Shand and another v Morgoed Estates Ltd

Rentcharge – Enforcement – Terre-tenant – Respondents holding first rentcharge over land – Appellant holding second rentcharge created by grantor of first – Whether appellant liable as terre-tenant to respondents for payment of chief rent – Whether liability lying only with freeholder of land – Appeal allowedBy a number of conveyances, various parcels of land were conveyed to a developer, with rentcharges reserved over the land in favour of the vendor; the respondents were the successor in title to those rentcharges. The appellant held a second layer of rentcharges as the successor in title to the developer, which had, after developing the land for residential housing, sold the individual plots and reserved the second rentcharges out of those conveyances. On taking a transfer of the second rentcharges, the appellant covenanted with the transferor to pay the chief rent due under the respondents’ rentcharge; however, the appellant gave no such covenant directly to the respondents.The respondents brought proceedings against the appellant to recover arrears of chief rent. The appellant argued that it had no direct liability to the respondents for the chief rent since there was neither privity of contract nor privity of estate between them. It contended that, in the absence of a direct covenant with the respondents, only the terre-tenant, being a freeholder in actual possession and enjoyment of the land or in receipt of its profits, was liable to pay the chief rent; the appellant did not hold a freehold interest.Allowing the claim, the district judge held that since a rentcharge was a legal interest in land and the appellant was in possession of the rent thereunder, its position was equivalent to being in possession of the land and, as such, it was the terre-tenant. The appellant appealed.Held: The appeal was allowed.The action in debt to enforce the rentcharge lies against the terre-tenant, who must be both the person with the freehold interest in the property and the person entitled to possession or to “pernancy of the profits” of that property, namely the right to receive the profits from the land: Thomas v Sylvester (1873) LR 8 QB 368 and Swift v Kelly (1889) 24 LR Ir 478 applied. If a freeholder is entitled to immediate possession, it is no objection that he is not in actual occupation of the profits or has not actually received such rents and profits as exist or that those were insufficient to pay the chief rent: Cundiff v Fitzsimmons [1911] 1 KB 513 applied. However, in order to be liable, the person charged must be the freeholder of land. The owner of a second rentcharge is not the freeholder but only the person to whom the freeholder pays the second rent, and as such he cannot be the terre-tenant. The district judge had erred in conflating the two necessary and cumulative tests of holding a freehold interest in the land and being the pernor of the profits, and had treated the question of who was the terre-tenant as depending only on the latter. The appellant was not the terre-tenant and was not liable for the chief rent under the respondent’s rentcharge; the respondents would have to pursue their entitlement to rent against the freehold occupiers of the land for the time being.Mr Jonathan Roberts of Morgoed Estates Ltd appeared for the appellant; William Hanbury (instructed by Blackhurst Budd, of Blackpool) appeared for the respondents.Sally Dobson, barrister