Kishenin (t/a Beiderbeckes Hotel And Restaurant) v Kalkstein-Bleach & Ors

THE DEPUTY JUDGE: I am asked to rule on the question of whether the claimant, Vladimir Kishenin, is entitled to immediate possession of the property at 1-3 The Crescent, Scarborough, North Yorkshire Y011 2PW (Title Number NYK113384) (“the property”), at which is operating a business known as Beiderbeckes Hotel & Restaurant (“the business”). I am also asked to declare that the claimant is the sole beneficial owner of the business.

At the beginning of this hearing, I refused an application by the first defendant, Peter Von Kalkstein-Bleach, and the third defendant, Beiderbecke’s Ltd, a company controlled by Mr Von Kalkstein-Bleach, to adjourn this matter. The second defendant, Sadie Shard, and the fourth defendant, Scarborough Cocktails Limited, a company controlled by Ms Shard, did not appear. My understanding is that second and fourth defendants assert no personal right to occupy the property.

The primary case of the claimant is that the first and third defendants have been in unauthorised possession of the hotel since 27 May 2013 and that there was no agreement reached then that entitled those defendants to occupy the hotel for their own benefit and therefore no legal basis for their occupation. The claimant says that even if the first defendant’s case is correct regarding what was agreed between the claimant and the first defendant at a meeting on 27 May 2013, the first and third defendants are still required to vacate the premises immediately because, even on the first defendant’s own case, the agreement expired after one year and was replaced by an arrangement under which rent would be subject to agreement based on a percentage of profits. That, according to the claimant, was, at best, simply an agreement to agree, and so as at 27 May 2014 there was no enforceable agreement between the parties in relation to the property and therefore no new tenancy.

To consider the claimant’s primary case I would be required to make findings of fact regarding what happened at the meeting on 27 May 2013 between the claimant and the first defendant. I was invited by the claimant, with the agreement of the first defendant, to proceed on the basis that the first defendant’s account of what was agreed on 27 May 2013 was correct by way of assumed facts and then consider the legal consequences that flowed from those assumed facts. Counsel for the claimant then took me to the claimant’s reply setting out his position on the first defendant’s alleged legal basis for remaining in occupation. That was set out, in particular, at paragraph 5 of the claimant’s reply. Mr D’Cruz then took me to the first defendant’s witness statement of 19 March 2014 and, in particular, paragraphs 22.9 to 22.12. As I am proceeding on assumed facts, it is important that we are clear as to what those assumed facts are. I am therefore going to read the relevant part of the first defendant’s witness statement into the record, namely, paragraph 22.11:

“I then put a proposal to the claimant as follows: I said that I would arrange for a limited company to be set up, and I would buy the assets from him and place them into the company. I pointed out to him that this would effectively allow the hotel to make a new start and all debts would be left behind with the old company. I told him that I believed that if the old Red Square Cocktail Bar was reopened, it would generate sufficient cash to keep the business afloat until such time as the economy improved. I stressed to him that it was vital not only that he sell the freehold of the building, but also that this was a genuine sale. Otherwise HMRC would be likely to seize the building against the debt, thus ruining the entire business, and I was not prepared to go ahead if that were to be a risk. I also proposed that whoever was to be the owner of the building, Beiderbecke’s Limited should be given a year rent-free, which would allow the business to recover, and then at the end of the first year, rent should be negotiated as a percentage of profit. I pointed out to the claimant that this was a risk-free alternative for him. So long as he traded as a sole trader, he was personally liable for all the debts of the company. By accepting my proposal, the owner of the building would have no liability for the debts of the business. All that risk would transfer to Beiderbecke’s Limited. I also pointed out to him that creditors to the old company would be most unlikely to try and pursue the claimant in Moscow for his debts in the UK, and be most likely to write off those debts.”

That is the whole of paragraph 22.11. I will not read out the corresponding paragraphs in the first defendant’s witness statement of 14 April 2014, but it is largely consistent with that account.

Reverting to the reply, and specifically paragraph 5.2 of the reply, the claimant’s position is that there was no consideration for that one year rent-free period, and therefore, it was a mere licence, and being a mere licence it could be terminated by notice and was, in fact, terminated by the letters dated 5 March 2014 which were sent to each of the first, second, third and fourth defendants. It follows that the defendants have been in unlawful occupation since those letters were sent out. The claimant also says in his reply that even if the foregoing is not correct and there is some basis for the defendants continuing in occupation beyond 5 March of this year, on the defendant’s own case the agreement to occupy ended on 27 May 2014, leaving only an unenforceable agreement to agree. Mr D’Cruz also submits that at no point prior to today has the defendant questioned the claimant’s legal analysis on this point.

Mr D’Cruz took me to various authorities, including Chitty on Contracts(31st edition) at paragraph 2-113 (which deals with agreements in principle only), paragraph 2-127 (which deals with terms to be agreed) and paragraph 2-141 (which deals with the requirement of certainty). All of this is, of course, basic contract law. Mr D’Cruz also referred me to the case of King’s Motors (Oxford) Ltd v Lax [1970] 1 WLR 426. In that case there was a lease with an option for a grant of a further term at such rent as might be agreed between the parties. The Vice-Chancellor held that, in the absence of an arbitration clause or some supplementary agreement fixing the rent to be paid, the option was void for uncertainty. Mr D’Cruz submits that in this case it is even clearer that there cannot be any ongoing legal basis for the defendant to remain in occupation because we are talking about an agreement to agree by reference to an unspecified percentage of profit.

Mr D’Cruz also referred me to King v King (1981) 41 P&CR 311, where Nourse J held that in, in contrast to a contract for the sale of specified commodities on an exclusive basis at a price to be agreed, where a court would imply a term that the price should be a reasonable one, in the case of a lease with a rent revision clause where no machinery has been provided for arriving at a revised rent, it did not follow that the court would imply a term that a reasonable rent would be paid.

In King v King Nourse J was considering a lease for a term of 21 years with rent fixed for the first seven years and a provision for the remaining years of the lease of “such rent as may be agreed between the parties”. Nourse J held on the facts of that case that the parties must have intended that the lease would, in the absence of agreement on a new rent, continue at the agreed rent. That case, however, can be distinguished from this one in at least two important respects. First, on our assumed facts, there was no agreed rent for the first year. Secondly, rent for each subsequent year was to be determined by negotiation and as an unspecified percentage of profits.

For his part, Mr Von Kalkstein-Bleach objected to the submissions of Mr D’Cruz on behalf of the claimant in relation to the unenforceability of the alleged lease on the basis that the claimant’s case relied on “hearsay”. Bearing in mind that Mr Von Kalkstein-Bleach was conducting his case as a litigant in person and is a businessman rather than a lawyer, I understood, after further discussion with him of his objection, that the true ground of the objection was that we were proceeding on assumed facts. Although he had earlier agreed that we should proceed on that basis, he now maintained that I should hear evidence as to what was said at the meeting on 27 May 2013 from the claimant, from Paul Dixon, the accountant for the hotel business, and from himself.

Given that we were proceeding on assumed facts drawn from his own witness statement, I did not consider that, at that stage of the proceedings, hearing evidence regarding the discussions at the meeting on 27 May 2013 would materially assist me. I did, however, hear further submissions from Mr Von Kalkstein-Bleach as to the implications flowing from the assumed facts. For example, he submitted that the purpose of allowing the rent-free year to the first and third defendants was to give them the chance to turn the business around. He made a number of related submissions, all largely consistent, in my view, with the assumed facts as drawn from his witness statement.

Accordingly, in relation to the question of the right of the first and third defendants to continued occupation of the property, I conclude that there are two issues I need to decide. First, was there consideration for the alleged lease for the period ending 27 May 2014? Mr D’Cruz had submitted that there was no consideration, given that no rent was agreed for this period, and therefore there was no lease. Since we are proceeding at this point on the assumption that the defendant’s case is true in relation to what was agreed on 27 May 2013, then it stands to reason that there was consideration for the lease. It is highly improbable that the claimant, himself an experienced businessman, would have agreed to the one year rent-free period unless there was “something in it” for him. It is not reasonable to suppose that a businessman, such as Mr Kishenin, would, absent special circumstances, make a gift of a rent-free period of occupation of his property to a person, Mr Von Kalkstein-Bleach, with whom he has only a commercial relationship.

Mr D’Cruz quite properly raised the point that this was the first occasion on which the alleged consideration for the one-year rent-free period had been set out in detail by the first defendant and he submitted that it had not been properly pleaded. With respect to Mr D’Cruz, it seems to me that there is sufficient detail in the defendant’s witness statements to support his argument that there was consideration for the rent-free period, although I appreciate that Mr Von Kalkstein-Bleach expanded on those indications in his witness statements in his oral submissions before me.

Given that we are proceeding on the basis of the first defendant’s pleaded case on this issue, I would, if I had to, be inclined to rule, given the assumed facts, that there was consideration for the first year’s tenancy that expired on 27 May 2014. If that were my ruling, then there would, in order to ensure fair treatment of the first defendant, no need to accede to his submission that I should hear evidence on that point. In any event, I do not need to rule on that point, because the immediate question is whether the first and third defendants have a current and continuing right to occupation of the property, and that question is disposed of by my conclusion on the next issue.

Assuming that there was a valid tenancy for the one-year period ending on 27 May 2013, the next question is whether there is a valid agreement for a tenancy of the property by the first and third defendants for any subsequent period? On that issue I find, in keeping with the authorities and, in particular, the first one I mentioned (and there are many), that the alleged tenancy agreement was incomplete and void for uncertainty and therefore the alleged arrangement forming part of our assumed facts did not give rise to an enforceable contract. Accordingly, I conclude that the first and third defendants have no valid tenancy in respect of the property and that the claimant therefore has the right to require the first and third defendants to vacate the property.

It was not in dispute that (a) the business was originally established by the claimant, (b) over the years he had engaged various persons to assist in managing the business and (c) the first defendant became involved with the business when he was engaged to manage it. There were some differences between the parties as to the detail of the history of the first defendant’s engagement to manage the business, but they are not material for present purposes. At some point in the history of this matter, it was apparently part of the first defendant’s case that at the meeting on 27 May 2013 the claimant had agreed to sell the business to the first claimant for a nominal amount, however he did not take that position at the hearing before me. There is clearly a close connection between the property and the business, given the nature of the business, and no alternative claim to the ownership of the business was pursued before me. I will therefore also make the declaration requested by the claimant that he is the sole beneficial owner of the business.

In light of my conclusions, the appropriate order as to costs is that the defendants pay to the claimant his costs of this claim to date on a standard basis, to be assessed if not agreed.