Plaintiff assigning residue of lease to defendants – Defendants assiging residue to E – E in administration – B entering into possession and paying rent to plaintiff – Plaintiff claiming arrears of rent from defendants – Judge finding no surrender of lease by operation of law – Appeal dismissed
By a transfer dated May 5 1982, the reversion of a lease of 130 High Street, Edgware (the premises), for a term of 25 years from March 25 1979, vested in the plaintiff, Mattey Securities Ltd. By a licence to assign made on October 2 1986, Ervin, Sutton and Mitchell, the defendants, covenanted with the plaintiff, inter alia, to pay the rents reserved by the lease. The lease was subsequently assigned to Ensii & Sons Ltd, who traded as Bambino, by a licence dated October 2 1986. Ensii provided two sureties, the Patels, who gave the usual covenants to perform the tenant’s obligations. Ensii was put into administration by order of the court on May 21 1991 and was subsequently dissolved. The administrator, with the plaintiff’s leave, sold two of the company’s premises (ie Ensii’s premises) with stock to Phoenix Star Ltd and Bellbrink Ltd. In anticipation of Ensii’s dissolution, negotiations for a possible assignment of the lease took place but came to nothing. Through no action of the plaintiffs, Bellbrink entered the premises in August 1991 and traded therefrom under the name of Bambino with the same personnel. In October 1991 Bellbrink paid the rent and arrears up to date. On March 24 1994 the term expired, but the lease continued under the provisions of the Landlord and Tenant Act 1954, Part II. Arrears began to accumulate and Bellbrink ceased trading in September 1994. In May 1995 the plaintiff granted a lease of the premises to a third party. The plaintiff did not know of Ensii’s dissolution until December 1995 when it brought proceedings against the defendant tenants to recover arrears of rent. The judge found for the plaintiff and concluded that, following the administration order, the lease had not been surrendered by operation of law. The defendants appealed contending that the combination of Ensii ceasing to occupy the premises, of Bellbrink having exclusive possession of the premises and trading from them and of the plaintiff accepting rent paid by Bellbrink from and after August 1 1991 operated as a surrender of the lease by operation of law.
Held The appeal was dismissed.
1. Surrender by operation of law did not depend upon the intention of the parties (see Lyon v Reed (1844) M&W 285) and a clear distinction was to be made between the legal requirements for surrender, where intention was not a legal requirement, and an intention to enter into legal relations, where intention was highly relevant.
2. It was clear from the facts that there had been no act which estopped the parties. Considering all the circumstances it was not proper to infer from the plaintiff’s acceptance of rent that a new tenancy had been created: see Copeland v Watts (1815) 1 Stark 95 and Javad v Mohammed Aqil [1991] 2 EGLR 82, per Lord Nicholls. There had been no unequivocal act capable of amounting to an estoppel whereby surrender of the lease by operation of law could arise.
3. The plaintiff had not been a party to the entry into the premises by Bellbrink, with whom it had no intention to enter into legal relations: see Street v Mountford [1985] 1 EGLR 128, per Lord Templeman; Longrigg, Burrough & Trounson v Smith [1979] 2 EGLR 42.
David Parry (instructed by Gateley Wareing, of Leicester) appeared for the appellants; Nicholas Taggart (instructed by Lehrer Segal, of Edgware) appeared for the respondent.
