Freifeld v West Kensington Court Ltd [2015] EWCA Civ 806
Relief From Forfeiture in Deliberate Breach Cases
The head lessee unlawfully sub-let a restaurant. It did not seek the landlord’s consent, having decided not to do so and committed a deliberate breach. This was accepted by the head lessee at trial. The first instance judge found that the breach was cynical and hence the head lessee faced a “vertiginous climb” to get relief. The head lease was worth between £1 million and £2 million, and the landlord would obtain a substantial windfall. The head lessee proposed that relief be granted conditional on a sale of the lease within six months.
The Court of Appeal decided that:
(1) Relief could still be granted even where a breach had been deliberate, and a landlord should not be entitled to keep a windfall where there was no lasting damage to him: Magnic Ltd v Ul-Hassan [2015] EWCA Civ 224.
(2) A tenant’s conduct was a relevant consideration but the Court had to consider whether depriving even the wilfully breaching tenant of a valuable asset was proportionate. The landlord was obtaining a substantial benefit, however the circle could be squared by giving a tenant the chance to sell his interest and bring to an end his relationship with the landlord in a more proportionate manner.
(3) The Court of Appeal re-exercised the discretion, allowing relief for six months to effect a sale on condition of good behaviour.
Briggs LJ explained at paragraph [66] that
“This conclusion should not be misinterpreted as conferring carte blanche on tenants to disregard their covenants, wherever there is value in their leasehold interest which would be lost by an unrelieved forfeiture. In every case a balance will have to be struck, and there may well be cases where even substantial value has to be passed to the landlord, if no other way of securing the performance of the tenants’ covenants can be found.”
Caroline Shea appeared for the successful appellant.
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