Joseph Donovan v Prescott Place Freeholder Limited & Others

The Court of Appeal considered (i) whether the appellant's reliance on an alleged beneficial interest was an abuse of process in the Henderson v Henderson sense; (ii) the nature and effect of an order under section 19 of the Landlord and Tenant Act 1987; and (iii) whether equitable leases created after a section 19 order bound the purchaser nominated by qualifying tenants. The court held that the judge at first instance erred in finding a Henderson v Henderson abuse because the Tenants, not the appellant, bore the onus of joining the appellant to earlier 1987 Act proceedings or applying for directions under s12B(5), and the appellant's secondary case (that a trust was created in 2019) could properly be run. The court further held that a s19(1) order does not, as such, create an immediate equitable interest in land; and on the facts the section 19 order in this case did not give rise to an equitable interest because the legal title was held by a trustee who lacked equitable title to convey. For those reasons the Court of Appeal allowed the appeal in part and set aside the injunctions made by the High Court.

This appeal arose from complex property litigation concerning the statutory right of qualifying tenants under the Landlord and Tenant Act 1987 to compel transfer of a freehold interest. The factual matrix involved: transfers and declared trusts affecting 34-36 Prescott Place; long leases and later equitable 999-year leases of two flats; a section 12B purchase notice served by tenants; a county court section 19(1) order requiring transfer; First-tier Tribunal proceedings to determine consideration; and subsequent High Court proceedings in which the tenants sought injunctions and declarations restraining registration or protection of equitable leases said to have been created after the section 19 order.

Procedural history

• The Tenants obtained a section 19(1) order in the County Court (25 October 2019).
• The Nominee applied to the FTT under section 13 to determine consideration (FTT Decision dated 12 April 2021).
• High Court (Business & Property) proceedings followed; the trial judge delivered two judgments: [2023] EWHC 435 (Ch) and [2023] EWHC 1445 (Ch).
• The present appeal was brought to the Court of Appeal and decided [2024] EWCA Civ 298.

Relief sought: The Tenants and Nominee sought permanent and interim injunctions to prevent the respondent(s) registering or protecting equitable leases purportedly granted after the section 19 order, declarations about the effect of the 1987 Act on subsequent dispositions and that the Nominee would take the freehold free of specified incumbrances.

Issues for the court: (i) whether the appellant's reliance on an alleged beneficial interest was an abuse of process (Henderson v Henderson); (ii) whether and when a section 19(1) order creates an equitable interest in land; (iii) the priority and effect of equitable leases granted after a section 19 order; and (iv) whether injunctions preventing the appellant from protecting the leases or occupying the flats were justified.

Reasoning and conclusions: The Court of Appeal concluded (i) that the county court proceedings were concerned only with whether a section 19(1) order should be made and did not, as constituted, require the appellant to have been joined; the Tenants could, but did not, seek joinder or pursue a direction under s12B(5) to address alleged equitable interests, so it was not an abuse of process for the appellant to run his claim in the High Court; (ii) that section 19(1) is an in personam enforcement power and does not, simply by operation of the statutory wording and the tenants' statutory right to withdraw before a binding contract, create an immediate equitable proprietary interest of a kind recognised before 1925; and (iii) that even if a section 19(1) order could in principle give rise to an equitable interest, it did not do so in this case because the legal title at the time was held by a sole trustee who lacked an equitable title to convey. On that basis the court allowed the appeal in part and set aside the injunctions previously granted by the High Court.

This is an appeal allowed in part. The Court of Appeal held that the judge below erred in finding a Henderson v Henderson abuse of process and in treating the section 19(1) order as creating an immediate equitable interest binding the Nominee; consequently the injunctions made by the High Court were set aside. The court explained that the Tenants, not the appellant, bore the onus of joining the appellant to earlier 1987 Act proceedings or seeking directions under s12B(5), and that a s19(1) order is an in personam enforcement measure rather than an automatic source of proprietary equitable rights; on the facts no equitable interest arose that would have priority over the later equitable leases.

The litigation started with county court proceedings under Part I of the Landlord and Tenant Act 1987 which led to a section 19(1) order on 25 October 2019. The tenants then invoked the First-tier Tribunal under section 13 to determine the consideration (FTT Decision, 12 April 2021). Subsequent High Court (Business & Property Courts) proceedings produced two judgments: [2023] EWHC 435 (Ch) (First Judgment) and [2023] EWHC 1445 (Ch) (Second Judgment). The appellant appealed to the Court of Appeal, which delivered the present decision, [2024] EWCA Civ 298.