Prescott Place Freeholder Limited & Ors v Constantin Batin & Anor

The statutory right of first refusal regime does not create a self-contained title-cleansing code. A transfer made pursuant to a Landlord and Tenant Act 1987 order remains subject to ordinary land-law principles concerning equitable interests, subject to the court’s powers regarding charges and other incumbrances. The expression “incumbrances” is not confined to registered interests.

A party who knew of earlier county court and tribunal proceedings, and had a proper opportunity to raise an interest affecting the property, may be barred from raising it later as an abuse of process. That principle does not necessarily bar a later claim concerning interests created after the earlier proceedings or matters having no bearing on the earlier statutory determination.

The tenants of a property exercised their right of first refusal under Part I of the Landlord and Tenant Act 1987 after the freehold had been transferred to the first defendant. The county court made an order under section 19 requiring transfer of the freehold to the tenants’ nominee, and the First-tier Tribunal later determined the consideration payable.

The second defendant subsequently claimed that the property was held for him under earlier trust arrangements and that he held equitable leases of two flats. The issues included the effect of the statutory scheme, abuse of process, actual occupation under the Land Registration Act 2002, and the effect of documents found to have been backdated.

1. Statutory scheme. Part I of the Landlord and Tenant Act 1987 does not prevent the purchaser from granting further interests after a section 19 order. Sections 12B(2), 12B(5) and 19 do not require the county court or First-tier Tribunal to produce a complete report on title. Ordinary land-law principles determine which non-charge incumbrances bind the tenants’ nominee. The expression “incumbrances” in section 12B(5)(b) is not limited to registered interests. (paras [20]–[23])
2. Abuse of process. Applying the broad merits-based approach in Henderson v Henderson and the principles summarised in Johnson v Gore Wood, it was abusive for the second defendant to assert that the property was held for him under a constructive trust or the 2014 Trust Deed. He and the trustee knew of the county court and First-tier Tribunal proceedings and had ample opportunity to raise those matters. The fact that he was not formally a party did not make him a stranger to the litigation. (paras [53]–[79])
3. The claim based on the Equitable Leases was not abusive because those leases did not affect the earlier statutory determination and had not been determined in the earlier proceedings. (paras [76], [79]–[80])
4. The evidence did not establish that the first defendant held the property on trust for the second defendant at the time of the 2014 transfer, or that the second defendant was in actual occupation for Schedule 3 to the Land Registration Act 2002. (paras [113]–[126])
5. The 2014 Trust Deed and Equitable Leases were backdated. They nevertheless had legal effect from their actual dates of execution, the court having received no argument on forgery or illegality. (paras [137]–[140])
6. The Section 19 Order remained effective. The first defendant was required to transfer the freehold to the tenants’ nominee. Charges fell within section 12B(5)(a), while ordinary land-law principles applied to other incumbrances under section 12B(5)(b). Further orders were reserved if the parties could not agree their terms. (paras [142]–[144])

The proceedings arose after:

• County Court of Central London: on 25 October 2019 HHJ Lethem refused to join the second defendant and made a section 19 order requiring transfer of the freehold to the tenants’ nominee.
• First-tier Tribunal: on 12 April 2021 the Tribunal determined that the consideration payable for the transfer was £125,000.
• High Court: the present court determined the remaining trust, equitable lease, statutory and abuse-of-process issues.