Articles

Curzon v Wolstenholme [2017] EWCA Civ 1098 – Court of Appeal Decision

11th September 2017

Summary

Overturning the decision of the UT, Court of Appeal held that a s.13 notice ceases to have effect upon the original reversioner where the freehold is transferred to a third party and then subsequently re-transferred. The Court also held that where the parties had agreed some, but not all, of the terms of the transfer, the FTT has no jurisdiction to interfere with those terms absent a change of circumstances.

Facts

The participating tenants served a collective enfranchisement initial notice in 2004. In error, the initial notice was not protected by the registration of a unilateral notice against the freehold title until July 2013, which was shortly before the hearing of an earlier appeal to the Upper Tribunal in this case.

In July 2007, the parties’ respective surveyors agreed the purchase price and certain other terms, though not the entirety of the terms of acquisition. The agreement was recorded in a document that was signed by both surveyors and stated that, in the event of the parties not agreeing the remaining terms of acquisition, being the detailed terms of the proposed lease-back of the first floor flat and garden, either party reserved the right to apply to the LVT (as it then was) for their determination, but that the agreed terms were to remain as agreed regardless of any other terms.

There followed what the President of the Upper Tribunal described, with some understatement, as years of “determined opposition” to the enfranchisement claim by the reversioner, Mr Curzon. This included various adjourned and otherwise ineffective hearings before the LVT, an appeal by the reversioner to the Upper Tribunal on the terms of the lease-back, which was withdrawn on the day of the hearing, and the transfer of the the freehold to his wife in October 2012 for a nominal consideration followed by a subsequent transfer back to him by way of a gift in March 2013.

There was therefore a hiatus in Mr Curzon’s freehold ownership between October 2012 and 28 March 2013, when he once again became the registered proprietor of the freehold. During this period, the initial notice continued to be unprotected by registration at the Land Registry.

Issues

Two discrete issues fell to be determined:

  1. Whether an initial notice served pursuant to s.13 of the 1993 Act which has not been protected by registration at the Land Register may be enforced against the leasehold reversioner who originally received it in cases where the reversion is transferred to a third party and then later transferred back to the original recipient of the notice;
  2. Where the price for the freehold has been agreed between the reversioner and the nominee purchaser, whether either party may resile from the agreement and apply to have the price determined.

First instance

The FTT held that the initial section 13 notice remained effective against the freeholder, Mr Curzon despite the transfer of the freehold reversion without prior protection on the Land Register and its subsequent re-transfer with the consequence that the FTT retained jurisdiction. It was also held that, as the purchase price for the freehold had been agreed, neither party could apply to the FTT for determination of the price.

The decision was appealed to the Upper Tribunal who upheld the FTT’s decision, holding that:

  1. Mr Curzon’s wife had acquired the freehold free of the obligations arising under the initial notice (ss. 19(2) & (3) and 97). However, the Upper Tribunal held that the initial notice nevertheless remained in force. This was so as none of the events prescribed by s. 13(11) had occurred. The initial notice was therefore, by definition, still in force and hence effective as against Mr Curzon, though not against anyone else. Protection by registration at the Land Registry was essential in order for the obligations under the initial notice to be transmitted to transferees of the reversionary interest. Once the freehold was transferred back to Mr Curzon, there was nothing to stop the nominee purchaser continuing to pursue the claim for collective enfranchisement against him.
  2. Once a term of acquisition has been agreed, the FTT no longer has jurisdiction to determine it. The relevant jurisdiction is limited to the determination of terms which cannot be agreed (s. 24(1)). Further, “agreed” for the purposes of the statutory scheme did not require a contractually binding agreement, this being implicit as s.38(4) provides that agreement for the purposes of the 1993 Act includes an agreement subject to contract. Hence, a final, in the sense that it is clear that negotiations have been completed and a final agreement has been concluded, and unconditional, in the sense that what has been agreed is not contingent upon the agreement nor the determination of other terms of acquisition such as the terms of the transfer deed, will suffice.

The UT’s decision was then appealed to the Court of Appeal both in relation to the Section 13 Notice issue and in relation to the disputed price issue.

Decision on appeal

The Court of Appeal held that the FTT and UT had erred in law in holding that the initial notice remained enforceable against Mr Curzon following the re-transfer of the reversion. Firstly, it was pointed out that it was uncontroversial that a notice was not enforceable against the transferee of the reversion and that it was therefore not necessary to make an application to withdraw the notice against the transferor in order to serve a fresh notice against the transferee.

The Court of Appeal rejected the argument that s.9 of the 1993 referred to the reversioner at the time when the initial notice was served. Therefore, the words “in connection with any claim to exercise the right to collective enfranchisement” in s.9 could not be interpreted so as to resurrect the initial notice upon re-transfer.

It was further held that the UT erred in law in holding that s.13(11) was exhaustive in its enumeration of the circumstances in which a notice ceases to have effect. By way of example, a notice may cease to have effect when the proceedings to which it relates are struck out. The Court was of the view that even if s.13(11) were exhaustive, the notice would not be enforceable against Mr Curzon due to a combination of s.19(2), (3) and s.97(1) because the tenants’ rights were not protected with the Land Registry.

In relation to the disputed price issue, it was held that neither the FTT nor the UT had erred in law. The position, supported by s.24(4)(b)(i), that the only grounds upon which a term which had been agreed could be re-visited is when there has been a change of circumstances, was upheld. Even though terms had been agreed “subject to contract”, they are still to be treated as having been agreed under the statutory regime.

Comment

This decision throws the importance of registering the tenants’ interests at the Land Registry in to very sharp relief. The case also provides further ballast to the principles established in Westminster City Council v CH3006 Ltd [2009] UKUT 174 (LC) that, terms as to acquisition which have been agreed between the parties may not, depending on the circumstances of the case, be enforceable in contract, must nevertheless be treated as having been agreed under the statutory regime.

Expertise: Leasehold Enfranchisement & Lease Extensions

Disclaimer

This content is provided free of charge for information purposes only. It does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/ or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of Chambers or by Chambers as a whole.

 

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