Aldford House Freehold Ltd v Grosvenor (mayfair) Estate

Hearing dates: 7, 8, 9, 12, 13 November 2018

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

This is a claim by Aldford House Freehold Limited (“the Claimant”) to establish its entitlement to acquire the freehold of the building known as Aldford House, Park Street, London W1K 7LG (“the Building”) under Chapter 1 of Part I of the Leasehold Reform, Housing and Urban Development Act 1993 (“the 1993 Act”).Chapter 1 confers on qualifying tenants the right to acquire the freehold of premises to which it applies. The Claimant is the nominee purchaser of the participating tenants in the Building. The First Defendant owns the freehold and also represents another Grosvenor company that owns a long overriding headlease of the Building. The original headlease of the Building, which expires in 2100, is vested in the Second Defendant. I shall refer to the Defendants as “Grosvenor” and “K Group” respectively.

The Building faces Park Lane on an island block, a little to the north of the Dorchester Hotel. It comprises commercial space at basement and ground floor levels and a number of residential flats (or intended residential flats) on the ground to eighth floors. The total number of flats in the Building – in particular whether there are any “flats” within the meaning of Part I of the 1993 Act on the sixth and seventh floors – is one of the principal issues that I have to decide. The Claimant contends that there are twenty-six flats in the Building. The Defendants contend that there are thirty.

The Claimant's claim to the freehold of the Building arises from two notices dated 23 July 2015 (“the relevant date”) served on Grosvenor as “reversioner” pursuant to section 13 of the 1993 Act. The first notice (“the Initial Notice”) was given on the basis that there were on the relevant date twenty-six flats in the Building. The second notice (“the Second Notice”) was given, without prejudice to the validity of the Initial Notice, on the basis that there were on the relevant date thirty flats in the Building. Both notices were signed by a solicitor purportedly on behalf of seventeen participating tenants of flats. On 25 September 2015, Grosvenor gave counter-notices pursuant to section 21 of the 1993 Act in response to the Initial Notice and Second Notice. The first counter-notice stated that the Initial Notice was wrong to state that there were twenty-six flats in the Building and asserted that the correct number was thirty. In other respects, the two counter-notices were substantially identical. They both stated that Grosvenor did not admit that on the relevant date the participating tenants were entitled to acquire the freehold. They both asserted that three of the participating tenants (of Flats 21–23, 44–45 and 51) were not qualifying tenants.

It is common ground that the counter-notices were validly given. That means that, by virtue of section 22 of the 1993 Act, the nominee purchaser had to issue an application to the court within a period of two months from the date on which the counter-notices were given in order to preserve the claim of the participating tenants. The claim form in these proceedings was issued by the Claimant on 23 November 2015. It claims a declaration that the participating tenants were on 23 July 2015 (a date referred to therein as “the date of service of their initial notice”) entitled to exercise the right of collective enfranchisement in relation to the Building. The claim form was issued as a Part 8 claim and contained a summary of the grounds on which the Claimant claimed to be entitled to the relief sought. These stated, among other matters, that the Building contained twenty-six flats, all of which were let on long leases, and identified the date of service of the Initial Notice and the counter-notice. It is also stated that Grosvenor claimed that there were four flats on the sixth and seventh floors of the Building but that the Claimant disputed it. The claim form was supported by a witness statement of Amanda Louise McNeil dated 20 November 2015, which exhibited the documents relied on in support of the Claimant's claim.

In due course K Group was added as a defendant to the claim and the County Court gave directions, including the transfer of the claim to the High Court. There was no direction for the parties to exchange statements of case, although by that time both Grosvenor and K Group had filed witness statements on which they intended to rely and the Claimant had provided Further Information in response to Part 18 requests made on behalf of K Group.

At both case management conferences and at the pre-trial review, the parties provided a short, agreed list of issues. The list did not identify all the issues on which one or more of the parties now seeks the court's determination. Neither were all those issues adequately defined in the statements of case (such as they were) or in the evidence. There was until shortly before the exchange of skeleton arguments before the trial some confusion about the issues on which argument was to be addressed to the court.

As a result, there were several procedural issues and interim applications before me on day 1 of the trial. The applications were by the Claimant for permission to amend the claim form to rely on the Second Notice, if the claim form as it stood did not permit it to do so, and by K Group for permission to adduce further evidence relating to the status of Flat 51 and the amount of internal space in the Building that was neither common parts nor space occupied or intended to be occupied for residential purposes.

Apart from these applications, there was also disagreement in the skeleton arguments about whether the Claimant was entitled to argue that overriding underleases of parts of three flats were unlawfully granted by K Group and whether the Defendants were entitled to take points about the validity of the Initial Notice that had not previously appeared on the List of Issues. In the event, all parties agreed at the start of the trial that arguments on these procedural matters could be advanced at the same time as the presentation of the argument on the substantive issues, leaving me to decide the applications and procedural issues at the same time as I addressed the substantive issues in my judgment. For those purposes, it was accepted that I would read the disputed evidence de bene esse.

Against that brief rehearsal of the background, the issues that were argued before me were the following:

(1) Whether there were on the relevant date four, two or no “flats” within the defined meaning of that term in Part I of the 1993 Act on the sixth and seventh floors of the Building.

(2) Whether the participating tenants' solicitor, Ms McNeil, had validly been given authority on behalf of three tenants, MBOSE Limited, Rokkibeach Limited and Leclipse Asset Corp, to give the Initial Notice and Second Notice on their behalf.

(3) Whether MBOSE Limited, Aweer Property Limited and Kirama Properties Limited, as tenants of Flats 21–23, 44–45 and 51 respectively, were “qualifying tenants” within the meaning of the 1993 Act, given that they hold their interests under two separate underleases from different landlords. It is in relation to this issue that the dispute about whether the Claimant is entitled to assert that overriding underleases were unlawfully granted arises.

(4) Whether on the relevant date more than 25% of the internal floor area of the Building comprises space that was neither common parts nor occupied or intended to be occupied for residential purposes. If it did, the collective enfranchisement provisions of the 1993 Act do not apply to the Building at all. It is in relation to this issue that K Group applies to adduce further evidence in relation to floor areas.

(5) Whether the Initial Notice was invalid if there were on the relevant date more than 26 flats in the Building. It is in this context that the claimant applied to amend the claim form.

(6) Whether, if MBOSE Limited, Aweer Property Limited and Kirama Properties Limited are not qualifying tenants, the Initial Notice was invalid pursuant to para. 16 of Schedule 3 to the 1993 Act because it was given by fewer than two-thirds of the total number of qualifying tenants of the flats in the Building.

I shall deal with these issues below – to the extent necessary or appropriate to do so – in what appears to be a logical order.

Number of flats in the Building

It was not in dispute that there are twenty-six flats in the Building excluding the sixth and seventh floors. Subject to the third issue identified above, it is accepted that the tenant of each of the flats is a qualifying tenant within the meaning of the 1993 Act.

Before 2008 there was a single flat on each of the sixth and seventh floors. The underleases of each of these flats had been acquired in 1996 and 1998 respectively by Park Lane Holding Inc (“PLH”), a company in the same ultimate ownership as K Group. In April 2003, planning permission was sought to extend the sixth and seventh floors to create three flats on each floor. This was...