Duvall v 11-13 Randolph Crescent Ltd


Reference:

Date:
6th May 2020

Court:
Supreme Court

Facts:

Summary of the decision 

Long leases in a block of flats contained an absolute prohibition against lessees carrying out certain works and a covenant by the landlord (if requested by a lessee) to enforce covenants against other lessees. The Supreme Court held that, in those circumstances, the landlord was not entitled to grant one lessee a licence to carry out works which would be a breach of the absolute prohibition. To do so would be a breach of covenant by the landlord.

 

Introduction

Long leases of flats frequently contain prohibitions on the carrying out of works by lessees. Some covenants constitute a qualified prohibition, that is, the leaseholder cannot carry out works without the landlord’s consent. Other covenants are absolute, that is, there is no provision for allowing the works with the landlords consent. Typically, structural or other substantial works are likely to be absolutely prohibited.

 

Qualified covenants frequently provide that consent will not be unreasonably refused and, even if this is not the case, a landlord cannot unreasonably withhold consent in relation to improvements by virtue of s.19(2) of the Landlord and Tenant Act 1927. As a result, a common type of dispute is whether a landlord’s refusal of consent or unreasonable.

 

Duval v 11-13 Randolph Crescent Ltd concerned a different situation i.e. whether the landlord was entitled to grant permission to one lessee to carry out works which would otherwise be a breach of an absolute covenant.

 

Facts 

The premises in question was a block of nine flats. Each flat was let on a long lease in substantially the same terms. Under each lease the interior parts of the flats were demised but structural walls were retained by the landlord. There was an absolute prohibition on cutting, maiming or injuring the roof, wall or ceilings of the building (clause 2.7) and a qualified covenant against lesser alterations or improvements (clause 2.6).

Clause 3.19 of each lease provided that other leases granted by the landlord would contain similar covenants and regulations and that, at the lessee’s request (subject to the lessee giving security for costs) the landlord would enforce such covenants against another lessee.

 

One of the lessees, Mrs Winfield, wished to carry out works which would constitute a breach of the absolute covenant in clause 2.7 because they would involve removing part of a load-bearing wall. Following representations by Mrs Winfield’s engineers and architects, the landlord was minded to grant a licence. However, another lessee ,Dr Duval, objected. Dr Duval asked the landlord to obtain an undertaking by Mrs Winfield not to breach clause 2.7.  When this did not occur she issued the claim for a declaration that the landlord did not have the power to permit Mrs Winfield to breach clause 2.7.


Comment:

The Decision

The Supreme Court approached the issue in two stages. Firstly,  construction of the two clauses, in accordance with the usual test i.e. to ascertain the meaning the words would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties to each lease. Secondly, to consider whether any term should be implied.

 

The Supreme Court rejected the argument that there was a general principle that, where one party undertook a conditional or contingent obligation, they were under an obligation not to prevent the contingency from arising or putting it out of their power to discharge the obligation when the contingency arose.

 

The Court found, however, that there was an implied term that the landlord would not put it out of its power to enforce clause 2.7. Its reasoning was that the purpose of clauses 2 and 3.19 was primarily to provide protection to all the lessees. Furthermore, each lessee would know that the other lessees were subject to the same obligations and that the landlord would, at the request of another lessee (and on provision of security) enforce those covenants. Therefore, it must follow that the landlord would not put it out of its power to enforce clause 2.7 by licensing activity which would otherwise be a breach.  

 

The Supreme Court also stated if the landlord did authorise a lessee to breach of clause 2(7) it would be unable to take enforcement action against that lessee but that  would not prevent it being in breach of clause 3(19) to another lessee. Otherwise clause 3(19) could be deprived of practical effect and the parties cannot have intended that the valuable right to object to works could be defeated depending on who acted first – the landlord or the lessee.

 

An interesting point is how the Supreme Court disposed of the landlord’s argument that the parties must have contemplated that, over the course of the long leases, lessees would wish to carry out repairs, renovations or improvements and that, if those works had no effect on other lessees, they cannot have intended that the landlord could not give consent. The Supreme Court said that, as a matter of construction, such routine repairs and renovations would not fall within the absolute covenant of clause 2.7 but the qualified covenant in clause 2.6. That was the case even if, strictly speaking, route repairs and renovations might involve cutting wires or walls (which on a literal interpretation might call within clause 2.7). The parties would have intended the two clause to b e read together, with clause 2.6 being intended to apply to routine alterations or improvements and clause 2.7 being intended to apply to activities in the nature of waste, spoil or destruction that went beyond route alterations or improvements.

 

 

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