Did you miss? Prescott Place Freeholder Ltd v Batin [2023] EWHC 1445 (Ch)

Following trial, Mr Justice Richards had to determine various consequential matters.  The key question was whether an order made pursuant to s 19 of the Landlord and Tenant Act 1987 was in interest in land or created purely personal rights and obligations.

C2-8 were long residential leaseholders. C1 was a company nominated by them to acquire the freehold of their building. SD became registered proprietor of the property in 2004. SD held the property on trust for D2. D2’s interest was unregistered. In May 2014, SD transferred the property to D1 for £125,000. The 2014 Transfer resulted in D1 taking free of D2’s beneficial interest. The 2014 Transfer was a “relevant disposal” for the purposes of s4 of the 1987 Act. That triggered C1’s right under the 1987 Act to seek to acquire the freehold interest in the property from D1.

On 25 February 2019, Cs commenced proceedings in the County Court seeking an order under s19 of the 1987 Act requiring D1 to convey the freehold interest in the property to C1. On 25 October 2019, HHJ Lethem made the Section 19 Order that required D1 to convey the freehold interest in the Property to C1 “on the same terms as [D1] acquired the freehold of the Property, or alternatively on terms as may be determined by the [FTT]“. C1 entered 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, and before 14 January 2021, D1 and D2 executed the Equitable Leases granting long leases over various flats to D2 for no premium and a nominal rent. The Equitable Leases were backdated to make it appear as though they had been executed in 2014. Their purpose was to devalue the freehold interest that C1 was entitled to acquire pursuant to the Section 19 Order.

Cs obtained an injunction restraining D2 from registering any interest arising out of the Equitable Leases at HM Land Registry.

On 12 April 2021 the FTT determined that the consideration that C1 should pay to acquire the property in accordance with the Section 19 Order was £125,000.

Jamal Demachkie acted for D1 and D2’s mortgagee, who was joined as an Interested Party following the trial.

Interest in land

The judge held that a s.19 Order is an interest in land from the moment it is made. First, the order had been made against D1, who was the registered proprietor of the freehold interest in the property. Therefore, D1 had a sufficient proprietary interest in the property for the s.19 order to constitute an interest in land. Secondly, there are considerable similarities between the s.19 order and a contract for the sale of land. Where a contract is made for the sale of land, and the purchaser is potentially entitled to the equitable remedy of specific performance, the purchaser obtains an immediate equitable interest in the property contracted to be sold. The maxim that equity regards as done that which should be done is ostensibly just as applicable to the Section 19 Order as it is to a contract for sale of land. In fact, the maxim might be said to be more applicable to the Section 19 Order than to a mere contract, since, in the case of the contract, it is only following the exercise of the court’s discretion that an order for specific performance will be granted whereas, in the present case, a court order has already been made.

The equitable interest arising under the s.19 order had priority over the interest arising under the equitable leases. In the circumstance, it was right to continue the injunction against D2.

Lessons learnt

Save for the perils of being found out when fabricating documents in proceedings, the lesson which can be taken away from the Judge’s reasoning is that statutory remedies will not negate rights becoming proprietary interests. The Judge held that the fact that the claimants might have other statutory remedies against D1 or D1’s transferee did not of itself cause C1’s rights under the s.19 order to become purely personal right. When Parliament created particular rights by statute, it was significant whether it expressed those rights to take effect as an interest in the land concerned. However, any rights to land created by the s.19 order were created by the court’s decision to make such an order, and not by Parliament. It followed that little significance attached to the fact that Parliament had not expressly stated that an order under s.19 was to constitute an interest in land.