B e f o r e :
THE MASTER OF THE ROLLS
(Lord Denning)
LORD JUSTICE UPJOHN
and
LORD JUSTICE DIPLOCK
IN THE MATTER OF THE ESTATE OF RICHARD FRANCIS_HENRY KING dec.
Between
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Between:
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(Transcript of the Shorthand Notes of The Association of Official Shorthandwriters, Ltd.,
Room 392, Royal Courts of Justice, and 2, Now Square, Lincoln's Inn, London, W.C.2).
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MR H.E.FRANCIS, Q.C. and MR S.L. NEWCOMBE (instructed by Mr J.G. Barr, Solicitor to the London County Council)
appeared as Counsel for the Appellants.
MR R.W. GOFF, Q.C. and MR A.A.BADEN FULLER (instructed by Messrs C.A. Maddin & Co.)
appeared as Counsel for the Respondent, Louis Waiter John Robinson.
MR A.J. BALCOMBE and MR I.D. IWI (instructed by Mr Edward F. Iwi)
appeared as Counsel for the Respondent, Edward Ernest Graves-Tagg.
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HTML VERSION OF JUDGMENT
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Crown Copyright ©
THE MASTER OF THE ROLLS: On the 5th December, 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 eighty years from the 29th September, 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 torn 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 bo received under any such policy "in rebuilding or repairing such part of the said premises as shall have boon 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 Mr Edward Ernest Graves Tagg (hereinafter called "Mr Tagg"). The lease has been vested in Mr Richard Henry Francis Ling (hereinafter called Mr Ling) and his executors. The lessee, Mr Ling, sub-let the premises for twenty-one years from the 29th September, 1944, and covenanted with the sub-lessee that he (Mr Ling) would perform the covenants of the head lease, and would insure against fire.
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. Mr 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 Mr Tagg and Mr 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 a.3 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".
Mr King died on the 18th June, 1949, and the defendants are the executors of his will. The factory never has been repaired or rebuilt. In 1951 Mr Tagg served notice on Mr 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 the l6th February, 1953; an order was made for the administration of Mr King's estate in Chancery. In July 1954 both Mr Tagg and the sub-lessee made claims in the administration, claiming to be creditors of Mr King's estate. Mr Tagg claimed £19,619 damages for breaches of covenant to repair or reinstate and £800 arrears of rent under the lease. The sub-lessee 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 4th September, 1954. On the 17th November, 1954, the London County Council served on Mr Tagg notice to treat. On the 9th September, 1955, they served notices to treat on Mr King's executor and the sub-lessee. On the 28th December, 1960, Mr Tagg transferred the fee simple to the London County Council and they paid him £3,750 for it. On the 6th March, 1961, the sub-lessee transferred the sub-lease to the London County Council and they paid him £2,500 for it. Mr Ring's executors have not yet transferred the lease to the London County Council but the compensation for it has boon fixed at £1, subject to resolving the disputes here under debate.
The first point is this. Mr Tagg says that, although ho has transferred his interest in the factory to the London County Council, ho can still claim damages against Mr King's executors for their failure to repair or reinstate the premises after the fire. Mr King's executors say that if they are liable to Mr 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 Mr Tagg raises directly for decision this important point: when a lessor assigns his reversion to a purchaser, does ho still retain the right to sue the lessee for broaches of covenant that occurred before the assignment? Both Woodfall and Foa on Landlord and Tenant say that he can. Thus Woodfall says (20th Edition, p.852) that
"The assignee of a reversion has no right of action against the lessee for arrears of rent previously due nor for damages for broaches of covenants, though 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 (8th Edition, 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 and last Edition in 1862 (p.l8l):
"The purchaser is entitled to the benefit of covenants in a lease by the lessee with the vendor and may recover for a broach 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 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 Edition, Vol.11, 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 ho 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 moan 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 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 throat of forfeiture, the lessee may rebuild and reinstate of his own accord. Can the assignor afterwards sue the lessee for the broach 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 got 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 VIII, 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 (1789) 3 T.R. at p.402,
"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 sec whether this action could have been maintained by the heirs".
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, sec Webb v. Russell (1789) 3 T.R. at p.40l, or devisee Vyvyan v. Arthur (1823) 1 B. & C. p.410, and not to the executor, for he took only the personal estate, see Kingdon v. Nottle (1813) 1 M.&.S,, 354; Sullen & Leake, 3rd Edition, p.209. So far as breaches during the heir's or devisee's own time was concerned, there was never any difficulty. The heir or devisee could sue for those breaches. Ho 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. Lewington, 2 Levinz, 26, Bullen & Leake, 3rd Edition, 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., l62a. Even the executor could not sue for it until ho was authorised to do so by another statute of 1540 (32 Henry VIII, 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 hold 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. Mottle (1813) 1 M. & S. 354, 4 M. & S. 53? King v.Jones (18l4) 5 Taunt. 4l8 at p.428, 4 M. & S. 188, and Raymond v. Fitch (1835) 2 Cr. M. & R. at pp.598-9.
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. Williams (1857) 1 H. & N. 817, at p.825 by Baron Martin: but a covenant to repair does not fall into that category: ibid at p.821 by Baron Watson.
(ii) Failure to pay rent during the assignor's time was a broach which caused damage to the assignor exclusively. He alone could sue for it and not the assignee: see Flight v. Bentley (1835) 7 Simons, p.151, where the Judges of the Courts of Common Law (according to Shadwell, Vice-Chancellor) expressed the opinion "that, though the assignment could give to the assignee the entire 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 more 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's case in 1802, which is not reported but is recorded in the 2nd Edition of Woodfall (l804) p.529. The facts were these. On the 9th June, 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 ail three breaches. The defendant appealed and put this question to the Court in banc presided over by Lord Kenyon, Chief Justice: "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) as his authority for the passage I have quoted; and it seems to me to warrant it.
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 1925 Act 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. Williams supra: 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 supra. 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 ay-self in agreement with the editors of Smith's Leading Cases, who, before my time in the notes to Spencer's case, 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 the reversion is concerned" (11th Edition, p.66). And also with the very knowledgeable authors of Wolsten-holme & Cherry who said that Section 141 "reproduces" the statute of Henry VIII with the additions made in 1881 and 1911, and that Flight v. Bentley is still good law. Whereas the Statute of Henry VIII applied only to leases under seal, the 1881 Act extended to leases in writing, and the 1925 Act to oral tenancies. Subject to those extensions, 1 believe the law, therefore, remains as I stated it in the three propositions above.
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 in 3 Leonard, 51, 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 Mr Justice Willes in Coward v. Gregory (1366) L.R. 2 C.P. at p.168, who said, as to one point at least in it: "That is contrary to the modern authorities". In Johnson v. The Churchwardens of St. Peter, Hereford, (1836) 4 Ad. & El., 520, and in Wedd v. Porter, 1916; 2 K.B. 91, 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 VIII 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 (1858) 26 Beaven, p.11. 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, 12 M. & W., 718. It does not, therefore, affect this case.
My conclusion is, therefore, that after Mr Tagg assigned this derelict factory to the London County Council, he had no right to sue Mr 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 it is their intention to pull down the premises. Indeed, they have never suggested that they wish to claim under it.
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. Cheetham (1827) 1 Simons, 146: 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. It is clear from the Life Insurance Act 1774 (14 George III, Ch.48, Sections 2, 3 and 4) which by its very terns 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. Preston (1883) 11 Q.B.D. at p.400 by Lord Justice Bowen. 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. (1863) 1 H. & M., 618, 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 Act, 1774, and Sinnott v. Bowden, 1912, 2 Ch. 414. 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 ho is interested in the policy moneys and that the insurance is to cover his interest as well as that of the tenant. 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 December 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 Mr 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 Mr King's executors should be made liable in damages for non-repair, seeing that the factory has not and never will be rebuilt but pulled down. Equally it would not seen right that Mr King's executors should be able to keep all the insurance moneys and that Mr 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.
LORD JUSTICE UPJOHN: 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. Sub-sections (l) 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 and Law of Property Act 1881 (as itself amended by- Section 2 of the Conveyancing Act 1911) but splitting the words of that sub-section into two sub-sections4 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 mo clear that the assignee alone can sue. Upon the assignment the benefit of 'every covenant" on the lessee's part to be observed or 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. The right to sue on breach is merely one of the bundle of rights that are contained in the concept "benefit of the covenant". The reasoning of the common law judges in Flight v. Bentley, 7 Simons, 151, 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. Vice-chancellor Shadwell 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. Suppose the right to sue for broach 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.
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 words 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 broach 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 promises because otherwise the assignee will re-enter. 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 pro-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. 3ut that is a matter of practical negotiation and nothing more. It may be Mr Tagg's misfortune that in this case ho and his advisors, 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 Mr 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 l88l. The Mastor of the Rolls has pointed out in his Judgment that we were able to put most of thorn on one side marked "Not to bo looked at again" because so many of thorn 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-l88l authorities on the shelf "Hot to be looked at again" because 1 do not think they form any 3afc guide to the law to-day. Whore 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 enquire 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 l88l 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. The old law stems, of course, from 32 Henry VIII, Ch. 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 Ryder and Steadman's Contract, 1927, 2 Ch., 62, at p.84). 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. Commissioners of Inland Revenue, 1960 AC 1. 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. 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, Master of the Rolls, 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 Henry VIII, Ch. 34 and Section 10. Therefore, for my part I forbear from any examination of the many interesting authorities and text books dealing with the law before l88l 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 loads to a different result (a matter on which I express no opinion), to say that Flight_v._Bentley (assuming it correctly to interpret the law before l88l) no longer represented the law as to arrears of rent. Finally, I do not deal with the case of Wedd v. Porter, 19l6, 2 K.B., 91 (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 1881 Act.
In my judgment Mr Tagg's claims fail and I would allow this part of the appeal.
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, 5 E. & B., 870, and London & North Western Railway v. Glynn, 1 E. & E., 652, 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 lion for warehouse charges and so forth, the owners of the goods, having 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 bo 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 net 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 hold 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.
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 mo 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. The policy, incidentally, only covered 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 of 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 found expressly or by necessary implication from the terms 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. He has done so as security and only as security for his covenant to reinstate. That 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 learned Judge came to a different conclusion upon the terms of the letter of the 28th November, 1945, whore the lessor set out the terms upon which the policy moneys were to be invested. This letter was agreed to by the lessee's solicitor. The letter recognised that owing to wartime 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 learned 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 bo 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 learned 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, with all respect to the learned Judge, I cannot see how it can bo construed as an agreement whereby Mr Tagg was to receive the policy moneys on Mr King's death if it became impossible to reinstate.
For these reasons, therefore, I would allow the appeal upon this matter and declare that Mr King's estate is entitled to the policy moneys and interest, subject only to the payment thereout of the rent due to Mr Tagg while he remained the freeholder
LORD JUSTICE DIPLOCK: We are here concerned with covenants in a lease (1) to keep promises 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 text books 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 VIII, 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 1573 reported in 3 Leonard at p.5l and 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, referred to by the Master of the Rolls. 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 l6th Edition in 1862, after saving 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, ho 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. The Churchwardens of St. Peter, Hereford (4 Ad. & El. 520) which, as the Master of the Rolls has pointed out, is not germane to the point.
The dearth of direct authority on the point, either before or after l88l, 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 thorn. 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 l88l. 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 l88l.
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 ho 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 subsection (2)) the right to enforce the covenant by exercising such remedies for its broach as are expressly provided by the lease (e.g. by forfeiture or entry to execute the repairs and recover their cost) or as are available at common law, i.e. by suing for damages for breach. By sub-section (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 of 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 sub-section (1) is confirmed by sub-section (3) which makes it clear chat 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 broaches 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 partics 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 bo 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 when over 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 bo 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 broaches 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 lip. 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 the 28th November, 1945, construed in the light of the provisions of the lease relating to the insurance of the promises 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 bo 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 fur 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 bo 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 even though he was unaware f it at the time at which it was entered into. See Waters v. Monarch Fire & Life Insurance Co. Ltd. (5 E. & B., 870); London and North Western Railway v. Glynn (1 E. & 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 promises. 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 ho can make sure that the policy moneys are not paid to the tenant before the landlord has had an opportunity of exorcising 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 bo 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 promises. 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 the 25th November, 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 learned 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 Lord Justice Upjohn that in the events that have happened the executors of Mr King are entitled to the insurance moneys.
Order; As in minute prepared by Counsel.
