Landlord and tenant — Forfeiture — Whether breaches of covenants other than against assignment capable of remedy — Whether section 146 notice required remedial action — Whether lease forfeited
By a lease dated July 11 1991 the
respondent tenant was granted a term of commercial premises by the appellant
landlords subject to covenants by the tenant not to display signs or alter the
premises without the landlords’ consent. The landlords served a notice under
section 146 of the Law of Property Act 1925 and then purported to forfeit the
lease on the grounds that the tenant had changed the signage, altered the
frontage and constructed a flue without consent; the notice did not require the
tenant to remedy the alleged breaches of covenant. The landlords appealed the
decision of the court below.
breaches of covenant were capable of remedy. It is a remedy if the mischief
caused by the breach can be removed. In the case of covenants not to make
alterations, or not to display signs, without consent, if there is a breach the
mischief can be removed by removing the signs or restoring the property to the
state it was in before the alterations. The lease was not forfeited because the
section 146 notice did not require the breaches to be remedied. The
construction of the flue was a technical trespass, but because the landlords
had not shown any loss, they were only entitled to a liberty to apply for an
injunction or other remedy if circumstances changed by which they wished to use
the roof space.
The following cases are referred to in
this report.
Billson v Residential Apartments Ltd
(1990) 60 P&CR 392, Ch; [1992] 1 AC 494; [1991] 3 WLR 264; [1991] 3 All ER
265; [1991] 1 EGLR 70; [1991] 18 EG 169 & [1991] 19 EG 122, CA; [1992] 1 AC
494; [1992] 2 WLR 15; [1992] 1 All ER 141; [1992] 1 EGLR 43; [1992] 01 EG 91,
HL
Expert Clothing Service & Sales Ltd v Hillgate House Ltd
[1986] Ch 340; [1985] 3 WLR 359; [1985] 2 All ER 998; [1985] 2 EGLR 85; (1985)
275 EG 1011 & 1129, CA
Scala House & District Property Co
Ltd v
Forbes [1974] QB 575; [1973] 3 WLR 14; [1973] 3 All ER 308; [1973] EGD 342;
(1973) 227 EG 1161, CA
This was an appeal by the plaintiff
landlords, George and Amalia Savva, from a decision of Judge Cotran in Central
London County Court, in proceedings for forfeiture and trespass against the
defendant tenant, Kemal Houssein, and in respect of a counterclaim for breach
of repair.
Neil Mendoza (instructed by Cornillie
& Co) appeared for the appellants; David Lonsdale (instructed by Johns
& Saggar) represented the respondent.
Giving judgment, Staughton LJ said: We have today an
appeal from the decision of Judge Cotran in Central London County Court, as
long ago as November 1994, after a trial that lasted four days.
It must have been a very expensive
proceeding and so must this appeal be, because we have had some beautifully
produced transcripts of the evidence, which extend to a great number of pages
and have not really been of any importance at all in this appeal.
The story begins with a lease which was
granted on July 11 1991 by Mr and Mrs Savva, the landlords, to Mr Houssein as
tenant. It was for a period of 12 years and the permitted use was for a cafe,
snack bar and a place for operating mini-cabs. As is usual, there were a number
of other covenants by the tenant, clause 4(15) dealt with what signs might be
erected outside the premises. It was a covenant:
Not to display on the outside of the
premises or any part thereof including the shop front any sign or advertisement
except where the premises have been let for permitted trade or professional use
(but not otherwise save for the sign presently on the premises which reads
Delancey cafe and Delancey cars and measures approximately 18’x18′ together
with the blue canopy presently erected on the premises) bearing the name of the
Tenant and the nature of the trade business or profession carried on thereat by
the Tenant.
Then it says that the design colour and
so forth must,
be first approved in writing by the
Landlord whose consent shall not be unreasonably withheld.
Clause 4(23) dealt with alterations. It
said that the tenant should:
Not without the previous consent in
writing of the Landlord such consent not to be unreasonably withheld to make
any alterations or additions to the premises whatsoever and in the event of
such consent being granted to have the plans and specifications and such
alterations or additions approved by the Landlord’s surveyor.
Then the tenant is obliged to remove all
the alterations and additions at the end of the term.
There were other matters which are
relevant to this appeal. The lease provides in 5(d) that the landlord is:
To keep the main walls roofs and main
drains of the demised premises in good and tenantable repair and condition
except so far as the Tenant shall be liable to do so under his covenant
hereinbefore contained.
Finally clause 7(b) provides:
That if the Landlord obtains planning
permission from the Local Planning Authority to build a further storey to the
building of which the demised premises forms part the Tenant shall forthwith
grant permission to the Landlord to erect a staircase in the corner of the
demised premises.
The story about that is, that the
landlord had already applied for permission to pull down the building and erect
a two-storey block instead of this one-storey cafe and mini-cab shop; that
permission had been granted. What was contemplated by clause 7(b) was not the
pulling down and erection of a two-storey building, but the building of a
further storey above the existing building. Planning permission for that has
not yet been granted.
The action in Central London County Court
came about because the landlord served a notice under section 146 forfeiting
the lease for breach of covenant.
The main heads of breach with which we
are now concerned are, first, the change of signs in the front of the premises.
Second, the alteration of the facia or frontage on its left hand side as seen
from the street. Third, that a flue was put, by the tenant, through the ceiling
and through the air space between the ceiling and the roof, and then through
the roof into the air space above. In dealing with the terms of the lease, I
should have mentioned that in the schedule setting out the demised premises it
said:
All that Ground Floor shop and premises situate
and known as 9 Delancey Street, London NW1 including the Ground Floor up to and
including the ceiling plaster.
In addition to the proceedings for
forfeiture, the landlord complained of trespass in respect of the roof and the
air space, and sought damages and an injunction under that head.
We have been provided with some
photographs. With the help of Mr Neil Mendoza we have followed what, in the
landlords’ submission, are the breaches of covenants complained of. We were
shown that at the date of the commencement of the lease there was a doorway in
the middle of the front and two large windows, one on either side. There was a
sign painted on the canopy, ‘Delancey Cars and Snack Bar’. There was a sign
sticking out into the street saying ‘Delancey Cars’ as described in the lease.
By April 1992 one of the windows had been
removed and replaced by a folding door of six panels. The sign sticking out
into the street had been removed and instead of it there was painted, on the
remaining picture window, ‘Roger Cars’ and some telephone numbers. The canopy
had been removed and instead there was painted along the top of the front,
‘Antony’s Pie and Mash House’. Antony was not the name of the tenant.
By June 1992 the facia was no longer
coloured blue but green. One cannot really tell whether the doors have changed,
but there is now a large vertical sign sticking out into the street saying
‘Roger Cars’ and giving further details of the good things that were available
inside.
Up to that point the landlords do not
complain, or cannot now complain, because those alterations had been condoned
by the acceptance of rent thereafter. By the next set of photographs that we
have, as of February 1993, the central doors had been altered. Instead of
having two panels they had four. The left hand doors which had six panels when
last seen now had two and a large picture window. The sign over the front of
the facia was large and illuminated and said, ‘City Karahi’. The sign that
recently had been sticking out into the street was now a sign flat against the
front of the shop, different from any that had been there before. Also, by this
time, the flue had been inserted to take vapours from the grill in the
restaurant through the ceiling, through the void, through the roof and above
that into the air space. Those are the complaints which are now relied on.
The first question which the judge had to
consider was whether those amounted to breaches of the covenants. There had
been waiver, as I have mentioned, of some breaches as the matter went along.
The next question would be whether there was any other waiver, and indeed any
waiver of forfeiture. To my mind, we do not need to enter upon those matters. I
say that for this reason, the Law of Property Act 1925, section 146 provides:
(1) A right of re-entry or forfeiture
under any proviso or stipulation in a lease for a breach of any covenant or condition
in the lease shall not be enforceable, by action or otherwise, unless and until
the lessor serves on the lessee a notice —
(a) specifying the particular
breach complained of; and
(b) if the breach is capable of
remedy, requiring the lessee to remedy the breach; and
(c) in any case, requiring the
lessee to make compensation in money for the breach;
and the lessee fails, within a reasonable
time thereafter, to remedy the breach, if it is capable of remedy, and to make
reasonable compensation in money, to the satisfaction of the lessor, for the
breach.
In this case the question is whether the
breaches, if there were breaches, were capable of remedy. They amount to doing
things without the consent of the landlord. That is what the covenant did not
allow. In the case of Billson v Residential Apartments Ltd (1990)
60 P&CR 392*, Mummery J touched on the question whether such a breach could
ever be capable of remedy. He said at p406:
*Editor’s note: Also reported at [1991] 1
EGLR 70
I reject the defendants’ arguments on the
ground that the breach of covenant committed by making the alterations in the
property without the plaintiffs’ consent ‘first had and obtained’ was not
capable of remedy by the defendants. It was a breach of the covenant for the
defendants to embark on alterations to the property without first applying for
and seeking to obtain the plaintiffs’ consent. Now that the alterations have
been made without consent it is impossible for the defendants to comply with
the covenant which required them first to apply for consent so that they could
either obtain it or, if they did not obtain it, be in a position to contend
that they were entitled to make improvements because the plaintiffs had unreasonably
withheld consent. In those circumstances I hold that the breech was not capable
of remedy …
When that case reached the Court of
Appeal, the Vice Chancellor said:
The judge held, first, that since the
alterations had been started without prior consent of the plaintiffs the
breach was irremediable. Second, he held that even if he were wrong on the
first point, remedying the breach would consist, not in doing the works of
reinstatement but in stopping the works, submitting the necessary plans and
specifications and then awaiting the giving or unreasonable withholding of
consent.
I prefer to express no view on the
judge’s first ground of decision, beyond expressing some doubt as to whether he
was right in holding that the breach was irremediable.
It is established law in this court that
the breach of a covenant not to assign without consent cannot be remedied. That
was decided in Scala House & District Property Co Ltd v Forbes
[1974] QB 575. Even then relief from forfeiture was granted, so that may not be
of any great consequence.
In my judgment, except in a case of
breach of a covenant not to assign without consent, the question is: whether
the remedy referred to is the process of restoring the situation to what it
would have been if the covenant had never been broken, or whether it is
sufficient that the mischief resulting from a breach of the covenant can be
removed. When something has been done without consent, it is not possible to
restore the matter wholly to the situation which it was in before the breach.
The moving finger writes and cannot be recalled. That is not to my mind what is
meant by a remedy, it is a remedy if the mischief caused by the breach can be
removed. In the case of a covenant not to make alterations without consent or
not to display signs without consent, if there is a breach of that, the
mischief can be removed by removing the signs or restoring the property to the
state it was in before the alterations.
I would hold that all the breaches
complained of in this case were capable of remedy. It follows that the notice
under section 146 should have required them to be remedied. As it did not, Mr
Mendoza concedes, as he has to, that the notice was not a valid one. In those
circumstances there is no question of forfeiture here. There is, I suppose,
still a claim for damages for breach of covenant, or there may be. But if there
were breaches here they were not such as to give rise to any damages, at any
rate for the time being. There was, as I have mentioned, a provision about
restoring the property at the end of the term.
There remains the claim in respect of
trespass. We have been referred to the definition of trespass in Clerk and
Lindsell on Torts 17th ed para 17-01
Trespass to land consists in any
unjustifiable intrusion by one person upon land in the possession of another.
Then some examples are given in para
17-02. In para 17-03 it is said that:
It may be a trespass to invade the
air-space above land.
In para 17-08 it is said:
To support an action of trespass it is
not necessary that there should have been any actual damage.
The judge here found that there was no
trespass. But, in my judgment, he was not right in that. The penetration
through the roof which remained the property of the landlords was technically,
at any rate, a trespass. Also, possibly, the invasion of the landlords’ air
space above the roof may have been a trespass. But for the time being it is not
suggested that the landlords have suffered any loss. It is possible that they
may suffer loss in the future, if the time comes when they may lawfully build
on top of the existing one-storey building and they wish to do so.
There does not seem to be any present
prospect of that happening, but we must make some provision for that. I would
then vary the judge’s judgment, not by awarding any damages for trespass, but
by granting liberty to apply for an injunction or other remedy if there should
be a change of circumstances.
It remains to deal with the counterclaim.
This was based on what were said to be leaks in the roof and damp in the walls.
It was, under clause 5 of the lease, the task of the landlords to keep the roof
and walls in good repair. It would seem that there has been a failure to comply
with that, because at one stage the tenant had engaged
of it. But I do not see that that relieves the landlords of any obligation they
may have had. What is said with more force by Mr Mendoza, is that the leaks
were all connected with the hole that the tenant had made in the roof to put
his flue through. However, there is no finding made by the judge to that
effect, and it is essential that there should be such a finding if we were to
hold that the landlords were not liable to repair the roof. It simply is not
there. I would accept the judge’s conclusion that there had been culpable
failure to repair. He awarded two remedies; the first was damages and the
second was an order that the landlords should repair. As to damages, the tenant
attempted to prove loss of profit during a period from October 1993 to August
1994 when the premises were shut due to damp. Mr Mendoza says that the cause
was not that, but the fact that the tenant, Mr Hussein, was in ill-health and
unable to carry on the business. But he had the judge’s finding against him on
that.
In the event, the judge was not satisfied
by the tenant’s figures for his loss during that period. But he did award an
amount equal to two months’ rent. He must, in my judgment, have reached that
figure on the basis that the tenant was carrying on business in the premises.
The tenant must have been making at least sufficient profit to pay his rent;
otherwise he would not be doing it at all. Therefore, it was a reasonable
inference that he suffered a loss to that extent. That was a view that the
judge, in my opinion, was fully entitled to take. I can see no objection to his
awarding damages on that basis. Mr Mendoza says, ‘Well, the judge picked a
figure out of the air because it happened to be equal to the two months’ rent
which the Tenant still owed’. It may be that there is some truth in that; but
it seems to me that the logic by which I think the judge reached that
conclusion is perfectly justified.
Finally, the judge made an order for
repair for the future. The terms of the order recorded by Central London County
Court were as follows:
the plaintiffs do within 56 days effect
or cause to be effected such repairs to the roof and walls of the premises so
as to render them in good and tenantable repair and condition,
I must admit that I am slightly surprised
by an order in those terms, because it seems to me that a person is entitled to
be told what he has to do if he is under threat of going to prison if he does
not do it, and told in rather more precise terms than that. But Aldous LJ says
that this is a very common order to make, and if the landlords have any doubt
as to what they should do they can go back to the court and ask the judge to
decide.
In his judgment, the judge said:
There remains the question of what to do
with the roof and the dampness on the walls. I have held that these are the
landlords’ responsibility and both the plaintiffs’ and the defendant’s
surveyors agree that the present roof needs attention or must be replaced. As
to dampness on the walls, they both agree that it must be eradicated, though
there is some disagreement as to whether a new damp course is necessary.
Those conclusions of the judge, and so
far as he did reach conclusions, are the basis for his order. If further detail
of the order is necessary, then it must be sought from a judge of Central
London County Court. For my part, I would not suppose that that really is
necessary if good sense prevails, or possibly even a spirit of co-operation.
Apart therefore from adding to the order
liberty to apply for an injunction or other remedy in respect of trespass, I
would leave it as it stands and dismiss the appeal.
Agreeing, Aldous LJ said: I agree with the judgment of Staughton
LJ. In particular, I believe that the breaches of the covenant relied on by the
plaintiffs in this court were capable of being remedied. It follows that the
section 146 notice was inappropriate. It also follows that the statement of law
of Mummery J, referred to by Staughton LJ in Billson v Residential
Apartments Ltd, cannot be supported.
In one sense a breach can never be
remedied because there must have been non-compliance with the covenant for
there to be a breach. That cannot be the solution. Thus, the fact there has
been a breach does not determine whether it can be remedied in the way
contemplated by the Law of Property Act 1925 section 146. That was decided in Expert
Clothing Service & Sales Ltd v Hillgate House Ltd [1986] Ch
340*. Slade LJ p357F:
*Editor’s note: Also reported at [1985] 2
EGLR 85
… breach of a positive covenant to do
something … can ordinarily, for practical purposes, be remedied by the thing
being actually done …
I can see no reason why similar reasoning
should not apply to some negative covenants. An important purpose of section
146 is to give tenants, who have not complied with their obligations, one last
chance to do so before the landlord re-enters. Slade LJ in Expert Clothing
proposed this test at p358D:
… if the section 146 notice had required
the lessee to remedy the breach and the lessors had then allowed a reasonable
time to elapse to enable the lessee fully to comply with the relevant covenant,
would such compliance, coupled with the payment of any appropriate monetary
compensation, have effectively remedied the harm which the lessors had suffered
or were likely to suffer from the breach?
It is only if the answer to that question
is ‘no’ can it be said that the breach is not capable of being remedied.
What was proposed as the question to ask
by Slade LJ, albeit in relation to a case of dispute about a positive covenant,
is relevant to consideration as to whether a negative covenant can be remedied.
There is, in my view, nothing in the statute, nor in logic, which require
different considerations between a positive and negative covenant, although it
may be right to differentiate between particular covenants. The test is one of
effect. If a breach has been remedied then it must have been capable of being
remedied.
For the reasons given by Staughton LJ I
agree with the order proposed.
Also agreeing, Sir John May said: I agree with both judgments which have
been given by Staughton and Aldous LJJ. In particular, I agree with the views
which they have expressed on the meaning and effect of the Law and Property Act
1925 section 146, and the circumstances in which alleged breaches by a lessee
of covenants in a lease are, or are not, capable of remedy.
I therefore respectfully agree that this
appeal should be dealt with in the way suggested by Staughton LJ.
Appeal dismissed with costs.
