Judgment
As Approved by the Court
Lord Justice Thomas :
1. On 21 December 2006 Judge Ryland determined at the Central London County Court that the lease of flat 20 Wellesley Court, Maida Vale had been forfeited; he refused World Environment Foundation Ltd (WEF) and Dr Mehra, the defendants to actions in the Central London County Court and appellants in this court, relief against forfeiture. Dr Mehra and WEF appeal by permission granted by Carnwath LJ in relation to their contention that the right to forfeit the lease had been waived and on refusal of relief against forfeiture; they also seek to renew their applications for permission to appeal on other grounds. The factual history of the matters is somewhat tortuous, but it is necessary to set it out as it is of material importance to the appeal on the refusal of relief against forfeiture.
The factual history
(a) The terms of the lease and the acquisition by Dr Mehra
2. The respondents to the appeal and the claimants in the
“not to assign transfer demise underlet or otherwise part with possession of the whole of the Flat
a) without the licence in writing of the Lessor which shall not be unreasonably withheld in the case of a respectable and responsible assignee transferee or underlessee PROVIDED THAT such licence shall be deemed to be reasonably withheld and shall be granted only after the Lessee shall have duly paid to the Lessor all arrears of rent and Service Charge which are payable hereunder and are calculated to the date of such disposition together with the Lessors reasonable legal fees for the preparation and completion of such licence and the ascertainment and collection of such arrears
b) except to a person who before completion of such disposition covenants directly with the Lessor to perform all the Lessee’s covenants by means of a separate Deed of Covenant duly executed and delivered to the Lessor or its Solicitor”
3. In 1994, Dr Mehra acquired the tenant’s interest in the lease.
“IN consideration of the Licence hereinbefore contained the Assignee hereby covenants with the Lessor that during the term created by the Lease he will pay the rents and other payments thereby reserved and observe and perform the stipulations covenants and conditions on the part of the Lessee contained or referred to in the Lease.”
4. Disagreements soon arose between Dr Mehra and
i) In March 1995 Dr Mehra stopped paying the ground rent, the service charge and the insurance.
ii) In April 1998
iii) Subsequently Greenwood obtained an interim charging order in respect of the judgment on Flat 21, Florence Court, Maida Vale which was registered in Dr Mehra’s name; at the trial of the present proceedings Dr Mehra admitted in cross examination that he had avoided the imposition of a final charging order by transferring the flat to a company with which he had a connection.
(b) The assignment to WEF
5. On 3 November 2001 Dr Mehra assigned the tenant’s interest in the lease to WEF. WEF is an English company incorporated in 1998. Its registered office was at first at
i) No information was provided to the trial judge or to this court as to the directors of the company.
ii) As a condition of the permission to appeal granted by Carnwath LJ, WEF was required to file a statement setting out its interest in this appeal. In compliance with this order, a witness statement was signed by Mr Ashok Kapur in July 2007. Mr Kapur, who appeared to be a retired member of the Indian Administrative Service, stated that he was instructed on behalf of the trustees of WEF; he stated (as was the case) that WEF was a charity registered in the
iii) In a letter dated 13 October 2005 (to which I refer at paragraph 17.i) below) Mr Kapur listed the trustees of the English charitable trust known as the World Environment Foundation as Mr John Davidson, 9 Coniston Court, London, W2 2AN and 3 persons resident in India.
iv) The English charity were also connected to an Indian charity (registered in India under the Society Registration Act 21 of 1960) based in New Delhi; the letterhead of World Environment Foundation listed as members of a council or trustees of the Indian charity a number of persons described as holding or having held distinguished positions in India.
v) We were told that none of the trustees of the English or Indian Charity were directors of WEF.
vi) WEF had been founded by Dr Mehra; according to the evidence given at trial, it had very little by way of assets. The judge made a number of findings in respect of WEF (as summarised at paragraph 32 below) including that it was never at arm’s length from Dr Mehra; that Dr Mehra acted for it on many occasions and it was a useful vehicle for him to act through on many occasions.
6. The transfer of the leasehold interest in the flat to WEF was registered with the Land Registry on 7 November 2001 with WEF becoming the registered proprietor. The value of the flat was given as between £100,000 and £200,000.
7. Although it was claimed on behalf of Dr Mehra and WEF that letters had been sent to Greenwood prior to the assignment to WEF, the judge found that no notice was given to Greenwood prior to 30 November 2001, when Greenwood received a notice dated 12 November 2001 telling it that the lease had been transferred and the rent would be paid in the future by WEF.
(c) The action said to constitute a waiver of the right to forfeit
9. On 9 December 2002, that is over a year after the assignment of the leasehold interest to WEF, Dale & Dale, solicitors then acting for
“We are instructed by our above Client regarding the substantial arrears of ground rent and service charges. Our Client has already obtained a Judgment against you for £7750.00 together with further interest from 9.7.2001. The interest amounts to date in the sum of £879.89 and continues at a daily rate of £1.70 until payment of the principle is made. Our Client was also awarded its costs of the action and we will soon be serving upon you our Client’s Bill of Costs. However we estimate those costs to be £12,434.44 which also attracts interest.
Since the issue of the last claim further ground rent and service charges have fallen due in the sum of £10,471.18.
We note that you have ‘sold’ the flat to World Environment Foundation. Our Client cannot accept the purported assignment by reason of your breaches of covenant.
Unless we receive payment from you for all arrears of £18,221.18, interest on the Judgment debt of £879.98 together with some form of security for our Client’s costs, our Client will be left with no alternative other than to take further action against you and your purported purchaser such proceedings will include a claim for forfeiture of the Lease and hence possession of the flat.
May we suggest that you take legal advice regarding this matter.”
10. A copy of that letter was sent to WEF under cover of a letter of the same date which stated:
“We are instructed by our above Client regarding the substantial arrears of ground rent and service charges. We understand that you purported to purchase the above property and have done so without any investigation as to whether there were outstanding any ground rents service charges legal costs or indeed any breaches of covenant.
We enclose a copy of our letter to Dr. Mehra the contents of which we believe are self explanatory. We look forward to hearing from you on this matter by return.”
These letters were relied on as constituting a waiver of the right to forfeit.
11. When WEF responded, Dale & Dale replied on 7 January 2003 as follows:
“As we have already advised you, you appear to have purchased the property without any reference to enquiries from either our Client or it’s Managing Agents regarding breaches of covenant by Dr Mehra, including the substantial arrears that he had incurred.
We therefore have to advise our client to issue proceedings in respect of all arrears outstanding, and would be obliged if you could provide us with confirmation that you either wish us to serve proceedings upon yourself at your address at 1 Northumberland Avenue, Trafalgar Square, London WC2N 5BW, or whether you have Solicitors who are instructed to accept service of proceedings.”
12. On 24 March 2004
(d) The commencement of proceedings
13. On 5 May 2004
i) The proceedings were duly served on WEF which served a defence and counterclaim with a statement of truth signed by Mr SN Aga on 9 June 2004. He also made a witness statement on 17 June 2004.
ii) Various steps were taken during 2004 and 2005 in the action. These included an application to the Court supported by a witness statement signed by Mr SN Aga on behalf of WEF – Mr Aga describing himself as an administrative officer with WEF who had conduct of the matter on behalf of WEF; the parties reached an agreement on directions which was given effect by an order of 15 March 2005 fixing a trial date of 30 June 2005.
iii) An application was made by WEF to vacate the trial date fixed for 30 June 2005. The application notice and the statement of truth put forward by WEF were signed by Lora Janice, the company secretary. The application was also supported by a witness statement signed by Dr Mehra in which he stated he had been one of the founders of WEF and that his wife was one of the trustees; he stated that the action had been conducted in house on behalf of WEF by an officer with a law degree; solicitors, HL Miller & Co, had since been instructed who had advised that there was a substantial defence. On 30 July 2005, at a hearing where
(e) The assignment by WEF to Dr Mehra
14. On 4 July 2005, WEF assigned its interest back to Dr Mehra:
i) The assignment was signed by Dr Mehra on his own behalf and on behalf of WEF.
ii) On 4 July 2005, Dr Mehra wrote to the Land Registry stating that as the landlord had refused consent, the transfer of the flat to WEF made by him as a donation could not take effect; WEF had no interest in the property and wished the Registry to reverse the entry. The forms accompanying the letter valued the flat at £130,000.
iii) The transfer was registered at the Land Registry on 6 July 2005. Dr Mehra was registered as the proprietor.
iv) Dr Mehra informed
v) It was claimed before the trial Judge, without production of the documents set out in the following subparagraphs that, as Dr Mehra had not gone out of occupation and as the lease had been transferred back to Dr Mehra, there had been no assignment to WEF. He gave evidence that WEF was not prepared to have any interest in it and had written to the Land Registry to say it was not prepared to accept the gift. The judge rejected the contention that there had been no assignment to WEF; he held there had been a valid assignment in November 2001; Dr Mehra had intended to leave the UK and go and live in India as he had done; the assignment had been properly registered. It was not a sub-letting. The judge also held that there was an assignment back to Dr Mehra in 2005 which had been duly registered. There was no appeal from these findings.
vi) Paragraph 10 of the statement signed by Mr Kapur in July 2007 and sent directly to this court on 9 July 2007 gave an explanation of the assignment:
“The charity discussed the terms of the notice with the Defendant no. 2 [Dr Mehra]. It was agreed that the breach, if at all, should be remedied and the property re-assigned to Defendant no. 2 on the undertaking by D2 that the charity will be entitled to the proceeds of the rent accruing from the flat.”
A further, but unsigned version of the statement of Mr Kapur in the bundle was provided to this Court by WEF; we were told that this was in fact signed and dated 13 August 2007. It contained the following further sentences in paragraph 10:
“The charity agreed to the re-assignment on the pre-condition that Def. no. 2 shall continue to pay to the Deft No 1 [WEF] the full rent. This was done through a proper written agreement. Evidence in support of averment made by charity is attached, in the form of a copy of the bank statement showing full deposit of the rent, of £1126.66 in respect of last month’s rent.”
vii) At a directions hearing before me on 17 October 2007, counsel for
viii) On 5 November 2007, Mr Kapur e-mailed to
“6. It was finally agreed between the parties that
i. the second party [WEF] shall transfer the property back to the first party [Dr Mehra] to remedy the breach.
ii. the first party shall hold the property in trust for the second party and approach the landlord for grant of the lease before transferring it to the second party.
7. This agreement said Dr Madhav Mehra, first party, confirms that he understands that the property is held by him in trust on behalf of the World Environment Foundation and that he has no beneficial interest in the property. The property continues to be owned by the second party and the second party is entitled to receive all the rent accruing from the property.
8. The first party will ensure that the rent collected continues to be credited into the account of the World Environment Foundation, the second party.”
ix)
(f) The attempt to appeal against the consent judgment
15. Dr Mehra then sought to appeal the consent judgment entered on 9 July 2001, as set out in paragraph 4.ii).
i) On 22 August 2005, Dr Mehra served a notice of appeal on the basis that he had been forced into the settlement by his lawyers.
ii) Permission to appeal was refused on paper by Eady J on 10 February 2006. Dr Mehra sought an oral hearing. Because numerous adjournments were obtained by Dr Mehra, it was not until 6 June 2006 that the renewed application for permission to appeal was heard. In refusing permission Collins J observed:
“It is clear beyond any doubt whatever that there is no conceivable merit in this appeal …. I am singularly unimpressed with the manoeuvres of Dr Mehra to try to avoid attending hearings. Enough is enough, this must be brought to an end and this application for permission to appeal is dismissed with costs.”
iii) Dr Mehra did not initially accept the order of the Judge refusing permission to appeal. He sought to make further challenges but abandoned his application for permission to appeal subsequently and he paid £7,750, but without the interest due on it. During the course of the trial of these proceedings, he told the court there was a possibility he might seek to resurrect the appeal.
16. Dr Mehra commenced proceedings in the Leasehold Valuation Tribunal asking the Tribunal to consider the service charges on flat in the period 1994 – 2005. He failed in his claim and stated during the trial of these proceedings that he intended to appeal to the Lands Tribunal.
(g) The course of the proceedings for possession
17. The proceedings commenced by
i) Although WEF had been represented by counsel when the judge on 30 June 2005 ordered the trial be adjourned to October 2005, Mr Kapur stated in his witness statement signed in July 2007 that WEF whom he called “the charity” had only learnt on 13 October 2005 that the matter had been listed for hearing that month; that the charity had contacted the court, told the court it had no knowledge of the proceedings and requested an adjournment; it asked that copies of all the correspondence be sent to the charity in India as that was where most of the trustees were located. He confirmed his conversation in a letter to the court on the same day (13 October 2005) which he copied to Howard Kennedy, the solicitors acting for
ii)
iii) In a subsequent letter to Howard Kennedy on 31 October 2005, Mr Kapur stated that the trustees had had no knowledge of the proceedings and Mr Aga had not been authorised by the trustees to represent them.
iv) On 16 February 2006
v) At a case management conference in the second action heard on 13 June 2006 letters from WEF and Dr Mehra were before the court but neither attended. The District Judge ascertained that the registered office of WEF shown in Companies Registry was at
vi) On 12 July 2006 WEF made an application to the court to dismiss the claim in the second action on the basis that it was an abuse of process or alternatively the case be transferred to the defendant’s home court,
vii) On 16 August 2006 the District Judge held a further directions hearing, this time in both actions. There were written submissions from WEF dated 15 August 2006; Dr Mehra was present to represent himself. The Judge dismissed WEF’s application of 12 July 2006, consolidated the actions and she fixed the trial for two days on 26 October 2006. The usual further directions for the service of skeletons and the agreed bundle were made. The judge ordered WEF to pay
viii) On 21 August 2006, Dr Mehra wrote to the Court making various complaints about the conduct of the case, seeking to have the claim dismissed or alternatively the trial date adjourned.
x) On 13 October 2006 WEF made a formal application to adjourn the trial and sought further directions; the application notice and the statement of truth was signed by an unidentified person described as “administrator”. The address for service was the Potters Bar address. The statement of case set out in the application notice stated that WEF was unable to attend the hearing on 16 August 2006 as it had received no response to the application for transfer to its home court; when it received the order fixing the trial date, WEF had sought directions, but none had been made and it would be unfair to proceed to trial.
xi) In the statement made by Mr Kapur in July 2007 (made in the circumstances to which I have referred), he claimed that in the period after October 2005 he had telephoned the court and left messages for the partner at Howard Kennedy; that he was given the impression that Greenwood had abandoned the matter. It was only on 20 October 2006 that he learnt from Dr Mehra that the case was listed for hearing on 26/27 October 2006. He explained in the statement that the registered address in
xii) It was clear from the evidence of Dr Mehra at the trial, that the address of WEF’s registered office in Potters Bar was a house registered in the name of Dr Mehra’s son but at which Dr Mehra lived whilst in
xiii) It is impossible to understand how a contention could be advanced that the actual defendants, WEF, did not know of the proceedings. Counsel for WEF who was directly instructed by WEF and who had Mr Kapur present in this court to give instructions was unable to explain the basis on which the actual defendants, WEF, could advance such a contention, given the service of the documents on their registered office and their active participation in the proceedings.
(h) The refusal of the application to adjourn the trial in October 2006
18. The application to adjourn was referred to the trial Judge to be heard on the date fixed for trial, 26 October 2006.
i) WEF and Dr Mehra instructed Mr James Browne of counsel, under the Bar’s direct access scheme, to represent them solely in respect of the application for an adjournment on 26 October 2006.
ii) On instructions from WEF, Mr Browne submitted that WEF’s trustees had little knowledge of the claim. They had told
iii) Detailed arguments were then advanced to the judge as to why WEF and Dr Mehra were not in a position to defend, that further pleadings were needed and why more information was needed.
iv) The judge dismissed the application. He went through the history of the matter since 2004 (which I have outlined). He concluded that he was satisfied WEF was perfectly well aware of the proceedings. He was satisfied that Dr Mehra and WEF were intimately intertwined on the basis of the evidence before him and that WEF was perfectly well aware of the state of the proceedings brought by Greenwood against it; it was inconceivable that WEF had no knowledge. He was also satisfied, when the District Judge made the order fixing the trial date, Dr Mehra recognised that the trial was to be on 26 October 2006. His actions since then had been a cynical attempt to try and bypass proper procedures. There was no prejudice to WEF or Dr Mehra that justified an adjournment; WEF and Dr Mehra had ample time to prepare for trial.
(i) The trial and the order made by the judge
19. Mr Browne then withdrew with the permission of the judge; he acted with complete propriety, as his instructions had been limited to applying for an adjournment. Dr Mehra represented himself. As a result of the limitation of Mr Browne’s instructions and WEF’s decision not to appear by anyone else, WEF was not represented at the trial. It did not seek to make written submissions.
20. As I have set out, the judge concluded that there had been no waiver and refused relief against forfeiture. His reasons for so doing were set out in a written judgment sent to the parties on 27 November 2006; it is more convenient to consider his reasons when considering the two grounds of appeal. There was a further hearing on 21 December 2006 when the court made the orders consequent upon the judgment; possession of the flat was to be given to
21. The hearing of this appeal was delayed by attempts on behalf of the appellants to put off the hearing; it became necessary to hold the hearing for directions to which I have referred.
The first ground of appeal: waiver
22. It is clear that
23. The judge held that there had been no waiver.
i) As set out at paragraph 8,
ii) He considered the letters of 9 December 2002 and 7 January 2003 to WEF, set out at paragraphs 10 and 11 above (but not the letter to Dr Mehra set out at paragraph 9 enclosed with the letter to WEF of 9 December 2002) and held that they did not amount to a waiver of the forfeiture of the lease. In so doing, he relied upon a passage at paragraph 91 in the judgment of Neuberger J (as he then was) in Yorkshire Metropolitan Properties Ltd v Co-operative Retail Services Ltd [2001] L&T R 26 as constituting the relevant test for waiver. Neither letter was “so unequivocal that when considered objectively it could only be regarded as being consistent with the lease continuing”.
iii) As Mr Luba QC correctly pointed out, on behalf of Dr Mehra, waiver constituted by the letter to Dr Mehra on 9 December 2002 was also pleaded, but not dealt with by the judge. It is quite understandable why, given all the points that were being run in this case by Dr Mehra (to which it has not been necessary to refer), the judge omitted to deal with this particular point.
24. The first and principal submission made by Mr Luba QC was that if the letter of 9 December 2002 to WEF was read with the letter to Dr Mehra, it was clear that a demand for rent was being made; a demand for rent was not subject to the test relied on by the judge (as set out in Yorkshire Metropolitan Properties), but was in itself an act which had exactly the same effect as the receipt of rent, namely the strict rule that it operated as a waiver. If the judge had approached the case in this way and applied the strict rule, he would have decided that there had been a waiver. The second submission made by Mr Luba QC was that even if the demand for rent was not to be equated to the receipt of rent and the strict rule applied, nonetheless the two letters read together satisfied the general test for waiver as the demand was so unequivocal that when considered objectively it could only be regarded as being consistent with the lease continuing.
25. Before addressing the two submissions advanced by Mr Luba QC on behalf of Dr Mehra and adopted by Mr Browne for WEF, it is necessary to set out matters that are common ground:
i) In December 2002,
ii) It is clear that even though
iii) If the letter sent to Dr Mehra on 9 December 2002 had not been copied to WEF, it could not be argued that the demand made of Dr Mehra in the letter would constitute a waiver; no demand for rent would in those circumstances have been made of the actual lessee.
26. The first submission was founded on the proposition that an unqualified demand for rent had the same effect as the acceptance of rent and that therefore the strict rule applicable to the payment of rent applied to the demand. In two first instance decisions in the Queen’s Bench Division, that of Sachs J in Segal Securities v Thoesby [1963] 1QB 887 and that of Swanwick J in David Blackstone Limited v Burnetts (West End) Limited [1973] 1 WLR 1487 at 1496-8, it was held that an unambiguous demand for future rent, made after knowledge of the breach, operated in the same way as the receipt of rent so as to amount to an election to treat the tenancy as continuing and constituted a waiver. Both these decisions were arrived at after a careful review of various observations going back to 1836 when Parke B had expressed a similar view in Doe d.Nash v Birch 1 M&W 402. There is no authority in this court or the House of Lords approving those decisions and the point is therefore open in this court, though views have been expressed in this court. In Central Estates (Belgravia) v Woolgar (No2) [1972] 1 WLR 1048, Buckley LJ expressed the view that a demand for rent could only be done consistently with the continuation of a tenancy, but Cairns LJ assumed that a demand did not by itself effect waiver. In Expert Clothing Services and Sales v Hillgate House [1986] Ch. 340, Slade LJ (with whom the other judges agreed) assumed the first instance decision holding that a demand for rent operated in the same way as receipt of rent to be correct without deciding the point. In Thomas v Ken Thomas Ltd [2006] EWCA Civ 1504 ([2007] L&TR 21) Neuberger LJ observed that a subsequent demand for rent was a classic way in which a landlord could waive the right to forfeit.
27. Although therefore this appeal would give this court an opportunity to decide the point that has for so long remained undecided, it seems to me that in the circumstances of the present case that, as in Expert Clothing, I can proceed on the assumption that an unqualified demand for future rent will operate a waiver and the strict rule applicable to receipt of rent is applicable; it is not necessary, in my view, to determine whether the two first instance cases were correctly decided. I shall assume they were.
28. It seems to me right to do so, as this appeal can be decided on this assumption as to the law, by reference of the specific terms of the letters of 9 December 2002 to Dr Mehra and the letter to WEF, without examining the more general issue. There are two reasons why this is so. First, if the letters are read together, as they must be on the appellants’ case, it is clear that no demand for the payment of rent was made of WEF, which at that time was the tenant under the lease. The terms of the letter to WEF made no demand of WEF for rent; it merely required an explanation. The demand made of Dr Mehra was for payment of the judgment, interest and costs in respect the action commenced against Dr Mehra in April 1998; these were amounts due solely from Dr Mehra. The demand for the unpaid rent and service charges (which plainly included sums due after the assignment) were also only made of Dr Mehra; if he had any liability after the assignment that was a liability under the licence agreement set out at paragraph 3; he was not liable as the tenant under the lease as he had ceased to be the tenant.
29. Second, the letters read as a whole are not in any event an unequivocal demand to pay rent. What the letter to Dr Mehra said was that, unless the sums enumerated in the letter (which included the unpaid judgment sum, interest and costs of the first action against Dr Mehra) were paid, proceedings which would include a claim for forfeiture, would be taken. The letter made it quite clear that it was only on payment of the rent that the landlord would accept the tenancy as continuing. It was therefore not even an unequivocal demand.
30. For these reasons therefore, I cannot accept the first submission made by Mr Luba QC. As to the second submission, it was common ground that the right approach, if there is no special rule as to demands for rent, is for the court to consider objectively whether in all the circumstances the act relied on as constituting waiver is so unequivocal that when considered objectively it could only be regarded as being consistent with the lease continuing. However, for the reasons I have already given, the letters could not from their terms be regarded as satisfying this test. In my view therefore the appeal on waiver of the right to forfeit fails and it becomes necessary to consider the appeal against the refusal of relief against forfeiture.
The second ground of appeal: relief against forfeiture
31. The judge approached the issue of relief against forfeiture on the basis of a passage in the speech of Lord Wilberforce in
“It remains true today that equity expects men to carry out their bargains and will not let them buy their way out by uncovenanted payment. But it is consistent with these principles that we should reaffirm the right of courts of equity in appropriate and limited cases to relieve against forfeiture for breach of covenant or condition where the primary object of the bargain is to secure a stated result which can effectively be attained when the matter comes before the court, and where the forfeiture provision is added by way of security for the production of that result. The word “appropriate” involves consideration of the conduct of the applicant for relief, in particular whether his default was wilful, of the gravity of the breaches, and of the disparity between the value of the property of which forfeiture is claimed as compared with the damage caused by the breach.”
i) Dr Mehra was never at arm’s length from WEF; he always knew what was going on in WEF and was identified very closely with it.
ii) WEF was in possession of most of the information available to Dr Mehra at all material times; Dr Mehra acted on behalf of WEF on many occasions and WEF was a useful vehicle for him to act through on many occasions.
iii) Both Dr Mehra and WEF had acted in a wilful manner with regard to making the assignment of the flat from Dr Mehra to WEF without seeking the consent of
iv) Dr Mehra had made himself un-amenable to any judgment being enforced against any property that he owned in this country or abroad. Dr Mehra had accepted that he had two homes in
v) The course of events demonstrated woefully wilful and bad behaviour with regard to Dr Mehra’s tenancy; he had acted without any regard for the rights of
vi) The re-assignment compounded the bad behaviour of Dr Mehra as a tenant, as the re-assignment to Dr Mehra was effected without WEF seeking consent from
vii) He had acted extremely badly as a tenant, disobeyed and flouted court orders; he had caused
viii) There was no valuation of the flat before the court. The value of the flat in 2005 had been £130,000 as valued by Dr Mehra and it had probably increased in value slightly since then. The judge concluded it was worth £150,000. The costs of the action would be extremely substantial; prior to assessment they stood at £95,000. Interest on the consent judgment was £3,288; there were unpaid service charges and ground rent amounting £19,941. These totalled £118,000; there were in addition the costs of the appeal from the Leasehold Valuation Tribunal to the Lands Tribunal and the costs of the probable appeal in the present case. There was no substance in any of Dr Mehra’s counterclaims against
ix) He concluded that, although there might be a windfall to Greenwood on the figures as they stood at that time, judging by the history there would be further costs incurred in an appeal and therefore in fact little by way of windfall.
x) WEF had breached the covenant against assignment; WEF could not apply for relief against forfeiture as it had transferred its interest to Dr Mehra and that had been registered.
This was a case where he was quite satisfied it would be inequitable to grant relief from forfeiture. It was not a case to grant relief on terms the flat was sold immediately with the proceeds being used to discharge Dr Mehra’s liabilities and any residue being paid to him, as had been considered in Khar v Delmounty (1996) 75 P&CR 232. This was because there was unlikely to be a substantial windfall, it would cause delay (and hence further cost) and in any event Dr Mehra’s conduct had been so bad as to merit refusing relief. After the judgment had been handed down, but a day or two before the hearing on 21 December at which the order was drawn up, Dr Mehra sent to the court a letter from estate agents in Maida Vale to Mr SN Aga recommending he market the flat for £279,950; the letter made it clear that this was not a valuation.
33. Mr Luba QC’s submission that the judge was wrong and should have granted relief was advanced on a number of grounds. First it was said that the judge had not had regard to Section 146(2) of the Law of Property Act 1925:
“… the court may grant or refuse relief, as the court, having regard to the proceedings and conduct of the parties under the foregoing provisions of the section, and to all other circumstances, thinks fit; and in case of relief may grant it on such terms, if any, as to costs, expenses, damages, compensation, penalty, or otherwise, including the granting of an injunction to restrain any like breach in the future, as the court, in the circumstances of each case, thinks fit.”
Although the judge had referred to the passage in Lord Wilberforce’s judgment, he had approached the exercise of his discretion on the wrong basis, as he had approached the matter on the basis that relief could only be given where there had been wilful breach in “exceptional” circumstances. The judge should have approached the exercise of his discretion more broadly applying the general discretion given to him by s.146(2) in accordance with the principles emphasised by Earl Loreburn in Hyman v Rose [1912] AC 623 in respect of the statutory predecessor of s.146(2). In that case in the Court of Appeal, Cozens-Hardy MR ([1911] 2 KB 234 at 242), whilst acknowledging that statute conferred a wide discretion, had thought it helpful to lay down some general principles according to which the discretion should be exercised. Earl Loreburn disagreed (page 631):
“I desire in the first instance to point out that the discretion given by the section is very wide. The court is to consider all the circumstances and the conduct of the parties. Now it seems to me that when the Act is so express to provide a wide discretion, meaning, no doubt, to prevent one man from forfeiting what in fair dealing belongs to someone else, by taking advantage of a breach from which he is not commensurately and irreparably damaged, it is not advisable to lay down any rigid rules for guiding that discretion. I do not doubt that the rules enunciated by the Master of the Rolls in the present case are useful maxims in general, and that in general they reflect the point of view from which judges would regard an application for relief. But I think it ought to be distinctly understood that there may be cases in which any or all of them may be disregarded. If it were otherwise the free discretion given by the statute would be fettered by limitations which have nowhere been enacted. It is one thing to decide what is the true meaning of the language contained in an Act of Parliament. It is quite a different thing to place conditions upon a free discretion entrusted by statute to the Court where the conditions are not based upon statutory enactment at all. It is not safe, I think, to say that the Court must and will always insist upon certain things when the Act does not require them, and the facts of some unforeseen case may make the Court wish it had kept a free hand.”
34. Mr Luba QC then submitted that the judge had failed to approach the exercise of the discretion in accordance with these general principles; a number of specific arguments were advanced.
i) Forfeiture was a draconian response and should be avoided by the grant of relief wherever possible; it should only be available in circumstances where no other remedy was available. Alternative remedies were available to the judge in this case. The damage to
ii) In coming to the decision whether to grant forfeiture, the judge had given undue prominence to the question of whether Dr Mehra’s breach had been wilful. Though the fact that the breaches were wilful was a matter to be taken into account, the judge had paid inordinate attention to that and too little attention to the windfall that
iii) The judge had failed properly to balance the alleged losses sustained by
iv) The judge had accepted without enquiry the sum of £95,515 as being the legal costs of
v) The judge had failed to have regard to the fact that Dr Mehra had in fact remedied the breach by restoring the flat to himself.
vi) As the judge had concluded that Dr Mehra was of limited means, the trial judge had wrongly deprived him of the opportunity to sell the property in order to repay
35. In approaching the matter, it is important to bear in mind that the judge was exercising a discretion. As Lord Simon of Glaisdale said in
“It is only if there has been a misdirection (in fact or in law) or if the exercise of the discretion is “plainly wrong” (which means, I think, that no reasonable tribunal could exercise the discretion in such a way) that the appellate court is entitled to interfere.”
36. I cannot discern any error of principle or misdirection in the approach of the judge. He described the case as “exceptional in many ways”, as indeed the long history of the tenancy and the manoeuvres of Dr Mehra demonstrate. He did not proceed on the basis that only in exceptional cases could relief be granted against a wilful breach. He looked at all the circumstances relating to the history of the tenancy, the breach, the conduct and the financial effects. He approached the matter on the basis that he was exercising a broad discretion. There is therefore no basis for interfering in the exercise of the judge’s discretion on the ground that he misdirected himself or erred in principle in his approach.
37. It is important to bear in mind that this was not a case simply about unpaid money; I do not accept that this was a case where the breaches had purely financial consequences which Dr Mehra could remedy.
38. The judge plainly had regard to the issue of proportionality; he carefully evaluated the evidence of the value of the flat; Dr Mehra produced no valuation to the court. In fact Dr Mehra confirmed in his evidence that the value of the flat in July 2005 had been £130,000; the judge was therefore entitled on the evidence to conclude that its value just over a year later was £150,000. There was no basis on which the judge should have taken the letter of 16 December 2006 from the estate agents into account; it was not a valuation and was provided long after the judge had made his judgment available to the parties. The judge also carefully examined the very significant sums owed to
39. I do not consider that any regard should be had to the evidence produced by Mr Kapur, including the document dated 4 July 2005 purporting to create a trust of the tenancy in favour of WEF. It was not produced at trial and there is no basis to admit that evidence in this court, particularly where there is a strong argument as to whether the document is what it purports to be.
40. The judge carefully considered whether he should order the sale of the flat on terms similar to those in Khar v Delmounty; he gave clear reasons for his decision not to do so. Given the long history of Dr Mehra’s conduct, his attempts to evade the enforcement of courts order and the other matters to which the judge referred, the judge was entitled to exercise the discretion in the way he did.
41. I therefore conclude that the judge was entirely within the proper bounds of his discretion in coming to his decision to refuse relief. When the actions of Dr Mehra and WEF, the loss they would sustain, the benefit to
42. I would therefore dismiss the appeal on both grounds. There remain the renewed applications for permission.
The application for permission to appeal in respect of the refusal to adjourn the trial
43. It was argued both on behalf of Dr Mehra and separately by Mr Browne on behalf of WEF that the judge had wrongly refused to adjourn the trial. I have already set out the facts leading to the application to adjourn.
44. In my view, the renewed application is totally without merit and should be refused. In the light of the history of the proceedings which I have set out and the findings of the judge, including those in relation to the claim for the relief against forfeiture, it is impossible to contend that WEF knew nothing about the case between October 2005 and October 2006. It is clear that WEF knew precisely what was going on, that the documents were served on the registered office and that the registered office at the address at Potters Bar was no accommodation address, as it was in fact a home used by Dr Mehra. The contention advanced to us by Mr Browne on behalf of WEF that the documents should have been served on the trustees of WEF whom Mr Kapur also purported to represent was untenable; WEF was a company registered in this jurisdiction, the documents were served on the registered office and WEF responded, even making an application on 12 July 2006 to dismiss the claim. No material was produced to this court explaining any of this, save the assertion that Mr Kapur and the trustees in India did not know; it is difficult to see how the conduct of those who responded to the claim and made the application on behalf of WEF could be explained as being without the authority of WEF on a basis that was consistent with honesty on the part of Dr Mehra. The judge was absolutely right in refusing the application for an adjournment on that ground.
45. The application was also advanced on the basis that the defendants did not have time to prepare for the trial and the bundles had been served late; this was merely a continuation of the numerous attempts made by Dr Mehra to prevent the claim coming to trial. It had no merit.
The application for permission to appeal in respect of the orders on costs
46. Dr Mehra also sought permission for permission to appeal against the order of the judge that he should pay the costs of both actions.
47. It is accepted on his behalf that, as the actions were consolidated, it was within the judge’s jurisdiction to do so, but it was submitted that the judge was wrong in the exercise of his discretion. It seems to me quite clear on the findings made by the judge and which were entirely open to the judge on the evidence, that the order made by the judge was entirely a proper one.
48. Once he had concluded that there was a close relationship between Dr Mehra and WEF and once he also had concluded that Dr Mehra had been engaged in a cynical attempt to make himself judgment-proof, it was entirely within his discretion to make the order that he did. This application is also, in my view, totally without merit and this renewed application should also be refused.
Lord Justice May
49. I agree.
Lord Justice Pill
50. I also agree.
