Central Estates (Belgravia) Ltd v Woolgar
| Jurisdiction | England & Wales |
| Judge | THE MASTER of THE ROLLS,LORD JUSTICE PHILLIMORE,LORD JUSTICE MEGAW |
| Judgment Date | 28 July 1971 |
| Neutral Citation | [1971] EWCA Civ J0728-2 |
| Judgment citation (vLex) | [1971] EWCA Civ J0728-1 |
| Court | Court of Appeal (Civil Division) |
| Date | 28 July 1971 |
[1971] EWCA Civ J0728-1
In The Supreme Court of Judicature
Court of Appeal
Appeal of defendant from order of His Honour Judge Ruttle at Westminster County Court dated November 26th, 1970.
The Master of The Rolls (Lord Denning),
Lord Justice Phillimore and
Lord Justice Megaw.
Releasehold Reform Act 1967
Re Lease between the Duke of Wastminster and Miss Pezatti Re Sidney Woolgar'S Application.
Mr. CM. CLOTHIER, Q. C., and Mr. ROBIN HAY appeared on behalf of the Appellant Defendant.
Mr. R. BERNSTEIN, Q. C., and Mr. J. RICARDO appeared on behalf of the Respondent Plaintiffs.
In 1930 the trustees of the Westminster A Estates let No, 13 Denbigh Street, Warwick Square, London, to a lessee on a lease for 63 years at £30 a year. Afterwards the lessor's Interest In the tenancy became vested In Central Estates (Belgravla) Ltd. The lease contained a covenant by the lessee In these terms:-
"… Nor shall any act deed or thing be done In or about the demised premises which shall or may be or become a nuisance (whether indictable or not) or which may grow or lead to the damage annoyance inconvenience or disturbance of the Landlord or the tenant or occupier of any adjacent or neighbouring hereditaments…."
The lease also contained a proviso for re-entry in case of breach-of covenant.
In October 1957 Sidney Woolgar took an assignment of the lease. He has resided in the house ever since. He has lived in the first and second floors but has allowed others into the ground floor and basement.
On 22nd May, 1970, the police found out that Sidney Woolgar was keeping a brothel in the house. He was summoned before the magistrate at Bow Street. The charge was for unlawfully keeping a brothel contrary to section 33 of the Sexual Offences Act, 1956, and section 6 of the Sexual Offences Act, 1957. The case was heard on 23rd June, 1970, Mr. Woolgar pleaded Not Guilty. But the Magistrate found the offence proved. He was discharged conditionally for twelve months.
That conviction obviously imperilled Woolgar's possession of the premises. He acted quickly, On 6th July, 1970, his solicitors applied to the landlords', solicitors for permission to sell his leasehold interest to a Mrs. Anthony. The landlords did not know at that time of his conviction. On 10th July,1970, they notified Mr. Woolgar that they were going to inspect. the premises for the purpose of preparing a schedule of dilapidations.
A fortnight later the conviction was known. Each side gave a notice which crossed in the post. On 22nd July, 1970, the tenant gave notice to the landlords, saying that he desired to buy the freehold. On 23rd July, 1970, the landlords served notice on Mr. Woolgar complaining that he had been unlawfully keeping a brothel at the premises and had been convicted of the offence.
There were cross-claims. On the one hand, the landlord was entitled to forfeit the lease for breach of covenant. The breach (keeping a brothel there) was of such a nature that it was not capable of remedy, see Rugby School (Governors) v. Tannahill, 1935, 1 K. B. 87. Forfeiture was the almost inevitable consequence. Relief is rarely given for such a breach: for the simple reason that "it must cast a stigma on the premises and impose a taint which can only be removed if those who brought it about are no longer associated with the premises", see Egerton v. Esplanade Hotels. London. Ltd. 1947 2 A. E. R. at page 91 by Mr. Justice Morris.
On the other hand, this lease was within the Leasehold Reform Act, 1967. It was a long lease at a low rent. The tenant had been occupying part of it as his residence for the last five years and more. He was, therefore, entitled to buy the freehold et a very low price. Once he did so, he would be clear of the covenants and the landlords would be out.
Which of these two cross-claims is to prevail? Parliament has given us some guidance in the 1967 Act, Schedule 3, paragraph 4(1), which says:-
"When a tenant makes a claim to acquire the freehold or an extended lease of any property, then during the currency of the claim no proceedings to enforce any right of re-entry or forfeiture terminating the tenancy shall be brought in any Court without the leave of that Court, and leave shall not be granted unless the Court is satisfied that the claim was not made in good faiths but when leave is granted, the claim shall cease to have effect."
It comes, therefore, to this. If the tenant's claim to buy the freehold is made in good faith, it will prevail and the landlords will not be able to forfeit the lease. But, if the tenant's claim is not made in good faith, the forfeiture will prevail and the landlords will be able to re-enter and regain the premises.
How then are we to decide whether the tenant's claim to buy the freehold is made in good faith, or not? The words "in good faith" are often used in statutes but rarely defined. A good instance is the Larceny Act, 1916, which speaks of "a claim of right made in good faith", but does not tell us what "good faith" means. Other instances come readily to mind. The Limitation Act, 1939. speaks of cases when a right of action is concealed by "fraud", but does not define what is meant by "fraud" in this context. It is left to the Courts to work it out from case to case; see Applegate v. Moss. 1971 2 W. L. R. 541. In all such cases, when a word or phrase goes undefined, the Judges have to work out for themselves the meaning of it, doing the best they can to interpret the will of the legislature in regard to it. That is the principle I stated in Seaford Court Estates v. Asher, 1949 2 K. B. at page 499. To my mind under this statute a claim is made "in good faith" when it is made honestly andwith no ulterior motive. It must be made by the tenant honestly in the belief that he has a lawful right to acquire the freehold or an extended lease, and it must be made without any ulterior motive, such as to avoid the just consequences of his own misdeeds or failures. If the landlord asserts that the tenant's claim is not made in good faith, the burden is on the landlord to satisfy the Court that the tenant, in making the claim, was acting dishonestly or with an ulterior motive.
Applying this meaning to this case, the plain fact is that the tenant was convicted of keeping a brothel. A few days later he put in a claim to buy the freehold. The inference is obvious: The tenant had an ulterior motive. He desired to buy the freehold in order to avoid the forfeiture which would follow on his conviction. He did not go into the witness-box to explain his motive. The Judge inferred that it was an ulterior motive. He said: "This tenant chose to remain silent and has given no reason for silence; his claim was not made in good faith." I agree.
Seeing that the claim to buy the freehold was not made in good faith, it must be rejected. The landlords are entitled to forfeit the lease. The Judge gave leave for the purpose.
I agree with him, and would dismiss this appeal.
This appeal raises the question of whether and, if so, in what circumstances, an application by a tenant to acquire the freehold can be said to be made otherwise than in good faith. The question depends on the true construction of section 4 of Schedule 3 to the Leasehold Reform Act 1967 - an ill-designed piece of legislation which has caused endless litigation. It was designed to help a deserving class of tenants, namely those holding on long leases small and oftenterrace houses in Wales where the landlord had in effect been paid the value of the house over and over again.
In effect and certainly for the purposes of this appeal the tenant, if he applies to purchase the freehold, is to be granted what he asks, unless it can be said that his application is not made in good faith.
Despite his plea of not guilty, the appellant was convicted on 22nd May 1970 of keeping a brothel on the premises. He asked the landlords for permission to assign his lease to a Mrs, Anthony, but then applied to purchase the freehold in accordance with his rights under the Act, This application crossed in the post with a notice by the landlords claiming to forfeit on the ground of the conviction. Obviously the tenant had realised that the landlords were about to learn or had learned of the conviction.
Was the claim made otherwise than in good faith? Counsel could not help us very much.
One said that a claim was not made in good faith when it was made in bad faith. Another said that a claim must be dishonest if it was to be described as made otherwise than in good faith. It was said that a claim would not be made in good faith if the facts stated in it were untrue to the knowledge of the tenant or if the claim was made for some ulterior motive. One Counsel said it all depended on "quo animo" the claim was made and another said that motive must be distinguished from intention. Further it is said that even if the tenant has so breached his covenants that his landlord has become entitled to forfeit his lease in circumstances where no Court would grant relief, it is Impossible to say that a claim to acquire the freehold is made in bad faith in the light of the provisions ofsub-section (2). of section 4 of the Schedule.
I have come to the conclusion that the only course that this Court can follow is to deal with this matter on the facts of this case.
So far as Mr. Woolgar is concerned, he had breached his covenant and committed a criminal offence. He had exposed himself to forfeiture in circumstances where no Court would grant relief.
He sought agreement to assign, and then, having realised that the true facts were likely to emerge, he applied for the freehold.
I think he acted otherwise than in good faith...
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