The consideration for the grant of a lease was not a capital sum, but substantial building works. Application was made for its forfeiture.
Held: Dillon LJ assumed that the words ‘if the tenant shall enter into liquidation whether compulsorily or voluntarily’ in a re-entry clause in a lease refer to the making of the winding up order.
Save in relation to non-payment of rent, the power to grant relief from forfeiture to lessees is now exclusively contained in section 146 of the Law of Property Act 1925.
Dillon LJ said in relation to section 9(3) and (4) of the 1972 Act: ‘The question then is whether, even so, it is implicit in section 9 (4), or necessary in order to give effect to section 9 (4), that, after an official notification of an event has become fully effective, all persons must be treated as having constructive notice of that event. Three matters can be urged in support of the argument, viz.: (i) if an event has not been officially notified a company can still rely on it against a person who has actual knowledge of it, and so official notification is in a sense treated as the counterpart of actual knowledge, in enabling the company to rely on the event; (ii) during the period of grace before the official notification has become fully effective, the person concerned can prevent the company relying on the event by showing he was unavoidably prevented from knowing of the event, absence of the event being treated in the period of grace as countervailing the official notification: and (iii) it is difficult to think of the circumstances in which a company will wish to rely as against a third party on the happening of the event of its own liquidation and in which the real issue will not be the third party’s knowledge of that event rather than the happening of the event itself.
This question whether official notification of a relevant event constitutes notice of that event to all the world, is an important question. If indeed the notification does constitute notice at all, the very many landlords who are not in the habit of studying the London Gazette regularly of effecting regular searches of the files of their company tenants in the Companies registry will be at risk of inadvertently waiving the forfeiture of leases by accepting rent after the company tenants went into liquidation.
The deputy judge, after considering the wording of section 9(4) and views expressed in Palmer’s Company Law 23rd ed., vol. 1, pp. 184, 185 – 186, concluded that subsection (4) did not impute knowledge to anyone. It was essentially negative in its impact. It provided that a company cannot rely upon a relevant event if it is not in the Gazette but it did not make the positive counter proposition that a company can rely upon that event – sc. it can rely upon everyone having notice of that event – merely because it is in the Gazette. I agree with the deputy judge’s analysis of the subsection and with his conclusion.
I would add two further comments. In the first place, I do not think that the link, such that it is, in section 9(4), between official notification of a relevant event, and actual knowledge of the event if it has not been officially notified, requires that official notification should be treated as importing notice of the event to everyone. The object of the legislation is that persons dealing with a company should be officially given an opportunity to finding out important information concerning the company vis-a-vis those who have actual knowledge of the relevant event. Hence the qualification of the restriction imposed by the subsection of the company. It is not necessary to treat official notification as the equivalent of actual knowledge in all circumstances.
In the second place, among the events, other than liquidation and the appointment of a liquidator, listed in section 9(4) as events on which a company cannot rely in the absence of official notification are making of any alteration in the memorandum of association of the company, including, of course, its object clause, and the making of any change among the company’s directors. But it is plain to my mind from section (9)1 that a person dealing in good faith with a company is not to be treated as having constructive notice (as under the previous ultra vires doctrine of English law) of the terms of the company’s objects clause, whether in its original form or as from time to time altered, and is not to be treated as having constructive notice of the composition from time to time of the Old Aachener Re board of directors of the company. The tenor of the section is thus against imputing constructive notice of the relevant events to persons dealing with a company, while ensuring that they have an opportunity to find information about those events.’
Judges:
Dillon LJ
Citations:
[1985] Ch 151
Statutes:
European Communities Act 1972 9(3) 9(4), Law of Property Act 1925 146
Jurisdiction:
England and Wales
Cited by:
Cited – Cavendish Square Holding Bv v Talal El Makdessi; ParkingEye Ltd v Beavis SC 4-Nov-2015
The court reconsidered the law relating to penalty clauses in contracts. The first appeal, Cavendish Square Holding BV v Talal El Makdessi, raised the issue in relation to two clauses in a substantial commercial contract. The second appeal, . .
Lists of cited by and citing cases may be incomplete.
Landlord and Tenant, European
Updated: 26 November 2022; Ref: scu.592685
