Landlord and Tenant Act 1927, section 19(1)(b) — Qualified covenant against assignment — Building lease for more than 40 years with more than seven years of the term unexpired — Provisos requiring lessees to obtain, if so required by the lessors, an acceptable guarantor and a direct covenant by the assignee with the lessors to observe and perform the covenants and conditions of the lease — Whether effect of section 19(1)(b) was to relieve lessees of the obligations contained in the provisos — No existing authority on the true construction of section 19(1)(b) — Held by Knox J that the obligations in regard to a guarantor and a direct covenant by the assignee were not struck down by the 1927 Act
to these proceedings were tenants and landlords under four underleases which
related to premises connected with the Swallow Hotel, Newgate Street, Newcastle
upon
which were to constitute an hotel, was for a term of 99 years less three days
from August 25 1967 — It was thus common ground that section 19(1)(b) of the
Landlord and Tenant Act 1927 applied inter alia to any assignment — The
relevant covenants in the underlease were not to assign the demised premises without
the consent of the underlessors; upon any assignment to obtain, if required by
the latter, an acceptable guarantor for any private limited company; and to
obtain a direct covenant by the assignee with the underlessors
proceedings arose because the plaintiff underlessees claimed to be entitled to
assign to WHL Hotels Ltd without being under an obligation to provide an
acceptable guarantor — The plaintiffs’ originating summons accordingly sought
declarations that they were entitled to assign the underlease (a) without the
consent of the defendant underlessors, (b) without obtaining any guarantor and
(c) without obtaining a direct covenant by WHL Hotels Ltd with the defendants —
There was, of course, no contention with regard to (a)
submitted that section 19(1)(b) was a much more far-reaching provision than
section 19(1)(a) — Section 19(1)(b), it was suggested, showed a discernible
statutory policy designed to confer freedom of assignment, so that anything
which inhibited such freedom was repugnant to the policy and was intended to be
struck down — The plaintiffs also submitted a somewhat more philosophical
doctrine, namely, that the congeries of obligations, including the specific
covenant not to assign without consent, the provisos as to a guarantor and a
direct covenant by the assignees, together with other associated provisions,
should all be regarded as parts of one covenant, ‘which made a seamless whole’
— The idea appeared to be that this one seamless covenant was in its entirety
subject to section 19(1)(b) and as such enjoyed a dispensation from due
performance — Neither of these submissions found favour with the judge
however, derived some assistance from the authorities on the construction of
section 19(1)(a), such as Adler v Upper Grosvenor Street Investment Ltd and Bocardo SA v S&M Hotels
Ltd, which vindicated, as against dicta in Greene v Church Commissioners, the
continued validity of a requirement for a tenant to offer to surrender his term
to his landlord as a condition precedent to the operation of the covenant
against assignment without consent — The correct procedure was to look at the
relevant clause and see whether the words introduced by the operation of the
statute necessarily prevented effect being given to what the parties had agreed
should be the bargain between them — Taking as an example the proviso about a
guarantor, the obtaining of a guarantor was not a condition precedent to the
assignment being effected; it was something to be carried out once there was an
assignment — The judge therefore rejected the proposition that the introduction
of the statutory words had the effect of destroying the bargain which the
parties had made about the provision of a guarantor — Accordingly, the
guarantor covenant was not struck down by section 19(1)(b) — The same reasoning
applied to the proviso about securing a direct covenant by the assignee
touched briefly on the suggestion made by Danckwerts LJ in Property &
Bloodstock Ltd v Emerton that the application of section 19(1) to an absolute
covenant against assignment remained undecided
the answers to the questions in the originating summons were that the
plaintiffs were entitled to assign the underlease to WHL Hotels Ltd without
licence or consent but were not entitled to do so without obtaining a guarantor
or without obtaining a direct covenant by the assignees
The following
cases are referred to in this report.
Adler v Upper Grosvenor Street Investment Ltd [1957] 1 WLR 227;
[1957] 1 All ER 229
Bocardo
SA v S&M Hotels Ltd [1980] 1 WLR 17;
[1979] 3 All ER 737; (1979) 39 P&CR 287; [1979] EGD 500; 252 EG 59, [1979]
2 EGLR 48, CA
Creer v P&O Lines of Australia Pty Ltd (1971) 125 CLR 84
Greene v Church Commissioners for England [1974] Ch 467; [1974] 3
WLR 349; [1974] 3 All ER 609; (1974) 29 P&CR 285, CA
Property
& Bloodstock Ltd v Ernerton (No 2)
[1967] 2 All ER 839
Woolworth (FW) & Co Ltd v Lambert [1937] Ch 37
This was an
originating summons whereby the plaintiffs, Vaux Group plc, sought declarations
on the true construction of provisions in the underlease of the Swallow Hotel
in Newgate Street, Newcastle upon Tyne. The plaintiffs were the underlessees,
the underlessors being the defendants, Arthur John Lilley and Basil Layton
Mitchell.
Nigel Thomas
(instructed by Slaughter & May) appeared on behalf of the plaintiffs;
Jonathan Gaunt (instructed by Titmuss Sainer & Webb) represented the
defendants.
Giving
judgment, KNOX J said: Part of an originating summons between Vaux Group
plc as plaintiffs and Arthur John Lilley and Basil Layton Mitchell as
defendants has been adjourned to be tried separately from the rest. The parties
are tenant and landlords under four underleases between predecessors in title
of the defendants and the plaintiff company, in some cases under a different
name. The most important of those four underleases is one dated August 25 1967,
made between Crossgate Properties Ltd and Vaux & Associated Breweries, as
the plaintiffs were then called. That was accepted as being a building lease:
there were terms in clause 2 whereby the lessee covenanted to erect buildings
which were to constitute an hotel. That is not a matter which is in any way in
dispute, nor indeed are any other facts in dispute in respect of the questions
which have been adjourned for decision now. The term was for 99 years less
three days from August 25 1967, and that means that it is common ground between
the parties that the provisions of section 19(1)(b) of the Landlord and
Tenant Act 1927 apply in relation to any assignment that is sought to be made.
The other
relevant terms of this underlease are the covenant in clause 3(17)(a) and (b),
for which the sidenote to the lease says: ‘As to assignment and
underletting.’ The covenant reads as
follows:
(a) not to assign underlet or part with the
possession of part only of the demised premises save for the kiosk in the
pedestrian mall for use as a barber’s shop
(b) not to assign underlet or part with the
possession of the whole of the demised premises without the consent in writing
of the lessor first obtained which consent shall not be unreasonably withheld
in the case of a respectable and responsible assignee or underlessee proof of
which is furnished to the lessor
Provided
Always that the demised premises shall not be sublet at a lower rent than the
rent hereby reserved nor otherwise than upon the covenants and conditions
herein contained and before granting such licence the lessor shall be entitled
to be furnished by the lessee with particulars of the proposed assignment or
underletting and the lessee shall pay the lessor’s solicitor’s proper charges
for every such licence. AND upon any assignment to obtain if the lessor shall
so require an acceptable guarantor for any private limited company and a direct
covenant by the assignee with the lessor to observe and perform the covenant
and conditions of this underlease, and on the grant of any underlease out of
this underlease to obtain
(i) an unqualified covenant on the part of the
underlessee that the underlessee will not assign underlet or part with
possession of part only of the premises thereby demised (as aforesaid) and
(ii) a covenant on the part of the underlessee
that the underlessee will not assign underlet or part with possession of the
whole of the premises thereby demised without obtaining the previous written
consent of the lessor under this present lease and its superior lessor (such
consent not to be unreasonably withheld) and to provide in any such underlease
that any sub-underleases granted out of such underlease whether immediate or
mediate shall contain similar covenants
Provided
Always that in no event shall the lessee be entitled to assign underlet or part
with possession of the demised premises or any part thereof prior to the
completion of the erection and fitting out of the said hotel in manner
aforesaid and the opening of the same for business.
The next
covenant is one for the registration with the lessor within one month after
execution of any assignment, transfer, underlease or devolution. I need not
read it in full; it is a common form type of provision. The user was restricted
to that of a high-class residential hotel, and there were numerous other
covenants entered into by the tenant which do not, in my judgment, directly
affect the question of construction which falls to be decided.
The underlease
was in fact varied by two deeds which are not material and I need not take time
in describing their effect.
The other
three underleases are of smaller adjoining or abutting premises. The first is
an underlease of a public house lately known as ‘Images’; that was dated April
16 1971. It was not a building lease; it was a lease of a constructed building
for 99 years less three days from June 25 1969. The rent was a peppercorn and
there was a provision (as indeed there was in relation to the first underlease
of the hotel, which is now called the Swallow Hotel) with regard to the service
charge. The provisions in the public house lease do contain a reference to the
Swallow Hotel for the purposes of calculating and apportioning the
subject-matter of the service charge. Otherwise there is no direct connection
between the two. There are restrictions in that public house underlease on
assignment and underletting which it is unnecessary to read in full. They are contained
in clause 2(17)(a) and (b) and they very closely follow the terms of the
underlease of the Swallow Hotel. There are differences, which are largely
attributable to the fact that these were licensed premises.
The third of
the four underleases was dated January 4 1980 and that concerned premises which
have been used (and indeed were required only to be used by the terms of the
underlease) as a generator. The land thereby underdemised was quite small (an
area of 59 sq yds), and the term in that case was from December 25 1979 until
August 21 2066. The rent was £50 per year variable upwards and has indeed been
varied upwards.
Finally, the
fourth of these underleases concerned a basement storage area. That was dated
October 2 1987 and the landlord was in fact different, but nothing turns on
that. The term there was to last until August 24 2066 and the initial rent was
£130 which thereafter went up, and again there were provisions for service
charge. Those premises were linked specifically in one respect with the
underlease of the Swallow Hotel, because in the covenant not to assign underlet
or part with possession of the whole of the demised premises (there being an
absolute covenant not to do that in respect of part), the lessee was required
at the same time to assign underlet or part with the possession as the case
might be of the whole of the premises demised by the underlease of the Swallow
Hotel. To that extent, therefore, the two had either not to be assigned or to
be assigned together. In other respects, in common with the other three
underleases besides the Swallow Hotel one, there were similar covenants not to
assign without obtaining an acceptable guarantor, and the lessee was required
to obtain covenants on the part of a further underlessee if there were an
underlease out of this underlease.
The defendants
now have been approached for this reason: that the plaintiffs claim that
section 19(1)(b) of the Landlord and Tenant Act 1927 applies to the
Swallow Hotel and has the effect of relieving the plaintiffs from the
requirement of providing an acceptable guarantor, and it is whether that
contention is correct that forms the principal subject-matter of the first
question in the originating summons before me.
The
originating summons seeks this relief in para 1: declarations that on the true
construction of the underlease of the Swallow Hotel the plaintiff is entitled
to assign the underlease to WHL Hotels Ltd (a) without any licence or consent
from the defendants, (b) without obtaining a guarantor for WHL Hotels Ltd
acceptable to the defendants or any guarantor, and (c) without obtaining a
direct covenant by WHL Hotels Ltd as assignee with the defendants to observe
and perform the covenants of the underlease. Question 2 of the originating
summons raises questions which are not before this court, namely whether a
refusal to grant a licence to assign to WHL Hotels Ltd was unreasonable, and
other similar questions in relation to the refusal of a guarantor. Question 3
of the originating summons, which is before me, seeks declarations that on the
true construction of the three underleases of the other three premises that I
have detailed the plaintiff is entitled to assign those underleases to WHL
Hotels Ltd (a) without seeking any licence or consent from the defendants, (b)
without obtaining a guarantor for WHL Hotels Ltd acceptable to the defendants
or any guarantor, and (c) without obtaining a direct covenant by WHL Hotels Ltd
as assignee with the defendants to observe and perform the covenants and
conditions of the said underleases.
There is
unchallenged evidence, which does not in fact, I think, affect the matters that
I have to decide, to the effect that the public house has been since August
1987 out of use and is now locked and boarded up, and that the generator
building which is the subject of the third of the four underleases has been out
of use since 1987 and is now empty and locked up. The last of the four
premises, the basement, is currently used as a wine store for the Swallow
Hotel. There is in evidence the amount of rent which is currently reserved and
passing under the various underleases, and also the service charges that are
payable under them. The rent for the hotel is by far and away the most
substantial; it is currently £84,853. The other rents are much smaller.
Similarly, the service charge in respect of the hotel is very much higher than
the service charge payable in respect of the three other premises, which are
all lumped together for the purposes of the evidence before me. Nothing, I
think, in fact turns on the amount of the rent or the service charge. Equally,
in my judgment, nothing turns on the correspondence that has passed between the
parties, because it is well settled that events subsequent to the grant of an
interest by a document such as an underlease cannot affect the true
construction of the underlease itself, and I need not refer to that
correspondence.
I turn,
therefore, to section 19(1) of the 1927 Act. It reads as follows:
In all
leases, whether made before or after the commencement of this Act containing a
covenant condition or agreement against assigning, underletting, charging or
parting with possession of demised premises or any part thereof without licence
or consent, such covenant, condition or agreement shall, notwithstanding any
express provision to the contrary, be deemed to be subject
(a) to a proviso to the effect that such licence
or consent is not to be unreasonably withheld, but this proviso does not
preclude the right of the landlord to require payment of a reasonable sum in
respect of any legal or other expenses incurred in connection with such licence
or consent; and
(b) (if the lease is for more than 40 years, and
is made in consideration wholly or partially of the erection, or the
substantial improvement, addition to or alteration of buildings, and the lessor
is not a Government department or local or public authority, or a statutory or
public utility company) to a proviso to the effect that in the case of any
assignment, under-letting, charging or parting with the possession (whether by
the holders of the lease or any under-tenant whether immediate or not),
effected more than seven years before the end of the term no consent or licence
shall be required, if notice in writing is given to the lessor within six
months after the transaction is effected.
I am told that
the researches of counsel, which I have no reason at all to doubt, were
exhaustive, show that there is no authority in English law which touches the
true construction of section 19(1)(b). There is a considerable weight of
authority in relation to section 19(1)(a), which has been the target of
considerable expenditure of ingenuity by draftsmen over the years. Some of
those efforts have been crowned with success and others not.
The main issue
before the court is really one of approach to the construction and effect of
section 19(1)(b). It was submitted to me on behalf of the plaintiffs by
Mr Thomas that there was a discernible policy which is much more far-reaching
than that in relation to section 19(1)(a) to be seen in the provisions
of section 19(1)(b). It is, of course, clear that they both are preceded
by the same initial five lines, and notably by the words ‘notwithstanding any
express provision to the contrary’. They have in common the legislative
technique of introducing a proviso into the terms of the lease in question.
Their difference, upon which Mr Thomas insisted, is that, whereas in 19(1)(a)
the proviso was only to the effect that licence or consent was not to be
unreasonably withheld, in 19(1)(b) the introduced proviso is to the
effect that no consent or licence is to be required. This, it was submitted, is
intended to confirm freedom of assignment on assigns so that anything which
inhibits such freedom is repugnant to, and therefore struck down by, the
provisions of section 19(1)(b) and the discernible statutory policy
behind it.
The second
main submission made on behalf of the plaintiffs was that the clause which I
have read in the Swallow Hotel underlease in clause 3(17)(b) is all one
covenant and that one should treat as within the terms of a single covenant not
only the provision which on an assignment requires consent not to be
unreasonably withheld but also the first proviso that there should not be a
subletting at a lower rent than the rent thereby reserved or otherwise than
upon the covenants and conditions, and the second one, that the lessor should
be entitled to have particulars of the proposed assignment before any
assignment was made, and the further requirement that, upon any assignment, the
lessee should obtain, if the lessor should so require, an acceptable guarantor
for any private limited company and a direct covenant from the proposed
assignee. Those, it was submitted to me, were really all one covenant which
made a seamless whole. There is in fact, for what it is worth, upper case or
capital letters used in the word
should obtain a guarantor and a direct covenant by the assignee, but I doubt
whether that is anything upon which it would be safe to place weight.
I was
referred, principally in connection with the authority which does exist
concerning the ambit of section 19(1)(a), to the last of the decisions
regarding attempts that successive generations of conveyancers have made to
give a landlord an opportunity of obtaining a surrender of the lease when an
application is made to them for leave to assign and there is a qualified
covenant against such assignment so that section 19(1)(a) applies. In Bocardo
SA v S & M Hotels Ltd [1980] 1 WLR 17 there was a lease which
contained a clause that provided that if the tenants desire to assign they
should first by irrevocable notice in writing to the landlords offer to
surrender the lease to the landlords by deed absolutely and without any
consideration. The issue that fell for determination by the Court of Appeal was
whether that was effective, regard being had to section 19(1)(a) of the
Landlord and Tenant Act 1927. The Court of Appeal held that it was, approving
an earlier decision of Hilbery J, Adler v Upper Grosvenor Street
Investment Ltd [1957] 1 WLR 227, and not applying certain dicta that
had been uttered by Lord Denning MR and Sir Eric Sachs in Greene v Church
Commissioners for England [1974] Ch 467. The Court of Appeal was influenced
by the fact that the High Court of Australia, in Creer v P & O
Lines of Australia Pty Ltd (1971) 125 CLR 84, had approved the decision of
Hilbery J in Adler v Upper Grosvenor Street Investment Ltd. Megaw
LJ gave his reasons for reaching the conclusion which he did at p 24 in the
following terms:
In the
balance of conflicting arguments, I reach that conclusion substantially for
three reasons. First, the respect due to the decision of the High Court of
Australia, and the reasoning of the judgments therein; secondly (as is indeed a
ground which clearly strongly influenced Menzies J in that case), the fact that
the Adler decision has stood and has been acted on, for so many years;
and thirdly (a ground which makes me feel able to place much greater reliance
on the second ground than I should otherwise have done), the fact that I cannot
see any good argument of policy for interfering, more than is essentially
required by the words of the statute or by binding authority, with freedom of
contract in respect of an agreement between the parties that the landlord
should be entitled to the option of requiring a surrender of the lease, where
the tenant desires to be freed from his obligation under the lease; bearing in
mind that the legislature did not, in 1927, consider, and has not since
considered, that policy requires infringement of freedom of contract between a
potential landlord and a potential tenant validly and effectively to agree that
there shall be no right of assignment at all, however reasonable the tenant’s
subsequent desire to assign may be.
In my
judgment, that attitude should govern my approach to this particular problem
under section 19(1)(b).
That is
reinforced by the approach of the Court of Appeal in F W Woolworth & Co
Ltd v Lambert [1937] Ch 37, at p 60 of which Greene LJ said of
section 19(2) (which is concerned with the making of improvements with consent
rather than assigning with consent but is otherwise in closely similar terms to
section 19(1) of the same Act):
It is, in my
judgment, a misconception to treat the relevant subsection here as though it
were a subsection conferring upon the court some remedial jurisdiction to
relieve the lessee from the covenant or to modify it. It is in truth nothing of
the kind; it is a statutory addition to the terms of a particular type of
covenant and the proviso which the subsection mentions is to be read into the
covenant. What the legal consequences of that may be in relation to any
particular set of facts is a matter which will fall to be determined in the
usual way. It is quite wrong to look upon this as something which enables the
court to say that a particular set of terms or some particular conditions would
be the reasonable thing for the lessor to impose in the circumstances. The practical
question which falls to be decided in matters of dispute under this is simply
the question aye or no, has the covenant been broken? Aye or No, does the covenant, or does it not,
apply in the particular circumstances of this case?
That attitude
was, in my judgment, re-echoed by the judgments in the Court of Appeal in Bocardo
SA v S & M Hotels Ltd, in addition to that of Megaw LJ to which
I have referred, where Lawton LJ in particular, at p 25, quoted part of what I
have just read from Greene LJ in the Woolworth case and said of it:
The same can
be said about the proviso mentioned in subsection (1) with which this appeal is
concerned.
So far as
general approach is concerned, therefore, I prefer the arguments advanced on
behalf of the defendants that the appropriate technique for the court to adopt
is to regard this as a provision which requires the writing into the relevant
clause of the words that the section contains.
On the second
question, that is to say, the question whether this is truly to be treated as a
single covenant or whether it is appropriate to look at the detailed effect of
the covenant and see how it should be construed, read as a whole, it is, in my
judgment, clear that, applying the technique which I have mentioned as laid
down in the Woolworth case and in the Bocardo case, the insertion
that falls to be made is one which, first, requires the first part of clause
3(17)(b) to have a limited operation. It is to be noted that section 19(1)(b)
itself is hedged around with limitations. It operates only during the period of
the lease before the last seventh of the term; it operates only where the
lessor is not a government department or other public authority; and it
operates only if notice in writing of the transaction is given to the lessor within
six months after the transaction is effected. So that for all those three
reasons it is not possible to say that, even where section 19(1)(b)
clearly applies so as to modify the provisions that the parties have sought to
put in their lease, the modification takes the effect of deleting the provision
in question for all purposes and for the whole of the life of the lease. That,
incidentally, is another difficulty in the path of an argument that there is a
discernible statutory policy which requires total freedom for lessees in
relation to the assignment of this particular type of building lease.
But in
connection with the construction of the statutory words, in my judgment one has
to look at the clause and see whether the words thus introduced by the operation
of the statute do prevent effect being given to what the parties have otherwise
agreed shall be the bargain between them. It was submitted to me that, although
obtaining a direct covenant from an assignee and registering the transaction
after it had taken place and obtaining covenants from the subtenant when there
is a further underletting all fell outside the ambit of something that was
prevented by the introduction of the statutory words, the requirement that a
guarantor acceptable to the lessor should be procured was contrary to, and
therefore nullified by, the introduction of the statutory words. In my judgment
that is not a correct analysis of the situation. It seems to me clear that the
assignment is one operation and the obtaining of a guarantor is not a condition
precedent to its being effected; it is something that has to be effected once
there is an assignment, but that, in my judgment, is not by any means the same
thing. I do not, therefore, accept the proposition that the introduction of the
statutory words involves a prohibition of giving effect to the bargain which
the parties have reached that a guarantor should be provided.
In those
circumstances it seems to me that the guarantor covenant is, as a matter of
construction, not excluded by the terms of section 19(1)(b). I am
encouraged in reaching that conclusion by a consideration of what the position
would be if in fact there was no covenant regarding assignments and
underletting at all. It seems to me plain beyond any sort of argument that
section 19(1) would not apply at all in those circumstances because it starts
with the words, ‘In all leases containing a covenant, condition or agreement
against assigning, underletting, charging or parting with the possession of
demised premises or any part thereof without licence or consent . . .’ certain
things shall take effect, and obviously, it seems to me, a lease that contained
nothing at all on the subject of assignments and underlettings would not fall
within the ambit of the subsection. In those circumstances section 19(1)(b)
could not apply and, accordingly, a guarantee covenant such as the one that is
included in this lease would, it would seem, necessarily be valid and
effectual. This is yet another argument against there being discerned a statutory
policy giving freedom of operation in all respects to lessees who fall within
section 19(1)(b) as these lessees do.
I have not
gone into the difference of opinion that is contained in two decisions of the
Court of Appeal, both, I think, by way of dicta, in relation to the question
whether section 19(1) applies to unqualified covenants against assigning. It is
clear, of course, that qualified covenants (that is to say, covenants against
assigning without licence or consent) are within the subsection, because those
initial words that I read out include a reference to covenants, conditions or
agreements against assigning, underletting, charging or parting with the
possession of demised premises or any part thereof without licence or consent.
But Danckwerts LJ in Property & Bloodstock Ltd v Emerton
[1968] Ch 94, at the end of his judgment, specifically reserved his opinion on
the point whether the provisions of section 19(1) of the Landlord and Tenant
Act 1927 had no application to a covenant in simple terms against assignment or
assignment without the landlord’s consent of the property comprised in the
lease, saying that he was by no means convinced that that was
counsel on either side, in the Bocardo case felt able to discern how an
unqualified covenant could be embraced by the words of section 19(1). What
Megaw LJ said on the score, at p 22, was:
Neither of
the parties before us asks us to give effect to the doubts on that point expressed
by Danckwerts LJ in Property & Bloodstock Ltd v Emerton. It
is hard to see how the words of section 19(1), ‘in all leases . . . containing
a covenant . . . against assigning . . . demised premises . . . without licence
or consent . . .’ could fairly be construed as applying to leases which contain
a simple covenant against assigning, with no reference whatever to ‘without
licence or consent’. I do not pursue that question because it is accepted
before us that section 19(1) has no application where there is a prohibition of
assignment.
It is for that
reason that I treat this question as being one on which there is no decision of
the Court of Appeal binding upon me, in the one case because Danckwerts LJ
clearly was speaking of something that he was not deciding, and in the other
case because the matter was not argued and went by concession.
Nevertheless,
it is of marginal significance to this case because it was accepted, rightly, I
think, by Mr Thomas, on behalf of the plaintiffs, that unless he could
establish that section 19(1) did apply to unqualified covenants against
assignment, it would be virtually impossible to discern a statutory policy
requiring total freedom against fetters on assignment in favour of lessees.
There would be a necessary inconsistency between lessees with qualified
covenants being totally free and lessees with unqualified covenants being
anything but. My view, for what it is worth, is that the opinion in passing of
Megaw LJ is very much to be preferred. I, too, find it impossible to see how a
lease with an unqualified covenant can be described as ‘a covenant not to
assign without licence or consent’. However, that is not an issue which is
central to the decision which I reach, which is based on the policy of the Act
not being the clear guide which would be needed to assign such a wide effect to
section 19(1)(b) and on the conclusion that I have reached, that there
is not here a single covenant but that the requirement for a guarantee is
something which can, and legitimately should, operate independently of,
although closely in connection with, the covenant against assignment.
For those
reasons, it seems to me that question 1 of the originating summons should be
answered (a) ‘yes’, but (b) and (c) ‘no’. That means that the question in para
3 hardly arises, because it was not, I think, submitted that if I answered
question 1 in the way which I propose, question 3 could be answered in a
different way. But even if I had decided question 1 the other way, I would have
been unpersuaded that the quite separate underleases, at a later date, being
underleases which, it is rightly accepted, are not themselves within section
19(1)(b), could be, because of the reference at any rate in the last of
the three to the Swallow Hotel, bound up in the same qualification. However,
the point does not, in the circumstances, arise and I need not elaborate it
further. I therefore propose to answer question 3 in the sense of ‘no’ to all
three of the subparagraphs.
