Bland v Ingrams Estates Ltd (No 2)

Equitable relief from forfeiture for non-payment of rent must restore the parties to the position they would have occupied without the forfeiture. A right of re-entry is security for rent, not a means by which the landlord may profit. Arrears, contractual interest and properly incurred costs will normally be payable, but the landlord must give credit for benefits received through lawful possession after re-entry.

That account is taken when fixing the terms of relief. The tenant need not first pay all rent and then pursue a separate trespass claim. A landlord who uses the premises for its own business during the period of inchoate forfeiture should be charged a full occupation rent. Costs caused by unnecessary opposition to relief are not part of the price of relief.

The appellant was an equitable chargee of the former tenants’ leasehold interest. The freeholder forfeited the lease for rent arrears and, three days later, granted a new lease to the second and third respondents, who had notice of the former tenants’ right to seek relief from forfeiture.

The County Court transferred the claim after holding that it lacked jurisdiction. A Deputy Judge of the High Court dismissed the claim: [1999] 2 EGLR 49. On the earlier hearing of the appeal, the Court of Appeal held that relief could be granted to an equitable chargee and adjourned the question of terms.

The issues at this further hearing were whether the respondents’ occupation of the premises had to be credited against rent claimed as a condition of relief, what costs should be included in those terms, and whether a vesting order should be made.

1. Appeal allowed. Chadwick LJ, with whom Hale LJ agreed, ordered relief from forfeiture on terms substantially less onerous than those advanced by the respondents.

2. Equity treats a proviso for re-entry for non-payment of rent as security for the rent: Howard v Fanshawe [1895] 2 Ch 581. Relief will ordinarily require payment of arrears, contractual interest and costs properly incurred through re-entry. Relief restores the former lease for all purposes, as though re-entry had not interrupted it: Dendy v Evans [1910] 1 KB 263. The new lessees therefore became intermediate landlords on restoration.

3. The court rejected the contention that the applicants had first to pay all rent accruing after re-entry and then leave the former tenants to claim trespass damages. The landlord’s possession during inchoate forfeiture is lawful. The appropriate course is an equitable account when setting the price of relief. Since the respondents had occupied the premises for their own restaurant business, they had to credit a full occupation rent, and corresponding interest, for that period. That credit matched the rent and interest otherwise accruing after 29 April 1996.

4. The respondents were entitled only to costs that would have been incurred on a short, unopposed County Court application. They could not recover costs generated by their unnecessary and ill-considered opposition, including separate expenditure by the freeholder despite its lack of direct commercial interest. The respondents were jointly and severally liable for the appellant’s costs in the Court of Appeal, with the burden shared equally between them.

5. No order was made under section 90 of the Law of Property Act 1925. The former tenants could transfer the restored lease with the chargee’s consent. Liberty to apply was given if a future difficulty arose. If the sum payable could not be agreed, the matter was to be remitted to the County Court for an account.

• Court of Appeal (Civil Division) — The court had indicated on 21 December 2000 that the appeal would be allowed and that relief should be granted, in judgments reported at [2001] 2 WLR 1638. This further judgment fixed the terms of relief and formally allowed the appeal.
• High Court, Chancery Division — Mr Peter Leaver QC, sitting as a Deputy Judge, dismissed the claim for relief from forfeiture on 13 April 1999: [1999] 2 EGLR 49.
• County Court — His Honour Judge Hull QC held that relief could not be granted under the provisions relied upon and transferred the action to the High Court to consider inherent jurisdiction.