Qualified covenant against assignment – Landlord instructing solicitors to issue draft licence – Solicitors acting on instruction – Landlord then claiming not to have consented – Whether consent given in correspondence headed “subject to licence” – Declaration in favour of tenant
The plaintiff tenant held retail premises in High Street, Slough, under a 25-year lease commencing February 6 1987, at a reviewable rent. The lease contained a covenant against assignment qualified by the proviso that the landlord would not unreasonably withhold consent to an approved assignee who should covenant directly with the landlord to observe the terms of the lease. The following letters passed during 1997. By letter dated June 2 the tenant formally applied to the first defendant (the landlord) for a licence to assign to the second defendant (B), enclosing accounts showing three years’ profitable trading by B up to June 30 1996. On June 19, the tenant and B signed an agreement for the sale of the lease for £50,000 conditionally upon obtaining the landlord’s licence. On June 30, the landlord’s surveyor, W, stated that she could not recommend consent without further information relating to B, which the tenant supplied on July 2. On July 7 W requested “without prejudice” details of any institutional landlords receiving equivalent rents from B. By letters dated July 17 and 21 the tenant formally notified the landlord of the sale to B who would furnish the information requested. On August 13 W wrote that she could not confirm the landlord’s decision until provision of the requested information. On August 27, having just received the requested information, W wrote”subject to licence” that she would instruct solicitors to issue the draft licence subject to satisfactory comment from the other landlords. On September 5, again writing “subject to licence”, W confirmed receipt of satisfactory references from the other landlords and that she had instructed solicitors, LG, to issue a draft licence and expressed the hope that the matter would proceed to a swift conclusion. On September18 the tenant acknowledged receipt of an acceptable draft licence from LG, and on September 29 forwarded the executed licence to LG for completion. On October 2 LG informed the tenant that the landlord intended not to give his consent, having learned of trading losses incurred by B since June 30 1996. On or about October 18 the tenant sued for a declaration that consent had in fact been given by the landlord. The proceedings were opposed both by the landlord and B who no longer wished to buy.
Held Judgment was given for the tenant.
1. As a drafting matter the requirement for a direct covenant demonstrated that the lease contemplated the execution of a formal tri-partite document. However, without contrary indication, that did not mean that the giving of consent could not be otherwise expressed. Read together with the earlier correspondence, the landlord’s letter of September 5 and the forwarding of the draft by its solicitors clearly signified that the landlord had consented.
2. Since the claim concerned an alleged unilateral act on the part of the landlord the rubric “subject to licence” did not have the same suspensive effect as “subject to contract” when placed on documents otherwise having bi-lateral contractual force. Consequently the landlord’s intention could be sought from the correspondence as a whole: see Prudential Assurance Co v Mount Eden Land Ltd [1997] 1 EGLR 37.
Paul de la Piquerie (instructed by Harvey Ingram Owston, of Leicester) appeared for the plaintiff; John McGhee (instructed by Lawrence Graham) appeared for the first defendant; Sandra Corbett (instructed by Harkavys) appeared for the second defendant.
