England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CENTRAL LONDON COUNTY COURT
(His Honour Judge Hallgarten QC)

		Royal Courts of Justice Strand London WC2 Wednesday 1st May, 2002

1. LORD JUSTICE TUCKEY: This is a renewed application by the defendant for permission to appeal from a judgment of Judge Hallgarten QC, given in the Central London County Court, in which he declared that its notice dated 24th October 2000, served under section 42 of the Leasehold Reform, Housing and Urban Development Act 1993 was invalid. Such a notice is required if the tenant of premises, which he holds on a long lease, asks for a new long lease under the provisions of that Act. By section 42(3)(c) the notice is required to specify:

"... the premium which the tenant proposes to pay in respect of the grant of a new lease ..."

2. The defendant's notice specified the sum of £12,000. The claimant landlord challenged its validity on the ground that this was an unrealistic amount. After hearing evidence from the defendant's solicitor about how the £12,000 had been calculated and from a valuer called on behalf of the claimants, the judge accepted that the defendant's proposal was genuine but described it as, "wholly unrealistic", "quite baffling", "something other than a genuine proposal" which "could logically be torn up". A realistic proposal would have been in the order of £60,000.
3. The basis for the judge's approach was the decision of this court in Cadogan v Morris [1999] 1 EGLR 59, where we held that a notice specifying £100 was invalid where a realistic figure would have been between £100,000 and £300,000. At page 61 of the report Stuart-Smith LJ (with whose judgment Otton LJ and I agreed) said:

"I do not consider it is necessary to read any words into section 42(3)(c). The tenant is required to specify the premium that he proposes to pay. He did not do so; he deliberately specified a figure that he did not propose to pay. I do not think the tenant is required to offer his final figure that he may be prepared to go to, but he should, in my view, offer a realistic figure. The judge was troubled by the difficulty in telling whether the offer was a realistic one. I very much doubt whether in practice this will present the difficulties that the judge envisaged. It ought to be possible both for the landlord and the judge to recognise whether the offer is a realistic one or simply a nominal or wholly unrealistic one. The landlord would need to be on fairly firm ground if he sought to challenge a substantial offer, even if he thought it was considerably too low. The court will obviously allow a fairly wide margin. If the landlord unsuccessfully challenges the validity of the notice, he will find himself paying the costs. On the other hand, even if it is the tenant's opening bid, it should, in my view, be a realistic one. I decline to lay down any more precise guidelines. In this I follow what Sir John Donaldson MR said in Cresswell v Duke of Westminster [1985] 2 EGLR 151 at p.152:

`Where we draw the line I do not know, I doubt whether it is in anybody's interests that I should attempt to draw that line. Many cases will answer the question on their own facts.'

This seems to me to be an application of the well known elephant test. It is difficult to describe, but you know it when you see it. I think we can trust to the good sense of landlords not to make frivolous applications and county court judges to take a robust line and not get enmeshed in hearing detailed evidence. A brief inquiry, if necessary with limited evidence from tenant and landlord, should suffice."

4. Mr Barlow, for the applicants, argues that in Cadogan we said no more than that the offer should be genuine. In other words, an amount which the tenant genuinely proposed to pay. He is right in saying that this was one ground upon which the notice in that case was held to be invalid.
5. Mr Barlow continues by submitting that we meant no more than that when we went on to say that the offer should be realistic. But if we did say more than that it was obiter, and if necessary wrong, because of the difficulties in practice which that creates, which are referred to in the passage which I have quoted, and because it introduces the word "realistic" into the legislation where it does not appear.
6. The difficulties to which Mr Barlow referred were, he submitted, illustrated by this case, where the judge could only decide what offer should have been made after hearing expert evidence from the claimants' valuer. In the alternative, Mr Barlow says that, accepting that this court is bound by its own decisions, I should recognise the force of his submissions by giving permission to appeal and dismiss the appeal summarily, so as to enable him to have the opportunity to take the point to the House of Lords if they can be interested in it.
7. I am afraid to say that, skilfully though those submissions were put, I cannot accept any of them. The passage from the judgment in Cadogan does, it seems to me, make the position clear. The offer has to be realistic, both in the sense that it is a genuine offer and in the sense that it makes some realistic attempt to put forward a sum which the tenant is to offer for the granting to him of a new long lease. Unless it meets those requirements, it is not an offer within the meaning of the Act. There are good reasons for that to be so, which are spelt out in the earlier part of the judgment in Cadogan which I need not repeat today. In this case the judge took a robust view, as we invited him to do, of the tenant's offer and his decision on whether or not that offer was realistic cannot, in my judgment, be faulted.
8. As to Mr Barlow's alternative suggestion that I should at least recognise that there is a strong argument that Cadogan is wrong and therefore deal with the application in a way which will enable the point to be taken to the House of Lords, I do not say that such a course would be impossible but it would be a wholly exceptional course for this court to take, and would only be taken if the court thought its earlier decision was obviously wrong but was nevertheless binding. That is not my state of mind about the judgment in Cadogan in this case, not least I suppose because I was a party to it. But there it is. I am afraid I cannot accede to that application.
9. When I dismissed this application on paper I said:

"I do not think the judge misunderstood or misapplied Cadogan and I see no real prospect of this court upsetting his robust conclusion. What the applicants are really saying is that Cadogan was wrongly decided but it is binding on this court."

10. That, I am afraid, remains my view. So this application must be dismissed.
ORDER: Applications for permission to appeal and for permission to rely on further evidence refused. (Order not part of approved judgment)