Phillips & Ors, Re: Holiday Chalets at Point Curlew [2011] UKUT 346 (LC)

IN THE MATTER OF AN APPLICATION UNDER SECTION 84 OF THE
UT Neutral citation number: [2011] UKUT 346 (LC)Venue LAW OF PROPERTY ACT 1925, BY, DENNIS PHILLIPS, AND, ROYNA GODDARD AND OTHERS, Re: Holiday Chalets at Point Curlew, St Merryn, Padstow, Cornwall, Before: The President, Sitting at Plymouth District Magistrate Court,, St Andrew Street, Plymouth, Devon PL1 2DP, Rawdon Crozier instructed by Wolferstons, solicitors of Plymouth, for the applicants, Ewan Paton instructed by Meade King, solicitors of Bristol, for the objectors, The following cases are referred to in this decision:, Re Truman, Hanbury Buxton & Co Ltd [1956] 1 QB 261, The following further cases were referred to in argument, Phillips v Francis [2010] 24 EG 118, Re Bass Ltd (1973) 26 P & CR 95, Stockport MBC v Alwiyah Developments (1986) 56 P & CR 278, Re Bennett and Tamarlin Ltd (1987) 54 P & CR 578, Cadogan v Guinness [1936] Ch 515, Re Abbey Homesteads (Developments) Ltd 53 P & CR 1, Re Martin (1988) 57 P & CR 119, Re SJC Construction Co Ltd (1974) 28 P & CR 200, Re Quartley (1989) 58 P & CR 518, Re Lloyds Bank Ltd (1976) 35 P & CR 128, Ridley v Taylor [1965] 1 WLR 611, DECISION, Introduction
Between
Phillips & Ors, Re: Holiday Chalets at Point Curlew
Date 11 May 2011
[5]The standard form lease under which all of the applicants hold their chalets is for 999 years at a yearly rent of £10. Rights of way and easements of passage for services across the estate are granted, together with car parking rights and the right to use areas of the estate designated by the lessor for purposes in connection with the use and enjoyment of the chalet. The lease contains at clause 2 the usual tenant’s covenants. Covenant (q) is to pay a service rent, defined in clause 4 as a fair and equitable proportion of the sums actually incurred by the lessor in connection with the management and maintenance of the estate and the provision of services, including but not limited to the matters referred to in Schedule 3. Schedule 3 specifies the services that the lessor is obliged by clause 2 to provide. They include the maintenance of soil and drainage pipes and pumps relating thereto, the mowing of grass and pruning of trees, the management of the estate, including staff costs, and the repair and maintenance of those parts of the estate used in common with other lessees.[6]Before the applicants acquired the freehold the park was operated and maintained by the company, operating as a tenants’ management organisation. It ran into financial difficulties and in consequence of this the decision was taken to sell the estate. Following the purchase of the freehold, the applicants thus became responsible under the terms of the leases for the maintenance of the estate. Since they acquired it they have constructed the office/reception/shop building and the launderette and staff building; they have removed a number of bunds, which, it appears, had been created when the footings of the chalets were excavated; they have extended the tarmac parking areas; they have closed one entrance to the park; and they have done other works. They have plans to do other things, including the provision of a surface water drainage system to take rainwater from the roofs of the chalets to reduce flooding of the site and the replacement of the sewage pumping plant, which has inadequate capacity. As is perhaps inevitable among such a large number of chalet owners, some of whom have been tenants for many years, there are differences of opinion about the appropriateness of some of the things that Mr and Mrs Francis have done and plan to do, and in the short time of their ownership there has been extensive litigation. Currently there is a dispute about the service charge, which is before the county court. 7. Outline planning permission for erection of 220 holiday bungalow units and 5 staff units had been granted on 23 September 1974. It contained the following condition among others:
“ 7. The development hereby permitted shall not be occupied during the period from the 2 nd January to the 28 th or 29 th February in each year. ”
The reason for the condition was stated to be: “To ensure that the development is not used for permanent residential accommodation.” 8. On 11 May 2006 on the application of the company planning permission was granted lifting condition 7 and adding a new condition: “The development hereby permitted shall be used for holiday accommodation only and for no other purpose including any other purpose in Class C3 of the Schedule to the Town and Country Planning (Use Classes) Order 1987, or in any provision equivalent to that class in any statutory instrument revoking and re-enacting that Order. Reason : The site is not within an area where residential development would normally be permitted, therefore any such use, other than the proposed holiday use, would be contrary to the policies of the Cornwall Structure Plan and the District Local Plan in respect of such development.” 9. It was in consequence of this change in the planning condition that the present applicants made their application seeking the removal of the restriction that prevents occupation of their chalets during January and February. The application was made on grounds (a), (aa), (b) and (c) of section 84(1), but ground (b) was withdrawn at the hearing. 10. In relation to ground (a) the applicants rely on three matters in contending that there have been changes in the character of the property and the neighbourhood and other material circumstances by reason of which the restriction ought to be deemed to be obsolete. They are: (i) The failure of the company to enforce the restriction. (ii) The terms of condition (o), which showed that it was imposed solely for the purpose of ensuring compliance with the planning condition preventing occupation during January and February. (iii) The removal by the 2006 planning permission of the restriction and the circumstances in which that occurred. 8A In relation to grounds (aa) and (c) reliance is placed on the same matters and in addition to the following: (iv) The absence of evidence that not enforcing the restriction caused any problems prior to the purchase of the park by the objectors. (v) The offering by the objectors in letters dated 29 December 2008 of a new lease which would have allowed 12 month occupancy, and the grant of one new lease (the Lyden lease) in January 2009 that did not contain the restriction. (vi) The entitlement of the tenants to carry out maintenance work on their chalets during January and February and the consequence of this that the park could never be closed during those months. (vii) The fact that only a small percentage of the amount spent on works in 2009 by Mr and Mrs Francis related to works carried out during January and February, showing, it is said, that there is no need to prevent occupation during those months in order to facilitate the carrying out of works on the park . Evidence[11]Evidence for the applicants was given by John Walpole, Dennis Phillips, John Sandoz and Frances Stephens. The objectors, Martin Francis and Rebekah Katherine Francis, both gave evidence.[12]Mr Walpole said that he had owned two chalets, which he had built himself. He sold one in 2005 and another in 2007. As a building contractor he had worked on between 12 and 18 chalets over about 8 years. He had worked on chalets during the winter months and had always stayed on site. People would often work on their chalets during January and February. In 2005 the then chairman of the management company, Mr Curson, sought to police the restriction, and initially owners would ask before using their chalets during the restricted period. He himself asked, but he never applied in writing, and the restriction was not in the event policed.[13]In his witness statement Mr Phillips said that he had been the owner of a chalet since November 2004. It had previously been owned by his parents and he had in effect been involved with the park since December 1975. Over the years, he said, more and more people were occupying chalets all the year round. On the basis of information with which, he said, other chalet owners had provided him, he identified 12 such chalets, plus a further two that had been used as staff accommodation. In the early years of his ownership the restriction was virtually ignored and no steps were taken to either to enforce the covenant or to regularise the position. Eventually in 2005 the company decided that it needed to deal with the problem, and the board resolved with the consent of the members to apply to the planning authority for the removal of the restriction. It was only after Mr and Mrs Francis bought the site in April 2008 that the covenant was again enforced. In cross-examination he said that there had been mixed views about whether the restriction should be maintained, but in 2005 the shareholders were making clear that they were not happy with the situation. Those lessees who were there in January and February were those doing work to their chalets, although there might have been some who were on holiday. The site was always open, and the gates were never barred.[14]Mr Sandoz’s witness statement, apart from personal details, was for the most part word-for-word the same as Mr Phillips, although he said in cross-examination that he had drafted it himself. He said that he had been the owner of a chalet since 1991 and had sat on the board of directors from August 1994 to April 2003 and again from June 2007 to February 2009. In cross-examination he said that the concern of Mr Curson, the chairman of the management company, had been that the local planning authority might come down on them. That was the official line, although unofficially it was “if you let us know, you can use the site.”[15]Mrs Stephens said that she had been the owner of a chalet since December 2003, and she identified 8 chalets that, she said, had been occupied in the winters of 2006 and 2007, and she gave the names of their owners. She and her husband used occasionally to use their chalet during January and February to do maintenance work. 16. In addition to this evidence Mr Rawdon Crozier for the applicants relied in particular on the contents of two letters written to leaseholders on 29 November 2008 and 29 December 2008. The first letter, which covered a range of matters following a meeting between Mr and Mrs Francis and chalet owners on 25 October 2008, included the following paragraph:
“We spoke to all Chalet/Lodge owners to advise that with immediate effect we are intending to revert back to the terms of your lease i.e.; Clause 2 (O)…This is so that any works which we may need to carry out that may cause problems to your access to the site i.e. new speed humps or the new barrier system can be actioned at this time. If you have made any arrangements to occupy the premise next January of February please send a request in writing advising us of the dates etc and we will see if it will be possible for you to be allowed to stay at this time. This permission will be treated as a one off arrangement and you must have written authority from Mr and Mrs Francis to attend the site during this time.” 17. The letter of 29 December 2008 enclosed the maintenance/service charge for 2009, and it required each leaseholder to send a cheque for £1250 within 21 days and said that the remainder could be spread over 11 months by monthly standing order. It went on: “We would like to advise that there is also a second option available to all leaseholders with regards to your future maintenance/Service charge that option is a new lease. The lease we are offering will have a fixed service charge/ground rent of £2350 per annum, fixed for 5 years then increasing in line with RPI annually, plus there would be a 5% uplift to Point Curlew Holiday Park upon resale. It will be able to be paid as above £1250 in January the remainder spread over the next 11 months The new lease will have 12 months holiday use written into it allowing you to use or let your chalet/lodges for a full 12 months in any year. This will enable you to get a further 8 weeks of lets should you wish each year plus when the facilities on site are better it would encourage a more sustainable letting period in winter and summer.” 18. The letter went on to point out other advantages that it suggested such a new lease would have, and it said that the site had been badly neglected for many years and that it was proposed to spend £1.5-2 million in the next 5 years “to get the site up to a good level”
. There was also the following paragraph:
“In order to implement the new lease we would require at least 50% uptake, therefore we will go on your response to decide if it is a feasible option.”
[19]In the event there was one new lease that was granted that did not contain the prohibition on occupation during January and February. That was a lease dated 11 February 2009 of chalet H7 to Julian Lyden and Shirley-Ann Lyden. Under covenant (O) they covenanted to use the chalet only as holiday accommodation and not to occupy it or permit it to be lived in or occupied as a permanent or only home. The applicants rely on this.[20]Both Mr Francis and Mrs Francis gave evidence. Mr Francis said that when he and his wife acquired the park it was clear that wholly inadequate amounts had been obtained from lessees on account of urgent expenditure, so that they had to spend significant amounts out of their own pocket to finance works that were immediately necessary. There were banks that had been formed from excavations when the estate had been laid out, and there were blocked drains and flooding problems. They undertook immediate works to deal with these problems, but it was clear that there was a need for much increased expenditure in future to carry out the necessary works of repair. At the end of the calendar year 2008 they requested an amount on account from the lessees for the calendar year 2009, an amount which was in excess of the amounts that the company had demanded in previous years but which, as a significant number of lessees appreciated, was necessary to do works that had been neglected by the previous owners. The issue of an on-account service charge, however, was not well received by other lessees, who formed themselves into an association, withheld the amount sought and issued county court proceedings seeking an injunction preventing forfeiture.[21]One of the matters relied on by the applicants, Mr Francis noted, was the offer in the letter sent to lessees on 29 December 2008 of a new lease that would have permitted occupation during January and February. The letter made clear, he said, that the offer was subject to specific conditions: that there would be a fixed service charge/ ground rent of £2,350 pa for five years, increasing thereafter in line with the RPI; that the lessors would be entitled to 5% of the net proceeds on any chalet sale; and that at least 50% of lessees must agree to take new leases on these terms. In the event there was insufficient enthusiasm on the part of lessees to enter into such new leases, and accordingly the plan was aborted.[22]Mr Francis identified two disadvantages that, he said, the lessors would suffer if the restriction was removed. Firstly it would mean additional office and administration expenses. Currently there were up to two full-time and two part-time employees, responsible for the administration of the estate. The intention was that they should take their holidays during January and February when the site was closed to occupation. It would not be possible to make such arrangements if the site had to be kept open for occupation during those months.[23]The second disadvantage was that it would make it very difficult to undertake the essential repair and remedial works. The scale of the works was far in excess of those they had understood to be necessary when they suggested the modification of leases. They included in particular a new drainage system to deal with the rainwater from the chalet roofs, which as things were gave rise to flooding, and a replacement of the sewage pumping station. It would not be possible to complete these works within a two-month period, and it would be necessary to stage it over a number of years. The replacement of the sewage pumping station would require the closure of the site.[24]Mr Francis said that other holiday parks operated a period of winter closure, and he identified seven of these within the local area.[25]It was put to Mr Francis in cross-examination that the accounts showed that in 2009 only 7% of the expenditure on the site was incurred during January and February. Mr Francis said that this was because lessees were withholding the service charges that had been sought from them at the end of 2008. It was suggested to him that it would be possible through the site rules to achieve such non-occupation as was necessary to permit the carrying out of works, but he said that there were all sorts of problems that might arise and it was important to have January and February available to catch up. He said that the offer of new 12-month leases was made at an early stage when they were naïve about the problems of running the site.[26]Mrs Francis said that she handled the book-keeping side of the business. About the Lyden lease she said that the Lydens were existing owners who had lost their lease and required a new one because they were selling. The lease was prepared by Mr Andrews, their property consultant, who had prepared a number of drafts before the end of 2008. They never offered new leases as such because there was insufficient uptake of the offer in the letter of 29 December 2008. The inclusion of the modified covenant (O) was an error. As to the works, Mrs Francis said that Conclusions[27]Applications to the Tribunal to modify or discharge restrictions contained in a lease are a comparative rarity, and in approaching an application by tenants it is important to take note of and to bear in mind the nature of the landlord’s interest on the facts of the particular case. Here Mr and Mrs Francis have not only the reversionary interest in each of the chalets that are the subject of this application but also a reversionary interest in each of the other chalets and an interest in possession in the rest of the park. As landlords they have obligations under each lease to maintain the estate, including drainage, the extensive areas of grass, the footpaths, roadways and car parks and any amenity centre. As freehold proprietors they have an interest in ensuring that the park is well maintained and operated so that they can maximise the value of any new lodges or chalets that may be built and also the value of existing chalets the leases of which might become liable to forfeiture. All these features of their interest are to be borne in mind when considering the grounds on which the application is made.[28]The application is advanced on grounds (a), (aa) and (c). It is convenient that I consider first the fundamental criterion in ground (aa) – whether the restriction confers any practical benefit of substantial value or advantage to the landlords. The contention on the part of the objectors is that to have a two-month winter shutdown is of advantage to them as landlords because it permits the carrying out of maintenance and improvement works more conveniently and economically; and because it enables other savings to be made in respect of staff and other costs. The applicants said that the evidence belied the claimed benefits. There had never been a complete exclusion of tenants during the two-month period (and there could not be: covenant (o) only prevented occupation and not access for maintenance); and only 7% of the expenditure in 2009 related to that period. Site rules were sufficient to limit access during the carrying out of works. Moreover Mr and Mrs Francis had been prepared to offer new leases for 12-month occupation, and had in fact granted one such lease to the Lydens. It was contended that the real reason for their wish to retain the existing restrictions was so that they could extract money from lessees through the grant of new leases.[29]I accept the Francises’ explanation for the small amount of work carried out during January and February 2009, and it appears to me probable, as they claimed, that the covenant in the lease granted to the Lydens was an error. But even if the applicants were factually correct on these matters, those and the further fact that there has been some limited amount of chalet occupation during the winter months, would be insufficient in my judgment to show that the restriction is not of substantial value or advantage to the objectors. I am satisfied that the ability on the part of the landlords to have a winter shutdown is at the very least of real potential benefit, and that landlords in their position could well wish to be able to do this in order to achieve economies in staffing and other costs and to simplify the carrying out of maintenance and other works, for which the site rules might well not be adequate. It is significant, in my view, that Mr and Mrs Francis were only ready to grant new leases for 12-month occupancy provided that at least 50% of lessees wished to take up the offer of this and in return for a set annual charge. Ground (aa) is not made out, in my judgment.[30]There were two basic contentions that Mr Crozier advanced on ground (a). The first was that the reason for the inclusion of the January and February limitation in covenant (o) was simply to provide for compliance on the part of the tenant with the limitation that appeared in condition 7 of the planning permission; so that, once that limitation was removed by the 2006 planning permission, the purpose of this part of covenant (o) disappeared and the restriction became obsolete in the terms of ground (a). I accept for present purposes that the test of obsoleteness is whether the purpose for which the restriction was imposed is still capable of achievement (see Re Truman, Hanbury Buxton & Co Ltd [1956] 1 QB 261 at 272, per Romer LJ). It is to be noted, however, that the covenant does not incorporate the precise words of the planning condition, referring as it does to “lived in or occupied” rather than “occupied” and incorporating a proviso about the storage of furniture. If the purpose had simply been to ensure compliance with the planning condition one might have expected instead that it would incorporate just the words of the planning condition. Moreover I can see no reason for thinking that the benefits that, as I have concluded, the landlord might derive from being able to have a winter shutdown would not have been equally perceptible to the landlord from 1974 (when the planning permission was granted) onwards. In consequence I find myself unable to accept the applicants’ contention that the reason for inclusion of the words in covenant (o) was simply to ensure compliance with the planning condition. In my judgment, therefore, the 2006 planning permission has not rendered the restriction obsolete.[31]Mr Crozier’s second contention was that the failure of the company to enforce the winter occupation restriction and the circumstances under which the planning condition came to be varied showed that the restriction had become obsolete. As to this, I have already concluded that the restriction continues to confer benefits of substantial value or advantage to Mr and Mrs Francis, and, since those benefits are ones that existed at the time the covenant was imposed it follows that the restriction has not become obsolete. I conclude, therefore, that ground (a) has not been made out.[32]Since I have concluded in relation to ground (aa) that the restriction does confer substantial value or advantage on the objectors it follows that they would be injured by its removal; and accordingly ground (c) is not made out. The application is refused. Dated 5 September 2011 George Bartlett QC, President Schedule of Applicants Dennis and Iris Phillips Royna and Seymore Goddard Raymond Afshar-Rad Robert & Linda Archibald Keith Bailey Hazel and Mike Bale Peter Bentham Jackie Bewley Doreen Brady Robert Cardall Les Clarke Yvonne and Arthur Deeley Lionel and Shirley Dunn Anne Easter David Easter Anita and John Edhouse Ivor Evans Carol Evered Kevin Fagan Nicola Finnegan Julie Foster Pamela and Colin George Gordon Goddard Elaine and Ross Hanger Jean Harris Mick Haynes Mike Haynes Steven and Sandra Heath David Hickman Roger and Carol Hopkins Mark Hughes Ernie Hughes Jarvis Graham Adrian Jones Jeffrey Jones Elizabeth Kerry Janet and Dave Kindred Richard Larson Karen Low Gary Maher Kathleen Marriot Dana and Steve Mansfield Steve and Natalie McCausland Hannah McDonald Lesley and Adrian Pattendon Helen Pattelton Sandra and Tony Piddock Derek and Stephanie Rayson Wendy and David Rioch Matthew Sandoz John and Susan Sandoz Ian Sargeant Hilda Mary Jean Sinnett Penny Sutcliffe David Turner Sam and Kevin Viant David Walch Mark Williams Kelvin Wheeler John White James White John White June and Derek White Callie Wray-McCann Martin and Catherine Young and Clinton

Cited in 2 later judgments