Wildsmith and Others v Arrowgame Ltd (Landgate (New Homes) Ltd intervening)
| Jurisdiction | England & Wales |
| Judge | Miss Geraldine Andrews Q.C. |
| Judgment Date | 22 November 2012 |
| Neutral Citation | [2012] EWHC 3315 (Ch) |
| Docket Number | Appeal Ref CJ/2011/ 0658 |
| Court | Chancery Division |
| Date | 22 November 2012 |
[2012] EWHC 3315 (Ch)
Geraldine andrews QC (Sitting as a Judge of the High Court)
Appeal Ref CJ/2011/ 0658
Claim No 0CL10240
IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION
ON APPEAL FROM THE CENTRAL LONDON COUNTY COURT
CHANCERY LIST
Royal Courts of Justice
Strand, London, WC2A 2LL
Mark Warwick (instructed by David Goodman & Co) for the Appellant
Anthony Radevsky (instructed by John May Law) for the Respondents
Piers Harrison (instructed by Ashley Wilson) for the Intervener
Hearing dates: 25 and 26 July 2012
Approved Judgment
INTRODUCTION
This is an appeal from the decision of His Honour Judge Cowell dated 28 October 2011 making an acquisition order under Part III of the Landlord and Tenant Act 1987 ("the 1987 Act"). I was told by Counsel that, so far as they are aware, it is the first contested case on the interpretation of s.27 of the 1987 Act. The order was stayed pending the outcome of the hearing of this appeal, which was brought with the permission of Arnold J.
The Respondents to the appeal, the Claimants below, are the long lessees of flats 1–10 and flat 12 Colebrook Court, Sloane Avenue, London SW3, and the company incorporated to act for them for the purposes of seeking to obtain the reversionary interest in all 12 flats (hereafter referred to as "the Property"). The reversionary interest is a head lease granted by Shellmex and BP Limited for a term of 99 years on 21 September 1966. The head lessee is the Appellant, Arrowgame Ltd, ("Arrowgame") which bought the head lease on 18 February 1993 for £5,500. Arrowgame is a company with two shares, held by a Mr Browne and his wife. According to Mr Browne, Arrowgame purchased the head lease as a "long term investment and development opportunity".
I was shown photographs of the Property. At ground floor level there used to be a petrol station, but that is now occupied by a "Sainsbury's Local" food store. The Property, which sits above those commercial premises, is a three storey block of twelve flats, comprising four flats per floor, built as a rectangle but with octagonal ends. To the rear there is what is described as an "amenity terrace" between the raised ground floor and first floor, with a number of car parking spaces underneath. The access to these is via a driveway immediately adjacent to the police station to the rear of the building. There are a number of much taller buildings in the neighbourhood, mostly blocks of flats.
For many years, the Property was managed by a professional firm of managing agents named Gross Fine. However, after being taken over by another group, Gross Fine gave notice to terminate their managing agency with effect from June 2003. Thereafter, the Brownes left the management of the block in the hands of a solicitor, Mr David Goodman, who is also the long leaseholder of flat 11 Colebrook Court. A management company, Colebrook Court Management Ltd, was formed. The Brownes held control over the management company by means of voting rights attached to their shares in it. Mr Goodman was the company secretary and, until 1 June 2008, the sole director of that company. On that date he was replaced as the director by a friend of his, a surveyor named Mr Lumley. Colebrook Court Management Ltd. was struck off the register of companies on 30 March 2010 for failing to file its annual returns. Its last filed set of accounts was for the year ended 25 March 2005.
Mr Goodman was replaced as manager by an order made by the Leasehold Valuation Tribunal ("LVT") on 14 February 2006, appointing an experienced property manager, Mr Bruce Maunder Taylor FRICS, as the manager in his place under Part II of the 1987 Act. The application to the LVT was strenuously opposed by Mr Goodman, and it is clear that he still disagrees with its decision. Both the LVT and Judge Cowell were highly critical of Mr Goodman. Unlike me, they had the advantage of seeing and hearing him (and the other witnesses) give evidence in the witness box, where it was tested by cross-examination. Mr Warwick, who is instructed by Mr Goodman on behalf of Arrowgame, does not seek to challenge any of the fact-findings made by the Judge.
The Claimants' application for an acquisition order was based on their contention that the appointment of Mr Maunder Taylor had not cured the problems that they had been experiencing with Mr Goodman, and which had led them to seek the appointment of a manager. One of the grounds on which they relied was the alleged failure by the Landlord (i.e. Arrowgame, represented at all material times by Mr Goodman) to co-operate with the manager to an exceptional extent, unprecedented in the considerable experience of Mr Maunder Taylor.
The main reason why Arrowgame opposed the application was that it did not wish to lose the opportunity of realising the development potential of the Property. In particular, Arrowgame claimed that there were real prospects that a developer would obtain planning permission for a scheme to build a further three storeys of flats immediately above the existing third floor. It sought to rely upon a recent agreement with a company named Landgate (New Homes) Ltd, (a joint venture between a Mr Giles Underhill and a Mr Parma Suhl) by which Landgate was to acquire the share capital of Arrowgame for £4 million, with a view to acquiring the head lease from Arrowgame in due course, and carrying out the proposed development (on the assumption that planning permission and any other necessary consents are obtained).
At the trial, Arrowgame relied upon a witness statement from Mr Underhill dated 18 October 2011, in which he outlined his extensive experience of property development and explained that Landgate's preference was to purchase the head lease for £4 million, but that it could not do so until after the notice period under s.5 of the Landlord and Tenant Act 1987 had expired. That was why Landgate had entered into the agreement to acquire Arrowgame's share capital. (Arrowgame purported to serve notices under s.5 on all the lessees on 17 October, which happened to be the first day of trial). Mr Underhill stated that after the development was completed, the head lease would be transferred into a special purpose vehicle owned by all the lessees.
The Judge was plainly no more impressed by Mr Underhill's evidence than he was by the evidence of the majority of the other witnesses called by Arrowgame. He pointed to the fact that Landgate did not appear to have any assets, and it was that company which was (or was to be) party to the relevant agreements with Arrowgame. He described Mr Underhill's evidence regarding the proposed development as "to a large degree, speculative" and pointed out that there was an express clause in the agreement for the acquisition of Arrowgame's shares that entitled Landgate to rescind that agreement at any time, without reason. He also pointed to the fact that the share sale agreement expressly excluded the right of any third party to enforce any term of it under the Contracts (Rights of Third Parties) Act. This meant that a somewhat vaguely expressed provision in clause 50 that once the development had been completed and the development sold, the sub-lessees were to manage the block of flats, was ineffective to confer any enforceable right on the sub-lessees.
The effect of the Judge's decision is that, upon the parties agreeing the price for Arrowgame's interest in the Property, or the LVT determining that price, Arrowgame will be obliged to convey all its interest in the Property to the Twelfth Claimant. In the course of submissions, some argument was directed to the date on which the value of the Property should be assessed for the purposes of Section 31(2) of the Act, namely, whether it should be the date of the acquisition order, or the later date on which the matter is determined by the LVT or agreed by the parties. That is not a matter with which this appeal is directly concerned, and I therefore propose to express no view about the merits of the rival arguments in this judgment. However, since Section 31(2) provides for the LVT to determine the consideration on the basis of the open market value, then whatever the appropriate date may be for assessment of that value, it was plainly contemplated by Parliament that the market value on that date would be regarded as a fair means of compensation for the acquisition once an acquisition order has been made. Therefore it cannot be open to a lessor to contend, as Arrowgame at one point sought to contend, that an acquisition order should not be made because, by reason of the operation of Section 31(2), he will not, or may not, receive the true worth of his reversionary interest.
The judge described Mr Goodman as "a professional procrastinator whose last-minute, or post-last-minute, activity has occasioned additional costs, stress and exasperation on the part of all those who have had the misfortune to be his opponents in any form of litigation". The judgment contains a number of clear examples of this behaviour. Unfortunately, that criticism has not prompted Mr Goodman to change his ways. Almost all the first day of the hearing of this appeal was spent on argument about whether Arrowgame should be allowed to adduce further evidence, once again served on the Respondents at the very last minute, comprising fresh witness statements from Mr Goodman and Mr Underhill dated 20 th July 2012 (two working days before the hearing). The latter exhibited voluminous documentation pertaining to an application for planning permission which Mr Underhill claimed had been submitted to the Royal Borough of Kensington and Chelsea on 6 July 2012, though Mr Radevsky told...
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