Landlord and tenant — Action by lessor against original lessee after assignment of the term for arrears of rent falling due after the assignment — In this case the deed of licence to assign contained a personal covenant by a guarantor that the assignee would pay the rent and observe the covenants in the lease — Subsequently the lessor released the surety unconditionally from his personal guarantee — Lessee in present action contended that, as the relationship between a lessee and assignee was itself analogous to that of surety and principal debtor, the release granted to the surety had the effect of putting an end also to the lessee’s obligations to discharge the arrears of rent — In rejecting this argument, Walton J reviewed the authorities concerning the relationship between lessee and assignee of the term — Although the assignee is liable to indemnify the original lessee if the lessor recovers against the latter, the relationship is not that of principal debtor and surety or analogous thereto — The original lessee’s continuing liability is direct and primary, not collateral — It is accordingly not cancelled by acts which would put an end to a surety’s obligations under a contract of guarantee — Baynton v Morgan and Warnford Investments Ltd v Duckworth cited among other cases — Lessor entitled to succeed in action for arrears of rent
The
plaintiffs, Allied London Investments Ltd, lessors of premises at 82 Brook
Street, London W1, sued the defendants, Hambro Life Assurance Ltd, the original
lessees under a term expiring in the year 2000, for arrears of rent amounting
to £48,146.83. The arrears in question accrued after the defendants had
assigned the term to another company.
Gavin Lightman
QC and Christopher Priday (instructed by Wright & Webb, Syrett & Sons)
appeared on behalf of the plaintiffs; Gerald Godfrey QC and Jonathan Gaunt
(instructed by Nabarro Nathanson) represented the defendants.
Giving
judgment, WALTON J said: By a lease dated January 27 1972 made between the
plaintiff by its then name Eighty-Eight Brook Street Ltd and the defendant the
premises known as 82 Brook Street, London, were demised by the plaintiff (which
was in fact itself only a leaseholder) to the defendant for a term commencing
on January 27 1972 and ending on September 26 2000. The lease reserved a
reviewable rent and also an additional rent. There is no dispute whatsoever
relating to the amount of the rents, which were, when this action was commenced
by the plaintiff to recover the arrears thereof from the defendants,
£48,146.83.
The form of
the covenant by the defendants to pay the rent is, however, of importance. It
is as follows:
The tenant
for itself and its assigns and to the intent that the obligations may continue
throughout the term covenants with the landlord as set out in the third
schedule hereto.
The first of
the items on the third schedule is to pay the rent. This is of course the usual
form. It is a covenant by the tenant that either he or his assigns will pay the
rent. If the rent is in arrears the covenant has, prima facie, been
broken, and in this action the plaintiff seeks to recover those arrears from
the defendants under and by virtue of this covenant.
By a deed of
licence dated December 3 1973 and made between the plaintiff by its former name
of the first part, the defendants of the second part, a company called Padseal
Ltd the assignee, and one Terence Cole, the surety, of the fourth part, the
plaintiff gave the defendants licence to assign the term created by the lease
to the assignee. The assignee covenanted with the plaintiff to pay the rent and
perform the covenants from the date of such assignment, and the surety
covenanted with the plaintiff that the assignee would pay the rent and observe
the covenants contained in the lease and that he would pay and make good to the
plaintiffs all losses sustained by or incurred by them as a result of any
default by the assignee.
The land being
registered, the assignment of the lease was effected by a transfer of the whole
dated December 19 1973. In that transfer another company Hyde Park Management
Ltd joined, and in consideration of the transfer being entered into by its
direction and at its request, that company covenanted with the defendants that
the assignee would duly pay all rent and observe and perform all covenants and
conditions in the lease and indemnify and keep the defendants indemnified in
respect of all actions, costs, claims and demands arising from any non-payment,
breach or other non-observance or non-performance thereof.
In due course,
the assignee underlet the premises comprised in the lease in two portions.
Thereafter, there were allegations of non-payment of rent, wants of repair, and
so forth, and ultimately there were no fewer than eight actions on foot: three
by the plaintiff against the assignee; one by the assignee against the
plaintiff; two actions by the assignee against its underlessees — one against
each — and two actions, one by each of its underlessees against the assignee.
This legal
bonanza was obviously too good to last and ultimately matters were brought to a
head in a series of compromises, as a result of which the lease was forfeited
but the plaintiffs abandoned all its money claims in the relevant action other
than for arrears of rent, and — and for present purposes this is the crucial
matter — the plaintiff released the surety unconditionally from his personal
guarantee contained in the licence of December 3 1973.
It is this
release of the surety and upon such release only that the defendants now rely
to defend the present action. If I may for a moment put what is a fairly
complex argument in a nutshell, the defendants, through Mr Godfrey, say that
the relationship of the defendants and the assignee in relation to the payment
of rent to the plaintiff at all times after the date of the assignment was
analogous to that of surety and principal debtor, and that accordingly the
position was equivalent to the plaintiff having one principal debtor, the
assignee, and two sureties for its liability, namely, the defendants and the
surety, and that by the release of the surety in accordance with the well-known
principles applicable to all contracts of suretyship properly so called, his
co-surety, the defendants, were also released.
Mr Godfrey
chose to rest most of his argument upon the impossibility after the release of
the surety of the defendants being subrogated to the rights of the plaintiff
against the surety. I must confess straight away that this method of
presentation of his case does not appeal to me in the slightest.
The reason for
its failure to appeal is that it quite clearly involves an overstatement of its
case by the defendants, for if it were
that any right of action against co-surety would be one for contribution and
not — because this is what the claim for subrogation must inevitably lead to —
a claim to be indemnified by the co-surety. I do not think that because Mr
Godfrey claims that it is only in a position analogous to that of surety the
defendants can lay claim to be completely indemnified by a co-surety.
In this
connection I bear fully in mind Lord Diplock’s warning in Orakpo v Manson
Investments Ltd [1978] AC 95, at p 104, against any attempt to rely upon
analogy when extending the scope of subrogation as being particularly perilous.
Certainly I shall not be the first judge to extend it so as to entitle one
surety or person in an analogous position to a surety to claim an indemnity
from another surety or person in an analogous position.
This, however,
merely disposes of the main avenue down which Mr Godfrey sought to advance. It
does not, unfortunately, dispose of the real underlying argument. Before I turn
to a strict analysis of the position of the plaintiff and the defendants which
is required to deal with the argument, I think I should dispose of one argument
which has been put forward by the plaintiff which I am wholly unable to accept.
In his helpful
summary of his argument, Mr Lightman submitted under head E the following: the
scheme adopted in this case militates against any right of subrogation, for the
original lessee alone was given the right of recourse against Hyde Park
Management by the assignment and the landlord alone the right of recourse
against Mr Cole, and any right on the part of the original lessee to recourse
against Mr Cole was omitted. Neither side called any oral evidence before me,
the facts relied on by all being contained in admitted documents. The actual
facts set out in head E are admitted. But there is in the documents no
suggestion of any such scheme as is therein referred to and I do not think that
it is possible to infer the existence of any such scheme merely from the
unchallenged facts.
Accordingly, I
do not think that I can accede to head E of Mr Lightman’s submission. What I
think I have to do is to analyse as accurately as I can precisely what the
tripartite relationship between the lessor, the original lessee and an assignee
in possession under his assignment is. Obviously, the assignee being in
possession is the person who ought as between himself and the original tenant
to be paying the rent. There can be no question of this even apart from the Law
of Property Act 1925, Sched 2, Part 9, or, as we are here dealing with registered
land, the Land Registration Act 1925 section 24(1).
From the point
of view of the landlord, therefore, the situation is simply that he now has two
persons whom he can treat as being directly liable to him for the rent, the
original tenant and the assignee in possession. As between the two of them in
default of any contrary agreement between them the assignee is liable to
indemnify the original tenant if the landlord recovers against the original
tenant. Obviously, if one is prepared to paint with an extremely broad brush,
the situation is somewhat similar to that of a principal debtor and a surety,
the assignee being in the role of principal debtor and the original tenant in
the role of a surety. Indeed, there are old cases in which this resemblance has
been particularly observed upon: notably, in Wolveridge v Steward
(1833) 1 Cr & M 644 at 660 and Moule v Garrett (1870) LR 5Ex
132 at 138; affirmed (1872) LR 7 Ex 101.
However,
because the drawing of this comparison in general does no particular harm, it
is nevertheless not to be relied upon as expressing the whole truth. This was
well put by Megarry VC in Warnford Investments Ltd v Duckworth
[1979] Ch 127 at pp 137-138. At p 137 the Vice-Chancellor said:
(1) Generally speaking, an original lessee prima
facie remains liable to the reversioner for the payment of the rent throughout
the term, even after it has been assigned. This is a direct and primary
liability, though after an assignment it is normally accompanied by rights of
indemnity against the first assignee, and also, where there have been further
assignments, against the assignee in whom the lease is for the time being
vested. I shall turn to these rights in due course.
(2) These are authorities, not explored in the
argument before me, for describing the liability of an original lessee after
the lease has been assigned as being that of a surety for the performance of
the obligations of the lease by the assignee in whom the lease is vested: see,
for example, Wolveridge v Steward (1833) 1 Cr & M 644, 660,
and Moule v Garrett (1870) LR 5 Ex 132, 138; affirmed (1872) LR 7
Ex 101. At first blush, such language might be thought to give some
encouragement to the defendants. If the lessee is a mere surety for the rent,
would that not bring the defendants within the cover of Stacey v Hill
[1901] 1 KB 660? However, I think it is
important to consider such statements in their context, and not to read too
much into them. As between the lessee and the assignee, such statements reflect
the fact that the assignee takes the lease subject to its burdens, and he is
under a duty to discharge them. His is the primary duty, and if he fails in his
duty and the lessee has to pay, the lessee, like a surety, has the right to be
reimbursed by the assignee. That is the position as between the lessee and the
assignee which was being considered in the cases. But as between the lessee and
the lessor, the position is quite different. The assignment of the lease does
nothing to disturb the direct liability of the lessee to the lessor under the
lease for the whole of the term. The assignment does not, in my judgment,
prevent the lessee from remaining directly and primarily liable to the lessor,
or reduce him to being a mere surety towards the lessor for the discharge of
the obligations of the lease by the assignee.
(3) Generally speaking, the guarantor of rent due
under a lease is in a very different position towards the lessor from that of
an original lessee. Like any other guarantor, from the start the liability of a
guarantor is merely collateral, or accessory, or secondary: the terms used in
the authorities vary. There never is a period when the guarantor alone is
liable to the lessor for the rent, in the way that initially the lessee is
alone liable for it to the lessor. Instead, the guarantor is merely liable to
pay if the principal debtor does not. It follows that once the liability of the
principal debtor for future payments is at an end, so also is the liability of
the surety.
So it is quite
clear that the position is not as between the assignee and the original lessee
that of principal debtor and surety. While indeed it is always open to two
principal debtors to agree to this rearrangement of their liabilities inter
se, and thereby bind their creditor if he has notice of such arrangement
(see Rouse v Bradford Banking Company Ltd [1894] AC 586), it
would never be strictly possible in the case of landlord and tenant because, of
necessity, all liability of the assignee would be gone once he had assigned
over, and it would certainly not lie in the competence of the debtors to
deprive the landlord of his contractual rights under the original lessee’s
original covenant.
Mr Godfrey’s
argument is that, admitting that there is no true relationship of principal
debtor and surety, nevertheless the relationship comes within the third class
mentioned by Lord Selborne LC in Duncan, Fox & Co v North and
South Wales Bank (1880) 6 App Cas 1 at p 11 where he divides the cases with
which he is dealing into three categories. The third being:
Those in which,
without any such contract of suretyship, there is a primary and a secondary
liability of two persons for one and the same debt, the debt being, as between
the two, that of one of those persons only, and not equally of both, so that
the other, if he should be compelled to pay it, would be entitled to
reimbursement from the person by whom (as between the two) it ought to have
been paid.
Lord Selborne
then applies the usual equitable principles dealing with the release of surety,
and so forth, to this third class of cases. The example of such cases which he
gives being the rights of an endorser against an acceptor of a bill of
exchange. This example is, of course, a long way from the present case.
However, it is to be observed that at p 11 of the report Lord Selborne says
this:
It is, I
conceive, to the first of these classes of cases, and to that class only, that
the doctrines laid down in such authorities as Owen v Homan, Newton
v Chorlton and Pearl v Deacon apply in their full extent. If, so
far as the creditor is concerned, there is no contract for suretyship, if the
person who has (in fact) made himself answerable for another man’s debt is,
towards the creditor, no surety, but a principal, then I think that the
creditor would not be subject to those special obligations which were described
by Lord Truro in Owen v Homan and would not, generally, have his
powers of dealing with securities circumscribed and restricted in the manner
described by Vice-Chancellor Wood in Newton v Chorlton and by
Lord Romilly and the lords justices in Pearl v Deacon. If, for
example, in Pearl v Deacon the contract of suretyship had been
only between Pearl and Pearson inter se, Messrs Deacon dealing with them
both as principals, and not with Pearl as a surety, I should take it to be
clear that Messrs Deacon might have distrained upon goods comprised in their
security for the rent due to them from Pearson, without losing (as they did in
the actual case) their remedy against Pearl. The difficulties, therefore, which
in the present case appear to have weighed most upon the minds of the judges in
the Court of Appeal, would not ordinarily arise, unless there was a contract of
suretyship properly so called, not between the two debtors only, but between
them and the creditor also.
Of course the
plaintiff as landlord must be taken to have had notice of the position as
between the original tenant and the assignee, but from Lord Selborne’s way of
looking at the matter, it is I think plain that it is essential for a correct
analysis of the true position to be made before seeking to apply his wide third
class to any particular class of case.
Mr Godfrey
also cited as one of his authorities the third edition of Rowlatt on the Law
of Principal and Surety. But upon a close
assistance is to be derived therefrom. At pp 6 and 7 the learned author wrote:
There lies,
however, just beyond the border line of suretyship the class of cases in which,
without any contract between the debtors, there is a primary and secondary
liability of two persons for one and the same debt, the debt being, as between
the two, that of one of those persons only, and not equally of both; so that
the other, if he should be compelled to pay it, would be entitled to
reimbursement by the person by whom, as between the two, it ought to have been
paid. Such persons, when both have become liable to the creditor, and it is
within his choice upon which to put the burden, do stand in a relation to one
another which gives rise to an equity identical with one which exists between
principal and surety — namely, that securities given by the primary debtor are
attributable in the hands of the creditor to the satisfaction of the debt, and
do not go back to that debtor or his general creditors.
But the author
is careful to confine his remarks to security given by the primary debtor. It
is certainly not what the present case relates to in any manner.
The passage at
the top of p 8 reads as follows:
Again, the
transferor of shares, who is liable by statute under certain circumstances to
pay calls if the transferee does not, the owner of goods which by the law of
distress may be made liable for the rent of the premises upon which they are, a
lessee liable under the covenants in a lease assigned, a mortgagor liable for
the mortgage money after the sale of the equity of redemption, can none of them
be classed as sureties, although in each case the liability is a secondary one,
and in each case the person secondarily liable has upon payment the right to be
reimbursed by the person primarily liable, founded upon the same principle as
the right of a surety to sue the principal for the money paid by him.
This hardly
assists, but note (q) is illuminating. So far as material, it reads after the
citation of two cases:
The covenant
of the lessee is not collateral to the liability of the assignee of the lease,
to pay if he does not, but is a covenant that the lessee or his assigns shall
pay . . . In truth, the liability of the lessee is not undertaken in
contemplation of a principal liability to be contracted by an assignee of the
lease towards the lessor. The liability of the assignee to the lessor upon the
privity of estate is, as regards the lessee, an accident.
And in those
words surely lies the death knell of any serious attempt to equate the present
position with suretyship.
All that is
relevant in the passage at p 184 is as follows:
So where a
lessee is compelled to perform the covenants in a lease he can recover over
against the assignee, however remote, in whose possession the land is;
Upon that
again there is no controversy. Finally, before I turn to the true analysis of
the position I think that I should refer to one other case which Mr Godfrey
thought afforded his case some comfort: namely, Re Downer Enterprises Ltd
[1974] 1 WLR 1460. What happened in that case was that the original tenant of
the leasehold premises assigned them to S, and S later assigned them to a
company. The company fell into arrears with the rent and later went into
liquidation. The original tenant was clearly liable for the arrears of rent and
upon the landlord demanding payment from him he demanded payment from S who
paid up. Clearly S was entitled to prove for the amount of rent he had paid
against the company in the liquidation. However, as the lease had been retained
by the liquidator with a view to finding a purchaser and thus for the benefit
of the liquidation, the claim by the landlord — at any rate in part — would
have ranked as an expense of the liquidation. S claimed to be subrogated to the
landlord’s rights in this regard and Pennycuick VC acceded to this request. The
principle which he applied is stated very shortly at p 1468 as follows:
The general
principle here, I think, is not in doubt, namely, that if A and B are liable to
a creditor for the same debt in such circumstances that the ultimate liability
falls on A, and if B in fact pays the debt to the creditor, then B is entitled
to be reimbursed by A, and likewise is entitled to take over by subrogation any
securities or rights which the creditor may have against A, and I can see no
reason why such rights should not include the right to be paid rent in full in
circumstances such as the present, ie the circumstances of a company in
liquidation.
That is to
say, S was subrogated to the rights of the landlord against the assignee in
possession, the company. This is just a short cut to taking an assignment of
the debt with its existing priority, and I cannot think, especially in view of
Lord Diplock’s warning, that I can obtain anything more out of that case.
I now turn to
the case which in my view, being a decision of the Court of Appeal and
therefore binding upon me, is completely decisive of the present case — namely Baynton
v Morgan (1888) 22 QBD 74, CA. I shall first of all read the head note:
The plaintiff
demised premises to the defendant for a term of years by deed containing a
covenant by the defendant for the payment of the rent reserved. The defendant
assigned the term, and his assignee surrendered a portion of the premises to
the plaintiff. In an action on the covenant the plaintiff claimed to recover
the amount of the apportioned rent for the part of the premises not
surrendered:
Held, that the liability of the defendant on the covenant was not
extinguished by the surrender of part of the demised premises, but he still
remained liable thereon, at any rate to the amount claimed.
Quaere, whether he remained liable to the extent of the whole of the rent
originally reserved.
For the
appellant in that case there were two arguments. One was that what had taken
place was analogous in principle to an eviction by the landlord from part of
the premises which suspended the rent as long as the tenant remained evicted. I
need spend no further time on this argument, which was rejected by the Court of
Appeal.
The other
argument appears at the top of p 76:
Further, it is
contended that the covenant by the lessee for the payment of rent by his
assignee is in substance a contract of suretyship, and, therefore, on the
general principles of the law of suretyship, any alteration of the terms of the
lease as between the landlord and the assignee behind the back of the lessee
extinguishes his liability. The object of the insertion of the personal
covenant to pay rent is merely to secure the payment of the rent after an
assignment, the lessee’s liability on the reddendum, or what has been called
the real contract, being gone with the privity of estate.
[FRY LJ: The
lessee covenants that his assigns will pay, not that he will pay if they do
not. The words of the covenant appear to import a primary liability.]
If the lessee
is not in the position of a surety, the lessor could give time to the assignee
and so preclude himself from suing the assignee for the rent, and yet might
immediately sue the lessee, which would be a great hardship and anomaly.
Lord Esher
said this:
In this case
an action has been brought by the plaintiff upon a personal covenant by the
defendant for the payment of rent reserved in a lease. The plaintiff agreed at
the trial to take judgment for part only of the quarter’s rent for which the
action was brought. It is contended for the defendant, however, that the
plaintiff is not entitled to recover from him either the whole or any part of
such rent. We have now to decide whether that contention is well founded. One
of the grounds relied on by the defendant is that this covenant, after an
assignment, is merely one of suretyship, by which the lessee guarantees the
payment of the rent by his assignee of the lease; and, that being so, that, the
assignee and the lessor having altered the original contract without the
consent or knowledge of the guarantor, he is released from further liability on
the covenant. The true answer to this contention seems to me to be that this is
not a contract of guarantee. We must construe this contract, which is in
writing, in accordance with its terms. There is not a word in it about a
guarantee. It is a direct promise that certain sums of money shall be paid as
rent on certain days during a certain period. Such being its express terms, it
could only be contended to be a contract of suretyship by virtue of some
implication. I see nothing that authorizes us to make any such implication. It
was suggested that, unless the contract were treated as one of suretyship, some
hardship might arise. I do not think that such considerations afford any ground
for altering the effect of the plain words of the covenant. If there were any
hardship, it would be one arising out of the terms of the contract which the
parties have chosen to make . . . The true answer, however, to the argument
appears to me to be that the contract is not one of suretyship, but one
creating a primary liability. The covenant for payment of the rent is a
covenant which has been usually inserted in leases for a very long time, I
think I may safely say for at least a hundred years, and it has never been
suggested before that it is a contract of guarantee.
The contract
therefore not being one of guarantee, but importing a primary liability, it is
material to remember that it is a contract under seal, and therefore would be
binding without any consideration. It follows, as it seems to me, that an
alteration of the actual consideration would be immaterial, for a partial
failure of consideration cannot, one would think, have a greater effect than a
total absence of consideration. What, then, is the nature of the promise? It is a covenant for the payment of what was
the agreed rent at the time of the lease on the specified quarter days during
the term. If it could be shewn that the term had come to an end, no doubt the
period to which the contact applied would be gone. The term may, of course,
come to an end by expiration of the period for which the lease was granted. It
may come to an end in other ways, for example by a surrender of the whole of
the demised property to the landlord accepted by him: but it has been held that
a surrender by the lessee himself of part of the demised property does not have
the effect of putting an end to the term. That being so, it seems to me clearly
to follow that a surrender of part by an assignee to whom the lessee has given
authority to do that which he himself could have done cannot have that effect.
Therefore it cannot be said that the term has been put an end to by the
assignee surrendering part of the premises.
Fry LJ said:
Then it was
contended that the covenant was a contract of suretyship. There may be
expressions in one or two cases in which the obligation of the lessee on such a
covenant, after he has parted with his whole interest by assignment, is spoken
of as being in the nature of a contract of suretyship. But that which is said
to be in the nature of a thing is not the thing itself, and there is no case
which says that the contract is one of suretyship. If were, then the landlord,
by giving time to the assign to pay the rent, would extinguish the liability of
the lessee on the covenant. Such a giving of time must often have happened, and
yet there is no case in which it has been suggested that it extinguished the
lessee’s liability. It seems incredible, if the doctrines relating to
suretyship are applicable to such a covenant, that there should have occurred
no case in which those doctrines have furnished a defence to an action on the
covenant. Yet there is no instance of the kind in the books. I think that this
circumstance alone gives rise to a strong presumption against the argument.
And, when I turn to the covenant itself, I come without hesitation to the
conclusion that its terms import a direct contract for payment of the rent by
the assign, not a contract to be surety for payment by him.
Lopes LJ said:
The action is
brought upon an express covenant by the lessee, couched in clear and unambiguous
terms, for the payment of the rent reserved by the lease on the proper quarter
days at all times during the term. The rule of law is that a lessee remains
liable upon his express covenants, notwithstanding an assignment and acceptance
by the landlord of rent from the assignee, and there is an implied promise on
the part of each successive assignee to indemnify the lessee against breaches
of the covenants of the lease in his own time. Then how can the liability under
the express covenants be got rid of? It
may cease by reason of a surrender of the term, a surrender of all the premises
demised by the lease, an eviction, or a release. There can be no suggestion
here that there has been a surrender of the term or of all the premises
comprised in the lease. It is said that there has been something analogous to
an eviction by the landlord. The facts here do not, in my opinion, shew an
eviction or anything analogous thereto. Such an eviction imports a wrongful
entry by the landlord and dispossession of a tenant in possession. The
defendant here was not in possession, and the effect of the assignment which he
himself made was to authorise a surrender by the assignee to the landlord. He
could himself have surrendered, and by putting his assignee in his shoes he authorised
him to do what he himself might have done. Then of course there can be no
suggestion of a release here. It was argued that the covenant is one of
suretyship. I agree with what has been said by the Master of the Rolls and my
brother Fry as to that argument. Reading the covenant as it stands, it contains
nothing about suretyship, and the terms of it clearly import a primary and not
a collateral liability. Whether the covenant is apportionable or not, it is not
necessary to decide, for the plaintiff has submitted to an apportionment. I am
of opinion that the surrender of part of the premises by the assignee did not
extinguish the covenant. For these reasons I think the appeal must be
dismissed.
So there is a
decision of the Court of Appeal not only that the relationship is not that of
suretyship but going much further and pointing out that down to that date there
had been no case in which any of the usual suretyship doctrines had ever been
held to furnish a defence to an action against the original tenant for arrears
of rent which had occurred after he had assigned the term.
The position
is now very much reinforced, for equally in the ensuing 95 years also there has
been no such case. Moreover, Baynton v Morgan was approved in the
House of Lords in Matthey v Curling [1922] 2 AC 180 in the speech
of Lord Atkinson at pp 235-236. It is of course a fair enough comment that it
was really on the other aspect of the case that he gave it judicial approval.
However, the case did receive the general approval of Younger LJ, as Lord
Blanesburgh then was, in the Court of Appeal in that case in these words:
The position
of a lessee after assignment towards his lessor in relation to the covenants in
his lease is concluded in this court and I doubt not in all courts by the
decision of Baynton v Morgan. The lessee is not a surety for the
assignee any more than is the assignee the agent of the lessee. The lessee in a
lease — the defendant so covenanted in this case — covenants in effect that he
or his assignee will perform the covenants and observe the conditions contained
in it; and when, as in the present instance, the defendant sets up no
performance by himself of the covenants sued on, his defence must be either
that his assignee has performed them or that his assignee is in some way as
between himself and the lessor absolved from performance. Baynton v Morgan
shows, amongst other things, that this last contention may not always be relied
on by the lessee; and accordingly the position of the defendant is not put
otherwise than favourably to himself if it is said that the measure of his
liability here, that of a lessee after assignment, is the performance or non
performance of the covenants in question by his assignees when he cannot and
does not aver any performance by himself. The point may in this case be very
appositely illustrated by reference to the insurance covenant on which so much
turns. The defendant has not insured at all. So far as he has covenanted
himself to insure no performance of the covenant is even suggested; his defence
on the insurance covenant is that his assignees have insured. If to that it can
be truly replied either, as is here said, that the assignee’s insurance is not
a complete performance — the insurance is not in the lessor’s name — or, as is
also said, that all liability under the insurance covenant has been repudiated
by the assignees, then the lessee has to stand the consequences, in the first
case because the assignees have not duly performed the covenant, as he the
lessee covenanted that they would, and in the second case because the assignees
have repudiated the covenant altogether, so that the tendered performance by
the assignee is as non-existent as his own.
These two
cases, then, make it perfectly clear that when he is sued, as in the present
case, on the covenants contained in the original lease, the original tenant’s
only possible defences are either: (1) that he has performed the covenants; or
(2) that the relevant assignee has performed the covenants; or (3) that there
has been some operation conducted upon the lease — for example surrender of the
whole — which has put a complete end to the liability to pay rent. Short of one
of these three defences, there is no defence. In particular, the defence sought
to be set up in the present case that the original tenant is only in a position
analogous to that of the surety has been deliberately rejected by the Court of
Appeal and Younger LJ, so that there is no possibility of his relying upon any
circumstance which might have discharged him if he had been truly in that
position. For the foregoing reasons, the plaintiff’s claim in the present
action must in my view succeed.
