Billson v. Residential Apartments Ltd

The House of Lords construed section 146(2) of the Law of Property Act 1925 (reproducing section 14(2) of the Conveyancing and Law of Property Act 1881) as permitting a tenant to apply to the court for relief against forfeiture where the landlord has proceeded to determine the lease either by issuing and serving a writ or by peaceable re-entry. The court held that the words "is proceeding, by action or otherwise" include a landlord who has re-entered peaceably after service of a section 146(1) notice and that a tenant is not thereby precluded from applying for relief. By contrast, a tenant cannot apply for relief after the landlord has obtained and executed a final, unappealed judgment for possession; possession under such a judgment is not treated as mere enforcement by the landlord under the lease. The court remitted the matter to the Chancery Division for determination of relief on the merits and addressed the ordering of costs, disallowing indemnity costs as a general condition of relief.

The tenant (appellant) held a long lease and carried out alterations without the lessors' consent, thereby breaching a covenant and attracting a proviso for forfeiture. The lessors (respondent trustees) served a notice under section 146(1) of the Law of Property Act 1925 and then, on 18 July 1989, peaceably re-entered the premises and changed the locks. The tenant issued a counterclaim seeking relief against forfeiture under section 146(2). The trial judge (Mummery J) and subsequently the Court of Appeal held that the court had no jurisdiction to grant relief because the landlord had already re-entered, and so the tenant had not applied before re-entry. The House of Lords allowed the tenant's appeal.

Nature of the claim: Application for relief against forfeiture under section 146(2) of the Law of Property Act 1925 (and related declarations and injunctive relief).

Issues framed:

• Whether a tenant may apply for relief under section 146(2) after the landlord has peaceably re-entered (without a court judgment);
• Whether the words "is proceeding, by action or otherwise" in section 146(2) exclude post-re-entry applications; and
• Consequential issues on costs and the practice of ordering indemnity costs in forfeiture cases.

Reasoning and outcome on issues: The House analysed the historical authorities and the statutory wording, concluding that Parliament intended the tenant's right to apply to be available both where the lessor is "proceeding by action" and where the lessor is "proceeding otherwise" (including peaceable re-entry). The court distinguished cases which preclude applications only after a final, executed judgment for possession. The House emphasised that a lawful re-entry does not automatically oust jurisdiction and that the court may take into account delay or other circumstances when considering relief. The House remitted the application for relief to the Chancery Division to be determined on the merits and curtailed the practice of imposing indemnity costs as a condition of relief.

Appeal allowed. The House held that section 146(2) must be read to permit a tenant to apply for relief against forfeiture even after a landlord has peaceably re-entered following a section 146(1) notice, although the court will take into account all circumstances (including delay). The court distinguished a landlord's possession under a final, unappealed judgment, after which relief is not available unless the judgment is set aside. The orders of the trial judge and Court of Appeal were set aside and the matter was remitted to the Chancery Division for determination on the merits; the House also restricted the practice of awarding indemnity costs as a condition of relief.

Trial: Chancery Division (Mummery J) — order of 16 February 1990 (trial judge refused relief on grounds of jurisdiction). Court of Appeal (Sir Nicolas Browne-Wilkinson V.-C., Parker and Nicholls L.JJ.) — order of 11 February 1991 held that tenant could not apply after landlord's re-entry. House of Lords — appeal allowed [1991] UKHL 7; set aside both earlier orders and remitted to the Chancery Division.