Scribes West Ltd v Relsa Anstalt and Others (No 3)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Carnwath,Lord Justice Rix,Lord Justice Mummery |
| Judgment Date | 20 December 2004 |
| Neutral Citation | [2004] EWCA Civ 1744 |
| Docket Number | Case No: A3/2003/2010 |
| Court | Court of Appeal (Civil Division) |
| Date | 20 December 2004 |
[2004] EWCA Civ 1744
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL APPEALS DIVISION)
ON APPEAL FROM Barnet County Court
Her Honour Judge Mayer
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Mummery
Lord Justice Rix and
Lord Justice Carnwath
Case No: A3/2003/2010
John Cherryman QC and Tom Weekes (instructed by Mischon de Reya) for the Appellant
Elizabeth Jones QC and Andrew Bruce (instructed by Richards Butler) for the First Respondent
Background
This appeal raises a short but important point on the right to forfeit a lease of registered land, in the period between execution of a transfer of the reversion and its registration.
The appeal has taken an unusual route to this court. Permission to appeal was first granted on paper by Chadwick LJ on 24 th November 2003. On 20 th July 2004, the Court of Appeal held that the correct route of appeal had been to the High Court judge and not to the Court of Appeal: see EWCA Civ 965. On the same day, Brooke LJ, sitting as a High Court judge, determined that permission to appeal ought to be granted and that the appeal should be transferred to the Court of Appeal under CPR 52.14 (a case raising "an important point of principle", or "some other compelling reason") . (Before that, on 29 th June 2004, the court had used the case as a vehicle to give general guidance on the general changes to appeal procedure under CPR52, due to come into effect the next day: see [2004] EWCA Civ 835.) We now have to deal with the substance.
The relevant facts can be shortly stated. The claimants, Scribes West Ltd ("SW"), were the lessees of business premises on the ground floor and basement of the Barkers Centre, Kensington, under a lease dated 25 th January 1991 granted by House of Fraser plc. The first defendants Relsa Anstalt ("RA") were registered as the freehold proprietors of the premises on 10 th November 1993.
SW ceased trading on 1 st May 1997. On the same day they were granted a licence to assign the lease to London Sportsman's Club Limited ("LSC"), and they also entered into a second charge over the leased premises to secure a loan they had made to LSC. In November 1999 SW entered into a voluntary arrangement with its creditors.
On 28 th February 2001 RA assigned its reversionary interest to Relsa Barkers Limited ("RB"), pursuant to the terms of a transfer document. The transfer was on a standard Land Registry form (" TR1"), under which "the transferor transfers the property to the transferee". It recorded the receipt of the purchase price of £131m. It contained some "additional provisions": including a statement that "the transferor assigns to the transferee the benefit of any rights claims title or covenants to which it is entitled in respect of the property"; and a covenant by the transferee "by way of indemnity" to perform all the transferor's obligations relating to the property "at all times from the date of this transfer". On the same day RB gave notice to LSC of the assignment and required LSC to pay the rent to it. The transfer to RB was not registered at the Land Registry until 3 rd January 2002.
On 16 th July 2001 RB peaceably re-entered the premises on the grounds of arrears of rent. On 25 th July 2001 RB granted a new lease of the premises to a company called Settle Up Limited.
The sole issue in the appeal is whether, for the purposes of a valid forfeiture by RB, it was sufficient that the transfer of the reversion had been executed and notice given to the lessee, notwithstanding that the transfer had not been registered. The judge held that it was, applying section 141(2) of the Law of Property Act 1925. SW appeals.
The law
Section 141 provides:
"(1) Rent reserved by a lease, and the benefit of every covenant or provision therein contained, having reference to the subject-matter thereof, and on the lessee's part to be observed or performed, and every condition of re-entry and other condition therein contained, shall be annexed and incident to and shall go with the reversionary estate in the land, or in any part thereof, immediately expectant on the term granted by the lease, notwithstanding severance of that reversionary estate, and without prejudice to any liability affecting a covenantor or his estate.
(2) Any such rent, covenant or provision shall be capable of being recovered, received, enforced, and taken advantage of, by the person from time to time entitled, subject to the term, to the income of the whole or any part, as the case may require, of the land leased." (emphasis added)
In applying the section to the present case, three propositions are I believe uncontentious:
i) The transfer of a registered estate is not completed until registration, and until then the transferor remains the proprietor of the legal interest (Land Registration Act 1925, s 19(1)) .
ii) Before registration, and following execution of the transfer and payment of the purchase price, the transferee becomes the owner in equity, and the transferee holds the land on trust for him (see Megarry & Wade Law of Real Property 6 th Ed para 12.051ff; Rose v Watson (1864) 33 LJCh 385, per Lord Cranworth at pp.389–390; see also Re Rose [1952] Ch 499, 514) .
iii) An equitable assignment of a chose in action requires no more than an expression of intention to assign, coupled with notice to the debtor, to impose on the latter an obligation to pay the assignee (see Snell's Equity 13 th Ed p 87–8, 92; William Brandt's Sons & Co v Dunlop Rubber Co [1905] AC 454, 462) .
It is not disputed, as I understand it, that a right to rent is a chose in action capable of assignment in equity, although Mr Cherryman submits that the transferor requires to be joined in any proceedings.
RB's case, which the judge accepted, was that on 16 th July 2001, the date of forfeiture, although it was not the registered freehold proprietor of the premises, it had taken a valid equitable assignment of the rents, and notice had been given to the lessee. It was therefore entitled (albeit only in equity) to receive the rents of the property, which was sufficient to bring it within the emphasised words of section 141(2) .
This view of the section was consistent with that expressed in a number of textbooks, notably including Wolstenholme and Cherry's Conveyancing Statutes. (The central roles of Edward Wolstenholme and Sir Benjamin Cherry in the property reforms leading to the 1925 Acts are vividly described by Sir Robert Megarry, in his Foreword to the 13 th Edition of that work.) The notes to section 141 in the 11 th (1925) edition said that the section (as is now common ground) did no more than reproduce the effect of section 10 of the Conveyancing Act 1881. Of section 141(2), it was said:
"The latter part of this section gives to the 'person entitled to the income', that is, the beneficial owner as well as the legal reversioner, the right to recover, receive, enforce and take advantage of rent, lessee's covenants and conditions." (emphasis added)
At first sight, and subject to consideration of the authorities, this seems to me the natural reading of the section. The word "entitled" does not of itself import a distinction between legal and equitable interests. It connotes simply an enforceable right to the relevant income. An equitable assignee of the right to rent has such an enforceable right as against the assignor and, at least following notice, against the lessee (whether or not, as Mr Cherryman suggests, the assignor procedurally has to be a party) . Thus, in the present case, RB is for the time-being "the person… entitled to the income… of the land leased". Nor does it seem to me to matter if this in theory results in RB having that right concurrently with RA, as legal owner. The section is designed to extend rights to enforce, without taking away existing rights; and in any event anything done by RA could only be done as trustee for RB.
I would add that, like the judge, I see no force in the subsidiary argument that the assignment of rights was not intended to have immediate effect. The wording of the transfer seems to me clearly designed to have such effect. Further, it is very difficult to see any practical reason for the parties wishing to postpone it until registration, which would be at an uncertain time in the future.
I turn therefore to Mr Cherryman's arguments based on the authorities. To understand and do justice to them, it is necessary to say a little more about the 1881 Act, and the earlier history.
The law before the Conveyancing Act 1881
His review starts in 1540, with the first statute ( 32 Henry 8, c.34) which expressly permitted assignees of a landlord's reversionary interest to enforce tenant covenants (see Megarry & Wade 6 th Ed para 15–011) . (It seems that this apparently far-sighted example of early law reform was a response to the very practical immediate problems caused by the seizure and redistribution of monastic lands: ibid para 15–047) .
Moving from there to the 19 th century, Mr Cherryman identifies a problem which arose in connection with mortgages. Before the 1925 reforms mortgages were typically made by a conveyance or demise to the mortgagee, subject to a covenant for reconveyance on redemption of the mortgage. Where after the grant of a lease the lessor mortgaged his interest in that way, the legal title to the reversion immediately expectant upon the lease would vest in the mortgagee.
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