Mann Aviation Group (Engineering) Ltd v Longmint Aviation Ltd & Anor

A periodic tenancy may arise by implication where the parties’ conduct shows an intention to create a landlord and tenant relationship and substantial periodic rent is paid. The principle applies to commercial as well as residential premises. Physical control, intention to occupy for the occupier’s own benefit, payment of rent at full value and an intention to create legal relations are relevant indicators.

A later change in ownership or group structure does not surrender the tenancy without unequivocal conduct showing that it has ended. Implied forfeiture terms require the usual contractual justification and will not be inferred merely because the tenant leaves the relevant corporate group, competes with another group company or allegedly acts to its detriment.

The joint administrators of Mann Aviation Group (Engineering) Ltd sought declarations and injunctive relief concerning the company’s occupation of aircraft hangars, offices, workshops and related premises at Fairoaks Airport. Longmint Aviation contended that MAGE was a licensee, or alternatively that any tenancy could be terminated or forfeited.

The dispute also concerned a £2.5 million inter-company accounting entry made shortly before MAGE entered administration. The central issues were whether MAGE held an implied periodic business tenancy, whether that tenancy had been surrendered or could be forfeited, and whether the accounting entry was a transaction at an undervalue under the Insolvency Act 1986.

1. MAGE held an implied periodic tenancy from 1 November 2000. The parties’ intention that the relationship should be one of landlord and tenant, substantial periodic rent, MAGE’s physical control of the premises, its intention to occupy for its own benefit, and the intention to create legal relations together supported that conclusion. The tenancy was annual, with rent payable by quarterly instalments.

2. The implication of a periodic tenancy applies to commercial premises as well as residential premises. The tenancy was a business tenancy protected under Part II of the Landlord and Tenant Act 1954. MAGE’s tenancy was an overriding interest and was not qualified by the later Longmint Aviation lease.

3. MAGE had not surrendered the tenancy when the corporate group and airport ownership changed in July 2007. Its continued occupation, operation of its regulated engineering business, payment of sums described as rent and continued control over use of the hangars were inconsistent with unequivocal surrender.

4. The implied tenancy contained no term permitting forfeiture merely because MAGE or its business left the group, competed with another group company or behaved to the detriment of a group company. Such terms were unsupported by the recognised tests for implication. A serious and sustained failure to pay rent might have justified forfeiture, but no such breach was established.

5. Longmint Aviation had not given effective notice terminating the tenancy. Injunctive relief was therefore appropriate.

6. The £2.5 million entry in favour of Longmint Aviation was a transaction at an undervalue under section 238 of the Insolvency Act 1986. MAGE received no consideration because the debt was properly owed to Longmint Group Limited, not Longmint Aviation. The statutory defences failed, and the entry was to be reversed.

First-instance decision. No prior appellate decision is stated in the judgment.