Commercial lease — Tenant’s covenant not to assign without prior consent of landlord — Consent not to be unreasonably withheld — Tenant given option under lease to determine after 10 years — Proposed assignee intending to determine — Landlord refusing to consent — High Court holding that refusal was reasonable — Court of Appeal upholding that decision — Terms of lease clear and court should not rewrite terms — Appeal dismissed
By a transfer dated March 28 1991 B transferred to OPIL the freehold interest in 8-10 Great George Street, London SW1. The freehold was acquired subject to a lease of the ground, fifth, sixth, seventh and eighth floors of the property (“the demised premises”). The lease contained a covenant by the tenant not to assign, transfer, sublet, etc the demised premises without the previous consent of the landlord, which was not to be unreasonably withheld. EPL was the original tenant under the lease and they alone had the right to determine the lease at the expiration of the 10th year of the term upon giving the landlord 12-months notice in writing. By an assignment in October 1987, EPL assigned its interest in the demised premises to Olympia & York (“O&Y”). O&Y went into administration in May 1992. In December 1992 the administrators of O&Y informed OPIL that it proposed to assign the lease to EPL. On December 10 1992 Harman J granted an injunction restraining O&Y from assigning the lease of the demised premises without the consent of OPIL. By a letter of December 29 1992 OPIL informed O&Y that it was refusing to grant its consent to the proposed assignment to EPL. O&Y applied to the court for a declaration that OPIL was unreasonably withholding consent to the assignment of the unexpired term of the lease. Harman J refused to make the declaration sought (see [1993] EGCS 129), but O&Y appealed. On appeal it was agreed that the judge should have taken into account the onerous nature of the lease in the circumstances which existed at the date of the application for assignment, in particular the absence in the market place of anyone prepared to take on the lease other than in consideration of a substantial reverse premium.
Held The appeal was dismissed.
1. OPIL was entitled to rely on EPL’s intention to exercise the contractual right conferred upon it to determine the lease as a reasonable ground for refusing consent to the assignment to EPL.
2. The terms of the lease were clear and business efficacy did not require a construction of the lease which implied that the parties to the lease had contemplated that the lease could be assigned back to EPL as original tenant; or that OPIL as landlord would not seek to deprive EPL of its contractual entitlement by relying upon the existence of that right as a reason for refusing consent.
3. The fact that the terms of the sale would operate harshly on O&Y in the unexpected circumstances which had arisen did not enable the court to rewrite the clear provisions of the lease.
Ian Glick QC and Timothy Harry (instructed by Slaughter & May) appeared for the landlord; Terence Etherton QC and Wayne Clark (instructed by Allen & Overy) appeared for O&Y.
