Lejonvarn & Anor v Cromwell Mansions Management Company Ltd

This is the trial of a Part 8 claim in which the claimants, Jason Victor Lejonvarn and Basia Sarola Paczynski-Lejonvarn, seek declarations that the premises which were demised to them under a lease dated 17^th July at 65 Cromwell Avenue, London N6, included the sub-soil beneath the basement and garden of the Flat as defined and, second, that the defendant, Cromwell Mansions Management Company Limited, which is the freehold owner of the demised premises, has unreasonably refused its consent to works to the demised premises.

At the beginning of this trial this morning the parties accepted that as there was only one day allocated to the trial of this matter, I should decide at least the first issue. Since it is now four o’clock and I am in the course of giving judgment, that was a very sensible thing to have agreed.

The claimants are the tenants under a lease for 999. years of the ground floor flat, number 1, at 65 Cromwell Avenue (the ‘Property’). They wish to carry out substantial development works which would involve excavating below the ground of the present floor of the flat. The leasehold owners of the two flats above, namely Miss Goddard, who owns the first floor flat, and Mr. Forsyth who owns the second floor flat, have taken exception to this development. The claimants, together with Miss Goddard and Mr. Forsyth, are the three directors of the defendant company. They have, therefore, a majority on the board of the defendant company and have opposed the proposed development.

The claimant sought a licence to carry out the development pursuant to clause 2(30) of the lease, and by a letter dated 6^th December 2010 the solicitors acting for the defendant stated that the issue of the defendant's consent did not arise because the proposed works did not comprise the demise of the premises in the flat owned by the claimant's.

The issue which has been tried before me is whether the demise of Flat 1 to the claimants included a demise of the sub-soil. The claimants hold the leasehold interest in the property under a lease dated 17^th July 1975. The demise of the property is contained in clause 1:

“The Lessor hereby demises unto the tenant all that the Ground Floor and Basement and Cellar Flat (hereafter called the ‘Flat') numbered 1 and being on the Ground Floor and Basement and Cellar of the Building and including one half part in depth of the structure between the ceilings of the Flat and floors of the Flat above it, and the internal and external walls of the Flat up to the same level, together with the land being the garden as is shown coloured pink on a plan hereto annexed, together with the easements, rights and privileges mentioned in the First Schedule hereto ...”

The case presented on behalf of the claimants by Mr. Anthony Tanney, counsel for the claimants, is that construed in the relevant context the words of the demise operate as a demise of the whole of the property below the horizontal plane located half way between the ceilings of the flat and floors of the flat above, including the sub-soil beneath the flat and garden. Second, Mr. Tanney argues that if I construe the demise in such a way that it does not include the sub-soil beneath the flat and the garden, there is nevertheless a legal presumption that the sub-soil is to be included in the lease. I shall consider each of these arguments in turn.

There is no issue between the parties as to the proper approach to construction. As Lord Clarke observed in Beresford v. Maxfield Housing Co-Operative Limited [2011] UKSC 52, there is no difference between interpreting a lease and the interpretation of any written contact. The precise rights and obligations of the parties under it must depend on the terms which the parties have agreed and the circumstances in which they were agreed. The parties accept, therefore, that it would be right to take into account the surrounding circumstances when the contract was made and to look at the commercial efficacy of the arrangements as part of the basis of construction. It is also accepted that in so far as is necessary to imply any terms into this lease, the process of implication is part of a continuum in the analysis of construction.

Despite the warning of Lord Hoffmann that one must not get involved in semantic construction of documents, nevertheless, understandably, counsel on both sides took me to a detailed analysis of the various terms in the lease and provided different explanations for them.

It seems to me that the wording used in clause 1 is of crucial importance. I bear in mind that this is a document that was prepared by lawyers and that the words will therefore have been carefully chosen. It is significant to me that the words that were used in clause 1 for the definition of the “Flat” were “the ground floor and basement and cellar flat”. One starts with what must be, on this analysis, rooms. It is not talking about, for example, the land which might have been conveyed. It is not uncommon where there are leases and apartments in blocks that what is transferred by way of lease is the self-contained unit of the flat. The fact that the draftsman chose to use those words and gave them there a defined meaning for the remainder of the lease is significant.

Mr. David Holland QC, counsel for the defendant, said that I should also contrast the words used when the reference was to the lease of the garden because it was accompanied with the words “the land”. I see the force of that as a point, although it is not an overwhelming one. It could simply have been the draftsman’s standard usage when property upon which no building was placed to describe it as “land”. What is plain is that the lease did not include any express demise of the sub-soil. Indeed, I expressed the view in argument to Mr. Tanney that it would have been unknown for a lease of a flat such as this to see such a reference, and Mr. Tanney, who is a very experienced landlord and tenant counsel, accepted that it was not something that he had ever come across.

I must turn then to look at the other clauses within the lease to see whether they assist me. Mr. Tanney submitted that the use of the “Flat” in this lease had two meanings, and that can be seen from the fact that on a number of occasions the “Flat” was used with its defined meaning, but in others the “Flat” plainly embraced more than the built accommodation. For example, Mr, Tanney pointed out that para.6 of the Fourth Schedule of the lease provided that;

“No clothes or other articles should be hung or exposed out the Flat (except in the garden), and no mats shall be shaken out of the windows of the Flat.”

Mr. Tanney rightly said that obviously in this part of the lease the draftsman had thought about the garden. It seems to me that this is a piece of drafting that has neutral significance because the draftsman clearly has deliberately used the defined term “Flat”, but in using the exception, as he does, I take the view that what he was intending to do there was to make clear that there was, in fact, in any event permission to put clothes and other articles out for hanging in the garden. I do not find that to be a provision that justifies me in saying that “Flat" is really used with two different meanings within this lease.

When I turn to many of the other provisions within the lease, I find that the use of the word “Flat” is consistent with the meaning of that which I have indicated, namely the built out part of the demise. For example, there is a recurring obligation in clause 2(8) and the Jarvis v. Harris clause in 2(11). Where the draftsman thought it necessary to distinguish between the “Flat" and the “Garden” he did so very clearly in clause 2(24).

A clause that again is a material one in deciding what was demised or not is, it seems to me, clause 2(2), which is the tenant’s obligation to pay the service charge to the landlord. That is based on a one-third obligation on each of the tenants. It seems to me that that is consistent with the flats being sold on the basis that each had approximately the same kind of accommodation and it does not contemplate that there would be a development of a kind that would effectively add below ground an extra floor. Mr. Tanney answers that point by saying that the second floor tenant could develop the roof space. There is a difference there because, of course, the roof space was specifically demised and included. Mr. Tanney is right that where a tenant seeks permission to develop terms could be imposed However, it seems to me that what the initial, demise contemplated was that all properties would be the same.

I turn then to clause 4(4). By clause 4(4) the lessor covenanted that it would maintain, re-decorate and keep in repair:

“(a)

the main structure and exterior and common interior parts of the Building including (without limitation) the load bearing walls, structural timbers, foundations and the roof thereof with the gutters."

Mr. Holland submits that this is an important provision in that there is the express obligation on the lessor to repair the foundations of the house which of course are in the sub-soil below Flat 1, and that the incorporation of the foundations in that obligation is consistent with that being a part of the property which was demised under the lease. It seems to me that to some extent that is again an argument that is neutral in the sense that there are within that recurring obligation items such as the load bearing walls, structural timbers and the roof, which all fall to be demised to one or other or all three of the flats within the properly.

What is of perhaps greater significance is that the obligation is on the landlord to maintain, the foundations. Mr, Holland argues that the foundations of a property such as this are so important to all three flats within a property that one would expect the freehold owner to retain control of the foundations so that it was not subjected to its rights of entry for the purposes of repair and imposing of repairing obligations, but rather it was to take the primary obligation by taking the whole interest in the foundations. There is, in my judgment, force in that submission that the foundations are in a class of their own because it is the position that the foundations will have a fundamentally detrimental effect on all three flats if they were to fail.

I do not accept that the complete answer to that point suggested by Mr. Tanney is that the roof in Flat 3 was included within the demise of Flat 3, because, as Mr. Holland said, the roof is of much more immediate impact on Flat 3 itself, rather than on Flats 1 and 2, although of course in more extreme situations it is right that it could effect Flats 1 and 2.

Mr. Tanney also argued that the breadth of the tenant’s repairing covenant in clause 2(8) of the lease ensured that any new development would be caught by the clause. However, in my judgment, that clause cannot answer the question of what was included in the demise.

Mr. Holland demonstrated that the proposed new development would result in a considerable increase in the exterior walls of the building. He submitted that this would increase the extent of the landlord’s obligation under clause 4(3) of the lease. I accept Mr, Holland’s submission that this makes it highly improbable that a development of this kind was contemplated by the lease.

One of the most telling clauses in this lease is the first paragraph of the First Schedule which are reservations for the benefit of the demised premises. Paragraph 1 provides:

Mr. Holland submitted, rightly as it seems to me, that the express use of the word “under” as it is used in para.2 is only consistent with the tenants not having any property themselves in the sub-soil, since otherwise they would need no right to have the use of the sewers, drains, channels and water courses, cables, pipes and wires which run under the building. If they owned as a leaseholder the sub-soil it would have been completely unnecessary to use those words. It seems to me that that is a very strong indication, therefore that they demise did not include the subsoil.

As against that, Mr. Tanney submits that one must look at the reciprocal obligations which are given to the benefit of the lessor and the lessees of the other parts of the building in a second schedule. Paragraph 1 provides that the lessor and lessees should have:

“(1)

Easements, rights and privileges over and along and through the flat equivalent of those set forth in para.2 of the First Schedule.”

What Mr. Tanney says is that if you construe the demised premises as including the sub-soil then para.(1) is totally consistent with that because that is all that is necessary. There would be no need for any further wording in para.1 of the Second Schedule.

It seemed to me that that is not a complete answer to the very clear words that have been used in para.(2) of the First Schedule, and the use of the word “under” in para.(2) is, it seems to me, of major importance.

I turn then to the other way in which it is put in any event by Mr. Tanney, that the structure of these arrangements in the three leases is such that at the time when the leasehold interests were carved out, the freehold owner was intending to divest itself of as much of the property as it could without retaining for itself any future rights that it might wish to sell in a phrase Mr. Tanney describes as “one of maximum right”. He made that submission good by saying that the roof structure was given away and you would have expected the freehold owner to have disposed of everything because the freehold owner was not interested in future development. Mr. Tanney submits that it is commercially odd that it should now emerge that the freeholder could demand, if it wished, a price for carrying out development in the basement. I am not convinced by that argument because it seems to me that it is far from clear that at the time when this lease was granted that anyone would have thought at that moment of time of a major development whereby the basement of the property would have been excavated in this way. This is a lease that was originally made in July 1975. It seems to me that what is far more likely is that the freeholder retained, and desired to retain, a degree of control over the very important foundations of a house such as this. My judgment is that, as a matter of construction, the lease did include only the built out areas known as the Ground Floor, Basement and Cellar Flat, and did not include the sub-soil.

The claimants rely on a legal presumption that if they fail on their primary submission, which I have rejected, there is a grant that includes everything above and beneath the property. The presumption is expressed in the phrase coined by the Italian lawyer in the 13^th Century, Accursius, “Cuius estate solum eius est usque ad coelum et ad inferos” - “He who owns the soil owns up to heaven and down to hell". The breadth of that phrase has to some extent been limited by recent authority, but certainly the general principle remains that ownership of land will normally carry with it the ownership of the air space above it.

In Lewison on the Interpretation of Contracts, 4^th Edition, at para. 11.12 it is stated:

“A conveyance of land is presumed to carry with it the air space above and the soil below. There are, however, no clear presumptions determining boundaries as between individual parts of a building.”

There is no doubt that the courts have interpreted the presumption to apply in the cases of leases (see Kelsen v. Imperial Tobacco Company (of Great Britain & Ireland) Limited [1957] 2 QB 334, 339-340, 345.

Mr. Tanney starts with the most recent decision of the Supreme Court in Bocardo v. Star Energy UK Onshore Limited [2011] 1 AC. He relies on para.27 of the speech of Lord Hope:

“The better view, as the Court of Appeal recognised [2010] Ch 100 para. 59, is to hold that the owner of the surface is the owner of the strata beneath it, including the minerals that are to be found there, unless there has been an alienation of them by a conveyance, at common law or by statute to someone else."

In the previous paragraph, 26, Lord Hope had stated that the “brocard”, his description of the “usque ad' principle, was a proposition of law which commanded general acceptance.

The question is the extent to which that presumption can apply in the case of a development of flats, the rights of which have been carved out of what was originally a single dwelling house. There is no doubt that thepresumption has been applied in the case of a flat. This was done in Davies v. Yadegar [1990] 1 EGLR 71 where the Court of Appeal rejected the submission that the presumption did not apply because it was merely the demise of a flat. In that case the roof space had been included in the demise where there were two flats in a property. The Court of Appeal in that case found that in that situation it was nevertheless one where it was logical that the air space above should be included in the demise. In the judgment of Sir Roger Ormrod at p.73, Sir Roger Ormrod quotes from the judgment of Nicholls LJ in Straudley Investments Limited v. Barpress Limited [1987] 1 EGLR 69, That was a case where there was reference to air space above rooms. Nicholls LJ reached the conclusion that the demise in that case was of the whole building including the roof, and that in the normal way that would include the air space above those roofs. Nicholls LJ bolstered that conclusion by saying that if that were not correct:

It seems to me that the rationale for the presumption of usque ad is founded primarily where it is the freehold owner who has conveyed the freehold title to another person. The law is plain that it can apply to leasehold interests as well. However, the principle cannot be applied blindly in the case of leases and it must depend on looking at the particular circumstances of the lease within the context of the whole property in which that leasehold has been carved out.

I note that in a recent case, Rosebery v. Rocklee [2011] 1 EGLR 105, Mr. Nicholas Strauss QC (sitting as Deputy Judge of the High Court) reviewed the authorities, including those to which I have just referred and concluded at para.43:

“In my opinion, the authorities do not support the proposition advanced by Mr. Harpum that there is a presumption in any lease of, or including, a roof that it extends upwards to the full height of the airspace available to the lessor. Davies v. Yadegar was a case in which the demise included the whole of the top floor and the whole of the roof. The passage emphasised in the judgment of Woolf LJ. above suggests that, where the demise is of the roof of a small part of the building, in circumstances in which its use could affect tenants on other floors, no such presumption applies. I agree with Lewison on Interpretation of Contacts, 4^th ed. at §11-12 that there are no clear presumptions relating to divisions of individual parts of a building.”

It may be that the judgment of Mr. Strauss, para.43, is misquoted because I doubt that he intended to say that the authorities did not support the proposition that there could be a presumption usque ad where there is a demise of the roof space. The authorities, it seems to me, leave the question open as to whether it would be appropriate to apply the presumption in the case of leases. I note that Mr. Strauss went on to approach the issue unhampered by any presumption.

The issue, it seems to me, is for me to decide whether, looking at the terms of this lease in the context of the way in which the property has been divided up, it is correct to apply presumption. At one extreme I take the example of a large block of purpose built flats where there may be a number of flats on the ground floor. If a ground floor tenant sought to say that it had the usque ad presumption in his favour that would be very odd, because the whole scheme of the way that a purpose built block of flats has been devised is, of course, by reference to the particular flat that has been carved out, and no one would expect for one flat to be able to be developed in that way. It would seem to me to be wholly uncommercial in that situation. Again, it seems to me that the Davies v. Yadegar case was a case which was decided on its own facts because there was a demise of the roof in that case and it seemed inevitable that, if the tenant of the first floor flat had the roof space demised to it, it could go on and do what it wanted above that roof space.

The leases that I am looking at are, as I have indicated, three in number, and they form really a carefully devised structure of rights and obligations. It would seem to me that there is in this context a world of difference between being able to develop upwards and therefore be of no real consequence to the remaining tenants of the property and to start digging under and into the foundations. It seems to me that this is very different from the case of a freehold owner of a property who would naturally have all the rights below ground. It seems to me that a structure such as this does not naturally lend itself to being in the same category of case where the presumption of usque ad is at all appropriate. I decline to apply any such presumption on the particular facts of this scheme.

There is a further reason why I would not apply the presumption in this case. The presumption is, in any event, not to apply where it is either expressly excluded - an unlikely event in a lease such as this, as conceded by Mr. Tanney - or it is an exclusion that can be inferred from all the circumstances. It seems to me that the very careful drafting of this lease so as to define the flat to mean only, as I have found, the built out part of the flat, and the other clauses that have indicated to me that the foundations were to be retained by the freeholder and maintained by them, make it clear beyond peradventure that there was to be an exclusion of the rights as against the leaseholder of the first floor flat. Therefore, on that additional ground, I find that the presumption does not apply. I should add that had I found that the presumption did apply, then it was common ground that thee was no other evidence that would be such as would allow the presumption to be rebutted.

For these reasons, I answer the first question posed to me for the purposes of this trial by rejecting the declaration sought.