In re King, decd

Under section 141 of the Law of Property Act 1925, the benefit of a tenant’s covenant which relates to the leased land passes with an assignment of the reversion. The assignee alone may enforce the covenant, including in respect of breaches occurring before the assignment. The assignor consequently retains no independent claim for antecedent breaches of repairing or reinstatement covenants.

Where insurance obtained by a tenant in joint names served as security for the tenant’s obligation to reinstate, joint naming did not give the landlord beneficial ownership of the proceeds. Once reinstatement became impossible without the tenant’s fault, the proceeds belonged to the tenant’s estate, subject to rent payable while the landlord retained the reversion.

A factory held under a long lease was destroyed by fire. The lease required the tenant to insure in the joint names of landlord and tenant and to apply the proceeds towards reinstatement. Wartime restrictions prevented rebuilding, and the proceeds were invested in joint names as security for performance of the tenant’s covenants.

After the tenant’s death, the landlord claimed in the administration of his estate for breaches of the repairing and reinstatement covenants. The landlord subsequently transferred the freehold to the London County Council, which intended to demolish the factory. Buckley J nevertheless upheld the landlord’s claim and decided that the landlord was entitled to all the insurance money.

The central questions were whether an assignor of the reversion could sue for breaches preceding the assignment and who beneficially owned the insurance proceeds once reinstatement had become impossible.

1. The appeal was allowed. All three members of the court held that the former landlord could not, after assigning the reversion, sue for breaches of the repairing and reinstatement covenants committed before the assignment.

2. Lord Upjohn LJ and Diplock LJ held that section 141 of the Law of Property Act 1925 governed the express covenants. The benefit of a covenant includes the remedies available for its breach. The statutory words providing that the benefit is annexed to and goes with the reversion transfer those remedies to the assignee, including remedies for antecedent breaches. The assignor’s corresponding right to enforce the covenant ceases.

3. Lord Denning MR reached the same result through the historical law and section 141. He distinguished liabilities which had become choses in action severed from the reversion, such as accrued rent, from breaches of repairing or reinstatement covenants whose damage continued to affect the land. Claims in the latter category passed with the reversion.

4. Diplock LJ added that the ordinary measure of damages for breach of a covenant running with the land is the diminution in the value of the reversion. Transferring the existing remedies to the assignee avoids double recovery and permits the price paid for the reversion to reflect their value.

5. By a majority, Upjohn and Diplock LJJ held that the tenant’s estate was entitled to the insurance proceeds. The insurance and joint control of its proceeds were intended as security for the tenant’s obligation to reinstate, rather than insurance of separately valued proprietary interests. When reinstatement became impossible without the tenant’s fault, the security ceased to operate. The 1945 arrangement preserved the fund through the tenant’s death but did not confer it beneficially upon the landlord.

6. Lord Denning MR dissented on the insurance issue. He considered that insurance in joint names covered both proprietary interests and would have divided the proceeds between landlord and tenant proportionately. The majority instead declared the proceeds and interest payable to the tenant’s estate, subject to rent due while the former landlord retained the freehold.

• Court of Appeal: Allowed the appeal from Buckley J. It held unanimously that the assignor of the reversion could no longer enforce the repairing and reinstatement covenants, and by a majority that the tenant’s estate was entitled to the insurance proceeds.
• High Court, Buckley J: Held that the former landlord could pursue the covenant claim and was entitled to all the insurance proceeds. No citation is stated in the judgment.