HL Deb 17 October 1944 vol 133 cc581-92

2.22 p.m.

LORD MESTON had the following Notice on the Paper: To call the attention of His Majesty's Government to the situation of tenants who have disclaimed their leases under the provisions of the Landlord and Tenant (War Damage) Acts, 1939 and 1941, and who, under the Treasury direction to the War Damage Commission of October, 1943, will not get any share of a "value payment" and will not be able to go back to their houses when rebuilt by reason of the fact that they have disclaimed their leases, and to move for Papers.

The noble Lord said: My Lords, I rise to move the Motion which stands in my name. I am afraid the matter is rather technical and I doubt therefore whether it will prose of much general interest. As your Lordships know, when a house has been so badly damaged by enemy action as to constitute a total loss the normal type of payment to be made in respect of that louse is a value payment. On the other hand, if a house has been bombed but does not constitute a total loss, that is to say in ordinary language it is worth while repairing it, the normal type of payment to be made in respect of that house is a payment of cost of works. On October 25, 1943, the Treasury issued a direction to the War Damage Commis- sion the substance and effect of which is as follows: In the case of a house built since March 31, 1914, notwithstanding, the fact that the house may have been bombed to such an extent as to constitute a total loss, the War Damage Commission are enabled to make a payment of cost of works it and when the owner rebuilds the house. Moreover, the same position applies in the case of a house built before March 31, 1914, provided that the Commission are satisfied that before the bombing or blast the house was not less sound than when erected and in design, lay-out and amenities was reasonably similar to a post-1914 house of the same type. That is the substance and effect of the Treasury direction to the War Damage Commission in October, 1943.

In the meantime, that is to say since the beginning of the war onwards, a number of tenants whose property has been so badly bombed as prima facie to be beyond repair have given their landlords a notice of disclaimer of their lease under the provisions of the Landlord and Tenant (War Damage) Acts, 1939 and 1941. A tenant with a proprietary interest, that is a tenant with a lease of seven years or more, who disclaims his lease does not lose or prejudice his right to a value payment, but now the War Damage Commission, in pursuance of the Treasury direction of October 25, 1943, have decided in some cases and are likely so to decide in more cases to make a payment of cost of works in the case of houses which are beyond repair and which normally would attract a value payment. The result is that the tenants who have disclaimed their leases will not get any share of the value payment, for the simple reason that a value payment is not now to be made by the Commission, and some tenants will not be able to go back to their houses when rebuilt for the reason that they have disclaimed their leases and hence have given up their interest in the premises.

At this point I should pause and refer to the Landlord and Tenant (War Damage) (Amendment) Act, 1941, which was passed on August 7, 1941—the date is important, August 7, 1941—which was designed to remedy among other matters the very matter about which I am now speaking. Under Section 2 of that Act, which is not retrospective, it was provided in terms that a tenant instead of serving upon his landlord a notice of disclaimer may serve on his landlord a conditional notice of retention. Under a conditional notice of retention a tenant has the best of it both ways. If the War Damage Commission finally decide to make a payment of cost of works the tenant retains his lease and goes back to his premises when they are rebuilt. On the other hand, if the War Damage Commission decide finally to make a value payment the conditional notice of retention is deemed automatically to be converted into a notice of disclaimer and the tenant will get any share of the value payment to which he is entitled when that value payment is made. The importance of the date, August 7, 1941, is this. Unfortunately a good deal of damage was done before August 7, 1941, that is the date of the passing of the Landlord and Tenant (War Damage) (Amendment) Act, 1941, and a number of tenants disclaimed their leases before August 7, 1941. Moreover, since August 7, 1941, a number of tenants have served on their landlord a notice of disclaimer instead of taking advantage of Section 2 of the Landlord and Tenant (War Damage) (Amendment) Act, 1941, and serving a conditional notice of retention. That may have been a very unwise thing to do, but tenants take rather a different view of this matter from the War Damage Commission.

In doubtful cases the War Damage Commission, applying a certain formula, can now quite easily determine whether bombed premises do or do not constitute a total loss. Moreover, in other cases where there can be no doubt about the premises constituting a total loss, the War Damage Commission may now in pursuance of the powers conferred upon them by the Treasury direction make a payment of cost of works where clearly in the ordinary course a value payment would be the proper payment. The tenant takes a very different view from the War Damage Commission. The tenant merely observes that his house is a pile of rubble. He says to himself: "There is my house, completely flattened out by a bomb; there is no chance of it being repaired and the War Damage Commission will surely make a value payment in respect of my house; hence the best thing for me to do is to disclaim the lease and get a share of the value payment that will be ultimately made." As I have already explained to your Lordships if the War Damage Commission decide finally to make a payment of cost of works the tenant who has served a notice of disclaimer will get no compensation and will not be able to go back to his house when it is rebuilt.

It is only fair to refer to an explanatory pamphlet on claims under the War Damage Act called Form CIA, published by the War Damage Commission. In that the Commission state: The Commission warns tenants that if a lease is disclaimed before the Commission has decided what kind of payment to make for the war damage, the tenant will have no right to any war damage payment in the event of a cost-of-works payment being determined. It is perfectly clear that the terms of my Motion imply no criticism of the Government, or of the War Damage Commission or of the law. In point of fact, the law has been designed to be as fair as possible. But, as your Lordships know, it does not matter how fairly the law is designed there are always bound to be a number of cases which are hard cases, and which are not covered by the law. These tenants who have disclaimed their leases, and are unable to get any compensation because the War Damage Commission have decided, or are going to decide, to allow the house to be rebuilt, and to make a payment on cost-of-works basis, are in a dilemma, and in my respectful submission the only way out is to provide that every notice of disclaimer, whenever given, shall be deemed to be a conditional notice of retention.

There is one case where that would act unfairly. It would clearly act unfairly where the property has changed hands. It might seem almost nonsense to talk about selling a ruined site, but you can imagine, nowadays, an owner of a ruined site selling to a purchaser who hopes to get vacant possession. In these circumstances, if all the tenants have given a notice of disclaimer of their leases, the purchaser obviously buys with vacant possession. In that case, and in that case alone, it would be unfair to adopt my suggestion and to provide that a notice of disclaimer should, in any event, be deemed to be a conditional notice of retention. Subject to that exception, to which effect is given in this Treasury direction, in my submission the only way out of this dilemma is to provide that every notice of disclaimer, whenever given, shall be deemed to be a conditional notice of retention, and so tenants who, in years gone by, have disclaimed their leases may now be in a position to go back to their houses if and when they are rebuilt, and to continue under the terms of their original tenancy. I beg to move for Papers.

2.36 p.m.

THE LORD CHANCELLOR

My Lords, of us who have listened to my noble friend will, I am sure, have admired the combined care and confidence with which he has threaded his way through what must be admitted to be a rather complicated piece of legislation. It has beer. my sad fate, from time to time, to expound complicated and difficult things to your Lordships' House as well as I can, but I am quite ready to admit that the prize in the matter of complication should be given to some of the Statutes to which my noble friend has referred with such clarity.

I will deal in a moment with both the alleged grievance and his suggested remedy, and I do not think it would be difficult to show that we could not adopt his remedy. But may I first of all, with great respect to my noble friend, correct what seems to me a mistaken view which he holds, and which, I daresay, other people hold, as to the meaning of "total loss"? You cannot say that a building is a total loss because it has been smashed to bits. The test as to what is a total loss, whether we are dealing with the loss of an insured ship or anything else—and I see I am speaking in the presence of a great authority on these matters—is this. It depends on the answer to the question: Is this thing damaged in such a way that the cost of reinstating it is likely to be more than the added value created by the reinstatement? It does not in tie least follow that because a house has been reduced to rubble it is a "total loss." If, for example, you have a well-built house of three storeys, with five bedrooms, a couple of living rooms, a good basement, built in a suitable area where houses of that sort are readily sold, then, although the house be smashed to pieces by bombs, it is not a total loss for it is a profitable use of money to repair it because, when it is repaired, it will gain more in value than the money which you spend on it. I venture to deal with this because I am aware that a number of people are under the impression that "total loss" means merely that a thing has been very much damaged. It does not mean that at all. Indeed, the definition in the Act would show that it did not.

Subject to that, I think, we all feel the difficulty which my noble friend has placed before us. He says, and I am afraid it is true, that in a number of cases tenants were very ill-advised in giving notice of disclaimer. They were authorized, permitted, to give such a notice, if they liked, by a Statute passed at the beginning of the war. Without that Statute it would be mere beating of the air, of course, because the tenant remained liable for rent and repair whether a German bomb hit the house or not. But quite early—indeed I think it was a day or two before the war broke out—Parliament enacted, I think very wisely, that supposing a house was damaged by enemy action, it was open to the tenant, if he liked, to give a notice of disclaimer.

The result was that he washed his hands of the premises. He returned it to the landlord, whether the landlord liked it or not, in the same way as that in which he would return it to the landlord by agreement if there was a surrender of the lease. Moreover—and this is very material—he ceased to be liable for any more rent. A great many leaseholders whose houses were smashed were very glad to be able to say "At any rate I shall not have to pay any more rent if I make use of this opportunity." None the less, it was not in all cases a wise thing to do, because if the Government came forward with a great scheme of compensation for war damage, it might in some cases be better to weather the storm, to endure the affliction, and to see whether in the end it was not better to remain a tenant than to cease to be a tenant.

It was the fact that that alternative existed and that it was not very easy in all cases to see in advance which would be the better course for the tenant to adopt which induced the Government to introduce—and I very well remember expounding it in this House—a middle course, which was immensely to the advantage of the tenant. If his house was hit he might, if he liked, give a conditional notice of retention. The result then was that he could wait to see what the War Damage Commission did in the case of his house. If the Commission came to the conclusion that his house was a total loss, then it would do nothing to help to build it up again, and all that would happen would be that there would be a payment (I need not stop to define it) which was called a value payment. That value payment would be for the benefit of all the parties interested in the house at the time of the bombing, including the tenant, so that it might be that it would be better for the tenant to hold on and get his share of that payment. If, on the other hand, it turned out that the house was worth repairing, and that it was worth spending money on it, then the payment, as my noble friend has reminded us, would be a cost-of-works payment, and, of course, the cost-of-works payment goes to the party who does the repair. Manifestly, if the tenant has decided to disclaim and has taken himself away from the premises and disclaimed all interest in them, he cannot have any part of a cost-of-works payment.

We therefore provided, in the Amending Act, that a notice could be given by the tenant which in effect reserves for him the best of both worlds. He would share in the value payment, if one was given: he could keep his lease if the payment was on a cost-of-works basis. I think that that was quite right. What my noble friend says is that in some cases, in spite of all that having been provided for and publicly announced in both Houses of Parliament, and in spite of it having been the subject of many articles in the legal and surveyors' journals, a number of tenants have, after all, rashly, and indeed foolishly, given a notice which is simply a notice of disclaimer. I am afraid I must say that I do not think that they have been very well advised, but I cannot see that we can yet further alter the law in the tenant's favour—it has been rightly made very much in his favour in any case—simply because that mistake has been made. If the tenant has been wrongly advised, his remedy, if he has one, is elsewhere.

My noble friend goes on to say—and this is the actual point of his Motion—that the Treasury have now come in and have made a direction, which they are entitled to do under the original Act, to the War Damage Commission, which injures tenants, or a certain number of tenants, because, he says, instead of working out the necessary figures and estimates for the purpose of determining whether there shall be a cost-of-works payment or a value payment, the Treasury have given a direction—my noble friend read part of it—that in the case of a large class of houses (normally, I think, those built since 1914) the Commission is to treat the case as one for a cost-of-works payment. What my noble friend has not noticed—because I am sure that if he had noticed it he would have read it at once—is that the Treasury Regulation contains an exception, in these words: … unless in the opinion of the Commission the exercise of such powers in any particular case would involve injustice to any person interested in the question of the kind of payment to be made. As I shall show in a moment, there has been a number of cases where the Commission have not followed the course directed, for that reason.

Why did the Treasury issue this direction to the Commission? Not to do harm to any tenant, but for a reason which will appeal to your Lordships at once. It is immensely important to get on with the business as fast as we can of deciding what houses shall be re-erected—what houses, in other word, shall have a cost-of-works payment. It is immensely important to determine as soon as we can what that cost-of-works payment will be. It is more important still since the latest form of bombing than it was before, for here we have vast areas which have been laid waste, and one of the greatest of all necessities in the near future is to facilitate in every way we can the rebuilding of houses. If the Treasury had not given this direction it would be necessary in the case of every single house all over the country for the War Damage Commission to make a rather elaborate calculation. It would have to survey the place and to calculate at 1939 prices what would be the cost of rebuilding, and also what would be the added value if the house was rebuilt. The process of calculation might be very elaborate.

In the vast majority of cases houses do earn a cost-of-works payment, and therefore the Treasury told the War Damage Commission to go ahead and treat all the houses within defined classes which have been knocked down as worth a cost-of-works payment "unless in the opinion of the Commission the exercise of such powers in any particular case would involve injustice to any person interested in the question of the kind of payment to be made." There have been cases, as I am sure my noble friend will be interested to hear, and quite a number of cases, in which those interested in particular premises have said to the Commission, under the terms of this exception, "You must not treat this house as though automatically it was entitled to a cost-of-works payment. We ask you to make the calculations, and we think you win see that it is really a case "—for whatever reason —" for a value payment." That has been done and, in some cases, that contention has been found to be quite correct, but in all the other cases it does not matter whether the Treasury direction is applied or not, or whether there was a Treasury direction or not, because the result is the same either way: there would not be a "total loss," the house would be worth repairing, and the payment made would be on a cost-of-works basis. My noble friend will see, therefore, that it is important not to overlook (as I appreciate that he did) the exception which is in the Treasury direction, because it is precisely that exception which prevents the Treasury direction from inflicting any injury at all. The direction merely has the result of saving time and expediting administration.

My noble friend said—and I must thank him for showing so practical a spirit—that he would suggest an amendment of the law which would be fair all round. He suggests that we should enact now, in 1944, that every notice of disclaimer, whenever this may have been given—however early in the war—shall be deemed to have been a conditional notice of retention. He points out that there must be at any rate one exception—namely, that this would not apply where the owner has parted with his property since it was bombed. But is that a practical suggestion at all? In the first place, it is retrospective legislation of the most extreme kind; it is enacting at the end of the year 1944 that a man who in fact gave notice quite early in the war, repudiating any further connexion with the property and leaving it and avoiding the payment of rent, is none the less to be treated now as though he had not disclaimed at all.

There are some cases, of course, in which the tenant was very glad to disclaim. The bomb may have delivered him from the burden of a tenancy which was far from satisfactory to him. It may be that it had become an onerous arrangement—one perhaps which he entered into when he was more prosperous or when he had a bigger family, and he says, as far as a patriotic man can say it, "Thank God for Hitler's bomb, now I can get out of my tenancy." But apart altogether from that, consider the position of the other party. It certainly is the case that our law on this subject has shown very great consideration for the tenants—quite rightly—and has left the landlord to bear the burden in a great many cases. But is the only exception the exception where the landlord has sold the premises? Why, there are lots of cases in which there has been reletting. What are you going to do with the cases where there has been a reletting? The new tenant was perfectly entitled to take the place, to live there and to pay whatever reduced rent he may pay. Are you going to turn him out because, four years ago, somebody made a mistake in saying that he wanted to disclaim? The landlord may say, "This site is very much smashed up, but at least now it is a free site. I have no longer got a tenant and when I get the money from the Commission I propose to build a house myself there and live there."

There are heaps of instances which show the difficulty of the proposed amendment. There is the instance where an arrangement has been made to amalgamate properties and build, it may be, a better kind of premises over the whole site. I do not think for one moment it is possible to go back, as my noble friend suggests, and confer on the tenant, who in some cases may have made a mistake, the very extraordinary privilege, now that bombing is over, as we all hope, that he may sweep aside anything that has happened in the last three or four years and claim to be back where he was at the start. It is perfectly right in this legislation to defend the tenant's interest but this is going further than is reasonable. Therefore my answer to my noble friend is this: I regret it extremely if anybody has been badly advised in this matter but I do not think it is the fault of the Government. I cannot think of anything they have ever said which led to what turned out to be foolish action on the part of some tenant. We on the contrary, realizing the tenant's difficulty, introduced this new conception—a most extraordinary one—of a conditional notice of retention, so that the tenant might get the best of both worlds. My noble friend tells me that there are tenants who know so little about it or are so ill advised that, in spite of that, they have insisted on giving a notice of disclaimer. There cannot be many such cases, I am sure. At any rate, it is really impossible to ask Parliament by retrospective legislation, disregarding all intermediate interests, to put them into a better position than they have put themselves into.

If it was true that the Treasury direction had created a situation of injustice, as my noble friend I think thought when he spoke, that certainly would be a good ground for correcting the Treasury direction. But it is not so. Exception is made in any case which would injure the tenant's right to share in a value payment. I can assure my noble friend, after making inquiries in a number of cases, that this exception has been operated and I do not see what the Commission can do more. They do in fact do one thing more; that is this. When they come across a case where they think that though the landlord has got all the law on his side because of the action of the tenant, none the less the tenant is in a very unhappy position, the Commission do their utmost, whenever it is at all hopeful or practical, to try and bring the parties to a compromise. There have been cases in which landlords—corporations indeed—having their attention called to hardship suffered by a particular tenant, have been assisted by the Commission to enter into an agreement with the tenant to give him some relief. I am very glad it is so. But apart from that they really cannot go further. I know very well that this matter raises very strong feelings in some individual cases, but I hope that what I have said will satisfy the House in general.

2.57 p.m.

LORD MESTON

My Lords, I am very grateful to the noble and learned Viscount for his very long and detailed reply. I quite appreciate the difficulties of taking the course which I have suggested. May I for a moment draw your Lordships' atten- tion to one matter which I do not think has been mentioned at all? For two years in the middle of the war it was almost impossible even for the War Damage Commission to decide whether a certain ruin was or was not a total loss. The War Damage Act was passed on March 26, 1941, and under that Act the War Damage Commission had to address their mind to a number of absolutely hypothetical propositions relating to prices and costs and so forth after the war, and the result was that it was practically impossible for them, let alone any ordinary layman or individual, to decide whether a certain property was or was not a total loss. The matter was not rectified until the passing of the War Damage (Amendment) Act, 1943, on March 25, 1943. That Act only had a short life as a separate Statute, because a few months later it was repealed and embodied in the consolidating Act of 1943.

It was not until March 25, 1943, that a new formula was introduced, and the new formula was to this effect. The War Damage Commission merely had to decide whether or not, on the basis of prices and costs as existing on March 31, 1939, it was worth while to rebuild a house. I think the noble and learned Viscount on the Woolsack said himself in the debate on the subject, before I had the privilege of being a member of your Lordships' House, that "If the house was worth repairing as at March 31, 1939, it is worth repairing to-day; if it was not worth repairing on March 31, 1939, it is not worth repairing to-day." That is the simple formula which the War Damage Commission now have to operate, but for two years in the middle of the war there was no such formula, and for two years in the middle of the war it was impossible even for the War Damage Commission to decide finally and with any certainty whether or not certain properties did or did not constitute a total loss. However, that only touches on one aspect of the matter, and I can only say I am very grateful to the noble and learned Viscount on the Woolsack for so clearly explaining the position to me. I ask leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.

House adjourned at three o'clock.