England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM STAINES COUNTY COURT
(HIS HONOUR JUDGE HULL QC)

		Royal Courts of Justice The Strand London
		15 May 1996

LORD JUSTICE ALDOUS: This is an appeal from the decision of HH Judge Hull QC which dismissed the applicants' request for declarations that Twinsectra Ltd, the respondent, was in default in not complying with a notice served pursuant to the Landlord & Tenant Act 1987 and therefore the applicants were entitled to require Twinsectra to transfer the reversionary interest in certain property to them.

The appeal is concerned with the application and provisions of Part I of the Landlord & Tenant Act 1987. That Act, as stated in the title, was passed inter alia "to confer on tenants of flats rights with respect to the acquisition by them of their landlord's reversion". In outline Part I of the Act gives to certain tenants the right of first refusal to acquire the landlord's reversion. Section l states that a landlord shall not make a "relevant disposal" affecting any premises to which Part I of the Act applies without serving a notice in accordance with section 5 of the Act. The premises are defined as those which consist of the whole or part of a building and contain two or more flats held by qualifying tenants and the number of the flats held by such tenants exceeds 50% of the total number of flats contained in the premises. Sections 2 to 4 define who are relevant landlords and qualifying tenants and what is a relevant disposal. Section 5 requires a landlord who proposes to make a relevant disposal to serve a notice in accordance with the section on the qualifying tenants, thereby giving the tenants first refusal. Sections 6 to 10 are concerned with what happens after the notice has been served.

Sections 11 to 17 come into effect when the original landlord has, in breach of his obligations, disposed of his reversion to a new landlord. Section ll requires the new landlord to comply with a notice served by the requisite majority of qualifying tenants requiring him to supply particulars of the terms on which the original disposal was made. Section 12 gives the requisite majority of qualifying tenants the right to serve a "purchase notice" on the new landlord requiring him to dispose of the estate or interest that was the subject of the original disposal on terms on which it was made to a person or persons nominated by them for that purpose. Section l3 gives to a rent assessment committee, called a leasehold valuation tribunal (LVT), the jurisdiction to hear and determine questions arising in relation to any matters specified in the purchase notice, the identity of the property or relating to other terms on which the disposal is to be made and any question arising for determination in consequence of the provision in a purchase notice such as is mentioned in section 12(3)(b). Sections l4 to l7 are concerned with eventualities that may arise after service of a purchase notice pursuant to section 12.

Section l9 deals with enforcement of obligations under Part I of the Act. It provides that the court may, on the application of any person interested, make an order requiring any person who has made default in complying with any duty imposed by any provision of Part I of the Act to make good the default within an appropriate time. That application cannot be made unless a notice has previously been served on the person in question requiring him to make good the default and more than l4 days have elapsed since the date of service of the notice.

The facts

The named applicant is Mr John Green who is the nominated representative of l7 tenants of Tudor Court and Tudor House, Castle Way, Hanworth, in the London Borough of Hounslow. I will refer to them as the applicants.

London & City Westcliffe Properties Ltd were the owners of Tudor Court, Tudor House and Parr Court of Castle Way, Hanworth, in the London Borough of Hounslow. Those properties consist of flats, bungalows and terrace houses which are let. London & City decided to dispose of the freeholds, but failed to serve a section 5 notice on the tenants of the properties. Instead the freeholds, which were registered at the London Registry under titles MX420465 and MX304042, were put up for auction as one lot with the particulars of sale drawing attention to the fact that no section 5 notice had been served. They were purchased on 25 February l992 by Twinsectra for £240,000 and it was registered as proprietor of the freehold interest in the properties on 13 April l992. On l May l992 Mr John Green, as the nominated representative of the applicants, served on Twinsectra a section ll notice requiring it to supply particulars of the terms upon which the disposal was made. Solicitors acting on behalf of Twinsectra replied to that notice giving the information required by the Act, but stating that it was given without prejudice to Twinsectra's contentions that the notice was not a valid notice under section ll of the Act and the premises were not premises to which Part I of the Act applied. On 20 July l992, a section 12 notice (the purchase notice) was served on Twinsectra by solicitors acting on behalf of Mr Green and on behalf of the l7 other long lease tenants in Tudor Court and Tudor House whose names and addresses were given in the notice. I shall have to come back to the terms of that notice, but in effect it required Twinsectra to dispose of the freehold of a number of units within Tudor House and Tudor Court to Mr Green, who was the nominated person as required by the section. An immaterial amendment was made nine days later. Twinsectra failed to comply with the notice and these proceeding were started on 12 November l992.

Tudor Court consists of four buildings which I will refer to as buildings l, 2, 3 and 4. Building l is the main building. It is an attractive l6th century domestic dwelling with the main part running north/south and attached to it two wings protruding in a westerly direction to form three sides of a courtyard, now a garden. It has been converted so that it now contains seven flats and three terrace houses which are included in title MX304042.

Building 2 is situated to the west of the main part of building l and faces across the courtyard. It is a later addition to the complex and consists of two semi-detached bungalows. It is included in titles MX304042 and 420465.

Building 3 appears to have been built as servants' cottages. It is adjacent, but not attached, to the northern wing of Tudor Court. As let, it contains two terrace houses and two bungalows. It is also included in both titles.

Building 4 is adjacent to the southern wing of Tudor Court. It is a modern purpose built block of five flats which is contained within title MX420465.

Around the buildings comprising Tudor Court is a garden and what was called the amenity land comprising ponds and trees. That garden abuts the garden of Tudor House which is situated to the west. It is a l9th century mansion which has been divided into seven flats with its own drive passing to the north of Tudor Court and terminating in Castle Way. It is within title MX420465.

Parr Court is a modern building consisting of about 44 flats which is built around three sides of a court with lawns and ponds. It is situated to the north-west of Tudor House and its grounds are separated from those of Tudor House by a wall. It is included within title MX420465.

With three exceptions, all the flats and houses in Tudor Court and all the flats in Tudor House are occupied under long leases at low rents on substantially the same terms. The leases gave access to the garden, but did not include the amenity land.

Parr Court was let differently and some of the tenancies were regulated tenancies.

The proceedings

Before the judge the applicants sought declarations that Twinsectra was in default in failing to comply with the provisions of the section 12 notice. It followed, they alleged, that they were entitled to acquire the freehold of the seven flats in Tudor House and the buildings which comprised Tudor Court. On this appeal, they only challenged the judge's decision in respect of Tudor House and buildings l and 4 of Tudor Court. They were also concerned to ensure that this court decided the essential issues between the parties. They therefore applied to amend their pleading and Notice of Appeal so as to seek declarations:

(i) that the purchase notice, dated 27 July l992, served on the respondent by the applicants is an effective notice under section 12 of the Landlord and Tenant Act l987;

(ii) that the respondent is in default in compliance with the purchase notice dated 27 July l992 served on it by the applicants pursuant to section 12 of the Landlord and Tenant Act l987; and

(iii) the applicants are therefore entitled to require the respondent to transfer the reversionary interest in that part of Building l Tudor Court, or in the alternative the reversionary interest in that part of Building l Tudor Court, save for those parts of Building l which do not comprise "flats" within the meaning of section 60 of the said Act of l987, the reversionary interest in Building 4 Tudor Court, and the reversionary interest in Tudor House with all appurtenances to such buildings.

As the respondents did not object, the court allowed the amendments leaving to be decided the question of costs.

The judge dismissed the applicants' claim for declarations. He held that the notice had not been served by a nominee of the requisite majority of tenants because the applicants could not sever Parr Court from the application. He also held that the purchase notice was invalid for a number of reasons to which I have to come. However, it is convenient at this stage of my judgment to set out the relevant parts of the purchase notice:

"FLATS 1, 1A, 1B, 2, 2A, 3, 3A, 4, 4A, 4B, 5 5A, 6, 6A, 7, 8, 9, 10, 11, 12 Tudor Court, and

1, 2, 3, 4, 5 & 6 Tudor House

Castle Way, Hanworth, Middlesex.

LANDLORD & TENANT ACT 1987

As solicitor for JOHN KAY GREEN of Flat 8 Tudor Court, the duly appointed nominee for the purposes of the above mentioned Act, on his own behalf and on behalf of the l9 other Long Lease Tenants whose names and addresses are specified at the foot of this notice

NOTICE IS HEREBY GIVEN pursuant to Section 12 of the above mentioned enactment that you are required to dispose of the estate or interest that you hold in the above mentioned premises (that estate or interest being part of the subject matter of the original disposal thereof by instrument of transfer dated 25 February 1992 and made between London City & Westcliffe Properties Limited (1) and Twinsectra Limited (2)) to the above named JOHN KAY GREEN he being the person nominated for the purposes of the said Section 12 by the majority of the qualifying tenants of TUDOR COURT and TUDOR HOUSE flats whose names and addresses are specified at the foot of this Notice

AND FURTHER TAKE NOTICE that the terms on which the above said estate or interest to them are (1) the same terms on which the said estate or interest was disposed of to Twinsectra Limited; or (2) alternatively on such terms as may be determined by a rent assessment committee pursuant to Section 12(3)(b) of the above mentioned enactment."

At the foot of the notice was listed the flats referred to at the start together with the names and addresses of the tenants. They include all but one of the flats in Tudor House; all but two of the flats in building l and one house; one of the bungalows in building 2; two houses and one bungalow in building 3 and all but one flat in building 4.

The Act

Although it will be necessary for me to refer to other sections of the Act, it is convenient to set out the most relevant parts of the sections at the heart of this case.

1. Qualifying tenants to have rights of first refusal on disposals by landlord

(1) A landlord shall not make a relevant disposal affecting any premises to which at the time of the disposal this Part applies unless --

(a) he has in accordance with section 5 previously served a notice under that section with respect to the disposal on the qualifying tenants of the flats contained in those premises (being a notice by virtue of which rights of first refusal are conferred on those tenants); and

(b) the disposal is made in accordance with the requirements of section 6 to l0.

(2) Subject to subsections (3) and (4), this Part applies to premises if --

(a) they consist of the whole or part of a building; and

(b) they contain two or more flats held by qualifying tenants; and

(c) the number of flats held by such tenants exceeds 50 per cent of the total number of flats contained in the premises.

(3) This Part does not apply to premises falling within subsection (2) if --

(a) any part or parts of the premises is or are occupied or intended to be occupied otherwise than for residential purposes; and

(b) the internal floor area of that part or those parts (taken together) exceeds 50 per cent of the internal floor area of the premises (taken as a whole);

and for purposes of this subsection the internal floor area of any common parts shall be disregarded.

..........

5. Requirement to serve notice conferring rights of first refusal

(1) Where, in the case of any premises to which this Part applies, the landlord proposes to make a relevant disposal affecting the premises, he shall serve a notice under this section on the qualifying tenants of the flats contained in the premises.

(2) A notice under this section must --

(a) contain particulars of the principal terms of the disposal proposed by the landlord, including in particular --

(i) the property to which it relates and the estate or interest in that property proposed to be disposed of, and

(ii) the consideration required by the landlord for making the disposal;

(b) state that the notice constitutes an offer by the landlord to dispose of the property on those terms which may be accepted by the requisite majority of qualifying tenants of the constituent flats;

(c) specify a period within which that offer may be so accepted, being a period of not less than two months which is to begin with the date of service of the notice; and

(d) specify a further period within which a person or persons may be nominated for the purposes of section 6, being a period of not less than two months which is to begin with the end of the period specified under paragraph (c).

(3) Where, as the result of a notice under this section being served on different tenants on different dates, the period specified in the notice under subsection (2)(c) would, apart from this subsection, end on different dates

(a) the notice shall have effect in relation to all the qualifying tenants on whom it is served as if it provided for that period to end with the latest of those dates, and for the period specified in the notice under subsection (2)(d) to begin with the end of that period and

(b) references in this Part to the period specified in the notice under subsection (2)(c) or (as the case may be) subsection (2)(d) shall be construed accordingly.

(4) Where a landlord has not served a notice under this section on all of the qualifying tenants on whom it was required to be served by virtue of subsection (1), he shall nevertheless be treated as having complied with that subsection if --

(a) he has served such a notice on not less than 90 per cent of the qualifying tenants on whom it was so required to be served, or

(b) where the qualifying tenants on whom it was so required to be served number less than ten, he has served such a notice on all but one of them.

(5) Where a landlord proposes to effect a transaction that would involve both --

(a) a disposal of an estate or interest in the whole or part of a building constituting a relevant disposal affecting any premises to which this Part applies, and

(b) a disposal of an estate or interest in the whole or part of another building (whether or not constituting a relevant disposal affecting any premises to which this Part applies) or more than one such disposal,

the landlord shall, for the purpose of complying with this section in relation to any relevant disposal falling within paragraph (a) or (b) above, sever the transaction in such a way as to secure that, in the notice served by him under this section with respect to that disposal, the terms specified in pursuance of subsection (2)(a) are the terms on which he is willing to make that disposal.

..........

11. Duty of new landlord to furnish particulars of disposal made in contravention of Part I

(1) Where --

(a) a landlord has made a relevant disposal affecting any premises to which at the time of the disposal this Part applied ("the original disposal"), and

(b) either no notice was served by the landlord under section 5 with respect to that disposal or it was made in contravention of any provision of sections 6 to l0, and

(c) those premises are still premises to which this Part applies,

the requisite majority of qualifying tenants of the constituent flats may, before the end of the period specified in subsection (2) below, serve a notice on the transferee under the original disposal requiring him to furnish a person (whose name and address are specified for the purpose in the notice) with particulars of the terms on which the original disposal was made (including those relating to the consideration payable) and the date on which it was made; and in the following provisions of this Part the transferee under that disposal is referred to as "the new landlord".

(2) The period referred to in subsection (1) is the period of two months beginning with the date by which --

(a) notices under section 3 of the Landlord and Tenant Act 1985 (in this Act referred to as "the l985 Act") relating to the original disposal, or

(b) documents of any other description indicating that the original disposal has taken place,

have been served on the requisite majority of qualifying tenants of the constituent flats.

(3) Any person served with a notice in accordance with subsection (1) shall comply with the notice within the period of one month beginning with the date on which it is served on him.

12. Right of qualifying tenants to compel sale etc by new landlord(1)Where --

(a) paragraphs (a) and (b) of section ll(1) apply to a relevant disposal affecting any premises to which at the time of the disposal this Part applied (other than a disposal consisting of such a surrender as is mentioned in section l5(1)(b), and

(b) those premises are still premises to which this Part applies,

the requisite majority of qualifying tenants of the constituent flats may, before the end of the period specified in subsection (2), serve a notice ("a purchase notice") on the new landlord requiring him (except as provided by the following provisions of this Part) to dispose of the estate or interest that was the subject-matter of the original disposal, on terms on which it was made (including those relating to the consideration payable), to a person or persons nominated for the purposes of this section by any such majority of qualifying tenants of those flats.

(2) The period referred to in subsection (1) is -

(a) in a case where a notice has been served on the new landlord under section ll(l), the period of three months beginning with the date on which a notice is served by him under section ll(3); and

(b) in any other case, the period of three months beginning with the date mentioned in section 11(2).

(3) A purchase notice --

(a) shall, where the estate or interest that was the subject-matter of the original disposal related to any property in addition to the premises to which this Part applied at the time of the disposal --

(i) require the new landlord to dispose of that estate or interest only so far as relating to those premises, and

(ii) require him to do so on the terms referred to in subsection (1) subject to such modifications as are necessary or expedient in the circumstances;

(b) may, instead of specifying the estate or interest to be disposed of or any particular terms on which the disposal is to be made by the new landlord (whether doing so expressly or by reference to the original disposal), provide for that estate or interest, or (as the case may be) for any such terms, to be determined by a rent assessment committee in accordance with section 13.

(4) Where the property which the new landlord is required to dispose of in pursuance of the purchase notice has at any time since the original disposal become subject to any charge or other incumbrance, then, unless the court by order directs otherwise --

(a) in the case of a charge to secure the payment of money or the performance of any other obligation by the new landlord or any other person, the instrument by virtue of which the property is disposed of by the new landlord to the person or persons nominated for the purposes of this section shall (subject to the provisions of Part I of Schedule l) operate to discharge the property from that charge; and

(b) in the case of any other incumbrance, the property shall be so disposed of subject to the incumbrance but with a reduction in the consideration payable to the new landlord corresponding to the amount by which the existence of the incumbrance reduces the value of the property.

The first issue

Twinsectra in its skeleton argument submitted that, even if, it be assumed that a landlord had a duty to comply with a purchase notice, the County Court in this case did not have jurisdiction to grant the declarations because the declarations sought in the pleadings were said to be "in aid of" an enforcement order and as no default notice had been served, an enforcement notice could not be made so as to trigger the court's powers under section l9 of the Act. That was a pleading point and was one reason why the applicants requested the amendment to which I have referred. It was not pressed at the hearing before us. However the amendment did not solve the question as to whether it would be right to grant the declarations originally sought, even if the purchase notice was a valid notice. Twinsectra submitted that even if it had been served with a valid notice, it was not under an obligation to comply with it. If that is right there would be no purpose in granting those declarations. Thus the first question for decision is - does a landlord, upon whom a valid purchase notice has been served, have to give effect to it? Mr Lewison QC submitted that the Act did not contain any requirement that a landlord, who was served with a section l2 purchase notice, need comply with it. All that the section did was to provide for service of a notice in a particular form. That, he submitted, was to be contrasted with the effect of service of a section 5 notice. That constituted an offer which could be accepted by a nominated person in accordance with the provisions of section 6. He also drew attention to section 19 which empowers the court to "make an order requiring any person who has made default in complying with any duty imposed on him by any provision of this part to make good the default within such time as specified in the order." He submitted that the Act did impose duties as could be seen, for example in section l ("a landlord shall not make"), section 5 ("he shall serve a notice"), section (5) ("the landlord shall, for the purpose ..."), and section ll(3) ("shall comply with the notice"). In contrast section 12, he submitted, contained no such duty upon a landlord to comply with the notice when served.

Mr Lewison referred us to the criticisms of the Act made by this court in Belvedere Court Management Ltd v Frogmore Developments Ltd [1996] 1 All ER 312. In that case landlords had sold flats to Frogmore without serving a section 5 notice. Prior to receipt of a purchase notice, Frogmore granted certain leases in the block of flats to another party. Sir Thomas Bingham MR said this, at page 330H:

"In Denetower Ltd v Toop [1991] 1 WLR 945 at 952 Browne-Wilkinson VC sitting in this court described the l987 Act as 'ill-drafted, complicated and confused'. The argument in this case has given new force to this under-stated criticism. Some anomalies have already been mentioned. There are others. Nothing in section 12 imposes on the new landlord a duty not to dispose of his interest, such as is imposed on the original landlord by section 6(1). It is unclear why not. There is nothing in section 12 which gives the tenants a right to require a subsequent purchaser from the new landlord to dispose of his interest to the tenants' nominees. A limited right is given by section l6, but it is not equivalent to the right given by section 12(l) against the new landlord. It is again unclear why not. Counsel discounted the suggestion that an acceptance notice under section 6(l)(b) or a purchase notice under section l2(l) might create a equitable interest in the land capable of registration as a land charge or protection by a caution, and I am not inclined to disagree. But one could wish that the Act provided as many answers as it raised problems."

Hobhouse LJ made a similar criticism. He said at page 331 E:

"The Act imposes certain obligations on landlords but does not match them with adequately expressed rights for the tenants. In some respects the drafting is extremely detailed, in others obvious situations have not been provided for. In places restrictive expressions are used -- section l6 provides examples -- but the reasons for the restrictions are not clear and the Act does not deal with the lacunae that result. Overall the drafting does not disclose a clear and consistent policy and it falls between the two stools of being both excessively and inadequately detailed."

After referring to two cases he went on:

"The legislature does not seem to have appreciated what was involved in making the rights sought to be conferred on tenants effective. Whilst the drafting of fully effective provisions would not be unduly difficult (and has been achieved in other legislation covering similar matters), it is not the role of the court to construct such provisions if they are not to be found expressly or implicitly in the Act as drafted. The ease of the legislative task does not mean that the distinction between the roles of the courts and the legislature can be disregarded. The solutions to the problems posed have to be found, if at all, within the scope of the interpretative tools open to the courts to uncover and give effect to the statutory intention."

Mr Lewison submitted that the words of Hobhouse LJ were applicable to the facts of this case and the court should not construct a duty which was not there. If there was a lacuna, as he submitted there was, it should be remedied by Parliament and not by the court.

Mr Neuberger QC, who appeared for the applicants, submitted that a landlord who was served with a purchase notice had to give effect to it. Although there was no section of the Act which so stated the requirement was, in the words of Hobhouse LJ, "found expressly or implicitly in the Act." I believe he is right.

I have already set out part of the long title to the Act. It is an Act "to confer on tenants of flats rights with respect to the acquisition by them of their landlord's reversion."

To give effect to that, it is necessary that a landlord should, when served with a purchase notice, comply with it and to decide to the contrary would be failing to comply with the stated intention of the legislature. In any case, I believe that the words of section 12 are such as to require a landlord to give effect to the notice. Section 12(1) enables qualifying tenants to serve a purchase notice on the new landlord, "requiring him ... to dispose of the estate or interest that was the subject matter of the original disposal"; and subsection 4 refers to "where the property which the new landlord is required to dispose of in pursuance of the purchase notice ...". It goes on to state that -- "The property shall be so disposed of ...". Thus the section assumes that the purchase notice operates so as to require disposal and provides a duty as to the way the property has to be disposed. Further, to accept the submission of Twinsectra would mean that sections 12 to l7 had no purpose as a landlord could refuse to comply with a purchase notice which had been served. That is unreal.

I have not found it necessary, when concluding that there was a duty upon a landlord to give effect to a purchase notice, to rely upon the heading of section 12 which makes it clear that such a duty exists. Even so, I believe it clear that the section is concerned with the right of tenants to compel a sale by a new landlord. That appears to have been the view of the Master of the Rolls in Belvedere when he said in the passage that I have quoted,

"A limited right is given by section 16, but it is not equivalent to the right given by section 12(1) against the new landlord."

The conclusion I have reached is consistent with the decision of the court in Denetower to grant the declarations which they did. If the judges had believed that the landlord did not have to give effect to the purchase notice, they would not have granted the declarations which they did as to do so would not have resolved the essential issue between the parties.

The second issue

Was the purchase notice served by the requisite majority of qualifying tenants?

Mr Lewison submitted that the notice was not served by the requisite majority of tenants of the relevant premises. He drew our attention to the way that the Act enables qualifying tenants to serve notices. Section 3 defines a qualifying tenant as a tenant of a flat under a tenancy other than certain tenancies such as protected shorthold tenancies. He accepted that those of the applicants who were tenants of flats were qualifying tenants within the definition, if they were tenants of the relevant premises. He pointed out that a purchase notice could only be served by qualifying tenants where:

"paragraphs (a) and (b) of section ll(i) apply to a relevant disposal affecting any person to which ... this part applied."

Section ll(1)(a) was concerned with relevant disposals affecting any premises which at the time of the disposal Part I applied and section l(ii) defined the premises to which Part I of the Act applied in this way.

"This part applies to premises if --

(a) they consist of the whole or part of a building; and

(b) they contain two or more flats held by qualifying tenants; and

(c) the number of flats held by such tenants exceeds 50 per cent of the total number of flats contained in the premises."

Mr Lewison submitted that the word "premises" in section 1 meant, in this case, the complex as a whole meaning Tudor Court, Tudor House and Parr Court. If so, the applicants did not have the requisite majority defined in section 5(6). He also submitted that "premises" to which Part I applied had to be comprised within one registered title. There were, he submitted, two estates in land capable of subsisting or of being conveyed, namely an estate in fee simple absolute in possession or a term of years absolute and that, by virtue of section 69 of the Land Registration Act l925 each separate registered title was a separate estate in land. Therefore the "premises" could not comprise more than one estate. Thus, he submitted, the premises must be encompassed within one land registration title.

Those latter submissions found favour with the judge. He said:

"In addition, it appears to me that the word "premises" imports a requirement that the building or buildings or parts of buildings constituting the premises to which Part I applies must be held by the same title. "Premises" meant originally the commencement of a deed, setting out particulars of the property intended to be transferred thereby; hence it has come to mean the lands granted by a particular deed. If "premises" means something more than a building or part of a building, then I do not think it should be extended to include all the buildings held by a particular landlord, by whatever title they are held. The Act is ex proprietary and the court should not be "too ready to give it to liberal a construction" - see per Goff LJ in Methuin-Campbell v Walters [1979] 2 WLR 113, CA at page 117 D dealing of course with the Leasehold Reform Act l967."

I cannot accept the conclusion of the judge that title is relevant. The premises must consist of whole or part of a building which, as was made clear in Belvedere, could include a garden. The word "premises" does not have a special meaning. It is a word which over the years has been applied to houses, land, shops, and the like with the result that it has come to mean real property of some kind. Thus the Act states that a landlord should not make a relevant disposal affecting any real property without serving a section 5 notice, if it consists of the whole or part of a building and it contains two or more flats held by qualifying tenants and the number of those flats exceeds 50 per cent of the total. The fact that the building is included within one or more titles is irrelevant. It follows that the question of whether a relevant disposal of premises has been made has to be considered on a building by building basis. Thus when ascertaining whether the applicants were a requisite majority, it is not appropriate to take into account Parr Court. Each building must be considered separately.

In this case we are only concerned with Tudor House, and buildings l and 4 of Tudor Court and in each case the relevant applicants constituted the requisite majority of tenants in the building. Parr Court was a different building. If the tenants wished to purchase the freehold of that building, the question of whether they could do so would be for them to decide. Any decision they took could not affect the rights of the tenants of the other buildings. The contrary conclusion would be surprising. If the original landlord had complied with his duty under section 5, he would, under section 5(5), have had to sever each building from the others. Thus it would be surprising if the procedure laid down after transfer to a new landlord, placed the tenants of Tudor House in the position of being governed by the decisions of the tenants of Parr Court.

It follows that the purchase notice was served by the requisite majority of tenants of Tudor House and buildings l and 4 of Tudor Court.

The third issue

A number of attacks were advanced against the content of the purchase notice which, it was submitted, rendered it invalid. Each needs consideration.

The purpose of Part I of the Act was to give qualifying tenants a right of first refusal. To achieve that, section l placed a duty upon a landlord not to make a relevant disposal without serving a section 5 notice giving to the tenants a right to acquire the relevant estate or interest. Section 5 sets out in detail the form of the notice which the landlord has to serve. The offer made in the notice can be accepted by the tenants by serving an acceptance notice as provided for in section 6. In general, such difficulties in procedure which arise are borne by the landlord as he has to draft the relevant section 5 notice.

If the original landlord is in breach of his obligations under sections l and 5, the qualifying tenants have the right to acquire the estate from the new landlord by serving a section l2 notice. In this case, it is said that the content of that notice was not in accordance with section l2 and as a result it was invalid. If that be right, then the failure of the original landlord to serve a section 5 notice placed the tenants in a position in which they should not have been put.

I shall come to section 12, but it is important to bear in mind that the purpose of a purchase notice is to give to the new landlord adequate notice that the qualifying tenants of the building wish to acquire the freehold upon the terms of the original disposal or upon terms to be decided by the LVT. That was the view of the Vice-Chancellor in Denetower which was a case where it was alleged that the purchase notice was invalid as it failed to define the property adequately. He said at page 953:

"Given the complexity of the Act, a draftsman of a notice would be presented with an impossible task in seeking to specify in detail the exact property to be acquired. A notice in terms such as those contained in the present notice gives to the new landlords adequate notice of the claim. Details of the property to be acquired and the terms of the acquisition can in default of agreement be sorted out by the Rent Assessment Committee on an application under section l3(1)."

A purchase notice must give adequate notice to the new landlord of the qualifying tenants desire to purchase the estate or interest that they should have been offered by the original landlord. That is imperative, in the sense that it must be followed to the letter, but some of the other requirements of section 12 are only directory. That difference can arise as was made clear in Howard v Secretary of State for the Environment [1975] 1 QB 235. In that case, the Secretary of State contended that a notice of appeal was invalid as it failed to comply with the statutory obligation that it "shall be made by notice in writing to the Minister, which shall indicate the Grounds of Appeal and state the facts upon which it is based." The Secretary of State contended that the Notice was invalid as it failed to provide details of the facts relied on. The court held that it was imperative to serve a Notice of Appeal in writing, but it was only directory that the Notice of Appeal had to contain the facts. Thus the Notice of Appeal was not invalid because it did not include all the facts which were going to be relied on. Lord Denning MR cited this passage from the speech of Lord Penzance in Howard v Boddington [1877] 2 PD 203 at 210:

"Now the distinction between matters that are directory and matters that are imperative is well-known to us all in the common language of the courts at Westminster .... A thing has been ordered by the legislature to be done. What is the consequence if it is not done? In the case of statutes that are said to be imperative, the courts have decided that if it is not done the whole thing fails, and the proceedings that follow upon it are all void. On the other hand, when the courts hold a provision to be mandatory or directory, they say that, although such provision may not have been complied with, the subsequent proceedings do not fail."

Later he said at page 242E:

"The section is no doubt imperative in that the notice of appeal must be in writing and must be made within the specified time. But I think it is only directory as to the contents. Take first the requirement as to the "grounds" of appeal. The section is either imperative in requiring "the grounds" to be indicated or it is not. That must mean all or none. I cannot see any justification for the view that it is imperative as to one ground and not imperative as to the rest. If one was all that was necessary, an appellant would only have to put in one frivolous or hopeless ground and then amend later to add his real grounds. That would be a futile exercise. Then as to "stating the facts". It cannot be supposed that the appellant must at all costs state all the facts on which he bases his appeal. He has to state the facts, not the evidence; and the facts may depend on evidence yet to be obtained, and may not be fully or sufficiently known at the time the notice of appeal is given.

All things considered, it seems to me that the section, insofar as the "grounds" and "facts" are concerned, must be construed as directory only: that is, as desiring information to be given about them. It is not to be supposed that an appeal should fail altogether simply because the grounds are not indicated, or the facts stated. Even if it is wanting in not giving them, it is not fatal. The defects can be remedied later, either before or at the hearing of the appeal, so long as an opportunity is afforded of dealing with them."

In Belvedere, Hobhouse LJ expressed his views as to the way that the l987 Act should be construed using different language, but I believe arriving at the same result. He said at page 335 at D:

"By way of final comment I would add that I am strongly attracted to the view that legislation of the present kind should be evaluated and construed on an analytical basis. It should be considered which of the provisions are substantive and which are secondary, that is, simply part of the machinery of the legislation. Further, the provisions which fall into the latter category should be examined to assess whether they are essential parts of the mechanics or merely supportive of the other provisions so that they need not be insisted on regardless of the circumstances. In other words, as in the construction of contractual and similar documents, the status and effect of the provision has to be assessed having regard to the scheme of the legislation as a whole and the role of that provision in that scheme - for example, whether some provision confers an option properly so called, whether some provision is equivalent to a condition precedent, whether some requirement can be fulfilled in some other way or waived. Such an approach when applied to legislation such as the present would assist to enable the substantive rights to be given effect to and would help to avoid absurdities or unjustified lacunae."

A section l2 notice must be in writing and served upon the new landlord in time. Further, it must give adequate notice of the requirement of the qualifying tenants to have the estate or interest in the premises, as defined in section l, to be transferred to a nominated person. Those requirements are in my view imperative.

The first complaint as to the form of the notice made by Twinsectra was a failure to include Flat 7, Tudor House, in the notice. It was said that that failure was fatal to the validity of the purchase notice as a whole. That was accepted to be a valid complaint by the judge.

It is correct that Flat 7, Tudor House, is not included in the heading of the Notice and therefore it is possible to read the Notice as only relating to six flats in Tudor House. That, to my mind, would not give full effect to the notice that was given. The notice required Twinsectra to dispose of the freehold interest that Twinsectra held in "the above-mentioned premises". Given that what was being referred to was a freehold interest in Tudor House, it would be absurd to understand the notice as only requiring part of that freehold interest to be transferred. Further, if there was doubt, the letter sent with the notice made it clear that what was being referred to was the whole of the freehold interest in Tudor House. I therefore conclude that the notice was not invalid on this ground.

Second, Twinsectra drew attention to section 12(3) which is concerned with an acquisition where the original disposal included property in addition to premises to which Part I of the Act applied. In such a case, the subsection states that the purchase notice should require the new landlord to dispose of the estate or interest "only" so far as relating to the particular premises and upon terms of the original disposal subject to such modifications as are necessary or expedient.

Twinsectra submitted that the purchase notice required transfer of all Tudor Court, whether or not the buildings contained houses or bungalows and that the inclusion of such units in the notice was a clear breach of section l2(3)(a)(i). That the judge held to be correct.

The applicants accept that the purchase notice could advantageously have been drafted in different terms. However, I believe that the requirements in section 12(3)(a)(i) are only directory. In this case, the purchase notice included extra property, but that did not invalidate the notice as a whole. It gave adequate notice of the requirement of the qualifying tenants that the landlord should transfer buildings l and 4 of Tudor Court and Tudor House. Further, it was clear that Parr Court was not included. The notice also stated that in the alternative to disposal to them on the original terms, the terms were to be determined by a LVT. Thus the landlord was given adequate notice that the tenants of buildings l and 4 of Tudor Court and Tudor House wished to acquire the freehold interest in them. That was in my view sufficient.

Third, Twinsectra submitted that section 12(3)(a)(ii) stated that the purchase notice should require the terms of the original disposal to be modified. That the notice did not do. The notice required Twinsectra to "dispose of the said estate or interest to them on (i) the same terms on which the said estate or interest was disposed of to Twinsectra Ltd; or (ii) alternatively on such terms as may be determined by a Rent Assessment Committee pursuant to section 12(3)(b) of the above-mentioned enactment."

Although the notice could have been worded so as to refer to the words of section 12(3)(a)(ii), there was in my view no need for it to do so. For practical purposes, it was sufficient to make it clear to the landlord that the qualifying tenants wished to have the estate conveyed to them upon the same terms with such appropriate modifications as would be agreed or settled by a LVT. That I believe was the effect of the notice which was served. It follows that for practical purposes Twinsectra could have been in no doubt, after receipt of the notice, that the terms would have to be settled, in default of agreement, by a LVT.

It is an imperative requirement of section 12(3) that the qualifying tenants should inform the new landlord of the property to be acquired, thereby informing him that the qualifying tenants desire to acquire the estate or interest in that property which was transferred to the new landlord in breach of the original landlord's obligations under section 1. The provisions of sections 12(3)(a) and (b) allowing the qualifying tenants to either acquire the whole of the property or sever and to leave it to a LVT to sort out the estate or interest or terms, are in my view directory. I therefore conclude that this objection also fails.

I conclude that the notice served was a valid notice by the qualifying tenants of buildings l and 4 of Tudor Court and of Tudor House. In those circumstances I would allow this appeal insofar as it relates to the tenants of those buildings and grant declarations appropriate to the conclusion I have reached.

SIR JOHN MAY: I have had the opportunity of reading both my Lords' judgments in draft and I agree with them. Although we are differing from the decision of the learned judge below, I do not think it necessary to add anything on my own account. I too would allow this appeal and grant the declarations to which my Lords have referred.

LORD JUSTICE STAUGHTON: This is the most remarkable case of statutory interpretation that I have ever seen. It is as plain as can be what the purpose of part I of the Landlord and Tenant Act 1987 was -- to enable tenants of flats to buy their landlord's interest in the building if the landlord proposed to sell it to someone else, and to buy it from the purchaser if the landlord had actually done so. But nowhere does the statute say expressly that the tenants shall have that right against the new landlord. If that omission is fatal, part I of the Act is not worth the paper which it is written on. One can compare what Lord Simonds said in Inland Revenue Commissioners v. Ayrshire Employers Mutual Insurance Association Ltd [1946] 1 All ER 637 at p.641:

"The case is an unusual one. The section under discussion, section 31 of the Finance Act 1933, is clearly a remedial section, if that is a proper description of a section intended to bring further subject-matter within the ambit of taxation. It is at least clear what is the gap that is intended to be filled and hardly less clear how it is intended to fill that gap. Yet I can come to no other conclusion than that the language of the section fails to achieve its apparent purpose and I must decline to insert words or phrases which might succeed where the draftsman failed."

We are not left in such a state of impotence in this day and age, or with this statute. As Aldous LJ has pointed out, the long title of the Act suggests that it confers on tenants rights with respect to the acquisition of their landlord's reversion. And section 12(1), which allows the tenants to serve a notice requiring the new landlord to dispose of his estate or interest to their nominee, by implication enacts that the landlord shall be obliged to comply with the requirement. If this be constructive judicial legislation, then it is an example of what Sir Thomas Bingham MR considered (in the Belvedere Court case) to be called for.

It seems to me that this conclusion is supported by the marginal note to section 12:

"Right of qualifying tenants to compel sale etc. by new landlord."

See also the marginal note to section 17:

"Termination of rights against new landlord or subsequent purchaser."

There is a strong argument for paying some attention to the marginal notes, while not allowing them to be decisive. After all, they are included in the copy of the bill that is before Parliament, although not susceptible to alteration by vote of the members but only by officials: see Bennion on Statutory Interpretation (2nd edition) pp.486, 512-514. However, reliance on marginal notes in a statute for the present has to be regarded as controversial.

The other problems in this appeal relate to the content and extent of the purchase notice which the tenants gave. First it is essential to decide what is meant by the provision in section 1(2):

"... this Part applies to premises if --

(a) they consist of the whole or part of a building ..."

Although a different view seems to have been common ground before the judge, in my opinion more than one building cannot, in the ordinary way, be treated as comprised in premises for the purposes of the Act. There may be an exception for outhouses and the like; but in general I consider that separate buildings must be treated separately. Otherwise there is very likely to be absurdity; the judge doubted whether the Act could then be made to work.

It follows that there could be no objection to the omission of Parr Court from the tenants' purchase notice, although (i) it was transferred to Twinsectra Ltd by a conveyance which included other buildings which featured in the purchase notice, and (ii) it was registered in the same title as Tudor House and parts of Tudor Court. If Parr Court was properly omitted from the purchase notice, there was no lack of a qualifying majority of tenants for each of the buildings to which part I of the Act applied.

However, the inclusion of buildings 2 and 3 of Tudor Court in the purchase notice was an infringement of section 12(3)(a)(i). That provides that where the original landlord's disposal included property in addition to the premises which the Act applied to, the notice must require the landlord to dispose of his estate or interest only so far as relating to those premises.

I cannot regard this defect in the tenants' purchase notice as so significant as to render it altogether invalid, for three reasons. In the first place, it was in all probability caused by the original landlord's failure to serve a notice under section 5 and in doing so to sever the transaction as required by subsection (5) of that section. Secondly, it must have been perfectly obvious to the new landlord which parts of Tudor Court could, and which could not, qualify under part I of the Act. And thirdly, the purchase notice allowed as an alternative that the terms might be determined by a rent assessment committee, which would have jurisdiction under section 13(1)(a) to determine "the identity of the property to be disposed of". I would therefore conclude that the purchase notice did not fail to comply with section 12 in any respect that was imperative or mandatory, but at most where it was directory (see Howard v. Secretary of State for the Environment [1975] QB 235, and the judgment of Hobhouse LJ in the Belvedere Court case at p.335).

It may be that there should strictly have been not one purchase notice served by the tenants but three, relating to the three buildings to which part I of the Act applied. However, I did not understand Mr Lewison to insist that there should have been three separate pieces of paper; and if he pressed the point, I would not have held that any such requirement was imperative or mandatory.

Finally, there was a complaint that the purchase notice, by reason of the way it was drafted, referred only to flats 1 to 6 in Tudor House and not to flat 7. I would reject that argument for the reason given by Aldous LJ. All told, I would allow this appeal, and grant declarations as he proposes.

Order: Appeal allowed. No decision reached on the question whether the three houses in building 1 form part of the property to be acquired. The appellants to have the costs of the appeal and half their costs below. Leave to appeal to the House of Lords refused.

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