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The application of the doctrine of mitigation of damages to leases

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References

  1. See, e.g., the remarks of Nicholls V.-C. inCrago v.Julian [1992] 1 W.L.R. 372, 377.

  2. See, generally, S. Hicks, “The Contractual Nature of Real Property Leases”, 24Baylor Law Review (1972), 443–544 and J. Effron,The Contractualisation of the Law of Leasehold: Pitfalls and Opportunities, 14Monash Law Review (1988), 83–113.

  3. Progressive Mailing House Property Ltd v.Tabali Property Ltd (1985) 157 C.L.R. 17, 51,per Deane J. (High Court of Australia).

  4. The lease constitutes an executory contract because, even after the lease is granted, the rights and obligations of the parties remain outstanding on both sides throughout its currency:National Carriers Ltd v.Panalpina (Northern) Ltd [1981] A.C. 675, 705,per Lord Simon.

  5. Ibid.,The lease constitutes an executory contract because, even after the lease is granted, the rights and obligations of the parties remain outstanding on both sides throughout its currency:National Carriers Ltd v.Panalpina (Northern) Ltd [1981] A.C. 675, 705,per Lord Simon. at 51,per Deane J.

  6. See, generally, K. Mackie, “Repudiation of Leases”, 62Australian Law Journal (1988), 53–63.

  7. It may be inappropriate to view the lease in contractual terms where the demise is unconditional for a long term with no rent reserved. Here, the lease takes on the character of a conveyance of land and, hence, purely a vehicle of estate ownership: see, e.g.,Knight's Case (1588) 5 Co. Rep. 54b, 55a: 77 E. R. 137, 138.

  8. [1978] A.C. 904 (H.L.).

  9. [1981] A.C. 675 (H.L.).

  10. [1992] 2 E.G.L.R. 87. See also,Dudley Port Warehousing Co Ltd v.Gardner Transport & Distribution Ltd [1995] E.G.C.S. 5 (C.A.), where the doctrine of repudiatory breach was applied to a licence of warehouse space. Contrast,Total Oil Great Britain Ltd v.Thompson Garages (Biggin Hill) Ltd [1972] 1 Q.B. 318 (C.A.), where the doctrine of repudiatory breach was held to have no universal application to leases. The basis of the decision was that (1) a lease differed from other contracts in creating an estate in land and (2) a lease could not be determined by frustration and nor, therefore, by repudiation and acceptance. These grounds no longer represent the law. See further, S. Bright, “Repudiating a Lease-Contract Rules”, [1993]Conveyancer 71–77; C. Harpum, “Leases as Contracts”, [1993]Cambridge Law Journal 212–214 and M. Pawlowski, “Repudiatory Breach in Leases”,Litigation 14/1 (1994), 7–14.

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  11. [1985] 2 E.G.L.R. 79, 84. The relevant passage reads as follows: “The defendants have not in my judgment repudiated the lease and, even if they have, the plaintiffs have not accepted the repudiation but have continued in possession of the flat.”

  12. [1991] 3 W.L.R. 579.

  13. See, further, M. Pawlowski,The Forfeiture of Leases, Sweet & Maxwell Ltd., 1993, 48–51.

  14. K. Gray,Elements of Land Law, Butterworths, 2nd ed, 1993, 764.

  15. Reference smay also be made toKillick v.Roberts [1991] 4 All E.R. 289 (C.A.), where it was recognised that a Rent Act tenancy agreement which one party was induced to enter into by the fraudulent representation of the other party could be rescinded at the innocent party's election. See alsoSolle v.Butcher [1950] 1 K.B. 671 (C.A.), where a subsisting lease of rent-protected premises was rescinded on the ground of common mistake of fact.

  16. (1971) 17 D.L.R. (3d) 710, 721 (Supreme Court of Canada).

  17. C.H. Bailey v.Memorial Enterprises [1974] 1 W.L.R. 728, 732,per Lord Denning M.R. See also,Bradshaw v.Pawley (1980) 253 E.G. 693, 694,per Sir Robert Megarry V-C.

  18. [1992] 2 E.G.L.R. 87, 88. See also,Dudley Port Warehousing Co Ltd v.Gardner Transport & Distribution Ltd [1995] E.G.C.S. 5 (C.A.), where the doctrine of repudiatory breach was applied to a licence of warehouse space. Contrast,Total Oil Great Britain Ltd v.Thompson Garages (Biggin Hill) Ltd [1972] 1 Q.B. 318 (C.A.), where the doctrine of repudiatory breach was held to have no universal application to leases. The basis of the decision was that (1) a lease differed from other contracts in creating an estate in land and (2) a lease could not be determined by frustration and nor, therefore, by repudiation and acceptance. These grounds no longer represent the law. See further, S. Bright, “Repudiating a Lease-Contract Rules”, [1993]Conveyancer 71–77; C. Harpum, “Leases as Contracts”, [1993]Cambridge Law Journal 212–314 and M. Pawlowski, “Repudiatory Breach in Leases”,Litigation 14/1 (1994), 7–14.

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  19. In the United States, it is well recognised that a tenant may terminate the lease when the landlord is in breach of his imiplied warranty of habitability: see, e.g.,Pugh v.Holmes 486 Pa. 272 (1979);Steel v.Latimer 521 P. 2d 304 (1974) andTeller v.McCoy 253 S.E. 2d 114 (1978).

  20. See, e.g.,Smith v.Marrable (1843) 11 M. & W. 5; 152 E.R. 693 (infestation with bugs);Wilson v.Finch Hatton (1877) 2 Ex.D. 336; 46 L.J.Q.B. 489 (defective drain containing stagnant filth);Collins v.Hopkins [1923] 2 K.B. 617 (premises had been occupied by person suffering from pulmonary tuberculosis);McNerny v.Lambeth London Borough Council [1989] 19 E.G. 77 (C.A.) (condensation dampness). If the condition is not fulfilled on the day the tenancy commences, the tenant is entitled to treat the letting as discharged, quit the premises and sue for damages.

  21. [1977] A.C. 239 (H.L.). See also,Duke of Westminster v.Guild [1985] Q.B. 688 (C.A.);Western Electric Ltd v.Welsh Development Agency [1983] Q.B. 796;McAuley v.Bristol City Council [1991] 3 W.L.R. 968;King v.Southern Northamptonshire District Council [1992] 06 E.G. 152 (C.A.). See, generally, C.M. Brand and D. Williams, “Implied Obligations in Business Leases and Licences” (1983) 268 E.G. 1099–1101 In the United States, a more general warranty of habitability is implied into residential tenancies: see, e.g.,Javins v.First National Realty Corporation 428 F. 2d 1071 (1970).

  22. [1990] 1 Q.B. 348 (C.A.).

  23. Hammersmith and Fulham London Borough Council v.Monk [1992] 1 A.C. 478, 483, where it was held that a joint periodic tenancy can be terminated by just one (and not all) of the tenants giving notice to the landlord. See also,Hadjiloucas v.Crean [1988] 1 W.L.R. 1006, 1022,per Mustill L.J.;Prudential Assurance Co Ltd v.London Residuary Body (1992) 63 P. & C.R. 386, 399,per Scott L.J.

  24. See, generally, A.J. Bradbrook, “The Application of the Principle of Mitigation of Damages to Landlord-Tenant Law”, 8Scottish Law Review (1977), 15.

  25. [1992] 1 E.G.L.R. 86 (C.A.). See also,Dudley Port Warehousing Co Ltd v.Gardner Transport & Distribution Ltd [1995] E.G.C.S. 5 (C.A.), where the doctrine of repudiatory breach was applied to a licence of warehouse space. Contrast,Total Oil Great Britain Ltd v.Thompson Garages (Biggin Hill) Ltd [1972] 1 Q.B. 318 (C.A.), where the doctrine of repudiatory breach was held to have no universal application to leases. The basis of the decision was that (1) a lease differed from other contracts in creating an estate in land and (2) a lease could not be determined by frustration and nor, therefore, by repudiation and acceptance. These grounds no longer represent the law. See further. S. Bright, “Repudiating a Lease-Contract Rules”, [1993]Conveyancer 71–77; C. Harpum, “Leases as Contracts”, [1993]Cambridge Law Journal 212–214 and M. Pawlowski, “Repudiatory Breach in Leases”,Litigation 14/1 (1994), 7–14.

  26. The suggestion, inVickers v.Stichtenoth Property (1989) 52 S.A.S.R. 90, that a duty to mitigate applies to a claim for rent, which is a claim in debt, is considered to be “plainly unsound” by W. Woodfall,Landlord and Tenant, Sweet & Maxwell, para. 16.053 n.94, In this case, the assignors successfully contended that dthere ought to be a duty on the landlord towards the assignors to act to mitigate any loss as a consequence of breaches committed by the assignee of the lease. In particular, it was argued that the landlord should have advised the assignors of the assignee's breaches of the tenancy when they first occurred. The assignors claimed that, had they known of the assignee's defaults earlier, they may have been able to negotiatde with them, or proceed against them, or to take some other action. It should be noted that, under the Landlord and Tenant (Covenants) Act 1995, which is targeted to be brought into force on 1st January 1996, neither an assignor nor his guarantor shall be liable for rent, service charges or liquidatded damages under a lease in respect of which an assignee has defaulted unless the landlord has served them with notice within six months of the charge becoming due: s.17.

  27. [1953] 1 Q.B. 234 (C.A.).

  28. Ibid., [1953] 1 Q.B. 234 (C.A.). at 245.

  29. Ibid., [1953], 1 Q.B. 234 (C.A.) at 247. Woodfall,supra n.26, suggests that the decision on this point may have been confined to the facts of that case: para. 17.315.

  30. (1975) 5 A.L.R. 197 (Supreme Court of the Northern Territory).

  31. See, e.g., Gray,supra n.14, K. Gray,Elements of Land Law, Butterworths, 2nd ed, 1993, 764. at 844.

  32. (1988) 20 H.L.R. 332 (C.A.).

  33. (1988) 20 H.L.R. 392 (C.A.)

  34. Ibid., (1988) 20 H.L.R. 392 (C.A.) at 398.

  35. (1989) 51 D.L.R. (4th) 593 (Alberta Court of Appeal).

  36. (1971) 17 D.L.R. (3d) 710 (Supreme Court of Canada). The decision received implicit acceptance by the House of Lords inNational Cariers Ltd v.Panalpina (Northern) Ltd. [1981] A.C. 675, 696,per Lord Wilberforce, and was also applied by the Supreme Court of Victoria inRipka Property Ltd v.Maggiore Bakeries Property Ltd [1984] V.R. 629.

  37. The traditional view is that, once the landlord has resumed possession of the premises, the tenant's obligations under the lease come to an end. Thus, the landlord can recover damages for breaches of covenant committed before the termination of the lease but not thereafter:Walls v.Atcheson (1826) 3 Bing. 462 andOastler v.Henderson (1877) 2 Q.B.D. 575. Moreover, if a landlord forfeits a lease, he cannot sue the tenant for the rent for the unexpired portion of the term:Jones v.Carter (1846) 15 M. & W. 718, 726.

  38. See, e.g.,Associated Deliveries Ltd v.Harrison (1984) 272 E.G. 321 (C.A.), applyingCanas Property Co Ltd v.K.L. Television Services Ltd [1970] 2 Q.B. 433 (C.A.). In these cases, the concept of the forfeiture of the lease is seen as a vesting of the landlord's reversionary interest, which terminates his rights as landlord under the doctrine of merger. See, generally, M. Pawlowski,supra n.13 See, further, M. Pawlowski,The Forfeiture of Leases, Sweet & Maxwell Ltd., 1993, 48–51 at 77–78.

  39. (1985) 57 A.L.R. 609 (High Court of Australia).

  40. The repudiation consistsed of a failure to pay a significant amount of rent. See also,Nai Property Ltd v.Hassoun Nominees Property Ltd [1985–1986] Aust. & N.Z. Conv. Rep. 349 (S.A.S.Ct.), where the repudiatory conduct involved an attempt by the tenant to sublet in violation of the terms of the lease.

  41. (1906) 3. C.L.R. 704 (High Court of Australia).

  42. 732 P. 2d 603 (1987) (Supreme Court of Colorado). See alsoBrown v.Republic Bank First National Midland 766 SW.2d 203 (1988) (Supreme Court of Texas).

  43. Ibid. 732 P. 2d 603 (1987) (Supreme Court of Colorado). See alsoBrown v.Republic Bank First National Midland 766 SW. 2d 203 (1988) (Supreme Court of Texas). at 610.

  44. Supra, n.3.Progressive Mailing House Property Ltd v.Tabali Property Ltd (1985) 157 C.L.R. 17, 51,per Deane J. (High Court of Australia).

  45. See, e.g.,Tangye v.Calmonton Investments Ltd (1989) 51 D.L.R. (4th) 593 (Alberta Court of Appeal).

  46. One notable exception is the House of Lords decision inPrudential Assurance Co Ltd v.London Residuary Body [1992] 2 A.C. 386, where the contractual agreement between the parties was rejected for the traditional rule of property law that the term of a lease must be certain.

  47. [1992] 2 E.G.L.R. 87, 90.

  48. InNai Property Ltd v.Hassoun Nominees Property Ltd [1985–1986] Aust. & N.Z. Conv, Rep. 349 (S.A.S.Ct.), Zelling J. accepted a submission that s.10 of the Landlord and Tenant Act (S.A.) 1936 (providing a duty on the lessor to give notice before re-entry) did not apply because the termination of a lease for repudiation or fundamental breach was not a “re-entry”. The act of the landlord in taking possession was simply renamed to take the landlord's action outside the label for such conduct referred to in the statute. On the other, hand, inGallic Property Ltd v.Cynayne property Ltd (1986) 83 F.L.R. 31 (N.T.S.Ct.), Kearney J. held that acceptance by the landlord of repudiation by the tenant constituted a “forfeiture” and thus s. 192(IV) of the Northern Teritory's Real Property Act applied so as to enable the landlord to use the summary ejectment provisions contained in that section.

  49. See, further, Pawlowski,supra n.10, [1992] 2 E.G.L.R. 87. See also,Dudley Port Warehousing Co Ltd v.Gardner Transport & Distribution Ltd [1995] E.G.C.S. 5 (C.A.), where the doctrine of repudiatory breach was applied to a licence of warehouse space. Contrast,Total Oil Great Britain Ltd v.Thompson Garages (Biggin Hill) Ltd [1972] 1 Q.B. 318 (C.A.), where the doctrine of repudiatory breach was held to have no universal application to leases. The basis of the decision was that (1) a lease differed from other contracts in creating an estate in land and (2) a lease could not be determined by frustration and nor, therefore, by repudiation and acceptance. These grounds no longer represent the law. See further, S. Bright, “Repudiating a Lease-Contract Rules”, [1993]Conveyancer 71–77; C. Harpum, “Leases as Contracts”, [1993]Cambridge Law Journal 212–214 and M. Pawlowski, “Repudiatory Breach in Leases”,Litigation 14/1 (1994), 7–14.

  50. Progressive Mailing House Property Ltd v.Tabali Property Ltd (1985) 57 A.L.R. 609 (High Court of Australia).

  51. When the lease is, however, liable to forfeiture, enforcing the forfeiture will presumably both determine the tenant's interest in the property and constitute the landlord's election to accept the repudiation.

  52. Ibid. When the lease is, however, liable to forfeiture, enforcing the forfeiture will presumably both determine the tenant's interest in the property and constitute the landlord's election to accept the repudiation, at 628.

  53. See Pawlowski,supra n. 10, [1992] 2 E.G.L.R. 87. See also,Dudley Port Warehousing Co Ltd v.Gardner Transport & Distribution Ltd [1995] E.G.C.S. 5 (C.A.), where the doctrine of repudiatory breach was applied to a licence of warehouse space. Contrast,Total Oil Great Britain Ltd v.Thompson Garages (Biggin Hill) Ltd [1972] 1 Q. B. 318 (C.A.), where the doctrine of repudiatory breach was held to have no universal application to leases. The basis of the decision was that (1) a lease differed from other contracts in creating an estate in land and (2) a lease could not be determined by frustration and nor, therefore, by repudiation and acceptance. These grounds no longer represent the law. See further, S. Bright, “Repudiating a Lease-Contract Rules”, [1993]Conveyancer 71–77; C. Harpum, “Leases as Contracts”, [1993]Cambridge Law Journal 212–214 and M. Pawlowski, “Repudiatory Breach in Leases”,Litigation 14/1 (1994), at 12–14.

  54. This, however, was not allowed inHussein on the basis that it was not shown to be consequent on the landlord's breaches of covenant. According to the assistant recorder: “ … they are the consequences of the coming to an end of the letting and I am not satisfied on the evidence that they are any greater than they would have been had the term run its course and the plaintiffs then vacated”:ibid., [1992] 2 E.G.L.R. 87 See also,Dudley Port Warehousing Co Ltd v.Gardner Transport & Distribution Ltd [1995] E.G.C.S. 5 (C.A.), where the doctrine of repudiatory breach was applied to a licence of warehouse space. Contrast,Total Oil Great Britain Ltd v.Thompson Garages (Biggin Hill) Ltd [1972] 1 Q.B. 318 (C.A.), where the doctrine of repudiatory breach was held to have no universal application to leases. The basis of the decision was that (1) a lease differed from other contracts in creating an estate in land and (2) a lease could not be determined by frustration and nor, therefore, by repudiation and acceptance. These grounds no longer represent the law. See further, S. Bright, “Repudiating a Lease-Contract Rules”, [1993]Conveyancer 71–77; C. Harpum, “Leases as Contracts”, [1993]Cambridge Law Journal 212–214 and M. Pawlowski, “Repudiatory Breach in Leases”,Litigation 14/1 (1994), 7–14., at 93.

  55. 1992] 2 E.G.L.R. 87, 93.

  56. If a lease is now a contract, is inducing its breach a tort?: see J. Fleming,The Law of Torts, 6th ed, Sweet and Maxwell, 1983, 651–652. Is the landlord now able to get an injunction or specific performance of the lease against his tenant? Orthodox theory suggests not:Hill v.Barclay (1811) 18 Ves. Jun 56; 34 E.R. 238. In the recent case ofBoustany v.Pigott (1995) 69 P. & C.R. 298 (P.C.), a lease was set aside on the ground that it constituted an “unconscionable” bargain.

  57. See, generally, J. Effron, “The Contractualisation of the Law of Leasehold: Pitfalls and Opportunities”, 14 Monash Law Review (1988), 83, 99–112. The author concludes by saying that “the future of the common law of leasehold is intriguing …the [contractual] tools are there: it is now up to lessors, lessees and their counsel to use them”:ibid. If a lease is now a contract, is inducing its breach a tort?: see J. Fleming,The Law of Torts, 6th ed, Sweet and Maxwell, 1983, 651–652. Is the landlord now able to get an injunction or specific performance of the lease against his tenant? Orthodox theory suggests not:Hill v.Barclay (1811) 18 Ves. Jun 56; 34 E.R. 238. In the recent case ofBoustany v.Pigott (1995) 69 P. & C.R. 298 (P.C.), a lease was set aside on the ground that it constituted an “unconscionable” bargain. at 113.

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  1. School of Law, University of Greenwich, UK

    Mark Pawlowski LL.B. (Hons), BCL (Oxon), ACIArb. (Barrister, Reader in Property Law)

  2. Visiting Lecturer in Land Registration, University College, London, UK

    Mark Pawlowski LL.B. (Hons), BCL (Oxon), ACIArb. (Barrister, Reader in Property Law)

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Pawlowski, M. The application of the doctrine of mitigation of damages to leases. Liverpool Law Rev 17, 173–188 (1995). https://doi.org/10.1007/BF02439522

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