Landlord and tenant — Forfeiture — Whether tenant entitled to relief from forfeiture after landlord has peaceably re-entered — Held that tenant so entitled
dated July 15 1964 the appellant, Residential Apartments Ltd, held premises at
17 Gledhow Gardens, London SW5, for a term expiring on June 25 1997 — The
respondent trustees held the reversion expectant upon the term — By the lease
the appellant covenanted not to alter or add to the premises without the
lessors’ consent — The lease contained a provision entitling the lessors to
re-enter upon failure by the lessee to comply with any covenant — By a notice
dated July 4 1989 given pursuant to section 146 of the Law of Property Act
1925, the respondents alleged that the appellant had carried out works of
alteration without consent, and required the breach to be remedied — On July 18
1989 the respondents effected peaceable re-entry by entering the premises and
changing the locks — Within four hours the appellant had recovered possession
respondents issued proceedings claiming possession, damages for breach of
covenant and damages for trespass — The appellant counterclaimed seeking relief
from forfeiture — The trial judge and the Court of Appeal both held that they
had no jurisdiction to grant relief — The appellant appealed
peaceably re-entered premises is no longer ‘proceeding’ to enforce his rights
within the meaning of section 146(2) of the Law of Property Act 1925 is unsound
— Section 146(2) enables a tenant to apply for relief whenever and however the landlord
claims that the lease has been determined for breach of covenant — Rogers
v Rice distinguished — A tenant cannot apply for relief from forfeiture
after a landlord has forfeited a lease by issue and service of proceedings, has
recovered judgment and obtained possession pursuant to that judgment; if such a
judgment is set aside or successfully appealed, the tenant will be able to
apply for relief in the landlord’s action
judge’s order for costs on an indemnity basis against the appellant should not
have been made — The practice of ordering indemnity costs as a condition of
granting relief from forfeiture is ripe for reconsideration
The following
cases are referred to in this report.
Canas
Property Co Ltd v K L Television Services Ltd
[1970] 2 QB 433; [1970] 2 WLR 1113; [1970] 2 All ER 795; (1970) 21 P & CR
601; [1970] EGD 445; 214 EG 1494, CA
Egerton v Jones [1939] 2 KB 702
Jacques v Harrison (1884) 12 QBD 165
Jones v Carter (1846) 15 M&W 718
Pakwood
Transport Ltd v 15 Beauchamp Place Ltd (1977)
36 P&CR 112; [1978] EGD 233; 245 EG 309, [1978] 1 EGLR 27, CA
Quilter v Mapleson (1882) 9 QBD 672
Rexdale
Investments Ltd & Gibson, Re [1967] 1 Ont LR
251
Rogers v Rice [1892] 2 Ch 170; (1892) 8 TLR 511
This was an
appeal by the tenant, Residential Apartments Ltd, from the Court of Appeal (see
[1991] 1 EGLR 70), which had dismissed an appeal from a decision of Mummery J,
who had held that the respondent trustees were entitled to possession of
premises at 17 Gledhow Gardens, Earl’s Court, London SW5.
Michael
Driscoll (instructed by Gouldens) appeared for the appellant; and Robert Reid
QC and Gordon Bennett (instructed by Frere Cholmeley) represented the
respondents.
In his speech,
LORD TEMPLEMAN said: By a lease dated July 15 1964 freeholders demised
the premises, 17 Gledhow Gardens, South Kensington, for a term due to expire by
effluxion of time on June 25 1997. On May 3 1989 the lease was assigned to the
appellant, Residential Apartments Ltd. The reversion is vested in the
respondent trustees.
The provisions
of the lease included a covenant by the tenant:
(f) . . . not to make any alteration in or
addition to the demised premises or any part thereof without the consent in
writing of the Lessors first had and obtained
The lease also
contained the following proviso for re-entry:
(i) If and whenever any rent hereby reserved
shall be in arrear for twenty-one days after becoming due (whether legally
demanded or not) or if and whenever any covenant by the Lessee hereinbefore
contained (other than the covenant to pay rent) shall not be performed or
observed then and in any such case the Lessors may by re-entry or (at their
option) by notice in writing in that behalf given to the Lessees determine this
demise and thereupon this demise shall absolutely determine but without
prejudice to any right of action or remedy of the Lessors in respect of any
breach of covenant by the Lessees.
In breach of
covenant the appellant embarked on alterations to the demised premises without
the consent of the trustees. Section 146(1) of the Law of Property Act 1925
provides that:
A right of
re-entry or forfeiture under any proviso or stipulation in a lease for a breach
of any covenant or condition in the lease shall not be enforceable, by action
or otherwise, unless and until the lessor serves on the lessee a notice —
(a) specifying the particular breach complained
of; and
(b) if the breach is capable of remedy, requiring
the lessee to remedy the breach; and
(c) in any case, requiring the lessee to make compensation
in money for the breach;
and the
lessee fails, within a reasonable time thereafter, to remedy the breach, if it
is capable of remedy, and to make reasonable compensation in money, to the
satisfaction of the lessor, for the breach.
The trustees
served on the appellant a notice dated July 4 1989 complying with section
146(1) but the appellant did not remedy its breach of covenant within a
reasonable time.
Section 146(2)
of the Law of Property Act 1925 provides that:
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.
On July 18
1989 at 6 am agents for the trustees peaceably re-entered the demised premises,
which were vacant, and changed the locks. By 10 am on the same day workmen
engaged by the appellant had retaken possession of the property, as the
trustees say, unlawfully.
By the writ in
this action dated July 19 1989 the trustees claim possession, damages for
breach of covenant and damages for trespass. By its defence and counterclaim
the appellant counterclaims for relief against forfeiture. By their reply the
trustees claim that the court has no jurisdiction to grant the appellant relief
from forfeiture. The trial judge, Mummery J, and the Court of Appeal (Sir
Nicolas Browne-Wilkinson V-C, and Parker and Nicholls LJJ) considered that they
were constrained by authority to hold that the court had no jurisdiction to
grant the appellant relief against forfeiture pursuant to section 146(2)
because the appellant had not applied to the court for relief prior to the
re-entry into possession by the trustees on July 18 1989. The appellant now
appeals.
By the common
law, when a tenant commits a breach of covenant and the lease contains a
proviso for forfeiture, the landlord at his option may either waive the breach
or determine the lease. In order to exercise his option to determine the lease
the landlord must either re-enter the premises in conformity with the proviso or
must issue and serve a writ claiming possession. The bringing of an action to
recover possession is equivalent to an entry for the forfeiture. Thus in Jones
v Carter (1846) 15 M & W 718 Parke B said at p 726:
. . . the
bringing of an ejectment for a forfeiture, and serving it on the lessee in
possession, must be considered as the exercise of the lessor’s option to
determine the lease; and the option must be exercised once for all . . . for
after such an act, by which the lessor treats the lessee as a trespasser, the
lessee would know that he was no longer to consider himself as holding under
the lease, and bound to perform the covenants contained in it . . .
This
observation was cited and applied by Lord Denning MR in Canas Property Co
Ltd v KL Television Services Ltd [1970] 2 QB 433 at p 440.*
*Editor’s
note: Also reported at (1970) 214 EG 1494.
Before the
intervention of Parliament, if a landlord forfeited by entering into possession
or by issuing and serving a writ for possession, equity could relieve the
tenant against forfeiture but only in cases under the general principles of
equity whereby a party may be relieved from the consequences of fraud, accident
or mistake or in cases where the breach of covenant entitling the landlord to
forfeit was a breach of the covenant for payment of rent.
Mr Reid QC,
who appeared for the trustees, conceded that, where equity claimed power to
relieve against forfeiture, the tenant could apply for relief irrespective of
the method by which the landlord had exercised his option to determine the
lease. Relief could be granted whether the landlord had forfeited by entering
into possession or had forfeited by issuing and serving a writ claiming
possession.
In 1881 Parliament
interfered to supplement equity and to enable any tenant to be relieved from
forfeiture. The need for such intervention was and is manifest because
otherwise a tenant who had paid a large premium for a 999-year lease at a low
rent could lose his asset by a breach of covenant which was remediable or which
caused the landlord no damage. The forfeiture of any lease, however short, may
unjustly enrich the landlord at the expense of the tenant. In creating a power
to relieve against forfeiture for breach of covenant Parliament protected the
landlord by conferring on the court a wide discretion to grant relief on terms
or to refuse relief altogether. In practice this discretion is exercised with
the object of ensuring that the landlord is not substantially prejudiced or
damaged by the revival of the lease.
Section 14(1)
and (2) of the Conveyancing and Law of Property Act 1881 were provisions which
conferred on the court power to relieve against forfeiture and those provisions
were reproduced in section 146(1) and (2) of the Law of Property Act 1925 in
identical terms. In referring to a section 146 notice I shall therefore mean
and include a notice served under section 14(1) of the Act of 1881, and in
referring to section 146(1) and (2) I shall mean and include section 14(1) and
(2) of the Act of 1881 where appropriate.
Section 146(1)
prevents the landlord from enforcing a right of re-entry or forfeiture by
action or otherwise so that the landlord cannot determine the lease by issuing
and serving a writ or by re-entering the premises until the tenant has failed
within a reasonable time to remedy the breach and make reasonable compensation.
Section 146(2) enables the tenant to apply to the court for relief where the
landlord ‘is proceeding, by action or otherwise,’ to enforce his right of
re-entry or forfeiture. If the landlord ‘is proceeding’ to determine the lease
by issuing and serving a writ, the tenant may apply for relief after the writ
has been served. If the landlord ‘is proceeding’ to determine the lease by
re-entering into possession, the tenant may apply for relief after the landlord
has re-entered.
Mr Reid
submitted and referred to authority for the proposition that on the true
construction of section 146(2) a tenant cannot apply for relief against
forfeiture after the landlord has re-entered without obtaining a court order.
Thereafter the landlord is no longer ‘proceeding’ to enforce his rights; he has
succeeded in enforcing them. The proposition is, in my opinion, historically
unsound because the effect of issuing and serving a writ is precisely the same
as the effect of re-entry; in each case the lease is determined. The landlord
is entitled to remain in possession if he has re-entered and he is entitled to
possession if he has issued and served a writ because the lease no longer
exists. In each case the tenant seeks relief because the lease has been
forfeited. The proposition is also inconsistent with the language of section
146(2). The tenant may apply for relief where the landlord is ‘proceeding, by
action or otherwise’ to enforce his rights. The tenant may apply for relief
where the landlord is ‘proceeding’ by action and also where the landlord is
proceeding ‘otherwise’ than by action. This can mean only that the tenant may
apply for relief where the landlord is proceeding to forfeit by re-entry after
the expiry of a section 146 notice. If re-entry bars relief, the right of the
tenant to apply for relief where the landlord is proceeding otherwise than by
action is substantially inoperative and the words ‘or otherwise’ in section
146(2) have no application. In my opinion, those words must have been included
because Parliament intended that a tenant should be able to obtain relief
against a landlord whether the landlord has asserted his rights by a writ or by
re-entering. It is said that a tenant served with a section 146 notice could
during and after the expiration of the notice apply for relief under section
146(2) but if he fails to do so he is at the mercy of the landlord who decides
to re-enter and whose rights are therefore, it is said, quite unaffected by the
provisions of section 146(2) designed to relieve tenants from the consequences
of breach of covenant. In my opinion, the ambiguous words ‘is proceeding’ can
mean ‘proceeds’ and should not be construed so as to produce the result that a
tenant served with a section 146 notice can ensure that he will be able to
apply for relief only if he does so before he knows whether the landlord
intends to proceed at all or whether, if the landlord decides to proceed, he
will issue and serve a writ or will attempt to re-enter.
When a tenant
receives a section 146 notice he will not know whether the landlord can be persuaded
that there is no breach or persuaded to accept in due course that any breach
has been remedied and that he has been offered adequate and satisfactory
compensation or whether the landlord will seek to determine the lease by
issuing and serving a writ or will seek to determine the lease by re-entering
the premises. The tenant will not wish to institute proceedings seeking relief
from forfeiture if those proceedings will be aggressive and hostile and may be
premature and unnecessary. Parliament cannot have intended that if the landlord
employs the civilised method of determining the lease by issuing and serving a
writ, then the tenant will be entitled to apply for relief, but if the landlord
employs the dubious and dangerous method of determining the lease by
re-entering the premises, then the tenant will be debarred from applying for
relief.
Mr Reid
concedes that re-entry can avail the landlord only if the entry is lawful.
Re-entry is unlawful where the premises are occupied by the tenant but not unlawful
where the premises are occupied by the tenant’s goods. If the argument of the
trustees is correct, section 146 provides a method by which a landlord can
sneak up on a shop at night, break into the shop, and install new locks so that
the tenant loses his lease and can only press his nose against the shop window,
being unable to obtain the assistance of the court because he has become a
trespasser entitled to no rights and to no relief. The farce in the present
case when the landlord occupied the premises for four hours should not be
allowed to defeat the statutory rights of the tenant.
The right
conferred by section 146(2) on a tenant to apply for relief against forfeiture
may, without violence to the language, be construed as a right to apply ‘where
a lessor proceeds, by action or otherwise,’ to enforce a right of
re-entry. So construed, section
claims that the lease has been determined for breach of covenant. I have no
doubt that this was the object and intention and is the effect of section 146.
In Quilter
v Mapleson (1882) 9 QBD 672 a landlord forfeited a lease before the Act
of 1881 came into force by issuing and serving a writ for possession. He
recovered judgment, the tenant appealed and the Act of 1881 came into force
before the appeal was heard. The Court of Appeal held that the Act was
retrospective and granted relief to the tenant. Lindley LJ at p 676 decided
that section 14(2) was applicable:
The action
was brought by the landlord on the ground of breaches committed before the Act,
and he obtained judgment before the Act came into operation, but execution was
stayed, so that he has never obtained possession. The original action then is
not yet at an end . . . so long as the tenant has not been turned out of
possession he is within the terms of the enactment, for the lessor is
‘proceeding to enforce’ his right of re-entry. The enactment then being in
terms retrospective must be construed according to its terms as being retrospective.
The judgments
of Sir George Jessel MR and Bowen LJ were to the like effect and it is now
settled law that where a landlord forfeits a lease by issuing and serving a
writ for possession the tenant may apply for relief before but not after the
landlord has recovered judgment and re-entered. But although the court limited
the time during which a tenant could apply for relief against forfeiture
constituted by the issue and service of the writ, the court had no power and,
in my opinion, did not intend to deprive a tenant of any right to apply for
relief after a forfeiture constituted by re-entry without judgment. Quilter
v Mapleson is authority for a case where the landlord forfeits by issue
and service of a writ but is not authority for a case where the landlord
forfeits by re-entry.
In Rogers
v Rice [1892] 2 Ch 170 a landlord forfeited by the issue and service of
a writ recovered judgment and re-entered pursuant to the writ of possession
then issued and was held to be no longer ‘proceeding by action’ within section
146(2). The tenant sought and was refused leave to set aside the verdict and
the judgment. The tenant later issued an originating summons seeking relief
from forfeiture under section 146(2). Lord Coleridge at pp 171-172 said that a
section 146 notice had been given and ignored, and continued:
The action
proceeded to judgment, the judgment was executed, so far as possession was
concerned, and at the time when the present proceeding was commenced the lessor
was in possession. The action then, so far as related to enforcing the right of
re-entry, was at end, and it cannot be said that the landlord was ‘proceeding’
to enforce his right of re-entry. The case is clear on the terms of the Act,
but I cannot omit to notice that the same view was taken by the judges of the
Court of Appeal in Quilter v Mapleson 9 QBD 672, 677, where all
three judges gave their opinion to this effect, though that was not the point
on which their decision turned.
The decision
can be supported on the grounds that no court could properly exercise its
discretion to relieve against forfeiture after the landlord had issued and
served a writ, recovered judgment in the action and entered into possession
pursuant to that judgment. The decision can also be supported on the grounds
set out in the speech of my noble and learned friend Lord Oliver of Aylmerton.
But the court had no power and, in my opinion, did not intend to deprive a
tenant of any right to apply for relief after a forfeiture constituted by
re-entry without judgment.
In Pakwood
Transport Ltd v 15 Beauchamp Place Ltd (1977) 36 P&CR 112* the
Court of Appeal rejected an argument by a landlord who had served a section 146
notice that the tenant could not apply for relief from forfeiture until
proceedings for forfeiture had been instituted by the landlord. All three lord
justices derived from the cases of Quilter v Mapleson (1882) 9
QBD 672 and Rogers v Rice [1892] 2 Ch 170 the proposition that in
the words of Orr LJ at p 117:
. . . a
lessee could not apply for relief against re-entry or forfeiture after the
landlord had obtained a judgment of the court entitling him to re-enter on a
forfeiture; and it is claimed, and in my judgment rightly claimed, that the
same principle must apply where the landlord has peacefully recovered
possession. In other words, once he has either recovered possession or obtained
an order for possession he can no longer be said to be ‘proceeding by action or
otherwise to enforce a right of re-entry or forfeiture’.
*Editor’s
note: Also reported at (1977) 245 EG 309, [1978] 1 EGLR 27.
My lords, I
accept that it is now settled law that a tenant cannot apply for relief after
the landlord has recovered judgment for possession and has re-entered in reliance
on that judgment. But I do not accept that any court has deprived or is
entitled to deprived a tenant of any right to apply for relief if the landlord
proceeds to forfeit otherwise than by an action instituted for that purpose.
Orr LJ
continued:
On this basis
the argument for the lessor appears to me to involve an absurdity, in that if
the landlord has done no more than serve a section 146 notice, it is too early
for the tenant to apply for relief; but if the landlord’s next step is
peaceably to recover possession, it is then too late for the tenant to apply.
For my part, I am not prepared to accept an argument which leads to this
absurdity, and I have no hesitation in holding that a landlord who serves a
section 146 notice is at that stage ‘proceeding to enforce a right of re-entry
or forfeiture’ in that the service of such a notice is a step which the law
requires him to take in order to re-enter or forfeit.
My lords, I
accept the conclusion that a landlord who serves a notice under section 146(1)
can be said, for the purposes of section 146(2), to be proceeding to enforce
his rights under the lease. A tenant authorised by section 146(2) to apply to
the court for relief against forfeiture if he fails to comply with a section
146 notice may make that application after service of the notice for the
purpose of elucidating the issues raised by the notice, ascertaining the
intentions of the landlord, and setting in train the machinery by which the
dispute between the landlord and the tenant can be determined by negotiation or
by the court. But the fact that the tenant may apply to the court for relief
after service of the section 146 notice does not mean that if he does not do so
he loses the right conferred on him by section 146(2) to apply for relief if and
when the landlord proceeds, not by action but ‘otherwise’ by exercising a right
of re-entry. No absurdity follows from a construction which allows the tenant
to apply for relief before and after a landlord re-enters without first
obtaining a court order.
In the words
of Laskin J A in Re Rexdale Investments Ltd & Gibson [1967] 1 Ont LR
251 at p 259 dealing with provisions in the Ontario legislation
indistinguishable from section 146(2), the argument that a tenant cannot apply
for relief after a landlord has determined the lease by re-entry:
depends on a
detached grammatical reading of the phrase ‘is proceeding’ . . . which makes
nonsense of the phrase ‘or otherwise’ (as covering physical re-entry) by making
ineffective, in any practical sense, the provision for relief from forfeiture
applicable to such re-entry. We do not construe statutes, especially when they
are remedial . . . to the point of self-contradiction. In my opinion, the
phrase ‘is proceeding’ is more properly read in the sense of ‘has proceeded’,
and I am fortified in this view by the fact that the exercise of the power of
termination is manifested effectively by the mere taking of proceedings as well
as by physical re-entry. What [section 146(2)] means, therefore, is that when
the landlord has terminated the lease by action or by actual re-entry without
action, the tenant may seek relief from forfeiture in the pending action, if
any, or, if none, by proceedings initiated by him. In the latter case, one
would expect prompt reaction by the tenant . . . The English cases relied on .
. . [Rogers v Rice [1892] 2 Ch 170; Locke v Pearce
[1893] 2 Ch 271 and Quilter v Mapleson (1882) 9 QBD 672], are
distinguishable, if need be . . . by the fact . . . that they relate to
re-entry in pursuance of a judgment for possession.
These
observations by a distinguished Canadian judge, who subsequently became Chief
Justice of the Supreme Court of Canada, support the views which I have formed
concerning the construction of section 146 and the ambit and effect of the
earlier decisions.
Mr Reid argued
that your lordships should not interfere with 19th-century decisions and for my
part I do not intend to do so on this occasion or to question the result of the
decision of the Court of Appeal in Pakwood Transport Ltd v 15
Beauchamp Place Ltd (1977) 36 P&CR 112. The authorities were never
directed to the point now in issue and certainly never decided that issue.
It was
suggested that Parliament in 1925 accepted the views expressed in the
19th-century cases. I agree that Parliament accepted that a tenant cannot apply
for relief under section 146(2) after the landlord has forfeited the lease by
issuing and serving a writ for possession and in his action has recovered and
enforced judgment. The 19th-century cases were not directed to the problem
which has now emerged.
We were
informed that the researches of counsel had not disclosed any reported case in
which a landlord has forfeited by re-entry and then successfully denied the
right of the tenant to apply for relief.
The trustees or
their advisers, perhaps incensed by the activities of the appellant in the
present case, conceived and carried out a dawn raid which fortunately did not
result in bloodshed. Since the decision of the Court of Appeal in the instant
case there has been a proliferation of section 146 notices followed by pressure
on tenants to surrender on terms favourable to the landlord. If this appeal
were not allowed, the only safe advice for a tenant would be to issue
proceedings for relief against forfeiture as soon as a section 146
notice is received at a time when the tenant cannot know whether relief will be
necessary. A tenant ignorant of the development in the law pioneered by the
trustees in the present case will be at the mercy of an aggressive landlord.
The conclusions which I have reached will not entail these consequences and
will not again involve Parliament in correcting judicial constructions of
statute by further legislation.
The results of
section 146 and the authorities are as follows. A tenant may apply for
appropriate declarations and for relief from forfeiture under section 146(2)
after the issue of a section 146 notice but he is not prejudiced if he does not
do so. A tenant cannot apply for relief after a landlord has forfeited a lease
by issuing and serving a writ, has recovered judgment and has entered into
possession pursuant to that judgment. If the judgment is set aside or
successfully appealed the tenant will be able to apply for relief in the
landlord’s action but the court in deciding whether to grant relief will take
into account any consequences of the original order and repossession and the
delay of the tenant. A tenant may apply for relief after a landlord has
forfeited by re-entry without first obtaining a court order for that purpose,
but the court in deciding whether to grant relief will take into account all
the circumstances including delay on the part of the tenant. Any past judicial
observations which might suggest that a tenant is debarred from applying for
relief after the landlord has re-entered without first obtaining a court order
for that purpose are not to be so construed.
I would
therefore allow the appeal and set aside the orders of the trial judge and the
Court of Appeal. The trustees must pay the costs of the appellant in this House.
There will be no order for costs in the Court of Appeal because a number of
issues were decided against the appellant and there is no appeal from any
decision of the Court of Appeal other than the decision on the right of the
appellant to appeal for relief against forfeiture. The application of the
appellant for relief against forfeiture will be remitted to the High Court. The
judge would have been prepared to grant relief against forfeiture except for
the fact that he considered that he had no jurisdiction to do so. On the
renewal of the appellant’s application for relief the parties will be at
liberty to file and adduce further evidence in order that the judge may
consider the propriety of granting relief and the terms of relief on the basis
of the facts as at the date of the hearing of the renewed application for
relief. The costs of the original hearing of all the issues by the trial judge
and the costs of the renewed application before the trial judge will be in the
discretion of the judge who hears the renewed application.
When the judge
refused relief to the appellant on the grounds of jurisdiction he made an order
for costs against the appellant on an indemnity basis. In my opinion, such an
order should not be made. There is no reason why an unsuccessful applicant for
relief should be in any worse case than any other unsuccessful litigant.
Moreover, if a landlord is entitled to costs on an indemnity basis, whether
relief is obtained or not, there will be no inducement to the landlord to
compromise his dispute with the tenant.
For my part I
consider that the practice of ordering indemnity costs as a condition of
granting relief is ripe for reconsideration. Indemnity costs to a landlord
encourage lawyers and surveyors and other advisers to charge large fees. I make
no criticism of the advisers of the trustees because I do not know what fees
and charges they intend. But it seems to me that, in principle, a tenant should
not be at the mercy of an order made by a judge who has no means of knowing the
effect of the order and imposes no impartial criterion by which costs can be
taxed down.
In his speech,
LORD OLIVER OF AYLMERTON said: I have had the advantage of reading in
draft the speech delivered by my noble and learned friend, Lord Templeman, and
I agree that the appeal should be allowed for the reasons which he has given. I
add a few words of my own only in deference to the very clear and helpful
argument presented to your lordships by Mr Reid QC on behalf of the
respondents, which, at one point during the hearing, appeared to me to present
an insurmountable obstacle in the appellant’s path.
Broadly the
argument was to this effect. Rogers v Rice [1892] 2 Ch 170
established that once possession had actually been resumed by the landlord
under the forfeiture clause in a lease it was too late for a successful
application for relief to be mounted under section 146(2) of the Law of
Property Act 1925 (then section 14(2) of the Conveyancing Act 1881) since the
landlord was no longer ‘proceeding’ to enforce a forfeiture but had completed
the process. That construction of the section, it was urged, had now stood
unchallenged for the past 100 years and could be departed from only by
overruling Rogers v Rice. Parliament had, in 1925, re-enacted the
section in precisely the same terms and, it must be assumed, had done so in the
knowledge of the construction accorded to the words ‘is proceeding’ by a strong
Court of Appeal consisting of Lord Coleridge CJ and Lindley and Kay LJJ
following obiter dicta to the same effect from Jessel MR and Lindley and
Bowen LJJ in Quilter v Mapleson (1882) 9 QBD 672. Whatever might
have been the position in 1925, when the legislature came to reconsider the
legislation, it was now too late for your lordships to adopt a construction
which differed from what must have been intended by Parliament when the
self-same words were re-enacted. In so submitting, Mr Reid was echoing what was
said by Sir Wilfrid Greene MR in Egerton v Jones [1939] 2 KB 702
at p 707.
I confess to
having been very much troubled by this submission, to which, at the time, I
could see no logical answer but which, as it seemed to me, led to a result not
only manifestly inconvenient but also opposed to common sense. On further
consideration, however, I think that the fallacy of the argument lies in the
way in which the essential premise is expressed. Neither Rogers v Rice
nor Quilter v Mapleson did, in fact, establish that the right to
apply for relief under section 146(2) was ousted simply by a landlord’s
resumption of possession, however that occurred. The expressions used by the
judges in both cases were directed only to the position of a landlord who was
the plaintiff in legal proceedings against his tenant for possession of the
premises comprised in the lease on the ground of forfeiture. In Quilter
v Mapleson the point did not arise directly or, indeed, at all, since
notice of appeal by the tenant was given before judgment against him was
executed and a stay had been granted pending appeal. Bowen LJ’s statement
(quoted by Lord Coleridge CJ in Rogers v Rice) that ‘the tenant
may apply for relief until the landlord has re-entered’ was made in the context
of pending proceedings for possession. It was, in fact, not strictly accurate,
since the re-entry dates technically from the service of the writ; but it was
in any event clearly directed to the enforcement of a final and unappealed
judgment in the proceedings.
In Rogers
v Rice, similarly, the very brief judgments were directed entirely to a
situation in which the landlord had obtained a judgment for possession which
had been executed and against which there was no appeal, either pending or
possible. It was pointed out by Lord Coleridge CJ that at the time when the
tenant’s originating summons for relief was taken out ‘the action . . . so far
as related to enforcing the right of re-entry, was at an end’. It could not
therefore be said that the landlord was ‘proceeding’ to enforce his right of
re-entry. Now although it is true that Lord Coleridge also mentioned that the
landlord was in possession, the salient point, as I read the judgment, was not
the mere fact that the landlord had resumed possession but the fact that
possession was held under an unassailable judgment in proceedings which had
been litigated to the end. It is clear, for instance, that where a judgment for
possession has been wrongfully obtained because, for instance, no notice was
served under section 146(1), it may, by appropriate procedure, be set aside so
as to enable one deriving title under the lessee to defend (see Jacques
v Harrison (1884) 12 QBD 165). What defeats the claim to relief is not
the fact of possession simpliciter but possession under a final and
unassailable judgment. It is, in fact, worth noting that in Rogers v Rice
there had been, after execution of the writ of possession, an application to
set the judgment aside. That had failed and it was therefore unnecessary for
the court to advert to it in its judgment; but had it succeeded, I doubt
whether the result would have been the same, for even though the landlord was
in actual possession, his title to hold the property would have rested upon the
forfeiture of the lease and not upon the judgment in the proceedings. He would,
therefore, still be ‘proceeding’ to enforce the forfeiture in seeking to restore
the judgment.
As my noble
and learned friend Lord Templeman has said, the court was simply not directing
its mind to what the position might be in a case where the landlord sought to
enforce the right of re-entry, not by proceedings for possession, but by
physical entry upon the demised premises; and I do not think that it
necessarily follows at all, as the Court of Appeal seems to have assumed in Pakwood
Transport Ltd v 15 Beauchamp Place Ltd (1977) 36 P & CR 112,
that because legal proceedings resulting in a final, unappealed and fully
executed judgment are then at an end so that the landlord is no longer
enforcing his right of re-entry, a landlord who has entered upon the demised
premises or, possibly, even upon a portion of the demised
once he has lawfully set foot on the premises, any longer ‘proceeding . . . to
enforce’ his right of re-entry. I would, for my part, adopt the analysis
suggested by Sir Nicolas Browne-Wilkinson V-C in the Court of Appeal in the
instant case. A landlord who re-enters peaceably holds possession of the
demised premises as against the tenant and his privies by virtue of the right
accorded to him by the proviso for re-entry contained in the lease. If the
lease is set up against him, he can justify keeping the tenant out only by
pointing to the forfeiture clause and pleading his entry under it; and so long
as that remains the position he is ‘proceeding . . . to enforce’ it. Obviously
there is going to come a time when a tenant who delays applying for relief will
find himself debarred from obtaining it, but theoretically the landlord who has
elected to enforce his forfeiture in this way remains vulnerable to an
application unless and until he obtains a final judgment for possession.
That position
is to be contrasted with that of the landlord who adopts the more conventional
course of forfeiting by means of an action for possession. Once he has obtained
judgment and has been put into possession, any attempt by the tenant to raise
the lease against him is met by a simple plea of the judgment. The landlord is
no longer proceeding to enforce a right of re-entry, for his possession rests
now not upon the exercise of a right under the lease but upon a judgment of the
court which, as between the parties and their privies, constitutes res
judicata. Proceedings for relief under section 146(2) cannot therefore be
effective unless and until that position is reversed and the judgment set
aside, as it might be, for instance, in the case of a default judgment or one
obtained without proper service.
This seems to
me to be an essential distinction and it is one which is not touched by and was
not adverted to in Rogers v Rice. Accepting, therefore, that
Parliament, in re-enacting section 14(2) of the Act of 1881 as section 146(2)
of the Act of 1925, was endorsing and perpetuating the Court of Appeal’s
construction that a landlord holding by virtue of an executed final judgment
was no longer ‘proceeding to enforce’ his right of re-entry but was merely
relying upon his judgment in proceedings which had conclusively terminated,
there is nothing in this construction which governs the quite different case of
the landlord who elects to exercise his right ‘otherwise’ by physical entry
upon the property.
It was, of
course, the ratio of the decision of the Court of Appeal in the Pakwood
Transport case that a peaceable entry by a landlord was to be equiparated
with an executed judgment, the court’s conclusion in that case that the proceedings
were not premature being based on what they saw as the manifest absurdity of
the right to relief being destroyed eo instante with the forfeiture from
which it arises. It does not, however, follow from the rejection of that ratio
that the conclusion itself was wrong. ‘Is proceeding’ means, I think, no more
than ‘is taking the necessary steps’ or ‘proceeds’, which would include the
service of the necessary preliminary notice under subsection (1). Where a
landlord has given notice of his intention to forfeit, on, for instance, the
liquidation of a company tenant, there is obvious good sense in enabling the
liquidator to clarify the position without waiting for the landlord’s action so
that the lease may be sold as soon as possible.
For these
reasons and for those more fully expressed in the speech of my noble and
learned friend Lord Templeman, I agree that the appeal should be allowed and
concur in the order for costs which he proposes.
LORDS KEITH
OF KINKEL, GOFF OF CHIEVELEY and JAUNCEY OF
TULLICHETTLE agreed with the speeches of Lord Templeman and Lord Oliver of
Aylmerton and the reasons given and did not add any observations of their own.
