Toms v Ruberry: serving a notice under LPA s. 146 (CPO s. 58)

by Professor Michael Lower, CUHK LAW


Toms v Ruberry

In Toms v Ruberry ([2019] EWCA Civ 128), the forfeiture clause in a business lease required the landlord to give 14 days’ notice of a breach. Only if the breach was not remedied at the end of the 14 days did the landlord have the right of re-entry.


Section 146 of the Law of Property Act 1925 is the English equivalent of section 58 of Hong Kong’s Conveyancing and Property Ordinance. In this post, I refer to section 146 but the importance for the Hong Kong reader depends on the very close similarity between it and section 58.


Section 146 provides that a right of re-entry in a lease is not enforceable unless its requirements are satisfied. The section requires landlords intending to forfeit a lease to serve a notice on the tenant specifying the breach committed and requiring it to be remedied (if it is capable of remedy).


In Toms, the landlord served both the 14-day notice required by the forfeiture clause and the section 146 notice on the same day. The section 146 notice gave the tenant 7 weeks to remedy the breach complained of. The landlord contended that he was entitled to serve the section 146 notice as soon as the tenant was in breach of the repair and decoration provisions in the lease.


The English Court of Appeal decided that the landlord should have waited for the 14-day period to expire before serving the section 146 notice. The section 146 notice was invalid.


Rationale

The Court of Appeal based its conclusion on a ‘common-sense interpretation’ of section 146 (at [19]). The opening words of the section make it clear that it governs ‘a right of re-entry or forfeiture’ (at [26]). The Court of Appeal thought it clear that a section 146 notice could only be served after the right of re-entry had arisen (at [28]).


The Court of Appeal found support for its interpretation from a reflection on the wording of section 146(2). This allows the tenant to apply for relief from forfeiture ‘[w]here a lessor is proceeding, by action or otherwise, to enforce such a right of re-entry or forfeiture’. In Pakwood Transport Ltd v 15 Beauchamp Place Ltd ((1977) 36 P & CR 112) the English Court of Appeal held that to serve a section 146 notice was to enforce the right of re-entry and gave the tenant the right to apply for relief. It follows that the at the section 146 notice cannot be served until the landlord has the right to enforce the right of re-entry ([29]).


Comment

It has been suggested that the forfeiture clause in this lease was badly drafted (Kwan, 2019: 396). Might it not have been better to provide that the right of re-entry would arise as soon as the tenant was in breach of its repairing and decorating obligations under the lease?


Perhaps so, but it is easy to understand, and sympathise with, the thinking behind the clause. It enables the landlord to fire a warning shot across the bows of the defaulting tenant. The clause allows the landlord to include in this warning shot a time-limited opportunity for the tenant to put things right. The 14-day limit in the clause gives force to the landlord’s call for the breach to be remedied within this time.


Kwan suggests that Toms v Ruberry raises the question as to whether the lease can contractually specify the reasonable time required to be given in a section 146 notice (Kwan, 2019: 396).


In fact, the judgment is not authority on the question since the judgment rests on the proposition that the right to serve the notice had not arisen, not on whether adequate notice had been given.


Kwan’s question is worth asking, nonetheless. Is the lesson to be learned from Toms v Ruberry that landlords should provide for the right of re-entry to arise immediately on breach (of a repairing covenant for example) and for the parties to agree in advance that the ‘reasonable time’ for any breach is 14 days? Would this be valid?


Section 146(1) provides that the landlord can only enforce the right of re-entry if the notice has been served and the tenant fails to remedy the breach ‘within a reasonable time thereafter’. From this it can be inferred that the notice must give the tenant a reasonable time to remedy the breach (Rugby School (Governors) v Tannahill ([1935] 1 KB 87 at 93, Maugham LJ). Otherwise the notice is invalid (Re Riggs [1901] 2 KB 16).


Landlords must decide what would be a reasonable time. What is a reasonable time, in general, depends on the circumstances (Hick v Raymond & Reid [1893] AC 22 at 29). In the context of a section 146 notice, what is reasonable depends on the nature of the breach and the length of the lease remaining (Expert Clothing Service & Sales Ltd v Hillgate House Ltd [1986] Ch 340 at 357 – 8).


To return to the question, it seems that the ‘reasonable time’ cannot be specified in advance by agreement between the parties. Section 146(12) provides that section 146 has effect notwithstanding any stipulation to the contrary. A provision such as that envisaged would seem to be an attempt to contract out of


One can sympathise with the frustration that the landlord must have felt in this case. Because of the wording of the forfeiture clause, the landlord had to give the tenant two ‘last chances’ to remedy the breach of the repair and decorating covenants.


The lesson to be learned from Toms v Ruberry, however, is that where a forfeiture clause requires the landlord to serve notice requiring the tenant to remedy a breach within a specified time, the landlord has to wait for the notice period to expire before serving a section 146 notice. The section 146 notice must give the tenant an additional ‘reasonable’ time to remedy the breach.


Reference

M. Kwan, ‘Contractual clauses on right of re-entry and forfeiture’, (2019) 135 Law Quarterly Review 396

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