Landlord recovering rent from original tenants — Original tenants obtaining summary judgment for arrears from guarantors — Guarantors raising triable issue based on estoppel by convention — Break-clause notices ineffective — Landlords allowing guarantors to believe notices effective — Appeals allowed
By a lease dated July 22 1977 the plaintiffs were the original tenants of a 25-year term of 189-191 New Kent Road, London SE1, the lease contained a break clause upon six months’ notice. By an assignment made February 18 1983 Pan-Litho Sales Ltd acquired the term and the first and second defendants, directors of the company, became guarantors for the rent. By a conveyance made May 1 1984 the third defendants acquired the reversion to the lease. Following Pan-Litho’s ceasing to trade in March 1986, the guarantors paid the rent up to June 1986, but not thereafter. The third defendant recovered five quarters rent from the plaintiffs, and the plaintiffs obtained final judgement in respect of the same under RSC Ord 14 against the guarantors. The guarantors’ appeals were dismissed by His Honour Judge Butler QC (sitting as a judge of the High Court) on the grounds that they had no arguable defence. They appealed that decision on the ground that in July 1984, alternatively in January 1986, notices had been served purportedly to exercise the break clause in the lease. Although both notices were invalid, the first because it was given by the gurantors, and not the tenant, and they had no rights of subrogation, and the second because at the time the tenant was in compulsory winding-up, the appellants contended that the third defendant was estopped from denying the validity of the notices.
Held The appeals were allowed.
The evidence showed that by a number of telephone conversations the third defendant had led the guarantors to believe that their liability for the rent was limited for two years having regard to the break notices. It was arguable that estoppel by convention arose because rent was asked for in the knowledge that the guarantors believed their liability was limited in time.
Roger Henderson QC and Simon Buckhaven (instructed by Thomas Boyd Whyte, of Bexleyheath) appeared for the appellants, the first and second defendants; Ellis Meyer (instructed by Newman Plaskow) appeared for the third defendants, Guardcliff Properties Ltd; and Charles Sparrow QC and Stephen Jones (instructed by Titmuss Sainer & Webb) appeared for the respondent plaintiffs.
