Expert Clothing Service & Sales Ltd v Hillgate House Ltd

A breach of a positive covenant will ordinarily be capable of remedy for the purposes of section 146 of the Law of Property Act 1925, whether continuing or once-and-for-all. The question is whether compliance within a reasonable period, together with appropriate compensation, could effectively retrieve the landlord’s harm. A landlord cannot refuse all time for remedy merely because the tenant has previously lacked the means or will to perform. Negative user covenants may differ where cessation cannot remove lasting stigma. The reconstruction breach was remediable, so the section 146 notice was invalid. The landlord had not waived forfeiture by sending an unexecuted deed of variation.

The defendants appealed from an order giving the landlord possession of commercial premises and dismissing the tenant company’s application for relief from forfeiture. The lease originally licensed reconstruction, but an earlier compromise placed the tenant under a contractual obligation to reconstruct by 28 September 1982. The tenant failed to reconstruct and failed to give notice of a charge over the premises.

The landlord served a notice under section 146 of the Law of Property Act 1925, stating that the breaches were incapable of remedy, and later sought possession. The issues were whether the breaches were capable of remedy, whether the landlord had waived forfeiture by sending a draft deed of variation, and, if necessary, whether relief from forfeiture should be granted.

Slade LJ gave the leading judgment and O’Connor LJ agreed, adding reasons concerning the scope of Scala House. The appeal was allowed.

1. The breach concerning late notice of the charge was capable of remedy. The breach of the positive covenant to reconstruct was likewise capable of remedy under section 146(1) of the Law of Property Act 1925.
2. Capability of remedy depends on whether, if the notice required remedy and a reasonable period were allowed, compliance and appropriate compensation could practically retrieve the landlord’s harm. A positive covenant will ordinarily be remediable by performance out of time. Its once-and-for-all character is not decisive.
3. The rent review provisions did not make reconstruction irremediable. The tenant could not rely on its own default to reduce the rent, and the valuation could proceed on the assumption that the required reconstruction had occurred.
4. Negative user breaches may be different where cessation does not remove stigma or other lasting harm. The landlord could take account of the tenant’s previous delay when setting a tight reasonable period, but could not refuse all time for remedy.
5. There had been no waiver. Waiver is assessed objectively. Acceptance, and possibly demand, of rent may be unequivocally inconsistent with forfeiture. Other acts must be considered in their circumstances. The unexecuted draft deed, sent shortly after the section 146 notice and amid related proceedings, was not an unequivocal recognition that the tenancy remained subsisting.
6. The notice was invalid because it treated remediable breaches as irremediable and gave no opportunity to remedy them. Relief from forfeiture therefore did not arise. The appeal was allowed with costs in the court below, with no order for costs on the appeal. Leave to appeal to the House of Lords was refused.

• Court of Appeal: allowed the defendants’ appeal from the order of His Honour Judge Paul Baker QC, sitting as a deputy High Court judge, which had awarded possession to the landlord and dismissed the tenant company’s counterclaim for relief from forfeiture.
• West London County Court: earlier proceedings were compromised by consent on 29 June 1981, including agreed terms for variation of the lease. The later consolidated proceedings resulted in the order appealed from.