Jaura -v- Ahmed – Court of Appeal: 21st February 2002

Facts:

The Defendant was granted a lease of business premises in 1991. During 1994, the Defendant found himself in financial difficulties with his business and he sub-let the premises. Subsequently, the Claimant landlord alleged non-payment of the rent due under the lease and then forfeited the lease and thereafter issued proceedings claiming arrears of rent. The tenant counter-claimed for damages on the basis that there had been a wrongful termination of the lease and the claim for rent was subsequently dismissed by consent.

The Decision:

The tenant was awarded damages for wrongful forfeiture of his lease together with simple interest at 8% (pursuant to section 35A of the Supreme Court Act 1981). The tenant appealed the rate of interest awarded, seeking a higher rate of interest that reflected the rate of interest that the tenant had paid to his bankers for an overdraft he had utilised for the period when he had not been receiving rent from the sub-tenants, as a result of the (wrongful) termination of his lease.

The simple interest at 8% awarded by the Court represented a figure of approximately 2% over base rate. However, the tenant had incurred a rate of interest on his overdraft at 3% over base rate, for the period from the date of the wrongful forfeiture until the Judgment date of 5th March 2001. The tenant having been wrongfully deprived of the rent from the sub-tenant, and having incurred borrowings to cover this for his business, the Court of Appeal decided that the interest rate should be set at a level that adequately reflected the real cost of borrowing incurred by the tenant.

Comment: A common sense approach adopted by the Court resulting in a party receiving an accurate reimbursement of interest incurred rather than a statutorily imposed rate of interest which, in this case, would not have reflected reality.

This article was first published in Property Week. For further information please contact Andrew Walker at [email protected] or on 020 7367 2710