Business lease — Tenants as individuals trading in partnership — Failing to pay successive rent instalments — Landlords obtaining judgments for instalments and re-entering premises — Whether landlords waiving right of re-entry by suing for rent instalments — Whether right of re-entry prohibited by insolvency legislation — Tenants’ appeal dismissed
In April 1994 individuals trading in partnership (“the tenants”) took a 25-year lease of business premises in Portishead, Bristol. The £9,950 quarterly rent was payable in advance in June, September, December and March of each year. The tenants were unable to pay the September instalment and December 1, the next instalment due, was not paid. The lease contained a common form proviso for forfeiture. It gave the landlords the right of re-entry, inter alia, if any part of the rent was unpaid for 14 days after it became payable. That was “without prejudice to the right of action of the landlord in respect of any antecedent breach”. The landlords’ right of re-entry only became exercisable in respect of the December 1 instalment on December 15 1994.
On January 5 1995 a writ was issued for the two instalments. On February 10 judgment in default was entered. A few days prior to that, interim orders had been granted under section 252 of the Insolvency Act 1986, with a view to an individual voluntary arrangement to allow them a moratorium to meet creditors’ demands. On February 13 the landlords peaceably re-entered. On the same day, they received written notice of the interim orders. They applied, pursuant to section 252(B) of the Insolvency Act 1986, for a declaration that their re-entry had been effective. On February 16 1995 an order was made in the county court that: the right of re-entry had not been waived by the landlords’ writ; its exercise was not prohibited by section 252 which provided: “No other proceedings and no execution or other legal process may be commenced or continued against the debtor or his property without leave of the court”. The tenants appealed.
Held The appeal was dismissed.
1. There was nothing inconsistent between the landlords both forfeiting the lease and demanding (or accepting) rent providing it had accrued due before (cf after) their right of forfeiture became exercisable. Thus, while they had waived their right to forfeit for non-payment of the September instalment, by demanding the December instalment, they had not waived their right to forfeit for non-payment of the December instalment.
2. There was nothing inconsistent between the landlords’ claim for the full amount of a quarterly rent instalment payable in advance and their exercise of a right of re-entry during the relevant quarter.
3. It followed from the decision in Macmillan & Sons Ltd v Cerrone [1994] BCC 25, namely that the remedy of distress did not constitute “other proceedings … execution … or other legal process” under section 252(2) that peaceable re-entry was also excluded from the section.
4. The ordinary meaning of “proceedings” and “legal process” adopted by Millet J in Re Olympia & York Canary Wharf [1993] BCC 154, namely that these phrases did not embrace non-judicial steps which did not require the assistance of the court, could provide assistance in interpreting section 252(2). While Millet J was considering the use of those phrases in section 11(3) of the 1986 Act, one would expect the same words used in two sections of the same Act to have the same meaning.
Malcolm Warner (instructed by Galbraith Quinn, of Bristol) appeared for the tenants; Jeremy Bamford (instructed by Clarke Wilmott & Clarke, of Taunton) appeared for the landlords.
