Wendy Fair (Heritage) Ltd v Hobday & Anor

On a tenant’s holding over after a lease ends, there is a presumption that the tenant remains liable at the former rent. The presumption may be rebutted by evidence that the parties disagreed about the rent; if so, reasonable rent is payable.

On a summary judgment application, the court may reject evidence which is flatly inconsistent with contemporaneous documents and inadequately explained. It must nevertheless permit a defence which is more than fanciful to proceed to trial.

Arrangements expressly made subject to contract and without prejudice do not ordinarily create a binding agreement or estoppel. Directors who allow an insolvent or near-insolvent company to incur liabilities for the benefit of another company may face claims for misfeasance or wrongful trading, but such issues may require a trial.

The Liquidator of Wendy Fair (Heritage) Ltd applied under CPR Part 24 for summary judgment in two related proceedings.

The first claim sought a contribution under section 214 of the Insolvency Act 1986, or compensation for misfeasance, from two directors of Heritage. The second claim, brought by Heritage, sought payment from Wendy Fair Markets Ltd for its use and occupation of premises after Heritage’s lease had ended.

The central issues were the rent payable during the period of holding over, whether the arrangements between the companies were back to back, whether later negotiations produced a binding variation or estoppel, and whether the directors had a viable defence to the claims against them.

1. Use and occupation. A tenant holding over after expiry of a lease is presumed, absent evidence to the contrary, to hold as a tenant at will at the former rent. Disagreement about the amount due is sufficient to rebut that presumption, in which event reasonable rent is payable: Dean & Chapter of Canterbury Cathedral v Whitbread (1995) 72 P & CR 9.
2. Summary judgment and evidence. The court was not required to accept witness evidence which was flatly contrary to contemporaneous documents and unsupported by a credible explanation. However, applying Three Rivers Council v Bank of England (No 3) [2001] 2 All ER 513, judgment should not be entered where the defence was more than fanciful. The court could assess documents and contradictions without conducting a mini-trial.
3. Application to the market premises. The evidence established a back-to-back arrangement. Heritage remained liable to Kitgrove at the passing rent of £9,676 per week, and Markets’ corresponding arrangement with Heritage was materially identical. Markets therefore had no defence to the claim as limited to £9,676 per market, and judgment was entered for those sums.
4. Subject-to-contract negotiations. The January 2003 discussions were expressly subject to contract and without prejudice. They did not create a concluded agreement, and no estoppel could arise from provisional arrangements. The parties could resile from their understanding until a binding agreement was made.
5. Claims against the directors. If the arrangements were not back to back, the directors arguably exposed Heritage to liabilities for Markets’ benefit. Given Heritage’s insolvency or near insolvency, the relevant duty could be owed to creditors as well as to the company: West Mercia Safetyware v Dodd [1988] BCLC 250. The possibility of negotiating release or relaxation of arrears, and the unresolved factual issues, meant that the section 214 and misfeasance claims could not be summarily determined. Summary judgment was refused on those claims, but a conditional order was made. The condition had to be realistic, since an illusory condition would impair the respondents’ Article 6 rights: Anglo Eastern Trust Ltd v Kerman Shahci [2002] EWC Civ 198 C.A.