Landlord and tenant – Assignment – Consent – Appellants seeking consent to assignment of lease – Respondent landlord willing to consent only on terms that directors of assignee company providing personal guarantees – Those guarantees nor provided but company going into occupation and respondent accepting rent – Claim against company for arrears of rent settled – Whether respondent entitled to bring such claim against appellants – Whether estopped from asserting claim – Whether appellants ceasing to be tenants by way of valid assignment or surrender by operation of law – Appeal dismissed
The respondent was the landlord and the appellants were the tenants under a lease of car showroom premises for a term of 10 years to August 2017. The lease contained a covenant against assignment without the written consent of the appellant. A break clause gave the appellants the option to end the lease by six months’ written notice provided they paid the rent and any other monies due. That option was personal to the appellants and expired in May 2012.
In October 2008, the first appellant decided that he no longer wanted the premises. The respondent indicated that it was willing to grant a licence to the appellants for a proposed assignment of the lease to a company, but only on condition that two directors of that company personally guaranteed its obligations under the lease. The directors were not prepared to give such guarantees. That issue, as well as others concerning registration of the appellants’ title and the benefit of the break clause, remained unresolved when, in November 2008, the appellants vacated the premises and allowed the company to take up occupation.
From December 2008, the respondent accepted payments from the company that were referable to the rent under the lease. Meanwhile, the appellants and the company proceeded with their preparations to assign the lease; by January 2009, the firm of solicitors acting for both sides held a transfer deed signed by the respondents.
In March 2010, the company notified the respondent of its intention to vacate the premises. In July 2010, it agreed to pay £15,000 in settlement of a claim that the respondent had brought against it for arrears of rent and other sums due under the lease.
In December 2011, the respondent brought a further claim, this time against the appellants, to recover sums due under the lease. The appellants counterclaimed for a declaration that the lease was no longer vested in them, having been assigned to the company or surrendered by operation of law. They contended that: (i) there had been an effective assignment of the lease in equity; (ii) the respondent was estopped from denying that the company was its tenant and was thereby prevented from asserting its claim against the appellants; or (iii) the settlement of the claim against the company had effected a surrender of the lease by operation of law.
In the county court, the recorder allowed the respondent’s claim and dismissed the appellants’ counterclaim. The appellants appealed.
Held: The appeal was dismissed.
(1) A deed would not become effective until the final formality of delivery had been fulfilled. Whether there had been delivery was essentially a question of the intention of the maker of the deed. It had to be shown that the maker intended the document to be executed as his deed and to be binding on him. The deed of transfer signed by the appellants was held by solicitors who were, somewhat unusually, acting for both the transferors and the transferee. Moreover, there were outstanding matters relating to registration of the appellants’ own title, the provision of the guarantees required by the respondent as a condition of consent to assignment and the company’s requirement for a break clause. In all the circumstances, it was unlikely that the formalities of execution were ever completed. The recorder had been entitled to find that the solicitors were holding the document on behalf of both the appellants and the company pending final instructions for its delivery.
(2) No estoppel by arose so as to bar the respondent from asserting its claim against the appellants under the lease. As to estoppel by representation, such an estoppel was personal to the parties. The court was therefore concerned with the relationship between the respondent and the appellants, not that between the respondent and the company. In that regard, it was relevant that the respondent was prepared to allow an assignment of the lease only if it received personal guarantees from the company’s directors, which had never been provided, that it had never consented to the company going into occupation but had been presented with a fait accompli and that there had never been a formal assignment of the lease. In those circumstances, regardless of what might have been the position as between the respondent and the company, there was never any representation by the respondent to the appellants that it had accepted the company as the assignee of the lease. Moreover, an essential element of such an estoppel was that the representation had induced the representee to alter his position to his detriment. The appellants had not acted in any way to their detriment in reliance on anything said or done by the respondent in its dealings with them or with the company.
Much the same difficulties arose in relation to a claim of estoppel by convention. For such a claim to succeed, it had to be shown that all the parties had proceeded on a shared understanding or convention as to the basis of their relationship. No shared understanding or convention of the kind contended for by the appellants ever existed, and the parties never conducted themselves on the basis that it did.
(3) The settlement between the respondent and the company in July 2010 did not bring about any surrender of the lease by operation of law. The appellants’ case on surrender depended on an assertion that the conduct of the respondent and the company in reaching the settlement unequivocally amounted to an acceptance by them both that the tenancy had ended, making it inequitable for either of them to assert to the contrary. That case failed since that conduct could only ever have amounted to a surrender of such estate as the company possessed, whereas, at all material times, the appellants were the tenants under the lease and bound by the covenants that it contained.
Anthony Allston (instructed by direct access) appeared for the appellants; Stephen Jones (instructed by Warner Goodman LLP, of Southampton) appeared for the respondent.
Sally Dobson, barrister
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