Malekshad v Howard de Walden Estates Ltd
| Jurisdiction | UK Non-devolved |
| Judge | LORD NICHOLLS OF BIRKENHEAD,LORD HOPE OF CRAIGHEAD,LORD HOBHOUSE OF WOODBOROUGH,LORD MILLETT,LORD SCOTT OF FOSCOTE |
| Judgment Date | 05 December 2002 |
| Neutral Citation | [2002] UKHL 49 |
| Date | 05 December 2002 |
| Court | House of Lords |
[2002] UKHL 49
HOUSE OF LORDS
Lord Nicholls of Birkenhead
Lord Hope of Craighead
Lord Hobhouse of Woodborough
Lord Millett
Lord Scott of Foscote [2001] EWCA Civ 761
My Lords,
I have had the advantage of reading in draft the speeches of my noble and learned friends Lord Hope of Craighead and Lord Scott of Foscote. I have reached the same conclusion as them, although in one respect I am inclined to differ in my reasoning. I too would allow this appeal.
The question of interpretation
This appeal raises the question of the proper interpretation of the phrase 'material part' in section 2(2) of the Leasehold Reform Act 1967. The context is that the Act confers a right of enfranchisement on the tenants of some, but not all, residential units. Houses may be enfranchised, flats may not. So the statute has to draw a demarcation line between houses and flats. Typically a flat comprises one floor, or part of one floor, of a building. So section 2(1)(a) excludes from the concept of a 'house' the flats or other units resulting from the horizontal (side to side) division of a building. Typically also a house may be structurally attached to other property, as with a semi-detached house or a terraced house. So section 2(1)(b) provides that where a building is divided vertically (from top to bottom), the building as a whole is not a 'house' though any of the units into which it is divided may be.
So far so good. But divisions of a building, either as originally constructed or later adapted, are frequently not wholly along straight lines. A building may be divided from top to bottom, but the dividing line may have a 'kink' or a 'dog-leg' in it. The division may be along what has been described as a broken vertical line, partly vertical and partly horizontal. Then one unit will, in part, lie over or under the other. Clearly, it would be absurd if every such deviation from a straight vertical line, however trivial or unimportant, were to take a unit outside the scope of section 2(1)(b).
Section 2(2) provides how the concept of a 'house' is to be applied in such 'mixed' cases. The effect of this subsection is that if a material part of a (structurally attached) 'house', ascertained in accordance with section 2(1), lies above or below a part of the structure not comprised in the house, then the enfranchisement provisions are inapplicable to that house. In this context 'material part' must mean material part of the house, namely, of the unit identified as a house by application of section 2(1). This unit is to be excluded from enfranchisement by section 2(2) if, but only if, a material part of it lies above or below a part of the structure to which it is attached.
The criterion by which materiality is to be judged for this purpose must depend upon the purpose which section 2(2) is intended to serve. On this there has been some difference of judicial emphasis. I think the better view is that the purpose of the section is simply to avoid the absurdity mentioned above. The subsection is concerned to ensure that the right of enfranchisement is not lost by reason of the fact that a trivial or unimportant part of the house overhangs or underlies another part of the structure to which it is attached. The subsection achieves this result by excluding from the scope of the Act cases where a material part of the house lies above or below a part of the structure to which it is attached.
This suggests that in this context materiality calls for a broad assessment of the relative importance or unimportance of the part as a feature of the house. Does this part have the effect that the house as a whole overhangs or underlies the structure to which it is attached to a substantial, or important, extent? If, judged by this standard, the underlying or overhanging part of the house is immaterial, then the landlord's interests, if any, in the adjoining property are protected by section 2(5), not by exclusion of the whole house from enfranchisement.
In Parsons v Trustees of Henry Smith's Charity [1973] 1 WLR 845, 854, Stephenson LJ said that material "must mean material to the tenant or to his enjoyment of the house." This formulation seems to link materiality to the use made of the part by the tenant. I do not think this can be correct. Whether a part is material cannot vary according to the use made of the part by the particular tenant or, indeed, according to the potential use of the part. A very small area is often capable of valuable use. But this ought not to make 'material' a part of the house which otherwise would not be such. It ought not to exclude the house from enfranchisement. Section 2 (1)(b) uses the physical state of the building as the criterion ('divided vertically'). Section 2(2) is concerned to ease the rigour of the 'vertical division' criterion.
When the Parsons case reached your Lordships' House Lord Wilberforce left open the exact meaning of this phrase in this context: see [1974] 1WLR 435, 439-440. He did note that whether a part is material is an issue which must be largely factual and one of common sense. This suggests a simple, non-technical approach. The question I have posed conforms with this approach.
It follows from what I have said that on this question of interpretation I respectfully differ from the view expressed by Nourse LJ in Duke of Westminster v Birrane [1995] QB 262, 270-271. He identified the primary purpose of section 2(2) as follows:
"The primary purpose of section 2(2) must have been to exclude from the operation of the Act houses in respect of which the inability of one freehold owner to enforce positive obligations against successors in title of the other would be likely to prejudice the enjoyment of the house or another part of the structure."
He then stated the test to be applied when deciding whether a part is material:
"if the part of the house which lies above or below a part of the structure not comprised in it is of sufficient substance or significance to make it likely that enfranchisement will prejudice the enjoyment of the house or another part of the structure, whether by reason of the inability of one freehold owner to enforce positive obligations against successors in title of the other or otherwise, then it is a material part of the house within section 2(2)."
I recognise that difficulties of enforcement of positive obligations against successors in title, and other difficulties of this nature, may well have led, or contributed, to the policy decision to exclude flats from the scope of the Act. But I am not persuaded that section 2(2) is aimed directly at these difficulties. Rather, section 2(2) is aimed more generally at elucidating, and giving effect to, the broad distinction drawn by the Act between houses, which may be enfranchised, and flats, which cannot. If, having given effect to this distinction, the unit in question is not excluded from enfranchisement by section 2(2), and there are potential difficulties arising from the fact that an (immaterial) part of the house underlies or overhangs structurally attached property of the landlord, the provisions of section 2(5) are apt to produce an adequate, balanced solution. Therein lies the landlord's protection against the risk of possible prejudice in the respects identified by Nourse LJ. The test enunciated in Birrane, on the other hand, would go far to emasculate what must have been the intended operation of section 2(5).
This case
In the Court of Appeal Robert Walker LJ was of the view that the whole of the built structure, or building, comprising 76 Harley Street and 27 Weymouth Mews can reasonably be called a 'house'. I have some sympathy with this view. The fact that for some years 27 Weymouth Mews was occupied and used as a separate residential unit has only a limited bearing on the question whether the whole of this single structure can reasonably be called a 'house'. 76 Harley Street is itself divided into several separate residential units. Despite this the whole of 76 Harley Street can reasonably be called a 'house', as the Act itself envisages: see section 2(1), and the observations of Dillon LJ in Malpas v St Ermin's Property Ltd [1992] 1 EGLR 109, 110.
Where I part company with the Court of Appeal is that, even if the whole structure can reasonably be called a 'house', I do not think that is the end of the matter. The scope of the opening words of section 2(1) ('"house" includes any building designed or adapted for living in and reasonably so called') is cut down, when the circumstances require, by section 2(1)(b) ('where a building is divided vertically the building as a whole is not a house'). That is this case. The structure comprising 76 Harley Street and 27 Weymouth Mews is divided vertically at the point where the eastern end of the extended ground floor and basement of 76 Harley Street meets 27 Weymouth Mews. The division is vertical (from top to bottom), even though part of the basement of 76 Harley Street lies under 27 Weymouth Mews.
Accordingly there can be no question of Mr Malekshad being entitled to enfranchise 27 Weymouth Mews as well as 76 Harley Street. Each of these two units comprises a house for the purposes of the Act. Of these two houses, Mr Malekshad was, it seems, occupying the third floor flat in 76 Harley Street as his residence. His claim to enfranchise 27 Weymouth Mews must fail.
Thus far I have applied the provisions of section 2(1) to the particular facts of this case. The next step is to apply section 2(2), given that at the point of division between 76 Harley Street and 27 Weymouth Mews part of the basement of 76 Harley Street lies below 27 Weymouth Mews. The basement of 76 Harley Street extends back...
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