Landlord and tenant –– Forfeiture –– Relief –– Registered equitable charge of lease –– Whether equitable chargee entitled to relief from forfeiture
By an agreement dated 4 May 1994, the claimant surrendered a lease of restaurant premises to the first defendant landlord. The landlord granted a new lease to Mr and Mrs B, who agreed to pay the claimant £172,500 in instalments for the business. Following the failure to pay certain instalments, the claimant obtained summary judgment against Mr and Mrs B and, later, two charging orders, one against the assets of Mr and Mrs B and the other against the beneficial interests of Mrs B. Both orders included the lease. These orders were registered in January 1996, pursuant to the Land Charges Act 1972. In April 1996 the lease was forfeited by peaceable re-entry for arrears of rent and a new lease was granted to the second and third defendants. In proceedings by the claimant seeking relief from forfeiture on the basis that she was an unpaid vendor and equitable chargee with the benefit of registered charges over the forfeited lease, the claimant’s application was dismissed. In a further action, Mr and Mrs B claimed ownership of chattels as against the second and third defendants; in that action an injunction was granted against the second defendant on cross-undertakings in damages by the claimant. The second defendant appealed against the dismissal of his claim that the injunction should not have been granted.
Held: The appeal was allowed in the forfeiture action and dismissed in the chattels action. Although a claim by the claimant for direct relief from forfeiture, based upon the inherent jurisdiction of the court, was not advanced before the trial judge, such a claim failed. The cases in which the inherent jurisdiction to grant relief from forfeiture for non-payment of rent were restricted to those in which the person claiming relief was entitled to possession of land or had a legal estate or equitable interest in it. The court had no jurisdiction to grant relief to an equitable chargee who had no such interest. However, an equitable chargee of a lease that has been forfeited for non-payment of rent can seek relief from forfeiture indirectly. The basis of such a claim was an implied obligation upon the chargor, under an equitable charge, to take reasonable steps to preserve the chargee’s security. The effect of the charging order was to impose upon Mr and Mrs B equitable obligations, enforceable by the claimant, that included an obligation to apply for relief from forfeiture. If relief were to be granted upon this indirect basis, Mr and Mrs B would have to be made parties for the purposes of the order for relief. The court was likely to exercise its discretion to grant relief on terms that the claimant made payment to the landlord, and the second and third defendants respectively, of all arrears of rent payable under the forfeited lease and costs. The second defendants’ appeal in relation to the action concerning chattels was dismissed.
The following cases are referred to in this report.
BICC plc v Burndy Corporation [1985] 1 Ch 232; [1985] 2 WLR 132; [1985] 1 All ER 417
Bowser v Colby (1841) 1 Hare 109
Carreras Rothmans Ltd v Freeman Mathews Treasure Ltd (in liquidation) [1985] Ch 207; [1984] 3 WLR 1016; [1985] 1 All ER 155
Clark v Chief Land Registrar; Chancery v Ketteringham [1994] Ch 370; [1994] 3 WLR 593; [1994] 4 All ER 96, CA; [1993] Ch 294; [1993] 2 WLR 141; [1993] 2 All ER 936; (1993) 65 P&CR 186, ChD
Cosslett (Contractors) Ltd, Re; sub nom Clark (Administrator of Cosslett (Contractors) Ltd) v Mid Glamorgan County Council [1998] Ch 495; [1998] 2 WLR 131; [1997] 4 All ER 115
Croydon (Unique) Ltd v Wright [2001] Ch 318; [2000] 2 WLR 683; [1999] 4 All ER 257; (1999) 78 P&CR D40; [1999] 3 EGLR 28; [1999] 40 EG 189; (2000) 32 HLR 670
Cummins v Perkins [1899] 1 Ch 16
Dendy v Evans [1909] 2 KB 894; [1910] 1 KB 263, CA
Faith Panton Property Plan Ltd v Hodgetts [1981] 1 WLR 927; [1981] 2 All ER 877
Gill v Lewis [1956] 2 QB 1; [1956] 2 WLR 962; [1956] 1 All ER 844
Harmer v Armstrong [1934] Ch 65
Hayim v Citibank NA [1987] AC 730; [1987] 3 WLR 83
Howard v Fanshawe [1895] 2 Ch 581
King v Smith (1843) 2 Hare 239
Ladup Ltd v Williams & Glyn’s Bank plc [1985] 1 WLR 851; [1985] 2 All ER 577; (1985) 50 P&CR 211
Newbolt v Bingham (1895) 72 Law Times 852
Scandinavian Trading Tanker Co AB v Flota Petrolera Ecuatoriana [1983] 2 AC 694; [1983] 3 WLR 203; [1983] 1 All ER 301, HL (E)
Shiloh Spinners Ltd v Harding [1973] AC 691; [1973] 2 WLR 28; [1973] 1 All ER 90; (1973) 25 P&CR 48, HL
Sport International Bussum BV v Inter-Footwear Ltd [1984] 1 WLR 776; [1984] 1 All ER 321, HL
This was the hearing of two appeals: the first by the claimant, Davinia Patricia Bland, in proceedings seeking relief from forfeiture against the defendants, Ingram’s Estates Ltd, Forgir Uddin and Ripon Chowdhery Forgir; and the second by Forgir Uddin in proceedings by Franco and Caroline Beer relating to chattels, from a decision of
Robert Denman (instructed by Joseph Aaron & Co, of Ilford) appeared for the claimant; Timothy Fancourt (instructed by Collyer-Bristow) appeared for the first defendant; Justin Althaus (instructed by Armstrong & Co) appeared for the second and third defendants.
1. Giving the first judgment, NOURSE LJ said:
2. The principal question on these appeals is whether an equitable chargee of a lease that has been forfeited for non-payment of rent can, where the tenant himself does not seek relief, claim relief against the forfeiture under the inherent jurisdiction of the High Court, either directly or indirectly in the shoes of the tenant.
Facts
3. The premises affected are 54-56 The Parade, Bourne End, Buckinghamshire, which, before the events that must now be described, had been used as a café. The freehold owners of the premises were Ingram’s Estates Ltd (Ingrams). In May 1989 they granted to Davinia Patricia Bland and her husband, John Colin Bland, a lease of the premises (the Bland lease) for a term of 16 years from 25 March 1988, at an annual rent, subject to review, of £10,000. That was double the rent paid by the previous tenants, whose lease, when surrendered, had about 18 months still to run, and to whom Mr and Mrs Bland paid £100,000 in order to obtain possession. In 1990 and 1991, at a further cost of about £100,000, they extended the premises and turned them into an Italian restaurant, which opened towards the end of 1991.
4. In 1992 a bankruptcy order was made against Mr Bland. His trustee having disclaimed his interest under the Bland lease, Ingrams permitted Mrs Bland to remain in possession as the sole tenant. By an agreement dated 4 May 1994, she sold the premises, together with the trade fixtures and fittings, to Franco Beer and his wife, Caroline, for £172,500, payable by instalments over a period ending on 25 June 1996. It is not clear whether the Bland lease was surrendered or forfeited by peaceable re-entry. In any event, on 12 May 1994, Ingrams granted to Mr and Mrs Beer a lease of the premises (the Beer lease) for a term of 16 years from 25 March 1994, at an annual rent, subject to review, of £14,000.
5. Mr and Mrs Beer were soon in financial difficulties. They paid a number of instalments of the purchase price to Mrs Bland, and drew three post-dated cheques in favour of her solicitors in the aggregate amount of £24,000 that were dishonoured upon presentation. On 30 November 1995 Mrs Bland obtained summary judgment against them, in the Queen’s Bench Division, for £24,000, together with interest of £354.83 and costs. On the same day, the master made a charging order nisi against Mr and Mrs Beer’s interests in four different properties, one of which was the premises. So far as material, the order provided:
IT IS ORDERED that unless sufficient cause to the contrary be shown on the 20th day of December 1995 the Defendants’ interests in the said assets shall, and IT IS ORDERED THAT in the meantime do, stand charged with the payment of £24,354.83p and costs to be taxed due on the said judgment and interest thereon at the statutory rate together with the costs of this application.
6. It is clear that the effect of the order nisi was to create a defeasible charge upon the legal estate in the Beer lease, as well as upon Mr and Mrs Beer’s beneficial interests therein: cf Clark v Chief Land Registrar [1994] Ch 370 at pp380-381. On 20 December 1995 the master made an order absolute in the case of Mrs Beer only, and directed that, as against Mr Beer, the hearing be adjourned. That order provided that “the interests of the Second Defendant Caroline Beer in the assets specified in the Schedule hereto stand charged with the payment of £24,354.83 etc”. On 10 January 1996 the master made an order against Mr Beer in similar terms.
7. There was some debate in argument as to the effect of the two orders absolute in regard to the legal estate in the Beer lease. It is clear, and it was not disputed, that they rendered absolute and indefeasible the charges on the respective beneficial interests of Mr and Mrs Beer. But it was argued that they had in some way brought to an end the defeasible charge on the legal estate. I am unable to see how they could have had that effect. What the order nisi said was that unless sufficient cause to the contrary was shown on 20 December 1995 (or, by implication, at any adjourned hearing), Mr and Mrs Beers’ interests in the specified assets should, and in the meantime did, stand charged with payment. A literal reading of those words might suggest that since sufficient cause to the contrary was not shown, either on 20 December 1995 or on 10 January 1996, the charge on the legal estate became absolute and indefeasible on the latter date. However, since no order absolute was made against Mr and Mrs Beer jointly, it seems unlikely that that could be a correct view of the position. But that is not an end of the point. In my view, it is difficult, indeed impossible, to see how the defeasible charge on the legal estate could have been brought to an end. In my view, that charge continued. By virtue of section 3(4) of the Charging Orders Act 1979, it has the like effect, and is enforceable in the same courts and in the same manner as an equitable charge created by the debtor by writing under his hand. I therefore proceed on the footing that Mrs Bland was at all material times an equitable chargee of the legal estate in the Beer lease.
8. On 9 February 1996 Mrs Bland obtained a further summary judgment against Mr and Mrs Beer in the Queen’s Bench Division, this time for £72,500, together with interest of £360.55, plus costs. Shortly afterwards a bankruptcy order was made against Mr Beer. On 4 March 1996 the master made a charging order absolute against Mrs Beer in respect of the judgment for £72,860.55. All three orders absolute were registered at the Land Charges Registry pursuant to the provisions of the Land Charges Act 1972.
9. Mr and Mrs Beer were in debt not only to Mrs Bland. By the end of February 1996, there were arrears of rent owing to Ingrams, under the Beer lease, of between £11,000 and £12,000. There were discussions between Ingrams’ solicitors and Mr and Mrs Beer’s solicitors about a replacement tenant to be found by the Beers; the transaction to be carried out either by a surrender or by forfeiture by peaceable re-entry, followed, in either case, by the grant of a new lease to the new tenant. By the end of the first week of March, Ingrams’ solicitors were in correspondence with solicitors acting for Fogir Uddin and his wife, Ripon Chowdhery Fogir, as to the terms of a new lease.
10. On 29 April 1996 Ingrams granted to Mr and Mrs Uddin a lease of the premises (the Uddin lease) for a term of 24 years, from 25 March 1996, at a premium of £12,000 and an annual rent, subject to review, of £14,000. On the view I take of the case, and by reason of a concession made by Mr Althaus on behalf of Mr and Mrs Uddin, it is unnecessary to examine in any great depth the circumstances in which the Uddin lease came to be granted. It is enough to record, first, that at a time while the Beer lease was still subsisting, Ingrams received actual notice that: Mrs Bland had a charging order over it; second, the Beer lease was forfeited by peaceable re-entry on Friday 26 April; third, on Monday 29 April, at 12.41 pm, Ingrams’ solicitors received a faxed letter from Mr and Mrs Beer’s solicitors stating that they would be applying for relief against the forfeiture of the Beer lease (that information was not passed on to Mr and Mrs Uddin); fourth, it was not until 1.38 pm on that day, nearly an hour later, that the Uddin lease was granted; fifth, before it was granted, Mr and Mrs Uddin had actual notice that the Beer lease had been forfeited. It was the fifth of these points that was conceded by Mr Althaus, without doubt correctly on the facts. It necessarily follows that, before the Uddin lease was granted, Mr and Mrs Uddin had constructive notice of Mr and Mrs Beer’s right to claim relief against the forfeiture of the Beer lease.
11. Mr and Mrs Beer did not, as their solicitors had intimated they would, apply for relief against the forfeiture of the Beer lease. Instead, on or about 15 May 1996, they commenced an action in High Wycombe County Court (the chattels action) against Mr Uddin, claiming ownership of the fixtures and fittings in the premises, the return thereof, and damages. I will return to that action, in which there is a subsidiary question for our decision, in due course. Our main concern is with a second action (the forfeiture action), which was brought by Mrs Bland against Ingrams and Mr and Mrs Uddin, also in
Forfeiture action
12. The forfeiture action first came before Judge Hull QC at Epsom. In his judgment, delivered on 17 September 1998, the judge recorded that Mrs Bland, relying upon her equitable charge of the Beer lease in order to give her the necessary locus standi, claimed relief against its forfeiture under section 146(4) of the Law of Property Act 1925, and, further or alternatively, section 139 of the County Courts Act 1984. He held that he had no jurisdiction to grant relief under either of those provisions. However, recognising that the High Court, unlike the county court, has power to grant relief under the inherent jurisdiction, he did not dismiss the action, but transferred it to the Chancery Division pursuant to section 44(2) of the County Courts Act 1984.
13. The forfeiture action came on again in March 1999 before Mr Peter Leaver QC, sitting as a deputy judge of the Chancery Division; see [1999] 2 EGLR 49. He gave Mrs Bland leave to re-reamend her statement of claim in order to rely upon the inherent jurisdiction of the court. In a reserved judgment delivered on 13 April 1999, the judge rejected Mrs Bland’s claim for relief, and dismissed the action. He refused an application by her for permission to appeal to this court. On 30 July 1999 permission was granted by myself on consideration of the documents.
14. One point can be disposed of straightaway. In the court below, Mr Robert Denman, for Mrs Bland, sought to contend that it was open to her to claim relief not only under the inherent jurisdiction, but also under section 146(4) of the 1925 Act. The learned deputy judge ruled, correctly, that it was not open to her to rely upon that provision, and that, in the absence of any appeal against it, the judgment of Judge Hull was decisive on that question. Mr Leaver based his ruling upon estoppel by record, but I think it would be more accurate to say that, within and for the purposes of the forfeiture action, it had already been disposed of at first instance. Mr Denman sought to reopen it before us. Since it is a question of pure law, we could, had there been anything in it, have given Mrs Bland leave to appeal against Judge Hull’s decision out of time. But it is plain that the question is unarguable. Section 146(4), as both Judge Hull and Mr Leaver observed, only allows an application for relief to be made by “a person claiming as underlessee”. Whatever else may or may not be said about the interest or status of an equitable chargee of a lease (see below), it cannot be said that he claims as an under-lessee.
15. In the circumstances, relief against the forfeiture of the Beer lease can only be granted to Mrs Bland, if at all, under the inherent jurisdiction of the court. In the court below, and in the early stages of the argument in this court, her case proceeded on the footing that, where the tenant himself does not seek relief, an equitable chargee of a lease has a direct right to claim relief against its forfeiture. However, as a result of exchanges between the court and Mr Denman, and while the claim for direct relief was not abandoned, Mrs Bland’s case came to be based primarily upon the proposition that the equitable chargee can claim relief in the shoes of the tenant.
Claim for direct relief
16. The convenient course is to start with the claim for direct relief. Recently, such a claim was successful in Croydon (Unique) Ltd v Wright [2000] 2 WLR 683*, where it was held by a majority of this court that an equitable chargee of a lease, being “a person with an interest under the lease of the land derived (whether immediately or otherwise) from the lessee’s interest therein” within section 138(9C) of the County Courts Act 1984, was entitled to apply to the court for relief against forfeiture under section 138(9A). That decision, having been based upon the particular wording of section 138(9C), is not an authority on the inherent jurisdiction. However, each member of the
* Editor’s note: Also reported at [1999] 3 EGLR 28
17. It is necessary to start by defining the attributes of an equitable charge. In Carreras Rothmans Ltd v Freeman Matthews Treasure Ltd (in liquidation) [1985] Ch 207 at p227C, Peter Gibson J said:
Such a charge is created by an appropriation of specific property to the discharge of some debt or other obligation without there being any change in ownership either at law or in equity, and it confers on the chargee rights to apply to the court for an order for sale or for the appointment of a receiver, but no right to foreclosure (so as to make the property his own) or [to] take possession
18. In Re Cosslett (Contractors) Ltd [1998] Ch 495 at p508G, Millett LJ, in distinguishing between a mortgage and an equitable charge, said:
The difference between them is that a mortgage involves a transfer of legal or equitable ownership to the creditor, whereas an equitable charge does not.
19. As applied to land, those observations emphasise, correctly in my judgment, that the creation of an equitable charge, unlike an equitable mortgage, does not give the chargee an equitable interest in the land. A fortiori it gives him no right to possession. Nevertheless, his right to protect or realise his security by applying to the court for the appointment of a receiver or an order for sale does give him an interest of a sort. This has been variously described in the authorities, most frequently, it appears, as a proprietary interest. In so far as the appointment of a receiver or an order for sale enables the chargee to appropriate, in the first case the rents and profits of the land and in the second its proceeds of sale, to the discharge of his debt, I do not quarrel with that description. But it is important to bear in mind that the interest, although registrable against the chargor, remains inchoate and ineffectual until an order of the court is made.
20. Such being the attributes of an equitable charge, can the chargee of a lease that has been forfeited for non-payment of rent, where the tenant himself does not seek relief, claim relief against the forfeiture? If the question could be considered simply as between the chargee and the tenant, everything would point to its being answered in the affirmative. After all, by asking the court to reinstate his security he seeks relief preliminary to, and of the same character as, an order for the appointment of a receiver or sale. Clearly, however, the question is not as simple as that. The grant of relief necessarily creates a relationship, which did not exist before, between the chargee and the landlord. While the case of a subtenant demonstrates that that in itself is not necessarily an objection, the position of someone who has never had a legal estate or equitable interest in the land is clearly distinguishable.
21. The inherent jurisdiction of the court was developed by the old Court of Chancery, whose practice and the effect of whose decrees are described by Wigram VC in Bowser v Colby (1841) 1 Hare 109 at pp126 and 130 and by Cozens-Hardy MR and Farwell LJ in Dendy v Evans [1910] 1 KB 263 at pp226-267 and 270. In Shiloh Spinners Ltd v Harding [1973] AC 691 at p726, Lord Simon of Glaisdale spoke thus of the jurisdiction:
The last hundred years have seen many examples of relaxation of the stance of regarding contractual rights and obligations as sacrosanct and exclusive of other considerations: though these examples do not compel equity to follow –– certainly not to the extent of overturning established authorities –– they do at least invite a more liberal and extensively based attitude on the part of courts which are not bound by those authorities. I would therefore myself hold that equity has an unlimited and unfettered jurisdiction to relieve against contractual forfeitures and penalties. What have sometimes been regarded as fetters to the jurisdiction are, in my view, more properly to be seen as considerations which the court will weigh in deciding how to exercise an unfettered jurisdiction.
22. That broad view was not shared by Lord Wilberforce, with whose speech Viscount Dilhorne, Lord Pearson and Lord Kilbrandon agreed. Further, the tendency of subsequent authorities relied upon by Mr Timothy Fancourt, for Ingrams, (although none of them was concerned with land) has been against the broader view: see Scandinavian Trading Tanker Co AB v Flota Petrolera Ecuatoriana
23. The only authority cited that is directly in point is Ladup Ltd (supra), whose facts were very like those of the present case. The plaintiff (Ladup) obtained a charging order absolute over a lease of a flat in Westminster. Subsequently, the landlord, having obtained judgment for forfeiture of the lease for non-payment of rent, recovered possession of the flat. Shortly afterwards, Ladup issued an originating summons in the Chancery Division, claiming relief against the forfeiture under both statute and the inherent jurisdiction of the court. The landlord applied for an order that the summons be struck out as disclosing no reasonable cause of action, or as an abuse of the process of the court. The landlord’s application was dismissed.
24. At the hearing, it was conceded, on behalf of Ladup, that the claim for relief could only be made, if it could be made at all, under the inherent jurisdiction of the court. The essential contention of counsel for the landlord (Miss Hazel Williamson) was that the originating summons was misconceived because an equitable chargee was not within the category of persons who could claim, as against the landlord, relief against forfeiture for non-payment of rent. She did not take any point based upon Ladup’s omission to join the tenant as a party or to explain his absence: as to these three matters, see [1985] 1 WLR at p854C-G.
25. In a reserved judgment, Warner J, having started by considering section 3(4) of the Charging Orders Act 1979 and the attributes of an equitable charge, referred to section 90 of the Law of Property Act 1925, whose effect, so far as material, is to enable the court to create and vest in an equitable chargee a legal term of years absolute, so as to enable him to carry out a sale as if the charge had been created by deed by way of legal mortgage. He then proceeded to consider the arguments of counsel for the landlord in relation to the inherent jurisdiction. Having done that, he said at p859H, that he did not find that the statutory provisions relied upon, or the cases cited by counsel, pointed to any clear conclusion upon the question of whether an equitable chargee of a lease was a person in whose favour the court might, in the exercise of its inherent equitable jurisdiction, grant relief against forfeiture for non-payment of rent. He accordingly had to approach that question as one of principle.
26. Warner J then turned to the arguments of counsel for Ladup, who relied primarily upon Lord Simon’s dictum in Shiloh Spinners Ltd (supra). Having referred to Lord Wilberforce’s narrower view, the judge said that it was in his speech that guidance must be looked for. He summarised the crucial points in it by saying that there was not, and never had been, any fetter upon the jurisdiction of courts of equity to relieve against forfeiture where the object of the insertion of the right to forfeit was essentially to secure the payment of money, as in the case of the right to forfeit a lease for non-payment of rent. However, as counsel for the landlord had pointed out, Lord Wilberforce did not deal with the question in whose favour the equitable jurisdiction might be exercised, being a question that remained free from authority.
27. At p860G, the judge summarised the submission made by counsel for the landlord:
Miss Williamson, for her part, submits that relief against forfeiture imports that someone should remain in, or assume, possession of the demised property in right of the lease, who will be, in consequence, under a continuing liability to the landlord for the rent and for compliance with the other covenants in the lease, and that that someone cannot be a person such as an equitable chargee who is not entitled to possession.
28. Although he felt the force of that submission, the judge thought that the submission made on behalf of Ladup had greater force. He said:
It may be that, because of difficulties of the kind suggested by Miss Williamson, there will be cases where the court will be unable to exercise its discretion to grant relief to an equitable chargee where it would have been able to grant relief to an applicant with a right to possession. I do not think, however, that such possible difficulties constitute a compelling reason for holding that the court has no jurisdiction at all to entertain an application for relief made by an equitable chargee. It seems to me that the fact that the court has power, at the suit of an equitable chargee, to order the sale of the property subject to his charge, coupled with the fact that, in the case of land, it has the powers conferred by section 90 of the Law of Property Act 1925, should enable the difficulties in question to be overcome in most or at least many cases. At all events, I am certainly not persuaded that it is plain and obvious that as a matter of law this court has no jurisdiction to entertain Ladup’s application. I therefore propose to dismiss the motion to strike it out.
29. It would be quite wrong to discount the value of Warner J’s view of this question simply because it was expressed in the context of an application to strike out. Clearly, it was the product of a careful process of reasoning. Moreover, the judge had to examine the application of an equitable jurisdiction to a species of security that, as he pointed out at [1985] 1 WLR 857C, it is probable was comparatively rare at the time that the jurisdiction was first assumed. There being no authority to the contrary, it was not unnatural that he should feel that the jurisdiction ought to extend to the case of an equitable charge; see also the observation of Butler-Sloss LJ in Croydon (Unique) Ltd v Wright [2000] 2 WLR 683 at p699H:
It seems to me astonishing that the holder of a charging order over a lease is said to be unable to be heard in forfeiture proceedings and powerless to obtain any relief or protection of the asset which is the object of the charging order.
30. It has not been suggested that the case against the grant of relief to an equitable chargee can be put higher or better than it was put by Miss Williamson in Ladup. The culmination of her submission was that relief cannot be granted to someone who is not entitled to possession. If we were exercising a truly discretionary jurisdiction, I would see no great magic in that requirement. I would think that the more important requirement was that identified earlier in the submission, namely that someone should remain in, or assume possession of, the demised property in right of the lease, who will, in consequence, be under a continuing liability to the landlord for the rent and for compliance with the other covenants in the lease. And I would see no reason why an equitable chargee should be incapable of assuming that role simply because he was not entitled to possession.
31. While I sympathise with the feelings of Warner J and Butler-Sloss LJ, I do not think it is open to us to give them effect. A jurisdiction does not become discretionary just because it is both inherent and equitable. The authorities show that the cases in which the inherent jurisdiction to grant relief against forfeiture for non-payment of rent has been exercised have been restricted to those in which the person claiming relief is entitled to possession of the land, or at any rate, which is not necessarily the same thing, has a legal estate or equitable interest in it. Now that so much of the jurisdiction has been overtaken by statute, any legitimate basis for its extension has disappeared. Admittedly and notoriously, there are gaps and anomalies in the statutory framework. But it is not for the courts to fill the gaps and cure the anomalies in purported reliance upon a jurisdiction that has never existed. In the circumstances, I would reject the claim for direct relief.
Claim for indirect relief
32. I turn to the claim for relief in the shoes of the tenant. The basis of this claim is an implied obligation upon the chargor under an equitable charge to take reasonable steps to preserve the chargee’s security. Messrs Fancourt and Althaus suggested that no such obligation exists. In support of that suggestion, Mr Fancourt referred us to King v Smith (1843) 2 Hare 239, in which Wigram V-C held that the court would not, upon the application of a mortgagee out of possession, restrain the mortgagor from felling timber growing on the mortgaged property unless the security was insufficient. However, Mr Fancourt recognised that that was really a decision on voluntary waste, a doctrine far removed, both in time and space, from the obligations that ought to be implied in an equitable charge deemed by statute to have been created by a debtor by writing under his hand in 1979 or later. If the law did not imply an obligation on the chargor to take reasonable steps to preserve the security, my astonishment would be at least as great as Butler-Sloss LJ’s. No other relevant authority having been cited, I hold
33. In an attempt to defeat that seemingly self-evident proposition, Mr Althaus directed our attention to cases in which the preservation of the security would involve the taking of steps other than the payment of money, for example the carrying out of repairs to the demised premises. I say nothing at all about such cases, nor about what steps might or might not be regarded as reasonable in relation thereto. I confine myself to cases of forfeiture for non-payment of rent.
34. On this footing, the position as between an equitable chargee of a lease that has been forfeited for non-payment of rent and a tenant who does not himself seek relief, is analogous to the position as between a beneficiary under a trust and a trustee who fails or neglects, in the performance of a duty owed by him to the beneficiary, to protect the trust estate or the interests of the beneficiary therein: see the judgment of the Privy Council delivered by Lord Templeman in Hayim v Citibank NA [1987] AC 730, in which the previous authorities are reviewed. In such a case, the beneficiary may join the trustee as a defendant to the action and sue in right of the trust and in the shoes of the trustee. I can see no distinction in principle between a case where the obligation arises under the law of trusts and one where it arises in contract. So here Mrs Bland may join Mr and Mrs Beer as defendants to the forfeiture action and claim relief in their shoes.
35. I would therefore hold that Mrs Bland’s claim for indirect relief is one that the court can entertain. The present position in regard to Mr and Mrs Beer appears from a passage in the judgment of Mr Leaver [1999] 2 EGLR 49 at p50F:
During the course of the trial, an issue arose as to whether the proceedings were properly constituted in the absence of Mr and Mrs Beer. I indicated that, in my judgment, it would be necessary to have the Beers as parties to the action: alternatively, as Nichols J suggested in Abbey National Building Society v Maybeech Ltd [1985] Ch 190, the Beers should be notified of the proceedings and should consent to the court granting relief against forfeiture, if the court so ordered. This they did, on Mrs Bland’s undertaking to assume their responsibilities under the Beer lease, if it were revived. In addition, Mr Beers’ trustee in bankruptcy stated that he would disclaim the Beer lease if relief were granted to Mrs Bland. On that basis, I allowed the proceedings to continue as constituted before me.
36. From that, it is clear that Mr and Mrs Beer’s consent to the court granting relief against forfeiture, if the court so ordered, was upon the basis of the direct claim. If this court should decide that relief ought to be granted upon the basis of the indirect claim, then a further approach will have to be made to Mr and Mrs Beer (and the trustee in bankruptcy), and they will, in any event, have to be made parties to the order for relief.
Relief –– discretion
37. In the court below, Mr Leaver, having rejected Mrs Bland’s entitlement to claim direct relief, nevertheless, in case he was wrong in that conclusion, went on to ask himself whether she ought, as a matter of discretion, to be granted relief: see [1999] 2 EGLR pp51M-52M. He answered that question in the negative. However, his examination of it was necessarily in the context of the claim for direct relief. To the claim for indirect relief, which was not advanced before him, different considerations apply. The question of discretion must therefore be examined afresh.
38. Because the claim for indirect relief emerged only during Mr Denman’s opening of the appeal, counsel were not in a position, as it appeared to me, fully to argue the question of discretion in relation thereto. They must be given a further opportunity to do so after consideration of our judgments. However, three points are, in my view, clear. First, as all counsel accepted, if relief is granted, the Uddin lease will take effect as a demise of the premises subject to the Beer lease, with the consequence that, as from 29 April 1996, the rent reserved by the Beer lease will be payable to Mr and Mrs Uddin and not to Ingrams. Second, since Mr and Mrs Uddin had constructive notice, before the Uddin lease was granted, of Mr and Mrs Beer’s right to claim relief against the forfeiture of the Beer lease, they are in no better a position to resist the claim for indirect relief than Ingrams itself. Third, the claim for indirect relief ought, in principle, to succeed, upon terms that Mrs Bland makes payment to Ingrams and Mr and Mrs Uddin respectively of all arrears of rent payable under the Beer lease, and costs.
39. As to the third of the above points, it was suggested in argument that the court ought to adopt a broad approach to the question of discretion, taking into account the conduct of the parties. I reject that suggestion. The correct approach appears from the following passage in the judgment of Jenkins LJ in Gill v Lewis [1956] 2 QB 1 at p13:
As to the conclusion of the whole matter, in my view, save in exceptional circumstances, the function of the court in exercising this equitable jurisdiction is to grant relief when all that is due for rent and costs has been paid up, and (in general) to disregard any other causes of complaint that the landlord may have against the tenant. The question is whether, provided all is paid up, the landlord will not have been fully compensated; and the view taken by the court is that if he gets the whole of his rent and costs, then he has got all he is entitled to so far as rent is concerned, and extraneous matters of breach of covenant, and so forth, are, generally speaking, irrelevant.
40. Mr Fancourt and Mr Althaus nevertheless argued that Mrs Bland ought to be denied relief on a number of grounds, including: (i) her omission to commence the forfeiture action until nearly four months after the forfeiture; (ii) her failure to join Mr and Mrs Beer or to notify them of it until she was required to do so at the trial in March 1999; and (iii) her failure to advance the claim for indirect relief until the hearing in this court. Mr Althaus added that Mr and Mrs Uddin had been prejudiced by Mrs Bland’s not having taken those steps when she ought to have done. I do not think that there is anything of substance in any of these points. The important considerations are, first, that, in a letter of 8 May 1996, Mrs Bland’s solicitors informed Mr and Mrs Uddin’s solicitors of her charging order, and that her right to enforce it against the premises was reserved, and, second, that by the end of August 1996 Mr and Mrs Uddin knew that Mrs Bland was seeking relief against the forfeiture of the Beer lease. The capacity in which she did so, and the constitution of the forfeiture action, were matters of form rather than of substance.
41. Two further points must be made in regard to Mrs Bland’s entitlement to relief in principle. First, in a witness statement signed shortly after the hearing before Judge Hull in 1998, Mrs Bland’s son, Mr Errol Bland, who described himself as a director and part-owner of an electrical installation company, confirmed that if she were required to pay the arrears of rent under the Beer lease as a condition of obtaining relief, then he was able and willing to provide her with the necessary sum for that purpose. In that connection, he stated his understanding to be that the arrears of rent at the time of the forfeiture were in the region of £15,000. (We were told that the exact figure was £15,217.16.) It was suggested that that evidence came too late, and, further, that since the arrears and costs would now considerably exceed £15,000, it was inadequate for the purpose of showing that Mrs Bland would be able to put up the sum necessary to obtain relief. However, while that eventuality might prevent her from obtaining relief, it is not a reason for holding that she is not entitled to it in principle.
42. Second, it was said that Mrs Bland had not established that the Beer lease, if revived, would have any premium value in the open market. That point was considered by Mr Leaver, who said at [1999] 2 EGLR 52L:
Furthermore, there is no evidence that I can accept that Mrs Bland would obtain any substantial value for the lease if she were to be granted relief and then immediately sell it.
43. The judge referred to valuation evidence put in on behalf of Mrs Bland, which he described as confused and confusing. However, it is not, in general, necessary for someone claiming relief against forfeiture to establish that the lease, if revived, would be a valuable asset. Except where the evidence establishes that the claim is frivolous
44. Having held that Mrs Bland is entitled to relief in principle, I refer to the particular feature of this case, which may make it inappropriate for it to be granted simply on terms that she makes payment to Ingrams and Mr and Mrs Uddin respectively of all arrears of rent payable under the Beer lease, and costs. That feature consists in the cross-claims between the parties, actual or potential, to which a revival of the Beer lease will give rise. Although some of them were discussed in argument, they were not enumerated, nor were their implications fully addressed. Mr Fancourt’s position was that it would be either impossible or impracticable to dispose of all the cross-claims in these proceedings. That may prove to be the case. But the first step should be for the parties to identify the cross-claims they wish to make, so that the position can be considered after judgment and directions given for any further hearing that may be necessary. We will also consider the further approach that must now be made to Mr and Mrs Beer and Mr Beer’s trustee in bankruptcy.
Chattels action
45. The progress of the chattels action up to the beginning of September 1996 (when the fixtures and fittings were removed from the premises by Mrs Bland) is described in Mr Leaver’s judgment under the heading “Claim on the cross-undertaking” at [1999] 2 EGLR pp52M-53C-D. It need not be repeated. The central event for present purposes was Mrs Bland’s giving of the usual cross-undertaking in damages in favour of Mr Uddin on the “renewal”, on 18 June 1996, of the injunction that had been granted against him, at the suit of Mr and Mrs Beer, on 16 May 1996. The injunction restrained Mr Uddin from dismantling or taking away the fixtures and fittings at the premises or “from damaging and/or otherwise using the fixtures and fittings generally or as part of his own business”. Mrs Bland’s cross-undertaking was “to be responsible for any loss or damage which [Mr Uddin] might suffer by reason of the injunction in the event that it should not have been granted”.
46. In the court below, Mr Uddin claimed both that the injunction should not have been granted and, because it had prevented him from trading from the premises until 23 September 1996, that he had suffered loss and damage by reason of it. Mr Leaver did not think that it would be right for him to act as an appellate court in respect of the injunction, and therefore proceeded upon the basis that it was rightly granted: see p53E. Although it made no difference in the result, it was not correct to say that the judge was being asked to act as an appellate court. He was the trial judge, who was being asked, once the facts had been found, to decide whether an injunction granted at an interlocutory stage, when the facts had not been found, had been rightly granted. However, the judge went on to consider the merits of Mr Uddin’s claim, and concluded that the loss and damage alleged was not such as should fairly and reasonably be regarded as having been in the contemplation of the parties at the time that the undertaking was given; still less was it something that was in the actual contemplation of the parties: see p53J. He therefore dismissed it.
47. In response to Mr Uddin’s appeal against the dismissal of his claim, Mr Denman has adopted the judge’s view as Mrs Bland’s second line of defence. Her primary defence is that it was not the injunction that prevented Mr Uddin from trading, but his taking possession of premises containing fixtures and fittings that did not belong to him. Mr Denman submitted that the 14-odd weeks needed to sort out the chattels between 18 June and 23 September 1996 were the consequence of Mr Uddin’s own actions, not of the injunction.
48. Since I am satisfied, on one ground or another, that Mr Leaver’s decision to dismiss Mr Uddin’s claim on the cross-undertaking ought to be affirmed, I propose to deal with the matter relatively briefly. I agree with the judge that the first question to be determined is whether the injunction granted to Mrs Bland on 18 June 1996 was rightly granted. In this respect, Mr Denman pointed to Mr Uddin’s application to discharge it, upon which, on 2 July 1996, no order was made, save that Mr Uddin was ordered to pay the costs of Mr and Mrs Beer and Mrs Bland: see [1999] 2 EGLR 53C. However, that was simply a further interlocutory application, upon which the rights of the parties could not be finally determined. The crucial event was an order made in interpleader proceedings between Mrs Bland and Mr and Mrs Beer on 28 April 1998, by which it was determined that Mrs Bland was the owner of the fixtures and fittings. Thus, it was established that the injunction had been rightly granted to her on 18 June 1996.
49. Mr Althaus contested that proposition, primarily upon the ground that Mr and Mrs Uddin had not been parties to the interpleader proceedings. To that, I would answer that since they did not themselves claim ownership, that was hardly surprising. However, since the question of whether the injunction was rightly granted was not fully argued, it would not be right to base the decision upon the view expressed in the preceding paragraph. It can be based either upon the judge’s view that the loss and damage claimed by Mr Uddin was too remote, or upon Mr Denman’s primary submission that the claim fails on causation. My own preference is for the latter of these. It was not satisfactorily established upon the evidence that if the injunction had not been granted, Mr Uddin would have succeeded in sorting out his self-induced problems over the chattels in such a way as to enable him to start trading from the premises before 23 September 1996.
Conclusion
50. I would allow Mrs Bland’s appeal in the forfeiture action, and adjourn further consideration of the terms upon which relief ought to be granted to her. I would dismiss Mr Uddin’s appeal in the chattels action.
51. Giving the second judgment, CHADWICK LJ said:
52. Appeal against the refusal to grant relief from forfeiture.
53. Section 3(4) of the Charging Orders Act 1979 provides that a charge imposed by a charging order “shall have the like effect and shall be enforceable in the same courts and in the same manner as an equitable charge created by the debtor by writing under his hand”. That is the effect that must be given to the charging order made on 30 November 1995 in the proceedings brought by Mrs Bland against Mr and Mrs Beer. The order imposed a charge over the leasehold interest of Mr and Mrs Beer in the property known as 54-56 The Parade, Bourne End. It is immaterial that that order was an order nisi, so that the charge that it imposed was defeasible. Nothing has occurred that can have had the effect of defeating the charge.
54. Mr and Mrs Beer held the property under a lease granted on 12 May 1994 by Ingram’s Estates Ltd (Ingram’s Estates) for a term of 16 years from 25 March 1994. The lease contained the usual proviso for re-entry in the event of non-payment of rent. On 26 April 1996 the amount unpaid in respect of rent due under the lease was £15,217. It is not in dispute that the landlord was entitled to, and did, forfeit the lease by peaceable re-entry on that day.
55. The power to re-enter and forfeit a lease for non-payment of rent has long been regarded in equity as a security for the rent: see Howard v Fanshawe [1895] 2 Ch 581 at p588 and Newbolt v Bingham (1895) 72 Law Times 852 at p854. In the latter case, Rigby LJ referred to “the settled practice of a court of equity to grant relief against forfeiture for nonpayment of rent on payment of all rent in arrear and costs”. He went on:
Of course, the court was not absolutely bound by its practice where it would not do justice, and if some new interest had been created before the application, the court would refuse to interfere. That was not done to put the landlord in a better position, but because the rights of third parties had intervened.
56. In the present case, in the circumstances to which Nourse LJ has referred, it is accepted that, notwithstanding the grant of a new lease on 29 April 1996 to Mr Fogir Uddin and his wife, there was no reason why the court should depart from its settled practice and refuse to grant relief from forfeiture upon an application by Mr and Mrs Beer. In particular, it was accepted that: (i) there would be no inequity in the grant of relief
57. The issue in the present case arises because the application for relief from forfeiture is made, not by Mr and Mrs Beer, as tenants (or former tenants) under the 1994 lease, but by Mrs Bland, as a person having an equitable charge over that lease. In Croydon (Unique) Ltd v Wright, Butler-Sloss LJ observed, at pp699H-700A, that it seemed “astonishing that the holder of a charging order over a lease is said to be unable to be heard in forfeiture proceedings and powerless to obtain any relief or protection of the asset which is the object of the charging order”. I agree. I agree, also, with the view expressed by Sir Christopher Staughton on that appeal, at p694E-F, that it would usually “be manifestly unjust to deprive the holder of a charging order of any right to apply for relief from forfeiture”. But that is, of course, subject to the proviso that relief, if granted, will be granted upon terms that restores the landlord to the position that he would have been in if the breach that gave rise to the right of re-entry had not occurred.
58. In Croydon (Unique) Ltd,the issue arose in circumstances in which the landlord had obtained an order for possession against the tenant in the county court. The creditors, having a charging order on the tenant’s interest in the lease, sought to intervene in those proceedings and obtain relief from forfeiture. The question before the court was whether the creditors were persons “with an interest under [the] lease of the land derived (whether immediately or otherwise) from the lessee’s interest therein”, so as to enable them to make an application under section 138(9C) of the County Courts Act 1984 (as amended by the Administration of Justice Act 1985). The county court judge (who was, by coincidence, Judge Hull QC) held that they were not. This court (Butler-Sloss LJ and Sir Christopher Staughton, Pill LJ dissenting) held that they were. That led to consideration of the relief that could be granted under section 138(9C) of the 1984 Act.
59. Section 138(9C) of the County Courts Act 1984 empowered the court to make an order that “vests the land in [the applicant], as lessee of the lessor, for the remainder of the term of the lease under which he has any such interest as aforesaid, or for any lesser term”. The grant of a new lease to an applicant under section 138(9C) was in contrast to the position where the lessee had applied under section 138(9A). In the latter case, if relief were granted, the lessee was to hold the land “according to the lease [meaning the lease that had been forfeited] without any new lease”: see section 138(9B). Sir Christopher Staughton asked himself, [2000] 2 WLR 683 at p693F, whether the only remedy available to the holder of a charging order (assuming that his case fell within section 138(9C)) was to acquire a lease that he never had before, and to impose upon the landlord a new tenant. In answer to that question, he said at p694G-H:
60. First, I do not think that an applicant under subsection (9C) is confined to the relief mentioned under that section. Subsection (9C) begins: “An application under subsection (9A) may be made by a person” If so made, it is still an application under subsection (9A); and the words “on any such application” in subsection (9A) consequently apply. Nor do I think that relief under subsection (9A) or (9C) is confined by subsection (9B).
61. Accordingly, it seems to me that, upon an application by the holder of a charging order, the court could, if it thought fit, restore the original lease for the purpose merely of enabling the applicant to apply for an order for sale, and on condition that he do so. [Emphasis as in original.]
62. The second answer amounts in practice to much the same thing. One should not be shocked if the effect of subsection (9C) is that the holder of a charging order can obtain a lease which he never had before, and can thrust upon the landlord himself as a new tenant. Similar relief is provided in the Law of Property Act 1925 itself at section 90.
63. The present case is not one in which the landlord was ever proceeding by action to enforce a right of re-entry. It had effected a peaceable re-entry without recourse to the court. Accordingly, the application made by Mrs Bland to the county court, in the present case, was not made under section 138 of the County Courts Act 1984. But it was made under section 139 of that Act, as well as under section 146(4) of the Law of Property Act 1925. Judge Hull QC held, correctly in my view, that section 146(4) of the Law of Property Act 1925 was of no assistance to Mrs Bland. As Nourse LJ has pointed out, whatever else may be said as to the position of a person entitled to an equitable charge over a leasehold interest, he or she is not a person “claiming as underlessee any estate or interest in the property comprised in the lease”. But Judge Hull QC held, also, that he had no jurisdiction to grant relief under section 139 of the 1984 Act. For my part, I am not at all sure that he was right to take that view.
64. Sections 139(2) and (3) of the 1984 Act are in these terms:
(2) Where a lessor has enforced against a lessee, by re-entry without action, a right of re-entry or forfeiture as respects any land for non-payment of rent, the lessee may at any time within six months from the date on which the lessor re-entered apply to the county court for relief, and on any such application the court may, if it thinks fit, grant to the lessee such relief as the High Court could have granted.
Subsections (9B) and (9C) of section 138 shall have effect in relation to an application under subsection (2) of this section as they have effect in relation to an application under subsection (9A) of that section.
65. Judge Hull QC delivered judgment in the present case on 17 September 1998, some three months before his judgment in Croydon (Unique) Ltd v Wright (18 December 1998). In his judgment in the present case he held that “lessee” for the purposes of section 139(2) of the 1984 Act –– even giving that expression the extended meaning provided by section 140 of the Act – did not include a person claiming as equitable chargee. He did not address section 139(3) of the Act; which, as it seems to me, enables an application under section 139(2) to be made by a person who could have made an application (in a case to which section 138 applied) under section 138(9C) –– that is to say, a person “with an interest under the lease of the land derived from the lessee’s interest”. If he had done, there is no reason to think that he would have not have reached the same conclusion as he did reach, some three months later, in Croydon (Unique) Ltd v Wright –– that Mrs Bland was not a person with an interest under the lease derived from the lessee’s interest. But, as this court held on appeal from his later decision, that conclusion would have been wrong.
66. Judge Hull QC remitted the matter to the High Court in order that Mrs Bland should have the opportunity (if she could) of invoking the inherent jurisdiction to relieve from forfeiture. That was a jurisdiction which could be exercised by the High Court; but which, in 1998, could not be exercised in the county court. It was the exercise of the inherent jurisdiction which was for consideration before Mr Peter Leaver QC, sitting as a deputy judge of the High Court –– see his observations at [1999] 2 EGLR 49 at p50K. It would not have been open to the deputy judge to revisit the question whether there had been jurisdiction in the county court to grant relief under section 139 of the 1984 Act –– and he was not asked to do so.
67. It would have been open to Mrs Bland to seek leave to appeal, out of time, against the decision of Judge Hull QC that he had no jurisdiction under section 139(2) of the County Courts Act 1984 –– read with sections 139(3) and 138(9C) of that Act –– to grant her the relief from forfeiture which she sought. If such an application had been made, the reasoning of the majority of this court in Croydon (Unique) Ltd v Wright would, as it seems to me, have been directly in point. For my part, I have little doubt (at present) that, had such an application been made, I would have taken the view that it would have been right to hear an appeal out of time against Judge Hull’s decision on the section 139(2) point; and to allow that appeal. But no such application has been made; and so we have not heard argument on the question whether the decision of this court in Croydon (Unique) Ltd v Wright is determinative in favour of holding that section 139(2) does confer
68. But, even if the reasoning of this court in Croydon (Unique) Ltd v Wright is of no direct assistance on that question, it is, I think, of help: (i) in identifying the conceptual distinction between relief from forfeiture in a form which restores, or revives, the pre-existing lease and relief in a form which vests a new lease in the applicant and thereby “thrusts upon the landlord [the applicant] as a new tenant”; and (ii) in demonstrating that, in practice, whether the pre-existing lease is restored or a new lease is vested in the applicant, the end result is likely to be much the same. That is because section 90 of the Law of Property Act 1925 provides that:
Where an order for sale is made by the court in reference to an equitable mortgage on land (not secured by a legal term of years absolute or by a charge by way of legal mortgage) the court may, in favour of a purchaser, make a vesting order conveying the land or may appoint a person to convey the land or create and vest in the mortgagee a legal term of years absolute to enable him to carry out the sale, as the case may require, in like manner as if the mortgage had been created by deed by way of legal mortgage
69. So, in practice, if the pre-existing lease is restored, the court has ample power, under section 90 of the Law of Property Act 1925, to make a further order that enables that lease to be sold: there is no need to create a new lease vested in the chargee for that purpose, and, even if there were, that could be done under section 90 of the 1925 Act.
70. The reasoning of this court in Croydon (Unique) Ltd is of assistance, also, in identifying the two distinct questions: (i) who can apply for relief from forfeiture?; and (ii) what form should the relief take? In particular, it demonstrates that the answer to the first of those questions does not, necessarily, dictate the answer to the second. There is no reason, in principle, to assume that, upon an application by an equitable chargee (if such an application can be entertained), the only order that could be made is an order vesting a new lease in the applicant. There is no reason, in principle, why, upon an application by an equitable chargee, the court should not make an order that restores the pre-existing lease –– with the consequence that the former lessee remains liable under the covenants in that lease –– if that is an appropriate order to make in the circumstances. It is, as it seems to me, unlikely that that will be an appropriate order unless the applicant is able to offer satisfactory indemnities to the lessee against the lessee’s continuing liability under the restored lease –– and, perhaps, to assume some liability to the landlord as surety for the performance of those covenants –– but that goes to the exercise of the jurisdiction, not to its existence. Those considerations provide a good reason why, as Sir Christopher Staughton observed in Croydon (Unique) Ltd in the passage at p693H, to which I have already referred, the court should restore the pre-existing lease upon an application by the holder of a charging order for the purpose merely of enabling the applicant to apply for an order for sale and on condition that he do so.
71. Nourse LJ has drawn a distinction between the claim for direct relief and the claim for indirect relief. As I understand that distinction, it is between a claim for relief in the form of an order vesting in the applicant a new lease (for a term equal to or less than the residue of the term of the pre-existing lease) (direct relief), and a claim for relief in a form that restores or revives the pre-existing lease, under which the former lessee remains tenant (indirect relief). In the latter case, the applicant claims to be entitled to make the application for relief that the lessee could have made, and to have relief in the form that would be granted upon an application by the lessee. It is in that sense that the applicant claims to stand in the shoes of the lessee. The applicant does not claim a right to become tenant of the property under the restored lease.
72. I respectfully agree that the authorities do not sanction, or lend any support to, an extension of the inherent jurisdiction of the court so as to recognise a claim for direct relief by an applicant who has no legal estate or equitable interest in the land and no right to be in possession. But I see no difficulty in recognising an inherent jurisdiction –– in so far as it is still required, having regard to what I would regard as the true effect of section 139(2) of the County Courts Act 1984 –– in relation to a claim for indirect relief. That does not, as it seems to me, require any extension of well-established principles.
73. It is well established that equity will grant relief from forfeiture of a lease for non-payment of rent on the grounds that the power to forfeit is properly to be regarded as security for the payment of the rent. It is well established, also, that equity will preserve and protect a fund that is held as security for the discharge of a liability; for example, by the appointment of a receiver: see Cummins v Perkins [1899] 1 Ch 16, 19 and Faith Panton Property Plan Ltd v Hodgetts [1981] 1 WLR 927 at pp931H-932B and 935H-936B. I agree with Nourse LJ that it would be astonishing if equity would not intervene, in an appropriate case, to preserve and protect, for the benefit of an equitable chargee, a leasehold interest that was the subject of the charge. For example, it would be remarkable if a court of equity were to refuse to preserve a leasehold interest from forfeiture by appointing a receiver to pay the rent out of funds provided by an applicant whose interest was as chargee, or to compel the lessee to apply funds provided by the applicant for the same purpose. It would, I think, be equally remarkable if the court could not require a former lessee to seek relief from forfeiture (against a suitable indemnity from the chargee) where the leasehold interest has been forfeited on the grounds of non-payment of rent. As Nourse LJ has observed, the proposition seems self evident.
74. If, as I would hold, there is equitable jurisdiction, upon the application of a chargee of a leasehold interest that has been forfeited on the grounds of non-payment of rent, to require the former lessee to apply for relief from forfeiture, then I can see no reason why the two applications should not be made together, in proceedings brought by the chargee to which both the former lessee and the landlord are party. I find confirmation that that is the correct approach in the judgments of this court in Harmer v Armstrong [1934] Ch 65. At p88 Lawrence LJ said:
Whenever a party under a contract, at the date when he enters into it is (or thereafter constitutes himself) a trustee for a third party that party has a right conferred upon him by way of property to sue on the contract and can, according to well settled principles, enforce that right in equity, joining the trustee as a defendant to the action. The right of a beneficiary in such a case as the present, however, is to enforce the agreement according to its tenor, that is to say in favour of the [trustee], and not in favour of the plaintiff beneficiar[y].
75. In the present case, the effect of the charging order was to impose upon Mr and Mrs Beer equitable obligations, enforceable by Mrs Bland, in respect of the lease subject to the charge. Those obligations included, in my view, the obligation to apply for relief from forfeiture of the lease (against a sufficient indemnity from Mrs Bland). The right to apply for relief from forfeiture is a right in equity, which Mr and Mrs Beer, as former lessees, were obliged to exercise, if Mrs Bland so required, for the protection of her interest as chargee. The principle recognised in Harmer enables her to enforce, in the same proceedings, both her right against Mr and Mrs Beer and their right, as former lessees against the landlord, Ingram’s Estates.
76. It will be clear that I take the view that Mr and Mrs Beer are necessary parties to proceedings brought by Mrs Bland to obtain relief from forfeiture under the inherent jurisdiction. But it has not been suggested that, in the absence of Mr and Mrs Beer as parties, the present proceedings ought to be struck out. The reason lies in the passage in the judgment of the deputy judge, at [1999] 2 EGLR 49 at p50F, to which Nourse LJ has already referred. It seems to me that the terms in which consent has already been obtained from Mr and Mrs Beer may well cover the grant of what has been described above as indirect relief –– that is to say, relief that takes the form of restoring or reviving the pre-existing lease –– but I agree with Nourse LJ that the position should be put beyond doubt by joining them (and, perhaps, Mr Beer’s trustee
77. I agree, also, that, if relief from forfeiture is to be granted, then, in principle, the grant must be on terms that Mrs Bland pays all arrears of rent and the costs of re-entry. But, as Nourse LJ has pointed out, the way in which effect should be given to that principle is not free from difficulty in the present case. It is clear that: (i) Ingram’s Estates is the person entitled to arrears of rent under the 1994 lease, up to the date upon which the 1996 lease was granted (29 April 1996); and (ii) Mr and Mrs Uddin are the persons entitled to arrears of rent under the 1994 lease from 29 April 1996. That is because the effect of the 1996 lease is that Mr and Mrs Uddin became the immediate landlords entitled to receive rent under the 1994 lease, to which their lease was subject. But: (a) Ingram’s Estates may have a claim for unpaid rent due from Mr and Mrs Uddin under the 1996 lease; (b) Mr and Mrs Uddin may have a claim against Ingram’s Estates on the covenant for quiet enjoyment in the 1996 lease; (c) Mr and Mrs Uddin may have a claim against Ingram’s Estates in respect of the premium that they paid in consideration for the grant of the 1996 lease; and (d) Mrs Bland may have a claim against Mr and Mrs Uddin for mesne profits in respect of their occupation of the property since 29 April 1996. The list is intended to be illustrative rather than exhaustive. The point that it is intended to illustrate is that it may well not be just, in the circumstances of the present case, when granting relief, to impose terms that require Mrs Bland to make substantial payments to both Ingram’s Estates and Mr and Mrs Uddin. It may well be necessary, first, to consider the extent to which the potential claims and cross-claims (if established) should be set off against each other. I agree that further consideration will have to be given to the terms upon which relief should be granted when the parties have had the opportunity to make representations in the light of this judgment.
Appeal in the chattels action
78. I turn, now, to the appeal against the refusal to award damages on the cross-undertaking given by Mrs Bland in the chattels action.
79. The injunction granted on 16 May 1996 on the application ex parte by Mr and Mrs Beer, and continued on 18 June 1996 on the application of Mrs Bland, restrained Mr Uddin from dismantling or taking away fixtures or fittings at the property (listed in the schedule to the particulars of claim) and from damaging or using the fixtures and fittings generally or as part of his business.
80. The chattels action was commenced by Mr and Mrs Beer (and one other) against Mr Uddin. But the real dispute was between Mr and Mrs Beer, on the one hand, and Mrs Bland, on the other, each claiming ownership of the chattels. Mr Uddin interpleaded. Mrs Bland was joined in the action on 18 June 1996 in order to be claimant in the interpleader proceedings. She gave a cross-undertaking in the chattels action “to be responsible for any loss or damage which the defendant [Mr Uddin] might suffer by reason of the injunction in the event that it should not have been granted”. Eventually, on 25 March 1998, Mrs Bland obtained judgment against Mr and Mrs Beer in the interpleader proceedings.
81. The disputed chattels remained at 54-56 The Parade, Bourne End, until the end of August 1996, when they were removed to storage or sold. Mr Uddin’s claim under the cross-undertaking is based upon the assertion that, because the chattels remained on the premises until the end of August 1996, he was unable to commence trading until 23 September 1996. He claims loss of profits over the period of 18 weeks from June to September 1996.
82. I agree with Nourse LJ that the short answer to the claim under the cross-undertaking is that it was never established that the loss that Mr Uddin claims to have suffered was caused by the grant of the injunction on 18 June 1996. He had chosen to go into possession, on 29 April 1996, of premises that had been the subject of a peaceable re-entry in circumstances in which the former tenants were asserting a right to relief from forfeiture, and in which there were chattels that (upon any view) were not landlord’s fixtures, and which had not been removed by the owner. By going into possession under the 1996 lease at a time when the premises contained fixtures and fittings that were not the subject of that lease, he became bailee of those chattels until he could deliver them to the owner. He could not dispose of them. In the circumstances that the ownership of the chattels was in dispute, there was a difficulty in obtaining a receipt. It was to meet that difficulty that Mr Uddin interpleaded in the proceedings that the Beers had commenced against him. But it was that difficulty, rather than the injunction, that was the primary cause of his inability to commence trading at the premises. Unless he could show that, but for the injunction, that difficulty could have been removed earlier than it was, his claim that he suffered loss or damage “by reason of the injunction” must fail. In the event, he did not establish the necessary causal link.
Conclusion
83. For the reasons that I have set out, as well as for the reasons given by Nourse LJ, with which I agree, I, too, would allow Mrs Bland’s appeal against the refusal to grant relief from forfeiture, and adjourn further consideration of the terms upon which relief should be granted. I would dismiss Mr Uddin’s appeal in the chattels action.
84. Agreeing, HALE LJ said:
85. I agree that relief against forfeiture is available and should be granted in this case in the form of the restoration or revival of the 1994 lease. The advantages of that course and the reasons why it is available in this case have been fully explained by Chadwick LJ. The appropriate financial consequences of that will, as my lords have explained, require further consideration.
86. In reaching that conclusion, however, I would not wish to express any opinion upon whether the inherent jurisdiction is available to the holder of a charging order in the alternative form of “thrusting upon the landlord a new tenant”. I accept, of course, that there is no precedent for such a claim. The cases that explore the extent of the right to claim relief against forfeiture do refer to a “possessory or proprietary right”: see Scandinavian Trading Tanker Co AB v Flota Petrolera Ecuatoriana [1983] 2 AC 694 at p 702; Sport International Bussum BV v Inter-Footwear Ltd [1984] 1 WLR 776, at p794; and BICC plc v Burndy Corporation [1985] 1 Ch 232. The nature of an equitable charge, and the difference between such a charge and a mortgage, were explained in Carreras Rothman Ltd v Freeman Mathews Treasure Ltd (in liquidation) [1985] Ch 207 at p227 and in Re Cosslett (Contractors) Ltd [1998] Ch 495 at p508, both cases relating to chattels. It does not necessarily follow, it seems to me, that the holder of a charging order over a lease of land does not have such a proprietary interest in the lease as would entitle him to seek relief from forfeiture of the lease. There is a distinction between a proprietary interest and a right to possession.
87. It is likely, however, that the point is an entirely academic one. I cannot immediately see any answer to the point raised for the first time in this case in the judgment of Chadwick LJ. Section 139(3) of the County Courts Act 1984 clearly applies section 138(9B) and (9C) to applications for relief after re-entry without action, as they apply to applications for relief after recovery of possession by action. This court held, in Croydon (Unique) Ltd v Wright, that the holder of a charging order was “a person with an interest under a lease of the land derived (whether immediately or otherwise) from the lessee’s interest therein” for the purpose of section 138(9C). This enables the court to grant relief in either of the forms contemplated by section 128(9C).
88. If so, this will in future avoid any need for further discussion of whether the holder of a charging order who has an “interest” for that purpose has a proprietary interest, either in the land or in the lease for the purpose of the inherent jurisdiction.
Mrs Bland’s appeal in the forfeiture action allowed. Mr Uddin’s appeal in the chattels action dismissed.
