Landlord and tenant — Refusal of consent to assign, change of use and make alterations — Whether refusal reasonable — Whether landlord entitled to consider estate management objectives of its estate — Whether relief from forfeiture for deliberate breach
By a headlease dated December 22 1914 the
plaintiffs demised premises in Regent Street, London, for a term of 80 years,
the lease containing covenants by the tenant against certain uses or
alterations without the plaintiffs’ consent. On March 24 1972 the headlessee
granted an underlease which was later assigned to the first defendant. That
lease contained covenants by the tenant to comply with the terms of the
headlease, and not to assign without landlords’ consent. On the expiration of
the contractual term of the headlease in October 1993, the underlease continued
by virtue of Part II of the Landlord and Tenant Act 1954. On November 3 1994
the first defendant applied to the plaintiffs for consent to assign the
underlease to the second defendant, and for consent for a change of use and
alterations; this was refused by letter of November 18 setting out the
plaintiffs’ objections having regard to their objectives for the development of
their Regent Street Estate. On December 20 1994, and pursuant to an unconditional
agreement of October 28 1994, the first defendant assigned the underlease to
the second defendant without the plaintiffs’ consent. On December 30 1994 the
plaintiffs served on both defendants notices under sections 146 of the Law of
Property Act 1925, and on February 9 1995 they issued the present proceedings
claiming possession of the premises, mesne profits and damages on the
ground that the lease was forfeit; the second defendant sought relief from
forfeiture.
withheld consent; the second defendant’s application for relief from forfeiture
was dismissed. In considering the application for consent to the assignment,
change of use and alterations, the plaintiffs were entitled to consider them
together as constituting essentially one scheme. The unity of the plaintiffs’
Regent Street Crown Estate was relevant, and it was reasonable for them to have
regard to the estate management considerations they had identified as
objectives for the strategic improvement of the estate. They were entitled to
object to a proposal involving subdivision of a retail unit. Their reasons for
refusal of consent were reasonable and were adequately stated in the refusal
letter. There was a deliberate intention of the defendants to proceed with the
assignment in any event, if necessary in breach of covenant.
The following cases were referred to in
this report:
British Bakeries (Midlands) Ltd v Michael Testler & Co
Ltd [1986] 1 EGLR 64; (1986) 277 EG 1245
Hyman v Rose [1912] AC 623
International Drilling Fluids Ltd v Louisville Investments
(Uxbridge) Ltd [1986] Ch 513; [1986] 2 WLR 581; [1986] 1 All ER 321; (1985)
51 P&CR 187; [1986] 1 EGLR 39; (1986) 277 EG 62, CA
Killick v Second Covent Garden Property Co
Ltd [1973] 1 WLR 658; [1973] 2 All ER 337; (1973) 25 P&CR 332; [1973]
EGD 377; 227 EG 1849, CA
Shiloh Spinners Ltd v Harding [1973] AC
691; [1973] 2 WLR 28; [1973] 1 All ER 90; (1973) 25 P&CR 48, HL
Southern Depot Co Ltd v British Railways Board
[1990] 2 EGLR 39; [1990] 33 EG 45
Warren v Marketing Exchange for Africa Ltd
[1988] 2 EGLR 247
This was a claim by the plaintiffs, the
Crown Estate Commissioners, in forfeiture proceedings claiming damages against
the defendants, Signet Group plc and TTT Moneycorp Ltd, and possession and mesne
profits against the second defendants; the second defendants counterclaimed for
relief from forfeiture.
Hazel Williamson QC and Carolyn Walton
(instructed by McKenna & Co) appeared for the plaintiffs; Erica Foggin and
Lana Wood (instructed by Theodore Goddard) represented the first defendant;
Kirk Reynolds QC (instructed by Denton Hall, of Milton Keynes) represented the
second defendant.
Giving judgment, Judge Bromley QC said: These are
consolidated actions for possession and rent or mesne profits with
interest by the Crown Estates Commissioners, who own in right of the Crown the
freehold of Regent Street, London, on both sides from Waterloo Place, across
Piccadilly, up Regent Street to just short of the BBC. The property in question
(‘the property’) is 262–264 Regent Street, which is effectively the second shop
down Regent Street from Oxford Circus on the eastern side, with five floors of
offices over and a basement.
The first defendants, Signet Group plc
(‘Signet’) were the underlessees of the property and, when the headlease
expired held directly from the commissioners, they entered into an
unconditional contract to assign to the second defendant, TTT Moneycorp Ltd
(‘TTT’) the residue of the term, consent to which assignment the commissioners
refused. The assignment was effected.
The commissioners rely on forfeiture of
the lease and claim possession of the property against TTT. TTT contend that
the commissioners’ refusal of consent to assignment was unreasonable and that,
accordingly, Signet was released from its obligation to obtain consent for the
assignment. Alternatively, if the assignment was in breach of covenant, TTT
seeks relief from forfeiture.
The property has a ground-floor frontage
to Regent Street of some 6.5m, or about 20ft, with the doorway to the upper
floors separate on the north side. TTT proposes to divide the ground floor into
two, occupying 3.3m of frontage itself on the north, with an upper floor or
floors as offices. One of the upper floors is actually occupied now by TTT. The
southern part of the frontage, some 3.2m, is proposed to form a retail unit
with a new mezzanine floor to be constructed in the present ground-floor across
the whole width of the frontage, including across the ground-floor area which
TTT proposes to occupy. In short, the conversion works will produce street
level windows with doors to each unit of some 10ft width in total each and a
mezzanine floor. There are other such subdivisions in Regent Street: one pair
is not far away and one of that pair is occupied by Thorntons the
confectioners. There are also other mezzanine floors in Regent Street, but not
on the whole many.
Regent Street was designed by John Nash
as the proposed ceremonial way from Carlton House, where the Prince Regent
lived, to a proposed summer residence in Regent’s Park. The Prince Regent
succeeded to the throne in 1820 and moved to Buckingham Palace and the summer
residence was anyway not built. Regent Street was, however, developed.
By about the turn of the 19th century
extensive rebuilding was required, and between about 1910 and 1930 Regent
Street was redeveloped as visually it appears today. The redevelopment was
carried through by means of building leases of particular blocks or sites, and
of course the headlessees then generally sublet the redeveloped properties. In
about the 1980s, the headleases began to fall in, as of course the
commissioners, who manage the Crown’s Regent Street estate and much other Crown
property, were aware.
The unity of the freehold title of Regent
Street in the Crown was, in my judgment, a matter of general public knowledge
at all material times, not least because the commissioners’ annual reports were
laid before parliament and were themselves in the public domain.
Regent Street at ground-floor level on
both sides is a shopping street of international reputation and calibre. That
is not to say it has not had and, to some extent, still has, some non-shopping
use, using ‘shopping’ in the sense of the sale by retail of finished goods. For
example, there are or have been airline offices (such as British Airways, which
has now moved) and shops selling materials by the roll, banks and building
societies and, although I am satisfied that this was a commissioner’s mistake
to permit, a bureau de change at 67 Regent Street in a half unit. In recent
years the street furniture and paving has been improved, so that the visual
appearance has been enhanced. The clientele is the well-heeled foreign tourist
and those from these islands who, well-heeled or not, enjoy the quality on foot
of either shopping or window-gazing which Regent Street, by its reputation for
quality, offers.
Regent Street is round the corner from
the large stores which attract so many to Oxford Street, and it is served by
two major access interchange tube stations: Oxford Circus in the link position
between Oxford Street and Regent Street, and also Piccadilly Circus. There are
bus services along Regent Street itself and along the other roads which converge
at Oxford Circus. Regent Street is of course in and within walking distance of
much of central London.
The shops in Regent Street selling
finished goods by retail are of varying sizes, from one standard unit frontage
like the Property to shops spread across the equivalent of numbers of units.
They encompass large-scale, high-quality retailers — Liberty, Austin Reed,
Burbery, Garrard and the like — and smaller retailers selling high-quality
goods to the public.
In a much-abused but, in this case, an
accurate term, Regent Street on the ground floor and in some cases higher is a
prestige shopping location, with predominantly high-quality retailers selling
high-quality finished goods to the public. The window-level impact of the
street as a whole on pedestrians is, in my judgment, of high commercial
significance.
Against this background, I turn to the
directly relevant facts. By a lease dated December 22 1914 the property was
demised for a term of 80 years, which started on October 10 1913. That lease
(‘the headlease’) contained in clause 10 a wide-ranging user restriction
against public houses, tripe boilers and other industrial uses or any other
noisome, noisy or offensive trade or business, against asylums or other
charitable institutions or auction sales, and it concluded:
… without in all such aforesaid cases
obtaining the previous consent in writing of the Lessor nor use or permit to be
used the said premises for any illegal or immoral purpose nor do or permit to
be done in or upon the said
shall become a nuisance annoyance or disturbance to the owner or occupier of
any neighbouring premises or which in the opinion of the Lessor shall
prejudicially affect or depreciate any adjoining premises belonging to His
Majesty.
Clause 12 is in the following terms:
Not to erect during the said term any
additional building upon the said land other than such as shall have been
previously approved of in writing by the Lessor or his Architect nor to cut or
injure any of the principal timbers or walls nor make any alteration whatsoever
in the plan or elevation of any of the buildings for the time being on the said
land either internally or externally nor place or affix to the front of the
front of the said buildings any water ventilating or other pipe nor alter cover
up or change any of the architecture or architectural decorations or the
external colour of such buildings or the iron railings (if any) in front
thereof nor paint write place or exhibit any inscription figure or letter nor
affix attach or exhibit any pole sign board advertisement or notice or any bill
or placard whatsoever on or to any part of any of such buildings above the
ceiling of the ground floor thereof nor make any addition temporary or
otherwise to any of such buildings either in height or projection without in
every case obtaining the previous consent in writing of the Lessor.
It is possible that later the word
‘alter’ may have been inserted before ‘cut or injure’ by amendment.
Then clause 16 excluded the acquisition
of easements:
… from or over or affecting any land or
hereditaments belonging to His Majesty not comprised in this demise …
A right was reserved to the lessor (the
Crown):
… to erect any new buildings of any
height on any land belonging to His Majesty not included in this demise.
I comment: the fact that the property
with adjacent property were all part of the Crown estates was clear to the head
tenant.
The headlease was later assigned and the
then head tenant granted an underlease on March 24 1972 for a term from March
25 1972 to October 6 1993. The underlease was assigned with licence on February
2 1981 to Signet by its former name of Ratners (Jewellers) Ltd.
The commissioners were concerned during
1993 about dilapidations and a schedule of dilapidations was served on Signet
in August 1993. The cost of remedying the dilapidations is now of the order of
£100,000. There were, during 1993, inconclusive negotiations about the renewal
of the underlease.
The headlease expired on October 10 1993
and, although the contractual term under the underlease would have expired on
October 6 1993, it continued by virtue of Part II of the Landlord and Tenant
Act 1954. Signet held directly from the commissioners after the expiry of the
headlease. I will call the statutorily continued lease ‘the lease’. On January
19 1994, Signet applied to the county court to renew the lease under the 1954
Act. On December 20 1994 Signet assigned the lease to TTT without the
landlords’ consent and TTT went into occupation of at least one floor. The
ground floor remains with the shuttering around it.
On December 30 1994 the commissioners
served on both defendants notices under section 146 of the Law of Property Act
1925. On February 7 1995, the commissioners issued proceedings, which were
served on February 9 1995, forfeiting the lease and claiming possession, mesne
profits, damages and interest.
On August 7 1995, an order was made in
the county court substituting TTT for Signet in the application for the renewal
of the lease.
I return to identify other material
provisions in the tenant’s covenants in the lease. First, clause 2(b):
To observe and perform all the Lessee’s
covenants (other than the covenant to pay rent) and the restrictions contained
in a lease dated the 22nd day of December 1914 and made between The King’s Most
Excellent Majesty of the first part George Granville Leveson Gower of the
second part and Alice Ada Sykes and Frank James Sykes of the third part
(hereinafter called ‘the Head Lease’) as if the same were expressly set out in
these presents notwithstanding any inconsistency between this Underlease and
the said covenants and restrictions contained in the Head Lease and to keep the
Lessor fully and effectually indemnified against any breach thereof.
I need not cite the last passage in that
clause by the tenant.
Then clause 2(d)(ii) is as follows:
Not to assign the whole of the demised
premises or underlet or part with the possession of the demised premises or any
part thereof without the previous consent in writing of the Lessor and Superior
Landlords which shall not be unreasonably withheld.
Then clause 2(h):
Not without the previous consent in
writing of the Lessor and Superior Landlord to use the demised premises or any
part thereof for any of the purposes prohibited by the Superior Lease nor
without the previous consent in writing of the Lessor such consent not to be
unreasonably withheld for the purposes of any trades or businesses other than
those at present carried on therein.
Clause 2(b) clearly shows the nexus
between the lease and the headlease, with the tenant covenanting to observe the
lessee’s covenants in the headlease as if set out in the lease. The tenant
must, in my judgment, be taken clearly to be on notice that the property was, with
adjacent property, part of the Crown estates.
Clause 2(h) was restrictive of user
without consent. The licence of February 2 1981 for the assignment of the lease
to Signet licensed Signet to use the ground floor and basement of the premises
for:
… the retail sale of jewellery and
ancillary items and for no other purpose without first obtaining the Lessor’s
prior written consent, which consent shall not be unreasonably withheld.
Signet also covenanted with the then
headlessee to observe and perform the tenant’s covenants in the lease.
In summary, there is no doubts that
licence to assign the lease was required, such consent not to be unreasonably
withheld: clause 2(d)(ii) of the lease. Licence to change of use was required
from the retail sale of jewellery and ancillary items, such consent also not to
be unreasonably withheld per the licence of February 2 1981, with such further
impact about user as clause 2(h) of the lease might have.
As to building alternations, it has been
accepted before me that the landlords’ consent was required, not to be
unreasonably withheld. Miss Hazel Williamson QC, in her written submission, put
the basis on clause 12 of the headlease (now expired) with the tenant’s
covenant’s in the lease to observe the covenants in the headlease as if
expressly set out in the lease, and section 19(2) of the Landlord and Tenant
Act 1927.
I continue with the more immediate
chronology. TTT was taking an interest in the property by March 1994, and
Signet’s agents, Thomas Davidson by a letter of March 22 1994 put forward terms
of assignment of the lease to TTT. Negotiations continued between Mr Shlewet of
TTT principally and Thomas Davidson. By a letter dated August 5 1994, Thomas
Davidson put forward to Signet TTT’s offer to take an assignment on terms. The
terms included:
The premises are required for use as a
bureau de change.
The excellence of TTT’s covenant was
emphasised in the final paragraph, with its accounts being sent and the
location of the principal outlets being stated. These were bureaux de change
and non travel agency outlets, save the Covent Garden branch, which I shall
mention again. The offer of TTT as conveyed to Signet contained no reference to
travel agency and it has not been suggested in evidence that the offer was at
that time misrepresented.
Then, having consulted Signet, Thomas
Davidson in a letter dated August 9 1994 put forward to TTT a method by which
the disposal of the lease to TTT could be achieved. I cite from that letter:
3. Initially the assignment of the lease
renewal rights will be subject to landlord’s consent. A three months
conditional contract will be agreed during which time Signet will attempt to
secure landlord’s consent for the assignment. Following this period whether the
landlord’s consent has been achieved or not the contract will be completed.
4. In the event that landlord’s consent
has not been obtained TTT Moneycorp will retain the lease renewal rights and
the onus will be placed on the landlords to prevent the continued occupation of
the premises by your organisation by taking forfeiture proceedings. In the
event that the landlords seek forfeiture proceedings you will then be able to
seek relief on the grounds that the landlords are unreasonably withholding
their consent and take the necessary action to remedy the situation.
The assignment is not subject to planning
permission being obtained.
5. If you are prepared to proceed on this
basis Signet’s board approval will be obtained to the transaction and the
matter will be placed in solicitors’ hands.
6. It is noted that you wish to exchange
contracts within a four/six week period following which completion would be set
to take place for 1st January 1995.
The legal technicality changed so that
there was an unconditional contract, but the substance did not, and the
anticipation of the ultimate seeking of relief from forfeiture if necessary was
made clear to TTT.
In September 1994, TTT, with its
solicitors, consulted a QC about the proposed transaction. By the end of
September 1994, TTT had agreed terms with Signet.
Mr Dillon was the urban estate manager
(West End and City Estates) for the commissioners and the Regent Street estate
fell within his responsibility. On the initiative of TTT, on October 21 1994,
Mr Shlewet, who was the managing director of TTT, had a meeting with Mr Dillon.
I am satisfied that Mr Dillon was the determining mind for the commissioners
then and in relation to the application made on November 3 1994 to which I
shall refer, and that TTT, by Mr Shlewet, appreciated this at all material
times thereafter. Mr Shlewet was accompanied by a Mr Phillips, who knew Mr
Dillon professionally.
At the meeting, Mr Shlewet handed Mr
Dillon a letter from TTT with an accompanying folder. The letter identified, inter
alia, the long-establishment, turnover, profits, and eight branches in
central London locations and four branches at Gatwick Airport of TTT, with
other plus factors as to its suitability as tenant. The folder included a
variety of financial accounts of TTT as a corporate entity, two photographs of
‘TTT Travel Centre at 35 Longacre, WC2 — opened December 1991’ and two
photographs of ‘2 TTT Foreign Exchange Corporation branches at Gatwick Airport
— opened April 1993′. The directors’ report on the 1992 accounts identified the
principal activities of TTT as follows:
The principal activities of the company
are the provision of bureau de change, foreign exchange, travel and theatre
booking services.
The letter contained other information
conducive to acceptance of the proposal to assign the lease. The plans in the
folder included a shopfront design with, over the ground-floor part to be
occupied by TTT, ‘Bureau de Change’, and over the door to the upper floors:
‘Flights’ and over the first floor of the other half: ‘TTT Travel Centre’. Mr
Shlewet certainly approved that design and, in my judgment, it represented the
reality of the business concept at that time. The letter continued:
Proposed scheme
TTT will take a lease of the whole
building dividing the ground floor area as shown in Section 9 of the folder to
create two new shops, with a new mezzanine level:
The words ‘a new’ appear to be
underlined.
First shop comprising 555 sq ft on ground
and 826 sq ft on mezzanine — total 1,381 sq ft (with a possible basement
storage).
Then:
The second shop comprising 266 sq ft on
ground floor, with a basement.
The new scheme offers significant
improvement in appearance in line with some of the best shop fronts in Regent
Street, with an additional retail floor space of 826 sq ft (new mezzanine
level).
The scheme will also offer increased
employment in the area of at least 5 more jobs. The current tenants have 4/5
employees: whereas the new fashion shop will have at least similar numbers to
cater for business on the new mezzanine level and the second shop, offering
travel, tourist information and foreign currency services, will employ at least
5 new employees.
Clearly, it was the second shop, only on
the ground floor, which TTT was to occupy, the new fashion shop occupying the
remainder of the ground floor and the new mezzanine floor. It will be noted
that there are services identified, three of them: travel, tourist information
and foreign currency.
TTT is from its accounts and Mr Shlewet’s
evidence a highly successful and reputable business in financial, especially
currency exchange, servicing. I accept that evidence. Mr Shlewet runs a high
quality operation from its layout and fittings upwards and he is, in my
judgment, on the evidence before me entitled to his pride in the quality of
TTT’s operation. That quality and quality of covenant for a landlord is a
material consideration, albeit not the only one for a landlord to take into
account.
The accompanying documents included ‘The
Marketing Strategy’ in the following terms:
The marketing
strategy
Prime city centre and airport locations
serving tourists and business travellers
Strong brands and high quality retail
design
Extended opening hours, seven days a week
Wide range of money services together
with highly competitive exchange rates and willingness to negotiate
Fast and friendly service provided by
experienced staff who are rewarded by performance-related pay
Full use of computer technology
throughout the operation.
The terms did not change with the
application letter of November 3 1994.
The purpose of the meeting was, in my
judgment, a perfectly legitimate one of advocacy to, and softening up of, Mr
Dillon with explanation before the application for consent was made, with an
element of testing the temperature of the water. In the light of the terms and the
rejection letter, to which I shall come later, it is important to note that Mr
Shlewet said in evidence that:
I believe Mr. Dillon understood the
extent of the areas at the meeting.
I agree and so find.
Mr Shlewet invited Mr Dillon to inspect
the Longacre branch, which he did. I have done so myself with counsel.
That property is a corner property with
entrances on two sides. On the other two sides are counters, on the left for
bookings and ahead for foreign exchange. The centre area from both doors is an
open one, unimpeded, encouraging easy access to the counters. There is little
in the way of brochures and no desk for customers in the immediate off-street
area, although there are rooms behind to which customers might be taken. Over
the Longacre entrance, a wide one, with doors fastened open, was an illuminated
sign: ‘Airline Agency’ and on the line below: ‘Bureau de Change’. Then on the
left in the same style and size is: ‘Flight Centre’ and on the right: ‘Theatre
Tickets’. On the left of the main door under lights are four other signs: one:
‘TTT Travel Centre, Open 7 days a week’ and another: ‘Our Money Service’.
There were certainly some tourist guides,
but there was not displayed the range of brochures for holidays of one sort or
another among which a customer might browse, nor did it have easily accessible
desks at which a customer might consult an adviser to choose amongst a range of
options. While some of the functions of a travel agency are carried out, I do
not think that one would naturally describe it as a travel agency. In my
judgment, the layout conveys principally that it is a high-quality bureau de
change and ticket booking agency. It was such an operation that on October 21
1994 Mr Shlewet conveyed to Mr Dillon that TTT wanted to conduct in the
property.
Nothing conclusive emerged from the
meeting on October 21 1994. On October 28 1994, Signet and TTT signed an
unconditional agreement for the assignment of the lease to TTT. The deposit was
£50,000. The agreement defined the property contracted to be assigned as the
property under its registered title number
… or if appropriate the Vendor’s
equitable or statutory rights to obtain relief from forfeiture.
Completion date was January 3 1995 (‘the
effective date’) subject as thereinafter appeared and the further definition
appeared: ‘Longstop Date 1st June 1995’. The agreement was in substance made
for purchase and sale on January 3 1995. Clause 7(2) of the agreement was in
the following terms:
This Agreement is not conditional upon
consent being obtained from any reversioner of the Lease (‘the Landlord’) to
either the Assignment to the Purchaser or for the change of use of the Property
or any part thereof (‘the Licence’) notwithstanding the Vendor will up to the
Effective Date take all steps properly required of it to obtain the Licence
including licence to do other things reasonably required by the Purchaser and
the Purchaser shall not be entitled to refuse to complete if Licence has not
been obtained.
Clause 7(3) then provided:
The Purchaser shall promptly and at the
Purchaser’s own cost and expense:–
…
(ii) deal with all correspondence and
documentation relating to any Vendor’s application for the Licence made at the
Purchaser’s request.
Clause 8 of the agreement was in the
following terms:
The Property is sold in its present state
and condition and is from the date hereof at the risk of the Purchaser in all
respects The Purchaser hereby agrees to indemnify the Vendor in respect of (i)
compliance with any schedule of dilapidations served whether before or after
the date of this Agreement and (ii) the terms of any relief that might be
required or agreed in respect of any forfeiture of the Lease or if relief is
not granted the cost of compliance with the covenants contained in the Lease on
the termination thereof.
The agreement then conferred on TTT the
option to delay actual completion beyond January 3 1995 to June 1 1995 by the
service before December 20 1994 of an option notice. Save for the fifth floor,
vacant possession was to be given to TTT on completion.
I comment that at October 28 1994, Signet
and TTT removed the possibility of the absence of the commissioner’s consent to
assignment or to change of use as a bar to completion and had contemplated that
the court might impose terms on granting relief from forfeiture. This was
before any formal application to the commissioners for consent was made. The
agreement was in this respect unconditional.
Following the agreement, TTT was in the
driving seat so far as negotiations with the commissioners was concerned. It is
clear from the unconditional contract that on Signet’s behalf it was required
so to be and, in its own interests, was entitled so to be. No point was taken
before me about communication or lack or timing of communication between TTT and
Signet. In the circumstances, in my judgment, this was right.
The formal application for consent to
assignment, change of use and alterations was of course sent by Signet and that
was dated November 3 1994. It was from Theodore Goddard, Signet’s solicitors.
It closely resembled, but it was not identical with, the letter and
accompanying documents which had been left and discussed with Mr Dillon on
October 21 1994.
I cite in full the passage dealing with
‘Proposed Scheme’.
Proposed Scheme
We are advised that TTT Moneycorp Limited
propose to divide the ground floor area currently approximately 820 sq ft as
shown in Section 7 of the folder to create two new shops with a new mezzanine
level.
The first shop will compromise 555 sq ft
on ground and 826 sq ft on mezzanine — total 1,381 sq ft, with a possible
basement storage area, this will be sublet to a quality fashion retailer.
The second shop comprising 266 sq ft
ground floor, with a basement, will be retained by TTT Moneycorp Limited and
operated as a travel agency; a second branch of its TTT Travel Centre division.
Then the proposed scheme went on with
paragraphs dealing with the improvement of appearance and employment. It ended:
TTT Moneycorp Limited have consulted with
Westminster Council design officers and planners and will consult with English
Heritage regarding its proposals, which have been designed to conform to all
the requirements in the Westminster Council Regent Street Guide for Shopfronts
and Advertisements and the Crown Estate Regent Street Guidelines for Occupiers.
The significant change is the
introduction of the third paragraph about operation as a travel agency. I do
not find any change in commercial intention or purpose, but the advocacy is
apparent.
TTT consulted planning solicitors and was
simultaneously pursuing obtaining planning permission for the proposed new
shopfront for the two units. The application was made on November 7 1994 and
one of the units was described as:
Travel Centre/Airline Agency, providing
tourist information and sales of flights, tours, theatre bookings and other
related activities, including foreign currency.
Under the Use Classes Order a travel
agency falls within Class A1, as do other retail shops, and A1 was the
permitted use, whereas a bureau de change would fall within Class A2 and need
planning permission. The application was skilfully presented to show that no
change of use class was envisaged, and it succeeded in due course.
Mr Shlewet was naturally concerned to
know how Mr Dillon’s more considered appraisal of the application was
progressing and he telephoned him twice in or up to about mid-November 1994. He
said of Mr Dillon:
He gave me the strong impression he did
not want us to be there.
As to the last telephone conversation Mr.
Shlewet said in evidence:
He [Mr Dillon] was not happy the
transaction go through.
Then:
I tried very hard to talk to him, discuss
us, what wrong with our proposal? He: banks, airline offices out of Regent
Street. He did not want us there.
The substance of the matter was that
before the commissioners’ rejection letter of November 18 1994 was sent, Mr
Shlewet had three times discussed the proposals of TTT with Mr Dillon, Mr
Shlewet doing his best to be persuasive and to disarm objections. There cannot,
in my judgment, be any doubt that Mr Dillon continued to understand TTT’s
proposals as he had on October 21 1994, with in particular the new mezzanine
floor being part of the retail shop unit, not part of the unit TTT was to
occupy.
Mr Shlewet did not suggest in his
evidence that he had to disabuse Mr Dillon of any misunderstanding about the
respective areas, and it is inconceivable that the two men could have conducted
their repeative discussions without such a misunderstanding emerging, if it
existed. It did not and I find that Mr Shlewet never thought that it did.
On November 14 1994, Signet and TTT
executed a deed drafted by TTT’s solicitors embodying under seal the
unconditional contract between them of October 28 1994.
Mr Dillon delegated the preparation of
the commissioner’s refusal letter to his assistant, with McKennas as solicitors
and Hillier Parker. He took no part in the drafting and, while he must have
seen the letter of November 18 1994 before it went or in draft, he never picked
up the misdescription of the respective areas of occupation.
Mr Mullens, a director of TTT and a
solicitor, gave evidence. It is clear from his evidence that he anticipated
that the commissioners would object. He was right.
The letter of refusal from McKennas is in
the following terms. It is necessary that I should set it out in full.
We refer to the proposals contained in
your letter dated 3rd November 1994 to our clients’ surveyors and to our
letters dated 4th and 10th November.
In your letter, your client seeks
landlord’s consent for the following:
1. proposed assignment of the lease of
the premises dated 24th March 1972 to TTT Moneycorp Limited (trading as TTT
Travel Centre) (‘TTT’);
2. change of use from the permitted retail
user to a mixed service and retail use; and
3. alterations involving the division of
the premises into smaller self-contained units.
In support of your clients’ application,
you have supplied us with an information pack explaining the nature of TTT’s business
and its proposals in respect of the premises.
TTT’s proposed scheme would involve the
sub-division of the existing single retail unit into two separate units. One of
those units would be operated by TTT as a bureau de change/ticket sales
operation. TTT’s intention is to sub-let the second unit to be utilised for
retail purposes.
Your client has therefore requested
landlords consent for a change of use from the permitted retail user under the
terms of the lease — menswear/jewellery — to a mixed service use (comprising a
bureau de change) with a partial retail use (ticket sales/travel agency) on the
ground and mezzanine floors.
Having given your client’s requests for
consent to assignment and/or sub-letting detailed consideration together with
their professional advisers, our clients do not consent for the following
reasons:–
1. Our clients consider that TTT’s
proposed use of the premises is fundamentally contrary to their strategy and
long-term planning for Regent Street and to the principles of good estate
management both generally and specifically as articulated in various policy
documents and statements. This is so as regards the premises themselves, their
immediate neighbourhood and the Crown Estate’s Regent Street estate as a whole.
2. Our clients have for many years had
firm, clear and reasonable policies in respect of their Regent Street estates
as a whole and these have been consistently implemented. Those policies embrace
an estate management strategy committed to maintaining and improving the quality
of Regent Street as one of Europe’s premier shopping streets and of maintaining
and enhancing its value in accordance with our clients’ wider responsibilities
as custodians of the Crown Estate. Our clients regard TTT’s proposed use of the
premises as detracting from the implementation of those policies.
3. A key aspect of our clients’
management strategy is the promotion of large high-quality shops in Regent
Street. It is our clients’ stated objective — amongst other things — to extend
and deepen retail floor space within Regent Street, particularly at ground
floor level, with a view to creating large, high-quality shops which increase
the attractiveness of shopping in Regent Street to the clientele which both our
clients and their tenants regard as their target market.
As part of this strategy our clients seek
to encourage existing banks, building societies and other ‘service’ users, such
as ticket offices, to relocate away from ground floor level and new service
users, if permitted, are directed towards upper floors. TTT’s proposed use and
occupation of the premises would be contrary to the implementation of that
strategy.
4. One of the principal objectives of our
clients’ long term policies for their Regent Street estate is the creation of
new, larger and better shops facilitating the creation of flagship stores.
TTT’s proposed division of the premises into two independent units is contrary
to the implementation of our clients’ policy of encouraging an increase rather
than a decrease in the extent of shop frontage to Regent Street and the size of
individual units.
5. Our clients consider that TTT’s
proposed use of the premises would lead to over provision of bureaux de
change/ticket shops in the vicinity of the premises. The existing bureau de
change at 239, 241 and 291A Oxford Street and the existing ticket office at 19A
Argyll Street (which are not part of our clients’ estate) and the currency
exchange facilities within National Westminster Bank at 246/250 Regent Street
(which is part of our clients’ estate) are in close proximity to the premises.
There are additional bureaux de change at 83 and 173 Regent Street and currency
exchange facilities at 50/52 and 210 Regent Street (Barclays) and 132 Regent
Street (Lloyds) (which are not part of our clients’ estate) together with a
bureau de change at 117 Regent Street and currency exchange facilities at
133/135 Regent Street (Midland) and 115 Regent Street (TSB) (which are part of
our clients’ estate). Such over provision would detract from our clients’ policies
in respect of, amongst other things, tenant mix.
6. Our clients’ guidelines for occupiers
are generally enforced in relation to, amongst other things, the design of
shopfronts and their style and harmonisation.
Elements of TTT’s proposals for the appearance
of the unit (which result from the use to which they propose they to put it)
are contrary to our clients’ general guidelines in this regard.
7. Our clients object to TTT’s proposed
use because of the above reasons and because of the precedent which it would
set and because of its detrimental effect which the grant of consent would or
might have on our clients’ relations with other tenants.
We have elaborated above on the reasons
for refusing consent to assignment and sub-letting. Our clients also refuse
consent to the change of use and alterations proposed by your client for the
same and similar reasons, without limiting their position in that regard.
Following receipt of McKennas’ letter of
November 18 1994, TTT with its solicitors again consulted leading counsel.
On December 20 1994, Signet assigned the
lease to TTT without the commissioners’ consent. TTT immediately went into
possession, as to the shop allowing Signet, by a side letter, to have the
benefit of the Christmas trade to January 7 1995.
On December 21 1994, TTT’s solicitors,
Denton Hall, sent a letter to McKennas’ in answer to the letter of November 18
1994, which included the following passages:
As you will know from Theodore Goddard’s
letter to you of 3rd November, we act on behalf of TTT Moneycorp Limited
(‘TTT’) which has been negotiating with Signet Group plc to take an assignment
of its Lease of the above premises. Theodore Goddard have passed us a copy of
your letter of 18th November responding to the request for Landlord’s consent to
the assignment, to a change of use, and to certain alterations. It is clear
from that letter that your clients have not understood the nature of TTT’s
proposal. This has, we fear, led your clients to make a flawed decision.
Your clients appear to have understood
TTT’s proposal as a proposal to operate a small unit:
‘as a bureau de change, ticket sales
operation’.
That has led your clients to undertake
(amongst other things) a survey of banks and bureaux de change within the
locality.
However, TTT’s proposal is not to use the
smaller unit as a bureau de change but as a travel agency (as Theodore Goddard
stated on page 2 of their letter). It would be similar to the travel centre
which TTT operate in Covent Garden (to which Theodore Goddard also referred on
page 2 of their letter). Thus comparison between TTT’s proposed use and bureaux
de change is, with respect, irrelevant, not least because none of them operates
as a travel agent. We do not, of course, deny that as part of the business of a
travel agent facilities will be offered for changing money and buying
travellers cheques and issuing travel insurance, but this is part of the normal
business of any travel agent.
I pause in the citation to draw attention
to the fact that that letter refers to the smaller unit being occupied by TTT
and reinforces the absence of misunderstanding of the letter of November 18.
Then, with further criticisms, but not specifically in relation to the
misstatement of areas, the letter contains the following passage:
As a result of the above, we have advised
our client (and this advice has been confirmed by Leading Counsel) that your
refusal to grant the licences sought is unreasonable. We have also advised our
client that in the circumstances it is relieved from seeking further licence or
consent, and that it is entitled to take an assignment of the lease, occupy the
premises for its proposed use and carry out the planned alterations. The
assignment was therefore completed by our client yesterday and we will let you
have formal notice of that assignment pursuant to cause 2(c)(v) of the
Underlease dated 24th March 1972, together with the Transfer and our cheque for
£4 in respect of the prescribed registration fee in due course.
It will be noted that it was said that it
was because of the unreasonable refusal of consent that therefore the
assignment was made. That there was a prior unconditional contract was
concealed, both in the opening paragraph and in the last paragraph cited. I
shall return to this letter in due course.
The commissioners were still unaware of
the unconditional contract and deed for the assignment of the lease and the
letter did not tell them. The commissioners were faced with a fait accompli.
It is clear from the evidence of Mr Mullen that TTT’s hope and expectation was
that, faced with a fait accompli and the letter of December 21 1994, the
commissioners would, perhaps after some negotiation, accept TTT as tenant and
its occupation of part of the street frontage. TTT was wrong. Section 146
notices were served and then, as I have said, the forfeiture proceedings were
begun on February 7 1995. Further section 146 notices were served with regard
to unauthorised alterations and the consequent proceedings were begun on April
11 1995. Those are the consolidated actions which I have mentioned.
I refer now to the relevant provisions of
the Landlord and Tenant Act 1988, which relate to the assignment of the lease
in the present case. Section 1(3) is as follows:
(3) Where there is served on the person
who may consent to a proposed transaction a written application by the tenant
for consent to the transaction, he owes a duty to the tenant within a
reasonable time —
(a) to give consent, except in a case
where it is reasonable not to give consent,
(b) to serve on the tenant written notice
of his decision whether or not to give consent specifying in addition —
(i) if the consent is given subject to
conditions, the conditions
(ii) if the consent is withheld, the
reasons for withholding it.
Further provisions in section 1 are as
follows:
(5) For the purposes of this Act it is
reasonable for a person not to give consent to a proposed transaction only in a
case where, if he withheld consent and the tenant completed the transaction,
the tenant would be in breach of a covenant.
(6) It is for the person who owed any
duty under subsection (3) above —
…
(c) if he did not give consent and the
question arises whether it was reasonable for him to do so, to show that it was
reasonable,
Then section 4:
A claim that a person has broken any duty
under this Act may be made the subject of civil proceedings in like manner as
any other claim in tort for breach of statutory duty.
I come to the authorities, starting with
International Drilling Fluids Ltd v Louissville Investments (Uxbridge) Ltd
[1986] Ch 513*:
*Editor’s note: Also reported at [1986] 1
EGLR 39
The user clause in the lease restricted
use to offices. As to assignment, the tenant was not to assign without the
landlord’s licence, but licence not to be unreasonably withheld. The tenant
vacated the premises so that they were empty. He sought licence to assign to an
assignee, but proposed to use the premises as serviced offices. The landlord
refused its licence on the grounds that the proposed use would be detrimental
to the value of the reversion and would create a parking problem. The trial
judge held that the refusal of consent to assign was unreasonable and the Court
of Appeal upheld that decision.
The following propositions appear from
the judgment of Balcombe LJ at the pages I shall identify. I substitute the
present statutory provision as to onus at (3) for what his lordship said. He
said:
(1) The purpose of a covenant against
assignment without the consent of the landlord, such consent not to be
unreasonably withheld, is to protect the lessor from having his premises used
or occupied in an undesirable way, or by an undesirable tenant or assignee …
That is at p519.
(2) … a landlord is not entitled to
refuse his consent to an assignment on grounds which have nothing whatever to
do with the relationship of landlord and tenant in regard to the subject matter
of the lease …
That is at p520. He said a collateral
purpose will not suffice.
(3) By the statute, section 1(6)(c) cited
above — the onus of proving consent has been reasonably withheld is on the
landlord.
(4) It is not necessary for the landlord
to prove that the conclusions which led him to refuse consent were justified,
if they were conclusions which might be reached by a reasonable man in the
circumstances …
P520.
(5) It may be reasonable for the landlord
to refuse his consent to an assignment on the ground of the purpose for which
the proposed assignee intends to use the premises, even though that purpose is not
forbidden by the lease …
P520.
(6) … while a landlord need usually only
consider his own relevant interests, there may be cases where there is such a
disproportion between the benefit to the landlord and the detriment to the
tenant if the landlord withholds his consent to an assignment that it is
unreasonable for the landlord to refuse consent.
P521.
(7) Subject to the propositions set out
above, it is in each case a question of fact, depending upon all the
circumstances, whether the landlord’s consent to an assignment is being
unreasonably withheld …
P521.
I add, as appears from p522, that on an
application for leave to assign, whether the proposed use will or will not fall
within the user clause in the lease is a material consideration.
The application in the present case was
three-fold: for consent to assignment, for consent to change of use and for
consent for alterations. In Warren v Marketing Exchange for Africa
Ltd [1988] 2 EGLR 247, Judge Finlay QC, sitting as a judge of the High
Court, was faced with the argument based on Killick v Second Covent
Garden Property Co Ltd [1973] 1 WLR 658 that the application for consent to
assign should be dealt with entirely separately from the application for change
of use in that case. Killick was a case where it was not a necessary
consequence of assignment that there would be any breach of the user covenant
and also the proposed assignee was prepared to take the risk of the user clause
being used against him after assignment.
Judge Finlay QC held in Warren
that in that case the assignment would inevitably give rise to a breach of the
user covenant and the assignment and user issues were ‘inevitably connected’.
He held, accordingly, that the landlords in that case were entitled to take
into account the effect of granting permission for the assignment, if the
result was to lead to a breach of the user covenant, as he held it was.
I come to British Bakeries (Midlands)
Ltd v Michael Testler & Co Ltd [1986] 1 EGLR 64*. The case
establishes that if a landlord has a good reason and a bad reason for refusing
consent, so long as the bad reason does not vitiate the good reason, the
refusal of consent may be upheld by the court (pp64–66).
*Editor’s note: Also reported at (1986)
277 EG 1245
I consider that the effective three
applications in the present case were inevitably connected, to use Judge
Finlay’s term, since the assignment was to an assignee whose intended use was
the changed use for which permission was sought and there were alterations as
part of the same scheme.
I conclude that, just as the applicants
made the three applications together, so the commissioners were entitled to
consider them together as constituting essentially one scheme. While of course
the weight and indeed the relevance of reasons for refusal must vary from
application to application, since each application is for a different thing, it
was rightly not suggested in argument that one application or two applications
should succeed if the remaining two or one failed.
The question whether the commissioners
have established that their refusal of consent to assignment is reasonable
initially requires a perception of the factual matrix against which it was set.
The commissioners called as an expert
surveyor with a close knowledge of Regent Street Mr Ovenden, a partner in
Gerald Eve. I accept Mr Ovenden as an accurate, truthful expert witness. His
was the only independent surveyor’s evidence before me. In his supplemental
report, Mr Ovenden analysed for the Piccadilly Circus to Oxford Circus section
of Regent Street the percentages of street frontage by use at five periods,
namely 1963; 1970; May 1978; September 1991 and October 1995. The analysis is
by the three use classes of A1, A2 and A3, with subdivision percentages in each
class, plus then the percentage of vacancies.
In round terms, the percentages for
retail sales of goods fell from 74.1% in 1963 to 69.3% in September 1991. In
October 1995, this class of occupancy had climbed 77.4%, the highest figure for
33 years before me. The percentage for service users, that is, travel agents
and tourist offices in class A1, with the uses in class A2 of banks principally
and then building societies and more minimally in terms of frontage, bureaux de
change (and at two dates employment agencies) is as follows, to which I add the
vacancies. Then there follow five columns with the dates I have given and then
on the left, service uses, percentages: 22.6%, 24.7%, 26.1, 16.3 and 11.9 .
Then vacant: 0.7,
and vacancies were about an eighth in the early 1990s. Service uses and
vacancies together in September 1991 were 28.3%, between a quarter and a third
of all frontages. Well known retailers left Regent Street in the 1980s: Miss
Selfridge in 1982, Swan & Edgar in 1982, Richard Shops in 1985, Boots in
1989, I add, however, for reasons that I do not know.
Mr Ovenden’s evidence includes the
following points, which I accept.
1. In a prime retail shopping street, a
destination centre, it is important that a high proportion of the frontage
should be occupied by shops selling finished goods, so that comparison shopping
can be undertaken by passers by, without passing significant lengths of
frontage which do not offer these goods.
I add that Regent Street is such a
street, a shopping centre of international importance, as Mr Ovenden said.
What Regent Street needs, he said, is
more retail frontage for the sale of finished goods and more catering for
ground-floor shoppers to refresh themselves to continue shopping in Regent
Street.
2. The proportion ought to be
significantly higher than 70%, that being about one-third frontage not being
shops. Although he could not state a precise percentage, he instanced Bond
Street at 89% and Oxford Street at just under 85%.
3. Some type of high-class travel agency
occupying a full unit ‘might possibly’, were his words, be compatible with the
commissioner’s policy for Regent Street, but both ticket offices and travel
agencies suffer from the same disability of not being for the sale of finished
goods and not generating, in his phrase, ‘window interest’.
4. The site location, given its adjacency
to Oxford Circus, has an especial importance of conveying a first impression of
the quality of shopping in Regent Street. The premises are in a high-profile
position, Mr Ovenden said.
5. The unit is not too small to be a
flagship shop for niche retailers.
6. A divided unit is not usually
attractive visually, because a full width shop unit can take advantage of width
and height with the least amount of doors.
7. Regent Street is now benefiting from
increased focusing on high-class retail outlets and the steps being taken to
increase the frontage devoted to that use.
I have heard considerable evidence about
the development of the commissioner’s estate management policy for the Crown’s
Regent Street estate. The commissioners are required by the Crown Estates Act
1961 to make an annual report to Her Majesty and this is made public. In so
wide-ranging a document, much in the way of detail is not to be expected, but
the report for the year ended March 31 1992 includes:
The West End
The retail strength of Regent Street has
long been recognised and much has been done over the past year to progress
plans to underpin its future success. The long-awaited enhancement scheme,
including new street furniture, paving and lighting commenced in January 1992.
Commissioners, together with Westminster City Council, are investing over £3
million in this scheme, which will do much to improve the quality of the
environment in Regent Street.
Hillier Parker became the commissioners’
managing agents in October 1992. I have little direct evidence of the
commissioner’s policy before the first draft of Hillier Parker’s draft Regent
Street Strategy Report of March 1993. Long leases had however begun to fall
in during the 1980s. I accept the evidence of Mr Dawson of Hillier Parker that
Regent Street had been in decline during the 1980s. There were a lot of vacant
units and there were smaller suites of offices of poor quality. The
commissioners however, with the local authority, as I have said, brought the paving
and street furniture up to standard and carried out a significant redevelopment
at 182 Regent Street. There were significant numbers of ground-floor airline,
bank and building society occupiers and Hillier Parker perceived the need for
the introduction of a more vigorous tenant mix, such as one finds in a shopping
centre.
I accept Mr Dawson’s evidence that even
at the time Hillier Parker took over in October 1992, the commissioners were
resisting banks, building societies and airlines. He gave an example from
1983–1984 of a bank relocating from the street frontage to the first floor,
with escalators from the ground floor.
Mr Dawson’s evidence was that
fundamentally, Hillier Parker’s review was a continuation of the earlier policy
of the commissioners. I accept that as basically correct, but the policy was, I
infer, made sharper and more focused, while retaining and continuing antagonism
to dead or dull ground-floor frontages not attractive in a high-class major
shopping street, attracting buyers from around the world, so far as the
commissioners could.
I do, however, accept Mr Kirk Reynolds
QC’s point that there is no reference in terms in any of the drafts and
policies in the policy documents to sites for the sale of finished goods.
However, the point is, in my judgment, implicit, as in the next citation which
I shall make, and there are other references, for example, under ‘Signs’
pointing the same way.
There were in 1991–1992 guidelines for
occupiers produced in relation to ‘the Crown Estate Regent Street’ by Driver
Jonas. The introduction includes the following:
The Crown Estate’s policy is to retain
Regent Street as a high quality shopping area whilst enhancing the listed
buildings. The unique position of a single ground landlord for the whole street
enables the Crown Estate to encourage improvements in the standard of
shop-fronts, signage and street furniture to make it a showpiece example of an
international shopping street.
The same guidelines stated:
The architectural quality and importance
of Regent Street is paramount. Any alteration to shopfronts must preserve and
harmonise with the particular characteristics of the street.
There were then more detailed
requirements as to shopfronts, signs, canopies, blinds, shutters, etc; all had
this in common, that they related to the visual unity and impact of Regent
Street.
The Regent Street Shopfront and Signs
Guidelines, as revised in 1994, include in the introduction:
Adherence to the Guidelines is a vital
component in the Crown Estate’s strategy to upgrade Regent Street.
There was then produced in 1994 a block
by block review in relation to Regent Street, and I cite from it. From the
introduction:
This annual Block by Block report has
taken account of the main findings of the following Regent Street reports
considered by the Commissioners:
Strategy Report March 1993;
Investment Review and Strategic Options
October 1993; and Public Realm Strategy Report September 1994.
Then para 1.3 runs as follows:
In selecting options we have had regard
to the principal goals of the strategy ‘to strengthen Regent Street as both a
shopping street and a business location and to improve the Public Realm.’ In
summary, the main objectives are:
·
Maintenance of the strong retail frontage at ground floor level;
·
New, larger and better shops, especially on the west side;
·
Creation of some specific magnet stores;
·
More cafes and better hotels;
·
Better office accommodation; and
·
Better pedestrian movement.
I accept the summary of the
commissioner’s objectives. They are short, clear and defined and, in my judgment,
are legitimate estate management objectives for the commissioners in relation
to the Regent Street estate. I use the word ‘estate’ deliberately, since, in my
judgment, the commissioners are entitled to look, as landlords, at this whole
close-compacted property estate. Nor do I consider that tenants should be
surprised at the estate’s objectives, provided those objectives fall within the
bounds of the reasonable, proper and relevant to the landlord and tenant
relationship in question and certainly where the
case, to both Signet and to TTT.
In short, the unity of the Regent Street
Crown estate is, in my judgment, both relevant and known to tenants. I consider
the commissioners in considering an application relating to one only small unit
on the estate are entitled to have regard to general estate management
considerations of the nature I have identified. It is reasonable for the
landlords in the context of this case to do so.
I return to the commissioners’ refusal
letter of November 18 1994, which has been the subject of close scrutiny to me
by counsel. Mr Reynolds for TTT, summarised the commissioner’s objections as
follows:
We refuse because the proposal involves a
change of use from retail use of a ground floor unit to non-retail use and
involves the subdivision of a standard unit, each of which is undesirable on
the grounds of good estate management.
He then submitted that the reasons were
not so stated.
The first point I make is that that
distillation falls well within the objectives of the commissioners which I have
identified from para 3 of the introduction cited above.
I was initially troubled that the refusal
letter wrongly attributed the mezzanine floor to service use and not to retail
use. However, the mis-statement of the proposal is not of itself a
mis-statement of the reasons for withholding consent within section 1(3) of the
1988 Act.
As I have said, I am satisfied that Mr
Dillon did not misinterpret the proposals, that Mr Shlewet did not think that
he did and that TTT, through Mr Shlewet, were not misled by the apparent
misinterpretation. The reply letter of December 21, in my judgment, makes that
conclusion clearly right. In short, this was, in my judgment, on the evidence
an irrelevant misstatement.
I next accept Miss Williamson’s
submission that the identification of the reasons for refusal must be on a
sensible, common-sense basis, not for example constrained by the close
attention to precise wording which on occasions Chancery lawyers have been
accused of applying to statutes. The context is commercial and, in my judgment,
the words used must be considered in the context of informing the lessee with
reasonable precision of the reasons, so that he may sensibly evaluate them and
plan his future actions.
The first point is that the summary in
the letter at the beginning of the application being for a change from
permitted retail use to a mixed service and retail use is accurate. So also is
the statement that there are proposed alterations involving the division of the
premises into smaller units. That summary of the application fits precisely Mr
Reynolds’ summary of the reasons for refusal. The letter then goes on to state
the subdivision proposal and, in my judgment, states accurately that TTT would
operate one unit as a bureau de change/ticket sales operation and would sublet
the other for retail purposes.
The next paragraph dealing with change of
use deals only with TTT’s proposed use, but wrongly includes the mezzanine
floor. Then the first reason objects to TTT’s use, not, be it noted, that that
use is a function of the area to be occupied. Then para 2 states:
Our clients regard TTT’s proposed use of
premises as detracting from the implementation of those policies.
Thus the objection is to TTT’s use per
se, not to the quantum of the area which TTT was to occupy.
Para 3 of the objections emphasises the
Regent Street shopping centre objective, to which TTT’s use is contrary, I add.
The objective of larger units does not, in my judgment, detract from the force
of the objection against non-retail shop user. The objective is reinforced, in
my judgment, by the paragraph as to relocating service uses like banks away
from the ground floor, to which TTT’s proposed mixed user is contrary, even if
it did include the mezzanine floor below first-floor level.
Objection 4 is premised on wished-for
larger units. The concept of flagship stores is clearly linked to larger units
in this paragraph, and the basis for regarding a single unit as a flagship
potential unit at first consideration is not easily to be appreciated. I do not
think that the paragraph was directed at niche flagship stores.
However, the thrust of the paragraph is
against subdivision and it is, in my judgment, a legitimate objective of the
landlord to object to a decrease in shop frontage to Regent Street and in the
size of individual units. I do not regard the existence of a very limited
number of subdivided units as falsifying the general policy.
Objection 5 is directed specifically
against over-provision of bureaux de change and detraction from tenant mix. In
my judgment, the commissioners were entitled to take such an objection.
Then objection 6 relates to shopfront
objectives and clearly implicitly encompasses objection to the open front, open
invitation style of bureaux de change and ticket sale operation, as operated in
Longacre.
Finally, objection 7 objected to the
precedent which might be set and to the effect of consent on the commissioners’
relations with other tenants.
In my judgment, the objections made stem
from those identified by Mr Reynolds, but go further. However, in my judgment
they all fall within the band of objections which a reasonable landlord in
these circumstances could properly take. Even if any were not so, they do not,
in my judgment, negate the effect of the others. As I have said, the point of
principle is whether the commissioners were entitled to look to estate
management considerations affecting the Regent Street estate as a whole. In my
judgment, they were.
Mr Reynolds made the point that these
considerations were not generally known. In detail, they may well not have
been, but the overall estate unity of ownership and to a considerable extent of
management or management potential was certainly generally known.
In my judgment, while the lack of
knowledge of policies in a particular case may go to the reasonableness of the
refusal, this is not such a case, where the essential estate unity was known
and ‘the retail strength of Regent Street’, which is a quotation from the
annual report cited above, was public knowledge. In any event, Signet and TTT
had only to await the refusal letter to be better informed if they had not
known or suspected before, but they elected not to. I add that I do not
consider that the commissioners are limited to objections extant or known at
the time of the lease. In my judgment, the reasonableness of the refusal has to
be considered at the time of the refusal.
I accordingly conclude that the
commissioners have discharged the burden of establishing that their reasons for
refusal were reasonable and I consider that they were adequately stated in the
refusal letter.
I come to the question of relief from
forfeiture, and first, the law. It is convenient to take both the citation of
the statutory basis of the jurisdiction and the analysis of the discretion
conferred from the judgment of Morritt J in Southern Depot Co Ltd v British
Railways Board [1990] 2 EGLR 39*, at p42J–43B:
*Editor’s note: Also reported at [1990]
33 EG 45
Thus the only dispute of substance is
whether I should grant relief at all. The power to do so is conferred by
section 146(2) of the Law of Property Act 1925 in the following terms:
‘… the court may grant or refuse relief,
as the court, having regard to the proceedings and conduct of the parties under
the foregoing provisions of this section, and to all the other circumstances,
thinks fit; and in case of relief may grant it on such terms, if any, as to
costs, expenses, damages, compensation, penalty, or otherwise, including the
granting of an injunction to restrain any like breach in the future, as the
court, in the circumstances of each case, thinks fit.’
The width of this discretion under the
statutory predecessor of section 146(2) was emphasised by the Lord Chancellor,
Earl Loreburn, in Hyman v Rose [1912] AC 623. At p631 he said:
‘I desire in the first instance to point
out that the discretion given by the section is very wide. The Court is to
consider all the circumstances and the conduct of the parties. Now it seems to
me that when the Act is so express to provide a wide discretion, meaning, no
doubt, to prevent one man from forfeiting what in fair dealing belongs to
someone else, by taking advantage of a breach from which he is not
commensurately and irreparably damaged, it is not advisable to lay down any
rigid rules for guiding that discretion. I do not doubt that the rules
enunciated by the Master of the Rolls in the present case
view from which judges would regard an application for relief. But I think it
ought to be distinctly understood that there may be cases in which any or all
of them may be disregarded. If it were otherwise the free discretion given by
the statute would be fettered by limitations which have nowhere been enacted.
It is one thing to decide what is the true meaning of the language contained in
an Act of Parliament. It is quite a different thing to place conditions upon a
free discretion entrusted by statute to the Court where the conditions are not
based upon statutory enactment at all. It is not safe, I think, to say that the
Court must and will always insist upon certain things when the Act does not
require them, and the facts of some unforeseen case may make the Court wish it
had kept a free hand.’
Counsel for British Rail submitted that
in exercising my discretion I should take no account of the interests of BPCC
at all because they are strangers to the landlord and tenant relationship, not
a party to these proceedings, and their interest arises from the very
transaction which constitutes the breach of covenant from the consequences of
which relief is sought. I do not accept this submission. First, although it may
be strictly accurate to say that BPCC are strangers to the landlord and tenant
relationship under the terms of the declaration of trust and the contract, they
were the absolute beneficial owners and are now purchasers under a conditional
contract. Counsel for British Rail accepted that in the case of a trust or
contract promptly and frankly disclosed the position and interest of the
beneficiary or purchaser may be considered. Thus his complaint was the
concealment of the declaration of trust from November 6 1987 to May 20 1988.
But this, it seems to me, is a factor which may be relevant in the exercise of
my discretion but is not a reason for ignoring the interests of BPCC
altogether.
Second, in the straightforward case of an
assignment without consent the assignee becomes the tenant but liable to
forfeiture. If the lease is forfeited the assignee may apply for relief. It
cannot be suggested that in considering whether or not to grant relief his
interests cannot be taken into account because they arise from the transaction
of which complaint is made.
Third, the words in the subsection ‘all
the other circumstances’ follow and are in addition to the conduct of the
parties under subsection (1). This plainly can include the relevant conduct and
interests of non-parties.
Accordingly, in my judgment, I am
entitled to consider the interests and conduct of BPCC as well as of SDC.
I will consider the interests of SDC
first …
SDC was the tenant and British Rail was
the landlord. BPCC were the beneficiaries under a declaration of trust which
had been executed. The case was one where the scheme involved proposed
assignment without consent and concealment of the interest of the proposed
assignee, BPCC, from the lessor, British Rail. Morritt J took account of the
interest of the proposed assignee, BPCC, and said that it was right to do so,
even though it arose from the impugned transaction (p43A).
I respectfully agree. He went on at p43H
to cite from the speech of Lord Wilberforce in Shiloh Spinners Ltd v Harding
[1973] AC 691, where, at p723G, Lord Wilberforce said:
… it remains true today that equity
expects men to carry out their bargains and will not let them buy their way out
by uncovenanted payment. But it is consistent with these principles that we
should reaffirm the right of courts of equity in appropriate and limited cases
to relieve against forfeiture for breach of covenant or condition where the
primary object of the bargain is to secure a stated result which can
effectively be attained when the matter comes before the court, and where the
forfeiture provision is added by way of security for the production of that
result. The word ‘appropriate’ involves consideration of the conduct of the
applicant for relief, in particular whether his default was wilful, of the
gravity of the breaches, and of the disparity between the value of the property
of which forfeiture is claimed as compared with the damage caused by the
breach.
The citation continued from p725, where
Lord Wilberforce said:
The power of re-entry was inserted by way
of reinforcement of the contractual obligation which it must have been
perceived might cease to be enforceable as such. Failures to observe the
covenants having occurred, it would be right to consider whether the assignor
should be allowed to exercise his legal rights if the essentials of the bargain
could be secured and if it was fair and just to prevent him from doing so. It
would be necessary, as stated above, to consider the conduct of the assignee,
the nature and gravity of the breach, and its relation to the value of the
property which might be forfeited. Established and, in my opinion, sound
principle requires that wilful breaches should not, or at least should only in
exceptional cases, relieved against, if only for the reason that the assignor
should not be compelled to remain in a relation of neighbourhood with a person
in deliberate breach of his obligations.
Those expressions in relation to
deliberate breach were used by Lord Wilberforce in relation to the general
equitable jurisdiction and not in relation to the statutory discretion under
section 146(2). As to the latter, Morritt J continued at pp43M–44AB:
There can be no doubt that the wilfulness
of the breach is a relevant consideration and that the court should not in
exercising its discretion encourage a belief that parties to a lease can ignore
their obligations and buy their way out of any consequential forfeiture. But to
impose a requirement that relief under section 146(2) should be granted only in
an exceptional case seems to me to be seeking to lay down a rule for the
exercise of the court’s discretion which the decision of the House of Lords in Hyman
v Rose [1912] AC 623 said should not be done. Certainly Lord Wilberforce
in Shiloh Spinners Ltd v Harding did not purport to do so in
cases under the statute.
Accordingly, in my judgment, although I
should give considerable weight to the fact that two out of the three breaches
were wilful, I am not required to find an exceptional case before granting
relief from forfeiture.
Later on in his judgment his lordship
said at p44E–F:
With this perhaps over-lengthy
consideration of the circumstances, I return to the words of the Lord
Chancellor in Hyman v Rose [1912] AC 623 at p631, which describes
the purpose of section 146(2). I would paraphrase it by posing the questions
whether the damage sustained by British Rail is proportionate to the advantage
it will obtain if no relief is granted and, if not, whether in all the circumstances
it is just that British Rail should retain that advantage. I answer both
questions in the negative.
I pause to comment at this point that,
while granting relief from forfeiture in that case, Morritt J was clearly
influenced by the circumstance that if in the future, an application for
consent to assignment were made to the landlord (and none had been) then the
landlord could take objection then. He said this at p44E:
Thus if British Rail reasonably refuses
its consent, it will be in no worse position.
That is not the present case, where the
assignment has been effected.
I entirely, with respect, agree with what
his lordship said about not applying any requirement of exceptional case in
relation to the statutory jurisdiction, for the reason which appears from the
speech of the Lord Chancellor in Hyman v Rose.
Mr Reynolds proffered two conditions for
relief which, if necessary, TTT would accept, that the ground floor be not used
save for sale by retail of finished goods, and that the ground floor would not
be subdivided. He also submitted that, as was Mr Shlewet’s and Mr Mullens’
evidence, TTT acted upon advice and in good faith in completing the assignment.
The advice was lawyer’s advice because TTT did not take any surveyor’s advice,
considering the issues to be legal only, so Mr Mullens said. I am puzzled by
this, since the evaluation of the landlord’s reasons for refusal of consent to
assignment would, I would have thought, have required expert estate management
input. The absence of such input in my judgment is, however, consistent with a
determination to proceed anyway and it would have been a waste of money, at
least prior to assignment.
So far as legal advice is concerned, the
thrust of the point is that if TTT’s lawyers got it wrong, TTT should not be
penalised by losing the lease. I do not, however, have the instructions to
counsel (leading counsel was certainly twice consulted, in September and
December 1994) nor any attendance note of consultation or written opinion,
however, the advice was given, or letter recording the advice. I do not know
what counsel was told, nor how he expressed himself. I do not know, for
example, whether, before the unconditional contract was entered into, any
future alternatives were canvassed with counsel. These might have included that
consent would have been given, or that consent would be refused but
unreasonably or, that if consent was refused with arguably sound reasons, the
commissioners could be faced with a fait accompli of an assignment and, either
by lethargy or through later negotiation, might accept the assignment or, as a
last
conditions, because TTT by that stage had much to lose.
I conclude that I am unable on the
evidence before me to place weight on the naked assertion that TTT acted on
legal advice.
TTT has paid its deposit of £50,000 and
if relieved from forfeiture on the conditions offered, would be able to
continue its occupation of at least one of the upper floors and sublet the
ground floor as a shop or perhaps assign the whole. Whether it would make or
lose money in those circumstances, I do not know, but at least the certain loss
of the £50,000 would be avoided and the legal costs in the transaction would
not be thrown away, nor the dilapidations liability perhaps incurred. Also, TTT
is a sound covenant.
There would, in my judgment, be some
uncovenanted windfall benefit to the commissioners in having vacant premises
free from a renewed lease under the Landlord and Tenant Act 1954, since they
can then deal with the property as they wished. I do not envisage any
incapacity to relet as they wish, nor has there been evidence to that effect.
However, in my judgment, standing immediately before the unconditional
contract, the only reasonable conclusion is that the tenant and proposed
assignee intended to effect an assignment in any event. They then contracted
unconditionally to do that, before any licence to assign was sought. They
carried out their intention.
In my judgment, the letter of December 21
1994 was misleading, and deliberately misleading, in referring to TTT ‘which
has been negotiating with Signet Group PLC to take an assignment of its lease
of the above premises’ without referring to the concluded contract which
antedated the application for a licence.
Moreover, the letter uses the term
‘therefore’ as the reason for assigning (unreasonable refusal) without
reference to the antecedent unconditional binding contractual obligation, which
was also less than the whole truth.
Further, I regard the description of
‘travel agency’ as owing more to advocacy than accuracy, and there was some
element of misleading involved also in this. A major contribution from
financial services was, I am satisfied, an essential if the costs of the lease
of TTT were to be met, and the Longacre branch figures bears this out.
I am concerned at the deliberate
intention of tenant and assignee to proceed in any event, if necessary in
breach of the tenant’s bargain with his landlord. I am also concerned that the
prospect of relief from forfeiture, albeit on conditions, was, I infer, taken
into account as a long stop minimalisation of risk. Ought the court’s
discretion be relied on as an adjunct of the deliberate breach of a commercial
relationship of landlord and tenant? Should the commissioners be forced to
accept this tenant? Miss Williamson has to the end opposed relief from
forfeiture on the commissioners’ behalf.
Moreover, in relation to the Regent
Street estate of the Crown, should the message go out from this court that
deliberate breaches of covenant against assignment without consent are
worthwhile, or maybe worthwhile, because at the end of the day, relief from
forfeiture is likely to be obtained? Is that fair to the commissioners? I think
not.
I accordingly refuse TTT relief from
forfeiture.
After hearing further submissions, Judge Bromley continued: I propose
to order as to costs as follows. That the defendants, that is, both of them,
should pay the costs of the consolidated action save so far as such costs have
been increased by the action 2108 I shall order then, second — because I think
that the second action has added nothing apart from increasing the costs and
since not pursued effectively those costs should be borne by the plaintiff —
that the plaintiff should pay the defendants’ costs of that action.
Third, it does appear to me to be a
matter of sufficient significance to trouble the Court of Appeal with this
matter and I propose to give leave to appeal if Mr Reynolds’ clients elect to
go ahead. So I will give leave to appeal. Is it only the second defendant, or
are you asking the same? [Appeal not sought] Leave to the second defendant to
appeal to the Court of Appeal. Fourth, I will say if any application for a stay
be launched by the second defendant within 28 days, the order for possession
shall be stayed until the determination of that application.
