Tenant seeking relief against forfeiture for non-payment of rent – Tenant’s ability to pay arrears dependent upon successful outcome of damages claim against a third party – Relief refused
In May 1996 the defendant tenant took an assignment of a lease of the Albion public house, Bridlington, the lease then having 16 years unexpired. The terms of the lease included a beer tie and a covenant by the lessee to pay the rent without deduction by variable direct debit. In July 1997 the tenant stopped paying rent pending the outcome of a number of test cases (the Article 85 litigation) in which she and other lessees of the same landlord claimed damages on the basis that the tie had been imposed in breach of Article 85 (now 81) of the EC Treaty. In April 1998 the claimant landlord commenced proceedings for forfeiture for non-payment of rent.
On 27 May 1999 the claims in the Article 85 litigation were dismissed by the Court of Appeal: see Courage Ltd v Crehan [1999] 2 EGLR 145; [1999] EGCS 85. At or about this time the tenant, proceeding by way of a Part 20 claim in the forfeiture action, made a fresh claim for damages against a predecessor of the landlord, contending that the predecessor had breached an undertaking, given to herself and the original tenant, that they would both be released from the tie from the end of March 1998.
On 23 July 1999 the tenant applied for relief against forfeiture, her grounds being that, although she was presently unable to find the arrears of £32,000, she would be able to do so if the Part 20 claim was successful, as she would then be in a position to assign the lease at a substantial premium. Her application was granted by a master of the Chancery Division, who took the view that it would be inequitable to require payment of the arrears before the hearing of the Part 20 claim, which would be heard not later than June 2000. Relief was accordingly granted on terms that all arrears and costs should be paid within 28 days of the final determination of that claim.
The landlord appealed to the Chancery judge, who proceeded on the basis that the Part 20 claim was at least arguable and that, if successful, the tenant would be able to obtain bridging finance while finding a buyer for the lease.
Held: The appeal was allowed.
The discretion to grant relief was to be exercised on the principle that the landlord should be put in the same position as he would have been if there had been no forfeiture: see Egerton v Jones [1939] 2 KB 702. While there was no rule that relief should be limited to 28 days, the period fixed for the payment of arrears had to be one within the immediately foreseeable future, so that the court could say with sufficient degree of certainty that the rent outstanding would be paid. It was not enough for the defendant tenant to show that she would be able to pay if the Part 20 claim was successful. As it appeared that she would be unable to pay if the claim did not succeed, it would be contrary to the above-stated principle to grant relief.
Richard Field QC and Martin Rodger (instructed by Masons) appeared for the claimant; Jonathan Brock QC (instructed by Maitland Walker) appeared for the defendant.
Alan Cooklin, barrister
