Landlord and tenant — Covenant in lease against alteration of user of demised premises without previous consent of lessors — Plaintiff lessees seek declaration that the lessors may not under this clause unreasonably withhold consent — Landlord and Tenant Act 1927, section 19(1), (2) and (3) — Section 19(3) does not provide for an implied term that consent is not to be unreasonably refused — Various arguments put forward by plaintiffs, including the application by analogy of the obiter dictum by Megaw LJ in Bocardo S A v S & M Hotels Ltd as to an implied term at common law that consent is not to be unreasonably withheld — Megaw LJ’s obiter dictum not followed — Held that plaintiff lessees were not entitled to the declaration sought
This was an
originating summons taken out by Guardian Assurance Co Ltd, lessees of office
premises at 555 Cranbrook Road, Ilford, seeking a declaration in their favour
as to the construction of a covenant in their lease preventing the alteration
or use of the demised premises for any purpose other than as offices for their
business as an assurance corporation. The lessors, defendants to the summons,
were Gants Hill Holdings Ltd.
R J A Carnwath
(instructed by Stones Porter & Co) appeared on behalf of the plaintiffs; N
F Stadlen (instructed by L M Doffman & Co) represented the defendants.
Giving
judgment, MERVYN DAVIES J said: This originating summons concerns a lease dated
August 1 1958 and made between Gants Hill Holdings Ltd, the defendants and
landlords of the one part, and The Employers Liability Assurance Corporation
Ltd of the other part. The plaintiffs, Guardian Assurance Co Ltd, are now the
tenants. The lease demises office premises at 555 Cranbrook Road, Ilford, for
35 years from June 24 1958 at a rent of £4,075 a year with no provision for
review. Clause 2 of the lease contains some tenant’s covenants including
subclause (12):
(12) Not without the previous consent of the
Lessors to convert or use nor permit the said demised premises or any part
thereof to be converted or used for any purposes whatsoever other than as
offices for their business of an Assurance Corporation.
A dispute has
arisen about the effect of clause 2(12). To resolve the dispute the plaintiffs
in the originating summons seek a declaration:
That upon the
true construction of the above mentioned lease and, in particular subclause
2(12) thereof, whereby the lessees covenant not without the previous consent of
the lessors to convert or use or permit the demised premises or any part
thereof to be converted or used for any purpose whatsoever other than as
offices for their business of an Assurance Corporation, the lessors may not
unreasonably withhold the consent required under the said subclause.
There is an
affidavit in support of the summons sworn on October 6 1982 by Mr R N L Hanson,
the solicitor acting for the plaintiffs. I need not refer to the affidavit save
to say that in clause 5 there are these words:
. . . by
letter from my firm to the defendants’ solicitors dated June 14 1982, they (the
plaintiffs) requested the defendants to confirm their agreement that there is
to be implied into clause 2(12) a term that the landlords cannot refuse their
consent unreasonably to any office use of the premises or any part thereof. By
letter dated June 24 1982, the defendants’ solicitors stated their disagreement
with this interpretation.
It will be
appreciated that those words suggest that the issue between the parties is not
quite the same as the issue suggested by the proposed declaration. However that
may be, Mr Carnwath for the plaintiffs said that the declaration sought was as
set out in the originating summons and the matter proceeded before me on that
footing without objection from Mr Stadlen who appeared for the defendants. In
fact Mr Carnwath said that what he was contending for was that clause 2(12)
ought to be read as though the words ‘such consent not to be unreasonably
withheld’ appeared after the existing initial words — ‘Not without the previous
consent (such consent not to be unreasonably withheld) . . .’ and so on.
I will deal
first with four points put forward by Mr Stadlen for the defendants.
(1) There are four other subclauses in clause 2
which refer to consents. By clause 2(7) the tenant covenants ‘not without first
obtaining the consent in writing of the lessors to erect . . . any building
other than or in addition to the said demised messuage and buildings now
erected thereon . . .’. In clause 2(15) there is a covenant ‘not to do or
permit or suffer anything upon the demised premises which may make void or
voidable any policy for the insurance of the premises against fire . . . nor
without the written consent of the lessors do or suffer any act which may
render any increased or extra premium payable in respect thereof.’ In clause 2(20) there is a covenant ‘not to
place, erect . . . upon . . . any part of the hereby demised buildings . . .
any . . . sign, notice or advertisement without the lessors previous written
consent.’ So the three subclauses so
mentioned are like clause 2(12) in that there is no provision that the consents
are not to be unreasonably withheld. One then looks at clause 2(17). That reads
— ‘Not without the previous written consent of the lessors to assign, underlet,
charge, share or part with the possession of the demised premises . . . such
consent not to be unreasonably withheld . . .’. No doubt the words ‘such
consent not to be unreasonably withheld’ appear there in deference to section
19(1) of the Landlord and Tenant Act 1927, which I will mention later. But be
that as it may, the lease certainly contemplates both (i) a consent to be given
or not given and (ii) a consent to be given unless reasonably refused. This
suggests that if the parties to the lease had intended clause 2(12) to have the
meaning contended for by Mr Carnwath they would have inserted words similar to
those that appear in 2(17).
(2) Section 19(1) of the Landlord and Tenant Act
1927 is to the effect that a covenant in a lease against assigning,
underletting, charging or parting with possession, without licence or consent
is to be deemed subject to a proviso that consent is not to be unreasonably
withheld. In comparable fashion section 19(2) provides that a covenant against
making improvements without licence or consent is deemed subject to a like
proviso.
One then moves
to section 19(3) which mentions covenants against alterations of user without
consent. Section 19(3) shows that payment cannot be exacted for such a consent,
but unlike section 19(1) and section 19(2), section 19(3) does not enact that a
consent to an altered user is to be subject to a proviso that consent is not to
be unreasonably withheld. Since statute makes plain that some consents are
subject to the proviso mentioned while making no reference to the proviso in
relation to an alteration of user consent, it is difficult to see how the
proviso can be implied under the general law. To my mind the section makes
plain that the proviso applies to the covenants mentioned in subsections (1)
and (2) and does not apply to the covenant mentioned in subsection (3). I
suppose it is conceivable in special circumstances that a covenant against user
alteration might implicitly be read as meaning that a consent to alteration is
not to be unreasonably withheld, but I see no such special circumstances here.
(3) Mr Stadlen relied on Liverpool City
Council v Irwin [1977] AC 239. That case considers when words may by
implication be read into a lease. I do not think it necessary to refer to the
speeches at length. It is enough at present to say that an implication is not easily
made.
(4) Mr Stadlen also referred to Granada TV
Network Ltd v Great Universal Stores Ltd (1963) 187 EG 391. In that
case the plaintiff tenants sought a declaration that the defendant landlords
were unreasonably withholding their consent to an assignment. The lease
contained a covenant against change of user without consent. Pennycuick J had
to consider the interaction of the covenant against user change (without
consent) with the covenant against assignment (without consent, such consent
not to be unreasonably withheld.) The
learned judge did not regard, in the circumstances of that case, the covenant
against user change without consent as being subject to an implied term that
consent should not be unreasonably withheld.
Mr Carnwath’s
principal submission for implying a proviso that consent is not to be
unreasonably withheld was founded on some words of Megaw LJ spoken obiter in
Bocardo SA v S & M Hotels Ltd [1980] 1 WLR 17 at p 22. Those
words are:
It follows
that the deemed proviso, ‘such . . . consent is not to be unreasonably
withheld’, applies only if and to the extent that the covenant or
Such a provision would, in strict law, be meaningless or ineffective, unless it
were to have implied in it some such term as ‘such . . . consent is not to be
unreasonably withheld’. For if the landlord was entitled to refuse consent at
his own entirely unrestricted discretion, the provision for assignment with
consent would add nothing to, and subtract nothing from, the effect in law of
the contract as it would be without those words being included. For a
contracting party is entirely free to agree to a variation of the contract at
the request of the other party. That applies equally where, as here, the
variation of the contract would constitute a novation. It seems to me to follow
that the effect of section 19(1) of the Act of 1927, on its true analysis, was
merely to make statutory an implied term which must already have been implied,
if the express words were to have any sensible purpose.
So the learned
judge took the view that a covenant to assign only with consent carries an
implied term that such consent is not to be unreasonably withheld. From that
basis Mr Carnwath said that a covenant to change user only with consent must
carry a similar implied term. It is my duty to be guided by the learned lord
justice; but since his words were plainly obiter I may take his guidance
only if I think it right to do so. Unfortunately, I am not in that position. As
I see it, if A and B choose in a lease to express what it is not necessary to
express, one is not obliged to conclude that the expressed words bear not only
the expressed meaning but also some additional implied meaning. It follows that
I reject Mr Carnwath’s principal submission.
Mr Carnwath’s
second submission was that section 19(3) was enacted on the assumption that at
law a covenant against a change of user without consent carries within it an
implied term that consent must not be unreasonably withheld. I see no grounds
for justifying the view that such an assumption was made. No authority was
produced to indicate that in 1927 or before (or since) the law implied into a
change of user covenant without consent a proviso that consent was not to be
unreasonably withheld. Apart from that, the assumption cannot, I think, be made
when one reads section 19(3) in the context of the whole of section 19. Section
19(1) in regard to covenants against assigning without consent enacts that such
covenants are to be deemed subject to a proviso that consent is not to be
unreasonably withheld. Then section 19(2) in regard to covenants against
improvements without consent enacts that such covenants are subject to a like
proviso. But when one comes to section 19(3), in regard to covenants against
change of user without consent, it is not enacted that such covenants are
deemed subject to the proviso in question. In these circumstances, had the
legislature assumed that a covenant as mentioned in section 19(3) was already
at law subject to the proviso mentioned in section 19(1) and section 19(2), it
would hardly, in the context of section 19(3), have left that assumption to be
inferred.
Mr Carnwath
referred to Dallman v King (1837) 4 Bing NS 105. That was a case
where a tenant was to carry out some works to the approval of the landlord. It
is there stated that, this work once done, the landlord should not be allowed
capriciously to withhold his approval. That situation is far from the present
case.
Since Mr
Carnwath’s submissions fail, the plaintiffs are not, in my judgment, entitled
to the declaration sought in the originating summons or as suggested in clause
5 of the affidavit I have mentioned. I take this view (a) because, as I
construe the lease, the suggested words are not to be read into clause 2(12) in
light of the fact that when the lease intends to refer to a covenant that is
subject to a proviso that the consent is not to be unreasonably withheld, it
says so — see clause 2(17); so that when it refers to a consent and does not go
on to express the proviso (as in clauses 2(7), 2(12) and 2(15)) it must be
taken to mean what it says; and (b) because the law does not imply into a
covenant against change of user without consent a proviso that consent is not
to be unreasonably withheld.
The
originating summons was dismissed with costs.
