City Council of Bristol v. Lovell [1998] UKHL 8

House of Lords

Between

City Council of BristolAppellant

LovellRespondent

Before

Lord Goff of Chieveley

Lord Lloyd of Berwick

Lord Hoffmann

Lord Hope of Craighead

Lord Clyde

Date 26 February 1998

My Lords,

I have had the advantage of reading in draft the speech prepared by my noble and learned friend, Lord Hoffmann. For the reasons he gives I would allow the appeal.

LORD LLOYD OF BERWICK

My Lords,

It is helpful to have in mind the order of events leading up to this appeal. The tenant, Mr. Lovell, was first in the field. He claimed to exercise his right to buy his home under Part V of the Housing Act 1985 by notice served on the Council in about April 1994. The Council might have responded by serving a counter-notice under section 124 denying the tenant's right to buy, and stating the grounds. But they did not do so. They admitted the right to buy, and then, on 30 June, served a further notice stating the price and other terms of sale. On 14 October the tenant accepted the Council's terms. On 4 November the tenant's solicitors approved the form of transfer, and called for completion under section 138. There can, I think, be no doubt that at that stage the Council were under a duty to convey the freehold, and the tenant was in a position to enforce that duty by claiming an injunction under section 138(3). The statutory conditions were satisfied.

But in the meantime the Council had served a notice under Part IV of the Act informing the tenant that they intended to make a claim for possession. The notice was not served until 4 July, that is to say, some few days after they had told the tenant of the terms of sale. The proposed grounds included Ground 2 of Schedule 2. But the grounds did not at that stage include an allegation that the tenant was dealing in drugs. On 21 September 1994 the Council commenced proceedings. But again there was no mention of drug-dealing. It was only after the tenant's solicitors had approved the form of transfer, and called for completion, that the Council amended their particulars of claim to allege that the tenant was a drug-dealer. On 4 January 1995 the tenant amended his defence to add a counterclaim for an order that the Council convey the premises under Part V of the Act, whereupon the Council answered with allegations of misrepresentation, fraud and illegality. In particular, they alleged that the money with which the tenant was proposing to buy the premises came from the proceeds of his drug-dealing.

On 10 January 1995 the tenant applied for an injunction pursuant to his counterclaim. On 27 January the District Judge declined to grant relief on the ground that an injunction is an equitable remedy, and he could not be satisfied at that stage that the tenant had come with clean hands. He stressed that he was not adjourning the injunction proceedings so as to enable the possession action to be tried first. But that was the effect of his order.

So the question which arises is whether the judge was entitled to adjourn the application for an injunction once the conditions set out in section 138 had been satisfied. If the Council had already obtained an order for possession, then the case would have fallen within section 121(1). The right to buy could not have been exercised. But there was no order for possession in existence on 10 January, when the tenant applied for an injunction, or on 27 January when the district Judge refused an injunction; and there is nothing in section 121 or elsewhere in the Act about an application for an order for possession.

Similarly if the tenant had a bankruptcy petition pending against him, he could not have exercised his right to buy: see section 121(2). But that was not the case here.

The only other qualification on the landlord's duty to convey the freehold once the statutory conditions are satisfied is contained in section 138(2). It provides that the landlord is not bound to comply with section 138(1) if, and so long as, the tenant is four weeks or more behind with his rent. But that is the only exception. The implication is that in all other circumstances the duty is absolute and peremptory.

How then can it be said that the judge was entitled to refuse the injunction when the case came before him on 27 January? It is said that he was entitled to adjourn the application, on the ground that all courts have an inherent power to adjourn proceedings in the interests of proper case management. There is nothing in the Act, so it is said, to exclude the judge's ordinary discretion under Ord. 13, r. 3(1) of the County Court Rules 1981 to adjourn the tenant's application for an injunction so as to allow the Council's application for a possession order to be heard first. It was considerations of this kind which weighed with Lord Woolf M.R. but which in the end he put on one side having regard to previous decisions of the Court of Appeal.

I am bound to say that I have serious doubts about this line of argument, attractive though it can be made to seem at first sight. I have two concerns: one general and the other particular.

As to the general concern, I accept of course that all courts are in control of their own proceedings, and can regulate the order in which cases are brought on for hearing. They can fix dates, and they can vacate dates. But they must not do so in such a way as to deprive one or other party of his substantive rights. The distinction is fundamental. Thus a court will not hesitate to grant an adjournment in an appropriate case if one or other party is not ready for trial, or if, for example, a witness is not available, even if, without the evidence of that witness, the party in question would be bound to fail. But in all such cases the substantive rights of the parties are unaffected. The adjournment touches only their enforcement.

In the present case the purpose of the adjournment was quite different. It was to enable the Council to mount a defence which was not otherwise available when the tenant's application came on for hearing, thereby depriving him of his substantive right to buy. On 27 January there was no defence to the tenant's claim for an injunction under section 138(3). The effect, if not the purpose, of the adjournment was to provide the Council with the opportunity of putting forward a defence by obtaining an order for possession. It seems to me that this goes far beyond the ordinary limits of case management. The general rule must be that courts are obliged to decide cases as they come before them in accordance with the rights of the parties as they then stand. The Divisional Court has recently held that magistrates were wrong to grant an adjournment in a case under the Environment Protection Act 1990 on precisely this ground: see Reg. v. Dudley Magistrates Court, Ex parte Hollis (unreported) following and applying Reg. v. Walsall Justices, Ex parte W

[1990] 1 Q.B 253

. Moses J, said:

"The wide discretion as to whether to grant an adjournment conferred by section 10 and section 54 of the Magistrates Court Act 1980 cannot, usually, be impugned. But it is a power which must not be exercised in a manner which undermines the statute under which the proceedings are brought or in a way which deprives a litigant of rights conferred by that statute. An adjournment cannot be granted if the only purpose is to avoid the consequences which the law provides will follow, should the hearing continue."

My particular concern relates to the specific provisions of Part V of the Act. It is said that Parliament must have intended judges to be able to exercise their discretion under Ord. 13, r. 3(1) of the County Court Rules even though the statutory conditions for the grant of an injunction under section 138(3) have been fulfilled. Again I have doubts. There is nothing in the language of the Act to support such a view. Indeed, as has been pointed out in previous cases, the language is drawn very tightly in favour of the tenant. Once the right to buy has arisen, the circumstances excluding the exercise of the right are strictly confined. In Taylor v. Newham London Borough Council [1993] 1 W.L.R. 444 it was argued that more general considerations might still be relevant. The argument was rejected. Sir Thomas Bingham M.R. said, at pp. 451-452:

A little later he said:

So far from supporting the argument that the judge has a discretion to adjourn proceedings for an injunction under section 138(3) the language and purpose of Part V of the Act point the other way.

I should refer next to Dance v. Welwyn Hatfield District Council [1990] 1 W.L.R. 1097. The essential facts were very similar to those of the present case. As in the present case, it was the tenants who were first in the field by claiming the right to buy; and as in the present case it was the Council who then gave notice of their intention to apply for a possession order. The only difference on the facts is that it was the tenants who were the first to commence proceedings, and the Council who then counterclaimed for a possession order. In that sense the parties were the other way round. But this cannot affect the question whether the judge had a discretion to adjourn the tenants' application for an injunction until the Council's claim for possession had been determined. This is what the judge decided to do, as in the present case. But the Court of Appeal held that he was wrong. It is important to recognise that the discretion with which the Court of Appeal was concerned was the procedural discretion to adjourn the application. That was what the case was about: see per Nourse L.J., at p. 1102.

In a judgment with which Sir Nicolas Browne-Wilkinson V.-C. agreed, McCowan L.J. said, at pp. 1106-1107:

As I understand it McCowan L.J. was deciding that the judge did not have a procedural discretion to adjourn the tenants' application because, under the terms of the Act, the tenants were entitled there and then to a grant of the freehold. The Council had no defence to the tenants' application. I am not persuaded that this line of reasoning involves any non sequitur.

I return to Taylor v. Newham London Borough Council . The facts again were very similar, the only difference being that there were separate proceedings brought by the Council for a possession order on Ground 2 (racial harassment) and by the tenant for an injunction. The judge ordered both proceedings to come on together: see p. 446. If the possession action were to be decided first, then it would or might have provided the Council with a defence to the tenants' claim for an injunction. But on a preliminary issue the judge held that he had no discretion to withhold the injunction.

In the Court of Appeal Sir Thomas Bingham M.R. quoted at length the passage which I have already quoted from the judgment of McCowan L.J. in Dance v. Welwyn Hatfield District Council , pointing out that McCowan L.J.'s judgment had the agreement of the Vice-Chancellor. Sir Thomas Bingham M.R. continued:

It is said that Taylor v. Newham London Borough Council does not assist us, because nobody asked the right question. But as I understand Sir Thomas Bingham M.R.'s judgment in the passages I have quoted he was directing his mind to the very same procedural question which had been decided in Dance's case, namely, whether a judge has a discretion to adjourn injunction proceedings so as to await the outcome of the possession action. The court answered that question in the negative.

But for one factor to which I shall come, I would for my part be content to follow and approve the decisions in Dance and Taylor , together with the judgments of Hobhouse L.J. and Morritt L.J. in the court below. As Lord Woolf M.R. observed there is no ground for distinguishing between the three cases. In particular I regard it as irrelevant that in Dance's case the claim for possession was on Ground 10, whereas the allegations in the present case are obviously much more serious. The underlying merits cannot affect the question whether the procedural discretion exists once the conditions are satisfied.

The factor which has caused me to change my mind arises out of a concession made by counsel for the tenant towards the end of his argument. He was asked whether it would be open to the Council to pursue its claim for possession (assuming no order had been made to the contrary) or even start fresh proceedings for a possession order, notwithstanding the grant of an injunction under section 138(3). To my surprise Mr. Woolley said that it would. I do not think he was obliged to make that concession whether by the language of section 139(2) of the Act (or any other provision of Part V) or by reason of the decision of the Court of Appeal in Bradford City Metropolitan Council v. McMahon [1994] 1 W.L.R. 52. To my mind Parliament cannot have intended that the Council should be able, in effect, to reverse a mandatory injunction by obtaining a subsequent order for possession. The intention must have been that the grant of an injunction was to be, so to speak, the end of the road, subject only to the provisions of section 140 and 141. If I am right that Mr. Woolley's concession was wrongly made, then it would have the additional advantage of bringing the English and Scottish procedures more closely into line.

But I cannot ignore the concession, even if I think it was wrong. If it be assumed that a mandatory injunction is not the end of the road, and that it is open to this or any other landlord to obtain a possession order at any time up to the actual grant, notwithstanding a mandatory injunction against him, then the only sensible course in practice would be to allow the possession action to be determined first. Otherwise court proceedings would be brought into disrepute. If so, and still on the same assumption, it must follow that the court has a procedural discretion to adjourn the tenant's application. It is for that reason, and that reason alone, that I would allow the appeal.

LORD HOFFMANN

My Lords,

Mr. Lovell is the secure tenant of a house belonging to the Bristol City Council on its Southmead Estate. The Council wants to evict him. It says that he is using the house as a shop to sell drugs. It has been suitably adapted to the trade, with steel grilles over doors and windows, kennels for Rottweiler dogs, surveillance cameras to check visitors, a radio scanner tuned to police frequency and equipment for locating covert listening devices. The Council says that his use of the house has been a nuisance and annoyance to neighbours, which is a statutory ground for a possession order (Ground 2 in Schedule 2) under Part IV of the Housing Act 1985.

Mr. Lovell, on the other hand, wants to acquire the freehold under the "right to buy" provisions in Part V of the same Act. He has served the appropriate notices and his statutory right to buy (by virtue of his occupation of the house as a secure tenant for more than two years) has been admitted by the Council. The price calculated by the Council (£16,660) is acceptable to him and he says that he will pay in cash. Section 138(1) of the Act provides that in such a case "the landlord shall make to the tenant . . . a grant of the dwelling-house for an estate in fee simple." Subsection (3) says that "[t]he duty imposed on the landlord by subsection (1) is enforceable by injunction."

The way in which the respective claims have come before the court is that on 21 September 1994 the Council issued proceedings for possession. On 4 January 1995 Mr. Lovell served a defence and counterclaim, denying the allegations about his unlawful use of the house, and counterclaiming for conveyance of the freehold.

The situation at the close of pleadings therefore was that Mr. Lovell had established his right to buy and that the conditions in section 138(1), giving rise to the statutory duty to convey the freehold, had been satisfied. On the other hand, the right to buy would cease to be exercisable if the court made an order for possession. Section 121(1) reads as follows:

This means that if an order for possession were made, Mr. Lovell would no longer be entitled to an injunction. The "right to buy" is defined in section 118(1) as "the right . . . to acquire the freehold of the dwelling-house" and an application for an injunction therefore involves exercising the right to buy: Enfield London Borough Council v. McKeon [1986] 1 W.L.R. 1007. So the outcome of the case appeared likely to depend upon the order in which the claims were heard. If the Council's claim was heard first and succeeded, Mr. Lovell would fail in his claim to the freehold. Conversely, if Mr. Lovell's claim was heard first, he would obtain his injunction and upon the grant of the freehold the Council would cease to be his landlord and its claim to possession would lapse.

On 3 February 1995 Mr. Lovell attempted to have his claim heard first by making an interlocutory application for an injunction under C.C.R. Ord. 13, r. 6(1). The District Judge refused to grant it. He said that it should come on for trial with the Council's claim for possession. His decision was reversed by His Honour Judge Batterbury, who held that Mr. Lovell was entitled to an immediate injunction. The judge was affirmed by the Court of Appeal, which held that it was bound by previous authority to decide that the judge had no discretion to refuse the application.

The question is therefore whether the judge had a discretion. It is however very important to be clear as to what kind of discretion we are talking about. The fact that the statutory remedy is an injunction naturally brings to mind the fact that an injunction is traditionally said to be a discretionary remedy. This is true not only of interlocutory injunctions, where the discretionary nature of the remedy is obvious, but also of final injunctions. An injunction granted under section 138(3) is a final mandatory order. So that suggests that we are concerned with the discretion to grant or refuse a final injunction.

In my view, however, that kind of discretion has nothing to do with the case. The reason why an injunction is a discretionary remedy is because it formed part of the remedial jurisdiction of the Court of Chancery. If the Chancellor considered that the remedies available at law, such as damages, were inadequate, he could grant an injunction to give the plaintiff more effective relief. If he did not think that it was just or expedient to do so, he could leave the plaintiff to his rights at common law. The discretion is therefore as to the remedy which the court will provide for the invasion of the plaintiff's rights.

It is hard to see how such a discretion can have any application to the enforcement of the right to buy. There is no question of leaving the tenant to his remedy at common law. Unlike the equivalent Scottish statute (see section 66(2) of the Housing (Scotland) Act 1987 and Cooper's Executors v. Edinburgh City District Council (1991) 23 H.L.R. 349) the Act of 1985 does not bring into existence a deemed contract. It misses out the contractual stage of normal conveyancing and creates a statutory right to a conveyance. The only remedy provided for the enforcement of this right is an injunction. It is not necessary to decide the point, but I rather doubt whether there is a right to damages at all. The purpose of the statute is to enable tenants to buy their dwelling-houses, not to allow landlords to retain the houses on paying the tenants a sum of money. While, therefore, I would not wish to exclude the possibility that there may be a case in which it would be proper to refuse an injunction, I cannot think of an example. So in my view the fact that an injunction is traditionally a discretionary equitable remedy is a red herring.

The discretion with which we are concerned in this case is of an altogether different nature. It has nothing to do with the fact that the remedy claimed by Mr. Lovell happens to be an injunction. It is the administrative discretion of the court to regulate its business and to decide when and in what order it will hear the cases which come before it. In the present case, District Judge Bolton exercised his discretion to refuse to hear Mr. Lovell's interlocutory application in advance of the trial. The same question would have arisen if Mr. Lovell and the Council had commenced separate proceedings and Mr. Lovell's application had come on first. Would the court have had a discretion to adjourn his application until it had heard the Council's claim for possession?

The court has an inherent jurisdiction to regulate its business, but the power of the County Court to adjourn proceedings is codified in Ord. 13, r. 3(1):

This would appear to confer a broad discretion which can be exercised in order, among other things, to ensure that related cases are heard in the order which justice and convenience requires. Obviously the discretion must be exercised judicially and not for the purpose of defeating the policy of the statute or the rights which it confers upon the tenant. So the question is whether Part V of the Housing Act 1985 expressly or impliedly excludes the ordinary discretion conferred by Ord 13, r. 3(1) and confers upon the tenant a procedural right to have his application heard as soon as he can bring it before the court.

There is certainly nothing in the Act which expressly confers such a right. The fact that the tenant may be entitled to an injunction at the time when he wants his application heard does not mean that he must be entitled then and there to have it determined. If such a right existed, the consequences would be extremely arbitrary. (Compare Reg. v. Walsall Justices, Ex parte W. [1990] 1 Q.B. 253). The substantive outcome of the tenant's application would depend upon the accidents of the court lists or a race to judgment between him and the landlord. It would be in the interests of the tenant to delay the hearing of an action for possession while he made his application for an injunction. Strictly speaking, it would be not so much a race to judgment as a race to execution of the judgment. Until the grant has actually been made, the tenant remains a secure tenant (see section 139 (2)) and the action for possession can, in theory at least, continue. If there is some delay in completion (for example, because the tenant has difficulty in raising the money) the landlord may still be able to obtain his possession order and defeat the tenant's claim at the last minute. Mr. Woolley Q.C. rightly accepted this to be so. My Lords, I very much doubt whether Parliament could have intended the enforceability of the right to buy to depend upon such games of chance. It seems to me much more likely that the courts were intended to use their ordinary discretion, whether under Ord 13, r. 3(1) or the inherent jurisdiction, to hear the applications at whatever time and in whichever order appeared just and convenient.

So far I have discussed the matter without reference to previous authority, except for the decision in Enfield London Borough Council v. McKeon [1986] 1 W.L.R. 1007 which Mr. Woolley (again in my view rightly) did not challenge. But I must now deal with the two cases which, in the view of the Court of Appeal, obliged them to dismiss the appeal. The first is Dance v. Welwyn Hatfield District Council [1990] 1 W.L.R. 1097, a decision of Sir Nicolas Browne-Wilkinson V.-C. and Nourse and McCowan L.JJ. The essential facts were very similar to those of the present case, except that the tenants had actually started proceedings for an injunction first. The landlord was counterclaiming for possession. Such questions of timing may be relevant to the exercise of the discretion, if there is one, but I do not think that they affect the question of whether a discretion exists. The same is true of another distinction which clearly affected the view which the court took of the merits: the ground for possession (Ground 10 in Schedule 2) was that the landlord wanted the premises to demolish and reconstruct and was willing to provide alternative accommodation. There was no suggestion of any misconduct on the part of the tenants.

The judge in the County Court adjourned the plaintiff's claim until the merits of the counterclaim had been determined. The Court of Appeal held that he had no discretion to do so. Nourse L.J., who gave the leading judgment, said that when the landlord's duty to convey arose under section 138 the tenant acquired an equitable interest in the property and the landlord was bound to convey in the same way as if the tenant were entitled to specific performance of an unconditional contract. Even if the comparison with specific performance was not exact, the injunction could not be less readily available than specific performance, which, although discretionary, was refused only on well-settled principles. On the facts of the case, there were no grounds upon which the injunction could be refused.

As Nourse L.J. himself acknowledged, the comparison with specific performance of a contractual obligation to convey is not exact and I respectfully think that it is positively misleading to speak of the tenant having acquired an equitable interest in the property. The tenant acquires no proprietary interest whatever until the grant of the freehold. Until then he remains a secure tenant. But I do not think this matters because I agree with Nourse L.J. that the discretion to refuse an injunction, if it exists at all, cannot be wider than the discretion to refuse specific performance. I therefore accept that if the tenant's case had to be heard separately at the time when it came before the judge in the County Court, he was entitled to succeed.

In my view, however, this does not mean that the tenant was entitled to insist that his case be heard before that of the landlord. As I have pointed out, the decision about the order in which the cases will be heard involves a different kind of discretion from the decision as to whether, when the case is heard, the court should grant or refuse an injunction. Of course the fact that, as things stand, the tenant is entitled to the injunction is a relevant consideration in the exercise of the discretion. If his rights were not defeasible under section 121, there would usually be no reason for delay. It is the fact that the Act expressly makes his rights defeasible which may require the exercise of the discretion.

Probably on account of the way the case was argued, the judgment of Nourse L.J. does not distinguish between the two kinds of discretion and does not refer to the procedural discretion at all. The only other judgment was that of McCowan L.J., who said, at p. 1107:

My Lords,

for the reasons I have already stated at some length, this seems to me to be a non sequitur.

I can refer more briefly to the other case, Taylor v. Newham London Borough Council [1993] 1 W.L.R. 444 because it followed Dance v. Welwyn Hatfield District Council [1990] 1 W.L.R. 1097. Once again the tenant was claiming an injunction and the landlord possession, although this time in separate proceedings. The judge in the County Court does not seem to have been asked to exercise his procedural discretion to order that both cases come on together. Instead, the parties agreed that he should try as a preliminary issue the question of whether he had a discretion to refuse the injunction. Not surprisingly, and in my view rightly, they got a negative answer from both the judge and the Court of Appeal. At no stage does anyone appear to have asked the right question.

I would therefore overrule Dance v. Welwyn Hatfield District Council [1990] 1 W.L.R. 1097 (but not Taylor v. Newham London Borough Council [1993] 1 W.L.R. 444) and allow the appeal. Your Lordships were not invited to exercise the discretion themselves and the matter must therefore be remitted to Judge Batterbury (or another judge in the Bristol County Court) to rehear the appeal from the District Judge in the light of your Lordships' judgment. He will also find guidance in the judgment of Lord Woolf M.R. in this case, with which I agree.

LORD HOPE OF CRAIGHEAD

My Lords,

I have had the advantage of reading in draft the speech which has been prepared by my noble and learned friend, Lord Hoffmann. I agree with it, and for the reasons which he has given I too would allow this appeal.

I should like to add only a few words with regard to the right to buy provisions in Part III of the Housing (Scotland) Act 1987, to which we were referred in the course of the argument. One might have expected the procedure by which the secure tenant was to be enabled to exercise his right under that Act to be similar to that in Part V of the Housing Act 1985, as the policy initiative which lay behind this legislation was the same in both England and Scotland. But only a brief examination of the Scottish Act is needed to demonstrate that this is not so. The statutory procedures which are set out in each of these two Acts are quite different and they also differ in their consequences.

The procedure in the Scottish Act has been designed on the assumption that all that needed to be done was to lay down the means by which a contract for the sale of the house could be constituted. Under the procedure laid down by the English Act there is no contract, so the procedure is not brought to an end until the grant to the tenant of an estate in fee simple or of a lease: Act of 1985, section 139(2). Until that stage has been reached the procedure can be interrupted at any time under the statutory mechanism. This because section 121, which lays down the circumstances in which the right to buy cannot be exercised, continues to apply right up to the moment when the procedure is brought to an end by the grant. Under the Scottish Act there is nothing by way of any further statutory procedure which must be gone through in order to give effect to the contract. The whole process is designed to achieve a contract between the parties on terms which comply with the statute: see section 66(2). Thereafter the enforcement of the contract is left to the principles of the common law. The decision of this House in Cooper's Executors v. Edinburgh District Council , 1991 S.C.(H.L.) 5 that the tenancy is limited to come to an end on the settlement of the transaction once the contract has been constituted and that the right to buy, having been exercised, is not available to any person who in the meantime may succeed to the secure tenancy, was reached upon an application of those principles. But it is not one which could have been reached under the Act of 1985.

It would not be appropriate in this case to express an opinion as to how the problem which has arisen in this case ought to have been resolved had it arisen in Scotland. It is sufficient to say that the solution would have had to have been a different one from that which has been applied here. The procedures under each Act are so different that no assistance as to what the solution should be in this case can be found in the procedure laid down in Part III of the Housing (Scotland) Act 1987. Nor will the decision in this case be of any assistance as to what the solution should be in Scotland should a case arise there on the same facts.

LORD CLYDE

My Lords,

This appeal concerns a potential competition which may arise between the operation of two distinct but related Parts of the Housing Act 1985. Part IV deals with secure tenancies and in particular with the recovery of possession by the landlord of the let premises. Part V deals with the right of a secure tenant to buy the dwelling-house of which he is the tenant. The problem which arises is how these distinct procedures are to be reconciled or prioritised when both are being pursued at the same time or over the same period.

I should observe at the outset that while the corresponding legislation in Scotland in the Housing (Scotland) Act 1987, to which we were referred, seeks to achieve the same objects as the Housing Act 1985 seeks to achieve for England and Wales, the Scottish Act is cast in provisions conceived to be appropriate to the relevant areas of Scottish law, but which are significantly different from those of the English legislation. It does not seem to me that any guidance on the problems arising in the present case is to be found from the Scottish legislation and correspondingly the resolution of the present case should not be seen as throwing light on the Scottish provisions.

In April 1994 by a notice served by the respondent in this appeal, being the secure tenant of a dwelling-house in Bristol, on his landlords, the appellants, in conformity with section 122 of the Housing Act 1985, the respondent sought to exercise his right under that Act to buy the house. It is not disputed that he had that right. On 30 June 1994 the appellants served on him a notice in conformity with section 125 of the Act, stating the price and other particulars. On 4 July, however, the appellants served on him a notice under section 83 of the Act stating that they intended to apply to the court for an order requiring him to give up possession of the house. The notice set out the grounds on which they proposed to seek the order. On 21 September 1994 they began proceedings for possession. The respondent however, continuing with his intended purchase, sent to the appellants a completed pro-forma dated 14 October 1994 accepting the terms of the offer made to him for the purchase and stating his wish to proceed with it. By an application to the County Court dated 1 November 1994 he sought a stay of the proceedings for possession on the grounds that the appellants were bound to convey the property to him by virtue of section 138 of the Act. Thereafter the appellants amended their grounds for seeking possession including an allegation that the respondent was using the premises for a business, believed to be drug dealing, in breach of his tenancy conditions. On 10 January 1995 the respondent applied for an injunction under section 138(3) of the Act.

The two applications, one for a stay and the other for an injunction, came before District Judge Bolton on 27 January 1995. On 3 February he dismissed both applications. He took the view that the appellants' allegations should be investigated before the court considered the matter of an injunction. He did not suggest adjourning the injunction proceedings but dismissed that application on the basis that he was not prepared to grant leave for what he conceived to be the equitable remedy of injunction at that stage. The matter then came before His Honour Judge Batterbury and he then granted an order in favour of the respondent and dismissed the appellants' claim. The appellants' appeal to the Court of Appeal was unsuccessful and they have now brought the matter to your Lordships' House.

The right to buy which is provided by the Act in section 118 is expressed in that section to be a right "in the circumstances and subject to the conditions and exceptions stated in the following provisions of" Part V of the Act. Its existence is qualified by sections 119 and 120. Its exercise is qualified by section 121. It is a right which, as section 125 discloses, requires to be established by agreement or determination. Before that stage is reached the tenant can in the words of section 122(1) only "claim to exercise" it. In terms of section 122(3) of the Act it is a right which can be withdrawn at any time. That means that it can be withdrawn at any time during the period of the exercise of the right.

The exercise of the right is a process which begins with the notice under section 122(1) by which the tenant claims to exercise it and continues right up until the grant of the estate or the leasehold interest is made by the landlord to the tenant. Only at that point does the secure tenancy in terms of section 139(2) come to an end. During the whole period of the process up to that point the tenant remains a secure tenant and is to be seen as still in the course of exercising his right. This continuing feature of the exercise of the right was not disputed before us and is well supported by such cases as Enfield London Borough Council v. McKeon [1986] 1 W.L.R. 1007 and Muir Group Housing Association Ltd. v. Thornley (1992) 25 H.L.R. 89. The stage of affairs with which Section 138 is concerned thus occurs while the period of the exercise of the right is still continuing. That section creates a duty on the landlord to make a grant to the tenant of the house. The creation of the duty is to be distinguished from the performance of it. The duty emerges "as soon as all matters relating to the grant and to the amount to be left outstanding or advanced on the security of the dwelling-house have been agreed or determined." Its existence is qualified by the provision in respect of unpaid rent in section 138(2). But the substance of the duty is not to be seen necessarily as the making of an immediate grant at that stage. It is to be noted that the duty is not matched by any express obligation on the tenant to accept the grant. The situation is very different from the contract of sale and purchase which is achieved under the Scottish legislation in section 66(2) of the Housing (Scotland) Act 1987. Moreover section 138(1) of the Act of 1985 obliges the landlord to make the grant "in accordance with the following provisions of this Part." That takes one beyond simply the following section to sections 140 and 141. Those sections provide for the landlord to take steps towards requiring completion by the tenant. If at the end of his efforts the tenant fails to respond there is a deemed withdrawal of the original notice claiming to exercise the right to buy. In such a case the exercise comes to nothing and the duty under section 138 should disappear.

Compliance with the duty comprises more than the execution of a conveyance. The "matters relating to the grant" referred to in section 138(1), included in the "relevant matters" for the purposes of sections 140 and 141, do not in my view include the evidencing of the landlord's title to the house nor the preparation of the instrument of conveyance and agreement on its terms. Indeed the order granted by the County Court Judge illustrates this. It orders the City Clerk not only to deliver to the respondent within fourteen days documents evidencing their title and a draft instrument of conveyance but also to respond to any inquiries from the respondent's solicitor about the conveyance. Furthermore the respondent may well wish to investigate the landlord's title through the Land Register. It is only after all of that that the grant should properly be made. Accordingly the obligation in section 138 should be understood as allowing for these steps to be taken. In addition the landlord is entitled to be confident that the price will be forthcoming on delivery of the title. It was not suggested that the landlord could be compelled under section 138 to make the grant regardless of the readiness of the tenant to make the purchase price forthcoming. That too is recognised in the order which was made in the present case in that it orders the execution and delivery of the conveyance upon confirmation from the respondent's solicitors that he wishes to proceed and that they hold the amount of the purchase price.

Once it is accepted that the process of the exercise of the right continues, and that the status of the would-be purchaser continues as that of a secure tenant, right up until the point of the grant, the creation of the duty under section 138(1) can be seen as a milestone, but only one of the milestones, on the journey towards that eventual goal. But the goal may not be reached. The original notice may actually or constructively be withdrawn. The tenant may lose the right to exercise the right, for example by virtue of section 121(2) following on the presentation of a bankruptcy petition against him. The stage may be reached where the grant of an injunction under section 138(3) would be irresistible. But even if an injunction was granted under section 138(3) that does not complete the journey for him. If the view of the continuing existence of the exercise of the right is accepted it cannot be correct that at the stage of section 138 the tenant has become the equitable owner of the house or has exercised his right to buy, as was considered to be the position in the case of Dance v. Welwyn Hatfield District Council [1990] 1 W.L.R. 1097. I would adopt the reservations expressed by the Master of the Rolls in the present case about the reasoning of Nourse L.J. in Dance's case but I would go further and hold that that case was wrongly decided. The idea that the tenants had exercised their right to buy at the stage of section 138, which seems to me to lie within the view expressed in the case that they had become the equitable owners of the freehold in the property, cannot stand with what was accepted before us to be the proper analysis of the position, namely that the exercise of the right continues up until the point of the making of the grant. It does not seem to me to be useful to describe or analyse this milestone in terms borrowed from other situations. As Balcombe L.J. recognised in Bradford City Metropolitan Council v. McMahon [1994] 1 W.L.R. 52 at p. 60 the right to buy "is a creature of statute and is sui generis. . ." Thus it cannot be that any possible adjournment of the case which is within the ordinary power of the court is excluded once the stage of section 138 is reached.

The provision in section 138(3) that the duty in subsection (1) is "enforceable" by injunction is in my view only of procedural and jurisdictional significance. It enables that form of remedy to be adopted in the County Court if the circumstances justify such a remedy. The making of such an order should not be seen as automatic once the circumstances exist for the creation of the duty, though it may well be in practice, as a matter of the existence of those circumstances rather than as any matter of law, that an order may be irresistible. Though the fact that there may be an irresistible case for granting the order does not resolve the present problem. Section 138 makes provision for the situation of a dilatory or reluctant landlord. Sections 140 and 141 provide for the case of a tenant who is thought to be dragging his heels. But their status respectively as landlord and tenant is preserved until a grant is made.

The present case started with a recognition that the merits of the appellants' case ought to be explored before attention was given to the application for the injunction. In my view that approach was correct. It was however based on too wide a view of the discretion to grant or withhold an injunction. The critical issue was one of the managing of the proceedings before the court. But that critical issue became lost from view before the County Court and while it emerged before the Court of Appeal it could make little headway in the face of the decision in the case of Dance and the extent to which the judgments in Taylor supported that case. The decision in Taylor can be justified on its particular facts, but I find no way of distinguishing the case of Dance .

The proper course in the present case was for the judge to look at the whole situation as it was presented before him, with the conflicting claims by the two sides, and decide what course should be followed in the handling of the various issues raised. In my view the appeal should be allowed and the case should be remitted to the County Court to enable the appropriate procedure to be adopted.

Cited in 11 later judgments

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