Case No: CO/7759/2005

Neutral Citation Number: [2006] EWHC 1892 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT

Royal Courts of Justice
Strand, London, WC2A 2LL

Wednesday 26th July 2006

Before :

THE HONOURABLE MR. JUSTICE McCOMBE
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Between :

	Maurice KILBY	Claimant	
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	Basildon District Council	Defendant	
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(Transcript of the Handed Down Judgment of
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Mr Nigel GIFFIN QC & Miss Liz DAVIES (instructed by Sternberg Reed Taylor & Gill) for the Claimant
Mr Andrew ARDEN QC & Mr Andrew DYMOND (instructed by Basildon Council) for the Defendant

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Judgment
Mr. Justice McCOMBE: 
1.	The Claimant is a secure tenant (within the meaning of the Housing Act 1985 –“the Act”) of premises at 53 Frettons, Basildon, Essex. The landlord is the Defendant, Basildon District Council (“the Council”).
2.	Section 102 of the Act provides: 
“(1) The terms of a secure tenancy may be varied in the following ways, and not otherwise-
(a) by agreement between the landlord and the tenant;
(b) to the extent that the variation relates to rent or payments in respect of rates, council tax or services, by the landlord or the tenant in accordance with a provision in the lease or agreement creating the tenancy, or in an agreement varying it;
(c) in accordance with section 103 (notice of variation of periodic tenancy).
(2) References in this section and in section 103 to variation include addition and deletion; and for the purposes of this section the conversion of a monthly tenancy into a weekly tenancy, or a weekly tenancy into a monthly tenancy, is a variation of a term of the tenancy, but a variation of the premises let under a tenancy is not.
(3) This section and section 103 do not apply to a term of a tenancy which –
(a) is implied by an enactment, or
(b) may be varied under section 93 of the Rent Act 1977 (housing association and other tenancies: increase of rent without notice to quit… ”
Section 103 provides:
“(1) The terms of a secure tenancy which is a periodic tenancy may be varied by the landlord by a notice variation served on the tenant
(2) Before serving a notice of variation on the tenant the landlord shall serve on him a preliminary notice-
(a) informing the tenant of the landlord’s intention to serve a notice of variation,
(b) specifying the proposed variation and its effect, and
(c) inviting the tenant to comment on the proposed variation within such time, specified in the notice, as the landlord considers reasonable;
and the landlord shall consider any comments made by the tenant within the specified time.
(3) Subsection (2) does not apply to a variation of rent, or of payments in respect of services or facilities provided by the landlord or of payments in respect of rates.
(4) The notice of variation shall specify- 
(a) the variation effected by it, and
(b) the date on which it takes effect;
and the period the date on which it is served and the date on which it takes effect must be at least four weeks or the rental period, whichever is the longer.
(5) The notice of variation, when served, shall be accompanied by such information as the landlord considers necessary to inform the tenant of the nature and effect of the variation.
(6) If after service of the notice of variation the tenant, before the date on which the variation takes effect, gives a valid notice to quit, the notice of variation shall not take effect unless the tenant with the written agreement of the landlord, withdraws his notice to quit before that date. ”
3.	By contrast,  the Claimant’s tenancy agreement with the Council has contained at all material times a clause (to be found in clause 11 of the Claimant’s agreement) in this form:
“We can only change the terms of this agreement if a majority of the Tenants’ Representatives agree to this at a special meeting where at least 25% of the Tenants’ Representatives are present. (This does not apply to changes in rent nor changes to meet legal requirements.) When changes are agreed, we will give four weeks notice before they come into force. ”
(“Tenants’ Representatives” are defined as persons elected to represent tenants on the Tenants’ Management Board. That Board is said to be a tenants’ committee set up to serve local Council-housing areas. The Claimant was one of the elected representatives. There is a dispute about the identity of the relevant representatives and of the appropriate tenant committee, but that issue has not been argued before me; it is agreed that this is not the subject of the present proceedings and that the point need not be addressed in this judgment.)
4.	A provision in the form of clause 11 has been included in a large number of the Council’s secure tenancy agreements since 1995 until the making of the decision presently under challenge. That decision is that of the Council made on 30 June 2005 “to approve and implement a new secure tenancy agreement”.  One of the proposals of the new draft agreement is the deletion of the present clause 11.
5.	The present proceedings are brought to resolve the apparent conflict between Clause 11 and the provisions of Sections 102 and 103 of the Act. The Council contends that, in so far as Clause 11 conflicts with those sections, it is ultra vires the Council’s contracting powers and void accordingly. It has purported to give preliminary notice of its intention to vary the terms of its secure tenancies in various respects including the removal of clause 11. First by interim injunction and later by agreement the Council has not yet served formal notices of variation pending resolution of this claim.
6.	Mr. Arden QC (with whom Mr. Dymond appears) for the Council stresses that his client is a public authority and argues that the powers conferred by Sections 102 and 103 of the Act are powers in aid of its powers under sections 9 and 21 of the Act to provide housing accommodation and to exercise management control over its housing stock. He argues that the clause 11 operates as an unlawful fetter to, or unlawful delegation of, the management powers under the Act. It is, he submits, therefore void. He relied upon a long series of well-known cases on this subject ranging from Gardner v London Chatham & Dover Rly Co. (1867) LR 2 Ch App. 201, Ayr Harbour Trustees v Oswald (1883) 8 App. Cas. 623 and Birkdale District Electric Suppy Company v Southport Corporation [1926] AC 355 to Credit Suisse v Allerdale BC [1997] QB 306, Credit Suisse v Waltham Forest LBC [1997] QB 362 and (in the housing field) Akumah v Hackney LBC [2005] UKHL 17 and Parker v Camden BC [1986] 1 Ch 162.
7.	Mr. Giffin QC (with whom Miss Davies appeared) for the Claimant submitted that what had occurred here was that the Council had validly exercised its statutory powers to manage its properties and to grant tenancies. That power included a power to agree to clauses in the form of Clause 11; in doing that, he argues, it is perfectly lawful for it to agree not to exercise certain other statutory powers (such as those in Sections 102 and 103): see R v Hammersmith & Fulham LBC, ex p. Beddowes [1987] 1 QB 1050.
8.	Rather similar circumstances to the present case arose in R v Brent LBC, ex p. Blatt (1991) 24 HLR 319. In that case, the applicant was a secure tenant of the respondent. The respondent decided in 1981 to revise its standard form of tenancy agreement, including in it a list of items of repair for which it would be responsible and a procedure by which it could vary the terms of the agreement which was modelled on what is now Section 103(2) of the Act. There was a further clause, clause 8(b), by which the respondent agreed that no variation might be made to the agreement which either reduced the respondent’s repair obligations or made them more difficult to enforce or which reduced the tenant’s security of tenure under the agreement. In 1991 the respondent decided that it wanted to remove the list of its repair obligations from the agreement, to remove the contractual security of tenure provisions and to replace them with the grounds provided by the Act and to remove the variation clause, including clause 8(b). 
9.	On an application for judicial review it was held that Section 102 of the Act gave power to the respondent to vary the terms of a secure tenancy; clause 8(b) was itself a term of the tenancy and so could itself be varied by deletion pursuant to statutory procedure. The case was approached as a matter of construction of the statute; no question of the vires of the respondent appears to have been raised. In giving the first judgment, Leggatt LJ said,
“Mr. Watkinson argues that it was open to the Council to agree not to exercise the power given by section 103.  He says that that is what the council did in 1981 as a result of negotiations with the tenants’ associations.  He submits that the effect of including clause 8(b) in the old Agreement was to preclude the Council thereafter from varying the standard form by reducing the security of tenure of tenants under the Agreement.  The respondents, therefore, cannot now reduce the quality of the security, as they have purported to do in the fashion complained of under the applicant’s first argument.  Attractive though the argument is, especially since that is what the average tenant might expect the position to be, it cannot, in my judgment, prevail over the language of the statute.  Section 102 gives power to the Council to vary the terms of a secure tenancy by Agreement with the tenants, or alternatively, in accordance with section 103 by giving notice of variation of a periodic tenancy following compliance with the statutory arrangements for a preliminary notice.  In that way the respondents can in effect vary the terms of the tenancy unilaterally.  Clause 8(b) is itself a term of the tenancy, so it can be varied by deletion.  It does not, after all, contain or constitute a promise that it will not itself be revoked.  In truth, however, as I have earlier indicated, this represents no substantial diminution in the tenants’ rights.  Their basic protection is afforded by the statute, and such embellishments of that protection as were brought about by contract, would, if enforceable, only have been of value in the event that the statutory protection was itself reduced in future ...”
Owen J agreed and said,
“…  I would only add that whilst not finding that it is possible I am far from convinced that it would be impossible for a local authority to contract out the powers given by sections 102 and 103 of the Housing Act 1985.  However, if such a contracting out is possible, then it would need to be both clear and explicit.  I am satisfied there was no such contracting out here.  Once that conclusion is accepted, then the changes intended to be made by the proposed Tenancy Agreement do not provide a sufficient Basis for the application made here. … ”
I shall return to this case later.
10.	Mr. Giffin submitted that Sections 102 and 103 were merely enabling provisions, giving to landlords powers of variation of secure tenancies which would not have been available under the common law. He argued that it did not follow that Parliament intended that that mechanism was to be exclusive of what the landlord and tenant may agree about variation procedures; the court should also lean in favour of freedom of contract, absent a firm indication in the Act to the contrary. Mr. Giffin urged further that we are here concerned with an essentially contractual matter (in contrast (say) to a public function like the grant or refusal of a planning permission); contracts inevitably result in restraints upon the contracting parties; the restraint in clause 11 is procedural and not substantive; the Council has not committed itself not to use Section 102 at all, merely not to use it without the requisite agreement of the tenants’ representative body.
11.	The submissions for the claimant were founded essentially upon the decision of the Court of Appeal in the Beddowes case (supra). In that case a local authority entered into a transaction with a property developer for the sale of part of a housing estate. It proposed on the sale to enter into restrictive covenants in respect of the retained parts of the same estate preventing the letting of any vacant flat except by way of a long lease at a premium. The decision was challenged on the basis that the covenants would amount to an unlawful fetter upon the authority’s future exercise of its discretion as to the use of part of its housing stock, namely the retained land. The Court of Appeal held that, since the Council’s policy, albeit designed to produce owner occupancy rather than rental occupancy, was consistent with the purpose of using the estate for housing accommodation in the district, the submission to the proposed restrictive covenants would not unlawfully fetter the exercise by the Council of its housing powers. The reasoning in the majority judgments can be taken from the following passages in the judgments of Fox LJ and of Sir Denys Buckley at [1987] QB 1050,  pp. 1063D-1066D and 1076B-D respectively.
First, Fox LJ said,
“The attack as developed on the appeal is, as I have indicated, really based upon the contention that the covenants fetter the council’s discretion to deal with the retained land and are bad accordingly.
“The first question, I think, in relation to that contention is whether the council is entitled to impose on its retained land covenants which were restrictive of its user of that land.  In my opinion it is. …
“In general, I do not understand it to be disputed that there was power in the council (as the judge held) to create restrictive covenants under the Housing Acts, or otherwise.  Power to create restrictive covenants does not, however, resolve the question whether the covenants constitute an unlawful fetter. … “It is clear that a local authority cannot, in general, make declarations of policy which are binding in future on the council for the time being.  A council cannot extinguish statutory powers in that way.  But it may be able to do so by the valid exercise of other statutory powers. If a statutory power is lawfully exercised so as to create legal rights and obligations between the council and third parties, the result will be that the council for the time being is bound, even though that hinders or prevents the exercise of other statutory powers. …
“What we are concerned with in the present case are overlapping or conflicting powers.  There is a power to create covenants restrictive use of the retained land; and there are powers in relation to the user of the retained land for housing purposes. In these circumstances, it is necessary to ascertain for what purpose the retained land is held.  All other powers are subordinate to the main power to carry out the primary purpose…
“Now the purpose for which the Fulham Court estate is held by the council must be the provision of housing accommodation in the district.  The council’s policy in relation to the estate, as I have set it out above, seems to me to be consistent with that purpose. … The policy, it is true, is designed to produce owner-occupancy and not rented accommodation.  Historically, local authority housing has been rented.  But a substantial inroad upon that was made by Part 1 of the Housing Act 1980, which gave municipal tenants the right to purchase their dwellings.  In the circumstances it does not seem to me that a policy which is designed to produce good accommodation for owner-occupiers is now any less within the purposes of the Housing Acts than the provision of rented housing. …
“It seems to me that if the purpose for which the power to create restrictive covenants is being exercised can reasonably be regarded as the furtherance of the statutory object, then the creation of the covenants is not an unlawful fetter.  All the powers are exercisable for the achieving of the statutory objects in relation to the land, and the honest and reasonable exercise of a power for that purpose cannot properly be regarded as a fetter upon another power given for the same purpose.
“We were referred to the decision in Ayr Harbour Trustees… But that was a case where the trustees simply ‘renounced part of their statutory birthright.’  There was an incompatibility between what they were proposing to do and the actual statutory purpose.  In the present case, as it seems to me, the purpose of the contract is the same as the statutory purpose.  Devlin L.J. in Blake v Hendon Corporation [1962] 1 Q.B. 283, 303, said:
‘For example, a man selling a part of his land might object to a refreshment pavilion on his boundary.  Provided that the erection of a refreshment pavilion on that spot was not essential to the use of the land as a pleasure ground, the local authority could properly covenant not to erect one, notwithstanding that it had statutory power to do so.  This illustrates the proper application of the principle in the Ayr case: see Stourcliffe Estates Co. Ltd. v Bournemouth Corporation [1910] 2 Ch. 12’
 “I can see that there is something to be said for the view that so long as the council retains Part V land it should retain all the powers which the statute gives in relation to that land.  That is simple and logical.  But I think it is too inflexible and takes insufficient account of the practical difficulties of administering such an estate as Fulham Court.  To bring it up to standard, money has to be found and compromises have to be made.  It is not practicable to sell the whole estate at once.  It has to be phased in order to prevent excessive voids and high loss of income.  On 21 March 1986 only Block A (32 flats) was totally empty.  But the scheme was quite far advanced.  Out of a total of 372 flats, 189 were empty.  The policy having been decided upon, it was necessary to press ahead with it”. (at 1063/D-1066D).
Then, at p. 1076, Sir Denys Buckley said,   
 “I am clearly of the opinion that, if a statutory authority acting in good faith in the proper and reasonable exercise of its statutory powers undertakes some binding obligation, the fact that such obligation may thereafter preclude the authority from exercising its statutory powers in some other way, cannot constitute an impermissible fetter on its powers.  Any other view would involve that the doctrine against fettering itself would involve a fetter on the authority’s capacity to exercise its powers properly and reasonably as it thinks fit from time to time.  So, in my view the decision of the present case depends primarily upon whether the council was acting properly and reasonably in proposing to covenant with Barratts in the terms of the second schedule covenants.  For the reasons indicated by Fox L.J., I think this was so.”
12.	In the end, of course, the identification of the purposes for which statutory powers are conferred remains a matter of statutory construction. It is necessary to examine the Act in which the powers are to be found and to decide whether the particular contractual provision relied upon truly usurps that power. It seems to me to be clear that the purpose of the powers conferred in Sections 102 and 103 are indeed to aid the Council in its statutory function to provide housing in its borough and to manage its housing stock accordingly. It discharges that function in part by the grant of secure tenancies with the important corollary power to vary the terms of such tenancies in the circumstances provided for by the sections which we have been considering.
13.	The rival positions of the parties are polarised. Mr. Giffin submits that clause 11 constitutes the valid exercise of a statutory power to grant a tenancy excluding the future exercise of the statutory powers of variation without the approval of the Tenants’ Representatives during the subsistence of the tenancy. Mr. Arden’s principal submission was that such was indeed the purported effect of clause 11 and that the clause was, therefore, void as an illegal fetter on the Council’s general statutory powers to manage its housing stock.
14.	It seemed to me initially that clause 11 on the one hand and the provisions of the Act on the other were each reconcilable with the other. In this respect I had in mind the approach of Leggatt LJ in Blatt’s case (supra). As already mentioned, in that case the learned Lord Justice took the view that the contractual prohibition on variation (no variation of landlord’s repair obligations and no variation of security of tenure provisions) was itself capable of variation by means of the powers conferred by sections 102 and 103. Was it possible to take a similar view of clause 11 in this case? Could the Council in exercise of its power of management arrange, for such time as it thinks fit, for variations in tenancy agreements to be subject to the approval of a representative body of tenants’. It might conceive it to be in the best interest of good tenant relations so to organise its affairs. The survival of these arrangements from 1995 to 2005 suggested that the Council has found this arrangement to be perfectly consistent with good management of its estate in practice. In the background, the statutory provisions remained. Was it possible, therefore, that these statutory provisions should apply to this contractual variation provision as it did to the one in issue in Blatt’s case?  
15.	Mr. Arden agreed that there was no reason why the agreement and statute should not be so construed, but he objected that clause 11 was in any event void as an unauthorised delegation by the authority of its management powers. He submitted that, so construed, clause 11 delegated the Council’s variation powers to the Tenants’ Representatives and that was void in law. Mr. Giffin said it was not a delegation; the Council retained its powers but subject to veto by the Tenant’s Representatives.
16.	In the end, I decided that my initial impression outlined above was incorrect. It was not accepted by Mr. Arden whose interest it favoured and it is probably a strained construction of the inter-related contractual and statutory provisions. I also bear in mind that Blatt was concerned with provisions restricting variations in certain terms of the agreement. Those provisions could readily be changed by the statutory process. In this case, what is purportedly agreed is a new machinery for variation of any terms of the tenancy, different from any of those set out in Section 102. On the face of the agreement it requires all variations to go through the clause 11 procedure, even a proposed variation of clause 11 itself. That seems to me to offend against Section 102(1) which provides that a secure tenancy may be varied in three ways “and not otherwise”. While Mr. Arden’s submissions were made on a much wider and more fundamental basis, it seems to me that clause 11 does attempt to provide for variation “otherwise” than in a manner permitted by the section. For that reason alone, it seems to me that the clause unlawfully fetters the statutory powers of variation in the Act. Further, the statute states that the terms of secure tenancies can only be varied in the three ways there set out. Clause 11 seeks to impose a different way of variation; that is prohibited by Section 102. Irrespective of the Council’s management powers, Parliament has simply directed that the parties are not free to contract in this way and accordingly clause 11 is ineffective.
17.	Equally,  I would be inclined to accept Mr. Arden’s submission that the clause was void as an illegitimate fetter on the Council’s statutory powers under the Act. I think that the statutory powers and duties conferred upon local housing authorities by the 1985 Act envisage that secure tenancies may be granted by such authorities for the purposes of alleviating social housing need. It seems to have been the intention of Parliament that a corollary of that power should be the right of the authority to vary the terms within the powers conferred by Sections 102 and 103. Leggatt LJ accepted a submission to that effect made by counsel for the local authority in Blatt (see p. 325). If the Council did in fact purport to contract irretrievably out of those powers by agreeing to clause 11 then it appears to me that Parliament’s intention and purpose would be frustrated. The attempt to do this would, I think, be void as falling foul of the principle relied upon by Mr. Arden.
18.	Mr Giffin had a secondary argument. He submitted that if clause 11 was an invalid fetter on the Council’s statutory powers then the Claimant had a legitimate expectation that the Council would go through the hoops of that clause to ascertain the wishes of the relevant Tenants’ Representatives and that if those wishes went against any proposed variation it would weigh that fact (and the fact of its “invalid” promise in clause 11) in the decision making process.  If clause 11 is void from the outset, I agree with Mr. Arden that it could hardly be a proper expectation that the Council should have to go through an unlawful procedure as part of its process of deciding whether to invoke the statute.
19.	For these reasons, this application for judicial review fails.