Thirunavukkrasu v Brar & Anor

The court held that the landlord's use of Commercial Rent Arrears Recovery (CRAR) on 1 February 2016 constituted an unequivocal election that the lease continued and thereby waived the right to forfeit for the rent arrears in respect of which CRAR was exercised. The judge concluded that CRAR, although a statutory regime different from the abolished common-law distress, can have the same effect of constituting waiver where, on the facts, CRAR was exercised while the lease subsisted. The county court judge was entitled to determine the preliminary issue summarily under CPR 24 on the evidence before him, including rejecting late and fragmentary points about insurance rent. The appeal was dismissed and the costs order below was upheld.

This was an appeal from a county court declaration that a purported peaceable re-entry and forfeiture of a commercial lease on 12 February 2016 was unlawful. The respondent tenant sought a declaration that the forfeiture was unlawful and damages for trespass, breach of covenant and conversion; the preliminary issue before the county court concerned lawfulness of the re-entry. The central legal issue was whether the landlords' instruction to enforcement agents to commence CRAR on 1 February 2016 operated as an election inconsistent with forfeiture (i.e. waiver of the right to forfeit) in respect of arrears recoverable by CRAR.

Background and parties:

• The Lease dated 10 July 2013 reserved quarterly rent; arrears existed and the landlords instructed enforcement agents to exercise CRAR in January 2016.
• The enforcement agents took control of goods on 1 February 2016; funds were later paid to the landlords. The landlords re-entered the property on 12 February 2016 and purported to forfeit the lease.

Procedural posture: The preliminary issue whether the landlords' actions were lawful was tried summarily by His Honour Judge Madge (no oral evidence). The judge declared the forfeiture unlawful on the basis that CRAR constituted waiver of the right to forfeit. The landlords appealed; permission to amend grounds and to appeal was given by Arnold J on 11 April 2018.

Issues framed by the court:

• Whether the exercise of CRAR amounted to waiver of the right to forfeit.
• Whether, if CRAR could effect waiver, there had in fact been a valid CRAR (including whether notice was given to the tenant).
• Whether the county court erred in deciding the preliminary issue summarily without hearing evidence on factual matters such as alleged insurance-rent demands, an alleged variation of the rent payment dates, and alleged acceptance of payment of future rent.
• Whether the costs order below (indemnity costs) was wrong.

Court’s reasoning and outcome:

• The court analysed the statutory scheme established by the Tribunals, Courts and Enforcement Act 2007 and concluded that CRAR is not a mere codification of the old remedy of distress but is a statutory replacement with material differences; nevertheless the common-law rules on waiver and election continue to apply where appropriate.
• On the facts of this case the conditions that would permit CRAR to be exercised after termination of the lease (section 79(3)) did not obtain, so CRAR was exercised while the lease subsisted and thus contained an unequivocal representation that the lease continued, producing waiver of forfeiture in respect of arrears recoverable by CRAR.
• A defective CRAR notice (if there was none) did not alter that conclusion in this case: the tenant was aware that enforcement had been commenced and the absence of notice made the process more like historic distress, which also gave rise to waiver.
• The county court was entitled to determine the preliminary issue summarily under CPR 24; the late insurance-rent point was not substantively pleaded or supported by evidence and could be dealt with by the judge's case-management choice. The costs decision was within the trial judge’s discretion.

The court dismissed the appeal.

The appeal is dismissed. The court upheld the county court’s declaration that the landlords’ purported forfeiture was unlawful because their instruction to enforcement agents to exercise CRAR while the lease subsisted amounted to an unequivocal election that the lease continued and therefore waived the right to forfeit in respect of arrears recoverable by CRAR. The judge was entitled to determine the preliminary issue summarily under CPR 24, and the costs order below was within discretion.

Appeal from an Order of His Honour Judge Madge (County Court at Central London) declaring the purported forfeiture on 12 February 2016 unlawful; permission to amend grounds and to appeal granted by Arnold J on 11 April 2018; appeal heard in the High Court (Chancery Division) before Mr Justice Marcus Smith (decision 24 September 2018).