Reichman v Beveridge and Gauntlett
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE AULD,Lord Justice Lloyd,Lord Justice Rix,Lord Justice Auld |
| Judgment Date | 13 December 2006 |
| Neutral Citation | [2006] EWCA Civ 967,[2006] EWCA Civ 1659 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: 2005/2438,B2/2005/2438 |
| Date | 13 December 2006 |
[2006] EWCA Civ 1659
IN THE SUPREME COURT OF JUDICAT
COURT OF APPEAL (CIVIL DIVISI
ON APPEAL FROM THE GUILDFORD COUNTY CO
HIS HONOUR JUDGE REID Q.C.
ON APPEAL FROM DISTRICT JUDGE KUB
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Auld
Lord Justice Rix and
Lord Justice Lloyd
Case No: 2005/2438
The Appellant in person The Respondents not present or represented
Amanda Tipples (instructed by The Treasury Solicitor) as advocate to the court
The Defendants were in practice together as solicitors in partnership, under the style Beveridge Gauntlett. They had offices in Yateley, Hampshire, which they held as tenants under a lease dated 30 August 2000 from the Claimants as landlords, for a term of 5 years from 26 January 2000. For reasons which do not matter for present purposes, they ceased to practise as solicitors in February 2003 and had no further need for the offices. They did not pay the rent due on 25 March 2003, or thereafter, nor the water rates due after that date. In January 2004 the Claimants sued for the arrears due up to then, seeking only a money judgment for the sums due. Mr Gauntlett, the Second Defendant, served a Defence in which, among other things, he said that the Claimants had failed to mitigate loss arising from any non-payment of rent. He said that the Claimants were fully aware of the plight of the Defendants which led to their ceasing to practise as solicitors, "but failed to forfeit the lease in order to mitigate their own loss". The First Defendant took the same point in her Defence.
Something of the factual context of the case can be gathered from Mr Gauntlett's Defence, in which, after the passage referred to above, he said that the landlords' agent at first indicated that they would accept the offer of someone who was their tenant of other premises to take a new lease of the premises let to the Defendants, surrendering her own, that the agent then said that compensation would be necessary for that to be allowed, and finally that no such surrenders would be allowed. The First Defendant put it succinctly in her Defence: the landlords failed to instruct agents to market the premises, failed to accept the offer of a prospective tenant who wanted to take an assignment or a new lease, and failed to accept an offer from the First Defendant to negotiate payment of a consideration for a surrender of the Defendants' lease.
Rather than investigate the contentions on the facts, a Deputy District Judge was persuaded to order a preliminary issue as to "whether it is necessary as a matter of law for a landlord to mitigate his loss when seeking to recover arrears of rent." That issue came before District Judge Kubiak on 1 February 2005. She held that a landlord was under no such duty. Mr Gauntlett appealed. The appeal was heard by His Honour Judge Reid Q.C. On 17 October 2005 he handed down a reserved judgment dismissing the appeal. Mr Gauntlett appeals to this court, with permission granted by Chadwick LJ. Mr Gauntlett appears in person, as he has throughout these proceedings. Miss Beveridge has taken no part in the proceedings since the hearing before the District Judge, at which she was professionally represented. The Claimants, having been represented by Counsel in the courts below, have chosen not to take part on this appeal, contending that the judge was right for the reasons he gave. In those circumstances the court was faced with the prospect of grappling with a point of law of sufficient importance to have justified the grant of permission for a second appeal but with argument only from one side. Fortunately, we have had very helpful submissions from Miss Tipples as advocate to the court, supported by a full and learned skeleton argument which is plainly the result of thorough research.
The lease
There is nothing unusual about the lease. I have mentioned the term. The rent was £23,010 per annum, payable monthly in advance, and the tenants were also liable to pay by way of rent the amount of any insurance premium incurred by the landlord for insuring the premises against specified risks. There were normal covenants by the tenants to pay outgoings and to keep the premises in proper repair and decoration, to use the premises only as offices, and not to assign or underlet, part with or share possession of the premises except by way of what were called a permitted assignment or a permitted underlease of the whole, on defined terms, and not in those cases without consent. The lease contained a proviso for forfeiture in the event (among others) of rent being unpaid for 14 days. The lease was excluded from the protection of Part II of the Landlord and Tenant Act 1954.
A number of provisions in the lease allowed the landlords or their representatives to enter the premises otherwise than by way of forfeiture. Clause 3.9 related specifically to the inspection of the state of the premises and, if the tenants did not do work which was specified to them, allowed the landlords to enter in order to have the work done. Clause 3.10 gave a right of entry if that were necessary for work to the building as a whole or to the rest of the building. Clause 3.18 required that the landlords be allowed to enter, within 6 months next before the expiration or sooner determination of the term, to advertise the premises for re-letting and that persons authorised by the landlords be permitted to view the premises on reasonable notice.
Leases as contracts
At the heart of Mr Gauntlett's argument is the proposition that a lease is a contract, even though it also creates an estate in land, that the courts have recognised increasingly over recent years that the rights and obligations of the parties should be ascertained by reference to principles of contract law, and that there is no reason why that should not also apply to the consequences of a breach of the tenant's covenant to pay rent. He relied on this striking passage in a judgment of Bollen J in the Supreme Court of South Australia:
"There is no reason why in modern times mitigation of damage should not apply. It is an ordinary principle of contract law. With modern leases the law should recognise the importance of the contractual aspect of a lease. Why should not a landlord faced with abandonment take steps to try to reduce his loss? Why should a vendor of tomatoes faced with refusal to take delivery by his purchaser suffer if he does not sell if he can to another purchaser and yet a quiescent and immobile landlord not suffer if he fails to seek another tenant? Modern ideas say that there is no reason for this anomaly." See Vickers v Stichtenoth Investments Pty Ltd (1989) 52 SASR 90 at 100.
The contractual nature of a lease has been emphasised by the House of Lords in several cases over the last thirty years. In United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904, Lord Diplock said at 935:
"The mediaeval concept of rent as a service rendered by the tenant to the landlord has been displaced by the modern concept of a payment which a tenant is bound by his contract to pay to the landlord for the use of his land."
Accordingly the rights and obligations of the parties in respect of rent, and in particular under rent review clauses, had to be determined as a matter of the construction of the contract, just as payment obligations would be under any other contract.
The potential application of the doctrine of frustration to leases (albeit only very exceptionally, and not on the facts of the particular case) was established in National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC 1965.
The fact that a contractual periodic tenancy held by more than one tenant could be determined by any one of them giving notice to the landlord, without the need for all to join, was established in Hammersmith and Fulham London Borough Council v Monk [1992] 1 AC 478. Lord Bridge said of that issue, at 483:
"As a matter of principle I see no reason why this question should receive any different answer in the context of the contractual relationship of landlord and tenant than that which it would receive in any other contractual context."
Elsewhere in the judicial hierarchy, Mr Assistant Recorder Sedley Q.C., as he then was, held in the county court in Hussein v Mehlman [1992] 2 EGLR 87 that a lease could be brought to an end by the tenant's acceptance of a repudiatory breach by the landlord. He held that a decision of the Court of Appeal to the contrary in Total Oil Great Britain Ltd v Thompson Garages (Biggin Hill) Ltd [1972] 1 QB 318 could no longer stand after National Carriers. Since then, other courts in England have held, or assumed, that a lease can be brought to an end by acceptance of a repudiatory breach, but there is no decision to that effect in this court.
There is no doubt that, where a party to a lease seeks to recover damages from the other for breach of covenant under the lease, the rules about mitigation of loss will apply.
However, Mr Gauntlett seeks to go further than that, and to establish that the same rule applies even if the landlord does not terminate the lease for breach of the tenant's covenants, but merely sues for each instalment of rent as it falls due. This proposition is not, in truth, part of the principles relating to mitigation of damages properly so-called, which apply only if the claim is for damages. The landlord's claim for rent is in debt and the rule does not apply to a claim in debt: see Jervis v Harris [1996] Ch 195...
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