Landlord and tenant — Forfeiture of lease — Relief for mortgagees — Question here was whether, after lessors had forfeited a lease for non-payment of a sum of money other than rent (a maintenance contribution in respect of specified outgoings such as insurance and repair of structure) and had retaken possession in pursuance of a court order, the court had power to grant relief to the mortgagees of the lease — Relief under the provisions of section 146(4) of the Law of Property Act 1925 was not open to the mortgagees, since the lessors having gone into possession, were no longer ‘proceeding to enforce a right of re-entry or forfeiture’ — It was, however, submitted by the mortgagees that the court still possessed an ancient inherent equitable jurisdiction to grant relief; that the statutory provisions for relief against forfeiture had not ousted this equitable jurisdiction; that this relief was available to a mortgagee by way of charge expressed to be by way of legal mortgage as well as to a mortgagee by sub-demise and to ordinary sublessees; and that the court ought to exercise its jurisdiction in the present case — The lessors argued that section 146(4) constituted a complete code and that there was no subsisting residual equitable jurisdiction — After a detailed review of the history of relief against forfeiture and an
By this
originating summons the plaintiffs, Abbey National Building Society, sought an
order giving them relief against the forfeiture of an underlease of Flat 9 in
92-95 Wilton Road, London SW1. The first defendants were Maybeech Ltd, the
present underlessors. The second defendant was the assignee of the underlease,
a Mr Kwang Sek Chang, who had disappeared and so, although named as a
defendant, had not been served with the proceedings. The third defendant, Mr
Paul Newberry, was the original underlessee. The plaintiffs had made a loan to
Mr Chang of £17,608, secured by charge by way of legal mortgage.
Gavin Lightman
QC and Peter Crampin (instructed by Kleinman Klarfeld & Co) appeared on behalf
of the plaintiffs; Paul de la Piquerie (instructed by Freeman Box & Co)
represented the first defendants; counsel for the third defendant, Mr Newberry,
took no part in the proceedings, an agreement having been reached between him
and the plaintiffs before the hearing began.
Giving
judgment, NICHOLLS J said: This originating summons raises the question
whether, after a lessor has forfeited a lease for non-payment of a sum of money
(other than rent) payable thereunder by the lessee and has retaken possession
of the demised premises under a court order, the court has any power to grant
relief to a mortgagee of the forfeited lease.
The facts are
not in dispute. On June 10 1980 Signgate Properties Ltd granted to Mr Paul
Newberry, the third defendant, a lease (strictly, an underlease, but nothing
turns on this) of Flat 9, in the building 92-95 Wilton Road, London SW1, for a
term of 82 years (less 10 days) from February 10 1979. A premium of £17,700 was
paid by the lessee, and the lease reserved a ground rent of £50 per annum
(reviewable after 25 and 46 years). By clause 2(1) the lessee covenanted to pay
the reserved rent, and by clause 2(2) he covenanted to pay to the lessor by way
of lessee’s maintenance contribution one-twelfth of certain specified outgoings
such as the cost of insurance and repair of the structure of the building. The
lease contained no provision to the effect that the sums payable under clause
2(2) were to be, or to be recoverable as, rent. The lease included a common
form provision for re-entry and forfeiture in the event of non-payment of rent
or breach of lessee’s covenants.
In December
1980 Signgate Properties Ltd assigned its reversion to the first defendant,
Maybeech Ltd. On January 19 1981 Mr Newberry assigned the lease to Mr Kwang Sek
Chang (the second defendant), and the Abbey National Building Society, the
plaintiff in these proceedings, made a loan to him of £17,608.75 secured by a
charge by way of legal mortgage over the lease. On the following day solicitors
for Mr Kwang Sek Chang gave written notice to Maybeech’s solicitors of the
assignment of the lease to him and of the mortgage to Abbey National. In due
course Mr Kwang Sek Chang was registered in HM Land Registry as the proprietor
of the lease and Abbey National was registered as proprietor of the charge. The
existence of the lease was also noted in the charges register of the title to
the reversion.
Mr Kwang Sek
Chang fell into arrears with payment of the ground rent and maintenance
contributions, and in February 1983 Maybeech through its solicitors served on
him a notice under section 146(1) of the Law of Property Act 1925 (the 1925
Act) in respect of the non-payment of two years’ ground rent (£100) and of
maintenance contributions amounting to £419.49. No reply was received. Maybeech
then commenced forfeiture proceedings against Mr Kwang Sek Chang in the
Westminster County Court. On July 29 1983, with Mr Kwang Sek Chang not
represented, the court made an order for delivery up to Maybeech forthwith of
possession of the demised property and for payment by Mr Kwang Sek Chang to
Maybeech of the sum of £634.49 (being the rent and maintenance contributions
referred to in the section 146 notice plus £115 for costs incurred in
connection with the notice). On August 24 the county court bailiff executed a
warrant for possession, and recovered possession of the flat for Maybeech. In
September Maybeech applied to the Land Registry for the reference to the
forfeited lease to be deleted from its title to the reversion and for the
closure of Mr Kwang Sek Chang’s title relating to the lease. On September 30
the Land Registry wrote to Abbey National giving it notice of Maybeech’s
application, stating that effect would be given to the application after 14
days, and adding that if Abbey National had any objection to the application an
appropriate statement should be lodged within that period.
This was the
first notification to Abbey National, from any source, of the forfeiture
proceedings. Until receipt of this letter on October 4 the building society had
no knowledge of the proceedings, or of the judgment, or of the execution of the
judgment. Abbey National did not lodge any statement of objection with the Land
Registry, and the Registry duly closed the title to the lease and expunged the
reference thereto from Maybeech’s title to the reversion. Instead Abbey
National wrote to Maybeech’s solicitors expressing concern and surprise at what
had happened. From the correspondence which ensued it is apparent that
Maybeech’s failure to notify Abbey National of the proceedings was not an
oversight but was done deliberately.
By the middle
of October negotiations by Maybeech for the grant of a new lease (for a term of
about 90 years, in return for a premium of £20,000) had reached the stage of a
draft contract being sent to a potential new lessee. In November Abbey
National, owed about £17,600 on the security of the forfeited lease, commenced
proceedings for relief from forfeiture in the county court, but these were
abandoned after they had barely begun.
The originating
summons before me was issued on November 21 1983. The relief sought is an order
under the inherent jurisdiction of the court relieving Abbey National from
forfeiture of the lease. I should mention that Abbey National has not been able
to trace its borrower, Mr Kwang Sek Chang, so although he is named as a
defendant he has not been served with the proceedings.
Before
continuing I should refer to some of the well-known provisions in section 146
of the 1925 Act, which are central to the issue before me. The effect of
subsection (1) is that a right of re-entry or forfeiture under any proviso in a
lease for a breach of any covenant or condition in the lease is not enforceable
until the lessor has served on the lessee the prescribed notice and the lessee
has failed to remedy the breach if remediable and to pay compensation therefor.
Subsection (2) reads as follows:
Where a
lessor is proceeding, by action or otherwise, to enforce such a right of
re-entry or forfeiture, the lessee may, in the lessor’s action, if any, or in
any action brought by himself, apply to the court for relief; and the court may
grant or refuse relief, as the court, having regard to the proceedings and
conduct of the parties under the foregoing provisions of this section, and to
all the other circumstances, thinks fit; and in case of relief may grant it on
such terms, if any, as to costs, expenses, damages, compensation, penalty, or
otherwise, including the granting of an injunction to restrain any like breach
in the future, as the court, in the circumstances of each case, thinks fit.
Subsection (4)
reads:
Where a
lessor is proceeding by action or otherwise to enforce a right of re-entry or
forfeiture under any covenant, proviso, or stipulation in a lease, or for
non-payment of rent, the court may, on application by any person claiming as
underlessee any estate or interest in the property comprised in the lease or
any part thereof, either in the lessor’s action (if any) or in any action
brought by such person for that purpose, make an order vesting, for the whole
term of the lease or any less term, the property comprised in the lease or any
part thereof in any person entitled as underlessee to any estate or interest in
such property upon such conditions as to execution of any deed or other document,
payment of rent, costs, expenses, damages, compensation, giving security, or
otherwise, as the court in the circumstances of each case may think fit, but in
no case shall any such underlessee be entitled to require a lease to be granted
to him for any longer term than he had under his original sublease.
By virtue of
subsection (5) ‘lease’ includes an underlease, and ‘lessor’ and ‘lessee’ bear
corresponding meanings, and ‘underlessee’ includes any person deriving title
under an underlessee. Subsections (8), (9) and (10) provide that the section
does not extend to certain specified covenants or conditions such as a covenant
or condition against assignment or underletting, or apply to a condition for
forfeiture on bankruptcy of the lessee or on taking in execution of the
lessee’s interest in certain instances or events. Subsection (11) provides that
the section does not, save as otherwise mentioned, affect the law relating to
re-entry or forfeiture or relief in case of non-payment of rent. I should add that
the Law of Property (Amendment) Act 1929, section 1, provides that nothing in
subsections (8), (9) and (10) of section 146 affects the provisions of section
146(4).
With that
introduction I turn to the issues in these proceedings. The case for Maybeech,
the lessor, can be stated shortly. The events entitling Maybeech to forfeit the
lease were the tenant’s failure to pay rent and also his failure to pay other
sums of money which were not
National for relief from forfeiture in respect of the non-payment of rent could
be made either under section 210 of the Common Law Procedure Act 1852 (in which
case the time-limit for making the application would be six months from the
execution of the possession order) or under section 146(4) of the 1925 Act, the
only relieving jurisdiction applicable in respect of the non-payment of
maintenance contributions is that provided by section 146(4). Abbey National
falls within that subsection because, as a mortgagee under a charge expressed
to be by way of legal mortgage, it is entitled to the same right to apply for
relief from forfeiture of the charged lease as if a subterm less by one day
than the term of the lease had been created in its favour: see section 87(1) of
the 1925 Act and Grand Junction Co v Bates [1954] 2 QB 160.
However, the court’s jurisdiction to grant relief under section 146(4) is
governed, and limited, by the opening words of that subsection: ‘Where a lessor
is proceeding, by action or otherwise, to enforce a right of re-entry or
forfeiture . . .’. Nearly a century ago the Court of Appeal (Lord Coleridge CJ,
Lindley LJ and Kay LJ) held in Rogers v Rice [1892] 2 Ch 170,
construing similar wording in section 14(2) of the Conveyancing and Law of
Property Act 1881, that after a lessor had given a proper notice under section
14(1) of the 1881 Act (corresponding to section 146(1) of the 1925 Act), which
the lessee had not complied with, and the lessor had obtained judgment for
possession, and that judgment had been executed and the lessor had gone into
possession, the lessor was no longer ‘proceeding’ to enforce his right of
re-entry. Hence once those steps had been taken it was too late for the lessee
to apply for relief. That decision, on the subsection which was the predecessor
of section 146(2), must apply equally to section 146(4) where the relevant
wording is identical. In the present case the originating summons was not
issued by Abbey National until after Maybeech had taken all the steps necessary
to enforce its right of re-entry, including retaking possession. In those
circumstances Abbey National’s application was made too late and fails for that
reason.
Furthermore,
it was said, it is of no assistance to Abbey National that Maybeech did not
inform the building society of service of the section 146(1) notice, or make
Abbey National a party to or give it notice of the forfeiture proceedings, even
though Maybeech was aware of the existence of the mortgage: the lessor’s
obligations in this field were considered by the Court of Appeal in Egerton
v Jones [1939] 2 KB 702, where Sir Wilfrid Greene MR said at p 706:
But the
substantial point upon which Mr Denning said that the terms which the learned
judge fixed were the right ones, was based upon the fact that when the
plaintiffs began these proceedings, and during their continuance, they gave no
notice to the mortgagees. Mr Denning said, and said truly, that if the
ejectment action against Miss Jones had been carried to its conclusion, and the
plaintiffs had re-entered, the mortgagees, as underlessees, would have lost all
right to apply for relief. That was settled as long ago as 1892 by a decision
of this court in Rogers v Rice. But notwithstanding that
decision, the legislature did not think fit in 1925 to alter the law as there
laid down.
Accordingly,
in the case of a mortgagee by subdemise, that mortgagee is always at the risk
of the lessor obtaining re-entry for breach of covenant without the mortgagee
knowing anything about it; in which case the mortgagee is completely shut out.
Every mortgagee therefore knows that that is the risk he runs. If, after taking
a covenant from his mortgagor to observe the covenants in the lease, he takes
no steps whatsoever to satisfy himself from time to time that no breach of
covenant is taking place, he is always exposed to the risk that behind his
back, and without his knowledge, the lessor will succeed in re-entering, and so
determining the lease, with the result that all possibility of relief from
forfeiture is lost to the mortgagee. That is one of the risks of the game.
Before
mentioning the submissions made in answer to Maybeech’s formidable case I
should dispose of one point. As I have already observed, the application to the
county court was founded on non-payment both of rent and of maintenance
contributions. Under section 191(1) of the County Courts Act 1959, where a
lessor is seeking to enforce a right of re-entry or forfeiture on the ground of
non-payment of rent the county court has jurisdiction (subject to certain
conditions being fulfilled) to order possession of the land to be given to the
lessor ‘at the expiration of such period, not being less than four weeks from the
date of the order, as the court thinks fit’. In the instant case the order made
was for delivery up of possession forthwith. Such an order could not have been
made under section 191(1). Before me it was common ground that, although rent
was in arrear, the order for possession was made not on that ground but on the
ground of breach of the covenant to pay a sum other than rent, namely,
maintenance contributions (to which the provision in section 191(1) for a
minimum period of four weeks’ grace is not applicable). Hence in the present
case there is no question of the application for relief being barred by the
provisions of section 191(1)(c).
For Abbey
National, Mr Lightman’s submissions encompassed the following points. First,
whatever may have been the precise limits of the ancient jurisdiction of courts
of equity to relieve from forfeiture of leases based on defaults by lessees
other than non-payment of rent (for example, disrepair), that jurisdiction did
include power to relieve from forfeiture in respect of breach of a lessee’s
covenant to pay to his lessor a sum of money otherwise than as rent. In this
regard I was referred to passages in the judgments of Lord Eldon in Hill
v Barclay (1811) 18 Ves Jr 56 and Kay LJ in Barrow v Isaacs
& Son [1891] 1 QB 417 at p 425, and in the speeches of Lord Wilberforce
and Lord Simon in Shiloh Spinners Ltd v Harding [1973] AC 691, at
pp 722-5, 726. Second, the relieving jurisdiction of courts of equity was
exercisable in favour of underlessees and mortgagees: see Webber v Smith
(1698) 2 Vern 103; and Doe de Whitfield v Roe (1811) 3 Taunt 402.
Third, the equitable jurisdiction existed even where the forfeiture had been
completed by judgment and execution: see Hare v Elms [1893] 1 QB
604, per Day J at pp 607-8. Fourth, the equitable jurisdiction (so far as it
has not been displaced or superseded by statute) of the former High Court of
Chancery is now vested in the High Court: see Supreme Court of Judicature Act
1873, section 16; Supreme Court of Judicature (Consolidation) Act 1925, section
18; and Supreme Court Act 1981, section 19. Thus far Mr de la Piquerie for
Maybeech was ready to go along with Mr Lightman: he accepted the substance of
these four submissions.
Where counsel
parted company was on the effect of the statutory intervention in this field.
Mr Lightman submitted that, save where expressly cut down, the equitable
jurisdiction still subsists today, and that accordingly, where a lessee fails
to pay a sum due under his lease otherwise than as rent, the court still has power
under its ancient equitable jurisdiction to grant relief to an underlessee. Mr
de la Piquerie’s submission was that in this field section 146(4) of the 1925
Act is a complete code in respect of when and where relief is available:
Parliament has prescribed the circumstances in which (and, by implication, in
which alone) the court may grant relief to an underlessee, and no residual
jurisdiction remains in the court. He relied on a passage in the speech of Lord
Wilberforce in the Shiloh Spinners case. In that case a right of entry
was reserved in favour of an assignor of a leasehold interest in the event of a
breach of covenant by the assignee. One of the questions which arose was
whether a court of equity had any power to grant relief against the exercise of
that right of entry, and on this a submission was made that the statutory
intervention in the case of leases indicated that it was not intended that
there should be a corresponding jurisdiction outside the case of leases.
Delivering the leading speech Lord Wilberforce said at p 724:
As regards
covenants to pay rent, in spite of Lord Eldon LC’s reservations, the matter
has, subject to qualifications which need not be discussed, been taken over by
statute, first, by 4 George 2 c 28, then by later Acts leading up to the Law of
Property Act 1925. The same is true of covenants to insure and other covenants
in leases.
After
commenting on Lord Eldon’s decision in Hill v Barclay, Lord
Wilberforce considered two arguments against the existence of a relieving jurisdiction
in the Shiloh Spinners case, and said regarding the second argument:
Secondly, a
point of more difficulty arises from the intervention of Parliament in
providing specific machinery for the granting of relief against forfeiture of
leases: see Law of Property (Amendment) Act 1859, Common Law Procedure Act
1852, Law of Property Act 1925, Leasehold Property (Repairs) Act 1938 and other
statutes. This, it is said, negatives an intention that any corresponding
jurisdiction should exist outside the case of leases. I do not accept this
argument. In my opinion where the courts have established a general principle
of law or equity, and the legislature steps in with particular legislation in a
particular area, it must, unless showing a contrary intention, be taken to have
left cases outside that area where they were under the influence of the general
law. To suppose otherwise involves the conclusion that an existing jurisdiction
has been cut down by implication, by an enactment, moreover, which is positive
in character (for it amplifies the jurisdiction in cases of leases) rather than
negative. That legislation did not have this effect was the view of Kay LJ in Barrow
v Isaacs & Son [1891] 1 QB 417, 430, when he held that covenants
against assigning — excluded from the Conveyancing Act 1881 — were left to be
dealt with according to the ordinary law.
Counsel for
Maybeech submitted that, unlike the position in Shiloh Spinners, the
legislature has stepped in with particular legislation in the particular area
of law relevant in the present case, and this negatived an intention that any
other jurisdiction should exist in this area.
On its face
section 146(4) is an enabling provision. Admittedly there is no express
provision in the 1925 Act negativing the continued existence of any equitable
jurisdiction, and so the question I have to consider is whether impliedly the
statutory intervention in this field has had the negativing effect being
contended for. To answer this question requires some consideration of the history
and terms of the statutory intervention. The Common Law Procedure Act 1852,
sections 210-212, substantially re-enacting the Landlord and Tenant Act 1730,
sections 2-4, excused a lessor from the necessity of making a formal demand for
payment where rent was in arrears for six months and limited to a period of six
months from the execution of the judgment the time within which an application
for relief could be made. Those provisions did not deal with the case of a
lessee wishing to apply for relief after a lessor had re-entered peaceably, but
in Lovelock v Margo [1963] 2 QB 786 the Court of Appeal, applying
the decision of Stirling J in Howard v Fanshawe [1895] 2 Ch 581,
affirmed the continued existence of the equitable jurisdiction to grant relief
in such a case. Thus those statutory provisions were not treated as negativing
the existence of the relieving jurisdiction where a forfeiture had been
completed by a means not referred to in the statute.
By the Law of
Property Amendment Act 1859, section 4, the court was granted power to relieve
against forfeiture for breach of a covenant to insure, in certain cases. In Barrow
v Isaacs & Son [1891] 1 QB 417, at 429, Kay LJ commented on the
background to that enactment. Having referred to the legislation limiting the
time within which relief could be given in cases of non-payment of rent, he
said:
Then ensued a
long period in which equity seems to have refused relief in cases of breach of
any of the other covenants in a lease. Very hard cases occurred in which unconscionable
landlords insisted on their legal rights. Especially hard were these
forfeitures for breach of the covenant to insure when no damage had ensued.
In 1860 the
Common Law Procedure Act conferred on the common law courts power to exercise
the Court of Chancery’s jurisdiction to grant relief from forfeiture in cases
of non-payment of rent (section 1) and failure to insure (section 2). This Act
made no mention of any other jurisdiction of the Court of Chancery to relieve
from forfeiture.
Section 14 of
the Conveyancing and Law of Property Act 1881 (the 1881 Act) was the
predecessor section, in part, of section 146 of the 1925 Act. In particular,
subsections (1), (2) and (8) were in all relevant respects in the same terms as
subsections (1), (2) and (11) respectively of section 146. Section 14(7)
repealed the Law of Property Amendment Act 1859, section 4, and the Common Law
Procedure Act 1869, section 2. However, section 14 did not contain any
subsection corresponding to section 146(4), enabling underlessees to apply for
relief. In 1891 it was decided that section 14 of the 1881 Act did not enable
an underlessee of part of the demised property to apply for relief: Burt
v Gray [1891] 2 QB 98. In the following year section 4 of the
Conveyancing and Law of Property Act 1892 (the 1892 Act) was enacted. This
section provided that:
where a
lessor is proceeding by action or otherwise to enforce a right of re-entry or
forfeiture under a covenant, proviso or stipulation in a lease, the court may,
on application by any person claiming as underlessee any estate or interest in
the property comprised in the lease or any part thereof either in the lessor’s
action (if any) or in any action brought by such person for that purpose, make
an order vesting . . .
and continued
in the same terms as section 146(4) of the 1925 Act. Having regard to the
subsequent legislative history, the true construction of this section is of
crucial importance: did this section prescribe exhaustively the circumstances
in which thenceforth an underlessee could apply for relief and thereby displace
any existing jurisdiction in that regard?
Considering,
first, the language employed, it will be seen that this section, as also
section 14(2) of the 1881 Act regarding applications by lessees, was expressed
in positive, enabling terms. It conferred a power on the court, for the benefit
of underlessees. There are no words which display any intention to abrogate or
limit any existing jurisdiction possessed by the court. Secondly, I turn to the
decision of the Court of Appeal in Gray v Bonsall [1904] 1 KB
601, which I find of considerable assistance. There an underlessee was granted
relief in respect of non-payment of rent due under the headlease. The question
which arose was whether the court’s power to grant that relief arose under the
Common Law Procedure Act 1860, section I, or under section 4 of the 1892 Act.
It was argued that it could not have been intended that there should be
separate, and inconsistent, provisions for relief in the case of such forfeiture
under the 1860 Act and the Acts of 1881 and 1892. Romer LJ rejected this ‘no
overlap’ argument, saying that it was clear that relief might be granted to the
underlessees in that case either under the 1860 Act or under section 4 of the
1892 Act. He said (at p 607):
In my
opinion, section 4 of the Act of 1892 is not a mere amendment of section 14 of
the Act of 1881 as suggested; but on the contrary is a general enabling clause
by which the court is empowered to give relief to an underlessee in the case of
forfeiture under any covenant, proviso or stipulation in a lease, on such
conditions as appear to the court to be just.
Mathew LJ
concurred, describing section 4 of the 1892 Act as ‘an independent enactment,
which must be construed according to the plain meaning of its terms’ (p 609).
Thus the court construed section 4 as not excluding the (wider) jurisdiction
already existing in the case of non-payment of rent.
In line with
this construction of section 4 of the 1892 Act as non-exhaustive, although not
so significant for the purpose in hand, is the decision in Nind v Nineteenth
Century Building Society [1894] 1 QB 472. In that case it was argued that
an underlessee of the whole of the premises demised by the headlease could not
be within section 14 of the 1881 Act, because section 4 of the 1892 Act plainly
applied to such an underlessee and that section appeared to be based on the
assumption that prior to its enactment the power thereby conferred no more
existed in the case of an underlessee of the whole than it did in the case of
an underlessee of part. In declining to accept this, Day J said (at p 477):
But it was
said that the language of section 4 of the Act of 1892, which was admittedly
passed with the object of getting rid of the effect of Burt v Gray,
applies in terms to underlessees of the whole of the demised premises as well
as to underlessees of a part; whereas if the plaintiff’s contention is right,
and if the court already had power under the Act of 1881 to protect
underlessees of the whole of the demised premises, the language of the section
is unnecessarily wide. It may be that it is so, and that so far as it confers
upon the court a power which they had already got, it is superfluous. But that
cannot affect our decision.
(In passing, I
mention that this decision was not referred to in the course of the hearing
before me, but the conclusion I have reached would have been the same even had
I not become aware of this authority.)
I return to
the question of construction posed above. I summarise my answer to that
question as follows. Section 4 was expressed in enabling terms and drew no
distinction between covenants for payment of rent and other covenants. If, as
has been decided by the Court of Appeal in Gray v Bonsall is so,
this section was not an exhaustive provision regarding the court’s jurisdiction
to grant relief to underlessees in rent breach cases and it did not displace
the existing jurisdiction in that regard, I can see no sound basis for
construing the section as an exhaustive provision regarding the court’s
jurisdiction to grant relief to underlessees in other cases, displacing any
existing jurisdiction in such other cases.
I can complete
this summary of the relevant statutory provisions very shortly. In 1925 section
146, as amended by the Law of Property (Amendment) Act 1929, section I
(correcting an alteration made inadvertently), replaced section 14 of the 1881
Act and section 4 of the 1892 Act without any material amendment. The phrase
‘or for non-payment of rent’ was added to subsection (4) in order to preserve
the existing law as decided in Gray v Bonsall: see Belgravia
Insurance Co Ltd v Meah [1964] 1 QB 436, per Russell LJ at p
448.
Against the
background of that history of the legislative intervention, my conclusion is
that section 4 of the 1892 Act did not displace any other jurisdiction then
possessed by the court to grant relief to underlessees, and that in that
respect the repeal of that section and its replacement without any relevant
amendment by section 146(4) of the 1925 Act did not change the law.
I should
mention some other points. It may be said that if the ancient relieving
jurisdiction still exists in non-rent cases, it is surprising that its
existence was not referred to by anyone in cases such as Rogers v Rice,
and remarkable that this flower of equity has managed to survive, for so long
and unnoticed, in Lord Simon’s juristic desert (see the Shiloh Spinners
case, at p 726). Again, it may
to be given in non-rent cases has been the assumption that courts of equity
possessed no jurisdiction of their own in such cases, and it is now far too
late for the court to seek to assert such a jurisdiction. Further, it can be
said that if such a jurisdiction exists today, it will be a jurisdiction
concurrent with the statutory jurisdiction, but lacking certainty as to its
ambit: the courts will be faced with deciding now questions which were the
subject of much controversy in the last century concerning the circumstances in
which (or the covenants as to which) courts of equity could or would give
relief.
I have not
been persuaded by these considerations. I do not know, but I suspect, that
instances in which an applicant with a substantial claim for relief finds
himself outside the statutory jurisdiction are few and far between (and in
passing I note that Abbey National’s assistant chief solicitor could not recall
a case over the last 10 years where a security had been forfeited without the
building society being notified. More importantly, it is to be borne in mind
that only comparatively recently has the legal profession had the benefit of
Lord Wilberforce’s authoritative explanation of cases such as Hill v Barclay
(see the Shiloh Spinners case, pp 722-725). Moreover, although I have
approached the plaintiff’s claim to have rediscovered an ancient equitable
jurisdiction with considerable caution, I think the question before me, on the
construction and effect of section 146(4), is to be answered no differently now
from the way the comparable question on section 4 of the 1892 Act would have
been answered shortly after the passing of that Act. Whatever answer the court
might then have given regarding the precise extent of the jurisdiction of
courts of equity to relieve in cases other than for non-payment of rent or
regarding the circumstances in which that jurisdiction would be exercised, it
seems to me clear that the court would have held that section 4 of the 1892 Act
was not intended to negative any other jurisdiction then possessed by the
court. In my judgment, therefore, Abbey National’s submission that the court
has jurisdiction to grant it relief is well-founded.
On this part
of the case there is one last point I must mention. For Maybeech it was
submitted in effect that Abbey National has only itself to blame for its
present predicament, because in the case of registered land the lessor was still
‘proceeding’ at the time when the Land Registry notified Abbey National of
Maybeech’s application to have the lease expunged from the register. It was
submitted that Maybeech could not have granted a new lease to anyone else until
the register had been amended, and therefore until that had been done it was
open to Abbey National to have applied to the court under section 146(4). I
cannot accept this. The registrar had no discretion to exercise. His function
was to amend the register to record that the lease had been determined upon
being satisfied of this by the production to him of appropriate evidence. Thus
Maybeech’s application to the registrar was not to enforce its right of
re-entry or forfeiture: Maybeech had already lawfully re-entered and the forfeiture
was complete. Its application was to have the entries on the register brought
up to date, into line with the legal position as already changed by the
re-entry and forfeiture.
I come now to
the question whether, on the facts of this case, the court should exercise its
jurisdiction in favour of granting relief. In my view it should: the breaches
of covenant were non-payment of rent and other money; Abbey National was not at
fault in any way regarding those breaches or in not applying for relief at an earlier
stage; the value of the lease far exceeded the amount of the unpaid sums; if
relief is not granted Abbey National may well lose the whole of the amount
outstanding and which was secured on the lease; and it is not suggested that
Maybeech has suffered any loss which will not be adequately recompensed by
payment of the arrears of rent and maintenance contributions plus interest and
costs. I think this is eminently a case in which relief should be granted.
Before
deciding the terms on which relief should be given, I have to consider what is
the form which the relief should take, for this reason. The original lessee, Mr
Newberry, was added as third defendant to these proceedings because Maybeech
reserved the right to take the point that in his absence either the court could
not or in the circumstances the court should not grant relief. Abbey National
contended that joining Mr Newberry was unnecessary and pointless and submitted
that the costs incurred by such joinder should be borne by Maybeech. To understand
the rival contentions on this I must mention the nature or form of the relief
granted by courts of equity on the one hand and available under the 1925 Act on
the other hand.
In courts of
equity relief was afforded by granting an injunction to restrain the lessor
from proceeding with his action of ejectment where forfeiture had not been
completed. Where the forfeiture was complete, relief took the form of ordering
a new lease to be executed similar to the old lease. For that purpose the
parties to the new lease had to be before the court. In cases where the
applicant was not the original lessee the practice of the court was that,
unless good cause was shown for proceeding in his absence, the original lessee
was required to be before the court (so that, for example, he could make
representations on why he should not have reimposed upon him the burden of the
covenants from which he had been released by the forfeiture): see Hare v
Elms [1893] 1 QB 604, and Humphreys v Morten [1905] 1 Ch
739. However, under the statutory jurisdiction the court has power to order the
execution of a new lease directly in favour of the applicant (eg the
underlessee), and since an order in this form would not affect him, it is not
necessary for the original lessee to be brought before the court before such an
order is made.
Against this
background Mr Lightman submitted that joinder of Mr Newberry was unnecessary,
for two reasons: first, in exercising the old jurisdiction the court today
should act by analogy to the statutory provisions and order the grant of a new
lease directly to the applicant underlessee; second, even if relief were
granted by way of an order for the resurrection of the old lease, in this case
the original lessee’s presence was unnecessary. I am unable to accept either of
these submissions. Abbey National is invoking the old jurisdiction of the
courts of equity; under that jurisdiction relief of a particular nature, or in
a particular form, was available; I do not see what is the basis on which in
exercising that jurisdiction today the court can grant relief of a different
nature or in a different form. On the alternative submission, had Mr Newberry’s
consent to the relief sought by Abbey National, expressed in suitable terms and
form, been obtained before he was joined as a party, it might well be that his
formal joinder could have been dispensed with in this case. So far as I know
this was not done. On the contrary, as soon as these proceedings came on for
hearing before me Mr Lightman sought and obtained a short adjournment to enable
terms between Mr Newberry and Abbey National to be agreed or finalised. Counsel
for Mr Newberry then withdrew and took no part in the proceedings. In those
circumstances it seems to me that Mr Newberry was a necessary party at the time
he was joined.
I come
finally, to the terms on which relief should be granted. In my judgment the
appropriate terms are that Abbey National should pay to Maybeech all arrears of
rent and maintenance contributions with interest, Maybeech’s costs of the forfeiture
proceedings, and Maybeech’s costs of these proceedings except in so far as
those costs have been increased by Maybeech’s opposition to the grant of
relief. To the extent that the costs have been so increased Maybeech should pay
the costs of Abbey National and Mr Newberry. There will be the usual set-off in
respect of the orders as to costs.
