Landlord and Tenant Act 1954 — Ineffective section 25 notice — Representation and estoppel — Whether tenant accepted validity of notice by unconditional counternotice
In 1981 the
appellant acquired a lease of premises due to expire in June 1992. He lived and
practised as a solicitor at the premises. In 1991 the appellant served a notice
of leaseholder’s claim under the Leasehold Reform Act 1967 (‘the 1991 notice’).
On September 2 1991, and following earlier proceedings, in which the Court of
Appeal held that the 1991 notice was ineffective because when it was served no
notional reduction in the rateable value of the premises to reflect tenant’s
improvements ([1991] 2 EGLR 89) had been obtained, the plaintiff landlords
served notice on the appellant under section 25 of the Landlord and Tenant
1954. The section 25 notice was defective because it was not in the prescribed
form and failed to refer to the tenant’s rights under the Leasehold Reform Act
1967. The appellant served a counternotice and commenced proceedings for a new
tenancy. On November 5 1993, after the Leasehold Reform, Housing and Urban
Development Act 1993 came into effect removing the rateable value limit for
enfranchisement under the 1967 Act, the appellant served a second
enfranchisement notice (‘the 1993 notice’). In the court below it was held that
the appellant was estopped from disputing the validity of the section 25
notice, and that, because the 1993 notice was served more than two months after
the section 25 notice, the 1993 notice was invalid. The appellant appealed.
notice was plain on its face in view of the statement that it should not be
used where the tenancy was one to which the 1967 Act may apply; the defect was
known to the appellant at the time. Although the landlords’ section 25 notice
was in the wrong form, the appellant’s counternotice assumed the validity of
the section 25 notice. By his actions in carrying on with the 1954 Act
procedure, the appellant represented that the section 25 notice was a good
notice. The landlords suffered detriment in lawyers’ and surveyors’ fees, and
refrained from serving a second notice. It was unconscionable for the appellant
to contend, in relation to the 1993 notice, that the section 25 notice was
defective. Further, by the appellant’s dealings with the landlords after the
1991 notice was held to be ineffective, he thereby represented that he had no
continuing right to claim that the 1991 notice was valid. The principle, that a
landlord and tenant may not contract out of statutory rights given to a tenant
for his protection, did not apply because at the time the appellant knew he had
no rights under the 1967 Act.
The following
cases are referred to in this report.
Bremen v Varden [1978] 2 Lloyd’s Rep 109
Collin v Duke of Westminster [1985] QB 581; [1985] 2 WLR 553; [1985]
1 All ER 463; (1984) 50 P&CR 380; [1985] 1 EGLR 109; 273 EG 881; 25 RVR 4,
CA
Daejan
Properties Ltd v Mahoney [1995] 2 EGLR 75;
[1995] 45 EG 128, CA
Joseph v Joseph [1967] Ch 78; [1966] 3 WLR 631; [1966] 3 All ER 486,
CA
Keen v Holland [1984] 1 WLR 251; [1984] 1 All ER 75; (1984) 47
P&CR 639; [1984] 1 EGLR 9; [1984] EGD 9; 269 EG 1043, CA
Tegerdine
v Brooks (1977) 36 P&CR 261; [1978] 1
EGLR 33; [1978] EGD 49; 245 EG 51, CA
Tennant
v London County Council (1957) 121 JP 428;
55 LGR 421; 169 EG 689, CA
This was an
appeal by the appellant, William George Mayhew, from the decision of Judge
Zucker QC in Central London County Court, who on August 25 1995 dismissed the
appellant’s counterclaim and granted the respondents, the Keepers and Governors
of the Possessions Revenues and Goods of the Free Grammar School of John Lyon
(Harrow School), a declaration that the appellant was not entitled to acquire
the freehold of 31 St John’s Wood, London NW8.
Michael
Driscoll QC, Julius Seal and Andrew McGuinness (instructed by Mayhew & Co)
appeared for the appellant; Anthony Radevsky (instructed by Lee & Pemberton)
represented the respondents.
Giving the
first judgment, Leggatt LJ
said: William George Mayhew appeals against the order of Judge Zucker QC
sitting in Central London County Court whereby on August 25 1995 he dismissed
Mr Mayhew’s counterclaim and granted to his landlords, Harrow School, a
declaration that Mr Mayhew was not entitled to have the freehold of 31 St
John’s Wood, London NW8, pursuant to Leasehold Reform Act 1967 (‘the 1967
Act’). On February 9 1981 Mr Mayhew became the lessee under a long lease of
those premises. The landlords own the freehold. The lease was for a term of 70
years from June 24 1922, expiring in June 1992. When Mr Mayhew took his
assignment, it had 11 years to run. Mr Mayhew lives at the premises and, as is
permitted by the lease, also practises there as a solicitor. It is common
ground that his tenancy therefore fell within Part II of the Landlord and
Tenant Act 1954 (‘the 1954 Act’). Because the lease was a long lease at a low
rent it would have fallen within the provisions of the 1967 Act, had the
rateable value on April 1 1973 not exceeded £1,500. It was in fact £1,680.
By section
1(4A) of the 1967 Act, Mr Mayhew could have applied under Schedule 8 to the
Housing Act 1974 to have the rateable value notionally reduced in consequence
of tenant’s improvements so as to bring the premises within the Act. But in
order to be able to serve a valid notice of leaseholder’s claim it is first
necessary to have obtained the notional reduction in accordance with the
procedure prescribed by the 1974 Act. By para 2 of Schedule 3 to the 1967 Act a
claim to acquire the freehold is of no effect if made more than two months
after a landlord’s notice to terminate the tenancy under section 25 of the 1954
Act; and, on the other hand, a landlord’s notice terminating a tenancy under
that section is of no effect if served during the currency of a claim to
acquire the freehold. Mr Mayhew’s first notice of leaseholder’s claim was, as
this court held on May 21 1991*, not effective, because when it was served no
notional reduction in rateable value had been obtained. Mr Mayhew’s petition to
the House of Lords for leave to appeal against that decision was dismissed on
July 22 1991. Soon thereafter on September 2 1991 the landlords served a notice
under section 25 of the 1954 Act. So far from challenging the validity of that
notice Mr Mayhew served a counternotice and started proceedings for a new
tenancy. The section 25 notice was served in form 1 in Schedule 2 to the
Landlord and Tenant Act 1954 Part II (Notices) Regulations 1983 (as amended)
(‘the 1983 regulations’). There is no dispute that that notice ought to have
been in form 13.
*Editor’s
note: Reported at [1991] 2 EGLR 89
On November 1
1993 the Leasehold Reform, Housing and Urban Development Act 1993 took effect
removing the limit on rateable value for the purpose of enfranchisement under
the 1967 Act. Four days later Mr Mayhew gave to the landlords a second
enfranchisement notice (‘the 1993 notice’).
The
relationship between the notices under the Acts is this. A tenant’s claim is of
no effect if made more than two months after a section 25 notice has been
given. Since the 1993 notice was given more than two months after service of
the section 25 notice, the 1993 notice will have been of no effect if the
section 25 notice was valid. A section
Hence the need to consider whether the 1991 notice was ineffective or ceased to
have effect before service of the section 25 notice. The critical question on
this appeal is whether the section 25 notice has effect. If it does not, Mr
Mayhew’s 1993 notice is valid, but if it does, that notice is of no effect. On behalf
of Mr Mayhew, Mr Driscoll QC submitted that for two reasons the section 25
notice did not have effect. First, it did not satisfy para 10 of Schedule 3 to
the 1967 Act in that it did not contain the statements required by that
paragraph, because it was in form 1 instead of being in form 13. Second, it was
served during the currency of Mr Mayhew’s 1991 notice under the 1967 Act and
was therefore of no effect by force of para 2(2) of Schedule 3 to the 1967 Act.
Section 25(1)
of the 1954 Act provides that:
The landlord
may terminate a tenancy to which this Part of this Act applies by a notice
given to the tenant in the prescribed form …
Forms 1 and 13
are prescribed by the 1983 regulations. The forms are similar except that form
13 alerts the tenant to his rights under the 1967 Act, whereas form 1 does not.
The judge held
at p23E of the transcript of his judgment that:
As at the
date of the [1991] notice Mr Mayhew had no right to acquire the freehold or to
serve a notice under section 8 of the 1967 Act, a notice in form 13 was totally
unnecessary. A notice in form 1 sufficed for all purposes.
He relied on Tegerdine
v Brooks (1977) 36 P&CR 261*. In that case certain notes were
omitted from a section 25 notice. The 1983 regulations permit the use of a form
‘substantially to the like effect’ as the prescribed form. This court held that
the omission of notes which in the circumstances were irrelevant did not
invalidate the notice. But in this case the judge’s attention was not drawn to
Schedule 3 para 10(2) to the 1967 Act. That provides that a landlord’s section
25 notice shall not have effect unless it states:
*Editor’s
note: Also reported at [1978] 1 EGLR 33
(a) that, if
the tenant has a right under Part I of this Act to acquire the freehold or an
extended lease of property comprised in the tenancy, notice of his desire to
have the freehold or an extended lease cannot be given more than two months
after the service of the landlord’s notice; …
For the landlords,
Mr Anthony Radevsky bravely argued that because Mr Mayhew had no rights under
the 1967 Act, the words omitted from form 1 were immaterial, and so for present
purposes the notice was ‘substantially to the like effect’ as form 13. This is,
in my judgment, a hopeless argument, because it disregards the express language
of para 10(2). That provides that the notice shall not have effect unless it
states what was omitted from the form used. The omission was therefore fatal.
The 1991 notice was of no effect.
Mr Radevsky,
however, also succeeded before the judge on the ground of estoppel. The judge
held at p26E that by serving a counternotice and issuing an originating
application claiming a new tenancy Mr Mayhew ‘clearly and unequivocally
represented that he would not exercise any right he might have had to claim
that the section 25 notice was invalid, either by reason of the first
enfranchisement notice or of any defects in the notice itself’.
In this court
Mr Driscoll QC for Mr Mayhew invoked section 23(1) of the 1967 Act, which
provides that:
(1) Except as
provided by this section, any agreement relating to a tenancy (whether
contained in the instrument creating the tenancy or not and whether made before
the creation of the tenancy or not) shall be void in so far as it purports to
exclude or modify any right to acquire the freehold or an extended lease or
right to compensation under this Part of this Act …
He argued that
where a tenant is prevented by statute from contracting out of a statutory
right, he cannot achieve the same effect by an estoppel. That principle is well
established: the question is whether it applies here.
Mr Driscoll
argued that the landlords were here relying on an estoppel when parliament has
said that the tenant cannot agree to give up the right. Mr Mayhew has a right
to acquire the freehold unless he has been served with a valid section 25
notice. He cited Keen v Holland [1984] 1 WLR 251* at p261C for
the proposition that the parties could not by estoppel confer on the court a
jurisdiction which they could not confer on it by express agreement. Mr Mayhew
could not have agreed with the landlords that the notice should be treated as
in the correct form. In Joseph v Joseph [1967] Ch 78 this court
held that the words of section 38(1) of the 1954 Act ‘purports to preclude the
tenant from making an application or request’ meant ‘would but for its
avoidance by the sub-section have the effect of precluding the tenant from
making an application or request’.
*Editor’s note:
Also reported at [1984] 1 EGLR 9
Mr Driscoll
referred also to Daejan Properties Ltd v Mahoney [1995] 2 EGLR 75
at p79L. This court was there concerned with para 13(2) of Schedule 1 to the
Rent Act 1977, which provided that an agreement in writing between a statutory
tenant and an incoming tenant, having the effect of deeming the incoming tenant
to be the statutory tenant, shall not have effect unless the landlord is party
to it. The landlord, without being party to the agreement between the statutory
and incoming tenants, recognised both as joint statutory tenants. It was held
that the landlord was estopped from denying that that was the position. At p79M
Hoffmann LJ said:
It is true
that the effect of the estoppel is to allow the transfer of the statutory
tenancy to take place without the written agreement between outgoing and
incoming tenant required by para 13(1). It seems to me, however, that this is a
formality for the protection of the individual parties rather than one imposed
in the public interest. The parties are therefore entitled to waive it: …
The 1954 Act
contains no provision comparable with para 10(2). There was therefore nothing
to prevent the tenant from agreeing or representing that he would not dispute
the validity of the section 25 notice. I can see an argument that such an
agreement would not be an ‘agreement relating to a tenancy’ within the meaning
of section 23(1) of the 1967 Act. But in circumstances where, as the judge
held, Mr Mayhew knew that the 1991 notice ceased to be effective after the
House of Lords had dismissed his petition, I can see no reason why he should
not have agreed not to dispute the validity of the section 25 notice. He was
then in the same position as he would have been, had the 1954 Act stood alone.
In any event, the agreement could not have had the effect of excluding a right
to acquire the freehold, because by the time the notice was served he had no
such right.
A statement
that Mr Mayhew would not be willing to give up possession would have been
purposeless unless the section 25 notice was valid. That it was given is
explicable only as a response to the requirement of notification under section
25(5). Similarly, the counternotice assumed the validity of the section 25
notice: cf Tennant v London County Council (1957) 55 LGR 421 at
pp434 and 436. The defect was plain on the face of form 13 in view of the
statement at its foot that it should not be used where the tenancy is one to
which the 1967 Act may apply. Since the representation was merely that Mr
Mayhew was not disputing the validity of the section 25 notice, it matters not
what grounds he would have had for doing so, or whether he knew what those
grounds were. In any event, the judge was entitled to infer and find, as he
did, that Mr Mayhew knew that the wrong form had been used.
Mr Driscoll
did faintly argue that the landlords called no relevant evidence that they were
affected by what Mr Mayhew did. But, in my judgment, it is indisputable that
the landlords relied on the section 25 notice, and that they relied on nothing
else. They do not have to go further and show what they would have relied on if
there had been no representation that its validity was not disputed. By
incurring lawyers’ and surveyors’ fees the landlords suffered obvious
detriment, despite Mr Driscoll’s ingenious argument that by an award of costs
they might be reimbursed at least in part. They also refrained from serving
another section 25 notice in the correct form. Since the landlords refrained
from doing so on the faith of Mr Mayhew’s representation that he was treating
the section 25 notice as valid, it would plainly be unconscionable for Mr
Mayhew to take the point thereafter that the section 25 notice was defective.
Since Mr Mayhew knew that the wrong form had been served, while it is evident
that the landlords did not, there is no unfairness in Mr Mayhew being bound by
the consequence of treating it as valid.
Mr Driscoll
also argued that the section 25 notice was invalid because it was served during
the currency of his 1991 notice. That depends on the true construction of para
2(2) of Part I of Schedule 3 which provides that:
A landlord’s
notice terminating a tenancy of any property under section … 25 of the Landlord
and Tenant Act 1954 … shall be of no effect if given … during the currency of a
claim made in respect of the tenancy to acquire the freehold …
By para
5(1)(c):
references to
the currency of a claim shall be taken as references to the period from the
giving of a notice which has effect or would, if valid, have effect to the time
when the notice is effective or ceases to have effect, or (not being a valid
notice) is set aside by the court or withdrawn or would, if valid, cease to
have effect, and those references shall include any period when the notice is
suspended.
The judge
summarised his conclusions on this issue by saying:
In sum, I
hold firstly that the 1991 enfranchisement notice was from the outset invalid
and ineffective; alternatively, that after the decision of the House of Lords
on 22nd July 1991, the first enfranchisement notice ceased to have any effect
and was both explicitly and implicitly withdrawn or abandoned.
Mr Driscoll
argued that, because it was not, and never could have been, a valid notice, the
hypothesis that it ‘would, if valid, cease to have effect’ was inapplicable.
Its period of currency could only be determined if it was set aside by the
court or withdrawn. Since it has never been set aside by the court or
withdrawn, it is still current. He cited Collin v Duke of Westminster
[1985] QB 581* for the proposition that the right to rely on a notice cannot be
abandoned by inactivity. But although the judge mentioned abandonment he relied
also on withdrawal.
*Editor’s
note: Also reported at [1985] 1 EGLR 109
As Mr Radevsky
pointed out, after the dismissal of his petition for leave Mr Mayhew, after
corresponding with his Member of Parliament, dealt with the landlords’
surveyors on the footing that, although he asserted no current right to
enfranchise, the landlords should negotiate with him outside the scope of the
1967 Act in anticipation of a change in the law. It was to that conduct that
the judge was referring when he declared that the notice ‘was both explicitly
and implicitly withdrawn or abandoned’. There is force in the argument that by
that conduct it was by necessary implication withdrawn. Alternatively, if valid
(which it was not), the notice would have ceased to have effect when leave to
appeal was refused. The fact that it never could have been valid ought not to
put it in a better position than it would have been if it could have been
valid. But there are difficulties in the way of both arguments. The draftsmen
did not directly cater for the position where, as here, it is definitively
stated that a purported notice never could have been valid and so could not
‘cease to have effect’. I prefer to rest on the judge’s alternative conclusion
at p27F of his judgment that Mr Mayhew is now estopped from challenging the
validity of the section 25 notice ‘either on the ground that he had previously
served the first enfranchisement notice or by reason of the use of the wrong
form’. His dealings with the landlords’ surveyors after he had been refused
leave necessarily presupposed, and he thereby represented, that he had no
continuing right to claim that the 1991 notice was valid.
I would
accordingly dismiss the appeal.
Agreeing, Henry LJ said: As the judge found,
from the moment when Mr Mayhew took his assignment of the fag end of this
lease, he
a shrewd
solicitor who is well acquainted with the provisions of the relevant statutes
and regulations … has been absolutely determined … to take any and every step to
secure enfranchisement if he could.
Initially his
problem was that the rateable value of the property was too high to be within
the enfranchisement limit. But Schedule 8 to the Housing Act 1980 provided
machinery whereby the rateable value might be adjusted downwards where the
tenant (or previous tenants) had been responsible for qualifying improvements —
and thus the property might be brought within the limit.
In 1983 Mr
Mayhew served such a notice on his landlord. The statutory scheme gives the
parties six weeks to agree, and failing agreement, another six weeks to apply
to the court. Mr Mayhew did not apply in time. Nor was any extension granted to
him. So he tried to revive his claim by making a fresh Schedule 8 application,
followed by his first enfranchisement notice, the 1991 notice. But this court,
on May 21 1991, allowed the landlords’ appeal, and held that as the statutory
time limits were mandatory, so there could be no second application after the
first had failed. Parker LJ said [1991] 2 EGLR 89 at p91K that the respondent:
having failed
to apply to the county court within the time-limit, was not entitled to serve a
second notice; that, although he has now done so and obtained a certificate
which, if valid, would have entitled him to serve a section 8 notice, the
factual rateable value remains the value for the purposes of the Act; and that
he has accordingly no right to acquire the freehold under the 1967 Act.
Leave to
appeal to the House of Lords was sought, but refused on July 22 1991. At this
time, questions in parliament had given rise to the hope that at some time in
the future the enfranchisement limit would be done away with altogether (this
eventually happened, but not until the passing of the Leasehold Reform, Housing
and Urban Development Act 1993, with effect from November 1 1993). Returning to
1991, Mr Mayhew informed the landlords of the prospect of extending the right
to enfranchisement, and invited them to negotiate with him in anticipation of a
change in the law.
This
invitation the landlords declined. Instead they served him with a section 25
notice. As Leggatt LJ has already made clear, if that notice was effective when
given (or if the tenant has waived his right to or is estopped from any
challenge to its validity) then the tenant cannot succeed in his second
enfranchisement notice, given on November 5 1993, immediately after the change
in the law, and so is not entitled to have the freehold of the property, and
accordingly this appeal would fail.
In my
judgment, the live issue here is whether the appellant left it too late to take
the point that the landlords’ section 25 notice did not ‘have effect’ because
it did not inform the tenant of his 1967 Act rights. I agree with Leggatt LJ
that, because of the clear language of para 10(2) of the third Schedule to that
Act, the notice was ineffective. An ineffective notice clearly does not require
a response, but the tenant would then risk losing his chance of a new tenancy
by a court finding the notice to be effective. Accordingly, the prudent course
for a tenant so placed is to serve the counternotice without prejudice to the
contention that (on the basis of the appellant’s submissions in this case) the
section 25 notice was ineffective: (i) as to its form (for the reasons set out
above); and (ii) because the section 25 notice had been given ‘during the
currency of [the tenant’s] 1991 enfranchisement claim’ under the extended
meaning given to ‘currency of a claim’ by para 5(1)c of Schedule 3 to the 1967
Act. What the tenant in fact did was to take no point as to the efficacy of the
section 25 notice, but to proceed in all respects as if that notice was valid
and effective, and only to take the point after the property had come within
the scope of the enfranchisement provisions (November 1 1993) and after the
second enfranchisement notice had been served (November 5 1993). The point was
taken by letter dated November 22 1993.
There is no
shortage of authorities in many branches of the law to the effect that failure
to object to a recognised defect or omission or to take an obvious defence may
be objectively construed as that party’s unequivocal indication of his
intention not to insist on his strict legal
109. In such cases, the main question is whether the party against whom the
point has been taken has reasonably inferred that the notice in question has
been accepted as a valid and effective notice. So in all such cases, it is
ultimately a question of fact to be determined by the trial judge.
Mr Mayhew in
the witness box pleaded a degree of ignorance in relation to the 1954 and 1967
Acts. The judge clearly did not accept his evidence as to that. I have already
quoted his finding as to his knowledge and determination. The judge was also to
find:
1. In relation
to the submission that the section 25 notice was ineffective because the 1991
enfranchisement claim was still ‘current’, he found that at the time of the
service of the section 25 notice, Mr Mayhew realised there was no further legal
life in his 1991 enfranchisement notice, and that he made his abandonment of
the claim clear by inviting the landlords to negotiate in anticipation of a
change of the law. Otherwise he would have said that realistically they had to
deal with him, because until those proceedings were set aside by the court or
withdrawn, the landlords’ proceedings were frozen. Thus that point was both
implicitly and explicitly abandoned.
2. In relation
to the form of the notice, the judge crucially found that Mr Mayhew knew from
the outset that the landlord had used form 1 when it should have used form 13.
Mr Mayhew did not take the point at the time as: (i) it was then irrelevant,
given the state of the law; and (ii) if the point were taken, the result would
be that the correct form would be used — so to take the point would be futile.
Against the
background of Mr Mayhew’s knowledge, it is clear to me that all his actions,
objectively viewed, would appear to a reasonable landlord as an acceptance of
the section 25 notice as valid.
First, it is
clear that once the notice has served its statutory purpose of starting the
proceedings, if no point on its validity is taken, it will not generally be
critically examined again. Second, the tenant by his actions in taking no point
on the notice but carrying on with the 1954 Act procedure as though it was a
good notice represented that it was, and so discouraged any critical
examination of it. He intended that there should be none, because the defect
was easily curable up until: (1) the change in the law; and (2) the service of
an enfranchisement notice. So the tenant clearly intended the landlords to act
on his representation, and the landlords did so act, first, in not examining
the notice critically and so not amending it, and, second, by incurring expense
on activities only relevant to the 1954 proceedings for a new lease (ie
predicated on acceptance of the notice as valid). And as Mr Mayhew was aware of
the defect, and was hoping to take advantage of the landlords’ mistake, he lulled
them into a sense of false security by not taking this point. So there is
nothing inequitable in holding him to the stance he presented to the world:
namely that the notice was effective.
Last, while I
entirely accept the general principle that landlord and tenant may not contract
out of statutory rights given to the tenant for his protection, that principle
does not apply here for the reasons given by Leggatt LJ.
I, too, would
dismiss this appeal.
Hutchison LJ agreed and did not
add anything.
Appeal dismissed.
case on this subject see p233
