England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE CCRTI 96/0435/E

IN THE COURT OF APPEAL (CIVIL DIVISION )

(HIS HONOUR JUDGE MOSELEY QC )

Royal Courts of Justice

Strand

London W2A 2LL

Tuesday 29th April 1997

B e f o r e

LORD JUSTICE WAITE

MR JUSTICE SINGER

(1) JOHN LAWRENCE DAVID BELL

(2) ISLYWN THOMAS WIGLEY

(3) ANTHONY MARK WILLIAMS Appellants

v.

GENERAL ACCIDENT FIRE AND LIFE

ASSURANCE CORPORATION PLC Respondents

(Computer Aided Transcription of the Stenograph Notes of

Smith Bernal Reporting Limited, 180 Fleet Street

London EC4A 2HD Tel: 0171 831 3183

Official Shorthand Writers to the Court)

MR NICHOLAS COOK (instructed by Messrs Doel & Co, Cardiff) appeared on behalf of the Appellants (Plaintiffs).

MR MARTIN HUTCHINGS (instructed by Messrs Iliffe Booth Bennett, Uxbridge, Middlesex) appeared on behalf of the Respondents (Defendants).

JUDGMENT OF THE COURT

(As approved by the court)

©Crown Copyright

LORD JUSTICE WAITE: The application before the court today arises in very unusual circumstances. On 30th and 31st January 1997 the court, consisting of Mr Justice Singer and myself, heard an appeal on which we reserved judgment. The nature of the appeal in very brief summary was as follows. It arises from an administrative error made some years ago, but only discovered fairly recently, in the office of a large insurance group when granting a lease of business premises. The lease was inadvertently granted by one company within the group which in fact had no right or interest in the property at all, the true title being vested in another company in the same group.

It was undisputed in the action, as originally constituted and pleaded, that the effect of the error, which was unknown to either party at the time and remained undiscovered throughout the entire term of the lease, was to render the letting a tenancy by estoppel. Following its expiration the lessors and lessees (being both then still unaware of the error) proceeded at first on the assumption that the tenancy was one to which Part II of the Landlord and Tenant Act 1954 applied. There was the usual exchange of notices - to terminate the tenancy on the lessors' side, and, on the lessees' side, to apply for a new tenancy. The lessors also served a notice seeking determination under the Act of the rent which the lessees were to pay pending the grant of the new tenancy.

The lessees later had a change of heart, gave notice withdrawing their application for a new tenancy, and shortly afterwards gave up possession. By that date both sides had become aware of the defect in the lessors' title. Nevertheless the lessors sought to assert their claim to establish an interim rent under the 1954 Act. That was resisted by the lessees on the ground that, by reason of the defect in the lessors' title, the tenancy had never qualified at any stage as a tenancy to which the definitions in the Act had any application at all. The lessors, it was contended, could not satisfy the Act's requirement that for landlord status they should be, or derive title from, the owner of the fee simple; and the tenancy itself could not satisfy the requirement that it should be created out of the freehold.

In Cardiff County Court the lessees maintained their objection successfully before the district judge, who dismissed the interim rent application as misconceived. On 7th March 1996 His Honour Judge Moseley QC reversed that decision on appeal, ruling in favour of the lessors. From that ruling the lessees by leave of the judge appealed to this court. The opposing contentions (already summarised) were argued, and judgment was reserved.

While we were considering the case, a point occurred to the members of the court which did not appear to have been raised by either side, but which seemed to be of possible significance. It was put to the parties by means of a letter from my clerk to counsel dated 3 March 1997 in the following terms:

"While reserving judgment on this appeal a point has occurred to the members of the court which does not appear to have been raised before the judge and which did not feature in argument at the appeal hearing. It can be summarised shortly as follows.

The granting by Fire of a lease of Life's property to the original lessees on 29th June 1978 for a term of 14 years expiring in September 1992 constituted a dispossession of Life as the true owner which started time running under section 15 and Schedule 1 of the Limitation Act 1980. On that basis Life's title was extinguished on 29th June 1990, 12 years from the date of dispossession, and Fire became the fee simple owner by adverse possession. The estoppel was thus 'fed' on that date with the result that by the date of expiry of the lease in September 1992 Fire had become the true owner of the freehold title and reversion."

Counsel for the respondent lessors and appellant lessees responded by Notes dated 13th March and 24th March respectively, The respondents' counsel indicated that he wanted to adopt the point; and, if required to do so, to apply for leave to file a Respondents' Notice out of time to raise it. The appellants' counsel indicated that such an application would be opposed on the grounds that it is too late to raise it at this stage; that it would have irretrievable prejudicial consequences; and that the point sought to be raised was in any event without substance. Accordingly, the appeal was relisted for hearing today to consider the respondents' application to raise the point out of time by a Respondents' Notice; and (if such an application were to succeed) to give directions as to the future conduct of the appeal.

The opposing contentions are these. Mr Hutchings for the respondents acknowledges that the application to raise the point is made at a very late stage of the proceedings indeed, but he submits that it is a point of law and one which it would be unreal to put to one side. If it is to be left out of account, there is an obvious risk that a major, and possibly decisive, point would be denied consideration and the proceedings would become unreal as a result. He tells us that there are other cases which would be influenced by the result of this appeal, because the same error was unfortunately applied by his clients to a number of other leases of property in their commercial portfolio.

Mr Cook, on the other hand, points to the potential prejudice that his clients stand to suffer. They are placed in difficulties now in regard to any decision that they might take to withdraw their appeal, whether with or without the benefit of negotiation with the other side. He argues, further, that the question is not purely one of law. He might, for instance, wish to contend that section 32 of the Limitation Act 1980 is relevant to this case, so as to leave him with an argument that any claim to an adverse title by Fire could have been defeated by a claim on the part of Life in proceedings for relief from the consequences of the mistake which had led Fire into the possession of the rents and profits of Life's property. That may, he said, require some investigation of the background, including the terms of the original letting and the arrangements that were made for payment of rent and so on. He, understandably, is wholly uninterested in the effect of those proceedings on other cases. This is an isolated matter (apart from other proceedings which have been mentioned to us between the same parties relating to the same property) so far as his clients are concerned, and the wider consequences do not affect them in the least.

We have to exercise our discretion by answering the question whether a point (which is obviously a relevant, significant and perhaps even a decisive one) should be allowed to be raised at this stage, notwithstanding the potential prejudice and disadvantage to which Mr Cook has drawn very eloquent attention. On the whole my conclusion would be that, although there are disadvantages undoubtedly to the appellants in allowing a respondents' notice to be served at this late stage, the balance of justice requires that leave be granted, provided that it can be properly compensated in costs. We have heard the submissions of counsel as to what costs order would be appropriate in these circumstances, and my conclusion would be that as a condition of leave the respondents should be ordered to pay all the costs of the appeal in any event down to and including today's hearing.

Two further matters need to be mentioned. This has been listed only as an appointment for the purpose of hearing the application to serve a respondents' notice out of time. The appeal will have to be listed afresh for an adjourned hearing. We are faced with the difficulty that the commitments of each member of this court make it a virtual impossibility for any adjourned hearing to take place before us at any date which it would be satisfactory to contemplate. Bowing to the inevitable, the appeal will therefore have to proceed before another constitution. There can be no doubt that difficult questions of law arise. It would be appropriate in our view for the court to be composed of three Lords Justices, and listing should please note that one of those should be a Lord Justice with Chancery experience. That will have to be the direction. The appeal should proceed afresh before a new constitution.

The remaining point concerns the opportunity which the respondents desire of electing whether or not to accept the proposed order as to costs as a condition of being granted leave. They wish to reserve the right, if the costs order be found to be too onerous, to abandon their application. That seems to be entirely reasonable. It is not opposed by Mr Cook.

In those circumstances the order that I propose would be the following: leave to the respondents to file out of time within 14 days a respondents' notice in the form proposed, subject to the costs of the appeal being paid by the respondents down to and including today in any event. In the event of the respondents' notice being so filed, the appeal is to be relisted for hearing afresh before a constitution of three Lords Justices. In the event of the respondents deciding not to lodge a respondents' notice we shall proceed to hand down judgment as soon as possible. In that event the respondents will pay the costs of today in any event.

Order: Appeal allowed; order as per judgment.