Property litigation weekly update - 29 January 2021

In this week's bulletin we look at recent cases on adjournment of court hearings, waiving the right to forfeit by acceptance of rent and variation of fixed service charge percentages in residential leases. With the usual insights from our colleagues and some positive news.

Adjournment of court hearings - Bilta (UK) Ltd (In Liquidation) v SVS Securities Plc and ors [2021]

Although Courts remain open, many hearings are being heard remotely and will be for some time to come. In Bilta (UK) Ltd (In Liquidation) v SVS Securities Plc and ors [2021] the High Court issued guidance on when it might be appropriate to adjourn a trial where key witnesses were reluctant to attend Court to give live evidence.

The case concerned alleged dishonest assistance, so the evidence and credibility of the witnesses was crucial. Following the introduction of the current lockdown, some of the witnesses became reluctant to attend Court. This prompted one of the Defendants to apply for an adjournment because they wanted the witnesses to give evidence in person, rather than remotely.

Mr Justice Marcus Smith acknowledged that oral evidence given under cross examination was the "gold standard" of evidence, because this enabled an assessment of the witness' credibility. Giving evidence remotely ranked as second best. However, a derogation from the gold standard would not necessarily be improper or unfair. In determining whether to adjourn or conduct a remote hearing, the Judge considered the following principles identified by the Court of Appeal in a 2020 family case, Re A (Children):

  • Whether to conduct a remote hearing was a case management decision and so within the wide discretion of the Court, based on the ordinary principles of fairness and justice;
  • Agreement between the parties may be a powerful factor, but is not necessarily determinative;
  • Factors will vary from case to case but might include:
  1. Whether a final or interim order is sought;
  2. Urgency and the effect of a delay;
  3. Whether the parties are represented;
  4. Will evidence be heard or only legal argument?;
  5. Whether the parties have the ability to engage with and follow the proceedings (which might include access to and familiarity with the necessary technology);
  6. The scope and scale of the hearing;
  7. The experience and confidence of the Court (as well as those appearing before it) in conducting hearings remotely, and;
  8. Whether any (Covid) safe alternatives are available for some or all of the participants to take part in the hearing by physical attendance.
    The Judge refused the application to adjourn and gave directions for various measures to be put in place to address the witnesses' concerns about attending Court, including specific directions as to which Court would be used, how social distancing could be maintained, limited attendance by legal team and court staff, and a detailed timetable to avoid witnesses having to wait.

It was stressed that this was a "baseline…so as to so as to assuage any reasonable person's concerns about COVID-19 infection through attending court in person" and variations to this baseline might be considered. The Judge was clear that a key factor in this case was the need for him and the lead advocates to see the same oral evidence, because perception is key to assessing credibility.

The High Court's decision has been appealed but, subject to the Court of Appeal's assessment of this decision, these principles may be more widely applied.

Rent and waiving the right to forfeit – Mohammed Majeed Faiz (1) Shakeela Faiz (2) and Sassf Ltd (3) v Burnley Borough Council [2021] EWCA Civ 55

The Court of Appeal has ruled on whether demand and acceptance of rent, whilst a landlord has knowledge of a breach, amounted to a waiver of the right to forfeit if the rent accrued due before the landlord had knowledge of the breach.

The landlord, Burnley Borough Council, granted a lease to the tenants which contained a clause that insurance rent was payable within 7 days of demand. However, without the landlord's knowledge the tenants had granted a sub-lease which amounted to a breach of the lease.

The landlord demanded the insurance rent which was payable within 7 days, however after demanding this, the landlord became aware that the tenants had granted the sub-lease. The landlord served a Section 146 notice and sent a second invoice for payment of the insurance rent, calculated only up to the date upon which the Council became aware of the breach. The tenants paid the invoice, following which the landlord purported to forfeit the lease by peaceable re- entry. The tenants argued that by accepting the insurance rent the landlord had waived its right to forfeit the lease.

The Court held that the first demand for the insurance rent could not have amounted to a waiver, as the tenants had failed to prove that the breach of the lease occurred before the insurance rent was due. In addition, the landlord did not know of the breach at the time the insurance rent fell due. The Court said that, "It does not matter whether the rent accrued due before or after the date of the landlord's knowledge; but whether it accrued due before or after the date of the breach of which the landlord (now) has knowledge".

The other issue the Court had to consider was whether the second invoice amounted to a fresh demand for rent as the landlord had knowledge of the breach. The Court held that it did not, as payment was due on the day the invoice was sent and the second invoice must have superseded the first. Therefore, the second invoice did not amount to a fresh demand for rent and there was no waiver of forfeiture.

The case demonstrates that the acceptance and demand for payment, when rent has already been accrued, will not amount to a waiver of the right to forfeit the lease if the landlord does not have knowledge of a breach.

Variation of fixed service charge percentages - Aviva Investors Ground Rent GP Ltd v Williams [2021]

The Court of Appeal has given helpful guidance on how provisions in residential leases entitling the landlord to vary a fixed service charge percentage are to be interpreted.

The issue in this case concerned residential long leases which provided for the leaseholders to pay a service charge based on a specific percentage share "or such part as the landlord may otherwise reasonably determine".

Section 27A(6) of the Landlord and Tenant Act 1985 provides that an agreement is void if it purports to provide for a determination in a particular manner or on particular evidence of any question which may be the subject of an application to the First-tier Tribunal.

This brought into question whether: (a) the landlord was able to charge the lessees the specific percentage shares, but could also propose a change from the fixed percentages, which would then be for the First-tier Tribunal to rule on; or (b) whether the clause meant that only the specified percentages could be charged.

The Upper Tribunal had concluded that the effect of section 27A(6) was that the words "or such part as the landlord may otherwise reasonably determine" were void and should be deleted from the lease, meaning that the landlord was stuck with the fixed percentage of costs.

The Court of Appeal allowed the Landlord's appeal, clarifying that Section 27(A)(6) was only concerned with removing the landlord's role from the decision making process, such that the Tribunal was not deprived of its jurisdiction to substitute a new percentage.

This decision will be welcomed by landlords as it ensures that where leases permit a landlord to substitute new percentages, the landlord retains the flexibility to do so, albeit that decision will need to be taken by the Tribunal rather than the landlord. The Court of Appeal also confirmed that either the landlord or the leaseholder could apply to the Tribunal in respect of whether a different percentage should be applied.

Insight from our colleagues around the firm


Positive news stories

  • Joe Biden's dog, Major, has had his own virtual 'indoguration'! The German shepherd raised around £146,000 for charity and is the first dog from a shelter to live in the White House. The event has been described as the world's largest virtual party for dogs.
  • The Royal Society for the Protection of Birds (RSPB) is hosting a 'Big Garden Birdwatch LIVE', this weekend which will be the UK's largest citizen science project. The event is expected to have a high turnout due to the amount of people who have taken an interest in birdwatching during lockdown. The chief executive of the RSPB noted there has been unprecedented interest in the event this year. 
  • A set of Elizabethan- era maps depicting the Spanish Armada have been saved for the nation to see. The National Museum of the Royal Navy raised £600,000 to purchase the maps which are believed to have been drawn a year after the famous battle in 1588. The maps are due to go on display to educate and inspire future generations.

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