Camelot Guardian Management Ltd v Khoo

MR JUSTICE BUTCHER: This is an appeal from a decision of Mr Recorder Cohen QC (to whom I will refer as "the Judge") of 4 May 2018. The Judge delivered his judgment after a two-day hearing of the Respondent's (which I will call "CGML") claim for possession of Ingestre Court 2, London, W1F 0JL (which I will call "the Property"). CGML's claim was that the Property was occupied by the Appellant (to whom I will refer as "Mr Khoo") pursuant to a licence which had been determined by a notice which was served on 11 September 2017, that Mr Khoo was now a trespasser and that CGML was entitled to an order for possession. Mr Khoo's case was that he was occupying the Property not pursuant to a licence but to a tenancy, which took effect as an assured shorthold tenancy, of one room and two storage rooms at the Property.

The Judge held in favour of CGML, and made an order for possession. In the course of his judgment, the Judge said at paragraph 23 that Mr Khoo had not just de facto exclusive possession of a single room and storerooms but that he had a right to that exclusive possession. Nevertheless, the Judge considered that the arrangement under which Mr Khoo was in occupation of the Property was not a tenancy at all but was accurately described as a licence (paragraph 29).

Mr Khoo was granted permission to appeal against the Judge's order by May J, who ordered the appeal to be expedited and stayed the order for possession until the determination of the appeal. CGML has served a Respondent's Notice. In it, CGML contends that the Judge was wrong to conclude that Mr Khoo had a right to exclusive possession of any part of the Property. The Respondent's Notice also sets out further matters, which it describes as "special circumstances which negated the creation of a tenancy", as additional grounds supporting the Judge's decision. I heard the appeal yesterday and, in view of its urgency, have given judgment today. Mr Khoo was represented by Mr Edward Fitzpatrick and CGML by Ms Kerry Bretherton QC. I am grateful to both counsel for their submissions.

As the Judge recorded, most of the background facts are almost wholly uncontentious. What follows is a summary. I will return to certain features of the facts when considering the issues and the circumstances surrounding the conclusion of the agreement between the parties and the issues of pretence.

CGML is part of a group of companies (which I will call the "Camelot Group") which, at all material times, carried on business providing security services to property owners for the protection of temporarily vacant property. It did this by sourcing what were described as "property guardians" to occupy the relevant vacant property. CGML manages the properties that are occupied by guardians. One of the properties managed by CGML is the Property.

The Property is office space not designed for residential accommodation. The freehold owner of the Property is the Lord Mayor and Citizens of the City of Westminster (which I will call "Westminster City Council"). On or about 9 April 2015,

That agreement, which appears to have been in standard terms, contained a provision that it could be determined by Westminster City Council on not less than five weeks' notice to Camelot. However, it also provided that, if there were an inconsistency between the standard terms and the offer letter relating to the particular premises concerned, the terms of the offer letter would prevail. The offer letter in relation to the Property specified that the notice period was of one week "after which the Property will be delivered clean and empty on the next Monday morning".

As I have said, CGML manages the Property and it entered into a number of agreements with property guardians to occupy the Property. One of the guardians with whom it entered into an agreement was Mr Khoo. Mr Khoo had previously been a guardian at a different property managed by CGML, White Knight Laundry, from August 2014 to December 2015. On 17 December 2015, Mr Khoo was invited to view the Property by Mr Jason Greer, the Property manager. He then entered into an agreement with CGML. I will refer to that agreement as "the Agreement". It is in writing and it is dated 22 December 2012. In the Agreement, Mr Khoo is referred to as "the Guardian".

The terms of the Agreement are of importance and they include the following. Under the heading, "Licence agreement" on the first page, an “Important Note” is set out as follows:

There then followed a page of financial calculations which indicated that Mr Khoo was a transfer guardian, which was because he had previously been a guardian at a different property. There then followed the Camelot Property Management terms and conditions. In those terms and conditions, there was no actual definition of the Property but it is apparent from the terms of the Agreement that the Property contained and was not confined to the Living Space. It is implicit in the Agreement that the Property is Ingestre Court 2. The term "Living Space" was defined as:

There then followed a number of clauses to which it is necessary to refer. Clause 2 is headed, "Background" and it provides:

Clause 3 then provided, under the heading, "This is not a tenancy":

Clause 4 is headed, "Permission to share the living space." It includes the following provisions:

Clause 10 of the Agreement contained a number of provisions as to the use of the Property by the Guardian. They included the following:

Under clause 11, there were provisions as to use of the Property, containing other obligations. Those included the following:

After the making of the Agreement, Mr Khoo went into occupation of the Property. CGML entered into other similar agreements with other property guardians. It is said in Mr Fitzpatrick's skeleton argument that initially six rooms were occupied but the numbers went up to some 11 rooms with 14 residents. In about August 2017, Westminster City Council indicated to CGML that it would shortly need the Property back in order to start plans for redevelopment. On 11 September 2017, CGML served a notice to determine on Mr Khoo, which gave him notice that his licence was to terminate on 11 October 2017. Mr Khoo has remained in occupation since. By the time the possession claim was heard, he was, as I understand it, the only person in occupation.

There is agreement between the parties:

I was referred to a number of well-known authorities in relation to the distinction between a tenancy and a licence and the court's approach to determining whether a particular arrangement was one or the other. In short summary and insofar as relevant for present purposes, the position as to the existence of a tenancy is as follows:

In determining whether an agreement creates a tenancy or a licence, the approach of the courts is, as I understand it, as follows:

I turn to consider the nature of the Agreement in this case. I will first consider whether it conferred a right to exclusive possession. That is a point which, as I have said, the Judge decided against CGML. He considered that Mr Khoo was given a right to exclusive possession of a bedroom and two storerooms with, in addition, a right to the shared use of the remainder of the premises excluding the bedrooms or particular spaces of the other occupants. His conclusion that Mr Khoo had a right to exclusive possession of any part of the Property is put in issue on this appeal by the Respondent's Notice. It is necessary, or at least convenient, to start with the words of the Agreement.

Given the terms of the “Important Note” and of clauses 2.4, 3.1, 4.1, 4.4 and 4.5 in particular, I consider that the natural meaning of the words of the Agreement is that Mr Khoo did not have a right to exclusive possession. The first point in this regard is that the subject-matter of the Agreement is a right in respect of the Property as a whole, not a room or other part of the Property. Rights of possession in respect of the Property as a whole are plainly not exclusive in that it is provided that there should be occupation of the Property by other Guardians as well. The terms of the Agreement do not create two species of rights in the Guardian, one of exclusive possession of a part of the Property and another type of right over the rest of the Living Space. There is a unitary right, which is provided in clause 4.1, to share the occupation of the Living Space. As I have said, this cannot be a tenancy because it was a right enjoyed with other Guardians.

Furthermore, none of the clauses can be said, on their natural meaning, to confer a right to exclusive possession of the Property or any part of it. Clause 4.1 gives a right to share the occupation of the Living Space with others. Clause 4.2 is consistent with that in stating that the permission is personal. Clause 4.4 permits CGML to alter the extent and location of the Living Space within the Property. That might, for example, mean that CGML could say that a particular room or rooms, including rooms which have been hitherto occupied by the Guardian, were no longer part of the Living Space.

The terms of clauses 10 and 11, which I have quoted, appear to me consistent with an interpretation of the Agreement as not conferring exclusive possession. The degree of control as to what a Guardian should and should not do, for example clause 10.6 and clause 11.1, would constitute unusual restrictions in an agreement which conferred a right to exclusive possession. They are consistent with an arrangement which is not intended to confer exclusive possession but to be a licence and add support to a construction of the Agreement as conferring a licence without exclusive possession.

The Judge considered that clause 4.1 of the Agreement meant that a right to exclusive possession of a particular room or rooms was conferred by the Agreement. He placed reliance on the provision:

As I have said, however, and as the Judge considered, the process of construction is not confined to considering the words of the Agreement in isolation but can and should take into account the background and other circumstances existing at the time of the conclusion of the Agreement which must be taken to be known to both parties. Does a consideration of this context indicate that the words of the Agreement should be interpreted as providing for a right to exclusive possession of part of the Property?

The Judge analysed what he considered might count as the relevant context for these purposes. The only matters which he identified as existing before or at the time of the Agreement and which he considered were relevant to its interpretation are those referred to in paragraph 22 of his judgment. These are the terms of the Camelot websites, which are referred to in paragraphs 5 and 6 of the judgment, and how the letting took place, which is a reference to what is set out in paragraph 7 of the judgment. As to the websites, these do not appear to me to take the matter very far. It is true that they use the word "let" but equally refer to "property guardianship" as an alternative, and a more social one, to private rental.

As to the way in which the letting took place, I do not see that this provides a basis for construing the Agreement as providing for legal exclusive possession of a particular

Furthermore, I do not consider that the relevant background, or what is often still referred to as the "factual matrix", is confined to the matters referred to by the Judge which I have identified. The relevant background against which the Agreement is to be construed includes the nature of the Property Guardian Scheme. Indeed the importance of this background is made clear by its inclusion in clause 2 of the Agreement itself. This must have been known not just to CGML but also to Mr Khoo and indeed, as is apparent from clause 2 of the Agreement, it was essential to the operation of the guardianship scheme that the relevant premises should be able to be returned to the owner of the Property, with vacant possession. This might well be at short notice and clause 5.2 of the Agreement makes it clear that, whenever CGML's permission to use the Property is terminated, the Agreement will come to an end.

The operation of the scheme, its commercial purpose and indeed the continued existence of such scheme depends upon the terms of the contract meaning what they say and not creating a tenancy. Given that the commercial purpose of the transaction would be undermined if the terms of the Agreement were given a strained or artificial meaning, then that supports the construction of those terms which accords with their natural meaning. Accordingly, as a matter of construction, taking both a textual and contextual approach, I consider that the Agreement does not confer legal exclusive possession.

That is not the end of the matter, however. There remains the question of whether the Agreement was in relevant respects a sham or pretence for, as it was put in Street v Mountford, the court should be:

As I have already said, what is involved in this investigation is to see whether the parties in fact had no intention of honouring their respective obligations or enjoying their respective rights under the provision or agreement in question (National

In the same case, Neuberger J said, as I have already referred to, that an allegation of sham carries with it a degree of dishonesty. In the present case, Mr Fitzpatrick for Mr Khoo said that the provisions in the Agreement between CGML and his client, which provided that there was no exclusive possession and provided rights which were inconsistent with exclusive possession did involve a degree of dishonesty on the part of CGML. As in any case where dishonesty is contended for, the court will carefully consider whether it is made out, the onus being on the party which is alleging that an agreement or provision is a sham or pretence to make that out (see generally National Westminster Bank v Jones at [46], [59] and [68]).

In considering such matters, it has to be borne in mind that not every departure from the terms of a contract and how it is operated indicates that the relevant agreement was a pretence when entered into. Furthermore, the fact that a contractual right is not exercised does not of itself mean that it ceases to exist. The relevant party may be entitled subsequently to insist on its performance nevertheless, as stated in Huwyler v Ruddy [1996] 28 HLR 550 at 556 per Peter Gibson LJ.

I consider that a case that there was a relevant sham or pretence in the present case was not made out. In entering into the Agreement, as both parties knew and must be taken to have intended, the basis of the arrangement was that CGML was providing some protection to temporarily-vacant premises against vandals and trespassers by arranging for accommodation by Guardians. As I have set out above, it was essential to such an arrangement that the Guardians should not have tenancies. The inference I would draw is that CGML did indeed intend, when entering into the Agreement, that its terms would be enforceable by and capable of being enforced against it. It was in its interests that they should be.

By way of example, I do not consider that there is any adequate basis on which to conclude that CGML did not intend clause 4.5 to be enforceable against it such that, if the Guardians at any time decided that where they were to sleep should be different from what had been initially indicated in discussions between a particular Guardian and CGML, they would be entitled to insist on doing so subject to informing CGML of what had been decided in this regard. The fact that this did not actually occur does not mean that CGML did not intend to honour that term. Equally, there is no adequate basis on which to conclude that CGML did not intend clause 4.4 to be effective so that it could decide that a particular room or rooms did not fall within the Living Space.

This is not a case where there is "an air of total unreality" (to use the expression of

The Judge did not rely on any finding that the Agreement or provisions within it were a sham or pretence in his conclusion in paragraph 23 of his judgment that Mr Khoo had a

The Judge's statement that provisions of the Agreement were "almost certainly intentionally" misleading on the part of CGML was not based on any evidence relating to the actual intentions of anyone who may have been responsible for the terms or entering into of the Agreement; it was an inference by the Judge. I do not consider that it was an inference which can be safely drawn from any of the materials which the Judge referred to in his judgment. Although Mr Khoo may in fact have been permitted exclusive occupation of a room or rooms, that does not in the circumstances of this case overcome the strong presumption that parties to a transaction intend its terms, both as to rights and obligations, to be effective.

As I have endeavoured to set out, as a matter of construction, I regard it as clear that the Agreement did not confer a right to exclusive possession of the Property or any part of it and the case as to sham or pretence was not made out. For these reasons, I find that there was no right to exclusive possession of any part of the Property created by the Agreement and that it was not, for that reason, a tenancy. I do not, therefore, need to deal with the question of whether, if there was the right to exclusive possession, nevertheless the case fell within one of the exceptional cases whose continuing existence was recognised by Lord Templeman in Street v Mountford. For these reasons, the appeal must be dismissed.