National Carriers Ltd v Panalpina (Northern) Ltd

JurisdictionUK Non-devolved
JudgeLord Hailsham of St. Marylebone,Lord Wilberforce,Lord Simon of Glaisdale,Lord Russell of Killowen,Lord Roskill
Judgment Date11 December 1980
Judgment citation (vLex)[1980] UKHL J1211-1
Date11 December 1980
CourtHouse of Lords
National Carriers Limited
Panalpina (Northern) Limited

[1980] UKHL J1211-1

Lord Chancellor

Lord Wilberforce

Lord Simon of Glaisdale

Lord Russell of Killowen

Lord Roskill

House of Lords

Lord Hailsham of St. Marylebone

My Lords,


We are all agreed that this appeal from decisions of Master Waldman and Sheen J. refusing leave to defend under RSC 0.14 fails on the facts for the reasons given by my noble and learned friends to which personally I have nothing to add. The appellants have failed to raise a triable issue.


Nevertheless, though they arrive in your Lordships' House by an unusual route, the proceedings do raise an interesting and important general question of principle relating to the extent and nature of the law of frustration which has long been debated and which, since the matter has reached this stage and has been fully argued, should now be decided by your Lordships' House.


This question is the applicability of the law of frustration to leases and agreements for a lease. The question is discussed at length in Cricklewood Property and Investment Trust Ltd. v. Leightons Investment Trust Ltd. [1945] A.C. 221 by the decision of which in the Court of Appeal, Master Waldman and Sheen J. rightly considered themselves bound, with the result that, in dismissing the appeal from Master Waldman, Sheen J. gave his certificate under section 12 of the Administration of Justice Act 1969, and so, for the first time in my experience, an Order 14 summons bypasses the Court of Appeal and "leapfrogs" directly to the Appellate Committee of the House of Lords.


Before I reach a discussion of the point of law it is necessary that I fill in the factual background. This illustrates the curious and sometimes unexpected results which can ensue from the present vogue of listing industrial buildings as part of our national heritage. Kingston Street, Hull is a continuation of English Street (of which, originally it may have been part) and terminates by running perpendicularly into a T junction with Railway Street. Before it reaches this end, it crosses more or less at right angles an intersection with Commercial Road and Manor House Street. Hereinafter, when I speak of Kingston Street, I shall be referring solely to that section of it between this intersection and the T junction with Railway Street. Although it is now, it would seem, a public highway for all types of traffic, it may well be that at one time it was the private property of a railway company, since otherwise it is difficult to explain the "demise" (sic)of a private right of way along it by the lessors of the property about to be described.


Kingston Street is bounded on both sides by warehouses and on part of one side by a railway shed. At one side of it, at the point nearest the intersection, is a derelict and ruinous Victorian warehouse which at some time has become, under the laws for the conservation of our national heritage, a "listed building" which means that it cannot be demolished without the consent of the Secretary of State for the Environment, and that, if the demolition is objected to by local conservationists (as in fact happened), this consent will not be granted without the holding of a public local enquiry. Even assuming a result favourable to demolition the total process is likely to last a year. In the events which have happened, the process is not yet complete, but, on the material before us, is likely to be concluded by the end of December 1980 or the beginning of January 1981. By that time, it will have lasted about 20 months.


Since, in course of time, the Victorian warehouse became dangerous as well as derelict it evidently presented problems of safety to the City Council of Hull. In 1978 they placed a restriction order on Kingston Street, and on the 16th May 1979 they closed it altogether to vehicular traffic. It was not made altogether clear to us under what powers they acted, but the closure was subsequently confirmed and continued by the Secretary of State, and, at the present, access to Kingston Street is not merely prohibited to vehicles, but rendered physically impossible, by the erection across it by the local authority of a fenced barrier. This will not be removed until the demolition process is completed at the end of the current year or the beginning of next.


Opposite the ruinous listed building, there is another warehouse, more or less triangular in shape, the only access to which (except perhaps on foot) is via a loading bay in Kingston Street. The consequence of the application for demolition, and the subsequent proceedings, has been that, from the 16th May 1979 until the time when the barriers are finally removed and the prohibition order lifted, this triangular warehouse has been rendered totally useless for the one purpose, that of a commercial warehouse, for which alone it is fitted, and for which alone, by the terms of the contract between the parties, it may be lawfully used.


In 1974 the triangular warehouse had become the subject of a demise between the plaintiffs/respondents to these proceedings, the lessors, and the defendants/appellants. This demise was contained in a lease dated the 12th July 1974 and was expressed to run for 10 years from the 1st January 1974. The terms of the lease, most of which are not unusual in documents of this kind, contained inter alia a covenant to pay an annual rent (£6,500 for the first five years, and for the second five years subsequently increased by agreement in accordance with a formula contained in clause 4(1) of the lease to £13,300) payable in advance by four quarterly instalments. The present proceedings, commenced by writ dated the 9th July 1979, are for the payment of £5,115�38 being the two quarterly instalments due on the 1st April, and the 1st July 1979. There is no dispute between the parties as to the amount of this sum, nor, subject to the defence of frustration hereinafter to be mentioned, of the liability of the defendants/appellants to pay it.


The lease also contained obligations by the tenants to pay rates, to repair, to pay a rateable proportion of the expense of cleaning and maintaining the sewers, roads etc., to insure at full value in the joint names of landlord and tenant, to paint, to yield up in good and substantial repair at the end of the tenancy, not to assign or sublet, alter, or to utilise otherwise than for the purpose of a warehouse without the written consent of the landlord, and other matters. The landlord's covenants included an express covenant of quiet enjoyment. There were special provisions for the suspension of the obligation to pay rent and for the termination of the tenancy at the option of the landlord in case of destruction by fire, and provisions for re-entry by the landlord in case of breach of covenant, or on six months notice, if the premises were required for the proper operation of British Railways (with whom the plaintiffs are associated).


The sole defence raised by the defendants/appellants to their obligation to pay rent was that, by reason of the events described above the lease had become frustrated and was therefore wholly at an end. By their printed case each party raised two questions for your Lordships' decision. The first is the broad question of principle, viz. whether the doctrine of frustration can ever apply to determine a lease, and the second, of particular application, whether even if the doctrine can on occasion apply, there is here a triable issue as to whether it does apply to the lease between the parties in the circumstances described. In the event of both questions being determined in favour of the appellants, your Lordships, if allowing the appeal, would have no option but to return the case for trial at first instance, with the possible result that, after a lapse of two years, it might reappear in your Lordships' list for a second hearing. In any event, unless some guidance is given on the first issue, sooner or later argument would have to be directed to it in some later proceeding. It is therefore perhaps as well that, although dismissing the appeal on the second question, we thought it right to hear the first fully argued on both sides. We are doubly indebted to counsel for the appellants, who, though aware that he had not succeeded, nevertheless stayed to deliver an admirably concise reply to the forceful arguments on the point of principle helpfully presented on behalf of the respondents.


The doctrine of frustration is of comparatively recent development. The general rule of common law, laid down as early as 1647 in Paradine v. Jane ( Aleyn 26) is that the performance of absolute promises is not excused by supervening impossibility of performance. Paradine v. Jane itself, a case arising out of the civil war, was like the present, an action of debt based on a covenant to pay rent contained in a lease. But, since the doctrine of frustration had not at that stage come into existence, the argument turned solely on the absolute and unconditional nature of the promise to pay the rent, and the applicability to the estate in land created by the demise of any such doctrine did not arise.


It is generally accepted that the doctrine of frustration has its roots in the decision of the court of Queen's Bench given by Blackburn J. in Taylor v. Caldwell (1863) 3 B & S 826. In that case, the parties to the contract had used terms appropriate to the relationship of landlord and tenant describing the money payment as "rent" and the transaction as a "letting". But, after analysing the facts, Blackburn J. decided that the true nature of the transaction was not one of landlord and tenant but one of licensor and licensee. He then added, cryptically, the words: "Nothing, however, in our opinion depends on this". I am inclined to think that by these words he was in effect taking the view which I...

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