Wellcome Trust Ltd v Bellhurst Ltd

Under Part I, Chapter II of the Leasehold Reform, Housing and Urban Development Act 1993, a tenant’s notice must be given to each person who is a statutory third party to the lease. That requirement serves the purpose of protecting persons who will acquire rights or assume obligations under the new lease. It does not extend to a person who was named in the original lease only to give effect to a subsale and has no continuing interest.

Failure to provide copies of a tenant’s notice to an “other landlord” does not ordinarily invalidate the notice. Under Schedule 11, paragraph 4(1), invalidity applies only where the tenant obtained information under section 41 and failed to act on it. In other cases, paragraph 4(2) provides a remedy in damages for loss caused by non-compliance.

The Wellcome Trust, the competent landlord, appealed from an order of His Honour Judge Cowell in the West London County Court dismissing its application for a declaration that Bellhurst Limited’s notice claiming a new lease was invalid.

Bellhurst had failed to give notice to Charlgrove Securities Limited, an intermediate landlord, and to Mr Edgson, who had been a party to the original underlease but had no continuing interest after its grant. The issues were whether those omissions invalidated the tenant’s notice under section 42 and Schedule 11 of the Leasehold Reform, Housing and Urban Development Act 1993.

1. Disposition. The appeal was dismissed. The order dismissing the Trust’s application was upheld, with costs summarily assessed at £6,259.22.
2. Third-party issue. Section 42(2) uses mandatory language. A notice is defective if it is not given to a person who falls within the statutory definition of a third party. The statutory purpose, reflected in section 57(9), is to keep in the new lease a person who has continuing rights or obligations connected with the existing lease. The decision in John Lyon Grammar School v Secchi [1999] 3 EGLR 49 provided a clear indication of that purpose.
3. Mr Edgson was a party to the underlease as a deed, but only to give effect to his subsale. Once the underlease had been granted, he had no continuing interest, rights or obligations. He was therefore not a statutory third party requiring notice. The Trust was granted permission to appeal on this point, but the appeal failed.
4. Other landlord issue. Schedule 11, paragraph 1 makes a tenant’s notice effective as against the competent landlord if it is given to any other landlord instead. Paragraph 2 requires copies to be given to the other landlords known or believed by the tenant to exist. However, paragraph 4 draws a deliberate distinction. Where the tenant obtained information under section 41 and failed to use it, paragraph 4(1) causes the notice to cease to have effect. In all other cases, paragraph 4(2) imposes liability for loss caused by non-compliance, without invalidating the notice.
5. The possible hardship caused by that statutory scheme could not justify departing from its clear language. Section 49(2) was consistent with the conclusion that a notice may remain effective despite failures concerning copies. Authorities concerning inaccuracies in the contents of notices, including Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749, did not alter the construction required here.

• Court of Appeal (Civil Division): Appeal from the West London County Court dismissed. The first-instance order dismissing the application for a declaration of invalidity was upheld.
• West London County Court: His Honour Judge Cowell dismissed the Trust’s application on 18 October 2001.