Consent to under-letting — “Our clients are willing, and we are preparing the necessary documents” — Letter held to constitute a licence to under-let, to be embodied in formal document — Words not the equivalent of “subject to contract” — Roskill J’s application of Rutter v Michael John, Ltd, 201 Estates Gazette 299 — “No reason to think abbreviated report other than accurate” — Further points on waiver and tenant’s liability for cost of preparing section 146 notice — Lease may cast this liability on lessee by express provision
In this action, Bader Properties, Ltd, of Regent Street, London, W, claimed possession of premises known as factory No 28, Hersham Trading Estate, Molesey Road, Hersham, mesne profits and 105 guineas, being expenditure incurred by the plaintiffs on surveyors’ fees in respect of the service on the defendants of a notice under section 146 of the Law of Property Act, 1925. The defendants, who denied breach of covenant and pleaded waiver, counterclaimed relief from forfeiture.
Mr S Goldblatt (instructed by Messrs Michael Kramer & Co) appeared for the plaintiffs, and Mr VG Wellings (instructed by Messrs Theodore Goddard & Co) represented the defendants.
Giving judgment, ROSKILL J said that the case raised a number of points, some of them of considerable difficulty. On June 18, 1957, Bader Properties, Ltd, let the premises in question to the Bader Machinery Co, Ltd, for 21 years at a rent of £1,850. The present defendants’ title derived from that lease, the covenants of which were in usual form. Clause 2(9)(xi) provided that the lessee should not “assign, underlet, share or part with possession of the demised premises or any part thereof without the written consent of the lessor.” Such consent was not to be unreasonably withheld. The lessee was within one month of any such transaction to furnish the lessor’s solicitors with a copy of the assignment or other document, and produce the original. Clause 4(1) provided for re-entry by the lessor if any covenant on the part of the lessee should not be performed or observed. In 1959 the rent was revised from £1,850 to £2,940. On May 27, 1963, by an assignment between the original lessees, Bader Machinery Co, Ltd, and Aircraft Furnishing, Ltd, described as the assignees, the residue of the term granted under that head-lease was assigned for £5,000. Aircraft Furnishing’s title passed, through related companies, to the defendants, who came upon the scene through three documents which appeared to have been executed in March, 1965. In a letter of the following July 7, the defendants’ solicitors told the plaintiffs that their clients were proposing to underlet the property to Aircraft Furnishing, Ltd, the former assignees of the lease. The defendants did in fact enter into an underlease, as the plaintiffs alleged, without a licence to do so. The defendants claimed that a letter received from the plaintiffs’ solicitors was on its true construction a licence to underlet. It would seem that those advising the defendants had, rightly or wrongly, taken that view.
If this point taken by the defendants were right, the plaintiffs’ claim for possession must fail; if wrong, other considerations would arise. The defendants further argued that if they were wrong in their interpretation of the letter, and the underlease was accordingly a breach of covenant, that breach was subsequently waived by the plaintiffs in that on or about March 25, 1966, the plaintiffs accepted one quarter’s rent, and about the beginning of April, after acceptance of the rent, the plaintiffs tentatively suggested buying the defendants’ interest in these premises back from them. It was said by the defendants that either or both of those actions were inconsistent with any right of the plaintiffs to claim forfeiture, although there was a previous statement by the plaintiffs’ solicitors in the correspondence, “It would appear that there has been a subletting without licence, and our clients reserve their rights in this respect.” The parties had made certain admissions, two of which were relevant here: that when the quarter’s rent was accepted in March, 1966, the plaintiffs knew that the defendants had sublet to Aircraft Furnishing, who were in possession pursuant thereto; but that the plaintiffs did not know, when they accepted that rent, on what terms the subletting had been effected.
The language of the letter of October 8, 1965, which the defendants said was a licence, raised a short question of construction. The letter stated: “We have now heard from our clients to the effect that they are quite willing for your clients to underlet to Aircraft Furnishing, Ltd. We are preparing the necessary documents, and will forward them to you in due course.” Did that last sentence alter the construction which would normally be put upon the first sentence read alone? Did it involve a reservation of any binding consent until the stage of execution of documents? It had often been said in “subject to contract” cases other than those to do with contracts of sale of land that the law was not a destroyer of bargains, and that rules of construction were but guides to the truth, so that they must not be allowed to compel a construction which would otherwise not be the natural construction of the language used. Then Mr Wellings had cited Rutter v Michael John, Ltd, and anr (1967), 201 ESTATES GAZETTE 299. That was a decision of Fenton Atkinson J, on a point very similar to that in the present case, though on other facts and documents. The report was an abbreviated one, not verbatim, but there was no reason to think that it was other than accurate. The learned judge there held that although there was reference in certain correspondence to other documents not having been prepared, none the less the landlord’s consent to a proposed transaction had been given by the letters in question. In the present case, did the words of the letter, “We are preparing the necessary documents, etc…” mean, “this consent is not be taken as binding upon us unless and until the necessary documents are prepared and executed”? In his (Roskill J’s) judgment, they did not. He considered that the language of the letter was clear and unequivocal, and that the defendants were then free to go ahead on the basis that what would follow would be no more than a formality. Accordingly, he held that consent to the underlease was given on October 8, 1965. The plaintiffs had put forward a condition which they said they were minded to impose when the formal documents were drawn up. As to this, he thought that the plaintiffs would have had no right in October, 1965, to impose the condition, and that its imposition then would have been wholly unreasonable.
If the view he (his Lordship) had arrived at on the construction issue were right, nothing else arose in the case, and anything he might say about the defence of waiver was obiter dictum. Nevertheless he would express his opinion on this aspect of the case. Faced with the stringency of the rule regarding a landlord who accepted rent with knowledge of the breach, if not of the terms, on which it was committed, Mr Goldblatt argued that, although the breach went back to November 3, 1965, none the less this breach did not crystallise until very much later, and after the rent had been accepted. But the plaintiffs knew there was a breach, and must be taken to have known that they thereupon acquired a right of re-entry. If they had wished to make sure of the situation without prejudicing their position, they could have protected themselves completely by refusing rent unless and until the position was clarified. It seemed to him (Roskill J) on the |page:656| authorities that even if he were wrong in his conclusion in respect of the letter of October 8, 1965, so that a licence was still required and the underlease was entered into in breach of the defendants’ obligations, none the less the breach was quite plainly waived. Correspondence in the case constituted quite plain and unequivocal affirmation of the existence of the lease, with knowledge of it. In particular, he failed to see how the plaintiffs could offer £2,500 to purchase the defendants’ interest, save on the basis that the defendants’ interest was a subsisting interest.
There remained the question of the surveyors’ fees. In Skinners Company v Knight, [1891] 2 QB 542, a plaintiff landlord who was duly entitled to claim that the tenant was in breach, incurred costs in consulting and employing a solicitor and surveyor in connection with the preparation of a notice under section 14 of the Conveyancing and Law of Property Act, 1881. The Court of Appeal was clearly of the opinion that in the absence of express provision the expenses in question were not recoverable. That section of the Conveyancing Act was replaced in 1925 by the comparable section 146 of the Law of Property Act, which by subsection (3) gave a landlord the right to recover such expenses in certain defined circumstances. The Leasehold Property (Repairs) Act, 1938, restricted this right in cases to which the Act applied, and provided that the court should have power to direct whether, and to what extent, the lessor was entitled to payment thereof. However, the plaintiffs here did not seek to recover by statutory provision, but by an express term of the lease requiring the lessee to pay in respect of all such expenses. Mr Wellings had contended that in view of the legislation, this covenant was ineffective. In his (Roskill J’s) view, where parties had expressly provided for expenses of this kind to be paid by the lessee, there was nothing to prevent effect being given to that provision. To that extent, the plaintiffs’ claim succeeded, but their claim for possession failed.
The plaintiffs were accordingly awarded judgment for £110 5s, the defendants to have their costs less £50.
