Reichman & Anor v Beveridge & Anor

A landlord suing for rent that accrued while a lease remains in force brings a claim in debt, not damages. The ordinary duty to mitigate loss therefore does not apply.

The limited equitable qualification derived from [1962] AC 413 does not ordinarily compel a landlord to terminate an abandoned lease and re-let. It applies only in an extreme case where retaining the contract is wholly unreasonable and damages would adequately protect the landlord. A tenant must establish both matters. Where English law does not clearly permit recovery of future-rent loss after re-entry, damages are not an adequate substitute for continuing liability for rent.

The defendants were solicitor-tenants under a five-year commercial lease. After they ceased practice, they abandoned the premises and stopped paying rent and water rates. The landlords claimed accrued sums only.

The defendants pleaded that the landlords should have mitigated their loss by forfeiting the lease, marketing the premises, and accepting a replacement tenant or a negotiated surrender. A preliminary issue was ordered on whether a landlord must mitigate loss when recovering rent arrears.

District Judge Kubiak held that no such duty arose. His Honour Judge Reid QC dismissed the defendants’ first appeal. The second defendant appealed to the Court of Appeal. The central issue was whether a defaulting tenant could require the landlord to terminate the lease and seek another tenant rather than sue for rent as it became due.

1. Appeal dismissed. Lord Justice Lloyd, with whom Lord Justice Rix and Lord Justice Auld agreed, held that the pleaded mitigation defence was unavailable.

2. A claim for rent falling due under a subsisting lease is a claim in debt. The ordinary mitigation rules govern damages claims and do not require a landlord, merely because a tenant has abandoned the premises, to forfeit the lease or re-let before claiming accrued rent. The contractual character of a lease does not alter that distinction.

3. The court applied the narrow equitable qualification discussed in [1962] AC 413 and developed in the charterparty authorities. An innocent party’s right to keep a contract alive and claim the contract price may be restricted only in an extreme case. The defaulting party must show both that continuing the contract is wholly unreasonable and that damages are an adequate remedy. This was not such a case.

4. The court found no English authority allowing a landlord who re-enters and ends the lease to recover damages for the future rent lost for the balance of the term. (1826) 11 Moore CP and Exch. Reports 379 pointed the other way, subject to an uncertain possible arrangement for reletting on the tenant’s account. A landlord could therefore reasonably avoid terminating a lease where forfeiture might end the right to the original rent without securing equivalent damages.

5. It was not wholly unreasonable for the landlords to leave the defaulting tenants to propose an assignee or subtenant under the lease. Such a proposal could engage the landlord’s obligation not unreasonably to withhold consent and any statutory remedy, but the tenants had not established an unreasonable refusal. The court did not decide the wider question whether, and to what extent, repudiation operates in English landlord and tenant law.

• Court of Appeal (Civil Division) — dismissed the second defendant’s second appeal: [2006] EWCA Civ 1659.
• Guildford County Court — His Honour Judge Reid QC dismissed the appeal from the District Judge on 17 October 2005.
• Guildford County Court — District Judge Kubiak determined the preliminary issue on 1 February 2005, holding that the landlord had no duty to mitigate when recovering rent arrears.