England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand London WC2A 2LL
		14th October 2009

1. MR JUSTICE FLAUX: This is an appeal by the defendant, Adejola Bello, against the judgment of His Honour Judge Behar at the Wandsworth County Court on 23 October 2008, whereby he made an order for possession of premises at 143 Eardley Rod, London SW16, of which the defendant was the tenant, on forfeiture for rent arrears. At a renewed oral application for permission to appeal against that judgment on 9 July 2009, (permission having previously been refused on paper) Blair J gave permission to appeal on one ground alone, as appears in more detail hereafter. The essential facts are not in dispute and can be stated shortly.
2. By a lease dated 5 May 1969 the then freeholder of the premises let them for a term of 50 years from 25 March 1969. By clause 1 of that lease the rent payable during the first 25 years of the lease was the sum of £60 per annum. Clause 2 was a rent review clause which provided, so far as relevant, as follows:

"The Lessee shall pay for such residue"

That is to say, the residue after the first 25 years of the lease.

"hereinbefore mentioned of the said term an annual rent which shall be determined in accordance with the following formula that is to say such rent shall be the rent (but not less than the rent firstly hereinbefore reserved) at which the demised premises first mentioned might reasonably be expected to be let in the open market by a willing landlord by a Lease for a term of years equivalent to such residue as aforesaid without regard for anything built on the land on the same terms and subject to the same incidents in all other respects as this present demise, provided that if no agreement is reached between the parties by the penultimate quarter day prior to the commencement of such residue as aforesaid as to the rent at which the demised premises might reasonably be expected to be let in the open market on the basis hereinbefore described, then the question shall be referred to the decision of a single arbitrator to be appointed by the President for the time being of the Royal Institution of Chartered Surveyors in accordance with the provisions of the Arbitration Act 1950 or any statutory modification or re-enactment thereof for the time being in force, provided further that until such new rent shall have been determined the rent firstly hereinbefore reserved shall continue to be payable and any difference between that and the said new rent during such period as this last proviso operates shall be added to and be payable with the next instalment of rent due after the said new rent has been determined."

3. The first 25-year period expired on 24 March 1994. No rent review took place. The defendant apparently purchased the premises at auction on 14 July 2005. At that time a rent review under clause 2 had still not taken place. However, as Tomlinson J pointed out in refusing permission to appeal on paper, the terms of sale excluded the seller's liability for arrears of rent above the £60 per annum so that the defendant might, if he had considered the matter, have realised that there was a potential liability on him as the buyer for any arrears of rent above £60 per annum which might result from a rent review.
4. The claimant's company acquired the freehold interest from the original freehold owner on 8 March 2006. In due course, the claimant raised with the defendant the question of a rent review under clause 2. There was no constructive response from the defendant, let alone one suggesting that any such review was too late and, accordingly, the claimant referred the issue of rent for the residue of the term to an arbitrator, Mr Copping Joyce, pursuant to the terms of clause 2 of the lease. The defendant was notified of the arbitration by both the claimant and the arbitrator, but chose, no doubt for reasons of his own, not to participate. On 22 August 2007 the arbitrator issued his award, determining the rent at £1,700 per annum, or £425 per quarter from 25 March 1994. No attempt was made by the defendant to appeal the arbitrator's award or to seek to set it aside before this court.
5. On 29 September 2007 the rent as determined by the arbitrator fell due under the terms of clause 2 of the lease. On 30 November 2007 the claimant's solicitors wrote to the defendant enclosing by way of service a notice under section 166 of the Commonhold and Leasehold Reform Act 2002 of the rent due following the arbitrator's award. The schedule to that notice and the letter itself make clear two things: firstly, that the defendant had not paid any of the passing rent from the date that the claimant acquired the freehold interest, i.e. the figure of £15 per quarter from 25 March 2006; and, secondly, that the claimant assumed in the defendant's favour that such rent had been paid before the claimant's acquisition of the freehold. Accordingly, the rent arrears were claimed only for the quarters from 25 March 2006 up to and including the quarter of 24 June 2007 at the original rate of £15 per quarter, and what was claimed thereafter at the 29 September 2007 quarter date was, as was explained in the schedule, rent from 25 March 1994 to 29 September 2007 at £425 per quarter less rent at £15 per quarter, assumed to have been paid prior to the claimant's acquisition of the freehold reversion.
6. The defendant made no reply to this letter. Before the learned judge he tried to claim that he had not received the letter or the notice, but the judge rejected that contention and held that, on a balance of probabilities, it was received. In his Defence the defendant ran two substantive defences: first, a point on section 168 of the 2002 Act, which the learned judge held was unsustainable. No permission to appeal that conclusion has been given. The second defence was a defence that any claim for the arrears of rent was time-barred under section 19 of the Limitation Act 1980. That provides as follows.

"No action shall be brought, or distress made, to recover arrears of rent, or damages in respect of arrears of rent, after the expiration of six years from the date on which the arrears became due."

7. The judge concluded that, pursuant to clause 2 of the lease, the arrears claim did not fall due until 29 September 2007, the quarter day when the next instalment of rent was due after the determination by the arbitrator. Accordingly, he held that the claim was not time-barred. However, as the judge pointed out, the defendant, who appeared in person before the judge, raised a number of additional arguments which the judge allowed him to raise, on abandonment, estoppel, acquiescence and laches, all focusing on the delay of 13 years from 1994 to 2007 in seeking a rent review under clause 2 of the lease. The judge held at paragraph 34 of his judgment that the short answer to those arguments was that the defendant was bound by the determination of the arbitrator, which he had not appealed, so that he could not raise those matters which should have been raised before the arbitrator.
8. However, the judge went on to deal with the arguments, as he said shortly, and, in dismissing them, he made three findings which are critical for the purposes of this appeal. Firstly, he held at paragraph 36 that clause 2 did not stipulate that time was of the essence and that there was no basis for the implication of a term. Secondly, he held at paragraph 37 that the defendant was not relying on anything more than the delay and, in those circumstances, he held that the decision of the Court of Appeal in Amherst v James Walker Limited [1983] 1 Ch 305 was a formidable obstacle in the way of the defendant's argument. Thirdly, he held at paragraph 38 that there was no evidence upon which to found a discrete defence of estoppel, waiver, acquiescence or abandonment, and in his view laches did not apply on the facts. Accordingly, the judge held that the defence failed.
9. The defendant sought to appeal the judge's conclusions on a number of grounds. As I have already said, his application was refused on paper by Tomlinson J in February of this year. He then instructed Mr Macleod-James, who appears before me today and who drafted an amended notice of appeal. That was considered by Roderick Evans J on 24^th April, and he made an order that the application for permission to appeal in relation both to the original grounds and the revised grounds should be listed for oral argument. It was on that basis that the matter came before Blair J, who refused permission to appeal on all grounds but one, and gave permission on that single ground described as limitation.
10. Mr Fain, who appears on behalf of the claimant, as he did before the learned judge, argued that that meant that only the section 19 point was in play before me, but I accept Mr Macleod-James' contention that Blair J must have had in mind the wider issue of delay generally and its impact. Otherwise I cannot conceive on what basis he could have thought that the limitation defence under section 19 on its own was arguable. Accordingly, I have approached the case on the wider basis.
11. Having said that, like the learned judge I consider that the complaints about delay in seeking the rent review are all matters that the defendant could and should have raised before the arbitrator. Had he done so, the arbitrator might well have concluded that the review was too late, or he might have accepted the arguments now raised by Mr Fain. Either way, those matters were not ventilated when they should have been and, in my judgment, it is not open to the defendant to raise in court by a collateral attack such matters. As the judge rightly held, he is bound by the determination of the arbitrator.
12. That is the short answer to this appeal, but since the other points were fully argued I will deal with them by reference to the points raised in Mr Macleod-James' skeleton argument.
13. First is the issue whether time was of the essence under this contract. Mr Macleod-James drew my attention to the point which he said distinguishes this case from the lease considered in Amherst, namely that this lease has what he described as a starting point for the review. In other words, if the parties had not agreed by the penultimate day of the quarter date prior to the commencement of the residue of the second 25 years, then the question, i.e. the question of the rent payable, was to be referred to an arbitrator. That penultimate day of the quarter was 24 March 1994. That is no doubt correct, but, in my judgment, all that is doing is setting the first point at which the landlord can trigger a review. There is nothing in clause 2 that says that thereafter the review has to take place within any particular time, and I agree with the learned judge that there is nothing in the contract, either expressly or by implication, that made time of the essence.
14. The second point raised by Mr Macleod-James is the point on which he spent by far and away the most time in his oral argument, which is the point about the delay of 13 years. As he submitted, this was longer than any applicable limitation period, be it a 6-year period under section 19 or a 12-year period on the basis that the lease is a specialty. He contended that in no previous case had a delay this long been considered and that researches had indicated that the longest delay in any other case was in the region of 6 years. He recognised that Amherst presented an obstacle.
15. In that case, the relevant delay between the date when the rent review could first have been sought and the date when it was in fact sought, was some 4½ years. The Court of Appeal concluded that mere delay in itself in a case where time was not of the essence was nothing to the point and did not provide the tenant with a defence. It is necessary, however, to cite two passages from the judgment which can, it seems to me, legitimately be regarded as qualifying that stark conclusion.
16. First of all, from the judgment of Oliver LJ at page 317 of the report. He concluded that there had been no prejudice suffered by the tenant as a result of the delay, and that the delay was not substantial and that the failure to seek a review was not in any sense unreasonable. He then went on to say this:

"Finally, I am encouraged to find that the view that I have formed as to the way in which this type of problem should be approached coincides (save in the one respect of the possibility of abandonment as a separate legal concept) with the views expressed by Slade L.J. in the recent decision of the court in  London & Manchester Assurance Co. Ltd. v. G. A. Dunn & Co.  (1982) 265 E.G. 39, 135:

'In the absence of binding authority compelling a different conclusion, I am satisfied that delay on its own, even if unreasonable, will not in general disentitle a landlord from invoking a rent review clause in a case where time has not been made of the essence of the contract. There is, I think, no general principle of the law of contract that mere delay in the enforcement of a contractual right, or in the performance of a contractual duty, by one party to a contract ('A') will entitle the other party ('B') to regard himself as discharged from the obligation to recognise such right or from the contract as a whole (as the case may be). If in such circumstances A has been guilty of unreasonable delay, then, ordinarily, the prudent and proper course for B to adopt, if he wishes to bring matters to a head, will be to serve a notice on A fixing a reasonable period within which A must exercise his right (if at all) or must perform his part of the contract (as the case may be). In some circumstances, of course, the delay on the part of A may be so gross and inexplicable as to make it so clear that he does not intend to exercise his right or to perform his part of the contract that any such notice is unnecessary. But, ordinarily, it will be necessary for B to serve a notice on A or at least to have some communication with him before he can properly and safely regard himself as being absolved.'

It is true that in the circumstances of that case what Slade L.J. said was obiter, but it forms part of a carefully reasoned analysis which I gratefully adopt."

17. Then in the judgment of Lawton LJ at 319D:

"In my judgment there is no justification for reading into the lease an implied term that if the landlord did not serve a rent assessment notice on or before December 25, 1974, he had to do so within a reasonable time thereafter. Such an implied term would not have been necessary to give business efficacy to the lease. The landlord would not have wanted it and the tenants benefited by not having it. Any delay on the landlord's part would mean that the tenants went on paying the original rent until such time as the landlord did serve a notice. If for any reasons of their own, such as a general fall in rental values, they had wanted the landlord to come to a decision about the service of a rent assessment notice they themselves could have served what has come to be known, inaccurately, as a notice "making time of the essence of the contract": see  Stickney v. Keeble  [1915] A.C. 386 and  United Scientific Holdings Ltd. v. Burnley Borough Council  [1978] A.C. 904."

18. The learned Lord Justice then continued at page 320:

"He would only have been estopped if the tenants could have proved that by his words or conduct he had represented that he did not intend to ask for the payment of a higher rent and in reliance on that representation they had altered their position to their prejudice. In my judgment nothing short of estoppel would have relieved the tenants from their liability to pay a higher rent. The concept of abandonment has been referred to in some of the rent review cases. I do not regard it as a term of art apt to describe a defence to a landlord's claim for a higher rent. If a landlord by his words or conduct leads his tenant reasonably to infer that he did not intend to claim a higher rent he makes a representation to that effect so that the foundation of an estoppel is laid; but the landlord will not be estopped unless the tenant has acted on the representation to his prejudice. A landlord who over a long period makes no attempt to set a rent review procedure in motion may be adjudged to have represented that he did not intend to exercise his rights; but whether he did would be a matter of inference from the circumstances in which the delay had occurred, not from the mere fact of the delay. I can see no reason why mere delay, not amounting to a representation, can be a bar to a landlord in this kind of case claiming a higher rent. He has his contractual rights to a higher rent and the tenant has an obligation to pay it unless he can prove that there is some good reason why he should not. Mere delay would not be a good reason. On the facts of this case, as Mr. Rich admitted when opening the appeal, there was no evidence which would have founded an estoppel."

19. Mr Macleod-James relied upon those qualifications to submit that there was here an unreasonable or a gross and inexplicable delay, such as to justify the conclusion that it was too late for the claimant to seek to review the rent. The insuperable difficulty which that argument faces, in my judgment, is the judge's finding of fact in paragraph 38 of his judgment that there is no evidence to found a defence of estoppel or similar in the present case. The defendant is bound by that finding and is thrown back on no more than the length of the delay without more. However, as Amherst demonstrates, mere delay is not enough.
20. In that context I was not helped by hypothetical examples, put forward essentially in terrorem, of 99-year leases or even longer leases where there was no review until 50 years after the review was first available or even 100 years after the review was first available. Each case turns on its own facts and it may be that in such a case the facts and circumstances of the case might give rise to an estoppel. It may be that they would not. What matters is that, in the present case the defendant simply cannot point to anything which amounts to a representation that the landlord would not seek a rent review at or after the time when the defendant purchased the lease. Indeed, as I have already mentioned, the fact that in the conditions of sale the seller only undertook responsibility for the £60 per annum does point at least to the possibility that there might very well be a rent review in the future and also, although of course one cannot make too much of this point, the fact that there is unlikely to have been any communication between the landlord and the original tenant from which any representation that there would not be a rent review could be derived. At all events, as the judge rightly pointed out, there was simply no evidence of that kind at all.
21. The third point relied on by Mr Macleod-James is whether delay after the limitation period limits the extent of recovery. This argument focuses on the fact that the arrears of rent date back to 1994 and it is said that such rent must be time-barred so it cannot be recovered. In my judgment, this argument misses the point that there are two elements to the rent. First, there is the rent at £15 per quarter from 25 March 1994, which was always due irrespective of the rent review. Of course, to the extent that the claimant sought to recover that rent in 2007, the claim would be time-barred for any period prior to 2001 pursuant to section 19 of the Limitation Act. But, as was clarified before Tomlinson J, the claimants were not claiming and are not claiming that portion of the rent, and they assume that rent had been paid before the defendant became the tenant. Mr Macleod-James essentially complained about that and said that there was no evidence whether the rent had been paid before the defendant became a tenant or not, but it does not seem to me that that matters. All that matters is that the claimant is not claiming that element of the rent until 25 March 2006, when the claimant purchased the freehold reversion, and that period of time after 25 March 2006 is well within the limitation period.
22. The second element of the rent is the balance of arrears from 25 March 1994, i.e. the balance between the £15 per quarter originally due and the £1,700 per quarter assessed by the arbitrator. So far as that is concerned, as the judge rightly held on the correct construction of clause 2, none of that fell due until 29 September 2007, so again there is no question of section 19 being engaged, and, in my judgment, all the attempts of Mr Macleod-James to sidestep that, as I see it, inevitable conclusion, meet the barrier of the clear words of the clause in the lease. That is also the answer to his fourth argument about the inability to review by a rent review a statute-barred rent. Whatever the position would be in another case or in a case where time was of the essence, the short answer to this point is that the claim to the arrears of rent is not statute-barred under section 19, because it simply was not due within the meaning of section 19 until it had been ascertained by the arbitrator's award and then at the first quarter day thereafter, being 29 September 2007.
23. Finally, Mr Macleod-James sought to make much in his oral submissions of the prejudice suffered by the defendant by reason of liability for rent for a period before he was even the tenant. Much was said about injustice and the impact of the decision on consumer lessees of long leases who could be saddled with such liabilities. Again I am not over impressed with those sorts of arguments since there are, in my judgment, two clear answers to the suggestion of prejudice in the present case.
24. First, if at the time of purchasing the lease the claimant had sought legal advice as to the effect of clauses 1 and 2 and as to the possibility of a rent review, I have little doubt that, if properly advised, he would have been told that there was always a risk of a rent review. There could then have been a discussion with the landlord and it may be that she would have agreed that it was now too late for a review, in which case the claimants could not have pursued the present claim at a later date when they purchased the freehold reversion. Alternatively, if the landlord were not prepared to agree that it was too late for a review, the defendant might have sought and might have obtained some form of indemnity from the seller.
25. Second, if the defendant had participated in the arbitration, all the arguments now put forward so eloquently on his behalf by Mr Macleod-James could have been put before the arbitrator, who might have declined a review or limited it in some way. None of that happened and if, as is submitted, the defendant has suffered prejudice, that is in large part of his own making. I prefer to leave for another occasion issues of the wider ramifications of what might happen on different facts.
26. In my judgment, this appeal must be dismissed.