Landlord and tenant — Liability for payment of rent arrears arising from a rent review — Assignment of lease to defendants — Lease provided that on the failure of the parties to reach agreement on the rent under review it should be fixed by an independent surveyor and communicated to the parties; immediately on such communication the rent so determined would become the rent payable for the relevant three-year period — The tenant company, Million Pigs Ltd, got into financial difficulties and a receiver was appointed — The determination of rents by the independent surveyor under the rent review clause (the assessment not having been agreed by the parties) was considerably delayed — It was eventually communicated to the parties about a month before the lease was assigned to the defendant company — The plaintiff landlords, who were the freehold owners, claimed, on the basis of South Tottenham Land Securities Ltd v R & A Millett (Shops) Ltd, that the defendants were liable for the rent review arrears — There was no hope of recovering the sums from the receiver — It was submitted that, in the absence of special terms to the contrary, the rent review arrears became due and payable on the next date for payment of rent after the increased rent was determined; on that date the defendants were ‘the tenant’ as assignees of the term — Defendants argued that there was a special provision in the lease which excluded the South Tottenham rule, namely, that the rent review arrears became payable immediately on the communication to the parties of the surveyor’s determination; and this communication took place before the assignment to the defendants — Second, the defendants relied on the Apportionment Act 1870 and the decision in Torminster Properties v Green — Held, accepting the defendants’ submissions, that the receiver in the present case came under a liability, treated as accruing from day to day, to pay the increased rent when fixed — The receiver was therefore liable to pay the rent review arrears and the defendant company, as assignee, was not liable — Plaintiffs’ action dismissed — (The point decided had no bearing on forfeiture for non-payment of rent)
The following
cases are referred to in this report.
Glass v Patterson [1902] Ir R 660
Howell,
ex parte Mandelberg, Re [1895] 1 QB 844
South
Kensington Co-operative Stores, Re (1881) 17 ChD
161
South
Tottenham Land Securities Ltd v R&A Millett
(Shops) Ltd [1984] 1 WLR 710; [1984] 2 All ER 614; [1984] EGD 96; (1983)
269 EG 630, [1984] 1 EGLR 115, CA
Swansea
Bank Ltd v Thomas (1879) 4 ExD 94
Torminster
Properties Ltd v Green [1983] 1 WLR 676;
[1983] 2 All ER 457; (1983) 45 P&CR 391; [1983] EGD 174; (1983) 267 EG 256,
[1983] 2 EGLR 30, CA
This was an
action by the plaintiffs, Hylton Royle Parry and Ruby Sarah Parry, freehold
owners of 300 acres of farmland at Minsterley, Shropshire, against
Robinson-Wyllie Ltd, assignees from Million Pigs Ltd, of a lease of the farm
for 21 years from March 25 1972. The plaintiffs’ claim was for arrears of
increases of rent determined by an independent surveyor in pursuance of a rent
review clause in the lease.
M Blackett-Ord
(instructed by Harry W Hughes & Son, of Shrewsbury) appeared on behalf of
the plaintiffs; R W Moxon Browne (instructed by Evershed & Tomkinson, of
Birmingham) represented the defendants.
Giving
judgment, SIR NICOLAS BROWNE-WILKINSON V-C said: The plaintiffs are the
freehold owners of 300 acres of farmland at Minsterley, Shropshire. By a lease
dated November 25 1972 they granted to Million Pigs Ltd a lease of the farm for
a term of 21 years from March 25 1972. The rent originally reserved was £15 per
acre (ie £4,500 per annum) payable quarterly in arrears. However, clause 2(c)
of the lease provided for a rent review every three years in the following
terms:
(c) the yearly rent payable by the Tenant shall
be reviewed after every third year of the tenancy and shall be the sum of £15
per acre aforesaid or such sum whichever be the higher as shall be assessed as
a reasonable rent for the demised premises for the appropriate period such assessment
to be made in the following manner that is to say:
Either
(i) such assessment as shall be agreed between
the parties hereto in writing before the 25th day of March in respect of each
successive three-yearly period or
(ii) In the event of the parties hereto failing to
reach such agreement as aforesaid on or before the appointed dates . . . then
the reasonable rent for the successive three-yearly period shall be fixed or
assessed by an independent surveyor . . . and such assessment shall be communicated
to the parties hereto in writing and immediately upon such communication the
rent so assessed as a reasonable rent for the respective periods or the
original rent of £15 per acre whichever shall be the higher shall be the
respective rents payable for the successive three-yearly periods under the term
hereof.
(iii) . . .
(iv) the right of entry hereby reserved shall be
exercised by the Landlords as well in the case of non-payment of the said rent
of £15 per acre as in the case of non-payment of rents so agreed (sic) or
assessed and also in the event of the Tenant refusing to refer the question of
the rent payable hereunder in accordance with this clause and the Tenant hereby
charges the premises with the payment of the rent so agreed or assessed as
reasonable rents at the time and in the manner provided for the payment of rent
of £15 per acre hereby reserved and this remedy shall be in addition to and not
in derogation of any other remedy in respect of such rent.
The tenant
company got into financial difficulties and a receiver was appointed on March
11 1977. There has been a series of disputes between the receiver of the
company and the plaintiffs: this is the fifth action relating to this lease. As
a result, the operation of the rent review provisions in the lease has been
very much delayed. Although the original rent of £4,500 has been paid
throughout, the increased rent payable in respect of the three-yearly periods
commencing March 25 1978 and March 25 1981 was not fixed until determined by an
independent surveyor on November 16 1983. The increased rents were determined
at £6,600 per annum for the three-year period starting March 25 1978 and £9,900
per annum for the three-year period starting March 25 1981. That determination
of the new rents by the independent surveyor was communicated to both parties
shortly after November 16 1983.
During the
period when the original rent was being paid by the receiver but the increased
rent had not been determined, the defendant company was introduced to the
property and became anxious to take an assignment of the lease from the
receiver. The plaintiffs took the view that the receiver could not assign to
the defendant company without providing security for the payment (when
assessed) of the increased rent payable in respect of the period from March 25
1978 onwards. In October 1983, the plaintiffs applied to the court for an
interim injunction to restrain the assignment to the defendant company; such
injunction was refused. Accordingly, on December 22 1983 (ie after the
increased rent had been determined by the surveyor) the lease was assigned to
the defendant company.
As a result of
the determination of the increased rent on November 16 1983, £19,800 rent in
respect of the period from March 25 1978 onwards remains unpaid. I will call
this sum ‘the rent review arrears’. In this action the plaintiffs claim from
the defendants as assignees of the lease the rent review arrears together with
interest from December 25 1983. There is no hope of recovering the arrears from
the receiver.
The
plaintiffs’ case is straightforward. They say that, in the
and payable on the next date for payment of rent after the increased rent was
determined. South Tottenham Land Securities Ltd v R & A Millett
(Shops) Ltd [1984] 1 WLR 710*. Since the increased rent was determined only
on November 16 1983 (or shortly thereafter when communicated to the parties)
the rent review arrears became first payable on the following quarter day,
namely December 25 1983. On that date, ‘the Tenant’ was the defendant company,
as assignee of the term. Therefore, they say, the defendant company is liable
to pay all the rent review arrears even though such arrears relate to a period
during which the defendant company was not the tenant.
*Editor’s
note: Also reported at (1983) 269 EG 630, [1984] 1 EGLR 115.
Mr Moxon
Browne, for the defendant company, submits that the plaintiffs’ approach is too
simplistic. First, he submits that in this lease clause 2(c)(ii) provides that
the rent review arrears were to become ‘immediately’ payable on the
communication to the parties of the determination of the new rent (ie before
the assignment) thereby excluding the general rule laid down in the South
Tottenham case. Second, he submits that, even if the rent review arrears
did not become payable until December 25 1983, those arrears represent rent in
respect of a period prior to the assignment and the Apportionment Act 1870
applies: the plaintiffs are only entitled to demand payment of such arrears
from the receiver. He relies, by analogy, on the decision of the Court of
Appeal in Torminster Properties Ltd v Green [1983] 1 WLR 676† .
† Editor’s
note: Also reported at (1983) 267 EG 256, [1983] 2 EGLR 30.
In my
judgment, Mr Moxon Browne’s submissions are right. I will assume, in the
plaintiffs’ favour, that the general rule in the South Tottenham case
applies in this case and that the rent review arrears first became actually
payable on December 25 1983, ie after the date of the assignment to the
defendant company. In the Torminster case, rent was payable by the
tenant, a limited company, in advance. A rent review clause provided for an
increased rent to be payable on the September and December quarter days in
1978. In fact the amount of the increased rent was not fixed on review until
1980. In the meantime, the tenant company had been wound up and the lease
surrendered. The landlord was held entitled to recover from sureties the amount
of the increased rent unpaid on the September and December 1978 quarter days.
The Court of Appeal held that, despite the surrender of the lease before the
amount of the increased rent had been fixed, the landlord had an accrued right
to the increased rent when the period in respect of which it was payable had
started to run, even though such increased rent was not payable until it had
been fixed: there was ‘a present right, not yet actionable, to a future
payment’. This accrued right to the rent was not destroyed by the surrender.
This authority
is not decisive of the present case, since it was concerned with the effect of
a surrender, not an assignment. Moreover, there are remarks (at pp 684G and
685A) which suggest that if, as in the instant case, the rent had been payable
in arrears and not in advance, the result might have been different. But, in my
judgment, it does establish two things. First, that the liability to pay rent
review arrears is not necessarily linked to the date when such arrears become
payable. Second, that ‘the lessee’s duty to pay the difference between the old
and the review rent for the period after the review date is correlative with
the lessee’s right to possession during that period’: see at p 684E.
I turn to
consider the incidence of liability for payment of rent when the term has been
assigned between two quarter days. To my surprise, there is no clear statement
of the law to be found in the textbooks. However, I am satisfied that the
decided cases establish that the Apportionment Act 1870 applies for all
purposes. Under section 2 of the Act the rent is treated as accruing from day
to day; but under section 3, there is no right for the landlord to recover an
apportioned part of the rent until the next date on which, under the lease, the
rent is payable. Accordingly, on an assignment of the term between two quarter
days, the assignor alone is liable to the landlord for rent in respect of the
period down to the date of the assignment and (notwithstanding the covenant to
pay the whole quarter’s rent in arrear on the quarter day) the assignee is only
liable for the rent referable to the period after the date of the assignment.
It is not
necessary for me to decide whether, apart from authority, that would be the
correct construction of the Act. Although Mr Blackett-Ord, for the plaintiffs,
challenges the existing authorities, in my judgment they have been established
by the law for over 100 years. In Swansea Bank Ltd v Thomas (1879)
4 Ex D 94 and Re Howell ex p Mandelberg [1895] 1 QB 844 it was decided
that the effect of the Apportionment Act was to render the assignor liable to
the landlord for the rent in respect of the period down to the date of
assignment. Those cases did not decide whether the assignee was also liable for
such rent. But in Re South Kensington Co-operative Stores (1881) 17 Ch D
161 the tenant company had been wound up and the liquidator remained in
possession of the demised premises. Fry J held that the Apportionment Act
required the rent to be apportioned between the periods before and after the
date of the presentation of the petition. Under the Act, rent accrued due from
day to day down to that date and had to be proved for in the liquidation: rent
accruing after that date had to be paid by the liquidator who had gone into
possession. The liquidator was not held liable to pay the full rent for the
quarter even though he was in possession on the quarter day. The point was also
expressly decided by the Court of Appeal in Ireland in Glass v Patterson
[1902] Ir R 660: see especially the judgment of Palles CB.
That being the
position in relation to rent payable in respect of the current quarter, in my
judgment the same must, a fortiori, be true of ordinary arrears of rent
outstanding in relation to a previous period. The rent for that previous period
having fallen not only due but also payable before the date of assignment, only
the assignor would be liable to the landlord for such arrears.
There is,
however, an obvious difference between ordinary arrears of rent and rent review
arrears; therefore rent review arrears cannot be actually payable at the
earliest until the reviewed rent has been fixed. But in my judgment the fact
that the rent review arrears are not immediately payable does not alter the
position. Under the Apportionment Act rent is treated as accruing due from day
to day, even though not immediately payable. Moreover, the Torminster case
establishes that, prior to the fixing of the increased rent, the tenant is
under an existing liability to pay the rent when fixed: the liability to pay
the increased rent is correlative with the lessee’s right to possession during
the period in respect of which the increased rent is payable. In my judgment,
therefore, in the present case the receiver came under a liability, treated as
accruing from day to day, to pay the increased rent when fixed. The receiver is
therefore liable to pay the rent review arrears and the defendant company, as
assignee, is not so liable.
There are two
matters that I should mention. First, the point I have decided has no bearing
on a case where the landlord is seeking to re-enter for non-payment of rent. If
the right of re-entry is exercisable simply in the event of non-payment of
rent, the landlord will be entitled to re-enter after assignment whether it is
the assignor or the assignee who is under the personal obligation to pay the
arrears. In the instant case, it has been decided in one of the earlier
actions* that the plaintiffs’ right of re-entry under the lease is void as
conflicting with the provisions of the Agricultural Holdings Act: whether that
decision was right or wrong, the point is res judicata between these
parties. It is for this reason that the plaintiffs have not re-entered but have
had to sue the defendant company, as assignee, on the covenant to pay rent.
*Editor’s
note: Parry v Million Pigs Ltd (1980) 260 EG 281, [1981] 2 EGLR
1.
Second, the
plaintiffs (after giving the matter consideration) have not sought to rely on
the unusual provision in clause 2(c)(iv) which expressly charges the premises
with the increased rent. I therefore express no view on the effect of that
clause.
For those
reasons, the action is dismissed.
