London Borough of Lewisham v Bello & Ors

Before making a possession order, a court must determine a pleaded defence which may establish that a third party’s lease binds the claimant. This remains so where the claimant relies on a registered local land charge and argues that the lease cannot prevail as a matter of law. A local land charge may have priority over other encumbrances, but the authorities do not establish that no lease can bind its holder. A concession made by counsel for one defendant cannot be treated as abandoning another defendant’s distinct defence without clear evidence that it was made on that defendant’s behalf.

The appeal was a renewed application for permission to bring a second appeal from an order of Royce J dismissing an appeal from a possession order made by HHJ Collins CBE in the Central London County Court.

The third defendant pleaded that it held a 20-year lease of the premises, and that the lease was binding on the local authority. HHJ Collins made a possession order without determining that defence. Royce J treated a concession made by counsel as applying to the third defendant and dismissed the appeal. The central issue was whether possession could properly be ordered against all defendants without determining the third defendant’s pleaded lease defence.

1. Appeal allowed and remitted. Permission to bring the second appeal was granted. The appeal succeeded on the limited issue concerning the third defendant’s lease defence. The matter was remitted to the County Court so that the defence could be determined before a possession order was made.
2. A pleaded defence that a lease binds the holder of a local land charge raises a question of law and potentially fact. The court could not conclude, on the authorities cited, that the local authority was bound to succeed or that the defence disclosed no cause of action. The question whether the lease bound the local land charge holder required determination.
3. Section 7 of the Local Land Charges Act 1975 provides that a registered local land charge takes effect as if created by a deed of charge by way of legal mortgage within the meaning of the Law of Property Act 1925, without prejudice to priority. That wording may support priority over other encumbrances, but did not establish that a lease could never bind the charge holder. The suggested exclusion of section 99 of the Law of Property Act 1925 therefore remained an arguable issue.
4. The concession recorded by HHJ Collins was treated as having been made for Miss Bello, the defendant involved in the preliminary issues, rather than for the third defendant. The circumstances were confused, and there was no clear indication that the third defendant’s written lease defence had been abandoned. The third defendant was entitled to have its defence heard.
5. The court also held that the issue disclosed an important point of principle or practice, or another compelling reason, sufficient to justify hearing a second appeal. Sir Paul Kennedy noted that Lewisham had offered in open court to accept, for this action, that the freehold interest was subject to the third defendant’s lease, but the issue nevertheless required remittal unless compromised at first instance.

• Court of Appeal (Civil Division): [2008] EWCA Civ 420. Permission granted for the second appeal; appeal allowed on the limited issue and remitted to the County Court.
• High Court, Queen’s Bench Division (Royce J): appeal from the County Court possession order dismissed. The judge treated the concession as applying to the third defendant and did not determine the lease defence.
• Central London County Court (HHJ Collins CBE): possession order made on 23 October 2006 without determining the third defendant’s pleaded lease defence.