England and Wales Lands Tribunal

 


Stephenson & Anor v Leathbond Ltd & Anor [2004] UKLANDS LRA_72_2004 (22 June 2005)

LRA/72/2004

LANDS TRIBUNAL ACT 1949

LEASEHOLD ENFRANCHISEMENT – collective enfranchisement – preliminary issue – proposal to acquire additional land – dispute as to right to acquire part of additional land – whether leasehold valuation tribunal had jurisdiction to determine dispute – held that it did – Leasehold Reform, Housing and Urban Development Act 1993 sections 24, 90 and 91 and Schedule 3 paragraph 15

IN THE MATTER OFAN APPEAL FROM A DECISION OF THE LEASEHOLD

VALUATION TRIBUNAL FOR THE LONDON RENT ASSESSMENT PANEL

BETWEEN

(1) JOHN M STEPHENSON Applicants (2) IAN MICHAEL HARPER

and

(1) LEATHBOND LIMITED Respondents

(2) EDGESIDE LIMITED

Re: 1-129 Riverview Gardens

London SW13

Before: The President

Sitting at Procession House, 110 New Bridge Street, London EC4V 6JL

On 20 May 2005

Mark Sefton instructed by Howard Kennedy for the appellant.

Edwin Johnson instructed by Bircham Dyson Bell for the respondent.

The following cases are referred to in this decision:

Malekshad v Howard de Walden Estates Ltd [2003] AC 1013

Malekshad v Howard de Walden Estates Ltd (No 2) [2004] 1 WLR 862

DECISION

1. This is an appeal from the Leasehold Valuation Tribunal for the London Rent Assessment Panel who determined against the appellants a preliminary issue arising on an application to the LVT under section 24 of the Leasehold Reform, Housing and Urban Development Act 1993. The salient facts and the issue can be stated shortly.
2. A claim under section 13 of the Act to exercise the right to collective enfranchisement was given on 25 November 2003 in respect of premises known as numbers 1-129 Riverview Court, London SW13. The premises consist of buildings containing flats. In addition to these buildings the tenants claimed the freehold interest in certain additional land comprising communal gardens and an area used as a children's playground adjoining the gardens. The first appellant is the freehold owner of the buildings and the additional land, with the exception of the playground and another small part of the garden. The freehold in those areas is vested in the second appellant, a subsidiary of the first appellant. The appellants served a counter-notice dated 29 January 2004 in which they admitted the right of the respondents to have the freehold interest the buildings and the bulk of the additional land but disputed the right of the respondents to have the freehold interest in the playground and an adjoining part of the additional land.
3. The Respondents applied to the leasehold valuation tribunal under section 24 of the Act for the determination of the issue of the disputed additional land. The Appellants claimed that this issue was not one on which the LVT could adjudicate and that it was a matter for the county court. The LVT decided to determine this question of jurisdiction as a preliminary issue, and in its decision of 12 August 2004 it determined that it did have jurisdiction to determine the issue. The Appellants now appeal against this determination with permission granted by the LVT. They say that the issue is one that falls to be determined by the county court by reason of the provisions of paragraph 15 of Schedule 3 to the Act.
4. The following provisions in Chapter I of the Act as amended are of potential materiality to the question of jurisdiction:

"1. The right to collective enfranchisement

(1) This Chapter has effect for the purpose of conferring on qualifying tenants of flats contained in premises to which this Chapter applies on the relevant date the right, exercisable subject to and in accordance with this Chapter, to have the freehold of those premises acquired on their behalf –

(a) by a person or persons appointed by them for the purpose, and

(b) at a price determined in accordance with this Chapter;

and that right is referred to in this Chapter as 'the right to collective enfranchisement'.

(2) Where the right to collective enfranchisement is exercised in relation to any such premises ('the relevant premises') –

(a) the qualifying tenants by whom the right is exercised shall be entitled, subject to and in accordance with this Chapter, to have acquired, in like manner, the freehold of any property which is not comprised in the relevant premises but to which this paragraph applies by virtue of subsection (3); and

(b) section 2 has effect with respect to the acquisition of leasehold interests to which paragraph (a) or (b) of subsection (1) of that section applies.

(3) Subsection (2)(a) applies to any property if at the relevant date either –

(a) it is appurtenant property which is demised by the lease held by a qualifying tenant of a flat contained in the relevant premises; or

(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) …

13. Notice by qualifying tenants of claim to exercise right

(1) A claim to exercise the right to collective enfranchisement with respect to any premises is made by the giving of notice of the claim under this section …

(3) The initial notice must –

(a) specify and be accompanied by a plan showing –

(i) the premises of which the freehold is proposed to be acquired by virtue of section 1(1),

(ii) any property of which the freehold is proposed to be acquired by virtue of section 1(2)(a) …

(g) specify the date by which the reversioner must respond to the notice by giving a counter-notice under section 21…

(12) In this Chapter 'the specified premises', in relation to a claim made under this Chapter, means –

(a) the premises specified in the initial notice under subsection (3)(a)(i), or

(b) if it subsequently agreed or determined under this Chapter that any less extensive premises should be acquired in pursuance of the notice in satisfaction of the claim, those premises …

(13) Schedule 3 to this Act (which contains restrictions on participating in the exercise of the right to collective enfranchisement, and makes further provision in connection with the giving of notices under this section) shall have effect …

21. Reversioner's counter-notice

(1) The reversioner in respect of the specified premises shall give a counter-notice under this section to the nominee purchaser by the date specified in the initial notice in pursuance of section 13(3)(g).

(2) The counter-notice must comply with one of the following requirements, namely –

(a) state that the reversioner admits that the participating tenants were on the relevant date entitled to exercise the right to collective enfranchisement in relation to the specified premises;

(b) state that, for such reasons as are specified in the counter-notice, the reversioner does not admit that the participating tenants were so entitled …

(3) If the counter-notice complies with the requirement set out in subsection (2)(a), it must in addition –

(a) state which (if any) of the proposals contained in the initial notice are accepted by the reversioner and which (if any) of those proposals are not so accepted, and specify –

(i) in relation to any proposal which is not so accepted, the reversioner's counter-proposal …

22. Proceedings relating to validity of initial notice

(1) Where –

(a) the reversioner in respect of the specified premises has given the nominee purchaser a counter-notice under section 21 which (whether it complies with the requirement set out in subsection (2)(b) or (c) of that section) contains such a statement as is mentioned in subsection (2)(b) of that section, but

(b) the court is satisfied, on an application made by the nominee purchaser, that the participating tenants were on the relevant date entitled to exercise the right to collective enfranchisement in relation to the specified premises,

the court shall by order make a declaration to that effect.

(2) Any application for an order under subsection (1) must be made not later than the end of the period of two months beginning with the date of the giving of the counter-notice to the nominee purchaser…

24. Applications where terms in dispute or failure to enter contract

(1) Where the reversioner in respect of the specified premises has given the nominee purchaser –

(a) a counter-notice under section 21 complying with the requirement set out in subsection (2)(a) of that section, or

(b) a further counter-notice required by or by virtue of section 22(3) or section 23(5) or (6),

but any of the terms of acquisition remain in dispute at the end of the period of two months beginning with the date on which the counter-notice or further counter-notice was so given, a leasehold valuation tribunal may, on the application of either the nominee purchaser or the reversioner, determine the matters in dispute.

(2) Any application under subsection (1) must be made not later than the end of the period of six months beginning with the date on which the counter-notice of further counter-notice was given to the nominee purchaser.

(3) Where –

(a) the reversioner has given the nominee purchaser such a counter-notice or further counter-notice as is mentioned in subsection (1)(a) or (b), and

(b) all of the terms of acquisition have been either agreed between the parties or determined by a leasehold valuation tribunal under subsection (1),

but a binding contract incorporating those terms has not been entered into by the end of the appropriate period specified in subsection (6), the court may, on the application of either the nominee purchaser or the reversioner, make such order under subsection (4) as it thinks fit.

(4) The court may under this subsection make an order –

(a) providing for the interests to be acquired by the nominee purchaser to be vested in him on the terms referred to in subsection (3) …

(8) In this Chapter 'the terms of acquisition', in relation to a claim made under this Chapter, means the terms of the proposed acquisition by the nominee purchaser, whether relating to –

(a) the interests to be acquired,

(b) the extent of the property to which those interests relate or the rights to be granted over any property,

(c) the amount payable as the purchase price for such interests,

(d) the apportionment of conditions or other matters in connection with the severance of any reversionary interests, or

(e) the provisions to be contained in any conveyance,

or otherwise…"

5. Sections 90 and 91 are of importance. So far as material they provide:

"90. Jurisdiction of county courts

(1) Any jurisdiction expressed to be conferred on the court by this Part shall be exercised by a county court.

(2) There shall also be brought in a county court any proceedings for determining any question arising under or by virtue of any provision of Chapter I or II or this Chapter which is not a question falling within its jurisdiction by virtue of subsection (1) or one falling within the jurisdiction of a leasehold valuation tribunal by virtue of section 91.

91. Jurisdiction of leasehold valuation tribunals

(1) Any question arising in relation to any of the matters specified in subsection (2) shall, in default of agreement, be determined by a leasehold valuation tribunal.

(2) Those matters are –

(a) the terms of acquisition relating to –

(i) any interest which is to be acquired by a nominee purchaser in pursuance of Chapter I …

(9) A leasehold valuation tribunal may, when determining the property in which any interest is to be acquired in pursuance of a notice under section 13 or 42, specify in its determination property which is less extensive than that specified in that notice…

(11) In this section –

'the nominee purchaser' and 'the participating tenants' have the same meaning as in Chapter I;

'the terms of acquisition' shall be construed in accordance with section 24(8) …"

6. In Schedule 3 paragraph 15 provides:

15. Inaccuracies or misdescription in initial notice

(1) The initial notice shall not be invalidated by any inaccuracy in any of the particulars required by section 13(3) or by any misdescription of any of the property to which the claim extends.

(2) Where the initial notice –

(a) specifies any property or interest which was not liable to acquisition under or by virtue of section 1 or 2, or

(b) fails to specify any property or interest which is so liable to acquisition,

the notice may, with the leave of the court and on such terms as the court may think fit, be amended so as to exclude or include the property or interest in question.

(3) Where the initial notice is so amended as to exclude any property or interest, references to the property or interests specified in the notice under any provision of section 13(3) shall be construed accordingly…

7. For the appellants Mr Mark Sefton submitted that the issue of whether there was entitlement to acquire the disputed land was one that fell to be exercised by the county court under section 90 rather than by an LVT under section 91. This jurisdiction was conferred on the court by the operation of section 13(13), which gave effect to paragraph 15 of Schedule 3. Under paragraph 15(2) it was for the county court to decide whether the initial notice specified any property or interest that was not liable to acquisition under section 1(2)(a).
8. Mr Sefton said that section 91, which conferred on LVTs the jurisdiction to determine certain disputes, had no application in the present circumstances. Under section 91(2)(a)(i) the matters that the LVT was to determine were the terms of acquisition of any interest "which is to be acquired" by a nominee purchaser. It was for the LVT to determine the terms of acquisition of an interest which the nominee purchaser had the right to acquire. The words "which is to be acquired" presumed that the right to acquire had already been determined, and the LVT was not able to determine the question of whether the nominee purchaser had the right to acquire the interest. If there was no right to acquire the additional land the LVT had no power to make any determination in respect of it. Under section 24(1), where a counter-notice had been served but any of the terms of acquisition remained in dispute, the LVT had power to determine the matters in dispute. Under section 24(8) "the terms of acquisition" included, at paragraph (a) "the interests to be acquired" and at paragraph (b), "the extent of the property to which those interests relate". Mr Sefton said that paragraph (b) enabled the tribunal to determine the physical extent of the property once the right to acquire it had been established. Matters such as air space and boundary issues would fall for determination under this provision.
9. Mr Sefton placed reliance on Malekshad v Howard de Walden Estates Ltd (No 2) [2004] 1 WLR 862, in which Neuberger J held, on wording in the Leasehold Reform Act 1967 that was similar to that in paragraph 15(2) of Schedule 3 to the 1993 Act, that if a notice was in need of amendment because land had been included which ought not to have been included the notice was not valid until it had been amended with leave of the court. It was submitted that until the court had decided whether the notice required amendment the notice was not valid and there could be no "proposed acquisition" for the purposes of identifying under section 24(8) the terms of acquisition.
10. For the respondents Mr Edward Johnson submitted that jurisdiction as between county courts and LVTs was governed by sections 90 and 91 in a way that left no room for doubt. Under section 90(2) the county court had jurisdiction to determine questions arising under Chapters I and II of the Act provided that the relevant question did not fall within the jurisdiction of the LVT by virtue of section 91. Section 91(2) listed the matters over which the LVT had jurisdiction. They included the terms of acquisition relating to an interest to be acquired by a nominee purchaser under Chapter I. The terms of acquisition, as defined in section 24(8), included the interests to be acquired and the extent of the property to which those interests related. That clearly, said Mr Johnson, included the disputed part of the additional land. Moreover section 91(9), which enabled the LVT in its determination to specify less extensive property than that in the initial notice showed beyond doubt that it had jurisdiction in a dispute as to the extent of the additional land.
11. Mr Johnson submitted that there arose in section 21 a critical bifurcation between the two jurisdictions. A landlord who disputed the tenants' entitlement to the specified premises, that is to say the buildings, could serve a counter-notice to that effect and under section 22(1) the dispute was to be determined by the county court. If, however, the landlord admitted the entitlement to acquire the specified premises, any matters in dispute, the terms of the acquisition under section 24(8), were to be determined by the LVT.
12. The division of functions between county courts and leasehold valuation tribunals is, in my view, quite clear from the provisions of the Act. It stems from the provisions relating to the reversioner's counter-notice in section 21. The reversioner in his counter-notice must (see sub(2)) state either that he admits the right to enfranchisement of the relevant premises or that he does not admit such right. If he says that he does admit the right he must in addition (see subs(3)) state which (if any) of the proposals in the initial notice are accepted or rejected. A distinction is thus established between, on the one hand, a dispute as to the right to enfranchise the relevant premises and, on the other hand, the proposals in the initial notice. Such proposals would include "any property of which the freehold is proposed to be acquired by virtue of section 1(2)(a)" (see section 13(3)), ie the additional land specified in the notice.
13. The distinction established by section 21 is carried forward into sections 22 and 24, which deal with the resolution of disputes arising from the counter-notice. If the counter-notice was served under section 21(2)(b), ie not admitting the entitlement to enfranchise the specified premises, the issue of entitlement is for the county court to determine under section 22(1). If the counter-notice was served under section 21(2)(a), ie admitting the entitlement to enfranchise but not accepting all the proposals in the initial notice, and if any of the terms of acquisition remain in dispute two months later, it is for the LVT to determine the matters in dispute under section 24(1). "The terms of acquisition" are widely defined by section 24(8) to mean "the terms of the proposed acquisition" whether relating to "(a) the interests to be acquired [or] (b) the extent of the property to which those interests relate … [or] otherwise." This definition quite clearly, in my judgment, covers any property specified in the initial notice "of which the freehold is proposed to be acquired by virtue of section 1(2)(a)", ie the additional land.
14. The contention on behalf of the appellants comes down to this: that sections 22 and 24 make incomplete provision in relation to disputes arising under counter-notices, and in particular that there is a lacuna affecting proposals to acquire additional land; and that this lacuna is filled by section 90(2) and paragraph 15(2) of Schedule 3, so that disputes on such proposals concerning entitlement are to be determined by the county court. I reject that contention. It would be surprising if sections 22 and 24 had omitted to deal with disputes as to the right to acquire additional land or part of the additional land, and, as I have said, the definition in section 24(8) seems to me in terms to cover that matter. In addition the provision in section 91(9) that empowers an LVT, when determining the property in which any interest is to be acquired under section 13, to specify property which is less extensive than that specified in the notice makes clear that the LVT does have jurisdiction to decide the extent of the property to be included. There is thus nothing to bring section 90(2) into effect in relation to such disputes.
15. Between them sections 90 and 91 make full provision for establishing by whom, county court or LVT, disputes are to be decided where no specific provision is made elsewhere. Paragraph 15(2) seems to me, in the light of provisions of these sections, to be worded inappositely for the purpose of conferring on the county court jurisdiction to resolve disputes arising under counter-notices. It does not provide for a reference of the dispute to the county court. It envisages instead an application by the tenant to amend the notice. But, self-evidently, there is no reason why the tenant should apply to amend a notice that he contends accurately specifies the property that is liable to acquisition. The sidenote to paragraph 15 "Inaccuracies or misdescription in initial notice" states correctly in my view what the paragraph is dealing with. Sub-paragraph (2) enables a notice which specifies property which was not liable to acquisition to be amended with the leave of the court. It does not say that the court is to have jurisdiction to determine disputes as to the entitlement to acquire such property, and there is no need, in view of the provisions of section 90 and 91, and the earlier provisions in sections 22 and 24, that it should have any role in conferring jurisdiction to decide disputes.
16. Mr Sefton, as I have said, sought to rely on Neuberger J's decision in Malekshad (No 2), but I do not think that this assists him. That was a decision in a leasehold enfranchisement case under the Leasehold Reform Act 1967. Paragraph 6(3) of Schedule 3 to that Act contains provisions that are effectively the same as those in sub-paragraphs (1) and (2) of paragraph 15 in Schedule 3 to the 1993 Act. Neuberger J held that the exclusion (or inclusion) in particulars in a tenant's notice of claim of property which ought (or ought not) to have been included as part of the relevant house and premises had the effect of invalidating the notice unless the notice was amended under paragraph 6(3). What had happened in that case was that in 1997 the tenant had given notice seeking to enfranchise property consisting of a house and an adjoining mews house. The landlord disputed the tenant's right to have the mews house included, and ultimately the House of Lords held (in Malekshad v Howard de Walden Estates Ltd [2003] AC 1013) that the tenant had no right to have the mews house included. The proceedings under which that dispute was determined were brought in the county court. (Section 20(2) of the 1967 Act gives the county court jurisdiction in respect of proceedings for determining to what property a person's right to enfranchise extends.) In Malekshad (No 2) the issue was whether the 1997 notice required amendment in consequence of the House of Lords decision, and Neuberger J, disagreeing on this point with the county court judge, held that it did. What was not in issue in those later proceedings was whether the tenant was entitled to have the mews house included as part of the property to be enfranchised. That issue had already been decided. There is nothing in the decision, therefore, that would suggest that paragraph 15(2) of Schedule 3 to the 1993 Act gives a county court jurisdiction to determine disputes as to entitlement to acquire additional land. It cannot, in my view, be the case, as the appellants contend, that an initial notice is rendered invalid by the statement in their counter-notice that they do not accept the proposal to acquire all of the additional land.
17. In my judgment the LVT came to a correct decision on the preliminary issue. The appeal is dismissed.

22 June 2005

George Bartlett QC, President