Two leases assigned to company – Company dissolved without knowledge of original tenants or landlord – Leases becoming Crown property – Leases determined by disclaimer – Dissolved company’s rights and liabilities determined, but not rights and liabilities of original tenants – Whether original tenants liable to landlord for unpaid rent
The defendants were the lessees of 32A Chequers Court, Huntingdon under a lease for a term of 28 years dated November 20 1978, and were also the lessees of 32B Chequers Court under a lease dated June 20 1975, which was assigned to Day & Son in 1976. On May 16 1984 both leases were assigned to Chequers Bureau Ltd (CBL). On February 24 1987 CBL was dissolved under section 652 of the Companies Act 1985 and the leases became vested in the Crown as bona vacantia. The plaintiff, the landlord, had no knowledge of CBL’s dissolution until 1992. The leases remained vested in the Crown until they were disclaimed under section 656 of the 1985 Act in April 1993. A second company, Chequers Bureau (Technical Services) Ltd (CBTS) was the tenant of unit 28 in the same building. Notwithstanding its dissolution, CBL continued in business and CBTS paid the rent of 32A and 32B. C was both a director of and surety for CBL and CBTS.
Between September 1990 and December 1992 arrears began to mount. The landlord commenced proceedings against the surety and in August 1991 obtained judgment which was unsatisfied in respect of the arrears for 32A and 32B. Two months later liquidators were appointed of CBTS. Thereafter the landlord called upon the original tenants to pay the sums due under the lease. In May 1993 the landlord granted a new lease of 32A to another company. In June 1995 the landlord relet 32B. The landlord then commenced two actions against the original tenants, the defendants in both actions, claiming £16,400 and £19,120 under the leases. The question for the judge was whether the defendants remained liable to the landlord under the terms of the two leases, where the landlord was the original landlord and the defendants had been original tenants of 32A and stood in the shoes of the original tenants of 32B. The judge held that the leases had terminated either by forfeiture at common law, or as a result of the landlord having “entered upon his own property”. The landlord appealed.
Held The appeal was allowed.
1. By operation of the disclaimer provisions in section 656 of the Companies Act 1985 and section 178(4) of the Insolvency Act 1986, the leases were deemed retrospectively not to have vested in the Crown at all, but rather to have been disclaimed by a notional liquidator on February 24 1987, with the result that CBL’s rights and liabilities were thereby determined, but not those of the original tenants.
2. Whether looked at in terms of forfeiture or by reference to Hindcastle v Barabara Attenborough & Associates [1996] 1 EGLR 94, the defendants’ argument foundered upon the facts, namely: (a) that until 1992 the landlord had no knowledge of CBL’s dissolution; and (b) so far as the payment of rent was concerned, the landlord had made no distinction between CBL and CBTS. The act relied upon as constituting “the final and positive act of forfeiture” was the landlord’s acceptance of rent from CBTS in possession, but the landlord did not know that it was CBTS as opposed to CBL who was in possession. Therefore, no intention to forefeit CBL’s leases could be implied. The landlord had not, by his own act of taking possession, demonstrated that he regarded the leases to CBL as ended for all purposes. His conduct was consistent with there being a continuing liabilty on others to perform the tenant covenants in the lease.
John West (instructed by Blake Lapthorne, London agents for Payne Skillington) appeared for the appellant; Nicholas Dowding QC (instructed by Kingsford Stacey, London agents for Leeds Day, Huntingdon) appeared for the first respondents, Godfrey, Keyworth and Lowe and (instructed by Eversheds, London agents for Crane & Walton, of Leicester) appeared for the second respondents, Wright, Bush, Radford and Woodthorpe.
