Home Information Cases Reichman v Gauntlett (2006)

Skip to content. | Skip to navigation

Reichman v Gauntlett (2006)

Summary

Where a tenant had failed to pay rent due under a lease and had abandoned the demised premises, a landlord was under no duty to mitigate his loss when seeking to recover arrears of rent.

Facts

The appellant tenant (T) appealed against a decision that his landlords (L) were under no duty to mitigate their loss when seeking to recover arrears of rent. T had failed to pay rent due under a lease and had abandoned the premises. L sued for the arrears, seeking only a money judgment for the sums due. T served a defence alleging that L had failed to mitigate their loss by failing to instruct agents to market the premises, failing to accept the offer of a prospective tenant who wanted to take an assignment or new lease and failing to accept an offer to negotiate payment of a consideration for a surrender of the lease. T submitted that the contractual rules relating to mitigation of loss applied even though L had not terminated the lease for breach of T's covenants but had merely sued for each instalment of rent as it had fallen due.

Held

T's argument had failed to take into account the consequences of the premature termination of a tenancy or the limited scope for the intervention of equity. There was a very limited category of cases where, having elected not to accept a repudiation of contract, an innocent party to a contract was prevented from enforcing his contractual right to maintain a contract in force and sue for the contract price, namely cases where damages would be an adequate remedy and where an election to keep the contract alive would be wholly unreasonable, White and Carter (Councils) Ltd v McGregor (1962) AC 413 considered. A tenant could not successfully invoke equity in that way, Gator Shipping Corporation v Trans-Asiatic Oil SA (1978) 2 Lloyd's Rep 357 considered. In the instant case it was far from clear that L were acting wholly unreasonably in not taking their own steps to find a new tenant, rather than leaving it to T to propose one, or in rejecting a proposal made by T. Furthermore, if market rent had been lower than that reserved by the lease, damages would not be an adequate remedy for L if they had terminated the lease by way of forfeiture and then re-let at a lower rent because they could not recover damages to compensate for the loss of rent. If, on the other hand, the market rent had been the same or higher, it should have been possible for T to have taken their own steps to find an assignee. If T had found an assignee or subtenant that the landlords refused to accept on reasonable terms, then T would have had a statutory remedy under the Landlord and Tenant Act 1985 . Furthermore, there was no authority to show that a landlord could recover damages from a former tenant in respect of loss of future rent after termination. In those circumstances, either damages were not an adequate remedy for the landlord or the landlord would be acting reasonably in taking the view that he should not terminate the lease because he may well not be able to recover such damages. In principle, if the landlord chose to regard it as up to the tenant to propose an assignee, sub-tenant or substitute tenant, that was not unreasonable, still less wholly unreasonable.

Appeal dismissed.

Court of Appeal
Auld LJ, Rix LJ, Lloyd LJ
Judgment date
13 December 2006
References

​Times, January 4, 2007LTL 13/12/2006 : (2007) Bus LR 412 : (2007) 8 EG 138 : (2007) 1 EG 92 (CS) : (2006) NPC 132 : (2007) L & TR 18 : Times, January 4, 2007 

Practice areas