Navit Savadas Keshwala v Sharda Bhalsod

Hearing dates: 16 July 2020

APPROVED JUDGMENT

Introduction

By permission granted by myself on 5 June 2020, the Claimants appeal against the decision of Her Honour Judge Alison Hampton dated 10 January 2020 whereby she refused to grant the Claimants' relief against forfeiture in respect of the lease of which the Claimants were tenants and the Defendants' landlords.

Background Facts

The background to this matter is fully set out in the admirable judgment of Judge Hampton which it is unnecessary for me to repeat in full. The salient facts are as follows:

(i) On 12 March 2008 the Claimants entered into a lease of 89 Narborough Road, Leicester, for a term of 20 years: the landlord and freeholder was one Rachel Jane Rowley; the Second Claimant, Mr Kiran Sharma, has always been the lessee with the main interest in, and control of, the premises.

(ii) The property consisted of a lock-up shop on the ground floor with living accommodation above, on one of the main arterial roads leading into the city centre in an area of either secondary or tertiary mixed commercial and residential properties.

(iii) The Defendants bought the freehold from Ms Rowley in April 2015 and thereby became the Claimants' landlord.

(iv) In July 2015 the rent fell into arrears for the first time and the Defendants, who at all times acted through Mr Anil Bhalsod, forfeited the lease by re-entry pursuant to clause 5 of the lease which provided:

“If the rent or any part of the rent is unpaid for 21 days, after any of the days on which it is not paid, whether the same shall have been formally demanded or not, it will be lawful for the landlord to re-enter the property or any part of it in the name of the whole and to again repossess and enjoy thenceforth the property as if this lease had not been made, without prejudice to the right of action or remedy of the landlord in respect of any antecedent breach of any covenants or agreements by the tenant.”

(v) On that occasion the claimants applied for relief from forfeiture promptly and this application was resolved by a consent order on 10 November 2015 whereby the figure in arrears (£5,000) and costs were to be paid and the Claimants were able to resume possession.

(vi) Unfortunately, the business run from the premises (a travel agency) failed and there was an attempt to convert the residential part of the property into student lets, but this was without the necessary licence from the City Council which brought an enforcement action.

(vii) In the course of 2018, the second Claimant planned to open a hairdressing business in the property and paid significant sums of money to refurbish the premises.

(viii) The second Claimant apparently entrusted the payment of the quarterly rent of £2,000 to his sister and, for reasons which are not material, she mistakenly paid only £1,500 in June 2018 leaving the rent £500 in arrears; this mistake was not appreciated by anyone at the time except Mr Bhalsod.

(ix) On 1 September 2018, the landlords' property agents, Andrew Granger, issued an invoice for the rent for the September quarter which was due on 29 September 2018: that invoice made no reference to the outstanding £500.

(x) On 13 September 2018 the Defendants effected forfeiture by re-entry using the services of bailiffs. The second Claimant then became aware that there had been a shortfall in the rent and there had been a re-entry.

(xi) The second Claimant arranged for the payment of the arrears of £500 to the agent, Andrew Granger, and on 24 September 2019 he wrote an email to a Mr Skipworth of Andrew Granger:

“You have failed to tell me how to pay rent. Accordingly, I am now forced to make an application to the court. I have paid £500 to your bank account and this quarter's rent is £2,000 and I have still not had a response from you. This is my fourth email I am sending to you.”

The second Claimant also indicated his readiness to pay the quarterly rent due on 29 September 2018.

(xii) On 14 October 2018 Mr Skipworth wrote, copying in Mr Bhalsod:

“I am sorry for not replying. I have specific instructions from my client not to take any action as he is dealing with the matter. Please forward any correspondence to Mr Bhalsod.”

(xiii) Unfortunately, there was then no contact between the Claimants, or anyone on their behalf, and the Defendants or Mr Bhalsod, a delay which is unexplained. The next attempted contact was on 25 January 2019 when solicitors to the Claimants, Messrs Bond Adams, sent an email to Mr Bhalsod indicating the Claimants' willingness to pay the outstanding quarterly rents which would have been due on the September and December quarter days but for the forfeiture, and explaining that there had been some delay in lodging the claim for relief from forfeiture as signatures had needed to be obtained from India, and stating “we trust you have done nothing to disturb our client's property interest.” Even more unfortunately, there was an error in the email address so that this email was never received by Mr Bhalsod.

(xiv) On 4 February 2019, the Defendants re-let the commercial and residential parts of the property in separate leases: the residential part on an assured short hold tenancy and the commercial premises on a three-year lease.

(xv) On 26 ^th February 2019, the Claimants issued their claim for relief from forfeiture.

The Hearing before Judge Hampton

The claim for relief from forfeiture came before Judge Hampton on 9 January 2020 when she heard evidence from the second Claimant, Mr Sharma, his uncle, Mr Mistry, and Mr Anil Bhalsod. It is fair to say that the learned judge was, to a degree, dissatisfied with the evidence on both sides. So far as Mr Bhalsod was concerned, she considered that his decision to forfeit a 20 year lease which still had some 10 years to run for £500 arrears which had only been in arrears for a short period of time to have been a very harsh decision, albeit lawful. She said:

“73. I consider it to be harsh business practice to forfeit for only what is a fraction of the rent, when your agent has already furnished the invoice for the following quarter's rent without making any reference to the arrears and without giving the tenant any notice of what you are about to do.”

After the forfeiture, the learned judge referred to Mr Bhalsod's “harsh and unyielding attitude” in making life difficult for the Claimants to make good the default by withdrawing instructions from the agents with whom the Claimants had dealt throughout, without informing the Claimant of this and then in failing to respond to any informal approaches through friends or relatives of the Claimant (including Mr Mistry).

So far as the second Claimant is concerned, he tried to run a case that the premises had not been occupied for the purposes of a business so that the case came within the Landlord and Tenant Act 1987 rather than the Landlord and Tenant Act 1954 so that formal notice of forfeiture was required. The learned judge had no difficulty in rejecting this argument. She referred to the Claimants' conduct in unlawfully sub-letting the residential premises as student lets, the lack of any correspondence from 14 October 2018 to 25 January 2019, and the delay in making the application for relief from forfeiture.

At the hearing, the Defendants argued that the way in which the second Claimant had managed the property in not running an active business there, or not attempting to do so until very shortly before the forfeiture, was a reason why relief should not be granted. They also raised the unsuccessful attempt to let the residential part of the premises as a house in multiple occupation without the required license. They further argued that the court in fact had no discretion to grant relief from forfeiture because of the Claimants had failed to establish the participation in the proceedings of the first Claimant, it being trite law that, with a joint tenancy, if there is a forfeiture, it is necessary for both tenants to apply for relief. This argument was rejected on the basis that it had not been properly pleaded.

At the heart of the learned judge's decision not to grant relief from forfeiture was the delay on the part of the Claimants. She made it clear that, had the Claimants made a prompt application, she would have granted it, saying:

“31. The claimant says, and I accept in the circumstances, that quarter's rent would have been paid had it not been for the forfeiture, the defendants having then taken the decision to re-enter the premises without notice, using bailiffs, and in the bailiffs' notice not stating why they were re-entering the premises. If the claimants had made a prompt application at that stage for relief from forfeiture, it is highly likely that the court would have granted such an application.”

Again, at paragraph 119 of the judgment, the learned judge repeated that, if the application for relief had been made promptly or if the Claimants had at least forewarned the...