HL Deb 23 October 1985 vol 467 cc1160-3

100A After Clause 34, insert the following new clause— (". No proceedings to forfeit leases or agreements for leases on grounds of the appointment of an administrative receiver or any other receiver may be commenced or continued, and no peaceable re-entry made, while the administrative receiver remains in office, except with the leave of the court and subject to such terms as the court may impose").

The reason for the insertion of these amendments is to deal with circumstances where either an administrator, an administrative receiver, a receiver or a liquidator takes possession of a business or finds himself in control of a business which occupies leased premises. It is to ensure that the very fact of his appointment as an administrator, an administrative receiver or receiver is not grounds for the landlord to forfeit the lease. In other words, it is designed to ensure that the administrator in charge of a business on leased premises is entitled to the quiet possession of them in accordance with the normal terms of the lease, notwithstanding any provision to the contrary in the lease.

Those noble Lords who are in possession of long leases of ordinary, residential properties will be aware that the freeholders often seek to insert in the lease a clause by virtue of which it becomes forfeit in the event of the lessee becoming bankrupt, or anything like that. That means of course that for the purposes of obtaining a building society loan it becomes immediately invalid in the sense that no building society will give any advance on a long lease if that clause remains valid, since it would destroy their security in the event of the lessee becoming bankrupt.

That is the principle behind this. As I say, it is to ensure that where an administrator takes over a business, supervises a business, or an administrative receiver or receiver takes over a business or its conduct, and the business is in leased premises, notwithstanding any provision in the lease he is entitled to the possession of it and that no peaceable entry can be made by virtue of the terms of the lease itself.

As I indicated to your Lordships, I have had unofficial conversations on this matter with the Department of Trade and Industry. We have sought the expedition of this Bill by co-operating together. I am given to understand that the Department of Trade and Industry think that this provision is unnecessary in that no court would permit this to happen. In my last unofficial conversations, which by agreement in this instance I am entitled to reveal, the way I left it was this. I said that if they could produce a cited case, a case precedent, for this then I should be happy to withdraw the amendment.

If the noble Lord can produce to mean authoritative cited case that safeguards the rights of an administrator, an administrative receiver and receiver against the head landlord in the event of such a clause being put in the lease, then I should be quite happy to withdraw the amendment. I am quite sure that the noble Lord, being himself a lawyer of some distinction, will realise that a cited case is required in order for a matter to be watertight. One does not always like to refer to judges' rules. I beg to move.

Moved, That this House do agree with Amendment No. 61A as an amendment to Commons Amendment No. 61.—(Lord Bruce of Donington.)

6.45 p.m.

Lord Meston

My Lords, as I understand this amendment, it proposes a very serious alteration in the existing law of landlord and tenant and a very serious inroad into the freedom of contract between landlord and tenant which has stood for many years. As I anticipate the Government's answer, notwithstanding the presence or absence of any decided case law, the fact of the matter is that the court has power to grant relief from forfeiture.

Lord Cameron of Lochbroom

My Lords, the noble Lord, Lord Meston, has anticipated the Government's response and indeed has put things much more clearly than ever I could, in a matter which in some sense is foreign to me. I shall adopt what he has said.

In my response I take all four amendments together because they are all directed to the same point, although the individual concerned is in each case different. If the right to re-enter is being considered here, of course, as the noble Lord, Lord Meston, has pointed out, that is a substantive right of a landlord, not merely a procedural remedy. The object of this part of the Bill is to impose a moratorium, to suspend creditors' remedies while not affecting their substantive rights. I do not think it justifiable to make an exception to that rule in the case of landlords.

I am also not convinced that landlords will be able to achieve or will even attempt peaceable re-entry in most cases. Obviously if the administrator or the receiver, or the like, agrees to it, then no difficulties arise. I understand that in the case of receiverships, which of course is the point that is under discussion in relation to Amendment No. 100A, although leases may provide that the lease can be terminated on the appointment of a receiver, the receiver usually negotiates with the landlord either to remain in occupation or to dispose of the unexpired term of the lease for the benefit of the debenture holder. Of course in the case of the administrator, any such disposal will be for the benefit of the company. I believe that landlords will react in a similar manner to the appointment of an administrator.

I suggest that Amendment No. 67B is unnecessary to the extent that it relates to proceedings for forfeiture being commenced or continued. Such proceedings are already subject to the moratorium by virtue of Clauses 15(1)(c) and 16(2)(c). I should also point out that there is a technical defect in Amendment No. 67B, in that it provides for no proceedings to be taken on the grounds of an administrator being appointed while an administrative receiver is in office.

In regard to Amendment No. 100A, I understand it is quite common for leases to contain provision for forfeiture on the appointment of a receiver. If the amendment were accepted it would mean that one creditor, the debenture holder who appointed the receiver, would then benefit at the expense of another—the landlord. In other words, we would interfere, as the noble Lord, Lord Meston, said, with the contractual rights, to favour one class of creditor over another. I can see no reason why this preference should be given.

Accordingly, particularly since here again in practice the receiver usually negotiates with the landlord either to remain in occupation or to dispose of the unexpired term of the lease for the benefit of the debenture holder, I do not see any advantage in this amendment. For these reasons, I would not advise your Lordships to accept these amendments.

Lord Bruce of Donington

My Lords, I am very grateful to the noble and learned Lord and also to the noble Lord, Lord Meston, for having cleared this matter up to some extent. I am still not quite clear about the position of the administrator. The whole point in the appointment of an administrator as such is surely in circumstances in which it is possible for the business to be pulled round and set on its feet again and for the business to proceed. If there were in the lease of the property occupied by the company concerned a clause that automatically forfeited the lease on the appointment of an administrator this would completely frustrate that. I appreciate what the noble Lord, Lord Meston, has said about the sacredness of a particular contract. What I am anxious to obtain from the noble Lord is what remedy there is for an administrator in those circumstances where he had been appointed on the basis of being able and believing himself able to pull a company round who suddenly finds himself in possession of a property, the lease of which contains a provision that on his appointment it is to be forfeited.

What kind of remedy would he have? What kind of relief is open to him? Or, alternatively, are the Government saying that in such cases there is no use appointing an administrator because the premises would be whisked from under him from the moment that he started? These are the practical implications of this. If I may say so, I speak very humbly on this. As is well known, I am not a lawyer and I make no claim to the legal wisdom which the noble and learned Lord has and which he shares with the noble Lord, Lord Meston. For the moment, I am merely concerned with the practical implications of it. If the noble and learned Lord can explain or if the noble Lord, Lord Meston, can explain or if anybody else in the legal profession can explain, I shall be greatly relieved and much obliged.

Lord Cameron of Lochbroom

My Lords, I had hoped that I had made it clear. Obviously, it is entirely my fault that I failed to do so. What is proposed in the Bill is not intended to affect the substantive rights which lie in particular parties in this regard. I would simply respond to the noble Lord's questions by repeating what I said at the beginning; that is to say, the the object of the moratorium is to suspend creditors' remedies while not affecting their substantive rights. Obviously, in the case where, as otherwise, there is provision in the contract itself for certain things happening, those provisions will rule, as I have already indicated. I do not think I can assist the noble Lord any further.

Lord Meston

My Lords, I venture with some hesitation simply to add this. The noble Lord, Lord Bruce, asked what remedies there are. The remedies are that the tenant, or the administrative receiver standing in his shoes can go to court and ask for relief against forfeiture.

Lord Bruce of Donington

My Lords, I am greatly obliged to the noble Lord, Lord Meston, and ask leave to withdraw the amendments and all the consequential amendments.

Amendment to the Motion, by leave, withdrawn.

On Question, Motion agreed to.