Property guardians, possession claims and appearance of a defence for CPR 55.8

Global 100 Ltd v Kyselakova & Ors (2021) EW Misc 13 (CC)

This is the judgment in an appeal to a Circuit Judge – HHJ Luba QC – from a possession order made by a District Judge at the first hearing of the possession claim. The issues involved the threshold for “circumstances where the defendant had disputed the claim on grounds that appeared to be substantial.” for the purposes of CPR 55.8, (which is of broad application to all residential possession claims) as well as putative defences to the claim.

We are grateful for the following note of the judgment from Simon Mullings of Edwards Duthie with Nick Bano of Garden Court, who acted for the appellant defendant. I’e added a comment at the end.

This site has not shirked from reporting property guardian cases as they have emerged and some of these can be found here,  here, here, and here, while Camelot Guardian Management Ltd v Khoo (2018) EWHC 2296 (QB) here is the case most often referred to.

We now have a decision on appeal to a Circuit Judge, in this case HHJ Luba QC, in an ongoing property guardian possession case, dealing with the defence raised and also CPR 55.8. As always the judgment needs to be read in full but we hope that the long quotations from the judgment in this post are helpful to readers.

This case concerns possession proceedings brought against property guardians in a former residential building (more recently used as office space), one of whom is legally aided to defend. At a first instance hearing in Wandsworth County Court District Judge Parker considered the defences of the defendants, one of which was settled by counsel. After hearing from Counsel for the 6^th Defendant Nick Bano, and Leading Counsel Nick Grundy QC (who filed a 14-page skeleton argument) for the Claimant, the District Judge made a possession order, finding that the defences did not come up to the CPR 55.8 (2) test for case management of the claim:

The hearing

55.8

(1) At the hearing fixed in accordance with rule 55.5(1) or at any adjournment of that hearing, the court may –

(a) decide the claim; or

(b) give case management directions.

(2) Where the claim is genuinely disputed on grounds which appear to be substantial, case management directions given under paragraph (1)(b) will include the allocation of the claim to a track or directions to enable it to be allocated.

The 6^th Defendant appealed that decision and after permission was granted by HHJ Monty QC, the appeal came before HHJ Luba QC for determination.

In order to decide the appeal, Judge Luba considered the case management role and discretion of judges hearing first instance cases (and also cases adjourned for a variety of reasons prior to any decision as to whether the case manage the claim or make an order), and the defence raised in this particular case.

Three heads of defence were before the District Judge when the possession order was made:

1. In this particular case the claimant did not have sufficient interest in the land to be entitled to a possession order. This also formed ground one of the appeal. The facts of this case are that that NHS Property Services Limited own the building. They entered into property guardianship arrangement with Global Guardians Management Ltd (GGM). GGM later entered into another arrangement with Global 100 Ltd (G100) granting G100 permission to grant licences to prospective property guardians. To put it very shortly the 6^th Defendant contends that this does not amount to sufficient interest.
2. Licence v tenancy. The 6^th Defendant argues that she is a tenant and not a licensee, that any agreement purporting to be grant a licence only is a sham, and therefore the notice to quit relied upon by the claimant can be of no effect. This is the classic property guardian defence.
3. Where the claimant purported to serve the 6^th Defendant by email, that was not proper service because (i) it did not comply with common law principles as to service and/or (ii) the provision in the agreement for service by email was an unfair term contrary to the Consumer Rights Act 2015. As with point 1 above, at this stage it will not help the reader to go into much more detail on that point. Both points may have their day in the sun another time.

The parties were represented by the same counsel on the appeal as in the first instance hearing.

The first head of defence set out above was also the first ground of appeal. The judge rejected the ground on the basis that he agreed with the first instance judge that the agreement between the owner and GGM, and GGM and G100 were sufficient to confer sufficient interest, essentially deciding that G100 did have standing to bring the claim.

46. It might be thought that a claim for possession brought against trespassers by a sub-licensee would break new ground but it seems to me that if the sub-licensee enjoys (by contract or proper implication) sufficient ‘control’ of the land, such a claim would be properly constituted. 

47. On a plain reading of the inter-company agreement in the instant case, GGM is giving G100 licence to “manage, protect and occupy” by the installation (and if necessary, removal) of individual guardians and “sufficient interest … to bring claims for possession”.

48. Like the Judge, I am satisfied that this is a sufficient degree of control, if available in respect of the present property, to enable G100 to maintain its present claim.

That then dealt with ground 1 of the appeal and the judge’s view of that limb of the defence. However there are these interesting comments on the point:

57. I accept that, if this claim goes further, the point may possibly become determinative on a second appeal on the ‘standing to sue’ issue (if the Judge and I are wrong on the ‘standing to sue’ point). It will be for the parties and the Court of Appeal to decide if it could or should be canvassed then.

and

77. I would add, however, that I would have found it difficult to criticise any first instance judge had they, when faced with this point […], decided that it did appear to dispute the claim on substantial grounds and could not be dealt with at a short hearing initially listed for 15-minutes.

The second ground of appeal; “was the claim ‘genuinely disputed on grounds which appear to be substantial?”

The substantive law on the ‘standing to sue’ defence point was decided via ground one so – even if the judge below had been wrong to decide that it had not been an arguable defence – it wouldn’t have mattered because the occupier would have gone on to lose on that issue.

If we may now be forgiven for jumping ahead, the service by email point (in both its limbs) was expressly rejected by HHJ Luba QC as being capable of representing substantial grounds for dispute:

106. There was no dispute that his client had received the Notice sent to her. In those circumstances, even if the terms of the licence agreement as to deemed service fell, by operation of the 2015 Act, to be struck down by some means, that would have made no difference whatever to the substance of the possession claim.
107. In any event, I can discern no error in the Judge’s summary treatment of this point. Even if the terms of the agreement do contain provisions as between grantor and grantee as to deemed service of notice which are slightly less generous to the latter than the former, I consider that there did not even appear to be any grounds on which it could be found that the imbalance was ‘significant’.

While the ‘standing to sue’ and email notice points remain of interest and may return in future case reports, the utility of and interest in this judgment lies in the treatment of CPR 55.8 and the remaining licence v tenancy limb of the defence.

HHJ Luba QC recognised the need for further guidance to first instance judges on the application of CPR 55.8

62. The decision whether to adjourn a hearing or not is pre-eminently a matter of judicial case management. As LJ Lewison has explained in Birmingham CC v Stephenson (2016) HLR 44 (our note), a possession claim hearing may be adjourned for a wide range of reasons, not limited to those in CPR 55.8 (lack of court time, sudden illness of a party, breakdown of video/audio arrangements, etc, etc) and on any such adjournment case management directions may or may not be given. In respect of that form of judicial case management, the substantial deference which an appeal court will have for the exercise of judgment by the Judge hearing the matter requires no further elaboration.

63. But the specific inclusion of the features identified in CPR 55.8 strongly suggest that if the claim before a Judge has been disputed on grounds which appear to the Judge to be substantial then case management directions for the future determination of those matters should ordinarily be given.

64. In my judgment, the ‘threshold’ in CPR 55.8 must be a relatively low one. That emerges not only from the use of the words “which appear” rather than “which are” in CPR 55.8 but also from the special rule in Part 55 possession claims that a defendant to such a claim, who has not filed a defence, still has a right to take part in the hearing and, presumably, simply describe – at the hearing – something that they may later plead. To similar effect is PD 55A paragraph 5.1, indicating that the place for evidence in a possession claim is in a statement of case. By definition, if a defendant is participating in a hearing not having filed a defence, the assessment of whether the claim is opposed on substantial grounds is one to be potentially made without a written defence and without any evidence i.e. on assertion or submission alone (of course, in the context of the material properly already before the Court from the claimant).

(….)

70. It seems to me not unimportant to note that in this claim, as it stood before this Judge at the short first hearing before her (initially fixed for 15 minutes): (1) the defendant was represented by specialist solicitors who had a contract with the Legal Aid Agency to conduct housing work, primarily in possession claims; (2) the defendant had legal aid funding to defend the claim; (3) a fully pleaded defence had been filed; (4) that defence had been settled by specialist counsel from long-established chambers; (5) the points taken had been considered sufficient on the claimant’s part to cause them to engage the services of Leading Counsel from whom a 14-page skeleton argument had been received; (6) the defendant had been in residential occupation of the property for many months (if not a year or more) rather than just a few days or weeks; (7) the argument took over an hour – with no waste of time; and (8) the claim arose in the relatively novel area of emerging jurisprudence concerned with property guardianship.

 

71. One might have thought, having regard to the relatively low threshold, that unless the points pleaded by the defence were unarguable, this was the sort of case very unlikely to have been suitable for determination on a summary basis.

72. Mr Bano referred me to two relatively recent judgments of other judges of this Court, sitting on appeal, in which summary determinations in possession claims had been overturned because the material advanced at first instance plainly appeared to be sufficient to be described as appearing to raise ‘substantial’ grounds for defending the claim. He might, for good measure also have referred to two further such instances where the appellate tribunal was the High Court.

(NL note. These cases are – France v Drury (HHJ Monty QC, 28 September 2018) and Lakhany v Pempeh (HHJ Lethem, 16 December 2019) (our note) in the County Court, and Benesco Charity Ltd v Kanj (2011) EWHC 3415 Ch  (our note) and Evans v Brent LBC (unreported, QBD, 18 December 2012) (Our note)).

73. If it might have been hoped that, post-Stephenson, fewer such successful appeals would be brought because fewer unsuitable cases would be determined on a summary basis, I regret to record that I have myself very recently allowed an appeal in just such a case.

74. Should this matter go further, I believe it would be helpful to both first instance judges and those who sit on first appeals to have a clear steer on the correct application of CPR 55.8 in the generality of cases. For my own part, I meanwhile take that steer from the judgment of LJ Lewison in Stephenson and from the wording of CPR 55.8 itself.

 

This is useful guidance that is very likely to be persuasive before District Judges hearing possession actions that have not yet been case managed or disposed of, and Housing Possession Court duty advisers in particular will wish to take note. Clearly a judgment to keep in the briefcase until Defending Possession Proceedings (LAG etc.) is updated.

So the CPR 55.8 test having been addressed that left the licence v tenancy point and how that sized up against the 55.8 test:

84. It is important to recall that the Judge had no evidence in the case beyond the usual short witness statement filed in support of a claim against trespassers and the exhibit to that.

 

85. She was, as she recognised, concluding on a summary basis the factual determination of whether an occupation agreement was a lease or licence. Although contextual information was, as the judge recognised, important for such a determination, she had none before her from the defendant because there was no evidence put in yet for the defendant. That would come as part of preparations for any trial.

 

86. In my judgment, Mr Grundy’s submission, that the matter was in effect foreclosed by the decision in the Camelot case, ought not to have been accepted by the Judge and I reject it on this appeal.

(…)

88. In the present case, the terms of the licence agreement entered into by Ms Laleva may have been similar, or perhaps even identical, to those of the Camelot case. But that did not foreclose her from contending that, in the circumstances of her particular occupancy, she actually enjoyed a tenancy and that the licence agreement either innocently mislabelled the relationship or was a ‘sham’.

 

89. In particular, I note that the occupancy of the premises by Ms Laleva began before the parties each signed the Licence Agreement now relied upon and the premises she occupies were not a former warehouse of some other empty commercial building but a property with a history of use for residential occupation. The licence being entered-into by an incumbent resident in such accommodation may have very much coloured the contextual background.

 

90. I have no hesitation in holding that the Judge was wrong to find that the defence advanced did not even appear to raise substantial grounds for defending the claim. I note that in her summary reasons for refusing permission to appeal, while discretely dealing with all the other matters she determined, she does not deal with this one.

 

91. Both counsel were right to draw my attention to the fact that other claims brought on a similar basis by the same claimant are awaiting trial on, inter alia, the self-same lease/licence/sham points in this court and another county court in London. Likewise, that ‘property guardianship’ is a relatively novel concept in our law of property and its implications are still being worked-through by the Courts. These matters seem to me to demonstrate that here a defence was being advanced which clearly appeared to dispute the claimant’s case on substantial grounds.

It should go without saying that in this judgment, treatment of the licence v tenancy point is only in the context of an appeal and so only for the purpose of deciding whether such an argument appears to demonstrate a substantial ground for dispute. However, the judge’s comments make clear (if it wasn’t already) that Khoo (and Ludgate House for that matter) is by no means the last word on the property guardian issue.

Indeed, the analysis of CPR 55.8 means that pretty much every occupier in a property guardian case ought to be given the chance to argue at trial that their case is different from Khoo. This is a real problem for guardian agencies, given that their business model and offer to landowners is predicated upon a quick possession order against guardians.

NL Comment

It is a county court appeal, so not binding, but at the same time it is an HHJ Luba QC judgment so of definite ‘persuasive’ value.

The CPR 55.8 point is important and of broad application. The 10 or 15 minute first hearing is not for summary determination of any defence put forward or indicated, but if a potential defence is raised, it simply for determination of the question of whether the potential defence appears to be substantial (not immediately and clearly hopeless). This is a low threshold.

For property guardian possession claims, it appears that Camelot v Khoo was far from the last word on the tenancy/licence issue (as indeed I suggested at the time), and that issues of the kind of property (as well as those surrounding the licence agreements etc) may yet play a part in the saga. As ever with property guardian firms, when you occupy a legal grey area, there is always the risk of things becoming uncomfortably black and white – and, as in this case, a very drawn out possession claim preventing the return of a property. This may well not be the last appeal…

The judgment notes that there are a number of other property guardian possession claims in which the ‘tenancy’ defence has been advanced underway, so the saga definitely continues.

The issue of the standing of property guardian firms to bring possession claims, particularly where as here (and like Camelot of yore) they have divided themselves into two separate corporate entities, is a very interesting one that had come up with Camelot cases. The licence from the property owner is granted to one company, which then grants the other company the right to grant sub-licences to occupy to guardians. But there is often a lot of confusion between the companies, and the nature of their arrangements can make it unclear, to say the least, who has sufficient interest in or control of the property to bring a possession claim.