Leases for 999 years — Tenant required to demolish existing buildings and rebuild — Building becoming listed — Tenant contending that covenant void and that covenant impossible of performance — Planning permission for listed building demolition unlikely to be forthcoming — Whether tenant in breach — Whether covenant suspended because of listed building status — Whether landlord entitled to forfeiture — Judgment for tenant
By two building leases dated March 14 1934, the defendant landlord granted to the plaintiff tenant the demised premises, which comprised the central and the western part of the Peter Jones Department store, Kings Road, London SW3, for 999 years from December 25 1933. Under clause III, the lessees covenanted to pull down the buildings and erect new buildings “with the plans which have already been approved by the lessors” by 1945 in the case of block A and, in the case of block B, by December 25 1987. Both leases contained a proviso for re-entry in the event of breach of covenant by the lessees.
One of the buildings to which the covenant referred was given listed building status in 1969 (“the MackMurdo Building”). In April 1988, the defendant purported to give two notices to the plaintiff under section 146 of the Law of Property Act 1925 specifying breaches under clause III, viz failure to carry out the redevelopment of block B by December 25 1987, and stating their intention to re-enter. Despite extensive searches no plans “approved by the lessors” had ever materialised. The tenant sought a declaration that the landlord was not entitled to re-enter the premises, and argued, on a preliminary point, inter alia, that in view of the fact that no such plans had become available, the covenants to build in clause III in conformity with the plans were incapable of performance and were void; that the loss of the plans meant that the covenants had become impossible to perform and accordingly were discharged and/or were unenforceable; and in light of the listed building status, planning permission would not now be granted for its demolition and the redevelopment. Thus the covenants to demolish were discharged and/or suspended until such time as they could legally be performed. Further argument was addressed as to the question of the specificity of the section 146 notices, and whether the landlord had accepted the rent and thereby waived the right to forfeiture. The landlord counterclaimed for damages for breach of covenant and possession.
Held Judgment for the plaintiff on the issue of suspension of the covenants until such time as they could be performed.
1. The court was guided by the basic principle of construction that it should attempt to validate a contract rather than take a view which rendered it meaningless.
2. The court was unable to accept the argument for the tenant that in essence, if there were no plans, there was no obligation and hence no breach. Clause III, on its true construction, was not unenforceable in that it imposed an obligation on the tenant to build blocks A and B in conformity with plans approved by the lessors which from documentary evidence had once existed. That would have accorded with the intention of the parties as evidenced in the lease.
3. With regard to the supervening grant of listed building status, it was common ground that only a first-class scheme could possibly make a convincing case for demolition of a listed building. In fact it had become increasingly difficult to obtain such consent and therefore the question to ask was not whether the tenant was in breach of covenant — it was plainly in breach — but whether there was any excuse for the tenant’s non-performance of its covenant.
4. The submissions by the tenant were accepted. When the covenants were entered into listed building consent for demolition of the existing buildings by 1987 was not a foreseeable requirement. While it had been possible to demolish the building before it had been listed in 1969, that was not relevant. The issue had arisen through the supervening legislation and not by act or default of the tenant.
5. In effect phase two of the development had not become more onerous or more costly to the tenant but the impediment to carrying it out had become more serious. In Cricklewood Property & Investment Trust Ltd v Leighton Investment Trust Ltd [1945] AC 221, wartime restrictions prevented a tenant from performing his covenant to build shops. Although the action was for rent for which the tenant was held liable notwithstanding, as a matter of principle it was held that there was a lawful excuse for non-performance of the covenant.
6. By accepting that, in the present proceedings, the tenant was not in breach of covenant, did not discharge the tenant from its obligations. The lease still had some 930 years to run and there might be no lawful excuse for failure to perform the covenant at a later stage; artistic taste might change; the buildings might deteriorate or the legislative requirement could alter and the landlord would then be in a position to implement its rights.
7. The court rejected the argument that the tenant was disentitled by its own conduct to plead lawful excuse. The failure to redevelop earlier had to be viewed against the timescale of the lease. There was no act or omission on its part which remotely resembled self-induced frustration. It had intended to perform its obligations as the evidence showed and had endeavoured to set up a first-class scheme, but had been faced with insurmountable difficulty. There was no point in going through the motions to make an application for listed building demolition if it were to be refused in any event.
David Neuberger QC and Erica Foggin (instructed by the solicitor to John Lewis Properties plc) appeared for the plaintiff tenant; Joseph Harper QC and Jonathan Karas (instructed by Lee & Pembertons) appeared for the defendant landlord.
