Principles governing relief against for forfeiture

In Shiloh Spinners Ltd v Harding ([1973] AC 691, HL) S assigned part of their leasehold property to T. The assignment imposed positive obligations on T. There was a right of re-entry in the event of the non-performance of these obligations. T assigned to H who defaulted. S brought proceedings to recover possession. The House of Lords held that the right of re-entry was an equity and did not fail for want of registration under the Land Charges Act 1925.

One question was whether relief against forfeiture was available in principle. Lord Wilberforce referred to ‘the right of courts of equity in appropriate and limited cases to relieve against forfeiture for breach of covenant or condition where the primary object of the bargain is to secure a stated result which can effectively be attained when the matter comes before the court, and where the forfeiture provision is added by way of security for the production of that result.’ (723)

Relief was possible, in principle, in this case:

‘The power of re-entry was inserted by way of reinforcement of the contractual obligation which it must have perceived might cease to be enforceable as such. Failures to observe the covenants having occurred, it would be right to consider whether the assignor should be allowed to exercise his legal rights if the essentials of the bargain could be secured and if it was fair and just to prevent him from doing so. It would be necessary …  to consider the conduct of the assignee, the nature and gravity of the breach and its relation to the value of the property which might be forfeited. Established and, in my opinion, sound principle requires that wilful breaches should not, or at least should only in exceptional cases, be relieved against, if only for the reason that the assignor should not be compelled to remain in a relation of neighbourhood with a person in deliberate breach of his obligations.’ (725)

As mentioned in this passage, one question was whether relief is available in cases of wilful breach. Lord Wilberforce indicates not. Lord Simon of Glaisdale thought that relief was always available in principle but that the fact that breach was wilful would be a factor to be considered when deciding on whether or not relief should be granted.

The House of Lords upheld the first instance decision not to grant relief in this case where the breach was clear, wilful and substantial.


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