Lord Chancellor, R (on the application of) v Chief Land Registar

MR JUSTICE STANLEY BURNTON: These proceedings raise two very short but important questions as to the true construction of Schedule 2 of the Courts Act 2003 concerning property transfer schemes relating to magistrates' courts.

Immediately before that Act responsibility for the administration of magistrates' courts was in the hands of local magistrates' courts committees under section 31 of the Justices of the Peace Act 1997. However, apart from the Greater London Magistrates' Courts Authority, the magistrates' courts committees did not have power to hold estates in land. The premises of magistrates' courts outside Greater London were provided by local authorities as "responsible authorities" under section 55 of the Justices of the Peace Act 1997, and apparently also by other public authorities who were the freehold owners or lessees of the premises. The Greater London Magistrates' Courts Authority was an exception in that it did have power to hold estates in land.

While some magistrates' courts premises provided by local authorities were entire buildings, others were and are parts of buildings, the remainder of which were occupied by the local authority and used as offices for its own functions, or for the functions of police authorities, or they might be let or sublet to third parties. The local authority did not grant itself a lease of the part of such premises used by magistrates' courts, no doubt because it was unnecessary for it to do, but also because it could not, of course, grant a lease to itself.

In October 2001 Auld LJ published his report entitled A Review of the Criminal Courts of England And Wales. He recommended that a single agency with central funding should replace the existing court service and executive agency of the Department of Constitutional Affairs that was responsible for the administration of the Supreme Court and county courts and magistrates' courts committees. The new agency would have responsibility for the administration of all civil and criminal courts in England and Wales with the exception of the House of Lords. This recommendation was accepted by the government in its White Paper Justice For All. This led to the enactment of the 2003 Act, which received the Royal assent on 20th November 2003. The underlying purpose of Part 1 of that Act was to bring the whole of the court system under the auspices of the Lord Chancellor.

Section 1 of the Courts Act 2003 imposes on the Lord Chancellor a duty to ensure that there is an efficient and effective system to support the carrying on of the business of the Supreme Court, county courts, and magistrates' courts and that appropriate services are provided for those courts.

Section 3 of the Act empowers him to provide, equip, maintain and manage such court houses, offices and other accommodation as appears to him appropriate for the purpose of discharging his general duty in relation to the courts.

The magistrates' courts committees and the Greater London Magistrates' Courts Authority have been abolished by section 6 of the Act. Subsection (3) of section 6 provides that Schedule 2 (Abolition of Magistrates' Courts Committees: Transfers) has effect. Paragraphs 1, 3, and 4 of the Schedule are, so far as relevant, as follows:

The general intention of the government was that magistrates' courts should be owned and administered by central government, or by agencies of central government. Indeed, the scheme provided for under the Act envisages the transfer of property rights and liabilities to the First Secretary of State.

Following the passing of the Act, the Department for Constitutional Affairs published a consultation paper on its proposals for the transfer of property rights and liabilities of the magistrates' court estate. Following the completion of the consultation, in the purported exercise of his powers under the Act, on 30th March 2005 the Lord Chancellor made the Transfer of Property (Abolition of Magistrates' Courts Committee) Scheme 2005. Part 1 of the Schedule to the Scheme contains details of existing property interests relating to the premises of magistrates' courts, or the buildings that include magistrates' courts; that is to say the freehold or leasehold interest held by, in general, the local authorities in question. Part 2 of the Schedule lists some 50 magistrates' courts, which, in accordance with the terms of the scheme, were to be the subject of new leaseholds created pursuant to the Scheme granted by local authorities to the First Secretary of State on terms to be stipulated by the Lord Chancellor in substantially the same form as the draft lease at Part 3 of the Schedule to the Scheme.

That draft form of lease is for a term of 999 years from 1st April 2005 at a peppercorn rent. It, of course, includes obligations on the part of the landlord, that is to say normally a local authority. Clauses 6.2 and 6.3 of the draft lease impose obligations in relation to the maintenance of air conditioning and water supply systems and impose obligations to provide utilities. There is a covenant to insure the entirety of the building containing the magistrates' courts, with the lessee, that is to say the First Secretary of State, paying an insurance rent. It is not suggested that any of these obligations imposed on the lessor is particularly onerous or unusual.

Part 5 of the Scheme is headed Transfer of Land, and, so far as is relevant, it is as follows:

Subparagraph (4) deals with easements and other rights. Subparagraph (5) may be omitted.

Subparagraphs (6) and (7) are as follows:

The circumstances in which the first issue I have to consider arose are set out in the witness statement of Alan Sloan, the Operations Director, HMCS Estates at the Department for Constitutional Affairs. He said:

Accordingly, the Lord Chancellor commenced these proceedings seeking a declaration as to his power to create leases by a scheme under the 2003 Act. The Treasury Solicitor very properly informed the various local authorities who were affected by this dispute of the proceedings so that they could decide whether they wished to participate as interested parties. The London Borough of Barking and Dagenham ("LBBD") decided to do so. It owned the freehold of the building occupied by the Barking Magistrates' Court and that of an annexe to the magistrates' court on the ground floor of the building at 14 to 16 North Street, Barking. None of the remainder of that building is or has been occupied by or for the purposes of the magistrateS' Court. The upper three floors of that building are let to residential tenants: some on secure tenancies under the Housing Act 1985 to council tenants.

No issue arises in relation to the main Barking Magistrates' Court building. The issues between the local authority and the Lord Chancellor relate to the annexe which is listed in Part 2 of the Schedule to the Scheme. The Lord Chancellor has purported to create a 999 year lease of the ground floor of the building. He has taken the position that the lease is intended to convey a virtual freehold and that, accordingly, any terms restricting his ownership or control of the property are inappropriate. He has declined to incorporate any clauses to allow for its redevelopment, notwithstanding that the annexe was, according to LBBD, always intended to be temporary accommodation, not a permanent solution. There is a redevelopment plan which includes the building in which the magistrates' court annexe is situated. According to the LBBD it is currently actively seeking to redevelop and regenerate that part of Barking town city centre in which the magistrates' court annexe is situated. It is acting in partnership with English Partnerships and has already spent considerable sums on the plans for redevelopment of this deprived area. If it cannot obtain the Lord Chancellor's consent to vacate the property for the purposes of redevelopment, this is likely to prevent the redevelopment taking place.

The difficulty which has arisen is that previously, on and for the purposes of redevelopment, LBBD could obtain possession of the Magistrates' Court. As a result of the grant of a 999 year lease effected by the Lord Chancellor, purportedly under the Act, it has no power to terminate that right of occupation of the Magistrates' Court conferred by the new lease. It is not surprising that in these circumstances the local authority supports the Chief Land Registrar's position that the Act does not confer on the Lord Chancellor power on behalf of the local authority to grant leases for magistrates' court buildings.

The local authority is, however, also concerned about the fall-back position advanced by the Lord Chancellor in paragraph 26 of Mr Sloan's witness statement. The Lord Chancellor considers that he has power under the Act to transfer the entirety of the freehold owned by a local authority of a building, such as that housing the Barking Magistrates' Court annexe: that is to say, the freehold of both the ground floor and the upper residential floors. The Lord Chancellor says that he has the power to do so because the entirety of the building, or the freehold to it, is within paragraph 1(1)(b) of Schedule 2; that is to say, it is property which subsisted for the purposes of or in connection with or otherwise attributable to magistrates' courts.

LBBD contends that this is too wide an interpretation of that provision and that correctly construed it is limited to court buildings and parts of buildings used in connection with the court, such as common parts, including means of access.

The first issue I have had to consider is whether the Lord Chancellor has power under Schedule 2 to the Act to effect a grant by a local authority of a lease of that part of a building which comprises a magistrates' court in circumstances where the magistrates' court is only part of that building.

As I said during the course of argument, it is clear that any sensible scheme would involve the grant of leases of magistrates' courts by local authorities to the First Secretary of State where no pre-existing lease existed and the magistrates' courts' premises are only part of the building in which the court is situated. A sensible and purposive construction of the Act would favour the conferment of the power which the Lord Chancellor claims. I also have no doubt that if the bill put before Parliament had contained suitable provisions for the grant of leases of parts of buildings, Parliament would have enacted it. But the question for me is not what Parliament would have done or what it should have done, but what it has done. That is to say, what power has it conferred on the Lord Chancellor? If I felt it possible to construe Schedule 2 as conferring the power he claims I should want to do so. However, as I indicated after completion of counsels' submissions yesterday, I cannot do so. Parliament has conferred on the Lord Chancellor the power to transfer property, but that in my judgment is not a power to create leases or to grant them.

The words "property" and "transfer" are not defined in the Act. Mr Mould submitted that, giving the statute a broad, practical and purposive construction, the grant by a local authority to a minister of a lease of a magistrates' court for a term of 999 years at a peppercorn rent is a transfer of the magistrates' court. As Mr Mould accepted, the Lord Chancellor's contention involves reading the word "property" in paragraph 1 of Schedule 2 as meaning "premises" or "building", or that part of the building that is used as a magistrates' court rather than its normal legal sense. I accept that colloquially the word "property" may be used in the sense contended for by the Lord Chancellor. But this is not a colloquial context. Mr Mould could not point to any other statute in which the word "property" has been used to mean building or premises.

It is informative to compare the wording of Schedule 2 with the very different wording of section 55 of the Justices of the Peace Act 1997 "court houses and other accommodation." Similar words are used in section 3 of the Courts Act 2003, which refers to the power of the Lord Chancellor to provide, equip and maintain and manage "such court houses, offices and other accommodation as appears to him appropriate for the purposes of discharging his general duty in relation to the courts". Words such as these would have been used if the meaning contended for by the Lord Chancellor had been intended. The context I am considering is the transfer of "property, rights or liabilities", and in this context it would be anomalous to construe "property" as meaning something physical, when there is a clear non-physical genus. Furthermore, one would not use the word "subsist" in relation to a building, but on the Lord Chancellor's interpretation of the Act he does so in paragraph 1(1)(b).

There is an obvious difference between the transfer of property and the creation or grant of a new property interest. If Parliament had intended that there to be a power to grant leases different words were required and would have been used. It is useful to contrast the wording of paragraph 1 of Schedule 2 with that of the Land Registration Act 1925 and the Land Registration Act 2002 which deal separately and specifically with transfers of property and the grant of leases and other estates in land: see, for example, section 4 of the 2002 Act.

Furthermore, as Mr Jones pointed out, physical buildings are not transferred by a scheme such as that envisaged by the Act. The building has not moved. What is transferred by a transfer of property is the bundle of rights and obligations relating to that building. The creation of a lease does not transfer any rights or obligations. It subjects the lessor's rights to those of the lessee. The lessor ceases to be entitled to exclusive possession of the premises because an inconsistent right having priority to his has been conferred to the lessee. On termination of the lease the lessee's right to possession is not transferred back to the lessor. The lessee's right to possession comes to an end, so that there is no longer any inconsistent right to the freeholder's right of possession.

There are additional reasons why I cannot accept the submissions made on behalf of the Lord Chancellor. The Act does not make any provision for the determination of the provisions of a new lease. The Lord Chancellor claims to be entitled to determine their terms unilaterally and to impose them on local authorities, but there is nothing in the Act authorising him to do so. If Parliament had intended to grant him this far-reaching power it would have done so, and would have had to do so, in express terms. If it had done so, it would also have had to consider whether provision was required in the Act for any limitation of this power, or for independent determination of any dispute as to the terms of any lease. While the Lord Chancellor would, in any event, be required to decide on the terms of a new lease reasonably, it has to be borne in mind that his interests and those of the local authority lessor are different and are liable to conflict, as the case of LBBD demonstrates. A lease may impose onerous obligations on the lessor, or confer on the lessee rights that may be onerous for the lessor, and the length of its term may, as in the case of the annexe to Barking Magistrates' Court, be such as to interfere with or damage a local authority's property interests.

Similarly, if the local authority is the leasehold owner of a building that includes a Magistrates' Court, on the Lord Chancellor's case he could cause the local authority to grant a sublease of the part of the building used for the court. I would expect that in such a case the sublease would follow the terms of the local authority's lease, so as to impose on the First Secretary of State the same obligations in relation to the magistrates' court as the local authority as lessee has accepted in relation on the whole building. Yet, on the Lord Chancellor's case, he is free to depart from the terms of the local authority's lease.

It is not suggested that the Scheme is a legitimate guide to the construction of the Act. It is nonetheless comforting to see that it refers expressly in paragraph 5(6) and (7) to the creation of estates in land and the creation of leases. That is, I think, because there is a well recognised difference between a transfer and the creation of an estate in land, and the draftsman of the Scheme was compelled to use the language of creation because transfer does not include creation. A reference to a transfer of property would simply not be understood to include the creation of such an estate.

Lastly, I should mention that the Lord Chancellor does not rely on paragraph 3(1) of the Second Schedule since it only applies to property transferred by a scheme, and on the basis of my interpretation of paragraph 1, it does not confer a power to create property.

For the above reasons I shall make a declaration that the Lord Chancellor has no power under Schedule 2 of the Act to effect the grant of new leases of magistrates' courts by responsible authorities.

The issue to be considered under this head is whether the Lord Chancellor can compel a local authority to transfer the entirety of its freehold or leasehold interest in a building, part of which is a magistrates' court. The question is whether such a transfer is within paragraph 1(1)(b) of Schedule 2.

I accept Miss Mulcahy's submission that a transfer of property by a council of an outer London Borough, such as LBBD, may be effected by a scheme under the Act only if that property is both property to which the local authority is entitled immediately before the appointed day, which is 31st March 2005, and if it is property "which then subsists" et cetera. That is made clear by the word "and" which cannot be read in the present context as "or", and Mr Mould did not submit to the contrary.

Paragraph 1(b) cannot be said to be a masterpiece of draftsmanship. It confuses a non-physical concept: a property right or liability that subsists, with the purposes for which the physical property is used. It is this infelicity that I think is the key to its effect. One would not say that the entirety of a building, such as Barking Magistrates' Court annexe, in which the magistrates' court is only part of a building "exists" (which I use as a substitute for subsists), or is used "for the purposes of or in connection with or otherwise attributable to the magistrates' courts". Perhaps more to the point, there are far more obvious and clear means of providing for the power to transfer the local authority's interest in the whole of a building that includes a magistrates' court occupying part only.

Where the magistrates' court is the entirety of a building I can see that it may be said that the property subsists or exists for the purposes of a magistrates' court. One would not naturally or normally say that of a multi-storey building of which only the ground floor is a magistrates' court. The obvious intention of the words "in connection with or otherwise attributable to a magistrates' court" is to include premises ("property") such as the offices used in connection with the magistrates' court itself, and rights, such as rights of way, for example, over staircases, and rights relating to pipes and cables, and other rights that are ancillary to the magistrates' court accommodation itself. The words "in connection with or otherwise attributable to magistrates' courts" cannot drastically enlarge the scope of the power to take property, so as to include the legal estate in accommodation that is not used in connection with and is not in any meaningful sense attributable to the magistrates' court.

Moreover, if Parliament had intended to confer on the Lord Chancellor power to compel the transfer of the ownership of premises that are not in any meaningful sense used as or in connection with the magistrates' court, and as an example I instance the residential premises at Barking, it would have used clear words. I should not conclude that Parliament intended to confer such a far-reaching and less than obvious power when the wording of the Act does not make that clear.

This consideration is fortified by the absence of any provision in the Act for the payment of compensation to a transferor whose interests would be compulsorily taken away by a scheme. There is a strong presumption that Parliament does not intend to confer a power to take property away without compensation. It is not suggested that compensation would be payable to a local authority transferor under any other statute. That Parliament was conscious of the need to compensate those adversely affected by a scheme appears from paragraph 5 to Schedule 2, and it is significant that it does not apply to transferors.

I infer from that that Parliament did not anticipate that the property or financial interest of transferor authorities would be adversely affected by the operation of a statutory scheme. Yet a transferor divested of its freehold or leasehold of offices or residential accommodation could well be losing a valuable asset. It is no answer that the transferor is a local authority and therefore a public authority. The financial interests of local authorities are not identical to the financial interests of those of central government. Moreover, local authorities and other public authorities are not as such excluded from entitlement to compensation under paragraph 5. It is understandable that Parliament did not think it necessary to compensate local authorities for their loss of magistrates' courts' premises, since the local authorities were being relieved of the obligation to provide them. It is not understandable that Parliament would create a power to deprive local authorities of entire buildings where only part is occupied by the magistrates' court without provision for compensation. The court should not, in the absence of clear words, interpret a statute as having this effect.

It was suggested that the Lord Chancellor could grant a lease back of the part of the building not occupied by the magistrates' courts, but the Act does not provide for the creation of such leases. Paragraph 3.1 does not apply. Significantly it refers to the creation of rights and liabilities, but does not include property, and contrasts in that respect with paragraphs 1(1) and 3(2). A difference was clearly intended. If it was intended to confer a power to grant a lease back, that would have been expressly provided for: compare again the provisions of the Land Registration Acts. In any event, the Act imposes no obligation on the Lord Chancellor to exercise his power under paragraph 3.2 and there is the same difficulty as to the terms of any lease that I have referred to in considering the first issue. Miss Mulcahy suggested that it would be curious if the result of a scheme would be that the Lord Chancellor became the landlord of the local authority in relation to premises that had nothing to do with the magistrates' court, other than the fact that part of the building is occupied by that court. I agree.

Lastly, so far as the wording of the Act is concerned, it does provide a means with dealing with the present problem. The Lord Chancellor has power under paragraph 3(2) to apportion or to divide any property rights or liabilities. That power is noticeably not qualified by the equivalent of the subparagraphs (a) and (b) of paragraph 1(1). Where the local authority's estate is leasehold, no difficulty should arise. If the local authority's estate is a freehold, the undesirable prospect of flying freeholds does arise, as to which I say no more.

My conclusion is that Schedule 2 does not confer on the Lord Chancellor power to effect a transfer by a responsible authority, or a local authority, of an entire building where part only is occupied as a magistrates' court. If I had any doubt as to the correct interpretation of the Schedule I should happily have regard to the passage in Hansard cited by Miss Mulcahy in her skeleton argument. She refers to the debate on what became the Act in the House of Lords. Mr Christopher Leslie, Parliamentary Under Secretary for Constitutional Affairs to the Standing Committee of the House Lords, stated as follows (Hansard column 59, second sitting, 26th June 2003):

Mr Heath intervened:

I therefore find that the Lord Chancellor does not have the power he claims under the Act to effect a transfer of the entirety of the freehold or leasehold of a building only part of which is used as a magistrates' court. I shall make a declaration to that effect. Its terms, and the terms of the declaration to be granted as a result of my conclusion on the first issue, may be discussed between counsel and hopefully will be agreed. If not, this matter can be mentioned to me during the course of next week.

Finally, as I said during argument, I am fully conscious of the practical difficulties that may be said to arise from my decision. In truth, however, they arise not from my decision, or from the position taken by the Chief Land Registrar, or the LBBD, but from the provisions of the Act. The enabling provisions of a statute for schemes such as that involved in this case must be as carefully considered as the provisions of the scheme itself in order to ensure that the necessary powers and obligations are clearly conferred and imposed on the executive arm of government. That did not happen in the case of Schedule 2 to the Courts Act 2003.