Lease — Preliminary point — Construction of statutory provisions governing re-entry and foreclosure — Mortgage — Tenant entering into possession on basis of premium advanced by mortgagee — Tenant failing to pay costs of possession proceedings — Lessor retaking possession of property — Mortgagee seeking relief from forfeiture — Whether mortgagee’s application should be struck out — Whether court having jurisdiction — Whether granting relief a matter of court’s discretion — Preliminary point decided in favour of mortgagee
In December 1983, N Ltd, the predecessor in title to the defendant (“Shellpoint”) granted a lease of a flat at 22 West Kensington Court, London W14, for 99 years from June 1978 at a rent of £50 pa. The lease contained provision for payment of service charges and a proviso for forfeiture for non-payment of rent or service charges. The lease was assigned to K for a substantial premium of which £61,000 was advanced by the plaintiff mortgagee (“UDT”) to K. K then granted a charge over the lease to UDT and was registered as the proprietor of the lease. N Ltd succeeded in possession proceedings against K for arrears of service charges and, when K failed, to costs of the action. N Ltd proceeded to execute judgment and retook possession of the flat. UDT had specifically been given notice of the proceedings, pursuant to which N Ltd and then, by transfer of the reversion of the lease to it, Shellpoint took possession of the flat. UDT then issued the instant proceedings against Shellpoint for relief from forfeiture of the lease. Shellpoint took out a summons to strike out the application, which was dismissed by the master. It was agreed between the parties that it was to be determined as a preliminary point whether the court had jurisdiction to entertain UDT’s application for relief from forfeiture.
The statutory provisions involved were section 210 of the Common Law Procedure Act 1852 and section 138(7) of the County Courts Act 1984, which provided that if the arrears of rent and service charges and costs were not paid into court within the specified time, then the lessee would be barred “from all relief”. By section 138(9A), a lessee had a six-month period from the date on which the lessor recovered possession to apply to the court for relief. However, by the time UDT made application for relief from forfeiture the time-limit had expired. Section 210 of the 1852 Act provided, inter alia, that in all cases between landlord and tenant where one-half year’s rent was in arrear, the landlord had the right to re-enter. In cases of judgment and execution, the lessee, his assignee, and all other persons claiming and deriving under the lease, should be barred and foreclosed from all relief after six months.
Held Preliminary point decided in favour of mortgagee; mortgagee entitled to seek relief from forfeiture.
1. The consequences of construing section 138(7) in such a way as to debar the mortgagee from any right whatever to seek relief from forfeiture could be draconian in two respects: (1) it was not the default of the mortgagee which had brought about the forfeiture but that of the tenant under the lease; and (2) it was not as if the mortgagee were normally party to possession proceedings.
2. It did not automatically mean that if a mortgagee applied for relief from forfeiture he would obtain such relief; it would be a matter for the court’s discretion.
3. The extension of the expression “lessee” to include “original. . .underlessee” was to emphasise that if the lease which was the subject of the forfeiture proceedings was an underlease, then section 138 of the County Courts Act 1984 applied as much to that as it applied to a headlease. It was common ground that the plaintiff as mortgagee was within the concept of an underlessee: see Grand Junction Co Ltd v Bates [1954] 2 QB 160.
4. With regard to section 210 of the 1852 Act, UDT contended that the present application for relief from forfeiture was not of a type barred by section 210. That contention was accepted because the plaintiff was not a party to the claim for possession brought by Shellpoint’s predecessor and therefore was not a person barred from seeking relief under the section.
Simon Berry QC and Andrew Goodman (instructed by Hill Bailey) appeared for UDT; Wayne Clark (instructed by Binks Stern) appeared for Shellpoint.
