McHale & Anor v Right Honourable Charles Gerald & Anor

On a renewed application for permission to appeal from a specialist valuation tribunal, the Court of Appeal will not reopen an established valuation guidance rate through submissions unsupported by proper independent expert evidence. A specialist tribunal’s guidance remains applicable unless property-specific features justify departure. A statutory valuation scheme must be construed coherently. Where marriage value requires the value of existing leasehold interests to be brought into the calculation, it is arguable that the statutory assumptions governing the freeholder’s and intermediate leaseholder’s interests apply throughout that valuation. Questions of lease construction concerning the value of caretaker accommodation are also properly arguable where the contractual provisions may affect whether any rack rent is recoverable.

The applicants were Mr Henry McHale and 10 Sloane Gardens Management Company Ltd, the nominee purchaser in a collective enfranchisement. The respondent was the freeholder, Earl Cadogan. The Leasehold Valuation Tribunal determined the price payable, including a 5% deferment rate, marriage value and a nil value for a caretaker’s flat. The Lands Tribunal dismissed challenges to those three matters on 30 October 2008, while correcting minor valuation errors.

Mr McHale renewed an application for permission to appeal after permission had been refused on paper. The Court of Appeal considered whether the proposed challenges disclosed an arguable point of law, including the construction of Schedule 6 to the Leasehold Reform, Housing and Urban Development Act 1993 and the effect of the headlease and underleases on the caretaker’s flat.

1. Deferment rate. Permission was refused on this ground. The Lands Tribunal’s guidance in Earl Cadogan & Anor v Sportelli [2007] 1 EGLR 153, including the generally applicable 5% rate for flats in prime Central London, had been endorsed by the Court of Appeal [2008] 1 WLR 2142. There were no property-specific features requiring departure. Mr McHale’s proposed challenge depended on specialised valuation propositions which required evidence from a genuinely independent expert. His submissions could not substitute for such evidence, and the Court of Appeal would not reopen the established guidance on that basis.
2. Marriage value. Permission was expressly granted. The Court considered that the tribunals were probably correct that the assumptions in paragraph 3(1) of Schedule 6 to the Leasehold Reform, Housing and Urban Development Act 1993 should apply when the participating tenants’ current leasehold interests are brought into the marriage-value calculation. That approach was consistent with the statutory scheme, which compensates the freeholder and intermediate leaseholder for interests acquired through enfranchisement. However, the legislation did not provide a direct answer to the argument, the issue was one of law and of potential general importance, and it had not previously been considered by the Court of Appeal.
3. Caretaker’s flat. The Court treated the issue as arguable. The earlier decision in The Earl Cadogan & Anr v 27/29 Sloane Gardens Ltd & Anr differed because the relevant lease terms and service-charge obligations were not identical. The present issue turned on construction of the headlease and underleases. The headlease required a full-time caretaker to occupy the designated flat rent-free, but the service-charge provision referred to loss of rack rent. It was arguable that this wording addressed the inability to recover rack rent for the caretaker’s accommodation. The approved transcript contains substantial inaudible passages in paragraphs 39–42.
4. The formal order was: application for permission allowed in part.

• Court of Appeal (Civil Division): On 30 April 2009, Rimer LJ renewed the application after Carnwath LJ had refused permission on the papers on 20 February 2009. Permission was refused on the deferment-rate issue and expressly granted on the marriage-value issue. The caretaker-flat issue was treated as arguable, but the approved transcript does not fully disclose the precise order on that ground.
• Lands Tribunal: On 30 October 2008, the tribunal rejected the challenges to the LVT’s determinations on the deferment rate, marriage value and caretaker’s flat, subject to correction of minor valuation errors.
• Leasehold Valuation Tribunal: On 17 January 2007, the LVT determined the valuation issues, including a 5% deferment rate, the relevant marriage-value assumptions and nil value for the caretaker’s flat.