Savva & Ors v Galway-Cooper [2005] EWCA Civ 1068

Case No A3/2004/2626[2005] EWCA Civ 1068
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
Venue Royal Courts of JusticeDate Wednesday, 6th July 2005
Strand
London, WC2
B E F O R E:
LORD JUSTICE CHADWICK
LORD JUSTICE CLARKE
LORD JUSTICE CARNWATH
Between
SAVVA AND OTHERSAppellant-v-
Between
GALWAY-COOPERRespondent
(Computer-Aided Transcript of the Stenograph Notes ofSmith Bernal Wordwave Limited190 Fleet Street, London EC4A 2AGTel No: 020 7404 1400 Fax No: 020 7831 8838Official Shorthand Writers to the Court)
MR C DOUTHWAITE (instructed by Georgiou Nicholas) appeared for AppellantsMR A RADEVSKY (instructed by Barron Grey) appeared for Respondent
J U D G M E N T

LORD JUSTICE CARNWATH:

[1]The six claimants are the current lessees of the four flats at 160A Haverstock Hill NW2. The first and second claimants are the lessees respectively of the lower ground floor and the upper ground floor. The third and fourth claimants are the lessees of the first floor, and the fifth and sixth claimants are the lessees of the second floor. They all claim to be entitled to enforce rights under Part I of the Landlord and Tenant Act 1987, to require the transfer to them or their nominee of leases of the front garden and the roof space, which were granted to the defendant in February 1995. The defendant and his wife were at that time lessees of the first floor flat and they were also shareholders and directors of the then freeholder company -- called Judgeinform Limited. It is agreed that the applicable provisions are those of the 1987 Act, before amendment by the Housing Act 1996.[2]We were asked by Mr Radevsky for the defendant to bear in mind that the amendments were long overdue and that the drafting of the unamended Act had been described in this court as "ill-drafted, complicated and confused" (see Belvedere Management Limited [1997] QB 858 at page 881, where Sir Thomas Bingham MR thought that criticism "understated"). The only relevance of that submission, as I understood it, was that we should not necessarily be surprised if common sense does not in the end turn out to be a reliable guide to the statutory language. Mr Radevsky also accepts, I think, that a sensible solution should at least be our preferred goal.[3]The point at issue is a short one. It was common ground before the judge that the grant of each of the leases was a "relevant disposal" under section 4 of the Act; that accordingly (by section 5) notice should have been given to the "qualifying tenants", offering "the requisite majority" an opportunity to take the lease upon the same terms; and that no such notice was given. It is also common ground that the present claimants are all the qualifying tenants now entitled to enforce any rights under the Act.[4]The issue arises under sections 11 and 12. In summary, where there has been a relevant disposal without complying with section 5, the "requisite majority" has the right within a defined period, first (under section 11) to serve on the transferee a notice requiring particulars of the terms of the original disposal (section 11), and, in any event (under section 12), to serve a purchase notice requiring transfer of the interest to them or their nominee on the same terms. The requisite majority is defined by section 5(6) as follows:
"References in this Part to the requisite majority of qualifying tenants of the constituent flats are references to qualifying tenants of those flats with more than 50 per cent of the available votes ..."
[5]The only provisions which need to be looked at in detail are section 11(1) and (2) and section 12(2). Section 11(1) provides that where there has been a failure to comply with section 5:
"the requisite majority of qualifying tenants of the constituent flats may, before the end of the period specified in subsection (2) below, serve a notice ..."
By section 11(2) it is provided:
"The period referred to in subsection (1) is the period of two months beginning with the date by which -- (a) notices under section 3 of the Landlord and Tenant Act 1985 (in this Act referred to as the 1985 Act) relating to the original disposal, or (b) documents of any other description indicating that the original disposal has taken place have been served on the requisite majority of qualifying tenants of the constituent flats."
Thus, service of the documents on the requisite majority is the trigger for time to start running. (There was some debate about whether the requisite majority in this context must consist of the same tenants as those who are going to serve the notice; but that issue does not need to be resolved in this case.)[6]I should also refer to section 3 of the 1985 Act which is mentioned in section 11(2). That section is headed "Duty to inform tenant of assignment of landlord's interest." It reads as follows:
"(1) If the interest of a landlord under a tenancy of premises which consists of or includes a dwelling is assigned, the new landlord shall give notice in writing of the assignment and/or his name and address to the tenant not later than the next day on which the rent is payable under the tenancy or, if that is within two months of the assignment, the end of that period of two months."
That provision is not directly relevant here since the landlord did not assign his interest. Section 5 of the 1987 Act requires a notice in a wider range of circumstances, including circumstances such as here where the landlord has given a lease of part of the common parts.[7]Turning then to section 12, by section 12(2) the same trigger is applied for the purpose of the right to serve a purchase notice requiring transfer of the relevant interests to the tenants. However, in that context there is a three month time limit. In the present case a purchase notice under section 12 was served on the defendant on 16th May 2003. The issue for the judge, therefore, was whether this was outside the time limit or, more precisely, whether before 16th February 2003 there had been "served on the requisite majority . . . documents . . . indicating that the original disposal had taken place".[8]The judge answered this question in the affirmative. He held that "served" in this context had no special connotation. It did not matter where the documents came from, or when; nor whether they were received by the tenants individually or collectively. In effect, he said "served" simply meant "received" (see judgment paragraph 37). It was enough therefore if each of the tenants making up the requisite majority had at some time before 16th February 2003 received a document or documents "indicating" that the transfer had taken place.[9]The findings which led to his conclusion in respect of each first class were in summary: (1) Lower ground floor[10]In February or March 1995 the former tenant was given a summary of the garden lease; in February 2003 the present tenant, Mr Savva, the first claimant, was sent by his own solicitor a letter drawing attention to the disposals based on office copy entries from the Land Registry. The judge held that the solicitor's letter to his client was "service" of the information contained in it. (2) Upper ground floor[11]The second claimant did not enter into the discussion because no service was alleged in respect of that interest. (3) First floor[12]This was formerly occupied by the defendant himself, but was then subject to a new lease in favour of Mr Burns granted in November 1996. The judge held, understandably, that notice to the defendant himself as a former lessee was not enough (paragraph 38). But there was evidence that Mr Burns' solicitor, following the acquisition the lease in 1996, had sought and obtained office copy entries from the Land Registry in which the two leases were mentioned in a schedule. The supply of those documents to the solicitor was held to be a "service" of the information on the solicitor and, through him, on his client. (4) Second floor[13]It was found that "successive tenants" had been sent copies of the roof space lease; and there was a letter dated 9th January 1998 from the defendant to the fifth claimant giving particulars of the garden lease.[14]On that basis it was held that the service of the relevant documents had been effected on three out of the four lessees and therefore on the majority required by the Act. The individual cases show what a broad view the judge took of this section. In effect, it was enough that at any time before the trigger date, even going back a number of years, each tenant or his predecessor could be shown to have received (either directly or through an agent) the information in documentary form from any source, even from his own solicitor. The same would have applied, as I understand the reasoning, if it had been given to one of the tenants who had then copied it to another; or even if it had been found in a newspaper report which happened to have come to the tenant's attention. Nor did it matter that the information had come in over a number of years at different times to different tenants, or that each tenant had no way of knowing whether any other tenant had received it or would be treated as having received it through an agent.[15]With respect to the judge I cannot accept that as a possible, let alone reasonable, interpretation of the statutory language in its context. There has been some discussion of the meaning of the term "served" in other statutes. The judge relied on some dicta of Clauson J in Re Harris [1931] 1 Ch 138. Mr Radevsky referred us to three more recent cases: Re 88 Barclay Road [1971] Ch 641, Sun Alliance and London Assurance Co v Hayman [1975] 1 WLR 177 and Hastie and Jenkerson v McMahon [1991] WLR 1575. With respect, I do not find any of those authorities of assistance, since the statutory context was quite different in each case. There is no particular difficulty about the ordinary legal meaning of the word "served", but like most English words it must take particular colour from its context.[16]In this case, in my view, both the ordinary meaning and the context point strongly against the judge's interpretation. In no context, in my view, would anyone naturally use the word "served" to describe the receipt of office copy entries from the Land Registry or a letter from one's own solicitor or, even less, information from reading a newspaper. The ordinary use of the word is to describe the supply of some document in relationship (actual or prospective) between parties with distinct legal interests.[17]However, even if the judge's interpretation was a possible use of the word, it is not supported by the statutory scheme I mention three points:(1) Service of documents under 11(2) is intended to provide a defined and workable trigger point for the running of time against the tenants for something they are to do collectively. To achieve this, one would expect the documents to be provided in a manner and form which would fairly alert a reasonably informed tenant to their significance.(2) The word "served" is used also to describe the notice required by section 3 of the 1985 Act. In that context it describes the "notice in writing" of an assignment which the new landlord is required to "give" to the tenant. A duty to "give notice in writing" implies, to my mind, a formal and specific step.(3) Although the expression "documents of any other description" is wider than "notice" under section 3, the same term "served" is used to describe both processes. If the draftsman had intended (b) to refer to information obtained by any means from any documentary source, one would not have expected him to use the same word to describe the process. On the contrary, one would have expected a clear contrast to be drawn with the specific notice required under (a).[18]All these factors confirm my view that, on the facts of this case, the judge was wrong to find that the requisite majority had been "served" with the necessary information before the trigger date. Something was made of the contrast between section 11(1) which refers to a notice "served by the landlord" under section 5, and section 11(2) which uses the word "served" alone. However, subsection (2) needs to take account of the fact that the person doing the service may be either the transferor under the relevant disposal, as it is under section 5 of this Act, or the transferee as it is under section 3 of the 1985 Act. This may explain the use of the passive tense, without any reference to the particular person doing the serving.[19]I conclude that on the facts of this case the judge was wrong to hold, at least in respect of the lower ground and first floor flats, that there had been the requisite service. That is enough to allow the claimants to succeed in this appeal. It is unnecessary for the purpose of this case to decide precisely what is the minimum requirement for service under the subsection, and it is probably undesirable since we would not be taking account of the later amendments to the Act. For these reasons, I would allow the appeal.

LORD JUSTICE CLARKE: I agree.

LORD JUSTICE CHADWICK: I too would allow this appeal.

[22]The 1987 Act was enacted for the purpose, among others, of conferring on tenants of flats rights with respect to the acquisition by them of their landlord's reversion (see the long title to the Act). Part 1 of the Act confers on the tenant of the flat the right to first refusal in circumstances where the landlord proposes to make a relevant disposal affecting any premises to which Part 1 applies. Before doing so, the landlord is required to give notice to the tenant under section 5 of the Act. That is a notice which is to be served on all qualifying tenants of flats contained in the premises. Sections 6 to 10 provide for what is to happen when a notice under section 5 is served.[23]But Parliament has recognised that there will be cases where a relevant disposal is made by a landlord without having given the notice required under section 5; and so in breach of section 5. In those circumstances, tenants are given rights against the new landlord who is the transferee under the relevant disposal.[24]Those rights are conferred by sections 11 to 15 of the Act. Section 11 gives to "the requisite majority of qualifying tenants" the right to require of the new landlord, being the transferee under a disposal made in breach of the requirements of section 5, certain information, including particulars of the disposal itself. That right is a group right exercisable by "the requisite majority of qualifying tenants". In that context that phrase has the meaning given to it by section 5(6). It means a majority of qualifying tenants having more than 50 per cent of the available votes. The way in which that majority is determined is set out in section 5(6).[25]The right is exercisable by the group serving a notice. But the notice must be served within a prescribed period. That period is prescribed by section 11(2). It is a period of two months beginning on the occurrence of one or other of two events. Those are(i) the service of a notice under section 3 of the Landlord and Tenant Act 1985 relating to the original disposal order, and(ii) the service of documents of any other description indicating that the original disposal has taken place.[26]Section 3 of the Landlord and Tenant Act 1985 requires the landlord who has taken a transfer of the reversion under any description ("the new landlord") to give to all the tenants, within two months of the assignment, notice of his name and address so that the tenants may know to whom the rent should be paid. Clearly, therefore, for the purposes of section 11(2)(a) the notice to be given by the new landlord will be a notice given to all the tenants within a relatively short period of two months of the acquisition.[27]Section 11(2)(b) is, as it were, a "sweep-up" provision. It enables the period for the exercise of the right to require information under section 11 of the 1987 Act to commence where there has not been a notice served under section 3 of the 1985 Act, but where documents of some other description have been served which indicate that the original disposal has taken place. But, in my view, that second requirement must be construed in the context of the first. It was plainly the intention of Parliament that the tenants who were, together, to exercise the group right to be put in a position where they would know that the opportunity to exercise that right had arisen.[28]Section 11, as I have indicated, gives a group right to require information. Section 12 gives a group right to require a transfer of the interest which has been disposed of to the new landlord. But otherwise the provisions are very much the same. The right to require a transfer of the interest is a right exercisable by "the requisite majority of qualifying tenants"; and the right must be exercised within a prescribed period. The prescribed period for the exercise of the right under section 12 is defined in Section 12(2). In the present context, that period is a period of three months beginning with the date mentioned in section 11(2). So, again, Parliament's intention was that the tenants should know that the opportunity to exercise a group right has arisen. They need to know that they must do something if they wish to take advantage of the rights that Parliament has given to them. That is the context in which the phrase "documents of any other description indicating that the original disposal has taken place have been served on the requisite majority of qualifying tenants" must be construed.[29]Although, as my Lord has indicated, it is unnecessary to decide the point, for my part I would find it difficult to reach a conclusion that the persons on whom the documents had to be served were not all the tenants entitled to exercise the rights conferred by sections 11 and 12. What those sections require, as it seems to me, is that the prescribed period for the exercise of the group not begin until all potential members of the group are aware that the right has become exercisable. To require less is to risk denying the right to those whom Parliament intends should be able to exercise it.[30]Be that as it may, what is clearly necessary if the group right is to have any force -- given the time limitation -- is that the members of the group are aware that time has started to run. For my part I would hold that "service" in that context is some act of physical delivery on behalf of the landlord which brings to the attention of the person in receipt of the documents (in the light of an assigned knowledge of the statutory provisions) that the right given by the Act has arisen and that the period during which the right is to be exercised has begun to run against him. In the present case the facts simply do not meet that test. For the reasons given by Carnwath LJ.

Order

Appeal allowed. Consideration to be determined by a Leasehold Valuation Tribunal. Costs awarded to the Appellant.