ISSUE 23
serlespeak RAISING THE BAR IN CHANCERY AND COMMERCIAL
Property Law
serlespeak
“ Challenging established property chambers, matching them with legal acumen, while exceeding them in adaptability and delivery of service” Legal 500
I am delighted to introduce this new edition of Serlespeak on topics in the law of property. I begin the edition by considering the Supreme Court’s expansive approach to the law of easements in the Regency Villas case. Andrew Francis in his article draws attention to recent trends on applications to modify or discharge restrictive covenants. Thomas Braithwaite then considers the Supreme Court’s approach to the service of notices in UKI (Kingsway) Ltd v Westminster CC. Jonathan Fowles discusses the decision of the Court of Appeal in Antoine v Barclays Bank on rectification of the Land Register and fraudulently obtained court orders. Finally, Amy Proferes analyses the decision of the Supreme Court in Franses v Cavendish Hotel on the renewal of business tenancies under the 1954 Act. Christopher Stoner QC
02
Chambers News & Events People We would like to congratulate Constance McDonnell on her appointment to Queen’s Counsel. Constance McDonnell QC looks forward to continuing her established Traditional Chancery practice specialising in trust and probate disputes. We are delighted to welcome Zoe O’Sullivan QC to Chambers. Zoe has a thriving commercial practice ranging across a wide field of commercial litigation and arbitration, including civil fraud, company law, banking and oil & gas. This takes the number of silks at Serle Court to 27. We also welcome Stephanie Wickenden to Chambers, whose Intellectual Property practice expands our commercial team, taking the total number of barristers at Serle Court to 69. Conferences and seminars In November Serle Court held its third International Trusts and Commercial Litigation Conference in New York. We welcomed our clients from London, the Channel Islands, Bermuda, Bahamas, the Cayman Islands, the British Virgin Islands, Turks & Caicos Islands, Switzerland and the USA. The 2019 conference will take place on 11 November. We conducted a substantial business development programme in the Cayman Islands with John Machell QC, Dakis Hagen QC and Giles Richardson, joined by Senior Clerk Nicholas Hockney, hosting clients at the PCD Club Dinner, meeting with clients and participating in the STEP Conference. We held a series of Minority Shareholder Dispute seminars in Hong Kong to mark the launch of Minority Shareholders: Law, Practice and Procedure with Daniel Lightman QC
and Tim Collingwood joining Victor Joffe QC. This was followed by a book launch and reception in London. We held a seminar on The Governance of Charitable Companies at Serle Court with Will Henderson, Ruth Jordan, Jonathan Fowles, Sophie Holcombe and Gregor Hogan speaking on, among other things, the decision in CIFF which raises issues about the extent to which charitable companies are different from private companies. This was followed by a reception in Chambers. The first in a series of commercial seminars, Hot Topics in Share Sale Disputes, took place in chambers with John Machell QC as chair, and David Drake, Dan McCourt Fritz and Charlotte Beynon speaking about misrepresentation, expert determination clauses and restrictive covenants in share purchase agreements. The second in the series Fiduciary Duties in Commercial Contexts will take place on 8 May at Serle Court. We sponsored and attended the C5 Fraud, Asset Tracing and Recovery Conference in Geneva, with Lance Ashworth QC speaking on The New Doctrine of “Unexplained Wealth”: Anonymity – Extraterritoriality – Recovery – Risks to “Professional Enablers”. Hugh Norbury QC, Kathryn Purkis James Mather, Dan McCourt Fritz, Charlotte Beynon, and Emma Quin from our clerking team attended to host meetings and dinners with our clients. Awards Philip Marshall QC won the Legal 500 Insolvency Silk of the Year award, Emma Hargreaves was recognised by The Lawyer for her specialist Chancery work in their Hot 100 list and Serle Court was awarded the Bar Council Wellbeing at the Bar certificate of recognition.
LinkedIn We have 4 discussion groups on LinkedIn to enable Serle Court members and clients to discuss topical issues in Partnership and LLP Law, Fraud and Asset Tracing, Contentious Trusts and Probate, and Competition Law; please join us. Please also follow us on Twitter @Serle_Court. Upcoming chambers events Tue 30 April Serle Court Dubai Seminars The Ritz-Carlton DIFC, Gate Village Wed 8 May Commercial Series II: Fiduciary Duties in Commercial Contexts Serle Court, 6 New Square, Lincoln’s Inn, London WC2A 3QS Tue 25 June (half day) Save the date: Serle Court Property Conference 2019 The Old Hall, 16 Old Buildings, Lincoln’s Inn, London WC2A 3UP Thur 27 June (half day) Save the date: Serle Court Inaugural Company Conference 2019: Company Law in the Real World The Old Hall, 16 Old Buildings, Lincoln’s Inn, London WC2A 3UP
Mon 11 November Serle Court International Trusts & Commercial Litigation Conference Rainbow Room, 30 Rockefeller Plaza, New York, NY 10112 Upcoming external events Mon 29 April - Wed 1 May Knect365 Transcontinental Trusts: Geneva Forum Grand Kempinski Hotel, Geneva Wed 5 June - Fri 7 June KNect365 Transcontinental Trusts: International Forum The Hamilton Princess, Bermuda Mon 10 June - Tue 11 June C5 5th Edition Fraud, Asset Tracing & Recovery Asia Conrad Hong Kong Hotel, Hong Kong All the above events are supported by our Business Development team and Clerks who organise and attend the events in London and globally. If you would like to attend any of the above events, or would like some more information, please visit our website or contact RSVP@serlecourt.co.uk. Serlespeak is edited by Jonathan Fowles
04
serlespeak
Easements of recreation – a new species of right
It is rare for the consideration of easements to reach the lofty heights of the Supreme Court, but such an occasion arose in the case of Regency Villas Title Ltd & others v Diamond Resorts (Europe) Ltd & others [2018] UKSC 57 and resulted in the boundaries of the law being strained and a ‘new species’ of easement being recognised.
The case concerned an estate in Kent which had once been the home of Lord Kitchener where, in 1979, the upper floors of the main house were converted into time share apartments and a large number of recreational facilities were built, including an outdoor swimming pool, a championship standard golf course and tennis courts.
identified in In re Ellenborough Park [1956] Ch 131, namely (1) there must be a dominant and servient tenement; (2) the easement must accommodate the dominant tenement; (3) the dominant and servient owners must be different persons; and (4) a right over land cannot amount to an easement, unless it is capable of forming the subject-matter of a grant.
A lease was granted of the timeshare units, which had free use of the recreational facilities, with the landlord covenanting to keep them in good repair.
As is often the case, the focus of attention was on the 2nd and 4th elements.
The timeshares were a great success prompting the building of more timeshares in the grounds in 1981, the contemporary marketing promoting free use of the recreational facilities. However, for reasons that are not altogether clear, rather than a leasehold structure a freehold was granted including the grant of ‘easements’ for the use of the recreational facilities. Hence the critical issue of whether the transfer in 1981 successfully granted proprietary rights to the owners and occupiers of the new timeshares in the form of easements, or whether it merely granted personal rights to the original transferees. A back-to-basics approach was required and the Supreme Court reminded itself of the four essential characteristics of an easement
As to whether the easement accommodated the dominant tenement the key argument was whether a right to use the recreational facilities was an end in itself, as opposed to a right which benefited the dominant tenement. Could, for example, a round of golf be said to benefit the enjoyment of the timeshare apartment? The Supreme Court had little difficulty in concluding that it could. In re Ellenborough Park was good authority for this proposition. Whilst, in that case, the central argument had been whether the use of gardens benefited the dominant properties, which it plainly did, Evershed M.R. also referred to the enjoyment extending to “… parts … set apart for particular recreations such as tennis or bowls.” In the present instance it was of importance to the Supreme Court that the dominant properties were
06
serlespeak timeshare apartments on an estate largely devoted to recreational pursuits. Lord Briggs, with whom the majority agreed, said: “Although in terms of legal memory timeshare is a relatively recent concept, timeshare units of this kind are typically occupied for holidays, by persons seeking recreation, including sporting activities, and it is to my mind plain beyond a doubt … that the grant of rights to use an immediately adjacent leisure development with all its recreational and sporting facilities is of service, utility and benefit to the timeshare apartments …” It may be that this will, in future, prove to be a ground on which to seek to limit Regency Villas to its own facts, or at least distinguish it. The far more controversial aspect of the decision, however, relates to the catch-all 4th characteristic of an easement and, most specifically,
the issue of whether in the present instance the servient owner was merely ‘passive’ or whether the reality of the grant was to facilitate the use of recreational facilities provided and paid for by the servient owners. It is on this point that Lord Carnwath provides a persuasive dissent. It is well established that, subject to irrelevant exceptions, an easement does not require anything more than mere passivity on the part of the servient owner and if more is required, the right is not an easement. In the present instance, the debate was whether the intended package of rights granted in 1981, most obviously in the case of the golf course and the swimming pool, could not be enjoyed without active provision, maintenance and management on the part of the servient owner.
The majority concluded there was not a problem as the 1981 transfer did not impose any obligation on the servient owner to provide the recreational facilities. There was merely a grant to facilitate the use of such facilities as may exist from time to time, but no obligation on the servient owner to provide them, such that the dominant owner could, if the need arose, ‘step in’ and at least maintain and manage the facilities to ensure their continued availability. Lord Briggs said: “There is… nothing inherently incompatible with the recognition of a grant of rights over land as an easement that the parties share an expectation that the servient owner will in fact undertake the requisite management, maintenance and repair of the servient tenement and any structures, fittings or even chattels located thereon. The only essential requirement… is that the
servient owner has undertaken no legal obligation of that kind to the dominant owner.” The Supreme Court was therefore able to recognise what it accepted was a ‘new species of easement’. You will form your own view. However, there must be unease with passivity being extended to a shared intention the servient owner will, in fact, expend potentially considerable sums. Christopher Stoner QC specialises in all aspects of property litigation.
08
serlespeak
The times they are a’ changin’
In which we serve
Has there been a recent change of outlook when applying to discharge, or modify covenants in the Upper Tribunal (Lands Chamber)?
What does it mean to serve a document? And can documents be served electronically outside the statutory code for electronic service? Service is the first hurdle in many legal processes relating to property, and is important to get right.
Behind the bar in Public Houses a sign can warn patrons that they should not ask for credit, as refusal often offends those seeking it. Until recently this was often the impression applicants gained (without intending any disrespect to the Tribunal) when seeking to discharge, or modify restrictive covenants in the Upper Tribunal (Lands Chamber) (“UTLC”) under s. 84(1) Law of Property Act 1925 (“s. 84”) when applications were so frequently dismissed. The statistics of contested applications shows that until about 2015, the majority of applications failed. What was worse was that it could take up to 2 years to reach a hearing. It was no wonder that applicants (usually developers) preferred to approach those with the benefit of restrictive covenants armed with a large cheque book. But, as the title indicates, there has been a change in recent years. There have been three main changes. First the pre-hearing procedure is simplified and directions to the parties are more composite. This means less cost for the parties and usually leads to the second change which is that hearings are coming on much sooner. In many cases the hearings will be dealt with in under 9 months from the start of the application; in some cases sooner, at least where there are no preliminary issues. Finally, the applications made which reached a final hearing over the last 2-3 years show a significant rise in success for the applicants. Of course this is also bad news for objectors. Recent decisions such as Theodossiades [2017] UKUT 461 (LC), Lamble v Buttaci [2018] UKUT 175 (LC), Thomas Pocklington Trust v Aikman [2018] UKUT 256 (LC), and Broadway Homes [2018] UKUT 264
all demonstrate success, particularly under ground (aa) and in Hancock v Scott & ECA [2019] UKUT 16 (LC) even under ground (a). Five or ten years ago, most of these applications may well have failed. Whilst some recent applications have been dismissed (eg. Signature of St Albans v Wragg & Ors [2019] UTLC 70) they merely show how fact-specific each application will be. There is also the warning from the Court of Appeal in Millgate Developments [2018] EWCA Civ 2679, about the fact that bad conduct by applicants (eg. building knowingly in breach of covenant before the application is made) is to be frowned on and the UTLC should exercise its discretion under s. 84 to refuse such applications. The reasons for the change in outcomes is probably due to the fact that only applications with a reasonable prospect of success are being made and under the “right” grounds. There is a more sophisticated approach by advisers in assessing whether s. 84 applications should be taken to the hearing. The lesson to be learned from the recent trend under s. 84 is that careful expert advice is needed from experienced counsel and other experts (eg. valuers) right from the start. In addition there is no point in making weak applications on the wrong grounds. The changed outlook under s. 84 is at least supporting an increased demand for residential accommodation by freeing up land use in many cases. Andrew Francis was counsel for the successful applicants in Theodossiades, Lamble v Buttaci and Thomas Pocklington Trust v Aikman and for the unsuccessful objectors in Hancock v Scott & ECA.
Sometimes statutory service provisions are prescriptive: a document will not be treated as being served unless the provisions are performed to the letter. More often, however, the provisions are designed to protect the serving party: service in accordance with the provisions will be deemed valid, but it is open to the serving party to effect service by other means should they wish to do so. So it is with the Local Government Act ‘completion notice’ procedure by which a new-build becomes liable for non-domestic rates. In UKI (Kingsway) Ltd v Westminster CC [2018] UKSC 67, the council sought to serve such a notice on the building owner. Rather than follow the statutory procedure, they did so by leaving the notice with a receptionist at the building, asking for the notice to be forwarded to ‘the owner’. The receptionist was not employed by the owner, but did as she was asked, and scanned and emailed the notice to the owner. The question for the courts was whether the council had validly effected service at common law. The Valuation Tribunal said not. The Upper Tribunal disagreed, but was itself overturned by the Court of Appeal. Now, the Supreme Court has weighed in, and has usefully clarified two issues relating to the service of documents at common law. The first issue was whether the Council had ‘served’ the notice at all. The Court of Appeal had held that it had not, because all the Council had done was to give the document to someone not authorised to accept it. The Supreme Court disagreed: even though the receptionist was not agent for either party, it was a natural consequence of asking her to forward it that she would
do so. Hence, when she did, the notice was ‘served’ by the council because the steps taken by the council were causative of the notice being received by the intended recipient. The second issue was whether it made any difference that the receptionist had scanned and emailed the notice, rather than serve the original. Parliament has, of course, provided a mechanism by which email communications can be used for service under the Electronic Communications Act 2000. But that did not apply in the instant case. The Supreme Court held that service was valid at common law, and by parity of reasoning with cases relating to faxes, held that the contents of the email had been communicated, and so the notice itself had been served. That being the position apart from the 2000 Act, nothing in the 2000 Act could be read as restricting or cutting down the pre-existing rules of service at common law. So the Supreme Court sided with the Upper Tribunal. The result is probably sensible, though it leaves much food for thought as to when the notice was served. When received on the owner’s email server? Or its computer? Or when actually read? The Supreme Court brushed such concerns aside as not being material on the facts of the case; and whilst it is easy to sympathise with a pragmatic decision, it is one that arguably robs the 2000 Act of much of its purpose and could lead to uncertainty in an area of law where uncertainty is best avoided. Thomas Braithwaite is a seasoned property practitioner, acting in domestic and international disputes at all levels. He has been recommended in the leading directories for many years. 10
serlespeak Fulham
Joanna Smith QC, sitting as a Deputy High Court Judge because, applying the analysis of mistake in NRAM v Evans [2018] 1 WLR 639, she held that no “mistake” had been made such as to engage the rectification provisions in Schedule 4: [2018] 4 WLR 67. The Land Registry had made no relevant mistake in acting upon the Order to enter Mr Taylor as registered proprietor, judged at the time the entry was made. The Court of Appeal dismissed the appeal from her judgment: [2018] EWCA Civ 2846. The Court of Appeal helpfully glossed the discussion of mistake in NRAM: establishing mistake did not depend on the Registrar’s subjective state of mind or ability to make inquiries. The key question was whether the Registrar had acted correctly in an objective sense – if a void disposition is registered, that is a mistake not so much because of the Registrar’s ignorance of the underlying facts but because a void disposition is not a disposition at all.
(“the Property”) in the event of default in repayment of a supposed loan from Mr Taylor.
Fraud does not unravel all
In spite of an order for substituted service by advertisement, the claim was not answered, and an order was made by Master Moncaster in July 2007 for the vesting of the freehold and leasehold of the property in Mr Taylor in default of payment or notice of intention to redeem by a certain date (“the Order”)
The final months of 2018 brought unwelcome news to property owners undone by fraudsters, with the decisions of the Court of Appeal in Rashid v Nasrullah [2018] EWCA Civ 2685 and Antoine v Barclays Bank [2018] EWCA Civ 2846 showing the extent to which the land registration regime, when combined with principles in other areas of law, can indirectly help the unscrupulous. This article focusses on the more recent decision in Antoine. It is particularly striking how vulnerable personal representatives are to illfounded or fraudulent claims being made against a deceased’s estate, as in Antoine. The dead cannot speak to those claims, and fraudulent claimants may take advantage of any omissions in the administration of the estate to seek to vindicate their claims behind the personal representatives’ backs.
In Antoine around a decade after Mr Antoine Joseph died and his son Mr Antoine had been appointed as his administrator in 1996, Mr Taylor brought a claim against Mr Joseph’s estate based on forged documents. Those forged documents purported to show an agreement whereby Mr Joseph would grant Mr Taylor freehold title to his property in
The Land Registry registered Mr Taylor as registered proprietor of the Property in reliance on the Order. Subsequently in early 2008 Mr Taylor obtained a loan from Barclays which was secured on the Property by legal charge (“the Charge”). It was only later in 2008 that Mr Antoine, having discovered that Mr Taylor was carrying out renovations to the Property, successfully applied to set aside the July 2007 Order on the ground of fraud, though the order to set it aside was without prejudice to the Charge. The issue before the Court of Appeal arose on the 2016 claim by Mr Antoine for the rectification of the Land Register to delete the Charge under Schedule 4, Land Registration Act 2002. Mr Antoine’s claim was dismissed by
In Antoine itself, the Court of Appeal held, following earlier authority, that the Order had to be obeyed until it was set aside and was in that sense valid until that point. Accordingly, the Registrar had acted correctly in entering Mr Taylor as proprietor. It may seem odd that the position would have been different if a forged disposition had been presented directly to the Registrar, but on the Court of Appeal’s analysis, this is justifiably the difference that a court order must make if the rule of law is to be respected. Some may feel, however, that the analysis is an unnecessary extension of the principle of the validity of orders in other contexts into the law of land registration. Since rectification is retrospective, treating the action of a Registrar in reliance on a fraudulently obtained order as a mistake arguably would not pose any real threat to the rule of law. But if, as NRAM requires, the court is to judge whether a mistake was made as at the time the entry was made, the Court of Appeal’s conclusion becomes inevitable. Jonathan Fowles specialises in property litigation, the law of charities, and trusts and succession.
12
serlespeak
Landlords, know your intention The Supreme Court’s ruling in Franses v Cavendish Hotel [2018] UKSC 62 clarifies the test applicable where a landlord objects to the grant of a new business tenancy under s30(1)(f) of the Landlord and Tenant Act 1954, namely that it intends to demolish or reconstruct the premises or carry out other works which cannot reasonably be done without obtaining possession. s31A of the 1954 Act gives tenants the ability to accept certain inconveniences to continue the tenancy, namely access arrangements or moving to an economically separable part of the premises for the duration of the works. However such compromises are often not commercially practical, and landlords objecting under this ground have often met with success. In Franses the landlord operated a hotel from premises on Jermyn Street. The tenant occupied the ground floor and basement under a 25 year lease which ended in 2015. The landlord objected to the tenant’s request for a new lease, claiming that it intended to carry out significant and disruptive works. It freely admitted that the works had no practical utility and were designed to remove the tenant, saying ‘The works are thoroughly intended because they are a way of obtaining possession. That is all there is to it.’ The landlord also admitted that if the tenant succeeded it would not carry out the works, the estimated cost of which was £776,707 plus statutory compensation of £324,000. In the febrile West End property market, this was deemed to be a reasonable investment to reclaim the entirety of the premises. The landlord relied on the line of authority beginning with Cunliffe v Goodman [1950] 2 KB 237, summarised as a 2 stage test: the landlord must (1) genuinely intend to carry out the works and (2) be practically able to do so. The motivation behind that intention was, it said, irrelevant to whether the ground
was met. This succeeded both in the County Court and the High Court, from where Jay J granted a leapfrog appeal to the Supreme Court. The Supreme Court confirmed that ground (f) does require the landlord to have a genuine intention to carry out the works. The reasonableness of his motivation is not relevant, and he is not required to alter his plans to accommodate the tenant. However the intention cannot be conditional on whether the tenant asserts a claim to a new tenancy: ‘The acid test is whether the landlord would intend to do the same works if the tenant left voluntarily’. If the works, as in this case, are simply an expensive form of reclamation, this will not suffice. Therefore the landlord’s intention must be both genuine and unconditional; motivation can be relevant when testing that intention. It may be expected that this ruling will be welcomed by tenants, but met with some trepidation by commercial landlords as well as judges faced with the task of determining the finer details of their intentions. Amy Proferes is regularly instructed on many of Chambers’ practice areas, with a particular focus on property, probate, and insolvency.
14
6 New Square Lincoln’s Inn London WC2A 3QS T: +44 (0)20 7242 6105 F: +44 (0)20 7405 4004 @Serle_Court www.serlecourt.co.uk