1972 Oct. 11, 12, 16, 17, 18, 19 23, 24; Dec. 13
Lord Wilberforce, Viscount Dilhorne, Lord Pearson, Lord Simon of Glaisdale and Lord Kilbrandon
CATCHWORDS
Land Charge - Charges registrable - Equitable easement - Assignment of leasehold - Right to re - enter on breach of covenant in - Whether registrable - Land Charges Act 1925 (15 & 16 Geo. 5, c. 22), s. 10 (1), Class D (iii)
Land Charge - Charges registrable - Estate contract - Assignment of leasehold - Right to re-enter on breach of covenant and "to hold as if assignment had not been made" - Whether "any other like right" - Whether registrable - Land Charges Act 1925, s. 10 (1), Class C (iv)
Landlord and Tenant - Forfeiture of leasehold - Re-entry - Right to re-enter on breach of covenant - No one any longer directly liable for breach of covenant - Covenant not complied with - Whether right to re-entry enforceable
Landlord and Tenant - Forfeiture of leasehold - Relief from forfeiture - Assignment of leasehold - Breach of covenant to repair and support - Whether capable of remedy
HEADNOTE
By section 10 (1) of the Land Charges Act 1925: "The following classes of charges on, or obligations affecting, land may be registered as land charges in the register of land charges, namely: -. . . Class C: - A mortgage charge or obligation affecting land of any of the following kinds, created either before or after the commencement of this Act, but if created before such commencement only if acquired under a conveyance made after such commencement, namely: - . . . (iv) Any contract by an estate owner or by a person entitled at the date of the contract to have a legal estate conveyed to him to convey or create a legal estate, including a contract conferring either expressly or by statutory implication a valid option of purchase, a right of pre-emption or any other like right (in this Act referred to as 'an estate contract') . . .
Class D: - A charge or obligation affecting land of any of the following kinds, namely: - . . . (iii) Any easement right or privilege over or affecting land created or arising after the commencement of this Act, and being merely an equitable interest (in this Act referred to as an 'equitable easement') . . . ." In 1961 the plaintiffs assigned their leasehold interest in mill premises to T Ltd. By the assignment, T Ltd. covenanted on their own behalf and that of their successors in title to observe and perform certain stipulations as to fencing and support of buildings retained by the plaintiffs. On failure to observe or perform any covenant the plaintiffs had a right to re-enter and to retake the premises. That right was not registered as a land charge. In 1965 T Ltd. sold their interest in the premises to the defendant and were thereby exonerated, under the terms of the 1961 assignment, from all further liability under the stipulations. In 1969 the plaintiffs, relying on their right to re-enter, sued the defendant for possession of the premises alleging a failure to perform and observe the stipulations. Burgess V.-C., giving judgment for the plaintiffs in the Lancaster County Palatine Court, held that the right to re-enter was not registrable as a land charge and was enforceable against the defendant to whom no relief from forfeiture ought to be granted. The Court of Appeal having reversed his decision, the plaintiffs appealed to the House of Lords:-Held, (1) that a right of entry could be validly reserved on an assignment of leasehold property when the assignor retained no reversion. (2) That a right of entry could subsist in law in respect of non-compliance with covenants if those covenants, as such, were not enforceable. (3) That as a matter of construction of the assignment the right of entry was exercisable in the circumstances of the case. (4) That the right of entry, which was not registered under the Land Charges Act 1925, was exercisable against the defendant, since the right of entry was equitable and did not fall either within Class C (iv) or Class D (iii) under section 10 of the Act. (5) That this was a case where a court of equity might grant relief against the exercise of a right of entry; though there was no general power in courts equity to relieve against a man's bargains, those courts in appropriate and limited cases might relieve against forfeiture for breach of such a covenant where the primary object of the bargain was to secure a stated result which could be effectively attained when the matter came before the court and where the forfeiture provision was added by way of security for the production of that result. Hill v. Barclay (1811) 18 Ves. 56 explained. (6) That wilful breaches should only in exceptional circumstances be relieved against and the present case, where there were substantial breaches and a continuing disregard of the plaintiffs' rights over a period of time, was not one for relief. Decision of the Court of Appeal [1972] Ch. 326; [1971] 3 W.L.R. 34; [1971] 2 All E.R. 307 reversed.
CITATIONS
The following cases are referred to in their Lordships' opinions:
Bargent v. Thomson (1864) 4 Giff. 473. Barrow v. Isaacs & Son [1891] 1 Q.B. 417, C.A. Blunt v. Blunt [1943] A.C. 517; [1943] 2 All E.R. 76, H.L.(E.). Bracebridge v. Buckley (1816) 2 Price 200. Doe d. Freeman v. Bateman (1818) 2 B. & Ald. 168. Herrington v. British Railways Board [1972] A.C. 877; [1972] 2 W.L.R. 537; [1972] 1 All E.R. 749, H.L.(E.). Hill v. Barclay (1811) 18 Ves. 56. Horsey Estate Ltd. v. Steiger [1899] 2 Q.B. 79, C.A. Hughes v. Metropolitan Railway Co. (1875) 1 C.P.D. 120, C.A.; (1877) 2 App.Cas. 439, H.L.(E.). Hyde v. Warden (1877) 3 Ex.D. 72, C.A. Ives (E. R.) Investment Ltd. v. High [1967] 2 Q.B. 379; [1967] 2 W.L.R. 789; [1967] 1 All E.R. 504, C.A. Kara v. Kara and Holman [1948] P. 287; [1948] 2 All E.R. 16, C.A. Nash v. Derby (Earl) (1705) 2 Vern. 537. National Provincial Bank Ltd. v. Hastings Car Mart Ltd. [1965] A.C. 1175; [1965] 3 W.L.R. 1; [1965] 2 All E.R. 472, H.L.(E.). Peachy v. Duke of Somerset (1721) I Stra. 447. Reynolds v. Pitt (1812) 19 Ves. 134. Sanders v. Pope (1806) 12 Ves. 282. Stevens v. Copp (1868) L.R. 4 Exch. 20. Wadman v. Calcraft (1804) 10 Ves. 67. Webber v. Smith (1689) 2 Vern. 103.
The following additional cases were cited in argument:
Anon. (1552) 1 Dyer. 74a. Banning v. Wright [1972] 1 W.L.R. 972; [1972] 2 All E.R. 987, H.L.(E.). Barton Thompson & Co. Ltd. v. Stapling Machines Co. [1966] Ch. 499; [1966] 2 W.L.R. 1429; [1966] 2 All E.R. 222. Beesly v. Hallwood Estates Ltd. [1960] 1 W.L.R. 549; [1960] 2 All E.R. 314. Belgravia Insurance Co. Ltd. v. Meah [1964] 1 Q.B. 436; [1963] 3 W.L.R. 1033; [1963] 3 All E.R. 828, C.A. Cox v. Higford (1710) 2 Vern. 664. Demetriades v. Glasgow Corporation [1951] 1 All E.R. 457, H.L.(Sc.). Eastern Telegraph Co. v. Dent [1899] 1 Q.B. 835, C.A. Grumston v. Bruce (Lord) (1707) 1 Salk. 156. Hickman v. Kent or Romney Marsh Sheepbreeders' Association (1920) 37 T.L.R. 163, C.A. Lewin v. American & Colonial Distributors Ltd. [1945] Ch. 225; [1945] 2 All E.R. 271n., C.A. Lewisham Borough Council v. Maloney [1948] 1 K.B. 50; [1947] 2 All E.R. 36, C.A. Morgan v. Liverpool Corporation [1927] 2 K.B. 131, C.A. Newbolt v. Bingham (1895) 72 L.T. 852, C.A. North (Lord) v. Butts (1556) 2 Dyer 139b. Popham v. Bamfield (1682) 1 Vern. 167. Poster v. Slough Estates Ltd. [1969] 1 Ch. 495; [1968] 1 W.L.R. 1515; [1968] 3 All E.R. 257. Ralph, Ex Parte, (1845) 2 De Gex (Bankruptcy) 219. Rolfe v. Harris (1811) 2 Price 206n. Samuel Properties (Developments) Ltd. v. Hayek [1972] 1 W.L.R. 1296; [1972] 3 All E.R. 473, C.A. Thomas v. Marconi's Wireless Telegraph Co. Ltd. [1956] 1 W.L.R. 850; [1965] 2 All E.R. 598, C.A. Thomson v. Eastwood (1877) 2 App.Cas. 215 H.L.(E.). United Dominions Trust (Commercial) Ltd. v. Eagle Aircraft Services Ltd. [1968] 1 W.L.R. 74; [1968] 1 All E.R. 104, C.A. Westminster Bank Ltd. v. Lee [1956] Ch. 7; [1955] 3 W.L.R. 376; [1955] 2 All E.R. 883. Woodcock v. Woodcock (1600) Cro. Eliz. 795. Wright d. Plowden v. Cartwright (1757) 1 Burr. 282.
FACTS APPEAL from the Court of Appeal (Russell, Sachs and Buckley L.JJ.) This was an appeal from a judgment and order of the Court of Appeal made on February 10, 1971, reversing a judgment and order of Burgess V.C. made on February 9, 1970, in an action commenced by the appellant company, Shiloh Spinners Ltd., by writ of summons issued on January 15, 1969, in the Chancery of the County Palatine of Lancaster. The general nature of the questions raised was whether or not the appellants were entitled to possession of the leasehold land specified in the writ of summons by virtue of a right of entry reserved by the appellants in an assignment of that leasehold land to the predecessor in title of the respondent, Joseph James Harding, dated October 31, 1961, in the circumstances that none of the covenants therein mentioned was enforceable against the respondent or anyone else and there existed between the appellants and the respondent no privity of contract or estate. The facts are set out in the opinion of Lord Wilberforce.
COUNSEL John Vinelott Q.C. and Andrew Morritt for the appellant company. A. J. Balcombe Q.C. and Peter Keenan for the respondent.
Their Lordships took time for consideration.
JUDGMENT December 13, 1972,
LORD WILBERFORCE.
My Lords, the present dispute, one of a commonplace character between neighbours, was tried in the County Palatine Court of Lancaster by Burgess V.-C. who, after a full hearing and in a careful judgment, allowed the appellants' claim. It has attracted in its subsequent progress a number of points of law, more or less substantial, which may have wider influence. I can state the facts briefly. The appellants were the assignees of two long leases of adjoining properties on which there stood, inter alia, a mill called Shiloh No. 2 Mill. On October 31, 1961, the appellants assigned their interest in a part of the properties, including Shiloh No. 2 Mill, to Thornber Brothers Ltd. retaining the rest. There were contained in the assignment to Thornber Brothers Ltd. a number of covenants, positive and negative, relating (inter alia) to (a) fencing of boundaries (b) keeping in repair a tower (the "lavatory tower") so as to provide support and protection to retained buildings (c) bricking up openings into a retained roadway (d) not diminishing support and protection given to the retained premises. There was reserved in the assignment a right to re-enter or retake the assigned property in the following terms:
"7. (a) If at any time during the lifetime of the last survivor of the descendants now living of His Late Majesty King George V and twenty one years after the death of such last survivor or during such further period (if any) as shall not infringe the law against perpetuities there shall be any failure to perform or observe any of the covenants herein contained implied or referred to on the part of the purchaser then and in every such case and notwithstanding the waiver of any previous default it shall be lawful for the vendor or the owner or owners for the time being of the premises comprised in the first lease and the second lease not hereby assigned at any time or times during the periods aforesaid into and upon the premises hereby assigned or any part thereof in the name of the whole to re-enter and to hold the same for their own absolute use and benefit as if this deed had not been made but without prejudice to any right of action or remedy in respect of any antecedent breach of any of the covenants by the purchasers herein contained implied or referred to."
There was a proviso by which Thornber Brothers Ltd. were exonerated from liability under any of the stipulations after they had parted with their interest in the assigned premises. On March 5, 1965, Thornber Brothers Ltd. for consideration assigned their interest to the respondent, a demolition contractor: he had actual knowledge of the terms of the 1961 assignment. He has demolished the greater part of the buildings on his premises and in doing so, and generally, has committed breaches of the covenants above referred to. The present action was brought by the appellants claiming possession of the premises comprised in the assignment of 1961: the respondent disputed the appellants' right of re-entry and alternatively sought relief against forfeiture. He failed before Burgess V.-C. but succeeded in the Court of Appeal.
The questions which arise may be logically arranged in the following order:
1. Whether a right of entry can be validly reserved on an assignment of leasehold property when the assignor retains no reversion.
2. Whether a right of entry can subsist in law in respect of non-compliance with covenants if those covenants, as such, are not enforceable.
3. As a matter of construction of the assignment whether the right of entry is exercisable in the circumstances of the case.
4. Whether the right of entry is exercisable against the respondent, a purchaser for value, not having been registered under the Land Charges Act 1925.
5. Whether this is a case where a court of equity may grant relief against exercise of the right of entry.
6. Whether relief should be granted to the respondent in the circumstances.
My Lords, I can deal briefly with the first three questions. The question of law raised by the first was answered in the affirmative in 1818 by the King's Bench, following older authorities, in Doe d. Freeman v. Bateman (1818) 2 B. & Ald. 168. In 1877 this case was approved by the Court of Appeal in Hyde v. Warden (1877) 3 Ex.D. 72, 84 and it has never been criticised. No intelligible objection in point of principle was formulated against the proposition so stated, which would merely apply to leaseholds a similar rule as, indisputably, applies to freeholds. In my opinion this House should leave it undisturbed.
As regards the second question, there is again, no convincing reason for giving other than a positive answer. The purpose of the right of entry was to provide a remedy to the lessor in the event-clearly foreseeable since some of the covenants are positive in character-that the covenants themselves could not be enforced against assignees. The only support in law for a negative answer was sought to be drawn from two cases between landlord and tenant-Stevens v. Copp (1868) L.R. 4 Exch. 20 and Horsey Estate Ltd. v. Steiger [1899] 2 Q.B. 79. Neither of these cases gives me satisfaction but it is not necessary to disagree with them since they do not apply directly. Moreover the principle accepted in Doe d. Freeman v. Bateman that the validity of the right of entry does not depend upon annexation to a reversion, removes any reason for their application here by analogy. I can see no reason for applying technical rules which since the 16th century have confused the law of landlord and tenant to a different relationship, namely, one which is, or at least closely resembles, that of restrictive covenants.
On the third question, the respondent sought to invoke the words "failure to perform and observe" and "default" appearing in the re-entry clause in order to found an argument that this clause became inoperative when the covenants themselves became unenforceable. The argument, though forcefully put, failed to persuade me that the construction it sought to place on the clause was otherwise than strained. Since this is an issue which does not extend beyond the present litigation I am content to express my entire satisfaction with the disposal of it by Russell L.J., any addition to whose words would be repetitive. The next question is of a substantial character. The right of entry, it is said, is unenforceable against the respondent, although he took with actual notice of it, because it was not registered as a charge under the Land Charges Act 1925. There is no doubt that if it was capable of registration under that Act, it is unenforceable if not registered: the appellants deny that it was so capable either (i) because it was a legal right, not an equitable right, or (ii) because, if equitable, it does not fall within any of the classes or descriptions of charges registration of which is required.
I consider first whether the right of entry is legal in character or equitable, using these adjectives in the technical sense in which they are used in the 1925 property legislation. The question is purely one of statutory definition, the ingredients of which are found in sections 1 and 205 (1) (x) of the Law of Property Act 1925. The contention that the right is legal was not accepted by Burgess V.-C. or advanced in the Court of Appeal below, nor was it contained in the printed case signed by eminent counsel, though if it were upheld it would be decisive of the case. The appellants were, however, permitted to lodge an amended case raising the point. I set out for convenience section 1 (1), (2) and (3) of the Act. The definition section 205 (1) (x) uses the same verbiage and adds nothing to the argument.
"(1) The only estates in land which are capable of subsisting or of being conveyed or created at law are - (a) An estate in fee simple absolute in possession; (b) A term of years absolute. (2) The only interests or charges in or over land which are capable of subsisting or of being conveyed or created at law are - (a) An easement, right, or privilege in or over land for an interest equivalent to an estate in fee simple absolute in possession or a term of years absolute; (b) A rent-charge in possession issuing out of or charged on land being either perpetual or for a term of years absolute; (c) A charge by way of legal mortgage; (d) Land tax, tithe rent-charge, and any other similar charge on land which is not created by an instrument; (e) Rights of entry exercisable over or in respect of a legal term of years absolute, or annexed, for any purpose, to a legal rent-charge. (3) All other estates, interests, and charges in or over land take effect as equitable interests."
The right of entry in this case is not contained in a lease, so as to be annexed to a reversion, nor is it exercisable for a term of years, or (comparably with a fee simple) indefinitely. Its duration is limited by a perpetuity period. Whether it can be said to be "exercisable over or in respect of a legal term of years absolute" appears obscure. It is not exercisable for a legal term of years (whether that granted by the lease or any other term): it is not so exercisable as to determine a legal term of years. To say that a right of entry is exercisable in respect of a legal term of years appears to me, with respect, to be without discernible meaning. The effect of this right of entry is to cause a legal term of years to be divested from one person to another upon an event which may occur over a perpetuity period. It would, I think, be contrary to the whole scheme of the Act, which requires the limiting and vesting of legal estates and interests to be by reference to a fee simple or a term of years absolute, to allow this to rank as a legal interest. In my opinion it is clearly equitable. So I pass, as did the Court of Appeal, to the Land Charges Act 1925. The original contention of the respondents was that the equitable right of entry was capable of registration under Class D (iii) of the Act. In the Court of Appeal an alternative contention was raised, apparently at the court's suggestion, that it might come within Class C (iv). In my opinion this is unmaintainable. Class C (iv) embraces:
"Any contract by an estate owner or by a person entitled at the date of the contract to have a legal estate conveyed to him to convey or create a legal estate, including a contract conferring either expressly or by statutory implication a valid option of purchase, a right of preemption or any other like right (in this Act referred to as 'an estate contract')".
The only words capable of including a right of entry arc "any other like right," but, in my opinion, no relevant likeness can be found. An option or right of pre-emption eventuates in a contract for sale at a price, this is inherent in "purchase" and "pre-emption," the right of entry is penal in character and involves the revesting of the lease, in the event of default, in a previous owner. There is no similarity in law or fact between these situations. Class D (iii) reads:
"A charge or obligation affecting land of any of the following kinds, namely:-. . . (iii) Any easement right or privilege over or affecting land created or arising after the commencement of this Act, and being merely an equitable interest (in this Act referred to as an 'equitable easement')."
The argument for inclusion in this class falls into two parts. First it is said that a right of entry falls fairly within the description, or at least that, if the words do not appear to include it, they are sufficiently open in meaning to admit it. Secondly it is said that the provisions of the Law of Property Act as to "overreaching" compel the conclusion that a right of entry must fall under some class or sub-class of the Land Charges Act, and since this is the only one whose words can admit it, they should be so interpreted as to do so. Thus the argument depends for its success upon a combination of ambiguity, or openness of Class D (iii) with compelling consideration brought about in the overreaching provision. In my opinion it fails under both limbs: Class D (iii) cannot be interpreted so as to admit equitable rights of entry, and no conclusive, compelling, or even clear conclusions can be drawn from the overreaching provisions which can influence the interpretation of Class D (iii).
Dealing with Class D (iii) I reject at once the suggestion that any help (by way of enlarging the content of this class) can be derived either from the introductory words, for they limit themselves to the "following kinds," or from the words "and being merely an equitable interest," for these are limiting, not enlarging, words. I leave out of account the label at the end- though I should think it surprising if so expert a draftsman had attached that particular label if the class included a right of entry. To include a right of entry in the description of "equitable easement" offends a sense both of elegance and accuracy. That leaves "easement right or privilege over or affecting land." If this were the only place where the expression occurred in this legislation, I should find it difficult to attribute to "right" a meaning so different in quality from easement and privilege as to include a right of entry. The difference between a right to use or draw profit from another man's land, and a right to take his land altogether away, is one of quality, not of degree. But the words are plentifully used both in the Law of Property Act and elsewhere in the 1925 legislation, so are the words "rights of entry," and I find it impossible to believe that in this one context the one includes the other. The two expressions are even used by way of what seems deliberate contrast in two contexts: first in section 1 of the Law of Property Act, where subsection (2) (a) mentions "An easement, right, or privilege in or over land" and paragraph (e) of the same subsection "Rights of entry": secondly, in section 162 (1) (d) which mentions both. An argument, unattractive but perhaps just palatable, can be devised why it might have been necessary in section 1 of the Law of Property Act to mention both easements, rights or privileges and the particular rights of entry described in subsection (2) (e), but no explanation can be given why, if the latter are capable of being included in the former, they should be mentioned with such a degree of separation. I do not further elaborate this point because a reading of their judgments leaves little doubt that the Lords Justices would themselves have read Class D (iii) as I can only read it but for the influence of the overreaching argument.
So I turn to the latter. This, in my opinion, only becomes compelling if one first accepts the conclusion that all equitable claims relating to land are either registrable under the Land Charges Act, or capable of being overreached under section 2 of the Law of Property Act; i.e., are capable by use of the appropriate mechanism of being transferred to the proceeds of sale of the land they affect. If this dilemma could be made good, then there could be an argument for forcing, within the limits of the possible, an equitable right of entry into one of the registrable classes, since it is obviously not suitable for overreaching. But the dilemma cannot be made good. What may be overreached is "any equitable interest or power affecting that estate": yet "equitable interest" (for powers do not enter into the debate) is a word of most uncertain content. The searcher after a definition has to be satisfied with section 1 (8) "Estates, interests, and charges in or over land which are not legal estates are in this Act referred to as 'equitable interests'"-a tautology rather than a definition. There is certainly nothing exhaustive about the expression "equitable interests"- just as certainly it has no clear boundaries. The debate whether such rights as equity, over the centuries, has conferred against the holder of the legal estate are truly proprietary in character, or merely rights in personam, or a hybrid between the two, may have lost some of its vitality in the statutory context but the question inevitably rises to mind whether the "curtain" or "overreaching" provisions of the 1925 legislation extend to what are still conveniently called "equities" or "mere equities," such as rights to rectification, or to set aside a conveyance. There is good authority, which I do not presume to doubt, for a sharp distinction between the two-I instance Lord Upjohn in National Provincial Bank Ltd. v. Hastings Car Mart Ltd. [1965] A.C. 1175, 1238 and Snell's Principles of Equity, 25th ed. (1960) P. 38. I am impressed by the decision in E. R. Ives Investment Ltd. v. High [1967] 2 Q.B. 379 in which the Court of Appeal held that a right by estoppel-producing an effect similar to an easement-was not registrable under Class D (iii). Lord Denning M.R. referred to the right as subsisting only in equity. Danckwerts L.J. thought it was an equity created by estoppel or a proprietary estoppel: plainly this was not an equitable interest capable of being overreached, yet no member of the court considered that the right -so like an easement-could be brought within Class D (iii). The conclusion followed, and the court accepted it, that whether it was binding on a purchaser depended on notice. All this seems to show that there may well be rights, of an equitable character, outside the provisions as to registration and which are incapable of being overreached.
That equitable rights of entry should be among them is not in principle unacceptable. First, rights of entry, before 1925, were not considered to confer an interest in the land. They were described as bare possibilities (Chalis's Real Property, 3rd ed. (1911), p. 76) so that it is not anomalous that equitable rights of entry should not be treated as equitable interests. Secondly, it is important that section 10 of the Land Charges Act 1925 should be given a plain and ordinary interpretation. It is a section which involves day to day operation by solicitors doing conveyancing work: they should be able to take decisions and advise their clients upon a straight-forward interpretation of the registration classes, not upon one depending upon a sophisticated, not to say disputable, analysis of other statutes. Thirdly, the consequence of equitable rights of entry not being registrable is that they are subject to the doctrine of notice, preserved by section 199 of the Law of Property Act. This may not give complete protection, but neither is it demonstrable that it is likely to be less effective than the present system of registration against names. I am therefore of opinion that Class D (iii) should be given its plain prima facie meaning and that so read it does not comprise equitable rights of entry. It follows that non-registration does not make the appellants' right unenforceable in this case.
The consequence is that the appellants' claim to re-enter must succeed unless the respondent can and should be relieved in equity against the appellants' legal right. This involves two questions: first, in law, whether a court exercising equity jurisdiction does relieve against forfeiture in a case such as the present, viz. in a case of breaches of condition as to fencing, support, or blocking of openings, and bearing in mind the relationship of the parties; secondly, the question whether the court ought to relieve the respondent in the circumstances. There cannot be any doubt that from the earliest times courts of equity have asserted the right to relieve against the forfeiture of property. The jurisdiction has not been confined to any particular type of case. The commonest instances concerned mortgages, giving rise to the equity of redemption, and leases, which commonly contained re-entry clauses; but other instances are found in relation to copyholds, or where the forfeiture was in the nature of a penalty. Although the principle is well established, there has undoubtedly been some fluctuation of authority as to the self-limitation to be imposed or accepted on this power. There has not been much difficulty as regards two heads of jurisdiction. First, where it is possible to state that the object of the transaction and of the insertion of the right to forfeit is essentially to secure the payment of money, equity has been willing to relieve on terms that the payment is made with interest, if appropriate, and also costs (Peachy v. Duke of Somerset (1721) 1 Stra. 447 and cases there cited). Yet even this head of relief has not been uncontested: Lord Eldon L.C. in his well known judgment in Hill v. Barclay (1811) 18 Ves. 56 expressed his suspicion of it as a valid principle, pointing out, in an argument which surely has much force, that there may be cases where to oblige acceptance of a stipulated sum of money even with interest, at a date when receipt had lost its usefulness, might represent an unjust variation of what had been contracted for: see also Reynolds v. Pitt (1812) 19 Ves. 140. Secondly there were the heads of fraud, accident, mistake or surprise, always a ground for equity's intervention, the inclusion of which entailed the exclusion of mere inadvertence and a fortiori of wilful defaults.
Outside of these there remained a debatable area in which were included obligations in leases such as to repair and analogous obligations concerning the condition of property, and covenants to insure or not to assign. As to covenants to repair and cases of waste, cases can be quoted before the 19th century in which relief was granted: see Webber v. Smith (1689) 2 Vern. 103 and Nash v. Earl of Derby (1705) 2 Vern. 537. There were hostile pronouncements. In Wadman v. Calcroft (1804) 10 Ves. 67 both Sir William Grant M.R. and Lord Eldon L.C. are found stating it to be clear that relief cannot be given against the breach of other covenants - i.e. than covenants to pay rent.
It was soon after that the critical divide or supposed divide occurred, between the liberal view of Lord Erskine L.C. in Sanders v. Pope (1806) 12 Ves. 282 and the strict view of Lord Eldon L.C. in Hill v. Barclay. The latter case came to be followed as the true canon; the former was poorly regarded in Lincoln's Inn, but it is important to observe where the difference lay. This was not, as I understand it, in any disagreement as to the field in which relief might be granted, for both cases seem to have accepted that, in principle, relief from forfeiture might be granted when the covenant was to lay out a sum of money on property: but rather on whether equity would relieve against a wilful breach. The breach in Sanders v. Pope was of this kind but Lord Erskine L.C. said, at p. 293:
"If the covenant is broken with the consciousness, that it is broken, that is, if it is wilful, not by surprise, accident, or ignorance, still if it is a case, where full compensation can be made, these authorities say, not that it is imperative upon the court to give the relief, but that there is a discretion."
To this Lord Eldon L.C. answers, 18 Ves. 56, 63:
". . . with regard to other cases," (sc. waste or omitting repairs) "the doctrine I have repeatedly stated is all wrong, if it is to be taken, that relief is to be given in case of a wilful breach of covenant."
The emphasis here, and the root of disagreement, clearly relates to wilful breaches, and on this it is still Lord Eldon L.C.'s view which holds the field.
The suggestion that relief could not be granted against forfeiture for breach of other covenants was not one that followed from either case: relief was so granted in Bargent v. Thomson (1864) 4 Giff. 473. Equally in Barrow v. Isaacs & Son [1891] 1 Q.B. 417, a case of a covenant against underletting without consent, a high water mark of the strict doctrine, the emphasis is not so much on the nature of the breach which may or may not be relieved against, but on the argument that it is enough to show that compensation can be given:
". . . it was soon recognised that there would be great difficulty in estimating the proper amount of compensation, and, since the decision of Lord Eldon L.C. in Hill v. Barclay it has always been held that equity would not relieve, merely on the ground that it could give compensation, upon breach of any covenant in a lease except the covenant for payment or rent" (per Kay L.J., at p. 425).
We are not bound by these decisions, certainly not by every shade of opinion they may reflect, but I am entirely willing to follow them in their main lines.
As regards the present appeal it is possible to disengage the following considerations. In the first place there should be put on one side cases where the court has been asked to relieve against conditions contained in wills or gifts inter vivos. These raise considerations of a different kind from those relevant to contractual stipulations. Secondly, no decision in the present case involves the establishment or recognition directly or by implication of any general power-that is to say, apart from the special heads of fraud, accident, mistake or surprise-in courts exercising equitable jurisdiction to relieve against men's bargains. Lord Eldon L.C.'s firm denial of any such power in Hill v. Barclay does not call for any revision or review in this case. Equally there is no need to qualify Kay L.J.'s proposition in Barrow v. Isaacs & Son (cited above.) I would fully endorse this: it remains true today that equity expects men to carry out their bargains and will not let them buy their way out by uncovenanted payment. But it is consistent with these principles that we should reaffirm the right of courts of equity in appropriate and limited cases to relieve against forfeiture for breach of covenant or condition where the primary object of the bargain is to secure a stated result which can effectively be attained when the matter comes before the court, and where the forfeiture provision is added by way of security for the production of that result. The word "appropriate" involves consideration of the conduct of the applicant for relief, in particular whether his default was wilful, of the gravity of the breaches, and of the disparity between the value of the property of which forfeiture is claimed as compared with the damage caused by the breach.
Both as a matter of history and by the nature of things, different considerations apply to different covenants. As regards covenants to pay rent, in spite of Lord Eldon L.C.'s reservations, the matter has, subject to qualifications which need not be discussed, been taken over by statute, first by 4 Geo. 2 c. 28 then by later Acts leading up to the Law of Property Act 1925. The same is true of covenants to insure and other covenants in leases. I shall consider shortly the implications of the legislation as regards other covenants than those expressly mentioned. As regards covenants to repair and analogous covenants concerning the condition of property, other than those now dealt with by Act of Parliament, it is not necessary to overrule Hill v. Barclay any more than it was necessary for Lord Eldon L.C. to do more than to distinguish Sanders v. Pope. Lord Eldon L.C.'s decision was in fact based partly upon the circumstance that he was concerned with a wilful default and partly upon the impossibility of speculating whether the later doing of the repairs would compensate the landlord: such considerations remain relevant. Where it is necessary, and, in my opinion, right, to move away from some 19th century authorities, is to reject as a reason against granting relief, the impossibility for the courts to supervise the doing of work. The fact is a reality, no doubt, and explains why specific performance cannot be granted of agreements to this effect but in the present context it can now be seen (as it was seen by Lord Erskine L.C. in Sanders v. Pope) to be an irrelevance: for what the court has to do is to satisfy itself, ex post facto, that the covenanted work has been done, and it has ample machinery, through certificates, or by enquiry, to do precisely this. This removes much of the support from one of the more formidable authorities, viz.: the majority judgment in Bracebridge v. Buckley (1816) 2 Price 200. There remain two other arguments which cannot be passed over. First it is said that the strict view (that there should be no relief except under the two classical headings) has been endorsed in this House in Hughes v. Metropolitan Railway Co. (1877) 2 App.Cas. 439. There is no substance in this. The basis of decision in this House was that the landlord's notice was suspended in operation by acquiescence, so that there was no effective breach. The opinion invoked is that of Lord Cairns L.C., in which there appears this portion of a sentence, at p. 448:
"it could not be argued, that there was any right of a court of equity, . . . to give relief in cases of this kind, by way of mercy, or by way merely of saving property from forfeiture, . . ."
- words which have only to be re-read to show that they are no sort of denial of the jurisdiction now invoked.
Secondly, a point of more difficulty arises from the intervention of Parliament in providing specific machinery for the granting of relief against forfeiture of leases: see Law of Property (Amendment) Act 1859 (22 & 23 Vict. c. 35), Common Law Procedure Act 1852, Law of Property Act 1925, Leasehold Property (Repairs) Act 1938 and other statutes. This, it is said, negatives an intention that any corresponding jurisdiction should exist outside the case of leases. I do not accept this argument. In my opinion where the courts have established a general principle of law or equity, and the legislature steps in with particular legislation in a particular area, it must, unless showing a contrary intention, be taken to have left cases outside that area where they were under the influence of the general law. To suppose otherwise involves the conclusion that an existing jurisdiction has been cut down by implication, by an enactment moreover which is positive in character (for it amplifies the jurisdiction in cases of leases) rather than negative. That legislation did not have this effect was the view of Kay L.J. in Barrow v. Isaacs & Son [1891] 1 Q.B. 417, 430, when he held that covenants against assigning - excluded from the Conveyancing Act 1881 - were left to be dealt with according to the ordinary law. The Occupiers' Liability Act 1957 gave rise to a similar problem since it legislated as to one part of a larger total field, I may perhaps refer to what I said in Herrington v. British Railways Board [1972] A.C. 877.
The present case, in my opinion, falls within the class of case in which it would be possible for a court of equity to intervene. When the appellants assigned a portion of their leased property, retaining the rest, which adjoined and was supported by the portion assigned, they had an essential interest in securing adequate protection for their buildings, in having the entire site fenced, in preventing unauthorised access through the assigned property. The covenants were drafted accordingly. The power of re-entry was inserted by way of reinforcement of the contractual obligation which it must have been perceived might cease to be enforceable as such. Failures to observe the covenants having occurred, it would be right to consider whether the assignor should be allowed to exercise his legal rights if the essentials of the bargain could be secured and if it was fair and just to prevent him from doing so. It would be necessary, as stated above, to consider the conduct of the assignee, the nature and gravity of the breach, and its relation to the value of the property which might be forfeited. Established and, in my opinion, sound principle requires that wilful breaches should not, or at least should only in exceptional cases, be relieved against, if only for the reason that the assignor should not be compelled to remain in a relation of neighbourhood with a person in deliberate breach of his obligations.
In this light should relief have been granted? The respondent's difficulty is that the Vice-Chancellor, who heard the witnesses and went into all the facts, clearly took the view that the case was not one for relief. I should be reluctant, in any event, except on clear conviction to substitute a different view of my own. But I have examined in detail the evidence given, the correspondence over a period of four years, the photographs and plans of the site. All this material establishes a case of clear and wilful breaches of more than one covenant which, if individually not serious, were certainly substantial: a case of continuous disregard by the respondent of the appellants' rights over a period of time, coupled with a total lack of evidence as to the respondent's ability speedily and adequately to make good the consequences of his default, and finally a failure to show any such disproportion between the expenditure required and the value of the interest involved as to amount to a case of hardship. In my opinion the case is not, on established principles, one for relief. For all these reasons I would allow the appeal.
VISCOUNT DILHORNE. My Lords, I have had the advantage of reading my noble and learned friend Lord Wilberforce's speech. I agree with all he says and that the appeal should be allowed. I only desire to add that the cases in which it is right to give relief against forfeiture where there has been a wilful breach of covenant are likely to be few in number and where the conduct of the person seeking to secure the forfeiture has been wholly unreasonable and of a rapacious and unconscionable character.
LORD PEARSON. My Lords, I have had the advantage of reading the opinion of my noble and learned friend, Lord Wilberforce, and I agree with it and have nothing to add. Accordingly I would allow the appeal.
LORD SIMON OF GLAISDALE. My Lords, I have had the advantage of reading in draft the speech prepared by my noble and learned friend, Lord Wilberforce. As I am in general agreement with it what follows is by way of marginal comment.
In setting himself to answer the fourth main question which he poses, my noble and learned friend deals with the issue whether the right of re-entry is legal or equitable. My agreement with his conclusion that the right is equitable does not imply that I think that if the right of re-entry had been for a defined or indefinite term - not merely limited by reference to the uncertain perpetuity period - the right would have been legal and not equitable. With reference to the fifth question - whether this is a case where a court of equity might grant relief against exercise of the right of entry - I agree that Sanders v. Pope (1806) 12 Ves. 282 and Hill v. Barclay (1811) 18 Ves. 56 are not in themselves inconsistent authorities; nevertheless, they seem to me to be the respective culminations of a more liberal and a stricter attitude towards equity's jurisdiction to relieve against forfeiture. Lord Eldon L.C.'s inclination, with its emphasis on strict respect for contractual rights and obligations, was more congenial to the following age, and came to be followed. Barrow v. Issacs & Son [1891] 1 Q.B. 417 was a natural consequence; and I am bound to say that it seems to me to demonstrate an abnegation of equity, and to show that the trail from Hill v. Barclay leads into a juristic desert. Since what was said by Lord Cairns L.C. in Hughes v. Metropolitan Railway Co. (1877) 2 App.Cas. 439, 443, was obiter, and merely reflects the acceptance then generally current, none of the authorities binds your Lordships. The last hundred years have seen many examples of relaxation of the stance of regarding contractual rights and obligations as sacrosanct and exclusive of other considerations: though these examples do not compel equity to follow - certainly not to the extent of overturning established authorities - they do at least invite a more liberal and extensively based attitude on the part of courts which are not bound by those authorities I would therefore myself hold that equity has an unlimited and unfettered jurisdiction to relieve against contractual forfeitures and penalties. What have sometimes been regarded as fetters to the jurisdiction are, in my view, more properly to be seen as considerations which the court will weigh in deciding how to exercise an unfettered jurisdiction (cf. Blunt v. Blunt [1943] A.C. 517; Kara v. Kara and Holman [1948] P. 287, 292). Prominent but not exclusive among such considerations is the desirability that contractual promises should be observed and contractual rights respected, and even more the undesirability of the law appearing to condone flagrant and contemptuous disregard of obligations. Other such considerations are how far it is reasonable to require a party who is prima facie entitled to invoke a forfeiture or penalty clause to accept alternative relief (e.g., money payment or re-instatement of premises) and how far vindication of contractual rights would be grossly excessive and harsh having regard to the damage done to the promisee and the moral culpability of the promisor. (I do not intend this as an exhaustive list.) It is these internal considerations which may limit the cases where courts of equity will relieve against forfeiture, rather than any external confine on jurisdiction. Lastly, there being, in my judgment, jurisdiction to relieve against re-entry in the present case, how should it be exercised? The learned Vice-Chancellor, himself holding that he had jurisdiction to relieve, addressed himself to the question whether it would be right to exercise it in favour of the instant respondent, and held that it would not be. This is a discretionary jurisdiction. The proper attitude of an appellate court in the review of a discretionary jurisdiction has frequently been stated. Perhaps the locus classicus is the speech of Viscount Simon L.C. in Blunt v. Blunt [1943] A.C. 517, in which the rest of the House concurred. He was speaking of the exercise of the Divorce Court's discretion under section 4 of the Matrimonial Causes Act 1937; but his invocation of a widely different discretionary jurisdiction shows that his observations were of general application. He said, at pp. 526 - 527:
"This brings me to a consideration of the circumstances in which an appeal may be successfully brought against the exercise of the divorce court's discretion. If it can be shown that the court acted under a misapprehension of fact in that it either gave weight to irrelevant or unproved matters or omitted to take into account matters that are relevant, there would, in my opinion, be ground for an appeal. In such a case the exercise of discretion might be impeached, because the court's discretion will have been exercised on wrong or inadequate materials, but, as was recently pointed out in this House in another connexion in Charles Osenton v. Johnston [1942] A.C. 130, 138: 'The appellate tribunal is not at liberty merely to substitute its own exercise of discretion for the discretion already exercised by the judge. In other words, appellate authorities ought not to reverse the order merely because they would themselves have exercised the original discretion, had it attached to them, in a different way. But if the appellate tribunal reaches the clear conclusion that there has been a wrongful exercise of discretion in that no weight, or no sufficient weight, has been given to relevant considerations . . . then the reversal of the order on appeal may be justified.' Osenton's case was one in which the discretion being exercised was that of deciding whether an action should be tried by an official referee, and the material for forming a conclusion was entirely documentary and was thus equally available to the appellate court. The reason for not interfering, save in the most extreme cases, with the judge's decision under section 4 of the Matrimonial Causes Act 1937 is of a far stronger character, for the proper exercise of the discretion in such a matter largely depends on the observation of witnesses and on a deduction as to matrimonial relations and future prospects which can best be made at the trial."
Viscount Simon L.C. did not, in my view, intend in any way to suggest that it was enough to justify an appellate court in interfering with the exercise of a discretion that the appellate court would give different weight to the various considerations which the court exercising the jurisdiction must have had in mind: that would be to substitute the appellate court's discretion for that of the court charged with the exercise of the discretion, since it is generally of the essence of a discretionary jurisdiction that there are a number of conflicting considerations to be weighed, to which different minds could reasonably attach different weight. It is only if there has been misdirection (in fact or in law) or if the exercise of the discretion is "plainly wrong" (which means, I think, that no reasonable tribunal could exercise the discretion in such a way) that the appellate court is entitled to interfere. In the instant case the learned Vice-Chancellor had the advantage, denied to your Lordships, of observing the witnesses; and the impression he formed was obviously influential in his discretionary decision. He had to judge of future prospects, notably the likelihood of the respondent being good for the cost of remedying the defects and the relationship between neighbours if discretion were exercised to relieve against re-entry. Such observations and judgment are, as Viscount Simon L.C. said, best made at the trial. The learned Vice-Chancellor in no way misdirected himself and there was abundant material to justify him in exercising his discretion in the way he did. I therefore agree that the appeal should be allowed.
LORD KILBRANDON.
My Lords, I have had the advantage of seeing in writing the speech which my noble and learned friend, Lord Wilberforce, has delivered. I entirely agree with it, and cannot usefully add anything. I would allow the appeal.
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