MALEKSHAD v HOWARD DE WALDEN ESTATES LIMITED [2001] EWCA Civ 761

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CENTRAL LONDON COUNTY
COURT (HH JUDGE RYLAND)
[2001] EWCA Civ 761Case No Case No: B2/2000/0396 CCRTFVenue Royal Courts of Justice, Strand, London, WC2A 2LL, Wednesday 23rd May 2001
Between
MALEKSHADAppellantHOWARD DE WALDEN ESTATES LIMITEDRespondent
Before
Lord Justice Robert WalkerLord Justice SedleyMr Justice LightmanMr Paul Morgan QC (instructed by Mischon de Reya for the appellant)Miss Judith Jackson QC and Mr Timothy Harry (instructed by Speechly Bircham for the respondent)Date 23 May 2001

LORD JUSTICE ROBERT WALKER:

Introduction

[1]This is an appeal from an order of His Honour Judge Ryland made on 28 February 2000 in the Central London County Court. The judge had heard some preliminary issues in an application for leasehold enfranchisement under the Leasehold Reform Act 1967 ("the 1967 Act") made by the tenant, Mr Nasser Malekshad ("the applicant"). The respondent was the freehold owner, Howard de Walden Estates Ltd ("the freeholder"). The judge decided the preliminary issues adversely to the applicant and in consequence he dismissed the application with costs (had he decided any of the preliminary issues the other way, further issues would have had to be tried). The applicant appeals to this court with permission which I gave on paper on 14 April 2000. The statutory provisions[2]The relevant statutory provisions are in Part I of the 1967 Act. For the purposes of the issues which the judge had to decide most of the relevant provisions are in a single section, section 2 (meaning of "house" and "house and premises" and adjustment of boundary). These are brought into play by section 1(1), which confers on a tenant of a leasehold house, occupying the house as his residence, a right to acquire the freehold on fair terms. Section 1(1) (as amended and extended, in particular by the Leasehold Reform, Housing and Urban Development Act 1993) goes on to lay down valuation limits and time limits (for the duration of the tenant's occupation). The valuation provisions are extremely complex but they are not material to the preliminary issues. Section 1(2) provides that a tenant satisfies the condition of occupying a house as his residence if he is occupying the house (in whole or in part) as his only or main residence.[3]Then come the provisions of section 2, which are all-important to this appeal. The section has given rise to a good deal of litigation, with at least two appeals going to the House of Lords. Subsections (1) to (5) are in the following terms:
"(1) For purposes of this Part of this Act, "house" includes any building designed or adapted for living in and reasonably so called, notwithstanding that the building is not structurally detached, or was or is not solely designed or adapted for living in, or is divided horizontally into flats or maisonettes; and - (a) where a building is divided horizontally, the flats or other units into which it is so divided are not separate "houses", though the building as a whole may be; and (b) where a building is divided vertically the building as a whole is not a "house" though any of the units into which it is divided may be. (2) References in this Part of this Act to a house do not apply to a house which is not structurally detached and of which a material part lies above or below a part of the structure not comprised in the house. (3) Subject to the following provisions of this section, where in relation to a house let to and occupied by a tenant reference is made in this Part of this Act to the house and premises, the reference to premises is to be taken as referring to any garage, outhouse, garden, yard and appurtenances which at the relevant time are let to him with the house and are occupied with and used for the purposes of the house or any part of it by him or by another occupant. (4) In relation to the exercise by a tenant of any right conferred by this Part of this Act there shall be treated as included in the house and premises any other premises let with the house and premises but not at the relevant time occupied and used as mentioned in subsection (3) above (whether in consequence of an assignment of the term therein or a subletting or otherwise), if - (a) the landlord at the relevant time has an interest in the other premises and, not later than two months after the relevant time, gives to the tenant written notice objecting to the further severance of them from the house and premises; and (b) either the tenant agrees to their inclusion with the house and premises or the court is satisfied that it would be unreasonable to require the landlord to retain them without the house and premises. (5) In relation to the exercise by a tenant of any right conferred by this Part of this Act there shall be treated as not included in the house and premises any part of them which lies above or below other premises (not consisting only of underlying mines or minerals), if - (a) the landlord at the relevant time has an interest in the other premises and, not later than two months after the relevant time, gives to the tenant written notice objecting to the further severance from them of that part of the house and premises; and (b) either the tenant agrees to the exclusion of that part of the house and premises or the court is satisfied that any hardship or inconvenience likely to result to the tenant from the exclusion, when account is taken of anything that can be done to mitigate its effects and of any undertaking of the landlord to take steps to mitigate them, is outweighed by the difficulties involved in the further severance from the other premises and any hardship or inconvenience likely to result from that severance to persons interested in those premises."
Subsections (6) to (7) are not directly relevant to the appeal.[4]Mr Paul Morgan QC (who appeared in this court, but did not appear below, for the applicant) drew the court's attention to some other provisions in Part I of the 1967 Act which show how it works in practice. Sections 8, 9 and 10 of the Act are machinery provisions for giving effect to a claim for enfranchisement. Section 8 prescribes in general terms the rights and obligations resulting from a valid claim. Section 9 (as greatly elaborated by subsequent amendments) provides for the ascertainment of the purchase price. Section 10 provides for matters of conveyancing, including (in subsection (2)) a provision that a transfer of an enfranchised house shall (as regards rights of support and other similar easements and rights) have effect to grant with it, but also to make it subject to, all such easements and rights as are necessary to reproduce, as nearly as possible, rights and obligations in respect of adjacent property as they were before enfranchisement. The facts[5]This case is concerned with a building or buildings in a fashionable part of central London. (In order to avoid pedantic repetition of 'a building or buildings' I shall use the plural form in the rest of this narrative, but that does not in any way prejudge the first main issue in the case.) The buildings have from time to time since 1775 - and most materially, on 2 and 4 April 1997 when the applicant's solicitors served notices under the 1967 Act - occupied a rectangular piece of land running from Harley Street, London W1 at the west to Weymouth Mews, London W1 at the east. The ground slopes slightly from the west down to the east. At the Harley Street end is a substantial terraced residential building, 76 Harley Street. At the Weymouth Mews end is what many would call a mews cottage, 27 Weymouth Mews. 76 Harley Street has a basement, ground floor and four upper floors. 27 Weymouth Mews has a basement, ground floor and one upper floor. Between the two main buildings, and in some way forming part of them, are further built structures at basement and ground floor level.[6]The judge had a good deal of evidence about the history of the buildings. This had been derived from researches either undertaken or commissioned by the applicant's architect, Mr Bryan Green. The judge discounted some of this evidence as conjectural. In any event the details of building development and domestic or other use in the fairly remote past would rarely (if ever) be of central importance. In relation to the first 160 years or so since the main buildings were built in 1775 it is sufficient to say that they were an integrated residential unit, in the sense that the owner and his family (or possibly, after the Married Women's Property Act 1882, the owner and her family) lived in the house and the family's horses and carriage were kept in the mews, with one or more grooms or coachmen occupying living accommodation over the carriage house. (This layout of the ground floor of the mews, with two small loose boxes at the south side of the carriage house, can still be seen in an architect's drawing made in 1935.)[7]During the whole of this period the two main buildings were physically linked by a basement running all the way from Harley Street to Weymouth Mews. At first this was covered by an open yard, which was later (probably in the 1850's) built over at ground level on the south side (but left open on the north side). The tradesmen's entrance to the main residence, and the route for disposal of its waste, was through the mews. Whether or not the entire property was a single house, it was until the 1930's adapted to the needs of a single prosperous household and its servants.[8]The architect's drawing already mentioned shows that in 1935 or thereabouts 27 Weymouth Mews was modified so as to create a more or less self-contained unit. On the ground floor the loose boxes were removed and a second garage was formed (the carriage house having already become a garage). A door leading to the rear of 76 Harley Street was blocked up. On the first floor the architect managed to fit in a living room, four small bedrooms, a kitchen and bathroom. The drawing does not show the basement, as at that time it was all occupied with 76 Harley Street.[9]The modern history of the property can be regarded as beginning in 1949. By a lease ("the headlease") dated 25 February 1949 the freeholder's predecessor in title demised the property to a company called Langdon (Dorset) Farm Ltd ("Langdon") for a term of 48¾ years from 6 July 1948 (that is, until 6 April 1997) at a yearly rent of £300. The property demised was described as "All that piece or parcel of ground with the messuage or dwelling house garage building and all other erections thereupon ..." with an identification of the two postal addresses and a reference to a plan. The plan shows number 76 as "residential premises" and number 27 as "private garage buildings" with a detailed depiction of the intervening area as built on (apart from two small open areas) up to ground level or (on the south side) to the extent of one further storey (or two where there is a sort of small apse projecting over a staircase).[10]By the headlease the tenant covenanted "forthwith to convert the buildings now comprised in the demised premises into high class residential flats or maisonettes" in accordance with plans and specifications approved by the lessor. There was in evidence a plan dated June 1948 (apparently approved on behalf of the Howard de Walden Estate on 6 July 1948). It showed that the conversion consisted mainly of putting in new bathrooms and kitchens so as to form a caretaker's flat in the basement, two maisonettes (on two floors) and one flat. This layout changed later, but the details are unimportant. The main interest of the plan is in showing that the basement flat extended the whole length of the site, ending in two storerooms (under 27 Weymouth Mews) whereas the ground floor ended at the back wall of the ground floor of no. 27.[11]The judge heard and accepted the evidence of Mr John Godliman, who is a surveyor and a director of the freeholder. His evidence was that no further changes in the physical layout took place until 1960, when Langdon granted an underlease to Dr William McKenzie, a Fellow of the Royal College of Surgeons. This underlease ("the 1960 underlease") was dated 3 March 1960 and it demised 27 Weymouth Mews to Dr McKenzie (who was already an occupying undertenant of part of 76 Harley Street) for a term ending on 1 April 1997 (that is five days before the headlease). The parcels clause closely (and perhaps inappropriately) followed that of the headlease except that it referred only to 27 Weymouth Mews. It had three plans, one showing that part of the basement formerly occupied with no. 76 (that is, the two storerooms) was now included with no. 27. The basement area included was however appreciably smaller than the area of the ground floor and the first floor; the judge recorded that it was common ground that the difference is 27.3 square metres.[12]The 1960 underlease required the tenant "to use the ground floor of the demised property for a private motor garage only and the first floor as a self-contained private residential flat or for the accommodation of a chauffeur only". The basement was to be used only for service purposes. These broadly corresponded to user covenants in the headlease. There was another covenant requiring Dr McKenzie, at the end of the term, "or in the event of his giving up personal occupation of the adjoining maisonette known as 76 Harley Street at his own cost to reinstate and make good the door opening between the garage and the said maisonette and restore the same to the same state and condition as that part of the demised premises are now in".[13]The judge seems not to have had detailed evidence as to Dr McKenzie's underlease of the maisonette but Mr Godliman's evidence was that it comprised the ground floor (where Dr McKenzie had a consulting room) and the first floor of no. 76. So a door was opened at ground level (which in fact involved a few steps down from Harley Street ground level to Weymouth Mews ground level). The steps and the door can be seen on the ground floor plan on a drawing dated October 1959 which seems to have been approved on behalf of the Howard de Walden Estate on 12 February 1960. The basement plan shows that the two storeroom doors (shown on the plan on the 1960 underlease) were to be bricked up, leaving the ground-floor door as the only access between no. 76 and no. 27.[14]Dr McKenzie seems to have left no. 76 in 1970, when his underlease of the maisonette (including the consulting room) seems to have been assigned to another medical practitioner. Then in 1974 the 1960 underlease of 27 Weymouth Mews was assigned to Dr Joan Gomez. As the judge commented in his judgment, in order to comply with his covenant Dr McKenzie should then have blocked up the communicating doorway at ground-floor level.[15]The best evidence of what actually happened was in the witness statement of Dr Gomez which was before the judge. In his judgment he summarised this evidence as follows:
"In her statement which was before me, although she was unable through illness to attend the hearing, Dr Gomez said that she had taken an assignment of Dr McKenzie's underlease which ran from 25 December 1959 to 1 April 1997. She had occupied the Mews as her main residence until September 1996 and thereafter she or a friend had returned there approximately three times a week to see that everything was all right. This was until March 1997 when her friend had found the locks changed. The premises let to her comprised a flat on the first floor to which the only means of access was in Weymouth Mews, two garages on the ground floor and two basement storerooms. The only access to the storerooms was through the smaller garage. Just above the ground floor level of the Mews there was a doorway in the wall between 76, Harley Street and 27, Weymouth Mews. It was at the top of three or four steps leading up from the garage. The door clearly had not been used for years as it was very dirty and there were many cobwebs on it. There were neither a door handle nor hinges visible on the Mews side of the door. During the period of her occupation she had retained control of the garages, using the smaller one for her own purposes and letting the larger one."
[16]The applicant took an assignment of the headlease on 6 November 1987. By then the rent had been increased, by a deed of variation, to £365 a year. He had by then obtained vacant possession of the basement and of the maisonette on the ground floor and first floor of no. 76. His evidence (which the judge found unreliable on this point) was that on or just after 28 March 1997 he called in a locksmith to drill out the old lock on the communicating door and fit a new lock and a new burglar alarm. The judge found that the applicant was not in residential occupation of 27 Weymouth Mews on 2 or 4 April 1997. He found that the applicant was a trespasser in no. 27 until the 1960 underlease expired on 1 April 1997. During the next three days the applicant could have occupied no. 27 but he did not in fact do so. In an addendum to his judgment (made at the request of counsel) the judge made clear that he did not accept that the applicant occupied the garage (on the ground floor) or the storerooms (in the basement) between those dates. He also clarified that the basement within 76 Harley Street undercut both the garages and the first floor flat at no. 27, and that he had formed the view that such undercutting was to a material degree.[17]The judge also heard evidence from Mr Green and Mr Godliman and made some findings about the effect of the overhang on the stability of no.27. Miss Judith Jackson QC (appearing with Mr Timothy Harry for the freeholder) accepted that these findings were not entirely clear but the essential passage was as follows:
"If the Harley Street house were to be enfranchised and the Mews house were to revert to the Respondent the position would be that the Mews house would continue to depend for its support on those parts of the basement of 76, Harley Street which were delineated on the plans. If the basement parts of 76, Harley Street were to be permitted to fall into disrepair by the Applicant or his successors in title, or the rear wall of the Mews house otherwise fell into a state of disrepair, the rear part of the Mews property would collapse. Clearly, the Respondent could not enforce any provision requiring the Applicant to keep the load bearing part of the basement in repair. I am satisfied that the overhanging by the Mews property is material."
The statutory meaning of "house": the main authorities[18]The judge had to determine two preliminary issues. The first he stated (not quite accurately) as whether 76 Harley Street and 27 Weymouth Mews constituted one house or two houses. The second issue (arising if the buildings did not constitute a single house) was whether neither no.76 nor no.27 constituted a house (within the meaning of the 1967 Act) because the overhang of part of no.76's basement by part of no.27's ground floor and first floor led to both properties being excluded under s.2(2).[19]The judge decided that there were two buildings and two houses and that the two together could not reasonably be called a single house. He also held that neither of the two buildings could qualify as a house within the meaning of the 1967 Act because the overhang or undershoot (however it was described) was a material part. Before looking more closely at the judge's reasoning I find it helpful to consider the general scheme of section 2 of the 1967 Act and to refer briefly to some of the many reported decisions on the 1967 Act (eleven of which were cited to the judge, together with one decision of the House of Lords on positive covenants).[20]The draftsman of the 1967 Act has used three concrete nouns in section 2: house, building and (in subsection (2)) structure. The all-important term is 'house', the meaning of which has to be derived from the fairly intricate language of subsections (1) and (2), taken together. It is clear that subsection (1), on its own, lets in buildings which might not normally be called houses (for instance a barn, schoolhouse or chapel converted into permanent living accommodation). It is also clear (subject to argument on 'material part') that subsection (2) excludes buildings which would normally be called houses (for instance, semi-detached houses built with cellars which project under the neighbouring property). The word 'building' seems to be used in a flexible, non-technical sense since in subsection (1)(b) it can refer to a whole terrace of houses, but language earlier in the subsection shows that a house need not be a building which is "structurally detached" (which means "detached from any other structure": see the speech of Lord Wilberforce in Parsons v Trustees of Smith's Charity [1974] 1 WLR 435, 439). The word 'structure' is also used in a non-technical way.[21]The most important authorities, for the purpose of determining this appeal, are the decision of the House of Lords in Tandon v Trustees of Spurgeons Homes [1982] AC 755 and the decision of this court in Duke of Westminster v Birrane [1995] QB 262. Tandon was mainly concerned with the significance of "reasonably so called" in s.2(1). Birrane was partly concerned with s.2(1) but its main importance lies in what was said about "material part" in s.2(2).[22]Tandon was concerned with what are often called 'mixed units', that is residential and retail property comprised in a single letting. That is not the problem in this case, but the majority of the lordships (Lord Roskill, with whom Lord Scarman and Lord Bridge agreed) stated a principle of general application. In allowing an appeal from this court and restoring the decision of the county court judge Lord Roskill said, at p.766-7 "Small corner shops and terrace shops combined with living accommodation are to be found in almost every town and village in England and Wales. Parliament plainly intended that a tenant who occupied such premises as his residence should have the benefit of the Act if the building could reasonably be called a "house". It is imperative, if the law is to be evenly and justly administered, that there should be not only uniformity of principle in the approach of the courts to the question but also a broad consistency in the conclusions reached. The question must not, save within narrow limits, be treated by the courts as a question of fact: for the variations of judicial response could well be such as to give rise to unacceptable, indeed unjust, differences between one case and another. This could lead to the statute being applied to two practically identical buildings one way by one judge and another by another - an echo of equity and the length of the Chancellor's foot. For this reason, the Court of Appeal's decision in Lake v Bennett [1970] 1 QB 663 was welcome as stating a principle and confirming the question of fact to a narrow area. I deduce from it the following propositions of law:(1) as long as a building of mixed use can reasonably be called a house, it is within the statutory meaning of "house", even though it may also reasonably be called something else;(2) it is a question of law whether it is reasonable to call a building a "house";(3) if the building is designed or adapted for living in, by which as is plain from section 1(1) of the Act of 1967, is meant designed or adapted for occupation as a residence, only exceptional circumstances, which I find hard to envisage, would justify a judge in holding that it could not reasonably be called a house. They would have to be such that nobody could reasonably call the building a house." The other members of the House of Lords (Lord Wilberforce and Lord Fraser dissented not as to the meaning of s.2(1) (see at pp.760 and 761) but as to the correctness of the first-instance judge's assessment of the facts.[23]That approach has been echoed by Millett LJ in Cadogan v McGirk [1996] 2 EGLR 75 . In considering whether the Act should be strictly construed as expropriatory legislation he said, at p.76, "It would, in my opinion, be wrong to disregard the fact that, while the Act may to some extent be regarded as expropriatory of the landlord's interest, nevertheless it was passed for the benefit of tenants. It is the duty of the court to construe the Act fairly and with a view, if possible, to making it effective to confer on tenants those advantages which parliament must have intended them to enjoy."[24]The facts of Birrane had a superficial resemblance to those of this case in that in Birrane there was a large town house (2 Wilton Crescent) and a mews property (2 Kinnerton Street) which had formerly been held with it under a single lease granted in 1913 for a term of 63 years (extended in 1949 so as to expire in 2009). Much of the basement of the mews property extended under the rear part of 2 Wilton Crescent, and the two properties were structurally linked. But there was one very important difference in the facts, that is that the lease had been assigned (in respect of the two parts of the original holding) to two different assignees, with an apportionment of the rent. Mr Birrane was the assignee of the mews property and he wished to enfranchise it. The landlord applied for a declaration and Mr Birrane counterclaimed. His evidence was that the basement was inconvenient and liable to flood and that he did not use it.[25]The county court judge ruled in favour of Mr Birrane's counterclaim, holding that the basement did not form part of the house occupied by the tenant. But this court allowed the landlord's appeal. In his judgment Nourse LJ (with whom Mann and Saville LJJ agreed) differed from the approach of Lord Denning MR in two early cases on the Act ( Peck v Anicar Properties [1971] 1 AER 517 and Wolf v Crutchley [1971] 1 WLR 99). Nourse LJ stated that the identity of the house must be determined solely by reference to s.2 of the 1967 Act, and without reference to s.1. He said at p.268, "In my view the correct approach to the construction of sections 1(1) and 2(1) is as follows. The first requirement of section 1(1) is that there should be a leasehold house held by the tenant. In order to find out whether that requirement is satisfied you go straight to section 2(1), which invites you to identify a building held by the tenant and designed or adapted for living in; it need not be structurally detached, nor solely designed or adapted for living in. If and when you have identified such a building you must consider whether it is reasonable to call it a house. If it is, then you go back to the other requirements of section 1(1) and consider next whether the tenant is occupying the building as his residence. You do not consider that question unless and until the requirements of section 2(1) are satisfied."[26]In referring to s.2(1) Nourse LJ cannot have intended to exclude reference to s.2(2), which he then went on to consider. He referred to Parsons v Trustees of Henry Smith's Charity both in this court [1973] 1 WLR 845 and in the House of Lords [1974] 1 WLR 435. In this court Lord Denning MR and Stephenson LJ had expressed rather different views on the meaning of 'material part'. In the House of Lords it had no longer been an issue but Lord Wilberforce ([1974] 1 WLR at p.440) had referred to it as "an issue which must be largely factual and one of common sense". But Lord Wilberforce had already identified the legislative purpose in his discussion of s.2(1) (at p.439):
"From section 2(1) it appears, and indeed it is well known, that the Act was intended to provide "enfranchisement" for dwelling houses but not for flats. Flats, as are "strata" in other systems, are units which arise by horizontal division of a building, and by this criterion they are excluded by paragraph (a). On the other hand, the Act evidently intended to allow enfranchisement of terrace houses and dwellings arising by vertical division. This is effected by paragraph (b). If one seeks a reason for this different treatment, it may lie in the difficulty, in relation to units arising by horizontal division, of providing, after they become freehold by enfranchisement, for the enforcement of necessary positive covenants - a difficulty which did not exist while they were leasehold. Possibly there were other reasons for the discrimination: at any rate it was clearly made in section 2(1) of the Act. Then it was necessary to make provision for mixed cases, where units were separated by a broken vertical line, or as it might be expressed, partly vertically and partly horizontally. This I take to be the purpose of subsection (2) and it uses as the discrimen the lying of a material part above or below a part of the structure to which the house is attached. It was necessary to confine the exemption to cases of structural attachment, in order not to include within it cases of mere projection, over or under another structure, without attachment."
Lord Wilberforce was particularly familiar with the problems of making positive covenants run with freehold land since he had chaired an official committee which reported on the problem in 1965 (Cmnd 2719). Since then there have been further reports by the Law Commission and others (The Law of Positive and Restrictive Covenants (1984) Law Comm. no.127; Commonhold: a consultation paper (1990) Cm 1345) but no legislative action.[27]In Birrane Nourse LJ developed Lord Wilberforce's line of reasoning. He said (at pp.270-1):
"In ordinary legal parlance "material", used adjectivally, is not found in a vacuum. It imports a reference to something else. The thing to which it is applied must be material to some inquiry or for some purpose. It must be of sufficient substance or significance to have an effect of some kind. So Parliament must have intended that the part of the house, in order to be material, would be of sufficient substance or significance to have an effect of some kind. What might that effect be? Bearing in mind the primary purpose of section 2(2), I think it must be prejudice to the enjoyment of the house or another part of the structure caused by enfranchisement, in particular by reason of the inability of one freehold owner to enforce positive obligations against successors in title of the other. I would therefore hold that if the part of the house which lies above or below a part of the structure not comprised in it is of sufficient substance or significance to make it likely that enfranchisement will prejudice the enjoyment of the house or another part of the structure, whether by reason of the inability of one freehold owner to enforce positive obligations against successors in title of the other or otherwise, then it is a material part of the house within section 2(2). In practice it may be found that that test will exclude from the operation of the Act houses of which little more than a trivial or insignificant part lies above or below a part of the structure not comprised in it. But that is not a reason for rejecting the only test that Parliament can reasonably be supposed to have intended."
The first issue:
"reasonably so called"
[28]This court was not shown the precise terms in which the preliminary issues were directed. In his judgment the judge stated the first issue as "whether or not 76 Harley Street and 27 Weymouth Mews constitute one house or two houses." Mr Morgan criticised this, saying that the judge was asking himself the wrong question. There is force in that criticism. Even when the redundant "or not" is disregarded the judge was posing the question on the unspoken assumption that the building or buildings could not simultaneously be one house and two houses. After referring to Birrane (with a citation from the judgment of Nourse LJ including the passage set out in para 25 above) he repeated that he had to decide "whether the two structures form a house or two houses", determining it on a common sense and objective approach. He then went on to what he called the secondary issue of whether the two houses (as he found them to be) were nevertheless a (single) house "reasonably so called".[29]The judge's approach was (if I may say so) entirely understandable but it failed to take account of the clear guidance given by the House of Lords in Tandon , especially in the passage from Lord Roskill's speech set out in para 22 above. The judge listed Tandon as having been cited but apart from that he did not refer to it. Logic says that X cannot at once be Y and not be Y, but once the element of reasonable opinion is introduced logic is no longer a bar. As Lord Hailsham LC said (in the context of parental consent to adoption) in Re W (an infant) [1971] AC 682, 700, "Two reasonable parents can perfectly reasonably come to opposite conclusions on the same set of facts without forfeiting their title to be regarded as reasonable. The question in any given case is whether a parental veto comes within the band of possible reasonable decisions and not whether it is right or mistaken. Not every reasonable exercise of judgment is right, and not every mistaken exercise of judgment is unreasonable. There is a band of decisions within which no court should seek to replace the individual's judgment with his own." The same point was made by Salmon LJ in one of the earliest cases on the 1967 Act, Lake v Bennett , [1970] 1QB 663, 672.[30]In this case the judge was (in effect) being asked to rule against the applicant's assertion that the entirety of the property comprised in the headlease could (on 2 and 4 April 1997) reasonably be called a house. The fact that it could reasonably be called two houses (even, indeed, that it might be more reasonable to call it two houses) was immaterial. (Mr Morgan did not explicitly rely on the argument from absurdity that the alternative view might be, because of s.2(2), that the property comprised in the headlease did not comprise a house at all.)[31]Miss Jackson sought to uphold the judge's approach, arguing that it was only in 'mixed use' cases (like Tandon ) that the competing answers of 'one house' and 'two houses' were not mutually exclusive. In support of this she referred to Peck v Anicar Properties [1971] 1 AER 517 and Wolf v Crutchley [1971] 1 WLR 99. Those were both cases in which two adjoining terraced properties, let under separate leases or tenancies, had been linked internally at one level. In each case the tenant was seeking to enfranchise only one of the properties (otherwise the tenant would have been blocked by the rateable value limit in both cases, and also by s.2(2) in Peck ). I do not think these cases assist Miss Jackson. Indeed Wolf seems to me positively unhelpful to her: see Lord Denning MR at p.102E, Phillimore LJ at p.103E and Cairns LJ at p.104 A-B.[32]Miss Jackson also referred to two decisions of this court since Tandon , Sharpe v Duke Street Securities (1987) 55 P&CR 331 and Malpas v St Ermin's Property Company [1992] 1 EGLR 109. Both were concerned with terraced buildings in south London purpose-built at the beginning of the twentieth century to provide two maisonettes, one above the other, in each vertically-divided property. Each property looked like an ordinary terraced house except that it had two front doors, one leading into a small hall and a staircase to the upstairs. In Sharpe a doorway had been constructed between the two ground-floor halls and the tenant of the two maisonettes occupied both together as his residence. It is not clear from the report whether he held them under a single lease, but it seems likely that he did.[33]This court held that the two combined maisonettes were a single house for the purposes of the Act, because the vertically-divided terraced property could reasonably be called a house. (It might reasonably have been called two maisonettes, but could not reasonably have been called two houses.) The facts of Malpas differed from Sharpe in that the vertically-divided property was certainly held under a single lease, but the two maisonettes were in separate residential occupation, the ground-floor maisonette being sublet. There was therefore no internal connection like the internal doorway in Sharpe . Nevertheless the tenant's claim to enfranchisement succeeded. After referring to Sharpe and to Lake v Bennett Dillon LJ (with whom Steyn LJ agreed) said (at p.110):
"This could reasonably be called a building divided horizontally into two flats or maisonettes, but to my mind it is quite plain, looking at the photographs, that it can also reasonably be called a house notwithstanding that it has two front doors and two back doors. I do not regard the fact that there are the two front doors as meaning that this is not a house and some longer circumlocution has to be used to describe it."
[34]Miss Jackson referred to these two cases not because they directly assisted her, but to distinguish them as being concerned with the express references to flats and maisonettes in section 2(1). However section 2(1) and (2) cannot be treated as a series of integers to be understood and applied separately. They must so far as possible be read as a coherent whole. Sharpe is a case of some significance since it shows that two residential units may constitute a single house although they were purpose-built for separate occupation and have always been in separate occupation, with no internal communication at all.[35]As I have said, the judge asked himself the question 'one house or two?', which was not quite the right question. In answering it in favour of two houses the judge referred to Dr McKenzie having had only a personal right of access between no.76 and no.27 which was later 'blocked'. (I am not sure that the evidence went that far, although no doubt the locksmith had to use a drill to change the locks; certainly the access seems never to have been used when Dr Gomez was in no.27.) The judge also slightly misquoted the headlease: its description of the demised premises used the words "messuage or dwellinghouse" (not dwellinghouse and messuage). He said that he was satisfied that at some time after the headlease was granted, no.27 became a separate building from no.76. Mr Morgan criticised the judge's reasoning on several points, and especially this last point. Mr Morgan said that if after the grant of the headlease anyone had stood in that part of the basement of no.76 which projected under no.27, that person would on the judge's analysis have been in two different buildings at once. Whether that is right or not, it illustrates the difficulty of the transition from the non-technical meaning of 'building' to the complex definition of 'house'.[36]When he came to what he called the subsidiary issue of "reasonably so called" the judge reminded himself that he was not dealing with a 'mixed use' situation. He then expressed his conclusion as follows:
"I accept that it matters not if one can describe the two parts of the building as something else if one can still describe them reasonably as a house. In my view, it would be illogical and incorrect to describe these two buildings as a house. Each one is a house in its own right. I do not consider that the purpose of the Act was to enable Applicants to seek to unite two houses together and to make the united whole fit into the description of a house. I consider that by using the word "building" in the singular in section 2(1) the draftsman of the Act was envisaging one house and not two as constituting a house reasonably so called. It follows that I do not think that any other person could reasonably call the structure a house nor do I consider that the two buildings can reasonably be called a house."
[37]This conclusion turned on an issue of law (see Lord Roskill's second proposition in Tandon ) and it is open to this court to review it, even though the judge had viewed the property and this court has not (we have however had the benefit of good colour photographs and many detailed plans, elevations and sections). In my respectful view the judge erred in law in this conclusion, partly perhaps because he had posed the main issue as 'one house or two?' and had reached a clear conclusion on that before he took a second look at the significance of "reasonably so called". He should have begun by looking at the entirety of the property demised by the headlease and asked himself whether it could reasonably be called a house. Although (in the first sentence of the passage which I have cited) the judge set off on the right track, he then strayed off it.[38]From 1775 the entirety of the site between Harley Street and Weymouth Mews was occupied by a built structure (if one includes the basement under the open yard) and until some date in the 1930's (at the earliest) it would have been reasonable and natural to call the whole of that structure a house. It was still described as (essentially) a house and garage building when the headlease was granted in 1949, and although by then the original groom's or coachman's sleeping quarters in the mews had been converted (or were in course of conversion) to more modern residential accommodation, a chauffeur's quarters was one of the uses contemplated in the headlease. This was replicated in the 1960 underlease to Dr McKenzie, although there is no evidence as to whether he had a chauffeur or how he used no.27. At all times down to 1997 there was a means of access between no.76 and no.27, although from 1970 or 1974 the access was not used and the door was either locked or (as the judge put it) blocked. Other means of access at different levels had existed in the past, but had been blocked up (in particular, when the division of the basement space was altered). But the physical shape of the entire structure remained essentially the same, despite these internal rearrangements, from the middle of the nineteenth century until 1997. In my view the judge was wrong to conclude that the entire structure ceased, in or about 1970, to be capable of being reasonably described as a house. In my view it remained a single house, for the purposes of the 1967 Act, at the time when the notices were given in 1997. The second issue[39]That is enough to lead to this appeal being allowed. But since the court heard full argument on the second issue it is right to say something about it, especially as the court permitted Mr Morgan to amend his notice of appeal so as to take a point on the Human Rights Act 1998 ("the 1998 Act") which was not open when the case was heard at first instance.[40]The human rights point concerns articles 8 and 14 of the Convention and section 3 of the 1998 Act. Articles 8 and 14 provide as follows:
"Article 8 Right to respect for private and family life 1. Everyone has the right to respect for his private and family life, his home and his correspondence. 2. There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well-being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others. ..... Article 14 Prohibition of discrimination The enjoyment of the rights and freedoms set forth in this Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status."
Section 3 provides as follows:
"(1) So far as it is possible to do so, primary legislation and subordinate legislation must be read and given effect in a way which is compatible with the Convention rights. (2) This section - (a) applies to primary legislation and subordinate legislation whenever enacted; (b) does not affect the validity, continuing operation or enforcement of any incompatible primary legislation; and (c) does not affect the validity, continuing operation or enforcement of any incompatible subordinate legislation if (disregarding any possibility of revocation) primary legislation prevents removal of the incompatibility."
In J A Pye (Oxford) Ltd v Graham [2001] EWCA Civ 117 (6 February 2001) this court held that it should apply section 3 on any appeal heard after the section came into force, even if it did not apply at the making of the decision which is appealed from.[41]It is best to start by considering the position before the judge, when no reliance was placed on the 1998 Act. The judge made findings of fact as set out in para 17 above. He also referred to the evidence about the relationship between the area of the overhang (about 27 square metres) and the total area of no.27 (either as a ground floor "footprint", or the total floor area). The judge's findings on this point are not very clear, and Mr Morgan submitted that if that sort of comparison was relevant at all, it should be a comparison, not with no.27, but with no.76 (the area of the overhang is only about two per cent of the total floor area of no.76).[42]But Lord Wilberforce and Nourse LJ have (in Parsons and Birrane respectively) identified that what is material (for the purposes of s.2(2) of the 1967 Act) depends not on the calculation and comparison of floor areas but on whether the overhang or undershoot would significantly prejudice the adjoining owners' enjoyment, after enfranchisement, of their respective properties. Mr Morgan relied on s.10 of the 1967 Act and pointed out that under its provisions the freeholder would (after enfranchisement of no.76 but not no.27) be entitled to an easement of support for no.27 (and in particular for its rear wall, on which the judge heard evidence and made the findings already mentioned).[43]Miss Jackson pointed out that an easement of support is something of a misnomer in that it does not compel the servient owner to take any positive steps to maintain support. The servient owner's obligation is limited to not withdrawing support ( Bond v Nottingham Corporation [1940] 1 Ch 429, 438-9). The freeholder's right to enter the servient tenement to inspect and carry out repairs at its own expense would not be a satisfactory substitute for a right to have repairs carried out at the tenant's expense.[44]I consider that the judge was right, on the arguments addressed to him, to conclude that the freeholder's enjoyment of no.27 (as a separate house) would be prejudiced by the severance of no.76 into different freehold ownership. That leaves Mr Morgan's point on the 1998 Act. Mr Morgan accepted that he could not succeed by reliance on Article 8 alone. He relied on Article 8 in conjunction with Article 14, arguing that s.3 of the 1967 Act should be construed in a way which was not arbitrary and disproportionate.[45]Section 2(2) of the 1967 Act does (as Lord Wilberforce in terms recognised in Parsons at p.439) discriminate against tenants of flats or other premises which overhang or undershoot other units of accommodation in the same building. But if that discrimination is objectively justifiable and proportionate it is compatible with Convention rights. The construction of "material" which this court adopted in Birrane , following on from what Lord Wilberforce said in Parsons , shows that the discrimination cannot be regarded as arbitrary or disproportionate. On some particular set of facts it may appear arbitrary or disproportionate, but it is nevertheless based on solid grounds of policy.[46]These points are more fully explored in the judgment of Sedley LJ, which I have read in draft and with which I respectfully agree. I would not therefore differ from the judge's conclusion on the second issue. But on the first issue I would allow this appeal.

LORD JUSTICE SEDLEY:

[47]Like Robert Walker LJ I would allow this appeal on the ground that, as a matter of law, the entirety of the premises can reasonably be called a house. Once this point is reached, it becomes irrelevant that the premises can equally reasonably be otherwise described.[48]Had the premises been capable of being reasonably regarded only as two houses, I too would have upheld the judge's decision that the overlap was material. Because, however, the Human Rights Act 1998 has come into force since the hearing before Judge Ryland, and because this case is not likely to be the last one under the 1967 Act in which the European Convention on Human Rights is deployed in argument, I would add the following to the reasons given by Robert Walker LJ, who has set out the material provisions.[49]If articles 8 and 14 of the Convention are to have an effect, through section 3 of the Human Rights Act 1998, on the construction of s. 2(2) of the 1967 Act, it is that "material" is not to be so construed as to diminish the occupying tenant's entitlement to freedom from unjustifiable discrimination in his enjoyment of the respect due to his home. This is because, as Mr Morgan QC accepts, a statute which limits a lessee's occupancy to the term of his lease cannot by itself offend against article 8, if only because it is a plainly proportionate limitation of the Convention right to respect for his home in favour of the lessor's legal right to the reversion. But he submits that, when it comes to the right to enfranchise a leasehold, shutting out the otherwise eligible lessee of premises which happen to have even a slight horizontal overlap with adjacent premises is to subject him not simply to property-based discrimination in the enjoyment of his right to respect for his home, but to discrimination which is arbitrary and disproportionate. The disproportion is to be measured, Mr Morgan submits, by comparing those tenants who would be entitled to enfranchisement but for such an overlap with those entitled to enfranchisement but not so affected.[50]Accepting without deciding that this is the relevant comparison to be made, and that the right of a resident tenant to enfranchise his leasehold comes within the primary article 8 right to respect for his home, the distinction between the two groups cannot in my judgment be stigmatised as irrational or disproportionate. Its rationality lies in the legislative policy described in the judgment of Robert Walker LJ and the authorities cited by him. Its proportionality lies in the word "material", which in my judgment has been used by Parliament precisely in order to exclude from consideration any overlap not capable of impinging appreciably on the interests which the exclusion of horizontally divided premises is designed to protect.[51]What those interests are is indicated in the speech of Lord Wilberforce in Parsons v Trustees of Henry Smith's Charity [1974] 1 WLR 435, 439 (and see the general note to the Part I of Act, and the note to s. 2(2), in 1967 Current Law Statutes). What "material" means in the context of these interests is explained by Nourse LJ in Duke of Westminster v Birrane [1995] QB 262, 269, 271. It is in my view a meaning which requires no artificial expansion in order to embrace the Convention rights relied on by Mr Morgan, whether or not he has a proper case for invoking them. The meaning is, as Nourse LJ says, that the partial overlap must be of sufficient substance or significance to make it likely that enfranchisement will prejudice the enjoyment of the house or another part of the structure.[52]Whether anything less would be disproportionate, or capable of operating disproportionately, is academic, since it is countenanced neither by the legislation nor by any decided case. The further passage in which Nourse LJ considers the possible future operation of the subsection is not, and is plainly not intended to be, a legal gloss on the meaning of "material". It is simply a worst-case test of his conclusion; but even this, as he says, demands the involvement of something " more than a trivial or insignificant part" of the structure. If his remark is being used by lessors' advocates in the county courts, as Mr Morgan tells us it is, as if it were a legal test requiring refusal of enfranchisement for overlaps which border on the trivial, it should not be.[53]If it were otherwise, I might have been prepared to accept Mr Morgan's submission that section 3 of the Human Rights Act 1998 now requires "material" in s. 2(2) of the 1967 Act to be so construed as not to discriminate arbitrarily between one leaseholder's prospects of enfranchising his home and another's - but not without balancing the leaseholder's article 8 right against the freeholder's right under article 1 of the first protocol to be protected against arbitrary or disproportionate interefence by law with his own property. All this, however, the word "material" in its context already does.[54]In these circumstances it is not necessary to decide whether the text of Clayton and Tomlinson, The Law of Human Rights, is correct in paragraph 17.83 (upon which Mr Morgan has relied) to suggest that article 14 governs the enjoyment not only of Convention rights but of rights which the state voluntarily guarantees. I doubt for my part whether the Belgian Linguistic Case (No. 2) (1968) 1 EHRR 252 goes further than establishing that article 14 applies not only to the minimum of steps required of state in the discharge of its positive obligations but to the totality of steps which it decides to take to that end. I would want to be satisfied by clear jurisprudence or compelling argument of the much larger proposition, which is not apparent on the face of the Convention, that any domestic legislative measure which creates rights of any kind falls without more within the charmed circle of article 14. MR

JUSTICE LIGHTMAN:

[55]I agree with both judgments.

ORDER

Appeal allowed with all the costs here and below; order below set aside; declaration made giving effect to decision of this court on appeal; order made in terms of paragraph 6 of draft minute of order with date of 5 th June 2000 inserted and date of 30 th May 2001 changed to 7 th June 2001; order made in terms of paragraph 7 of draft minute of order with insertion of the sum of £60,000 and date of 30 th May 2001 changed to 7 th June 2001; permission to appeal to the House of Lords refused. (Order does not form part of approved Judgment)

Cited in 3 later judgments