SOURCE: National Carriers Ltd v Panalpina (Northern) Ltd [1980] UKHL 8; [1981] AC 675 URL: https://www.bailii.org/uk/cases/UKHL/1980/8.html ACCESSED: 16 September 2026 (BAILII text opened in a browser on the user's Mac; page text saved verbatim) [Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback] [DONATE] United Kingdom House of Lords Decisions You are here: BAILII >> Databases >> United Kingdom House of Lords Decisions >> National Carriers Ltd v Panalpina (Northern) Ltd [1980] UKHL 8 (11 December 1980) URL: https://www.bailii.org/uk/cases/UKHL/1980/8.html Cite as: [1980] UKHL 8, [1981] 2 WLR 45, [1981] AC 675, [1981] 1 All ER 161 [New search] [Buy ICLR report: [1981] 2 WLR 45] [Buy ICLR report: [1981] AC 675] [Help] JISCBAILII_CASE_CONTRACTJISCBAILII_CASE_PROPERTY Parliamentary Archives,HL/PO/JU/18/240 Die Jovis 11° Decembris 1980 Upon Report from the Appellate Committee to whomwas referred the Cause National Carriers Limited againstPanalpina (Northern) Limited, That the Committee hadheard Counsel as well on Monday the 6th as on Tuesdaythe 7th and Wednesday the 8th days of October last uponthe Petition and Appeal of Panalpina (Northern) Limitedof 5 Westgate, Bradford, Yorkshire praying that thematter of the Order set forth in the Schedule thereto,namely an Order of the Queen's Bench Division of HerMajesty's High Court of Justice of the 16th day ofOctober 1979 might be reviewed before Her Majestythe Queen in Her Court of Parliament and that the saidOrder might be reversed, varied or altered or that thePetitioners might have such other relief in the premisesas to Her Majesty the Queen in Her Court of Parliamentmight seem meet; as also upon the Case of NationalCarriers Limited lodged in answer to the said Appeal;and due consideration had this day of what was offeredon either side in this Cause: It is Ordered and Adjudged, by the Lords Spiritualand Temporal in the Court of Parliament of HerMajesty the Queen assembled, That the said Order ofthe Queen's Bench Division of Her Majesty's High Courtof Justice of the 16th day of October 1979 complainedof in the said Appeal be, and the same is hereby,Affirmed and that the said Petition and Appeal be, andthe same is hereby, dismissed this House: And it isfurther Ordered, That the Appellants do pay or causeto be paid to the said Respondents the Costs incurred bythem in respect of the said Appeal, the amount thereofto be certified by the Clerk of the Parliaments if notagreed between the parties. HOUSE OF LORDS NATIONAL CARRIERS LIMITED(RESPONDENTS) v. PANALPINA (NORTHERN) LIMITED(APPELLANTS) Lord ChancellorLord WilberforceLord Simon of GlaisdaleLord Russell of KillowenLord Roskill Lord Hailsham of St. Marylebone my lords, We are all agreed that this appeal from decisions of Master Waldmanand Sheen J. refusing leave to defend under RSC 0.14 fails on the factsfor the reasons given by my noble and learned friends to which personallyI have nothing to add. The appellants have failed to raise a triable issue. Nevertheless, though they arrive in your Lordships' House by an unusualroute, the proceedings do raise an interesting and important general questionof principle relating to the extent and nature of the law of frustrationwhich has long been debated and which, since the matter has reached thisstage and has been fully argued, should now be decided by yourLordships' House. This question is the applicability of the law of frustration to leases andagreements for a lease. The question is discussed at length in CricklewoodProperty and Investment Trust Ltd. v. Leightons Investment Trust Ltd.[1945] A.C. 221 by the decision of which in the Court of Appeal, MasterWaldman and Sheen J. rightly considered themselves bound, with theresult that, in dismissing the appeal from Master Waldman, Sheen J. gavehis certificate under section 12 of the Administration of Justice Act 1969,and so, for the first time in my experience, an Order 14 summons bypassesthe Court of Appeal and " leapfrogs " directly to the Appellate Committeeof the House of Lords. Before I reach a discussion of the point of law it is necessary that I fill inthe factual background. This illustrates the curious and sometimesunexpected results which can ensue from the present vogue of listingindustrial buildings as part of our national heritage. Kingston Street, Hullis a continuation of English Street (of which, originally it may have beenpart) and terminates by running perpendicularly into a T junction withRailway Street. Before it reaches this end, it crosses more or less at rightangles an intersection with Commercial Road and Manor House Street.Hereinafter, when I speak of Kingston Street, I shall be referring solelyto that section of it between this intersection and the T junction withRailway Street. Although it is now, it would seem, a public highway forall types of traffic, it may well be that at one time it was the privateproperty of a railway company, since otherwise it is difficult to explainthe " demise " (sic) of a private right of way along it by the lessors of theproperty about to be described. Kingston Street is bounded on both sides by warehouses and on partof one side by a railway shed. At one side of it, at the point nearest theintersection, is a derelict and ruinous Victorian warehouse which at sometime has become, under the laws for the conservation of our nationalheritage, a " listed building " which means that it cannot be demolishedwithout the consent of the Secretary of State for the Environment, and that,if the demolition is objected to by local conservationists (as in facthappened), this consent will not be granted without the holding of a publiclocal enquiry. Even assuming a result favourable to demolition the totalprocess is likely to last a year. In the events which have happened, theprocess is not yet complete, but, on the material before us, is likely to beconcluded by the end of December 1980 or the beginning of January 1981.By that time, it will have lasted about 20 months. 2 Since, in course of time, the Victorian warehouse became dangerousas well as derelict it evidently presented problems of safety to the CityCouncil of Hull. In 1978 they placed a restriction order on Kingston Street,and on the 16th May 1979 they closed it altogether to vehicular traffic.It was not made altogether clear to us under what powers they acted, butthe closure was subsequently confirmed and continued by the Secretary ofState, and, at the present, access to Kingston Street is not merely prohibitedto vehicles, but rendered physically impossible, by the erection across it bythe local authority of a fenced barrier. This will not be removed untilthe demolition process is completed at the end of the current year or thebeginning of next. Opposite the ruinous listed building, there is another warehouse, moreor less triangular in shape, the only access to which (except perhaps onfoot) is via a loading bay in Kingston Street. The consequence of theapplication for demolition, and the subsequent proceedings, has been that,from the 16th May 1979 until the time when the barriers are finally removedand the prohibition order lifted, this triangular warehouse has beenrendered totally useless for the one purpose, that of a commercialwarehouse, for which alone it is fitted, and for which alone, by the termsof the contract between the parties, it may be lawfully used. In 1974 the triangular warehouse had become the subject of a demisebetween the plaintiffs/respondents to these proceedings, the lessors, andthe defendants/appellants. This demise was contained in a lease datedthe 12th July 1974 and was expressed to run for 10 years from the 1stJanuary 1974. The terms of the lease, most of which are not unusualin documents of this kind, contained inter alia a covenant to pay anannual rent (£6,500 for the first five years, and for the second five yearssubsequently increased by agreement in accordance with a formulacontained in clause 4(1) of the lease to £13,300) payable in advance by fourquarterly instalments. The present proceedings, commenced by writ datedthe 9th July 1979, are for the payment of £5,115.38 being the two quarterlyinstalments due on the 1st April, and the 1st July 1979. There is nodispute between the parties as to the amount of this sum, nor, subjectto the defence of frustration hereinafter to be mentioned, of the liability ofthe defendants/appellants to pay it. The lease also contained obligations by the tenants to pay rates, to repair,to pay a rateable proportion of the expense of cleaning and maintaining thesewers, roads etc., to insure at full value in the joint names of landlord andtenant, to paint, to yield up in good and substantial repair at the end ofthe tenancy, not to assign or sublet, alter, or to utilise otherwise than forthe purpose of a warehouse without the written consent of the landlord, andother matters. The landlord's covenants included an express covenant ofquiet enjoyment. There were special provisions for the suspension of theobligation to pay rent and for the termination of the tenancy at the optionof the landlord in case of destruction by fire, and provisions for re-entryby the landlord in case of breach of covenant, or on six months notice, ifthe premises were required for the proper operation of British Railways(with whom the plaintiffs are associated). The sole defence raised by the defendants/appellants to their obligationto pay rent was that, by reason of the events described above the lease hadbecome frustrated and was therefore wholly at an end. By their printedcase each party raised two questions for your Lordships' decision. Thefirst is the broad question of principle, viz. whether the doctrine of frustrationcan ever apply to determine a lease, and the second, of particular application,whether even if the doctrine can on occasion apply, there is here a triableissue as to whether it does apply to the lease between the parties in thecircumstances described. In the event of both questions being determinedin favour of the appellants, your Lordships, if allowing the appeal, wouldhave no option but to return the case for trial at first instance, with thepossible result that, after a lapse of two years, it might reappear in yourLordships' list for a second hearing. In any event, unless some guidance isgiven on the first issue, sooner or later argument would have to be directed 3 to it in some later proceeding. It is therefore perhaps as well that, althoughdismissing the appeal on the second question, we thought it right to hearthe first fully argued on both sides. We are doubly indebted to counselfor the appellants, who, though aware that he had not succeeded,nevertheless stayed to deliver an admirably concise reply to the forcefularguments on the point of principle helpfully presented on behalf of therespondents. The doctrine of frustration is of comparatively recent development. Thegeneral rule of common law, laid down as early as 1647 in Paradine v. Jane(Aleyn 26) is that the performance of absolute promises is not excused bysupervening impossibility of performance. Paradine v. Jane itself, a casearising out of the civil war, was like the present, an action of debt based ona covenant to pay rent contained in a lease. But, since the doctrine offrustration had not at that stage come into existence, the argument turnedsolely on the absolute and unconditional nature of the promise to pay therent, and the applicability to the estate in land created by the demise ofany such doctrine did not arise. It is generally accepted that the doctrine of frustration has its roots inthe decision of the court of Queen's Bench given by Blackburn J. in Taylorv. Caldwell (1863) 3 B & S 826. In that case, the parties to the contracthad used terms appropriate to the relationship of landlord and tenantdescribing the money payment as " rent" and the transaction as a" letting". But, after analysing the facts, Blackburn J. decided that thetrue nature of the transaction was not one of landlord and tenant butone of licensor and licensee. He then added, cryptically, the words:" Nothing, however, in our opinion depends on this ". I am inclined tothink that by these words he was in effect taking the view which I myselfam about to express, but, as counsel for the respondents firmly pointedout when I put the point to him in argument, they are capable of a moreneutral meaning, viz., that since the question of demise did not arise inthe case before the court, it did not call for decision. I am content toassume, though I am inclined to the contrary view, that this is right. At least five theories of the basis of the doctrine of frustration have beenput forward at various times, and, since the theoretical basis of thedoctrine is clearly relevant to the point under discussion, I enumerate themhere. The first is the " implied term ", or " implied condition " theory onwhich Blackburn J. plainly relied in Taylor v. Caldwell, as applying tothe facts of the case before him. To these it is admirably suited. Theweakness, it seems to me, of the implied term theory is that it raises oncemore the spectral figure of the officious bystander intruding on the parties atthe moment of agreement. In the present case, had the officious bystanderpointed out to the parties in July 1974 the danger of carrying on thebusiness of a commercial warehouse opposite a listed building of doubtfulstability and asked them what they would do in the event of a temporaryclosure of Kingston Street pending a public local inquiry into a proposalfor demolition after the lease had been running for over five years, I havenot the least idea what they would have said, or whether either wouldhave entered into the lease at all. In Embiricos v. Sydney Reid & Co. [1914]3 K.B. 45 at 54 Scrutton J. appears to make the estimate of whatconstitutes a frustrating event something to be ascertained only at the timewhen the parties to a contract are called on to make up their minds, andthis I would think, to be right, both as to the inconclusiveness of hindsightwhich Scrutton J. had primarily in mind and as to the inappropriateness ofthe intrusion of an officious bystander immediately prior to the conclusion ofthe agreement. Counsel for the respondent sought to argue that Taylor v. Caldwell couldhave as easily been decided on the basis of a total failure of consideration.This is the second of the five theories. But Taylor v. Caldwell was clearlynot so decided, and in any event many, if not most, cases of frustrationwhich have followed Taylor v. Caldwell have occurred during the currencyof a contract partly executed on both sides, when no question of totalfailure of consideration can possibly arise. 4 In Hirji Mulji v. Cheong Yue Steamship Co. Ltd. [1926] A.C. 497, 510Lord Sumner seems to have formulated the doctrine as a " device (sic) by" which the rules as to absolute contracts are reconciled with a special" exception which justice demands " and Lord Wright in Denny, Mott &Dickson Ltd. v. James B. Fraser & Co. Ltd. [1944] AC 265 at 275 seemsto prefer this formulation to the implied condition view. The weakness ofthe formulation, however, if the implied condition theory, with which LordSumner coupled it, be rejected is that, though it admirably expresses thepurpose of the doctrine, it does not provide it with any theoretical basis at all. Hirji Mulji v. Cheong Yue Steamship Co. Ltd. is, it seems to me, reallyan example of the more sophisticated theory of" frustration of the adventure "or " foundation of the contract" formulation, said to have originated withJackson v. Union Marine Insurance Co. Ltd. (1874) L.R. 10 C.P. 125, cf.also e.g. per Goddard J. in W. J. Tatem Ltd. v. Gamboa [1939] 1 K.B. 132at 138. This, of course, leaves open the question of what is, in any givencase the foundation of the contract or what is " fundamental " to it, or whatis the " adventure ". Another theory, of which the parent may have beenLord Loreburn in Tamplin Steamship Co. Ltd. v. Anglo Mexican PetroleumCo. [1916] 2 A.C. 397, is that the doctrine is based on the answer to thequestion: " What in fact is the true meaning of the contract? " See TamplinSteamship Co. Ltd. v. Anglo Mexican Petroleum Co. [1916] 2 A.C. 397, 404).This is the " construction theory ". In Davis Contractors Ltd. v. FarehamU.D.C. [1956] AC 696 at 729 Lord Radcliffe put the matter thus, and itis the formulation I personally prefer: " Frustration occurs whenever the law recognises that, without default" of either party, a contractual obligation has become incapable of" being performed because the circumstances in which performance is" called for would render it a thing radically different from that which" was undertaken by the contract. Non haec in foedera veni. It was" not this that I promised to do ". Incidentally, it may be partly because I look at frustration from this pointof view, that I find myself so much in agreement with my noble and learnedfriends that the appellants here have failed to raise any triable issue as tofrustration by the purely temporary, though prolonged, and in 1979,indefinite, interruption, then expected to last about a year, in the access tothe demised premises. In all fairness however, I must say that my approachto the question involves me in the view that whether a supervening eventis a frustrating event or not is, in a wide variety of cases, a question ofdegree, and therefore to some extent at least of fact, whereas in yourLordships' House in Tsakiroglou & Co. Ltd. v. Noblee Thorl G.m.b.H.[1962] A.C. 93 the question is treated as one at least involving a questionof law, or, at best, a question of mixed law and fact. For a discussion ofthe apparent inconsistency of this view with the verdict of the jury in Jacksonv. Union Marine Insurance Co. Ltd. (1874) L.R. 10 C.P. 125 see ProfessorTreitel's treatise on Contracts 5th Edition at p.671 when the author suggeststhat the reconciliation may lie in the distinction between primary andsecondary facts now developing as the result of the disappearance of thecivil jury. This discussion brings me to the central point at issue in this case which,in my view, is whether or not there is anything in the nature of an executedlease which prevents the doctrine of frustration, however formulated,applying to the subsisting relationship between the parties. That the pointis open in this House is clear from the difference of opinion expressed inthe Cricklewood case (supra) between the second Lord Russell of Killowenand Lord Goddard on the one hand, who answered the question affirmatively,and Viscount Simon and Lord Wright on the other, who answered itnegatively, with Lord Porter reserving his opinion until the point arosedefinitively for consideration. The point, though one of principle, is anarrow one. It is the difference immortalised in H.M.S. Pinafore between"never" and "hardly ever", since both Lords Simon and Wright clearlyconceded that, though they thought the doctrine applicable in principle toleases, the cases in which it could properly be applied must be extremely rare. 5 With the view of Viscount Simon and Lord Wright I respectfully agree.It is clear from what I have said already that, with Lord Radcliffe in thepassage I have cited, I regard these cases as a subspecies of the class ofcase which comes so regularly before the courts, as to which of twoinnocent parties must bear the loss as the result of circumstances for whichneither is at all to blame. Apart from the statute of 1943, the doctrine offrustration brings the whole contract to an end, and in the present case,apart from any adjustment under that Act and any statutory right tocompensation under the closure order, the effect of frustration, had it beenapplicable, would have been to throw the whole burden of interruptionfor 20 months on the landlord, deprived as he would be of all his rent, andimposed, as he would have, upon his shoulders the whole danger ofdestruction by fire and the burden of reletting after the interruption. As itis, with the same qualification as to possible compensation, the tenant hasto pay the entire rent during the period of interruption without any part ofthe premises being usable at all, together with the burden (such as it maybe) of the performance of the other tenant's covenants which includecovenants to insure and repair. These are no light matters. I approach the question first via the authorities, mainly catalogued in thereport of the Cricklewood case at first instance and in the Court of Appeal.I need not analyse these in detail, but, your Lordships having done so inthe course of argument, I must say that, although they all tend in thatdirection, they did not and they never did afford the court compellingauthority for the proposition advanced. The point was not argued at allin front of Asquith J., and in the very short judgment of the Court ofAppeal, the three cases cited London & Northern Estates Co. v. Schlesinger[1916] 1 K.B. 20, Whitehall Court Ltd. v. Ettlinger [1920] 1 K.B. 680,and Matthey v. Curling [1922] 2 A.C. 180 do not, I believe, on analysisconstitute authority for the proposition. The most that can be said is that,as Lord Goddard said, the view that frustration did not apply to leaseswas widely held in the profession at the time and that Lord Atkinson inMatthey v. Curling [1922] 2 A.C. 180 at pp.233, 237 gave expression tothe view that Whitehall Court v. Ettlinger (supra) was rightly decided. Iagree here with what Lord Simon said on this at p.231 of the Cricklewoodcase (supra), and I would add that what was decided both in WhitehallCourt (supra) and London and Northern Estates (supra) was no more thanthat the legal estate created by a lease that was not destroyed by wartimerequisition and such requisition was not an eviction by title paramount.In the Court of Appeal I do not find that Bankes L.J. (at p. 185) or YoungerL.J. (at p.210) were unequivocal on the present point at issue, and I notethat Younger L.J. committed himself to the now untenable propositionthat the doctrine of frustration was not to be extended. Atkin L.J. (whodissented) gave, at pp.199 and 200 important reasons for rejecting the" never " principle and in Cricklewood at p.230 Viscount Simon expresslyapproved the crucial paragraph in Atkin L.J.'s judgment in support of the" hardly ever " doctrine. Before us there was some discussion in argumentof American cases, especially the liquor saloon cases based on prohibition,in some of which at least the frustration doctrine was applied to leases.We were also referred to the opinions of Laskin J. in Canada in HighwayProperties Ltd. v. Kelly, Douglas & Co. Ltd. (1971) 17 D.L.R. (3d) 710,at p.721, and that of Isaacs J. in the Australian case of Firth v. Halloran(1926) 38 C.L.R. at p.269 (where, however, he appears to have differedfrom his colleagues), all of which favour the " hardly ever" doctrine.Reference was also made to text book authority. Megarry & Wade (4thedition) tend to the " never " view, but run into fairly heavy weather whenthey discuss the possible destruction of a flat on the higher floors of atenement building (see p.675). Professor Treitel, after referring to Cusack-Smith v. London Corporation [1956] 1 W.L.R. at 1368 which in turn reliedon Denman v. Brise [1949] 1 K.B. p.22 esp. at p.26 (the only case wherefrustration appears to have been advanced on behalf of a landlord) comesto the conclusion that the " never " position is only open to review at thelevel of the House of Lords but concludes that the " hardly ever " view 6 is intrinsically preferable. This also appears to be the opinion of theAmerican writers Williston and Corbin and in England of Cheshire andFifoot. I conclude that the matter is not decided by authority and that thequestion is open to your Lordships to decide on principle. In my viewyour Lordships ought now so to decide it. Is there anything in principlewhich ought to prevent a lease from ever being frustrated? I think there isnot. In favour of the opposite opinion, the difference in principle betweenreal and chattel property was strongly urged. But I find it difficult to acceptthis, once it has been decided, as has long been the case, that time anddemise charters even of the largest ships and of considerable duration canin principle be frustrated. This was sufficiently well established by 1943to make these charters worthy of an express exception upon an exceptionin the Law Reform (Frustrated Contracts) Act 1943 section 2(5), and sincethen the Suez cases have supervened. There would be something anomalousin the light of what has been going on recently in the Shatt el Arab todraw a distinction between a leased oil tanker and a demise-chartered oiltanker. Other anomalies would follow if the absolute principle were to beapplied to leases. Golf J. appears to have found no difficulty in applyingfrustration to an agreement for a lease (which creates an equitable estatein the land capable of being specifically enforced and thereby convertedinto a legal estate operating as from the beginning of the equitable interest).See Rom Securities Ltd. v. Rogers (Holdings) Ltd. (1968) 205 Estates Gazette427. Personally I find the absurdities postulated by Megarry and Wadein the case of the destruction by fire of the upper flat of a tenementbuilding (already referred to) unacceptable if the " never " doctrine wererigidly applied, and I am attracted by Professor Treitel's argument (atp.669 of the current edition of his work on contracts) of the inequitablecontrast between a contract for the provision of holiday accommodationwhich amounted to a licence, and thus subject to the rule in Taylor v.Caldwell and a similar contract amounting to a short lease. Clearly thecontrast would be accentuated if Goff J.'s view be accepted as to theapplicability of the doctrine to agreements for a lease (see above). I accept of course that systems of developed land law draw a vitaldistinction between land, which is relatively permanent and other typesof property which are relatively perishable. But one can overdo thecontrast. Coastal erosion as well as the " vast convulsion of nature"postulated by Viscount Simon in Cricklewood (at p.229) can, even in thisisland, cause houses, gardens, even villages and their churches to fall intothe North Sea, and, although the law of property in Scotland is different,as may be seen from Tay Salmon Fisheries Co. Ltd. v. Speedie 1929 S.C.593, whole estates can there, as Lord President Clyde points out at p.600,be overblown with sand for centuries and so fall subject to the rei interitusdoctrine of the civil law. In Taylor v. Caldwell itself Blackburn J., afterreferring to the Digest on the subject of " obligatio de certo corpore " onwhich in part he founds his new doctrine, expressly says: (at p. 834) " No doubt the propriety, one might almost say the necessity, of" the implied condition is more obvious when the contract relates to" a living animal, whether man or brute, than when it relates to some" inanimate thing (such as in the present case a theatre) [emphasis" mine] the existence of which is not so obviously precarious as that" of the live animal, but the principle is adopted in the civil law as" applicable to every obligation of which the subject is a certain" thing ". He then refers to Pothier, Traite des Obligations partie 3. chap. 6. art. 3in support of his contention. No doubt a long lease, say for example one for 999 years, is almostexactly identical with the freehold for this purpose, and therefore subjectto the ordinary law regarding the incidence of risk (recognised as regardschattels in section 7 of the former Sale of Goods Act 1893). But thereis no difference between chattels in this respect and real property except 7 in degree. Long term speculations and investments are in general lesseasily frustrated than short term adventures and a lease for 999 yearsmust be in the longer class. I find myself persuaded by the argumentpresented by Atkin L.J. in his dissenting judgment in Matthey v. Curlingat p.200 and quoted with approval by Viscount Simon in Cricklewood atp.230. In that passage Atkin L.J. said: " It does not appear to me conclusive against the application to a" lease of the doctrine of frustration that the lease, in addition to" containing contractual terms, grants a term of years. Seeing that" the instrument as a rule expressly provides for the lease being" determined at the option of the lessor upon the happening of certain" specified events, I see no logical absurdity in implying a term that" it shall be determined absolutely on the happening of other events" namely, those which in an ordinary contract work a frustration." I pause here only to observe that, in the instant case, the lease gave thelessor a contingent right of determination in case of destruction by fire orin case of a need for the use of the premises in connection with the railways,and to point out that in the War Damage Acts the lessee was given astatutory right, albeit different in kind from the doctrine of frustration, todisclaim a current lease on the happening of other events as the result ofenemy action. In the result, I come down on the side of the " hardly ever " school ofthought. No doubt the circumstances in which the doctrine can apply toleases are, to quote Viscount Simon in Cricklewood at p.231, " exceedingly" rare ". Lord Wright appears to have thought the same, whilst adheringto the view that there are cases in which frustration can apply (ibid, p.241).But, as he said in the same passage: " The doctrine of frustration is modern and flexible and is notsubject to being constricted by an arbitrary formula ". To this school of thought I respectfully adhere. Like Lord Wright, I amstruck by the fact that there appears to be no reported English case wherea lease has ever been held to have been frustrated. I hope this fact willact as a suitable deterrent to the litigious, eager to make legal history bybeing first in this field. But I am comforted by the reflexion of theauthority referred to in the Compleat Angler (pt. i, ch. 5) on the subjectof strawberries: " Doubtless God could have made a better berry, butdoubtless God never did ". I only append to this observation of naturethe comment that it does not follow from these premises that He neverwill, and if it does not follow, an assumption that He never will becomesexceedingly rash. In the event my opinion is that the appeal should be dismissed with costs. Lord Wilberforce My lords, There are two questions for decision in this appeal: (a) whether thedoctrine of frustration can apply to a lease so as to bring it to an end if afrustrating event occurs; (b) whether, if so, in the circumstances the existinglease between the respondent and the appellant has been determined. The lease was dated 12th July 1974. The respondent as landlord let tothe appellant as tenant a purpose-built warehouse in Hull for a term of tenyears from 1st January 1974. The rent was £6,500 a year during the firstfive years, and for the remainder was to be the open-market rent of thedemised premises let as a warehouse. In fact this was fixed at £13,300. There was a covenant by the tenant not without the landlord's consent touse the premises for any purpose than that of warehousing in connectionwith the tenant's business, or to assign, underlet, or part with possession. 8 There was only one access to the warehouse—along a street calledKingston Street. This would appear to be a public highway, but the land-lord purported to grant a right-of-way along it for all purposes connectedwith the occupation of the premises. On 16th May 1979 the City Councilmade an order under section 12(1) of the Road Traffic Regulation Act 1967closing Kingston Street for use with or without a vehicle. This was donebecause another warehouse, of the Victorian period and style, abutting onthe street was in a dangerous condition. Because it was a listed buildingthere were conservationist objections against its demolition. The order was,it appears, renewed by the Secretary of State, under the same Act on 15thAugust 1979 and again, purportedly, but with questionable validity, by theCouncil's Engineer under section 25 of the Public Health Act 1961. Wemust assume, at this stage, that all these acts of closure were valid and legal.I shall refer further to this matter when dealing with the second question. Because of this closure, which made the warehouse unusable for the onlypurpose for which it could be used under the lease, the appellant contendedthat the lease was frustrated, so that rent ceased to be payable. In an actionfor rent due, followed by a summons for summary judgment underRSC.O.XIV the master, upheld by the judge, held that the defence offrustration was not available as a matter of law. That the doctrine offrustration was not available to determine a lease had in fact been decidedby the Court of Appeal in Leighton's Investment Trust Ltd. v. CricklewoodProperty and Investment Trust Ltd. (the "Cricklewood" case) [1943]K.B. 493. An appeal was brought to this House but, on the question oflaw, their Lordships were divided, two Lords holding that the doctrinecould be applied, two that it could not, and the fifth expressing no opinion.The House unanimously held, on the facts, that frustration had not occurred.The point is therefore open for decision. My Lords, the arguments for and against application of this doctrine arefully and cogently put in the rival speeches in the Cricklewood case, for itspossible application by Viscount Simon L.C. and Lord Wright, against byLord Russell of Killowen and Lord Goddard. I can therefore give fairlybriefly the reasons which have persuaded me, on the whole, that the formerought to be preferred. The doctrine of frustration of contracts made its appearance in Englishlaw in answer to the proposition, which since Paradine v. Jane (1647)Aleyn 26 had held the field, that an obligation expressed in absolute andunqualified terms, such as an obligation to pay rent, had to be performedand could not be excused by supervening circumstances. Since Taylor v.Caldwell (1863) 3 B & S 826, it has been applied generally over the wholefield of contract. Various theories have been expressed as to its justification in law: asa device by which the rules as to absolute contracts are reconciled with aspecial exception which justice demands, as an implied term, as a matter ofconstruction of the contract, as related to removal of the foundation of thecontract, as a total failure of consideration. It is not necessary to attemptselection of any one of these as the true basis: my own view would be thatthey shade into one another and that a choice between them is a choice ofwhat is most appropriate to the particular contract under consideration.One could see, in relation to the present contract, that it could provisionallybe said to be appropriate to refer to an implied term, in view of the grantof the right-of-way, or to removal of the foundation of the contract—viz. useas a warehouse. In any event, the doctrine can now be stated generally aspart of the law of contract; as all judicially evolved doctrines it is, and oughtto be, flexible and capable of new applications. 3. In view of this generality, the onus, in my opinion, lies on those whoassert that the doctrine can never apply to leases. They have at once to facethe argument that it has been held to apply to demise charters of ships, (andpresumably by analogy could apply to hirings of other chattels), and tolicences for use (Krell v. Henry [1903] 2 KB 740 and other Coronationcases). So why not to leases of land? To place leases of land beyond a firm 9 line of exclusion seems to involve anomalies, to invite fine distinctions, or atleast to produce perplexities. How, for example, is one to deal with agree-ments for leases? Refusal ever to apply the doctrine to leases of land mustbe based upon some firm legal principle which cannot be departed from:(compare Art. 62 of the Vienna Convention on treaties which excludesboundary disputes from the analogous doctrine in international law). 4. Two arguments only by way of principle have been suggested. Thefirst is that a lease is more than a contract: it conveys an estate in land.This must be linked to the fact that the English law of frustration, unlikeits continental counterparts, requires, when it applies, not merely adjustmentof the contract, but its termination. But this argument, by itself, isincomplete as a justification for denying that frustration is possible. Theargument must continue by a proposition that an estate in land once grantedcannot be divested—which, as Viscount Simon L.C. pointed out, begs thewhole question. It was pointed out, however, by Atkin L.J. in Matthey v. Curling, in apassage later approved by Viscount Simon, that as a lease can be determined,according to its terms, upon the happening of certain specified events, thereis nothing illogical in implying a term that it should be determined on thehappening of other events—namely, those which in an ordinary contractwork a frustration ([1922] 2 A.C. 200). It has indeed been held, withreference to an agreement for a lease, that this can be put an end to throughimplication of a term (Rom Securities, Ltd. v. Rogers (Holdings) Ltd. (1967)205 Estates Gazette 427, per Goff J.). So why, in the present case, forexample, should an actual lease not be determinable by implication of aterm? If so, it could hardly be suggested that a lease was not capable offrustration even though the theory of frustration had shifted to anotherbasis. In the second place, if the argument is to have any reality, it must bepossible to say that frustration of leases cannot occur because in any eventthe tenant will have that which he bargained for, namely, the leaseholdestate. Certainly this may be so in many cases—let us say most cases.Examples are London & Northern Estates Co. v. Schlesinger [1916] 1 K.B.20, where what was frustrated (viz. the right of personal occupation) wasnot at the root of the contract, and requisitioning cases, e.g. Whitehall CourtLtd. v. Ettlinger [1920] 1 K.B. 680, where again the tenant was left withsomething he could use. But there may also be cases where this is not so.A man may desire possession and use of land or buildings for, and onlyfor, some purpose in view and mutually contemplated. Why is it ananswer, when he claims that this purpose is " frustrated " to say that he hasan estate if that estate is unusable and unsaleable? In such a case thelease, or the conferring of an estate, is a subsidiary means to an end, not anaim or end of itself. This possible situation is figured, in fact, by ViscountSimon L.C. in Cricklewood. The second argument of principle is that on a lease, the risk passes to thelessee, as on a sale it passes to the purchaser (see per Lord Goddard hiCricklewood). But the two situations are not parallel. Whether the risk—or any risk—passes to the lessee depends on the terms of the lease: it is notuncommon indeed, for some risks—of fire or destruction—to be specificallyallocated. So in the case of unspecified risks, which may be thought to havebeen mutually contemplated, or capable of being contemplated by reasonablemen, why should not the court decide on whom the risks are to lie? Andif it can do this and find that a particular risk falls upon the lessor, theconsequence may follow that upon the risk eventuating the lessee is releasedfrom his obligation. To provide examples, as of a 999-year lease during which a frustratingevent occurs, or of those in decided cases (see above), to show that in suchcases frustration will not occur is insufficient as argument. These examplesmay be correct: they may cover most, at least most normal, cases. But theproposition is that there can be no case outside them and that I am unableto accept. 10 5. I find the experience in the United States of America instructive. Itis clear that in the common law jurisdictions of that country, the doctrineof frustration has developed and is still developing. It has been appliedinter alia in connection with Prohibition and leases of liquor saloons, toleases. Yet neither of the well-known commentators Williston, or Corbin,sees any doctrinal objection to this. I quote one passage from Corbin: " In modern cases, there has been a tendency to treat a lease as" a contract instead of a conveyance, although in fact it is both at" once. The older allocation of risks does not now always seem just." Many short-term leases have been made, in which the purpose of the" lessee was to conduct a liquor saloon, a purpose known to the" lessor and one which gave to the premises a large part of its rental" value. There followed the enactment of a ... prohibitory law" preventing the use of the premises for the expected purpose. The" prohibition law does not make it impossible or illegal for the lessee" to keep his promise to pay the rent . . . but it frustrates his purpose" of using the premises for a liquor saloon in the reasonable hope of" pecuniary profit. If the terms of the lease are such that the lessee is" restricted to this one use, it has been held in a considerable number" of cases that his duty to pay rent is discharged." (Corbin onContracts (1951) Vol. 6, para. 1356.) Williston is to a similar effect, where it is pointed out that termination ofa lease by frustration is more difficult to establish than termination of amere contract (Williston on Contracts, 3rd Ed. (1978), para. 1955). There is a similar indication in Canada. The Supreme Court had toconsider in 1971 the extent to which the contractual doctrine of wrongfulrepudiation could be applied to a lease—the argument being that thelandlord was limited to remedies given by the law of property. In aninstructive judgment Laskin J. said: " It is no longer sensible to pretend that a commercial lease, such" as the one before this court, is simply a conveyance and not also" a contract. It is equally untenable to persist in denying resort to" the full armoury of remedies ordinarily available to redress" repudiation of covenants, merely because the covenants may be" associated with an estate in land." Highway Properties Ltd. v. Kelly,Douglas & Co., Ltd. (1971) 17 DLR, 3rd, 710, 721. So, here is a route opened by common law jurisdictions, by which theresult of frustration of leases may be attained. This may be wide, ornarrow, or indeed very narrow: that we need not decide in advance. Butit would be wrong to erect a total barrier inscribed " You shall not pass ". 6. I can deal briefly with the authorities: they are one way (againstapplication of the doctrine), they are partial. They decide that particularsets of facts do not amount to frustrating events. A judgment often quotedis that of Lush J. in Schlesinger's case (u.s.) where a lessee was unable tooccupy the rented premises because he was an alien enemy: " As the contract could be performed without his personal residence," the fact that his personal residence was prohibited by the Order did" not make the performance of the contract impossible. But there is," I think, a further answer to the contention. It is not correct to" speak of this tenancy agreement as a contract and nothing more." A term of years was created by it and vested in the appellant, and I" can see no reason for saying that because this Order disqualified him" from personally residing in the flat it affected the chattel interest which" was vested in him by virtue of the agreement." I.e. p.24. There is nothing to disagree with here—the argument may indeed bevalid in many or most cases of leases. It is not expressed as one whichmust apply to all. The reasoning of this House in Matthey v. Curling [1922] 2 A.C. 180. isnot " clear " or any authority that the doctrine of frustration does not applyto a lease (see per Lord Wright in Cricklewood 1.c. p.230). It was not 11 until Cricklewood that the argument was put on principle and fully explored.The governing decision (of the Court of Appeal) was summary, unargued,and based upon previous cases which will not bear the weight of ageneralisation. I think that the movement of the law of contract is awayfrom a rigid theory of autonomy towards the discovery—or I do not hesitateto say imposition—by the courts of just solutions, which can be ascribed toreasonable men in the position of the parties. It is said that to admit the possibility of frustration of leases will leadto increased litigation. Be it so, if that is the route to justice. But evenif the principle is admitted, hopeless claims can always be stopped at anearly stage, if the facts manifestly cannot support a case of frustration. Thepresent may be an example. In my opinion, therefore, though such casesmay be rare, the doctrine of frustration is capable of application to leasesof land. It must be so applied with proper regard to the fact that a leasei.e. a grant of a legal estate is involved. The court must consider whetherany term is to be implied which would determine the lease in the eventwhich has happened and/or ascertain the foundation of the agreementand decide whether this still exists in the light of the terms of the lease,the surrounding circumstances and any special rules which apply to leasesor to the particular lease in question. If the " frustrating event" occursduring the currency of the lease it will be appropriate to consider theLaw Reform (Frustrated Contracts) Act 1943. I now come to the second question which is whether on the facts of thecase the appellant should be given leave to defend the action: can itestablish that there is a triable issue? I have already summarised the termsof the lease. At first sight, it would appear to my mind that the casemight be one for possible frustration. But examination of the facts leadsto a negative conclusion. The circumstances which it is claimed amount toa frustrating event are proved by affidavit evidence supplemented andbrought up-to-date by other documents. They are as follows. The firstorder closing Kingston Street was made on 16th May 1979 to take effectfrom 18th May. The lease had then four years and six-and-a-half months torun. In his affidavit sworn on 20th September 1979 the appellant's solicitorstated that it was likely that " well over a year " would have elapsed beforea decision could be made as regards the listed Victoria warehouse oppositethe appellant's premises, the condition of which made the closure necessary.The Town Clerk of the City of Kingston-upon-Hull had written on7th August that it was probably unlikely that the matter could be resolved" within the next year ". It appears that a local enquiry was held into thefuture of the listed warehouse, and the Secretary of State on 20th March1980 approved the Inspectors' report and granted consent for its demolition.On 30th September 1980 the Town Clerk informed the lessors that theestimated date for completion of the demolition was " sometime in lateDecember 1980 or early January 1981 ". I think it is accepted that there-opening of Kingston Street would immediately follow. So the position is that the parties to the lease contemplated, when KingstonStreet was first closed, that the closure would probably last for a year or alittle longer. In fact it seems likely to have lasted for just over eighteenmonths. Assuming that the street is re-opened in January 1981, the leasewill have three more years to run. My Lords, no doubt, even with this limited interruption the appellant'sbusiness will have been severely dislocated. It will have had to movegoods from the warehouse before the closure and to acquire alternativeaccommodation. After reopening the reverse process must take place. Butthis does not approach the gravity of a frustrating event. Out of tenyears it will have lost under two years of use: there will be nearly threeyears left after the interruption has ceased. This is a case, similar to others,where the likely continuance of the term after the interruption makes itimpossible for the lessee to contend that the lease has been brought to anend. The obligation to pay rent under the lease is unconditional, with asole exception for the case of fire, as to which the lease provides for a 12 suspension of the obligation. No provision is made for suspension in anyother case: the obligation remains. I am of opinion therefore that the lesseehas no defence to the action for rent, that leave to defend should not begiven and that the appeal must be dismissed. Lord Simon of Glaisdale my lords, By a lease dated 12th July 1974 the respondents as landlord let to theappellants (who carry on business of warehousing) as tenant premises whichwere described in the lease as " warehouse premises . . . comprisingwarehouse no. 2 ". Included in the demise was " a right of way for purposes" connected with the occupation of the said premises . . . ": this wasalong a road called Kingston Street, the only road giving access to thepremises. The lease was for 10 years as from 1st January 1974 at arent of £6,500 during the first 5 years of the term: as for the remainder,a rent review clause provided that " the yearly rent payable during the last" 5 years of the said term . . . shall be the fair yearly rent of the said" premises let in the open market for the purpose of a warehouse at the" commencement of such period ", being determinable by arbitration indefault of agreement. The landlord's reservation of services was subjectto compensation to the tenant for disturbance of the tenant's business.Amongst other tenant's covenant's (mostly common form) were thefollowing: — " (5) To insure and keep insured the said premises to the full value" thereof . . .in the joint names of the landlord and the tenant against" loss or damage by fire and such other risks as may from time to time" be required by the landlord . . . " (13) Not to do or omit to do or suffer to be done or omitted to be" done in or upon the said premises any act or thing which will render" any increased or extra premium payable for the insurance of the" said premises, or any adjoining property of the landlord . . . provided" always that the tenant's business of warehousing to be carried on" upon the premises shall not constitute any such act or thing as is" referred to in this clause and the tenant shall not be liable in respect" of any increased premiums by virtue of activities in accordance with" the ordinary course of such business. " (15) Not without the consent in writing of the landlord to use the" said premises or any part thereof or permit or suffer the same to be" used for any other purpose than that of warehousing in connection" with the tenant's business and in particular that they shall not be used" for residential purposes or for any person to sleep thereon or in any" manner which would constitute a change of use under the Town and" Country Planning Acts. " (17) That no act or thing which shall or may be or become a" nuisance [etc.] to the landlord or the landlord's tenants [etc.] shall" be done upon the said premises or any part thereof save that any" activities properly carried on in the ordinary course of the tenant's" business shall not constitute a breech of this clause. " (20) Not to use or permit or suffer to be used the said premises" or any part thereof as a factory or workshop . . ." By clause 3 the landlord covenanted in usual terms for the tenant'squiet enjoyment of the premises during the term. Clause 4(1) is the rent review clause. Clause 4(2) deals with destructionor damage by fire. It provides for abatement of the rent pendingreinstatement, and for the landlord's right to determine the tenancy in theevent of complete destruction or substantial damage by fire of the demisedpremises or the landlord's adjoining property. Clause 4(3) provides for the 13 landlord's right to determine in the event of the premises being " required" in connection with the proper operation of the British Railways undertaking" and Part III of the Landlord and Tenant Act 1954 shall not apply." The rent review clause was in fact operated so that the yearly rent for thelast 5 years of the term was agreed to be £13,300. The lease makes it clear that the parties contemplated that the demisedpremises, which were purpose-built as a warehouse, should be used as suchthroughout the term; rent was geared to this use; and no other use wascontemplated. The demised warehouse has a loading bay and large doors at theentrance from Kingston Street. Immediately opposite stood a large derelictVictorian warehouse, a building listed by the Department of the Environment.The Kingston upon Hull City Council believed that building to be adangerous structure; and they applied to the Secretary of State for theEnvironment for listed-building consent to demolish it: this must havebeen some time between April 1978 and July 1979. Demolition wasopposed by a number of conservation groups; and at the time the evidencewas filed (September 1979) the Secretary of State was to appoint a PublicInquiry into the matter. In April 1978 the City Council made an orderunder section 12(1) of the Road Traffic Regulation Act 1967, as amended,restricting the passage of vehicular and pedestrian traffic in KingstonStreet. On the 16th May 1979 the City Council made a further order, thistime closing Kingston Street to all vehicular and pedestrian traffic from18th May 1979. The order of 16th May 1979 was continued by order ofthe Secretary of State for the Environment; and it was still effective whenthe evidence was filed. No question turns on the vires of these orders.There being no other form of access to the demised premises than alongKingston Street, the closure of that street made it impossible for theappellants to continue to use the demised premises as a warehouse; nor havethey used it for any other purpose. An affidavit sworn on behalf of the appellants deposed the opinion thatin those circumstances well over a year would elapse between applicationfor listed-building consent and the ministerial decision. An exhibited letterfrom the Town Clerk of 7th August 1979 stated that "it is probably" unlikely that the matter can be resolved within the next year." Fromevidence placed before your Lordships it appears that a Public Inquiry hadbeen held in the meantime, that demolition of the derelict warehouse wassanctioned and that on the 30th September 1980 the Town Clerk informedthe respondents that the estimated date for demolition was late December1980 or early January 1981, The appellants apparently accept thatKingston Street would thereupon be again open to all traffic. The appellants ceased to pay rent to the respondents as from 18th May1979, the date of total closure of the highway. By a writ issued on 9th July1979 the respondents demanded the rent which would have been due underthe lease in the sum of £5,115.38. On 27th July 1979 the appellants fileda defence claiming that by reason of the closure of Kingston Street thelease had been frustrated on 18th May 1979, and they counterclaimed adeclaration that the lease had been discharged by frustration. On 20thSeptember 1979 Master Waldman heard the respondents' summons forsummary judgment under RSC Order 14. He was bound by authority(Cricklewood Investment Trust Limited v. Leighton's Investment TrustLimited [1943] 1 K.B. 493; Denman v. Brise [1949] 1 K.B. 22) to holdthat the submission that a lease could be discharged by frustration was notopen to the appellants to argue to any court below your Lordships' House(see Cricklewood Property v. Leighton's Investment Trust Limited [1945]A.C.221). The appellants appealed from the order of the learnedMaster. Sheen J., being similarly bound by such authority, by consentdismissed the appeal; and, since the Court of Appeal would also be similarlybound, he granted the appellants a certificate under section 12 of theAdministration of Justice Act 1969 (leapfrogging). An Appeal Committeeof your Lordships' House in due course gave leave to appeal. 14 The appeal raises three questions: — Is the doctrine of frustration inherently incapable of application toa lease? If not inherently and generally inapplicable to leases, is the doctrineof frustration capable of applying to this lease in particular? If yes, have the appellants demonstrated a triable issue that thislease has been discharged by frustration? Unless the appellants can demonstrate that the answer to (1) is 'No', andto (2) and (3) ' Yes', the respondents are entitled to summary judgment,and the appeal must be dismissed. I. Frustration of a contract takes place when there supervenes an event(without default of either party and for which the contract makes nosufficient provision) which so significantly changes the nature (not merelythe expense or onerousness) of the outstanding contractual rights and/orobligations from what the parties could reasonably have contemplated atthe time of its execution that it would be unjust to hold them to the literalsense of its stipulations in the new circumstances; in such case the lawdeclares both parties to be discharged from further performance. Whether the doctrine can apply to a lease is of more than academicinterest, considerable though that is. In the Cricklewood Property caseViscount Simon, who favoured the extension of the doctrine to leaseholds,nevertheless considered it likely to be limited to cases where "some vast" convulsion of nature swallowed up the property altogether, or buried it" in the depth of the sea " (p.229). But I think this puts the matter toocatastrophically, even in the case of a long lease. There are several placeson the coast of England where sea-erosion has undermined a cliff causingproperty on the top of the cliff to be totally lost for occupation: obviouslyoccupation of a dwelling house is something significantly different in naturefrom its aqualung contemplation after it has suffered a sea-change. Andin the case of a short lease something other than such natural disaster—thesort of occurrence, for example, that has been held to be the frustrating eventin a charter-party—might in practice have a similar effect on parties to alease. Take the case of a demise-chartered oil tanker lying alongside an oilstorage tank leased for a similar term, and an explosion destroying bothtogether. The question is entirely open in your Lordships' House, as was recognisedin the Cricklewood Property case. In my view a lease is not inherentlyunsusceptible to the application of the doctrine of frustration. In the first place, the doctrine has been developed by the law as anexpedient to escape from injustice where such would result from enforcementof a contract in its literal terms after a significant change in circumstances.As Lord Sumner said, giving the opinion of a strong Privy Council inHirji Mulji v. Cheong Yue Steamship Co. Ltd. [1926] A.C. 497, 510: " It is really a device, by which the rules as to absolute contracts are" reconciled with a special exception which justice demands. " Justice might make a similar demand as to the absolute terms of a lease. Secondly, in the words of Lord Wright in the Cricklewood Propertycase (p.241): ' The doctrine of frustration is modern and flexible and is not subject" to being constricted by an arbitrary formula ". It is therefore on the face of it apt to vindicate justice wherever owing torelevant supervening circumstances the enforcement of any contractualarrangement in its literal terms would produce injustice. Thirdly, the law should if possible be founded on comprehensiveprinciples: compartmentalism, particularly if producing anomaly, leads tothe injustice of different results in fundamentally analogous circumstances.To deny the extension of the doctrine of frustration to leaseholds producesa number of undesirable anomalies. It is true that theoretically it would 15 create an anomalous distinction between the conveyance of a freeholdinterest and of a leasehold of, say, 999 years. But it would be only inexceptional circumstances that a lease for as long as 999 years would in factbe susceptible of frustration. On the other hand, to deny the application ofthe doctrine would create an anomalous distinction between the charter ofa ship by demise (see Blane Steamships Ltd. v. Minister of Transport [1951]2 K.B. 965; Law Reform (Frustrated Contracts) Act 1943. section 2(5) (a))and a demise of land: compare, for example, a short lease of an oil storagetank and a demise charter for the same term of an oil tanker of a peculiarclass to serve such a storage tank, and a supervening event then frustratingthe demise charter and equally affecting the use of the oil storage tank.Again, a time charter has much in common with a service tenancy offurnished accommodation. Then there would be the distinction between alease and other chattel interests—say, under a hire-purchase agreement. Butmost striking of all is the fact that the doctrine of frustration undoubtedlyapplies to a licence to occupy land: see, e.g., Krell v. Henry [1903] 2 K.B.740 and the other Coronation cases. However, the distinction between alicence and a lease is notoriously difficult to draw, and, when it comes to theapplication of a doctrine imported to secure justice, even more difficult tojustify. The point is well put by Treitel, the Law of Contract, 5th edition(1979) pp.669, 670. I am clearly of opinion that the balance of anomalyindicates that the doctrine of frustration should be applied to a lease.Moreover, I shall venture to refer later to the effect of an agreement to granta lease operating to create an equitable term of years: if, as would seemto be the case, the doctrine of frustration applies to such an agreement, therewould be yet another anomaly. Fourthly, a number of theories have been advanced to clothe the doctrineof frustration in juristic respectability, the two most in favour being the" implied term theory " (which was potent in the development of the doctrineand which still provides a satisfactory explanation of many cases) and the" theory of a radical change in obligation " or " construction theory " (whichappears to be the one most generally accepted today). My noble and learnedfriends who have preceded me have enumerated the various theories; andthe matter is discussed in Chitty on Contracts, 23rd Edition (1968), volume 1,pp. 585-592. Of all the theories put forward the only one, I think,incompatible with the application of the doctrine to a lease is that whichexplains it as based on a total failure of consideration. Though such maybe a feature of some cases of frustration, it is plainly inadequate as anexhaustive explanation: there are many cases of frustration where thecontract has been partly executed. (I shall deal later with the argumentthat " the foundation of the contract" in a lease is the conveyance of theterm of years, which is accomplished once for all and can never bedestroyed.) Fifthly, a lease may be prematurely determined in a considerable varietyof circumstances. Perhaps forfeiture by denial of title is the most relevant(though now largely of historical interest), since it depended on a rule of lawextraneous to any term of the lease or to agreement of the parties wherebythe lease was prematurely discharged. I can see no reason why a rule oflaw should not similarly declare that a lease is automatically discharged onthe happening of a frustrating event. Sixthly, it seems that authorities in some other common law jurisdictionshave felt no inherent difficulty in applying the doctrine of frustration to alease. This appears especially in the American cases on the frustration ofleases of premises to sell liquor by the advent of constitutional Prohibition(see Corbin on Contracts, 1951 ed., volume 6, pp.338 et seq. for a generaldiscussion and pp.388-390 for a discussion of the Prohibition cases inparticular). Corbin's summary (p.391) has relevance to such a lease as isunder your Lordships' instant consideration: " If there was one principal use contemplated by the lessee, known" to the lessor, and one that played a large part in fixing rental value," a governmental prohibition or prevention of that use has been held 16 " to discharge the lessee from his duty to pay the rent. It is otherwise" if other substantial uses, permitted by the lease and in the" contemplation of the parties, remain possible to the lessee. " (See also the passage quoted by my noble and learned friend, LordWilberforce). Then there is the judgment of Isaacs J. in Firth v. Halloran(1926) 38 C.L.R. 261, 269. Less directly in point, but important andrelevant for its general reasoning, is the judgment of the Canadian SupremeCourt delivered by Laskin J. in Highway Properties Ltd. v. Kelly Douglas& Co. Ltd. (1971) 17 D.L.R. 3rd 710, holding that the contractual doctrineof repudiation, with its remedies independent of the landlord/tenantrelationship, is applicable to a lease. Lastly, then, from Laskin J.'s judgment (p.721): " It is no longer sensible to pretend that a commercial lease ... is" simply a conveyance and not also a contract." The doctrine of frustration, no less than the doctrine of repudiation, isapplicable to a contract. It must therefore be determined whether there isanything in a lease-as-conveyance which repels the doctrine of frustrationinherent in the lease-as-contract—outweighing the demands of justice, ofconsistency, of juristic theory accounting for the doctrine, of analogy andof authoritative opinion in other common law jurisdictions. I therefore turn to consider the arguments to the contrary. Counsel forthe respondents advanced six arguments of principle against the extensionof the doctrine of frustration to a lease. I shall not here set them out:they will, I trust, appear when this appeal is fully reported. Several would,it seems to me, apply equally to a licence to occupy land and/or to thecharter of a ship, both unquestionably susceptible of frustration. I shallconsider the others along with the arguments collected from the speechesof Lord Russell of Killowen and Lord Goddard in the Cricklewood Propertycase. The arguments are, I think, fourfold: The lease itself is the "venture" or "undertaking" on which theparties have embarked. In so far as the lease is contractual, the" foundation " of the contract is the transfer of the landlord's possessionof the demised property for a term of years in return for rent; that happensonce for all on the execution of the lease; so that its contractual" foundation " is never destroyed. The lease is more than a contract: it creates a legal estate or interestin land; and, added counsel for the respondents, it operates in rem. The contractual obligations in a lease are merely incidental to therelationship of landlord and tenant. On the conveyance the " risk " of unforeseen events passes to thelessee, as it does to the purchaser of land. I presume to think that the third proposition adds nothing to the firsttwo, from which it necessarily follows if they are valid. As for the leaseitself being the " venture " or " undertaking " the same might be said ofa licence or of a demise charter. So, too, it may be said that the" foundation " of a demise charter is that the shipowner parts with hispossession of the demised property for a term of years in return for hire.In truth, " venture ", " undertaking " and " foundation " are picturesqueor metaphorical terms: though useful in illuminating the doctrine, theyare too vague to be safe for juristic analysis. The real questions, in myrespectful submission, are the second and fourth—namely, whether the factthat a legal estate or interest in land has been created makes a leaseinherently unsusceptible of the application of the doctrine of frustration,and that the risk of what might otherwise be a frustrating event passesirrevocably to the lessee on execution of the lease. As for the significance of the creation of a legal estate or interest inland, it is convenient to note at this stage the case of an agreement to grant 17 a lease. This can operate to create an equitable term of years (Walsh v.Lonsdale (1882) 21 ChD 9). Cheshire's Modern Law of Real Property,12th ed. (1976), p.388, states specifically: " An equitable term of years may pass to the person who holds" under a contract for a lease." (book's italics.) See also Megarry & Wade, The Law of Real Property, 4th ed. (1976),pp.625 et seq. So take the case of an agreement to grant a lease of ahouse on a clifftop which, before execution of any lease, collapses intothe sea. It was conceded that equity would not grant specific performanceat the suit of the prospective lessor, the subject-matter having disappeared.Nor, since the subject-matter of the agreement cannot now be delivered,could he recover damages for breach of contract. Nor could any obligationto pay rent be enforced, since rent is payable under the lease, which willnot now be decreed. Faced with this situation, counsel for the respondentsgave two alternative answers: first, the doctrine of frustration is notapplicable to an agreement for a lease; and, secondly, if it is. it does notapply after the conveyance. But in the postulated case no conveyancefollows; and in any case the second answer is a mere reiteration of thegeneral conclusion (which is in question) that the doctrine of frustrationdoes not apply to a lease. As for the first alternative, the situation involvesthat the agreement for a lease has been frustrated de facto—it cannot befurther performed, and neither party has any obligation to or remedyagainst the other. It would be ridiculous for the law to close its eyes tothe reality of this situation or to refuse it its proper name. Moreover, anagreement to grant a lease is certainly an interest in land; it is registrableas an estate contract Class C (iv): see Land Charges Act 1925, section 10;Land Charges Act 1972, section 2(4). So here we have the case of anagreement being effectually discharged by frustration notwithstanding thatit has created an estate or interest in land, albeit equitable. The rule canhardly depend on whether the estate or interest in land is legal or equitable :no one has so suggested; and it would create an even more absurd anomalythan those to which I have ventured already to refer. I cite Denny Mott & Dickson Ltd. v. James B. Fraser Ltd. [1944] A.C.265 with some hesitation, since your Lordships did not have the benefitof adversary argument on it. But it was a case where both a contract togrant a lease (which may have operated as a lease) and an option topurchase land were held to be frustrated. It is true that they were partof a larger agreement including trading arrangements which had beenfrustrated; but I do not think that this can affect the force of the decisionas regards the frustration of the contract for a lease of (or the lease) andof the option. It is also true that it was a Scottish appeal; but LordMacmillan (p.272) stated that the incidence of the Scots doctrine offrustration was the same as the English (though the consequences mightbe different); and none of their Lordships indicated that the decisiondepended on any peculiar rule of Scots land law. Again, although Rom Securities, Ltd. v. Rogers (Holdings) Ltd. (1967)205 Estates Gazette 427 was cited to your Lordships, no argument wasdeveloped on it. Goff J. was faced with an agreement for a lease enteredinto on the unexpressed assumption that relevant planning permissionwould be granted, whereas in the event it was refused. Though the learnedjudge " was far from satisfied that the doctrine of frustration could not be" applied to an agreement for a lease " at least before entry into possession,in fact he held that the agreement was discharged under an implied termthat this should be the effect if planning permission was refused—that is,he applied a similar line of reasoning to that of Blackburn J., giving thejudgment of the Court of Queen's Bench, in Taylor v. Caldwell (1863)3 B. & S. 826, the fons et origo of the modern doctrine of frustration. Inmy view Rom Securities was a case of frustration. I can for myself see nothing about the fact of creation of an estate orinterest in land which repels the doctrine of frustration. It cannot be thatland, being relatively indestructible, is different from other subject-matter 18 of agreement: that would perhaps make a lease so much the less likely to befrustrated in fact, but would not constitute inherent repugnance to thedoctrine. In any case, we are concerned with legal interests in the landrather than the land itself. It cannot be because a lease operates in rem :so, for example, does a contract for seamen's wages, since that gives rise toa maritime lien, yet can presumably like other contracts for personalservices be frustrated by ill-health or death. Moreover, the criterion ofoperation in rem hardly matches counsel's first submission on agreementsfor a lease, which operate in personam. It cannot be because, once vested,a lease cannot be divested except by agreement of the parties. That wouldbe to beg the question: if frustration applies, it can be so divested.Moreover, as I have tried to demonstrate, quite apart from frustration itcan be so divested by operation of law in the doctrine of denial of title.And, as my noble and learned friend, Lord Wilberforce, has pointed out,there is nothing illogical in implying a term in a lease that it shall bedischarged on the occurrence of a frustrating event. Nor, finally, is itrealistic to argue that on execution of the lease the lessee got all that hebargained for. The reality is that this lessee, for example, bargained, notfor a term of years, but for the use of a warehouse owned by the lessor—justas a demise charterer bargains for the use of the ship. I turn, then, to the second main contention—namely, that the risk ofunforeseen mischance passes irrevocably to the lessee at the moment ofconveyance. This, too, begs the question whether the doctrine of frustrationapplies to leaseholds. If it does, such risk does not pass in allcircumstances. Moreover, the sale of land is a false analogy. A fullyexecuted contract cannot be frustrated; and a sale of land is characteristicallysuch a contract. But a lease is partly executory: rights and obligationsremain outstanding on both sides throughout its currency. Even a partlyexecuted contract is susceptible of frustration in so far as it remainsexecutory: there are many such cases in the books. As for the authorities, I have had the advantage of reading in draftthe speeches of my noble and learned friends who have preceded me andof my noble and learned friend, Lord Roskill. I agree with, and beg toadopt, their analyses and conclusions. I would only add a comment onParadine v. Jane (1647) Aleyn 26, since that seems to be the starting pointof those who deny the applicability of the doctrine of frustration to leases.But it did not turn at all on the fact that a leasehold was in question. Itwent on the then prevalent rule of the law of contract that a party who " by his own contract creates a duty or charge upon himself, he is" bound to make it good, if he may, notwithstanding any accident by" inevitable necessity, because he might have provided against it by his" contract." A rule in such terms can hardly stand since the development of the doctrineof frustration. My conclusion on the first issue is therefore that the doctrine of frustrationis in principle applicable to leases. II. Counsel for the appellants claimed that this was a " commercial" lease ", a class at any rate to which the doctrine of frustration is applicable.In a sense every lease is commercial insofar as it is a matter of businessbetween landlord and tenant. On the other hand, a lease and itssubject-matter may be more or less closely connected with commerce, tradeor industry. The answer which I ventured to propose to the first issuefacing your Lordships indicates my view that there is no class of lease towhich the doctrine is inherently inapplicable. But, as with any otheragreement, the terms and subject-matter of a lease will affect thecircumstances in which it might be frustrated. The more commercial thecharacter of an agreement, the more various are the circumstances in whichit is liable to frustration. In a lease, as in a licence or a demise charter, the length of the unexpiredterm will be a potent factor. So too, as the American cases show, will beany stipulations about, particularly restrictions on, user. In the instant 19 case the lease was for a short term/and had only about four-and-a-halfyears to run at the time of the alleged frustrating event—the closure ofKingston Street. The demised premises were a purpose-built warehouse, andboth parties contemplated its use as a warehouse throughout the term. Thisuse, in Corbin's words, "played a large part in fixing rental value," asthe rent review clause shows. After the closure of Kingston Street it couldno longer be used as a warehouse. No " other substantial use, permitted" by the lease and in the contemplation of the parties," remained possible tothe lessee. Therefore, although I do not think that there is any definable class oflease which is specifically susceptible of frustration, the facts of the caseas I have summarised them in the previous paragraph indicate that thislease is very much the sort that might be frustrated in the circumstancesthat have occurred. HI. The question therefore arises whether the appellants havedemonstrated a triable issue that the lease has been frustrated. The mattermust be considered as it appeared at the time when the frustrating eventis alleged to have happened. Commercial men must be entitled to act onreasonable commercial probabilities at the time they are called upon tomake up their minds (Scrutton J. in Embiricos v. Sydney Reid & Co. [1914]3 K.B. 45, 54). What we know has in fact happened is, however, availableas an aid to determine the reasonable probabilities at the time when decisionwas called for (Lord Wright in Denny Mott & Dickson Ltd. v. James B.Fraser & Co. Ltd. [1944] AC 265, 277, 278). Favourably to the appellant's case, the road would remain closed for" well over a year" from application for listed-building consent todemolition. Still more favourable is that it will in fact remain closed forsome twenty months. The appellants were undoubtedly put to considerable expense andinconvenience. But that is not enough. Whenever the performance of acontract is interrupted by a supervening event, the initial judgment isquantitative—what relation does the likely period of interruption bear tothe outstanding period for performance? But this must ultimately betranslated into qualitative terms: in the light of the quantitativecomputation and of all other relevant factors (from which I would notentirely exclude executed performance) would outstanding performance inaccordance with the literal terms of the contract differ so significantly fromwhat the parties reasonably contemplated at the time of execution thatit would be unjust to insist on compliance with those literal terms? Inthe instant case, at the most favourable to the appellants' contention, theycould, at the time the road was closed, look forward to pristine enjoymentof the warehouse for about two-thirds of the remaining currency of the lease.The interruption would be only one-sixth of the total term. Judging bythe drastic increase in rent under the rent review clause (more than doubled),it seems likely that the appellants' occupation towards the end of the firstquinquennium must have been on terms very favourable to them, as itwould probably be again at the end of the second. The parties can hardlyhave contemplated that the expressly-provided-for fire risk was the onlypossible source of interruption of the business of the warehouse—somepossible interruption from some cause or other cannot have been beyond thereasonable contemplation of the parties. Weighing all the relevant factors,I do not think that the appellants have demonstrated a triable issue thatthe closure of the road so significantly changed the nature of the outstandingrights and obligations under the lease from what the parties couldreasonably have contemplated at the time of its execution that it would beunjust to hold them to the literal sense of its stipulations. It follows that in my judgment the appellants fail on the third issue; andI would therefore dismiss the appeal. I would, however, presume to suggest that consideration should be givento whether the English doctrine of frustration could be made more flexiblein relation to leases. The 1943 Act seems unlikely to vouchsafe justice in 20 all cases. As often as not there will be an all-or-nothing situation, the entireloss caused by the frustrating event falling exclusively on one party, whereasjustice might require the burden to be shared. Nor is this situationconfined to leases. Lord Russell of Killowen MY LORDS, I am prepared to accept that the termination of a lease may be involvedin the frustration of a commercial adventure when, as merely incidentalto the overall commercial adventure, and a subordinate factor, a leasehas been granted. To that extent at least I accept that there may befrustration of a lease, and that the second answer of the Pinafore's captainon the subject of mal-de-mer is to be preferred to his first. But the instant case is in no way such a case. It is simply a lease of theland with the building on it. I cannot accept that it is to the point to saythat the use to which it was assumed and intended that the building onthe demised land was to be put was commercial. That does not bring thelease into the field of a commercial adventure, so as for that reason tobring it within the scope of frustration. The only adventure was thegranting and acceptance of a demise of the land, as in the case of anylease, at a rent. Land is of its nature different from a chattel, however small the plotand however large the chattel. A leasehold interest is described as achattel real, but that distinction touched only on questions of descent andinheritance. Originally perhaps sounding only in contract or covenant ithas long since come to man's estate as a legal estate in land—indeed nowone of the only two. Land has in general a quality of indestructibility lacking in any chattel.Under a grant of the freehold estate in the fee simple the land passes asto its surface and below its surface, and the airspace above, subject toexclusions, e.g. of minerals: though " flying" freeholds require specialconsideration. Under the grant of the leasehold interest the land similarlypasses for its duration, subject to the ability to determine that duration byeither the lessor or the lessee according to the terms of the lease. And Iremark at this stage that I cannot see the force in the suggestion that,because according to its terms the lease may in certain circumstances bedetermined otherwise than by the expiry of its term, there can be noobjection to its determination by application of the doctrine of frustration. Another distinction between the nature of land and of chattels is that incertain situations—riparian or by the seashore—there may be accretionto the land and therefore to the site comprised in the lease. A vesselunder a so-called time charter demise can only acquire barnacles. It is my understanding of the law that the purchaser of land, whetherfor a freehold or a leasehold interest, takes the risk that it may be or mayturn out to be less suitable or quite unsuitable for the purpose he has inmind, unless the vendor or lessor has taken upon himself by warranty orotherwise some liability in that event. A freehold purchaser cannot inthat event, after completion, return the land and ask for his money back:though in an appropriate case he might be able to resist specific performancewhile the contract remained outstanding. So also in the case of a leasefor which a premium has been paid in addition to rent: the lessee cannotrequire repayment of the premium and refuse to pay the rent: nor wherethere is no premium can he refuse to pay the covenanted rent. Under the bargain between lessor and lessee the land for the term haspassed from the lessor to the lessee, with all its advantages anddisadvantages. In the instant case a disadvantage existed, or rathersupervened, in that access to the building preventing its use for anypurpose was blocked by administrative action which we must assume was 21 legally permitted, and for which we were not told that any compensationcould be claimed. If a principle of achieving justice be anywhere at theroot of the principle of frustration, I ask myself why should justice requirethat a useless site be returned to the lessor rather than remain the propertyof the lessee? (It is not suggested that a just solution can be achieved bysomehow sharing the bad luck between lessor and lessee by, for example,a reduction of rent.) I would reserve consideration of cases of physical destruction of flyingleaseholds: and of the total disappearance of the site comprised in thelease into the sea so that it no longer existed in the form of a piece ofterra firma and could not be the subject of re-entry or forfeiture. In thatlast case I would not need the intervention of any court to say that theterm of years could not outlast the disappearance of its subject matter:the site would no longer have a freeholder lessor, and the obligation topay rent, which issues out of the land, could not survive its substitutionby the waves of the North Sea. It will be sufficiently seen from what I have said that I am not able togo so far as do your Lordships on the potential applicability of the doctrineof frustration to leases, and would with minor qualification adhere to theviews expressed in the Cricklewood case in this House by Lord Russell ofKillowen and Lord Goddard. These views expressed, as Lord Goddardsaid, the general view taken of the law by the profession, and there hasbeen some statutory recognition of that view in giving relief to lesseeswhere war damage had made the building on the leased site useless for itspurpose as a dwelling house. In the instant case I would have denied acase of frustration even if the closing of the access to the site had followedonly a year after the commencement of the lease and were to last for thewhole of its remaining duration. Having regard to the powerful expressions of opinion of the others ofyour Lordships, I do not think that any useful purpose would be servedby elaboration on my part I am, on the assumption that in general your Lordships are correct,entirely in agreement with the view that on the facts of this case, as nowknown, the appellant does not establish a triable issue of frustration, andaccordingly I concur in the view that this appeal must be dismissed. Itrust that those advising lessees will mark well the " hardly ever " approach,and that litigation will be little encouraged by this cautious departure fromwhat may previously have been thought to be the law. Lord Roskill MY LORDS, The appellants are the lessees of a warehouse in Kingston Street, Hull, ofwhich the respondents are the lessors. Their lease was dated the 12th July1974 and its term was 10 years from the 1st January 1974. It therefore expireson the 31st December 1983. It is beyond question that since the 18thMay 1979 the appellants have been deprived of the beneficial use of thewarehouse by the closure of Kingston Street both for vehicles and pedestrians,but their possession of the warehouse under the demise from the respondentshas in no way been disturbed. It is not necessary in this appeal to considerprecisely the powers under which the closure order was finally made, uponwhich the information before your Lordships' House was regrettably sparse.It can be assumed that that order was lawfully made and is still in force.The cause of the closure was the unsafe condition of a derelict Victorianwarehouse opposite. That warehouse is now being demolished withpermission and the recent correspondence placed before your Lordshipsshows that that demolition should be complete by the end of this year orthe beginning of next. If this prediction proves accurate, the appellantswill once again have the necessary access to their warehouse and itsbeneficial use will once again be available to them. Upon the basis of 22 those dates the appellants will have lost their beneficial use for about20 months. There was at the time of the first closure order just over4 1/2 years of the term of 10 years unexpired and there will be some 3 yearsremaining when the beneficial use is likely to be restored. The respondents have claimed rent throughout the period of closure.The obligation to pay rent is, it is said, absolute and unqualified and therisk of loss of beneficial use falls on the lessees. The appellants refusedto pay. They claimed that their obligation to pay rent had come to anend because of frustration brought about by the closure of Kingston Streetand the denial to them of the beneficial use of the warehouse. Therespondents issued a writ on the 9th July 1979 in respect of rent due onthe 1st April and 1st July 1979. Your Lordships were told that there wasno dispute on figures and if the appellants are liable the sum due is thatclaimed. I would only observe that on any view of this case I find it difficultto see what defence there could be to the claim for rent due on the 1st April1979 since the event relied upon for excusing liability, namely the streetclosure order, did not take effect until the 18th May 1979 and under thelease rent was payable in advance. But if the appellants be right theywould have a defence to the claim for rent for the quarter beginning the1st July 1979. The respondents sought judgment under Order 14. The learned mastergave judgment for the amount claimed. The appellants appealed to thejudge in chambers, Sheen J. That learned judge rightly dismissed the appealon the 16th October 1979. Your Lordships were told that he did sowithout giving a reasoned judgment because he was bound by the decisionof the Court of Appeal in Cricklewood Property & Investment Trust Ltd.v. Leighton's Investment Trust Ltd. [1943] K.B. 493 that as a matter of lawthe doctrine of frustration could not apply to a lease. Accordingly therecould be no defence to the respondents' claim. The learned judge wasclearly bound by that decision as the Court of Appeal would have beenhad the present appeal first proceeded to that court. The learned judge then certified under section 12 of the Administrationof Justice Act 1969 that a point of law of general public importance wasinvolved in respect of which he was bound by a decision of the Court ofAppeal and accordingly gave the appellants a certificate for leave to presenta petition of appeal to your Lordships' House. That petition your Lordshipssubsequently granted. The course so adopted, very naturally in thecircumstances, has had the result that this important and long debatedquestion of law—can a lease ever be frustrated—comes before yourLordships for decision in Order 14 proceedings without your Lordshipshaving the benefit of judgments of the trial judge or of the Court of Appealand on facts the supply of which has certainly been economical. My Lords, this question was last before your Lordships' House some 35years ago on appeal in the Cricklewood case [1945] A.C. 221. Therewere then sitting in your Lordships' House Viscount Simon L.C., thesecond Lord Russell of Killowen, Lord Wright, Lord Porter and LordGoddard. All their lordships were agreed that if the doctrine of frustrationcould apply to a lease it did not apply to the building lease in question. Butupon the issue now before your Lordships there was a sharp division ofopinion, Viscount Simon L.C. and Lord Wright taking the view that thedoctrine could apply to a lease, albeit extremely rarely, and the secondLord Russell of Killowen and Lord Goddard emphatically taking the viewthat it could never apply to a lease. Lord Porter declined to express a view,leaving the point to be decided when it arose for decision. My Lords,some 35 years later the point does arise for decision. In the interval therehas been much debate and much learning which view should prevail. One thing at least is plain. This question has never yet been the subjectof direct decision in your Lordships' House. My Lords, what is nowcalled the doctrine of frustration was first evolved during the nineteenthcentury when notwithstanding the express language in which the partieshad concluded their bargain the courts declined in the event which 23 occurred to hold them to the strict letter of that bargain. Taylor v. Caldwell(1863) 3 B & S 826; 122 ER 309 is perhaps the most famous mid-nineteenthcentury case, in which the relevant principle was laid down by Blackburn J.(as he then was) giving the judgment of the Court of Queen's Bench. Thedispute in that case arose under a document which was expressed in thelanguage of the lease but which was held to be a licence. There was nodemise of the premises. But the licensee was relieved of his obligation topay " rent" because of the fire which destroyed the premises and so madeperformance impossible. One can find what might be called anticipatorytraces of the doctrine enunciated in Taylor v. Caldwell in some of the earliernineteenth century cases, principally in relation to contracts of personalservice made impossible of performance by death or illness, but no usefulpurpose would be presently served by reviewing them. What is importantis not what happened before Taylor v. Caldwell but what happenedthereafter. The doctrine evolved slowly especially in the field of commercial law.It was invoked in the Coronation cases. As late as Matthey v. Curling[1922] 2 A.C. 180, Younger L.J. (as he then was) said in the Court of Appealat p.210 of the report that the doctrine of frustration was not one to beextended, a view much falsified in the event. It is interesting to observe,in view of the respondents' insistence that the doctrine had no applicationto a lease, that for a while it was thought that the doctrine had no applicationto the ordinary form of time charter party under which no possession passesto the time charterer. In Admiral Shipping Co. Ltd. v. Weidner Hopkins& Co. [1916] 1 K.B. 429 as experienced a judge as Bailhache J. expressedthe view that this was so and some support for his view can be found inthe speech of Lord Parker of Waddington in Tamplin's case [1916] 2 A.C.397 at pages 424/5. But your Lordships' House in Bank Line Ltd. v.Arthur Capel & Co. [1919] AC 435 determined the law beyond alldoubt—that such a time charter-party could be determined by frustration ifthe facts of the particular case justified that conclusion. That decision didnot, however, expressly at least, embrace a charter by demise wherepossession passes to the demise charterer and Mr. Godfrey Q.C. for therespondents was able to show that as recently as Blane Steamships Ltd. v.Minister of Transport [1951] 2 K.B. 965 counsel for the appellants wereable—see page 975 of the report—on the strength of the Cricklewood caseto argue (albeit wholly unsuccessfully) that the doctrine had no applicationto a charter by demise. It is now clear beyond question that the doctrineapplies to time charters by demise as well as to other forms of time orvoyage charter-parties. My Lords, I mention these matters for three purposes, first to show howgradually but also how extensively the doctrine has developed; secondlyto show how, whenever attempts have been made to exclude the applicationof the doctrine to particular classes of contract, such attempts, thoughsometimes initially successful, have in the end uniformly failed and thirdly,albeit I hope without unnecessary reference to a mass of decidedcases—many in your Lordships' House—the doctrine has at any rate in thelast half century and indeed during and since the first World War beenflexible, to be applied whenever the inherent justice of a particular caserequires its application. The extension in recent years of Governmentinterference in ordinary business affairs, inflation, sudden outbreaks of warin different parts of the world, are all recent examples of circumstances inwhich the doctrine has been invoked, sometimes with success, sometimeswithout. Indeed the doctrine has been described as a " device " for doingjustice between the parties when they themselves have failed either whollyor sufficiently to provide for the particular event or events which havehappened. The doctrine is principally concerned with the incidence ofrisk—who must take the risk of the happening of a particular eventespecially when the parties have not made any or any sufficient provisionfor the happening of that event. When the doctrine is successfully invokedit is because in the event which has happened the law imposes a solution,casting the incidence of that risk on one party or the other as thecircumstances of the particular case may require, having regard to the express 24 provisions of the contract into which the parties have entered. The doctrineis no arbitrary dispensing power to be exercised at the subjective whim ofthe judge by whom the issue has to be determined. Frustration if itoccurs operates automatically. Its operation does not depend on theaction or inaction of the parties. It is to be invoked or not to be invokedby reference only to the particular contract before the court and the factsof the particular case said to justify the invocation of the doctrine. My Lords, I think it can at the present time be safely said that, leases andtenancy agreements apart, there is no class of contract in relation to whichthe doctrine could not be successfully invoked if the particular case justifiedits implication, however slow and however hesitant the common law mayhave been in developing the doctrine thus far. Clearly it is likely to beable to be more successfully invoked in some classes of case than others,for example, where the requisition of a ship under time charter which islikely to outlast the remaining period of the charter—e.g. Bank Line Ltd.v. Capel & Co. (supra), though not if the requisition is likely to be short inits duration—Port Line Ltd. v. Ben Line Steamers Ltd. [1958] 2 Q.B. 146.It will not often (if at all) be able to be successfully invoked by a seller ofgoods who is likely to invoke it on a rising market merely because the modeof performance contemplated when the contract was made proves impossiblebut some other and, according to the tribunal of fact, not fundamentallydifferent but more expensive mode of performance remains available—Tsakiroglou & Co. Ltd. v. Noblee Thorl G.m.b.H. [1962] A.C. 93 and theother Suez cases. If, therefore, this doctrine, developed as it has pragmatically andempirically, has advanced thus far by the last quarter of the twentiethcentury, I ask what the reasons are in principle why it should not now beheld capable of embracing leases and tenancy agreements? Some of thereasons are certainly formidable and have undoubtedly attracted weightysupport hi your Lordships' House from, the second Lord Russell ofKillowen and Lord Goddard. First, it is said that the lessee has secured fullconsideration for his covenant to pay rent, namely the conveyance of theleasehold interest for the relevant term of years with all the attendantbenefits and burdens. Then it is said that it is a basic principle of land: lawnot now to be disturbed hi your Lordships' House which has prevailed bothin relation to the conveyance of freeholds and leases—that the incidence of therisk of accidents passes to the purchaser or lessee. Then it is said, quitecorrectly, that a lease creates an estate in land and third parties may acquirerights thereunder so that to apply the doctrine of frustration would or mightdestroy the interests of third parties against their wishes. It is also said thatit is the lease and therefore the estate in land which is the adventure and thatthe attached contractual conditions are but ancillary provisions to thatestate in land. But there are also formidable arguments the other way. The law shouldnot be compartmentalised. In principle a common law doctrine ought notto be held capable of applying only in one field of contract but not hianother. To preserve the dichotomy between leases on the one hand andother types of contract on the other can undoubtedly create anomalies. Thusif a ship is demise-chartered for the purpose of storing oil and explodeswithout fault of either party, the demise charter would clearly be frustrated.If the same demise charterer also leases an adjacent shore installation for thesame purpose and the same explosion destroys that installation along withthe demise-chartered ship, rent for that storage installation would remainpayable in full for the unexpired period of the lease though liability fordemise charter hire had ceased upon the frustration of the demise charterparty. My Lords, another consideration is surely this. There are many reportedcases in recent years, especially in connection with attempts to avoid theoperation of the Rent Acts, where disputes have arisen whether a particularagreement is a lease or tenancy agreement on the one hand or a licence onthe other. Such cases often turn on narrow distinctions. But it is difficultto justify a state of the law which would uphold the application of the 25 doctrine of frustration where the agreement is held to be a licence but woulddeny the application of that doctrine where the agreement is held to be alease or tenancy agreement In so stating I have not lost sight of the contraryanomaly to which my noble and learned friend Lord Russell of Killowendrew attention during the argument and which could in theory arise if theappellants' submissions are allowed to prevail; for their submission woulddeny the invocation of the doctrine where the conveyance was of a freeholdbut would allow its invocation, at least in legal theory if not in reality, if theconveyance were only of a lease for 999 years. Yet another considerationwhich is relevant is this. However much weight one may give to the factthat a lease creates an estate in land in favour of the lessee, in truth it is byno means always in that estate in land in which the lessee is interested. Inmany cases he is interested only in the accompanying contractual right to usethat which is demised to him by the lease and the estate in land which heacquires has little or no meaning for him. In Professor Treitel's book onContract (5th edition at pages 669-70) the learned author mentions the caseof a cottage leased for a period as a holiday home. In many such cases theholiday maker's rights are not only a licence to use but include a demisewith the concomitant right to exclusive possession. The holiday makeracquires an estate in land. But that, my Lords, has little meaning for him.He acquires that estate in land, it is true, but only in order to enjoy for awhile that exclusive right to the demised premises for his holiday. I find itdifficult to see why in principle such a lease should be incapable of beingfrustrated if the facts justify that result, especially as the doctrine wouldclearly be applicable had the holiday maker's rights derived from a licenceand not from a lease. My Lords, if your Lordships are now to say that a lease can never befrustrated, it must be for some reason of policy. I unreservedly accept thathitherto whenever the argument that a lease can be frustrated has beenadvanced, that argument has failed. In passing it is interesting to notethat, although all members of your Lordships' House thought otherwise,Asquith J. (as he then was), the trial judge in the Cricklewood case, wouldhave held the building lease there in question to be frustrated had he feltfree to hold that the doctrine was capable of application to leases. My Lords, in a matter of this kind while it is right for your Lordshipsto look back to the past, it is surely more important to look forward andconsider what rule of law should henceforth prevail. Historic considerationsalone cannot justify the preservation of a rule if that rule has ceased toserve any useful purpose and is unlikely to serve any useful purpose inthe years immediately ahead. One submission in favour of preserving the old rule was that to holdthat the doctrine is applicable to leases would encourage unmeritoriouslitigation by lessees denying liability for rent which was plainly due. Thisis the not unfamiliar " floodgates " argument invariably advanced wheneverit is suggested that the law might be changed. My Lords, such anargument should have little appeal. If a defence of frustration be plainlyunarguable, it will always be open to the master or judge in chambers soto hold and to give summary judgment for the lessors on the ground thatthe lessees have failed to show any arguable defence. I respectfully agreewith Viscount Simon L.C. and Lord Wright in the Cricklewood case thatthe cases in which the doctrine will be able to be successfully invoked arelikely to be rare, most frequently though not necessarily exclusively wherethe alleged frustrating event is of a catastrophic character. If that be sothe " floodgates " argument ceases to have any weight. Your Lordships were referred to a decision of Goff J. (as he then was)in Rom Securities, Ltd. v. Rogers (Holdings) Ltd. (1968) 205 EstatesGazette 427, in which that learned judge expressed himself as far fromsatisfied that the doctrine of frustration could not be applied to an agree-ment for a lease. My Lords, if that view be right, as I think it is, and thedoctrine is applicable to an agreement for a lease, I find it difficult to see 26 why a different view should apply in the case of a lease because in thelatter case there has been a demise whereas in the former there has not;equity presumes that to have been done which should be done. Thus far, my Lords, I have sought to examine the crucial question onprinciple and without detailed regard to the many authorities to whichyour Lordships have referred. The three principal English cases reliedupon by the respondents are London and Northern Estates Co. Ltd. v.Schlesinger [1916] 1 K.B. 20, Whitehall Court Ltd. v. Ettlinger [1920]1 K.B. 680, and Matthey v. Curling [1922] 2 A.C. 180. In the first ofthese cases Lush J. at page 24 stated as a ground for denying theapplicability of the doctrine that a term of years has been created by theagreement in question, but the decision was plainly right upon the trueconstruction of the lease and the facts of that case. The lease properlyconstrued did not contemplate only personal residence by the defendant.Similarly Whitehall Court Ltd. v. Ettlinger was rightly decided on the trueconstruction of the lease and the particular facts of that case. Like LordWright in the Cricklewood case I do not regard the passage in the judgmentof Lord Reading C.J.—be it noted that it was an extempore judgment—at page 685 as holding that a lease Is incapable of frustration. My Lords, I think Mr. Godfrey Q.C. was right in saying that the genesisof the suggestion that a lease is capable of frustration lies in the dissentingjudgment of Atkin L.J. (as he then was) in the Court of Appeal in Mattheyv. Curling [1922] A.C. at 119/200. I have read and re-read the speechesin your Lordships' House. I am clearly of the view that the majority ofyour Lordships' House though disagreeing with that dissenting judgmentwere deciding that case (a singularly harsh decision from the tenant's pointof view) by reference to the particular lease and the particular facts of thecase. I do not think that decision in any way assists the determination ofthe present question. Nor, with respect, is any assistance to be gainedfrom the Scottish case of Tay Salmon Fisheries Co. Ltd. v. Speedie 1929S.C. 593 which was decided under a system of law different in the crucialrespect from that applicable to Matthey v. Curling. In my judgment theCourt of Appeal in the Cricklewood case was wrong in assertingcategorically that those three English cases to which I have referred weredecisive in favour of the proposition that the doctrine of frustration hadno application to a lease, even though in the first there is a dictum to thateffect. I find myself in respectful agreement with what Viscount SimonL.C. and Lord Wright said with regard to those three cases. Your Lordships were referred to certain United States authorities collectedin Williston on Contracts (3rd Edition 1978), volume 18, paragraph 1955.Clearly there are United States decisions —none it seems of the highestauthority—both ways. Many of these cases arose from the EighteenthAmendment and its effect upon leases of premises entered into solely forthe sale of liquor. I respectfully doubt whether much help is to be gainedfrom such decisions. It is however interesting to observe that ProfessorCorbin in his work on Contracts (1951 Edition), volume 6, paragraph 1356,takes the view at page 387 that the argument in favour of the non-applicability of the doctrine of frustration based upon the view that thelessee had assumed the risk " has long since ceased to be convincing"adding " Whether the frustration of the tenant's purposes operates in" discharge of his duty depends upon all the circumstances, especially upon" the extent of that frustration and the prevailing practices of men in like" cases." Your Lordships were helpfully referred to one Canadian and oneAustralian decision, the former of the Supreme Court of Canada, the latterof the High Court of Australia. In the former, Highway Properties Ltd. v.Kelly, Douglas & Co. Ltd. (1971) 17 D.L.R. (3d) 710 Laskin J. (as he thenwas) delivering the judgment of the Supreme Court, said: " There are some general considerations that support the view that" I would take. It is no longer sensible to pretend that a commercial" lease, such as the one before this court, is simply a conveyance and 27 " not also a contract. It is equally untenable to persist in denying resort" to the full armoury of remedies ordinarily available to redress" repudiation of covenants, merely because the covenants may be" associated with an estate in land. " In the latter case, Firth v. Halloran (1926) 38 C.L.R. 261, Isaacs J. (as hethen was), though agreeing with other members of the court in holdingthat in a particular case there was no frustration, said at page 269: " I do not agree that, because the contractual obligation relied on by" the plaintiff is created by an instrument of lease, the doctrine of" frustration is necessarily excluded. The nature of the relation of" landlord and tenant, the history of the doctrine of frustration, its" inherent meaning and the judicial determination of relevant cases" would lead me to reject so sweeping a rule. Nor do I think the" consequences of terminating the relation of landlord and tenant any" more extraordinary than that of terminating any other legal relation" which by hypothesis is expressly and impliedly created on a mutual" and fundamental basis of existence or continuance which fails at" a given point. . . ." It is, however, right to say that he alone of the members of the HighCourt of Australia took that view and certainly two other members of thatcourt agreed with the court below in holding that the doctrine had noapplication to a lease. My Lords, I do not find anything in these writings and decisions whichaffords a compelling reason for maintaining the view that the doctrine isinapplicable to leases. The inclination of these writings and decisions is tomy mind the other way. The learned authors of Megarry & Wade's Law ofReal Property (4th edition) at page 674, not surprisingly in view of thedifference of opinion in the Cricklewood case, treat the question as open. My Lords, I do not find it necessary to examine in detail thejurisprudential foundation upon which the doctrine of frustration supposedlyrests. At least five theories have been advanced at different times: seethe speech of my noble and learned friend Lord Wilberforce in LiverpoolCity Council v. Irwin [1977] AC 239 at pages 253/4. At one time withoutdoubt the implied term theory found most favour, and there is highauthority in its support. But weighty judicial opinion has since movedaway from that view. What is sometimes called the construction theoryhas found greater favour. But my Lords, if I may respectfully say so, Ithink the most satisfactory explanation of the doctrine is that given byLord Radcliffe in Davis Contractors v. Fareham U.D.C. [1956] AC 696 atpage 728. There must have been by reason of some supervening eventsome such fundamental change of circumstances as to enable the court tosay—" this was not the bargain which these parties made and their bargain" must be treated as at an end " —a view which Lord Radcliffe himselftersely summarised in a quotation of five words from the Aeneid " non haec" in foedera veni". Since in such a case the crucial question must beanswered as one of law—see the decision of your Lordships' House in theTsakiroglou case—by reference to the particular contract which the partiesmade and to the particular facts of the case in question, there is, I venture tothink, little difference between Lord Radcliffe's view and the so-calledconstruction theory. My Lords, it follows that on the question of principle, I find it impossibleto justify compartmentalisation of the law or to agree that the doctrine offrustration applies to every type of contract save a lease. I can see nological difference between frustration of a demise charterparty andfrustration of a lease. In principle the doctrine should be equally capableof universal application in all contractual arrangements. I therefore findmyself in respectful agreement with the reasoning of Viscount Simon L.C.and Lord Wright and in respectful disagreement with the views of thesecond Lord Russell of Killowen and Lord Goddard in the Cricklewoodcase. 28 But to hold that the doctrine is capable of applying to leases does notmean that it should be readily applied. Viscount Simon L.C. and LordWright both indicated in the Cricklewood case some of the limitations towhich the invocation of the doctrine would be subject. I respectfully agreewith what was there said but I do not think any useful purpose wouldpresently be served by attempting to categorise those cases where thedoctrine might be successfully invoked and those where it might not.Circumstances must always vary infinitely. I am, however, clearly of theview in common with all your Lordships that the doctrine cannot possiblybe invoked in the present case for the reasons given by my noble and learnedfriend Lord Wilberforce. I would therefore dismiss this appeal with costs. 312948 Dd 8013619 170 12/80 BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII URL: https://www.bailii.org/uk/cases/UKHL/1980/8.html