John Lyon’s Charity v London Sephardi Trust [2017] EWCA Civ 846 (CA)

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Philip Rainey QC appeared for the successful respondent, the London Sephardi Trust.

On 29 June 2017 the Court of Appeal gave judgment on an interesting question of statutory construction concerning the valuation provisions in section 9 of the Leasehold Reform Act 1967 ("LRA67") and the Interpretation Act 1978 ("the Interpretation Act").

This case concerns a house in Maida Vale.  The house became qualified under the LRA67 in 1974, when the LRA67 was amended to allow enfranchisement and lease extension for some higher value houses.  It was at that time that the section 9(1A) valuation basis was introduced, which was based on the market value of the reversion “subject to the tenancy”.  On 5 March 1986, the Court of Appeal gave judgment in Mosley v Hickman in which they held that if the lease had been extended under the LRA67, the reference to “the tenancy” meant the new, extended lease.  That was a problem for landlords, because under the LRA67, a 50 year lease extension is obtained for no premium, but the effect of deferring the freehold value by an extra 50 years depresses the value and price to be paid on a freehold claim.  So by extending the lease, and then claiming the freehold, tenants could reduce the price they paid to acquire the freehold.

By s.23 of the Housing and Planning Act 1986, the LRA 1967 was changed, and an assumption was added to s.9(1A) that the lease terminated on its original term date even if it had been extended.  But s.23(3)(c) of the 1986 Act provided that the amendment not apply where a lease extension had been claimed before 5 March 1986 when Mosley v Hickman was decided.

The predecessors in title of the Trust had done just that.  An extended lease had been granted in 1983, expiring in 2066.  So their right to claim the freehold on the old, favourable basis was preserved.  But no claim to the freehold was then made.

Then in 2002, more changes to the LRA67 were made by the Commonhold and Leasehold Reform Act 2002.  The main thrust was to lift a prohibition on claiming the freehold after the original term date, and in making changes consequent on that, the 1986 amendments were removed from s.9(1A) and inserted into a new s.9(1AA).  But the 2002 transitional provision only said that the 2002 amendments did not apply where a freehold claim was made before 26 July 2002.  However, s.23(3)(c) of the 1986 Act was not repealed.

In 2013, the Trust claimed the freehold.  This was only 3 years before the original term date of 25/12/2016.  The landlord, John Lyon, asserted that the effect of the 2002 Act amendments was that the preserved right to rely on the old law had been lost in 2002, and that the premium for the freehold should be assessed on the assumption that the lease had only c.3 years to run.  The Trust argued that it retained its preserved rights, and that the valuation should be on the basis that the lease had c.53 years to run.  In valuation terms, the difference in price to be paid was agreed to exceed £1million.

The landlord prevailed in the FTT, but the Upper Tribunal found for the Trust by reason of s.17 of the Interpretation Act.  John Lyon were granted permission for a second appeal.

The Court of Appeal upheld the Upper Tribunal’s decision and reasoning.  The Court agreed that the 2002 Act repealed and re-enacted the 1986 Act amendments.  S.17(2) of the Interpretation Act provides that in such circumstances, unless a contrary intention is shown, any reference in another enactment to the repealed provision is taken to be a reference to the re-enacted provision.  Therefore, the saving provision in s.23(3)(c) was taken to apply to the relevant wording where it now appears in s.9(1AA) of the LRA67.  The very simple and generalised transitional provisions in the 2002 Act were found not to demonstrate any contrary intention to exclude s.17 of the Interpretation Act from having effect.

The Court of Appeal’s judgment sheds light on the "repeal and re-enactment" provision of the Interpretation Act, which is a statute we often take for granted because it usually operates unseen in the background.

The full judgment can be viewed here.

Philip Rainey QC (instructed by Forsters LLP) appeared for the London Sephardi Trust.