We use cookies to improve our site and your experience. By continuing to browse on this website you accept the use of cookies. Read more...

Property: Charles Terence Estates Limited v Cornwall Council [2012] EWCA Civ 1439

In which circumstances can a local housing authority (‘LHA’) rely on its own breach of duty to escape its contractual obligations?

Not in those of the recent decision of Charles Terence Estates Limited v Cornwall Council [2012] EWCA Civ 1439 in which a LHA sought to argue that its predecessors had acted ultra vires in failing to have regard to market rents when agreeing a lease of residential accommodation with a private party.

The background. Under Part VII of the Housing Act 1996 LHAs are under statutory duties to secure accommodation for the unintentionally homeless in priority need.  Two district councils entered into an agreement with CTE in which CTE purchased identified properties, leased them to the district councils, which then sublet or licensed them to their client groups, including those in priority need.

When Cornwall, as the new unitary authority, took over their rights and liabilities, it stopped paying rent to CTE, yet continued to occupy and use the premises. Cornwall’s defence to an action for unpaid rent included that its predecessors had breached fiduciary duties owed to their council taxpayers with the result that the leases were ultra vires and void. By invoking its predecessors' lack of capacity, Cornwall was attempting to rid itself of what it considered to be bad bargains.

Cranston J dismissed the claim. However, LJs Maurice Kay, Moore-Bick and Etherton in allowing CTE’s appeal on the issue of fiduciary duty, set out that the following was relevant:

  1. There was no legal or evidential basis to have found that the leases were void because of a failure to have regard to market rents. No expert evidence was adduced as to whether any relevant market existed and, if so, what was the market and what was the level of market rents. Nor was there any evidence as to what loss the district councils had suffered as a result of the rent levels specified in the leases with CTE.
  2. CTE had acted in good faith throughout.
  3. The district councils were doing what they were empowered to do in order to meet their onerous statutory duties.

Philippa Seal / 1st Dec 2012


The information and any commentary on the law contained on this web site is provided free of charge for information purposes only. Every reasonable effort is made to make the information and commentary accurate and up to date, but no responsibility for its accuracy and correctness, or for any consequences of relying on it, is assumed by any member of Chambers. The information and commentary does not, and is not intended to, amount to legal advice to any person on a specific case or matter. You are strongly advised to obtain specific, personal advice from a lawyer about your case or matter and not to rely on the information or comments on this site. No responsibility is accepted for the content or accuracy of linked sites.

Download as PDF

Back to News