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The mortgagors were assignees of a leasehold
interest in certain premises which they mortgaged by way of
legal charge to the plaintiffs on 23rd May 1967. the charge,
which was registered on 30 May, contained a covenant by the
mortgagors not to create any lease or tenancy of the premises,
and a provision conferring on the plaintiffs the right to
possession in the event of the mortgage interest falling into
arrear. The mortgagors did in fact default and, in June 1968,
the plaintiffs obtained an order for possession of the premises
but did not seek to enforce it. In November 19*68, the mortgagors
let the premises to the defendant as a weekly tenant. On 23
December 1968, the plaintiffs appointed R as receiver under
the mortgage and R collected rent from the defendant thereafter.
On the same day, the plaintiffs' solicitors wrote to the defendant
informing him that the plaintiffs had appointed R As receiver
of the rents and profits of the property, and continued: 'Please
take notice that henceforth you should not pay any sums to
your former landlords [the mortgagors] but to [R]…' The plaintiffs
appealed from an order refusing their claim for possession.
Held -
The claim for possession failed; the
receipt of rent by a receiver appointed by a mortgagee did
not, without more, create a tenancy by estoppel as against
the mortgagee, but the plaintiffs had so conducted themselves
that they were precluded from denying that they had accepted
the defendant as their tenant, for their letter of 23 December
1968 would have been understood by any reasonable man (and
was understood by the tenant) to mean that the mortgagors
had ceased to be his landlords and that in their place, the
plaintiffs accepted him as their tenant with the result that
a new tenancy was created.
Appeal -
This was an appeal by the plaintiffs,
Chatsworth Properties Ltd, as mortgagees, from an order of
his Honour Judge Vick, made at Wandsworth County Court on
20 April 1970, dismissing the plaintiffs claim for possession
of the mortgaged property, 37 and 37a Kettering Street, Wandsworth,
which was occupied by the defendant B Effiom. The facts are
set out in the judgement of Salmon LJ.
JR Reid for the plaintiffs.
RB Mawrey for the defendant.
SALMON LJ -
On 8th June 1901, premises known as 37
and 37a Kettering Street, Wandsworth, were leased to a Mr
Coomber for a term of 99 years from 25 March 1901. Much later,
this leasehold interest was assigned to a Mr and Mrs Lamptey.
On 23 May 1967, Mr and Mrs Lamptey mortgaged that interest,
and the legal charge made in favour of the plaintiffs was
registered on 30 May 1967. It contained a covenant by Mr and
Mrs Lamptey not to create any lease or under-lease or tenancy
or otherwise part with possession of the whole or any part
of the premises, and a covenant that they would personally
occupy the first floor of the premises. The deed also contained
the usual provision conferring on the mortgagee the right
to possession in the event of the mortgagors falling into
arrear in the payment of their mortgage interest.
The mortgagors did default under the
mortgage and, on 27 June 1968, the plaintiffs obtained an
order in the Chancery Division for possession of the premises
in question. They did not, however, seek to enforce that order,
Mr and Mrs Lamptey seem to have remained in possession until
November 1968, when in breach of their covenant in the mortgage
deed, they let the premises to the defendant. He went in as
a weekly tenant, and, providing the letting to him was lawful,
his was a protected tenancy under the Rent Acts. Incidentally,
Mr and Mrs Lamptey appear to have extracted about £158 from
the defendant as payment for rent in advance. On 23 December
1968. the plaintiffs appointed a Mr Richardson as receiver
under the mortgage to receive the income, rents and profits
of the premises. It is quite plain that a receiver under a
legal charge is deemed to be the agent of the mortgagor (s109(s)
of the Law of Property Act 1925) and a mortgagor is solely
responsible for the receivers' acts or defaults, unless the
mortgage deed otherwise provides. This mortgage deed did not
do so. Mr Richardson after his appointment as receiver continued
for a time to collect the rent from the defendant. It is plain
that although, as between Mr and Mrs Lamptey and the defendant,
Mr and Mrs Lamptey were bound by the terms of the tenancy
agreement, the defendant, Mr and Mrs Lamptey were bound by
the terms of the tenancy agreement, the defendant could not
obtain any right against the plaintiffs under that tenancy
agreement for it had been entered into by Mr and Mrs Lamptey
in breach of the mortgage deed.
Now the mere fact that Mr Richardson
continued to collect rent after 23 December 1968, would not,
if it stood alone, have the effect of making the defendant
the tenant of the plaintiffs. The receipt of rent by a receiver
appointed by a mortgagee does not, without more, create a
tenancy by estoppel as against the mortgagor: But the receipt
of rent by the receiver does not stand alone in this case,
as I will presently show.
It is unnecessary to go through the
history of all that occurred after 23 December 1968. Eventually,
in January 1970, the present proceedings were instituted by
the plaintiffs, claiming possession of the premises against
the defendant. There was also a disputed money claim which
we are not concerned with in this appeal. The judge refused
to make an order for possession, holding that the right inference
to draw from all the facts was 'that the plaintiff has accepted
the defendant as tenant and I must reject the plaintiff's
claim for possession'. This was a long and very careful judgement
and the judge based his decision on a number of points. In
spite of the valiant and very skilful effors made by counsel
for the plaintiffs to persuade us to the contrary, I have
come to the conclusion that the decision at which the judge
arrived was completely right.
I found my judgement on one short point.
In my view the plaintiffs so conducted themselves that they
are precluded from denying that they accepted the defendant
as their tenant. The inference which I draw from the facts
is that they did indicate to him that they were accepting
him as the tenant, that he so understood what they told him
and that any ordinary man would, in all the circumstances,
have understood the same thing.
Before I deal with what the plaintiffs'
solicitors wrote and did, I must refer to the principle lucidly
stated by Cross J in Stroud Building Society v Delamount,
he said -
"When a mortgagor has granted a tenancy
which is not binding on the mortgagee [which is the present
case] the latter can, instead of treating the tenant as a
trespasser, consent to treat him as his own tenant or he may
act in such a way as precludes him from saying that he has
not consented to take him as a tenant. Such an acceptance
by the mortgagee of the mortgagor's tenant, whether express
or implied, or operating by way of estoppel, must I think,
amount to a creation of a new tenancy between the parties.
The tenancy between the mortgagor and the tenant is not one
which is merely voidable by the mortgagee if he chooses not
to accept it, but which he can confirm by waiving his right
to avoid it. It is a nullity as against the mortgagee and
so, if the mortgagee is to lose his right to treat the mortgagor's
tenant as a trespasser, it must be because the tenant has
become the mortgagee's tenant under a new tenancy."
Then Cross J said:
"So far as I know there is nothing in
point of law to prevent a mortgagee who has appointed a receiver
of mortgaged premises from creating, by virtue of his legal
estate in the land, the relationship of landlord and tenant
between himself and a tenant of the mortgagor without previously
terminating the receivership."
The vital letter in this case is a letter
of 23 December 1968, written to the defendant by the plaintiffs'
solicitors acting on their behalf. The letter is in these
terms:
"we act for [the plaintiffs] who have
today appointed a receiver of the income, rents and profits
of the above property. The Receiver is Mr R C Richardson of
Messrs C H & J W Willmott, 65 Goldhawk Road, W12. Please take
notice that henceforth you should not pay any sums to your
former landlords, Mr and Mrs Lamptey, but to Mr Richardson
or to whom he shall direct. Further take notice that no credit
will be given for monies paid from now on to Mr and Mrs Lamptey.
Yours faithfully."
Then it is signed by the solicitors.
Now what does this letter mean? Counsel for the plaintiffs
says, quite rightly, that the rest (sometimes described as
'objective') is not, what did the defendant understand by
it? But, what would this letter mean to the ordinary reasonable
man? Counsel for the plaintiffs says that a receiver appointed
under a mortgage deed is the agent of the mortgagor and not
of the mortgagee. I entirely agree. He says that the true
view of this letter is that it is giving notice to the defendant
that the plaintiffs have appointed a receiver under a mortgage
into which Mr and Mrs Lamptey had entered, that it gave the
defendant notice that Mr Richardson was Mr and Mrs Lamptey's
agent to receive and rents, and that in future the rent should
be paid to Mr Richardson as agent for Mr and Mr Lamptey and
not to them.
I am afraid that, persuasively as counsel
for the plaintiffs has put the argument, I am quite unable
to accept it. I do not think that the letter means anything
of the kind. To begin with, it is to be noticed that it does
not say a word about any 'mortgage deed' or 'legal charge'.
There is not a spark of evidence that the defendant had any
idea that the Lampteys had mortgaged their leasehold interest
in the premises. The natural meaning to the ordinary person
would be that Mr Richardson was appointed as the agent of
the plaintiffs, on behalf of whom the letter was written,
to receive the rent due to them in respect of the premises.
It is said: well, that cannot be right: surely that fact that
the word Receiver is used in the letter - particularly with
a large 'R' - ought to put the ordinary man on some sort of
enquiry, even if he is not a lawyer.
But even if one were to accede to that
argument, and I am afraid I do not, the rest of the letter
seems to me to make it abundantly plain that the one thing
that would not be communicated to the mind of the ordinary
man by this letter is that the plaintiffs had appointed Mr
Richardson a receiver to collect rents on behalf of Mr and
Mrs Lamptey as landlords. The passage to which I draw particular
attention is the passage in which the letter says "henceforth
you should not pay any sums to your former landlord, Mr and
Mrs Lamptey". I think that that can only mean, to the ordinary
person, that Mr and Mrs Lamptey were no longer his landlords:
the rent must be paid to Mr Richardson, presumably as agents
for the landlord. If any reasonable man received a letter
such as that written on behalf of the plaintiffs, I think
that he would come to the conclusion, a very sensible conclusion,
that the letter was telling him not only that Mr and Mrs Lamptey
had ceased to be his landlords but that the plaintiffs, on
behalf of whom the letter was written, were his landlords
and that they appointed Mr Richardson to collect the rents
from him on their behalf. Thereafter, without more ado, Mr
Richardson collected the rent from the defendant in accordance
with the terms of that letter. A new rent book was issued
to the defendant describing the landlord as 'R C Richardson
Receiver'. This in the circumstances would convey to the defendant
only that Mr Richardson was the landlord's agent.
In my view a fresh tenancy had indeed
been created between the plaintiffs and the defendant; at
any rate the plaintiffs are precluded from denying that they
did become the defendant's landlords.
On that short ground alone, without
going into the other points canvassed by the judge (I am not
by any means disagreeing with them),. I am satisfied that
his judgement is clearly right. It may be unfortunate from
the point of view of the plaintiffs that the crucial letter
was perhaps written without very much consideration. The position
would have been very different if the letter had stated that
the plaintiffs were the mortgagees and that Mr Richardson
had been appointed receiver under the legal charge created
by the mortgagors, and particularly if it had not referred
to Mr and Mrs Lamptey as the former landlords. Whether it
would have made any difference to the defendant, who I do
not suppose was particularly familiar with the extreme technicality
of the position which arises under S109(s) of the Law of Property
Act 1925. I rather doubt. But that does not matter. As counsel
for the plaintiffs rightly says, the test is not what the
defendant thought about the letter, but what would this letter
convey to the ordinary reasonable man. In my judgment it clearly
meant what I have already indicated; and I am also sure that
that is how it was understood by the defendant. The plaintiffs
solicitors having written that letter and the rent having
thereafter been collected by Mr Richardson, this claim for
possession was hopeless, I would accordingly dismiss the appeal.
FENTON ATKINSON LJ
- I agree. Applying the language of Cross J In Stroud Building
Society v Delamount, to which Salmon LJ has already referred,
I have to say whether, looking at the facts as a whole and
putting myself in the position of a juryman, the plaintiffs
had consented to accept the defendant as tenant, notwithstanding
the receivership, or whether they had not. I have no doubt
whatever in my own mind that the county court judge gave the
right answer to that question, and like Salmon LJ I cannot
see that nay other answer to the question was possible in
face of the letter of 23 December 1968. Counsel for the plaintiffs
has done a gallant best to escape from the difficulties created
by that letter but I think that he has quite failed to do
so, and I agree that this appeal must fail.
KARMINSKI LJ
- I also agree. Applying the test formulated by Cross J in
Stroud Building Society v Delamont, I have endeavoured, as
did the judge below, to try and get a picture as a whole of
the relevant facts in this case. I agree with what has been
said about the vital letter of 23 December 1968. Nothing was
said in the subsequent letters, so far as I have been able
to discover, to vary the inference which must of necessity
be drawn, applying the objective test, by anybody who read
that letter.
After that letter was written there was
a good deal of discussion between the receiver and the defendant
about the amount of the rent and the rates. I have no doubt
that Mr Richardson, when he talked about discussions, referred
to discussions between himself and the plaintiffs. Further,
Mr Richardson as receiver collected the rent as it became
due from the defendant. I have come to the conclusion, in
spite of the interesting and constructive argument of counsel
for the plaintiffs, that the county court judge was clearly
right and that this appeal must be dismissed.
Appeal dismissed.
Solicitors:
W R Bennett, Emanuel & Co (for the plaintiffs);
Swepstone, Walsh & Son (for the defendant).
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