Chelsea Estates Investment Trust Company Ltd v Marche
| Jurisdiction | England & Wales |
| Date | 1955 |
| Year | 1955 |
| Court | Chancery Division |
Mortgage - Leasehold - Redemption - Recovery of possession by landlord - Order for relief against forfeiture obtained by mortgagee - New lease - Sale by mortgagee as absolute owner - Action for redemption - Mortgage still subsisting - Mortgagor entitled to order for accounts and inquiries -
Possession of leasehold premises, subject to a mortgage by way of legal charge, was granted to the landlords for non-payment of rent. On application by the mortgagee in the landlord's action the court made an order granting the mortgagee relief against forfeiture under section 146 (4) of the Law of Property Act, 1925, and ordered that the premises comprised in the lease should vest in the mortgagee “for all the residue of the term … granted by the said lease.” The mortgagor, in an action for redemption of the mortgage, claimed that the term vested in the mortgagee was an assignment of the old term and was subject to the mortgage; alternatively, that if it were a new lease it was a substituted security and similarly subject to the mortgage.
After the issue of the writ in the redemption action, the mortgagee had entered into a contract for the sale of the property, purporting to sell as absolute owner. The purchasers were joined subsequently as defendants:—
Held, (i) that the term granted by the order was not an assignment of the old lease, but constituted a new lease, in which the same terms and conditions as those contained in the old lease had to be implied.
(ii) That the new lease being for the protection of the mortgagee must be regarded as a substituted security and accordingly subject to the mortgage.
(iii) That in the circumstances the mortgagor, who did not claim to restrain the mortgagee from proceeding with the sale, was entitled to an order for accounts and inquiries.
ACTION.
On April 18, 1952, the Prudential Assurance Company Ld., as landlords, granted a lease of two premises known as Nos. 35 and 36 Princes Square, Bayswater, in the county of London, to the first defendant, Peter Marche, for a term expiring in the year 2010 at a rent, after June 24, 1952, of £400 a year. The user of the premises was by the lease restricted to that of carrying on the business of a high class hotel or boarding house, and the lease contained the usual proviso for re-entry for nonpayment of rent. The lease was registered with a good leasehold title in the Land Registry on May 29, 1952.
On January 27, 1953, the defendant Marche assigned the lease to the plaintiff company, Chelsea Estates Investment Trust Co. Ld., and one Edward Anthony Coles was joined as a guarantor for the performance by the plaintiffs of the covenants in the lease, Coles being the principal shareholder in the plaintiff company. By a legal charge also dated January 27, 1953, the plaintiffs charged the premises to Marche to secure repayment of the sum of £4,500 together with interest, the principal being repayable by instalments. The security was a charge by way of legal charge of the demised premises. Both the assignment and the legal charge were registered in the Land Registry on March 11, 1953. The charge included not only the demised premises, but certain fixtures and fittings and the goodwill of the business of an hotel carried on thereon, but claims in the pleadings with regard to the fixtures and fittings were not proceeded with, as it was agreed that there was a difficulty in determining that question in the absence of the landlord, the Prudential Assurance Company Ld.
The plaintiffs entered into possession of the premises before the date of the execution of the assignment to them, but they never paid any rent to the landlord, and on May 13, 1953, the Prudential Assurance Company Ld. issued a writ in the Queen's Bench Division against the plaintiffs and the guarantor, Coles, claiming possession of the demised premises and rent. On May 29, 1953, the Prudential obtained a judgment for possession in default of appearance, but they never went into possession.
The defendant mortgagee, Marche, had issued a writ in the Chancery Division against the plaintiffs and against the guarantor on May 20, 1953, claiming payment of the principal amount due because the plaintiffs had paid neither rent nor interest on the mortgage. Judgment in that action was given against the guarantor Coles only, on July 17, 1953.
In the first action, that by the Prudential, in which judgment for possession had been given, the plaintiffs applied under section 146 (2) of the Law of Property Act, 1925,F1 for relief from forfeiture of the lease, and on March 23, 1954, an order was made, by which the plaintiffs were to be allowed relief from forfeiture on the terms of paying all the costs incurred, all the arrears of rent, on making some repair or improvement to the demised premises and on certain other terms, not here relevant, as between the plaintiffs and the defendant mortgagee; but it was provided that, if those terms were not complied with, within the limit of seven days set on the payment of the arrears of rent, the application for relief from forfeiture was to be dismissed with costs.
The plaintiffs did not comply with that order, and it was common ground that the application was therefore dismissed. Peter Marche as mortgagee then applied for relief from forfeiture under section 146 (4) of the Law of Property Act, 1925. He was a chargee by way of legal mortgage, and by the recent decision in Grand Junction Canal Co. v. Bat sF2 he was in as good a position as a lessee to seek relief from forfeiture, because under section 87 of the Act he was to be treated as being an under-lessee for one day less than the head lease.
On that application an order was made on April 29, 1954, in these terms:
and then there was an order on the present plaintiffs to pay costs and the arrears of rent in the usual way“The court doth pursuant to section 146 of the Law of Property Act, 1925, order that the two messuages and premises situate and known as Nos. 35 and 36 Princes Square, Bayswater, in the county of London, comprised in a lease dated April 18, 1952, and made between the plaintiffs [in that action, the Prudential] of the one part and the applicant Peter Marche of the other part do vest in the said applicant for all the residue of the term expiring on June 24, 2010, granted by the said lease,”
Upon that the plaintiffs appealed to Pearson J. who dismissed their appeal on May 11, 1954. The plaintiffs delivered up possession to the mortgagee on July 10, 1954, pursuant to an order of June 17, 1954, so that the present position, admitted upon the pleadings...
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