For the appellant: Dalgleish; Gillespie Macandrew LLP

For first respondent: Lindhorst; Bonar Mackenzie

For second respondent: Party

23 November 2011

Introduction

[1] This is an appeal by Dundee City Council (the Council) as the levying authority for council tax against a decision of the first respondent (the Committee) dated 19 July 2011. The question is whether the second respondent (the landlord) is liable for the council tax due in respect of flats in Dundee that he owns and lets. I understand that the number of flats involved was latterly 27.

[2] The Council determined that the landlord was liable for the council tax in each case. The landlord appealed on the ground that, since a valid lease existed over each of the flats at the relevant date, the tenant was liable for the tax in each case. He argued (a) that each tenancy continued beyond the contractual date of ish by virtue of tacit relocation until it was validly terminated; and (b) that since none of the leases had been terminated, the liability for the tax remained with the tenant.

The nature of the tenancies

[3] Although the Committee has failed to refer to this, it seems to be agreed that all of the properties in this case were let on short assured tenancies under sections 32-35 of the 1988 Act and that they were let in accordance with the landlord's standard form of lease, a copy of which was exhibited to and approved by the Council in each case for housing benefit purposes.

The statutory provisions

[4] Section 75 of the Local Government Finance Act 1992 (the 1992 Act) provides inter alia as follows:

"75-(1) The person who is liable to pay council tax in respect of any chargeable dwelling and any day is the person who falls within the first paragraph of subsection (2) below to apply, taking paragraph (a) of that subsection first, paragraph (b) next, and so on.

(2) A person falls within this subsection in relation to any chargeable dwelling and any day if, on that day -

(a) he is the resident owner of the whole or any part of the dwelling;

(b) he is a resident tenant of the whole or any part of the dwelling;

(c) he is a resident statutory tenant, resident statutory assured tenant or resident secure tenant of the whole or any part of the dwelling

(d) he is a resident sub-tenant of the whole or any part of the dwelling;

(e) he is a resident of the dwelling; or

(f) he is any of the following -

(i) the sub-tenant of the whole or any part of the dwelling under a sub-lease granted for a term of six months or more;

(ii) the tenant, under a lease granted for a term of six months or more, of any part of the dwelling which is not subject to a sub-lease granted for a term of six months or more;

(iii) the owner of any part of the dwelling which is not subject to a lease granted for a term of six months or more ... "

[5] Section 32 of the Housing (Scotland) Act 1988 (the 1988 Act) provides inter alia as follows:

"32-(1) A short assured tenancy is an assured tenancy -

(a) which is for a term of not less than six months; and

(b) in respect of which a notice is served as mentioned in subsection (2) below ...

(3) Subject to subsection (4) below, if, at the ish of a short assured tenancy -

(a) it continues by tacit relocation; or

(b) a new contractual tenancy of the same or substantially the same premises comes into being under which the landlord and the tenant are the same as at the ish,

the continued tenancy or, as the case may be, the new contractual tenancy shall be a short assured tenancy, whether or not it fulfils the conditions in paragraphs (a) and (b) of subsection (1) above ... "

The hearing
[6] The appeal before the Committee proceeded on the understanding (a) that at the relevant date each of the flats was unoccupied; and (b) that if any of the flats nonetheless remained subject to a tenancy, the tenant and not the landlord would be liable for the tax by reason of section 75 of the 1992 Act (supra).

[7] The Committee told the parties at the outset that it would arrive at a view in principle on the law and that thereafter either party could make further submissions to it in respect of any individual property.

The decision

[8] By letter to the landlord dated 19 July 2011, the Committee gave its decision and its reasons. The letter, so far as relevant, is in the following terms:

"I refer to your attendance at the Valuation Appeals Committee which sat in Dundee on 29th March 2011. The Committee has now reconvened and has asked me to write to you to advise you of their view, in principle, on your Appeal. I am writing in similar terms to Dundee City Council and it will then be up to them whether they want to come back the Committee on any of the specific properties to argue why the decision of the Committee should not apply in any of the particular cases.

It is, of course, open to either of you to appeal to the Court of Session in Edinburgh if either of you is not in agreement with the decision.

The Committee were of the view that, in principle, your Appeal should succeed for the following reasons:-

1 In terms of the Lease which you produced to the Panel and on
the assumption that the Leases for the other properties which you rented out were in similar terms, the Tenants had Security of Tenure under the Housing (Scotland) Act 1988.

2 The rule of tacit relocation applies to these Tenants which
means that their Leases continue until such time as either a valid Notice to Quit is served by you as Landlord and accepted by the Tenant or the Tenant gives proper notice to you as Landlord in terms of the Lease or you, as Landlord, obtain a Court Order evicting the Tenant from the property and therefore bringing the Lease to an end. No evidence was led by Dundee City Council that valid Notices to Quit had been served by you on any of the Tenants and you indicated to the Committee that you had not issued such Notices to Quit. No evidence was led by Dundee City Council to show that any of the Tenants had given proper notice to you and the indication by you to the Committee was that such notices had not been given to you. No evidence was led by Dundee City Council that you had sought Eviction Orders from the Court for any of the properties in question and you indicated to the Committee that you had not taken steps to recover possession of any of the properties through the Courts.

3 The Committee can find no requirement in law that requires a
Landlord to serve a Notice to Quit on a Tenant or to seek recovery of a property through a Court Order even although the Tenant of the property in question is not paying rent and/or appears to have abandoned the property.

4 The hierarchical structure for liability of Council Tax is clear laid out in s 75 of the Local Government Finance Act 1992 and the liability for Council Tax falls with the first person who meets the test laid out in each of the paragraphs under s 75(2) of that Act. The first five provisions of that subsection relate to people who are resident within a property. It is the understanding of the Committee that all of the properties in question were unoccupied and therefore the first relevant paragraph is s 75(2)(f) which provides firstly for a sub Tenant under a sub Lease for a term of 6 months or more. This makes no reference to the requirement for a property to be occupied. So far as the Committee were aware there were no sub Tenancies. The next person who would be liable is 'the Tenant, under a Lease granted for a term of 6 months or more of any part of the dwelling which is not subject to a sub Lease granted for a term of 6 months or more'. On the basis that there were Tenants with the Leases granted for a term of 6 months or more, these tenancies having continued under the Rule of tacit relocation, the Committee therefore took the view that these Tenants had responsibility for payment of the Council Tax for the properties in question."

The appeal

[9] The appellant contends (1) that the Committee's decision is wrong in law; (2) that decree of eviction is not a means of terminating a lease; (3) that the Council erred in making a decision "in principle" in these cases and thereby fettering its discretion in a decision on any of the individual appeals; and (4) that it erred in reversing the onus of proof, the true position being that the onus was on the landlord to establish that at the material date each lease remained in force.

[10] The Committee has lodged answers to the effect that (1) the appeal is premature and (2) that its decision is sound in law. The landlord's answers support the decision and the reasoning of the Committee.

Conclusions

The procedure adopted by the Committee

[11] In my opinion, the Committee erred at the outset in the procedure that it adopted. Where there is a multiplicity of appeals, a committee should, in general, refrain from making a decision on principle without having made findings in fact in any of the cases. It may appear to a committee that it can make such a decision on submissions by the parties, but that is an exceptional procedure. Experience shows that in most cases the decision depends on the facts. It would have been better if the Committee had required the parties to lodge a joint minute setting out the agreed facts in each case and heard evidence on any matters that were in dispute. It would then have been better able to consider how the statutory provisions applied.

[12] Perhaps the Committee thought that its procedure would expedite the resolution of these appeals. Unfortunately in consequence of its procedure it has reached a decision that is illogical, erroneous in law and based on inadequate findings in fact. In my view, the decision will have to be set aside.

The Committee's decision

Illogicality
[13] In my opinion the decision of the Committee is invalid because while it bears to decided in principle, for reasons 2, 3 and 4, that it is the tenant who is liable in each case for the tax, it in effect reserves leave to the Council to challenge the applicability of that decision in any individual case. The decision is therefore self-contradictory.

Error in law

[14] In my opinion, the Committee erred in its conclusion in law. It concluded that the leases continued in force by tacit relocation until either party gave notice of termination to the other or the landlord obtained a court order for eviction of the tenant (para 1). Since there was no evidence that a notice of termination had been served; or that the landlord had sought any order for eviction (para 2), and since there was no obligation on the landlord to serve a notice to quit or to seek a court order for recovery of the property even though the tenant was not paying rent and/or had abandoned the property (para 3), the Committee found that in each case the tenant was a tenant under a lease granted for a term of six months or more of any part of the dwelling which was not subject to a sublease granted for a term of six months or more. Therefore, section 75(2)(f) of the 1992 Act applied. In reaching this conclusion, the Committee did not refer to any of the provisions of the 1988 Act.

[15] Section 32 of the 1988 Act (supra) applies in all of these cases. In contrast with, for example, section 3 of the Agricultural Holdings (Scotland) Act 1991, section 38 does not provide that at the contractual expiry, the lease shall continue by tacit relocation unless either party takes certain steps. Instead, it merely provides that at the expiry of the contractual term the tenancy will continue as a short assured tenancy "if ... it continues by tacit relocation." Whether it is so continued will therefore be decided on common law principles.

[16] The Committee's understanding was that when the term of a lease expired, the lease was automatically renewed by tacit relocation and continued so to be renewed until either party served notice of termination or the landlord obtained a court order for eviction. Therefore, in the view of the Committee, since none of these events had occurred, the tenancies continued by operation of law.

[17] In my opinion, the Committee's interpretation of the principle is unsound. In leases of heritable property, the broad general principle is straightforward. If at the expiry of the contractual endurance of the lease neither party indicates to the other that he does not consent to the renewal of the lease, the lease is held to be renewed on the basis that the mutual consent of the parties is to be presumed from their silence. At common law, any overt indication by either party that he does not consent to the prolongation of the lease is sufficient to exclude tacit relocation.

[18] In considering whether the leases have been terminated by notice of termination or by a decree of removal, the Committee has overlooked the rule that the operation of tacit relocation is excluded where the tenant does not retain possession after the contractual ish (Rankine, Leases, 3rd ed, p 600; Ersk, Inst, II.vi.35).

[19] In Signet Group plc v J Clark Retail Properties Ltd (1996 SC 444), it was suggested that unilateral actings by one party that were unknown to the other could not prevent the operation of tacit relocation. That was a case where the tenant sought to prevent tacit relocation. It was held that there was nothing to show that any of the actings founded on by the tenant were known to the landlords (ibid, at p447 C-D). [20] Where a flat let under a short assured tenancy appears to be vacant at or after the date of ish, the question whether the tenant has abandoned it will be particularly fact-sensitive. It occurs to me that the special problem in the present cases is that the landlord's typical tenant will not be minded to give notice, oral or written, to the landlord. He will simply vacate the flat and cease to pay rent. That, in my view, would be prima facie evidence of abandonment. It may reasonably be supposed that in such a case those facts will come to the notice of the landlord. However, in view of the many diverse circumstances in which tacit relocation may be excluded, it is essential that the Committee should hear evidence in each case and make a decision on its special facts.

Findings in fact

[21] My comments on the operation of tacit relocation indicate how important it is that a committee in cases of this kind should make clear findings in fact and set them out in its decision before giving its reasons. It is unfortunate that the Committee has recorded scarcely any findings in fact.

[22] On the information before us it is agreed by counsel that at the relevant date each of these properties was unoccupied; but the Committee failed to consider whether that was because the tenant had abandoned the property or was merely absent from it temporarily. No decision can be made in any of these cases until that question is resolved. For this reason alone, I would have been of the view that the decision appealed against was invalid.

The position of the appellant
[23] Although the matter is not referred to in the Committee's decision, it is significant that the case involves two separate functions of the appellant, namely its function as levying authority for Council tax and its function as a housing authority administering the system of housing benefits. It is unfortunate that counsel for the appellant was not familiar with the 1988 Act or with the closely related system of housing benefit.

[24] It seems that virtually all the flats in this case were let to tenants who received housing benefit. Housing benefit is funded and administered by the Council (Social Security Administration Act 1992, s 134). It is payable in respect of a specified property and is calculated by reference to the rent due for that property (Housing Benefit Regulations 2006 (SI No. 213), Part 3). Although in certain limited circumstances the Council has a duty or a discretion to pay housing benefit direct to a private landlord, in the normal case it pays it to the tenant (ibid, regs 95-96). A recipient of housing benefit is obliged to inform the Council of any material change of circumstances (ibid, reg 86). One such change would be where the tenant vacates the property and becomes tenant of another. If the new property is within the Council's jurisdiction, the Council may pay benefit in respect of the new property.

[25] The landlord has complained to us that when a flat appears to have been vacated by the tenant, he cannot be certain that the tenant has abandoned it until he knows that the tenant's housing benefit for that flat has been withdrawn. The landlord says that in such cases he cannot obtain the relevant information from the Council because it is bound by data protection requirements.

[26] It is essential that both parties should place before the Committee all relevant evidence that they have on the question whether a flat has been truly abandoned or is merely temporarily unoccupied. That may cause difficulties for the parties and for the Committee; but there is no way of deciding the landlord's appeals other than by a scrutiny of the evidence in each case.

Disposal

[27] I propose to your Lordships that we should allow the appeal and recall the decision appealed against; and that we should return these cases to the Committee with a direction to it to hear evidence in each of them and to make findings in fact and in law by way of deciding whether the tenancy continues in force. It would lighten the burden of the Committee if the landlord and the Council were to submit a statement of agreed facts in each case.

Convening the Committee as a respondent

[28] Counsel for the Committee has been helpful to us on numerous points; but he appeared in this appeal only because the appellant convened the Committee as first respondent. In my opinion, that was incompetent. Where an appeal is taken to this court against a decision of an inferior court or of a tribunal or committee, the decision-maker ought not, in my opinion, to be convened as a party to the appeal. The decision-maker is by then functus. It is for the successful party, and not the decision-maker, to defend the decision appealed against.

For the appellant: Dalgleish; Gillespie Macandrew LLP

For first respondent: Lindhorst; Bonar Mackenzie

For second respondent: Party

23 November 2011

[29] I concur with the Opinion of your Lordship in the chair and with the disposal which you propose.

For the appellant: Dalgleish; Gillespie Macandrew LLP

For first respondent: Lindhorst; Bonar Mackenzie

For second respondent: Party

23 November 2011

[30] I have had the advantage of reading in draft the Opinion prepared by your Lordship in the chair. I fully agree with all of it, including your Lordship's proposals as to the disposal of this appeal.