An interesting case from the High Court from the back end of 2007 that appears to have escaped much notice is Typeteam (Typeteam Limited v Douglas James Acton and Sarah Louise Elizabeth Lea CH/07/PTA/0067).
This was a case concerning the assignment (or purported assignment of a Section 42 notice). In August 2006 Mr Rosner entered in to a contract to sell Flat 20, Cavendish Mansions, Mill Lane Hampstead to Mr Acton and Ms Lea. On the same day Mr Rosner served a valid section 42 notice on the landlords, Typeteam Limited.
The contract contained a provision requiring the benefit of the notice of claim to be assigned to the buyer on completion. The clause was in fairly standard terms. The parties also entered into a deed of assignment on the same day in relation to the notice.
However the deed of assignment contained wording to the effect that in consideration of the purchase of the flat, Mr Rosner:-
“hereby assignes unto the the buyers all that right and interest to obtain an extended lease of the property by virtue of service by the seller of the s.42 notice…”
Registration of the transfer completed on 21 September 2005. On 3 November 2005 the landlords served counter-notice expressed to be without prejudice to the contention that the claim had been deemed to be withdrawn by virtue of s.43 of the 1993 Act.
Section 43 of the 1993 Act provides in particular (Section 43(3)) that:
“Notwithstanding anything in subsection (1), the rights and obligations of the tenant shall be assignable with but not capable of subsisting apart from, the lease of the entire flat; and if the tenant’s lease is assigned without the benefit of the notice, the notice shall accordingly be deemed to have been withdrawn by the tenant as at the date of the assignment.”
The conventional wisdom is to rely on the provisions of s.27 of the Land Registration Act 2002 and to assume that the transfer cannot take effect at law until such time as the registration completes. Traditional transfer wordings therefore make mention of the fact that the transfer is not to take effect until such time as the registration completes and the notice is to vest in the buyer from that point.
Following service of the negative counter-notice the landlords commenced court proceedings for a declaration that the notice was deemed to be withdrawn on 7 July 2006. On 20 July 2006 Mr Rosner and the new owners entered into a deed of rectification seeking to rectify the assignment of the rights so that the deed of assignment should be read as if the assignment took place when the new owners became the registered owners of the flat.
In Typeteam Judge Cowell in the County Court heard argument from the landlords to that effect. However, he rejected this saying that in his view it was permissible to interpret section 43(3) as also including an equitable assignment so that there was no deemed withdrawal of the claim.
Whilst the landlords appealed the High Court agreed with the lower court and held that Mr Rosner had done ‘everything he could’ to pass the rights on to the buyer.
The court held that the clear intention of the parties was to assign the rights under the s.42 notice and that those rights should pass with the benefit of the lease. The assignment ‘could not take effect any other way.’
As such Sir Donald Rattee held that any other construction would have produced a ‘wholly unrealistic’ and ‘nonsensical’ result and held that on a ‘proper construction’ the lease was never assigned without the benefit of the s.42 notice and that the notice was not deemed withdrawn by virtue of Section 43(3).
This is an interesting case because it is not completely clear whether the decision tells us that an assignment will not fall foul of the provisions of Section 43(3) if it is expressed in such a way that it could take effect in equity only. The presence of the deed of rectification somewhat muddies the waters. However, notwithstanding the permissive view taken in this case, the standard precedent wording is clearly less likely to cause arguments.
9 March 2009