Landlord and tenant — Forfeiture — Irremediable breach — Validity of two notices under section 146 of the Law of Property Act 1925 — Whether notices valid — Whether tenant entitled to relief from forfeiture
defendant, Judy Properties Ltd, is the owner of premises consisting of a shop
with two flats above — By a lease dated November 8 1976 the defendant demised
the premises for a term of 20 years from June 24 1976 — The tenant covenanted
not to assign, underlet or part with possession of the premises subject to a
proviso that the landlord should not unreasonably withhold consent and,
further, not to use the ground floor of the premises other than for the retail
sale of drapery — In January 1988 the then tenants, J R Graham Ltd (‘Graham’),
sought the defendant’s consent to assign the premises to the plaintiffs and for
a change of use as to the ground floor for an estate agency — Following
‘subject to contract and without prejudice’ correspondence and a letter from
the defendant’s managing agents stating that the defendant’s solicitors were
being instructed to prepare a draft licence to assign, subject to the managing
agents inspecting the premises before they could advise the defendant to
complete, Graham assigned the term on April 13 1988 to the plaintiffs for an
agreed premium of £30,000 — The deed of assignment wrongly stated that the
defendant landlord’s consent had been obtained — In September 1988 the
plaintiffs’ application for planning permission for change of use was refused
and they sought consent to assign the term to another firm of estate agents,
Andrews, although by the beginning of January 1989 Andrews had withdrawn — The
plaintiffs paid the quarterly payments of rent in June, September and December
1988 and these were accepted — On February 9 1989 the defendant’s solicitors
sent a notice (‘the first notice’) under section 146 of the Law of Property Act
1925 to Graham alleging breach of covenant against assignment and requiring the
breach to be remedied within seven days, a copy of the notice being sent to the
plaintiffs’ solicitors for information — On February 24 the defendant peaceably
re-entered the premises and changed the locks — On February 28 1989 the
defendant served a further notice (‘the second notice’) pursuant to section 146
on the plaintiffs; this notice was in the same terms as the first notice — In
response to the second notice the plaintiffs issued the writ in this action
claiming that the defendant could not reasonably have withheld consent to the
assignment, that it was not entitled to forfeit the lease and alternatively
that any forfeiture had been waived by the acceptance of rent — The relief
claimed included an injunction restraining the defendant from entering the
premises, damages and relief against forfeiture — On July 10 1990 the defendant
granted a new lease of the premises to Hirestar Ltd (‘Hirestar’)
of the action, Mervyn Davies J held that no licence to assign had been granted,
there had been no unreasonable withholding of consent and therefore the
assignment of April 13 1988 had been executed in breach of covenant — He
further held that the first notice was ineffective, not having been served on
the plaintiffs as the tenants and that the second notice was invalid because
the defendant had taken possession: therefore the lease had not been forfeited
— The defendant appealed
having been served on the tenant — The second notice was valid and the writ in
these proceedings was issued before the defendant could effect a forfeiture in
reliance on it, with the consequence that the plaintiffs’ application for
relief against forfeiture was properly before the court — The defendant had
peaceably re-entered to effect the forfeiture, but before the Court of Appeal
the defendant conceded that relief against forfeiture should be granted to the
plaintiffs on appropriate terms — Hirestar were purchasers of a legal estate
without notice of the plaintiffs’ equity to seek relief against forfeiture and
were therefore not bound by the equity — The plaintiffs were entitled to relief
from forfeiture subject to the lease held by Hirestar; accordingly, the
plaintiffs were put into the position of immediate reversioners on Hirestar’s
lease liable to pay rent under their lease to the defendant but entitled to the
rent payable by Hirestar — As a further condition of relief the plaintiffs were
to pay the costs of the proceedings down to the judgment of the judge
The following
cases are referred to in this report.
Billson v Residential Apartments Ltd [1992] 1 EGLR 43; [1992] 01 EG
91
Horsey
Estate Ltd v Steiger [1899] 2 QB 79;
[1895-9] All ER Rep 515; 68 LJQB 743; 80 LT 887; 47 WR 644; 15 TLR 367, CA
Old
Grovebury Manor Farm Ltd v W Seymour Plant Sales
& Hire Ltd [1979] 1 WLR 1397; [1979] 3 All ER 504; (1979) 39 P&CR
99; [1979] EGD 529; 252 EG 1103, [1979] 2 EGLR 52, CA
Scala
House & District Property Co Ltd v Forbes
[1974] QB 575; [1973] 3 WLR 14; [1973] 3 All ER 308; [1973] EGD 342; (1973) 227
EG 1161, CA
This was an
appeal by the defendant, Judy Properties Ltd, from the order of Mervyn Davies J
given in October 17 1990 in relation to the claim by the plaintiffs, Mark Peter
Fuller and Joy Carolyn Fuller, for damages and relief from forfeiture in
relation to the defendant’s peaceable re-entry of premises at 534 London Road,
North Cheam, Surrey, of which the plaintiffs, who carry on business as estate
agents, had been assigned a lease dated November 8 1976. Mervyn Davies J’s
decision is reported at [1991] 2 EGLR 41.
Graham
Platford (instructed by Cohen & Naicker) appeared for the appellant;
Christopher Moger and Alison Potter (instructed by Symons, of Croydon)
represented the respondents.
Giving
judgment, DILLON LJ said: This appeal, from a decision of Mervyn Davies
J given in the Chancery Division on October 17 1990 after the trial of the
action, raises, upon somewhat unusual facts, novel questions as to the service
of a forfeiture notice under section 146 of the Law of Property Act 1925 where
there has been an irremediable breach of covenant and as to the granting of
relief against such forfeiture.
The appellant,
Judy Properties Ltd (‘Judy’), the defendant in the action, is the owner of
premises at 534 London Road, North Cheam, Surrey. These premises consist of a
shop, which is at the end of a terrace of shops, with two flats above.
By a lease
dated November 8 1976 Judy demised the premises for a term of 20 years from
June 24 1976. By the beginning of 1988, that term had for some years been duly
vested in a company called J R Graham Ltd (‘Graham’). The lease provided for
five-yearly rent reviews and, by the beginning of 1988, the rent was at the
rate of £10,500 pa payable by quarterly instalments in advance.
The lease
contained in clause 3(15) a tenant’s covenant not to assign, underlet or part
with possession of the premises or any part thereof subject to a proviso that
the landlord should not unreasonably withhold consent to an assignment or
underletting of the whole of the premises. There was provision that the tenant
would procure that any assignee of the premises would enter into a direct
covenant with the landlord to pay the rent and observe the tenant’s covenants
during the residue of the term. There was also provision for notice of any
assignment to be given to the landlord within one month after the execution of
the assignment and for a registration fee to be paid. In addition, there was in
clause 3(16) a negative covenant by the tenant prohibiting any use of the
premises other than as to the ground floor (ie the shop) for the retail sale of
drapery and as to the upper floor as residential.
At the
beginning of 1988 Graham agreed in principle on the sale of the premises to the
plaintiffs in this action (‘the Fullers’), who are the respondents to this
appeal. The Fullers carry on business as estate
agency. Before they could do that, they needed planning permission for change
of use and also the landlord’s consent under the lease to a change of use and
to the assignment of the premises to them.
Accordingly,
on January 15 1988 Graham’s solicitors wrote to Judy’s managing agents,
Willmotts, for a licence to assign the premises to the Fullers and a licence
for the change of use.
On February 1
Willmotts stated in a letter to Graham’s solicitors that they wished to carry
out an inspection of the premises before the matter proceeded any further. In a
letter of February 5, marked ‘Subject to Contract and Without Prejudice’, they
stated that Judy was reasonably satisfied with the status of the proposed
assignees and they suggested that Judy’s solicitors might prepare a draft
licence to assign and deeds of variation. Inconclusive further letters passed
and on April 14 Willmotts wrote to Graham’s solicitors, subject to contract and
without prejudice as before, confirming that they were instructing Judy’s
solicitors to prepare a draft licence to assign but pointing out that until
they had gained access to inspect the premises they could not advise Judy to
complete any licence to assign.
In fact, on
April 13 1988 Graham had assigned the premises to the Fullers for the unexpired
residue of the term of the lease and the Fullers had paid Graham the agreed
premium of £30,000 for the assignment. The deed of assignment recites that the
consent in writing of the landlord to the assignment had been made and duly
obtained, but that was not so. It would seem that on the execution of that
assignment Graham left the ground floor of the premises vacant and handed over
the keys to the Fullers. No notice of the assignment was given to Judy or
Willmotts.
In the early
summer of 1988 Willmotts obtained access to the premises to inspect them and on
June 20 1988 they sent Graham’s solicitors a schedule of items of repair and
decoration, on the basis that in the licence to assign to the Fullers, which
was then circulating in draft, the Fullers should covenant to complete the
works in the schedule within three months of completion of the assignment.
However, in September 1988 the Fullers’ application for planning permission for
the change of use of the premises was refused by the local planning authority.
Consequently, the Fullers changed their plans and sought permission instead to
assign the premises to Andrews, another firm of estate agents. Andrews did not
face the same planning difficulty as the Fullers, since Andrews could obtain
planning permission for the use of these premises as estate agents’ offices by
surrendering an existing permission to use their existing nearby premises for
that purpose. The proposal that there should be an assignment to Andrews and
that Andrews should covenant to carry out the works in the schedule was
acceptable in principle to Judy, but at the beginning of January 1989 Andrews
withdrew.
Accordingly,
at January 5 1989 the Fullers’ solicitors asked Judy’s solicitors for the
original formal licence under which the Fullers would undertake to carry out
the works in the schedule. It has been the Fullers’ position since their own
application for planning permission was refused that they accept that they
cannot establish their own estate agents’ offices in the premises, but they
want to sell the premises to some purchaser for a permitted use in order to
recoup the premium which they had paid to Graham.
The quarterly
instalments of rent under the lease which were due in June, September and
December 1988 were in fact paid by the Fullers and the payments were accepted.
It does not appear, however, that Judy, Judy’s solicitors or Willmotts knew at
that stage that the lease had already been assigned to the Fullers.
On February 9
1989, however, Judy’s solicitors sent a notice under section 146 of the Law of
Property Act 1925 (‘the first section 146 notice’) to Graham. This notice
refers to the covenant against assignment or parting with possession of the
premises in clause 3(15) and asserts that that covenant had been broken in so
far as Graham had assigned and/or parted with possession of the premises to the
Fullers.
The notice
continues in paras 3 and 4:
3. We require
you to remedy the breach set out in paragraph 2 insofar as the same is capable
of remedy and to make compensation to Judy Properties Limited in money for such
breach.
4. On your
failure to comply with this Notice within 7 days (or within a reasonable time)
it is the intention of Judy Properties Limited to commence proceedings to
recover possession of the premises.
Although that
notice was addressed only to Graham, a copy of it was sent on February 9 by
Judy’s solicitors to the Fullers’ solicitors for information.
There were
letters from the Fullers’ solicitors objecting strongly to the first section
146 notice. On February 24 Judy re-entered the premises without any court order
and changed the locks. The shop remained otherwise unoccupied; one of the flats
continued to be occupied by a statutory tenant.
Thereafter,
Judy’s solicitors served a further notice (‘the second section 146 notice’) on
the Fullers. This notice is dated February 28 1989, but it is common ground
that it was received by the Fullers only on March 3 1989. Save for its date and
for the fact that it is addressed to the Fullers and not to Graham, it is in substantially
the same terms as the first section 146 notice, and includes the same paras 3
and 4 as set out above.
In response to
the second section 146 notice, the Fullers issued the writ in this action on
March 8 1989. It was served on Judy on the same day. The statement of claim
endorsed on the writ pleaded the first and second section 146 notices. It
asserted that the defendant could not reasonably have withheld its consent to
the assignment to the plaintiffs and accordingly is not entitled to forfeit the
lease and, alternatively, that any forfeiture had been waived by the acceptance
of rent. The relief claimed was: (1) an order to restrain the defendant from
entering into or remaining on the premises; (2) an order on the defendant to
supply the plaintiffs with keys to the premises; (3) damages under section 50
of the Supreme Court Act 1981; (4) damages; and (5) relief against forfeiture.
Certain other
matters of fact can be set out shortly:
(1) In a
letter of March 6 1989 to the Fullers’ solicitors, Judy’s solicitors, after
referring to both of the section 146 notices, asserted categorically:
Our clients
were perfectly entitled to take peaceable possession of the premises following
an irremediable breach of covenant having been committed. The lease has not been
forfeited.
(2) On April
26 1989 Judy’s solicitors told the Fullers’ solicitors that Judy intended to
relet the premises and they were being placed on the market for that purpose.
(3) At some
unknown date, the Fullers changed the locks again so that they alone had keys
to the shop. But on May 22 1989 Willmotts, on behalf of Judy, changed the locks
yet again and since then the Fullers have had no key to the premises. At that
stage the shop still remained unoccupied.
(4) On July 10
1990 Judy granted a new lease of the premises to a third party, Hirestar Ltd
(‘Hirestar’), for a term of 16 years from June 24 1990 at a yearly rent of
£19,500 with four-yearly rent reviews and in consideration of a premium of
£5,000. The user clause limits use to use as a retail shop for the sale of
double glazing and associate materials. Hirestar duly went into occupation of
the shop, though it appears that they are now seeking to find a purchaser. On
all the available evidence it appears that Hirestar had no notice at all, when
they took their lease and entered into occupation, either of these proceedings
or of the former lease which had been assigned to the Fullers, or of the
Fullers’ claims in respect of the premises; Hirestar understood that they were
taking a new lease from Judy as landlords of premises which — save for the flat
occupied by the statutory tenant — had become vacant.
The trial of
the action took place in October 1990 and Mervyn Davies J gave judgment on
October 17. Having analysed the facts and correspondence, he held that no
licence to assign to the Fullers had ever been granted by Judy nor had there
been any unreasonable withholding of consent. Thus the assignment of April 13
1988 had been executed in breach of covenant. He further held that there had
been no licence ex post facto or waiver of the breach of covenant by
acceptance of rent or otherwise. None of these findings is challenged on this
appeal.
In relation to
the first section 146 notice, however, the judge held, following the decision
of this court in Old Grovebury Manor Farm Ltd v W Seymour Plant Sales
& Hire Ltd (No 2) [1979] 1 WLR 1397*, that the notice was ineffective
because it had been served on Graham and not on the Fullers. That is a point
which had been taken by the Fullers’ solicitors as long ago as March 3 1989.
*Editor’s
note: Also reported at (1979) 252 EG 1103, [1979] 2 EGLR 52.
It was not
suggested in the court below or in this court that the sending by Judy’s
solicitors of a copy of the first section 146 notice to the Fullers’ solicitors
on the same day, February 9 1989, on which they sent the original to Graham was
a sufficient service of that notice
before the judge that on the correspondence the Fullers were estopped from
asserting that because of the assignment of April 13 1988 they, and not Graham,
were the lessees on whom a section 146 notice fell to be served. It was
submitted that the execution of the assignment had been concealed and that
thereby and by the correspondence the Fullers had represented that Graham was
still the lessee and so still the proper person to serve with the notice.
The judge
rejected those submissions, after examining the correspondence, but they are
raised as, logically, the first ground of Judy’s appeal. I agree with the judge
on this point and I, too, would reject these submissions for, essentially, the
same reasons as did the judge, viz: (1) there was no clear
representation by the Fullers that Graham was still the lessee and (2) there is
no basis for supposing that in choosing to serve the first section 146 notice
on Graham Judy’s solicitors were relying on anything they had been told by the
Fullers or the Fullers’ solicitors.
Judy then
relied, before the judge, on the second section 146 notice. The judge held that
that too was invalid; I shall come to his reasons shortly.
Section 146
provides by subsection (1) that:
(1) A right
of re-entry or forfeiture under any proviso or stipulation in a lease for a
breach of any covenant or condition in the lease shall not be enforceable, by
action or otherwise, unless and until the lessor serves on the lessee a notice
. . . and the lessee fails, within a reasonable time thereafter, to remedy the
breach, if it is capable of remedy . . .
Consequently,
the effect of the judge’s rulings that both the first and the second section
146 notices were invalid was that the lease subsisted and had not been
forfeited. Judy as landlord had not succeeded in getting to the point where it
would be entitled to enforce any forfeiture.
Accordingly,
by his order the judge: (1) granted an injunction restraining Judy from
remaining on the premises; (2) ordered Judy to supply the Fullers with keys to
the premises; and (3) directed an inquiry as to what damages the Fullers had
sustained by reason of illegal entry. He also awarded the Fullers their costs
of the action. That order was stayed by this court pending the hearing of this
appeal.
Taking the
view he did, the judge did not have to deal with the Fullers’ prayer for relief
against forfeiture and in his order he did not deal with it. But in his
judgment he said that had Judy succeeded in showing that it was entitled to
forfeit, he would have been of the opinion that relief ought to be given to the
Fullers in the way of allowing the lease to continue to run on condition that
the Fullers paid Judy its costs of the proceedings within six months and without
any other condition. He plainly regarded it as unfair that, for having acted
precipitately in taking the assignment before licence to assign had actually
been granted, the Fullers should wholly forfeit, in effect, their premium of
£30,000 paid to Graham, while Judy should have had the advantage of the premium
and higher rent payable by Hirestar.
It is a bit
difficult to see what the judge had in mind in granting the first injunction
restraining Judy from remaining on the premises, since by the time of the trial
Hirestar were in possession of the premises under their lease of July 10 1990.
It would seem, however, that the judge intended that that order would require
Judy to evict Hirestar from the premises; since Judy had taken it upon itself
to let Hirestar into occupation of the premises when the trial was pending, it
was for Judy, by whatever means, to get Hirestar out again so as to give vacant
possession of the shop to the Fullers.
The difficulty
about that is that Hirestar have, under their lease, a business tenancy for a
16-year term, which is also protected by Part II of the Landlord and Tenant Act
1954, and Judy has no legal right to evict Hirestar. If, therefore, the judge’s
purpose was to require Judy to get Hirestar out of the premises, that would, in
effect, have meant ordering Judy to pay Hirestar whatever sum would be enough
to persuade Hirestar to agree to surrender their lease. If that was the purpose
I do not believe that that injunction was properly granted.
In fact, after
the judge’s order had been made, the Fullers started proceedings in the
Chancery Division against Hirestar for possession of the premises. The basis of
those proceedings is that, if the lease assigned to the Fullers has never been
forfeited, the Fullers have, and have at all times had, a legal estate in the
premises under that lease which had priority to any interest of Hirestar under
their lease. The consequence of that would be that the Fullers would obtain
possession against Hirestar (subject to any future forfeiture proceedings
against the Fullers) and Hirestar would be left with a claim for damages
against Judy for breach of Judy’s covenant for quiet enjoyment in the Hirestar
lease. Against that background, I turn to what I regard as the first main issue
on this appeal, namely the validity of the second section 146 notice.
The judge held
that it was invalid, so that Judy could not found a forfeiture on it, because
at the time it was served Judy was already in possession, claiming to have
forfeited, and Judy has continually throughout the proceedings sought to
maintain a forfeiture based on the first section 146 notice. The judge
reinforced his conclusion by reference to the fact that section 146 requires a
lessee to be allowed a reasonable time to remedy a breach if it is remediable;
ordinarily and inferentially, a lessee will require possession of the premises
if he is to be able to remedy a remediable breach such as a breach of a
covenant to repair.
Both parties,
however, agreed that the breach in the present case — breach of a covenant
against assignment — is to be classified as irremediable. It has happened, once
and for all, although relief against forfeiture may be granted: see Scala
House & District Property Co Ltd v Forbes [1974] QB 575, a
decision of this court.
The reasons
for having a section 146 notice, as it now is, are conveniently set out in the
judgment of Lord Russell of Killowen CJ, with which the other members of this
court agreed, in Horsey Estate Ltd v Steiger [1899] 2 QB 79 at p
91 as follows:
The reason is
clear: [the tenant] ought to have the opportunity of considering whether he can
admit the breach alleged; whether it is capable of remedy; whether he ought to
offer any, and, if so, what, compensation; and, finally, if the case is one for
relief, whether he ought or ought not promptly to apply for such relief. In
short, the notice is intended to give to the person whose interest it is sought
to forfeit the opportunity of considering his position before an action is
brought against him.
In the
circumstances of the present case, therefore, what the Fullers as the lessees
had to consider was whether there was indeed the breach of covenant alleged, or
whether there was no breach because consent to assignment had been given or had
been unreasonably withheld, or whether any breach had been waived by the
acceptance of rent or otherwise or whether they should apply for relief against
forfeiture. All this they were well able to consider, and did consider, without
having possession or occupation of the shop at the premises; the outcome was
the issue of the writ in these proceedings on March 8 1989.
I have no
doubt at all that the writ was issued within a reasonable time after the
service of the second section 146 notice on March 3 and it was therefore issued
before Judy could effect a forfeiture in reliance on the second section 146
notice. The consequence of that is that the application for relief against
forfeiture in this case is properly before the court irrespective of the
decision of the House of Lords in Billson v Residential Apartments
Ltd*, delivered since the argument on this appeal.
*Editor’s
note: Reported at [1992] 1 EGLR 43 ante.
The seven
days, or reasonable time, referred to in para 4 of the second section 146
notice must, in view of the wording already quoted in subsection (1) of section
146, run from the service of the notice and not from whatever date the notice
happens to bear — semble in the present case when it was typed.
I see no
reason, therefore, why it was necessary in the particular circumstances of the
present case for Judy to give up possession of the premises and hand over the
keys to the new locks to the Fullers before serving the second section 146
notice. Having the keys to the shop would not have assisted the Fullers in any
way in dealing with the second section 146 notice. Indeed, there was nothing
they had done before or could have done afterwards in the shop, since, in the
absence of planning permission, they could not trade there. For Judy to have
sent the new keys to the Fullers would have been a mere token formality. Again,
I can see no reason why, because Judy was contending that the first section 146
notice was valid, Judy should be precluded from serving and relying on the second
section 146 notice in the alternative; given that a copy of the first section
146 notice was sent to the Fullers’ solicitors at the same time as the notice
itself was sent to Graham, the invalidity relied on against the first section
146 notice was somewhat technical and I see no reason why Judy should have to
wait until the validity of the first notice had been decided by the court
before serving the second notice. I would accordingly hold that the second
section 146 notice was a valid notice, even if the first were not.
It is,
accordingly, necessary to consider the Fullers’ application for
to Mr Moger’s submissions for the Fullers, Judy had peaceably re-entered to
effect the forfeiture pursuant to whichever notice was valid before Mervyn
Davies J gave his judgment. The evidence that that was Judy’s intention is
overwhelming and Judy’s acts are unequivocally against treating the previous
lease as still on foot; I refer in particular to the final changing of the
locks in May 1989, to the putting of the premises on the market and to the
granting of the new lease to Hirestar.
In the court
below it was submitted for Judy that relief against forfeiture should not be
granted to the Fullers because they were the authors of their own difficulties
in having taken the assignment of the lease when they did, at such a high
premium, before licence to assign had been granted and before they had obtained
the planning permission they needed. In this court that stance has been
abandoned in view of the importance attached by the judge to the unfairness of
the Fullers losing their £30,000. It is therefore conceded by Judy that relief
against forfeiture should be granted to the Fullers on appropriate terms.
But the
difficulty about terms arises from the position of Hirestar and was touched on
only in the last minutes of the argument in this court. It does not seem to
have been explored at all in the court below.
But if the
second section 146 notice (or the first) was valid and as Judy had clearly
re-entered to enforce the forfeiture before Hirestar took their lease, the
position was that the Fullers’ lease and legal term in the premises were at an
end by forfeiture and the Fullers merely had an equity to seek relief against
forfeiture when Hirestar entered and took their legal term. But Hirestar were
purchasers of a legal estate without notice of that equity and therefore
Hirestar are not bound by the equity. Any terms for relief against forfeiture must
therefore recognise the priority of Hirestar’s term. As already indicated, Judy
cannot evict Hirestar and equally the Fullers cannot if their lease has been
forfeited and is only now restored by a grant of relief against forfeiture —
albeit the restoration of the forfeited lease by the grant of relief is
retrospective.
The effect,
therefore, of granting relief on the basis favoured by the judge would seem to
be to put the Fullers into the position of immediate reversioners on Hirestar’s
lease. The Fullers would be liable to pay the rent payable under their lease
from the date covered by the last payment accepted by Judy, but they would be
entitled to the rent payable by Hirestar until June 24 1996, when the Fullers’
term will expire and, since relief against forfeiture is retrospective, they
would be entitled to recover from Judy, as moneys had and received, the rent
heretofore received by Judy from Hirestar and the £5,000 premium paid by
Hirestar.
By contrast,
Mr Platford submitted for Judy that any grant of relief against forfeiture to
the Fullers should be on the condition that the Fullers forthwith surrendered
their restored lease to Judy against payment by Judy to the Fullers of the
Fullers’ premium of £30,000 less the unpaid rent to date under the Fullers’
lease and the amount required to carry out the works in the schedule of works
of repair and decoration prepared in 1988 as already mentioned. That was,
however, put forward on the assumption that Judy would be retaining the rent
and premium already paid by Hirestar, to which the rent to be deducted from the
£30,000 would be additional. As to the cost of the scheduled works, the fact is
that Judy has the benefit of Hirestar’s covenant to repair in its lease. Mr
Moger submitted that if the £30,000 were to be payable by Judy to the Fullers,
it ought to carry interest from February 1989.
Apart
altogether, however, from any question of double accounting and excessive
benefits to Judy under Mr Platford’s proposals, it would, in my judgment, be
wrong in principle for the court to grant relief against forfeiture of a lease
on condition that the restored lease is immediately surrendered to the
landlord. The object of relief against forfeiture is the continuation of a
lease and not its extinction.
It may be that
the most satisfactory outcome of these proceedings would be for the Fullers to
surrender their lease to Judy for the appropriate payment. But that must be a
matter for agreement between the parties. It is not for this court, in the
exercise of its powers to grant relief against forfeiture, to make a new
contract between the parties or to impose a price of the court’s choosing on
Judy against Judy’s will.
I would
therefore grant the Fullers relief against forfeiture on the basis indicated by
the judge, with the consequences, as I understand them, which I have indicated.
I would impose no conditions except, like the judge, a condition as to the
payment of costs, namely the costs of these proceedings down to the judgment of
the judge.
Accordingly, I
would allow this appeal and vary the order of the judge.
I would
discharge the injunctions granted by the judge against Judy, since Hirestar
will be remaining in possession of the premises. I would leave, for what it is
worth, the inquiry directed by the judge as to damages sustained by the Fullers
for wrongful entry into the premises and the direction for payment of the sum
found due on the making of that inquiry. But I stress that the entry would have
ceased to be wrongful when forfeiture took place pursuant to the second section
146 notice.
I would grant
the Fullers relief against forfeiture as indicated, subject to the condition
that they pay the costs of these proceedings down to the judgment of the judge.
I would consequently set aside the judge’s order as to costs.
Agreeing, STOCKER
LJ said: I have no comment except to express my gratitude upon the
recitation of the facts contained in the judgment of Dillon LJ, which I have
read in draft.
I also agree
with his conclusion (and that of the learned judge) that there was nothing in
the correspondence to establish the proposition that Graham remained the lessee
and this was the appropriate person upon whom to serve the section 146 notice.
The first notice was invalid, since it was served on Graham and not on the
Fullers, though a copy was sent to the latter. This fact does not render the
copy sufficient service of the notice. It did, however, indicate quite clearly
to them the grounds upon which Judy was intending to forfeit. Moreover, it does
not seem to me that, even paying full regard to the passage cited by Dillon LJ
from the judgment of Lord Russell of Killowen CJ in Horsey Estate Ltd v Steiger
[1899] 2 QB 79 at p 91, those considerations could, on the facts of that case,
have made any difference at all to the position of the Fullers. In so far as
the Fullers either needed to or did consider these matters, they did not
require possession in order to do so — a fortiori where possession would
be useless to them by reason of the refusal of planning permission. I confess
to considerable doubts whether a landlord in possession can ever serve a valid
section 146 notice, since the latter by its terms must presuppose that the
tenants are in possession. None the less, I agree with Dillon LJ that, in all
the circumstances of this case, Judy cannot be said to have been a trespasser
when it forfeited and entered into possession under one or other of the section
146 notices. The breach was irremediable whichever party was in possession at
the time of the notices and no further consideration of that fact by the
Fullers can have altered the position. I therefore agree that the grant of an
injunction, the effect of which was to remove Judy from possession of the
premises, was inappropriate and that this injunction should be set aside. I
also agree that the position as it in fact existed at the date of the trial — viz
that a third party was in possession under a lease protected by Part II of the
Landlord and Tenant Act 1954 — was a further factor which rendered the grant of
an injunction inappropriate.
I would grant
relief from forfeiture on the terms suggested by Dillon LJ, thus creating the
situation to which Dillon LJ has referred. This cannot be disadvantageous to
the Fullers, who cannot themselves make any meaningful use of the premises
having regard to the planning situation. I agree with the order which Dillon LJ
has proposed.
BUTLER-SLOSS
LJ agreed and did not add anything.
Appeal
allowed; plaintiffs to pay one-half of the defendant’s costs of the appeal;
application for leave to appeal to the House of Lords refused.