Commercial lease – Assignment – Guarantee – Licence to assign executed by parties – Defendant guaranteeing obligations of assignee and agreeing to take new lease in event of disclaimer by assignee – Lease disclaimed – Whether defendant obliged to take new lease – Whether licence validly executed – Whether material alterations made without defendant’s knowledge or consent – Whether valid request by claimant– Claim allowed
Upon an assignment of a lease in 2005, the defendant agreed to act as guarantor of the obligations of the assignee, a related company. The assignment took place pursuant to a licence to assign, which took the form of a deed to be signed by all parties and expressed to take effect once the duly executed licence and counterpart were exchanged and dated. Under the terms of the licence, the defendant undertook that, in the event of the assignee disclaiming the lease, the defendant would enter into a new lease of the premises “if the landlord so requires in writing of the Assignee’s Guarantor”. The claimant landlord later acquired the freehold reversion to the property.
In 2006, the assignee went into liquidation and the liquidators disclaimed the lease. By a letter of January 2007, addressed to the defendant’s solicitor, the claimant required the defendant to take a new lease. However, the defendant failed to do so. The claimant brought proceedings, seeking a declaration that the defendant as obliged to enter into a new lease and for specific performance of that obligation. The defendant contended that it was under no such obligation because: (i) the licence had not been duly executed since the signature given by one of its directors had not been properly witnessed; (ii) the licence was void against it, or it was discharged from its obligations, because manuscript amendments had been made to the licence without its knowledge or consent, thus releasing the previous tenant from its obligations under the lease; or (iii) even if it was otherwise bound by the licence, the letter of January 2007 had not been effective to trigger the requirement to take a new lease since a letter addressed to the defendant’s solicitor was not a requirement made “of the Assignee’s Guarantor”. The claimant subsequently retook possession of the premises and elected to claim damages in lieu of specific performance.
Held: The claim was allowed.
There was no evidence that the licence had not been validly executed. Moreover, even if there were a defect in execution, that did not mean that the execution of the licence was invalid. The lease contained no formal requirement for the landlord to give its consent to assign, and there could be no doubt that the landlords had consented to the assignment. In those circumstances, the degree of formality with which the consent was given was irrelevant.
On the evidence, the manuscript amendments had been made by the assignee’s solicitor, which did not have either ostensible or actual authority to agree to them on behalf of the defendant. Although the solicitor had authority to make the necessary arrangements to complete the licence on behalf of both the assignee and the defendant, and to exchange on their behalf, such authority did not impliedly extend to agreeing the relevant amendments. It was not within the usual powers of someone authorised to exchange to agree to such amendments: Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 distinguished. However, the unauthorised amendments did not effect a material alteration that was potentially prejudicial to the rights and obligations of the defendant, or that otherwise prejudicially altered the business utility of the licence. Accordingly, the defendant was not released from its obligations: Raiffeisen Zentralbank Osterreich AG v Crosseas Shipping Ltd [2000] 1 WLR 1135 applied. The alteration, properly construed, released the former tenant from liabilities accruing from the date of the assignment, but not from pre-existing liabilities. The fact that the release reduced the number of “potential targets” for the landlord to pursue in respect of dilapidations existing at the time of assignment was not sufficient to make the alteration material.
It was overwhelmingly probable that the letter of January 2007 had been passed to the defendant. The letter clearly communicated that the defendant was required to take a new lease. It was sufficient to comply with the requirements of the licence if the defendant received the letter indirectly via its solicitor. On receipt of that letter, the defendant had become obliged to take a new lease.
Sally Dobson, barrister
