Hilton v Plustitle Ltd

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLORD JUSTICE CROOM-JOHNSON
Judgment Date03 November 1988
Judgment citation (vLex)[1988] EWCA Civ J1103-5
Date03 November 1988
Docket Number88/0898

[1988] EWCA Civ J1103-5

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE BLOOMSBURY COUNTY COURT

(His Honour Judge Dobry, Q.C.)

Royal Courts of Justice

Before:

Lord Justice Croom-Johnson

and

Lord Justice Stuart Smith

88/0898

Between:
Robert Hilton
Respondent (Plaintiff)
and
Plustitle Limited
(First Defendants)

and

Helen Rose
Appellant (Second Defendant)

MR. C. CONEY (instructed by Messrs Graham Harvey & Co.) appeared on behalf of the Respondent/Plaintiff.

MR. P. WALTER (instructed by Messrs S. Newman & Co.) appeared on behalf of the Appellant/Second Defendant.

LORD JUSTICE CROOM-JOHNSON
1

This judgment has been jointly prepared by myself and Stuart-Smith L.J. and is the judgment of the court.

2

If a dwelling-house is let to a limited company, the company cannot become a statutory tenant under the terms of the Rent Act 1977 s.2, on the termination of the tenancy. This has been so since Hiller v. United Dairies (London) Ltd. (1934)1 KB 67. This rule has remained unchanged during re-enactments of the Rent Acts ever since. If a tenancy is granted to one person (e.g. a company) on terms that someone else is to reside in the house, there will be no statutory tenancy in favour of that other person. S.L. Dando v. Hitchcock (1934) 2 AER 335. In Firstcross Ltd. v. East-West (Export/Import) Ltd. (1980) 255 E.G. 355 the tenants' nominee was their director and was actually named in the agreement: it was held he acquired no statutory tenancy. Accordingly, if a landlord does not want to be saddled with a statutory tenant he lets on what is known as a "company let".

3

The plaintiff in this action, Mr. Hilton, is a Civil Engineer who has in recent years reconstructed a number of premises in London and therein created flats which are high quality flats. They also contain built-in furniture made in his own workshop. They are not let at excessive but market rents for flats of that quality. He is a good landlord who provides value for money. His policy is to let only as company flats, and his flats are advertised as such.

4

The defendant, Miss Rose, is an actress. She saw in an evening newspaper on 8 August 1986 an advertisement referring to one of Mr. Hilton's flats. The advertisement made it clear that it was to be a company let. She knew what that meant. She got in touch with Mr. Hilton and saw several flats. Eventually she saw one at 45 Priory Road, London, N.W.6. Miss Rose, as an actress, had no need for a company, but Mr. Hilton made it clear that any letting would have to be a company let and that the rent would have to be guaranteed by a third party. He gave her the name and telephone number of his accountant, who would be able to provide her with a company which could become the tenant and then nominate her as the person who would reside in its flat.

5

As the judge found, Mr. Hilton told her that the letting to the company would be for a limited period, with a possibility of renewal if everything was satisfactory.

6

Miss Rose did not go to the accountant. She took advice from her solicitors, and went to a firm called Jordans, from whom she bought a company off the shelf. It was called Plustitle Ltd. It cost her £150. She became a shareholder and a director.

7

On 1st September 1986 Plustitle entered into a written agreement with Mr. Hilton to take the flat for an initial term of six months at a rent of £345 per month. Miss Rose signed the agreement as managing director of Plustitle. The agreement gave Plustitle the right to nominate the occupiers of the property, who would pay no rent. The agreement contained all the usual tenants' covenants. The landlord consented to maintain the services in good condition. The rent and fees to be paid by Plustitle were guaranteed by John Rose, who is Miss Rose's brother.

8

Before that agreement was made, Mr. Hilton obtained a banker's reference for Miss Rose for an amount which was the obligation to pay the monthly rent of £345.

9

In February 1987 the term was by mutual agreement extended for 3 months till May. It was followed by an offer for a further 3 months' extension. There was a dispute about a slight increase in the rent and so the offer was withdrawn by Mr. Hilton. He asked for possession. Miss Rose sought legal advice, and refused to leave. The result has been the present proceedings, in which Mr. Hilton has asked for an order for possession on the basis that this was a company letting. Miss Rose defends the claim on the basis that the letting to Plustitle was a sham. That has been the only issue before the court.

10

The judge found the defence was not made out, and made an order for possession. He gave a long and careful judgment. He found that Miss Rose fully understood what she was doing, and acted after obtaining legal advice. After moving in she paid the rent by her personal cheques, the company not having a bank account.

11

After reviewing all the evidence, the judge said: "…..I find without the slightest hesitation that it was both parties' clear intention with all knowledge of what this involved that the flat should be let to a company and not to Miss Rose personally. I find as a fact having heard the evidence, and having noted submissioins made on behalf of Miss Rose in that respect." On page 11 of his judgment he listed sixteen items of fact, all of which Indicated that Miss Rose entered into the whole transaction with the intention that this was to be a company let in the normal way, and that in the agreement there were no provisions inconsistent with the letting being to a company and not to Miss Rose. The judgment concluded:—

……the reality was indeed the factual matrix that the company was the tenant and Helen Rose was not liable personally for anything at all. There is no disagreement between the parties that at all material times the plaintiff insisted upon a limited company as his tenant. It is quite plain upon the construction of the written agreement that its object was to create a letting to a company. The defendant has the burden of showing that this prima facie construction is either deliberately deceptive or in any way wrong. There is no evidence before me and I mean no evidence, to support that contention, thus in the end on the basis of the agreement itself and also the factual matrix I find this was a letting to a limited company which came to an end and that the contention that this was a sham fails in limine. At no time did the landlord purport to create or create any rights in Helen Rose."

12

Counsel for Miss Rose says that the employment of the company was a sham in that it was a device to prevent Miss Rose from being the tenant, and so far from her being the company's nominee, the company was her agent. Accordingly, he submits, the reality of the letting was that it was to her and not to the company.

13

The mere fact that the purpose of the legal arrangement was to prevent the creation of the statutory tenancy is by itself not enough. In Aldrington Garages Ltd v. Fielder (1978) 37 P. & CR 461 at p.468 Geoffrey Lane L.J. said: "there is no reason why, if it is possible and properly done, agreements should not be entered into which do not fall within the Rent Acts, and the mere fact that those agreements may result in enhanced profits for the owners does not necessarily mean that the agreements should be construed as tenancies rather than as licenses." At p.473 in the same case Roskill L.J. said: "persons are entitled to arrange their affairs to their best advantage so long as the law allows it. That has long been the position in tax cases, and equally long been the position in Landlord and Tenant and Rent Act cases". This subject was given a detailed summary by Bingham L.J. in Antoniades v. Villiers (1988)...

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