Factual and Procedural Background
The appeal arises from a decision of the First-tier Tribunal (Property Chamber) ("FTT") concerning an application by Company B, the landlord, against the Appellant, the tenant under a shared ownership lease of a residential property located in The City. The lease contains an absolute covenant prohibiting subletting. The tenant had sublet the property without permission, contrary to the lease terms, and the landlord sought a determination under section 168 of the Commonhold and Leasehold Reform Act 2002 that breaches of covenant had occurred as a prelude to forfeiture proceedings.
The tenant applied to strike out the landlord's application on the grounds that the proceedings were an abuse of process due to waiver of the right to forfeit by the landlord's acceptance of rent with knowledge of the breach. The FTT refused the strike-out application and determined that the tenant had breached the covenant by unauthorised subletting. The tenant appealed against the refusal to strike out the proceedings.
Legal Issues Presented
- Whether the First-tier Tribunal was correct to refuse to strike out the landlord's application as an abuse of process on the basis that the landlord had waived the right to forfeit by accepting rent with knowledge of the tenant's subletting breach.
- Whether the First-tier Tribunal had jurisdiction to consider the issue of waiver of forfeiture in the context of an application under section 168 of the Commonhold and Leasehold Reform Act 2002.
Arguments of the Parties
Appellant's Arguments
- The proceedings were an abuse of process because the landlord's right to forfeit the lease had been waived by acceptance of rent with knowledge of the breach.
- The sole purpose of the section 168 application was to obtain a determination of breach as a precursor to forfeiture, which was barred by waiver.
- The First-tier Tribunal erred in refusing to strike out the proceedings and in considering the availability of alternative remedies as justification for refusing strike-out.
- The Tribunal was wrong to consider it lacked jurisdiction to determine the issue of waiver as part of the strike-out application.
- It was strongly arguable that waiver of the breach had occurred and the proceedings should therefore have been struck out.
Respondent's Arguments
- The landlord did not have sufficient knowledge of the breaches to have waived the right to forfeit for all breaches alleged.
- The acceptance of rent after 9 August 2018 waived the right to forfeit only for breaches known at that time, but not for subsequent breaches.
- The First-tier Tribunal correctly refused to strike out the proceedings as the application was not an abuse of process.
- The availability of alternative remedies such as injunctions or damages was relevant and justified refusing to strike out.
- The Tribunal was correct to treat the issue of waiver as not within its jurisdiction in the context of the section 168 determination.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Hunter v Chief Constable of West Midlands Police [1982] AC 529 |
Definition and scope of abuse of process as inherent court power to prevent unfairness or disrepute to justice. |
Used to explain the nature of abuse of process in the context of striking out proceedings. |
| Attorney General v Barker [2000] 1 FLR 759 |
Working definition of abuse of process as misuse of court procedure for an improper purpose. |
Supported the principle that striking out for abuse requires a significant departure from proper use of process. |
| Summers v Fairclough Homes Limited [2012] UKSC 26 |
Guidance on the careful and proportionate exercise of striking out powers for abuse of process. |
Emphasized the need for scrupulous examination before striking out a claim as abuse of process. |
| Cable v Liverpool Victoria Insurance Co Ltd [2020] EWCA Civ 1015 |
Two-stage test for abuse of process strike-out: (1) conduct is abuse, (2) discretion to strike out. |
Applied to confirm the approach to strike-out applications and the role of proportionality. |
| Faiz v Burnley Borough Council [2021] EWCA Civ 55 |
Principles of waiver of forfeiture: landlord's election to forfeit or affirm lease, acceptance of rent as waiver. |
Explained the legal principles of waiver relevant to the landlord's acceptance of rent with knowledge of breach. |
| Swanston Grange (Luton) Management Ltd v Langley-Essen [2008] L & TR 20 |
FTT's jurisdiction to determine whether a covenant has been waived as a preliminary to breach determination. |
Distinguished between waiver of covenant and waiver of right to forfeit; relevant to Tribunal's jurisdiction. |
| Barrett v Robinson [2014] UKUT 322 (LC) |
FTT's jurisdiction to determine waiver of right to forfeit in relation to costs recovery. |
Confirmed circumstances when FTT may consider waiver issues as necessary to decide related questions. |
| Stemp v Ladbroke Gardens Management Ltd [2018] UKUT 375 (LC) |
FTT's jurisdiction to decide waiver of right to forfeit in the context of administration charges. |
Clarified the scope of FTT jurisdiction in waiver questions linked to forfeiture-related claims. |
| Crestfort v Tesco [2005] L & TR 20 |
Availability of alternative remedies such as injunctions and damages for breach of covenant. |
Referenced to illustrate potential remedies aside from forfeiture in breach of covenant cases. |
| Triplerose Ltd v Patel [2018] UKUT 374 (LC) |
FTT's limited jurisdiction to determine breach but not to decide waiver of breach for forfeiture purposes. |
Reinforced that waiver is generally a matter for the County Court, not the FTT, in section 168 proceedings. |
Court's Reasoning and Analysis
The court began by outlining the statutory framework under section 168 of the Commonhold and Leasehold Reform Act 2002, which restricts landlords from serving forfeiture notices unless a breach has been admitted or finally determined. The court explained the division of jurisdiction between the FTT, which determines breaches, and the County Court, which handles forfeiture proceedings.
The appellant contended that the FTT should have struck out the application as an abuse of process on the basis of waiver by acceptance of rent with knowledge of subletting. The court acknowledged the legal principles of waiver, notably that acceptance of rent after knowledge of breach can amount to a waiver of the right to forfeit for that breach, but distinguished waiver of forfeiture from waiver of the covenant itself.
The court considered the FTT's reasons for refusing strike out: first, that the application was not futile because a determination of breach could support alternative remedies beyond forfeiture, such as injunctions or damages; second, that the FTT did not have jurisdiction to decide the waiver issue as part of the section 168 determination. The court found the FTT's consideration of alternative remedies relevant and appropriate to the abuse of process analysis.
Regarding jurisdiction, the court held that although the FTT could in principle consider waiver issues in the context of procedural applications like strike out, it was not strictly a jurisdictional question. However, even if the FTT erred in this regard, the exercise of its discretion to refuse strike out was correct because the facts were not clear, and the waiver defence was not indisputably established.
The court emphasized that the factual matrix was incomplete, with limited evidence about the breaches and the landlord's knowledge, and that it was premature to conclude that the proceedings were abusive. The court also endorsed the FTT's case management approach of hearing the substantive application and strike-out application together to avoid unnecessary delay and duplication of evidence.
Holding and Implications
The appeal is DISMISSED.
The court upheld the FTT's refusal to strike out the landlord's application for a determination of breach under section 168. The decision confirms that the FTT may properly refuse strike out applications on abuse of process grounds where the factual and legal issues are not clear-cut, and that the availability of alternative remedies beyond forfeiture is a relevant consideration. Furthermore, while the FTT may consider waiver issues in some procedural contexts, the determination of waiver as a defence to forfeiture remains primarily within the jurisdiction of the County Court.
The direct effect is that the landlord may proceed to serve notice under section 146 and, if desired, commence forfeiture proceedings, where the tenant may raise waiver as a defence. No new precedent is established beyond the application of existing principles to the facts of this case.