Local Authorities 2 Snail Farmers 0

Greenhalgh Kerr’s Local Authority Team recently obtained another successful result for a Local Authority challenging a snail farming scheme.

The landlord in question had produced a series of tenancy agreements, to five different companies which were said to have occupied a single property in quick succession.  The purported tenants (some of which shared common directors) were all recently incorporated companies with no documented trading history, and indeed no evidence that they were ever legitimate trading companies.

Based on our previous experience of dealing with these types of schemes, we advised the Council to maintain liability with the landlord, on the basis that the purported leases were shams.  The landlord was therefore forced to provide evidence to support their claims, and those of the supposed tenants.

Liability Order Hearing

The matter proceeded to a disputed liability order hearing. The landlord provided various witness statements from the purported “tenant” companies, claiming that they been in occupation for the purposes of snail farming throughout the relevant period.  No actual documentary evidence was provided, however, to establish any actual occupation of the property.  The Council’s site inspections had found the property to be empty at all times.

At the hearing, the purported tenants failed to turn up to give their evidence in person, but the director of the landlord gave evidence to support the company’s position.  The director was, however, unable to give any clear evidence as to the circumstances around the execution of the supposed leases, the various discrepancies in the documents which we had highlighted, or the “deal” struck between the landlord and Sheridan Gillis, the company which facilitated the leases.   The Judge found the director’s evidence to be unconvincing, lacking in clarity, and misleading.

Sheridan Gillis

We also drew the Court’s attention to the fact that Sheridan Gillis (the company responsible for landlords across the country adopting the snail scheme) has recently been wound up by the Insolvency Service.  The Official Receiver had taken this action on the grounds that it was in the public interest to do so, as Sheridan Gillis was harming the interests of local authorities, by facilitating sham leases across the country.

In addition, one of the directors of Sheridan Gillis, Mr Colman Ivers, was also a director of one of the purported tenants.  This led the Judge to the conclusion that the landlord, having been introduced to Sheridan Gillis (which came up with a “solution” of providing companies to “lease” the property) had adopted a scam that appeared to have been repeated across the country.

The Court therefore accepted our arguments that there was no rateable occupation by the purported tenants, and that the leases were shams, which did not divest the landlord of its right to possession of the Property.

A liability order was obtained against the landlord in respect of the full debt, together with legal costs.  Shortly thereafter, the landlord offered to agree terms for the repayment of all sums due.

Whilst each case will turn on its own facts, this case demonstrates how Councils can stop snail schemes in their tracks (…sorry!).