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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Artworld Financial Corporation v Safaryan & Ors [2009] EWCA Civ 303 (27 February 2009) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2009/303.html Cite as: [2009] 23 EG 94, [2009] EWCA Civ 303 |
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(HER HONOUR JUDGE HAZEL MARSHALL QC)
Strand, London, WC2A 2LL |
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B e f o r e :
LORD JUSTICE DYSON
and
LORD JUSTICE JACOB
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ARTWORLD FINANCIAL CORPORATION |
Appellant/ Claimant |
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- and - |
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SAFARYAN & ORS |
Respondents/Defendants |
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WordWave International Limited
A Merrill Communications Company
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Mr N Dowding QC (instructed by Messrs Lawrence Graham) appeared on behalf of the Respondents.
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Crown Copyright ©
Lord Justice Jacob:
"Artworld owns the freehold of No 11/11A Holland Villas, London W 14, a large and extremely well-appointed Victorian family house in a most desirable area of London. It can fairly be described as an 'ambassadorial' residence, because, after being a family home for the Tatanaki family, it was … let to the Saudi Arabian Ambassador. With an 'in and out' gated drive, it comprises five floors of accommodation, with living and reception rooms on the raised ground floor, a kitchen/breakfast room, study, snooker room, utility area, staff quarters and private swimming pool complex in the extended semi-basement, a master bedroom, dressing room and bathroom suite on the first floor, and two more floors of bed and bathrooms. It has underfloor heating, and a lift. To the rear are terraces at two levels, a formal garden and a staff cottage. Major refurbishment and extension took place in 1996-8."
"1) The landlord's acceptance back of the keys to the property.
2) The landlord's instructing and obtaining 'the checkout report' and inventory by Mrs Walton [who had been an agent of the landlord].
3) The carrying out of works of redecoration to the property to the taste of Mr and Mrs Tatanaki.
4) The re-hanging of certain curtains removed from the property at the Safaryans' request.
5) The removal of some garden sheds from the property.
6) The return to the property of some furniture which had been taken away to storage because the Safaryans did not want it.
7) The use of the drive of the property for parking Mr Fayez Tatanaki's Rolls Royce and Mr Tatanaki's, [that is Mr Tatanaki junior] Porsche motor cars, on several occasions.
8) Mr Tatanaki's moving into, and staying and sleeping at the property.
9) The moving into the property of some furniture for Mr Tatanaki, and in particular IT equipment and his games console.
10) Mr Tatanaki's younger sister also stayed at the property."
"Examining the acts on which Mr Kremen relies, therefore, I find that the acceptance of the keys is an equivocal act, as is the making and handing over of the Check Out Report. The title of this document is of no significance, only its purpose. Faced with a tenant who has evinced an intention to leave the property regardless of the duration of the lease, and well advised landlord would reasonably want to record the state of the premises, and the inventory, at that time, to avoid future argument and protect his own interests. Similarly, carrying out works of repair to the property -- whether these were arguably required because of a breach of covenant by the landlord or by the tenant -- would come within the principle that the landlord is entitled to protect and preserve the fabric of his property."
"There is legal distinction between a surrender by operation of law and an implied surrender. The terms surrender by operation of law 'is applied to cases where the owner of a particular estate has been a party to some act the validity of which he is afterwards estopped from disputing, and which would not be valid if his particular estate had continued to exist…'"
"The conduct of the parties must unequivocally amount to an acceptance that the tenancy has ended. There must either be relinquishment of possession and its acceptance by the landlord, or other conduct consistent only with the cesser of the tenancy, and the circumstances must be such as to render it inequitable for the landlord or the tenant to dispute that the tenancy has ceased."
"In my judgment, considering all the facts above, the acts of the Tatanaki family, which Artworld must be taken to have authorised, amount to much more than merely protecting the property or seeking to make the best of the Safaryans' having departed, and go significantly beyond anything consistent with the continued existence [of] the tenancy."
The test she applied was to look for acts significantly beyond anything consistent with the continued existence of the tenancy.
"The test is whether the landlord's conduct is 'so' inconsistent ([Oastler v Henderson 1877 2 QBD 575 at 577) with the continuation of the tenant's lease that it could only be justified as being lawful on the basis that the landlord has accepted the tenant's implied offer to give back possession, and has taken possession of the premises beneficially for himself."
"In my judgment the question whether there has been a deemed surrender by operation of law does not depend on the landlord's stated intention, but on the intention demonstrated on an objective basis by its conduct as a whole. Of course this includes both what it says and what it does, and what it says may assist in interpreting the true effect of acts which might otherwise be equivocal, but is not open to the landlord to turn black into white merely by assertion. Just as one cannot 'approbate and reprobate', where aspects of the landlord's conduct are contradictory the court must look at that conduct as a whole, and decide what is its real effect."
"5.24 To permit entry
5.24.1 To permit the Landlord, the Landlord's Agent and their workmen on reasonable written notice at reasonable hours by prior appointment except immediately in the case of Emergency using a set of keys (if necessary) to enter the Property for the purposes of:
(i) viewing and recording the condition of the Property (including during the carrying out of the Works)
(ii) repairing and maintaining or cleaning any part of the Property
(iii) complying with any of its obligations under this Agreement or for any other reasonable purpose
(iv) allowing prospective tenants to view the same during the last three months of the Term (howsoever determined) and at any time during periods of Holding Over
(v) effecting any reasonable and necessary additions alterations and improvements to the Property
(vi) removal of any items of Fixtures and Fittings previously identified by the Tenant within 7 days of the Completion Date
5.24.2 allowing prospective purchasers to view the same upon giving the Tenant fourteen days written notice and obtaining the Tenant's consent to such viewings (not to be unreasonably withheld or delayed)"
"Plaintiffs let a house to defendant for seven years from Lady Day, 1868. Defendant entered and occupied till Michaelmas, when he left England for America. He left the keys with an agent to dispose of the house if he could, if not, to make the best bargain he could with plaintiffs for the surrender of the term. The agent was unable to find a tenant, and gave the keys in December, 1868, to plaintiffs. They employed a house agent to let the house, and he put up bills in the house and advertised it to let, but the house was not let till Lady Day, 1872, when a new tenant went in. In 1870, for a short time, some workmen of plaintiffs occupied two rooms in the house for the purpose of plaintiffs' saddlery business."
"But up to that date they had not done such an act, for they had not virtually taken possession of the premises; and in order to estop the lessors, so as to constitute a surrender by operation of law, there must be a taking of possession. I do not say a physical taking of possession, but, at all events, something amounting to a virtual taking of possession. But here there was no such taking of possession."
And he said this about the taking of the rooms:
"As for the fact that the plaintiffs' workmen used two of the rooms in 1870, I do not think that any jury ought to hold that to be equivalent to a taking of possession, for it is, under the circumstances, quite consistent with an intention to hold the defendant to his lease."
Bramwell LJ, clearly evincing a lot of sympathy for the landlords, pointing out it was unoccupied and bringing in no rent, regarded the fact that the rooms were used as simply a natural thing for them to do in circumstances where they thought the defendant was not going to return. Brett LJ simply expressed it this way:
"The plaintiffs' workmen, were, it is true, let into two of the rooms for a time, but that was not by way of taking possession."
Lord Justice Dyson:
"The doctrine of surrender by operation of law is founded on the principle of estoppel, in that the parties must have acted towards each other in a way which is inconsistent with the continuation of the tenancy. That imposes a high threshold which must be crossed if the tenant is to be held to have surrendered and the landlord is to be held to have accepted the surrender."
There is reference in some of the authorities to the circumstances having to be such as to render it "inequitable" for the landlord or tenant to dispute that the tenancy has ceased: see, for example, Bellcourt, paragraphs 19-21 in the judgment of Longmore LJ. But I would accept the submission of Mr Dowding QC in his skeleton argument, at paragraph 15, where he says that the references
"are not to be read as importing inequity as a separate requirement. The doctrine is not based on conscience. Where possession is unequivocally offered and retaken, it will, without more, be inequitable for the landlord to deny that the tenancy has ended, because he cannot at one and the same time have both possession and continuing rent under the tenancy. That is clear from (amongst other things) Aldous LJ's description, in McDougalls Catering Foods v BSE trading [1998] 2 EGLR 65 of the court's task as being to ascertain from all the facts whether the landlord's conduct:
'did in fact amount to an unequivocal acceptance of cessor of the tenancy such that it would be inequitable for the landlord to dispute that the tenancy ceased'. [emphasis added]. In other words, the two are the same thing."
"(1) The issue of whether there has been a surrender by operation of law after a tenant's abandonment of the leased premises must be determined by evaluating the effect of the landlord's conduct as a whole (cf London Borough of Brent v Sharma (1992) 25 HLR 257 at 259). I accept Mr Kremen's argument that the totality of such acts can amount to a resumption of possession even though individual acts might each be only equivocal. With this in mind --
(2) The test is whether the landlord's conduct is 'so' inconsistent (Oastler v Henderson 1877 2 QBD 575 at 577) with the continuation of the tenant's lease that it could only be justified as being lawful on the basis that the landlord has accepted the tenant's implied offer to give back possession, and has taken possession of the premises beneficially for himself.
(3) Accepting back the keys without more will always be equivocal. As a matter of practicality and common sense, one party has to hold the keys to prevent an absurd situation in which they are passed back and forth because neither party wants to risk it being suggested that it has made an admission by holding them.
(4) Any act of the landlord which is consistent with its rights under the lease, such as entering the premises to inspect or to repair them, will not in itself give rise to a surrender because, by definition, it is not inconsistent with the lease continuing.
(5) Any further act of the landlord which amounts to protecting or preserving the property, such as taking security measures or doing necessary repairs, will not in itself give rise to a surrender because such self-help, necessary to preserve the landlord's interest in the value of his property, is a reasonable response to the tenant's evinced intention not to perform the obligations of the tenancy: cf McDougall's Catering Foods Ltd v BSE Trading Ltd 1998 P & CR 312; Relvok Properties Ltd v Dixon (1972) 25 P & CR 1, at p 7.
(6) Similarly, any act of the landlord which amounts to the landlord's performing the tenant's covenants under the lease, such as keeping the garden tidy, would not necessarily amount to a resumption of possession as it is not inconsistent with holding the defaulting tenant to performing the lease.
(7) Any further act of the landlord referable to the landlord's seeking to re-let the premises will not necessarily give rise to a surrender by operation of law, as it is no more than what the landlord might reasonably be expected to do in the circumstance for the potential benefit of all parties: Oastler v Henderson (above). The landlord must be entitled to seek to mitigate the damage caused in reality (even if not yet technically in law so long as the lease remains extant) by the tenant's abandoning the lease, by seeking to obtain another tenant, without thereby losing his rights against the original tenant if he is unable to do so.
(8) However, if the landlord goes further and uses the premises for his own benefit beyond the totally trivial -- and certainly, in my judgment, if such use amounts to occupation of the premises -- then he re-takes possession of the premises inconsistently with the continuance of the lease. This will give rise to a surrender by operation of law, since it is only on the basis of having accepted such a surrender that the landlord's acts would be lawful."
"Having deliberately taken that of acting in a manner undeniably inconsistent with the continued existence of the estate which he has granted, he has elected to treat that estate as determined in accordance with the offer to relinquish it made by the tenant, and cannot thereafter change his mind."
In my judgment that is a proper approach to the issue of surrender by an operation of law.
Lord Justice Sedley:
"Although surrender by operation of law will be described in the language of estoppel, to which it bears some resemblance, this is really in the context of indicating the distinction of the acts which do amount to a resumption of possession, and acts which are viewed as being too trivial to do so. In my judgment, the principle is more accurately viewed as a case of election."
Order: Appeal dismissed