Landlord and tenant – Forfeiture of lease – Appellant landlords appealing against decision of county court that re-entry by first and second appellants to cinema premises unlawful because no occasion of forfeiture at time of re-entry – Whether statutory moratorium on enforcement procedures in force at date of forfeiture – Appeal dismissed
The respondent was the tenant of cinema premises in Leicester Square, London, under the remainder of a 99-year lease. The first and second appellants were the landlords. The lease expired on 3 November 2036.
The premises were closed from 21 March 2020 to 18 July 2021 because of the Covid pandemic and the respondent did not pay the rent or insurance for that period.
The appellants then purported to forfeit the lease by re-entering the premises on the morning of 4 May 2023. By noon they had granted licences to occupy to the third and fourth appellants. On the following day, the third appellant was granted a formal lease.
The respondent paid the disputed arrears on the afternoon of 4 May and obtained a limited injunction concerning re-admittance to the premises.
The respondent claimed the benefit of a temporary statutory moratorium on enforcement procedures and a statutory arbitration procedure which were part of the Covid legislation. A referral to arbitration extended the moratorium to the conclusion of the arbitration process. The arbitrator rejected an attempt to abate the rents and determined that the whole rents were payable.
The county court granted the respondent’s application for summary judgment and declared that the re-entry was unlawful because there was no forfeiture at the time of re-entry.
The judge held, among other things, that on the true construction of section 23 of the Commercial Rent (Coronavirus) Act 2022, the moratorium was still in force at the date of the forfeiture. The appellants appealed.
Held: The appeal was dismissed.
(1) The appellant contended that, in the context of governmental guidance and codes of practice, the purpose of the Act was to provide relief from payment of certain rent debts to particular categories of tenants affected by the Covid-19 pandemic who genuinely needed such relief in order to support an otherwise viable business. Tenants who did not need such relief should pay rent in full to their landlords, without any delay. Tenants whose businesses were unviable were not expected to receive any relief from payment, but instead to enter into some sort of insolvency process as a function of their lack of viability as a business.
However, the focus had to be on the purpose of the provision in question, albeit in the context perhaps of the more overall purpose. The Act achieved its purpose by providing an arbitration mechanism and a moratorium linked to that mechanism which was quite clear and achieved the purpose.
(2) Even if one adopted the appellants’ formulation of the purpose, it did not assist them in establishing that an appeal somehow had to be “genuine”, especially in the light of the uncertainties and vagaries to which the appellants’ interpretation gave rise. One could effect that purpose by putting an arbitration system in place for deciding into which category tenants fell, which was what the Act did.
There would be disputes whether a tenant was intended to have the protection of the Act and it was the arbitrator who decided those disputes. They did not have to be decided by some criterion of assessment as to whether a tenant even had an argument as to what should happen to it so that a tenant who had no case for relief at all did not even have a right to a moratorium, or an appeal.
(3) If the respondent were correct in saying that a tenant with lots of money, or no money, was not to be protected by the Act, then presumably it ought to follow that such a tenant did not even have a right to the moratorium, but that was not provided for by the Act. Nor should a tenant have a right to apply for an arbitration itself, with its extended moratorium, but that was not provided for either and the appellant did not propose any interpretation of any part of the Act which would achieve that.
In fact, the appellants’ position in this case required a non-worthy tenant, such as they said the respondent was, should have the benefit of an arbitration and the accompanying extended moratorium. In order to succeed, the appellants needed the first stage of the moratorium. That was because, on the facts of this case, the appellants would be vulnerable to a waiver of forfeiture defence if they did not have the moratorium on payment associated with the arbitration itself. They needed the disputed rent to be “protected rent” during the moratorium, as extended by the arbitration, to avoid the consequences of a waiver.
The appellants accepted three-quarters of rent from September 2021. That receipt would be capable of amounting to a waiver of forfeiture in relation to the non-payment of the protected rent in this case unless the commencement of the arbitration proceedings extended the moratorium.
(4) There was an inherent illogicality in the appellants’ analysis. There was also an inevitable problem of uncertainty. The existence or otherwise of the moratorium was an important matter for the parties. They needed to know where they stood. It was clear that if an arbitration was commenced the moratorium continued beyond the statutory cut-off date. After that date, the moratorium continued to another cut-off date (28 days after the award) unless there was an appeal, in which case the final conclusion of the appeal became the final cut-off date. All that was clear, workable and intelligible, which was important when enabling the parties to ascertain their proprietary rights. The appellants’ interpretation had none of those qualities.
(5) The existence of the moratorium depended on the legal quality of the appeal’s chances, as to which views might differ and, to a degree, on the subjective intention of the tenant. If the appeal looked very difficult and the tenant decided not to appeal, but to carry on and take advantage of what it perceived to be the moratorium, then on the appellants’ analysis the moratorium came to an end, unbeknown to the landlords, because it was no longer serving the apparent statutory purpose. It was not sensible to allow an important matter like the moratorium to be governed by such uncertain factors when the mechanical test apparently provided by the statute provided complete certainty and made sense.
Nicholas Trompeter KC (instructed by Ronald Fletcher Baker LLP) appeared for the first, second and fourth appellants; Jonathan Seitler KC and Benjamin Faulkner (instructed by Maples Teesdale) appeared for the respondent.
Eileen O’Grady, barrister
Click here to read a transcript of Leicester Square (2015) Ltd and others v Empire Cinema 2 Ltd
