Home From Home Ltd. v Home

LORD JUSTICE BROOKE: This is an appeal by Miss Home from an order of Jack J on 1 December 2005 whereby he adjourned, at her request, her appeal from an order of Mr Recorder Hampton in the Central London County Court on the condition that she pay £5,000 into court to stand as security for costs within 14 days and in default of such payment her appeal should stand dismissed.

The dispute relates to the tenure by Miss Home of a third floor flat at 26 Curzon Street in Mayfair, London, SW1. The claimants hold the head lease of the building, and on 23 December 1999 they granted a 13 year sub-lease of the entire building to a company called Archer Estates Limited (“Archer”) at an annual rent of £180,000. Archer did not pay any of the quarterly rent due on 25 December 2002 or the next two quarter days, and on 9 September 2003 the claimants commenced possession proceedings against Archer when the arrears of rent and insurance rent exceeded £140,000. The claimants were aware that Miss Home occupied part of the building as her residence, and they gave her notice of the progress of the proceedings. She did not, however, attend the trial in November 2003 when a possession order was made or take any other steps to protect her interests until after a warrant for possession was executed in the claimants’ favour on 27 January 2004.

On 8 March 2004 she, together with another tenant of the building, made an application to HHJ Zucker QC, who directed that the warrant for possession of two of the flats be suspended until after the trial of the issues between the claimants and the flat occupiers, including Miss Home, who were joined as defendants in the action. The judge also directed a timetable of the steps to be taken leading up to a trial before a circuit judge with a listing window set for the month of June 2004.

Although reference was made to other procedural provisions, by the time of the hearing before Mr Recorder Hampton on 14 June 2004 there was common ground that the court’s only power to grant relief stemmed from the statutory scheme enacted in section 138(9A) to (9C) of the County Courts Act 1984 (as amended). Section 138(9A) gives the lessee power to apply for relief from forfeiture on such terms and conditions as the court thinks fit, provided that the application is made within six months from the date on which the lessee recovers possession. Section 138(9C) provides:

“(9C) An application under subsection (9A) may be made by a person with an interest under a lease of the land derived […] from the lessee’s interest therein in like manner as if he were the lessee; and on any such application the court may make an order which (subject to such terms and conditions that the court thinks fit) vests the land in such a person, as lessee of the lessor, for the remainder of the term of the lease under which he has any such interest as aforesaid, or for any lesser term.”

By her defence filed on 15 April 2004 Miss Home said that Archer had granted her a lease of the third floor flat at 36 Curzon Street on 1 May 2001. The lease was granted for a term of five years from 7 October 2001 to 8 October 2006 if she paid the entire rent in advance by a single payment of £129,600. She said that the claimants had always known of her tenancy of the flat because she had originally rented the flat from their agents, Countrywide Estate Agents (“CEA”), in November 1999, and in December 1999 those agents directed her to deal with Archer and sign a lease with that company, which she did. She added that when she entered into the May 2001 lease with Archer her solicitors, who drafted the lease, enquired of the claimants or their agents whether Archer – who had by then changed their name to Mayfair Properties Limited (“Mayfair”) – were authorised to lease the premises to her.

Miss Home filed a written statement on 22 April 2004 in which she expanded on some of the matters set out in her defence. She said that an employee of CEA had first showed her the flat in November 1999, when she was told that the weekly rent would be £500. She paid them a week’s rent and a deposit of £1,000. It was agreed that they would install a bathroom sink, fix the shower, and make other repairs before she moved in. She said that she entered into a written lease for the flat with CEA and moved in in December 1999, although the repairs had still not been done. CEA then told her that Archer was now the landlord, and in the same month she made a lease with them on terms that they would carry out certain repairs.

In due course she withheld the rent, on her solicitors’ advice, when these repairs were not done. When litigation ensued, she achieved a settlement whereby she made the agreement with Mayfair to which she referred in her defence. In addition to paying £129,960 as the advance rent for the first renewable five-year term of the new agreement, she also made a payment of £41,164 in respect of rent at the time she signed the May 2001 agreement.

She exhibited a number of documents, mostly in manuscript, to her witness statement. She said that they showed the monies she had paid as rent for the flat, and that all told she had paid more than £235,000 for rent since May 2001 and that the rent was paid until 30 November 2007. In neither her defence nor her witness statement did she say anything about any direct contact with Home from Home Limited after May 2001.

The claimants’ reply put most of the assertions in the defence in issue, except that they accepted that CEA had been their managing agents at all material times. In particular they put Miss Home to proof of the execution and validity of the 1 May 2001 agreement and of her payment by way of advanced rent, and denied that they let the flat to her in 1999 or had any knowledge of her tenancy. Indeed, they relied on a term of their lease with Archer which prohibited any separate sub-letting of the third floor. They also denied that Miss Home’s solicitors made any enquiries of them as alleged.

The claimants’ witness statements, however, which are not now before this court, painted a slightly different picture so far as their willingness to permit tenancies on an assured shorthold basis was concerned. Needless to say, Miss Home’s tenancy as she described it was not on an assured shorthold basis.

Miss Home appeared in person at the hearing before the Recorder, and in a short judgment he described the background of her application and said that he accepted her evidence. She was, he said, the unfortunate victim of people she believed to be her friends, particularly a man called Abdullah of Archer Estates, whom she regarded as a good friend. At the time she entered into the five-year agreement she had a flourishing business, and in addition to the advance rent of £130,000 she had also paid Archer £120,000. She received promises of refurbishment, and promises that Archer would pay the rent arrears she knew were owed to the claimants. She therefore advanced large sums to Archer as a loan which she had borrowed on the security of her own assets. The Recorder found that at the time of the trial she had no money and did not currently have any business. She certainly had no funds available to pay the rent.

Although she was intending to set up a similar business to the one that she ran before, and expected it to be profitable, she could not pay any rent for the next six months. Since the rent was perhaps less than £20,000 per year, this would mean that the landlord would be out of pocket for up to £10,000 over those six months. Whether she was able to resume payment of the rent after that time remained to be seen. The Recorder ended his judgment in these terms:

“Therefore I have come to the conclusion with considerable regret that I cannot exercise my discretion in her favour to allow her relief from forfeiture in this matter. The first consideration that I have to have is the rent issue. It may be that the other issues, if the rent issue did not dominate, would not be a problem. She is in every other way a perfectly satisfactory tenant. She is a very pleasant lady and I expect that she would use the premises in a perfectly good tenantable and decent manner and look after them. Without the payment of the rent unfortunately I am not able to grant her the relief which she has sought, and therefore this application by her must be dismissed”.

I have described how there is no trace of any suggestion, either in the defence or the witness statement, of any direct dealings between Miss Home and Home from Home Limited after May 2001. It also appears from the recorder’s judgment that she gave no evidence of any such direct contact at the trial. On 12 July 2004 Miss Home, who had now instructed solicitors, filed a Notice of Appeal at the High Court. She now sought to assert that after she had received notice that Archer were in arrears of rent, she telephoned the claimants and offered to buy Archer’s lease. The claimants allegedly told her that they could not accept the money from her, but that she could speak to Archer who could transfer its lease to her. It was therefore on the claimants’ advice that she had paid a further £120,000 to Archer to cure Archer’s default on their lease with the claimants. She had borrowed this money from various people and was now obliged to repay it. She therefore sought a stay of the warrant of possession pending her appeal which was brought on the grounds that the Recorder’s judgment was contrary to the weight of the evidence, that the claimant had actual knowledge of Miss Home’s five year residential tenancy, and that his order produced an unjust result in that her tenancy was forfeit and the claimants had been unjustly enriched thereby. No notice to adduce further evidence on the appeal was served with the Notice of Appeal. It was not totally clear how she could reasonably expect that such crucial evidence which was not given at the trial and which she must have known about because she was directly involved in it, , could be admissible on the appeal under the rule of Ladd v Marshall.

On 19 July 2004 the Notice of Appeal was supported by a skeleton argument settled by counsel who did not have any access to any note or transcript of the judgment and had an incomplete version of the trial bundle in his possession. After setting out the issues as they appeared from the pleadings and the witness statements, counsel said that the appeal was based on the fact that there was overwhelming evidence that Miss Home had reached an agreement with Archer for a tenancy and had paid very substantial rent in advance in respect of the same. He added that her assertion that the claimant and its servants or agents knew of this tenancy and permitted it was enhanced by the untrue evidence which was filed in support of the claim. This was apparently a reference to the way in which the evidence about the claimants’ ability to permit assured shorthold lettings had altered prior to the trial. That was counsel’s best effort to formulate what the appeal was all about without having access to a note or transcript of the judgment. No further elucidation was given as to what the grounds of appeal truly were.

Nothing then happened for over a year until on 13 October 2005 Openshaw J granted permission to appeal on the basis that since Miss Home had not been represented at the trial, the Recorder had not dealt with the point that she had only had dealings with Archer because the claimants, from whom she had rented the property, had directed her to deal with that company. Openshaw J appears not to have addressed his mind to the problem that the appellant was now seeking to rely on evidence which was not before the Recorder, so that the Recorder could hardly have been wrong in not deciding the matter on the basis of evidence he had never heard.

When the appeal came for hearing before Jack J, Miss Home appeared in person and asked for an adjournment. She said she had wished to be legally represented but they had waited and waited for legal aid to come through, and although she had told her original solicitor she would not wait any longer but would raise the cash to pay him, he had said he would not act for her any more. Delays had occurred because her court papers had been seized from an office in another flat when the claimants obtained possession of it. She had succeeded in finding another solicitor to act for her, but he would not be available until after Christmas, and she told him she would raise the cash to pay him. She said that money was definitely coming which was owed to her.

The judge said that he was not willing to grant an adjournment until he was satisfied that there really was some point in the appeal. He was then told the facts of the dispute by counsel for the claimants, who also observed that she had not paid any rent to his clients since the hearing before the Recorder, and that if she could not afford a solicitor she could not pay the rent.

The judge said that it looked as if there was really nothing in the appeal, but because there was quite a lot of money involved so far as Miss Home was concerned, he was prepared to adjourn the hearing of the appeal, but only on the basis that Miss Home paid £5,000 into court, which would stand as security for the claimants’ costs, within 14 days. Otherwise, he said, on what he had heard, there was nothing in the case and he would dismiss the appeal. After stating that he was going to make this order, the judge asked whether Miss Home thought she would be able to find £5,000 within a fortnight. The transcript then reads :

“Miss Home: I am giving £3,000. Can I pay it in two sums, sir?

“Judge: No. You will pay the £5,000 within a fortnight, or your appeal will be dismissed.”

Miss Home in due course received permission to appeal to this court from Moore-Bick LJ on a point which turns round the decision of the House of Lords in MV Yorke Motors (a firm) v Edwards [1982] 1WLR 444. Moore-Bick LJ said:

“Although he was justifiably sceptical about the merits of the appeal, the judge was persuaded that there were grounds for granting an adjournment. However, he also seems to have accepted that the appellant was substantially without means. In those circumstances it is arguable that he should not have ordered her to make a payment into court by way of security for the respondent’s costs and to direct that in default of her doing so the appeal should stand dismissed since there was no reason to think that she could comply with such an order”.

The respondents have now filed a Respondents’ Notice in which they contend that the judge was wrong to grant the appellant an adjournment to obtain legal advice. He failed to take into account or give sufficient weight to the fact that the solicitors acting for her when the appeal was lodged helped with the original application by Miss Home to have the warrant for possession set aside which was heard by Mr Recorder Hampton on 14 June 2004. Thus the appellant had almost a year and a half to organise legal representation for an appeal. There was no credible explanation as to why the solicitors acting for the appellant after the June 2004 hearing could not have organised representation for her on 30 November 2005. There was no evidence that the appellant had wanted such representation. To date she had always represented herself.

It is then said that the judge was further wrong to grant her an adjournment to obtain legal advice because the appeal had no prospect of success. In November 2003 Home from Home was granted possession of the building at 36 Curzon Street, London, W1 with the third floor flat occupied by the appellant. Miss Home had continued to occupy the flat since that date, but had paid not one penny of rent. Before Mr Recorder Hampton on 14 June 2004 the appellant’s case was that she could not afford to pay any rent for the foreseeable future six months. That has proved to be a gross underestimate.

It was then said that the appellant’s case is that she is entitled as a sub-tenant to some form of relief from forfeiture. Even if that were right (and the respondents do not accept that it is right in principle let alone on the merits), the standard terms for relief in any such case would be that she pay a proportion of the arrears of rent in relation to the flat. The appellant’s present case, and that before Jack J, appeared to be that she still has no means. In the event that the appellant could not even pay at present a current market rent from the flat, let alone any arrears, the appeal was hopeless and should have been dismissed. Other grounds advanced included the way in which the appellant was taking steps at the very last moment at each stage. There was an irresistible inference that she was playing the system.

We have received spirited submissions by Mr David Schmitz, who appears for the appellant before us. He accepts that there were formidable difficulties in having further evidence adduced on the appeal on Ladd v Marshall principles, but he contended that she had received only very perfunctory legal help. She had not had help from her lawyers. The case was bedevilled by the absence of counsel, and she had only the most basic assistance. He has told us that legal help is available for this class of case, and from what she told the judge she seems to have gone to consult a lawyer who knew nothing about the legal aid system and was an American lawyer at that. She did not take the opportunity of obtaining help from an English lawyer with experience in landlord and tenant matters before the hearing of the appeal.

Mr Schmitz went on to say that the way that the Recorder exercised his discretion was flawed and would be challengeable on a retrial. There was a viable issue on the appeal. He was less convincing in his submissions as to what was wrong with the way that the Recorder approached the matter on the evidence before him, which was that there was no prospect of the tenant being able to pay any rent for at least six months for premises for which the market rent was about £20,000 a year, and it was only then a hope that she might be able to pay the rent. He contended that the Recorder had misdirected himself, and he went on to contend that the judge was wrong to grant an adjournment on terms as to money into court when he had not satisfied himself that she was able to pay the sums he ordered, and in those terms what he was granting would be of no value at all. Orders of this kind had been deprecated by the House of Lords in the Yorke Motors case.

In my judgment it is more appropriate to approach the merits of this case on the approach of the respondents in their Respondents’ Notice. There really was no defence to this action and no reasonable prospect of the tenant being able to improve her position on the appeal by adducing evidence for the first time of conversations which she now alleges - or has been alleging ever since she first filed her Notice of Appeal - she had direct with the claimant’s representatives, of which not a mention was made either in her defence or in her witness statement or in her oral evidence at the trial. In my judgment the judge was wholly entitled to form the view that there was really no merit and really nothing in the appeal. In those circumstances it was a wrong exercise of his discretion to grant an adjournment.

I would therefore dismiss the appeal on the grounds put forward in the Respondents’ Notice.

LADY JUSTICE SMITH: I agree.

LORD JUSTICE WALL: I also agree. I have to say that on my initial reading of the case it seemed to me at least arguable that the judge’s action in granting an adjournment on terms that £5,000 was paid could be said to be vitiated by his apparent recognition that the appellant was unable to raise that sum. However, on the full analysis which we have been able to conduct in court this morning it is now clear to me that no possible criticism can be made of the Recorder’s decision. Accordingly any appeal from it would stand no prospect of success. Like my Lord, I prefer to deal with the matter on the basis of the Respondents’ Notice, and I too would therefore dismiss this appeal.