Landlord and tenant — Covenant by tenant not to do or permit or suffer to be done any act or thing which should be illegal — Forfeiture order made by magistrates in respect of obscene films, magazines and books kept for publication at tenant’s shop, although tenant was not himself prosecuted for an offence under the Obscene Publications Act 1959 — Landlords granted order for possession in Order 14 proceedings — Tenant now appealed against deputy judge’s decision upholding possession order — Held by Court of Appeal that tenant was in breach of covenant; that the breach was incapable of remedy; and that no criticism could be made of the deputy judge’s refusal to grant tenant relief against forfeiture — Authorities on breaches incapable of remedy reviewed — Appeal dismissed
This was an
appeal by Denis Gerald Holloway against a decision of Sir Douglas Frank QC,
sitting as a deputy judge of the Queen’s Bench Division, dismissing an appeal
from an order made by Master Lubbock under RSC, Order 14, ordering the tenant
to give up possession to the landlords, Dunraven Securities Ltd, of a shop and
basement at 34 Greek Street, Westminster. The order under Order 14 was made on
the ground of failure to pay rent and of breach of covenant.
J Davies
(instructed by Adrian James & Co) appeared on behalf of the appellant; H A
P Picarda (instructed by Brecher & Co) represented the respondents.
Giving
judgment, STEPHENSON LJ said: This is an appeal by Mr Holloway, the defendant,
against an order made by Sir Douglas Frank, sitting as an additional judge of
the High Court of Justice, Queen’s Bench Division, on January 22 of this year.
By that order he dismissed the defendant’s appeal from an order of Master
Lubbock made on December 17 of last year, ordering the defendant to give the plaintiffs,
Dunraven Securities Ltd, possession of a shop and basement at 34 Greek Street,
Westminster, and ordering also the payment of some mesne profits. That order
was made under Order 14 on the ground of failure to pay rent and breach of a
covenant in, to me at any rate, a somewhat unusual form in the lease which the
defendant had taken from the plaintiffs.
That lease was
a lease of the premises of the shop and basement in Greek Street for 20 years
from September 29 1977. In that lease there was first of all a covenant to pay
the rent and additional rent reserved thereby in the manner therein specified,
and that rent was a rent which went up to £3,250 after starting at a lower
figure. There was also a covenant:
Not to do or
permit or suffer to be done in or upon the demised premises any act or thing
which shall be illegal or which is or may be or become a nuisance damage
annoyance or inconvenience to the landlord or the tenants or occupiers of any
other adjoining premises or the neighbourhood.
So, by that
covenant the defendant had promised that he would not do or permit or suffer to
be done in these premises any act or thing which should be illegal.
That is
exactly, on the evidence, what he did. He did or permitted an illegal act; he
committed an offence against the Obscene Publications Act of 1959, section 2.
He was not prosecuted for that offence; he was not convicted of an offence
under that section, but he was the subject of an order made by the magistrates
at Bow Street on May 13 1980. When I say that he was made the subject of an
order, what happened was that the manager of the business which was carried on
on the defendant’s behalf at his premises was summoned to show cause why three
8 mm films, 138 magazines and 106 books, which had been seized under section 3
of the Obscene Publications Act 1959 as being obscene and kept for publication
for gain, should not be forfeited and, the manager having failed to show cause
why they should not, a forfeiture order was made by the magistrates on that
date.
That section,
section 3, provides first of all by subsection (1) that:
If a justice
of the peace is satisfied by information on oath that there is reasonable
ground for suspecting that, in any premises in the petty sessions area for
which he acts, or on any stall or vehicle in that area, being premises or a
stall or vehicle specified in the information, obscene articles are, or are
from time to time, kept for publication for gain, the justice may issue a
warrant
and so on.
Then, by
subsection (3):
Any articles
seized under subsection (1) of this section shall be brought before a justice
of the peace acting for the same petty sessions area as the justice who issued
the warrant, and the justice before whom the articles are brought may thereupon
issue a summons to the occupier of the premises or, as the case may be, the
user of the stall or vehicle, to appear on a date specified in the summons
before a magistrates’ court for that petty sessions area to show cause why the
articles or any of them should not be forfeited; and if the court is satisfied,
as respects any of the articles, that at the time when they were seized they
were obscene articles kept for publication for gain, the court shall order
those articles to be forfeited.
That is what
this magistrates’ court did.
They could not
have made that order unless they had been satisfied that these articles were
obscene articles kept for publication for gain, and to keep an obscene article
for publication for gain is an offence under section 2 of the Act. In those circumstances
I have been unable to accede to Mr Davies’ argument on behalf of the defendant
that no illegal act was committed by him.
Mr Davies has
not sought to say that the defendant was not responsible for his manager’s act
in keeping these obscene articles for publication for gain; but he has said:
Well, he was
not proceeded against himself for committing that offence; he was not convicted
of an offence under section 2 and therefore he did not do an illegal act or
permit or suffer an illegal act to be done.
That, I am
afraid, strikes me as a non sequitur. The unappealed order of the
magistrates could not have been made unless an offence had been committed at
these premises, and once it is conceded that the offence committed at these
premises was an offence for which the defendant was responsible, it seems to me
to follow as night the day that he was in breach of this covenant.
There then
arises the question whether the breach was capable of remedy. The notice which
was served under section 146 of the Law of Property Act 1925 did require the
defendant to remedy this breach. On the authorities, if the breach was
incapable of remedy it need not have done so; but it did, and the second
question which the learned deputy judge had to decide, having, in my judgment,
rightly decided that there was a breach of this covenant, was: was that breach
capable of remedy? He held that it was
not.
Perhaps I
should say, in justice to Mr Davies’ argument, and dealing with his submission
that no illegal act had been done or committed by the defendant, that he
referred us to the case of Cox v Stinton [1951] 2 KB 1021, in
which this court held that a forfeiture under the similar proceedings of the
1857 Obscene Publications Act was a peculiar procedure and did not involve the
commission of any criminal offence; but it is quite plain that what was being
said there by Lord Goddard CJ was that the proceedings under the 1857 Act were
different from any other class of proceedings which come before justices,
because although justices make an order for destruction no offence is created
by the Act. That appears to have been so; no offence was created by the 1857
Act, but the 1959 Act differs in that respect because, as I have pointed out,
it does create an offence which is a prerequisite of the exercise of the
forfeiture jurisdiction of the justices under section 3.
The authority,
binding on this court, of Rugby School (Governors) v Tannahill
[1935] 1 KB 87 does, I think, establish first of all that if a breach is
incapable of remedy, then notice does not require it to be remedied; but secondly
that a covenant not to use premises for immoral purposes is a covenant which is
incapable of remedy.
That case has
been followed in three other authorities; one is Egerton v Esplanade
Hotels, London, Ltd [1947] 2 All ER 88, which was not cited to us; and two
which were, Hoffman v Fineberg and Glass v Kencakes Ltd.
In Hoffman v Fineberg [1949] 1 Ch 245 Harman LJ had to deal with
a tenant who had been convicted of using his premises for gaming; he followed
the decision of this court in the Rugby School (Governors) case and
decided that the breach was incapable of remedy. But he did point out that it
was not every criminal offence which would necessarily be a breach incapable of
remedy, although the illustration which he gave at pp 256 and 257 of his judgment
is not, I think, helpful to the appellant. He was clearly of the opinion that
any serious criminal offence would constitute a breach incapable of remedy if
it was committed in relation to the tenant’s premises.
The last case
to which Mr Davies referred us was the decision of Paull J in Glass v Kencakes
Ltd [1966] 1 QB 611, in which the facts were very much more favourable to
the tenant than are the facts of this case. There a tenant had a house of
considerable size in Queensway, and one subtenant had used part of that house
for immoral purposes without her knowledge. As soon as she got to know of it
she took steps to get the subtenant’s lease ended and in those circumstances
the learned judge came to this conclusion. He said at p 629:
Having
considered these authorities
these are the
authorities to which I have already referred, with one further authority to
which I have not referred
I think the
following propositions may be stated: (1) The mere fact that the breach
complained of is a breach of user by a subtenant contrary to a covenant in the
lease does not render the breach incapable of remedy. If one of the tenants of
these flats in Queensway had, unknown to the defendants, carried on a small
business of dress-making in the flats, I would hold without hesitation that
breach was capable of remedy so far as the defendants are concerned, but it may
be that the remedy would have to consist not only of stopping the tenant from
carrying on that business but of bringing an action for forfeiture, it being then
left to the court to decide whether the particular tenant should be granted
relief. (2) The fact that the business user involves immorality does not in
itself render the breach incapable of remedy, provided that the lessees neither
knew of nor had any reason to know of the fact that the flat was being so used
I emphasise
that proviso.
The learned
judge went on:
The remedy in
such a case, however, must involve not only that immediate steps are taken to
stop such a user so soon as the user is known, but that an action for
forfeiture of the subtenant’s lease must be started within a reasonable time.
If therefore the lessee has known of such a breach for a reasonable time before
the notice is served, the breach is incapable of remedy unless such steps have
been taken. (3) It does not follow that such a breach is always capable of
remedy. All the circumstances must be taken into consideration. For example, if
the notice is not the first notice which has had to be served, or if there are
particularly revolting circumstances attaching to the user, or great publicity,
then it might well be that the slate could not be wiped clean, or, to use
another phrase, the damage to the property might be so great as to render the
breach incapable of remedy.
It is quite
clear that the learned judge’s finding that that tenant’s particular breach of
covenant was capable of remedy and was in fact remedied within a reasonable
time, was based on her innocence — the fact that she had no knowledge of the
immoral user of these premises, a factor which cannot be said to be present
here in view of Mr Davies’ concession, and indeed in view of all the evidence,
to some of which I shall refer.
But Mr Davies
does rely on that authority for the statement that all the circumstances must
be taken into consideration in seeing whether the slate can be wiped clean of
the breach; he says that you must look at all the circumstances, at the
premises, at the nature of the premises and the area in which they are, before
deciding whether a breach which might at first sight look, on the authorities,
to be incapable of, remedy, is really irremediable or is one which can be
remedied.
In this case
instructions had been given to the manager by the defendant, as both the
manager and the defendant swear, that he was not to keep on the premises, or
try to sell from the premises, any of the sorts of matters which were the
subject of the magistrates’ forfeiture order. But it seems to me that there are
no factors of the kind which led Paull J to distinguish the case before him
from such cases as Rugby School (Governors) v Tannahill, and in
my judgment the learned deputy judge was quite right to hold that this breach
was incapable of remedy.
Mr Davies’
submissions about that run into his submissions that this is a case in which
the defendant should be granted the relief from forfeiture, which the learned
deputy judge also refused him in dismissing his appeal against Master Lubbock’s
order; and I consider the evidence of all the circumstances in relation to both
matters, the irremediability of the breach and the question of relief against
forfeiture.
The first
matter to be observed is that at the very start it came to the plaintiffs’
knowledge that the defendant was intending to use these
permission of the plaintiffs. Immediately preceding the tenant’s covenant ‘not
to do or permit or suffer to be done in or upon the demised premises any act or
thing which shall be illegal’ was a covenant not to carry on or permit to be
carried on upon the demised premises any trade, business or profession other
than that of a retail shop and ancillary office and storage. That was the user
of the premises which was authorised by this 20-year lease, and at the very start
the plaintiffs’ solicitors wrote on November 21 1977, the lease dating from
September 29 but being, I think, actually executed on November 16, five days
earlier, as follows:
It has come to
our clients’ attention that notices are affixed to the exterior of this
property indicating the intention shortly to open from the premises a ‘Sex
Shop’.
In the course
of negotiations for the lease your client unequivocally represented that he
required the premises for the sale of old and modern prints, old books and small
objets d’art. If our clients had been aware of your client’s true
intention in relation to the property, no lease would have been granted to him.
Your client’s proposed use of the premises will undoubtedly have a harmful
effect on the value of the property to our clients as an investment.
We require,
therefore, please, an immediate assurance that the premises will solely be used
for the purpose represented or some other innocuous retail use in accordance
with the lease provisions,
and then there
is a reference to the notice having been fixed without consent.
To that the
solicitors for the defendant replied on December 5, saying:
You will
recall that when the writer spoke to your Mr Fireman during the course of
agreeing the terms of the lease that you expressed the view that one did not
tend to be too fussy in that area. We would say that our client has taken a
number of substantial shops in London and that landlords are generally
accepting that these are good tenants who more often than not pay their rent
more promptly than other tenants. We are arranging for plans relating to the
sites (sic) to be sent for formal approval.
That produced
a further letter from the plaintiffs’ solicitors dated December 8 saying:
Thank you for
your letter of the 5th inst. Our Mr Fireman is still of the view that one
cannot be too fussy regarding the user clause of a lease in Soho. This private
remark made during the course of a lengthy conversation is however scarcely
relevant. Your clients represented that they would be using the shop for a
specific trade. There can be little doubt whatsoever that your clients
deliberately misled our clients because they knew that objection would be taken
to your clients true intention. Our clients are not prepared to let the matter
rest.
We note that
you say that plans relating to the signs are to be sent for formal approval.
These plans will receive proper consideration.
It is clear
that your clients will not desist from their proposed use of the premises. We
therefore look forward to hearing from you in reply to the final paragraph of
our letter to you which crossed with your letter now under reply.
Subsequently
to that, we are told, these premises were used as a sex shop, but in 1979 the
plaintiffs again took action to stop that use by issuing a writ, dated May 4
1979, endorsed with a statement of claim claiming possession for breaches of
exactly the same two covenants as those for which they now have successfully
sought possession, namely, the covenant to pay rent and the covenant not to do
or permit or suffer to be done in or upon the demised premises any act or thing
which shall be illegal. Those proceedings were compromised, there being some
ground, as I understand it, for saying that the plaintiffs had waived their
right to forfeit the lease for these breaches of covenant.
So this is the
second time that an action has been brought on this covenant not to act
illegally as well as on the covenant to pay the rent, and both these sets of
proceedings followed this earlier exchange of letters, which perhaps present
curious features but which I am unable to regard simply as so much eyewash on
the part of the plaintiffs. These matters were all before the learned deputy
judge and, as I have said, I entirely agree with his decision that the covenant
was broken; and when all the circumstances are looked at, with the best will in
the world I cannot see that there is any reason for supposing that this breach
of covenant by the defendant, even in this area of Soho, is capable of remedy
simply by being discontinued. I am not clear whether it ever has been
discontinued until these last proceedings were brought. The plaintiffs have at
least twice apparently sought to get it discontinued, but according to Mr
Davies’ instructions the premises have continued to be used, until the
forfeiture order of the magistrates, as a sex shop. It seems to me that it
would have been a bold course for the learned deputy judge, in all the
circumstances of this case as disclosed in the evidence, to have granted relief
against forfeiture once he had found that there was a breach and that it was
incapable of remedy.
But the matter
was one for the exercise of his discretion. If he had exercised it differently
from the way in which he did exercise it, it is possible that there might have
been enough material for this court to have interfered with the exercise of his
discretion, but that is not a matter which has to be decided. The only matter
which, on appeal from the exercise of the judge’s discretion, the court has to consider
is whether his decision was erroneous in law or in principle, whether he took
into account something which he ought not to have taken into account, or did
not take into account something that he should have taken into account, or
whether his decision is plainly wrong. I cannot say, on the material that we
have, that there is anything plainly wrong with his decision.
Mr Davies did
not appear before him; but we are told that the arguments lasted an hour and a
half on all the points which have been well argued by Mr Davies in this court,
and I cannot say that the judge failed in any way in his duty to take into
account relevant considerations and not to take into account irrelevant
considerations. There is nothing on the face of it wrong with his decision; it
would appear to be a decision well justified by the facts.
Mr Davies has
said that this is a special case; that there was no covenant against immoral
user and that there was only this covenant against doing, or suffering to be
done, illegal acts; and he says that we should ignore the fact, and I suppose
that the master and the learned judge should have ignored the fact, that the
particular illegal act which broke the covenant was an act which might be
classed as an act of immorality. It seems to me that the court has to accept Mr
Davies’ contention and look at all the circumstances, including the nature of
the illegal act which constituted the breach of the covenant. When one does
that, I can find nothing wrong with the learned judge’s decision, either on the
irremediable nature of the breach or in his refusal to relieve the defendant
against forfeiture.
Accordingly, I
would dismiss this appeal.
SIR DAVID
CAIRNS: I, too, would dismiss this appeal for the reasons which have been given
by my Lord, to which I cannot usefully add anything.
The appeal
was dismissed with costs.