Landlord and tenant – Forfeiture of lease – Summary judgment – Claimant granting underlease of commercial premises to defendant – Parties discussing possible surrender of lease – Claimant seeking declaration that lease continuing and applying for summary judgment – Whether defendant having real as opposed to merely fanciful prospect of succeeding on its case at trial – Application granted
In October 2019, the claimant landlord granted the defendant an underlease of commercial premises at Second Floor, 40 Grosvenor Place, London SW1, for a term of 10 years.
The basic rent was £3,115,134 annually plus VAT, commencing on 19 February 2022. Pursuant to clause 2.2 of the lease, the basic rent was “to be paid by equal quarterly payments in advance on the Quarter Days…” (25 March, 24 June, 29 September and 25 December). Neither the basic rent nor any other amounts due under the lease had been paid.
On 4 February 2022, the defendant contacted the claimant to discuss the possibility of the parties agreeing a surrender of the lease. On 8 April 2022, the claimant’s managing agents carried out works to upgrade the entry barrier system in the building. That involved the deactivation of existing keycards and reissuing new keycards to tenants of the building. No new key cards were issued to the defendant, which informed the claimant that it had in fact vacated the demised premises on 8 April 2022. No surrender was ever agreed.
The defendant subsequently alleged that the claimant’s upgrade works to the building amounted to a forfeiture of the lease on 8 April 2022; and the deactivation of the key cards amounted to a peaceable re-entry of the premises. Therefore, its liabilities under the lease ended on that date.
The claimant did not accept that the lease had been terminated and sought a declaration that the lease was continuing, together with costs. The claimant applied for summary judgment under CPR 24.2.
Held: The application was granted.
(1) An application under Part 24 might give rise to a short point of law or construction. If the court was satisfied that it had all the evidence necessary for the proper determination of the question and that the parties had had an adequate opportunity to address it in argument, it should decide it. If the evidence showed that although material in the form of documents or oral evidence that would put the documents in another light was not currently before the court, such material was likely to exist and could be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success: Easyair Ltd v Opal Telecom [2009] EWHC 339 (Ch) applied.
The court’s task was to ascertain the objective meaning of the language which the parties had chosen to express their agreement. That was not a literalist exercise focused solely on a parsing of the wording of the particular clause. The court had to consider the contract as a whole and, depending on the nature, formality and quality of drafting of the contract, give more or less weight to elements of the wider context in reaching its view as to that objective meaning: Wood v Capita Insurance Services Ltd [2017] AC 1173 applied.
(2) The present case involved a short point of construction of clause 6.1(a) of the lease as to when the basic rent became payable. The relevant quarter day was 25 March 2022, and the court accepted that the 14-day period only began to run on 26 March 2022. The whole of that period must have elapsed before the right to forfeit could accrue.
Where the period within which the act was to be done was a number of days, months or years from or after a specified day, the specified day was excluded from the period, ie the period commenced on the day after the specified day. In this case, rent could never be treated as unpaid until 26 March: Zoan v Rouamba [2001] WLR 1509 considered.
Thereafter, the general rule was that in approaching the computation of periods of time, the day on which the initial event occurred was excluded. Although that rule was not absolute, there was nothing in the wording of clause 6.1(a) to displace the general rule.
Forfeiture was a serious remedy and, generally, a longer rather than shorter period should be afforded to the tenant before the landlord was entitled to terminate. The court could take that into account, applying the general approach of looking at the contract as a whole and having regard to its nature and the wider context when reaching an objective conclusion as to its meaning: Re Lympne Investments [1972] 1 WLR 523 considered.
Accordingly, the defendant’s defence proceeded on an erroneous calculation of when the claimant became, in theory, entitled to forfeit the lease: the claimant could not lawfully have determined the lease on 8 April 2022.
(3) Peaceable re-entry required some form of actual physical re-entry onto the whole of the demised land. But entry onto part only was sufficient if the lease so provided. Changing the locks was the best evidence of re-entry. Where that was not practical, there had to be some other obvious manifestation of re-entry. However, it was always important to look at the facts.
In Revlok Properties v Dixon [1973] 25 P&CR 1, where a tenant had absconded, the Court of Appeal held that the landlord was entitled to secure the premises by changing the locks without it amounting to a peaceable re-entry. It was always a matter of looking at the individual circumstances rather than taking any one individual act, such as changing keys, as a definite open-and-shut answer one way or the other.
In this case, the claimant’s actions did not amount to an unequivocal retaking of possession of the premises. If the defendant was correct, the deactivation of the keycards would presumably unlawfully have forfeited the leases of the other tenants in the buildings on 8 April 2022. There was no suggestion that that was what occurred. The defendant continued to control access to the second-floor entry points through its own keycard system. The claimant did not control that system but only the ground-floor barriers, which were upgraded. One needed to look at the undisputed factual context.
In all the circumstances, there was no form of actual physical re-entry of the demised premises to bring the lease to an end. Re-entry would only avail the claimant if it was lawful. It could not be said that there was any unlawful forfeiture of the lease. It followed that the claimant was entitled to judgment.
Isabel Petrie (instructed by Bryan Cave Leighton Paisner LLP) appeared for the claimant; Camilla Lamont (instructed by Eversheds Sutherland LLP) appeared for the defendant.
Eileen O’Grady, barrister
Click here to read a transcript of NPS (40GP) Ltd v Liberty Commodities Ltd
