Mohammed Majeed Faiz Shakeela Faiz SASSF Ltd v Burnley Borough Council

The claimants sought a declaration that the landlord (the Council) had waived its right to forfeit a lease of premises known as the Old Stables by demanding and accepting payments after becoming aware of an alleged unauthorised sublease. The court found that the only relevant sublease was the 2017 Sublease, which was likely back-dated and executed no earlier than May–October 2019, and rejected the claim that a separate earlier written sublease had been granted to the Second Company. The court applied established principles of waiver and election (Matthews v Smallwood; Kammins Ballrooms) and held that a landlord only waives forfeiture by an unequivocal act recognising continuation of the lease coupled with knowledge of the breach; further, acceptance of sums which fell due before the landlord acquired the requisite knowledge does not amount to waiver (following the analysis of Osibanjo and Price v Worwood as interpreted by the court). On that basis the claimant’s declaration failed and the court declared the Lease and the 2017 Sublease determined by the landlord’s re-entry on 22 November 2019.

Background and parties:

• The claimants were the tenants (father and daughter) under a 10-year lease of the Old Stables at Towneley Hall, and SASSF Ltd sued as sub-tenant. The freehold owner, Burnley Borough Council, contended that the tenants had breached the Lease by subletting and had lawfully forfeited the Lease by peaceable re-entry on 22 November 2019.

Nature of the claim and relief sought:

• The claimants sought declaratory relief that the Council had waived its right of forfeiture (and consequential relief) by demanding and accepting payments after knowledge that SASSF occupied under a sublease.

Procedural posture:

• First instance hearing in the High Court (Chancery), case allocated to the Capped Costs List pilot. Interim injunctive relief was granted pending trial. Trial heard over two days.

Key factual findings:

• The business at the Old Stables had been carried on sequentially by related companies (the First Company, the Second Company and later SASSF). The court rejected the claim that a written sublease had been granted to the Second Company in about 2012, finding the witness evidence on that point unreliable and no contemporaneous documentary steps (including registration where required) had been taken.
• The 2017 Sublease between the tenants and SASSF was executed as a deed, but on the evidence was likely back-dated: the court concluded it was probably executed between the meeting on 20 May 2019 and 18 October 2019 and retrospectively dated 1 August 2017.
• The Council acquired the knowledge that SASSF was in occupation in January 2018 (information reached the Council via its food safety/regulatory records and was fed into property services). Before receiving solicitors’ letter of 18 October 2019 the Council had no reason to believe SASSF held a sub-tenancy rather than occupying as a licensee.

Legal issues framed by the court:

1. Whether, on the facts, there had been an act or acts by the Council which, with knowledge of the relevant breach, constituted a waiver or election to treat the lease as subsisting.
2. Whether the Council’s invoice of 4 November 2019 for a revised insurance rent and its subsequent acceptance of payment amounted to an unequivocal act of recognition of the lease taken with knowledge of the breach and therefore a waiver.

Court’s reasoning and conclusions:

• The court restated the legal test: waiver/election requires knowledge of the facts giving rise to the right of forfeiture and an unequivocal act consistent only with continuation of the lease (Matthews v Smallwood; Kammins Ballrooms). There is also an additional requirement that the landlord’s act be communicated to the tenant (Cornillie v Saha).
• The court distinguished Metropolitan Properties v Cordery (where a once-and-for-all subletting made the position different) on the facts because SASSF had initially occupied as a licensee and the 2017 Sublease was executed substantially later.
• On the invoice issue the court held that the tenants’ liability to pay the insurance rent arose under the original invoice dated 26 September 2019 (i.e. before the Council had knowledge sufficient to found waiver). The revised invoice of 4 November 2019 was objectively a recalculation limiting the demand to the period before the Council’s knowledge and thus did not amount to an unequivocal act of recognition of the lease which would give rise to waiver. The court accepted Mummery LJ’s approach in Osibanjo as correctly stating the law and applied the standard principle that acceptance of sums which accrued due prior to the landlord’s knowledge does not ordinarily waive forfeiture.

Subsidiary findings and implications:

• The court found some witness evidence incomplete or implausible and cautioned against accepting uncorroborated retrospective assertions of title to a sublease. The court noted the possible consequences for security of tenure under the 1954 Act if waiver had been found but did not decide those issues as they were not argued in detail.

Outcome:

• The claim for a declaration of waiver was dismissed. The court declared the Lease and the 2017 Sublease determined on 22 November 2019. The court reserved consequential matters, including costs.

The claim is dismissed. The court held that (1) the 2017 Sublease was likely back-dated and executed no earlier than between 20 May 2019 and 18 October 2019; (2) there was no enforceable written sublease to the Second Company in 2012; (3) the Council acquired knowledge that SASSF occupied in January 2018 but had no reason to believe SASSF held a sub-tenancy until the solicitors’ letter of 18 October 2019; and (4) the Council did not waive their right of forfeiture by sending the revised invoice of 4 November 2019 or by accepting payment because the liability arose under the earlier invoice and the revised invoice was objectively a recalculation reserving the landlord’s rights. Consequently the Lease and the 2017 Sublease were declared determined by re-entry on 22 November 2019.