Leasehold Reform Act 1967 — Question as to appropriate rateable value — Schedule 8 to Housing Act 1974 — Reduction of rateable value in case of improvements — Time-limits for service by tenants of notice requiring landlords to agree to a reduction and for an application to the county court in default of agreement — ‘Such longer time as the court may allow’ — Whether an application for extension of time beyond the period of six weeks mentioned in para 1(2) must be made only within the period or could be made after the expiration of that period — County court judge took strict view that he had no jurisdiction to give an extension if the application was made after the expiration of the period — Held that this rigid view was erroneous — The plain words of para 1(3) together with consideration of the context indicated otherwise — Held also that the court’s discretion to grant an extension should be exercised in the tenants’ favour — Landlords over a lengthy period had given no indication that they would be opposed to an extension and in any case had suffered no relevant prejudice — Appeal allowed
This was an
appeal by tenants, Mordechai Arieli and Ilana Zilla Arieli, from a decision of
the West London County Court that the court had no jurisdiction to extend the
time for applying, under the provisions of Schedule 8 to the Housing Act 1974,
for a determination of the matters relevant to the reduction of rateable value
on account of improvements. The question of the appropriate rateable value
arose in connection with the tenants’ claim to acquire the freehold of their
premises at 41 South Eaton Place, London SW1. The landlords, respondents to the
appeal, were the Duke of Westminster, John Nigel Courtenay James and Sir Richard
Baker Wilbraham Bt.
N T Hague QC
and G F Laurence (instructed by Norton Rose, Botterell & Roche) appeared on
behalf of the appellants; David Neuberger (instructed by Boodle, Hatfield &
Co) represented the respondents.
Giving
judgment, EVELEIGH LJ said: The appellants are the tenants of premises at 41
South Eaton Place, London. The respondents are the landlords. The tenants hold
under a lease to which the Leasehold Reform Act 1967 applied and are, it is
conceded, entitled to purchase the freehold. The question in this case is
raised as to the appropriate rateable value, because the price to be paid by
the tenants will vary according to whether or not the rateable value is below
£1,000.
On October 5
1981 the tenants served the usual notice upon the landlords of their intention
to acquire the freehold. On December 16 the landlords gave a notice in reply
admitting the tenants’ rights. Notice under Schedule 8, paragraph 1, was served
upon the landlords on behalf of the tenants and that was acknowledged by a
letter from the landlords’ solicitors dated September 14 1982 in which they
said: ‘We thank you for our letter’, which must be ‘your letter’, ‘of September
10 and acknowledge receipt of your clients’ notice of the above Act.’ Again, that must mean ‘under the above Act’.
‘Thank you also for letting us know approximately when the works were carried
out. We have asked our clients’ estate surveyor to comment and will be in touch
with you again in due course.’
I pause there
to look at the provision of Schedule 8 in so far as it is relevant. The
schedule is headed ‘Reduction of Rateable Value in Case of Certain
Improvements.’ Para 1(1) reads:
Where the
tenant, or any previous tenant, has made or contributed to the cost of an
improvement on the premises comprised in the tenancy and the improvement is one
to which this Schedule applies, then, if the tenant serves on the landlord a
notice in the prescribed form requiring him to agree to a reduction under this
Schedule, their rateable value as ascertained for the purposes of
section 1 of
the Leasehold Reform Act 1967
shall be
reduced by such amount, if any, as may be agreed or determined in accordance
with the following provisions of this Schedule.
Then by
paragraph (2) it is said:
This Schedule
applies to any improvement made by the execution of works amounting to
structural alteration, extension or addition.
Provision is
made for the reduction to be agreed in writing between the landlord and the
tenant. Then in para 2(2) it is said:
Where, at the
expiration of a period of six weeks from the service of a notice under
paragraph 1 of this Schedule any of the following matters has not been agreed
in writing between the landlord and the tenant, that is to say,
and then there
is set out various matters
the county
court may on the application of the tenant determine that matter.
Subpara (3)
reads:
An
application under the last foregoing subparagraph must be made within six weeks
from the expiration of the period mentioned therein or such longer time as the
court may allow.
With those
provisions in mind I revert to the history of this matter. On October 26 1982
the six weeks referred to in para 2(2) of the Eighth Schedule expired. On that
date the tenants’ surveyors wrote to the landlords asking if the matters set
out in the notice had been agreed. On November 24 1982 the surveyor sent
another letter to similar effect. On December 7 1982 the second period of six
weeks expired. So accordingly, if an application were to be made, it would be
necessary to rely upon the concluding words of para 2(3), namely, ‘or such
longer time as the court may allow’.
The tenants
and their advisers woke up to the position in December and there ensued
correspondence with the landlords to which I will refer later. On January 13
1983 an originating application was filed at the county court for determination
of the matters set out in para 2(2) of the Eighth Schedule and also seeking
leave under para 2(3) for the application to be made notwithstanding the fact
that time had expired.
Before the
county court judge it was argued that an application for extension of time had
to be made within the second period of six weeks; in other words, that an
extension could not be granted if an application were made after the expiration
of the total of 12 weeks from the date of the original notice. This argument
was accepted by the learned county court judge, who held, therefore, that he
had no jurisdiction to extend the time. He went on to consider further the
facts of the case and also said that if he had had a discretion to extend the
time he would not have granted it. He further ordered that there should be no
subsequent or new proceedings under Schedule 8 and
para 1 of the Eighth Schedule.
The tenants
now appeal to this court against the learned judge’s decision. We have had the
first two points argued before us, namely, whether or not there was
jurisdiction to extend the time and whether, if so, it was right to do so. We
did not deal with argument relating to the order restraining the tenants from
issuing another notice because it was agreed before us that, if the first two
questions were determined in the tenants’ favour, the third matter would not
arise.
First, we have
to decide whether or not the judge had jurisdiction. He came to the conclusion
that the Act was aimed to demand strict compliance with its rules from the
tenants, and he construed it with a leaning in that direction because, he said,
and rightly said, this was a case where the landlords were being compelled to
sell that which was theirs to the tenants. He regarded it as a form of
compulsory purchase. He was influenced, I feel, perhaps by a decision of my own
in the case of Re A Debtor Exp Slater Walker Ltd [1981] 1 WLR 1205 and
by an argument addressed to him to the effect that to exercise discretion
freely would deprive the landlords of a vested right, and under such influence
he concluded that an application to the court to exercise its discretion to
extend the time must be made within the second six-week period.
Now in
construing an Act of Parliament one reads the words in their natural meaning,
unless there is something compelling to require the court to do otherwise.
These words in subpara (3) seem to me to be as plain as they can be, and I
summarise it: an application must be made within six weeks, and then there
comes the words ‘or such longer time as the court may allow’. Those last words
giving the court power to allow a longer time are unqualified, and I can see no
reason from the words of the schedule, or indeed the wording in the Act, to
read any qualification into the sentence. When we are asked by these
respondents to support the learned judge’s conclusion, it seems to me that in
the end this court is being asked to depart from the plain meaning of the words
because of other considerations which are said to exist; the one prominent in
the able argument addressed to us by Mr Neuberger was the one that the
landlords would be deprived of what he called a vested right. That argument
arises in this way. I need not refer to the sections, but the Act provides
that, upon the tenant giving his notice to the landlord, there shall be
established in effect a contractual relationship between them for the sale and
purchase of the house. The Act also provides that the price, if not agreed,
shall be determined according to certain criteria. Those criteria vary
depending upon the rateable value of the property being above or below £1,000.
When the period of 12 weeks has expired and there is no application before the
court, then, says Mr Neuberger, the situation has crystallized to the extent
that the landlord is entitled to have the price assessed on the rateable value
pertaining at that moment in the register, and to give leave to make the
application out of time would deprive the landlord of that right which was now
a firm, as I understand it, indefeasible vested right. In support of that
argument the court has been referred to a number of cases including the case of
Joan Barrie Ltd v Gus Property Management Ltd, reported in (1981)
259 ESTATES GAZETTE 628 and also to Robert Baxendale Ltd v Davstone
(Holdings) Ltd*, reported in [1982] 1 WLR 1385. In the Baxendale case the
court was concerned with applications for renewed tenancy under the Landlord
and Tenant Act 1954. The appropriate notice was served under that Act and the
position was reached where it was incumbent upon the tenant to apply to the
county court for a new tenancy. The statutory period of two months was allowed
to pass by a matter of a very short time. In spite of its being only a short
time, the learned county court judge and the Court of Appeal refused to grant
an extension.
*Editor’s
note: Also reported at 264 EG 713, [1982] 2 EGLR 65.
Section 29(3)
of the Landlord and Tenant Act 1954 provides:
No
application under subsection (1) of section 24 of this Act shall be entertained
unless it is made not less than two nor more than four months after the giving
of the landlord’s notice under section 25 of this Act or, as the case may be,
after the making of the tenant’s request for a new tenancy.
An extension
of time which a tenant might seek under the 1954 Act must necessarily depend
upon invoking rules of court, and rules of court were invoked in the Baxendale
case when the tenant sought the extension of time. Order 40, rule 8, Order 8,
rule 35 and also Order 13, rule 5 were referred to. The court said that, as
there were no exceptional reasons which could be advanced by the tenant, the
leave to extend the time would be refused.
To my mind
that case and other similar cases which come before this court, notably in
relation to Order 6, rule 8 for the extension of time for serving a writ or for
renewing a writ, are subject to different considerations. I think perhaps
‘rule’ is too strong a word, but it is a well-known practice of the court not
to allow a writ to be renewed if to do so would deprive a defendant of a
defence under the statute of limitations. It has been said on numerous
occasions that, if the leave had the result or would have the result of
depriving the defendant of such a right of such a defence, exceptional reasons
would have to be adduced.
In the present
case it is important to realise that the landlords’ claim to base the valuation
upon an existing rateable value is one that can only be sustained as long as
that rateable value is not altered by the court. It is for the very purpose of
altering that rateable value that the application is made under Schedule 8. It
is for the very purpose of altering the rateable value that the judge has the
power under para 2(3) to extend the time for an application to be made.
Consequently, any right of the landlord to rely upon an existing rateable value
is not an indefeasible right; it is a right that is made vulnerable by the
provisions of that very schedule, Schedule 8. So that, if it is correct, and I
am by no means saying it is correct, to regard it as a vested right, it is
clearly not such a right that cannot be defeated by procedure under Schedule 8
and, as the very plain words of that schedule indicate that an application can
be made, as I read them, after the expiration of the second period of six
weeks, it follows that the statute itself contemplates varying that right by
that machinery. Thus the considerations that have been present to the mind of
the court in dealing with applications to renew a writ and similar applications
cannot apply to a case of this kind. I am not saying that there may not be in
these cases common considerations when the judge comes to decide whether to
exercise his discretion or not, but certainly the argument that the landlord
will be deprived of a vested right is not one which applies when considering
whether or not to extend the time under Schedule 8.
I therefore
can find no justification at all for saying that an application to extend time
must be made before the second period of six weeks expires. While it may not be
100% correct to say that if the landlords’ contention were right the extension
of time would be valueless, it comes very close to saying just that, or, if the
landlord is in a position to go before the court to ask for an extension of
time to file his application and he must do so within the second six weeks, he
could on that very same occasion make the application itself, so that leave to
extend time would not be necessary.
I draw support
for the conclusion to which I come from the case of R v Bloomsbury
and Marylebone County Court, ex parte Villerwest Ltd, which is reported in
[1976] 1 WLR 362, and in particular the sentence in the judgment of Roskill LJ
at p 366 where he says:
If one
rejects that submission of Mr Ralls it is difficult to see in logic why the
position should be different according to whether the application is made before
the time runs out or after the time has run out, unless a different answer is
compelled by the language of the relevant rules.
I can see
nothing in the language of the rules under Schedule 8 to compel an answer which
is contended for by the landlords. I would express the appreciation of the
court to Mr Neuberger for drawing our attention to that judgment which he has
done as one would expect.
I therefore
think that the learned county court judge did have jurisdiction to extend the
time, and I now consider whether or not he did reach his alternative decision
on discretion in a proper way. For that purpose it is necessary to resume the
history of the case.
On December 20
1982 the tenants’ surveyors wrote to the landlords seeking a formal reply, as
it was put, to the Schedule 8 notice. On December 21 the tenants’ surveyors
wrote to the tenants saying that an application could be made to the county
court as the landlords had not answered the Schedule 8 claim. On December 22
the landlords’ solicitors acknowledged the letter of December 20 in these
words: ‘We thank you for your letter dated December 20 and would inform you
that the person dealing with this matter is at present away from the office. No
doubt he will give this matter his early attention on his return, around
January 4’ — no indication at all that the landlords would not seek to agree
the matters set out in the original notice; no indication that they would take
the point that any application to the county court would be out of time.
On January 4
the tenants’ solicitors wrote to their surveyors saying a necessary application
would be made to the county court and
have said, the applications were filed.
On February 11
1983 the landlords’ solicitors wrote to the tenants’ solicitors a long letter.
They gave detailed comments on the matters contained in the tenants’ original
notice. Those comments occupied well over a page and they said at the end of
those comments: ‘You will appreciate therefore that on the strength of the
information which we have available, ie in the form of the 1927 and 1932
drawings of which we are sending you copies, our clients are not prepared to
agree that the improvements specified in your clients’ notice are improvements
which qualify to be taken into account for the purposes of a Schedule 8
claim.’ They then said: ‘Arising out of
the above we have been considering what is the tenancy to be taken into
account’, and they then considered the provisions of the relevant lease and the
dates contained therein.
They went on
to say: ‘We appreciate that you will now wish to refer back to your clients
and/or to Messrs Marr Johnson & Stevens.’
(They are the surveyors.) ‘In the
circumstances may we suggest that we agree between us that the registrar be
asked to give the following directions at the appointment before him on
February 23 at 11.50 am: 1 The respondents file an answer within 42 days. 2
Lists of documents to be exchanged within 21 days thereafter. 3 Inspection 14
days thereafter. 4 Experts’ reports to be exchanged . . . 5 The matter to be
set down for hearing on the filing of a certificate of readiness by either
party. 6 Costs in cause.’ Then they
explain why they had asked for six weeks for filing an answer.
So the
position on February 11 was that the landlords were proceeding as though the
application would be granted. They gave no indication of an intention to oppose
an extension of time and the tenants made that application.
The tenants’
surveyors swore an affidavit. In that affidavit they stated that their firm had
had dealings on many occasions with the Grosvenor Estate. The deponent said:
I calculate
that I see either someone from the estate office or someone from Messrs Gerald
Eve & Co, the estate agents, personally about once a month. I have always
found the estate’s solicitors and agents courteous and business-like to deal
with although they do occasionally take rather a long time to deal with
correspondence.
He went on to
say that although he was aware of the 12-week deadline, it did not occur to him
that it would be necessary to ensure that the application was made within that
time. He went on to say:
On the
contrary, my assumption was that the parties would make a serious attempt to
reach agreement first so that the applicants would have to launch Court
proceedings only if such attempt failed.
It is worth
having in mind, in considering whether or not leave should be granted, note 3
to the form of notice by tenant in Schedule 8 to the Housing Act 1974. That
note, which is not an editor’s note but forms part of the Queen’s printer’s
copy of the statute itself, reads:
Before,
however, an application is made to the Valution Officer
because that
is the ultimate object of this procedure
the landlord
and the tenant must try to agree in writing on the items mentioned at (a) to
(d) of this paragraph, or such of those items as are material. If at the end of
a period of six weeks after the service of this notice any of these items have
not been agreed, the tenant may, within a further six weeks or so much longer
time as the court may allow, apply to the county court to settle the matter.
It is clearly
the scheme of the Act that where possible the parties shall agree, and agree to
everything if that can be done.
The tenants’
surveyors in this case were in effect promised a reply to the tenants’ notice.
They were assured, as I see it, that the matter would be considered by the
landlords, who would then notify the surveyors whether or not the landlords
could agree to all or any of the matters set out in the notice. Even after the
time had expired, the landlords were still asserting that a reply would be
sent. They were therefore inducing, as I see it, the tenants and their
surveyors to be pursuing their case and consequently making such preparations
as may be necessary to that end in the attitude of mind that negotiations would
be worthwhile. Consequently, as I see it, the tenants were justified in
thinking that no point would be taken upon the question of an extension of
time. I do not say necessarily that in every case the parties themselves can
bind the court by an agreement as to extension of time. I do not have to answer
that question and I do not advert to it.
The facts of
this case indicate that at that period of November, December and January the
tenants’ surveyors were occupied in preparing a case, and it may not have been
a great deal that they had to do at that stage: I know not. It may only have
been writing the odd letter, but they were occupied upon the case on the basis
that their duty would be to seek to obtain agreement from the landlords, who on
their side were people who would be trying expeditiously to agree. It has been
conceded in this case on behalf of the landlords that they have suffered no
prejudice. It is true that if the rateable value is changed the price of the
house will be lower, but that is not the kind of prejudice with which one is
concerned in determining whether the landlords have suffered a prejudice or
will be in a prejudiced position when it comes to presenting their case in the
proceedings which will ensue for the determination of the rateable value.
The learned
county court judge looked only for exceptional reasons to be advanced on behalf
of the tenant, and he found that there were none. He did not, as I see it, take
into consideration the fact that a reply had been promised by the landlords’
solicitors and he did not give the weight that he should have done to the
relationship that existed between the surveyors and the estate agents of the
landlords, who were accustomed to deal with one another. He did not mention at
all the fact that the landlords suffered no prejudice. Those are matters which
in my view should be adverted to in exercising discretion, and as they were not
it necessarily follows that the learned judge did not approach this matter upon
a correct basis. In all the circumstances, as there is no further information
that the court requires to determine this matter, I think that this court
should exercise its own discretion in the matter. In doing that, I would grant
the extension of time requested under paragraph 2(3) and I would allow this
appeal.
REEVE J agreed
and did not add anything.
The appeal
was allowed with costs in the Court of Appeal and below. Leave to appeal to the
House of Lords was refused.
