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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Shaws (EAL) Ltd. v Pennycook  EWCA Civ 100 (02 February 2004)
Cite as:  L & TR 34,  18 EG 102,  2 EGLR 55,  2 WLR 1331,  2 All ER 665,  EWCA Civ 100,  Ch 296
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF
JUSTICE, CHANCERY DIVISION
(The Hon Mr Justice Pumfrey)
London, WC2A 2LL
B e f o r e :
LADY JUSTICE ARDEN
SIR MARTIN NOURSE
| Shaws (EAL) Limited
|- and -
Smith Bernal Wordwave Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
William Geldart (instructed by Hallmark Atkinson Wynter) for the Respondent
Crown Copyright ©
Lady Justice Arden :
"26 Tenant's request for a new tenancy
(1) A tenant's request for a new tenancy may be made where the tenancy under which he holds for the time being (hereinafter referred to as "the current tenancy") is a tenancy granted for a term of years certain exceeding one year, whether or not continued by section twenty-four of this Act, or granted for a term of years certain and thereafter from year to year.
(2) A tenant's request for a new tenancy shall be for a tenancy beginning with such date, not more than twelve nor less than six months after the making of the request, as may be specified therein: …"
"25 Termination of tenancy by the landlord
(1) The landlord may terminate a tenancy to which this Part of this Act applies by a notice given to the tenant in the prescribed form specifying the date at which the tenancy is to come to an end (hereinafter referred to as "the date of termination"):
(5) A notice under this section shall not have effect unless it requires the tenant, within two months after the giving of the notice, to notify the landlord in writing whether or not, at the date of termination, the tenant will be willing to give up possession of the property comprised in the tenancy."
"24 Continuation of tenancies to which Part II applies and grant of new tenancies
(1) A tenancy to which this Part of this Act applies shall not come to an end unless terminated in accordance with the provisions of this Part of this Act; and, subject to the provisions of section twenty-nine of this Act, the tenant under such a tenancy may apply to the court for a new tenancy:
(a) if the landlord has given notice under section 25 of this Act to terminate the tenancy, or
(b) if the tenant has made a request for a new tenancy in accordance with section twenty-six of this Act."
"29. Order by court for grant of a new tenancy
(1) Subject to the provisions of this Act, on an application under subsection (1) of section twenty-four of this Act for a new tenancy the court shall make an order for the grant of a tenancy comprising such property, at such rent and on such other terms, as are hereinafter provided.
(2) Where such an application is made in consequence of a notice given by the landlord under section twenty-five of this Act, it shall not be entertained unless the tenant has duly notified the landlord that he will not be willing at the date of termination to give up possession of the property comprised in the tenancy …"
14 Grafton Street
"There was some discussion, unsupported by authority as I was told none existed, as to whether the tenants could, on or before November 27, have revoked their positive counter notice and given the negative counter notice required by section 29(2) to enable proceedings to be taken. In my view the purpose of section 25(5) is to introduce an element of certainty into the relationship between the landlord and the tenant. A tenant is not bound to serve a negative counter notice before the end of the two month period allowed to him. He may pause for that period of time while he makes up his mind. If however he does serve a positive counter notice during the two month period, I think that he must abide by what he has done. If that were not the case, the positive counter notice would serve no purpose whatever compared with complete inaction, for in either case the landlord would not know where he stood until the end of the two month period. If a positive counter notice is revocable the tenant serving the same would be able to serve a negative counter notice right up to the end of the two month period. If on the other hand the tenant does nothing, he may likewise serve a negative counter notice right up to the end of the two month period. It follows that a positive counter notice would be wholly devoid of any function, even that of courtesy, if it were revocable at the will of the tenant. I, therefore, conclude that a positive counter notice is irrevocable; and that in this case the tenants ceased to be able to serve a negative counter notice after October 13 1969, and that they then lost their right to apply to the court for an order for the grant of a new tenancy.
I have not overlooked the fact that the Act of 1954 is not expressed to impose on the tenant an obligation to serve a notice of either description within the two month period. All that the Act does is to impose on the landlord, as a condition of a valid section 25 notice, the obligation of informing the tenant that he is required to serve an notice one way or the other within the two month period, and to place the tenant under a disability if he fails to serve a negative counter notice. In my view, however, it is a necessary implication from section 25(5) that a tenant is under a statutory obligation to serve notice one way or the other within the two month period, although I accept that there is no sanction imposed on him for ignoring that obligation, except his inability to apply to the court.
In these circumstances the position in my view was as follows:
On October 14 1969, that is to say, about eight days before the Act of 1969 received the Royal Assent, the landlords had an indefeasible right to recover possession on April 1 1970, without payment of compensation, if I am correct in my conclusion that the tenants were precluded from withdrawing their letter of October 13, and from serving a negative counter notice.
Alternatively, on November 28, that is to say, just over a month before the Act of 1969 came into force, the landlords had an indefeasible right to recover possession on April 1 1970, without payment of compensation, if, contrary, to my view, the tenants were able, notwithstanding their letter of October 13, to serve a negative counter notice after that day."
"The importance of the passage for us lies in the judge's view that the only purpose of the positive counter notice is to introduce certainty into the transaction. By contrast, the negative counter notice serves another obvious purpose, since it links in directly with section 29(2) of the Act.
If that is right, as I believe it to be, I ask myself next, what was the object of introducing certainty into the transaction in the case of a positive counter notice? Was it for the benefit of the landlord or the tenant or both? The answer to that question must surely be that it was for the benefit of the landlord alone.
Mr Elvin sought to persuade us that certainty could also have been for the benefit of the tenant. But as Nourse LJ pointed out in the course of the argument, the tenant must know already if he is willing to give up possession. If he knows, how could the giving of a positive counter notice make him more certain of that fact? So far from being a benefit to the tenant, the only foreseeable consequence to him of giving a positive counter notice is prejudicial. Once given, the notice cannot be withdrawn, as the judgment of Brightman J demonstrates."
The judgments below
"16. I approach this passage with all the respect which is owing from me to a judge of great experience and authority in this field. I would, however, respectfully doubt whether the "therefore" in the words, "I, therefore, conclude that a positive counter-notice is irrevocable" in fact indicates a logical conclusion from the premises. It seems to me that it is a possible view that a positive counter-notice is not devoid of any function including that of courtesy if the tenant gives it, and thereafter it is acted upon by the landlord. If, however, there is no (to use a shorthand expression) "change of position" on the part of the landlord in reliance upon the serving of a positive counter-notice , I do not, as presently advised, understand why it is necessary to conclude that the counter-notice irrevocable. Mr Vickery, who appeared on behalf of the landlord in the present case, suggested a number of reasons why that should be so. He pointed to the symmetrical nature of the provisions of the statute relating first of all to landlord's notices under section 25 and secondly to the tenant's notice under section 26. He pointed out, correctly, that if a landlord gives a counter-notice, as is permitted under section 26(6), it is well settled that the grounds of opposition set out in such a notice are, like the grounds of opposition specified in the landlord's notice under section 25, unamendable and irrevocable. He submits that to treat the tenant's counter-notice under section 25(5), albeit it appears to have no other legal effect, as revocable, introduces an anomaly in the scheme of the Act which must be doubtful in view of the irrevocability of the other notices.
17. Mr Vickery submitted further that there is a good reason for treating a tenant's positive counter-notice as irrevocable. If the only question, he says, is whether in all the circumstances it is fair to allow the tenant to resile from a positive counter-notice, then an undesirable species of satellite litigation is introduced into a well understood, well circumscribed, kind of application made all the time in the county court and well understood by all involved. He says that it is thoroughly undesirable to introduce into this well understood system a possibility of satellite disputes as to the validity of tenants' negative notices if previous positive notices have been given and the tenant has for some reason or other changed its mind.
18. I see the force of these submissions. However, I am not satisfied that in point of fact the circumstances arising here are likely as a practical matter to arise at all frequently. There can be little doubt that there is no question of a change of mind here, but a simple error on the part of the solicitor. Second, I cannot see why, in the ordinary course, a tenant will give a positive notice unless quite satisfied that it does indeed intend to give up possession at the end of the notice period. I am not satisfied that positive counter-notices are such a common phenomenon in any event that it is necessary to consider the risks involved from the point of view of the proper administration of justice in permitting, in a proper case, a negative counter-notice to be substituted for a positive counter-notice already given. So although I freely accept the possibilities to which Mr Vickery referred, I doubt very much whether in point of fact they amount to a cogent objection to the construction of the relevant provisions which I prefer. The construction which I prefer is that section 29(2) is satisfied if in point of fact within the two-month period, thus giving proper emphasis to the word "duly", a notice stating that the tenant will not be willing at the date of termination to give up possession, has in point of fact been given.
19. I do not believe that this construction is precluded by the judgment of Brightman J, since in that case, although Brightman J held that the landlords had an indefeasible right to recover possession on 1 April 1970 without payment of compensation, in In re 14 Grafton Street, London W1  Ch 935 Brightman J is considering the indefeasible right of landlords having regard to the ability of the tenants to give a negative counter-notice after 13 October. It is to be observed that in that case no negative counter-notice was in fact given. The point, therefore, did not arise and the tenants took no steps to raise the question until after the expiry of the two-month period. I do not think it can be seriously contended that the two-month period is in any extensible, and it would follow, therefore, that after the expiry of the two-month period the landlord's right became indefeasible whether or not during the period from 13 October to 27 November there had been a contingent right in the tenants to revoke their original positive notice. Accordingly, it does not seem to me that this determination was essential to the decision of Brightman J, but if that is a wrong analysis I would, to the extent that I have indicated, very respectfully disagree with the generality of what he said.
20. It follows that in my view this appeal ought to succeed on the grounds that the tenant was entitled to give a second notice and that section 29(2) was potentially satisfied. However, it seems to me that in any case where the tenant has made a positive representation, it will be a question whether it is in fact entitled to resile from the positive notice which is given in answer to a section 25 notice given by the landlord. I say no more about that in this case, save to say that it must be open to the court of determine that in all the circumstances it is wrong for a tenant to seek to substitute a new statement of his intention for the purposes of section 29(2), but each such case must be dealt with on its own merits. I would accordingly allow this appeal on this ground. "
"In his first judgment the judge considered Doe d.Cheny v Batten (1775) 1 Cowp.243, and the recent discussion of it by Knox J in Dun & Bradstreet Software Services (England) Ltd v Provident Mutual Life Assurance Association (unreported), 2 April 1996. But before any detailed consideration of those cases it is necessary to make some general observations about estoppel, election and waiver. All share a common foundation in a simple instinct of fairness, and in particular the perception that as between two parties to a transaction or a legal relationship it is or may be unfair for one party, A, to adopt inconsistent positions in his dealings with the other, B. As Lord Wilberforce said in Johnson v Agnew  A.C. 367, 398: 'Election, though the subject of much learning and refinement, is in the end a doctrine based on simple considerations of common sense and equity.' Equitable, or promissory, estoppel applies only where there is an unequivocal representation, in words or conduct, by A and it is relied on by B. That does not arise here (the tenant's original pleading of estoppel was concerned with the identity of the landlord to which the notice was addressed, a point which is no longer live). In election, by contrast, A's words or conduct unequivocally evince a choice by A between inconsistent alternatives. In such a situation reliance by B on A's unequivocal words or conduct, as opposed to B's knowledge of what A has said or done, it not a necessary ingredient. But knowledge on the part of A that there is a choice to be made is a necessary ingredient. He must make an informed choice. But as Stephenson LJ said in Peyman v Lanjani  Ch.457, 487: 'When a party has legal advice, he will be more easily presumed to know the law and evidence or special circumstances may be required to rebut the presumptions.' "
Article 1 of the First Protocol
"Each natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.
The preceding provisions shall not, however, in any way impair the right of a state to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties."
"39. … 'Possessions' in article 1 is apt to embrace contractual rights as much as personal rights. Contractual rights may be more valuable and enduring than proprietary rights. But, by virtue of the statute, the contractual rights acquired by First County Trust were enforceable only with the consent of the borrower pursuant to section 173(3).
40. The response of the Secretary of State and others is that all the rights acquired by First County Trust under the agreement were from their inception subject to the limitations prescribed by the Consumer Credit Act. A restriction on the scope of the rights acquired by a lender under a transaction is not within article 1 of the First Protocol. A person who acquires property subject to limitations under national law which subsequently bite according to their tenor cannot complain that his rights under article 1 of the First Protocol have been infringed.
41. I do not agree. This proposition is stated too widely and too loosely to be acceptable. Clearly, the expiry of a limited interest such as a licence in accordance with its terms does not engage article 1. That is not this case. Here the transaction between the parties provided for payment of the loan and for the car to be held as security. What is in issue is the "lawfulness" of overriding legislation. The proposition advanced by the Secretary of State would mean that however arbitrary or discriminatory such legislation might be, if it was in existence when the transaction took place a court enforcing human rights values would be impotent. A Convention right guaranteeing a right of property would have nothing to say. That is not an attractive conclusion.
42. There are of course many circumstances where statutes empower the executive or the courts to make orders depriving a person of some of his possessions. Compulsory acquisition, and property adjustment orders on divorce, are instances. The exercise of powers such as these prima facie engages article 1. This is so irrespective of whether the enabling statute was enacted before or after the property affected by the order was acquired. Hakansson and Sturesson v Sweden (1990) 13 EHRR 1 is an example where the law was in place before the property in question was acquired. The law providing for the compulsory resale of the applicants' land within two years existed when they bought the land. Thus a provision in the Consumer Credit Act empowering a court to refuse to enforce a regulated agreement may engage article 1 even though the Act was in force before the agreement was entered into.
43. In the present case the relevant statutory provisions are framed differently. They do not empower the court to refuse to enforce the agreement now in question. They go further. The court is compelled to refuse to make an enforcement order. Is this difference material? I think not. It would be passing strange if article 1 were engaged in the former case but not the latter. A law regulating the effect of a transaction between the parties in the public interest does not always escape review under article 1 if it creates an 'imbalance' between the parties which would result in one party being arbitrarily or unjustly deprived of his possessions for the benefit of the other: see Bramelid and Malmström v Sweden (1982) 5 EHRR 249, 256.
44. Thus the question in the present case is one of characterisation of the nature and effect of the relevant provisions of the Consumer Credit Act, considered as a matter of substance rather than form. In my view, consistently with the underlying objective of article 1 of the First Protocol, the relevant provisions in the Consumer Credit Act are more readily and appropriately characterised as a statutory deprivation of the lender's rights of property in the broadest sense of that expression than as a mere delimitation of the extent of the rights granted by a transaction. The rigid ban on enforcement of security and contractual rights prescribed by section 127(3) alone and in conjunction with sections 106 and 113 engages article 1 of the First Protocol. The lender's rights were extinguished in favour of the borrower by legislation for which the state is responsible. This was a deprivation of possessions within the meaning of article 1: see James v United Kingdom (1986) 8 EHRR 123, 140, para 38. Whether this statutory interference with First County Trust's peaceful enjoyment of its possessions was justified, and therefore not a breach of article 1, is a separate issue."
"106 Article 1 of the First Protocol has a similar character [to article 6(1)]. It does not confer a right of property as such nor does it guarantee the content of any rights in property. What it does instead is to guarantee the peaceful enjoyment of the possessions that a person already owns, of which a person cannot be deprived except in the public interest and subject to the conditions provided for by law: Marckx v Belgium (1979) 2 EHRR 330, 350, para 50. Here too it is a matter for domestic law to define the nature and extent of any rights which a party acquires from time to time as a result of the transactions which he or she enters into. One must, of course, distinguish carefully between cases where the effect of the relevant law is to deprive a person of something that he already owns and those where its effect is to subject his right from the outset to the reservation or qualification which is now being enforced against him. The making of a compulsory order or of an order for the division of property on divorce are examples of the former category. In those cases it is the making of the order, not the existence of the law under which the order is made, that interrupts the peaceful enjoyment by the owner of his property. The fact that the relevant law was already in force when the right of property was acquired is immaterial, if it did not have the effect of qualifying the right from the moment when it was acquired.
107. The rights of property which are in issue in this case are those set in an agreement which is regulated by the 1974 Act. The Act subjects the rights of the creditor to restrictions in some circumstances. Section 65 declares that a regulated agreement which is improperly executed cannot be enforced by the creditor except by means of an order of the court, and section 127(3) declares that it is not to be enforceable at all except upon the condition which it lays down. The agreement which was entered into in this case was from the outset an agreement which was improperly executed. So it was always subject to the restrictions on its execution which sections 65(1) and 127(3) of the 1974 Act set out. I would hold that FCT's Convention rights under article 1 of the First Protocol are not engaged in these circumstances.
108. The Court of Appeal said that the effect of sections 65(1) and 127(3) was to deprive the pawnbroker of its ability to enjoy benefit from the contractual rights arising from the agreement or from the rights arising from the delivery of the pawn: paragraph 32. But the fact is that FCT never had an absolute and unqualified right to enforce this agreement or to enforce the rights arising from the delivery of the motor car. Article 6(1) of the Convention and article 1 of the First Protocol cannot be used to confer absolute and unqualified rights on FCT which, having regard to the terms of the statute by which agreements of this kind are regulated, it never had at any time under the improperly executed agreement which it entered into.
109. As I would hold that article 1 of the First Protocol is not engaged in this case, I do not need to examine the question whether section 127(3) is compatible with the rights guaranteed by that article. Had it been necessary for me to do so, I would have reached the same conclusion as Lord Nicholls has done for the reasons he gives."
"68. I turn now to consider whether section 127(3) of the Consumer Credit Act is compatible with the rights guaranteed by article 1 of the First Protocol. Inherent in article 1 is the need to hold a fair balance between the public interest and the protection of the fundamental rights of creditors such as First County Trust. It is common ground that section 127(3) pursues a legitimate aim. The fairness of a system of law governing the contractual or property rights of private persons is a matter of public concern. Legislative provisions intended to bring about such fairness are capable of being in the public interest, even if they involve the compulsory transfer of property from one person to another: see the leasehold enfranchisement case of James v United Kingdom (1986) 8 EHRR 123, 141, para 41. More specifically, persons wishing to borrow money are often vulnerable. There is a public interest in protecting such persons from exploitation.
69. There must also be a reasonable relationship of proportionality between the means employed and the aim sought to be achieved. The means chosen to cure the social mischief must be appropriate and not disproportionate in its adverse impact. Whether that relationship exists in the case of section 127(3) is the key issue.
70. In approaching this issue, as noted in R v Johnstone  1 WLR 1736, 1750, para 51, courts should have in mind that theirs is a reviewing role. Parliament is charged with the primary responsibility for deciding whether the means chosen to deal with a social problem are both necessary and appropriate. Assessment of the advantages and disadvantages of the various legislative alternatives is primarily a matter for Parliament. The possible existence of alternative solutions does not in itself render the contested legislation unjustified: see the Rent Act case of Mellacher v Austria (1989) 12 EHRR 391, 411, para 53. The court will reach a different conclusion from the legislature only when it is apparent that the legislature has attached insufficient importance to a person's Convention right. The readiness of a court to depart from the views of the legislature depends upon the circumstances, one of which is the subject matter of the legislation. The more the legislation concerns matters of broad social policy, the less ready will be a court to intervene."
"35. The distinction between the substantive content of a right and an unacceptable procedural bar to its enforcement by a court can give rise to difficulty in distinguishing the one from the other in a particular case. As a matter of drafting, a restriction on the scope of a right may be framed in several different ways. But the drafting technique chosen by the draftsman cannot be determinative of this issue. Human Rights conventions are concerned with substance, not form, with practicalities and realities, not linguistic niceties. The crucial question in the present context is whether, as a matter of substance, the relevant provision of national law has the effect of preventing an issue which ought to be decided by a court from being so decided. The touchstone in this regard is the proper role of courts in a democratic society. A right of access to a court is one of the checks on the danger of arbitrary power. In Matthews v Ministry of Defence  2 WLR 435, 477, para 142, Lord Walker of Gestingthorpe noted that article 6 is in principle concerned with the procedural fairness of integrity of a state's judicial system. Lord Hoffmann observed, at p 447, para 29, that it should not matter how the law is framed, provided one holds onto the underlying principle, which is to maintain the rule of law and the separation of powers.
36. In the present case the essence of the complaint is that section 127(3) of the Consumer Credit Act has the effect that a regulated agreement is not enforceable unless a document containing all the prescribed terms is signed by the debtor. In my view, thus framed, the complaint does not bring the article 6(1) into play. In terms of labels, that is a restriction on the scope of the rights a creditor acquires under a regulated agreement. It does not bar access to court to decide whether the case is caught by the restriction. It does bar a court from exercising any discretion over whether to make an enforcement order. But in taking that power away from a court the legislature was not encroaching in territory which ought properly to be the province of the courts in a democratic society.
37. In reaching the opposite conclusion the Court of Appeal focused on the exclusion of any meaningful consideration by the court of the creditor's rights under the agreement in a case where the document signed by the debtor does not include all the prescribed terms. The court held that the exclusion of any judicial remedy in such a case engages article 6(1):  QB 74, 92-93, paras 31, 32. I am unable to agree. The inability of the court to make an enforcement order in such a case, whatever the circumstances, is a limitation on the substantive scope of a creditor's rights. It no more offends the rule of law and the separation of powers than would be the case if Parliament had said that such an agreement is void."
Extension of time
Sir Martin Nourse :
Lord Justice Thorpe :