Intermediate assignee — Covenant to pay rent due — Occupying assignee in arrears — Surrender of lease and goods provided in “full and final” settlement of rent due — Whether intermediate assignee liable for balance of rent — Claim by landlord dismissed
In 1972 Deanplan Ltd (D) demised a factory unit on an industrial estate at Enfield to a lessee for 20 years at an initial yearly rent of £3,850. In 1974 the lease was assigned under licence to CT (London) Ltd (C), which entered into a direct covenant with D to pay the rent and to abide by the covenants. In 1986 the lease was again assigned under licence to M. M proved to be an unsatisfactory tenant and fell into arrears with the rent. D subsequently distrained for arrears of rent in the sum of £17,866. A sum of £309 was eventually recovered. On March 2 1988, M surrendered the lease in consideration of D’s accepting some of his stock of goods “in full and final settlement of all claims and demands against me under the terms of the lease and specified in the notice of distress dated March 2 1988”. Next D demanded the balance of the outstanding rent from C but failed to disclose that all claims against M had been released. The question arose whether the agreement of March 2 1988 between D and M was a defence to a claim for the balance of moneys allegedly due as against C.
Held The claim against the intermediate assignee was dismissed.
1. The issue was whether an original lessee or an intermediate assignee of a lease, who had given a direct covenant to pay the rent and observe the covenants, was released from liability following an agreement between the lessor and an occupying assignee of the lease under which the lessor took a surrender of the lease and some of the assignee’s goods in return for relieving the assignee of all claims under the lease.
2. A release of one joint contractor released the other; there was only one obligation. The release might be under seal or by accord and satisfaction. A covenant not to sue was not a release: it did not affect the liabilities of the other joint contractors and its effect was a question of construction in the light of surrounding circumstances.
3. Similarly, if one joint and several covenantors were released by accord and satisfaction, all were released. Where the obligations were non-cumulative, the acceptance of some performance in lieu of the promised performance relieved the other. The covenantee could not have both the promised performance and some other performance which he had agreed to accept. Otherwise the co-covenantors could claim contribution on indemnity, which would be a breach of contract with the released covenantor.
4. The present case, where a number of separate covenantors were each liable to perform the same obligation, seemed to be a clear case of accord and satisfaction. The arrangement contained no words of preservation of rights against other parties and there was nothing to rebut the prima facie meaning of the agreement.
5. Had the landlords chosen to distrain M’s goods and forfeit the lease, C’s liability for the balance of the rent could not be resisted. However, D had chosen to bargain with M and had to accept the consequences.
Constance Whippman (instructed by B Erlich, of Walthamstow) appeared for the plaintiff, Deanplan; and Nicholas Harrison (instructed by Rowe & Maw) appeared for the second defendant, CT (London) Ltd; and the first defendant did not appear and was not represented.
