Law of Property Act 1925–Application for leave to amend statement of claim–Additional ground for forfeiture–Landlord claiming to re-enter on bankruptcy of surety–Whether statutory notice must be served under section 146–Notice required–Leave to amend refused
This was a
summons by the plaintiffs, Halliard Property Co Ltd, seeking leave to amend a
statement of claim by adding the bankruptcy of a surety as a further ground in
an action to recover possession of the demised premises. The first defendant,
Jack Segal Ltd, objected to the amendment because no notice was served before
issue of the writ pursuant to section 146 of the Law of Property Act 1925.
R M Slowe
(instructed by Tobin & Co) appeared for the plaintiff; J K Reynolds
(instructed by Donne, Mileham & Haddock, of Brighton) represented the first
defendant.
Giving
judgment, GOULDING J said that this summons was one of two in the same action
and raised a short point in the law of landlord and tenant.
The
first-named defendant, Jack Segal Ltd, was tenant under a lease dated June 24
1964, made between Isiah Segal, the landlord, the tenant, and two sureties,
namely, the landlord Isiah Segal and Robert Emmanuel Segal. It was for a term
of 21 years less three days from Lady Day 1964 and contained a proviso in a not
unusual form for re-entry, in the event of the tenant’s voluntary or compulsory
liquidation, or the bankruptcy of the tenant or sureties. The present landlord,
the plaintiff, had brought the action to recover possession of the demised
premises on the ground of a forfeiture under the proviso by reason of a breach
of covenant, namely, an unauthorised underletting of part of the premises to
the second defendant.
The landlord
now sought leave to amend its statement of claim by adding a further ground,
namely the bankruptcy of one or both of the sureties. The tenant objected to
the proposed amendment because, he said–and it was admitted as a fact–that no
notice was served before issue of the writ pursuant to section 146 of the Law
of Property Act 1925. In relation to the bankruptcy of sureties, his Lordship
said, the application for leave to amend raised a short point whether a
landlord claiming to re-enter under such a proviso must first serve the
statutory notice as he must do in many other cases of a right to re-enter. He
had been told that there was no direct authority on this particular question.
Mr Reynolds
for the tenant had said quite plainly that where there was a condition for
re-entry in case of the bankruptcy of a surety there was a breach of condition
if the surety went bankrupt and the lessor must serve the statutory notice. The
case was one of a right of re-entry for a breach of condition in the lease, and
since the bankruptcy was not that of the lessee, the case could not fall within
any of the exceptions to section 146 defined in subsections (9) and (10). He
said that clearly a right of re-entry arising on bankruptcy was prima facie
within the section under the words of subsection (1); otherwise why should the
original Act of 1881 have thought it necessary to except from the provisions of
the statute a condition for forfeiture on the bankruptcy of the lesssee.
Mr Slowe for
the landlord said that section 146 did not apply to all rights of re-entry
under a lease but only to those rights of re-entry which arose under a proviso
or stipulation in the lease for a breach of a covenant or condition in the
lease. Breach of a covenant or condition, Mr Slowe submitted, involved a
voluntary or unjustifiable violation or transgression of some obligation. Where,
therefore, the event on which the landlord under the condition had a right to
re-enter was one such as the bankruptcy of a third party which the tenant had
no power to control, it was quite incorrect to speak of a breach of condition
and the section did not apply. Therefore no notice was required. Mr Slowe took
a series of examples of cases in which under the provisions of a lease a
landlord might have had a right to re-enter. The reason, Mr Slowe submitted,
why the later legislation had required the notice in certain types of case on
re-entry for bankruptcy was because the policy of Parliament was to discourage
collusive forfeitures on the tenant becoming insolvent.
He (his
Lordship) did not propose to try to draw a theoretical line in the present
judgment. It was quite apparent from the language of the section in its
successive drafts enacted by Parliament that, subject to the statutory
exceptions, a condition for forfeiture on the bankruptcy of the lessee was
considered as a case of breach of condition. He was unpersuaded by Mr Slowe’s
attempted distinction between that case and the one of bankruptcy of a surety.
A surety was a person put forward by the lessee in support of his obligations
under the lease, and the commonsense of the matter seemed to him to require the
bankruptcy of the surety to be within the section if the bankruptcy of the
lessee prima facie was included.
Breach of a
condition was not necessarily a voluntary or avoidable act of the person bound
by the condition. It was enough for him (his Lordship) to say that, applying
his mind to the section as it stood, he was satisfied that it was a normal and
reasonable interpretation of the words ‘breach of condition’ in subsection (1)
to hold that they applied to the bankruptcy of the surety in the present case.
The
consequence was that leave to amend the statement of claim must be refused.
