London Borough of Bexley v London & Quadrant Housing Trust

The court was asked to decide the proper construction of clause 6.1 of the Nomination Rights Deed entered in 1998 between the claimant local authority and the original housing association purchaser. Clause 6.1 required the association, on certain transactions affecting the transferred housing stock, to procure that any third-party acquirer undertook directly with the council to comply with relevant covenants and obligations. Applying established principles of contractual interpretation (including the unitary exercise of textual and contextual analysis and the ejusdem generis / "Same Class" principle), the judge concluded that the words "or any other transaction" are limited by the class of transactions expressly identified earlier in the clause (mergers, amalgamations and transfers of engagements). The clause therefore does not catch sales of individual dwellings to private purchasers and does not oblige the defendant to procure the specified undertaking from such purchasers.

Key statutory context informing the construction included Section 133 of the Housing Act 1988 (as amended by the Housing and Planning Act 2016) and provisions governing transfers/amalgamations of registered societies (Industrial and Provident Societies Act 1965, section 50). The court rejected the claimant's alternative arguments based on factual matrix and redundancy of exceptions, finding the defendant's construction to be linguistically and commercially coherent.

Background and parties: The claimant, London Borough of Bexley, transferred a large part of its housing stock by stock transfer in 1998 to London & Quadrant Bexley Housing Association Limited (L&QHA). The defendant is the successor in title following amalgamation and novation. The Bexley Agreements included a Nomination Rights Deed giving the council rights to nominate tenants and containing clause 6.1 addressing third-party acquisitions.

Nature of the application: The defendant applied under CPR Part 24 for summary determination of a construction point limited to clause 6.1: whether its sale of individual dwellings from the transferred stock to private purchasers was caught by clause 6.1, thereby requiring the defendant to procure from purchasers a direct undertaking to comply with relevant covenants.

Issues framed by the court:

• What is the meaning and scope of the words "or any other transaction" in clause 6.1?
• Whether clause 6.1 applies to disposals of individual dwellings to private purchasers (including sales and grant of tenancies).
• Whether contextual factors (statutory background, the purpose of nomination rights, other contractual restraints in the Bexley Agreements) point to a wider or narrower construction.

Reasoning and conclusions: The judge applied the modern approach to contractual interpretation (unitary textual/contextual exercise drawing on Rainy Sky, Arnold, Wood and related authorities). He divided clause 6.1 into constituent parts and identified that the triggering words describe a class of transactions: mergers, amalgamations and transfers of engagements (transactions governed by the 1965 Act which could effect statutory vesting of property). The words "or any other transaction" were held to be a sweeping-up provision limited by the preceding class (the Same Class Principle / ejusdem generis), not an open-ended reference to every possible transaction affecting part of the Property. Contextual considerations reinforced this: the clause reads as a means of ensuring an acquiring registered society expressly undertakes obligations where property passes on a merger/transfer; it would be linguistically and commercially odd to treat a sale of an individual dwelling as the type of two-stage transaction contemplated by clause 6.1; other contractual provisions in the Bexley Agreements and the statutory context (including s.133 HA 1988 as it then stood and the 2017 changes made by the Housing and Planning Act 2016) supported the narrower reading. The judge therefore declared that clause 6.1 does not apply to sales of individual dwellings to private purchasers and the defendant is not obliged to procure the undertaking from such purchasers.

Procedural note: The point was determined on the Part 24 application on the documents and submissions; ancillary issues (for example, whether the burden of clause 6.1 runs with the land as a restrictive covenant) were not pursued and were not decided.

The application is allowed in favour of the defendant on the Construction Issue. The court declared that clause 6.1 of the Nomination Rights Deed must be read as limiting "any other transaction" to transactions of the same class as mergers, amalgamations and transfers of engagements, and that clause 6.1 does not apply to the sale of individual dwellings to private purchasers; accordingly the defendant is not required to procure the undertaking specified in clause 6.1 from those purchasers. The judge reached this conclusion by applying modern principles of contractual interpretation, the Same Class Principle (eiusdem generis), and consideration of the statutory and contractual matrix surrounding the Bexley Agreements.