Service please? A cautionary tale of s146 Notices and the right to forfeit.

Toms v Ruberry (2017) EWHC 2970 (QB)

 

Simon Lane has successfully represented the Respondent tenant on appeal in the High Court in a long running possession claim arising from forfeiture of the lease of a pub in Cornwall.

 

The High Court (Mr Justice Dingemans) has upheld the decision of the County Court in the first reported decision of its kind, confirming that for a section146 Notice to be valid, the right to forfeit must have arisen before it has been served.

 

Mrs Ruberry is the tenant of a public house in Cornwall. In 2015 Punch Taverns sold the freehold of the Queens Arms in Constantine, Cornwall following an auction to Mr Toms with Mrs Ruberry as a sitting tenant.

The pub was in a poor state of repair and various disputes had arisen as to whose responsibility it was to repair the pub and for its decoration.

The lease provided that before the landlord could re-enter for breach of covenant, the landlord was required to serve upon the tenant a “default notice” giving the tenant 14 days to remedy the breaches. There was no requirement under the lease that the landlord was required to forfeit the lease at the expiry of the 14 days following service. In February 2016, the landlord served a default notice at the same time as a s146 Notice under the Law of Property Act 1925. The notices required the tenant to complete certain works to the public house within 7 weeks of the notices.

Mr Toms brought possession proceedings based on forfeiture of the lease due to the underlying breaches of covenant. Mrs Ruberry Defended the claim on the basis that she was not in breach of covenant but in any event the right of re-entry had not arisen contractually, by the time that she had been served with the s146 Notice, as the “default notice” had not expired.

Following the 3 day trial in May 2017, the County Court found that Mrs Ruberry had not completed the required works within the 7 weeks, nor to the standard provided. However, the Court also determined that because the s146 Notice was served before the “default notice” had expired, the right to forfeit had not arisen and therefore dismissed the claim for possession, acceding to what had been described as the Defendant’s “silver bullet” point. Further, whilst the landlord had claimed damages for breach of covenant, the evidence had not been directed towards that issue and therefore also dismissed the claim for damages.

 

The landlord appealed the Court’s dismissal of the claim for possession, relying in particular upon Penton v. Barnet [1898] 1 QB 276 and Fuller v. Judy Properties [1992] 1EGLR 75 as providing authority for the proposition that the right to forfeit did not necessarily need to exist at the time the s146 Notice was served.

Mr Toms was granted permission to appeal on paper and the matter came before Mr Justice Dingemans in the High Court sitting in Bristol as a full appeal.

 

In a detailed judgment and reviewing the authorities, in particular the impact of Akici v LR Butlin Ltd [2005] EWCA Civ 1296 and Mannai Investment v Eagle Star Life Assurance [1997] AC 749 the High Court dismissed the landlord’s appeal. The Court distinguished Penton on the basis that this was a case where the right had been waived rather than having arisen at all and Fuller on the basis that that case had nothing to do with the timing of a s146 Notice. The High Court held at paragraph 42 of the judgment as follows:

 

In my judgment the authorities establish that section 146 must be given a common sense interpretation, and that the purpose of the section is that the tenant should have full notice of what the tenant is required to do. However there is no authority to support the proposition that a section 146 notice may be served before the relevant right to re-entry has occurred. The wording of section 146(1) requires "a right of re-entry or forfeiture under any proviso or stipulation in a lease for a breach of any covenant or condition in the lease". The ordinary meaning of this provision suggests that the right of re-entry must exist because there is reference to "a right" not to "a future right". This interpretation is supported by the requirement set out in section 146(1)(a) that the notice shall specify "the particular breach complained of". This requires the "particular breach" to have occurred, because otherwise the service of the section 146 notice becomes a matter of guesswork about whether a particular breach will occur, and because it is not possible to specify a particular breach unless it has occurred. If the right of re-entry in this case arises because of a failure to take action within 14 days of the clause … [requiring a default notice], then the 14 days is required to elapse before the notice can be served because this is the particular breach relied on.

 

It follows that this is a classic case where a landlord and its representatives must read and understand the operation of the forfeiture clause and how this interacts with s146 of the Law of Property Act 1925 before embarking on expensive proceedings. It was clear from the correspondence prior to trial that the landlord considered that the service of the s146 Notice was a mere formality and the expiry of that notice giving an independent right to possession of the property. They got this very badly wrong and had spent in excess of £100,000.00 on the proceedings for no apparent result; apparently for the sake of 14 days.

 

Simon was instructed by Lee Stutt, Head of Litigation at Nalders LLP in Truro

 

Simon is a property and estates barrister and mediator, specialising in landlord and tenant, real property, and inheritance and probate work. He is based in London but his practice covers the whole of the England and Wales, in particular London, the South and South West of England.