In last
week’s issue, we considered a case in which it had to be decided whether a
landlord should be taken to have either forfeited or accepted a surrender of a
lease. We continue the theme in this issue because the Court of Appeal has
recently been required to address much the same question. In McDougalls
Catering Foods Ltd v BSE Trading Ltd [1997] EGCS 70 the plaintiffs had sublet
premises in Reading in 1981.
In January
1993, the subtenant was placed in administrative receivership and soon
afterwards ceased trading and vacated the premises. The defendant, as surety
under the sublease, became liable and, having tried and failed to negotiate a
surrender, paid the rent until the end of 1993. However, when the March 1994
quarter became due it refused to pay, claiming that the lease had been either
forfeited or surrendered as a result of the landlords’ actions.
When this
dispute eventually came to court, the claim based on forfeiture was abandoned
and the outcome hinged solely on whether the plaintiffs’ actions had given rise
to a surrender by operation of law.
invasion
The
landlords’ problems stemmed from the fact that in April 1993 a group of gypsies
came on to the demised premises. The landlord promptly requested the defendant
to take action to have them removed and the latter, just as promptly, passed
the buck to the subtenant’s receiver who, in turn, claimed to have no interest
in the property.
Despite
numerous communications, over the next few months, during which the plaintiffs
demanded that BSE take steps to remove the gypsies, no progress was made.
Indeed, the situation deteriorated as more travellers moved on to the site. By
mid-December they had caused considerable damage.
Under threat
of the withdrawal of insurance cover, which would have put them in breach of
the terms of their headlease, the plaintiffs, on December 20, issued
proceedings under Ord 113 seeking possession of the demised premises against
‘Persons Unknown’.
On January 4
they wrote to the defendant confirming that they were seeking possession against
the gypsies, and stating that ‘it is not, and never has been, our client’s
intention to forfeit the underlease’.
The hearing
took place on the same day, and an order for possession was made and executed
with the help of the police on January 7. Later that month the defendant wrote
seeking to open negotiations for the surrender of the sublease, and its agent
continued to visit the premises on a regular basis to ensure that the property
remained secure.
It was only
later that BSE took the point that the landlords had, by seeking and obtaining
possession against the gypsies, effectively accepted a surrender of the
sublease.
position
As in the
case considered last week, there was no dispute as to the relevant legal
principles. In order for there to be a surrender by operation of law, there
must be relinquishment of possession and its acceptance by the landlord, or
other conduct consistent only with the cesser of the tenancy, and the
circumstances must be such as to render it inequitable for the tenant, or the
landlord, to dispute that the tenancy has ceased.
In a case
such as the present, where the actual litigation was between the landlord and a
surety, it was important to remember that the court had to look at the
situation between the landlord and the tenant.
Here, the
Court of Appeal had no doubt that the subtenant could be taken to have
relinquished possession. The tenant itself had vacated and its receiver had
made it clear that he had no interest in the property. Accordingly, the central
question was whether the actions of the plaintiffs were an unequivocal
acceptance of possession.
The existing
authorities make it clear that once a tenant has abandoned the premises, the
landlord is entitled to take steps to protect his interests without these necessarily
being viewed as the unequivocal acceptance of possession.
Thus, in
Oastler v Henderson (1877) 2 QBD 575, it was held that a landlord whose tenant
had left the premises could not be said to have accepted possession merely by
accepting the keys from the tenant’s agent and trying to relet the property;
only when he actually succeeded in reletting had a surrender taken place.
In Relvok
Properties Ltd v Dixon (1972) 25 P&CR 1 a landlord whose tenant had done a
midnight flit instructed agents to change the locks in order to secure the
premises; again it was held that this did not amount to a surrender. In an
Australian case, Buchanan v Byrnes (1906) 3 CLR 704, a landlord of hotel
premises, whose tenant had abandoned them, went in and arranged for the business
to be continued so that the liquor licence would not be lost while he tried to
relet. He was held not to have accepted a surrender.
The present
Court of Appeal regarded all these cases as representing a consistent view
namely, that unequivocal acceptance is a question of fact which must be viewed
in the light of all the circumstances. Here, the question was whether the
landlords’ action in claiming possession against third parties, and thereby
necessarily asserting their own right to possession of the premises, should be
treated as the acceptance of a surrender.
Despite the
citation of a case in which such a ruling had been made (see McVicar v Jackson
75 WN 46) the court in McDougalls was satisfied that the surrounding
circumstances were here very different and that there was no surrender. (In the
earlier case, the landlord had been seeking possession against a third party
who had occupied premises abandoned by the tenant. There, it was the third
party who was resisting the claim on the basis that the plaintiff landlord had
no right to possession. The court had no hesitation in concluding that the
issue of the proceedings for possession amounted to the acceptance of a
surrender.)
In the
present case it was clear that it had been essential to get rid of the gypsies.
Although adopting an inappropriate procedure, the landlords had made it clear
to both the defendant and the receiver that they did not intend to bring the
lease to an end, and neither could have believed that the proceedings were
intended to evict them.
