Landlord and tenant — Letting of business premises with prohibition of use as residence — Use in breach of prohibition and temporary waiver of breach — Premises let with covenant under which tenant was empowered to carry on any business but covenanted not to use premises as a private residence — Tenant began to use premises as a residence, at first without the knowledge of landlord — Later, landlord became aware of this use but waived the breach by acceptance of rent and continued to do so even after entering into a new agreement containing a similar prohibition — Eventually, having decided to assign his reversion, landlord served a notice under section 146 of the Law of Property Act 1925, complaining of breach and threatening forfeiture — Proceedings for possession followed — County court judge held that the prohibited use constituted a continuing breach of covenant and found that, although it had been waived for a time, the waiver had been ended and the landlord was entitled to possession — Submissions by tenant based on alleged variation of agreement, promissory estoppel and once-for-all waiver rejected — Nothing to preclude landlord from putting an end to the waiver and enforcing covenant — No point taken by tenant as to whether a reasonable time had been given to remedy the breach — County Court judge came to correct conclusion on his findings — Appeal dismissed
This was an
appeal by the tenant, James Martin Henderson, of part of a building at 78
Streatham High Road, London SW16, from a decision of Judge Coplestone-Boughey
at Wandsworth County Court, granting a possession order in favour of the
landlord. The first respondent, Harold Cooper, had assigned his reversion to
the second respondent, Ibrahim Halusi, after the proceedings for possession had
begun.
Roderick
Johnson (instructed by Rosenbergs) appeared on behalf of the appellant; Kenneth
Munro (instructed by Graham, Harvey & Co) represented the first respondent;
the second respondent appeared in person.
Giving
judgment, CUMMING-BRUCE J said: The first plaintiff had a leasehold interest in
a building known as 78 Streatham High Road from December 1971 until these
proceedings began. After the proceedings began he assigned his interest to the
second plaintiff by an agreement dated August 1981, completed on September 29
1981. The premises were on three floors. The first plaintiff carried on his own
business on the ground floor, and the first floor was let as offices. Since
April 1 1979 the defendant has been occupying the second and third floors of
the building. He went into occupation under a tenancy agreement, which was
before the judge, dated March 27 1979. That agreement begins as follows:
Between
Harold Cooper (hereinafter called the Landlord which expression where the
context admits includes the persons for the time being entitled in reversion
expectant on the tenancy hereby created) of the one part and J Henderson and P
J Ingram T/A Hangers On (hereinafter called the Tenant which expression where
the context admits includes the persons deriving title under the Tenant) of the
other part.
The agreement
was as follows:
1. The
Landlord shall let and the Tenant shall take
ALL THAT
Office above and forming part of the building known as 78 Streatham High Road,
Streatham, London SW16 . . .
For the Term
of Six Months from the First April 1979 until the tenancy shall be determined
by either party giving to the other at least Twentyeight days notice in writing
to quit expiring at the end of the first or any subsequent period thereafter.
At the Yearly
Rent of £1,680 (subject nevertheless as hereinafter provided) clear of all
deductions to be paid by equal MONTHLY payments on the FIRST DAY in every MONTH
the first of such payments to be made on the First Day of April 1979.
A very
appropriate date in the light of the subsequent history.
By Clause 2(5)
the tenant covenanted
To carry on
or permit to be carried on upon the premises any profession trade or business
whatsoever but not to use the same as a private residence.
As the learned
judge observed, that clause is not artistically drafted: it is manifestly
adapted from the usual drafting of negative covenants. The result of it was
that the tenant was contractually empowered to carry on any business whatsoever
on the premises but had covenanted not to use the premises as a private
residence.
On the finding
of the judge (with which I agree, with respect) at the date of the grant of the
lease of business premises on March 27 1979 it was a perfectly genuine
agreement, granting to the tenant premises for business use.
After the
business tenants, Henderson and Ingram, had taken possession, upon the evidence
before the judge, the business tenancy continued. It may well have diminished
or even disappeared, but the important point is this, that there was no
evidence before the judge that the landlord had knowledge of the diminution of
business user, much less cessation thereof.
A case was
pleaded and presented in the county court to the effect (a) that the agreement ab
initio was a sham; or (b) that when it was replaced by a series of
subsequent agreements culminating in an agreement on October 1 1980, all of
those agreements or at least the last of them, were sham. It is not possible to
sustain that submission in this court on the findings of fact made by the
learned judge because there was no evidence on which the judge could find that
the business user had, to the landlord’s knowledge, been replaced by a
residential user.
The landlord
learned in the middle of 1980 that one of the business tenants, Henderson, was
resident in the premises, and he did not at that juncture complain of breach of
covenant 2(5) by the tenant but, on the contrary, knowing that the tenant was
still there, he entered into a subsequent agreement on October 1 1980 which
incorporated on its face exactly the same term prohibiting residential user.
Our attention
has been drawn by Mr Munro to a passage in the judge’s note of evidence where
the defendant described how he came to be living there. He said this: ‘Our
relationship was very amicable until last Christmas.’ — they signed further
agreements in the same form as the first one — ‘We were looking for a flat but
he was letting us live there.’
The landlord’s
interests changed. He decided to assign his interest in the premises to the
second plaintiff, by the agreement which I have already stated, completed on
September 29 1981.
Against that
background, on June 1 1981, the first plaintiff gave notice to the defendant
entitled:
In the
matter of: an agreement dated October 1 1980 and made between Harold Cooper (the
landlord) and J Henderson —
and the words
‘P J Ingram’ are struck out —
Trading as
Hangers On (the Tenant)
I, HAROLD
COOPER hereby give you notice as follows:
1. By the above-mentioned agreement, the
Tenant covenanted by Clause 2(5) . . . not to use the (premises) as a private
residence.
2. The above-mentioned covenant has been
broken and the particular breach which is complained of is your use of all that
office above and forming part of the building known as 78 Streatham High Road,
London, SW16, as was let to you by the said agreement as a private residence.
I require you
to remedy the said breach within the next seven days and if you fail to do so,
it is my intention to re-enter upon the said premises and forfeit your tenancy
and claim damage for the said breach of covenant.
This notice
is served upon you as required by section 146 of the Law of Property Act, 1925.
By June 1 1981
the term of the lease dated October 1 1980 had determined and had been
succeeded either by a continued contractual tenancy pursuant to the terms of
the agreement or by a periodic tenancy. As no notice to quit has ever been
served the consideration of the precise rights of landlord and tenant in that
matter will not arise on this appeal. The relevant clause of the lease may be described
as ambiguous because the words:
For the Term
of Six Months from First April 1981 until the tenancy shall be determined by
either party giving to the other at least 28 days’ notice in writing to quit
expiring at the end of the first or any subsequent period thereafter
may be
construed to have the effect that the contractual tenancy continued after the
term of six months had ended, until one party had given the other party the
notice in writing to quit specified in the agreement. There is an alternative
construction. It is unnecessary for this court in these proceedings to
determine which it was. On any view the tenant pending notice to quit had got a
right to stay, unless he had forfeited that right by virtue of breach of
covenant, notice to remedy which had been properly given, followed by
appropriate proceedings. The proceedings that were instituted by the landlord
were proceedings for possession founded on breach of covenant and on breach of
covenant only: see paragraphs 6 and 7 of the particulars of claim filed in the
county court, dated October 29 1981.
The defendant
filed a defence and we have before us a document entitled ‘Amended Defence and
Counter Claim’. The significant paragraphs are these; the defendant admitted
clause 2(5) of the agreement, as written in the agreement, but went on:
The defendant
denies that the said term was of any effect. The defendant avers that the
plaintiff agreed with the defendant orally when the said premises were let that
the said premises would be used by the defendant as a private residence.
Further and in the alternative the defendant avers that the plaintiff has
waived the said clause.
The defendant
admits that ab initio he has used the said premises as a private residence but
denies that this only came to the plaintiff’s knowledge in or about the end of
May 1981. The defendant avers that the plaintiff has known and approved of the
defendant’s residence there from the beginning of the tenancy.
So the
defendant denied that there was any breach; denied that the notice under
section 146 was of any effect; and went on to make this averment: ‘The
defendant avers that the premises are premises to which the Rent Act applies, .
. . the defendant is a protected tenant.’
There is a
counterclaim, and by his counterclaim the defendant averred that the premises
were residential and protected by the Rent Act 1977 and claimed a declaration
to that effect.
The judge
heard the evidence of the first plaintiff, the second plaintiff, the defendant,
the defendant’s wife, a young gentleman called Bradley, a Mrs Anderson, and he
took the view that save for Mr Bradley he could not be confident that any of
the evidence that he had heard was really reliable. But he made findings of
fact. He found that shortly after the business tenancy had been granted the
tenant, Henderson, moved in, and used the premises as his residence. He
rejected the claim of the defendant that the grant of a business tenancy had
been a sham. He went on to find that by mid-1980 the first plaintiff knew that
the defendant was living on the premises. The way he put it was this: ‘I accept
that the first plaintiff was at first unaware that the defendant and his wife
were residing upstairs but the first plaintiff must soon have had some
suspicion hardening into knowledge long before 1981 of the breach of covenant
which would accordingly be waived for at least so long as he accepted rent.’
Founding himself on the only witness he could trust the judge made those
findings, having formed the view that the first plaintiff and the defendant
were both lying.
So the judge
came to consider the legal effect of the situation at the time when the section
146 notice was served. After the six months of the 1980 agreement had expired
the first plaintiff accepted rent for the month of April 1980 and for the month
of May. The landlord proffered a further agreement in the same terms as the
previous agreement but the defendant refused to accept such an agreement as
long as it contained a clause prohibiting residential use. Against that
background the section 146 notice was issued.
The judge,
after considering the authority of Segal Securities Ltd v Thoseby
[1963] 2 WLR 403, held that a prohibited use of premises is a continuing breach
of covenant, and went on:
I must
therefore hold that the breach was waived by acceptance of rent in May up to
that date but the continuing breach after the date of acceptance is not waived
and the first plaintiff was therefore entitled to forfeit the defendant’s lease
and I must order possession in 14 days and dismiss the counterclaim.
In this court
Mr Johnson, on behalf of the appellant, has made a number of submissions. He
submitted that the plaintiff could not rely upon the breach of clause 2(5)
either because he was estopped from such reliance or because there was a waiver
once for all of the clause 2(5) in the tenancy agreement of March 1980 and
thereafter. As to estoppel, I accept Mr Munro’s submission that, on the facts
found by the judge, there is no evidence of such a representation express or
implied as to found a promissory estoppel, that is to say a promise by the
landlord that he would never enforce covenant 2(5) against the tenant. In the
light of the evidence given by the defendant when he described how the landlord
let him live there while he was looking for a flat, it is certainly very
difficult to see how the facts which come under the general description of
waiver can be erected into the edifice of a promissory estoppel. Estoppel was
apparently
much force it was argued we know not. It was not pleaded and it is not, to my
mind, surprising the judge did not deal with it.
So one comes
to the question of waiver. The authorities are overwhelming in establishing
that breach of a covenant as to user of premises has the characteristic of a
continuing breach. Therefore, the question is, whether there were any facts
whereby the landlord, having waived the breach for a period, was precluded from
ending his waiver and enforcing the covenant. Mr Johnson submitted that on the
facts there was evidence of a variation of the tenancy agreement of March and
October 1980 when the landlord knew for the first time in mid-1980 of the
residential use. But he was unable to point to any consideration moving from
the promissee which could have the effect of giving rise to an enforceable
variation of the agreement of March 1980 and the agreement of October 1980.
When one comes to waiver the question then is: did the landlord by his conduct
in waiving strict reliance on the prohibition in clause 2(5) from mid-1980
until the date of the service of the section 146 notice put himself in the
position in which he was precluded from withdrawing his continuing waiver?
We have been referred
by Mr Munro to Harman J’s decision in City & Westminster Properties
(1934) Ltd v Mudd [1959] 1 Ch 129 and it appears to me clear on
consideration of the argument followed by the judgment in that case that on the
facts found by the learned judge, Judge Coplestone-Boughey, in the instant case
there is no legal ground for holding that the landlord’s waiver from mid-1980
of the prohibition upon residential user for a period of what in the event
turned out to be a year had the effect of giving the tenant a legal right to
insist upon the continuance of the waiver. It is clear on the authorities that
in the absence of such conduct as would give rise to a claim for equitable
relief on the grounds of acquiescence which involves detriment, or to an
enforceable variation of the agreement, it was open to the landlord at any
time, if he had been polite enough to allow the tenant to begin staying in the
business premises with his family, to withdraw that consent at any time, which
indeed he did. As soon as one read the section 146 notice and the terms in
which it was expressed, and saw that the landlord, who had allowed this family
to live in the business premises for a year, was then giving them seven days’
notice to get out, followed almost at once, within a matter of days, with
proceedings for possession on the ground of forfeiture for breach of covenant,
one could see the position. It was manifestly open to the defendant, had he
wished, to plead that the time contemplated in the statute as the requisite
period for instituting proceedings based on breach of covenant and forfeiture
of the lease, being a reasonable time in which to remedy the breach, had not
elapsed. But that was never pleaded and the point does not appear ever to have
been taken before the judge. Had it been pleaded and the point taken, it may
very well be that the landlord would have been advised that the period before
the institution of proceedings on reflection clearly was not reasonable, and
the landlord might — it is only a matter of speculation — have determined the
first proceedings, issued a second section 146 notice, and waited for a
reasonable time to elapse for remedying the breach before issuing further
proceedings. But all those matters are otiose, they were not pleaded and they
do not arise in these proceedings; and, if it be thought that I am unduly
criticising by implication the advisers of the defendant, let me add a
counterweight of criticism which may perhaps be levelled at the advisers of the
first plaintiff that, had they read the agreement and decided to determine the
business tenancy in accordance with the terms of the agreement of October 1980,
they might well have had a very simple way of ejecting the tenant from the
premises by serving a notice to quit. It may be that they preferred not to do
that, because in the back of their minds there were thoughts about Part II of
the Landlord and Tenant Act 1954. So in this court we only deal with the case
as it was before the judge, and on the findings of the learned judge I content
myself with saying that, on the authorities, his conclusion in law was right,
and he was right in granting possession and rejecting the counterclaim. I would
only say this about the counterclaim that, really, there is absolutely nothing
here on which to build an edifice of a sham to evade the provisions of the Rent
Act once it is appreciated that the judge rightly found that this was the grant
of a business tenancy in its inception and that there was no evidence of
determination of business user known by the landlord in the proceedings before
the judge. I would dismiss the appeal.
Agreeing DUNN
LJ said: On the findings of fact which the learned judge made, and which are
quite unassailable in this court, I agree with my Lord that he came to the
right conclusions in point of law and, for the reasons that he gives, I would
accordingly dismiss this appeal.
The appeal
was dismissed with costs; legal aid taxation was ordered.
