FSV Freeholders Ltd v SGL 1 Ltd
| Jurisdiction | England & Wales |
| Judge | Lady Justice Asplin,Lord Justice Arnold,Lord Justice Peter Jackson |
| Judgment Date | 14 November 2023 |
| Neutral Citation | [2023] EWCA Civ 1318 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: CA-2022-002111 |
[2023] EWCA Civ 1318
Lord Justice Peter Jackson
Lady Justice Asplin
and
Lord Justice Arnold
Case No: CA-2022-002111
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN LIVERPOOL
CHANCERY APPEALS (ChD)
Mr Justice Fancourt
[2022] EWHC 3336 (Ch)
Royal Courts of Justice
Strand, London, WC2A 2LL
Farhan Asghar (instructed by Direct Access) for the Appellant
John de Waal KC and Gemma de Cordova (instructed by MSB Solicitors) for the Respondent
Hearing date: 26 October 2023
Approved Judgment
This judgment was handed down remotely at 12 noon on 14 November 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
This appeal is concerned with whether two sets of offer notices which were dated 11 February 2020 and were served by the administrators of Fox Street Village Limited, (“FSV Ltd”) upon qualifying tenants complied with the requirements of section 5 and 5A Landlord and Tenant Act 1987 (“LTA 1987”). The issues arise in relation to the disposal of the freehold title of Blocks A — E, Fox Street, Liverpool, L3 3BQ (the “Entire Property”) and the tenants' rights of first refusal in relation to the disposal of Blocks A – C and E.
By an order dated 11 January 2022, District Judge Lampkin: declared that FSV Ltd, the then freehold owners of the Entire Property had complied with the provisions of section 5 LTA 1987 on its disposal of the freehold title of the Entire Property to the Respondent, SGL1 Limited, (“SGL1”); recorded that the Appellants' response to the Claim was totally without merit; and ordered that the Appellant and other Defendants pay SGL1's costs which he summarily assessed at £17,204 plus any applicable VAT.
Fancourt J heard an appeal from District Judge Lampkin's order. By an order dated 14 October 2022 he: allowed the appeal in part; set aside the order of District Judge Lampkin; restored the claim for the purposes of determining whether: (i) Blocks A, B, C and E, Fox Street form one, two, or more “buildings” within the meaning and for the purposes of Part I of the LTA 1987; and (ii) as a result of the answer to (i), whether the notices served on qualifying tenants by FSV Ltd (by its administrators) pursuant to section 5 or 5A of the LTA 1987 were valid; and made directions for the hearing and an order as to costs.
The judge rejected the argument that the section 5 LTA 1987 notices were invalid because they did not set out the proposed terms in relation to the entire transaction in the sense of the sale of the Entire Property being Blocks A, B, C, E (and Block D to which the LTA 1987 did not apply,) or alternatively, that the eventual sale of the freehold to SGL1 was invalid in view of the terms of the section 5 notices, which severed the transaction.
The judge gave a short ex tempore judgment, the citation of which is [2022] EWHC 3336 (Ch). He dealt with the question of whether the notices were invalid because they did not set out the terms of the transaction that was proposed, being the sale of the Entire Property for £1.6 million at [30]. In summary, he decided that: the argument was based on an incorrect interpretation of the LTA 1987; section 5A(2) which requires the terms of the proposed disposal to be summarised, is a requirement which is incorporated into section 5, but section 5(3) requires the transaction to be severed for the purposes of the notices; the section 5 notices do not have to contain the terms that the purchaser agreed but rather the severed terms that section 5(3) requires; and accordingly, there was no arguable basis for contending that the notices were invalid in this respect. He explained the matter in this way:
“… Section 5A(2), which requires the terms of the proposed disposal to be summarised, is a requirement that is incorporated into section 5 of the Act, but section 5(3) requires the transaction to be severed for the purposes of the notices. That is how the Act works. If block A was one building, and blocks B, C and E were another, the proposed transaction was correctly severed. It is not the case that if the offers to the lessees are not accepted, the landlord then has to sell on a severed basis to the proposed purchaser. It can proceed with the unsevered transaction. The section 5 notices do not have to contain the terms that the purchaser agreed but rather the severed terms that section 5.3 (sic) requires, which often require the consideration to be apportioned… .”
The Appellant, FSV Freeholders Limited (“Freeholders”) had been incorporated on 14 January 2021. It was authorised by 115 of the qualifying tenants as their nominee for the purposes of acquiring the freehold. Various other leaseholders who took part in the proceedings below are not parties to the appeal.
Background
On 11 February 2020, notices were served on behalf of FSV's administrators on qualifying tenants, pursuant to section 5 LTA 1987. Although there is no prescribed form for notices under section 5 of the LTA 1987, we were informed that generally they take the form which was used by the administrators' solicitors. They were each addressed to a particular “qualifying tenant” at his or her flat and stated that they were from FSV acting by its administrators. It was stated expressly that the notice contained important legal rights for the benefit of the addressee and other qualifying tenants under the LTA 1987 and that urgent independent legal advice should be sought.
The notices were of two types. One referred to Block A and the other referred to Blocks B, C and E. The type relating to Block A, defined Block A at paragraph 1, as the “Property” edged red on the plan attached and stated that the flat of which the addressee was a qualifying tenant formed part of that Property and that notice was given under section 5 and 5A LTA 1987 (as amended). Paragraph 2 provided that the landlord owned the freehold of which the Property forms part and provided the relevant title number and paragraph 3 made clear that the landlord proposed to “enter into a contract to create or transfer an estate or interest in land, namely to sell the freehold interest in the Property edged red on the plan attached …”. Paragraph 4 stated that it was intended that the proposed disposal would be subject to the leases, tenancy agreements, occupancies and other interests affecting the Property, details of which were set out. At paragraph 5, consideration for the “proposed disposal” was stated to be £350,000 and at paragraph 6 it was stated that completion would take place 20 working days after the date of exchange and that a 10% deposit would be payable on exchange of contracts.
Paragraph 7 provided as follows:
“THIS NOTICE CONSTITUTES AN OFFER by the landlord to enter into a contract on the principal terms mentioned in paragraphs 3 to 6 of this notice. This offer may be accepted by the requisite majority of qualifying tenants of the constituent flats.”
The notices specified 27 April 2020 as the date for giving notice accepting the offers to sell to the tenants and a further period of two months from the expiration of the acceptance period during which the qualifying tenants could nominate a purchaser, pursuant to section 6 LTA 1987. Any notice accepting the offer or other correspondence about the notice itself was required to be sent to the landlord's solicitors.
The notices in relation to Blocks B, C and E were in very similar form and adopted the same formula. “Property” was defined as Blocks B, C and E, shown edged red on the plan. The material differences from the Block A notices were that: in paragraph 5, consideration for the proposed disposal of Blocks B, C and E was stated to be £1,050,000; and there was no reference to a required deposit.
Block D, which was empty, was not subject to the provisions in Part 1 of the LTA 1987 and accordingly, no notices were served in relation to it.
No acceptance notices were served by qualifying tenants and by a contract dated 12 June 2020, made between FSV (in administration), the administrators and SGL1, FSV agreed to sell the freehold of the Entire Property being Blocks A, B, C and E and Block D, defined as the “freehold property on the east side of Fox Street, Liverpool and registered at HM Land Registry with title absolute under title number LA303457” for £1.6 million excluding VAT. The purchase price was defined in the following way:
“Purchase Price means £1,600,000 (exclusive of VAT), being the aggregate of the following amounts of consideration attributable to the five blocks comprising the Property:
Block A
£350,000
Blocks B, C and E
£1,050,000
Block D
£200,000”
The deposit was defined as meaning £80,000 exclusive of VAT and included an Exclusivity Sum of £25,000 which had been paid by the buyer and held by the vendor's solicitors.
The contract was subject to a number of conditions precedent the first of which was the delivery of a “Sealed Court Order” authorising the sale for no less than the Purchase Price and providing for the cancellation of entries on the Land Register in relation to charging orders and equitable liens protected by a notice. That order was obtained on 25 September 2020. On 25 November 2020, the sale contract was completed and SGL1 was registered as the freehold proprietor of the Entire Property thereafter.
It is said that the qualifying tenants were unaware that the administrators of FSV had executed a contract for sale with SGL1 and the notices did not state that the total price for the Entire Property was £1.6 million. Nevertheless, on 28 September 2020, tenants offered to purchase the Entire Property for £1.65 million which was rejected. As I have already mentioned, Freeholders was incorporated...
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