This week's round up includes a recent opposed 1954 Act lease renewal case, temporary legislation on homelessness and a further case considering forged signatures and the status of the resulting property transfer. All this and more with insight from around the firm, positive news
Milestar Ltd v (1) Mr Narenda Gandesha, (2) Homerton Holdings Limited
The Claimant sought a lease renewal in respect of retail premises. This was opposed by the Defendant landlords on the basis of two grounds of opposition under section 30(1) of the Landlord and Tenant Act 1954, namely (b) (rent arrears) and ground (f) (landlord's intention to redevelop). The landlord was successful in opposing the grant of a new lease.
Ground (b) - persistent delay in paying rent: The tenant's argument was it had cross-claims against the landlord which take effect as an equitable set off and as a result no rent was due at all. The parties were family members and there were various disputes amongst them. The tenant argued it had a right of set off in respect of the arrears, and in particular, in respect of rent received by the landlord for an adjoining property of which the tenant was a beneficial owner.
The judge relied on the authorities set out by Rix LJ in Geldof Metaalconstructie NV v Simon Carves Limited [2010] EWCA Civ 667 of there being a single test with two elements. The formal element being whether there is a close connection between the claim and the cross-claim and the functional element being whether it would be unjust to enforce the claim without taking into account the cross-claim.
Ground (f) - intention to redevelop the premises: The tenant argued there was no real prospect of the landlord obtaining planning permission for the redevelopment. The landlord's expert expressed the view that the probability of obtaining planning permission was greater than 50%. Referring to the subjective and objective nature of intention, the judge noted that an intention to bring about a state of affairs must be rooted in reality.
The decision: HHJ Monty QC held that both grounds of opposition were made out. He said the tenant's cross-claims could not be relied on for the equitable set off argument as they were not sufficiently closely connected to the landlord's claim for rent under the lease. The judge also held that even if there had been the existence of a right of equitable set off, this did not mean that the rent did not become due for the purposes of section 30 (1) (b) of the 1954 Act.
With regards to ground (f), the tenant had instructed the same planning consultant to act as its expert in the lease renewal proceedings, as it had used previously to oppose the landlord's planning application for redevelopment. The judge was of the view that the tenant's expert was not properly independent and found there was a clear conflict between the roles. Being in favour of the evidence put forward by the landlord's planning expert, which he found to be more balanced and independent, the judge determined that the landlord had established the requisite intention to redevelop under ground (f).
Homelessness (Suitability of Accommodation) (Amendment) (England) Order 2022
The Homelessness (Suitability of Accommodation) (Amendment) (England) Order 2022 (the 2022 Order) comes into force on 1 June 2022 as a temporary measure, expiring on 1 June 2023.
The 2022 Order makes two important changes which are as follows:
- Accommodation that is a private dwelling will not be classed as B&B accommodation under the Housing Act 1996.
- Specified classes of people will be excluded from the maximum period of 6 weeks in which they can be accommodated in B&B accommodation by a local housing authority (subject to caring responsibilities).
The specified class of people are those who:
- Are eligible for assistance under Part VII of the Housing Act 1996.
- Make an application for assistance under Part VII on or after 1 June 2022 and within 2 years beginning with the date of their arrival in the UK.
- Did not have the right to occupy accommodation in the UK for an uninterrupted period of 6 months or more in the 3 years prior to their arrival in the UK.
The 2022 Order will primarily affect recent refugees from Ukraine, Afghanistan and Hong Kong with the removal of a private dwelling from the definition of B&B accommodation appearing to be aimed at the Homes for Ukraine scheme. In an explanatory memorandum to the 2022 Order, the Government highlighted that the 2022 Order is being introduced to "help local authorities manage an increase in homelessness pressures as a result of two recent humanitarian crises".
Victus Estates and others v Munroe and others [2021] EWHC 2411 (Ch)
This case considered two issues; 1) where a property is owned legally and beneficially by two parties and on transfer one party forges the signature of the other with the transferee knowing of the forgery, will that nullify the transfer or will the equitable interest still pass?; and 2) if the transfer is fraudulent, even where the property is subject to a mortgage, should the court apply the law of illegality so that the third party acquires no interest with no charge created?
Facts and Issues
The cases involved two properties that were owned by Mr Charles jointly and beneficially with two others. Mr Charles was declared bankrupt and sought to sell the two properties to companies controlled by Mr Agrawal to annul the bankruptcy. Mr Agrawal was aware of forgery and lack of co-owner's consent. The transfers completed and sought to assign the legal and beneficial interest, which was a mortgage fraud. A necessary part of the scheme was that the co-owner's equity would appear to have transferred, both properties being charged.
It was common ground that there was no effective transfer of legal title due to the forged signature but there was an issue over the equitable interest. The banks argued the effect of section 63 of the Law of Property Act 1925 meant that Mr Charles' beneficial interest did pass by applying Ahmed v Kendrick. The co-owners adopted the argument that s.63 did not apply as the documents were not 'conveyances' and in any event were shams and so void.
Decision
On appeal by the banks Morgan J concluded that:
- Mr Charles' beneficial interest did pass under section 63. Although fraudulent, the documents were in a form that satisfied the definition of 'conveyance'.
- The transfers were not a sham but fraudulent. Mr Charles and the companies owned by Mr Agrawal intended the conveyances to have legal effect, the purpose being the annulment of Mr Charles' bankruptcy.
- Following previous decisions in Penn and Grondona v Stoffel [2020] there was no transfer of the equity of the party who was not part of the fraud and the remaining equitable interests of Mr Charles could be passed despite an illegal contract.
The result being that the transfers did not give the transferee the right to be registered as legal title holder, rectification of the register was allowed for the co-owners but Mr Charles' equitable interest in each property had transferred and was to remain charged to the banks.
Analysis
Permission to appeal has been refused. There remains debate regarding section 63, it poses a reminder that illegality is not a sufficient defence in mortgage fraud cases, as the victim (being the bank and co-owners) would have been left with no equitable interest or charge if illegality was upheld.
Insights from around the firm
