SECOND READING. (Hansard, 18 February 1880)

§ MR. MARTEN
, in moving that the Bill be now read a second time, said, its object was to empower the Court of Chancery to afford relief, where it thought proper, against forfeiture of leases in cases of non-performance of covenants, and of certain other obligations not being pecuniary obligations. The existing state of the law on the subject occasioned serious hardships to tenants. The ordinary form of a proviso for re-entry in a lease was that in the event of the tenant failing to pay the rent, or to perform the covenants of the lease, the landlord was entitled to re-enter and avoid the lease. The Courts of Equity, from the earliest times, had viewed a proviso for re-entry on account of non-payment of rent rather as in the nature of a security than as a penalty to be specifically enforced, and had, consequently, relieved tenants against any forfeiture attempted to be asserted on the ground of the failure to pay the rent reserved. In the same way they had also been in the habit of relieving against forfeiture for non-payment of damages, or in respect to any pecuniary obligation which the tenant was under. But, unfortunately, when the question arose whether they would adopt the same principle in regard to covenants of repair, and the like, as in 887 the case of pecuniary defaults, the Courts of Equity held that they were powerless to grant such relief. By an Act passed in 1859, however, relief could be granted in the case of failure to insure according to covenant, provided that no damage had ensued, and that the covenant of insurance was also thenceforward carried out. But the Act required that when the relief was granted a memorandum of it should be made on the lease, and also provided that the relief should not be granted twice. Now, this Bill proposed that the Court should be invested with power, in any action or proceeding in which it was asked to give effect to any proviso for re-entry, or other stipulation by way of forfeiture for any breach of any covenant, to inquire into the case, and to refuse to give effect to such proviso or stipulation and to relieve against the forfeiture. Such refusal and relief might be either absolute or on terms as to making good any defect of repair or other defect, paying costs or damages, or preventing a future breach, or as to any other matter, according to what should, appear to the Court to be just and reasonable in the circumstances of the case. The Bill also proposed that there should be no forfeiture for the breach of any covenant that any assignment or under-lease should be prepared by the lessor's solicitor, or any particular solicitor or person. It likewise contained a clause securing the mutual rights of several tenants holding under the same lease. In each of the Sessions of 1876 and 1877 the House had sanctioned the principle of his Bill by passing the Forfeiture Relief Bill, which he had had the honour to introduce, and which received a general acceptance on both sides of the House, but which had failed to pass the other House. That Bill, in 1876, failed in the other House on account of the late period of the Session when it stood for consideration there. Lord Cairns had expressed on that occasion the opinion that it was a good measure, and one that would not be productive of injury to lessors. In 1877 the Bill was sent up to the other House early in the Session, but was not proceeded with then. For himself, he believed the present Bill would prove beneficial to lessors by increasing the value of their property. He would, with the permission of the House, refer to instances of great hardship under the 888 existing law to illustrate the necessity for the remedy which he now suggested. One of them was that of a barrister, whose letter he held in his hand, and who, in 1871, purchased a lease of four houses worth about £5,000. In 1873, his clerk, who received his monies, had instructions to pay the premiums for fire insurance; but, as he unintentionally omitted to do so, the lessor threatened to bring an action of ejectment, although, on receiving an explanatory letter, the lessor did not persevere. Subsequently, however, the clerk made a similar slip, when the lessor brought five actions of ejectment against the lessee and his tenants. Relief was thereupon sought under the existing Statute, but was strenuously opposed under the allegation that what took place in 1873 amounted to a waiver out of Court. When there was a waiver out of Court, it was, by the Act of 1859, equivalent to the grant of relief by the Court, and under the Act there could be only one relief, so that a second relief was put out of the power of the Court. The Justices of the Court of Queen's Bench Division held that the lessor's contention was correct, and the result was that an accidental slip in the non-payment of £1 16s.for fire insurance involved the loss, probably, of £5,000 by the forfeiture of the lease. In another case, the particulars of which were furnished by a highly respectable London solicitor, there were 40 houses held under various under-leases, but all comprised in the same superior lease. About five of these houses were allowed to get out of repair, and were not repaired by the under-lessee of them after notice served upon him to do so. Thereupon the landlord on the superior lease brought ejectment for the whole 40houses, on the ground that they were all forfeited by reason of the neglect to repair the few. There being no defence, judgment of ejectment was obtained, and the unfortunate tenants—themselves perfectly innocent—who had kept their own houses in repair, were compelled to throw themselves upon the mercy of the superior landlords. The landlords exacted a fine equivalent to about 10 years' purchase of the ground rents, besides heavy costs. The third case was that of a mortgage of leaseholds. The particulars of this case were also furnished by the solicitor already referred to. There the mortgagor com- 889 mitted a breach of covenant, for which the landlord brought ejectment. The writ was served upon the mortgagor, who allowed judgment to go by default. The effect was that the mortgagees found themselves completely in the power of the landlord, who, after the payment of heavy expenses, consented to the granting of a new lease. Another instance, mentioned in a letter addressed toThe Times,on January 19th, by Messrs. Hunters, Gwatkin, and Haynes, well-known solicitors, was thus described— An action of ejectment is now pending in which one of the London hospitals seeks to destroy a lease of property in the City of London, valued at many thousand pounds, on the ground of a breach by the lessee of the covenant to repair. The action was commenced without any previous notice. The lease is in mortgage, and the mortgagees have offered at once to do whatever repairs the lessors require; hut the hospital have declined this offer, and state that their right to recover possession is perfectly clear, and that they intend to continue the action. A graphic account of another grievous case was given by Lord Justice James in "Hodgkinsonv.Crowe" in the 10th volume ofThe Law Reports Chancery Appeals.The Lord Justice said— A case in which I was counsel, many years ago, produced a strong effect upon my mind—a case where a forfeiture was enforced, in which there was no legal defence, and no equitable relief could be obtained. Extensive copper works were forfeited by reason of a broach of covenant in not keeping up a fence which had become perfectly useless, and the not keeping it up did not do one shilling's worth of damage to anybody. Cases of that kind showed how oppressively such a power may be used. The only other case with which he would trouble the House was one in which a leasehold house was mortgaged to a building society. This house was kept in excellent repair, and no complaint respecting it was suggested by the landlord. Unfortunately, the lease under which it was held comprised another house; and this being out of repair the landlord brought ejectment for both houses. Judgment was obtained, and the property was given up, the only terms on which a new house was offered being prohibitory. These six examples of the mischief and injustice which might be done under the present state of the law were enough, he submitted, to show the necessity for the interference of the Legislature. They could be multi- 890 plied indefinitely by cases drawn from the experience of those who were concerned, either professionally or otherwise, in transactions relating to leaseholds. It was in order to remedy such cases of hardship that the Bill was now introduced. He, however, disclaimed any intention to interfere unduly with freedom of contract, and contended that his Bill was in conformity with the principle recognized by the Court of Chancery that covenants were to be construed in a reasonable manner, and according to their proper interpretation. An eminent conveyancer had written to him that the landlord generally reserved to himself the power to evict, with the view of using it only in flagrant instances; but it was sometimes exercised oppressively, and the present Bill was likely to give fair relief against that grievance. If those covenants of re-entry were intended when they were entered into to be dealt with in an unreasonable way, they would be in the nature of gambling eon-tracts, which ought not to be enforced. Was it to be said that a property worth, it might be, £100,000, merely because some fence or road of no importance to anybody was not made, or some other trumpery covenant in the lease had been infringed, was on that account to be subject to forfeiture? That would be perfectly monstrous. Belying on the precedent afforded by the Chancery Amendment Act of 1858, he proposed, in this Bill, to vest in the Court a discretion as to enforcing forfeiture, just as under the Act of 1858, in the case of breaches of covenant, the Court had now an absolute discretion to substitute the giving of damages for an injunction. He did not propose to deal with those cases in which the renewal of leases was made dependent on the performance of certain covenants, or in which the lessee had a power to determine the lease contingent upon his performance of the covenants, or with building agreements which provided that unless the ground was covered with buildings before a certain time the landlord should not be bound to grant a lease. Nor did he deal with cases of an option to purchase, where the option was only to arise on the performance of some condition precedent, such as the payment of the purchase money before a certain time. The Bill was, moreover, limited to covenants or engagements in the lease; and it 891 was, consequently, obvious that it did not affect the determination of the lease from bankruptcy, or any other cause, independent of covenants in the lease. He had been anxious, in framing the Bill, to confine it to well-known and notorious cases of hardship; and he proposed to give a discretionary power to grant relief from forfeiture in cases of non-fulfilment of covenants, so that the Court might be able to do justice in the classes of cases to which the Bill related. When the Court was asked to give effect to a provision for re-entry by way of forfeiture for breach of covenants and engagements the Court might inquire into the case, and it might grant relief against forfeiture absolutely, or upon terms which it might think fit to impose. The object of another clause of the Bill was to give tenants under the same lease mutual rights, and the effect of it would be that one tenant might require other tenants under the same lease to perform, as regarded their respective tenements, all the covenants which ought to be performed, so as to prevent forfeiture. He did not propose to interfere with the making of covenants, nor with damages for breach of covenant, or with injunctions against breach of covenant; but he desired to save the leaseholder in certain cases from the absolute forfeiture of the lease. He repudiated the least intention, in bringing forward this measure, to cast any imputation on the great body of landlords generally. The Corporation of the City of London was one of the best landlords, and if all other landlords were like it his Bill would not have been necessary. London, too, was, for the most part, parcelled out among great proprietors, most of whom would never think of enforcing these forfeitures; but even under these great proprietors there were many intermediate and smaller landlords, who might be needy, and who sometimes might not scruple to act oppressively. The rights of any landlord acting fairly would not be in the slightest degree impaired by that Bill; but, on the contrary, the value of leasehold estates would be greatly increased by the security the measure would give against the capricious enforcement of covenants of reentry. The Bill had received the approval of, among many others, Mr. Lawrence, the President of the Incorporated Law Society, and the Master of the 892 Rolls. The former had written of it as follows:— The Bill is an excellent measure, and will, if it passes, effect a great improvement in the law. The Master of the Rolls had said— I fully agree with the principle of the Bill, and I have long considered a measure of this Kind to be highly desirable. With regard to the terms on which relief should be granted, I think the Court should have as wide a discretion as possible. The wide discretionary power thus recommended by the Master of the Rolls formed the basis of the present measure, and he hoped the House would read it a second time.

§ MR. ALDERMAN COTTON
, in moving that the Bill be read a second time that day six months, said, that his object in doing this was that more time might be given for the consideration of it, as it had come suddenly before the House, and the Corporation of London and other bodies and persons had not had sufficient time to look carefully into its merits or demerits. The Bill would, if passed, affect all existing leases as well as all future leases, and it would interfere with very important and serious interests. Besides, Clause 2 contained very objectionable matter—it was a thin crust between what was proposed and tenant right. It refused a lessor the right of re-entry and obliged him to go to a Court of Law. He thought this involved considerable injustice. If any right of re-entry was interfered with it should be with the landlord's consent, and not by the Court of Chancery absolutely. Clause 3, with some slight improvements, would have his heartiest sympathy. It was only last night that his attention had been called to the Bill. The matter would be brought before the Corporation of the City of London tomorrow, when it would be carefully considered. It was possible that the Bill might be made a very good one; and if the hon. and learned Member would allow it to be referred to a Select Committee he would withdraw his opposition. He concluded by moving that the Bill be read a second time that day six months.

MR. OSBORNE MORGAN
supported the Bill, which introduced no new principle, but merely extended one that had been adopted many years ago by Lord St. Leonards. He denied that the Bill unduly interfered with the freedom of contract, and said that questions of forfeiture, so far as the landlord was concerned, might safely be left to the Courts, which would not be over-indulgent to tenants. The Bill would, he believed, not only do justice to the tenants, but be an actual benefit to the landlords. Delay would be fatal to the measure, the principles of which had already been fully discussed; and he should, therefore, be much surprised if the hon. and learned Member who had charge of the measure consented to the proposal to refer it to a Select Committee.

§ MR. ROBERTS
cordially supported the Bill, which would give satisfaction to thousands of lessees. He was also quite sure that no landlord would object to it.

MR. RIDLEY
thought the measure hardly corresponded with the observations which had been made in its favour. It was evident that the Bill was drawn a great deal too widely. They had to remember that it referred to every sort of lease issued in England. No doubt cases of hardship might be quoted, and he did not dispute their existenoe; but there was an old maxim which set forth that "hard cases made bad law." In his opinion, the Bill would interfere unduly with the rights of property. Clause 2, which was the most important part of the Bill, in the most sweeping manner gave power to the Court of Equity to interfere in every case in which the landlord endeavoured to enforce his rights, whereas the Bill known as Lord St. Leonards' measure only interfered in cases of accident or mistake. The power of interference with the contract was at present limited to cases in which the landlord could be put in the same position as if no breach of covenant had been committed. The 894 present measure would extend this power of interference to cases in which such re-instatement would be impossible. He admitted that there might be some cases in which it would be desirable to protect tenants from arbitrary conduct on the part of landlords; but the Bill would permit interference where no such conduct could be complained of. If the Bill were sent to a Select Committee it might come back in a shape more generally acceptable to the House; but at present the scope of the Bill was too wide.

§ MR. GREGORY
thought there were hardly sufficient grounds for referring so short and simple a Bill to a Select Committee. It had been argued that it would be hard that a man should be compelled to have recourse to a Court of Law in order to enforce his remedy by forfeiture. But, as a matter of fact, the position of the party, as regarded the necessity of having recourse to law after a breach of covenant, was not altered by the present Bill. He thought the jurisdiction of the Court of Equity might very safely be extended in the manner contemplated in the Bill, which he characterized as a just remedial measure and one well fitted to meet cases in which a breach of covenant was taken advantage of for enforcing hard terms on the lessee.

§ MR. FRESHFIELD
held that the Bill, in its present form, went too far. It should not be forgotten, he thought, that lessees were bound to know the contents of their leases, and that they generally did so. He could not agree with the hon. and learned Member opposite, who seemed to think that deeds under hand and seal were to be treated as nullities. There were many reasons why landlords should insert special covenants in their leases. With regard to the covenants against under-lease and assignment, and the submission of mortgages and assignment to the landlord's solicitors, these provisions were neither unreasonable nor unnecessary, in many cases, from complications and special circumstances affecting the land. The Bill assumed that provisions of this nature were of no value, and accordingly did not give effect to them. As regarded the Bill generally, he thought the House should have had a little more Notice. He believed the Bill had not been in print until the previous day. He should, 895 therefore, support the proposal to refer it to a Select Committee.

§ THE SOLICITOR GENERAL (Sir HARDINGE GIFFARD)
said, that no doubt cases of great hardship existed with respect sometimes to covenants in leases. At the same time, it was a wide proposition to say that it should be permitted to a Court to say, in every case, in what way covenants deliberately entered into should be carried out. The Bill offered no restriction, but simply the Court was to be at liberty at its discretion to break the bond between the parties. He was not surprised to learn that the lawyers, as a body, were in favour of the Bill; but it was because he thought that it would have a mischievous effect in rendering liable to litigation every transfer of real property that he considered the remedial portions ought to be guarded against. He reminded the House that the Lord Chancellor was about to make a proposal on the same subject; and in view of that, and the other circumstances of the case, if the Bill were referred to a Select Committee, he should not oppose its Second Reading.

§ MR. MARTEN
said, he would assent to the proposal to refer the Bill to a Select Committee.