Gibbs v Lakeside Developments Ltd  EWCA Civ 2874
Forfeiture – Long residential lease – Setting aside orders – Relief against forfeiture -Unjust enrichment
Rupert Higgins appeared before the Court of Appeal for a determination of the question: If a possession order was liable to be set aside for non-service of the proceedings, can the tenant recover the proceeds of sale of the property on the basis of unjust enrichment without the possession order first being set aside?
The salient facts are as follows. The appellant was the lessee of a studio flat in Whitechapel pursuant to a 999 year lease. The appellant did not live in the flat which was unoccupied. The landlord knew this and the managing agents used the address of her parents’ house for correspondence. Due to an oversight the appellant stopped paying rent and insurance rent in or around 2007.
The respondent landlord obtained default judgment for outstanding rents in 2009 and a possession order in February 2010. The landlord then re-entered the flat on 28 April 2010. Neither of the proceedings were correctly served however, having been sent to the flat which was not the appellant’s usual or last known residence.
The appellant found out about the proceedings in July 2011. She made an application to set aside the possession order and sought relief from forfeiture in October 2011. In the meantime, the landlord was marketing the property for sale, refusing to give an undertaking not to sell. No interim injunction was sought by the appellant and on 15 December 2011, the landlord granted a new long lease of the flat at a premium to a third party who had no knowledge or notice of the appellant’s claim.
The appellant then amended her application notice “to make the claim one of unjust enrichment and to add a claim for damages for conversion of [the appellant’s] possessions in the Property”. By the time of the trial, the trial judge found that the appellant had abandoned the claim for relief against forfeiture and to set aside the possession order. The court held that as the possession order had not been set aside, the unjust enrichment claim failed. The appellant appealed to HHJ Walden-Smith who dismissed the appeal. Permission for a second appeal was given by Patten LJ.
The landlord relied upon the trite proposition that an order of the court has the force of law, and that a step taken in compliance with it is necessarily lawful. Such a step cannot therefore result in “unjust” enrichment unless the order is set aside.
The appellant argued that this general rule was subject to an exception in a case where an order cannot be set aside by reason of intervening third party interests. In such a case, the appellant argued, it should be sufficient to establish that the order would otherwise have been set aside.
The Court of Appeal’s decision
The Court of Appeal did not determine whether such exception to the general rule exists. Instead the Court rejected the premise of the proposition and held that the possession order could be set aside on terms without interfering with the rights of the new lessee of the flat in this case. The Court of Appeal however refused to exercise its power to set aside the order, holding that it would be wrong to interfere with the lower court’s finding that the appellant had abandoned the claim to set aside the possession order. In doing so, the Court noted that even if they would set aside the possession order, this would not assist the appellant. The court’s reasoning, set out by LJ Lewison, is interesting.
The Court held that as the flat had been unoccupied, the landlord did not need to rely upon the possession order. Forfeiture had been lawfully effected when the landlord re-entered the flat on 28 April 2010. It was therefore irrelevant whether the possession order was set aside when the money judgment for rent arrears, which gave the landlord the right to re-enter, had not been set aside. Further, the County Court’s power to grant relief from forfeiture was limited to 6 months from the date of re-entry pursuant to s 138 of the County Court Act 1984. It followed that as long as the proceedings stayed in the County Court, whether or not the possession order was set aside could have made no difference to the consequences of the landlords’ lawful exercise of their right of forfeiture.
The appeal was dismissed.