- Court of Appeal (Civil Division)
- 9 December 2021
- King, Asplin and Elisabeth Laing LJJ
- [2021] EWCA Civ 1871
- [2021] PLSCS 212
Housing – House in multiple occupation (HMO) – Reasonable excuse – Appellant owning HMO – Respondent local authority imposing financial penalty for absence of HMO licence – Appellant appealing to First-tier Tribunal (FTT) relying on defence of reasonable excuse – Upper Tribunal reversing decision allowing appeal against penalty – Appellant appealing – Whether FTT erring in law in approach to reasonable excuse defence in section 72(5) of Housing Act 2004 – Appeal dismissed
In March 2014, the appellant purchased a property in Grays, Essex and converted it for occupation by six people, with a shared kitchen. In September 2017, the respondent local authority served on the appellant two prohibition notices pursuant to section 20 of the Housing Act 2004, requiring work to be carried out, including the creation of a kitchen of a suitable size for six households. The appellant built an extension to the kitchen in order to comply with the notices.
Under section 72(1) of the 2004 Act, an offence was committed by a person having control of or managing a house in multiple occupation (HMO) which was required to be licensed. On 1 October 2018, the Licensing of Houses in Multiple Occupation (Prescribed Description) (England) Order 2018 came into force, after which the property required a licence as an HMO. The appellant owned other properties and held HMO licences for them and it was common ground that he knew about the licensing regime. In the meantime, planning permission for the appellant’s kitchen extension was refused but an appeal against that decision was allowed.
In March 2019, the respondent undertook inspection visits and subsequently served a notice of intent to impose a financial penalty on the basis of the absence of an HMO licence. In August 2019, a final notice was issued imposing a penalty of £17,500. The respondent had applied for an HMO licence in July 2019. It appealed against the final notice to the First-tier Tribunal (FTT) relying on the defence of reasonable excuse in section 72(5) of the 2004 Act. The FTT allowed the appeal and cancelled the final notice, thereby cancelling the civil penalty. The Upper Tribunal (UT) allowed an appeal against that decision: [2020] UKUT 355 (LC). The appellant appealed.
Held: The appeal was dismissed.
(1) It was not in dispute that section 72(5) contained a statutory defence to the offence set out in section 72(1). The plain language of section 72(1) provided that the offence amounted to having control of or managing an HMO which was required to be licensed. There was no definition of “reasonable excuse” in the 2004 Act. However, the plain meaning of the words in section 72(5) as a whole, and in context, was that there was a defence if, viewed objectively, there was a reasonable excuse for having control of or managing an HMO without a licence. Therefore, the reasonable excuse had to relate to the activity of controlling or managing the HMO without a licence. It was that activity which was the kernel of the offence in section 72(1), not the failure to apply for a licence.
The prohibited activity was controlling or managing an HMO without a licence. The reasonable excuse had to relate to that prohibited activity. Not applying for a licence and controlling or managing an HMO without a licence were not the same thing. They were not logically concomitant: a person might have a perfectly reasonable excuse for not applying for a licence which did not (everything else being equal) give that person a reasonable excuse to manage or control those premises as an HMO without that licence.
(2) If a reasonable excuse for not applying for a licence was interchangeable with a reasonable excuse for committing the offence in section 72(1), a person aware that they did not meet the criteria for an application for a licence to be granted would have a reasonable excuse for having control or management of an HMO. It would be possible to argue that it was a defence that a licence had not been applied for because it would not be granted as the property was not up to standard. Such a construction or application of section 72(5) would be at odds with its statutory context. It would drive a coach and horses through the offence itself and undermine the object and purpose of the statutory licensing regime which was to promote proper housing standards for tenants of HMOs: R (on the application of Mohamed) v Waltham Forest London Borough Council [2020] EWHC 1083 (Admin); [2020] 1 WLR 2929; [2020] PLSCS 90 considered.
It was best not to speculate about what circumstances might amount to a reasonable excuse for the purposes of section 72(5). The FTT had to consider all the relevant circumstances when seeking to determine whether the defence was made out and to view the matter objectively. It might be that the reason for failing to apply for a licence did provide a reasonable excuse for having committed the offence when viewed in the context of all relevant circumstances. However, the excuse in relation to failure to apply for a licence could not lead, as a matter of course, to the conclusion that the defence was made out.
(3) In the present case, reading the decision as a whole, it was clear that the FTT had asked itself the wrong question and did not address its mind to the defence in section 72(5). Having set out the offence correctly, the FTT used a variety of formulations of the defence, none of which were the same as the terms of section 72(5) itself. Furthermore, the discussion centred on the failure to apply for a licence rather than a reasonable excuse for managing or controlling the property without a licence.
Despite the fact that the FTT returned to the correct formula when summarising its conclusions, all of the previous formulations of the test and the consideration of the conduct had been in error. The FTT was focused solely on the failure to apply for a licence and used the wrong filter for its consideration of whether there was a reasonable excuse. It was not clear that the FTT would have reached the same conclusion had it addressed the correct question and taken into account all the relevant circumstances.
Accordingly, the UT properly concluded that the FTT had applied the wrong legal test and was right to remit the matter to the FTT for rehearing to address the correct question in the light of all the relevant facts.
Michael Paget (instructed by Palm View Estates Ltd) appeared for the appellant; Nicholas Ham (instructed by Thurrock Council) appeared for the respondent.
Eileen O’Grady, barrister
Click here to read a transcript of Palmview Estates Ltd v Thurrock Council
