Landlord and tenant — Leasehold Reform, Housing and Urban Development Act 1993 — Assignment of tenant’s notice to new lease — Contract to assign — Failure to complete assignment of notice — Whether legal assignment of notice of claim required — Whether lease assigned without benefit of notice — Whether notice deemed withdrawn
The plaintiff landlord was the freehold owner of a
block of flats. On 18 August 1997 Miss H, the lessee, by assignment of a long
lease of one of the flats, served on the landlord a notice of claim under
section 42 of the 1993 Act claiming a new extended lease. The landlord served a
counternotice admitting the claim on 14
Miss H contracted to sell her lease to the defendant; the contract contained a
provision that on completion the seller would effect a valid assignment of the
notice of claim. Completion took place on 28 October when a form of transfer
was provided to the defendant; there was no reference to the transfer of the
benefit of the notice of claim. The transfer was registered at the Land
Registry on 19 November 1997. Although there was a purported deed of transfer
of the notice of claim made in about July 1998, there was otherwise no legal
assignment of the benefit of the notice of claim. Accordingly the landlord
claimed that the notice of claim was deemed withdrawn pursuant to section 43(3)
of the Act. The defendant contended that the Act does not require a legal
assignment, an equitable assignment will suffice.
The notice of claim was deemed withdrawn. Section 43, in the context of the
relevant chapter of the Act as a whole, anticipate only a legal assignment of
both the lease and the benefit of the notice of claim. Accordingly the notice
of claim was deemed withdrawn on 19 November 1997. If, in the alternative, the
Act allows of the assignment of the lease and of the notice of claim by
equitable assignment, then in whatever way the transactions or deemed
transactions are analysed, the respective assignments did not occur at the same
time, contrary to section 43(3).
The following cases are
referred to in this report.
Barclays Bank plc
v Zaroovabli [1997] Ch 321; [1997] 2 WLR 729; [1997] 2
Brown & Root Technology Ltd v Sun Alliance & London Assurance Co Ltd (1997) 75 P&CR
223; [1997] 1 EGLR 39; [1997] 18 EG 123, CA
Central Insurance Co Ltd v Seacalf Shipping Corporation (The Aiolos) [1983]
2
Kingston upon Thames Royal London Borough
Council v Prince [1998] EGCS 179
R v Tower
Hamlets London Borough Council, ex parte Von Goetz [1999] 2
CA
Three Rivers District Council v Bank of England [1996] QB 292; [1995] 3 WLR 650; [1995] 4
All ER 312
Walsh v Lonsdale
(1882) 21 ChD 9
Weddell v JA
Pearce & Major [1988] Ch 26; [1987] 3 WLR 592; [1987] 3 All ER 624
William Brandt’s Sons & Co v Dunlop Rubber Co Ltd [1905] AC 454
Gary Cowen (instructed by
Wallace & Partners) appeared for the plaintiff; Jane Evans-Gordon
(instructed by Harveys) represented the defendant.
Giving judgment, MR RECORDER GERREY said: In this action, the plaintiff,
Aldavon Co Ltd, seeks against the defendant, Ceris Deverill, a declaration that
a tenant’s notice of claim dated 18 August 1997 pursuant to section 42 of the
Leasehold Reform, Housing and Urban Development Act 1993, which I shall refer
to in a moment, was withdrawn on 28 October 1997, alternatively 19 November
1997.
The facts in this case are fairly short and are
not in dispute. The plaintiff company is the freehold owner and headlessor of a
block of flats known as Mountsfield Court, Hither Green Lane, London SE13. One
of the flats comprised in that block, flat 23, was the subject of an underlease
granted on 16 March 1972, which granted a term of 99 years from 25 March 1996.
That underlease was the subject of various assignments, and on 9 September 1988
it was assigned to Julie Hamilton. She remained the occupier and underlessee
until the autumn of 1997, and on about 18 August 1997 Miss Hamilton served on
the plaintiff notice under section 42 of the Leasehold Reform, Housing and
Urban Development Act 1993, claiming to exercise her right to call for a new
lease of the flat under the terms of that statutory provision.
It is not necessary for me to go into detail about
the statutory provisions that do in fact grant lessees the right, subject to
certain qualifying conditions, to extend the leases of qualifying premises and
qualifying tenants, but, pursuant to the statutory provisions, the plaintiff
served on Miss Hamilton a counternotice on 14
being pursuant to section 45 of the Act, admitting Miss Hamilton’s entitlement
to a new lease but proposing slightly different terms for the grant of that
extended lease. It seems from the facts that that was what Miss Hamilton had
been waiting for, because on 21
to sell the flat to the defendant, and in fact that contract was completed a
week later on 28
The contract is contained in the agreed bundle of
documents before me. It is not necessary for me to go into all the terms. The
most important ones are to be found in clause 7. Clause 7(1) defines a tenant’s
notice of claim as meaning the notice given by Miss Hamilton on 18 August 1997,
and by subclause (2) of para 7 the contract provided that:
On completion of the sale of the property, the
sellers will effect a valid assignment to the buyer of the benefit of the
tenant’s notice of claim.
It is common ground that that in fact did not
occur.
Completion,as I say, took place on 28 October
1997, and the only document that was in fact handed over at completion was a
Land Registry form of transfer, that relating to the property, 23 Mountsfield
Court, Hither Green. There is no reference in that transfer to the benefit of
the notice served by Miss Hamilton under the 1993 Act. The transfer
of the leasehold interest was registered at the Land Registry on
19
of section 22(1) of the Land Registration Act 1925 and decisions thereunder,
legally the leasehold interest did not become vested in the defendant until the
registration on that date.
The position so far as the rights under the 1993
Act are concerned, so far as Miss Hamilton was concerned, effectively came to
an end sometime in 1998. What happened was that the licensed conveyancers who
were representing the defendant, as I understand it both in the purchase of the
flat and in the application to the leasehold valuation tribunal, submitted an
application to the tribunal on 20 February 1998, seeking resolution of the
issues between the defendant and the landlord so far as the terms of the
extended lease are concerned. On 8
acting on behalf of the landlords, wrote to Anderson Hunt, the conveyancers who
had represented the defendant, referring to the fact that they had received a
copy of the application to the leasehold valuation tribunal and stating that
the papers included a copy of the contract. The letter continued:
However, they do not include a copy of the
assignment of the Lease or the benefit of the Notice of Claim to exercise the
right to a new lease. We should be grateful if you could provide us with copies
of the same.
The response from Anderson Hunt, dated 11 June
1998, acknowledged the letter and enclosed a copy of the transfer, which they
said ‘of course operates by way of an Assignment’ and said:
We also enclose a photocopy of the contract dated
21st October 1997 thereof relating to the assignment of the benefit of the
Notice. We trust the above will suffice for your purposes.
That was responded to on 16 June:
Thank you for your letter dated the 11th June and
the enclosures therewith. Whilst we have noted the provision in the Contract
relating to the assignment of the benefit of the tenant’s Notice of Claim, we
note the Transfer itself is limited to the leasehold interest. Since there does
not appear to have been a separate assignment of the benefit of the Notice, the
same is accordingly deemed to have been withdrawn by virtue of the provisions
of Section 43(3) of the Act,
and that is really the issue in this case, and I
shall come back to that in a moment. The letter continues:
We should be grateful to receive your
confirmation that you accept the Notice is deemed withdrawn and that you will
not be pursuing the Application that has been made to the Leasehold Valuation
Tribunal.
A fortnight or so then elapsed before the licensed
conveyancers responded on 1 July 1998:
Thank you for your letter of 16th June. We
apologise for the delay in replying to your letter due to the Writer’s recent
holiday. We further apologise for omitting to send you a copy of the Assignment
relating to the benefit of the Notice under the Leasehold Reform, Housing and
Urban Development Act and now rectify this omission. We trust that this now
disposes of your enquiry so as to enable the matter to proceed.
With that letter the conveyancers enclosed a copy
of a short form of assignment, which purports to be a transfer of the benefit
of the notice under the 1993 Act and which purports to have been dated 28
October 1997 — the date, as I have already indicated, on which completion of
the transfer of the lease took place.
Wallace & Partners responded by writing, in
fact, to the solicitors who had acted for Miss Hamilton in the sale of the flat
to the defendant. They sent a copy of the document that they had received from
Anderson Hunt and said:
Could you please confirm the document was
executed by your client and passed to the purchaser’s solicitors prior to
completion.
They wrote on the same day to Anderson Hunt,
requesting evidence that the assignment had been completed at the same time as
the transfer of the lease. The solicitors for Miss Hamilton responded on 14
July 1998:
Thank you for your letter of the 3rd July
received at these offices during the writer’s recent absence. We would advise
you that we received the assignment document, of which you have seen a copy,
recently from Messrs Anderson Hunt. In accordance with their request, we have
passed the document on to our client and asked her to return it direct to
Messrs Anderson Hunt in the pre paid envelope supplied by them. We did not date
the notice. We can, however, confirm that a condition of the contract of sale
in respect of the property provided that our client would effect a valid assignment
to the buyer of the benefit of the tenant’s notice of claim.
Hardly surprisingly, armed with that information
the plaintiff’s solicitors took issue with Anderson Hunt as to what appeared to
be a deliberate attempt to deceive or mislead. The tone of the correspondence
degenerated to some extent, but it seems quite plain that the purported deed of
assignment of the benefits of the notice was only prepared sometime in about
July 1998, and attempted to be backdated. Clearly, as a matter of law, that could
not be effective when prepared in that way, and it may well be that, depending
on my decision in relation to the issues in this case, the defendant in this
current action may have to consider her position as against those who
represented her in the conveyancing transaction; but, as I say, that will of
course depend on the decision that I shall give shortly on the issues in this
case.
Those then are the facts. There was a transfer of
the leasehold interest on 28 October 1997, registered on 19
so, as I say, it is conceded as a matter of law that the defendant did not in
fact in law become the owner of the leasehold interest until 19 November, and
that there was no written assignment or purported assignment of the benefit of
the notice under the 1993 Act until some considerable time after completion of
the transaction and registration of the leasehold interest. With those facts, I
then have to consider the provisions of the statute and the issues that have
arisen in this case.
The Act is the Leasehold Reform, Housing and Urban
Development Act 1993, and the rights with which I am concerned arise under
Chapter II of that Act, subtitled ‘Individual right of tenant of flat to
acquire new lease’, beginning at section 39 and going through to section 42,
which is the section of the Act that sparked off the chain of events in the
current claim. Section 42 sets out in detail the matters that must be dealt
with by a tenant giving notice as a qualifying tenant of a claim to exercise
the right, and Mr Gary Cowen, who represents the plaintiff in the action,
submits to me that, looking at the provisions generally of section 39, it is
his submission that the word ‘tenant’ has to be looked at in the whole context
of that particular chapter and particularly in the context of section 43, which
is the particular point that arises in this action.
I was told at the outset that there is no clear
authority on the point, and that therefore my decision is the first that will
be given. I turn then to section 43. Section 43(1) reads as follows:
Where a notice has been given under section 42
with respect to any flat, the rights and obligations of the landlord and the
tenant arising from the notice shall enure for the benefit of and be
enforceable against them, their personal representatives and assigns to the
like extent (but no further) as rights and obligations arising under a contract
for leasing freely entered into between the landlord and the tenant.
Pausing there, Mr Cowen makes the point that that
subsection does not include predecessors in title of either the landlord or the
tenant. Subsection (2) says:
Accordingly, in relation to matters arising out
of any such notice, references in this Chapter to the landlord and the tenant
shall, in so far as the context permits, include their respective personal
representatives and assigns.
Subsection (3), which is really at the heart of
this action, reads as follows:
Notwithstanding anything in subsection (1), the
rights and obligations of the tenant shall be assignable with, but shall not be
capable of subsisting apart from, the lease of the entire flat; and, if the
tenant’s lease is assigned without the benefit of the notice, the notice shall
accordingly be deemed to have been withdrawn by the tenant as at the date of
the assignment.
It is accepted that there was no legal assignment
of the benefit of the notice, whether contained in the transfer of the lease or
any other separate document. It is accepted that the transfer was a legal
transfer, but of course did not have the effect of transferring the legal
benefit of the lease to the defendant until registration on 19 November 1997,
and the issue raised in this case is whether, on the facts that I have
outlined, the defendant can succeed in her defence to the action on the basis
that there was an equitable assignment of the lease and an equitable assignment
of the benefit of the notice, those equitable assignments taking effect
together so as to in fact avoid the provision of section 43(3), if in fact the
two transactions had the effect of separating the holding of the lease and the
benefit of the notice.
Mr Cowen submits that on its true construction
that section of the Act, looking at the chapter as a whole, anticipates only a
legal assignment of both the lease and the benefit of the notice. Miss Jane
Evans-Gordon, who represents the defendants, says no, the Act does not in fact
say it has to be a legal assignment. One cannot read such a provision into the
Act. In a moment I will refer to the authorities and learned texts referred to
by both parties in support of their submissions.
So there, really, are the issues. First of all, is
it open to the defendant to rely upon equitable rather than legal assignments;
and, second, if she is so entitled to rely, on the facts as found by me, did
those assignments take place at the same time so as to avoid the deemed
withdrawal of the notice under the subsection to which I have referred.
Both parties have submitted very helpful written
submissions and bundles of authorities and, so far as the plaintiff is
concerned, really there is no issue in relation to some of the matters because
it is accepted as a matter of law that the legal estate in the lease did not
become vested in the tenant until 19 November 1997. Some reliance was placed by
Mr
Alliance & London Assurance Co Ltd [1997] 1 EGLR 39. He relied
particularly on a number of passages in the principal judgment of Mummery LJ.
So far as that is concerned, it concerns in particular the question of a break
clause and whether in fact assignment of that clause had taken place. The
principal point, however, was really on the land registration point, but Mr
Cowen does rely on a number of passages set out in the judgment of Mummery LJ,
particularly the four reasons for the conclusion of the learned lord justice
set out at p41 of the report beginning at letter J. But again, the point there
I am not sure is of direct application in this case. It seems to me it is a
matter of general application.
Similarly, I do not think I need to deal in any
detail with the next authority to which he referred, which was Barclays Bank
plc v Zaroovabli [1997] 2 WLR 729. Again, that was really the
question of the registration point, which, as I say, is not in fact an issue.
I will come back in a moment to the question of
dates of contracts and the effect that they have. I move on now to some
particular passages relied upon by Mr Cowen, first of all in Ruoff &
Roper’s very useful book on registered conveyancing, and the passage contained
at para
under the Leasehold Reform Act 1967, and I read the two paragraphs in full:
When a tenant has given
notice of his desire to acquire the freehold reversion or an extended lease, it
is expressly provided that his rights and obligations, may be assigned with,
but not so as to subsist apart from, the tenancy of the entire house and
premises. There is the corollary that should the tenant assign his tenancy
without the benefit of the notice, or should he assign it in respect of a part
only of the house and premises, his notice will thereby be rendered nugatory.
Clearly, it is the intention of the 1967 Act that the benefit of the rights
resulting from the service of the notice should never be divorced from the
actual ownership of the tenancy.
It has been suggested that this means that, if
the tenant transfers his leasehold interest in the whole of the house and
premises, he must, in the case of registered land, include an assignment of his
rights arising under the 1967 Act in the instrument of transfer. However, a
transfer of registered property does not take effect at law until it has been
completed by registration. On the other hand, should an assignment of the
tenant’s rights under the Act be included in the instrument of transfer then,
simply because that assignment is incapable of being registered, it will
presumably take effect immediately upon the execution of the instrument… it may
well be that the most satisfactory way of carrying out the transaction is for
the tenant to assign his rights by means of a separate instrument so worded as
to take effect only when the transfer of the tenancy is completed by
registration.
That appears to be borne out by the editors of the
Encyclopedia of Forms and Precedents, because included in the bundle is
a copy of a form numbered 119, which is a specific form of assignment of the
benefit of the tenant’s notice of claim, and under the operative part of that
precedent, clause 2.1:
The Seller assigns to the Buyer the benefit of
the Tenant’s Notice of Claim (with effect from the vesting of the Lease in the
Buyer by virtue of the registration of the transfer to the Buyer of the
leasehold interest in the Flat),
and there are some footnotes there recording the
fact that there is no provision in the land registration rules for a form that
combines the transfer of registered land with such an assignment:
The benefit of a tenant’s notice is not capable
of subsisting apart from the tenancy of the flat… and it is arguable that if
the transfer of a registered lease contains an assignment which takes effect
contemporaneously with the transfer itself, the benefit of the notice of claim
becomes separated from the tenancy,
and there is reference to a further note. Then the
final note on that page:
Where a registered lease is assigned with the benefit
of a tenant’s notice care should be taken to ensure that the assignment of the
benefit of the notice takes effect contemporaneously with the vesting of the
lease in the buyer ie at the time of registration of the transfer… rather than
at the time of completion of the transfer. If the benefit of the notice is
assigned in the transfer itself (or in a separate instrument which takes effect
at the same time) this may be interpreted as severing the benefit of the notice
from the lease (which at the moment of transfer still remains vested
temporarily in the seller) so as to cause the tenant’s notice to cease to have
effect.
It is common ground that if the matter were done
in that way, without a specific provision in the assignment that it should only
become effective upon registration of the leasehold interest in favour of the
purchaser, that would have the effect of severing the two interests so that the
exclusion clause in section 43(3) would apply, and the notice would be deemed
to have been withdrawn. However, Mr Cowen does rely upon that precedent in
support of his contention that a legal and formal assignment of the benefit of
the notice is anticipated, certainly by those authors and upon their
construction of the statute.
The final learned writer upon whom reliance is
placed is the book entitled Hague on Leasehold Enfranchisement, a recent
third edition by Mr Anthony Radevsky and Mr Damian Greenish, and first of all
there is a reference to p103 in that book, para 5-10:
Assignment of benefit.
However, special rules govern the assignment of
the benefit of a tenant’s notice, which is ‘assignable with, but not capable of
subsisting apart from, the tenancy of the entire house and premises’.
Pausing there, that again of course is referring
to the Leasehold Reform Act and not the 1993 Act:
If the tenancy is
assigned or vests otherwise than as affecting the whole of the house and
premises, the notice ceases to have effect; and in that event the tenant may
become liable to pay ‘such compensation as may be just’.
The clear purpose of requiring the benefit of the
notice only to be assignable with the tenancy is to ensure that only the tenant
for the time being can benefit from the notice, but the requirement is
sometimes overlooked in the common case where the tenant has agreed to sell to
a purchaser with the benefit of a notice.
That clearly seems to have been the case here.
The best and safest
course in such circumstances is to incorporate an express assignment of the
benefit of the notice in the assignment or transfer of the tenancy, but an
assignment by a contemporaneous document would certainly suffice. If there is a
condition under a prior contract under which the tenant is obliged to assign
the benefit, but no formal assignment is made on completion, it is considered
that the purchaser will nevertheless be entitled to the benefit of the notice,
which will thus not cease to have effect, on three alternative grounds, viz:
(1) upon payment of the purchase price, the
condition operates as an equitable assignment of the benefit of the notice;
(2) the purchaser is entitled to a retrospective
rectification of the assignment or transfer of the tenancy to include an
express assignment of the benefit of the notice, in accordance with the
condition;
(3) a later assignment of the benefit of the
notice, in accordance with the condition and as part of the same transaction,
is sufficient.
I will come back to that in a moment, but I will
refer briefly to another paragraph in that volume at p457 as to the contractual
effect of such notice, at para 30-12:
Unlike a Notice of Tenant’s Claim under the 1967
Act, the section 42 notice does not constitute a statutory contract. Instead,
it starts a procedure which, if successful, leads to the grant of a new lease.
The rights and obligations of the landlord and tenant arising from the notice
are treated as if they were contractual rights to the extent that they enure
for the benefit of, and are enforceable against, their personal representatives
and assigns. If either party defaults in carrying out their obligations arising
from service of the notice, the other has the rights and remedies that would
have flowed if a contract had been entered into.
And I will come back in a moment to that, because,
as part of her submissions, Miss Evans-Gordon has raised the question as to
whether, upon the facts of this case, it would have been open to the defendant
to seek either rectification of the transfer or specific performance, although
it is accepted that it is no part of her pleaded case that she seeks
rectification.
A number of authorities are relied upon by Miss
Evans-Gordon, going back to the old authority of Walsh v Lonsdale
(1882) 21 ChD 9 on the question of the enforceability of an agreement for a
lease. She also referred again to the old case of William Brandt’s Sons
& Co v Dunlop Rubber Co Ltd [1905] AC 454. Two more recent cases
she refers to are Central Insurance Co Ltd v Seacalf Shipping
Corporation (The Aiolos) [1983] 2 Lloyd’s Rep 25 and Weddell v JA
Pearce & Major [1988] Ch 26 at pp40-41; and, on a similar point, the
case of Three Rivers District Council v Bank of England [1995] 4
All ER 312. Those cases, for the major part, are concerned with the position of
equitable assignees in bringing proceedings based upon the assignment.
From those authorities, one can deduce that
proceedings commenced by an equitable assignee without joining the assignor and
before the assignment has been completed as a legal assignment can commence
proceedings, but it may be that any proceedings commenced without the joinder
will be stayed. The authorities clearly say that such proceedings are not a
nullity, as of course so many of the Rules of the Supreme Court provide that
technical failure to follow the rules do not nullify the proceedings but may
result in the proceedings being stayed until the procedural requirements have
been followed. But it seems to me that that merely confirms as a matter of law
the position of equitable assignees, and does not, in my judgment, assist me
directly on the issue with which I am concerned.
Finally, in Miss Evans-Gordon’s bundle there are
two cases concerning the circumstances in which equitable interests may give
rise under certain statutes to entitle a claim for legal benefit under the
particular provisions, and she refers first to the case of R v Tower
Hamlets London Borough Council, ex parte Von Goetz [1999] 2 WLR 582, where
it was held that an owner having an equitable interest in a property was
entitled to benefits under the Local Government and Housing Act, the court
deciding that on that particular statutory provision it was not confined to
legal interests or estates. Finally, there was the recent unreported case of
which I have seen a Court of Appeal transcript, Kingston upon Thames Royal
London Borough Council v Prince (2 December 1998)*, which received a
certain amount of publicity, in which it was decided that a minor grandchild
was entitled to succeed to a secure tenancy. But again it seems to me that that
was a case decided upon its own facts and on the particular statutory
provision. I am not persuaded that it directly assists me in determining the
issue before me.
*Editor’s note: Reported at [1998] EGCS 179
So far as the position at law is concerned, I come
back again to considering the overall tenor of Chapter II of the 1993 Act, and
particularly the provisions of section 43, and particularly subsection (3),
which I repeat once more:
Notwithstanding anything in subsection (1), the
rights and obligations of the tenant shall be assignable with, but shall not be
capable of subsisting apart from, the lease of the entire flat; and, if the
tenant’s lease is assigned without the benefit of the notice, the notice shall
accordingly be deemed to have been withdrawn by the tenant as at the date of
the assignment.
Having regard to the matters to which I have been
referred, looking at the particular section of the Act, bearing in mind the
intention of the Act and those that it was designed to protect and upon whom it
was intended to confer benefits, and applying ordinary canons of construction,
it seems to me that, on the first point, the words ‘the lease is assigned’ and
‘as at the date of the assignment’ do anticipate a legal and formal assignment.
Indeed, coming back to the particular clause in the contract to which I have
referred, it seems to me that that was the understanding and intention of the
parties to that contract. Bearing in mind the wording of clause 7(2), to which
I have already referred, that on completion of the sale of the property, the
seller will effect a valid assignment to the buyer of the benefit of the
tenant’s notice of claim, and while of course the action of parties at the time
is not in itself conclusive, it certainly seems to me that the subsequent
attempt by the licensed conveyancers to obtain a formal deed of assignment
certainly suggests that both at the time of the contract and at some time
thereafter, it was the understanding of certainly the parties then that a
formal and legal assignment of both the lease and the rights under the notice
were required. But, as I say, looking at the wording of subsection (3) and
bearing in mind specific reference to ‘if the lease is assigned without the
benefit of the notice, notice shall accordingly be deemed to have been
withdrawn by the tenant as at the date of the assignment’, it seems to me that
in the normal course of events, although I accept that the word ‘legal’ or
‘formal’ does not apply, applying the general principles of construction, what
is anticipated there in the Act is a formal assignment — that is to say, a
legal assignment — of both the lease and the benefit of the notice — the
latter, it being accepted, being in the nature of a chose in action rather than
an interest in property. If it were the latter, of course, then, as a matter of
quite separate law it would require to be in writing. So it therefore seems to
me that on the construction point I am initially with Mr Cowen on his first
submission that that would require a legal assignment of both the lease and the
chose in action, and that on that basis and that basis alone it seems to me
that the plaintiff would succeed in its claim for a declaration.
However, if I were wrong as to that, I go on to
consider what the position would be if in fact the statute would allow the
assignment of the lease and the notice to be by equitable assignment. It is
conceded that as a matter of law the completion of the transaction on 28
October 1997 did not effectively transfer the legal estate because registration
was required for that to be done, and therefore the effect of that was that, as
of the date of completion and payment of the purchase money, that had the
effect of an equitable assignment of the lease.
It is pleaded as part of the defence at para 3
that upon the completion of the assignment of the flat to the defendant by Miss
Hamilton the benefit of the tenant’s notice of claim was equitably assigned to
the defendant. I think it is conceded that in fact that is not correct, and
that, although the completion operated as an equitable assignment of the lease
for reasons that I have indicated, was the date of the contract that gave rise
to an equitable assignment of the benefit of the notice, if from its wording I
can draw the inference that it was the common intention of the parties that
that should occur. I have already referred on two occasions to that particular
provision, but for the sake of completeness I refer to it again:
On completion of the sale of the property, the
sellers will effect a valid assignment to the buyer of the benefit of the
tenant’s notice of claim,
It seems to me, as again I think I have indicated
earlier in this judgment, that it was obviously the intention of the parties at
the time
at completion to complete the assignment of the chose in action. Now it is
submitted that the fact that one was not in fact handed over really is
irrelevant to the question of whether or not the contract operated as an
equitable assignment, and Miss Evans-Gordon invites me to find that, because
that was the intention of the parties at the time of the contract and because
some months later an attempt was made to put matters right, I can nevertheless
infer that it was the common intention of the parties as at the date of
completion that the assignment was to be effective, notwithstanding the absence
of a formal document, and that may become important if Miss Evans-Gordon is to
say that this is a case where the court would have granted either rectification
of the transfer that was actually executed or specific performance of the
contract. Unhappily, there is just no evidence before me as to precisely what
the common intention of the parties was at the date of actual completion.
There are a number of inferences that can be
drawn, but of course this particular clause in the contract was of absolutely
no benefit to Miss Hamilton, the vendor. The only person who could benefit from
that assignment was the defendant as purchaser, and it was clearly a matter for
her representatives to take the necessary steps to secure that documentation.
So far as Miss Hamilton was concerned, she was perfectly entitled, as I
indicated in the course of submissions, to adopt the attitude: ‘Well, the
purchaser has not worried to ask for an assignment of the chose in action. For
all I know, she is no longer interested.’
If I am to find that the contract was sufficient
to amount to an equitable assignment, I would have to be satisfied that that
was the common intention of the parties when part performance took place by
payment of the moneys on completion. And although it is one inference, it is
not the only inference that can be drawn. I am therefore not satisfied, on the
evidence before me, that I can infer that there was an equitable assignment of
the chose in action at the date that completion took place, or indeed at any
other earlier point in time.
If I were wrong on that particular point, that an
equitable assignment can be inferred from the action of the parties as at the
date of contract — and indeed it is submitted to me that in fact I have to look
here at the two different dates, because as a matter of conveyancing law,
although the transfer was executed on 28 October 1997 and although, as it were,
that formalised the transfer of the equitable interest under the lease to the
purchaser, as a matter of general conveyancing law and practice, it is the date
of contract that polarises the transfer of the equitable interest in land, and
therefore, on the facts before me, there is no doubt whatsoever that an
equitable transfer of the interest under the lease was effective as at the date
of contract. It was, as it were, formalised by the transfer on 28 October, and,
as I say, the legal estate still remained vested in the vendor until
registration.
But even if I were wrong on the question of the
intention of the parties as at the date of completion, and even if it were open
to me to infer an equitable assignment of the chose in action as at the date of
completion, the situation we are then left with is that the transfer of the
equitable interest under the lease was effective as at the date of the
contract. A week then elapsed before the transfer of the chose in action took
place (if it took place) as an equitable assignment, and therefore the two had
been separated, because if the equitable assignment had been completed prior to
the assignment of the lease, then again, looking at the ordinary construction
of section 43(3), it says in terms that the rights and obligations of the
tenant shall be assignable with, but not capable of subsisting apart from, the
lease of the entire flat. Therefore, although it may only have been a period of
a week, it seems to me that if there had been the separation by reason of two
deemed equitable assignments, then there had been the separate assignment of
the chose in action prior to the assignment of the lease, and therefore, since
the lease itself was assigned without the concurrent assignment of the benefit
of the notice, it seems to me that the situation was caught by the proviso in
section 43(3) that the notice was accordingly deemed to have been withdrawn
and, in those circumstances, as I have indicated, on the alternative basis, the
plaintiff is again, it seems to me, entitled to its remedy.
The situation, I would add, is not fatal by any
means from the defendant’s point of view. More than 12 months have elapsed
since the service of the original notice, and therefore it is open to her to
serve a fresh notice. She will have to wait until she has been in occupation
for three years to become a qualifying tenant, so she would have to wait
another 14 or 16 months before she could serve the statutory notice. Although
she may face some delay, she is only prejudiced to that extent. These are
matters that, it seems to me, were totally overlooked by those who represented
her at the time of completion, and it seems to me they totally failed to take
account of the requirement under clause 7(2) of the contract. They attempted by
their actions, as evidenced by the documents I have referred to, to cure
matters with the benefit of hindsight; and if, as a result of this judgment, it
appears that the defendant has suffered loss, it seems to me that she may well
have her remedy elsewhere. That of course is not a matter that I have taken
into account in arriving at my decision. I mention it purely for the benefit of
the defendant, although I am sure that she will already have received advice so
far as that is concerned.
But, in any event, for reasons that I hope I have
dealt with in sufficient detail in my judgment, the plaintiff’s claim succeeds.
Judgment for the plaintiff.
