John Lyon's Charity v London Sephardi Trust
| Jurisdiction | England & Wales |
| Judge | Lord Justice Briggs,Lord Justice Bean,Lady Justice Arden |
| Judgment Date | 29 June 2017 |
| Neutral Citation | [2017] EWCA Civ 846 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: C3/2016/0394 |
| Date | 29 June 2017 |
[2017] EWCA Civ 846
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE UPPER TRIBUNAL (LANDS CHAMBER)
HHJ Huskinson and AJ Trott FRICS
LRA1412014
Royal Courts of Justice
Strand, London, WC2A 2LL
Lady Justice Arden
Lord Justice Briggs
and
Lord Justice Bean
Case No: C3/2016/0394
Nicholas Dowding QC asnd Mark Sefton (instructed by Pemberton Greenish LLP) for the Appellant
Philip Rainey QC (instructed by Forsters LLP) for the Respondent
Hearing date: 14 June 2017
Approved Judgment
Introduction
This is an appeal from the decision of the Upper Tribunal (Lands Chamber) dated 19 November 2015. It raises a question of statutory construction in relation to the scheme for leasehold enfranchisement provided for by the Leasehold Reform Act 1967, as amended ("the 1967 Act").
The parties are respectively the landlord and the tenant of a house in Maida Vale, London. It is common ground that the tenant, the London Sephardi Trust ("LST") validly exercised its right to acquire the freehold interest in the property from the landlord John Lyon's Charity ("JLC") by notice under Section 8 of the 1967 Act on 14 October 2013, but they are at loggerheads about the price.
The statutory scheme requires the price to be ascertained by reference to the amount which, at the relevant time (that is the date of the giving of the Section 8 notice), the property might be expected to realise if sold on the open market by a willing seller, subject to stated assumptions. One of those assumptions is that the property is sold "subject to the tenancy". The original lease of this property which gave rise to a right to enfranchise was to expire in December 2016, but in the early 1980s the then tenants secured a 50 year extension to that lease by giving notice under section 14 of the 1967 Act so that, in fact, the lease will expire in 2066.
The expiry date of the tenancy to which the freehold interest is assumed to be subject has a major effect upon the statutory formula for determination of the price. In the present case the price for the freehold interest, on the assumption that the tenancy determines in 2066, is £1.748 million, whereas the price for the same interest, if the tenancy determined in 2016, is £2.866 million.
The issue for determination on this appeal turns on the construction of section 9 of the 1967 Act, as successively amended by section 118 of the Housing Act 1974 ("the 1974 Act"), section 23 of the Housing and Planning Act 1986 ("the 1986 Act") and section 143 of the Commonhold and Leasehold Reform Act 2002 ("the 2002 Act"), together with the Commonhold and Leasehold Reform Act 2002 (Commencement No 1, Savings and Transitional Provisions) (England) Order 2002 ("the Commencement Order"), and upon the effect upon the interpretation of those provisions brought about by section 17(2) of the Interpretation Act 1978 ("the Interpretation Act").
As Mr Nicholas Dowding QC for the appellant observed in opening, the point at issue is really quite a short one, but its brevity becomes apparent only after struggling through a thicket of original and amending legislation. By contrast, the relevant facts are mercifully simple and uncontested.
The Facts
JLC is and has at all relevant times been the freehold owner of the property. On 12 December 1935 JLC granted a long lease of the property at a ground rent of £25 per annum for a term expiring on 25 December 2016, to a Mr William Tweddle. I shall call it "the Original Lease". The Original Lease was subsequently acquired by LST's predecessors in title Mr and Mrs Gaesteoker. At a date unknown in the early 1980s but, by common consent, before 4 March 1983 the defendants served notice under section 14 of the 1967 Act demanding an extended lease of the property. This was granted on 4 March 1983, for a term expiring on 25 December 2066, replacing the original lease. I shall refer to it as "the Extended Lease".
After acquiring the property from the Gaesteokers, LST exercised its right to purchase the freehold of the property by serving a section 8 notice under the 1967 Act on 14 October 2013. On 2 December 2013 JLC admitted LST's right to buy the freehold.
The issue as to the price for the purchase of the property was referred to the First tier Tribunal by JLC. By its decision dated 4 September 2014, the FTT determined that the tenancy to which the freehold interest was assumed to be subject was the Original Lease, expiring in 2016.
LST appealed that decision to the Upper Tribunal. By its decision dated 19 November 2015 the UT allowed LST's appeal on that issue, holding that the freehold interest was to be assumed to be subject to the Extended Lease, expiring in 2066. I have already described the substantial consequence of that decision in terms of the reduced price payable.
It was common ground before both tribunals that this question turned on statutory construction, and upon an issue about which there was no directly applicable authority. It was only before the UT that it was argued (in the event successfully) that the outcome turned on section 17 of the Interpretation Act. The UT granted permission to JLC to appeal that decision to this court, upon the ground (among others) that it disclosed an important point of statutory construction, with potentially large valuation consequences.
The Legislative Framework
From its inception, the 1967 Act conferred by section 1 rights upon qualifying tenants of leasehold houses both to enfranchise (that is to acquire the freehold) and to obtain an extended lease of the property. The right to acquire the freehold has always been a right to do so on fair terms, including as to price. The right to an extended lease obliged the tenant to pay no premium, although he might be obliged to pay an increased site rent, from the date of determination of the original lease.
The right to enfranchise was originally subject to a range of qualifying conditions. The main effect of most of the numerous subsequent amendments to the 1967 Act has been progressively to relax or remove those restrictions. They included a qualifying residence condition (see the original section 1(1)(b)), the requirement that the rateable value of the property be below relatively modest levels (see, originally, section 1(1)(a)), and a requirement that the tenant serve notice under section 8 before the expiry of the original lease: see section 16(1)(a) of the 1967 Act in its original form. Further, (and this has not changed) the right to an extended lease can only be exercised once: see section 16(1)(b).
In addition to removing or relaxing these conditions, the amendments to the 1967 Act with which this case is concerned also extended to the provisions for determining the price in section 9 of the 1967 Act. These amendments are of central importance to this appeal and need to be set out in full. They are what Mr Dowding aptly describes as a thicket.
Section 9(1) in its original form provided (so far as is relevant) as follows:
" 9. Purchase price and costs of enfranchisement, and tenant's right to withdraw
(1) Subject to subsection (2) below, the price payable for a house and premises on a conveyance under section 8 above shall be the amount which at the relevant time the house and premises, if sold in the open market by a willing seller, might be expected to realise on the following assumptions: —
(a) on the assumption that the vendor was selling for an estate in fee simple, subject to the tenancy but on the assumption that this Part of this Act conferred no right to acquire the freehold, and if the tenancy has not been extended under this Part of this Act, on the assumption that (subject to the landlord's rights under section 17 below) it was to be so extended."
Section 37(1)(d) of the 1967 Act defines "relevant time" in section 9(1):
""relevant time" means, in relation to a person's claim to acquire the freehold or an extended lease under this Part of this Act, the time when he gives notice in accordance with this Act of his desire to have it".
It will be seen that, in its original form, section 9(1) provided that the tenancy to which the freehold interest was assumed to be subject was, in effect, the extended lease, whether or not the original lease in question had actually been extended.
The main effect of section 118 of the 1974 Act was to raise the rateable value limits below which a right to enfranchise arises, by appropriate amendments to section 1 of the 1967 Act. But by section 118(4) the 1974 Act also made amendments to the assumptions to be used for the purpose of determining the price of the freehold interest, by a series of amendments to section 9 of the 1967 Act. For present purposes the relevant amendment, applicable to those properties brought within the right to enfranchise by the raising of the rateable value limits, was the addition of a new section 9(1A), in the following terms:
"(1A) Notwithstanding the foregoing subsection, the price payable for a house and premises, the rateable value of which is above £1,000 in Greater London and £500 elsewhere, on a conveyance under section 8 above, shall be the amount which at the relevant time the house and premises, if sold in the open market by a willing seller, might be expected to realise on the follows assumptions:-
(a) on the assumption that the vendor was selling for an estate in fee simple, subject to the tenancy, but on the assumption that this Part of this Act conferred no right to acquire the freehold."
It was this increase in the rateable value ceiling which brought the property subject to this appeal within the scope of enfranchisement. Thus the first version of the price determination assumptions applicable to this property...
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