Billson and Others v Residential Apartments Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Keith of Kinkel,Lord Templeman,Lord Oliver of Aylmerton,Lord Goff of Chieveley,Lord Jauncey of Tullichettle |
| Judgment Date | 12 December 1991 |
| Judgment citation (vLex) | [1991] UKHL J1212-1 |
| Date | 12 December 1991 |
| Court | House of Lords |
[1991] UKHL J1212-1
Lord Keith of Kinkel
Lord Templeman
Lord Oliver of Aylmerton
Lord Goff of Chieveley
Lord Jauncey of Tullichettle
House of Lords
My Lords,
I have had the opportunity of considering in draft the speech to be delivered by my noble and leaned friend Lord Templeman. I agree with it, and for the reasons he gives would allow this appeal. I agree also with his observations regarding costs and with the orders which he proposes in respect to them.
My Lords,
By a lease dated 15 July 1964 freeholders demised the premises, 17 Gledhow Gardens, South Kensington, for a term due to expire by effluxion of time on 25 June 1997. On 3 May 1989 the lease was assigned to the appellant, Residential Apartments Ltd. The reversion is vested in the respondent trustees.
The provisions of the lease included a covenant by the tenants:
"( f) … not to make any alteration in or addition to the demised premises or any part thereof without the consent in writing of the Lessors first had and obtained.
The lease also contained the following proviso for re-entry:
( i) If and whenever any rent hereby reserved shall be in arrear for twenty-one days after becoming due (whether legally demanded or not) or if and whenever any covenant by the Lessee hereinbefore contained (other than the covenant to pay rent) shall not be performed or observed then and in any such case the Lessors may by re-entry or (at their option) by notice in writing in that behalf given to the Lessees determine this demise and thereupon this demise shall absolutely determine but without prejudice to any right of action or remedy of the Lessors in respect of any breach of covenant by the Lessees."
In breach of covenant the appellant embarked on alterations to the demised premises without the consent of the trustees. Section 146(1) of the Law of Property Act 1925 provides that:
"(1) A right of re-entry or forfeiture under any proviso or stipulation in a lease for a breach of any covenant or condition in the lease shall not be enforceable, by action or otherwise, unless and until the lessor serves on the lessee a notice:
( a) specifying the particular breach complained of; and
( b) if the breach is capable of remedy, requiring the lessee to remedy the breach;
( c) in any case, requiring the lessee to make compensation in money for the breach;
and the lessee fails, within a reasonable time thereafter, to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money, to the satisfaction of the lessor, for the breach."
The trustees served on the appellant a notice dated 4 July 1989 complying with section 146(1) but the appellant did not remedy its breach of covenant within a reasonable time.
Section 146(2) of the Law of Property Act 1925 provides that:
"(2) Where a lessor is proceeding, by action or otherwise, to enforce such 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."
On 18 July 1989 at 6 a.m. agents for the trustees peaceably re-entered the demised premises which were vacant and changed the locks. By 10 a.m. on the same day workmen engaged by the appellant had retaken possession of the property, as the trustees say, unlawfully.
By the writ in this action dated 19 July 1989 the trustees claim possession, damages for breach of covenant and damages for trespass. By their defence and counterclaim the appellant counterclaims for relief against forfeiture. By their reply the trustees claim that the court has no jurisdiction to grant the appellant relief from forfeiture. The trial judge, Mummery J., and the Court of Appeal (Sir Nicolas Browne-Wilkinson V.-C., and Parker and Nicholls L.JJ.) considered that they were constrained by authority to hold that the court had no jurisdiction to grant the appellant relief against forfeiture pursuant to section 146(2) because the appellant had not applied' to the court for relief prior to the re-entry into possession by the trustees on 18 July 1989. The appellant now appeals.
By the common law, when a tenant commits a breach of covenant and the lease contains a proviso for forfeiture, the landlord at his option may either waive the breach or determine the lease. In order to exercise his option to determine the lease the landlord must either re-enter the premises in conformity with the proviso or must issue and serve a writ claiming possession. The bringing of an action to recover possession is equivalent to an entry for the forfeiture. Thus in Jones v. Carter (1846) 15 M. & W. 718, Parke B. said at p. 726:
"… the bringing of an ejectment for a forfeiture, and serving it on the lessee in possession, must be considered as the exercise of the lessor's option to determine the lease: and the option must be exercised once for all … for after such an act, by which the lessor treats the lessee as a trespasser, the lessee would know that he was no longer to consider himself as holding under the lease, and bound to perform the covenants contained in it …."
This observation was cited and applied by Lord Denning M.R. in Canas Property Co. Ltd. v. K. L. Television Services Ltd. [1970] 2 Q.B. 433 at 440.
Before the intervention of Parliament, if a landlord forfeited by entering into possession or by issuing and serving a writ for possession, equity could relieve the tenant against forfeiture but only in cases under the general principles of equity whereby a party may be relieved from the consequences of fraud, accident or mistake or in cases where the breach of covenant entitling the landlord to forfeit was a breach of the covenant for payment of rent.
Mr. Reid, who appeared for the trustees, conceded that where equity claimed power to relieve against forfeiture, the tenant could apply for relief irrespective of the method by which the landlord had exercised his option to determine the lease. Relief could be granted whether the landlord had forfeited by entering into possession or had forfeited by issuing and serving a writ claiming possession.
In 1881 Parliament interfered to supplement equity and to enable any tenant to be relieved from forfeiture. The need for such intervention was and is manifest because otherwise a tenant who had paid a large premium for a 999 year lease at a low rent could lose his asset by a breach of covenant which was remediable or which caused the landlord no damage. The forfeiture of any lease, however short, may unjustly enrich the landlord at the expense of the tenant. In creating a power to relieve against forfeiture for breach of covenant Parliament protected the landlord by conferring on the court a wide discretion to grant relief on terms or to refuse relief altogether. In practice this discretion is exercised with the object of ensuring that the landlord is not substantially prejudiced or damaged by the revival of the lease.
Section 14(1) and 14(2) of the Conveyancing and Law of Property Act 1881 were provisions which conferred on the court power to relieve against forfeiture and those provisions were reproduced in section 146(1) and 146(2) of the Law of Property Act 1925 in identical terms. In referring to a section 146 notice I shall therefore mean and include a notice served under section 14(1) of the Act of 1881 and in referring to section 146(1) and 146(2) I shall mean and include section 14(1) and 14(2) of the Act of 1881 where appropriate.
Section 146(1) prevents the landlord from enforcing a right of re-entry or forfeiture by action or otherwise so that the landlord cannot determine the lease by issuing and serving a writ or by re-entering the premises until the tenant has failed within a reasonable time to remedy the breach and make reasonable compensation. Section 146(2) enables the tenant to apply to the court for relief where the landlord "is proceeding, by action or otherwise" to enforce his right of re-entry or forfeiture. If the landlord "is proceeding" to determine the lease by issuing and serving a writ, the tenant may apply for relief after the writ has been served. If the landlord "is proceeding" to determine the lease by re-entering into possession, the tenant may apply for relief after the landlord has re-entered.
Mr. Reid submitted and referred to authority for the proposition that on the true construction of section 146(2) a tenant cannot apply for relief against forfeiture after the landlord has re-entered without obtaining a court order. Thereafter the landlord is no longer "proceeding" to enforce his rights; he has succeeded in enforcing them. The proposition is in my opinion historically unsound because the effect of issuing and serving a writ is precisely the same as the effect of re-entry; in each case the lease is determined. The landlord is entitled to remain in possession if he has re-entered and he is entitled to possession if he has issued and served a writ because the lease no longer exists. In each case the tenant seeks relief because the lease has been forfeited. The proposition is also inconsistent with the language of section 146(2). The tenant may apply for relief where the landlord is "proceeding, by action or otherwise" to enforce his rights. The tenant may apply for relief where the landlord is "proceeding" by...
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