Landlord and tenant — Forfeiture — Relief — Alteration of parties’ position — Discretion to refuse relief from forfeiture for non-payment of rent in exceptional circumstances — Appeal from decision of Turner J refusing relief — ‘Eleventh-and-a-half hour’ application by tenants after a series of steps to delay giving up possession — Tenants at first said that they would not contest landlords’ proceedings for possession, payment of rent arrears and mesne profits but would seek a stay in respect of any money judgment — Landlords had, on the basis of tenants’ assurance and the order for possession in proceedings not defended by tenants, entered into negotiations for the grant of a tenancy of the premises to a third party — There then followed an application by the tenants, which was dismissed, for a stay of execution on the money judgment; a summons for relief against forfeiture and for a stay of all further proceedings, including the execution of the order for possession; an agreement by the landlords not to execute a writ of possession and fieri facias; a hearing before a master at which the tenants offered only a post-dated cheque, the summons for relief being then dismissed; after the execution by the landlords of the lease of the premises to the third party, a notice of appeal to the judge in chambers from the master’s dismissal of the summons for relief; and, two days before the hearing by the judge, the proffer of a cheque for the amount due, properly drawn by a partner in the tenants’ firm of solicitors on the firm’s client account, but held by Turner J to be too late — Held, on appeal, that the judge had properly exercised his discretion and there was no misdirection — The judge had correctly applied the principles in the case of Gill v Lewis and the earlier case of Stanhope v Haworth — The present was a case where the position of the parties had altered and the rights of a third party had intervened — In these circumstances the court can properly refuse relief — Appeal dismissed
The following
cases are referred to in this report.
Chandless-Chandless v Nicholson [1942] 2 KB 321
Gill v Lewis [1956] 2 QB 1; [1956] 2 WLR 962; [1956] 1 All ER
844, CA
Stanhope v Haworth (1886) 3 TLR 34
This was an
appeal by AFCO (UK) Ltd, Dildar Aziz Khan and Tayyadas Iqbal Fareed,
defendants, from the decision of Turner J refusing them relief from forfeiture
in proceedings for possession, arrears of rent and mesne profits brought by the
plaintiffs (the present respondents), Joyce Silverman, Geoffrey Mayer Silverman
and Peter Douglas Ziwan. The premises concerned were the back suite of offices
on the mezzanine floor of 92 Regent Street, Westminster.
Leslie
Michaelson (instructed by Kennedys) appeared on behalf of the appellants;
Laurence Marsh (instructed by Silvermans, of Barnet, Herts) represented the
respondents.
Giving
judgment, SLADE LJ said: On December 17 1987 Turner J made an order refusing
the defendants in these proceedings relief from forfeiture of certain office
premises of which they were tenants consisting of the back suite of offices on
the mezzanine floor in the building known as 91 Regent Street in the City of
Westminster (‘the premises’). In view of the urgency of the matter an appeal by
the defendants from his decision was heard by us on the last day of the
Michaelmas Term, December 21 1987. We dismissed the appeal and said that we
would give the reasons for our decision at a later date. This we now do.
The history of
the matter is as follows. By a lease dated July 2 1987 and made between the
plaintiffs of the first part, the first defendant of the second part and the
second and third defendants as guarantors of the third part the premises were
demised by the plaintiffs to the first defendant for a term of 10 years from
December 23 1985 at an annual rent of £6,250 (subject to variation as provided
by the lease) and further rents payable in respect of service and insurance
charges. The lease contained a proviso entitling the plaintiffs to forfeit it
and to re-enter the premises in the event of the rent or any part thereof being
in arrears for 21 days after becoming due.
On August 26
1987 the plaintiffs issued a writ endorsed with a statement of claim asserting
that there was a balance of £7,394.07 rent due and unpaid under the lease and
claiming possession of the premises, payment of the last-mentioned sum plus
interest and mesne profits plus interest.
On September
14 1987 (as we have been told in an agreed chronology) solicitors acting on
behalf of the first defendant filed an acknowledgement of service stating that it
did not intend to contest the proceedings but intended to seek a stay of
execution in respect of any judgment entered in respect of the debt or
liquidated demand.
On September
28 1987, no notice of intention to defend having been given by any of the
defendants, an order was made that the defendants should
(i) give the plaintiffs possession of the
premises;
(ii) pay the plaintiffs £7,499.41 and £86.90
interest making a total of £7,586.31;
(iii) pay the plaintiffs mesne profits at the rate of
£18.84 per day from September 29 1987 to the time of obtaining possession.
Following the
making of that order the plaintiffs entered into negotiations for the grant of
a lease of the premises for three years to a chartered quantity surveyor, Mr C
S Parsons, with a view to his going into occupation on December 1 1987. In
affidavits sworn in these proceedings Mr Parsons and the plaintiffs’ solicitor,
Mr Gary Chambers, stated that an agreement for the grant of a lease to Mr
Parsons was concluded in October 1987. Mr Chambers exhibited copies of two
letters passing between the parties respectively dated October 9 and 13. These
letters do not by themselves evidence a concluded agreement and there is no
particularised evidence before us to show when a legally binding agreement (if
any) for the grant of a lease to Mr Parsons was finally reached. However, the
correspondence shows that it was the parties’ intention that the term of the
new lease should begin on December 1 1987 and that by October 13 they had at
least reached an advanced state of negotiation. Mr Parsons himself closed his
previous office premises in Somerset on October 15 1987.
On October 20
1987 an application by the defendants for a stay of execution on the money
judgment was dismissed. On that same day they issued a summons seeking relief
from the forfeiture and a stay of all further proceedings in the action,
including execution of the order for possession. The summons was returnable
before the master on December 1. We have been told that it was simply a
coincidence that this was also the date on which the plaintiffs contemplated
giving possession of the premises to Mr Parsons. So far as the evidence shows,
the issue of this summons was the first intimation by the defendants that they
would or might seek to retain possession of the premises.
On October 27
1987, pursuant to the leave of Master Turner, the plaintiffs issued a writ of
possession and fieri facias. However, their solicitors agreed with the
defendants’ solicitors that it should not be executed pending the hearing on
December 1 1987 before Master Turner.
The defendants
apparently took few steps to prepare for that hearing. They filed no affidavit
in support of the summons. They made no tender of payment. Effectively all they
did at the hearing on December 1 was to make an offer of a post-dated cheque of
their own in settlement of the arrears (an offer which they repeated after the
hearing). Not surprisingly, Master Turner considered this offer inadequate and
dismissed the defendants’ summons for relief from forfeiture. The correctness
of the master’s decision, in the circumstances as they were before him, was not
challenged at the subsequent hearing before Turner J. At the hearing before the
master the defendants did not seek a stay of execution or mention any intention
to appeal.
Following this
decision, the plaintiffs took the view that there was nothing to prevent their
implementing the arrangements with Mr Parsons. On December 1 1987 they informed
him that they would be able to enter into a lease of the premises and arranged
to meet him on
offices and shortly thereafter a lease of the premises bearing that date was
executed in his favour. The lease was substantially in the same form as the
lease to the defendants save that the annual rent was £6,500, the term was
three years and there were no guarantors.
At 12.21 pm, after
execution of this new lease, there arrived at the plaintiffs’ solicitors’
offices a ‘faxed’ letter from the defendants’ solicitors stating that they
would probably be instructed to appeal and seek a stay of execution in the
meantime.
On December 3
1987 the defendants issued a notice of appeal to the judge in chambers from the
master’s decision of December 1. On December 10 the defendants’ solicitors
obtained a stay of execution of the writ of possession until December 17 when
the appeal was due to be heard by the judge in chambers.
On December 15
1987 Mr Chambers swore an affidavit on behalf of the plaintiffs stating that
the total amount due to them was £6,152.84. On December 16 1987 Mr Olympitis, a
partner in the firm of the defendants’ solicitors, made an offer to the
plaintiffs’ solicitors by telephone of a cheque for this amount, and on
December 17 1987 sent them a cheque drawn on his firm’s client account, which
was available for examination at the hearing before Turner J. It is common
ground that this offer of payment was properly and sufficiently made.
On December 17
1987 Turner J dismissed the defendants’ appeal from Master Turner’s order. The
short note of his judgment available to us reads as follows:
On December 1
1987 Master Turner refused an application by the defendant to be relieved from
forfeiture. It was accepted before me that Master Turner’s decision was
unexceptionable — I would say unappealable except that the defendants have the
right of appeal.
The defendants
say they are entitled to relief. The circumstances have changed in that at the
eleventh-and-a-half hour they have tendered a cheque for the amount that is
owing drawn on their solicitors client account.
That would
have saved the day but the plaintiffs, not unreasonably given the history of
this matter, on December 2 had granted a fresh lease of the premises. There is
binding and persuasive authority to which I have been referred — Gill v Lewis
(1956) 2 QB 1 at 10 per Jenkins LJ. The plaintiffs are not to be
embarrassed by this eleventh-and-a-half hour application. It would be quite
wrong.
Appeal
dismissed with costs.
Stay of
execution of writ of possession pending appeal to the Court of Appeal refused.
On December 18
1987 Parker LJ granted a stay of execution over the hearing of the appeal on
December 21 1987. On that day, as we have said, we dismissed the appeal.
The right of a
tenant to apply for relief from forfeiture for non-payment of rent is conferred
by the combined effect of section 38(1) of the Supreme Court Act 1981
(replacing section 46 of the Supreme Court of Judicature (Consolidation) Act
1925) and section 210 of the Common Law Procedure Act 1852.
These
statutory provisions by their terms confer on the court a discretionary power
to grant relief from forfeiture. As Mr Michaelson rightly stressed on behalf of
the defendants, however, it is a well-established general principle that:
The court, in
exercising its jurisdiction to grant relief in cases of non-payment of rent is,
of course, proceeding on the old principles of the court of equity which always
regarded the condition of re-entry as being merely security for payment of the
rent and gave relief if the landlord could get his rent.
(Chandless-Chandless v Nicholson [1942] 2 KB 321 at p323 per Lord Greene
MR).
Consequently,
as Mr Michaelson also rightly submitted, it is an equally well-established
principle that, save in exceptional circumstances, a court which is asked to
grant relief from forfeiture for non-payment of rent should do so if by the
time of judgment all that is due for rent and costs has been paid up or
tendered: see, for example, Gill v Lewis [1956] 2 QB 1 at p13 per
Jenkins LJ.
However, as
Hodson LJ pointed out in the same case (at p17) the so-called right to relief
is a right to relief in equity and equity reserves to itself the right to
refuse relief in an appropriate case. In the passage in his judgment in Gill
v Lewis to which Turner J clearly intended to refer in the present case,
Jenkins LJ, after referring to the decision of this court in Stanhope v Haworth
(1886) 3 TLR 34, said at p10:
So that case
shows that where parties have altered their position in the meantime, and in
particular where the rights of third parties have intervened, relief ought not
to be granted where the effect of it would be to defeat the new rights of third
parties or be unfair to the landlord having regard to the way in which he has
altered his position.
Those are some
of the exceptional circumstances in which the court may properly refuse relief.
In Stanhope
v Haworth an order had been made in favour of a landlord for possession
of colliery premises. Relief was applied for towards the end of the six-month
period allowed by section 210 of the Common Law Procedure Act 1852. Meanwhile,
the landlord had let other people into possession and he and they had spent
substantial sums in working, or purchasing plant to work, the colliery on the
footing that the lease was at an end. This court agreed with the Divisional
Court that the tenant should not be given relief. Lindley LJ said at p35:
The tenant,
he said, had delayed his application for relief until just before the end of
the six months, and in the meantime the position of the plaintiff was altered.
The plaintiff had in the meantime kept the colliery up, and had entered into an
arrangement with other parties to let the colliery to them. There was no
explanation of the delay by the tenant except that he had not had the money.
That was no reason for allowing him now to have relief to the prejudice of the
other parties, and it would be unreasonable to give him such relief.
Lopes LJ (at
p35) said that he quite agreed with the Divisional Court:
that it would
be ‘monstrous’ now to give the tenant such relief as he asked. Relief ought not
to be granted if the landlord and other parties interested could not be put in
the same position as before, and here that was impossible, and the relief asked
for would be unjust and inequitable.
Mr Michaelson
submitted that there are a number of points which render the present case
distinguishable from Stanhope v Haworth. First, he pointed out
(and we accept) that there is no clear evidence that the plaintiffs had
actually committed themselves to any legally binding agreement to grant a lease
to Mr Parsons before they did so on December 2 1987. In these circumstances, he
submitted, the grant of the lease to him should be regarded as a purely
voluntary undertaking. Second, at the time when the plaintiffs executed that
lease they knew of the defendants’ wish to remain in the premises, a wish which
they had demonstrated before the master, even though they had not been able to
support it by a tender of the outstanding rent. Furthermore, at that time they
knew or should have known that, by virtue of RSC Ord 58, r1, the defendants had
the right to appeal to the judge in chambers from the master’s order within
five days from its date. Third, so Mr Michaelson submitted, at the time when
they executed the lease in favour of Mr Parsons, the plaintiffs were aware that
the defendants would shortly be in funds because they had offered the
plaintiffs a post-dated cheque. Fourth, in his submission, the plaintiffs, in
granting the lease to Mr Parsons, should have made it clear to him, if they did
not do so, that the defendants were still in possession of the premises and had
the right to appeal from the master’s order within the next four days. The
plaintiffs and Mr Parsons, in proceeding to execute the lease as they did on
December 2, were, in Mr Michaelson’s submission, doing so at their own risk.
The grant of relief to the defendants, he contended, would, in all the
circumstances, cause no unfair prejudice to either the plaintiffs or to Mr
Parsons. The prejudice to Mr Parsons, it was said, would in any event be purely
financial, since he was not yet in possession of the premises and would be
paying a rack-rent for them.
We see the
force of at least some of these submissions and accept that the grounds for
refusing relief in the present case are certainly less compelling than they
appear to have been on the facts of Stanhope v Haworth.
Nevertheless, the jurisdiction to grant relief for non-payment of rent is of a
discretionary nature and in the end, as Mr Marsh submitted on behalf of the
plaintiffs, the question for this court was whether sufficient grounds had been
shown for us to interfere with the exercise of Turner J’s discretion. In our
judgment there were not.
In our
judgment, a crucial question is whether or not the learned judge was justified
in finding as he did that the plaintiffs had acted ‘not unreasonably’ in
executing a lease of the premises in favour of Mr Parsons on December 2 1987.
It is not surprising that, effectively, by far the greater part of the argument
before us was directed to this issue. We have already summarised the
contentions put forward on behalf of the defendants by Mr Michaelson, who
submitted that the grant of the lease on that day, if not a manoeuvre
calculated to defeat the defendants’ rights to apply for relief on appeal to
the judge in chambers, was at least a precipitous act done in what should have
been the knowledge that an appeal might follow and that relief might be granted
by the judge. Mr Marsh on behalf of the plaintiffs, however, submitted with no
less force that, having regard to the history of the matter, there was no
sufficient reason why the
the new lease.
The learned
judge accepted the latter submission and we are not disposed to differ from his
view, in particular for the following reasons.
On the
available evidence, we are, as we have already indicated, willing to assume in
favour of the defendants that no agreement for the grant of a lease by the
plaintiffs to Mr Parsons had been concluded before the lease in his favour was
actually executed. However, as we have also indicated, the evidence does show
that by October 13 the parties were in an advanced state of negotiation and
that already by that date it was the plaintiffs’ stated intention to give him
possession of the premises on December 1 1987 if possible.
Furthermore,
in our opinion, as at October 13 the plaintiffs would have been fully justified
not only in entering into arrangements for the grant of a lease of the premises
to Mr Parsons but in doing so in the belief that they would be able to give him
possession at least by December 1. The first defendant in its acknowledgement
of service had specifically intimated that it did not intend to defend the
claim for possession. No notices of intention to defend the proceedings had
been given by any of the defendants. The summons seeking relief from forfeiture
had not yet been issued. As at mid-October there was no reason for the
plaintiffs to suppose, when making their arrangements with Mr Parsons, that
they would not be able to give him vacant possession of the premises as their
new tenant in due course. He himself closed his previous office in Somerset on
October 15 1987.
The first
intimation from the defendants that they might not be willing voluntarily to
vacate the premises came when they issued their summons for relief from
forfeiture on October 20 1987. The plaintiffs’ solicitor, having issued a writ
of possession and fieri facias, subsequently, sensibly, agreed with the
defendants’ solicitors that it should not be executed pending the hearing of
the summons for relief returnable on December 1 1987. The defendants, however,
must be taken to have known that the plaintiffs were willing to show
forbearance only until that date. The plaintiffs, for their part, in our
judgment, were entitled reasonably to assume that, if the defendants had both
the intention and the ability to pursue an effective application for relief
from forfeiture, they would make a tender of all the outstanding moneys due to
the plaintiffs before the hearing on December 1 or at very latest at the
hearing.
The
defendants, who had had several more weeks in which to collect the money since
the issue of their summons on October 20 1987, did no such thing. All they did
at the hearing before the master on December 1 1987 was to make an offer of a
post-dated cheque without (so far as the evidence shows) any guarantee that the
cheque would be met or, it would seem, any explanation as to why the landlord’s
further forbearance was sought in this manner.
When Master
Turner, surely to no one’s surprise, rejected the defendants’ application for
relief, they did not ask him for any further stay of execution. Nor did they on
December 1 express their intention to appeal from his order.
When their
offices opened on December 2 1987 the plaintiffs’ legal advisers were
presumably aware that the defendants had the right under the rules to lodge an
appeal to the judge in chambers from the master’s order at any time within the
next four days. However, as Mr Marsh asked rhetorically during the course of
argument: ‘How many bites of the cherry are tenants to be allowed in circumstances
such as these?’ The plaintiffs and their
legal advisers could not, in our opinion, be said to have been unreasonable in
taking the view that the defendants had come to the end of the road and that
there was no sufficient reason why they should defer any longer the grant of
the proposed lease to Mr Parsons, who had left his own previous business
premises on October 15 and to whom they had held out the hope and expectation
of completion on December 1.
On this
crucially important premise we can see no sufficient ground for interfering
with the exercise of the learned judge’s discretion in refusing the defendants
relief from forfeiture in accordance with the principles stated by Jenkins LJ
in Gill v Lewis (supra at p10).
At the time
when he accepted the lease neither Mr Parsons nor the plaintiffs themselves
would, in our judgment, have been unreasonable in thinking that the plaintiffs
were in a position to confer on him a good title to the premises which they
were purporting to demise. By the time when the defendants made their first
tender of the sums due to the plaintiffs, very shortly before the hearing, on
December 17 1987, both the plaintiffs and Mr Parsons had substantially altered
their positions by the grant and acceptance of the new lease. Mr Michaelson
criticised the learned judge’s description of the relevant passage from Jenkins
LJ’s judgment in Gill v Lewis at p10 as ‘binding and persuasive
authority’. In our judgment, however, that passage and the decision in Stanhope
v Haworth on which it is based supported the proposition that the court
may, in the exercise of its discretion, properly refuse relief from forfeiture
even to a tenant who belatedly tenders the full amount of outstanding rent and
costs if, during the interim period, the landlord has, not unreasonably or
precipitously, granted rights in the premises to third parties, on the footing
that the original lease is at an end, and the court considers that, in all the
circumstances, the grant of relief to the original tenants would cause
injustice to the landlord or the third parties or both.
Such was the
learned judge’s view of the present case. Because, and only because, of the
rights which had been created by the plaintiffs in favour of Mr Parsons during
the long period between the judgment of September 28 1987 and the first tender
of the outstanding rent on or about December 16, he thought it would be ‘quite
wrong’ that the plaintiffs should be embarrassed by this ‘eleventh-and-a-half
hour’ application for relief. We do not think that in any respect he
misdirected himself in principle. Nor do we regard his decision as plainly
wrong. It was a decision to which he was, in our judgment, entitled to come in
the exercise of his discretion.
For these
reasons, we dismiss this appeal.
The appeal
was dismissed with costs. Leave to appeal to House of Lords was refused. A stay
was granted during the period within which the appellants had the right to
petition the House of Lords for leave to appeal under an undertaking by the
appellants to indemnify the respondents against any damages which they might
suffer through the stay having been granted in the event of the petition being
refused or the appeal being unsuccessful.