Landlord and tenant — Forfeiture — Premises found to have been used for purposes of prostitution — Although breaches of covenant had been established, the present judge, in his judgment of January 27 1989, granted the defendant owners of the premises relief against forfeiture on terms — One of the terms required by the judge was that the defendants should enter into a deed of variation of the user clause in order to exclude hostesses from the premises — Agreement on the wording of the deed caused difficulties and led to the present application to the judge under the liberty to apply — In requiring a deed of variation the judge was concerned to relieve the plaintiffs of the need to prove knowledge on the part of the defendants that the girls were offering their services for sex
of the discussions on the proposed deed of variation the original wording
suggested by the landlords was objected to as being too wide and a modification
suggested by the landlords was also criticised as involving the risk of
forfeiture if any female visitor unknown to them were, privately and entirely
for her own benefit, to proposition a customer — The tenants then, after some
discussion and amendment, put forward a revised version and although the
landlords were not entirely happy with this, as it involved proof of some
knowledge on the part of the tenant or management of the club of the activities
of the girl in question, the judge decided to approve it as a term for granting
relief — He pointed out that under the provisions of the lease the landlords
had to prove knowledge not only of the presence of the hostesses but also of
the fact that they were acting as prostitutes — Under the draft suggested by
the tenants it would be sufficient to prove knowledge of the fact that the
girls were acting as hostesses, that is to say providing their company, however
innocently, for reward
proposed by the defendant tenants was accordingly approved as satisfying the
term of relief relating to the deed of variation
The following
case is referred to in this report.
Ropemaker
Properties Ltd v Noonhaven Ltd [1989] 2 EGLR
50; [1989] 34 EG 39
This was an
application by the parties, Ropemaker Properties Ltd and Noonhaven Ltd, under
the liberty to apply granted by Millett J in his judgment delivered on January
27 1989 in the case of Ropemaker Properties Ltd v Noonhaven Ltd
reported at [1989] 2 EGLR 50; [1989] 34 EG 39. The application concerned the
deed of variation required by the judge as one of the terms of the relief from
forfeiture granted to Noonhaven Ltd.
Derek Wood QC
(instructed by Linklaters & Paines) appeared on behalf of Ropemaker
Properties Ltd; Jonathan Gaunt (instructed by Rubinstein Callingham Polden
& Gale) represented Noonhaven Ltd.
Giving
judgment, MILLETT J said: This is an application under a liberty to
apply to resolve a difficulty which has arisen in carrying out the terms of an
order made following a judgment which I delivered at the conclusion of the
action in January 1989.
The action was
a claim for forfeiture of a lease of West End premises for breach of the user
covenant. The premises were used as hostess clubs. The user clause of the lease
was contained in clause 3(12)(a) and (b) and was in these terms:
(a) Not knowingly to use or permit the demised
premises or any part thereof to be used for any illegal or immoral purpose and
that the demised premises shall be used only in accordance with the provisions
of sub-clause (b) of this sub-clause (12) and for no other purpose which use
shall not be construed to be a breach of this clause . . .
(b) Not to use or permit the basement ground and
first floors of the demised premises or any part thereof to be used for any
purpose other than as a high class restaurant/night club to include music
dancing and cabaret and gambling . . .
The premises
were used as hostess clubs. The plaintiffs alleged that the hostesses were
propositioning men for the purposes of prostitution. The defendants denied that
they were doing so or that they themselves were aware of the fact and denied
that they were in breach of the covenant.
When the
action began the plaintiffs were under the impression that the defendants were
themselves managing the hostess clubs and must have known of the activities of
the hostesses because it was so widespread. In fact it turned out that the
clubs were managed by an undertenant in one case and a licensee in another, and
the defendants attempted to distance themselves from the activities of the
clubs.
I found that
the clubs were used for the purposes of prostitution and that the defendants,
if not actually aware, must have been taken to have been aware of those
activities. I found that it was a case of wilful blindness.
I therefore
found that breaches of covenant were established but I granted relief from
forfeiture upon terms. One of the terms which I required was that the
defendants should enter into a deed of variation of the user clause in order to
exclude hostesses from the premises. My intention in imposing that requirement
was to make it easier for the plaintiffs to obtain forfeiture should there be
any repetition. In particular, I was concerned to relieve the plaintiffs from
the need to prove knowledge on the part of the defendants that the girls were
offering their services for sex.
In the course
of drafting the deed of variation, however, the parties’ respective solicitors
were unable to agree on its terms. This has given rise to a critical difference
which was properly brought back to me because it is of considerable importance
to the parties. The landlords’ proposed clause originally read as follows:
That there
shall not at any time be present on the demised premises hostesses, that is to
say, female persons accompanying or offering to accompany members of or
visitors to the club for payment commission or reward.
That is now
recognised as being too wide because there would be a breach of such a covenant
if a customer entered the club accompanied by (say) a girl from a legitimate
escort agency which had nothing to do with the management of the club or the
defendants and which did not provide girls for sex, the girl having arranged to
accompany the customer for money. The landlords now put forward a modified
clause under which the words ‘accompanying or’ are omitted. The result of the amended
clause is that it would not establish a breach of the covenant merely to prove
that a girl from an escort agency was on the premises; it would be necessary to
prove that there were present on the demised premises at any time girls who while
on the premises were offering to accompany members of or visitors to the
club for payment, commission or reward. This would avoid the need to prove
knowledge on the part of the defendants.
The defendants
object because they claim that it would be unfair to put them at risk of
forfeiture if any female visitor unknown to them but privately and entirely for
her own benefit were to proposition a customer. The only way in which in
practice the defendants could ensure that there was no breach of such a
covenant would be to insist that no unaccompanied girls should attend the
premises at all. Even that might not be sufficient because it would be
impossible to be absolutely certain that waitresses and bar girls properly
employed by the management of the club did not on occasion proposition a
customer.
Accordingly,
the defendants have put forward a clause which, after some discussion and
amendment, reads:
That there
shall not at any time be present on the demised premises hostesses, that is to
say, female persons whose presence on the demised premises is permitted or
suffered by the tenant or the management with a view to their offering to
accompany members of the club or visitors to the club for payment commission or
reward.
The landlords
object to that form of wording because they say it reintroduces in the
definition of the hostess the concept that there must be some knowledge on the
part of the tenant or management of the activities of the girl in question.
That is true, but, in my judgment,
presence is integral to the way in which the club is run and that her services
are provided by the club as one of the facilities offered to customers.
It is not
correct to say, as the landlords submit, that the formula put forward by the
tenants leaves the landlords in no better position than they were before. Under
the clause in the present lease, the landlords were faced with two
difficulties. First, they had to prove knowledge on the part not only of the management
of the club but of the defendants themselves. Second, they had to prove
knowledge not only of the presence of hostesses but of the fact that they were
acting as prostitutes. The clause proposed by the defendants obviates both
those difficulties. It will still be necessary for the landlords to prove some
knowledge on the part of either the tenant or the management of the club, but
it will be sufficient for them to prove knowledge of the fact that the girls
are acting as hostesses, that is to say, providing their company, however
innocently, for reward. I doubt that this will in practice cause any great
problem should this activity recommence. It should be easy enough to detect any
waitresses or other employees of the club sitting at tables with customers.
That is not the normal activity of a waitress or bar girl and it would be
extremely implausible should she sit with a customer unless there was something
in it for her. That fact would be known to the management of the club and the
inference would be obvious. Equally, the appearance of a number of girls
unaccompanied at the beginning of the evening waiting for customers to arrive
and then approaching them and sitting with them would also lead to an almost
irresistible inference, and if such an inference can be drawn by the court that
would only reflect the obviousness of the situation to the management of the
club.
In my
judgment, therefore, the form of clause proposed by the defendants is one which
I think should sufficiently deal with the problem and I will be satisfied with
it as a term of giving relief.
