Plaintiff judgment creditor obtaining and registering charging orders against interests of joint lessees – Lease forfeited on peaceable entry by landlord – premises relet – Whether plaintiff entitled to relief under section 146(4) Law of Property Act 1925 or under inherent jurisdiction of court – Whether new lessees fixed with notice of orders in favour of plaintiff – Relief refused
The first defendant (the landlord) was the freehold owner of commercial premises in Bourne End, Buckinghamshire, which, at all material times before May 1984, had been leased to the plaintiff for use as a restaurant. In that month the plaintiff surrendered her lease to the landlord, having previously reached an agreement with the intended new tenants, CB and FB, for the sale to them of trade fixtures and fittings for £172,000, part of which was to be paid by instalments. On 12 May 1984 the landlord granted a 16-year lease to CB and FB at an annual rent of £14,000, subject to review. CB and FB failed to keep up the agreed payments to the plaintiff, who, on 24 May 1995, obtained summary judgments against them for amounts totalling £96,000, which were subsequently secured by two charging orders against the assets of CB (including the premises) and a similar order against FB.
On 19 January 1996 the charging orders were registered pursuant to the Land Charges Act 1925. CB and FB also failed to pay the rent due under their lease, which, on or about 26 April 1996, was forfeited by the landlord pursuant to a peaceful re-entry. On 29 April 1996 the landlord granted a new lease to the second and third defendants (the occupying lessees). The plaintiff brought county court proceedings seeking relief against forfeiture, basing her claim upon the provisions of section 146(4) of the Law of Property Act 1925 as well as upon the inherent jurisdiction of the court. The judge, having held that no claim lay under section 146, went on to declare that the county court did not possess the inherent jurisdiction contended for. The case was ordered to be transferred to the High Court.
Held: Relief was not available.
1. By virtue of section 3(4) of the Charging Orders Act 1979, the charges imposed by the orders were enforceable in the same manner as an equitable charge created in writing by the debtor. Though entitled to apply to the court for an order for sale (see section 90 of the 1925 Act), an equitable chargee could not take possession, as he had neither a legal estate nor a contract to create one.
2. Since the present proceedings had not been brought by way of appeal, the plaintiff was bound by the county court’s interpretation of section 146(4) of the 1925 Act. In any event, there was no reason to differ from the judge’s conclusion that the plaintiff was not an underlessee within the meaning of that section.
3. Although an inherent jurisdiction was available in certain circumstances, that was not so where, as here, the lease had been forfeited by peaceful re-entry and no relief had been sought by the persons, namely CB and FB, who could otherwise apply. Relief was only available where proprietary or possessory rights were liable to be forfeited: see Shiloh Spinners v Harding [1973] AC 691 and BICC plc v Burndy Corporation [1985] Ch 232. An equitable chargee in the position of the plaintiff had, at most, a mere equity, and as such had no right to relief: Westminster Bank Ltd v Lee [1956] Ch 7 and Ladup v Williams & Glyn’s Bank plc [1985] 2 All ER 577 considered. To hold otherwise would render it extremely difficult for a landlord to deduce a good title to a new tenant.
4. Even if the plaintiff had been entitled to claim relief, the occupying lessees could claim to be bona fide purchasers from the landlord without notice of the plaintiff’s equitable charges over the beneficial interests of CB and FB. The plaintiff could not rely on section 198(1) of the 1925 Act, which deems registration to constitute actual notice, as the relevant “land affected” could only be the lease held by CB and FB. As purchasers of a new lease from the landlord, the occupying lessees would have no reason to search against the names of previous tenants. To require such a search would only add to the acknowledged defects of a system of registration against names: see generally Standard Property Investment plc v British Plastics Federation (1985) 53 P&CR 25.
Robert Denman (instructed by Joseph Aaron & Co, of Ilford) appeared for the plaintiff; Timothy Fancourt (instructed by Collyer-Bristow) appeared for the first defendant; Justin Althaus (instructed by Armstrong & Co) appeared for the second and third defendants.
Alan Cooklin, barrister
