London Borough of Lewisham v Bello & Ors

This is a renewed application for permission to appeal by the third defendant in this action from the order of Royce J dated 9 April 2007 on a single issue and on notice to the respondent with appeal to follow if permission is given.

This is a second appeal. Royce J had before him an appeal from the possessions order dated 23 October 2006 made by HHJ Collins CBE. The single issue before this court is whether HHJ Collins CBE was wrong to make a possession order without it whether first determining an issue raised by the third defendant’s defence, namely had a lease over the property the subject of the possession order (referred to below as “the premises”) which was binding on the respondent: If so, Royce J was wrong to dismiss an appeal from the judge’s order.

I need not go into the detail of this litigation, which has had a long history. I can instead refer to the judgment which I gave when this matter was last before the court on 12 July 2007:

“2.

I now turn briefly to the background. Pursuant to the service of enforcement notices, Lewisham incurred costs in taking steps to remedy the matters set out in the enforcement notices, and as a result it claims to have acquired firstly a legal charge dated 6 October 1998 registered against the property in the sum of £27,285.43 and secondly a legal charge registered as a unilateral notice dated 9 May 2005 in the sum of £4,245.34 plus value added tax. The enforcement notices required the demolition of an extension erected on the property in breach of planning control. Lewisham contends that this charge is enforceable as a local land charge under the provisions of the Town and Country Planning Act 1990 regulation 14(2) and Town and Country Planning General Regulations 1992

3.

It is said that in July 2005, as I have already indicated, Adeola Bello leased the property to NCC at an initial yearly rent of £10,000 per annum. On 22 June 2006 Lewisham started these proceedings for possession. The District Judge ordered the trial of three preliminary issues. First, was Adeola Bello the owner? Second, was she the successive owner? Third, what was the amount due under the charges?

4.

The matter came before HHJ Collins, who in effect discharged the order for the trial of the preliminary issues and asked for submissions on the question whether the county court could, as it was put, "go behind the charge". On that occasion both the appellants and Lewisham were represented by counsel. Before the judge there was argument as to who was the owner and the judge held that Adeola Bello was the owner. He rejected the argument that she had let the property to a company run by her father at a rack rent. The judge also rejected the argument that the property was let on lease. I referred just now to "rack rent" but the transcript says "rack rent" so it may be that that was not the matter the judge was rejecting.

5.

The judge rejected the argument that the charge was invalidated by article 1 of the First Protocol to the European Convention on Human Rights. Bello had at that moment no charge over the premises. The judge also rejected the argument that the charge fell when the lease of the property fell, and he held that the county court had no power to set aside the charges. He further held that it did not matter whether the claimants were entitled to the precise amount of claimed. That did not affect their right to possession.

6.

Accordingly, on 23 October 2006 HHJ Collins made a possession order. The appellants appealed to the judge, Royce J.  The appellants submitted that the nature and structure of the hearing before HHJ Collins was unfair. The judge rejected this on the ground that the case management matters were a matter for the judge. The appellants contended that the judge should have admitted evidence that the appellants did not receive a rack rent. The judge rejected that argument on the same ground. The appellants further contended that if the further evidence had been admitted they might have been able to show that Miss Bello was not the owner.”

Now the position is that the third defendant had put in a substantial defence in the possession action, to be found in the bundle at page 34 of section A of part C. The defence runs to several pages, and it is not necessary for me to refer to all of the paragraphs as there is some repetition. There is a denial in paragraph 2 that the claimant has any right to possession of the premises, and in paragraph 4 it is alleged that in 2005 the second and third defendants acquired a lease of the premises for 20 years at a rent of £20,000 per annum and that the lease was registered under title number TGL262612. In paragraph 5 it is alleged that the fourth defendant had a sub-lease for a term of not less than seven years at an initial rent of £13,200 per annum, such rent being subject to annual review. In paragraph 6A it is denied that the claimant had any right in, or to, the premises whether by way of any purported charge or security or otherwise howsoever.

It will be recalled that on 23 June 2006 District Judge Thomas sitting in the Bromley County Court had made an order in this action for the trial of three preliminary issues. They concerned the first defendant, Miss Bello. The first preliminary issue was whether she was the “owner” of the property   within   the   meaning of sections 178 and 336 of the Town and Country Planning Act 1990 as amended, as at the date of the demolition carried out by Lewisham, in about March 1998. The second question was whether she was the successive owner of the property pursuant to Section 14(2) of the Town and Country Planning General Regulations1992 at the date when the proceedings were issued in or about January 2006 and continues to be the successive owner at the date when the preliminary issue was determined. The third question was whether the claims made by Lewisham that Miss Bello pay the total amount set out in the Particulars of Claim are time-barred pursuant to the Limitation Act 1980.

Now those preliminary issues concerned only Miss Bello. They were set down for trial and they came before HHJ Collins sitting in the Central London County Court on 23 October 2006. The judge took the view that it was not necessary to deal with the preliminary issues. He went on to hear limited argument and he then made an order for possession. After that occurred he heard argument on permission to appeal and Mr Macleod-James submitted to the judge that the judge had not dealt with certain allegations in the defence, particularly an allegation that the premises were occupied other than by the first defendant. The judge had decided to give permission to appeal, and, though there is an argument as to the breadth of the permission he gave, we are not concerned with that matter. The appeal went to Royce J.

Before I leave that judgment I should make the following observations. The judge did not deal with the allegations in the third defendant’s defence. What had been listed before him were the preliminary issues. As I have said, Miss Bello was the defendant to those issues. The judge makes reference in his judgment to the leases but he says that there is no pleaded allegation that the premises were subject to a lease. Now, as I understand it from counsel, that is not in fact a reference to the third defendant’s defence but, subject to that, there is no reference in the judge’s defence to any leases of the premises. At paragraph 3 of the judgment, the judge says this :

“No steps have ever been taken to challenge the validity of either of these two charges, the first of which has stood now for over eight years. I do not understand [Mr Macleod-James] on behalf of the defendant to be arguing anything other than that these are binding charges which give the claimants an immediate right to possession unless the charges were set aside.”

Pursuant to the permission to appeal given by the judge, an appeal came before Royce J. I am not concerned with his judgment dismissing the appeal other than on the point which is the subject of this application and that is, of course, the leases. The judge came to the question of leases at paragraph 16 of his judgment and he set out the arguments on both sides. Miss Bhogal, who appears today for Lewisham and indeed so appeared for them before Royce J, contended that, in effect, the leases could not bind Lewisham. Then the judge at paragraph 17 states:

“Mr Macleod-James says that a number of those matters are in issue. Before the judge, however, it appears that the matter was raised with both parties and that quoting from paragraph 14 ‘I pointed out to the parties, and counsel have both accepted, that since the legal charges stand the claimant must be entitled to possession unless the charges are set aside in some way’.”

The judge continued at paragraph 17:

“Mr Macleod-James says that while he may have made that concession at the time on reflection it does not seem to him that he should have done and that it was wrong in law.”

Royce J then goes on to consider the position of HHJ Collins. He continues:

“It appears to me that he was faced with a situation where a concession had been made, which appeared to have received the support of counsel for both parties, and the judge so proceeded. It was incumbent upon him, it seems to me, not to waste time on dealing with issues which were not in dispute. There can therefore be no criticism of him in proceeding in the way that he did and, it seems to me, in determining that there was an entitlement to possession.”

As I read it, that certainly related to the first and third defendants, represented by Mr Macleod-James. The fourth defendant does not appear to have been represented before the judge. And then he refers to the judge’s order, and then the judge continues:

“There is, therefore, an element, on the face of it, of ambiguity. However it is noteworthy that there has been no appearance or appeal by the fourth defendant from the judge’s order. It seems to me that the judge’s intention was that there should be an order for possession against all defendants. I say ‘all defendants’ because the action was discontinued against the second defendant. As there has been no appeal from the fourth defendant I do not consider it would be right to allow an appeal on the basis that there was no concession made on his behalf about whether or not possession should inevitably proceed. I am reinforced in that conclusion by the arguments that Miss Bhogal has advanced and in my judgment her contentions here are sound. For these reasons I am satisfied that the judge reached the correct overall conclusion.”

Just pausing there: while one understands the difficulties of HHJ Collins, faced with a rather confused position, Royce J does not, in his final conclusions dealing with the position of each of the defendants, deal with the position of the third defendant. Also, in the earlier part of his judgment he has not quoted from paragraph 3 of the judgment of HHJ Collins, which states that the concession was made on behalf of “the defendant” which at that stage was Miss Bello, she being the defendant to the preliminary issues. While it is correct that Mr Macleod-James has acted for and represents the first and third defendants, on the preliminary issues he of course appeared only for Miss Bello.

So the position is somewhat confused. Miss Bhogal has pointed out that in the grounds of appeal many grounds were taken, including the ground that the defences of the third defendant had not been considered and determined. They appear at letters L, M and N of the grounds of appeal. She also points out, correctly, that in her skeleton argument she told the court that the appellant’s counsel accepted that a) the judge did not have power to set aside the charges, b) that the charges were binding until set aside and c) if the charges stood, then the respondent was entitled to possession, and she submits in her skeleton argument that that is the correct analysis. She accepts, however, that she did not, in terms, submit in her skeleton argument that because of the concession the points raised by the third defendant in the third defendant’s defence had been abandoned and could not be relied upon before the judge.

I return then to the issue before this court. It is a simple issue as to whether or not the judge could properly have made a possession order which would bind all the defendants without the third defendant’s defence having been determined.

Now I will take Miss Bhogal’s submissions. She submits that the position of the third defendant is unarguable. She submits that the status of a local land charge is that it attaches to each and every interest in the land, and that the two charges were created prior to the leases in question; and for this purpose she submits that Section 99 of the Law of Property Act 1925 cannot apply to a local land charge. The difficulty about this argument, and I fully take her point that if it is correct it may undermine to some extent the value and purpose of a local land charge, is that there is no authority exactly on this point. Section 7 of the Local Land Charges Act 1975 provides that:

“A local land charge, falling within sub-section 1(1)(a) above shall, when registered, take effect as if it had been created by a deed of charge by way of legal mortgage within the meaning of the Law of Property Act 1925, but without prejudice to the priority of the charge.”

Megarry and Wade, The Law Of Real Property, 6^th edition, states that the status of a local land charge may indeed prevail over that of other encumbrances such as a mortgage: see paragraph 5.132 at page 198. However, the position is that that text only says that the local land charge may take priority. The question is whether it is possible to conclude that there is no possibility, as a matter of law, of there being a lease which binds the holder of the local land charge. In my judgment the answer to that question is not clear on the authorities cited to us. It is a question of law upon which the court may or may not decide in the same way as Lewisham submits if the matter proceeds to a trial. It is not possible to conclude that Lewisham are bound to succeed and that therefore the defence discloses no cause of action and that it ought to have been struck out.

Then Miss Bhogal submits that there was plenty of opportunity for the third defendant to bring these matters to the attention of HHJ Collins and she submits that, after the judgment was given, counsel indeed referred to the defence. But the difficulty about that point, subject to the concession, is that she has to show that the matter has been dealt with in some way in the judgment and I think she accepts that the learned judge HHJ Collins did not deal with the third defendant’s defence before he made the order for possession.

Then Miss Bhogal submits that Royce J dealt with all the grounds but as I have explained, the judge dealt with the matter on the basis of the concession referred to in paragraph 3 of the judgment of HHJ Collins. So he did not deal in terms with the argument that the third defendant had a lease which took priority over the local land charge and that would mean that possession could only be ordered subject to the position of the holder of the lease.

I should add one further submission which Miss Bhogal has made, namely that this is a second appeal, and that therefore this court must be satisfied that there is an important point of principle or practice involved or there is some other compelling reason for an appeal. Subject to the point about the concession, if there was a defence of a party which disclosed a cause of action and which had not been tried, but which had been concluded by the court, I would be of the view that that was a reason why the appeal should be heard by this court, even though it is a second appeal. Now, the matter came before Pill LJ and myself, as I have explained. In argument, Mr Macleod-James produced a short skeleton argument referred to in the judgment of the court and that refers very briefly to the argument that the third defendant’s defence had not been tried. It does not refer to the concession. It says that there was a dispute of both law and fact as to whether or not a lease had been created which bound the local authority. Mr Macleod-James submitted to us that the point had never been considered, let alone the dispute analysed. He added that:

“Possession has been granted without the third defendant’s defence ever being considered even squatters have a right to be heard before possession is granted.” (skeleton argument, paragraph 5(c))

Now the issue then, it seems to me, that I must deal with at this point is this question of the concession. As I have said, HHJ Collins was expected to deal with preliminary issues in which only Miss Bello was involved, and the transcript of his judgment states that the attendance was only on behalf of Miss Bello; and the judge carefully sets out in paragraph 3 of his judgment that the concession, if it was given, was given on behalf of the defendant, which was Miss Bello at that point in time.

Now, the position before the judge was obviously a little confused because the parties did not appreciate before the hearing that the judge was of the view that the preliminary issues were unnecessary and that he would go on to deal with other matters in the action. But Mr Macleod-James does not, I think, say that he did not give the concession as stated in the judge’s judgment. When we come to the judgment of Royce J, the judge treated the concession as given on behalf of both the first and the third defendant and on that basis he did not deal with this point that the third defendant was entitled to have its defence determined by a court.

In my judgment, although the position was very confused, we should have regard to the fact that the judge did state that the concession was given on behalf of Miss Bello, rather than on behalf of also the third defendant. There is no reference to the lease of 2005 -- which is a lease in writing and it is enclosed in our bundle -- and no one at any point in the hearing appears to say, “Well, that means the defence about that lease has been totally abandoned”.

In those circumstances, I would come to the view that the concession should be treated as given on behalf of Miss Bello, not on behalf of the third defendant, and that had it been given, in loose terms, that Mr Macleod-James should not be treated as having given it on behalf of the third defendant. That means that we are in a situation where the judge proceeded to make an order for possession without the third defendant’s defence having been dealt with. In my submission, whether or not the third defendant is right or wrong as a matter of law and on the facts in its defence, it was entitled to its day in court. In those circumstances, the right course would be for this court to give permission and to allow the appeal in respect of this very small issue, and to remit the matter back to the County Court in order that the defence of the third defendant may be dealt with before the possession order is made.

I agree. I do so with some reluctance because one sees in the judgment of HHJ Collins, paragraph 3, already quoted by my Lady:

“I do not understand Mr McLeod on behalf of the defendant to be arguing anything other than that these are binding charges which give the claimants an immediate right to possession unless the charges were set aside”.

It is true of course that Mr McLeod-James at that stage was representing only the defendant and Adeola Bello, who was before the judge, but he had previously been representing the third defendant. It is now being said that the third defendant’s position should have been attended to. I find it mysterious, to say the least, that Mr McLeod-James did not at that stage alert HHJ Collins to that position. Had he done so, we would not have been where we are today.

I agree. Despite the unsatisfactory state of this case, in more respects than one, that there is here an issue of principle for a second appeal, that permission to appeal should accordingly be granted, and that the appeal succeeds to the extent that the issue has to be remitted for hearing. But I note, too, that the London Borough of Lewisham has, in open court today, expressed its readiness solely for the purposes of this action to accept that the freehold interest -- to which they are entitled by way of enforcement of the charge -- is subject to the third defendant’s lease. The reason they are prepared to do this is that they advise that on sale, subject to the lease, they can still expect to recover the amount of the charge in full. What will be reduced is the surplus payable to the first defendant or others.

The good sense of this is readily apparent. What is not apparent is why Lewisham was nevertheless not prepared to agree such an outcome to the present application, which would have enabled them to proceed to sale of the premises. Instead, the issue will have to go back to first instance and, unless compromised there, will make its way through the system. Whether this is to happen is out of our hands. Permission to appeal will be given and the appeal allowed on the terms indicated by Arden LJ.