Landlord and tenant –– Assignment –– Landlord and Tenant Act 1988 –– Application for consent to underlet and change of use refused –– Nightclub premises –– Proposed underletting to fitness club –– Consent would cause alleged £300,000 damage to reversionary interest –– Whether refusal reasonable –– Whether valuer’s approach reasonable and informed
The claimant tenant held a lease of premises, granted in 1996, for a term of 20 years, at an initial rent of £35,000. Prior to the grant, the defendant landlord had operated the premises as a nightclub. During a
Held: The tenant’s claim was allowed and the landlord’s counterclaim dismissed.
The landlord unreasonably withheld consent to both the change of use and the underletting. W’s method of first valuing the business as a nightclub was improper as a means of measuring the value to the landlord of the premises, and involved a hopeless mismatch with what was being compared. W was also wrong in dismissing the fitness club use as a mere “fad” that would not last; he failed to research the available information. His approach was ill-informed, wrong-headed and unreasonable. The valuations of the tenant’s valuer were reasonable. On a balance of probabilities, the fitness-club use would marginally enhance the value of the reversionary interest. W’s advice to the landlord was so flawed in its approach, and so wide of the mark in its substance, that it was unreasonable advice that rendered the decision of the landlord to withhold the consents unreasonable. Although the tenant was in breach of the lease in failing to keep open the nightclub, the landlord had failed to mitigate his loss by unreasonably withholding consent to the change of use
The following cases are referred to in this report.
Blockbuster Entertainment Ltd v Leakcliff Properties Ltd [1997] 1 EGLR 28; [1997] 08 EG 139, Ch
International Drilling Fluids Ltd v Louisville Investments (Uxbridge) Ltd [1986] Ch 513; [1986] 2 WLR 581; [1986] 1 All ER 321; (1985) 51 P&CR 187; [1986] 1 EGLR 39; 277 EG 62, CA
This was the hearing of the first part of trial in a claim by the tenant, Luminar Leisure Ltd, for declaratory relief and damages against the landlord, Lucas Apostole.
Jonathan Small (instructed by Field Fisher Waterhouse) appeared for the claimant; Alistair Norris QC (instructed by Hatch Brenner, of Norwich) appeared for the defendant.
Introduction and facts
1. The claimant claims that the defendant has unreasonably withheld his consent to the proposed underletting and change of use of the premises the subject of this litigation. The defendant counterclaims for damages for the claimant’s ceasing to use the premises as a nightclub and for surrendering the relevant licences, allegedly in breach of the lease covenants.
2. The lease of the premises was made between the defendant, as landlord, and the claimant, as tenant, for a term of 20 years from 20 February 1996, at an initial rent of £35,000 pa with five-year rent reviews. The first rent review, due on 20 February 2001, has not yet been completed.
3. The premises demised by the lease are Tudor Hall, Rose Lane, Norwich. When the lease was granted, they were known as, and operated as, the Peppermint Park Nightclub. The premises were built between 1898 and 1900 in the Tudor style, incorporating features from early Norwich houses. The premises were spot listed by the Department of National Heritage on 30 August 1996, the noted features being mainly within the interior.
4. The facts in summary are as follows. The defendant ran the Peppermint Park Nightclub (under a manager) up to the grant of the lease. The claimant is a successful nightclub owner and operator. It is uncontested evidence of Mr Aust, of the claimant, that, in 1996, the nightclub had a tarnished reputation, with undesirable clientele and drugs problems. It is also common ground that, in 1995, the defendant had been convicted of certain offences comprising breach of a number of safety regulations on a particular occasion. In the event, the claimant formed the view that it was necessary to close down the nightclub for a while, refurbish it and open it under obvious new management. The nightclub shut for this purpose on 6 July 1996. However, on 30 August 1996 the premises were spot listed by the Department of National Heritage. Thereafter, as a result of its experience of trying to work with English Heritage, the claimant concluded that reopening the nightclub, with the structural alterations appropriate for a nightclub, would be an unviable proposition, and it chose to abandon its plans and surrender the relevant licences. The claimant sought to underlet the premises.
5. The claimant found a gym/health-centre operator, Hi Life (Norwich) Ltd (Hi Life), and sought to underlet the premises to it. Hi Life operates a number of health and fitness clubs throughout the country, and the claimant has a number of transactions with it at locations such as Ipswich and Basingstoke, although there is no evidence before me of the terms of its trading at these locations, nor what, if any, impact those other deals had upon the deal eventually struck in respect of these premises.
6. The heads of terms, agreed between the claimant and Hi Life in July 1999, were for rent in the sum of £70,000 pa, with a capital contribution by the claimant of £ 175,000, to be repaid either in the form of additional rent or to be dealt with as a loan, depending upon which arrangement was most efficient for accountancy and legal purposes. In fact, those terms had changed somewhat by October, when the agreement for lease was struck. The base rent was £65,000 pa, but, for the first four-and-a-half years, there would be an additional rent of £7,222. Rent reviews were to be every five years. On 11 November 1999 the claimant sought, from the defendant, a licence both to underlet and for a change of use. The proposed new use is not mentioned in the letter but I infer that the change of use was to be to a health and fitness club. The rent on the underletting was disclosed as an initial rent of £72,777. That seems to be inaccurate, in that the agreement for lease was for an initial rent of £72,222, but nothing turns upon the marginal difference.
7. The defendant responded, on 5 January 2000, that, upon the advice he had received, it was reasonable to withhold the licence to a change of use and, hence, to the underletting, until he received satisfactory proposals to compensate him for the loss in value of his reversionary interest. That loss in value was put at being in the region of £300,000, and this took into account the projection to the next review of the rent that the claimant was able to achieve on the underletting. The view expressed by the defendant was that he had advised that the rent proposed to be charged to the subtenant would result in the premises being overrented. It had been, and remains, the claimant’s case that the underletting to Hi Life would, if anything, increase the value of the defendant’s reversionary interest in the premises.
8. The advice acted upon by the defendant was that of Mr Welister, the chartered surveyor who had acted for the defendant for a number of years. On 7 January he set out his reasoning. He confirmed that his estimation of loss in value to the landlord’s reversion, as at that date, was in the region of £300,000. He stated that, in giving advice upon the effect to the landlord’s reversion as at that date, he had used the level of net profit from the draft accounts ending with the half-year to May 1995, for the nightclub, and for the fitness-centre use had capitalised his opinion as to the present day rental values for such use. He had made no investigation into Hi Life.
9. On 12 January the defendant responded, inter alia, to an offer by the claimant to purchase the freehold. This was their second overture to purchase, one having been made in about June 1999. On each occasion, the defendant indicated a willingness, in principle, to sell, but stipulated a price that resulted in that matter not being taken any further.
10. On 19 January the claimant asked if consent would be forthcoming if, notwithstanding the change of use, the rent review would take place upon the basis that the authorised use was as a licensed nightclub.
11. On 3 February Mr Webster gave his response to that suggestion. He indicated that it would go some way to protect his client’s interest during the course of the existing lease, but “would not reflect the reduction in the ultimate value of the reversion”. As for the extent of the diminution, he confirmed his opinion that the public entertainment licence for the premises had been irrevocably lost, and the loss in value to the landlord’s reversion is the difference between a fully operational licensed nightclub and whatever use might be fashionable, or permitted, by the planning authority upon expiry of the existing lease. The value he placed upon the premises as a nightclub was arrived at by applying a number of years purchase to the average net profit immediately before the lease to the claimant and, as a health and fitness centre, by capitalising his opinion of the rental value for such use. He then illustrated the difference in rental values between the two uses, by citing a bar/restaurant premises sited “on pitch” with an A3 use at £ 10 psf, and a first-floor gym in Ber Street rented at £3 psf.
12. Relying upon this advice, the defendant affirmed that he was withholding his consent, on the basis that there was a clearly detrimental effect upon the value of his interest for which there was no proposal for him to be compensated.
13. Although Hi Life appeared willing to proceed with the transaction until very recently, on the afternoon of Friday, 11 May 2001, it indicated that it was withdrawing from the transaction, as it was entitled to do under the agreement for lease.
14. The issues in the action are: (i) has the defendant unreasonably withheld its consent to the underletting of the premises to Hi Life?; (ii) has the defendant unreasonably withheld its consent to the change of user under the lease to encompass use as a fitness/health centre?; (iii) if so, what damages have been caused to the claimant that are recoverable under section 4 of the Landlord and Tenant Act 1988?; (iv)has the claimant committed a breach of the tenant’s covenants at paras 11.3 or 14.5 of schedule 4 of the lease?; and (v) if so, what, if any, damage has been suffered by the defendant?
15. As a result of Hi Life’s withdrawal from the transaction on 14 May, I have ruled that there be a split trial in this matter, with, effectively, liability on the claimant’s claim for declarations and the entirety of the counterclaim being tried in the first instance. If the claimant is successful, then the question of causation and damages can be tried at a later date. If the claimant fails, then the question of damages will not arise on the claim.
16. The reason for this ruling is that, as a result of Hi Life’s recent decision, the claim for damages will be substantially changed, because now the claimant will need to remarket the premises to find an alternative tenant. New expert evidence will need to be given as to: (i) how long it will take to find a new tenant; and (ii) what rent the new tenant can be expected to pay. It may also be necessary to approach Hi Life to see if its reasons for withdrawing from the transaction have any bearing upon the claimant’s case.
Law: underletting
17. Under para 3.3 of schedule 4 of the lease, the tenant covenants:
Not to… underlet… the whole of the Premises except with the previous written consent of the Landlord which shall not be unreasonably withheld
18. The matter is further governed by section 1 of the Landlord and Tenant Act 1988, which provides:
(3) Where there is served on the person who may consent to a proposed transaction a written application by the tenant for consent to the transaction, he owes a duty to the tenant within a reasonable time ––
(a) to give consent, except in a case where it is reasonable not to give consent,
(b) to serve on the tenant written notice of his decision whether or not to give consent specifying in addition ––
(i) if the consent is given subject to conditions, the conditions,
(ii) if the consent is withheld, the reasonfor withholding it.
(4) Giving consent subject to any condition that is not a reasonable condition does not satisfy the duty under sub-section (3)(a) above.
…
(6) It is for the person who owed any duty under sub-section (3) above ––
…
(b) if he gave consent subject to any condition and the question arises whether the condition was a reasonable condition, to show that it was…
19. By section 144 of the Law of Property Act 1925, the alienation covenant in the lease is deemed to be subject to a proviso to the effect that “no fine or sum of money in the nature of a fine shall be payable for or in respect of such licence or consent”.
20. It is settled that the defendant can rely only upon reasons for refusing consent to underlet, which were: (a) in his mind at the time of responding to the application; and (b) set down in writing in his response to the application.
Change of user
21. By para 14.4 of schedule 4 of the lease, the tenant covenants:
not without the consent in writing of the Landlord (which shall not be unreasonably withheld) to use or permit or suffer or allow the Premises to be used for any purpose other than that of a Night Club.
22. The Landlord and Tenant Act 1988 does not apply to applications for change of user, nor does section 144 of the Law of Property Act 1925. Further, section 19(3) of the Landlord and Tenant Act 1927 (which contains limitations upon demanding fines for changes of user) has no application in this case, because the proposed alteration of the user of the premises involves structural alterations to the premises.
23. The claimant accepts that, upon the facts of this case, the defendant was entitled to consider together the application to underlet and the application for change of use. It is not suggested that the defendant should have granted permission to underlet if he could reasonably withhold permission for change of use.
24. Although there has been a difference of opinion upon the precise operation of the burden of proof in this case, I conclude that the position is as follows: (i) the defendant cannot unreasonably refuse to consent to the change of use; (ii) if it is reasonable to do so, the defendant can make his consent conditional upon the payment of compensation for the diminution in value attendant upon any change of use; (iii) the defendant is not entitled unreasonably to refuse consent to underlet to Hi Life; (iv) however, if the defendant was entitled to refuse consent to change of user until he had received compensation for his alleged diminution in value, it would have been reasonable for him to withhold his consent to underlet to Hi Life in the meantime; (v) conversely, if the defendant was not entitled to withhold consent to the change of use in the terms in which he did, it would not have been reasonable to withhold consent to the underletting, and his refusal gives rise to a cause of action under section 4 of the Landlord and Tenant Act 1988; and (vi) because the root problem in this case concerns the change of use, rather than the identity of the proposed subtenant, the onus of proof is on the claimant to demonstrate that the refusal of consent for the change of use, subject to conditions, was unreasonable.
25. The leading authority on the question of a landlord’s proper approach to an application to assign is International Drilling Fluids Ltd v Louisville Investments (Uxbridge) Ltd [1986] 1 Ch 513*. Balcombe LJ set down various propositions of law at pp519-522. Although the Court of Appeal was there considering the grant of consent to
(4) It is not necessary for the landlord to prove that the conclusions which led him to refuse consent were justified, if they were conclusions which might be reached by a reasonable man in the circumstances…
(6) There is a divergence of authority on the question, in considering whether the landlord’s refusal of consent is reasonable, whether it is permissible to have regard to the consequences to the tenant if consent to the proposed assignment is withheld…
But in my judgment a proper reconciliation of those two streams of authority can be achieved by saying that while a landlord need usually only consider his own relevant interests, there may be cases where there is such a disproportion between the benefit to the landlord and the detriment to the tenant if the landlord withholds his consent to an assignment that it is unreasonable for the landlord to refuse consent.
Subject to the proposition set out above, it is in each case a question of fact, depending on all the circumstances, whether the landlord’s consent to an assignment is being unreasonably withheld…
* Editor’s note: Also reported at [1986] 1 EGLR 39
26. Balcombe W’s proposition (4) was considered in further detail by Neuberger J in Blockbuster Entertainment Ltd v Leakcliff Properties Ltd [1997] 1 EGLR 28 at p31G-M. There, it was held that the landlord cannot say that his view upon valuation matters is reasonable, merely because it is supported by the evidence or advice of a valuation surveyor. One has to consider whether the surveyor’s view is reasonable.
Arguments and conclusions
27. The defendant’s approach was predicated upon a substantial diminution in value of his reversionary interest, put at the time as being in the region of £300,000. My reading of his letter of 5 January 2000 is that he was refusing consent, but was indicating a willingness to reconsider, on condition that satisfactory proposals were made to compensate him for the loss in value to his reversionary interest. The claimant sought to have him reconsider by offering to have a rent review as if there had been no change of use, but the refusal remained in place for essentially the same reason.
28. Accordingly, the question the court has to determine is whether the defendant could have reasonably supposed that he would suffer a substantial material diminution in the value of his reversion if the underletting to Hi Life, with the concomitant change of use, went ahead. Since the defendant was apparently reliant upon the views of his expert, Mr Webster, prima facie an experienced and competent valuer with local knowledge, the question becomes whether the conclusion arrived at by Mr Webster was one to which he could have reasonably come.
29. Criticism is made of Mr Webster’s initial approach on a number of grounds. First, it is said that his initial exercise, evidenced by his letters of 7 January and 3 February, were misconceived in approach. He was, it is said, not comparing like with like. On the one hand, he was valuing the business of a nightclub by taking a multiplier of the average net profit of the business run by the defendant (an improper approach, it is said, to evaluating the landlord’s reversionary interest in the premises), and, on the other, taking the value to the landlord of the premises by capitalising the rental value of the premises without its nightclub licence, but as available for use at the end of the underlease for any “fashionable” purpose. Further, in selecting his illustrations of rental value, he was taking the very top end of the bar/restaurant market and the very bottom end of the gym market and discounting entirely the best evidence of the rental value with gym use, namely the deal that Hi Life and the claimant had made.
30. In my judgment, these criticisms are well made. The illustrations are misleading and the approach to valuing the business as a nightclub is both improper, as a means of measuring the value to the landlord of the premises, and involves a hopeless mismatch in what is being compared. Whether his assessment of the value as a health centre is valid is not a matter of approach, but a matter of substance, to which I refer below.
31. On 25 August 2000 Mr Webster wrote again, setting out his process of reasoning in response to a valuation report, obtained by the claimant, to try to persuade the defendant that a health-club use was indeed an enhancement to the value of the landlord’s reversionary interest.
32. In that document, he adopted a more conventional approach to assessing the reversionary value of the premises with its use as a nightclub. He based it upon a market rent of just over £60,000 pa, and adopted a conventional approach to the calculation.
33. As to the reversionary interest with the change of use, he takes as read the fact that, upon rent review on the headlease, the apparent open market rent may be assumed to be that which the claimant has achieved on the underletting, but he splits it for the purpose of capitalising it by applying a differential yield, reflecting the differing element of risk attached to what he sees as the overrenting of the premises. In each case, he applies a significantly higher yield-risk factor than for the nightclub use, and comes up with a difference in the value of the reversion of £140,000-odd.
34. In his report for the court, Mr Webster has taken the rental value of the premises with nightclub use as being £60,000 pa, and has taken the rental value of the premises with use as a healthclub as being £36,760 pa. He has, on that basis, valued the landlord’s reversion at the end of the lease, for each of the uses, as being £600,000 and £334,516 respectively. This results in a crude difference at that date of £265,484. He acknowledges in his report that the payment of such a sum, as at today’s date, would be ahead of time, and would need to be the subject of discount for early payment. I am told, and accept as a matter of mathematics, that to discount this sum, applying the factor of 10% that I conclude is appropriate, would result in a present diminution to the value of the landlord’s reversion of £63,500 –– a sum far short of £300,000, but none the less substantial.
35. The effect upon the landlord’s freehold reversion of granting the consents sought in this case depends upon assessing the value to the landlord, during the lease, of the respective uses, and, at the end of the lease, the value to the landlord of the then vacant premises on assumptions based upon its immediately preceding use.
36. Mr Gooderham, the expert for the claimant, has given evidence orally and in the form of two reports. He has put the rent achievable for a nightclub use during the lease as being £42,500 pa. He has reached this by taking as a starting point a proportion of the anticipated turnover as the level of rent the use could accommodate. This figure is £56,000 pa, but he has discounted it by reason of certain peculiar terms in the lease that redound to the disadvantage of the landlord. By discounting these, he has come up with that figure. He has cross-checked the rent to which that process has given rise, with his experience of the specialist market, and has come up with a rent of £3.75 psf . In evidence, he said that the range for rents for provincial nightclub use was, in his experience, between £3-£5 psf. He acknowledged in cross-examination that he would be comfortable arguing for a rent of £5 psf for these premises. A small number of “comparables” have been put forward for premises in Norwich used as nightclubs, but they are all “on pitch”, and are barely comparable with the subject premises. They do, however, attract levels of psf rent at significantly higher levels than those argued for by Mr Gooderham.
37. In my judgment, the calculation that Mr Webster has conducted, for the purpose of this litigation, of the value of the landlord’s reversionary interest, on the assumption that it was used as a going nightclub, does fall within the reasonable band of valuations for such use. Had that been one element of his advice upon which the defendant acted, it would have been an element in a potentially reasonable decision.
38. Unfortunately, the same cannot be said of his assessment of the value of the reversion where consent has been given for use as a health and fitness club.
39. It is clear that, throughout, Mr Webster has approached this calculation on the footing that health and fitness clubs are a “fad”, unlikely still to be in fashion at the end of the lease, so that, at that stage, the landlord will be left with an empty space for use for whatever might be arranged, and so it has no greater value than as an empty space. Further, he has severe doubts about the viability of the level of rent
40. Mr Webster is a local valuer with no particular specialist expertise, and he cannot be expected to have such. However, as a professional person confronted with a problem that is outside his normal range of experience, it is not, in my judgment, consistent with a reasonable discharge of his function to fail entirely to try to find out something about the present state and prospects for this sector of the market. Nor is it, in my judgment, so consistent to act upon the basis of an instinctive hunch that this sector is a mere “fad”, and so utterly to discount the best evidence he had available to him of the state of the market, namely the deal in respect of which his client’s consent was being sought. Mr Webster indicated that he has available to him the experience of his contacts in the profession. Mr Gooderham has produced a great deal of material to demonstrate that those who advise the market, both from an independent and a partial standpoint, regard this sector as having substantial potential for growth and being far from saturated. While this material was all published after Mr Webster was asked to advise, the material in it is by no means news, but is no more than a distillation of trends that have been reported upon in the public domain for a number of years. I have no doubt that if Mr Webster had taken any trouble at all to find out about this sector and had not relied upon pure instinct, he would have had no difficulty gaining access to similar opinions. While what these publications record are, it is true, only opinions, the fact is that they represent the current views of the market. He was engaged in an exercise to gauge the impact of giving the consents sought, upon the present value of the landlord’s reversion. Thus, the present view of the prospects for that undertaking and that use were wholly to the point. Further, such information would have confirmed the fact that, as I find, the level of rent being charged by the claimant to its proposed underlessee was relatively modest and reasonable, given the present state of the market as revealed by the material exhibited by Mr Gooderham in his supplemental report and in the comparables to which he has referred. It follows that, in my judgment, the valuation that Mr Gooderham placed upon the reversion, were the consents given, are reasonable, and that of Mr Webster is ill-informed, wrong-headed and unreasonable.
41. It follows, therefore, that, in my judgment, upon the basis of these conventional approaches to the question, the value of the landlord’s reversion is about the same, whether, in the meantime, it has been subject to use as a nightclub or as a health and fitness centre. On the balance of probabilities, it is more likely that it would be marginally enhanced by use as a health club. It is, in my judgment, unreasonable to conclude that there would be a substantial diminution in the value of the landlord’s reversion in the event that the consent for change of use were given.
42. One of the factors to which Mr Webster had particular regard was the fact that, having given up the licences necessary to run a nightclub, the reversion to be valued was one where nightclub use would be impossible. In my judgment, he overstated this aspect of the matter. The evidence of Mr Smith, a licensing solicitor called by the claimant, was that it would be more difficult to obtain the necessary licences anew than to obtain renewal of existing ones. It was, however, by no means impossible. Thus, in my judgment, to assume, as Mr Webster did, that the licences had been irrevocably lost is to overstate the position. On the other hand, if the premises have not been used as a nightclub in 15 years, the premises would not be kitted out as a nightclub, and that would undoubtedly affect its attractiveness to a prospective tenant for such use. Thus, in my judgment, the overstatement by Mr Webster of the ability to obtain a licence is not an error that would turn a reasonable view into an unreasonable one.
43. Quite apart from the fact that, in my judgment, Mr Webster’s presently held view, based upon a conventional approach to valuing the landlord’s reversionary interest, is unreasonable, I am persuaded that the advice that he gave to the defendant at the time, evidenced by his letters of 7 January and 3 February 2000, was so flawed in its approach, and so wide of the mark in its substance, that it was unreasonable advice, which rendered the decision of the defendant, based upon it, unreasonable.
44. It therefore follows that the defendant did unreasonably refuse to consent to the change of use, and, consequentially, to the underlet. There was no reasonable basis to conclude that the damage to his reversionary interest was substantial, so as to entitle him to refuse consent outright, or to demand recompense for such an alleged substantial diminution. The claimant is therefore entitled to the declarations sought in paras (1) to (4) of the particulars of claim.
Defendant’s counterclaim
45. The defendant claims damages for breaches of the following covenants in schedule 4 of the lease:
11.3 To comply substantially with the terms and conditions of the Liquor/Public Entertainments Licences applicable to the Premises and/or the business of a Night Club carried on therefrom and not to do or permit nor omit to be done any act or thing whereby the said Licences may be prejudiced restricted or avoided.
…
14.5 At all times of the year during the usual business hours of the locality to keep their Premises open as a Night Club premises for carrying on such business.
46. It is admitted that the claimant deliberately ceased to operate a nightclub at the premises on or around 6 July 1996, and later in 1996 made a decision to close the nightclub permanently and to surrender the relevant licences.
47. I find that, in so acting, the claimant was in breach of covenant 14.5, but that it was not in breach of 11.3.
48. Para 14 of the counterclaim states:
The Claimant has caused the Liquor/Public Entertainment licences applicable to the premises to be lost to the premises. It is unlikely that an application to restore the said licences would be successful. The premises therefore cannot be used as a Night Club. The Defendant has suffered a diminution in the value of its freehold reversion as a consequence. The Defendant’s loss does not exceed £300,000.
49. In my judgment, the matters pleaded in the second and third sentences of this paragraph have not been established. Whether or not licences would be granted, when applied for in the future, will depend upon the merits of the application at the time, and on a large number of matters current at that time. The fact that, at some historic point, the premises had licences that were given up will be relatively unimportant, if of any relevance at all. Thus, I find that the causal basis for this claim as pleaded is not established
50. In any event, even if these matters had been proved, or the inability to let it as a nightclub was causally linked to the breach of covenant that has been established, on the basis of the evidence on valuations that I have accepted, I find, on the basis of a proper valuation of the landlord’s freehold reversionary interest, respectively for use as a nightclub and a health and fitness club, that these valuations are within a few thousand pounds of each other, and that, on the balance of probabilities, the likelihood is that use as a health and fitness club will give the higher reversionary valuation. Thus, the defendant has, by unreasonably refusing his consent to that underletting and change of use, failed to mitigate his loss arising from the breach of covenant. Had he done so, no loss would have flowed from the breach of covenant.
51. In my judgment, therefore, the counterclaim for damages fails.
Claim allowed.
