Landlord and tenant — Repairing covenant — Shop premises — Breaches — Provision for re-entry — Forfeiture — Relief — Application for summary judgment under Ord 14 — Plaintiff landlords sought by way of summary relief orders for possession, arrears of rent and mesne profits, inquiry into damages and certain surveyor’s fees — Judge’s wide discretion — Liverpool Properties Ltd v Oldbridge Investments Ltd followed — Unconditional leave to defend given
two summonses — The first sought the relief mentioned above; the second, which
asked for an order for interim payments on account of the defendant tenants’
use and occupation of the property, was undisputed — Disputes as to breaches of
the repairing covenant went back for several years, including the comparatively
small matters of the repair or replacement of a blind box and the maintenance
of an outside wc — There was a substantial matter of the renewal of the roof,
but this was settled by agreement — Other alleged breaches, however, remained
in dispute and there were abortive proceedings for forfeiture in 1987, not
pursued to a conclusion because the defendants took the point that the
plaintiffs had waived the right to forfeit by demanding rent — New proceedings
were commenced in 1988 after a new notice under section 146 of the Property Act
1925 — Defendants asserted that all works for which they were properly liable
had either been completed before the proceedings were issued or were in process
of execution — In their counterclaim they asserted that if the lease were
forfeited they would undertake to execute all proper works as soon as
reasonably practicable and they sought relief from forfeiture
application for summary judgment under Ord 14 came before Peter Gibson J it was
not clear exactly how much repair work had been done at the commencement of the
proceedings — What remained to be done was relatively trivial — There was the
long-standing dispute about the repair of a blind box housing a blind over the
front of the premises, the repair of an outside we not used by the tenants, and
some small areas of rendering — Peter Gibson J referred to the decision in
Liverpool Properties Ltd v Oldbridge Investments Ltd, by which he was bound — The ratio of
that decision was that the claim for relief from forfeiture was an equitable
counterclaim inextricably involved in the claim, it being understood that the
counterclaim for relief should be a genuine claim which might succeed — Peter
Gibson J rejected a contention that the Liverpool Properties case could be
distinguished from the present case and also rejected a submission that on the
facts of the present case there was no prospect of relief being granted — The
discretion given to a judge by section 146(2) of the Law of Property Act 1925
was very wide; it would be a fairly rare case where the court would be able to
say that a genuine claim for relief from forfeiture was bound to fail — It was
quite impossible in the present case to say that the claim for relief was not
genuine or that it had no prospect of success — In addition, the defendants’
counsel had offered an undertaking, which the judge accepted, that they would,
within 28 days, remedy the defect in the rendering and connect the outside wc —
Unconditional leave to defend granted
The following
cases are referred to in this report.
Liverpool
Properties Ltd v Oldbridge Investments Ltd
[1985] 2 EGLR 111; (1985) 276 EG 1352, CA
Morgan
& Son Ltd v S Martin Johnson & Co Ltd
[1949] 1 KB 107; [1948] 2 All ER 196; 64 TLR 381, CA
The main
summons by the plaintiffs, Sambrin Investments Ltd, sought orders under RSC Ord
14 for possession and other relief against the defendants, William and Paul
Taborn, in respect of the shop premises at 186 High Street, Merton, London SW
19. A second summons, as mentioned above, was not the subject of dispute. The
summonses had been adjourned into court by the master.
Miss Monica
Carss-Frisk (instructed by Brecher & Co) appeared on behalf of the
plaintiffs; Mark Blackett-Ord (instructed by Watts Vallance) represented the
defendants.
Giving
judgment, PETER GIBSON J said: I have before me two summonses. By the
first, the plaintiff, Sambrin Investments Ltd, as the landlord of premises
known as 186 High Street, Merton, London SW 19, seeks orders under Ord 14
against the defendants, William Taborn and Paul Taborn, who are the assignees
of the lease of these premises. The orders sought are possession of the
premises, arrears of rent and mesne profits, an inquiry as to damages and
certain surveyor’s fees. By the second summons, the plaintiff seeks an order
for interim payments on account of the defendants’ use and occupation of the
premises. The relief sought in the second summons is not disputed. The master
adjourned the summonses into court.
The facts are
these. By a lease dated January 10 1975 the premises were let by the plaintiff
for a term of 15 years. The provisions of the lease included a covenant by the
tenants in clause 2(5):
From time to
time and at all times during the said term well and substantially to repair,
cleanse and keep in good and substantial repair and condition the demised
premises and all additions thereto.
There was a
covenant by the tenants to pay the landlord all costs, charges and expenses
(including fees payable to a surveyor) which might be incurred by the landlord
in proceedings under section 146 of the Law of Property Act 1925. Clause 4 of
the lease contained a provision for re-entry on, inter alia, breach of
any of the tenants’ covenants contained in the lease. The lease was assigned to
the defendants on January 20 1978.
In April 1986
the plaintiff served a section 146 notice on the defendants requiring them to
remedy breaches of the repairing covenant. Those breaches were set out in a
schedule of dilapidations. There then followed protracted negotiations between the
surveyor for the plaintiff (Goodman Mann) and the surveyor for the defendants
(Challengers) as to what repairs were necessary. By March 1987 a general
measure of agreement had been reached upon most items, as Goodman Mann
acknowledged in a letter of March 24 to Challengers, but there were certain
items in dispute and Goodman Mann set out their final view upon those
outstanding items. One item
premises. Goodman Mann said in that letter:
I consider
that my clients are fully entitled to the repair of the blind box, and if
beyond repair its replacement. I recognise, however, that it is no longer used
and, on a without prejudice basis, agree to its replacement with a suitable
fascia adequately weather protected.
Challengers in
their letter of reply of March 30 1987 accepted what Goodman Mann proposed.
There is a dispute between the parties as to whether that amounts to a
concluded agreement, in effect varying the repairing covenant under the lease
so that the plaintiff can no longer insist on the repairs of the blind box.
Another item
in dispute at that time was the outside toilet. Goodman Mann said this in their
letter:
The outside
toilet forms part of the demised premises and is capable of being repaired.
Whilst your clients may not wish to use the toilet, its removal will detract
from the amenities of the building in the future. My clients will not agree to
its removal and insist that it is placed into working order.
Challengers’
comment on that in their letter of March 30 was:
As you say,
my client does not require the outside we and, frankly, we doubt whether
another tenant would require such a we. However, as a concession my client is
prepared to undertake maintaining the structure of this outhouse and, at the
end of his tenancy, to leave a functioning wc but of course he will at no time
take responsibility for the latent defects.
A major item
in dispute was the roof, leaks through which had damaged the interior of the
premises. The defendants disputed that a complete renewal was called for, but
eventually agreement was reached that the defendants would replace the roof but
the plaintiff would contribute £2,500. That work was carried out and completed
by October 1987. In the meantime the defendants had not carried out, as I
understand it, any of the other matters which were in the schedule of
dilapidations. The defendants took the view that there was no point in effecting
those repairs until the roof had been made sound, as otherwise only further
damage would result. In October 1987 the plaintiff refused to accept rent
because of the breaches of the repairing covenant. On October 28 1987
proceedings for forfeiture were commenced, but they were not pursued when the
defendants took the point that the plaintiff had waived the forfeiture because
of demands for rent.
Accordingly, a
new section 146 notice and a new schedule of dilapidations were prepared by new
surveyors for the plaintiff and served on the defendants on February 19 1988. A
period of three months was specified for compliance. On May 27 these
proceedings were commenced. In their defence the defendants say that all work,
which is specified in the schedule of dilapidations and which is properly the
obligation of the defendants to effect, had either been executed before the
proceedings were issued or was in the process of such execution as the
plaintiff had already been informed. The second defendant, in his affidavit,
describes the repair work as being by the commencement of the proceedings ‘well
under way’, but no details are given. The defendants, in their counterclaim,
say that if (which is denied) the lease is forfeited they offer an undertaking
to execute all the works properly required to be done under the lease as soon
as reasonably practicable and they seek relief from forfeiture.
On the
evidence before me there are three items in the schedule of dilapidations which
have not been repaired; that is to say the blind box, the outside wc and making
good what is described in the schedule of dilapidations as ‘small areas of
spalled rendering to the flank elevation above the second floor of an adjoining
building’. The first item, as I have indicated, is the subject of dispute which
will have to be determined at the trial, but Mr Blackett-Ord for the defendants
accepted that the other two items had not been repaired at the date of the
commencement of proceedings and consequently he was driven to concede that
those were breaches of the repairing covenant. He has told me on instructions,
but I repeat that there is no evidence before me, that the wc has been restored
though the water to it has not been connected. The areas of the spalled
rendering were the subject of some correspondence, but certainly by the end of
January the defendants had been informed precisely where those areas were.
Miss
Carss-Frisk for the plaintiff initially submitted that, as the plaintiff had
been able to show that the defendants were in breach of covenant, the plaintiff
was entitled under clause 4 of the lease to re-enter and there was no defence
to the claim for possession. She further submitted initially that the
defendants’ application for relief was not a defence to her claim but was a
separate application arising after forfeiture and she pointed out that the
defendants were not at this hearing seeking relief from forfeiture but were
leaving that to the trial of the counterclaim.
The point is
not free from authority. In Liverpool Properties Ltd v Oldbridge
Investments Ltd (1985) 276 EG 1352* the facts were that a plaintiff
landlord of a lease containing a full repairing covenant with a proviso for
re-entry claimed that the defendant tenants were in breach of the repairing
covenant and sought forfeiture of the lease and possession of the premises. The
damages for breach of the repairing covenant were claimed to be in excess of
half a million pounds. The defendants counterclaimed for relief against
forfeiture, but the landlord submitted, on the summons for summary judgment,
that an order for possession should be given, leaving the trial of the
counterclaim for relief to proceed at a later date. It was admitted by the
plaintiff in that case that, subject to terms, the tenants would be entitled to
relief from forfeiture. The judge held that the defendants were in breach of
covenant to the extent of some £80,000 worth of work. Accordingly, there was no
doubt in that case that the claim for forfeiture was a good claim. Nevertheless
the judge gave unconditional leave to defend, relying upon the words of Ord 14,
r 3 that there was an issue or question in dispute which ought to be tried or
that there ought for some other reason to be a trial of the action. On appeal
the submission that the judge’s order was wrong was rejected. Parker LJ, with
whom Croom-Johnson LJ agreed, said at p 1353:
Although the
right to relief against forfeiture is now statutory, it is in origin an
equitable defence. It was a means by which equity stepped in to prevent the
enforcement of a legal right. It is inextricably mixed with the claim for
forfeiture, and it is, in my judgment, a true equitable defence to the legal
claim for forfeiture. In those circumstances, it is something which should be
viewed quite without regard to the words of Order 14, rule 3 upon which the
judge relied. It is a counterclaim which ought to result in unconditional leave
to defend being given.
*Editor’s
note: Also reported at [1985] 2 EGLR 114.
He referred to
an authority on equitable set-off, Morgan & Son Ltd v S Martin
Johnson & Co Ltd [1949] 1 KB 107. He went on to say that, even if that
were not so, he would take the view that the learned judge was entirely right
because of certain behaviour by the landlord in that case, and he continued:
I would for my
part, if I had not come to the conclusion that the order was justified because
it was an equitable counterclaim inextricably involved in the claim, also have
come to the conclusion, as did the learned judge, that there ought to be
unconditional leave to defend under Order 14, rule 3. I cannot see that it
would serve the ends of justice if claims of this sort were to result in orders
for possession. It would put tenants in a position which would be wholly untenable.
It was
submitted on behalf of the plaintiffs that, if this were so, no landlord would
ever be able to get an order for possession, for all that would be needed would
be that the tenant should counterclaim for relief. That may be so, but if the
counterclaim for relief is a genuine claim which might succeed, I see no reason
why the landlord should have a claim to possession immediately. If the tenant
has got an arguable claim for relief which he desires to pursue, and which, if
successful, will result in the lease never being truly determined, then I see
no reason why a landlord should have judgment under Order 14.
The ratio of
that decision therefore is that the claim for relief from forfeiture was an
equitable counterclaim inextricably involved in the claim, and the learned
judge posed as the test that the counterclaim for relief should be a genuine
claim which might succeed. Miss Carss-Frisk pointed out that the facts of that
case were not on all fours with the present case because of the admission in
that case that the tenants were entitled to relief subject to terms. But unless
she can show that the counterclaim for relief in the present case is not a
genuine claim which might succeed, it seems to me that distinction is of no
validity. She boldly submitted that on the facts of the present case there was
no prospect of relief being granted. She pointed to the long history of
failures by the defendants to honour their contractual obligation to repair the
premises and, in particular, to the fact that a schedule of dilapidations had
been served as long ago as 1986, and she submitted that, even now, there is no
evidence that all the repairs have been completed.
I must, in
considering this point, bear in mind the width of the discretion conferred by
section 146(2) of the Law of Property Act 1925 on the court when it comes to
consider whether or not relief from forfeiture should be granted:
. . . the
court may grant or refuse relief, as the court, having regard to the
proceedings and conduct of the parties under the foregoing provisions of this
section, and to all the other circumstances, thinks fit; and in case of relief
may grant it on such terms, if any, as to costs, expenses, damages,
compensation, penalty, or otherwise, including the granting of an injunction to
restrain any
thinks fit.
So wide is that
discretion that, in my judgment, it will be a fairly rare case where the court
will be able to say that a genuine claim for relief from forfeiture is bound to
fail.
In the present
case it is far from clear from the evidence precisely how much work of repair
had been done at the commencement of these proceedings. What remains to be done
is, if I might say so, relatively trivial: the landlord’s insisting on the
repair of an outside wc not used by the tenants, and some small areas of
rendering and there is the dispute, too, about the blind box which, again, it
is clear the tenants do not use. Indeed Mr Blackett-Ord submitted that the landlord’s
behaviour has, as he put it, been nothing short of bloody-mindedness.
I do not think
it appropriate to comment on the rights and wrongs of this dispute at this
stage; that seems to me to be a matter for the trial judge. It seems to me
quite impossible to say that the claim for relief from forfeiture in the
counterclaim is neither genuine nor has no prospect of success. In addition, Mr
Blackett-Ord has offered an undertaking, which I accept, that the defendants,
within 28 days, will remedy the defect of the spalled rendering and will
connect the wc.
Miss
Carss-Frisk submitted that the Liverpool case was wrongly decided. That
robust decision can be reversed only by a higher court. Its reasoning is
plainly binding on me and I must follow it.
It seems to me
in the circumstances to be a clear case where I should grant unconditional
leave to defend and I so do.
