3PLR – [In RE KING, DECD.] ROBINSON V. GRAY.
POLICY, PRACTICE & PUBLISHING LAW REPORTS, 3PLR
[In RE KING, DECD.]
ROBINSON
V.
GRAY.
COURT OF APPEAL
1962 DEC. 11, 12, 13, 14, 17, 1963 FEB.4
3PLR/1963/73 (CA-E)
OTHER CITATIONS
[1963] 2 W.L.R. 629
[1953 K. No. 196.]
BEFORE THEIR LORDSHIPS:
Upjohn and Diplock L.JJ.
Lord Denning M.R.,
MAIN ISSUES
REAL ESTATE AND PROPERTY LAW – LANDLORD AND TENANT:- Assignment of lease or underletting – Effect of assignment – Assignment of freehold reversion, lease and underlease – Covenants – Express covenants to repair and reinstate premises – Breach of covenants by lessee before compulsory purchase of freehold reversionary interest – Whether assignor entitled to sue lessee after date of assignment for breaches of covenant before assignment – “Benefit of every covenant” including right to sue passing by statute to assignee – Law of Property Act, 1925 (15 Geo. 5, c. 20), s. 141.
INSURANCE AND REINSURANCE LAW:- Interest of third party in policy – Landlord and tenant – Covenant – Covenant to keep premises insured against fire in joint names of lessor and lessee and to reinstate in event of damage or destruction by fire – Premiums paid by lessee – Premises destroyed by fire – Supervening circumstances rendering reinstatement of premises impossible – Whether lessor entitled to share in insurance moneys – Effect of insurance policy in joint names
SUMMARY AND HISTORY OF CASE
Section 141 (1) of the Law of Property Act, 1925,1 provides that:
“Rent reserved by a lease, and the benefit of every covenant or provision therein contained … shall be annexed and incident to and shall go with the reversionary estate in the land …”;
and by subsection (3) where a person
“becomes entitled by conveyance or otherwise, such rent, covenant or provision may be recovered, received, enforced or taken advantage of by him …”.
By a lease dated December 1895, a lessor T. demised to one B. a piece of land with a factory recently erected thereon for a term of 80 years at a yearly rental of £100. The lessee covenanted with the lessor (a) to keep the premises in repair during the term and to yield them up in repair at the end of the term; (b) at her own expense to “insure and keep insured” the premises against loss or damage by fire “in the joint names of the lessor and lessee in a sum equal to three fourths of the value of the … premises”; (c) to lay out all moneys received under any such policy of insurance in rebuilding or repairing such part of the premises as should have been destroyed or damaged by fire, and if such moneys were insufficient for the purpose, the lessee covenanted to spend such further sums as might be necessary to reinstate the premises. The premises were so insured at all material times, the lessee paying the premiums.
In 1908 the lease vested in K. (“the deceased”). In 1944 he sublet the premises for 21 years and covenanted with the underlessee to perform the covenants of the lease of 1895 and, in the event of damage or destruction by fire, to reinstate the factory with all reasonable speed. In December, 1944, the factory was severely damaged by fire and reduced to a shell, but owing to wartime and post-war restrictions it could not be rebuilt at that date. In 1945 the insurance moneys paid out were invested in the joint names of lessor and lessee on the terms of a letter dated November 28, 1945 (“the insurance agreement”) from the lessor’s solicitors to the lessee’s solicitors, the fund being “charged with the liability” of
1 Law of Property Act, 1925, s. 141: “(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. (3) Where that person becomes entitled by conveyance or otherwise, such rent, covenant or provision may be recovered, received, enforced or taken advantage of by him notwithstanding that he becomes so entitled after the condition of re-entry or forfeiture has become enforceable, but this subsection does not render enforceable any condition of re-entry or other condition waived or released before such person becomes entitled as aforesair. (4) This section applies to leases made before or after the commencement of this Act, but does not affect the operation of – (a) any severance of the reversionary estate; or (b) any acquisition by conveyance or otherwise of the right to receive or enforce any rent covenant or provision; effected before the commencement of this Act.” the lessee to perform his covenants under the lease, the concluding sentence of the letter stating that “the said sum on his [the lessee’s] decease not to form part of his estate.”
In 1947 T. was registered as the proprietor of the freehold reversion to the lease. After the death of the lessee, K., in 1949, T. claimed to be a creditor of the estate for damages for breach of the covenants in the lease to repair and reinstate; and in February, 1953, an order was made for the administration of the estate by the court.
By a compulsory purchase order dated April 14, 1953, and confirmed on September 4, 1954, the London County Council served notices to treat on the owner, the lessee’s surviving executor, and the underlessee for the compulsory acquisition of all the interests in the property; the council entered into possession on March 28, 1957, pulled down the ruin of the factory, and built a new housing estate on the site. On February 17, 1960, the Lands Tribunal fixed the price to be paid by the council to the lessee’s estate for the leasehold interest at £1. On July 7, 1960, the council and the owner T. agreed the price for the reversionary interest at £3,750, and the sale was completed on November 28, 1960. On March 6, 1961, the underlease was transferred to the council for £2,500.
On a summons taken out in the administration action the surviving executor of the lessee asked the court to determine questions concerning (inter alia) the liability of the estate for breaches of covenants in the lease and the proper covenants to be included in the conveyance of the leasehold interest by the executor to the council; and concerning the disposition of the fund consisting of the insurance moneys. Buckley J. held that the owner as assignor of the reversion remained entitled to sue the lessee for damages for breaches of covenant committed before the assignment, notwithstanding the assignment, and that the council was bound to indemnify the lessee’s estate against all claims for breaches of covenant in the lease and the underlease; and he held further that in the light of the insurance agreement of November, 1945, the owner T. was entitled to the whole of the insurance moneys.
On appeals by the London County Council and by the surviving executor:-
Held, (1) allowing the appeal of the London County Council (per Upjohn and Diplock L.JJ.), that under the clear and unambiguous terms of section 141 of the Law of Property Act, 1925, the right of the assignor of the reversionary estate to sue the lessee for breaches of express covenants in the lease occurring before the assignment (and a fortiori for continuing breaches) passed on the assignment to the assignee as part of “the benefit of every covenant … annexed and incident to” and “going with” the reversionary estate, so that the owner of the reversion to this lease had no right after the date of the assignment to sue the lessee’s estate for breaches of the covenants to repair and reinstate the premises. Any other construction of section 141 would lead to absurd and unjust results. Nor should the assignor be adversely affected by such a construction of section 141, since the price agreed for the sale of the reversion could take account of the value of the rights of action or other remedies against the lessee for antecedent breaches of covenant transferred by operation of the statute to the assignee on the assignment (post, pp. 648, 655).
Per Lord Denning M.R. The history of the law relating to the rights of assignor and assignee of the reversion show that (a) the assignor alone can sue for breaches causing damage to him exclusively during his time; (b) the assignor alone can sue the lessee for failure to pay rent during his time; but (c) the assignee alone can sue for breaches occurring during the assignor’s time which cause damage continuing to depreciate the property after the assignment: and therefore as a matter of principle this assignor could not, after he had assigned his reversion to the council, sue the lessee on the covenants to repair or reinstate (post, p. 641).
Semble, per Upjohn and Diplock L.JJ. Section 10 of the Conveyancing Act, 1881 (which is substantially re-enacted by section 141 of the Act of 1925), altered the pre-existing law relating to the assignee of a reversion, and accordingly pre-1881 decisions and statements in textbooks based on those decisions could not assist on the question here arising, the answer to which depended entirely on the construction of section 141 of the Act of 1925 (post, pp. 648,653).
Held (2) allowing the cross-appeal of the executor (Upjohn and Diplock L.JJ., Lord Denning M.R. dissenting in part), that on the true construction of the insurance agreement of November, 1945, and in the events which had happened, the insurance moneys belonged to the lessee alone, for the requirement in the lease that the insurance against fire should be effected in joint names of lessor and lessee was no more than a method of enabling the lessor to make sure that the policy moneys would be expended on reinstating the premises after damage or destruction by fire, and the insurance agreement (including the provision that the fund should not form part of the lessee’s estate) was also by its terms directed to ensuring that the insurance moneys should be preserved for the purpose of reinstatement; and when, without fault of either party, reinstatement became impossible owing to supervening circumstances, the insurance moneys became the property of the lessee who had paid the premiums, subject only to payment of the rent due to the lessor before the sale of his reversionary interest (post, pp. 651, 656).
Per Diplock L.J. Where a tenant has entered into an absolute covenant with his landlord to keep premises in repair or reinstate them after a fire, the measure of the lessee’s own loss and his own insurable interest is the full value of the premises and is not limited to the value of his leasehold interest (post, p. 656).
Waters v. Monarch Fire and Life Assurance Co. Ltd. (1856) 5 E. AND B. 870 and London and North Western Railway Co. v. Glyn(1859) 1 E. AND E. 652 distinguished.
Per Lord Denning M.R. Where an insurance is effected in joint names of lessor and lessee in performance of a covenant in a lease, the purpose is to ensure that both lessor and lessee are insured in respect of their interests in the property, so that when the policy moneys have been received and the covenant to reinstate becomes impossible of performance, the moneys should be divided between lessor and lessee in proportion to their respective interests in the property (post, p. 645).
Decision of Buckley J. [1962] 1 W.L.R. 632; [1962] 2 All E.R. 66 reversed in part.
APPEALS from Buckley J.2
By a lease dated December 5, 1895, the lessor Edward Graves-Tagg, demised to the lessee, Elizabeth Annie Elven, certain land in the Parish of St. Matthew, Bethnal Green, and the factory recently erected thereon for a term of 80 years upon the terms contained in the lease, which included first, a covenant on the part of the lessee
“that she the lessee her executors administrators or assigns shall and will at their proper costs and charges keep the said factory and premises hereby demised (including landlord’s fixtures) in good and substantial repair and condition during the term hereby granted whether required so to do by writing or not.”
2 [1962] 1 W.L.R. 632; [1962] 2 All E.R. 66.
Secondly, a covenant that
“the said premises being so repaired and kept in repair as aforesaid at the end of the term hereby granted shall and will peaceably and quietly leave surrender and yield up the same unto the lessor.”
Thirdly, a covenant to insure in the following terms:
“And further that she the lessee her executors administrators or assigns will at their own expense insure and keep insured the said premises against loss or damage by fire in the Sun Insurance Company or some other responsible office to be approved of in writing by the lessor in the joint names of the lessor and lessee in a sum equal to three fourths of the value of the said premises.”
Finally, a covenant to reinstate in the event of fire in the following terms:
“And will also lay out all moneys which shall be received under or by virtue of any such policy or policies in rebuilding or repairing such part of the said premises as shall have been destroyed or damaged by fire and in case such moneys shall be insufficient for the purpose she the lessee her executors administrators and assigns will out of their own moneys expend such further sums as may be necessary to reinstate the said premises.”
By an assignment of February 12, 1907, all the residue of the term granted by the lease less the last day thereof, were assigned to Richard Francis Henry King (“the deceased”), and on July 3, 1908, the deceased was registered under the Land Transfer Act, 1875, as amended by the Land Transfer Act, 1897, and the Land Transfer Rules, 1903, as proprietor of the term granted by the lease with a possessory title.
On September 29, 1944, the deceased granted an underlease of the property for 21 years to Stonehill Furniture Ltd. The underlease contained a covenant by the deceased (inter alia) in the case of destruction or damage to the premises by fire to rebuild or reinstate them with all reasonable speed. On September 5, 1949, the underlease was assigned to Jasco Ltd.
In December, 1944, the factory was severely damaged by fire, so that it was reduced to a mere shell. Owing to wartime and post-war restrictions it, could not be repaired or rebuilt at that time. In 1945, the insurance moneys, amounting to £6,380 11s. 6d., were duly paid into the joint names of the lessor and the lessee; and after certain outgoings arising in connection with the making of the claim, there was a balance of £5,939 17s. 5d. available for rebuilding or repairing the premises. The solicitors for lessor and lessee agreed that that sum should be dealt with on the terms of a letter dated November 25, 1945, from the lessor’s solicitors to the lessee’s solicitors [“the insurance agreement”], which stated:
“The balance of £5,939 17s. 5d. to be invested in the joint names of my client and your client in Savings Bonds 1965/75. My client, after reserving unto himself from the dividends sufficient to pay the rent as provided by the lease, shall account to your client each year for the balance … The said sum of £5,939 17s. 5d. to be charged with the liability of your client to perform his covenants under the lease, the said sum on his decease shall not form part of his estate.”
No reinstatement of the premises was effected. On September 24, 1946, the freehold interest in the premises was transferred to Edward Ernest Graves-Tagg (hereinafter called “the owner”). On June 3, 1947, the owner was registered as the proprietor of the reversion to the lease.
On June 18, 1949, the deceased died. On October 15, 1949, probate of his will was granted to Frances Audrey Gordon Gray and Louis Walter John Robinson, the two defendants in the action, the first of whom had since died, leaving the second defendant and present applicant the sole surviving executor of the deceased.
On July 15, 1951, the owner, as owner of the freehold reversion, served notice on the deceased’s executors alleging breaches of the lessee’s covenants in the lease, and threatening proceedings to recover possession of the property in default of those breaches being remedied.
On February 11, 1953, an action was commenced by originating summons, asking for administration of the deceased’s estate; and on February 16, 1953, Upjohn J. made an order for administration of the estate.
By a compulsory purchase order dated April 14, 1953, and confirmed on September 4, 1954, under which the necessary steps were subsequently taken, the London County Council compulsorily acquired all the interests in the property. The ruin of the factory was pulled down, and the property redeveloped for housing.
On July 2, 1954, the owner, by an affidavit filed in the action, claimed to be a creditor of the estate for approximately £20,000 damages for breach of covenant and £800 arrears of rent under the lease. On November 17, 1954, notice to treat was served upon the owner in respect of the reversion, but notice to treat was not served upon the deceased’s executors until September 9, 1955. On March 28, 1957, the London County Council took possession of the property. On February 17, 1960, the Lands Tribunal fixed the price to be paid by the London County Council to the estate of the deceased in respect of the leasehold interest at £1. On July 7, 1960, the London County Council and the owner reached agreement on the price to be paid to the owner for the reversion, that price being £3,750. On November 28, 1960, the sale of the reversion to the London County Council was completed, and they paid to the owner the £3,750 with interest from March 28, 1957, the date when they entered into possession of the property.
On July 5. 1961, the surviving executor of the deceased issued a summons in the administration action, to which the owner and the council were respondents, which raised (inter alia) questions concerning the liability of the deceased’s estate to the owner in respect of breaches of the covenants to repair and to re-instate contained in the lease dated December 5, 1895, and the sub-lease dated September 29, 1944, and the covenants to be contained in the instrument of transfer of the deceased’s leasehold interest in the property on the sale of that interest by the applicant executor to the council.
Buckley J.,2 on the questions relevant to the present appeals, granted declarations (1) that the respondent owner did not by transferring his absolute interest in the premises comprised in the lease of 1895 preclude himself from claiming damages thereafter in respect of any breach of the repairing covenant; and (2) that on the true construction of the insurance agreement in the solicitor’s letter of November, 1945, and in the events which had happened, the insurance moneys belonged to the owner beneficially; and he ordered that the London County Council should pay the costs of the surviving executor, including the costs occasioned by the owner’s claim, and should indemnify the executor and the estate against the costs of the owner of and incidental to his claim.
The London County Council appealed, asking, inter alia, for orders declaring that the owner was precluded by the assignment of his interest from claiming thereafter in respect of any breach of the repairing covenant, and that the conveyance of the leasehold interest by the executor to the council should be completed by a transfer omitting all or any indemnity by the council to the executor in respect of any breaches of any covenant occurring before the transfer. The executor, by a cross-notice under R.S.C., Ord. 58, r. 6, asked that the court should declare that on the true construction of the insurance agreement and in the events which had happened the insurance moneys belonged to the estate of the lessee.
2 [1962] 1 W.L.R. 632., 3 [1946] K.B. 481; 62 T.L.R. 400; [1946] 1 All E.R. 719. , 4 [1912] 1 Ch. 770., 5 (1888) 58 L.T. 307; 4 T.L.R. 260., 6 [1920] 1 Ch. 472; 36 T.L.R. 307, C.A., 7 (1601) Cro.Eliz. 863., 8 (1818) 8 Taunt. 227.
- E. Francis Q.C. and S. L. Newcombe for the appellant London County Council.
- W. Goff Q.C. and A. A. Baden Fuller for the respondent executor.
- J. Balcombe and I. D. Iwi for the respondent owner, Edward Ernest Tagg.
The following cases in addition to those referred to in the judgments were cited in argument: Eyre v. Johnson3; In re Pyke4; In re Edie and Brown’s Contract5; In re Lyne-Stephens AND Scott-Miller’s Contract6; Lewes v. Ridge7; Canham v. Rust8; Raffety v. Schofield9; Penny v. Penny10; Phoenix Assurance Co. v. Spooner11; Mercer v. Liverpool, St. Helens and South Lancashire Railway Co.12; Salisbury v. Gilmore13; London County Freehold and Leasehold Properties Ltd. v. Wallis-Whiddett14; Henderson v. Thorn15; Joyner v. Weeks16; Rickett v. Green17; Bickford v. Parson18; Mascal’s Case19; Midgley v. Lovelace20; Lofft v. Dennis21; Garden v. Ingram22; General Accident Fire and Life Insurance Corporation Ltd. v. Midland Bank Ltd.23 February 4, 1963. The following reserved judgments were read.
MAIN JUDGMENT
LORD DENNING M.R. [DELIVERING THE LEAD JUDGMENT OF THE COURT]
On December 5, 1895, Mr. Edward Graves Tagg, an original lessor, let to an original lessee, Mrs. Elven, a piece of land in Bethnal Green, together with a factory which had recently been erected on it. The term was for eight years from September 29, 1894, at a rental of £100 a year. The lessee, for herself, her executors, administrators and assigns, covenanted with the lessor, his heirs and assigns (a) to keep the premises in repair during the term and yield them up in repair at the end; (b) at their own expense to insure the premises and keep them insured against loss or damage by fire “in joint names of the lessor and lessee” in a “sum equal to three quarters of the value of the premises”; (c) to lay out all moneys which should be received under any such policy
“in rebuilding or repairing such part of the said premises as shall have been destroyed or damaged by fire and, in case such moneys shall be insufficient for the purpose, she, the lessee, her executors, administrators and assigns will out of their own moneys expend such further sums as may be necessary to reinstate the said premises.”
The reversion expectant on the lease has at all material times been vested in Edward Ernest Graves Tagg (hereinafter called Tagg). The lease has been vested in Richard Henry Francis King (hereinafter called King) and his executors. The lessee, King, sublet the premises for twenty-one years from September 29, 1944, and covenanted with the sub-lessee that he (King) would perform the covenants of the head lease, and would insure against fire.
9 [1897] 1 Ch. 937., 10 (1868) L.R. 5 Eq. 227. , 11 [1905] 2 K.B. 753; 21 T.L.R. 577; (1906) 22 T.L.R. 695, C.A., 12 [1903] 1 K.B. 652, C.A.; [1904] A.C. 461; 20 T.L.R. 673, H.L., 13 [1942] 2 K.B. 38; sub nom. Salisbury v. Marcel, 58 T.L.R. 226; [1942] 1 All E.R. 457, C.A., 14 [1950] W.N. 180., 15 [1893] 2 Q.B. 164., 16 [1891] 2 Q.B. 31; 7 T.L.R. 509, C.A., 17 [1910] 1 K.B. 253, D.C., 18 (1848) 5 C.B. 920., 19 (1587) 1 Leon. 62., 20 (1693) Carth. 289., 21 (1859) 1 E. AND E. 474., 22 (1852) 23 L.J.Ch. 478., 23 [1940] 2 K.B. 388; 56 T.L.R. 905; [1940] 3 All E.R. 252, C.A.
In December, 1944, the factory was severely damaged by fire so that it was reduced to a mere shell. It could not, of course,
be repaired or rebuilt at that time owing to the restrictions in force. King, the lessee, had duly insured in joint names of lessor and lessee. In 1945 the insurance moneys, which amounted to £6,380 11s. 6d., were duly paid into the joint names of Tagg and King and after certain outgoings there was a balance of £5,939 17s. 5d. available for rebuilding or repairing the premises. The solicitors for lessor and lessee agreed that this sum should be dealt with according to the terms of this letter sent by the lessor’s solicitors to the lessee’s solicitors:
“The balance of £5,939 17s. 5d. to be invested in the joint names of my client and your client in Savings Bonds 1965-1975. My client, after reserving unto himself from the dividends sufficient to pay the rent as provided by the lease, shall account to your client each year for the balance … The said sum of £5,939 17s. 5d. to be charged with the liability of your client to perform his covenants under the lease, the said sum on his decease shall not form part of his estate.”
King died on June 18, 1949, and the defendants are the executors of his will. The factory never has been repaired or rebuilt. In 1951 Tagg served notice on King’s executors alleging breaches of the covenants in the lease and requiring them to be remedied. The executors did not repair or reinstate the premises. On February 16, 1953, an order was made for the administration of King’s estate in Chancery. In July, 1954, both Tagg and the sublessee made claims in the administration, claiming to be creditors of King’s estate. Tagg claimed £19,619 damages for breaches of covenant to repair or reinstate and £800 arrears of rent under the lease. The sublessee claimed damages of £6,750 against the executors for their failure to reinstate.
About this time, however, the London County Council came on the scene. They took steps compulsorily to acquire the derelict factory and made a compulsory purchase order. Their intention was not to repair it but to pull it down and replace it by new houses. The compulsory purchase order was confirmed by the Minister on September 4, 1954. On November 17, 1954, the London County Council served on Tagg notice to treat. On September 9, 1955, they served notices to treat on King’s executor and the sublessee. On November 28, 1960, Tagg transferred the fee simple to the London County Council and they paid him £3,750 for it. On March 6, 1961, the sublessee transferred the sublease to the London County Council and they paid him £2,500 for it. King’s executors have not yet transferred the lease to the London County Council but the compensation for it has been fixed at £1, subject to resolving the disputes here under debate.
The first point is this. Tagg says that, although he has transferred his interest in the factory to the London County Council, he can still claim damages against King’s executors for their failure to repair or reinstate the premises after the fire. King’s executors say that if they are liable to Tagg in damages, they should be indemnified by the London County Council against the claim and that such indemnity should be included in the transfer by them of the lease to the London County Council.
This claim by Tagg raises directly for decision this important point: when a lessor assigns his reversion to a purchaser, does he still retain the right to sue the lessee for breaches of covenant that occurred before the assignment? Both Woodfall and Foa on Landlord and Tenant say that he can. Thus Woodfall [on law of Landlord and Tenant (26th ed. (1960), Vol. I, p. 852)] says that
“The assignee of a reversion has no right of action against the lessee for arrears of rent previously due nor for damages for breaches of covenants, although running with the land, committed before the assignment of the reversion, unless the right to sue for such arrears or damages has been properly assigned to him as a chose in action; but the assignor may sue for such previous breaches notwithstanding the assignment.”
Foa says much the same [in General Law of Landlord and Tenant, 8th ed. (1957), p. 442]. The judge has accepted that as a correct statement of the law. But Sugden and Dart on Vendor and Purchaser say the opposite. Edward Sugden (afterwards Lord St. Leonards) wrote every line himself. This is the passage which appears in every edition from the second edition in 1806 to the thirteenth edition in 1862 (p. 181):
“The purchaser is entitled to the benefit of covenants in a lease by the lessee with the vendor and may recover for a breach before his time, if he is seized of the reversion during the continuance of the term; and he may, after notice to the tenant of the the conveyance, distrain for rent in arrear, whether the estate be freehold or leasehold. But he cannot recover arrears of rent due before the assignment, although it will carry the right to the whole accruing quarter or half year: nor can he recover if he purchase after the term ended for a breach during the term.”
Dart says much the same (8th ed. (1929) Vol. II, p. 693).
Which of these conflicting views is right? Let me take the covenant to keep in repair. The premises fall out of repair during the assignor’s time and remain unrepaired during the assignee’s time. A year or so later the lease comes to an end and the premises are delivered up still out of repair. The assignee can clearly sue the lessee for dilapidations and he will recover the cost of making them good: for that is, in the ordinary way, the amount by which the value of the reversion is diminished. No distinction is ever drawn between those dilapidations that occurred before the assignment and those that occurred after the assignment. The assignee recovers for the whole of them. Such is the law and it has been so applied in numberless cases to my knowledge. And I ask myself: can the assignor in those circumstances afterwards sue the lessee for the breach that occurred, before the assignment, of the covenant to keep in repair? Clearly not: for that would mean that the lessee would be made liable twice over. I have taken that case when the assignee sues first. But suppose the assignor sues first. Can that make any difference? Surely not. The rights of the parties cannot depend on which of the two is first in time in issuing a writ. It would, of course, be different if the assignor, before the assignment, had recovered damages from the lessee for the breach. That would go in mitigation of the damages which the assignee could recover from the lessee, but would not otherwise affect his claim.
Let me next take the covenant to reinstate. Suppose the premises are damaged by fire. The lessee does not reinstate within a reasonable time. The breach is over once and for all, but its effect continues. The lessor assigns to a purchaser, whilst the premises still remain damaged. The assignee serves a notice requiring the lessee to remedy the breach. In order to avoid a forfeiture, the lessee rebuilds and reinstates the premises. Or even without a threat of forfeiture, the lessee may rebuild and reinstate of his own accord. Can the assignor afterwards sue the lessee for the breach that occurred, before the assignment, of the covenant to reinstate? Clearly not: for the lessee has made good any damage that any reversion could possibly sustain.
These illustrations convince me that, as a matter of principle after an assignor has assigned his reversion, he cannot thereafter sue the lessee on the covenants to repair or reinstate. Only the assignee can do so. Sugden and Dart are right. Woodfall and Foa are wrong. But I must needs prove that what is clear in principle is true also in law. And I propose to do so by going through the history of the law on the matter.
Before the year 1540, when a lessor assigned his reversion to a purchaser, the assignee did not get the benefit of any of the express covenants in the lease. He could not even sue for breaches that occurred in his own time after he bought the premises. The simple reason was because the covenant was between the lessor and the lessee. The assignee was a stranger to it and could not sue on it. There was no privity of contract between assignee and lessee but only privity of estate. The privity of estate gave the assignee the right to sue the lessee in debt for rent that occurred in his own time, and also the right to sue on covenants implied in law for breaches in his own time, but no right to sue on the express covenants at all.
In 1540 the dissolution of the monasteries made it necessary to amend the common law. The monks had let out the monastic lands on lease. The King granted their lands to assignees who desired to enforce the covenants in the leases. The common law did not permit this. So an Act was passed (32 Henry 8, c. 34) which gave to assignees of the reversion the self-same advantages, benefits and remedies as the heirs.
“Under this statute,” said Lord Kenyon in Webb v. Russell,1 the grantees “or assignees stand in the same situation, and have the same remedy against their lessees, as the heirs at law of individuals … it becomes therefore necessary to see whether this action could have been maintained by the heirs.”
1 (1789) 3 Term Rep. 393, 402.
It is apparent, therefore, that in considering any doubtful points about the position of assignees, it will be helpful to consider the position of heirs at law. It was always clear that at common law, when an owner in fee simple let land on lease and afterwards died whilst the lease was still running, then the benefit of those covenants by the lessee which ran with the land (such as a covenant to pay rent, to repair or reinstate) passed to the person to whom the land descended, that is, to the heir: see Webb v. Russell,2 or devisee: Vyvyan v. Arthur3 and not to the executor, for he took only the personal estate, see Kingdon v. Nottle.4 Bullen AND Leake [Precedents of Pleadings] (1868), 3rd ed., p. 209. So far as breaches during the heir’s or devisee’s own time were concerned, there was never any difficulty. The heir or devisee could sue for those breaches. He could sue for rent falling due in his own time or for failure to repair during his own time. But so far as breaches during the ancestor’s time were concerned, three propositions can be discovered:
(i) If the breach had caused damage once for all to the ancestor which affected his personal estate exclusively and did not continue to affect the land, then the executor could sue, and the heir or devisee could not: see Lucy v. Levington5: Bullen AND Leake, 3rd ed. p. 209.
(ii) Failure to pay rent during the ancestor’s time was a breach which caused damage once for all. The damage was caused exclusively to the ancestor and he was the only person who could sue for it. The heir or devisee could not sue for it: see Coke on Lit., 162a. Even the executor could not sue for it until he was authorised to do so by another statute of 1540 (32 Henry 8, c. 37).
(iii) But if the breach during the ancestor’s time caused continuing damage, which continued to depreciate the property during the time of the heir or devisee, so that he was damnified in his inheritance by it (as it would, of course, do in the case of a failure to repair or reinstate), then the heir or devisee could sue in respect of the whole ultimate damage. The reason is not far to seek. If the covenant to repair or reinstate had been performed, the advantage of it would have accrued to the heir or devisee and not to the executor. It was only right, therefore, that when the covenant was not performed, the heir or devisee should have the damages for non-performance. It would obviously be wrong that the damages should go into the pockets of those entitled to the personal estate. The loss had not accrued to them, but had been suffered by the heir or devisee of the real estate. So it was held that the heir or devisee could sue for breaches during the ancestor’s time causing continuing damage, but the executor could not.
These propositions can be derived from a perusal of Kingdon v. Nottle6; King v. Jones7 and Raymond v. Fitch.8
2 3 Term Rep. 393, 401., 3 (1823) 1 B. AND C. 410., 4 (1813) 1 M. AND S. 354; (1815) 4 M. AND S. 53., 5 (1671) 2 Lev. 26., 6 1 M. AND S. 354; 4 M. AND S. 53., 7 (1814) 5 Taunt. 418, 428., 8 (1835) 2 Cr.M. AND R. 588, 598, 599.
Such being the position of the heir or devisee, it affords good guidance to the position of the assignee. The cases are very few but they support similarly three propositions:
(i) If the cause of action accrued exclusively to the assignor during his time (as, for instance, when compensation was to be paid to him for damage done to the land so that it became “merely a chose in action” severed from the reversion) then the assignor alone could sue and not the assignee: see Martyn v. Williams9 by Martin B.; but a covenant to repair does not fall into that category: see Watson B.9
(ii) Failure to pay rent during the assignor’s time was a breach which caused damage to the assignor exclusively. He alone could sue for it and not the assignee: see Flight v. Bentley10 where the judges of the Courts of Common Law (according to Shadwell, V.-C.) expressed the opinion
“that, though the assignment would give, to the assignee, the entire title to the rent to become due on the quarter day next after the assignment, yet it was clear that the assignment would not, at law, pass the antecedent rent; for it had been severed from the reversion, and was a mere chose in action.”
(iii) If there was a breach during the assignor’s time which caused damage which continued to depreciate the property during the assignee’s time (as it would do in the case of a failure to repair or reinstate), then the assignee could sue in respect of the whole damage: for then it was annexed to the reversion and not severed from it. This is supported by Davis’s11 case in 1802, which is not reported but is recorded in the second edition of Woodfall. The facts were these. On June 9, 1778, M. let premises to one Davis for twenty and one quarter years. Davis covenanted to pay rent of £64 a year, to repair, and to lay dung each and every year during the continuance of the term. In 1798, eight days before the end of the term, X bought the property. After the lease had expired, X died and his executor brought an action against the defendant for the last quarter’s rent (£16), for not repairing, and for not putting dung upon the premises. The judge gave judgment for the plaintiff on all three breaches. The defendant appealed and put this question to the court in banc presided over by Lord Kenyon C.J.:
“The fact was that the plaintiff’s testator purchased the estate only eight days previous to the expiration of the lease. Did his Lordship therefore think that he was entitled to the benefit of this covenant, and could assign a breach for the non-expenditure of the dung which was to be laid every year upon the premises?”
Lord Kenyon:
“Yes, beyond all doubt; if the testator were seized of the reversion during the continuance of the term.”
The judgment was affirmed. That case was given by Edward Sugden in the next edition of his book (1806) (2nd ed.) as his authority for the passage I have quoted; and it seems to me to warrant it.
9 (1857) 1 H. AND N. 817, 825, 821., 10 (1835) 7 Sim. 149, 151., 11 (1802) Woodfall on Law of Landlord and Tenant, 2nd ed. (1804) 529.
Such was the law as it was declared to be under the statute of 1540. The next time Parliament considered the subject was in 1881. It enacted section 10 of the Conveyancing Act, 1881, which is now replaced in much the same words by section 141 of the Law of Property Act, 1925. These sections provide that the assignee of the reversion is entitled to the rent and to the benefit of the covenants and conditions of the lease. Under these sections it is clear that for rent accruing during the assignee’s time and for breaches during the assignee’s time, the assignee can sue. But what about rent falling due in the assignor’s time and breaches during his time? I do not find the sections at all clear on this point. Section 141 of the Act of 1925 does, however, say at the end that it is “without prejudice to any liability affecting a covenantor or his estate.” Those words clearly preserve the lessee’s liability on his covenants, so far as it is a liability which exists by privity of contract, and has not passed with the reversion. It preserves, therefore, his liability for breaches of covenant during the assignor’s time when they have become merely choses in action severed from the reversion, (as in Martyn v. William,12 and his liability on his covenant for rent which fell due in the assignor’s time, for that, too, has been severed from the reversion, (as in Flight v. Bentley.13 But it seems to me that all liabilities which are annexed to the reversion (such as the liability in the covenant to repair or reinstate) pass to the assignee; and the lessee is liable to him and not to the assignor. This means that the sections have not changed the previous law. I find myself in agreement with the editors of Smith’s Leading Cases, who, before my time, in the notes to Spencer’s case,14 commented on sections 10 and 11 of the Conveyancing Act, 1881, and said:
“These sections do not seem to alter the previous law so far as the running of covenant with reversion is concerned”
(1903) (11th ed., p. 66 (1929) 13th ed., p. 63); and also with the very knowledgable authors of Wolstenholme and Cherry in Conveyancing Statutes, 12th ed. (1932) who said that section 141 “reproduces” the statute of Henry 8 with the additions made in 1881 and 1911, and that Flight v. Bentley15 is still good law. The only difference is that, whereas the statute of Henry 8 applied only to leases under seal, the Act of 1881 extended to leases in writing, and the Act of 1925 to oral tenancies. Subject to those extensions, I believe the law, therefore, remains as I stated it in the three propositions above.
12 1 H. AND N. 817., 13 7 Sim. 149., 14 (1583) 5 Co.Rep. 16a., 15 7 Sim. 149, 151., 16 (1573) 3 Leon. 51.
Many cases were referred to us but, having looked at them, we were able to stack most of them on one side in a pile marked “not to be looked at again.” Only three or four need particular mention. In 1572 in an Anonymous case,16 it is said to have been holden by the court that
“the grantee of the reversion should not recover damages (for want of reparation) but from the time of the grant and not for any time before.”
But that case was disposed of by Willes J. in Coward v. Gregory,17 who said, as to one point at last in it: “That is contrary to the modern authorities.” In Johnson v. St. Peter, Hereford (Churchwardens),18and in Wedd v. Porter,19 there was a lease for years which expired by effluxion of time. The lessee failed to yield the premises up in repair in accordance with his covenant and stayed in occupation, holding over. The lessor afterwards sold the premises to a purchaser. They were still in a dilapidated state at the time he bought. The purchaser then sued the lessee for want of repair. It was held that the purchaser was not entitled to recover for any dilapidations that existed when he bought. The simple explanation is, of course, that the lease had expired when he bought. The only relationship with the tenant was an oral tenancy by holding over. And to such a relationship neither the statute of Henry 8 nor section 10 of the Conveyancing Act, 1881, had any application. The purchaser’s only claim against the lessee was under the common law by privity of estate, by virtue of which he could claim damages for breach of the covenant implied by law to use the premises in a tenant-like manner, but only for breaches during his own time and not in the time of the vendor. Those cases have no bearing here. The only other case I need mention is Brown v. Trumper.20 There the landlord was tenant for life and was succeeded by a remainderman: and it was held that the remainderman could sue only for dilapidations that occurred during his own time. This is readily explainable, because a remainderman stands in a different position from an heir: see Ricketts v. Weaver.21 It does not, therefore, affect this case.
My conclusion is, therefore, that after Tagg assigned this derelict factory to the London County Council, he had no right to sue King’s executors for the breaches of the covenant to repair or reinstate. The London County Council alone could sue: but that right is not one which is worth anything to them, seeing that it is their intention to pull down the premises. Indeed, they have never suggested that they wish to claim under it.
17 (1866) L.R. 2 C.P. 153, 168.; 18 (1836) 4 Ad. AND E. 520.; 19 [1916] 2 K.B. 91, C.A.; 20 (1858) 26 Beav. 11.; 21 (1844) 12 M. AND W. 718.
There is one further question for decision. Who is entitled to the insurance moneys? The parties to the lease provided for one event – they thought the premises would be rebuilt – and said that the moneys were to be used in rebuilding the premises, and if they were insufficient, the lessee was to make up whatever extra was necessary. But that event did not happen. An event happened which they did not foresee. The premises have not been rebuilt and the moneys will not be used for that purpose at all. So what is to be done with the moneys? Mr. Goff argued strongly that all the moneys should go to the tenant. He said that it was a general proposition that the policy moneys belong to the person effecting the insurance and paying the premiums: see Leeds v. Cheetham22; and that it made no difference that it was effected in joint names, save that it was a security for the performance by the tenant of his covenant to rebuild and reinstate. If the tenant was for any reason absolved from performance of that covenant, then the moneys belonged to him absolutely. They always were, he said, the tenant’s moneys, subject to the charge: and when they were freed of the charge, they were his absolutely.
I cannot agree with Mr. Goff’s argument. It does not give proper weight to the fact that the insurance was in joint names. The reason for joint names seems to me obvious. It was to ensure that both landlord and tenant were insured under the policy, each in respect of his interest in the property. The tenant was insured in respect of his interest as leaseholder. The landlord was insured in respect of his interest as freeholder. You must remember that when you take out a policy of fire insurance of a building (as distinct from goods), you must insert in the policy the names of all the persons interested therein, or for whose use or benefit it is made. No person can recover thereon unless he is named therein, and then only to the extent of his interest. That is clear from the Life Assurance Act, 1774 (14 Geo. 3, c. 48, ss. 2, 3 and 4), which by its very terms applies to “any other event” as well as life. If the tenant insures, therefore, in his own name alone, it is only good to the extent of his interest. True it is that, when he is bound by covenant to repair, his interest extends to cover his liability: and thus he recovers the cost of reinstatement: see Castellain v. Preston23 by Bowen L.J. But nevertheless, it is the tenant’s interest alone which is covered; he alone is entitled to the policy moneys, and the landlord has no claim upon them: see Simpson v. Scottish Union Insurance Co.,24 where Sir Hugh Cairns, in the course of his successful argument, put the law most neatly:
“The insurance was in the tenant’s name and could only be good to the extent of the tenant’s interest. It could not cover the landlord’s interest unless his interest appeared on the face of the policy.”
The landlord can, of course, if he acts promptly, request the insurance company to lay out the moneys in rebuilding; see the Fires Prevention (Metropolis) Act, 1774, and Sinnott v. Bowden.25 But once the policy moneys are paid over to the tenant, he is powerless. It is in order to overcome those drawbacks that the landlord often stipulates for the policy to be in the joint names of himself and the tenant, for then it is clearly shown that he is interested in the policy moneys and that the insurance is to cover his interest as well as that of the tenant.
22 (1827) 1 Sim. 146.; 23 (1883) 11 Q.B.D. 380, 400, C.A.; 24 (1863) 1 Hem. AND M. 618.; 25 [1912] 2 Ch. 414; 28 T.L.R. 594.
He is one of the principals to the contract of insurance and the tenant cannot exclude him from his interest therein.
Applying those principles, it seems to me clear that when the fire occurred and the policy moneys were received, they belonged to the two persons concerned, landlord and tenant, proportionately to their interests. True it is that the moneys were to be laid out in rebuilding the factory – and were in that sense charged (as the letter of November 1945, said) with that liability – but that does not mean that they belonged to the tenant. He could not do what he liked with them. They could never, according to the lease, come to him for his own benefit to the exclusion of the landlord. If the covenant had been performed, the benefit of these moneys would have come to both landlord and tenant in the shape of the rebuilt factory: and they would both have benefited proportionately to their interests. So also when, owing to an unforeseen event, the covenant is not performed, the moneys should be divided in like proportions.
The judge has held, however, that they should all go to Tagg. He did so hold because he was much impressed with the final phrase in the letter of December, 1945:
“the said sum on his decease (that is the decease of the tenant) shall not form part of his estate.”
The judge inferred that the said sum was never to belong to the tenant, but only to the landlord. I cannot read so much into that phrase. It was only inserted so as to make sure that on the death of the tenant the moneys were to remain charged with the liability to rebuild the factory, and were not to be distributed to the other creditors. It still contemplated the rebuilding of the factory. It does not deal with the unforeseen event of the factory not being rebuilt.
In the events that have happened, I am of opinion that the moneys should be divided proportionately to the interests of landlord and tenant in the property.
I venture to suggest that the law as I have stated it accords with justice and common sense. It would not seem right that King’s executors should be made liable in damages for non-repair, seeing that the factory has not been and never will be rebuilt but pulled down. Equally, it would not seem right that King’s executors should be able to keep all the insurance moneys and that Tagg should have nothing. The factory was his property and it was burned down without his being compensated for it. He should have his due proportion of the insurance money. I would allow this appeal accordingly.
UPJOHN L.J. [DISSENTING]
The Master of the Rolls has set out in his judgment all the relevant facts, and I can, therefore, go straight to the points of law which arise in this appeal.
The first question may be briefly stated in this way: Can a landlord, who has assigned his reversion to a lease, after the date of such assignment, sue the lessee in respect of breaches of covenant which occurred before the assignment? The second question is a completely different one and relates to the rights of lessor and lessee respectively in insurance moneys received under a policy of insurance after a fire. The lessee was obliged by the terms of the lease to take out and maintain a policy of insurance in the joint names of the lessor and lessee, and it had become impossible to expend the policy moneys in rebuilding the property.
I turn to the first question. This case is concerned with express covenants in a lease, and in such case it cannot possibly be doubted that section 141 of the Law of Property Act, 1925, governs the situation. Subsections (1) and (2) are in these terms:
“(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.”
These sections re-enact in almost identical form section 10 (1) of the Conveyancing Act, 1881 (as itself amended by section 2 of the Conveyancing Act, 1911) but splitting the words of that subsection into two subsections. For the purposes of this case, the only material differences between the Act of 1881 (as amended) and the Act of 1925 are, first, that by judicial decision it was held that section 10 only applied to leases in writing, whereas it is quite plain that section 141 applies to all leases, and, secondly, that section 10 applied only to leases made after the commencement of that Act, whereas section 141 applies to all leases whenever made.
I turn then to a consideration of the meaning of section 141 and construe the language used in its ordinary and natural meaning, which seems to me quite plain and clear. To illustrate this, consider the case of a lease containing a covenant to build a house according to certain detailed specifications before a certain day. Let me suppose that after that certain day the then lessor assigns the benefit of the reversion to an assignee, and at the time of the assignment the lessee has failed to perform the covenant to build. Who can sue the lessee for breach of covenant? It seems to me clear that the assignee alone can sue. Upon the assignment the benefit of every covenant on the lessee’s part to be observed and performed is annexed and incident to and goes with the reversionary estate. The benefit of that covenant to build, therefore, passed; as it had been broken, the right to sue also passed as part of the benefit of the covenant and, incidentally, also the right to re-enter if that has not been waived. I protest against the argument that because a right to sue is itself a chose in action that it, therefore, has become severed from, and independent of, the parent covenant; on the contrary it remains part of it. The right to sue on breach is merely one of the bundle of rights that are contained in the concept “benefit of every covenant.” The reasoning of the common law judges in Flight v. Bentley,26 that rent which issued out of the land became severed after it had become due, does not apply to a covenant. Further, for my part I do not regard this authority as very satisfactory. Shadwell V.-C. does not appear to have heard full argument and his consultation with some common law judges (who heard no argument) seems to have been most informal. To return to my example, suppose the right to sue for breach of that covenant did not pass, and that right remained in the assignor, then the assignee would take the lease without the benefit of that covenant and he could never enforce it. So he has not got the benefit of every covenant contained in the lease and the words of the section are not satisfied. That cannot be right. The obligation to build being (as I have assumed) clearly defined by detailed specifications in the lease, it seems to me quite plain that the assignee could bring an action for specific performance compelling the lessee to perform his covenant to build. That is one of the rights which passed to him when the benefit of that covenant passed. The assignor has by the operation of section 141 assigned his right to the benefit of the covenant and so has lost his remedy against the lessee. Of course, the assignor and assignee can always agree that the benefit of the covenant shall not pass, in which case the assignor can still sue if necessary in the name of the assignee.
26 7 Sim. 149, 151.
Then suppose the lease contains a covenant to keep in repair which is broken at the date of the assignment, and that at all material times the premises were out of repair; that is, a continuing breach. It is an a fortiori case to the example I have just dealt with. Indeed, with all respect to the argument to the contrary, you cannot give any sensible meaning to the word of the section unless the entire benefit of a repairing covenant has passed, leaving the assignor without remedy against the lessee. Look at the absurd results if that were not so. The assignor of the reversion remains at liberty to sue the lessee for breaches down to the moment of the assignment. After assignment he sues and obtains judgment for certain damages. But then the premises are still out of repair and the breach continues. The assignee claims to re-enter or to sue because the premises are out of repair. What is the situation of the lessee? Either he has to pay damages twice or pay damages to the assignor and then reinstate the premises because otherwise the assignee will reenter. This is impossible. Alternatively, the assignee’s right to re-enter or to sue in respect of post-assignment breaches is in some way adversely affected by reason of the fact that the assignor has recovered a judgment for damages for pre-assignment breaches; therefore, the benefit of the covenant to keep in repair did not pass wholly to him even in respect of post-assignment breaches. That directly contradicts the words of the section.
I reject the argument based on the view that the assignee will pay less for the property because he purchases it without the benefit of the right to sue in respect of pre-assignment breaches. That, with all respect, begs the question. You must first ascertain what passes to the assignee. The assignee may in fact be expected to pay rather less where some covenants remain unperformed because a covenant performed is worth more in a commercial sense than a covenant unperformed. A property with a house on it is probably worth more than a property unbuilt though with an enforceable covenant to compel the lessee to build. A property in repair is almost certainly worth more than a property out of repair though with an obligation on the lessee to repair. But that is a matter of practical negotiation and nothing more. It may be Tagg’s misfortune that in this case he and his advisers, and also the London County Council, misunderstood the legal position, but that, of course, cannot affect the matter one iota. It seems to me clear, as a matter of construction, therefore, that section 141 operated to pass all the rights vested in Tagg to the London County Council when he assigned the property to them. Is there anything which prevents the court from adopting that construction?
We have been referred by counsel, whose researches were extensive, intensive and painstaking, to a vast body of authority dealing with the state of the law before the Conveyancing Act of 1881. The Master of the Rolls has pointed out in his judgment that we were able to put most of them on one side marked “Not to be looked at again” because so many of them hardly touched the fringe of the problem before us. Upon a full consideration of the matter, I do so for an additional reason. I would put all the pre-1881 authorities on the shelf “Not to be looked at again” because I do not think they form any safe guide to the law today. Where the language of a statute is clear and unambiguous it is wrong to interpret the statute by reference to earlier law. The language employed prevails. Where the proper construction of the statute is doubtful or it appears to be ambiguous, it may be necessary to inquire into the relevant law before the passing of the statute, but in my opinion section 141 for all relevant purposes is clear and unambiguous. Furthermore, great as is my respect for the Master of the Rolls as such and also as one of the editors of Smith’s Leading Cases, I cannot agree that section 10 of the Act of 1881 was declaratory of the existing law. Section 10, as was plain not merely from the long title but the contents of the Act itself, is an enactment intended to amend the law.
[ourse, from 32 Hen. 8, c. 34.] It is in terms in language so entirely different from the Act of 1881 that it seems to me hardly possible that the draftsman of section 10 thought that he was re-enacting the old law, merely putting it in modern phraseology. But what the draftsman may have thought is not only irrelevant; it is positively dangerous to rely on his thoughts (see In re Ryder and Steadman’s Contract27. The court must still perform its primary duty of construing the words of the statute. That this is so is shown by the recent case of Grey v. Inland Revenue Commissioners.28 The question there depended on the construction of section 53 (1) (c) of the Law of Property Act, 1925, and it was generally thought in the profession that that section merely re-enacted section 9 of the Statute of Frauds, 1677. Indeed, when the matter came before me at first instance I fell into that error. I can only plead in mitigation that I was in distinguished company, for Lord Evershed M.R., in the Court of Appeal fell into the same error. But we reached this conclusion upon the footing that the Law of Property Act, 1925, was a consolidating statute and so presumed not to change the law, although there may be certain changes of language. However, while the matter was progressing from the Court of Appeal to the House of Lords, it was discovered that in fact section 9 of the Statute of Frauds had been amended by the Law of Property (Amendment) Act, 1924. Accordingly, as the House of Lords held, the words of section 53 had to be construed in their ordinary and natural meaning regardless of the earlier case law. Whereupon it was apparent that in fact, whatever the intention of the draftsman, the law in fact had been drastically altered by a comparatively slight change of language. Exactly the same considerations seem to me to apply in this case, though with much greater force because of the quite violent difference in language between 32 Hen. 8, c. 34 and section 10. Therefore, for my part I forbear from any examination of the many interesting authorities and textbooks dealing with the law before 1881 to which we have been referred. It follows from what I have said that I would regard it as open to any court, if satisfied that section 141 leads to a different result (a matter on which I express no opinion), to say that Flight v. Bentley29 (assuming it correctly to interpret the law before 1881) no longer represented the law as to arrears of rent. Finally, I do not deal with the case of Wedd v. Porter,30(which I find rather difficult upon the question of the respective rights of assignor and assignee of a leasehold reversion), for it was not concerned with the true construction of the Act of 1881.
In my judgment Tagg’s claims fail and I would allow this part of the appeal.
27 [1927] 2 Ch. 62, 84; 43 T.L.R. 578, C.A.; 28 [1960] A.C. 1; [1959] 3 W.L.R. 759; [1959] 3 All E.R. 603, H.L.; 29 (1835) 7 Sim. 149.; 30 [1916] 2 K.B. 91, C.A.
I pass to the entirely different question as to the proper destination of the policy moneys in the events which have happened. Again it is unnecessary to set out the facts. Mr. Balcombe invites us to apply the analogous cases of Waters v. Monarch Fire and Life Insurance Co. Ltd.,31 and London AND North Western Railway v. Glyn,32 to this case. Those cases establish that where a warehouseman (without the consent, or even knowledge, of the owners) insures the whole value of the goods in his warehouse, although his only interest in those goods is his lien for warehouse charges and so forth, the owners of the goods, which have been destroyed by some accidental fire, are entitled to claim against the insurers for the value of the goods. This is ancient mercantile law. The warehouseman is presumed to be insuring the respective interests of himself and the owners in the goods and each may claim according to his interest. So, says Mr. Balcombe, in a case such as this, where the lessee is not making a merely voluntary insurance but is obliged by the terms of the lease to insure the property in the joint names of the lessor and himself and himself to pay the premiums from time to time payable, the inference must be that the parties have intended that the insurance should be intended to cover the respective interests of the lessor and lessee. Accordingly, if the premises are not or cannot be reinstated, the policy moneys should be held for the respective interests in the premises of the lessor and lessee in due proportion. He suggests that the proportion should be worked out by investing the money so that the interest thereon should be paid to the lessee and his executors during the term of the lease and thereafter the capital should belong to the lessor.
31 (1856) 5 E. AND B. 870.; 32 (1859) 1 E. AND E. 652.
This at first sight is an attractive argument and at one time I was inclined to think that the fact that the lessee was obliged to maintain the policy in the joint names must give the lessor some interest in the policy moneys. On reflection I think the matter requires further analysis as to the intentions of the parties. The lessor and lessee could, of course, agree to enter into an insurance policy which would insure their respective interests in the property. Valuers could, I suppose, do this, and it would follow that each year the interest of the lessee would become less and that of the lessor greater. The one thing that is clear is that lessor and lessee never intended to do any such thing and the analogy with the cases I have mentioned breaks down. It appears to me clear from the terms of the lease (I do not quote the clauses, for they were in ordinary common form) that the common intention was to create a fund whereby the premises could be reinstated in aid of the lessee’s obligation to reinstate the premises should they be destroyed by fire. By the terms of the lease, the policy was required only to cover three-quarters of the lessee’s liability. That was the whole object of the policy: to assist in the immediate reinstatement of the premises for the benefit of both, so that the lessee would have a factory to carry on his business during his term and thereafter the lessor would have the benefit of a factory built on his land. Upon reflection, I cannot ascribe much importance to the fact that the policy was to be in the joint names. The reason, and to my mind the sole reason, for making that provision in the lease was to ensure that, apart altogether from the Fires Prevention (Metropolis) Act, 1774 (which applied as against the insurance company only until the money was paid), the lessor wanted to have the security of knowing that the insurance money could only be paid on the joint receipt of both so that he would be in a secured position to see that the lessee performed his obligation of reinstatement. That is what every ordinary mortgagee does when he makes his mortgagor insure. I, therefore, feel bound to reject Mr. Balcombe’s argument.
One is, therefore, faced with the problem, which has not yet been decided by any authority directly, which may be stated thus: Where, without fault of either party and owing to supervening circumstances making it impossible to carry out their common intention of reinstating the premises, that part of the contract is thereby frustrated, what is to happen to the funds received on a policy of insurance taken out by the lessee under an obligation contained in the lease? Initially this is a matter to be determined either expressly or by necessary implication from the language of the lease, but, of course, neither party contemplated the impossibility of reinstatement, so this does not help; it must be solved on general principles. As I have already said, it seems to me quite plain that the insurance of the premises was for one purpose only – that as security for the performance by the lessee of his obligation to reinstate the premises upon destruction for the benefit of each party so that the factory might be rebuilt and enjoyed by each according to the lease.
If, therefore, this becomes impossible, what is the situation? The lessee has paid all the premiums. Reinstatement being impossible of performance without any fault on the part of the lessee, it seems to me that the policy moneys must belong to the lessee or his estate. The judge came to a different conclusion by reason of the terms of the letter of November 28, 1945, where the lessor set out the terms on which the policy moneys were to be invested. This letter was agreed to by the lessee’s solicitor. The letter recognised that owing to early post-war conditions it would not be possible to reinstate the premises in the near future, but it plainly never contemplated the possibility that in fact reinstatement might become impossible. The parties in my view were merely dealing with the situation in the interval before it was possible to use the money for reinstatement. I think they were doing no more than recognise that the purpose of the fund was to reinstate the premises. Reasonably they went no further. The judge, however, decided the matter on the last sentence of the letter, which was in these terms:
“The said sum of £5,939 17s. 5d. to be charged with liability of your client to perform his covenants under the lease, the said sum on his decease shall not form part of his estate.”
The earlier part of this sentence recognises that the fund was merely a security for the performance by the lessee of his obligations. The latter part, which so strongly influenced the judge, was merely inserted (as I think) to guard against the possibility that the lessee (then an elderly man, I suppose, as he had purchased the lease as long ago as 1908) might die before reinstatement became possible. In that event it would still remain as security and would not be divisible as part of his estate. Even if that be a wrong construction of the last sentence, I cannot, with all respect to the judge, see how it can be construed as an agreement whereby Tagg was to receive the policy moneys on King’s death if it became impossible to reinstate.
For these reasons, therefore, I would allow the appeal upon this matter and declare that King’s estate is entitled to the policy moneys and interest, subject only to the payment thereout of the rent due to Tagg while he remained the freeholder.
DIPLOCK L.J.
We are here concerned with covenants in a lease (1) to keep premises in repair during the term, and (2) to reinstate after damage by fire. These covenants overlap. I need not rehearse the relevant facts. The main and short question in the case is: Can the assignor of the reversion to the lease sue the tenant for breaches of these covenants committed before the date of the assignment where the assignment itself contains no express provision about the matter? The answer, I emphasise at the outset, depends upon the true construction of section 141 of the Law of Property Act, 1925, which re-enacts in substantially the same words the provisions of section 10 of the Conveyancing Act, 1881, and section 2 of the Conveyancing Act, 1911, and applies these provisions to oral leases as well as to leases in writing. Cases decided and textbooks written before 1881, at the latest, are of assistance in construing section 141 of the Law of Property Act, 1925, only in so far as they throw light upon the meaning of terms of art used in the section or indicate the mischief under the pre-existing law which the section was intended to cure.
Where the reversion to a lease is assigned after breach by the tenant of a repairing covenant, there are mathematically only four possible answers to the question: Who is entitled to sue the tenant for damages for the breach? namely, (1) the assignor of the reversion, (2) the assignee of the reversion, (3) both, and (4) neither. The third and fourth possibilities would not be easy to reconcile with a just and rational system of law. The question which is the right answer, must have arisen time and time again as the law of landlord and tenant has evolved since 1540, when, by the Act of 32 Henry 8, the action of covenant upon undertakings by the tenant contained in leases under seal was first made available to assignees of the reversion. Yet so far as the researches of counsel have gone, there is no reported case in which the assignor of the reversion to a lease has sought to recover damages for breach of a repairing covenant committed before the date of the assignment; and the only two cases in which an assignee of the reversion to a lease has sought to recover damages for breach of a repairing covenant committed before the date of the assignment are in conflict with one another and unsatisfactorily reported. The first is an anonymous case in 157333 recording, if I have understood it aright, the opinion of the court that the assignee of the reversion cannot recover damages for breaches prior to the assignment; the second, to the opposite effect, in 1802 is Davis’s case,34 referred to by Lord Denning M.R. This is reported only in the earliest editions of Woodfall, and omitted at least as early as the 6th edition, published in 1849 and edited by Wollaston, which contains in the text the categorical statement that the assignor of the reversion can, and the assignee of the reversion cannot, sue for breaches of covenant committed before the date of the assignment. To add to the confusion, Sugden in his 14th edition in 1862, after saying in the passage cited by the Master of the Rolls that the assignee can sue, goes on:
“If the seller (i.e., the assignor) has sold the estate for a lower price because he is to have the remedy against the tenant, he may sue on his own account: if he has received the full price, he may sue as trustee for his vendee,”
thus suggesting that both assignor and assignee may sue; but he cites as authority for this proposition Johnson v. St. Peter, Hereford (Churchwardens)35which, as the Master of the Rolls has pointed out, is not germane to the point.
33 (1573) 3 Leon. 51.; 34 (1802) Woodfall, 2nd ed. (1804), p. 529.; 35 (1836) 4 Ad. AND El. 520.
The dearth of direct authority on the point, either before or after 1881, has led counsel to seek some indirect light on the topic in observations by judges in cases dealing with actions by assignors or assignees of the reversion in which the question which we have to decide was not immediately in issue. In view of the careful analysis of these cases contained in the judgment of the Master of the Rolls, I will say only three things about them. First, the law of landlord and tenant has been evolving continuously during the period covered by the authorities which have been cited, and the earlier the case the less reliable a guide it is to how the law stood in 1881. Secondly, the conclusion that I reach is that the law as to rights of assignors and assignees with respect to breaches of covenant committed by tenants before the date of the assignment in respect of leases to which the Act of 1540 applied, was confused and uncertain, which may well constitute part of the mischief to which the Act of 1881 was directed. Thirdly, that so far as I am concerned, no light is thrown upon the problem by any case decided since 1881.
I, therefore, approach the question unassisted, and I hope unconfused, by authority, as a simple question of the meaning of section 141 of the Law of Property Act, 1925, which reads as follows:
“(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. (3) Where that person becomes entitled by conveyance or otherwise, such rent, covenant or provision may be recovered, received, enforced or taken advantage of by him notwithstanding that he becomes so entitled after the condition of re-entry or forfeiture has become enforceable, but this sub-section does not render enforceable any condition of re-entry or other condition waived or released before such person becomes entitled as aforesaid. (4) This section applies to leases made before or after the commencement of this Act, but does not affect the operation of – (a) any severance of the reversionary estate; or (b) any acquisition by conveyance or otherwise of the right to receive or enforce any rent covenant or provision; effected before the commencement of this Act.”
The “benefit” of a covenant to keep premises in repair or to reinstate them after fire is (as is apparent from sub-section (2)) the right to enforce the covenant by exercising such remedies for its breach as are expressly provided by the lease for example, by forfeiture or entry to execute the repairs and recover their cost, or as are available at common law, namely, by suing for damages for breach. By subsection (1) this right to enforce the covenant in question is not only to be “annexed and incident to” the reversionary estate in the land, but also is to “go with” that reversionary estate. The expression “go with” must be intended to add something to the concept involved in the expression “annexed and incident to” and in my view connotes the transfer of the right to enforce the covenant from the assignor to the assignee with the consequent cessation of the right to the assignor to enforce the covenant against the tenant. Such remedies as the assignor was entitled to exercise in respect of existing breaches of covenant by the tenant become vested in, and exercisable by, the assignee. This view of the meaning of subsection (1) is confirmed by subsection (3) which makes it clear that the assignee can exercise the remedies available under the terms of the lease or at common law in respect of breaches committed before the date of assignment of the reversion, for it is only in respect of such breaches that “the condition of re-entry or forfeiture” can have become enforceable before the assignee became entitled to the reversion.
Looked at purely as a matter of the meaning of the words used in section 141 of the Law of Property Act, 1925, I take the view that the effect of this section is that after the assignment of the reversion to a lease, the assignee alone is entitled to sue the tenant for breaches of covenants contained in the lease whether such breaches occurred before or after the date of the assignment of the reversion. The effect of the section so construed is to enact a simple, rational and just rule of law. The measure of damages for breach of a covenant in a lease which runs with the land – the only kind of covenant with which the section is concerned – is the diminution in the value of the reversion consequent upon the breach and is sustained by the person entitled to the reversion. If upon an assignment of the reversion the benefit of such covenants, including the right to exercise remedies in respect of existing breaches, is transferred from the assignor to the assignee, justice is done to all three parties concerned. The assignor suffers no loss, for the sale price of the reversion will take account of the value of the rights of action or other remedies against the tenant for antecedent breaches of covenant which are transferred to the assignee; the assignee will be able to enforce these remedies against the tenant; the tenant will remain liable for the diminution in value of the reversion caused by his breaches of covenant whenever committed. Any other solution would lead to complication and injustice, particularly where there is a continuing covenant to keep in repair which, as in the present case, overlaps a covenant to reinstate within a limited time. What would be the tenant’s position if the assignor could sue for breaches committed before the date of the assignment of the reversion? If the tenant put the premises into repair after the date of the assignment, either voluntarily or under threat of forfeiture by the assignee, what would happen to the assignor’s right of action for lack of repair before the assignment and what would be the measure of damages? If the assignor sued the tenant after the assignment and recovered damages representing the diminution in value of the reversion at the date of the breach or breaches relied upon, could the assignee nevertheless subsequently enforce a forfeiture for failure to put the premises into repair or bring an action against the tenant and recover a similar measure of damages? I need not set out the permutations and combinations of complications and injustices which would result. They seem to me strongly to confirm the construction of section 141 of the Law of Property Act, 1925, to which a consideration of its language had already led me. On this issue, therefore, I would allow this appeal.
There remains the short point about the insurance moneys.
The right to these depends upon the meaning of the letter of November 28, 1945, construed in the light of the provisions of the lease relating to the insurance of the premises and the application of the insurance moneys. The tenant’s obligations under the lease were to insure the premises in the joint names of himself and his landlord against fire for not less than three-quarters of their value, and in the event of damage by fire, to lay out the insurance moneys in reinstating the premises, and to the extent that the insurance moneys were insufficient to meet the cost of reinstatement, to pay the balance of the cost of reinstatement himself. The requirement that the policy should be in joint names was, I think, no more than a method of enabling the landlord to make sure that the policy moneys should be expended on reinstating the premises. Cases relating to policies of insurance against damage by fire taken out by bailees of goods are not in my view apposite. A bailee of goods is not normally liable to his bailor if the goods are damaged by fire while in his custody unless the loss was due to his negligence. He has a possessory interest in the goods as security for his charges and the amount of his charges is the measure of his own loss and of his insurable interest. Where, therefore, he insures the goods, not merely for the amount of his charges for which he has a lien, but for their full value and the terms of the policy are apt to cover goods of which he is only bailee, it may be a reasonable inference that both the bailee and the insurers intended the policy to cover the bailor’s proprietary interest in the goods even though the bailor is not an express party to or named in the policy – for otherwise the policy would a wagering policy. In such a case, and this has long been a common mercantile usage, the bailee insures the bailor’s proprietary interest in the goods as agent for the bailor as his unnamed principal, and even if he is under no contractual liability to his bailor to do so, the contract of insurance can be ratified by the bailor though he was unaware of it at the time at which it was entered into: see Waters v. Monarch Fire AND Life Insurance Co. Ltd.36; London and North Western Railway v. Glyn.37
36 5 E. AND B. 870.; 37 (1859) 1 E. AND E. 652.
But where a tenant has entered into an absolute covenant with his landlord to keep the premises in repair or to reinstate them after fire, the measure of the tenant’s own loss and of his own insurable interest is the full value of the premises. It is not limited to the value of his leasehold “interest” in the premises. There is no business reason why the landlord also should insure his “interest” as long as he can make sure that the policy moneys are not paid to the tenant before the landlord has had an opportunity of exercising his statutory right under the Fires Prevention (Metropolis) Act, 1774, of requiring the insurers to lay out the moneys upon reinstatement of the premises. If the landlord nevertheless thought it desirable to insure his own “interest” in the premises, it would hardly make sense for him to do so with the same insurers as the tenant, for the insurers on paying to the landlord his proportion of the policy moneys would be subrogated pro tanto to the landlord’s remedies under the lease against the tenant under his covenant to reinstate – a liability against which they would themselves be insurers of the tenant. And if the landlord did not expend his proportion of the policy moneys on reinstating the premises, the insurers would be liable twice over unless some term preventing this is to be implied in the policy. A clause in the policy giving the insurers an option to reinstate would not protect the insurers if the policy were not for the full value of the premises. That such circuity and complexity of legal relationships was intended by the parties seems to me to be not only improbable, particularly where the insurance required by the covenant was for three-quarters of the full value of the premises, but also inconsistent with the presence of a covenant by the tenant and the absence of any corresponding covenant by the landlord to spend the policy moneys on reinstating the premises.
At the time at which the insurance moneys were paid in the present case it was impossible lawfully to expend them on reinstating the premises, as a building licence for the purpose could not be obtained. They were accordingly invested in joint names upon terms set out in the letter of November 28, 1945, which included a provision that the tenant should acknowledge his liability to satisfy the covenants contained in the lease notwithstanding that the cost of reinstatement should exceed the amount of the insurance moneys. The balance of the insurance moneys, after deduction of certain expenses, was
“to be charged with the liability of – (the tenant) – to perform his covenants under the lease, the said sum on his decease shall not form part of his estate.”
But for the reference to the death of the tenant, I should have thought it beyond argument that this balance was held as security for the liability of the tenant to perform his covenants under the lease and that upon such performance being completed or excused, the tenant was entitled to the moneys. The judge regarded the reference to the death of the deceased as entitling the landlord to the moneys in the event of performance of the covenants being excused and the deposited moneys not being expended upon the reinstatement of the premises. I do not think that they have this effect. I think that they were inserted per majorem cautelam and were merely intended to ensure that the moneys should continue to be held as security for the performance of the tenant’s covenant to reinstate the premises notwithstanding the death of the tenant.
I accordingly agree with Upjohn L.J. that in the events that executors of King are entitled to the insurance moneys.
Appeals allowed.
Directions as to costs referred to the Taxing Master.
Order that the council pay the taxed costs of and incidental to the executor’s application (except so far as such costs had been increased by the insurance moneys questions) and of the appeal, and indemnify the executor and the estate against the taxed costs of the owner of and incidental to the application (except in so far as such costs had been increased by the insurance moneys questions).
Order that the owner pay the executor the costs of the application and the cross appeal in so far as they had been increased by the insurance moneys questions.
Leave to appeal granted to the owner on condition that he did not seek to disturb the order of the court so far as it related to the executor or the estate being paid or exonerated from the costs of the application and the appeal of the council.
Solicitors: J. G. Barr; C. A. Maddin AND Co.; Edward F. Iwi.
- M. H.
