Patel and Another v K & J Restaurants Ltd and Another
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lloyd,Lord Justice Elias,Lady Justice Black |
| Judgment Date | 28 October 2010 |
| Neutral Citation | [2010] EWCA Civ 1211 |
| Docket Number | Case No: B2 2009/1600 |
| Court | Court of Appeal (Civil Division) |
| Date | 28 October 2010 |
[2010] EWCA Civ 1211
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CENTRAL LONDON COUNTY COURT
His Honour Judge Bailey
Before: Lord Justice Lloyd
Lord Justice Elias
and
Lady Justice Black
Case No: B2 2009/1600
CHY09090
Jonathan Small Q.C. and Oliver Radley-Gardner (instructed by Hugh Cartwright Amin) for the Appellants
Katharine Holland Q.C. (instructed by Layzells) for the Respondent K&J Restaurants Ltd
The Respondent MP Catering Ltd took no part in the appeal
Hearing date: 30 June 2010
Lord Justice Lloyd:
Introduction
The Claimants, Mr and Mrs Patel, own the freehold of 116 Tottenham Court Road, London W1. The ground floor and basement are used for business purposes, as a restaurant, and each of the first, second and third floors contains a flat. The whole building is the subject of a lease dated 18 May 2005 in favour of the First Defendant, K&J Restaurants Ltd (which I will call K&J for short), with a term of 20 years from 25 December 2004. By the proceedings from which this appeal arises the Claimants sought possession of the entire premises on the grounds that they had forfeited the lease for breach of covenant. One of the breaches alleged was that the First Defendant had underlet, or parted with or shared possession or occupation of, the ground floor and basement, in favour of the Second Defendant, MP Catering Ltd (MPC, for short). The Second Defendant has played no part in the appeal, though it was represented at the trial. The First Defendant denied any breach of covenant, and alternatively claimed relief against forfeiture.
The case came to trial in the Central London County Court before His Honour Judge Bailey for four days in March 2009. On the fifth day, 3 April 2009, he gave an impressively full and clear judgment, by which he dismissed the claim for forfeiture and possession and ordered the Claimants to pay K&J's costs of the proceedings. Permission to appeal was refused to the Claimants by the judge but granted by Lady Justice Smith.
Two quite different breaches of covenant were alleged. I have mentioned one, concerning the status of the Second Defendant as regards the restaurant premises. The other focussed on the use of one of the flats, which the police found to be used for the purposes of prostitution. On that basis, it was alleged that K&J was in breach of covenant because of the use of the flat for an illegal or immoral purpose. The two breaches are unconnected and I will need to deal with them separately.
The facts in outline
The lease was granted by a company called Chalfords Ltd, from whom the Claimants later bought the freehold, subject to and with the benefit of the lease. The tenant's covenants are in clause 3. The use of the premises is governed by clause 3(20)(a), as follows:
“That the demised premises shall not be used for any illegal or immoral purpose or any noise noisome or offensive trade or business or as a public house beer shop betting shop or public place of amusement or (save as hereinafter specifically permitted in respect of the upper floors) for residential purposes and not to hold or permit any sale by auction or any public meeting on the demised premises.”
Alienation is dealt with in clause 3(22)(a) as follows:
“Save as permitted in this clause in respect of under-letting of the upper part on residential a tenancy not to assign underlet agree to underlet part with or share the possession or occupation of part only of the demised premises.”
Although there is much more in that sub-clause, none of the rest seems to me to add to or alter the effect of paragraph (a) so far as relevant to this case.
Clause 5(1) is a proviso for forfeiture in conventional terms.
The Claimants gave notice to K&J dated 28 February 2008 under section 146 of the Law of Property Act 1925, relying on a breach of clause 3(20)(a). The breach was stated to be incapable of remedy. Seven days' notice was given of the Claimants' intention to enforce their rights. Whether that notice was valid is in dispute; this depends on whether the breach was or was not capable of remedy.
On the previous days police officers had visited first the Claimants and then Mr Kurt Albright, the person behind K&J, and had served on each of them a notice stating that there was evidence that the premises at 116A Tottenham Court Road were being used as a brothel, and requiring each of them to take immediate action to remedy the situation. The action taken by the Claimants was to serve the section 146 notice. The action taken by K&J was to evict the tenant of Flat 2, which was done by 6 March 2008.
So far as the restaurant premises are concerned, K&J and MPC had entered into a series of related agreements on 13 May 2007, the effect of which I will need to examine in detail. Under them, MPC was to manage the restaurant from then until 24 December 2009.
It seems that at the end of February 2008 Mr Mario Leale, of MPC, told Mr Patel that K&J had sublet the restaurant to MPC. The Claimants took the view (rightly) that if this had happened it would be a breach of the lease. On 29 March 2008 K&J changed the locks on the restaurant, and then terminated the agreements with MPC, on the ground that by telling Mr Patel of the position Mr Leale had broken the confidentiality clause in one of the agreements. MPC then began proceedings in the Chancery Division to get back in, which succeeded on an interim basis. Eventually, after the trial of the county court proceedings, it seems that K&J was able to get rid of MPC, on 3 May 2009 by an order made by agreement.
The Claimants gave a second notice under section 146 in April 2008, relying on breaches under both clause 3(20)(a) and clause 3(22)(a). This notice required the breaches to be remedied, insofar as they were capable of remedy, while asserting that they were not so capable. It is not in dispute that this notice was valid in itself. The issue here is whether there were breaches as alleged and, if there were, whether relief against forfeiture should be granted.
On 18 March 2008 K&J started proceedings against the Claimants seeking relief against forfeiture. On 31 March 2008 the Claimant started proceedings for possession against K&J, MPC and the tenant of flat 1. These proceedings relied on the first section 146 notice, though they also referred to other breaches having come to light since service of that notice, namely the breach as regards MPC. On 9 May 2008 the Claimants began further possession proceedings against the same Defendants relying on the second section 146 notice. K&J claimed relief from forfeiture by counterclaim in each of the possession proceedings. Eventually Counsel appeared for MPC at the trial as well, to resist the claim. The tenant of Flat 1 took no part in the proceedings. All three actions were heard together.
In order to decide the issues on the appeal it is necessary to consider the two alleged breaches separately, and first to examine the facts relating to each. I will start with the breach alleged as regards clause 3(20)(a): immoral and illegal use of the premises.
Immoral and illegal use of the premises
In May 2007 a fire occurred at 116 Tottenham Court Road. A police report after this incident recorded that checks were carried out which revealed that flat 2 was a brothel. No immediate action seems to have been taken by the police as a result of that. There was a further police visit to flat 2 on 2 July, attended among others by PC Emma Rickard. Mr Leale spoke to Mr Albright in August or September 2007 and raised the possibility that the comings and goings of men to and from the upstairs flats might indicate that there was a brothel in one of the flats. Although lettings of flats were dealt with by an agency, Mr Albright knew one tenant, Miss Valerie Fairchild, who had been the tenant of flat 2 but by August or September 2007 had moved up to flat 3. Mr Albright saw her about this suggestion, but she assured him that nothing of that kind was going on. On 1 November 2007 K&J let flat 2 to one Sarah Melman for 12 months.
In November 2007, on a date which the judge held to have been early in the month, Mr Albright spoke on the telephone to PC Rickard. She told him that flat 2 was being used as a brothel. According to Mr Albright's evidence she said she would write to him about this. PC Rickard accepted that she may have said that she would send a letter confirming the police's position as to the use to which flat 2 was being put. Mr Albright took no action as a result of the telephone conversation, pending receipt of the letter.
On 30 January 2008 the police attended the premises again, and again discovered evidence of flat 2 being used as a brothel. That led to the notices being served on the Claimants and on K&J to which I have already referred. By 6 March 2008 Mr Albright had secured Ms Melman's departure from flat 2. The flat was then re-let, there being no suggestion at the trial that it was then being used in breach of covenant.
The cases about immoral use of demised premises draw a distinction between the case of direct use by the tenant, on the one hand, and use by a subtenant which is or may be permitted by the tenant, on the other hand. So far as K&J is concerned this case is in the latter category. A breach consisting of direct use by the tenant is not remediable. If the use is not direct, then the breach is remediable so long as the...
To continue reading
Request your trial
-
Cukurova Finance v Alfa Telecom
... ... Telecom Holdings Limited ("CTH"), which was itself wholly owned by another newly incorporated BVI company, CFI, whose two shares were owned by CH ... ...
-
Pineport Ltd v Grangeglen Ltd
...to pay the arrears within a fixed time." 29 As for costs, the matter has been dealt with definitively by the Court of Appeal in Patel v K&J Restaurants Ltd [2010] EWCA Civ 1211, in which it was said (within a detailed examination of the authorities at paras.96–104): "Having given closer con......
-
General Motors UK Ltd v The Manchester Ship Canal Company Ltd No 2
...claims. The most recent explanation of those rules is to be found in paragraphs 100 and 104 of the judgment of Lloyd LJ in Patel v K & J Restaurants [2010] EWCA Civ 1211: 100. Mr Small relied on a passage from the judgment of Chadwick LJ in Bland v Ingrams Estates Ltd (No 2) [2001] EWCA Civ......
- Zestcrest Ltd v County Hall Green Ventures Ltd