Level Properties Ltd v Balls Brothers Ltd
| Jurisdiction | England & Wales |
| Judge | THE HONOURABLE MR JUSTICE WYN WILLIAMS,The Honourable Mr Justice Wyn Williams |
| Judgment Date | 30 March 2007 |
| Neutral Citation | [2007] EWHC 744 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC05CO2513 |
| Date | 30 March 2007 |
[2007] EWHC 744 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Wyn Williams
Case No: HC05CO2513
Mr Stephen Jourdan (instructed by Fladgate Fielder Solicitors) for the Claimant
Mr John Male QC (instructed by Denton Wilde Sapte Solictors) for the First Defendant
The Second Defendant did not appear
Hearing dates: 7 th -8 th December 2006
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
By a Lease made the 24 th December 1993 between the Claimant and Benjys Group Limited, the Claimant demised to Benjys Group Limited the premises described more fully below) at 21/26 Leadenhall Street and 52/54 Lime Street London EC3 for a term of 16 years from the 25 th December 1993. On the 18 th July 1996 Benjys Group Limited assigned the term then remaining under the Lease to the First Defendant.
The Lease contains a rent review clause (Clause 6). In summary the rent reserved under the Lease is reviewed at the end of each four year period of the term. Upon review the rent is the higher of the passing rent and the “open market yearly rent” at the relevant review date.
The rent fell to be reviewed for the period 25 th December 2001 to 24 th December 2005. The review was referred for the determination of the Second Defendant who was acting as an independent expert. The appointment of the Second Defendant was made by the then President of the Royal Institute of Chartered Surveyors and the appointment took effect on the 29 th May 2002. On the 16 th December 2002 the Second Defendant determined that the rent for the period in question should be £190,000 per annum.
In advance of the Second Defendant's Determination it had become apparent that there were differences between the Claimant and the First Defendant about the interpretation of provisions within the Lease.
On the 16 th September 2005, the Claimant commenced these proceedings. The full extent of the relief which it claims is set out in the Amended Particulars of Claim contained within the Trial Bundle. On the 6 th June 2006 Master Teverson ordered the trial of certain preliminary issues, although his order was not sealed until 10 th July 2006.
The preliminary issues came on for hearing before me in December 2006. At the hearing four issues for my determination were identified. Those four issues were formulated in the Skeleton Argument of Mr Jourdan, Counsel for the Claimant.
For reasons which are unimportant to this judgment the issue which was identified as “ Issue 3” was not considered by me. The parties agreed that this issue should be adjourned for a further hearing. I heard full argument, however, upon the other issues, which had been identified by Mr Jourdan. The issues which I considered were as follows:
(a) On an application for license to assign the Lease, can the landlord insist on the provision of a surety on assignment even if it is unreasonable to do so? (“ Issue 1”)
(b) Should a declaration be made against Balls Brothers Ltd that, on the true construction of the Lease, the “open market yearly rent” should be determined either on the basis of a single letting or, if it produces a higher figure, on the basis of two lettings, one of the ground floor and one of the basement, the “open market yearly rent” being the aggregate of the rents payable under those two lettings? (“ Issue 2”)
(c) Are the landlord and Balls Brothers Limited bound by the determination of the Second Defendant in whole or in part? (I will refer to this as “ Issue 3” although it was “ Issue 4” as identified by Mr. Jourdan.)
Issue 1
Clause 3 of the Lease contains covenants on the part of the tenant. Clause 3.13.3. is in the following terms:—
“[Not to] assign the whole of the demised premises without first having obtained not more than three months previously the Landlord's written license which subject to compliance with the following requirements shall not be unreasonably withheld.
3.13.3.1
The Tenant shall provide the Landlord with such audited accounts references and other evidence to demonstrate the identity and financial standing of the Assignee as the Landlord shall acting reasonably require
3.13.3.2
The Assignee shall enter into a direct covenant by deed with the Landlord to observe and perform all the Tenant's covenants in this Lease during the term
3.13.3.3
In the case of an Assignee which is a body with limited liability the Landlord shall be entitled to require that the parent body or any director or other principal shareholder or other participator shall act as surety to the assignee and that the Tenant shall provide such information concerning the identity or financial standing of the proposed surety as the Landlord may require and that the proposed surety shall enter into a covenant by deed with the Landlord in the form of Clause 7 of this Lease or alternatively if unsatisfactory sureties are provided that the assignee provide security in cash or by bank bond for the performance of its covenants in such sum and on such terms as the Landlord (in its reasonable discretion) shall specify
3.13.3.4
That in the case of any assignee and/or surety who shall not be resident or have an established place of business within the jurisdiction of the English Courts the Landlord may require the intended assignee and/or the surety to enter into a deed containing (i) an unqualified covenant on the part of the assignee and the surety that this lease and rights and obligations of the Tenant and the Surety shall be governed by the Laws of England and that any legal action or proceedings with respect to this Lease against the assignee and/or the surety may be brought in the High Court of Justice or any other competent court in England and that the assignee or surety accept irrevocably and unconditionally the jurisdiction of the High Court of Justice and of any other competent court in England and (ii) an unqualified agreement on the part of the assignee and/or the surety irrevocably to designate or appoint or empower their Solicitors in England the name and address of whom shall be supplied to the Landlord prior to completion of the Deed to receive for and on behalf of the assignee and/or the surety service of all notices served in accordance with the provision of this Lease and of process in any legal action and proceedings within the Jurisdiction of the Courts of England with respect to the same PROVIDED ALWAYS that if such Solicitors shall for any reason be unable or unwilling to act for the assignee and/or the surety the assignee and or the surety shall forthwith appoint a firm of Solicitors practising in England for the same purpose and shall forthwith notify this appointment to the Landlord in writing”
Clause 3.13.3. expressly provides that the Landlord's written license to assign the whole of the demised premises shall not be unreasonably withheld. The provision that the license shall not be unreasonably withheld, however, is said to be “subject to compliance with the following requirements.” One of the requirements which follow, of course, is an entitlement on the part of the landlord to require a surety in the case of an assignee which is a body of limited liability.
Counsel for Claimant submits that by virtue of Section 19(1) of the Landlord and Tenant Act 1927 Clause 3.13 of the Lease is subject to an unconditional proviso to the effect that the landlord's license is not to be unreasonably withheld. That unconditional proviso applies notwithstanding any expressed provision to the contrary by virtue of the terms of section 19. He submits that Clause 3.13.3 is an attempt to limit the application of that proviso and to that extent it is of no effect. It follows, so he submits, that the Landlord cannot insist upon the provision of a surety on assignment unless it is reasonable to do so. 1
The First Defendant resists this contention. It does so, essentially, upon the basis that the phrase “which subject to compliance with the following requirements” imposes upon the tenant an obligation to perform the requirements which follow and those requirements are antecedent to the question of whether or not a license to assign is to be granted. In the submission of Mr Male QC Section 19 of the 1927 Act has no application to the provision in Clause 3.13.3.3 which relates to a requirement to provide a surety.
Ultimately the resolution of this issue is dependent upon the proper interpretation of the clause in question. However, Section 19(1) of the 1927 Act has been considered in a number of cases and each party relies upon case law to support its contention. I began my search for the proper interpretation of this Clause, therefore, with Section 19(1) of the 1927 Act and cases upon it.
Section 19(1) provides that:
“In all leases whether made before or after the commencement of this Act containing a covenant condition or agreement against the assigning, under-letting, charging or parting with the possession of demised premises or any part thereof without licence or consent, such covenant condition or agreement shall, not withstanding any express provision to the contrary, be deemed to be subject –
(a) to a proviso to the effect that such licence or consent is not to be unreasonably withheld, but this proviso does not preclude the right of the landlord to require payment of a reasonable sum in respect of any legal or other expenses incurred in connection with such licence or consent.”
In Re Smith's Lease [1951] 1 ALL ER 346, the relevant Clause...
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