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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Paratus AMC Ltd v Fosuhene [2013] EWCA Civ 827 (11 July 2013) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2013/827.html Cite as: [2013] EWCA Civ 827

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IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Ms LESLEY ANDERSON QC SITTING AS A DEPUTY JUDGE
[2012] EWHC 3791 (Ch)

		Royal Courts of Justice Strand, London, WC2A 2LL
		11/07/2013

Lord Justice Floyd:

1. This is an appeal by Ms Doe Fosuhene, the second defendant in the action, from the judgment and order of Ms Lesley Anderson QC sitting as a deputy judge of the Chancery Division dated 5 October 2012. By her order the deputy judge dismissed an appeal from the judgment and order of Master Teverson of 19 September 2011 striking out Ms Fosuhene's defence and granting the claimant, Paratus AMC Limited ("Paratus"), possession of a property known as 18 Gill Close, Watford, Hertfordshire ("the property") which Ms Fosuhene occupies with her family.
2. On Monday 1 July 2013 when this appeal was called on at 12 noon, the respondent was present by solicitors and counsel but the appellant was not. This was a surprise because, on the previous Friday, 28 June, my clerk had telephoned the chambers of Mr Krolick, who had represented Ms Fosuhene before the Deputy Judge, to enquire where the authorities bundle was. She was told that Mr Krolick was without instructions. In consequence my clerk telephoned Chancery CS Solicitors of Clapham, who are on the record for Ms Fosuhene, and told them that the bundle of authorities was required for the appeal listed for Monday. In the end the bundle was obtained via the respondent. Counsel for the respondent explained in her statement that she had been attempting via her clerk to contact the appellant's counsel concerning the requirements of CPR 52 CPD 29 but had received no response.
3. The appeal has been listed with the co-operation of the appellant's counsel's clerk as long ago as 31 January to be heard on either 1 or 2 July. The appellant's solicitors, have at all times been on the record and indeed had communicated with the Court of Appeal as recently as 17 June without informing the Court of the fact that counsel was no longer instructed. It was, of course, their responsibility to liaise with the court and their client as to the timing of the hearing of the appellant's appeal. In those circumstances the court suggested that rather than proceeding to determine the appeal there and then, they would adjourn until 2.00 p.m. so that the respondent's solicitors could communicate with the appellant's solicitors to find out why neither they nor the appellant were present in court. On making such communication it was confirmed that the original counsel was no longer instructed and that the appellant would be appearing in person at 2.00 p.m.
4. The court reconvened at 2.00 p.m. The appellant was still not present; the court then asked the respondent's counsel to explain what the case was about and asked various questions, since it did not think it right to dismiss the appeal for which Aikens LJ had granted permission merely because the appellant was not present to introduce her appeal.
5. The appellant, who is herself a solicitor and is employed by Chancery CS Solicitors, then appeared during this discussion at about 2.40 p.m. and said she wished to instruct new counsel and that she had been told by telephone that the appeal would be listed for tomorrow 2 July. Since the cause list had been published on Friday afternoon with the appeal listed for 12 noon on Monday this seemed extremely unlikely and the court concluded that, in any event, it was far too late to consider instructing new counsel and that the appeal must proceed. She also asked if her case could be presented by a Mackenzie friend who turned out to be Mr Dixit Shah (as to whom, see further below). We considered that the appellant as a solicitor must be competent to argue her appeal herself and we declined to hear Mr Dixit Shah although he sat next to the appellant during her submissions and she was able to consult him. The appeal then proceeded.
6. Since the hearing Chancery CS Solicitors have written to the court by letter dated 2 July 2013 saying that Ms Fosuhene contacted the court "on behalf of this firm" both on Friday 28 June and Monday 1 July. On both occasions she alleges that she was told that there was no date showing on the court system. The letter expresses regret for the confusion, inconvenience and time wasting which occurred, which the court acknowledges.
7. I am satisfied that it was correct to proceed with the appeal in these circumstances. Ms Fosuhene was plainly aware that the appeal was supposed to be heard on 1 or 2 July, but had made no efforts to instruct anyone to represent her. In those circumstances she was always going to have to argue her appeal herself. We have, in any event, had the benefit of the skeleton arguments put before the court by her former counsel Mr Krolick.

Background

8. In January 2008 Paratus (who were formerly known as GMAC RFC Limited) advanced the sum of £425,000 to enable the property to be purchased in the name of a Mr Maru. The loan was to be secured by a mortgage, and a mortgage deed was purportedly executed on 16 January 2008 by Mr Maru. A legal charge was accordingly registered against the property on 5 March 2008. The mortgage contained the usual term excluding the mortgagor's statutory power to let, and prohibiting the mortgagors from granting a lease of the property without the consent of the mortgagee.
9. It seems likely that the mortgage deed was a forgery. Mr Maru subsequently came forward in September 2008 and informed Paratus that the mortgage had nothing to do with him. He claimed that his identity had been stolen for this purpose by a Mr Dixit Shah, from whom Mr Maru had once rented a property. Dixit Shah was subsequently convicted of mortgage fraud in December 2010. The property was apparently one of those included in the fraud.
10. Shortly after the mortgage was entered into, the direct debit mandate for payment of the mortgage was cancelled. Thereafter, although there were some credit card payments between April and October 2008, arrears built up on the account. Possession proceedings were commenced in 2008, but were adjourned generally when a card payment of £4500 was made in October 2008 to clear the arrears. From November 2008 arrears began to build up again, until payments in the sum of £1000 pounds a month began, the first being on 7 August 2009. Those payments increased to £1110 in February 2010. According to running statements of account which were in evidence in the courts below, the arrears were caused to reduce from a maximum of almost £11,000 in July 2009 down to a level of around £4000 in March 2011, and were shown as around £2700 in August 2011.
11. On 10 August 2009 Ms Fosuhene entered into a residential tenancy agreement in respect of the property. The counterparty was a Mr Bishon Singh who purported to act on behalf of the (unidentified) landlords of the property. The agreement was for a period of 5 years at a monthly rent of £1000 per month for the first year and thereafter rising by £50 per month in each successive year. That agreement did not, on the face of it, bind Paratus, because they were not parties to it, because it was entered into after Paratus' legal charge had been registered and because it was said to be made in breach of the terms of the mortgage which prevented the grant of a tenancy to a third party without Paratus' consent. Ms Fosuhene says she has been living at the property since August 2009 with her two children.
12. On 14 December 2009 an agent of Paratus visited the property and was informed by a 14 year old boy with whom he spoke that his parents were renting the property, but were not present. The agent's account is recorded in a field report.

"I spoke to the child of the occupiers. I would say he was only 14 years old. His parents weren't home, but he said Mr Maru did not live there and they were renting the property. He did not have any contact numbers, so I left him with the occupier's letter and asked him to give it to his parents and get them to call in."

13. Save that Ms Fosuhene says that the boy in question was a nephew who resided with her permanently, the contents of the report are not at this stage in dispute.
14. Ms Fosuhene says that she has been making payments direct to Paratus since November 2009. She produced paying-in slips which she said demonstrated that she deposited several sums of £1000 into Paratus' account in December 2009 and January 2010, and thereafter the sum of £1110 per month from February 2010. These slips showed that the sums were paid in cash. She also produced bank statements showing bank transfers of £1110 to Paratus in November and December 2010 from her bank account at Barclays Bank. A further bank statement shows a payment of the same sum in August 2011. As at March 2011, the monthly payments due under the mortgage were £902.85. This was of course less than the payments which were in fact being made.
15. Ms Fosuhene gave evidence about the increase in the payment to £1110. In paragraph 4 of her defence (which was supported by her statement of truth) she said that it was a result of an agreement which she made directly with Paratus. In her later witness statement she said merely that "an arrangement was made on or around December 2009/January 2010 for an increase in the payment of the monthly instalment to clear the arrears." She gave no details of how or in what circumstances she came to be discussing the matter with Paratus, or with whom she spoke.
16. On 18 August 2010 solicitors for Paratus wrote to the "tenants or occupiers" of the property explaining that they understood that the addressees "occupied the Property pursuant to an arrangement that you have with the purported owner of the Property". The letter asserted that the agreement did not bind Paratus. The solicitors asked for a copy of their tenancy agreement, confirmation of the amount paid under it and details of how and to whom the rental payments were made. Paratus' letter was consistent with the report they had received from their agent that the property was occupied and that the occupiers were "renting". It does of course not show that they knew who the occupiers were, or that the occupiers were paying money to Paratus.
17. On 5 April 2011 Paratus began proceedings against Mr Maru and Mr Dixit Shah for possession (Claim HC 11 01124). The present proceedings for possession were also commenced on 5 April 2011 (Claim HC 11 C01123). The proceedings were commenced against "persons unknown" but in July 2011 Ms Fosuhene came forward and was joined as second defendant. On 6 July 2011 Deputy Master Cousins made an order in Claim 1124 declaring that Paratus was entitled to rely on its legal charge. He made a possession order in favour of Paratus, an order for sale of the property and gave directions as to the payment of the proceeds of sale. His order was stayed pending the outcome of the claim against Ms Fosuhene and others in Claim 1123.
18. In August 2011 Ms Claire Critchley, a solicitor from the firm previously acting for Paratus, made a witness statement. She said that the claimant's first knowledge of Ms Fosuhene was when Ms Fosuhene attended a hearing in July 2011. No one had previously indicated that Ms Fosuhene was a tenant at the property. Her position was that Paratus only ever accepted payments from a third party on the basis that they were made on behalf of the borrower and as the borrower's agent. She also said that it was not possible to identify the source of the payments in the statements of account. She relayed her instructions about the agents' report of the visit to the property in December 2009:

"I am advised by the claimant that no other contact was established with the occupiers either prior to or since. It is therefore denied that the claimant entered into any payment agreement with the defendant either as alleged or at all"

19. She pointed out that the statement of account showed the payments rising to £1110 in February 2010, rather than December 2009 as Ms Fosuhene had alleged in her defence.
20. In her witness statement which is undated but which was filed on 5 September 2011, Ms Fosuhene takes issue with the assertion that Paratus had no knowledge of the tenancy. She relies in this connection only on the field report dated December 2009 as evidencing the fact that Paratus were aware of her occupation of the premises, and that they were renting it. She asserted that she had been "paying the mortgage" since November 2009. She also asserts that as Mr Maru had come forward to say he was not the mortgagor, Paratus should have deduced from the fact that payments were being made that they were being made by the tenant. Finally it is in this statement that she refers, without any detail, to the arrangement that was made to increase the payments to bring down the arrears.

The judgments below

21. Master Teverson dealt with the matter in this way:

"Putting the evidence of Ms Fosuhene at its highest, which for the purposes of today I think it right I should, it may be said that she has been making monthly mortgage payments and speaking to the Claimant about the level of those payments. It is not however alleged nor is there any evidence to support it that the Claimant expressly or in my view impliedly consented to Ms Fosuhene becoming the tenant of the Claimants or that the Claimants agreed to treat the tenancy as binding on it. Indeed the evidence is that the Claimants were not aware of the tenancy agreement and had not seen the relevant document.

In those circumstances, it does not seem to me that Ms Fosuhene has a realistic prospect of being able to establish that the tenancy which she undoubtedly appears to have been granted by someone connected with either Mr Dixit Shah or Mr Maru is binding on the Claimant. The position is that the tenancy was one created subsequent to the charge and without the consent of the legal chargee and I am not satisfied that there is any material to support a case that the Claimant as mortgagee has acted in a way as to preclude it from denying that it has consented to Ms Fosuhene being its tenant."

22. Master Teverson accordingly made an order for possession, but that order has been stayed pending the appeal first to the Deputy Judge and then to this court.
23. In granting permission to appeal to the single judge of the High Court from Master Teverson's order, Peter Smith J considered two grounds to be arguable, of which only one was pursued before the judge. That ground was that Ms Fosuhene's payments to Paratus were arguably made "by her as tenant". If Paratus received those payments with knowledge it was arguable that it had waived the right to enforce the mortgage and would be bound by the tenancy.
24. The Deputy Judge who heard the appeal rejected that ground. She agreed with Master Teverson that there was no evidence to support any suggestion that the claimant had expressly or impliedly consented to Ms Fosuhene becoming a tenant of the claimants, or otherwise agreed to treat the tenancy as binding.
25. Ms Fosuhene now brings this second appeal with the permission of Aikens LJ from the decision of the Deputy Judge.

The grounds of appeal

26. There are four grounds of appeal, which are in summary:

i) There was an arguable case on the evidence that Paratus had waived the right to treat Ms Fosuhene as a trespasser, or were estopped from doing so;

ii) The judge should have found the defendant had obtained an equitable right to remain in the property on the terms of her lease;

iii) The judge should not have decided disputed questions of fact;

iv) The judge should have held that Ms Fosuhene had acted to her detriment by making the payments to Paratus.

Mortgagee treating tenant as his own

27. In Parker v Braithwaite [1952] All ER 837 the mortgagee knew that the mortgagor had let the mortgaged property, in breach of its terms. Furthermore, one L was collecting the rent, paying the mortgage instalments to the mortgagee out of the rent and remitting the balance after deducting a commission to the mortgagor. It was contended that the mortgagee had recognised the tenant's tenancy, and could not now be allowed to say that a valid tenancy was not created by the mortgagor in her favour. Danckwerts J found that the rents were collected by L, not as the agent of the mortgagee, but as the agent of the mortgagor and nobody else. Having reviewed the authorities he said at page 841 D-G:

"The result of those authorities seems to me to be this. It is not to be denied that there may be cases where a mortgagee may so conduct himself as to confirm in some way a tenancy which has been created by the borrower in favour of a short-term tenant. It, no doubt, depends on the circumstances of the particular case whether that recognition of a tenancy has occurred, so that the mortgagee is bound to treat the tenancy as lawful against him and cannot evict the tenant, but otherwise it seems to me that, where the statutory power of leasing is exercisable only with the written consent of the mortgagee, a tenancy created by the mortgagor without that consent is not binding on the mortgagee. In the circumstances of the present case the mere refraining by the building society from taking action to evict the tenant and doing nothing for some eight months cannot amount to such recognition of the tenancy as to deprive them of their right to recover possession of the property, not only against the borrower, but also against the tenant who holds only by such right as the borrower would give her. Accordingly, it seems to me that there is no answer in this case to the claim to possession by the building society, and that the society is entitled to succeed."

28. In Stroud Building Society v Delamont [1960] 1 WLR 431, following the mortgagor's bankruptcy, the mortgagee sought to evict a tenant of the mortgagor, but subsequently allowed him to remain and continue to pay rent to the mortgagor's trustee in bankruptcy. The mortgagee appointed a Law of Property Act receiver to collect the rents. The case is complicated by the fact that such a receiver received the rents on behalf of the mortgagor, not the mortgagee. Nevertheless the mortgagee had expressly told the tenant that the terms of her tenancy which she held as a tenant of the building society were the same as those granted by the mortgagor. The tenant had paid cheques in favour of the building society for the rent. Cross J said this at 434:

"When a mortgagor has granted a tenancy which is not binding on the mortgagee the latter can, instead of treating the tenant as a trespasser, consent to treat him as his own tenant or he may act in such a way as precludes him from saying that he has not consented to take him as a tenant. Such an acceptance by the mortgagee of the mortgagor's tenant, whether express or implied, or operating by way of estoppel, must, I think, amount to a creation of a new tenancy between the parties. The tenancy between the mortgagor and the tenant is not one which is merely voidable by the mortgagee if he chooses not to accept it, but which he can confirm by waiving his right to avoid it. It is a nullity as against the mortgagee and so, if the mortgagee is to lose his right to treat the mortgagor's tenant as a trespasser, it must be because the tenant has become the mortgagee's tenant under a new tenancy."

29. Cross J went on to hold that, looking at the facts as a whole, the mortgagee had agreed to accept the tenant as their tenant.
30. This court reviewed these and other authorities in Nihar v Mann [1998] 32 HLR 223, In that case the mortgagee, knowing of the tenancy granted in breach of the terms of the mortgage, decided not to challenge the tenant's status, and collected rent in the belief that it was being collected on its behalf. Ward LJ said that the facts pointed overwhelmingly to a fresh tenancy between the mortgagee and the tenant. The Court approved Cross J's approach in Stroud when he said:

"I have to say whether (looking at the facts as a whole and putting myself in the position of a juryman) the society had consented to accept the tenant as tenant"

31. In Towerson v Jackson [1891] 2 QB 484 the mortgagee gave the tenant a notice informing him of the existence of the mortgage and requiring him to pay rent. The tenant remained in possession, but did nothing else. The Court of Appeal held that this did not create a tenancy between the mortgagee and the tenant.
32. The present case was decided without disclosure or cross-examination, a point much stressed in the skeleton arguments of Ms Fosuhene's former counsel. It was, in effect, decided on the summary basis that on the material before the Master, Ms Fosuhene had no defence to the claim for possession. I have no doubt that that is a correct approach. I should therefore approach the issues on the basis that the appeal should be allowed if Ms Fosuhene can arguably demonstrate that Paratus had consented to treat her as its tenant, or had precluded itself from denying her status as a tenant of its own.

The arguments on appeal

33. Ms Fosuhene relied on the following facts:

i) Paratus had known that the premises were rented from the visit report in December 2009.

ii) Paratus knew that the occupier was not Mr Maru, because Mr Maru had come forward and said he was not the purchaser.

iii) She had been paying sums into Paratus' account.

iv) Paratus must have realised that the person paying these sums was the person in occupation.

34. On this basis Ms Fosuhene argues that she has an arguable case that Paratus has recognised her as a tenant, or should not be allowed to dispute her status as such.
35. Counsel for the respondent submitted that there was no basis to recognise such a case. In effect she submitted that there was nothing to connect the payments which Paratus was receiving with the person in possession of the property. Even if they had noticed Ms Fosuhene's name on the bank transfers, there was no reason why Paratus should connect that name with the person in possession.
36. I am in no doubt that counsel for the respondent is right. Paratus deny that they knew that the payments were coming from the occupier. It was for Ms Fosuhene to adduce at least some evidence from which it could be inferred that they did know. When the money was being paid into Paratus' account in cash they could have had absolutely no knowledge of who was paying. They received payments into the account in various ways since the commencement of the mortgage, both before and after Ms Fosuhene's occupation Moreover, even if one assumes that Paratus' bank statements would have shown Ms Fosuhene's name, this would not have told them that the money was coming from the occupier. No doubt they could have instigated a range of enquiries which might have uncovered more information, but there was no reason why they should.
37. The evidence about the arrangement that was reached to increase the payments to £1110 is at best unclear, as the judge pointed out, and was not stressed by Ms Fosuhene. Critically, it does not go as far as to suggest that she identified herself as the occupier when she spoke to Paratus. When Ms Critchley said in her witness statement that Paratus had no contact with the occupiers either before or after the agent's visit in December 2009, one would have expected Ms Fosuhene's main witness statement to have included further details of the circumstances under which the arrangement in December 2009/January 2010 was made if any were available. Instead, as I have pointed out, her evidence gives no further detail, and does not refer to this agreement in the context of rebutting the case that there was no contact with the occupiers either before or after the visit by the agent. A discussion or even an agreement about the levels of payment of mortgage and arrears would only be of significance if Ms Fosuhene had identified herself as a tenant, as opposed, for example, to someone speaking on behalf of the mortgagor.
38. In those circumstances it is not surprising that both courts below held that there was no evidence to support Ms Fosuhene's defence. That is enough to dispose of the first two grounds of appeal. In coming to that conclusion, those courts were not deciding any disputed issues of fact, as alleged in the third ground. They were merely identifying an essential element of Ms Fosuhene's defence which was entirely missing, taking her evidence at its highest. As to the fourth ground of appeal Ms Fosuhene's case does not fail for absence of evidence of detriment to her. It fails because there was nothing to alert Paratus to the fact that it was the occupier who was paying in the capacity of tenant.

Disposal

39. I would accordingly dismiss the appeal. It follows that I would give permission to enforce the possession orders made by the courts below.  Although we have been asked by Ms Fosuhene to give her a further 28 days in which to give up possession, we have no power to do so as, as against Paratus, she is a trespasser: see Boyland & Son v Rand [2006] EWCA Civ 1860.  The respondent is entitled to its costs of the appeal, which we assess in the sum of £10000.

Lord Justice Leveson

40. I agree.

Lord Justice Longmore

41. I agree also.