Charles Russell property team win ground breaking case

06 Feb, 2013

The property team at Charles Russell LLP has successfully advised Charles Terence Estates Limited in the ground breaking case, Charles Terence Estates Ltd (“CTE”) v Cornwall Council.


The Court of Appeal has upheld an appeal against the High Court decision that had allowed Cornwall Council to rid itself of what it considered to be bad bargains by evoking its predecessor district authorities’ (Restormel Borough Council and Penwith District Council) lack of capacity. 


Between 2007 and 2010, CTE had granted 30 leases of houses to Cornwall’s predecessor authorities to allow the local authorities to house vulnerable homeless people in good quality accommodation and reduce the use of temporary accommodation. This was a unique arrangement designed to assist the local authorities in meeting their statutory duties to house the homeless. 


In July 2010, that Cornwall Council decided it wanted to terminate the leases and stopped paying rents, attempting to avoid their liabilities by claiming that the Council’s decision to take on the leases was ultra vires.


In 2011, The High Court found that the local authorities had breached their fiduciary duties to their council tax payers by failing to have regard to market rents when negotiating the terms of the leases.  Despite High Court Judge, Sir Ross Cranston declaring CTE acted in good faith, all 30 leases were void and struck down.


CTE appealed the High Court decision. The Court of Appeal found that it was inappropriate for Cornwall to seek to avoid the leases just because financial circumstances may have changed and the Council now thought that the leases were no longer commercial. The President of the Supreme Court Lord Neuberger acceded to CTE’s request for Cornwall’s application for permission to be expedited.   Cornwall Council were refused permission to appeal.


Peter Levaggi (pictured), Partner and Joint Head of Property Litigation Group at Charles Russell said: “We are delighted to have successfully advised Charles Terence Estates Ltd and welcome the Court of Appeal’s decision. The news will be welcomed by private business entering into a contract with a local authority, particularly in the current economic climate where public authorities are seeking to cut costs. Nevertheless, private contractors would be well advised to seek clarification that a contracting public authority has the necessary vires at the outset.” 


The Charles Russell team was led by Peter Levaggi with assistance from Alison Crabbe, Associate in the Guildford office.

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