Landlord and tenant — Covenant against alterations without landlord’s written consent — Whether consent granted by ‘subject to licence’ letter
By four leases
the respondent tenant held 999-year terms from dates in 1917 and 1924 of
commercial premises. The leases were subject to covenants that certain
alterations could not be carried out without the landlord’s ‘previous written
consent’. On March 1 1993 the tenant sought the written confirmation of the
landlord, the predecessor in title to the appellant, for specified works to
commence in April. On May 18 1993 the agents for the landlord wrote a letter
marked ‘subject to licence’ giving consent to the works subject to conditions
that, inter alia, a formal licence was entered into. On September 6 1994
the then landlord served a notice under section 146 of the Law of Property Act
1925 alleging that the work had been carried out without landlord’s consent.
Judge Rich QC, sitting as a High Court judge, held that the letter of May 18
1993 constituted a written consent for the purposes of the leases. The landlord
appealed.
principle illustrated by the ‘subject to contract’ or ‘subject to lease’ cases
from the field of bilateral negotiations to that of a unilateral act. In cases
requiring unilateral act the only question is whether that act has occurred.
The letter of May 18 1993 expressed consent in the clearest terms and was a
consent as required by the leases. The heading ‘subject to licence’ added
little to the condition requiring formal licence, and meant that it served to
emphasise the degree of formality required so that the express condition for a
formal licence should not be satisfied in correspondence. However, no such
document was required by the terms of the leases.
The following
cases are referred to in this report.
Akiens v Salomon (1992) 65 P&CR 364; [1993] 1 EGLR 101; [1993]
14 EG 97
Consolidated
Pool Carriers GmbH v CTM CIA Transmediterranea
SA: The CPC Gallia [1994] 1 Lloyd’s Rep 68
Longman v Viscount Chelsea (1989) 58 P&CR 189; [1989] 2 EGLR 242,
CA
Star
Steamship Society v Beogradska Plovidba: The
Junior K [1988] 2 Lloyd’s Rep 583
Venetian
Glass Gallery Ltd v Next Properties Ltd
[1989] 2 EGLR 42; [1989] 30 EG 92
This was an
appeal by the defendant, Mount Eden Land Ltd, from a decision of Judge Rich QC,
sitting as a High Court judge, who granted a declaration in an application by
originating summons made by the plaintiff, Prudential Assurance Co Ltd.
Kim Lewison QC
(instructed by Herbert Smith) appeared on for the appellant; Derek Wood QC
(instructed by Lovell White Durrant) represented the respondent.
Giving
judgment, Morritt LJ said:
This is an appeal of Mount Eden Land Ltd, the landlord, from the order of Judge
Rich QC, sitting as additional judge of the Chancery Division, made on July 14
1995. By that order he declared in answer to a preliminary issue that the
appellant’s predecessor in title to the reversion, Grovewood (LE) Ltd, had
granted consent to the tenants, Prudential Assurance Co Ltd, for the execution
of works to properties in Oxford Street and Wells Street, London, which in the
absence of such consent would have constituted breaches of covenants contained
in the relevant leases.
The leases in
question are four in number, three were dated January 17 1917 and the fourth
June 24 1924. They were leases of 134/140 Oxford Street and 80/83 Wells Street
for terms which amounted in total, that is to say under each lease, to the
equivalent of 999 years from April 6 1915. The four leases were so far as
relevant in the same terms. The term which is relevant is the expression
‘previous written consent’ contained in clauses II(9) and II(8) in these terms:
That (without
the previous written consent which may be temporary or permanent revocable or
irrevocable or otherwise howsoever framed or qualified of the Lessor)
The other
material provision is the covenant in question, which is against the making of
alterations. That is contained in clauses II(11) and II(10) in the respective
leases. That provides:
That without
such previous written consent as aforesaid and except in accordance with plans
previously approved by the Lessor and to his satisfaction no building or
erection shall at any time be built or placed on the said demised premises and
no addition or alteration affecting the elevation external structure or
stability of the said premises or any parts thereof shall at any time be made
to any building or erection for the time being on the said demised premises and
that no machinery shall at any time be erected upon or affixed to the said
demised premises except under the supervision and to the satisfaction of the
Lessor and that the said Lessees will pay to the Lessor on demand and indemnify
the Lessor against all reasonable Surveyors Fees and other charges and expenses
which the Lessor may incur in connection with any matter or thing under this
present sub-clause.
By October
1992 Grovewood (LE) Ltd, then in administrative receivership, held the
reversions to each of the four leases, the terms were vested in Prudential
Assurance. Prudential had ascertained that the outer cladding of the building
needed to be replaced and that that would give rise to an alteration of the
appearance of the outside. On October 5 1992 Prudential wrote to the agents for
the landlord notifying them of their proposals to carry out such works.
On January 5
1993 Prudential sent to the agents for the landlord, ‘the latest plans being
considered by the Planners’. On March 1 1993 Prudential wrote to the agents of
the landlord seeking, ‘written confirmation of your client’s agreement’ for the
works due to commence in April of that year. On March 24 1993 the agents for
the landlord wrote to Prudential in these terms:
Please note
that I have not yet received confirmation from my clients that consent will be
given for these works.
I will
endeavour to keep you fully informed of any progress in this matter.
On March 29
1993 Prudential expressed concern at the delay in obtaining an answer, and on
April 1 1993 the agents for the landlord again replied that they had still not
received:
authority to
grant consent for your alteration to the elevations.
On the planning
front, on April 6 1993 the City of Westminster, as the planning authority, gave
consent, but subject to certain specified conditions, to the proposed works of
recladding. Then, on May 18 1993 the agents for the landlord wrote the crucial
letter. It is in these terms:
Subject to
License [sic]
Dear Mr
Pritchard,
Wells House,
134/140 Oxford Street, London W1
I refer to
your request to consent to alter the external appearance of the above building
during the course of maintenance to the defective cladding.
I can confirm
that the Freeholder, Grovewood (LE) Limited (In Administrative Receivership),
gives consent for the works subject to the following conditions:
1. A formal
licence is entered into by your client, The Prudential Assurance Company Ltd.
2. The
Prudential will pay my client’s costs in this matter, including any additional
insurance premium levied as a result of the works.
3. The
Prudential are to obtain necessary consents and statutory approvals.
If you can
confirm acceptance of the above terms, I will arrange for my client’s solicitor
to prepare the necessary licence. When replying, I should be grateful if you
would confirm the name of the solicitor who will be representing your client
and the appropriate drawing numbers to be incorporated in the licence.
On June 30 and
then again on August 5 1993 the City of Westminster, as the planning authority,
approved the reserved matters.
On September 7
1993 Prudential wrote confirming their agreement to the conditions set out in
the letter of May 18 1993. That letter reads as follows:
Reference your
letter dated 18th May. I confirm my client’s agreement to items 1-3 inclusive.
I have
forwarded drawings and details of the licence to my client’s solicitors:– [the
name and address of Lovell White Durrant is there set out]
I should be
grateful if you would inform your client’s solicitors of the position.
Subsequently,
on September 6 1994 section 146 notices were served on Prudential, by the then
landlord, claiming among other things that the replacement of the cladding had
been carried out without the landlord’s consent. This prompted Prudential to
issue an originating summons on November 23 1995 claiming, among other things,
that previous written consent had been given by the then landlord’s predecessor
in title.
In March 1995
Master Dyson ordered that that issue be tried as a preliminary issue. Then, on
July 14 1995 the matter came before Judge Rich.
The judge
concluded that the letter of May 18 1993 did constitute such consent as the
leases required. After referring to the facts and the terms of the letter he
posed the issue for his decision in these terms:
The issue
therefore, it appears to me, between the parties is whether or not the
expression ‘subject to licence’ has a similar magic to the expression ‘subject
to contract’ such that it may contradict the effect which would otherwise arise
from the words of the letter.
I put it that
way, conscious that the letter has got to be construed as a whole and of
course, even if those words lack magic, they may so reinforce the implications
of other words in the letter as to contradict the expression ‘I can confirm
that the freeholder gives consent’, if that expression may, within the body of
the letter, be said to give with one hand what is withdrawn with another.
I think that
Mr Neuberger has wished, at the same time as he relies upon the magic of
‘subject to licence’, also to put the totality of the effect of the letter as
being other than the granting of a licence because of, in effect, the
withdrawal of what is said in ‘I give consent’ by the conditions and
requirements identified subsequently in the letter.
The judge then
considered the four reported cases to which he was referred. The fourth was the
decision of Harman J in Venetian Glass Gallery Ltd v Next Properties
Ltd [1989] 2 EGLR 42. At p12 of his judgment Judge Rich continued:
If the
importation of the words ‘subject to licence’ in any letter automatically had
the effect that no consent is to be granted until the execution of a formal
licence, then of course the letter upon which the plaintiffs here rely would be
nullified in its effect, but Harman J at p44H, in my judgment, completely
destroys Mr Neuberger’s concept that those words are of themselves magic words.
He referred to the three cases to which I have also referred and he said:
‘All three go
to show that there is a distinction recognised by the law between
relationships, such as those between landlord and tenant, where there is an
existing set of legal obligations between the parties and there is sought
within those obligations a consent, and relations between strangers in law, as
between prospective purchaser and prospective vendor, where there is no present
tie and the parties are in mere negotiation.
I accept that
there is such a distinction and I agree that one does not regard the need for a
formal licence, probably under seal, as being the essential step without which
there can be no effective licence.’
He contrasted
to that the situation in relation to vendor and purchaser transactions where
there is no pre-existing relationship between the parties.
In other
words, Harman J accepted, as I think it is necessary to accept in the light of
many decisions to which I do not need to refer, that the words ‘subject to
contract’ do have what Mr Neuberger I think very reasonably describes as a
magic, but that magic arises from the particular incantation in the particular
context of particular transaction. Because the words ‘subject to contract’
create magic it does not mean that similar magic is created by different words
in different contexts.
Harman J has
rejected that concept. I entirely agree with him in rejecting it. Without
magic, this letter granted consent. There is no magic. It is a consent and I so
declare.
From that
decision the landlord now appeals.
It contends
that the judge was wrong. Its case is that the heading ‘Subject to License [sic]’
prevented the letter having any legal consequence. It submits that there is a
general principle that:
where parties
contemplate completion of a formal document in due course their negotiations
are subject to the completion of that document and preclude any legal
consequences from anything that precedes the execution of that document.
It is
submitted that such a proposition is a general application and makes for
certainty in a transaction such as this.
In support of
that proposition we have been referred to cases dealing with phrases such as
‘subject to lease’ and ‘subject to details’ in the field of carriage of goods
by sea. In those cases the same effect was given to those phrases as to the
familiar phrase ‘subject to contract’ in the field of sales of land. Thus in Longman
v Viscount Chelsea (1989) 58 P&CR 189* Nourse LJ said at p193–194:
*Editor’s
note: Also reported at [1989] 2 EGLR 242
Wherever
parties intend to enter into the relationship of landlord and tenant without a
preliminary contract for the grant and acceptance of a lease, and their
negotiations are expressed to be ‘subject to the completion of a lease,’
‘subject to lease,’ ‘subject to contract’ or the like, then, so long as the
qualification remains in force, the relationship does not become binding on
them unless and until there is an exchange of lease and counter-part, before
which either party can withdraw. The parties intend to be bound at one
ascertainable point of time, conventionally at a completion meeting where, if
there is to be a mortgage, the mortgagee will also be represented and where all
necessary formalities and exchanges will take place. With advances in modern
technology it may increasingly be possible to dispense with a physical
encounter between the parties. But in the absence of evidence to the contrary
it is not possible to dispense with the common intention that the parties shall
become bound at one ascertainable point of time.
The judgment
of Nourse LJ was quoted and adopted by Dillon LJ in Akiens v Salomon
(1992) 65 P&CR 364*. At p369 he said:
*Editor’s
note: Also reported at [1993] 1 EGLR 101
The parties
were negotiating throughout on the basis that neither would be bound until the
terms of lease had been embodied in formal lease and counterpart and these had
been exchanged in the usual way. They had been negotiating on a basis that
accepted, as each of the solicitors must have known, that either could withdraw
from the negotiations at any point before the exchange had taken place.
In Consolidated
Pool Carriers GmbH v CTM CIA Transmediterranea SA: The CPC Gallia [1994]
1 Lloyd’s Rep 68 Potter J adopted a similar approach to the phrase ‘subject to
details’ when used in negotiations for the carriage of goods by sea. At p73 he
quoted with approval the dictum of Steyn J in Star Steamship Society
v Beogradska Plovidba: The Junior K [1988] 2 Lloyd’s Rep 583 where he
said:
I would
respectfully suggest that it is in the interests of the chartering business
that the Courts should recognise the efficacy of the maritime variant of the
well-known ‘subject to contract’. The expression ‘subject to details’ enables
owners and charterers to know where they are in negotiations and regulate their
business accordingly. It is a device which tends to avoid disputes and the
assumption of those in the shipping trade that it is effective to make clear
that there is no binding agreement at that stage ought to be respected.
I do not
accept that it is legitimate to extend the principle illustrated by those cases
from the field of bilateral negotiations to that of a unilateral act. There can
be no doubt that the distinction drawn by Harman J in the Venetian Glass
case, to which the judge referred is a
context of negotiations is to avoid the other side seeking prematurely to
conclude a contract by the acceptance of an offer so as to give rise to
unintended legal consequences. In cases requiring a unilateral act the only
question is whether that act has occurred. So in this case the only question is
whether the letter of May 18 1993 was a consent as required by the leases. That
is a question of the construction of the letter in the light of all the
surrounding circumstances.
So regarded I
have no doubt that the letter does express the consent required by the leases.
It will be remembered that such consent may be temporary or revocable or
qualified. This letter expresses consent in the clearest terms. The consent was
qualified by the stipulation for a formal licence as stated in the body of the
letter. For that document it would be necessary to have the drawing numbers
referred to in the concluding passage. In truth the heading ‘subject to
licence’ added little to the condition expressed in the body of the letter and
could not qualify the unambiguous expression of consent it contained. If it be
necessary to attribute some meaning to the heading then it might serve to
emphasise the degree of formality required so that the express condition for a
formal licence should not be satisfied in correspondence or by some less formal
method than a licence strictly so-called. But no such document was required by
the terms of the leases. In my view, it was right for the reasons he gave and I
would dismiss this appeal.
Sir John
Balcombe and Beldam LJ
agreed and did not add anything.
Appeal
dismissed.
