Massart v Blight

The premises consist of some flats, apparently eight in number, in Blair Street, Bondi. The lease made between the predecessor in title of the landlords (the now respondents) and the predecessor in title of the present tenant (the now appellant) is dated 11th January 1944 and was for a fixed term of two years and four months commencing from that date. It contained, however, a condition that if the lessor should permit the lessee to continue in occupation of the premises after the expiration of the term, which, in the event, happened, the tenancy should continue as a weekly tenancy only at the fixed rental, to be determined by a month's notice in writing from either party thereto. The lease contained a short form of covenant that the lessee would not assign or sublet without leave, no fine to be taken. This form of covenant operates under par. 16 of Part II. of the fourth schedule to the Conveyancing Act 1919-1943 to introduce into the lease the long form of covenant stated in the second column of that schedule. The long form includes a covenant that the lessee will not assign, transfer or part with the possession of the demised premises unto any person or persons without the consent in writing of the lessor, but that such consent shall not be refused in the case of a proposed respectable and responsible assign, tenant or occupier. The appellant acquired title to the tenancy by an assignment dated 20th July 1949 and went into possession of the premises by entering into actual occupation of one of the flats and into the receipt of the rents of the others, which were held by sub-tenants. Notwithstanding s. 36 of the Landlord and Tenant (Amendment) Act 1948-1949, he paid £1,250 to the assignor for the assignment. On 27th August 1949 the respondents gave to the appellant notice to quit and deliver up the premises on 3rd October 1949. Four grounds were stated in the notice to quit, but two of these were negatived on the facts at the hearing of the complaint for the recovery of possession. Of the other two, one was that prescribed by s. 62 (5) (b) of the Act, namely, "that the lessee has failed to perform or observe some other term or condition of the lease (i.e., other than to pay rent) and the performance or observance of that other term or condition has not been waived or excused by the lessor." An information or complaint against the appellant was made by the respondents for the recovery of possession of the premises but it was dismissed by the magistrate who formed the "court of competent jurisdiction".

The magistrate decided that there was no evidence that the premises were reasonably required by the lessors for occupation by themselves. He also decided that the defendant was occupying one of the eight flats with his wife and child and had no other suitable accommodation available to his family. He found, further, that the landlords had established that the lessee had failed to perform or observe a term of the lease and that the performance or observance of that term or condition had not been waived or excused by the lessors. That is to say, he found in favour of the respondent as to the ground prescribed by s. 62 (5) (b) of the Landlord and Tenant (Amendment) Act 1948-1949. The term or condition which the magistrate found had not been performed or observed was the condition against assignment without consent. Having found the issue raised by that ground in favour of the respondents, the magistrate, as his stated case says, took into consideration the relative hardships which would be caused to the complainants and the defendant by the refusal or making of an order and, acting under s. 70 (1), refused to make an order for the recovery of possession of the premises by the landlords from the tenant. Section 70 (1) provides that: -

On the hearing of any proceedings by a lessor for an order for the recovery of possession of any prescribed premises, the court shall take into consideration, in addition to all other relevant matters -

(a) any hardship which would b caused to the lessee or any other person by the making of the order;

and may, in its discretion, make the order or may, on such conditions (if any) as it thinks fit, refuse to make the order notwithstanding that one or more of the prescribed grounds has been established.

The landlords appealed to the Supreme Court pursuant to s. 74, adopting proceedings by way of case stated for the purpose. Section 74 (1) provides that, except as provided in the section, there should be no appeal in proceedings under that part of the Landlord and Tenant (Amendment) Act 1948-1949 from an order of a court of competent jurisdiction. Sub-section (2) provides, however, that there shall be an appeal, as to questions of law only, to the Supreme Court from any order of the court in proceedings under the Part. The jurisdiction of the Supreme Court was therefore confined to deciding questions of law. The case stated came, in the first instance, before Herron J. His Honour regarded the matter as one of importance because a question which arose was whether, having regard to the amendment in s. 62 (7) (b) and the addition to s. 62 of sub-s. (10) made by Act No. 21 of 1949, s. 5, a landlord could recover possession of premises under s. 62 (5) (b) or (n) from an assignee of a lease in possession when the lease contained a covenant against assigning. His Honour gave an explanation of the problem raised by these provisions and referred the appeal by case stated to the Full Court.

On the hearing of the appeal some difficulty arose concerning the case stated and it was remitted in order to enable the magistrate to find additional facts and this was done. The Full Court upheld the appeal upon the ground that there was no evidence of hardship which enabled the magistrate to act under s. 70 (1) and refuse to make an order for possession. Their Honours took the view that the tenant (the now appellant) had obtained an assignment in breach of covenant and had entered into occupation of the premises under a title which was only derived from such breach. In fact no consent had been given to the assignment by the landlords. Circumstances were relied upon by the tenant (the now appellant) as showing that the assignment was not a breach of covenant. The circumstances set up were that an application for consent to the assignment had been made by the assignor to the landlords (the now respondents) and that they had failed to grant consent although the assignee was a respectable and responsible person. As the long form of covenant, which makes no reference to an unreasonable withholding of consent, requires the landlord to give consent in the case of a respectable and responsible person and, as it was not disputed that the assignee (the appellant) fell within that description, it was said that it was no breach to assign. The authority of Barrow v. Isaacs & Son [1] , and of Lewis & Allenby, (1909) Ltd. v. Pegge [2] was relied upon. The Supreme Court however, negatived this view, chiefly upon the facts. The court then overruled the magistrate on the question of hardship. Their Honours accepted the submission made for the present respondents (the landlords) that hardship springing from a wrong to which the tenant as assignee was a party could not be hardship justifying the magistrate's refusal under s. 70 (1) to make an order for the recovery of possession. Street C.J., who delivered the judgment of the court, said: - "It is clear in the present case that the respondent (i.e., the tenant the now appellant) obtained possession of these premises by paying money to his assignors in order to procure them to commit a breach of their agreement with the appellants (i.e., the landlords the now respondents), and, in order to establish his claim to retain possession of the premises he had to rely upon what the magistrate has found to be a breach of the term of the original lease under which he claims to hold. Under those circumstances, it is not open to the respondent to suggest that the hardship which will be occasioned to him arises from the making of the order requiring him to vacate the premises. In one sense it results from the making of that order, but it really arises from his own self-created necessity based upon his being a party to procuring his assignors to commit a breach of their agreement." [1] .

1. (1891) 1 Q.B. 417. 2. (1914) 1 Ch. 782. 3. (1950) 67 W.N. (N.S.W.), at p. 207.

Adopting this view, it became necessary for the Supreme Court, in order to determine the rights of the parties, to decide whether the ground stated in s. 62 (5) (b) was available against the tenant (now appellant) as an assignee of the lease. Their Honours decided that the ground was available and accordingly allowed the landlords' appeal. The contention made to the contrary was that under s. 62 (1) a notice to terminate the tenancy could not lawfully be given and the right to take proceedings to recover possession of the premises from the lessee did not exist, when the prescribed ground was that stated in sub-s. (5) (b) and an assignee was in possession, unless the assignee so in possession had committed a breach of covenant and that from the nature of the case it was the assignor and not the assignee who committed the breach of a covenant against assignment; the tenor of such a covenant made it impossible for anybody except the assignor to break the covenant. The appeal to this Court is supported on grounds which include the contention that the magistrate's decision as to hardship ought not to have been overruled and the contention that in consequence of the amendments in s. 62 (7) (b) and the addition of sub-s. (10) of s. 62 - amendments made by Act No. 21 of 1949, s. 5 - the respondents cannot recover possession on the ground that the assignment was made without their consent, there being a covenant against assignment. In our opinion the contention of the appellant is right, both upon the question of hardship under s. 70 (1) (a) and also in respect of the inapplicability of the ground contained in s. 62 (5) (b). It would be enough for the purpose of determining the present appeal to confine ourselves to the question of hardship, but, in view of the observations made by Herron J. and of the general importance of the question, we think it right to state our opinion also upon the application of s. 62 (5) (b) to the circumstances of such a case as this.

Dealing first with the question of hardship, the cardinal consideration appears to us to be that the magistrate as a tribunal of fact has found that in all the circumstances there is no other suitable accommodation for the tenant and his wife and child and, having taken into consideration the relative hardships which would be caused to the landlords and the tenant by the refusal or the making of an order, has, in his discretion, refused to make an order. We are prepared to assume, although there is not sufficient evidence to establish it, that when the appellant (the tenant) took the assignment he knew that his assignors had failed to obtain the consent of the landlords (the respondents) to the assignment and that he knew the terms of the covenant. Consistently with that knowledge he may have believed that the assignment was not in breach of the covenant. But that is not an important consideration. It is true that he gave a sum of money for the assignment and that to do so involved an infringement of s. 36 of the Act, but that does not invalidate the transaction: see s. 91. It is not found that he counselled and persuaded the assignor to break his contract and it may well be that he did not. But, be that as it may, the doctrine that a man may not set up his own wrong as a title to rights has no direct application to the matter. The appellant in his character of assignee obtained a valid title to the lease and is in possession under the lease. That is the title which he is setting up. In stating that the circumstances are those of hardship, he is relying on a set of considerations arising from his occupation of the demised premises, his inability to obtain another dwelling place and the general circumstances surrounding his occupation. Doubtless the manner in which he came into occupation should be taken into consideration by the magistrate, but there is no reason to suppose that it was not taken into consideration. It is no more than a circumstance to be weighed with all the other circumstances of the case. There is nothing in the case stated to show that the magistrate misunderstood the position or proceeded upon any erroneous legal principle and the complete discretion which is given to him by s. 70 (1) can only be reviewed on appeal under s. 74 when an error of law has been committed or the exercise of his discretion has so miscarried that his conclusion cannot be supported in point of law. We do not think there is any ground upon which his discretion can be set aside in the present case. It follows that he properly refused to make an order. His refusal to make an order is therefore to be supported independently of the question whether, in other respects, the landlords made out a case for an order for the recovery of possession.

But we do not think that under par. (b) of sub-s. (5) of s. 62 the landlords could make out a case for the recovery of possession. Before the amendment of s. 62 by s. 5 of Act No. 21 of 1949, s. 62 (7) was in the following form: -

Notice to quit on a ground specified in paragraph (n) or paragraph (o) of subsection five of this section -

(b) may be given whether or not the assignment, transfer or sub-lease was in breach of any covenant or condition.

(n) that the lessee has become the lessee of the premises being a dwelling house by virtue of an assignment or transfer which the lessor has not consented to or approved.

It will be seen that as the law then stood a landlord, where his tenant had assigned the lease to an assignee, could take proceedings against the assignee in possession on the ground stated in par. (n) of s. 62 (5). Paragraph (n), by its very terms, acknowledged that the lessee (that is to say the assignee of the lease, who is in possession) had obtained that character in virtue of an assignment or transfer. The assignee is a lessee within the meaning of s. 62 by virtue of the definition of lessee contained in s. 8 (1). By that definition "the lessee", besides including other persons, means the parties to a lease or their respective successors in title.

But, by Act No. 21 of 1949, s. 5 sub-s. (7) (b) was transformed. A new paragraph was substituted for the words which have been quoted, with the result that sub-s. (7) (b) enacted that notice to quit on a ground specified in par. (n) or par. (o) of sub-s. (5) of s. 62 may be given only where the lease contains no covenant, whether absolute or conditional, against assigning transferring or subletting by the lessee. The consequence of this amendment is that par. (n) of sub-s. (5) cannot apply where the lease does contain a covenant against assigning and, accordingly, as the lease in the present case contains such a covenant, it is outside par. (n).

But Act No. 21 of 1949, s. 5, added a new sub-section to s. 62 - sub-s. (10). Sub-section (10) provides that "nothing in sub-section seven, eight or nine of this section shall prejudice the right of a lessor to give notice to quit on the ground specified in paragraph (b) sub-section five of this section". Par. (b), to which reference has already been made, includes as a prescribed ground that the lessee has failed to perform or observe some other term or condition of the lease, there being no waiver. This paragraph was obviously intended to be of general application, but it would appear from the terms of the new sub-s. (10) that the draftsman was of opinion that its operation would include a breach of a covenant not to assign and it is likely that he thought that a case such as the present would be best dealt with by the application to it of ground (b). Unfortunately the draftsman appears to have overlooked the fact that the lessee referred to in par. (b) is the same lessee as is referred to in s. 62 (1). The definition in s. 8 (1) of "lessee" gives a very wide application to that term and persons holding the premises or title to the premises in various capacities may come within that definition. But sub-s. (1) of s. 62 is directed to the person who answers the defined description of "lessee" to whom a notice to quit is given and against whom proceedings to recover possession of the premises are taken. In the case of a lessee who sub-leases, a notice to quit may, according to circumstances, be given to the lessee so sub-leasing, notwithstanding that the sub-lessee is the person in actual possession. But, in the case of an assignor who has gone out of possession, it is the assignee in possession against whom the proceedings are taken, as was done in the present case. He is the person against whom a ground for giving the notice to quit must be made out. When sub-s. (5) enumerates the prescribed grounds and comes to par. (b) it appears reasonably obvious that the lessee who has failed to perform and observe some term or condition is that person against whom the proceedings are taken or the person to whom notice to quit is to be given. In the present case it was the assignor who failed to perform or observe the term or condition when he made the assignment. No doubt at that time he filled the description of lessee, but he is not the lessee against whom the proceedings are taken. An attempt was made to answer this position on the ground that under par. (b) it was enough that any person who at the moment of breach of covenant or condition filled the description of lessee had failed to perform or observe the term or condition. That, we do not think, is the true meaning of the provision. Like many other of the prescribed grounds, it was directed against the occupation or possession of leased premises by lessees who failed in the performance of their obligations. The terms in which par. (n) is expressed show clearly enough that when it was desired to provide a ground depending on a breach by a predecessor in title it was seen that a different form of expression was essential. The very terms in which par. (n) is expressed are enough to confirm the construction which we have placed on par. (b). A probable explanation of sub-s. (10) is that the draftsman believed that if an assignment was made in breach of condition the assignment was void and the assignee took nothing, but that is an error. The breach of condition does not make the assignment nugatory. It merely exposes the lease to forfeiture, a forfeiture which of course would at common law, considered independently of the Landlord and Tenant (Amendment) Act 1948-1949, deprive the assignee of his estate or interest. If we are right in thinking that this is the explanation of sub-s. (10), it affords an explanation of the legislation, but it does not enable us to give a new meaning to sub-par. (b). The result is a very curious one, and one that it may be confidently assumed the legislature did not intend to bring about. For, as the law stands, an assignment of a lease which has not been consented to or approved by the lessor is a ground for giving a notice to quit under s. 62 if there is no covenant against assigning contained in the lease, but is not a ground if there be such a covenant and none of the prescribed grounds extend effectively to such a case. The question is one which may merit the attention of the legislature, but it is not a position which can be rectified by any construction to which, in our opinion, the legislation is reasonably open.

The appeal should be allowed with costs, the order of the Supreme Court discharged and the order of the magistrate restored.