Leasehold Reform, Housing and Urban Development Act 1993 – Collective enfranchisement – Determination of purchase price by leasehold valuation tribunal (LVT) – Appeal to Lands Chamber of Upper Tribunal (LC) – All outstanding grounds of appeal resolved – Whether LC retaining jurisdiction to correct arithmetical error of LVT – Whether having power to include as term of acquisition a provision for additional payment by nominee purchaser in event that Supreme Court making ruling in another case favourable to respondent’s position – Appeals disposed of accordingly
On an application by the appellant nominee purchaser, under section 24 of the Leasehold Reform, Housing and Urban Development Act 1993, the leasehold valuation tribunal (LVT) determined that a purchase price of £2.05m was payable to the respondent freeholder on a collective enfranchisement of a building under the Act.
On appeal against that decision, the appellant raised an issue as to the correctness of the Lands Tribunal decision in Earl Cadogan v Sportelli [2007] 1 EGLR 153 as applied by the LVT. That issue was resolved when Sportelli was confirmed by the Court of Appeal: see [2007] EWCA Civ 1042; [2008] 1 EGLR 137. The respondent also challenged the LVT’s decision on four issues. Two were abandoned, the others concerned: (i) a challenge to the deferment rate applied by the LVT when calculating the vacant possession value of the freehold, which was determined in a separate hearing before the Lands Chamber (LC) of the Upper Tribunal and increased the deferment rate above the 5% Sportelli rate applied by the LVT (see [2010] UKUT 427 (LC); [2011] PLSCS 62); and (ii) the question of whether rights under the 1993 Act should be taken into account when valuing the existing leases for the purposes of calculating the marriage value, was decided by the Court of Appeal in McHale v Earl Cadogan [2010] EWCA Civ 1471; [2011] 05 EG 106, in which a party whose family interests included the respondent company acted as intervener.
All the issues in the appeal having been abandoned or determined, it remained for the LC to recalculate the price in accordance with the amended deferment rate. The appellant pointed out other minor errors in the LVT’s calculations where it had applied the wrong multiplier in certain places, and requested the LC to correct those. The respondent contended that the LC had no jurisdiction to do so or, if it had, it should not exercise that jurisdiction. It further sought to protect its position in the event that permission to appeal to the Supreme Court was sought and granted in McHale and a ruling more favourable to its contentions was given. To that end, it asked the LC to include, as one of the terms of acquisition, a provision that the purchase price should be recalculated, and the appellant should pay the difference, in the event that McHale were subsequently reversed.
Held: The appeals were disposed of accordingly.
(1) On the section 24 application, the LVT had been asked to determine various matters in dispute, including the amount payable as the purchase price. In deciding that issue, the LVT had made arithmetical errors as identified by the appellant. The errors amounted to “clerical mistakes in a document or any errors arising in it from an accidental slip or omission”, within the meaning of regulation 18(7) of the Leasehold Valuation Tribunals (Procedure)(England) Regulations 2003, such that the LVT would have had the power to correct them under that provision had it been asked to do so. It was clear what the correct price would be should the errors be corrected.
The LC was required, on the appeals from the LVT’s decision, to decide the amount to be paid as the purchase price. It would be wrong for the LC deliberately to fix as the purchase price a sum that it knew to be incorrect. Since, by section 175(4) of the Commonhold and Leasehold Reform Act 2002, the LC could exercise any power that was available to the LVT, it was possible to correct the LVT’s errors in the manner requested by the appellant. It was not a prerequisite for exercising that power that a formal application had first been made to the LVT. In so far as the correct price continued to be disputed, this was determined at £2.0217m, that being the figure reached after the deferment rate was amended and the LVT’s arithmetical errors corrected.
(2) Since the Court of Appeal in McHale had decided that the rights under the 1993 Act should not be taken into account when valuing existing leases for the purposes of the marriage value, the LC had to dismiss the respondent’s appeal so far as it sought to argue the contrary. Notwithstanding the wide wording of section 24(8) in defining the “terms of acquisition”, there was no jurisdiction to include as part of those terms a clause that left the purchase price payable in accordance with Schedule 6 only provisionally decided. A clause that contemplated a nominee purchaser being asked to make an additional payment after completion would be inconsistent with the provisions of Schedule 5 to the Act, which contemplated that the relevant interest would be vested in the nominee purchaser on the payment into court of the appropriate sum and that, once this was done, the nominee purchaser would obtain the freehold interest and, by virtue of para 4, would not be required to satisfy any further claim against the nominee purchaser or the participating tenants in respect of the price payable. It followed that there was no power to include a clause of the type requested by the respondent.
Kenneth Munro (instructed by Pemberton Greenish LLP) appeared for the appellant; Stephen Jourdan QC (instructed by Forsters LLP) appeared for the respondent.
Sally Dobson, barrister
