Landlord and tenant – Consent to underletting and alterations – Respondent having headlease of building and agreeing to underlet two floors to appellant – Superior landlord’s consent required for such arrangements – Agreement providing for obtaining of superior landlord’s consent “by way of” licences in specified form – Right to determine agreement if consent not obtained by certain date – Whether right to determine arising where superior landlord consenting in principle by relevant date but formal licences not yet executed – Appeal allowed By an agreement dated September 2007, the respondent agreed to grant an underlease to the appellant of the first and second floors of a building of which it was the headlessee. The appellant proposed to carry out substantial alterations to the premises. Under the terms of the respondent’s headlease, the consent of the landlord was required for any underletting or alterations and there was an absolute prohibition on underletting part of the premises. The agreement provided for the respondent to use reasonable endeavours to obtain the “Superior Landlord’s Consent” for the arrangements; that term was defined to mean “the consent of the Superior Landlord to the grant of the Leases by way of the Licence to Underlet and to the Tenant’s Works by way of the Licence for Alterations”. The agreement went on to specify that the licences were to be given in the forms set out in two schedules to the agreement. Either party was entitled to determine the agreement with immediate effect in the event that the superior landlord’s consent could not be obtained by October 2007. Draft licences to underlet were signed by both parties in September 2007. The respondent signed a draft licence for alterations in November 2007. The superior landlord’s solicitor then sent an email indicating that it was holding those documents and would be in a position to complete the licences as soon as it received various fees in that regard. The appellant served notice to terminate the agreement on the ground that the superior landlord’s consent had not been obtained by the relevant date. The respondent maintained that the superior landlord had given its consent and that the notice was accordingly invalid; it contended that a unilateral act of consent from the superior landlord was sufficient for that purpose and the licences could follow thereafter. It brought a claim against the appellant for damages of more than £1.5m. Allowing the claim in the court below, the deputy judge held that the definition of “Superior Landlord’s Consent” contemplated that there would be licences but did not mean that no consent would exist until they were executed. The appellant appealed. Held: The appeal was allowed. The language of the agreement was clear and unambiguous. It defined the superior landlord’s consent as a consent “by way of” the relevant licences. The ordinary and natural meaning of those words was that the consent had to be in the specified forms of licence and no other. It was not necessary to give the wording anything other than its natural and ordinary meaning; this was not a case where something had gone wrong with the drafting or where the natural meaning would produce a result that was unreasonable or inconsistent with business common sense: Investors Compensation Ltd v West Bromwich Building Society [1998] 1 WLR 896 and Rainy Sky SA v Kookmin Bank [2010] EWCA Civ 582 considered. It was relevant that the agreement had been made in the context of a headlease containing provisions on underletting and alterations, breach of which would give rise to a right in the superior landlord to forfeit the headlease, and that the underletting envisaged by the agreement did not in all respects conform with the alienation provisions in the headlease since it involved an underletting of part of the premises. That supported the view that the consent had to be in the specific form of the carefully drawn licences in the schedules, with the numerous covenants that they contained. The specific requirement as to the form of the licences further confirmed the natural and ordinary reading of the consent provisions since that requirement would make no sense if the superior landlord’s consent could be given orally or on quite different terms to those in the schedules, and, in particular, without the various covenants by the appellant and the respondent for which the schedules provided. The licence to underlet and the licence for alterations were intended to be executed as deeds. The superior landlord had never executed them as deeds because they were never delivered but were retained by the superior landlord’s solicitor pending payment of fees. Unless and until delivery occurred, the superior landlord was entitled to change its mind about granting consent. It was inconceivable, and would defy business common sense, that the parties would have committed themselves to the grant of the underleases without such consent, so exposing the respondent to the forfeiture of its lease and the appellant to the loss of the underleases. Nicholas Taggart (instructed by Winckworth Sherwood LLP) appeared for the appellant; David Mitchell (instructed by Gately LLP) appeared for the respondent. Sally Dobson, barrister
British Telecommunications Ltd v Rail Safety and Standards Board Ltd
Landlord and tenant – Consent to underletting and alterations – Respondent having headlease of building and agreeing to underlet two floors to appellant – Superior landlord’s consent required for such arrangements – Agreement providing for obtaining of superior landlord’s consent “by way of” licences in specified form – Right to determine agreement if consent not obtained by certain date – Whether right to determine arising where superior landlord consenting in principle by relevant date but formal licences not yet executed – Appeal allowed By an agreement dated September 2007, the respondent agreed to grant an underlease to the appellant of the first and second floors of a building of which it was the headlessee. The appellant proposed to carry out substantial alterations to the premises. Under the terms of the respondent’s headlease, the consent of the landlord was required for any underletting or alterations and there was an absolute prohibition on underletting part of the premises. The agreement provided for the respondent to use reasonable endeavours to obtain the “Superior Landlord’s Consent” for the arrangements; that term was defined to mean “the consent of the Superior Landlord to the grant of the Leases by way of the Licence to Underlet and to the Tenant’s Works by way of the Licence for Alterations”. The agreement went on to specify that the licences were to be given in the forms set out in two schedules to the agreement. Either party was entitled to determine the agreement with immediate effect in the event that the superior landlord’s consent could not be obtained by October 2007. Draft licences to underlet were signed by both parties in September 2007. The respondent signed a draft licence for alterations in November 2007. The superior landlord’s solicitor then sent an email indicating that it was holding those documents and would be in a position to complete the licences as soon as it received various fees in that regard. The appellant served notice to terminate the agreement on the ground that the superior landlord’s consent had not been obtained by the relevant date. The respondent maintained that the superior landlord had given its consent and that the notice was accordingly invalid; it contended that a unilateral act of consent from the superior landlord was sufficient for that purpose and the licences could follow thereafter. It brought a claim against the appellant for damages of more than £1.5m. Allowing the claim in the court below, the deputy judge held that the definition of “Superior Landlord’s Consent” contemplated that there would be licences but did not mean that no consent would exist until they were executed. The appellant appealed. Held: The appeal was allowed. The language of the agreement was clear and unambiguous. It defined the superior landlord’s consent as a consent “by way of” the relevant licences. The ordinary and natural meaning of those words was that the consent had to be in the specified forms of licence and no other. It was not necessary to give the wording anything other than its natural and ordinary meaning; this was not a case where something had gone wrong with the drafting or where the natural meaning would produce a result that was unreasonable or inconsistent with business common sense: Investors Compensation Ltd v West Bromwich Building Society [1998] 1 WLR 896 and Rainy Sky SA v Kookmin Bank [2010] EWCA Civ 582 considered. It was relevant that the agreement had been made in the context of a headlease containing provisions on underletting and alterations, breach of which would give rise to a right in the superior landlord to forfeit the headlease, and that the underletting envisaged by the agreement did not in all respects conform with the alienation provisions in the headlease since it involved an underletting of part of the premises. That supported the view that the consent had to be in the specific form of the carefully drawn licences in the schedules, with the numerous covenants that they contained. The specific requirement as to the form of the licences further confirmed the natural and ordinary reading of the consent provisions since that requirement would make no sense if the superior landlord’s consent could be given orally or on quite different terms to those in the schedules, and, in particular, without the various covenants by the appellant and the respondent for which the schedules provided. The licence to underlet and the licence for alterations were intended to be executed as deeds. The superior landlord had never executed them as deeds because they were never delivered but were retained by the superior landlord’s solicitor pending payment of fees. Unless and until delivery occurred, the superior landlord was entitled to change its mind about granting consent. It was inconceivable, and would defy business common sense, that the parties would have committed themselves to the grant of the underleases without such consent, so exposing the respondent to the forfeiture of its lease and the appellant to the loss of the underleases. Nicholas Taggart (instructed by Winckworth Sherwood LLP) appeared for the appellant; David Mitchell (instructed by Gately LLP) appeared for the respondent. Sally Dobson, barrister