41-60 Albert Palace Mansions (Freehold) Ltd v Craftrule Ltd
| Jurisdiction | England & Wales |
| Judge | Lady Justice Smith,Lady Justice Black,The Chancellor of the High Court |
| Judgment Date | 24 February 2011 |
| Neutral Citation | [2011] EWCA Civ 185 |
| Court | Court of Appeal (Civil Division) |
| Date | 24 February 2011 |
| Docket Number | Case No: A3/2010/1428 |
[2011] EWCA Civ 185
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM Chancery Division
ON APPEAL FROM CENTRAL LONDON COUNTY COURT
Mr Justice Henderson
His Honour Judge Madge
Before: The Chancellor of the High Court
Lady Justice Smith
and
Lady Justice Black
Case No: A3/2010/1428
CC/2009/PTA/0514
Mr Kenneth Munro (instructed by Olswang LLP) for the Appellant
Mr Philip Rainey QC (instructed by Butcher Burns) for the Respondent
Hearing date: 15 February 2011
Lady Justice Smith:
Introduction
This is an appeal from the order of Henderson J made on 27 May 2010 dismissing the appeal of Craftrule Ltd against the order of HH Judge Madge sitting in the Central London County Court. It is therefore a second appeal. It raises a point of statutory construction as to the meaning of the words 'a self- contained part of a building' in sections 3 and 4 of the Leasehold Reform, Housing and Urban Development Act 1993 (the 1993 Act). Rimer LJ gave permission to appeal as he considered that the issue raised an important point of principle which this court ought to consider.
The appellant, Craftrule Ltd, is the owner of the freehold reversionary interest in the premises known as 41- 60 Albert Palace Mansions, Lurline Gardens, London, SW11 4DQ (the property). The respondent is a limited company set up for the purpose of purchasing the freehold of the property pursuant to the enfranchisement provisions within the 1993 Act. It is controlled by the leasehold tenants of the flats comprising the property and is their nominee purchaser for the purpose of their claim for enfranchisement.
Part 1 Chapter 1 of the 1993 Act provides for the collective enfranchisement of flats by qualifying tenants. For the purposes of this appeal, the essentials are that, pursuant to section 13 of the Act, a group of long lease-holding tenants holding not less than half the flats within the premises concerned may serve a notice on the landlord seeking to acquire the freehold. The premises concerned must be a self-contained building or part of a building, as defined in section 3 of the Act. Section 3 is headed 'Premises to which this Chapter applies' and provides:
(1) Subject to section 4, this Chapter applies to any premises if—
(a) they consist of a self-contained building or part of a building…
(b) they contain two or more flats held by qualifying tenants; and
(c) the total number of flats held by such tenants is not less than two thirds of the total number of flats contained in the premises.
(2) For the purposes of this section a building is a self- contained building if it is structurally detached, and a part of a building is a self-contained part of a building if —
(a) it constitutes a vertical division of the building and the structure of the building is such that that part could be redeveloped independently of the remainder of the building: and
(b) the relevant services provided for occupiers of that part either –
(i) are provided independently of the relevant services provided for occupiers of the remainder of the building, or
(ii) could be so provided without involving the carrying out of any works likely to result in a significant interruption in the provision of any such services for occupiers of the remainder of the building."
Section 4 of the Act provides for certain exclusions from the right to enfranchisement but it is common ground that none of them applies in the present case.
The property forms part of a terraced building comprising 160 flats, built in the late 19 th or early 20 th century. The building consists of eight 'handed pairs'. Each 'pair' comprises 20 flats, arranged on 5 floors. The property comprises one such pair consisting of 20 flats, numbers 41–60, situated roughly in the middle of the terrace. Each half of the pair has a separate entrance leading to separate common parts and staircases. There is a dividing wall between each half (and the adjacent parts of the building) which is vertically continuous from the footings to roof level. Each half has its own drainage system, mains water riser, electricity supply and entry phone. Telephone and cable TV services are provided to individual flats although the cables are bundled together. There are no other communal services. Each half of the pair could be redeveloped independently of the other half of the pair and/or of the rest of the building. All the flats in the property save for numbers 41 and 50 are demised under long residential leases for a term of more than 21 years. The service charge provisions in the leases are defined by reference to the whole property (flats 41–60).
Save in one respect, it is not disputed that the whole property (flats 41–60) satisfies all the requirements of section 3 as set out above. The only issue which the appellant raises is that the property is not 'a vertical division of the building'. It contends that it is two vertical divisions of the building. However, it is agreed that each half of the pair (41–50 and 51–60) would independently satisfy all the requirements of section 3. I interpose to say that, in my view, the expression 'vertical division' is rather odd. A division is a line of no thickness. It seems to me that what section 3(2)(a) means is that the premises must be a vertical slice of the building.
Section 13(1) of the 1993 Act provides that a claim for enfranchisement is to be made by the giving of a notice to the landlord. By section 13(2) the notice must be given by the qualifying tenants (viz tenants with long leases) of not less than half of the total number of flats within the relevant premises. In March 2008, a group of ten long leasehold tenants (the participating tenants) gave notice pursuant to Section 13 claiming the right to acquire the freehold reversionary interest in the whole property (flats 41–60). Seven of "the participating tenants" lived in the 51- 60 half and only three lived in the 41–50 half. The landlord failed to issue a counter-notice as it could have done pursuant to section 21 of the 1993 Act. The result was that, unless the notice were to be declared invalid, "the participating tenants", through their nominee purchaser, would be entitled to purchase the freehold on the terms set out in the notice.
The proceedings below
A dispute arose between the parties as to the validity of the notice and the tenants commenced proceedings in the Central London County Court seeking a declaration pursuant to section 25 of the Act that their notice was valid and that they were entitled to acquire the freehold on the terms proposed. It was common ground that the notice was valid subject to the one issue which remains for determination on this appeal. The landlord contended that it was not open to the tenants to seek to enfranchise the whole property, that is, all 20 flats, by the issue of one notice. It argued that the right to enfranchisement attaches only to the smallest possible self-contained part of a building. As each half of the pair is a self-contained part of a building, each half must be the subject of a separate claim and notice must be given by qualifying tenants of at least half the flats in that half of the pair.
HH Judge Madge rejected that submission and held that the notice in respect of the whole property was valid. The same arguments were deployed before Henderson J on the first appeal. He dismissed the appeal, taking the same view for much the same reasons as those given by Judge Madge.
The basis of Henderson J's decision was that the statutory language of section 3 was clear and unambiguous. It permitted the enfranchisement of any self-contained part of a building (subject to the exclusions in section 4 which did not apply). There was nothing within the section which suggested that the right attached only to the smallest possible self-contained part. If Parliament had intended to oblige tenants to claim the smallest part of the building to satisfy the requirements of section 3(2) it would have said so. He was satisfied that this construction was consistent with the statutory purpose of the scheme, as identified in Majorstake Ltd v Curtis [2008] 1 AC 787 at paragraphs 21 and 23. Moreover, this construction of section 3 derived support from other provisions of the Act, in particular subsections 13(8), (9) and (10) and section 4(3A). He rejected the submission advanced by Mr Kenneth Munro for the landlord that there was authority, which although not directly in point, was of assistance. The judge regarded those cases as irrelevant. Further he rejected Mr Munro's invitation to have regard to certain passages from the speeches of Lord Strathclyde taken from Hansard. The judge said that there was no ambiguity in the statutory words to justify such a course. In any event, having read the passages de bene esse, the judge did not think that they were capable of resolving any supposed ambiguity.
Rimer LJ gave permission for this second appeal because the issue is of some general importance on which there is no direct authority.
The appeal to this court – submissions
In outline, Mr Kenneth Munro, (counsel for the landlord in this court and below) submitted that Henderson J had erred in several respects. He had been wrong to reject the authorities cited as irrelevant. He should not have refused to have regard to the Hansard extracts. He had failed to deal with the submissions advanced as to the implications of the decision. Mr Munro submitted that the construction accepted by the judge would have a...
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