Hush Brasseries Limited v RLUKREF Nominees (UK) One Limited & Anor

Relief from forfeiture may be available where an option over land is terminated for breach of obligations in a related lease. The grantee need establish only a proprietary interest in the land immediately before termination; the interest need not have any additional quality, such as being perpetual or already capable of specific performance. The termination provision must have been intended as security for performance of a primary obligation. Jurisdiction having been established, relief remains discretionary and turns on whether it would be unconscionable to permit reliance on the termination right. Relevant considerations include the nature of the default, its seriousness, the value forfeited compared with the loss caused, whether the secured obligation has been performed, and whether the terminating party retains the benefit of that obligation.

The claimant tenant held a 2011 call option requiring the landlord, if exercised during the final year of the lease, to grant a further lease. The option allowed the landlord to terminate it if events occurred which entitled the landlord to forfeit the lease, including rent arrears.

The defendants acquired the freehold and served notice terminating the option after rent arrears accrued during the Covid-19 pandemic. They did not forfeit the lease. The arrears were subsequently settled and paid. The claimant sought unconditional or conditional relief from forfeiture.

The parties agreed that jurisdiction required a proprietary interest in the premises and a termination provision securing performance of the lease covenants, followed by a discretionary assessment. The issues were whether those conditions were met and whether it would be unconscionable to allow the defendants to retain the benefit of termination.

1. Relief granted. The claimant had established the jurisdictional conditions and was entitled to unconditional relief from forfeiture. The defendants’ termination of the option was therefore relieved against.
2. The first condition required only that the claimant had a proprietary interest in the premises by virtue of the option immediately before termination. An option to purchase land creates an immediate equitable interest even though it cannot yet be exercised and no specifically performable sale contract has arisen. The reasoning in London and South Western Railway Co v Gomm and First National Securities Ltd v Chiltern DC supported that conclusion. The interest was not required to be perpetual or to have been enjoyed for many years.
3. The second condition was satisfied. The option and lease were intended to operate together. The termination clause operated on breach of the lease covenants, particularly the rent obligation, and was additional security even though the lease contained its own forfeiture clause and the option was a separate document. A provision need not secure the obligation exclusively.
4. Once jurisdiction existed, the court had a discretion governed by unconscionability. The jurisdiction was not confined to cases involving an ulterior or abusive purpose. The relevant assessment included the claimant’s conduct, whether the default was wilful, the gravity of the breach, the disparity between the value forfeited and the loss caused, and whether the secured obligation had since been performed.
5. It would be unconscionable for the defendants to retain the termination benefit. The arrears had been fully settled, the default was not wilful, the defendants continued to receive rent under the existing lease, and by not forfeiting that lease they retained the benefit of the primary obligation which the option clause secured. Costs and consequential matters were reserved for further submissions.