An Equitable Road to Succession – Clarion Housing Association Limited v Carter
In this case, a previously unclear equitable concept, trust of a promise, was successfully deployed to defeat a privity of contract argument intended to frustrate the deceased tenant’s intention of passing the tenancy of her home to her family members.
The Court of Appeal held that where an assured tenant dies and there is no spouse or civil partner in occupation, and s.17(1A), Housing Act 1988 does not apply so as to vest the tenancy in favour of another, but there is in the tenancy agreement a clause which purports to allow succession to a family member in certain circumstances (“succession clause”), a person fulfilling those criteria can take the benefit of them, despite not being a party to the tenancy agreement, even though the Contracts (Rights of Third Parties) Act 1999 do not apply. The succession clause may ground the “trust of a promise”, a concept which arises in equity by way of an exception to the doctrine of privity of contract. The tenancy will pass to the successor on assent. Despite the general state of the law being unclear, the Court managed to distil those principles which underlie the trust of a promise – see further, below.
And thus, “an antidote to what would otherwise be an unjust lacuna” was met, per Kerr J, .
Clarion’s claim failed, in any event, on public law grounds – its own policy clearly anticipating “contractual succession” of the type claimed by Ms Carter, but yet was not applied.
The case is another example of the common occurrence of succession throwing up a plethora of complicated legal issues.
Clarion’s position in the case was not a sympathetic one: it was, in substance, seeking to escape contractual provisions clearly intended to benefit someone such Ms Carter. A position not helped by its decision-making process which (on its own admission) been “replete with errors”.
Mrs Monica Carter was granted a secure tenancy of 9 Station Road, Attlebridge, Norwich (“the property”) in 1987 by Broadland District Council. By reason of a stock transfer from the Council to a housing association in 1990, the tenancy became an assured tenancy for the purposes of the Housing Act 1988, and its terms were modified. At some point, the claimant – Clarion Housing Association Limited – became the landlord.
Monica Carter had serious health difficulties. In October 2004, her daughter, Ms Carter (the defendant) moved out of her own home into the property to look after her mother, whilst holding down a full-time job as a specialist practitioner in inpatient recovery.
On 13 June 2017, Monica Carter died intestate. The following day, solicitors then acting for the defendant wrote to Clarion asking if she could buy the property. Refusing to sell, Clarion maintained the view that Ms Carter would not be permitted to stay on if it could be shown that the property was not her principal home (a matter not subsequently disputed in the appeal). A notice to quit was served on 17 August 2017.
On 24 August 2017, Ms Carter called Clarion and asked if she could succeed to the tenancy. She subsequently set her request out in a letter dated 29 August 2017. On 16 October 2017, the request was refused with Clarion declining to accept that the property was Ms Carter’s principal home.
Her solicitors wrote to Clarion on 30 October 2017, setting out detailed reasons as to why Ms Carter was entitled to succeed, referring to relevant terms set out in the tenancy agreement, in particular the landlord’s covenants. By response, Clarion asked Ms Carter to fill out an application form, which she returned on 7 November 2017.
At the end of 12 December 2017, a period of six months from Monica Carter’s death elapsed, in which time her daughter had not applied for letters of administration.
On 26 January 2018, Clarion wrote in response, refusing Ms Carter’s request without giving any reasons. It stated that a notice to quit had been served on the personal representatives and on the Office of the Public Trustee. A copy of the notice was enclosed.
On 29 January 2018, Ms Carter’s new solicitors asked Clarion to provide reasons for its refusal and to provide any policy documents that it might be relying on. Clarion did have a policy Succession for Lifetime Tenants, but nonetheless Clarion did not respond.
On 20 March 2018, the Public Trustee confirmed that it had received a copy of the notice to quit. The same day, Clarion wrote, asserting that Ms Carter did not fulfil the criteria for succession as set out in the tenancy agreement, and even if she had, she could not rely on the contractual terms because she was not party to the contract, and it pre-dated the effect of Contract (Rights of Third Parties) Act 1999. A Notice Seeking Possession under the 1988 Act was served, relying on Ground 7 in Schedule 2 to that Act, namely that the tenancy was a periodic tenancy “which has devolved under the will or intestacy of the former tenant and the proceedings...are begun not later than 12 months after the death of the former tenant”.
On 21 May 2018, Letters of Administration were granted to Ms Carter in respect of her mother’s intestacy. A week later there was an express assent of the tenancy to Ms Carter. Clarion served another notice to quit on the personal representatives and the Public Trustee.
On 7 June 2018, Ms Carter’s solicitors wrote to Clarion asking that, in the light of the assent, it exercise its discretion under the terms of the tenancy agreement to allow further time for their client to apply for letters of administration. There was no response.
Since the tenancy had begun before 1 April 2012, Ms Carter did not have the benefit of s.17 (1A), Housing Act 1988 which provides that, where the landlord is a private registered provider, the deceased was a sole tenant upon whose death there was no spouse or civil partner occupying the property as their only or principal home, the terms of the tenancy agreement makes provision for some other person to succeed to the tenancy, and there is such a person, then the tenancy vests automatically in that person and does not devolve under the tenant’s will or intestacy.
By clause 4(2)(vii)(d) of the tenancy agreement, the landlord covenanted not to bring possession proceedings on Ground 7, provided six conditions were met. It was common ground that five were met. The sixth was in dispute: within six months of the tenant’s death or such further time as the landlord, upon written request, shall in its discretion allow, the “successor” applies for a Grant of Probate or Letters of Administration and/or seeks to have the Tenancy vested in him/her.
At trial, the court heard evidence from Clarion’s officer who admitted that it had got the case wrong, that the tenancy contained terms intended to secure succession for a family member such as Ms Carter, it had not applied its own policy, and that by January 2018 it had closed is mind to the possibility of succession.
Judge Holt found:
(i) the legal title had passed to the Public Trustee who held the tenancy on trust for any beneficiary under the intestacy rules. Ms Carter was such a beneficiary, was in occupation, and became entitled to the tenancy in equity becoming an assured tenant immediately upon her mother’s death;
(ii) the notice to quit was of no effect, and was, in any event, incorrectly served;
(iii) the claim on Ground 7 was rejected, Ms Carter having sought to have the tenancy vested in her within six months of her mother’s death;
(iv) there was a public law defence, it having been conceded that the case was “replete with errors”; had Clarion applied its own policy correctly it was highly likely that the claim would not have been brought;
(v) whilst no reasons were set out in the judgement, the defence on Art.8 ECHR was made out.
Court of Appeal
Aside from the conclusion as to only or principal home, Clarion appealed all of the above. By way of cross-appeal, it was argued that Ms Carter had acquired rights enforceable against Clarion because she was “the beneficiary of a trust of the promise” made to Monica Carter that it would observe the terms of the tenancy agreement relating to succession after her death.
Allowing the appeal against the finding that the Public Trustee held the tenancy on trust for Ms Carter, it was held that the general rule that a person on intestacy does not acquire an immediate interest in the estate applied. The upshot of this was that the tenancy did not vest in Ms Carter upon her mother’s death.
However, Ms Carter’s cross-appeal succeeded. In seeking to defend it, Clarion argued that Ms Carter could not take the benefit of the terms of the tenancy because there was no privity and contract, and the Contracts (Rights of Third Parties) Act 1999 could not assist her, having come into force on 11 May 2000, well after the commencement of the tenancy. Rejecting this, the Court concluded that the benefit of Clarion’s promise under the tenancy to Monica Carter was held on trust for her daughter, the common law not having been disrupted by the 1999 Act.
Principles which appear to be settled in relation to trust of a promise are (i) there must be an intention to benefit a third party, (ii) as a general rule, the intention must be irrevocable, (iii) the intention to benefit, whilst necessary, was not in itself sufficient since there must also be an intention to create a trust.
The Court of Appeal held that, the terms of the tenancy agreement governing succession were entered into by Monica Carter with the intention of conferring a benefit on a third party, because they could be of no benefit to her: she would not be alive. There was also an intention to create a trust since the potential class of beneficiaries was ascertainable - those taking under a will or intestacy. The subject matter of the trust was clear, the benefit being a chose in action against Clarion.
Nor could the terms of the trust be considered revocable: whilst those within the class of beneficiaries could vary, there was no basis on which the benefit under the trust could be redirected to those categories of person not mentioned in the tenancy agreement.
Ms Carter, having sought to have the tenancy vested in her within six months of her mother’s test, met the contractual provisions, and had established that Clarion was not entitled to rely on Ground 7.
In relation to its policy, Succession for Lifetime Tenants, whilst applicable it was not applied. Nevertheless, it was argued by Clarion that even if it had been applied it was highly likely that Clarion’s decision to seek possession would have been the same because Ms Carter had delayed for ten months in applying for Letters of Administration, Clarion had waited more than six months before serving an operative notice to quit, Ms Carter had her own property and would not qualify for an allocation. Rejecting all of this, in the light of his damning findings, Judge Holt had been “unquestionably right to decide...that if the policy followed the outcome probably would have been different”. Rather, however, than quash the notice he should have said the decision to serve notice and bring possession proceedings was unlawful.
Having decided the above, Clarion’s victory on service of the notice, and theoretical remission of the Art.8 point fell away.
4-5 Grays Inn Square
29 November 2021