The Corporation of Trinity House of Deptford Strond v 4–6 Trinity Church Square Freehold Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice McCombe,Lord Justice Moylan,Lady Justice Asplin |
| Judgment Date | 18 April 2018 |
| Neutral Citation | [2018] EWCA Civ 764 |
| Docket Number | Case No: C3/2016/4746/LATRF |
| Court | Court of Appeal (Civil Division) |
| Date | 18 April 2018 |
[2018] EWCA Civ 764
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE UPPER TRIBUNAL (LANDS CHAMBER)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice McCombe
Lord Justice Moylan
and
Lady Justice Asplin
Case No: C3/2016/4746/LATRF
( Anthony Radevsky instructed by Forsters LLP) for the Appellant
( Piers Harrison instructed by Ashley Wilson Solicitors LLP) for the Respondent
Hearing date: 27 th March 2018
Judgment Approved
This is an appeal from the decision of Martin Rodger QC, Deputy Chamber President and Andrew Trott FRICS sitting in the Upper Tribunal (Lands Chamber) dated 7 November 2016 (the “Decision”). It is concerned with the proper construction of section 1(4) Leasehold Reform, Housing and Urban Development Act 1993 (the “Act”). It arises out of a dispute about the nature of the rights which must be granted over a garden at the rear of 4 – 6 Trinity Church Square (the “Garden”).
Trinity Church Square is a garden square in the London Borough of Southwark. At 4 – 6 Trinity Church Square there are three adjoining townhouses which have been converted into flats, (the “Building”) the freehold of which is owned by the Appellant, the Corporation of Trinity House of Deptford Strond (“the Corporation”). The tenants of the flats within the Building who are “qualifying tenants” have the right to collective enfranchisement in relation to the freehold of the Building pursuant to section 1(1) of the Act. The Respondent, 4–6 Trinity Church Square Freehold Limited (“Freehold Ltd”) is the nominee purchaser appointed by a number of those qualifying tenants to acquire the freehold on their behalf.
Each of the tenants of the flats in the Building are entitled to use the Garden, in common with others, under a licence contained in their respective leases. It is an express term of the licence that it may be revoked in writing by the Corporation at any time. The licence had not been revoked at the “relevant date” for the purposes of section 1 of the Act, being the date of the initial notice to exercise the right to collective enfranchisement served pursuant to section 13 of the Act, although it was so revoked subsequently.
All of the terms in relation to the acquisition of the freehold of the Building have been agreed. It has also been agreed that upon the transfer of the freehold of the Building to Freehold Limited, the Corporation will retain the freehold of the Garden. The only remaining issue is the nature of the rights over the Garden which must be granted in order to satisfy the requirements of section 1(4) of the Act.
As Messrs Rodger and Trott explained at [8] and [9] of the Decision, Chapter I of Part I of the Act confers on the qualifying tenants of flats in premises to which the provisions apply, the right to have the freehold of those premises acquired on their behalf by a nominee at a price determined under that Chapter. Where the right to collective enfranchisement is exercised, pursuant to section 1(2)(a) the qualifying tenants are also entitled to have acquired on their behalf “the freehold of any property which is not comprised in the relevant premises but to which this paragraph applies by virtue of subsection (3).” The relevant part of Section 1(3) is as follows:
“(3) Subsection (2)(a) applies to a property if at the relevant date either —
…
(b) it is property which any such tenant is entitled under the terms of the lease of his flat to use in common with the occupiers of other premises (whether those premises are contained in the relevant premises or not).”
The right to acquire the freehold of property described in section 1(3)(b), (in this case, the Garden) may be satisfied by the fulfilment of one of the alternatives in section 1(4). It provides:
“The right of acquisition in respect of the freehold of any such property as is mentioned in subsection 3(b) shall, however, be taken to be satisfied with respect to that property if, on the acquisition of the relevant premises in pursuance of this Chapter, either–
(a) there are granted by the person who owns the freehold of that property —
(i) over that property, or
(ii) over any other property,
such permanent rights as will ensure that thereafter the occupier of the flat referred to in that provision has as nearly as may be the same rights as those enjoyed in relation to that property on the relevant date by the qualifying tenant under the terms of his lease; or
(b) there is acquired from the person who owns the freehold of that property the freehold of any other property over which any such permanent rights may be granted.”
As I have already mentioned, the “relevant date” for the purposes of section 1(3) is defined as the date on which the notice of the claim for collective enfranchisement is given under section 13 of the Act: see section 1(8). In this case, therefore, the relevant date was 3 July 2015 which was before the licence to use the Garden was revoked. Any terms of acquisition which cannot be agreed are to be determined by the appropriate tribunal on an application made under section 24.
The Leases
The licence to use the Garden is contained in clause 7 of the leases. It is as follows:
“The Lessee shall be entitled as Licensee only to use in common with others the garden shown for the purposes of identification only coloured green on the said plan annexed hereto and marked “Plan A” upon the following conditions:
(i) The garden shall be used for recreational purposes and then only provided that no nuisance or annoyance is thereby caused to the other lessees of the flats in the Building
(ii) The Licence hereby granted may be revoked in writing by the Lessor at any time.”
Further in each lease, by paragraph 1 of the First Schedule the tenant is granted the following qualified rights in common with others:
“… for all purposes incidental to the occupation and enjoyment of the Flat (but not further or otherwise and without prejudice to the right of the Lessor to make such regulations as may be reasonable with regard to the security of the Building) to use on foot only the entrance halls … and passages leading to the Flat and (during the currency of the Licence granted by Clause 7 of this lease) the garden hereinbefore referred to.”
Submissions and Upper Tribunal reasoning in outline
Mr Radevsky on behalf of the Corporation submits that the meaning of “such permanent rights” should be taken from its context in section 1(4)(a). He says that it is used to cater for the fact that prior to the enfranchisement process, the lessees only have rights granted for the duration of their leases whereas once the freehold of the main premises, in this case, the Building, has been acquired they will be able to grant themselves new long leases without restriction as to the length of term. The rights will no longer be co-terminus with the term of the leases and must be capable of lasting as long as any new long lease which may be granted in this case by Freehold Ltd. He also says that the same phrase “such permanent rights” used in section 1(4)(b) should be construed in exactly the same way in that sub-section, a conclusion which Mr Harrison on behalf of Freehold Ltd accepted.
Furthermore, Mr Radevsky says that “permanent” is a relative term. In this regard he referred us to Henriksen v Grafton Hotel Ltd [1942] 2 KB 184 which was concerned with whether tenants of a licensed premises were entitled when computing their profits for income tax purposes to deduct the monopoly value fixed by the licensing justices when granting licences of three years duration, the monopoly value being paid by annual instalments. The question was whether the sums payable were in the nature of revenue expenditure or a capital outlay. In that context, Lord Greene MR noted at 192 that: “[t]he thing that is paid for is of a permanent quality although its permanence, being conditioned by the length of the term, is short-lived.” Having referred to two Scottish cases in which the relevant question had been formulated by reference to whether the sums were expenditure necessary for the acquisition of rights of a “permanent character”, Du Parcq LJ, pointed out at 196 that phrases such as “of a permanent character” were introduced only for the purpose of making it clear that the asset or right had enough durability to justify treating it as a capital asset. He added: ““Permanent” is indeed a relative term and is not synonymous with “everlasting””.
Furthermore, Mr Radevsky says that there is nothing in the wording of section 1(4)(a) to warrant a change in the quality of the rights granted under the leases. He says that the express provision in the sub-section that the rights granted must be “… as nearly as may be the same rights as those enjoyed … under the terms of [the] lease” creates sufficient latitude to enable rights expressed in the lease to be translated into the freehold context but is not wide enough to allow or require revocable rights to be converted into irrevocable ones. Mr Radevsky submits therefore, that the Upper Tribunal was wrong to find as it did at [42] – [47] of the Decision and in particular, to reach the conclusion succinctly expressed at [45] as follows:
“45. Where the rights originally enjoyed by a qualifying tenant under the lease of the flat were revocable, the requirement of permanence therefore means that they must become irrevocable on the completion of the transfer. Section 1(4)(a) contemplates that the rights to be enjoyed may not be identical in every respect to the original rights, but must be “as nearly as may be the same”. The possibility of modification is necessary because the replacement rights may be granted over different property, but also because of the...
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