Landlord and tenant — Forfeiture — Relief against forfeiture — Breach of covenants — Construction of covenant restricting user of premises to that of ‘grocers provisions wine spirit and beer merchants’ in tenancies granted in early 1950s before the revolution in retailing gave rise to self-service and supermarkets — In the present case landlords (themselves leaseholders under very long leases) sought to forfeit the leases granted by them of five lock-up shops which had been combined to constitute a single business — There were in fact three leases, but treated for the purpose of this case as a single lease, which became vested in Tesco Stores Ltd — The lease contained a covenant ‘not to use, carry on or permit or suffer to be used, exercised or carried on in or upon the demised premises or any part thereof any trade or business whatsoever other than that of grocers provisions wine spirit and beer merchants without the consent in writing of the landlord for that purpose first having been obtained’ — Tesco, having decided to cease trading on the premises, obtained a licence from the freeholders to underlet to the first defendant, N Patel, the licence containing elaborate provisions to safeguard the landlords’ interest, including a requirement that the underlease should contain covenants similar to those in the lease and a restriction against the assignment of the underlease without the landlords’ consent — In fact the underlease to N Patel was granted with an apparent total disregard of all undertakings given in the licence; and subsequently the underlease was assigned by N Patel to J Patel without the consent, or indeed the knowledge, of the landlords — As time went on, J Patel faced with the competition of supermarkets, made structural alterations to the premises and extended the range of products sold, to include newspapers, magazines, books, cards, records, tapes, small electrical articles and later incorporated a video hire business — All this was done without the knowledge of the landlords until they received complaints from other traders — After promises to discontinue the offending lines were not kept, the landlords brought proceedings seeking forfeiture against Tesco, which would terminate J Patel’s underlease as well — Tesco and J Patel applied for relief
use to which the premises had been put was a breach of the covenant restricting
user to that of grocers provisions wines spirits and beer merchants — Despite
the changes in retailing, the covenant could not be construed to cover the
items sold in supermarkets — The meaning of a phrase such as ‘grocer and
provision merchant’ had not changed since the 1950s, but there were few
establishments now within that category — At the very least Mr Patel was also
carrying on the business of a newsagent and a hirer of video films or perhaps
the business of a general store — The landlords were entitled to forfeit the
lease — As regards relief against forfeiture, it was clear that Tesco did not
qualify; by granting the underlease on terms which disregarded the undertakings
in the licence they had put it out of their power to ensure that the
undertakings would be observed — The position of Mr Patel was more difficult,
but in all the circumstances the court decided that he did not qualify — He had
been guilty of continuing to trade in breach of restrictions after promising
not to do so; he was likely to be in financial difficulties if he operated in
accordance with the restrictions; and in any case why should the landlords have
to accept him as a tenant by way of relief when they had never accepted him as
a tenant in the first place? — Order
accordingly against Tesco for possession, quantified damages relating to a
section 146 notice served by the landlords, and mesne profits to be assessed —
Order against Mr Patel for possession
The following
case is referred to in this report.
Shiloh
Spinners Ltd v Harding [1973] AC 691; [1973]
2 WLR 28; [1973] 1 All ER 90; (1973) 25 P&CR 48, HL
This was an
action, brought by the plaintiffs, St Marylebone Property Co Ltd, against Tesco
Stores Ltd as the first defendants and Narendra Kanuehai Patel as the second
defendant. In fact Narendra Patel had assigned the underlease of the subject
premises some years before to Jitendra Amealal Patel, unknown to the
plaintiffs, and had died before the action was commenced. Jitendra Patel was
joined as a defendant. The executors of Narendra Patel were not served and took
no part in the proceedings. The lease (in fact three leases but
Road, Herne Hill, London SE24.
Paul Morgan
(instructed by Sylvester Amiel) appeared on behalf of the plaintiffs; Guy
Fetherstonhaugh (instructed by Robyn Middleton & Co) represented the first
defendants, Tesco Stores Ltd; Jonathan Brock (instructed by J B Wheatley &
Co) represented the third defendant, Jitendra Patel.
Giving
judgment, HOFFMANN J said: This is an action by a landlord for the forfeiture
of three leases which together include five lock-up shops known as 31-39
Norwood Road in Herne Hill. The shops have been combined so that they are now
used for a single business, and it will be convenient, although there are three
leases, for me to speak of them as though they were a single lease. They are
for practical purposes all in the same tenancy.
The landlords,
St Marylebone Property Co Ltd, hold the premises under headleases for 99 years
granted by the Dulwich Estate in 1979. The headleases comprise a number of
other shops in the same parade.
The leases
granted by the landlord or its predecessor in title were made in 1950 and 1953
respectively and they were for a term of years expiring in 1991 at a rent in
the case of one of the shops of £200 per year, in the case of another at an
increasing rent, which now during the last part of the term is £120 per year,
and in the case of the remaining three at a rent which is now £360 per year.
The tenant in each case was a company called Williamsons Ltd, which was
afterwards acquired by Tesco Stores Ltd, and the benefit of the leases was
assigned to them.
By clause
2(10) of each lease the tenant covenanted
not to use,
carry on or permit or suffer to be used, exercised or carried on in or upon the
demised premises or any part thereof any trade or business whatsoever other
than that of grocers provisions wine spirit and beer merchants without the
consent in writing of the landlord for that purpose first having been obtained.
Williamsons,
and after them Tesco Stores Ltd, carried on what appears from the evidence to
have been a conventional grocery business, with the possible addition of some
sales of greengroceries as well. At some stage it was converted into a
self-service store, but the types of product sold there were those normally
associated with the description of grocers.
During the
1970s there were considerable changes in the pattern of food retailing and
Tesco found that it was uneconomical for them to continue to run shops below a
certain size. They therefore decided to cease trading on the premises and
applied to the landlords for consent to grant an underlease. The lease provided
by clause 2(11) that the tenant was
not to
assign, underlet or part with the possession of the demised premises or any
part thereof without the consent in writing of the landlord first had and
obtained, such consent not to be unreasonably withheld in the case of a
respectable and responsible tenant.
The
prospective undertenant was Mr Narendra Kanuehai Patel, who proposed to trade
in partnership with a relation of his named Mr Jitendra Amealal Patel, the
third defendant in this action. Notwithstanding the partnership, it was decided
for some reason that the underlease should be granted only to Mr Narendra
Patel, and according to the evidence of the third defendant it was only he who
dealt with the solicitors acting on behalf of the partnership and signed the
various conveyancing documents.
On April 29
1981 the landlords, then the plaintiffs’ immediate predecessors in title,
granted a licence to Tesco Stores Ltd to underlet to Mr Narendra Patel. Mr
Patel also joined as party to this licence, which contained elaborate
provisions to protect the interests of the landlord. By clause 4 it required
that the underlease should be made subject to the lessees’ (that is to say,
Tesco’s) covenants and conditions other than the covenant to pay rent, and
should contain a covenant by the subtenant, Mr Narendra Patel, not to assign,
underlet or part with possession without the consent of the superior landlord.
Tesco furthermore covenanted that they would not waive any of the undertenants’
covenants but would enforce them by forfeiture or otherwise if there were to be
any breach. A breach of the covenants by Tesco in the licence was declared to
be a ground for forfeiture of its lease. The subtenant, Mr Narendra Patel, also
covenanted directly with the superior landlord that he would observe the
covenants contained in his lease and that in particular he would not assign the
premises without the superior landlord’s consent.
That licence,
as I say, was executed on April 29 1981. A few days later, on May 5 1981, Tesco
Stores Ltd granted an underlease to Mr Narendra Patel with what appears to have
been total disregard of all the covenants which they had given in the licence.
The underlease did not contain the covenants which had been contained in the
headlease. In particular, the user of the premises is not restricted to grocery
provisions and so forth. It simply provided that Mr Narendra Patel was not to
use the demised premises otherwise than as a shop for retail trade. The
covenant concerning assignment or underletting made no reference to the consent
of the superior landlord. It required only the written consent of Tesco Stores
themselves.
Tesco moved
out and Mr Narendra Patel and the third defendant went into possession and
continued to run the business in much the same way. In 1984 Mr Narendra Patel
decided to withdraw from the business and the third defendant bought his share
in the partnership. He said in evidence that he paid his partner £90,000 for
the goodwill of the business, £15,000 for an assignment of the lease and
purchased his partner’s share of the stock at valuation.
On December 6
1983 Tesco Stores Ltd granted a licence for the assignment of the lease by Mr
Narendra Patel to the third defendant, and that assignment was executed on
January 24 1984. Since then the underlease has been vested in the third
defendant, but the plaintiffs had no knowledge of his existence.
Having taken
over the business himself the third defendant found that trading conditions
were being made difficult in the conventional grocery lines by the opening of a
number of very large supermarkets in the vicinity. He therefore decided to
change the nature of the business in two ways. One was by extending his opening
hours and the other was by extending the range of products which he sold. He
became a member of a co-operative association of retailers called Londis, who
all, although independent traders, use the same name and have the benefit of
communal facilities and expertise. He made alterations to his shop in the
summer of 1986. These alterations were partly structural. One of the partition
walls between two of the shops was demolished, and instead of two units being
used for storage only one was so used, and the other four were devoted to
selling space.
The additional
products which he began to sell were newspapers, magazines, books, birthday
cards, stationery and such products commonly sold by newsagents, records,
tapes, wool and small electrical goods such as plugs, batteries and light
bulbs. He also bought for £7,000 a video hire business which had been carried
on by another shop a little further up the parade. In this form the shop
reopened as Londis in July 1986. The result was a chorus of complaint to the
plaintiffs from other shopkeepers in the parade. The greengrocer, Mr Reardon,
who appears to have been a conventional, not to say old-fashioned, greengrocer,
complained of the sale of certain quantities of fresh fruit and vegetables in
the third defendant’s shop. The hardware store next door, run by Mr Didmon,
objected to the sale of electrical goods and the newsagent, another Mr Patel of
47 Norwood Road, objected to the newspapers, magazines and so forth. The
landlord sent his agent round to inspect, and the agent sent a letter to Mr
Patel asking him to stop selling the offending items. They also at the same
time wrote to Tesco.
That did not
produce any result, and on August 15 1986 the landlord served a notice under
section 146 of the Law of Property Act 1925 on Tesco and on what they thought
to be the undertenant, by way of information, whom they described as Mr
Narendra Patel. Mr Narendra Patel had, however, died about a year earlier, and
the undertenant was of course the third defendant. At that point the third
defendant sought advice from the solicitors who had acted both for Mr Narendra
Patel and himself on the original underletting in 1981, for both parties on the
assignment by Narendra Patel to him in 1984, and most recently in negotiations
for a proposed assignment to him of Tesco’s own interest under their lease. As
a result of that advice the solicitors wrote on August 20 to Tesco’s solicitors
saying that Mr Patel was very upset at the turn of events, because, so far as
he was concerned, he had acted within the terms of his lease from Tesco. His
solicitors nevertheless acknowledged that that would not help him if the
plaintiffs forfeited Tesco’s lease, and they went on to say that ‘having taken
advice from us Mr Patel has agreed to discontinue and clear from the shop the
exhibition and sale of videos, stationery and newspapers’. But greengrocery and
confectionery, to which objection had also apparently been taken, they said in
their opinion he was entitled under the covenant in the Tesco lease to continue
to sell.
This promise
was passed on to the plaintiffs, but on a further inspection on September 8 it
appeared that Mr Patel had not
this day.
The writ in
this action was issued on October 1 1986 and named the second defendant, Mr
Narendra Patel, whom the plaintiffs still thought to be the underlessee. On
October 15 the third defendant’s solicitors wrote to the plaintiffs’ solicitors
saying that he had taken an assignment of the premises from Mr Narendra Patel,
and indicated that he wished to be joined in the proceedings. This, according
to the plaintiffs’ representative Mr Herman, was the first time that the
plaintiffs had become conscious of the fact that there had been an assignment
without their consent of the underlease. It is true that in April 1980 Tesco’s
solicitors had written to the plaintiffs’ agent saying that they had been
instructed in connection with the proposed acquisition by the third defendant, naming
him in full, Mr Jitendra Amealal Patel, of the Tesco lease. Mr Herman, however,
said that when that letter was passed on to him he recognised the name Patel as
being the person whom he knew to be the underlessee and did not notice that the
forenames were different. I see no reason not to accept that evidence.
The matter
therefore now comes to trial on an application for forfeiture against the first
defendant, Tesco Stores Ltd. That would carry the consequence of terminating
the underlease as well, and if that happens there are applications for relief
against forfeiture by Tesco and also, separately, by the third defendant
underlessee. The executors of the original second defendant, Mr Narendra Patel,
have not been served and have taken no part in the proceedings.
The first
question is whether the use of the premises since July 1986 has been in breach
of the covenant not to use it for any trade other than that of grocers
provisions, wines, spirits and beer merchants. If the use has been in breach of
that covenant then there is no doubt that Tesco have suffered that use, because
by granting the underlease in unrestricted terms in 1981 they authorised any
retail use whatever.
The leases in
question were granted in the early 1950s at a time when there was much greater
specialisation in trades than there is today. In those days it would not have
been difficult to identify a grocer’s shop and to say what sort of lines one
would expect to find sold there. As in all these cases there might of course be
borderline items which might strike some people as unusual, but in general the
stock would consist of dry foodstuffs, tinned goods, household provisions of
various kinds such as soap and possibly paraffin, but not, I think, fresh fruit
and vegetables, which would be sold by greengrocers, an entirely different
trade, or fresh meat or fish, or newspapers and magazines which would be sold
by newsagents.
Over the years
since then two things have happened. In the first place the method of selling
groceries has changed from being predominantly over the counter to being almost
entirely by self-service. That has had the consequence that the owners of
self-service grocery stores have found it convenient to add other packaged
goods to the groceries on sale. As a result it is not unusual in a small
self-service store to find packaged fruit and vegetables and a freezer cabinet
which might even contain meat, ice-cream and similar foods, which grocers would
certainly not have sold in the early 1950s.
Mr Brock
submitted that one should give effect to these changes by asking what kind of
products one would now expect to find in a shop which was, so to speak, the
successor to the early 1950s grocer. That succession has today passed to the
supermarket and, he says, it is quite common for supermarkets to sell all of
the items which Mr Patel is now selling. I do not think that the covenant can
be construed as flexibly as that. If that were so a lease containing a covenant
only to carry on the trade of blacksmith granted in the 1870s would have
entitled the tenant to take on a substantial trade in bicycle repairs in the
1890s and to become a garage by 1920. Though the commercial progress is
perfectly reasonable, that does not in my view entitle one to say that the
garage is carrying on the trade of a blacksmith. It does not seem to me that
the meaning of the term ‘grocer and provision merchant’ has changed since the
1950s. What has happened is that there are now very few establishments to which
that expression could strictly be applied. Nevertheless, construing the
covenant requires one to ask whether Mr Patel can be said to be carrying on
only the trade of grocer and provision merchant or some other composite trade,
or differing trades in addition. This must be a matter of degree. For example, a
grocer’s shop which sells a few electric plugs and batteries might well be said
to be a shop which is a grocer but happens conveniently to sell some electrical
goods rather than a shop which carries on both the grocery and electrical
trades. On the other hand, if non-grocery products are sold in sufficient
quantity they will constitute the carrying on of a separate trade, and even if
a wide variety of non-grocery items are sold in quantities each of which would
not in themselves amount to a separate trade, the cumulative effect may be to
make it inappropriate to describe the premises as a grocery and provision
merchant rather than a general store or some other composite description.
The evidence
as to the significance of the non-grocery items here is as follows. Mr
McDonagh, who was employed by the landlords’ agents, said that it appeared to
him at his inspection that about half the shop was taken up with non-grocery
items. Mr Patel said that this was not so. Of the four units which comprised
the selling area of the shop, one contained the stands displaying newspapers,
magazines and stationery, records, tapes, videos and electrical goods.
On that basis,
and allowing of course for the fact that some areas such as the tills serve the
whole of the shop, the area devoted to the non-grocery items would be rather
more than a quarter. On the other hand, the evidence of Mr Patel was that those
items accounted for about half its turnover. He said that while he stocked a
full range of grocery products for the benefit of shoppers who came during
normal shopping hours the real profitability of the shop lay in being able to
induce customers to come in by the sale of the other products at times when the
shops which normally sold them were closed. So, for example, the newsagent
closed at midday on Sunday and Mr Patel by keeping open until 10 pm on Sunday
could satisfy demand not being met elsewhere. It is clear, therefore, that the
sale of these products is an extremely important part of the make-up of the
shop as a commercial venture.
On that
evidence I do not think that it is possible to say that the premises are being
used only for the purposes of a grocery and provision merchant. One might say
that, in addition, Mr Patel was, at the very least, also carrying on the
business of a newsagent and a hirer of video films, or one might say that the
business was that of a general store. I do not think it matters which, because
in either case it goes further than the covenant allows. That means that the
breaches not having been remedied the landlord is entitled to forfeit Tesco’s
lease.
I therefore
turn to the applications for relief. I deal first with the application by
Tesco. It is clear that relief cannot be granted except upon the terms that the
tenant will, so far as possible, remedy the breach and not commit any further
breaches thereafter. Tesco, however, by granting the underlease in the terms in
which they did in 1981, have put it altogether out of their power to ensure
that their undertaking does comply with the lease in the future. On that ground
alone it would seem to me that they do not qualify for relief. It was suggested
on their behalf that together with granting them relief the court should
require Mr Patel to give an undertaking that he would, although permitted by his
own lease to carry on any retail trade, abide by the terms of Tesco’s covenant.
I find it rather strange that that undertaking should be given in a form
enforceable by Tesco, who are co-defendants with Mr Patel, and in any case I do
not see why Mr Patel should have to put himself in danger of committal for what
would otherwise be an ordinary breach of covenant simply in order that Tesco
should continue to enjoy the profitable rental on their lease.
It was
submitted for Tesco that the loss of the profit rental for the last four years
would be disproportionate to any loss which the landlord might suffer through
failure to observe the covenant. I shall return in a moment to the question of
any damage to the landlord, but on the assumption that I am not willing to
extract an undertaking from Mr Patel, the alternative is that the landlords
should simply have to accept that the covenant is unenforceable and I do not
see why they should do so. As to the loss to Tesco, I am comforted by the
thought that they may well have some remedy against their legal advisers for
what on the documents before me and without explanation would appear to have
been an extraordinary blunder in 1981. I do not therefore in the exercise of my
discretion propose to grant relief against forfeiture to Tesco, and I come
therefore to the much more difficult question of whether relief should be
granted to Mr Patel.
Mr Morgan, for
the landlords, referred me to a recent statement of the principles on which
relief is granted made by Lord Wilberforce in Shiloh Spinners Ltd v Harding
[1973] AC 691 at p 723. He said that the courts of equity have a right in
appropriate and limited cases to relieve against forfeiture for breach of
covenant or condition where
effectively be obtained when the matter comes before the court and where the
forfeiture provision is added by way of security for the production of that
result. It is not, I think, in dispute that the primary object of the re-entry
provision is to provide security for the enforcement of the landlord’s
covenants in this case. Lord Wilberforce goes on to say:
The word
‘appropriate’ involves consideration of the conduct of the applicant for
relief, in particular whether his default was wilful, of the gravity of the
breaches, and of the disparity between the value of the property of which
forfeiture is claimed as compared with the damage caused by the breach.
Later in his
speech he said:
Established
and, in my opinion, sound principle requires that wilful breaches should not,
or at least should only in exceptional cases, be relieved against, if only for
the reason that the assignor should not be compelled to remain in a relation of
neighbourhood with a person in deliberate breach of his obligations.
The landlords
object to the grant of relief on a number of grounds. First they say that this
is a case of wilful breach. Mr Patel was asked in July of 1986 to stop trading
in breach of covenant, and he went to his solicitors for advice. They advised
him that certain lines at least should be discontinued, and he said in evidence
that they were authorised by him to promise that he would stop selling those
items. He did not keep that promise, and the main reason, as he said in his
evidence, was that he felt he could not afford to do so. He said that he had
spent a great deal of money on converting the shop for the purposes of the
Londis operation and that if he did not continue to sell items such as
newspapers and videos he would not be able to service the debt which he had
incurred for that purpose. Indeed he said earlier today that if he was stopped
from selling the newsagent’s and video goods the shop would be so unprofitable
that he would be obliged to close it. He did at one stage in his evidence
suggest that the advice which that letter records as having been tendered to
him was subsequently altered, but it afterwards appeared that all that he meant
was that he had been told he was not in breach of his own covenant (something
which the letter makes clear) and he said that he could not remember whether
there had been any change in the advice that he was in breach of the Tesco
covenant.
I think that
Mr Patel knew quite well that he had been advised that he was in breach of the
Tesco covenant and decided that he might as well continue in breach until he
was either able to come to some settlement with the landlords or was stopped by
the court. That may have been from his point of view a sensible commercial
decision, but it does, I think, mean that he was wilfully in breach of the
covenant from August of last year until now, and in breach because he thought
he could make more money, or at any rate lose less, if he did not observe it.
The second
ground upon which the landlords object is that they say that on his own
evidence Mr Patel if he continues to run the shop in accordance with the
covenant, is going to be in financial difficulties. At first, as I have
mentioned, Mr Patel said that running the shop in accordance with the covenant
was a perfectly hopeless enterprise. He later modified that by saying that he
would have to try and therefore still wanted relief. He is, together with
partners in his family, the owner of some 11 or 12 shops, but I know very
little about their financial circumstances. I accept that, including the money
borrowed for the purposes of this shop, he owes the bank about £1/2 million.
The landlords
say that it is not fair that they should have to accept Mr Patel as their
tenant by way of relief against forfeiture when they never accepted him as a
tenant in the first place. They had no idea, as I have said, that the lease had
been assigned by Mr Narendra Patel to the third defendant. Mr Patel says that
this is a somewhat technical point, because as a partner he has in substance been
one of the tenants from the very beginning, that his references were thought
perfectly good by Tesco, and that he has had no difficulty in paying them their
rent. It was also said that he was not in any way attempting to keep the
plaintiffs in the dark about the assignment to him. He personally was never
advised of the plaintiffs’ existence, let alone the need for their consent to
the assignment, and therefore made no attempt to mislead.
I accept that
evidence. On the other hand, the landlords from their point of view can fairly
say that they are altogether in the dark about Mr Patel’s means, and that Mr
Patel’s evidence about the viability of the shop is not encouraging.
The landlords
make the further point that given Mr Patel’s views about the extreme necessity
of being able to sell these additional lines they are bound to find themselves
in disputes which may well have arisen in good faith as to whether or not he
has taken some activity beyond the point which could be regarded as fairly
ancillary to the grocery trade and therefore in breach of covenant. Mr Herman
said in evidence that having got into litigation with Mr Patel once he had no
wish to do so again, and it is difficult not to sympathise with that point of
view.
I must,
however, turn to the question of proportionality between damage which may be
suffered by the plaintiffs and the loss which might be caused to Mr Patel if
relief against forfeiture is not granted. So far as the plaintiffs are
concerned, there has been no real evidence of quantifiable damage caused to
their interest by Mr Patel’s conduct over the last year. It seems clear that it
has caused some degree of irritation among other shopkeepers in the parade, and
this has been deflected on to the landlords by way of complaint. There was some
evidence that the greengrocer, Mr Reardon, when deciding not to ask for a
renewal of his lease, had mentioned Mr Patel’s activities as one of the reasons
why he felt that his own trade had become unprofitable, but that evidence fell
well short of establishing any real causal connection. Similarly, it was said
that negotiators on behalf of other tenants at rent reviews had mentioned Mr
Patel as a reason why they should pay less, but again that would hardly be
surprising.
Finally, it
was said that the demand by potential tenants for Mr Reardon’s empty shop was
not what it might have been, but it would be pure surmise to put this down to
Mr Patel.
Mr Patel for
his part says that he has in fact improved the trading position of the parade
as a whole. His late hours have encouraged other traders to open late, and
businesses such as restaurants have done better on account of the additional
passing trade.
It is not for
me to express a view on whether the sort of competition Mr Patel offers is a
good or a bad thing for the parade, still less for the consumers. A landlord
who lets premises with restrictive covenants of this kind is entitled to use
them to manage his properties by offering tenants a limited freedom from
competition in the immediate neighbourhood. Although, therefore, damage in the
nature of things is incapable of proof in financial terms, I am not prepared to
say that the landlord has not suffered any.
Mr Patel
himself says that if he is not granted relief he will lose the benefit of a
great deal of the money which he has spent on the premises. What he has spent
is, however, not necessarily the measure of his potential loss. The real
question is what is the value of his present leasehold interest subject to the
existing covenant. As to that I have only Mr Patel’s evidence at the first
stage, that so far from having a value, anyone who attempted to run a shop in
accordance with the covenants would be heading for bankruptcy, and his evidence
at the second stage that although this was not as certain as he had first said
it would none the less be very difficult. That does not suggest that the
leasehold interest is something with a substantial value.
Finally on
this process of weighing up the various factors relevant to relief, it does
seem to me that Mr Patel has got into the difficulty which he has in one of two
ways. Either he was very badly let down by his solicitors, in which case it
would seem to me that he is likely to have a remedy against them, or he is not
telling the truth when he says that he had no idea that the premises were
subject to this covenant. If that is the case then he certainly does not
deserve relief against forfeiture. For the purposes of this action, however, I
see no reason to reject Mr Patel’s evidence, and I accept it. But on that
assumption it is hard to believe that Mr Patel would not have a remedy for his
loss. That, in my view, mitigates what I think would otherwise have troubled me
as to the potential hardship which Mr Patel might suffer, despite his own
evidence, if relief were not granted, and taking into account that this has
been a case of wilful breach for over a year and the potential difficulty of
policing the covenant in the future in the face of Mr Patel’s strong commercial
inclination to push the boundaries of what he can sell as far as possible, I
think that it would be right to refuse relief.
I therefore
make an order for possession against the third defendant and an order against
the first defendant for mesne profits to be assessed. On the basis, as I think
must be the case, that the plaintiffs recover mesne profits against the first
defendant, there
Patel, who has paid his rent to Tesco.
As to the
claim for damages the statement of claim includes a liquidated claim for the
costs of the section 146 notice, which is payable contractually in accordance
with the terms of the lease, and Tesco have accepted that they are responsible
for this amount. There is also a claim for certain other legal costs in
connection with the investigation of the breach, but it was accepted I think by
all parties that these costs would in practice be recoverable by the plaintiffs
as part of the costs of the action, and it is therefore not necessary for me to
deal with them separately.
Apart from
those two items no other quantifiable damages in my judgment have been proved.
Mr Morgan said that the plaintiffs were entitled to compensation for the
expenditure of management time on investigating this affair. But their director
Mr Herman never mentioned this as a head of damage, no evidence was given as to
any particular time spent, and I think if the plaintiffs did not regard the
presentation of this head of claim as worth more trouble than that it is not
for me to attempt to assess it. The order against the first defendants will
therefore be for possession, and the quantified damages relating to the section
146 notice and for mesne profits to be assessed, and the only order against the
third defendant will be for possession.
