Monthly Archives: October 2014

Industrial purposes in pylon compensation agreement included warehousing

Public utilities have compulsory purchase powers and can insist on acquiring rights they require, but usually prefer to proceed by negotiation and agreement.

On occasion the deed of easement may contain a clause to ensure that if a development opportunity emerges in future, the Grantor or his successors will be entitled to compensation for any reduction in value due to the existence of the pipes or wires.

There may be advantages to both parties in this:

– the Grantor won’t have to accept a speculative assessment as to the reduction in the value of his land at some unknown point in the future for a use which can only be guessed at and could easily be underestimated; and,

– at the time of the easement being granted, the Utility would not be required to make a payment to compensate for a loss which may never happen.

In the Upper Tribunal (Lands Chamber) case of G Park Skelmersdale Ltd v Electricity North West Ltd [2014] G Park Skelmersdale Limited (“the claimant”) sought compensation from Electricity North West Limited (“the respondent”), under a deed of grant (“Deed”) dated 12 May 1967 made between the Central Electricity Generating Board (“CEGB”) and Mr William Holland, (“the Grantor”) who owned Spa Farm, Lathom, Skelmersdale, Lancashire (“the Property”) prior to the claimant.

This said that if the Grantor obtained planning permission for the Property “for residential or industrial purposes” the Grantor could give CEGB 6 months’ notice to pay the Grantor compensation for any diminution in the value of the areas benefited by the planning permission due to the presence of the electric lines above the Property.

The writer was brought up in Lathom within sight of the pylons and remembers their first appearance on the skyline. Indeed the House depicted above is nearby Lathom House, designed by Giocomo Leoni in 1714 for East India Company Director Sir Thomas Bootle, and mainly demolished in 1925.

On 26 March 2008 the claimant gave the respondent notice of planning permission for warehousing and distribution and claimed compensation under clause 3(1) of the Easement.

The parties agreed to postpone the 6 month deadline to pay to allow for consideration of the feasibility of diverting the overhead line to allow the development to proceed but that did not happen.

The two preliminary issues the Tribunal had to decide were:

1. Whether the references to “development … for … industrial purposes” and “such purposes” in clause 3(1) of the Easement included development for primary storage/distribution uses under Class B8 of the Use Classes Order 1987; and

2. Whether the appropriate valuation date for the assessing compensation was the date of:

2.1 the grant of outline planning permission (20 December 2001); or

2.2 the variation of that planning permission (9 September 2004), or

2.3 the approval of reserved matters (15 May 2007), or

2.4 the notice of claim (26 March 2008).

The respondent said clause 3(1) was to restrict compensation to cases where the development prevented was a residential or industrial use. However:

– the Tribunal could think of no reason why CEGB would reasonably expect to pay compensation if the presence of its overhead lines restricted one valuable use of the land, but NOT if another use was restricted; nor

– could it think why the ability to develop the land for certain uses should be restricted without the Grantor having any compensation for the reduction in value due his inability to pursue those uses. Such an uncommercial arrangement was not likely to have been the parties’ intention.

the Tribunal found:

– on the first preliminary issue that the expression “industrial purposes” was not to be narrowly construed, and was wide enough to include the development of the Property for storage and distribution uses within Class B8.

Against the context of the Property’s then agricultural use, the use of the composite expression “residential or industrial purposes” suggested that what was intended “was a broad classification of alternative uses “representing the principal classes of profitable development”, rather than a narrow focus on manufacturing industry.”

Also development for “industrial purposes” had a wider connotation than “development for industry”, and would include ancillary uses. Land used for the storage of raw materials or components for use in manufacturing, or of manufactured goods awaiting distribution to customers, was used for “industrial purposes”.

On the second issue of the valuation date, the relevant planning permission was the outline planning permission obtained in 2001, renewed and then supplemented by the reserved matters approval obtained on appeal on 15 May 2007.

The parties must have intended that the relevant permission would include the details necessary to enable the property to be developed. The test was at what date did the development get the planning permission that could not be implemented because of the electric lines over the property? That date was 15 May 2007 when the final reserved matters approval was obtained. It was only at that date that development could have proceeded.

So the valuation date under clause 3(1) was 15 May 2007.

This blog has been posted out of general interest. It does not remove the need to get bespoke legal advice in individual cases.

Construction: Court’s discretion to order stays and cost budgets

Often at a case management conference (“CMC”), one or more of the parties will seek a stay of the proceedings whilst they endeavour to resolve their disputes by way of mediation or some other form of alternative dispute resolution (“ADR”).

They can apply for an immediate stay, or for a stay later – maybe after disclosure or after the exchange of witness statements or expert’s reports.

Otherwise a party may not seek a formal stay of proceedings, but may instead ask the court to identify and fix a ‘window’ in the timetable, possibly as long as three or four months, during which the parties can devote their attention to resolving the dispute by way of ADR instead of the proceedings.

Disputes are time-consuming and therefore expensive to fight out in court. Even if the trial is reduced to a minimum by ‘hot-tubbing’ the experts and timetabling cross-examination.

The parties may resolve the most difficult cases in ADR and save everyone a good deal of money, time and effort.

The High Court case of CIP Properties (AIPT) Ltd v Galliford Try Infrastructure Ltd & Ors [2014] related to alleged defects at a large development in Ladywood, Birmingham. The claim for damages against the main contractors, Galliford Try, was based principally on the actual/estimated costs of remedial works and the claimants had acquired the £18 million claim by assignment.

Galliford Try had issued third party proceedings against the architects and some sub-contractors. The trial would require expert evidence and might take longer than 6 weeks.

The court said a stay or a fixed ‘window’ was likely to lead to delay, extra cost and uncertainty, and should not ordinarily be ordered.

Nor should they be ordered if the stay or the ‘window’ proposed was opposed by a significant party to the litigation. The claimants had opposed it here.

A sensible case management tool was a sensible timetable for trial that allowed the parties to take part in ADR along the way.

The requirements of ADR, and of sensible case management leading up to a prompt trial date, could conflict. To the extent that there is such a clash at a CMC, sensible case management must come first.

So the court declined to order a ‘window’ of four months prior to disclosure.

Due to the costs of experts, the provision of costs budgets and the possibility of subsequent costs management orders are one way of keeping such costs under control.

They are not automatically required in cases worth over £2 million (old regime) or £10 million (new regime), mainly because the higher the value of the claim, the less likely it is that costs will get disproportionate to claims.

When this claim was started, the mandatory limit was still £2 million, even now risen only to £10 million, so the filing and exchanging of costs budgets pursuant to CPR 3.13 had not been compulsory in this case. But the defendant said the court had a discretion, and should exercise that discretion, to order such budgets to be provided. The third parties supported the defendant in that application. The claimants opposed it.

The court said the court had the necessary discretion to order the provision of costs budgets in this case.

The court’s discretion under CPR 3.12(1) was unfettered and extended to all cases where the claim was for more than £2 million (old regime) or £10 million (new regime).

Where, in such a case, there was an application for the filing and exchanging of costs budgets, the court had to weigh up all the circumstances to decide whether such budgets should be provided.

There was no presumption against ordering costs budgets in claims over £2 million or £10 million, and no additional burden of proof on the party seeking the order.

If the claimants continued their stance against the provision of such budgets, the CMC would need to reconvene for detailed argument on the point.

This blog is posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Localism’s duty to cooperate ends at Plan’s submission for examination

In the Planning Court case of Samuel Smith Old Brewery (Tadcaster) v Selby District Council [2014] Samuel Smith Old Brewery (Tadcaster) (“SSOBT”) sought to quash the adoption of a Submission Draft Core Strategy (“the SDCS”) which was part of Selby District Council’s Local Development Framework. Selby District Council had adopted the SDCS under s113 of the Planning and Compulsory Purchase Act 2004 (“the 2004 Act”). SSOBT challenged the SDCS on several grounds. Mainly SSOBT said Selby District Council had failed to comply with the duty to co-operate under Section 33A of the 2004 Act. Selby District Council denied being bound by that duty in the circumstances.

Section 33A was introduced by the Coalition Government’s “localism” initiative.

The court agreed that there was an issue over the distribution of housing in part of Selby District Council’s area and in Tadcaster in particular but it was not an issue which required Selby District Council to cooperate with another local authority (i.e. Leeds or York) to resolve since there could be no issue of Selby District taking more of those authorities’ housing.

Whether Selby District Council’s housing need should be met in those neighbouring local authority areas was not at issue either. In any event that would have been an issue invoking those authorities’ statutory duty to cooperate with Selby rather than vice versa.

Not surprisingly no neighbouring local authority had complained of a want of co-operation by Selby District Council.

Whether Selby were in breach of the duty to co-operate was in fact irrelevant. It would not have changed the result.

SSOBT’s complaint related to the distribution of housing within Selby District Council’s own area which could not have been the subject of any duty to cooperate with another authority.

Furthermore SSOBT could not allege that the duty to co-operate in Section 33A of the 2004 Act applied after the conclusion of the plan preparation stage.

Where a plan was submitted for examination by a Planning Inspector the examination may be suspended to enable further work to it by the Council. The work in question may be of a type which would have been subject to the duty of cooperation had it been done during the period in which the Council were preparing the plan for submission to public examination.

The fact that that had happened here did not mean that any duty of cooperation that would have applied to the period of preparation had revived. Its being done after the plan’s submission for public examination meant no such duty of co-operation could apply to that further work.

The effect of the suspension here had not been to remove the plan from the scope of public examination. It was still in the examination phase, under the control of the Inspector as to timing, procedure and substance.

SSBOT failed also on its other 5 grounds of challenge.

In Samuel Smith Old Brewery (Tadcaster) v Selby District Council [2015] SSBOT appealed to the Court of Appeal but the Court of Appeal upheld the decision of the High Court.

There was no provision in the statutory scheme that required an inspector to determine whether, in preparing and promoting modifications during the examination of the submitted plan or in an adjournment or suspension of that examination, the planning authority had complied with any duty to co-operate.

Subsections (5)(a) and (7B)(b), called for the inspector to consider whether the authority complied with any duty to co-operate only “in relation to [the plan’s] preparation”. Had Parliament intended the section 33A duty to apply in relation to any additional work by the local planning authority to support a request for modification of the plan under subsection (7C), it would have made no sense to exclude compliance with such duty from scrutiny by the inspector under subsection (7C).

That was a clear indication that the duty to co-operate applies, and only applies, to the stage of the plan-making process that is properly to be regarded as plan preparation under section 19, that is to say, the stage prior to the plan being submitted for examination.

The duty to cooperate did not subsist during the examination stage, nor does it revive if the examination is adjourned or suspended for main modifications to be produced and presented to the inspector, so that the inspector can conclude whether the plan, so modified, meets the statutory requirements in section 20(5)(a) and is sound. The other relevant provisions of the statutory scheme were all to the same effect.

This blog has been posted out of general interest. It does not remove the need to get bespoke legal advice in individual cases.

Planning: “Other harm” may include non – green belt factors

Amongst the twelve “Core planning principles” in the National Planning Policy Framework (“the Framework”) is the protection of the Green Belt around main urban areas.

Under Paragraph 87, inappropriate development is, by definition, harmful to the Green Belt and should not be approved except in very special circumstances.

Under Paragraph 88, substantial weight must be given to any harm to the Green Belt. ‘Very special circumstances‘ will not exist unless the potential harm to the Green Belt by reason of inappropriateness, and any other harm, is clearly outweighed by other considerations.”

Do the words “any other harm” mean “any other harm to the Green Belt”, or do they extend to any other harm that is relevant for planning purposes, for example harm to landscape character, noise disturbance, adverse visual impact or adverse traffic impact?

Failing to take account of non – Green Belt harm as “any other harm” would make it easier to get planning permission for inappropriate development in the Green Belt as it would remove some of the obstacles to establishing “very special circumstances”. That is because all of the considerations in favour of granting permission would now be weighed against only some, rather than all, of the planning harm that an inappropriate development would cause in the Green Belt.

In Secretary of State for Communities and Local Government & Ors v Redhill Aerodrome Ltd [2014] the Court of Appeal said that had the Government intended to make such a significant change to Green Belt policy in the Framework it would have been expected to have made a clear statement to that effect.

All “other considerations” would, by definition, be non-Green Belt factors. If all “other considerations” in favour of granting permission, had to go into the planners’ weighing exercise, there could be no sensible reason to exclude “any other harm”, whether it was Green Belt or non-Green Belt harm, from that weighing exercise.

The Framework did not derogate from the fundamental statutory duty to have regard to “any other material consideration” when determining a planning application or appeal.

When deciding whether “material considerations indicate otherwise” the local planning authority or the Secretary of State would consider all of the “material considerations” i.e.:

– those which point in favour of granting permission e.g. employment and economic considerations, and

– those which, in themselves, or in combination with them conflicting with the development plan, militated against the grant of permission.

If the proposed development would cause some, insignificant harm to biodiversity, some insubstantial harm to the setting of a listed building, and some, unsevere residual adverse cumulative transport impact, those harmful impacts would nevertheless constitute “material considerations” militating against the grant of planning permission.

The fact biodiversity grounds, heritage grounds or transport grounds would not of themselves justify a refusal of planning permission did not mean that planners could simply ignore their harm to those interests. Though the weight to be given to that harm would for the local authority planning committee or Planning Inspector to decide in the light of the policies set out in the Framework.

In short they would not cease to be a “material consideration” merely because that particular ground, taken individually, had not crossed the threshold in the Framework for a refusal of planning permission.

If development is proposed within the Green Belt, the position will be no different, save that the “very special circumstances” test will be applied if the proposal is for inappropriate development within the Green Belt.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Court: Trustees could sell estate to that buyer at that price

Where a property is subject to a trust and the trustees are in doubt whether they should proceed with a propose sale, they can protect themselves from future actions by the beneficiaries by seeking court approval.

Since the giving of such approval will deprive the beneficiaries of their remedy, the legal precedents emphasise the requirement for caution by the court before approving trustees’ decisions to carry out “a momentous transaction”. The court will not approve a trustee’s decision without a proper evidential basis for doing so. Equally the court should not withhold approval from trustees “without good reason”.

One of the main tests is whether the trustees can show that their decision to enter into and complete the intended sale was “one which reasonable trustees could properly take in the interests of the beneficiaries”.

In the Court of Appeal case of Cotton & Anor v Brudenell-Bruce & Ors [2014] the court had to decide whether or not to approve a “momentous decision” made by trustees.

The case concerned Tottenham House, Savernake, Wiltshire (“Tottenham House”) which was the main asset of the Savernake Estate. It had been unoccupied since the 1990s, and was rapidly deteriorating. It was on English Heritage’s register of ‘at risk’ properties. Should the court approve the proposed sale to the existing buyer?

The trustees wanted the court to approve the intended sale. One of the main beneficiaries of the trust, Lord Cardigan opposed the intended sale.

For the trustees the intended sale price was a good one that presented an opportunity not to be missed. For Lord Cardigan the price was inadequate and was the outcome of an ineffective and inadequate marketing exercise.

The intended purchaser would originally have been able to walk away from the sale contract by now but had given the trustees an extension to the long-stop date to enable these proceedings.

The court was much concerned that the trust would be put “in an impossible bind” if court approval were withheld. The effects were potentially dire.

The trust had no money, and had to spend large amounts on insurance and maintenance. The trust had already defaulted in paying the bank, and the bank would probably enforce the security it held against three of the smaller properties on the estate.

The trustees would be thrown into an open marketing campaign, against the advice of their estate agent, GVA. They would risk losing the specially interested buyers who had meticulously assembled their bids.

The court had to be cautious to ensure that the trustees were indeed justified in proceeding with the sale but it was not the job of the court to place insurmountable hurdles in the path of trustees as badly placed as the Savernake Trustees were. “Caution cut both ways.”

The court confirmed to the trustees, that in acting on GVA’s professional advice to sell to that buyer at that price, the trustees would be fulfilling their duties to the trust beneficiaries.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Claimant argued for planning appeal costs based on unreasonableness

On average applications for costs occur in just 4% of planning appeals handled by written representation. The overall rate of success is about 40% for those applications.

Costs Circular 03/2009 sets out the policy framework for costs issues.

The main principles of the Circular are in paragraph A3.

The emphasis is on good behaviour and good practice.

The conditions are in paragraph A12 of the Circular:

Costs will normally be awarded if:

– a party has made a timely application for an award of costs;

– the party against whom the award is sought has acted unreasonably; and

– the unreasonable behaviour has caused the party applying for costs to incur unnecessary or wasted expense in the appeal process.

That unnecessary or wasted expense may be either:

– the whole of the expense because it should not have been necessary for the case to be determined by the Secretary of State or his appointed Planning Inspector, or

– part of the expense because of the manner in which the relevant party behaved during the procedures

Paragraph A22 gives a general sense as to what “unreasonable” means:

The most common examples involve failure to comply with procedural requirements or failure by the planning authority to substantiate a reason given for refusing planning permission.

The Court of Appeal case of Lochailort Investments Ltd v Secretary of State [2014] concerned the costs of a planning appeal to the Secretary of State determined by written representations.

The appeal followed from a planning application to demolish an existing dwelling in a village near Bath and to replace it with three new residences.

The narrow majority decision of the local planning authority to refuse the application ran against the recommendations of its planning officers.

That happens quite a lot nationally.

On appeal, the planning inspector was not satisfied that the local planning authority’s grounds for refusal were sustainable. So the appeal was allowed and the Secretary of State granted planning permission, subject to conditions.

The Claimant’s planning consultants said the reasons for refusal had relied on general, vague and “very sparse” evidence. The appeal site was visible from inside the local conservation area, though not significantly, and the issue had not been such that the local planning authority’s own conservation officer had objected. There had been no substantial evidence that the new development would have a harmful visual impact. There had been no analysis of the degree and nature of the new properties overlooking the Old Vicarage. The consultants also picked up on the local planning authority’s mistaken evidence that The Old Vicarage was a Grade II listed building. And in fact the highway authority had found that there was no evidence to contradict their view that there would be no significant increase in vehicular traffic along the lane.

The planning inspector found that appellant’s application for an award of costs relied substantially on the Council Committee’s failure to accept the recommendations of its planning officers to grant permission. The planning inspector then gave four short paragraphs of grounds on which that non acceptance might have been reasonable. The Court of Appeal found this explanation of the planning inspector’s decision not to award the claimant costs marginally insufficient to explain it to a developer and quashed the inspector’s decision not to award the claimant costs remitting the issue back to the Secretary of State.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

HMRC DIY Scheme: VAT could not be reclaimed for services

Normally, when a new residential dwelling is under construction, a VAT registered builder or subcontractor must zero-rate their work for VAT purposes and not charge VAT.

The builder or subcontractor must not seek to pass on to the Customer the VAT they have had to pay when they bought materials. They will be able to claim that VAT back at the end of each month, or whatever period they have agreed with HMRC.

To put the private individual in the same position as someone purchasing from a property developer, HMRC’s VAT DIY Housebuilders’ Scheme for new build dwellings (subject to specified exclusions) allows the self building claimant to reclaim VAT on building materials bought for the project and claimants are only entitled to a refund of VAT on those eligible building materials.

Subject to limited exceptions costs related to the supply of services are not eligible for VAT refund under that DIY scheme.

Otherwise there would be a risk of the DIY scheme being abused, as services cannot be as easily identified as materials as being for the construction of a dwellinghouse.

Costs, which are essentially for services, but which form an inherent and inseparable part of the cost of the materials may exceptionally be allowed for VAT reclaim by HMRC.

For example, VAT incurred on delivery charges separately itemised on main invoices for eligible goods rank as part of the value of the goods and can be refunded under the Scheme. On the other hand were such transport or delivery charges to be separately invoiced, they would not be eligible for refund.

In the First-tier Tribunal (Tax) case of Alan Johnson v Revenue & Customs [2014] the Appellant maintained that invoices were eligible for a VAT refund. But amongst others HMRC disallowed invoices amounting to £885.11 for equipment hire, JCB hire, scaffolding tower hire, digger hire, skip hire and disposal of excavated materials.

Applying the above principles, the Appellant’s appeal was dismissed. HMRC’s decision to refuse the Appellant’s VAT refund claim of £885.11 was upheld.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Estoppel based on promise of permanent home

In the Court of Appeal case of Southwell v Blackburn [2014] the Appellant and the Respondent had set up home together in Droitwich, in 2002. The Respondent, a divorcee with 2 daughters, had given up a secure tenancy of a property in Manchester, which she had spent roughly £15,000 on, based on his representations that she would have a long term home and the same security as a wife. The Appellant funded the purchase of the house with the equity from his old house and a repayment mortgage in his sole name which he alone repaid.

When the relationship broke down 10 years later the Respondent unsuccessfully claimed that the Appellant held the Droitwich house under a constructive trust for the benefit of both of them in equal shares. But the judge at first instance found she had an enforceable equity, in the Droitwich house, by operation of proprietary estoppel to the tune of £28,500.

It’s notable that the representations he made to her were specific as to the nature and extent of the “long term commitment” he gave her “to provide her with a secure home” but were not specific as to ownership of their new home.

The judge at first instance found that he had led the Respondent to believe she would have an entitlement which would, on any breakdown of the relationship, be recognised in the same way as the contribution of a wife to the assets of a marriage would be recogised on a marital breakdown. Without that she would not have given up her secure tenancy in Manchester.

His promise had not been of a half share in the house, but he had given her a promise of security, which he had failed to fulfil, and it would be unconscionable for the Appellant not to try to put her back in much the same position as she was before she gave up her own house.

The case is also significant in that much the larger part of her award was quantified not on what she spent on the Droitwich house but on what she had spent on the Manchester house, they not cohabited in, and that she had given up.

On top of her spending on her old home that she had given up, she had spent £4,000 – £5,000 as her contribution to setting up the new house with the Appellant. The Respondent had been relieved of her liability to pay rent in Manchester and had lived rent-free in Droitwich but her practical support had assisted him to increase his earnings by at least one major career promotion. The value of the new house had increased from £240,000 to £320,000. Allowing for inflation £20,000 was adjusted to the £28,500 she was awarded. That figure reflected the prejudice she had been subjected to by the Appellant not fulfilling his promise and should allow her to get back to her 2002 position.

The detriment to the Respondent had not been that she embarked upon a relationship with the Appellant but that she had abandoned her secure home in which she had invested, and she had then invested what little else she had in the Droitwich home even though she had no legal title to it.

It was that detrimental reliance which made the Appellant’s promise irrevocable and led to the conclusion that he could not conscionably go back on the assurance about her having a long term secure home.

This blog has been posted out of general interest. It does not remove the need to get bespoke legal advice in individual cases.

Third parties who induce breaches of personal rights may not rely on non registration

To make a purchaser of a registered land title subject to personal liability in respect of adverse contractual rights concerning land, not disclosed on the register, may seem contrary to the entire scheme of land registration.

Section 29(1) Land Registration Act 2002 is the section that regulates priorities but it does not concern itself with purely personal rights. It postpones any interest affecting land to any later land dealing, if the priority of that interest was not protected at the Land Registry at the time of registration of that later land dealing so long as that later land dealing has been done for value.

The key to this conclusion is that the phrase an interest affecting land covers proprietary rights – but would not extend to purely contractual rights as section 132(3)(b) of the Land Registration Act 2002 defines “any interest affecting the estate” as “an adverse right affecting the title to the estate…”

In the High Court case of Lictor Anstalt v Mir Steel UK Ltd & Another [2014] a hot steel strip mill (“HSM”) was in a factory which the claimant (Lictor) had procured for Alphasteel (now in administration).

The removal of a HSM would have been complex, very expensive and time consuming and would have required some remedial repair works to the site.

The court ruled that the HSM formed part of the site and so, part of the land itself. Given it’s very nature, the HSM was intended as a permanent or semi permanent structure. The purpose of securing the HSM to the site had been to enjoy the site as a functioning steel mill.

An HSM of this kind would have been expected to have an operable life of up to fifty years and would only be removed in exceptional circumstances.

It therefore rejected Lictor’s primary claim that the HSM was a collection of chattels which Lictor had retained title to despite Alphasteel’s ownership of the site.

Although the HSM had become part of the land an agreement between the Lictor and Alphasteel (“the April Agreement”) had sought to:

– regulate Alphasteel’s use of the HSM creating contractual and equitable rights and obligations in relation to the it;
– to classify the HSM as a chattel;
– to preserve a contractual right for Lictor to prevent dealings with the HSM by Alphasteel as if it were the owner; and
– to preserve a contractual right for Lictor to enter onto the site in order to sever the HSM from the land and remove the HSM.

When the Administrators of Alphasteel later sold the site including the HSM on to Mir, Mir actually knew through the Administrators that by executing the associated hive down agreement and the land transfer the April Agreement would be breached.

This exposed Mir to liability to Lictor for the tort (legal wrong) of inducing breach of contract.

Will this lead to a need for additional enquiries in every case? No because the tort is based upon actual knowledge by the purchaser of the contractual rights being broken.

However it does mean that a buyer with knowledge that it’s purchase proposals will contravene someone else’s contractual rights cannot simply close their eyes and rely on the fact that those rights are not protected by a notice or a restriction on the land register.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Landlord not bound by Right to Manage Company’s Claim Notice

Where a company (a “RTM Company”) applies to a residential landlord to acquire the right to manage conferred by Part 2 of the Commonhold and Leasehold Reform Act 2002 (“the 2002 Act”), section 78(5)(b) of the 2002 Act requires the service of “a notice inviting participation” to inform non-participating tenants that the RTM company’s articles of association are available for inspection on 3 days – at least one of which must be a Saturday or Sunday.

The claim notice must also be served on any landlord of the property under section 79(6) of the 2002 Act.

Would non-compliance with these requirements be fatal to the whole right to manage procedure or might it be overlooked?

In the recent case of Elim Court RTM Co Ltd v Avon Freeholds Ltd [2014] the first requirement was not complied with and as to the second requirement it was served not on the intermediate landlord but on one of the flats and not passed on to the intermediate landlord.

The Upper Tribunal (Lands Chamber) decided that the requirements were mandatory and that non compliance was fatal on both counts.

That disposed of the case in favour of the landlord but the case did raise an interesting signature issue.

The landlord argued that the disputed claim notice purported to be signed on behalf of the RTM Company by the secretarial company which was the company secretary of the RTM Company and that, accordingly, there being just the one unwitnessed signature on the claim notice, it was ineffective for failing to comply with section 44 of the Companies Act 2006.

The statement after the signature mentioned the signatory’s name and the words “RTMF Secretarial” which was the trading name of Federation Limited, the RTM Company’s company secretary, which suggested that he was signing as a representative of “RTMF Secretarial”, and not as the immediate agent of the RTM Company.

Had the signature been the purported signature of the secretarial company it would indeed have been ineffective for failure to comply with section 44.

However the Tribunal said the claim notice contained no indication as to who or what “RTMF Secretarial” was or indeed that it was a limited company. The provision of the additional information below his signature did not derogate from the fact that the signatory actually had separate authority to sign and give the notice in his individual capacity as authorised member or officer acting on behalf of the RTM Company.

The signatory’s signature neither purported to be that of a company to the intent that it was being given by the secretarial company on behalf of the RTM company, nor would Section 44 have allowed it to be. Had the secretarial company been pursuing that option a second company officer’s signature or a witness to his signature would have indeed have been required under Section 44 and their omission here would have been fatal to the validity of the notice.

We might disagree with the Tribunal and think the fact that someone acting in a particular way as a secretarial company’s signatory would have been legally ineffective has little probative value as a pointer to them having intended to act in their individual capacity as agent of the RTM Company (effective) especially when their signature was accompanied by a trading name which suggests they were actually signing, not in their individual capacity, but instead as the secretarial company’s signatory (ineffective).

This blog has been posted out of general interest. It does not remove the need to get bespoke legal advice in individual cases.