Monthly Archives: June 2016

CPO: Upper Tribunal could substitute new respondent after Limitation Period

After the expiry of the relevant limitation period, does the Upper Tribunal have power to substitute a new party as the respondent to a claim for compensation for disturbance?

There appears to have been no decision of the Upper Tribunal dealing with the issue of substitution of a party after the expiry of a limitation period.

In the Upper Tribunal (Lands Chamber) case of William Hill Organisation Limited v Crossrail Limited [2016], this was the position where the claimant had claimed against Crossrail Limited whereas the acquiring authority, and the proper respondent, should have been Transport for London (“TfL”).

Section 35, Limitation Act 1980 concerned the making of new claims in pending actions.

“35 (1)…..

(2) In this section a new claim means any claim by way of set-off or counterclaim, and any claim involving either –

(a) the addition or substitution of a new cause of action; or
(b) the addition or substitution of a new party; …

(5) The conditions …… are the following –

(a) ……; and
(b) in the case of a claim involving a new party, if the addition or substitution of the new party is necessary for the determination of the original action.

(6) The addition or substitution of a new party shall not be regarded for the purposes of subsection (5)(b) above as necessary for the determination of the original action unless either –

(a) the new party is substituted for a party whose name was given in any claim made in the original action in the stake for the new party’s name; or
(b) any claim already made in the original action cannot be maintained by or against an existing party unless the new party is joined or substituted as plaintiff or defendant in that action.”

So, the substitution of a third party (C) would only be necessary for the determination of the original action if either of two conditions was satisfied, namely: that the name of either A or B was given in a claim made in the original action in mistake for C’s name; or, a claim made by A or against B in the original action cannot be pursued by or against them unless C is joined or substituted as plaintiff or defendant in the action.

However Section 35 of the 1980 Act made no mention of tribunals, or of tribunal procedure rules.

The Tribunal was satisfied that, amongst the “powers akin to those of the High Court”, referred to by Sedley LJ in R (Cart) v Upper Tribunal [2010], vested in the Upper Tribunal by section 25 of the Tribunals, Courts and Enforcement Act 2007, is the power, conferred on the High Court by section 35(3)-(4) of the Limitation Act 1980, to allow, in accordance with the relevant rules of court, a new claim to be made, by the substitution of a new party, after the limitation period has expired, provided the conditions in section 35(5) were satisfied.

The Tribunal therefore determined the substitution of respondent “out of time” issue in the claimant’s favour.

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

Community donation immaterial consideration invalidating planning permission

The High Court case of Wright, R (on the application of) v Forest of Dean District Council & Anor [2016] concerned whether or not a local community donation, based on turnover generated by a wind turbine, amounted to a material consideration which it was lawful for the council to take into account when granting planning permission for the wind turbine.

The Environmental Report accompanying the planning application had offered benefits including:

“Annual community donations will also be made based typically on 4% of turnover (estimated at an average of around £15k to £20k each year for 25 years of operation – up to £500k to help address current and future community needs)…..”

The main ground of challenge to the permission was that this was not a material consideration that the council could lawfully have taken into account.

The court agreed:

“Simply being a contribution for community benefit related to a local strategy for health, social or cultural wellbeing does not make that contribution in and of itself material to a planning determination. It must pass the Newbury test and be for a planning purpose and be fairly and reasonably related to the development proposed. It is difficult to see how the provision of waterproof clothing for a play group or lunches for senior citizens has any proper bearing on the issues relevant to the regulation of land use and control of development which are at stake when considering whether or not to grant planning permission for a wind turbine. The opportunity to make provision for them from the turnover of the scheme is not a planning purpose and is not fairly and reasonably related to the development.”

The council was not entitled to take into account the offer of the local community donation as a material consideration in their planning decision. As a consequence the decision was unlawful.

The court “was not prepared to accept that there would have been no substantial difference to the outcome of the members’ decision-making process had they appreciated that they could not take account of the community donation in determining whether consent should be granted.”

The council’s decision should be quashed.

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

Proportionality assessment did not apply to private possession claim

In the Supreme Court case of McDonald v McDonald and others [2016] Fiona McDonald, was aged 45 and suffered from a personality disorder. In May 2005 her parents bought 25 Broadway Close, Witney (“the property”), with the aid of a mortgage from Capital Home Loans Ltd (“CHL”)

Her respondents granted her a series of assured shorthold tenancies of the property, culminating in one granted in July 2008 for a term of one year. Miss McDonald continued to live at the property.

The parents got into arrears with CHL and do did Miss McDonald’s rent. CHL appointed Receivers of the property. The Receivers subsequently served a notice, in the name of Miss McDonald’s parents, on Miss McDonald indicating they would be re-possessing the property. When that notice expired, they issued possession proceedings in the name of the parents.

Miss McDonald said that the court should have taken into account the proportionality of making an order for possession, for the purposes of Article 8 of the European Convention on Human Rights (“the ECHR), and, that that would have entitled the court to withhold making an order for possession despite being apparently mandated to do so by section 21(4) of the Housing Act 1988 (“the 1988 Act”) and section 89(1) of the Housing Action 1980 (“the 1980 Act”), which restricts how long a court can postpone an order for possession taking effect.

The Supreme Court faced three issues:

1. whether section 6 of the Human Rights Act 1998 (“the HRA”) and article 8 of the ECHR required a court to consider the proportionality of evicting the occupier when entertaining a claim for possession by a private sector owner against a residential occupier;

2. if the answer to 1. was yes, whether the relevant legislation, in particular section 21(4) of the 1988 Act, can be read so as to comply with that conclusion; and

3. whether, if the answer to 1 and 2 was yes, the trial judge would have been entitled to dismiss the claim for possession in this case, as he said he would have done, on the grounds that the claim for possession was disproportionate.

The Supreme Court said where the party seeking possession is a public authority within the meaning of section 6 of the HRA the occupier can raise the question of the proportionality of making an order for possession. However in the case of Manchester City Council v Pinnock [2011], the Supreme Court made it clear that it’s judgment had no application to cases where the person seeking possession was a private landowner.

The Supreme Court’s preliminary view was that it is unarguable for a tenant to say article 8 overrides the contractual relationship between the parties, at least where the legislative provisions of a democratically elected domestic legislature has balanced the competing interests of private sector landlords and residential tenants. Otherwise, the ECHR would be directly enforceable between private citizens so as to alter their contractual rights and obligations.

As to 2. above, had the court been persuaded that Miss McDonald was right on issue 1., a declaration of incompatibility under section 4 of the HRA would have been the only remedy.

As to 3, the judge had not considered whether, if the claim for possession had been disproportionate, there might have been other solutions to the problem than dismissing the claim.

Where (rarely) a court was required to assess the proportionality of making a possession order, it’s powers to suspend or postpone the effect of that order are much restricted by section 89(1) of the 1980 Act.

Very few cases justified a refusal, as opposed to a postponement, of a possession order and could only be cases where the gravity of the interference in the occupier’s right to respect for their home heavily outweighed the landlord’s interest in regaining possession.

Here, it seemed likely that on a proportionality assessment the most Miss McDonald could hope for would have been an order for possession in six weeks’ time – the maximum permitted by section 89(1) of the 1980 Act.

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

Earlier extension discounted under permitted development rights

In relation to householders’ permitted development rights what is the meaning of “the enlarged part of the dwellinghouse” in Class A of Part 1 of Schedule 2 to the Town and Country Planning (General Permitted Development)(England) Order 2015?

This grants planning permission for the “enlargement” of a dwellinghouse. Paragraph A.1(g) says that development is not permitted where the “enlarged part” would have more than one storey, and would (i) extend more than 6 metres [or 8 metres for a detached house] from the rear wall of the “original dwellinghouse”, or (ii) be more than 4 metres in height.

In the High Court case of Hilton v Secretary of State for Communities and Local Government [2016] Mr Hilton had already constructed a two-storey rear extension pursuant to an express planning permission. He then applied for prior approval for a single storey rear extension. Collectively the existing and proposed extensions would extend less than 6 metres from the rear wall of the original dwellinghouse.

However, on appeal under Section 78 of the Town and Country Planning Act 1990 the Inspector ruled that the “enlarged part” went beyond the extension proposed under the permitted development right; it also included the earlier extension. So the proposal was not permitted development because the previous extension had more than one storey. This was consistent with the Secretary of State’s guidance on householder permitted development rights.

The High Court said that the Inspector (and by implication that guidance) was wrong, and that the “enlarged part” of a dwellinghouse under Class A meant only what was being proposed.

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

Lender not bound by seller’s right to cancel unconscionable bargain

Section 116 of the Land Registration Act 2002 provides:

“It is hereby declared for the avoidance of doubt that, in relation to registered land, each of the following—

(a) an equity by estoppel, and:
(b) a mere equity,

has effect from the time the equity arises as an interest capable of binding successors in title (subject to the rules about the effect of dispositions on priority).”

So an equity, which would include a right to set aside an unconscionable bargain, is an interest capable of binding successors in title.

An interest which falls within any of the paragraphs of Schedule 3 of the Land Registration Act 2002 is not postponed to a registrable disposition under Section 29(1). These interests include:

“An interest belonging at the time of the disposition to a person in actual occupation, so far as relating to land of which he is in actual occupation, except for—

(a) …

(b) an interest of a person of whom inquiry was made before the disposition and who failed to disclose the right when he could reasonably have been expected to do so“.

The type of residential sale and leaseback which follows is now heavily regulated by financial conduct legislation. It is prohibited unless strict requirements are met.

In Mortgage Express v Lambert [2016] Ms Lambert had been in desperate financial straits. She contacted Annonna Ltd, which was owned and run by Messrs Sinclair and Clement. They visited her at her flat and told her that the flat was only worth £30,000. They offered to buy her lease of it for that. They also said that she would be able to continue living there indefinitely, rent free during the first year and then for £250 per month. The agreement to sell and the promise that Ms Lambert could stay were part of a single bargain.

In the course of the sale, she completed an “Overriding Interests Questionnaire” which her solicitors had sent her. It said she had to disclose all overriding interests of which she was aware, and then gave examples including “rights of persons in occupation”. The form said “If any of the above ARE applicable please enter details below”. She returned the questionnaire but did not disclose any rights. Her solicitors told her that flats like hers were selling at £115,000 to £120,000. Ms Lambert confirmed to them in writing that she had decided to sell at £30,000 of her own free will and had not been pressured into selling at that price. She later confirmed that she was happy to sell at an undervalue because her chief concern was to pay off her loan. She seems to have told the solicitors something about an arrangement for a tenancy but the solicitors do not appear to have made any inquiry about the nature of the leaseback.

Sinclair and Clement made an online application to Mortgage Express for a secured loan of £102,000. In the application form they said that they were applying for a buy-to-let remortgage and that the value of the flat was £120,000.

Sinclair and Clement changed solicitors causing a delay in obtaining a revised offer of a mortgage from Mortgage Express so they completed the purchase with the aid of a £30,000 bridging loan. Ms Lambert sold with full title guarantee. Clause 6 of the sale contract provided that vacant possession would be given on completion. Another special condition said:

“Any Occupier(s) who sign(s) this Contract gives his/her consent to the sale and agrees that vacant possession will be given on the Completion Date free from any estate rights or interest he/she may have in the Property (if any).”

Her solicitors’ replies to requisitions on title said that vacant possession was to be given on completion.

Mortgage Express later sent a new £102,000 mortgage offer based on a £120,000 valuation which Sinclair and Clement accepted. Their solicitors told Mortgage Express that the purchase price was £30,000 and that they were therefore taking out indemnity insurance against the possibility of the sale being set aside as an undervalue transaction if Ms Lambert became bankrupt.

Sinclair and Clement’s solicitors certified that Mortgage Express would obtain a good and marketable title free from any charges or onerous encumbrances, and that the purchase would be with vacant possession. The mortgage to Mortgage Express was completed and the bridging loan was paid off out of it’s proceeds

On 21 January 2008 Messrs Sinclair and Clement were registered at HM Land Registry as proprietors of the lease, and the mortgage to Mortgage Express was registered.

With Mortgage Express’s permission, Sinclair and Clement transferred the lease into Sinclair’s sole name but he failed to keep up his repayments so Mortgage Express appointed receivers. Ms Lambert also fell into arrears with her rent, and the receivers began possession proceedings against her.

The Court of Appeal said that the sale was an unconscionable bargain and that Ms Lambert’s right to have the sale to Sinclair and Clements set aside, for that reason, was capable of being an overriding interest and so it was a right that was proprietary in character.

The mortgage to Mortgage Express was made by Sinclair and Clement. Since they were joint registered proprietors, by sections 34 and 35 of the Law of Property Act 1925 they held the legal estate, and entered into the mortgage, as trustees of land so the capital monies from the mortgage were paid to them. As trustees Section 6(1) of the Trusts of Land and Appointment of Trustees Act 1996 gave them all the powers of an absolute owner.

Section 26 of the Land Registration Act 2002 provides:

“(1) Subject to subsection (2), a person’s right to exercise owner’s powers in relation to a registered estate or charge is to be taken to be free from any limitation affecting the validity of a disposition.

(2) Subsection (1) does not apply to a limitation—

(a) reflected by an entry in the register, or

(b) imposed by, or under, this Act.

(3) This section has effect only for the purpose of preventing the title of a disponee being questioned (and so does not affect the lawfulness of a disposition).”

There was no limitation in the register at the time of the mortgage; nor was there a limitation on the validity of the disposition imposed by the Act itself.

Section 26(3) made it clear that Section 26 aimed only to prevent the disponee’s title from being called into question. Section 26 would defeat any right which was an overriding interest to the extent that that right was a right to impugn the title acquired by the disponee.

If there were an overriding interest that interest would not affect the validity of the disposition consisting of the grant of the mortgage. The mortgage would have taken effect subject to it.

The effect of the mortgage being entered into by two (or more) trustees was governed by section 2 of the Law of Property Act 1925 which provides, inter alia, that:

“(1) A conveyance [which would include a mortgage] to a purchaser of a legal estate in land [which would include a mortgagee] shall overreach any equitable interest or power affecting that estate, whether or not he has notice thereof, if—

(ii) the conveyance is made by trustees of land and the equitable interest or power is at the date of the conveyance capable of being overreached by such trustees under the provisions of sub-section (2) of this section or independently of that sub-section, and the requirements of section 27 of this Act respecting the payment of capital money arising on such a conveyance are complied with…”

The bold words state that notice or otherwise of an interest is irrelevant to the question of overreaching.

What would amount to an overriding interest claim in the case of a sale by one trustee is shifted from the land to the sale or mortgage proceeds if the sale or mortgage was made by two trustees and the capital monies raised by the mortgage were paid to both of them. All this being the case here the only remaining question was whether Ms Lambert’s interest was “capable of being overreached”.

In Birmingham Midshires Mortgage Services Ltd v Sabherwal [2000] Robert Walker LJ said:

“The essential distinction is, as the authors of Megarry and Wade note, between commercial and family interests. An equitable easement or an equitable right of entry cannot sensibly shift from the land affected by it to the proceeds of sale. An equitable interest as a tenant in common can do so, even if accompanied by the promise of a home for life, since the proceeds of sale can be used to acquire another home.”

In the same way, Ms Lambert’s claim against Sinclair and Clement could shift to the proceeds of the mortgage which she could use to buy herself another home. It was different in character from an equitable easement which was one of the rights which made no sense unless it was attached to the land (see observations of Robert Walker LJ above).

So if Ms Lambert did have an interest that was an overriding interest, it was overreached by the grant of the mortgage by two trustees to Mortgage Express and her claim was transferred away from the property to the proceeds of that mortgage to buy herself a new home.

Had it been necessary to decide whether Ms Lambert’s right to have the bargain set aside fell within Schedule 3 paragraph 2 of the Land Registration Act 2002, the court would have said inquiry had been made of Ms Lambert before the disposition (that is to say the grant of the mortgage to Mortgage Express) and that she did not disclose the right that she now asserted. She could not reasonably have been expected to have labelled the right she now claimed as arising from an “unconscionable bargain” but it would have been reasonable for her to have at least disclosed that she was not in fact giving vacant possession and that when transferred to the purchasers the lease would be encumbered by the tenancy that she had agreed to take.

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

VAT: DIY Housebuilders – relaxation of residency restriction too late for refund

For DIY house builders to be able to recover input VAT from HMRC under Section 35 of the Value Added Tax Act 1994 several conditions must be fulfilled. For one thing statutory planning consent must have been granted and the building must have been constructed in accordance with that consent.

In the First-tier Tribunal (Tax Chamber) case of Akester v Revenue and Customs [2016] the property had been constructed in accordance with the planning permission. However it was being used by the developer in contravention of a residency restriction in that consent at the time HMRC rejected the claim.

The developer had supplied two different dates as to when he occupied the property: the former, 25 March 2015 was in breach of the then planning condition while the latter, 8 October 2015 was after the removal of the condition that prohibited that occupation.

When HMRC refused the developer’s claim for repayment of VAT the requirements of Note 2(c) and (d) of Group 5 of Schedule 8 of the Value Added Tax Act 1994 had not been satisfied.

The legislative requirements were framed in mandatory terms: HMRC were allowed no discretion to accept anything less than a planning permission free of non qualifying residency restrictions, nor could HMRC extend the time limit.

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

Fire escape right implied from common intention

In Nickerson v Barraclough [1981] Eveleigh LJ said:

“Section 62 [of the Law of Property Act 1925] says: ‘A conveyance of land shall be deemed to include…’ a number of things, all of which are clearly shown to be in actual existence either… as a right or as a factual advantage. It conveys that which is there to be conveyed, Where there has been no use at all within a reasonable period preceding the date of the conveyance (whether or not there had been use outside that period) it is clear that section 62 cannot operate to create an easement.”

“Section 62 is a conveyancing section; it passes only that which actually exists already, be it, for example, a right of easement, or be it an advantage actually enjoyed.”

So in Linvale Investments Ltd v Walker [2016] to establish an easement by virtue of section 62 of the Law of Property Act, the claimant needed to establish that there was a use in a regular pattern and during a reasonable period of time before the land was partitioned by land transfers.

The High Court said it was not enough that the fire escape doors and gravel path over the transferor’s other land were obvious. It was fatal to both claims to an implied fire escape easement under:

= Section 62 and

Wheeldon v Burrows[1879]

that the escape route over the transferor’s other land had not for a reasonable period before the partition been used as a fire escape or for fire drill.

So neither section 62 of the Law of Property Act or the rule in Wheeldon v Burrows assisted the claimant.

However in Pwllbach Colliery Co Ltd v Woodman [1915] Lord Parker recognised:

“The second class of cases in which easements may impliedly be created depends not upon the terms of the grant itself, but upon the circumstances under which the grant was made. The law will readily imply the grant or reservation of such easements as may be necessary to give effect to the common intention of the parties to a grant of real property”.

Here “the common intention … was clearly that the land be fully occupied and be fully occupied in order that the maximum profit could be realised from the property. In order for that to happen, there needed to be a right of way allowing the full extent of the building to be utilised with the operation of the existing fire escapes …The plain common intention of the parties was for the land to continue to enjoy the benefit of those fire exits and also the gravel pathway outside the property for the purpose of obtaining access out onto the concrete hard standing and the highway beyond.”

So though there had been no evidence of user of the fire egress and right of way, the claimant had satisfied the necessary test to establish that there was a right of way by reason of it being the intention of the parties to the transfers.

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