Rent arrears — Liability of assignee — Covenant to pay rent — Whether covenant limited to period during which lease vested in assignee — High Court holding that covenant limited to period during which lease vested in first defendant — Court of Appeal allowing appeal against that decision — Judgment for plaintiff
By a lease dated January 17 1977 the plaintiff landlord demised to the tenant lessee the ground-floor shop at 155 Wardour Street, London W1, for a term of 20 years from October 6 1976. By a license dated October 6 1980, made between the landlord, the tenant, the first defendant as assignee and the second defendant as surety, the tenant assigned the premises to the first defendant. There had been further assignments of the premises when in January 1993 the defendants were informed that the rent payable under the lease was in arrears in respect of five-quarterly instalments, the total sum outstanding being &49,937.50 inclusive of VAT and a demand for payment was made.
The plaintiffs subsequently obtained judgment under Ord 14 for the amount claimed. An appeal against that judgment was allowed and the defendants were given leave to defend the claim. The plaintiff appealed. The assignee had covenanted with the landlord to pay the rents reserved by the lease at the time and in the manner provided for and to observe and perform the covenants on the lessee’s part and the conditions contained therein. The question was whether the covenant was limited in point of time to the period during which the lease was vested in the assignee; or whether it extended to the whole of the term.
Held The appeal was allowed and the judgment restored.
1. Two obligations were assumed by the first defendant in clause 2 of the licence. The first was to pay the rents reserved by the lease at the time and in the manner therein provided for. The rents reserved by the lease were those for whose payment provision was made by the redendum. The reddendum provided for the payment “during the said term hereby granted” of the yearly rent of £4,500 (subject to review). Thus, the first defendant became bound to pay the rents payable during the whole of the term.
2. The second obligation assumed by the first defendant was to observe and perform all the covenants on the lessee’s part and the conditions contained in the case. It was clear that “the lessee” here included the person in whom the term might from time to time be vested. One of the lessee’s covenants was that contained in clause 2(1): “to pay the rent hereinbefore reserved at the time and in manner aforesaid”. So by an identical process of construction the first defendant became doubly bound to pay the rents payable during the whole of the term.
3. The obligation assumed by the second defendant in clause 3(1) of the license was to ensure that the first defendant would perform the obligations imposed on it by clause 2. In all material respects the wording of the two provisions was identical. Therefore, the second defendant became bound to pay the rents payable during the whole of the term, if and so far as they were not paid by the first defendant.
4. As regards interest the judge said that it would be inequitable if either the first defendant or his surety were required to pay interest going back to a period when they knew nothing at all about outstanding arrears of rent. He said that if he had awarded interest it would have been from January 27 1993 when the arrears of rent was brought to his attention. That was a question for the decision of the judge and the court would not interfere with it.
David Neuberger QC and Edward Denehan (instructed by Manches & Co, of Oxford) appeared for the plaintiff landlord; Norman Primost (instructed by Peter Gillis & Co) appeared for the defendants.
