Mrs Afreen Begum Haq (Claimant Respondent) v (1) Island Homes Housing Association (Defendant Appellant) (2) The Mayor and Burgesses of the London Borough of Tower Hamlets (Defendant Respondent)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lloyd,Lord Justice Tomlinson,Lady Justice Arden |
| Judgment Date | 20 July 2011 |
| Neutral Citation | [2011] EWCA Civ 805 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2010/1785 |
| Date | 20 July 2011 |
[2011] EWCA Civ 805
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CENTRAL LONDON COUNTY COURT
CHANCERY LIST
HIS HONOUR JUDGE COLLINS
Royal Courts of Justice
Strand, London, WC2A 2LL
Lady Justice Arden
Lord Justice Lloyd
and
Lord Justice Tomlinson
Case No: A3/2010/1785
CHY09669
and
Mr Martin Rodger QC (instructed by Bircham Dyson Bell LLP) for the Appellant.
Ms Sarah Asplin QC and Mr Oliver Hilton (instructed by Archer Fields) for the Respondent, Mrs Haq
Ms Michelle Stevens-Hoare (instructed by the Mayor and Burgesses of London Borough of Tower Hamlets) for the Respondent Council
Hearing dates: 22 and 23 June 2011
Introduction
In these proceedings the court has once again to consider the position of parties who embarked on a negotiation with a view to agreements to be set out in written contractual documents, where much of what was intended to be done under the intended contract was done, at substantial expense to one party on land belonging to the other, but where the documents were never executed, though they had been agreed in substance. The land is now owned by a third party which refuses to execute the documents. The most important aspect of the agreements cannot have effect at law without executed documents. Accordingly the arrangements are sought to be enforced by way of a constructive trust, so as to give effect to a proprietary estoppel. The judge held that they should be so enforced. The landowner appeals.
Judgment was given by His Honour Judge Collins CBE in the Central London County Court on 1 st July 2010 following a trial which had occupied the previous three days. The order giving effect to his judgment was not sealed until 22 nd November 2010. The claimant who seeks to enforce the proprietary estoppel and resists the appeal is Mrs Afreen Begum Haq. In practice all relevant matters were dealt with by her husband Mr Anwar Ul Haq, who runs the business which is operated at the relevant premises. Unless it is important to refer to one or the other of them for a particular reason, my references to Mr Haq include references to him as agent for and on behalf of his wife.
The original owner of the land was the London Borough of Tower Hamlets. In late 2005 it transferred the relevant land, with much other land, to the first defendant, Island Homes Housing Association Ltd. The housing association is the appellant, with the Council supporting it by way of a respondent's notice. Before us Mrs Haq was represented by Ms Sarah Asplin QC, leading Mr Oliver Hilton who had appeared below, the housing association was represented by Mr Martin Rodger QC who had not appeared below, and the Council was represented by Ms Michelle Stevens-Hoare who also did not appear below. The court is grateful to all Counsel for their helpful written and oral submissions in the course of the hearing of the appeal, which took the best part of two days.
Mrs Haq is and has since 1995 been the tenant of premises at 286 Manchester Road, London E14 at which a convenience store business is conducted. Mr Haq runs the business and has done so since 1981, originally as a partner with his father. In 1983 the Council granted a fifteen year lease which came to be vested in Mrs Haq in 1995. That tenancy has the protection of statutory rights under the Landlord and Tenant Act 1954 Part II, which is why there is no doubt that Mrs Haq is still the tenant of premises despite the fact that the contractual term expired in June 1998. Before that date, indeed some considerable time before it, Mr Haq had proposed to the Council that he should expand his business and the premises, and he had obtained planning permission for the extension of the premises with the Council's support as landlord. After the expiry of the contractual term, and with notices and counter-notices having been served under the 1954 Act and an application made for the grant of a renewal tenancy, the parties started negotiating about a new tenancy to include extended premises and for Mr Haq to do, at his own expense, the substantial work that would be necessary to enlarge the shop. Agreement in principle, expressly subject to contract, was reached and recorded in November 2001. Eventually the documentation got very close to an agreed state.
Contrary to what was originally intended, Mr Haq was allowed to enter on premises which were not part of the original tenancy and were owned and used by the local authority, and to do the work that was contemplated, without the contractual documents having first been executed. The work started in late July 2002, to the knowledge of the Council. It was complete by the middle of 2003. Mr Haq then started trading from the enlarged premises. Disputes arose between the parties in the latter part of 2003, possibly due to misunderstandings on each side. By February 2004 Mr Haq's solicitor suggested to the Council's legal department that all was now ready for the documents to be executed. Thereafter the matter seems to have gone into a dormant state as between Mr Haq's lawyers and the Council's legal department. By July 2005 internal documents of the Council indicate that it seems to have been regarded as ready to be finalised. However that did not happen. In December 2005 the Council transferred a great deal of property, including that relevant to this appeal, to the housing association, which is a registered social landlord. In August 2006 the housing association's solicitors stated that they were not prepared to grant a lease on the terms which had been agreed with the Council.
The housing association then issued proceedings for a new tenancy to be granted to Mrs Haq for a period of 15 years, which is the maximum possible under the 1954 Act, at a rent of £36,000 per annum. In terms, although the point was not explicitly addressed, that would have applied to the existing holding under the previous tenancy. Mrs Haq's previous application on her own part had been for a new tenancy of 20 years at £6,200 per annum. That application, issued in 1997, would certainly have been in relation to the existing holding only.
In 2009 Mrs Haq started further proceedings claiming, by way of proprietary estoppel, to be entitled to the grant of a 60 year lease of the extended premises on the terms negotiated between the parties including an initial rent of £5,570 reviewable every five years but only to 15% of the open market rental or the previous rent if higher. Judge Collins held that Mrs Haq was entitled to that. The housing association, supported by the Council, maintains that Mrs Haq is entitled to a statutory renewal tenancy under the 1954 Act, of a holding which comprises the extended premises. It accepts that because the work was done at the expense of the tenant in 2002 it is to be disregarded in assessing the appropriate rent under the renewal tenancy. On the expiry of that tenancy Mrs Haq, or other the then tenant, would be entitled, under the present law, to apply for a renewal tenancy under the 1954 Act but at that stage the improvements done and paid for by the tenant would be too far in the past to be disregarded in the calculation of the appropriate rent. Accordingly in practice, if the housing association is correct, the fact that the tenant has done and paid for the works of improvement will be reflected in an abatement of the rent for the period up to the grant of the first renewal tenancy and throughout the period of 15 years of the term for which that tenancy would last, but not thereafter. It seems that this would mean that the tenant would pay a discounted rent for 23 years, so that this is the period during which the benefit of the expenditure would be recouped by way of a discount on the rent.
The facts
I must now set out the relevant facts in some detail. I start with a brief description of the property. The premises of which Mrs Haq is tenant are on the ground floor of a six storey block of flats within a housing estate. As let under the 1983 lease the sales area extended to some 773 square feet with associated storage and other ancillary space. It had a frontage to Manchester Road but the entrance to the premises for customers was off a covered walkway which led off Manchester Road along one side of the building. At the far end of the covered walkway there were a workshop and a store which were retained by the local authority for use in connection with the block of flats and the housing estate of which it formed part. They were sometimes referred to as the sheds. The walkway was covered by a roof at first floor level. The surface of the roof of the covered walkway constituted part of the gardens of the flats, or some of them, at first floor level. Access to those flats was reached by way of a stairway which was at the end of the covered walkway but not within it. The proposal for the expansion of the premises was that the covered walkway would be enclosed and would form part of the sales area, as would the store and workshop previously retained by the Council. This would enlarge the sales area very considerably, to just over 2,000 square feet. It would enlarge the frontage to Manchester Road but the entrance to the premises would still be just off Manchester Road within the area of the former covered walkway. In addition to the incorporation within the demise of the covered walkway, the store and the workshop, there would also be a new plant room for the premises which, according to the...
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