Associated British Ports v C. H. Bailey Plc
| Jurisdiction | England & Wales |
| Judge | Lord Bridge of Harwich,Lord Templeman,Lord Griffiths,Lord Oliver of Aylmerton,Lord Lowry |
| Judgment Date | 22 March 1990 |
| Judgment citation (vLex) | [1990] UKHL J0322-1 |
| Date | 22 March 1990 |
| Court | House of Lords |
[1990] UKHL J0322-1
House of Lords
Lord Bridge of Harwich
Lord Templeman
Lord Griffiths
Lord Oliver of Aylmerton
Lord Lowry
My Lords,
I have had the advantage of reading in draft the speech of my noble and learned friend Lord Templeman. I agree with it and for the reasons he gives I would allow this appeal.
My Lords,
The appellant tenants, C. H. Bailey Plc., appeal against an order which granted the respondent landlords, Associated British Ports, leave to apply for forfeiture of the lease and damages for breach of a repairing covenant.
By a lease dated 15 February 1955 and made between the landlords' predecessors in title, the British Transport Commission, and the tenants, expressed to be in consideration of the widening and improvement by the tenants of the commercial dry dock at Barry in Glamorgan, two pieces of land containing 26,040 square yards comprising the dry dock, together with certain buildings thereon and a large number of fixtures and machinery necessary for the operation of the dry dock, were demised to the tenants for a term of 99 years from 31 July 1950 at a rent which has now reached its maximum of £4,000 per annum. The lease contained a covenant by the tenants to use the dry dock as and for the purpose of a dry dock only and not without the consent of the landlords to carry on upon the demised premises any other trade or business save that of ship repairers. The lease also contained the following repairing covenant on the part of the tenants:
"To keep the demised premises and all fixtures works appliances and machinery used in connection therewith … and all junctions and sidings now or which may be laid thereon in good and substantial repair and condition to the satisfaction of the [landlord] and so that the said dry dock is maintained at all times in a state of full efficiency."
As a result of the decline in demand for ship repairing facilities in Glamorgan, the dry dock has not been used since 1983, the buildings, which are largely of corrugated iron, have become derelict and most of the fixtures and machinery have disappeared or perished or become obsolete. It is doubtful whether the dry dock will ever be brought back into use as a dry dock and it is likely that anyone who in the year 2049 wished to carry on the business of ship repairers or any other business on the demised premises would construct entirely new buildings and install modern machinery and equipment. The lease contains the usual proviso for re-entry if, inter alia, "there shall be a breach of any of the covenants on the part of the lessees or conditions herein contained."
By a notice dated 28 August 1987, the landlords alleged that the tenants had broken their repairing covenant (an allegation which could not be gainsaid) and required the dilapidations specified in the schedule to the notice to be remedied. The cost of complying with that notice would exceed £600,000. The tenants have submitted evidence by a chartered surveyor that the buildings and fixtures and machinery would, in any event, have been useless by the year 2049 and that the diminution in value of the landlords' reversion attributable to the present state of disrepair is £3,500. The landlords' consultant surveyor does not "accept that the equipment was or is obsolete" and does not accept that the buildings would in any event be useless in 2049. He disputes the allegation that the landlords' reversion has only been diminished by about £3,500. It is abundantly clear that if the lease were enforced according to its express terms, the lease would be forfeited and the tenants held liable to pay heavy damages. But statute has intervened.
Section 14(1) of the Conveyancing and Law of Property Act 1881 , replaced by section 146(1) of the Law of Property Act 1925, debarred a landlord from exercising his right of re-entry or forfeiture for breach of covenant until after the landlord has served a notice specifying the breach, requiring the breach to be remedied and requiring compensation and after the tenant has failed within a reasonable time to comply with the notice.
Section 14(2) of the Conveyancing and Law of Property Act 1881 , replaced by section 146(2) of the Law of Property Act 1925, provides as follows:
"Where a lessor is proceeding, by action or otherwise, to enforce … a right of re-entry or forfeiture, the lessee may, in the lessor's action, if any, or in any action brought by himself, apply to the court for relief; and the court may grant or refuse relief, as the court, having regard to the proceedings and conduct of the parties under the foregoing provisions of this section, and to all the other circumstances, thinks fit; and in case of relief may grant it on such terms, if any, as to costs, expenses, damages, compensation, penalty, or otherwise, including the granting of an injunction to restrain any like breach in the future, as the court, in the circumstances of each case, thinks fit."
In Rose v. Spicer [1911] 2 K.B. 231, 241, Cozens-Hardy M.R. considered section 14(2) of the Conveyancing and Law of Property Act 1881 and thought it expedient to lay down some general principles with regard to the grant of relief against forfeiture on the application of the tenant:
"In the first place the applicant must, so far as possible, remedy the breaches alleged in the notice and pay reasonable compensation for the breaches which cannot be remedied…."
On appeal under the title Hyman v. Rose [1912] A.C. 623, 631, Earl Loreburn L.C. pointed out that:
"… the discretion given by the section is very wide. The court is to consider all the circumstances and the conduct of the parties. Now it seems to me that when the Act is so express to provide a wide discretion, meaning, no doubt, to prevent one man from forfeiting what in fair dealing belongs to someone else, by taking advantage of a breach from which he is not commensurately and irreparably damaged, it is not advisable to lay down any rigid rules for guiding that discretion. I do not doubt that the rules enunciated by the Master of the Rolls in the present case are useful maxims in general, and that in general they reflect the point of view from which judges would regard an application for relief. But I think it ought to be distinctly understood that there may be cases in which any or all of them may be disregarded. If it were otherwise the free discretion given by the statute would be fettered by limitations which have nowhere been enacted. It is one thing to decide what is the true meaning of the language contained in an Act of Parliament. It is quite a different thing to place conditions upon a free discretion entrusted by statute to the court where the conditions are not based upon statutory enactment at all. It is not safe, I think, to say that the court must and will always insist upon certain things when the Act does not require them, and the facts of some unforeseen case may make the court wish it had kept a free hand."
In the present case, therefore, it would be open for a judge in the exercise of the discretion conferred on him by section 146 of the Act of 1925 to grant relief against forfeiture of a lease with nearly 60 years to run without requiring the tenant to spend over £600,000 without substantial benefit to anybody.
Since 1925 additional steps have been taken by Parliament to protect a tenant against the consequences of a breach of a repairing covenant. By section 18(1) of the Landlord and Tenant Act 1927:
"Damages for a breach of a covenant … to keep or put premises in repair during the currency of a lease, or to leave or put premises in repair at the termination of a lease, … shall in no case exceed the amount (if any) by which the value of the reversion … in the premises is diminished owing to the breach of such covenant … and in particular no damage shall be recovered for a breach of any such covenant … to leave or put premises in repair at the termination of a lease, if it is shown that the premises, in whatever state of repair they might be, would at or shortly after the termination of the tenancy have been or be pulled down, or such structural alterations made therein as would render valueless the repairs covered by the covenant …"
So there is no question of the landlords, in the present case, being awarded damages remotely comparable to the sum exceeding £600,000 which the landlords have required the tenants to expend.
The provisions of the Act of 1927 are material in an action for forfeiture but a tenant faced with a formidable schedule of dilapidations annexed to a notice under section 146 of the Act of 1925 was obliged to determine which repairs were necessary and to speculate whether the premises would be demolished or reconstructed or re-occupied at the end of the term. Then in any action for forfeiture, the tenant, having committed breaches of covenant, was dependent on relief being granted to him. In practice many a tenant lost his lease or submitted to an increased rent or substantial expenditure rather than face the expense and uncertainty of a forfeiture action.
The Acts of 1925 and 1927 as construed and applied by the courts were found by Parliament to be insufficient protection for tenants. By the Leasehold Property (Repairs) Act 1938 further protection was afforded to tenants of long leases of small houses and that protection was by section 51(1) of the Landlord and Tenant Act 1954 extended so that the tenants are protected in the present case. By section 1 of the Act of 1938, as amended, and so far as material to this appeal:
"(1) Where a lessor serves on a lessee under subsection (1) of section 146 of the Law of Property Act 1925, a notice that relates to a breach of a covenant or agreement to keep or put in repair during the currency of the...
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