Northwood Solihull Ltd v Fearn & Cooke [2020] EWHC 3538 (QB)

By s.44 Companies Act 2006 a limited company may execute a document either by affixing its common seal to that document, or else by a director of the company signing the document in the presence of a witness or by two “authorised signatories” – which is defined to mean any director and the company secretary.

In Hilmi & Associates v 20 Pembridge Villas Freehold Ltd [2010] EWCA Civ 314, [2010] 1 WLR 2750 (“Hilmi”), the Court of Appeal held that, where a corporate tenant gave a notice under s.13 of the Leasehold Reform Housing and Urban Development Act 1993, that notice must be executed in accordance with s.44 Companies Act 2006 in order to be valid. Lloyd LJ, giving the only reasoned judgment, held that where a landlord was required to sign a document for some “formal legal purpose” and was a corporate entity, then this engaged the provisions of s.44 of the Companies Act 2006. As the notice in that case had only been signed by one director, it was invalid.

Unhelpfully, the court in Hilmi did not provide a clear definition which documents might attract the requirement for execution. With respect to Lloyd LJ, the phrase “some formal legal purpose” is rather vague.

Recently, there have been a number of County Court decisions where tenants’ advisors have sought to argue that the principle in Hilmi should apply to various notices required to be served by landlords.

Facts of Northwood v Fearn & Cooke

In the present case the tenant under an assured shorthold tenancy fell into rent arrears and the landlord served a notice seeking possession pursuant to s.8 Housing Act 1988. The notice was in the correct form and set out all the matters required by the governing legislation. It was signed by a property manager employed by the landlord, acting in the normal course of her duties. The tenant defended the subsequent claim for possession, arguing that the notice was invalid as the landlord was a corporate body and the notice was required for a formal legal purpose and so should have been executed in accordance with the Companies Act 2006.

The tenant also brought a counterclaim for a penalty award under s.214(4) Housing Act 2004 on the grounds that the prescribed form for the provision of prescribed information about the security deposit (as required to be followed by s.213(6) of the 2004 Act) demanded a signature by the landlord and that in this case it had only been signed by one director of the landlord company, without a witness to that signature . Again, the failure to “execute” this document was the only criticism made of it. All the information about the tenancy and the protection of the security deposit required by statute had been provided.

Both documents in issue must be given in a form prescribed by the statute or in a form substantially to the same effect. The prescribed form is set out in secondary legislation.

At first instance the circuit judge held that the section 8 notice was valid and made an order for possession. On the other hand, he considered that the confirmatory certificate did need to be executed and made an award against the landlord under s.214(4) of the 2004 Act. In arriving at these conclusions he considered that the decision in Hilmi required him to look carefully at the statutory wording. Where the landlord and no-one else was required to sign the document (as had been the case in Hilmi) the document had to be executed in accordance with the Companies Act. Where the landlord or an agent could sign, then there was no requirement for execution.

The Appeal

The tenant was granted permission to appeal against the trial judge’s findings in relation to the section 8 notice. The landlord served a Respondent’s Notice by which it sought to uphold the trial judge’s findings on the section 8 notice but also to cross-appeal against the finding in connection with the prescribed information confirmatory certificate.

The appeal was heard in the High Court in Birmingham by Mr Justice Saini. He gave the landlord permission to cross-appeal in relation to the landlord’s confirmatory certificate. He dismissed the tenant’s appeal on the section 8 issue and also the landlord’s cross appeal.

The following principles emerge from the judgment:

1. Following Hilmi, the requirement for a corporate landlord to execute a document only applies where the relevant statutory provision requires the landlord and only the landlord to sign. As a section 8 notice may be signed by the landlord or an agent, there is no requirement for execution.
2. The confirmatory certificate was (at the relevant time) required to be signed by the landlord alone and consequently the trial judge was correct to hold that it was not valid. There was no room to ask the question whether a document signed by only 1 director was “substantially to the same effect” as one properly executed by a corporate body as this was a binary issue:- either the certificate was properly executed, or it was not.

Further issues

1. Since 26 March 2015 it has been possible for a landlord’s agent and not just the landlord themselves to sign the Confirmatory Certificate. It follows that the decision on the cross-appeal is only relevant to prescribed information given before that date.
2. There is concern in the lettings agency industry about the effect of this issue on their business practices. Many lettings agencies are set up as corporate entities. If they sign such documents must they execute them? This issue was not addressed by Saini J but, since in his judgment the requirement to execute a document only applies when the landlord alone is required to sign, it seems unlikely that a corporate body lettings agency would be caught. Nevertheless, this might be an issue for another case. In the meantime, agencies which have concerns about the risk might wish to ensure their contracts list a named individual as the agent, rather than the employer company.
3. Section 21 notices. These were not considered by Saini J as the landlord had not relied on one. It is considered that, because the prescribed form (form 6A) permits either a landlord or an agent to sign, that the requirement for execution will not apply.
4. Corporate landlords and lettings agencies which act on their behalf should check all prescribed information documents given before 26 March 2015. Where they have not been executed in accordance with s.44 Companies Act 2006, new versions should now be given to the tenant as failure to do so would render any subsequent notice under s.21 Housing Act 1988 invalid.

James Browne appeared for the successful respondent landlord in the appeal before Saini J.