We’ve just heard that permission to appeal to the Supreme Court in Central Beds v Taylor has been refused. Our note of the Court of Appeal case is here. This was surely a chance for the Supreme Court to revisit Kay and Doherty in the light of the Connors and after ECtHR decisions, aka the great quarter pounder v Royale with cheese issue. Lords Walker, Mance and Collins held that:

“the application did not raise an arguable point of law of general public importance which ought to be considered by the Supreme Court at this time.”

One now wonders how the application for permission in Manchester CC v Pinnock will fare? (our note on Pinnock here) Particularly as a host of Court of Appeal (and possibly County Court) cases are stayed pending Pinnock.

“the application did not raise an arguable point of law of general public importance which ought to be considered by the Supreme Court at this time.”

Now, where to put the emphasis in that sentence? For me, I’d have thought that the ‘general public importance’ was a given, so the weight is on no ‘arguable point of law’.

With thanks to the November Legal Action housing updates. This was a tenancy deposit and 3 x deposit penalty claim. The rent was £1,950 a month. The tenancy agreement also stated ‘Payment required in advance of £4,200′. The invoice from the landlords agents said that of this, £2,250 was ‘a deposit’.

At the end of the tenancy, the deposit was requested by the tenant, but not returned. There was also no trace that the deposit had been protected in one of the schemes. The tenant brought a claim for deposit and the penalty. After the issue of proceedings, but before the hearing, the deposit was put into one of the schemes and details provided to the tenant.

DJ Burn ordered return of the deposit and the 3 x penalty. The DJ stated:

The purpose of the Act is to try to ensure that landlords secure tenancy deposits in a recognised deposit scheme at the start of the tenancy, so that the deposit can be returned to tenants quickly when the tenancy ends, and that disputes about the deposit can be resolved under the schemes’ procedures without the need for court proceedings.

Landlords who describe a deposit as something else, who do not secure it promptly in a deposit scheme as required by the Act, then fail to return the deposit when the tenant leaves (especially if this is without good cause, thereby forcing the tenant to start court proceedings to recover the money) but who then at the last minute after the tenant issues proceedings, pay the deposit into a scheme, are clearly flouting the spirit of the legislation and, on my interpretation, the letter also.

If the s213 and s214 remedies are not applied in a case such as the instant one, the Act would be rendered virtually toothless when landlords flout its provisions.

We are, of course, still in the land of the County Court lottery on the late compliance issue. None of these cases are binding on other courts. Harvey v Bamforth went one way and other cases, including this one, have gone the other. There does seem to be a distinct view on the spirit and purpose of the legislation emerging, through which the, to put it charitably, ambiguities of the Housing Act 2004 are viewed. But until we have a higher court judgment on the issue, there is no certainty.

[For all tenancy deposit case posts click here]

We’ll try and get a link to the order ASAP.

In the meantime, our post on Weaver in the Court of Appeal is here.

One of the slight frustrations of being an aspiring academic is that you tend to think in bite-size terms as and when the tutorial cycle demands.  We’ve just “done” the now familiar peaks and troughs of the “new model” constructive trust and proprietary estoppel.  When re-reading Thorner v Major (links to our post) and Yeoman’s Row v Cobbe (again, links to our post) for that purpose, a rather important side-issue emerges about whether proprietary estoppel can be used to “get around” section 2, LP(MP)A 1989.  Section 2, it will be remembered, requires that contracts for the sale or disposition of an interest in land require to be made in writing, signed by or on behalf of all parties, and incorporate all the terms.  Implied, resulting and constructive trusts are explicitly excluded from the formalities requirements (as with section 53(2), LPA).  NL’s post below deals with the interesting other issue about section 2 in relation to collateral contracts.

The Cases: A brief summary

The question about whether proprietary estoppel can be used to get round section 2 was first raised in the Court of Appeal in Yaxley v Gotts [2000] Ch 162.  There it was argued, drawing on Halsbury’s Laws (vol 16, para 962, 4th edn reissue), that: “‘The doctrine of estoppel may not be invoked to render valid a transaction which the legislature has, on grounds of general public policy, enacted ais to be invalid …”.  Different rationales were provided by the CA in Yaxley, – Beldam LJ, who chaired the Law Commission at the time at which the LP(MP)A was being recommended and therefore should know what he was talking about, made the important point that Halsbury’s needs to be read in the context of the nature of the enactment, the purpose of the provision and the social policy behind it; he says, in accord with the Law Commission report, that proprietary estoppel is not caught by section 2.  Walker LJ (as he then was) got around the issue by saying that the facts in Yaxley would have established a constructive trust anyway.  Clarke LJ occupied the rather awkward space between Beldam and Walker LJJ.

Now to Yeoman’s Row.  Lord Scott , at para 29, obiter (because Mr Cobbe fails in his claim anyway), says as follows:

My present view, however, is that proprietary estoppel cannot be prayed in aid in order to render enforceable an agreement that statute has declared to be void. The proposition that an owner of land can be estopped from asserting that an agreement is void for want of compliance with the requirements of section 2 is, in my opinion, unacceptable. The assertion is no more than the statute provides. Equity can surely not contradict the statute.

Lord Walker is careful to avoid saying anything. Lords Hoffmann and Mance explicitly only agree with Lord Scott; and Lord Mance unhelpfully on this point agrees with both Lords Scott and Walker.

Now to Thorner, where you would have thought that the issue must have arisen because the right by proprietary estoppel was granted (we could, of course, argue the toss about whether the HL was right in doing so).  Yet, it is not until para 99 (Lord Neuberger) that we find out that the respondents “… rightly, in my view, eschewed any argument based on section 2″.  Why was that “right”?  Well, Lord Neuberger, who didn’t sit in Cobbe, says:

Section 2 may have presented Mr Cobbe with a problem, as he was seeking to invoke an estoppel to protect a right which was, in a sense, contractual in nature (see the passage quoted at the end of para 96 above), and section 2 lays down formalities which are required for a valid “agreement” relating to land. However, at least as at present advised, I do not consider that section 2 has any impact on a claim such as the present, which is a straightforward estoppel claim without any contractual connection.

So that’s obiter as well. I could be wrong about this (my students have all complained about the length of the case!) but I don’t think that the other Lords actually address the question.

So, how can we make sense of this issue (which must surely reappear before the higher courts before too long)?

The Options

There seem to me to be three options, which we might refer to as: (a) the Yaxley solution; (b) the Thorner solution; and (c) a possible alternative. This is where ivory tower theory meets practical reality because each of these solutions, albeit plausible, potentially lead to different outcomes in different cases. I have to say that I benefited today from discussing this with a professor who knows a few things about property law and it’s always good for aspirationals to be seen to discuss “interesting” matters with professors.

(a) The Yaxley solution
This is to acknowledge that where CT and proprietary estoppel overlap we should not be overly rigourous in our analysis, because the CT is a recognised exception to section 2. Indeed, the strong version of this argument is that proprietary estoppel is a species of CT (see Re Basham). Now quite apart from the issue that they don’t always overlap because (in theory at least) the CT is based on a common intention as regards the acquisition of the land, whereas proprietary estoppel can arise at that point or at any time thereafter – if you think in venn diagrams, it’s the fried egg one with CT as the yolk and proprietary estoppel as the rest – there is also the issue that they are basically not the same doctrine. The Yaxley assimilation line (which goes back to Re Basham and Grant v Edwards [1986] Ch 638 and Rosset [1991] 1 AC 107) just doesn’t wash conceptually any more, and particularly not after Lord Walker’s disavowal of the analogy between them in Thorner (which, as a footnote, is rather odd, because he is the common link between all three cases).
(b) The Thorner solution
This is the Lord Neuberger solution and it’s rather neat, if under-theorised (or what counts for theory in doctrinal law, he says sniffily). This must, it seems to me, to be based on the desire in section 2 to get rid of the doctrine of part performance. So things which look like contracts, but which don’t meet the formalities, are void. Cobbe was just such a case; another is United Bank of Kuwait v Sahib [1997] Ch 107 (attempted equitable mortgage by deposit void). On the other hand, non-contractual cases like Thorner are ok because there is no “contract for the sale or disposition of an interest in land”. Now this is all very well, but what about cases like Taylors Fashions [1982] QB 133 (option to purchase extension to lease, unprotected Class C(iv) land charge, bound purchaser through estoppel – that’s off the top of my head, but I think it’s right) and, indeed, yaxley itself – would they survive section 2?
(c) A possible alternative
This is my proposal (well, I say it’s mine, but it’s kind of derived from a paper published in 1993 by Patricia Ferguson, strangely never heard of again, in the LQR) and again it is doctrinal “theory”. The point here is to recognise something which is commonly forgotten about the difference between CT and proprietary estoppel. Whereas with CT, the equitable interest arises when the detriment occurs, with proprietary estoppel, the key point is that the equity does not arise until the judge declares the estoppel to have arisen, phoenix-like, from the facts. To put this another way, whereas a CT gives an equitable interest from the date of the detriment, the proprietary estoppel is a “mere equity” until the remedy is granted. This is significant because the remedy might not be property based, but the payment of cash for example, or indeed, the remedy might be extinguished by the time the case is heard (and remember that, whatever view you take about the quantification of the beneficial interest under a CT, it is a lot clearer than the mess we’ve been left by Thorner). If it is a mere equity, then section 2 arguably does not come into play at all in any of the proprietary estoppel cases (whether contractually based or otherwise; and s 116, LRA 2002 would not be relevant to this discussion either), we don’t need to find difficult distinctions between near-contract cases and the others.

I suspect there are other possible solutions and would be interested to hear them.

Continuing the Norwegian theme we appear to have adopted for such cases, here we have a example of an ex-sale and rent back agreement, void and gone to join the choir eternal. It is an interesting County Court case on collateral agreements to sale of property. And it is something of a synecdoche for the past decade.

Miss Scowther owned a property in Morpeth, purchased under the right to buy in January 2003. In September 2006, she contacted Watermill, who set themselves as out providing a form of sale and rent back scheme aimed at those who wanted to stay in the property for the next 10 years or more.

Watermill proposed an agreement under which the property was valued at £125,000. Miss Scowther would receive 75% of that, less the redeemed charges on the property. She would be given a six month assured shorthold tenancy at a monthly rent of £593. If she did not leave the property for 10 years or be made to leave due to breach of tenancy in that time, she would then receive a payment of a further 15% of the sale price, styled a ‘bonus’. At the trial there was some dispute over what Miss Scowther understood of this including the nature of the tenancy and the effect of breach of tenancy. the court found it had been explained to her by Watermill, but she had not had made clear to her the effect of being evicted for rent arrears within the 10 years.

The precise terms of this agreement were not set out in a single document. instead bits of it were strewn across a variety of sources:
oral discussions between the vendor and the purchaser’s representative, a client quotation form signed by the vendor, a letter sent to the vendor and a document entitled “Frequently Asked Questions” sent to the vendor during the course of negotiations.

The FAQ did not actually mention that the ‘bonus’ would be forfeit if she had rent arrears, or was evicted for this reason.

The sale progressed, although in January 2007, the main mortgagee, G E Money, obtained a possession order for mortgage arrears and Waternill themselves obtained a £2,033 charge for money loaned to Miss Scrowther. At the date of sale in February 2007, once all charges were redeemed, Miss Scowther received £7,413 and the 25% of the sale price, £31,250, was paid to Watermill. Miss Scrowther was given a 6 month AST for rent of £593 per month.

Miss S shortly accrued rent arrears and proceedings were begun by Waterill. In September 2007, a possession order was made, plus arrears of £1,781.25, mesne profits and costs. Possession was given in November 2007. After carrying out some £5K of works, the property was re-let by Watermill at £525 per month

Miss S brought proceedings for the repayment of the £31,250, aided pro bono by Matthew West.

Watermill argued that there was a valid collateral agreement to the sale in terms:

that the Claimant pays back to the Defendant from the sale the sum of £31,250 (25% purchase price), in consideration of which:

1. The Defendant enters into the contract for sale;

2. The Claimant is not required to give vacant possession which the Defendant would otherwise be entitled to under the contract for sale. She remains in her own home as desired and avoids the cost of relocation;

3. The Defendant enters into the tenancy agreement and assumes all responsibilities as landlord, including mortgage payments, buildings insurance payments and maintenance of the Property;

4. The sum of £18,750 (15% purchase price) to be repaid to the Claimant on vacation of the Property following the completion of 10 years of satisfactory tenancy, or where the Defendant terminates the tenancy without breach by the Claimant (”the Rentback Bonus”).

On this, the court rather tersely observed that the sale was a sale at market value. “No doubt it would have been possible to devise a scheme with the purchase price being 75% of market value but that was not this scheme”. Further, while it is true that Miss Scrowther was not required to give up possession her status of occupation changed significantly. She became a tenant under the assured shorthold tenancy with no security of tenure at an above market rent (see below).

However under the tests set out by Arden J in Hanoman v Southwark L B C [2008] AER(D) 146 [para 47] (our note here), there was a collateral contract in this case, “The terms of the collateral contract can be gleaned from the documents signed by Miss Scrowther, the letter sent by Mr Botsford on 3rd October 2006 and the FAQs and the fact that Miss Scrowther signed the authority and paid over the £31,250 to Watermill on completion”. There was no mistake on Miss Scrowther’s part and she had had the benefit of legal advice (although see below).

On Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, s.2 provides:

(1) A contract for the sale or other disposition of an interest in land can only be made in writing and only by incorporating all the terms which the parties have expressly agreed in one document or, where contracts are exchanged, in each.
(2) The terms may be incorporated in a document either by being set out in it or by reference to some other document.
(3) The document incorporating the terms or, where contracts are exchanged, one of the documents incorporating them (but not necessarily the same one) must be signed by or on behalf of each party to the contract.
(4) Where a contract for the sale or other disposition of an interest in land satisfies the conditions of this section by reason only of the rectification of one or more documents in pursuance of an order of a court, the contract shall come into being, or be deemed to have come into being, at such time as may be specified in the order.

Miss S argued that if the collateral contract contradicted any of the terms of the contract for sale it would be invalidated by section 2., as per Business Environment Bow Lane Ltd v Deanwater Estates Ltd [2007] LT & R 389. Although Hanoman allowed a valid collateral contract not avoided by s.2 LPA, even though it was not included or refered to in the contract for sale, Hanoman could be distinguished here. In Hanoman, the collateral contract did not require rectification of the lease, nor was it an agreement as to the terms on which the lease was granted. Here:

In reality Miss Scrowther is paying £31,250 for the privilege of selling the property at the contractual price of £125,000 with the possibility of recovering £18,750 after 10 years. In effect the purchase price is at best £112,500 (£125,000 – £12,500) and probably £93,750 (£125,000 – £31,250). These features are inconsistent with the price stated in the contract for the sale of the property and thus, he submits, the collateral contract is void under section 2.

In response, Watermill argued that

The agreements should as far as possible be construed so as to respect the autonomy of the parties. The collateral contract is not an agreement as to the terms of the contract for sale or as to the terms of the tenancy agreement – it runs parallel with them both. Second she submitted that the effect of section 2 if it were to apply would be to render the entire set of agreements void.

Held:
i)The payment of £31,250 is, in effect, a reduction of the price and inconsistent with the contract for sale. It does not run in parallel with it. The collateral contract is within section 2 and void.
ii) Section 2 affects only the collateral contract and not the contract for sale or the assured shorthold tenancy.

It was unnecessary to consider the Unfair Terms in Consumer Contracts Regulations, but if it had been, the term relating to the Rentback Bonus, limiting it to 15%, rather than the full 25% would have been unfair on the facts.

Watermill to pay the £31,250. But ordered that “Miss Scrowther is impecunious. There is accordingly a real risk that if the appeal succeeds that any sums paid to Miss Scrowther would not be repaid. In those circumstances I would provisionally also grant Watermill a stay of execution pending appeal.”

This is an interesting result and we’ll keep our ears open for an appeal.

It is also something of a synecdochical morality play for the Noughties, of course, or perhaps a series of Hogarth paintings in modern dress. The ‘impecunious’ Miss S working her way through windfall assets and seeking a quick fix. Watermill setting up an agreement that gave them at the very worst, the property for 90% of the market price and a tenant at above market rent for 10 years. The court heard that the rent in the area was in a range of £400-£600 per month but council properties were usually at the lower part of the scale, the market rent more likely to be £500-£525 per month. At best, Watermill got the property for 75% of the market value and the cost of possession proceedings. Watermill did have the cheek to raise the £5K it had had to spend on renovating the property after getting possession as a painful expense that it should have been spared.

And then there was the arrangement of Miss S’s conyenacing solicitors on the sale. Watermill quite rightly said she could choose any she wanted, but if she chose one of their approved panel of conveyancers, Watermill would pay her solicitor’s fees. Conveyancing for free! how could Miss S resist? Sweeney Miller, a firm on Watermill’s panel, were instructed: “Some time around the end of October 2006 Watermill sent Sweeney Miller an e-mail introducing Miss Scrowther and giving brief details of the transaction. The e-mail included an authorisation form for Miss Scrowther to sign in relation to the £31,250.” As it happens, the Court notes that Sweeney Miller’s advice to Miss S, was inaccurate (stating that she would receive the full £31K back after 10 years) “and/or may have fallen short of what was required”. One might well have views about the propriety of a solicitor accepting payment of their fees by the buyer in the sale in which they are acting for the seller, apparently as a matter of routine.

It is to be noted that Watermill, also suitably emblematically, have fallen victim to the credit crunch and are no longer buying new properties, having bought some 360. One presumes that these are now worth less than 75% of the 2007 market value.

R(Gardiner) v Haringey LBC [2009] EWHC 2699 (Admin), [2009] All ER (D) 301 (Oct).
Or ‘everything old is new again’

From the full judgment: Ms G. had applied as homeless to Haringey, who found she was not homeless as she had accommodation available to her in Columbia. Ms G requested a review on the basis that that accommodation was not suitable for her child, who had a preliminary diagnosis of autistic spectrum disorder and severe and extensive care and support needs not available in Columbia. The review withdrew the decision. A further review upheld the decision, stating that Ms G’s decision to return to the UK, without definite accommodation, to seek care for her child was ‘reckless’. The different level of available care for the child was acknowledged but was not, in itself, sufficient reason to leave the Columbia house and come to the UK without definite accommodation.

A subsequent s.204 appeal upheld the decision. Ms G applied again 4 months later, supplying further information about her child’s situation and condition, including specialist evidence that the child would be very badly affected by instability and that she had improved considerably under current specialist care to the extent that she was now ‘thriving’ beyond expectation. The specialist’s letter stated that a return to Columbia would have a significant negative impact. Haringey refused the application on the basis that there were no new facts. They had already acknowledged that facilities were better than in Columbia. Ms G applied for Judicial review.

Held:
Following Maloba v Waltham Forest LBC [2008] All ER 701 (our post here), whether accommodation was suitable was no just a matter of its size and structural quality. The educational and medical needs of the child were material considerations. The Guidance, at para 6.27, states that a renewed application must be treated as a fresh application if there are substantive new facts. The significant issue was not now the difference in the level of available facilities, but the impact on the quality of life for the child. The Council had failed to look beyond the level of facilities available and consider the effect on quality of life. The reports submitted with the renewed application did amount to new facts, specifically on the severity of the likely degree of effect a return to Columbia would have on the child.

And then…

HSE v Helen Jayne Beckett Grimsby and Cleethorpes Magistrates Court

Various commentors on this post suggested that the HSE was less than enthusiastic about prosecuting private landlords over breaches of the gas safety check rules. So it is with pleasure that we can point to this prosecution (HSE press release)

Ms Beckett was a private landlord. Between 25 July 2007 and 5 January 2009 (about 18 months), Ms Beckett failed to ensure that a gas fire in the rented property she owned at Flat 1, 22 Sea View Street, Cleethorpes, had been checked for safety. Despite being served with an improvement notice by HSE in November 2008, she failed to get the necessary checks carried out by the required date.

She pleaded guilty at the Magistrates to breaching Regulation 36(3) of the Gas Safety (Installations and Use) Regulations 1998 – the 12 monthly check – and of contravening a previous improvement notice. She was fined £1,000 with £1,500 costs.

Now, let that not be a one off, pour encourager les autres, kind of prosecution and let others follow Yorks and Humberside’s lead.

The Government has released its response [link to PDF] to the Parliamentary Joint Committee on Human Rights report of 2007. Yes, 2007. The report that was released prior to the Lords judgment in YL v Birmingham City Council and the changed law in respect of care homes providing Local Authority contracted services in Health and Social Care Act 2008.

So, the Government notes the concerns that the Courts’ approach to what constitutes a public function for the purposes of the HRA is apparently too much guided by judicial review precedent and not enough focused on a ‘functional approach’ to the definition. It had followed the 2004 report’s recommendations that it should intervene in a suitable case to put this view and intervened in YL.

Now, the Government takes the view that having intervened in YL, unsuccessfully, and changed the law on care homes, what more can it really be asked to do. Yes, it is a bit disappointed too, but it cleared up the specific YL mess didn’t it? Isn’t that enough?

On the view that it isn’t really enough, because YL still covers all those other contracted out provision situations apart from the specific care home one, the Government takes the view that, well, yeah, whatever… At least YL clarified the law, apart from the specific situation it decided upon, where we changed the law.

On housing, at para 72:

There is no evidence that Parliament gave any considered view during the passage of the Human Rights Bill as to whether the provision of social housing is a function of a public nature. The Government’s view at this time is that the provision of housing by a landlord is not inherently a function of a public nature, even though a local authority can also arrange for the provision of housing. One needs instead to consider in the round the features of the function of providing social housing. On this basis, the Government’s view is that the balance of these features indicate that it is not a function of a public nature. To reach this conclusion based on this reasoning is not at all incompatible with the position that the Government has consistently taken on the interpretation of section 6 of the Human Rights Act, including before the House of Lords in the YL case.

But what of Weaver v L&Q, you might ask? The only mention is at para 100. Here it is:

Furthermore, the Government is considering the recent judgment of the Court of Appeal in R (Weaver) v London & Quadrant Housing Trust, which may be heard in due course by the Supreme Court. The Government nevertheless remains firmly committed to consulting on this issue.

So, they are considering and consulting while at the same time having the view that ‘the function of providing social housing [...] is not a function of a public nature’.

There is more, of course, but largely more of the same, so forgive me for not going into detail.

What is not at all clear, but definitely a question arising is if Weaver v L&Q does go to the Supreme Court, will HMG be intervening? And if so, in which way?

This was the Court of Appeal hearing of an appeal from a decision by a Circuit judge on an appeal from a order to set aside a possession order and grant of relief from forfeiture (Still with us? Good). It is potentially an important case for anyone looking to apply for set aside of a possession order made at first hearing of a possession claim, as it gives the Court a broader discretion to make a set aside order under CPR 3.1(2) than the strict requirements of CPR 39.3.

Forcelux was the landlord of the flat concerned and Mr Binnie held a long lease at a ground rent, with about 94 years left to run. The lease contained a provision for forfeiture on non-payment of ground rent.

Mr Binne fell into arrears of ground rent of about £300 and £600 insurance premiums. Forcelux obtained a default judgment on the sums, but no payment was made. In June 2007, Forcelux served a notice on Mr Binnie under section 146 Law of Property Act 1925 and section 81 Housing Act 1996. The notice relied on non-payment of insurance premiums in the sum of £599.05.

In July 2007, Forcelux began County Court possession proceedings. The claim form gave the flat as Mr Binnie’s address. A hearing was set for September 2007. The Court attempted to serve proceedings by post, which were returned marked ‘gone away’. In fact Mr Binnie had not been living at the flat for some time, he was living with his girlfriend and, despite the girlfriend’s flat being in the same building, his evidence was that he had not picked up any post for a long time. Mr Binnie was thus unaware of proceedings.

At the September 2007 hearing, in the absence of Mr Binnie, a possession order was made. The Court served the order by post on the flat – again returned marked gone away. In evidence, Forcelux showed photos of the flat boarded up and apparently vacant. In October 2007, Forcelux sent people to take possession, they were seen by Mr Binnie’s girlfriend, who alerted him. This was the first that Mr Binnie was aware of the proceedings. he obtained papers a saw solicitors. There was a delay of three weeks before they asked Forcelux for a copy of the lease. At the beginning of December, Mr Binnie sent a cheque for the £900 to Forcelux’s solicitors. It was returned. It was not until February 2008 that Mr Binnie made an application to set aside the posession order and relief from forfeiture. At initial hearing, the District Judge found that the Claim was deemed served. This is not appealed (if the claim was not served in compliance with the CPR, an application to set aside would not fall under CPR 39.3). At the subsequent hearing in July 2008, the District Judge set aside the possession order and granted relief.

Forcelux appealed. The Circuit Judge dismissed the appeal. Forcelux appealed to the Court of Appeal.

Forcelux contended that Mr Binnie had not ‘acted promptly’ once he found out the possession order had been made, as required by CPR Rule 39.3(5)(a). CPR 39.3(5) states that the Court may only grant a set aside application if the applicant:

(a) acted promptly when he found out that the court had exercised its power to……enter judgment or make an order against him;

(b) had a good reason for not attending the trial; and

(c) has a reasonable prospect of success at trial.

So acting promptly is a requirement before a set aside can be granted. Forcelux argued that the DJ had therefore been wrong to make the set aside order.

But Rule 39.3 is expressly concerned with ‘trial’. Was the hearing of September 2007 a trial? Rule 55, dealing with possession proceedings states at 55.1 that once the claim has been issued, the Court is to fix a date for ‘the hearing’. And at 55.8 the rule states:

(1) At the hearing fixed in accordance with rule 55.5(1) or at any adjournment of that hearing, the court may

(a) decide the claim; or

(b) give case management directions.

(2) Where the claim is genuinely disputed on grounds which appear to be substantial, case management directions given under paragraph (1)(b) will include the allocation of the claim to a track or directions to enable it to be allocated.

(3) Except where –

(a) the claim is allocated to the fast track or the multi-track; or

(b) the court orders otherwise,

any fact that needs to be proved by the evidence of witnesses at a hearing referred to in paragraph (1) may be proved by evidence in writing.

(Rule 32.2(1) sets out the general rule about evidence. Rule 32.2(2) provides that rule 32.2(1) is subject to any provision to the contrary)

(4) Subject to paragraph (5), all witness statements must be filed and served at least 2 days before the hearing.

Rule 32 addresses evidence both at trial and at hearing other than trial.

So there is nothing to state that the first listed hearing is a trial, even if the case is decided at that hearing. Where the CPR does define trial, it is at the end of a process, with allocation and case management directions given.

The Court of Appeal were not persuaded that the hearing of September 2007, the first listed hearing after issue, was a trial:

32. The judge (in practice the district judge) is given, expressly, two options under Rule 55.8(1). He may either decide the claim or he may give case management directions. Where the claim is genuinely disputed on grounds which appear to be substantial, case management directions are to be given, including allocation to a track. The aim of such directions must be to bring about a final disposal of the claim. Unless allocated, by agreement, to the small claims track, case allocation will be either to the fast track or the multi-track. In either case, case management directions are made with a view to an eventual “trial” – the word used in both Rules 28.2 and 29.2.

33. If the first option – deciding the claim – is adopted it can only be because the judge considers that he is able to decide the case on the evidence before him. In an exceptional case, it may be that he could, then and there, conduct a hearing on the merits. Thus, suppose his list has collapsed and he has half a day spare; suppose both sides are present and represented; and suppose that both sides have all their evidence available and agree that the matter should proceed. In these circumstances, the hearing could properly be called a trial. The judge would in effect be exercising his case management powers and bringing forward the trial to the date of the hearing.

34. But that would be an exceptional sort of case. The more usual sort of case, in a busy possession list with perhaps 5 to 10 minutes allowed for each case, will be an undefended case where the defendant, if he attends at all, has nothing to say. The judge will look at the evidence from the claimant – probably all the evidence there is – and make a determination and decision: he will satisfy himself that the case is made out on the claimant’s evidence and satisfy himself that any necessary statutory requirements are fulfilled; he will make a possession order (suspended or not as the case may be).

[...]

36. I do not consider that such a process of determination and decision can sensibly be called a trial as a matter of the ordinary use of the word. Nor do I consider that it is been seen as a trial within Rule 39.3; the word is not to be given some special and wider meaning in the context of that Rule. Rather, it can be seen more as a summary procedure in the sense of a procedure carried out rapidly with the omission of most of the steps which in an ordinary case lead to trial. It also has a lot in common with a disposal hearing as referred to in the PD to Part 26, which I have already described, and which is clearly not a trial either in the ordinary sense of the word or in the context of the CPR.

The decision of a case in this manner is closer to summary judgment than trial. Against Forcelux’ assertion that a hearing under Rule 55.8(1) is necessarily a trial, it is clearly the case that such a hearing may simply involve giving directions to trial.

It is true that s.138(9A) County Court Act 1984, permitting applications for relief from forfeiture, only applies to a tenant whose lease has been forfeited for non-payment of rent and where possession has been recovered under s.138(3). S.138(3) states that a requirement for a possession order is that “the court at the trial is satisfied that the lessor is entitled to enforce the right of re-entry or forfeiture.” This may appear to mean that the relief from forfeiture provision only applies where the possession order was made at trial. However, there was no reason to presume that ‘trial’ has the same meaning in s.138 as it does in CPR 39.3. After all, before CPR 55 was introduced, a possession order could have been made by summary judgment under Part 24. Part 55 introduced a new ’summary’ route with the hearing. It was unlikely that Parliament intended s.138 not to apply where the possession order had been obtained by summary judgment.

So, the hearing in September 2007 was not a trial. Therefore Rule 39.3 did not apply. In making the set aside order, the DJ presumed the order was made under the discretion in 39.3(3). This was not the case. While in Estate Acquisition and Development Ltd v Wiltshire [2006] EWCA Civ 533, the Court of Appeal had applied CPR 39.3 in an application from relief from forfeiture on a possession order made at first hearing, the issue of whether this was a trial or not had not been raised or argued, so it was not an authority on the point.

As 39.3 was not at issue, ‘acting promptly’ was not a requirement, but simply a factor to be taken into account. The rule that covered the situation was Rule 3.1(2) (m) “take any other step or make any other order for the purpose of managing the case and furthering the overriding objective”, which gave ample power to set aside an order if the interests of justice demand it. Further, Rule 3.1(7), providing a power of the court under these Rules to make an order, includes a power to vary or revoke the order, shows that there is a power to do so under Rule 31.2(m).

In considering the exercise of the power under Rule 3.1(2) as the Circuit Judge had done, the checklist in Rule 3.9(1) is a useful guide, although not directly applicable. In this case:

a. the interests of the administration of justice; there is nothing which suggests that the interest of the administration of justice would be prejudiced or compromised if the application for relief were granted;
b. whether the application for relief has been made promptly; I doubt very much that it was and proceed on the footing that it was not;
c. whether there is a good explanation for the failure; none has been provided. HH Judge Hampton herself observed that there was no explanation (but see paragraph 65 below);
d. whether the failure was caused by the party or his legal representative; the failure appears to have been entirely that of Mr Binnie’s solicitors;
e. the effect which the failure to comply had on each party; Mr Binnie will lose a valuable asset for want of payment of a comparatively modest sum which he attempted to pay by cheque in December 2007, his cheque being returned.
f. the effect which the granting of relief would have on each party; the Lease would be reinstated. Forcelux would lose what I think can fairly be described as a windfall.

This was a case for the exercise of discretion in favour of Mr Binnie. He had not acted promptly (and in principle would be held with the delay of his legal representatives, Training in Compliance Ltd v Dewse [2001] CP Rep 46, although Rule 3.9(1)(f) does mean that whether the delay was due to the the applicant or his representatives can be considered as a factor in the exercise of discretion). However, the delay was not such as to disentitle him from relief and enable Forcelux to keep their windfall. The Court of Appeal exercised the discretion under Rule 3.1(2) replacing the DJ’s set aside order, and dismissed the appeal.

In the costs hearing Forcelux Ltd v Binnie [2009] EWCA Civ 1077, Forcelux argued that it was entitled to recoup its costs from Mr Binnie under the lease, which had a covenant on Mr Binnie:

To pay all costs charges and expenses (including legal costs and also charges payable to a Surveyor) which may be incurred by the Lessor or in contemplation of any application to the Lessor for any consent pursuant the covenants herein contained and of any steps or proceedings or the service of any notice under Sections 146 or 147 of the Law of Property Act 1925 including the reasonable costs charges and expenses aforesaid of and incidental to the inspection of the Demised Premises the drawing up of schedules of dilapidations and notices and any inspection to ascertain whether any notice has been complied with and such costs charges and expenses shall be paid whether or not any right of re-entry or forfeiture has been waived by the Lessor or avoided otherwise than by relief granted by the Court

The Court agreed that possession proceedings brought to enforce a right of re-entry following a notice under section 146(1) could be construed as proceedings “under” section 146 and so fall under the clause.

However, “(a) that the contractual point was not raised below [in the set aside hearing or first appeal] or before us on the appeal (b) that costs orders were made below including the one made by DJ Hudson which deprived Forcelux of an element of its costs and (c) that the appeal failed on both the “trial” point and the issue of the exercise of discretion. ”

While the general principle is that the Court’s discretion on the award of costs should be exercised in line with the contractual provision. the general principle is not a rule of law and it may be that in particular cases, or classes of cases the discretion should override the contract.

For example, if a lessor loses a piece of litigation at first instance which it was reasonable for him to fight, it might be wrong to deprive him of a contractual right to costs. But if he goes on to appeal the decision against him and loses the appeal, then it is not obvious to me that the general rule should be that the discretion should be exercised in accordance with the contractual right; or if it is the general rule, then the court should be willing to depart from it quite readily.

Here, “I consider that this is a case where, in the exercise of the court’s discretion, Mr Binnie is entitled to a costs order which departs from the contract. I would reach that conclusion even if the point had been taken at the beginning of this litigation before DJ Hudson. I would do so because application of the general rule in relation to the facts of this appeal would cause an injustice to Mr Binnie.”

The Advocate General (Mr Mazak) has now delivered his opinion in the case, which is available here. The Advocate General is not a Judge of the ECJ nor is his view binding on the Judges although, in practice, the ECJ usually follows the advice given. We will, therefore, have to wait for the final decision, but, for what it is worth, he has concluded:

(a) children of EU citizens who have installed themselves in a member state during the exercise by their parents of rights as residence as workers in that state are entitled to reside in the state in order to attend general educational courses;

(b) a parent who is the primary carer of those children – irrespective of his or her nationality – is entitled to reside with the children in order to allow the children to exercise that right. The fact that the parent who is a citizen of the EU is no longer working in that state and has left the state is irrelevant;

(c) it is similarly irrelevant that the children and their primary carer are not self-sufficient and are dependent on social assistance;

(d) the length of time that the children have been enrolled in their educational courses is also irrelevant.

Incidentally, counsel’s advice to Harrow on the then prospective Court of Appeal proceedings in this case is available online as part of memo here [link to .doc] and google web version here. It really is amazing what Google can find!