England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE COUNTY COURT
SITTING AT CENTRAL LONDON
(HIS HONOUR JUDGE GERALD)

		Royal Courts of Justice Strand London, WC2A 2LL
		17 March 2016

1. LORD JUSTICE TOMLINSON: This is a renewed application for permission to appeal an order made by His Honour Judge Gerald sitting in the Central London County Court on 16 July 2015. The issue before the judge was whether or not relief from forfeiture should be granted.
2. The lease in question had been granted to Mr Patrick Burke, the First Defendant and now Appellant, in 2006 on the condition that he carried out extensive repair work. The bulk of that work had not been completed.
3. The dilapidations in question reappeared in the form of a schedule of dilapidations dated 3 March 2010 which was prepared as a condition of a proposed assignment from Mr Patrick Burke, the First Defendant, to his nephew, Mr Barrington Burke. Many of those dilapidations remained at the time of the purchase of the freehold by the Claimant Respondent on 31 July 2013.
4. After a refurbishment in December 2013, a Mr Vincent Power took over the management of the pub. The lease in question contained a number of fairly standard covenants including covenants not to part with or share possession and also, bearing in mind that it was a pub, for the tenant to be actively involved in managing the business.
5. The judge found that insofar as Mr Patrick Burke had apparently abandoned possession to Mr Barrington Burke and permitted him to carry on the running of the business, he had to that extent waived the breaches. But the judge made an express finding at paragraph 144 of his judgment to the effect that the landlord was wholly unaware that Mr Vince Power had moved in to open up his new business on 18 December 2013 and that whilst Mr Power's involvement formed no part of any section 146 notice, there could be no waiver of the breach in relation to him. The judge regarded that as a factor relevant to the granting of relief from forfeiture.
6. One of the points which Mr Johns seeks to pursue by way of appeal is that he says that in the circumstances there was no new breach and that the relevant breaches, that is to say the parting with possession and the failure to be involved in managing the business, had been waived.
7. So far as concerns the failure to be actively involved in managing the business is concerned, that contention seems to me, with respect, to be unarguable bearing in mind the obvious importance of the identity of the person involved in managing the pub, which to my mind militates against any suggestion either that there is not a fresh breach or that the first waiver can extend to what to my mind is a distinct second breach. In any event, Mr Johns did not suggest that it was impermissible for the judge to take into account subsequent breaches when it came to the exercise of his discretion whether to grant relief against forfeiture.
8. The main thrust of the arguments put forward by Mr Johns, very cogently both on paper and orally today, are that the judge has failed to have regard to the starting point for the exercise of the discretion in question, which was restated as recently as March of last year by Patten LJ when giving the leading judgment in Magnic v Ul-Hassan [2015] EWCA Civ 224 where at paragraph 50, Patten LJ said this:

"The starting point for the exercise of our discretion has to be to remind ourselves that the purpose of the reservation of a right of re-entry in the event of unpaid rent or a breach of covenant is to provide the landlord with some security for the performance of the tenant's covenants. The risk of forfeiture is not intended to operate as an additional penalty for breach. It is an ultimate sanction designed to protect the landlord's reversion from continuing breaches of covenant which remain unremedied and to secure performance of the covenants: see Shiloh Spinners Ltd v Harding [1973] AC 691 at p. 723. There may, of course, be breaches which are so serious and irremediable as to justify the refusal of relief: for example, an unlawful sub-letting. But in most cases relief will be granted on the breach being remedied and on terms as to costs."

9. Mr Johns suggests that the judge lost sight of that principle and also that he failed to have regard to the circumstance that ordinarily where there has been a forfeiture for disrepair, as is the case here, the judge having found at paragraph 199 of his judgment that the central factor grounding the claim for forfeiture is disrepair of a building, relief will be granted, albeit on terms.
10. Mr Johns also suggests that the judge has failed to give sufficient weight to the circumstance that the landlord, as he found, had from the start pursued an aggressive campaign designed to secure possession from the tenant. Mr Johns suggests that the approach of the judge has in effect been to find that the tenant's failure trumps the landlord's conduct, or to put it another way, that he has failed properly to weigh in the scales, as required, the conduct of the landlord.
11. Mr Johns also submits that it is an unusual feature of this case that the landlord has forfeited with however no interest in the repairs in respect of which he has served the section 146 notice. He reminds me that, as the judge found, in any event the landlord's schedule attached to the section 146 notice was exaggerated.
12. Finally, Mr Johns submits that the judge gave inappropriate weight to the circumstance that the tenant, Mr Burke, appears on the face of it to have been wholly unaware of the proceedings or of the circumstance that he was seeking relief from forfeiture.
13. Mr Johns therefore suggests that the judge has erred in principle in the manner in which he exercised his discretion and those points, either taken singularly or at any rate in combination, justify the grant of permission to appeal.
14. I remind myself that in matters of this sort there is no necessarily right answer. The question for this court is whether or not the decision reached by the judge in the exercise of his discretion falls within the ambit of reasonable decision making. In that regard, what plainly was regarded by the judge as tipping the scales was the really most extraordinary circumstances which were revealed by the facts of this case. The judge referred to those circumstances at paragraphs 222 and 223 of his judgment which I do not need to read into my own since the contents are well-known to all those who have any interest in these proceedings.
15. At paragraph 224, the judge said this:

"The minute the question is asked in this way [that is to say the way in which he posed it in paragraphs 222 and 223 against the most extraordinary background], it is, in my judgment, quite plain that the answer should be no. [That is to say relief should not be granted]. Where a tenant has for such a long time been completely disengaged in the premises and in these proceedings, it, in my judgment, would be a mockery of the whole basis and point of the granting of relief from forfeiture. An application for relief from forfeiture and the exercise of the discretion is a serious matter because it relates to in this case very valuable property and it will require that the landlord stays, to use old fashioned language, in a relationship of neighborhood with the tenant. The court needs to be satisfied that the tenant knows and understands and indeed agrees with that which is being said against him and on his behalf and is fully cognisant of the ramifications of the lease being resurrected if relief from forfeiture is granted, particularly where he has already been paid out [that being a reference to the consideration for the assignment of the lease]. Here there is no explanation as to why Patrick Burke has not given any evidence at all. There is no evidence that Patrick Burke has any interest in continuing the lease, the only person who has any such interest as matters presently stand being, it seems, Vince Power, an agent of the tenant who himself is in serious financial difficulties and has allowed himself to remain in occupation of the premises in breach of covenant thereby jeopardising the lease against the supposed interests of his principle."

16. The judge then came to exercise his discretion and in paragraph 228 expressly took into account the very aggressive approach to obtaining possession which had been adopted by the landlord, who he regarded as having very possibly paid over the odds for the property. But he weighed against that the circumstances to which I have referred, that is to say a tenant who has for all practical purposes abandoned and shown no interest of any substantive nature in relation to keeping the lease alive. He also had regard to the circumstance that the premises had been allowed to be run by Vince Power without any indication to the landlord that that was proposed.
17. As I indicated a moment ago, the question is whether the judge reached a conclusion which was within the ambit of reasonable decision making. The question is not whether it is the decision which I would myself have reached had I been the judge at first instance.
18. The application was considered on the papers by Patten LJ who has, of course, very considerable experience in these matters and only a few months prior to his consideration had delivered the judgment in Magnic to which I have already referred. I have no doubt that Patten LJ had all of the considerations urged by Mr Johns well in mind when he concluded that, having regard to the matters set out in paragraphs 222 and 223 of the judge's judgment, he was entitled to refuse relief and that his decision cannot be said to be wrong in principle, to which I would add that it cannot be demonstrated that he has made errors in principle along the way to reaching that conclusion in the overall exercise of his discretion.
19. For those reasons, therefore, which are essentially, as it seems to me, the reasons which commended themselves to Patten LJ, I decline to grant permission to appeal.