Paratus AMC Ltd v Fosuhene

A tenancy granted by a mortgagor after the mortgage, without the mortgagee’s consent, is not binding on the mortgagee. It becomes enforceable against the mortgagee only if the mortgagee expressly or impliedly accepts the occupier as its tenant, or acts so as to be precluded from denying that status, thereby creating a new tenancy. On a summary possession application, the court asks whether the evidence, taken at its highest, makes that case arguable. Mortgage payments alone are insufficient. There must be evidence capable of showing that the mortgagee knew the payer was the occupier acting as tenant.

Paratus AMC Limited brought possession proceedings concerning a property occupied by Doe Fosuhene and her family. Fosuhene relied on a residential tenancy granted after Paratus’s legal charge and on payments made to Paratus towards the mortgage and arrears. She argued that Paratus had consented to, waived its right to challenge, or was estopped from denying, her tenancy, and that she had acquired an equitable right to remain.

Master Teverson struck out her defence and ordered possession. The High Court dismissed her appeal in [2012] EWHC 3791 (Ch). The issue on the second appeal was whether, taking her evidence at its highest, she had an arguable case that Paratus knew she was the occupier making payments in her capacity as tenant.

Lord Justice Floyd gave the leading judgment, with which Lord Justices Leveson and Longmore agreed.

1. The appeal had properly proceeded despite the appellant’s initial absence. The court was satisfied that she knew of the hearing and was able to present her own case, particularly as she was herself a solicitor.
2. Because the case had been decided without disclosure or cross-examination, the correct question was whether Fosuhene could arguably demonstrate that Paratus had consented to treat her as its tenant or had acted so as to preclude itself from denying that status. The lower courts were entitled to take her evidence at its highest and identify an essential element which was wholly missing, without deciding disputed questions of fact.
3. The authorities, including Parker v Braithwaite [1952] All ER 837, Stroud Building Society v Delamont [1960] 1 WLR 431, Nihar v Mann [1998] 32 HLR 223 and Towerson v Jackson [1891] 2 QB 484, established that a tenancy granted without the mortgagee’s consent is ineffective against the mortgagee unless the mortgagee accepts the occupier as its tenant, expressly, impliedly or by conduct giving rise to estoppel. That acceptance creates a new tenancy between the mortgagee and occupier.
4. There was no evidence from which Paratus could be inferred to know that Fosuhene was the person paying the mortgage. Cash payments did not identify the payer. Even payments showing her name would not, without more, show that she was the occupier. The alleged arrangement increasing payments was also insufficient because it did not show that she had identified herself as the tenant. The appeal therefore failed on consent, waiver, estoppel and equitable-right grounds. It did not fail because detriment had not been proved.
5. The appeal was dismissed. Paratus was permitted to enforce the possession orders. The court had no power to grant a further 28-day period to an occupier who was a trespasser as against the mortgagee, applying Boyland & Son v Rand [2006] EWCA Civ 1860. Costs were assessed at £10,000.

1. Court of Appeal (Civil Division) dismissed Fosuhene’s second appeal and permitted enforcement of the possession orders.
2. High Court of Justice, Chancery Division dismissed the appeal from Master Teverson’s possession order in [2012] EWHC 3791 (Ch).
3. Chancery Division Master Teverson struck out Fosuhene’s defence and ordered possession.