QFS Scaffolding Ltd v Sable & Anor

The Court of Appeal allowed the appellant's appeal and set aside the county court’s order for possession. The central legal question was whether the lease of 31 August 2001 had been surrendered by operation of law so as to permit an implied tenancy at will or a new letting to the appellant. The court applied the established principles on surrender by operation of law as summarised in Woodfall: there must be conduct unequivocally inconsistent with the continuation of the tenancy, and the principle operates by estoppel rather than by reference to subjective intentions.

The court held that the facts here — negotiations between landlord and proposed new tenant, the original tenant ceasing active occupation while the proposed new tenant remained in situ, and an ambiguous receivers’ creditors’ report — did not amount to unequivocal conduct by the original tenant (acting through its receivers) that would justify implying a surrender. The judges emphasised that implying a new letting (or a tenancy at will) is only appropriate where the parties have reached the point immediately before a new letting; mere negotiations and the original tenant’s inactivity are insufficient.

Background and parties: The leasehold premises were let to London Demolition Company Limited (LDC) by Mr and Mrs Sable. LDC went into receivership and QFS Scaffolding Limited (QFS) began occupying the property and later sought assignment of the lease from the receiver. The landlords claimed possession, asserting that the 2001 lease had been surrendered by operation of law during negotiations and that QFS had occupied as a tenant at will which the landlords had determined.

Nature of the claim: The landlords sought possession on the basis that the original lease had been impliedly surrendered by operation of law, by reason of conduct amounting to an implied new letting (a tenancy at will) to QFS with the assent of LDC through its receivers.

Procedural posture: Trial in Reading County Court (HH Judge Hamilton) found for the landlords and ordered possession; QFS appealed to the Court of Appeal with permission.

Issues framed by the court:

• Whether, on the facts, there was a surrender by operation of law of the 2001 lease;
• Whether the conduct of LDC (through its receivers) was unequivocally inconsistent with continuation of the lease so as to give rise to estoppel and an implied surrender; and
• Whether the landlords’ conduct was unequivocally inconsistent with continuation of the lease.

Court’s reasoning: The court reviewed the relevant propositions in Woodfall and authorities on surrender by operation of law and emphasised that the required conduct must be unequivocal and inconsistent with the continuance of the tenancy. The Court of Appeal concluded that the county court had erred by assuming the existence of a tenancy at will as a starting point. The negotiation between the landlords and QFS did not reach the moment immediately before a new letting when an implied surrender is typically inferred. The receivers’ creditors’ report was ambiguous rather than an unequivocal representation that the lease had ended, and there was insufficient evidence that the receivers positively assented to a new letting. Consequently, there was no surrender by operation of law and the 2001 lease remained subsisting and vested in QFS by the subsequent deed of assignment dated 5 September 2008 (subject to any unargued covenant/assignment issues).

Wider context: The court reiterated that surrender by operation of law is a remedy requiring clear, unequivocal conduct and confirmed that mere negotiations or passive acquiescence by an original tenant or its receivers is ordinarily insufficient.

Appeal allowed. The Court of Appeal concluded that there had been no surrender by operation of law because the conduct of the original tenant (through its receivers) and of the landlords was not unequivocally inconsistent with the continuation of the lease; negotiations alone do not suffice to imply a new letting and the receivers’ report was ambiguous rather than an unequivocal representation that the lease had ended. The county court’s possession order was set aside.

On appeal from Reading County Court (HH Judge Hamilton; case no. 8SL01688). Permission to appeal to the Court of Appeal was granted by Patten LJ. The appeal was heard before Longmore LJ, Smith LJ and Morgan J, who allowed the appeal and set aside the county court order for possession. Neutral citation: [2010] EWCA Civ 682.