 |
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback] [DONATE] | |
England and Wales Court of Appeal (Civil Division) Decisions |
||
|
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Avon Freeholds Ltd v Cresta Court E Rtm Company Ltd [2025] EWCA Civ 1016 (30 July 2025) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2025/1016.html Cite as: [2026] 1 WLR 166, [2025] EWCA Civ 1016, [2026] WLR 166, [2025] WLR(D) 418 |
||
[New search]
[Context
]
[View without highlighting]
[Printable PDF version]
[Buy ICLR report: [2026] 1 WLR 166]
[View ICLR summary: [2025] WLR(D) 418]
[Help]
 EWCA Civ 1016 |
||
ON APPEAL FROM THE UPPER TRIBUNAL (LANDS CHAMBER)
Upper Tribunal Judge Elizabeth Cooke
[2024] UKUT 335 (LC)
Strand, London, WC2A 2LL |
||
LORD JUSTICE JEREMY BAKER
and
SIR LAUNCELOT HENDERSON
____________________
| Avon Freeholds Limited |
Appellant |
|
| - and - |
||
| Cresta Court E RTM Company Ltd |
Respondent |
____________________
Winston Jacob and Chelsea Sparks (instructed by direct access) for the Respondent
Hearing date: 19 June 2025
____________________
Crown Copyright ©
e-mail and by release to the National Archives.Sir Launcelot Henderson:
Introduction
enacted a new and self-contained regime under which qualifying tenants may acquire the right to take over the management of their block of flats on a no-fault basis (that is to say, without needing to prove any mismanagement by the landlord) and without payment of any compensation. The right is exercisable through the formation of a right to manage ("RTM") company which gives a notice of its claim to acquire the right to manage the relevant premises (a "claim notice") to the landlord and other specified recipients. The detailed provisions which govern the procedure are set out in Chapter 1 of Part 2 of the CLRA, running from sections 71 to 113.
Cresta Court, Hanger Lane, London W5, consisting of flats 7 to 26 ("the Property"). Five separate RTM companies were formed at the same time to acquire the right to manage other self-contained parts of Cresta Court and a neighbouring block of flats at Hill Court.
each person required to be given a notice of invitation to participate has been given such a notice at least 14 days before". It is convenient to refer to such a notice as a "participation notice".
"Before making a claim to acquire the right to manage any premises, a RTM company must give notice to
(a) is the qualifying tenant of a flat contained in the premises, but
(b) neither is nor has agreed to become a member of the RTM company."
"(a) state that the RTM company intends to acquire the right to manage the premises, (b) state the names of the members of the RTM company, [and] (c) invite the recipients of the notice to become members of the company …":
see subsection (2).
"Subject as follows, a person is the qualifying tenant of a flat if he is tenant of the flat under a long lease".
The basic definition of a "long lease" in section 76(2)(a) is that
"it is granted for a term of years certain
Cresta Court at the time when the respondent RTM company gave notice of its claim to the freeholder by a claim notice dated 21 January 2022 was Ms Beverley O'Connor. She held Flat 17 under a lease granted to her directly by Avon on 17 April 2020 for a term of 150 years from 1 January 2015. Her lease was undoubtedly a "long lease" as defined in section 76(2)(a) of the 2002 Act, but her leasehold title was not registered at HM Land Registry until after the claim notice was served. The registration of her title was then backdated to 15 July 2021, that being the date when her application for registration was evidently made. But at the date when the claim notice was given, Ms O'Connor's legal title had not yet been registered, and a search of the register would have revealed no more than a note on the freehold title of a pending application. Such notes do not say what is the application to which they refer, and it is common ground that the respondent did not make any enquiries about it.
either within the period ending 14 days before the notice was given stipulated by section 79(2) or at any time thereafter. On the other hand, there can be no doubt what her reaction would have been had a participation notice been given to her. On 26 January 2022 she gave a written consent to become a member of the respondent, and if she had given that consent at least 14 days before the claim notice was served, there would then have been no requirement to give her a participation notice at all: see section 78(1)(b), quoted at [5] above.
explain the background to the present litigation, which began with an application by the respondent to the First-tier Tribunal (Property Chamber) ("the FTT") under section 84(3) of the 2002 Act, after Avon had given a counter-notice to the notice of claim alleging that the claim notice was invalid because the respondent had not given a participation notice to Ms O'Connor who was a qualifying tenant of Flat 17. In accordance with section 84(3), the respondent sought a "determination that it was on the relevant date entitled to acquire the right to manage the premises". The FTT also had before it five related applications, raising different points, brought by the other Cresta Court and Hill Court RTM companies.
Cresta Court, the FTT began by rejecting any argument that the respondent could rely on Ms O'Connor's subsequent written consent to become a member of the respondent, on the (clearly correct) basis that the consent was given too late to satisfy the requirements of section 78: see para 30 of the FTT Decision. The FTT then recorded (at paragraph 31) that the main argument advanced by the respondent was that Ms O'Connor was not a qualifying tenant when the claim was made because her lease was not registered. The FTT considered this argument at paragraphs 32 to 37, and began by saying:
"However, as noted by [Avon], section 112(2) of the Act defines 'lease' as including an agreement for lease and section 112(3) of the Act directs that the
end of the matter, as part of the RTM companies' argument was that they were not on notice as to the existence of the lease of Flat 17. Avon countered, in turn, that they were on notice because of the note on the freehold title that there were pending applications for registration against the freehold title, in answer to which the respondent submitted that the legislative scheme would not be workable if whenever an RTM company became aware of a pending application for registration it could not give the claim notice until it had ascertained whether that pending application related to a newly completed lease: see paragraph 33.
emerged before the Upper Tribunal that the factual basis upon which the argument had been advanced before the FTT may have been unreliable: see [33] to [35] below. For present purposes, therefore, it is enough to record the FTT's conclusion at paragraph 37:
"In conclusion … we do not accept that a failure by a RTM company to give a [participation notice] to a tenant whose lease is not registered will invalidate the claim notice if the RTM company has no actual knowledge of the
The decision of the Upper Tribunal
Elizabeth Cooke, "the Judge") took place on 6 June 2024. The UT had before it the appeal of Avon from the FTT's finding that the failure to give a participation notice to Ms O'Connor did not invalidate the claim notice, and the cross-appeal of the respondent against the finding that the tenant of Flat 17 was a qualifying tenant. Mr Bates KC leading Ms Sophie Gibson appeared for Avon, and Mr Jacob again appeared for the respondent. With the agreement of the parties, the Judge delayed the publication of her decision until after the Supreme Court had delivered its decision in the case of A1 Properties (Sunderland) Ltd v Tudor Studios RTM Co Ltd [2024] UKSC 27, [2024] 3 WLR 601 ("A1 Properties"), in which the appeal had been heard on 8 February 2024 and judgment was pending. In the event, the Supreme Court gave its judgment on 16 August 2024, and the parties exchanged written submissions on its impact. The decision of the UT ("the UT Decision") was then promulgated on 28 October 2024: [2024] UKUT 335 (LC).
expertise in land law and her experience as a Law Commissioner. I will of course need to consider aspects of her reasoning in detail in this judgment, but this should not detract from the profit and pleasure to be derived from reading the UT Decision in its entirety. At [1] she correctly identified the two "interesting questions" raised by the appeals as:
"First, is the lessee under a newly granted long lease, not yet registered at HM Land Registry and therefore
"Ms O'Connor was a qualifying tenant, but the acquisition of the right to manage was not prevented by the failure to give her a notice of invitation to participate."
equitable) tenancy can be a qualifying tenant".
The statutory framework
explained, the legislation had its origin in a consultation paper issued by the Government in November 1998 in relation to various possible reforms in respect of residential leaseholds. In the light of the responses received the Government formulated its policy and a draft bill to implement it, contained in a further consultation paper published in August 2000 (Commonhold and Leasehold Reform, Draft Bill and Consultation Paper (Cm 4853) ("the Consultation Paper"): see A1 Properties at [23] and [24].
"The main objective is to grant residential long leaseholders of flats the right to take over the management of their building collectively without having
The Supreme Court observed at [25] that it was "legitimate to have regard to this paragraph as a general statement of the purpose of the CLRA" because it was "functionally equivalent to a government white paper and other types of report proposing draft legislation, which are legitimate guides to the purpose of legislation adopted in the light of them", citing well-known authority to that effect.
"a self-contained building or part of a building containing two or more flats held by qualifying tenants, where the total number of flats held by such tenants is not less than two-thirds of the total number of flats contained in the premises."
"(2) In this Chapter 'lease' and 'tenancy' have the same meaning and both
(a) a sub-lease or sub-tenancy, and
(b) an agreement for a lease or tenancy (or for a sub-lease or sub-tenancy),
but do not include a tenancy at will or sufferance.
(3) The
"29. Section 73 specifies that a RTM company has to be a private company limited by guarantee whose articles of association state that its objects include the acquisition and
30. The persons
example, shared ownership leases (of any duration) where the tenant's total share is 100 per cent and leases granted in pursuance of the right to buy conferred by Part 5 of the Housing Act 1985.
each person who on the relevant date is – (a) landlord under a lease of the whole or any part of the premises, (b) party to such a lease otherwise than as landlord or tenant, or (c) a manager appointed under Part 2 of the Landlord and Tenant Act 1987 … to act in relation to the premises": section 79(6). Section 79(7) deals with the position where the landlord or other person required to be served under subsection (6) cannot be found or his identity cannot be ascertained. Finally, section 79(8) provides that "A copy of the claim notice must be given to each person who on the relevant date is the qualifying tenant of a flat contained in the premises."
"(2) It must specify the premises and contain a statement of the grounds on which it is claimed that they are premises to which this Chapter applies.
(3) It must state the full name of
…
(6) It must specify a date, not
(7) It must specify a date, at least three months after that specified under subsection (6), on which the RTM company intends to acquire the right to manage the premises.
…"
explained in [12] and [13]:
"12. Section 84 makes provision for any of the recipients of a claim notice set out in section 79(6) to challenge it by serving a counter-notice, and in that
13. Where there is no objection to the claim notice,
The facts
eventually made; and (b) that it was to her application that the note of a pending application on the freehold title at the date of the claim notice referred. No challenge has been made before us to the drawing of either of these inferences. The UT added, at [19], that the reason for the delay in the registration of the lease of Flat 17 is not known, nor is the date on which the registration took place. But it had certainly not taken place by the crucial date, 14 days before the claim notice was given, and no participation notice was given to Ms O'Connor. Accordingly, on that crucial date, "Ms O'Connor held an equitable lease of flat 17 and there was no legal lease in existence": [21]. The effect of section 27 of the Land Registration Act 2002 ("LRA 2002") is that the grant of a lease for a term of more than 7 years out of a registered estate is a registrable disposition and it does not take effect at law until the lease is registered: [16] and LRA 2002 section 27(1) and (2)(b)(i).
evidence on the appeal, and there was no witness statement to verify it. The UT was concerned that the information "raises as many questions as it answers": [29]. For example, did Ms Bellenie share her knowledge with anyone else at the relevant time, and would she have appreciated that Ms O'Connor had an equitable lease because it had not yet been registered? In those circumstances, the Judge concluded at [30] that
"it appears that the factual basis presented to the FTT may have been wrong, but the
evidence or of any agreement by the parties to vary the facts found by the FTT.
Issue 1: was Ms O'Connor a qualifying tenant?
emphasised the importance of the status of qualifying tenant, and of knowing how many there are. Their number has to be known in order to work out whether the right to manage is available under section 72. They also have significant rights, such as to be a member of the RTM company (section 74), to receive a participation notice (section 78) and to receive a copy of the claim notice (section 79(8)). It would be inconsistent with the policy of the legislation to narrow down the availability of qualifying tenant status, submitted Avon, because that would deprive people of a potentially valuable right. If tenants in Ms O'Connor's position are not qualifying tenants, there is no obligation to inform them about an application to acquire the right to manage, which cannot have been Parliament's intention. Mr Bates KC instanced the example of a new block of 10 flats, where long leases have been granted but not registered, and some or all of the registrations are delayed by administrative problems at HM Land Registry, possibly for years. Meanwhile, all the tenants pay the same rent and service charges. This state of affairs, if the respondent's argument is correct, would initially prevent the block from being eligible for an RTM application under section 72, and later could exclude individual tenants from participation until enough flats are registered for the requirements of section 72 to be met.
example a lease for life converted by section 149(6) of the Law of Property Act 1925 to a 90-year lease, and some categories which cannot be registered at all, such as a short shared-ownership lease under section 76(2)(e). Moreover, if an eligible "long lease" is either unregistered or unregistrable, its existence will not be disclosed on the register or discoverable by a search of HM Land Registry. This shows, submitted Avon, that equitable leases cannot be excluded simply because they are unregistered.
equitable leases are not excluded by anything in the wording of section 75, and the express inclusion of "an agreement for a lease or tenancy" in the definition section 112(2) shows that at least some common types of equitable lease are included: see Walsh v Lonsdale (1882) LR 21 Ch D 9 (CA). It is trite law that an agreement for a lease which is enforceable by specific performance takes effect as an equitable lease, and for most practical purposes an equitable lessee has the same rights as a legal lessee. This consideration applies with particular force where the lessee has applied to register his or her lease at HM Land Registry and is caught in the "registration gap": see RM Residential Ltd v Westacre Estates Ltd [2024] UKUT 56 (LC), [2024] L.&T.R. 19 where it was held that a landlord whose title is not yet registered is entitled to collect service charges and manage the property as its owner. By parity of reasoning, said Avon, an equitable lessee of a flat is entitled to the status of qualifying tenant if the conditions in section 76 are met.
equitable lessee, it is the equitable lessee who is the qualifying tenant: [36] and [37].
equitable lessee is never a qualifying tenant, and that only legal lessees are within the meaning of a "long lease" in section 75: [38]. He submitted that this was the natural interpretation of section 75, and referred to the decision of Martin Rodger QC (Deputy President) in Assethold Limited v 7 Sunny Gardens Road RTM Company Limited [2013] UKUT 0509 (LC) where he held that upon the death of a qualifying tenant the legal estate in the lease devolved on her personal representatives who then became the qualifying tenant, although this would not be visible on the register. The Deputy President therefore held that section 78(1) of the 2002 Act was not complied with because no participation notice was given to the deceased tenant's personal representatives before the claim notice was served on the RTM company: see his decision at [33].
express provision including an equitable lessee. Thus, for example, under the Landlord and Tenant Act 1954 a notice terminating a business tenancy under section 25 must be served by the legal freeholder, not a beneficial owner of the freehold (Pearson v Alyo (1990) 60 P & CR 56), but contrast the Leasehold Reform Act 1967 where section 37(1)(f) states expressly that "tenancy" means "a tenancy at law or in equity".
enquiry to the freeholder and to every tenant in a substantial block.
easily identifiable from the Land Register because their leases would ordinarily be registered. If tenants under long equitable leases were included in the definition of qualifying tenants, they would be as difficult to find as landlords, yet the statute makes no provision for dispensation when they cannot be found.
equitable leases: [54]. As the Judge said (ibid) "A long lease-holder is in terms of ordinary language the lessee of their flat, whether or not their lease is registered."
express provision including equitable leases (such as section 37(1)(f) of the Leasehold Reform Act 1967) was not a problem in the light of section 112(2) which expressly includes "an agreement for a lease or tenancy". Such an agreement is an equitable lease, on principles going back to Walsh v Lonsdale; and if that is so, then section 75(2) must a fortiori include equitable leases within its ambit: [55].
equitable lease of the same flat where that is the position: [56]. In most cases, that is not the position because, as a matter of fact, there is only one lease of a flat, and it is a legal one; but in some circumstances there is more than one lessee. For example, if a long lessee contracts to sell his flat, from the moment of exchange of contracts the purchaser falls within the scope of section 112(2) but the assignment on completion of the sale operates only in equity until the purchaser is registered as the lessee. Accordingly, from exchange of contracts to registration of the purchase there are two lessees. The question then is which of them (the registered vendor or the unregistered purchaser) is the qualifying tenant? A choice must be made: [57].
equitable tenant is the qualifying tenant, is not an available construction of the statute, both as a matter of common sense and applying the principle of "construction against absurdity": [58]. The Judge thought Avon's construction would "make the acquisition of the right to manage well-nigh impossible". As she explained (ibid):
"Unregistered purchasers of flats are pretty much undiscoverable unless the legal lessee chooses to disclose their
"Where there is both a legal lease and an
This conclusion was in her view consistent with the analysis of the Deputy President in the 7 Sunny Gardens case (see [40] above) and also with the reasoning of the Supreme Court in A1 Properties, where it said at [69] that
"There will ordinarily be no difficulty in finding or identifying qualifying tenants".
As the Judge put it at [61]:
"In the paradigm case where all the flats in a building are let on long leases which are registered, the RTM company will be able to look at the freeholder's registered title, read the names of the lessees of
equitable one: [62]. In such a case, as she said at [63], "either the equitable lessee is the qualifying tenant, or there is no qualifying tenant of the flat in question". She then asked herself whether the need to construe against absurdity ruled out a reading of section 75 that takes the qualifying tenant to be the equitable lessee where there is no legal lessee (my emphasis), and answered that question as follows at [64]:
"I do not think it does. The fact that such leases are not visible on the Land Register is not fatal to their inclusion, because some of the legal leases within the definition in section 76 are
examples, the Judge considered at [68] whether there was any reason why a lessee (such as Ms O'Connor) whose lease was granted out of a registered estate, taking effect in equity until registered, should not be the qualifying tenant. The Judge continued:
"I think not. The mischief avoided by
"Accordingly I find that where a flat is let on an
Discussion of Issue 1
equitable lease are in existence, the equitable lessee must be the qualifying tenant.
endorse most aspects of the Judge's reasoning. Her solution seems to me to strike an appropriate balance between the starting point that qualifying tenancies should normally be ascertainable by a simple search of the Land Register, which implies that they will normally be legal tenancies registered as such, and the need to cater for at least some categories of equitable tenancies if an unreasonable result is to be avoided. Section 112(2) is important, because the express inclusion of agreements for a lease shows that one of the commonest types of equitable tenancy (an agreement for a lease which is capable of specific performance) may in principle qualify. And if that is right, it would in my view be irrational to exclude another common type of equitable tenancy exemplified by Ms O'Connor's case, where a long lease is granted for the first time to a purchaser and it will take effect at law when it is registered, but it can only take effect in equity during the "registration gap". By any normal metric, a tenant under such a lease who has taken possession of the flat on completion and lives there, or perhaps sub-lets it if authorised to do so, is for most practical and economic purposes the owner of the flat and would naturally so describe himself of herself. Equally, such a tenant is clearly within the class of residential long-leaseholders whom the RTM regime enacted in 2002 was intended by Parliament to benefit. If, however, such tenants are excluded from qualifying for a period of arbitrary, and perhaps considerable, length until the formalities of registration are completed by HM Land Registry, the statutory scheme is at risk of being frustrated (as the example given by Mr Bates KC well shows: see [36] above).
effected.
existence. The Judge rightly went out of her way to emphasise this point when rejecting Avon's argument that the equitable tenancy should always prevail in cases where both a legal and an equitable tenancy co-exist, and she reiterated it when stating her final conclusion at [69].
existence of Ms O'Connor's unregistered tenancy would cause significant practical difficulties for the respondent in making its application is in my view far-fetched. It is common ground that there was a note on the register of a pending application at the critical time, 14 days before the claim notice was given. The total number of flats contained in the Property was only 20, and in order to comply with section 79(5) at least 10 of the qualifying tenants (other than Ms O'Connor) must by then have become members of the respondent. Moreover, a simple search of the register would have revealed the identity of any other registered long leases of the flats then in existence, and it may well be the case that it would then have been apparent that the pending application related to Flat 17, or at least that the number of flats to which it might relate was very small. In those circumstances, it should not have been difficult for the respondent to use its information gathering powers under section 82 and/or to make a few simple enquiries on the ground in order to ascertain the true position. After all, Ms O'Connor was living in Flat 17, and there is nothing to suggest that she would not have responded to a simple enquiry, not least because we know that she supported the application. Yet the respondent did nothing, and thereby ran the risk that it might fail to comply with section 78 if there was a qualifying tenant of Flat 17 in existence upon whom a participation notice had to be served.
expressed by the Supreme Court in A1 Properties at [69] that there will "ordinarily be no difficulty in finding or identifying qualifying tenants".
element of exaggeration here, although I would not wish to differ from the view of an expert tribunal on a matter of this nature. But for present purposes the point is immaterial, because Avon no longer relies on the construction which elicited the Judge's comment, and there was in my opinion ample other justification for her rejection of Avon's then submission.
EWCA Civ 1544, in which judgment was handed down on 13 December 2024 following an oral hearing on 19 and 20 November 2024. The lead judgment was given by Falk LJ, with whom King and Nugee LJJ agreed. The case concerned an application for costs made under section 88 of the CLRA which, as in force at the material time (the section has since been repealed), provided by subsection (1) that:
"A RTM company is liable for reasonable costs incurred by a person who is –
(a) landlord under a lease of the whole or any part of the premises,
…
in consequence of a claim notice given by the company in relation to the premises."
entitled to seek its reasonable costs of an aborted RTM application by the appellant RTM company, at a time when Assethold had no legal interest in the property. The FTT accepted the RTM company's argument that Assethold was not a "landlord" and that the RTM company therefore had no liability for its costs. This decision was reversed by the UT (Judge Elizabeth Cooke), who held that the RTM company was estopped from denying that Assethold was the landlord for the purposes of section 88; but this decision was in turn reversed by this court, which reinstated the decision of the FTT.
equitable ownership of the freehold and headlease interests in the property had passed to Assethold in October 2019 when it had purchased them from two related entities called "Millcastle", and that this was enough to make Assethold a landlord at the date of the claim notice even though Millcastle had remained the registered, and therefore the legal, owner of both interests at that date.
"I do not agree that an
explaining that Ms O'Connor had been in a registration gap, but following the grant of a new lease rather than a sale of an existing interest, Falk LJ continued:
"41. … The freeholder challenged the proposed acquisition of RTM on the basis that Ms O'Connor had not been served with an invitation to participate in the RTM company.
42. As the UT held, at the relevant time no legal lease was in
43.
equitable lessee in the position of Ms O'Connor. And to the extent that the respondent may seek to rely on paragraph [28] of Falk LJ's judgment to argue by analogy that in its ordinary and natural meaning a tenant under a lease means the tenant as a matter of law, I would observe that the solution adopted by the Judge in our case does indeed give primacy to the legal lessee in any case where there are both legal and equitable leases of a flat in existence at the same time.
Issue 2: Did the failure to give a participation notice to Ms O'Connor invalidate the claim notice served by the respondent on 21 January 2022?
each person who at the time when the notice is given – (a) is the qualifying tenant of a flat contained in the premises …)". Further, although section 79(7) contains a limited dispensation from invalidity of a participation notice occasioned "by any inaccuracy in any of the particulars required by or by virtue of this section", there is no dispensing provision from the basic obligation under subsection (1) to give a participation notice to each qualifying tenant of a relevant flat who " (b) neither is nor has agreed to become a member of the RTM company". Ms O'Connor did not give her written consent to become a member of the respondent until 26 January 2022, five days after the date of service of the claim notice and 19 days after the last date for service on her by the respondent of a participation notice under section 79(2).
"(2) The claim notice may not be given unless
each participation notice required by section 78(1) before expiry of the 14-day deadline stipulated by section 79(2), namely that the claim notice "may not be given". On the face of it, that is a clear and unqualified prohibition such that a failure to comply with it will have the effect that the claim notice is invalid, and it therefore cannot set in motion a valid claim to acquire the right to manage. It is simply something that the RTM company must get right as a pre-condition to making a valid claim; and if for any reason the condition is not satisfied, the clear implication in my view is that the RTM company will be obliged to start again. In the present case, that would presumably have meant a delay of less than a week until after Ms O'Connor had given her written consent to become a member of the respondent, because the obligation to give her a participation notice would then have lapsed by virtue of section 79(1)(b). But instead of taking that simple and obvious course, the respondent has persisted in arguing that the effect of section 79(2) was not to invalidate the claim notice, or at any rate not to do so on the facts of the present case.
expressly stated by Parliament. In those circumstances, the Supreme Court held that the correct approach was to apply the principles formulated by the House of Lords in R v Soneji [2006] 1 AC 340 and to ask "whether it was a purpose of the legislature that an act done in breach of [the relevant] provision should be invalid": see [58], and [59] where the Supreme Court quoted the observation of Lord Steyn in Soneji at [14] that "A recurrent theme in the drafting of statutes is that Parliament casts its commands in imperative form without expressly spelling out the consequences of a failure to comply". In that context, said the Supreme Court at [59]:
"The courts had
emphasis in italics):
"67. … Where the right to manage is transferred to a RTM company, the
68. In our view the correct approach in a case where there is no
69. Section 78 requires the RTM company as promoter of the scheme to give a participation notice to all qualifying tenants who have not agreed already to become, or not actually become, members of the RTM company. Section 79(2) provides that until 14 days after that has been done, a claim notice may not be served at all. There will ordinarily be no difficulty in finding or identifying qualifying tenants. The absence of any saving or dispensing provisions of the type found in section 79(7) suggests that this was well understood by Parliament. Section 79(2) imposes a clear consequence of failure in good time to give participation notices: no valid claim notice can be given to anyone."
express statement of the consequences of non-compliance; (b) that it considered section 79(2) to be an example of such an express statement; and (c) that it understood the consequence of non-compliance laid down by Parliament to be that "a claim notice may not be served at all". It follows, in my view, that if a claim notice may not be served at all, any claim notice purportedly served before the non-compliance is remedied must be invalid, or in other words a nullity.
entitled to, but not given, a claim notice, but not void": see [87] and R (Youngsam) v Parole Board [2019] EWCA Civ 229, [2020] QB 387 at [21-22] (Nicola Davies LJ) and [40-59] (Leggatt LJ). I would only add that, even if the passage is properly to be classified as obiter, I would have no hesitation in following it as constituting, in my respectful opinion, a correct statement of the law in this area.
expressly stipulated the consequences of non-compliance is a theme to which the Supreme Court returned in A1 Properties when considering some subsidiary arguments advanced by Mr Bates KC for the intermediate landlord at [101] to [104]: see in particular [103] ("Parliament has not expressly stipulated what the consequence of non-compliance with those obligations should be, so the Soneji analysis is applicable"); and [104] where the court said:
"The same analysis applies. These are simply
emphasises that "the words which Parliament has chosen to enact as an expression of the purpose of the legislation" are "the primary source by which meaning is ascertained" ([29]), and although external aids to interpretation play a secondary role, "none of these external aids displace the meanings conveyed by the words of a statute that, after consideration of that context, are clear and unambiguous and which do not produce absurdity" [30]. Further, the "intention of Parliament" is an objective concept, not subjective, and "is a shorthand reference to the intention which the court reasonably imputes to Parliament in respect of the language used" ([31], citing the speech of Lord Nicholls in the Spath Holme case [2001] 2 AC 349, 396). It follows that where the language used by Parliament to state the consequence of non-compliance with a procedural requirement is clear, unambiguous and does not produce absurdity, it is the duty of the court or tribunal to interpret and apply that language accordingly. That is what the rule of law requires, and the court or tribunal would be overstepping its constitutional boundaries if it attempted to substitute for the language of Parliament an interpretation which in its view would produce a more reasonable result on the facts of the individual case before it.
expressly stated the consequences of non-compliance that there can be any room for a Soneji analysis designed to determine objectively what intention should be imputed to Parliament to fill the gap left by its silence on the point.
evidently of the same opinion when it said in A1 Properties at [69], quoted above, that section 79(2) "imposes a clear consequence of failure in good time to give participation notices: no valid claim notice can be given to anyone." It is equally clear to me that this construction does not, objectively, produce any absurdity, however widely the concept of absurdity should be interpreted. In my judgment there is nothing remotely absurd about a rule which in effect requires strict compliance with the procedural requirements for service of participation notices before a valid claim notice may be given. It is relevant here to have in mind the very significant disruption of complex private contractual arrangements that a successful claim under the RTM legislation entails; the early stage in the procedure at which the failure to comply with the relevant requirements occurs; and the comparative ease and speed with which the position can in principle be rectified by the RTM company. It is also relevant that the Supreme Court could not have said what they did in [69] if they thought that the consequence stipulated by Parliament led to an absurd or unjust outcome. To the contrary, the Supreme Court expressly recognised in [62] that:
"
ease with which an RTM company may serve a new claim notice shows that "Parliament intended that there should be strict compliance with the procedural requirements in the statutory regime". The first reason given for rejecting this submission was that one of the objectives of the statutory scheme, as explained in the Consultation Paper, was that "opportunities for obstructive landlords to thwart the transfer of the right to manage should be kept to a minimum" ([98]). The second reason was that there is "no guarantee that a RTM company will be in funds to make multiple applications" and the company "might be formed by just two tenants, or a small group of tenants, with limited resources" ([100]).
element of tension between the reasoning of the Supreme Court in these paragraphs and some of the other passages in their judgment upon which I have relied, I do not consider that these paragraphs can or should be read as casting any doubt on the central proposition endorsed by the Supreme Court that there can be no room for a Soneji analysis where Parliament has stipulated what the outcome of a failure to comply with a procedural rule should be, especially as the Supreme Court went on to reiterate that principle at [102] to [104]: see [76] above. It therefore seems to me that the reasons given by the Supreme Court for rejecting Mr Bates' submission should be confined to cases where a Soneji analysis is required, and should be read as having no application in cases where Parliament has expressly stated what the consequence of non-compliance is to be. I also note that, in [98], the Supreme Court said only that opportunities for obstructive landlords to thwart the operation of the scheme should be "kept to a minimum", not that they can or should be eliminated.
The decision of the UT on Issue 2
entirety, including the final part after the words "no valid claim notice can be given to anyone" which reads as follows:
"For present purposes we leave aside the difficult question whether this has the further consequence that, if a document purporting to be a claim notice is nonetheless given to another stakeholder, such as a landlord, the landlord could rely on the failure to give a participation notice to a qualifying tenant in order to object to the validity of the purported transfer of the right to manage which followed,
Evidently with that in mind, the Judge said at [114] that "that is the difficult question I now have to resolve".
essentially the arguments which I have already indicated seem to me to be part of the ratio of A1 Properties, depending on the sharp distinction to be drawn between cases where Parliament has expressly spelled out the consequences of non-compliance with a procedural requirement on the one hand, and the confinement of a two-stage Soneji analysis to cases where no such express consequence has been stated on the other hand. For his part, Mr Jacob for the respondent emphasised that Ms O'Connor had lost nothing of value, since she was now a member of the RTM company, and that it was not always an easy matter for an RTM company, having missed a qualifying tenant, to start again. Moreover, to allow Avon to rely on the procedural objection "would be yet another example of an obstructive landlord attempting [to] thwart the process in the way that the Supreme Court so clearly disapproved".
entirety of paragraph [69] of A1 Properties was obiter, and not just the second part of the paragraph after the words "no valid claim notice can be given to anyone". As I have already said, I respectfully disagree and I consider that this court, like the UT, is bound by the reasoning in the first part of [69]; and even if that is wrong, I would in any event adopt that reasoning as correct: see [75] above. In my view, this error led the Judge to suppose that she had more room for manoeuvre than was the case, and encouraged her to adopt as her preferred solution to the "difficult question" one that cannot be reconciled with the reasoning of the Supreme Court in A1 Properties, namely that when the Supreme Court said "not valid" (or, more accurately, "no valid claim notice can be given") it meant "that it is neither wholly valid nor wholly invalid, but voidable at the instance of the tenant": see [139]. Further, the Judge regarded the (clearly obiter) second part of [69] as "an invitation to adopt this solution", saying at [141]:
"It means that although no valid claim notice can be served if the qualifying tenants have not all been given the notice of invitation 14 days beforehand, the notice if served in spite of the requirement is not wholly invalid. Instead it is voidable. And the person
"That this is an appropriate solution is indicated first by its consistency with the Supreme Court's decision in [A1 Properties]. It is also indicated by the purposes of the statute in requiring notice to be given; the notice is overwhelmingly for the tenant's benefit and the purposes of the statute in facilitating the acquisition of the right to manage will be frustrated if anyone
Overall conclusion
Lord Justice Jeremy Baker:
Lord Justice Newey: