[2024] UKUT 33 (LC)

The Black Horse was a purpose-built public house dating from the 1960s. It is on two storeys and, as originally laid out, had licenced premises on the ground floor and residential accommodation on the upper floor.

The freehold interest in the site and the larger parcel of land on which it is situated belonged originally to the Greater London Council. On March 1966 it granted a lease of the Black Horse to the brewer Courage, Barclay & Simonds for a term of 99 years. When the GLC ceased to exist the reversion to the lease and ownership of the adjoining land became vested in Southwark.

Clause 3 of the lease comprised covenants by the Lessee, including a covenant against alienation at clause 3(i) by which it covenanted in terms which absolutely prohibited assignment or subletting in parts, as follows:

“Not to assign any part or parts (as opposed to the whole) of the demised premises and not without the previous written consent of the Lessor to assign the whole or to underlet (other than by way of mortgage) or part with possession of the demised premises or any part thereof PROVIDED that the consent of the Lessor shall not be required to the underletting of the demised premises for a term not extending three years”.

Clause 3(k) was a covenant against cutting or maiming timbers or other structural parts of the demised premises or making external alterations or alterations to the internal arrangement of counters and serving hatches.

By clause 3(n) the Lessee covenanted to keep the premises open and in use as a pub, as follows:

“So long as the requisite licences could be obtained to use the demised premises or cause or permit the same to be used as a licensed victualling house only and keep the same open as such during all lawful hours and conduct or cause to be conducted the business thereof in a lawful and orderly manner and so as to preserve or cause to be preserved the character of the said premises with the licensing authorities and the public”.

By clause 3(o) the Lessee covenanted at all times to use its best endeavours to obtain a renewal or transfer of all licences authorising the sale and consumption of alcohol on or off the demised premises, and if the licence was refused, to appeal against the refusal.

Finally, by clause 3(p) the Lessee covenanted that for as long as the premises were licensed for the sale of alcohol it would use them as a “bona fide refreshment house” which was to be managed in a manner described in eight detailed sub-clauses covering more than 2 pages of text. These included a requirement that all food and alcoholic drinks served to the public were to be “of good quality and unadulterated”, and others concerning furnishing the premises appropriately, employing an experienced manager, and so on.

By 2011 the lease had been acquired by the applicant, and the pub was being operated by a tenant, but by 2019 the tenant’s business had failed and the pub had closed. The applicant does not appear to have taken any steps to commence trading in its own right but it continued to offer the premises as available for letting to anyone who wanted them. Nobody did.

The Black Horse site and the adjoining land are considered by Southwark to be suitable for residential development. On 29 May 2020, in its capacity as a local planning authority, Southwark granted planning permission for the demolition of the pub and its replacement with a predominantly residential building of six storeys with commercial premises, including a new pub, on the ground floor. Between about 2016 and August 2021 occasional discussions took place between the applicant and Southwark over a possible sale of the freehold, or the surrender of the lease, or the grant of an extended term to facilitate development. Those discussions came to nothing and ended in August 2021 when Southwark made it clear that it was not interested in disposing of its freehold interest.

On 9 September 2021 the applicant applied to the Tribunal under section 84, 1925 Act for an order modifying the covenants to enable the planning permission obtained of 29 May 2020 to be implemented. A copy of the proposed proceedings and their accompanying statement of case had previously been sent in draft to Mr Warner of Southwark, in January 2021 and he had passed them on to Mr Paul Davies, head of Southwark’s Property Team. On 6 August 2021, a month before he issued the application, the applicant’s solicitor, Mr Michael Maunsell of Bryan O’Connor & Co, had spoken to Mr Davies on the telephone to alert him that the proceedings were about to be issued and to reassure him that the applicant wished to continue negotiating with Southwark. After that telephone conversation Mr Maunsell did not hear any more from either Mr Davies or Mr Warner.

By Rule 33(1) of the Tribunal’s rules, on receipt of an application under section 84 the Tribunal is required to give directions to the applicant for notice of the application to be given to all those who appear to be entitled to the benefit of the restrictions. On 10 September 2021 the Registrar therefore directed the applicant to serve the application and the attachments received with it on Southwark. He did not specify an address or method of service, nor did rules require him to do so.

The address given for Southwark in the application was a PO Box address. Nevertheless, Mr Maunsell decided to serve the application in person at Southwark’s main administrative offices at 160 Tooley Street, which is also the address given for Southwark in the Land Register entry for the property. On 12 October 2021 Mr Maunsell attended at 160 Tooley Street and delivered the application under cover of a letter which listed the documents enclosed, including the statement of case and the other documents filed with the Tribunal in support of the application.

In a witness statement prepared in response to the application to set aside the order, Mr Maunsell explained that Southwark does not accept post at its front desk at 160 Tooley Street and directs deliveries to a window at the side of the building. The person at that window provided Mr Maunsell with a receipt for the envelope he handed over which he in turn provided to the Tribunal on 19 November 2021 with a certified copy of the application as proof of compliance with the rule 33 direction.

At the hearing of the application Mr Maunsell was cross-examined on his witness statement. He explained that he had delivered the application by hand so that there could be no doubt that it had been received. It was suggested to him by Mr Rainey KC that service by hand, rather than by a post or email addressed to Mr Davies or one of his colleagues with whom the applicant had been negotiating, was a deliberate tactic adopted in the hope that Southwark’s administrative arrangements would be so chaotic that the application would not come to the attention of Mr Davies or anyone else who would understand its significance. Mr Maunsell refuted that suggestion, and I accepted his evidence that the purpose of serving the documents by hand was so that he could provide the necessary confirmation to the Tribunal that they had reached Southwark.

Mr Maunsell did not email another copy of the application to Mr Davies, Mr Warner or anyone else at Southwark. Nor did his client, Mr Heldreich, a director of the applicant’s parent company, Acorn Property Group, who had been conducting negotiations with Southwark. Mr Maunsell explained that, in view of his previous telephone conversation with Mr Davies warning that the proceedings were about to begin and inviting further proposals, he considered that the ball was in Southwark’s court and that it was for it to contact him to discuss the application if it wished to do so.

The covering letter was marked for the attention of Mr Davies (although his name was mis-spelt as Davis) of the Property Team, but it did not come to his attention. Mr Davies explained in a witness statement that there are other Paul Davis or Paul Davies working for Southwark, and that it is “not unusual for post to be misdirected”. He did not say whether there were any arrangements in place to redirect post misdirected in this way.

Southwark’s evidence was that in 2021 post delivered to 160 Tooley Street was liable to be left unattended for many months, as staff (including I assume Mr Davies) were working from home in the aftermath of the Covid 19 pandemic. Mr Davies candidly acknowledged that the Property Team did not address its backlog of 2021 deliveries until March 2022. He did not then find the envelope delivered by Mr Maunsell (nor a second envelope containing notice of a separate application in relation to a different pub). I assume that it has been lost somewhere in Southwark’s administrative innards.

Rule 34(1) of the Tribunal’s Rules requires that a person who wishes to object to an application under section 84 must file a notice of objection within one month of being given notice of the application. Southwark did not do so and therefore did not become a party to the application. In consequence, it received no communication from the Tribunal in connection with the application and was not served with a copy of the order of 24 February 2022 modifying the covenants in the lease.