England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Rolls Building, Fetter Lane, London, EC4A 1NL
		16/12/2011

Peter Smith J :

INTRODUCTION

1. This is an application for permission to appeal by the First Defendant Mr Kanj ("Mr Kanj") pursuant to an Appellant's Notice dated 13^th October 2011. He had applied for a further stay of execution before Morgan J on 31^st October 2011. He directed that the application for permission to appeal be heard in November 2011 (if possible) with the appeal to follow should permission be granted.
2. This is an appeal from the decision of HHJ Lamb QC sitting in the Central London County Court on 20^th September 2011 when he concluded that the claim for possession of the garage under Block No 1, Northways Parade, Finchley Road London NW3 ("the Garage") was not genuinely disputed on substantial grounds. He refused permission to appeal his judgment.
3. The application came on before me on 8^th December 2011. At the conclusion of that hearing I indicated that I was minded to give permission to appeal and allow the appeal and would give reasons for that decision at a later date. I also directed that the issue which I concluded there was between the parties as set out below should be the subject matter of a speedy trial (given the Respondent's contractual commitment that they have entered in to in respect of the Property) should be heard on 19^th, 20^th and 21^st December 2011. I made all necessary consequential directions order to enable the trial to take place at that date.

BACKGROUND

4. The Respondents ("Benesco") granted a lease of the Property to Speedway Tyres Ltd ("Speedway") for a term of 10 years at a yearly rent of £85,000. Mr Kanj accepted that he was instrumental in incorporating Speedway. His wife Joumana Meghrabi had at all material times been a director of that company. Mr Kanj had no status officially within the company.
5. Speedway was placed into a creditors' voluntary liquidation owing about £60,000 under the Lease and having a deficiency of £200,000 on 19^th May 2011. An associated company Speedway Autocare Ltd ("Autocare") was also placed into liquidation on the same date.
6. The liquidator of Speedway is a Mr Brenner. He is also the liquidator of Autocare.
7. On 16^th June 2011 the liquidator disclaimed the Lease under section 178 IA 1986. Mr Kanj acknowledges that he received that notice of disclaimer on the same day.
8. The effect of such a disclaimer puts an end to the relevant company's obligation but does not affect any other rights except for the purposes of releasing the company from its liability. Thus for example the disclaimer of the Lease would not affect any under lease which Speedway might have granted.
9. There are provisions (sections 179-182 IA 1986) enabling a person who claims an interest in the disclaimed property or who is in respect of any liability in respect of the disclaimed property to apply for a vesting order. Despite the wording of section 179 (1) (a) IA 1986 which suggests an application must be made within 14 days rule 4.194 (2) IR 1986 appears to enable the application to be made within 3 months of the applicant becoming aware of the disclaimer. Mr Kanj made such an application on 7^th September 2011 asserting he was entitled to make that application on the basis of a personal sub tenancy. That application has not yet been determined and as part of the procedural directions I made at the hearing of the appeal I directed that it be listed at the same time as the action for possession. As to the conflict see Woodfall "Landlord and Tenant" paragraph 16.211. As appears below Mr Kanj abandoned his contention that he had a personal tenancy on the second day of the hearing before HH Judge Lamb QC. Instead he now claims to be an assignee of a sublease held by Autocare by virtue of an assignment in his favour dated 20^th September 2011. It is proposed that Mr Kanj will apply for a vesting order in his favour in his capacity of assignee of the alleged sublease held by Autocare.
10. Somewhat intriguingly recital (A) of the assignment states "the assignor does not believe that the assignor has the benefit of an interest in the Property". Recital (B) then provides that without prejudice to that it has agreed to assign its interests of whatsoever nature to the assignee (i.e. Mr Kanj) which he does for a £1. I suppose it is a bit like the Khedive's rights "all rights are reserved. I do not know what they are but they are reserved anyway". Mr Kanj will therefore need to amend his application for a vesting order to state the different basis. This is a surprising somersault. Right up until the hearing under the appeal Mr Kranj asserted that he had a personal sub tenancy. Of course it suited him to say that at that time because he could not rely on any sub tenancy of Autocare because that company was in liquidation and he did not have the benefit of any rights before the assignment.

THE PROCEEDINGS

11. Benesco issued the Claim Form for possession on 9^th September 2011. It was an application for a summary order for possession on the basis that the occupants of the property were trespassers. Mr Kanj was named as a specific Defendant and the Second Defendant is the well known "Persons Unknown". It is a summary procedure designed to deal with persons who have no interest in the Property as Benesco asserted in their Particulars of Claim. That was supported by a witness statement by Richard Miles dated 31^st August 2011 a Chartered Surveyor retained to act for Benesco.
12. On 7^th September 2011 Mr Kanj served a Defence signed with a Statement of Truth by him. In that Defence he pleaded in paragraph 2.2 (somewhat cryptically) that Speedway on or around 22^nd October 2004 granted him or alternatively Autocare a sub tenancy of the Property. This is cryptic because of course Autocare was not a party to the action and that was a point if any to be taken by Autocare's liquidator. Mr Kanj was not able to make any assertion on behalf of Autocare until he had gathered in its interest (if any) pursuant to the assignment of 20^th September 2011.
13. He also had to deal with the fact that negotiations had taken place between Benesco and him whereby he as a director of a newly formed company ECRC Ltd signed a document dated 28^th June 2011 described as a tenancy at will. Mr Kanj asserted that that agreement was not valid and binding because it was entered into by reason of negligent or innocent misrepresentations made by Benesco. It appears to me provisionally that subject to contract negotiations had been entered into with a view to granting a new lease to ECRC which was permitted to occupy the Property under the provisions of that document. I am not however expressing a concluded view on that as it is a matter for the trial Judge (as are all question of fact in this case). That will not help Mr Kanj because a tenancy at will is terminable at will and confers no security in respect of a business occupier under Part II of the Landlord and Tenant Act 1954. If there were negotiations entered into subject to contract then either party is entitled to withdraw from those negotiations. That is what Benesco contends. However it goes further and contends that by entering into the agreement on 28^th June 2011 that operates as an implied surrender of the subsisting lease of Autocare. Thus Benesco submits that either Mr Kanj (because he never had a sub lease and at best can only claim derivative rights under ECRC's tenancy at will) nor as a result of this arrangement Autocare has a subsisting interest in the Property for the purpose of seeking a vesting order under section 178 IA 1986.

PROCEDURE

14. The application for possession as I have said came before HH Judge Lamb QC after a procedural direction on 22^nd September 2011. The procedure provides that at the hearing date fixed for the summary claim for possession under CPR 55.5 (1) the court might either (a) decide the claim or (b) give case management directions. Sub rule (2) provides "where the claim is genuinely disputed on grounds which appear to be substantial case management directions given under paragraph (1) (b) will include the allocation of a claim to attract more directions to enable it to be allocated".
15. Thus the application ought to be acceded to unless the claim is genuinely disputed on grounds which appear to be substantial.

THE JUDGMENT

16. The learned Judge gave a careful ex temporare judgment. As appears from that judgment Mr Kanj in the course of the hearing abandoned his claim for a personal tenancy and asserted that there was a tenancy in favour of Autocare the benefit of which has been assigned to him.
17. This was a difficult argument to maintain because his stance all along until that abandonment (subject to the oblique reference to Autocare in the Defence set out above) was that he not Autocare was the tenant.
18. There were further difficulties because Statements of Affairs signed off by Mr Kanj's wife in respect of the liquidation of both companies were at the best ambiguous. Thus for example in paragraph 3.2 in the section dealing with the trading history of Speedway it was said "the company sub let the premises to SACL (i.e. Autocare) under an informal licence. SACL are in arrears for the same amount of £59,650.23". Autocare is in the Statement of Affairs identified as a debtor. Equally in the case of Autocare's Statement of Affairs it was said that the premises were occupied by it under an informal Licence (paragraph 3.2). Mrs Meghrabi provided a witness statement in support of her husband's application. In that she deposes with a statement of truth that in effect (paragraph 35) she now understood that she had granted Autocare a sub lease of the premises (as opposed to an informal licence). In the same paragraph she deposed that her husband was entitled to remain in an exclusive occupation nowhere is there any mention of an exclusive possession. No evidence was provided by any party as to the status of the site in question i.e. its boundaries whether it was made secure and if so by whom and who had control of it.
19. The learned Judge dealt with all of this briefly in paragraph 17 of his judgment as follows:-

"I am quite prepared to conclude that Mr Kanj occupied part of the premises and traded from there from 2004 onwards. I am quite prepared to accept that Autocare formed the company part of the arrangements by which Mr Kanj and his wife organised their business affairs, but the evidence presented to me, evidence designed to show there are substantial grounds for disputing the claim on the basis Autocare had a tenancy at all I find difficult to accept not least because there is no evidence whatsoever to show that Autocare at any point in time from 2004, 2007 or at anytime had exclusive possession of the garage premises. So for my own part I do not see that there are substantial grounds upon which to dispute the claim."

20. He therefore did not find it necessary to deal with the tenancy at will document.
21. It seems to me that a fair reading of the witness statements contains an assertion that both Mr Kanj and/or Autocare had a sub tenancy. A witness statement should be not rejected at a summary stage unless the evidence is incredible. A person is entitled where there are matters raised in the witness statement unless that high threshold is reached to take the matter to trial. I do not accept that the learned Judge was right to conclude there was no evidence showing exclusive possession. The totality of the evidence shows that it is at least arguable that Autocare had a sub lease as opposed to a licence.
22. It is by no means clear what the true position is and it is equally true in my view that Mr Kanj and his wife will face serious cross examination at trial. However I do not accept that the Judge's conclusion was correct with respect to him to shut Mr Kanj out summarily at trial.
23. I do not propose to say anymore about that (nor about the tenancy at will granted to ECRC and its impact on any sub lease that Autocare might establish at this stage). All of these matters are for trial namely the trial that I directed to take place at the end of this term.
24. Those are my reasons for concluding that with respect to the learned Judge he was wrong summarily to accede to Benesco's application.