“A subsidiary within the meaning of Articles 2 and 2A of the Companies (Jersey) Law 1991.”
“Failing notice to the contrary, you should manage to invest the Trust Fund either: a) as we shall from time to time advise, or b) at your absolute discretion.”
“Price The proposed purchase price is: For the freehold interest in the specified premises -£111,660,000 [Further immaterial details]”
“3. The Reversioner does not admit that the May 2010 Notice was a valid initial notice under section 13 of the Act. Without prejudice to the generality of that non-admission, the Reversioner does not admit: 3.1 [a point no longer pursued based on the discontinuance of the previous proceedings] 3.2 that the May 2010 Notice was validly executed 3.3 that the price stated in the May 2010 Notice was a realistic one, having regard to the decision in Cadogan v Morris[1999] 1 EGLR 59 . 4. Without prejudice to what is said in paragraph 3 above, the Reversioner does not admit that the SPVs were, on the Relevant Date, entitled to exercise the right to collective enfranchisement in relation to the Specified Premises, because the Reversioner does not admit that there was, on the Relevant Date, a qualifying tenant of any of the Flats. Without prejudice to the generality of that reason, particulars of it are given in the attached schedule, which forms part of this notice, headed ‘Particulars’”. 5. The Reversioner also reserves the right to apply to the Court for an order setting aside the Structure undersection 423 of the Insolvency Act 1986 .”
“How would you describe these values? Optimistic/pessimistic/realistic/your choice of words?”
“These are “about right” to “slightly conservative”
“I would not bother to change the offer figures on that account. We know the offer is low. We now know it is a bit lower than we previously thought.”
“6(1) Rights held by a person as a nominee for another shall be treated as held by the other. (2) Rights shall be regarded as held as a nominee for another if they are exercisable only on his instructions or with his consent or concurrence.”
“any Borrower ceases to be a direct wholly-owned subsidiary of the shareholder [namely LLC]” (f) The reality was also reflected (so far as the claimant was concerned) by the fact in each of the years 2007 to 2010 the annual Directors’ Report reported that “The company is a wholly owned subsidiary and the directors have no interest in the company”
“(4) (a) it has the power to exercise, or actually exercises, dominant influence or control over it, or (b) it and the subsidiary are managed on a unified basis.”
“Section 736 defines the relationship which makes one company a subsidiary of another for the purposes of the Companies Acts. The definition of 'subsidiary' in s 736 must be distinguished from that of 'subsidiary undertaking' in the new s 258 ... The definition of 'subsidiary undertaking' applies exclusively in relation to accounts; the term 'subsidiary' is used elsewhere. Moreover unlike the tests for determining whether a company is a 'subsidiary undertaking’, each of the tests in s 736 depends on the existence of a legal right. The answer to the question whether a particular company is or is not a subsidiary of another does not therefore depend on a consideration of all the facts and circumstances of their relationship, as would be the case for instance under the new s 258(4)(a). Certainty in the application of the test of whether a company is a 'subsidiary' is particularly important in those provisions of the Companies Acts which create a criminal offence.”
“What I think is the true way of looking at the matter is that which was presented to this court by Sir Lynn Ungoed-Thomas, that is that the beneficiaries are entitled to be treated as though they were the registered shareholders in respect of trust shares, with the advantages and disadvantages (for example, restrictions imposed by the articles) which are involved in that position, and that they can compel the trustee directors if necessary to use their votes as the beneficiaries, or as the court, if the beneficiaries themselves are not in agreement, think proper, even to the extent of altering the articles of association if the trust shares carry votes sufficient for that purpose. In the present case, the trust holding gives complete control over the management of the company, and the sort of way in which I approach the plaintiff’s right in this matter is this, that if he, firstly, specifies the documents of the company which he wishes to see; secondly, makes out a proper case for seeing them, and, thirdly, is not met by any valid objection by the other beneficiaries or by the directors from the point of view of the company, then the directors should give inspection, not because they can be compelled to do so as directors, but as a short circuit, if one may so describe it, to an order compelling them to use their voting powers so as to bring about what the plaintiff desires to achieve.”
“ … once a beneficiary had made out a proper case for disclosure the trustees were under a positive duty to exercise their voting rights to allow disclosure to take place.”
“An entity is not a “tenant of a flat under a long lease” for the purpose of section 5(1) if the entity was created and granted a lease for the sole purpose of enabling an enfranchisement claim to be made. Where the capital structure of affiliated companies is created for the sole purpose of avoiding section 5(6) then they are, nonetheless, to be treated as associated companies for the purposes of section 5(6). The 1,223 leases granted under the Structure were not meant to be, and are not, ‘qualifying tenancies’ under section 5(1). The 612 SPVs were not meant to be, and are not, to be treated as falling outside the test of association in s.5(6).”
“Our main argument is that an entity is not a ‘tenant of the flat under a long lease’ for the purposes of s.5(1) if the entity was created and granted a lease for the sole purpose of enabling an enfranchisement claim to be made when otherwise it could not have been.”
“31. The opposing, and in my respectful opinion, preferable, view is that the Ramsay principle does not espouse any specialised principle of statutory construction applicable to tax legislation, whatever its language, but continues to assert the need to apply orthodox methods of purposive interpretation to the facts viewed realistically. In common with Lord Hoffmann in MacNiven v Westmoreland Investments Ltd[2003] 1 AC 311 at para 49, I am of the view that Lord Brightman's formulation is not a principle of construction, but, as stated above, a decision that the Court is entitled, for fiscal purposes, to disregard intermediate steps having no commercial purpose as a consequence of an orthodox exercise of purposive statutory construction. … 35. Accordingly, the driving principle in the Ramsay line of cases continues to involve a general rule of statutory construction and an unblinkered approach to the analysis of the facts. The ultimate question is whether the relevant statutory provisions, construed purposively, were intended to apply to the transaction, viewed realistically.”
“a manifestation of a purposive approach to the statutory construction of a tax exemption.”
“116. The key lies in Lord Wilberforce's approval of the United States decisions and his indication that they encapsulated a process of thought which it would not be inappropriate for the courts of the United Kingdom to adopt. It was because it is the likely (though not inevitable) result of a purposive construction of fiscal legislation that it should normally be confined to transactions which have some purpose beyond the mere generation of tax relief. The no business purpose test provides a practical criterion for distinguishing between transactions which operate "in the real world" and transactions which operate in "the world of make-belief" and an appropriate criterion for distinguishing between losses of a kind which were within the contemplation of the legislature when granting relief from tax and losses which were not. It also provides a defensible rationale for leaving intermediate steps out of account, not because they did not take place, but because they fell outside the legislative intent.”
“126. There is usually no difficulty in determining whether the transaction in question formed part of a larger transaction or series of transactions planned as a whole; or in determining whether the inserted steps (or in Ramsay the whole transaction) had any purpose other than avoidance of tax. These are questions of fact. The difficulty usually arises in determining how the words of the statute are to be applied to the end result. This is a question of law and depends on the legislative purpose of the relevant charging or exempting provision as the case may be.”
“151. … The question is not whether "share capital" is a legal or commercial concept, but whether share capital with the characteristics of the "B" non-voting shares and issued for the sole purpose of complying with the statutory formula were within the contemplation of the legislature when enacting s.45 of the Ordinance.”
“155. There is no magic in the figure of 90%. The legislature could have chosen a different figure for its purpose. It is not its purpose to grant relief in respect of a transfer to a company which is 90% controlled by the transferor. Its purpose is more general: to grant relief to transfers between associated bodies. 90% is merely the test of association. If the test is not satisfied, there can be no relief. But it does not follow that, if the test is satisfied, there must be relief. That depends on whether the test is satisfied in circumstances contemplated by the section, that is to say where it can be said that the bodies are genuinely associated so that the transfer does not involve a significant change of ownership. 156. … But the legislature cannot have intended the 10% allowance to outsiders to be exploited so as to permit relief to be available in a case where the property was to all intents and purposes transferred to a 98% owner with the transferor retaining only 2% even if the literal requirements for exemption were complied with.”
“157. Section 45 is not an end in itself. The words "issued share capital" in the section, properly construed, mean share capital issued for a commercial purpose and not merely to enable the taxpayer to claim that the requirements of the section have been complied with. It follows that the "B" non-voting shares issued to Shiu Wing are not "share capital" within the meaning of the section, and should be disregarded when calculating the proportions of the nominal share capital owned by Shiu Wing and Calm Seas respectively.”
“In such circumstances the conclusion must be, in my judgment, that Mrs Christopherson was at highest a mere nominee or agent of Mr Christopherson to grant a tenancy to the defendant, and what actually happened was that Mr Christopherson granted such a tenancy.”
“Essentially the scheme must fail because the Christophersons were trying to do by documents what, for the reasons given in Johnson v Moreton[1980] AC 37 , the law does not permit, viz to grant the defendant an agricultural tenancy without the statutory protection.”
“55. In my judgment, when the facts of this case are examined as a whole, it is clear, that, as the Judge found, clause 8(b)(iii) was merely a device. It was in reality a provision which would enable the landlord to obtain possession of the premises. As such, clause 8(b)(iii) masqueraded as a provision for an increase of rent: it was not in substance a provision for the payment of rent. It was introduced to enable the landlord to bring the assured tenancy to an end when it chose. In some cases the tenant might be expected to leave voluntarily. In other cases such as this, the landlord would have to make an application to the court but (subject to the outcome of this appeal) that would only be a formality since the rent was much higher than a tenant could be expected to pay. The landlord, therefore, did not have to give the tenants the last opportunity which they obtain in the usual way to pay the rent arrears at the door of the court to avoid an order for possession. The landlord may, as Miss Padley submits, have intended to demand rent but it had no genuine expectation that it would ever receive any rent under clause 8(b)(iii). 56. As I see it, the effect of the Act of 1988 is that where a tenant is in a position to pay the sum genuinely reserved as rent at the time provided in the tenancy agreement or at such later date as Parliament allows, he should be free to do so and not lose possession. In my judgment the effect of this agreement is that the tenant is prevented from paying the genuine rent by a provision for payment of a sum which was never expected to be paid and which is not on its true analysis rent at all. That provision in my judgment offends against the mandatory scheme of the Act of 1988 and is unenforceable. I differ from the Judge in that in my judgment this device (as he fairly called it) is not permissible.”
“I would also accept the judge's view that the Atherton leases were an artificial device intended to circumvent a result the Act would otherwise have brought about. But the finding of such a device did not defeat the reversioners in Jones v. Wrotham Park Settled Estates [1980] A.C. 74 nor the lessor in Hilton v. Plustitle Ltd [1989] 1 W.L.R. 149 and I am not for my part satisfied that in the field of real property the principles in Ramsay and Furniss entitle the court simply to ignore or override apparently effective transactions which on their face confer an interest in land on the transferee. Many transactions between group companies may be artificial. That does not entitle the court in ordinary circumstances to treat such transactions as null. I agree with the judge on this issue.”
“My Lords, it would seem most unlikely that either the draftsman of theLeasehold Reform Act 1967 , or those members of either House of Parliament by whose votes it was passed, had envisaged the possibility that any ground landlord would enter into an intermediate lease in the precise terms adopted by Wentworth and Wrotham or in any other terms which would have the same economic consequences as between ground landlord and intermediate tenant. If it had been envisaged it seems likely that the draftsman would have done something about it to prevent its having the effect of enhancing the price payable by the resident tenant for the freehold; but how he would set about achieving this and what words he would have used to do so is a matter of pure speculation. My Lords, I am not reluctant to adopt a purposive construction where to apply the literal meaning of the legislative language used would lead to results which would clearly defeat the purposes of the Act. But in doing so the task on which a court of justice is engaged remains one of construction; even where this involves reading into the Act words which are not expressly included in it. Kammins Ballrooms Co. Ltd. v. Zenith Investments (Torquay) Ltd. [1971] A.C. 850 provides an instance of this; but in that case the three conditions that must be fulfilled in order to justify this course were satisfied. First, it was possible to determine from a consideration of the provisions of the Act read as a whole precisely what the mischief was that it was the purpose of the Act to remedy; secondly, it was apparent that the draftsman and Parliament had by inadvertence overlooked, and so omitted to deal with, an eventuality that required to be dealt with if the purpose of the Act was to be achieved; and thirdly, it was possible to state with certainty what were the additional words that would have been inserted by the draftsman and approved by Parliament had their attention been drawn to the omission before the Bill passed into law. Unless this third condition is fulfilled any attempt by a court of justice to repair the omission in the Act cannot be justified as an exercise of its jurisdiction to determine what is the meaning of a written law which Parliament has passed. Such an attempt crosses the boundary between construction and legislation. It becomes a usurpation of a function which under the constitution of this country is vested in the legislature to the exclusion of the courts.”
“In my opinion, it was clearly the policy of the legislature under the Act of 1967 that the tenant should obtain the freehold of his home at the ordinary market price and not at a price which had been inflated by a transaction such as the present. I have no doubt that if it had ever occurred to the legislature that a transaction such as the present might have been devised and put into operation, clear words would have been introduced into the Act, which would preclude such a transaction from affecting the market price which the tenant would have to pay for the freehold of his home. As it is, no such words appear in the Act; and accordingly it contains a gap. It is well settled, however, that the courts have no power to fill in any gap in an Act, even if satisfied that, had the legislature been aware of the gap, it would have filled it in: Johnson v. Moreton [1980] A.C. 37 ; Gladstone v. Bower [1960] 2 Q.B. 384 and Brandling v. Barrington (1827) 6 B. & C. 467 , 475 per Lord Tenterden C.J. Accordingly, there is nothing to be done by this House, sitting in its judicial capacity, other than to allow the appeal. It may, however, perhaps be worth consideration in other quarters whether the Act should be amended.”
“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.”
“(2) The counter-notice must comply with one of the following requirements, namely— … (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;”
“ … The Act provides a mechanism for resolution of that matter and satisfaction of other requirements of exercise of the right, consisting broadly of two stages. The first is that of an exchange of notices between the tenants, or their nominee, and the landlord, which serves to identify at an early stage whether and broadly what issue or issues there are between them as to the tenants' right to exercise the power and/or as to the terms, including price, of its acquisition. It does not serve, as the judge appears to have considered at para 25 of his judgment, as a means of securing a final definition of, or constraint on, the issue or issues for determination by the court or a leasehold valuation tribunal, if the matter goes that far. Rather, it serves as a useful negotiating stage during which any issues may be resolved so as to avoid, if possible, recourse to the second stage, namely application to the court to determine the tenants' entitlement to enfranchisement and/or, as the case may be, to a leasehold enfranchisement tribunal to determine the price and/or other terms.”
“I am, however, plainly of the view that if a landlord gives a counter notice and starts proceedings under section 46, it is to be treated as making that application on the basis of the grounds set out in its counter notice (for which there is no machinery for amendment), and not on any other grounds. The whole purpose, as it seems to me, is to define the basic issues (and, indeed thereby give the tenant an opportunity to consider/reconsider its position) before proceedings start, and the landlord should not be entitled then to depart from that position and keep other matters "up its sleeve".”
“The court shall not make any order on an application made by virtue of [the failure of the landlord to serve a notice] unless it is satisfied – “(a) that the participating tenants were on the relevant date entitled to exercise the right to collective enfranchisement in relation to the specified premises; ...”
“Subject to section 4, this Chapter applies to any premises … [which are flats in itself contained building and where two thirds of flats are held by qualifying tenants].”
“Section 84(3) effectively defines the scope of a tribunal’s jurisdiction as being to determine whether the RTM company was ‘on the date entitled to acquire the right to manage the premises’. That is its statutory remit. There is no provision in section 84, or elsewhere in the 2002 Act, whose effect is to confine that jurisdiction to the contents of the counter-notice that has prompted the RTM company to apply for a determination of its entitlement to acquire the right to manage.”
“are neither (i) occupied, or intended to be occupied, for residential purposes, nor (ii) comprised in any common parts of the premises” and those parts exceed 25% or the internal floor area of the premises. Until an amendment in 2002 the figure was 10%. The key phrase for present purposes is “occupied … for residential purposes”, and its obvious opposite “non-residential purposes”
“(1) For the purposes of this Chapter a qualifying tenant of a flat satisfies the residence condition at any time when the condition specified in subsection (2) is satisfied with respect to him. (2) That condition is that the tenant has occupied the flat as his only or principal home— (a)for the last twelve months, or (b)for periods amounting to three years in the last ten years” (a)for the last twelve months, or (b)for periods amounting to three years in the last ten years” (ii) Section 10 contained a provision relating to a “resident landlord” who was someone who (inter alia) “at that time occupies a flat contained in the premises as his only or principal home” (iii) Section 39(2) provided that a qualifying tenant was one who: “at that time occupies a flat contained in the premises as his only or principal home”. (iv) Section 42(3)(b) required the tenant to give particulars of certain matters, including: “particulars of the period or periods falling within the preceding ten years for which the tenant has occupied the whole or part of the flat as his only or principal home”
“A private hotel and boarding house … in that they received guests for payment.”
“as a matter of the ordinary use of the English language” (p789G) the expression included the lettings by the taxpayer, but in the then context (factual and statutory) it did not extend to the lettings made by the taxpayer. Fox LJ held: “I accept that the words “residential accommodation” must be construed in their proper context and that that context includessection 101 of the Capital Gains Tax Act 1979 , but I see nothing in section 101 which displaces what is accepted to be the ordinary meaning of the words “residential accommodation.”
“Mr Moses [for the Revenue] said that the concept of a home is conveyed by the word “residence” alone”
“In sections 101 and 102 of theCapital Gains Tax Act 1979 , the concept of occupation as a home is derived not from the use of the term “residence” by itself, but from its use in the phrase “his only or main residence.”
“I consider that it is intended to include those parts of the building that either may be used by or serve the benefit of the residents in common (using that expression in a non-technical sense), as opposed to those parts of the building that are for the exclusive benefit of only one or a limited number of the residents or for none at all.”
“Where in the case of any such premises any part of the premises (such as, for example, a garage, parking space or storage area) is used, or intended for use, in conjunction with a particular dwelling contained in the premises (and accordingly is not comprised in any common parts of the premises), it shall be taken to be occupied, or intended to be occupied, for residential purposes.”
“the garden tennis courts .. gymnasium restaurant spa and such other areas as may be provided for by the Landlord from time to time.”
“in conformity with the provisions of Schedule 6 so far as relating to the determination of the price payable under this Chapter for the interest in question”
“specify the premium which the tenant proposes to pay” (subs (3)(c)) so the wording is an equivalent wording to that in section 13. Interestingly, the section never included a provision equivalent to section 13(6) providing for a prior valuer’s report. The tenant specified£100 , which was absurdly low - the range of possible values was apparently£100,000 and£300,000 . The landlord challenged the validity of the notice on the basis that the proposal was not good enough. The submission of his counsel was that the proposal as to the premium “must be a bona fide and genuine one, not a nominal figure or one that bears no relation to the true value”
“I do not think it necessary to read any words into section 42(3)(c). The tenant is required to specify the premium that he proposes to pay. He did not do so; he deliberately specified a figure that he did not propose to pay. I do not think the tenant is required to offer his final figure that he may be prepared to go to, but he should, in my view, offer a realistic figure. The judge was troubled by the difficulty in telling whether the offer was a realistic one. I very much doubt whether in practice this will present the difficulties that the judge envisaged. It ought to be possible both for the landlord and the judge to recognise whether the offer is a realistic one or simply a nominal or wholly unrealistic one. The landlord would need to be on fairly firm ground if he sought to challenge a substantial offer, even if he thought it was considerably too low. The court will obviously allow a fairly wide margin. If the landlord unsuccessfully challenges the validity of the notice, he will find himself paying the costs. On the other hand, even if it is the tenant's opening bid, it should, in my view, be a realistic one. I decline to lay down any more precise guidelines. In this I follow what Sir John Donaldson MR said in Cresswell v Duke of Westminster[1985] 2 EGLR 151 at p152: ‘Where we draw the line I do not know, I doubt whether it is in anybody's interest that I should attempt to draw that line. Many cases will answer the question on their own facts.’ “This seems to me to be an application of the well-known elephant test. It is difficult to describe, but you know it when you see it. I think we can trust to the good sense of landlords not to make frivolous applications and County court judges to take a robust line and not get enmeshed in hearing detailed evidence. A brief enquiry, if necessary with limited evidence from tenant and landlord, should suffice.”
“I have difficulty in finding that a realistic figure is one that cannot be justified by valuation evidence.”
“41. As I have mentioned, tenants’ notices and landlords’ counter-notices for which the Act provides do not have the function of pleadings of identifying the issues for the purpose of determination of the appropriate price through litigation if the parties cannot come to terms. Subject to the Willingale v Globalgrange Ltd consequence in default of a valid counter-notice, they are primarily a means of enabling the parties to identify whether there are, or are likely to remain, issues between them which may require resolution either by negotiation or, failing that, and after crystallisation in formal terms, by litigation. If there is a wide gap at the notice and counter-notice stage between the tenants and the landlord, each relying on their own valuers or otherwise, neither is unduly prejudiced. If they cannot agree, they can take the matter to the leasehold valuation tribunal; that is what it is there for. The county court should be wary of developing what could turn into parallel litigation of attempting to resolve fundamental disagreements as to valuation, often as between highly experienced and competent professional valuers, at the notice and counter-notice stage by developing a form of “strike-out” or default procedure. This is especially so in a process in which there are inevitably opening negotiating figures, which, as Stuart-Smith LJ acknowledged in Cadogan v Morris, may be no less genuine on that account. Quite apart from the difficulties for the court of discharging such a jurisdiction, it would not be the form of “brief inquiry … with limited evidence from landlord and tenant” that I believe Stuart-Smith LJ had in mind.”
“Their common purpose, as the general scheme provided by Chapter I indicates, is to set the scene for a process of negotiation, not in general a definition of issues for final determination of the matter by litigation.”
“44. The combination of the subjective element of a genuine offer made in good faith and a possible objective element that it should also not be “wholly unrealistic” is not easy in this context. And I do not think that Stuart-Smith LJ intended it. It seems to me that the primary consideration for him was the genuineness of the proposal, as a proposal and subject to a negotiating margin. The notion of a proposal that is not “wholly unrealistic” or, in the case of a landlord, not “absurdly high” is in most cases likely to arise for consideration only in extreme cases where it may serve as an aid to the court's assessment of the genuineness of the proposal. As I have mentioned in the last paragraph, and as the judge observed at para 62 of his judgment, Stuart-Smith LJ’s contemplation of the county court's resolution of such an issue by a brief inquiry with limited evidence from the tenant and landlord, not apparently, their respective professional valuers, suggests that it was the subjective element of genuineness of the proposal that was uppermost in his mind. I am, therefore, of the view that, if the judge needed to consider this at all, he was right to find that lack of good faith is the sole necessary precondition of a declaration of the invalidity of a landlord's counter-notice under these provisions.”
“57.
“I do not consider it necessary to read any words into section 42(3)(c). The tenant is required to specify the premium he proposes to pay. He did not do so; he deliberately specified a figure that he did not propose to pay.”
“even if it is the tenant's opening bid, it should, in my view, be a realistic one”
“It is true that, in Cadogan v Morris[1999] 1 EGLR 59 , the Court of Appeal held that, where a tenant had included a figure that he could not reasonably have expected to achieve in his notice under section 42, the notice was invalid. Assuming that that decision was correct, it seems to me plainly distinguishable, as was recognised in the subsequent Court of Appeal decision of 9 Cornwall Crescent London Ltd v Kensington and Chelsea Royal London Borough Council …”
“79. With these particular considerations and the totality of the evidence in mind we have reached the conclusion that Professor Lizieri's assessment of the risk factor is about right. Our conclusion is that the market in such investments would require a risk premium of 4.5%. Overall, therefore, we would take a risk premium of 4.5%, in combination with a risk-free rate of 2.25% and a real growth rate of 2%, producing a generic deferment rate of 4.75%.”
“95. … We think, however, that an adjustment needs to be made to reflect the management problems, although we do not consider it appropriate to differentiate between flats that are the subject of headleases and those which are not. Nor do we think that the management concerns are necessarily so much less for a single flat than for a block to warrant a different adjustment. Even where flats are efficiently managed, service charge and repairs problems inevitably occur, and the management exercise in itself is, we feel, sufficiently more complex to warrant a generalised 0.25% addition for flats. We do not consider that any fine-tuning below this percentage is justified.”
“121. … It is obviously undesirable, and indeed it would be impossible, for the sort of financial and valuation evidence that we have heard to be called and considered in every enfranchisement case. It is, in our judgment, unnecessary that it should be, because LVTs and this Tribunal are entitled to rely on their own expertise, guided by this decision. The prospect of varying conclusions on the deferment rate in different cases reached on evidence that was less comprehensive than that before us can therefore be avoided by LVTs adopting the practice of following the guidance of this decision unless compelling evidence to the contrary is adduced. This is justified because, as we have explained above, the deferment rate is unlikely to vary according to factors particular to the individual case. Some factors, including in particular the prospect of long-term growth, will not vary from case to case, while other factors, such as location and obsolescence, will already be reflected in the vacant possession value.”
“123. The application of the deferment rate of 5% for flats and 4.75% for houses that we have found to be generally applicable will need to be considered in relation to the facts of each individual case. Before applying a rate that is different from this, however, a valuer or an LVT should be satisfied that there are particular features that fall outside the matters that are reflected in the vacant possession value of the house or flat or in the deferment rate itself and can be shown to make a departure from the rate appropriate.”
“99. I agree with the Tribunal that an important part of its role is to promote consistent practice in land valuation matters. It was entirely appropriate for the Tribunal to offer guidance as they have done in this case, and, unless and until the legislature intervenes, to expect leasehold valuation tribunals to follow generally that lead.”
“The Tribunal’s later comments on the significance of their guidance do not distinguish in terms between the PCL area and other parts of London or the country. However, there must in my view be an implicit distinction. The issues within the PCL were fully examined in a fully contested dispute between directly interested parties. The same cannot be said in respect of other areas. The judgement that the same deferment rate should apply outside the PCL area was made, and could only be made, on the evidence then available. That must leave the way open to the possibility of further evidence being called by other parties in other cases directly concerned with different areas. The deferment rate adopted by the Tribunal will no doubt be the starting point; and their conclusions on the methodology, including the limitations of market evidence, are likely to remain valid. However, it is possible to envisage other evidence being called, for example, on issues relevant to the risk premium for residential property in different areas. That will be a matter for those advising future parties, and for the tribunals, to consider as such issues arise.”
“123. The application of the deferment rate of 5% for flats and 4.75% for houses that we have found to be generally applicable will need to be considered in relation to the facts of each individual case. Before applying a rate that is different from this, however, a valuer or an LVT should be satisfied that there are particular features that fall outside the matters that are reflected in the vacant possession value of the house or flat or in the deferment rate itself and can be shown to make a departure from the rate appropriate.”
“I conclude that, in the eleven cases with which I am currently concerned, investors would have required an addition of 0.5% to reflect the greater management problems associated with flats than with houses. In reaching this conclusion, I have borne in mind that the subject flats are no longer subject to the original headlease. Had that headlease still been in existence, I would not have considered it appropriate to depart from the Sportelli uplift of 0.25%.”
“I didn't distinguish Dolphin Square, because this was very much a "one size fits all" deferment rate that was established by Sportelli.” very much a "one size fits all" deferment rate that was established by Sportelli.”
“76. It is, in our judgment, the combined effect of the other components, volatility and illiquidity, that must have the major impact on the risk premium … Tradeability would, we think, be important as one of its components, and it is this that would make the volatility of the housing market and the relative illiquidity of the investment significant factors in the mind of a purchaser. 77. In this assessment of the characteristics of the market and the factors that would influence it we therefore prefer the evidence of Professor Lizieri, which we have summarised earlier. We think that the landlord's witnesses substantially underestimated the risks. We agree with Professor Lizieri that, since real house prices are shown to be prone to shocks and to be strongly cyclical, with persistent periods of negative growth, an investor in a long-term reversion would be very conscious of the risk that the market could be depressed at the point at which he wished to sell his interest, even though, as compared with equities, the residential property market is rather less volatile. Reversions would suffer in comparison with equities from illiquidity resulting from high transaction costs and the length of time to complete a transaction, and the latter factor would, we think, be perceived as adding substantially to the risk associated with volatility.”
“3.1Part XVI of the Insolvency Act 1986 is headed “Provisions Against Debt Avoidance”
“(1) This section relates to transactions entered into at an undervalue …”
“Furthermore, and most significantly, the transaction, if effective, placed her vis-à-vis the plaintiff in what Mr Moss described as a 'ransom' position. If the tenancy was effective, the plaintiff would have had to negotiate with and no doubt pay a high price to her before it could obtain vacant possession of the farm and sell it for the purpose of enforcing its security and repaying the debt owed to it by the first defendant. Thus, it was submitted, the transaction plainly conferred, and was intended to confer, on her significant enhanced benefits beyond the rights granted by the tenancy agreement itself, for which enhanced benefits she did not pay.”
“[73] Section 423(5) defines a victim of a transaction as a person 'who is, or is capable of being, prejudiced by it'. In choosing the term 'victim' and this definition, it is I think clear that it was intended to be a wider category than simply creditors. The words used are ordinary English words with no technical meaning and the correct approach in any given case is to ask whether, on the facts of the case, the claimant is a person who is, or is capable of being, prejudiced by the transaction. The fact therefore that Focus is not a creditor does not decide the case against it. [74] If the sale was at an undervalue, the amount directly recoverable by CFS, or by Focus on a subrogated claim, will be reduced and the amount payable by Focus on a claim by CFS under the policies will be increased. It is irrelevant that because of AS LLP's pre-existing insolvency, there would in any event be a shortfall on CFS' recovery from AS LLP and a liability of Focus on the policies. The prejudice lies in the increase in the shortfall. It is also irrelevant if CFS has yet to make a claim on the FGI policies. As CFS has the right to make such claims, Focus is a person 'capable of being prejudiced' by a sale at an undervalue. [75] I conclude therefore that Focus has a real prospect of establishing that it is a victim of the sale.”
“I assumed the CBRE valuation would be a reliable and reasonable valuation, and took it as read.”