Landlord and tenant – Quiet enjoyment – Damages for breach of covenant – Landlord unlawfully evicting tenant – Whether tenant entitled to recover premium paid for lease – Appeal allowed (by a majority)
The appellant was formerly the tenant of business premises leased to her by the respondents who lived upstairs and from which she carried on business as a sandwich shop. The parties entered into an oral agreement whereby the appellant paid £9,950, described as a premium, for the respondents’ interest in the business and for the goodwill.
The respondents evicted the appellant six months into the start of her six-year term. The county court found that the eviction was wrongful, concluding that alleged breaches of covenant by the appellant were not sufficiently serious to constitute a breach of the terms of the lease. In any event, the respondents had failed to give notice terminating the lease in accordance with section 146 of the Law of property Act 1925 and had waived any breach by accepting a payment of rent.
The recorder went on to consider the appropriate relief for the breach by the respondents of the express covenant for quiet enjoyment. He held that the appellant was not entitled to any substantive damages but awarded her nominal damages of £300. The appellant appealed, contending that she was entitled to recover from the respondents the premium she had paid on acquisition of the goodwill of the business.
An issue arose as to the correct principle to apply to the calculation of damages for wrongful eviction and the sum recoverable by a tenant under a lease of commercial premises.
Held: The appeal was allowed (by a majority).
The respondents’ conduct in unlawfully and permanently evicting the appellant was a repudiation which necessarily brought the lease to an end without any need for acceptance. Unlawful eviction of a tenant by a landlord was not a tort but a breach of contract, for which the tenant was entitled to claim damages. A critical factor in the present case was that the tenant had paid £9,950 to acquire the lease and the goodwill of the sandwich business carried on at the demised premises: Perera v Vandiyar [1953] 1 WLR 672 applied.
The basic principle governing the law of damages was that, where any injury was to be compensated by damages, the amount to be given for reparation of damage should be as nearly as possible that sum of money which would put the party who had been injured in the same position as he would have been in if he had not sustained the wrong for which he was now getting his compensation or reparation: Livingstone v Rawyards Coal Company (1880) 5 App Cas 25 applied.
The facts of the present case were very close to those in Sampson v Floyd [1989] 2 EGLR 49, where the Court of Appeal held that the measure of damages was the whole of the purchase price of the lease entered into only a few months before the actions complained of took place, together with expenses. If A purchased from B a lease of B’s property and B unlawfully evicted A at an early stage of the lease, the normal measure of damages was the price which A paid for the lease plus, where appropriate, any incidental expenses. In a case such as Sampson, the purchase price reflected the value that both parties put upon the lease which B sold to A and then unlawfully took away again. Alternatively, the purchase price represented the extent to which A was out of pocket as a result of acquiring the lease and then being evicted. The premium which A had paid to acquire the lease was of a different character from wasted expenditure. It was the agreed price of an asset which B had sold to A and then taken back for his own use.
In the present case, the purchase price paid by the appellant fell into a different category from other heads of wasted expenditure. The same approach had to be adopted as in Sampson. It was not necessary to embark upon detailed calculations in order to see whether the appellant had paid too much for the lease and goodwill of the premises. The starting point for assessing damages was the purchase price which the appellant had paid, namely £9,950. It would be manifestly unjust if the respondents could evict the appellant after only six months and still keep the purchase price. However, the appellant had to give credit of £871 for the benefit which she had received before the unlawful eviction so that there would be judgment for the appellant in the sum of £9,079.
(Per Arden LJ dissenting) The appellant’s primary case, built on the assumption that the premium was rolled-up rent which could be apportioned over the period of the lease to the performance of the lessors’ covenant to permit quiet enjoyment, was contrary to the facts found. The recorder held that the premium was paid for goodwill and for entering into the lease. There could not be a rule of law that the premium should always be recoverable in full or for the unexpired period of the term as if it were a rolled-up payment of rent. Even if the premium was an advance payment of rent, the parties agreed that it would be paid in full on entry into the lease, not over the period of the lease. There was no basis on which it could be treated as apportioned to the due performance of the covenant for quiet enjoyment over the six years of the lease.
Eleanor d’Arcy (instructed by Harrison Drury & Co Solicitors, of Preston) appeared for the appellant; Suzanne Mansfield (instructed by Brian Drewitt Solicitors, of Stockport) appeared for the respondents.
Eileen O’Grady, barrister
