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	England and Wales High Court (Administrative Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> Khatun & Ors v London Borough of Newham [2003] EWHC 2326 (Admin) (10 October 2003) URL: http://www.bailii.org/ew/cases/EWHC/Admin/2003/2326.html Cite as: [2003] EWHC 2326 (Admin)

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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		10th October 2003

Mr Justice Newman:

1. These three applications for judicial review raise the same two issues:-

(1) whether the policy/practice adopted by the London Borough of Newham (the Defendant) for the allocation of leased accommodation to homeless persons is lawful;

(2) whether the Unfair Terms in Consumer Contract Regulations 1999 and Council Directive 93/13/EEC ("the Directive") apply to the terms on which such accommodation is let by the Defendant.

Issue (2) is raised directly only in the case of Khatun and, in that case, the Office of Fair Trading has been joined as an interested party and has appeared by leading counsel.

THE FACTUAL BACKGROUND

2. The Claimants are members of three separate households. They are all homeless persons in respect of whom the Defendant housing authority has acknowledged a duty to provide suitable accommodation for an indefinite period under section 193 Housing Act 1996 (as amended). That duty is owed because in each case the Defendant was satisfied that the Claimant was eligible for assistance, unintentionally homeless, in priority need and had a local connection with the London Borough of Newham. Each Claimant was provided with bed and breakfast style accommodation in performance of that duty and each remained in unsuitable bed and breakfast accommodation for many months.
3. Whilst being so accommodated each Claimant was notified by letter that the Defendant had secured self-contained, unfurnished accommodation for them. The letters were framed in deliberate terms, pursuant to the policy and practice which is under challenge. The letter to Miss Khatun was in the following terms:

"I am pleased to inform you that the Homeless Persons Unit can now transfer you to alternative temporary accommodation. This accommodation is available under the Private Leasing Scheme and is a self-contained unfurnished property.

You should come to the Homeless Persons Unit, 3 Pragel Street, London, E13 9HB at 11.00 am on Thursday 12^th December 2002 to collect keys and sign the Tenancy Agreement.

We will continue your hotel booking for a further 3 nights if necessary from your appointment date, in order for you to arrange for gas and electricity supplies to be connected.

If you are unable to keep the above appointment, please telephone on the above number to arrange another appointment. Failure to contact us will result in immediate cancellation of your Bed and Breakfast booking and the offer of accommodation will be withdrawn.

You must ensure that you bring with you proof of identity, ie wage slips, benefits book, letter from employer etc., so that the Housing Benefit form can be completed on the appointment day.

If you have a partner, please ensure he/she turns up also, otherwise sign-up will not take place.

Please note, if you decide not to accept this offer, you will not receive any further offers while enquiries on your application are ongoing. If you are in Bed and Breakfast accommodation it will be cancelled. If you have received a positive decision to your application (letter re: s.184 accept), your application will be closed. Please note that this Authority may consider that you have rendered yourself intentionally homeless if you make a subsequent application.

This accommodation is considered suitable for you and is offered under s.193 of Housing Act 1996. You may apply for a review of the suitability of this accommodation provided you request this within 21 days of receiving this letter".

4. The letters to the Claimants Zeb and Iqbal were in identical terms to that quoted above and sent to Mrs Khatun. But in a later letter to Mrs Khatun the standard wording had been changed. The paragraph "You are advised" had been modified and in its new form it read:

"You are advised that if you refuse an offer of a suitable accommodation you may not receive any further offers and your current accommodation provided by the council may be cancelled. If you need any further advice on this matter please speak to a member of our staff when you attend the above-mentioned appointment".

5. The Claimants rely upon the following points in connection with the letters:-

(1) The failure to provide the Claimants with the address, general location or any details in connection with the offered accommodation.

(2) The requirement to attend for an appointment "to collect keys and sign the Tenancy Agreement" and a warning that failure to do so would result in "immediate cancellation" of their bed and breakfast booking and withdrawal of the offer of accommodation.

(3) The advice and warning to the effect that refusal of an offer of a suitable accommodation may result in no further offers and cancellation of their current accommodation.

(4) The terms of advice in connection with a review of the suitability of the accommodation which stated that time ran from the date of receiving the letter for 21 days thereafter.

6. The Claimants duly attended for their appointments. Each was presented with a pre-printed tenancy agreement for signature. Each was then told the address of the property being offered and was asked to sign the tenancy agreement. Each was told that it was the Defendant's policy to require acceptance of the offer "there and then" and that if it was not accepted the bed and breakfast accommodation would be terminated forthwith.
7. None of the Claimants was offered the opportunity to see the premises or consider the offer before being required to accept it. Where the opportunity to view was expressly sought, it was refused. Each was urged to sign on the basis that if they did not do so the offer would be withdrawn and their accommodation cancelled.
8. The Claimants Khatun and Zeb were offered accommodation which had been obtained under the Private Sector Leasing Scheme ("PSL"). Under the Scheme the Defendant takes a lease of accommodation from the owner and sub-lets it to a homeless person on a non-secure council tenancy. The Defendant had devised a standard non-secure tenancy agreement for use in such cases. In the case of Iqbal, the property was available under a Housing Association Leasing Scheme. Two of the properties were located in Newham, the other in Haringey.
9. The Claimant Khatun signed "there and then". The Claimants Zeb and Iqbal declined to sign without an opportunity to see the premises first. They were issued with a notice that the Defendant considered its duties at an end and their bed and breakfast accommodation was cancelled.
10. Each of the Claimants sought statutory reviews under section 202 Housing Act 1996. The accommodation offered to and accepted by the Claimant Khatun was held to be unsuitable. After a delay the Defendant made a further offer following the same procedure taken in connection with the first offer. The Claimant again signed "sight unseen". Although dissatisfied with the condition, she has not sought a review.
11. In the cases of Iqbal and Zeb, each was offered, in the course of review, a further opportunity to accept the original offer of accommodation. Each had visited the location and accepted. The Claimant Zeb sought no further review. Ms Iqbal sought a review, succeeded but has not been offered alternative accommodation and remained in the property.

THE PRACTICE/POLICY

12. There is no dispute that a policy exists and that a practice is followed by the Defendant in connection with the transfer of homeless persons from bed and breakfast accommodation into self-contained private sector leased accommodation (PSL accommodation) and other accommodation available from housing associations or private sector. In the week commencing the 24^th March 2003 the Defendant's Homeless Persons' Unit had 870 households in bed and breakfast accommodation. It receives 2,700 new applications each year. For reasons of necessity the interim accommodation normally provided is bed and breakfast accommodation. However Newham, along with other Local Authorities, is under pressure to transfer families in such accommodation into alternative PSL accommodation. The government has set all Local Authorities a target of having no households in bed and breakfast provision for more than six weeks unless there are exceptional circumstances. The target is due to be met by April 2004. There is a shortage of PSL property.
13. Newham pays between £200 and £280 per week rent for each PSL property. The rent charged to tenants is a flat rate of £310 per week. The difference is swallowed up in administrative costs, bad debt provision, staffing, repair costs, dilapidation costs, legal and finance charges and the cost of procurement.
14. Where Newham accepts a duty to provide accommodation a caseworker completes a nomination form which specifies details of the family composition, any medical recommendations and the particular type of property required as a result. The information is based on an interview with the applicant. Certain details will be available from the initial application for housing. At the time when the Claimants' cases were processed there was no system for recording area preferences, but one has been introduced since that time and is calculated to provide further relevant information.
15. The nomination form is suitable for recording any information relevant to the accommodation needs of an applicant. The information which is recorded is available to the allocating officer who is responsible for allocating the PSL accommodation. The officers are trained and experienced and look out for information and material relevant to area and need.
16. Where an applicant declines to accept an offer at the initial sign up meeting he or she will be interviewed that day by a caseworker, who then determines whether the property is suitable in the light of all the information then available, including any imparted by the applicant. An applicant wishing to contact a solicitor is given an opportunity to do so.
17. If the caseworker considers the property to be suitable, the property is re-offered and the applicant is advised of the right to request a review. According to the evidence of Ferzana Ali (the Defendant's manager of the Homeless Persons Unit):

"An applicant may be left alone for a short period in order to consider the offer without the presence of the caseworker. This relieves any pressure on the applicant. This also provides an opportunity for the applicant to contact a solicitor to seek advice".

Where medical issues are raised a doctor may be required to fill in a form". Further:

"The applicant may be advised to accept the offer and seek a review or the offer may be withdrawn – this is within the discretion of the caseworker and the decision will depend in part on the new information supplied. The caseworker's decision would be cleared with a senior officer in this situation".

THE CHALLENGE TO THE POLICY

18. The key features of the policy identified by the Claimants and relied upon in support of the challenge to its legality are:

(1) the letter notifying an applicant of an appointment (see paragraph 4 above);

(2) the interview at which the homeless person is told the name and address of the accommodation and is presented with a pro-forma tenancy agreement for signature. The rent is inserted and no viewing is permitted;

(3) the advice in connection with review to the effect that the accommodation can be accepted and made subject to review;

(4) the requirement to sign "there and then", failure to do so being capable of being treated as a "refusal" of the offer;

(5) if signed the current accommodation will be continued for three days; if not signed, the offer is withdrawn and the current accommodation is cancelled. A letter will be issued notifying the applicant that the section 193 duty has been discharged and that a review may be sought.

THE GROUNDS

19. Mr Luba QC submitted that the policy is manifestly unreasonable, offensive, unfair and accordingly unlawful. Further he submitted that the tenancy agreement offered to each of the Claimants is a contractual agreement to which the provisions of the Unfair Terms in Consumer Contracts Regulations 1999 (S1 1999 No. 2083) and the Directive apply.
20. Mr Luba drew attention to the statutory Code of Guidance (July 2002) to which the Defendant is required to have regard (see section 182 Housing Act 1996). It states in paragraph 9.12:

"Housing authorities must allow applicants a reasonable period for considering offers of accommodation, particularly final offers made under Part 6 that will bring the homelessness duty to an end whether accepted or refused. There is no set reasonable period; some applicants may require longer than others depending on their circumstances, whether they wish to seek advice in making their decision and whether they are already familiar with the property in question. Longer periods may be required where the applicant is in hospital or temporarily absent from the district. In deciding what is a reasonable period, housing authorities must take into account the applicant's circumstances in each case".

21. In its Detailed Grounds the Defendant states:

"Obviously, Newham is conscious of the Code of Guidance and has regard to it. Nonetheless, having regard also to the need to move families from bed and breakfast, it considers its current practice to be preferable to the one advocated by the Code".

In the Detailed Grounds of the Defendant's Skeleton Argument a separate point was advanced, namely that the "only purpose of the provision in the Code is to ensure that the authority is sufficiently informed of matters relevant to it being satisfied that the offer is suitable". That being the case, since Newham obtained the necessary information before making the offer, the purpose of the Code was thereby met.

22. Further, the Defendant submitted that the Code is silent on whether the applicant is to be given time to consider the offer before signing for the property and, in any event, the Code was particularly pertinent to Part VI offers. An offer made under Part VI will bring the homelessness duty to an end if the local authority regard the offer as suitable and that it is reasonable for the applicant to accept it (section 193(7F) Housing Act 1996). Offers under Part VII will bring the duty to an end if the authority is merely satisfied that the offer is suitable (see section 193(5)).
23. The evidence from the Defendant makes no reference to the process of drawing up the policy, and it is not clear whether consideration was given to the Code. The statement of Ferzana Ali does not refer to the Code. The justification for the policy which has been adopted is set out in paragraphs 10 to 14 of her statement. In short, the policy is driven by the target which has been set by government for achievement by April 2004 and the desire to avoid the loss of rent which could ensue were applicants to be given an opportunity to view accommodation prior to deciding whether it was suitable. Paragraph 14 of the witness statement states:

"The alternative to our practice, ie allowing for viewings, does not assist the authority in meeting its targets to re-house families from bed and breakfast accommodation or compensate for the loss of rent as a result of the additional time the property is unallocated. Given the volume of properties and applicants with which Newham deals, empty properties present a significant barrier to the achievement of the target and a loss of revenue to the authority. Newham believes that because of this policy it will be able to meet the Government target".

24. I reject the submission that the only purpose of the advice contained in paragraph 9.12 of the Code is to ensure that the local housing authority is sufficiently informed of information relevant to the suitability of the accommodation. It can be assumed that consideration will have been given to the suitability of the accommodation prior to it being offered. The Code draws attention to the value to be attributed to consideration of its suitability by the applicant. The input by the applicant may also serve to provide further information to the local authority but the purpose of the Code is wider. Its advice is directed towards the achievement of a fair and practical result. Fairness requires that an applicant should not be pressured into signing a contract giving rise to legal obligations before having a reasonable time for reflection. The right of review under Part VII of the 1996 Act points to the practical advantage in an applicant being in a position to make an informed decision before signing a tenancy agreement otherwise there will be unnecessary requests for a review. As the paragraph of the Code suggests, what is reasonable is linked to the state of knowledge of the applicant and his or her familiarity with the property.
25. I consider the detailed argument advanced by the Defendant to be flawed. It misunderstands the purpose of the advice contained in the Code. I have concluded that the statement in the Detailed Grounds probably more accurately reflects the Defendant's position. Paragraph 14 of the witness statement of Ferzana Ali is to the same effect. The Defendant decided that "allowing for viewings", which would have been consistent with the Code's advice to allow applicants a reasonable opportunity to consider an offer, would not assist it in reaching its target.
26. In my judgment to depart from national guidance given under statute in order to achieve a national guidelines target, which has been set administratively, is to run the risk of acting unlawfully by failing to follow the guidance. Numerous authorities were drawn to my attention in this regard which highlight the proper approach to be taken to national guidance. They included R v. North Derbyshire HA ex p Fisher (1997-8) 1 CCLR 150, R v Islington LBC ex p Rixon (1997-8) 1 CCLR 119 and R v Kensington & Chelsea RLBC ex p Bayani (1990) 22 HLR 406.
27. In my judgment the Defendant should not have permitted the targets which had been set to deflect its attention from the import of the guidance. More than that, the view it held, and which it asserted in argument, to the effect that its state of knowledge, at the signing of the tenancy agreement, as to the suitability of the accommodation, was of paramount importance, was wrong. As a result it failed, when devising the policy, to pay sufficient regard to the interests of applicants. Whilst it was relevant to take into account the existence of a right to ask for a review, that right did not constitute an absolute "get out" from the obligations assumed by entering into the tenancy agreement. A review is bound to take some time and carries a measure of uncertainty. In the case of Khatun where the Claimant, a Muslim, having accepted accommodation was placed in a flat above a public house, the Claimant was compelled to experience the unsuitability, exacerbated by racist abuse from patrons of the public house, for some time. It has to be said it would have been obvious that the accommodation was unsuitable even if a viewing had not taken place and simply its situation had been disclosed. It also has to be said that the policy delays the making of an informed decision and creates a degree of uncertainty and disruption in the lives of those who are vulnerable and who, above all, will benefit from settled housing.
28. I have no doubt that, subject to any legitimate considerations to the contrary, the fair and practical administration of the law in this regard requires that an opportunity should be given to applicants to view accommodation before they enter into a tenancy agreement. I have reached this conclusion taking account of the matters above and because I do not regard the right to request a review, which exists both before and after the signing of the tenancy agreement, distinguishes the homeless person as a prospective tenant from any other prospective tenant. As Mr Luba pointed out, in reality the homeless person is not going to have a great deal of choice about where he or she lives, but inspection of the physical condition and precise location are relevant to reaching a decision to pay rent and assume legal obligations as a tenant. I reject Newham's response that "the applicant may take the property and then make use of the statutory 21 day period to consider whether to seek a review" as inadequate and misconceived.

OPPRESSION

29. The Claimants characterised the policy as "high handed and oppressive" because applicants are denied an opportunity to view against the threat of cancellation of their current accommodation and notification that the authority's legal obligations have been discharged. Worse than that, where an applicant received a letter, for example, in the terms of the letter to Ms Khatun the applicant could reasonably believe that a decision had to be made before the date of the appointment or believe that a 21 day period which embraced the interview was all that the law accorded.
30. The Defendant maintained that its policy was fair and reasonable. Its Skeleton Argument (para 24) asserts:-

"No offer is made unless there are good grounds for believing it to be suitable. The applicant is given a reasonable chance prior to signing to inform Newham of a matter which makes the offer unsuitable. If after that Newham maintains that the offer is suitable, the applicant has three days' grace in the bed and breakfast and has the keys to the PSL so as to satisfy themselves as to their decision. At worst, the applicant must move into a PSL for a few weeks rather than stay in bed and breakfast accommodation".

31. The Defendant contended that Ms Zeb's case "amply demonstrates the rationality and fairness of Newham's practice in principle and in operation". Ms Zeb refused to sign the tenancy agreement, having been advised in advance by a solicitor that she should request a view and if refused, refuse to sign. The Skeleton Argument for the Defendant describes the circumstances as follows:

"… she had no comment to make as to the suitability of the property because she attended armed with a letter from her solicitor …. which told of advice not to accept without viewing, because he had litigation in mind".

In conclusion, it stated:

"She has never made any criticism of its suitability. It plainly always was suitable".

32. It is difficult to see how these facts touch the issue as to rationality and fairness. The efficiency of the Defendant in administering the system and its success in offering and providing suitable accommodation is not the issue. The issue is, whether there is any reason for not providing an applicant with an opportunity to view accommodation, if one is requested, before requiring them under threat of a legal sanction, to sign a tenancy agreement giving rise to legal obligations. I accept that the Defendant endeavours, on the basis of such information as it has, to match the PSL property to the applicant and generally succeeds, but the catalogue of information may or may not be determinative of suitability. Ultimately whether there is to be an issue will depend upon the applicant having seen the property and considered its suitability. That is what, in my judgment, Parliament contemplated when legislating for a right of review. It did not legislate for the local authority's judgment to operate, at any stage, as final and conclusive.
33. The facts in Zeb's case demonstrate that had Ms Zeb been given an opportunity to view the accommodation before signing the agreement she would have accepted it and signed the agreement without an application for review. The facts do not support the rationale of the policy. They do not show that the Government target was furthered or that revenue was saved.
34. Mrs Iqbal accepted the property once she had seen it. Having viewed it she sought a review, succeeded, but has remained. The facts demonstrate that she would have signed had she seen the property. The facts provide no support for the policy.
35. The facts in Khatun's case demonstrate that had she been told the accommodation was above a public house, it would have been agreed, without the necessity of a view of the property, that it was unsuitable. The Defendant described the "circumstances" as "exceptional", because it has only one property located over a public house. The observation misses the point. The right of an applicant to see a property in advance before signing a legal agreement does not turn on the exceptional character of the property. However the case acutely demonstrates why the right to seek a review should not be compressed into the period after occupation.

CONCLUSION

36. The Defendant, acting under pressure generated by the target set by the government, concluded that so long as it endeavoured to match the homeless person to the PSL property, in the vast majority of cases it would be offering suitable accommodation. As a result to offer a view prior to the applicant having accepted a legal obligation to take the property, which the Code advised, was unnecessary and it would be likely to impede the target being met and generate loss and expense.
37. The policy involved persuading applicants, by threat of legal sanction being applied against them, to exercise their right of review after signing the tenancy agreement and after taking occupation of the accommodation. It calculated that to allow an applicant to view before signing the agreement was likely to increase the number of requests for reviews and delay efficient and speedy transfer from bed and breakfast accommodation to PSL accommodation.
38. This policy moving, as it did, from a firm conviction in the rectitude of its own decision making and its own view that any move to PSL accommodation from bed and breakfast accommodation was a move for the better, led it to assume that a homeless person did not require the same degree of freedom to contract as would have unhesitatingly been accorded by it to others. The terms of the letter to invite applicants to an interview and the practice employed at the signing appointment were coercive and unfair. They departed from the Code. They infringed an applicant's right to be sufficiently informed in connection with the legal obligations to be assumed by the tenancy agreement. They were designed to wrongfully restrict the circumstances in which a review could be requested. It follows the policy is unlawful.

Issue (2). Whether the Unfair Terms in Consumer Contracts Regulations 1999 and the Directive apply.

39. By agreement the Court's present concern is to determine preliminary issues as to whether:

(1) the 1999 Regulations and Council Directive 93/13/EEC of the 5^th April 1993 apply to contracts relating to land, including to the grant of leases?;

(2) the 1999 Regulations and the Directive apply to public authorities such as the Defendant?;

(3) the Defendant is a "seller or supplier" and the Claimants are consumers within the meaning of the 1999 Regulations and the Directive?

These issues are of some considerable public importance. By agreement all issues as to whether the Defendant's standard non-secure tenancy agreement is unfair and unlawful are to be adjourned in order to give the Defendant and the Office of Fair Trading ("the OFT") an opportunity to resolve differences by agreement.

40. With effect from 1^st April 2003 the functions of the Director General of Fair Trading were transferred to a new corporate body, the OFT. It has powers and duties under the 1999 Regulations which include considering and investigating complaints and in appropriate cases bringing proceedings against sellers or suppliers. In the exercise of its powers it has intervened in these proceedings in order to have a determination from the Court on the issues which affect the scope of the Directive, the Regulations and its enforcement powers.
41. The Defendant's case as to the application of the Regulations is that they do not apply:-

(1) to contracts for an interest in land;

(2) to contracts in which the seller or supplier is a local housing authority, entered into in performance of its statutory duty, both because:

(a) it is not acting as a trade, business or profession; and

(b) the other contracting party is not a "consumer".

42. The 1999 Regulations are intended to implement the Directive, consequently, it is well settled that the Regulations must be interpreted so as to be consistent with the Directive. Accordingly, it is to the Directive that one must turn for guidance as to the scope of the 1999 Regulations (see Case C-300/95 Commission v. United Kingdom [1997] ECR I-2649 and Case C-240-244/98 Oceana Grupo Editorial [2000] ECR I–4941).
43. Pursuant to Article 1 the purpose of the Directive is stated to be to approximate the laws, regulations and administrative provisions of the Member States "… relating to unfair terms in contracts concluded between a seller or supplier and a consumer".
44. Article 2 defines "consumer" and "seller or supplier" in the following manner:-

"(b) "consumer" means any natural person who, in contracts covered by this Directive, is acting for purposes which are outside his trade, business or profession;

(c) "seller or supplier" means any natural or legal person who, in contracts covered by this Directive, is acting for purposes relating to his trade, business or profession, whether publicly owned or privately owned".

45. Two particular purposes can be identified as within the Directive. First, protection of the consumer. Secondly, stimulation of an internal market embracing free competition. The English language version of the Directive makes no reference to contracts conveying an interest in land. It refers to:

"the internal market …. in which goods, persons, services and capital move freely". (Preamble, fifth recital).

"… the seller of goods or supplier of services … and … distortions of competition .. amongst the seller and suppliers (Preamble, sixth recital).

"… consumers do not know the rules of law which, in Member States other than their own, govern contracts for the sale of goods or services; whereas this lack of awareness may deter them from direct transactions for the purchase of goods or services in another Member State … (Preamble, recital seventh and eighth).

46. On the basis of the above, the Defendant submits the Directive is clear in its purpose and extent. Protection eliminates disparities in protection for the consumer between Member States and thereby furthers free trade in goods and the free movement of services.
47. In contrast the OFT has received complaints about unfair terms in contracts relating to land and leases and as part of its enforcement procedure has considered over 350 cases. It has consulted with bodies representing both landlords and tenants and has published guidance containing its views on the application of the Regulations to terms commonly found in assured shorthhold tenancy agreements. It has secured amendments of unfair terms in the standard terms used by trade associations and the main publishers' agreements (Oyez and Law Pack for example). Additionally it has ongoing enforcement cases involving various agreements in use between local authorities and their tenants.
48. The OFT point to the huge lacuna which will be left in the scheme of consumer protection if land is excluded from the Regulations. Its information is to the effect that "… 30% of households in England occupy rented accommodation and 20% (3.9 million) have local authority or registered social landlord tenancies". The OFT submit that "… the Directive and the 1999 Regulations must be construed to avoid this effect since otherwise the purpose of consumer protection is acutely prejudiced. This means construing the protection afforded by the Directive to include land".
49. The OFT's argument involves a number of steps. Its starting point is that the language of the Directive does not exclude contracts conveying an interest in land from its protection. It can also be said that manifestly contracts for the supply of goods and services in connection with land are within the Directive. It is not disputed that a loan secured on land and the provision of a hotel room are within the Directive. Equally the provision of material to build a house and the services of a builder are within the Directive. If contracts such as these, which so closely touch land, are covered why should the conveyance of an interest in land be regarded differently?
50. It is undoubtedly the case that the legal regimes in Member States, relating to contracts for an interest in land differ widely, but as the Sixth Report from the Commission of the European Communities pointed out in its Proposal for the Directive, it was the existence of differences which provided the rationale for the Directive:-

"A striking example of difference in scope is provided by the contrast between British law and that of other Member States. British law excludes contracts of insurance from the application of the Unfair Contract Terms Act, whereby insurance is not excluded by the law of other countries".

It can be added that the Unfair Contract Terms Act 1977 does not apply to land either.

51. The terms of the Explanatory Memorandum of the Proposal point to a contemplation that there was a need for the contracts for the conveying of an interest in land to be within the Directive. It states:

"It cannot be assumed that consumers who cross frontiers to buy goods or services, or to invest or acquire property in other Member States, have understood and agreed the terms of a contract they have made, in that they do not speak the local language so are unfamiliar with the local law, especially if it is complex….".

52. The debate which the Court is now called upon to consider and to resolve is not a new one. The Directive was first implemented in domestic legislation by Regulations passed in 1994 (SI 1994 No. 3159) which came into force on 1^st July 1995. The Regulatory Impact Assessment published in connection with the 1999 Regulations points out that one of the two main purposes of the 1999 Regulations is "to remove the differences between definitions and layout in the EC Directive and the 1994 Regulations in order to remove any room for argument that the scope of the Regulations is different from that of the Directive. This is intended, in particular, to remove any uncertainty that to the extent that the Directive applies to contracts relating to land, including leasehold and tenancy agreements and licences, the Regulations also apply to such contracts".
53. Paragraph 11 of the Assessment states as follows:-

"There is doubt as to whether the Directive applies to land contracts, including leasehold and tenancy agreements and licences. The amendments to the definitions and layout of the Regulations are intended, in particular, to remove any uncertainty that the Regulations are not capable of applying to contracts relating to land to the extent that the Directive does so".

54. The step taken by the UK Government to amend the 1994 Regulations was prompted by the European Commission, from which one infers it holds the view that the Directive does extend to contracts relating to land. That such is the case is borne out by the terms of a memorandum of a telephone conversation between Mario Tenreiro of the European Commission and Emma Nathan of the OFT, dated 3^rd June 1998. Mr Tenreiro was the official within the Commission primarily responsible for drafting the Directive. He makes various points on the question which the OFT have adopted and developed in argument.
55. Three arguments call for particular attention. First, that the proper approach to the Directive requires attention to be paid to the contract and the capacity or character of the contracting parties rather than the subject matter of the contract. Secondly, that where a seller or supplier and consumer are involved in connection with a contract, the purpose of the Directive is met by providing protection and by extending it to the contract, unless the Directive specifically excludes the contract from its protection. By this process of interpretation the word "goods" means all things, including land, unless excluded. Thirdly, support can be found for the correctness of this approach from Directive 85/577/EEC on the protection of the consumer in respect of contracts negotiated away from business premises ("the doorstep selling directive").
56. In my judgment it is important not to lose sight of the character of the instrument under interpretative scrutiny. It is not to be construed by the Court as it would construe domestic legislation, which is the product of a close, legislative process of debate and amendment and approval by a legislative chamber. It is an autonomous instrument drawn up for implementation by domestic legislation in each Member State. In this context the expressed purpose of the Directive is of paramount significance and is not to be narrowed by legislative or semantic interpretations. Where the Directive will be available in the language of each Member State, too close attention to semantics will place too great a weight upon the problems which can arise from translation. The initial text of the Directive is in French but it has no status as the authoritative text.
57. The niceties to which foreign language translations can give rise is well illustrated by some of the translations of the Directive and the practice that all the language versions are, as a matter of principle of interpretation, admissible and relevant in determining the scope of the English language version of the Directive. By this "Community" approach to interpretation something akin to an authorised meaning can be established. I have no doubt that this is what is required and equally no doubt that in implementing the approach a strict legislative scrutiny of the language is out of place (see Sri Cilfit and Larificio di Gavaroda SLA v. Ministry of Health [1982] ECR 3415 at p.8430). The true meaning will be ascertained by considering the character and extent of the purpose and a broad flexible approach being given to the manner of its implementation.
58. The French, Italian, Spanish and Portuguese versions use a different word in relation to free movement of goods ("merchandises", "merci", "mercancias", "marcadorias" respectively) from that used for sales and supplies ("biens", "beni", "bienes", "bens" respectively). The French version at the second recital refers to "le vendeur de biens", the Italian to "il venditore di beni", and the Spanish to "el vendedor de bienes". I accept that according to Article 516 of the French Civil Code "biens" covers both moveable and immoveable property. A short journey from Brussels to Strasbourg discloses that in the French version of the First Protocol to the ECHR, Article 1, the word "biens" appears, which in the English version appears as protection for peaceful enjoyment of "possessions". Further the Strasbourg Court has ruled "possessions" covers all property including moveable and immovable property (see Clayton & Tomlinson, "The Law of Human Rights" at paragraph 18.33 et seq. where the relevant authorities are cited).
59. Directives derive their constitutionality from the Treaty. The Treaty provides that, "This Treaty shall in no way prejudice the rules in Member States governing the system of property ownership" (Article 222). Further the Directive was adopted pursuant to Article 100A. As such it is an internal market measure having as its object to contribute towards the establishment and functioning of the internal market. Article 3(1)(g) of the Treaty states that the activities of the Community shall include "… a system ensuring that competition in the internal market is not distorted". Article 7 of the Treaty defines the market as one in which there is to be the free movement of goods, persons, services and capital.
60. Having regard to the breadth of the character and content of the market drawn up by the Treaty, I can see no place for giving effect to a restrictive interpretation, rooted in the character of particular transactions or based upon the subject matter of contracts, so long as "… the rules in the Member States governing the system of property ownership" are not prejudiced. It has not been suggested that the OFT's case gives rise to such prejudice.
61. The "doorstep directive" is consistent with and illustrative of the legislative technique of stating broad purposes limited by express exclusions. It protects the consumer in respect of contracts negotiated away from business premises but provides by express exclusion that the Directive does not apply to, inter alia, "contracts for the construction, sale and rental of immoveable property or contracts concerning other rights to immoveable property".
62. A comprehensive consideration of the purpose of the Directive includes regard being paid to the express purpose of facilitating the free movement of persons within the area of the Treaty. The exclusion of contracts relating to land from the ambit of the Directive impedes rather than facilitates that purpose. It is obvious that persons exercising the right of free movement within Member States are likely to enter into contracts involving the acquisition of rights over land. I accept the submission that unfair terms in contracts for the provision of rental accommodation could present an obstacle to free movement and distort competition within the market.

Caselaw Guidance and domestic implementation by Member States other than the UK.

63. The position according to existing case law has been accurately described as pointing towards land being included, without any authority holding that it does not.
64. In Starmark Enterprises Limited v CPL Distribution Limited [2002] 4 All ER 264, Arden LJ stated (at p.279):

"It is relevant, however, to note that the lease is made between two commercial parties. If the tenant had been a consumer and the provisions for review of rent had not been individually negotiated (and no other enactment applied), it would be open to the tenant to argue that by virtue of the Unfair Terms on Consumer Contracts Regulations 1999 S1 1999/2083, the provisions of proviso (2) are not binding on him".

The Court's attention was drawn to County Court decisions where the Regulations have been given effect to in connection with leases, but it is not necessary to refer to them in detail.

The CLAB Database

65. The CLAB Europa database records decisions of regulatory bodies in numerous Member States. The Court has been provided with extracts from the database. It shows that a number of Member States (Austria, Spain, Netherlands and Belgium) have applied their unfair terms legislation to contracts relating to land. It can be said that in each case the State has implemented its own legislation and that the Directive has not limited the extent to which States may legislate in this area. Approaching the material with some caution, I regard it as a pointer towards the proper fulfilment of the Directive's purpose.

Conclusion

66. In my judgment, the Directive and the 1999 Regulations apply to contracts for the transfer of an interest in land because:

(1) the purpose of the Directive requires the conclusion;

(2) the proper interpretation of the Directive requires the conclusion;

(3) such contracts have not been excluded from the ambit of it, in circumstances where had such been the intention, they would have been;

(4) to exclude such contracts would impede the purposes of the Directive and create a large lacuna in the measure of protection available for consumers.

Do the 1999 Regulations and the Directive apply to public authorities such as the Defendant?

67. The Defendant submitted that the Directive does not apply to a local authority acting for the public benefit. Although the use of resources to provide accommodation confers a private benefit on the homeless, it is essentially action taken in the public interest pursuant to public policy. Further it was submitted the words "trade, business or profession" are not apt to describe the status fulfilled by a local authority when entering into a tenancy agreement with a homeless person and only a strained interpretation could lead to their inclusion.
68. I reject the submission for the following reasons:-

(1) Article 1(2) and Recital 13 of the Directive provide for the exclusion of contractual terms which reflect statutory or regulatory provisions or principles of international conventions from the provisions of the Directive.

(2) Recital 16 which is concerned with fairness states that the assessment of the unfair character of terms will "… in particular in sale or supply activities of a public nature providing collective services which take account of solidarity among users…." take account of the different interests involved.

(3) I accept the submission that the status, namely the public nature of the supplier, goes to fairness and not jurisdiction.

(4) Recital 14 states that the "… Directive also applies to trade, business or professions of a public nature".

(5) The conclusion that a local housing authority is within the Directive is consistent with the European Court of Justice's jurisprudence in connection with public authorities in the fields of competition. For example, a public authority can constitute an "undertaking" in the application of the law on competition and in connection with the transfer of undertakings (see Betterware Group Ltd v Director General of Fair Trade (Registered Homes Confederation of Northern Ireland Ltd and Another Intervening) [2002] All ER (D) 16 Aug). In this instance the local housing authority is engaging in activities which are capable of being performed by the private sector notwithstanding that it has done so in discharge of a statutory obligation to provide housing.

(6) A purposive interpretation requires the activities of housing authorities to be regulated by the Directive and the Regulations.

Whether the Defendant is a "seller or supplier" and the Claimant is a "consumer" within the meaning of the 1999 Regulations and the Directive?

69. The Defendant is plainly a "seller or supplier". The Claimants did not enter into the tenancy agreement for the purpose of their "trade, business or profession" and are plainly consumers.

70. It follows there should be judgment for the Claimants. I shall hear Counsel on the appropriate form of relief and any other outstanding issues.

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MR JUSTICE NEWMAN: For the reasons given in a judgment which has been handed down, these applications for judicial review are allowed. Mr Knafler, you have provided me with some draft orders which I think you have circulated.

MR KNAFLER: I understand the local authority's position to be that the format of all three orders is agreeable to them. Subject to your Lordship, I ask for those orders.

MR JUSTICE NEWMAN: They seem to me to meet the bill. Thank you very much indeed.

MR KNAFLER: It may be that other parties have other applications to make.

MR JUSTICE NEWMAN: Does anybody want to say anything about the relief?

MR GREEN: I have something to say about costs.

MR JUSTICE NEWMAN: What has happened? Let me see what you say about costs.

MR GREEN: I think it is agreed between the claimant and the local authority that the claimant gets its costs. No provision has been made for the Office of Fair Trading. We do seek our costs against the local authority.

MR JUSTICE NEWMAN: It is only in the one case you intervened, it is Khatun.

MR GREEN: I can take you for the reasons that we say that it is appropriate for costs to be ordered.

MR JUSTICE NEWMAN: Let me look at the order in Khatun and see the format of it. You ask for the costs of the Office of Fair Trading to be paid by the?

MR GREEN: The defendant, the local authority in the Khatun case. The reasons are, as your Lordship knows the Office of Fair Trading became involved, not by choice but through necessity, because the claimants complained to the Office of Fair Trading under the Unfair Contract Terms Regulations and the parties then asked the Office of Fair Trading not to determine the complaint pending judicial review. The matter was, therefore, going to be heard by the High Court. The Office of Fair Trading has an independent statutory task and function, which includes bringing matters to court for injunctions. In those circumstances it was inevitable that the Office of Fair Trading was going to have to argue the point as an interested party. Neither party objected to the Office of Fair Trading coming in, but it was going to have to argue the point of principle because there was a root and branch challenge to its jurisdiction. The High Court was, therefore, bound to determine an issue of importance and the Office of Fair Trading needed to be heard. It was made clear to the Office of Fair Trading in pre-hearing correspondence that Newham opposed the Office of Fair Trading at every move.

The second point is that the OFT's involvement was, in substance, a substitute for what would have become, in due course, more costly proceedings when the Office of Fair Trading brought separate proceedings against Newham in the Chancery Division for an injunction and appropriate rulings. Given that Newham was opposing the position throughout, and continues to oppose, that would have been inevitable. Those proceedings would have been more expensive because we would have been initiating them. In the event, the Office of Fair Trading was able, fortuitously, to slipstream into these proceedings and, therefore, the costs are lower than they would otherwise have been. When the Office of Fair Trading came in, we acted, in effect, as the claimant. We ran the unfair contract terms part of the case and, if I may say so, all parties acted efficiently, proportionately reasonably in order to keep costs down. But costs were incurred by the Office of Fair Trading in running that part of the case.

The respondents made clear to us in correspondence, and I have it here if it becomes relevant, that they would seek costs against us if they were not successful. In those circumstances a costs issue was live in the correspondence right up until shortly before the hearing and the position has never changed. They would be seeking costs against us if they won, and we reserved our opposition in costs against them.

We would submit, my Lord, that it is appropriate in these circumstances for the Office of Fair Trading who, in effect, have been forced to come along, have argued the point as claimants, to be given their costs in relation to the Khatun case only? Obviously, Mr Luba did not have to argue the point. We would submit there was no extension in the amount of time that would otherwise have had to be taken up if Mr Luba had argued it on behalf of the claimants. But we had to be here to protect what is a very important public interest position. Those are the circumstances, we submit, which justify an order for costs in our favour.

MR JUSTICE NEWMAN: You oppose that, Ms Davies?

MS DAVIES: Yes, my Lord. The local authority opposes the order of costs in relation to the Office of Fair Trading for the reason that the Unfair Contract Terms point was raised by the claimant and could have been argued by the claimant in the Khatun case. The claimant involved the Office of Fair Trading by way of bringing the complaint to the Office of Fair Trading, and it is the local authority's position that it was a matter of expediency to the claimant for the Office of Fair Trading, with its greater expertise and knowledge of the point, to argue the Unfair Terms Contract Regulations point. But the point could have been argued by the claimant. For those reasons the intervention of the interested party, the costs should not been borne by the local authority.

The intervention of the Office of Fair Trading did not add anything to the time that the case took. Mr Luba could have argued the point himself and, had he done so, would have been entitled to the costs of doing that, but it would not have made any difference to his costs. The local authority should not have the added burden of the OFT's costs.

In relation to the correspondence, I have had a brief look through the bundle of correspondence. Clearly, there was an issue as to costs because the local authority opposed the intervention of the Office of Fair Trading, but that was to make clear that it would accept intervention of the interested party in the event that it did not increase the time estimate or the costs implications.

For those reasons, the local authority submit that it should not pay the interested party's costs.

MR JUSTICE NEWMAN: Mr Green, do you suggest that it had to be argued by the Office of Fair Trading or that there were pressing needs for it to be argued by the Office of Fair Trading, as opposed to Mr Luba arguing it?

MR GREEN: Plainly, Mr Luba had the right to argue the point, but there were pressing needs for the Office of Fair Trading to argue it. It is an issue of very considerable importance. Here was a local authority making a vigorous stand against what was, in effect, the jurisdiction of the Office of Fair Trading, and the issue -- because the matter was in front of the Office of Fair Trading, the complaint had been made -- if the High Court found there was no jurisdiction, the Office of Fair Trading would not have been able to continue with its complaint and not have been able to continue with its review of the leases of a large number of other local authorities. It was of the greatest public importance for the Office of Fair Trading to present its case. The Office of Fair trading had access to information which Mr Luba did not have access to and we were able to put that before the court. I hope it was helpful to the court. They have a library of material, they have elections of literature, they have loads of discussions with Commission officials, they had access to the client data base and so on and so forth. Your Lordship has been able to review that material. With respect to Mr Luba, I rather doubt that he would have been able to put that material in front of the court.

MR JUSTICE NEWMAN: If Mr Luba had argued it, and you had stood back, I suppose there was always the chance that the claimants might succeed, as they have, in their personal claim as against the local authority, and you would, without foreknowledge, had to consider what would happen if the court is against the argument, dismisses the argument, on the Regulations. You are then faced with a judgment of this court, which you believe to be wrong which binds you.

MR GREEN: Which binds us and would have thrown an existing policy is into disarray. If the Office of Fair Trading had then sought to commence injunctive proceedings under Regulations against Newham, you would be faced with an authority which bound the High Court and we would have then had to go to court and say, "You were against us, we need to go to the Court of Appeal". But we would have been, in the intervening period, thrown into a state of chaos.

MR JUSTICE NEWMAN: You would have had to started the injunction proceedings, in the first instance, in order to generate the piece of litigation in which you had control of the outcome.

MR GREEN: We would have had to do that and we would have known at that point that we were going to lose because there was a binding High Court authority against us. That is a very unsatisfactory position to be in when the alternative is simply to intervene and put the Office of Fair Trading's case in a piece of ongoing litigation. It was more efficiently done in this context, we would submit, than in the context I have just described which would have been very unsatisfactory. So, the Office's view was that there was little choice but to intervene and it did what it had to do.

MR JUSTICE NEWMAN: Do you want to say anything, Miss Davies, in response to the observation I have made to Mr Green?

MS DAVIES: My Lord, the only comment I would make on that is what the Office of Fair Trading could have done in relation to the local authority, had it not been a party to these proceedings, is a matter of some speculation and the state of disarray into which the Office of Fair Trading would have been possibly thrown had the court ruled against it on that point, is again a matter of some speculation. It may have had other cases in which it could have challenged the ruling. It would not have had to be this particular case against Newham. Those, I would submit, are not satisfactory reasons for requiring the local authority to pay the interested party's costs.

MR JUSTICE NEWMAN: In my judgment, the Office of Fair Trading should have an order for costs against the defendant, the London Borough of Newham, for the following reasons. First, the issue was joined between the London Borough of Newham and the Office of Fair Trading prior to these proceedings, these judicial review proceedings. Because complaint had been made to the Office of Fair Trading, it had established a statutory duty to act.

Secondly, these proceedings were brought at the suit of the claimants who have a more direct personal interest in the arguments, apart from those which were advanced from by the Office of Fair Trading. Thirdly, the matter was, and is, of considerable general public importance for the Office of Fair Trading to have had a ruling on the issue. Fourthly, to have left the matter in the hands of litigants who did not have the same direct and statutory responsibility, before the enforcement of the law regarding my judgment, was an unattractive position for the Office of Fair Trading and they were entitled to take the view that at some stage this issue needed to be joined in proceedings in which they had some carriage of the matter. Fifthly, that the intervention has been moderate and proportionate. It has assisted the court and perhaps has assisted the court in a way which would not have been possible, even in the able hands of Mr Luba, who would otherwise have had to carry the argument.

For all those reasons, and in particular that even Mr Luba would have taken some time, the only area of costs extra to that which would have been incurred in any event, is the separate representation by counsel. But, as Mr Green points out, that, in any event, was likely to take place by proceeding by way of injunction in the Chancery Division to set up a situation in which the issue which had already been joined between Newham and the Office could be dealt with. Thus, it seems right and just that the Office of Fair Trading should have its costs.

What next?

MS DAVIES: The local authority seeks permission to appeal against both elements of your Lordship's judgment. If I can deal first with the allocations practice issue. Briefly, your Lordship had said, in paragraph 27 of the judgment, that the view that Newham held, which it asserted in argument, to the effect that its state of knowledge at the signing of the tenancy agreement as to suitability, was of paramount importance, was wrong. Your Lordship has said at paragraph 32 that when enacting the Housing Act Parliament did not legislate for the local authority's judgment to operate at any stage as final and conclusive. It is the local authority's submission that that is not what the Act says, or a reflection of settled authority, in particular the case of Puhlhofer in which it was held that the question of suitability is one for the authority alone, to be set aside only if its decision is verging on the absurd. Looking at the declarations which we annex to the draft order, the first declaration requires the local authority, in order to discharges its functions lawfully, to provide a viewing and an opportunity for the applicants to consider accommodation before signing a tenancy agreement. In the local authority's submission, that obliges the local authority to seek input from the applicant too, to the question of suitability which, in the local authority's submission, is clearly deemed by Parliament to be a matter only for the authority subject to the nationality argument.

That, in a nutshell, is the local authority's argument on the allocations point.

Turning to the issue of the Regulations, the judgment takes into account the purpose of the Directive and the intention of the UK government when the Regulations were enacted. It is the local authority's submission that the view of the Commission and the recitals and the legislative history in 1994 are also relevant and those show contrary intention when the Regulations were first enacted. In relation to the Regulations, I would also emphasise the extreme importance of the matter in terms of the number of leases entered into and the wide application of the Regulations.

Unless I can assist your Lordship further.

MR JUSTICE NEWMAN: No. Thank you, very helpful. Mr Knafler, are you going to respond, or Mr Green, if he is not offended by the alteration in priority of status.

MR KNAFLER: Since allocation was raised, first, by Ms Davies, if I may respond to that briefly, and say, that your Lordship's judgment is entirely consistent with central Government guidance. To the best of our knowledge, Newham is the only council authority that has this particular practice. It must be implicit in the 1996 Act that a reasonable opportunity of viewing accommodation is afforded.

In my submission, your Lordship's judgment is clearly right and, if an appeal is to be launched, it should be left to the Court of Appeal to decide whether that should take place.

MR JUSTICE NEWMAN: Puhlhofer -- you submit it is not inconsistent with Puhlhofer?

MR KNAFLER: Ultimately, the final decision as to whether accommodation is suitable is for the housing authority. That is not in dispute.

MR JUSTICE NEWMAN: Yes, Mr Green, what do you say about permission on your part?

MR GREEN: We suggest that this is a matter for the Court of Appeal. Your Lordship has given clear and unequivocal ruling which is consistent with the position adopted in other member states. It is relevant that in this regard we were threatened with an application for a Reference which was not, in the event, pursued by the local authority before your Lordship. If the local authority thought this was a matter that ought to go further, they should have made an application for a Reference. As matters stand, we will go to the Court of Appeal and the Court of Appeal might make a Reference. But they did not take the view that it was sufficiently serious for them at that stage. That is a reason why your Lordship can leave it to the Court of Appeal. If the Court of Appeal think it is an issue they wish to hear, then so be it.

There is another matter. We understand that the local authority has now a new set of draft terms and conditions. I think that was explained to your Lordship in the course of the hearing. It is not clear that there is any dispute between the Office of Fair Trading and the authority on those terms. We have not seen them, but the facts appear to have changed and that is a reason why, if there is anything left really in substance in this point, it is for the Court of Appeal.

MR JUSTICE NEWMAN: You do not resist the application for leave to be granted in connection with your part of the case, is that right?

MR GREEN: We do. We say it should be left to the Court of Appeal.

MR JUSTICE NEWMAN: You say it should be left to the Court of Appeal?

MR GREEN: Yes, it should be left to the Court of Appeal.

MR JUSTICE NEWMAN: You say it should be left, but not left in the sense by permission being granted, but left to the Court of Appeal to decide whether permission should be granted.

MR GREEN: The Court of Appeal should be entitled to choose from the menu.

MR JUSTICE NEWMAN: It seems to me, as the judgment records and you have said, it is a matter of public importance and, of course, one of the grounds upon which I do have to address the question of leave, whatever view I form as to the merits, is whether it is not simply, from the point of view of the importance of the point, better that there should be a Court of Appeal decision on it rather than simply my own.

MR GREEN: That is absolutely right, my Lord, save only that the Court of Appeal can take the same view as to the importance of the issue. The Office of Fair Trading is not saying it is not of importance, only that the Court of Appeal can make a determination whether that is sufficient for one of appeal.

MR JUSTICE NEWMAN: On balance, I am persuaded that the point is, so far as the Office of Fair Trading is concerned, a point of sufficient importance that it does fall within those classes of cases which, for that reason alone, I should grant permission and I so do.

So far as the allocation policy is concerned, I am not persuaded, either from the public importance of the point or from the merits of the matter, that it is a case which justifies the grant of permission. That can be a matter which the Court of Appeal can consider in the context of the permission I have granted on the other point.

Thank you all very much. There will be relief granted in the terms of the draft orders which have been submitted to the court, save that in the case of Khatun there must be a paragraph added to the effect that the Office of Fair Trading should have their costs against Newham.