Hilmi & Associates Ltd v 20 Pembridge Villas Freehold Ltd

The Court of Appeal decided that a notice to exercise the statutory right to acquire the freehold under Chapter 1 of the Leasehold Reform Housing and Urban Development Act 1993 (a notice given under section 13) must, where a qualifying tenant is a company, be signed by the company in accordance with the general law governing corporate execution of documents. The relevant statutory provision in company law was section 36A of the Companies Act framework (as in force at the time): a company may execute a document either by affixing its common seal or by the signatures of two directors or of a director and the secretary. A single director's signature without more did not amount to the company having signed the notice and therefore the section 13 notice was invalid.

The court rejected the contrary reasoning that the requirement in section 99(5) of the 1993 Act for the tenant to sign could be satisfied by a single officer of a corporate tenant simply signing on the company's behalf. The judgment treated the issue as one of statutory and general law construction, applying Companies Act execution rules to formal non-contractual notices required for statutory purposes.

Background and parties:

• The building at 20/20A Pembridge Villas comprised seven flats; to invoke the collective statutory right under Chapter 1 of the Leasehold Reform Housing and Urban Development Act 1993 a notice under section 13 must be given by qualifying tenants of not less than one half of the flats (four flats in this case).
• Three qualifying tenants were individuals who each signed the notice. The fourth qualifying tenant was Datamust Company Limited. The schedule to the notice contained a manuscript signature of Mr Michael Hickey with the handwritten description 'Director'. Mr Hickey stated he was authorised to sign for the company.

Nature of the application: The appeal concerned the validity of the section 13 notice: whether the signature of one director on behalf of a corporate qualifying tenant satisfied section 99(5) of the 1993 Act, which requires notices under section 13 to be signed by the tenant.

Issues framed:

1. Does section 99(5) require a corporate tenant to sign in a particular manner or is a signature by a single officer (for example one director) sufficient?
2. If a company must sign in a particular manner, what is that manner in law at the time the notice was served?

Court’s reasoning:

• The court examined the history and text of company law provisions governing execution and signature of documents, in particular the provisions denominated section 36A (and related section 36AA) as they stood following reforms implemented before the date of the notice. It rejected a narrow distinction that execution applied only to deeds or highly formal documents and that a section 13 notice was not an 'executed' document for these purposes.
• The court concluded that where a company is required to sign a document for a formal legal purpose it does so in accordance with the Companies Act regime: either by affixing the common seal or by signatures complying with section 36A(4) (two directors, or a director and the secretary). Section 36A(8) confirmed that special rules applied where signatories themselves were corporate in nature.
• Accordingly a single director signing did not amount to the company itself having signed the document; reliance on internal authorisation to allow one director to sign was insufficient to satisfy the statutory requirement in respect of a corporate tenant.

Decision and practical note: The Court of Appeal allowed the appeal, holding the notice invalid. The court noted that a fresh notice had been served but observed that intervening dealings by the reversioner might make the validity question significant for the eventual outcome.

This is an appeal allowed. The Court of Appeal held that the section 13 notice was invalid as given because the corporate qualifying tenant had not signed the notice in accordance with the Companies Act execution rules: a single director’s signature without the company’s common seal or the signature of a second director (or the secretary) did not constitute the company’s signature. The appeal was allowed for that reason.

Appeal from the Central London County Court (His Honour Judge Dight, case reference CHY08420). The Court of Appeal delivered judgment as [2010] EWCA Civ 314 on 30 March 2010.