UK & Europe
TFS Stores Ltd v Designer Retail Outlet Centres (Mansfield) General Partner Ltd and others; BMG (Ashford) Ltd and others v TFS Stores Ltd
Court of Appeal, Civil Division
 EWCA Civ 833
PD51Z (now CPR 55.29)
As a result of the COVID-19 pandemic, Practice Direction 51Z (PD51Z) granted a stay of claims for possession and enforcement action until 25 June 2020. CPR 55.29 came into force on 25 June 2020 and extended the stay on claims for possession further until 23 August 2020.
The proceedings relate to two actions involving TFS Stores Limited (TFS), a tenant, and six separate tenancies.
In the first action in 2017, TFS made a claim for a declaration that two of the six tenancies had not been validly excluded from the protections afforded under sections 24-28 of the Landlord and Tenant Act 1954 (1954 Act). TFS also sought an injunction preventing the landlords from taking possession. The landlords counter-claimed for possession.
The landlords issued the second action in 2018, claiming a declaration that the remaining four tenancies were not protected by the 1954 Act (the tenancies had not expired at the time the claim was made). The same year, the Court decided that all six tenancies were excluded from the 1954 Act protections. Both parties agreed by consent to orders for possession to give effect to the decision; however, the landlords' claim forms were never formally amended to include a claim for possession under CPR 55.
In May 2020, TFS applied to the Court, averring that the possession hearing due to take place on 24 June 2020 must be automatically stayed pursuant to PD51Z.
Lord Justice Vos considered two main question: i) as TFS' claim in the first action fell outside the scope of CPR 55, how would the landlords' counterclaim in that action, clearly proceedings for possession, be affected by PD51Z? and ii) could the orders for possession by consent in the second action be captured by PD51Z?
In a 2-1 majority judgment, the Court held that the automatic stay on possession proceedings pursuant to PD51Z (CPR 55.29) applied.
In respect of the first question, although the Court held that TFS' claim in the first action was for a declaration alone, the counterclaim was for possession, causing the entire action to become proceedings for possession brought under CPR 55 and, therefore, caught by PD51Z. Vos LJ stated:
"I accept that, without the counterclaim, the first action was not brought under CPR Part 55, but once the counterclaim was initiated, CPR Part 55 was engaged".
The Court continued, saying it would be inappropriate in the first action to allow the claim to go ahead, whilst acknowledging that the counterclaim for possession is stayed.
The second question the Court faced was whether the inclusion of a possession order by consent in the second action was caught by CPR 55. Here, the Court did away with the formal requirements of a claim under CPR 55, concluding that the stay on proceedings should operate, saying:
"[…] even though the consensual approach encouraged by the judge employed a short cut that abrogated the need for a formal amendment of the landlords' claim in the second action, the proceedings on which the judge made his Order must properly be regarded as proceedings for possession brought under CPR Part 55".
The Court believed there could not be an order for possession where there were no claim for possession.
Lord Justice Arnold held the dissenting view stating that in respect of the first action, CPR 55 does not envisage possession claims being brought by counterclaim to a Part 7 claim. Even if that were not the case, an additional or counterclaim is a distinct claim. Referencing 'counterclaim' in the CPR Glossary, as Vos LJ did, Arnold LJ disagreed with the argument that the landlord's counterclaim converted TFS' claim to one for possession. Instead, he argued, counterclaim simply means that the claim and counterclaim form part of the same action.
This latest hearing comes on the heels of the stay on possession proceedings being extended until 23 August 2020. Following the TFS decision, it is not unlikely that we will see further scrutinising of the blanket stay. Of particular interest will be the effect of the decision on other cases where one party seeks to convert the claim on the basis of a counterclaim. As Arnold LJ emphasised, the claim and counterclaim are normally to be treated as distinct. A counterclaim will continue even if the claim is discontinued. How this will fit together down the road remains to be seen.