Landlord and tenant — Forfeiture — Works of alteration in breach of covenant — Whether right of forfeiture waived — Whether continuing breach or once-and-for-all breach — Whether relief from forfeiture
assignment in 1973 the plaintiff, Iperion Investments Corporation, acquired an
underlease for a term of 99 years from June 24 1965 (less the last 10 days) for
a premium of £470,000 in respect of flat 26 in Broadwalk House, Hyde Park Gate,
London SW7 — The lease contained a covenant on the part of the tenant (a) to
permit the landlord at reasonable times to enter and examine the condition of
the premises; and (b) not to make any structural alterations or other
alterations which affected the elevation or external appearance of the flat —
The lease also included a provision for re-entry in the event of breach — In
late 1990, without the defendant landlord’s consent, the plaintiff commenced
major works of alteration in breach of the underlease, and further refused to
give access to the defendant — On January 29 1991 the defendant served a notice
under section 146 of the Law of Property Act 1925 requiring the plaintiff to
remedy the breaches — On April 24 1991 the defendant purported to exercise the
right of re-entry and on the same day served a second notice under section 146
alleging breach of a covenant against using the flat otherwise than as a
private residence — On April 26 1991, pursuant to a consent order, the
plaintiff regained possession on certain terms and on April 29 1991 the
plaintiff issued a writ and in this action sought possession, a declaration
that the lease had not been forfeited, in so far as was necessary, relief from
forfeiture, an injunction restraining the defendant from seeking to enforce a
forfeiture, damages and an order pursuant to section 20C of the Landlord and
Tenant Act 1985 that the defendant’s costs in connection with the proceedings
were not to be regarded as relevant costs for the purposes of determining
service charges — By its defence and counterclaim the defendant sought a
declaration that the lease had been determined by re-entry, that there was no
relief from forfeiture and injunctions relating to the works of alterations and
damages — In September 1990 the defendants were informed in detail about the
proposed structural alterations to the flat which were to increase the floor
space by approximately 90 m2 — The defendant
stated that consent could be granted in consideration of a licence fee of
£200,000, as well as any additional conditions imposed by the freeholder — The
plaintiff did not accept the conditions and at the beginning of December 1990
commenced the proposed works, which included wooden shuttering to the east and
west ends of a balcony facing Hyde Park Gate, which were filled with concrete
and reinforced with steel bars forming a framework with solid piers flush with
the original exterior wall of the flat — After the service of the first section
146 notice alterations were continued and the defendant’s agent observed the
continuance of that work on March 27 1991 — On April 11 1991 the rent and
service charge in respect of the March quarter day were paid on behalf of the
plaintiff — There were three main issues: (i) whether the defendant had waived
the right to forfeit by acceptance of the rent or otherwise; (ii) whether each
breach of the covenant against making alterations was a continuing breach or a
once-and- for-all breach; (iii) whether the plaintiff should be granted relief
from forfeiture at all — Subsidiary issues included: (iv) whether a Mrs Ralli
resided in the flat at the date of the re-entry (in which event the re-entry
was unlawful); (v) whether the defendant is entitled to possession for breach
of the covenant restricting user to that of a private residence; and (vi)
whether the defendant is entitled under the lease to use service charge moneys
to pay for the costs of the litigation; and (vii) the terms upon which any
relief from forfeiture should be granted
the requisite knowledge of the basic facts constituting the breach of covenant,
if not earlier — Accordingly, on April 11 1991 the defendant accepted rent with
knowledge of the breaches specified in the first section 146 notice — The
question as to whether the first section 146 notice gave a reasonable time to
remedy the breaches was not relevant to the question of waiver — By April 11
1991 the defendant must be taken to have waived the totality of works, albeit
that there were certain minor elements remaining incomplete — The acceptance of
rent on that particular date, with the particular knowledge the defendant had,
operated as a waiver of the building venture taken as a whole so far as it
constituted a breach of covenant — The works which remained outstanding on
April 11 1991 were asphalting and the insertion of windows neither of which
qualified as ‘structural alterations or other alterations which affected the
elevation or external appearance of the premises’ — Further, in an earlier
action seeking an injunction to restrain the structural works ‘without
prejudice to the defendant’s right to forfeit the underlease’, and in the acts
of the defendant thereafter, the defendant’s acts were consistent with an
unequivocal affirmation of the lease — In that earlier action the plaintiff
gave undertakings not to proceed with the works on April 3 1991; the effect of
seeking those undertakings was to amount to an enforcement of the terms of the
lease
the failure of the plaintiff to permit the landlord to enter and inspect, each
such failure by a tenant was a single once-and-for-all breach — The obligation
to give access must be to give access within a reasonable time and when that
time has elapsed the breach is complete —- In relation to the breach not to
make structural alterations the actual alterations carried out cannot be said
to be continuing breaches; each material alteration changes the fabric and
integrity of the building and examples of categories of work
pouring of concrete into shutterings; the insertion of reinforcing bars; the
erection of a wall; the construction of a concrete plinth; the laying of roof
members; or the installation of windows — By accepting rent on April 11 1991
the defendant waived the right to forfeit the lease in respect of the matters
in the first section 146 notice — The defendant was not entitled to forfeit the
lease in respect of the matters in the second section 146 notice as the alleged
breaches of covenant had been remedied
breaches of covenant were serious and cavalier, had the defendant forfeited the
lease the plaintiff would have been granted relief from forfeiture, the
relevant factors in the exercise of that discretion included the value of the
lease, there being no evidence that the value of the defendant’s reversion had
been diminished and that the alterations proposed and undertaken were not
objectionable to the defendant as a matter of principle provided the consent of
the superior landlord was obtained and satisfactory terms agreed
forfeiture been granted the following conditions would have been imposed: the
reinstatement at the plaintiff’s expense of the premises; the provision of all
necessary information to the defendant for the purpose of identifying the work
which had been done; an undertaking to the court that the flat would not be
used by it in breach of covenant and payment of the defendant’s costs on an
indemnity basis
lived in the flat but, by reason of a fire, lived in another flat and attended
the flat regularly during the day and at some weekends — She regarded the flat
as her home as she had no other — To the ordinary objective observer, on the
evidence, Mrs Ralli lived at the flat at the time of the re-entry — As a matter
of construction of the underlease, the costs of the defendant’s forfeiture
claim and the plaintiff’s claim for relief from forfeiture could not be brought
within its provisions as being a sum recoverable by way of the service charge,
although the costs associated with the claim for an injunction do qualify,
there being a major distinction between enforcing covenants (which is
‘management of the Property’) and claiming or resisting forfeiture of a lease —
It cannot have been intended that a lessee in the position of the plaintiff
could be required to pay a proportion of the costs of the defendant landlord in
claiming a forfeiture, particularly where the court has ruled there to have
been a waiver For the purposes of
section 20C of the 1985 Act, the defendant’s costs of the claim for forfeiture
and of resisting the claim for relief from forfeiture were not to be regarded
as relevant costs to be taken into account in determining the amount of any
service charge payable by the plaintiff
The following
cases are referred to in this report.
Alghussein
Establishment v Eton College [1988] 1 WLR
587, HL
Associated
Deliveries Ltd v Harrison (1984) 50 P&CR
91; [1984] EGD 511; 272 EG 321, [1984] 2 EGLR 76, CA
Billson v Residential Apartments Ltd (1990) 60 P&CR 392, Ch;
[1992] 1 AC 494; [1991] 3 WLR 264; [1991] 3 All ER 265; [1991] 1 EGLR 70;
[1991] 18 EG 169 & [1991] 19 EG 122, CA; [1992] 1 AC 494; [1992] 2 WLR 15;
[1992] 1 All ER 141; [1992] 1 EGLR 43; [1992] 01 EG 91, HL
Blackstone
(David) Ltd v Burnetts (West End) Ltd [1973]
1 WLR 1487; [1973] 3 All ER 782; (1973) 27 P&CR 70
Calabar
Properties v Seagull Autos [1969] 1 Ch 451;
[1968] 2 WLR 361; [1968] 1 All ER 1
Cardigan
Properties Ltd v Consolidated Property
Investments Ltd [1991] 1 EGLR 64; [1991] 07 EG 132
Central
Estates (Belgravia) Ltd v Woolgar (No 2) [1972]
1 WLR 1048; [1972] 3 All ER 610; (1972) 24 P&CR 103; [1972] EGD 648; 223 EG
1273, CA
Doe d
Ambler v Woodbridge (1829) 9 B&C 376
Downie v Turner [1951] 2 KB 112; [1951] 1 All ER 416; [1951] 1 TLR
217
Evans v Davis (1878) 10 Ch D 747
Expert
Clothing Service & Sales Ltd v Hillgate
House Ltd [1986] Ch 340; [1985] 3 WLR 359; [1985] 2 All ER 998; [1985] 2
EGLR 85; (1985) 275 EG 1011 & 1129, CA
Farimani v Gates [1984] EGD 467; (1984) 271 EG 887, [1984] 2 EGLR 66,
CA
Fuller’s
Theatre & Vaudeville Co Ltd v Rofe [1923]
AC 435; 128 LT 774; 39 TLR 236, PC
Gray v Fowler (1873) LR 8 Ex 249
Greenwich
London Borough Council v Discreet Selling
Estates Ltd [1990] 2 EGLR 65; [1990] 48 EG 113
Griffin v Tomkins (1880) 42 LT 359
Hyman v Rose [1912] AC 623
Joseph v London County Council (1914) 111 LT 276
King, Re;
Robinson v Gray [1963] Ch 459; [1963] 2 WLR
629; [1963] 1 All ER 781; [1963] RVR 245, CA
Lilley
& Skinner Ltd v Crump (1929) 73 Sol Jo
366
Matthews v Smallwood [1910] 1 Ch 777
Moore v Ullcoats Mining Co Ltd [1908] 1 Ch 575
Morgan v Murch [1970] 1 WLR 778; [1970] 2 All ER 100, CA
Palmer v McNamara [1991] 1 EGLR 121; [1991] 17 EG 88
Penton v Barnett [1898] 1 QB 276
Powell v Hemsley [1909] 1 Ch 680; [1909] 2 Ch 252, CA
Public
Trustee v Pearlberg [1940] 2 KB 1
Ropemaker
Properties Ltd v Noonhaven Ltd [1989] 2 EGLR
50; [1989] 34 EG 39
Segal
Securities Ltd v Thoseby [1963] 1 QB 887;
[1963] 2 WLR 403; [1963] 1 All ER 500
Sella
House Ltd v Mears [1989] 1 EGLR 65; [1989]
12 EG 67
Shiloh
Spinners Ltd v Harding [1973] AC 691; [1973]
2 WLR 28; [1973] 1 All ER 90; (1973) 25 P&CR 48, HL
Southern
Depot Co Ltd v British Railways Board [1990]
2 EGLR 39; [1990] 33 EG 45
Wheeler
v Keeble (1914) Ltd [1920] 1 Ch 57
This was an
action by the plaintiff, Iperion Investments Corporation, the lessee of flat 26
in Broadwalk House, Hyde Park Gate, London SW7, seeking relief following a
purported peaceable re-entry by the defendant landlord, Broadwalk House
Residents Ltd in relation to the plaintiff’s underlease dated January 13 1969.
David
Neuberger QC and Stephen Jourdan (instructed by Collyer Bristow) appeared for
the plaintiff; Robert Reid QC and Jonathan Ferris (instructed by Gray Marshall
& Campbell, of Croydon) represented the defendant.
Giving
judgment MR RECORDER MAULEVERER QC said: Broadwalk House, Hyde Park
Gate, London SW7 (‘the building’), consists of a block containing 25 flats and
five town houses or maisonettes. Flat 26 is the entire top, the 11th floor and
half of the 10th floor. The 11th floor is part flat and part balcony, with the
balcony forming the roof of part of the 10th floor. The front of the building
is shown in the photographs bundle. The layout of flat 26 is shown on the
sketch plans in the core bundle.
The building
is held by the defendant under a headlease made on July 15 1968. The landlords
under the headlease are the trustees of the Campden (Non-Educational) Charities
(‘the superior landlord’). The headlease was granted to Trafalgar House
Developments Ltd as tenant for a term of 99 years from June 24 1965.
Trafalgar
House Developments granted an underlease of flat 26 on January 13 1969 (‘the
lease’) to Lord and Lady Crowther, for a premium of £100,000, for the term of
the headlease less 10 days. The lease was assigned in 1973 to Bathgate Ltd and
in 1980 by Bathgate Ltd to the plaintiff for a premium of £470,000.
The lease
provided, inter alia, that:
(a) the tenant should permit the landlord at
reasonable times to enter upon and examine the condition of the premises;
(b) the tenant should not use the premises
otherwise than as a private residence;
(c) the tenant should not make any structural
alterations or other alterations which affected the elevation or external
appearance of the premises whatsoever;
and included a
provision for re-entry in the event of breach.
In about 1985
the plaintiff first proposed carrying out alterations to flat 26. Thereafter
there was much discussion and correspondence about the plaintiff’s proposals.
In late 1990, without first having secured the defendant’s consent, the
plaintiff commenced major works of alteration to flat 26. The works of
alteration admittedly constituted a breach of the provisions of the lease. In
addition the plaintiff refused to give access to the premises.
On January 29
1991 the defendant served a notice under section 146 of the Law of Property Act
1925. The notice required the plaintiff to remedy the breaches, in so far as
they were capable of remedy and to make compensation for those breaches. On
April 24 1991 the defendant purported to exercise the right of re-entry under
the terms of the lease. On the same day the defendant served a second notice
under section 146 complaining of breach of the covenant against using the
premises otherwise than as a private residence.
On April 26
1991 a consent order was made permitting the plaintiff to regain possession on
certain terms including undertakings by the plaintiff. On April 29 1991 the
plaintiff issued a writ. The reamended statement of claim seeks the following
relief: (1) possession; (2) a declaration that the underlease has not been
forfeited; (3) in so far as may be necessary, relief from forfeiture; (4) an
injunction to restrain the defendant from seeking to enforce a forfeiture; (5)
damages, together with interest thereon pursuant to section 35A of the Supreme
Court Act 1981, to be assessed; (6) an order pursuant to section 20C, Landlord
and Tenant Act 1985, directing that the costs incurred by the defendant in
connection with these proceedings are not to be regarded as relevant costs to
be taken into account in determining the amount of any service charge payable
by the plaintiff; and (7) a declaration that the defendant has consented to the
use of part of the premises for business purposes, and that as against the defendant,
the plaintiff may lawfully use part of the premises for business purposes.
The defendant,
in the re-reamended defence and counterclaim, seeks the following relief: (1) a
declaration that the lease was terminated by peaceable re-entry on April 24 1991
and there is no right to relief from forfeiture; (2) alternatively possession
of the premises; (3) in the further alternative an injunction to restrain the
said nuisance and trespass; and (in respect of the breaches of alterations
covenant and/or trespass) an injunction ordering the plaintiff to reinstate the
demised premises to the same condition as the same were in immediately before
the execution of the works of structural alteration and the said trespass, so
as to comply with the covenants in the lease; (4) damages for breach of
covenant, nuisance and trespass, together with interest thereon pursuant to
section 35A of the Supreme Court Act 1981; and (5) further or other relief.
At the heart
of the dispute are three main issues whether:
(1) the defendant has waived the right to forfeit
by acceptance of rent or otherwise
(2) each breach of the covenant against making
alterations is a continuing breach or a once and for all breach; and if a
continuing breach, when was the last breach?
(3) the plaintiff should be granted relief from
forfeiture at all.
There are
other issues which have assumed lesser importance:
(1) whether Mrs Ralli resided in flat 26 at the
date of the re-entry on April 24 1991 (in which event the ‘peaceable re-entry’
on that date was unlawful);
(2) whether the defendant is entitled to
possession for breach of the covenant restricting user to that of a private
residence;
(3) whether the provisions of the eighth schedule
to the lease entitle the defendant to use service charge moneys to pay for the
costs of this litigation;
(4) the terms upon which any relief from
forfeiture should be granted.
Each of these
issues contains subordinate issues which I will seek to address in the course
of this judgment. There is a measure of agreement between the parties as
follows. (1) It is agreed that the measure of damages payable by the plaintiff
to the defendant in respect of ingress of water should be £250. (2) It is
agreed that if the re-entry on April 24 1991 was unlawful the measure of damages
for the trespass should be £250.
The headlease
contained the following tenant’s covenants (in clause 2):
(17) Not to cut maim or injure or permit to allow
to be cut maimed or injured any of the walls timbers roofs floors ceilings
partitions lights or other parts of any erection or building from time to time
erected or built on the demised premises. . . .
(19) That the Tenant will not carry on or permit
or suffer to be carried on upon the demised premises or any part or parts
thereof or any building or buildings from time to time thereon any profession
trade sale exhibition manufacture or any business or occupation whatsoever nor
change or permit or suffer to be changed the user within the meaning of the
enactments relating to Town Planning of the demised premises or any building or
buildings thereon or in or on any part thereof. . . .
(20) Not to use the demised premises or any part
thereof for any purpose whatsoever other than as and for high class residential
flats each in the occupation of one family and no more and as pleasure grounds
and gardens appurtenant to and enjoyed therewith. . . .
(25) Not to erect on the demised premises or any
part thereof any erection or building whatsoever nor make any addition or
alteration to any erection or building at any time and from time to time
erected or built on the demised premises or any part or parts thereof or any
architectural decoration thereof except in any and every such case upon a site
and in strict accordance with plans and elevations first approved of in writing
by the Landlords’ Surveyor and in such style and manner as the Landlords’
Surveyor for the sake of architectural character and appearance or otherwise
may require and in all respects to the satisfaction of such surveyor . . .
The lease
provided as follows: definitions: Recital (K): ‘The landlord’s costs’ means all
costs sums payments charges and expenses properly incurred by the landlord in
carrying out its obligations under the seventh schedule and also under the
covenants and conditions contained in the headlease (but not so as to include
any sum reserved by way of rent in the headlease) and in the proper and
reasonable management of in and about the property. The items comprising and
included in the landlord’s costs are set out (but not by way of definition) in
the eighth schedule.
Clause 4 of
the lease contains a proviso for re-entry:
PROVIDED
ALWAYS AND IT IS HEREBY AGREED AND DECLARED as follows:
(1) If the rent hereby reserved or any part
thereof is unpaid for twenty-one days after becoming payable (whether formally
demanded or not) or if any of the covenants on the part of the Tenant herein
contained are not observed and performed then and in any such case it shall be
lawful for the Landlord or any person or persons authorised by it in that
behalf at any time thereafter to re-enter the Premises or any part thereof in
the name of the whole and thereupon the term hereby granted shall absolutely
determine but without prejudice to any right of action or remedy of the
Landlord in respect of any antecedent breach of the covenants on the part of
the Tenant herein contained.
The tenant’s
covenants are found in the sixth schedule:
7. The tenant
shall permit the Landlord with or without workmen and others at reasonable
times to enter upon and take a plan and examine the condition of the Premises
and also take a schedule of fixtures therein . . .
9. The Tenant
shall not allow or permit any new window light opening.
10. The
Tenant shall not use the Premises:–
(A) as regards the Flat otherwise than as a
private residence in single occupation only (and this shall exclude all
business or professional uses) and shall not take in lodgers or boarders or
paying guests
(B) . . .
11. The
Tenant shall not make any structural alterations or other alterations which
affect the elevation or external appearance of the Premises whatsoever nor
shall the Tenant make any other alteration in the Premises without the approval
in writing of the Landlord and if necessary of the Superior Landlord to the
plans and specifications thereof and shall make such alterations only in
accordance with such plans and specifications when approved. The Tenant shall
at the Tenant’s own expense obtain all licences planning permission and other
things necessary for the lawful carrying out of such alterations and shall
comply with all bye- laws regulations and conditions applicable generally or to
the specific works undertaken. . . .
15. The
Tenant shall permit the Landlord and the owners of the other flats and houses
to have access to and to enter upon the Premises as often as it may be
reasonably necessary for them to do so in the performance of the obligations
hereunder or under covenants relating to other flats or houses and similar to
those herein contained.
16. The
Tenant shall perform and observe the covenants on the part of the Landlord and
the conditions contained in the Head Lease so far as the same relate to the
Premises and shall keep the Landlord indemnified against all claims damages
costs and expenses relating thereto . . .
The landlord’s
costs are itemised in the eighth schedule:
6. All costs
expenses and payments made by the Landlord (other than for the payment of rent)
in complying with the covenants on its part contained in the Head Lease
including (without prejudice to the generality of the foregoing) contribution
to the expenses incurred with any other person in making repairing, renewing,
rebuilding and cleansing all party walls fences drains gutter downspouts and
other structures used in common with the owners and occupiers of any adjoining
or neighbouring premises the payment for the maintenance and upkeep of the road
called Hyde Park Gate.
7. The proper
cost of management of the Property. . . .
9. Services
reasonably and properly provided by the Landlord for the better enjoyment and
use of the Property by the several lessees tenants and occupiers thereof.
The first
section 146 notice (served on January 29 1991) relied upon breaches of
covenants 7 (permit entry), 11 (alterations) and 16 (perform covenants in
headlease) of the lease and 25 (alterations) of the headlease. The second
section 146 notice (served on April 24 1991) relied upon breaches of covenants
10(A) (private residence) and equivalent provisions in the headlease.
It is
necessary to recite the facts in some detail before turning to the issues
arising from them. I find that the following facts are either agreed or proved.
In 1980 the
plaintiff purchased the long-leasehold interest in flat 26 for £470,000;
Captain Stravelakis controlled the plaintiff at all material times though not a
member or officer of the company; the plaintiff is a corporation registered in
Liberia (and has never been registered in UK pursuant to section 691, Companies
Act 1985; none of Iperion’s officers or directors has ever resided in the UK).
Tasos
Alexandrou acted on behalf of the plaintiff during the period January 1 1990 to
April 24 1991. Mrs Eileen Griffiths acted on behalf of the plaintiff during the
period from January 1 1990 to April 24 1991.
The defendant
was formed by the residents in the building in order to acquire the headlease
from Trafalgar House Developments and the defendant accordingly took an
assignment of the headlease to the defendant in 1985. The plaintiff is and
always has been a director of and shareholder in the defendant.
From about the
time that the plaintiff purchased flat 26, a shipping company, Prometheus
Maritime (London) Ltd used one room on the 11th floor of the flat for the
purposes of its business. In 1985, the plaintiff first proposed carrying out
alterations to flat 26. Planning permission was obtained. Those proposals were
not proceeded with. Discussions about possible extensions proceeded intermittently
thereafter eg in 1988: see Kinleigh’s — the defendant’s managing agents —
letter of June 9 1988.
In about April
1989, the defendant decided to replace the roof of the building over flat 26:
see letter from Mr Simpson of Kinleigh to Mrs Griffiths of April 18 1989.
Subsequently, those works were deferred: see board minute of September 19 1989
para 5(c)(ii). On April 28 1989, Horrocks & Co, the plaintiff’s then
solicitors, wrote a letter before action to Kinleigh concerning the continuing
problems with water penetration. On June 22 1989, a writ was issued by the
plaintiff in action number 1989 ORB NO 0761 (‘the first action’), claiming
damages for breach by the defendant of its repairing covenant in the lease.
In about June
1989, there was a water leak from flat 26 into flat 25: see the board minutes
for June 6 1989 para 3(vii) and the letter from Mr Simpson of Kinleigh to Mrs
Griffiths of June 29 1989. On October 31 1989 there was a serious fire in flat
26. As a result, Prometheus moved its office to another flat in the building,
flat 22. A claim was made on the insurance policy held by the defendant with
Zurich Insurance. Ian Hyman & Co were engaged by the plaintiff as surveyors
to superintend the reinstatement works and a tender from Richard Devine, a firm
of builders, was accepted to carry out the works.
In about
February 1990, the plaintiff asked for the defendant’s consent to erecting
glass covered conservatories on the exposed parts of the 11th floor: see the
drawings attached to Horrocks’ letter of February 26 1990. On May 29 1990, Mr
Paul Manning of Kinleigh wrote to Mr Hyman agreeing to the instruction of
Richard Devine to undertake the reinstatement of the roof. On June 6 1990 the
Captain and Mr Alexandrou met Mr Hyman, in the presence of Eileen Griffiths,
and the Captain instructed Mr Hyman to go ahead with alterations without
planning permission, because the proposed alterations would not be visible from
outside the building. On July 11 1990, Mr Manning sent a formal order for the
work to Richard Devine.
On July 13
1990 Mr Hyman wrote to Mr Manning that the plaintiff had decided not to proceed
with the extensions to the north- facing elevation. On July 19 1990 the Captain
was warned in writing by Mr Hyman, that the underlessee was bound to require a
formal licence from the landlord for permission to construct the southern
extension. On August 10 1990 Mr Hyman wrote to inform Mr Manning that
extensions to the north were proposed.
On September
13 1990 the Captain was informed in writing by Mrs Griffiths of the need to
replace windows in the flat because of deteriorating weather and the risk of
leaks to flats underneath.
On September
18 1990 Mr Hyman explained the proposed extensions to the defendant’s board of
directors. The defendant told Mr Hyman and Eileen Griffiths that licence to
carry out the works would be subject to conditions: structural survey (to be
paid for by the plaintiff), the underlessee of flat 26 taking responsibility
for the parapet wall, the plaintiff paying legal costs, an increase in the
service charge in the underlease of flat 26 to reflect the increased floor
space in the flat, and a licence fee of £200,000, as well as any additional
conditions imposed by the freeholder. The defendant requested more detailed
information about the proposed extensions. Mrs Griffiths and Mr Hyman indicated
that work would probably not proceed if those were the conditions. The
increased floor space as a result of the proposed extensions was 90 m2.
On September
19 1990, the plaintiff’s contract with Richard Devine, the main contractors,
was terminated. They were replaced by Singleton Construction.
On September
19 1990, Mr Manning wrote to the plaintiff demanding that the work of replacing
the window frames in flat 26 be attended to forthwith. On the same day, Mr
Hyman wrote to Mr Ian Taylor [ARICS] of Chestertons, the superior landlord’s
surveyor, making formal application for licence for the alterations. On
September 24 1990, Mr Hyman sent Mr Taylor drawings of the proposed alterations
and on September 26 1990, layout plans. On September 19 1990 Mrs Griffiths was
informed of the conditions for a licence and the defendant’s request for more
information about the proposed extensions.
On September
25 1990, Mr Manning wrote to Mr Hyman requiring installation of windows and
pointing out that the contractor’s plastic sheeting was inadequate.
On September
27 1990 the plaintiff wrote to the defendant offering a payment of £50,000 for
permission to carry out the alterations and protesting about the sum of £200,000
which had been put forward by the defendant. At the end of September 1990, Mr
Hyman withdrew from the project and was replaced by John Perrin [FRICS] as the
surveyor supervising the works. On October 2 1990, Mr Hyman criticised the
Captain for his decision to employ Singleton Construction, a small contractor,
in place of Richard Devine. On October 17 1990, Lee Bolton & Lee, the
superior landlord’s solicitors, wrote to Mr Armstrong, chairman of the
defendant, asking for an undertaking as to the superior landlord’s legal and
surveyors’ costs of the application for licence for the alterations.
On October 21
1990 Mr Armstrong, in a letter to the plaintiff (of the details of which the
Captain was subsequently notified) reaffirmed the conditions for a licence and
affirmed his understanding that until the freeholder’s approval was obtained no
structural survey or any other work would be commissioned. The letter stated
that the licence fee of £200,000 was directly related to the estimated cost of
installing service lifts.
On November 1
1990 the plaintiff’s surveyor John Perrin informed Mr Alexandrou that plans for
the extensions were complete. Detailed plans at scale 1:50 had been prepared
for Mr Perrin in respect of the internal alterations and the extensions and the
external alterations. On November 6 1990, at the defendant’s board meeting
attended by Mrs Griffiths, it was recorded that no plans had been received from
the plaintiff as to the nature of the internal works to flat 26 which were then
proposed. On November 8 1990 Mrs Griffiths reported to the Captain that the
defendant was adamant as to the need for its permission before alterations took
place; Mr Manning wrote to Mr Perrin reminding him that no licence had been
given and requesting full plans and details of the proposed alterations and any
surveyor’s or engineer’s reports and requesting replacement of inadequate
plastic sheeting which was not keeping out the rain at flat 26 and below; Mr
Manning made the point that windows had to be replaced before the roof
replacement could continue.
On November 13
1990 Mr Perrin warned Mr Alexandrou in writing that to proceed with alterations
and extensions without a licence would risk an injunction.
On November 14
1990 Mr Perrin was instructed by the plaintiff to commence construction of the
extensions. On November 19 1990 Mr Manning requested the freeholders’
solicitors not to incur any fees as no terms had yet been agreed with the
plaintiff. On November 23 1990, Mr Manning asked the Captain to provide a key
to flat 26 for emergency access, but no key was provided then or later.
On November 23
1990, Mr Alexandrou (on behalf of the plaintiff) in a letter to Mr Armstrong
offered in principle to assume responsibility for the maintenance of the
balustrading on balconies and parapet walls of flat 26, and to disclose the
existing survey confirming that the building had sufficient loadbearing
capacity, and to pay a £50,000 fee or a modest increase thereof, in order to
secure a licence for what he described as the ‘proposed development’.
On November 26
1990, Mr Alexandrou was warned in a letter from Mr Perrin that there was water
ingress into the flat below although Mr Perrin had not seen the damage himself.
On November 28 1990, the Captain was warned by Mr Alexandrou that the defendant
was adamant on the condition of a licence — £180,000 for two lifts. On November
29 1990, the plaintiff was warned by Kinleigh that replacement of the roof was
delayed because of delay in the replacement of windows.
At the end of
November/beginning of December 1990, work began on constructing the alterations
to flat 26, consisting of:
(a) The erection of three extended areas on the
11th floor; one on the north-east side (to house the new kitchen); one on the
north-west side (to extend the office area) and one on the south side, (to fill
in the indentation in the straight run of the south facing wall).
(b) The installation of an underfloor-heating
system in both the 10th and 11th floors, to be covered with marble.
(c) The installation of air-conditioning units.
(d) The installation of a new kitchen in the
north-east extension.
On December 10
1990 the Captain was informed that Mr Armstrong was away on holiday over
Christmas until January 4 1991. On December 20 1990, Mr Alexandrou faxed Mr
Perrin that the Captain expected all building work to be completed before Mr
Armstrong’s return on January 4 1991 and asked Mr Perrin to get Singleton
Construction to increase its workforce to complete all present works as soon as
possible. By December 21 1990, the foundations to the office extension had been
laid.
On January 4
1991 Mr Manning telephoned Mr Alexandrou’s office in flat 22 and left a message
requesting access to inspect flat 26. No one returned Mr Manning’s call. On
January 10 1991, Mr Manning telephoned Mr Perrin’s office to request access and
was told that Mr Perrin was on his way to a meeting with the owner of flat 26.
Mr Manning telephoned flat 26 and was told he was not there. Mr Manning
received a fax message at 14.52 pm from Mrs Griffiths stating that Mr Perrin
could not contact the owner and therefore no permission to inspect the flat
could be given, and that strict instructions had been given not to allow access
to any unauthorised person.
Between
January 10 and January 12 1991 the Captain was staying in flat 22. That fact
suggests very clearly that Mrs Griffiths’ statement that she could not contact
the owner was untrue and part of a deliberate strategy of concealment.
On January 11
1991, the defendant’s solicitors, Gray Marshall & Campbell, in an open
letter warned the plaintiff’s solicitors, ‘Waterson Hicks’, that the defendant
would not countenance any structural alteration to the premises, demanded that
the work stop immediately and stated that the defendant would be considering
with Gray Marshall & Campbell what action was appropriate whether by way of
forfeiture proceedings or otherwise. On January 15 1991, Waterson Hicks
notified Gray Marshall & Campbell that they were unaware of the nature of
works and would take instructions. Work continued. On January 17 1991, Gray
Marshall & Campbell complained to Waterson Hicks that unauthorised
alterations appeared to be solid brick-built extensions and not what was
previously proposed; and unless building work stopped immediately all without
prejudice discussions would cease and steps would be taken to enforce the
covenants in the underlease.
On January 21
1991, Mr Manning was refused access to the premises by the plaintiff. Mr
Alexandrou demanded written requests for access. On January 21 1991, Gray
Marshall & Campbell told Waterson Hicks that without prejudice negotiations
could not be advanced until an undertaking not to continue with the building
works was given by the plaintiff. Gray Marshall & Campbell expressed
concern that the defendant might be in breach of the headlease through no fault
of its own.
On January 21
1991, Mr Manning wrote to Mr Alexandrou requesting access to inspect the
unauthorised alterations.
On January 22
1991 the defendant held a board meeting attended by Mr Hicks of Waterson Hicks.
On January 23
1991, managing agents were refused access to the premises. Mr Manning took
photographs from the adjacent roof, showing that the extensions involved
substantial structural work which was proceeding. Wooden shuttering to the east
and west ends of the balcony facing Hyde Park Gate had been filled with
concrete and reinforced with steel bars forming a framework with solid piers
flush with the original exterior wall of flat 26. To the rear of the flat a
concrete plinth had been formed on the balcony to receive a further extension.
On January 29
1991 a notice under section 146 of the Law of Property Act 1925 (the first
section 146 notice) was served on the plaintiff at flat 26 complaining of
breaches of covenant: unauthorised alterations and refusal of access. The
notice had to be sellotaped to the front door to the flat because the letterbox
was blocked up; and even though there were people in the flat no one opened the
door to accept service of the notice.
Between
January 30 and February 1 1991 alterations work was observed to continue
notwithstanding service of the first section 146 notice. Between 31 January and
February 2, the Captain was in London and staying at flat 22. On February 4
1991 builders materials were delivered to the premises.
On February 13
1991 Gray Marshall & Campbell served the defence and counterclaim in the
first action and a draft summons in that action applying for an injunction
restraining the plaintiff from making any structural alterations or other
alterations which affected the elevation or external appearance of flat 26,
until trial or further order (‘the first summons’). That summons was duly
issued on that day. The defence and counterclaim made identical complaints of
breach of covenant to those contained in the first section 146 notice: see para
6 of the counterclaim. In para 7 of the counterclaim it was pleaded: ‘it is the
intention of the Plaintiff to forfeit the said Underlease after the expiration
of a reasonable time’. The counterclaim prayed for injunctions ‘without
prejudice to the Defendant’s right to forfeit the Underlease’:
(a) restraining the plaintiff from making any
structural alterations or other alterations which affect the elevation or
external appearance of the premises;
(b) restraining the plaintiff from making any
other alterations without the written approval of the defendant and if
necessary the superior landlord;
(c) ordering the plaintiff to reinstate the
premises.
On February 14
1991, Kinleighs wrote to Mr Alexandrou at flat 26 asking for access to inspect.
On February 15 1991, Gray Marshall & Campbell served a copy of the first
summons endorsed with a return date of March 18 1991.
On February 18
1991, Gray Marshall & Campbell wrote to Waterson Hicks advising that Gray
Marshall & Campbell intended to apply on February 19 1991 for an ex
parte interim injunction pending the hearing on March 18. Waterson Hicks
replied, offering an undertaking by the plaintiff not to proceed with any
structural alterations or other alterations which might affect the elevation or
external appearance of flat 26 prior to March 19 1991, but without prejudice to
the plaintiff’s assertion that they were entitled to proceed with such
alterations. Gray Marshall & Campbell asked that the undertaking be to the
court, but Waterson Hicks refused: see attendance notes on February 18 and 19
1991. The undertaking in the form offered was given on February 19 1991 and in
consequence the defendant sought no order on February 19 1991: see Gray
Marshall & Campbell’s letter of February 19 1991.
On February 19
1991, managing agents took photographs of the building works on the roof of
flat 26: the photographs were taken from the adjoining roof showing the
unauthorised alterations continuing. On February 20 1991, Gray Marshall &
Campbell served a second summons (‘the second summons’) on Waterson Hicks,
seeking injunctions restraining the plaintiff until trial or further order:
(a) from making any structural alterations or
minor alterations which affect the elevation or external appearance of flat 26;
(b) from carrying out any further building works
of any kind on the balcony area at the penthouse level of flat 26 to enclose
the said balcony area or to extend the said premises
and an order
that the plaintiff do forthwith permit two surveyors acting for the defendant
to enter and examine the condition of flat 26.
On February 22
1991, Mr Gerald Swarbrick inspected the interior of flat 26: see para 31 of his
witness statement, and the Gray Marshall & Campbell attendance note of that
date. On the same date, Waterson Hicks wrote to Gray Marshall & Campbell
confirming that the plaintiff had advised that they would not proceed with work
to the newly extended areas prior to the meeting which had been arranged for
February 28 1991.
On February 28
1991, there was a without prejudice meeting attended by the Captain and
directors of the defendant to discuss consent to the alterations. In principle
it was agreed that consent could be given subject to head landlord’s consent,
access to the premises for proper inspection by the managing agents, agreement
as to compensation for consent and confirmation that unauthorised works would
not continue pending the superior landlord’s consent so as to avoid jeopardy to
the headlease. The Captain promised that no further works would be undertaken
in the extended premises. On March 1 1991, Mr Manning wrote to Chestertons
asking for the superior landlord’s approval to the alterations. On the same
date, Waterson Hicks wrote to Gray Marshall & Campbell confirming that the
plaintiff had advised that it would not proceed with any work within the
newly-extended areas until the superior landlord’s consent had been obtained to
the works.
On March 4
1991, Gray Marshall & Campbell reminded Waterson Hicks that access was
still required for an inspection. On March 5 1991, Waterson Hicks confirmed
that the plaintiff would permit access to surveyors on reasonable prior notice.
Between March 8 1991 and March 18 1991, Waterson Hicks and Gray Marshall &
Campbell discussed without prejudice the compensation for consent — namely the
provision of new additional lifts in Broadwalk House to be paid for by the
plaintiff. On March 13 1991, Lee Bolton and Lee wrote to Mr Armstrong asking
for a solicitor’s unequivocal undertaking as to the legal and surveyors’ costs
of the superior landlord in relation to the application for licence for the
alterations. On March 14 1991, Gray Marshall & Campbell replied asking for
a realistic estimate of those costs.
On March 15
1991 Waterson Hicks confirmed that the plaintiff would give undertakings not to
carry out unauthorised works including any further building works of any kind
on the balcony area on the 11th floor so that the application for interlocutory
relief listed for hearing on March 18 1991 could be stood out. On March 18
1991, Gray Marshall & Campbell sent Waterson Hicks a copy of the letter
from Lee Bolton & Lee of March 13 1991 and Waterson Hicks replied asking
Gray Marshall & Campbell to inquire whether an unlimited undertaking from
the plaintiff (rather than from solicitors) would suffice. On March 18 1991
Judge Bowser QC dismissed the first summons because the defendant did not
attend to pursue it.
On March 21
1991, Waterson Hicks sent Gray Marshall & Campbell the plaintiff’s
undertaking to reimburse the superior landlord and the defendant their
reasonable legal and surveyor’s costs in connection with the proposed works,
whether or not they proceeded to completion. On March 22 1991, Waterson Hicks
served on Gray Marshall & Campbell a summons for directions returnable on
April 24 1991. On that date, Prometheus began to move its office equipment from
flat 22 to flat 26.
On March 25
1991 the rent and service charge fell due under the lease. Payment was made by
cheque on April 9 1991; was paid in by Kinleigh on April 11 1991 and debited
from the plaintiff’s bank account on April 15 1991. Mr Manning says that the
ground rent and service charge account was sent ‘at about this time’ (referring
to a date in March 1991). He was aware of the first section 146 notice, but was
not aware that the demand for and acceptance of rent might in any way be
relevant to the section 146 notice (his statement para 60). The date of demand
pleaded in the reamended statement of claim was March 28 1991.
On March 27
1991, Mr Manning inspected the roof of Broadwalk House and observed that works
were continuing: the extension on the north-east side of the building had been
roofed over; and the extension on the north-west side of the roof had been
roofed over. On March 28 1991, Gray Marshall & Campbell complained to
Waterson Hicks about breach of the undertaking and warned that the summons for
interlocutory relief was being restored for hearings. Kinleigh sent the demand
for rent and service charge due on March 25 1991 to the plaintiff. Between March
26 and 28 1991 the Captain was in London and visiting flat 26. On April 2 1991,
Waterson Hicks informed Gray Marshall & Campbell that the plaintiff’s
instructions were that the new work was to the main roof and not to areas of
the new extension. On April 2 1991, Mrs Ralli moved from flat 22 to an hotel
for three nights and then to Greece for three weeks.
On April 3
1991, the plaintiff undertook to the court:
(a) ‘not to make any structural alterations or
minor alterations which affect the elevation or external appearance’ of the
flat and
(b) ‘not to carry out any building works of any
kind on the balcony area on the 11th floor of the said premises so as to
enclose the said balcony area or to extend the said premises’; and also to
permit two surveyors acting on behalf of the defendant to enter flat 26 on
reasonable notice (not less than 48 hours) and to examine the condition
thereof.
Orders were
also made for the service by the plaintiff of a reply and defence to
counterclaim by April 24 1991 and for discovery by May 8 1991.
On April 6
1991, Mr Manning wrote to Mr Perrin stating that the installation of marble
flooring in flat 26 was not permitted under the lease.
On April 8
1991, Mr Manning wrote to Waterson Hicks asking for access for inspection on
April 11 1991. On April 11 1991 it is agreed that rent was accepted. On April
12 1991 Waterson Hicks replied saying that they had been unable to make contact
with the plaintiff in order to arrange a mutually convenient time for
inspection of the premises. On April 15 1991, Mr Manning wrote to the Captain
at flat 26 and to Waterson Hicks, asking for access to inspect on April 17 1991
at 12 noon.
On April 16
1991, Gray Marshall & Campbell wrote to Lee Bolton & Lee pressing for a
figure in respect of the undertaking as to costs sought by the superior
landlord and stating ‘the parties are very anxious indeed to proceed with this
matter’. On the same date, Mrs Griffiths wrote to Kinleigh stating that the
owner of flat 26 was abroad and asking to defer an inspection until his return.
On April 17
1991, Mr Campbell of Gray Marshall & Campbell spoke to Mr Curtin of
Waterson Hicks on the telephone. Inter alia, Mr Campbell asked if
Waterson Hicks had had any response from Lee Bolton & Lee as to a ceiling
as to costs. On the same date, Gray Marshall & Campbell wrote to Waterson
Hicks, stating that the managing agents would attend at 12 noon that day and
that the plaintiff must give them access to inspect.
On April 18
1991, Gray Marshall & Campbell sent by fax to Waterson Hicks a copy of a
letter from Lee Bolton & Lee of the same date, containing an estimate of
the superior landlord’s surveyor’s fees and of those of Lee Bolton & Lee.
On the same day, copies of the order of April 3 1991 endorsed with penal
notices were served on a workman employed by Caradon Everest Ltd and on Messrs
Alexandrou and Singleton.
On April 19
1991, Waterson Hicks served the plaintiff’s reply and defence to counterclaim.
On the same day, Gray Marshall & Campbell wrote to Waterson Hicks giving
formal notice that the defendant’s surveyors would attend to inspect flat 26 on
April 22 1991. A copy of the order of April 3 1991 endorsed with a penal notice
was served on Mrs Griffiths. On April 22 1991, Mr Stuart Dowden [ARICS] and Mr
Manning of Kinleigh inspected flat 26 in the presence of Mr Perrin. On April 23
1991, Mr O’Brien of Gray Marshall & Campbell spoke on the telephone to Mr
Hicks of Waterson Hicks and agreed directions for the trial of the action,
which the judge would be invited to make at the hearing of the summons for
directions the next day.
On April 24
1991, at 6 am, bailiffs broke into flat 26 in the company of Mr Armstrong and
changed the locks. On the same day, Gray Marshall & Campbell served a
further section 146 notice (‘the second section 146 notice’) complaining of
breaches of:
(a) the covenant against using the premises
otherwise than as a private residence;
(b) the covenant to observe the headlease
covenants restricting use for business purposes.
Also on the
same day, an order for directions was made as agreed the day before.
Notification of purported re-entry was faxed to Waterson Hicks at about 8.03 am
on April 24 1991.
On April 26
1991 a consent order was made permitting the plaintiff to regain possession on
terms, including undertakings by the plaintiff:
(a) only to use the flat as a private residence,
but with 28 days to stop business user (expiring on May 24 1991);
(b) not to carry out any building works to the
interior or exterior of the newly-extended areas;
(c) not to lay marble floors in any part of the
flat;
(d) to abide by the tenant’s covenants in the
lease.
On April 29
1991, the writ and statement of claim in this action was served. On July 26
1991, the defence and counterclaim was served.
The
plaintiff’s conduct
I am satisfied
that from December 1990 onwards the plaintiff acted deliberately and
dishonestly in breach of covenant and was resolved to complete the works of
alteration as quickly as practicable with or without the consent of the
defendant or the freeholders. I am further satisfied that until April 18 1991
the plaintiff was willing to give undertakings that it was prepared to
disregard (although I consider quite separately below whether there was in fact
a breach of the undertaking given to the court on April 3 1991) and by denying
access to the flat and telling untruths attempted to mislead and deceive the
defendant as to its activities and intentions. Even the plaintiff’s own
solicitor, Mr Hicks, was kept in the dark. He told me: ‘I was aware that those representing
my client were capable of telling me one thing and something else to others and
performing work they hadn’t told me about’.
Did the
defendant waive the right to forfeit the lease?
The following
summary of the law is taken from Woodfall: Landlord and Tenant 28th ed
para 1-1906:
Acknowledgement
of continuance of tenancy is waiver of forfeiture.
Courts of law
always lean against forfeitures; therefore whenever a landlord means to take
advantage of any breach of covenant or condition so that it should operate as a
forfeiture of the lease, he must take care not to do anything which may be
deemed an acknowledgment of the continuance of the tenancy, and so operate to
waive the forfeiture. Merely lying by and
rule is that, the lease being voidable and not void, the lessor, or other
person legally entitled to the reversion, is put to his election as soon as he
becomes aware of the breach. The knowledge required to put a lessor to his
election is knowledge of the basic facts which in law constitute a breach of
covenant entitling him to forfeit the lease. Consequently, once he has
communicated to the tenant his election to treat the tenancy as continuing or
has done any act which recognises the continued existence of the tenancy or is
inconsistent with its determination, he is deemed to have waived the
forfeiture. Cases where there has been an acceptance of rent (and it seems also
cases where there has been a demand for rent) fall into a special category;
where no acceptance of rent (or demand for rent) is involved the court is free
to look at all the circumstances of the case to consider whether the act relied
upon as amounting to a waiver was so unequivocal that, when considered objectively,
it could only be regarded as having been done consistently with the continued
existence of the tenancy. A statement, or act, by the lessor which is neither
communicated to the tenant nor can have any impact upon him should not be taken
to be an election to waive the forfeiture.
It is agreed
that it is for the tenant to assert and prove the acts of affirmation relied
upon and also the landlord’s knowledge of the breach when doing those acts: Matthews
v Smallwood [1910] 1 Ch 777 and Fuller’s Theatre & Vaudeville
Co Ltd v Rofe [1923] AC 435.
In Central
Estates (Belgravia) Ltd v Woolgar (No 2) [1972] 1 WLR 1048 the
landlords served a notice under section 146 complaining that the tenant, in
breach of covenant, had been unlawfully keeping a brothel. Two months later, by
a clerical error, a demand for rent was sent out and the tenant paid the rent
and was given a receipt. The Court of Appeal held that the landlords’ demand
for and acceptance of rent, through their agents, with knowledge of the breach of
covenant effected a waiver of the forfeiture.
Lord Denning
said at p 1052F:
So we have
simply to ask: was this rent demanded and accepted by the landlords’ agents
with knowledge of the breach? It does
not matter that they did not intend to waive. The very fact that they accepted
the rent with the knowledge constitutes the waiver. The position here is quite
plain. The agents, who had full authority to manage these properties on behalf
of the landlords, did demand and accept the rent with full knowledge. It may be
that the instructions did not get down the chain of command from the partner to
the subordinate clerk who issued the demands and gave the receipts for rent.
That cannot affect, to my mind, the legal position. It comes within the general
rule that the knowledge of the agent — and of his clerks — is the knowledge of
the principal. A principal cannot escape the doctrine of waiver by saying that
one clerk had the knowledge and the other received the rent. They must be
regarded as one for this purpose. The landlords’ agents knew the position and
they accepted the rent with knowledge. That is a waiver.
I know that
the judge found that the agents had no intention to waive, and finds also that
the tenant knew they had no intention to waive. That seems to me to make no
difference. The law says that if the agents stated in terms: ‘We do not intend
to waive’, it would not have availed them. If an express statement does not
avail a landlord, nor does an implied one. So it does not avail the landlords
here.
For these
reasons I hold that the forfeiture was waived by the demand and acceptance of
rent.
Buckley LJ
said at p 1054D:
In my
judgment, the effect in law of an act relied on as constituting a waiver of a
right to forfeit a lease must be considered objectively, without regard to the
motive or intention of the landlord or the understanding or belief of the
tenant. It has long been accepted as law that a landlord cannot prevent
accepting a payment of rent from operating as a waiver merely by stating at the
time of payment that he accepts it without prejudice to his right to forfeit:
see Matthews v Smallwood [1910] 1 Ch 777, per Parker J at
p 786 and Oak Property Co Ltd v Chapman [1947] KB 886, 898. It
must in my judgment be equally true that a landlord may by some act such as
receiving rent after notice of a breach of covenant unequivocally and
effectively waive his right of action in respect of that breach,
notwithstanding that the tenant does not there and then appreciate the legal
consequences of the act.
The landlord’s
right is a right to elect whether to treat the lease as forfeit or as remaining
in force. Any election one way or the other, once made, is irretractable: Scarf
v Jardine (1882) 7 App Cas 345, per Lord Blackburn at p 360.
If the landlord by word or deed manifests to the tenant by an unequivocal act a
concluded decision to elect in a particular manner, he will be bound by such an
election. If he chooses to do something such as demanding or receiving rent
which can only be done consistently with the existence of a certain state of
affairs, viz, the continuance of the lease or tenancy in operation, he cannot
thereafter be heard to say that that state of affairs did not then exist. If at
the time of the act he had a right to elect whether to forfeit the lease or
tenancy or to affirm it, his act will unequivocally demonstrate that he has
decided to affirm it. He cannot contradict this by saying that his act was
without prejudice to his right of election continuing or anything to that
effect. In this respect his act speaks louder than his words, because the act
is unequivocal: it can only be explained on the basis that he has exercised his
right to elect. The motive or intention of the landlord, on the one hand, and
the understanding of the tenant, on the other, are equally irrelevant to the
quality of the act.
Cairns LJ
delivered a judgment to similar effect, but added at p 1057A:
But I go
further: even when the tenant knows perfectly well that the landlord intends to
forfeit, he must be entitled to put him to election. I will assume that a
demand for rent does not by itself effect waiver. If such a demand is made, the
tenant is entitled to tender the rent and to say: ‘Now you must elect: you can
refuse my rent and maintain the forfeiture, or you can accept the rent and
waive the forfeiture.’ It is not,
however, necessary for him to use such words or even to have such thoughts. The
tender of rent by itself is by implication an invitation to the landlord to
elect; and if he accepts the rent he elects to waive the forfeiture. I can see
no good answer to the contention that that is what happened in this case.
On March 27
1991, Mr Manning inspected the exterior of flat 26 from the roof. I have
already made findings as to what was found. He took photographs.
Mr Reid QC
accepted that he would be in some difficulty in contending that as at that date
the landlord did not have the requisite knowledge of the basic facts which in
law constituted a breach of covenant entitling the landlord to forfeit the
lease. In David Blackstone Ltd v Burnetts (West End) Ltd [1973] 1
WLR 1487 Swanwick J considered what degree of knowledge was required. He held,
at p 1501E: ‘In my judgment, again without the guidance of any direct
authority, the knowledge required to put a landlord to his election is
knowledge of the basic facts which in law constitute a breach of covenant
entitling him to forfeit the lease.’ Mr
Reid agreed that it was not necessary for the landlord to have knowledge of all
material facts. He must however have knowledge of the facts which give rise in
law to his alternative rights (forfeiture or affirmation of the lease).
I accept Mr
Reid’s submission that it would not be open to the plaintiff to submit that the
defendant should have known better or should not have been deceived by the
plaintiff. Plainly the plaintiff cannot rely upon his own wrong to avoid the
consequences of his own conduct: see Alghussein Establishment v Eton
College [1988] 1 WLR 587. The plaintiff does not, however, make that
submission; and I approach the evidence objectively to discover what was the
actual state of knowledge of the defendant.
In my
judgment, on March 27 1991 the landlord had the requisite knowledge as defined
above. Indeed it seems to me that there were a number of earlier occasions when
the landlord must have had such knowledge, albeit the works were at a less
advanced state: viz January 23 1991 when Mr Manning took photographs from the
adjacent roof (see the defendant’s pleaded knowledge at pp 6 and 7 of the
reamended defence and replies 5 and 6 in the further and better particulars of
the amended defence); January 29 1991 when the first section 146 notice was
served; February 13 1991 when the counterclaim was served (see the clear
allegations of breach in that pleading); February 19 1991 when further
photographs were taken; and February 22 1991 when Mr Swarbrick visited: see
also my specific findings below.
On April 11
1991 when the landlord accepted rent I am satisfied that he did so:
(a) with knowledge of the breaches of covenant
specified in the first section 146 notice (failure to permit entry and
structural alterations and alterations affecting the elevation or external
appearance of the premises); and
(b) with sufficient knowledge of the extent of
those breaches as at March 27 1991.
Submissions
were advanced as to the time which was reasonably required in order to remedy
the breaches specified in the first section 146 notice. That may be relevant on
the question whether a forfeiture took place too soon. But in my judgment it is
not relevant on the question of waiver for the following reasons: (1) if waiver
could not occur until a reasonable time had expired from service of a section
146 notice, a landlord could take any step, including accepting rent with
knowledge of the breach, provided he had not yet served a section 146 notice;
(2) the cases show that a landlord is fixed with his option to elect when he
has knowledge of the breach, not when a reasonable time has expired thereafter;
and (3) in my view section 146 and waiver are not connected: see eg Penton v
Barnett (infra).
If I should be
wrong about this I would observe that on the defendant’s own pleaded case as to
the date when the first notice of breach of covenant expired (reply no 2 of the
further and better particulars of the amended defence and counterclaim): ‘As at
the 29th January 1991, works of reinstatement might have taken as long
as about 8 weeks’. According to the defendant, therefore (the plaintiff asserts
a shorter period which, I shall consider below) the reasonable time to remedy
the breaches of covenant expired on about March 26 1991. No later date was
contended for by the defendant. Thereafter, on my findings, on March 27 1991
the landlord had all requisite knowledge of breaches committed before that
date; and on April 11 1991 the landlord, with that knowledge, accepted rent.
By way of
alternative findings I hold that the defendant was aware of the structural
works to the extension as at January 29 1991 and on subsequent dates as
follows:
(1) On January 31 1991 Mr Swarbrick visited the
communal roof and noted that work was continuing on the extensions. He noted
his detailed findings as to the state of the works (statement para 22).
(2) On February 4 1991 Mr Campbell was told by Mr
Armstrong that the works were continuing despite the service of the first
section 146 notice (statement para 24).
(3) On February 12 1991 Mr Armstrong noted
continuing works to the roof (statement para 44).
(4) On February 14 and 15 1991 Mr Swarbrick
visited the premises and noted that further works had taken place (statement
paras 26 and 27).
(5) On February 19 and 20 1991 Mr Swarbrick noted
further activities on site (statement paras 28 and 29). Photographs were taken
on February 19 1991.
(6) On February 22 1991 Mr Swarbrick visited the
communal roof and also gained access to the flat. He described what he saw and
took photographs. Further work had been carried out since the undertaking given
on February 19 1991 (statement para 31 and Mr Campbell’s statement para 46).
(7) On March 5 1991 Mr Swarbrick made a further
inspection from the communal roof and noted that insulation was now being
placed into the extended areas (statement para 32).
(8) On March 27 1991 Mr Swarbrick made the visit
that I have already described, when photographs were taken.
(9) On April 3 1991 kitchen fitters and window
fitters attended the flat (Mr Swarbrick para 40).
(10) After April 3 1991 Mr Armstrong observed
workmen on the roof (statement para 55).
I agree with
Mr David Neuberger QC, for the plaintiff, that, at least in general terms, it
must have been obvious to the defendant that the intended works were
proceeding. Mr Swarbrick was regularly in the building and he accepted that it
would have been unlikely for him not to have known of visitors to and
deliveries intended for flat 26. In my judgment, should it be necessary so to
find, the defendant had sufficient knowledge of the works as they existed both
on January 29 1991 and on various dates up to and including March 27 1991 and
indeed in general terms thereafter until April 11 1991.
Mr Reid, in
his written submission, accepts that the defendant could not forfeit the lease
in respect of any breach of which it knew at the date of the acceptance of the
rent.
Unless the
breaches complained of in the first section 146 notice were continuing
breaches, it must follow in my judgment that the landlord, by accepting rent in
the manner described, must have waived his right to forfeit the lease for the
breaches of covenant complained of in the first section 146 notice.
Subject to the
question of whether these breaches were continuing or once and for all
breaches, it does not seem to me to be necessary to explore the issue of waiver
further. Mr Neuberger, however, made additional submissions on the issue of
waiver and it is appropriate that I should consider them. He put his argument
in five different ways:
First, the
Defendant is only entitled to forfeit in respect of breaches before 29th
January 1991, when the first section 146 Notice was served, as any alterations
carried out after that date must be the subject of a fresh Section 146 Notice.
If that is right, the Defendant clearly must have waived the right to forfeit,
because, to put it at its lowest, the acceptance of rent on 11th April 1991
must have been with knowledge of the breaches on 29th January 1991.
Secondly, if
the Defendant’s test of substantial completion is correct, the works were
substantially complete, and known to the Defendant to be substantially
complete, by 11th April 1991.
Thirdly, if
the Defendant is right and there is a single continuing breach there is no
evidence of any work carried out which can properly found the forfeiture on
24th April 1991 without having had the right to forfeit waived in respect of it
by virtue of the acceptance of rent on 11th April 1991.
Fourthly, if
the Defendant is seeking really to suggest that one adopts a more general
approach to the question of waiver based on Expert Clothing [1986] Ch
340, then on the background of these facts, it is quite clear that the
Defendant has waived.
Fifthly, the
continuance of the injunction proceedings and the holding of the undertaking
obtained on 3rd April 1991 at all times until today is fatally inconsistent
with the claim for forfeiture and effectively prevents the Defendant from
forfeiting.
For reasons
already given I accept what Mr Neuberger describes as ‘the first waiver point’
(quoted above), unless it can be said that any of the breaches the subject of
the first section 146 notice were continuing breaches. I shall deal with that
question separately below.
The second
waiver point, namely that the works were substantially complete, and known to
the defendant to be substantially complete by April 11 1991, involves an
analysis of the evidence.
On March 27
1991, when Mr Swarbrick and Mr Manning inspected the premises, Mr Swarbrick
stated (at para 36 of his statement):
The
examination revealed that the extension to the north-east side of the building
was now finished except for a joining ridge between the old roof and the new
one. The north west roof asphalting was finished completely and the south
centre asphalting and roof were finished. In addition there was work being
undertaken on the communal roof itself.
Mr Manning’s
evidence was to like effect (paras 45 and 46). Mr Swarbrick also stated (para
40) that ‘Most of the windows were installed on or before the 27th March apart
from those on the south centre extension’.
In addition I
heard the evidence of Mr Tyler (the roofer); Mr Rose (the kitchen-fitter who
confirmed that the installation of the kitchen was complete on April 9 1991);
Mr Wells (the builder who said that all the structural work was done before the
end of February 1991 and that he was mainly doing general tidying up and bits
of decoration during the weeks prior to April 24); Mr Cox (the window
contractor); and Mr Sitton (the window-fitter). The combined effect of their
evidence was that the works were substantially complete by April 11 1991 save
for some finishing-off works including asphalting and installation of some
final windows.
In my
judgment, both as at March 27 1991 and as at April 11 1991 the works were so
nearly complete that an interested observer must have appreciated that any
residual works were only consequential or by way of finishing. I would not,
however, have expected that an architect could have issued a certificate of
practical completion on either of those dates.
On my findings
the defendant had sufficient knowledge of the state of the works as at March 27
1991. The evidence is less clear as to the state of the defendant’s continuing
knowledge between March 25 and April 11 1991, but I am satisfied that the
defendant knew in general terms that the residual works were proceeding between
those dates: see for example para 55 of Mr Armstrong’s statement.
Mr Neuberger’s
main point, however, is that a waiver of a breach carries with it the obvious
practical consequences of that breach. He argues that waiver of a right to
forfeit for alteration in respect of an extension which is complete apart from
the odd aperture for windows and a little of final asphalting detail carries
with it waiver of the installation of the windows and the completion of the
asphalting.
In my
judgment, the works of alteration of which the landlord had knowledge on March
27 1991 and up to April 11 1991 were so advanced that, by accepting rent on
April 11 1991 the landlord must be taken to have waived the totality of the
works, albeit that there were certain minor elements remaining incomplete on
March 27 and thereafter. The landlord, from an early stage, had knowledge of
the tenant’s envisaged works: see for example the explanation given by the
plaintiff’s surveyor at the meeting held on September 18 1990. In my judgment,
it would be artificial to hold that the acceptance of rent on April 11 1991
operated as a waiver in respect of the great majority of the works already completed
and known by the landlord to have been completed on March 27 1991, but not as a
waiver in respect of those outstanding works which were necessary in order to
complete the project. If necessary I would hold on the facts of this case that
the acceptance of rent on that particular date and with that particular
knowledge operated as a waiver of the building venture taken as a whole so far
as it constituted a breach of covenant. I accept Mr Neuberger’s submission that
a waiver must extend to the practical finishing-off consequences of a piece of
work which is almost completed.
Some support
for this conclusion is given in Griffin v Tomkins (1880) 42 LT
359. In that case there was a covenant against business user without the
licence or consent of the lessor. The lessees had, by consent, made some
alterations in the premises and part of the new building was occupied by two of
the defendants as plumbers, and they carried on their business there in a shop
suited for the purpose. There was no written licence or consent of the lessor
for this business,
commenced, with the lessor’s knowledge of this use of the premises. The
plaintiffs took proceedings to recover the land on the ground of a forfeiture
by a continuing breach of the covenant. Manisty J said at pp 361 and 362:
Now, as at
present advised, I am of the opinion that, having waived the forfeiture which
was worked by converting the premises into shops with the knowledge that those
shops were being used, that was a waiver once for all of that covenant as
regarded the conversion into shops, and I think it carried with it the user of
the shops, because a waiver of the forfeiture is in the nature of an assent to
that which has been done, and is being done at the time the forfeiture is
waived.
Cockburn CJ
said at p 362:
But I cannot
help thinking that, where a lessor with full knowledge that a breach of this
particular description has been committed waives the forfeiture by a distinct
acceptance of rent accruing due after the forfeiture, that amounts not merely
to a waiver of the past breach, but to a licence to continue the breach in
future.
The facts in Griffin
v Tomkins were different from those in the present case and I have
cautioned myself against placing reliance upon the decision as an authority
binding upon me. The case does, however, provide a helpful illustration of a
situation where, as in the present case, a waiver may constitute an
acknowledgment of a state of affairs. Mr Neuberger also relies upon Downie
v Turner [1951] 2 KB 112. In that case Jenkins LJ at p 119 held that the
landlord must be taken to have waived not merely the breach of the covenant
against underletting itself, but also the breach of the covenant as to user so
far as that breach was inseparable from and would necessarily continue during
the existence of, and merely by virtue of the existence of, the subletting, the
breach constituted by which he had waived.
Mr Neuberger’s
third argument on waiver involves an analysis of the nature and quality of the
works carried out after March 27 1991. He submits that, on the evidence, the
only works carried out after that date were (a) asphalting and (b) some work to
the windows. He submits that neither category of work qualify as ‘structural
alterations or other alterations which affect the elevation or external
appearance of the Premises’ — such being the language of the first section 146
notice.
Asphalting: In my judgment the remaining asphalting work to the extension was
very minor. I think this is clear from the evidence of Mr Swarbrick and the
photographs of the roof taken on March 27 1991. There remained some additional
asphalting around the perimeter and dressing the asphalting into the communal
roof. Mr Tyler said he had been asked to stop work on April 3 1991, but that
the work was basically finished by then. I accept his evidence that there were
only some minor outstanding details round the outside. The work was finished by
April 16 1991. The work of renewing what Mr Tyler described as the well-roof
areas (at balcony level on each side of the southern extension) was left until
last. That suggests that the minor asphalting work to the upper roof was done
somewhat earlier.
Windows: Between April 2 and 5 1991 Mr Sitton dealt principally with the
installation of the patio doors and units to the central southern extension of
the 11th floor. He also attended to the installation of the patio doors on the
end of the northern side of the 11th floor. He was also engaged in completing
trimming and other works to the other windows in the extended areas. He did not
attend site between April 5 and 17 1991. Between April 17 and 19 1991 he
carried out some finishing work which involved trimming off the frames and
sealing up behind the frames and varnishing. He said that only trimming up was
then left to be done, although there was some doubt as to the accuracy of this
part of his evidence in view of para 19 of his statement which described rather
more extensive outstanding works. I should also refer to Mr Cox’s evidence. He
said that his fitters had been installing windows in the extended areas during
the fortnight prior to April 19 1991. He also told Mr Campbell as much. Mr
Cox’s evidence is strictly hearsay because he was not on site. Where there is
an inconsistency I prefer the evidence of Mr Sitton.
On April 9
1991 Mr Rose described the premises as very quiet. There were a couple of other
people around. He was left alone putting protective wrapping on the kitchen
units. Mr Wells, looking at the photographs taken on March 27 1991, described
the asphalting as effectively complete. All that remained could have been done
in a day. In para 6 of his statement he said: ‘we were mainly doing general
tidying up and bits of decoration during the weeks prior to 24th April.’
In my
judgment, as a matter of fact and degree, neither the work of asphalting nor to
the windows which was carried out after March 27 1991 qualified as ‘structural
alterations or other alterations which affected the elevation or external
appearance of the premises’. In any event Mr Swarbrick was aware, at least in
general terms, that these works were proceeding (his statement para 40). It
follows that after March 27 1991 there was no separate breach relating to
alterations which would have entitled the defendant to forfeit the lease.
Mr Neuberger’s
fourth waiver point concerns the steps taken by the defendant before and after
March 27 1991. He contends that, taken as a whole or individually, the steps
taken are consistent only with an election to waive any right of forfeiture and
to affirm the lease. The following steps are relied upon:
(1) On February 13 1991 the defendant issued, and
on February 15 1991 served, a summons seeking an injunction to restrain the
plaintiff from making ‘any structural alterations or other alterations which
affect the elevation or external appearance of the premises’ (a precise
quotation from clause 11 of the lease).
(2) On February 20 1991 the defendant issued and
served a further more detailed summons.
(3) On March 28 1991, with requisite knowledge
obtained on March 27 1991 of the breaches giving rise to a right to forfeit,
the defendant restored the same summons.
(4) On April 3 1991, the plaintiff gave an
undertaking to the court, substantially in the terms of the more detailed
second summons. There was a separate undertaking to permit two surveyors acting
on behalf of the defendant to enter upon the premises upon reasonable notice.
That undertaking has never since been varied or released.
(5) On April 6 1991 Mr Manning on behalf of the
defendant wrote to the plaintiff in unequivocal terms requiring the plaintiff
to comply with certain covenants in the lease.
(6) On April 11 1991 the plaintiff accepted rent.
(7) On April 18 1991 the plaintiff served copies
of the order of the April 3 1991 (incorporating the undertaking) endorsed with
a penal notice.
(8) On April 22 1991 Mr Manning, Mr Dowden and Mr
Perrin gained access to the flat, thereby acting upon or enforcing the
undertaking to that effect.
(9) On April 23 1991 the defendant agreed
directions for the trial of the injunction proceedings.
I would add
that the demand for rent appears to have been made before the undertaking was
given on April 3 1991.
It is said
that not once between January 29 1991 and the re-entry on April 24 1991 did the
defendant intimate in any way to the plaintiff that it intended to exercise its
right of re-entry, save by the use of the words ‘without prejudice to the
Defendant’s right to forfeit the Underlease’ to be found in the introduction to
the prayer to the counterclaim dated February 13 1991 in action no 1989 OR NO
721. Mr Neuberger submits that all the acts following March 27 1991 were
consistent only with the lease continuing.
In Evans
v Davis (1878) 10 ChD 747 a landlord brought proceedings for breach of
an agreement to grant a lease. The writ was endorsed with a claim for an
injunction to restrain the defendants from committing a breach of the
agreement; damages for the breach; and to recover possession of the premises
comprised in the agreement. Fry J said at p 762:
Now it
appears to me that the Prayer is in this sense inconsistent, that the whole of
the relief asked for could not be had. The Plaintiff could not have at the same
time judgment for recovery of the possession of the premises, and a general and
unlimited injunction to give effect to the agreement to which, by recovering
the premises, he would put an end . . .
— and —
I think the
pleadings amount to an assertion that the agreement is still subsisting, and
that there has been the settlement of a lease under it.
In Griffin
v Tomkins Cockburn CJ said at p 362:
There
therefore was, as I say, a double waiver — first, by receipt of the rent, and
secondly, by calling, with her sanction, upon the tenant, the lessee, to do the
repairs specified by the surveyor.
In Moore
v Ullcoats Mining Co Ltd [1908] 1 Ch 575 a writ sought both possession
and an injunction to restrain the lessees from working a mine so as to occasion
loss or damage to it. Warrington J followed the decision in Evans v Davis
(supra) and held at p 586:
I think that
the claim for possession and the claim for an injunction and for the order
expressed in claim 4 are inconsistent, and therefore the Plaintiffs cannot
obtain possession in this present action.
and at p 587:
the Writ, in
order to be equivalent to re-entry under the proviso for re-entry, must be an
unequivocal demand for possession and nothing else.
In Cardigan
Properties Ltd v Consolidated Property Investments Ltd [1991] 1 EGLR
64 it was held that the pursuing of proceedings for delivery up of a copy of an
insurance policy constituted a waiver. Mr Neuberger also drew my attention to
the following passages in Expert Clothing Service & Sales Ltd v Hillgate
House Ltd [1986] Ch 340 — in the judgment of Slade LJ (with whom O’Connor
LJ and Bristow J agreed) at p 359 D, E:
Furthermore,
a landlord cannot prevent the acceptance of rent from operating as a waiver
merely by stating that he accepts it without prejudice to his right to forfeit:
see Central Estates (Belgravia) Ltd v Woolgar(No 2) [1972] 1 WLR
1048, 1054, per Buckley LJ.
and in the
same judgment at p 360:
It is, in my
view, quite clear that neither the plaintiffs nor Bennetts would have actually
intended to waive the relevant breaches of the covenant by the letter of 22
October 1982 and its enclosure. However, this particular point does not avail
the plaintiffs. As Buckley LJ pointed out in the Central Estates case
[1972] WLR 1048, 1054, the legal effect of an act relied on as constituting a
waiver of a right of forfeiture must be considered objectively, without regard
to the motive or intention of the landlord or the actual understanding or
belief of the tenant. The doctrine of waiver is thus quite capable in some
instances of operating harshly, most particularly where there has been an
acceptance of rent by the landlord.
However, I
think that Mr Collins is right in submitting that cases where there has been an
acceptance of rent fall into a special category. In such cases the established
legal effect of such acceptance is so clear that, whatever the particular
circumstances of the case, it is probably not open to the landlord to submit
that he has not waived the relevant breach. In the present case, where no
acceptance of rent (or demand for rent) is involved, the course is, I think,
free to look at all the circumstances of the case to consider whether the act
of the plaintiffs’ solicitors relied on (the sending of the letter of 22
October 1982 and the engrossment enclosed) was so unequivocal that, when
considered objectively, it could only be regarded as having been done consistently
with the continued existence of a tenancy as at 22 October 1982.
I would
accept Mr Neuberger’s submission that, on the particular facts of some cases,
the proffering of a mere negotiating document may be capable to amounting to an
unequivocal recognition of the existence of a presently subsisting tenancy.
However, with the possible exception of cases where a demand or acceptance of
rent is involved, I think that each such case has to be looked at against the
background of the particular circumstances in which the act relied on as a
waiver took place.
and at p 361:
In the end I
have come to the conclusion that, against the background of the circumstances
outlined in the preceding paragraph, the sending of the letter of 22 October
1982 and accompanying draft could not, on any fair objective consideration,
have been reasonably understood by the defendants or anyone else as
unequivocally indicating the plaintiffs’ intention to treat the lease as
subsisting on that date.
This area of
the law is highly technical and its application can lead to results which the
parties may not have expected. However, in my judgment the combination of
circumstances relied upon by the plaintiff as constituting a waiver did indeed
have that effect. In my judgment it was not open to the defendant, against that
background, to have re-entered on April 24 1991, at least without service of a
further section 146 notice. Nor on the facts of this case do I think that the
defendant sufficiently protected itself by introducing the prayer to the
counterclaim dated February 13 1991 with the words ‘without prejudice to the
Defendants’ right to forfeit the Underlease’. Taken as a whole the defendant’s
acts particularly after February 13 1991 were consistent with an unequivocal
affirmation of the lease, notwithstanding the very serious nature of the
breaches of covenant effected by the plaintiff.
Mr Neuberger’s
fifth ground of waiver concentrates on the continuation of the undertaking
given on April 3 1991. In Billson v Residential Apartments Ltd
(1990) 60 P&CR 392 (at pp 405, 406) Mummery J said:
Even if works
of alteration made before June 30 1989 had been completed once and for all and
no alterations were made in the period between June 30 and July 4, I hold that
there was no waiver of prior breaches by reason of the threat of proceedings
made in the two letters of Messrs Frere Cholmeley. There was no unequivocal
determination of the lease by the plaintiffs’ threats of proceedings against
the defendants. At the time when both letters were written no section 146
notice had been served. No proceedings for recovery of possession of the
property had been issued or served. No application had been made to the court
to restrain the works, either temporarily or permanently, on the grounds of
breach of covenant. See F Wheeler v Keeble (1914) Ltd [1969]
1 Ch 451 and Calabar Properties v Seagull Autos [1920] 1 Ch 57.
This case is quite different from Wheeler v Keeble where a
section 146 notice had been served, a writ claiming possession had been issued,
evincing an unqualified election on the part of the landlord to determine the
lease, followed by an application for an injunction restraining breach of
covenant. It is not surprising that in that case it was held that a claim for
relief for breach of covenant was inconsistent with a prior election to treat
the lease as determined. In my judgment, neither the terms of the two letters
of Messrs Frere Cholmeley nor the circumstances in which they were written
indicate an unequivocal election by the plaintiffs against forfeiture of the
lease and in favour of continuing the lease with a waiver of any existing right
to forfeit. Even after writing those letters it was open to the plaintiffs to
opt either to pursue a claim for possession or to proceed with a claim to enforce
the covenants upon the basis of the continued existence of the lease.
Mr Neuberger
relies upon the reasoning in Wheeler v Keeble (1914) Ltd and
in Billson for this proposition: ‘If a landlord cannot obtain an
injunction because he is seeking to allege the lease has come to an end, so if
he is not merely seeking to obtain an injunction but has got an undertaking, he
cannot seek to forfeit. If A is inconsistent with B, then B is inconsistent
with A’. I find that reasoning compelling, the more so as Wheeler v Keeble
was emphatically approved by the Court of Appeal in Associated Deliveries
Ltd v Harrison (1984) 272 EG 321, [1984] 2 EGLR 76. In that case
Dillon LJ (at p 325) considered the question of the twilight period during
which it was not clear whether a forfeiture was going to be effective if, for
instance, the allegations of breach of covenant were denied, or if for any
reason it was said that the procedural requirements of modern statutes had not
been complied with, or relief against forfeiture might be granted which would
restore the original lease ab initio. Dillon LJ was concerned at the
position of a landlord who sought to prevent further deterioration of his
reversion during this period. How was the landlord to protect himself from
affirming the lease if he were to apply for an injunction? Dillon LJ found that Younger J had pointed
the way in Wheeler v Keeble by allowing that the landlord could
seek an injunction founded on a cause of action in tort. Younger J had said, at
p 63:
It is not
permissible for the plaintiffs in this action — based as it is on the
determination of the lease — either in the 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.
In my opinion therefore the plaintiffs are not entitled to obtain the
injunction which they ask by simply referring to the terms of the lease. If
they are entitled to an injunction at all it must be apart from the terms of
the lease and solely in respect of their own interest in the premises and of
some irreparable injury which may be sustained by them through the acts of the
defendants on the plaintiffs’ own property in case those acts are likely to
continue.
Dillon LJ said
in Associated Deliveries Ltd v Harrison, at p 326:
Therefore, as
it seems to me, Younger J’s decision in Wheeler v Keeble is
correct in principle and should be applied. Mr Birts cannot succeed in this
appeal without our holding that Younger J’s decision was wrong, and for my part
I am not prepared to hold that.
I would feel
troubled at this conclusion if indeed there were no remedy available to a
landlord for deterioration of the premises or other ills suffered while a
lessee remained in occupation during the twilight period before an order for
possession under the writ claiming possession could be obtained and enforced.
But Younger J points the way in indicating the possibility of a claim in tort,
and in appropriate proceedings it seems to me that the landlord could well have
a very adequate remedy in a claim for damages for wrongful occupation of the
land. That does not assist the plaintiffs in this case because of the nature of
the pleadings.
Likewise in
the present case, the defendant had not sought any relief in tort. On the
contrary, it seems to me that the wording of both the summons and the
undertaking is so closely modelled on clause 11 of the lease as to amount to an
enforcement of the terms of the lease.
Finally, on
this part of the case, Mr Neuberger, appropriately in my view, prays in aid by
way of analogy the decision of the Court of Appeal in Public Trustee v Pearlberg
[1940] 2 KB 1 where both Slesser and Luxmoore LJJ applied the principle stated
by Kelly CB in Gray v Fowler (1873) LR 8 Ex 249 at p 272 as
follows:
The seller
cannot, while his bill for specific performance is pending, put an end to the
contract; he must first dismiss his bill with costs. But the whole meaning and
essence of that rule (which is a very reasonable rule) is that: ‘You cannot be
acting on the contract and assuming it to exist, and at the same time
exercising a right to put an end to it by rescinding it.
Continuing
breach or once-and-for-all breach
Mr Reid made
the following written submissions, which he amplified in argument:
A waiver of
the right to forfeit will operate only in respect of past breaches, so that the
landlord is still able to forfeit if there is a fresh breach of the same
covenant or if there is a continuance of the existing breach. Whether the
continuance of a state of affairs or of a course of conduct amounts to a
continuing breach or not depends upon the facts of the particular case and upon
the particular covenant. There is no reported case which decides
circumstances such as those in the present case is a continuing breach or not.
Reference to other types of breach of covenant is not helpful: see Downie
v Turner [1951] 2 KB 112 at p 115, (where Somervell LJ said: ‘Those
cases do not really help, because the covenants there concern quite different
subject matters’ — and at p 116: ‘The authorities show that there is no single
formula which can be applied in all cases.’).
The nearest
thing there is to authority is in Billson v Residential Apartments
Ltd (1990) 60 P&CR 392 where Mummery J at p 405, referred to
alterations being done as part of a ‘continuous fast moving programme of works
simultaneously executed’ and said that ‘the alterations were being made as part
of a continuing programme or process of alteration throughout the whole 14-week
period’. He then went on to say ‘Even if works of alteration made before June
30 1989 had been completed once and for all . . .’. These dicta indicate that
whilst a programme of alterations is continuing in breach of covenant, there is
a continuing breach.
This accords
with common sense. It is nonsense to suggest that there are a series of once
for all breaches, so that every time another course of bricks is laid there is
a fresh once off breach of covenant. Equally it is nonsense to suggest that
there is a single breach of covenant once for all once the first step in the
alterations takes place. There is no difficulty in the concept of a breach
which is a continuing breach which becomes a once for all breach once matters
have crystallised. It is true that there may be difficult issues of fact on
some occasions, but there is no conceptual difficulty in a tenant being
required to prove that his alterations had been completed before, for example,
rent was accepted.
Mr Neuberger
made the following written submissions:
The Defendant
is only entitled to forfeit in respect of breaches before 29th January, when the
first section 146 notice was served, as any alterations carried out after that
date must be the subject of a fresh section 146 notice. If that is right, the
Defendant clearly must have waived the right to forfeit, because, to put it at
its lowest, the acceptance of rent on 11th April must have been with knowledge
of the breaches on 29th January.
It is common
ground that once an alteration is complete, it is a once and for all breach.
The Defendant’s contention that an alteration is a continuing breach which when
complete becomes a once and for all breach creates a new concept in an already
complicated and technical area. There is no case suggesting that any other
breach can change its character and no case suggesting that alterations can.
What if work
stops half way? On the basis that it is
stopped, is it once and for all; or on the basis that it is part of a project,
does it remain continuing? Powell
v Hemsley [1909] 1 Ch 680; [1909] 2 Ch 252 suggests the former.
Who is to
judge when this continuing breach has become once and for all? Is it an objective test; is it what the
reasonable landlord will understand; is it what the tenant intends? If, as here, it is a structural alteration
which is said to be a breach, is it when the structural part of the alteration
is complete or is it when all the necessary fitting out and decorating has been
done? What is meant by ‘complete’: is it
substantial completion; practical completion; does it include snagging?
Test it this
way. The Defendant cannot forfeit in respect of alterations effected up to 29th
January, the date of the first section 146 notice (owing to clear acts of
waiver). He is therefore seeking to forfeit in respect of work carried out
after 29th January in respect of which section 146 requires a notice to remedy:
how can he say that a section 146 notice served on 29th January requires
remedying work which had not been done on that date? This point is particularly well illustrated
in relation to the southern extension, which was not even started on 29th
January apart from the concrete plinth which stood on its own (Manning C165
para 32(c)).
The work done
after 29 January was simply not the same as the work done before that date.
The
discussion in Greenwich LBC v Discreet Selling Ltd [1990] 2 EGLR
65 supports the Plaintiff’s case. In respect of disrepair, where a landlord has
accepted rent after the section 146 notice he must show the same items of
disrepair continue: he cannot rely on new disrepair. In this case, by the same
token, the landlord cannot rely on further alterations after the section 146
notice. Unlike disrepair, he cannot, as is accepted by the Defendants, rely on
the alterations prior to the section 146 notice, because they are a once and
for all breach and are waived by acceptance of rent (that is clear on this
test: if disrepair continues unchanged after section 146 notice and acceptance
of rent, the landlord may forfeit because it is a continuing breach, if
alterations continue unchanged — ie with no further alterations — and service
of section 146 notice and acceptance of rent, the landlord waives). This is why
the Defendant’s contention is inconsistent: disrepair is always a continuing
breach. Alterations never are.
It is well
established alterations are a once and for all breach. The logic of that is:
(1) either the Plaintiff is right OR
(2) the Plaintiff is too generous and the work of
alteration should be looked at as a whole: ie once it is clear that the work is
to one end acceptance of rent waives the right to forfeit for that completed
end.
The third
possibility — that contended for by the Defendant — involves not only a change
in category, but seems inconsistent with Powell v Hemsley [1901]
1 Ch 680, 682 and 688; [1909] 2 Ch 252, 256.
Both members
of the Court of Appeal in Farimani v Gates 271 EG 387 and one
member of the Court of Appeal in Greenwich show a distaste for the fact
that, even with disrepair, a landlord can forfeit if he accepts rent after
service of the section 146 notice. Apart from all its other problems so far as
established law is concerned, the Defendant’s argument faces the problem that
it is inconsistent with this distaste.
Billson (1990) 60 P&CR 392 at 405 is, it is accepted, not really in
point, but insofar as it assists, it is in the Plaintiff’s favour.
The ‘rolling
programme’ of works misses the point. The works can stop at any time and the
breach is complete. Disrepair cannot stop and is never ‘complete’.
In para 9.5 of
the re-reamended defence and counterclaim the defendant pleads:
In the
alternative, if by virtue of any of the said facts and matters the Defendant
waived the accrued right to forfeit in respect of the Plaintiff’s several
breaches of covenant, the Defendant will contend that the Plaintiff’s breaches
of covenant or some of them were continuing breaches and that the right to
forfeit accrued a fresh immediately after any alleged act of waiver; and that
as at the date of peaceable re-entry the Plaintiff’s continuing breaches of
covenant entitled the Defendant to exercise a right of peaceable re-entry.
Examples of
breaches of a continuing nature include those where the covenant is to keep the
demised premises in repair, or to keep them insured in a certain manner during
the term, or not to use the premises in a particular manner: see Woodfall
para 1-1914. Examples of covenants admitting of only a single breach are a
covenant to build or requiring performance of an act within a fixed period and
a covenant not to sublet.
In Penton
v Barnett [1898] 1 QB 276, a case concerning breach of a repairing
covenant and the consequences of a claim for rent, A L Smith LJ, at p 280,
spoke of breaches during the period after the date of the section 146 notice as
being ‘the same as those in respect of which the notice was given’. Rigby LJ
spoke of a ‘continuing breach’ and a ‘recurring breach’. Collins LJ spoke of a
breach ‘continuing or accruing day by day’. The Court of Appeal decided that,
in the case of a continuing breach, no further notice under section 146 was
necessary, at least if there had been no change in the condition of the
premises.
In Powell
v Hemsley [1909] 1 Ch 680 (affirmed by the Court of Appeal at [1909] 2
Ch 252), a house was partially erected in breach of covenant. When objection
was taken to it, the lessees stopped building. On the subsequent disclaimer of
the lease by their trustee in bankruptcy, the defendant re-entered upon the
demised land with the unfinished house upon it. Eve J said at p 688:
It has been
argued on the part of the plaintiff that the breach is a continuing breach —
that there is a new breach of covenant every day the house is left standing. I
cannot adopt this view. In my opinion the covenant was broken once and for all
when the house was erected contrary to it; it was a breach complete at once and
not continuous: see per curiam in Doe v Woodbridge. The
defendant therefore cannot be liable on the footing of a continuing breach.
In the Court
of Appeal Cozens-Hardy MR said at [1909] 2 Ch p 256:
Then Mr
Lawrence, who has argued this case with great ability, seeks to say that this
is not a case where the breach was a single breach complete before the
assignment, but that it is a continuing breach, and that when the defendant
covenanted that he or his assigns would build no other building except a dwarf
wall, and would erect on the piece of land no buildings other than private
residences, that that really meant will neither erect nor allow to remain
erected. I think it would be altogether wrong for us to so construe the
covenant. We are really being asked to construe a covenant which is affirmative
in form as implying and involving a negative covenant for the purpose of
invoking the jurisdiction of this Court which is limited to the case in which a
defendant has expressly and clearly covenanted that a certain thing shall not
be done. I therefore entirely decline to read the covenant in that way.
Farwell LJ,
with whom Kennedy LJ agreed said:
The only
other point argued was this. It was said this is a continuing breach. I agree
with Eve J that the case of Doe v Woodbridge illustrates the distinction
very well. The covenant there was that the tenant should not alter or convert
certain rooms into bedrooms. The Court held the conversion was a breach
complete at once. I entirely agree with Eve J and I think that this appeal
should be dismissed with costs.
In Doe d
Ambler v Woodbridge (1829) 9 B&C 376 at p 377 the report reads:
Per curiam. The conversion of a house into a shop, is a breach complete at
once, and the forfeiture thereby incurred is waived by a subsequent acceptance
of rent. But this covenant is, that the rooms shall not be used for certain
purposes. There was, therefore, a new breach of covenant every day during the
time that they were so used, of which the landlord might take advantage.
In my judgment
Mr Neuberger rightly submits that not too much
unfinished in that case, the case appears to have turned, not on the fact that
the house was unfinished but upon the fact that it had been allowed to remain
erected. Mr Neuberger relies on the decision, however, as a helpful
illustration.
In Re King;
Robinson v Gray [1963] Ch 459 at p 478 Lord Denning said:
Let me next
take the covenant to reinstate. Suppose the premises are damaged by fire. The
lessee does not reinstate within a reasonable time. The breach is over once and
for all, but its effect continues.
It seems to me
that this must be true of most single breaches. For example, where there is a
breach of a covenant not to sublet the breach takes place when the agreement to
sublet is made but the subtenancy still subsists; and where there is a breach
of a covenant not to convert premises into a shop the breach takes place when
the conversion takes place but the premises remain in their altered state.
In Farimani
v Gates (1984) 271 EG 887, [1984] 2 EGLR 66 the Court of Appeal held
that the tenant’s breach of an obligation to lay out insurance moneys was a breach
of a single obligation, not a continuing one. Griffiths LJ said, at p 889:
In this field
of law a reference to a continuing breach is a way of referring to breaches of
a continuing obligation and does not refer to the ability to remedy a single
breach.
Slade LJ said,
also at p 889:
If in any
given case the relevant obligation is to perform an act by a given date or (as
the case may be) within a reasonable time, that is an obligation which can only
be broken once.
The Court of
Appeal found the decision in Penton v Barnett (supra) was
‘puzzling and surprising’ but accepted that it was a decision binding on the
Court of Appeal.
In Greenwich
London Borough Council v Discreet Selling Estates Ltd [1990] 2 EGLR
65 the Court of Appeal reviewed the authorities and held that the court was
bound by the decision in Penton v Barnett.
In Billson
v Residential Apartments Ltd ((1990) 60 P&CR 392) the lease
provided, inter alia, that the lessees would not make any alteration to
the premises without the consent of the landlord. On May 4 1989 onwards the
tenants carried out extensive and expensive works at the property. The
landlords contended that those works were done in breach of the covenants in
the lease. On July 4 1989 the landlords served a notice under section 146 of
the Act (incidentally alleging that ‘the lessee has made and continues
to make alterations . . .’). The tenants did not comply with the notice.
Mummery J
described the circumstances in which works were carried out as follows (at p
399):
Many workmen
were engaged in carrying out different kinds of work simultaneously on the
property on the basis of oral rather than written instructions. At one time it
was estimated that as many as 52 people were working on the property at the
same time.
The tenants in
that case submitted that the landlords had waived any right which they might
have had to forfeit the lease for prior breach of the covenant by reason of
threats contained in two letters sent by Messrs Frere Cholmeley on their behalf
on June 1 and 30 1989 to seek an injunction to restrain future breaches of the
covenant. In the letter of June 1, Frere Cholmeley informed Piper Smith &
Basham that the plaintiff required the defendant to cease carrying out all work
of alterations to the property and that, unless they had an undertaking to that
effect by 12.00 noon on the following day, ‘Our instructions are that action
should be taken to restrain your clients from continuing the breach of
covenant’. In their letter of June 30, they repeated the request for a similar
undertaking and stated ‘unless we have the undertaking requested by 12.00 noon
on Monday, we will be issuing a summons seeking an injunction against your
clients’.
These threats
were, it was argued, unequivocal acts consistent, and consistent only, with the
continued existence of the lease. It was submitted that they were rather like
demands for rent and constituted an election to treat the lease as continuing
and were made at a time when the plaintiffs had full knowledge of the works
which had been carried out in alleged breach of covenant.
Reliance was
placed on the following authorities: Wheeler v Keeble (1914) Ltd,
Associated Deliveries Ltd v Harrison, Calabar Properties v
Seagull Autos and Expert Clothing Service & Sales Ltd v Hillgate
House Ltd.
As to possible
breaches of covenant committed after the letter of June 30 1989, which might
have justified the service of the section 146 notice on July 4 1989, it was
submitted that there was no evidence of any alterations being carried out
between those two dates and there were, therefore, no breaches on which the
plaintiffs could rely for the purposes of the section 146 notice.
Mummery J
rejected the tenant’s submissions on the waiver point for two reasons; the
first reason which I quote in full; the second reason being that neither of the
two letters constituted an unequivocal election by the landlords against
forfeiture of the lease. The first reason was as follows:
(1) I find on the evidence that it is impossible
to pinpoint when any particular alteration to the property was done. There were
no detailed plans or specifications. No daily work sheets were kept. No
evidence was given as to the date or dates on which alterations to the
structure were made. The general picture that emerged from the evidence is that
the property was a hive of activity for 12 hours a day for 14 weeks between May
4, and the middle of August, that many works were being carried out
simultaneously, with as many as 50-odd men on the property at the same time and
that, even after the top floor of the property was finished, structural work
was continuing at a late stage on the ground floor and basement areas which
were completed last. There was a continuous, fast-moving programme of works
simultaneously executed which makes it impossible to say, as the defendants
seek to contend, that there were a number of separate once and for all breaches
of which some were committed before June 30, and, on their case, waived, and
none of which were committed between June 30 and July 4. In my judgment, the
alterations to the property were being made as part of a continuing programme
or process of alteration throughout the whole 14-week period commencing May 4,
1989, and continuing down to August, including the period between the letter of
June 30, and the Section 146 notice of July 4.
The Court of
Appeal approved that finding at [1991] 3 WLR 273 A – E. The House of Lords in Billson,
[1992] 2 WLR 15*, was not concerned with this point.
*Editor’s
note: Also reported at [1992] 1 EGLR 43.
I consider
first, the breach of covenant expressed in the first section 146 notice as
follows:
2.1 You have failed to permit the Landlord at
reasonable times to enter upon and examine the condition of the Premises notwithstanding
that you have been requested to do so contrary to the covenant referred to in
clause 1.2.1. hereof
In my judgment
each request by the landlord and each failure by the tenant to permit the
landlord at reasonable times to enter upon the premises was a single once and
for all breach. The specific incidents relied upon are pleaded in reply 7 in
the further and better particulars of the amended defence, although Mr Reid
sought to rely upon a more extensive list at the trial. The obligation to give
access must be to give access within a reasonable time. When that time has
elapsed the breach is complete. It cannot be said to be continuing. If
necessary I would hold that to give the clause business efficacy, there must be
implied a term that the tenant would give access to the premises within a
reasonable time of the landlord’s request for him to give such access. I would
rely upon similar reasoning to that of Griffiths LJ in Farimani v Gates
(1984) 271 EG 887 at p 889, [1984] 2 EGLR 66, in the case of the covenant to
lay out insurance moneys. On January 21 1991 Mr Manning of Kinleigh on behalf
of the landlord confirmed in writing that ‘Kinleigh require urgent access to
flat 26’. Access to the flat was denied and on January 29 1991 the first
section 146 notice was served. The particular breach alleged is expressed in
the past tense and is linked to a request. In my judgment that breach was a
once-and-for-all-breach — as were the subsequent breaches of a similar nature.
If, contrary
to my view, the failure to give access was a continuing breach, then access was
in fact given on April 22 1991, two days before the re-entry on April 24 1991.
I consider,
second, the breach of covenant expressed in the first section 146 notice as
follows:
2.2 You have made structural alterations or other
alterations which affect the elevation or external appearance of the Premises
in breach of the covenant referred to in clause 1.2.2. hereof
Again the
breach alleged is expressed in the past tense. If (a) a tenant has made
structural alterations or other alterations which affect the elevation or
external appearance of the premises and (b) those alterations constituted a
breach of covenant when viewed as at January 29 1991, in my judgment, as a
matter of ordinary language those alterations cannot be said to be continuing
breaches.
In my judgment
there is a distinction between, for example, a building which remains in
disrepair and a building which is the subject of alterations. In the former
case the status quo remains. In the latter case each material alteration
changes the fabric and integrity of the building, and in the present case many
of the alterations changed the elevation and external appearance of the
building. In this connection I was referred to Joseph v London County
Council (1914) 111 LT 276 and Lilley & Skinner Ltd v Crump
(1929) 73 Sol Jo 366, as to the meaning of an ‘alteration’. It is in my view a
question of fact and degree what constitutes a material alteration. The word
‘material’ does not appear in the covenant; but I cannot think that alterations
which are de minimus would constitute a once-and-for-all breach. I
envisage categories of work which would constitute a qualifying
once-and-for-all alteration: for example the pouring of concrete into
shutterings; the insertion of reinforcing bars; the erection of a wall; the
construction of a concrete plinth; the installation of a steel framework (or
even a substantial RSJ); the laying of roofing members; or the installation of
windows. There must be many different combinations and permutations of building
activities.
I agree with
Mr Reid that it is a pure question of fact and impression for the judge on the
totality of the evidence what was the status of the works at any particular
time. In this case we have the unchallenged evidence of what Mr Manning saw and
recorded on January 23 1991. His evidence was:
From our
inspection we would see that the following works had been carried out:–
(a) The construction of wooden shutterings to
both the east and west ends of the balcony facing Hyde Park Gate.
(b) The pouring of concrete into shutterings and
the insertion of metal re-inforcing bars.
(c) The construction of a concrete plinth on the
balcony to the rear of the flat.
(d) The removal of a number of bricks from part
of the wall in order to receive the supporting head beam.
In my judgment
Mr Manning was correct, in para 35 of his witness statement, to describe the
work as ‘substantial and unauthorised building work’. I also think the
defendant’s solicitors were correct to use the past tense in the first section
146 notice (quoted above).
As I have
noted above, Mr Reid relies upon the first reason given by Mummery J in the Billson
case indicating that while a programme of alterations is continuing in breach
of covenant, there is a continuing breach, Mr Neuberger on the other hand
submits that Mummery J had a different issue before him. It was sufficient for
his conclusion that the programme of alterations included the period between
the letter of June 30 and the section 146 notice of July 4. It did not matter
whether the alterations were categorised as continuing breaches or once and for
all breaches, some of which were committed after June 30. The learned judge
would have reached the same conclusion whatever categorisation was applied to
the breach/breaches of covenant. Mr Neuberger also points out that the learned
judge appeared only to be concerned with works carried out up to July 4, the
date of the section 146 notice, and not after that date. He also pointed out
that the attention of Mummery J does not appear to have been drawn to Powell
v Hemsley.
In my judgment
Mummery J was not saying that alterations could not, as a matter of principle,
constitute a number of separate once and for all breaches. What he said was:
‘it is impossible to pinpoint when any particular alteration to the property
was done’ and ‘many works were being carried out simultaneously’. He was
concerned with an alleged act of waiver followed by a section 146 notice. I am
concerned with a section 146 notice followed by an alleged act of waiver.
The facts of
the present case are very different. On the evidence it is possible to pinpoint
certain works which had reached certain stages by certain dates. That is clear
from the photographs taken on January 23 1991 (before the date of the first
section 146 notice); February 19 1991, February 22 1991 and March 27 1991. It
is also clear from the evidence (see for example Mr Manning’s statement, paras
33, 38, 40 and 46). Indeed para 46 of Mr Manning’s statement is introduced by
the words: ‘The changes between the inspection on the 22nd February 1991 and my
inspection on the 27th March 1991 are as follows . . .’ (the changes are then
carefully identified).
I do not agree
with Mr Reid that the alterations in the present case are continuing breaches
or part of a rolling programme of works (notwithstanding his reliance on
Singleton Construction’s letter of January 8 1991 and Mr Perrin’s letters of
February 11 1991 and February 18 1991). I think they fall into a different
category from those breaches of a continuing nature discussed above. If a
snapshot is taken at any particular time, certain specific work stages can be
identified; and it cannot be predicted whether the works will be completed or
suspended or interrupted. Furthermore, to apply the words of A L Smith LJ in Penton
v Barnett, I do not think that material alterations carried out after
January 29 1991 were ‘the same’ breaches ‘as those in respect of which the
notice was given’.
When I gave an
example to Mr Reid of a building project that was interrupted for a prolonged
period and asked what the effect would be, Mr Reid submitted that as long as
the tenant had a continuing intention to continue the works and the works
remain incomplete, then there is a continuing breach; although there must come
a time when the works are to be viewed as complete. He submitted that the test
is to inquire whether the tenant evinced an intention to continue with the
works.
In my judgment
a breach of this covenant is either a continuing breach or a once-and-for-all
breach. I do not consider there to be any scope on the facts of this case for a
breach in one category changing its character so as to become a breach in the
other category. In my judgment a result such as that contended for by Mr Reid
would throw up unacceptable anomalies. If the works had been finally stopped
the day before the acceptance of rent then, as I understand Mr Reid’s
submission, it is accepted that there would have been a waiver (provided the landlord
had the requisite knowledge). But who is to decide when and whether the works
have stopped or are complete? What test
should be applied? Should it be
necessary to examine the tenant’s state of mind and his intentions? In my judgment this cannot be correct. A
court must be able to form an objective view, on the evidence before it,
whether there was a breach of the covenant against alterations and then decide
whether rent was accepted with knowledge of the relevant breach. In the present
case, as I have indicated, these ingredients of waiver are present.
Furthermore, I
am not satisfied that a landlord can rely upon a section 146 notice (which
expressly uses the past tense) as a sufficient notice in respect of subsequent
physical alterations which, at the date of the notice, have not even come into
existence. It would be necessary to serve a fresh section 146 notice in respect
of such later alterations.
It follows
from the foregoing that the plaintiff, by accepting rent on April 11 1991,
waived the right to forfeit the lease in respect of the matters complained of
in the first section 146 notice.
There are two
features which complicate this particular issue. The first concerns the effect
of the undertaking given to the court on April 3 1991; the second concerns the
relevance, if any, of the fact that rent was payable in advance. In my judgment
the relevance of the undertaking, if any, to this issue is as follows. In my
view, an objective observer on April 3 1991 would view the undertaking as an
acknowledgment by both parties that there was to be no further work carried out
by the plaintiff which would qualify as a breach of covenant. That is some
additional support for the view that I have already expressed that the relevant
alterations could not be regarded as continuing breaches. There was an
identifiable break in the history on April 3 1991. I consider later in this
judgment whether there was a breach of the undertaking. For reasons given
hereafter I am not willing to hold that the defendant has proved a breach of
the strict wording of the undertaking.
Turning to the
fact that rent was payable in advance: Sachs J said in Segal Securities Ltd
v Thoseby [1963] 1 QB 887 at p 901:
As regards
continuing breaches, it seems to me that, in the absence of express agreement,
the acceptance of rent in advance can at highest only waive those breaches that
are at the time of demand known to be continuing, and to waive them for such
period as it is definitely known they will continue.
The demand for
rent appears to have been made on a date in March 1991 (before the undertaking
was given on April 3 1991). The evidence is not sufficient, however, to show
that the defendant ‘definitely knew’ that the breaches would continue such as
to constitute a future waiver associated only with the fact that rent was
payable in advance.
A further
question is whether a reasonable time had elapsed between the service of the
first section 146 notice and the purported forfeiture. Mr Neuberger relies upon
the judgment of Sir Nicholas Browne-Wilkinson V-C in the Billson case in
the Court of Appeal (at p 274H):
In my
judgment, even if the breach was capable of remedy the defendants’ actions in
continuing to press on with the work in defiance of the warnings and in
defiance of the section 146 notice demonstrated that the defendants had no
intention to remedy the breach at all. It is to be noted that the section 146
notice itself does not have to limit a time within which the breach is to be
remedied. All that the statute requires is that a reasonable time to remedy the
breach must elapse between service of the notice and the exercise of the right
of re-entry or forfeiture. If the actions of the lessee make it clear that he
is not
in my judgment a reasonable time must have elapsed for remedying the breaches
once it is clear that they are not proposing to take the necessary steps to
remedy the breach but are committing further breaches. If this were not the
case, what would the landlord’s rights be if the defendant continued to commit
the very breaches complained of by the section 146 notice after the date of its
service? If he were to take proceedings
to restrain further breaches of covenant, he would subsequently be faced with
the contention, (such as that advanced by the defendants based on the threat of
proceedings in the letter dated 30 June 1989) that the landlord had waived his
right to forfeit by seeking to enforce the covenants. The only effective remedy
of a landlord, faced with intransigent behaviour such as that of the defendants
in the present case, must be to forfeit the lease on the ground that whatever
time was allowed the defendant was showing no intention of remedying the breach
at all.
In Billson
the re-entry was only 14 days after the service of the section 146 notice. Had
it been necessary to decide this question I would have held that similar
considerations applied in the present case. The first section 146 notice was
wholly ignored and alterations work was observed to continue on January 30 and
February 1 notwithstanding the service of the notice.
My conclusion
on the matters complained of in the first section 146 notice is that:
(1) the plaintiff succeeds in establishing that
there was a waiver by acceptance of rent alternatively by the other acts
referred to above;
(2) the ‘peaceable re-entry’ was unlawful;
(3) the defendant is not entitled to forfeit the
lease on those grounds.
The second
section 146 notice
The second
section 146 notice, served on April 24 1991, complained of breach of the
covenants restricting the use of the premises to that of a private residence in
single occupation only and excluding all business or professional use. Reliance
is placed on para 10 of the sixth schedule to the lease and covenants 2(19) and
2(20) in the headlease. The breaches of covenants alleged were expressed as
follows:
2.1 You have used the said flat otherwise than as
a private residence in breach of the covenant referred to in paragraph 1.2.1
hereof
2.2 You have carried on and/or permitted and/or
suffered to be carried on upon the demised premises or any part or parts of the
demised premises or a building thereon a profession trade sale or business or
occupation and/or changed or permitted or suffered to be changed the user
within the meaning of the enactments relating to Town Planning of the demised
premises or a building thereon or a part thereof and such represents a breach
of your covenant referred to in paragraph 1.2.2 to observe and perform (inter
alia) the covenant in the Head Lease referred to in paragraph 1.3 hereof
The second
section 146 notice included a requirement that the tenant should within a
reasonable time remedy the breaches of covenant in so far as they were capable
of remedy.
In my judgment
there were breaches of the user covenant and those breaches were capable of
remedy. It must be borne in mind, however, that the defendant had known about
the office use for a number of years and in my judgment on the evidence had
acquiesced in that use albeit flat 26 had not been used for any purpose between
the date of the fire and March 22 1991. I note in passing that Mr Neuberger
wished to reserve his position as to an argument to the effect that a landlord,
by acquiescing in a breach for several years (in this case 10 years) must be
taken to have waived the breach of the covenant for all time. He accepted,
however, that the law binding on me is not so extensive. A landlord, having
acquiesced in a breach, may require strict compliance with a covenant if he
gives to the tenant reasonable notice to that effect. There was a letter from
Mr Dowden dated February 22 1990 (written when flat 26 was empty), which
enclosed a copy of a letter received from the insurance company concerning the
use of the property. Mr Dowden’s letter referred to ‘improper use of Flat 26’
and concluded: ‘As you will be aware the lease specifically forbids the use of
flats at Broadwalk House for any purpose other than strict residential use’. Mr
Dowden does not deal with this letter in his witness statement, and in view of
the long history of acquiescence in the partial office user, I do not think
this letter constituted a sufficient notice that that particular use was
offensive to the defendant.
On the same
day as the second section 146 notice, April 24 1991, the defendant re-entered
the premises. On April 26 1991 the consent order was made permitting the
plaintiff to regain possession on the terms referred to above. One of the
terms, which in my judgment was a reasonable one to impose, was that the
plaintiff would only use the flat as a private residence, but within 28 days to
stop business user. At p 118 of the pleadings bundle the following forms part
of the order of April 26 1991:
It is hereby
agreed and understood that no right of forfeiture shall arise in respect of the
use of the Premises for business purposes during the period of 28 days referred
to in the undertaking appearing in paragraph (2) above.
That agreement
may have been overlooked when reply 12 of the further and better particulars of
the amended defence pleaded that ‘each and every breach was capable of remedy
within 7 days of service of the Notice’. I note also that reply 20(b) pleads:
‘part of the premises was used for office purposes until on or about the 16th
May 1991’ (ie less than 28 days from April 26 1991).
It is common
ground that the business user was discontinued within the 28-day period,
although Mr Reid submits that that amounts only to a temporary cessation as a
result of the undertakings given to the court in the interlocutory proceedings
in this action. I do not accept that submission. The fact is that the user
complained of has ceased. A permanent undertaking or injunction will no doubt
be sought. Further, I do not accept the plaintiff’s plea in para 15(b) of the
re-amended counterclaim that: ‘the Plaintiff has not remedied the said breaches
or any of them’. The breaches as to user having been remedied, in my judgment
the defendant is not entitled to forfeit the lease on this ground.
Relief
from forfeiture
Notwithstanding
my findings on the question of waiver, I think it appropriate to indicate what
I would have decided on the issue of relief from forfeiture. Section 146(2) of
the Law of Property Act 1925 provides:
Where a
lessor is proceeding, by action or otherwise, to enforce such a right of
re-entry or forfeiture, the lessee may, in the lessor’s action, if any, or in
any action brought by himself, apply to the court for relief; and 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 this section, and to
all the other circumstances, thinks fit; and in case of any 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.
It is accepted
on both sides that this subsection confers on the court a wide statutory
discretion. It is also clear following the decision of the House of Lords in
the Billson case [1992] 2 WLR 15 that there is jurisdiction to grant
relief notwithstanding the defendant’s physical re-entry of the premises on
April 24 1991. In approaching the exercise of my discretion, had it been
necessary in this case to apply it, I would have directed myself in accordance
with the subsection and carried out a balancing exercise of all factors and
circumstances appearing to me to be relevant. In particular I have given
careful consideration to the following cases.
In Hyman
v Rose [1912] AC 623, at p 631, the Lord Chancellor, Earl Loreburn
emphasised the width of the discretion under the statutory predecessor of
section 146(2). In the present case both counsel accepted that I had an
unfettered discretion. In Central Estates (Belgravia) Ltd v Woolgar
[1972] 1 WLR 1048 (at pp 1053B-1054B; 1055G-1056C and 1057B-F) relief was
granted in a case of unlawfully keeping a brothel.
In Shiloh
Spinners v Harding [1973] AC 691, a case concerning the equitable
jurisdiction to grant relief from forfeiture, Lord Wilberforce said at p 725:
Established
and, in my opinion, sound principle requires that wilful breaches should not,
or at least should only in exceptional cases, be relieved against, if only for
the reason that the assignor should not be compelled to remain in a relation of
neighbourhood with a person in deliberate breach of his obligations.
In Ropemaker
Properties Ltd v Noonhaven Ltd [1989] 2 EGLR 50, where clubs were
used for purposes of prostitution, Millett J, described the breaches as being
‘of the utmost gravity; they represented a deliberate and continuing disregard
of their obligations under the lease’. Yet he gave relief from forfeiture, holding
that it was an exceptional case and, inter alia, that forfeiture would
result in substantial financial loss to the defendants out of all proportion to
their offence.
In Southern
Depot Co Ltd v British Railways Board [1990] 2 EGLR 39, where two of
the breaches of covenant had been wilful and one, although not wilful, had
resulted in the lessors being misled, Morritt J, granting relief from
forfeiture, said at p 43M:
There can be
no doubt that the wilfulness of the breach is a relevant consideration and that
the court should not in exercising its discretion encourage a belief that
parties to a lease can ignore their obligations and buy
relief under section 146(2) should be granted only in an exceptional case seems
to me to be seeking to lay down a rule for the exercise of the court’s
discretion which the decision of the House of Lords in Hyman v Rose
[1912] AC 623 said should not be done. Certainly Lord Wilberforce in Shiloh Spinners
Ltd v Harding did not purport to do so in cases under the statute.
Accordingly,
in my judgment, although I should give considerable weight to the fact that two
out of the three breaches were wilful, I am not required to find an exceptional
case before granting relief from forfeiture.
Later (at p
44E, F), Morritt J said:
I return to
the words of the Lord Chancellor in Hyman v Rose [1912] AC 623 at
p 631, which describe the purpose of section 146(2). I would paraphrase it by
posing the questions whether the damage sustained by British Rail is
proportionate to the advantage it will obtain if no relief is granted and, if
not, whether in all the circumstances it is just that British Rail should
retain that advantage. I answer both questions in the negative.
If no relief
is granted then British Rail will obtain an advantage worth not less than £1.4m
from breaches which have caused it no lasting damage. Conditions for relief can
secure for British Rail compensation for the unauthorised advantages BPCC obtained
in the past and due performance of the covenants in the future.
In Billson
(supra), Mummery J held that the defendants had acted in deliberate breach of
their obligations. Nevertheless he granted relief. He said (at p 411) that:
Although the
Defendants have acted in deliberate breach of their obligations, it would, in
my judgment, be inequitable to refuse relief from forfeiture since the effect
of that would be to deprive them of all benefit of the very substantial
expenditure on the acquisition and improvement of the property. In my judgment,
that would be unfairly disproportionate to the breach of covenant which they
have committed and to their conduct in this affair. I would have exercised the
discretion to grant relief on stringent conditions.
In the Court
of Appeal in Billson Parker LJ said, at [1991] 3 WLR at p 288H:
I should
perhaps add, lest silence on the point should be taken to indicate concurrence
with the view taken by the judge, that, had there been jurisdiction to grant
relief, I am far from sure that I would have taken the same view. This was not
only a case of deliberate and flagrant breach but one in which there were many
aggravating circumstances. To have granted relief in such a case, on the sort
of conditions on which alone it could have been granted, would therefore appear
to me to be permitting the lessee to buy his way out by uncovenanted payment
and forcing the lessor to live in neighbourhood with a lessee who had no
respect whatever for his contractual obligations. That both considerations
militate against a grant is clear from the first of the above citations from
Lord Wilberforce’s speech in the Shiloh Spinners case and to grant relief in
such circumstances would be likely to encourage lessees to disregard their
obligations.
In the House
of Lords in the Billson case the question of relief was decided by Lord
Templeman (at p 24C) as follows:
The
application of the tenants for relief against forfeiture will be remitted to
the High Court. The judge would have been prepared to grant relief against
forfeiture except for the fact that he considered that he had no jurisdiction
to do so. On the renewal of the tenants’ application for relief the parties
will be at liberty to file and adduce further evidence in order that the judge
may consider the propriety of granting relief and the terms of relief on the
basis of the facts as at the date of the hearing of the renewed application for
relief.
At the time of
writing this judgment I do not know what may have been the final outcome of
that application.
Mr Reid
submits that where there is a deliberate breach of covenant, persisted in and
maintained with the aid of lies and deception, there is no good reason for
granting relief, whatever the value of the property to be forfeit to the
plaintiff. The defendant should not be required to remain in a contractual
relationship with so dishonest a partner.
I am satisfied
that these were deliberate breaches of covenant which were persisted in over a
period of several months. The plaintiff’s objective was clearly to secure the
completion of the works as quickly as possible in order to present the landlord
with a fait accompli. To that end the plaintiff employed various tactics
including refusal of access to the landlord and a campaign of deliberate
dishonesty as to the state of the works and as to the plaintiff’s activities
and intentions. On any view those were breaches of the most serious and
cavalier nature. In my judgment the breaches may be said to be more serious
than those in Southern Depot Co Ltd v British Railways Board
because of the additional elements of concealment and dishonesty.
In carrying
out the balancing exercise and in approaching the statutory discretion I am
assisted by the cases to which I have referred above and in particular by the
observations of Morritt J above quoted in the Southern Depot case.
The following
factors are relevant to the exercise of this discretion:
(1) The breaches of covenant were deliberately
committed and dishonestly concealed in the way that I have described. This is
clearly a very significant factor and I regard it as such.
(2) The question whether there was a breach of
the undertaking given on April 3 1991 and therefore a contempt of court. I have
already held that the works carried out after March 27 1991 did not on their
own constitute an independent breach of clause 11 of the lease. It is a more
difficult question whether they technically and literally constituted a breach
of the wider language of the order of April 3 1991. There are no contempt
proceedings before me and I am only invited to consider the issue of contempt
as one of the factors to be taken into account in the exercise of my discretion
as to the grant or refusal of relief from forfeiture. By letter dated October
30 1991 the plaintiff’s solicitors asked for details of the undertakings
alleged to have been breached by the plaintiff. On November 11 1991 the
defendant’s solicitors declined to ‘expend time setting out details of the
breaches of undertakings to the Court of which your clients are well aware and
have admitted. Full details will be set out in an Affidavit when we are
instructed to take proceedings to enforce the various undertakings’. Such
details were not, however, forthcoming. On the evidence before me I am not
willing to hold that the defendant has proved a breach of the strict wording of
the undertaking, notwithstanding the admission to that effect in para 27 of Mr
Marsh’s affidavit of September 23 1991 (an admission which in any event was withdrawn
by letter dated November 20 1991). What I do hold is that the plaintiff caused
or permitted the continuation of the finishing works, regardless of whether
that constituted a breach of the undertaking and contrary to the spirit of such
undertaking. That was consistent with the plaintiff’s earlier behaviour and is
conduct which on any view must be regarded very seriously indeed. As for the
separate complaint of failure to give access there seems to be some doubt as to
whether either of the letters of April 8 1991 or April 15 1991 gave as much as
48 hours’ notice of each intended inspection (as required by the order). In the
event access was finally given on April 22 1991. Here again the plaintiff in my
judgment was unco-operative and obstructive until the 11th hour and behaved in
a manner contrary to the spirit if not the letter of the undertaking.
(3) The lease is a valuable one. The plaintiff
acquired the lease in 1980 for a premium of £470,000. It is now agreed to be
worth between £1.4-£2m. The term of the lease will not expire until June 2064.
If relief is refused the plaintiff will lose, and the defendant will gain, a
valuable asset.
(4) The plaintiff has spent a large amount of
money in making alterations to the property. I do not have a precise figure,
but it seems clear that the amount involved has been a substantial six-figure
sum. It is accepted that, as a condition of granting relief, the plaintiff
would be required to remove the extensions and reinstate the property. That
exercise would involve further substantial expenditure — again in a six-figure
sum. From the plaintiff’s point of view the combined expenditure associated
with the erection and removal of the alterations would represent a major loss
of money — for which there would be no commensurate benefit of any sort.
(5) There was no evidence that the value of the
defendant’s reversion had been diminished by the actions of the plaintiff.
(6) For the 10-year period from 1980 to 1990
there was generally a good relationship between the landlord, including from
1985 the defendant, and the plaintiff. The plaintiff was a good tenant and
there was no previous suggestion of any breach of covenant or any underhand
behaviour.
(7) The history shows that the alterations
proposed and undertaken by the plaintiff, were not objectionable to the
defendant as a matter of principle provided that the consent of the head
landlord was obtained and satisfactory terms were negotiated.
(8) No further breaches were committed after the
re-entry (unlike the situation which obtained in Billson (see the
judgment of Mummery J at p 410). However, in the present case the works were at
the date of re-entry substantially complete: see generally the pleaded state of
the works at replies 14 and 15 of the further and better particulars of the
amended defence.
(9) The plaintiff has now candidly admitted the
breaches of covenant and, through leading counsel at the hearing, apologised
for its actions. Within 24 hours of the defendant amending its pleading to
claim an injunction the defendant conceded the plaintiff’s entitlement to such
relief.
In my
judgment, weighing all these matters in the scales, the balance tips, just, in
favour of granting relief from forfeiture rather than refusing it. One of the
most telling features of this case in my judgment is the financial
disproportionality of the gain to the defendant as against the loss to the
tenant if relief were to be refused. While the plaintiff’s conduct was for a
period of some five months reprehensible, I do not think the loss of this
valuable lease together with the additional costs to which I have referred
represents a fair penalty, when balanced against the other considerations
listed above. I do, however, reach this conclusion with some hesitation,
particularly having in mind the observations of Parker LJ in the Billson
case quoted above.
Before leaving
the issue of relief from forfeiture, it is striking that before the
re-amendment to the defence (on December 18 1991 following the decision of the
House of Lords in Billson) the defendant appears to have been content
for relief to be granted on the terms pleaded in para 13 of that pleading.
The plaintiff
also relies upon an offer made by the defendant in about October 1991 (before
the House of Lords decided Billson) to compromise the litigation on the
basis that they take 80% of the proceeds of sale of the flat (valued by the
defendant at that time at £2m) (see the letter of October 30 1991). Mr
Neuberger submits that that offer does not suggest any great genuineness in the
defendant’s contention that the defendant would find a future relationship with
the plaintiff unduly difficult. In my judgment, it would be inappropriate to
read too much into that offer; although it does appear that the plaintiff,
several months after the re-entry, was willing to negotiate on a basis which
did not involve a forfeiture.
Mr Reid relies
upon the plaintiff’s solicitors’ letter of October 28 1991 on the question of
the service charge and legal costs as being a factor to be taken into account
on the issue of relief from forfeiture. I do not agree with that contention. It
seems to me that the plaintiff’s argument is either a good one or it is not. I
do not consider the plaintiff’s motive to be relevant, even if there were any
sufficient evidence as to what that motive was.
Conditions
of relief from forfeiture
If it had been
necessary for me to do so I would have imposed the following conditions upon
the grant of relief from forfeiture.
(1) The reinstatement of the plaintiff’s expense
(such expense to include the reasonable cost of independent experts instructed
by the defendant to approve, monitor and inspect the reinstatement works) of
the property, including the common parts, to the state in which they were
before the relevant works commenced.
(2) The provision by the plaintiff within a
reasonable time of all information, calculations, specifications and drawings
reasonably required by it for the purposes of identifying the work which has
been done to the property.
(3) An undertaking to the court by the plaintiff
that the property shall not be used by it in breach of covenant.
(4) Payment by the plaintiff of the defendant’s
costs of this action on an indemnity basis. In Billson in the House of
Lords Lord Templeman said at [1992] 2 WLR 15 at p 24 E-F:
When the
judge refused relief to the tenants on the grounds of jurisdiction he made an
order for costs against the tenants on an indemnity basis. In my opinion such
an order should not be made. There is no reason why an unsuccessful applicant for
relief should be in any worse case than any other unsuccessful litigant.
Moreover, if a landlord is entitled to costs on an indemnity basis whether
relief is obtained or not, there will be no inducement to the landlord to
compromise his dispute with the tenant.
For my part I
consider that the practice of ordering indemnity costs as a condition of
granting relief is ripe for reconsideration. Indemnity costs to a landlord
encourage lawyers and surveyors and other advisers to charge large fees. I make
no criticism of the advisers of the landlords because I do not know what fees
and charges they intend. But it seems to me that in principle a tenant should
not be at the mercy of an order made by a judge who has no means of knowing the
effect of the order and imposes no impartial criterion by which costs can be
taxed down.
However, in my
judgment the plaintiff invited litigation and in view of its conduct cannot be
heard to complain if they have to pay costs on the indemnity basis, under Ord
62, r 12(2). I would not order the plaintiff to pay a fine or any other
financial penalty. The plaintiff has brought on its own head the equivalent of
a fine representing the wasted costs of these alterations and their
reinstatement.
Neither side
has submitted that I should impose a condition that the plaintiff should
surrender the lease and in my judgment such a condition would be unjust and
inappropriate.
Having seen
and heard the witnesses and read the correspondence, I am not satisfied that
there is likely to be a continuing problem between this landlord and this
tenant notwithstanding what Mr Reid describes as ‘the Plaintiff’s consistent
concerted course of deceitful conduct over a long period’. I doubt that there
will be a repetition of this cavalier and expensive behaviour by the plaintiff
or that, if there is such a repetition, there will be difficulty in restraining
it. If I had thought there was likely to be a real continuing difficulty in the
relationship between the parties I would have wished to impose a condition that
the plaintiff should sell the lease at the best price reasonably obtainable,
such sale to be under the supervision of the court. On the facts, however, I do
not think such a course is necessary, even if (which counsel appeared to doubt)
there was jurisdiction to impose such a condition.
Mrs
Ralli’s occupation
The plaintiff
contends that Katerina Karypidou-Ralli (‘Mrs Ralli’), the plaintiff’s
housekeeper, was on April 24 1991, resident in flat 26 for the purposes of
section 2 of the Protection from Eviction Act 1977. In consequence it is said
that the defendant could not lawfully forfeit the lease on April 24 1991 by
peaceable re-entry. The attempt to do so was therefore an unlawful trespass.
What follows in this part of my judgment is not necessary for my earlier
finding that the re-entry was unlawful on other grounds. I will, however, give
my findings on the issue.
Section 2 of
the 1977 Act provides that:
Where any
premises are let as a dwelling on a lease which is subject to a right of
re-entry or forfeiture it shall not be lawful to enforce that right otherwise
than by proceedings in the court while any person is lawfully residing in the
premises or part of them.
The issue in
the present case is whether Mrs Ralli was ‘lawfully residing’ in flat 26 on
April 24 1991. The plaintiff maintains that she was. The defendant maintains
that she was not.
Both counsel
have referred me to Morgan v Murch [1970] WLR 778, a decision of
the Court of Appeal under the Rent Act 1968, Schedule 1, para 7, where the
relevant words were ‘residing with’. Winn LJ said, at p 781, that the word
‘resided’ is to be given its ordinary, natural, common language meaning. He
also said, at p 782, that ‘a man may, in law, have more than one place in which
he resides as well as more than one place in which he lives’.
I have also
derived some assistance from Palmer v McNamara [1991] 1 EGLR 121,
a case under the Rent Act 1977 where it was held that the landlord was, on the
facts, a resident landlord notwithstanding the fact that he did not sleep at
the premises.
I heard
evidence on this issue from Mrs Ralli herself and from Miss Chrysanthi
Theodoridou who generally supported Mrs Ralli’s account of events. I find the
following facts:
(1) In about September 1987 Mrs Ralli came to
London. She was employed by Captain Stravelakis on behalf of Prometheus
Maritime (London) Ltd as a housekeeper, cook and companion to the Captain’s
daughters. Although she was employed by Prometheus, she regarded the Captain as
her employer. She moved into flat 26.
(2) She lived in flat 26 until October 1989 when
there was a fire. The flat was then uninhabitable and Mrs Ralli moved out. But
for the fire she would have remained in flat 26. Mr Armstrong described the
fire and said that it was because of the fire that they (meaning the plaintiff
and Prometheus) were not inhabiting flat 26. He added that he had no reason to
think otherwise than that when they finished the works they would move back to
flat 26.
(3) After the fire she stayed initially in a
rented room in Bayswater for about two weeks and then moved into flat 22,
Broadwalk House. It was her intention to return to flat 26 when it was repaired
and made habitable. She was told by the Captain that she would return to flat
26 when the works were completed. She accepts that if the Captain had decided
to go elsewhere she would have gone with him; but that was not what happened.
(4) On March 22 1991 the Prometheus office moved
back to flat 26. Mrs Ralli continued to sleep in flat 22, but attended flat 26
regularly during the day and even at some weekends. She says that she slept at
flat 26 on two occasions on a folding mattress bed which was in the office. I
reject her evidence on this point. There was no reference to it in her
statement and it appeared to be at odds with what Mr Armstrong and Mr Swarbrick
subsequently described following the re-entry on April 24 1991. At that time
they found no sign of any bedding or other sleeping facilities. Furthermore the
plaintiff expressly pleads that Mrs Ralli did not sleep in flat 26 at the
material time (para 2(d) of the amended reply). This aspect of her evidence
caused me to doubt the truth of other parts of her evidence; but in the end I
am satisfied that the facts set out in this part of this judgment are proved.
(5) On April 2 1991 Mrs Ralli moved to the John
Howard Hotel, Queensgate for three nights. It had been intended that she would
move back to live in flat 26, but her bedroom there was not yet ready.
(6) In the circumstances it was decided that she
should take her vacation, and on April 5 1991 she went on holiday to Greece for
about three weeks. Before she went she moved some of her personal belongings into
flat 26. She had her own proposals for the arrangement of her bedroom in flat
26. She expected that her room in flat 26 would be ready for her when she
returned from holiday.
(7) She regarded flat 26 as her home. She had no
other home.
(8) Upon her return from holiday on April 27 1991
she went to live in flat 26. In the meantime there had been the re-entry on
April 24 1991 and the consent order on April 26 1991.
Mr Reid at
first took the point that she could not have been lawfully residing in flat 26 because
her employer, Prometheus, was carrying on a business use which put the
plaintiff in breach of covenant. However I am satisfied that that breach was
acquiesced in and waived by the defendant until the date of the second 146
notice, served on April 24 1991; and that Prometheus’ user was until that date
lawful. Mr Reid submitted in substance that Mrs Ralli was not sleeping in the
flat; she was only a licensee of her employer; and that she was entirely
dependant upon her employer when it came to her place of residence.
In my
judgment, if either Mrs Ralli or the ordinary objective observer had been asked
the question: ‘where does Mrs Ralli live?’
On April 24 1991 the answer would, on the facts I have found, have been
‘Flat 26, Broadwalk House’. The facts are unusual and the answer is not one
that I have found easy, but that is the conclusion I have reached. I accept Mr
Neuberger’s submission that if the defendant is right the answer would,
apparently, be: ‘nowhere’.
Costs
The final
issue concerns the defendant’s legal costs. The plaintiff pleads in para 11 of
the re-amended statement of claim as follows:
11(a) The costs incurred by the Defendant in
connection with these proceedings are costs which it may be argued by the
Defendant fall to be included in the service charge payable by the tenants of
the Defendants, including the Plaintiff.
(b) The Plaintiff accordingly applies to the
Court under section 20C, Landlord and Tenant Act 1985 for an order directing
that the costs incurred by the Defendant in connection with these proceedings
are not to be regarded as relevant costs to be taken into account in
determining the amount of any service charge payable by the Plaintiff.
The defendant
pleads in para 14 of the re-amended defence:
14. The costs
incurred by the Defendant in this action have been incurred to prevent and/or
bring to an end wilful breaches of covenant by a dishonourable Underlessee, and
to ensure compliance with the Defendant’s covenants in the Headlease, and in
all the circumstances (including the possibility of damage done to the
integrity of the structure of Broadwalk House) as part of the proper cost of
management of that property. Paragraph 11 of the Re-Amended Statement of Claim
is not admitted.
Section 20C of
the Landlord and Tenant Act 1985 provides:
(1) A tenant may make an application to the
appropriate court for an order that all or any of the costs incurred, or to be
incurred, by the landlord in connection with any proceedings are not to be
regarded as relevant costs to be taken into account in determining the amount
of any service charge payable by the tenant or any other person or persons
specified in the application; and the court may make such order on the
application as it considers just and equitable in the circumstances.
The rival
contentions of the parties are set out at some length in the plaintiff’s
solicitors’ letter of October 28 1991; the defendants’ solicitors’ letter of
October 30 1991; the plaintiff’s solicitors’ letter of November 7 1991; and the
defendant’s solicitors’ letter of November 11 1991. I also have the benefit of
written submissions on both sides.
In Sella
House Ltd v Mears [1989] 1 EGLR 65 there was a dispute as to whether
the landlord could recover as part of the service charge legal expenses said to
have been incurred by the plaintiff in recovering rent and service charge from
other tenants. The total expenditure on which the service charge was based was
defined as meaning the total expenditure incurred by the lessor in any
accounting period in carrying out its obligations under clause 5(4) of the
lease. One of the landlord’s obligations under clause 5(4) was:
(i) To employ at the Lessors’ discretion a firm
of Managing Agents and Chartered Accountants to manage the Building and
discharge all proper fees salaries charges and expenses payable to such agents
or such other person who may be managing the Building including the cost of
computing and collecting the rents and service charges in respect of the
Building or any parts thereof
(ii) To employ all such surveyors builders
architects engineers tradesmen accountants or other professional persons as may
be necessary or desirable for the proper maintenance safety and administration
of the Building.
Dillon LJ, at
p 67 said:
The argument
for the plaintiff is that solicitors’ costs and counsel’s fees for recovering
arrears of rent and service charges from tenants, if the solicitors are
instructed directly by the plaintiff, falls under the words ‘administration of
the Building’, in clause 5(4)(j)(ii), that is to say:
To employ . .
. professional persons as may be necessary or desirable for the proper . . .
administration of the Building.
If,
conversely, the solicitors are instructed by the managing agents, they fall
within the phrase:
including the
cost of . . . collecting the rents and service charges . . . They are, it is
said, part of the managing agents’ charges and expenses for collecting the
rents and service charges.
The learned
judge dealt with this by saying, in relation to (j)(i), that that relates to
the management of the building. He then said that the words in (j)(i)
‘including the cost of computing and collecting the rents and service charges’
are clearly referable back to the words ‘Managing Agents and Chartered
Accountants’ and do not contemplate the fees of solicitors and counsel. In
relation to (j)(ii), the judge said that the words ‘or other professional
persons’ must be related to the proper administration of the building. The
words did not appear to the judge to cover legal proceedings for possession or
arrears of rent.
— and later,
at p 68 —
I have had
certain hesitation on this point, in the light of the argument in relation to
the position where solicitors are instructed by the managing agents. It does not
appear from the evidence whether that was actually the case. On the whole,
however, I have come to the conclusion that the judge was right in his view
that the fees of solicitors and counsel are outside the contemplation of either
limb of clause 5(4)(j) of the lease. Therefore, I would dismiss the
cross-appeal by the plaintiff also.
Taylor LJ, at
p 68 said:
I add only a
few words on the issue whether legal fees can be included in the service charge
under this lease. Nowwhere in clause 5(4)(j) is there any specific mention of
lawyers, proceedings or legal costs. The scope of (j)(i) is concerned with
management. In (j)(ii) it is with maintenance, safety and administration. On
the respondent’s argument a tenant, paying his rent and service charge
regularly, would be liable via the service charge to subsidise the landlord’s
legal costs of suing his co-tenants, if they were all defaulters. For my part,
I should require to see a clause in clear and unambiguous terms before being
persuaded that that result was intended by the parties. Accordingly, I agree
with Dillon LJ that the terms of para (j) of clause 5(4) do not extend to cover
legal costs in the service charge.
Mr Reid
initially relied upon paras 6, 7 and 9 of the eighth schedule to the lease in
support of his argument that the defendant’s costs of this action are covered
by the service- charge provisions. As the argument developed, however, I
understood him to rely principally, if not exclusively, upon para 7 of the
eight schedule: ‘The proper cost of management of the Property’.
I accept Mr
Reid’s submission that I should construe the eighth schedule as if the landlord
were Trafalgar House Developments Ltd. As a matter of construction I do not
consider the costs of the respective claims for forfeiture and relief from
forfeiture in this action to fall within the wording of para 6 (‘All costs . .
. made by the Landlord . . . in complying with the covenants on its part
contained in the Head Lease . . .’). I think it would require much clearer
words to achieve that result.
The only
covenant in the headlease relied upon in the first section 146 notice was
clause 2(25), namely the covenant restraining the defendant from erecting any
erection or building or making any addition or alteration. The plaintiff
contends that it was the plaintiff and not the defendant who carried out the
work, and therefore there was no breach of covenant by the defendant.
Furthermore, it is said that the headlessor’s consent was asked for and
unreasonably withheld. These contentions raise interesting and complex
questions which I do not find it necessary to decide in view of the conclusion
I have reached in the preceding paragraph.
In my judgment
the costs of the defendant’s forfeiture claim and the plaintiff’s claim for
relief from forfeiture cannot be brought within para 7 of the eight schedule.
For reasons similar to those advanced in the Sella House case I do not
consider that the cost on either side can properly be regarded as the cost of
‘management of the Property’, notwithstanding Mr Reid’s forceful submission
that the defendant had exhausted its remedies and was acting properly. However,
in my opinion the costs associated with the claim for an
qualify. In my judgment, there is a major distinction between enforcing
covenants (which I regard as at least partly a management exercise) and
claiming or resisting forfeiture of a lease. In my judgment it cannot have been
intended that a lessee in the position of the plaintiff could be required to
pay a proportion of the costs of the defendant in claiming a forfeiture,
particularly where the court has ruled there to have been a waiver.
The
defendant’s solicitors in the letter of October 31 1991 asserted that the costs
associated with enforcing covenants must be recoverable as part of the service
charge. I agree with that contention. But I do not agree, as a matter of
impression and ordinary English, that the costs of the contest as to whether
the plaintiff’s entire leasehold interests in one of the flats in the building
should be forfeited (and thereby extinguished) qualify as the costs of
‘management of the Property’, the more so as I have held that the defendant was
not entitled to forfeit the lease.
Mr Neuberger
relies strongly on the fact that work stopped on April 18 1991 following the
service of copies of the order endorsed with a penal notice and that it was
clear to the defendant’s representatives on April 22 1991 when they gained
access to the flat, that work had ceased. He says there was therefore no need
for the defendant to re-enter in order to enforce its rights, much less to
manage the property. In my judgment, however, at that stage (and ignoring for
these purposes the question of waiver) it was by no means obvious to the
defendant that the plaintiff would comply with the undertaking given on April 3
1991. The plaintiff’s previous conduct had done little to induce such
confidence in the defendant. I prefer therefore to decide this particular issue
solely on the construction of para 7.
As for para 9,
I cannot see how the costs of these proceedings could be regarded as being in
connection with ‘services reasonably and properly provided by the Landlord for
the better enjoyment and use of the Property by the several lessees tenants and
occupiers thereof’.
It has always
been open to the defendant to fund the litigation by voluntary contributions.
Apart from the claim for an injunction (recently extended by amendment and
within 24 hours of that amendment conceded) the defendant cannot in my judgment
recover its costs as part of the service charge.
For the
purposes of section 20C of the 1985 Act I direct that the defendant’s costs of
the claim for forfeiture and of resisting the claim for relief from forfeiture
are not to be regarded as relevant costs to be taken into account in
determining the amount of any service charge payable by the plaintiff.
It remains
therefore to formulate the orders which follow from my findings, Mr Neuberger
accepting that the defendant is entitled to the injunction sought by the
re-reamendment. I will hear argument as to the appropriate orders but I am
minded to order as follows:
(1) A declaration that the underlease dated
January 13 1969 of Flat 26, Broadwalk House, Hyde Park Gate, London SW7 (‘the
premises’), has not been forfeited.
(2) An order dismissing the plaintiff’s claim for
a declaration that the defendant has consented to the use of part of the
premises for business premises and that as against the defendant the plaintiff
may lawfully use part of the premises for business purposes.
(3) An order dismissing the defendant’s
counterclaim for a declaration that the underlease was terminated by peaceable
re-entry on April 24 1991.
(4) An order dismissing the defendant’s
counterclaim for possession of the premises.
(5) An order that the defendant do pay to the
plaintiff damages in the agreed sum of £250 in respect of the unlawful entry on
April 24 1991.
(6) An order that the plaintiff do pay to the
defendant damages in the agreed sum of £250 in respect of the defendant’s claim
for ingress of water.
(7) An injunction ordering the plaintiff to
reinstate the premises to the same condition as the same were in immediately
before the execution of the works of structural alteration and trespass, so as
to comply with the covenants in the underlease. I will hear argument as to time
for compliance and as to any consequential orders that may be necessary.
(8) A direction pursuant to section 20C, Landlord
and Tenant Act 1985 that the costs incurred by the defendant in connection with
the respective claims for forfeiture and relief from forfeiture are not to be
regarded as relevant costs to be taken into account in determining the amount
of any service charge payable by the plaintiff.
I will hear
argument about what orders should be made as to the costs of these proceedings.
I also invite the plaintiff to give an undertaking to the court hereafter
strictly to comply with all of the covenants in the lease.
