United Kingdom | Publication | February 2023
In this edition we take a look at two significant Supreme Court decisions, one involving the consequences of “visual intrusion” from the Tate Modern viewing gallery and the other the meaning of a “conclusive” service charge certificate; reforms to the Electronic Communications Code; an update to the EU Blacklist of non-cooperative tax jurisdictions; and the perils of “pernicious” knotweed.
If visitors to the Tate Modern public viewing gallery can see straight into the interior of neighbouring flats with floor to ceiling windows - and take full advantage of the fact - does this amount to an actionable private nuisance?
That is the question that the Supreme Court was asked to decide in Fearn and others v Board of the Trustees of the Tate Gallery [2023 UKSC 4]. Perhaps to the surprise of many, The Supreme Court held that it does.
Several long leasehold owners in a relatively new development adjacent to the Tate Modern whose flats are directly opposite the Tate Modern’s viewing gallery sought an injunction requiring the Tate to prevent members of the public from viewing their flats, alleging that this interfered unreasonably with their enjoyment of their flats and amounted to a private nuisance.
The Court of Appeal had disagreed, holding that “mere overlooking” is not, as a matter of principle, capable of giving rise to a cause of action in private nuisance.
The leaseholders appealed and their Lordships, having reviewed the principles of the common law of nuisance, decided by a majority of 3:2 that the Court of Appeal was wrong to conclude that the law of nuisance did not extend to a case of this kind, involving “visual intrusion”. There was no conceptual limit to what can constitute a nuisance - “the categories of nuisance are not closed. Anything short of direct trespass on the claimant’s land which materially interferes with the claimant’s enjoyment of rights in land is capable of being a nuisance”.
Was there an actionable nuisance in this case? The Supreme Court stated that the law of private nuisance is concerned with maintaining a balance between the conflicting rights of neighbouring landowners. If such a balance is to be maintained, not every interference with a person’s use and enjoyment of their land can be actionable as a nuisance. A critical question for the court was: did the Tate’s use of its land give rise, when looked at objectively, to a substantial interference with the ordinary use of the leaseholders’ properties?
On the facts, the Supreme Court held that this was certainly so. The living areas of the leaseholders’ flats were under constant observation from the Tate’s viewing gallery for much of the day, every day of the week, with the number of spectators in the hundreds of thousands each year, many taking photographs of the interiors of the flats and posting them on social media: “It is not difficult to imagine how oppressive living in such circumstances would be for an ordinary person – much like being on display in a zoo”. It was beyond doubt that the viewing and photography from the viewing gallery caused a substantial interference with the ordinary use and enjoyment of the leaseholders’ properties. It was also a highly significant factor that use of the Tate’s land as a public viewing gallery was not a “common and ordinary” use of the land, but an “exceptional” use.
The Supreme Court concluded that, if the parties could not agree a solution between themselves, the case should be remitted to the High Court to determine the appropriate remedy. If remitted, issues to consider might include whether there is a public interest in maintaining the gallery with a 360-degree view capable of overriding the leaseholders’ prima facie remedy of an injunction and whether any remedial measures proposed by the Tate were sufficient to avoid an injunction or damages. So all is not over yet……
It remains to be seen whether the decision will have a limited impact due to its unique facts or whether there will be wider repercussions for existing and new developments in built-up areas.
As a landlord, if your leases state that your service charge certificate will be "conclusive”, you might be fairly relaxed about incurring service costs at your properties. If so, the recent Supreme Court case of Sara & Hossein Asset Holdings Ltd v Blacks Outdoor Retail Ltd [2023] UKSC 2 should serve as a warning.
In this case, Blacks Outdoor Retail Ltd (the Tenant) was the tenant of commercial retail premises of which Sara & Hossein Asset Holdings Ltd (the Landlord) was the landlord under two successive leases dated 2013 and 2018 respectively (the Leases). The Leases were on materially the same terms and provided that the landlord’s certificate as to the service charge payable by the tenant was to be “conclusive” in the absence of “manifest or mathematical error or fraud”.
The Tenant refused to pay the service charges demanded for the years 2017-18 and 2018-19, amounting to £407,842.77, claiming that this amount was excessive and included unnecessary items and expenses that were not properly due under the terms of the Leases.
The Supreme Court held that the correct interpretation was that the Landlord’s certificates were conclusive as to what was required to be paid by the Tenant following certification, subject only to the permitted defences of manifest or mathematical error or fraud. However, payment of the certified sum did not prevent the Tenant from later disputing liability for that payment. Several provisions in the Leases appeared to limit the Landlord’s ability to simply charge what it pleased, for example:
These limitations and rights could lead to legitimate disagreements which were unlikely to amount to manifest or mathematical error or fraud. To give full effect to the purpose and intention of the Leases, the Tenant would need to be able properly to challenge the Landlord’s assertions as to the correct amount of the service charge. This conclusion - the so-called “pay now, argue later’ principle - seemed to be consistent with the overall contractual wording, arguably without leading to uncommercial consequences.
This might be seen as a surprisingly tenant-friendly perspective on traditionally worded service charge provisions and could potentially open the door to more pushback from tenants about their service charges. From the landlord’s perspective, on the other hand, there is some benefit to this ruling as it ensures prompt up-front payment of the certified service charge amount and requires the tenant to make an active decision about whether to take the risk and make the effort to establish a claim, thus reducing the risk of frivolous counterclaims.
Contributed by senior associate Roopa Modi. Please contact us if you require further information.
Telecommunications operators will be relieved - if not delighted - that long-awaited reforms to the problematic Electronic Communications Code (the Code) have started to come into effect.
It has been no secret that there are numerous problem areas with the way that the Code has operated in practice. Part 2 of the Product Security and Telecommunications Infrastructure Act 2022 seeks to address some of these and regulations were made in February bringing some of its provisions into force.
The regulations, in force on February 7, 2023 introduce:
Other Code reforms will come into force on April 17, 2023 including a conditional right for operators to upgrade and share relevant apparatus installed before December 29, 2003, when the Code came fully into force.
These changes complement those in The Telecommunications Infrastructure (Leasehold Property) Act 2021, which came into force on December 26, 2022. That Act focuses on the difficulties faced by operators wishing to provide broadband services to apartment blocks. It allows the courts to impose Code rights giving operators access to install broadband in such blocks where a tenant has requested it but the landlord has repeatedly failed to respond to an operator’s requests for access.
Readers should be aware that the EU Blacklist of non-cooperative tax jurisdictions has been updated to include the British Virgin Islands (BVI), a popular jurisdiction for holding UK real estate. The EU Council reviews the list every six months and includes countries which it considers either have not engaged in a constructive dialogue with the EU on tax governance or have failed to deliver on their commitments to implement certain reforms.
This will have implications for the DAC 6 disclosure regime (as fully implemented, rather than the UK’s Mandatory Disclosure Rules), as well as for defensive tax measures implemented in EU jurisdictions. These include at least one of the following four measures: imposition of increased withholding taxes; denial of deductions for cross-border payments (for example, interest, royalties and service fees); controlled foreign company rules that operate to include the income of any entity resident, or any permanent establishment situated, in a listed jurisdiction in the taxpayer’s tax base; and limitation of participation exemption for dividends or other profits treated as received from a blacklisted jurisdiction.
At this stage, we expect that the primary impact of the addition of the BVI to the EU’s Blacklist relates to cross-border payments from a Member State of the EU to a BVI company, although consideration should also be given to any restrictions within an investment policy which could be impacted by this latest update.
For further information please contact real estate tax partner Julia Lloyd.
Two cases involving Japanese knotweed on land have recently hit the headlines.
In Mark Christopher Davies v Bridgend County Borough Council [2023] EWCA Civ 80, knotweed growing on the respondent’s land encroached into the appellant’s adjoining property. The appellant succeeded in a claim in nuisance against the respondent and the issue before the Court of Appeal was: were damages payable for the diminution in the value of the appellant’s land caused by that nuisance? The lower courts had held that this was pure economic loss and that damages were irrecoverable.
The Court of Appeal disagreed: if the value of property is diminished as a result of an interference with the owner’s quiet enjoyment or the land’s amenity value caused by the (non-trivial) encroachment of knotweed from adjoining land, damages for diminution in the value of the property were available. This was not a case of pure economic loss but of physical interference.
The damages in issue here amounted to £4,900 and the judge commented that if that was all that was at stake, the proportionality of the proceedings having got as far as the Court of Appeal would be questionable. However “the point of principle about recoverability was important, particularly given the number of knotweed cases”.
The issue at stake in Downing v Henderson before the London Central County Court was a different one and involved a claim of misrepresentation by a purchaser against a seller who had stated in replies to standard pre-contract enquiries that the property was not affected by knotweed. This proved to be untrue.
The judge stated that if a misrepresentation is made, the burden is on the maker of the statement to establish that they believed their statement to be true and had reasonable grounds to do so. On the evidence, the seller did not meet that burden. The seller had also relied on the representation when deciding to proceed with the purchase.
There was quite a price to pay for the seemingly casual “No” given in the replies to enquiries: damages of £32,000 were awarded and (no doubt hefty) costs.
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