Orlando Investments Ltd (Appellant (Plaintiff) v Grosvenor Estate Belgravia (Respondent
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE MAY,LORD JUSTICE NOURSE,LORD JUSTICE NEILL |
| Judgment Date | 19 April 1989 |
| Judgment citation (vLex) | [1989] EWCA Civ J0419-2 |
| Docket Number | 89/0378 |
| Court | Court of Appeal (Civil Division) |
| Date | 19 April 1989 |
[1989] EWCA Civ J0419-2
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(Mr. Justice Hoffmann)
Royal Courts of Justice
Lord Justice May
Lord Justice Neill
and
Lord Justice Nourse
89/0378
MR. MARK BLACKETT-ORD (instructed by Messrs Dawson & Co.) appeared on behalf of the Appellant/Plaintiff.
MR. P. DE LA PIQUERIE (instructed by Messrs Boodle Hatfield) appeared on behalf of the Respondent/Defendant.
I will ask Lord Justice Nourse to give the first judgment in this case.
This is a case in which a tenant claims that his landlord has unreasonably refused consent to a proposed assignment of the lease. There have been admitted and extensive breaches of the tenant's repairing covenants, in respect of which a section 146 notice has been served. Before that there were lengthy negotiations for a scheme of alterations and improvements to the premises. The negotiations having come to nothing and the section 146 notice not having been complied with, the landlord stipulated that the proposed assignee and guarantor should enter into direct covenants to carry out the repairs, and also that the proposed assignee should provide security for the performance of those covenants. On 19th July 1988 Mr. Justice Hoffman held that it was not unreasonable for the landlord to refuse his consent if those stipulations were not met. The tenant has now appealed to this court.
The demised premises consist of a large house, No. 25 Wilton Crescent, London S.W.1., together with a mews garage at the rear forming part of No. 9 Wilton Row. The landlord is the defendant, Grosvenor Estates Belgravia, an unlimited company which holds the premises under a headlease granted to it by the trustees of the Grosvenor Estate. By an underlease dated 10 th June 1985 and made between the defendant as landlord of the one part and a company called Gable House Properties plc ("Gable House") as tenant, of the other part, the premises were demised for a term of 51 years from 25th March 1985 at no premium and at an initial yearly rent of £3,200, subject to review. By clause 2, the tenant covenanted (III) that it would at all times during the term well and sufficiently repair, paint, paper and cleanse the whole of the demised premises; (IX)(a) that it should not assign the demised premises otherwise than as a whole and would assign only with the previous written licence of the landlord or its solicitors (provided that such licence should not be unreasonably withheld); (X) that the demised premises should be kept and used as a single private dwelling house and private garage in the occupation of one family only, and (XII) that no alteration should be made to the premises except in accordance with a certain drawing and specification.
It is only this morning, during the argument of Mr. de la Piquerie for the defendant, that we have been properly informed as to the circumstances in which the underlease came to be granted. The premises were previously underlet to another tenant, being then divided into maisonettes and flats. His term would have expired on the same date as that until which the term of the current underlease has been granted, but in 1985 it was surrendered to the defendant. Mr. de la Piquerie suggested that the surrender was made in consideration of a premium paid by Gable House to the original sub-tenant. In any event he says that, if not as a matter of positive obligation under the terms of the underlease (something which may be open to argument), the understanding was that Gable House would restore the premises for use as a single dwellinghouse. That would explain the provisions of clause 2 (X) and (XII) of the current underlease. I state those facts, because they will make it easier to understand what the parties had in mind at a later stage with which we are more directly concerned. I would add that it seems to be somewhat unsatisfactory that we should have learnt about all this at such a late stage and not by way of evidence in the normal way.
On 22nd January 1986, some seven months after the grant of the underlease, the premises were transferred by Gable House to the plaintiff, Orlando Investments Ltd., at a price of £900,000. The assignment effected by that transfer was duly licensed by the defendant by a license made on the previous day, in which an individual joined in in order to guarantee the plaintiff's performance of the tenant's covenants in the underlease.
At the date on which the underlease was granted, and at all times since, the premises have been in a very poor state of repair. Furthermore, it is evident that during the seven months or so when the underlease was held by Gable House nothing was done by it in order to restore the premises for use as a single dwellinghouse. Be that as it may, Mr. Blackett-Ord, for the plaintiff, accepts that the effect of clause 2 (III) of the underlease was to impose an obligation on the tenant to put the premises into a proper state of repair, which obligation descended onto the shoulders of the plaintiff on the transfer to it of the premises. However, no steps were taken to enforce that obligation while negotiations took place between the plaintiff and the defendant in the first half of 1986 for alterations and improvements to the premises which the plaintiff wished to undertake. That scheme, which has come to be known as the Orlando scheme, was approved by the defendant in June 1986, subject to the execution of a formal licence and the obtaining of listed building and planning consents, the works to be commenced within six months and completed within eighteen months. The necessary consents were duly obtained, but the works were not commenced within six months. It was not until the second half of 1987 that the plaintiff engaged a builder to carry them out. Meanwhile the defendant had been expressing concern about the delay and the deteriorating state of the premises. On 6th October 1987 it gave notice of its intention to serve a section 146 notice.
That proposal was overtaken at that stage, because on 8th October 1987 the plaintiff entered into an agreement for the sale of the underlease to PCE Investments Ltd., a company owned and controlled by the owner of the next door property, No. 24 Wilton Crescent, Mr. Paul Dupee, at a price of £1.25m, the date fixed for completion being 9th November 1987. The agreement incorporated the national conditions of sale, 20th edition, clause 11(5) of which provided that the sale was subject to the reversioner's licence being obtained, where necessary, the purchaser supplying such information and references, if any, as might reasonably be required of him, the vendor to use his best endeavours to obtain such licence and to pay the fee for the same. It went on to provide that, if the licence could be obtained, the vendor might rescind the contract on the same terms as if the purchaser had persisted in an objection to the title which the vendor was unable to remove. At about the time that it entered into that agreement, the plaintiff cancelled its contract with the builder, who had not by that time progressed "very far with the works.
Between 7th October 1987 and 18th April 1988 there ensued a correspondence between the solicitors on each side, which culminated in the defendant's agreement to consent to an assignment to Mr. Dupee's company only on the terms to which I have referred. It is in large part by reference to this correspondence that the reasonableness or unreasonableness of the defendant's attitude is to be judged. I must therefore refer to the more important of the letters.
On 7th October the plaintiff's solicitor, in giving notice of the impending sale to Mr. Dupee and his forthcoming application for a licence to assign, said:
"It is fully appreciated that you are entitled to impose conditions as regards the carrying out of necessary works in connection with the granting of licence to assign and I shall be grateful if you will please keep in close touch with the Estates' surveyor in this connection."
Formal application for the licence was made on the following day and bank references for the company relating to its ability to meet the rent of £3,200 followed shortly afterwards. The defendant's initial assumption was that Mr. Dupee was going to take over the Orlando scheme. On 23rd October its solicitors wrote to the plaintiff's solicitor stating that it was only prepared to consider agreeing to the proposed assignment on certain terms, including the following:
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"3. Mr. Dupee to guarantee the proposed Assignee Company, PCE Investments Limited.
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4. References are to be produced to indicate that the proposed Assignee/Surety have or have access to sufficient funds, say £400,000, in order to put the property into repair."
By 17th November the defendant's solicitors had been told by Mr. Dupee's surveyor that he did not like the Orlando scheme. On 30th November there was a meeting between Mr. Dupee's solicitor (I think that Mr. Dupee himself was not present) and the defendant's surveyor and solicitors, when conditions were laid down on behalf of the defendant, which were later described on the one side as 'very tough and to an extent unreasonable' and on the other as 'very firm, but fair rather than tough'. It appears, however, that at that meeting it was promised on Mr. Dupee's behalf that he would carry out essential works to make the premises wind and watertight by the end of the year. I should interpose here to say that, although some work on the premises had...
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