Loveridge v London Borough of Lambeth [2014] UKSC 65

Lambeth Council unlawfully evicted Mr Loveridge, a secure tenant, believing he had died whilst abroad. The Supreme Court held that damages under section 28 of the Housing Act 1988 must be assessed assuming the tenant retained his secure tenancy rights, awarding £90,500.

Facts

In November 2002, the London Borough of Lambeth granted Mr Loveridge a weekly secure tenancy of a ground-floor flat at 19 Moresby Walk, London SW8, within a two-storey building whose upstairs flat (20 Moresby Walk) was also let on a secure tenancy. On 9 July 2009, Mr Loveridge travelled to Ghana, returning on 5 December 2009. Although he continued to pay rent, he breached a tenancy term requiring notification of absences exceeding eight weeks.

On 22 September 2009, believing Mr Loveridge had died, Lambeth forcibly entered the flat, changed the locks, and left a notice to quit. It subsequently disposed of his belongings and, two days after his return, re-let the flat to another tenant. The trial judge, HHJ Blunsdon, rejected Lambeth’s contentions that Mr Loveridge had ceased to occupy the flat as his principal home and that Lambeth had reasonable cause to believe he had ceased to reside there. The eviction was accordingly unlawful.

The judge awarded £9,000 for trespass to goods and £90,500 as statutory damages under section 28 of the Housing Act 1988. The Court of Appeal set aside the section 28 award (increasing damages otherwise awarded to £16,400). Mr Loveridge appealed to the Supreme Court.

Issues

The central issue was the proper construction of section 28 of the Housing Act 1988, specifically the interface between section 28(1)(a) (requiring valuation on the assumption that the residential occupier continues to have the same right to occupy) and section 28(3)(a) (requiring an assumed sale of the landlord’s interest on the open market to a willing buyer).

Concretely: when valuing the landlord’s interest, should the valuation assume the tenant remained a secure tenant (as he was immediately before eviction), or should it reflect that a notional sale by a local authority to a private landlord would automatically convert the secure tenancy into an assured tenancy under section 1(1) of the 1988 Act, thereby permitting market rents?

Arguments

Appellant (Mr Loveridge)

Section 28(1)(a) required the valuation to proceed on the assumption that he continued to enjoy the same right to occupy as before the eviction, namely that of a secure tenant. That assumption fixed the nature of the tenancy for valuation purposes and could not be displaced by the further open-market sale assumption in section 28(3)(a).

Respondent (Lambeth)

Relying on Raja Vyricherla Narayana Gajapathiraju v Revenue Divisional Officer, Vizagapatam [1939] AC 302, Lambeth argued that a market valuation must reflect all uses to which a purchaser might put the property. A notional purchaser (a private landlord) would automatically convert the secure tenancies into assured tenancies, permitting market rents. Hence there was no material difference between the value of the building with a secure tenant in occupation and with vacant possession, and damages should be nil.

Judgment

Lord Wilson (with whom Lord Neuberger, Lord Sumption, Lord Carnwath and Lord Toulson agreed) allowed the appeal and restored the trial judge’s award.

The Court explained the legislative context: sections 27 and 28 were enacted to deter unlawful evictions by unscrupulous landlords seeking to exploit the more favourable regime introduced by the 1988 Act, by awarding damages measured by the landlord’s notional gain rather than the tenant’s loss. Although primarily aimed at private landlords, the sections plainly extend to local authorities, save where expressly excluded (as with Crown tenancies under section 44(2)(a)).

The Court accepted that the obstacles to an actual sale by Lambeth were irrelevant because the assumption of a sale is mandatory, citing Lord Donaldson MR in Tagro v Cafane [1991] 1 WLR 378 at 387:

… the whole concept of the landlord … selling his interest on the open market to a willing buyer assumes that he can sell it on the open market to a willing buyer …

The critical question was whether the open-market sale assumption in section 28(3)(a) permitted the consequential downgrading of Mr Loveridge’s tenancy from secure to assured. Lord Wilson held it did not. Section 28(1)(a) mandates a valuation on the assumption that the tenant “continues to have the same right to occupy the premises as before” the eviction. Within this highly artificial exercise, one assumption is halted by another: the effect of the notional sale cannot be taken so far as to alter the very right that section 28(1)(a) requires to be preserved.

The Court endorsed the approach of Simon Brown LJ in Osei-Bonsu v Wandsworth LBC [1999] 1 WLR 1011 at 1022:

The clear answer to this argument, I am satisfied, lies in [Wandsworth’s] submission that what is being valued is the interest of the landlord … not the abstract interest of a notional willing buyer. Although the concept of a willing buyer helps to fix the respective valuations, one postulates the landlord’s continuing ownership in fact.

Lord Wilson acknowledged the force of Briggs LJ’s reasoning below, particularly his statement:

Mr Loveridge’s rights of occupation had, from the very grant of his secure tenancy, been vulnerable to being downgraded on a sale by his local authority landlord to a private landlord. It was a vulnerability inherent in the nature of his rights.

However, the Court held that endorsing a valuation predicated on the notional downgrading of Mr Loveridge’s tenancy was inconsistent with the requirement in section 28(1)(a) that the tenant “continues” to have the “same right” to occupy. The trial judge’s construction was correct, and his award of £90,500, based on Mr Jenner’s valuations of the building assuming both flats remained subject to secure tenancies for valuation (a), was restored.

Implications

The decision clarifies the mechanics of the statutory valuation exercise under section 28 of the Housing Act 1988. Where a landlord unlawfully evicts a residential occupier, the valuation of the landlord’s interest under section 28(1)(a) must proceed on the footing that the tenant retains precisely the same rights of occupation (including their statutory nature – secure, assured, or otherwise) as he enjoyed immediately before eviction. The open-market sale assumption in section 28(3)(a) cannot be used to reduce those rights by importing the statutory consequences that would follow if such a sale actually occurred.

The judgment matters especially to local authority landlords, whose secure tenants would otherwise be left with nominal statutory damages because a notional sale to a private landlord would convert secure into assured tenancies and eliminate any measurable difference in value. It preserves the deterrent function of section 28 in the local authority context, notwithstanding that local authorities do not typically stand to gain from unlawful evictions.

Lord Wilson expressly signalled disquiet about the operation of the provisions in local authority cases, observing that Lambeth had realised no capital gain and never aspired to, and that requiring payment out of public funds of a sum twelve times the tenant’s actual loss “seems wrong”. He suggested Parliament might wish to revisit the application of sections 27 and 28 to unlawful evictions by local authorities. That is an invitation to legislative reform rather than a qualification of the ruling itself.

More broadly, the case illustrates that within a statutory valuation regime constructed on multiple artificial assumptions, courts must give effect to each assumption discretely; the consequences of one assumption cannot be used to undermine another expressly required by the statute.

Verdict: Appeal allowed. The Court of Appeal’s order was set aside and the trial judge’s award of £90,500 in damages under section 28 of the Housing Act 1988 (in addition to £9,000 for trespass to goods) was restored.

Source: Loveridge v London Borough of Lambeth [2014] UKSC 65