Sarah Clare Bolton (Flat 8) and Others v Jonathan Reade Godwin-Austen and Others
| Jurisdiction | England & Wales |
| Judge | Lord Justice McCombe,Lord Justice Goldring,Sir Stanley Burnton |
| Judgment Date | 22 January 2014 |
| Neutral Citation | [2014] EWCA Civ 27 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: B2/2013/0820 & B2/2013/0860 |
| Date | 22 January 2014 |
[2014] EWCA Civ 27
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CENTRAL LONDON CIVIL JUSTICE CENTRE
His Honour Judge Hand QC.
ICL 10515,10528,10639
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Goldring
Lord Justice McCombe
and
Sir Stanley Burnton
Case No: B2/2013/0820 & B2/2013/0860
Mr Phillip Rainey QC (instructed by Child & Child) for the Appellants in the first appeal.
Mr Gary Cowen (instructed by Guy Clapham & Co) for the fourth Respondent in the first appeal and for the Appellant in the second appeal.
Mr Kevin Farrelly (instructed by Hunters) for the other Respondents in both appeals.
(A) Introduction
This is an appeal from the order dated 26 March 2013 of His Honour Judge Hand QC, sitting in the Central London County Court.
The claims before the Judge were brought by the tenants under long leases of three flats at 17 Clarges Street, London W1 ("the Property") for orders under section 48(3), or alternatively under section 49(1) of the Leasehold Reform Housing and Urban Development Act 1993 ("the Act") that the parties be compelled to perform their obligations arising out of the tenants' Notices of Claim under section 42 of the Act and determining that they were entitled to new leases on the terms set out in those notices.
By his order the Judge dismissed the tenants' claims and declared that, in each claim in respect of the "terms of acquisition", the term as to premium was agreed between the parties but that the terms to be contained in the leases were not agreed. There were orders for costs and for interim payments of costs. The tenants and the head lessee, St Anselm Development Company Limited ("St Anselms"), were granted permission to appeal. The judge directed, pursuant to CPR 52.14(1)(a), that the appeals, which otherwise would be to a Single Judge of the High Court, be transferred to this court, because they raised important points of principle.
The material provisions of the Act and of the Regulations made under it are set out in the Appendix to this judgment. However, the machinery provided for by the Act and Regulations can be briefly summarised.
Chapter II of the Act, specifically section 39(1), confers on long lessees of flats the right to a new lease. It is common ground that the tenants here satisfied the qualifying criteria. "The Landlord", for the purposes of the Act and the prescribed procedures under it, is the holder of the reversionary interest which enables it to grant a new lease as prescribed by the Act. In the present case, as the Act prescribes that any new lease shall be for a term expiring 90 years after the expiry of the existing term, the competent landlord was not St Anselms (whose head lease expires in 2063) but the freeholders. Upon the grant of the new lease, the remaining term of the head lease is "re-inserted" into the hierarchy of interests by a deemed surrender and re-grant, under the terms of Schedule 11 to the Act. The competent landlord represents the mesne landlords unless and until a Notice of Separate Representation is given, which cannot be done until after Notice and Counter Notice have been given by the tenant and competent landlord respectively. The issue in the present case turns upon the Notice and Counter Notice and the tenants' claim to have accepted the proposals made in the Counter Notice.
The claim to a new lease is triggered by giving a Notice under section 42 of the Act. The notice must specify the tenant's proposals as to premium and other terms of the new lease and must set a time (not less than 2 months distant) for service of a counter notice.
The counter notice (to be served under section 45 of the Act) must specify whether the claim to a new lease is admitted or not admitted. If the claim is admitted, the notice must then state which of the tenant's proposals are accepted and which not and must specify the landlord's counter proposals in respect of the tenant's proposals which are not accepted. In the absence of proper counter proposals the counter notice is invalid: Burman v Mount Cook Land [202] Ch 256 (CA), to which I shall return.
If a valid counter notice is not given, the tenant is entitled to apply to the court for an order determining the "terms of acquisition" in accordance with those proposed in the tenant's notice under section 42. If a claim is admitted in the counter notice, but the terms of acquisition are not agreed, the disputed matters are referred to the appropriate Tribunal for determination. The expression "terms of acquisition" is defined in section 48(7): see the appendix.
It is common ground in this case that the "terms of acquisition" and the form of the lease to be granted are different concepts. Broadly, the "terms of acquisition" are what are known commercially as "heads of terms" and the form of lease is then drafted to give effect to the terms of acquisition, as either agreed between the parties or determined by the Tribunal. Once the "terms of acquisition" are either agreed or determined, regulations provide for the landlord to draft the proposed new lease and for the tenant to respond to the details of the draft. The relevant regulations, made under sections 98 and 100 of the Act, are the Leasehold Reform (Collective Enfranchisement and Lease Renewal) Regulations 1993 ("the Regulations"). Pursuant to the Regulations, if either side does not respond to the other's proposals in the time required of it, it may find itself deemed to have accepted such proposals. The tenants contend that that is what has occurred in the present case.
The principal terms of the new lease are specified by section 56(1) of the Act which provides for the new lease to be for a term expiring 90 years after the term date of the existing lease and at a peppercorn rent. No other definition of "rent" is provided. Section 57(1) of the Act states that,
"Subject to the provisions of this Chapter (and in particular to the provisions as to rent and duration contained in section 56(1)) the new lease…shall be on the same terms as the existing lease but [with certain modifications which do not apply here] ".
Section 57(2) provides for inclusion in the lease of a requirement for payment by the tenant where the landlord is under any obligation to provide services or is under any obligation for repairs, maintenance or insurance. Section 57(6) provides that the terms to be imported into the new lease, by section 57(1) to (5), are subject to contrary agreement by landlord and tenant, in particular to remedy defects in the existing lease or for the exclusion or modification of any term which it would be unreasonable to include or to include without modification.
(B) Background Facts
By a head lease dated 29 October 1964 the Property was demised to the original head lessor for a term of 99 years from 29 September 1964, that is for a term expiring on 28 September 2063. The head lease is currently vested in St Anselms. The flats, the subject of the claim, were flats 8, 22 and 23 at the Property. Those flats are held by the tenants, the First to Third Claimants respectively, for terms expiring on 19 September 2063. The freehold of the Property is vested in the first three Respondents to the first appeal and the fourth to sixth Respondents in the second appeal, as trustees.
It is agreed by all parties that, pursuant to the terms of the Act, the tenant(s) of each flat are potentially entitled, subject to payment of the appropriate premium, to new leases of their respective flats (and ancillary car parking spaces) for terms expiring 90 years after the date of expiry of their current leases at a peppercorn rent. To that intent, by Notices of Claim to Exercise Right, under section 42 of the Act, each dated 29 November 2010, the tenant(s) of each flat claimed a new lease accordingly. The notices were served upon the freeholders as competent landlord for these purposes of the Act.
Each of the existing leases of the flats contains a covenant in clause 4(5) by the lessor with the tenant:
"to pay the rent reserved by the Headlease and to comply with the lessee's covenant therein contained save insofar as the same are the responsibility of the Lessee under these presents."
By clause 3(2) of each lease the tenant covenants with the lessor:
"to pay the Interim Charge and the Service Charge at the times and in the manner provided in the Third Schedule".
The Third Schedule provides that the lessee shall pay to the lessor the Service charge, which is defined as the "Annual Maintenance Provision" multiplied by such share of that provision or other percentage as the lessor may reasonably determine. By paragraph 1(a)(i) of that Schedule one of the components of the Annual Maintenance Provision is defined as
"all costs, charges, expenses and outgoings expended or incurred by the Lessor in any financial year in complying with its obligations under clause 4 other than in paying in each year the first four thousand pounds of the annual rent reserved by the Headlease".
The rent...
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