Cowley Property Investment Ltd v Oxford Karting Ltd [2018] EWHC 2824 (Ch)

[2018] EWHC 2824 (Ch)Case No CH-2018-000109IN THE HIGH COURT OF JUSTICEBUSINESS AND PROPERTY COURTSCHANCERY APPEALS (CHANCERY DIVISION)Venue Rolls Building, Fetter Lane, London, EC4A 1NLDate 30 October 2018
Before
MR JUSTICE ARNOLD
Between
COWLEY PROPERTY INVESTMENT LIMITEDClaimant/OXFORD KARTING LIMITEDDefendant/
Timothy C. Dutton QC (instructed by Howard Kennedy LLP) for Claimant/AppellantAndy Creer (instructed by Freeths LLP) for Defendant/RespondentHearing Hearing date: 18 October 2018
Judgment ApprovedMR JUSTICE ARNOLD :Introduction
[1]This claim relates to part of a property known as Oxford Stadium, Sandy Lane, Oxford OX4 6LJ (“the Stadium”). For many years the Stadium was owned by GRA Ltd. In 2013 GRA disposed of its interest to GRA Acquisition Ltd. On 7 September 2016 the Claimant (“Cowley”) purchased the Stadium subject to occupational leases.[2]Inside the Stadium, a go-karting business has operated since 1998 in an area known as the Old Tote Building and the Karting Track. On 14 August 2007 Karting UK (Oxford) Ltd (“Karting”) took a lease of the Old Tote Building and the Karting Track from GRA for a term of five years at an annual rent of £15,000 payable monthly in advance (“the 2007 Lease”). In August 2011 the go-karting business was taken over by the Defendant (“Oxford”). The 2007 Lease expired on 13 August 2012. The Defendant remains in occupation of the Old Tote Building and the Karting Track paying the rent specified in the 2007 Lease.[3]On 16 November 2016 Cowley commenced the claim seeking:
“1. A declaration as to the basis and terms of the Defendant’s occupation and use of the Old Tote Building and the Karting Track … 2. Payment of £73,232.65 for gas and electricity consumed by the Defendant, together with interest thereon.”
[4]On 27 March 2018 Cowley discontinued the claim for payment of £73,232.65. The claim for a declaration was tried by Her Honour Judge Baucher sitting in the County Court at Central London on 3 and 4 April 2018. On 11 April 2018 she handed down a reserved judgment dismissing the claim.[5]Cowley now appeals against the dismissal of its claim for a declaration with permission granted by Birss J. As counsel agreed at the hearing of the appeal, the appeal turns upon a very narrow point arising out of the rather curious procedural history of the claim.

Procedural history

[6]Cowley’s Particulars of Claim, which was verified by a statement of truth, began by setting out brief particulars and selected terms of the 2007 Lease, a copy of which was annexed to the Particulars. The pleaded terms included the annual rent of £15,000 payable monthly (i.e. £1,250 a month). The Particulars then pleaded that Cowley had been the registered proprietor of the Stadium since 4 October 2016. Under the heading “The legal basis of the Defendant’s occupation and use”, it recited that Cowley’s solicitors had asked Oxford in a letter dated 27 March 2015 to explain the basis of its occupation and use of the Old Tote Building and the Karting Track and that Oxford’s solicitors had replied by letter dated 24 April 2015 saying that Oxford had taken an assignment of the 2007 Lease in August 2011 and that Oxford’s occupation since August 2012 had been as a monthly periodical tenant under the Landlord and Tenant Act 1954. A copy of the 24 April 2015 letter was annexed to the Particulars together with its enclosures, which included a letter from Andrew Cooper of Oxford to Maureen Ridley of GRA dated 9 August 2011. This letter explained that a management buyout of Karting was taking place and that Oxford had been formed to take over the business. Details of Oxford’s company number, VAT registration number and bank account were set out. The letter concluded:
“The management intends to run the new company as previously…. We look forward to continue doing business with you under the same terms and conditions as before.”
[7]The Particulars of Claim continued, so far as relevant:
“11. [The Defendant’s entitlement to occupy and use the Old Tote Building and the Karting Track] is said to predate GRA Acquisition and the Claimant’s acquisition of Oxford Stadium. With that in mind, a. If it be alleged that the Defendant took an assignment of the 2007 Lease prior to its expiry on 13 August 2012 then the same is admitted; b. If it be alleged that the Defendant’s occupation of the Old Tote Building and the Karting Track after 13 August 2012 was a monthly periodical tenant on the terms of the 2007 Lease (so far as consistent with a monthly periodical tenancy) then that also is admitted; c. Save as aforesaid the Defendant is put to struct proof of its entitlement to occupy and use Oxford Stadium (or any part of it) and of the factual basis on which that entitlement is said to have arisen. … Have the terms of the Defendants’ occupation and use been varied? … 14. In the premises the Claimant’s case in relation to the terms on which the Defendant is entitled to occupy and use the Old Tote Building and the Karting Track is as follows: a. If it be alleged that the terms of the Defendant’s occupation are founded on the terms of the 2007 Lease then this is admitted …; b. If it be alleged that those terms have been varied (whether before or after the expiry of the 2007 Lease) then the same is denied; c. Save as aforesaid no admissions are made.” a. If it be alleged that the Defendant took an assignment of the 2007 Lease prior to its expiry on 13 August 2012 then the same is admitted; b. If it be alleged that the Defendant’s occupation of the Old Tote Building and the Karting Track after 13 August 2012 was a monthly periodical tenant on the terms of the 2007 Lease (so far as consistent with a monthly periodical tenancy) then that also is admitted; c. Save as aforesaid the Defendant is put to struct proof of its entitlement to occupy and use Oxford Stadium (or any part of it) and of the factual basis on which that entitlement is said to have arisen. Have the terms of the Defendants’ occupation and use been varied? a. If it be alleged that the terms of the Defendant’s occupation are founded on the terms of the 2007 Lease then this is admitted …; b. If it be alleged that those terms have been varied (whether before or after the expiry of the 2007 Lease) then the same is denied; c. Save as aforesaid no admissions are made.”

Have the terms of the Defendants’ occupation and use been varied?

[8]Oxford’s Defence admitted the brief particulars and selected terms of the 2007 Lease. It then pleaded as follows:
“12. In or about August 2011, the Defendant purchased the assets of Karting … which was believed to include the 2007 Lease as varied, and went into occupation of the Site with the knowledge and express or implied agreement of GRA. 13. If such transfer of the 2007 Lease was not a valid assignment, not having been executed by deed, then the occupation of the Site by the Defendant with the consent of Karting and GRA took effect as a surrender of the 2007 Lease. The Defendant therefore occupies the Site as a monthly periodic tenant by reference to the payment of rent monthly in advance. … 15. The 2007 Lease expired on 13 August 2012, if the occupation of the Site by the Defendant at paragraph 12 above did not operate as a surrender of the 2007 Lease. 16. The Defendant held over under the terms of the 2007 Lease as varied, alternatively continued in occupation pursuant to the monthly periodical tenancy.”
[9]Although these paragraphs refer to “the 2007 Lease as varied”, there was no antecedent allegation in the Defence that the 2007 Lease was varied, still less any particularisation of the alleged variations.[10]The Defence required Cowley to prove that it was the registered proprietor of the Stadium.[11]The Defence pleaded to paragraphs 11 and 14 of the Particulars of Claim as follows:
“28. Paragraph 11 is noted. The Claimant does not state its case unconditionally. .. 31. As to paragraph 14, the conditional admissions are noted. Paragraph 14b is a bare denial. The Claimant should state the basis of any such denial. 32. Further, the Particulars of Claim are inconsistent: on the one hand the Claimant is apparently saying that it cannot advance a positive case as the facts are outside of its knowledge; on the other hand it is making denials which must be based on knowledge of facts.”
[12]Notwithstanding the points made in these paragraphs, Oxford made no application to strike out the Particulars of Claim as disclosing no reasonable basis for bringing the claim for a declaration. Instead, it served a Request for Further Information seeking clarification of Cowley’s case which asked, in particular, whether Cowley advanced any positive case. In response to this, Cowley pleaded as follows in Further Information verified by a statement of truth dated 19 June 2017 (emphasis added): “1.2 … The Claimant is aware (in general terms) that the Defendant was a successor to Karting UK’s business and assets, and is therefore quite happy to admit that the Defendant’s occupation of the Property was (whether as a result of an assignment or as a result of a surrender and regrant) on the same terms as Karting UK had occupied the Property. 1.3 In correspondence the Defendant has repeatedly asserted that it occupied the Property as Karting UK’s successor, and in its solicitors’ letter dated 22 May 2017 it has suggested that surrender and regrant should be inferred. In these circumstances1.3.1 The Claimant does aver that the Defendant’s occupation of the Property has been (and is) on the terms of the 2007 Lease, either1.3.1.1 Because the Defendant took an assignment of the 2007 Lease, and remained in occupation beyond the contractual term dated of that lease on the terms of that lease; or1.3.1.2 Because there was an implied surrender of the 2007 Lease by Karting UK and an implied regrant (to the Defendant) of a tenancy on material identical terms.1.3.2 There should be a consensus between the parties that the Defendant’s occupation of the Property is on the terms of the 2007 Lease (subject to any question whether those terms have been varied at any point since the 2007 Lease was granted); … 1.4 The Claimant does not have any documents or other information to suggest the terms of Karting UK’s (latterly the Defendant’s) occupation were ever renegotiated or varied. …” 1.3.1 The Claimant does aver that the Defendant’s occupation of the Property has been (and is) on the terms of the 2007 Lease, either 1.3.1.1 Because the Defendant took an assignment of the 2007 Lease, and remained in occupation beyond the contractual term dated of that lease on the terms of that lease; or 1.3.1.2 Because there was an implied surrender of the 2007 Lease by Karting UK and an implied regrant (to the Defendant) of a tenancy on material identical terms. 1.3.2 There should be a consensus between the parties that the Defendant’s occupation of the Property is on the terms of the 2007 Lease (subject to any question whether those terms have been varied at any point since the 2007 Lease was granted); …[13]It can be seen that, unlike the Particulars of Claim, Cowley’s Further Information did contain a positive averment that Oxford’s occupation was on the terms of the 2007 Lease.[14]Cowley also served a Request for Further Information and obtained an order from DJ Jackson dated 11 July 2017 requiring Oxford to particularise its case on three matters. On 1 August 2017 Oxford duly served its Further Information verified by a statement of truth. In paragraph 6 it admitted that “the Defendant did not take an assignment of” the 2007 Lease. In paragraph 7 it pleaded:
“GRA were notified by a letter dated 9 August 2011 that the Defendant was in occupation of the Site for the purposes of its business. The Defendant commenced payment of the monthly rent of £1,250 plus VAT.”
It is plain that the letter dated 9 August 2011 is the letter from Mr Cooper to Ms Ridley referred to in paragraph 6 above.[15]Having admitted that it had not taken any assignment of the 2007 Lease, it followed that it was Oxford’s case that it occupied the Old Tote Building and the Karting Track on the basis set out in paragraph 13 of its Defence, namely as a monthly periodic tenant following a surrender of the 2007 Lease. The Further Information went on to make allegations that the 2007 Lease was varied in certain ways.[16]Shortly before trial, the parties’ counsel agreed a List of Issues for trial which stated:
“1. The following matters are common ground between the parties: 1.1 In 2007 Karting … took a lease, on the terms of the lease dated 14 August 2007; 1.2 In August 2011, Oxford … took over the business which (until then) had been operated by Karting and started to enjoy the rights of occupation and use which (until then) had been enjoyed by Karting …; 1.3 The precise legal mechanism by which Oxford … became entitled to enjoy those rights of occupation is unclear – e.g. the 2007 lease might have been assigned; or there might have by a surrender (by KUK) and regrant (to OKL) – but it is common ground that it makes no material difference what that mechanism was; 1.4 Although there was change of occupation in August 2011 (see above) the terms of occupation did not change at that time - ie Oxford went into occupation on exactly the same terms as (immediately before that date) had governed the relationship between KUK and its landlord. 2. With the above in mind, the issues between the parties are as follows: 2.1 The extent to which the terms of Karting’s tenancy changed in the period 2007 to August 2011. 2.2 The extent to which the terms of the D’s tenancy changed after its occupation of the premises commenced. … ” 1.1 In 2007 Karting … took a lease, on the terms of the lease dated 14 August 2007; 1.2 In August 2011, Oxford … took over the business which (until then) had been operated by Karting and started to enjoy the rights of occupation and use which (until then) had been enjoyed by Karting …; 1.3 The precise legal mechanism by which Oxford … became entitled to enjoy those rights of occupation is unclear – e.g. the 2007 lease might have been assigned; or there might have by a surrender (by KUK) and regrant (to OKL) – but it is common ground that it makes no material difference what that mechanism was; 1.4 Although there was change of occupation in August 2011 (see above) the terms of occupation did not change at that time - ie Oxford went into occupation on exactly the same terms as (immediately before that date) had governed the relationship between KUK and its landlord. 2.1 The extent to which the terms of Karting’s tenancy changed in the period 2007 to August 2011. 2.2 The extent to which the terms of the D’s tenancy changed after its occupation of the premises commenced. … ”
[17]On 28 March 2018 Cowley informed Oxford that it would not be calling any evidence.[18]In his skeleton argument dated 27 March 2018, which it appears was exchanged on 29 March 2018, counsel for Cowley stated at paragraph 8 that it seemed to be common ground that Oxford had a monthly periodical tenancy of the Old Tote Building and the Karting Track, but there was a dispute about the terms of the tenancy, and the extent to which they varied from the terms of the 2007 Lease. He went on to say that Cowley submitted that the terms of the 2007 Lease had not been varied. In paragraph 14 he submitted that the court should find that the terms on which Oxford held the Old Tote Building and the Karting Track were as set out in the 2007 Lease.[19]In her skeleton argument dated 29 March 2018 counsel for Oxford set out the background to the matter at paragraphs 5 to 29. In paragraph 15 she referred to the letter dated 9 August 2011 and in paragraph 29 she stated that Cowley had purchased the Stadium on 7 September 2016. Under the heading “The C’s case” she went on:
“31. As a consequence of the unusual pleading and lack of Reply, the C is advancing a series of conditional averments and attempting to reverse the burden of proof. 32. In reality, either: a) The C’s case is that the D occupies the commercial premises pursuant to a monthly periodic tenancy subject to the 1954 Act on the terms of the 2007 Lease (so far as consistent with a monthly periodic tenancy) … and it should prove the same; or, b) The C is simply advancing no positive case on what declaration the Court should make and it is unclear on what basis it can dispute the D’s evidence. 34. In agreeing the Case Summary and List of Issues it became apparent that:- a) The C accepted that the D had a monthly periodic tenancy subject to the Landlord and Tenant Act 1954; …” a) The C’s case is that the D occupies the commercial premises pursuant to a monthly periodic tenancy subject to the 1954 Act on the terms of the 2007 Lease (so far as consistent with a monthly periodic tenancy) … and it should prove the same; or, b) The C is simply advancing no positive case on what declaration the Court should make and it is unclear on what basis it can dispute the D’s evidence. a) The C accepted that the D had a monthly periodic tenancy subject to the Landlord and Tenant Act 1954; …”
[20]It can be seen from paragraphs1.3.1 and1.3.2 of Cowley’s Further Information quoted in paragraph 12 above that Cowley’s case was that which counsel for Oxford encapsulated in paragraph 32(a) of her skeleton argument. Counsel for Cowley’s skeleton argument referred to in paragraph 18 above confirmed this.[21]At trial, counsel for Cowley started to open his case and referred to the Agreed List of Issues. He said the parties were agreed that the terms of Oxford’s tenancy from August 2011 were no different to those which prevailed between Karting and GRA, and the only question was whether the terms of the tenancy had changed either before or after August 2011. He went on to submit that the starting point was to look at terms of the tenancy in 2007 and then to ask whether there had been any agreed departure from those terms at any time since 2007. Counsel for Oxford intervened to say that she was at a loss to understand how Cowley could prove its case if it called no evidence and that the burden of proof was not on Oxford. She asked forensically what the position would be if Oxford called no evidence. A little later she repeated this point. Counsel for Cowley pointed out that, if she was going to make a submission of no case to answer, she needed to make an election not to call any evidence. Counsel for Oxford elected not to call any evidence and submitted that there was no case to answer. In this context, she pointed out that the Particulars of Claim did not set out the terms of any declaration sought by Cowley. After some initial submissions from counsel for Oxford, the judge proposed that the hearing be adjourned to 15:00 that afternoon to give counsel for Oxford time to formulate her submissions more clearly. Counsel agreed to the adjournment.[22]During the adjournment, counsel for Oxford produced some brief written submissions making the following points: i) The Particulars of Claim advanced no positive case, but merely contained a series of conditional averments. ii) Not having called any evidence, Cowley could not prove its case. iii) Oxford had not sought a declaration and did not need one. iv) A declaration would not ordinarily be made on default of pleading, an admission of counsel or by consent. v) Oxford was not bound by the Agreed List of Issues. vi) There would no useful purpose in making a declaration.[23]After the adjournment, counsel for Oxford made submissions during the course of which a question arose as to the status of the documents included in the trial bundle. The hearing was then adjourned to the following day.[24]Overnight, counsel for Cowley produced some brief written submissions making the following points: i) In the light of the way things had moved on, Cowley sought a declaration in the following terms: “IT IS DECLARED that the Defendant holds a tenancy (continuing under section 24 of the Landlord and Tenant Act 1954) which is on the terms of a lease dated 14 August 2007 and made between GRA Limited(1) Karting UK (Oxford) Ltd(2) and Christopher Pettitt(3) so far as those terms are consistent with a monthly periodical tenancy”. ii) On the pleadings, the scope of the issue was very limited: it was common ground that Karting’s tenancy had been surrendered and there had been a re-grant to Oxford on the same terms in August 2011 and the only issue was whether the terms of Karting’s tenancy had changed between 2007 and 2011. iii) The documents in the trial bundle showed that (a) Cowley was the registered freehold owner of the Stadium, (b) the 2007 Lease had been granted by GRA to Karting on the terms thereof and (c) the only communication between Oxford and GRA in relation to the change of tenant was the letter dated 9 August 2011 which did not suggest that there had been any change in the terms of the tenancy.[25]The judge then received further oral submissions from both parties, during which counsel for Cowley amended the closing words of the declaration sought by Cowley to “so far as applicable to and not inconsistent with a monthly tenancy”. It appears, although it is not entirely clear, that the parties and the judge treated these submissions as closing submissions at trial rather than arguments on a submission of no case to answer. Much of the argument concerned the status of the documents included in the trial bundle. The judge’s judgment[26]In her judgment the judge held in summary as follows: i) Cowley had not positively averred that Oxford’s occupation of the Old Tote Building and Karting Track was on the terms of the 2007 Lease, but only that Oxford occupied the property on the same terms as Karting. Given the way in which it had pleaded its case, it was incumbent on Cowley to seek the revised declaration at the very latest when it opened its case. The revised declaration did not accord with Cowley’s pleaded case. ii) There was no dispute as to the authenticity of the documents relied on by Cowley, but there had been no agreement that the documents could be treated as evidence of the facts stated in them pursuant to Practice Direction 39A paragraph 3.9. Although Practice Direction 32 paragraph 27.2 provided that documents contained in bundles agreed for use at a hearing were admissible as evidence of their contents, that was subject to an order to the contrary. In exercising its discretion as to whether to make an order to the contrary, the court should be guided by the overriding objective. In this case, given the way the case was pleaded, the late abandonment of a substantial part of the claim and the late notification that Cowley was not calling any witness evidence, Oxford was entitled to know that Cowley was seeking to rely upon the documents in the bundle before Oxford made its election as to whether to call evidence. Cowley had not identified the documents it relied upon until counsel’s written closing submissions, after Oxford had made its election. Accordingly, as a matter of fairness, Cowley should not be permitted to rely upon those documents at that late stage. iii) It followed that Cowley had no evidence to prove its case, and accordingly the claim should be dismissed.

The appeal

[27]It is unnecessary for me to consider much of the judge’s reasoning, because, as stated above, counsel agreed at the hearing of the appeal that that the appeal turned on a very narrow point.[28]In paragraph 9 of her skeleton argument for the appeal counsel for Oxford stated:
“The parties were agreed that the D occupied the Premises on the same terms that Karting UK (‘KUK’) had occupied it in August 2011. The parties did not agree what those terms were or, indeed, who bore the burden of proof in respect of them.”
[29]In opening the appeal counsel for Cowley referred to this paragraph and stated that Cowley’s case was that the terms on which Oxford occupied the Old Tote Building and Karting Track were those set out in the 2007 Lease. He submitted that the burden lay on Oxford to establish any different terms, and that Oxford could not discharge that burden since it had called no evidence.[30]Counsel for Oxford submitted that the burden lay on Cowley to establish the terms on which it relied, that it was not open to Cowley to shift the burden of proof onto Oxford and that Cowley could not discharge the burden on it since it had called no evidence.[31]In those circumstances counsel agreed that the appeal turned on which party bore the burden of proof and whether that burden could be discharged without witness evidence, rather than upon the status of the documents included in the trial bundle.

Analysis

[32]Cowley’s case, as set out in paragraphs1.3.1 and1.3.2 of its Further Information, was that Oxford’s occupation of the Old Tote Building and the Karting Track was on the terms of the 2007 Lease. It follows that the burden lay on Cowley to prove that case. Oxford’s case, as set out in its Further Information, was that the terms of the 2007 Lease were varied. It follows that the burden lay on Oxford to prove that case.[33]Accordingly, the decisive question is whether either party was able to discharge the burden upon it without any witness evidence. Since the hearing was a trial, the fact that the parties’ statements of case were verified by statements of truth did not mean that the parties could rely upon those statements as evidence: see CPR rule 32.6(2). But what each party could rely upon was admissions made by the other, since facts which are admitted do not have to be proved. (Indeed, in an appropriate case, a party may obtain judgment on admissions: see CPR rule 14.3.)[34]In my judgment Cowley was able to discharge the burden upon it without any witness evidence for the following reasons: i) Although Oxford had formally put Cowley to proof that it was the registered proprietor of the Stadium in its Defence, at the trial Oxford admitted that Cowley was the owner of the property. (This admission was evidently the basis for the judge’s finding to the same effect at [6].) ii) It was common ground on the statements of case that the Old Tote Building and the Karting Track had originally been let by GRA to Karting on the terms of the 2007 Lease. iii) It was common ground on the statements of case that there had been no assignment of the 2007 Lease to Oxford. iv) It was common ground on the statements of case that Oxford’s occupation of the Old Tote Building and the Karting Track in August 2011 resulted in an implied surrender of the 2007 Lease by Karting. v) Oxford admitted that GRA had been notified that Oxford was in occupation of the Old Tote Building and the Karting Track by the letter dated 9 August 2011. As set out above, the letter dated 9 August 2011 stated that Oxford would “continue doing business with you on the same terms and conditions as before” i.e. as Karting had done. vi) Oxford admitted that, since going into occupation, it had paid the monthly rent of £1,250. vii) It was common ground on the statements of case that, after 13 August 2012, Oxford occupied the Old Tote Building and the Karting Track on a monthly periodic tenancy. viii) In those circumstances, it is to be inferred, in the absence of evidence to the contrary, that Oxford’s occupation of the Old Tote Building and the Karting Track from August 2011 to 13 August 2012 took effect as an implied re-grant by GRA to Oxford on the same terms as the 2007 Lease. It follows that Oxford’s occupation since 14 August 2012 has been on a monthly periodic tenancy on the same terms as the 2007 Lease so far as they are consistent with a monthly periodic tenancy.[35]In my judgment Oxford was not able to discharge the burden upon it without any witness evidence, because witness evidence was required in order to show that the terms of the 2007 Lease had been varied either before or after August 2011.[36]There was some debate between counsel as to whether a declaration would serve a useful purpose. In my judgment it would serve a useful purpose, because it would settle the dispute between the parties as to the terms on which Oxford has occupied, and continues to occupy, the Old Tote Building and the Karting Track.[37]Although I have arrived at a different conclusion to the judge, this is largely attributable to the different way in which in the case was argued before me. Furthermore, it does not appear that the judge was referred to either paragraph 1.3.1 of Cowley’s Further Information or paragraph 7 of Oxford’s Further Information.

Disposition

[38]Accordingly, the appeal will be allowed. I will make a declaration essentially as sought by counsel for Cowley in his closing submissions below. I will hear counsel as to the precise terms of the declaration, costs and any other matters arising.