First assignee of lease entering into direct covenant with landlord – Landlord licensing second assignment on terms discharging first assignee from liability – Whether original tenant discharged from liability for defaulting second assignee – Original tenant held liable
In 1980 the plaintiff landlord granted a 25-year lease of commercial premises in East Grinstead to the defendant (Tantofex) at a reviewable rent. In November 1982 Tantofex assigned the lease to the third party (Alpha) which, as required by the landlord’s licence (the first licence), gave a direct covenant to the landlord to observe the terms of the lease. On 18 November 1985 Alpha assigned the lease to Lambda Business Services pursuant to a licence (the second licence) under which the landlord released Alpha, as from that date, from the covenants given in the first licence. In August 1998, by which time the annual rent had risen from £7,000 to £16,000, the landlord issued a writ against Tantofex as original tenant for £34,326 arrears of rent and other sums falling due between June 1996 and December 1997, plus interest amounting to £7,271. Relying on passages in the judgment of Judge Paul Baker QC in Deanplan Ltd v Mahmoud [1992] 1 EGLR 79, Tantofex claimed that the second licence could not release Alpha without at the same time releasing Tantofex from its obligations under the lease. To hold otherwise, so it was maintained, would enable Tantofex, if successfully sued by the landlord, to claim an indemnity against Alpha, thus effectively depriving Alpha of the benefit of its release.
Held: Tantofex had not been released.
1. As acknowledged in Johnson v Davies [1998] 3 EGLR 72, the judgment in Deanplan (supra) now had to be read in the light of the observations of two members of the Court of Appeal in Watts v Aldington The Times 16 December 1993. These reaffirmed the rule that, unless a joint obligation had been assumed, the release of one debtor did not, in the absence of a contrary intention, release the other. It was otherwise where, as occurred on the facts of Deanplan, the terms agreed between the assignee and the landlord amounted to accord and satisfaction, in which case the original tenant could rightly claim that his contractual obligations had been performed. However, the terms of the second licence could not be so construed.
2. Logically, it would not be possible to allow the original tenant to claim the benefit of a release (not amounting to performance) without discharging later assignees.
Mark Wonnacott (instructed by Dibb Lupton Alsop) appeared for the plaintiff; Edward Cole (instructed by Donne Mileham & Haddock) appeared for the defendant and the third party.
Alan Cooklin, barrister