Landlord and tenant — Break clause — Holding over — Election — Landlord claiming contractual rent — Validity of break notice later accepted — Whether landlord entitled to double rent — Whether defence of election
The defendant
tenant held a lease of industrial premises from the plaintiff landlord.
Pursuant to a break clause in the lease, allowing the tenant to terminate the
tenancy on September 24 1996, the tenant served a break notice to terminate the
tenancy on September 25 1996. The landlord indicated that it was treating the
notice as defective and invalid; it also warned the tenant that if it continued
to maintain the validity of the notice, but failed to vacate the premises, it
would collect double rent under section 18 of the Distress for Rent Act 1737.
The tenant remained in possession of the premises for just over a year after
September 24 1996. In respect of the rent due under the lease for September,
the landlord sought the contractual rent plus interest and, when it was not
paid, issued a writ to recover it. The claim was met by the defence that the
tenancy was at an end. The landlord then amended its statement of claim to
claim in the alternative double rent under the Distress for Rent Act 1737. The
tenant contended that the landlord had, by its demand for contractual rent and
the original claim by the writ, elected to have the contractual rent only.
landlord. The landlord claimed rent in letters and the writ because of the
assertion, which the tenant denied, that the tenancy continued. On the tenant’s
assertion being vindicated so that it was decided that the tenancy did not
continue, it followed that the claim for rent was not justified on the basis on
which it was made. There was no basis for treating the demand, which was thus
established to be unjustified, as amounting to an election to abandon the claim
that the tenant’s own contention establishes as being justified.
The following
cases are referred to in this report.
Doe d
Cheny v Batten (1775) 1 Cowp 243
Dun &
Bradstreet Software Services (England) Ltd v Provident
Mutual Life Assurance Association [1996] EGCS 62
Mannai
Investment Co Ltd v Eagle Star Life Assurance Co
Ltd [1997] AC 749; [1997] 2 WLR 945; [1997] 3 All ER 352; [1997] 1 EGLR 57;
[1997] 24 EG 122; 25 EG 138, HL
Peyman v Lanjani [1985] Ch 457; [1985] 2 WLR 154; [1984] 3 All ER
703, CA
United
Australia Ltd v Barclays Bank Ltd [1941] AC
1
This was a
hearing of several summonses, including a summons under Ord 14A of the RSC, in
proceedings by the landlord, Ballard (Kent) Ltd, for arrears of rent against
the tenant, Oliver Ashworth (Holdings) Ltd.
Paul Morgan QC
and Nicholas Taggart (instructed by Cripps Harries Hall, of Tunbridge Wells)
appeared for the plaintiff; Jonathan Brock QC and Philip Rainey (instructed by
Rowe & Maw) represented the defendant.
Giving
judgment, JUDGE RICH QC said: The defendant holds
some industrial premises in Ballard Business Park, Cuxton Road, Stroud, Kent,
from the plaintiff as landlord under a lease granted to different parties by
the plaintiff’s predecessor in title on March 25 1986. That lease contained, at
clause 12, a tenant’s break clause by service of notice to terminate the
tenancy on September 24 1996.
The tenant
served a notice that was expressed to expire on September 25 1996, and the
plaintiff indicated shortly before September 24 that it was treating that
notice as defective and invalid. The plaintiff’s solicitors, in a letter of
September 23, went on to warn the tenant that, without prejudice to their
contention that the break notice was defective, if the tenant sought to
maintain that the break notice was valid, but failed to vacate the premises,
the landlord would be entitled to collect double rent from the tenant —
reference was made to the ‘Landlord and Tenant Act’ 1737 section 18 — for such
period as the tenant remained in occupation.
The tenant, in
spite of maintaining the validity of the notice, remained in occupation of the
premises. The landlord, immediately after the proposed expiry date and before
the next quarter day, namely September 29, gave notice that the defendant would
be required to pay September’s quarter rent and, in the event of late payment,
to pay interest on it.
That was
repeated in a demand on October 18 1996, and, on the tenant’s failing to make
any payment, a writ was issued on November 1 1996 claiming, quite simply, the
quarter’s rent and interest thereon. That claim was met by the defence that the
tenancy was at an end. In response to that claim, the plaintiff amended the
statement of claim served with the original writ to claim, in the alternative,
what was described as ‘mesne profits’ at the rate of double the passing
rent from the date when the tenancy was said to have come to an end, pursuant
to the Distress for Rent Act 1737, section 18. The defendant maintains that
those demands and the original claim by the writ for the rent due under the
tenancy constituted an election on the part of the plaintiff landlord to have
single contractual rent under the terms of the tenancy, and not to have what
was claimed by way of amendment: double rent under the statutory provisions of
1737.
Mr Paul Morgan
QC, in a skeleton argument prepared in support of an Ord 14A summons claiming
that the pleaded allegations of election did not amount to a waiver of the
landlord’s right to demand and receive double rent under the Act, summarised
the law in regard to election in the following terms, which, subject to only
one equivocation, Mr Jonathan Brock QC, for the defendant, accepts. He says:
‘The law as to election between inconsistent rights can be briefly summarised.
In order for there to be an election the person making the election must have a
choice between inconsistent rights, must know of his right to elect, must make
that choice and must communicate that choice to the other party.’ He adds that:
‘In such a case it is not necessary for the other party to rely upon the
election or change his position to his detriment’. He refers to the principles
having been summarised in Peyman v Lanjani [1985] Ch 457. In the
course of argument before me he has further supported them by reference
particularly to the decision of the Privy Council in United Australia Ltd
v Barclays Bank Ltd [1941] AC 1.
The
equivocation that Mr Brock has advanced by way of slight gloss on this summary
of the law is to suggest that it is not a choice between inconsistent rights so
much as inconsistent courses of action, or even remedies, that gives rise to an
election. But for the purposes of this case, at least until I turn to the
specialised circumstances of choices in regard to claims for double rent, I do
not think that that distinction is either valid or in point. I accept Mr
Morgan’s reference to the speech of Lord Atkin in the United Australia
case at p29, where he specifically identified the significance of the choice of
words, other than rights, as used in cases other than Peyman v Lanjani,
as meaning in their context the same thing.
Taking the
matter quite simply and divorced for the moment from any specialised rule that
might apply to claims for statutory double rent, it seems to me that when the
plaintiff in this case asserted his claim for rent, he was choosing to assert
the invalidity of the break notice and to assert his right to the benefit of
the tenancy agreement. He did so on the basis of what he apprehended to be an
error in the break notice. Following the decision of the House of Lords in Mannai
Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749*,
those advising the plaintiff landlord have come to the conclusion that it is no
longer arguable that this apparent defect in the break notice rendered it
invalid. In those circumstances, they amended their pleadings so as to accept
the validity of the break notice, and a declaration to that effect has by
consent been made by the court. But that was done only after the defendant had
continued in occupation of the premises for something just over a year from the
expiry of the break notice and had actually then given up possession. These
facts illustrate that the decision of the plaintiff to assert the invalidity of
the break notice and to claim the rights that he would have enjoyed had he been
right in so doing did not avail him to, in fact, enjoy those rights.
*Editor’s
note: Also reported at [1997] 1 EGLR 57
In making the
decision to sue for the rent on the basis of the tenancy, the plaintiff was
not, in fact, making a choice between inconsistent rights, because, although
the right to maintain and have the benefit of the continued tenancy was
inconsistent with the right to claim possession and compensation for being
denied possession, he did not, in fact, have any right to maintain the
continuation of the tenancy.
Of course, if,
after that assertion, the defendant had accepted what was asserted by the
landlord, even though wrong in law, that the break notice was ineffective, the
landlord would have been bound by it; and if the tenant had altered his
position in reliance upon it, the assertion might well have given rise to an
estoppel. But the claim that is made on behalf of the defendant is not of that
kind; it is a claim quite simply of election at common law, with the result
that has been described in the excerpt from Mr Morgan’s skeleton argument,
which I have already cited. In my judgment, common law election does not arise
on the basis of the principle that he has there expressed, because the person
making the alleged election did not have a choice between inconsistent rights.
He only had a choice between inconsistent assertions.
But it is said
in this case that the principle of election in regard to claims for statutory
double rent go rather further than is summarised in the excerpt from Mr
Morgan’s skeleton argument. Mr Brock refers me to a statement of the law in
clear terms that has been incorporated into Woodfall on Landlord and Tenant,
as he tells me, for at least the past 30 years. It is that the acceptance of
single rent accrued due subsequently to the notice is a waiver of the
landlord’s right to double rent, although it does not necessarily imply that
the tenancy should continue. That is now found at para 19.028 of Woodfall on
Landlord and Tenant and recites in support of that proposition the case of Doe
d Cheny v Batten (1775) 1 Cowp 243. That case has supported that
statement of law, as Mr Brock would maintain, ever since it was decided nearly
two and a quarter centuries ago. When Knox J was referred to that authority,
which I must myself consider with a little care shortly, in Dun &
Bradstreet Software Services (England) Ltd v Provident Mutual Life
Assurance Association (of which I have a transcript of the judgment dated
April 2 1996*), he accepted the conclusion that that judgment established that
there is a waiver of double rent by the acceptance of single rent.
*Editor’s
note: Reported at [1996] EGCS 62
I comment
immediately upon that judgment of Knox J because it is only with the very
greatest of hesitation that I would differ from any view that he had formed. He
considered the effect of the acceptance of rent upon a claim for double rent
under the 1737 Act in the context of having rejected an alternative claim for
double value under the similar 1730 Act, whose provisions I must refer to in
greater detail shortly. He, having dismissed the claim under the 1730 Act,
recited the terms of section 18 of the 1737 Act and then recited the reported
judgment of Aston J in the Cheny v Batten case where Aston J said
at p246:
There is no
doubt but that at the time of the demise laid, the lessor of the plaintiff had
a clear right to the possession.
The question
is, whether he has done any subsequent act which amounts to a waiver of that
right? The only act which appears is, the acceptance of a single quarter’s rent
accrued since. I think that is only a waiver of his right to double rent under
the Stat 4 Geo 2, [the 1730 Act] and does not necessarily imply a consent that
the tenancy should continue … For here the acceptance of single rent, is only a
waiver of his right to double.
On that, Knox
J made a comment that I have already recited, saying, although strictly obiter:
That and
similar statements by other members of the court seem to me to establish that
there is a waiver of double rent by the acceptance of single rent.
The learned
judge did not find it necessary to engage in greater analysis of the reasoning
of the 18th-century court, because there was, as he said, another obstacle in
the defendant’s path to that particular claim, namely that as a matter of fact
the holding over in respect of which the claim was made was not, on his
analysis of the facts, a holding over following the determination of the
tenancy by a tenant’s notice, which is the essential ingredient of the claim
for double rent under the 1737 Act.
It is, I
think, for that reason that Knox J, on the 57th page of a judgment that dealt
with many other and more difficult questions, did not think it necessary to
analyse what was actually decided in the case of Cheny v Batten.
The passage that he cited from the judgment of Aston J makes it clear that the
real issue was whether or not the acceptance of something called ‘rent’ after
the termination of a tenancy by notice to quit was to be construed as either
reviving or continuing a tenancy or waiving, as it was sometimes said, the
notice to quit that had brought it to an end. That issue was decided in the
well known phrase used by Lord Mansfield in that case at p245:
The question
therefore is, quo animo the rent was received …
And what the
real intention of both parties was, was therefore a matter for the decision of
the jury.
It is only in
contrast to that that it was observed by each of the four judges who gave
judgment in that case that the position in regard to a claim for double rent,
as they there called it, although strictly it would have been a claim not for
double rent but for double value under the 1730 Act, was to be treated
differently. As Lord Mansfield said at p246:
The statute
gives double rent if the tenant continues in possession after notice to quit.
But still it is to be received as rent. What then is the case where a landlord
accepts the single rent only. The taking half, when he is entitled to an action
for the whole, is an act of lenity; but it does not import a consent that the
tenant shall continue in possession, or a waiver by the landlord of his remedy
by ejectment.
Aston J said,
in terms, that he thought it was only a waiver of the right to double rent
under the statute. But he says it by contrasting that it does not necessarily
imply a consent that the tenancy should continue. The judgment of Ashurst J at
p247 was that:
If the
landlord accepts it only as a compensation for the double rent, which the
statute says he shall have a right to, it is a waiver of that only.
So the
question that was under discussion was not whether and how and why it should be
a waiver of the double rent, but merely, even on the acceptance of the practice
that it should be so treated, whether it was therefore to be construed also as
a waiver of the notice to quit.
The 1730 Act
does, in fact, differ from the 1737 Act, albeit that it is quite clear that the
judges in Cheny v Batten were not advising themselves of those
differences. The 1730 Act provides that there shall be available, as a remedy
for holding over, double value, but it does so only if the holding over after a
notice to quit by the landlord is wilful and if notice is served. Thus, if a
claim is to be made for double value, there can be uncertainty on the part of
the claimant landlord, both as to
The position
under the 1737 Act differs in this way: that the entitlement to double rent
against a tenant, who, having himself given notice to terminate the tenancy
then does not vacate, is automatic. It does not depend on notice or on
wilfulness nor is there any difficulty in identifying the quantum of the
compensation because it is to be twice the rent, not twice the value, which may
need to be ascertained. Thus, it seems to me that the acceptance of rent under
that name — and Lord Mansfield recited in terms at p245 as to the facts in this
case, ‘the landlord who has received rent eo nomine for a quarter of a
year’ — may have a different effect from the effect of accepting single rent
from a tenant who is liable for double rent under the provisions of the 1737
Act. It is not, I think, necessary for me to consider in this court for the
purpose of this summons whether or not the observations, which as Knox J
pointed out, were obiter in regard to the effect of the 1730 Act, are or
are not to be followed.
I note that it
is said in Woodfall that the two Acts are to be construed in pari
materia, but that is based on other observations of 18th century courts
directed, in fact, to identifying what distinctions can properly be made by the
different formulations of the obligation to pay double value or double rent as
the case may be. I do not, therefore, think that that mode of construction
would force the conclusion that, even if it were right that mere acceptance of
single rent under that name would constitute an election or other
disqualification for claiming double value under the 1730 Act, the same
conclusion would necessarily apply to such acceptance in the circumstances
where the 1737 Act would otherwise apply.
In
considering, therefore, the effect of Cheny v Batten, I would
turn to the point of principle and the exposition of the rules, which, as I
have indicated, is largely agreed as set out in Mr Morgan’s skeleton argument.
In order for
there to be an election, the person making the election must have a choice
between inconsistent rights, must know of his right to elect and must
communicate that choice to the other party. The choice of a single rent if so
limited and expressed to exclude an option for a further tranche of rent so as
to bring it up to double rent clearly is a choice inconsistent with a choice of
double rent. To so express it is merely tautologous, but the acceptance of a
sum of money equal to the single rent if not so expressed and on account of
sums claimed clearly would not be such a choice.
The defendant
has sought to rely not only on the claims made in the writ, to which I have
already referred, but also to payments made in a context that can properly be
categorised as the second of the two alternatives. So far as such receipt of
money, demands and discussions after the initial events are concerned, I can
dismiss the defendant’s case very shortly. It has, by a series of amendments
culminating in what were described for the purposes of the hearing before me as
the ‘yellow amendments’, recited a number of different bases for claiming that
the landlord had put it out of his power by an election to claim money under
the 1737 Act. But it seems to me that all such argument is completely undermined
by the fact that the defendant’s solicitors, in tendering various sums, which
were accepted, expressly said that their proposals were in order to limit the
issues between the parties to the issue of double rent. As to this they said in
a long letter dated December 2 1997: ‘whether or not the plaintiff is entitled
to double rent is purely a matter of law and there is no evidence in issue
between the parties’. The case in regard to the sums that were paid under
orders for interim payment made by the court is even less arguable.
I return,
therefore, to the question of whether or not the demand for contractual rent on
the basis that the tenancy continued can be taken as a waiver of a claim for
double rent in the event that it is established: (a) that the tenancy has not
continued; and (b) that, nevertheless, the tenant has held over.
The essence of
the distinction that is made in Cheny v Batten between the effect
of the acceptance of rent upon the continuation of the tenancy and the right to
claim double value is that the question of the continuation of the tenancy was,
so far as the landlord was concerned, something that he disputed. He was
accepting whatever money he was accepting on the basis that he was contending
that the defendant in that case was not a tenant, but a trespasser.
The
plaintiff’s claim in this case is on directly the opposite basis. The plaintiff
in this case claims rent in the letters and writ to which I have referred only
because of the assertion, which the defendant denies, that the tenancy
continues. On the tenant’s assertion being vindicated, so that it is decided
that the tenancy did not continue, it follows that the claim for rent was not
justified on the basis on which it was made. I see no basis for treating the
demand that is thus established to be unjustified, as amounting to an election
to abandon the claim that the tenant’s own contention establishes as being
justified. For those reasons I will determine the questions raised on the
summons in the plaintiff’s favour.
Judgment
under Ord 14 for the plaintiff.
