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|Judgments - Regina v. Secretary of State for the Environment, Transport and the Regions and Another, Ex Parte Spath Holme Limited On 7 December 2000
HOUSE OF LORDS
Lord Bingham Of Cornhill Lord Nicholls of Birkenhead Lord Cooke of of Thorndon Lord Hope of Craighead Lord Hutton
OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT
IN THE CAUSE
SECRETARY OF STATE FOR THE ENVIRONMENT, TRANSPORT AND THE REGIONS AND ANOTHER
EX PARTE SPATH HOLME LIMITED
ON 7 DECEMBER 2000
LORD BINGHAM OF CORNHILL
On 11 and 8 January 1999 the Secretary of State for the Environment, Transport and the Regions and the Secretary of State for Wales (to whom I shall together refer as "the ministers") made The Rent Acts (Maximum Fair Rent) Order 1999 (S.I. 6/1999) ("the Order"), which applied to England and Wales. They did so in the exercise of powers expressed to be conferred on them by section 31 of the Landlord and Tenant Act 1985. Spath Holme Limited, a landlord, sought to challenge the Order, contending (among other things) that section 31 of the 1985 Act did not give the ministers power to make it. Permission to apply for judicial review was refused by the single judge, but granted by the Court of Appeal which, at a further hearing, accepted Spath Holme's contention and quashed the Order. The main question in this appeal to the House is whether the Court of Appeal was right to hold that section 31 gave the ministers no power to make the Order.
In paragraphs 3 - 13 of its judgment () 3 WLR 141) the Court of Appeal has helpfully summarised the facts in clear and uncontentious terms. A further account of the statutory history and certain decisions of the courts is given by the Court of Appeal in Curtis v. London Rent Assessment Committee  QB 92. I give here a brief account of the context in which the present problem arises.
During the last century England and Wales suffered from a persistent shortage of housing. The demand, in particular for private rented accommodation, was greater than the supply. This enabled some private landlords to exploit the scarcity of what they had to let by exacting exorbitant rents and letting on terms disadvantageous to the tenant. A series of statutes, beginning in 1915, sought to address this problem, by controlling the rents which could be charged and affording security of tenure to tenants. This control, beneficial though it was in many ways, tended by its very effectiveness to exacerbate the problem: the financial return to the landlord was at times so modest that there was very little incentive to let accommodation to private tenants, with the result that the supply of accommodation available for private letting tended to shrink. Thus statutes were passed with the object of giving landlords a return sufficient to induce them to make accommodation available.
The Rent Act 1965 was intended to revitalise the market in privately rented accommodation by introducing a new regime of what were called fair rents. These provisions were consolidated in the Rent Act 1968, extended in the Rent Act 1974 and consolidated in the Rent Act 1977, which remains in force. Section 70 of that Act governs the assessment of fair rents, which are to be open market rents adjusted to discount for scarcity and to disregard certain matters specified in section 70(3). While the statute does not in terms refer to open market rents, that has been held by the Court of Appeal to be the proper starting point in the process of assessing and registering a fair rent under the 1977 Act: see Spath Holme Ltd. v. Chairman of the Greater Manchester and Lancashire Rent Assessment Committee (1995) 28 HLR 107; Curtis v. London Rent Assessment Committee, above.
In giving effect to this statutory regime, rent officers and rent assessment committees faced the practical difficulty that there was no open market in unregulated privately-rented property with which comparison could be made. The years following 1965 were also years of very high inflation. The result was that rents set by rent officers and rent assessment committees did not keep up with inflation, to the benefit of tenants but to the obvious disadvantage of landlords. So the problem which Parliament had sought to address in 1965 once more became acute, and the market in privately-rented accommodation declined. By the Housing Act 1988 it was again sought to stimulate a free market in such accommodation by providing for assured and assured shorthold tenancies, which (subject to a limited safeguard for some tenants) provided for rents to be negotiated and agreed between landlord and tenant. Regulated tenancies under the Rent Act 1977 continued to exist, but no new regulated tenancies were to come into existence.
The 1988 Act had its desired effect of tempting private landlords back into the market. But it also had another effect, important for present purposes, of giving rise to rents negotiated between landlord and tenant in the market. Whereas rent officers and rent assessment committees had previously relied on other registered fair rents as the basis of comparison when setting new fair rents, there was now available a range of comparators, drawn from the market, on which they could rely (subject to making the adjustments required by statute) instead of the less factual basis of previously registered fair rents. In most areas, rent officers and rent assessment committees took advantage of this new basis of comparison in undertaking their statutory task, but in some areas (notably London and the North West) they were reluctant to do so. In these areas the gap between registered fair rents and open market rents increased, to the point where the former were at a level about half the latter, even in the absence of scarcity. In the two judgments already mentioned the Court of Appeal clearly laid down the correct approach to the assessing of fair rents, and at last even the rent officers and rent assessment committees who had previously been reluctant to do so gave effect to the basis of assessment prescribed by the 1977 Act. This had the unfortunate side-effect that tenants whose rents had previously been registered at levels well below the adjusted open market level at which they should have been set suffered very sharp and unexpected increases in the rent payable.
The Minister for London and Construction made a statement on this subject in the House of Commons in January 1998, expressing the government's concern about the disproportionate increases which some regulated tenants had suffered, and a consultation paper was issued in May 1998 outlining the options which had been identified and the action which the government provisionally favoured. The options were: to do nothing and allow rent officers to continue to set fair rents in accordance with section 70 of the 1977 Act; to provide for a phasing of the rent increases over a period of 2 to 3 years; or to apply a maximum limit linked to the retail price index to increases in rents which had already been registered, but excluding lettings where a substantial increase in rent was attributable to repairs or improvements carried out by the landlord. The consultation paper made plain the government's provisional preference for the third of these options, which would be given effect by exercising the reserve power in section 31 of the Landlord and Tenant Act 1985.
Not surprisingly, tenants and tenants' associations supported the third option, while seeking a maximum percentage increase smaller than the government had proposed. Landlords and their associations favoured the first, or failing that the second, option. They opposed the third. This was understandable: since the cap was not to apply to rents registered for the first time, the third option if adopted would have the consequence that landlords who had previously been receiving a registered rent lower than it should have been if the rent had been assessed on the correct basis, and who had thereby been subsidising their tenants, were liable to suffer further loss through denial of the full increase to which adoption of the correct, adjusted market value, basis of assessment would have entitled them.
Following public consultation, the government adopted the third option, subject to a reduction in the maximum percentage increase as sought by tenants. The Order was accordingly made by the ministers, "in exercise of the powers conferred upon them" by section 31 of the 1985 Act. It contained a formula set out in article 2 of the Order, the effect of which is best summarised. On the first application for registration after the Order had come into effect, the permitted increase in a registered fair rent would be five per cent, if the retail price index had increased by five per cent over the two year period since the last registration, plus 7.5 per cent. Thereafter any subsequent increase over a two-year period would be five per cent plus the difference in the retail price index. The Order would only apply where there was an existing registered rent when the Order came into effect, and it would not apply where, because of repairs or improvements carried out by the landlord, the fair rent exceeded by at least fifteen per cent the previous registered rent. Article 3 of the Order and the Schedule provided that The Rent Act 1977 should be modified by inserting a new paragraph into Schedule 11 of the 1977 Act. That is the Schedule which governs applications for the assessment and registration of fair rents by rent officers and rent assessment committees. The new paragraph provides:
Section 31 of the 1985 Act, relied on as the source of power to make the Order, is headed "Miscellaneous" and has a sidenote "Reserve power to limit rents". The section reads:
The main issue
At issue in this appeal is the scope of the order-making power conferred by section 31: to what (if any) limits is that power subject?
Mr. Bonney QC for Spath Holme rightly reminded us that no statute confers an unfettered discretion on any minister. Such a discretion must be exercised so as to promote and not to defeat or frustrate the object of the legislation in question. Counsel relied on Padfield v. Minister of Agriculture, Fisheries and Food  AC 997 at 1030 where Lord Reid said:
Counsel also referred us to the endorsement by Lord Bridge of Harwich, with the concurrence of the other members of the committee, of a passage under the heading "No unfettered discretion in public law" in Professor Sir William Wade's Administrative Law (5th ed., 1982) pages 355-356 in Reg. v. Tower Hamlets London Borough Council, Ex parte Chetnik Developments Ltd.  AC 858 at 872; to observations of Lord Bridge in Reg. v. Secretary of State for the Environment, Ex parte Hammersmith and Fulham London Borough Council  1 AC 521 at 597; and to the opinion of Lord Ackner in Reg. v. Secretary of State for the Home Department, Ex parte Brind  1 AC 696 at 761. The soundness of these principles is not in doubt. The object is to ascertain the statutory purpose or object which the draftsman had in mind when conferring on ministers the powers set out in section 31.
The starting point must be section 31 of the 1985 Act, quoted above. The 1985 Act consolidated provisions of the law of landlord and tenant formerly found in the Housing Acts and the Landlord and Tenant Act 1962, with amendments to give effect to recommendations of the Law Commission. It contained a series to provisions giving tenants the right to be told the identity and address of their landlord and the identity and address of the directors of a corporate landlord, imposing on landlords a duty to give notice to tenants of an assignment, requiring the provision of rent books for certain tenants and prescribing particulars to be contained in rent books, creating offences for breach of some of these provisions by landlords, implying terms in some lettings that premises should be fit for human habitation, extending the implied term of fitness to certain agricultural occupancies, implying covenants by the landlord to repair in certain specified lettings and regulating the service charges recoverable by landlords. Section 31 was followed by a section which, in subsection (3), provided:
There followed statutory definitions and formal provisions. All the provisions of the Act were directed to the relationship which exists between landlords and tenants, and all were intended to strengthen the rights of the tenant and protect the tenant against various forms of potential disadvantage or exploitation. But, because the Act covered a number of aspects of the landlord-tenant relationship, one cannot discern any very specific unifying scheme in the legislation. I do not find, studying the language of section 31, that it is in any way ambiguous or obscure, or such as to lead to absurdity if given its full apparent effect. But Mr. Bonney is correct in his submission that the language is, on its face, very broad. It applies to lettings of dwellings of every kind, no matter who is the landlord or what the nature of the tenancy (subject only to the exception in section 32(3)); it places no limit on the restrictions which the minister may impose on rental payments; it provides only for annulment on negative resolution; and it gives no indication of the circumstances in which Parliament contemplated that the order-making power should be exercisable. One learns only, from the sidenote and the reference in section 32(3), that this is a reserve power, which indicates that it is not a power to be exercised very readily or routinely.
Mr. Bonney submitted that, faced with language of this breadth, the courts should apply certain presumptions. The first of these is that, since Parliament does not lightly delegate to the executive the power to amend primary legislation, such a provision should be narrowly and strictly construed and any doubt resolved in favour of the narrower rather than the broader interpretation. He placed reliance on McKiernon v. Secretary of State for Social Security (Court of Appeal, unreported, 26 October 1989, CAT No.1017) where Lord Donaldson of Lymington MR said (at page 10B of the transcript):
This principle was endorsed by this House in Reg. v. Secretary of State for Social Security, Ex parte Britnell  1 WLR 198 at 204. Recognition of Parliament's primary law-making role in my view requires such an approach. But it is an approach which is only appropriate where there is a genuine doubt about the effect of the statutory provision in question. Here, the language used seems on its face to leave little room for doubt about the scope of the power in section 31(2).
The second presumption relied on is that Parliament does not intend to take away or prevent the exercise of any property right without compensation unless clear and unambiguous words are used. Counsel for Spath Holme relied on Westminster Bank Ltd. v. Minister of Housing and Local Government  AC 508 at 529, where Lord Reid accepted that if there was any reasonable doubt the subject should be given the benefit of it. This presumption (it was submitted) was fortified by the presumption that Parliament would intend to legislate in conformity with the European Convention on Human Rights, and in particular Article 1 of the First Protocol:
Counsel submitted that section 31 left the imposition of any restriction so completely to the discretion of the minister that the conditions for exercise of the power were not "provided for by law". In support of this submission he referred the House to Sunday Times v. United Kingdom (1979) 2 EHRR 245 at 270-273; Silver v. United Kingdom (1983) 5 EHRR 347 at 371-3; and Malone v. United Kingdom (1984) 7 EHRR 14 at 39-41. I have no doubt that clear and unambiguous words should be used if the citizen is to be deprived of his property without compensation and any reasonable doubt should be resolved in his favour. But a power to restrict or prevent increases of rent which would otherwise take place or restrict the amount of rent which would otherwise be payable on a new letting must of necessity deprive the landlord of rent which he would, but for the minister's order, receive. The words used are capable of no other construction. As to the European Convention, Mr. Kenneth Parker QC for the ministers pointed out that the presumption in question is a weak one: see Lester and Pannick, Human Rights Law and Practice (Butterworths 1999), paragraph 4 .19.14; Clayton and Tomlinson, The Law of Human Rights (Oxford, 2000) at paragraph 18.73. Any measure restricting rents, or prices or charges of any kind, must have the effect of depriving the recipient of what he would otherwise receive, but the European Court of Human Rights has respected the need for national authorities to strike a balance between the rights of individuals and the general interest of the community. This would appear to be such an instance. As for the requirement that the condition of any restriction be provided for by law, it seems clear that one must look not at the empowering condition, which until exercised has no effect on the rights of the citizen, but at the terms of any order made under it. In this case Spath Holme's complaint is not so much that the terms of the Order are unclear as that they are all too clear.
Mr. Bonney relied on other features of section 31 as showing that the section could not be understood to give a general power to ministers to restrict rents so as to protect tenants against perceived hardship. He pointed out that the Prices and Incomes Act 1968, the Rent (Control of Increases) Act 1969, the Housing Act of 1969, the Housing Rents and Subsidies Act 1975 ("the 1975 Act") in section 7, and the Rent Act 1977 (in section 55 and Schedule 8) had made provision for the phasing of rent increases over a period in certain cases, and this was the recognised statutory means of addressing tenant hardship. He contrasted the rule - making power in section 74, which provided for approval by affirmative resolution although dealing with procedure only, with the power in section 31 which on the ministers' construction contained much more far-reaching powers but was only subject to annulment by negative resolution. He described the provisions of Schedule 11 to the 1977 Act as "entrenched" and suggested that Parliament could not have intended to empower a minister to modify this carefully defined regime. These considerations, among others, led the Court of Appeal to consider that the effect of section 31 was unclear, and are considered further below. But the phasing provisions only applied to certain classes of tenancy, and in any event deferred the rent increase without restricting it; plainly Parliament considered that an additional power was necessary. The contrast between the procedure in sections 31(4) and 74 could be explained by apprehension that exercise of the reserve power in section 31 might call for urgent action. Whether Schedule 11 to the 1977 Act was "entrenched" in the sense that it could not be modified by ministerial order is considered below.
While I am not persuaded by Mr. Bonney that section 31 is ambiguous or unclear, or that it should receive any construction not based on what appears to be its clear meaning, I am left with a sense of unease springing from the lack of a specific purpose unifying the provisions of the 1985 Act and the difficulty of placing it in context and understanding why, in 1985, Parliament chose to legislate in the terms of section 31 even as part of a statutory consolidation. The question thus arises whether the courts are entitled to trace section 31 back to its original source in search of a clearer indication of the draftsman's intention and the factual context in which the provision was originally enacted. Mr. Parker pressed for a negative answer to this question. He relied on the speech of Lord Simon of Glaisdale (on behalf of Lord Diplock and himself) in Maunsell v. Olins  AC 373 at 392 where he said: