Manson v Duke of Westminster
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE STEPHENSON,LORD JUSTICE BRANDON,SIR DAVID CAIRNS |
| Judgment Date | 12 December 1980 |
| Judgment citation (vLex) | [1980] EWCA Civ J1212-2 |
| Docket Number | 7914745 |
| Court | Court of Appeal (Civil Division) |
| Date | 12 December 1980 |
In The Matter of the Leasehold Reform Act 1967
And In The Matter of a Lease dated 12th day of July 1945 made between the 2nd Duke of Westminster (1) the Trustees of the Grosvenor Estate (2) and Walter William John Wright (3)
And In The Matter of a house and premises at 42 Chester Row, London SW1
[1980] EWCA Civ J1212-2
Lord Justice Stephenson
Lord Justice Brandon
and
Sir David Cairns
In The Supreme Court of Judicature
Court of Appeal
On Appeal from the West London County Court
(His Honour Judge Corcoran)
MR. KENNETH J. FARROW (instructed by Messrs Hansons) appeared on behalf of the Respondent (Applicant).
MR. E. G. NUGEE, Q. C. and MR. T. ETHERTON (instructed by Messrs Boodle, Hatfield & Co.) appeared on behalf of the Appellants (Respondents).
(Reserved)
This is an appeal by the landlords of a leasehold house, number 92 Chester Row, London SW1, against an order of Judge Corcoran made in the West London County Court on 5th November 1979 declaring their tenant to be entitled to acquire the freehold of the house pursuant to the Leasehold Reform Act 1967.
Section 1(1)(a) of that Act conferred on a tenant of a leasehold house, occupying the house as his residence, a right to acquire on fair terms the freehold or an extended lease of the house and premises where "his tenancy is a long tenancy at a low rent and the rateable value of the house and premises on the appropriate day is not (or was not) more if it is in Greater London, than £400". For tenancies created before 18th February 1966 S.118(1) of the Housing Act 1974 raised that figure to £1,500 and altered the appropriate day from 23rd March 1965 to 1st April 1973. A "long tenancy" means a tenancy granted for a term of years certainexceeding 21 years: s.3(1).
The meaning of "low rent" is given in s.4(1), on the proviso to which this appeal turns. The subsection provides:
"4(1) For purposes of this Part of this Act a tenancy of any property is a tenancy at a low rent at any time when rent is not payable under the tenancy in respect of the property at a yearly rate equal to or more than two-thirds of the rateable value of the property on the appropriate day or, if later, the first day of the term:
Provided that a tenancy granted between the end of August 1939 and the beginning of April 1963 otherwise than by way of building lease (whether or not it is, by virtue of section 3(3) above, to be treated for other purposes as forming a single tenancy with a previous tenancy) shall not be regarded as a tenancy at a low rent if at the commencement of the tenancy the rent payable underthe tenancy exceeded two-thirds of the letting value of the property (on the same terms)."
On 12th May 1978 the tenant gave notice of his claim under the Act and on 3rd July 1978 the landlords gave notice in reply that they did not admit "your right on the grounds that the tenancy is not a tenancy at a low rent in that at the commencement of the tenancy-rent payable under the tenancy exceeded two-thirds of the letting value of the property (Proviso to Section 4(1) of the Leasehold Reform Act 1967)".
The tenant applied to the County Court pursuant to s.20 of the Act on 7th March 1979 for an order determining that he was entitled to acquire the freehold. By their answer the landlords put him to proof of the occupation of the house as his residence which the Act requires and denied that the rent of £100 per year payable under the lease was a low rent as defined by s.4 of the Act.
At the hearing the tenant admittedly satisfied every statutory requirement except one. He was a tenant of this house pursuant to a lease dated 12th July 1945 granted for a term of 40 years and one half of another year from 29th September 1945 at a rent of £100 per year, which he acquired by an assignment dated 8th January 1973 for a premium of £18,500. He has occupied it as his residence since May 1973. Its rateable value on the 1st April 1973 was £1076. His rent of £100 a year was payable at a yearly rate much less than two-thirds of that rateable value. But his tenancy was granted between the end of August 1939 and the beginningof April 1963 otherwise than by way of a building lease. So the judge had to decide the question whether at the commencement of the tenancy - in 1945 - that rent payable under it "exceeded two-thirds of the letting value of the property (on the same terms)". If it did exceed that proportion of that value the tenant was not entitled to acquire the freehold because the rent was too high. If it did not, it was a low rent and he was entitled to acquire the freehold.
That was the only issue ultimately left for the judge to decide. It depended on the meaning of the words "the letting value" in their context. He accepted the tenant's construction of the words and decided the issue in his favour. The landlords ask this court to accept their construction of the words and decide in their favour that he is not entitled to the declaration granted by the judge.
The landlord's case is that the 'letting value of the property (on the same terms)1 means simply the rent which the landlords could have obtained in the open market if they had offered the property for letting on the terms of the lease. And that means in this case the rent of £100 a year which is the maximum rent they could have lawfully obtained. The tenant's case is that that value means the whole consideration for which the landlords could have let the property in the open market, including a premium in addition to the rent. And that means in this case a sum to be calculated by decapitalizing the obtainable premium which, when added to the £100 rent, would bring the obtainableconsideration above the minimum amount required to prevent the £100 exceeding two-thirds of that consideration.
The rent of £100 a year was admitted to be the highest rent which the landlords could exact in 1945. Tenancies of dwelling houses within the Act of 1967 are not generally tenancies controlled by the Rent Acts because the rent of the former must not equal or exceed two-thirds of the rateable value whereas the rent of the latter must. But this house is subject to new control under the Rent and Mortgage Interest Restrictions Act 1939, £100 a year is the standard rent and there were no permitted increases entitling the landlords to recover more. It was also common ground that as the law stood in 1945 there was nothing to prevent the landlords charging and recovering a premium as the term of this lease was not less than 14 years. Furthermore the landlords did not challenge, and the judge accepted, the evidence of an experienced valuer and chartered surveyor called by the tenant that 7% was the correct percentage'to apply to a premium in order to obtain its annual equivalent by decapitalization and that to produce by this means the £50 a year necessary to keep the £100 a year rent down to two-thirds of the sum of those two amounts the minimum amount required as capital premium was £581. Finally it was conceded by the landlords that they could not call evidence to discharge the burden imposed on them by s.4(5) of proving that less than £581 could be lawfully exacted from a tenant in the open market on 29th September 1945.
So the tenant's right to acquire the freehold restson the single question whether the court can take into account a premium in assessing "the letting value of the property (on the same terms)".
My first impression was that the court can and should take it into account as the judge did, because the natural and ordinary meaning of the words would not be limited to the rent but would include any other consideration - certainly any other consideration in cash - which the landlords would get for letting the house.
The expression is not defined in the Act. The industry of counsel has not found it in any other statute. The expression "the lettable value of the premises" occurs in the Liabilities (War Time Adjustment) Act 1944 s.6, where it was defined as "the rent at which in the opinion of the court the premises might reasonably be expected to let, or, as the case may be, might reasonably have been expected to let, under atenancy for one year granted upon the same terms and conditions (so far as applicable) as those upon which the debtor is holding the premises". But "the letting value" is not an expression of legal art, as Lord Justice Stamp said in Gidlow-Jackson v Middleqate Limited 1974 Q. B. 361 at page 376; and though he went on to use "letting value" and "lettable value" as apparently convertible terras, I derive no more help from the definition in the Act of 1944 than from the absence of any definition in the Act of 1967. In that case this court held that the letting value of the property could not exceed the amount of rent at which the property could lawfully be let and the standard rent was the letting value. But therewas no premium for the lease granted in that case and no possibility of lawfully exacting it and so no question whether a premium could be included in that value was raised or considered, let alone decided. Unhelped and unhampered by any statutory definition or judicial authority I would have thought a landlord who had been paid a good-sized premium by the tenant of his property would be astonished if he were told by an estate agent or his legal adviser, or by a judge, that the letting value of the property was confined to the rent. That value is what the property would be worth to him if he let it: and I agree with Mr. Farrow for the tenant that if the landlord had asked an estate agent what it would be worth to him if he let it, the estate agent would surely reply: "You can get a rent of no more than £100 a year, but...
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