Hammersmith and Fulham London Borough Council v Bulitron Management Ltd

  The Application   I have before me an application by the Claimant, the London Borough of Hammersmith and Fulham under CPR Part 8 for permission under the Leasehold Property (Repairs) Act 1938 (“the Act”) to bring forfeiture proceedings against the Respondent, Bulitron Management Limited for breaches of a repairing covenant under a Lease dated 16 July 1981 (“the Lease”) in respect of premises known as 239 Uxbridge Road, London, W.12 (“the Premises”).   Background   The background to the application can be shortly stated. By the Lease, the Claimant let the Premises to the Respondent for a term of 30 years and 9 months from 30 September 1980. The Premises are presently occupied by a number of sub-tenants and/or licensees of the Respondent.   On 24 September 2002, the Claimant served on the Respondent a Notice under Section 146 of the Law of Property Act 1925 setting out certain breaches of covenant by the Respondent, including  breaches of the covenant to repair. In response thereto, the Respondent served a Counter Notice dated 10 October 2002 claiming the benefit of the Act.   On 30 January 2004, the Claimant issued forfeiture proceedings (“the First Proceedings”) for arrears of rent and other like breaches but not for breach of the covenant to repair. The witness statement of Mr Adam in support of the First Proceedings mentions the breach of repairing covenant but states that the Claimant is not yet making an application for permission under the Act to forfeit on that ground.   The First Proceedings are defended by the Respondent. However, in its Defence dated 22 March 2004, the Respondent admits the arrears of rent and to that extent the claim for possession of the Premises. The Respondent claims relief from forfeiture under Section 138 County Courts Act 1984. Pleadings have now closed in the First Proceedings and a Case Management Conference in the First Proceedings was adjourned pending determination of the application before me. In the event that I grant permission to the Claimant to initiate forfeiture proceedings for breach of covenant to repair, it is common ground that the proceedings should be consolidated with the First Proceedings.   The Claimant’s Part 8 application was issued on 7 September 2004.   On 26 November 2004, the Respondent applied for an order striking out the application on the grounds that the Claimant was not entitled to commence proceedings to forfeit the Lease for breach of covenant to repair as it had already forfeited the Lease by the issue and service of the First Proceedings.   The Respondent’s strike out application came before District Judge Nicholson in the West London County Court on the 20 December 2004. On 7 April 2005, District Judge Nicholson dismissed the Respondent’s application but adjourned the Claimant’s application for permission under the Act to a 2 day hearing with cross examination of experts.   On 8 July 2005, HHJ Medawar QC in this Court made an order listing the application for permission without attendance of witnesses with a time estimate of one day. Following HHJ Medawar’s order (dated 11 July 2005), the parties agreed a Joint Scott Schedule of Dilapidations in respect of the Premises. According to this Schedule, works amounting to £183,402 are required to be carried out by the Respondent to meet its repairing obligations under the Lease. Accordingly, the application comes before me under Part 8 without any witnesses attending.   The Issue    The issue before me is a short one, namely whether the Claimant should be granted permission under Section 1(3) of the Act to issue forfeiture proceedings on the ground of breaches of covenant to repair in circumstances where it has already issued and served the First Proceedings claiming forfeiture on the ground of arrears of rent.    The issue raises two questions:   what is the effect of the issue and service on the Respondent of the First Proceedings?   whether, having issued and served on the Respondent the First Proceedings, the Claimant is nonetheless entitled to seek permission under the Act to forfeit the Lease?     The Claimant’s case   The Claimant, represented by Ms Townsend, contends that the issue and service of the First Proceedings does not prevent the Claimant from now seeking and obtaining permission from the Court under Section 1 of the Act to issue further proceedings for forfeiture relying on the breaches of repairing covenant.   Ms Townsend’s submissions, set out in a helpful and concise skeleton argument, may be summarised as follows:   the breaches of repairing covenant existed prior to the issue of the First Proceedings and were included in the Section 146 Notice served on the Respondent on 24 September 2002.   between service of the First Proceedings and the Court granting forfeiture, the parties are acting in what is known as the “twilight period”  (per Associated Deliveries v Harrison [1985] P&CR 91) during which the Lease is treated as at an end for some purposes but not all. Whilst service of a writ claiming forfeiture is an unequivocal election by the landlord to forfeit the lease, it does not by itself determine the lease. The lease remains in existence albeit that if the defences fail and the claim for relief from forfeiture is unsuccessful, then the forfeiture will be treated as having taken effect on the service of the writ. See Lord Templeman in Billson v Residential Apartments [1992] 1 AC 494 at 540D-F, and Sir John Vinelott in Ivory Gate Limited v Spetale & Ors (CA) reported 24 April 1998. An obvious example of the position in the `twilight period’, Ms Townsend contends, is the tenant’s right to apply for relief from forfeiture even where the Landlord has physically recovered possession of the premises (to which the issue and service of proceedings is comparable).   the Claimant’s case is supported by the decision of Judge Paul Baker QC in Baglarbasi v Deedmethod Ltd [1991] 2 EGLR 71 where the Court held that a landlord’s Section 25 notice was valid notwithstanding the existence of valid forfeiture proceedings (see, in particular, the Learned Judge’s reasoning at p 72 L-M; p73B-C)   if the Defendant is correct then there are two consequences, neither of which can have been intended:                                                                 i.      a landlord is required in every case to seek and obtain permission to forfeit under the Act before issuing and serving proceedings to forfeit for those breaches for which permission is not required; and                                                               ii.      critically, if the Defendant is successful in obtaining relief from forfeiture in the First Proceedings, the Claimant can thereafter seek permission to forfeit for breach of the repairing covenants. In other words, the Claimant is not barred from seeking permission to rely on these breaches; it must simply wait for the First Proceedings to take their course. Accordingly, there will be an unnecessary duplication of proceedings and there can be no unfairness to the tenant in permitting the landlord to issue forfeiture proceedings whilst the First Proceedings are on going.   finally, Ms Townsend contends that before preventing the Claimant from bringing forfeiture proceedings, the Court should expect the citation of clear and relevant statute or authority and there is neither.   The Defendant’s answer   The Defendant, represented by Mr Fieldsend, makes five short points  in answer in his equally helpful skeleton:   the issue and service of a claim for possession has precisely the same effect as a re-entry; the lease in each case is thereby immediately terminated. Billson v Residential Apartments (ibid) at 535G; Canas Property Co Ltd v KL Television Services Ltd (1970) 2 QB 433; GS Fashions Ltd v B&Q Plc and others [1995] 1 EGLR 62.   having elected to terminate the lease by the issue and service of the claim for possession in the First Proceedings, it is no longer open to the Claimant to seek the Court’s permission, in effect, to re-forfeit the Lease. There is simply no Lease to forfeit.   the bringing of the Part 8 Claim is wholly inconsistent and incompatible with the election made by the Claimant in bringing the First Proceedings and with it the determination of the Lease.   in light of the decision in  Billson v Residential Apartments, the view expressed by Judge Paul Baker in Baglarbasi v Deedmethod Ltd can not stand and, indeed, Mr Justice Lightman  in GS Fashions (at 64F) has said as much, and   finally, in the First Proceedings the Respondent has acknowledged the lawful forfeiture of the Lease. The obtaining of relief from forfeiture by the Respondent does not affect the validity or effect of the original forfeiture. In short, unless and until the Lease is reinstated, the Claimant is not entitled to seek to forfeit the Lease.      Judgment    Ms Townsend is correct that there is no authority directly on the point before me.   Moreover, she is right that the result contended for by the Respondent is both unattractive and technical, in the sense that were the Claimant seeking to rely on any other breach of covenant to forfeit, (ie, on one that did not require the Claimant to seek the Court’s permission before so doing), the Claimant could simply amend the First Proceedings to add the further breach(es) provided such breach(es) existed prior to the issue of the First Proceedings, and could rely on such breaches as additional grounds for forfeiting the Lease. Moreover, the Court is entitled in any event to take into account the breaches of repairing covenant in exercising its discretion to grant the Respondent relief from forfeiture in the First Proceedings. In short, the Respondent can not avoid the claim for breach of repairing covenant for ever. If the Respondent is correct, the Claimant simply can not bring those proceedings now.   However, the starting point in the present application must be the wording of Section 1(3) of the Act itself. Section 1 (3) provides   1(3) Where a counter-notice is served by a lessee under this section, then, notwithstanding anything in any enactment or rule of law, no proceedings, by action or otherwise shall be taken by the lessor for the enforcement of any right of re-entry or forfeiture under any proviso or stipulation in the lease for breach of the covenant otherwise than with the leave of the court’ (emphasis added)   In the present case, the Claimant has already issued and served the First Proceedings seeking to forfeit the Lease for arrears of rent. By so doing, the Claimant has made an unequivocal election to forfeit the Lease from which it can not now resile unless it discontinues the First Proceedings and/or waives the forfeiture. Authority for this can be found in the judgment of Younger J in Wheeler v Keeble (1914) Ltd [1920] 1 Ch 57.   In Wheeler v Keeble, the plaintiffs issued a writ to forfeit a lease, claiming possession of the premises and damages for breaches of covenant contained in the lease. The plaintiffs thereafter sought an injunction to restrain the defendant from erecting certain lettering at the front of the premises in breach of the covenants contained in the lease. The question arose whether the landlord could enforce those covenants having already issued a writ to forfeit the lease. Citing Jones v Carter (1846) 15 M&W 748 and an earlier authority of Birch v Wright (1786) 1 Durn v E 379, Younger J stated   `It seems to me that no change has been made by subsequent procedure in the principles that are laid down by these two cases and that accordingly, it is not permissible for the plaintiffs in this action-based as it is on the determination of the lease- either in a writ itself or in any proceedings subsequent to the writ to claim relief on the footing that the lease is a subsisting lease, the terms of which continue to be binding on the defendants……’   The remedy available to the Landlord for deterioration of the premises or other ills while the lessee remains in occupation during `the twilight period’ is a claim in tort and/or in appropriate cases damages for wrongful occupation of the land. The decision in Wheeler v Keeble has been approved by the Court of Appeal in Associated Deliveries v Harrison [1985] P& CR 91.   Although Lord Templeman in Billson v Residential Apartments Limited (at 534 D-F and 535G) expressed the view that the legal effect of the issue and service of forfeiture proceedings was the determination of the lease and not merely an unequivocal election to determine, it is not necessary to go that far for present purposes. Further, in my view, the issue and service of a writ claiming forfeiture is best analysed in terms of an unequivocal election to forfeit as opposed to an act putting the Lease at an end once and for all. Where a landlord issues and serves proceedings seeking forfeiture of a lease, he unequivocally elects to treat the lease at an end. However, whether forfeiture will ultimately be effective at the date of the issue of the writ is not then certain. It will depend, for example, on the validity of the proceedings. If it turns out that the landlord’s claim is justified, then the lease is forfeited from the date of service of the proceedings. The fact that the tenant may be entitled to relief from forfeiture or compensation does not alter the fact that the lease is forfeit from the date of issue. (Billson v Residential Apartments Ltd). If however it transpires that the proceedings were misconceived, then the Lease is treated as never having been terminated.   The difficulty for the Claimant in the present case arises from the wording of Section 1(3). Section 1(3) requires the Claimant to seek permission to forfeit the Lease. In other words, the Claimant has to positively contend for the purposes of its application that the Lease is in existence otherwise it has no rights to exercise and has no entitlement to forfeit. However, having issued and served the First Proceedings the Claimant cannot now be heard to say that it wishes to do something which treats the Lease as in existence. Having made an unequivocal election to treat the Lease at an end, such an assertion would, in my view, be entirely inconsistent with its election.   As I have already indicated, I accept that the position would be otherwise were permission under the Act not required. If the Claimant was simply asserting that at the date of service of the writ in the First Proceedings, there were two grounds, grounds A and B, on which it was entitled to forfeit and although it had forfeited on ground A alone, ground B existed as a reason for forfeiture at the date on which it forfeited on ground A, the Claimant would be able to seek and obtain permission to amend its proceedings. In short, the Claimant would be contending not that it was now entitled to forfeit on ground B but that it was always entitled to forfeit on ground B.   However, the Act requires the Claimant to assert something quite different. It requires the Claimant to assert that the Lease continues to exist and can now be forfeited and the Claimant seeks the Court’s permission to do so. In my view, in light of the First Proceedings, which have yet to be determined, it is not open to the Claimant to make such an assertion and to seek relief based on the proposition that the Lease is still in existence.   Further, in my view, the decision of Judge Paul Baker QC in Baglarbasi v Deedmethod (ibid) relied upon by the Claimant can be distinguished from the facts in the present case and in any event may not be correct in light of the Court of Appeal’s judgment in Wheeler v Keeble and the view expressed by Lord Templeman in Billson v Residential Apartments Ltd   In Baglarbasi, the tenant challenged the landlord’s right to serve a section 25 Notice where the landlord had already issued and served a writ forfeiting the lease in question. The learned judge held that whilst a landlord was not entitled to do anything inconsistent with his intention to determine the lease, the landlord was entitled to serve a section 25 notice as he had not elected to treat the lease as dead, but had elected only to procure its determination.   In my view, the service of a writ claiming forfeiture is an unequivocal election by the landlord to forfeit the lease, not, with respect, an election to procure its determination. Further, the Claimant here, by its application, is asserting and must assert that the Lease is in existence which is clearly inconsistent with its assertion that it is to be treated at an end from the date of issue of the First Proceedings. In short, the Claimant is not simply seeking to rely on a breach which existed prior to forfeiture in the First Proceedings as justification for such forfeiture; it is implicitly asserting that there now exist breaches of covenant which entitle it now or in the future to forfeit the Lease.   Ms Townsend referred me in argument to the decisions in Associated Deliveries Ltd v Harrison and Ivory Gate v Spetale and highlighted in particular the decisions referred to therein of Driscoll v Church Commissioners for England [1957] 1 QB 330 and Peninsular Martime Limited v Padseal Ltd (1981) 259 EG 860. CA; However, both decisions concern the position of a tenant who has been served with proceedings for forfeiture, which is quite different from that of the landlord. The tenant is not electing to treat the lease at an end. Accordingly, unlike the landlord, the tenant can seek to rely on the covenants in the lease as against the landlord; for example, it can apply to the Lands Tribunal for variation of the covenants and it can seek an injunction requiring the landlord to abide by the covenants in the lease. It is the fact that the landlord has elected, by issuing and serving forfeiture proceedings, to treat the lease at an end that is determinative. Having so elected, it can not act as if the lease is still in existence.   I recognise that the conclusion I have reached may appear both unattractive and overly technical and I have considered whether it is open to me to conclude that the law has changed as a result of the CPR such as to enable me to reach a different result. However, in my view, the issue is not one of procedure but a point of principle. The requirement on the part of the landlord to seek permission under the Act to commence forfeiture proceedings for breach of a repairing covenant in certain circumstances heralds from a time when the Court took a strict view of forfeiture, and relief from forfeiture was difficult to obtain. Those views may now be regarded as antiquated and the protection afforded to the tenant by the Act may no longer be necessary in view of the ability of a tenant to obtain relief from forfeiture from the Court. Further, it needs to be borne in mind that the decision of the House of Lords in Billson v Residential Apartments which allowed for a tenant to seek relief from forfeiture where a landlord had peaceably re-entered the premises was only reached in 1992. Prior to that date, if the landlord changed the locks and took possession, the tenant was left without recourse.    Accordingly, for the reasons set out above, the Claimant’s application under CPR Part 8 fails. If the Claimant wishes to rely on the breaches of repairing covenant, it must await the determination of the Respondent’s application for relief from forfeiture in the First Proceedings or withdraw those proceedings.    However, in case this matter goes further and having heard argument on the substantive claim under Section 1(5) of the Act, I should perhaps deal with this aspect also.   Permission to bring forfeiture proceedings may be given where a lessor proves, inter alia, that `the immediate remedying of the breach is required in the interests of the subtenants’ (Section 1(5) (c)).   The parties have agreed a Joint Schedule of Dilapidations and it is agreed that works of a total value of £183,402 are required to be carried out by the Respondent to meet its obligations under the Lease. Such works include repairing the roof which is actively leaking in numerous places (Para 1.01); providing a new electrical lighting system to comply with Means of Escape and Health and Safety requirements (Para 18.01) and taking steps to prevent the ingress of moisture internally in the units (Para 21.1). As Ms Townsend contends, the works speak for themselves and in this regard, she relies on the decision of Harman J in Phillips v Price [1959] 1 Ch 181 at 190. Ms Townsend contends that the immediate remedying of the breaches is self evidently required in the interests of the subtenants of the Respondent and that I should exercise my discretion to grant permission unless I am clearly convinced that, despite compliance with the requirements of subsection (5)(c) the application should be refused (per Ungoed Thomas J in In re Metropolitan Film Studios Ltd’s Application [1962] 1 WLR 1315.)    Mr Fieldsend contends, in short, that there is no immediate need to remedy the breach in the interests of the subtenants. The premises are commercial not residential; there is no evidence that the occupiers are complaining or contending for the work to be carried out and there is no evidence from the occupiers as to how their interests might be best served. Further, he contends that the exercise by the Court of its discretion is unfettered (per Land Securities Plc v Receiver for the Metropolitan Police District [1983] 1 WLR 439 at para 27-68) and when considering how to exercise that discretion, I need take into account the fact that (i) it is the Defendant’s evidence that they took over the Premises in a very poor state of repair (ii) that it is the direct result of the occupiers failure to pay rent that the works have not been undertaken (iii) that the occupiers are not complaining to the Defendant and (iv) that there are already possession proceedings underway between the parties.   In my view, on the evidence before me, the Landlord has established a case under Section 1(5)(c) for obtaining permission to issue proceedings, and but for the existence of the First Proceedings and the reasons set out above, I would have granted permission to the Landlord to now issue proceedings.    The question whether the immediate remedying of the breach is required in the interest of the subtenants must be answered on an objective assessment of the evidence. The fact that the occupiers are not complaining about the disrepair to the Respondent can not be determinative. In any event, the Claimant disputes this evidence. In view of the extent and nature of the works agreed to be necessary to remedy the disrepair, in my view, the immediate remedying of the breaches complained of is required in the interests of the subtenants. The evidence of Mr Cornet, the Claimant’s expert on this aspect is not controverted by the Respondent’s expert, Mr Smith and in the present circumstances, I would agree with Ms Townsend that the disrepair speaks for itself. It is clearly to the advantage of the occupiers that the breaches should be remedied and should be remedied immediately. In every case there will be cost consequences to the tenant and possibly to the subtenants. However, the Respondent has advanced no evidence before me on this point and accordingly, I can attach little or no weight to it. Further, if I am wrong in relation to the first issue in this Judgment, the fact that the First Proceedings exist takes the issue on Section 1(5)(c) no further.   Accordingly, had I been of the view that the Claimant’s application for permission was valid, I would have granted permission to the Claimant under Section 1(5) to institute proceedings based on the alleged disrepair. Costs/other orders    It was common ground before me that costs should follow the event if the Claimant was unsuccessful in its application. Accordingly, the Defendant having succeeded on the first ground, the Claimant must pay the Defendant’s costs of the application to be assessed if not agreed.    Further, it was agreed between the parties that in the event that I was against the Claimant, the existing directions dated 7 April 2005 in the First Proceedings should be amended as follows: Paragraph 3- the date should now be 28 October 2005 Paragraph 7- the date should now be 9 December 2005 Paragraph 8- the date should now be 6 January 2006    Further, it is agreed between the parties that the First Proceedings should now be listed for a hearing, with a time estimate of 3 days, on the first open date after 20 January 2006. The Claimant should prepare agreed bundles to be lodged with the Court not less than 14 days before trial, and the parties should exchange skeletons 7 days before trial. Costs of the CMC in the First Proceedings are to be costs in the case.   I would be grateful if Counsel could draw up and agree a minute of Order to be lodged in relation to both the First Proceedings and the application before me. With regard to the latter, the order should simply record the dismissal of the Claimant’s application together with an order for costs in favour of the Defendant, to be assessed if not agreed.   As regards any application for permission to appeal (by the Claimant in relation to the first issue and/or by the Defendant in relation to the second) I am happy to determine any such application on paper unless either side wishes to make oral submissions.  Accordingly, unless I receive notice to the contrary, I am happy to accept any such submissions by e-mail on the basis that each party provide the other with its submissions at the same time, so that the other party can make any reply submissions it considers necessary. I will then provide a determination as soon as possible by e-mail.   Finally, I would like to express my gratitude to both Counsel for their help in this case. I have been greatly assisted both by the skeleton arguments and the oral submissions.        Recorder Prevezer QC      17 September 2005