Ahmed v Ahad & Anor [2011] EWCA Civ 51

Case No B5/2010/1121Case No B5/2010/1116[2011] EWCA Civ 51IN THE HIGH COURT OF JUSTICE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM Central London Civil Justice Centre
His Honour Judge Cowell
CHY09547
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 18/01/2011
Before
LORD JUSTICE MAURICE-KAYLORD JUSTICE THOMASLORD JUSTICE ETHERTON
Between
Hussain AhmedAppellant(1) Mohammed Abdul Ahad (Deceased)Respondents(by his executor) Zakariya AhadRespondent(2) Ful MiahRespondentHussain AhmedAppellant(1) National Westminster Bank PlcRespondents(2) Mohammed Abdul AhadRespondent(3) Ful MiahRespondent
(Transcript of the Handed Down Judgment ofWordWave International LimitedA Merrill Communications Company190 Fleet Street, London EC4A 2AGTel No: 020 7404 1400, Fax No: 020 7831 8838Official Shorthand Writers to the Court)
Jonothon Gavagham, John Bankes-Jones (instructed by Grower Freeman) for AppellantPaul Clarke (instructed by Rippon, Patel and French) for Respondent sHearing Hearing dates : 18th January 2011
JudgmentLORD JUSTICE ETHERTON :Introduction
[1]There are before us two linked appeals in two different actions from orders made by HH Judge Cowell in the Central London County Court on 20 April 2010 arising from a single judgment on the merits and another on costs which he gave on that date. Both orders concern premises at 61 Berwick Street, London (“the Property”), in which an Indian restaurant business has been carried on for many years. The core issue on the appeals is whether the Judge was wrong to make an order for possession of the Property against the appellant, Hussain Ahmed.[2]One order was made in proceedings brought by the respondent National Westminster Bank plc (“the Bank”) against the appellant, the respondent Ful Mia (“Mr Mia”) and Mohammed Abdul Ahad (“Mr Ahad”), who was originally a respondent to the appeals but has since died and whose estate is now represented by his son, Zakariga Ahad (“Zak Ahad”). That was a mortgage possession action (“the Mortgage Action”), in which the Bank claimed possession of the Property pursuant to a legal mortgage dated 27 March 2002 (“the Mortgage”), there having been a failure to comply with the terms of the mortgage loan and a demand for repayment having been made. Mr Ahad and Mr Miah accepted the Bank’s claim to possession, but the appellant did not. The Judge’s order under appeal in the Mortgage Action was that the appellant give possession of the Property to the Bank by 2 July 2010, and that any question of costs be adjourned generally with liberty to apply.[3]The other order was made in proceedings brought by Mr Ahad and Mr Mia against the appellant. That was a partnership action (“the Partnership Action”), in which Mr Ahad and Mr Mia claimed, among other things, a declaration that the Indian restaurant operated at the Property was operated in partnership between them and the appellant; an account of the profits of the partnership; an order that the partnership be dissolved and that the affairs of the partnership be wound up; and an order that the Property be sold. The Judge’s order under appeal in the Partnership Action was that the appellant give possession of the Property to Mr Ahad and Mr Mia by 2 July 2010; there be an order for sale of the Property; and that there be no order as to costs as between the appellant, Mr Ahad and Mr Mia save that, as between them, the appellant shall pay the Bank’s costs of attending the trial of certain preliminary issues.

The course of the proceedings

[4]The Claim Form in the Mortgage Action was issued in the Central London County Court on 18 September 2007, and Particulars of Claim were served at the same time. In a witness statement dated 18 October 2007 made by Sara Hughes, on behalf of the Bank, she stated that the total amount due and outstanding pursuant to the Mortgage was £383,830.62 plus legal costs.[5]As I have said, Mr Ahad and Mr Miah did not oppose the Bank’s claim for possession, and an order for possession was in due course made against them. The appellant served a Defence, which, among other things, alleged that he and his family had at all material times been the sole occupiers of the Property pursuant to a tenancy granted to him. He alleged that the tenancy was granted before the Mortgage; the Bank at all times had knowledge of and consented to the tenancy; the Mortgage was therefore subject to the tenancy; and the appellant had at all material times since the date of the Mortgage paid rent directly into bank account 39022862 (“the bank account”) with the Bank’s full knowledge and consent. The Bank served a Reply specifically denying that the Mortgage was subject to any tenancy; that it had any knowledge of the tenancy at the time of the Mortgage; or that any payment was accepted by the Bank as rent.[6]In Replies to the Bank’s Request for Further Information pursuant to CPR Part 18 the appellant said that the tenancy was granted orally in about 2002 by Mr Ahad, Mr Mia and himself, and that the tenancy was with the full knowledge of Mr Paul Duffin, the then manager of the Bank’s branch, and that the appellant paid the rent into the joint partnership account of Mr Ahad, Mr Mia and himself at the Bank, and the mortgage payments were then paid out of that account.[7]By order dated 19 November 2008 Deputy District Judge Hood ordered, among other things, that the parties give standard disclosure by 20 November 2008 and lay witness evidence be exchanged by 12 December 2008.[8]The Claim Form in the Partnership Action was issued on 12 February 2009. Particulars of Claim were served at the same time. It is not necessary for the purpose of this appeal to recite the allegations in detail. It is sufficient to say that it was alleged that Mr Ahad, Mr Miah and the appellant were the joint registered proprietors of the Property; an Indian restaurant business (“the Business”) was being carried on at the Property; Mr Ahad, Mr Miah and the appellant were partners in that business; that was a successor partnership to a series of previous partnerships, and arose following the withdrawal of one of the previous partners, Mr Madaser, in 2002; it was agreed that the appellant would run the Business on behalf of the partnership; the loan accounts from the Bank, for the purpose of purchasing the Property, were a partnership liability, and the monthly payments in respect of them fell to be discharged from the takings of the Business; in breach of agreement with Mr Ahad and Mr Miah, the appellant stopped making payments to cover the partnership’s liability to the Bank; the appellant refused to share the profits of the Business with Mr Ahad and Mr Miah, and to provide accounts, and had wrongly excluded them from the Business and the Property, and denied the existence of the partnership in the Business.[9]The appellant served a Defence in which he alleged that he ran the business then being carried on at the Property under the name “Taste of Spice” as its sole proprietor, and that the Property was let to him. He admitted and averred that Mr Ahad, Mr Miah and he were all partners in a property business, the purpose of which was to sell the Property at a profit, and (paragraph 18(b) of the Defence) “continue to allow a profitable and successful restaurant to operate in the Property in order to: i. enchance its long-term value; and ii. pay rent in the meantime.”[10]The Defence also alleged that Mr Ahad and Mr Miah had wrongly caused the appellant to be evicted and excluded from the Property from 31 December 2008 until they were ordered to permit him to resume occupation of the Property by order of HH Judge Collins on 13 January 2009; and Mr Ahad and Mr Miah were responsible for assaults committed on him, and for pain, suffering, loss of amenity and financial loss in connection with that eviction and exclusion. The Defence alleged that in about January 2002 the appellant, with the consent of Mr Ahad and Mr Miah, allowed Dinepark Limited (“Dinepark”) to take a subtenancy of the Property, and that, following the demise of Dinepark, the appellant had continued to operate the Business in the Property in his own name. The appellant, on the basis of the allegations in the Defence, counterclaimed for various heads of relief, including damages. In their Reply and Defence to Counterclaim, Mr Ahad and Mr Miah, among other things, denied that the Property was let to the appellant and that he paid anything in respect of his occupation.[11]In his Reply to a CPR Part 18 Request by Mr Ahad and Mr Miah, the appellant alleged that in about February 2002 Mr Ahad and Mr Miah granted an oral lease of the Property to the appellant at a rent of £22,000 payable monthly.[12]On 16 October 2009 HH Judge Hazel Marshall QC made an order at a case management hearing that the Mortgage Action “shall run with” the Partnership Action; and that there be a trial of preliminary issues (“the Preliminary Issues”). There were directions for disclosure of documents for the purposes of the Preliminary Issues. The Preliminary Issues were redefined in an order of HH Judge Hazel Williamson on 4 December 2009, and included the following:
“(b) Whether the relevant partnership between the Claimants and the Defendant granted a tenancy or some other licence or entitlement to occupy 61 Berwick Street, London, W1V 3PA (“The Property”) to the Defendant. c. Whether there was a sub-tenancy or licence to occupy the property in favour of Dinepark Limited and, if so, what has happened in respect of such sub-tenancy or licence to occupy. d. Whether the Defendant presently has a tenancy of, or some other right by way of licence or by virtue of his interest as part owner of the freehold of the property to be entitled to occupy and/or run a restaurant there.”
[13]Those orders bore the heading and number of the Partnership Action only.[14]Various witness statements were made for the purpose of the Preliminary Issues, including a witness statement by the appellant dated 27 January 2010.

Judgment of HH Judge Cowell

[15]The trial of the Preliminary Issues took place before HH Judge Cowell over four days, on 3 and 4 March 2010 and, following an adjournment, 19 and 20 April 2010. He gave judgment in the afternoon of 20 April 2010, having heard the final submissions of counsel in the morning of that day. At the outset of his judgment, he described as follows the two issues to be decided:
“1. … The first general question is: has he done it as his own business or as one of three partners? The second question that arises is: was he granted a lease of the premises by the three freeholders of the property who are the two claimants and himself, the defendant? ”
[16]He described as follows the representation before him:
“3. On the first two days in March of the hearing there were three counsel: Mr Gavaghan for the two claimants (Mr Ahad and Mr Miah), Mr Paul Clarke for the defendant (Mr Ahmed) and a Mr Stacey appeared for the mortgagee bank. The volcano in Iceland meant that on 19 April Mr Stacey was still in Turkey and so Mr Bankes-Jones stepped in representing the bank on 19 and 20 April.”
[17]The Judge then described various unsatisfactory features in the case, including the oral evidence. He said:
“6. The defendant was the only one of the three to give evidence and to speak English reasonably fluently. Yesterday the defendant's wife was called but she hid beneath a burka and shielded her evidence by means of an interpreter although clearly she could speak a certain amount of English, and my general impression was that she probably knew very little about any relevant matter. “10. So because of the problems over the reliability of much of the evidence, for the reasons which I have given -- and I should add that one of the problems about the defendant's case is that certain payments were made by him in 2005 to Mr Ahad through his son, which suggested some kind of entitlement on the part of the first claimant to something, and what may be unsatisfactory reasons were given by the defendant for doing so, that first of all it was a loan, secondly it was to encourage Mr Ahad to think that the defendant was someone who should be appointed to some financial post abroad, and that sort of thing -- I feel that I am bound to rely heavily upon the undoubtedly authentic documents in this case.”
[18]The Judge was not impressed with the clarity of the Defence and Counterclaim. He said:
“The defence is a long document running to 12 pages settled by Mr Jonathan Rich of counsel. It is a very prolix document; it is not easy to see from it what the real defence is. Counsel have attempted to analyse the defence. It would appear from paragraphs 5, 14 and 51 that what is being claimed is that the defendant was a tenant of the premises paying a rent and that at some stage he granted a subtenancy of the premises to a limited company called Dinepark Ltd which eventually went into liquidation and which as a matter of formality was directed by the defendant's wife while the Company Secretary was the defendant's sister. The counterclaim is rather baffling. Fortunately, the defendant has been represented by Mr Paul Clarke to whose sense of relevance I pay tribute.”
[19]The Judge held that the original partnership, with Mr Madaser, came to an end on 17 January 2002, and the business that had been run by that partnership closed at the end of 2001. He made the following further findings relevant to these appeals. “27. Dinepark Ltd was set up and the wife of the defendant and his sister were made officers of it on 22 February 2002 in preparation for the business which was run. Between April and July one can see from the bank account that six payments of £2,500 were being made to pay off the mortgage. That figure of course is more than a monthly amount based on an annual rent of £22,000, the figure which featured in the document of July 1999 which, so far as one can tell, was intended to be a rent, so called, for five years.28. What is known is that by the year 2003 the figure that was being regularly paid by Dinepark which was used to discharge the mortgage instalments (which I should have explained, but it is an obvious point, had greatly increased as a result of the additional loan of £120,000 in March 2002), the rent, so called, which Dinepark paid became £975 a week, which is far in excess of £22,000 a year. One thing which is quite clear is that the payments that were being regularly made by this stage were such as to discharge the mortgage instalments which were much higher.29. After Mr Duffin retired, a Mr Griffiths took over as bank manager. Mr Griffiths noted:
"Mr Ahmed has income from Golden Orient/Taste of Spice business which will reduce to £500 per month when he leaves to concentrate on the new ventures"
. In July 2004 he made a note to the effect that "£975 per week is transferred ..." His note is extremely difficult to read, but he read it out in evidence. The gist of it was that it seemed to Mr Griffiths that effectively income derived from the property was being used, as indeed it was, to discharge the mortgage instalments. 30. I will return later to the order of events because it is at this stage that it is important to appreciate what the position was as between these three “partners”, and my findings as to what the position was at the end of 2001 was as follows. 31. First, the business had stopped and the accounts were to be done up to 17 January 2002. Secondly, at any rate until the property could be refurbished, no rent was being paid by anyone, nor was any income being generated from the property. Thirdly, the mortgage instalments had to be paid if the investment which had been made by the purchase in 1999 was to be retained and ultimately sold on good terms when the occasion was right. The fourth point is that the immediate priority was for somebody to be on the property paying for the privilege. 32. Fifthly, neither Mr Ahad senior nor Mr Miah had any inclination to carry on or be involved in any business run at the premises. Because they had been encouraged to invest in the freehold by the defendant and would readily blame him if anything went wrong, they looked to the defendant to find a way to produce money to pay the instalments. 33. The question is whether the defendant carried on the partnership business (in which he would have a 26 per cent share, though ordinarily there would be some agreement about some management fee), or did he carry on or allow someone else to carry on, in the form of Dinepark, a new business, paying the owners of the property for the privilege of occupying the property in order to do so? In answering that question it is necessary to see what all of them did. 34. I find that the defendant, finding nobody else who wanted to rent the property either at £22,000 a year or at a higher amount, persuaded his wife, through the company Dinepark Ltd, to run the business; she would nominally run it though he effectively ran it as a manager, at any rate when he was not attending to another similar business that he had in East London; and in so far as she was concerned, he persuaded her to make payments through Dinepark sufficient to pay the mortgage instalments which he and the claimant had to pay. It seems to me all the parties knew, for at any rate the years 2002 to 2004, that that was how the mortgage instalments were paid. They were paid from fixed payments made by a business introduced and managed by the defendant and to some extent by his wife. The claimants accepted the receipt of those monies on that basis and they did not risk taking merely a share of the profits, if any, after some kind of remuneration of the defendant or whoever was managing it, nor did they take a share of any loss. It seems to me that during that period they cannot reasonably have believed that what they received was their entitlement to a share in the partnership. 35. Indeed, as I shall mention, they continued to seek to recover the fixed sums being paid between 2002 and until about June of 2006. They sought to recover those same sums afterwards. 36. I come back to the documents. There are many things which in my judgment support the conclusion that the business which was started was the business of the defendant in respect of which the claimants understood they were receiving what they called rent but at any rate was a regular payment sufficient to pay the mortgage instalment.”

The Judge then referred to various parts of the evidence, and continued:

“46. So what all that shows is that the claimants' concern was to receive a fixed amount, the £975 which they described as being due, sufficient to pay the mortgage and to preserve their investment of the freehold. The fixed amount bears no relation to the profit or loss of the new business, with which they had nothing to do, and in which they did nothing. It is another question whether it was accurately called rent in the sense that it might not have been due under a lease or tenancy but may have been the consideration for the freeholders’ permission or licence to occupy. It is not of crucial importance as between the claimants and the defendant in relation to the first question or issue I mentioned at the outset of this judgment, and I will come back to it later because it is crucial to the second. However, what is important is that it connotes the payment of a fixed sum which cannot be referable to a share in the business paying it.” “48. The understanding of the defendant that the claimants were partners in the freehold, while they were not partners in the business, does in my judgment entirely reflect the reality of the situation, at any rate for so long as the fixed amount was paid.…”
[21]The Judge then turned to the question of the tenancy, which is at the heart of these appeals. He said:
“ 55. The next and second question or issue is whether any kind of lease or tenancy was granted. What is quite clear is that nothing was ever reduced to writing. The nearest one gets, but this of course relates to the position in 1999, is the document at page 42. As between the claimants and the defendant it is clear they thought in these terms of a lease being granted and of a fixed sum being paid to the freeholders. But it seems to me that what essentially was done in this case was that there was an arrangement made between the three freeholders by which one of them, in this case the defendant, might make an income out of the premises for so long as he ensured that enough of the income was used to pay the mortgage instalments. That arrangement was no doubt conditional upon the instalments being paid, conditional in the sense that it was of the essence of the arrangement that they should be, and that a failure to pay would bring the arrangement to an end, just as in the case of a well drawn lease for a term the failure to pay rent occasions a forfeiture, It is entirely understandable that the other freeholders used the bailiffs as if they were entitled to forfeit the lease and took possession accordingly as they did in December of 2008. 56. I find that the three freeholders essentially permitted the defendant, who was one of them, to use the premises as he might decide, provided sufficient of its income paid the mortgage instalments, and if they were not paid then that permission might be withdrawn. I can see no reason to strain in order to find the equivalent of a formal written agreement or lease or to find that exclusive possession was given to the defendant by the co-owners. The element of partnership between the three of them precludes that, and I am much persuaded by the submissions of Mr Gavaghan in this respect that as between partners one does not readily find that one of them is granted a particular interest to the exclusion of the others. In short, there was nothing more than an arrangement that was made between them, conditional as I have explained. 57. Equally there is no need to strain in order to find that the claimants agreed to share any profit or any loss that the defendant might make in circumstances in which they expected the defendant to pay their mortgage instalments whether or not he made any profit or loss, and I am quite satisfied that no lease or tenancy was granted to Dinepark Ltd. Dinepark was simply what businessmen describe as a 'vehicle' which carries on business with the advantages as against the outside world of limited liability. 58. My analysis of all that is that the three freeholders, by their agent the defendant, one of them, simply permitted the limited company to operate on the premises. Eventually the limited company went into liquidation and the defendant as agent of the freeholders retook possession. So although as between the parties they referred to "rent", the crucial point was that that was a payment to discharge the mortgage instalments, it did not connote the granting of any leasehold interest in favour of either the defendant or Dinepark Ltd.”
[22]The Judge answered as follows the Preliminary Issues, including the second question he had described at the outset of his judgment:
“61. The second question (b) is whether the relevant partnership between the claimants and the defendant granted a tenancy or some other licence or entitlement to occupy 61 Berwick Street to the defendant. I would answer in this way: the claimants and the defendant as freeholders simply permitted the defendant to do whatever business he chose that would enable payment of the mortgage instalments. It was no more than a permission. 62. (c): Whether there was a sub tenancy or licence to occupy the property in favour of Dinepark Ltd, and if so, what has happened in respect of such subtenancy or licence to occupy? In my judgment there was clearly a licence to occupy which was terminated either on the liquidation or when the defendant as agent of the three freeholders regained possession. 63. (d): Whether the defendant presently has a tenancy of or some other right by way of licence or by virtue of his interest as part owner of the freehold of the property to be entitled to occupy and/or run a restaurant there. In my judgment he has no tenancy and he has no permission that survives the so-called forfeiture, by which time it was quite clear that the arrangement under which he had occupied had come to an end, and the defendant is simply a beneficial owner of a share of the freehold in the share stated in the document of 28 January 2002.”
[23]The Judge then went on to state the consequences of his findings, so far as concerns the right of the Bank and Mr Ahad and Mr Miah to possession of the Property:
“64. I am quite satisfied that there is nothing that precludes the bank from obtaining possession and it would be wholly disproportionate, having heard all the evidence, for me to say that the issues between the bank and the parties can be tried, for it would be tried effectively all over again. There is no entitlement in the defendant to resist possession either by the bank or by the claimants, who it seems to me are fully entitled to sell the property.”

The appeal in the Mortgage Action

[24]The grounds of appeal in the Mortgage Action may be summarised as follows:(1) The Judge was wrong in finding that the appellant did not have a tenancy of the Property, and should have found on the evidence that he was granted a tenancy.(2) The Judge was wrong in making a possession order in favour of the Bank at a trial of preliminary issues (not including the issue of possession) in a separate action, the Partnership Action. This procedural irregularity resulted in great unfairness to the appellant.(3) In all the circumstances, the Judge should have ordered that the Bank’s costs of and associated with the trial should not be added to its security.[25]Those grounds were elaborated upon in the appellant’s skeleton argument and in oral submissions of Mr Paul Clarke, the appellant’s counsel, as follows. (1). Findings of the Judge on the evidence.[26]Mr Clarke emphasised the following matters of evidence, bearing on the question whether, as a matter of fact, a tenancy had been granted to the appellant. First, he submitted that the best evidence on this issue was the appellant’s own evidence, which was that he was granted a lease by his other partners. There was no statement from Mr Ahad, who did not attend the trial, to contradict the appellant’s evidence on this issue. The Judge described Mr Miah’s evidence as “unhelpful” because it lacked figures and details, and the Judge said that he was “really no better informed having heard it”. The Judge said that it was quite clear that Mr Miah was not a partner in any business at the Property between July 1999 and January 2002. His one page witness statement in the Partnership Action did not expressly address the issue. Mr Clarke submitted that, in those circumstances, the Judge failed to attach proper weight to the appellant’s evidence and should have accepted it.[27]Mr Clarke contended that the Judge’s own findings that the appellant was left in possession of the Property for several years by Mr Ahad and Mr Miah from February 2002 to use as he wished, on the basis he was to make regular payments to the bank account which were then used to pay the mortgage on the Property, and that the appellant made those payments, were sufficient to establish that he had a tenancy. In that connection he cited the following statement of Nicholls LJ in Javad v Aqil [1991] 1 WLR 1007, at 1012: “As with other consensually-based arrangements, parties frequently proceed with an arrangement where by one person takes possession of another’s land for payment without having agreed or directed their minds to one or more fundamental aspects of their transaction. In such cases the law, where appropriate, has to step in and fill the gaps in a way which is sensible and reasonable. The law will imply, from what was agreed and all the surrounding circumstances, the terms the parties are to be taken to have intended to apply. Thus if one party permits another to go into possession of his land on payment of a rent of so much per week or month, failing more the inference sensibly and reasonably to be drawn is that the parties intended that there should be a weekly or monthly tenancy. Likewise, if one party permits another to remain in possession after the expiration of his tenancy. But I emphasis the qualification “failing more”.[28]There was, Mr Clarke said, nothing to negative the natural inference of a tenancy raised by the appellant’s exclusive possession and regular payments. So far as concerns exclusive possession, Mr Clarke relied on the Judge’s finding ([56]) that the appellant was permitted by Mr Ahad and Mr Miah “to use the premises as he might decide”, and on the absence of any evidence of control by Mr Ahad and Mr Miah over the appellant’s use and occupation.[29]Mr Clarke criticised the Judge’s view ([56]) that “the element of partnership between the three of them precludes” a finding of a lease. Mr Clarke submitted that, not only was that statement not correct as a matter of law, but it was inconsistent with the Judge’s own finding that that the previous partnership business had ended in January 2002.[30]Furthermore, Mr Clarke submitted, there were many documents before the Judge which strongly support the view that the parties understood the appellant had a tenancy, and none of the documents are inconsistent with this view. The Judge, he said, failed to attach proper weight to the documents. Mr Clarke pointed to the following examples: the appellant’s tax returns after 2002 declaring the receipt of rent; a letter dated 30 January 2006 from Zak Ahad to the appellant concerning “rent”; a letter dated 15 June 2006 from Zak Ahad to the appellant and his wife concerning “rent”; the warrant of distress of 6 November 2006 levied on the appellant’s business; the authority of 9 December 2008 to effect forfeiture issued by Mr Ahad against the appellant’s business “Taste of Spice” as “Tenant”; and, particularly, a letter dated 3 September 2007 from Mr Ahad to the Insolvency Service stating that Dinepark had been trading at the Property without a written or verbal lease and without authority from Mr Ahmed or Mr Miah, and that the appellant “has been trading at the premises through security of tenure under the Landlord and Tenant Act 1954”.[31]Mr Clarke submitted that Dinepark’s presence is of no relevance to the question whether the appellant was granted a tenancy since the Judge saw it as a vehicle operated by the appellant. (2). Procedural unfairness[32]The appellant’s case is that the Preliminary Issues were directed in the Partnership Action, and that those proceedings had never been formally consolidated with the Mortgage Action. Further, there were no directions to allow the Bank to have any involvement in the trial of the Preliminary Issues. Nevertheless, counsel for the Bank was allowed to be present, was allowed to adduce evidence in the form of witness statements, and was allowed to make submissions that no tenancy had been granted to the appellant. Mr Clarke said that the focus of the appellant’s preparation for trial of the Preliminary Issues, however, was on establishing that he had been trading at the Property on his own account. There was no claim for possession in the Claim Form or the Particulars of Claim in the Partnership Action. Accordingly, he said, while the issue of tenancy was something that was addressed in the appellant’s evidence, it was not essential to the appellant’s case. In particular, the appellant did not seek disclosure on the issue from the Bank, or consider what witnesses he might rely on to rebut the Bank’s evidence. Furthermore, it is the appellant’s case that there were many documents potentially relevant to the issue which were disclosable by the Bank, and were not before the Court. In his skeleton argument Mr Clarke gave the example of a note dated 8 March 2002 of Mr Griffiths of the Bank which was put in evidence by the Bank. The note said:
“Before new loan is drawn, please clarify strategy for new ltd coy without existing principals as directors. What lease is to be granted to Ltd coy and for what parts of the building? What is the effect of any lease on our S/R value….”
[33]The Bank did not disclose the reply to that enquiry. The appellant contends that it was unfair on the appellant not to be given a fair opportunity to pursue that line of enquiry and seek additional documents or evidence from the Bank. In general, the appellant complained that there was no compliance by any party in the proceedings with the orders that had been made for disclosure and witness statements, and the Mortgage Action was not ready for trial. The issue in those proceedings of the appellant’s tenancy could not, therefore, be fairly decided.[34]At the very end of his oral submissions, Mr Clarke raised a further point on procedural unfairness. He submitted that, by not permitting the Mortgage Action to proceed to trial, the Judge deprived the appellant of the opportunity to ask the Court to exercise its powers under section 36 of the Administration of Justice Act 1970, including postponing the date for delivery of possession, so as to give the appellant the opportunity, for example, to pay off or re-finance the Mortgage.

Costs

[35]Mr Clarke submitted that, if the Judge had rejected the Bank’s claim for possession, as he ought to have done, the Judge should have ordered that the Bank’s costs of and associated with the trial should not be added to the Bank’s security. He further submitted that the Judge should have made such an order in any event since the Bank had attended the hearings of its own volition, and the appellant should not have had to pay their costs of doing so.

Discussion

[36]Notwithstanding the able submissions of Mr Clarke, both oral and in his skeleton arguments, I consider that the appeal in the Mortgage Action fails on all the grounds relied upon.[37]Mr Clarke’s first line of attack on the judgment is a frontal challenge to the Judge’s central finding of fact that a tenancy was never granted to the appellant. That attack is bound to fail because there plainly was material on the basis of which the Judge could properly arrive at his conclusion. Furthermore, the Judge’s conclusion on the central issue of fact was, in my judgment, correct.[38]Mr Clarke criticises the Judge’s rejection of the appellant’s oral evidence, but the Judge explained why he felt bound to place considerable weight on the documentary evidence. It is impossible to criticise the Judge’s reliance on the evidence as a whole rather than just the appellant’s oral evidence.[39]The documents relied upon by the appellant, in which references are made to “rent”, “tenant”, and “lease” and the like are not conclusive. As regards the letter from Mr Ahad to the Insolvency Service, on which Mr Clarke placed particular reliance, it seems to be common ground that it was in fact written by Zak Ahad, whose e mail address is given at its head. The letter appears, on its face, to have the primary intention of deflecting Dinepark’s liquidator from claiming any leasehold interest in the Property. Zak Ahad was apparently cross-examined on the letter, but none of the counsel before us was able to provide any record or clear recollection of what his explanation was of the passage to which Mr Clarke attached importance. In those circumstances, I cannot see that the letter can carry any particular weight on this appeal.[40]By contrast, a highly significant factor, highlighted by the Judge, is that the actual sums paid into the bank account did not reflect at all rental payments of £22,000 per annum. The payments were much higher and were clearly intended to meet the sums due under the mortgage. Mr Clarke acknowledged in his oral submissions that the rental could not have been £22,000 per annum, but he accepted that was the basis on which the appellant’s case was fought before the Judge. If the rental was not £22,000 per annum, it is entirely unclear what was the rent reserved by the appellant’s alleged tenancy.[41]Further, as Mr Jonathan Gavaghan, counsel for Mr Miah and Mr Ahmed, observed in his helpful skeleton argument, the suggestion of a tenancy at a yearly rent of only £22,000 (which was the appellant’s formal case and the one had advanced on the trial of the Preliminary Issues) does not make any commercial sense when the mortgage payments were significantly higher. The whole object of the partnership, according to the appellant’s own case, was to sell the Property at a profit and to allow a restaurant to operate in the Property in the meantime to enhance its long-term value. The effect of the grant of a lease at a yearly rent of only £22,000 would be to imperil at the outset that objective since there was no proposal or means of meeting the higher mortgage payments save out the income – on the appellant’s case, the rent – from the Property.[42]Mr Clarke relied upon the appellant’s possession of the Property while making regular payments in respect of it, and, in that connection, he criticised the Judge’s statement that “the element of partnership between the three of them precludes” a finding of a lease. Mr Clarke is right to point out that the Judge’s statement appears inconsistent with his finding that there was no partnership between the appellant, Mr Ahad and Mr Miah after February 2002. The better view of what the Judge must have meant, however, is that the grant of a tenancy to the appellant would have been inconsistent with the partnership in respect of the ownership of the freehold, the purpose of which, according to the appellant’s own case, was to sell the Property at a profit. The grant to only one of the partners of an oral yearly tenancy, with none of the usual provisions for a commercial lease of retail property, including rent review, with security of tenure as a business tenant, was not consistent with that purpose.[43]Further, the evidence was not entirely consistent with the grant of exclusive possession to the appellant. The evidence was that the appellant’s wife and Dinepark also occupied the Property for their commercial purposes, and the evidence is consistent with Dinepark making payments into the bank account.[44]So far as concerns the appellant’s criticism of procedural unfairness, it is true that there are some unconventional aspects to the proceedings. Mr Clarke rightly points out that the Mortgage Action and the Partnership Action were never consolidated. Moreover, the orders of 16 October 2009 and 4 December 2009 for the trial of the Preliminary Issues bear the heading only of the Partnership Action, and no direction was given for the participation of the Bank in that trial. It is perfectly clear, however, that the findings in the trial of the Preliminary Issues were intended to be binding in both actions. The direction in the order of 16 October 2009 that the Mortgage Action “shall run with” the Partnership Action must have been intended to be an order made in both actions and should have been recorded in the Bank Action as well as the Partnership Action. The obvious reason for the two actions to run together was because the appellant’s Defences in both actions raised the same issue of whether he had been granted a tenancy in February 2002.[45]It is far too late for the appellant now to complain that the question whether the appellant was granted a tenancy of the Property was not an issue raised in Claim Form or the Particulars of Claim in the Partnership Action, and should not have been one of the Preliminary Issues. It was raised by the appellant in his Defence and was a material aspect of the value and conveyancing of the Property, for which Mr Ahad and Mr Miah had sought an order for sale. In any event, the appellant never appealed the order for the trial of the Preliminary Issues, and the Judge had to deal with all of them, including the issue of the tenancy. It would have been absurd, in those circumstances, if the Bank had not been entitled to participate in the trial of the Preliminary Issues and if the parties in both Actions were not to be bound by the findings of the Judge in respect of them.[46]So far as concerns the incomplete state of disclosure in the Mortgage Action and non-compliance with directions as to disclosure and evidence, I cannot see any proper basis for complaint by the appellant. The trial of the Preliminary Issues did not take place until 2010. As I have said, there had been directions in the Mortgage Action for disclosure and exchange of witness statements by the end of 2008. Although it was plain that the question of the tenancy was to be determined as a Preliminary Issue relevant to and binding in both actions, the appellant apparently did not take steps to secure compliance with those directions before the trial of the Preliminary Issues. Nor, when the trial resumed on 19 April 2010, did he seek an adjournment in order to deal with the new evidence then submitted by the Bank and to make enquiries about further relevant documentation. Indeed, he did not even support the Bank’s application for an adjournment on that occasion.[47]Although the hearing of the Preliminary Issues was not, formally, the trial of the Mortgage Action, once the Judge had determined that the appellant had not been granted a tenancy of the Property, the appellant had no remaining defence to the Bank’s claim for possession. That was expressly accepted in paragraph 13 of Mr Clarke’s skeleton argument for the appeal in respect of the Bank’s Action. It was within the powers of the Judge, consistent with the Overriding Objective in CPR Part 1, for the Judge then to make an order for possession in favour of the Bank, without further delay and cost.[48]As I have said, Mr Clarke, at the very end of his oral submissions, said that the appellant was prejudiced by not being able to make submissions in respect of the Court’s powers under section 36 of the Administration of Justice Act 1970. There is no merit, however, in that submission since Mr Clarke freely acknowleged that, when the Judge gave his judgment, Mr Clarke did not raise the issue with the Judge or make any objection to the making of a possession order for that reason.[49]In the light of what I have said about the merits of the other aspects of the appellant’s appeal in the Mortgage Action, the appeal in relation to costs necessarily also fails.[50]It is not necessary, in the circumstances, to consider the additional grounds for upholding the Judge’s order in the Bank’s Respondent’s Notice.

The appeal in the Partnership Action

[51]The grounds of appeal in the Partnership Action may be summarised as follows:(1) The Judge was wrong to find that the appellant did not have a tenancy of the Property, and should have found on the evidence that he was granted a tenancy.(2) The Judge should have made an order that Mr Ahad and Mr Miah pay all or some of the appellant’s costs.[52]The arguments of the appellant on the first ground, as elaborated upon in the appellant’s skeleton argument and Mr Clarke’s oral submissions, were the same as those I have already described in connection with the appeal in the Mortgage Action. I reject that ground of appeal for the same reasons as I have given in respect of that appeal.[53]As to costs, the Judge, having heard oral submissions from Mr Gavaghan, who argued for an order in favour of his clients for 75 per cent of their costs, and from Mr Clarke, who argued for an order in favour of the appellant for some or all of his costs, expressed his conclusion succinctly, as follows:
“5. Taking all matters into consideration, bearing in mind the success of each party, possibly the more important success is that of the claimant but more time was taken at trial on the matter on which the defendant succeeded. I think the fair result is that as between the claimants and the defendant there should be no order as to costs.”
[54]The appellant submits that order was wrong for the following reasons. First, he says that the appellant succeeded on Preliminary Issue (e) – “whether the business of a restaurant being carried on at the Property by the Defendant is being carried on by him for himself alone or for the parties as partners”. Secondly, he submits that the issues on which Mr Ahad and Mr Miah succeeded, namely possession and an order for sale, were not raised by the Preliminary Issues, or not intentionally raised by them, because the parties intended the Preliminary Issues to decide the key point between them which was whether the appellant was trading on his own behalf or on behalf of a partnership with Mr Ahad and Mr Miah. The appellant won on that point. Thirdly, in so far as the Judge went beyond adjudicating the Preliminary Issues, and determined other claims in the Particular Action, the Judge rejected the whole of the claim, which ran to 14 paragraphs of relief, except for the relief in paragraph 11 which sought an order for sale; but that was not an important issue between the parties because the Bank had already claimed possession in the Mortgage Action, and the Bank would be taking possession and selling the Property.[55]With all respect to Mr Clarke, the appeal on costs is quite hopeless. Costs are peculiarly within the discretion of the trial Judge. It is simply impossible to contend that the issue of the tenancy was not a Preliminary Issue, and, for the reasons I have already given, an important one both factually and commercially, as was the order for sale. The Judge took into account all the arguments addressed to him on costs and came to a decision which was plainly within the ambit of a proper exercise of judicial discretion.[56]It is not necessary in the circumstances to deal with the additional grounds for upholding the Judge’s order in the Respondent’s Notice issued by Mr Ahad and Mr Miah.

Conclusion

[57]For those reasons, I would dismiss both appeals. LORD JUSTICE THOMAS[58]I agree LORD JUSTICE MAURICE-KAY[59]I also agree.

Cited in 1 later judgment