Santos & Anor v Compatriot Holdings Ltd

Transitional protection requires a new tenancy to follow immediately after the earlier protected or statutory tenancy. A party cannot introduce a materially important, unpleaded issue for the first time in closing submissions where the other party has been denied a fair opportunity to meet it with evidence. A landlord’s authorised agent may grant a direct tenancy on the landlord’s behalf. The agent’s earlier tenancy may thereby be impliedly surrendered.

The respondents occupied rooms in a building owned by the appellant. After an earlier tenancy of room 74, they occupied room 79 and were later granted a tenancy of room 14 in February 1996. The Central London County Court declared them regulated tenants under the Rent Act 1977 by virtue of the transitional protection in section 34(1)(b) of the Housing Act 1988, and dismissed the appellant’s counterclaim for possession and arrears.

The appellant challenged the finding that the respondents had been direct tenants of room 79 and argued, for the first time at trial, that there had been a gap between the two tenancies. The appeal concerned whether that point could be raised and whether the evidence established an unauthorised subletting.

Appeal dismissed unanimously. Mr Justice Blackburne gave the judgment. Lord Justice Chadwick and Lord Justice Wall agreed.

1. Section 34(1)(b) of the Housing Act 1988 requires the new tenancy to be granted immediately after the earlier protected or statutory tenancy. A gap between the tenancies would prevent the transitional protection from applying.
2. The judge was entitled to refuse to allow the alleged gap to be raised only in closing submissions. The point had not been pleaded, developed in the evidence, or put in cross-examination. It would have materially altered the case and required an adjournment so that the respondents could call evidence. The appellant’s earlier abandonment of its case that the respondents did not occupy room 79 had also led witnesses to be stood down. Raising the issue at that stage would have been litigation by ambush.
3. The evidence did not in any event establish a gap. The rent ledgers were of limited reliability because they were compiled by the dishonest housekeeper, who did not give evidence. Slight discrepancies could not properly support a finding on an issue that had not been investigated.
4. The challenge to the finding of a direct tenancy was a challenge to fact. The judge was entitled to rely on the respondents’ occupation, their payment of rent, receipts issued by the housekeeper on behalf of the appellant, and the housekeeper’s authority to grant lettings. The lower rent recorded as paid to the appellant was consistent with dishonest accounting rather than an unauthorised subletting. The housekeeper had impliedly surrendered any earlier tenancy and her authority extended to accepting surrenders on the appellant’s behalf.
5. The respondents therefore qualified for transitional protection and were regulated tenants under the Rent Act 1977. The county court’s order was upheld.

• Court of Appeal (Civil Division): In [2007] EWCA Civ 863, the appeal was dismissed.
• Central London County Court: HHJ Levy QC declared that the respondents were regulated tenants under the Rent Act 1977 and dismissed the appellant’s counterclaim for possession and arrears.