases where it will be right not to hear both claims at the same time will be rare. Even in a case where serious allegations as to the tenant’s behaviour have been made, it will be necessary to consider the tenant’s claim for an injunction in any event, because that is relevant to the question of whether it is reasonable or not to make an order – see Enfield London Borough Council v McKeon [1986] 1 WLR 1006 at 1016.[19]Quite apart from this, if the Court has to embark on the initial question of whether the local authority’s claim for possession or the tenant’s claim for an injunction is hopeless, two points can be made. First, if it decides that one or the other claim is hopeless, then, in practice, it will be deciding that claim before, rather than after (as suggested in the passage I have quoted from Lord Woolf), the other claim. Secondly, in order to satisfy oneself that a claim is properly hopeless, it is in many cases necessary to consider the claim in a little detail; in those circumstances it appears to me that it would be a better and more efficient use of Court time, and of the parties’ money, for both claims to be considered properly together, rather than for a slightly artificial initial stage of considering whether either claim is hopeless.

The balancing exercise to be carried out

[20]Where, as will therefore usually be the case, the court hears both claims at the same time, and where each claim appears well-founded (at least in the absence of the other), the question to be addressed is how the conflict between the rival claims is to be resolved.[21]In Hislop’s case, at paragraphs 21 and 22 Lindsay J, at the invitation of counsel, helpfully, if diffidently, offered some general guidance by identifying many of the factors that he considered might be relevant when the Court is called upon to make the difficult decision which the District Judge was called upon to make in the present case. I agree with most, but not all, of what is said in those paragraphs.[22]Referring first to paragraph 21, I consider that it would be in the tenant’s favour if his occupation of the property concerned is “long established”, if moving “would be unusually disruptive”, if he “is not in breach of any covenant” and if “his claim to buy is well founded and genuine”, in the sense of his intending, and being able, to complete it. On the other hand, I am not convinced that it would normally be of much weight if it can be shown that the local authority had “deliberately failed to perform [its] statutory duty in processing a tenant’s claim” to purchase, although it would be different if the deliberate failure had caused the tenant actual damage. Thus, it could, and often would, be a significant factor if such a deliberate failure had resulted in the local authority being able to raise a ground of possession which it could not otherwise have raised[23]As to the factors identified by Lindsay J in paragraph 22 of his judgment, I agree that it would be in the local authority’s favour “if the tenant is in persistent or serious breach of the terms of his tenancy”. I also consider that it would be relevant if the landlord was seeking possession “in order the better to deploy its housing stock”, provided that was a genuine and practical desire.[24]However, I am not convinced that it would be in the local authority’s favour if “the right to buy would create an enfranchised pocket in otherwise ordinarily rented land”. As Mr Summers points out on behalf of Mr Whelan, it is hard to see how any problem could arise for the local authority if (as here) it is the freehold of a house which represents the “enfranchised pocket”; it might be different if the enfranchisement resulted in one flat in a block being subject to a different service charge regime from the other, unenfranchised, flats. Even in such a case, I am doubtful as to whether the creation of an “enfranchised pocket” should carry any significant weight. After all, if that is the result of the tenant exercising his right to buy, it is a consequence of the policy of Part V. In any event, the property concerned would be likely to be enfranchised in due course by a future tenant. Furthermore, the land on which the property would be an enfranchised “pocket” would normally be subject to tenancies which would themselves be liable to lead to enfranchisement and the creation of further “pockets”.[25]On the other hand, I agree that, if the tenant was creating a nuisance to neighbours, that would be a factor militating in favour of the local authority, because it would obviously be undesirable to perpetuate the risk of nuisance by letting the tenant stay in the property.[26]At the end of paragraph 22 of his judgment in Hislop’s case, Lindsay J said this:
“A factor which, in my view, is likely to tip the balance one way or another is that, if the right to buy prevails, then the landlord, if a local authority, loses the premises as part of its housing stock for ever whereas, upon a tenant being given alternative accommodation by a local authority, in many cases the right to buy on the tenant’s behalf will be once again available after an appropriate further period and will, in alleged under-occupation cases, then apply to premises which will less deplete the local authority’s available supply of space.”
[27]I would like to make two points about that observation. First, when considering which factors can properly be taken into account when resolving the difficult conflict in a case such as the present case or in Hislop’s case, I do not believe that it is appropriate to suggest any particular point would, or even might, be likely to tip the balance. While I entirely endorse Lindsay J’s acceptance of the invitation to identify the potentially relevant factors for general guidance in cases of this nature, it does not seem to me that it can be right to suggest that any particular factor is likely to tip the balance. This is an area where each case must turn on its own particular facts, especially, as pointed out in Hislop’s case, where there is no express statutory guidance as to the factors to be taken into account.[28]Secondly, I accept that, at least in a case such as this (and Hislop’s case), where a claim for possession under ground 16 is in play, the local authority can pray in aid the fact that, if the tenant’s application for an injunction prevails, the property in question will be under-occupied (with all the disadvantages that that involves in the light of the demands and shortages in the area). However, in my judgment, that is as far as the point can go. It does not seem to me that the local authority can properly rely on the fact that it will lose that property from its housing stock as a reason for the claim for possession prevailing over the claim for an injunction: the loss of the property is a consequence of the policy of Part V. Quite apart from this, the fact that, in the present case, a three-bedroom property would be under-occupied can be overstated. Mr Wahlen may in due course start a family, or sell on the house to a family; equally, if the house is let to a family who in due course exercise the right to buy, there will be nothing to stop them after a suitable period, selling it on to a single person.

Resolution in Ground 16 Cases

[29]I now turn to the question, which is ultimately the crux of this case, namely how the Court should resolve the conundrum thrown up at a hearing of both the local authority’s claim for possession under ground 16 and the tenant’s claim for an injunction to enforce his right to buy.[30]In many (indeed most) such cases, it appears to me that the Court will have an unenviable task, in that the balancing exercise to be carried out will involve comparing factors which are largely incommensurate with each other. That is well illustrated by this case. If the Council obtains an order for possession, Mr Wahlen will have to move out of the house which has been his only home for 28 years, he will lose his otherwise unassailable right to buy that house at a discount, and, while he will acquire a tenancy of a new property which in due course he will be able to buy, any right to buy will be put off for 5 years, which would be likely (but not of course certain) to be financially disadvantageous. On the other hand, if Mr Wahlen’s claim for an injunction succeeds, a three bedroom house, currently included in the Council’s stock, will be occupied by only one person, and the Council’s success would not result in Mr Wahlen being homeless, merely in his being relocated in another property which, by definition, will be suitable to his needs, and which he will be able to buy in due course.[31]On the basis of the current evidence in this case, and the arguments we have heard, it seems to me that those are the relevant factors which have to be weighed up when deciding whether to favour the Council’s claim for possession or Mr Wahlen’s claim for an injunction. As I have said, it appears to me to be difficult to decide which of these two competing sets of factors should outweigh the other, not least because there would normally be no obvious answer to any of the factors, and they do not really relate to each other.[32]However, when considering the force of those factors in a particular case, it seems to me necessary for the Judge to look into the evidence with some care. The length of the period the tenant has occupied the property, whether it is and has been his only home for that period, the importance to the tenant of continuing to live, indeed of owning, the property which is and has been his home, and the inconvenience and disruption of moving, will depend very much on the facts of the particular case, as will the financial advantage, and indeed financial importance to the tenant, of acquiring the property at a discount. Equally, the importance to a local authority of having its housing stock (in this case, its stock of three-bedroom properties) fully occupied, and the efficiency with which the particular local authority deploys its housing stock, will differ from one authority to another, and will no doubt vary from time to time within a particular authority. While the depth and length of any judicial enquiry into such matters must, of course, be limited by reference to proportionality, it seems to me impossible to carry out a sensible balancing exercise of the sort required in a case such as the present, without some sort of proper enquiry into such issues.[33]Having identified the factors which are relevant in a case such as this, it is right to mention the certain matters which I do not consider to be relevant. On behalf of the Council, it was suggested that the fact that Mr Wahlen’s application to buy the house appears to have been prompted by the intimation of the Council’s claim for possession pursuant to ground 16, was something which militated in favour of making an order for possession. I do not agree. It seems to me that that argument is wrong in principle, and indeed runs counter to the observations of Lord Hoffmann deprecating the “race to judgment”, in Lovell’s case which I have quoted above.[34]The furthest that the point can properly be taken is that it might be said that the fact that Mr Wahlen did not seek to exercise his right to buy until a claim for possession was intimated may indicate that buying the house is not of great importance to him. I suspect that point would have, at best, limited weight, not least because the obvious answer is that his main desire may be to retain the house as his home, and in light of the notice of the claim for possession, he appreciated that the exercise of the right to buy was to way to safeguard his home. Furthermore, the short gap between the intimation to Mr Wahlen of a claim for possession and his invocation of section 138 suggests that he may well have been seeking advice on exercising his right to buy before the claim for possession was even intimated.[35]Secondly, it was suggested on behalf of the Council that the fact that it would lose a three-bedroom house from its housing stock was a relevant factor in favour of letting the Council’s claim for possession trump Mr Wahlen’s claim for an injunction. I do not agree. It is clear that the policy of the Part V is, subject to certain exceptions irrelevant for present purposes, to enable residential tenants to buy the properties they rent from local authorities; it is never open to a local authority to rely on the consequent loss to its housing stock as a reason for refusing to give effect to the tenant’s right to buy. In those circumstances, it seems to me wrong in principle that a local authority should be able to invoke the fact that they will lose a property from their housing stock, if the tenant exercises his right to buy, as a reason for defeating the tenant’s claim for an injunction. The purpose of ground 16 is not to protect a local housing authority’s housing stock, but to enable it to put its stock to better use.[36]Quite apart from this, if the Council obtains an order for possession against Mr Wahlen, while it would have thereby defeated his claim to acquire the house, the likelihood is that the house will be lost from its housing stock in the not too distant future, as a result of a subsequent tenant exercising the right to buy.

The District Judge’s Judgment in the Instant Appeal

[37]It is plain that the District Judge concluded that because the provisions of Section 138(1) had been fulfilled, the Council’s duty to make a grant of the freehold to Mr Wahlen had been fulfilled. He had, so he appears to have believed, no alternative but to grant the injunction and dismiss the Council’s claim for possession.[38]It is also clear that the District Judge carried out no balancing exercise. He made no reference to the Council’s competing claim. He explained the reason for this approach as being that, because all the conditions identified in Section 138(1) had been fulfilled, the guidance proffered by Lindsay J in Hislop’s case was not applicable.[39]It is true that, in Hislop’s case, the right to buy application had not reached the stage where the requirements of section 138 had been fulfilled because the local authority had not yet served a notice under section 125. However, that does not alter the fact that the District Judge’s reasoning was, in my judgment, inconsistent with that of the majority of the House of Lords in Lovell’s case. It replicated the error of the courts below in that case. The essential point in this connection is that the mere fact that the conditions in section 138 are fulfilled does not dictate the priority of the competing claims. That priority can only be determined by weighing the factors to which I have already referred. It is impossible to detect, in the judgment of the District Judge, any process of balancing the competing factors one way or the other.[40]Even if it can be said that the District Judge properly exercised his discretion by holding that Mr Wahlen’s claim for an injunction should prevail over the Council’s claim for possession, it seems to me that his decision could not stand. He had to carry out the difficult balancing exercise to which I have made reference, and it seems to me that it must be an essential ingredient of any judgment in that connection that it contains some reasoning explaining how the balancing exercise was carried out, and why the balance ultimately came down in favour of Mr Wahlen.[41]As may be clear from what has already been said in this judgment, I am conscious of the fact that there is a limit to how far any such reasoning can be intellectually satisfying: in many cases it may simply be a question of the Judge identifying the relevant factors and the evidence relating thereto, and indicating which he thinks should prevail. Nonetheless, the parties (and in particular the losing party) must be entitled to have some express indication of the reasoning of the Judge, not least because it would otherwise be impossible to say whether or not he had gone wrong in principle, thereby depriving the Court of Appeal of any meaningful jurisdiction.

Resolution of this appeal

[42]Realistically, Mr Summers does not contend that the decision of the District Judge should be upheld on the basis that it was the only decision he could have reached. He accepts that, if we reach the conclusion which I have indicated, the matter would have to go back to another District Judge. Although it appears to me that Mr Wahlen probably has a strong case in the present instance, it is impossible to say that the District Judge reached the only decision which could fairly have been reached. So far as the evidence is concerned, I do not consider that it is in such a state as can enable us, as an appellate court, to reach a conclusive view of our own on this issue.[43]In all the circumstances, I would allow this appeal, and remit the matter to the County Court for a retrial before a different Judge. It is only fair to record that the District Judge in this case was faced with a difficult problem, that his judgment is clearly and concisely expressed, and my view that the matter should come before a different Judge is based on the need for justice to be seen to be done, rather than on any doubts as to the ability of District Judge Chandler to retry the case fairly.[44]I agree.