Industrial Properties (Barton Hill) Ltd v Associated Electrical Industries Ltd

A tenant who has entered into possession and enjoyed the consideration for the lease cannot, merely because the term has ended, deny the landlord’s title to defeat liability for rent or covenants. The estoppel continues where the tenant has not been disturbed by, or exposed to, an adverse claim based on title paramount.

The position differs where the tenant has been evicted by title paramount, or its equivalent. In that event the tenant may dispute the apparent landlord’s title. The contrary wider reasoning in Harrison v Wells (1967) 1 QB 263 was treated as having been given per incuriam.

The equitable owner of factory premises granted Associated Electrical Industries Ltd a 21-year lease, determinable after seven years. The company was not the legal freeholder, although the legal owners had acquiesced in the lease and could have conveyed the legal title to it. The tenant occupied without disturbance for seven years, then left the premises in disrepair after the lease was determined.

The landlords claimed damages under the repairing covenant. The tenant contended that, after leaving possession, it could deny the lessor’s title and avoid the covenant under Harrison v Wells (1967) 1 QB 263. Judge Edgar Fay QC rejected that defence. The tenant appealed.

1. Appeal dismissed. Lord Denning MR, Roskill LJ and Lawton LJ held that the tenant remained estopped from denying the lessor’s title. It had enjoyed undisturbed possession and the full benefit of the bargain. The legal owners had acquiesced in the grant and had joined the action, so there was no actual or possible adverse claim against the tenant.

2. The common basis of the decision was that tenancy estoppel is not automatically exhausted when the tenant leaves possession. A tenant who has had possession for the whole term cannot afterwards deny the landlord’s title in order to avoid a repairing or other contractual obligation arising from that occupation, unless a claim by title paramount has placed the tenant in peril in respect of that period.

3. Lord Denning MR regarded Cuthbertson v Irving as directly establishing that estoppel may operate in a dilapidations action after the tenant has left possession. Roskill LJ and Lawton LJ agreed that the broader statements in Harrison v Wells were made per incuriam, because the court had not been given the full reports of Cuthbertson v Irving. Roskill LJ considered that Harrison v Wells could be correct on its own facts, where the tenant remained at risk from the legal owner.

4. Eviction by title paramount, attornment to the true owner, or an equivalent adverse claim removes the estoppel. Short of that event, a tenant cannot rely on a defect in the landlord’s title. The innocent statement that the equitable owner was freeholder caused no detriment and afforded no defence.

5. Roskill LJ’s conclusions on two further grounds were expressly obiter. The purported lease could take effect in equity as an agreement for a lease because the necessary conveyance and lease could have been specifically performed. Further, a repairing covenant could in principle be enforceable through privity of contract even without an effective legal demise.

The appeal was dismissed with costs. Leave to appeal to the House of Lords was refused.

• Court of Appeal: Appeal dismissed, affirming the conclusion that the tenant was liable on the repairing covenants.
• High Court of Justice, Queen’s Bench Division, Bristol District Registry: Judge Edgar Fay QC rejected the tenant’s defence based on the lessor’s lack of legal title.