Panagopoulos and another v Earl Cadogan and another
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE CARNWATH,LORD JUSTICE HUGHES,CHANCELLOR OF THE HIGH COURT |
| Judgment Date | 11 November 2010 |
| Neutral Citation | [2010] EWCA Civ 1259 |
| Docket Number | Case No: A3/2010/0735 |
| Court | Court of Appeal (Civil Division) |
| Date | 11 November 2010 |
[2010] EWCA Civ 1259
IN THE HIGH COURT OF JUSTICE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT OF JUSTICE
CHANCERY DIVISION
Mr Justice Roth
Before: Chancellor of the High Court
Lord Justice Carnwath
and
Lord Justice Hughes
Case No: A3/2010/0735
CC/2009/0296
Kenneth Munro (instructed by Pemberton Greenish) for the Appellants
Andrew Walker (instructed by Bircham Dyson Bell LLP) for the Respondents
Hearing date : Tuesday 26th October, 2010
Introduction
This is an appeal from the judgment of Roth J. The issue in short is whether a caretaker's flat was within the “common parts” of the relevant premises for the purposes of Part I of the Leasehold Reform Housing and Urban Development Act 1993 (“the 1993 Act”). Other issues, covered in detail in the judgments below, were raised by a respondents' notice, but in the event we have not needed to hear argument on them.
The property in question is at 51 Cadogan Square in Knightsbridge, within the Cadogan Estate. It is part of a terrace. It comprises five converted flats or maisonettes on the ground floor and upper floors, and a basement in which there is, below the rear of the main part of the building, a flat hitherto used as a caretaker's flat. The front of the basement is a storage area, with a front exit door into an open area with a staircase up to the street, and access to vaults under the pavement.
The statutory process began on 25 April 2006, when three of the five qualifying tenants (the lessees of flats 2, 3 and 5) served notice on the appellants (the Estate”) to acquire the freehold of the property. The date on which that notice was given became “the relevant date” for the purpose of the other statutory provisions, including valuation of the freehold (s 1(8)). The notice specified the respondents as the nominee purchasers (“the purchasers”). On 30 June 2006, the Estate served a counter notice. On 13 July 2006 the tenants' notice was registered as a local land charge (the freehold title being unregistered): see section 97. On 13 October 2006, the purchasers applied to the Leasehold Valuation Tribunal to determine the terms of the acquisition.
On 25 March 2007 the Estate gave notice of their intention to grant a lease of the caretaker's flat to a nominee. The purchasers objected to the validity of this grant and sought to raise it as a preliminary issue before the LVT, but the tribunal decided that it had no jurisdiction to make a determination. The parties agreed terms of the acquisition on alternative bases according to whether the intended lease of the caretaker's flat was, or was not, void. On 27 March 2008 the Estate granted a lease of the caretaker's flat to a nominee for a 999 year period. (The terms of the lease are not material to the main issue before us.) The Estate applied to the Land Registry to register the lease, but following an objection by the purchasers the matter was referred to the Adjudicator to Her Majesty's Land Registry. Those proceedings were overtaken by an application by the Estate to the County Court on 11 June 2008, which led to the judgment of HH Judge Marshall. It is that judgment which was upheld by Roth J, whose judgment is now under appeal.
The statutory framework
The “collective enfranchisement” provisions of the 1993 Act are by now well-known, although they continue to give rise to problems of interpretation. They give “qualifying tenants” of flats in “relevant premises” the right to have the freehold of those premises acquired on their behalf by a nominee purchaser. Relevant premises must consist of “a self-contained building or part of a building”, containing one or more flats and the total number of flats held by qualifying tenants must be at least two-thirds of the total number of flats in the premises (s 3(1)). The right must be exercised by the tenants of at least one half of the flats in the building (s 13(2) (ii)).
The general approach to interpretation of this statute is well settled:
“It is the duty of the court to construe the 1993 Act fairly and with a view, if possible, to making it effective to confer on tenants those advantages which Parliament must have intended them to enjoy.” Cadogan v McGirk [1996] 4 All ER 643, 648 per Millett LJ)
It should also be borne in mind that the issues are not only of concern to the participating tenants, on the one hand, and the freeholder on the other. The interests of the other tenants (whether qualifying or not) cannot be ignored. As the law stands at present (and as it appears likely to remain), the other tenants, even if they are “qualifying”, have no right to participate in the acquisition. However, they have a right to the protection of their own property interests, one aspect of which may be the need for the new freeholder to obtain the rights necessary to secure their own continued use and enjoyment of the building as they were before the transfer.
The right to collective enfranchisement of the “relevant premises” is conferred by section 1. There are various provisions dealing with the acquisition of other premises or interests which are related to the tenants' enjoyment of the premises. Of direct relevance to this appeal is the right to have acquired, on behalf of “the qualifying tenants by whom the right is exercised”, the interest of a tenant under any lease –
“under which the demised premises consist of or include—
(a) any common parts of the relevant premises,…
where the acquisition of that interest is reasonably necessary for the proper management or maintenance of those common parts,… [on behalf of the tenants by whom the right to collective enfranchisement is exercised].” (s 2(1)(b),(3)(a))
Although it is not material in this case, it is of interest to note that the words in square brackets are to be repealed from an appointed date by the Commonhold and Leasehold Reform Act 2002 (s 180 sched 14). This perhaps reflects the consideration that the enjoyment of the common parts may not be confined to the participating tenants, and that proper management by the nominee purchaser may be needed on behalf of all the tenants of the building, whether participating or not.
Section 19 is the foundation of the claim that the lease of the caretaker's flat was void:
“(1) Where the initial notice has been registered in accordance with section 97(1), then so long as it continues in force—
(a) any person who owns the freehold of the whole or any part of the specified premises or the freehold of any property specified in the notice under section 13(3)(a)(ii) shall not—
…
(ii) grant out of that interest any lease under which, if it had been granted before the relevant date, the interest of the tenant would to any extent have been liable on that date to acquisition by virtue of section 2(1)(a) or (b);…
and any transaction shall be void to the extent that it purports to effect any such disposal or any such grant of a lease as is mentioned in paragraph (a)…”
Applying that to the present case, the issue is whether the lease to the nominee would, if granted before the relevant date, have been liable to acquisition under section 2(1)(b). That in turn depends on —
i) whether the “demised premises” under the lease (that is, the caretaker's flat) consisted of or included “common parts” of the relevant premises; and, if so,
ii) whether the acquisition of the interest was “reasonably necessary for the proper management or maintenance of those common parts” on behalf of the participating tenants.
The lease provisions
The relevant lease history begins with a 61 year headlease granted by the Estate on 9 October 1962 in connection with the conversion of the building into five separate flats. An area in the basement was defined as the caretaker's flat. Individual leases of the five flats were granted by the head-lessee, beginning in October 1962.
The treatment of the caretaker and the flat in the various leases is not wholly consistent:
i) By the 1962 headlease the head-lessee covenanted with the Estate to
“To provide for the demised premises throughout the said term a full-time Caretaker… who shall reside in the Caretaker's flat on a service basis…” (clause XB)
The Caretaker's duties were defined (for example, cleaning the entrances, staircase, and lift, refuelling the boilers etc).
ii) The lease of flat 4, also granted in 1962, contains a reference in the recitals to “flat occupied by the caretaker hereinafter mentioned”, and a covenant by the lessor:
“That…the Lessor will at all times during the said term provide and use his best endeavours to maintain the services of a caretaker for the performance of [the various specified duties]” (clause 3(8)).
iii) By 1966 the obligation to provide for a resident care-taker in a particular flat had become clearer. The lease of flat 1 (1966) contains a reference in the recitals to “the flat occupied by the caretaker hereinafter mentioned”, and a covenant by the lessor:
“That…the Lessor will at all times during the said term provide and use his best endeavours to maintain the services of a full-time caretaker resident in the caretaker's flat for the performance of [the various specified duties]” (clause 3(8)).
The lease of flat 5 (1967) was in the same terms.
iv) The leases of flats 2 and 3 are recent (1998 and 2004), having been recast in connection with the grant of 90-year extensions granted under the 1993 Act, presumably to conform with a more modern form of Estate lease. For reasons which are not clear, the reference to caretaking appears only in the...
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