Right to determine underlease — Assignment by lessee pursuant to licence from lessor — Reassignment to original lessee — Whether right to determine lost — High Court holding that lessee lost right to determine on original assignment — Right was personal to lessee — Majority of Court of Appeal upholding that decision — Leave to appeal to House of Lords refused
By an underlease made on June 27 1985 Crowvale Properties Ltd demised office premises at Waterman’s Park, High Street, Brentford, to Max Factor Ltd for a term of 25 years from June 24 1985 for an annual rent of £305,000. Clause 5.09 contained a mutual right to determine at the end of the 10th year of the term on giving 12 months’ notice in writing. It was also provided that in the event of the lessee, expressed to mean Max Factor Ltd only, assigning the interest in the premises prior to the expiration of the 10th year of the term, then the lessors’ right to determine should cease forthwith. On November 16 1992 Max Factor assigned the term to an associated company with the consent of the landlord. In May 1993 the reversion became vested in the defendant, Wesleyan Assurance Society (“Wesleyan”). On September 8 1993 the term was reassigned with the consent of Wesleyan, to Max Factor. On June 15 1994 Max Factor gave notice to Wesleyan of their wish to determine the lease pursuant to clause 5.09. Wesleyan disputed Max Factor’s right to determine at the end of the 10th year on the ground that Max Factor had ceased to be to the original lessee and so had lost that right. That contention was upheld by the High Court, but Max Factor appealed.
Held The appeal was dismissed by a majority.
1. The right to determine was a right personal to Max Factor, albeit derived from the underlease. It did not run with the term and was not intended to confer any right on an assignee of Max Factor. Once Max Factor assigned the underlease there was no continuing contractual life in the break clause. The assignee could not, by reassignment of the underlease, bring it to life again: see Olympia & Canary Wharf Ltd v Oil Property Investments Ltd [1994] 2 EGLR 48.
2. The use of the formula in clause 5.09 of the words “the lessee (here meaning Max Factor Ltd only)” and the provision that the mutuality of the right to determine would not survive an assignment by Max Factor made plain the intention that neither party’s right to determine would survive any assignment by Max Factor.
3. There was nothing in the provision that would indicate that the parties intended that Max Factor’s personal right would survive assignment in a suspensive state and would be capable of exercising that right in the event that the underlease fell back into its hands. The right to determine was a personal right which fell away on the occasion of the assignment.
4. The court should not construe a lease as creating a right intended to run with the lease, but though not exercisable after an assignment, yet (in the event of a reassignment), exercisable again by the original lessee.
5. Per Staughton LJ dissenting: The right conferred by clause 5.09 on Max Factor did not “disappear” when there was an assignment. It was assigned like all the other rights of the original lessee; it was merely of no value while it belonged to the assignee. But it became once more a right of some value once there had been a reassignment back to Max Factor.
David Neuberger QC (instructed by Simmons & Simmons) appeared for Max Factor; Jonathan Gaunt QC (instructed by Colley & Tilley, of Birmingham) appeared for Wesleyan.
