Paul Tonkin summarises recent case law.

Mortgagee’s losses on fraudulent sale

Godiva Mortgages Ltd v Khan [2012] EWHC 1757 (Ch)

Godiva lent £321,750 to Mrs Khan in the belief that it would acquire a legal charge over a property which she was purchasing. In fact it transpired that there was no purchase as the purported seller of the property was deceased. As a result, Godiva did not obtain a charge and the monies disappeared. Godiva issued a claim against Mrs Khan in fraud and also issued proceedings in negligence against the solicitors who had acted on the purported sale, arguing that they should have bought to Godiva’s attention various matters which would have caused it not to lend the monies. The court held that Mrs Khan had orchestrated the fraud. It was clear that, had Godiva known the true state of affairs, it would not have lent the money. Mrs Khan was therefore fully liable for Godiva’s losses as a result of the transaction. The court also considered that the solicitors had been negligent. In particular, they had been led to believe by Mrs Khan that the deposit on the property had been paid directly between the parties and that the seller had agreed to a reduced purchase price being paid on completion, so as to enable the solicitors’ costs to be discharged out of the mortgage advance. Both of these matters should have given the solicitors cause for suspicion as they could not be sure that any monies were passing between the parties other than those coming from Godiva. The Council of Mortgage Lenders’ Handbook required disclosure of these matters. However, the court was not persuaded that Godiva would have refused to lend even if it had been aware of these matters. On that basis, it concluded that, although the solicitors had breached their duties, Godiva had not suffered any loss as a result and was therefore only entitled to nominal damages from the solicitors.

Prescriptive rights of light and successive owners

CGIS City Plaza Shares 1 Ltd v Britel Fund Trustees Ltd [2012] EWHC 1594 (Ch)

CGIS and Britel owned neighbouring buildings. Owners Britel wished to redevelop its building in a manner which would interfere with access to light to CGIS’ building and CGIS applied to court for a declaration that it enjoyed the benefit of rights of light over Britel’s building. Britel relied upon a conveyance from 1967 between the City of Birmingham, which was CGIS’s predecessor in title, and the Bank of England, Britel’s successor in title. The conveyance granted to the Bank rights to build without regard to any interference with air or light enjoyed by “the buildings for the time being erected on any adjoining adjacent or neighbouring land owned by or vested in the City of Birmingham”. CGIS argued that the conveyance only applied to buildings owned from time to time by the City and could not apply to buildings which it had since sold.

The court held that the conveyance prevented CGIS from acquiring a prescriptive right of light over Britel’s building. The relevant words operated as a consent for the purposes of section 3 of the Prescription Act 1832, meaning that CGIS’ access to light was enjoyed with Britel’s consent and not as of right. In particular, the words “for the time being” simply referred to the physical location of the buildings, they did not limit the application of the consent to the period during which the building was owned by the City and it was therefore capable of operating against CGIS as successor to the City.

Address of landlord’s managing agent not sufficient

Beitov Properties Limited -v- Elliston Bentley Martin [2012] UKUT 133 (LC)

Beitov was Mr Martin’s landlord of a flat in London. Mr Martin applied to the Leasehold Valuation Tribunal (LVT) for a declaration that he was not required to pay a service charge demand issued by Beitov because the demand did not comply with section 47 of the Landlord and Tenant Act 1987. Section 47 provides that any written demand for payment must contain the name and address of the landlord (and an address for service in England & Wales if the landlord is based overseas) and the demand is not payable until this information is provided. In this case the demand gave the name of the landlord but the address given was the address of its managing agent, not the landlord’s registered office address. The LVT held that this did not satisfy section 47 and therefore the demand was not payable. Beitov appealed to the Upper Tribunal.

The Tribunal held that the primary purpose of section 47 was to enable a tenant to know exactly who his landlord is. On that basis, it was not enough to provide an address at which the landlord would receive correspondence. The address to be provided is the address where the landlord can be found. In the case of an individual this would be his or her primary residence and in the case of a company, its registered office or trading address. The address of the landlord’s agent did not suffice for these purposes and therefore the decision of the LVT was correct.

Notification by management company of revised car parking scheme

Samambwa v Countrywide Managing Residential Ltd [2012] EWCA Civ 1133

Mr S was a long leaseholder of a flat. The lease included a right to park in an allocated parking space. The lease contained a duty on the part of the management company to manage the car parking spaces. In practice it was often difficult for Mr S to park in his allocated space and a practice had grown up over time whereby tenants would park as close as possible to their allocated space. The management company decided to revise the car parking arrangements by marking out and re-allocating spaces, including visitors’ parking, and employed a clamping company to police the new arrangements. Mr S breached the new arrangements and his car was removed by the clamping company, who refused to release it unless a fine had been paid. Mr S sought injunctions against the management company and the clamping company.

The Court of Appeal was highly critical of the conduct of the clamping company and held that their conduct in removing the car and refusing (in breach of an earlier court order) to return it was tortious and entitled Mr S to damages against them. However, as the clamping company had since been placed into liquidation, the real issue was whether the management company could also be liable for the clamping company’s conduct. The Court of Appeal held that the real issue which should have been argued before the Court was whether the management company had a duty under the lease to give Mr S reasonable notification of the revised car parking scheme and, if so, whether it had discharged that duty. If not, this would open the way for Mr S to claim against the management company direct. However, because Mr S was unrepresented those issues had not been properly argued before the Court. The Court considered however that a grave injustice had been done to Mr S and it was proper and just for the matter to be submitted for a re-trial so that the issue of notification could be properly argued.

Rateable occupation must be beneficial to occupier

Makro Properties Ltd v Nuneaton and Bedworth BC [2012] EWHC 2250 (Admin)

Makro was the tenant of a wholesale warehouse in Coventry. The Local Authority sought to recover empty rates from Makro for the years 2009 and 2010. It was accepted by Makro that the property was empty for part of that period. However, Makro relied upon the fact that it had used the property for storing 16 pallets of documents during the period 25 November 2009 to 12 January 2010. It then reoccupied the warehouse in July 2010.

Makro sought to rely upon rating rules to the effect that a six month rate free period could be triggered when a property subsequently became empty, provided that there had been an intervening period of occupation of at least six weeks. Makro argued that the use of the property to store the pallets of documents constituted a six week period of occupation so that it then had the benefit of a six month rate free period from January to July 2010.

The court held that there had been rateable occupation of the property for the six week period during which the pallets of documents had been stored. It was clear that Makro had intended to occupy the property during this period (albeit for the specific purpose of taking advantage of the six month rate free period) and the court considered that where an intention to occupy was present the acts necessary to constitute actual occupation could be less than might otherwise be the case. The court also considered the rateable occupation was occupation which was beneficial to the occupier. In this case it could not be said that storing the pallets of documents was of no practical benefit to Makro.

Rights of access for third parties

London Trocadero Limited v Family Leisure Holdings Limited [2012] EWCA Civ 1037

LTL was the landlord of the Trocadero Centre in Piccadilly. LTL granted to a subsidiary of FLH a lease of an amusement arcade within the Centre. That lease contained detailed provisions setting out a procedure for collections and deliveries of goods from the Centre. The tenant hired arcade games and equipment from FLH under a hire purchase agreement. The terms of that agreement provided that it would terminate if the tenant became insolvent. In the event of termination the agreement entitled FLH to enter the premises and take possession of the arcade equipment. The tenant went into administration and FLH sought to exercise its rights to repossess the equipment. The tenant’s administrators consented to this. However, LTL refused to permit access arguing that FLH was a third party and had no rights of access over the common parts of the Centre for such purposes. FLH issued proceedings seeking an order for delivery up of the equipment.

The judge held that the rights in the lease entitling the tenant to make deliveries and collections from the premises and to make use of the common parts for these purposes were not personal to the tenant but could be extended to those authorised by the tenant. Therefore, FLH could rely upon the fact that they had been authorised by the administrators to remove the equipment. The Court of Appeal agreed and upheld the judge’s order. It also expressed the view that the approach adopted by LTL had been unnecessarily aggressive and the case was one which ought to have been capable of settlement without the need to go to court.

Removal of door handle made injury forseeable

Alexander v Freshwater Properties Ltd [2012] EWCA Civ 1048

Ms Alexander was the tenant of a flat within a block managed by Freshwater. She was injured when the front door to the block shut on her hand. Ms Alexander bought proceedings against Freshwater and against the builder engaged by them to carry out a refurbishment of the block. She claimed that the automatic closing mechanism for the door was defective so that it was necessary to pull the external handle to properly shut the door. When the builder removed the handle during the course of the works this meant that the door could only be closed by grasping the edge and moving one’s fingers away before it fully closed. This is what Ms Alexander had been doing when her hand became trapped.

The trial judge held that the builder had been negligent. It should have been apparent to him that the selfclosing mechanism was defective and that removing the handle would make it difficult to safely shut the door. The risk of injury was foreseeable, not remote and could easily have been avoided by fitting a temporary handle. The position of Freshwater was similar. If anything it was in a better position to know about the defective closing mechanism as it regularly visited the property. The judge therefore found both liable but ordered that the damages payable be split so that 75% were borne by Freshwater and 25% by the builder.

The Court of Appeal agreed on the issue of liability but not on apportionment of damages. It considered that Freshwater and the builder were equally liable. Both knew or should have known that the automatic closing mechanism was defective and that the removal of the handle was an accident waiting to happen. The builder could have fitted a temporary handle and Freshwater could have asked him to do so.

Repudiatory breach and misrepresentation

Ampurius Nu Homes Holdings Ltd v Telford Homes (Creekside) Ltd [2012] EWHC 1820 (Ch)

Ampurius and Telford entered into a development contract whereby Telford contracted to undertake the development works with all due diligence and agreed to use reasonable endeavours to complete the works by March 2009. In November 2009 Telford ceased work due to funding delays. However, Ampurius did not terminate the contract until October 2010. Ampurius argued that Telford’s delay amounted to a repudiatory breach and also that it was entitled to rescind the contract for misrepresentation as Telford had represented that it was in a strong financial position. Telford had in fact just resumed work when Ampurius terminated the contract. It denied that Ampurius was entitled to terminate and sought to terminate itself in November 2010 for non-payment.

The court rejected the misrepresentation claim, finding that although Telford had indicated that it was profitable and doing well, no specific statements had been made which could form the basis of a misrepresentation. Telford’s cessation of work in November 2009 was however a breach of its obligation to undertake the works with all due diligence. This obligation meant more than simply doing the works carefully. It required them to be done with due care and due expedition and a deliberate cessation of work was not consistent with this. By the end of 2009, Telford’s breach was sufficiently substantial so as to entitle Ampurius to terminate the contract. The fact that Ampurius had engaged in negotiations with Telford between November 2009 and October 2010 in an attempt to save the contract did not amount to an affirmation of the contract and Ampurius was therefore entitled to terminate in October 2010.

Beware the slippery steps

Drysdale v Hedges (2012) 162 N.L.J. 1056

Mr Hedges was Ms Drysdale’s landlord of a flat. Ms Drysdale sustained serious injuries when she fell down the steps leading to the flat and she claimed damages from Mr Hedges in negligence and occupiers’ liability and under the Defective Premises Act 1972, arguing that his actions in painting the steps with outdoor paint to improve their appearance had made them more slippery and therefore created a foreseeable risk of injury.

The court rejected Ms Drysdale’s claim. When the Occupiers’ Liability Act 1957 was first enacted it set out a general duty of care in section 2 and a specific landlord’s duty of care in section 4. Section 4 had since been replaced by the Defective Premises Act 1972. The court considered that the purpose of section 4 had been to apply a different level of duty to landlords than to other occupiers and the replacement of section 4 by the 1972 Act had not changed this. Mr Hedges could not therefore be liable as a landlord under the Occupiers’ Liability Act. Liability under the Defective Premises Act 1972 could only arise if the premises were in disrepair. Painting the steps did not cause them to be in disrepair and therefore there could be no liability under the 1972 Act either. The court also rejected the claim under common law negligence. Whilst Mr Hedges owed a common law duty to take reasonable care not to create an unnecessary risk of injury, painting the steps did not breach this duty. The paint was outdoor paint and the reasonable man in the street would have assumed, absent any warnings on the tin, that it was suitable for painting outdoor steps.

Consent to assign not unreasonably delayed

E.ON UK Plc v Gilesports Ltd [2012] EWHC 2172 (Ch)

E.ON was Gilesports’ landlord of a retail shop. Gilesport sought to assign the lease and requested E.ON’s consent by email. The email did not state that there was an urgency in respect of the transaction. Gilesports provided financial information in respect of the assignee on 9 May 2008 and proceeded to complete the assignment on 28 May 2008 notwithstanding the fact that E.ON’s consent had not yet been given. Gilesport did not tell E.ON that the assignment had taken place and in 2009 the assignee went into administration. E.ON served notice on Gilesport under section 17 of the Landlord and Tenant (Covenants) Act 1995, seeking to recover arrears of rent from Gilesport as former tenant. Gilesport argued that, as it had not given an authorised guarantee agreement, it had no further liability. E.ON claimed that the assignment had been unlawful and therefore had not released Gilesport from liability under the 1995 Act. Gilesport’s position was that E.ON had unreasonably delayed in giving its consent to the assignment and it was therefore lawfully entitled to assign.

The court found in favour of E.ON. The alienation covenant in the lease did not state that consent to an assignment was not to be unreasonably delayed. Therefore Gilesport would need to rely upon the statutory duty not to unreasonably delay under the Landlord and Tenant Act 1988. However, that duty only arose where an application for consent had been made in accordance with the terms of that Act. The judge considered that under the Act service by email was not sufficient and did not trigger the application of the Act. E.ON was not therefore under a duty not to unreasonably delay. In any case, the judge did not consider that the 11 working day period between E.ON receiving the accounts and Gilesport proceeding with the assignment was an unreasonable one, particularly in circumstances where Gilesport had not suggested that there was an urgency in respect of the application or that it was subject to any particular deadline. Therefore, E.ON had not been guilty of unreasonable delay and so the assignment had been unlawful which meant that Gilesport remained liable under the lease.