Claimant judgment creditor obtaining charging orders against interests of joint lessees – Lease forfeited on peaceable re-entry by landlord – Premises relet – Whether claimant entitled to apply for relief under inherent jurisdiction of High Court – Whether application permissible when made (indirectly) for restoration of pre-existing lease – Whether application could have been made under County Courts Act 1984
The first defendant (the landlord) was the freehold owner of commercial premises in Bourne End, Buckinghamshire, that were leased to the claimant for use as a restaurant. In May 1984 the claimant 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. The agreed price of £172,000 was to be paid partly by instalments. Later that month, 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 claimant, who, in May 1995, obtained summary judgments against them for amounts totalling £96,000. The judgments were subsequently secured by two charging orders against the assets of CB (including the premises) and a similar order against FB.
CB and FB also failed to pay the rent due under their lease, which, in April 1996, was forfeited by the landlord by peaceful re-entry. In the same month, the landlord granted a new lease to the second and third defendants. The claimant 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, and ordered that the case be transferred to the High Court. In that court, it was held (see [1999] EGCS 54) that relief under the inherent jurisdiction could not be extended to the claimant, whose status was, by virtue of section 3(4) of the Charging Orders Act 1979, no higher than that of equitable chargee. The claimant appealed.
Held: The appeal was allowed.
1. The courts below had correctly held that the claimant had no right to apply under section 146(4) of the 1925 Act, since she could not be described as an “underlessee” within the meaning of the section.
2. As an equitable chargee, the claimant could apply to the court for an order for sale under section 90 of the 1925 Act, but she could not claim possession, as she had no interest, legal or otherwise, in the land: see generally Carreras Rothmans Ltd v Freeman Matthews Treasure Ltd (in liquidation) [1985] Ch 207 and Re Cosslett (Contractors) Ltd [1988] Ch 495. For that reason, relief could not be given to the claimant in her own right (direct relief) without vesting a new lease in her favour, thus creating a landlord and tenant relationship that did not previously exist. To allow such an application would amount to an unwarranted extension of the inherent jurisdiction: Ladup Ltd v Williams & Glyn’s Bank plc [1985] 1 WLR 851 considered.
3. The above objections did not apply to a claim (not made in the court below) to indirect relief, whereby the applicant, standing in the shoes of the defaulting lessees (who should be joined to the application), sought the restoration of the pre-existing lease. Such a claim was derived from the right of a beneficiary to compel a trustee to lend his name to an action to protect a fund (see generally Harmer v Armstrong [1934] Ch 65 and Hayim v Citybank NA [1987] AC 730), and was allowable on the basis that the charging orders imposed equitable obligations upon CB and FB, including an obligation to apply for relief against forfeiture. A further hearing was required in order to determine whether relief should be granted and, if so, upon what terms.
4. Per Chadwick and Hale LJJ: An equitable chargee, seeking relief against a county court order for possession, would have a strong case for claiming direct relief under the terms of section 138(9)(c) of the County Courts Act 1984, as considered in Croydon (Unique) Ltd v Wright [1999] 3 EGLR 28. There seemed to be no reason why the same should not apply to a forfeiture by peaceable re-entry: see section 139(3) of the 1984 Act.
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.
Alan Cooklin, barrister
