Any lover of films knows that sequels can be a bit hit and miss. There are those that simply disappoint and others, like The Godfather trilogy, which just keep on giving. The decision of the High Court in Prescott Place Freeholder Ltd and others v Batin and another [2023] EWHC 1445 (Ch), dealing with consequential matters that arose following trial, is the legal equivalent of an unmissable summer sequel. The decision follows hot on the heels of the trial judgment ([2023] EWHC 435 (Ch)), as discussed in the earlier Legal Note, “Circumventing the right of first refusal” (https://www.egi.co.uk/legal/circumventing-the-right-of-first-refusal/).
The matter was dealt with expeditiously, in part to prevent the defendants from taking further steps that would deprive the order made under section 19 of the Landlord and Tenant Act 1987 of much of its intended effect.
The recap
34-36 Prescott Place, Clapham, London, SW4, is a development of six residential flats. In 2004, the second defendant, Joseph Donovan, gave his brother monies to acquire the freehold interest in the premises. An express deed of trust was executed, with Donovan’s brother holding the premises on trust for him.
In 2014, Donovan’s brother executed a transfer of the premises to the first defendant, Constantin Batin, for £125,000. Batin became registered proprietor with a deemed registration date of 29 May 2014. The transfer meant Batin taking free of Donovan’s beneficial interest under the 2004 trust deed.
The first claimant – Prescott Place Freeholder Ltd – was the nominee purchaser of the second to eighth claimants, who were the long leaseholders of the flats. As the 2014 transfer was a relevant disposal under section 4, PPF sought to acquire the freehold interest in the premises. PPF subsequently applied for an order under section 19 requiring Batin to convey it the freehold interest in the premises.
The section 19 order was made on 25 October 2019. It required Batin to convey the freehold interest in the premises to PPF on the same terms that Batin acquired it or on terms to be determined by the First-tier Tribunal.
PPF registered a unilateral notice in respect of the section 19 order in the charges register of the freehold title at HM Land Registry on 11 November 2019.
After the section 19 order was made, but before 14 January 2021, Batin and Donovan executed equitable leases in respect of two flats within the premises at a nominal rent and for no premium. The purpose being to devalue the freehold interest that PPF was entitled to acquire by virtue of the section 19 order. On 15 January 2021, an interim injunction was granted, restricting Donovan’s right to register interests arising out of the equitable leases.
The cliffhanger
The question for the High Court in the current proceedings was the nature of the rights Donovan retained, or should be permitted to retain, pursuant to the equitable leases. PPF wanted the interim injunctions to be made final.
It also sought a supplemental injunction prohibiting Donovan, whether by himself or through others, from going into occupation of the premises until the freehold was conveyed to PPF. This would preclude Donovan from arguing that his rights under the equitable leases were overriding interests by virtue of his actual occupation.
Donovan contended the claimants had no legal right or cause of action that could restrain him from protecting the equitable leases at HM Land Registry or disposing of an interest in the premises. He opposed the making of final injunctions on the basis that the court did not have the power to grant or continue the same.
The court identified two questions to determine. First, whether PPF’s rights under the section 19 order constituted an interest in land. Second, how the issue of priority would be resolved as between that interest in land and the interest in land under the equitable leases following a conveyance of the freehold title to PPF under the section 19 order.
The action
The High Court applied general principles in resolving the questions. It was common ground that an “interest in land” could only be created by someone who had sufficient title to create proprietary rights. The section 19 order was made against Batin, who was the registered proprietor of the freehold interest in the premises.
Rights which are purely personal in nature are not capable of constituting interests in land. Yet, the section 19 order did not create a personal right. It was a court order requiring Batin to transfer the freehold interest to PPF. It conferred a proprietary right over the premises and constituted an interest in land from the moment the order was made.
In respect of the issue of priority, section 28 of the Land Registration Act 2002 preserved the rule that the priority of competing equitable interests was determined by the order in which they were created. PPF’s equitable interest arising under the section 19 order was to have priority over the interest arising under the equitable leases.
The resolution
The court paid short shrift to the contention that it did not have the power to grant the final injunctions sought. It was necessary in this case to restrain the unconscionable conduct on the part of Batin and Donovan to circumvent the effect of the section 19 order.
Elizabeth Dwomoh is a barrister at Lamb Chambers
