Cayman Arms (1982) Ltd v English Shoppe Ltd

• Jurisdiction: Cayman Islands
• Judge: (Harre, J.)
• Judgment Date: 21 May 1991
• Court: Grand Court (Cayman Islands)
• Date: 21 May 1991

Grand Court

(Harre, J.)

CAYMAN ARMS (1982) LIMITED

and

ENGLISH SHOPPE LIMITED

P. Lamontagne, Q.C. and A. McLaughlin for the plaintiff;

E. Grant and O.L. Panton for the defendant.

Cases cited:

(1) Ambler v. WoodbridgeENR(1829), 9 B. & C. 376; 109 E.R. 140, applied.

(2) Baker v. JonesENR(1850), 5 Ex. 499; 155 E.R. 218, applied.

(3) Bank of Nova Scotia v. Hellenic Mutual War Risks Assn. (Bermuda) Ltd., [1990] 1 Q.B. 818; [1989] 3 All E.R. 628, followed.

(4) Carl-Zeiss-Stiftung v. Rayner & Keeler Ltd. (No. 2), [1967] 1 A.C. 853; [1966] 2 All E.R. 536, dicta of Lord Upjohn applied.

(5) Central Estates (Belgravia) Ltd. v. Woolgar (No. 2), [1972] 1 Q.B. 48; [1971] 3 All E.R. 651, dicta of Lord Denning, M.R. applied.

(6) Cricklewood Property & Inv. Trust Ltd. v. Leighton”s Inv. Trust Ltd., [1945] A.C. 221;.[1942] 2 All E.R. 580, dictum of Viscount Simon, L.C. applied.

(7) Greenwich London Borough Council v. Discreet Selling Estates Ltd.(1991), 81 P. & C.R. 405, dicta of Staughton and Neill, L.JJ. applied.

(8) Henderson v. HendersonENR(1842), 3 Hare 100; 67 E.R. 313; [1843–60] All E.R. Rep. 378, dicta of Wigram, V.-C. considered.

(9) Highway Properties Ltd. v. Kelly, Douglas & Co. Ltd.UNK(1971), 17 D.L.R. (3d) 710.

(10) Hyman v. Rose, [1912] A.C. 623; [1911–13] All E.R. Rep. 238, considered.

(11) Liverpool City Council v. Irwin, [1977] A.C. 239; [1976] 2 All E.R. 39, dicta of Lord Cross applied.

(12) National Carriers Ltd. v. Panalpina (Northern) Ltd., [1981] A.C. 675; [1981] 1 All E.R. 161, considered,

(13) New River Co. v. Crumpton, [1917] 1 K.B. 762; [1916–17] All E.R. Rep. 876, dicta of Rowlatt J. applied.

(14) North Shore Sewer & Water Inc. v. Corbetta Construction Co.(1968), 395 F. 2d 145, considered.

(15) Penton v. Barnett, [1898] 1 Q.B. 276, considered.

(16) Segal Securities Ltd. v. Thoseby, [1963] 1 Q.B. 887; [1963] 1 All E.R. 500, dicta of Sachs J. applied.

(17) Shea v. City of Los AngelesELR(1935), 45 P. (2d) 221, considered.

(18) Yat Tung Inv. Co. Ltd. v. Dao Heng Bank Ltd., [1975] A.C. 581; (1975), 119 Sol. Jo. 273, “considered.

Legislation construed:

Liquor Licensing Law, 1985 (Law 8 of 1985), s.11(4):

‘Every licensee shall (save in exceptional and unforeseen circumstances) keep the premises open for the sale of intoxicating liquor to the public during the specified hours and may in addition keep the licensed premises open during other permitted hours.’

Registered Land Law (Revised) (Law 21 of 1971, revised 1976), s.55(3):

‘The right to forfeiture shall be taken to have been waived if- (a) the lessor accepts rent which has become due since the breach of agreement or condition which entitled the lessor to forfeit the lease or has by any other positive act shown an intention to treat the lease as subsisting. . . .’

Landlord and Tenant-breach of covenant-waiver-forfeiture-under Registered Land Law (Revised), s.53(3) landlord waives right to forfeit lease for tenant”s breach if accepts rent due even if ‘without prejudice’ to right of forfeiture-tenant”s subsequent continuing breach re-establishes right to forfeit without service of further notice

Estoppel-res judicata-issues available in previous proceedings-if party advisedly fails to contest issue for purposes of argument on another issue, no res judicata to prevent contesting issue in later proceedings, as not left undecided through negligence or accident

Contract-specific performance-unclean hands-tenant in breach of fundamental conditions of lease not entitled to seek specific performance of other conditions by landlord

Landlord and Tenant-frustration of lease-different modes of performance-no frustration if only one of several ways of performance frustrated, or if tenant seeks to remain on premises to remedy breach acknowledged by landlord to be capable of remedy

The plaintiff sought declarations in respect of and specific performance of a lease of premises owned by the defendant and rented to the plaintiff. The defendant counterclaimed for repossession of the premises.

The plaintiff operated a lounge and restaurant on the leased premises. Disputes between the parties had already been the subject of litigation when in 1986, cl. 2 of the lease was amended. By it the plaintiff agreed to use the premises for the business of a lounge and restaurant only, to keep in full force and effect during the term of the lease all necessary liquor and other licences and approvals and to keep the premises open for business as permitted by the laws of the Cayman Islands.

Subsequently, the parties formally adopted an agreement in which the plaintiff agreed to give up certain rights in return for which the defendant would make certain alterations and provide additional services and give consent for other specified changes. Other conditions were that (a) the lease would be amended to give effect to the covenants in the agreement; and (b) the plaintiff would have the use of the existing

water drainage and septic tank facilities which the defendant would maintain.

In September 1987 the plaintiff closed its business in order to carry out substantial renovations upon which depended the grant of a new liquor licence. The premises were never reopened, nor was the renovation work completed. After the defendant served on the plaintiff notice of forfeiture and repossessed the premises, the plaintiff successfully brought proceedings in the Grand Court (reported at 1988–89 CILR 383 and upheld on appeal) to regain possession on the ground that, assuming without admission it was in breach, the notice of forfeiture was not a valid notice. Accordingly, the plaintiff retook possession of the premises in October 1989 and the defendant continued to receive rent for the whole period up to the beginning of the present proceedings.

In these proceedings the plaintiff sought orders to give effect to the terms of the lease and agreement of variation. The defendant counterclaimed that the lease had been forfeited or, alternatively, had been frustrated.

The plaintiff submitted, inter alia, that (a) the defendant had waived its right to forfeit by the acceptance of rent; (b) it was not in breach of the lease because cl. 2 merely prohibited it from carrying on any business other than a restaurant and lounge and obliged it, at such times as it did carry on such business, to do so in accordance with the law; and (c) it was entitled to an order for specific performance to compel the defendant to carry out its obligations under the lease and agreement, and a declaration for it to pay towards the cost of building a new drainage system on failure to maintain the existing one.

The defendant submitted in reply that (a) it was entitled to forfeit the lease in spite of its acceptance of rent because it had clearly indicated that it was doing so without prejudice to its right of forfeiture and because the plaintiffs breaches were continuing breaches which subsisted up to the time of the filing of its counterclaim; (b) the plaintiff was estopped from denying that it was in breach of the lease because it had not sought to determine this issue in the earlier proceedings but had, to the contrary, acknowledged a breach; and (c) the plaintiff”s continuing failure to obtain all the necessary licences and approvals and to keep the premises open was a fundamental and continuing breach of the lease. Consequently, it was not entitled to the equitable relief of specific performance and the particular nature of the breach amounted to a frustration of the lease.

Held, making the following declarations and refusing specific performance:

(1) The defendant”s statements that it was accepting rent without prejudice to its right to forfeit would not in themselves save the right. Under the Registered Land Law (Revised), s.55(3) a lessor who had served on a lessee notice of a breach and who nevertheless accepted rent due, waived the right to forfeit the lease (a) in respect of past breaches, or (b) in the case of rent paid in advance, breaches which, at the highest,

it knew to be continuing and for such period as it definitely knew that they would continue. However, it was entitled to rely on subsequent continuation of the breaches without the service of a further notice to re-establish the right to forfeit. The defendant had therefore not waived its right to forfeit the lease by accepting rent (page 310, lines 2–5; lines 32–36; page 314, lines 11–27).

(2) Although in the earlier action it had been expedient to assume that the plaintiff was in breach of the lease in order to determine whether it had been served with a valid notice of forfeiture under s.56, the issue of whether it was in breach had not been decided nor had it been left undecided through any negligence, inadvertence or accident. The plaintiff had successfully contested the defendant”s claim to a right of forfeiture on the ground of an invalid notice. It was then under no obligation to challenge that claim on additional or different grounds and accordingly it could not now be subject to an estoppel merely because it had not sought to determine the question of the alleged breach. The doctrine of res judicata had no applicability in these circumstances and the plaintiff was not barred by the earlier judgment in its favour from denying that it was ever in breach of the lease (page 316, lines 5–20).

(3) The plaintiff was in fact in breach of its obligations under cl. 2 of the lease to have at all times in force the necessary licences and approvals and to keep the premises open for business. Moreover, the contractual obligation to maintain a liquor licence carried with it a statutory obligation under the Liquor Licensing Law, 1985, s.11(4) to remain open for business. These were fundamental terms, the continuing breach of which barred the plaintiff as an applicant with ‘unclean hands’ from seeking the equitable relief of specific performance with respect to the defendant”s failure...