Summary

The judge had no doubt that despite the way in which the tenants had underlet the premises, it would have been wrong to have deprived the tenants of a valuable asset. Relief from forfeiture was granted on the condition that the tenants obtained consent on future underleases.

Facts

Landlord's claim seeking possession of premises from the first and second defendant tenants for breach of covenant (namely three instances of underletting parts of the premises without the landlord's consent) and the defendants' counterclaim for relief from forfeiture. The third to fifth defendants, who were subtenants, also sought relief from forfeiture, but that hearing was adjourned pending the resolution of the dispute between the claimant and defendants. The defendants admitted the breaches of covenant, sought retrospective consent and attempted to settle the matter by making an offer under CPR Part 36. The landlord rejected their offer and the judge had to decide whether relief should be granted in all the circumstances.

Held

(1) The power under s.146 Law of Property Act 1925 to grant relief from forfeiture was a wide discretion and was not to be curtailed by strict rules. On the evidence the judge found that the defendants' conduct had been "sloppy" regarding their attempts to obtain consent from the landlord and the landlord's predecessors in title, but the breaches had not been wilful or deliberate. The breaches were due to the fault of an employed solicitor in the first defendant's firm. The first defendant (a partner in the firm) had given responsibility to the employed solicitor (no longer working at the firm at the date of the hearing) for obtaining consent, etc for subleases. Woodfall on Landlord and Tenant at paragraph 17.166 considered as to the factors that the court should consider when exercising its discretion on relief from forfeiture. Accordingly, although Lord Wilberforce's comments in Shiloh Spinners Ltd v Harding (1973) AC 691 deserved the highest respect, the judge thought Morritt LJ's approach in Southern Depot v British Railway Board (1990) EGLR 39 was more appropriate although it was not strictly relevant as, on the present evidence, the judge had found that the tenants' breaches of covenant were not wilful.

(2) The judge had to weigh up all the factors including the value of the lease and the fact that the defendants had abandoned their arguments on waiver by the landlords for example. It was a question of proportionality between the parties and, on the facts of the present case, if possession was granted to the landlord their gain would be totally disproportionate to the breaches of covenant. There was no evidence before the judge to suggest that the landlord would have been entitled to have reasonably refused consent and all the underleases had been at the market value. The judge had no doubt that despite the way in which the defendants had underlet the premises it would have been wrong to have deprived them of a valuable asset. It was a case where relief from forfeiture should be granted on the condition that consent was obtained on future underleases.

(3) The defendants' Part 36 offer had not been "bettered" by the judge's order, but the judge took account of the defendants' conduct and the factual basis of their arguments when assessing costs. The landlord was awarded its costs up to 1 September 1999 (the date the Part 36 offer had lasted until) and thereafter there was no order as to costs. Billson v Residential Apartments (1992) 1 AC 495 considered. It was not an invariable practice that indemnity costs would be granted for the landlord. Indemnity costs needed to be justified as exceptional and there was no reason to justify them in the present case. Accordingly costs were to be paid on the standard basis within 21 days.

Order accordingly.