Landlord and tenant — Forfeiture by service of writ — Whether lease remained forfeited following compromise of forfeiture proceedings — Whether tenant entitled to enfranchisement under Leasehold Reform Act 1967
In 1978 HP Ltd
acquired the freehold reversion to a 99-year lease of residential premises, the
tenant being H Ltd. Following the service of a notice under section 146 of the
Law of Property Act 1925, on February 16 1982 HP Ltd issued and later served a
writ on H Ltd claiming possession on the grounds the lease was forfeit; H Ltd
denied the alleged breaches of covenant and counterclaimed for relief from
forfeiture. On September 6 1983 the lease was transferred to the respondent
tenant, who was registered as proprietor. Sometime before 1988 the reversion
was assigned to the appellant landlord. On July 19 1988 HP Ltd and H Ltd
compromised the forfeiture action by agreeing, inter alia, that the
action be dismissed. On December 15 the tenant served notice under the
Leasehold Reform Act 1967 claiming to be entitled to acquire the freehold. The
county court dismissed the landlords’ contention that, by reason of the
proceedings between HP Ltd an H Ltd by which the lease had been forfeited, the
respondent was not a tenant and therefore not entitled to enfranchise. The
landlords appealed.
had the consequence that the forfeiture had not been established; the lease
must be taken to have been fully restored. There was no need for the grant of
relief from forfeiture to restore the lease from the shadowy state it had been
put by the forfeiture action. Alternatively, the counterclaim seeking relief
continued to exist and this was sufficient to maintain for the lease a shadowy
existence. Upon the dismissal of the proceedings, the act of forfeiture became
a nullity.
The following
cases are referred to in this report.
Canas
Property Co Ltd v KL Television Services Ltd
[1970] 2 QB 433; [1970] 2 WLR 1113; [1970] 2 All ER 795; (1970) 21 P&CR
601; [1970] EGD 445; 214 EG 1494, CA
Dendy v Evans [1910] 1 KB 263
Driscoll v Church Commissioners for England [1957] 1 QB 330; [1956] 3
WLR 996; [1956] 3 All ER 802; (1956) 7 P&CR 371; [1956] EGD 259; 168 EG
521, CA
Jones v Carter (1846) 15 M&W 718
Meadows v Clerical Medical & General Life Assurance Society
[1981] Ch 70; [1980] 2 WLR 639; [1980] 1 All ER 454; (1979) 40 P&CR 238;
[1980] 2 EGLR 63; 255 EG 883
Serjeant v Nash Field & Co [1903] 2 KB 304; (1903) 72 LJKB 630;
89 LT 112; 19 TLR 510
This was an
appeal by the landlords, Twinsectra Ltd, from a decision of Judge Tibber, in
Lambeth County Court, in an originating application by the tenant, John Patrick
Hynes, to determine his entitlement to enfranchisement under the Leasehold
Reform Act 1967.
Romie Tager
(instructed by Wallace & Partners) appeared for the landlords; Bruce
Speller (instructed by Armstrong & Co) represented the tenant.
Giving the
first judgment at the invitation of Leggatt LJ, HUTCHISON LJ said: This
appeal by landlords who were the unsuccessful respondents to an application
under the provisions of the Leasehold Reform Act 1967, determined in Lambeth
County Court on June 28 1993 by Judge Tibber, gives rise to the question
whether the learned judge was right to hold that, on the date when the tenant
served his notice claiming enfranchisement he was ‘a tenant of a leasehold
house’ (see section 1(1)) or whether, as the appellants contended, the tenancy
had long since come to an end by forfeiture.
The facts
giving rise to that question can be summarised relatively briefly as follows.
The premises concerned are 22 Crewdson Road, London SW7. By August 17 1978 a
company called Haysport Properties Ltd had acquired the freehold to those
premises which were subject to a 99-year lease from December 25 1889. The
residue of the term was vested in a company called Harscott Ltd. The lease was
subject to a full repairing covenant.
In March 1981
Haysport served a notice pursuant to section 146 of the Law of Property Act
1925 in respect of alleged breaches of the repairing covenant and in due course,
on February 16 1982, issued a writ claiming possession of the premises and
damages. The writ was served shortly afterwards and on March 25 1982 Harscott
served a defence denying the alleged breaches and a counterclaim asking for
relief from forfeiture.
On September 6
1983 Harscott, in consideration of the payment of £1,500, transferred the lease
to Mr Hynes, who was registered as the proprietor on June 11 1985. On a date
which has not been ascertained but which was said to be sometime before 1988,
Haysport transferred the reversion to the appellants, Twinsectra Ltd, an
associated company.
It seems that
not a great deal had been happening meanwhile in the forfeiture action, though
certain steps had been taken and a number of summonses had been heard. By 1988,
as a result of the dispositions just referred to, the parties to that action
were, of course, no longer interested in the property, either as landlords or
tenant. By mid 1988, it seems, the case was at risk of being listed or relisted
and on July 19 1988 Haysport and Harscott compromised the action. The agreed
order provided that: (a) the action was dismissed; and (b) that Harscott should
pay Haysport’s costs, including the costs of preparing the section 146 notice.
No application was made to join the new landlords or the new tenant, and the
order made no provision for, or reference to, the counterclaim.
On December 15
1988 Mr Hynes served a notice pursuant to the Leasehold Reform Act 1967
indicating that he was ‘a tenant of the house and premises’ and wished to
acquire the freehold. Once some confusion as to the precise identity of the landlords
(the respondents to that notice) had been sorted out there was on January 19
1989, served by Twinsectra a notice in reply in which they gave notice of their
objection on the ground, inter alia, that Mr Hynes was not the tenant.
Various other objections were raised, some of which were argued before the
learned judge in the ensuing proceedings to which I shall shortly refer; none
save the assertion that he was not the tenant is now of any relevance. Having
been served with that counternotice on February 24, Mr Hynes issued his
application to the county court for an order vesting the freehold in himself.
In their
answer of April 25, Twinsectra asserted, among other things, that the lease had
been forfeited in or about February 1982 by the service of the writ; that the
forfeiture had been on the grounds of breach of repairing covenant, and the
transfer to Mr Hynes had been subject at all material times to the fact that
the lease had been forfeited, of which fact Mr Hynes had or should have had
express notice. The answer also contained this sentence in para 2:
The lease was
forfeited by the service of the said proceedings by reason of the lessee’s
breaches of covenant as pleaded in the specially indorsed Statement of Claim.
The argument
relied on by the appellants before the learned judge and in this court can be
simply expressed, as appears from the above summary. It involves the
proposition that the consequence of the issue and service of the writ claiming
forfeiture in February 1982 was to terminate the lease; that (no order for
relief from forfeiture having been obtained) the lease had not been revived;
and that, accordingly, Mr Hynes was not at the date of his 1967 Act notice a
tenant and accordingly failed to qualify for enfranchisement.
The learned judge,
having rehearsed the facts as they were established before him in evidence,
mentioned the basis of the landlords’ argument (just summarised) and said:
It is clear
from the authorities helpfully cited by Mr Tager that a lease comes to an end
on the service of the writ in which the landlords claim forfeiture. But here
there is a consent order dismissing the action. Can it follow that the law is
that, whether or not a claim for possession succeeds, the mere service of a
writ puts an end to the lease? Commonsense requires a negative answer to that
question and, as one might hope, the law, in my view, provides the same answer.
He then went
on to consider the authorities, to which I shall in due course refer. However,
before doing so, I venture to observe that there is, it might be thought, some
slight contradiction between the first and the third sentences of the passage I
have just quoted, for it seems to me that if, as the judge accepted in the
first sentence, the lease comes to an end on the service of a writ claiming
forfeiture, the answer to the question posed in the third sentence: ‘Can it
follow that the law is that, whether or not a claim for possession succeeds the
mere service of a writ puts an end to the lease?’, ought to be: ‘Yes, subject
only to the tenant’s right to claim relief’. The fact that there is that, as it
seems to me, inherent contradiction in the passage I have quoted, is
symptomatic of the very real conceptual difficulties inherent in the law
relating to the status of a lease after service but before resolution of a
claim for forfeiture.
The learned
judge, having posed the question already cited and given an indication of his
views that it should be answered favourably to Mr Hynes, went on to explain his
reasons in the context of some of the authorities to which he had been
referred. What he said was:
In Driscoll
v Church Commissioners for England [1957] 1 QB Denning LJ (as he then
was) said at p339 — I should say that was a case in which the applicant was
applying to the Land’s Tribunal to vary certain covenants in a lease and it was
said that, because of a writ for forfeiture, the applicant had no locus
standi to apply for the restrictions to be modified —
‘… [it is argued that] the issue of a writ for
forfeiture is an unequivocal election by the landlords to determine the leases,
and in consequence the leases had gone and the covenants had gone and that
there was nothing left to modify. I do not agree with that argument, for this
reason: that although a writ is an unequivocal election, nevertheless, until
the action is finally determined in favour of the landlord, the covenant does
not cease to be potentially good. For instance, the forfeiture may not be
established.’
He goes on to
consider certain other matters but it is clear, in my view, from what Denning
LJ was saying that, if the forfeiture is not established, then the lease is not
forfeit. As I say, that seems to me to be common sense.
Furthermore,
in Meadows v Clerical Medical and General Life Assurance Society
[1981] 1 Ch 70, a case under the 1954 Act, the landlord had obtained judgment
for possession in a forfeiture action before the tenant had applied under the
1954 Act. The execution of that judgment was stayed pending the adjourned
hearing of the tenant’s application for relief, and the Vice-Chancellor held
that the tenant remained a tenant for the purposes of the 1954 Act, since
pending a decision on the application for relief, it was not known whether the
underlease would remain forfeit or be restored. The Vice-Chancellor, it would
be wrong to say ‘approved’, but referred, in approving terms, to the judgment
of Denning LJ (to which I have already referred) and said that Hodson and
Morris LLJ in that case concurred in rejecting this contention of the landlord
and, although they were less explicit than Denning LJ on the point: ‘I do not
think that they were in any way disagreeing with Denning LJ’.
Neither Driscoll
nor Meadows nor the other cases cited appear to have considered in terms
whether or not an action for possession on the ground of forfeiture which fails
means that the forfeiture remains effective. But I think that the statement by
Denning LJ in the Driscoll case supports that contention. In my view, it
cannot be right and it would follow that, if a landlord without grounds serves
a writ claiming possession on the ground of forfeiture, the lease is forfeit.
It makes no
difference, in my view, that the claim was dismissed by consent; nor that the
parties to the action at the time of dismissal had no interest in the premises.
The respondent sought to go behind the face of the order and say that there
were clearly breaches of the repairing covenant and that the claim for
possession would have succeeded if tried, subject of course to any claim for
relief. Such a contention would involve trying an action between two parties
who were not before the court. There is no pleading of lack of repair and I
decline to draw the inferences that counsel would have me draw as to the state
of repair of the premises at the date of the commencement of the action, in
February 1982.
I should pause
to interpolate the comment that there was before the learned judge a great deal
of evidence derived from examination and cross-examination of Mr Hynes himself
in the main, but in part from the documents, as to the state of repair of the
premises when he took them over and as to the repairs which he had carried out,
on the basis of which Mr Romie Tager, on behalf of the landlords, had sought to
persuade the learned judge to infer that the premises must have been in a state
which amounted to a breach of the covenants to repair at the date of the issue
of the writ in the forfeiture action.
The learned
judge, as is apparent from what I have just quoted from his judgment, was not
prepared to make that assumption. Before this court, the matter of the
significance of that evidence has not really been investigated because Mr Tager
was encouraged by the court to address us on other matters, and it would not be
right to state any conclusion about it. But what can, perhaps, be said, is that
it appears to be common ground that, over the space of a year or two after he
acquired the lease, Mr Hynes did carry out a good deal of repair work to the
premises at very considerable cost to himself, and we were told in argument that
by the time the events with which this action is primarily concerned had
occurred, the premises were in a good state of repair as a result of such works
as Mr Hynes had carried out.
The learned
judge concluded the relevant part of his judgment with these words:
As to the
claim for relief: it was made in March 1982, had not been pursued when the
lessee assigned in 1983 and has not been pursued since. The Vice-Chancellor
held in Meadows that undue delay in pursuing a claim for relief would
defeat the claim. I suspect that the consent order was intended to dispose of
the entire action, that is to say claim and counterclaim. If it did not, and if
the forfeiture survived the consent order (contrary to my view), I think the
10-year delay in pursuing the claim would probably defeat it.
Against that
judgment, as I have indicated, the landlords appeal. The arguments advanced by
Mr Tager are essentially those which he developed before the learned judge.
They have been helpfully summarised, subject to an addition which I shall
mention, in the very full and clear skeleton argument, which Mr Tager has
prepared for our assistance. They come to this. The bringing of an action
claiming possession on the grounds of the lessee’s breach of covenant is
treated as the equivalent of actual re-entry and is a final election to forfeit
the lease. For that, authorities (to which I shall refer) are cited. The
landlords cannot thereafter do anything inconsistent with their intention to
forfeit; contrast the position of the tenant. Other authorities are relied on
by Mr Tager which he suggests, I consider correctly, support the proposition of
law stated in the current 18th ed of Hill & Redman’s Law of Landlord and
Tenant (vol 1, para 2201):
The law is
that during a genuine and subsisting claim for relief the lease has a shadowy
existence for some purposes.
Mr Tager
argues that after June 11 1985, Harscott (the tenant company) could no longer
have pursued its counterclaim for relief from forfeiture, and he submits that,
no claim for relief having been made on behalf of Mr Hynes prior to the expiry
of the term on December 25 1988, there was no subsisting or possible claim for
relief from forfeiture when Mr Hynes served his notice in 1988 and issued his
proceedings thereafter. It is contended on behalf of the appellant company that
it would have been necessary for Mr Hynes to have issued an application for
relief from forfeiture at some stage prior to the service of his notice under
the 1967 Act, or perhaps to have applied before the forfeiture action was
settled, to substitute himself for Harscott as a party claiming relief. It is
contended that his failure to do so — and it is not suggested that he did
otherwise — finally lost him the opportunity to categorise himself as a tenant
entitled to apply for relief.
The judge, it
is submitted, was confused in that part of his judgment in which he dealt with
the effect of the order of July 19. That order, it is said, made no reference
to the counterclaim and after 1985 Harscott could have had no basis for
counterclaiming relief from forfeiture and there was no question of any delay
defeating it.
So far as the
consent order of July 19 1988 was concerned, Mr Tager argues that after June
1985 the action could only have been proceeding in respect of Haysport’s
damages and interest claims and the costs of the action, and that once all the
repairs had been carried out by Harscott and later by Mr Hynes, there would
have been no question of any damages other than nominal damages. Effectively,
therefore, all that was left to dispose of in the action when it was settled in
1988, was the matter of costs. The terms in which the costs were dealt with, he
argues, are strongly indicative of an acceptance on the part of Harscott that
the forfeiture notice and the assertion of breach of repairing covenant was
justified.
Mr Tager, in
the course of argument before us, dealt with the suggestion that the learned
judge’s judgment was correct in attaching significance to the settlement of the
forfeiture action in 1988. Mr Tager’s submissions in relation to that were to
the following effect. He conceded that, had the original parties to the
proceedings still been in the position of landlords and tenant, then the effect
of settling the action would have been effectively to dispose of the
forfeiture. He conceded that even a stay, not merely a dismissal of
proceedings, would have the same effect. But he submitted that, because there
had been a change of parties and the lease was by now in the possession of Mr
Hynes and the reversion in the possession of Twinsectra, the fact that the two
original parties (the two companies Harscott and Haysport) chose to settle
their action (which they did obviously as a matter of commonsense in order to
dispose of it) could have no effect whatever on the previously created
forfeiture, and certainly could not enable the applicant, Mr Hynes, to contend
that he in some way had, as a result of their settlement of the action, become
the tenant.
Now it is
necessary to look at some of the authorities which have been cited to us in
order to see how the law stands in relation to the facts of this case. I refer
first of all to the case of Serjeant v Nash Field & Co [1903]
2 KB 304. That is one of the cases principally relied upon by the appellants.
The issue was as to what had been the effect of the service of forfeiture
proceedings, and it arose in the context of a claim by the plaintiff in the
action for damages for wrongful distress. The lessee of the premises had
granted a yearly tenancy to the plaintiff and, at the same time and in breach
of covenant, mortgaged the premises by way of subdemise. On the lessee’s
bankruptcy, the mortgagees appointed a receiver. After the issue and service of
the writ claiming forfeiture, the plaintiff refused to pay rent to the receiver
who thereupon distrained. The assertion that the distress was illegal depended
on the validity of the plaintiff’s contention that at the date it took place
the term had come to an end as a result of the service of the writ. The Court
of Appeal, upholding Darling J, held that it had. The Master of the Rolls, Sir
Richard Collins, said (I cite the passage from the middle of p310 of the
report):
It is said on
behalf of the defendants that the distress was lawful because there was a
subsisting tenancy between the plaintiff and the mortgagees, on whose behalf
the distress was put in, and it is contended that the fact that proceedings had
been instituted by the head landlord to recover possession of the premises did
not in itself determine the tenancy of the plaintiff, and could not alter the
rights of third parties. On the other hand, it was contended, and the learned
judge so directed the jury, that the tenancy had determined. I am of opinion
that this view is correct. There is a final determination of a tenancy under a
lease when the lessor, by some final and positive act which cannot be
retracted, treats a breach of covenant by the lessee as constituting a
forfeiture. There was a faint suggestion that a mortgage by way of sub-demise
does not come within the covenant as to assignment, but it cannot be seriously
contended that there had been no breach of the covenant in the head lease, and
therefore the condition letting in the right to a forfeiture had happened, and
the only question is whether the lessor had availed herself of the breach of
covenant in a final manner. I think that she had done so, for, except by taking
physical possession of the premises, she had done the only thing that she could
do to indicate her intention to put an end to the lease. The point was decided
by authority in the year 1872 in the case of Grimwood v Moss.
A little later
the learned judge, having referred to the decision in Jones v Carter (1846)
15 M&W 718, quoted the following passage from the judgment in that
authority:
I entirely
agree that the true principle upon which that decision was founded was, that
the bringing of the action of ejectment is equivalent to the ancient entry. It
is an act unequivocal in the sense that it asserts the right of possession upon
every ground that may turn out to be available to the party claiming to
re-enter… . It is quite clear if the
landlord, instead of bringing ejectment, had entered, he could have justified
in an action of trespass by reference to any act of forfeiture which he could
prove.
The learned
Master of the Rolls continued:
That
principle is as much applicable to the procedure of today as to that under the
Common Law Procedure Act which dispensed with the old allegation of entry and
ouster. That being so, it is clear that the writ in the action to recover
possession was a conclusive election to treat the act of the lessee in
sub-demising the premises without the consent of the lessor as creating a
forfeiture. It is true that the rights of the parties were not determined by the
issue of the writ, and could not be finally determined until the result of the
action was known; but that consideration does not affect the fact of the
election of the lessor to treat the lease as at an end, subject to proof that
there had been a breach of covenant which entitled her to do so. There was,
therefore, no relation of landlord and tenant existing between the mortgagees
and the plaintiff, and no right to distrain, and that ground of defence fails.
Stirling LJ
concluded his review of some of the authorities with these words (p314):
I come,
therefore, to the conclusion that the lease was forfeited and gone from the
time when the writ was served, and that consequently there was no right of
distress against the plaintiff.
Mathew LJ at
p315 expresses similarly unequivocal views.
We were also
referred to the decision in Canas Property Co Ltd v KL Television
Services Ltd [1970] 2 QB 433. The issue there was whether issue or service
of the writ brought the lease to an end. It is upon that issue that the judgments
almost exclusively concentrate. The proposition that service of the writ (held
to be the critical event in that case and always subsequently accepted to be
so) did have the effect of bringing it to an end, was, it seems, accepted
without question.
However, that
the lease, for some purposes and to some extent, has a continuing existence is
conceded by Mr Tager and established by other authorities and accepted by
textbook writers. It is apparent that the concession is made from the citation
which I have already quoted from Hill & Redman. That sentence,
namely:
The law is
that during a genuine and subsisting claim for relief the lease has a shadowy
existence for some purposes
finds an echo
in the judgment of Sir Robert Megarry V-C, in one of the authorities on which
counsel for the respondent principally relies, namely Meadows v Clerical
Medical & General Life Assurance Society [1981] Ch 70*. I begin by
citing a short passage from the judgment of Sir Robert Megarry V-C at p75 where
he said:
*Editor’s
note: Also reported at [1980] 2 EGLR 63.
There are, of
course, curiosities in the status of a forfeited lease which is the subject of
an application for relief against forfeiture. Until the application has been
decided, it will not be known whether the lease will remain forfeited or
whether it will be restored as if it had never been forfeited. But there are
many other instances of such uncertainties. When the validity of a notice to
quit is in dispute, until that issue is resolved it will not be known whether
the tenancy has ended or whether it still exists. The tenancy has a trance-like
existence pendente lite; none can assert with assurance whether it is
alive or dead. The status of a forfeited underlease which is the subject of an
application for relief seems to me to be not dissimilar; at least it cannot be
said to be dead beyond hope of resurrection.
The
difficulties inherent in that particular concept were highlighted in the
concluding paragraph of the Vice-Chancellor’s judgment where he said (p78):
Perhaps I may
add that I am conscious that this judgment has not attempted to analyse the
attributes of a lease during the twilight period between its forfeiture and the
determination of an application for relief against the forfeiture. There are
plainly conceptual difficulties in almost any approach, and these,
understandably, have not been fully explored during argument. My duty is not
one of carrying out a jurisprudential analysis but merely one of finding what I
hope is a safe resting place for my decision. For the reasons that I have
given, I hold that the defendants’ summons fails and should be dismissed.
Having
referred to this case for the so far limited purpose that I have, I can
conveniently at this stage consider it further, because it is, in my judgment,
of particular relevance and has importance in the context of the current case.
It concerned a business tenant’s claim for a new lease under the Landlord and
Tenant Act 1954. The problem that confronted him was that, before the issue of
his originating application for a new tenancy, the landlord had served
forfeiture proceedings for breach of covenant and obtained judgment, though a
claim for relief was outstanding. It was therefore argued that the claim for a
new tenancy must be dismissed because, at the date of the issue of the
originating summons, the plaintiff had no tenancy to which Part II of the Act
applied; his tenancy had ceased to exist from the issue of the summons.
I should cite
a number of passages from the judgment in order to make it clear why it is that
I attach particular importance to this decision. After rehearsing the
landlord’s arguments, the learned Vice-Chancellor continued as follows (p74):
On behalf of
the plaintiff, Mr Prince accepted much of these contentions. However, he
contended that in section 24(1) ‘tenant’ and ‘tenancy’ ought to be construed in
a way which carried out the purpose of Part II of the Act in protecting
tenants. Accordingly, the subsection should be treated as including a forfeited
tenancy if there was a subsisting claim to relief against forfeiture which, if
successful, would result in the existence of a tenancy which on any footing was
within the subsection. Furthermore, he contended that in section 24(2)
‘forfeiture’ must mean a perfected forfeiture, and not a forfeiture which is
still liable to be set aside as a result of a subsisting application for relief
against it. In a forfeiture case, the two subsections, when read together, mean
that a tenancy which otherwise would be within the Act is continued under it
until the forfeiture is perfected and is no longer liable to be set aside under
a subsisting application for relief.
A number of
authorities were discussed in argument, but none of them had any direct bearing
on this problem. It seems clear that the mere issue of a writ claiming
forfeiture of a lease does not bring about a forfeiture. On the other hand,
there is authority for saying that as soon as such a writ is served, there is a
forfeiture, though not until judgment will it be determined whether the
forfeiture was justified. There is also authority for saying that it is clear
that ‘the lease is not terminated until judgment is given for possession,’
though, when given, the judgment relates back to the issue of the writ: see City
of Westminster Assurance Co Ltd v Ainis (1975) 29 P&CR 469, 471
per Cairns LJ. That was a case in which authorities for the proposition that
the lease is terminated by service of the writ without awaiting judgment do not
seem to have been cited: see, for instance, Sergeant v Nash Field
& Co … and Canas Property Co
Ltd v KL Television Services Ltd …
both decisions of the Court of Appeal. Fortunately I do not have to
discuss this apparent conflict, since on any footing there had been both
service of the writ and a judgment for forfeiture well before the plaintiff
issued his originating summons under the Act of 1954.
I think the
starting point is that before Sulka issued and served their writ, the plaintiff
was plainly and admittedly a tenant who could claim the protection of the Act
of 1954. The plaintiff is still in occupation of his premises and carrying on
his business there. If he obtains relief against forfeiture, the effect will be
as if the underlease had never been forfeited. Thus in Dendy v Evans [1910]
1 KB 263 it was held that an assignee of a forfeited lease could, after
obtaining relief against forfeiture, sue an underlessee for rent falling due
after the date of the forfeiture. When the plaintiff in the present case issued
his originating summons under the Act of 1954, his underlease, though
forfeited, was the subject of a subsisting application for relief which, if it
succeeded, would restore his underlease to its full effect as if it had never
been forfeited; and in that case, the originating summons must be valid. That
being so, ought the originating summons to be dismissed as claimed by the
defendants.
Then comes the
passage which I have already cited. The learned Vice-Chancellor continues as
follows at C:
Mr Prince
relied on Driscoll v Church Commissioners for England [1957] 1 QB
330; and although the issue was different in a number of respects, I think that
case is helpful. Under section 84 of the Law of Property Act 1925, a tenant, Mr
Driscoll, applied to the Lands Tribunal for the discharge or modification of
certain restrictions as to user in his leases. Before his application was
heard, the landlord had issued and served writs claiming forfeiture of the
leases for breach of covenant, and the tenant had applied for relief from
forfeiture. On the tenant’s appeal from the Lands Tribunal’s refusal to
discharge or modify the covenants, the landlords contended, inter alia,
that the tenant had no locus standi to apply to the Lands Tribunal as a
‘person interested’ under section 84(1) of the Law of Property Act 1925, since
the leases had gone, and so there were no covenants left which could be
discharged or modified. On this contention, Denning LJ, who delivered the leading
judgment, said at p340:
…
and he cites a
passage from Denning LJ’s judgment in that case. He continues by pointing out
that Hodson and Morris LJJ agreed, although they were less explicit than
Denning LJ.
The learned
judge then continued as follows at the bottom of p75:
Obviously a
person may be a ‘person interested’ without being a tenant: and I am concerned
with what is a ‘tenant’ and a ‘tenancy’ within the Landlord and Tenant Act
1954, Part II, and not with a ‘person interested’ under section 84(1) of the
Law of Property Act 1925. Nevertheless, the concept of a covenant being
‘potentially good’ necessarily involves the lease being ‘potentially good,’
awaiting the determination whether or not relief against forfeiture will be
granted. Does a tenancy which formerly was plainly within the Act get driven
out of the Act when it becomes a tenancy which is only ‘potentially good’? Does
it thereupon cease to be a ‘tenancy’ within the meaning of section 24(1) of the
Landlord and Tenant Act 1954? The definition of ‘tenancy’ in section 69(1) of
the Act does not help in answering this question.
The learned
judge then considered the terms of the relevant sections (it is unnecessary to
quote the passage) and stated his conclusion towards the bottom of p76 in the
following terms:
Is a forfeited
tenancy which is the subject of a subsisting application for relief, which may
restore the tenancy as if it had never been forfeited, a tenancy which has come
to an end for these purposes, at any rate in the sense in which a tenancy which
has been surrendered has come to an end?
The point is
not easy, but in my judgment the answer is ‘No.’ I think that such a tenancy is
a tenancy which may or may not have truly come to an end, and that the
subsection is contemplating a tenancy which has in fact come to an end. The
right of a tenant to apply for relief is part of the process of forfeiture, and
until that process is complete, I do not think that the tenancy
Tenant Act 1954. The plaintiff’s tenancy in this case had accordingly not been
taken out of the operation of section 24(1), and it continued under it, thus
enabling the plaintiff to apply for a new tenancy. I do not think that it
matters much whether the form that any relief would take would be the
restoration of the old lease or the grant of a new lease on the terms of the
old: in either case the relief would relate back to the date of the forfeiture
and so produce a tenancy which was within the Act when the originating summons
was issued.
The learned
Vice-Chancellor then summarises the effect of the case of Ainis which,
incidentally, it is worth noticing, is cited in Hill & Redman for
the proposition that the lease is not terminated until judgment is given for
possession. He mentions the arguments of counsel for and against his
conclusions, which I need not cite, and finds in favour of the applicant.
Those, I am
afraid rather lengthy, quotations from the case of Meadows make it, I
think, unnecessary to cite directly from either Driscoll v Church
Commissioners for England or Dendy v Evans, both cases parts
of which were read to us by Mr Tager in support of his argument. The former
case was another on which the learned judge relied, and the passage cited from
it in Meadows undoubtedly assists the respondent.
The outcome of
this case can, it seems to me, be said to depend on the answer to this
question: at the date when Mr Hynes purported to exercise his right to obtain
enfranchisement, did the lease under which he claimed to be a tenant exist?
In my
judgment, that question must be answered in favour of the tenant for the
following reasons. First — and this bears on the last part of the submissions
which Mr Tager made to us — I would hold that the dismissal of the forfeiture
action is conclusive of the matter. The order made was that that action should
be dismissed, and it seems to me impossible to contend, once that has happened,
that any conclusion follows other than that the forfeiture has not been
established. The lease, whatever may have been its status pending that action,
must, in my judgment, be taken to have been fully restored when the action was
dismissed. The learned judge was, in my view, correct when, in his judgment, he
refused ‘to go behind the face of the order and say that there were clearly
breaches of the repairing covenant and that the claim for possession would have
succeeded if tried, subject of course to any claim for relief’. In my view,
once the forfeiture proceedings were dismissed, the contention that the lease
did not exist cannot be accepted. There was no need for a grant of relief to
restore the lease from the shadowy state it had enjoyed to a full existence;
the dismissal of the claim that had driven it into the shadows had that effect.
The question
whether the appellants can now demonstrate, as they sought before the learned
judge to do, that the allegation of breach of covenant was soundly based is, in
my judgment, irrelevant. The breaches were not admitted, nor had they been
established in evidence at any material time. At the material times, when the
lease was assigned and when the action was settled, the position remained the
same. I consider, therefore, that the attempt to prove that the repairs in fact
constituted a breach of contract is beside the point. Accordingly, I would
dismiss this appeal on the ground that the settlement of the action on terms
which resulted in the dismissal of the forfeiture action, is fatal to the
contention that the tenant had no subsisting tenancy.
If that
conclusion as to the effect of the settlement be wrong, I would nevertheless
uphold the learned judge’s judgment on other grounds. In the circumstances it
is necessary to state what those grounds are only briefly.
If, as I
consider that it did, the dismissal of the forfeiture action disposed of the
claim to forfeit the lease, it rendered otiose the counterclaim for relief
which therefore may be taken impliedly to have fallen with the action.
However, if as
the appellant contends the lease remains forfeit, notwithstanding the dismissal
of the action, there is, as it seems to me, every reason to treat the
counterclaim as continuing to subsist; and that it should do so, must, I
consider, have accorded with the intention of the parties to the settlement of
the proceedings. I point out, incidentally, that the fact that the counterclaim
may continue to be in existence, is consistent with the provisions of Ord 15, r
2(3), which provides:
A
counterclaim may be proceeded with notwithstanding that judgment is given for
the plaintiff in the action or that the action is stayed, discontinued or
dismissed.
There was in
existence at all material times, therefore, a subsisting and genuine claim for
relief, though it was in the name of Harscott and not Mr Hynes. There can be no
doubt that the latter could, on acquiring the term, had he chosen to do so,
have sought to be joined as a party to the counterclaim. The existence of this
claim for relief, on this hypothesis still subsisting, was on authority
sufficient to maintain for the lease the sort of shadowy existence described in
the passages I have cited from the judgment of Sir Robert Megarry V-C in the
case of Meadows.
Thus, at the
date of election (and indeed at the date of the hearing before the learned
judge) the lease undoubtedly had a sufficient existence to render it amenable
to such an election and to entitle Mr Hynes to assert that he had the status of
a tenant.
I would
dismiss the appeal.
Agreeing, ALDOUS
LJ said: I agree and will not deal with the facts or refer to the
authorities as they have been dealt with in detail in the judgment of Hutchison
LJ. However, I desire to emphasise that the authorities establish that service
of proceedings for possession is an election by the lessor to treat the lease
as forfeited. Further, it is to be taken as notional re-entry and thus
forfeiture; but the act of forfeiture is subject to determination by the court
of the validity of the claim. The lease is potentially good and the process of
forfeiture is not complete until the proceedings are determined, which may
include determination of an application for relief from forfeiture. Thus,
service of the proceedings is taken as forfeiture, but it will be a nullity if
the proceedings do not succeed, or there is relief from forfeiture.
In the present
case, proceedings for possession were started in 1982. The order that was
subsequently made did not refer to the counterclaim. However, by consent the
court ordered that the action be dismissed and it is not now open to the
parties to go behind that order. The result is that the proceedings for
possession, that are relied on as causing the forfeiture, failed and the act of
forfeiture which stemmed from service of those proceedings became a nullity.
The fact that the parties had disposed of their interests is irrelevant as the
forfeiture relied on arose from service of the proceedings, and those
proceedings were dismissed; the result being that the act of forfeiture became
a nullity.
I would, too, would
dismiss this appeal.
LEGGATT LJ agreed and did not add anything.
Appeal
dismissed with costs.
