This December, the Legal Notes team of Allyson Colby, James Driscoll and Stuart Pemble have been visited by an angel, who offered them a tantalising glimpse of what could have happened if things had been otherwise in the courts in 2015
The bells will soon be ringing out for Christmas and when they do, please spare a thought for Clarence, an angel in training, who needs his wings.
This year his superior, Joseph, thought that the property world might be in need of a guardian angel. So he asked Clarence to help us consider what life would have been like if some of this year’s biggest decisions had gone the other way.
Reversing adverse possession?
Scrolling back to the beginning of the year, in R (on the application of Best) v Chief Land Registrar [2015] EWCA Civ 17; [2015] PLSCS 20, the Court of Appeal considered changes to the law that criminalised squatting in residential buildings, which had left the legal world pondering how this would affect the law on adverse possession. The court decided that squatters in residential properties can still acquire title to the land, but Clarence wondered whether this could be right. What angel could support actions that are criminal?
Then Clarence imagined a world in which the case had been resolved differently. Squatters would be able to acquire title to some properties, but not others, depending on the type of property involved and the facts of each individual case. Empty residential properties, the owners of which were untraceable, would be more likely to go to rack and ruin – and it would be more difficult to bring ownerless land back into economic use. On balance, therefore, Clarence could see that there were good reasons for the decision.
Suffering service charges
There were lots more interesting residential cases during 2015. Clarence considered just two of them. In Arnold v Britton and others [2015] UKSC 36; [2015] EGLR 53, the Supreme Court had to decide whether a service charge provision that allowed annual increases on a compound basis was a fixed charge, or a variable charge that was susceptible to challenge under the Landlord and Tenant Act 1985. A majority of the court ruled, with some regret, that it was a fixed charge, leaving leaseholders of certain holiday chalets facing potential bills of more than £1m.
Had the court decided otherwise, the landlord would have been unable to claim service charges unless they were linked to the landlord’s actual expenditure and were reasonable. Clarence suspected that many leaseholders and commentators would have welcomed such a decision as an excellent example of the court striving to ensure that clauses are interpreted not only to give effect to their intended purpose, but also to guard against unfair and unintended burdens being placed on lessees. Clarence could not help sympathising with the chalet leaseholders, but was unable to reverse the decision.
Managing rights and wrongs
The statutory right to manage allows qualifying groups of leaseholders to take over management of their block of flats. It is a no-fault right and no compensation is payable to the landlord. In order to exercise the right, the participating leaseholders must form a right-to-manage company (“RTM company”). If there is more than one block of flats on an estate, can the leaseholders in the blocks club together and use one company? The Court of Appeal said a resounding “no” in TripleRose Ltd v Ninety Broomfield Road RTM Co Ltd and two similar appeals [2015] EWCA Civ 282; [2015] EGLR 51.
Clarence imagined what might have happened had the court decided, pragmatically, that one RTM company could manage more than one block of flats, provided that the majority of leaseholders in each block supported the right-to-manage claim. This would mean that estate-wide works and services could be provided by one company and would have come as a relief to all those leaseholders of more than one block who had already acquired a right to manage through the medium of one such company. But, unfortunately, the legislation did not allow for this and changing that is an arduous process, even for an angel.
Construction deconstruction
When it came to construction and professional negligence, Clarence thought about two decisions. A number of construction lawyers felt that the Supreme Court’s decision in Aspect Contracts (Asbestos) Ltd v Higgins Construction plc [2015] UKSC 38; [2015] EGLR 54 was wrongly decided and the facts of Goldswain and another v Beltec Ltd (t/a BCS Consulting) and another [2015] EWHC 556 (TCC); [2015] PLSCS 82 were enough to tug at even the most hardened of trainee angels’ heartstrings.
Aspect involved the disputed enforcement of an adjudicator’s award where the limitation period for bringing a claim under the contract to which the award related had expired. The Supreme Court agreed with Higgins that the Scheme for Construction Contracts (England and Wales) Regulations 1998 (IS 1998/649) implied a term that any dispute that has been referred to adjudication can be finally determined by legal proceedings, with a fresh limitation period of six years. Clarence had thought that the courts rarely implied terms into contracts and he was puzzled as to why the Supreme Court was so lenient in a case that was effectively about one party having delayed too long before bringing proceedings.
Goldswain concerned a family whose cellar refurbishment had gone so badly wrong that they had actually had to run out of their house as it fell down around them. The contractor, whose poor workmanship was the main cause of the problems, was insolvent and so the family sued the engineers who designed the work and who had professional indemnity insurance cover that could meet any damages claim. Akenhead J refused to penalise the engineers because their design was not faulty and they had not been instructed to supervise the work. Clarence would have liked the family to get some compensation for losing their house – after all, it is Christmas.
However, having thought about it some more (and showing that he was learning how to be a proper angel), he decided not to change either decision. There would have been little practical benefit in overturning Aspect because lawyers were either ignoring it or drafting clauses making it clear that the limitation period for enforcing adjudicators’ awards is the same as that in the underlying contract. And, although the facts of Goldswain were sad, the decision was correct because the engineers had done nothing wrong. Professional consultants need to celebrate Christmas too.
Penalty shoot-out
This led Clarence to the law on penalties, now reshaped following Cavendish Square Holding BV v Talal El Makdessi; ParkingEye Ltd v Beavis [2015] UKSC 67; [2015] PLSCS 309. The judgment makes it clear that contractual provisions will constitute unenforceable penalties if they impose consequences for breaches of contract that are out of all proportion to any legitimate interests of an innocent party in the enforcement of the contract breaker’s obligations.
The trainee angel knew that Christmas would have arrived early for some if, in Parkingeye, instead of upholding the £85 charge imposed on a motorist who had overstayed his welcome in a car park, the court had decided that the charge was unenforceable. But, after picturing Christmas shoppers desperately looking for space in car parks jammed by long-stay users, or perhaps even the loss of short-term free parking altogether, Clarence began to understand the perils of trying to rescue unfortunate motorists from the Supreme Court’s decision.
Magic and sparkle?
Our final legal flashback saw Clarence heading only a little over a fortnight into the past to wrestle with Marks & Spencer plc v BNP Paribas Security Services Trust Co (Jersey) Ltd and another [2015] UKSC 72; [2015] PLSCS 341, where the allure of “what might have been” was hard to resist. Tenants had hoped that the litigation would prove a turning point in the battle to have rent apportioned when a lease is broken, but – as we all now know – it was not to be.
The Supreme Court acknowledged that it might be reasonable and equitable to imply a term into the parties’ lease requiring the landlord to refund any rent prepaid in advance for the period between the break date and the end of the quarter, but decided that this would be inappropriate. It was not necessary to give business efficacy to the parties’ contract and would fly in the face of a clear, consistent and correct line of authority, dating back to Ellis v Rowbotham [1900] 1 QB 740, concerning the non-apportionability of rent that is paid in advance.
Our angel in training sympathised with those who were disappointed by the decision but, in his mind’s eye, saw the difficulties that would have been caused had the court ruled otherwise. A decision to the contrary would have raised questions about the legal position when a landlord forfeits a lease, as well as opening the floodgates to claims for restitution of sums that have been overpaid in the past. More importantly, it would have had serious implications for the law on implied terms in general, had the court stepped in where Clarence feared to tread.
Lexis angelicus
Clarence’s review of some of this year’s leading cases reminds us that it has been another busy year for the courts, in which they have had to deal with disputes about the meaning of contractual and statutory provisions affecting residential and commercial properties across the spectrum. We hope that Clarence’s efforts will stand him in good stead when the Angel Promotion Board next sits.
Clarence’s Legal Notes checklist
Want to know more about the cases that caught the eye of an angel? Then these are the Legal Notes you need to read:
- R (on the application of Best) v Chief Land Registrar: Allyson Colby, No adverse effects, 28 February 2015, p107
- Arnold v Britton: James Driscoll, Chalet some mistake? 27 June 2015, p117
- TripleRose Ltd v Ninety Broomfield Road RTM Co Ltd and two similar appeals: James Driscoll, One block or more? 13 June 2015, p113
- Aspect Contracts (Asbestos) Ltd v Higgins Construction plc: Stuart Pemble: Who’d be a High Court judge? 19 September 2015, p119
- Goldswain and another v Beltec Ltd (t/a BCS Consulting) and another, Stuart Pemble: Hard cases do not always make bad law, 6 June 2015, p75
- Cavendish Square Holding BV v Talal El Makdessi; ParkingEye Ltd v Beavis: Allyson Colby, Penalty kicks, 28 November 2015, p111
- Marks & Spencer plc v BNP Paribas Security Services Trust Co (Jersey) Ltd and another: Legal Note coming early in 2016.
Allyson Colby is a property law consultant, James Driscoll is a solicitor and writer, and Stuart Pemble is a partner at Mills & Reeve LLP
