Elizabeth Dwomoh takes a look at abuse of process in the context of waivers and applications for a determination of breach.
Key points
- It was not an abuse of process for a landlord who has purportedly waived the right to forfeit for a breach of covenant to seek a determination of the breach
- In an application under section 168 of the Commonhold and Leasehold Reform Act 2002, it may sometimes be necessary for a tribunal to determine whether the landlord has waived the right to rely on the covenant at all
- Determining whether a covenant had been waived was different from determining whether the right to forfeit for a particular breach of covenant had been waived
Section 168(1) of the Commonhold and Leasehold Reform Act 2002 provides that a landlord under a long lease of a dwellinghouse may not serve a notice under section 146(1) of the Law of Property Act 1925 for a suspected breach of covenant by the tenant, unless the same has been determined by the First-tier Tribunal or the tenant has admitted the breach.
In Bedford v Paragon Asra Housing Ltd [2021] UKUT 266 (LC); [2021] PLSCS 180, the Upper Tribunal (Lands Chamber) was asked to consider whether it was an abuse of process for a landlord who had purportedly waived the right to forfeit for a breach of covenant to apply for a determination of the breach pursuant to section 168 of the 2002 Act.
The problem
Charles Bedford was the long lessee of a property in Kingston-upon-Thames. Paragon Asra Housing Ltd was his landlord. In 2009 Bedford acquired the lease of the property on a shared ownership basis. The alienation provisions of the lease contained an absolute covenant against subletting. This was a normal clause inserted into shared ownership leases to protect the public purse and provide some protection from the commercial exploitation of such properties.
In October 2010, Bedford sought permission from Paragon to sublet the property for a year as he was moving abroad. Paragon granted permission on the basis that Bedford would resume occupation at the end of 2011. Bedford failed to do so.
On 9 August 2018, Bedford’s mortgage lender notified Paragon that he was subletting the property. Despite being aware of Bedford’s breach of covenant, Paragon continued to demand and collect rent from him until May 2020.
In July 2020, Paragon applied to the FTT for a determination pursuant to section 168(4) of the 2002 Act that Bedford had repeatedly breached the alienation provisions of his lease. Bedford applied to strike out the application on the basis that it was an abuse of process as Paragon had waived its right to forfeit.
An abuse or not?
The FTT dismissed Bedford’s application. In so doing the FTT observed that even in circumstances where Bedford was able to establish that Paragon had waived its right to forfeit, Paragon’s application was not a “futile exercise”. Forfeiture may ultimately be barred for Paragon, but a determination under section 168 of the 2002 Act provided a springboard from which Paragon could claim alternative relief, such as injunctive relief or damages.
On appeal, Bedford argued that the availability of other remedies was an irrelevant consideration. The UT rejected that contention. It determined that the availability of other remedies was a highly relevant consideration. In particular, a waiver of the right to forfeit for breach of covenant would not afford Bedford a defence to either a claim for injunctive relief or damages.
Additionally, he had not sought to argue that waiver was irrefutable. He instead contended that waiver by Paragon was “plainly arguable” or, at its highest, “strongly arguable”. Paragon, however, disputed that it had waived its right to forfeit for any subsequent breaches after August 2018. The UT underscored that, whichever remedies Paragon sought to pursue, it could not do so without the FTT first determining whether there had been a breach of covenant.
The UT found that Paragon was free to serve a notice under section 146 of the 1925 Act, giving Bedford time to remedy the breaches, if possible. If Bedford failed to do so, Paragon was at liberty to issue forfeiture proceedings in the county court. As a defence to the forfeiture claim, Bedford could properly rely on the defence of waiver.
Jurisdiction
Bedford argued additionally on appeal that the FTT had erred in finding that it lacked jurisdiction to determine whether the right to forfeit had been waived when considering his strike-out application. The UT noted that the FTT may have fallen into error on this ground.
The jurisdiction of the FTT under section 168 of the 2002 Act was to determine whether a breach of covenant had been committed. Relying on Swanston Grange (Luton) Management Ltd v Langley-Essen [2008] L&TR 20, the UT observed that it may sometimes be necessary for a tribunal to determine whether the landlord had waived the right to rely on the covenant at all. Yet, determining whether a covenant had been waived was a different matter from determining whether the right to forfeit for a particular breach of covenant had been waived.
Further, the UT noted that, in certain exceptional circumstances, it may be necessary for the FTT to determine whether a breach of covenant had been waived in order to determine some other question.
Elizabeth Dwomoh is a barrister at Lamb Chambers
