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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 >> Fitzkriston LLP v Panayi & Ors [2008] EWCA Civ 283 (12 February 2008) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2008/283.html Cite as: [2008] EWCA Civ 283

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IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM SHOREDITCH COUNTY COURT
(HIS HONOUR JUDGE COTRAN)

		Royal Courts of Justice Strand, London, WC2A 2LL
		12th February 2008

Lord Justice Rix:

1. This is an appeal which arises out of a claim for possession to certain property, known as Unit C, 174 - 178 Courtauld Road, London, N19, possession proceedings which, I regret to say, have an unfortunate history.
2. The claim was brought by relatively new registered owners, the claimants, and in this court the respondents, Fitzkriston LLP, who bought Unit C at that address, together with its neighbouring unit B, in July 2006. They promptly became the registered owners of the property in question. They then brought  these proceedings for possession against, amongst others, the   first   defendant,   Mr Kyriacos Panayi, and his business company, Euro American Car Service Ltd, the second defendant. There is also a claim for possession against a third defendant in respect of Unit B, but this court is no longer concerned with that.
3. The judge, HHJ Cotran, by his judgment given on 5 April 2007 in the Clerkenwell and Shoreditch County Court, found in favour of Fitzkriston's claim for possession and made an order giving possession of Unit C with damages to be assessed and costs, with an order for payment on account of costs in the sum of £10,000.
4. On this appeal Mr Michael Roberts, who appeared before the judge below, submits, with considerable force, that the judge did not give to his clients -- Mr Panayi and his company -- a fair trial. His grounds of appeal are to the effect that the trial was conducted in an unjudical manner; that the judge had effectively made it clear at the outset of the trial that he had made up his mind against the first two defendants, and that thereafter the trial was conducted in such a manner as effectively to deprive them of their right to a fair trial.
5. The grounds and the skeleton argument in support of them illustrate, in some considerable detail, the difficulties that Mr Roberts was labouring under at trial. In particular, he draws our attention to passages in his opening before the judge -- such as at page 151 of our bundle -- where the judge says that the critical document which Mr Panayi was relying upon as the foundation of his right to be in Unit C was "all rubbish"; to page 153 where the judge responded to the submission of Mr David Lewis, who is appearing for Fitzkriston below as he does on this appeal today, reminded the judge of his reference to rubbish, so as to elicit from the judge the remark:

"It seems to me that this case can be decided in a minute. There is no need for all this evidence."

That was, as emerged a page later in the transcript (at page 154) before the judge had even read the skeleton arguments in the case. Finally, to illustrate, most especially, the judge's attitude to the case, Mr Roberts referred us to page 160 of the bundle, where the judge said:

"There is no fact finding to find in this case. What you put forward is not a contract, nor a lease. It is nothing."

6. With that introduction to the main plank of this appeal, let me give some further background facts. The document that the judge was referring to in that last quote -- "…is not a contract nor a lease. It is nothing" -- was a document before the court, I do not want to call it a lease because that is begging the question; so I will just refer to it as "the lease document", made in the names of the then landlord (and when I say "then" I am referring to 1998, Saigas Ruchie Ltd, and a tenant by the name of Paraskas Theophilou who, despite having a different surname, is one of Mr Panayi's brothers.
7. The lease document refers to a tenancy for one year at a rent of £4,000 per annum, payable monthly in advance. Clause 2 of the lease document says that the tenant agrees to pay that rent in the manner aforesaid, and there then follow other typical provisions and covenants of the lease. The lease document is not dated either at its very beginning, where space is left for a date to be entered into the typed provisions, or at the very end, on the last page of the document, where space is again left for a date. The lease document ends in typescript with the words "signed as a deed on behalf of Saigas Ruchie Ltd in the presence of" but there are no signatures against that typing.
8. There is nothing in typescript to reflect the need for any signature from the tenant, Mr Theophilou. However, at the end of the document, below the typescript to which I have just referred looking for a signature on behalf of the landlord Saigas Ruchie Ltd, there is written in manuscript the words "tenant Farascos Theophilou" and a signature beneath that, and then beneath that the word "witness" and a signature and then a stamp "Michales Pierides, advocate". This lease document was not before the court as an original of any kind, but only in copy. That was the document that the judge was referring to in the passage which I have cited. That lease document was disputed at the trial as having any genuineness or as having been recognised or executed in any way by the landlord, Saigas Ruchie Ltd.
9. Also before the judge at trial was a relevant document about which there was no dispute. That was an agreement -- dated 27 March 1998, also referring to a completion date of 27 June 1998 -- for the sale of a third unit in Courtauld Road, namely Unit A; and that agreement for the sale of Unit A was between Saigas Ruchie Ltd (the then landlords of the three units to which I have referred) and a Mr Phytos Stavrinides. The purchase price of Unit A expressed in the contract was £254,000 and the contract also referred to a deposit of £25,400. Clause 17 of this agreement stated this:

"On completion the seller will grant and the buyer will take a lease of Unit C for the term of one year at the rental of £4,000 per annum."

10. That was certainly positive contractual and evidential material which lay in the background of the disputed lease document. Also before the court were documents further explained in evidence before the court, whereby Mr Stavrinides, the buyer under that agreement of 27 March 1998, agreed to the sale of the benefit of that agreement onwards to a company by the name of MobileXpress Ltd, for a nominal amount of £1. That on-sale is not dated or signed, but is further evidenced by a statement dated 1 May 1998 by a solicitor, Mr George Norsworthy, setting out the circumstances in which Mr Norsworthy confirmed that he had given advice to Mr Stavrinides in respect of the making of that on-sale agreement.
11. There was evidence before the judge that Mr Stavrinides was acting as a go-between or agent or was at any rate fronting for Mr Panayi's brother, Mr Theophilou, who was, in effect, through the company MobileXpress Ltd, taking the benefit of the agreement for the sale of Unit A and a one-year lease of Unit C at a rental of £4,000.
12. Also before the judge were some documents which were said to evidence the payment to Saigas Ruchie Ltd's solicitors, Messrs YVA, of two sums of £10,000 and £20,000 respectively. Those payments were in fact effected by banker's drafts made out to the solicitors and appeared to have been debited to an account of the bank in question held in the name of a further company about which not much is known, Master Repairs and Servicing Ltd. The cheques in question are dated 13 February 1998 (that is the £10,000 cheque) and 22 March 1998 (that is the £20,000 cheque). It was submitted to the judge that those two cheques evidenced the payment through Master Repairs and Servicing Ltd of what was essentially Mr Theophilou's interest in the purchase of Unit A under the agreement of 27 March 1998. The £30,000 was said to represent the deposit of £25,400; legal fees of £600, making £26,000, and advance payment of the rent for the whole of the alleged one-year tenancy in the sum of £4,000, making a total of £30,000.
13. So, the case relied upon before the judge, by Mr Panayi and his company, as establishing their right to occupy Unit C, was that, in the agreement of 27 March 1998, Mr Stavrinides had been given a right to take a tenancy for one year at Unit C for £4,000. That right had been passed on to a company known as MobileXpress Ltd, but behind all of that lay the brother Mr Theophilou. Mr Theophilou had taken the benefit of that right to take a new one-year lease in the form of the lease document which he had signed and returned, as it was said, on the evidence of a third brother, Mr Titos Pavlou, to solicitors of Saigas Ruchie Ltd, YVA. It was submitted that, in this form, despite any lack of execution on the part of Saigas Ruchie Ltd, a tenancy had been entered into for the benefit of Mr Theophilou and that Mr Theophilou had occupied Unit C through his brother Mr Panayi, who had conducted his business from that unit, as it seems he had been doing for many years already before then. That was Mr Panayi's essential case at trial before the judge. It was said that in those circumstances, when Mr Panayi held over at the end of that year's tenancy, he or his brother had a periodic tenancy in the form of a business tenancy within the Landlord and Tenant Act 1954, Part 2.
14. There was much to be said on the other side -- on the side of Fitzkriston --against that case, such as that, in his first witness statement in these proceedings, Mr Panayi had not relied upon any tenancy to his brother, but had relied on the inconsistent fact of adverse possession; such as that the lease document, to which I have referred, came forward very late in the day, variously spoken to as three or four weeks before the trial and only in the form of a copy, as I have mentioned, such as the fact that Mr Theophilou gave no evidence whatsoever at the trial in support of what was said to be his tenancy; and such as the fact that in a reply to Fitzkriston's request for further information made by Mr Panayi on 6 March 2007 under a statement of truth, Mr Panayi had stated that the £4,000 rent in question had been paid not through the banker's drafts to which I have referred, but:

"…in cash to his brother Tito who gave this to Mr Stavrinides as agent for Saigas Ruchie."

15. So there were certainly difficulties in Mr Panayi's defence, to which the contrary positive evidence of witnesses called by Fitzkriston added. Those witnesses included Mr Stavrinides himself and a director of Saigas Ruchie Ltd, a Russian gentleman, Sergei Tchaousov.
16. The judge, in his judgment, having set out in his own way the progress of the proceedings and the essential material and the evidence of Mr Panayi, which was heavily challenged in cross-examination and which -- it is common ground before us -- was evidence that was very poorly given (albeit Mr Panayi explained that on the ground that he was not a man who was good at his paperwork), roundly condemned that evidence and very briefly, and without setting out what the contrary evidence was, said that he entirely accepted the evidence of Fitzkriston's witnesses. He concluded, at the end of his judgment:

"This is a question of credibility. I reject entirely their evidence. I accept the evidence of the claimant's witnesses who are new owners."

17. Quite apart from criticisms which Mr Roberts makes of that as a judgment in itself - a matter in respect of which, if it turned on that, his submissions may have been in some difficulty, but that was not a question that was really explored upon this appeal – Mr Roberts nevertheless submits that the judge's comments in the opening of the trial, and the way in which he intervened and interrupted the evidence of Mr Panayi in particular, amounted to a failure to give to Mr Panayi a fair trial and to afford to him a proper and fair opportunity to deploy his defence and his evidence for its proper worth.
18. In brief, I regret to have to say that I accept those submissions. They are well illustrated by some of those comments to which I have referred towards the beginning of this judgment, from the very opening of the trial. Things did not improve thereafter. The judge remained impatient throughout the trial; first in having the important documents explained to him by Mr Roberts, and secondly, when he reached the evidence in listening patiently and without interruption to Mr Panayi give his evidence.
19. If the matter turned entirely upon these matters, I would not be willing to accept Mr Lewis' fallback submission - I say fallback submission because he very fairly and candidly accepts the criticisms which are made of the judge's conduct at the trial - that a re-trial would afford Mr Panayi and his company no assistance at all, because, in any event, a new judge and a new trial would be bound to come to the same answer on the question of credibility in the light of the documents which I have briefly described. Therefore, if that was all that this appeal was about, I would conclude that, troublesome as it is for the parties who have expended considerable sums upon the trial which has taken place, a new trial would have to be ordered.
20. There is, however, a further point in the case, arising out of Fitzkriston's respondent's notice. This essentially rests on a point of law. Although the judge, in two paragraphs of his judgment, makes glancing references to the issue as having been raised before him, he says absolutely nothing whatsoever in decision of it. Nevertheless, it has been presented to us today by Mr Lewis, pursuant to the respondent's notice. The essential point is this: as registered owners, Fitzkriston's title takes precedence to all prior interests unless they are overriding interests. For these purposes one needs to look at the Land Registration Act 2002 and, in particular, Section 29 of that Act, which reads as follows:

"(1) If a registrable disposition of a registered estate is made for valuable consideration, completion of the disposition by registration has the effect of postponing to the interest under the disposition any interest affecting the estate immediately before the disposition whose priority is not protected at the time of registration.

(2) For the purposes of subsection (1), the priority of an interest is protected –

a) in any case, if the interest – …

ii) falls within any of the paragraphs of Schedule 3…"

One must therefore turn to Schedule 3, paragraph 1 of which reads as follows:

"A leasehold estate in land granted for a term not exceeding seven years from the date of the grant, except for –…

b) a lease the grant of which constitutes a registerable disposition."

21. It is then necessary to turn to the Law of Property Act 1925 section 54, which deals with the subject of creation of interests in land by parole. That section reads:

"(1) All interests in land created by parole and not put in writing and signed by the persons so creating the same, or by their agents thereunto lawfully authorised in writing, have, notwithstanding any consideration having been given for the same, the force and effect of interests at will only.

(2) Nothing in the foregoing provisions of this Part of this Act shall affect the creation by parole of leases taking effect in possession for a term not exceeding three years (whether or not the lessee is given power to extend the term) at the best rent which can be reasonably obtained without taking a fine."

22. The upshot of those provisions is that a parole tenancy will take effect as an interest at will only, and will not suffice as a periodic tenancy for purposes of the 1954 Act, unless it falls within subsection 2 of section 54 as being a parole lease for a term not exceeding three years at the best rent. So, the issue which these provisions give rise to is whether, assuming, in favour of Mr Theophilou, that a periodic tenancy might have been otherwise created, was there here a parole lease -- because of course the lease document was not executed by the owners Saigas Ruchie Ltd -- at the best rent? Ultimately that was the point which was addressed to the judge by Mr Lewis on behalf of Fitzkriston, and that is the issue which arises on the respondent's notice. As to that question, there were three pieces of evidence before the trial judge.
23. It is common ground for these purposes that best rent means market rent. The evidence on that question was as follows. The director of Saigas Ruchie Ltd, Mr Tchaouzov, was asked in cross-examination about the £4,000 rent and whether he, or his company, would have been perfectly happy with the lease of £4,000, to which he said yes, if we agreed. He was also asked how the figure of £4,000 had been arrived at. That, it will be recalled, was the rent entered not only into the lease document, but also into clause 17 of the agreement of 27 March 1998; and he answered, "Probably, it was the market pricing" and again "Probably it was the market price". He also said he did not remember how they negotiated for this amount. That was the first piece of evidence.
24. The second piece of evidence was that Mr Stavrinides was also asked in cross-examination about the £4,000; but he, on the contrary, said that it was "undervalued marketwise". He was then challenged with Mr Tchaouzov's evidence, to which Mr Stavrinides said:

"Mr Tchaouzov doesn't live in the UK. He lives in Russia.

Q: So you did not tell him it was undervalued?

A: I did."

25. That was the second piece of evidence. However, more important than either, in its way, because it came from an entirely independent source, was a letter, not written in the light of these proceedings or this dispute or this issue, but drawn up as long ago as 10 June 1999, by a firm of consultant surveyors known as "Jon Christopher". The letter is in fact signed by   a Mr Chris Pishiri BSc ASVA, written to Mr Stavrinides at Stovaco Holdings Ltd. Stovaco were purchasers from Saigas Ruchie Ltd and sellers to the current owners Fitzkriston. The letter concerns Unit C, which is identified in the heading to the letter, not only by reference to the address, 174-178 Courtauld Road, London N19, but also by means of an accurate description of Unit C, namely "single storey warehouse with front yard area", and that letter says that Mr Pishiri is pleased to provide the firm's recommendations on the best marketing method for the property. It says that an initial asking price of £120,000 would be reasonable, but he was aware that rental offers had been received in the region of £20,000 and therefore, if a full repairing and insuring commercial lease for a term of ten years of more and subject to periodic rent reviews was obtained on that basis, it would be possible to market the property for closer to £200,000. Even on the basis of the initial asking price of £120,000 that is good evidence from an independent and professional source -- and contemporaneous evidence -- that a market rent for the Unit C was at least something in the region of £12,000 and, of course, there is also reference to rental offers received in the region of £20,000. On any view of that letter, that is good evidence that a rental of £4,000 is not a market rent or best rent.
26. Mr Roberts submits that there are difficulties with that evidence. It is only in the form of a letter. It came forward late, he submitted; but it turns out that it was in fact properly disclosed, even if it was not then noted for what it said. Mr Roberts submits that the best evidence before the court was that of Mr Tchaouzov because that was the rent agreed, and that Mr Stavrinides was giving partial and partisan evidence by speaking of an undervalue, evidence which was promoted by his better understanding of the legal issues in the case than Mr Tchaouzov had. But, in my judgment, giving the fullest effect to those submissions, the fact of the matter is that the evidence from that letter from professional surveyors at a contemporaneous time in 1999 is far better than the latter-day evidence of Mr Tchaouzov and Mr Stavrinides, and is clear evidence that any agreement made for a tenancy at £4,000 was not within the statute as one concluded at a best rent.
27. This is despite Mr Roberts' additional submission that the best evidence of the best rent is the rent agreed for the property in question; but if that submission were correct than the statute calling for a best rent would be meaningless, because, in every case, the best rent in question would be the agreed rent. So I do not accept that submission.
28. On this basis, it seems to me, that the point that the judge entirely ignored, arising out of Mr Lewis' respondent's notice, is a good point; and the effect of it is that, giving the fullest possible effect that one could to the material relied upon as evidencing a lease by way of a parole tenancy granted to Mr Theophilou (the brother of Mr Panayi) and thus as providing a basis for Mr Panayi's possession, there never was a valid parole tenancy and thus no continuing periodic tenancy under the 1954 Act which could override Fitzkriston's registered interest. Therefore, despite the entirely unsatisfactory and indeed, unfair way, as I have said, in which the judge dealt with the main issue at trial, which must be a matter of regret, and the need otherwise for a retrail to deal with those matters, I conclude that Fitzkriston is entitled to succeed on its respondent's notice and thus to obtain possession of Unit C, which it claims in these proceedings. I would, on that basis, but on that basis only, dismiss this appeal.

Lord Justice Jacob:

29. I agree. I am quite sure that Mr Panayi feels he did not have a fair trial. Nor did he. Nonetheless the point upon which this appeal is being dismissed was clearly before the judge in the sense that it was in the pleadings and in the arguments before the judge. It is worse than unsatisfactory that the judge failed to deal with the point, for if he had it may well be that this appeal would never have been launched. Any party that has not had a fair trial is bound to want to appeal, particularly if, although there is a knockout point against him lurking around, the judge has not dealt with it at all. Accordingly I well understand why the appeal was brought. But it must nonetheless be dismissed.

Lord Justice Laws:

30. I agree with both judgments. The trial was lamentably conducted by Judge  Cotran. One feels much sympathy for the position of the appellants, but, like my Lords, it seems to me that the point arising under Part 2 of the Landlord and Tenant Act 1954 must conclude the case in favour of the respondent. In those circumstances the appeal is dismissed.

Order: Appeal dismissed