Landlord and tenant — Breach of covenants — Use as a ‘public house beer shop’ prohibited — Use without consent for purposes other than for sale or hire of videos restricted — Whether consent unreasonably withheld for change of use — County court judge decided all these questions adversely to tenant — Held by Court of Appeal, dismissing tenant’s appeal, that there was ample evidence on which the judge could so decide, including his refusal to exercise his discretion to grant relief against forfeiture
tenant held a nine-year term of shop premises — His lease prohibited, inter
alia, the use of the premises for the trade or business of a ‘public house beer
shop’ and prevented without the consent of the landlord the use of the premises
for any purpose other than the sale or hire of video tapes or equipment — The
plaintiff, finding his video business falling off, obtained an off-licence and
began to sell some wines and spirits and lager and Yorkshire bitter in cans —
The landlord objected and served a notice under section 146 of the Law of
Property Act 1925 requiring breaches to be remedied; failing which, the
landlord stated that he would forfeit the lease — The tenant then commenced
proceedings for a declaration that consent was being withheld unreasonably for
the sale of intoxicating liquor — At the trial the county court judge held that
there had been breaches of both the absolute and the qualified covenant, that
consent had not been withheld unreasonably in respect of the latter, and that
relief against forfeiture would not be granted — The tenant appealed
contended that he was not in breach of the absolute covenant because the
alcoholic liquor sold amounted only to a small percentage of his turnover and
its display occupied only a small part of his shelf space — The judge had not
accepted that evidence and from photographs shown to the Court of Appeal it
appeared that there were four shelves containing intoxicating liquor of one
kind or another, each perhaps 3m long — They may have comprised as much as a third
or nearly a half of the shop — There was a possible query about the meaning of
a ‘beer shop’, but the old case of Bishop of St Albans v Battersby was authority
that a beer shop was a shop where beer was sold for consumption off the
premises — As to whether consent had been unreasonably withheld for the change
of use, the landlord had asked eight questions to be answered in support of the
tenant’s
the tenant answered only one in part and the others not at all — In these
circumstances it was not unreasonable for the landlord to refuse consent — The
view was supported by the cases of Fuller’s Theatre & Vaudeville Co Ltd v Rofe and Isow’s
Restaurants Ltd v Greenhaven (Piccadilly) Properties Ltd — On the final question, as
to whether relief should be granted, the judge had given his reasons for
refusal at considerable length and they included material which was perfectly
adequate to justify refusal — Apart from these specific matters, the judge had
found that he could not accept anything the tenant said in evidence; that there
had been falsehood in the proceedings; and that points had been taken which
could not really be regarded as put forward in good faith
circumstances it was within the judge’s discretion to refuse relief and the
appeal must be dismissed
The following
cases are referred to in this report.
Fuller’s
Theatre & Vaudeville Co Ltd v Rofe
[1923] AC 435; 128 LT 774; 39 TLR 236, PC
Isow’s
Restaurants Ltd v Greenhaven (Piccadilly)
Properties Ltd [1970] EGD 82: (1969) 213 EG 505
St
Albans (Bishop of) v Battersby (1878) 3 QBD
359
This was an
appeal by Mr S C Sood, trading as Kumar Videos International, from the decision
of Judge S M Willis, at Croydon County Court, dismissing an application for a
declaration that permission was being withheld unreasonably by the landlord, Mr
Paul Barker, for the sale of intoxicating liquor; and holding that the lease of
the premises at 906 London Road, Thornton Heath, had been forfeited and
granting an order for possession.
The appellant
appeared in person; Michael Harington (instructed by Copley Singletons of
Croydon) represented the respondent.
Giving
judgment, STAUGHTON LJ said: This is an appeal from a decision of His
Honour Judge Willis at the Croydon County Court. The story begins on October 20
1983 with a lease granted by Paul Anthony Barker (the defendant in this action
and respondent to the appeal) to Kumar Videos International. It was for a term
of nine years and related to premises at 906 London Road, Thornton Heath, which
were a shop. There were covenants, and in particular clause 22, which reads as
follows:
(a) That the demised premises shall not be used
for any illegal or immoral purpose of any noisy noisome or offence
that does not
seem to make sense
to the trade
or business or as a public house beer shop betting shop or public place of
amusement nor shall there be held or omitted any sale or auction or public
meeting on the demised premises.
(b) Not without the consent of the landlord which
shall not be unreasonably held in respect of trades not being of a competitive
nature to that being carried on by the landlord to use the premises for any
purpose other than for the sale and hire of video tapes and equipment provided
that there shall not be implied any warranty or other obligation or
representation on the part of the landlord that such is the permitted use for
the purpose of the Town and Country Planning Act 1962 and 1968.
(Any apparent
misprints in the clause are not mine but in the original.) There is also the usual proviso for re-entry
in the case of breach of covenant.
Mr S C Sood,
one of the plaintiffs, claims that he is the sole proprietor of, and trades as
the tenant under the lease, Kumar Videos International. At one stage in the
proceedings a Mr N C Sood was joined as co-plaintiff by order of the registrar.
After the trial, the judge ordered that he should be deleted from the
proceedings and that instead Mr R K Sood, a brother of Mr S C Sood, should be
substituted, and that is the state of the action at this date.
In 1988, Mr
Sood says, the video business was not doing too well. An off-licence nearby had
closed down, and he applied for a licence to sell intoxicating liquor. His
application was refused by the justices, but granted on December 15 by Croydon
Crown Court. He then or there abouts started to sell wines, spirits, lager in
cans and Webster’s Yorkshire Bitter in cans. On February 16 1989 there was a
letter from the landlord’s agents complaining that the use of the premises had
been changed without consent and that this was a breach of the terms of the
lease. They required Mr Sood to refrain forthwith from this unauthorised use.
There was then
some correspondence, to which I shall return later. On May 17 1989 the
solicitors of the landlord served a notice under section 146 of the Law of
Property Act 1925, saying that there had been breaches of covenant in respect
of the sale of alcoholic and other drinks, including beer for consumption off
the premises, the premises had been used for the sale of food, and that they
had been used as an employment agency. They required the breaches to be
remedied and compensation in money. They said that, failing compliance within a
reasonable time, it was the intention of the landlord to re-enter and forfeit
the lease.
There was some
further correspondence, and on June 13 1989 Mr S C Sood started proceedings in
the Croydon County Court. He claimed a declaration that permission was being
withheld unreasonably by the landlord to the sale of intoxicating liquor. On
July 11 1989 the landlord’s solicitors served a defence and counterclaim in
which they claimed possession of the premises.
The case
eventually came on for trial on July 30 and 31 1990, when Mr S C Sood was
represented by his brother, Mr R K Sood, who eventually became a co-plaintiff,
as he has been represented before us. The judge held that there were breaches
both of clause 22(a) and clause 22(b), that the landlord’s consent had not been
withheld unreasonably and that there should be no relief against forfeiture.
Accordingly, he held that the lease had been forfeited and granted an order for
possession.
Notice of
appeal has been given by Mr S C Sood alone. There are, as it seems to me, three
issues. First, has there been a breach of clause 22(a) by the use of the
premises as a beer shop? Second, has
there been a breach of clause 22(b) by a change of use, and has the landlord’s
refusal of consent been unreasonable?
Third, should there be relief against forfeiture?
I turn first
to the question about clause 22(a) — use of the premises as a beer shop. The
facts are that Mr S C Sood took to selling lager and Webster’s Yorkshire Bitter
in cans. He also sold wines and spirits. He said he did so on a small scale. He
claimed that it was no more than 5% of his turnover as a whole and that the
lager and Yorkshire Bitter were only half of that, about 2.5%. He said that
there were only 3m of shelves in the shop devoted to lager, Yorkshire Bitter,
wines and spirits as a whole.
The judge did
not accept that evidence, or indeed anything else that was said on behalf of
the plaintiffs, but he did not make an affirmative finding as to what
percentage of the trade was in those commodities. We have been provided with
some photographs, which the judge saw. They seem to show that there were four
shelves containing intoxicating liquor of one kind or another, each perhaps 3m
long. They may have comprised as much as a third or nearly a half of the shop.
We have no further information as to what the sales were.
The first
point taken is that the lease contains the words ‘public house beer shop’,
without, as is unfortunately often the case, any punctuation. Mr Sood submits
that that is all one noun. I am afraid that I cannot accept that argument. It
seems to me that it is referring to two creatures, a public house and a beer
shop. Next, it is argued that neither lager nor Webster’s Yorkshire Bitter is
beer. That is, to my mind, manifestly and plainly wrong. One can refer to
‘Yorkshire bitter’, or ‘bitter beer’ or ‘mild beer’ or ‘Newcastle brown ale’
for that matter. They are all beer. Then it is said that this only happened to
a small extent. But I do not think that this was so trivial that it could be
overlooked. It was argued that it was ancillary to the sale of videos, just as
the sale of cigarettes and cigars in a restaurant might be said to be ancillary
to the sale of food and drink. I cannot accept that argument either.
What did
strike me initially as an arguable point is the meaning of the words ‘beer
shop’. It is not a term in current use, as far as I know, and it probably has
not been for a number of years. This illustrates the vice of using old
precedents which contain language which is no longer in current use. The new English
Dictionary published by Collins first defines ‘beer house’ as a tavern and
then ‘beer shop’ likewise as a tavern. That would make some sense of clause
22(a), because it would mean that it prohibited use of the premises as a public
house where intoxicating liquors of all kinds were sold and an on-licence place
where only beer was sold. If, on the other hand, ‘beer shop’ meant a retail
establishment for the sale of beer for consumption off the premises, one
wonders why the clause did not also prohibit a wine shop, a gin shop or a
whisky shop.
However, there
is authority which shows this view is wrong. That is the case of the Bishop
of St Albans v Battersby (1878) 3 QBD 359,
that he would not without the consent of the landlord use the premises as a
beer shop, or public house, or any theatre, or public show, or exhibition.
Cockburn CJ held that this was a breach of covenant, because a beer shop was a
place where beer was sold for consumption off the premises. Mellor J agreed.
After such a length of time, I do not think that it would be right for this
court to depart from that interpretation of the word. Consequently, there was a
breach of covenant in selling beer in this establishment.
The clause
contains nothing about consent. Had it provided expressly that this was not to
be done without the consent of the landlord, section 19 of the Landlord and
Tenant Act 1927 would have had the effect that, whatever else the clause said,
it was to be implied that the consent of the landlord was not to be
unreasonably withheld. But as clause 22(a) contains no mention of the consent
of the landlord, section 19 has no effect and the covenant is absolute.
I turn to the
second question — whether there has been a breach of clause 22(b) in that the
premises have been used for a purpose other than the sale and hire of
videotapes and equipment without the consent of the landlord. For the reasons
already given, I do not consider that the sale of intoxicating liquor was so
minimal that it could be overlooked, or ancillary to the sale of videotapes.
Accordingly, there has been a breach. But has consent been unreasonably
withheld subsequently?
What happened
was this. On April 13 1989 the landlord’s solicitors wrote a letter, wrongly
described as ‘without prejudice’, and they said:
To avoid
unnecessary expense, inconvenience or unpleasantness, we are instructed by our
client’s managing agents to tell you that they are prepared to consider any
reasonable application for licence to change the use of the demised premises.
If you wish to make such an application you should deliver it to the office of
[the landlord’s agents]. The application should include a full statement of the
following:
1 The use or uses to which the premises are
now being put and will be put;
2 When such use or uses first started;
3 The full names of the proprietors of the
business or businesses;
4 Copies of any off-licence and/or
employment agency licence granted in respect of the business now being run at
the premises;
5 The full addresses of any and all other
properties at which you are carrying on the same or any other business or
businesses;
6 The full names and addresses of the
landlords of any and all such premises, whom our client’s managing agents may
contact to obtain references;
7 The names and addresses of the bank or
banks at which you run accounts relating to the business or businesses, from
whom also the managing agents may seek references;
8 The full trading accounts (including
profit and loss account and balance sheet) of the business or businesses for
the last three years or such shorter period as the business or businesses have
been in operation.
They then say
that this is to be answered within seven days.
Mr Sood says
that they knew some of this information already, but not all of it. Some of
those questions could very easily have been answered. None of them would have
involved any great difficulty, although some involved confidential information
which Mr Sood was not under any obligation to disclose to anybody and might
wish to keep confidential unless the landlord had reasonable grounds for asking
about it. On April 19 1989 there was a reply from Mr Sood which said:
. . . this is
to inform you that in pursuance of an off-licence granted to us for the sale of
liquors at the above premises, we seek the landlords consent for the partial
change of use.
So he had, in
part at any rate, answered question 1. He purported to answer it entirely, but
he might not have done so accurately.
None of the
other questions was ever answered. On April 24 the managing agents wrote that
the matter was in the hands of solicitors and it was important that Mr Sood
respond to them promptly either directly or through his own solicitors, and
they concluded:
We shall be
obliged, therefore, if you will respond in full to the enquiries raised in
their correspondence to you.
There then
came the section 146 notice, to which I have already referred. On May 19 Mr
Sood wrote to the landlords’ solicitors:
We
acknowledge receipt of your notice under s146 Law of Property Act 1925.
However, we DO NOT accept the accusations made in the said notice. We have
already applied to the managing agents to seek the Landlord’s permission to
sell intoxicating drinks off the premises, the use of which is not restricted
under the terms of the lease anyway.
Then they refer
to payment of rent. The landlord’s solicitors replied on May 22. They
challenged the contention that there was no prohibition on the use of the
premises as an off-licence.
There it is.
The judge held that the landlord was entitled to answers to all the questions
asked before considering whether to grant consent. I quote from the judgment:
The defendant
is entitled to that information and the law is quite clear that where
information is refused, as it has been here, it cannot be suggested that the
landlord is being unreasonable in withholding his consent.
The judge did
not refer to authorities for that proposition. We have been referred to two
cases by Mr Harington. First, the case of Fuller’s Theatre & Vaudeville
Co Ltd v Rofe [1923] AC 435. That was a case of subletting without
consent. The tenant had applied for consent but had refused to disclose the
terms of the proposed sublease. His refusal was based on the argument that, as
the landlord had unequivocally agreed to give his consent upon performance of a
condition which had been fulfilled, there was no point in disclosing to him the
terms of the sublease. Nevertheless, the Judicial Committee of the Privy
Council held that the landlord was entitled to require to know the terms of the
sublease and was not unreasonable in refusing consent until he had done so. One
can quite see in general that, in the case of a covenant against subletting,
the terms of the proposed sublease would be material for the landlord to know
before he granted or refused consent.
The other case
was Isow’s Restaurants Ltd v Greenhaven (Piccadilly) Properties Ltd
(1969) 213 EG 505. That was a case of both underletting and change of use. The
proposed underlessee was to be a cinema club which was to show films of a kind
not generally available to the public. The landlord wished to know what sort of
films they were going to be and what record the proposed sublessee had of
showing such films elsewhere. One can well see that those were matters which a
landlord would reasonably wish to know before he granted or refused consent. Plowman
J held that the information was for the greater part relevant.
I would not,
for my part, accept the judge’s proposition, if such it was, that a landlord is
entitled to ask any questions he pleases and to refuse consent if he does not
get an answer. However, one has to look at the questions asked in this case.
Some of them were, I think, relevant to the question which the landlord had to
decide — whether he should grant permission for these premises to be used not
wholly as a video shop but also as a shop for selling intoxicating liquors.
Others, as it seems to me, may well have been going too far. But Mr Sood did
not answer any of them. In those circumstances, it seems to me that the
landlord was not unreasonable in refusing his consent.
I should perhaps
have mentioned earlier one argument of Mr Sood. This was that he had sent the
landlord a copy of his application for a licence to sell intoxicating liquor,
and the landlord had not objected to it. Whatever might have been the case if
that were true, the judge did not accept that the letter was ever sent to the
landlord. In fact, he concluded that it had not been.
So I come to
the third issue, whether the court should grant Mr Sood relief against
forfeiture under section 146 of the Law of Property Act 1925. Mr Sood, we are
told, has a wife and two children, and this is his only livelihood. The
business is not going well. We must take that into account, I suppose. He said
that the shop next door had to close down. Hence he obtained a liquor licence.
If he had given it up during the proceedings, he might have lost his chance,
because two other shops close by also wished to have liquor licences; they
might have been successful, and his licence might have been withdrawn. One
remedy for that situation, which his brother and advocate described as ‘Catch
22’, would have been to hasten on the proceedings in the Croydon County Court.
Far from doing that, Mr Sood seems to have done the opposite.
The judge gave
his reasons for refusing relief against forfeiture at considerable length. They
cover two and a half closely written pages. In general, it seems to me that
there was perfectly adequate material which would justify the judge in refusing
relief. There are three points in the course of his discussion of the issue which
have caused me some concern. He said that these were wilful breaches of
covenant and, according to authority, that those should be relieved against by
forfeiture only in exceptional cases. He observed that Mr Sood was still
maintaining in his conduct of the action that he was entitled to act as he had
done.
It does not
seem to me that a tenant is precluded from asserting in court that he has
committed no breach, and asking in the alternative for relief against
forfeiture if he has committed a breach, provided always that that is done in
good faith. If, on the other hand, a tenant puts up a case which is wholly
unarguable and cannot be said to be put forward in good faith, then it may be
that that is a powerful reason
behalf in the Croydon County Court seem to me to come into the second category.
The suggestion that the words ‘public house beer shop’ comprise only one
description of premises seems to me absurd, and even more absurd is the
suggestion that neither lager nor Webster’s Yorkshire Bitter is beer. I would
find it difficult to accept that either of those arguments was put forward in
good faith.
Second, the
judge regarded as relevant the fact that Mr Sood never paid his rent on the due
day but always at the last possible minute before he became in peril of
forfeiture under the terms of the lease. I certainly agree that honest men
should pay their debts on the day they are due. Unfortunately, in these times
when people have come to realise the importance of cash flow, a great many of
them do not do that, but pay their debts only when there is a threat of some
sanction in sight. I wonder whether it may be demanding too high a standard to
say that a tenant who is always 20 days overdue but never 21 is to be
reproached on that account, when he has an application for relief against
forfeiture.
Third, there
was an episode during the course of the proceedings when Mr Sood tendered the
rent and the landlord or his solicitors or agents felt obliged to refuse it. Of
course they had to, because the law states that acceptance of rent is a waiver
of forfeiture. However, they proposed that Mr Sood should agree that it should
be paid without prejudice so that there would be no waiver. Mr Sood declined to
agree to that. For my part I would be inclined to think that he was exercising
his legal right. If the law is unfair to landlords in holding that in any and
all circumstances an acceptance of rent is a waiver of forfeiture, that is a
defect in the law, and Mr Sood cannot be reproached for taking advantage of it.
However, even
without those points, it seems to me that there were ample grounds for the
judge to refuse relief against forfeiture. They are set out at great length in
the judgment and I do not repeat them. He found that he could not accept
anything Mr Sood said in evidence. He found that there had been falsehood in
the proceedings, that there had been undue delay, and that points had been
taken which could not really be regarded as being put forward in good faith.
In those
circumstances it was within the judge’s discretion to refuse relief, and I
would dismiss the appeal.
McCOWAN LJ agreed and did not add anything.
The appeal
was dismissed with costs to be taxed if not agreed; costs order below to be
varied.
