Toms v Ruberry

This appeal raises an interesting point about whether the right of re-entry to the relevant leasehold premises needs to have accrued under the provisions in the lease before a notice under section 146 of the Law of Property Act 1925 can be validly served.

The appeal is against the judgment of Mr Recorder Mawhinney dated 27^th July 2017, pursuant to permission granted by order dated 28^th September 2017. Mr Recorder Mawhinney had dismissed the claim for possession of Queen’s Arms, Fore Stree, Constantine, Falmouth, Cornwall (“The Queen’s Arms”) made by Andrew Toms (“Mr Toms”) against Marylin Ruberry (“Ms Ruberry”). Ms Ruberry has served a Respondent’s Notice seeking to affirm the judgment on grounds other than those relied on in the judgment.

The Queen’s Arms is a public house. Mr Toms is the freehold owner of the Queen’s Arms. Ms Ruberry is the tenant of the Queen’s Arms and resides there.

The relevant lease was termed a “Business Development Agreement” and is dated 22^nd April 2005. It has been referred to throughout the proceedings as the lease. The lease was originally made between Punch Taverns (SPML) Limited (“Punch Taverns”) and Philip Dunn (“Mr Dunn”).

Mr Dunn assigned the lease to Ms Ruberry for payment of £70,000 under an assignment dated 9^th December 2005. The lease was for 3 years and has been extended by various “Rent and Roll agreements” for 3 years each time. The last extension was dated 3^rd May 2015 and provided for the rent to continue at £13,500 per annum. On 7^th July 2015 the freehold reversion was transferred from Punch Taverns to Mr Toms.

The relationship between Mr Toms and Ms Ruberry broke down in the circumstances set out in the judgment of Mr Recorder Mawhinney. There was mutual suspicion and distrust. Mr Recorder Mawhinney found that Ms Ruberry’s evidence about the circumstances leading to the breakdown of the relationship was not reliable and that Mr Toms’ concerns about Ms Ruberry’s actions in relation to a carpet were justified.

Relevant terms of the lease are set out in paragraphs 6, 7 and 8 of the judgment. The lease has two main parts, and both parts include clauses with the same number. A reference to clause 3.6.1 Part 1 is a reference to the clause 3.6.1 in the first part of the lease. So far as is material to this judgment I note the following terms of the lease:

After various meetings and issues between Mr Toms and Ms Ruberry on 20^th January 2016 the Queen’s Arms was inspected by Jon Stone, FRICS (“Mr Stone”), a surveyor instructed by Mr Toms. There were identified breaches of covenant being: (a) a failure to keep the garden and grounds clean and well-tended. Parts had become overgrown, there appeared to be an abandoned car, and there was builders’ rubbish; (b) a failure to keep the aluminium door of the garage in good condition. The slide bolt did not line up meaning that a padlock could not be fitted. The yale lock was damaged and the keys had been lost; (c) no test or other certificates for fire alarms and emergency lighting had been obtained; and (d) the Queen’s Arms had not been redecorated within the last 3 years.

Solicitors acting for Mr Toms sent a default notice pursuant to clause 4.1.7, Part II, and a section 146 notice by email and registered post on 23^rd February 2016. There were incorrect covering letters attached, so that the section 146 notice was sent with the letter referring to the clause 4.1.7 notice, and the clause 4.1.7 notice was sent with the section 146 covering letter. The report from Mr Stone was attached. The letters were sent again on 25^th February 2016, but this time with the correct covering letter. No point arises on the earlier error and it is agreed that the relevant date of service was 25^th February 2016.

The section 146 Notice was headed “Notice under section 146 of the Law of Property Act 1925”. After details of the parties and legal representatives were set out the notice continued. It was stated that “The agreement contains the following covenants” and clause 3.5 Part I, 3.6, 3.6.1 Part I, 3.6.2 Part I, 3.7 Part I, 3.7.1 Part I, 3.7.2 Part I were set out. There was reference to Mr Stone’s report, which was attached, and the overgrown car park, the loss of the keys to the garage door, the failure to provide certificates and the failure to redecorate was particularised. The notice went on to provide “2. You are required to remedy the breaches within a reasonable time so far as they are capable of remedy. 3. If you fail to comply with this notice within 7 weeks the landlord intends to re-enter the premises pursuant to clause 4.1.7 of the agreement and claim damages for the above breaches of covenant.”

On 10^th March 2016 Cornwall Council prepared and served a Housing Improvement Notice pursuant to section 11 of the Housing Act 2004, giving Mr Toms 28 days to remedy a number of hazards. On 30^th March 2016 Mr Toms appealed the notice to the First-tier Tribunal Property Chamber (Residential Property) which was said to be a waiver of the right to forfeit (because it affirmed the continuing basis of the tenancy). The First-tier Tribunal subsequently allowed Mr Toms’ appeal.

Ms Ruberry instructed Richard Thomas, MRICS (“Mr Thomas”) a chartered building surveyor to survey the Queen’s Arms. A survey was carried out on 25^th April 2016 by Mr Thomas.

On 28^th April 2016 a further inspection was carried out of the Queen’s Arms. Some works had been carried out by Ms Ruberry but Mr Toms claimed there had been a failure to remedy the breaches within a reasonable time and that the lease was forfeited.

On 14^th July 2016 Mr Toms brought proceedings for possession with Particulars of Claim dated 12^th July 2016. The original date for hearing was 22^nd August 2016. A defence and counterclaim seeking relief from forfeiture was dated 19^th August 2016.

Directions were given by Deputy District Judge Whitford on 22^nd August 2016. A reply and defence to counterclaim dated 16 September 2016 was served. Further directions were given on 9^th November 2016. Mr Toms alleged that Ms Ruberry had acted in breach of the terms of the lease.

The trial took place in Plymouth on 9, 10 and 11 May 2017. Evidence was given by Mr Toms, Trevor Toms, Ms Ruberry and a statement from Jon Rossiter, a customer at the public house, was read. Written submissions followed the hearing and Mr Recorder Mawhinney gave a written judgment dated 27^th July 2016.

Mr Recorder Mawhinney found both Mr Toms and Mr Trevor Toms to be straightforward witnesses. He found the evidence of Ms Ruberry more difficult to accept, for reasons set out in the judgment which it is not necessary to repeat. Mr Recorder Mawhinney found that the change of regime from Punch Taverns to Mr Toms had annoyed and inconvenienced her, which had coloured her approach to the case.

Mr Recorder Mawhinney noted that relations between Mr Toms and Ms Ruberry had broken down. Ms Ruberry suspected Mr Toms of wanting to evict her, but Mr Toms’ evidence that he simply wanted a good relationship with Ms Ruberry was accepted. Incidents about a carpet and the garage door were addressed in the judgment. These were mainly relevant to the break-down in the relationship between the parties.

In paragraph 25 of the judgment Mr Recorder Mawhinney set out the 4 breaches of covenant relied on by the Mr Toms. Mr Recorder Mawhinney referred to the Scott schedule which had been completed by the surveyors (who, pursuant to pre-trial directions, had not attended to give evidence) and then dealt with each alleged breach.

In paragraphs 28 to 30 Mr Recorder Mawhinney dealt with the car park and garden and found that Ms Ruberry had failed to keep the exterior of the premises and car park clean and well-tended, and the breach was not remedied by 14^th April 2016. There was also an overgrown tree which should have been cut back. This matter was largely but not completed remedied in the period of time specified in the section 146 notice.

In paragraphs 31 to 32 Mr Recorder Mawhinney dealt with the garage door and found that Ms Ruberry was in breach of the obligation to replace keys to the integral lock. In paragraphs 33 to 40 Mr Recorder Mawhinney analysed the evidence relating to the electrical certificate and found a breach which was not remedied prior to expiration of the section 146 notice. In paragraphs 41 to 45 Mr Recorder Mawhinney set out that there were a number of breaches of the obligation to decorate which had not been remedied within the period provided for by the section 146 notice period.

In paragraph 46 Mr Recorder Mawhinney summarised the breaches before turning to consider the right to re-entry and the section 146 notice in paragraphs 47 to 65 of the judgment, before dismissing the claim to possession. Having set out relevant legal principles and statutory provisions Mr Recorder Mawhinney set out the terms of the section 146 notice served on 25^th February 2016 in paragraph 49. Mr Recorder Mawhinney noted that a default notice had also been served under clause 4.7.1. This referred to breaches set out in Mr Stone’s report and gave 14 days for compliance.

Mr Recorder Mawhinney noted that the section 146 notice allowed 7 weeks for compliance, which was 14^th April 2017. He recorded that there had been discussion about the relationship between clause 4.1.5 and clause 4.1.7. It was noted that no claim under clause 4.1.5 had been pleaded, but it was relied on behalf of Mr Toms as the mechanism by which the lease came to an end. In paragraph 61 of the judgment Mr Recorder Mawhinney agreed that clause 4.1.5 (see paragraph 7.6 above) was not relied on to found a breach of covenant, but it needed to be relied on if it was to found any claim outside clause 4.1.7 (see paragraph 7.7 above).

In paragraphs 62 and 63 of the judgment Mr Recorder Mawhinney dealt with the point made on behalf of Ms Ruberry to the effect that possession could not be claimed pursuant to clause 4.1.7 because the 14 day period had not expired.

In paragraphs 64 and 65 of the judgment Mr Recorder Mawhinney rejected submissions to the effect that clause 3.45 (paragraph 7.5 above) of the lease provided a free-standing obligation to comply with the default notice, or that Mr Toms was entitled to forfeit before the expiry of the 14 day period.

The issue of waiver was addressed by the Judge in paragraphs 66 to 79 of the judgment in case he was wrong on the issue of a right to possession. Mr Recorder Mawhinney found that there would have been no waiver on the facts of the case either by reason of the appeal to the First Tier Tribunal or by reason of the alternative method of locking the garage door.

In paragraphs 80 to 84 of the judgment a claim for a declaration that Mr Toms was bound by the terms of the IF Code 2013 was dismissed because Mr Toms was an individual and not a company.

In consequential orders the claims for possession and damages were dismissed, the counterclaim for a declaration that the IF Code applied was dismissed, and the counterclaim for relief against forfeiture was stayed pending determination of any appeal.

I am very grateful to Mr Auld and Mr Lane for their helpful submissions. Mr Auld relies on two grounds of appeal. First it is said that Mr Recorder Mawhinney should not have held that this section 146 notice was invalid because it was served before the landlord had a right to re-enter. Mr Auld submitted that a section 146 notice could be validly served before the right of re-entry had arisen, so long as the right had arisen before possession (or proceedings seeking possession) was taken. Mr Auld relied on various authorities which he said supported this ground of appeal. Mr Lane said that this ground of appeal was contrary to the plain wording of section 146 and that none of the authorities, properly analysed, supported this ground of appeal.

The second ground of appeal was that the Judge should have held that “standards” in clause 4.1.5 referred to standards of repair and decoration set out in clause 3.6 and 3.7 and not just “standards of performance” set out in clause 3.13 (see paragraph 7.4 above) in the lease Part II. Mr Lane submitted that the Recorder’s interpretation was right, and that no reliance had been placed on clause 4.1.5 which had not been pleaded. It was recognised in submissions by both parties that the lease appeared to have been the product of a number of revisions and additions from previous drafts, and that it did not necessarily read as well as might be hoped.

Mr Lane relied on a ground not relied on by Mr Recorder Mawhinney but set out in a Respondent’s notice to affirm, namely that the section 146 notice in this case did not set out the particular breach of covenant on which Mr Toms relied. Mr Auld submitted that the section 146 notice was sufficient and had told Ms Ruberry what needed to be put right, which was the purpose of the section 146 notice.

Section 146 of the Law of Property Act 1925 provides: “(1) a right of re-entry or forfeiture under any proviso or stipulation in a lease for a breach of any covenant or condition in the lease shall not be enforceable, by action or otherwise, unless and until the lessor serves on the lessee a notice- (a) specifying the particular breach complained of; and (b) if the breach is capable of remedy, requiring the lessee to remedy the breach; and (c) in any case, requiring the lessee to make compensation in money for the breach; and the lessee fails, within a reasonable time thereafter, to remedy the breach, it if is capable of remedy, and to make reasonable compensation in money, to the satisfactory of the lessor, for the breach.” (underlining added).

It is relevant, because some of the authorities relied on predate the 1925 Act, to record that section 146 of the Law of Property Act 1925 was in identical terms to section 14 of the Conveyancing Act 1881.

A re-entry proviso in a lease should be construed against the landlord in cases of doubt, see Woodfall: Landlord and Tenant at paragraph 17.066.1.

In Penton v Barnett [1898] 1 QB 276 (decided in relation to section 14 of the 1881 Act) the Court of Appeal rejected an argument that a new notice was required in respect of breaches occurring after the first notice had been served in circumstances where AL Smith and Collins LJJ held that the right to possession had been inadvertently waived by the acceptance of rent before 25^th December (Rigby LJ held that there was no waiver). AL Smith LJ said at page 280 that the breaches after the waiver period “are the same as those in respect of which the notice was given”. Collins LJ said at page 281, having referred to the phrase “particular breach” in section 146 said “The expression `breach’ means the neglect to deal with the condition of the premises so pointed out, and not merely failure to comply with the covenants of the lease. The common sense of the matter is that the tenant is to have full notice of what he is required to do. He has had notice and has failed to act on it; and with regard to that the physical condition of the premises which he was required to make good was the same when the action was brought as when the notice was given.”

Penton v Barnett establishes the purpose for the enactment of section 14 of the 1881 Act (and now section 146 of the Law of Property Act) was so that the tenant may have full notice of what the tenant is required to do. It is a waiver case showing that there is no need for a second notice if there has been a period of time where the right to take possession has been suspended by a waiver, but the relevant breach has continued throughout. It is right to say that, read out of context, dicta in Collins LJ’s judgment might support the proposition that a notice simply had to give full notice of what the tenant had to do, and therefore a section 146 notice could be served at any time. However that was not the issue in the case, and the Court was not rewriting the words of the statute.

Reference was also made to Fuller v Judy Properties [1992] 1 EGLR 75 a case in which an assignment to a new tenant was in arguable breach of covenant under the lease entitling re-entry. The landlord served a notice on the original tenant and took possession of the premises. Then, recognising that although the assignment might have been in breach of covenant it would have been effective, the landlord served a notice on the new tenant while in possession of the property. This was held to be sufficient in circumstances where it was common ground that the assignment in breach of covenant was irremediable, see page 77H. Dillon LJ referred to the purposes of section 146 of the Law of Property Act 1925 by reference to earlier authority so that the tenant could have the opportunity of considering, among other matters, whether to admit the breach alleged and whether the breach was capable of remedy. In that case the new tenant did not need possession of the property to consider those matters.

In Fuller v Judy Properties no issue about the timing of the right to re-entry had arisen. In my judgment the case is not authority for the proposition that a section 146 notice can be served before a breach of covenant giving the right of re-entry has occurred.

Akici v LR Butlin Ltd [2005] EWCA Civ 1296; [2006] 1 WLR 201 was a case about the contents of section 146 notices. In that case the section 146 notice had specified a breach of covenant by “assignment or alternatively subletting or alternatively parting with possession of the premises without the landlord’s consent”, see paragraph 7 of the judgment. In fact there had been sharing of the premises. It was held that the approach of the majority of the House of Lords in Mannai Investment v Eagle Star Life Assurance [1997] AC 749 ought to apply to the construction of section 146 notices. However Neuberger LJ, giving the judgment of the Court, noted in paragraph 54 that if the notice “does not specify the right breach, then nothing in Mannai Investment can save it”, before noting that a reasonable tenant in that case might consider that there was nothing to be done as a requirement because the tenant had not assigned, sublet or parted with possession, and was simply sharing possession. Reference was made in Akici to the proposition that the notice should be construed as a whole in a common sense way.

The effect of Akici was summarised in Woodfall: Landlord and Tenant at 17.130 as being that “all that the landlord is bound to do is to state particulars of the breaches of covenants of which he complains …”. Woodfall went on to identify that it was not necessary to refer expressly to section 146 or to the covenant in question in the notice “so long as it adequately identifies the breach”.

There was reference in argument to the approach taken by the Courts to the interpretation of section 146(1)(c). I was referred to Rugby School v Tannahill [1935] 1 KB 87 where a breach giving right of re-entry had occurred and a section 146 notice had been served which did not require remedy or compensation. The Court considered earlier authorities and noted that section 146 had been given a common sense interpretation so that if the landlord did not want compensation then there was no requirement to specify an amount of compensation in the Act, notwithstanding the wording.

In my judgment the authorities establish that section 146 must be given a common sense interpretation, and that the purpose of the section is that the tenant should have full notice of what the tenant is required to do. However there is no authority to support the proposition that a section 146 notice may be served before the relevant right to re-entry has occurred. The wording of section 146(1) requires “a right of re-entry or forfeiture under any proviso or stipulation in a lease for a breach of any covenant or condition in the lease”. The ordinary meaning of this provision suggests that the right of re-entry must exist because there is reference to “a right” not to “a future right”. This interpretation is supported by the requirement set out in section 146(1)(a) that the notice shall specify “the particular breach complained of”. This requires the “particular breach” to have occurred, because otherwise the service of the section 146 notice becomes a matter of guesswork about whether a particular breach will occur, and because it is not possible to specify a particular breach unless it has occurred. If the right of re-entry in this case arises because of a failure to take action within 14 days of the clause 4.1.7 notice, then the 14 days is required to elapse before the notice can be served because this is the particular breach relied on.

Mr Auld’s second ground of appeal would, if right, mean that the right of re-entry had arisen by the time of service of the section 146 Notice. It would mean that Mr Toms succeeded in the appeal, subject to the point raised under the Respondent’s Notice.

It is right to say that in general terms the requirements set out in clause 3.6 and 3.7 can be referred to as “standards”, although the more normal description might be considered to be obligations. However it is an agreed principle of interpretation (and a proposition that accords with the expectation of reasonable landlords and tenants) that the use of a word or phrase will be consistent throughout the lease. In this case there is express reference to “standards of performance” in clause 3.13. The expectation is therefore that “standards set forth in this agreement” in clause 4.1.5 (see paragraph 7.6 above) will be a reference to those “standards of performance” referred to in clause 3.13 (see paragraph 7.4 above). I also note that this is a re-entry proviso in a lease and therefore should be construed against the landlord in cases of doubt.

Mr Auld points out that in clause 3.13 the tenant is required “to achieve the levels of growth and standards of performance as set out in the manual” and notes that in clause 4.1.5 there is reference to “the standards as set forth in this agreement and manual” which he submits means that something more than the standards of performance set out in the manual is required, and that this must therefore refer, among other matters, to standards set out in clauses 3.6 and 3.7. I do not accept that submission because the wording of clause 3.13 refers to “standards of performance as set out in the manual and as agreed from time to time with the company”. In my judgment “the standards” referred to in clause 4.1.5 is a reference to the standards of performance as set out in the manual and also the standards of performance “as agreed from time to time with the company” which are referred to in clause 3.13 and therefore referred to in the “agreement”, which is a reference to the lease.

As Mr Recorder Mawhinney noted this point was not pleaded in the Particulars of Claim. Mr Auld pointed out that the Particulars of Claim had stated that there would be reference to the terms of the lease for its full terms and effect, but that is not a sufficient and fair pleading of a breach of clause 4.1.5. The pleading point was taken at trial and no amendment was made (for understandable reasons given the potential costs consequences). Mr Recorder Mawhinney relied on the pleading point in his judgment and he was entitled to do so in the absence of an amendment. However as Mr Toms was not, in my judgment, entitled to rely on clause 4.1.5 to found a right of re-entry for these breaches, the pleading point does not strictly arise.

This means that the point raised in the Respondent’s Notice does not arise for decision.

For the detailed reasons set out above I dismiss the appeal.