Landlord and tenant — Whether disclaimer of lease by liquidation of assignee company discharges liability of original tenant, earlier assignee and surety for arrears of rent
By a lease
dated October 20 1983 the first defendant was granted a 20-year term of
premises from September 12 1983 at an initial yearly rent of £13,626 subject to
upwards-only review. In 1987 the lease was assigned to the second defendant
pursuant to a licence to assign containing a covenant by the second defendant
to pay the rent and perform the covenants during the remainder of the term; the
obligations of the second defendant were guaranteed by the third defendant by
way of a surety covenant. In 1989 the second defendant assigned the lease to P
Ltd and in 1990 the rent was reviewed to £37,500 pa. Following P Ltd’s
liquidation, the liquidator disclaimed the lease on December 8 1992 pursuant to
section 178 of the Insolvency Act 1986. The plaintiff claimed arrears of rent
from the defendants, and summary judgment was entered against all the
defendants. The appeal of the second defendant’s liquidator and the third
defendant, in which they contended that the disclaimer operated to determine
the lease and the liability of the original tenant, and therefore their own
liability, was dismissed by the Court of Appeal. They appealed.
disclaimer of the lease by the liquidation of the assignee ends the obligations
of that assignee to the landlord and the assignee’s obligations to indemnify
the guarantor. Upon the disclaimer of the lease the rights and liabilities of
others, such as the original tenant and guarantors, remain as though the lease
had continued and not determined; section 178(4)(b) of the Insolvency Act 1986
operates as a deeming provision. The liability of the original tenant and any
guarantors will determine if the landlord takes possession and treats the lease
as determined. The decision in Stacey v Hill [1901] 1 KB 660 was
overruled and that in Hill v East & West India Dock Co (1884)
9 App Cas 448 applied.
The following
cases are referred to in this report.
Finley,
In re ex parte Clothworkers’ Co (1888) 21
QBD 475
Harding v Preece (1882) 9 QBD 281
Hill v East & West India Dock Co (1884) 9 App Cas 448
Inglis v Macdougal (1817) 1 Moore CP Rep 196
Katherine
et Cie Ltd, Re [1932] 1 Ch 70
Levy, Re ex parte Walton (1881) 17 ChD 746
Maurice
Tempany v Royal Liver Trustees Ltd [1984]
BCLC 568
Smyth v North (1872) LR 7 Ex 242
Stacey v Hill [1901] 1 KB 660
Tuck v Fyson (1829) 6 Bing 321
Warnford
Investments Ltd v Duckworth [1979] Ch 127;
[1978] 2 WLR 741; [1978] 2 All ER 517; (1977) 36 P&CR 295
WH
Smith Ltd v Wyndram Investments Ltd [1994] 2
BCLC 571
This was an
appeal by the second and third defendants, CIT Developments Ltd and Patrick
John Whitten, from the decision of the Court of Appeal [1994] 2 EGLR 63 which
had dismissed an appeal from a decision of Mr Simon Goldblatt QC, sitting as a
deputy judge of the Queen’s Bench Division, who on October 14 1993 gave summary
judgment to the plaintiff, Hindcastle Ltd, under Ord 14 of the RSC.
David Oliver
QC and Carolyn Walton (instructed by Houghtons) appeared for the appellants;
Kim Lewison QC and Jonathan Arkush (instructed by Chethams) represented the
respondent.
In his speech,
Lord Lloyd of Berwick
said: I agree that the appeal should be dismissed for the reasons to be given
by my noble and learned friend, Lord Nicholls of Birkenhead. I add a short
speech of my own only because I have found the case to be one of some
difficulty.
At an early
stage of the hearing I formed the view that Hill v East & West
India Dock Co (1884) 9 App Cas 448, and Stacey v Hill [1901]
1 KB 660, could not well stand together, despite Sir Robert Megarry V-C’s
attempt to reconcile the decisions in Warnford Investments Ltd v Duckworth
[1979] Ch 127, and Millett LJ’s further attempt at reconciliation, on rather
different grounds, in the court below. If the decisions cannot be reconciled,
the question becomes which of the two decisions should be preferred.
For much of
the hearing I was attracted by Mr David Oliver QC’s argument that the reasoning
in Stacey v Hill was the more convincing. The key feature of that
decision, as Mr Simon Goldblatt QC pointed
Smith MR and Cotton LJ regarded the case as being concluded by the passage
which the former quoted from the judgment of Lindley LJ in In re Finley, ex
parte Clothworkers’ Co (1888) 21 QBD 475, at p485:
Now the
operation of those clauses in the simple case of a lease is not very difficult
to ascertain. If there is nothing more than a lease, and the lessee becomes
bankrupt, the disclaimer determines his interest in the lease under sub s 2. He
gets rid of all his liabilities, and he loses all his rights by virtue of the
disclaimer. There is no need of any provision for vesting the property in the
landlord, but the natural and legal effect of sub s 2 is that the reversion
will become accelerated.
AL Smith MR
put the point as follows in Stacey v Hill [1901] 1 KB 660, at
p664:
In other
words, the effect of the sub-section is that in such a case the lease is put an
end to altogether as between the lessor and the bankrupt lessee, the intention
being that the bankrupt shall be altogether freed from any obligation arising
under or in relation to it; and, consequently, no other person being interested
in the lease, it ceases to exist. As the lease is determined, no rent can,
subsequently to the disclaimer, become due under it: the reversion on the term
is in effect accelerated; and the lessor gets back his property, and can let it
to another tenant, for aught I know, at a higher rent.
AL Smith MR
then went on to consider the position of a guarantor for the original lessee.
He gave two reasons for rejecting the argument that the guarantor remained
liable, even though no more rent could fall due from the bankrupt lessee. The
first depended on the need to release the bankrupt from liability to indemnify
the guarantor. I do not find that ground convincing for the reasons to be given
by my noble and learned friend, Lord Nicholls. But the second ground was a
straightforward application of the ordinary law of principal and surety. If the
lease has ceased to exist, to use the language of AL Smith MR, how could the
surety be liable for rent which has not yet fallen due? A surety is normally
only liable for the defaults of the principal debtor. But the lessee cannot
make default after disclaimer, for he is no longer liable to pay the rent. The
lease has come to an end by operation of law.
Collins LJ
said, at p666:
I think that
what the Legislature intended in such a case as this was that the lease should
be determined by the disclaimer as between the lessor and the lessee, and
therefore incidentally as regards the surety, with the result that the bankrupt
lessee is discharged and incidentally the surety also …
A little later
he said:
If disclaimer
under the present law operates in the language of Lindley LJ to ‘accelerate the
reversion’, the condition of the surety’s liability in this case must
necessarily fail …
Perhaps the
clearest exposition of the point is to be found in the short judgment of Romer
LJ at p667. He regarded the release of the guarantor as ‘necessary for the
purpose of releasing the bankrupt’ because that is the inevitable result in law
of bringing the lease to an end. If the lease has ceased to exist as between
lessor and lessee, it cannot be treated as if it continued to exist for the
purpose of making the surety liable. So to hold would be to impose on the
surety a different kind of liability.
For the
defendant has only agreed to be liable as surety for the payment of rent by a
lessee under a lease: and yet the appellant seeks to make him liable to pay
money, though there is no rent payable, no lease, and no person in the position
of lessee.
The next step
in Mr Oliver’s argument was that if the surety for the original lessee is
released by a disclaimer on the part of the original lessee’s trustee in
bankruptcy, the same must apply where the lease has been assigned, and it is
the assignee who has become bankrupt. If the assignee’s trustee in bankruptcy
disclaims the lease, it ceases to exist just as surely as if it is disclaimed
by the trustee in bankruptcy of the original lessee; and if the lease has
ceased to exist, the assignee’s guarantor must necessarily also be released
under the ordinary law of principal and surety, since to hold him liable would
be to impose on him a different kind of liability.
Mr Oliver
accepted that it would be possible to devise a form of guarantee under which
the surety would undertake an independent liability in the event of disclaimer.
Clause 5(2) in the licence dated April 22 1987 is just such a provision. But it
is clear from the language of clause 5(2) that the parties contemplated such
independent liability as arising under a new lease on the same terms as
the old, which was to take effect on the date of the disclaimer, and was to be
delivered to the lessor after execution by the surety. It is difficult to see
how a new lease could be brought into existence unless the old lease has ceased
to exist.
Finally, Mr
Oliver returned to consider the position of the original lessee, where it is
the assignee’s trustee in bankruptcy who disclaims. Mr Oliver argued that the
original lessee’s position must be the same as that of the surety of the
bankrupt assignee. If the lease has ceased to exist, it must have ceased to
exist for all purposes. The original lessee cannot be liable for rent if there
is no lease. By the same token, the original lessee’s guarantor, and the
guarantor of any intermediate assignee would also be released.
If Mr Oliver’s
argument be correct, it would follow that Hill v East & West
India Dock Co (1884) 9 App Cas 448 was wrongly decided. Alternatively, Mr
Oliver sought to distinguish Hill v East & West India Dock Co
on the ground that section 23 of the Bankruptcy Act 1869 (32 & 33 Vict c
71) is in very different terms from section 55 of the Bankruptcy Act 1883 (46
& 47 Vict c 52), as the Court of Appeal in Stacey v Hill
[1901] 1 KB 660 were at pains to emphasise.
It will be
apparent from this inadequate account of Mr Oliver’s argument that it all
depends on his underlying proposition that disclaimer has a dual effect. It
determines the rights, interests and liabilities of the bankrupt tenant. But it
also determines the leasehold estate, not only in the case of the original
lessee’s bankruptcy, but alternately any subsequent assignee becomes bankrupt.
The question is thus whether this dual effect is indeed the consequence of
section 178(4) of the Insolvency Act 1986. In order to answer this question it
helps to go back to the language of the Act of 1869.
Section 23 of
the Act of 1869 provided:
When any
property of the bankrupt acquired by the trustee under this Act consists of
land of any tenure burdened with onerous covenants … the trustee … may …
disclaim such property, and upon the execution of such disclaimer the property
disclaimed shall … if the same is a lease be deemed to have been surrendered on
the same date …
In Re Levy,
ex parte Walton (1881) 17 ChD 746 Sir George Jessell MR held that the words
‘deemed to be surrendered’ were to be given a narrow construction. He said, at
p754:
Therefore it
seems to me that the section must be read as meaning that the property is to be
disclaimed inter se, so as not to interfere with the rights of third
parties, and only for the benefit of the bankrupt and his estate; so far, that
is, as respects any rights and liabilities in relation to it as between the
trustee and the person who is entitled to the benefit of those obligations
which attach to the property; so far only as is necessary in order to relieve
the bankrupt and his estate and the trustee from liability.
James LJ said,
at pp756–757:
That being
the sole object of the statute, it appears to me to be legitimate to say, that,
when the statute says that a lease, which was never surrendered in fact (a true
surrender requiring the consent of both parties, the one giving up and the
other taking), is to be deemed to have been surrendered, it must be understood
as saying so with the following qualification, which is absolutely necessary to
prevent the most grievous injustice, and the most revolting absurdity, ‘shall,
as between the lessor on the one hand, and the bankrupt, his trustee and
estate, on the other hand, be deemed to have been surrendered.
James LJ went
on to ask, rhetorically, whether it could ever have been intended that the
bankruptcy of the lessee should release the surety, the very question which,
contrary to the clear implication of the question, was answered in favour of
the surety in Stacey v Hill.
In Hill
v East & West India Dock Co (1884) 9 App Cas 448 it was
argued that ex parte Walton was wrongly decided, and was, indeed,
inconsistent with an earlier decision in which James LJ had said that the
effect of the disclaimer was that the lease was to be deemed to have come to an
end ‘for all purposes’: the term ‘was gone’. However, the House, by a majority,
held that ex parte Walton was correctly decided. Earl Cairns quoted
extensively from the judgment of James LJ. Lord Blackburn held, at p459, that
the narrow construction put upon the section by James LJ was ‘more natural and
more reasonable and more correct than the construction for which the appellant
contends … .
Hill v East & West India Dock Co is thus clear authority of
your lordships’ House that, despite the ‘deemed surrender’ of the lease by the
assignee’s trustee in bankruptcy, the lease does not come to an end for all
purposes. The original lessee’s liability survives and so presumably does the
liability of his surety. This would, I think, be almost enough to persuade me
that Stacey v Hill was wrongly decided and ought to be overruled.
But what carries the day to my mind is the intervention of the legislature
between the date of the decision in ex parte Walton and the decision of
your lordships House in Hill v East &West India Dock Co. For
the reference to the ‘deemed surrender’ of the lease — the phrase which caused
all the difficulty in Hill v East & West India Dock Co and
which does indeed lend some support to Mr Oliver’s argument that the lease
comes to an end for all purposes — is no longer to be found. Instead, section
55 of the 1883 Act substitutes the narrow construction favoured by the Court of
Appeal in Re Levy, ex parte Walton (1881) 17 ChD 746 and adopts language
very similar to that used by Sir George Jessell MR in that case. In the light
of that legislative history, I do not think it was open to AL Smith MR in Stacey
v Hill [1901] 1 KB 660 to disregard, as he did, the cases decided under
the Act of 1855 on the ground that the language was very different. Since the
legislature had, in effect, adopted the narrower construction favoured by the
Court of Appeal in Re Levy, ex parte Walton, and subsequently approved
by the House in Hill v East & West India Dock Co (1884) 9 App
Cas 448 the Court of Appeal in Stacey v Hill ought to have held
that the surety was not released. It follows that, for the same reasons, none
of the three defendants were released in the present case. Despite Mr Oliver’s
persuasive argument to the contrary, I would dismiss the appeal.
Agreeing, Lord Nicholls
of Birkenhead said:
This case arises out of the recession in the property market. It raises a much
vexed question about the liability of a guarantor when the tenant becomes
insolvent and the lease is disclaimed.
In times of
recession the rent payable under a lease may exceed the current rental value of
the property in the open market. The rental value of the property may have
fallen since the lease was granted or the rent was reviewed. This is especially
likely where the rent review is upwards only. So long as the tenant remains
solvent, the fall in property values leaves the tenant out of pocket, not the
landlord. The tenant is out of pocket by paying more for the property than its
current worth.
The picture
changes if the tenant gets into financial difficulty. If the insolvent tenant
was the original tenant and there was no guarantor, there is nothing the
landlord can do. He can forfeit the lease and recover his property, but the
shortfall between the current rental value of the property and the rent
reserved by the lease is a loss he has to bear. The loss resulting from the
falling market will be his loss. He has a right to prove in the tenant’s
insolvency, for however much or little that may yield.
The picture
changes again if the landlord has protected himself against the risk of the
tenant’s insolvency by requiring a guarantor to join in the lease. When the
rent payable under the lease is higher than the rental value of the property at
the time of the tenant’s default, the landlord’s financial interests may be
better served by looking to the guarantor than by taking possession of the
property and reletting it. Similarly, if the impecunious tenant is not the original
tenant but a person to whom the lease has been assigned, the landlord may look
to the original tenant for payment. When the lease was granted the original
tenant covenanted with the landlord to pay the rent and to do so throughout the
whole term of the lease. This included any increased rent payable under the
rent review provisions. In these cases the loss falls on the guarantor or the
original tenant, not the landlord.
Sometimes, in
post-assignment cases, the landlord’s protection may be achieved at an
unreasonably high price to others. The insolvency may occur many years after
the lease was granted, long after the original tenant parted with his interest
in the lease. He paid the rent until he left, and then took on the
responsibility of other premises. A person of modest means is understandably
shocked when out of the blue he receives a rent demand from the landlord of the
property he once leased. Unlike the landlord, he had no control over the
identity of assignees down the line. He had no opportunity to reject them as
financially unsound. He is even more horrified when he discovers that the rent
demanded exceeds the current rental value of the property.
Mounting
public concern at this post-assignment state of affairs led to the enactment of
the Landlord and Tenant (Covenants) Act 1995. In future, where a tenant
lawfully assigns premises demised to him he will be released from the covenants
falling to be complied with by the tenant of the premises.
However, the
principal provisions of the new Act do not apply to tenancies granted before
the Act came into force on January 1 1996. So this amelioration of a tenant’s
lot does not apply in the present case. In the present case the three
defendants are the original tenant, a first assignee which entered into direct
covenants with the landlord covering the rest of the term, and a guarantor for
the first assignee. A subsequent assignee, Prest Ltd, became insolvent. Because
of the fall in property values, the lease had no value. It was unsaleable. The
liquidator of Prest wished to have nothing to do with it. He disclaimed the
lease as onerous property. The defendants are liable for non-payment of the
rent and service and other charges unless the liquidator’s act in
disclaiming the lease ended their liability. That depends upon the
proper interpretation of the disclaimer provisions in the Insolvency Act 1986.
Lease and
the proceedings
In 1983 the
plaintiff, Hindcastle Ltd, leased second-floor office premises at 297 Oxford
Street in the west end of London to the first defendant Barbara Attenborough
Associates Ltd. The lease was dated October 20 1983 and was for 20 years. The
initial rent was £13,626 pa with periodic rent reviews, upwards only.
In May 1987
the lease was assigned to the second defendant, CIT Developments Ltd. On that
occasion, by a licence dated April 22 1987 CIT covenanted with the landlord to
pay the rent and perform the lessee’s covenants during the residue of the term.
The third defendant, Mr Patrick Whitten, was a director of CIT. He guaranteed
performance of CIT’s obligations for a period of 10 years from the date of the
lease.
CIT was not
tenant for very long. Two years later, in May 1989, CIT assigned the lease to
Prest Ltd. Thereafter the rent was reviewed upwards to £37,500 pa, nearly three
times the amount of the original rent. The increase was backdated to Christmas
Day 1988. None of the defendants took any part in the negotiations with the
landlord. On October 31 1992 Prest went into creditors’ voluntary liquidation
and on December 8 its liquidator gave notice of disclaimer of the lease. No one
applied for a vesting order.
In 1993 the
plaintiff landlord brought proceedings against all three defendants for unpaid
rent and other money falling due both before and after the date of the
disclaimer. On applications for summary judgment Mr Simon Goldblatt QC, sitting
as a deputy judge of the High Court, gave judgment for the plaintiff for just
over £50,000. The original tenant, Barbara Attenborough, then went into
compulsory liquidation and took no further part in the proceedings. The first
assignee, CIT, went into creditors’ voluntary liquidation and its liquidator
disclaimed CIT’s liability, if any, in respect of the lease. The Court of
Appeal, comprising Sir Stephen Brown P, Rose and Millett LJJ, dismissed an
appeal by CIT’s liquidator and Mr Whitten. The court applied the decision in Hill
v East & West India Dock Co (1884) 9 App Cas 448 and distinguished
the decision in Stacey v Hill [1901] 1 KB 660. The tension
between these decisions lies at the heart of this appeal.
Rights,
interests and liabilities of a tenant
Before turning
to the statute I should set the scene in one further respect. I must refer
briefly to some basic propositions concerning the typical rights, interests and
liabilities of a tenant in respect of property leased before the coming into
force of the 1995 Act. A tenant is under a liability to the landlord to
pay the rent and perform the tenant’s other covenants under the lease. This
obligation arises by virtue of privity of contract, in the case of the original
tenant. An assignee is under a similar liability so long as he holds the lease,
by virtue of privity of estate. If the assignee enters into a direct covenant
with the landlord his liability will also be by virtue of privity of contract,
in the terms of his covenant. That was the position of CIT in the present case.
A tenant
enjoys rights under a lease as well as being subject to liabilities. The
landlord covenants that the tenant will enjoy the property free from
disturbance. The landlord may undertake repairing obligations or obligations to
provide services. The rights of a tenant under these covenants will be
enforceable by him against the landlord, either by virtue of privity of
contract, or privity of estate, or both.
Each of the
liabilities of the tenant has a reverse side. A tenant is under a liability to
the landlord to pay the rent. The reverse side is that the landlord has a right
to be paid the rent. Similarly with the rights of a tenant: a tenant has a
right to quiet enjoyment. The reverse side is that the landlord is under a
liability to the tenant to afford quiet enjoyment.
A tenant may
enjoy rights, and be subject to obligations, against other persons as well as
the landlord. If he has sublet the property he will be entitled to rights and
subject to liabilities vis-à-vis the subtenant. The reverse side of
these rights and liabilities of the tenant as sublessor will be liabilities and
rights of the subtenant.
A tenant may
also owe obligations to persons who have no proprietary interest in the
property. Under general principles of subrogation a tenant will be obliged to
indemnify a person who has guaranteed payment of the rent. If a tenant is an
assignee of the lease he will normally be under an obligation to the assignor
to pay the rent and perform the tenant covenants in the lease, by virtue of the
covenant implied by section 77(1)(c) of the Law of Property Act 1925.
These liabilities of the tenant have, as their reverse side, a right enjoyed by
the guarantor or assignor against the tenant.
Finally, a
tenant has a proprietary interest in the property, namely the lease. This is a
legal estate, of which the tenant is the owner. The landlord owns the
reversion, expectant on the determination of that estate.
Statutory
disclaimer provisions
Sections 178
to 182 of the Insolvency Act 1986 are a group of sections governing the
disclaimer of onerous property by a liquidator of a company that is being wound
up. Similar provisions, in sections 315 to 321, apply to trustees in bankruptcy.
The differences between the two sets of provisions are not material for the
purposes of this appeal. The ancestor of the disclaimer provisions in their
present form is the Bankruptcy Act 1883, replaced subsequently by the
Bankruptcy Act 1914. Disclaimer in corporate insolvencies was introduced in the
Companies Act 1929. Again, and save as mentioned below, the differences between
the 1883 Act and its successors and the current statutory provisions are not
material for present purposes.
Section 178(2)
empowers a liquidator to disclaim any onerous property. Onerous property means
any unprofitable contract, and any other property of the company which is
unsaleable or not readily saleable or such that it may give rise to a liability
to pay money or perform any other onerous act. Subsection (4) sets out the
effect of a disclaimer. This is the crucial provision. It reads:
A disclaimer
under this section —
(a)
operates so as to determine, as from the date of the disclaimer, the rights,
interests and liabilities of the company in or in respect of the property
disclaimed; but
(b)
does not, except so far as is necessary for the purpose of releasing the
company from any liability, affect the rights or liabilities of any other
person.
Subsection (6)
spells out a further consequence of disclaimer:
Any person
sustaining loss or damage in consequence of the operation of a disclaimer under
this section is deemed a creditor of the company to the extent of the loss or
damage and accordingly may prove for the loss or damage in the winding up.
Where a
liquidator has disclaimed property an application may be made to the court for
an order vesting the disclaimed property in the applicant, or for an order for
the delivery of the property to the applicant. Under section 181(2), an
application may be made by:
(a)
any person who claims an interest in the disclaimed property, or
(b)
any person who is under any liability in respect of the disclaimed property,
not being a liability discharged by the disclaimer.
The court
cannot make an order under (b) except where it would be just to do so
for the purpose of compensating the person subject to the liability in respect
of the disclaimer. The effect of such an order is to be taken into account in
assessing, for the purposes of section 178(6), the extent of any loss or damage
sustained by any person in consequence of the disclaimer.
If an
underlessee or mortgagee of leasehold property takes a vesting order he is, in
short, required to stand in the shoes of the company. An underlessee or
mortgagee who declines to do so is excluded from all interest in the property.
If there is no underlessee or mortgagee willing to do so, the court may vest
the company’s estate or interest in the property in ‘any person who is liable …
to perform the lessee’s covenants in the lease’, and may do so freed and
discharged from all estates and incumbrances created by the company: see
section 182(3).
The
fundamental purpose of these provisions is not in doubt. It is to facilitate
the winding up of the insolvent’s affairs. There is a further purpose in
personal insolvency cases. A bankrupt’s property vests automatically in his
trustee. The disclaimer provisions operate to discharge the trustee in bankruptcy
from all personal liability in respect of the property: see section 315(3)(b).
Equally clear
is the essential scheme by which the statute seeks to achieve these purposes.
Unprofitable contracts can be ended and property burdened with onerous
obligations disowned. The company is to be freed from all liabilities in
respect of the property. Conversely, and hardly surprisingly, the company is no
longer to have any rights in respect of the property. The company could not
fairly keep the property and yet be freed from its liabilities.
Disclaimer
will, inevitably, have an adverse impact on others: those with whom the
contracts were made, and those who have rights and liabilities in respect of
the property. The rights and obligations of these other persons are to be
affected as little as possible. They are to be affected only to the extent
necessary to achieve the primary object: the release of the company from all
liability. Those who are prejudiced by the loss of their rights are entitled to
prove in the winding up of the company as though they were creditors.
I turn next to
consider the application of these provisions to the principal types of landlord
and tenant situations. I do so initially without reference to the decided
cases.
Disclaimer:
(1) where only a landlord and tenant are involved
The simplest
case is of a landlord and an insolvent tenant. No third parties are involved.
Disclaimer operates to determine all the tenant’s obligations under the
tenant’s covenants, and all his rights under the landlord’s covenants. In order
to determine these rights and obligations it is necessary, in the nature of
things, that the landlord’s obligations and rights, which are the reverse side
of the tenant’s rights and obligations, must also be determined. If the tenant’s
liabilities to the landlord are to be extinguished, of necessity so also must
be the landlord’s rights against the tenant. The one cannot be achieved without
the other.
Disclaimer
also operates to determine the tenant’s interest in the property, namely the
lease. Determination of a leasehold estate has the effect of accelerating the
reversion expectant upon the determination of that estate. The leasehold estate
ceases to exist. I can see no reason to question that this is the effect of
disclaimer when the only parties involved are the landlord and the tenant.
Disclaimer:
(2) where others have liabilities in respect of the lease
Thus far I
have addressed the case where, apart from the insolvent tenant, the only person
involved is the landlord. In such a case there is no scope for any rights or
liabilities to be preserved by para (b) of section 178(4). In order to
achieve the statutory objective of releasing the insolvent from liability, it
is necessary to determine all the rights of the landlord.
The matter stands
differently where the landlord has the benefit of covenants from a guarantor.
In this situation the liabilities of the insolvent tenant to the landlord are
ended, but not so as to affect the obligations of the guarantor to the
landlord. That is the effect of para (b) of section 178(4). Similarly,
where the insolvent tenant is an assignee and the landlord has the benefit of
the covenants of the original tenant: the original tenant’s obligations to the
landlord are not affected.
Also ended is
the obligation of the insolvent tenant to indemnify the guarantor but, here
again, not so as to affect the mutual rights and obligations of the landlord
and the guarantor. Termination of the liabilities of the insolvent does not
carry with it any legal necessity to determine the guarantor’s obligations to
the landlord. The right of recourse of the guarantor against the insolvent can
be effectually determined without, at the same time, releasing the guarantor
from his liability to the landlord. His liability to the landlord can survive
extinguishment of his right of recourse. Similar considerations apply to the
liabilities of the original tenant where the insolvent tenant is an assignee.
I shall have
to enlarge upon these points later when considering the decision in Stacey
v Hill [1901] 1 KB 660. But there is a recondite point which must be
faced and resolved here as part of the process of interpreting the sections as
a whole. It concerns what happens to the lease in this tripartite situation.
The point may be stated shortly. A lease either exists, or it does not. If
disclaimer has the effect of ending the lease, no further rent can become due,
and so the guarantor and original tenant cannot be called upon. It is a
contradiction in terms for rent to accrue for a period after the lease has
ended. If, however, disclaimer does not end the lease, so that rent continues
to accrue, what happens to the lease, bearing in mind that the insolvent’s
interest in the property has been ended? Possibilities are that the lease vests
in the Crown as bona vacantia, or that it remains in being but without
an owner, or that it remains vested in the tenant but in an emasculated form.
Each of these possibilities raises its own problems.
The starting
point for attempting to solve this puzzling conundrum is to note that the Act
clearly envisages that a person may be liable to perform the tenant’s covenants
even after the lease has been disclaimed. A vesting order may be made in favour
of such a person: see section 182(3), and see also section 181(2)(b).
The proper legal analysis has to be able to accommodate this conclusion. The
search, therefore, is for an interpretation of the legislation which will
enable this to be achieved as well as fulfilling the primary purpose of freeing
the insolvent from all liability while, overall, doing the minimum violence to
accepted property law principles.
If the problem
is approached in this way the best answer seems to be that the statute takes
effect as a deeming provision so far as other persons’ preserved rights and
obligations are concerned. A deeming provision is a commonplace statutory
technique. The statute provides that a disclaimer operates to determine the
interest of the tenant in the disclaimed property but not so as to affect the
rights or liabilities of any other person. Thus when the lease is disclaimed it
is determined and the reversion accelerated but the rights and liabilities of
others, such as guarantors and original tenants are to remain as though
the lease had continued and not been determined. In this way the determination
of the lease is not permitted to affect the rights or liabilities of other
persons. Statute has so provided.
The vesting
order provisions do not run counter to this analysis. If a vesting order is
made, the court order operates by virtue of the statute to vest the lease in
the person named on the terms fixed by the court. That the lease may have
ceased to exist meanwhile is neither here nor there. If necessary, there will
be a statutory recreation.
If no vesting
order is made and the landlord takes possession the liabilities of other
persons to pay the rent and perform the tenant’s covenants will come to an end
as far as the future is concerned. If the landlord acts in this way, he is no
longer merely the involuntary recipient of a disclaimed lease. By his own act
of taking possession he has demonstrated that he regards the lease as ended for
all purposes. His conduct is inconsistent with there being a continuing
liability on others to perform the tenant covenants in the lease. He cannot
have possession of the property and, at the same time, claim rent for the
property from others.
The result is
not without artificiality. Unless a vesting order is made, after disclaimer
there will be no subsisting lease, and the property will be vacant and empty.
But if the landlord enters upon his own property, he will thereby end all
future claims against the original tenant and any guarantor, not just claims in
respect of the shortfall between the lease rent and the current rental value of
the property. It must be recognised, however, that awkwardness is inherent in
the statutory operation: extinguishing (‘determining’) the lease so far as the
bankrupt is concerned, but leaving others’ rights and liabilities in respect of
the same lease affected no more than necessary to achieve the primary purpose.
Disclaimer:
(3) where other persons have an interest in the property
In both
instances considered so far no person had acquired a proprietary interest under
the lease before disclaimer. The third typical case is where a third party has
acquired such an interest. The prime example is a subtenant. I can deal with
this very shortly. In order to free the tenant from liability, it is necessary
to extinguish the landlord’s rights against the tenant and also the subtenant’s
rights against the tenant. The tenant’s interest in the property is determined,
but not so as to affect the interest of the subtenant. Determination of the
subtenant’s interest in the property is not necessary to free the tenant from
liability. Hence the subtenant’s interest continues. No deeming is necessary to
produce this result. Here the deeming relates to the terms on which the
subtenant’s proprietary interest continues. His interest continues unaffected
by the determination of the tenant’s interest. Accordingly the subtenant holds
his estate on the same terms, and subject to the same rights and obligations,
as would be applicable if the tenant’s interest had continued. If
he pays the rent and performs the tenant covenants in the disclaimed lease, the
landlord cannot eject him. If he does not, the landlord can distrain upon his
goods for the rent reserved by the disclaimed lease or bring forfeiture
proceedings. In practice, matters are likely to be brought to a head by one of
the parties making an application for a vesting order.
Earlier
legislation and the authorities: before 1862
I turn next to
the earlier legislation and the decided cases, with particular reference to the
position of guarantors. Before 1869 the assignees of a bankrupt, who were the
statutory predecessors of the trustee in bankruptcy, had to elect whether to
accept a leasehold interest. The statute of 49 Geo 3, c 121, section 19,
provided that if the assignees elected to accept the lease, ‘the bankrupt shall
not … be liable to pay the rent accruing due after such acceptance …’. In Inglis
v Macdougal (1817) 1 Moore CP Rep 196 the court held that,
notwithstanding this discharge of the principal debtor, a surety remained
liable. LCJ Gibbs said, at p198:
The very
object of taking sureties is to provide against the insolvency of the
principal; and the object of the insolvent acts and statutes applying to
bankrupts is to discharge debtors and bankrupts from obligations, but not to
disturb the claims of creditors on other persons, as sureties, from the failure
of such debtors or bankrupts.
In Tuck
v Fyson (1829) 6 Bing 321 the same approach was adopted to the language
of the later Act of 6 Geo 4, c 16, section 75.
From 1869
to 1883
The Bankruptcy
Act 1869 (32 & 33 Vict c 71) introduced machinery enabling the trustee, for
the first time, to disclaim leases and other onerous property. Section 23
stated the consequences of
determined. If the property was a lease, it was ‘deemed to have been
surrendered’. If the property comprised shares in a company, they were deemed
to be forfeited. Any person ‘interested in any disclaimed property’ could apply
to the court for an order for delivery up of the property.
From an early
date the court robustly declined to give effect to the literal construction of
these words. On ordinary principles, if a lease is surrendered no further rent
is payable. But in Smyth v North (1872) LR 7 Ex 242 the Court of
Exchequer held that section 23 affected only the relationship of the bankrupt
and the lessor, and not third parties. So where the bankrupt was the assignee
of a lease, disclaimer did not affect the liability of the original tenant.
The Court of
Appeal took the same view in Re Levy, ex parte Walton (1881) 17 ChD 746.
Sir George Jessell MR, at p753, considered the results of a literal
construction of the section would be so monstrous that such a construction must
be considered absurd. He stated, at p754:
… the section
must be read as meaning that the property is to be disclaimed inter se,
so as not to interfere with the rights of third parties, and only for the
benefit of the bankrupt and his estate; so far, that is, as respects any rights
and liabilities in relation to it as between the trustee and the person who is
entitled to the benefit of those obligations which attach to the property; so
far only as is necessary in order to relieve the bankrupt and his estate and
the trustee from liability.
(Emphasis
supplied.)
The words I
have emphasised may well be the source of the express provision to the same
effect included in all the disclaimer legislation from 1883 onwards. The
precise words in section 55(2) of the Bankruptcy Act 1883 were ‘… but shall
not, except so far as is necessary for the purpose of releasing the bankrupt
and his property and the trustee from liability, affect the rights or
liabilities of any other person’.
James LJ
adverted to the position of a surety of a disclaimed lease. He posed a
question, at pp755–756, in terms which made plain his unstated answer:
Take the case
of a lease with a surety for the payment of rent. Could it ever have been
intended that the bankruptcy of the lessee was to release the surety?
This question
had to be answered in Harding v Preece (1882) 9 QBD 281. The
Queen’s Bench Divisional Court held that both the original tenant and the
surety for a bankrupt assignee of a lease remained liable for the rent of the
lease after it had been disclaimed.
In Hill
v East & West India Dock Co (1884) 9 App Cas 448 your lordships’
House considered section 23. The assignee of a lease had become bankrupt and
his trustee had disclaimed the lease. Your lordships decided that the original
tenant remained liable for rent notwithstanding the deemed surrender of the lease.
Lord Bramwell disagreed vigorously. He adhered to the dissenting opinion he had
expressed in Smyth v North (1872) LR 7 Ex 272. He was
oppressed by the injustice of a construction of the Act which meant that the
original tenant had to continue paying rent and yet never be able to benefit
from the property. The original tenant could not apply for possession under the
statute because, no longer having a proprietary interest, he ceased to be
‘interested’ in the property.
After 1883
When your
lordships’ House heard the appeal in Hill v East & West India
Dock Co, the Act of 1883 had already received the Royal Assent. At the
beginning of his speech Earl Cairns described the new statute as much more
explicit. He said, at p453, that the question raised by the appeal was
therefore not one which could very well occur again. And it is to be noted, in
passing, that the injustice which so troubled Lord Bramwell under the earlier
legislation did not arise under the new disclaimer provisions. Under the 1883
Act applications for vesting orders were not confined to persons having a
proprietary interest. Under the 1883 Act and all subsequent Acts, such an
application might be made by a person who was under any liability in respect of
the disclaimed property which was not discharged by the Act.
It is now over
a century since the disclaimer provisions in their present form were first
enacted. In that time reported decisions on the legislation have been few. I
mention the leading cases. In In re Finley, ex parte Clothworkers’ Co
(1888) 21 QBD 475 the Court of Appeal held that the landlord of a disclaimed
lease which had been mortgaged by the bankrupt was entitled to apply for an
order vesting the lease in the mortgagee. The court comprised Lord Esher MR,
Lindley and Bowen LJJ. Delivering the judgment of the court, Lindley LJ
analysed the effect of the Act in similar terms to those set out above in my
categories (1) and (3).
A case in
category (2), concerning the liability of a guarantor, came before the Court of
Appeal, comprising AL Smith MR, Collins and Romer LJJ, in Stacey v Hill
[1901] 1 KB 660. The defendant had guaranteed payment of the rent by the
tenant. The tenant became bankrupt and his trustee disclaimed the lease. The
landlord did not resume possession. The court held that the guarantor was not
liable for rent after the lease was disclaimed. I shall examine the reasoning
of this decision below.
In recent
years the most common circumstance in which landlords insist on guarantors is
when the tenant is a company. The directors are required to assume personal
liability in case the company defaults. It was not until 1929 that liquidators
of companies were given power to disclaim onerous property. Under the Companies
Act 1929 the liquidator required the leave of the court in all cases before he
could disclaim. In 1932 Maugham J, in Re Katherine et Cie Ltd [1932] 1
Ch 70, used this as a means of circumventing the decision in Stacey v Hill.
Disclaimer would have caused loss to the landlord, because it would have
released the guarantor. So the judge refused to permit the liquidator to
disclaim. Thereafter, as noted by Millett LJ in the present case ([1995] QB 95*
at p100), the court normally refused leave to disclaim where this would
prejudice the lessor by discharging the surety from liability. This practice
continued until the 1986 Act brought corporate insolvency into line with
personal insolvency regarding leave to disclaim. Now the landlord generally has
no opportunity to object.
*Editor’s
note: Also reported at [1994] 2 EGLR 63
Finally, in Warnford
Investments Ltd v Duckworth [1979] Ch 127 Sir Robert Megarry V-C
held that the original tenant remained liable after the liquidator of an
insolvent assignee disclaimed the lease. He applied the decision in Hill
v East & West India Dock Co (1884) 9 App Cas 448 and distinguished Stacey
v Hill [1901] 1 KB 660.
Decision
in Stacey v Hill
Four different
grounds have been put forward in support of the decision in Stacey v Hill.
None is satisfactory. The first, and broadest, ground is that on disclaimer the
lease determines and no rent can subsequently become due under it. This is the
first ground of the decision of AL Smith MR and Collins LJ: see [1901] 1 KB
660, at pp664–665. If well founded, this ground would apply also to an original
tenant. He would be discharged where an assignee becomes insolvent and the
lease is disclaimed. That, indeed, was the primary argument of Mr Oliver QC
before your lordships’ House. Mr Oliver submitted there is no logical
distinction between the position of the original tenant and the position of a
guarantor. The Warnford Investments case was wrongly decided. Stacey
v Hill is to be preferred to Hill v East & West India Dock
Co.
I agree that
such differences as there are between an original tenant and a guarantor are
not material on this point. Post-disclaimer, both are liable or neither. I also
agree that either the 1883 Act left the existing law clarified but unchanged,
in which case both the original tenant and the guarantor remained liable
notwithstanding disclaimer, or the Act changed the law and relieved original
tenants and guarantors alike from liability post-disclaimer.
Where I am
unable to agree is that the reasoning in Stacey v Hill on
this point is to be preferred. The difficulty I have is that this reasoning
flies in the face of the plain language of the statute. The reasoning fails to
give effect to para (b) of section 178(4) and its evident purpose. The
1883 Act made explicit what Hill v East & West India Dock Co
held was implicit in the 1869 Act.
It must be
recognised that underlying the victorian decisions was a rigorous belief in the
sanctity of contracts freely entered into. A century later there is more
recognition of inequality of bargaining power, especially where consumers are
involved. But the fact remains that parliament incorporated the judicial
interpretation of the 1869 Act into the 1883 Act, in terms which have been
continued by parliament to this day, most recently in 1986.
The second
line of reasoning advanced in support of the decision in Stacey v Hill
[1901] 1 KB 660 prays in aid the principle that the release of a debtor
discharges his guarantor. Collins LJ said, at p666, that: ‘the liabilities of a
surety are in law dependent upon those of the principal debtor …’. As a general
proposition this is true. But, here again, the conclusion sought to be drawn
fails to take account of the saving words in para (b) of subsection (4).
Disclaimer operates to determine the insolvent’s liabilities under the lease,
but subject to a qualification: not so as to affect the rights or liabilities
of other persons. Parliament has provided that the general rule shall not
apply. The release of the insolvent debtor is not to discharge a surety from
his liabilities to the lessor.
The third
ground is that the exception built into para (b) applies in the case of
a guarantor. This was relied upon by AL Smith MR and Romer LJ. In order to
release the insolvent from all his liabilities in respect of the lease, it is
necessary to release the guarantor from his obligations to the landlord. As
already explained, I am unable to agree. In order to release the insolvent it
is sufficient to extinguish the insolvent’s liability to indemnify the
guarantor. It is not necessary to go further, and release the guarantor from his
liability to the lessor.
The fourth
ground calls for fuller treatment. This ground was touched upon by Romer LJ,
and developed more fully by Millet LJ in the present case. I can summarise the
reasoning as follows. Unlike an original tenant, who undertook liabilities
without any right of recourse against anyone at that time, a guarantor’s right
to be indemnified by the principal debtor is inherent in the relationship
between them. His right of indemnity arose at the moment of creation of the
guarantee liability, and is to be regarded as inseparable from it. Millet LJ
[1995] QB 95, at p105E said:
It would …
require very clear statutory language to deprive a surety of his right to
indemnity while leaving his liability unimpaired. No such language is to be
found in subsection (4)(b).
Romer LJ
[1901] 1 KB 660, at p667 said:
The section
does not operate so as to cast upon third persons liabilities different in kind
from what they were under before the disclaimer.
The law, more
specifically equity, has traditionally shown a tender regard for guarantors.
The law has gone to great lengths to see that guarantors are not called upon to
discharge burdens different from those they originally undertook. There are
some who believe that on occasions the law has gone too far, attaching more
importance to form than substance. In the present context it is essential to
have in mind that the fundamental purpose of an ordinary guarantee of another’s
debt is that the risk of the principal debtor’s insolvency shall fall on the
guarantor and not the creditor. If the debtor is unable to pay his debt when it
becomes due, his bankruptcy does not release the guarantor. The discharge of a
bankrupt releases him from all his bankruptcy debts, but this does not release
a guarantor for the bankrupt: see section 281(1) and (7) of the 1986 Act. The
very object of giving and taking a guarantee would be defeated if the position
were otherwise. So the guarantor remains liable to the creditor. The guarantor
has a right of proof, for whatever that may be worth, as a creditor of the
debtor’s estate.
The disclaimer
machinery in the insolvency statutes achieves the same result in the case of
guarantees of leases. The guarantor remains liable to the landlord. The
guarantor loses his right to an indemnity from the insolvent tenant, but in
place the statute gives him a right to prove as a creditor of the insolvent
tenant’s estate. Thus there is no question of the guarantor’s right to an
indemnity being confiscated. After disclaimer the guarantor’s position is no
different from the position of any unsecured guarantor of a debtor who becomes
insolvent. Had there been no disclaimer the guarantor’s right of indemnity
would have led only to a right to prove against the insolvent’s estate. The
disclaimer provisions do not change this. The Act leaves the loss consequent
upon the tenant’s bankruptcy where the parties to the guarantee intended. In
addition, the guarantor can take steps to obtain some return from the property
by applying to the court for a vesting order, if necessary seeking an extension
of time for this purpose. Or he may now be entitled to an overriding lease
under section 19 of the Landlord and Tenant (Convenants) Act 1995, despite
subsection (7). Section 19 is one of the few sections in the 1995 Act which
applies to existing leases.
Way ahead
There are
three possible courses open to your lordships. One is to depart from Hill
v East & West India Dock Co and to decide that disclaimer discharges
the original tenant and the guarantor. The second course is to overrule Stacey
v Hill and hold that disclaimer does not affect the obligations of
original tenant or guarantor. The third course is to leave the two decisions
standing side by side. I have given my reasons for rejecting the first course.
The choice lies between the second and third courses.
This is the
difficult part of the appeal. The decision in Stacey v Hill is
unsatisfactory. It has been much criticised. In WH Smith Ltd v Wyndram
Investments Ltd [1994] 2 BCLC 571, at p576, Judge Paul Baker QC, sitting as
a judge of the High Court, observed that the decision has failed to win
universal acceptance. It has not been followed in Ireland: see Maurice
Tempany v Royal Liver Trustees Ltd [1984] BCLC 568. In the textbooks
it has been doubted or embraced with a marked lack of fervour: see for
instance, Rowlatt on Principal and Surety, 4th ed (1982), pp173–174; Gower’s
Modern Company Law, 4th ed (1979) p737, note 69; Buckley on the
Companies Acts, 14th ed (1981), vol 1 pp753–754: and Williams and Muir
Hunter on Bankruptcy, 19th ed (1979), pp388–389, at p394.
However,
although criticised and distinguished and circumvented, the decision has stood
as a decision of the Court of Appeal for over 90 years. This is a long time.
The decision has been acted upon frequently after leases have been disclaimed.
The disclaimer provisions have been re-enacted on several occasions from the
Bankruptcy Act 1914 to the 1986 Act, but parliament has not intervened.
These are
important considerations, but they should be seen in perspective. Disclaimer is
an intermittent rather than a constant problem, associated with periods of
recession when leases are unsaleable.
A further
important factor is that it would not be right for your lordships’ House to
overrule Stacey v Hill if this would expose guarantors to more
extensive liabilities than they reasonably anticipated when signing their
guarantees. Prospective overruling is not yet a principle known in English law.
I do not
believe that overruling Stacey v Hill would have this
consequence. I am not persuaded that people have been entering into guarantees
in the expectation they will not be liable in the very circumstance at which
the guarantee is primarily aimed: the insolvency of the person whose
obligations are being guaranteed. Professionally drawn guarantees habitually
include express provision protecting landlords if the lease is disclaimed.
Those unversed in the finer points of bankruptcy law will not have had Stacey
v Hill in mind when undertaking their obligations. They would expect to
have to pay the rent if the tenant, the principal debtor, became bankrupt.
Ultimately
what has persuaded me and dispelled any lingering hesitation is the frankly
absurd results produced if Stacey v Hill and Hill v East
& West India Dock Co were left standing uneasily side by side. First,
in practical terms, an original tenant guarantees that the
practical justification for distinguishing his position from that of a formal
guarantor.
Second, the
present case is illustrative of the tortuous distinctions which would follow.
According to Stacey v Hill, a surety’s liability is discharged
when the principal debtor’s obligation to indemnify him is determined by
disclaimer of the lease. But this reasoning would not operate to release Mr
Whitten in the present case. He guaranteed the obligations of CIT, not Prest.
The right of indemnity which then arose was against CIT. That right, which is
the all important right according to Stacey v Hill, was not
determined when the lease was disclaimed by the liquidator of Prest. The
disclaimer operated to determine Mr Whitten’s right of indemnity against Prest,
but that right arose after he had given the guarantee. Determination of a right
of indemnity arising later does not bring down the guarantee because it is not
an inherent part of the guarantee. So the end result, on this footing, would be
that disclaimer operates to discharge a guarantee if the disclaimer is in the
insolvency of the principal debtor, but not if the disclaimer is in the
insolvency of an assignee.
This would
make no sort of legal or commercial sense. This would mean that directors who
guarantee their company’s obligations would not be liable if their own
company became insolvent while tenant, but they would be liable if an assignee
from their company encountered financial difficulties while tenant. Mr Whitten,
as guarantor of CIT’s obligations, remains liable to the landlord. According to
Stacey v Hill, had he been a guarantor of Prest’s liabilities,
the disclaimer would have released him. What sort of a law would this be?
In the present
case the liquidator of CIT disclaimed CIT’s liabilities under the lease after
the rents and other amounts had fallen due. The consequences of this disclaimer
had it preceded the accrual of the liabilities were not explored in argument.
But the possibility of a disclaimer by a non-tenant affecting the guarantor’s
position underlines the curious distinctions and evident anomalies arising if Stacey
v Hill and Hill v East & West lndia Dock Co were left
standing together.
At the outset
I drew attention to the practical mischiefs which can arise when former tenants
are held liable for defaults by subsequent assignees. These mischiefs do not
assist the appellants. Stacey v Hill does not have the effect of
striking down liabilities by reason of the acts of assignees over whose
identity a guarantor has no control. Stacey v Hill has the
paradoxical effect of discharging the guarantee in a circumstance at which it
was primarily aimed and when there are no such mischiefs, but of not
discharging the guarantee in a more remote circumstance where the mischiefs
following assignments may arise.
I am unable to
accept that this is, or should be, the state of the law. It would lack any
rational or practical basis. It would defy coherent explanation. It would
defeat the parties’ intentions. I would overrule Stacey v Hill.
Conclusion
There remains
one last point. The appellants contended that on the particular wording of the
licence of April 22 1987 neither CIT nor Mr Whitten were liable once the lease
had been disclaimed. CIT’s obligation was to pay rent ‘during the residue of
the term created by the Lease’, and Mr Whitten’s guarantee was to run ‘during
the continuance of the Lease’. Under clause 5(2) Mr Whitten could be required
to take up a new lease in certain circumstances following a disclaimer. The
submission was that the parties had contracted on the footing that on
disclaimer the lease would end for all purposes, and that the quoted words
should be construed accordingly. I cannot accept this. The put option in clause
5(2) was exercisable after disclaimer or other event brought an end to the
lease ‘so far as concerns the lessee for the time’. This wording provides no
support for the view that the parties thought that disclaimer would end the
lease so far as CIT and Mr Whitten were concerned. I would dismiss this appeal.
Lords Keith
of Kinkel, Griffiths and
Browne-Wilkinson agreed that the appeal should be dismissed and
did not add anything.