Exclusive possession and property guardians

In Camelot Guardian Management Ltd v Khoo ([2018] EWHC 2296) the court had to consider whether an agreement with a ‘property guardian’ created a lease or a licence.

Facts

Westminster City Council (‘the council’) appointed Camelot Guardian Management Ltd (‘CGML’) to provide security services in respect of a temporarily empty office building (‘the property’). This agreement envisaged that CGML would grant licences to suitable guardians and carry out regular inspections of the property until the council wanted it back.

CGML entered into an agreement (‘the agreement’) with Mr Khoo giving him the right to occupy a room in the property.

The agreement had a number of features designed to emphasise that it created a licence and was not a tenancy:

  1.  it was headed ‘licence agreement’;
  2.  it included an ‘important note’ emphasising that Mr Khoo would share the property with others;
  3.  it recorded CGML’s agreement with the council concerning the property;
  4.  Mr Khoo could choose a room but could be required to move to another room by CGML;
  5.  Mr Khoo could change the room he used but had to notify CGML of the change;
  6.  Mr. Khoo could not have visitors stay overnight.

In August 2017 the council gave notice to CGML that it would shortly require the property back. CGML served notice to determine Mr. Khoo’s licence. Mr. Khoo refused to move out and claimed to be an assured shorthold tenant. It was agreed that if Mr Khoo was a tenant then he was an assured shorthold tenant and the claim for possession should be dismissed.

Legal analysis

Butcher J. explained that after  Street v Mountford ([1985] 1 AC 809) the court had to consider whether, properly interpreted, the agreement conferred exclusive possession on the occupier.

Construction of the agreement involves looking at the words used in the light of the relevant background. The court should be astute to detect a sham: it should be alert to the possibility that the words used were a dishonest attempt to mislead as to the true substance of the agreement between the parties. When considering the question of a sham the court was entitled to look at how the parties behaved after the agreement was reached.

Butcher J concluded that Mr Khoo did not have exclusive possession and was not a tenant.

The terms described above all pointed in this direction. CGML’s agreement with the council and its underlying purpose were part of the relevant background ([28] – [29]). The circumstances surrounding the agreement (the language used in the website and the fact that Mr Khoo was shown a particular room) were part of the background but did not detract from the conclusion that this was a licence.

On the idea of a sham, Butcher J. observed that:

it has to be borne in mind that not every departure from the terms of a contract and how it is operated indicates that the relevant agreement was a pretence when entered into. Furthermore, the fact that a contractual right is not exercised does not of itself mean that it ceases to exist. The relevant party may be entitled subsequently to insist on its performance nevertheless’ ([33]).

There was no sham, no ‘element of dishonesty’ here ([34] – [36]).

Michael Lower

 

 

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