3PLR – ABBEY NATIONAL BUILDING SOCIETY V. MAYBEECH LTD AND OTHERS
POLICY, PRACTICE AND PUBLISHING, LAW REPORTS 3PLR
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ABBEY NATIONAL BUILDING SOCIETY
V.
MAYBEECH LTD AND OTHERS
[1984] 3 ALL ER 262
CHANCERY DIVISION
18 APRIL 1984
3PLR/1984/1 (CH.D)
LORD:
NICHOLLSJ
MAIN ISSUES
Landlord and tenant – Relief against forfeiture – Underlessee – Lease mortgaged – Relief of mortgagee – Loan to lessee by mortgagee secured by charge by way of legal mortgage – Action for possession by lessor for non-payment of maintenance contribution – Proceedings unknown to mortgagee until after forfeiture of lease – Relief barred by statute – Whether court having equitable jurisdiction to grant relief – Law of Property Act 1925, s146(4).
A mortgagee advanced money to a lessee of a flat, the loan being secured by a charge by way of legal mortgage. Subsequently the lessor of the flat brought proceedings against the lessee to enforce his right to forfeit the lease for non-payment of certain maintenance contributions payable under the lease but without notifying the mortgagee of the proceedings. In consequence the lease was forfeited and the lessor obtained possession of the premises under a court order without the knowledge of the mortgagee. When it discovered what had happened, the mortgagee applied to the court for relief against forfeiture of the lease. The lessor contended that it was too late for the court to grant such relief because the mortgagee was a ‘person claiming as under-lessee [an] estate or interest in the property comprised in the lease’, within s146(4)a of the Law of Property Act 1925, and therefore could only be granted relief while the lessor was ‘proceeding by action or otherwise to enforce a right of re-entry or forfeiture’, which the lessor was no longer doing once judgment had been executed and the lessor had gone into possession.
Held –
On its true construction, s146(4) of the 1925 Act did not displace the court’s inherent equitable jurisdiction to grant relief to a person claiming as underlessee where the lessee failed to pay a sum (other than rent) due under the lease. It followed that, although it was too late for the court to grant the mortgagee relief under s146(4), the court could, and would, grant relief in the exercise of its equitable jurisdiction Dictum of DayJ in Nind v Nineteenth Century Building Society [1894] 1 QB at 474, Gray v Bonsall [1904] 1 KB 601 and dictum of Lord Wilberforce in Shiloh Spinners Ltd v Harding [1973] 1 All ER at 102 applied.
Cases referred to in judgment
Barrow v Isaacs AND Son [1891] 1 QB 417, CA.
Belgravia Insurance Co Ltd v Meah [1963] 3 All ER 828, [1964] 1 QB 436, CA.
Burt v Gray [1891] 2 QB 98, DC.
Doe d Whitfield v Roe (1811) 3 Taunt 402, 128 ER 160.
Egerton v Jones [1939] 3 All ER 889, [1939] 2 KB 702, CA.
Grand Junction Co Ltd v Bates [1954] 2 All ER 385, [1954] 2 QB 160, [1954] 3 WLR 45.
Gray v Bonsall [1904] 1 KB 601, CA.
Hare v Elms [1893] 1 QB 604, DC.
Hill v Barclay (1810) 16 Ves 402, [1803–13] All ER Rep379, 33 ER 1037,LC; subsequent proceedings (1811) 18 Ves 56, 34 ER 238,LC.
Howard v Fanshawe [1895] 2 Ch581, [1895–9] All ER Rep855.
Humphreys v Morten [1905] 1 Ch739.
Lovelock v Margo [1963] 2 All ER 13, [1963] 2 QB 786, [1963] 2 WLR 794, CA.
Nind v Nineteenth Century Building Society [1894] 1 QB 472, DC; rvsd [1894] 2 QB 226, CA.
Rogers v Rice [1892] 2 Ch170, [1891–4] All ER Rep1181, CA.
Shiloh Spinners Ltd v Harding [1973] 1 All ER 90, [1973] AC 691, [1973] 2 WLR 28, HL.
Webber v Smith (1689) 2 Vern 103, 23 ER 676.
Cases also cited
Chelsea Estates Investment Trust Co Ltd v Marche [1955] 1 All ER 195, [1955] Ch328.
Dendy v Evans [1910] 1 KB 263, [1908–10] All ER Rep589, CA.
Matthews v Dobbins [1963] 1 All ER 417, [1963] 1 WLR 227, CA.
Newbolt v Bingham (1895) 72 LT 852, CA.
Scandinavian Trading Tanker Co AB v Flota Petrolera Ecuatoriana, The Scaptrade [1983] 2 All ER 763, [1983] 2 AC 694, HL.
Standard Pattern Co Ltd v Ivey [1962] 1 All ER 452, [1962] Ch432.
Thatcher v C H Pearce AND Sons (Contractors) Ltd [1968] 1 WLR 748.
Originating summons
By an originating summons dated 21 November 1983 the plaintiffs, Abbey National Building Society, applied for relief from forfeiture of a lease dated 10 June 1980 and made between Signgate Properties Ltd as lessors and Paul Henry Newberry as lessee, on such terms as to payment of rent and costs and as to the remedying of breaches of covenant as the court thought fit. The defendants were (1) Maybeech Ltd, to whom Signgate Properties Ltd had assigned its reversion, (2) Kwang Sek Chang, to whom Paul Newberry had assigned the lease, and (3) Paul Newberry. The facts are set out in the judgment.
Gavin LightmanQC and Peter Crampin for Abbey National.
Paul de la Piquerie for Maybeech.
The second and third defendants did not appear.
Cur adv vult
18 April 1984. The following judgment was delivered.
MAIN JUDGMENT
NICHOLLSJ. This originating summons raises the question whether, after a lessor has forfeited a lease for non-payment of a sum of money (other than rent) payable thereunder by the lessee and has retaken possession of the demised premises under a court order, the court has any power to grant relief to a mortgagee of the forfeited lease.
The facts are not in dispute. On 10 June 1980 Signgate Properties Ltd granted to Mr Paul Newberry, the third defendant, a lease (strictly, an underlease, but nothing turns on this) of Flat 9, 92–95 Wilton Road, London SW1, for a term of 82 years (less 10 days) from 10 February 1979. A premium of £17,700 was paid by the lessee, and the lease reserved a ground rent of £50 per annum (reviewable after 25 and 46 years). By cl2(1) the lessee covenanted to pay the reserved rent, and by cl2(2) he covenanted to pay to the lessor by way of lessee’s maintenance contribution one-twelfth of certain specified outgoings such as the cost of insurance and repair of the structure of the building. The lease contained no provision to the effect that the sums payable under cl2(2) were to be, or to be recoverable as, rent. The lease included a common form provision for re-entry and forfeiture in the event of non-payment of rent or breach of lessee’s covenants.
In December 1980 Signgate Properties Ltd assigned its reversion to the first defendant, Maybeech Ltd. On 19 January 1981 Mr Newberry assigned the lease to Mr Kwang Sek Chang (the second defendant), and the Abbey National Building Society, the plaintiff in these proceedings, made a loan to him of £17,608·75 secured by a charge by way of legal mortgage over the lease. On the following day solicitors for Mr Kwang Sek Chang gave written notice to Maybeech’s solicitors of the assignment of the lease to him and of the mortgage to Abbey National. In due course Mr Kwang Sek Chang was registered in HM Land Registry as the proprietor of the lease and Abbey National was registered as proprietor of the charge. The existence of the lease was also noted in the charges register of the title to the reversion.
Mr Kwang Sek Chang fell into arrears with payment of the ground rent and maintenance contributions, and in February 1983 Maybeech through its solicitors served on him a notice under s146(1) of the Law of Property Act 1925 in respect of the non-payment of two years’ ground rent (£100) and of maintenance contributions amounting to £419·49. No reply was received. Maybeech then commenced forfeiture proceedings against Mr Kwang Sek Chang in the Westminster County Court. On 29 July 1983, with Mr Kwang Sek Chang not represented, the court made an order for delivery up to Maybeech forthwith of possession of the demised property and for payment by Mr Kwang Sek Chang to Maybeech of the sum of £634·49 (being the rent and maintenance contributions referred to in the s146 notice plus £115 for costs incurred in connection with the notice). On 24 August the county court bailiff executed a warrant for possession, and recovered possession of the flat for Maybeech. In September Maybeech applied to the Land Registry for the reference to the forfeited lease to be deleted from its title to the reversion and for the closure of Mr Kwang Sek Chang’s title relating to the lease. On 30 September the Land Registry wrote to Abbey National giving it notice of Maybeech’s application, stating that effect would be given to the application after 14 days, and adding that if Abbey National had any objection to the application an appropriate statement should be lodged within that period.
This was the first notification to Abbey National, from any source, of the forfeiture proceedings. Until receipt of this letter on 4 October the building society had no knowledge of the proceedings, or of the judgment, or of the execution of the judgment. Abbey National did not lodge any statement of objection with the Land Registry, and the Registry duly closed the title to the lease and expunged the reference thereto from Maybeech’s title to the reversion. Instead Abbey National wrote to Maybeech’s solicitors expressing concern and surprise at what had happened. From the correspondence which ensued it is apparent that Maybeech’s failure to notify Abbey National of the proceedings was not an oversight but was done deliberately.
By the middle of October negotiations by Maybeech for the grant of a new lease (for a term of about 90 years, in return for a premium of £20,000) had reached the stage of a draft contract being sent to a potential new lessee. In November Abbey National, owed about £17,600 on the security of the forfeited lease, commenced proceedings for relief from forfeiture in the county court but these were abandoned after they had barely begun.
The originating summons before me was issued on 21 November 1983. The relief sought is an order under the inherent jurisdiction of the court relieving Abbey National from forfeiture of the lease. I should mention that Abbey National has not been able to trace its borrower, Mr Kwang Sek Chang, so although he is named as a defendant he has not been served with the proceedings.
Before continuing I should refer to some of the well-known provisions in s146 of the 1925 Act, which are central to the issue before me. The effect of sub-s(1) is that a right of re-entry or forfeiture under any proviso in a lease for a breach of any covenant or condition in the lease, is not enforceable until the lessor has served on the lessee the prescribed notice and the lessee has failed to remedy the breach if remediable and to pay compensation therefor. Subsection (2) reads as follows:
‘Where a lessor is proceeding, by action or otherwise, to enforce such a right of re-entry or forfeiture, the lessee may, in the lessor’s action, if any, or in any action brought by himself, apply to the court for relief; and the court may grant or refuse relief, as the court, having regard to the proceedings and conduct of the parties under the foregoing provisions of this section, and to all the other circumstances, thinks fit; and in case of relief may grant it on such terms, if any, as to costs, expenses, damages, compensation, penalty, or otherwise, including the granting of an injunction to restrain any like breach in the future, as the court, in the circumstances of each case, thinks fit.’
Subsection (4) reads:
‘Where a lessor is proceeding by action or otherwise to enforce a right of re-entry or forfeiture under any covenant, proviso, or stipulation in a lease, or for non-payment of rent, the court may, on application by any person claiming as under-lessee any estate or interest in the property comprised in the lease or any part thereof, either in the lessor’s action (if any) or in any action brought by such person for that purpose, make an order vesting, for the whole term of the lease or any less term, the property comprised in the lease or any part thereof in any person entitled as under-lessee to any estate or interest in such property upon such conditions as to execution of any deed or other document, payment of rent, costs, expenses, damages, compensation, giving security, or otherwise, as the court in the circumstances of each case may think fit, but in no case shall any such under-lessee be entitled to require a lease to be granted to him for any longer term than he had under his original sub-lease.’
By virtue of sub-s(5) ‘lease’ includes an underlease, and ‘lessor’ and ‘lessee’ bear corresponding meanings, and ‘under-lessee’ includes any person deriving title under an under-lessee. Subsections (8), (9) and (10) provide that the section does not extend to certain specified covenants or conditions such as a covenant or condition against assignment or underletting, or apply to a condition for forfeiture on bankruptcy of the lessee or on taking in execution of the lessee’s interest in certain instances or events. Subsection (11) provides that the section does not, save as otherwise mentioned, affect the law relating to re-entry or forfeiture or relief in case of non-payment of rent. I should add that the Law of Property (Amendment) Act 1929, s1, provides that nothing in sub-ss(8), (9) and (10) of s146 affects the provisions of s146(4).
With that introduction I turn to the issues in these proceedings. The case for Maybeech, the lessor, can be stated shortly. The events entitling Maybeech to forfeit the lease were the tenant’s failure to pay rent and also his failure to pay other sums of money which were not rent, namely maintenance contributions. Whilst the application by Abbey National for relief from forfeiture in respect of the non-payment of rent could be made either under s210 of the Common Law Procedure Act 1852 (in which case the time limit for making the application would be six months from the execution of the possession order) or under s146(4) of the 1925 Act, the only relieving jurisdiction applicable in respect of the non-payment of maintenance contributions is that provided by s146(4). Abbey National falls within that subsection because, as a mortgagee under a charge expressed to be by way of legal mortgage, it is entitled to the same right to apply for relief from forfeiture of the charged lease as if a sub-term less by one day than the term of the lease had been created in its favour: see s87(1) of the 1925 Act and Grand Junction Co Ltd v Bates [1954] 2 All ER 385, [1954] 2 QB 160. However, the court’s jurisdiction to grant relief under s146(4) is governed, and limited, by the opening words of that subsection: ‘Where a lessor is proceeding by action or otherwise to enforce a right of re-entry or forfeiture … ‘ Nearly a century ago the Court of Appeal (Lord ColeridgeCJ, Lindley and KayLJJ) held in Rogers v Rice [1892] 2 Ch170, [1891–4] All ER Rep1181, construing similar wording in s14(2) of the Conveyancing and Law of Property Act 1881, that after a lessor had given a proper notice under s14(1) of the 1881 Act (corresponding to s146(1) of the 1925 Act), which the lessee had not complied with, and the lessor had obtained judgment for possession, and that judgment had been executed and the lessor had gone into possession, the lessor was no longer ‘proceeding’ to enforce his right of re-entry. Hence once those steps had been taken it was too late for the lessee to apply for relief. That decision, on the subsection which was the predecessor of s146(4), must apply equally to s146(4) where the relevant wording is identical. In the present case the originating summons was not issued by Abbey National until after Maybeech had taken all the steps necessary to enforce its right of re-entry, including retaking possession. In these circumstances Abbey National’s application was made too late and fails for that reason.
Furthermore, it was said, it is of no assistance to Abbey National that Maybeech did not inform the building society of service of the s146(1) notice, or make Abbey National a party to or give it notice of the forfeiture proceedings, even though Maybeech was aware of the existence of the mortgage: the lessor’s obligations in this field were considered by the Court of Appeal in Egerton v Jones [1939] 3 All ER 889 at 892–893, [1939] 2 KB 702 at 706–707, where GreeneMR said:
‘The substantial point upon which counsel for the respondents said that the terms which the learned judge fixed were right ones, was based upon the fact that when the plaintiffs began these proceedings, and during their continuance, they gave no notice to the mortgagees. Counsel said, and said truly, that if the ejectment action against Miss Jones had been carried to its conclusion and the plaintiffs had re-entered, the mortgagees, as under-lessees, would have lost all right to apply for relief. That was settled as long ago as 1892 by a decision of this court in Rogers v. Rice ([1892] 2 Ch170, [1891–4] All ER Rep 1181). Notwithstanding that decision, the legislature did not think fit in 1925 to alter the law as there laid down. Accordingly, in the case of a mortgagee by sub-demise, that mortgagee is always at the risk of the lessor obtaining re-entry for breach of covenant without the mortgagee knowing anything about it in which case the mortgagee is completely shut out. Every mortgagee, therefore, knows that that is the risk he runs. If after taking a covenant from his mortgagor to observe the covenants in the lease, he takes no steps whatsoever to satisfy himself from time to time that no breach of covenant is taking place, he is always exposed to the risk that behind his back and without his knowledge, the lessor will succeed in re-entering, and so determining the lease with the result that all possibility of relief from forfeiture is lost to the mortgagee. That is one of the risks of the game.’
Before mentioning the submissions made in answer to Maybeech’s formidable case I should dispose of one point. As I have already observed, the application to the county court was founded on non-payment both of rent and of maintenance contributions. Under s191(1) of the County Courts Act 1959, where a lessor is seeking to enforce a right of re-entry or forfeiture on the ground of non-payment of rent the county court has jurisdiction (subject to certain conditions being fulfilled) to order possession of the land to be given to the lessor ‘at the expiration of such period, not being less than four weeks from the date of the order, as the court thinks fit’. In the instant case the order made was for delivery up of possession forthwith. Such an order could not have been made under s191(1). Before me it was common ground that, although rent was in arrear, the order for possession was made not on that ground but on the ground of breach of the covenant to pay a sum other than rent, namely, maintenance contributions (to which the provision in s191(1) for a minimum period of four weeks’ grace is not applicable). Hence in the present case there is no question of the application for relief being barred by the provisions of s191(1)(c).
The submissions of counsel for Abbey National encompassed the following points. First, whatever may have been the precise limits of the ancient jurisdiction of courts of equity to relieve from forfeiture of leases based on defaults by lessees other than non-payment of rent (for example, disrepair), that jurisdiction did include power to relieve from forfeiture in respect of breach of a lessee’s covenant to pay to his lessor a sum of money otherwise than as rent. In this regard I was referred to passages in the judgments of Lord EldonLC in Hill v Barclay (1811) 18 Ves 56, 34 ER 238 and KayLJ in Barrow v Isaacs AND Son [1891] 1 QB 417 at 425 and in the speeches of Lord Wilberforce and Lord Simon in Shiloh Spinners Ltd v Harding [1973] 1 All ER 90 at 100–103, 103–104, [1973] AC 691 at 722–725, 726. Second, the relieving jurisdiction of courts of equity was exercisable in favour of underlessees and mortgagees: see Webber v Smith (1689) 2 Vern 103, 23 ER 676 and Doe d Whitfield v Roe (1811) 3 Taunt 402, 128 ER 160. Third, the equitable jurisdiction existed even where the forfeiture had been completed by judgment and execution: see Hare v Elms [1893] 1 QB 604 at 607–608 per DayJ. Fourth, the equitable jurisdiction (so far as it has not been displaced or superseded by statute) of the former High Court of Chancery is now vested in the High Court: see the Supreme Court of Judicature Act 1873, s16 the Supreme Court of Judicature (Consolidation) Act 1925, s18 and the Supreme Court Act 1981, s19. Thus far counsel for Maybeech was ready to go along with counsel for Abbey National: he accepted the substance of these four submissions.
Where counsel parted company was on the effect of the statutory intervention in this field. Counsel for Abbey National submitted that, save where expressly cut down, the equitable jurisdiction still subsists today, and that accordingly, where a lessee fails to pay a sum due under his lease otherwise than as rent, the court still has power under its ancient equitable jurisdiction to grant relief to an underlessee. Counsel for Maybeech’s submission was that in this field s146(4) of the 1925 Act is a complete code in respect of when and where relief is available: Parliament has prescribed the circumstances in which (and, by implication, in which alone) the court may grant relief to an underlessee, and no residual jurisdiction remains in the court. He relied on a passage in the speech of Lord Wilberforce in Shiloh Spinners Ltd v Harding [1973] 1 All ER 90 at 101, [1973] AC 691 at 724. In that case a right of entry was reserved in favour of an assignor of a leasehold interest in the event of a breach of covenant by the assignee. One of the questions which arose was whether a court of equity had any power to grant relief against the exercise of that right of entry, and on this a submission was made that the statutory intervention in the case of leases indicated that it was not intended that there should be a corresponding jurisdiction outside the case of leases. Delivering the leading speech Lord Wilberforce said:
‘As regards covenants to pay rent, in spite of Lord EldonLC’s reservations, the matter has, subject to qualifications which need not be discussed, been taken over by statute, first by 4 Geo 2 c 28(the Landlord and Tenant Act 1730), then by later Acts leading up to the Law of Property Act 1925. The same is true of covenants to insure and other covenants in leases.’
After commenting on Lord EldonLC’s decision in Hill v Barclay (1811) 18 Ves 56, 34 ER 238, Lord Wilberforce considered two arguments against the existence of a relieving jurisdiction in Shiloh Spinners Ltd v Harding, and said regarding the second argument ([1973] 1 All ER 90 at 102, [1973] AC 691 at 724–725):
‘Secondly, a point of more difficulty arises from the intervention of Parliament in providing specific machinery for the granting of relief against forfeiture of leases (see Law of Property Amendment Act 1859, Common Law Procedure Act 1852, Law of Property Act 1925, Leasehold Property (Repairs) Act 1938 and other statutes). This, it is said, negatives an intention that any corresponding jurisdiction should exist outside the case of leases. I do not accept this argument. In my opinion where the courts have established a general principle of law or equity, and the legislature steps in with particular legislation in a particular area, it must, unless showing a contrary intention, be taken to have left cases outside that area where they were under the influence of the general law. To suppose otherwise involves the conclusion that an existing jurisdiction has been cut down by implication, by an enactment moreover which is positive in character (for it amplifies the jurisdiction in cases of leases) rather than negative. That legislation did not have this effect was the view of Kay LJ in Barrow v Isaacs AND Son [1891] 1 QB 417 at 430 when he held that covenants against assigning—excluded from the Conveyancing Act 1881—were left to be dealt with according to the ordinary law.’
Counsel for Maybeech submitted that, unlike the position in Shiloh Spinners Ltd v. Harding the legislature has stepped in with particular legislation in the particular area of law relevant in the present case, and this negatived an intention that any other jurisdiction should exist in this area.
On its face s146(4) is an enabling provision. Admittedly there is no express provision in the 1925 Act negativing the continued existence of any equitable jurisdiction, and so the question I have to consider is whether impliedly the statutory intervention in this field has had the negativing effect being contended for. To answer this question requires some consideration of the history and terms of the statutory intervention. The common Law Procedure Act 1852, ss210 to 212, substantially re-enacting the Landlord and Tenant Act 1730, ss2 to 4, excused a lessor from the necessity of making a formal demand for payment where rent was in arrears for six months, and limited to a period of six months from the execution of the judgment the time within which an application for relief could be made. Those provisions did not deal with the case of a lessee wishing to apply for relief after a lessor had re-entered peaceably, but in Lovelock v Margo [1963] 2 All ER 13, [1963] 2 QB 786 the Court of Appeal, applying the decision of StirlingJ in Howard v Fanshawe [1895] 2 Ch581, [1895–9] All ER Rep855, affirmed the continued existence of the equitable jurisdiction to grant relief in such a case. Thus those statutory provisions were not treated as negativing the existence of the relieving jurisdiction where a forfeiture had been completed by a means not referred to in the statute.
By the Law of Property Amendment Act 1859, s4, the court was granted power to relieve against forfeiture for breach of a covenant to insure, in certain cases. In Barrow v Isaacs AND Son [1891] 1 QB 417 at 429 KayLJ commented on the background to that enactment. Having referred to the legislation limiting the time within which relief could be given in cases of non-payment of rent, he said:
‘Then ensued a long period in which equity seems to have refused relief in cases of breach of any of the other covenants in a lease. Very hard cases occurred, in which unconscionable landlords insisted on their legal rights. Especially hard were these forfeitures for breach of the covenant to insure when no damage had ensued.’
In 1860 the Common Law Procedure Act conferred on the common law courts power to exercise the Court of Chancery’s jurisdiction to grant relief from forfeiture in cases of non-payment of rent (s1) and failure to insure (s2). This Act made no mention of any other jurisdiction of the Court of Chancery to relieve from forfeiture.
Section 14 of the Conveyancing and Law of Property Act 1881 was the predecessor section, in part, of s146 of the 1925 Act. In particular, sub-ss(1), (2) and (8) were in all relevant respects in the same terms as sub-ss(1), (2) and (11) respectively of s146. Section14(7) repealed the Law of Property Amendment Act 1859, s4, and the Common Law Procedure Act 1860, s2. However, s14 did not contain any subsection corresponding to s146(4), enabling underlessees to apply for relief. In 1891 it was decided that s14 of the 1881 Act did not enable an underlessee of part of the demised property to apply for relief: see Burt v Gray [1891] 2 QB 98. In the following year s4 of the Conveyancing and Law of Property Act 1892 was enacted. This section provided:
‘Where a lessor is proceeding by action or otherwise to enforce a right of re-entry or forfeiture under any covenant, proviso or stipulation in a lease, the court may, on application by any person claiming as under-lessee any estate or interest in the property comprised in the lease or any part thereof either in the lessor’s action (if any) or in any action brought by such person for that purpose, make an order vesting [it then continues in the same terms as s146(4) of the 1925 Act].’
Having regard to the subsequent legislative history, the true construction of this section is of crucial importance: did this section prescribe exhaustively the circumstances in which thenceforth an underlessee could apply for relief and thereby displace any existing jurisdiction in that regard?
Considering, first, the language employed, it will be seen that this section, as also s14(2) of the 1881 Act regarding applications by lessees, was expressed in positive, enabling terms. It conferred a power on the court, for the benefit of underlessees. There are no words which display any intention to abrogate or limit any existing jurisdiction possessed by the court. Second, I turn to the decision of the Court of Appeal in Gray v Bonsall [1904] 1 KB 601, which I find of considerable assistance. There an underlessee was granted relief in respect of non-payment of rent due under the headlease. The question which arose was whether the court’s power to grant that relief arose under the Common Law Procedure Act 1860, s1, or under s4 of the 1892 Act. It was argued that it could not have been intended that there should be separate, and inconsistent, provisions for relief in such a case under the 1860 Act and under the 1881 and 1892 Acts. RomerLJ rejected this ‘no overlap’ argument, saying that it was clear that relief might be granted to the underlessees in that case either under the 1860 Act or under s4 of the 1892 Act. He said (at 607):
‘In my opinion, s.4 of the Act of 1892 is not a mere amendment of s.14 of the Act of 1881 as suggested but, on the contrary, is a general enabling clause, by which the Court is empowered to give relief to an underlessee in the case of forfeiture under any covenant, proviso or stipulation in a lease, on such conditions as appear to the Court to be just.’
MathewLJ concurred, describing s4 of the 1892 Act as ‘an independent enactment, which must be construed according to the plain meaning of its terms’ (at 609). Thus the court construed s4 as not excluding the (wider) jurisdiction already existing in the case of non-payment of rent.
In line with this construction of s4 of the 1892 Act as non-exhaustive, although not so significant for the purpose in hand, is the decision in Nind v Nineteenth Century Building Society [1894] 1 QB 472. In that case it was argued that an underlessee of the whole of the premises demised by the headlease could not be within s14 of the 1881 Act, because s4 of the 1892 Act plainly applied to such an underlessee and that section appeared to be based on the assumption that prior to its enactment the power thereby conferred no more existed in the case of an underlessee of the whole than it did in the case of an underlessee of part. In declining to accept this, DayJ said (at 477):
‘But it was said that the language of s.4 of the Act of 1892, which was admittedly passed with the object of getting rid of the effect of Burt v. Gray ([1891] 2 QB 98), applies in terms to underlessees of the whole of the demised premises as well as to underlessees of a part whereas, if the plaintiff’s contention is right, and if the Court already had power under the Act of 1881 to protect underlessees of the whole of the demised premises, the language of the section is unnecessarily wide. It may be that it is so, and that so far as it confers upon the Court a power which they had already got, it is superfluous, but that cannot affect our decision.’
(In passing, I mention that this decision was not referred to in the course of the hearing before me, but the conclusion I have reached would have been the same even had I not become aware of this authority.)
I return to the question of construction posed above. I summarise my answer to that question as follows. Section4 was expressed in enabling terms, and drew no distinction between covenants for payment of rent and other covenants. If, as has been decided by the Court of Appeal in Gray v Bonsall, that is so, this section was not an exhaustive provision regarding the court’s jurisdiction to grant relief to underlessees in rent breach cases and it did not displace the existing jurisdiction in that regard, I can see no sound basis for construing the section as an exhaustive provision regarding the court’s jurisdiction to grant relief to underlessees in other cases, displacing any existing jurisdiction in such other cases.
I can complete this summary of the relevant statutory provisions very shortly. In 1925 s146, as amended by the Law of Property (Amendment) Act 1929, s1 (correcting an alteration made inadvertently), replaced s14 of the 1881 Act and s4 of the 1892 Act without any material amendment. The phrase ‘or for non-payment of rent’ was added to subsection (4) in order to preserve the existing law as decided in Gray v Bonsall: see Belgravia Insurance Co Ltd v Meah [1963] 3 All ER 828 at 834, [1964] 1 QB 436 at 448 per RussellLJ.
Against the background of that history of the legislative intervention, my conclusion is that s4 of the 1892 Act did not displace any other jurisdiction then possessed by the court to grant relief to underlessees, and that in that respect the repeal of that section and its replacement without any relevant amendment by s146(4) of the 1925 Act did not change the law.
I should mention some other points. It may be said that, if the ancient relieving jurisdiction still exists in non-rent cases, it is surprising that its existence was not referred to by anyone in cases such as Rogers v Rice, and remarkable that this flower of equity has managed to survive, for so long and unnoticed, in Lord Simon’s juristic desert (see Shiloh Spinners Ltd v Harding [1973] 1 All ER 90 at 104, [1973] AC 691 at 726). Again, it may be said that underlying all the legislation from 1859 onwards enabling relief to be given in non-rent cases has been the assumption that courts of equity possessed no jurisdiction of their own in such cases, and it is now far too late for the court to seek to assert such a jurisdiction. Further, it can be said that if such a jurisdiction exists today, it will be a jurisdiction concurrent with the statutory jurisdiction, but lacking certainty as to its ambit: the courts will be faced with deciding now questions which were the subject of much controversy in the last century concerning the circumstances in which (or the covenants as to which) courts of equity could or would give relief.
I have not been persuaded by these considerations. I do not know, but I suspect that instances in which an applicant with a substantial claim for relief finds himself outside the statutory jurisdiction are few and far between (and in passing I note that Abbey National’s assistant chief solicitor could not recall a case over the last ten years where a security had been forfeited without the building society being notified). More importantly, it is to be borne in mind that only comparatively recently has the legal profession had the benefit of Lord Wilberforce’s authoritative explanation of cases such as Hill v Barclay (see Shiloh Spinners Ltd v Harding [1973] 1 All ER 90 at 100–103, [1973] AC 691 at 722–725). Moreover, although I have approached the plaintiff’s claim to have rediscovered an ancient equitable jurisdiction with considerable caution, I think the question before me, on the construction and effect of s146(4), is to be answered no differently now from the way the comparable question on s4 of the 1892 Act would have been answered shortly after the passing of that Act. Whatever answer the court might then have given regarding the precise extent of the jurisdiction of courts of equity to relieve in cases other than for non-payment of rent or regarding the circumstances in which that jurisdiction would be exercised, it seems to me clear that the court would have held that s4 of the 1892 Act was not intended to negative any other jurisdiction then possessed by the court. In my judgment, therefore, Abbey National’s submission that the court has jurisdiction to grant it relief is well founded.
On this part of the case there is one last point I must mention. For Maybeech it was submitted in effect that Abbey National has only itself to blame for its present predicament, because in the case of registered land the lessor was still ‘proceeding’ at the time when the Land Registry notified Abbey National of Maybeech’s application to have the lease expunged from the register. It was submitted that Maybeech could not have granted a new lease to anyone else until the register had been amended, and therefore until that had been done it was open to Abbey National to have applied to the court under s146(4). I cannot accept this. The registrar had no discretion to exercise. His function was to amend the register to record that the lease had been determined on being satisfied of this by the production to him of appropriate evidence. Thus Maybeech’s application to the registrar was not to enforce its right of re-entry or forfeiture: Maybeech had already lawfully re-entered and the forfeiture was complete. Its application was to have the entries on the register brought up to date and into line with the legal position as already changed by the re-entry and forfeiture.
I come now to the question whether, on the facts of this case, the court should exercise its jurisdiction in favour of granting relief. In my view it should; the breaches of covenant were non-payment of rent and other money, Abbey National was not at fault in any way regarding those breaches or in not applying for relief at an earlier stage, the value of the lease far exceeded the amount of the unpaid sums, if relief is not granted Abbey National may well lose the whole of the amount outstanding and which was secured on the lease, and it is not suggested that Maybeech has suffered any loss which will not be adequately recompensed by payment of the arrears of rent and maintenance contributions plus interest and costs. I think this is eminently a case in which relief should be granted.
Before deciding the terms on which relief should be given, I have to consider what is the form which the relief should take, for this reason. The original lessee, Mr Newberry, was added as third defendant to these proceedings because Maybeech reserved the right to take the point that in his absence either the court could not, or in the circumstances the court should not, grant relief. Abbey National contended that joining Mr Newberry was unnecessary and pointless and submitted that the costs incurred by such joinder should be borne by Maybeech. To understand the rival contentions on this I must mention the nature or form of the relief granted by courts of equity on the one hand and available under the 1925 Act on the other hand.
In courts of equity relief was afforded by granting an injunction to restrain the lessor from proceeding with his action of ejectment where forfeiture had not been completed. Where the forfeiture was complete, relief took the form of ordering a new lease to be executed similar to the old lease. For that purpose the parties to the new lease had to be before the court. In cases where the applicant was not the original lessee the practice of the court was that, unless good cause was shown for proceeding in his absence, the original lessee was required to be before the court (so that, for example, he could make representations on why he should not have reimposed on him the burden of the covenants from which he had been released by the forfeiture): see Hare v Elms [1893] 1 QB 604, and Humphreys v Morten [1905] 1 Ch739. However, under the statutory jurisdiction the court has power to order the execution of a new lease directly in favour of the applicant (eg the underlessee), and since an order in this form would not affect him, it is not necessary for the original lessee to be brought before the court before such an order is made.
Against this background counsel for Abbey National submitted that joinder of Mr Newberry was unnecessary, for two reasons: first, in exercising the old jurisdiction the court today should act by analogy to the statutory provisions and order the grant of a new lease directly to the applicant underlessee; second, even if relief were granted by way of an order for the resurrection of the old lease, in this case the original lessee’s presence was unnecessary. I am unable to accept either of these submissions. Abbey National is invoking the old jurisdiction of the courts of equity; under that jurisdiction relief of a particular nature, or in a particular form, was available; I do not see what is the basis on which in exercising that jurisdiction today the court can grant relief of a different nature or in a different form. On the alternative submission, had Mr Newberry’s consent to the relief sought by Abbey National, expressed in suitable terms and form, been obtained before he was joined as a party, it might well be that his formal joinder could have been dispensed with in this case. So far as I know this was not done. On the contrary, as soon as these proceedings came on for hearing before me counsel for Abbey National sought and obtained a short adjournment to enable terms between Mr Newberry and Abbey National to be agreed or finalised. Counsel for Mr Newberry then withdrew and took no part in the proceedings. In those circumstances it seems to me that Mr Newberry was a necessary party at the time he was joined.
I come, finally, to the terms on which relief should be granted. In my judgment the appropriate terms are that Abbey National should pay to Maybeech all arrears of rent and maintenance contributions with interest, Maybeech’s costs of the forfeiture proceedings, and Maybeech’s costs of these proceedings except in so far as those costs have been increased by Maybeech’s opposition to the grant of relief. To the extent that the costs have been so increased Maybeech should pay the costs of Abbey National and Mr Newberry. There will be the usual set-off in respect of the orders as to costs.
Order accordingly.
Solicitors: Kleinman Klarfeld AND Co (for Abbey National); Freeman Box AND Co (for Maybeech).
Jacqueline Metcalfe Barrister.
