Landlord and tenant — Underlease — Liability of guarantors in respect of rent and mesne profits — Breach of covenant by underlessees in parting with possession — Whether underlease terminated by writ served on trespassers or by forfeiture proceedings against underlessees — Appeal by plaintiff lessee from decision of Henry J in Ord 14 proceedings
holder of leasehold interest in premises in Savile Row, granted an underlease
for a short term to the first defendant, the second and third defendants being
the guarantors — Underlease included a covenant that the underlessees would not
part with possession of any part of the demised premises without the consent of
the plaintiff — In breach of this covenant the underlessees allowed a company
(Ardil) into possession —- Ardil were not assignees, but trespassers —
Underlessees soon became insolvent and a winding-up order was made, the
official receiver being appointed liquidator — Dates are of some importance in
the history of these events — On December 8 1987 plaintiff served a notice
under section 146 of the Law of Property Act 1925 requiring the underlessees to
remedy their breach in parting with possession — On January 8 1988 plaintiff
served a writ on the trespassing company, Ardil, claiming possession and
damages for trespass — The underlessees were not joined in the proceedings and
no formal steps were taken to terminate the underlease — Ardil in fact vacated
the premises on February 6 1988 and paid the plaintiff £30,303.63; no further
proceedings were taken in that action — On March 7 1988 plaintiff served a writ
on defendants claiming possession on the ground of forfeiture for breach of
covenant and also claiming rent and mesne profits — Plaintiff gave credit for
the £30,303.63 received from Ardil — On March 29 the official receiver
surrendered the underlease to the plaintiff
proceedings the master gave judgment against the defendants for £15,016.90 plus
interest — On appeal from the master to Henry J, the judge set aside the
master’s order and directed that the plaintiff should have judgment against the
second and third defendants (the guarantors) for £4,306.17 only and gave these
defendants leave to defend as to the balance of the plaintiff’s claim — The
first defendant, the underlessee, did not appeal to the judge — Henry J
accepted a submission by the guarantors that by serving a writ on Ardil
claiming damages for trespass, and by recovering possession under or by means
of these proceedings, the plaintiff had acted as though entitled to possession
of the premises, thereby indicating that the underlease had been terminated —
The service of the writ against Ardil was in fact re-entry by peaceable means —
After termination of the underlease in this manner there could be no liability
for the guarantors under it — Henry J held, however, that the guarantors were
liable for mesne profits (the sum of £4,306.17 mentioned above) from the date
of service of the writ to the date of vacation by Ardil; the defendants were
responsible for allowing the trespass
Court of Appeal held that the plaintiff was entitled to judgment for the
quarter’s rent due on December 25 1987, irrespective of whether the underlease
was forfeited on January 8 or March 7 1988 — Where a rent was payable in
advance the claim should be for the whole quarter’s rent due in advance — The
court also held that the plaintiff was entitled to judgment in respect of the
four days’ mesne profits, irrespective of the date of termination of the
underlease — It was not necessary for the court to decide the interesting
disputed point as to whether the underlease was determined on January 8 1988 by
the service of the writ on the trespassers, Ardil — Ralph Gibson LJ, however,
commented that the decision in Commissioners of Works v Hull, which had been relied
on, did not by itself establish that the writ served on Ardil must be treated,
as a matter of law, as determining the underlease and bringing the guarantors’
liability to an end — Appeal allowed and judgment for plaintiff in respect of
the sums claimed
The following
cases are referred to in this report.
Associated
Dairies Ltd v Pierce [1983] EGD 383; (1982)
265 EG 127, [1983] 1 EGLR 45, CA
Bayliss v Le Gros (1858) 4 CB(NS) 537
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
Commissioners
of Works v Hull [1922] 1 KB 205; (1922) 91
LJKB 308; 126 LT 349
Serjeant
v Nash Field & Co [1903] 2 KB 304;
(1903) 72 LJKB 630; 89 LT 112; 19 TLR 510
This was an
appeal by the plaintiff, Capital & City Holdings Ltd, from a decision of
Henry J, who had set aside an order of Master Turner in Ord 14 proceedings in
favour of the plaintiff for £15,016.90 plus interest against the defendants,
Dean Warburg Ltd, James Neate Warburg and Jane Brooker. The litigation
concerned premises on the fifth floor of Brummel House, Savile Row, London W1.
John Elvidge
(instructed by Paul Shrank & Co) appeared on behalf of the appellants;
Stephen Jones (instructed by Titmuss Sainer & Webb) represented the
respondents.
Giving
judgment, RALPH GIBSON LJ said: This is an appeal by the plaintiff, Capital
& City Holdings Ltd, brought with the leave of the judge, from the decision
of Henry J of June 23 1988, whereby he set aside the order of Master Turner of
May 20 1988. Master Turner had in Ord 14 proceedings given judgment for the
plaintiff for £15,016.90 plus interest to be assessed against the three
defendants in the action, Dean Warburg Ltd, who were undertenants of office
premises under a subtenancy granted by the plaintiff, and the second and third
defendants, James Neate Warburg and Jane Brooker, who were guarantors of the
liabilities of the first defendant under the underlease. The appeal to Henry J
was by the second and third defendants only. By his order Henry J directed that
the plaintiff should have judgment against the second and third defendants for
£4,306.17 only and that the second and third defendants should have leave to
defend as to the balance of the plaintiff’s claim.
The argument
in this court was in large part directed to the question whether the underlease
granted by the plaintiff to the first defendant was brought to an end by
forfeiture by reason of the issue and service of a writ by the plaintiff upon
another company. The point is of considerable difficulty and interest although
unlikely to arise with any frequency. For reasons which will become apparent,
however, it is, in my judgment, not necessary to decide it in order to deal
with the issues raised in the appeal.
The plaintiff
holds a leasehold interest in premises on the fifth floor of Brummel House,
Savile Row, London W1. By an underlease dated July 7 1987 the plaintiff let to
the first defendant part of those premises for the period from July 7 1987 to
June 23 1991 at a yearly rent of £78,500. The underlease contained a covenant
by the first defendant to the effect that it should not part with possession of
any part of the demised premises without consent of the plaintiff. The first
defendant in breach of that covenant on about June 23 1987 let into possession
of all or part of the premises a company called Ardil (Holdings) UK Ltd
(‘Ardil’).
The first
defendant got into difficulties. It paid no rent on or after
appointed of the first defendant company by the Royal Bank of Scotland. The
receivers attemped to negotiate an assignment of the underlease to a company
called Antrak plc, but they failed. On October 2 1987 a winding-up order was
made against the first defendant and the official receiver was appointed
liquidator. On October 23 1987 the administrative receivers by their solicitors
by letter required Ardil to vacate the premises immediately and asserted that
Ardil had no authority to remain in occupation. The plaintiff was informed of
the making of that demand.
On November 19
1987 there was a telephone conversation between Mr Thorogood of Ardil and Mr
Shaw of the plaintiff. Mr Shaw indicated that the plaintiff would look
sympathetically upon the continued occupation of the premises by Ardil provided
that Antrak plc confirmed that they had no objection to the presence of Ardil
during the discussions which were going on between Ardil and Antrak. Ardil
agreed to be directly responsible to the plaintiff for the outstanding rent,
rates and service charge payable in respect of the premises occupied by Ardil
with effect from September 26 1987 until vacation of the premises by Ardil. In
a letter to the plaintiff dated November 19 1987, confirming the arrangement,
Ardil wrote:
this
undertaking is limited to your company only and is in no way intended to
replace or reduce the liability of the current legal tenant.
It must have
been in the contemplation of Ardil and of the first defendant that the
plaintiff might take steps to forfeit the underlease for breach of covenant and
to recover possession of the premises in order to relet them. The undertaking
by Ardil to pay ‘outstanding’ rent, that is to say, as I understand it,
whatever sums the first defendant failed to pay, was apparently intended to
cause the plaintiff not at once to take such proceedings.
On December 8
1987 the plaintiff served notice under section 146 of the Law of Property Act
1925. By it the plaintiff required the first defendant to remedy the breach of
covenant, constituted by the parting with possession to Ardil, within a
reasonable time or else the plaintiff would exercise its right of re-entry under
the underlease. No specific period of time for compliance was stated in the
notice.
On January 8
1988 the plaintiff served on Ardil a writ, issued on January 6 1988, by which
the plaintiff claimed:
Damages
arising from the trespass of Ardil . . . at the plaintiff’s . . . premises . .
. by virtue of Ardil’s continued occupation of the premises without . . .
permission . . . or other legal . . . interest therein . . . (including) . . .
a claim for recovery of possession of the aforesaid premises by the plaintiff.
The trespass took place about 14th June 1987.
The first
defendant, who was in possession or entitled to possession under the
underlease, was not joined in that writ and nothing prior thereto had been done
to terminate the underlease. The contention for the guarantors is that service
of that writ must in law have had that effect.
On February 6
1988 Ardil vacated the premises, or whatever part of them which they had
occupied, and on February 19 1988 Ardil paid to the plaintiff £30,303.63. No
further proceedings were taken under the writ served on Ardil.
On February 23
1988 the plaintiff issued the writ against the first defendant and the second
and third defendants who are respondents to this appeal. That writ was served
on March 7 1988. In it the plaintiff claims possession on the ground of
forfeiture for the breach of covenant set out in the section 146 notice. It was
alleged that the first defendant still retained possession. Rent was claimed to
the date of the writ together with mesne profits thereafter until possession be
delivered up and damages for breach of covenant. It will be necessary later in
this judgment to examine in detail the way in which arrears of rent were
calculated.
On March 1
1988 (ie after the issue of the present writ and before service of it) the
Royal Bank of Scotland released the premises from their debenture, under which
presumably the administrative receivers had been appointed, and, as the last
act in this account of the facts, the official receiver on March 29 1988 by letter
informally surrendered the underlease to the plaintiff. It is to that last date
that the plaintiff claims mesne profits.
The evidence
before the court for the Ord 14 proceedings included the facts stated above,
supplemented by a statement of facts agreed between the parties for the
purposes of this appeal. The plaintiff considered it had to treat the first
defendant as retaining possession until judgment was obtained, not least
because the official receiver had not disclaimed or surrendered the underlease
and might still advance a claim to relief. The plaintiff referred to and gave
credit to the defendants for the recovery of £30,303.63 from ‘the trespassers .
. . Ardil’ which the plaintiff had accepted in settlement of the trespassers’
liabilities arising from their unlawful occupation of the premises.
The affidavit
for the second and third defendants asserted no new facts but raised the point
of law that, by claiming damages in trespass in the writ against Ardil, and by
effecting recovery under or by means of that writ, the plaintiff acted as
though entitled to possession of the premises, and it could not have been so
entitled without termination of the underlease. It was also said that the
plaintiff must have considered itself as being in possession of the premises.
It was not asserted that the first defendant by the official solicitor was not
claiming to retain possession until the decision to surrender was made. Since
the underlease was terminated by service of the writ on Ardil, there could be
no liability in the first defendant under the lease after that date.
Henry J
accepted that contention. He held that the principles stated in the case of Commissioners
of Works v Hull [1922] 1 KB 205 directly governed this case. The
service of the writ against Ardil was re-entry by peaceable means. The fact
that there was no surrender by the first defendant until March 29 was
irrelevant because, after service of the writ on Ardil, there was nothing to
surrender. The defendants were, however, liable to the plaintiff for mesne
profits for the period after the service of the writ on Ardil down to the date
when Ardil went out of the premises, on the ground that the defendants had
permitted Ardil to be in possession and were responsible for Ardil’s trespass
until their trespass finished. The second and third defendants were therefore
liable for the sum of £4,306, the mesne profits calculated to that date, and
there is no cross-appeal in respect of that part of the judge’s order.
For the
plaintiff as appellant, Mr Elvidge’s submissions may be summarised, I think, as
follows:
(i) The writ served on Ardil was based upon an
obvious error of law: even if that writ could be held on service to terminate
the underlease vested in the first defendant, it could found a claim to damages
for trespass only from the date of service and it was clear from the writ that
the plaintiff was seeking to recover payment in respect of the period since
June 14 1987.
(ii) The payment received from Ardil was a
transaction between the plaintiff and Ardil which did not affect the
plaintiff’s rights against the defendants: it was res inter alios acta,
as was the service of the writ which prompted the payment. The money paid by
Ardil was a windfall which went to reduce the liability of the defendants.
(iii) The reasoning and decision in the case of Hull
have no application to this case, since the decision was based upon the
principle that the taking of proceedings against the assignee of a tenancy
could forfeit the tenancy without joining the original tenant or giving notice
to him. Ardil were not, and never claimed to be, assignees of the first
defendant or to hold any other interest in the premises.
(iv) In any event, whether the underlease to the
first defendant be held to have been terminated on January 8 1988 by service of
the writ on Ardil, as the defendants contended, or upon March 7 1988 by service
of the writ on the first defendant, as the plaintiff contends, the first
defendant was liable under the terms of the underlease to pay in advance the quarter’s
rent due on December 25 1987, namely £19,625; and the second and third
defendants were liable therefore as guarantors. The plaintiff had formulated
its claim to rent in the writ down to the date of the writ and claimed mesne
profits thereafter. Upon the authority of Canas Pty Co Ltd v K L
Television Ltd [1970] 2 QB 433 the plaintiff was entitled to claim in the
writ the rent due on December 25 1987, and mesne profits for the four days from
March 25 1988 until the surrender of the underlease by the official receiver on
March 29 1988. The plaintiff applied for leave to amend the particulars of its
claim accordingly.
(v) The first defendant was liable for the four
days of mesne profits; alternatively was liable for mesne profits from the date
of termination of the underlease, whether January 8 1988 or March 7 1988,
because the first defendant had, in breach of covenant, failed to yield up
possession of the premises until the surrender by the official receiver on
March 29 1988; and the second and third defendants were liable as guarantors
for those damages.
For the
respondents, the second and third defendants, Mr Jones resisted the grant of
leave to amend on the ground that, upon the true construction of the
underlease, the first defendant was not liable for rent in respect of any
period of time after the date of termination of
amendment on terms that the validity of the claim would be decided in the
judgment on the appeal and that all questions of costs arising from the making
of the amendment would be reserved until after judgment.
As to the
question of the date of termination of the underlease, Mr Jones again based his
submissions upon Hull’s case. The service of the writ upon Ardil was
sufficient evidence in the circumstances of this case of the plaintiff’s
intention to re-enter and the underlease was therefore ended on January 8 1988.
After Ardil went out of the premises the defendants could not be liable to the
plaintiff because there was no liability for rent and no continuing occupation
by any person for whose presence the defendants were responsible.
The service of
the writ on Ardil was done after the plaintiff had served on the first
defendant the section 146 notice, which relied upon the wrongful presence of
Ardil as a ground of forfeiture. That which worked the forfeiture was the
landlord’s act, not the communication to the tenant of information as to what
had been done. The writ served on Ardil claimed possession and was therefore an
assertion of the right to possession on a ground for forfeiture. Ardil should
be regarded as in the same position as assignees for the purposes of the
decision in Hull’s case.
For my part, I
have no doubt that the plaintiff is entitled to judgment in respect of the
quarter’s rent due on December 25 1987, irrespective of whether the underlease
was forfeited on January 8 or March 7 1988. In the Canas Pty Co Ltd case
Lord Denning MR, in a judgment with which Fenton Atkinson and Megaw LJJ agreed,
said at p 442D:
The rent is
payable up to the date of service. Mesne profits are payable after the date of
service. The writ should be indorsed accordingly. Take an instance when the
rent is payable quarterly (for instance on March 25 1968) and the writ for possession
is issued and served during the quarter (for instance on April 25 1968). If the
rent is payable in advance, the writ should claim for the whole quarter’s rent
due in advance on March 25 1968: Ellis v Rowbotham [1900] 1 QB
740 and mesne profits from June 24 1968 to the date of delivery of possession.
Mr Jones
submitted that the words contained in clause 2 of the underlease caused the
first defendant to have no liability for rent after the termination of the
underlease by service of the writ on Ardil on January 8 1988. The words relied
upon are as follows:
yielding and
paying therefor during the term . . . yearly (and proportionately for any part
of a year) the rent which shall be payable by equal quarterly payments in
advance on the quarter days the first of such payments or a proportionate part
thereof to be due on the date specified in the particulars and to be in respect
of the period therein mentioned . . .
The term was
from July 7 1987 to June 23 1991. The quarter days were stated to be March 25,
June 24, September 29 and December 25 in each year. The tenant covenanted to
pay the rent at the times and in the manner provided. Mr Jones argued that,
despite the clear obligation to pay a quarter’s rent on December 25 1987, the
words ‘proportionately for any part of a year’ and ‘or a proportionate part
thereof’ caused that liability to be reduced by the serving of the writ. I do
not agree. It seems to me that the references to the proportionate part of a
year were included to deal with the fact that the term commenced on July 7 and
called for a proportionate payment down to the first following quarter day. The
presence of those words does not, in my judgment, modify in any way the
obligation imposed by the lease on the tenant to pay a full quarter’s rent on
December 25 1987. It is common ground that the plaintiff gave proper credit in
respect of the sums received by it from Ardil.
That
conclusion, if right, disposes of the issues in the case save for the claim for
mesne profits for four days in respect of the period from March 25 to March 29.
It seems to me that the plaintiff is also entitled to judgment against the
defendants in respect of the four days’ mesne profits which, I think, is a sum
in the region of £862 and, again, irrespective of the date of termination of
the underlease. Upon termination of the underlease, whether upon January 8 or
March 7 1988, it was the obligation of the first defendant to yield up the
demised premises to the plaintiff. The evidence before the court shows, in my
judgment, that the first defendant is to be taken as having continued to assert
a right to possession of the premises under the underlease until the official
receiver surrendered it on March 29. The defendants have put forward no
evidence to deny that fact. Their contention is that as a matter of law the
alleged termination of the underlease, by the service of the writ upon Ardil,
showed that the plaintiff ‘considered itself as being in possession of the
premises’. I do not accept that. At most, the service of the writ upon Ardil
(ignoring the plaintiff’s evidence that the basis of the claim in the writ was
misconceived, and mistaken in law and was to be redrafted by counsel) shows
that the plaintiff considered itself as entitled as against Ardil to
possession, not that the plaintiff considered itself, or that it was actually,
in possession. The plaintiff clearly regarded the first defendant, by the
official receiver, as continuing to assert a right to possession under the
underlease and the plaintiff was, as I have said, in my judgment entitled to
hold that view. It was for that reason that it issued the writ against the
defendants in these proceedings. Since the first defendant is thus shown to be
liable for the four days of mesne profits, the second and third defendants as
guarantors are liable also: see Associated Dairies Ltd v Pierce (1982)
265 EG 127, [1983] 1 EGLR 45.
It is
therefore, in my judgment, unnecessary for this court to decide whether the
underlease was determined on January 8 by service of the writ on Ardil. I
would, however, make the following comments upon the submissions which have
been made. Commissioners of Works v Hull [1922] 1 KB 205 is, as
Shearman J observed at p 207, a curious case. The report states that the case
was tried in the county court on the footing that the defendant was an
assignee. If he were to be so treated, it is difficult to see what question
could be raised as to the need to join or to give notice to the original
tenant, since, if he had assigned, he retained no interest in the premises
although he might be liable upon his covenants. The decision of Shearman J was
to the effect that service of proceedings in ejectment upon the underlessee
claiming to be in possession under the lessee was sufficient as a peaceable
means of re-entry. Salter J agreed and held that, treating the defendant as an
assignee of the interest of the original tenant, the plaintiffs had taken the
proper steps to determine the tenancy. That decision of the Divisional Court
does not establish, in my view, by itself that the writ served on Ardil must be
treated in this action as a matter of law as determining the underlease vested
in the first defendant.
Shearman J referred
to the case of Serjeant v Nash Field & Co [1903] 2 KB 304 for
the principle that the best and most irrevocable indication of an intention to
claim a forfeiture is the issue of a writ. That case concerned a claim to
damages for wrongful distress. The distress was wrongful if the lease had been
determined. The writ in question had been served upon the plaintiff in the
action who was claiming damages for wrongful distress and upon one Baker, the
tenant under the lease. Collins MR at p 311 said:
. . . it is
clear that the writ in the action to recover possession was a conclusive
election to treat the act of the lessee in subdemising the premises without the
consent of the lessor as creating a forfeiture. It is true that the rights of
the parties were not determined by the issue of the writ, and could not be
finally determined until the result of the action was known; but that
consideration does not affect the fact of the election of the lessor to treat
the lease as at an end, subject to proof that there had been a breach of
covenant which entitled her to do so. There was, therefore, no relation of the
landlord and tenant existing between the mortgagees and the plaintiff, and no
right to distrain, and that ground of defence fails.
It is to be
noted that in that case the tenant was a defendant to the writ which was held
to have worked the forfeiture.
In the case of
Canas Pty Co Ltd, mentioned above, the question was raised whether a
lease is forfeited from the date of issue of the writ or from the date of service
of it. This court held that it was from the date of service and the reasons for
so deciding were expressed thus (p 411E):
The result is
that, in my opinion, a lessor does not effect a forfeiture merely by issuing a
writ for possession against the lessee. He must go further and serve it. Then
only does the lessee get to know of it. Then only does he become a trespasser.
And, when I speak of the ‘lessee’, I include, of course, ‘the assignee’; for
when a lease is assigned the assignee is then the proper defendant: see Commissioners
of Works v Hull [1922] 1 KB 205. If the lessee has left the premises
and cannot be found, service can be effected by affixing a copy of the writ to
some conspicuous part of the land: see RSC Ord 10, r 4: and thereupon the lease
comes to an end.
It was upon
that basis that it was submitted to the court for the plaintiff that the
service of the writ upon Ardil is not shown to have been brought to the
attention of the first defendant and there is no evidence that the first
defendant was in any way affected by it. In one of the cases mentioned in Hill
and Redman’s Law of Landlord and Tenant (18th ed) para 2167, to which we
were referred, namely Bayliss v Le Gros (1858) 4 CBNS 537, the
act of the landlord in creating a new tenancy with a third person in possession
of the premises was held to have effected a forfeiture of the plaintiff’s lease
from the landlord so as to deprive the plaintiff of the title to claim
possession against that third person. It was said in argument that the
plaintiff was unaware of the act of the landlord. Objection was taken at the
trial to the evidence of the landlord that, the premises being out of repair,
he had let them with the intention of putting an end to the plaintiff’s lease.
It was argued on appeal that the court should not take notice of the intention
with which the act was done. Cockburn CJ in the Court of Common Pleas said (p
554):
Finding the
premises in a dilapidated state, the landlord comes upon them and enters into
an agreement with a man he finds in possession, to become his tenant —
intending thereby to act upon the forfeiture and to oust the lessee. I think
that was quite sufficient to constitute an entry by the landlord so as to put
an end to the lease.
The case
suggests that, provided the landlord intended by his act to bring the lease to
an end by forfeiture, it matters not that the tenant was unaware of it. Since
then, of course, section 146 of the Law of Property Act 1925 (successor to the
provision contained in the Conveyancing Act 1881) has provided, by subsection
(1), that:
A right of
re-entry or forfeiture under any proviso or stipulation in a lease for a breach
of any covenant . . . 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, by
subsection (2):
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; . . .
The requirement
of notice to the lessee before the landlord may enforce a right of re-entry by
action or otherwise ensures, of course, that the tenant knows of the landlord’s
intention to forfeit, but it would not necessarily, as it seems to me, preclude
some act of the landlord being held to amount to re-entry although the tenant
was not aware of the act when it was done.
As I
understand Mr Jones’ submissions, he acknowledged that the effect of service of
the writ upon Ardil could be disputed by the tenant. Notice under section 146
had been served upon him. The tenant could have argued, if it were the case,
that the alleged breach had been waived, so as to claim that there was no
ground of forfeiture, and that he was entitled to retain possession, or he
could have applied for relief. But, it was said, the tenant was entitled, on
becoming aware of the plaintiff’s writ served on Ardil, to accept and rely upon
the consequence of the plaintiff’s act as amounting to forfeiture. The second
and third defendants as guarantors must be entitled to point to and rely upon
that which brought the tenants’ liability to an end; and, without direct
evidence of the subjective intention of the landlords in serving the writ upon
Ardil, the court can infer what, objectively regarded, that intention must be
taken as having been.
There would be
some difficulty, I think, in holding that the service of the writ upon Ardil
could be held to have been in the circumstances of this case such an act as
amounted to forfeiture of the lease by the plaintiff. The position of a person
in occupation with the consent of the original tenant seems to me to be
different from that of an assignee, as the defendant was regarded as being in Commissioners
of Works v Hull, cited above, for the purposes of considering
the effect of service of a writ to which the original tenant has not been made
a defendant. There was in this case no re-entry in fact as had occurred in Bayliss
v Le Gros, cited above, but only service of a writ to which the sole
defendant had a clear defence in law if he had chosen to raise it. There was no
alleged reliance by the first defendant, as tenant, upon the fact of the
service of the writ upon Ardil, or upon the terms of it, or upon the going out
of possession by Ardil, or upon the payment made by Ardil to the plaintiff.
Without trying to resolve such questions, for my part, if it be assumed that
service of the writ on Ardil amounted to an act which unequivocally evinced the
plaintiff’s intention to forfeit the lease, then I see much force in the
contentions made by Mr Jones for the second and third defendants that they
would be entitled to rely upon it as bringing their liability to an end, in so
far as that liability depended upon the continued existence of the lease, even
though the first defendant had not claimed to rely upon it. For the reasons
explained above, however, those submissions cannot help the second and third
defendants in this case. There is no evidence that the first defendant did
accept or rely upon the consequence of the plaintiff’s act in any way and, as
has been said above, the first defendant by the official receiver appears to
have continued to assert the right to possession until the surrender of the underlease.
For the
reasons which I have stated, I would allow the plaintiff’s appeal and order
that there be judgment for the plaintiff for the sums claimed. I would wish to
hear counsel upon the proper amount of the judgment.
Agreeing,
NICHOLLS LJ said: I, too, would allow this appeal on which, I have no doubt, we
had the benefit of fuller argument than did the judge. In my view, for the
reasons stated by Ralph Gibson LJ, the second and third defendants as
guarantors are liable to the plaintiff for the balance of the rent payable in
advance on December 25 1987 for the quarter ending on Lady Day 1988 remaining
due after offsetting the payments made by Ardil. They are liable as guarantors
for the balance of this quarter’s rent irrespective of whether the underlease
was, as contended by them, determined by forfeiture by service of the writ on
Ardil on January 8 1988 or, as contended by the plaintiff, the underlease was
not determined until service of the writ in the present action on March 7 1988.
Further, again
for the reasons given by Ralph Gibson LJ, the second and third defendants are
liable as guarantors in respect of the mesne profits payable for the four days
from Lady Day 1988 to March 29 1988, on the principle stated in Associated
Dairies v Pierce (1982) 265 EG 127, [1983] 1 EGLR 45. They are so
liable, irrespective of whether the underlease determined on the earlier or
later of the two alternative dates mentioned above.
The appeal
was allowed, plaintiff to have costs below; no costs of appeal. Leave to appeal
was refused.