Scribes West Ltd v Relsa Anstalt & Ors

For the purposes of section 141(2) of the Law of Property Act 1925, the person entitled to enforce lease rent, covenants and re-entry conditions is not confined to the registered legal proprietor. A transferee whose transfer of the reversion has been executed and paid for, but not yet registered, may be the equitable owner. Where the transfer assigns the rent and notice is given to the lessee, the transferee has an enforceable equitable right to the income. That is sufficient to validate forfeiture before registration. A mere beneficiary with only a right to an account of profits, without an assignment of the rent and notice, is in a different position.

Scribes West Ltd was the lessee of business premises. Relsa Anstalt transferred the reversion to Relsa Barkers by an executed transfer on 28 February 2001, and notice was given to the lessee, but registration was not completed until 3 January 2002. Relsa Barkers peaceably re-entered for rent arrears on 16 July 2001 and subsequently granted a new lease. The county court held that the forfeiture was valid under section 141(2) of the Law of Property Act 1925. The appeal concerned whether an unregistered transferee could forfeit the lease before registration.

The appeal reached the Court of Appeal after procedural directions concerning the correct appellate route and transfer under CPR 52.14.

Lord Justice Carnwath gave the judgment of the court. Lord Justice Rix and Lord Justice Mummery agreed. The appeal was dismissed.

1. The court accepted three relevant propositions. A transfer of registered land is incomplete until registration, so the transferor remains the legal proprietor under section 19(1) of the Land Registration Act 1925. Nevertheless, after execution and payment of the purchase price, the transferee becomes the equitable owner and the transferor holds the land on trust. An equitable assignment of a chose in action requires an intention to assign and notice to the debtor.

2. Section 141 of the Law of Property Act 1925 performs two related functions. It annexes rent, lease covenants and re-entry conditions to the reversion despite severance. It also permits enforcement by the person from time to time entitled to the income of the leased land. The word entitled is general and is not restricted to legal interests. The approach in Turner v Walsh [1909] 2 KB 484 supported this construction.

3. Relsa Barkers had received an equitable assignment of the rents under the transfer and had given notice to the lessee. It was therefore entitled, at least in equity, to the income of the land for section 141(2) purposes. The possibility that it held that right concurrently with the legal owner caused no difficulty. The section extended enforcement rights without removing existing rights, and the legal owner would act as trustee for the transferee.

4. Schalit v Joseph Nadler Ltd [1933] 2 KB 79 did not govern the case. That decision concerned a beneficiary whose ordinary right was to an account of profits, with no assignment of the rent and apparently no notice to the tenant. It therefore did not determine the position of an equitable assignee with an enforceable right to rent.

5. The wording of the transfer assigned the relevant rights immediately. There was no practical reason to postpone the assignment until registration. The forfeiture was accordingly valid. The order was made as agreed between the parties, and permission to appeal to the House of Lords was refused.

1. Court of Appeal (Civil Division) — In the present judgment, [2004] EWCA Civ 1744, the appeal was dismissed and permission to appeal to the House of Lords was refused.

2. Court of Appeal — In [2004] EWCA Civ 965, the court held that the correct route was an appeal to a High Court judge rather than directly to the Court of Appeal.

3. High Court — Brooke LJ granted permission to appeal and directed transfer to the Court of Appeal under CPR 52.14.

4. Court of Appeal — In [2004] EWCA Civ 835, the court used the case to provide general guidance on changes to appeal procedure under CPR 52.

5. Barnet County Court — Her Honour Judge Mayer held that the forfeiture was valid under section 141(2) of the Law of Property Act 1925.