S. Franses Limited and another v Block 6 Ashley Gardens Roof Gardens Limited and others  EWHC 2880, Ch
A decision under the Landlord and Tenant 1987 Act that has everything about the exercise and enforcement of the right of first refusal.
- Validity of Purchase Notices, validity of Default Notices,
- Extent of Discretion under s.19,
- Estoppel, Illegality,
- Law of Property (Miscellaneous Provisions) Act 1989,
- Terms of Disposal,
- and Consideration.
Wayne Clark acted for the successful nominee purchaser/qualifying tenants enabling them to acquire roof space leases which had been granted in 2012 by the landlord tenant owned company without complying with s.5 of the 1987 Act. Judge Dight CBE granted the order in October 2022 (judgment having been delivered in April 2022) and the purchasers (tenants within the building) appealed on 11 grounds. The appeal was dismissed.
- HH Judge Dight’s judgment can be read here.
- And that of Mr Justice Richards can be read here.
In particular it should be noted that HH Judge Dight held that:
- A purchase notice under s.12B does not have to refer to any non-monetary consideration which formed part of the original disposal. This did not form the subject matter of an appeal.
- A default notice pursuant to s.19 of the Act did not have to specify the method by which the purchasers were to comply with their statutory duty and thus it mattered not that the default notice attached a TR1 which requested transfer for £1. The notice was not invalidated by reason of the fact that the consideration as found by the Court to be payable was different from that which the qualifying tenants had specified in the default notice.
- Estoppel cannot be prayed in aid to prevent qualifying tenants from invoking their rights under the 1987 Act. This did not have to be determined by Mr Justice Richards on appeal.
- In so far as estoppel could be relied upon it was not made out on the facts.
- The Court had a discretion under s.19 of the 1987 Act in determining whether or not to make an order requiring the purchasers to comply with their statutory duty to comply with the purchase notice served under s.12B(2). An order was to be made notwithstanding the 44 factors relied upon by the purchasers as to why an order ought not to be made.
- The court was not sanctioning an illegal act albeit the participation agreement entered into by the qualifying tenants provided for a potential entitlement for the landlord, which had granted the leases in breach of the terms of the Act, to obtain, upon acquisition of the roof space leases by the nominee purchaser, part of the roof to facilitate repair and maintenance.
- The making of an order for acquisition by the qualifying tenants did not infringe the rights of the purchasers under the Human Rights Act 1998.
The purchasers appealed. The nominee purchaser cross appealed arguing that (1) an oral agreement by the purchasers to contribute up to £100,000 towards the decoration of the common parts was to be excluded as a term as to “consideration” as it fell foul of s.2 of the Law of Property (Miscellaneous Provisions) Act 1989 and (2) a covenant in the leases granted to effect work to the roof to create roof gardens was equally not consideration within the meaning of the Act for the disposal.
Mr. Justice Richards dismissed the appeal holding, inter alia:
1) The default notices served under s.19 of the 1987 Act were valid. No particular form of default notice is required. The default notices referred to the purchase notices which had been served, had made it clear that the purchasers were under an obligation to dispose of the leases to the nominee purchaser and combined with a threat of “legal enforcement proceedings” conveyed the clear message to the purchasers that the nominee purchaser was requiring the purchasers to makes good their default in complying with their duty under s.12B(2).
2) The Judge had not erred in the way in which he had expressed the breadth of the discretion under s.19. The exercise of the discretion involves an analysis of whether the purchasers should be relieved from a duty Parliament has imposed on them. The decision of Michaels and another v Harley House (Marylebone) Ltd  Ch 104, CA did not set out any legal principles of general application with respect to the exercise of discretion.
3) The exercise of discretion does not involve the application of any established equitable principles. The judge’s reference to considering whether it was “inequitable” to make an order was being used in the sense of meaning “unfair” or “unjust”.
4) In considering an appeal on the exercise of a discretion it was necessary to pay “a high degree of deference” to the Judge’s exercise of the discretion. It was furthermore insufficient simply to persuade the appeal judge that he/she would have exercised the discretion differently. (R v Competition and Markets Authority and others  4 WLR 2940, Ch at  followed).
5) The nominee purchaser was not seeking to enforce any agreement, still less an illegal agreement, that engaged the principles contained in Patel v Mirza  AC 467, SC and/or Welwyn Hatfield BC v Secretary of State for Communities and Local Government  AC 304, SC. Whether the landlord would actually obtain any benefit should the nominee purchaser acquire the leases was uncertain. In any event any benefit was modest and moreover the nexus between the landlord’s original unlawful act (granting leases without serving a s.5 notice) and the averred benefit was slender.
Mr Justice Richards also dismissed the cross appeal holding that:
1) The 1989 Act was not applicable. A purposive construction of the 1987 Act was required and such a construction did not require terms only to be “enforceable terms”. Woodridge v Downie (1998) 76 P&CR 239, LT not followed.
2) The covenant to carry out works to the roof was no, as conceded by the appellants, “consideration” (York House (Chelsea Ltd v Thompson  Ch 1 Ch). Nevertheless, it was still at “term” on which the purchasers obtained the leases and thus was a matter to be taken into account for the purposes of s.12B(2).
Wayne was instructed by a great team at Withers, namely, Andrew Chesser, Eloise Illingworth and Ed Willams.
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