Billson v Residential Apartments Ltd

Under section 146(2) of the Law of Property Act 1925, a tenant may seek relief against forfeiture after a landlord has peaceably re-entered without first obtaining a court order. The words “is proceeding” should be read as including a landlord who has proceeded to enforce re-entry otherwise than by action.

The tenant may apply after service of a section 146 notice, but need not do so to preserve the right to apply after peaceable re-entry. By contrast, relief is unavailable after a landlord has obtained and enforced a final judgment for possession, unless that judgment is set aside or successfully appealed. The court retains its broad discretion over relief and its terms.

The tenant company held a long lease containing a covenant against alterations without the lessors’ written consent. Following unauthorised alterations, the trustees served a notice complying with section 146(1) of the Law of Property Act 1925. They later peaceably re-entered vacant premises and changed the locks.

In possession proceedings, the tenant counterclaimed for relief against forfeiture. Mummery J and the Court of Appeal held that section 146(2) gave no jurisdiction to grant relief because the tenant had not applied before re-entry. The House considered whether a landlord who has forfeited by peaceable re-entry, without a possession judgment, remains a landlord who is proceeding to enforce the right of re-entry for section 146(2).

1. Appeal allowed unanimously. Lord Templeman delivered the leading speech, with which Lords Keith, Goff and Jauncey agreed. Lord Oliver also agreed and gave additional reasons. The House set aside the orders below and remitted the application for relief against forfeiture to the Chancery Division.
2. Per Lord Templeman, section 146(2) of the Law of Property Act 1925 must give practical effect to the words “by action or otherwise”. A landlord may enforce forfeiture either by a possession action or by peaceable re-entry. The tenant may therefore apply for relief after re-entry without a court order. Construing “is proceeding” as meaning “proceeds” avoids making the statutory protection ineffective whenever the landlord chooses physical re-entry.
3. The ability to seek relief after service of a section 146 notice does not require the tenant to apply at that stage, or cause the tenant to lose the later right to apply after peaceable re-entry. The court must distinguish that situation from forfeiture through an action for possession. After a landlord has recovered and enforced a final judgment for possession, the landlord holds by the judgment rather than by the lease’s forfeiture clause; relief under section 146(2) is then unavailable unless the judgment is reversed.
4. Lord Oliver explained that the earlier authorities concerned possession held under final, executed judgments. They did not govern simple physical re-entry. He treated the crucial distinction as one between possession resting on an unassailable judgment and possession still justified by the contractual right of re-entry.
5. The renewed application was remitted for a discretionary decision on relief and its terms, with further evidence permitted. Delay and all the circumstances remain relevant. Lord Templeman also held that an unsuccessful applicant for relief should not ordinarily be exposed to indemnity costs merely because relief was sought.

• House of Lords: Appeal allowed. The Court of Appeal order was set aside and the relief application was remitted to the Chancery Division.
• Court of Appeal: On 11 February 1991, held that the court lacked jurisdiction under section 146(2) of the Law of Property Act 1925 because the tenant had not applied before peaceable re-entry.
• Chancery Division: Mummery J, on 16 February 1990, likewise held that relief against forfeiture could not be granted for want of jurisdiction.