Central Rentals Ltd v Patton & Storck Ltd [2008] FJSC 30; CBV004.2008 (17 October 2008)

IN THE SUPREME COURT, FIJI ISLANDS
AT SUVA

CIVIL APPEAL NO. CBV 0004 OF 2008
(Fiji Court of Appeal Civil Appeal No ABU118 of 2006)

BETWEEN:

CENTRAL RENTALS LIMITED
Petitioner

AND:

PATTON & STORCK LIMITED
Respondent

Coram: The Hon Justice, Keith Mason, Judge of the Supreme Court
The Hon Justice Ke Handley, Judge of the Supreme Court
The Hon Justice Mark Weinberg, Judge of the Supreme Court

Hearing: Tuesday, 14th October 2008, Suva

Counsel: Ms A. Neelta for the Petitioner
Mr H. Lateef for the Respondent

Date of Judgment: Friday, 17th October 2008, Suva

JUDGMENT OF THE COURT

1. This is a petition for special leave to appeal from the judgment of the Court of Appeal of 24 April 2008. That Court reversed the judgment of Coventry J of 17 November 2006 which adjudged the petitioner (the landlord) entitled to immediate vacant possession of the subject premises at 52 Pratt Street, Suva from the respondent (the tenant). Coventry J had stayecution of the juhe judgment on terms which the tenant complied with for a time by paying money into Court but it was unable or unwilling to comply with a further condition imposed by his orde5 March 2007 and it vacatedcated the premises. Although it succeeded in having the judgment for possession reversed on appeal it did not seek and does not seek to be restored to possession of the premises which would have been its normal entitlement as a successful appellant. The better view in these circumstances is that the lease came to an end on 31 March 2007 when the tenant vacated the premises.
   
2. The premises had been leased to a predecessor in title of the tenant for term of seventy-five years from 1 March 1939 and the lease was registered under the Transfer of Land Act. The landlord is an assignee of the reversion. As long ago as 20 December 1993 the landlord took steps to recover possession of the property by serving on the tenant a notice to quit the premises by 31 January 1994 for breaches of the terms of the lease by sub-letting part of the premises without firstly obtaining the landlord’s consent in writing, and for non-payment of rent.
   
3. The tenant did not vacate in accordance with the notice and the landlord applied to the Registrar of Titles, without notice to the tenant, for the cancellation of the lease pursuant to a forfeiture for breach of the covenant against subletting without the landlord’s prior written consent. The application was not based on non-payment of rent.
   
4. The Registrar of Titles granted the landlord’s application without giving notice to the tenant and cancelled the registered lease. On 20 March 1994 the tenant commenced proceedings for an order that the lease be reinstated on the register. On 20 April 1994 the landlord filed an originating summons in the High Court under s 169he Land Transfer Afer Act (Action 183/94)claiming an order for vacant possession of the property. On 19 January 1995 Fatiaki J set aside the cancellation of the lease and, acting on his own motion, granted relief against forfeiture, and summarily dismissed the landlord’s summons for possession. The landlord’s appeal to the Court of Appeal from the judgment of Fatiaki J was allowed in part on 16 August 1996. The decision to set aside the cancellation of the lease by the Registrar of Titles was affirmed, but the orders granting relief against forfeiture and summarily dismissing the landlord’s originating summons under s 169 of b>Land Transfer Afer Act were set aside.
   
5. The Court of Appeal held that up until 30 Mar94 "the landlord had not foot forfeited the lease or made any effective attempt to do so" (p 8) "either by physical re-entry, or by bringing an action for possession" (p 10).
   
6. The Court of Appeal also considered the application of s105(8)(a) of the Property Law Act (Cap 130) which qualifies the general requirement in s 105(1) that a righforfeitureiture is not enforceable unless the landlord has given the tenant a notice specifying the breach of covenant complained of requiring the tenant to remedy the breach or compensate thelord. Sub-section 8(a) prov provides:
   

"(8) The provisions of this section shall not extend –

(a) to a covenant or condition against assigning, subletting, parting with the possession or disposing of the land leased."

7. Section 105(5)(a) was based on s 14(6)(i) of thConveyanciyancing Act 1881 (Eng) which was repealed by the Law of Property Act 1925 and not re-enacted as part 146, the corresponding section, in the new Act. Fatiaki J had referred to dicta in twin two English cases in 1923 and 1924 which held that the equivalent of s 105(8)(a) did not apply to a covenant against subletting part only of the premises. However the Court of Appeal was referred to two later English decisions in 1925 where judges had refused to follow these dicta and had held,avour of landlords, that that the equivalent of s 105(8)(a) did to covenantsnants against subletting part of the premises. The Court of Appeal said:-
   

"Faced with this conflict of opinion we think we ought to fo... the last decisions on s on s 14(6)(i) before its repeal. When the Fiji Parliament adopted this section in 1971 in preference to s 146 of the Law of Property1Act 1925 (Eng) which replaced it, which was more favourable to the tenant, it should we the taken to have adopted thed the construction the section had received in the most recent English decisions."

8. The Court concluded:-
   

"In our opinion therefore the breach of the covenant against subletting relied upon by the landlord fell within the exclusion in s 105(8)(a) and thelord was nwas not obliged by s 1 to give a notice to remedremedy the breach."

1. Earlier the Cthe Court of Appeal said (p 8):-
   

"On 20 April 1994 the landlord commenced an action (183/94) to recover possession of the property. As the trial Judge explained, service of such proceedings constituted an unequivocal election by the landlord to exercise any subsisting right to forfeit the lease."

10. However proceedings in matter 183/94 were not commenced by writ, but by a summons under s 169 of the Land Ter Act. Fatiaki J had not held that service of a summons under s 169 "constituted aquivocal ocal election by the landlord to exercise any subsg right to forfeit the lease." He held that an action of ejof ejectment had this effect citing Town v Stevens (1899) 17 828, 831; Moore v Ul v Ullcoats Mining Co Ltd [1907] UKLawRpCh 115; [1908] 1 Ch 575, 584, 587-8; Re Register [1958] NZLR 1050, 1054; and McKinnon v Portelli (1960) 60 SR(NSW) 343, 350.
    
11. Fatiaki J did not consider the effect of serving a summons under s 169 and did noer to the tere terms of the section which provides:
    

The following persons may summo person in possession of land to appear before a judge in chambers to show cause why the pehe person summoned should not give up possession to the applicant:-

(a) the last registered proprietor of the land;
(b) a lessor with power to re-enter where the lessee or tenant is in arrear for such period as may be provided in the lease and, in the absence of any such provision therein, when the lessee or tenant is in arrear for one month, ...whether or not any previous demand has been made for the rent;
(c) a lessor against the lessee or tenant where a legal notice to quit has been given or the term of the lease has expired."

12. The section is only available to enforce a forfeiture for non payment of rent. A lease for a fixed term cannot be determined by a notice to quit. Proceedings to enforce a forfeiture for breach of any other covenant cannot be bought under this section, and the dictum of the Court of Appeal in its 1996 decision cannot prevail against the clear words of the section. As Williams J said of a si section in Town v Stevens (1899) 17 NZLR 828, 831:"an action for ejectment would be equivalent to re-entry; but no action of ejectment ... c brought under this section". The Court of Appeal in 2008 f008 followed this decision in holding, correctly in our view, that an action for ejectment could not be brought under s 169 except fo payment of reof rent.
    
13. The summons under s 169 claimed possessithout iout identifying any for that claim, but the afhe affidavit of Jameela Sherani in support of the summons sworn 15 April 1994 referred to service of the n to quit and the fact that the tenant was still in possessisession. Much later, in 2005, the landlord filed a statement of claim pursuant to leave granted under O 28 r 9. This continued the orl pnal proceedings, in terms of r 9(1), as if the cause or matter had been commenced by writ. The statement of claim pleaded breaches of covenant by the tenant, termination of the ley serof thice to e to quit,quit, and the tenant’s failure to vacate. It claimed an order for poor possession, mesne profits, and damages for breach of the lease. It did not claim that a forfeiture was effected by service of the summons.
    
14. The Court of Appeal said in its 1996 decision (p 10):
    

"This [the notice to quit] was not an unequivocal election by the landlord to immediately forfeit the lease, and it did not operate as a re-entry. Indeed it recognised the right of the tenants to occupy the premises for a further six weeks. We agree with the conclusion of the trial judge on this question ...Whatever the merits of the landlord’s claims, it had taken no effective steps [prior to 15 February 1994] to forfeit the lease either by physical re-entry, or by bringing an action for possession."

15. The Court set aside Fatiaki J’s order for the summary dismissal of action 183/94 and remitted the matter to the High Court for determination. It said (p 18):-
    

"It appears that the questions for determination in action 183/94 would include whether there was a subsisting breach of covenant when that summons was served on the respondent, whether the unauthorised sublease was a continuing breach or a breach once for all, and whether it had been waived by the landlord by service of the notice to quit or otherwise."

16. The tenant had sublet part of the premises to Mr and Mrs Turaganivalu between 1991 and 1992 and sublet part of the premises to Mishra & Co from September 1993 to August 1994 (Judgment of Coventry J 5/3/07). The covenant against subletting was as follows:
    

"The Lessee will not transfer or sublet or part with the possession of the said premises or any part thereof without the previous consent in writing of the Lessor but so that such consent shall not be unreasonably arbitrarily or vexatiously withheld."

17. The lease did not contain a covenant against permitting or suffering an unauthorised subtenant to remain in possession of the premises or any part thereof. In the absence of such a covenant a subletting in breach of covenant is a once and for all breach and not a continuing breach: Walrond v Hawkins [1875] UKLawRpCP 12; (1875) LR 10 CP 342; Scala House District Property Co Ltd v Forbes [1974] QB 575 CA, 585 per Russell LJ: "An unlawful subletting is a breach once and for all. The subterm has been created", and at pp 587, 588, 591.
    
The rental arrears were assessed by Coventry J on 5 March 2007 from J993. Thus the landlord had accepted rent after the once ande and for all breach of the covenant against subletting in the case of the Turaganivalus in 1991. That breach was waived by acceptance of rent with knowledge of the breach.

19. The breach of the covenant by subletting to Mishra & Co in September 1993 was not waived by the landlord accepting rent with knowledge of the breach and it is therefore necessary to consider the effect of the notice to quit as a possible waiver of known breaches of covenant.
    
20. The notice to quit required the tenant to vacate the premises by 31 January 1994, but permitted it to remain in possession under the lease for a further six weeks.
    
21. In Re Register [1958] NZLR 1050 Gresson J held that a notice to quit at a future day for breach of covenant was a waiver of any right the landlord may have had at the that time to forfeit the lease. He said at 1055-6:
    

"A right to re-enter under a lease is waived by the lessor if, knowing the facts on which the right arises, he does something unequivocal which recognises the continuance of the lease ...it is not the notice to quit which of itself waives the forfeiture. It is rather evidence to show that the lessor has elected not to avoid the lease. ... a lessor must be held responsible for the consequences of his or her acts; and here the action ... in giving notice to quit amounted, in my view, to an unequivocal act affirming the existence of the lease which ... the lessor treated as continuing after knowledge that the rent was one month in arrears ... I am, therefore, of opinion that the notice to quit precluded the lessor from exercising any right of re-entry for any antecedent non-payment of rent"

22. In our judgment the notice to quit did affirm the lease and keep it on foot until the notice to quit itself expired and as such it waived the known breach of the covenant against subletting without consent. In its 2008 decision the Court of Appeal found for this reason that there had been a waiver of the right of forfeiture and we agree.
    
23. The landlord has never attempted to forfeit the lease or justify its forfeiture for the tenant’s breaches of its covenant to pay rent. It did attempt to rely in these proceedings on other breaches of covenant against subletting which occurred after the summons under s 169 of the Land Tra Afer Act was served on the tenant. However it had not attempted to affect a forfeiture by physical re-entry or by commencing ejectment proceedin reliance of those breaches and they are not relevant.
    
    
24. The result of the decisions of the Court of Appeal in 1996 and 2008 is that the landlord did not take effective steps to forfeit the lease by giving the notice to quit, or by applying for the cancellation of the registration of the lease, or by issuing and serving the summons under the Land Transfer Act. This Court has decided that the breach of covenant by subletting to Mishra & Co was not a continuing breach and the Court of Appeal in its 2008 decision found that the past breach of that covenant was waived by the service of the notice to quit. We agree with these findings. The Court of Appeal was therefore correct in reversing the decision of Coventry J that the landlord was entitled to possession.
    
25. Although the landlord argued that the question had become moot prior to the decision of the Court of Appeal because the tenant had vacated the premises at the end of March 2007 this was not the case because Coventry J had also entered judgment for the landlord for damages and mesne profits to be assessed.
    
26. The statement of claim only pleaded breaches of the covenant against subletting without consent. Although the landlord is entitled to damages for these breaches these could only be nominal and an assessment should not be ordered. However there is $11,000 in Court that was paid in by the tenant between January and March 2007. The landlord is entitled to the contractual rent for the months of December 2006 to March 2007 inclusive in the amount of $80.00 and that amount should be paid out to it. The tenant is entitled to the balance of the monies in Court.
    
27. The landlord did not include in its statement of claim a claim for unpaid rent or for breach of any of the other covenants in the lease. In these respects it must take such further proceedings, if any, as it may be advised. In the interests of finality special leave should be granted to enable orders for payment out to be made, but the appeal should otherwise be dismissed. The following orders should be made:
    

1. Special leave granted.

2. Order of the Court of Appeal of 24 April 2008 varied by adding an order that the monies in Court be paid out as follows: $80.00 to the solicitors for the landlord and the balance to the solicitors for the tenant.

3. Appeal otherwise dismissed with costs.

Hon Justice Keith Mason
Judge of the Supreme Court

Hon Justice Kenneth Handley
Judge of the Supreme Court

Hon Justice Mark Weinberg
Judge of the Supreme Court

Solicitors:

Sherani & Company, Suva for the Petitioner
Lateef & Lateef, Suva for the Respondent