Dollar Land (Cumbernauld) Ltd (Original Appellants and Cross-Respondents) v C.I.N. Properties Ltd (Original Respondents and Cross-Appellants) (Scotland)
| Jurisdiction | England & Wales |
| Judge | LORD BROWNE-WILKINSON,LORD JAUNCEY OF TULLICHETTLE,LORD NOLAN,LORD HOFFMAN,LORD HOPE OF CRAIGHEAD |
| Judgment Date | 16 July 1998 |
| Judgment citation (vLex) | [1998] UKHL J0716-1 |
| Court | House of Lords |
| Docket Number | No 8 |
| Date | 16 July 1998 |
[1998] UKHL J0716-1
HOUSE OF LORDS
Lord Browne-Wilkinson
Lord Jauncey of Tullichettle
Lord Nolan
Lord Hoffmann
Lord Hope of Craighead
My Lords,
I have had the advantage of reading in draft the speech prepared by my noble and learned friend, Lord Hope of Craighead. For the reasons which he gives I would dismiss the appeal.
My Lords,
I have had the advantage of reading in draft the speech of my noble and learned friend, Lord Hope of Craighead, with which I agree. It is therefore unnecessary for me to set out in detail the circumstances in which the appellants (D.L.C.) came to be the tenants under the Sublease of 8 November 1983 and 2 February 1984. Suffice it to say that D.L.C. defaulted on their payments of rent and the respondents (C.I.N.) invoked the Irritancy Clause (5) in the Sublease. In C.I.N. Properties Ltd. v. Dollar Land (Cumbernauld) Ltd. 1992 S.C.(H.L.) 104 this House followed the earlier decision in Dorchester Studios (Glasgow) Ltd. v. Stone 1975 S.C.(H.L.) 56 and rejected the contention of D.L.C. that the Irritancy Clause was unreasonable inasmuch as the relationship of the parties was more akin to a joint venture, and the irritancy was really a penalty clause. The Lord Ordinary's decree of the declarator of irritancy was accordingly upheld. It is significant that Counsel for D.L.C. before this House on that occasion expressly declined to make any submissions on oppression.
The present appeal is the sequel to the 1992 appeal, in which it was pointed out that D.L.C. would lose a very substantial sum if the irritancy were incurred. D.L.C. now claims to be recompensed by C.I.N. to the extent to which the latter were lucrati by the operation of the irritancy on the basis of unjust enrichment. This claim has failed before the Lord Ordinary and an Extra Division of the Inner House by a majority.
The general proposition that a tenant, whose lease has been irritated for non-payment of rent and has thereby suffered loss, has a right to recover from his landlord the amount by which the latter has been enriched by the termination of the lease is a novel one in the law of Scotland and no case was referred to by Mr. Clarke Q.C for D.L.C. in which such a right had been recognised. However he argued forcefully that the present situation was not the simple landlord and tenant relationship under a single lease but a more complex commercial arrangement whereby the Head Lease was intended to provide security to C.I.N. for their investment and that there was no reason in principle why a claim by D.L.C. for unjust enrichment in these circumstances was not competent. Although, in a particular situation, it might be perfectly reasonable for a landlord to enforce an irritancy clause in a lease, that did not prevent the court affording a remedy to the tenant where the adverse consequences to him and the enrichment to the landlord were wholly disproportionate to the breach. In such a situation the court was entitled to consider that the disequilibrium to the parties warranted its intervention.
Counsel referred to three cases involving agricultural leases which demonstrated, he submitted, that the purpose of a conventional irritancy was to enable a landlord to get rid of an unsatisfactory tenant, but which did not exclude a subsequent claim by the tenant for unjust enrichment. In Moncreiff v. Hay (1842) 5 D. 249 and Chalmer's Trustee v. Dick's Trustee 1909 S.C. 761 it was held, as a matter of construction of the respective irritancy clauses in the agricultural leases, that enforcement thereof had deprived the tenants of all property in the crops growing at the time when the leases were terminated. In Stewart v. Watson (1864) 2 M. 1414 the court held that an irritancy clause taking effect on the sequestration of a tenant was lawful and, in contradistinction to a legal irritancy, could not be purged. My Lords, I do not find that these cases throw any light on the proposition advanced by D.L.C.
It has long been recognised that there exists a power to intervene where a conventional irritancy is being enforced oppressively, although the researches of counsel could find no case in which such power had been exercised. It is, however, one thing to say that an irritancy should not be enforced in an oppressive manner, but quite another to say that reasonable enforcement of an irritancy can nevertheless give rise to a claim by the tenant in breach for recompense on the basis of unjust enrichment to the landlord.
The basis of the D.L.C.'s claim is that there is enrichment to C.I.N. and that this enrichment is unjust. The measure of their claim is quantum lucrati sunt C.I.N. That the enforcement of an irritancy is likely to result in enrichment to the landlord is far from unusual. In Moncreiff v. Hay and Chalmer's Trustee v. Dick's Trustee, the landlord acquired the growing crops sown by the tenant. When a grassum has been paid by a tenant for a lease, it has not been suggested that it is recoverable if the lease is irritated. Similarly, where a tenant has effected improvements to property in the expectation of enjoying that property for a significant period, the value of those improvements is not recoverable at Common Law. D.L.C. accepted that mere enrichment to the landlord is not enough; that enrichment must be unjust or, in other words, disproportionate in all the circumstances to the consequences to the landlord of the breach. Two difficulties stand in the way of D.L.C. In the first place a claim for recompense quantum lucratus est in the law of Scotland normally arises where one party provides goods or services disconform to contract which are nevertheless accepted by the other as, for example, where a builder departs substantially from the contractual plans for a house ( Ramsay & Son v. Brand (1898) 25 R. 1212) and is thereby disabled from suing on the contract. Your Lordships were referred to no case in which a party was claimed to have been lucratus unjustly solely by reason of the termination of a contract in accordance with the specific provisions thereof. In the second place, the allegedly unjust nature of C.I.N.'s enrichment arises directly from the terms of the irritancy clause. It is the second difficulty which, to my mind, presents an insurmountable hurdle for D.L.C. They must show not only that C.I.N. were enriched, but that they were unjustly enriched.
Clause 5 of the Sublease provides inter alia:
"… the Tenant shall forfeit all right and title under these presents and the Lease hereby granted and all transmissions and subleases thereof with all that has followed or can competently follow thereon shall become ipso facto void and null and that without the necessity of any declarator, process of removal or other procedure at law and the leased premises shall thereupon revert to the Landlord and it shall be lawful for the Landlord or any person or persons duly authorised by the Landlord in that behalf to enter upon the possession of the leased premises or any part thereof in name of the whole and to uplift rents, eject the Tenants, Subtenants and occupiers and thereafter use, possess and enjoy the same free of all claims by the Tenant, Subtenants and others as if these presents had never been granted…."
The effect of these provisions is, in my view, clear. D.L.C. forfeited all right under the sub-lease and the sub-leases granted by C.D.C. under Clause 2(27)(vi) whereby C.D.C. and, later D.L.C., received the rents from the occupational tenants with the result that D.L.C.'s income stream dried up. C.I.N. then became entitled to absolute possession of the subjects with the ability to do with them what they willed. If they renegotiated the occupational sub-leases, then they would receive all the rents payable thereunder instead of only the 77 per cent. which they received while D.L.C. had rights under Clause 2, but they would of course incur administration expenses for which D.L.C. had previously been responsible. In short, the events which have occurred are precisely those which flow naturally from the operation of and are provided for in Clause 5, and which should have been readily apparent to D.L.C. when they acquired C.D.C.'s interests under the Head Lease and the sub-lease. It was inevitable that C.I.N. would be enriched if the irritancy clause were enforced. I simply do not see how results for which parties or their predecessors had specifically and willingly contracted could be said to be unjust. On this short ground alone, I would dismiss the appeal.
In my speech in C.I.N. Properties Ltd. v. Dollar Land (Cumbernauld) Ltd. 1992 S.C.(H.L.) 104, I confessed at pp. 126-127 to doubts as to whether irritancy clauses for non-payment of rent fairly reflected social policy in the case of long term investment leases. This case has done nothing to remove those doubts. To permit claims for recompense after enforcement of an irritancy could, in my view, create many problems, not least to a landlord who might not know until it was too late whether enforcement of an irritancy was for him a beneficial course. Any reform of the law could, in my view, more aptly proceed along the lines of the observations of Lord Shand at p. 383 in Hannan v. Henderson (1879) 7 R. 380, to which I referred on p. 126, as to the possibility of attaching conditions to the purgation of an irritancy where enforcement involved the loss of large vested rights of property.
My Lords,
I have had the advantage of reading in draft the speech prepared by my noble and learned friend, Lord Hope of Craighead. For the reasons which he gives, I would dismiss the appeal.
My...
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