Keshwala & Anor v Bhalsod & Anor (2020) EWHC 2372 (QB)

An appeal from a Circuit Judge’s decision refusing relief from forfeiture, focussing on the issue of delay in making the application for relief. This was a commercial lease, though with living accommodation above. Mr Keshwala had taken a 20 year lease of the property in 2008. In 2015, the current freeholder had bought the freehold. Also in 2015, the rent first fell into arrears. The freeholder forfeited by re-entry and Mr K obtained relief from forfeiture on payment of arrears and costs.

In June 2018, due to a mistake in payment, the rent went into arrears of £500. On 1 September 2018, the quarterly rent demand was served, making no mention of the £500 arrears. The rent was payable by 29 September. On 13 September, the freeholder forfeited by re-entry. At this point the lessees became aware of the rent shortfall. A payment of £500 was sent to the freeholder’s agent but not accepted, and the lessees were told that the freeholder was dealing with the matter.

Then nothing happened until solicitor for the leaseholders attempted to contact the freeholder in Janaury 2019 about an application for relief, but the email was misaddressed.

On 4 February 2019, the freeholder re-let the property to another party.

The lessees issued the application for relief from forfeiture on 26 February 2019.

At first instance, as well as dealing with various other issues (though perhaps surprisingly not including waiver), the Circuit Judge dismissed the application on the basis that there had not been a prompt application for relief.

if this application for relief had been made promptly or at least the claimants had forewarned the defendants promptly in September or October 2018 that there would be an application for relief from forfeiture, I have no doubt the court would have [had] no difficulty in granting relief. In the circumstances of the case for the reasons that I have discussed, I find that although the matter is finely balanced, it is not appropriate to grant relief from forfeiture in this case, and the claimants’ claim is dismissed.

The lessees appealed, arguing that the Judge “failed to appreciate that the equitable discretion to grant relief from forfeiture in the case of non-payment of rent proceeds on the footing that the proviso for re-entry is, in the eyes of equity, merely a security for the payment of rent and accordingly, save in exceptional circumstances, relief ought to be granted so long as the tenant pays the rent”, and that “the general rule is that equity follows the law and that account should have been taken of the fact that the statutory provisions relating to claims for relief from forfeiture which are governed by statute require the claim to be made within six months of the date of re-entry, as was the case here.”

The High Court held:

in exercising the discretionary remedy of relief from forfeiture, the proviso for re-entry is to be treated as no more than security for the payment of rent, so that if rent is paid (or tendered) relief should follow unless there is some exceptional reason why it would be unjust to grant relief. As stated in Woodfall at paragraph 17.181,

“In the eyes of equity, the proviso for re-entry was merely a “security” for the rent. Equity is in the “constant course” of relieving against forfeiture where the tenant pays the rent and all expenses. Thus save in exceptional circumstances the function of the court as to grant relief when all that is due for rent and costs has been paid up.”

So the question was whether the delay in the case comprised such exceptional circumstances as to justify the refusal to grant the relief sought.

On that, the guidance for exercising the equitable jurisdiction was, as per Billson v Residential Apartments Ltd [1992] 1 AC 494, and Gibbs v Lakeside Developments Ltd [2019] 4 WLR 6, that the statutory 6 month period under the Common Law Procedure Act 1852 was the base line for what was reasonable.

although an application for relief from forfeiture may be brought more than six months after possession has been taken by the landlords so long as the elasticity of “reasonable promptitude” has not snapped, an application brought within six months is to be taken as having been brought with “reasonable promptitude”. In those circumstances, the factor relied upon by the learned judge in refusing to grant the relief sought, namely the delay within six months, was not capable of amounting to the kind of exceptional circumstances which it is necessary for a landlord to show when inviting the court to refuse relief despite the application having been brought within six months.

On the re-letting of the property, in this instance

So far as the residential part of the premises is concerned, as at the date of the hearing they had been vacated; as regards the ground floor business premises, the Claimants have stated that they would be content with a reversionary lease and, in those circumstances, I consider that, if the order makes appropriate provision for the terms upon which relief from forfeiture is granted, the re-letting of the premises is no bar to granting this application for relief from forfeiture.

Appeal allowed and relief granted.

Comment

That is clarity on the delay factor for equitable relief.

I’m not entirely sure why the September 2018 rent demand wasn’t argued as waiver of the June 2018 underpayment for forfeiture purposes, but there isn’t full detail of first instance in this appeal decision.