Rochdale Borough Council v Dixon [2011] EWCA Civ 1173

Case No B5/2010/2199

[2011] EWCA Civ 1173

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM OLDHAM COUNTY COURT

HIS HONOUR JUDGE PLATTS

9PA59605

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 20/10/2011

Before

LORD JUSTICE RIX

LORD JUSTICE RIMER

LORD JUSTICE ELIAS

Between

ROCHDALE BOROUGH COUNCILClaimant / Respondent

DIXONDefendant / Appellant

(Transcript of the Handed Down Judgment of

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Mr Martin Westgate QC and Mr Lindsay Johnson (instructed by Rochdale Law Centre) for Appellant

Mr Andrew Arden QC and Mr Andrew Dymond (instructed by Legal Services & Enforcement Team) for Respondent

Hearing Hearing dates : Tuesday 21 st June 2011

Judgment

Lord Justice Rix :

[1]This appeal arises out of a claim for possession of a dwelling-house at 28 Kirklee Road, Castleton in Rochdale. It is the home of Mr Frank Dixon, the defendant in these proceedings, and in this court the appellant. He has lived there as its tenant since 1972. His landlord is Rochdale Metropolitan Borough Council (“Rochdale”), the claimant, and in this court the respondent. After trial in the Oldham county court, HHJ Platts made a possession order in favour of Rochdale, but suspended it provided that Mr Dixon paid his current rent and other charges and in addition paid £5 per week towards the arrears of £1,451 in respect of water charges which have accumulated, unpaid, since Mr Dixon deliberately, and as a matter of principle, stopped paying them in 2007. Thus Mr Dixon was given nearly six years to pay off his arrears. At the beginning of this appeal we were told by Mr Martin Westgate QC on behalf of Mr Dixon that the suspended order was being performed, but also by Mr Andrew Arden QC on behalf of Rochdale that that was disputed.

[2]However, we are not concerned with that dispute now. What we are concerned with is Mr Dixon’s appeal against the making of any order for possession. He has four grounds of appeal, although several other grounds were advanced to the judge but are not pursued here. His four grounds are(i) that Rochdale’s purported agreement with United Utilities to collect its water charges on its behalf from council tenants, pursuant to the Water Consolidation (Consequential Provisions) Act 1991, was ineffective as being ultra vires;

(ii) that Rochdale’s purported variation of its tenancy agreements so as to incorporate the payment to Rochdale of United Utilities’ water charges as an obligation of those tenancies was ineffective because Rochdale had not properly complied with the statutory requirements for the making of such a variation laid down by section 103 of the Housing Act 1985;

(iii) that that variation was ineffective as being unfair in terms of the Unfair Terms in Consumer Contracts Regulations 1999; and

(iv) that it was in any event unreasonable for the judge to make an order for possession. I shall refer to those four grounds as respectively the ultra vires issue; the ineffective variation issue; the unfair term issue; and the unreasonable order issue.

The statutory background

[3]The following statutory provisions are relevant.

[4]The Housing Act 1985 (“HA 1985”) provides by section 84 for the grounds on which orders for possession of a secure tenancy may be made. Thus – “84.–(1) The court shall not make an order for possession of a dwelling-house let under a secure tenancy except on one or more of the grounds set out in Schedule 2.

(2) The court shall not make an order for possession – (a) on the grounds set out in Part I of that Schedule (grounds 1 to 8), unless it considers it reasonable to make the order.” The first ground under Schedule 2 Part 1 is – “Rent lawfully due from the tenant or an obligation of the tenancy has been broken or not performed.”

[5]In the present case the judge exercised his discretion to make a possession order against Mr Dixon, on the basis that he considered it reasonable to do so, on the ground that Mr Dixon had not complied with the obligation of his tenancy to pay water charges to the council, viz under ground 1 of Part I of Schedule 2.

[6]Sections 102/103 of HA 1985 make provision for the variation of the terms of a secure tenancy:

“102.– (1) The terms of a secure tenancy may be varied in the following ways, and not otherwise – … (c) in accordance with section 103 (notice of variation of periodic tenancy)… 103.– (1) The terms of a secure tenancy which is a periodic tenancy may be varied by the landlord by a notice of variation served on the tenant. (2) Before serving a notice of variation on the tenant the landlord shall serve on him a preliminary notice – (a) informing the tenant of the landlord’s intention to serve a notice of variation, (b) specifying the proposed variation and its effect, and (c) inviting the tenant to comment on the proposed variation within such time, specified in the notice, as the landlord considers reasonable; and the landlord shall consider any comments made by the tenant within the specified time. (3) Subsection (2) does not apply to a variation of the rent, or of payments in respect of services provided by the landlord or of payments in respect of rates. … (c) in accordance with section 103 (notice of variation of periodic tenancy)… (a) informing the tenant of the landlord’s intention to serve a notice of variation, (b) specifying the proposed variation and its effect, and (c) inviting the tenant to comment on the proposed variation within such time, specified in the notice, as the landlord considers reasonable; (4) The notice of variation shall specify – (a) the variation effected by it, and (b) the date on which it takes effect; and the period between the date on which it is served and the date on which it takes effect must be at least four weeks or the rental period, whichever is the longer. (5) The notice of variation, when served, shall be accompanied by such information as the landlord considers necessary to inform the tenant of the nature and effect of the variation…”

[7]Thus the landlord must serve on the tenant a preliminary notice, giving time for consultation, and that preliminary notice must specify “the proposed variation and its effect”. The essence of the ineffective variation point depends on whether Rochdale’s preliminary notice in this case succeeded in specifying “the effect” of the proposed variation, which was to include the local water undertaker’s water charges in the weekly amount that the council would collect together with the rent from each of its tenants as an obligation of the tenancy.

[8]As for Rochdale’s agreement to collect the water charges for United Utilities, the relevant statutory provisions are as follows.

[9]First, there is the general power for local authorities to provide administrative services under contract to a “public body” as set out in the Local Authorities (Goods and Services) Act 1970 (“LA(GS)A 1970”) at section 1:

“1.– (1) Subject to the provisions of this section, a local authority and any public body within the meaning of this section may enter into an agreement for all or any of the following purposes, that is to say – (a) the supply by the authority to the body of any goods or materials; (b) the provision by the authority of any administrative, professional or technical services…”

[10]When the water undertakers were privatised, the Water Consolidation (Consequential Provisions) Act 1991 (“WC(CP)A 1991”), by para 20 of its Schedule 1, which listed consequential amendments, provided as follows:

“The powers conferred by section 1 of the Local Authorities (Goods and Services) Act 1970 (supply of goods and services by local authorities to public bodies) shall be exercisable by a local authority, within the meaning of that section, as if the NRA was a public body within the meaning of that section; and the powers of a local authority under that Act shall be deemed to include power to enter into an agreement for the collection and recovery by the authority, on behalf of any water undertaker or sewerage undertaker, of any charges fixed by the undertaker under Chapter I of Part V of the Water Industry Act 1991.”

Thus “an agreement for the collection and recovery by the authority, on behalf of any water undertaker or sewerage undertaker, of any charges fixed by the undertaker…” was deemed to be an agreement within section 1 of LA(GS)A 1970. The ultra vires issue arises under this last cited paragraph. Various points are or have been made under this issue, for instance as to whether the agreement made between Rochdale and United Utilities (see below) is an agreement for the “collection and recovery…of…charges” or is for the collection of charges “on behalf of” United Utilities, or (perhaps) concerns “charges fixed” by it.

[11]The powers of water undertakers to charge are contained in the contemporaneous Water Industry Act 1991 (“WA 1991”), sections 142ff. Section 142 provides:

“142.– (1) Subject to the following provisions of this Chapter, the powers of every relevant undertaker shall include power – (a) to fix charges for any services provided in the course of carrying out its functions and, in the case of a sewerage undertaker, charges to be paid in connection with the carrying out of its trade effluent functions; (b) to demand and recover charges fixed under this section from any persons to whom the undertaker provides services or in relation to whom it carries out trade effluent functions.”

Section 144 set out the corresponding liability of occupiers for the time being of premises supplied. powers of every relevant undertaker shall include power –

The agreement between Rochdale and United Utilities

[12]On 16 May 2005 Rochdale (described as the “Council”) and United Utilities (UU, described as the “Company”) made an agreement for the collection and recovery by Rochdale on behalf of UU of water charges fixed by UU for the supply of water and sewerage services (the “agreement”).

[13]The preamble (“Background”) contained the following:

“C. The Council is empowered by the Water Consolidation (Consequential Provisions) Act 1991 to enter into an agreement for the collection and recovery by the Council on behalf of the Company of Charges fixed by the Company for the supply of water and sewerage services. D. The Council and the Company have agreed that the Council will collect and recover the charges fixed by the Company for the supply of water and sewerage services in respect of the Council’s residential letting properties on the terms and conditions set out in this Agreement.”

The agreement went on to describe the method by which this would be accomplished. The “charging year” was defined as running from 1 April to 31 March. Each year at least 2 months before 1 April Rochdale would provide UU with full and accurate records of all residential properties owned or leased by Rochdale for the purposes of letting (clause 3.1). Then UU, at least 35 days before 1 April, would provide Rochdale with the charges due for each property, with sufficient information to enable Rochdale to prepare an invoice for its tenants (clause 4.1). Rochdale would pay UU the amount of the charges in four equal instalments throughout the year (in mid May, August, November and February), with a counter-payment on the same day by UU to Rochdale of the latter’s commission, which was £28.60 per property (rising each year with the RPI) plus 8% of the charges: clause 6. Rochdale took the risk of non-payment and of property voids. It was Rochdale’s obligation to collect and recover the charges, and (inter alia) to deal with any enquiries and complaints from tenants regarding billing in a prompt, courteous and efficient manner (clause 3.2.5 and schedule 3), but otherwise to refer enquiries and complaints regarding the provision of services to UU (clause 3.2.6).

[14]It is relevant to cite the following provisions of the agreement. Thus clause 1 contained the following definitions:

““Charges” the aggregate amount of liability for charges for water and sewerage services provided by the Company to all of the Properties in a Charging Year, such amounts to be notified to the Council by the Company in respect of each Charging Year in accordance with clause 4.1.2… “Collection Method”

The Council shall vary the tenancy agreements between the Council and their customers to pay the Charges due in respect of their occupation of the Properties to the Council as an obligation of the tenancy or as rent (or such other means of collection as may be agreed between the parties in writing)… “Customers” Such of the tenants or other occupiers of the Properties who are liable to pay water or sewerage charges to the Company pursuant to Sections 142 and 144 of the Act”

[15]Other provisions were:

“2. AGREEMENT 2.1 In consideration of the payment of the Commission by the Company to the Council the Council agrees to provide the Services for the Term. 2.2 The Company hereby authorises the Council to collect the Charges on behalf of the Company by the Collection Method in accordance with the terms of this Agreement… 2.1 In consideration of the payment of the Commission by the Company to the Council the Council agrees to provide the Services for the Term. 2.2 The Company hereby authorises the Council to collect the Charges on behalf of the Company by the Collection Method in accordance with the terms of this Agreement… 3. COUNCIL’S OBLIGATIONS … 3.2 The Council shall use reasonable skill and care throughout the Term: 3.2.1 collect and recover the Charges from the Customers by way of the Collection Method; 3.2.2 exercise all due skill, care and diligence in the performance of the Services… 3.3 The Council shall ensure that… 3.3.1 all Customers are correctly and promptly invoiced for the Charges in accordance with the provisions of Schedule 5… However, there appears to have been no Schedule 5 4. COMPANY’S OBLIGATIONS … 4.3 The Company shall: 4.3.1 receive and answer all enquiries and complaints from Customers regarding the water and sewerage services provided by the Company as defined in schedule 3, including the basis of the Charges (but not payment arrangements)… 15. NATURE OF AGREEMENT … 15.2 Relationship of Parties Nothing contained in this Agreement, and no action taken by the parties pursuant to this Agreement, will be deemed to constitute a relationship between the parties of partnership, joint venture, principal and agent or employer and employee. Save in respect of the collection of the Charges by the Council, the Council does not have (nor may it represent that it has) any authority to act or make any commitments on the Company’s behalf.”

[16]The parties to this appeal debated whether in the light of these arrangements the relationship of UU and Rochdale in respect of collection and recovery of the charges could be described as a relationship of principal and agent or whether in any other sense the collection and recovery of the charges could be said to be carried out “on behalf of” UU.

[17]The profit earned by Rochdale by undertaking the collection of the water charges was paid into its housing revenue account for the benefit of its tenants.

The factual background

[18]The background facts have been well set out by the judge at paras 1/17 of his judgment dated 11 August 2010. I need not rehearse all those facts here, but I will state what is needed for the matters argued in this court.

[19]As stated above, Mr Dixon has been the tenant of his home since 1972. In 2002 Rochdale Boroughwide Housing (RBH) was set up by Rochdale to manage its council homes. I will refer, however, in the main simply to “Rochdale” to cover both the council and its housing management arm.

[20]Prior to the variation of the tenancy agreement in issue in this case, Mr Dixon’s tenancy agreement contained a line for “Current Rent” and a separate line for “Current Service Charge”. Following the variation notified on 28 February 2005 the amended tenancy agreement with which we are concerned contained three lines, two as before for “Current Rent” and “Current Service Charge” and a new line for “Current Water Charge”. At the time of the proceedings at trial, Mr Dixon’s current weekly payment which he was obliged to pay Rochdale, sometimes spoken of as his current “rent” but probably inaccurately so, was £70.16 a week, of which £6.20 per week represented his current water charge. Mr Dixon had paid his current water charge to Rochdale following the variation of his tenancy agreement for some two years until 2007, but he then ceased to do so and continued in that refusal, described by the judge as a matter of principle, at least down to the time of the judge’s order. The water charge arrears that had built up by the time of the issue of proceedings were £1,451. There was a further variation of the tenancy agreement in 2007, which it is said may be of relevance, but Rochdale has not relied on it in these proceedings and it can therefore be ignored.

[21]Before the variation the tenancy agreement provided as follows, under the heading of “CONDITIONS OF TENANCY – THE TENANT’S OBLIGATIONS”. “Rent Payment 2. The rent is due in advance on Monday each week. Service Charge 3. The service charge is due in advance on Monday each week. Other Charges 4. You must pay all other charges when they fall due… Termination by 10. The Council may terminate the tenancy by the Council leaving any Notice required by law at the property or by posting such Notice to you at the property and, where necessary, obtaining a Possession Order from the Court… Keeping to the You must keep to all the terms of this Agreement…” Agreement Other Charges 4. You must pay all other charges when they fall due… Termination by 10. The Council may terminate the tenancy by Keeping to the You must keep to all the terms of this Agreement…”

Agreement

[22]Following the variation in this case the tenancy agreement read in the same way save that clause 4 had been amended to read: Other Charges 4. You must pay all charges including water charges in respect of your occupation of the property by weekly instalments in advance on Monday of each week.” In this way, water charges were subsumed, like rent and service charges, into the weekly Monday payment.

[23]The idea of making the agreement with UU was trailed in July 2004 in Rochdale’s newsletter for its tenants (“Talkback”) under the heading “Collection of water rates”. (That misnomer nevertheless harks back to an earlier time when “water rates” properly so called were regularly collected from tenants by landlords.) The item read:

“Rochdale Boroughwide Housing is considering collecting water rates on behalf of United Utilities. This would mean that you would continue to receive an annual statement from United Utilities but instead of paying the bill to United Utilities, the amount would be added to your rent and paid with your rent. This has some key benefits for you such as: ● Pay your water rates over 12 months instead of 10 as it is now. ● Pay two regular household bills (your rent and your water rates) in one go at one payment point. ● Choose from a wider range of payment methods including paying at any one of our housing offices. To find out what you think of this idea we will be writing to you and sending you a questionnaire asking your views. You will also get the chance to attend local and area board meetings to let us know any concerns you have. We will provide you with regular updates in future editions of Tenants Talkback.”

This has some key benefits for you such as:

[24]The questionnaire was sent out in August 2004. There is a report on the results of the survey in the October 2004 issue of Talkback:

“The recent survey we sent to all tenants on Office Accommodation included a section on Water Rates. There was a very good response to the questions on water rates with 2541 replies. You were asked whether you wanted to pay your water rates with your rent. 63% of you said yes and 37% of you said no. As almost two thirds of you are in favour of paying your water rates with your rent, We will now enter into detailed discussions with the council and United Utilities. If the council approve the scheme we will write to you in the New Year to change your conditions of tenancy and explain your options for payment.”

[25]The cabinet decision to go ahead with the proposal was made on 10 January 2005. There was a further item in the January 2005 edition of Talkback:

“In the previous edition of Tenants’ Talkback we reported that there had been a very positive response from tenants to the proposal for RBH to collect water charges with the rent from next April. RBH is now finalising the scheme with United Utilities and if the council agrees, we will write to every tenant in February so that we can vary the conditions of the tenancy and let you know how it works. You will get a separate letter which will tell you how much you will need to pay in addition to your rent and any service charges…”

[26]Rochdale’s preliminary notice pursuant to section 103(2) of HA 1985 was sent to its tenants by letter dated 3 February 2005. It was signed both on behalf of Rochdale (by Mr Paul Neate, managing director of RBH) and on behalf of UU (by Mr Gary Dixon, its customer services director). It read as follows:

“COLLECTION OF WATER CHARGES – PRELIMINARY NOTICE There is an important change to the way in which your water charges are to be collected in the future. From 1 April 2005, United Utilities will no longer send you a bill for your annual water charges. Instead, you will pay your water charges direct to the Council as part of your weekly rent. You will receive a rent increase notification by the end of February 2005 which will give you details of your rent, water and other charges for the coming year. Please note: water charges are payable by all tenants and are not covered by housing benefit. Your tenancy agreement will be changed to make it clear that your rent includes water charges from 4 April 2005 and we will send you a copy of the variation to your tenancy agreement shortly. The proposed variation is: Conditions of Tenancy – The Tenant’s Obligations “You must pay all charges, including water charges, in respect of your occupation of the property, by weekly instalments in advance on Monday of each week.”

You will now benefit from paying your rent, including water charges, in a single transaction. You can choose from a wide range of convenient payment methods including Direct Debit, swipe card (to be introduced in April), cash or cheque, debit/credit card, telephone, internet banking at www.rbhousing.org.uk or standing order. If you choose to pay by Direct Debit you will get an immediate £5 annual discount from United Utilities and another £5 discount from Rochdale Boroughwide Housing at the end of the year if you are still paying by Direct Debit… If you wish to comment on the proposals, please do so by 25 February 2005. If you require any further information please contact your local housing office.” The proposed variation is: Conditions of Tenancy – The Tenant’s Obligations If you require any further information please contact your local housing office.”

Conditions of Tenancy – The Tenant’s Obligations

[27]The ineffective variation issue is whether section 103(2) required, and, if it did, whether this letter achieved, notification, as part of the alleged “effect” of the proposed variation, that in future non-payment of water charges would give to Rochdale the theoretical right to seek possession from, ie to evict, the tenant concerned.

[28]That this right to seek possession for non-payment of water charges was widely understood by tenants who raised the issue with Rochdale in the light of the preliminary notice was clear. Thus minutes of a cabinet meeting held on 10 February 2005 record:

“Several members referred to letters sent to tenants by Rochdale Boroughwide Housing requiring seeking the signing of new tenancy agreements in respect of the payment of water charges which had stated that eviction may follow should water charges be not paid. Concerns were being expressed across the Borough and there was a suggestion that OFWAT had queried whether such a statement was legal… It was AGREED that Margaret Carney/Rochdale Boroughwide Housing respond to Members on the legal position relating to the potential for eviction proceedings arising from non payment of water charges within the overall rent charge.”

[29]As the judge remarked, there is no evidence that that report was ever done or followed up. However, it is not in fact the case that the preliminary notice did expressly state that eviction may follow should water charges not be paid. That is now the complaint of Mr Dixon, that, for the “effect” of the proposal to be notified, it should have been expressly stated that eviction was possible for non-payment. That need is in dispute. However, what is clear is that the preliminary notice, in the form cited above, was generally understood (“across the Borough”) as making tenants liable for eviction for non-payment of the water charges, on the basis that they were “within the overall rent charge”. And the notice did state, perhaps not entirely accurately, but functionally so, that “the tenancy agreement will be changed to make it clear that your rent includes water charges”. That was because the weekly payment, which was essentially regarded as the rent payment, would now include the water charges.

[30]Thus Mr Dixon himself contacted Rochdale (or perhaps UU or both) on this matter. His communication is recorded in an email dated 22 February 2005 from Brian Courtney of Rochdale to UU. Mr Dixon is reported to have said:

“[I] believe [you] are dictating how and when [I] pay as [my] letter from Rochdale states that [I have] to pay weekly with [my] rent…[My] tenancy agreement says if [my] rent is not paid [I] can be evicted. [I] therefore feel [you] are using the threat of eviction as a debt recovery tool to get tenants to pay for water.”

[31]Mr Courtney suggested the following answer to be given to Mr Dixon:

“The tenancy agreement does not actually state this [ie that a tenant can be evicted for non-payment of rent] but it is correct that any landlord can apply for a possession order if tenants fail to comply with the tenancy conditions in every respect including payment of rent. This will still be the case for tenants who fail to pay their rent including water charges in future. However, as is currently the case, we will work with and advise any tenants who get into difficulties with rent payments and we will explore all options for repayment of any arrears that have arisen. Recovery through legal action is a last resort when all other alternatives have been investigated and/or there has not been any cooperation on the tenant’s part to tackle the problem. We do make alternative payment arrangements with tenants whenever they get into difficulties through sickness or unemployment and we will continue to do this when water charges are included in the rent.”

[32]I do not know whether a reply in those terms was sent, but it seems to me a perfectly reasonable answer. The judge refers to a reply from UU to Mr Dixon dated 24 February 2005, which he has taken into account but not cited: however, I cannot find that letter in our bundles.

[33]At all events, these communications show that not only tenants across the borough but Mr Dixon himself knew perfectly well (even though grounds for eviction were stated neither in the tenancy agreement nor in the preliminary notice) that non-payment of rent or water charges (and whether water charges were properly rent or not) could in theory be a ground for eviction. And that was their complaint.

[34]The final notice of variation was sent out on 28 February 2005 (prepared and dated 25 February). The notice read:

“YOUR RENT AND WATER CHARGES The Council hereby gives you notice that from 4 April 2005, and until further notice, your weekly rent will include water charges. Your tenancy agreement is hereby varied from 4 April 2005 as follows: Conditions of Tenancy – The Tenant’s Obligations Other charges – Section 4 is deleted and replaced with the following: “You must pay all charges, including water charges, in respect of your occupation of the property, by weekly instalments in advance on Monday of each week.”

The law requires the Council to send with this Notice any information it considers necessary. Please note the following: ● A joint letter of explanation from United Utlities and RBH has already been sent to you. ● This variation has amended your conditions of tenancy and the contract between you and the Council as explained above. ● The basis of your tenancy, and your rights and responsibilities, and those of the Council, remain the same.” The notice went on to set out the calculation of Mr Dixon’s water charges for the charging year 1 April 2005 to 31 March 2006, being 48 payments of £5.13 per week. The Council hereby gives you notice that from 4 April 2005, and until further notice, your weekly rent will include water charges. Your tenancy agreement is hereby varied from 4 April 2005 as follows: Conditions of Tenancy – The Tenant’s Obligations Other charges – Section 4 is deleted and replaced with the following:

“You must pay all charges, including water charges, in respect of your occupation of the property, by weekly instalments in advance on Monday of each week.”

[35]Mr Dixon wrote to Rochdale by letter dated 31 March 2005, in which he repeated his complaint that by reason of the tenancy agreement variation which he cited in terms, he could be evicted from his home (of 33 years) for non-payment of water charges. He also complained that his water charges exceeded the cost of his actual water use. I do not know whether he had made the same complaint to UU in the past, or on that ground had refused to pay his charges to it.

[36]Despite these complaints and Mr Dixon’s principled stance, he did in fact pay his water charges to Rochdale for the first two years. It is not clear why he did so and then stopped. However,

the judge expresses Mr Dixon’s attitude in this way:

“4. Having heard evidence from him, it seems that the reasoning behind his objection is as follows. Before 1989 he used to pay his water charges to the Local Authority as part of his rent but the amount he paid was based on an assessment of the actual amount of water he used. Whether this is correct or not, I do not know but certainly that was his belief. In 1989 the statutory scheme was changed and water charges became payable to the water company directly, in this case United Utilities. The amount of those charges was fixed by reference to the value of the property rather than, he says, the assessed usage. Any failure to pay those charges was recoverable by the water company as a private debt. The scheme which was introduced in 2005 if upheld means that the water charges are payable to the Local Authority as part of the tenancy obligations. However, the amount remains fixed by reference to the value of the property. Therefore as a result of the change any failure to pay could be treated as a breach of the tenancy agreement with the potential for eviction. He put it succinctly in this way: “Why should I be at risk of losing my home for something I am not using?”

He also believes that after 2005 he is no longer a customer of United Utilities and, therefore, he says he is unable to avail himself of their schemes for those who have difficulty paying and, indeed, he is unable to apply to them for water metering. I have to say I had some difficulty with accepting the logic behind that belief. 5. However, it is right to say that the stance he takes is one of principle. Although he, like many of the claimant’s tenants, has limited means, it has never been his case that the arrears have accrued because he cannot pay. He has not paid, as a matter of principle. He is clearly passionate about the matter…I am quite convinced that he genuinely believes not only in the moral strength of his position but also in the legal strength of his case.”

The ultra vires issue

[37]On behalf of Mr Dixon, Mr Martin Westgate QC has put his submissions as to the ultra vires incompetence of the agreement between Rochdale and UU in various ways. He has eschewed, however, one way in which the matter was put to the judge, when it was submitted that under the agreement Rochdale had taken over from UU as the provider of water services to its tenants itself. That, however, was an impossible submission and it was abandoned. Instead, Mr Westgate has I think emphasised three matters.

[38]The first was that the agreement was not for the “collection and recovery” of UU’s charges, because Rochdale simply bought those charges for itself, paid for them in advance, and then recovered for itself its outlay throughout the year from its own tenants under obligations imposed under its tenancy agreements. They may have been called “water charges” under those agreements, but they were owed to it, not to UU. They did not amount to water charges for the purposes of the 1991 Acts. The second was that in any event these water charges were not collected and recovered “on behalf of” UU, but for Rochdale itself. There was no element of agency involved, in particular, a matter emphasised by Mr Westgate, no accounting by Rochdale to UU. The third was that the water charges collected had not been “fixed” or “demanded” by UU, but by Rochdale. These were perhaps different ways of saying the same thing, which was in essence that UU had dropped completely out of the picture, at any rate once it had been paid by Rochdale, and all that was left was a bipartite arrangement between Rochdale and its tenants.

[39]In my judgment, however, these submissions missed their mark. UU had not dropped out of the picture, it remained the water undertaker which provided the water services to the occupiers of the properties concerned, it remained responsible to those tenants for the services provided, just as those tenants remained responsible, ie liable, to pay the charges statutorily imposed on them as occupiers; the charges imposed on the tenants under their tenancy agreements were the charges fixed by UU, and the liability imposed on the tenants under their tenancy agreements was the same as their liability to UU under statute. It was simply that the mechanism for the collection and recovery of those liabilities had been undertaken by Rochdale for UU. Whether it was strictly a matter of agency or not (but I believe it was), what Rochdale agreed to do by way of the collection and recovery of the water charges was done for UU, or, as one might naturally say, on behalf of UU. One might ask: Who else but UU provided the water services? Who else but UU was owed for those services? Who else but UU fixed the price of those services? If, therefore, by arrangement with Rochdale, it was Rochdale who invoiced and collected those water charges, it could properly be said that Rochdale did so on behalf of UU.

[40]It seems to me that such a conclusion is supported both by the agreement between UU and Rochdale, by good sense, and by authority.

[41]Thus the agreement provided for a mechanism by which UU continued to fix the charges, albeit it was left to Rochdale to invoice and collect them. Whether the charges were demanded by UU, they were certainly fixed by UU, and I believe it can properly be said, if that were necessary, that they were demanded as well, albeit that was done through the collection method provided by the agreement. All this is reflected in the wording of the agreement cited above: which refers to “charges fixed by the Company” (preamble C), to “charges for water and sewerage services provided by the Company” etc (definition of “Charges” in clause 1), to “Charges due in respect of their occupation of the Properties” (definition of “Collection Method” ibid), to customers and tenants (being the same) “who are liable to pay water or sewerage charges to the Company pursuant to Sections 142 and 144 of the Act” (definition of “Customers” ibid), to UU “authoris[ing]” (the language of agency) Rochdale to collect the charges “on behalf of the Company” (clause 2.2), to Rochdale being under an obligation to carry out such collection with “reasonable care and skill”, which shows that in doing so Rochdale is acting for UU and not merely for itself (clause 3.2), to Rochdale being under a duty to UU to invoice the customers (of course, those are UU’s customers even if they are also Rochdale’s tenants) for the charges fixed by UU (clauses 3.3 and 4.1), and to Rochdale being under a duty to deal with billing complaints itself (but in a “prompt, courteous and efficient manner”, because in doing so Rochdale is of course dealing with complaints about UU’s charges) and to refer to UU any complaints “regarding the provision of water and sewerage services by the Company” (because of course those services are being provided by UU to its customers and Rochdale’s tenants) (clause 3.2). Moreover, although there is a general provision in clause 15.2 stating that nothing in the agreement constitutes UU and Rochdale as partners or principal and agent etc, there is an immediate express proviso:

“Save in respect of the collection of Charges by the Council, the Council does not have (nor may it represent that it has) any authority to act or make any commitments on the Company’s behalf”

. That means that in that respect, concerning the collection of charges, Rochdale does have that authority, and to that extent therefore it is acting as an agent on behalf of its principal and may represent itself as such. Just as clause 2.2 had earlier stated in the definitive “Agreement” clause: “The Company hereby authorises the Council to collect the Charges on behalf of the Company by the Collection Method…”.

[42]In such circumstances it seems to me to matter not a bit that, by agreement between UU and Rochdale, Rochdale pays UU in bulk and at different times from its weekly collections. To some extent it collects in advance, and to some extent it collects in arrears, of its quarterly payments to UU. Neither is significant, it is the deal between the parties. It is certainly entitled to a price for its administrative services, which is expressed as a commission, a typical word used in an agency context. Of course, the mere use of labels, or of assertive language tracking the statute (para 20 of Schedule 1 of the WC(CP)A 1991), will not be decisive: but I see nothing in the provisions of the agreement to suggest a manipulative use of such labels or of language in general. It seems to me that the agreement expresses the reality of the enterprise. Nor does it matter that there is no provision for a liability to account as a fiduciary. There is a liability to account, but it is kept suitably simple, and is governed by the terms of the agreement. If, however, something went wrong and Rochdale ceased to provide the payments required, I do not doubt that it might be required to account; of course, it could also simply be sued for the contractual payments in debt.

[43]The question was canvassed whether the tenants could have continued to pay UU direct, if they so insisted. That question does not have to be answered. In practice, UU would refer them to the obligation to pay the water charges contained in their tenancy agreements. There is no reason why an agent may not contract as a principal to receive its own principal’s charges. If UU accepted any payment, it would be obliged to account to it to Rochdale: but the efficiency of the scheme would break down if there was any large scale divergence from it. Certainly UU had represented by its joint letter with Rochdale (which was also the preliminary notice) that its charges would be properly paid if paid to Rochdale, so that UU could not claim to recover the charges a second time. It is possible that Rochdale could insist that payment be channelled solely through it, or that payment to UU would not discharge the tenants’ liability under their tenancy agreements. In any event, no question of a payment directly to UU has in fact arisen.

[44]As for authority, a very similar scheme, perhaps essentially identical, was accepted in this court to be within the statutory provisions: see Lambeth London Borough Council v. Thomas

(1997) 30 HLR 89

(CA). That case involved an agreement between Lambeth and Thames Water which seems to have started life when Thames Water was still a public water authority and when Lambeth collected water rates properly so called from its tenants on behalf of the water authority. The agreement was not evidenced in writing or had been lost in the mists of time, but was found by the county court judge on the basis of the evidence in the case: so that its precise terms could not be stated in detail, but its essential outlines were found as facts. The tenant there, Mrs Thomas, was also a secure tenant who had failed to pay her water charges, which under her tenancy agreement were payable weekly together with her rent. A possession order was sought for some £600 of water charges (and some £100 of general rates). Her housing benefit had otherwise discharged all rent due from her. The judge regarded the water charges as rent, but refused to order possession on the basis that, although they were due, it would not be reasonable, at least normally, to use a possession order as a sanction to enforce payment of water charges for water supplied by a privatised third party (at 93). Lambeth appealed against the judge’s exercise of his discretion, submitting that it was flawed in principle.

[45]Mance J, with whose judgment Kennedy LJ agreed, described the agreement in that case in these terms, from which it will be seen that it was essentially in the same form as the agreement between Rochdale and UU:

“The position is thus that the Council had at all material times the power to enter into an agreement for the collection and recovery by the Council on behalf of the water authority or company of any water charges payable or fixed for the supply of water by the water authority or company, at least in the Council’s area. The Judge, after hearing evidence, was satisfied that the Council had entered into such an agreement, currently with Thames Water Utilities Limited, whereby the Council “undertook to collect money from each tenant”

. He described the origins of the agreement as “lost in the mists of time”, but set out certain of its characteristics which are worth mention. The Council, consistently with the statutory language, claims and seeks to collect from its tenants the amounts fixed by the water company in respect of their particular properties. The discounted lump sum is arrived at by negotiation and is based on the total water charges for all relevant Council properties, less a discount to take account of unoccupied premises and the costs of collection. Presumably, although this is not stated, the discount also takes account of the risks of non-recovery, since it appears that the Council undertakes to pay the water company the discounted lump sum, irrespective of what it recovers from its tenants. We were told that the discounting means in practice, and is designed to mean, that the Council achieves for the benefit of its housing revenue account a surplus through collecting on behalf of Thames Water Utilities Limited more by way of water charges than the amount for which the Council actually has to account to that company. It is always open to an agent to contract on such a basis, and I see no objection in the present statutory context to the arrangement made between the Council and the water company. Any surplus accruing to the Council’s housing account (which has been “ring-fenced” under the relevant legislation throughout the 1990s) ensures [sc ensures] to the benefit of all its tenants, since it enables the Council to keep rents down…The effect of the agreement between the Council as landlord and Mrs Thomas as tenant has been at all times such as to entitle the Council to claim from her the water rate or charges which the Council has arranged with the water authority or company to collect” (at 94/95).

[46]Mance J then considered the question of whether the water charges payable under Mrs Thomas’s tenancy agreement were rent properly so called or “an obligation of the tenancy”. He said that he saw great force in counsel’s argument (on behalf of Lambeth) that it was rent, but he preferred to leave any final determination to a case where it was essential to decide it, especially as Mrs Thomas was unrepresented and appearing as a litigant in person (at 96). It may be because of Lambeth that there is some talk in the papers in our case of water charges becoming part of the rent: however, we have not had definitive submissions on the issue and the point in my judgment remains unnecessary to decide. It may be that, if the water charges had become part of the rent, section 102 (3) of HA 1985 (see para 6 above) would mean that no preliminary notice was necessary: but we heard no submissions on this and the point may not be without difficulty.

[47]Mance J next returned to the effect of the arrangements in that case. He said (at 96/97):

“In the present case, the water charges are due from the tenant as occupier of the demised premises and a user of water there. Although the water supplies are made by the water company to Mrs Thomas and the statutory framework envisages the collection of the water charges by the Council on behalf of the water authority or company, the practical effect of the agreements made (a) between the Council and the water company and (b) the Council and Mrs Thomas is that Mrs Thomas answers for the water charges to the Council while the Council takes care of them vis-s-vis the water company. It was explained to us that this system not only provides a potential surplus in the Council’s housing account, to the benefit of all tenants including Mrs Thomas, it also corresponds with the Council’s policy that tenants who are less well off and, in some cases perhaps, less capable of looking after their own affairs should be protected from the risk of having their basic utilities cut off, due to failure to meet relevant charges. Some housing associations have, we were told, made similar arrangements, and the Council itself has some similar arrangements in relation to the supply of electricity and gas. There may be council tenants who do not approve or appreciate the policy or the making of such arrangements for their benefit, but the legislation clearly empowers it and the Council is clearly entitled to adopt such a policy. Where it has done so and has implemented it in the way described for the benefit of itself and its tenants, the resulting obligation on a tenant to pay to the Council the water charges must in my view be regarded as touching and concerning the demised house, and as an “obligation of the tenancy”, even if it is not anyway rent.”

[48]Because Mrs Thomas was a litigant in person, it is not entirely clear what issues were taken regarding the scheme, and therefore not entirely clear whether anything like the current ultra vires issue was before that court. In these circumstances I would be prepared to regard the Lambeth case as not amounting to an authority binding on this court on the present issue: however, this court through Mance J’s judgment clearly gave close and detailed consideration as to whether a scheme such as that described by him would fall within the statutory language in circumstances where it appears that Mrs Thomas, who after all was resisting possession on Lambeth’s appeal, was as it seems objecting to the principle of the thing. I would therefore regard Lambeth, if not formally binding on us, to be a most helpful authority to Rochdale. Mance J and Kennedy LJ clearly regarded the scheme described, essentially the same as the agreement in this case, as falling within the statutory language, as an agreement for the collection by the council on behalf of the water company of water charges fixed by the water company, and as a contract amounting to agency. I would therefore regard Lambeth as supporting the conclusion to which I have independently arrived in this case.

[49]If, however, I am wrong about this, and the concept of agency is inappropriately invoked in the analysis of these arrangements, there is also authority that the expression “on behalf of” does not necessarily require the concept of agency, but may have the more general meaning of “for the benefit of” or other such phrases. Indeed, Mr Westgate accepts that this is so and there is authority to that effect. Thus in Regina (S) v. Social Security Commissioner

[2009] EWHC 2221 (Admin)

[2010] PTSR 1785

, Sir Thayne Forbes held that “on behalf of” in para 4(10) of schedule 3 to the Housing Benefit and Council Tax Benefit (Consequential Provisions) Regulations 2006 was to be given the meaning of “in its place” or “instead of” rather than “for the benefit of” or “in the interests of” or as expressive of agency. At para 27 he referred to a wealth of authority in this country and in Australia as to the possible meanings of the phrase, and at para 28 wrote in seeming approval of the parties’ common ground conclusions, based on those authorities, to the effect that – “the key principles to be derived from the various cases in which the words “on behalf of” have been considered are as follows:(i) the phrase “on behalf of” does not have a fixed meaning, it is not a term of art;

(ii) the phrase is capable of bearing a wide range of meanings; and

(iii) it will take its meaning in any particular case from its statutory context.”

[50]Those conclusions seem correct to me. Indeed, I would include the simple preposition “for” as one of the possible meanings. In the circumstances, many of those meanings could apply here, so as to undermine Mr Westgate’s ultra vires argument. Thus, even if perchance the ultimately correct analysis of the agreement were to be found not in agency, but, for instance, in the concept of assignment (if, indeed, the statutory claims of water undertakers on their customers can be assigned), it would seem to me that the arrangements still amounted to a collection and recovery of water charges “on behalf of” the water undertaker. Mr Westgate submitted that the collection of the water charges was not for the benefit of UU at all, but for the benefit of Rochdale. However that submission was an essential repeat of his overall case (albeit in one formulation expressly abandoned) that the agreement was somehow concerned with Rochdale’s water charges rather than UU’s: as though Rochdale had somehow earned the charges concerned by the supply of water, rather than negotiated it as part of the collection method by which UU’s water charges were collected and recovered for it.

[51]I would therefore dismiss this first ground of appeal. In the circumstances it is unnecessary to consider Mr Arden’s alternative submission, raised by Rochdale’s respondent’s notice, that Rochdale had a separate source of statutory power for its agreement with UU pursuant to section 21 of HA 1985, citing Attorney-General v. Crayford Urban District Council

[1962] 1 Ch 575

(CA) at 587, 589, 590/592, and Akumah v. Hackney London Borough Council

[2005] UKHL 17

[2005] 1 WLR 985

at [21].

The ineffective variation issue

[52]Mr Westgate’s submission under this ground of appeal on behalf of Mr Dixon was in essence that the variation failed because Rochdale’s preliminary notice did not specify “the effect” of the proposed variation (for the purposes of section 103(b) of HA 1985) because the notice did not spell out the consequences for the tenant of his breach of the proposed variation, namely that it could lead to eviction for non-payment of the water charges.

[53]This issue resolved itself into counter-submissions as to whether the “effect” of a contractual term, here the proposed variation, is sufficiently specified by stating what its meaning is, or only by going on to state what the consequences of its breach may be. The judge decided this issue in favour of Rochdale, but, as he said, not without some hesitation, because of the fundamental nature of the sanction of eviction. He also held that in any event tenants could be taken to know the potential consequences of a failure to comply, as Mr Dixon personally and obviously did.

[54]Mr Westgate submitted that the ultimate test of the statutory requirement was whether sufficient information had been given to the tenants to enable them to participate in a meaningful consultation process: seeing that the purpose of the preliminary notice was to facilitate such a dialogue. For this purpose, to require the landlord to provide a mere gloss of the meaning of the variation which in any event had to be specified would be a requirement for a tautology.

[55]In my judgment there is force in this submission, but the ultimate question is how far it takes Mr Dixon. In the case of “consumerist” legislation of this kind, I do not think that the “effect” of a contractual provision can be limited to a mere gloss of meaning. However, it follows that it is not easy to formulate what amounts to a sufficient statement of a provision’s effect. That I think must depend on the circumstances. Clearly a full statement of all the possible consequences of a breach is not what is required: that would require the précis of a text-book. Moreover, the landlord is entitled to have regard to what must reasonably be understood by its tenants. In the present case, Rochdale’s preliminary notice stated that “United Utilities will no longer send you a bill for your annual water charges. Instead, you will pay your water charges direct to the Council as part of your weekly rent…Your tenancy agreement will be changed to make it clear that your rent includes water charges…” Whether that is strictly accurate, which is the point left open in Lambeth, the tenants are being informed in a straightforward way that the obligation to pay water charges to the council will in future have the same effect as the obligation to pay rent. Indeed, that was clearly understood by the tenants “across the Borough”, as the material set out above demonstrates. It was clear to Mr Dixon, indeed that was his complaint to the Council and remains so in these proceedings, that he may be evicted for non-payment of a charge, which he objects to all the more in circumstances where that charge is assessed (by reference to the value of his property) rather than measured. Where the information provided completely succeeded in enabling the tenants to enter into a dialogue concerning the merits of the proposed variation, it is to my mind difficult to say that Rochdale failed to meet its statutory obligations.

[56]Moreover, in circumstances where the statutory requirement is a matter of reasonable judgment, it is not possible to say that there has been such a defect as to invalidate the proposed variation where there has been substantial compliance with the statute; nor will every defect vitiate. That is the learning of authorities such as London & Clydeside Estates Ltd v. Aberdeen District Council

[1980] 1 WLR 182

(HL) and Regina v. Secretary of State for the Home Department, ex parte Jeyeanthan

[2000] 1 WLR 354

(CA). In London & Clydeside the statutory requirement was to include in a certificate “a statement…of the rights of appeal”. The certificate in question made no mention of rights of appeal at all, and the certificate was vitiated by that failure. However Lord Hailsham of St Marylebone said this (at 190A/C):

“In such cases, though language like “mandatory,” “directory,” “void,” “voidable,” “nullity” and so forth may be helpful in argument, it may be misleading in effect if relied on to show that the courts, in deciding the consequences of a defect in the exercise of power, are necessarily bound to fit the facts of a particular case and a developing chain of events into rigid legal categories or to stretch or cramp them on a bed of Procrustes invented by lawyers for the purposes of convenient exposition. As I have said, the case does not really arise here, since we are in the presence of total non-compliance with a requirement which I have held to be mandatory. Nevertheless I do not wish to be understood in the field of administrative law and in the domain where the courts apply a supervisory jurisdiction over the acts of subordinate authority purporting to exercise statutory powers, to encourage the use of rigid legal classifications. The jurisdiction is inherently discretionary and the court is frequently in the presence of differences of degree which merge almost imperceptibly into differences of kind.”

[57]Those remarks were set out by Lord Woolf MR in Jeyeanthan, where the Secretary of State sought to appeal against a special adjudicator’s decision on an asylum applicant’s appeal by letter rather than by using a prescribed form. Lord Woolf continued (at 362C/F):

“Bearing in mind Lord Hailsham L.C.’s helpful guidance I suggest that the right approach is to regard the question of whether a requirement is directory or mandatory as only at most a first step. In the majority of cases there are other questions which have to be asked which are more likely to be of greater assistance than the application of the mandatory/directory test. The questions which are likely to arise are as follows: 1. Is the statutory requirement fulfilled if there has been substantial compliance with the requirement and, if so, has there been substantial compliance in the case in issue, even though there has not been strict compliance? (The substantial compliance question.) 2. Is the non-compliance capable of being waived, and if so, has it, or can it and should it be waived in this particular case? (The discretionary question.) I treat the grant of an extension of time as a waiver. 3. If it is not capable of being waived or is not waived then what is the consequence of non-compliance? (The consequences question.)”

[58]In the present case, I would consider that there has been substantial compliance in a context where, unlike those other cases where the requirement was hard-edged (reference to rights of appeal; the use of a prescribed form), here the requirement was for something much more evaluative, namely the setting out of the “effect” of a provision. I would consider that the sufficiency of the information given by Rochdale was demonstrated by the general understanding of it on the part of tenants as a group; but my judgment is independent of that. In the circumstances it is unnecessary to consider whether Mr Dixon’s complete understanding of the import of the preliminary notice, (to say nothing of his willingness to pay his water charges for two years) undermines his attack on the validity the variation, which has been effective, subject to his defence in this litigation, for some six years to date.

[59]In my judgment, therefore, Mr Dixon’s second ground of appeal fails.

The unfair term issue

[60]Mr Westgate submits that the variation to introduce payment by the tenants of water charges to Rochdale as an obligation of their tenancy is an unfair term: because it renders them liable to eviction for non-payment.

[61]The statutory provisions invoked under this ground of appeal are regulations 5 and 6 of the Unfair Terms in Consumer Contracts Regulations 1999, which are as follows:

“5.– Unfair Terms (1) A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer… 6.– Assessment of unfair terms (1) Without prejudice to regulation 12, the unfairness of a contractual term shall be assessed, taking into account the nature of the goods or services for which the contract was concluded and by referring, at the time of the conclusion of the contract, to all the circumstances attending the conclusion of the contract and to all the other terms of the contract or of another contract on which it is dependent.” (1) A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer… 6.– Assessment of unfair terms (1) Without prejudice to regulation 12, the unfairness of a contractual term shall be assessed, taking into account the nature of the goods or services for which the contract was concluded and by referring, at the time of the conclusion of the contract, to all the circumstances attending the conclusion of the contract and to all the other terms of the contract or of another contract on which it is dependent.”

[62]It is common ground that the regulations apply: R (Khatun and others) v. Newham London Borough Council

[2004] EWCA Civ 55

[2005] QB 37

[63]In Director General of Fair Trading v. First National Bank plc

[2001] UKHL 52

[2002] 1 AC 481

at 494, Lord Bingham of Cornhill referred to the regulations in these terms:

“[17]…The requirement of significant imbalance is met if a term is so weighted in favour of the supplier as to tilt the parties’ rights and obligations under the contract significantly in his favour. This may be by granting to the supplier of a beneficial option or power, or by the imposing on the consumer of a disadvantageous burden or risk or duty. ..The requirement of good faith in this context is one of fair and open dealing. Openness requires that the terms should be expressed fully, clearly and legibly, containing no concealed pitfalls or traps. Appropriate prominence should be given to terms which might operate disadvantageously to the customer. Fair dealing requires that a supplier should not, whether deliberately or unconsciously, take advantage of the consumer’s necessity, indigence, lack of experience, unfamiliarity with the subject matter of the contract, weak bargaining position, or any other factor listed in or analogous to those listed in Schedule 2 to the Regulations…It looks to good standards of commercial morality and practice.”

[64]Mr Westgate submits that the core argument under this heading is that it is unfair unilaterally to impose an obligation to pay water charges where the consequence may be eviction, in Mr Dixon’s phrase “for not paying for something that you’ve not used”. It is again suggested that there was inadequate information given about the consequences of breach.

[65]Reliance was also placed on Guidance on unfair terms in tenancy agreements issued by the Office of Fair Trading (OFT) in September 2005 (at para 4.21) as follows:

“We take the view that it is unfair to change the nature of a debt owing to the landlord by means of a contractual term. We are likely to object to terms that deem outstanding interest, administration or service charges, or any other monies owing to the landlord other than rent as being rent or provide for them to be deducted from the rent account. Housing legislation provides that arrears of rent may be treated differently from other debts, particularly in regard to eviction, and we consider it is unfair for landlords to seek to enforce these other debts in this way.”

[66]The judge rejected these submissions on the ground that the variation was imposed pursuant to an express statutory power, carried out in accordance with the statute, after consultation, and following a decision taken by elected members of the local authority. As for the risk of eviction, that followed from the nature of the relationship of landlord and tenant, and was in any event subject to the control of the court, pursuant to legislation which ensured that possession orders would be granted only where it was reasonable to do so. As for the OFT guidance, that was given in relation to assured tenancies where non-payment of rent is a mandatory ground for possession, which is not the case in secure tenancies. It was in any event one factor alone, and outweighed by the others.

[67]In my judgment, the judge was right to conclude on this issue as he did, for the reasons which he gave. They are criticised by Mr Westgate on the basis that it is irrelevant that a tenant was already subject to eviction, for the variation increased that risk; the discretion of the judge in the matter of possession orders was originally also submitted to be irrelevant, as coming after the clause was imposed, but finally accepted as relevant, but not decisive; and the judge was wrong to discount the OFT guidance in the mistaken belief that it related only or primarily to assured tenancies. However, I would uphold the reasoning of the judge, and express the matter in my own words as follows.

[68]First, a term which is expressly authorised by a statutory power, which replicates or reaches back to the time when water rates were routinely collected through tenancy agreements, is unlikely to be unfair. Secondly, although the term is imposed unilaterally, statute also provides for the procedure for doing so, thus ensuring sufficient information about the proposed variation in advance, for the purpose of consultation. Thirdly, the material before the court shows that the scheme of collecting water charges through tenancy agreements is widespread. Fourthly, the efficiency of such a scheme works to the advantage of all parties, and saves money which goes into the housing fund for the benefit of tenants. Fifthly, the consultation carried out in this case, which both preceded and followed the preliminary notice, showed almost a two-thirds majority for the proposal. Sixthly, both for that reason and because the decision to vary the tenancy agreements is taken by democratically elected councillors of the local authority the proposed term, before it is imposed, has gone through a democratic process which is very different from the normal process of unilaterally imposed terms in a commercial relationship. Seventhly, I have rejected under the previous issue the submission that the tenants lacked sufficient information regarding the term and its possible consequences for eviction. Eighthly, the term imposed an obligation to pay water charges to the council for water services which the tenants obtained from UU. There can be no unfairness in paying for such charges: it would be unfair for the tenants/customers not to pay for such charges. Ninthly, there can be no unfairness in paying for such water charges on an assessed as distinct from a measured or metered basis: although it is possible to apply for a water meter, the great majority of water users prefer not to do so, believing that unmeasured use of water is a better bargain; and the fact that unmeasured use of water has to be assessed on some other basis than the measured amount of actual use does not mean that the charge is unfair because it may diverge (for better or worse, but there is no evidence to say in any substantial way) from some absolute standard. Tenthly, it is impossible to say that the context of the statutory requirement that eviction can only be obtained from a court which is persuaded of the reasonableness of a possession order is not relevant, and highly relevant, to the fairness at the time of contract of an obligation the breach of which may give rise to a ground for possession. Eleventhly, it is also relevant that the statutory scheme for obtaining possession nevertheless states that breach of any obligation of the tenancy, and not only of the obligation to pay rent, is a ground for possession, albeit subject to the requirement of reasonableness and the discretion of an independent and impartial judge. All this is built into the contractually contemplated consequences of the provision in question.

[69]Finally, the OFT guidance states in its para 1.3 that it “deals primarily with potential unfairness in assured and assured shorthold tenancy agreements”. Public sector tenancies are considered in Annex A to the guidance, where in para A.2 OFT states:

“We take into account the different legal and regulatory environments in which public sector and social housing landlords work when considering complaints about possible unfairness in their tenancy terms.”

In any event the para 4.1 advice relied on by Mr Dixon expressly makes the point about the problem of other charges being required to be paid as rent, thereby underlining the statutory difference between assured tenancies under the Housing Act 1988, where rent arrears are a mandatory ground for possession (ground 8), and secure tenancies under the HA 1985, where they are not. It seems to me that on its own terms and the logic of its argument para 4.2 does not apply to the present case concerning secure tenancies.

[70]UK Housing Alliance (North West) v. Francis

[2010] EWCA Civ 117

[2010] All ER 519

[2010] HLR 28

supports this analysis. There the fact that terms of a tenancy might in theory lead to eviction were reviewed in the context of a judge’s exercise of his statutory powers (at para 24).

[71]In sum, no significant imbalance is created by the insertion of the varied term, and nothing contrary to the requirement of good faith. The matter was dealt with openly, in accordance with statutory powers and requirements, after consultation, and democratically. No advantage was taken or sought to be taken of the tenants affected by the change. The position in which Mr Dixon finds himself is not because some unfair advantage has been taken of him, but because he has for some considerable time now refused to pay, although he is able to do so, water charges for a water service which he has enjoyed.

[72]I would therefore dismiss this third ground of appeal.

The unreasonable order issue

[73]This point was not emphasised among Mr Westgate’s submissions, but it remains. Mr Westgate acknowledges that reasonableness is a matter for the discretion of the judge and that this court would be slow to interfere in the exercise of that discretion. However, he submits that the judge erred in principle because he gave no weight to the fact that the non-payment was based on a genuine belief that there was no legal right to claim the money sought, nor did he adequately consider whether an order for possession was necessary in order to secure payment of the amounts due.

[74]In my judgment, these submissions carry no weight. The judge gave careful expression at the outset of his judgment to Mr Dixon’s stand of principle. I have cited the passage above, with its conclusion about the judge being “quite convinced that he genuinely believes not only in the moral strength of his position but also in the legal strength of his case”. The judge reverted to Mr Dixon’s stand in the passage in which he considered the exercise of his discretion, at his para 62 where he observed:

“It is contended and I accept that the arrears are solely in respect of water charges and the reason they have accrued is the matter of principle which has been explained by Mr Dixon.”

The judge also expressly took into account that, although Mr Dixon has “stated his willingness to pay the water charges…I have to say his stance remains that if they are to be paid to the claimant that is with considerable reluctance.” He added (at para 63):

“I am sure that he will have great difficulty in accepting this decision, that was clear in his evidence and that leaves me with some doubts as to whether I can accept his assurance made in evidence that he will pay without there being some sanction. It seems to me that in these circumstances if an order for possession was not made, I find it very difficult to envisage any circumstances in which an order for possession would be appropriate for failure to pay water charges alone and if that were the case the defendant, Mr Dixon, and any others following this case might feel that he has succeeded in his arguments when he has not.”

[75]The judge carefully balanced all the factors in the case, including those just referred to. He took into account the need for him to find that it was reasonable for him to make a possession order, he had regard to Lambeth where this court criticised the judge’s decision not to make a possession order, he observed that Mr Dixon had lived in his home for 33 years without any evidence of any other arrears, he referred to the uncertainties which had been entertained at the time of the variation as to how it would be enforced. However, he did not accept that the arrears were minimal or that a possession order would be disproportionate, and he referred to the other tenants being disadvantaged by Mr Dixon’s action. He concluded that, when weighing up all the factors, it was reasonable to make a possession

[76]It only remains to refer to what Mance J said in this court about the making of a possession order in Lambeth, which strongly supports the judge’s exercise of his discretion. It may be that some of those remarks are not directly relevant to the arguments raised as a matter of discretion in this case, as distinct from there, but they are all relevant as well to the general submission made under the unfair term point above. Mance J observed (at 97):

“The fact that the water was supplied by a third party is no reason for refusing a possession order in circumstances where the Council had undertaken to pay the water charges to the third party and to collect them from its tenants. The fact that the Council had no obligation to undertake this role is clearly irrelevant. It had specific statutory power to undertake it, and it was Council policy to do so – in the interests of its tenants and the fulfilment of its own functions as the relevant elected local authority. The fact that the statutory power was initially conferred at a time when water was supplied by a public body is irrelevant, as is the fact that the water is now supplied by a privatised water company. The express conferral in the 1989 and 1991 Acts of power on a local authority to enter into an agreement for the collection and recovery, on behalf of any privatised water company, of any charges fixed by such a company demonstrates the irrelevance of privatisation. The fact that the Council’s policy and the agreements which it has with water companies and with its tenants could, in certain circumstances of default, lead to tenants losing possession of their houses on account of non-payment of charges which would not normally expose other tenants to forfeiture of their leases is no reason for refusing a possession order, once it is accepted, as it must be, that the agreements were made pursuant to express statutory power and proper Council policy and were in the general interests of tenants.”

[77]For those and other reasons more personal to Mrs Thomas, this court would have made a suspended possession order in that case as “the only order which it would have been reasonable for the Judge to make” (at 98), had not matters moved on, with the effect that, with the assistance of the department of social security, Lambeth was obtaining payment of her arrears by instalments directly deducted from her income support.

[78]For these reasons, I can find no error in the manner in which the judge exercised his discretion. I cannot interfere with it, indeed it seems to me wholly correct.

Conclusion

[79]In sum, for the reasons given above, I would dismiss this appeal. I would pay tribute to the careful judgment of the judge, who had still further issues to decide which have not been challenged on this appeal.

Lord Justice Rimer :

[80]I agree.

Lord Justice Elias :

[81]I also agree.

order

but that it would be suspended, which was all that Rochdale itself sought. The condition imposed allowed Mr Dixon nearly six years to pay off the arrears.

Cited in 11 later judgments

and 2 more of the most senior