Joseph Donovan v Prescott Place Freeholder Limited & Others

The Henderson v Henderson doctrine requires a broad, merits-based assessment of whether raising an issue later misuses the court’s process. A matter is not abusive merely because it could have been raised earlier, particularly where the person advancing it was not a party to the earlier proceedings and the opposing parties could have joined that person.

An order under section 19(1) of the Landlord and Tenant Act 1987 is ordinarily an in personam enforcement order, not an immediate equitable interest in land. The statutory right to withdraw before a binding contract is made is inconsistent with equitable conversion. The court should not use an injunction to circumvent the statutory scheme and interfere with property rights where the statute provides the mechanism for doing so.

The tenants sought to acquire the freehold of 34–36 Prescott Place under the Landlord and Tenant Act 1987. After the purchaser failed to comply with a purchase notice, the County Court made an order under section 19(1) requiring transfer of the freehold to the tenants’ nominee. The First-tier Tribunal later determined the consideration.

Joseph Donovan subsequently asserted that the registered owner held the property on trust for him and that equitable leases of two flats had been granted after the section 19 order. The High Court held that reliance on the beneficial interest was an abuse of process, that the section 19 order created an immediate equitable interest taking priority over the leases, and granted injunctions. The central issues were whether those conclusions were correct and whether the injunctions were justified.

1. Appeal allowed. The findings concerning the 2014 Trust Deed were not displaced by Henderson v Henderson abuse of process. The injunctions were set aside.
2. The Henderson v Henderson principle, explained in Johnson v Gore Wood & Co and applied in Dexter v Vlieland Boddy and Aldi Stores v WSP Group Plc, requires a broad merits-based assessment of whether, in all the circumstances, later conduct is oppressive or otherwise an abuse. It is not a rule that every matter which could have been raised earlier should have been raised. Mr Donovan was not a party to the County Court or FTT proceedings. The tenants knew of the alleged beneficial interest, could have sought his joinder and could have applied under section 12B(5) of the Landlord and Tenant Act 1987. The responsibility to protect their position did not rest on him.
3. The beneficial interest was irrelevant to the County Court’s section 19(1) decision because the section 4(2)(g) exemption had not been raised, and no section 12B(5) application had been made. The existence and effect of the interest could have been considered if Mr Donovan had been joined, but it could not be said that he should have raised it. His dishonest backdating of the trust deed and leases was condemnable, but it did not prevent reliance on the facts found by the judge or make the alternative 2019 case abusive. Costs could address a false argument.
4. A section 19(1) order does not, on its proper construction, create an immediate equitable interest in land. Section 4(1) of the Law of Property Act 1925 permits statutory creation of new equitable interests, but section 19(1) instead provides a personal mandatory order enforceable by contempt. The order is not assignable and does not run with the land; the Landlord and Tenant Act 1987 supplies further enforcement mechanisms.
5. The statutory scheme is inconsistent with equitable conversion. Under section 14(1), the nominee may withdraw absolutely at any time before a binding contract is entered into, even after the consideration has been determined. Until then it cannot be known that the tenants will acquire the property. In any event, the order could not create an equitable interest in this case because the registered owner held only the legal title under the trust. The position might differ if the beneficial owner had been made party to the order or an order under section 12B(5) had required the nominee to take free of the beneficial interest.
6. The injunctions could not stand because they rested on the erroneous equitable-interest analysis. The statutory scheme permitted the owner to grant interests after the section 19 order, subject to the consequences prescribed by section 12B(5). The tenants had not obtained such an order. Granting injunctions to prevent conduct permitted by the statute would circumvent that scheme and unjustifiably interfere with existing property rights. The possible principle in Welwyn Hatfield Borough Council v Secretary of State for Communities and Local Government did not assist on these facts, although it might apply in other circumstances.

• Court of Appeal (Civil Division) — [2024] EWCA Civ 298: appeal allowed on grounds 1, 2(i) and 2(iii); the injunctions were set aside.
• High Court, Business and Property Courts (Chancery Division) — [2023] EWHC 435 (Ch) and [2023] EWHC 1445 (Ch): held that reliance on the beneficial interest was abusive, that the section 19 order created an immediate equitable interest taking priority over the leases, and granted injunctions.