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Case No: QBENF 98/1163 A2
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM NEWPORT COUNTY COURT
(HHJ MOSELEY)
Royal Courts of Justice
Strand, London, WC2A 2LL
Thursday 16th March 2000
B e f o r e :
LORD JUSTICE ROCH
LORD JUSTICE BROOKE
and
MR JUSTICE FERRIS
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|
ROBERT
ANTONY HODGE & ANR
|
Appellant
|
|
-
and -
|
|
|
NEWPORT
BOROUGH COUNCIL
|
Respondent
|
- - - - - - - - - - - - - - - - - - - - -
(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040, Fax No: 0171 831 8838
Official Shorthand Writers to the Court)
- - - - - - - - - - - - - - - - - - - - -
Mr John Macdonald, QC & Miss Sara Hargreaves (instructed by
Granville West Chivers & Morgan for the Appellant)
Mr Nigel Macleod, QC & Mr Jonathan Karas (instructed by Newport
Borough Council for the Respondent)
- - - - - - - - - - - - - - - - - - - - -
Judgment
As Approved by the Court
Crown Copyright ©
LORD JUSTICE ROCH:
This is an appeal from the judgment of HHJ Hywel Mosely, QC dated the 9th July
1999 in which he dismissed the appellant's claim against the respondent local
housing authority for damages for an alleged breach of the respondent's duty
under s. 562(3) of the Housing Act, 1985. The judge dismissed the appellants'
claim on two grounds: first, that they were not persons to whom the respondents
owed the duty under s. 562(3); second, the respondents were not in breach of
that duty, in any event.
The appellant's action was a test case on which eleven other cases raising the
same issues depended.
On the 1st December 1984, the Housing Defects Act, 1984, became law.
Subsequently that Act became Part 16 of the Housing Act, 1985. The reason for
the enactment of the 1984 Act was that local housing authorities had, in their
housing stock, several types of houses, usually of a prefabricated design and
designed either in the 1930's, 1940's or 1950's which were, because of
shortcomings in their design, inherently defective. The Act gave the Secretary
or State power to designate such types of houses as "defective dwellings", see
now s. 528 of the 1985 Act. The power to designate was to be exercised if it
appeared to the Secretary of State that buildings in the proposed class were
defective by reason of their design or construction and, by virtue of these
circumstances having become generally known, the value of some or all of the
dwellings concerned had been substantially reduced. A dwelling which was
included in a class so designated was "a defective dwelling". Once the
Secretary of State had made such a designation, Local Housing Authorities had
statutory obligations to bring those designations to the attention of council
house tenants and to persons who had bought their houses from the local
authority before what was called "the cut off date", being the 26th April 1984,
and to other persons who had bought such houses from persons who had bought
them from the local authority provided their purchase was prior to the cut-off
date. Those persons were potentially "persons eligible for assistance". That
phrase was defined by s. 527 of the. Act. That definition required the person
to satisfy the conditions in s. 531 of the Act. Assistance could take one of
two forms, either a reinstatement grant or, if the council had sold the house
to the former tenant, by way of repurchase. Such persons had a period of 10
years from the 1st December 1984 in which to seek assistance.
In addition, the local housing authority, under s. 563 of the Act had a duty ,
where a person was to acquire the freehold or a long tenancy of a defective
dwelling on a disposal by the authority, to give that person notice in writing
specifying the qualifying defect and stating that such person would not be
eligible for assistance under the scheme. Section 563(2) placed on the
authority a duty, before they conveyed the freehold or a long tenancy in a
defective dwelling in pursuance of a contract to a person on whom a notice
under s-s (1) of s. 563 had not been served, to give such person notice in
writing specifying the qualifying defect, stating that he would not be eligible
for assistance and informing him of his powers given by s-s (3) of the section
to delay completion of the conveyance for a period of 6 months and to withdraw
from the transaction.
Mr & Mrs Hodge are the owners and occupiers of 88, Ringwood Hill, Newport.
That is a house of the Schindler and Hawksley SGS type. That house is one of
approximately 200 houses of that design and construction built in Newport as
the Ringwood Estate in 1955 and 1956. That type of house was one type of house
designated as defective by the Secretary of State under what is now s. 528 of
the Housing Act, 1985 on the 1st November 1984. That designation came into
operation on the 1st December 1984, the date that the 1984 Act took effect.
Such houses look like traditional brick built houses, but they incorporate in
their construction reinforced concrete columns the embedded steel of which is
ineffectively protected against corrosion by the surrounding concrete.
On the 24th January 1985 the respondents published a Housing Defects Notice in
the press under the heading "Assistance for Eligible Private Owners of
Prefabricated Reinforced Concrete Dwellings Designed Before 1960". The notice
then listed 22 types of dwelling which the Secretary of State had designated.
One of those was the "Schindler and Hawksley SGS". The notice then contained
this statement:
"Only Airey, Cornish Unit and Unity of these types are believed to exist in the
Borough of Newport."
The cut off date which under s. 528(2)(b) meant the date by which, in the
opinion of the Secretary of State, the knowledge that buildings of a proposed
class were defective by reason of their design or construction became generally
known, was extended to the 1st April 1985.
The effect of designation by the Secretary of State of Schindler and Hawksley
SGS type houses was that no mortgage lending institution would lend on the
security of such a house. There is, therefore, virtually no market for such
houses because no potential purchaser can obtain a mortgage. Further those who
entered into mortgages before obtaining knowledge of the construction defects,
found themselves caught in a mortgage trap from which they could not escape
without remedying the defects, the cost of which they were unable to meet.
The appellants were among those who found themselves in this predicament. The
house which the appellants own was sold by the respondents to a Mr and Mrs Page
on the 10th April 1972. On the 15th October 1982 Mr and Mrs Page sold the
house to a Miss Vincent. Both those sales were before the "cut-off date". As
a consequence once the 1984 Act was passed Miss Vincent became a person
eligible for assistance under the scheme. There was no dispute that Miss
Vincent would have been able to satisfy the requirements of s. 527 and the
conditions of eligibility now to be found in s. 531 of the 1985 Act.
On the 12th March 1987 Miss Vincent contracted to sell the house to Mr and Mrs
Hodge for £24,000 and the sale was completed on the 20th March 1987.
Neither Miss Vincent nor the appellants was aware at the time of the sale that
the house was of the Schindler and Hawksley SGS type, nor that there were
fundamental defects in its design and construction. It was an agreed fact
between the appellants and the respondents that on the assumption that the
defects had been known in the market in March 1987 the value of the house in
the open market with that knowledge would have been £7,075. The
appellants purchased the house with the assistance of a loan secured by a
mortgage from a building society amounting to £22,800, being 95% of the
purchase price. The appellants are still paying instalments under that
mortgage.
The claim brought by the appellants against the respondents was for damages for
breach of statutory duty, the statutory duty being that alleged to be owed to
them under s. 562(3) of the 1985 Act. It is useful to set out the relevant
parts of s. 562, which read:
"(1) A local Housing Authority shall within the period of three months
beginning with the coming into operation of
(a) a designation under s. 528 ............ or
(b) a variation of such a designation, publish in a newspaper circulating in
their district notice suitable for the purpose of bringing the effect of the
designation or variation to the attention of persons who may be eligible for
assistance in respect of such of the dwellings concerned as are situated within
their district.
(2) No such notice need be published by a local housing authority who are of
the opinion
(a) that none of the dwellings concerned are situated in their district, or
(b) that no one is likely to be eligible for assistance in respect of the
dwellings concerned which are situated in their district.
(3) If at any time it becomes apparent to a local housing authority that a
person is likely to be eligible for assistance in respect of a defective
dwelling within their district, they shall forthwith take such steps as are
reasonably practicable to inform him of the fact that assistance is
available."
In 1989 a surveyor for the Halifax Building Society raised with the respondents
the question whether the houses at Ringwood were of the Hawksley SGS type.
Reference by the respondents to its archives revealed a contract dated the 1st
March 1955 between the respondents' predecessor the County Borough of Newport
and AW Hawksley Ltd which made it clear that there were within the Borough of
Newport 100 Hawksley SGS houses. The judge came to the conclusion that the
council had been careless in not having discovered that vital information prior
to March 1987 when the appellants had bought the freehold of their house from
Miss Vincent. The judge also came to the conclusion that s. 562(3) did create,
in a suitable case, a private law cause of action in favour of the persons
falling within the ambit of its protection. In arriving at that conclusion the
judge was much influenced by the provision in s. 572(1)(d) of the Act. Neither
of those findings or conclusions by the judge has been challenged by the
respondents in this appeal. There has been no cross-notice.
Mr MacLeod, QC for the respondents submitted that the question is whether as a
matter of statutory construction the appellants were within the class of
persons whom Parliament intended to protect by enacting s. 562(3). Mr MacLeod
relied upon a passage in the speech of Lord Browne-Wilkinson in X (Minors)
-v- Bedfordshire County Council [1995] 2 AC 633 at 731D when in considering
the first of four different categories of private law claims for damages
namely:
"(a) actions for breach of statutory duty simpliciter (i.e. irrespective of
carelessness)", Lord Browne-Wilkinson said:
"The principles applicable in determining whether such statutory cause of
action exists are now well established, although the application of those
principles in any particular case remains difficult. The basic proposition is
that in the ordinary case a breach of statutory duty does not, by itself, give
rise to any private law cause of action. However a private law cause of action
will arise if it can be shown, as a matter of construction of the statute, that
the statutory duty was imposed for the protection of a limited class of the
public and that Parliament intended to confer on members of that class a
private right of action for breach of statutory duty."
Mr MacLeod went on to submit that here the limited class were those "likely to
be eligible for assistance" and the appellants were not within that class.
Consequently there could be no question of them having an enforceable cause of
action for damages for breach of statutory duty. An examination of the scheme
of the Act makes it clear that the appellants are not within the class of
persons to whom a duty is owed. In s. 531 one of the conditions that had to be
satisfied so that a person became eligible for assistance under s. 527 was that
there had been no disposal for value by any person of a relevant interest
(freehold or long tenancy, s. 530) in the dwelling on or after the cut-off date
(i.e. 1st April 1985).
The purpose of s. 562 is that information should be provided in order to enable
those who may be eligible for assistance or who are likely to be eligible for
assistance to apply for assistance. The appellants do not come within that
class by reason of the conditions in s. 531. Mr & Mrs Hodge bought the
freehold of their home after 1st April 1985.
Mr MacLeod referred us to other provisions in Part XVI of the Act to
demonstrate that Parliament intended assistance to be given only to a limited
class of persons. Parliament did not intend property developers to benefit but
only individuals who bought their council houses. Parliament did not intend
that assistance in the form of restoration grants or repurchases should be
given to persons buying after the 1st April 1985: the only duty being imposed
on local housing authorities after that date was to give written notice of the
defects and the absence of eligibility for assistance to those who, after that
date, were intending to buy or were in the process of buying the freehold or a
long tenancy of their council houses from the authority. Moreover, the
assistance provided was to be claimable only in a period of 10 years from the
1st December 1984.
Mr MacLeod argued that had Parliament wished to protect persons such as Mr and
Mrs Hodge, who purchased a house of a type designated as defective unwittingly,
Parliament could have done so and would have done so by the use of clear words.
Parliament considered that by the "cut-off date" it would have become generally
known what types of house were designated as defective, and in the open market,
as opposed to purchasers direct from the local housing authority, that general
knowledge would afford sufficient protection.
Mr Macdonald, QC for the appellants told us that he relied on Category A of the
four categories identified by Lord Browne-Wilkinson in X Minors -v-
Bedfordshire County Council [above], that is to say actions for breach of
statutory duty simpliciter. Mr Macdonald accepted that the duty placed on the
respondents by s. 562(3) was a duty to inform Miss Vincent, that is to say the
person likely to be eligible for assistance. Mr Macdonald submitted that it
did not follow that that duty was owed only to Miss Vincent, or put another
way, if that duty to inform Miss Vincent was not discharged that only Miss
Vincent could sue for loss caused by the failure to discharge it. Miss Vincent
could not bring proceedings against the respondents for the undoubted failure
to take steps to inform her because having sold the freehold of her house to
the appellants, she had suffered no loss. The persons suffering the loss
caused by the respondents' failure to do that which s. 562 required them to do
were the appellants and Parliament must have intended them to have a remedy.
Mr Macdonald supported this part of his argument by referring us to the House
of Lords' decision in White & Anr -v- Jones & Anr [1995] 2 AC 207. Here the responsibility to inform Miss Vincent that assistance was
available which would have lead her to obtain a restoration grant was placed
upon the local housing authority. That authority would have known that loss
would be caused if they failed to discharge their duty. That loss has fallen
on the appellants, the unwitting purchasers of a defective house. That loss
would have fallen on Miss Vincent if she had retained the house until after the
1st December 1994, the end of the 10 year period without knowing that the house
was of a defective type. In those circumstances, Miss Vincent would have had
an action for damages against the respondents for breach of s. 562(3). It was
illogical and inequitable to read the Act in such a way as to deprive the
appellant's of that remedy.
Mr Macdonald further submitted that s. 572 which gives the County Court
jurisdiction to entertain proceedings for the recovery of damages in the event
of obligations not being performed, does not limit the persons who may bring
such proceedings. The lack of any alternative remedy for persons in the
appellants' position, pointed strongly to Parliament intending that such
persons should be able to sue for compensation for the local housing
authority's failure to do that which s. 562 required them to do. Parliament
intended that defective houses should be restored or repurchased so that the
loss which would otherwise arise from the defects would fall in the main on the
local authorities who had built and sold the houses and not on unwitting
purchasers.
Despite the cogent and powerful submissions of Mr Macdonald and the sympathy
that one inevitably has for the appellants, the conclusion that I have reached
is that the judge's decision on this issue was correct. What is being relied
on on behalf of the appellants is a breach by the respondents of a duty imposed
on them by s. 562(3) of the Act. This is not an action based on a common law
duty of care arising either from the imposition of a statutory duty or from
performance of it. Consequently, the question of the persons to whom the duty
is owed is to be determined by construing the statute and not by asking whether
the appellants are persons whom the respondents could have foreseen as
suffering loss and damage if the respondents did not exercise proper skill and
care.
A reading of the Act, and in particular of s. 562, makes it clear that the
duties to give notice and provide information are imposed to enable those
eligible for assistance to apply for assistance within the 10 year period.
Information is not to be given for the purpose of preventing a defective house
being sold on without the vendor or the purchaser knowing of the defects. The
Act suggests that Parliament believed that after the cut-off date the
categories of defective houses would be generally known or at least generally
known to surveyors and valuers, and that that knowledge would afford sufficient
protection to potential purchasers. Parliament intended eligibility for
assistance to end if there was a sale after the cut-off date. This, in my
judgment, makes it clear that the duty under s. 562 was not owed to persons
such as the appellants who bought such houses after the cut-off date when such
houses were already in private hands. Moreover, if such houses were still
owned by the local housing authority then the duties under s. 563 and not those
under s. 562 were applicable.
In view of the conclusion I have reached on the first ground on which the judge
decided the case against the appellants, it is not necessary for me to reach a
concluded view on the second ground, that there was no breach of duty. The
judge found that there was no breach of duty because at the time the appellants
bought their house in 1987 it had not become apparent to the local housing
authority that a person was likely to be eligible for assistance in respect of
a defective dwelling within their district. As I understand the judge's
judgment he was of the opinion that the word "apparent" should be read
subjectively and not objectively. He was assisted to that view by the words
"it becomes".
I have doubts as to the correctness of this reading of the sub-section. The
opening words of the s-s "If at any time" shows that something which is
apparent from the outset will activate the duty. Next the correct reading of
the sub-section may well be that it is the eligibility for assistance to which
the sub-section is referring rather than the defective character of the
dwelling. Parliament could well have assumed that a local housing authority,
once the Secretary of State had designated the types of houses which were
defective, would know whether they had or did not have such houses within their
area. But the principal potential difficulty with the judge's reading of the
sub-section on this point, is his interpretation of the word "apparent". In
my view, it is eminently arguable that something is or becomes apparent when it
is there to be seen, and that a local housing authority cannot say that
something was not apparent or did not become apparent to it because it
carelessly failed to see the obvious; that such a reading, would be putting too
great a premium on local housing authorities adopting the habits of an ostrich.
However, as it is not necessary to decide this point I would leave it open.
For these reasons I would dismiss this appeal.
LORD JUSTICE BROOKE:
I agree that this appeal should be dismissed for the reasons given by Roch LJ,
with which I agree.
If it had been necessary for us to make a ruling on the second ground on which
the judge decided the case against the appellants, I am doubtful whether I
would have been as sympathetic at Mr Macdonald's argument on that ground as
Roch LJ would have been disposed to be. There is no need, however, for us to
decide the point. Like Roch LJ, I will therefore say no more about it.
MR. JUSTICE FERRIS:
Notwithstanding the sympathy which I naturally feel for Mr. and Mrs. Hodge
in the predicament in which they find themselves and which was not of their
making, I agree that this appeal must be dismissed for the reasons given by
Roch LJ. As the case appears to govern a number of further cases I add some
words of my own.
The legislature might have dealt with the problem of defective dwellings by
providing a general right for the owners of such dwellings to receive
assistance by way of reinstatement grant or by way of repurchase. But it did
not in fact proceed in this way. Instead it provided an elaborate scheme for
defining precisely who should be eligible for assistance. Any scheme which
defines those who are eligible necessarily defines also, albeit by implication
or in silence, those who are not eligible. Amongst those who are not eligible
for assistance under what is now Part XVI of the Housing Act 1985 are
(i) a company or trustees for a company (s.527(a));
(ii) a person who previously had a relevant interest in a defective dwelling
but disposed of that interest without making a claim for assistance; and
(iii) a person who acquired a relevant interest in the defective dwelling on a
disposal for value occurring more than twelve months after the cut-off date
(s.531(3)(a)).
In the present case Miss Vincent would have been eligible for assistance down
to 12th March 1987, when she contracted to sell 88 Ringwood Hill to Mr. and
Mrs. Hodge and thereby disposed of the relevant interest in that property which
she previously owned. She did not know that she was eligible because she did
not know that the house was defective, but this ignorance did not prevent her
ceasing to be eligible for assistance on making that disposal. If she had
received the information mentioned in s.562(3) she would have known about her
eligibility and would almost certainly have claimed assistance. Fortunately
for her she suffered no loss because she sold her house to Mr. and Mrs. Hodge,
who also knew nothing of its defective construction, for its full value.
However Miss Vincent's good fortune is matched by the ill fortune of Mr. and
Mrs. Hodge because it is clear that, despite the fact that they had paid what
the house would have been worth if it had been free from defects, they never
became eligible for assistance. This is because they did not satisfy either of
the alternative sets of conditions for eligibility set out in s.531. The fact
that they took under a disposal made by Miss Vincent after the cut-off date
prevented them from satisfying the first set of conditions. The fact that that
disposal was made more than twelve months after the cut-off date prevented them
from satisfying the second set of conditions. All this is accepted on their
behalf.
The way in which the second set of conditions is formulated demonstrates, in my
view, that the legislature was aware that, despite the provisions of s.562,
there would be cases in which a person acquires a defective dwelling after the
cut-off date without being aware of the defects, even though the cut-off date
was itself to be the date by which, in the opinion of the Secretary of State,
the defective condition of the designated dwellings would have become generally
known. Instead of providing a general remedy for all those who, without fault
on their part, have purchased a defective dwelling in ignorance of its
defective condition, the legislature stipulated that those who purchased after
the cut-off date must satisfy all the conditions set out in s.531(3), including
the requirement that they acquired a relevant interest within twelve months
after the cut-off date. The legislature thus left unremedied the predicament
of those who, like Mr. and Mrs. Hodge, purchased a relevant interest after the
twelve months had elapsed. I doubt whether it is right to describe this as a
lacuna in the legislation. Rather it is the inevitable result of the division
of the owners of defective dwellings into those who are eligible for assistance
and those who are not eligible.
The argument for Mr. and Mrs. Hodge on this appeal, as it had been before the
judge, was that they can escape the consequences of not being eligible for
assistance because the Newport Borough Council failed to give Miss Vincent the
information referred to in s.562(3). If the Council had given her this
information Miss Vincent would either have applied for assistance herself or
have passed it on to Mr. and Mrs. Hodge when they negotiated their purchase.
If she had done the latter, it is inconceivable that Mr. and Mrs. Hodge would
have purchased at the full price and it is quite likely that they would not
have purchased at all.
I have no difficulty in accepting the argument down to that point. The Council
clearly owed a duty to Miss Vincent under s.562(3) and if it was in breach of
that duty (as I assume that it was for the purposes of the present argument)
there could be no doubt that Miss Vincent would have had a cause of action
against it. But the difficulty which lies in the way of Mr. and Mrs. Hodge is
that the duty imposed by s.562(3) is a duty to inform those who appear to be
eligible for assistance of the fact that assistance is available. The purpose
of this duty can only be to ensure that, so far as practicable, a person
eligible for assistance claims that assistance. Mr. and Mrs. Hodge could only
succeed if the duty were treated as one to give notice of the availability of
assistance to a person who is eligible for it not in order to provide an
opportunity for assistance to be claimed but in the hope or expectation that
the facts underlying the eligibility will be passed on to prospective
purchasers who will thereby be deterred from proceeding with their intended
purchase. It seems to me to be highly improbable that the legislature would
have intended to provide protection to unidentified future purchasers by this
circuitous and uncertain route. I cannot see how a duty which would avail Mr.
and Mrs. Hodge can be spelled out of s. 563(2) by any legitimate process of
statutory construction.
I do not think that there is a parallel between this case and the decision of
the House of Lords in White v Jones [1995] 2 AC 207. That was a
decision on the scope of the common law duty of care owed by a solicitor. The
present case depends entirely on the construction of the statute.
There is, I think, a further consideration to be borne in mind. If the
argument for Mr. and Mrs. Hodge were right the consequence would be that
persons whom the legislature has said are not to be eligible for assistance are
to receive compensation of an amount equivalent to what they would have
received if they were eligible. Moreover, as the judge observed in his
judgment, if that argument was right companies or trustees for companies would
be entitled to compensation in the circumstances which have arisen in this
case, even though they could not have received assistance if the Council had
fully performed its duty under s.562(3).
In view of my conclusion on the main argument, which assumes that the Council
was in breach of its duty under s.562(3), I am content to leave open the
question whether the words "becomes apparent" are to be construed subjectively
or objectively. I would observe, however, that what has to become apparent is
not that a particular house is defective but that a particular person is
eligible for assistance. Eligibility for assistance is quite a complex matter
which depends on the existence of particular facts some at least of which may
not be within the knowledge of the relevant housing authority. If "becomes
apparent" is to be construed objectively, so that the careless failure of the
Council in this case to appreciate that its houses at Ringwood Hill were within
the Secretary of State's designation puts the Council in breach of its duty
under s.562(3), it might be difficult to avoid a conclusion that an honest but
mistaken view of the facts relating to a person's eligibility for assistance
would likewise put the Council in breach. That is not a conclusion which I
would accept with equanimity but, as I have said, I am content to leave the
point open.
Order: Appeal dismissed with costs.
(Order does not form part of the approved judgment)
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