01/03/2020

Oh! What a tangled web we weave…

Del Rio Sanchez v Simple Properties Management Limited. Central London County Court sitting at Oxford Combined Court. 24 February 2020 (Unreported elsewhere. Copy of judgment available here.)

This is going to be quite long, I’m afraid, but this is such a mess of criminal companies and directors and unlawful conduct. ‘Accommodation clubs’  – we have had cause to comment on these deeply iffy setups before in May 2018, suggesting that they were a legal car crash waiting to happen.

In the case of Lifestyle Club Ltd, and its director, Gian Paulo Aliatis, that is what eventually happened in August 2019, with a £42,273 penalty in fines and costs (despite their policy of targeting overseas students as potential tenants on the basis that they wouldn’t understand the legal problems – this targeting is standard for all these ‘accommodation club’ companies). Unsurprisingly, Lifestyle Club Ltd opted for voluntary strike off of the Companies House register during the prosecution, in February 2019.

To add to this there was Lifestyle Club LSC Ltd (trading as Lifestyle Club London) with Tiina Lehtla as its sole director, which was found guilty of issuing sham ‘licences’ to tenants and fined £11,000 in 2018, and struck off the register of companies in October 2019.

Now, this case involves the afterlife of what was supposedly a different company, Lifestyle Club London Ltd, director Enzo Gallardo, a company that was no doubt entirely coincidentally also struck off the register of Companies House in January 2019.

These companies had some overlapping registered addresses at various points, even if the directors were technically separate individuals, and traded under overlapping names. Draw your own conclusions.

Anyway…  What happened to members/tenants/victims of Lifestyle Club London Ltd? That is what brings us to the county court judgment on a claim for unlawful eviction, harassment, and for tenancy deposit penalty.

Ms Del Rio Sanchez had entered a ‘membership agreement’ with Lifestyle Club London Ltd in September 2018 for a room in a five bedroom flat at 41C Kilburn High Road, NW6 5SB, with shared facilities, paying a ‘joining fee’ of £200, a ‘membership fee’ of £650 (‘to be repurchased by LSC at the end of the membership’) and a monthly ‘contribution fee’ of £693. The court was satisfied that she had exclusive occupation of this room (on which more below).

In November or December 2018, Simple Properties Management Limited entered the scene. (A company incorporated September 2018, sole director was Hannah Bellin until March 2019 when she resigned and Miguel Cabeo Cespedes became sole director). In November/December 2018, SPM apparently put up posters at the property saying that SPM had ‘taken over the property and would honour the LSC agreements’. This may have been a bit premature, given that SPM did not enter an agreement with the leaseholder of the flat, Mr David Van Dyk, until 7 February 2019. But by the time of the events at issue, SPM was definitely Ms DRS’ landlord.

Ms DRS unquestioned evidence was that SPM were at the same office with the same staff as LSC. She had complained about a number of issues: unannounced inspections, a roof leak, boiler not functioning and bailiff removal notices being served for the landlord’s unpaid bills. SPM threatened her with ‘termination’.

On 22 February 2019, Ms DRS found two men entering the property with their own keys. They told her they were there to carry out repairs. Mr DRS the left the property. On her return that evening, she found the locks had been changed. There were people in the property who told her, without opening the door, that they had a contart for the flat and were told not to let anyone in. Ms DRS called the police, but the people in the flat called the police to tell them not to come as it was just a tenancy dispute. When the police did attend, they told Ms DRS that the people in the flat had said they were tenants, and that everything had been cleared out of Ms DSR’s room. While the police were present, the Defendant made allegations via app messages that the two men in the property were claiming to be Ms DRS’ tenants and accusing Ms DSR of changing the locks.

The Defendant’s witness statements amplified this accusation. A Mr Kurlinkus, of the Defendant, said he visited the property on 22 February at 4 pm to find the locks changed and two men in the property, a James Kelly and Jose Fernades-Viana. A Ms Sergejeva of the Defendant said that at that time, the two men had told her in a phone call that Ms DRS had been advertising rooms and they had both paid her £400 deposit. Ms Sergejeva said she agreed to pay back these ‘deposits’ on condition that they wrote statements for the police and vacated the property as soon as possible. Mr Kurlinkus then stayed with them while they wrote their statements. The men left on 25 February.

It was odd, then, as the court notes, that the purported typed statements of the two men were signed and dated 28 February. And that unsigned copies were annexed to the Defence.

It was also odd that a neighbours evidence was that the men had taken the keys from the key cubby on the morning of 22 February, and that she had found Ms DRS’ bedding stuffed in a cupboard of the communal parts. The same neighbour had seen a van being loaded with rubbish bags on 25 February which she photographed and which included some of Ms DRS’s belongings. The court found:

Mr Baldwin (for the Claimant) submits that the Defendant’s story is patent nonsense. I accept his submission. I am satisfied on the balance of probabilities that the evidence of the Defendant’s witnesses about the events of 22 February 2019 is not true, and it was made knowing that it was not true.

And

Accordingly I am satisfied on the balance of probabilities that the Defendant, through its employees or agents, changed the locks on the Property in order to deprive the Claimant of occupation of the Property. I am satisfied that the Defendant, through its employees or agents, unlawfully took and disposed of the Defendant’s belongings, and that in doing so it evidenced an intention permanently to deprive the Claimant of her occupation of the Property. I am satisfied that the Defendant installed or caused the installation of Mr Kelly and Mr Fernandez-Viana (if that is indeed who they were) into the Property. I infer that they did so in order to warn the Claimant away, to prevent her from re-occupying it, and to put sufficient doubts about her bona fides into the minds of the police, if called, such that they would not be minded to assist her or properly to investigate the eviction and theft of her belongings. It is disappointing to note that the Defendant appears to have been successful in this latter regard.

But things were to get worse. Ms DRS was without belongings, and her passport. She stayed on a friend’s sofa. When she went to the Defendant’s office on 23 February to ask why she had been locked out and where her belongings were, she was kept waiting, then the Defendant told her that they had called the police. She was then sent a message from the Defendant saying she had been reported for letting people into the property and taking money from them, and threatening a private prosecution.

Even after Ms DRS instructed solicitors, the Defendant made spurious and untrue assertions that:

it had made three separate complaints against the Claimant to the police, listed as: on 13 February 2019, a complaint for false accusations of someone entering the room she was staying in; on 22 February 2019 for fraud and unlawful subletting; and on 23 February 2019 for the Claimant’s aggressive behaviour in the office. It stated that “the landlord has started trespassing proceedings against the unlawful occupiers who your client unlawfully let a property to. We are quantifying losses and will start a civil claim against your client”.

No counterclaim was raised by the Defendant.

The court found that this was an unlawful eviction, regardless of whether Ms DRS occupied under a tenancy or a licence (on which see below), as if it was a licence it was not excluded from Protection from Eviction Act 1977, and so a notice and court order would be required in any event.

However, as Ms DRS had also made a claim for return of the deposit and breach of deposit protection, it was necessary to decide the basis on which she occupied the property.

The Claimant argued Street v Mountford (1985) 1 AC 809, [1985] UKHL 4 and so that “the only intention which is relevant is the intention demonstrated by the agreement to grant exclusive possession for a term at a rent”. The court had already found Ms DRS had exclusive occupation of her room, as under the agreement the room could be and was secured by a lock.

The Defendant’s defence stated:

“7. In any case, the agreement between the Claimant and LSC is a license [sic] because:

    1. The agreement between us and Mr Van Dyk is largely irrelevant and it is irrelevant what we refer to our clients as. It is practical for us to put higher restriction upon how our landlord should recover his property to prevent him from bypassing us and recovering possession directly from our clients;
    2. The agreement is not strictly for a fixed term. Either party can terminate at any time, as per their agreement.
    3. The agreement expressly states that the Claimant does not enjoy exclusive possession. The fact that there is no resident landlord does is not [sic] a determining factor.
    4. Freedom of contract means that autonomous bodies are able to govern the terms that bind them. The agreement is express and clear from the outset that it is a license and in any case as per J Spurling Ltd v Bradshaw [1956] EWCA Civ 3 ‘red hand rule’ there was sufficient notice of the term in the Acknowledgement Document and thus it is valid.”

The Defendant was promptly hoisted on the petard of the incompetence of the ‘licence agreement’. The membership agreement did not provide that LSC London could terminate the agreement, only that Ms DRS could on 30 days notice. While the agreement did state that it didn’t create a right of exclusive occupation or a relationship of landlord and tenant, or an assured tenancy, the actual nature of occupation (and what was granted) could overrule the express terms as to the nature of tenure.

The Defendant itself referred to the ‘membership fee’ as rent in the amended Defence. So, the Claimant was given exclusive occupation of a room, for a term of more than 6 months, for rent. It was an assured shorthold tenancy.

The agreement between the Defendant and Mr Van Dyk meant that it took over the Claimant’s tenancy, which had been with a set up called Belmonts (actual name Real Estate Network Ltd), for whom LSC London were acting as agents (and indeed operating from the same Brick Lane office). Belmonts/Real Estate Network Ltd was wound up by the High Court on 21 August 2019.

On the deposit issue, the ‘membership fee’ of £650 was stated to be returnable. As this was an assured shorthold tenancy, it should have been protected and wasn’t. The Defendant took over responsibility for this from Belmonts on 8 February and did not protect it.

On Ms DRS’ claim for harassment:

I am satisfied that the actions of the Defendant in changing the locks on the Property; putting into the Property two men claiming, falsely, to be sub-tenants of the Claimant; taking possession of and disposing of the Claimant’s Property; providing false information and making false complaints to the Police; falsely denying changing the locks and taking possession of the Claimant’s belongings in correspondence with her solicitors and making unwarranted threats of civil action against her amount to conduct which is oppressive, and unacceptable and is of an order which would sustain criminal liability. Accordingly it amounts to harassment.

Quantum of damages.

General damages of £200 per day for the significant convenience caused by the eviction, claimant’s submission of 90 days being a reasonable period for damages, up to the end of the fixed term. £18,000 plus a 10% Simmons v Castle uplift.

Exemplary damages for conduct calculated to make a profit – £2000

Aggravated damages – “given the humiliating, frightening and distressing nature of the eviction, the Defendant should also pay aggravated damages” – £2000

Special damages for loss of belongings. There was a detailed schedule of loss, which was not challenged – £20,595.91 awarded.

Return of deposit and penalty. These were egregious circumstances, meriting the three times deposit penalty – £2600 altogether.

Harassment – via Vento v Chief Constable of West Yorkshire Police [2003] IRLR 102, there are three bands of severity. This was a course of conduct but in relation to a one off occurence, but the severity of the harassment and the effect on the Claimant meant an award at the top of the lower band/bottom of the middle band. The recent revaluing of the Vento bands but this at £8,800. There was also a 10% Simons v Castle uplift to be applied.

Total: £56,675.91

And costs.

The Defendant did not attend trial and was not represented, nor did any witnesses for the Defendant show up. The Defendant had made an application to adjourn the trial shortly beforehand on the basis that ‘the director of the Defendant was abroad’. This application had been refused before trial.

As it turns out, the director of Simple Properties Management Limited, Mr Miguel Cabeo Cespedes, might have had another reason not to attend trial on 11 February 2020, as on 6 February 2020, he received a £30,000 fine, and Simple Property Management Ltd a £40,000 fine for an unlicensed HMO with multiple safety failings in LB Camden. Also found guilty and fined at the same time was Santiago Hidalgo Ferrin (£18,000) sole director of Simple Properties Ltd (£18,000). We should also note Roomshub Ltd (fined £2500) and its sole director Liv Meijer (fined £2500) found guilty on the same offences.

Well, there is a surprise. Multiple companies with different sole directors, but clearly operating together. And just like all the other ‘accommodation club’ related directors and companies we saw before, happily committing a wide range of tenancy related offences.

 

Giles Peaker is a solicitor and partner in the Housing and Public Law team at Anthony Gold Solicitors in South London. You can find him on Linkedin and on Twitter. Known as NL round these parts.

4 Comments

  1. John

    Would I be right in thinking that by dissolving the companies all the directors effectively got off scot-free and were therefore able to start up new companies relatively unhindered, whilst leaving the “winning” sides having to cover their own legal costs and unable to recover any money? Were any of the directors sued personally or prosecuted under criminal law?

    Reply
  2. Ben Reeve-Lewis

    Thats how it works. As a judge said to me in a recent case “There are very few circumstances where one can pull back the veil of limited liability status”. Phoenix Companies, as we call them in housing enforcement, are the normal state of affairs John. Most times they dont even bother to change offices

    Reply
    • Giles Peaker

      There were at least personal fines on the directors in the Camden prosecution.

      Reply
  3. Benedict Hughes

    Simple Properties Management Limited hasn’t been dissolved yet. Nonetheless, I’d bet a pound to a penny that the Claimant won’t see any of that award. Who would be responsible for taking criminal proceedings? Presumably either the Local Authority or the CPS.

    Reply

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