In Thomas v Smalling [2020] EWHC 3186 (Ch), Mr Justice Trower refused permission to appeal HHJ Luba QC’s robust case management decision and the orders (including an order for possession) that followed. The fact that the court listed an application for relief from sanctions after the trial date was not a legitimate explanation of a failure to take steps to bring that relief application before the court on an expedited basis.
The claimant and defendant had been work colleagues. The defendant could not obtain a mortgage. She provided £50,000 to the claimant. With that money, a lump sum of her own and a buy-to-let mortgage the claimant purchased 59 Upper Seldon Road, South Croydon, Surrey. There was a written assured shorthold tenancy agreement dated 7 September 2012 signed by the claimant as landlord and the defendant as tenant. The defendant moved into the property.
In 2019, the claimant commenced possession proceedings for the property and claimed rent arrears. Her case was that the parties had agreed that she would purchase the property and that the defendant would occupy it under the tenancy agreement. After one year the claimant could sell the property but if the defendant had the ability she could buy it for the market price less £50,000.
In addition to the tenancy agreement, the claimant relied on a further document being a gifted deposit declaration form (the gift form) which had been required by the mortgagee. Although the gift form incorrectly recorded the sum provided by the defendant and wrongly stated that the defendant was the claimant’s niece, it was signed by the defendant and was clear that monies she contributed to the purchase price of the property were a gift.
The defendant filed a defence and counterclaimed that the property was held on trust for her. She asserted that the tenancy agreement, and the gift form were both shams. Her case was that it had been agreed that at some point she would take over ownership of the property and the mortgage liability and would then reimburse the claimant the money that the claimant had advanced towards the property’s purchase price.
Case management directions were made in July 2019, at which time the court accepted that the matter was urgent (the claimant wished to sell the property to assist in funding a mortgage on her own home). Directions were given which included the exchange of witness statements. The sanction for failing to comply with the exchange of witness statements was that oral evidence from that witness could not be given except with the permission of the court. A pre-trial review took place on 9 October 2019 before Judge Luba. He also accepted that the matter was urgent and listed the matter for trial in December.
At that pre-trial hearing the defendant’s counsel acknowledged that the defendant had not complied with the direction to exchange witness statements and was left in no doubt that urgent steps would need to be taken by the defendant to regularise the position. On 14 October 2019, the defendant’s newly instructed solicitors issued an application seeking relief from sanctions and permission to amend her defence. The defendant’s solicitors did not seek an urgent hearing and the court listed the hearing for a date after the date listed for trial. At the opening of the trial the defendant made her application for relief from sanctions.
Judge Luba was very critical of this approach – the relief from sanctions application should have been heard as a matter of urgency, relying on the court’s listing was no proper excuse. He refused the defendant’s applications for relief from sanctions and permission to amend her counterclaim, refused her application for an adjournment of the trial and dismissed her application for summary judgment on the counterclaim. After hearing evidence, he ordered possession of the property, entered money judgment for £67,528.99 rent arrears and dismissed the counterclaim.
Judge Trower found that in reaching his decision to refuse to grant relief from sanctions, Judge Luba had correctly applied the three-stage test set out in Denton v TH White Ltd [2014] EWCA 906. In exercising his discretionary case management powers, Judge Luba had taken account of his overriding duty to do justice between the parties fairly and proportionately. Further, on the substantive issues of the case, the judge’s findings that the gift form and the tenancy agreement were not shams were findings open to him. The gift form fell squarely within the category of a written declaration as to beneficial interest contemplated by Lord Briggs in Gany Holdings (PTC) SA v Khan [2018]UKPC 21.
Elizabeth Haggerty is a barrister at Lamb Chambers
