Long Acre Securities Ltd v Karet
| Jurisdiction | England & Wales |
| Judge | Geoffrey Vos Q.C. |
| Judgment Date | 03 March 2004 |
| Neutral Citation | [2004] EWHC 442 (Ch) |
| Docket Number | Claim No HC 03 C 02670 |
| Court | Chancery Division |
| Date | 03 March 2004 |
[2004] EWHC 442 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Geoffrey Vos Qc Sitting as a Deputy High Court Judge
Claim No HC 03 C 02670
Mr Philip Jones (instructed by Mackrell Turner Garrett) appeared for the Claimant
Mr Simon Adamyk (instructed by Adler & Adler) appeared for the Defendant
I direct that pursuant to CPR PD 39A paragraph 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.
The substance of this judgment may be communicated by solicitors and counsel to their clients not more than one hour before 9.45am on Wednesday 3rd March 2004
Introduction
This case raises the question of whether the word 'building', as used in the right of first refusal provisions in Part I of the Landlord & Tenant Act 1987 as amended (the "Act"), can mean more than one building. The Claimant's solicitors have brought the case in the Chancery Division, because they have certified that it involves a point of law of general importance.
On 17th July 1986, Long Acre Securities Limited, the Claimant ("Long Acre"), became the assignee of an underlease of a predominantly residential estate known as 'the Frognal Estate' adjoining Finchley Road, Hampstead NW3 (the "Estate"). By the Underlease dated 21st May 1970, the British Railways Board had demised the Estate to Mobax Properties Limited for a term of 120 years from 24th June 1969 (the "Underlease").
The Underlease contains covenants preventing Long Acre (a) from assigning part of the Estate, and (b) from underletting the whole of the 'residential part' or the whole of the 'shop part' of the estate without consent of the underlessor. Sub-letting of individual fiats is permitted. The Underlease was varied by a deed of variation dated 19th June 1972.
The Estate
In describing the Estate in this part of the judgment, I shall use the term 'structure' rather than 'building', to mean a single integrated structure separated from another structure by roadways, paths, gardens or other areas. As far as I am aware, there are no covered walkways or other connecting edifices between the structures concerned in this case, so I shall not need to consider an added complexity of that kind.
In broad terms, the Estate now comprises some 55 residential fiats and a number of commercial shop premises. The plans show that the main part of the Estate comprises at least 4 separate structures or parts of structures as follows:-
(1) A structure divided by a party wall between two blocks comprising 16 flats numbered 30 to 37, and 38 to 45 Frognal Court respectively.
(2) A structure divided by a party wall between two blocks comprising a further 16 flats numbered 14 to 21 and 22 to 29 Frognal Court respectively.
(3) A structure divided by several party walls comprising:-
(a) various commercial shop premises on the ground floor facing Frognal Parade (which itself runs alongside Finchley Road);
(b) four blocks of residential flats divided by party walls known as Flats 1–4 Midland Court, Flats 1–6 Warwick House, Flats 1–6 Frognal Court, most (but not all) of Flats 7–12 Frognal Court. I have not been told precisely which of Flats 7–12 Frognal Court is not included in this structure.
(4) Part of a structure (the "Part Structure") divided by a party wall from an adjoining property (which was itself included in the property demised by the Underlease and includes at least the two flats at 160B and 160C Finchley Road), but appears now to have been sold off. The part structure now comprised in the Estate contains one or possibly more of the flats numbered 7 to 12 Frognal Court and (probably) a commercial shop.
It will be noted that, somewhat confusingly, there is no Flat 13, Frognal Court.
In addition to the above 4 structures, the Estate also includes a Flat known as 160D Finchley Road ("160D"). Mr Philip Jones, who appears for Long Acre, has been unable to tell me precisely where 160D is located, but 160D is included in the registered title number NGL 138073 for the Estate. The Land Register shows 160D as a "first and second floor flat". The plan filed at the Land Registry includes the remainder of the structure adjoining the Part Structure (much of which has now apparently been sold). Thus, it seems likely that 160D is included in the same structure as the Part Structure.
The lack of clarity about the precise make up of the Estate is unfortunate. The best evidence that I have seen is contained in a plan, which I am informed was drawn up recently by Mr Gumby, a surveyor. Mr Gumby has not, however, made a witness statement and his plan is unclear in certain respects, most notably as to the location of 160D, and as to which flats are contained in the Part Structure.
The Estate also includes a single appurtenant accessway at the Southern end, car parking areas, a central yard or forecourt, paths, roadways, and an amenity space (probably encompassing some garden area) at the rear (the "Appurtenant Areas"). As I understand the position, these Appurtenant Areas have always been managed as part of the single Estate, and have been used in common by the occupiers of the 55 flats. I am told that it would be difficult to divide up the Appurtenant Areas so as to serve either the separate structures or the separate named blocks, being Midland Court, Warwick Court and Frognal Court (which are themselves spread around the separate structures as I have described).
The Notice
Long Acre wished (and wishes) to dispose of part of its interest in the Underlease. Accordingly, on 31st January 2003, Long Acre served a notice under sections 5 and 5B of the Act upon the residential tenants of the Estate (the "Notice").
The Notice stated that Long Acre intended to dispose of the leasehold interest in what is described as the "Building" by means of the grant of an underlease (in fact a sub-underlease) at a public auction on 2nd June 2003.
The Notice defined the "Building" as the 55 flats that I have described above "together with all roadways accessways footpaths stairwells giving access and egress from and including the whole of the premises demised by the Underlease", but excluding the commercial premises.
The Notice went on to make an offer to sell the proposed sub-underlease to a requisite majority (more than 50%) of the 55 qualifying tenants.
The tenants' reaction to the Notice and the cancellation of the auction
It appears that the relationship between Long Acre and the tenants of the Estate has not always been a harmonious one. There have been disputes and litigation over a considerable period. I do not, however, need to go in to the details of any of that.
The Defendant to this action, Claire Ann Karet ("Mrs Karet"), holds a lease from Long Acre of Flat 3, Midland Court. Mrs Karet's solicitors, Adler & Adler ("Adlers"), first wrote to Long Acre's solicitors, Mackrell Turner Garrett ("Mackrells") challenging the validity of the Notice on 12th March 2003. On that occasion, however, Adler & Adler gave reasons, which are unconnected with the issues before me.
On 1st April 2003, Adlers wrote to Mackrells saying that "having warned you that the notices are defective I don't intend to run up costs for the Karets debating the issue", and saying that the "residents' association" had obtained counsel's opinion which vindicated that view.
On 16th May 2003, Adlers wrote to Allsop & Co, Long Acre's agents and the proposed auctioneers, complaining that the conditions of sale were, in the circumstances, misleading, but not seeking to stop the sale itself.
At some point on or before 22nd May 2003, Dr Brian Karet (Mrs Karet's husband) telephoned Mr Christopher Berriman of Alisop & Co. It appears that he informed Mr Berriman that he thought that the Notice was invalid because each structure was not the subject of a separate notice.
Eventually on 22nd May 2003, Adlers wrote as follows to Alisop & Co:
"Meanwhile there is an underlying point. I understand that Dr Karet has warned you that you would be a party to a criminal offence if you knowingly sold the lot without valid notices having been served under s.5B of the Landlord and Tenant Act 1985 [sic]. You said you were relying on the seller's solicitors, whose view is that the notices were valid. But they have not so far as I know explained why your mutual clients were not required by s.5(3) of the Act to "sever the transaction so as to deal with each building separately".
Mr Berriman replied at once saying that he had not been instructed to withdraw the property from the auction. Despite that response, it is hardly surprising that Long Acre's agents took Adler's letter very seriously, alleging (as it did) that a criminal offence would be committed under the Act if the auction went ahead.
Both Dr Karet and the Treasurer of the informal residents' association, Dr Michael Anson, attended the auction on 2nd June 2003. Dr Anson spoke to Allsop & Co's auctioneer and informed him that the auction of the proposed sub-underlease was, in the opinion of the residents' association's counsel, illegal and in breach of the criminal law. Dr Anson's statement alleges that the auctioneer told him that he had had other representations to similar effect, and had sought legal advice himself, over the previous week-end. Dr Anson says also that the auctioneer told him that "as this advice was in concordance with ours", he had decided to withdraw the lot from the auction.
Dr Karet's statement says that he did nothing at the auction to discourage the auction. None of the Defendant's evidence was cross-examined and I accept it at face value. Nonetheless, I am quite satisfied that Mrs Karet's actions (particularly in instructing Adlers...
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41-60 Albert Palace Mansions (Freehold) Ltd v Craftrule Ltd
...cited by Mr Munro were: Denetower Ltd v Toop [1991] 1 WLR 945 (CA), Kay Green v Twinsectra Ltd [1996] 1 WLR 1587 (CA), and Long Acre Securities Ltd v Karet [2004] EWHC 442 (Ch), [2005] Ch 61 (Mr Geoffrey Vos QC, sitting as a deputy High Court judge). 17 I will postpone consideration of Mr ......
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41-60 Albert Palace Mansions (Freehold) Ltd v Craftrule Ltd
...Mr Munro also sought to rely on Denetower Ltd v Toop [19911 WLR 945, Kay Green and Others v Twinsectra Ltd [1996] 1 WLR 1587 and Long Acre Securities Ltd v Karet [2004] EWHC 442 (Ch), [2005] Ch 61. These were all cases under the Landlord and Tenant Act 1987 relating to a tenant's right of ......