House of Lords
Publications on the Internet|
|Judgments - Burton v. Mayor etc. of The London Borough of Camden
HOUSE OF LORDS
Lord Browne-Wilkinson Lord Nicholls of Birkenhead Lord Steyn Lord Hobhouse of Woodborough Lord Millett
OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT
IN THE CAUSE
MAYOR ETC. OF THE LONDON BOROUGH OF CAMDEN
ON 17 FEBRUARY 2000
I have had the advantage of reading in draft the speech prepared by my noble and learned friend Lord Nicholls of Birkenhead. For the reasons which he gives, I would allow this appeal and restore the order of Mr. Recorder Keane.
LORD NICHOLLS OF BIRKENHEAD
Miss Susan Burton lives at 49 Aborfield, Peckwater Street, London N.W.5. This is a three-bedroom flat, belonging to Camden London Borough Council. In February 1994 she became a weekly tenant jointly with Miss Jan Hannawin. The two of them occupied the flat with Miss Hannawin's son, then six years of age. The tenancy was a secure tenancy, satisfying the requirements of Part IV of the Housing Act 1985. Two years later, on 26 July 1996, Miss Hannawin bought a property elsewhere and moved out.
This gave rise to a financial difficulty for Miss Burton. She was in receipt of income support, and her housing benefit was assessed at one-half of the rent payable for the flat. Miss Hannawin was responsible for the other half of the rent. The Housing Benefit (General) Regulations 1987 (S.I. 1987 No. 1971), regulation 10 (1) and (5), provide for the payment of housing benefit, in the form of a rent rebate or allowance, when a person is liable to make payments of rent in respect of a dwelling he occupies as his home. Where more than one person is liable to pay rent in respect of a dwelling, the rent is apportioned appropriately for the purpose of calculating the eligible rent for housing benefit purposes. Miss Burton feared that her housing benefit would still be assessed at one-half of the rent for the flat after Miss Hannawin had left because, as one of the joint tenants, Miss Hannawin would remain liable to pay rent. In practice, however, Miss Hannawin would make no further payments of rent after she left the flat.
On 4 July 1996, in expectation of Miss Hannawin's departure, Miss Burton wrote to Camden council. She explained her position and requested a review of her housing benefit claim. If she were not paid housing benefit for the full rent of the flat, she could not remain in her home there. She would be homeless and have nowhere to go. Camden Community Law Centre also wrote on her behalf. On 18 July, after speaking to Miss Burton, the council replied to the law centre. The council was not willing to grant her a sole tenancy of 49 Aborfield because this was a three-bedroom flat. The council was desperately short of larger units to house families waiting in temporary accommodation. The council therefore wished to encourage Miss Burton to move to a one-bedroom flat. Until Miss Hannawin served a notice to quit, which would formally end the existing joint tenancy, Miss Burton would remain liable to pay the whole rent. (I note, in passing, that a notice to determine the tenancy served by Miss Hannawin alone would have been effective to bring this tenancy to an end: see Hammersmith and Fulham London Borough Council v. Monk  1 A.C. 478.) If such a notice were served, the council would seek to offer Miss Burton a secure tenancy of a suitable one-bedroom flat as soon as possible. If she refused a reasonable offer of alternative accommodation, the council would consider taking legal action to repossess 49 Aborfield.
Miss Burton did not wish to move. She wished to continue living at 49 Aborfield, but as the sole tenant. As sole tenant her housing benefit would be increased appropriately. But there was a difficulty in simply transferring the tenancy from joint names into her sole name. The council would not agree to such a transfer, and it was far from clear that Miss Burton and Miss Hannawin could go ahead without their landlord's consent. This stemmed from the provision in section 91(1) of the Housing Act 1985 that a periodic secure tenancy 'is not capable of being assigned'.
Miss Burton's legal advisers then put forward a means they hoped would solve Miss Burton's problem. They prepared, not a deed of assignment, but a deed of release. The deed was made between Miss Hannawin and Miss Burton, and was executed on 21 July 1996. The deed recited the tenancy agreement, that the two of them were joint secure tenants of the flat, and that Miss Hannawin would be leaving the flat permanently on 26 July. The operative part of the deed consisted of a single clause, in these terms:
The council refused to accept that this deed was effective to make Miss Burton sole tenant of the property. Miss Burton began proceedings in the Central London County Court claiming a declaration that she was the sole tenant and an order for the rectification of the council's rent account accordingly.
Mr. Recorder Keane dismissed the application. He held that the deed of release was, in substance, an assignment of Miss Hannawin's interest and was ineffective. Miss Burton appealed. The Court of Appeal (Butler-Sloss L.J. and Sir John Vinelott) reached the opposite conclusion, and made a declaration that Miss Burton was the sole tenant. The council has now appealed to your Lordships' House against that decision.
In order to succeed in her objective Miss Burton must surmount two hurdles. First, the deed of release must be effective in law to vest the tenancy in her alone. This depends on whether the deed falls foul of the non-assignability provision in section 91(1) of the Act of 1985. Assuming Miss Burton succeeds on the first point, she must also establish that Miss Hannawin ceased to be liable for the rent falling due after the deed of release. When the tenancy was granted, Miss Hannawin became jointly and severally liable to pay the rent. The question which arises, and this is the second hurdle, is whether Miss Hannawin continued to be liable for rent after she had parted with all interest in the flat.
Other questions may also arise on the interpretation of the housing benefit regulations. For instance, one issue raised before your Lordships was whether, following execution of the deed of release, Miss Burton was under an obligation to indemnify Miss Hannawin against any continuing liability she might have to pay rent and, if so, whether Miss Hannawin was a person liable to make a payment by way of rent for the purpose of regulation 10. These questions are not before your Lordships' House.
I turn to the statutory scheme concerning secure tenants. As is well known, the Housing Act 1980 introduced security of tenure for tenants of local authorities. The purpose was to give public sector tenants protection similar to that enjoyed by tenants in the private sector under the Rent Acts. The relevant provisions are now contained in Part IV of the Housing Act 1985. Stated shortly, and at the risk of over-simplification, a tenancy under which a dwelling-house is let as a separate dwelling is a secure tenancy at any time when conditions known as the landlord condition and the tenant condition are satisfied. The landlord condition is that the landlord is a local authority. The tenant condition is that the tenant is an individual and occupies the dwelling-house as his only or principal home; or, where the tenancy is a joint tenancy, that each of the joint tenants is an individual and at least one of them occupies the dwelling-house as his only or principal home (section 81). A secure tenancy which is a periodic tenancy cannot be brought to an end by the landlord except by an order of the court, which may be made on specified grounds.
Security of tenure is not confined to the original tenant. In certain circumstances a person may succeed a tenant on the tenant's death. Then the tenancy vests in the successor. A tenant is qualified to succeed in this way if he occupies the property as his only or principal home and he was the tenant's spouse or was another member of the tenant's family and had lived with the tenant for the last twelve months (section 87). Succession can take place only once. The succession provisions do not apply if the tenant was himself a successor.
This scheme would be open to abuse if a tenant were able to deal freely with his tenancy. Sections 91 to 95 are concerned to prevent this mischief and to regulate a tenant's rights in this regard. Some of the provisions in these sections are enabling, some restrictive. Section 91 sets out the primary and most fundamental restriction. Although the statutory scheme is grafted onto tenancies created at common law, an overriding statutory restriction or limitation is that, with certain tightly-drawn exceptions, a secure tenancy is, as a matter of law, incapable of being assigned. Section 91(1) provides:
The exceptions mentioned in subsection (3) are an assignment by way of exchange, with the consent of the landlord; an assignment in pursuance of property adjustment or similar court orders under the matrimonial or children legislation; and an assignment to a person who would be qualified to succeed the tenant if the tenant had died immediately before the assignment. None of the exceptions is applicable in the present case.
The first issue before your Lordships raises a question of interpretation of the phrase 'not capable of being assigned' in section 91(1). Miss Burton's case is that the deed of release was not an assignment. The foundation of her case is that where property is held by joint tenants, each of them has an identical interest in the whole of the property. If one joint tenant wishes to vest the entire interest in the property in the other, the appropriate mode is by way of release, not assignment. As a matter of conveyancing formality the property may now be conveyed by joint tenants to one of themselves, pursuant to the Law of Property Act 1925, section 72(4), but the right of one joint tenant to release his interest to the other is preserved by section 36(2).
I cannot accept the conclusion for which Miss Burton contended. The difference between a release and an assignment is familiar to property lawyers, although less so now than formerly. The difference was important at a time when use of appropriate words of limitation could be crucial. As your Lordships were reminded, the distinction can be traced at least as far back as the days of Coke on Littleton. But this ancient distinction does not provide the answer to the issue before your Lordships' House. The legal concept relied upon for Miss Burton is that a joint tenant, as distinct from a tenant in common, has nothing to transfer to the other tenant, because each already owns the whole. I have to say that this esoteric concept is remote from the realities of life. It should be handled with care, and applied with caution. In the present case the transaction sought to be carried through was that the tenancy should become vested in Miss Burton alone, and that Miss Hannawin should give up to Miss Burton her right to live in the flat. Whatever precise form of words was chosen, this transaction would ordinarily be regarded as a transfer of Miss Hannawin's rights in the flat to Miss Burton. Miss Hannawin was passing over her interest to Miss Burton. As a matter of conveyancing this transfer could be achieved by one of two means: either by a deed of assignment ('Miss Burton and Miss Hannawin hereby assign the tenancy to Miss Burton') or by a deed of release ('Miss Hannawin hereby releases her estate and interest in the property to Miss Burton'). Each would achieve the same result. In each case the legal estate in the tenancy, formerly held by the two of them, would become vested in one of them. It cannot be that section 91(1) bites or not according to which of these two conveyancing modes is used. That would make no sense.
Against this background I approach the matter as follows. The issue before your Lordships is whether the deed of release was effectual to vest the tenancy in Miss Burton alone. More precisely, before the execution of the deed of release the legal estate in the tenancy was held by Miss Burton and Miss Hannawin in trust for themselves as joint tenants: see section 36(1) of the Law of Property Act 1925, as amended. The issue is whether the deed of release was effectual to vest this legal estate in Miss Burton alone. This was the object she sought to achieve. Anything less would not assist her.
Having in mind that this is the issue, I turn to the non-assignability provision in section 91. In the context of a lease, assign normally connotes the transfer of the lease from one person to another. The simplest example is a transfer of a lease from A to B. Another example is a transfer of a lease from A to A and B. The present case is different because the transaction under consideration did not involve the introduction of a new tenant. The present case concerned a transfer of the legal estate from A and B to A alone. What was involved was that one of the existing tenants should cease to be a tenant. This difference is not material. Here also, as a matter of ordinary usage, such a transfer of a lease, changing the identity of the tenants, would be regarded as an assignment. Consistently with this, in Varley v. Coppard (1872) L.R.7 C.P. 505 one of two joint lessees assigned his estate and interest in the leased property to the other lessee. The court (Willes and Keating JJ.) held this was a breach of a covenant not to assign the demised premises. The fact that the assignee was already a tenant was not regarded by anyone as negativing a breach of the covenant against assignment. In that case the joint lessees held the lease as tenants in common, not joint tenants. On the point now under consideration that difference is immaterial. In each case the identity of the lessees is changed.
I can see nothing in the statutory context to indicate that assign in section 91 should be given a more limited meaning and not apply where one joint tenant drops out. If anything, the indications are to the contrary. One of the permitted exceptions is 'an assignment in pursuance of an order made under . . . section 24 of the Matrimonial Causes Act 1973 (property adjustment orders in connection with matrimonial proceedings)': see section 91(3)(b)(i). A common form of property adjustment order provides for the vesting of a joint tenancy of the matrimonial home in one spouse, typically the wife. Section 91(3)(b)(i) envisages that the document carrying the court order into effect would be an assignment within the meaning of section 91. True, the narrower interpretation of 'assign' propounded on behalf of Miss Burton would not deprive this provision of all content. On the narrower interpretation, section 91(3)(b)(i) could still apply in cases where the property was held by one spouse and ordered to be transferred to the other. But I doubt whether the draftsman of this section had this distinction in mind.
As already mentioned, the tenant condition in section 81 is satisfied in the case of a joint tenancy if only one of them occupies the property as his home. I recognise that it is difficult to see how a landlord could be prejudiced if a joint tenant who was not living in the property released his interest to the other joint tenant. However, this does not warrant reading into section 91 a further, unexpressed exception. It is possible to envisage other instances where an assignment might not prejudice the landlord. But, subject to the permitted exceptions, section 91(1) precludes all assignments, not only those which would or might prejudice the landlord.
Accordingly, the deed of release was ineffectual to achieve its object of vesting the tenancy in Miss Burton alone. Although expressed as a release ('Jan Theresa Hannawin hereby releases her legal . . . interest . . . to Susan Patricia Burton'), the object was to transfer the legal estate in the tenancy from the two of them to Miss Burton alone. By reason of section 91(1), that object was incapable of achievement. This is so, whatever form of words was used: release, surrender, transfer, assign, convey, grant. In colloquial terms, this tenancy bore a label 'not transferable.'
Since Miss Burton's case fails on this issue, the second issue does not arise for decision. I would allow this appeal, set aside the order of the Court of Appeal, and restore the order of Mr. Recorder Keane.
I have had the advantage of reading in draft the speech prepared by my noble and learned friend, Lord Nicholls of Birkenhead. For the reasons he has given I would also allow the appeal.
LORD HOBHOUSE OF WOODBOROUGH
I agree that this appeal should be allowed in accordance with the opinion of my noble and learned friend Lord Nicholls of Birkenhead. I will only add a further few words in view of the different opinion to be expressed by my noble and learned friend Lord Millett.
The tenancy with which the present appeal is concerned was a contractual tenancy entered into by three persons, the Borough Council as landlord and Miss Burton and Miss Hannawin as joint tenants. The contract was contained in or evidenced by the document which they signed and the 'Tenancy Conditions' to which it referred. The Conditions, in their turn, referred to the Housing Act 1985. The obligation of Miss Hannawin to pay rent to the Council was contractual. Each of the joint tenants were stated to be "jointly and individually liable to pay the charges and for all the obligations under the tenancy". Under clause C.1, tenants had an express obligation to pay the weekly rent and other charges regularly and promptly in advance. Under clause C.3, tenants were expressly required to use the premises as their only or principal home and not to part with the possession of the whole of the premises. There was also a contractual prohibition of assigning the tenancy expressed in similar terms to section 91 of the Act.
The Conditions provided that the tenants should have security of tenure in accordance with the Act and that the Council could not take possession of the premises save by getting an order under the Act or accepting a surrender of the tenancy by the tenant. Miss Burton and Miss Hannawin expressly agreed to accept these Conditions of Tenancy.
The contention of the Respondent is that, by means of the deed of release which they executed, she and Miss Hannawin have successfully brought to an end all Miss Hannawin's rights and obligations under the lease, including, specifically, her obligation to continue to pay the contractual rent, and that they have achieved this without having obtained the concurrence of the landlord and without terminating the tenancy of the premises.
Lord Nicholls has already discussed the statutory difficulties involved in accepting this submission. There are also fundamental contractual objections to the submission. Miss Hannawin accepted a joint and several contractual obligation to pay the rent. She cannot escape from this obligation (or any of her other obligations under the contract) by an act to which the Council, the landlord, is not a party and to which it has not assented. The contract (and the general law of landlord and tenant) permits Miss Hannawin to terminate her obligations and her liability to pay the rent by serving a notice to quit (or its equivalent) on the landlord. Such a notice will terminate the joint tenancy. (Hammersmith and Fulham London Borough Council v. Monk  1 A.C. 478)
A release by Miss Hannawin of her interest in the joint tenancy to Miss Burton has a different character: the deed was bilateral solely between Miss Burton and Miss Hannawin. The Council was not a party to the deed; it was unaware of its execution and never consented to it. Unless the contract can be construed so as to permit Miss Hannawin to terminate her contractual obligation by such means and without serving a notice to quit, such an act is contractually ineffective to limit the rights of the Council under its contract with her. For the sake of completeness it should be mentioned that if the deed of release was ineffective as between the Council and Miss Hannawin to terminate Miss Hannawin's contractual obligations to the Council it was likewise ineffective without more to deprive her of her contractual rights against the Council.
The arguments against construing the contract so as to permit a unilateral derogation are even stronger than those arising from the statute. The Respondent's submission involves an inference or implication which is contrary to the plain words of the contract. It is contrary to the surrounding circumstances in which the contract was entered into. The flat was suitable for occupation by two people and the contemplation (and agreement) was that it would be normally be occupied by both Miss Burton and Miss Hannawin. The rent payable to the Council was secured by the joint and several undertaking of both of them. Further, the construction contended for by the Respondent is not supported by the statute.
The opinion of Lord Millett which I have read in draft deploys the undoubted distinctions between a release by one joint tenant to another and an assignment. It is fundamental that there is only one tenancy. The distinctions have persuasive weight in relation to the breadth to be given to the prohibition in section 91 of the Act but not in relation to the contractual question. Similarly, section 81 is persuasive in relation to the recognition by the Act that one of the joint tenants may not in fact be occupying the premises as his or her home but does not detract from the contractual undertaking by both joint tenants, jointly and severally, to pay the rent so long as the tenancy should subsist; indeed, it could be thought to add force to the need for that undertaking.
I have joined your Lordships in allowing this appeal on what you have described as the first issue - the construction of the statute - but in my opinion the ultimately critical question in relation to the continuing liability of Miss Hannawin for the rent is the contract. The contract permitted Miss Hannawin to terminate her contractual liability to the Council for rent by terminating the tenancy. It did not permit her to do so by entering into some agreement or transaction with Miss Burton alone and specifically preserving the tenancy.
The word "assignment" is not a term of art. It denotes any conveyance, transfer, assurance or other disposition of property from one party to another. The essence of an assignment is that it operates to transfer its subject-matter from the ownership of the assignor to that of the assignee. A lease is not an assignment, because it does not transfer any pre-existing property from the lessor to the lessee, but creates a new interest and vests it for the first time in the lessee. A purported assignment of the interest of one joint tenant to the other joint tenant does not constitute an assignment, because each of the joint tenants is already the owner of the whole. The so-called assignor has no separate interest of his own which is capable of being transferred to the other and which the other does not already own. None of this, of course, applies to a tenant in common, because he has a separate and distinct interest of his own which he can assign either to a third party or to his co-owner.
Before 1926, therefore, one joint tenant could not assign his interest to the other. But he could achieve much the same result by releasing his interest. The release operated to extinguish his interest and not to assign it. The difference, though technical, was not a formality. Since a release did not operate by way of assignment or conveyance, it required no words of limitation. Moreover, where there were three or more tenants, a release by one joint tenant did not destroy the unity of title of the others and so sever their interests, for they did not acquire any interest by the release which they did not already own.
No particular form of words was required for a release. Even if it was drafted as an assignment, it still took effect as a release. The difference was one of substance not form; it was not merely a matter of language. The ability of one joint tenant to release his interest to the other has been preserved by section 36(2) of the Law of Property Act 1925. It is still not possible for one joint tenant to assign his interest to the other. Since 1925, however, the two joint tenants in whom the legal estate is vested have been able to join together to convey the estate to one of them. This was not possible before 1926 because the same person could not be both assignee and one of the assignors. Section 74(2) of the Act of 1925 has removed this difficulty.
The subject-matter of the Deed of Release in the present case is expressed to be Miss Hannawin's "legal and beneficial interest" in the secure tenancy, not the secure tenancy itself which of course did not belong to her. The deed was executed by both parties, but Miss Burton executed it only to signify her acceptance. Miss Hannawin was the sole grantor. The wording of the document follows the traditional form of release found in the precedent books. It is beyond argument that it took effect as a release of Miss Hannawin's interest. It cannot have taken effect by way of assignment of the tenancy itself. This would have required Miss Burton to join in the deed as assignor.
A covenant against assignment in a lease is strictly construed. It does not prohibit subletting or parting with possession. A covenant against subletting the demised premises does not prohibit a subletting of part. A covenant against assignment of the tenancy does not prohibit an assignment of the lessee's beneficial interest in the tenancy. A fortiori a covenant against assignment does not prohibit the release of the interest of one of two joint lessees. Such a transaction is not only not within the words of the covenant; it is not within the mischief which the covenant is designed to avoid. It does not foist a new and possibly unacceptable tenant upon the landlord without his consent. He has already accepted both joint lessees as his tenants, and has done so in the knowledge that (unless there is a severance) on the death of one of them the lease will devolve in its entirety on the other. By granting a lease to two or more joint lessees in the knowledge that their number must eventually reduce to one, the lessor has already signified his consent to any or either of them becoming his sole lessee.