Landlord and Tenant Act 1954, Part II–Application for new tenancy of business premises–Before issue of tenant’s summons claiming new tenancy a consent order had been made in other proceedings whereby the tenant’s lease was forfeited and an application for relief against forfeiture adjourned–Whether as a result of forfeiture the tenancy had ceased to exist at the date of the summons–Contrary submission that a tenancy otherwise within 1954 Act continued to subsist until a forfeiture was perfected by refusal of application for relief–Held that the tenant was entitled in the circumstances to apply to the court for a new tenancy despite the order for forfeiture–There might be cases where undue delay in seeking relief would result in a claim for relief being disregarded–That was not the present case and landlords’ application to have tenant’s claim for new tenancy dismissed failed–‘Conceptual difficulties’ relating to the ‘twilight period’ between forfeiture and determination of application for relief not fully explored in these proceedings
This was a
summons taken out by the defendants, the Clerical, Medical & General Life
Assurance Society, in the course of proceedings commenced by the plaintiff,
Harry Meadows, by originating summons claiming a new tenancy of premises at 160
New Bond Street, London W1. The facts and submissions are fully set out in the
judgment of Sir Robert Megarry V-C.
E Prince
(instructed by Kingsley, Napley & Co) appeared on behalf of the plaintiff;
Benjamin Levy (instructed by Frere, Cholmeley & Co) represented the
defendants.
Giving
judgment, SIR ROBERT MEGARRY V-C said: This is another example of simple facts
posing a new and not very easy problem of law. Put shortly, the question is
whether a business tenant whose lease has been forfeited for breach of covenant
but whose application for relief against forfeiture has yet to be determined is
a ‘tenant’ within Part II of the Landlord and Tenant Act 1954 who can claim a
new tenancy under the Act.
The matter
arises thus. By an underlease dated December 30 1965 a company called A Sulka
& Co Ltd (which I shall call ‘Sulka’) granted an underlease of part of
business premises in New Bond Street to Mr Meadows, the plaintiff, for 14 years
less three days from June 24 1965. The business carried on by the plaintiff on
his premises is that of a club or licensed restaurant. Sulka held the premises
under a lease from the defendants, the Clerical, Medical & General Life
Assurance Society, and Sulka occupy another part of the premises themselves for
business purposes. Sulka are thus the head tenants of the whole and the
plaintiff is a subtenant of part; and Sulka, I understand, had only a nominal
reversion on the term granted to the plaintiff. For the purposes of section 44
of the Landlord and Tenant Act 1954 the defendants, and not Sulka, are ‘the
landlord’ in relation to the plaintiff’s tenancy. On December 23 1978 the
defendants served on the plaintiff a notice under the Act dated December 22
1978 to determine his tenancy on June 24 1979 on the ground of breaches of
covenant and their intention to demolish or reconstruct the holding, and so on.
The plaintiff duly served a counternotice dated January 25 1979 and then on
April 20 1979, within the requisite period, issued an originating summons
against the defendants claiming the grant of a new tenancy under the Act.
Thus far,
there is nothing remarkable. However, at some stage the defendants discovered
that other proceedings had been taken in relation to the plaintiff’s tenancy.
On January 30 1979 Sulka, having served a notice on the plaintiff under section
146 of the Law of Property Act 1925, issued a writ against him, claiming
forfeiture of his underlease on the ground of breaches of his repairing
covenant. On April 9 1979 the plaintiff swore an affidavit in those
proceedings, claiming relief against forfeiture; and on April 10 1979 (that is,
10 days before the plaintiff issued his originating summons claiming a new
tenancy under the Landlord and Tenant Act 1954) an order was made by a Queen’s
Bench master in chambers. This was a consent order that judgment should be
entered for Sulka against the plaintiff for recovery of the premises held by
the plaintiff under his underlease and for damages to be assessed, that the
plaintiff’s application for relief against forfeiture and the assessment of
damages should be adjourned generally upon the plaintiff undertaking to make
quarterly payments to Sulka (without prejudice to their rights in the action)
equivalent to the amount of the current rent, and that execution of the
judgment for possession be stayed meanwhile. The formal judgment is, of course,
to the same effect, save that, for no reason that anyone could give, it failed
to comply with the elementary requirement that an order made by consent should
state this on the face of it. But nobody disputes that the judgment was in fact
by consent.
In those
circumstances, the defendants have taken out a summons in the proceedings by
originating summons under the Landlord and Tenant Act 1954, seeking under the
inherent jurisdiction to have the originating summons dismissed. The ground on
which the summons is based is that when the originating summons was issued the
plaintiff had no tenancy to which Part II of that Act applied, since his
underlease had been forfeited by virtue of the Queen’s Bench order made 10 days
earlier, if not before. In its essentials, the case made by Mr Levy on behalf
of the defendants could hardly be more simple. When the plaintiff issued his
originating summons his underlease had ceased to exist at least 10 days
earlier; he was therefore not a ‘tenant’ who held a ‘tenancy’ to which section
24(1) of the Landlord and Tenant Act 1954 applied; there was thus no ‘tenancy’
for that subsection to prolong and no ‘tenant’ who could apply for a new
tenancy; and section 24(2) makes it explicit that subsection (1) did not
prevent ‘the coming to an end of a tenancy by . . . forfeiture.’ The plaintiff’s claim to a new tenancy was accordingly
hopeless and should be dismissed without more ado. The plaintiff’s claim for
relief against forfeiture, which stood adjourned sine die, could make no
difference to this.
On behalf of
the plaintiff Mr Prince accepted much of these contentions. However, he
contended that in section 24(1) ‘tenant’ and ‘tenancy’ ought to be construed in
a way which carried out the purpose of Part II of the Act in protecting
tenants. Accordingly, the subsection should be treated as including a forfeited
tenancy if there was a subsisting claim to relief against forfeiture which, if
successful, would result in the existence of a tenancy which on any footing was
within the subsection. Furthermore, he contended that in section 24(2)
‘forfeiture’ must mean a perfected forfeiture and not a forfeiture which is still
liable to be set aside as a result of a subsisting application for relief
against it. In a forfeiture case, the two subsections, when read together, mean
that a tenancy which otherwise would be within the Act is continued under it
until the forfeiture is perfected and is no longer liable to be set aside under
a subsisting application for relief.
A number of
authorities were discussed in argument, but none of them had any direct bearing
on this problem. It seems clear that the mere issue of a writ claiming forfeiture
of a lease does not bring about a forfeiture. On the other hand, there is
authority for saying that as soon as such a writ is served, there is a
forfeiture, though not until judgment will it be determined whether the
forfeiture was justified. There is also authority for saying that it is clear
that ‘the lease is not terminated until judgment is given for possession,’
though, when given, the judgment relates back to the issue of the writ: see City
of Westminster Assurance Co Ltd v Ainis (1975) 29 P&CR 469 at
471, per Cairns LJ. That was a case in which
writ without awaiting judgment do not seem to have been cited; see, for
instance, Serjeant v Nash, Field & Co [1903] 2 KB 304, and Canas
Property Co Ltd v KL Television Services Ltd [1970] 2 QB 433, both
decisions of the Court of Appeal. Fortunately I do not have to discuss this
apparent conflict, since on any footing there had been both service of the writ
and a judgment for forfeiture well before the plaintiff issued his originating
summons under the Act of 1954.
I think the
starting point is that before Sulka issued and served their writ, the plaintiff
was plainly and admittedly a tenant who could claim the protection of the Act
of 1954. The plaintiff is still in occupation of his premises and carrying on
his business there. If he obtains relief against forfeiture the effect will be
as if the underlease had never been forfeited. Thus in Dendy v Evans
[1910] 1 KB 263 it was held that an assignee of a forfeited lease could, after
obtaining relief against forfeiture, sue an underlessee for rent falling due
after the date of the forfeiture. When the plaintiff in the present case issued
his originating summons under the Act of 1954, his underlease, though
forfeited, was the subject of a subsisting application for relief which, if it
succeeded, would restore his underlease to its full effect as if it had never
been forfeited; and in that case, the originating summons must be valid. That
being so, ought the originating summons to be dismissed as claimed by the
defendants?
There are, of
course, curiosities in the status of a forfeited lease which is the subject of
an application for relief against forfeiture. Until the application has been
decided, it will not be known whether the lease will remain forfeited or
whether it will be restored as if it had never been forfeited. But there are
many other instances of such uncertainties. When the validity of a notice to
quit is in dispute, until that issue is resolved it will not be known whether
the tenancy has ended or whether it still exists. The tenancy has a trance-like
existence pendente lite; none can assert with assurance whether it is
alive or dead. The status of a forfeited underlease which is the subject of an
application for relief seems to me to be not dissimilar; at least it cannot be
said to be dead beyond hope of resurrection.
Mr Prince
relied on Driscoll v Church Commissioners for England [1957] 1 QB
330; and although the issue was different in a number of respects, I think that
the case is helpful. Under the Law of Property Act 1925, section 84, a tenant,
Mr Driscoll, applied to the Lands Tribunal for the discharge or modification of
certain restrictions as to user in his leases. Before his application was
heard, the landlord had issued and served writs claiming forfeiture of the
leases for breach of covenant, and the tenant had applied for relief from
foreiture. On the tenant’s appeal from the Lands Tribunal’s refusal to discharge
or modify the covenants, the landlords contended (inter alia) that the
tenant had no locus standi to apply to the Lands Tribuntal as a ‘person
interested’ under the Law of Property Act 1925, section 84(1), since the leases
had gone, and so there were no covenants left which could be discharged or
modified. On this contention Denning LJ, who delivered the leading judgment,
said (at p 340):
I do not
agree with that argument, for this reason: that, although a writ is an
unequivocal election, nevertheless, until the action is finally determined in
favour of the landlord, the covenant does not cease to be potentially good. For
instance, the forfeiture may not be established; or relief may be granted, in
which case the lease is re-established as from the beginning. That appears from
the case of Dendy v Evans, following what Sir Richard Henn
Collins MR said in Serjeant v Nash, Field & Co. It seems to
me that so long as the covenant is potentially good, Mr Driscoll, or anyone in
like position, has a locus standi to apply to the tribunal for a
modification of the covenant.
Hodson and
Morris LJJ concurred in rejecting this contention of the landlord (see at pp
344, 348), and although they were less explicit than Denning LJ on the point, I
do not think that they were in any way disagreeing with Denning LJ. I may say
that in that case the application to the Lands Tribunal had been made before
the writ had been issued, and so at a time when on any footing there had been
no forfeiture: but nothing seems to have turned on this.
Obviously a
person may be a ‘person interested’ without being a tenant: and I am concerned
with what is a ‘tenant’ and a ‘tenancy’ within the Landlord and Tenant Act
1954, Part II, and not with a ‘person interested’ under the Law of Property Act
1925, section 84(1). Nevertheless, the concept of a covenant being ‘potentially
good’ necessarily involves the lease being ‘potentially good’, awaiting the
determination whether or not relief against forfeiture will be granted. Does a
tenancy which formerly was plainly within the Act get driven out of the Act
when it becomes a tenancy which is only ‘potentially good’? Does it thereupon cease to be a ‘tenancy’
within the meaning of section 24(1) of the Landlord and Tenant Act 1954? The definition of ‘tenancy’ in section 69(1)
of the Act does not help in answering this question.
I turn to the
language of the subsections mainly in point. By section 24(1), ‘A tenancy to
which this Part of this Act applies shall not come to an end unless terminated
in accordance with the provisions of this Part of this Act’; and the subsection
then authorises ‘the tenant under such a tenancy’ to ‘apply to the court for a
new tenancy . . . .’ Pausing there, but
for the forfeiture, the tenancy in issue in this case would have expired at
common law on June 21 1979, but would then have been continued under section
24(1). There is then section 24(2): and it is on this, rather than on section
24(1), that I think the case in the main turns. Section 24(2) provides:
The last
foregoing subsection shall not prevent the coming to an end of a tenancy by
notice to quit given by the tenant, by surrender or forfeiture, or by the
forfeiture of a superior tenancy:
and then there
are some exceptions which I need not read. It will be observed that mere
forfeiture is not enough: there must be ‘the coming to an end’ of the tenancy
‘by forfeiture.’ Furthermore, the phrase
‘the coming to an end’ of the tenancy is shared by a ‘notice to quit given by
the tenant’ and by ‘surrender.’ Has a
forfeited tenancy which is the subject of a subsisting application for relief
which may restore the tenancy as if it had never been forfeited a tenancy which
has come to an end for these purposes, at any rate in the sense in which a
tenancy which has been surrendered has come to an end?
The point is
not easy, but in my judgment the answer is No. I think that such a tenancy is a
tenancy which may or may not have truly come to an end and that the subsection
is contemplating a tenancy which has in fact come to an end. The right of a
tenant to apply for relief is part of the process of forfeiture, and until that
process is complete I do not think that the tenancy has come to an end within
the meaning of section 24(2) of the Landlord and Tenant Act 1954. The
plaintiff’s tenancy in this case had accordingly not been taken out of the
operation of section 24(1), and it continued under it, thus enabling the
plaintiff to apply for a new tenancy. I do not think that it matters much
whether the form that any relief would take would be the restoration of the old
lease or the grant of a new lease on the terms of the old: in either case the
relief would relate back to the date of the forfeiture and so produce a tenancy
which was within the Act when the originating summons was issued.
This
conclusion does not seem to me to be affected by the majority decision in City
of Westminster Assurance Co Ltd v Ainis (1975) 29 P & CR 469, a
case to which I have already referred. In that case, the landlords obtained
judgment in default of appearance for possession against the tenants under a
lease on the ground of non-payment of rent and breach of covenant. The tenants
then applied for relief against the forfeiture, and were granted it
conditionally upon complying with certain conditions, some of which could be
performed in the future. While certain conditions had yet to be complied with,
the landlords took proceedings for possession against some squat-
to sue for possession was in the tenants and not in the landlords. Over the
dissent of MacKenna J, Cairns and Lawton LJJ rejected this contention and
reversed the decision of Cusack J holding that the landlords were entitled to
sue the squatters for possession. The order giving relief was construed as
being an order which did not restore to the tenants the rights of lessees under
the forfeited lease until the conditions had been complied with. In the
meantime the tenants if they remained in possession, would, in the words of
Cairns LJ at p 472, be there ‘not as tenants under the lease but as tenants at
will or on sufferance.’ At p 473 Lawton
LJ treated the order for relief as imposing a fetter on the landlords’ right to
possession against the tenants. This fetter operated in favour of the tenants
alone, and not in favour of the whole world, so that as against others the
landlords were entitled to possession. On compliance with all the conditions the
tenants were to be restored to their rights as lessees, but until then they
were not to have the rights of lessees. This approach seems to assume the
continued existence of the lease in some form, despite the forfeiture, with the
order operating to qualify the tenants’ rights under the lease. I do not think
that there is anything in the case which shows that in such a case the lease
has come to an end by forfeiture within the meaning of section 24(2).
Mr Levy
contended that to hold that the plaintiff in this case was entitled to claim a
new tenancy would mean that a tenant who deliberately dragged out his
proceedings for relief from forfeiture could thereby obtain an unmerited
extension of his tenancy in a case in which in the end he would obtain no relief.
He pointed out that in the present case the order was made with the plaintiff’s
consent, and under it the claim for relief against Sulka stood adjourned
generally. The defendants, who were not parties to those proceedings, could not
say when it would be determined. Furthermore, in those proceedings the
plaintiff had admitted the extent of the work required to be done under his
repairing covenant, but contended that under section 18 of the Landlord and
Tenant Act 1927 (relating to diminution in the value of the reversion) he had a
good defence to the claim for damages if the defendants intended, as they
asserted; to demolish or reconstruct the premises, and so on, within the
meaning of the Landlord and Tenant Act 1954, section 30(1)(f). The plaintiff
was thus waiting to see what events would bring, and had little incentive to
have his application for relief determined promptly.
I can, of
course, see the force of this. I can also see some force in Mr Prince’s
contention that if the Act is held not to apply, landlords may find in timely
proceedings for forfeiture a means of depriving some tenants of the protection
which they ought to have. I agree that the Act should, if possible, be
construed in such a way as to prevent its being manipulated by either landlords
or tenants so as to produce results contrary to its purpose. I think that at
least something of the sting would be taken out of Mr Levy’s contention if it
is held, as I think it should be, that undue delay in seeking relief may
indicate that the claim to relief is unreal and so ought to be disregarded. I
do not consider that at present there is any question of that in this case.
Furthermore, I do not think that a decision now that the originating summons
should not be dismissed could preclude the defendants from seeking the
dismissal of the originating summons at a later date on the ground that there
is no longer any genuine application for relief, and so the forfeiture has by
then become fully effective. Doubtless such an application would have its problems,
but at least it could be made. All that I decide is that the originating
summons was not a nullity when it was issued and that as matters stand today
the plaintiff has not ceased to have a tenancy to which the Act applies.
Perhaps I may
add that I am conscious that this judgment has not attempted to analyse the
attributes of a lease during the twilight period between its forfeiture and the
determination of an application for relief against the forfeiture. There are
plainly conceptual difficulties in almost any approach, and these,
understandably, have not been fully explored during argument. My duty is not
one of carrying out a jurisprudential analysis but merely one of finding what I
hope is a safe resting place for my decision. For the reasons that I have
given, I hold that this summons fails and should be dismissed.
The summons
taken out by the defendants to have the plaintiff’s originating summons under
the Landlord and Tenant Act dismissed was dismissed with costs.
