Lands Tribunal for Scotland

OPINION

Smith
v
Aberdeen City Council

We sat to hear this application in Aberdeen on 10 November 2000. The applicant was represented by Mr Neil Beynon, Advocate, instructed by Messrs Bryan Keenan & Co, Aberdeen. Mr Charles Smith, Solicitor represented the landlord respondents, Aberdeen City Council. The application to the Tribunal seeks a finding in terms of section 71(2)(a) of the Housing (Scotland) Act 1987 that the landlord, having been duly served with an application by the tenant to purchase her dwellinghouse (the "subjects"), failed to issue timeously either an offer to sell or a notice of refusal.

The following facts were not in dispute. The applicant applied to buy the subjects by completing the appropriate form on 24 November 1999. This was received by the landlord on 25 November. The form posed the question: "Is the property the tenant's only or principal home?" and the applicant had ticked the box marked "yes". A note appended to this question on the form said: "You can only apply to buy if the property is your only or principal home". This note and the question posed are justified by the provisions of section 44 which provides that a tenant shall be a secure tenant if " (1)(b) the tenant is an individual and the house is his only or principal home". On receipt of the application, the landlords processed it in their usual way. They relied on the answer given and did not make any form of enquiry in relation to this particular issue.

By letter of 21 January 2000 they issued an offer to sell. On the face of it, this complied with the formal requirements of section 63(2). Shortly thereafter, the landlords received a typed unsigned message purporting to come from "anxious neighbours". This message alleged that the applicant and her partner "moved to Inverurie late November ’99 and purchased a … house". The respondents reacted by sending the applicant a letter dated 3 February 2000 in the following terms: "I refer to my offer dated 21 January 2000 to sell to you your dwellinghouse known as and numbered 23 Rowan Road, Aberdeen. On behalf of Aberdeen City Council I formally withdraw the said offer". The landlords at no time sent a notice of refusal within the meaning of section 68(1). The applicant at no time intimated acceptance of the offer of 21 January in terms of section 66. By letter of 15 May 2000 to the applicant's solicitors, the landlords confirmed that they were not to process the application.

The above narrative corresponded with the respondents' written answers. In these answers, the respondents adopted the position, repeated in submission before us, that the applicant should have ignored the letter of 3 February and accepted the offer. She had failed to do so. The offer, therefore, lapsed. There had been no failure by the respondents. The Answers referred to the fact of receipt "of an anonymous letter alleging that the applicant was not in occupation of the said dwellinghouse as required by the Housing (Scotland) Act 1987". There was no other reference to this matter. In particular, there was no assertion that, as matter of fact, the dwelling was not the principal residence of the applicant either at the date of application to purchase or at any other date. There was no attempt to found on this as a matter relevant to the disposal of the present application. No adjustments were intimated and a diet for hearing of the application and answers was fixed for 19 September 2000.

By letter of 25 August 2000 Mr Smith, for the respondents, wrote to the Clerk to the Lands Tribunal giving some further detail of the allegations made against the applicant and expressing the view that the applicant had made fraudulent misrepresentations. By letter of 12 September the respondents again wrote to the Clerk, this time enclosing a copy of their letter of the same date addressed to the Procurator Fiscal. This letter set out more detail of the applicant's alleged move from the subjects to an address in Inverurie and asserted that the applicant knew "when she applied in November 1999 to purchase the property … this was not her home and she did not intend it to be her home". It was submitted that the "representation was made fraudulently with an intention of cheating the Council" and that the council was in fact deceived. Various details were provided to the Procurator Fiscal to help establish that the applicant had not been resident in the subjects since November 1999. A copy of this letter was intimated to the applicant's agents.

The diet of 19 September was discharged to allow the Procurator Fiscal to make investigations. However as the applicant was anxious to make progress a further hearing was then fixed for 10 November. In accordance with our normal practice the respondents gave intimation to the Tribunal of the witnesses who might be called. There were some eight witnesses. It was obvious that the respondents intended to lead these witnesses to support the proposition that the applicant was not residing in the subjects. At the start of the hearing, Mr Beynon gave notice of his contention that such evidence was irrelevant as a matter of construction of the Act in the circumstances set forth above. He also contended that, in any event, there was no proper basis in the respondents’ pleadings for such evidence. The applicant had no fair notice of the case to be made.

Both parties were agreed that it would take more than one day for the Tribunal to hear the available evidence bearing on the question of residence. They were agreed that the pleadings raised substantive legal issues and that the time allocated to the hearing could best be used by debating those issues. Arrangements were accordingly made to release the witnesses and we then heard submissions.

Parties’ contentions

Mr Beynon set out his position with careful reference to the detail of the statutory scheme for the tenant's right to buy. It is unnecessary for us to set out this material. Nothing turns on the detail. (The scheme, as a whole, is summarised effectively in East of Scotland Water Authority v Livingstone 1999 SC 65). The short question was whether there was an offer to sell within the meaning of section 63(2). If there was not, the applicant was entitled to apply to the Tribunal under section 71, which, so far as relevant, provides: "71-(1) Where - (a) a landlord who has been duly served with an application to purchase fails to issue timeously either an offer or an amended offer to sell … or a notice of refusal … the tenant … may refer the matter to the Lands Tribunal … (2) Where a matter has been referred to the Lands Tribunal under subsection (1), the Tribunal shall consider whether in its opinion - (a) any of paragraphs (a) to (c) of that subsection apply, and if it so finds it may - … ".

The real issue was the status or effect of the letter of withdrawal. This, he contended, was essentially a matter of fact. It was simply nonsensical to suggest that because there were no statutory provisions for withdrawal, the purported withdrawal had to be ignored. In his submission, withdrawal of the offer meant that there was no offer. No offer was made and available for acceptance for the appropriate period. In terms of section 66(1) the tenant should have been given two months to accept the offer. The whole purpose of section 71 was to address situations where there was no offer for a tenant to accept.

The argument based on absence of acceptance by the tenant was similarly unfounded. It made no sense, in the context, to expect a tenant to ignore such a letter of withdrawal. The landlords had adopted their own procedures and these simply did not fit the scheme of the Act.

Mr Beynon cited Livingstone, supra. He referred in particular to the passages in the opinion of Lord Prosser at 78B-D and 80A-D and in the opinion of Lord Coulsfield at pages 84 and 85. The decision established that where there had been no offer and no timeous refusal an applicant could bring the matter before the Tribunal and thereafter the Tribunal's function was purely administrative. The landlords could no longer found on any allegation that the subjects were not a secure tenancy.

Some time was taken at debate by the Tribunal attempting to explore with Mr Beynon what distinction, if any, would fall to be drawn between challenge to the status of a secure tenant at the date of application on the issue of principal residence at that time; and challenge to such status if a tenant lost his position as secure tenant after making the application due to a change of circumstance. Mr Beynon reserved his position on this matter until hearing the full argument for the respondents. In the event, as appears below, it became clear that Mr Smith did not attempt to argue that a change after a date of application would be relevant. Accordingly, we do not require to deal with this issue.

Mr Beynon submitted strongly that, notwithstanding the practice of the Tribunal not to take a strict view of pleadings, there was no justification for any enquiry into the question of residence in this case. The answers came nowhere near giving fair notice. He accepted that some detail of the allegations was contained in the letter to the Procurator Fiscal of which the applicant had had notice. However that letter had not been lodged. There was no intimation that it would be founded on. In a matter of this importance, particularly with allegations of fraud, the Tribunal should not allow such enquiry on the present pleadings. His main submission, however, was that it was incompetent for the Tribunal to embark on that issue: Livingstone, at 84 D-E. As the terms "competent" and "relevant" could, he suggested, sometimes cause confusion, he submitted that, in any event, evidence bearing on status as a secure tenant was now irrelevant.

Mr Beynon referred us to MacKay v City of Dundee District Council 1996 SLT (Lands Tr) 9. In that case the Tribunal had held that when a tenant had lost the tenancy, the Tribunal could no longer make an offer to sell and, if it did, the former tenant could not validly accept it. In the present case, however, there was no doubt that the tenancy had continued. He accepted that the actual decision in MacKay could properly be read subject to the comment on it in Ross v City of Dundee Council 2000 SLT (Lands Tr) 2 at p.5L. In light of the decision in Livingstone, while change in status as a tenant might be relevant, change in status as a secure tenant would not be.

In response Mr Smith confirmed that the respondents' position was as set out in the answers. The present application was based on section 71(2)(a) which required the Tribunal to make a finding that the landlord had failed to issue timeously an offer to sell before the Tribunal was empowered to take any other steps. He supported this contention by reference to the rubric of the decision in Livingstone as reported in 1998 SCLR 1049. As the point was not in any sense contentious we did not require to look at the detail of the case in this connection but we take this opportunity to observe that the advantage of following well-established rules as to the hierarchy of reports to be used before courts or tribunals is that it avoids the type of difficulty which might have arisen in this case. The Tribunal had available the report in Session Cases, Mr Beynon used Scots Law Times and Mr Smith was working from Scottish Civil Law Reports.

Mr Smith stressed that in this case a timeous offer had been issued. Accordingly section 71 simply did not apply. The issue of the offer was a factual matter. Once issued it had the support of the Act and, therefore, treated as a matter of fact, was more weighty than the factual matter of withdrawal for which there was no statutory warrant. He accepted that his argument meant that if, for example, a landlord had sent with a letter of offer, a separate formal notice stating that the offer should be disregarded as the landlords had not decided whether to permit a sale, that would, nevertheless, be a good offer within the meaning of the Act because such a covering notice would have no statutory authority. In his submission in the present case there had been an offer. As it had not been accepted the offer lapsed: MacKay, supra, 12H. The tenant would, accordingly, require to start the whole process over again.

Mr Smith made it quite clear that in relation to the issue of the applicant's status as secure tenant, his contention would be that, as at 24 November 1999, the subjects were not the tenant's principal home. In other words, she was not qualified as secure tenant at the time of application. There was no question of relying on a change of circumstances.

He was unable to point to any legal basis for distinguishing the decision in Livingstone. However he suggested that the situation was different on the facts in as much as the information relied upon had not come to light in time for a timeous notice of refusal. He conceded that if the "information" had been available at 24 November, the decision in Livingstone would have covered the case. In his submissions Mr Smith did not attempt to suggest that Livingstone had been wrongly decided. We drew to the attention of parties our understanding that an appeal was pending, in the case of Graham v Northern Constabulary 2000 SLT (Lands Tr) 2, seeking to challenge the decision in Livingstone. Sensibly, the parties did not invite us to defer disposal of the present case to await the outcome of that appeal.

As a general proposition, Mr Smith stressed that it was reasonable for the landlord to rely on information provided explicitly by the tenant. There would usually be no reason to doubt that an application related to the tenant's principal residence. There would be no need to have a system of routine enquiry into that issue. There was no obvious line of routine enquiry. It would be invidious to attempt to make enquiries of neighbours where no ground for suspicion had arisen. Asked about the implications of section 68(2) (which makes provision for a period of two months for a notice of refusal where reasonable enquiries have to be made) he submitted that this would only apply if something had arisen to trigger an investigation.

Mr Smith accepted that there was no express statutory provision allowing the Tribunal to deal with an issue of deliberate falsehood. Even if it was indisputable that an applicant had told a deliberate lie in the application form, there was no mechanism for the Tribunal to set the application aside. There would, however, always be the possibility of having it reduced in the Court of Session or, possibly, finding some suitable declaratory procedure in the Sheriff Court. He submitted nevertheless that the Tribunal ought to be able to deal with the situation. It would, he said, be very unfortunate if there was no way the Tribunal was able to consider whether a tenant was entitled to buy. It was in the public interest that housing stock should not improperly be lost.

Mr Beynon in his response to these submissions said that as it was now clear that no change of circumstances was to be alleged, the application on any view was governed by the decision in Livingstone. The Tribunal's function was now solely administrative. The issue of residence was irrelevant. The Tribunal should go on to make the necessary order leading to the issue of an offer.

He agreed that if an application was based on falsehood the landlord would have the option of an action of reduction of the application in the Court of Session. This could be coupled with declarators that they were not obliged to continue with the procedure for sale.

He moved for certification of the case as fit for the employment of counsel. This was not opposed and parties agreed that expenses should follow success in relation to the debate.

Decision

We see no justification for holding that the attempt to withdraw the offer was not both competent and successful. No authority was advanced in support of the proposition that the withdrawal was invalid and we are aware of no general principle which would lead to that result. We are of course mindful of the need to interpret the Act in accordance with its purpose. A tenant would, in theory, have a benefit in being able to ignore a purported withdrawal and being able accordingly to conclude a bargain by timeous acceptance of the offer. However we are also aware, as the present case demonstrates, that such a construction would not provide any practical benefit for a tenant unless she was made aware of her right to ignore the withdrawal. We consider accordingly that a straightforward approach to construction of the Act is to be preferred to one which seeks to add to its provisions by implication. A straightforward approach is consistent with that taken by the majority in Livingstone, which we discuss further below.

There is, of course, no statutory provision for withdrawal of an offer duly made in accordance with section 63(2), just as there is no provision for withdrawal of a formal notice of refusal. However, there is, equally, no provision preventing such withdrawal. The machinery adopted for implement of the tenant's right to buy in Scotland is to create procedures which replicate, where possible, the essentials of consensual sale. An application to exercise the right to buy leads to the issue of an offer. A person making an offer to sell heritage is normally free to change or withdraw it at any stage before it has been accepted. There is no reason to doubt that the landlords intended that the effect of their letter of 3 February should be to prevent the tenant accepting the offer. A tenant receiving such an official letter would be expected to treat the offer as withdrawn. Any contrary interpretation would, in practice, be to the prejudice of the tenant.

The matter can be tested by considering the position of the landlords had they been able to issue an offer immediately and had then had reason to change their mind about the tenant's qualification. If they had been able to withdraw that offer and issue a notice of refusal within a month as provided for by section 68, it is hard to see what justification there could be to support a contention that they were not to be allowed to do so.

We are satisfied that an offer can be withdrawn and that after such withdrawal it has no validity or effect. It is no longer available for acceptance. In effect we are asked to decide whether, on the one hand, an offer which has ceased to be effective once withdrawn, should, nevertheless, be entitled to some residual effect as demonstrating a theoretical compliance with the strict provisions of the Act, or, on the other hand, whether that offer, having been withdrawn, should be treated for the purposes of section 71 as if it had never validly existed.

We have no hesitation in preferring the latter conclusion. The Act establishes a scheme to provide practical arrangements to give effect to the rights of qualified tenants to acquire title to their homes. It is consistent with that scheme to say that an offer which has subsequently been withdrawn should simply be treated as having no substance, void ab initio. This seems to us a common sense way of looking at the effect of withdrawal in the present context. Any other interpretation would mean that a tenant would not only be entitled to ignore a purported letter of withdrawal but would be bound to do so. The argument for the respondents in this case was, in effect, that a tenant should be deemed to be aware that a purported withdrawal was invalid and, accordingly, be bound to proceed to accept the original offer as if there had been no withdrawal, on pain of losing his or her rights entirely. We see no practical justification for such a rule. We are aware of no justification in principle or authority. It would seriously undermine the protection which is apparently intended by the Act: Livingstone. On the other hand if an offer is to be treated as nullified on withdrawal, a tenant will have the same protection as if the offer had never been made. He will be able to apply to the tribunal under section 71. That appears to us to be a sensible, practical result and there is no clear rule or principle of law which precludes it.

This approach gets some support from a consideration of the provisions of section 66(1) by which the tenant is given at least two months to accept the offer. In effect, therefore, any offer made in accordance with the Act must remain open for acceptance for a minimum period of two months. Although sections 64 and 65 provide machinery for control of the reasonableness of conditions in an offer it seems to us that an offer which purported to be open for acceptance for only two weeks would not be a valid offer for the purposes of the Act. We see no need to distinguish between an offer explicitly so limited and one withdrawn after that period. We consider that an offer which has been withdrawn within the period provided by the Act for acceptance is not an offer for the purposes of section 71(1)(a).

We accordingly reject the substantive case for the respondents. We turn now to consider whether the respondents have given adequate notice of an intention to challenge the status of the applicant as a secure tenant and whether, in any event, this is an issue which it is open to us to entertain.

There is plainly considerable force in Mr Beynon's submission that the respondents had not given proper notice of an intention to challenge such status in proceedings before the Tribunal. The answers make no attempt to do so. Indeed, far from contending that the applicant had no right to buy the subjects, the answers were based on the proposition that she could and should have accepted the offer. Nevertheless, we consider that the guiding principle of our procedure must be to attempt to allow all relevant issues to be addressed provided that this can be done without unfairness or prejudice to all parties. A difficult question might have arisen had we been required to decide whether to allow evidence on this issue at what was in effect a proof before answer on 10 November. Although the pleadings gave no indication of any challenge to status, the copy letter of 12 September gave adequate notice of the material which tended to demonstrate that the applicant might not be a secure tenant.

Considering the matter at the present stage, however, we can take account of the fact that any doubt as to the precise issue has since been clarified in submissions. There would be no procedural prejudice to the applicant in allowing this issue to be explored at a continued diet. We appreciate the weight of the submission made on behalf of the applicant that a challenge based on assertion of improper conduct requires to be made explicitly. However, where such conduct is alleged, we consider that the Tribunal should be slow to find procedural reasons to exclude evidence. Were this the only point at issue we would not have been prepared to sustain the submission that this material is now precluded by lack of proper notice.

However, we heard nothing to persuade us that the circumstances take the matter out of the ambit of the decision in Livingstone and we are persuaded that the effect of that decision is that where there has been no timeous notice of refusal we do not have jurisdiction to consider the issue of qualifying status.

Livingstone was also a case where an applicant sought a finding under section 71 that the landlords had failed to issue either an offer or a timeous notice of refusal and sought an order for procedure leading to an offer to sell. (The report in Session Cases at page 65H is slightly misleading on the latter point but nothing turns on this.) The landlords sought to defend on the basis that the tenancy was not a secure tenancy. In that case that issue turned on the terms of the applicant's contract of employment with the landlords, as his employers. The majority decision was that, as the time laid down by statute for challenge of status had passed, the Tribunal could not entertain that issue.

We accept that a practical distinction can be drawn between a case where all the information relevant to the issue of status is within the knowledge, actual or constructive, of the landlords and a case where the landlords would require to make positive investigation. However section 68(2) does make express provision giving an opportunity for landlords to make enquiries and there is no doubt that this section was in the contemplation of the Court in Livingstone. The submission in the present case turns implicitly on the proposition that a further distinction can be made, namely a distinction between a situation where it is entirely reasonable and sensible for landlords to make no enquiries and one where the landlords for some reason should be expected to make enquiries. However, we find nothing in the approach of the majority judges to suggest that such a consideration would have been relevant to their thinking. As we understand it, the basis of the decision was that the statutory scheme was clear and straightforward. There was provision for the landlord to challenge the tenant's entitlement to purchase by giving notice of refusal within a set period. There was no provision allowing the landlord to seek to give late notice. There was no scope for implying that, as matter of policy, the scheme of the Act should be interpreted in such a way as to allow scope for a landlord to have a further chance to make that challenge in proceedings before the Tribunal. The decision did not turn on the reasons for the landlords' failure to challenge timeously and there is little discussion of that question. Lord Prosser at page 86C made passing reference to a landlords failure "for whatever reason" to oppose the claim. This reference, although made in an indirect context, is consistent with the view that the landlords’ reason for failing to oppose in time was irrelevant to the statutory scheme.

In essence the decision was to the effect that the tribunal was not given a jurisdiction to embark on issues of status where no timeous challenge had been made by the landlord under section 68. At page 80H-I Lord Prosser said: "For the Lands Tribunal, as for the landlord, the statute appears to me to be proceeding upon the basis that one has moved on from section 61, to a stage where a new obligation has arisen under section 63(2), any questions under section 61 having either been answered, or having been conceded by default.” Lord Coldsfield also founds on the absence of any provision in the statutory scheme giving the Tribunal jurisdiction to hear evidence on this issue. It was too late for landlords to raise the objection: "There is nothing in the statute which entitles the landlord to present a late notice of refusal nor is there anything which entitles the landlord to state a late objection, before the Lands Tribunal": 84D. If there was no provision which allowed a landlord to bring the disputed issue before the Tribunal, there was no basis upon which it could be suggested that the Tribunal had an independent right to investigate the issue. Plainly if there is no provision allowing the Tribunal to consider the issue, it does not matter why it was not raised at an earlier stage. The fact that the problem was not known to the landlord timeously cannot, of itself, give the Tribunal a jurisdiction.

It may be that on a more exhaustive examination of the dicta in Livingstone it will be possible to demonstrate that as their Lordships had not in contemplation a situation where the landlords had failed to issue notice of refusal solely because of a proper reliance on the veracity of an assertion made by the tenant, their dicta are consistent with a different approach to the Act in that situation. There was no attempt to carry out any such analysis in course of the submissions we heard. In any event, dicta do not have statutory effect. We consider that the approach we prefer follows the ratio of the case.

It is important to recognise that the landlords are not left without remedy when faced with wilful falsehood. If a tenant's status as secure tenant changes there may be circumstances in which it is possible for the landlords to bring to an end the tenancy and with it the applicant's status as tenant. Of more significance, in the particular circumstances of the present case, is the agreement of parties that a remedy lies at common law in reduction of the application if it can be shown to be based upon a fraudulent misrepresentation.

For the above reasons we accordingly now make the preliminary finding in terms of section 71(2) that the landlords failed to make an offer within the meaning of section 71(1)(a). We were invited to go on to take the necessary steps on behalf of the landlords to make a formal offer. It would be possible for us to do so. In practice, however, we consider that it is likely to be quicker to give the respondents one month to consider their position. If they should reach a decision to take appropriate steps to resist the sale they should advise us as soon as possible. In light of our decision the Tribunal would then have to proceed to implement the necessary procedures unless and until formal steps were taken to prevent us doing so. If, on the other hand, the respondents take the view that in the whole circumstances this sale will simply have to proceed it would, in administrative terms, be more convenient for them to deal with the applicant directly.