Scala House & District Property Company Ltd v Forbes
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE RUSSELL,LORD JUSTICE JAMES,MR JUSTICE PLOWMAN |
| Judgment Date | 23 May 1973 |
| Judgment citation (vLex) | [1973] EWCA Civ J0523-2 |
| Date | 23 May 1973 |
| Court | Court of Appeal (Civil Division) |
[1973] EWCA Civ J0523-2
In The Supreme Court of Judicature
Court of Appeal
From: Mr Justice Nield (Q. B. D)
Lord Justice Russell,
Lord Justice James, and
Mr Justice Plowman
MR LIONEL BLUNDELL, Q. C. and MR G. W. BISHOP (instructed by Messrs. David Alterman & Sewell) appeared on behalf of the Appellants (Plaintiffs).
MR MERVYN HEALD, Q. C. and MR J. M. GRAY (instructed by Messrs. Walkins, Pulleyn & Ellison) appeared on behalf of the First Respondent (First Defendant).
MR JARLATH FINNEY (instructed by Messrs. Arnold Gilbert & Karsberg) appeared on behalf of the Second and Third Respondents (Second and Third Defendants).
It is a remarkable fact that this case raises questions under sec. 146 of the Law of Property Act, 1925, which, except in a case at first instance reported only in the Estates Gazette Digest, have never been considered for decision.
The First Defendant has, since 15 March, 1968, been, by permitted assignment, the lessee of the relevant premises under a lease dated 3 March, 1968. It is that lease that the Plaintiff seeks to forfeit. By the assignment to the First Defendant he, the First Defendant, covenanted with the then reversioner to observe the covenants in the lease. The premises the subject of the lease were the ground floor of 95, Dean Street, London: they were used as a cafe-restaurant: the term was for a period expiring on 25 December, 1981: the rent was £425 per annum: the lessee covenanted not to assign, sublet or part with possession of the premises demised without the consent of the lessor, such consent not to be unreasonably withheld in the case of a proper subtenant. There was a provision for re-entry on breach of such covenant. The Plaintiff Company acquired the reversion on 31 January, 1972. Before that happened the First Defendant had, in breach of covenant, sublet the premises to the Second and Third Defendants without seeking the then reversioners' consent. The then reversioners did not know this, and it is accepted that by receipt of rent they had not waived the right to forfeit the lease on the ground of that breach of covenant. What had happened was that the First Defendant, who had paid to the original lessees some £3,500 for the goodwill of the cafe business on taking the assignment of thepremises, and had continued to run (and perhaps build up) the business for some months, wanted to operate elsewhere and to find someone else to manage the business. He instructed his solicitor accordingly. His solicitor, in collaboration with the solicitors for the Second and Third Defendants, produced an agreement between the First Defendant and the Second and Third Defendants which, in law, quite plainly amounted to a subletting of the premises in breach of the covenant. It is idle to speculate how the solicitor could have thought otherwise, and it serves no purpose to analyse the agreement to show that it was a subletting in breach of covenant giving rise, according to the lease, to a right of re-entry. Moreover, it was for a term of 12 years certain at a rent of £25 weekly rising to £35 weekly.
The Plaintiff, having acquired the reversion, correctly concluded, after a visit to the premises, that there had been a breach of covenant, and on 1 February accused the First Defendant of such breach. This was stoutly denied by solicitors for the First Defendant on 9 February, though in the same letter (Bundle D, page 30) they said:
"Notwithstanding the foregoing, we have advised our client to consider the possibility of coming to other arrangements with Mr and Mrs Delpoio" - those are the Second and Third Defendants - "and we believe that as a result of this what our client will wish to do is to assign the Lease to Mr and Mrs Delpoio outright. Accordingly, we shall be obliged if you will kindly accept this letter as an application for your clients' consent to the assignment of the Lease to Mr and Mrs Delpoio, subject of course to our client being responsible for the proper costs involved. we trust you will accept that the above is the obvious and sensibleway of dealing with the position generally, and since our client can himself vouch for Mr and Mrs Delpoio as indeed can your clients' predecessors, we hope you will agree that in all the circumstances references for Mr and Mrs Delpoio will be unnecessary. If, however, you should take a contrary view perhaps you will let us know so that we can obtain the names and addresses of suitable referees for Mr and Mrs Delpoio".
On 15 February, 1972, faced with this denial of a breach of covenant, the Plaintiff served a notice under sec. 146 of the Law of Property Act, 1925, in the following form (Bundle D, page 35):
"We, the undersigned, give you notice as follows: "(1) The premises known as the Ground Floor Shop of 95 Dean Street, London, W. l. (hereinafter call-'d 'the demised premises') are held by you. under a Lease dated the 8th day of February, 1968 and made between Frances Violet Burr (1) and Geoffrey Vivian Baker (2) (hereinafter called 'the Lease').
"(2) The Lease contains a covenant by the Tenant not at any time during the said term to assign underlet or part with the possession of the demised premises or any part thereof without the previous written consent of the Lessors such consent not to be unreasonably withheld in the case of a respectable and responsible Assignee or Sub-Tenant.
"(3) The said covenant has been broken and the particular breach complained of is the assignment underletting or parting with the possession of the demised premises without the previous written consent of the Lessors.
"(4) We require you to remedy the said breach insofar as the same may be capable of remedy and to make compensation therefor to us in money.
"(5) The reversion immediately expectant upon the determination of the Lease is vested in Scala House & District Property Go. Limited and the Lease is vested in you";
On 1 March, 1972, about 14 days thereafter, the Plaintiff issued a writ and applied for summary judgment for forfeiture. Up to that date the solicitors for the First Defendant had denied any breach, and refused to disclose the agreement between the First Defendant and the Second and Third Defendants, which I have said plainly was a subletting in breach, asserting that they were not prepared to pander to what was idle curiosity on the part of the Plaintiff as to the arrangements between the Defendants. The solicitors for the First Defendant were genuinely convinced that there had been no breach: the First Defendant was also of that opinion on the basis of his solicitors' advice, which coincided with the original intention of the First Defendant that the second and Third Defendants were to be only managers for the First Defendant of his business as cafe proprietor. It is, I remark, not unusual that the business of A on A's premises should remain his business managed by B on terms that B should pay £x weekly to A and keep the rest of the profits for himself. But, as I have indicated, that was not the whole arrangement between the Defendants: the First Defendant was to have no control over the premises or business, and the arrangement amounted in law to a subletting at a profit rental for 12 years.
Now the first question for decision is whether this breach of covenant is capable of remedy under sec.146 of the Law of Property Act, 1925. If it was capable of remedy, then at once there is the question whether the period of 14 days before issue of the writ was sufficient. If it was not capable of remedy I should have thought it obvious that 14 days was sufficient.
I go to sec.146. That provides as follows:
"(1) A right of re-entry or forfeiture under any proviso or stipulation in a lease for a breach of any covenant or condition in the lease shall not be enforceable, by action or otherwise, unless and until the lessor serves on the lessee a notice -
(a) specifying the particular breach complained of; and
(b) if the breach is capable of remedy, requiring the lessee to remedy the breach; and
(c) in any case, requiring the lessee to make compensation in money for the breach;
and the lessee fails, within a reasonable tine thereafter, to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money, to the satisfaction of the lessor, for the breach".
Subsec.2 provides for relief from forfeiture, and I think I need only refer to subsec.8, in addition, specifically:
"This section does not extend -
(i) To a covenant or condition against assigning, underletting, parting with the possession, or disposing of the land leased where the breach occurred before the commencement of this Act…".
Relief from forfeiture of a lease has a long history. Early equity would relieve fron forfeiture for non-payment of rent, regarding the right of re-entry or forfeiture as merely a security for payment of money which would be satisfied by payment, albeit late. This equity was later overtaken by statute which in fact restricted the extent to which equity had been prepared, in point of time, to go. There was some difference of judicial opinion whether relief should be given in case of breach of repairing covenants, a difference noticed in the recent case of Shiloh Spinners Ltd. v. Harding in this court (1972: Ch., 326) and in the House of Lords. Breach of insurance covenants would not be relieved against in equity and statute intervened in a limited degree. Breechof covenants against assigning or subletting would scarcely be relieved against: see Barrow v. Isaacs & Son (1891, 1 Q. B., 417). Before Barrow v. Isaacs the ...
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