In part two of their series, adapted from their talk at the PLA’s Spring Conference, Sir Christopher Nugee and Guy Fetherstonhaugh KC identify cases that demonstrate persistently contentious matters.
Having discussed once-persistent matters that have rather fallen away in recent years, we turn to forecast those perennial aspects of property litigation which do seem likely to continue in the decades to come. We are focusing here on aspects of property law which traditionally have called for a different approach, especially in the field of remedies for breach of contract.
We all know that a lease is a special kind of contract, creating not merely a set of rights and obligations, but also an estate in land. Reflecting its feudal origins, rent is traditionally regarded as issuing out of that land, attracting special penalties (distress, forfeiture) when it is unpaid, that are not ordinarily available in the case of non-property contracts.
Because of this special nature of property contracts, contractual termination remedies (rescission, termination for repudiatory breach, frustration) have historically not been available to the parties to a lease. But this is slowly changing, and we think will continue to evolve through the coming decades. As Peter Smith J said in Akasuc Enterprise Ltd v Farmar & Shirreff (a firm) [2003] EWHC 1275 (Ch); [2003] PLSCS 127, dealing with the proposition that it might not be lawful to make a restriction on the register to protect a right to overage, because of the notion that that might be contrary to the Statute of Quia Emptores:
“It is unlikely that a modern judge would find a wide-spread, modern commercial arrangement unlawful because it offends against statute passed in the thirteenth century to prevent Barons exploiting their freehold subtenants.”
Rescission
In Killick v Roberts [1991] 2 EGLR 100, the court held that a tenancy agreement could be rescinded, even after it had expired by effluxion of time. The plaintiff, Genevieve Killick, claimed against the defendant, Brian Roberts, possession of her bungalow in Devon, on the ground that his tenancy of the premises, for one quarter (13 weeks) from 30 November 1988 to 1 March 1989, with the option (which he had exercised) of extending it weekly for a further four weeks, had expired on 29 March.
By an amended defence, the defendant alleged that, prior to the commencement of the tenancy, the plaintiff had not served on him any notice under Case 13 (holiday let) in Schedule 15 to the Rent Act 1977 that possession of the property might be required, claimed the protection of that Act and denied that the plaintiff was entitled to possession.
By reamended particulars of claim, the plaintiff alleged that in order to induce her to enter into the written tenancy agreement on 30 November 1988, the defendant had made false representations to her that he was having a house built for him which would be ready for his occupation in February 1989.
On 1 August 1990 a recorder ordered that the tenancy agreement should be rescinded; that there be judgment for the plaintiff for £4,870 mesne profits; and that the plaintiff recover possession of the property on 29 August 1990. By notice of appeal dated 28 August 1990, the defendant appealed against that order on the grounds, inter alia, that the recorder had erred in concluding that there could be rescission of a tenancy once the tenant had entered into possession of the demised premises, for restitutio in integrum was no longer possible and/or, an interest in land having been created, it could not be rescinded.
The Court of Appeal (Nourse LJ, Mustill and Neill LJJ concurring) dismissed the appeal, holding that if a tenancy could be rescinded (which had been established by authority dating back to the 1950s), then so too could any statutory tenancy succeeding that tenancy.
Frustration
Frustration is a contractual doctrine which provides that where a wholly unexpected event, for which the parties had not made an agreement, occurred which sufficiently affects the contract so as to, in some way, negate its purpose, then the contract will be discharged and end.
National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC 675 was the first authority to decide that this doctrine could apply to a lease. In that case, a road closure had prevented commercial premises, which had been let for 15 years (at an initial beneficial rent), being used after 10 years for some 18-20 months, after which the lease would still have another three years to run.
The tenant contended that the lease had been frustrated, but this contention was rejected by way of summary judgment by a Master. The Master’s summary conclusion was eventually upheld by the House of Lords, holding that the doctrine of frustration did apply to leases, but that it would be a rare occasion when a lease would be frustrated.
The doctrine was considered more recently in Canary Wharf (BP4) T1 Ltd v European Medicines Agency [2019] EGLR 17, in which it was argued that the effect of Brexit on the particular tenant, European Medicines Agency, meant that it could no longer operate from the premises. However, this was not held to be sufficient to engender frustration, with Marcus Smith J saying:
“Whether a contract is frustrated depends upon a consideration of the nature of the bargain of the parties, when considered in the light of the supervening event said to frustrate that bargain. Only if the supervening event renders the performance of the bargain ‘radically different’, when compared to the considerations in play at the conclusion, will the contract be frustrated.”
Similarly, in Bank of New York Mellon (International) Ltd v Cine-UK Ltd and other appeals [2021] EWHC 1013 (QB); [2021] EGLR 26, in a very fully reasoned judgment, Master Dagnall held that the forced closure of premises for lengthy periods required, in reaction to the Covid-19 virus, did not amount to a frustrating event.
It would be fair then to conclude that a lease may be frustrated in certain circumstances, but hardly ever, if not never (to use the language of National Carriers).
We think that this branch of the law may see more interest in the decades to come, picking up Lord Simon’s observation in National Carriers:
“I would, however, presume to suggest that consideration should be given to whether the English doctrine of frustration could be made more flexible in relation to leases.”
There is still a lot to work out, particularly concerning derivative interests.
Termination for repudiatory breach
In Ramsbury Properties Ltd v Ocean View Construction Ltd [2024] UKPC 40, the defendant (V) wanted to lease property from the claimant (R) to accommodate 250 workers who had travelled from Mexico to carry out repairs to a hotel on Nevis. The parties signed a seven-month lease. Its recital stated that it was granted “for the purpose of providing sleeping accommodation only for 250 workers”, and clause 1 stated that it was granted “for the purpose of sleeping accommodation for 250 workers”.
After three-and-a-half weeks of occupying the premises, V informed R that it would be terminating the lease and vacating the premises for R’s breach of the covenant of quiet enjoyment of the property. V said that the workers had been forbidden from eating or doing laundry on the premises. R denied breach of the agreement. The workers moved out and R sought specific performance and damages for breach of contract. V counterclaimed for refund of the deposit.
The High Court in St Christopher and Nevis found that R was in repudiatory breach and that V had been entitled to terminate the lease. It said that forbidding the workers from eating and doing laundry constituted a breach of the express term that the tenant should have quiet enjoyment of the property, and that there was an implied term that the workers should be able to eat on the premises, and that a breach of that implied term constituted a repudiatory breach of the lease.
R appealed against that decision and the Court of Appeal noted that while “sleeping accommodation only” appeared in the proviso and the recital, the main operative part of the lease did not contain the word “only”. It agreed that there was an implied term that the workers should be able to eat on the premises and extended that to being able to do laundry.
It said that such a term was necessary for business efficacy and/or was obvious. It held that R’s breach of the implied terms was a repudiatory breach because it deprived V of a substantial part of the benefit of the lease. It said that eating was such a vital aspect of existence, that to insist that the workers were not allowed to eat on the premises constituted a fundamental departure from an implied term of the lease. It dismissed the appeal.
Each of these three contractual termination doctrines, once thought to have no application to leases, are perhaps ripe for more extensive use in the future. But what of other aspects of property law? Which will shyly retire, and which will be resurgent – or altogether new? To be continued…
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Sir Christopher Nugee is a Lord Justice of Appeal and Guy Fetherstonhaugh KC is a barrister at Falcon Chambers
