Relief from forfeiture

Recent High Court case offers guidance

In an area of law full of uncertainty the recent High Court case of Ansa Logistics v Towerbeg offers useful and practical guidance on relief from forfeiture.

The case related to a large strip of land in Speke, Liverpool held under a long lease by Ansa Logistics. Towerbeg were the direct landlord of Ansa and refused licence to sub-let on the grounds of an earlier breach of covenant, which was denied.

The breach related to Ansa permitting a third party possession without consent. Ansa applied to the Court arguing that Towerbeg’s refusal to grant the necessary consent was unreasonable. Towerbeg denied unreasonableness and, in addition, made its own claim for possession due to the breach of covenant.

The Honourable Mr Justice Floyd considered some complex issues and ultimately concluded that Ansa was not in breach of any covenant and that Towerbeg had acted unreasonably in withholding consent. The issue of relief from forfeiture, however, was fully considered and the merits were recorded within the decision.

Section 146 Law of Property Act 1925 provides Judges with a broad equitable discretion to grant relief from forfeiture. In this case The Hon. Mr Floyd considered the following factors:

• The nature and gravity of the breach.
• Whether the breach was wilful.
• Whether the breach was concealed.
• Whether the breach wasn’t proposed to be remedied.
• What loss Ansa would suffer if relief was refused.
• Whether Ansa was an unsatisfactory tenant.

Ultimately it was considered that, should there have been a genuine breach of covenant by Ansa, there was no evidence that the breach had harmed Towerbeg’s interests in any way. Furthermore, it was not found that the alleged breach was either wilful or concealed by Ansa, nor were they an unsatisfactory tenant. The proposal to remedy the breach would be affected by the grant of the sub-lease if Towerbeg were not to withhold consent.

Interestingly, when considering the loss to Ansa, if the relief had been refused Ansa would be losing to Towerbeg an asset for which it paid £2.5million. The Judge clearly considered this to be a factor in supporting the application for relief, following the rules established in Scala House District Property Co. Ltd v Forbes [1974] QB 575.

The guidance provides useful clarification on key points to be considered by a Judge when relief from forfeiture is in question. Of particular note is Hon Mr Floyd’s decision to place emphasis on not only the potential loss that Ansa would incur as a tenant should relief be refused, but also the considerable windfall to be gained by Towerbeg in recovering a property for which a significant premium had been paid.