Court of Appeal allows second appeal in long-running forfeiture dispute

Mark O’Grady acted for the successful appellant in proceedings where a landlord sought to forfeit a 999-year residential lease, despite the parties’ having entered into a binding settlement agreement, which was negotiated by their respective solicitors.  The question on this second appeal was whether the landlord was entitled to take proceedings seeking forfeiture, or whether it was precluded by the terms of the settlement agreement from doing so.

The Court of Appeal handed down its unanimous judgment on 30 June 2025 in Rojer White v 29 Buckland Crescent Management Company Limited [2025] EWCA Civ 814.  Giving the lead judgment (with whom Nicola Davies LJ and Mr Justice Cobb agreed), Lewison LJ allowed the appeal against the decision of Richards J in the High Court (before whom the landlord had initially won on its first appeal) and restored the decision of the first instance trial judge, His Honour Judge Dight CBE. Mark represented Mr White at the original trial, through to the Court of Appeal.

Background

Mr White was the long leaseholder of a flat on the top floor of 29 Buckland Crescent; a Victorian house which had been divided into four flats in around 1980.   29 Buckland Crescent Management Company Limited (“the company”) was owned by the four long leaseholders in the block, but control of the company lay with Mr & Mrs Stevens, who were the owners of the basement and ground floor flats, comprised two of the three directors of the company, and were also the company’s majority shareholders.

Mr White’s lease had a repairing covenant in standard form, requiring him to keep his flat in repair. During 2020 and 2021, the leaseholder of the flat below Mr White experienced leaks from the ceiling into her property. It was eventually determined that Mr White’s bathroom was the source of the leaks.  The company brought proceedings in the FTT alleging, inter-alia, disrepair and seeking determinations in respect of disputed service charge arrears.  The proceedings were settled the day prior to the final FTT hearing, by a settlement agreement dated 5 December 2021 (“the settlement agreement”).

Terms of the settlement agreement

Recital B to the settlement agreement was in the following terms:

“[The company] is the holder of an insurance policy with Allianz for the Building (The Insurance Policy). [Mr White] has made a claim against the Insurance Policy in respect of the repairs required to the bathroom of the Property (The Works).”

There was no further detail in the settlement agreement as to what “the Works” were to comprise.  As HHJ Dight held at first instance:

“[76]… there are indications that the expression “the works” encompassed the work necessary to put the bathroom into repair, as well as the refurbishment. At the very least, it seems to me that the use of the expression “the works” goes beyond what was necessary to fix the leak and potentially beyond what was necessary to put the bathroom into the state contemplated by the covenant in the lease.”

The finding of the trial judge, that “the Works” went beyond mere compliance with the terms of the lease, was not appealed.

Recital C recorded that:

“The parties have settled their differences and have agreed terms for the full and final settlement of the Proceedings and wish to record those terms of settlement, on a binding basis, in this agreement.”

Clause 4 stated:

“[Mr White] admits the breach of Clause 3(1) of the Lease as set out in [the company’s] Application under Section 168(4) Commonhold and Leasehold Reform Act 2002 dated 24th May 2021.”

Clause 5.1 required Mr White to pay the company £75,000 in two instalments; and those sums were paid on time.  Lewison LJ noted at paragraph 28 that the £75,000 sum was far in excess of the sum that was sought by the company in the FTT proceedings themselves.

By clause 5.3, Mr White had to complete “the Works” by 28 January 2022.  In breach of that term, the Works were completed, but late, by around the end of May 2022.

Clauses 6 and 7 were at the heart of the dispute on appeal, and are in the following terms:

“6.  Release

This agreement is in full and final settlement of, and each party hereby releases and forever discharges, all and/or any actions, claims, rights, demands and set-offs, whether in this jurisdiction or any other, whether or not presently known to the parties or to the law, and whether in law or equity, that it, its Related Parties or any of them ever had, may have or hereafter can, shall or may have against the other party or any of its Related Parties arising out of or connected with the Proceedings.

7. Agreement not to sue

7.1  Each party agrees on behalf of itself and on behalf of its Related Parties not to sue, commence, voluntarily aid in any way, prosecute or cause to be commenced or prosecuted against the other party or its Related Parties any action, suit or other proceeding concerning the Proceedings, in this jurisdiction or any other.

7.2  Clause 6 and Clause 7.1 shall not apply to any claims in respect of any breach of this agreement.”

Under clause 10.2, in the event of any breach “of this agreement” by Mr White, the company would be entitled to recover its costs of enforcement on a full indemnity basis.

The dispute

On 9 March 2022, the company served a section 146 notice, citing the disrepair to Mr White’s bathroom.  Then, on around 26 April 2022, the company issued proceedings seeking forfeiture of Mr White’s lease, based on the disrepair to his bathroom.  Mr White’s defence was that the claim was precluded, by operation of clause 6 (the general release) and 7.1 (the agreement not to sue).

The company’s case was that the forfeiture proceedings did constitute a claim “in respect of a breach of the settlement agreement” and therefore fell within the meaning of clause 7.2.  As it pleaded at paragraph 8 of its Reply:

“… Clause 7.2 of the Settlement Agreement expressly provided that the release in clause 6 and the agreement not to sue in clause 7.1 “shall not apply to any claims in respect of any breach of this agreement”.  This claim is a claim in respect of a breach of the Settlement Agreement, being the breach by the Defendant of his obligation to complete the Works by 28th January 2022 in accordance with clause 5.3 of the Settlement Agreement.”

(emphasis added)

Lewison LJ placed importance on recital C to the settlement agreement, which made clear that the parties had settled their differences: “[39]… That, to my mind, demonstrates an intention to draw a line under the matters that had led to the applications to the FTT and to enter into a new arrangement for the future.”  He also noted the wide terms of the general release, which even released claims that were “unknown to the law”.

The core reasoning of the court on the correct interpretation of clause 7.2 (which the court termed “the carve out”) can be found at paragraphs 42 and 50.  Per Lewison LJ:

“[42] The carve out, by contrast, is much more limited in scope. It is limited to “claims in respect of any breach of this agreement”. It did not extend to breaches of any other agreement (including breaches of the lease). Although the Settlement Agreement contained an admission by Mr White that he was in breach of clause 3(1) of the lease, that did not amount to any kind of obligation in the Settlement Agreement that could be breached. The relevant obligation in the Settlement Agreement was that in clause 5.3; namely the agreement to remedy the breach of clause 3 (1) by carrying out the Works by 28 January 2022. Mr O’Grady therefore argued that the carve out applied only to breaches of the Settlement Agreement itself, and did not extend to breaches of the lease based on the same underlying facts.”

…

[50] The carve out referred to claims in respect of breach of the Settlement Agreement; not to breach of obligations contained in the lease. The forfeiture clause in clause 5 of the lease, however, entitles the landlord to forfeit if there is a breach of “any breach of any covenant or agreement on the part of the Lessee herein contained.” In other words, the right to forfeit is confined to breaches of covenant contained in the lease itself. It does not extend to breaches of obligations contained in different agreements, such as the Settlement Agreement.”

The company argued that the appellant’s interpretation of clause 7.2 should be rejected, as it would mean that the clause was redundant, since it would mean nothing more than the parties were at liberty to sue on the agreement if there was a breach of any of its terms.  The Court of Appeal rejected that contention: “[46]…The argument from redundancy, particularly in a poorly drafted contract, rarely carries much weight.”

The company also contended that the only reason for the inclusion of the admission of breach at clause 4 of the settlement agreement, was because it was intended by the parties that the company would retain a right to forfeit, if the bathroom was not repaired by the deadline.  The Court of Appeal rejected that contention, and accepted the appellant’s submissions that such an argument was contrary to the Court of Appeal’s own decision in Eastpoint Block A RTM Co Ltd v Otubaga [2023] EWCA Civ 879, [2023] 1 WLR 3896, in which Lewison LJ gave the leading judgment, and with whom Andrews LJ and King LJ agreed.

Eastpoint cited with approval the dicta of the Deputy President of the Upper Tribunal (Martin Rodger QC) in the case of Bedford v Paragon Asra Housing Ltd [2021] UKUT 266 (LC), [2022] L & TR 7, that a landlord might seek either a determination (or an admission) of breach  under s.168 of the Commonhold the Leasehold Reform Act 2002 for various reasons, not solely to pursue a claim for forfeiture.

Finally, the court addressed a further matter, which was not argued by either side.  It held that an important part of the legal background at the time the settlement agreement was entered into was the existence of the Leasehold Property (Repairs) Act 1938 (“the 1938 Act”).  Under the 1938 Act, if a landlord wishes to forfeit based on breach of a repairing covenant then, provided a leaseholder serves a notice under the 1938 Act in response to the s.146 notice, a landlord must first obtain leave of the court before it can issue proceedings.  Per Lewison LJ at paragraph 56:

“[56] In addition, even if the landlord is entitled to serve a section 146 notice, where the Leasehold Property (Repairs) Act 1938 applies the remedy of forfeiture may still not be available. At the date when the Settlement Agreement was reached, the company could have had no real confidence that it would, in due course, be entitled to forfeit, because Mr White could have been expected to claim the benefit of the 1938 Act. On the contrary, having regard to the legal background against which the Settlement Agreement was made, the reasonable reader of that agreement would naturally assume that if a section 146 notice were served, the lessee would claim the benefit of the 1938 Act, and that the landlord would have considerable difficulty in obtaining leave to forfeit a long and valuable lease. Thus, contrary to what the judge said at [55], the parties could not have agreed that if Mr White did not comply with his obligations under the Settlement Agreement, and if the breach of clause 3(1) therefore persisted, the company could forfeit the lease. That would have depended on whether Mr White claimed the benefit of the 1938 Act and, if he did, whether the court would have granted leave to bring proceedings. The fact that he, unaccountably, did not must have come as an unexpected windfall for the landlord.

[57] As Mr Bromilow candidly accepted, actually forfeiting a valuable long lease of a flat is virtually impossible.”

In conclusion, Lewison LJ held:

“[60]  In my judgment, the ordinary meaning of the Settlement Agreement, read in the context of the lease and the legal background, did not permit the company to forfeit for breach of clause 5.3. It follows, therefore, the company was not entitled to forfeit for breach of the obligation in clause 5.3 of the Settlement Agreement, because that was not an obligation contained in the lease. Nor was it entitled to forfeit for breach of clause 3 (1) of the lease, because that was not an obligation contained in the Settlement Agreement.

[61]  The ordinary meaning of the words used, interpreted against the background of the lease, is reinforced in my view by a consideration of why an application under section 168 might be made.

Costs

The Court of Appeal ordered that the entire costs of the proceedings from trial onwards be paid by the company on a full indemnity basis.

Conclusion

A point often repeated by the company landlord in this case was the eleventh-hour nature of the settlement agreement.  This case a salutary lesson for those involved in drafting settlement agreements to take extra care to make sure that, whatever point in time settlement is reached, the terms of such settlement must be clear and unambiguous.  In particular, the preservation of any rights that are intended to survive a general release must be clearly spelled out, or risk being ineffective.

A copy of the Court of Appeal’s decision can be found here:

White v 29 Buckland Crescent Management Company Ltd [2025] EWCA Civ 814 (30 June 2025)