Camelot Guardian Management Ltd v Khoo

An agreement creates a tenancy where it grants exclusive possession of residential premises for a term in return for payment, subject to exceptional cases where the relationship is legally different. The court must construe the agreement in its context, without being bound by the parties’ label and without first finding ambiguity. In identifying a sham or pretence, the court may consider the parties’ conduct before and after contracting, but the burden lies on the party alleging dishonesty. Departure from a contractual term, or failure to exercise a contractual right, does not by itself establish a pretence or extinguish the right. A genuine property-guardianship agreement which provides only shared, variable and non-exclusive occupation is a licence, not a tenancy.

Camelot Guardian Management Ltd sought possession of office premises occupied by Heiko Khoo under a written property-guardianship agreement. Camelot contended that the agreement created a licence which had been terminated by notice. Mr Khoo contended that, despite its terms, it created an assured shorthold tenancy because he had occupied a room and storage areas exclusively.

Mr Recorder Cohen QC held that Mr Khoo had a right to exclusive possession of part of the premises but nevertheless concluded that the arrangement was a licence and ordered possession. Mr Khoo appealed. Camelot served a Respondent’s Notice challenging the finding of exclusive possession and advancing further grounds based on the circumstances of the agreement. The central issue was whether the agreement created a tenancy or a licence.

The appeal was dismissed and the order for possession was upheld.

1. The court applied the principles in Street v Mountford [1985] 1 AC 809. An agreement granting exclusive possession of residential premises for a term in return for payment will ordinarily create a tenancy, subject to exceptional cases where the right is referable to another legal relationship.
2. The starting point is construction of the agreement. The court must read the words in their subject-matter and factual context, applying the ordinary principles of contractual construction identified in Arnold v Britton [2015] UKSC 36 and Wood v Capita Insurance Services Ltd [2017] UKSC 24. There is no requirement to find ambiguity before considering relevant background, although clearer wording is less readily displaced.
3. The agreement concerned the property as a whole and gave a unitary right to share occupation with other guardians. Clauses permitting Camelot to alter the living space, and denying any right to use a specific room, were inconsistent with legal exclusive possession. The provision requiring enough rooms for the guardians did not guarantee exclusive occupation of a particular room.
4. The court separately considered whether the agreement was a sham or pretence. Following AG Securities v Vaughan [1990] 1 AC 417 and National Westminster Bank plc v Jones [2001] 1 BCLC 98, post-contract conduct could be relevant to whether the parties intended the written rights and obligations to operate. However, there was a strong presumption that apparently proper contractual provisions were intended to be effective. The allegation of dishonesty was not established.
5. The fact that a contractual right was not exercised did not show that it ceased to exist, as explained in Huwyler v Ruddy [1996] 28 HLR 550. The agreement therefore created no right to exclusive possession and was a licence. It was unnecessary to decide whether any exceptional tenancy case would otherwise have applied.

• High Court (Queen’s Bench Division): Mr Justice Butcher dismissed the appeal and upheld the possession order.
• County Court: Mr Recorder Cohen QC, on 4 May 2018, held that the arrangement was a licence and ordered possession.