Pineport Ltd v Grangeglen Ltd
| Jurisdiction | England & Wales |
| Judge | Chief Master Marsh |
| Judgment Date | 13 June 2016 |
| Neutral Citation | [2016] EWHC 1318 (Ch) |
| Docket Number | Case No: HC-2015-004127 |
| Court | Chancery Division |
| Date | 13 June 2016 |
[2016] EWHC 1318 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Chief Master Marsh
Case No: HC-2015-004127
Mr Robert Bowker (instructed by Surjj Legal Ltd) for the Claimant
Mr Jamal Demachkie (instructed by Blaser Mills LLP) for the Defendant
Hearing dates: 6 and 7 April 2016
This claim concerns the Claimant's application for relief against forfeiture of an underlease of Unit 4, Endsleigh Industrial Estate, Endsleigh Road, Southall, Middlesex UB2 5QR ("Unit 4"). The underlease which is dated 20 July 1998 was granted to the Claimant for a term of 125 years, less 10 days, from 6 April 1981 for a premium of £90,000. It is agreed that the current value of the leasehold interest is £275,000 in its actual condition and £300,000 if Unit 6 were put into full repair. The reversionary interest expectant upon the termination of the lease became vested in the Defendant in about March 2011. The underlease includes a right of re-entry in the event of non-payment of rent for a period of 21 days, whether formally demanded or not (Clause 6(1)). The rent payable pursuant to the underlease comprises three elements:
i. ground rent of £100 per annum;
ii. a sum equivalent to the amount expended by the landlord in insuring Unit 4;
iii. a service charge as defined in clause 4(7).
The landlord's expenditure which falls within the service charge is widely defined and includes all the expenditure falling within the definition of "Management Services" as well as the costs of collection and audit and the creation of a reserve. The Claimant was obliged to pay:
i. A quarterly advance payment of an amount considered to be fair and reasonable by the landlord.
ii. A balancing payment in respect of the sum shown to be due by the account produced by the landlord supported by a certificate of the landlord or the landlord's managing agent produced as soon as reasonably practicable after the end of the service charge year. Clause 4(7)(b) makes provision for the information to be provided with the certificate. In the event that the tenant has overpaid for the service charge year, the overpayment is held by the landlord as a credit against the following year's service charge.
The only other clauses of the underlease which are material are clauses 4(12) and 4(13) concerning user. The use of Unit 4 was restricted to any use falling within Use Class III of the Town and Country Planning (Use Classes) Order 1972. The tenant covenanted not to use the premises for any illegal or immoral act or purpose. Unit 4 has been used as an MOT garage and workshop.
On 24 April 2014 the Defendant forfeited the underlease by peaceable re-entry based upon unpaid rent. However, this claim seeking relief against forfeiture was not issued until 23 June 2015. The claim was transferred to the County Court at an early stage but then transferred back on the basis that the County Court does not have jurisdiction to grant relief in the circumstances which have arisen. A case management conference was held on 25 November 2015 at which it was allocated to the case management and trial by Master management track. It came on for trial before me on 6 and 7 April 2016. The only other aspects of the order for directions made on 25 November 2015 which are worthy of mention are that:
i. An order for disclosure was made in accordance with CPR 31.5(7)(b), requiring the parties to serve the documents upon which they relied by 16 December 2015 with requests for specific disclosure and response by fixed dates. There was no order for standard disclosure.
ii. Witness statements were ordered to be exchanged by 29 January 2016.
The parties
The Claimant was incorporated on 3 March 1998 and operated its main business of providing MOT and garage services from Unit 4 until the underlease was forfeited. It has two directors, Mr Shorab Jadunandan and Mr Sajjad Ahmad, who are equal shareholders. In recent years Mr Ahmad has had no involvement with the running of the company and the business has been under the control of Mr Shorab Jadunandan. An underlease of Unit 11 on the same estate was purchased by the Claimant at the same time as Unit 4 but was sold a few years later. The company also holds an underlease of Unit 5 which has not been forfeited. The abbreviated balance sheet for the Claimant as at 31 March 2014 shows a negative balance of £24,022.
A restraint order was made against both the Claimant and Mr Shorab Jadunandan by a judge in Isleworth Crown Court on 2 August 2013 upon the application of the Vehicle & Operator Services Agency ("VOSA"). The order was made in extremely wide terms and included a prohibition against Mr Shorab Jadunandan disposing of, dealing with or diminishing the value of any of the assets the Claimant. It also prohibited any third party from "knowingly to assist in or permit a breach" of the order. No point was taken during the trial about whether the act of re-entry may have been a breach of the restraint order, or placed the Defendant at risk of contempt proceedings, although it is the Claimant's case that the Defendant was made aware of the order.
The prosecution was based upon the issue of MOT certificates by Mr Shorab Janunadan, and others, without the correct procedure being followed. The prosecution's case was that over 1,400 such MOT certificates had been issued; in some cases the certificate was issued without the vehicle being examined and in other cases following examination by a person who was not authorised. In any event, Mr Shorab Janunandan pleaded guilty on 23 April 2014 to two counts of conspiring dishonestly to make a false representation to make a gain. On 2 March 2015 he pleaded guilty to four further counts of dishonestly making a false representation to make a gain. His sentencing hearing was deferred and on 7 March 2016 Mr Shorab Janundandan was sentenced to a term of imprisonment of 18 months. When he gave evidence at the trial before me he was a serving prisoner. It is right to say, however, that Mr Shorab Jadunandian does not accept the prosecution case about the scope of his dishonest activity. He says that the prosecution extrapolated from a very limited review of test certificates issued and has come up with an estimated number of incorrect certificates which is far too large. Mr Jadundanian puts the number of vehicles which were given MOT certificates without tests having been undertaken at between 10 and 15. He accepted, however, that there were other irregularities concerning the manner in which MOT certificates were issued.
The Defendant is a property holding company. One of its directors, Mr Andrew Butler, is also head of the Uxbridge office of Colliers International which acted as managing agents for the estate.
Statements of case
The claim is made in straightforward terms. Although the Claimant reserved its position concerning the lawfulness of the re-entry there is now no challenge to it. The claim has proceeded on the basis that at the time of re-entry there were arrears of rent (in fact service charges) amounting to £2,155. In passing, I mention that a notice under s.146 of the Law of Property Act 1925 was served on 3 April 2014 although such a notice is not required in the case of unpaid rent. The claim merely asserts that the Claimant was ready willing and able to pay the arrears of service charges and seeks relief from forfeiture under the court's equitable jurisdiction on such terms as the court thinks fit, just and equitable.
The defence was settled by leading counsel, Mr Jonathan Karas QC. The Defendant relies on the delay on the part of the Claimant in making the claim for relief and the absence of an explanation for that delay. The claim for relief is described as being stale. In addition the Defendant relies upon the following points:
i. Prior to forfeiting the underlease the Defendant made repeated attempts to contact the Claimant to ascertain why the arrears had not been paid and to require payment.
ii On 8 August 2014 the Claimant's solicitors acting in the criminal proceedings, Makwanas, contacted the Defendant's solicitors and said a freezing order had been made against the Claimant. However, there was no follow up to that conversation.
iii. It was not until 12 June 2015 that the Claimant's current solicitors made contact and said an application for relief was to be made.
iv. The Defendant has incurred costs and expenses since the date of re-entry and the costs and expenses have increased by virtue of the delay. They are described as falling into four general categories namely (a) management, insurance and security, (b) dealing with vehicles found at Unit 4, (c) business rates and (d) preparing an application to the Land Registry to vacate reference to the underlease from the Defendant's title. The costs and expenses are particularised in a schedule served with the defence.
v. In addition, it is said that the Defendant has been prejudiced by the delay on the part of the Claimant in making the application for relief. The claim to prejudice is based upon the increase in costs and expenses incurred by the Defendant resulting from the delay.
vi. In the alternative, the Defendant requires payment of all sums which would have fallen due for payment had the lease continued and an indemnity for all costs and expense the Defendant has incurred.
In its reply the Claimant says at paragraph 3 that the Defendant "… did not at any time prior to re-entering the premises demand any alleged arrears, indicate its intention to forfeit, enter into dialogue with the Claimant regarding alleged arrears, or pursue pre-action correspondence". The Claimant goes on to say in the following paragraph that its solicitors hold £2,155 on their client account and that the...
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