Landlord and tenant — Forfeiture — Tenant’s fixtures — Bankruptcy — Whether tenant entitled to remove tenant’s fixtures following peaceable re-entry
On 11 January 1999 the petitioning landlord
peaceably re-entered business premises, demised to the debtor, in reliance on a
forfeiture clause in the lease. In connection with a bankruptcy petition, the
debtor tenant contended that he had a right to remove tenant’s fixtures that he
claimed had a value of over £19,000.
in Pugh v Arton (1869) LR 8 Eq 626 was binding. Accordingly, the
tenant had no counterclaim based on the landlord’s refusal to allow him to
remove the fixtures.
The following cases are
referred to in this report.
Pugh v Arton (1869)
LR 8 Eq 626
Smith v City
Petroleum Co Ltd [1940] 1 All ER 260
This was the hearing of a
bankruptcy petition by Bromley Park Garden Estates Ltd in respect of Assuntino
Palmiero.
Mark Loveday (instructed by Vizard Oldham)
appeared for the petitioner; Jonathan Lewis (instructed by LG Laurella)
represented the bankrupt.
Giving judgment, MR REGISTRAR JAQUES said: I have before me a bankruptcy
petition, which was presented to this court on 27 April 1999. The petitioning
creditor is Bromley Park Garden Estates Ltd, which I shall call ‘the landlord’.
The debtor is Assuntino Palmiero, whom I shall call ‘the tenant’. The petition
debt is £9,752.54, being, as to £9,334.25, arrears of rent and other sums due
under a 20-year lease of premises in Camden London Borough Council granted in
1984, and, as to the balance of £418.29, interest thereon. The tenant opposes
the petition on the ground that he has a counterclaim that exceeds the
landlord’s debt.
The lease was determined by forfeiture on 11
January 1999, when the landlord peaceably re-entered the demised premises,
without prior notice to the tenant, in reliance on the forfeiture clause in the
lease. Since that date, the landlord has refused the tenant access to remove
certain items of equipment installed by the tenant, the value of which,
according to the tenant, is £19,925. The landlord contends that these items
constitute ‘landlord’s fixtures’, which the tenant has no right to remove,
while the tenant says that they are ‘tenant’s fixtures’, which he is entitled
to remove following the determination of the lease. The landlord also disputes
the tenant’s valuation of the fixtures.
The demised premises consist of a pizza/pasta bar
on the ground floor and flats on the upper floors. It is not disputed that the
items in question are fixtures. On the evidence before me, I am satisfied that
they are tenant’s fixtures and not landlord’s fixtures. They were plainly
annexed to the demised premises by the tenant for the purposes of his trade and
are capable of being removed without causing substantial damage to those
premises and without losing their essential utility as a result of their
removal. The tenant so alleges in his affidavit evidence before me and the
landlord does not say otherwise in its affidavit evidence.
The principal issue between the parties is whether
the tenant had any right to remove these fixtures following the determination
of the lease by peaceable re-entry. Mr
the landlord, submitted that a tenant has no right to remove tenant’s fixtures
once his lease has been brought to an end by forfeiture. In this context he
referred me to a passage in Woodfall on Landlord and Tenant at para
13.157, where it is stated that ‘in the case of a peaceable re-entry, it is considered
that the tenant loses his right to remove fixtures upon the re-entry’. No
authority is cited in Woodfall for that proposition.
Mr Jonathan Lewis, counsel representing the
tenant, submitted that a tenant has a reasonable time after re‑entry to
remove tenant’s fixtures. He relied, by analogy, on the situation that arises,
where a tenancy is determined by a notice to quit, which is of so short a
duration that the tenant has no time to remove tenant’s fixtures. In that
situation, he submitted, a tenant has a reasonable time after the termination
of the tenancy to remove them. He referred me to Smith v City
Petroleum Co Ltd [1940] 1 All ER 260, where Stable J said something to that
effect.
In Pugh v Arton (1869) LR 8 Eq 626 a
lease was determined by peaceable re-entry on forfeiture, the re‑entry
being effected on two day’s notice, giving the tenant insufficient time to
remove tenant’s fixtures. It was argued, on behalf of the tenant, that he ought
to be allowed a reasonable time after the determination of the lease to remove
his fixtures. The learned judge, Sir
argument, saying at p630 that ‘unless the tenant protects himself by a contract
giving him a right to take away fixtures after the expiration of the term, either
by lapse of time or his own act, he cannot do so’.
In my judgment, the present case is on all fours
with that case and is binding on me, however fair or otherwise I may consider
the consequences of following it. At the end of his judgment the learned judge
described the suit as a most unconscionable and ungracious one and I feel the
same sentiments about this case, but I must not allow my distaste to deflect me
from applying what I find to be the law. On the basis of that decision, I feel
compelled to conclude that the tenant has no sustainable counterclaim based on
the landlord’s refusal to allow him an opportunity to remove the tenant’s
fixtures following the determination of his lease by peaceable re-entry on
forfeiture.
Certain other submissions were made by Mr Loveday
on behalf of the landlord. First, as already mentioned, the tenant’s valuation
of the tenant’s fixtures was challenged, reliance being placed on the absence
of any receipts or professional valuation, coupled with evidence, in the form
of a charge on some of those fixtures and negotiations to sell some of them to
a successor tenant, suggesting that the tenant has exaggerated their true
value. I reject that submission. The tenant has put forward what he honestly
considers to be the value of the fixtures and the landlord, who has possession
of them and thus has had an opportunity to obtain a professional valuation of
them itself, has chosen not to do so.
tenant’s fixtures, similarly the sale negotiations.
Second, it was argued that, under the terms of the
lease, tenant’s fixtures are included in the definition of the demised
premises, in clause 1(1), being additions or improvements, and are required to
be yielded up on the determination of the lease by clause 2(22) thereof, as
forming part of the demised premises or as additions thereto. In my judgment,
the references in those two subclauses to landlord’s fixtures make it
abundantly clear that tenant’s fixtures are neither part of the demised
premises nor additions thereto, within the meaning of those subclauses.
Rule 6.25(1) of the
Insolvency Rules 1986 provides that, on the hearing of a petition, the court
may make a bankruptcy order if satisfied that the statements in the petition
are true, and that the debt on which it is founded has not been paid or secured
or compounded for. I am compelled by the decision in Pugh v Arton
to conclude that the tenant has no arguable counterclaim based on the
landlord’s refusal to allow him to remove the tenant’s fixtures following
re-entry on forfeiture, and, accordingly, I consider that I ought to make a
bankruptcy order and should not be deflected from doing so by reason of the
fact that I view the landlord’s refusal with distaste. The landlord shall have
its costs.