Business premises–Occupant under purported management agreement did not in fact manage the business full-time, but started another of his own and behaved generally as a tenant–Agreement a sham, manager entitled to grant subtenancy–Subtenant accordingly protected by statute
This was an
originating summons by Mrs Yuan Wee Wang against Mr and Mrs William Wei, of 135
Cromwell Road, South Kensington, London SW7, for possession of business
premises known as the Orchid House Chinese restaurant, 134 Cromwell Road,
together with the flat occupied by the defendants in the adjacent premises, no
135. The plaintiff also sought damages for trespass or alternatively arrears of
rent.
Mr D T A
Davies (instructed by Cripps, Harries, Willis & Carter) appeared for the
plaintiff, and Mr C J Whybrow (instructed by C L MacDougall & Co)
represented the defendants.
Giving
judgment, JUDGE FAY said that Mrs Yuan Wee Wang acquired a leasehold interest
in both the restaurant and the flat in February 1963, and until 1971 she
herself ran the restaurant business. In that year she fell ill, found herself
unable to continue with the business, and handed it over to Mr Martin Wang. A
written agreement, due to expire on November 28 1974, was drawn up between
them. Mr Wang operated the business until 1974. Then, by an agreement expressed
to operate as a subtenancy from May 20 to November 30 1974, he handed it over
to Mrs Wei. She and Mr William Wei remained in occupation after the end of
November 1974, claiming the protection of Part II of the Landlord and Tenant
Act 1954. The issue turned on whether Mrs Wei had a lease or a licence in the
premises, and that in turn depended on whether Mr Wang had a lease or a
licence.
The agreement
between Mrs Wang and Mr Wang had been drawn up by solicitors. On its face, it
was a management agreement saying nothing about Mr Wang’s status on the
premises. It was implicit that his presence there was as an employee. There was
nothing in the agreement about the flat. That was Mrs Wang’s residence. In
1972, however, she went to Hong Kong for medical treatment. She retained a key
to the flat and left personal belongings locked in it, and it remained fully
furnished with her possessions. Mr Wang then used the flat in connection with
the business and paid an extra £20 a week to Mrs Wang. Mrs Wei was employed at
the restaurant in 1973 by Mr Wang, and her husband moved into a room in the
flat. Other rooms were occupied by other members of staff. Subsequently Mr Wang
entered into the transaction with Mrs Wei which he (Judge Fay) had already
outlined, with the result that from May 1974 Mr and Mrs Wei occupied both the
restaurant and flat and ran the business on their own account.
If Mr Wang had
power to grant a leasehold interest, Mrs Wei, having a business tenancy for
over six months, would enjoy the protection of Part II of the Landlord and
Tenant Act 1954. Under the agreement entered into by Mr Wang with Mrs Wang, he
was described as ‘manager.’ It was
provided that he was to act on the owner’s behalf, and that he must devote his
whole time to the business. The financial provisions of the agreement, on the
other hand, were such as were ordinarily found in a lease rather than a
contract of managership. Mr Wang had, for example, injected capital of his own
into the business. There was no rule of law which prevented the parties from
agreeing that Mr Wang should have merely a managership, with its consequential
status of licensee, and cogent among the items of evidence must be the terms
the parties had set their hands to: Shell-Mex v Manchester Garages
[1971] 1 WLR 612. The agreement, however, was equivocal. If the parties had
treated it as a managership agreement it could have conferred no more than a
licence upon Mr Wang. But in fact it had not been treated as such. In
particular, Mr Wang had paid no attention to the provision requiring him to
devote his whole time to the business. He started another business of his own,
and acted as though he were tenant of the Orchid House business and premises.
Mrs Wang did not object, although she knew of the presence of the Weis.
Where an
agreement was a sham, the reality of the situation had to be examined, and as
both parties had treated the agreement as a tenancy agreement, this conferred a
tenancy upon Mr Wang. It followed that Mr Wang had an estate in the land and
could grant an assignment or sublease. Accordingly Mrs Wei was a subtenant. For
all practical purposes, the flat also became part of the business premises and
of the business letting. It was accepted by counsel that in those circumstances
both premises were protected under Part II of the Act, so that there must be
judgment for Mr and Mrs Wei in respect of both the restaurant and the flat on
the claim for possession. That meant that the defendants had since December 1
1974 been tenants of the plaintiff under the provisions of the Act of 1954
relating to continuation of business tenancies, and the plaintiff would have
judgment for £3,208 as arrears of rent.
