Articles

Greenpine Investment Holding Ltd v Howard de Walden Estates Ltd [2016] EWHC 1923 (Ch)

1st November 2016

Summary

On the assumed basis that terms of acquisition could be raised after the date of the counter notice, a requirement that the tenant seeking the lease extension should provide a foreign lawyer’s opinion confirming the status of the tenant, which was a company incorporated in a foreign jurisdiction, was capable of amounting to a term of acquisition. A promise to complete “on receipt of funds” did not amount to a solicitor’s undertaking.

Facts

In this case two Part 8 claims were heard together. The first action was a claim by the Claimant (“Greenpine”) under section 48(3) of the Leasehold Reform, Housing and Urban Development Act 1993 (“the Act”) for an order that Howard de Walden Estates (“Estates”) grant Greenpine new leases of Flat 12 and Garage 22, 30 Harley Street, London W1G 9PW (“the Flat”). Greenpine is a BVI registered company.

The second action was a claim by Greenpine to enforce a professional undertaking. It was alleged to have been given by the Charles Russell Speechlys (“CRS”) by email to complete the grant of the new leases on receipt of funds from Greenpine’s solicitors.

Issues

“In the first claim, the main issues are whether Estates’ requirement for a foreign lawyer’s opinion letter on the status of Greenpine (“FLO”) was a “term of acquisition” as defined in section 48(7) of the Act, and if so when that term was agreed by the parties.

Estates’ case is that all the terms of acquisition were agreed by 7 January 2015 and that, absent any application to the County Court by 7 May 2015, Greenpine’s notice of claim to new leases was deemed withdrawn pursuant to section 53(1) of the Act on 7 May 2015. Greenpine’s case is that one term of acquisition, namely the precise terms of the FLO, was not finally agreed until 27 April 2015, so that its application to the County Court to enforce the statutory contract for new leases was made in time. If Greenpine is right in that regard, its notice of claim was not deemed withdrawn and it is entitled to new leases.

On the second claim, the main issue is whether a statement made by CRS in the course of pre-completion exchanges of correspondence amounts to a solicitor’s undertaking to complete upon receipt of funds from Greenpine. If it is, a second issue of whether the undertaking should be enforced falls to be determined. CRS denies that the statement in question amounted to a professional undertaking.”

Decision

Mr Timothy Fancourt QC sitting as a deputy High Court Judge held that the agreement to provide a FLO was a term of acquisition and the terms were agreed when the broad terms of the agreement to provide it were agreed, rather than when agreement on the finer detail of the contents were agreed. On that basis the first claim failed and the notice was deemed withdrawn.

The second claim also failed on the basis that the landlord’s solicitors agreement to complete “on receipt of funds” would not in the context that it was given have been understood as amounting to a solicitor’s undertaking.

Comment

The case is more interesting for what it did not decide that for what it did decide. Both landlord and tenant had approached the dispute on the basis that the requirement to provide the FLO was a term of acquisition. They only disagreed on the timing of when agreement was reached. In an interesting judgment Mr Fancourt CQ put forward an argument, which it would seem neither party had advanced, to the effect that the terms of acquisition could only ever arise out of the terms put forward in the tenant’s notice and the counter notice. As he put it:

“31. Given that the terms of the new lease are firmly based on the terms of the existing lease, it seems clear that the terms of acquisition that are in dispute are contemplated by the draftsman to arise from the terms of the tenant’s notice and the landlord’s counternotice. That is why section 48(1) refers to any terms of acquisition that remain in dispute 2 months after the counternotice and why the Tribunal is given jurisdiction to determine those matters in dispute.

37. Reading section 48 as a whole, and in the context of the statutory scheme, my conclusion would be that the terms of acquisition to be agreed or determined by the Tribunal are the proposals contained in the respective notices that remain in dispute at the relevant time.”

Although obiter dicta that is a fairly trenchant conclusion and come from a judge who is an eminent landlord and tenant practitioner. He did not actually need to decide this point because, on the case put forward by the parties, the same result ensued i.e. that there was a deemed withdrawal. There is a certain tension between the obiter part of the judgment and the conclusion that the requirement to provide an FLO was capable of amounting to a term of acquisition. The basis of that conclusion was the wording of s. 48 (7):

“(7) In this Chapter “the terms of acquisition”, in relation to a claim by a tenant under this Chapter, means the terms on which the tenant is to acquire a new lease of his flat, whether they relate to the terms to be contained in the lease or to the premium or any other amount payable by virtue of Schedule 13 in connection with the grant of the lease, or otherwise.”

Mr Fancourt QC held that:

“The words “or otherwise” are intended to prevent the words starting “whether they relate to …” from defining exclusively what terms are “terms of acquisition”. The central concept is that the terms of acquisition are the terms on which the tenant is to acquire a new lease of his flat, that is to say the terms of the transaction arising from the statutory contract.”

As the requirement for a provision of a FLO was one of the terms on which the tenant was to acquire a new lease it was a “term of acquisition”.

The tension is caused by the fact that s. 45 only requires a landlord to state which proposals in a tenant’s notice are disputed and to specify the landlord’s counter-proposals. The tenant only has to propose the “terms which … should be contained” in the new lease. The provision of a FLO is not a term of the new lease and so would not have been proposed by the tenant. So strictly speaking there is no opportunity for the landlord to counter-propose other terms, such as the provision of a FLO. If Mr Fancourt QC is right, then landlords ought not to confine themselves to making counter-proposals but should be including in the counter notice any other terms that they seek.

Another difficulty which arises out of Mr Fancourt QC’s obiter dicta, is whether, on the assumption that the terms of acquisition are fixed on service of the counter notice, the parties could later agree other terms. He dealt with this question:

“38. Such an interpretation would not prevent the tenant and the landlord – after the counternotice is served – from agreeing other terms as terms on which the tenant is to acquire a new lease of his flat. Chapter II, like Chapter I, is based on giving the parties sufficient time to agree as much as possible, before any application has to be made to the Tribunal or to the County Court to resolve any dispute… If the parties can agree something beyond the statutory scheme, then it may well be possible for an estoppel or waiver to arise in connection with such matters (though the time limits specified in section 48 are themselves strict time limits).”

These conclusions may surprise practitioners. Take the fairly common scenario where the only dispute disclosed on the face of the tenant’s notice and the counter notice is as to the premium. Suppose that the premium is agreed on 1st January 2017, but the parties then agree that, despite what was said in the notices, several clauses in the lease need to be altered in a fundamental way. They agree the terms of the new lease on 1st February 2017. On the basis of Mr Fancourt QC’s judgment the parties would be estopped from denying the agreed terms of the lease but this agreement would be outside the statutory provisions and would not affect the statutory timetable, with the result that there would be a deemed withdrawal on 1st May 2017, rather than 1st June 2017. Food for thought.

 

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