Mortgage — Mortgage of leasehold interest — Mortgagee in possession — Landlord and tenant — Forfeiture — Relief — Terms of relief — Whether mortgagee in possession entitled to serve counternotice under section 1 of Leasehold Property (Repairs) Act 1938 — Whether landlord estopped from relying on time-limit for relief from forfeiture under section 139 of the County Courts Act 1984
The applicant mortgagee held
a charge by way of a legal mortgage over a 99-year lease of a maisonette, the
reversion to which was owned by the respondent landlord. The lease had been
granted in 1986 at a premium of £150,000 and the mortgagee had loaned £135,000
to the lessee. In 1990 the mortgagee obtained a possession order against the
lessee for arrears of mortgage instalments; the mortgagee finally obtained
possession in October 1996 of part of the premises and in October 1997 of the
remaining part. On 5 March 1997 the landlord’s solicitor served a notice under
section 146 of the Law of Property Act 1925 requiring repairs to be carried out.
On 11 March 1997 the mortgagee’s solicitor served a counternotice under section
1 of the Leasehold (Repairs) Act 1938. The landlord failed to provide keys to
the outer door of the premises despite requests on behalf of the mortgagee from
April 1997. In February 1998 the landlord claimed to have forfeited the lease
by peaceable re-entry in May 1997, relying on a failure to pay ground rent and
service charges and to comply with the section 146 notice. At the hearing of
the application for relief, the mortgagee accepted that the landlord was
entitled to forfeit for the failure to pay a half year’s ground rent, and that
it should pay the service charge arrears as a condition of obtaining relief
from forfeiture, but contended that the counternotice under the 1938 Act was
effective to prevent a forfeiture in respect of the disrepairs.
upon payment of the arrears of rent and service charges. The landlord was not
entitled to forfeit the lease for the disrepairs for the following alternative
reasons: (1) Where a mortgagee has taken possession of leasehold premises,
service of a section 146 notice on the lessee would be pointless because he
could not lawfully enter the premises and do anything to remedy the breach. The
only person who can remedy, and hence the only person the landlord can require
to remedy, the breach is the mortgagee in possession. The mortgagee had an
interest in receiving the section 146 notice and taking the benefit of the 1938
Act; the counternotice under section 1 of the 1938 Act was effective: Church
Commissioners for England v Ve-Ri-Best Manufacturing Co Ltd [1957] 1
QB 238 distinguished as in that case the mortgagee was out of possession. (2)
Because the landlord had failed to provide the mortgagee with a key to the
outer door of the premises, a reasonable time for effecting the repairs had not
elapsed by May 1997. If the forfeiture for the failure to carry out the repairs
had been lawful, the mortgagee would not have been required, as a condition of
obtaining relief, to do the works in the section 146 notice. The time-limits
under section 139 of the County Courts Act 1984 were procedural and the
landlord was estopped from relying on these for the purposes of relief from
forfeiture in respect of the arrears of rent.
The following cases are referred to in
this report.
Church
Commissioners for England v Ve-Ri-Best Manufacturing Co Ltd [1957] 1
QB 238; [1956] 3 WLR 990; [1956] 3 All ER 777
Cusack-Smith v
Gold [1958] 1 WLR 611; [1958] 2 All ER 361
Kammins Ballrooms
Co Ltd v Zenith Investments (Torquay) Ltd [1971] AC 850; [1970] 3
WLR 287; [1970] 2 All ER 871; (1970) 22 P&CR 74; [1970] EGD 761; 216 EG 31,
HL
Kanda v Church
Commissioners for England [1958] 1 QB 332; [1957] 3 WLR 353; [1957] 2 All
ER 815
Old Grovebury
Manor Farm Ltd v W Seymour Plant Sales & Hire Ltd (No 2) [1979]
1 WLR 1397; [1979] 3 All ER 504; (1979) 39 P&CR 99; [1979] 2 EGLR 52;
[1979] EGD 529; 252 EG 1103, CA
Stevens &
Cutting Ltd v Anderson [1990] 1 EGLR 95; 11 EG 70
Taylor Fashion Ltd
v Liverpool Victoria Trustees Co Ltd [1982] QB 133; [1981] 2 WLR 576;
[1981] 1 All ER 897; sub nom Taylor Fashion Ltd v Liverpool Victoria
Friendly Society [1979] 2 EGLR 54; (1979) 251 EG 159
United Dominions
Trust Ltd v Shellpoint Trustees Ltd [1993] 4 All ER 310; (1993) 67
P&CR 18; [1993] 2 EGLR 85; [1993] 35 EG 121, CA
Viscount Chelsea
and Cadogan Estates Ltd v Hutchinson [1994] 2 EGLR 61; [1994] 43 EG
153; (1996) 28 HLR 17
Willmott v Barber
(1880) 15 ChD 96
Gary Webber (instructed by Mizler Wright)
appeared for the claimant; Kenneth Munro (instructed by Finers) represented the
defendant.
Giving judgment, COWELL J
said: This is an application by a mortgagee of a leasehold interest against the
freehold owner or landlord seeking declarations in relation to whether the
leasehold was forfeited by the landlord, and, to the extent that it was, it is
an application for relief.
The respondent landlord is Iza Ltd. It became the freeholder fairly
recently, in December 1996, of 47
respondent’s predecessor granted a 99-year lease, 99 years from 24
1986 at a substantial premium of £150,000. The annual rent, at any rate until
2019, is £75 a year. It goes up to £150 and then to £300 in later years. The
£75 a year is payable twice yearly on 24 June and 25 December in advance.
The lease was granted to one Mohammed Ahmed Halhoul. He was a
director of the grantor company, but at all material times he was the
leaseholder.
The lease is dated 10 November 1986, which was when it was granted.
It refers clearly to the property as being the first and second floor
maisonettes. In fact, I think geographically the demised property is on the
first floor and on an intermediate floor at the back extension between the
first and second floors. In the lease the entire property is referred to as
flat B, but the demised premises have at all times comprised what, on the
ground or in the building, are known as flat B and flat C. I should add that
there are four other flats in 47 Pembridge
leasehold property as one flat or two.
In a valuation that was obtained shortly before the grant of the
lease, which is dated 8 October 1986, the property is described as follows:
Currently the property is divided into two units but can easily be
reformed into one unit by knocking through the door opening.
On the same day as the lease was granted, in the usual manner,
Mr
Home Loans Ltd, which is the applicant, because the applicant had lent to
Mr
The respondent landlord claims to have forfeited the lease by
peaceable re-entry, under the usual forfeiture clause in the lease. The
applicant disputed any forfeiture and sought a declaration that the purported
forfeiture was invalid; alternatively, if valid, the applicant seeks relief.
At the start of the trial the applicant conceded that, by reason of
non-payment of one sum of £37.50, the respondent was entitled to forfeit at the
date of the alleged forfeiture, but the applicant disputed the two other
grounds of forfeiture. These were the failure to pay a service charge. In
practice, nothing turns upon the service charge element, because it is reserved
as rent and the applicant made it quite clear that, when it comes to relief, it
would pay whatever is owing. Though the applicant says that, at the time, the
appropriate procedures for certification of the service charge had not been
gone through, I think the applicant is right that it does not make any
difference in the long run.
The other ground of forfeiture was a failure to comply with a
notice served under section 146 of the Law of Property Act 1925 requiring repairs
to be done ‘within a reasonable time’. That notice was dated 5
and receipt of that notice by the mortgagee was acknowledged by a letter dated
11 March, which was a Tuesday. Apart from mentioning the date of the notice, I
have deliberately assigned no dates to the events that I have mentioned because
it is important, in my judgment, to see those events, for reasons that will
become apparent, as the applicant mortgagee saw them, particularly through its
agents and solicitor.
The events go along these lines. The mortgagee obtained an order
for possession against Mr Halhoul, because of his arrears in paying the
mortgage, on 27
typical history of attempts by the mortgagee to obtain possession under a
warrant of execution and repeated applications by Mr Halhoul to suspend the
warrant. A warrant was, for example, to be executed in December 1990, but Mr
Halhoul claimed that he was about to exchange contracts and the mortgagee
agreed that the warrant should be suspended.
Mrs Wright, the solicitor for the applicant, has very helpfully
sketched out over three pages a history that I have no doubt is perfectly
accurate, and I am simply choosing certain parts of it to highlight the general
progress. There was a further agreement to suspend in August 1991 upon the
immediate payment of £10,000, which was paid. Various arrangements were made
and various payments were received between 1992 and 1995. An appointment was
eventually set for the execution of a new warrant for June 1996, but again
there was an application to suspend on the ground that there was to be a
contract for sale. Finally, an application was refused in October 1996, the day
before the warrant was eventually enforced on 30 October 1996. I have no doubt
at all that the mortgagee did everything it could to obtain possession during
that period.
Despite the default that Mr Halhoul was in during that period, he
became the freeholder of the property on 15 November 1994. I do not know how he
did that, but he remained the freeholder until December 1996, when the freehold
was assigned to the respondent.
I mention, in short, the history between the obtaining of the
possession order on 27 October 1990 and the execution on 30 October 1996
because, at one stage of the argument, the respondent was critical of the delay
on the part of the mortgagee, but it seems to me that no proper criticism can
be levelled at the mortgagee on the ground of delay, because the mortgagee was
doing all it could against the determined opposition of Mr Halhoul.
On 5 March 1997, as I have indicated, a letter was written by
Finers, the respondent’s solicitor, to the mortgagee enclosing a notice under
section 146. The notice referred, as it had to, to the 1938 Act, which I will
come to in a moment. On 11 March the mortgagee by its solicitor, Mrs Wright,
gave what I call the counternotice, claiming the benefit of the Leasehold
Property Repairs Act 1938. It is the effect of that notice that is hotly in
dispute and that I will come to in detail fairly soon, after I have dealt with
the more detailed history of the events.
On 7 March the first letter in a long series of correspondence was
written about the mortgagee being supplied with the front door key to the
premises at 47
Just before I deal with the detailed history, I should explain one
of the problems that Mrs Wright, the solicitor for the mortgagee, had despite
the enforcement of the warrant on 30 October 1996. Because of the description
of the property in the lease as comprising flat B, when the warrant was
executed it was executed over part of the leasehold property, understandably
flat B. No possession had been obtained of flat C, to which the mortgagee was
entitled. Flat C remained in the possession of a Mrs Miller, who had been
there, according to a witness, a Mr Cohen, whose evidence I accept, since 1994.
It is perfectly clear that she was a subtenant of Mr Halhoul. Since the warrant
had been executed in 1996, flat B had been vacant but locked; flat C was occupied
by Mrs Miller.
Mrs Wright’s task was to gather together evidence to put before the
court to have a further warrant reissued. Many of her letters deal with this
particular matter, seeking evidence to put before the court to the effect that
the lease comprised flat C, at the same time as her letters make clear that she
was seeking the front door keys of the property because the leasehold property
was on the first floor, and to some extent the second floor, within it.
Mrs Wright herself attempted to visit the property in February
1997, but was unable to obtain access because the new landlord had changed the
locks and the new landlord had not supplied the locks to anybody on behalf of
the mortgagee — hence the request in the letter of 7 March 1997, which I do not
read in full, but it is there to be read.
The answer given by the respondent’s solicitor was that it had no
instructions. That prompted a letter on 25
for keys again, to be delivered within seven days. On about 1
was a visit by Mrs Wright. She was on that occasion let in by Mrs Miller, but
she still did not have the keys.
On 3 April there is a letter in which she seeks a plan of flat B.
There is a letter on 3 April by the respondent’s solicitor, the gist of that
being that the locks had been changed for security purposes ‘and if you require
sets of keys, our client suggests you make application to its managing agents,
the Avenue Agency’.
On 10 April Mrs Wright duly wrote a letter to the Avenue Agency,
the agent, asking for keys. At the same time she wrote a letter to the
respondent’s solicitor saying it was its duty to provide keys.
On 11 April Avenue Agency wrote saying:
We do not hold keys for the property and have contacted our
client, who is out of the country at present.
The response to that by Mrs Wright was: How can it manage the
property if it cannot get inside it?
On 14 April the respondent’s solicitor says it is taking
instructions.
On 23 April Mrs Wright points out that:
your clients do not purport to rely on their section 146 notice
over the period when they are effectively denying our clients access.
That seems to me to be a fair point.
On 30 April the respondent’s solicitor says:
We are seeking instructions and hope to be able to revert to you
shortly. We understand that our client’s representative has been abroad for a
while and inevitably this has led to a delay.
It is particularly important to attend to the terms of the letters
written thereafter by both parties, for a reason that I will come to in due
course.
On 15 May the respondent’s solicitor says that it has reviewed its
papers. It says that the original counterpart lease was not handed over. It
says that the lessee plan was not included within the copy. It cannot assist.
By ‘assisting’ I am referring to the efforts being made by Mrs
obtain evidence to put before the court. It suggests that she obtain a copy of
the lease plan from the Land Registry.
On 29 May Mrs Wright writes asking for a substantive answer to her
requests for keys to the premises and a reminder that the matter is still
outstanding and has not been dealt with.
Another letter is written to the respondent’s solicitor on 30 May
dealing with the mortgagee’s entitlements to have information under the
Landlord and Tenant Act 1985 and about entitlement to serve certain notices
thereunder.
No answer is given by the respondent’s solicitor to that.
In July 1997 Mrs Wright prepares her affidavit in the possession
proceedings, which is sworn on 29 July, having gathered together as much
information as she can in the way of evidence about the extent of the flat.
On 27 August 1997 Avenue Agency, the agent that said it did not
have keys, wrote a letter to an agent of the mortgagee asking for payment of
the service charges ‘in accordance with your lease’, and details were given. It
was followed on 25 September with a further service charge demand. As I have
said, there was no answer given about the keys, but on the strength of the July
affidavit, Mrs Wright was able to obtain a further warrant. This was executed
in relation to flat C, as a result of which Mrs Miller went on 7 October 1997.
Incidentally, I should point out that the bailiffs got in because another tenant
in the house opened the front door. So from that date the mortgagee obtained
possession of flat C as well, and the locks of the two flats were changed by
the bailiffs.
A further request for the keys was made on 25 October by
Mrs
Mrs
perfectly clear that the agent had the keys to number 47.
At this time, having received a demand for the service charge,
Mrs
about the rent and realised that rent had not been paid in the total sum of £75
in respect of the two payments due on 25 December 1996 and 24 June 1997. So she
sent a cheque to the Avenue Agency on 31
by the Avenue Agency under cover of a letter of 4 November. In that letter it
says:
We refer to your letter of 31 October, which we are instructed to
return to you with the commentary that any correspondence on this matter should
be conducted through Finers Solicitors, attention Mr
So on 17 November Mrs Wright sent, under cover of a letter of
17
but this is what I accept she clearly did do — the cheque for £75 to Finers.
On 24 November Finers wrote saying:
We are seeking instructions and hope to be able to revert to you
in due course.
Reminder letters were written by Mrs Wright on 12 December,
12
On 10 February Finers, the respondent’s solicitor, wrote saying:
It is now quite unnecessary to deal with the deed of variation or
indeed to provide you with a key to the front door. Our client forfeited the
lease by peaceable re-entry and recovered possession of the premises in May
1997.
That, understandably, brought forth a very full response by
Mrs
felt, in that she had had no knowledge whatever of that forfeiture, which had,
according to the respondent, occurred about nine months previously.
In fact, unknown to the mortgagee, a Mr Abel, a locksmith, and a Mr
Ritchie, of the landlord, had gone to the property and had changed the locks of
the flats, B and C, in early May. Mr Cohen, who gave evidence, was around at
the time. He says, and I accept, that this was in early May. That is the only
bit of evidence in the entire case that has sought to pinpoint the day on which
the forfeiture took place.
On 13 March 1998 an application was made to the court. On 8 April
1998 the respondent landlord let the property for twelve months to
Mr
dilapidations, which had been served in March 1997. He negotiated a rent upon
the basis that what would be taken into account would be his costs of making
the flats habitable. He did not do all the work set out in the schedule, but he
did sufficient of the work, which he says cost about £2,000, in order to make
the flat habitable. It has been inhabited under assured shorthold tenancies granted
by Mr Cohen since April 1998.
In case it matters, I should just point out that it is by clause
4.4 of the lease that the tenant covenanted to pay the service charge at the
times and in the manner provided in the fifth schedule, both such charges, that
is the service charge and interim charge, to be recoverable in default as rent
in arrear. The proportion that the leaseholder had to pay in this case was 35%
of the total expenditure, and a certificate, which had to be provided at the
end of the accounting year, is dealt with at para 6 of the fifth schedule.
As I say, the mortgagee accepts that, by reason of the non-payment
by May 1997 of the £37.50 due on 25
entitled to forfeit the lease by peaceable re-entry. The mortgagee does not
accept that the service charge was due at that time, but, since it is to be
treated as rent, is agreeable to pay whatever is asked after due certification.
All that can be considered under the heading of non-payment of
rent, a ground that is established. The only dispute arising out of that is how
the relief should operate, as I shall explain.
But I shall first consider the most hotly disputed question,
whether the landlord was entitled to forfeit on the ground of breach of
covenant, that is a ground otherwise than for non-payment of rent. The breach
of covenant alleged was failure to repair in accordance with the covenant to do
so, which required, as a precondition of the forfeiture under section 146(1),
the service of a notice. That notice, as I have said, was dated 5 March. It was
addressed to practically everybody who might be interested. It was addressed
to: (1) Mohammed Ahmed Halhoul; (2) the tenant, first floor flat, 47 Pembridge
Villas; (3) to whom it may concern, first and second floor flat, 47 Pembridge
Villas; (4) Target Home Loans Ltd. What is in dispute is the effect of the
counternotice given by the mortgagee a few days later on 11 March.
The landlord’s solicitor served the section 146 notice, dated 5
March 1997, on the mortgagee’s solicitor. The notice, as I say, was also
addressed to, among others, the lessee, Mr Halhoul. It contained the obligatory
notification that:
You are entitled within 28 days of the service upon you to serve
on your said landlords a counternotice claiming the benefit of the Leasehold
Property Repairs Act 1938 as amended…
The mortgagee’s solicitor, by the letter of 11 March 1997, gave
notice claiming the benefit of that Act (and I will refer to that as the
counternotice).
The landlord’s solicitor took the point on 12 March 1997 that the
mortgagee was ‘not the tenant, for the purposes of the Act, empowered to give
such counternotice’.
It was a bad point in so far as it suggested that the mortgagee was
not a ‘lessee’ because of the meaning given to the expression ‘lessee’ by
section 7(1) of the 1938 Act.
The mortgagee’s solicitor then, by a letter of 1 April 1997, gave a
notice ‘on behalf of’ the tenant Mr
appeared on behalf of the mortgagee, has not sought to argue that his client was
entitled to do that. Mr Webber’s argument is simply that, the counternotice
having been given by his client, the mortgagee, the landlord cannot, without
leave of the court, which has not been had,
of re-entry or forfeiture under any proviso or stipulation in the lease for
breach of the covenant or for damages for breach thereof’, as is stated in
section 1(3) of the 1938 Act.
The expression ‘lessee’ has, by section 7(1), the meaning assigned
to it by section 146 of the Law of Property Act 1925 (with an exception), so
that it ‘includes an original or derivative under lessee and the persons
deriving title under a lessee’. The mortgagee is in this case a lessee within
that definition. So, says Mr
counternotice, the prohibition of section 1(3) of the 1938 Act operates to
prevent forfeiture.
In answer to that, Mr Kenneth Munro, on behalf of the landlord,
relies upon the case of Church Commissioners for England v Ve-Ri-Best
Manufacturing Co Ltd [1957] 1 QB 238. In that case, as in this, it was the
mortgagee that gave the counternotice after receiving the section 146 notice.
The lessee, that is, the person in whom the leasehold term was vested and who
was in possession, had given no such counternotice. In the action brought for
forfeiture against the lessee it was held that the lessee could not rely upon
the prohibition contained in section 1(3). It had not served the counternotice
but could have done so, and the mortgagee was not a person on whom the landlord
had been obliged to serve any notice. Mr
my judgment, that it makes no difference that the landlord chose in this case
to effect a peaceable re-entry, whereas in that case the landlord brought an
action against the lessee. I consider that correct because the prohibition in
section 1(3) is against proceeding ‘by action or otherwise’.
The text in Woodfall at para 17.128 states that the
requirements of section 146(1) of the Law of Property Act 1925 are satisfied by
the service of one notice upon the lessee in possession or who has a subsisting
lease at the time the notice comes to be served, and cites in support of that,
in a footnote, a trilogy of cases: the Ve-Ri-Best case; Cusack-Smith
v Gold [1958] 2 All ER 361; and Kanda v Church Commissioners
for England [1958] 1 QB 332. In Kanda, the person (Kanda) in whom
the term was then vested was served, and he gave a counternotice. It was held
that the prohibition in section 1(3) applied so as to preclude the landlord
from taking action against his assignee, the term having been transferred to
his assignee, and the only leave from the court having been to take action
against Kanda. The key, in my judgment, to an understanding of those cases lies
in the passage in the judgment of Pilcher J at pp364H-365B of Cusack-Smith,
where he states:
a reading of the whole of s 1 of the Act of 1938 leads to the
conclusion that throughout the section wherever the words ‘a lessee’ or ‘the lessee’
are used, they must be given the same meaning as they have in s 146 of the Act
of 1925. The effect of s 1 of the Act of 1938 is… to require that the leave of
the court be obtained before proceedings for re-entry, forfeiture or for
damages for breach of covenant are brought by a landlord against [and I
emphasise the next passage] the same category of person on whom the appropriate
notice had to be served by the landlord before he took proceedings for re-entry
or forfeiture under s 146 of the Act of 1925.
After a reference to section 1(5) of the 1938 Act, Pilcher J
stated:
the protection afforded by the Act of 1938 was intended to be
confined to lessees in possession or lessees having a present estate or
interest in the premises.
At p365F he appeared to regard the case of Kanda as
authority for the conclusion that a lessee who is entitled to be served with a
section 146 notice and who gives a counternotice brings the prohibition of
section 1(3) into operation.
Who, then, is the lessee under section 146(1)? The starting point
must therefore be to determine who is the lessee within the meaning of section
146(1), who is entitled to be served. Innumerable persons, such as subtenants,
may qualify as a lessee within the statutory definition of the word, but the Ve-Ri-Best
case makes it clear that that is not the test of who has to be served. The
mortgagee in that case was served, but he was not entitled to be. The question
who is entitled to be served must, in my judgment, involve considering the
practical purpose of the requirement of service in section 146(1). A landlord
may have one aim: to forfeit and to obtain what is a windfall, if he has
received a premium up front and the term is to be cut very short. But the law
leans against forfeiture and supposes that the landlord’s primary aim is to see
that the leasehold covenants are performed and, for instance, wants of repair
are done.
The purpose underlying the requirement in section 146(1) of service
of notice on the lessee is the practical one that the lessor wants something
done and that the lessee served may choose to do what is required of him to be
done by the notice and so avoid forfeiture. The lessee in possession is
ordinarily the person best able to do what is required. Being the person
required in practice to comply with the notice, he is the person entitled to
choose the protection of the 1938 Act, particularly if he considers that the
landlord is guilty of the kind of abuse that the 1938 Act was designed to
prevent and that the landlord is not likely to obtain the leave of the court
under section 1(5). Put another way, the person entitled to be served is ‘the
person who is interested in getting the notice so that he can make up his mind
what if anything he can do about avoiding forfeiture’, as Lord Russell of
Killowen said in Old Grovebury Manor Farm Ltd v W Seymour Plant Sales
& Hire Ltd (No 2) [1979] 3 All ER 504* at pp505-506, where it
was held that a notice served on a former leaseholder who had assigned the term
was invalid because the assignee, the present leaseholder, was interested in
receiving the notice, in the absence of which forfeiture could not be had.
*Editor’s note: Also reported at [1979] 2 EGLR 52
If the mortgagor has lost possession of the leasehold property
because the mortgagee has taken possession, so that any retaking of possession
would be a trespass (it might even be a contempt of court if possession had
been given to the mortgagee by a warrant having been executed), service of a
section 146 notice on the mortgagor would be pointless because he cannot
lawfully do anything to remedy the breach. The landlord cannot forfeit without
serving a notice. In such a case it must follow that the only person who could
remedy, and hence the only person the landlord can require to remedy, the
breach is the mortgagee in possession. True it is, in such a case, the
mortgagor retains an estate in the term, but he has no possession of the
property. Even the estate is under the control of the mortgagee, and, in the
absence of redemption, can be assigned away by the mortgagee in exercise of the
mortgagee’s statutory power to sell it. In such a case, the mortgagee has both
an estate or interest in the term, or the equivalent if he is a legal chargee,
and possession of the property. He also has control over the mortgagor’s
estate.
The decision in the Ve-Ri-Best case is based on the facts
that the mortgagee had no right to receive any notice (see the observations of
Lord Goddard CJ at p241 and pp245-246) and that the action had been brought
against the lessee in possession (see p246), the leasehold term being vested in
the defendant who was in possession.
I now turn to this case. It seems to me that the crucial
distinction between the Ve-Ri-Best case and this case is that the
mortgagee was in that case out of possession. In his successful argument in
that case, Mr
It is agreed that notice may have to be served on a mortgagee in
possession, but there is no need to serve it on a mortgagee out of possession.
(whether ‘may have’ or ‘must’ was immaterial for the purposes of
that argument); and at p243:
The right to take advantage of section 1 of the Act of 1938 is
therefore confined to those who are entitled to have a notice served on them.
That proposition is echoed by Pilcher J in the passage mentioned
above in Cusack-Smith at p364I, in which he mentions the same category
of person on whom the appropriate notice had to be served by the landlord
before he took proceedings for re-entry or forfeiture under section 146.
The lessee in possession in this case in March 1997 was, in respect
of part of the leasehold property, flat B, the mortgagee. Mr Halhoul was only
in possession of the other part, flat C, by his receipt of rent from Mrs Miller
(which I assume), but in view of the possession order of 27
he had no entitlement to possession, for the mortgagee was entitled to
possession, and the possession that he had but to which he had no entitlement
was to be extinguished as soon as the steps being taken by the mortgagee to
obtain execution of a further warrant achieved their aim. The mortgagee was in
possession of part and entitled to possession of the remainder under an order
of the court. In my judgment, the mortgagee, being the only lessee in
possession of part and the only lessee entitled to possession of the rest of
the leasehold property, having an estate or interest of its own, and having control
over Mr Halhoul’s estate, was ‘the lessee’ within the meaning of section
146(1), the person on whom the landlord had to serve notice, as it did, and the
only person who could do the works required by the notice, and thus the person
interested in receiving the notice and taking the benefit of the 1938 Act.
For the reasons I have attempted to express above, I consider this
case to be the contrast of the Ve-Ri-Best case and readily
distinguishable. The mortgagee in that case was out of possession but in this
case in possession of flat B or entitled to possession of flat C, while the
person in whom the term was vested was in that case in possession but in this
case out of possession of flat B or had been ordered out of possession of flat
C. It follows in my judgment that, by reason of the counternotice of
11
from forfeiting the lease on the ground of breach of the repairing covenant,
whether by action or by peaceable re-entry.
If I am wrong about that, there is another reason for holding, as I
do, that the landlord was not entitled to forfeit on that ground. In early May,
when this forfeiture was supposedly effected, two months or less had elapsed
for the works to be done since the service of the notice. I am not purporting
to say that there is any particular requirement in the law about a reasonable
time for doing works. What I am saying is that it is perfectly clear in this
case that nobody could in practice sensibly be instructed to go into the
property to view it in the absence of a key to the front door. In February Mrs
Wright had not been able to get in. As she explained, it was invariably the
case that the mortgagee, when served with a notice, would send a surveyor in to
ascertain whether the repairs might be done, whether they should be done and
generally what should be done about the notice.
It was put to her that surely the surveyor could go along and ring
the bell and hope that Mrs Miller, who, as I shall come to mention, was a
prostitute, or some other tenant of the flat might open the door — in the first
case perhaps thinking that the surveyor was after her services. But it seems to
me to be wholly impractical and a waste of time to instruct professional men to
go to a property if the key to the property cannot be provided to them. There
was therefore no reasonable opportunity for the surveyor to go in. Accordingly,
it seems to me that a reasonable time for the doing of the works, which was
what the notice required — I stress the words reasonable time — had not elapsed
and so the forfeiture was invalid on that ground as well.
Even if I am wrong about the first two points and the landlord was
entitled, when it came to relief I should not have required as a condition of
the relief the doing of the works specified in the schedule for the following
reasons. First of all, the failure to provide keys to the front door meant that
the surveyor was not instructed, perfectly reasonably, to go in on behalf of
the mortgagee and did not have any opportunity of assessing the schedule. The
surveyor has had no opportunity to consider the matter at all. Second, even
were the surveyor to go in now, the schedule would be to some extent out of
date. Some of the work — the most essential work maybe — was done by Mr Cohen
in order to make the place habitable, so the schedule is out of date and part
of the works have been done. Third, a responsible mortgagee, such as the
applicant in this case, is likely to wish to carry out certain works in any
event in order to sell the leasehold term.
I have mentioned the evidence about prostitution. It was Mr Cohen’s
evidence that at some stage in 1997 he suspected that Mrs Miller might be a
prostitute. In about very early October, and indeed it must have been within a
few days of the warrant being executed in October 1997, he got into the flat
and saw clear signs that prostitution was going on — whether it was Mrs Miller
herself or someone else I do not know, but she was the tenant of Mr Halhoul. As
I say, it seems that she moved in in 1994 as Mr Halhoul’s tenant. That was
during a period when the mortgagee was doing its best to obtain possession of
the property and was thwarted frequently by Mr Halhoul. It seems to me that the
fact that prostitution was going on had nothing whatever to do with the
mortgagee. In any event, Mrs Miller has gone, and that was not as a result of
the landlord’s forfeiture, for he only changed the locks and left her there,
but by the efforts of the mortgagee. It is therefore a little rich, in my
judgment, that the landlord should argue that the mortgagee is disentitled to
relief on the ground of prostitution. I am quite satisfied that this affords no
bar to relief being granted to the mortgagee.
The situation, therefore, is that the only cause of forfeiture in
May 1997 was non-payment of rent. Relief from non-payment of rent may be had
either under section 146(4) of the 1925 Act by the mortgagee claiming, as
underlessee, any estate or interest in the property, and under that subsection
a vesting order is made. That subsection, incidentally, expressly includes
non-payment of rent. The alternative form of relief is under section 139(2) of
the County Courts Act 1984. What happens under the County Courts Act is that
there is effectively a retrospective reinstatement of the lease as though it
had never been forfeited. That is what it was called in the leading case of United
Dominions Trust Ltd v Shellpoint Trustees Ltd [1993] 4 All ER 310*
at p316B-C and p320. It was there called automatic relief, in contrast to what
was called the discretionary relief under subsection (4) of section 146 (see
p316B-C). It is also pointed out that nothing in section 138 or 139 is to be
taken to affect section 146(4). Thus, the difference is that under sections 138
and 139, the lease is effectively retrospectively reinstated as though it has
never been forfeited.
*Editor’s note: Also reported at [1993] 2 EGLR 85
It is necessary at this stage to consider, first of all, what the
mortgagee did. It seems to me that, first of all, it did not know of the
forfeiture in May 1997, and in that state of absence of knowledge it did the
following things. Through Mrs Wright it continued to ask for the keys of the
property. It continued to prepare for the sale of the term and to take steps to
obtain the warrant for possession. It eventually took that further possession
on 7 October 1997. It sent the rent on 31 October 1997 after the service charge
had been demanded. It sent the rent on 17
solicitor. It can only have done those things in the belief that the lease
continued to subsist.
There was considerable argument as to whether the mortgagee had
some kind of notice or constructive notice of the forfeiture, if indeed this is
a point that matters.
First of all, it is to be observed that the changing of the locks
to the flats’ doors by the landlord in May 1997 was the only physical
alteration that occurred then. At that date flat B remained empty, as it had
been, and flat C continued to be occupied by Mrs Miller, as it had been. There
was no apparent change of possession. But without the front door keys the
mortgagee could not even get in to see what, if anything, had happened. If it
had, as I say, the only difference would have been new locks on the flat doors.
On 7 October 1997, when the warrant was executed by the mortgagee, new locks
were fitted anyway. There was a notice that was put on the door of flat B by
the landlord in May 1997, but again that was not seen by anyone on behalf of
the mortgagee, and it certainly was not seen, I accept the evidence to this
effect, in October. So the forfeiture was certainly not evident to the
mortgagee.
It was said that surely the mortgagee should have realised when it
did not receive the keys that there had been a forfeiture. It is a remarkable
feature that the landlord never said in his letter: ‘You cannot have the keys
because the leasehold has been forfeited.’ It is something that the landlord
studiously avoided saying. Indeed, when the cheque for £75 was sent to the
landlord’s solicitor, it was not thereafter
attention of the mortgagee. There is also the crucial fact that the landlord’s
agent asked for payments of the service charge.
It is argued that the mortgagee should have realised from the
failure to provide the key that the forfeiture had happened, but the failure to
provide the key was a factor both before and after the forfeiture. Therefore,
that fact alerted the mortgagee to no change of position in May 1997.
At any rate, whatever may be said on this question of notice, it
seems to me that this is not a question of notice at all. It is a question,
first of all, of the belief on the part of the mortgagee in the subsistence of
the lease. For the reasons I have given, it is perfectly obvious that the
mortgagee believed that the lease subsisted.
It seems to me, next, that the landlord must have known that the
mortgagee was acting in the belief that the lease continued to subsist, because
the mortgagee would not otherwise have continued to ask for the keys or
continued to ask questions about the plans or continued to further its
proceedings for possession and sale, and it attempted to pay the rent. Indeed,
I infer from the fact that the landlord kept quiet about the forfeiture, as
well as the other facts, that the landlord realised that the mortgagee had not
realised that a forfeiture had happened, and that the mortgagee mistakenly
thought that the lease still subsisted. Indeed, the demand for the service
charge only encouraged the mortgagee to continue in the course that I have
mentioned.
It seems to me that the mortgagee was clearly doing things to its
detriment, in that it was doing all those things so as to sell the leasehold
term with vacant possession. It was to its detriment if, after six months from
early May, its time for applying for relief would expire and retrospective
reinstatement would not be possible. It seems to me, for all those reasons,
that the landlord is estopped from asserting that the forfeiture did occur
before 11 February 1998. Perhaps it could be argued that it ceased to be
estopped after the letter of 17
further response to it, though I would not so find myself.
It also seems to me, if it is necessary to say so, that the landlord
is estopped from asserting that it is entitled to mesne profits between
early May and 11 February 1998. That could become important if I am wrong about
saying the lease is to be retrospectively reinstated and if the other form of
relief is the more appropriate. I have in mind the authority, which I was
referred to, of Viscount Chelsea and Cadogan Estates Ltd v Hutchinson*.
It seems to me in this case that in respect of that period from early May to
11
profits. It would have to accept rent and service charge.
*Editor’s note: Reported at [1994] 2 EGLR 61
The question of law arises whether the landlord is effectively
estopped from relying upon the statute, section 139, which states that relief
has to be applied for within six months. It is the fact that in the case of
many statutes, such as statutes that affect the public interest, it is not
possible for one individual to be estopped for the benefit of another. It seems
to me that the time-limits in this Act are procedural, just as they were held
to be procedural under the 1954 Act between landlord and tenant. I reach that
conclusion on the basis of Lord Diplock’s speech in Kammins Ballrooms Co Ltd
v Zenith Investments (Torquay) Ltd [1971] AC 850 at p881E, where Lord
Diplock says:
Upon the purposive approach to statutory construction this is the
reason why in a statute of this character a procedural requirement imposed for
the benefit or protection of one party alone is construed as subject to the
implied exception that it can be ‘waived’ by the party for whose benefit it is
imposed even though the statute states the requirement in unqualified and
unequivocal words. In this context ‘waived’ means that the party has chosen not
to rely upon the non-compliance of the other party with the requirement, or has
disentitled himself from relying upon it either by agreeing with the other party
not to do so or because he has so conducted himself that it would not be fair
to allow him to rely upon the non-compliance.
So it seems to me that what applies to the 1954 Act equally applies
to section 139 of the County Courts Act and section 138.
I should just add that the section 146 notice is of course entirely
irrelevant (should any question of notice be relevant) because it only alerted
the mortgagee to the need (if it alerted him at all) to seek relief from
forfeiture based upon that ground, not upon any ground such as non-payment of
rent.
I should add that I have had regard to a passage in Woodfall
at 22.069 to the effect that reliance and detriment are not to be assumed. I
have been referred to the case of Stevens & Cutting Ltd v Anderson
[1990] 1 EGLR 95, but I find both those features, the reliance and the
detriment, in the acts done, already mentioned, by the mortgagee in the belief
that the lease continued to subsist, and in the fact that the landlord not only
stood by, knowing that belief from the letters that it received, and did
nothing to correct it, but, by demanding the service charges, the landlord
encouraged that belief. It seems to me that this is a classic case of estoppel.
I am not going to cite the passage, but I have had occasion to look at Oliver
J’s (as he then was) judgment in Taylor Fashion Ltd v Liverpool
Victoria Trustees Co Ltd [1982] QB 133* at pp146-147G, where he discussed
what he called the five probanda in an earlier case of Willmott v
Barber (1880) 15 ChD 96. It seems to me that this case very neatly fits
those five probanda.
*Editor’s note: Also reported sub nom Taylor Fashion Ltd v
Liverpool Victoria Friendly Society [1979] 2 EGLR 54
Finally, it is unnecessary, because the lease is effectively to be
reinstated, to consider whether any term ought to be imposed in relation to the
two flats being converted into one. I can deal very shortly with this aspect of
the case by saying that I approve of Mr Webber’s argument, set out in his
written argument. Basically they were two flats, as appears from the valuation
I mentioned of 1986, which existed as such before the lease was granted. It
seems to me that they may as well remain. I would not have imposed conditions
that they should become one and I should not have imposed them had I been
granting relief under section 146(4). For all those reasons, it seems to me
that the mortgagee is entitled to relief upon payment of the arrears of rent
and the service charge and I will hear any further argument about costs.
