Banks v Arch

• Jurisdiction: Cayman Islands
• Judge: (Sanderson, Ag. J.)
• Judgment Date: 07 July 2005
• Court: Grand Court (Cayman Islands)
• Date: 07 July 2005

Grand Court

(Sanderson, Ag. J.)

BANKS

and

R. ARCH and M. ARCH

A. Akiwumi for the plaintiff;

P.A.K. Broadhurst for the defendants.

Cases cited:

(1) Dalton v. Pickard, [1926] 2 K.B. 545; [1926] All E.R. Rep. 371, dicta of Vaughan Williams, L.J. applied.

(2) Morris v. Tarrant, [1971] 2 Q.B. 143; [1971] 2 All E.R. 920, referred to.

(3) Richmond v. Savill, [1926] 2 K.B. 530; [1926] All E.R. Rep. 362, applied.

Legislation construed:

Landlord and Tenants Law (1998 Revision) (Laws of the Cayman Islands, 1963, cap. 80, revised 1998), s.7: The relevant terms of this section are set out at para. 25.

s.9: The relevant terms of this section are set out at para. 25.

Landlord and Tenant-determination of lease-surrender of possession-by returning keys and leaving premises, tenant surrenders lease-surrender not under duress if adequate alternatives available to remain in possession long enough to obtain legal advice

Landlord and Tenant-distress-levy of distress-to levy distress for arrears of rent under Landlord and Tenants Law (1998 Revision), s.7, lease need not be by deed-s.7 not restricted by s.9-landlord permitted to rely on other evidence of agreement when bringing action for use and occupation of premises

Landlord and Tenant-distress-powers and duties of landlord-no obligation to sell distrained chattels-can be held but not given away or sold for less than best price, usually by auction-irregularity of distress gives rise to damages-distress not to be excessive in relation to size of debt plus costs of distress-if distress abandoned chattels revert to tenant

The plaintiff tenant brought an action against the defendants claiming wrongful forfeiture of a lease and illegal, irregular or excessive distraint of goods.

The plaintiff made an oral agreement with the defendants to lease a restaurant allegedly for 10 years. Due to the failure of the business, the plaintiff was unable to make any rental payments and fell into arrears of $21,000. He advertised the ‘entire restaurant fixtures, fittings and equipment for quick sale’ but the following day the defendants distrained upon the chattels in the restaurant. The levy of distress stated that the plaintiff would be allowed to stay on the premises but he would be required to sign an acknowledgement that he would not remove any

chattels. If he would not sign this acknowledgement he was told that a security guard would be hired to ensure that no chattels were removed. He was not told to vacate the premises or hand over his keys. The plaintiff refused to sign the acknowledgement and instead handed over his keys, claiming that he was doing so under duress. He then brought an action on the lease.

The plaintiff submitted that (a) the defendants had wrongfully forfeited the lease; (b) having forfeited the lease, they had no right to distrain upon the goods; (c) alternatively, the defendants were estopped from denying the 10-year lease and committed an anticipatory breach of it; (d) alternatively, if the defendants had any legal right to distrain, they failed to comply with the relevant provisions of the Landlord and Tenants Law (1998 Revision), s.9-as the landlord did not have a written lease he could not levy distress without a court order and the distraint was therefore illegal; (e) alternatively, if the defendants did have a legal right to distrain then it was conducted irregularly, as they did not take an inventory immediately (contrary to s.21 of the Landlord and Tenants Law) or within five days (as was stated in the levy of distress) and when done the inventory was incomplete; some chattels were sold below their best achievable price, some were given away and some were lost; (f) the distress levied was excessive compared with the size of the debt and the plaintiff suffered loss as a result; and (g) alternatively, if the plaintiff were found to have surrendered the lease, he did so under duress.

The defendants submitted that (a) the plaintiff surrendered the lease; (b) they were entitled, under the Landlord and Tenants Law (1998 Revision), to distrain on the goods and the distraint was not irregular or excessive; (c) they were entitled to the legal fees incurred in connection with the distress; and (d) they were due one month”s rent, in lieu of the one month”s notice of termination which had not been given.

Held, ordering payment to the plaintiff of the excess of the value of the chattels distrained upon over the arrears of rent, distraint and other costs owing to the defendants:

(1) By returning the keys to the defendants and leaving the premises, after refusing to sign an acknowledgement in the levy of distress not to remove any chattels, the plaintiff surrendered his lease. He was not acting under duress as there were adequate alternative courses of action open to him while he obtained legal advice. He knew, however, that he was going to surrender a few days later due to the failure of his business and lack of finances and therefore surrendered the lease voluntarily by handing over the keys when the distress was levied, allowing the landlord to sell the chattels (para. 4; paras. 15–16).

(2) It was not a precondition of the levy of distress for arrears of rent, as provided for in s.7 of the Landlord and Tenants Law (1998 Revision) which was not restricted by s.9 of that Law, that the lease be by deed. Section 9 permitted the landlord to rely upon evidence when the agreement was not by deed and the action was brought for use and

occupation of the premises. The defendants exercised their right of distraint as they were entitled to do, following which they accepted the plaintiff”s surrender of the lease (paras. 23–24; paras. 26–27).

(3) The defendants did not have to sell the chattels distrained, but could not simply abandon the distress (in which case the chattels would revert to the tenant), give away or lose the chattels or sell them for less than the best price that could be obtained for them. As they did not keep them, or hold an auction or otherwise sell them for the best price, they would be liable for the loss resulting from the irregularity of the distress. It was not, however, excessive, given the estimated value of the chattels (the best evidence of actual value being what a chattel could actually sell for on the open market), the costs of distress and size of the debt owed (paras. 29–30; para. 38; para. 42).

(4) The defendants” legal fees in relation to the distress should not be included in the costs of distress. Expenses which could be, but were not, claimed as ‘costs of distress’ included, inter alia, auction or brokerage fees, storage fees and transportation charges (para. 45).

(5) The defendants were not entitled to loss of rent in lieu of one month”s notice of termination after the surrender had occurred and been accepted, as the surrender operated to extinguish all future obligations, including the plaintiff”s liability for future rent (paras. 46–47; para. 50).

1 SANDERSON, Ag. J.: The plaintiff alleges that he entered into an oral lease with the defendants to lease a restaurant on the third floor of the Landmark Building on Harbour Drive in George Town, for a period of 10 years commencing July 13th, 1996. The alleged terms were, in part:

(i) the premises would be rent free until September 30th, 1996;

(ii) for the three months from October 1st, 1996 to December 31st, 1996 the plaintiff would pay rent of $3,000 per month; and

(iii) from January 1st, 1997 the plaintiff would pay rent of $5,000 per month.

2 The plaintiff was unable to make any of those rental payments. By March 20th, 1997 he was $21,000 in arrears. On March 26th, 1997 he advertised in the Caymanian Compass stating that ‘entire restaurant fixtures, fittings and equipment for quick sale,’ and that ‘everything must go quickly.’ On March 27th, 1997 the defendants distrained on the chattels and goods located in the restaurant. The plaintiff now sues claiming:

(i) the defendants wrongfully forfeited the 10-year lease;

(ii) the defendants, having forfeited the lease, had no right to distrain on the goods;

(iii) alternatively, the defendants are estopped from denying the 10-year lease;

(iv) alternatively, the defendants...