Szeto v Workman Llp

This is an application for permission to appeal to the Court of Appeal. The facts giving rise to this application are as follows. Between 2005 and 2008 the claimant was the tenant of commercial property at 25 to 27 Smallbrook Queensway in Birmingham. The lease was in fact an underlease. The underlessor is named on the front page of the lease as being Quintain (No. 26) Ltd and Quintain (No. 27) Ltd. The bundle provided to me by the claimant does not include any other sections of the lease but I have no reason to doubt that the parties are correctly shown on the front page, which is in evidence and which bears the date 10 October 2005.

The claimant, Mr Szeto, tells me that Quintain 26 and Quintain 27 went into liquidation some time after the lease was entered into. Unfortunately, there was no evidence about that before the lower courts and this is not a matter which I can explore at this hearing today. Suffice it to say that the claimant remained in occupation until 2008. The managing agents for the landlord were a firm called Workman LLP. According to Workman LLP, they remained the managing agents for the property until the end of February 2008. On their evidence, the property was owned by a subsidiary of Quintain Plc called Chesterfield Properties Ltd and the agents tended to treat Quintain and Chesterfield collectively as a single entity.

According to the agents, and it so appears from the records which they produced, the claimant was somewhat late and somewhat irregular in his payments of rent. Mr Szeto tells me today that there was another problem in relation to the lease, namely that he was in breach of an alienation clause and the landlord served the notice upon him under section 146 of the Law of Property Act. I have no reason to doubt what Mr Szeto says, although again this is not a matter which appears to have been explored in evidence before the courts below.

At the end of 2008, according to the evidence of Workmans, Workmans ceased to be the managing agents for the property. On or around 18 February 2008 the claimant called into Workman’s offices and made cash payments for the landlord – whether that be described as Chesterfield or Quintain or Chesterfield and Quintain I leave on side for the moment – but he made three payments intended for the landlord which totalled £6,990. The claimant made those payments to the managing agents in cash. The managing agents held these monies in their account, which was for Chesterfield and Quintain. They subsequently paid those monies to Chesterfield and Quintain.

Some six years later, in February 2014, the claimant issued proceedings in the Northampton County Court against Workman LLP, claiming repayment of the £6,990 which he had previously paid to them plus interest. The defendant, Workman LLP, applied to strike out the action on the basis that it had no prospect of success. The defendant maintained that it had been acting as managing agent for the landlord; it had received the monies from the claimant; it had remitted them to the landlord, who was its principal, and there was no basis upon which this claim could succeed.

In support of the application to strike out, the defendant filed a witness statement made by Mr Gordon Birdwood, the group company secretary of Workman LLP. Annexed to that witness statement are the relevant documentary records of the managing agents, including documents showing what payments the claimant made and when. There is no reason to doubt the accuracy of the historic records produced by the defendant, even though this claim was made very late in the day, right at the end of the limitation period, requiring the agents to go back through their records and books.

The application to strike out came on for hearing at the Birmingham County Court before District Judge Philips. The claimant argued that by 18 February 2014 the defendant had ceased to be agents for the landlord. Accordingly, the agents had no right to receive the money and should repay it to the claimant. District Judge Philips rejected that line of argument. She held that the defendant remained managing agent for the landlord, the underlessors of the property, throughout February 2008 and she identified the underlessor who had left the property to the claimant as Quintain Plc. She came to the conclusion that there was no effective challenge to Mr Birdwood’s evidence. The managing agents had received the payments from the claimant as agents; they had remitted them to their principal and there was no way this action could succeed. Accordingly she stuck the claim out as disclosing no reasonable grounds for bringing the claim.

The claimant was aggrieved by that decision and appealed to a circuit judge. The appeal came on for hearing before HHJ McKenna, who is and was the designated civil judge for the Birmingham area. The claimant advanced broadly similar arguments before the judge as he had developed before the district judge. HHJ McKenna was not persuaded. He took the view Workman LLP were agents for the landlord on 18 February, the date when the claimant made the payments in cash. The judge noted that there may be other managing agents who had also been appointed to act for the landlord or the underlessor, but nevertheless the original agents retained their agency status. That is not unusual when you have a change of managing agents; it frequently happens that there is an overlap period during which the old agents continue to discharge their outstanding obligations and the new agents are settling in and there is a period of handover, so the judge’s findings in that regard are obviously correct.

The judge then considered the argument that there was an agency for an undisclosed principal. The judge rejected that and said that the claimant knew perfectly well who the principal was, namely the underlessor, who the judge held to be Quintain (No. 26) and Quintain (No. 27). The judge therefore came to the conclusion that the action should indeed be struck out; the district judge was correct and the claimant had no entitlement to repayment of £6,990 together with seven years’ worth of interest. He dismissed the appeal.

The claimant was aggrieved by the judge’s decision and has applied for permission to appeal to the Court of Appeal. This matter was considered on the papers by Moore-bick L.J. The Lord Justice rejected the application for permission. He said that the claimant clearly knew who his principal was; it is clear that Workmans were the agents for the landlord at the relevant time. The notice of appeal had been served long out of time; there was no justification for that. The appeal had no real prospect of success. Furthermore, the appeal did not satisfy the requirements for a second appeal to the Court of Appeal.

Accordingly, and somewhat emphatically, Moore-bick LJ refused the application for permission to appeal on the papers. The claimant, as he is entitled to do, is here in court today in order to renew his application for permission to appeal orally. Mr Szeto has put his argument before me very clearly and courteously. He shrewdly began by asking me to say what I thought about the case and where his difficulties may lie. I did my best to assist Mr Szeto by telling him the outlines of the case as I saw it and the issues which he would need to address.

Mr Szeto argued that paragraph 5 of the witness statement of Mr Birdwood was misleading; it was not correct to say that Workman’s continued to be managing agents for the landlord until the end of February 2008. The difficulty there is that both the judges below made findings of fact and, as I explained to Mr Szeto, the Court of Appeal does not reopen issues of fact of that nature. It would not be possible for the Court of Appeal sitting here in London to retry every civil case and every criminal case which comes before the county courts and the crown court and the High Court around the country. What we are here to do is to look at the findings of fact and, unless there is something strikingly wrong with them, we concentrate on whether there was some error of law or procedural mishap which merits the intervention of the Court of Appeal.

I see no basis in this case upon which the Court of Appeal could depart from the factual findings made by the two lower courts.

Mr Szeto next said that an agency involves three parties: in this case, the tenant, the landlord and the managing agent, which is the intermediate party. I agree with him that a typical agency and the agency in this case does indeed involve three parties. Mr Szeto then complained about the judgments of District Judge Phillips and HHJ McKenna, saying that they do not explain that Workmans ceased to be managing agent for the landlord by 2 February at the latest. This really goes back to the first point which I mentioned. It is not appropriate for this court to consider criticisms of the evidence that was deployed before the lower courts and which was accepted by the lower courts.

Mr Szeto then told me about the breach of the alienation clause and the section 146 notice which was served. He said that a solicitor advised him to pay the outstanding rent which was due and that amounted to £6,990. Mr Szeto is not sure now whether that rent covered the first quarter of 2008 or the last quarter of 2007. Either way, it was a rent payment which had fallen due and which had not yet been paid. Mr Szeto says he followed the solicitor’s advice; he made that rent payment to the managing agents. He subsequently did some legal research and he noted that statements in the legal materials which he read were to the effect that a landlord should not accept payments of rent from a tenant after serving a section 146 notice.

The point which Mr Szeto makes there is not quite right. After serving a section 146 notice the landlord is entitled to accept payments of rent but very often will not do so because such acceptance of rent may be taken as a waiver of the breach and may disentitle the landlord to pursue the more ample remedies which were contemplated by the section 146 notice.

Mr Szeto’s main point here is that he made the payment to the solicitor under a mistaken view of his legal position or under a misapprehension. I am not sure that he was in fact under any such mistaken view, but, even if he was, a mistake of the law of that kind does not enable the payer to recover the payment made from the payee. The position was that Mr Szeto was in a legal relationship with the landlord; he had the obligations arising under the lease, which included an obligation to pay rent. On top of that, he faced a section 146 notice for previous breaches of his tenant’s obligations and on legal advice he made a payment. Whether or not that was a tactically wise move for the claimant to make and whether or not it was tactically wise for the landlord to accept the payment is neither here nor there. It cannot be said that this payment was made under a mistake of fact such that the claimant is entitled to recover it.

The next argument which Mr Szeto developed really arose out of the confusion concerning the identity of the landlord. Mr Birdwood said in his statement that Quintain Plc, the parent company of the group, had a subsidiary called Chesterfield Properties which owned the property and which was a subsidiary of Quintain Plc. Mr Szeto says that he only knew about Quintain; he did not know about Chesterfield, therefore Chesterfield was an undisclosed principal. I do not see any force in this argument. It is quite clear on the documents that Quintain Plc, Quintain (No. 26) Ltd, Quintain (No. 27) Ltd and Chesterfield Properties Ltd were all closely connected. Collectively they were the landlord, vis-à-vis the claimant. Furthermore, the judges below considered that the claimant knew perfectly well who the managing agent was acting for. Moore-bick LJ came to the same conclusion. Even if the claimant thought that the landlord was one company in the Quintain Group and in fact the landlord was another company in the Quintain Group, I do not think that that is the kind of situation which gives rise to a claim based upon agency for an undisclosed principal. Mr Szeto knew the crucial point, which is that the managing agents were acting for the underlessor, in other words Mr Szeto’s direct landlord.

Mr Szeto took me through some interesting passages in a textbook on the law of agency. He pointed out that where there was a genuine case of an undisclosed principal the third party had to elect whether to look for its remedy against principal or the agent and he took me to another passage in this book which showed that in that situation the tenant is under no duty to inquire. These are helpful and interesting passages on the law of agency, but they do not affect the present case.

The reality is that the claimant made a payment of £6,990 to the managing agents of premises of which he was the tenant. That payment was made in respect of arrears of rent which were unquestionably due to the landlord. The managing agents subsequently passed those payments onto the landlord. There is no genuine case of agency for an undisclosed principal here. There is no proper basis for a claim for return of money based upon a mistaken understanding of the position.

If I were to grant permission to Mr Szeto this appeal would go ahead, the defendants would be represented by solicitors and counsel in the Court of Appeal. The appeal would undoubtedly fail and Mr Szeto would incur a huge costs liability to the managing agents and that would serve no useful purpose at all, because this is not an appeal which can succeed.

In the result, therefore, whilst thanking Mr Szeto for his helpful explanation of the case and for his arguments, this application for permission to appeal is refused.