The Facts

In EI Group Plc v In & Out Developments Ltd, John Joseph Burke, and Barrington Burke (A Bankrupt) [2019] EWHC 1887 (QB) the Court refused a stay of execution of a possession order against the tenant of a pub pending the tenant’s application for permission to appeal.

From 2015 disputes arose between the parties regarding rent arrears and other breaches of covenant, and forfeiture proceedings were brought based on those breaches. A mediation took place in 2017, which led to a consent order in the form of a Tomlin order providing for relief from forfeiture if certain conditions were satisfied. While there was express agreement that the tenant would comply with all its obligations in the lease, the schedule in the Tomlin order did not require compliance with all obligations as a condition of relief. Once the agreed conditions were met, they were to be embodied in a deed of variation and the lease would be re-instated.

One of the conditions was that the tenant needed to provide details of two guarantors who would also be directors at the date of the deed of variation. While two proposed directors were considered acceptable by the landlord in August 2017 further disputes arose on amounts owed and the tenant’s compliance with other obligations.

The landlord therefore did not progress the deed of variation and issued possession proceedings on the grounds that the tenant was in breach of the consent order. A possession order was made. HHJ Monty QC heard the substantive application in the County Court at Central London to set it aside. He found that there had been non-compliance with the condition relating to guarantors as both the guarantors named in the deed were not directors of the tenant at the date of the deed of variation. He dismissed the tenant’s argument that the landlord had waived that requirement. The tenant sought permission to appeal against the order on the issue of waiver and was granted a temporary seven day stay of the order.

The tenant argued that it would be substantially prejudiced if it could not remain at the pub until the appeal was determined as its business would be at risk and jobs would be lost. The landlord argued that it would be prejudiced if a stay was granted, that the employees would be protected by Transfer of Undertakings (Protection of Employment) Regulations 1981, and there would only be a short period of closure.

The decision

Mr Justice Kerr accepted that there was evidence of a risk of prejudice to both sides if the stay was granted or refused. There was an inevitable risk to the goodwill of a business and jobs where the possession of a premises changed hands. Accordingly, the Court could consider the merits of the proposed appeal to assess where the balance of justice should lie. As to the merits, they were weak. The waiver issue had been argued before HHJ Monty QC and there was no strength in the tenant’s point that the Judge was bound to accept that the guarantor requirement had been waived. Justice therefore required the stay to be discontinued.

The court was not impressed by D1’s point that the waiver issue came before the judge in an oblique way. It had been aired in argument and D1 had had an opportunity to address it. The fact was that the proposed guarantors were not directors of D1 at the date of the deed of variation. There was no real force in D1’s argument that the judge had been bound to accept that the guarantor requirement had been waived. The merits of the proposed appeal were very weak. The balanced arguments on prejudice taken with the weakness of the grounds of appeal meant that justice required the stay to be discontinued.