Brake & Ors v The Chedington Court Estate Ltd (2022) EWCA Civ 1302
The Brake v Axnoller litigation reaches the Court of Appeal again, this time on the unlawful eviction claim concerning the cottage, which the Brakes had lost at first instance. In what is the stamp of this sprawling array of litigation, there are some deeply recherché issues of law. In a development that is less common, the Brakes partly won – though what the significance of this is remains deeply unclear.
For anyone who hasn’t been following the litigation, I will attempt a precis of the history and facts that led here (there are many. many twists, turns and issues not included in this!)
Ms Brake bought West Axnoller Farm in 2004, which included Axnoller House. In 2010, the Brakes entered a partnership with Pately Wood Farm LLP (principal Mrs Brehme) to use the house and farm for holiday lets and events like weddings.
Later in 2010 (but contemplated by the partnership deed), Mr & Mrs Brake, and Mrs Brehme bought West Axnoller Cottage, adjoining the farm. Title was in their three names, but the cottage was partnership property. After 2012, the Brakes would stay in the cottage when the house was required for weddings.
The partnership did not go well. Following the Brakes’ failure to pay arbitration costs orders, the Brakes were made bankrupt. Their trustee in bankruptcy was Mr Swift. The partnership itself went into liquidation in 2017, so title to the cottage was held by the Brakes and Mrs Brehme on trust for the creditors of the partnership.
Meanwhile, the Farm and house were sold by receivers of the mortgage lenders in 2015. Fortunately for the Brakes, the purchaser was a company called Sarafina Ltd, the shareholder and director of which was the Hon Saffron Foster, a good friend of Mrs Brake. The Brakes were employed by Sarafina Ltd to run the events business, and remained living in the house and staying in the cottage (which remained separate property held on trust for the partnership’s creditors) when weddings used the house (apart from a period in 2015-16, when they lived at the cottage, but that is not material.)
In 2016, Sarafina Ltd was sold to Dr Guy and renamed Axnoller Events Ltd. The Brakes remained as employees. In 2018, this relationship broke down. The Brakes were fired and told to leave Axnoller House. They did not and this gave rise to the possession claim for the house.
In 2019 Chedington Court Estate Ltd – another of Dr Guy’s companies – made an offer to the liquidators of the partnership for the cottage. This was accepted but the liquidators were not willing to take legal action to remove the Brakes from the title of the cottage.
Instead, it appears that Chedington came up with a cunning plan.
“Chedington would put Mr Swift (the trustee in bankruptcy of the Brakes) in funds so as to enable him immediately to buy such right and title to the cottage as the liquidator could sell. Mr Swift would then enter into a back-to-back conditional sale to Chedington of such right and title to the cottage as Mr Swift then had, but also clean registered title as a result of an application to the court by him (financed by Chedington). In addition, and in order to demonstrate an appropriate benefit to creditors of the partnership a facilitation fee would be paid by Chedington to Mr Swift, of £30,000 (plus VAT) on the execution of the contract, together with £3000 (plus VAT) per month until completion of the transfer enabling full registration, with a maximum of 12 successive months.”
Unfortunately for what followed, Mr Swift did not apply to the court for an order removing the Brakes from the title. ON the same day as the transfers, Mr Swift granted Cheddington a licence – “The terms of the licence provided that Chedington was permitted to occupy the cottage as a residential property in common with Mr Swift and all others authorised by him.”
Three days later (and the day after a hearing in the possession claim for the house), Cheddington sent a team to take possession of the cottage, without a court order. The cottage was not occupied and there was nothing much to show it was lived in.
The Brakes brought a claim for unlawful eviction, seeking delivery up of the cottage, an injunction and damages.
At first instance the Judge found that:
There was no claim in trespass, as that required the claimant to be in possession of the land.
There was no claim under the Protection from Eviction Act 1977 for a number of reasons, but principally because the Brakes weren’t residing at the cottage.
The Brakes did not have a licence to occupy the cottage, because “it is not legally possible for two out of three co-owners to grant a licence to two of their number. Even if a licence had been granted it could not have survived the liquidation of the partnership.”
A claim in ejectment – where a person had been ousted from possession – required the person claiming ejectment to have a better title than the person now in possession.
Chedington’s title was as licensee of the beneficial owner of the cottage (the trustee in bankruptcy). If trust property is occupied by the sole beneficiary with an interest in possession, and the trustees brought proceedings to recover possession of it, the beneficiary would have a good equitable defence to that action. If the beneficiary would have had a good equitable defence, then a person to whom he delegates the exercise of that right, such as a licensee has the same rights as the beneficial owner. His occupation is occupation on the beneficiary’s behalf.
Even if the beneficiary was out of possession, and brought an action against the trustees seeking possession, he would be entitled to an order for possession.
The claim was dismissed.
The Brakes appealed. This appeal judgment only dealt with two grounds:
i) The judge was wrong in dismissing the Brakes’ unlawful eviction claim brought on the basis that they had better title than Chedington.
ii) The judge was wrong to dismiss the claim under the Protection from Eviction Act 1977; and his finding of fact that the Brakes were not residing in it was one that no reasonable judge could have made.
On ii) the Protection from Eviction Act ground, this was simply dealt with. Whether the property was occupied as a residence was a question of fact for the judge. There are considerable difficulties in persuading an appeal court that findings of fact made by a judge after reviewing all the evidence were wrong to the extent that the judge was not entitled to reach those findings. The Brakes had failed to surmount that hurdle.
On ii), the question was rather more complex.
I will leave people to read the judgment for Lewison LJ’s summary of the law of ejectment from the middle ages to the present, ad also of the relation of common law and equity latterly involved. But the conclusion is that (quoting CC Proceeds Inc v Lehman Brothers International (Europe)  4 All ER 675 )
“But if a trustee brought an action in ejectment against a beneficiary having the right under the trust to occupy the land, before 1875 the beneficiary might obtain an injunction in Chancery to restrain the action in ejectment, on the grounds of the failure to allow the beneficiary to occupy. After 1875 the beneficiary would not even need to cross Westminster Hall to obtain an injunction from the Court of Chancery. The new unified High Court could regulate the equities in the ejectment claim, and simply dismiss it.”
The difficulty for Chedington was that the ‘beneficiary’ – Mr Swift – had not taken possession through an intervention of the court.
It might be correct that a beneficiary in possession would have an equitable defence to a claim for ejectment by the trustees, which was what had convinced the judge at first instance. It might well also be the case that if the beneficiary had brought a claim for title to be transferred to them (against the trustee on a ‘bare trust’) that this would almost inevitably succeed.
But the question that should have been considered was ‘did the beneficiary have a right to possession entitling them to enter without recourse to the court’?
It was also very doubtful that Mr Swift, as beneficiary and as a trustee in bankruptcy had an equitable defence. He was not occupying the cottage, and Chedington’s occupation of the cottage was in its own right, not a vicarious or representative occupation on behalf of Mr Swift.
I find it difficult to envisage a case in which a trustee in bankruptcy would be performing his statutory function by personally occupying property which had belonged to the bankrupt.
But in any event, the beneficiary’s remedy was in equity, and therefore required the order of the court.
It is not a matter of absolute right at common law such as to enable the trustee, either himself, or through the agency of Chedington, to exercise a self-help remedy without the intervention of a court of equity. In the present case, the trustee in bankruptcy has not even asked the Brakes to transfer legal title to him.
Any claims in equity by the beneficiary, Mr Swift, or by Chedington on his behalf were not before the first instance court, and the judge had erred in approaching matters as if they were.
The appeal was allowed to the extent of granting a declaration that
the exclusion of the Brakes from the cottage was unlawful at common law and that Chedington had no right or title at common law to justify any interference with the Brakes’ exclusive possession of the cottage without a court order.
What this actually means was left to another day
t does not, however, follow from that that the Brakes are necessarily entitled to any further relief; but as I have said the parties may wish to make further submissions on that question.
As noted at para 50 in Lewison LJ’s judgment, “There is, in my opinion, no cause of action at common law for wrongful eviction as such.” (though see comment below on para 50.) The Brakes’ claim under PEA failed and s.27& s.28 Housing Act 1988 did not apply. So, what is the remedy for an unlawful eviction in these circumstances?
We will have to wait to see, and with that whether the Brakes’ victory on appeal was entirely pyrrhic.
Fascinating, but one to be filed under the ‘extremely unlikely to ever come up as an issue ever again’.
That said, the whole of para 50 of Lewison LJ’s judgment troubles me somewhat.
It reads in part:
At this point it is necessary to distinguish between different causes of action. There is, in my opinion, no cause of action at common law for wrongful eviction as such. Nor does section 3 of the Protection from Eviction Act 1977 create such a cause of action: McCall v Abelsz (1976) 1 QB 585; Smith v Khan (2018) EWCA Civ 1137, (2019) 1 P & CR 4. (There is now a statutory liability, in the nature of a tort, for unlawful eviction of a residential occupier under section 27 of the Housing Act 1988; but that is not relied on in this appeal). In many cases, where the parties are or have been in a contractual relationship, the claim will be based on a breach of the express or implied covenant for quiet enjoyment. In other cases, where there has been no such relationship it will be based in trespass.
With some anxiety, I have to say I think that Lewison LJ is not right here about the PEA. Smith v Khan has nothing to do with the PEA, and this paragraph ignores Warder v Cooper (1970) 2 W.L.R. 975, which found actionable breach of statutory duty in unlawful eviction that fell under the PEA’s precursor terms in s.30 Rent Act 1965 meriting both injunction and damages.
And then McCall v Abelsz, again on s.30 Rent Act 1965, held that s.30(2) in creating a criminal offence, did not create a statutory cause of action for civil damages.
But section 3 PEA does not create a criminal offence. That is section 1. Section 3 creates a ‘prohibition of eviction without due process of law’ and simply provides that were an occupier occupied under a tenancy or licence and that has come to an end, but the occupier continues in occupation
it shall not be lawful for the owner to enforce against the occupier, otherwise than by proceedings in the court, his right to recover possession of the premises.
If Lewison LJ is correct, then section 3 would appear to be devoid of any point… (of course, breach of s.3 would be a statutory tort, not a common law cause of action per se).
Alternatively, it is a typo and Lewison LJ meant section 1 PEA, which would be quite right.
That all said, para 50 is – at least so far as the PEA is concerned – obiter, as the PEA did not apply in this case in any event…