Gaia v Abbeygate Helical [2019] EWCA Civ 823

Last week, the Court of Appeal handed down its decision in Gaia v Abbeygate Helical [2019] EWCA Civ 823, a case about whether a developer, Abbeygate Helical, had fulfilled its obligation to use ‘reasonable endeavours’ to satisfy certain conditions ‘as soon as reasonably practicable’ so as to trigger an obligation to make a £1.4million overage payment.  The conditions related to ’site assembly’, specifically the acquisition of and variation to various interests to enable the development to take place.

The High Court (Norris J) had held that Abbeygate had not satisfied the obligation but, if they had, the overage would have been triggered at a time that entitled Gaia to claim the overage. Abbeygate Helical was, therefore, ordered to pay the £1.4m overage payment.

There were several grounds of appeal. But Abbeygate’s principal argument was that its endeavours obligation entitled it to have regard to its own commercial interests when deciding what steps to take to satisfy the conditions. It said that it would have been absurd and ‘commercially irresponsible’ if Abbeygate Helical had made commitments that would satisfy the conditions without first securing funding for the development (of a few tens of millions).

The Court dismissed Abbeygate’s appeal. On the endeavours point, it held that, in circumstances where Abbeygate had itself restricted access to funding, it was open to the first instance Judge to conclude that, even if access to funding was a relevant consideration, it could not be relied upon to show that it had used ‘reasonable endeavours’ to satisfy the conditions ‘as soon as reasonably practicable’. Abbeygate Helical’s manipulation of the timetable to take the satisfaction of the conditions beyond the long stop date for payment of the overage was “on any view” a breach of the obligation. The other grounds of appeal also failed.

Mark Wonnacott QC and Harriet Holmes acted for the successful respondent.

The full judgment can be found here.

Neville Andrew v Commissioners for HM Revenue and Customs [2019] UKFTT 768 (TC)

Jonathan Davey QC has received judgment in a First-tier Tribunal appeal regarding a pre-planned tax scheme involving the disposal of gilt strips. The issues raised in the appeal included the meaning of the phrase “the amount payable on the transfer” (paragraph 14A(3) of Schedule 13 of the Finance Act 1996). The First-tier Tribunal (“FTT”) (Judge Ashley Greenbank) held that on a purposive construction of the relevant legislation, the term “transfer” was to be interpreted more broadly than the Appellants contended, and, accordingly, on the facts of the case, the “transfer” in question comprised the aggregate of two amounts including a cash cancellation payment under an option agreement. The FTT therefore found the Respondents on the point. Jonathan Davey QC acts for the Respondents (HMRC) with Sam Chandler (5 Stone Buildings); David Yates QC (Pump Court Tax Chambers) for the Appellant.

Read the full judgment here.

Churston Golf Club v Haddock

Conveyancers and property lawyers will breathe a sigh of relief on seeking the Court of Appeal’s decision in Churston Golf Club v Haddock [2019] EWCA Civ 544, with judgment handed down today. The Court has overturned the decision of Birss J that a standard form of fencing covenant should be treated as an anomalous “fencing easement”, capable of binding successors in title. The decision whether it is ever possible to create a fencing easement by express grant remains open for debate in a later case. Joanne Wicks QC acted with Malcolm Warner of Guildhall Chambers for the successful appellant.

The full judgment can be downloaded here.

Takhar v Gracefield Developments Ltd [2019] UKSC 13

The Wilberforce team of John Wardell QC and Andrew Mold (instructed by Tanners Solicitors) were successful in the Supreme Court case of Takhar v Gracefield Developments Ltd handed down yesterday morning.  A 7 justice Court unanimously allowed their client’s appeal and clarified the correct legal test for setting aside judgments on the grounds of fraud.

The full judgment is available for download here.

Keymed (Medical & Industrial Equipment) Limited v Hillman [2019] EWHC 485 (Ch)

Marcus Smith J has delivered his judgment in Keymed (Medical & Industrial Equipment) Limited v Hillman [2019] EWHC 485 (Ch), in relation to claims against the former Managing Director and Finance Director of the Claimant company for breach of duty and conspiracy, in connection with benefits provided to the directors from the Claimant company’s pension scheme. The following barristers appeared on the case: John Wardell QC, Andrew Mold and Tim Matthewson for the Claimant company, and Paul Newman QC, Simon Salzedo QC and Stephen Midwinter QC for the Defendant directors.

The full judgment is available for download here.

Canary Wharf v European Medicines Agency [2019] EWHC 335 (Ch)

Judgment is out on the much-talked-about case of Canary Wharf v European Medicines Agency: the Agency’s London lease will not be frustrated by the UK’s departure from the EU or the Agency’s move to Amsterdam. Wilberforce is proud to have appeared on both sides: Joanne Wicks QC and Jonathan Chew for Canary Wharf, and Jonathan Seitler QC and Emer Murphy for EMA.

The full judgment is available to download here.

The Christ Church, Spitalfields Case

The Christ Church, Spitalfields Case: 2012-2019

This is a case of some importance – certainly within the ecclesiastical jurisdiction and potentially of wider significance – in which Thomas Seymour acted throughout, instructed by Richard Buxton Environmental Planning and Public Law Solicitors.

In the wake of the magnificent multi-million pound restoration of Hawksmoor’s masterpiece, there has been a long-running legal dispute over the consecrated churchyard which forms the setting to the Church, a World Heritage Site. The dispute was finally brought to a close by the landmark judgment of the Court of Arches on 28 January 2019. The churchyard had been closed to burials in 1859 and was a disused burial ground where over 60,000 burials had taken place. For many years it had been managed by the local authority – now Tower Hamlets – under a management agreement with the Rector as freeholder, requiring its use as an open space for the public. In 1872 Christ Church School had been erected on the east end of the churchyard facing Brick Lane; it continues to operate as a primary, voluntary aided school on that site. S.3 of the Disused Burial Grounds Act 1884 prohibited the erection of any building on a consecrated churchyard with limited exceptions e.g. for an enlargement to the church or a building used for worship. This post-dated the 1872 school, but applied as from 1884.

By 1960 the church was derelict and might well have been condemned but for the efforts of the Betjeman Committee.

In the early 1970’s the Christ Church Adventure Playground Association was permitted to occupy the churchyard. A private Act of Parliament passed in 1967  enabled the local authority, where it holds or manages a disused burial ground as open space, to grant licences for recreational facilities and to erect related buildings, notwithstanding the prohibition in the 1884 Act. Under the auspices of the 1967 Act a building related to the adventure playground use was erected on the churchyard. The Association later gave way to a Youth Centre which by 2009-10 had become defunct.

At that time educational grants were made available for the refurbishment of the school premises. The London Diocesan Board of Schools (LDBS) was involved in the grant application process. The Rector, LDBS and the School Governors together developed the idea of extending the school’s operations over the churchyard: replacing the 1970’s building with a new building to serve as an additional school nursery, with ancillary communal facilities for the parish. This was to be funded by the educational grant funds. Despite significant opposition, Tower Hamlets granted planning permission in 2011. The Rector and Churchwardens then applied to the Chancellor of London, Nigel Seed Q.C. for a faculty, stating – quite wrongly – in the petition that the land was not consecrated and that there would be no interference with graves. Christine Whaite, a local resident, and Chairman of the Friends of Christ Church Spitalfields, put in a strong objection, but did not become a formal “party opponent”. In February 2012 the Chancellor granted the faculty, noting that there were no ecclesiastical reasons for not granting it. In August the old building was demolished. At this stage no one had identified the fact that erection of the proposed building would be in breach of S.3 of the 1884 Act and so could not be authorised by faculty at all. On 12 September Mrs Whaite –  who had by then started an informal association called Spitalfields Open Space (SOS), incorporated in March the following year – to all concerned, including the Chancellor,  objecting to the proposed works and warning that it would constitute a breach of S.3 of the 1884 Act. The works were commenced in October and carried out knowingly in the face of this objection and completed in mid 2013.

In March 2013 SOS  instructed solicitors and intimated an intention to seek an injunction. Tower Hamlets responded months later by issuing a decision purporting to authorise the new building under the private Act of 1967, on the basis that the School was a “club, society or other organisation engaged in the provision of social, recreational or educational facilities”. SOS and Mrs Whaite challenged that by judicial review. The proceedings were stayed by agreement, whilst the parties negotiated. Those negotiations proved abortive. In August 2014 the School announced its intention to go into occupation of the building, which in September the Chancellor permitted, in the face of objection from SOS and Mrs Whaite. SOS had sought to persuade the Attorney-General to bring a relator action, but the Attorney-General was not willing to take any action.

In August 2014 proceedings were brought by SOS in the Consistory Court for a Restoration Order – the equivalent of a mandatory injunction – under the relevant ecclesiastical measure. The Chancellor chose to call in the application and after making initial directions and hearing argument, stayed the proceedings as an abuse of process. This decision was appealed. In July 2015 the Court of Arches allowed the appeal and directed that the matter be tried before a deputy chancellor. June Rodgers, the then Chancellor of the Diocese of Gloucester was appointed for this purpose.

In April 2015 a new Measure was passed which authorised the Court, subject to certain conditions, to grant a faculty for the erection of a building on a disused burial ground, notwithstanding S.3 of the 1884 Act.

The Rector and Churchwardens petitioned for a “confirmatory faculty” under this Measure and argued that the Court could, and should, grant such a faculty, authorising the new building for the future, and on that basis dismiss SOS’s application.,

The trial, heard in June 2016, took 10 days – possibly the longest trial ever in the Consistory Court – was followed by a judgment remarkable, as the Court of Arches later noted, for its length (over 500 pages) and outspoken criticisms of the parties. The Deputy Chancellor accepted that the 1967 Act did not apply to Schools, and that the building had been erected in breach of S.3 of the 1884 Act and that had it come before her before April 2015, she would have had little option but to grant a restoration order. But she held that because of the 2015 Measure, it would be pointless for her to order demolition when an identical new building could be erected under faculty following its demolition. The judgment did not however indicate the source of the power to grant a confirmatory faculty. She also held that SOS did not have standing to sue and deplored the use of shell companies. Permission to appeal was refused.

As in 2015, SOS and Mrs Whaite received a more favourable hearing and outcome before the Court of Arches. Permission to appeal was given on two grounds: standing to sue and the jurisdiction to grant the confirmatory faculty.

On the standing issue, the issue was whether SOS had “sufficient interest”: the expression used in the case both of restoration orders and opposition to faculty applications is the same as that used in the context of judicial review, where use of a limited company is commonplace. The Court of Arches reviewed authorities in public law/judicial review cases, and took into account that any concerns as to the inability of shell companies to pay costs were met by the security for costs jurisdiction. On the facts SOS, which had been founded by members who were resident in Spitalfields with the bona fide objective of protecting open space in Spitalfields  did have a sufficient interest. The Court noted that on other facts, for example where the company had no connection with the parish, a sufficient interest might not be established. It acknowledged that views it had expressed obiter in its 2015 judgment that a proprietary interest was required appeared to be too narrow., no standing.

On the jurisdiction issue, the Court reversed the decision of the Deputy Chancellor, holding that there was no jurisdiction under the 2015 Measure to grant a confirmatory faculty. The 2015 Measure as a matter of construction only authorised a court to grant a faculty to authorise the erection of a future building: it did not authorise the Court to grant a confirmatory faculty. The fundamental difficulty was that the building, erected as it was in breach of S.3 of the 1884, could never have been authorised by faculty, as is well established by ecclesiastical caselaw. This could not be remedied by praying in aid the 2015 Measure.

The Court focussed on the fact that development was carried out in reckless disregard of the objection and specific warning given in September 2012 that the erection was in breach of S.3 of the 1884 Act, It characterised the conduct of all those responsible – Rector, Churchwardens, School, LDBS and Tower Hamlets – as “reckless and flagrant misconduct”. It held that there was a public interest in public Acts of Parliament being obeyed, noting that there was no other remedy afforded by the legislation. It took account of the fact that the breach was, according to case law, an indictable offence, and that Tower Hamlets was as borough council was responsible for enforcement. The court accordingly concluded, albeit with some regret, that a restoration order should be made. The order was suspended for an unusually long period until 1 February 2029, but to take effect earlier if the School closed or moved premises before that date. The rationale for the long suspension was that the new building was fulfilling a useful purpose and that by allowing it to stand till 2029, the expenditure of public funds would at least in part have been justified. (Compare Wrotham Park Limited v Parkside Homes Limited [1974] 1 WLR 798 in which Mr Justice Brightman refused to make an order to demolish new homes as being an unpardonable waste of public funds and awarded damages instead).

Conclusions

Ecclesiastical Law. The case is important, particularly as it is an authoritative appellate decision. In particular:

(i) The first case on the meaning and effect of S.4 of the 2015 Measure which confers the new power to grant a faculty on a disused burial ground which is a consecrated churchyard.  Not only is there a detailed analysis of the statutory provision and its effect, but, in consequence of a further argument pursued on appeal, the Court had to consider the meaning of “interment” and “relative” in the section.

(ii) Sufficient interest. The decision on standing is relevant not only for restoration order applications but in the context of the faculty jurisdiction where the same test applies.

(iii) Restoration Orders. There are not many reported cases on restoration orders, and very few, if any, concerning the erection of a building. The Court’s approach to the the principles and to the exercise of discretion will be important.

(iv) Breach of statute. Most cases concern breaches of faculty control: this case is unusual in that it was a breach of statute. The case endorses the important principle that faculties cannot authorise breaches of statute.

(v) Confirmatory Faculty. It also demonstrates the limitations of confirmatory faculties. Unless there is an express source for a confirmatory faculty, a confirmatory faculty cannot be used to authorise works in breach of statute which no prospective faculty could have authorised.

General

(i) Mandatory injunctions. The decision provides a further and drastic illustration of the principle that those who erect buildings when put squarely on notice that they are acting in breach of the law cannot expect to find sympathy  with the Court when a mandatory injunction is applied for. A developer will is likely to get short shrift if he resists the application on the basis that no interim injunction was applied for. Applying for an interim injunction entails substantial cost and risk and it is not unreasonable for the claimant objector simply to register the objection in writing.

(ii) Sufficient interest. The case will stand together with the judicial review cases as showing that a limited company formed at the time of the events in question to bring proceedings may have a sufficient interest.

(iii) Enforcement of the law. The case is of wider interest in the context of the relator jurisdiction of the Attorney-General in relation to civil injunctions.  Gouriet v Union of Post Office Workers [1978] AC 435 confirmed that the Attorney-General’s discretion was absolute and uncontrolled, and that no member of the public could bring proceedings for an injunction to restrain a breach of statutory duty.   In the Spitalfields case the Attorney-General was unwilling to take action, despite the ostensible breach of statute; he expressed the provisional view (wrongly as it transpired) that the private Act applied, and that there was no criminal offence.  It is likely that for costs reasons the Attorney-General will very rarely intervene in practice. Because of the “sufficient interest” test,  SOS and Mrs Whaite were nevertheless able to enforce in the Consistory Court. But had it been a secular matter, no member of the public could have brought civil proceedings against the wrongdoers. This seems inherently unsatisfactory.  Some assistance is provided by Section 222 Local Government Act 1972 under which local authorities can bring proceedings to enforce a breach where expedient for the promotion or protection of the interests of the public in their area. But local authorities, increasingly cost-conscious, are unlikely to invoke these powers except as a last resort. S.222  affords no assistance  where, as in this case, the local authority condones or is implicated in the wrongdoing.  Returning to the role of the Attorney-General, if the relator jurisdiction is to have any useful role in practice, surely the Attorney General’s discretion should be susceptible to judicial review.

The FA v West Ham United

David Phillips QC has chaired the FA Regulatory Commission that considered West Ham United FC’s liability for the supporter disorder at its match against Burnley FC held at the London Stadium on 10 March 2018. An unusual feature of the incident was the lack of legal control that West Ham had over the stewarding at the London Stadium. The Commission found West Ham to have been in breach of FA Rule E20: it dismissed West Ham’s argument that it could avail itself of the due diligence defence provided by FA Rule E21. West Ham was fined £100,000. The Written Reasons for the decisions on liability (4 December 2018) and sanction (18 January 2018) can be read here.

Gareth Clark v Commissioners for HM Revenue and Customs [2018] UKUT 0397 (TCC)

Jonathan Davey QC has been successful in an important Upper Tribunal appeal regarding the meaning of “payment” in the context of the unauthorised payment legislative regime relating to registered pension schemes (Finance Act 2004). The case concerned a set of arrangements aimed at extracting funds from a SIPP so that they could be used to invest in the Mayfair property market.

The Upper Tribunal (Mr Justice Arnold and Judge Timothy Herrington), upholding the decision of the First-tier Tribunal (Judge Roger Berner), held that the reasoning of the Court of Appeal in Venables v Hornby [2001] STC 1221, although not directly applicable, was persuasive by analogy. The Upper Tribunal also held that the reasoning of the High Court in Venables and the High Court in Thorpe v Revenue and Customs Commissioners [2009] STC 2108 was not persuasive because in both instances the case proceeded on the basis that the funds could and would be restored to the pension fund, contrasting the present case. The Upper Tribunal considered that the High Court’s decision in Hillsdown Holdings plc v Inland Revenue Commissioners [1999] TC 561 was distinguishable from the present case for similar reasons to those given by the Court of Appeal in Venables.

The full judgment can be downloaded here.

S Franses Ltd v The Cavendish Hotel (London) Ltd [2018] UKSC 62

1. On 5 December 2018 the Supreme Court handed down judgment in S Franses Ltd. For anyone advising landlords or business tenants in relation to security of tenure under the Landlord & Tenant Act 1954 (“the 1954 Act”) the case is a must-read: it introduces a whole new element to the test when establishing whether a landlord has the requisite intention to redevelop under ground (f), which may prove harder for landlords to satisfy.

The facts

2. The facts of S Franses are extraordinary, but the decision has wide ramifications for many ground (f) cases.
3. S Franses Ltd (“the Tenant”) has premises on the corner of Jermyn Street and Duke Street, which it holds under two leases and which it occupies for the purposes of its business as a textile art dealership and consultancy, specialising in antique tapestries and textiles. Most of the rest of the building is a hotel, run by the Tenant’s landlord (“the Landlord”). The tenancies benefit from security of tenure under the 1954 Act. After the leases came to an end, the Tenant requested new tenancies, which the Landlord opposed on ground (f), the redevelopment ground.
4. The Landlord put forward various schemes of work. The first involved combining the premises with the neighbouring hotel bar. The second involved creating two new retail units from the premises and part of the hotel. However, from the Landlord’s perspective there were two problems with this second scheme. First, it needed planning permission, both for the external works necessary to create a second entrance from the street and for a change of use. But its planning application was recommended for refusal. Secondly, its solicitors advised that the works involved were insufficiently substantial to satisfy ground (f). The scheme of work that the Landlord eventually relied upon was designed to address both of these issues. It took the plan for two retail units and stripped out all the external works for which planning permission was required. It also added various additional works, some of which were entirely contrived, such as artificially lowering the basement floor, repositioning smoke vents for no reason and demolishing and rebuilding an internal wall.
5. The proposed scheme had no practical utility, and would have been not just pointless, but also expensive and destructive, because it would have rendered the premises incapable of lawful use and occupation. The space created by the works could not be lawfully used because, for planning purposes, the premises had a ‘sui generis’ use, and the hotel had ‘C1’ use: it was impossible for a single user to use both parts simultaneously. Moreover, one of the units would have no entrance from the street and the wall between the two proposed new units would stop two metres short of the shopfront.
6. The natural inference was that the Landlord did not genuinely intend to carry out the works. However, the Landlord explained its reasoning: it wanted the Tenant out of the premises, and was prepared to do whatever it took to achieve that aim. The works were designed precisely because they were required to obtain possession. In an attempt to put matters beyond doubt, the Landlord also offered an undertaking to the Court that it would carry out the works, once vacant possession had been ordered. However, the Landlord’s evidence was that if the works were unnecessary to obtain vacant possession (e.g. because the Tenant vacated voluntarily), or if the works could be carried out under a right of entry with the Tenant remaining in possession, it would not carry them out.
7. There were therefore three important features:
   • The Landlord demonstrated that if it needed to carry the works out to obtain vacant possession it would definitely do so: its intention was genuine, firm and settled in that regard.
   • The Landlord’s sole purpose in carrying out the works was to get the Tenant out. This was not a case where the works themselves had any benefit. They were purely a mechanism to secure vacant possession.
   • The Landlord’s intention was conditional upon the works being necessary to obtain vacant possession. If the Tenant vacated voluntarily the works would not be carried out.

The Supreme Court’s decision

8. The Supreme Court decided that the Landlord’s intention was not of the nature or quality required by ground (f). That is because it was conditional in a disqualifying way, namely the works were only intended if they were necessary to get the Tenant out. If such a conditional intention was sufficient, tenants’ security of tenure would be undermined, because a landlord would simply be able to ‘buy out’ the tenants’ security of tenure by designing a scheme of works it would never otherwise carry out, serving no legitimate policy purpose. The interest of a landlord which ground (f) protects is its interest in redevelopment, not its interest in obtaining vacant possession, which is the very thing which the Act is designed to restrict. Consequently, Parliament cannot have intended a landlord which intended to carry out redevelopment only if it was necessary to satisfy ground (f) to be able to prevent its tenant obtaining a new tenancy.
9. Lord Sumption said at [19]:

“the landlord’s intention to demolish or reconstruct the premises must exist independently of the tenant’s statutory claim to a new tenancy, so that the tenant’s right of occupation under a new lease would serve to obstruct it. The landlord’s intention to carry out the works cannot therefore be conditional on whether the tenant chooses to assert his claim to a new tenancy and to persist in that claim. The acid test is whether the landlord would intend to do the same works if the tenant left voluntarily.”

10. This new test applies both to the scheme as a whole, and to each element of the scheme, separately. It is to be assessed at the date of the trial.
11. By the time of the trial, it might be crystal clear that in fact the tenant is not going to leave voluntarily, and so in fact there is no prospect of such a condition being unfulfilled: the landlord will carry the works out. Their Lordships concluded that even in such a case, if the landlord’s purpose is to get rid of the tenant, demonstrating that, if asked to consider what it would do, the landlord would not carry out the works if the tenant voluntarily vacated (however unlikely that might be), the intention requirement in ground (f) will not be satisfied. That is because the fact that the landlord is only proposing to carry out the works to get rid of the tenant reveals that its intention is qualified in an impermissible way (see [21] and [29]-[30]). As Lord Briggs said at [30]:

“there is nothing hypothetical or counter-factual about testing the type or qualify of the landlord’s intention, as at the time of the hearing, by an analysis of the purpose or motive behind it”.

12. In reaching its conclusion, the Supreme Court held and/or confirmed that:
    • The Act does not ask directly what a landlord’s purpose or motive is. It asks what the landlord’s intention is. But a motive to remove the tenant is evidentially relevant, not only in showing that the intention might not be genuine, but also in showing that it may be conditional in the impermissible way.
    • It is entirely up to the landlord to decide what works it wishes to carry out, whatever their utility. However, much like motive and purpose, utility may be evidence of whether the landlord’s intention is genuine, firm, settled and unconditional.
    • There is nothing wrong with the original inspiration for the works, or part of the motivation behind doing the works, being to get rid of the tenant. That motivation only becomes an issue where the landlord would not carry out the same works if the tenant vacated the premises voluntarily (see [31]).

Ramifications in other cases

13. Every ground (f) case will now need to consider this new Franses test: would the landlord still carry out the same works if the tenant left voluntarily? The question has to be asked in relation to each element of the proposed works. Where a landlord has ‘beefed up’ a scheme of works in order to ensure that they are sufficiently substantial to meet ground (f), or where a landlord is proposing works without any obvious use, its motive and purpose is likely to come under close scrutiny.
14. However, landlords who have put together a scheme of works because the works in and of themselves, and in their entirety, are desired come what may, will have nothing to be concerned about, provided that they are able to evidence that that is their intention.

 

JOANNE WICKS QC

BEN FAULKNER

Joanne Wicks QC and Ben Faulkner were instructed by David Cooper of David Cooper & Co on behalf of the tenant, S Franses Ltd.

For the judgment, click here.