High Court judge rejects appeal by council over whether business tenant was entitled to new lease

The Royal Borough of Kensington and Chelsea has lost an appeal over whether a tenant was entitled to a new lease.

In the High Court case, Mr Justice Edwin Johnson heard that a business named Mellcraft, of which Amir Moaven is sole director had gained an order from His Honour Judge Monty KC in the Central London County Court that it occupied the property concerned for business purposes at the date of expiry of its lease from the council and that the latter had failed to satisfy the ground of opposition in paragraph (g) of Section 30(1) of the Landlord and Tenant Act 1954.

In The Royal Borough of Kensington And Chelsea v Mellcraft Ltd [2024] EWHC 539 (Ch) Mr Justice Edwin Johnson said: “The overall result of these determinations was that the [Mellcraft] was entitled to a new lease of the property, pursuant to the provisions for the renewal of business tenancies in Part II of the Act.”

HHJ Monty has found Mellcraft collects rents from its sub-lessees it holds and pays them to the council as the superior landlord and that was “sufficient to establish that [Mellcraft] is carrying on business”.

The council argued HHJ Monty went wrong in his decision on both preliminary issues and asserted eight grounds of appeal claiming errors of law and errors in dealing with the evidence.

It sought an order that Mellcraft did not occupy the property for business at the time the lease ended and that it had satisfied the ground of opposition.

The council also asked for an order for possession of the property and reversal of a costs order made against it.

Mr Moaven applied in 2017 for a further lease but the council served notice under Section 25 of the Landlord and Tenant Act and said it would oppose a claim for a new lease on the basis of Paragraph (G), which states: “Subject as hereinafter provided, that on the termination of the current tenancy the landlord intends to occupy the holding for the purposes, or partly for the purposes, of a business to be carried on by him therein, or as his residence.”

The judge said the council’s case was that the lease was contracted out of the protection of Part II of the Act and that if the lease was protected as a business tenancy it opposed the grant of a new lease, on the basis of Paragraph G.

The council said it intended to use the flat to provide temporary accommodation to homeless families.

Edwin Johnson J dismissed all eight grounds argued by the council.

The first of these was that HHJ Monty erred in law in concluding Mr Moaven occupied the flat for business as his activities in the flat were insufficient to satisfy the requirements of Section 23(1).

Edwin Johnson J said: “The essential difficulty with Ground One seems to me to be that I can find no error of law in the judge's decision on the first preliminary issue.”

He added: “I can see no basis on which I can interfere with the judge's evaluation of the evidence [he] found that [Mellcraft] was carrying on a business, namely the management of the five leases held by [it], from the flat. The judge's evaluation of the evidence was that this business use of the flat was sufficient to fall within the terms of Section 23(1). This evaluation of the evidence was pre-eminently a matter for the judge. I am no position to interfere with that evaluation.”

The second ground was that HHJ Monty failed to have regard to the burden of proof on Mr Moaven, when concluding that he had satisfied the requirements of Section 23(1).

“It seems to me that it was not necessary for the judge to state, in terms, that the burden of proof was on the respondent,” Edwin Johnson J said.

“This is clearly something which can and should be assumed, in the absence of any evidence that the judge went wrong in this respect.”

He further dismissed the council’s argument in its third ground that HHJ Monty failed to have regard to Mr Moaven using the flat as a home for him and his family and that he worked from his flat only on an occasional and irregular basis.

The judge said: “It seems to me that there is a confusion in Ground Three. [Mellcraft] has corporate personality. As such, it has no ability directly to conduct business or to occupy premises. It can only act by its officers and agents, which essentially means Mr Moaven, as its sole director.

“It follows from this uncontroversial proposition that if Mr Moaven was occupying the flat for the purposes of transacting the business of the respondent, this was capable of qualifying as the business occupation of the flat by the respondent.”

Mark Smulian