Cadogan and Another v Search Guarantees Plc
| Jurisdiction | England & Wales |
| Judgment Date | 27 July 2004 |
| Neutral Citation | [2004] EWCA Civ 969 |
| Court | Court of Appeal (Civil Division) |
| Date | 27 July 2004 |
| Docket Number | Case No: B2/2004/0117 |
[2004] EWCA Civ 969
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CENTRAL LONDON COUNTY COURT
His Honour Judge Levy
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Jonathan Parker and
Mr. Justice Laddie
Case No: B2/2004/0117
Mr J Gaunt QC (instructed by Lawrence Jones) for the Appellant
Mr A Radevsky (instructed by Pemberton Greenish) for the Respondents
Mr Justice Laddie:
This is an appeal by Search Guarantees Plc from the judgment of His Honour Judge Levy QC given on 9 January 2004. Permission to appeal was given by the judge.
Since July 1997, the Appellant has been the registered proprietor of a lease of 51–52 Hans Place, London SW1 ("the Premises") granted on 21 March 1985 for a term of 65 years from 25 March 1984. The freehold reversion is vested in the Respondents, Earl Cadogan and Cadogan Estates Limited. The Premises comprise 6 flats or maisonettes, 5 of which are presently sub-let on short-term tenancies, and a caretaker's flat. By a Notice dated 17 December 2002, the Appellant applied to the Respondents to acquire the freehold pursuant to s 1 of the Leasehold Reform Act 1967 ("the 1967 Act") . If the landlord intends to object to the enfranchisement, he is required to serve a Notice in Reply.
Since the Respondents did object, on 28 March 2003, they served such a Notice which denied that the Appellant was entitled to enfranchise under s 1 because, so it was said, it did not satisfy the requirements of s 1(1ZB) of the 1967 Act. The Respondents then commenced these proceedings, seeking a declaration that the Appellant was not entitled to enfranchise. The Judge granted the Respondents the declaration they sought at the hearing on 9 January 2004.
Under s 101(3) of the Leasehold Reform, Housing and Urban Development Act 1993 ("the 1993 Act"), a headlessee can be a "qualifying tenant" for the purposes of Chapters 1 and 2 of Part 1 of the 1993 Act. This was held to be the case in Crean Davidson Investments Ltd v Earl Cadogan [1998] 2 EGLR 96 and is agreed to be so by the parties. Under s 39(4) of the 1993 Act, a person can be the qualifying tenant of each of two or more flats at the same time, whether he is tenant of those flats under one lease or under two or more separate leases. In this case the parties agree that, because the flats in the Premises are sub-let on short term tenancies, the tenant under the headlease, the Appellant, is the "qualifying tenant" of each flat. On the facts of this case, by virtue of the headlease, the Appellant is also the tenant of the whole house. It is because the Appellant is both the tenant of the house and a qualifying tenant of the flats under the 1993 Act that the current dispute has arisen.
S 1(1ZB) of the 1967 Act provides;
"where a flat forming part of a house is let to a person who is a qualifying tenant of the flat for the purposes of Chapter 1 or 2 of Part 1 of the [1993 Act], a tenant of the house does not have any right under this Part of the Act unless, at the relevant time, he has been occupying the house, or any part of it, as his only or main residence (whether or not he has been using it for other purposes) -
(a) for the last two years; or
(b) for periods amounting to two years in the last ten years."
The Respondents' argument, accepted by the judge, is as follows. All of the flats, each of which is for part of the house, is let to a qualifying tenant, namely the Appellant. Because that is so, the tenant of the house, who is also the Appellant, does not have any right to enfranchise unless it meets the occupancy requirements set by s 1(1ZB) . However, it is not in dispute that the Appellant cannot meet this requirement because it is a company; s 37(5) of the 1967 Act provides that a company cannot occupy property as its residence for the purposes of this legislation. It follows that the Appellant has no right to enfranchise.
The Appellant argues that this is not the correct construction of s 1(1ZB) . It says that, read purposively, the tenant of the house cannot be the same person as the qualifying tenant. It is inherent in the provision that they are different.
To determine the scope of s 1(1ZB) it is useful to have in mind the legislative history. Until amendment of the 1967 Act, including the introduction of s. 1(1ZA) and 1(1ZB), by s 138(2) of the Commonhold and Leasehold Reform Act 2002 (the "2002 Act"), a tenant of a house who wished to enfranchise under that Act or a tenant of a flat who wanted to obtain an extended lease under Chapter 2 of the 1993 Act had to demonstrate that he had been occupying the premises as his only or main residence or principle home for 3 years. This requirement had two effects. First, in most cases it resolved conflicts between different people who might be interested in enfranchisement of the same premises. Second, it severely restricted the ability of companies to seek enfranchisement because they were incapable of meeting the residency requirements as explained above. They could only seek enfranchisement under the group provisions of Chapter 1 of Part 1 of the 1993 Act. The consequence of this was that landlords used the residency requirement to curtail severely their exposure to successful applications for enfranchisement. So long as they only granted long leaseholds to companies and would only permit assignment to companies, they ensured that the tenant could never be treated as resident in the premises.
The amendments introduced under the 2002 Act largely removed the residency requirement for enfranchisement and thereby allowed company tenants to qualify for enfranchisement.
The 2002 Act introduced s 1(1ZA) and s 1(1ZB) . The former is in the following terms:
"Where a house is for the time being let under two or more tenancies, a tenant under any of those tenancies which is superior to that held by any tenant on whom this Part of this Act confers a right does not have any right under this Part of this Act."
The clear intention of this was to resolve conflicts between different tenants which would have surfaced because of the removal of the residency requirement. The sub-tenant can enfranchise, those higher up the ladder cannot.
Mr Gaunt QC, who appears for the Appellant, argues that the purpose of s 1(1ZB) is likewise to resolve potential conflicts between different tenants at different levels in the chain. Thus the section is dealing with who shall have the right to enfranchise when there is a tenant of the house and also a tenant of a flat forming part of the house, those being different people. He argues that the legislation is clear and accords with this construction.
Alternatively he argues that, if there is any ambiguity, it should be resolved in favour of his construction. In support of this he relies in particular upon the near-contemporaneous Leasehold Reform (Notices) Amendment Regulations, 2002, SI/2002/No1715 (the "2002 Regulations") which may be relied upon as an aid to construction under the principles set out in Hanlon v The Law Society [1981] AC 124, 193–4. He also relies on a ministerial statement made in Parliament by Lord Falconer when introducing what is now s 1(1ZB) . He says that these demonstrate that what was in contemplation was a resolution of the right of enfranchisement between different tenants, just as s 1(1ZA) does. Thus, insofar as material, the notes to the 2002 Regulations state:
"9. Section...
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