Tuesday Law Report: `Consideration' to be broadly construed

13 July 1999 Regina v Kensington and Chelsea Royal London Borough, ex parte Lawrie Plantation Services Ltd House of Lords (Lord Slynn of Hadley, Lord Goff of Chieveley, Lord Hope of Craighead, Lord Clyde and Lord Millett) 8 July 1999

THE WORD "consideration" in section 25(2) of the Greater London Council (General Powers) Act 1973 should not be construed as meaning a valuable consideration in the strict sense of contract law.

The House of Lords allowed the council's appeal against the decision of the Court of Appeal that the respondent company was not in breach of planning control by using flats which it owned in the borough to accommodate visiting overeas employees.

The council had granted a conditional planning permission for the conversion of a property into flats. Condition 11 of the grant provided:

The premises subject of this permission shall not be used at any time for any purpose specified in section 25 of the Greater London Council (General Powers) Act 1973 . . .

Section 25(2)(a) of the 1973 Act provided:

use as "temporary sleeping accommodation" means use as sleeping accommodation which is occupied by the same person for less than 90 consecutive nights and which is provided (with or without other services) for a consideration arising either - (i) by way of trade for money or money's worth; or (ii) by reason of the employment of the occupant; whether or not the relationship of landlord and tenant is thereby created.

The respondent acquired long leases of two flats in the property, which it used to provide accommodation for employees who generally came on holiday from the Indian sub-continent and used the flats for periods of up to two weeks. No monetary payment was required for the use of the flats, and no tenancy agreements were entered into.

The council took the view that condition 11 had been breached and issued breach of condition notices. The respondent sought judicial review. The application was allowed, and the notices were quashed. The Court of Appeal upheld the decision.

Both the deputy judge and the Court of Appeal adopted a strict construction of the word "consideration" in section 25(2)(a) of the 1973 Act, as meaning valuable consideration in the legal sense. The council appealed, contending that it should be given a wider meaning.

Mark Lowe QC and Thomas Cosgrove (Director of Legal Services, Kensington and Chelsea Royal London Borough) for the council; Michael Fitzgerald QC and Alun Alesbury (Travers Smith Braithwaite) for the respondent.

Lord Clyde said that the purpose of section 25 was plainly to control the extent to which residential property could be put to use for certain forms of short-term transitory occupation. In the construction of planning legislation dealing with the use of land it was particularly desirable to find a construction which satisfied the purpose of the legislation.

Since mention was made of "money or money's worth" in relation to section 25(2)(a)(i), it was difficult to read the earlier reference to "consideration" as meaning a valuable consideration in the strict sense. Some distinct content had to be given to the critical phrase "for a consideration arising", and the particular reference to money or money's worth in section 25(2)(a)(i) pointed to the adoption of the broader construction of the critical phrase.

Further, while the word "for" might seem to be meaning "in return for", the word could be readily understood as equivalent to some such phrase as "on account of". More importantly, however, the use of the word "arising" sat uneasily with the idea of a consideration such as a rent, and invited a wider construction than would be involved in the making of some obligatory return for the accommodation. Finally, the words "by reason of" implied a degree of latitude, requiring the existence of some causal relationship between the employment and the provision of the accommodation.

So long as it could reasonably be held that it was because of the employment of the recipient of the accommodation that he came to occupy it, that should suffice for the case to qualify under section 25(2)(a)(ii).