Cornwall Gardens Ltd v RO Garrard & Co Ltd [2001] EWCA Civ 699

The landlord of a block of flats challenged a collective enfranchisement notice, arguing tenants who were trustees should be counted as one entity. The Court of Appeal held that each individual trustee counts as a 'qualifying tenant', confirming the notice's validity.

Facts

Cornwall Gardens Ltd, the nominee purchaser, served an initial notice on the landlord, R.O. Garrard & Co Ltd, to exercise the right of collective enfranchisement for a block of 38 flats under the Leasehold Reform, Housing and Urban Development Act 1993. The Act requires the notice to be given by a number of qualifying tenants of flats contained in the premises which is not less than two-thirds of the total number of flats. The landlord challenged the validity of the notice on the basis that this threshold had not been met. The dispute centred on nine flats where the leases were held by two or more individuals as trustees. If each individual trustee was counted as a ‘qualifying tenant’, the number of participating tenants was 27 out of a total of 38 flats, satisfying the two-thirds requirement. If, however, the joint tenants of each flat were counted as a single qualifying tenant, the number fell to 21, which was below the required threshold.

Issues

The central legal issue was the correct interpretation of the phrase ‘qualifying tenant’ under the 1993 Act. Specifically, where a lease of a flat is vested in two or more persons as joint tenants (in this case, on trust), should each of those persons be counted individually as a ‘qualifying tenant’ for the purpose of the participation requirement for collective enfranchisement, or should they be treated as a single qualifying tenant?

Judgment

The Court of Appeal unanimously dismissed the landlord’s appeal, upholding the decision of Judge Rich QC. The leading judgment was given by Lord Justice Jonathan Parker.

Lord Justice Jonathan Parker’s Judgment

Lord Justice Jonathan Parker conducted a detailed analysis of the statutory wording. He concluded that the language of the 1993 Act was clear. Section 5(1) of the Act defines a ‘qualifying tenant’ as ‘a tenant of the flat under a long lease at a low rent’. He found no ambiguity in this definition when applied to joint tenants.

In my judgment it is perfectly plain that, on the true construction of the 1993 Act, where a lease of a flat is vested in two or more persons as joint tenants each of them is a ‘tenant’ of the flat for the purposes of the Act. I can find nothing in the context of the 1993 Act to lead to any other conclusion.

He addressed the landlord’s argument that such an interpretation would lead to anomalies and absurd results, such as a large number of trustees for a single flat being able to dominate the enfranchisement process. While acknowledging the potential for such scenarios, he held that this did not justify departing from the plain meaning of the words used by Parliament. He reasoned that the Act distinguishes between the status of being a ‘tenant’ (which each joint tenant is) and the exercise of rights under the lease (which must be exercised by the joint tenants acting together).

In my judgment, the fact that an individual joint tenant is a ‘tenant’ (and thus, if the other conditions are satisfied, a ‘qualifying tenant’) for the purposes of the 1993 Act does not carry with it the consequence that such a person is entitled, acting on his own, to exercise rights which are vested in the joint tenants collectively. Thus, where a right (e.g. the right to a new lease under Chapter II of the Act) is attached to the tenancy, that right must be exercised by the joint tenants acting unanimously.

The court concluded that for the purpose of calculating the number of participating tenants under section 13(2)(b) of the Act, each individual who is a joint tenant is to be counted. Therefore, the initial notice was validly served as the two-thirds threshold had been met.

Implications

The decision provides a definitive clarification on the counting of joint tenants, particularly trustees, for the purposes of meeting the participation threshold in a collective enfranchisement claim. It confirms that the statutory test focuses on the individual status of each tenant rather than the single legal entity of the tenancy itself. This interpretation facilitates the process of enfranchisement where properties are held in trust, as it increases the pool of potential ‘qualifying tenants’ who can participate. The judgment also serves as a strong example of the court’s adherence to a literal approach to statutory interpretation, even where it may lead to potentially inconvenient or complex practical outcomes, placing the onus on Parliament to amend the legislation if a different result is desired.

Verdict: Appeal dismissed.

Source: Cornwall Gardens Ltd v RO Garrard & Co Ltd [2001] EWCA Civ 699