Law Report: Tenant's ability to rectify breach: Darlington Borough Council v Denmark Chemists Ltd. Court of Appeal (Lord Justice Neill, Lord Justice Steyn and Sir Christopher Slade), 31 July 1992

A tenant who had been in clear breach of covenant for years, and yet sought relief against forfeiture on the ground that his financial circumstances had changed, must put forward precise evidence of where the money needed to remedy the breach would come from, and explain why it was not available previously.

The Court of Appeal dismissed an appeal by the tenant, Denmark Chemists Ltd (formerly Plansweep Ltd) against the order of Judge Bryant, sitting in Darlington County Court on 10 July 1991, giving possession of land and premises at Denmark Street, Darlington, back to the landlord, Darlington Borough Council.

Nicholas Patten QC, and John Fryer Spedding (Grunhut Makepeace & Duffy, South Shields) for Denmark; Christopher R Parker (Sharpe Pritchard, for P H Kearsley) for Darlington.

LORD JUSTICE NEILL said that under a lease of 19 May 1987, Denmark covenanted to build at its expense a doctor's surgery and retail pharmacy on the land within two years. The pharmacy was built, but not the surgery.

In 1989 Darlington served notice requiring Denmark to remedy the alleged breach of covenant. Denmark failed to do so. Darlington claimed repossession.

Denmark argued that the lease was frustrated because the local family practitioner committee was unlikely to permit any doctor to practice at the premises. The judge rightly rejected that argument on the ground that the alleged frustrating event had occurred before the lease was executed, and could have been discovered by simple inquiries. He refused relief against forfeiture, finding Denmark to be both 'unwilling' and 'financially unable' to remedy the breach.

On appeal, Denmark claimed to have had a change of heart, and that it was now in a position to build the surgery. But in his Lordship's view, where a tenant had been in clear breach of covenant for years, and the judge at the original hearing was not satisfied the tenant was in a financial position to remedy the breach, it was necessary for the tenant, if he wished to rely on a change of circumstances, (a) to put forward precise evidence of the sources of finance now available and his capacity to meet any interest payments, and (b) explain why it was not available when the matter came before the judge.

Lord Justice Steyn and Sir Christopher Slade agreed.