Lease – Rent arrears – Relief from forfeiture – Defendant landlord forfeiting lease for arrears of rent – Claimant applying for relief against forfeiture 14 months later – Whether delay in making application precluding grant of relief – Whether use of unit for illegal activity being relevant – Whether value of underlease measured against size of arrears to be taken into account – Whether prejudice to defendant resulting from non-payment of rent being relevant – Application granted
The claimant company had held the underlease of an industrial unit on the Endsleigh Industrial Estate, Endsleigh Road, Southall, Middlesex which it used as an MOT garage and workshop. The underlease which was dated 20 July 1998 was granted to the claimant for a term of 125 years, less 10 days, from 6 April 1981 for a premium of £90,000. The underlease included a right of re-entry in the event of non-payment of rent for a period of 21 days, whether formally demanded or not. The value of the property was agreed to be £275,000.
On 24 April 2014, the defendant landlord forfeited the underlease by peaceable re-entry based upon unpaid rent of £2,155. At that time, a freezing order was in place against the claimant’s assets after one of its directors had pleaded guilty to issuing MOT certificates without following the correct procedure. On 24 June 2015, the company applied for relief against forfeiture on the grounds that it was willing and able to pay the arrears of rent. The director’s brother had offered to sell his property and use the proceeds of sale to clear the debt. The defendant argued that, in light of the 14-month delay in making the application, the claim was stale. Furthermore, the defendant said it had incurred costs and expenses totalling £19,772.36 since the forfeiture which had increased as a result of the delay.
Held: The application was granted.
(1) The very lengthy period of delay was difficult for the claimant to overcome. The court had to consider whether it could be said that the application was made with “reasonable promptitude” taking a six-month period as a guide. The claimant said that that the delay arose from a combination of factors including the restraint order, the lack of money, an absence of specialist advice, and the fact that the director was suffering from depression. That evidence, combined with the well understood effects of depression which could include an inability to focus on important issues, were weighty factors to be put in the balance. The discretion to grant relief was broad, and reasonable promptitude was an elastic concept capable of taking into account human factors. Although 14 months was more than double the guide period, it would be wrong to bar the company from obtaining relief: Thatcher v CH Pearce & Sons (Contractors), Ltd [1968] 1 WLR 748 and Billson v Residential Apartments Ltd [1991] 1 EGLR 70 applied.
(2) The evidence concerning illegal activity was very limited. No evidence had been called by the defendant who wished to rely on the seriousness of the offending. Plainly the sentencing judge regarded the offence as being well over the custody threshold and one which merited for offences of dishonesty a moderately severe sentence. In the circumstances, the director’s conviction was not relevant. Although the offences were over the custody threshold and the conduct involved activity directly connected with the claimant’s principal business carried on at the unit, the case did not fall within the exceptional category. The claimant had lost its licence to issue MOT certificates and there was no real risk of the conduct continuing and there was limited evidence about the possibility of the premises being tainted by the past conduct: Gill v Lewis [1956] 2 QB 1 applied.
(3) It was an important factor to be weighed in the balance that the underlease had been granted for a premium of £90,000 at a ground rent of £100 per annum. The defendant had exercised its right to forfeit the underlease when the unpaid rent amounted to £2,155. That was less than 1% of the capital value of the underlease. If relief were granted, the sum payable would be about 10% of its value. Although it would be wrong to apply a purely arithmetic approach, there was a severe disproportion between the value obtained by the defendant as a windfall if relief was refused and the sum due. Given the starting point that equity regarded the right of re-entry in the case of unpaid rent as security for payment, the claimant had a powerful case for relief. Furthermore, the defendant had not been able to point to any prejudice to it or any third party as a result of the failure to pay the rent on time, the forfeiture or the delay in making the application.
(4) Accordingly, the claimant would be granted relief from forfeiture on the terms that it paid £24,530 to the defendant, which included interest at 1% over base rate during the period since re-entry. The claimant had established that it was able to meet that liability within a reasonable period: There was a buyer for the brother’s property and a real likelihood of a sale taking place, with the money being available within 12 to 16 weeks. That was sufficiently soon to be regarded as the immediately foreseeable future: Inntrepreneur Pub Co (CPC) Ltd v Langton [2000] 1 EGLR 34 considered.
Robert Bowker (instructed by Surjj Legal Ltd, of Stanmore, Middlesex) appeared for the claimant; Jamal Demachkie (instructed by Blaser Mills LLP) appeared for the defendant.
Eileen O’Grady, barrister
Click here to read transcript: Pineport Ltd v Grangeglen Ltd
