Archive for the ‘Public policy’ Category

The covenant for quiet enjoyment where the landlord also exercises powers in the public interest

November 24, 2014

In Shebelle Enterprises Ltd v The Hampstead Garden Trust Ltd ([2013] EWHC 948) the Hampstead Garden Trust Ltd (‘the Trust’) exercised the rights and powers of management under a scheme of management under England’s Leasehold Reform Act 1967 (‘the Act’). Shebelle (‘S’) held a long lease of a house in the area covered by the scheme of management and the Trust was the landlord. The lease contained an express covenant for quiet enjoyment. F owned the freehold of the neighbouring house (enfranchised under the Act and subject to the scheme of management) which was higher up a hill than S’ property. Although F owned the freehold, the Trust was ‘for the purposes of the scheme to be treated as the landlord for the time being’.

F proposed to carry out extensive works at their property. The scheme of management required them to get the Trust’s consent to the work. F applied and S objected because of concerns about the the effect of the development on the movement of ground water. When the Trust indicated that it was minded to grant consent to the works, S sought a quia timet injunction on the grounds that this would amount to a breach of the covenant for quiet enjoyment. The Trust cross-applied for summary judgment on the grounds that S had no real prospect of success.

S relied on the proposition drawn from Sanderson v Berwick-Upon-Tweed that: ‘if a common landlord A demises land to B and also demises neighbouring land to C, A will be liable to B for breach of the covenant if it authorises C to act in a way which will interfere with B’s quiet enjoyment.’ ([27] in Shebelle per Henderson J.). Either the Trust was to be regarded as being akin to a landlord ([27]) or else the proposition should be understood in such a way as to rely on the Trust’s degree of control over F and not on privity of estate ([29]).

One element of the Trust’s defence was the argument that the covenant for quiet enjoyment could not be invoked so as ‘to interfere with (and/or subvert) the performance by the landlord, in its capacity as a “custodian of the public interest”, of a role under a statutory scheme under which the landlord owes a duty to act in the public interest.” ‘ ([31]). This argument succeeded and the Trust was granted summary judgment. It did not matter that at the time of the grant of the lease the landlord was a private body:

‘The freehold reversion to the Lease was always freely assignable, and the parties must be taken to have contemplated that it might at some date become vested in a body which had duties of a public nature to perform. If the proper performance of those public duties impinged on the normal use and enjoyment of the demised premises by the tenant, it must in my view have been envisaged that the tenant would to that extent be deprived of a remedy under the covenant.’ ([63]).

Michael Lower



Estoppel in the face of a statute: public policy

January 28, 2013

In Kok Hoong v Leong Cheong Kweng Mines Ltd ([1964] A.C. 993, PC) K entered into an agreement to hire machinery to LCKM. A few months later, K obtained a default judgment in respect of rent arrears. K later brought a second action to recover further arrears. This time, LKCM argued that the arrangements were void and unenforceable as a result of a failure to comply with Malaya’s Moneylenders and Bills of Sale Ordinances. K responded that LCKM was estopped by the 1954 judgment from pleading the failure to comply with these Ordinances.

The Privy Council (on appeal from the Supreme Court of Malaya) held that while it was possible for a default judgment to form the basis of an estoppel, it was necessary to look carefully at the basis of the judgment and to consider what was  in substance the ratio of and fundamental to the decision (1012 per Viscount Radcliffe). There was no estoppel here.

In any event, it would be against public policy to allow an estoppel to take effect in the face of the Moneylenders Ordinance and the Bills of Sale Ordinance.

The Privy Council considered the general proposition that an estoppel cannot be set up in the face of a statute. It acknowledged that there can be estoppel in respect of some statutes (such as the Statute of Frauds). The test as to whether this would infringe public policy was stated as follows:

‘[A] more direct test to apply in any case such as the present, where the laws of moneylending or monetary security are involved, is to ask whether the law that confronts the estoppel can be seen to represent a social policy to which the court must give effect in the interests of the public generally or some section of the public, despite any rules of evidence as between themselves that the parties may have created by their conduct or otherwise.’ (1016 per Viscount Radcliffe)