Summary

The defendant property management companies did not have the benefit of a lease over a property but were managing agents of the property, which meant that they were entitled to grant sub-leases and to obtain deposits, but were then required to account to the registered proprietors of the property for the rent collected, less expenses and their commission.

Facts

(1) The lease was a sham. There was no evidence to show that F had ever paid any rent to W, who was supposed to be their landlord. In the vast majority of the sub-leases that F had purportedly granted they were not named as the sub-lessor, and the construction company, who did not have an interest in the property, was named as the sub-lessor. There was plenty of evidence to show that the lease had never operated: the documents obtained by R were at odds with there being a lease, as was the lack of record of any rent payments being made by F. The evidence demonstrated that F acted as M's managing agent, which meant that they were entitled to grant subleases and to obtain deposits, but were then required to account to M for the rent collected less the expenses and their commission (see paras 64, 68-70, 75 of judgment). (2) The burden of establishing that the lease was void was on R. The documentation that they had adduced and the fact that M was not an officer of W raised prima facie evidence to discharge the legal burden, which shifted the evidential burden onto F to rebut that evidence. Since F had not adduced any credible evidence in rebuttal, R had established that the lease was void (para.88). (3) R were entitled to be repaid the improper payments made by F to M and any other sums which should properly have gone to R (para.97-98).

Judgment for claimants

Held

The claimant receivers (R) brought a claim against the defendant property management companies (F) alleging that F had purportedly granted leases of part of a property despite the fact that they were merely letting agents.

R had been appointed when the registered proprietors (M) of the property, who had held it on trust for a company (W), had failed to pay sums due under a legal mortgage taken out on the property. M had taken out the mortgage in order to secure a loan to a construction company in which they had an interest. F asserted that they had been granted a lease over the entire property, and that they had granted sub-leases of residential units within the property. R obtained documents which recorded the amount of rent F had collected from those sub-leases, as well as the commission that they had taken and debt payments. F had accounted to M for those collections prior to R's appointment. The issues were whether (i) F had the benefit of a lease or whether they were acting on M's behalf as their managing agent; (ii) the lease was void in any event because it had been signed by M on behalf of W despite them not being officers of W.