The Mayor and Commonalty and Citizens of the City of London
(Appellants)
v.
Fell and others (Respondents)
JUDGMENT
Die Jovis 2° Decembris 1993
Upon Report from the Appellate Committee to whom was
referred the Cause The Mayor and Commonalty and Citizens of the
City of London against Fell and others, That the Committee had
heard Counsel as well on Monday the 8th as on Tuesday the 9th
days of November last upon the Petition and Appeal of the Mayor
and Commonalty and Citizens of the City of London of P.O. Box
270, Guildhall, London EC2P 2EJ, praying that the matter of the
Order set forth in the Schedule thereto, namely an Order of Her
Majesty’s Court of Appeal of the 25th day of November 1992, might
be reviewed before Her Majesty the Queen in Her Court of
Parliament and that the said Order might be reversed, varied or
altered or that the Petitioners might have such other relief in
the premises as to Her Majesty the Queen in Her Court of
Parliament might seem meet; as upon the case of John Arnold Fell
lodged in answer to the said Appeal; and due consideration had
this day of what was offered on either side in this Cause:
It is Ordered and Adjudged, by the Lords Spiritual and
Temporal in the Court of Parliament of Her Majesty the Queen
assembled, That the said Order of Her Majesty’s Court of Appeal
of the 25th day of November 1992 complained of in the said Appeal
be, and the same is hereby, Affirmed and that the said Petition
and Appeal be, and the same is hereby, dismissed this House: And
it is further Ordered. That the Appellants do pay or cause to be
paid to the said Respondent the Costs incurred by him in respect
of the said Appeal to this House, the amount thereof to be
certified by the Clerk of the Parliaments if not agreed between
the parties.
Cler: Parliamentor:
Judgment: 2 December 1993
HOUSE OF LORDS
MAYOR ETC. OF THE CITY OF LONDON
(APPELLANTS)
v.
FELL AND OTHERS
(RESPONDENTS)
Lord Templeman
Lord Goff of Chieveley
Lord Jauncey of Tullichettle
Lord Browne-Wilkinson
Lord Mustill
LORD TEMPLEMAN
My Lords.
By a Lease dated 15 July 1977 the appellant landlords, the Corporation
of the City of London, granted to the respondent partners in Wilde Sapte &
Co. premises in New Broad Street “to hold the premises . . . from 25 March
1976 for the term of ten years . . . (hereinafter called ‘the term’)”. The
Lease contained 23 covenants by the tenant firm including a covenant to pay
the rent. Those covenants were of course limited to the ten year period which
constituted the term.
In 1979 Wilde Sapte with the consent of the landlords assigned the
Lease to Grovebell Group Ltd. By privity of contract and pursuant to the
covenants contained in the Lease, Wilde Sapte remained liable to the landlords
to pay the rent and perform and observe the tenant’s covenants contained in
the Lease during the remainder of the term. By privity of estate, Grovebell
became liable to the landlords to pay the rent and to perform such of the other
tenant’s covenants contained in the Lease as touched and concerned the land.
The contractual liability of Wilde Sapte was due to end on 24 March 1986
upon the expiration by effluxion of time of the term granted by the Lease.
However, Part II of the Landlord and Tenant Act 1954 then applied:
“where the property comprised in the tenancy is or includes premises
which are occupied by the tenant and are so occupied for the purposes
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of a business carried on by him or for those and other purposes:” see
section 23(1) of the Act of 1954.
By section 69(1) of the Act of 1954 a tenancy is:
“a tenancy created either immediately or derivatively out of the
freehold, whether by lease or underlease, by an agreement for a lease
or underlease or by a tenancy agreement …”
In the circumstances of the present case, the Act of 1954 operated to
protect the occupying tenant, Grovebell Group Ltd., in respect of the tenancy,
that is to say the term granted by the 1977 Lease. This was effected by
section 24 of the Act of 1954 which, so far as material, provided as follows:
“(1) A tenancy to which this part of this Act applies shall not come
to an end unless terminated in accordance with the provisions of this
Part of this Act: and, … the tenant under such a tenancy may apply
to the court for a new tenancy –
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if the landlord has given notice under section 25 of this
Act to terminate the tenancy, or -
if the tenant has made a request for a new tenancy in
accordance with section twenty-six of this Act.
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(2) The last foregoing subsection shall not prevent the coming to
an end of a tenancy by notice to quit given by the tenant, by surrender
or forfeiture, or by the forfeiture of a superior tenancy, …”
The term granted by the 1977 Lease did not come to an end on 24
March 1986 under the Lease but was continued under the Act. The term
continued until 23 January 1987 when the liquidator of an insolvent Grovebell
surrendered the term. There was then owing rent and outgoings amounting
to £33,460.64 in respect of the period between 25 March 1986 and 22 January
1987.
In these proceedings the landlords seek to recover the sum of £33,460
from Wilde Sapte. The Deputy High Court judge Desmond Perrett Q.C. and
the Court of Appeal (Nourse and Evans L.JJ. and Sir Michael Kerr) held that
the landlords were not entitled to recover and the landlords now appeal.
Wilde Sapte are not contractually bound to pay the landlords any rent
for the period after 24 March 1986 because Wilde Sapte only contracted to
pay rent until that date. If Wilde Sapte are liable to the landlords after that
date, that liability must have been imposed by the Act of 1954. That Act does
not expressly impose any liability on anybody except the landlords and the
occupying tenant. There is no reason why any liability on Wilde Sapte should
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be implied. The Act was intended and expressed to protect occupying tenants
against their landlords not to impose liability on former tenants who ceased to
have any interest in the property before or after the Act of 1954. Mr. Arden,
who appeared for the landlords, attempted to wring some comfort out of the
words of the 1977 Lease, the language of the Act of 1954 and finally divers
sentences snatched like straws from passages in judgments which had nothing
to do with the Act of 1954 or were useless for present purposes. His gallant
attempts failed.
Mr. Arden relied on the following propositions. The Lease contained
covenants by the original tenant Wilde Sapte. As assignee of the Lease,
Grovebell was bound to perform and observe those covenants. If the
covenants ceased to be enforceable against the original tenant, they could not
be enforced against the assignee. The Act of 1954 would not therefore work
unless the statutory continuation of the term granted by the Lease also
continued the liability of the original tenant under the covenants. The Lease,
he said, must be underpinned, whatever that expression means, by the original
tenant’s covenants. I can find nothing in principle or authority to support the
proposition that if the covenants of a lease cannot be enforced against the
original tenant they cannot be enforced against the assignee. If, after an
assignment, a landlord expressly released the original tenant from his
covenants, the residue of the term granted by the lease would remain vested
in the assignee and the assignee would be obliged to observe and perform
those covenants which ran with the term, or, as it is usually put, ran with the
land, just as he would be liable before the release. Similarly, if an original
tenant were a corporation which was dissolved during the term, the residue of
the term would remain vested in the assignee who would remain liable to
observe and perform the covenants.
At common law, after an assignment, the benefit of a covenant by the
original landlord which touches and concerns the land runs with the term
granted by the lease. The burden of a covenant by the original tenant which
touches and concerns the land also runs with the term; see Spencer’s, case
(1583) 5 Co. Rep. 16(a).
By statute, the benefit of a covenant by the original tenant which
touches and concerns the land runs with the reversion. Section 141 of the
Law of Property Act 1925 replacing section 1 of the Grantees of Reversions
Act 1540 (32 Hen. 8 c.34), section 10 of the Conveyancing Act 1881 and
section 2 of the Conveyancing Act 1911 provides that:
(1) “Rent reserved by a lease, and the benefit of every covenant or
provision therein contained, having reference to the subject matter
thereof, and on the lessee’s part to be observed or performed, and
every condition of re-entry and other condition therein contained, shall
be annexed and incident to and shall go with the reversionary estate in
the land . . . immediately expectant on the term granted by the lease
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By statute, the burden of a covenant by the original landlord which
touches and concerns the land also runs with the reversion. Section 142 of the
Law of Property Act 1925 reproducing section 2 of the Act of 1540 and
section 11 of the Conveyancing Act 1881 provides that:
“(1) The obligation under a condition or of a covenant entered into
by a lessor with reference to the subject matter of the lease shall, if
and as far as the lessor has power to bind the reversionary estate
immediately expectant on the term granted by the lease, be annexed
and incident to and shall go with that reversionary estate . . . and may
be taken advantage of and enforced by the person in whom the term
is from time to time vested . . . and … the obligation aforesaid may
be taken advantage of and enforced against any person so entitled.”
The principle that the benefit and burden of covenants in a lease which
touch and concern the land run with the term and with the reversion is
necessary for the effective operation of the law of landlord and tenant.
Common law. and statute following the common law, recognise two forms of
legal estate in land, a fee simple absolute in possession and a term of years
absolute: see section 1 of the Law of Property Act 1925. Common law, and
statute following the common law, were faced with the problem of rendering
effective the obligations under a lease which might endure for a period of 999
years or more beyond the control of any covenantor. The solution was to
annex to the term and the reversion the benefit and burden of covenants which
touch and concern the land. The covenants having been annexed, every legal
owner of the term granted by the lease and every legal owner of the reversion
from time to time holds his estate with the benefit of and subject to the
covenants which touch and concern the land. The system of leasehold tenure
requires that the obligations in the lease shall be enforceable throughout the
term, whether those obligations are affirmative or negative. The owner of a
reversion must be able to enforce the positive covenants to pay rent and keep
in repair against an assignee who in turn must be able to enforce any positive
covenants entered into by the original landlord. Common law retained the
ancient rule that the burden of a covenant does not run with the land of the
covenantor except in the case of a lease, but even that rule was radically
modified by equity so far as negative covenants were concerned; see Tulk v.
Moxhay (1848) 2 Ph. 774.
The effect of common law and statute on a lease is to create rights and
obligations which are independent of the parallel rights and obligations of the
original human covenantor who and whose heirs may fail or the parallel rights
and obligations of a corporate covenantor which may be dissolved. Common
law and statute achieve that effect by annexing those rights and obligations so
far as they touch and concern the land to the term and to the reversion.
Nourse L.J. neatly summarised the position when he said in an impeccable
judgment at [1993] 2 W.L.R. p. 716:-
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“The contractual obligations which touch and concern the land having
become imprinted on the estate, the tenancy is capable of existence as
a species of property independently of the contract.”
The common law did not release the original tenant from liability for
breaches of covenant committed after an assignment because of the sacred
character of covenant in English law. I understand that Scots law releases the
original tenant once he has been replaced by a permitted or accepted assignee.
This only means that the fortunate English landlord has two remedies after an
assignment, namely his remedy against the assignee and his remedy against
the original tenant. It does not follow that if the liability of the original tenant
is released or otherwise disappears then the term granted by the lease will
disappear or that the assignee will cease to be liable on the covenants.
As between landlord and assignee the landlord cannot enforce a
covenant against the assignee because the assignee does not covenant. The
landlord enforces against the assignee the provisions of a covenant entered into
by the original tenant, being provisions which touch and concern the land,
because those provisions are annexed by the lease to the term demised by the
lease. The assignee is not liable for a breach of covenant committed after the
assignee has himself in turn assigned the lease because once he has assigned
over he has ceased to be the owner of the term to which the covenants are
annexed.
Covenants are introduced on the creation of a lease but are not
necessary to sustain a lease. Upon an assignment of a lease, the provisions
of the covenants by the original tenant continue to attach to the term because
those provisions touch and concern the land and not because there continues
to exist an original tenant who has ceased to own any interest in the demised
land but remains liable in contract to fulfil the promises he made under
covenant. Mr. Arden’s submission confuses contract with status, a distinction
fundamental to the English system of leasehold tenure of land. The only
object and effect of this submission is that it would enable the Corporation of
the City of London to compel Wilde Sapte to pay £33,460.64 which Wilde
Sapte never covenanted to pay in respect of an estate in land which Wilde
Sapte never enjoyed. I would dismiss this appeal with costs.
LORD GOFF OF CHIEVELEY
My Lords,
I have the advantage of reading in draft the speech prepared by my
noble and learned friend Lord Templeman. For the reasons he gives, I too,
would dismiss this appeal.
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LORD JAUNCEY OF TULLICHETTLE
My Lords,
I have had the advantage of reading in draft the speech by my noble
and learned friend, Lord Templeman. For the reasons he gives I too would
dismiss this appeal.
LORD BROWNE-WILKINSON
My Lords.
For the reasons given by my noble and learned friend Lord Templeman
I too would dismiss this appeal.
LORD MUSTILL
My Lords.
For the reasons given by my noble and learned friend Lord Templeman
I too would dismiss this appeal.
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Source: https://www.bailii.org/
