Lease — Business premises — Alleged breach of covenant by landlord — Rent withheld by tenant — Distraint of goods — Whether set off against claim for rent could be invoked against landlord exercising remedy of distress — High Court held that landlord’s right to distrain not affected by set-off — Court of Appeal reversing decision — Set-off available against claim to levy distress — Judgment for tenant
The plaintiff was the tenant of premises on a small industrial estate in West Hendon. He complained for some time of alleged acts of nuisance and breach of covenant by his landlord. He decided to put pressure on the landlord by withholding his rent. The landlord sent bailiffs to distrain upon his goods and chattels. The tenant was obliged to sign a possession agreement to prevent their physical removal. He then applied ex parte to the High Court for an injunction to restrain the landlord from proceeding with the distraint. He claimed that in equity he owed no rent because he was entitled to set off his claims for damages for nuisance and breach of covenant. The court granted the injunction, but on the landlord’s application it was discharged.
The court held that the tenant had an arguable cross-claim and accepted that as it arose out of the same lease as the claim for rent, they were sufficiently closely connected to give rise to an equitable set-off: see Hanak v Green [1958] 2 QB 9. It followed that if the landlord had been suing for rent, the tenant, if he had made good the cross claim, would have had a complete defence. However, the judge considered himself bound by authority to hold that set-off did not affect a landlord’s right to distrain. The tenant appealed.
Held The appeal was allowed and the injunction was restored.
1. In Halsbury’s Laws of England, vol 13, paras 284-6, it was said that the amount for which a landlord could distrain might be reduced by payments made on the landlord’s behalf with his express or implied authority. But otherwise, “the general rule of law was that there was no right to set off against or deduct from the rent distrained for sums due from the landlord to the tenant or payments made on behalf of the landlord”.
2. The cases cited in support of that proposition were before the Judicature Acts and not intended to alter the rights of parties in set-off, but were procedural or jurisdictional in content. There was no reason why the present case should not be decided in accordance with principle rather than following cases based upon procedural disfunctions of long ago.
3. The question was what should be done to ensure fair dealing between the parties: see Federal Commerce & Navigation Co Ltd v Molena Alpha Inc [1978] QB 927 at p974.
4. It was contrary to principle that a landlord should be able to recover more by distress than he could by action. It would mean that a landlord whose application for judgment under Ord 14, in a claim for rent was defeated by an arguable cross-claim could leave court and immediately enforce his claim by levying a distress. The injustice would be even greater if the landlord, as might be the position in this case, was in financial difficulties. The money recovered from the tenant by distress would on insolvency have to be distributed among the creditors while the tenant would have to be satisfied with a dividend in respect of his cross-claim.
5. Therefore, the court was free to hold that set-off was available against a claim to levy distress.
Richard Davison (instructed by Titus Miranda, of Southall) appeared for the tenant; the landlord did not appear and was not represented.
