England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE LANDS TRIBUNAL
MR GEORGE BARTLETT QC
LRX/145/2005

		Royal Courts of Justice Strand, London, WC2A 2LL
		20/11/2007

Lord Justice Mummery :

Introduction

1. Part II of the Landlord and Tenant Act 1987, as amended by the Commonhold and Leasehold Reform Act 2002, (the 1987 Act) conferred an important new jurisdiction on Leasehold Valuation Tribunals (LVT) in disputes arising from the failed management of buildings in multiple occupation. A tenant in a multi-tenanted block of flats can apply to the LVT for the appointment of a manager "in relation to" premises to which Part II applies. In its discretion the LVT may appoint a manager to carry out such functions in connection with the management of the premises as it thinks fit. The functions of management include repair, maintenance and improvement. In their judgments in Maunder-Taylor v. Blaquiere [2003] 1 EGLR 52 Aldous and Longmore LJJ explained the legislative policy in more detail.
2. In this case an application made to the Southern LVT by a number of long leaseholders for the appointment of a manager was not, in principle, opposed by the freehold owner of the premises. The dispute centred on the extent of the property over which a manager may be granted powers by the LVT. The appeal turns on a short point of construction of Part II of the 1987 Act, in particular sections 21 and 24, and their application to the particular facts of this case.
3. Since 10 June 2002 Cawsand Fort Management Company Limited (the Company) has been the registered proprietor of the freehold interest in a group of 19^th century buildings described in the heading of the proceedings as "The Fort, Cawsand, Torpoint, Cornwall." They are situated above Cawsand Bay at the western entrance to Plymouth Sound. The main buildings were built in about 1867. The Fort is a Grade II Listed Building and a Scheduled Ancient Monument.
4. After 1987 a Mr Michael Peacock developed the buildings at The Fort for residential purposes. 30 residential units were created in two phases around the inside of a curtain wall, a surrounding courtyard and a central subterranean magazine. There are 11 freehold units, which are connected to mains sewerage, and 19 leasehold units, which are connected to a septic tank sewerage system. All the units enjoy access over common roadways, footpaths and common land as identified on the plans to their respective title documents. There are also car parking spaces.
5. The respondents to the Company's appeal include Mrs EM Stafford and other lessees or joint lessees of leasehold residential units at the Fort. The leases were granted between 1988 and 1998 by Mr Peacock, the original landlord, for a term of 999 years at a peppercorn rent.
6. The First Schedule to the leases described the rights, easements and privileges granted to the lessees. Subsequently Deeds of easement and covenant were entered into between owners of the freehold and leasehold units and the Company relating to entry upon and use of defined "Amenity Land" by the residents of the units for recreational uses. The Company, which covenanted to repair and maintain the Amenity Land, has not been active in carrying out its management obligations to the residents.
7. There is an unfortunate history of bad feeling between the Company and the residents. There have been other legal proceedings. The lessees brought an action in the Plymouth County Court to enforce their rights of first refusal of the freehold interest under Part I of the 1987 Act. (The lessees have not subsequently followed through their claims to enforce rights to acquire the Company's freehold reversion under Part I.) An issue arising on the extent of the premises to which Part I applied was resolved by the Southern LVT on an application under section 13 of the 1987 Act. The issue related to the identification of the precise extent of the appurtenances the lessees of the residential buildings were entitled to acquire under Part I.
8. In its determination of 18 March 2005 (paragraph 21 and 22) the LVT held that the "relevant premises" for the purposes of the right of first refusal in Part I of the 1987 were the buildings containing the dwellings and their appurtenances within the curtilages of the buildings. This comprised the pathway and gardens, the steps from the roadway and included the garages and parking bays as demised in the various leases. The easements granted by the leases were "appurtenances" but were not appurtenant land as they do not fall within the curtilage of the building.
9. The Company contended that the ruling of the LVT in that case should have been carried across to the provisions for the appointment of a manager under Part II of the 1987 Act so that the property over which the manager may carry out his functions is limited to the buildings and the appurtenances within the curtilage of the buildings.

The present proceedings

10. This appeal by the Company is in a later set of proceedings by the respondent lessees at The Fort, which resulted in an order of the LVT under section 24 in Part II of the 1987 Act for the appointment of a manager in relation to the premises.
11. On 5 October 2005 the LVT appointed a Mr Martin Woodhead FRICS as "Manager of the Property" for a period of three years to undertake a scheme of management. A programme of the work to be carried out by the manager was appended to the order. The areas coloured on a plan include land in the Company's freehold title located outside the buildings and their curtilages. "The Property" affected by the order was defined in the heading as "The Fort, Cawsand, Torpoint, Cornwall PL10 1PL ("The property")." The order confers various common form powers which would be included in any order appointing a manager of or in relation to premises.
12. The Company appealed against the LVT order. On 7 November 2006 the Lands Tribunal (Mr George Bartlett QC President) dismissed the Company's appeal. Permission to appeal to this court was granted by Chadwick and Carnwath LJJ on a renewed application by the Company on 21 February 2007.
13. An appeal lies to this court on a point of law. The Company identified the legal point as an alleged excess by the LVT of its jurisdiction under section 24 in purporting to appoint a manager over or of premises to which Part II of the 1987 Act does not apply, being premises which are not comprised in the buildings containing the leasehold flats and their curtilages.

The 1987 Act

14. Part II of the 1987 Act applies to "premises consisting of the whole or part of a building if the building or part contains two or more flats": section 21(2), which is similar to the provisions in section 1(2) in Part I of the 1987 Act.
15. Section 24 (1) confers power on the LVT to make an order (whether interlocutory or final) appointing a manager

"to carry out in relation to any premises to which this Part applies-

(a) such functions in connection with the management of the premises or

(b) such functions of a receiver,

or both, as the tribunal thinks fit."

16. Under section 24(4) an order of the tribunal may make provision with respect to such matters relating to the exercise by the manager of his functions under the order and such incidental or ancillary matters as the tribunal thinks fit.
17. It is provided in section 24 (11) that references in Part II of the Act to the management of any premises "include references to the repair, maintenance, improvement or insurance of those premises."
18. Mr Guy Adams, counsel for the Company, also referred the court to the provisions in Part I, under which a leaseholder has a right of first refusal for the acquisition of the freehold of the premises, and to the provisions in Part III of the 1987 Act, which make provision for the compulsory acquisition of the landlord's interest in certain circumstances.

The issues

19. The Company has no objection to the appointment of a manager in this case or to Mr Woodhead being appointed manager by the LVT, provided that the order is limited to the buildings and their curtilages as defined in the LVT's earlier ruling under section 13 of the 1987 Act.
20. The Company bases its submissions on the interpretation of "the premises" in sections 21 and 24(1) of the 1987 Act. Its case is that the power of the LVT to appoint a manager does not extend to granting powers over property owned by the Company outside the leased buildings and their curtilages, such as the amenity land at The Fort over which the Company granted recreational rights to residents and other land over which the lessees enjoy appurtenant incorporeal rights. To the extent that the LVT order appointing a manager covered such property, it was ultra vires.
21. The respondents' case is that section 21 of the 1987 Act defines a tenant's right to apply for the appointment of a manager. They own premises which satisfy the requirements of the section. Each leasehold unit consists of a part of a building, which contains two or more flats. Section 24 defines the jurisdiction of the LVT to make an appointment and to lay down the functions of the manager appointed "in relation to" the premises owned by the respondents and to carry out functions in connection with their management. They contend that the functions of the manager as set out in the LVT's order for his appointment are to be carried out "in relation to" premises to which Part II of the 1987 Act applies, and the order was therefore validly made.

Decision of Lands Tribunal

22. The background to the appeal to the Lands Tribunal was set out in an agreed statement of facts and issues, from which I have made a summary of the basic facts and contentions.
23. Deciding the point of construction of sections 21 and 24 against the Company the President said this-

"17. As I have said, Mr Adams [counsel for the Company] accepts that "premises" for the purposes of section 24 includes incorporeal rights. Such rights in the present case include access over the common roadways and footpaths, the right to use the sewerage system and, in the case of 9 of the owners of the freehold units and 17 of the owners of the freehold units, the right to enter upon and use the amenity land for recreational purposes. Mr Adams also accepts that under section 24 a manager appointed in relation to a building may be authorised to manage the ancillary rights to the easements enjoyed by the tenants, for example the right to enter and repair rights of way. He is in my judgment clearly right to accept this. However, what has to be recognised is that in performing rights of repair a manager, although prompted by the tenant's right to enjoy an incorporeal right, would be carrying out functions in the form of physical works to the servient tenement. He would not, as Mr Adams put it, be repairing the right of way, since the rights of way are incorporeal. He would be repairing the ways themselves and these are part of the servient tenement. It seems to me for this reason to be inescapable that a management order "in relation to" premises that include easements may appoint a manager to carry out functions that may include works to the servient tenement. Those would, undeniably, be functions "in connection with the management of the premises". In these circumstances it is clearly the case that the "property" (to use the word in the management order) in respect of which the manager is appointed to exercise functions, may properly include appropriate parts of the servient tenement. The principal concern that led to the respondents' application related to the amenity land over which they had incorporeal rights and in my judgment the LVT had power to make an order that included this land in the property to which the management order related.

18. The contention of the appellant that the LVT had no jurisdiction to make a management order extending over parts of the fort that are not within the curtilage of the buildings containing the leasehold flats must therefore necessarily fail, and, since this is the only issue raised, the appeal must be dismissed. Mr Adams points out that the property as defined in the order included parts of the appellant's freehold over which the lessees have no rights (the buildings beneath the mound). It also included residential land that was in other freehold ownerships, although it is to be noted that there is apparently no objection on the part of those freehold owners to the inclusion of their properties. Under the programme of work the manager is required, among other things, "to keep insured the land and buildings", which would therefore extend to land and buildings in relation to which the lessees have no rights. It appears to me that in some respects the order probably does go too far, although what parts of the servient tenement it is appropriate to include must be a matter for the LVT's judgment. The remedy of the appellant, now that the issue in the appeal has been resolved, is to apply to the LVT under section 24(9) to vary the order if it feels that its provisions go beyond what is reasonably necessary."

24. In his skeleton argument Mr Adams criticised the President for treating the appeal as raising only the "premises issue" and for not deciding "the true issue" on the extent of the jurisdiction of the LVT to appoint a manager, which was limited to premises to which Part II of the 1987 Act applied. In oral argument I understood Mr Adams to accept that "the true issue" is simply another way of formulating the premises issue and that the appeal to this court, as to the Lands Tribunal, turns only on that issue.

Discussion and conclusion

25. Under the procedures relevant to the premises issue, which I have identified in paragraphs 20 and 21, it is necessary to consider four steps.
26. The first step is the applicant's entitlement to apply to the LVT for the appointment of a manager under Part II. This is governed by section 21 in Part II, which is clearly directed to the standard case of a lessee of a flat in a purpose-built block of flats or in a house or other building which has been converted into two or more flats. Section 21(1) provides that the applicant must be a "tenant of a flat contained in any premises to which this Part applies." Section 21(2) provides that Part II of the Act applies to "premises consisting of the whole or part of a building if the building or part contains two or more flats."
27. The focus of the provision is on a building or part of a building containing flats. There is no dispute that Mrs Stafford and her fellow leaseholders at The Fort are entitled to apply to the LVT for the appointment of a manager, all of them being tenants of flats in buildings to which Part II applies.
28. The second step is whether the case is one in which the LVT could properly exercise its discretion to appoint a manager. There is no dispute on this point. The Company has no objection to the appointment under section 24 of a manager to carry out on premises to which Part II of the Act applies, functions in connection with the management of the premises.
29. The third step is to identify the extent of the property over which the LVT has power to appoint a manager. This is the controversial aspect of the decision of the LVT and the Lands Tribunal.
30. Mr Adams correctly pointed to the fact that the opening words of section 24(1) contain the expression "premises to which this Part applies." He submitted that the manager can only be validly appointed of, over or in respect of a building (together with its curtilage) to which the 1987 Act applies, and not of, over or in respect of other premises, such as, for instance, the amenity land.
31. As David Richards J observed during argument, this submission, which concentrates on "the premises", does not give full effect to the language of section 24(1), which refers to the appointment of a manager to carry out functions "in relation to" any premises to which Part II applies. This clearly requires a causal link or nexus between the functions to be carried out by the manager and the premises defined in section 21(1), but it does not confine the manager's functions to buildings and their curtilages. The power of the LVT is broader than simply appointing a manager of or over the premises as a building or part of a building. For example, the recreational rights were granted by the Company over the amenity land. Although they were not granted over the building containing the flats, it is an accurate use of language to describe the rights granted over the amenity land as being "in relation to" the premises consisting of the building which contains the lessees' flats. In those circumstances an order appointing a manager to carry out functions "in relation to" the premises may extend to the amenity land and other land not within the buildings or their curtilages.
32. The section goes on to provide what functions the manager may be appointed to carry out, i.e. functions "in connection with the management of the premises" which may include repair, improvement and maintenance under section 24(11). This fourth step involves a decision by the LVT as to what management functions in connection with the premises the manager should carry out "in relation to" the premises.
33. In my judgment, the flaw in the Company's submissions on the construction of section 24 stems from narrowly concentrating on the definition of "the premises to which the Act applies" and neglecting the self-evident purpose of the provision and the width of the language in which the power of the LVT is expressed.
34. The practical purpose of Part II is to protect the interests of lessees of premises, which form part of a building, by enabling them to secure, through the flexible discretionary machinery of the appointment of a manager, the carrying out of the management functions which they are entitled to enjoy "in relation to" the premises of which their flats are part. There is nothing in the language of Part II or in its aim to justify limiting a manager's functions to those which must be carried out on "the premises to which the Act applies" in section 24(1) in the way suggested by the Company by reference to Parts I and III of the 1987 Act. Both the LVT and the Lands Tribunal rightly rejected the Company's submissions on construction.
35. I would add that I agree with the President of the Lands Tribunal that the only issue before him (and the same is true in this court) is the question of construction. If, in the light of the ruling on that issue, it appears that the order of the LVT goes too far by conferring powers on the manager otherwise than "in relation to the premises" the proper procedure for correcting the order of the LVT is not to appeal to the Lands Tribunal or to this court on a point of law, but to apply to the LVT under section 24(9) of the 1987 Act for a variation of the order. The LVT's order contains an express liberty to apply for variation: paragraph 19.

Result

36. For the above reasons there is no error of law in the decisions of the LVT and the Lands Tribunal and I would dismiss this appeal.

Mr Justice David Richards:

37. I agree.

Sir Paul Kennedy:

38. I also agree.