Landlord’s Consents
Assignment Cases
Magowan v Telford
Circuit Cases.
13 July 1909
[1909] 43 I.L.T.R 237
Dodd, J.
Downpatrick, July 13, 1909
This was an appeal from a decision by the County Court Judge of Down, sitting at Newry on June 1, 1909, dismissing on the merits the plaintiff’s civil bill for £20, being half a year’s rent of premises at 104 Hill Street, Newry, from May 1, 1908, to Nov. 1, 1908. The premises had originally been let to James Hendron on a parol agreement for a tenancy from year to year at a *237 rent of £40 a year, payable half-yearly. On Nov. 1, 1907, a full year’s rent was due, and shortly afterwards the tenant became insolvent, and on Dec. 11, 1907, he executed a deed of assignment of his property to David J. Telford in trust for his creditors. By this deed James Hendron was declared to “grant, demise, assign, transfer and set . . . [amongst other things] all that and those the hereditaments and premises set forth in the first schedule. . . . To have and to hold the said hereditaments and premises described in the first schedule for all the estate, term and interest of the said debtor therein, save such portion thereof (if any) as are of leasehold tenure, and as to such last-mentioned premises for all the estate and interest of the said debtor therein, save the last day of the term for which same may be held,” in order that he might “sell and dispose of the said hereby granted premises, &c.” The deed went on to declare that “the said James Hendron shall be allowed, free of charge, to occupy the upstairs of the house for one month as a minimum period, and in case the premises shall not be sold as a going concern, to such time as the trustee should surrender the premises, it being understood that this right of residence shall not be put against any monies coming to the said James Hendron for services rendered.” The only premises set out in the schedule to the deed were the premises out of which the rent arose, and were described as “the shop and premises situate at 104 Hill Street, Newry, in the County of Down, held by the debtor as tenant from year to year at the rent of £40 per annum.” The plaintiff received from the defendant a dividend with the other creditors for his rent due at Nov. 1, 1907, and was paid £20 in full for the half-year to May 1, 1908. Hendron continued to live free of charge on the premises, which were never sold as a going concern or surrendered. The landlord now sued for the half-year’s rent due on Nov. 1, 1908, claiming that the premises were not held under a lease, and had therefore been assigned altogether by the deed of assignment and not subdemised.
Representation
John Cusack for the plaintiff.
R. F. Harrison, K.C. (with him James Williamson), for the defendant, cited Oxley v. James, 13 M. & W. 214, and Wright and Tracey, Ir. R. 8 C. L. 478. The word demise is used to show that a subdemise and not an assignment was intended by the deed, and in all deeds of assignment of this kind the trustee never undertakes personal liability, but uses the common conveyancer’s expedient of a subdemise to escape it. The payment of half a year’s rent does not prejudice the defendant, for the payment was made under the Bankruptcy Rules, which were incorporated in the deed. It is immaterial that there is no instrument in writing creating the tenancy; that is only material to bring the letting within the definition of a lease in Deasy’s Act.
John Cusack, in reply.—Hendron was to occupy till sale or surrender. The mention of surrender to the landlord shows that the trustee was assignee. As to the word “lease,” the distinction between “lease” and “tenancy from year to year” has been clearly made in every statute composing the Irish Land Code from Deasy’s Act to the present time.
Dodd, J.
I affirm the dismiss in the Court below. I have no doubt as to what the parties intended to do by this deed, and that they never purposed that the trustee should become personally liable for this rent. As to the actual construction of the deed, I am in agreement with the argument for the defendant. The words in the deed are not “lease,” which might have been more difficult to construe, but “of leasehold tenure,” and I think that these words “of leasehold tenure” clearly include this property.
Meagher v Luke J Healy Pharmacy Ltd,
unreported, High Court, Murphy J., April 15, 2005; [2005] I.E.H.C. 120 1.
Background
1.1 The plaintiffs are successors in title to the landlord’s interest in an indenture of lease dated 14th May, 1971 and made between Marian Neumann of the one part and the defendant of the other part, whereby premises known as No. 1 West Street in the parish of St. Peter, town of Drogheda in the county of Louth (hereinafter called the premises) were demised unto the defendant for a term of 35 years from 1st June, 1971, subject to certain covenants and conditions therein contained.
By the said lease the defendant covenanted, inter alia, to preserve, uphold, support, maintain and keep the demised premises, including the roof and exterior walls and certain fixtures and fittings and all additions to the said premises in good and proper and sufficient order, repair and condition.
The defendant further covenanted not to assign the said premises or any part thereof without the previous consent in writing of the plaintiffs first having been obtained and to use and occupy the premises solely for the purpose of the defendant’s trade business as a pharmaceutical chemist and certain ancillary uses.
1.2 Mr. Patrick Hickey acquired the controlling shareholding interest in the defendant in 1995 at a time when there was outstanding a schedule of dilapidations of 1993.
Later in 1995 Messrs. Lisney & Co., on behalf of the plaintiffs, prepared a further schedule of dilapidations which, in turn, was updated in 1999.
It is common case that the defendant did not comply with the first and second schedule of dilapidations notwithstanding its intention to do so when Mr. Hickey became shareholder in 1995. While the premises continued to be used as a pharmacy it was Mr. Hickey’s evidence, not controverted by the plaintiffs, that it would be necessary to vacate the premises in order to carry out the extensive repairs necessitated by the schedule of dilapidations. To this end Mr. Hickey acquired a freehold interest in No. 9 West Street and, having eventually obtained the consent of the Health Board to transfer the general medical service permit to that premises, vacated No. 1 and sought to assign the defendant’s interest to three prospective assignees. The present proceedings were issued on 17th October, 1997.
2. Proposed Assignment 2.1 The first of these proposed assignees was a Mr. Austin Fitzpatrick in December, 1997 who was prepared to acquire the lessee’s interest for the sum of £10,000 and assume the obligation of the repairing covenant. The proposed closing was 30th January, 1998.
The consent of the plaintiff landlords was sought on 9th December, 1997. The landlords were requested to let the lessee/defendant’s solicitor know their requirements regarding references.
On 17th December, 1997 the solicitor on behalf of the plaintiffs wrote as follows:
“Re: Our Client: Denis and Miriam Meagher
Your Client: Luke J. Healy Pharmacy Limited
Premises 1 West Street, Drogheda, Co. Louth
We refer to the above and yours dated the 9th inst. Our clients will not be consenting to the assignment herein nor will they even consider same until such time as works as set out in the schedule of dilapidations have been completed by your clients to our clients’ satisfaction as same has been outstanding for a number of years. The High Court proceedings instituted herein are to proceed and we will be serving statement of claim shortly.
Kindly note that your clients are in clear breach of the covenants contained in the original lease on a number of grounds and unless we receive an undertaking by return that the premises will be immediately reopened as a pharmacy and works as set out in the schedule of dilapidations commenced our clients will, inter alia, retake possession of the property forthwith.
Kindly further note that any attempt to assign or sub-let the premises without our clients’ permission will be a further breach and in such an event we have immediate instructions to seek injunctive relief and this letter will be produced in court to ground our clients’ application for costs of same.”
Further correspondence ensued in relation to the compliance with the agreed schedule of dilapidations by the defendant and a suggestion that the building might be modernised to suit a prospective assignee rather than complying with the schedule of dilapidations. The defendant notified the plaintiff that it would be willing to consider a financial settlement with the plaintiff in lieu of those works, enabling the plaintiff landlord to develop the building in whatever way would best suit.
No reply was received to that letter of 19th February, 1998.
2.2 On 20th April, 1998 the defendant requested the landlord’s consent to a sub-letting to a Cyril Bellew on a short-term sub-letting while sewerage works were being carried out in Shop Street, Dundalk. Further reminders followed. On 30th April, 1998 the defendant’s solicitor referred to the correspondence being ignored and to what was termed “premature proceedings” to have the defendant complete an out of date schedule of dilapidations. The defendant had paid Lisneys for the schedule to be updated but the schedule was being deliberately withheld from it thus preventing it from complying with the schedule. The plaintiffs were asked if they were refusing to give their solicitor instructions and if they were instructing Lisneys not to make a copy of the schedule of dilapidations available to the defendant and, if so, to confirm the reason. That letter concluded as follows:
“It appears to us that your client has no agenda in this matter other than to damage our client.”
By two letters dated 8th May, 1998 solicitors for the plaintiff served the interim schedule of dilapidations and want of repair notice on the defendant and reserved their right to re-visit and re-inspect the premises when all the fixtures and fittings had been removed.
The second letter stated that:
“It is ridiculous to suggest that our clients are in any way attempting to damage your client financially or otherwise and we would respectively (sic) refer you to correspondence that has passed herein since your clients purchased the leasehold interest in No. 1 West Street, Drogheda, Co. Louth. It is your client’s refusal to deal with the schedule of dilapidations over the past number of years that has put them in the position they are, if at all.
…
We understand that your client seeks consent to sub-letting of the premises to one Cyril Bellew and in this regard we await the usual bank and trade references together with a copy of proposed agreement to enable us to obtain out client’s further instructions herein.”
2.3 A third request for consent was made on 30th June, 1998 together with references from AIB in respect of C.W. Ltd. A further reference from Esat Digiphone on 18th September named the proposed assignee as Cellular World Ltd. with whom Esat Digiphone had entered into a strategic alliance. There were further references from Ericsson and from Sigma Wireless Communications Ltd. The latter had mistakenly stated that Cellular World Ltd., the proposed assignee, had traded with them for ten years.
Solicitors for the plaintiff on 30th June asked why it had taken eight years for the defendant to respond to the schedule of dilapidations originally served and asked whether the defendant had removed all fixtures and fittings as their client wished to inspect the unit with a view to updating the interim schedule of dilapidations.
The defendant replied on 27th July saying that the reason why the respondent had failed to respond to the original schedule of dilapidations was because of a breach of contract by the vendors (the transferor of the shares in the defendant) who was not in funds to carry out the schedule of dilapidations and also because it made no sense for him to carry out the works that the defendant would require and, thirdly, that the defendant had received no notices. Rent was being paid and the plaintiff was suffering no loss.
The plaintiffs replied that non-compliance (of the repairing covenant) was clearly a breach of the lease and that the landlord’s investment was a risk by the defendant not attending to the schedule of dilapidations.
On 9th September, 1998 the defendants enclosed copy contract and bank and trade references in relation to Cellular World in which Cellular World intended to trade from the premises and to complete the schedule of dilapidations within one year from closing. The landlord’s consent was requested.
2.4 Meanwhile, on 15th September, 1998 the plaintiff requested the filing of the defendant’s defence immediately and indicated that they had instructions to serve a motion for judgment. On 21st September, 1998 the plaintiffs wrote expressing their surprise at the letter of 17th September as they had no record of numerous requests and telephone calls being made to their office seeking their client’s consent to the assignment to Cellular World Ltd. They said they received the request on the 9th and replied on the 15th stating that they were seeking their clients’ instructions. They had then received the instructions and were awaiting advices from counsel. Further correspondence referred to the pleadings, the outstanding defence and the awaiting of counsel’s advice.
On 8th October, 1998 the defendant’s solicitors replied that the defence would depend on whether or not the plaintiffs were refusing to give consent and thereby frustrate the contract reached between the defendant and the new tenant given that there had been a delay of four weeks.
That letter included the following paragraph:
“We do not accept your clients’ Bona Fides in this matter and are satisfied that they are motivated by malice. We enclose a copy letter received from the solicitors for the proposed new tenant who is frantic to get into the premises and to carry out the schedule of dilapidations which your clients allegedly want to have completed. (Their solicitors), John Griffin & Company, have indicated that they will give us a further period of time up to tomorrow, October 9th, before withdrawing from the contract. Our clients shall be holding your clients responsible for every loss, expenditure and cost should the contract be frustrated.”
Formal notice was given by their solicitors of their intention to withdraw from the contract at the end of a further two-week period up to 20th October, 1998. The proposed tenant withdrew on 21st October, 1998 there being no consent.
2.5 A further tenant wished to take a sub-letting of the premises. A request was made on 3rd December, 1998 to the plaintiffs to take an “opportunity to mitigate their loss in the related litigation” in which the defendants had, by then, counterclaimed. (See 3 and 4 below)
A notice of trial was served on 8th December by the defendant.
On 6th January, 1999 the plaintiffs informed the defendant’s solicitor that Lisneys had been instructed to carry out an up-to-date schedule of dilapidations. A forfeiture notice was served by the plaintiffs’ solicitor on 15th January, 1999. Later that year the defendant carried out repairs which were completed by September, 1999.
2.6 On 1st September, 1999 the solicitor for the defendant sought consent to the proposed assignment to Sean and Louise O’Sheehan of Hallmark Cards. Correspondence relating to the proceedings continued. There appeared to have been no reply. On 3rd November, 1999, the defendant’s solicitor pointed out the failure of the plaintiffs to deal with the consent to the assignment of the lease to Sean and Louise O’Sheehan. In the same letter of 3rd November, 1999 the defendant’s requested the plaintiff landlord’s consent for an agreement to Esat Digiphone Ltd.
On 8th November the plaintiffs said that they had advised Lisneys of the request of that assignment and that they had no objection to the defendant writing directly to Lisneys. On 11th November bank references were sent to the plaintiffs. On 18th November, 1999 the plaintiffs’ solicitor wrote “strictly without prejudice” regarding the proposed assignment to Sean and Louise O’Sheehan awaiting copies of a conditional contract. In principle their clients had no objections to the assignment in favour of Esat.
2.7 On 2nd February, 2000 the defendant complained that Lisneys had failed to furnish them with confirmation that the plaintiffs were satisfied that the schedule of dilapidations was completed and that this was frustrating yet another agreement with a proposed assignee.
It is clear at this stage that the defendant had substantially complied with the schedule of dilapidations during the autumn of 1999. Their consulting engineer, Joseph P. Osbourne, B.E., had inspected the property on 21st December, 1999 and confirmed that the building works had been carried out in accordance with the schedule of dilapidations and in accordance with good building practice.
On 15th February, 2000 the defendant complained that the tone of the correspondence reflected the reality of the relationship between the defendant and the plaintiffs in failing to confirm that the plaintiffs were satisfied. The following day, 18th February, 2000, the plaintiff’s solicitors stated:
“We now hereby confirm that our clients in relying on Joseph P. Osbourne, dated the 17th inst. confirm that in their opinion the works specified in the interim schedule of dilapidation has been complied with.”
That letter further noted that the defendant had been trying to assign the lease for about two years but stated that difficulties encountered by the defendants in that regard were entirely of their own making.
By 6th July, 2000 the plaintiffs’ solicitors pointed out that the proposed assignee’s accounts furnished showed considerable losses and borrowings and required the comfort of a parent guarantee or rent on deposit. On 28th July one year’s rent by way of deposit was required.
By letter dated 31st August, 2000 the plaintiffs’ solicitors confirmed that the client’s consent to the assignment was subject to legal formalities being completed. By letter dated 11th October, 2000 the defendants asked for confirmation of what legal formalities were now being claimed.
Further correspondence ensued relating to the progress of the proceedings.
3. Particulars of Counterclaim 3.1 By particulars of counterclaim dated 21st July, 2004 the defendants counterclaimed as follows:
1. Building contractor £91,045.72
2. Building preservation 1,462.50
3. Security systems 616.50
4. Gunne Auctioneers 9,229.82
5. Rent paid between 15th September, 1998
and 18th November, 2000 93,186.30
6. Security 205.70
7. Rates 4,220.08
8. Water charges 150.00
9. Repairs to shop front 358.04
10. Consulting engineer 4,694.80
11. Lisney Auctioneers 2,199.29
Total: £207,468.75
Less sum received on assignment of lease: 70,000.00
Total claim to date: £137,448.75
Being Euro: €174,749.31
3.2 An arbitrator’s award in respect of rent review published on 6th September, 2000 determined the rent as IR£43,000 per annum for a seven-year period commencing 1st June, 1999. 4. Defence and counterclaim of 28th October, 1998.
There was a preliminary objection that besides the plaintiffs being guilty of laches, that the proceedings were actuated by mala fides. It was pleaded that it was an implied term that consent would not be unreasonably withheld to an assignment or sub-letting and admitted that repeated requests had been made on behalf of the plaintiffs that the defendant should comply with the terms of the lease but that throughout the same period of time the plaintiffs themselves failed to comply with the express or implied terms of the covenants. It was denied that the defendant had failed or refused to comply or would continue to contravene and/or breach the terms of the lease. The plaintiffs had not suffered loss or damage or inconvenience and were not entitled to the relief sought.
By way of counterclaim the defendant had a legitimate expectation that they would be free to assign the leasehold provided the proposed assignee was good for the rent and for the covenants in the lease and was desirous of assigning the interest to a suitable assignee; that it would be more appropriate for the proposed assignee to carry out any schedule of dilapidations and that a suitable covenant to do so would be incorporated into any assignment.
The response of the plaintiffs was to issue the present proceedings.
On 9th December, 1997 the schedule of dilapidations was agreed and it was proposed by the defendant that the works be carried out within one year of the assignment to the first proposed assignee. No consent was given despite the special condition in the proposed assignment.
On 19th February, 1998 the defendants offered to enter into negotiations for a financial settlement to enable the landlord to carry out the schedule of dilapidations but such offer was ignored by the plaintiffs.
In the same month the defendant retained a quantity surveyor to attempt to agree an updated amendment of the schedule of dilapidations and paid the landlord’s agents but the said schedule was withheld from them for a period of about two months, thus preventing the defendant from negotiating sub-lettings or assignments. On 8th May, 1998 the amended schedule of dilapidations was finally furnished and agreed to.
On 30th June, 1998 the defendant sought the consent of the plaintiffs to an assignment of the leasehold to Cellular World and forwarded appropriate bank references. On 9th September, 1998 a copy of the executed contract in relation to that assignment was forwarded but the plaintiffs refused to furnish their consent notwithstanding notice that if such consent were not forthcoming by 20th October, 1998 Cellular World would withdraw from the proposed assignment.
The plaintiffs’ failure was unreasonable and arbitrary and, by reason of their breach, the defendant suffered and continues to suffer loss, damage, inconvenience and expense and sought a declaration and damages.
The plaintiff replied and defended the counterclaim joining issue with the defendant.
5. Evidence to the Court 5.1 Mr. Patrick Hickey, controlling shareholder of the defendant who had changed its name by a special resolution dated 5th March, 1998 to Hickeys Pharmacy (Drogheda) Ltd., gave evidence of his acquisition of the shares in 1995 and of the various requests for consent to assignment and of the circumstances of his acquisition of No. 9 West Street and the transfer of the business to that address initially pending the repairs and subsequently pending the outcome of negotiations for assignment subject to consent of the plaintiffs.
He also gave evidence relating to the enquiries by the plaintiff into the general medical service permit issued to the defendant and its transfer to No. 9 West Street and to his negotiations with Lisney, agents on behalf of the plaintiffs.
He believed that the attitudes of the defendants, who were competitors within the pharmacy business, were motivated by factors outside the relationship of landlord and tenant in that the transfer of the business to No. 9 was closer to the pharmaceutical business of the plaintiffs.
5.2 Mr. Hugh Markey, FRICS, of Lisneys, gave evidence on behalf of the plaintiff in relation to his negotiation and advices not to consent to an assignment as the schedule of outstanding dilapidations.
5.2.1 The only case in which a schedule was passed on was where there was not a full FRI lease, the landlord being responsible for walls and additional structures.
He believed that pharmacies paid higher rentals and, in shopping centres, would be put to tender getting twice the rent of fashion shops. The asset was a pharmacy of long standing and there was a restrictive covenant. He advised that it was better to retain a pharmacy tenant.
On re-examination he agreed that the entitlement of a landlord was to the covenants in the lease. When he had advised not to give a consent he agreed that there was not a refusal in relation to Cellular World. He relied on the principles of good estate management and he would have given the same opinion if it were an AAA company or an impecunious one. He agreed that the remedy was forfeiture in the event of non-compliance with the leasehold covenance. He believed that the defendant company could afford to carry out the necessary repairs on the basis of his calculation of the turnover from the premium paid in 1995. He did not believe that the time between 21st September, 1998 and 21st October, 1998 was sufficient to enable him to advise the plaintiff landlord as to the suitability of Cellular World Ltd. (the approach of 30th June, 1998 specified CW Ltd). He advised that the work should be done before consent was given and that Cellular World was not a good covenantee – its financial reliability was irrelevant, he was concerned about the references to ten years trading when it had only traded for two years.
He would have given his advice by telephone and not in writing.
He did no financial searches against the first proposed assignee, Mr. Fitzpatrick, in September, 1997. On 17th December, 1997 he advised that consent be refused.
He agreed that he did not follow this advice with Cellular World and that the delay was to enable the landlord to consider their position while they awaited counsel’s advice.
5.2.2 In relation to the schedule of dilapidations he believed that there was no onus on the landlord to release such schedule to the tenant. In any event he was not instructed to release the schedule of dilapidations to the defendant. The schedule of dilapidations is the property of the landlord, even though the tenant pays for it. He agreed that it took two months for it to be given to the defendant. The work was completed in September, 1999. However, there was no onus on the landlord to indicate that the work was done satisfactorily.
Mr. Markey was referred to the letter of the plaintiffs’ solicitors dated 17th December, 1997 which specifically referred to completion to the plaintiff’s satisfaction:
“Our clients will not be consenting to the assignment herein nor will they ever consider same until such time as works as set out in the schedule of dilapidations have been completed by your clients to our clients’ satisfaction as same have been outstanding for a number of years.”
He said that he was specifically instructed not to confirm the schedule of dilapidations, notwithstanding the terms of that letter.
The reason that consent was withheld from September, 1999 was that Esat was not suitable without a deposit or guarantee. He said that the delay was because of the impending takeover of Esat by British Telecom.
In re-examination Mr. Markey had referred to a letter of advice of 17th September, 1998 whereby he had advised that there should be no consent before the completion of the schedule of dilapidations. (It appeared that this letter was not on the discovery file)
He said that there was no proposal by the tenant that work should be done by any assignee proposed before the assignment was made.
5.3 Evidence was also given by Kevin Maguire BSc. as to incidents of schedules of dilapidation being complied with by suitable assignees after assignment and of such schedules being complied with before such assignments were completed.
Mr. Maguire outlined the basis for the items of expenditure. He agreed, in cross-examination, that the costs incurred at any event pursuant to the schedule of dilapidations, including fees, would have been almost half of the total. The additional costs incurred by the failure of the plaintiff was the extra rent payable between 15th September, 1998 and 18th November, 2000, together with the auctioneering costs of £9,229.00. The earlier date of the account of costs was the date of the binding contract with Cellular World and the latter date was the assumption of rent by that assignee.
6. Defendant/counterclaimant’s submissions
Mr. Dwyer SC, on behalf of the defendant, submitted the schedule of dilapidations having been completed, the remaining issue was the counterclaim. He agreed that there had been a breach in an obligation of the tenant to comply with the three schedules of dilapidations in 1993, 1995 and 1998. However, he said that the tenant did not avoid dealing with this particularly from 1995 onwards. The issue before the court was the reasonableness of the attitude of the plaintiff/landlords with regard to the holding of their consent.
The landlords, who were also pharmacists, were not entitled to rely on a commercial advantage outside the relationship of landlord and tenant. He referred, in particular, to the plaintiffs’ enquiry to the North Eastern Health Board regarding the defendant’s general medical service permit and the insistence on discovery of that contract in the proceedings.
Mr. Dwyer submitted that there was an obligation to consider an application by the landlord within a reasonable time and to require clarification if necessary. The application in relation to Fitzpatrick of November, 1997 was met with a blank refusal. That was per se unreasonable. He referred to Wylie 15.34 with regard to the obligation of the repairing covenant.
In relation to the application for consent for Cellular World in June, 1998 where a formal application was made on 8th September, 1998, this was “being considered” by the plaintiff but it dragged on unreasonably. Cellular World had issued a 28-day notice and the landlords were aware of this.
The defendant, as tenant, took the decision to carry out repairs and had those done by September, 1999. Yet there was a deliberate policy to refuse to confirm compliance for a further six months without any explanation being given for that delay. This was, prima facie, mala fides in the absence of a reason for the total inactivity – no reason was given for the failure of the plaintiffs to consent to the assignment.
Reasons given to the court must have been reasons known to the landlord at the time as was clear from Wright v. Dublin Corporation. Mr. Dwyer referred to the black deal at p. 180 that the landlord could not withhold consent unless he would be prejudiced. Reference was made to Kelly v. Cussen [1954] 88 ILTR 97 with regard to the unreasonable withholding of consent causing delay which would entitle the tenant to damages. Here the tenant had suffered damages by reason of the delay. The Cellular World deal was pivotal and there should have been no obligation on the tenant after the closing date of that proposed contract.
Mr. Dwyer submitted that, on the basis of an analysis of the case law the following propositions emerged:
1. The landlord has a statutory duty to the tenant within a reasonable time, to give consent except in a case where it is reasonable not to give consent.
2. In judging whether it is reasonable or not to give consent, the position must be tested by reference to the state of affairs at the expiry of the reasonable time.
3. If, at that time, the landlord has raised no point and there is no point outstanding which would constitute a reasonable ground for refusing of consent, then the landlord’s duty is positively to give consent.
4. The question whether the case is one “where it is reasonable not to give consent” ought to be tested by reference to the point at which the reasonable time for dealing with the application has expired (same as 2).
5. If at that point it cannot be shown that it is reasonable for the landlord not to give consent, then the statutory duty of the landlord is to give consent and the court can so declare.
6. It is not open to the landlord to seek to justify a refusal of consent by reference to matters not raised with the tenant prior to the expiry of the reasonable period.
7. A landlord who has given reasons in writing for refusing his consent cannot, when subsequently seeking to justify his refusal of consent, rely on reasons which he has not given.
He submitted that, in relation to damages for breach by the landlord the Irish position is that of Kelly v. Cussen [1954] 88 ILTR 97, where Judge Barra Ó Bríain stated:
“As a matter of principle, where there is a breach of a statutory duty, damages can be recovered from injury resulting therefrom.”
It was submitted that Rice v. Dublin Corporation [1947] I.R. 435 was not an authority for the proposition that an initial refusal by a landlord to give reasons for a withholding of consent was not necessarily unreasonable provided that the landlord gave good reasons later. This did not accord with the very mischief which s. 66 of the Landlord and Tenant (Amendment) Act, 1980 was designed to prevent.
7. Plaintiffs’ submissions
Mr. Rawlson SC for the plaintiff/defendant to the counterclaim stated that the fact there was no formal response to Cellular World could not be treated as a refusal. There were reasonable grounds of requiring repairs to be done before any assignment was consented to and, moreover, there were grave doubts as to the financial viability of Cellular World.
The delay in respect of Esat was related to the takeover by BT of Esat.
Section 66 (the unreasonable withholding of consent) required the obligation of the tenants to be complied with. The section did not impose a covenant nor allow damages for breach.
There was no positive covenant to give consent.
The English cases were not relevant given the radical change in the 1988 English legislation.
Moreover, Wylie at 37.646 distinguishes Kelly v. Cussen [1954] 88 ILTR 97 re damages because no loss was suffered. The judgment, accordingly, could not be taken as establishing a principle that a tenant may recover damages as a result of the withholding of consent. In any event, consent in principle was given to ESAT on 18th November, 1999.
8. Decision of the Court 8.1 The court has to be cautious in relation to English cases prior to the radical change in the legislation in 1988.
The import of the Irish legislation, particularly ss. 66 and 67, does however, to a lesser extent, occasion a radical change insofar as the rights of lessees are concerned to assign or sub-assign their interests. The rights of a landlord are necessarily restricted to those covenants contained in the lease, including the implied covenants imposed by the Landlord and Tenant (Amendment) Act, 1980. That is to say so long as the conditions covenanted in the lease, especially with regard to rent and repairs, are complied with then the remedy of forfeiture is not available to the lessor.
It is common case that the defendant, as lessee, was in breach of the covenant to repair. Proceedings had issued on 17th October, 1997. A notice of forfeiture had issued on 15th January, 1999. The context of the issuing of proceedings and the service of the forfeiture notice is, however, significant in relation to the dispute between the parties.
It is of some significance that, at the time that the second schedule of dilapidations was served, the shareholding of the defendant had changed. The evidence of Mr. Hickey was that at that time the company could not have complied with the schedule given its run-down state. Indeed, the evidence of Mr. Markey as to the viability of the company, at that stage, is based entirely on his understanding of the premium paid for the shares. In this regard the court must prefer the evidence of Mr. Hickey. Indeed, it is clear that Mr. Hickey proposed, at that stage, to carry out the schedule of dilapidations and negotiated with the plaintiff in that regard. Mr. Hickey traded out of the premises and I accept his evidence that, in order to carry out the schedule of dilapidations, he would need to move. This he did by acquiring the freehold interest in No. 9 West Street, after some opposition regarding the transfer of his permit as was then required by the Health Board. Some time after that move it seems that Mr. Hickey changed his mind with regard to carrying out the repairs and, having vacated the premises, sought to assign his leasehold interest.
The first attempt was met with a blank refusal as evidenced by the letter of 17th December, 1997:
“Our clients will not be consenting to the assignment herein nor will they ever consider sameiHicH until such time as works as set out in the schedule of dilapidations have been completed by your clients to our clients’ satisfaction as the same have been outstanding for a number of years.”
Moreover, High Court proceedings had been instituted some two months beforehand on 17th October, 1997.
That letter had also referred to a breach of the covenant regarding the premises being used as a pharmacy.
It seems to the court that the blank refusal to grant consent, without consideration of the proposed assignee does not accord with the provisions of s. 66 of the Landlord and Tenant Act.
That section provides, inter alia, that:
“A covenant prohibiting or restricting the alienation, either generally or in any particular manner, of the tenement without the licence or consent of the lessor, the covenant shall, notwithstanding any express provision to the contrary, be subject –
(c) to a proviso that the licence or consent shall not be unreasonably withheld, but this proviso shall not preclude the lessor from requiring payment of a reasonable sum in respect of legal or other expenses incurred by him in connection with the lease or consent.”
Section 68 is also relevant with regard to the change of user.
8.2 As that stage the schedule of dilapidations of 1993 had been outstanding for a period of four years and what was being offered by the defendant was a condition in the assignment that the proposed assignee would take over the obligation under that schedule.
Wylie, Irish Landlord and Tenant Law, at 15.34 referred to the practice of landlords serving schedules of dilapidations when notified of a proposed assignment seeking not alone repairs but improvements to the premises. This practice was often prompted by the premium received by the assignor.
Mr. Maguire’s evidence was that it was not unusual for assignees to take over a schedule of dilapidations but Mr. Markey, with greater experience could not recall schedules of dilapidations being passed on except in one particular case where the lease was not a full FRI lease.
Notwithstanding, it seems to me to be reasonable for a landlord to consider proposals regarding repairs and considering having those repairs done to a more appropriate standard to suit an incoming assignee.
8.3 In relation to the change of user the court should take into account that the premises is a free-standing one and that there is no good estate management reason why it should be maintained as a pharmacy as if it were in a shopping centre. If the rent, as reviewed, is payable, and the other covenants assured, by an assignee of the pharmacy tenant there seems to be no reason why consent should be withheld from the application for change in user. The rent reserved is a function of comparable rents. The evidence of Mr. Markey with regard to the rent of pharmacies in shopping centres would seem to have no application to the present case.
Further applications for consent were delayed. The delay in relation to Cellular World, in particular, was unreasonable and not in conformity with the 1980 Act.
The application for consent in relation to Cellular World included references and, furthermore, included the completion notice served on the defendant. In this case, in contradistinction to the original application of 9th December which was rejected on 17th December, the plaintiff purported to consider the assignment but delayed beyond the completion notice. To my mind this was unreasonable and prejudicial to the tenant.
Finally, in respect of the application for Esat, which had a strategic alliance with Cellular World, and taking into account the explanation given by Mr. Markey that the delay was occasioned by the takeover of Esat by BT, the court is of the opinion that, notwithstanding any delay that may have been so occasioned by the proposed assignee, it was inappropriate for the plaintiffs as landlords to delay.
The court has considered the counterclaimant’s allegations regarding the mala fides of the plaintiff as competitors motivated by considerations beyond the terms of the lease. The dismissive attitude in respect of the first requests for consent; the delays; the enquiries regarding the Health Board permit; the refusal to allow Lisneys to give the defendant a copy of the schedule of dilapidations for almost two months; the initial refusal to certify compliance with the schedule, notwithstanding their letter of 17th December, 1997 that they would not give consent until they were satisfied with compliance, and the plaintiff being in competition with the defendant, are instances relied upon by the defendant to support a lack of good faith.
Having considered the evidence in relation to these incidences, the court finds that, on the balance of probabilities, that the plaintiff acted unreasonably and was motivated by considerations beyond the terms of the lease.
Do they constitute mala fides or bad faith?
The relationship between the parties is strictly contractual and not fiduciary. No obligation of good faith arises. Yet the instances referred to do, in the view of the court, go beyond the duties and obligations of the plaintiff landlord.
The seven principles enunciated by Mr. Dwyer, S.C. are implied in the relationship of landlord and tenant. I would add that reasons outside that relationship are unreasonable but that no duty of good faith arises.
8.4 The issue of damages must be considered from the point of view of the relationship between landlord and tenant. That relationship is a commercial relationship with rights and duties emanating therefrom. The payment of rent, as reviewed from time to time, the maintenance and repair and insurance of the premises all involve financial obligation. There would seem to be no reason, in principle, why unreasonable delay in giving consent, on implied covenant under s. 66, should not be treated in a similar manner.
Kelly v. Cussen (88 ILTR 97) suggested that where a tenant proves that he has suffered loss by the unreasonable withholding of consent by a landlord, there is no reason in principle why the tenant should not be entitled to damages.
However, no loss was established in that case. In the instant case the court finds the plaintiff/landlord to have acted unreasonably and to have been motivated by reasons outside the terms of the lease. In the circumstances the plaintiff acted wrongfully as a result of which the defendant suffered loss and damage.
The remedies available to the landlord include damages for breach of covenant. For the landlord to act unreasonably is, similarly, a breach of the implied statutory covenant of s. 66 and s. 67. Where the landlord is motivated by considerations outside the least it would seem to follow that the tenant is entitled to damages for any loss ensuing.
I will, accordingly, make a declaration that the plaintiffs have unreasonably and wrongfully withheld their consent to the sale and assignment of the premises to Cellular World Limited.
In relation to the first applications for assignment, it seems to me that the defendant/counterclaimant did not have a concluded contract nor references. However, in relation to the Cellular World application for consent, those documents were submitted to the plaintiffs on 8th September, 1998. The 28-day completion notice was furnished to the plaintiffs which expired on 20th October, 1998. It seems to me that no reasonable objection had been taken by the plaintiffs with regard to the suitability of that tenant who was ready, willing and able to close the assignment on 20th October, 1998. The damages, accordingly, must be assessed from the date of the assumption of the assignee of liability for rent and repairs which was 20th October, 1998.
The measure of damage is, accordingly, the rent and rates paid by the defendant from 20th October, 1998 to the assumption by Esat of the tenant’s interest together with the selling agent’s fees in respect of that assignment.
Approved: R H Murphy
Meagher v Luke J. Healy Pharmacy Limited
[2010] IEHC 40
Judgment of Mr Justice Finnegan delivered on the 16th day of June 2010
By Indenture of Lease dated the 14th May 1971 made between Marianne Neumann of the one part and Luke J. Healy Limited of the other part (hereinafter “the Lease”) premises at 1 West Street, Drogheda (hereinafter “the premises”) were demised to Luke J Healy Limited for the term of thirty five years from the 1st June 1971 subject to the yearly rent thereby reserved and the covenants on the part of the Lessee therein contained. The appellants (hereinafter “the Lessors”) are entitled to the Lessors interest and the respondent (hereinafter “the Lessee”) to the Lessee’s interest in the Lease.
The Lease contained the following covenants on the part of the Lessee:-
“1. During the continuance of this demise to preserve, uphold, support, maintain and keep the demised premises including the roof and exterior walls, the glass in windows, all locks, sash cords, electric, gas and other fittings, mains, pipes and water taps and all sanitary fixtures and fittings therein and all additions made to the said premises in good and proper and sufficient order, repair and condition and at the end of the term hereby granted or the sooner determination of this demise to so leave and yield up the same unto the Lessor.
2. Not to assign the said premises or any part thereof without the previous consent in writing of the Lessor first had and obtained.
3. To use and occupy the premises solely for the purpose of the Lessee’s trade or business as a pharmaceutical chemist to include cosmetics, chiropody and photographic goods and services and not to use any part thereof for residential purposes or for any other trade or business whatsoever without the previous consent in writing of the Lessor first had and obtained.”
The Lease contained a provision for re-entry and forfeiture in the event of a breach, non-observance or non-performance by the Lessee of the covenants and conditions contained in the Lease. At all material times the Lessee was in breach of the repairing covenant. Three schedules of dilapidations were served, the first in 1993, the second in 1995 and the third in 1999. The repairs were not carried out and the present proceedings were instituted by the Lessor on the 17th October 1997, the relief sought being an injunction requiring the Lessee to comply with the repairing covenant. The Lessee delivered a defence and counterclaim on the 23rd October 1998. On the 9th December 1997 the Lessee sought consent to assign the Lease to Aidan Fitzpatrick on the basis that Aidan Fitzpatrick would undertake and contract to carry out the agreed schedule of dilapidations within the period of one year of closing the purchase of the Lease. By letter of the 17th December 1977 the Lessor responded as follows:-
“Our clients will not be consenting to the assignment herein nor will they even consider same until such time as works as set out in the schedule of dilapidations have been completed by your client to our clients’ satisfaction as the same have been outstanding for a number of years.”
On the 20th April 1998 the Lessee sought consent to assign the Lease to Cyril Bellew and consent to change of user: this correspondence was not responded to. By letter dated 30th June 1998 the Lessee sought consent to assign the Lease to Cellular World Limited. Protracted correspondence followed but the Lessors neither granted nor refused consent to assign. The counterclaim delivered on the 23rd October 1998 sought a declaration that the Lessee is entitled to assign the Lease to Cellular World Limited without the consent of the Lessors and damages for breach of contract, breach of covenant and breach of statute. By letter dated 3rd December 1998 the Lessee sought consent to assign the Lease to Newgrange Crystals Limited. By letter dated 6th January 1999 the Lessee informed the Lessors that it was proposed to carry out the works required by the up-to-date schedule of dilapidations and the works were carried out and completed by September 1999. On the 1st September 1999 the Lessee sought consent to assign the Lease to Sean and Louise O’Sheehan. By letter dated 3rd November 1999 consent to assign to Esat Digifone Limited was sought. By letter dated 18th November 1999 the Lessors consented in principle to an assignment to both Sean and Louise O’Sheehan and to Esat Digifone Limited. Consent to assign to Esat Digifone Limited was ultimately furnished on the 28th July 2000.
The action came on for hearing on the 5th, 6th and 7th April 2005 and judgment was delivered on the 15th April 2005. The learned trial judge found that the Lessors had acted unreasonably in refusing consent to assign the Lease to Cellular World Limited and made a declaration to that effect. In addition he awarded the Lessee damages from the 20th October 1998, the date of expiration of a completion notice served on the Lessee by Cellular World Limited, the learned trial judge finding that Cellular World Limited were ready, willing and able to complete the purchase of the Lease on that date. He measured damages at the rent and rates paid by the Lessee from the 20th October 1998 to the assumption by Esat Digifone Limited of responsibility for the same together with the selling agent’s fees in respect of the sale of the Lease to Esat Digifone Limited.
From the learned trial judge’s judgment and order the Lessors appeal. In summary it is contended that the learned trial judge was in error in holding that consent to assign had been unreasonably withheld and in awarding damages to the Lessee on that basis. In advance of the hearing in the High Court the Lessor furnished consent to the assignment of the Lease to Esat Digifone Limited and the assignment had taken place. In these circumstances if, as a matter of law, damages cannot be recovered for the unreasonable withholding of consent to assign to Cellular World Limited the declaration sought by the Lessee would be of no practical benefit. Only if the court decides that the Lessee is entitled to damages upon consent to assign to Cellular World Limited being unreasonably withheld will it be necessary to consider whether the Lessors’ failure or refusal to grant consent to assign in respect of an assignment to Cellular World Limited was unreasonable.
Submissions of the Parties
For the Lessee reliance was placed on Kelly v Cussen and Cussen 88 I.L.T.R. 97 a decision of the Circuit Court. There it was held that a like covenant arising under the Rent Restrictions Act 1946 section 40(4)(b) would entitle a statutory tenant to damages where consent to assign was improperly withheld. The plaintiff in that case also relied on The Landlord and Tenant Act 1931 section 56(1) and while not considered in the judgment that provision, in logic, could also give rise to an entitlement to damages where consent was unreasonably withheld. For the Lessors reliance was placed on Rendall v Roberts and Stacey Limited 175 E.G. 265, [1960] E.G.D. 161, a decision of the Queen’s Bench Division in England and Wales. In the course of the judgment I propose dealing with each of the authorities relied upon by the parties in more detail.
Discussion
The covenant in this case is an absolute covenant by the tenant:-
“Not to assign the said premises or any part thereof without the previous consent in writing of the Lessor first had and obtained.”
Most covenants to be found in leases are however in qualified form, the restriction normally being followed by a clause “such consent not to be unreasonably withheld”. The Landlord and Tenant Act 1931 section 56 provided as follows:-
“56(1) Every Lease (whether made before or after the passing of this Act) of a tenement which contains a covenant, condition, or agreement absolutely prohibiting or restricting the alienation, either generally or in any particular manner, of such tenement shall have effect as if such covenant, condition, or agreement were a covenant, condition, or agreement either (as the case may be) prohibiting or restricting the alienation, either generally or in any particular manner, of such tenement without the licence or consent of the Lessor.”
The Landlord and Tenant Act 1931 was repealed by the Landlord and Tenant (Amendment) Act 1980. The 1980 Act in section 66 thereof provides as follows:-
“66(1) A covenant in a Lease (whether made before or after the commencement of this Act) of a tenement absolutely prohibiting or restricting the alienation of the tenement, either generally or in any particular manner, shall have effect as if it were a covenant prohibiting or restricting such alienation without the licence or consent of the lessor.
(2) In every lease (whether made before or after the commencement of this Act) in which there is contained or in which there is implied by virtue of the British Statute passed on the 5th day of May 1826 and entitled ‘An Act to amend the Law of Ireland respecting the Assignment and Sub-letting of Lands and Tenements’ or by virtue of subsection (1) a covenant prohibiting or restricting the alienation, either generally or in any particular manner, of the tenement without the licence or consent of the lessor, the covenant shall notwithstanding any express provision to the contrary be subject –
(a) to a proviso that the licence or consent shall not be unreasonably withheld, but this proviso shall not preclude the lessor from requiring payment of a reasonable sum in respect of legal or other expenses incurred by him in connection with the licence or consent.”
Kelly v Cussen & Cussen concerned a statutory tenancy under the Rent Restrictions Act 1946. That Act provides in section 40(4)(b) as follows:-
“40(4)It shall be deemed to be a condition of a statutory tenancy in any controlled premises –
(b) that the tenant will not assign the premises or any part thereof without the consent in writing of the landlord, which consent may be withheld only if greater hardship would, owing to the special circumstances of the case, be
Consent to assign was withheld. The learned Circuit Court judge held that the greater hardship resulted from the withholding of the consent than the granting of consent would have caused and so declared. However the statutory tenant also sought damages for the unreasonable and wrongful withholding of consent and the learned Circuit Court judge dealt with the issue of damages as follows:-
“As a matter of principle, where there is a breach of statutory duty, damages can be recovered for injury resulting thereform (Feeney v W. & G.T. Pollexfen and Co Ltd [1931] I.R. 589), and if the plaintiff if this case had proved loss, I see no reason why he should not be entitled to damages.”
No damages were, however, awarded as the statutory tenant failed to establish loss.
It will be immediately clear that Kelly v Cussen & Cussen is not directly in point, it being concerned with the Rent Restrictions Acts and being concerned with a covenant implied and which in its terms differs significantly from the covenant in issue in the present proceedings as affected by the Landlord and Tenant (Amendment) Act 1980 section 66. Nevertheless the learned Circuit Court judge there held that where the landlord withheld consent to assignment of a statutory tenancy in breach of the deemed condition the statutory tenant had an entitlement to damages.
Apart from damages a Lessee has the following remedies where a Lessor unreasonably refuses consent to assign. An application can be made to the court for a declaration that consent has been unreasonably withheld in which case the Lessee will be entitled to assign without consent: Treloar v Bigge [1874] L.R. 9 Exch. 151. Alternatively, following the repeal of Deasy’s Act section 10 by the Landlord and Tenant (Ground Rents) Act 1967 section 35 (1) the lessee can assign and the lessee and any assignee of the lease can raise as a defence to any proceedings taken by the lessor for breach of the covenant against alienation the unreasonable refusal of consent. Finally an assignee of a lease without consent, consent having been refused, may seek a declaration that consent was unreasonably refused and in proceedings taken by the lessor can raise the unreasonable withholding of consent by way of defence. In assigning without consent there is the risk that ultimately the withholding of consent may be held not to have been unreasonable: however in such an event, since the repeal of Deasy’s Act section 10 and the amendment of the Conveyancing Act 1881 section 14 by the Landlord and Tenant (Ground Rents) Act 1967 section 35(1) relief against forfeiture may be obtained.
The entitlement of a Lessee to damages for the unreasonable refusal of consent is dealt with in The Law of Landlord and Tenant, Deale at page 184 as follows:-
“An unreasonable refusal of consent may entitle the Lessee to damages: Kelly v Cussen and Cussen: but see Rendell v Roberts and Stacey to the contrary.”
Landlord and Tenant Law, Wylie does not deal with Kelly v Cussen and Cussen or with the issue of damages for unreasonable refusal of consent.
In Rendell v Roberts and Stacey Limited the Lease contained the following covenant by the Lessee:-
“The Lessee will not assign, transfer, underlet or part with the possession of the said premises or any part thereof without the previous consent in writing of the Lessors and of the superior Lessors but so that such consent shall not be unreasonably withheld to an assignment of the whole of the demised premises to a respectable and responsible person or limited company to the reasonable approval of the Lessors who shall in the case of an assignment enter into a direct covenant with the Lessors to pay the rent and perform the covenants and conditions and obligations herein contained.”
The defendant lessor refused consent to assignment and it was accepted at the hearing that the refusal of consent was unreasonable. The issue on the hearing was whether the defendant’s refusal of consent amounted to a breach of covenant on their part which would make them liable for damages. The plaintiff lessee contended that the covenant was a covenant by the lessee not to assign without consent, but that it amounted also to a positive covenant by the lessor that he would not withhold consent unreasonably: the lessor being in breach of that covenant the lessee claimed an entitlement to damages. The lessor contended that the covenant was a covenant by the lessee not to assign without consent with the qualification that the consent should not be unreasonably withheld: the effect of the covenant, it was submitted, was that if the consent should be withheld unreasonably the lessee would be entitled to assign without consent but that the covenant did not entitle the lessee to damages. The learned trial judge in that case referred to Ideal Film Renting Company Limited v Nielsen [1921] 1 Ch. 575 where the covenant read as follows:-
“The plaintiffs covenant with the defendant that they will not assign, underlet, or part with the possession of the said premises, or any part thereof without the previous consent in writing of the Lessor, but the Lessor covenants with the company not unreasonably to withhold such consent in the case of a respectable and responsible assignee or under-tenant.”
He noted that in that case there was an express covenant by the Lessor not unreasonably to withhold consent in the case of a respectable and responsible assignee. In giving judgment in that case Eve J. said:-
“It is established beyond controversy that if the covenant on the part of the lessee not to assign without consent is merely qualified by a proviso that the consent of the lessor is not to be unreasonably withheld, there is no implied covenant by the lessor that he will not unreasonably withhold his consent and in the absence of an express covenant to that effect no action will lie against him for unreasonably withholding it.”
In giving judgment in Rendall v Roberts Stacey Limited, Salmon J., having quoted as above, went on to say:-
“Eve J. was stating what has been clear law since the case of Treloar v Bigge L.R. 9 Exch. 151. Treloar v Bigge had never been doubted up to the date of Eve J’s judgment in 1921, and it has not been questioned since.”
Later in the judgment Salmon J. continued:-
“There is not, as far as I know, any reported case where a tenant has successfully sued for damages for breach of a covenant in the present form. The high watermark of the plaintiff’s case is to be found in the judgment of the Master of the Rolls in the case of Moat v Martin [1950] 1 K.B. 175. In that case there was a tenancy agreement under which the tenant entered into a covenant with the landlord ‘not to assign, underlet or part with possession of the demised premises or any part thereof without the consent in writing of the landlord such consent will not be withheld in the case of a respectable and responsible person.’ As the covenant was written there was no full stop between the word ‘landlord’ and the words ‘such consent’, but it is quite plain that grammatically it is necessary to insert a full stop there in reading the case. The Master of the Rolls said ‘since Treloar v Bigge in the ordinary case where the covenant is qualified by words such as ‘such consent not to be unreasonably withheld’ the effect is not to impose a countervailing obligation on the landlord but to limit or curtail the tenant’s obligation under his covenant. In the present case there is, as I have said, a very unusual formula and it might be thought to be an exception to the general rule; but I think it unnecessary to express a conclusion one way or the other-because as he points out, on the facts of the case it was not necessary to decide the point.”
Finally Salmon J. dealt with the clause which he was required to construe as follows:-
“As I have said, the language of this clause in the under lease between the plaintiff and the defendant is somewhat unusual. The crucial words are ‘but so that such consent shall not be unreasonably withheld’. If the words were ‘provided that such consent shall not be unreasonably withheld’ it is conceded that that would not impose any obligation upon the landlord. I am being asked to construe these words as going beyond a qualification and amounting to an express covenant by the landlord to consent in a proper case. I am quite unable so to read the words. It seems to me that it would be unreal and highly artificial to draw a distinction between ‘but so that such consent shall not be unreasonably withheld’ and ‘provided that such consent shall not be unreasonably withheld’. I have come to a clear conclusion that, although the form of the words is unusual – and one of the textbooks to which I have been referred (Key and Elphinstone’s Precedents in Conveyancing) suggests in a footnote that there is a danger in these words – I cannot give them the meaning which the plaintiff attributes to them.”
Treloar v Bigge L.R. 9 Ex. Ch. 151 was decided on the 24th April 1974. The covenant in issue there was as follows:-
“And the said Thomas Treloar doth covenant with the said T.E. Bigge that he shall not nor will assign this present Lease, or let etc, or otherwise part with the premises hereby demised, or any part thereof, without the consent in writing of the said T.E. Bigge, such consent not being arbitrarily withheld.”
Kelly C.B. gave judgment as follows:-
“Two questions arise in this case, the first being whether certain words introduced in the clause prohibiting assignment, and whether the plaintiff covenants not to assign without licence in writing, amount to an absolute covenant on the part of the Lessor not to withhold his consent arbitrarily. I am of the opinion that they do not constitute a covenant on which the Lessee can sue but are words the only effect of which is to qualify the generality of the phrase into which they are introduced. The plaintiff covenants that he will not assign the Lease or the premises demised ‘without the consent in writing of the said T.E. Bigge first had and obtained’, and if the words stopped the tenant’s covenant would be absolute, but they are qualified by the words ‘such consent not being arbitrarily withheld’. Now the rule of law, no doubt, is that any words in a deed which impose an obligation upon another amount to a covenant by him; but the words must be so used as to shown an intention that there should be an agreement between the covenantor and the covenantee to do or not to do a particular thing. I cannot find any such intention here. The words taken grammatically, do not seem to me to amount to an undertaking by the Lessor, but are part of the same sentence as that containing the Lessee’s covenant, and qualify it’s generality. They prevent that covenant operating in any case of arbitrary refusal on the part of the Lessor, that is in any case where, without fair, solid and substantial cause, and without reason given the Lessor refuses his assent. I have known in my own experience several cases in which actions have been brought for the arbitrary withholding of consent by a landlord. But in all (as in the case of Shepherd v Hong Kong and Shanghai Banking Corporation, 20 W.R. 459) there was a covenant in express terms, so as to give the Lessee a right of action. In the present case for the reasons I have given, I think there was no such covenant.”
Between 1874 and the passing of the Landlord and Tenant Act 1988 in England and Wales, Treloar v Bigge was cited with approval and followed in many cases. This was so notwithstanding the provisions of the Landlord and Tenant Act 1927 section 19(1)(a) which provided that a covenant, condition or agreement against assigning, under-letting, charging or parting with possession of demised premises or any part thereof without licence or consent contained in any Lease is deemed to be subject to a proviso to the effect that such licence or consent is not to be unreasonably withheld. In those cases I have found only one dissenting voice. In Rose & Another v Gossman 201 E.G. 767, [1966] E.G.D. 103 in the Court of Appeal where the covenant against assignment was qualified with the words “such consent not to be unreasonably withheld” Denning J. said:-
“This is not by any means an easy point. If I were left to construe this document without the aid of previous authority, I confess I would be inclined to say that the landlord promises not unreasonably to withhold his consent. But, as against this view, there is a line of authority going back to Treloar and Bigge [1874], L.R. 9 Ex. Ch. 151, including observations by Romer L.J. in F.W. Woolworth and Company v Lambert [1937] 1 Ch. 53 and finally the decision of Salmon J. in Rendall v Roberts and Stacey Limited [1960] E.G. 265. These show that it has been accepted for nearly a hundred years now that with the Lessee’s covenant in this form, the words ‘such consent not to be unreasonably withheld’ are only a qualification on the lessee’s covenant. If the landlord unreasonably refuses consent, the tenant is entitled to assign or sublet without consent. But it does not give the tenant a right to damages. Mr Samuels says he wishes to challenge that view. I cannot say that he has much chance of success in doing so, for it has stood so long.”
That judgment concerned an application to strike out that part of the statement of claim in which the plaintiff claimed damages for his lessor’s failure to consent to an assignment: the court refused to strike out that claim on the grounds that the application was taken far too late.
I am satisfied that Treloar and Bigge represents the law in Ireland unless the law has been changed by the provisions of the Landlord and Tenant (Amendment) Act 1980 section 66(1). I am not satisfied that the section has that effect. In its terms it provides that a covenant prohibiting assignment generally or in a particular manner shall have effect as if it were a covenant prohibiting or restricting such alienation without the licence or consent of the lessor. The effect is not to impose a statutory duty but rather to regulate the construction of covenants freely entered into between a lessor and a lessee. What is required by the Act of 1980 is that the covenant should be construed as affected by the statutory provision. So construed the covenant is clear as to its effect in law. Statutory Interpretation, Benion, 2nd edition at section 269 provides as follows:-
“It is a principle of legal policy that laws should be altered deliberately rather than casually, and that Parliament should not change either common law or statute law by a sidewind, but only by measured and considered provisions. In the case of common law, or Acts embodying common law, the principle is somewhat stronger than in other cases. It is also stronger the more fundamental the change is.”
Had the Oireachas intended to alter the law as it has been understood for over one hundred and thirty years it is to be expected that clear wording would have been used. No such words were used and I am satisfied that the Act of 1980 did not alter the common law by providing an action for damages where none previously existed. In so holding I am mindful that the Landlord and Tenant Act 1931 and statutes relating to the law of landlord and tenant thereafter are statutes ameliorating the tenant’s position and this is relevant in construing their provisions. Notwithstanding this I am satisfied that had the Oireachtas intended to confer upon a lessee a cause of action where none had previously existed it would have done so in clear and unambiguous terms.
Conclusion
For the foregoing reasons I am satisfied that in Irish law having regard to the terms of the covenant against assignment in the Lease and the provisions of the Landlord and Tenant (Amendment) Act 1980 section 66 the Lessee has no right of action for damages by reason of the Lessors having unreasonably withheld consent to assign. It is, of course, open to the parties to a lease to include a covenant by the lessor not to unreasonably withhold consent the breach of which covenant would give to the lessee a right of action for damages. Absent such a covenant no such right arises. On this issue I would allow the appeal and set aside the judgment of the High Court. This being so it is unnecessary to consider whether the Lessors in refusing consent to the assignment of the Lease to Cellular World Limited acted unreasonably.
Perfect Pies Ltd v Chupn Ltd
[2015] IEHC 692
JUDGMENT of Mr. Justice Haughton delivered on the 6th day of November, 2015
Introduction
1. The first plaintiff is a limited company registered in the State and it is and was at all material times the lessee of the premises known as Café en Seine, 39/40 Dawson Street and 39 Anne’s Lane in the city of Dublin (“the Premises”). The second named plaintiff (“the Receiver”) is an accountant and is the lawfully appointed Receiver and Manager of the first plaintiff pursuant to Deed of Appointment executed by the first plaintiff’s mortgagee Allied Irish Banks Plc. (“AIB”) on 11th December, 2009. The defendant is a limited company registered in the State and is one of a group of companies (“the Fitzgerald Group”) owned or controlled by businessman Mr. Louis Fitzgerald (“Mr. Fitzgerald”). The defendant acquired the freehold interest in the Premises in October, 2010, and is the landlord of the first plaintiff under three leases, one dated 21st April, 1993 for a term of thirty-five years from 20th April, 1993, and two dated 29th April, 1997 for terms of twenty-five years from 1st April, 1997 (“the Leases”).
2. Following a tender process, by Tender Agreement entered into on 12th September, 2014 between the plaintiffs and Ardan Advisory Ltd. (“Ardan”) the plaintiffs agreed that the leasehold interests in the Premises under the Leases would be assigned to Sequana Management Ltd. (“Sequana”), a subsidiary of Ardan being a company incorporated by it for the purpose of acquiring the Premises. The completion date agreed was 14th October, 2014. The Tender Agreement was expressly subject to and conditional on the landlord’s, i.e. the defendant’s, consent to the assignment to Sequana. By letter dated 15th September, 2014 A.C. Forde & Co. solicitors for the plaintiffs, wrote to Arthur Cox, solicitors for the defendant, formally requesting the defendant’s consent to the assignment based on the information and extensive documentation furnished with that letter. There followed correspondence. Consent to assignment was not forthcoming, and by Plenary Summons dated 18th November, 2014 the plaintiffs commenced these proceedings in which they seek:-
“(i) A Declaration that the Defendant, in delaying or failing to consent to the plaintiff’s request to assign dated the 15th September, 2014 is acting unreasonably within the meaning of the Leases and/or Section 66 of the Landlord and Tenant (Amendment) Act 1980;
(ii) An Order dispensing with the defendants consent to the said assignment”
3. In its Defence the defendant asserts that it “has acted reasonably in declining to provide its consent, and has good and substantial reason for so declining”, and denies that “in delaying or failing to consent to the plaintiffs request” that it is acting unreasonably within the meaning of the Leases or s. 66 of the 1980 Act.
The Leases
4. The Leases cover separate parts of the Premises, but nothing turns on this. All three Leases contain at clause 3.21 similar provisions prohibiting the tenant from assigning, transferring, underletting or parting with or sharing the possession or occupation of the demised premises or any part thereof subject to the proviso that “the Landlord shall not unreasonably withhold or delay its consent to an assignment”. In all three Leases in clause 3.21 there is a covenant by the tenant not to assign “BUT SO THAT NOTWITHSTANDING the foregoing the Landlord shall not unreasonably withhold or delay its consent to an assignment…”. Under clause 3.21.1 it is provided that:-
“the Tenant shall prior to any such assignment or under-letting apply to the Landlord and give all reasonable information concerning the proposed transaction and concerning the proposed assignee or under-lessee as the Landlord may require”.
5. There are some differences between the 1993 Lease and the 1997 Leases in the wording used in clauses 3.21, and certain relevant sub-clauses, that should be identified:-
a. The 1993 Lease in clause 3.21 having stated that “the Landlord should not unreasonably withhold or delay its consent to an assignment” has the added words “to an assignee of …. good financial standing”, whereas the 1997 Leases refer “to an assignee of satisfactory financial standing”.
b. In the 1993 Lease clause 3.21.3 provides – “in the case of an assignment to a Limited Liability Company it may be deemed reasonable for the Landlord to require that two Directors of a standing satisfactory to the Landlord shall join in such consent as aforesaid as sureties for the company for a period of not more than five years …. and shall further provide for the sureties to accept a new lease of the demised premises upon the disclaimer of these presents by the company or on its behalf if so required by the Landlord within three months of such disclaimer such lease to be for the residue then unexpired of the said term of five years”. It will be noted that this provision says “it may be deemed reasonable …”, and limits the guarantees from such directors to a period of not more than five years.
c. By comparison the 1997 Leases at clause 3.21.3 provide – “in the case of an assignment to a limited liability company it shall be deemed reasonable for the Landlord to require that two Directors and/or shareholders of a standing satisfactory to the Landlord shall join in such consent as aforesaid as sureties … and shall further provide for the sureties to accept a new lease of the demised premises upon the disclaimer of these presents by the company or on its behalf if so required by the Landlord within three months of such disclaimer such lease to be for the residue then unexpired of the term hereby granted …”.
6. Thus, under the 1997 Leases the wording is “shall be deemed reasonable”, and the sureties may be directors or shareholders, and there is no five year limitation on the guarantee or the period during which the sureties may be required to take a lease in the event of a disclaimer.
7. The 1993 Lease was guaranteed by the then directors of Perfect Pies Ltd., Liam O’Dwyer and Desmond O’Dwyer for the first three years of the term. There was no evidence that that guarantee was ever extended, or that, once it lapsed, it was replaced by any other guarantee.
8. The 1997 Leases were supported by guarantees executed by “Break for the Border Group Plc.” for the duration of the respective leases. It was common case that those guarantees ceased to be effective some years ago. Thus, there were no guarantors in place at the time of the Tender Agreement or the request for consent to assignment.
Section 66, Landlord and Tenant (Amendment) Act 1980
9. This provides, so far as relevant:-
“66(1) A covenant in a lease (whether made before or after the commencement of this Act) of a tenement absolutely prohibiting or restricting the alienation of the tenement, either generally or in any particular manner, shall have effect as if it were a covenant prohibiting or restricting such alienation without the license or consent of the lessor.
(2) In every lease (whether made before or after the commencement of this Act) in which there is contained … a covenant prohibiting or restricting the alienation, either generally or in any particular manner, of the tenement without the license or consent of the lessor, the covenant shall, notwithstanding any express provision to the contrary, be subject –
(a) to a proviso that the license or consent shall not be unreasonably withheld, but this proviso shall not preclude the lessor from requiring payment of a reasonable sum in respect of legal or other expenses incurred by him in connection with the license or consent, …”
10. As to the interaction between the expressed covenant in the Leases and s. 66(2) counsel for the plaintiffs and defendant effectively agreed that the statutory proviso that “consent shall not be unreasonably withheld” supersedes the express provision in the Leases, notwithstanding that the original parties to the Leases expressly agreed that certain requirements of the landlord may be “deemed reasonable”. However, it was submitted by counsel for the defendant, and I accept, that the matters expressly agreed between the original parties to be reasonable are matters that the parties, and the Court, should consider and take into account when assessing whether or not consent has been “unreasonably withheld”. It follows that subtle differences between the 1993 Lease and the 1997 Leases, and the greater obligations from the tenant’s perspective, of the 1997 assignment provision, are matters that the parties and the Court can take into account, but these provisions are not determinative because the ultimate test is that of reasonableness. The difference in the sureties that may be required by the landlord under the different Leases has some relevance and will be commented on later in this judgment.
The Test of Unreasonableness
11. Although the law in the UK has changed since 1988 1 and must be approached with some caution, the parties did not disagree that the general principles to be applied in determining unreasonableness are laid down in the current edition of Woodfall’s Law of Landlord and Tenant2, para. 11.140, which states as follows:-
• The purpose of a covenant against assignment without the consent of the landlord, such consent not to be unreasonably withheld, is to protect the landlord from having his premises used or occupied in an undesirable way, or by an undesirable tenant or assignee;
• As a corollary to the first proposition, a landlord is not entitled to refuse his consent to an assignment on grounds which have nothing whatever to do with the relationship of landlord and tenant in regard to the subject matter of the lease 3;
• The onus of proving that consent has been unreasonably withheld is on the tenant 4;
• It is not necessary for the landlord to prove that the conclusions which led him to refuse to consent were justified, if they were conclusions which might be reached by a reasonable man in the circumstances;
• It may be reasonable for the landlord to refuse his consent to an assignment on the ground of the purpose to which the proposed assignee intends to use the premises, even though that purpose is not forbidden by the lease;
• While a landlord need usually only consider his own interests 5 there may be cases where there is such a disproportion between the benefit to the landlord and the detriment to the tenant if the landlord withholds his consent to an assignment, that it is unreasonable for the landlord to refuse consent;
• Subject to the proposition set out above, it is, in each case, a question of fact, depending on the circumstances, whether the landlord’s consent to an assignment is being unreasonably withheld.
12. In addition, the landlord may state the grounds for refusal to the Court even if no reasons had previously been given: Rice v. Dublin Corporation [1947] I.R. 425, a further authority for this proposition is Irish Glass Bottle Co. Ltd. v. Dublin Port Co. [2005] IEHC 89. Further, if a landlord gives an invalid reason for refusing, he can subsequently amend his hand by giving a valid reason: Boland v. Dublin Corporation [1946] I.R. 88, at 103-104. The essence of the test is that the onus is on the tenant to show that no reasonable landlord would have refused consent in the circumstances as the landlord apprehended them to be. A landlord does not need to justify the conclusions that led it to refuse consent. Moreover, the landlord is entitled to rely upon the advice of appropriate qualified professional/experts provided that the advice given is reasonable: Blockbuster Entertainment Ltd. v. Leakcliff Properties Ltd. [1997] 1 EGLR 28.
13. There was no disagreement between counsel that the date on which the reasonableness or otherwise of the landlord’s withholding consent falls to be considered is the date/time at which these proceedings were initiated, namely 18th November, 2014. It is on the basis of the proposals, information and documentation furnished at that point in time that the Court should make its determination. As will be seen, this is of particular significance in this case as there were subsequent developments and correspondence between the parties’ respective solicitors after the commencement of the proceedings, including a letter sent on the evening of the day that proceedings issued.
14. As to breach of covenant on the part of the outgoing tenant, refusing consent on this ground depends upon the seriousness of the breach, and on whether the landlord’s position is prejudiced by the assignment. In Cosh v. Fraser [1964] 108 SJ 116 it was held unreasonable to refuse consent on the basis of breaches of covenant not to make alterations in the premises where the breaches were easily remediable at the end of the term. In Meagher v. Luke J. Healy Pharmacy Ltd. [2005] IEHC 120, Murphy J. held that it was unreasonable for a landlord to refuse consent on the basis of dilapidations, which the proposed assignee was agreeable to remedy. However, the landlord is entitled to be reasonably satisfied that the proposed assignee will remedy any breaches of covenant to repair that are anything more than minimal: Goldstein v. Sanders [1915] 1 Ch 549. Furthermore, it may be reasonable for a landlord to demand that the assignee and its guarantor covenant to a strict timetable for repairs and to supply a performance bond or deposit: see Orlando Investments v. Grosvenor Estate Belgravia [1989] 2 EGLR 74.
15. Undoubtedly, the financial position of the proposed assignee is something that may be taken into account by a landlord in considering or refusing consent. As stated by Charleton J. in Cregan and Gray v. Taviri Ltd. [2008] IEHC 159:-
“… Consent to assignment of a lease would be unreasonably withheld where the landlord will be receiving from the new assignees the same benefit, in terms financial reward and care of the premises, as from his or her current tenants”.
In Kened Ltd. v. Connie Investments Ltd. [1997] 1 EGLR 21, a landlord company objected to the proposed assignee of a lease for a hotel on the grounds that they were not being offered the guarantee for the remainder of the lease of a surety with adequate assets in the country visibly being of sufficient financial status and standing. The Court of Appeal (Millet LJ.) held that the test to be applied was an objective one, i.e. whether no reasonable landlord would have withheld consent for the reasons stated by the landlord; the Court was not entitled to substitute its own view for that of the landlord, whose only legitimate concern, in relation to the financial status of the proposed assignee, was their ability to pay the rent due under the lease. Millett LJ. stated that “ an acceptable replacement surety” means a replacement surety which is objectively suitable for acceptance by a reasonable landlord.
16. Landlords are not entitled to seek security beyond what a reasonable landlord in their position would require. Thus in Re: Greater London Properties’ Leases [1959] 1 WLR 503, involving an assignment to a subsidiary, the landlord was held to have unreasonably withheld consent where it was refused unless the parent company guaranteed performance of the subsidiary’s obligations. So also in Storehouse Properties Ltd. v. Ocobase Ltd. (1996) 160 J.P. 669 it was held unreasonable for the landlord to require the guarantee of the parent company, which was in the FTSE 100, in respect of the obligations of a subsidiary, where the guarantee of another group company had been offered.
17. As to financial standing the defendant also relied on the following passage from Woodfall, at para. 11.143:-
“A reasonable landlord is concerned with the tenant’s ability to meet the obligations under the lease as those obligations fall due. Accordingly, where the assignee’s references cast doubt on his ability to pay the rent and perform the covenants, the landlord will normally be entitled to withhold consent … Where the proposed assignee offers guarantors to guarantee performance of his obligations, the landlord must have regard to the financial position of the guarantors as well as that of the assignee. If, however, the financial situation of the assignee and guarantor, taken together, is such that the landlord cannot be satisfied that the rent will be paid and the obligations performed, the landlord will be reasonable in refusing consent. In addition, it has been held that if there is grave doubt about the ability of the assignee to pay the rent, the offer of a guarantor will not necessarily cure the problem since the offer of a guarantor may not be a satisfactory substitute for a satisfactory and responsible tenant.”
18. The Court may also have regard to the financial position of the outgoing tenant: Curragh Bloodstock Agency v. Warner [1959] Ir. Jur Rep 73. In that Circuit Court case Deale J. commented:-
“[C]an the defendant be called unreasonable for refusing to exchange the certainty of a solvent and substantial company as his lessee for Mr. Davis and his hazardous enterprise? … Where he has a tenant of exceptional financial strength he should not have to relinquish such a tenant and take on one who will involve him in undue risk. His refusal to take this risk cannot, in my opinion, be said to be unreasonable.”
19. However, in assessing reasonableness it is clear that the Courts will not permit a landlord to use the opportunity of a request for consent to assignment to secure a collateral advantage or benefit over and above what the existing lease offers.
20. Of particular relevance to this case, because it is at the heart of the plaintiffs’ contentions, is that a landlord is not entitled to use the opportunity of an application for consent to assignment to pursue any “ulterior motives”. This principle was affirmed by Clarke J. in the context of an application for consent to change of use in Dunnes Stores (Ilac Centre) Ltd. v. Irish Life Assurance Plc. [2008] IEHC 114. Dunnes Stores was the lessee under a long lease and desired change of user for part of a unit in the Ilac Centre which they planned to use as a high-quality food hall. All parties agreed that such a change was inconsistent with the pre-existing leasehold clause as to user and that the consent of the landlord to the proposed change of user was required. Dunnes Stores claimed that the landlord had unreasonably withheld consent of the application for change of user contrary to s. 67 of the Landlord and Tenant (Amendment) Act 1980, a sister section to s. 66 quoted above, which provides that a landlord may not unreasonably withhold consent to a change of user. The landlord in the case had refused consent on “good estate management” grounds but had not elaborated on those grounds either in the original refusal of consent or in response to subsequent request for clarification from Dunnes Stores. In the course of exchanging documents relating to the litigation, the respondent landlord expanded on the refusal as follows:-
“The exact basis of the defendants (sic) plea is the defendants (sic) opinion that the plaintiff’s proposed use would not be consistent with the defendants’ vision and image for that part of the Ilac Shopping Centre, namely as a primary retail fashion area”.
Dunnes Stores challenged the refusal on three grounds:-
1. That this was not the real reason for the refusal, rather the landlord was attempting to use this situation to place pressure on Dunnes Stores to give up possession of this unit in the Ilac Centre (which was one of three held by the company);
2. That the reason given was not the bona fide reason for refusal;
and
3. Even if this where the bona fide reason for the refusal it was incompatible with the change of user clause in the lease.
21. Clarke J. held that it was well established that landlords are not entitled to use the opportunity of applications for consent to pursue any “ulterior motives”; rather, consent can reasonably be refused only for purposes reasonably contemplated by the lease itself. At para. 6.5 Clarke J. summarised this principle thus:-
“[W]hat is spoken of in the authorities as an “ulterior motive” does not necessarily (or indeed frequently) refer to a motive which might be inappropriate in itself. There might well be very good and sensible commercial reasons for the landlord seeking to achieve the end concerned. However, the landlord is not free to act without regard to his obligations under the lease which are already in being. However sensible, from the landlord’s point of view, a particular position may be, it cannot amount to a proper reason for refusing a consent to change of use or assignment unless it is a reason contemplated by the lease.”
22. On the basis of the facts presented to the Court Clarke J. held that he was satisfied that at least part of the motivation for the refusal of consent was an attempt to exert some kind of leverage on Dunnes Stores to give up the unit, this being further reinforced by the fact that the second defendant (co-landlord with the first defendant) had been holding negotiations with Dunnes Stores while the decision on consent was pending about Dunnes Stores giving up possession of the unit. As this was an improper purpose in refusing consent it caused the refusal to be unreasonable. As Clarke J. stated at para. 6.3:-
“[the landlord] is obliged to act reasonably in respect of an application for a change of use or assignment. He is not entitled to use such an application to obtain leverage in a strategy to regain possession of the property, even though he would be perfectly entitled to pursue any legitimate negotiation strategy to seek to achieve the same end. The reason why he cannot do this is that he is already bound by covenant only to refuse consent where it is reasonable so to do. The reason for his refusal must be reasonable, independent of his strategy to regain the property.”
23. In coming to this conclusion Clarke J. relied inter alia on the decision of Peter Smith J. in Design Progression Ltd. v. Thurloe Properties Ltd. [2005] 1 WLR 1 where the Court was satisfied on the evidence that a landlord’s refusal of consent to an assignment was based not on a bona fide reason but was designed for the purpose of getting back possession of the property concerned and, in effect, motivated by a desire to obtain the commercial benefit of the value of the lease for itself. He also relied on the decision of Dunne LJ. in Bromley Park Garden Estates Ltd. v. Moss [1982] 1 WLR 1019 where it was:-
“… noted that it would not be reasonable for a landlord to refuse his consent to an assignment where the purpose of the refusal was to seek to destroy the lease or cause it to be merged with another lease in the same building, even though such an eventuality might amount to good estate management. Such reasons were not the sort of reasons contemplated by the lease but amount to ulterior motive.” (Clarke J. para. 6.4).
24. I did not take the principles as enunciated in Dunnes Stores or the cases relied upon in that decision, or their applicability to s. 66 (as opposed to s. 67), to be disputed by the defendant. Accordingly, one of the Court’s tasks in this case is to assess on the evidence what the true motivation of the defendant was in withholding consent to assignment.
The Tender Process and Tender Agreement
25. The Premises was one of four properties of the plaintiff being sold by the Receiver. In the first round, offers were due in by 4th July, 2014. There were 20 expressions of interest received including one from Starpin Ltd., a company connected to the Fitzgerald Group and of which Mr. Fitzgerald’s son Edward is the principal shareholder. The initial offer from Starpin Ltd., which was for the Premises alone, was €4.265 million. 15 parties were selected through to the second round of the bidding process – a formal tender – the closing date for which was 7th August, 2014. The tender documents/contracts where uploaded into a Data Room and the selected parties had access to this. On behalf of Starpin Ltd. Mr. John Nash of the Fitzgerald Group had access to the Data Room. On the tender day, 11 formal tenders and one letter had been received. Starpin Ltd. tendered €5.2 million for the Premises, although the evidence of Mr. John Ryan of CBRE, the Receiver’s selling agent, was that no proof of funds, as was required in the Tender, accompanied the documentation. Following contact between Mr. Ftizgerald and Mr. Ryan, Starpin Ltd.’s offer was verbally increased to €5.35 million. However that bid was unsuccessful as the Receiver accepted the tender of Ardan for all four properties, including as part of that a tender €5 million for the Premises.
26. It should be noted that on 11th June, 2014 a surveyor Mr. Harry Dowey of Watts Group Plc. was instructed by the defendant to prepare a revised Schedule of Dilapidations on the premises to reflect its current condition. Mr. Dowey inspected on 12th June, 2014, and his “interim schedule of dilapidations” is dated the 23rd June, 2014. I accept the unchallenged evidence of Mr. John Ryan that it was on the defendant’s insistence that this interim schedule of dilapidations was placed in the Data Room. It was also not contested by the defendant that it was after the Tender was advertised that Mr. Dowey was instructed to undertake his inspection.
27. Following the tender process a Tender Agreement was entered into between the Receiver and Ardan dated the 12th September, 2014. Special condition 10 governed “consent to assign”. Clause 10.1 provides that the Agreement is subject to and conditional on the landlord’s consent to the assignment by the first plaintiff to Sequana “in compliance with Clause 3.21 of each of the capital leases”. Clause 10.2 provides that:-
“The Purchaser hereby agrees to provide all information reasonably required and satisfy all reasonable requirements of the Landlord in connection with the proposed assignment expeditiously. The Purchaser further agrees (where applicable) to provide such sureties as may be required by the Landlord having regard to Clause 3.21.3 of the Leases and each of them. Without prejudice to the generality of the foregoing, the Purchaser shall furnish the following on the execution hereof…“
28. There follows in clauses 10.2.1-10.2.15 inclusive a list of documents that Ardan was contractually obliged to furnish and 10.3 relating to the provision of an additional surety, and these may be summarised as follows:-
10.2.1 A certificate as to Sequana’s shareholders and directors and the same in relation to its associated companies.
10.2.2 Projected EBITDA for Sequana for the year 2014 “reviewed by a firm of chartered accountants representing Sequana…”
10.2.3 Written confirmation from Ardan in the form attached that it would act as surety in accordance with clause 3.21.3 of the Leases.
10.2.4 “Report from a firm of chartered accountants representing …” Ardan confirming it has net assets of a minimum of €10 million and specifying the nature of the assets.
10.2.5 Projected EBITDA “reviewed by a firm of chartered accountants representing Ardan…” for the year 2014.
10.2.6 Legal opinion from Ardan solicitors in the form attached as to Ardan’s status as an Irish owned company, its authority to act as a surety and matters related to the validity of the proposed deed of assignment and other documents required to complete the transaction.
10.2.7 “Confirmation that it can procure a Bank Guarantee (from a bank satisfactory to the Landlord) in favour of the landlord for an amount equal to the aggregate annual rent currently payable pursuant to the Leases for a period of five years or until such time as a consolidated EBITDA for Ardan Advisory Ltd. (as certified by a chartered accountant) exceeds three times the aggregate annual rent payable in respect of the Leases, which ever date shall be the earlier”.
10.2.8 Written confirmation from DP International Ltd., a company incorporated in Malta, that it will act as surety in accordance with clause 3.21.3 of the Leases and appoint Irish solicitors to accept service of notices and proceedings in Ireland.
10.2.9 A report from a firm of chartered accountants representing DP International Ltd. to confirm that it has net assets of a minimum of €10 million and specifying the nature of the assets “together with copy audited accounts for the said company for the last three financial years”.
10.2.10 Legal opinion from lawyers for DP International Ltd. in Malta in the form attached, or such amended form as might reasonably be required by the Landlord.
10.2.11 Written confirmation from J.T. Magen and Co Inc. (“Magen”) that it will act as surety and appoint solicitors in Ireland to accept service of notices and proceedings in Ireland.
10.2.12 A report from a firm of chartered accountants representing Magen to confirm that it has net assets in excess of $13.5 million and specifying the nature of the assets, together with copy audited accounts for the last three financial years
10.2.13 Legal opinion from lawyers for Magen in the jurisdiction in which it was incorporated in the form attached or such amended form as may reasonably be required by the Landlord.
10.2.14 Documentary evidence of Ardan’s agreement with Splash Hotels Ltd. in relation to the proposed management of the Premises.
10.2.15 A written undertaking from Sequana addressed to the Landlord to complete works required in the Interim Schedule of Dilapidations
10.3 “In the event that the Landlord states that the said sureties are inadequate and/or unacceptable, the Vendor shall (without further notice to the Purchaser) confirm to the Landlord that an additional surety will be provided from J.T. Magen and Co Inc.”
29. Under clause 10.4 the Tender Agreement then provided that if the landlord refused to consent or the vendor deemed that consent was “unreasonably withheld or delayed….on the basis of the above bank guarantee and sureties being available” then the vendor was to immediately issue proceedings against the landlord in the High Court seeking declarations in line with those sought in these proceedings, and to seek to have the proceedings heard in the Commercial Court, and to prosecute them without delay. Under clause 10.5 the vendor was required to appeal any adverse decision in the High Court to the Court of Appeal if in receipt of a written opinion from senior counsel confirming that there are grounds of appeal.
30. This revised clause 10 was the subject of negotiation between the plaintiff and Ardan, and was formally communicated by the plaintiffs’ solicitors to Ardan by letter dated 4th September, 2014 which also requested copies of the documents set out in the revised special condition 10 and evidence that Ardan was in a funds to complete the purchase of the leasehold interest in the premises for €5 million. The agreement to this revised term was endorsed in that letter on 5th September, 2014 and signed on behalf of Ardan, and the conditional purchase of the leasehold interest based on the Tender Agreement as so revised appears to have been completed on 12th September, 2014. I will comment later in this judgement on the quality of the financial comfort afforded by the documentation that accompanied the revised special condition 10, and the sureties and financial references that were ultimately provided to the defendant.
The Consent Process
31. By letter dated the 15th September, 2014 the plaintiffs’ solicitors formally wrote to Arthur Cox, solicitors for the defendant, notifying them of the sale of the leasehold interest in the Premises to Sequana and requesting the defendant’s consent, including the consent of the defendant’s lending institution, AIB. In this detailed letter A.C. Forde & Co. solicitors for the plaintiffs set out information on Sequana together with copies of its certificate of incorporation and memorandum and articles of association. This disclosed that the share capital was owned by Ardan as to 998 ordinary shares, with one share being owned by Magen, based in New York, and one share owned by DP International Ltd., a company based in Malta. The letter advised that Splash Hotels Ltd. had agreed to manage Café en Seine – as it had been doing for the past number of years, and a letter from Splash Hospitality was enclosed. A letter was also enclosed from Pricewaterhouse Coopers (“PWC”) dated 4th September, 2014 attaching projected EBITDA for Café en Seine for years 2014 and 2015, at €665,000 and €731,000 respectively. In relation to surety, the letter proposed Ardan and DP International Ltd.
32. With regard to Ardan, the letter enclosed the certificate of incorporation and memorandum and articles of association, confirmation that Ardan was prepared to act as surety, the legal opinion of Eugene F. Collins solicitors confirming its capacity to act as surety, and two letters from PWC. The first of these set out the projected consolidated EBITDA for Ardan for 2014 and 2015, noting that Ardan had also agreed to acquire the other three licensed premises “The George”, “Howl at the Moon” and “The Dragon”. The EBITDA projections were for €764,000 in 2014 and just over €2 million in 2015, this significant increase being reflected in a reduction in rent payable by Ardan from €1.625 million in 2014 to €752,000 in 2015. The second document from PWC stated that the net assets in the balance sheet of Ardan were €10 million, and indicated that €8.5 million had been placed in Ardan’s solicitor’s client account on 11th September, 2014 for the purposes of the acquisition of the four properties.
33. With regard to DP International Ltd., the letter enclosed a copy of the certificate of incorporation and the memorandum and articles of association, and confirmation that it was prepared to act as surety. There was also legal opinion from a Maltese firm of advocates confirming its capacity to act as surety. There was a report from PWC dated 11th September, 2014 stating that the net assets in the balance sheet of the company exceeded €10 million. Audited accounts for DP International Ltd. for the previous three financial years were not mentioned.
34. In terms of a guarantee, the letter offered a guarantee from HSBC Bank for a five year period or until such time as the consolidated EBITDA for Ardan exceeded three times the aggregated annual rent payable in respect of the leases, whichever date would be earlier. A copy of the draft guarantee was not enclosed but it was stated that this would be requested and that A.C. Forde & Co. would revert with same. Drafts to affect the consent were enclosed for approval. The closing paragraphs of the letter stated:-
“The agreed closing date is the 14th October, 2014 and in the circumstances, we should be obliged to receive your client’s consent in advance of that date and preferably no later than the 10th October, 2014 to allow time to have all documentation executed by the various parties in advance of completion.
In the meantime, if you have any queries or require any further information or clarification on any matter, we should be obliged if you would revert to us as a matter of urgency in order that we are ready to complete on the 14th October, 2014.”
35. As A.C. Forde & Co. had not received any reply by 26th September, 2014 they sent a reminder on that date to Arthur Cox. They also indicated that as they had not received any response they were enclosing a draft letter which they proposed sending to AIB on 30th September, with a Form of Acknowledgment seeking the bank’s consent to the proposed assignment.
36. By letter dated 30th September, 2014 Arthur Cox acknowledged receipt of the earlier letters from A.C. Forde & Co. and confirmed that “we are currently taking our clients instructions on this matter and will revert shortly”.
37. A.C. Forde & Co. wrote again to Arthur Cox on 3rd October, 2014 noting that they were taking their clients instructions, and referring to a telephone conversation on 2nd October in which Arthur Cox’s Mr. Martin Coleman is reported to have indicated that Arthur Cox will be in a position to revert “by the end of the week with confirmation of your client’s position”. This letter again emphasised the closing date of 14th October, 2014, and also notified that in the circumstances a letter was being written to AIB requesting their consent – and such a letter was indeed sent by courier on 3rd October, 2014.
38. As it happens Arthur Cox had written on the 2nd October, 2014, and this may have crossed in the post with the letter of 3rd October from A.C. Forde & Co. At any rate, Arthur Cox noted the request for their client’s consent to assignment and stated:-
“Our client is not in a position to consider the issue of consent to the assignment of the Leases to Sequana Management Ltd. until such time as your client details its proposals in order to address the significant breaches of the Leases. The breaches identified by our client include, but are not limited to, the following:-
(1) Breach of the repair clause – our client has prepared three interim Schedules of Dilapidations and to date we understand that no works have been carried out to bring your client into compliance with the requirements specified in same.
(2) Breach of the Alienation provisions – There had been significant breaches of the alienation provisions and a number of licences have been granted without our client’s permission.
Our client hereby calls on you to arrange for your client to revert immediately with its proposals to rectify these breaches. Thereafter, the issue of consent to the proposed assignment will be considered by our client.
Yours Faithfully”
39. A.C. Forde & Co. replied by letter dated 7th October, 2014 contesting that there was any breach. Their instructions were that the plaintiff had “dealt with the majority of the items identified in your client’s Schedule of Dilapidation dated 6th August, 2013” and that any items outstanding were minor or of a decorative nature or would be dealt with as part of phased maintenance repair programme in the usual way. They pointed out that many of the decorative items listed in the Schedule would not require to be dealt with until the final year of the tenancy. They then stated that “in any event, the proposed Assignee will be assuming all obligations of Tenant under the Leases, which includes any outstanding works required to be completed to be pursuant to your client’s Schedule of Dilapidations”. They then said:-
“We would point out that the decision of the Supreme Court in Denis Meagher and Miriam Meagher v. Luke J. Healy Pharmacy Ltd. upheld that the non-compliance with covenants by a Tenant did not entitle a Landlord to refuse to consider an application for consent to assignment”.
40. In relation to a question of a license being granted without the landlord’s permission they stated:-
“Our client engaged with your client in relation to Licenses granted to various occupiers and provided a schedule of occupiers. We refer in particular to a letter from your firm dated the 1st July, 2013 wherein you noted that there were ten separate sub-tenants in place at that time. We enclose herewith a copy of the letter and our client’s reply for ease of reference. Your client has never raised any objection to the licenses granted by our client.”
The letter then requested that the defendant consider the application for consent “as a matter of urgency” in view of the completion date. They added:-
“You will be aware the fact that Mr. Fitzgerald of your client company is connected with a different corporate entity which was anxious to purchase the property but which was unsuccessful in so doing can have no bearing on the issue of consent and the request for same must be considered bona fide and expeditiously by your client.”
41. They requested a response by Friday, 10th October. Enclosed with that letter was a copy letter from Arthur Cox to the Receiver dated 1st July, 2013 in relation to 10 separate sub-tenants in place in the property, and seeking confirmation of the term for which they occupied and also “that an appropriate Deed of Renunciation has been executed in respect of this arrangement”. This referred to renunciation of Landlord and Tenant rights. Also enclosed was a copy reply from RSM Farrell Grant Sparks to Arthur Cox dated 12th July, 2013 referring to certain changes in licensee and stating that:-
“Following on from the first license agreement outlined above, a further nine license agreements have been signed by various companies to occupy office spaces at 39 and 40 Dawson St.
I trust that this clarifies the questions raised by your client, however should you have any further queries please contact the undersigned.”
42. A.C. Forde & Co. did not hear back from Arthur Cox and wrote again on 14th October, 2014 stating:-
“Please note that in the event that we do not receive confirmation of your client’s consent to the assignment of Leases to the proposed assignee by close of business today we hold instructions to draft proceedings seeking a Declaration from the Court …”. The letter was marked “URGENT”.
43. Arthur Cox replied by letter dated 20th October, 2014, dealing at some length with “Breach of repair clause” and “Breach of Alienation Provisions”. As to the first, they took issue with the assertion that the plaintiff had dealt with the majority of items, or that the outstanding ones were minor or decorative, and sought details of all works carried out pursuant to the Schedules of Dilapidations. They stated:-
“following receipt of this information, our client’s surveyor will inspect the property to verify the works [have] been carried out.”
Noting the contention that the assignee will assume the obligations of the tenant they stated:-
“However, it is a matter for your client to resolve these subsistent breaches prior to any assignment of Lease”.
Having taken issue with A.C. Forde & Co.’s interpretation of the Supreme Court decision in Meagher, they then stated:-
“Please note that our client is entitled to satisfy itself that all subsistent breaches of Lease have been resolved by your client prior to considering the consent application of your client.”
44. With regard to breach of the alienation provisions they observed that providing information on the 10 licenses “did not constitute an application for consent of our client in accordance with clause 3.21 of the Lease”, and they sought details of renewals of the licenses which they understood had taken place without the defendant’s prior written consent, and they sought copies of the licenses together with deeds of renunciation. They stated:-
“We confirm that our client is committed to dealing with this matter as soon as your client has dealt with the outstanding queries above.”
45. In their penultimate paragraph they rejected any connection between their client’s relationship to another corporate entity submitting a bid for the property and their client’s handling of the application for consent and stated:-
“Our client has valid concerns in relation to the subsistent breaches of Lease which it requires your client to resolve prior to it considering the consent application of your client.”
46. A.C. Forde & Co. replied by letter dated 22nd October, 2014 stating that the outstanding works in the interim Schedule of Dilapidations were not an issue as the purchaser was fully aware of them and taking responsibility for completion of any outstanding items, and that “your client has always been fully aware of the occupation of the various licensees and has never objected to same.” They stated:-
“In all the circumstances therefore, it is difficult for our client to see what bona fide reason your client has for refusing to deal with the request for consent to assign the Leases. Your client’s responses to date do not indicate that your client is committed to dealing with the matter, as you state, and can only be interpreted by our client as a method of delaying the process.
Our client has therefore no alternative but to issue proceedings seeking a Declaration from the Court and then Order dispensing with your clients consent and we hold instructions to issue such proceedings without further notice to you.”
47. Arthur Cox replied by letter dated 31st October, 2014 again stating that dilapidations and licenses were live issues. They reiterated their client’s requirement for “unqualified agreement on your part that the works prescribed by our surveyor will be done” stating that “if it is the case that the purchaser intends to carry out these works in your place then our client welcomes this. However, in that event, we will require an open letter from them confirming this and our Client’s position on this issue remains fully reserved until such letter, in terms satisfactory to our client, is received.”
48. With regard to the alienation issue, an email dated 24th October, 2014 records that copies of the licenses for the premises were forwarded to Mr. Patrick Walsh of the Fitzgerald Group. Arthur Cox stated in their letter of 31st October, 2014 that since these had been received their client was now “in a position to undertake a review of the content of these licenses”. They stated that the plaintiff still had not dealt with the queries raised by their client in connection with breaches of the leases, and that it was “proper and reasonable for our client to clarify how your client is intending to rectify any breaches of the leases …”
49. On 6th November, 2014 A.C. Forde & Co. replied confirming that the proposed assignee would take over all the obligations of the tenant in the leases to include obligations related to dilapidations, and they enclosed a letter from the proposed assignee, and another from the proposed guarantor and parent company Ardan, confirming that they would accept responsibility for any outstanding items.
50. With regard to the licenses they reiterated that the defendant was aware of the occupation of the various licensees since he had been furnished with a schedule of occupants in July, 2013, and also from inspections of the property by the defendant’s agent on a number of occasions, following which no objection was taken. They also pointed out:-
“Furthermore, full details of the Licenses were available during the tender process in the data room. Your client had access to the data room and indeed on the instructions of your client you wrote to us on a number of occasions setting out your client’s demand with regard to documentation which your client wanted made available to prospective purchasers in relation to the Schedule of Dilapidations but no reference was made to the occupation by the Licensees in this correspondence.”
They reiterated that it was difficult for the plaintiff to see what bona fide reason the defendant had for refusing to deal with the request for the consent to assign, and they renewed the request for consent.
51. On 14th November, 2014 A.C. Forde & Co. wrote again requesting the consent, and imposing a deadline of close of business on Monday 17th November, 2014, indicating that proceedings would issue in default.
52. The next event was that the plaintiffs initiated these proceedings by Plenary Summons issued on 18th November, 2014, and a copy of that Plenary Summons was sent by A.C. Forde & Co. to Arthur Cox by email early that evening. Arthur Cox responded by letter also dated 18th November, 2014 which I was informed (and this was not disputed) was sent to A.C. Forde & Co. at about 9.00pm, presumably by email. It is important to note that this letter/email was sent by Arthur Cox in response to the issue of proceedings. This is of critical relevance because counsel for both parties agreed that the question of the reasonableness or otherwise of the defendant withholding consent falls to be considered as at the time of the issue of proceedings.
Post-Proceedings Exchanges
53. It is nonetheless necessary and instructive to refer to the contents of Arthur Cox’s letter, and other exchanges postdating the issue of proceedings for a number of reasons. First, in that letter the defendant through its solicitors addresses the question of sureties, and the quality of the financial information and comfort offered by the plaintiff in the letter of 15th September, 2014 seeking consent, and the enclosures with that letter. The plaintiffs’ witnesses asserted that this was the first time such matters were raised, although this was disputed by Mr. Fitzgerald in his evidence. Secondly, as the authorities referred to above establish, a landlord refusing consent may after the date of refusal and even in the course of the proceedings rely upon reasons not previously relied upon for such refusal. The defendant does rely on reasons given post the issue of proceedings in support of its contention that withholding consent was not unreasonable. Thirdly, the plaintiffs rely inter alia on events occurring after (as well as before) the 18th November, 2014 as showing or corroborating their assertion that the defendant’s stated reasons for not considering the request for consent were not genuine or bona fide concerns and that the defendant always intended to withhold consent for an ulterior motive, namely its desire to obtain possession of the Premises for itself or Starpin Ltd.
54. Referring first to the written exchanges, in their letter of 18th November, 2014 Arthur Cox firstly acknowledged receipt of the licenses which their client “continues to review”, and the correspondence from the proposed purchases in respect of the outstanding dilapidations. Secondly, they refer A.C. Forde & Co. to clause 3.21.3 of the Leases under which:-
“our client is entitled to, and requires, two directors and shareholders to join in the consent as sureties. As is normal in these circumstances our client requires three years audited annual accounts in respect of the proposed guarantors so that our client can assess the financial standing of these companies.”
They point to limitations in the PWC documentation concerning Ardan and DP International Ltd., stating that it “does not constitute an examination made in accordance with generally accepted auditing standards” and they go on to “urgently require three years audited accounts”. Finally, they pointed out that they had yet to receive a copy of the HSBC guarantee that had been offered.
55. A.C. Forde & Co. replied on 24th November, 2014 enclosing a copy letter from Ardan’s solicitors Eugene F. Collins of the same date. This letter advised that:-
• Ardan was a shelf company set up to acquire the tenant’s interest in the Premises, and they relied on PWC’s information (in the form already provided to the defendant with the letter of 15th September).
• DP International Ltd. was not required to provide audited accounts in Malta, and that the PWC Report should be relied upon.
• J.T. Magen & Co Inc, another shareholder in Ardan, would be “…happy to provide a further guarantee if required.”
• That J.T. Magen & Co. Inc.’s audited accounts, furnished to A.C. Forde & Co., would be furnished if the defendant executed a Confidentiality Agreement.
• A ‘Letter of Credit’ would be obtained from HSBC if required.
A Form of the proposed Letter of Credit and the Confidentiality Agreement were enclosed. The HSBC Form was from HSBC USA, was redacted, and indicated that it would be governed by the laws of New York.
56. Arthur Cox replied on 5th December, 2014, indicating they would resist the matter being admitted to the Commercial List. On dilapidations they stated “…a satisfactory response was finally received from your office on 7 November 2011”. They expressed continuing dissatisfaction on the licensee front – lack of evidence of identity of all the licensees, and lack of landlord consent. The request for two directors of Sequana to provide guarantees for five years was repeated. Objection was taken that the financial information provided was inadequate and the U.S. guarantees offered were “not adequate financial covenants”. They continued to rely on “several breaches of the Leases”.
57. A.C. Forde & Co. replied on 8th December, 2014 and stated inter alia:-
“We wrote to you seeking consent to assign by letter dated 15th December 2014 and provided full information on the financial status of the proposed assignee and proposed guarantors. You did not engage with us in any manner concerning the financial status of the proposed assignee until after our client issued proceedings and the first time you reverted to us in relation to the financial status of the proposed assignee was in your letter of the 18th of November, 2014. We passed this letter to the Solicitors for the proposed purchaser/assignee, the outcome of which was to reply to you by letter dated the 24th of November 2014 and included an offer by the proposed assignee of an additional guarantee from J.T. Magen & Co. Inc. You have not responded to this letter or provided the confidentiality agreement sought therein.
You have used alleged breaches of the terms of the Leases as a delaying tactic since our letter of 15th September and the requirement to provide a letter from the proposed assignee (which you state is a “satisfactory response”) in relation to the schedule of dilapidations was and is superfluous as the proposed assignee will be bound by the terms of the Lease, to include the schedule of dilapidations.”
58. Thereafter the case was admitted to the Commercial List by Order of McGovern J. dated 8th December, 2014. Some “engagement” on the issue of consent resumed in September, 2015 after Mr. Mark O’Meara, a director of Sequana, made a witness statement which was dated 17th September, 2015 and filed late on behalf of the plaintiffs. At the hearing I ruled this to be admissible and Mr. O’Meara gave oral evidence and adopted and confirmed the contents of his statement which included the following:-
“7. I confirm that Sequana has always been and continues to be ready, willing and able to meet such reasonable security requirements that the Landlord may have.”
59. Following delivery of this witness statement the parties’ solicitors in open correspondence reprised the history of their debate over consent and joined issue with para. 7 of Mr. O’Meara’s witness statement. Arthur Cox on the defendant’s behalf took the position that this was a new departure – indeed this was a position maintained in court. In their letter of 30th September, 2015 they indicated that:-
“Any guarantees must obviously be supported by satisfactory certified net asset statements that demonstrate the proposed guarantors to be persons of robust solvency”;
and observed:-
“It follows that the provision of guarantees from individuals or substantial trading entities was the established norm as between the parties’ respective predecessors in title under the Leases at issue in these proceedings, a matter specifically recognised in each of the Leases.”
Arthur Cox indicated that “In the alternative, our client is willing to accept an appropriate Irish bank guarantee” or in the alternative a security deposit paid now into a nominated joint account in an amount equivalent to 18 months’ rent and rates.” They stated:-
“Our client’s position remains that it is willing to consider a fresh application for consent if the present proceedings are discontinued and our client’s costs are discharged.”
60. In a further letter of 30th September, 2015 Arthur Cox sought to clarify that their reference to personal guarantees was to “both directors and shareholder”. A.C. Forde & Co. responded by letter the same day (headed “without prejudice”, but this was waived at the hearing) that this was still unclear and asked for clarity on “precisely what your client is now requesting in your letter in respect of each lease and from whom.” Arthur Cox replied on 1st October, 2015 that their first option was a reference “to personal guarantees from two directors of a standing satisfactory to our Client as envisaged [under] the provisions of the 3 Leases in question…Clearly the offer of guarantees from shareholders is inadequate as, first, the financial standing of those proposed guarantors has not been established and, secondly, the Leases, and in particular the Lease of 21st April 1993, provide for guarantees by directors.”
Motive – The Evidence in Controversy
61. The plaintiffs submitted that the defendant’s real motive in withholding consent was its desire to obtain possession of the Premises. They contended that by raising issues with regard to breach of covenant in respect of repair and licensees whose occupation had not been the subject of any express consent the defendant was not raising bona fide issues and was wrongfully refusing to consider the application for consent. They contended that the real reason for the defendant putting these obstacles in the path of the plaintiffs was the defendant’s desire to obtain possession for itself or the associated company Starpin Ltd. controlled by Mr. Fitzgerald’s son, Edward Fitzgerald. In particular, they relied upon the failure of Starpin Ltd. to acquire the Premises in the Tender Process; certain conversations between Mr. Fitzgerald and the selling agent Mr. John Ryan during that process and prior to the request for consent; and an attempt by Mr. Fitzgerald through Avalondale Ltd., a company in the Fitzgerald Group, to put the first named plaintiff into compulsory liquidation with the intention that the Leases would then be forfeit. In this regard, each of the Leases provides for forfeiture and a right of re-entry inter alia where the tenant “being a company shall go into liquidation either compulsory or voluntary” (see clause 5.1.3).
62. The defendant denied this and, principally through the evidence of Mr. Fitzgerald, asserted that the reasons given for withholding consent were given bona fide and underpinned by professional and legal advice, and reflected valid concerns in relation to subsisting breaches of the Leases – while also accepting that the defendant/the Fitzgerald Group did ultimately want to obtain possession of the Premises. In what follows this judgement deals with relevant evidence and my findings in relation to the repair issue, the licensee issue and other relevant evidence concerning the alleged ulterior motive.
Repair – Dilapidations
63. The defendant acquired the lessor’s interest in the premises on 13th October 2010, and Schedules of Dilapidations were prepared and issued by the Watts Group Plc. on 31st March, 2011, 18th July, 2013 and 6th August, 2013. As to the first two of these, the Receiver’s evidence was that no steps were taken by the defendant to ensure compliance with those Schedules. In his evidence Mr. Fitzgerald indicated that he instructed Mr. Pat Walsh, a manager in the Fitzgerald Group, to deal with the question of dilapidations, and he was unable to say whether any steps had been taken to ensure compliance. In particular he was unable to say whether there were any subsequent inspections to ascertain to what extent the works mentioned in the first two schedules had been addressed.
64. The third Schedule of Dilapidations resulted from instructions from the defendant on 11th June, 2014, and led to an inspection by Mr. Harry Dowey on the following day. The inspection was visual only. When Mr. Fitzgerald was asked why this Schedule was felt necessary in June, 2014 he said that:-
“Well, I do believe, Your Honour, that potential buyers should understand that there was a dilapidation there and it was quite substantial.” (Day 2, p. 86)
65. Mr. Fitzgerald accepted under cross-examination that he had never compared all three Schedules of Dilapidations (Day 3, p. 12). No evidence was presented by the defendant to indicate that there was any failure to carry out works, or at any rate significant works on the part of the tenant after the first or the second Schedules of Dilapidations. Mr. Fitzgerald had a singular lack of knowledge, and relied on Mr. Pat Walsh (who did not give evidence), and he was unable to point to any documentation or correspondence indicating any failure on the part of the first named plaintiff to address or carry out works pursuant to the Schedules.
66. Of significance is that Mr. Fitzgerald admitted that he had not read the third Schedule of Dilapidations. He was unable to point to any significant item constituting a want of repair. Most of the remedial works referred to in the third Schedule appear to relate to cleaning or other maintenance matters, redecoration or other minor matters. For instance, item 1.1 concerns missing roof tiles and requires “Fit new hip tiles to match existing and replace missing cowl”. Item 6.3 relates to the floor in the third floor kitchen and the remedial work required is “wash the floor covering”. Some of the items do not demonstrate lack of repair because they are stated to be matters to be addressed before the expiry or surrender of the lease. For example, item 5.3 concerns “windows, doors & joinery”, and under the heading “Breach” says “windows, doors and joinery are all in good decorative order”, and the remedial work required is stated to be “within 12 months of the expiry/surrender of the lease clean down, prepare and redecorate all windows, doors and joinery in accordance with the lease covenant.” Similar wording appears in clauses 7.3, 7.4 and 7.5. It was an extraordinary feature of Mr. Fitzgerald’s evidence that not only had he not read the Schedule but he was unable to identify any single substantial breach or element of remedial work required. He simply resorted to repeatedly saying “my understanding of it is that the works hadn’t been carried out and there was issues” (Day 3, p. 17), or words to similar effect. He accepted that no letters had been written which belied his assertions that dilapidations were a matter of significant concern.
67. While the Receiver in his evidence did acknowledge that there were “some” repairs outstanding, he characterised these correctly in the Court’s view as minor. There is no evidence that the landlord regarded them as significant at any stage. It is notable that nowhere in the correspondence between 15th September, 2014 and 18th November, 2014 relating to the consent requested by the plaintiff did the defendant’s solicitors, Arthur Cox, identify any significant items of disrepair or identify what works they were referring to when they stated “we understand that no works have been carried out” (their letter of 2nd October, 2014 to A.C. Forde & Co.). In this context there was no justification for the defendant’s request in Arthur Cox’s letter of 20th October, 2014 for “full details of the works that had been undertaken by your client to rectify the matters identified in their Schedule of Dilapidations”, or the statement that following receipt of that information the defendant’s surveyor would inspect the property to verify the works carried out.
68. It was also not disputed that it was on the insistence of the defendant that the third Schedule of Dilapidations was placed in the Data Room.
69. The Receiver accepted that in the Tender Documentation prospective purchasers were advised “some of the work” had been carried out. However, he denied that there was any breach, stating (Day 1, p. 25) – “again we would have taken advice on that, that in terms of when the Notice of Dilapidation was served upon us, we engaged our own consultant to review the Schedule of Dilapidations and he reported back to us and he told us that in very simple terms the matter of dilapidations were of a decorative nature and of a minor nature. That’s the advice we got.” See also his evidence to similar effect referring to retaining there own expert Val O’Brien & Associates who reviewed the Schedule of Dilapidations and informed the Receiver that “all matters in relation to the dilapidations had been dealt with apart from minor elements…” (Day 1, p. 21).
70. For these reasons I prefer the evidence of the Receiver in relation to the dilapidations issue. I do not accept that there was any significant or material breach of the repair covenant at the time that consent to assignment was sought – at most there were some minor matters outstanding. I do not accept the contention in Arthur Cox’s letter of 31st October, 2014 that dilapidations “are a live issue”, particularly having regard to the content of the third Schedule of Dilapidations to which I have referred. I found Mr. Fitzgerald’s evidence on this issue entirely unconvincing.
71. It was put to Mr. Fitzgerald in cross-examination that the only reason for the third Schedule of Dilapidations, and the requirement that it be put in the Data Room, was to deter prospective purchasers and thereby enhance the prospects of Starpin Ltd. succeeding in the tender process. His response was that dilapidations were a “real live issue” (Day 2, p. 86), and “that potential buyers should understand that there was a dilapidation there and it was quite substantial” (Day 2, p. 83). He was then asked:-
“ Q. Are we taking that as a yes?”
A. Yes” (Day 2, pp. 86-87)
72. This was a virtual admission by Mr. Fitzgerald that the real purpose behind obtaining the third Schedule of Dilapidations and requiring that it be put in the Data Room was to put off other potential purchasers. I find that this was the defendant’s real motive in preparing that Schedule and putting it in the Data Room, and in pursuing that issue in the correspondence sent on the defendant’s instructions by Arthur Cox in response to the request for consent. I find that as that correspondence between solicitors developed the defendant, through its solicitors Arthur Cox, realised the weakness of the defendant’s position. Whether as a ground for refusing consent or simply refusing to consider the application for consent, this issue dissolved on 6th November, 2014 when A.C. Forde & Co. confirmed that the proposed assignee would deal with any outstanding works referred to in the Schedule of Dilapidations, and enclosed signed undertakings in that regard from Sequana and Ardan. I am not satisfied that the dilapidations issue was or could have been a bona fide or a valid reason for failing or refusing to consider the application for consent. I am further satisfied that it was not, taken alone or in combination with any other factors, a reasonable basis for the defendant to withhold consent to assignment as of 18th November, 2014. I am also satisfied, having regard to my further findings, that it was raised for an ulterior motive.
Licensees for which there was no Landlord’s Consent
73. The position taken by Arthur Cox solicitors on the defendant’s behalf in correspondence prior to the issue of proceedings was last stated in their letter of 31st October, 2014 in the following terms:-
“The alienation issue similarly remains live as between our Clients. Your letter states that our Client has always been fully aware of the various licensees. This is not the case. Our Client has only recently been made aware of the identity of all of their licensees and their consent has not been sought in each case. It is noteworthy that your Client has only furnished documentation in respect of the Licenses last week and has never requested nor applied for the appropriate consent in each case.
And now that our Client has received a full list of Licensees currently in occupation, it is, for the first time, in a position to undertake a review of the content of these licenses. Also, please confirm that our Client should interpret the provision of this information as a formal request for the consent of our Client to the grant of these licenses, in accordance with Clause 3.2.1 of the leases. We are reviewing each of the licenses with our Client and will provide our comments and queries, very shortly.”
74. The Receiver in his witness statement, which forms part of his evidence, said that he was surprised that this issue had been raised during the consent process as “at no stage during the tender process did the Landlord raise any issue whatsoever concerning the licenses. I say it was only when the company connected to the Landlord (Starpin Ltd.) was unsuccessful in the tender process that the Landlord started to raise these issues” (para. 17).
75. The Receiver asserted that there could be no doubt that the Landlord was fully aware of the occupation by the licensees, and in support of this he refers, in para. 23 of his witness statement to a number of documents:-
1. A letter dated 21st October, 2010 from Arthur Cox solicitors to him as Receiver confirming the purchase by the defendant of the Premises, and requesting redirection of payments to the defendant. This letter stated that:-
“also, we understand that a short-term letting was permitted to Eco Securities Group Plc and that permitted subletting has expired. Please clarify whether this Tenant is still in occupation and if so the status of this occupation. Clearly no Landlord and Tenant rights should be allowed to accrue and you might confirm the position in this regard.”
2. In the Receiver’s letter dated 5th September, 2011 to Mr. Pat Walsh of “the Louis Fitzgerald Group” the Receiver stated that:-
“I would appreciate if you would formally confirm your consent to the proposed sublease with RF Intro Agency Ltd., a copy of which I enclose for further information.
I trust the above is in order, however should you have any queries or require clarification on any point please do not hesitate to contact my colleague…”
3. In a response by email dated 14th September, 2011 Mr. Walsh responded:-
“Both leases seemed to be in order but obviously our consent is subject to receipt of properly completed and signed leases and deeds of renunciation. Any queries give me a shout.”
4. By letter dated 19th June, 2013 the Receiver wrote to Mr. Pat Walsh of the Fitzgerald Group stating that:-
“… please find enclosed, a schedule of the subtenants at 39 – 40 Dawson Street.
I trust the above is in order, however, should you have any queries or require clarification on any point please do not hesitate to contact my colleague…”
5. Attached to this letter was a Table listing ten subtenants of the Premises, indicating the term (in months) of their occupation, and the dates upon which they commenced. One of the occupants “Intro” had commenced occupation on 1st March, 2011 and was on a 12 month “rolling” term. Another, Ali Coffey was on a 12 month term with six month break, and commenced occupation on 20th June, 2013. The other eight named occupants were all on 12 month terms and commenced occupation between February and April, 2013.
6. That letter and Table elicited a response from Arthur Cox solicitors on behalf of the Fitzgerald Group by letter dated 1st July, 2013. They “noted the Schedule of subtenants which were furnished to our Client which would indicate that there are now ten separate subtenants in place at the property”. They noted that Eco Securities International Ltd. appeared no longer to be a subtenant, and they requested confirmation. They noted that Intro had been in possession since 1st March, 2011 and they sought confirmation of “the precise term for which they currently occupy and also that an appropriate Deed of Renunciation has been executed in respect of this arrangement”. They also sought confirmation that the first occupation by each of the other nine subtenants commenced on the dates stipulated in the Schedule (Table) and that there was no prior occupation by them. This obviously demonstrated the defendant’s solicitors’ concern that no subtenants or licensees should obtain any Landlord and Tenant rights in respect of those parts of the Premises occupied by them. However, the landlord’s solicitors expressed no concern over the absence of prior written consent to the licenses, and they did not seek applications for consent.
7. On Mr. Powell’s behalf, his firm replied to Arthur Cox by letter dated 12th July, 2013. This letter confirmed that Eco Securities were no longer tenants, their lease agreement having been terminated on 8th May, 2012. They then stated:-
“RF Intro Ltd. signed a new lease agreement on 21st September 2011 for one office space at 40 Dawson Street. A Deed of Renunciation was also signed in relation to this letting at the same date.
On 21st January 2013 RF Intro signed a LICENSE AGREEMENT to occupy 3 office spaces at 39 and 40 Dawson Street, through letting agents Bespoke. It is the letting agent’s advice that the rights conferred by such a license agreement are very different to that granted by a lease, and that no automatic entitlement to renew applies until at least five years of occupancy. Further it is the letting agent’s advice that this license agreement supersedes the earlier lease agreement in place with RF Intro Ltd.
Following on from the first license agreement outlined above, a further 9 license agreements have been signed by various companies to occupy office spaces at 39 and 40 Dawson Street.
I trust that this clarifies the questions raised by your Client, however should you have any further queries please contact the undersigned.” This letter did not provoke any further response.
76. The Receiver asserted that at no stage was any objection raised by or on behalf of the landlord to the licenses during or following this correspondence, and prior to Arthur Cox’s letter 2nd October, 2014 which for the first time raised alleged breach of alienation provisions as a matter to be addressed before the issue of consent of the proposed assignment would be considered. The Receiver asserted that the failure by the landlord to object to the licenses granted by him in his capacity as the Receiver could only be deemed to be acquiescence on the part of the landlord.
77. In cross-examination of the Receiver it was put to him that there were other licensed subtenants referred to in the Conditions of Tender Documents Schedule at item 19, referring to License Agreements with Irogon, and Amicus Recruitment. The Receiver explained that these were licenses created in the year 2014 (Day 1, p. 41), and indeed the Documents Schedule lists their dates as being 13th May, 2014 and 4th February, 2014, respectively. He said that they were negotiated by the operator of the property, Splash Hotels and “our understanding was that provided there was a Deed of Renunciation contained within the licenses that rights did not accrue to particular occupants, that our understanding was the landlord didn’t have a difficulty” (Day 1, p. 41). He accepted that the landlord would not have seen these two licenses until copies were provided on 24th October, 2014 to Arthur Cox (during the consent process). The Receiver stated that “what I do know is that the landlord was aware of the nature of these rolling licenses” and “…I restate that there was a practice in operation, and again you know we would operate it as best practice. Certainly, if the landlord had indicated at any stage that he required, you know, a formality as regards these licenses, we would have concurred with that” (Day 1, p. 43). The Receiver was then referred to one of the “office based license agreements” furnished to Arthur Cox, dated 23rd July, 2014, with a license C “Rathula”, and due to commence on 1st August, 2014. This arose during the Tender Process. The Receiver acknowledged that he would not “personally” have known the identity of the occupants but their requirements were “that they meet certain standards; that there would be, obviously, financial covenants; that it be in the form of a license, and there would be absolutely no right, any rights in relation to the occupancy of the properties.” (Day 1, p. 46)
78. In his evidence the Receiver confirmed his understanding that the licenses were in the Data Room. It was not disputed that Mr. Nash, Financial Controller of the Fitzgerald Group, visited the Data Room on 13th June, 2014. The Receiver confirmed that he did not at any stage after that visit hear any issue being raised in relation to the licenses (Day 2, p. 10).
79. In his witness statement and his oral evidence Mr. Fitzgerald relied on the fact that the Leases at clause 3.21 provided that the tenants might not assign or sublet or part with possession of the property without the landlord’s consent, such consent not to be unreasonably withheld. He relied on the correspondence in 2011 and 2013, referred to above, as not constituting a request for or a provision of or form of consent, and maintained that details of the license arrangements “were first provided by Fiona Fitzpatrick of Duff & Phelps on behalf of Mr. Farrell by email to my colleague, Pat Walsh of the Fitzgerald Group, on 24th October 2014.” (para. 3.17 of his witness statement). He asserted that the Receiver did not “follow proper procedures”, and that it could not be said that the defendant acquiesced in connection with the arrangements.
80. Under cross-examination Mr. Fitzgerald accepted that when the defendant bought the property it was aware that there were people in occupation of the office space, be they subtenants or licensees. He said that “when I bought the premises my legal people would have assured me that everything was in order and they were all checked out and everything was above board at that time.” (Day 3, p. 27). He accepted that the defendant continued to accept rent from the first named plaintiff following the exchange of information between the Receiver and Arthur Cox/ Mr. Pat Walsh in 2013.
81. I should refer to one other piece of evidence on this issue which I found to be significant. On Day 3 I addressed the following question to Mr. Fitzgerald: –
“Q. Mr. Fitzgerald, are you saying that Chupn’s real concern was the financial covenant, that really the dilapidations and licenses were secondary matters, that there were concerns but not major concerns?
A. Yes, absolutely, yes, because…
Q. That really the financial covenant was blocking you?
A. Absolutely because as a person that operates in Ireland and I was told by my professional people that I would have to go to Malta and go to the US or somewhere else in the event of a dispute and that would be a major problem for me because I don’t have that kind of experience to operate outside of Ireland because I don’t have any business outside of Ireland and I needed comfort in that area and that was the main problem.”
82. No evidence was given by Mr. Patrick Walsh, or by Mr. Nash who inspected the Data Room on behalf of the Fitzgerald Group. I infer from this that there is no genuine evidence on the part of the defendant or its advisors prior to the correspondence from Arthur Cox in October, 2014, in relation to the occupation of office parts of the Premises by licensees. I also conclude that Mr. Fitzgerald had no real or genuine concerns about this issue at any relevant time.
83. In argument counsel for the defendant relied on the Receiver’s acceptance that from a landlord’s point of view knowing who is occupying the property is important. It was argued that the Receiver held its information both as to the identity of the occupants and the nature of their occupations, and held the agreements under which they occupied. Reliance was placed on s. 43 of Deasy’s Act 6 which provides:-
“Where any lease made after the commencement of this Act shall contain or imply any condition, covenant, or agreement to be observed or performed on the part of the tenant, no act hereafter done or suffered by the landlord shall be deemed to be a dispensation with such condition, covenant or agreement, or a waiver of on the benefit of the same in respect of any breach thereof, unless such dispensation or waiver shall be signified by the landlord or his authorised agent in writing under his hand.”
84. Counsel argued that there was no evidence in writing constituting waiver by the defendant of compliance with clause 3.21 in respect of the licenses. Counsel for the plaintiffs argued that Mr. Fitzgerald accepted that the questions of dilapidations and licenses were “secondary matters” (Day 3, p. 40), and that his various advisers never concerned themselves in practical terms with the licenses. He argued that they knew they were there and everything about them, but as the tenancy progressed they really did not concern themselves with them, until the application for consent was made. Reliance was also placed upon the fact that copies of the licenses were in fact furnished to Arthur Cox on or about 24th October, 2014.
85. On the evidence I find that the raising by the defendant of the issue of breach of covenant in respect of the absence of formal written consent in respect of the licenses was not raised bona fide by the defendant – either as a reason for refusing to consider the application for consent to assignment or as a reason for refusing that consent. I find that the defendant was aware of the presence of occupants, be they subtenants or licensees, from the time that it acquired the landlord’s interests in the premises in 2010. I find that the defendant was, through its solicitors Arthur Cox, aware insofar as it wished to be of the details concerning subtenants/licensees following the correspondence and exchange of emails in mid-2013. Mr. Fitzgerald in his evidence repeatedly resorted to answering questions by reference to his reliance on his professional advisors. In Arthur Cox solicitors, the defendant had most eminent solicitors, and they were specifically engaged to enquire into sub tenancies/licenses in mid-2013, and having obtained the responses outlined above they did not pursue the matter any further. It was reasonable thereafter for the Receiver to assume that the landlord was content with practical arrangements under which short term licenses would be made occupants, and rolled over from time to time, provided that Deeds of Renunciation in respect of landlord and tenant rights were assigned – and in effect provided that none of the occupants obtained any rights under the 1980 Act. Furthermore Mr. Nash, when inspecting the Data Room in June, 2014 had available to him the current information in relation to licenses, yet no issue was taken by him or Starpin Ltd. or the defendant or anyone in the Fitzgerald Group in relation to the absence of formal written consent in respect of any of the licensees.
86. For these reasons it was disingenuous of the defendant to raise through the correspondence from Arthur Cox the issue of licenses. I am satisfied that in instructing or permitting Arthur Cox to raise these issues the defendant was seeking to pursue purely legal grounds upon which to obstruct the consent process. The issue was used as an excuse to avoid giving due or proper consideration to the application for consent. I am also of the view that following the production of copies of the current license agreements on 24th October, 2014 Arthur Cox on the defendant’s behalf had ample time in which to review them and consult with their client. Accordingly, even if I am wrong, and the defendant raised a bona fide issue, this should reasonably have been regarded as resolved within days of receipt of those copy licenses, and the defendant should have proceeded to consider the application for consent to assignment on its merits. That this did not happen before the proceedings were commenced lands a further support to my findings.
Ulterior Motive
Disputed Evidence on Ulterior Motive
87. Mr. John Ryan of CBRE on behalf of the plaintiffs gave certain evidence of contact with Mr. Fitzgerald prior to the date upon which consent to assignment was sought. The Fitzgerald Group had made an initial offer of €4.625 million for the premises, and at the second stage of the Tender, Starpin Ltd. submitted a tender of €5.2 million. Mr. Ryan gave evidence that on the 3rd July, 2014 he met with Mr. Fitzgerald in the Burlington Hotel and had a conversation around the mechanics of the bid process. He said Mr. Fitzgerald queried if the Schedule of Dilapidations posted in the Data Room had deterred or was likely to deter any party from participating in the bidding process. Although Mr. Fitzgerald in his evidence denied that that conversation took place, for reasons that will become apparent I prefer the evidence of Mr. Ryan on this point.
88. Mr. Ryan stated that he had further telephone conversations with Mr. Fitzgerald on 16th July, 2014, four dates in August and four dates in September. Mr. Ryan’s evidence in accordance with his witness statement at para.s 3.6-3.8 was as follows:-
“3.6 In a telephone call on 6th September, 2014: Louis Fitzgerald telephoned to say that he understood the “sale of Café en Seine was not going his way”. He asked if there were any other difficult landlords to deal with in this whole process. I asked what did he mean and he responded by saying he has had considerable difficultly with the tenant and was the Receiver and AC Forde & Co., aware of these difficulties? I responded that I understood that there had been considerable correspondence between his legal advisers and the Receiver particularly in relation to the interim Schedule of Dilapidations. Louis concluded by saying he would be “going to London for his legal advice on this one”.
3.7 In a further telephone call on 10th September: Louis Fitzgerald telephoned and stated that it was all around town that another entity was buying Café en Seine. He said that the Receiver had broken all the rules and he could initiate legal proceedings to get the property back. He further stated that despite repeated requests (referring to the schedule of dilapidations) nothing had been done with the premises, there were unauthorised people on the premises on license agreements that he knew nothing about and for which landlords consent was not granted. He also raised an issue regarding insurance. I responded that he should put his concerns in writing to Pearse Farrell (Receiver) immediately. I also pointed out that no formal decision on the tender process had yet been made and that the decision date was expected on 15th September. As this date was only a few days away Louis responded to say that he would not do anything and would wait to hear from me.
3.8 I have read the witness statement of Louis Fitzgerald and in particular paragraph 1.5. At no time in any of my conversations with Louis Fitzgerald did he raise the issue of covenant strength of any prospective new tenant with me. His sole focus was on the schedule of dilapidations and landlords consent around the licence agreements”.
89. Mr. Ryan was not challenged on this evidence. Under cross-examination Mr. Fitzgerald was asked what he meant by his reference to “other difficult landlords”, and his response that it was “… maybe just soft talk or pub talk, to know did he [have] any difficulty with any other landlords” (Day 2, p. 107). A further response from Mr. Fitzgerald was “probably there I was inquiring to know other landlords that would have, also any other issues with other landlords in relation to the sale of the other premises.” He denied that there was any threat implicit in the comment.
90. When the comment about “going to London for his legal advice on this one” was put to Mr. Fitzgerald he responded:-
“I think it was kind of soft talk in relation to possibility, there was a lot of talk going around at the time with NAMA and stuff like that and builders were drinking in the pub and they might have said we are going to London because we have a problem, you know, it was soft talk, it was pub talk, there was nothing in that.” (Day 2, p. 110)
Again Mr. Fitzgerald denied that there was any threat contained in this comment.
91. The comment that “the Receiver had broken all rules and that he could initiate legal proceedings to get the property back” was put to Mr. Fitzgerald. He said that he had no memory of that conversation with Mr. Ryan, and denied that he would threaten Mr. Ryan. Mr. Fitzgerald denied that at that time in September he had in mind initiating proceedings to wind up the first named plaintiff to thwart the assignment to Ardan.
92. In considering this evidence I bear in mind that Mr. John Ryan was subjected to cross-examination limited to the question of whether or not Mr. Fitzgerald had raised, as he contended, the question of the financial strength of the incoming tenant in any of their conversations. Mr. Ryan’s evidence was that the financial strength of any proposed assignee was never raised with him by Mr. Fitzgerald, and he emphasised this on several occasions (Day 2, pp. 50-52). Not only was Mr. John Ryan not challenged in relation to the content of the conversations described in his witness statement, but no reason was suggested as to why his recollection or evidence should be disbelieved or disregarded.
93. I also take into account the fact that the Fitzgerald Group holds extensive assets and is very successful, and that Mr. Fitzgerald could be described as a businessman of substance. His evidence was that the Fitzgerald Group consists of over thirty companies, and holds twenty-three or twenty-four licensed premises, and engages in other enterprises such as letting apartments and bookies offices, and that one way or another it holds up to thirty different premises. Accordingly, I give great weight to Mr. Fitzgerald’s statement that “myself and my son Eddie purchased Café en Seine with the intention that someday we might own it” (Day 2, p. 78), meaning that they had purchased the freehold and intended that some day they would be the occupiers. I have also come to the conclusion that Mr. Fitzgerald was not indulgencing in “soft talk or pub talk” in his conversations with Mr. John Ryan. My finding is that in mentioning “other difficult landlords” and similar matters, and in saying that “he was going to London for his legal advice”, and that the “Receiver had broken all the rules” Mr. Fitzgerald was giving a clear indication to the Receiver’s selling agent that he would not accept the outcome of the tender process, that he would use the position of landlord to prevent the assignment proceeding, and that he would take all possible steps “to get the property back”. While there was insufficient evidence to satisfy me that as of 6th or 10th September, 2014 Mr. Fitzgerald had decided to attempt to put the first named plaintiff into liquidation in order to force a forfeiture of the Leases, I am satisfied that at least from that point onwards he was actively engaged with his management and advisors in obstructing the completion of any assignment of the leasehold interests, and seeking to advance the objective of obtaining possession of the premises. Accordingly, I am satisfied that prior to the date upon which consent to assignment was sought the defendant through the control of Mr. Fitzgerald intended to pursue an ulterior motive, namely the desire to obtain possession of the Premises, in addressing the anticipated request for consent to assignment.
The Petition
94. In a Petition dated 14th January, 2015 Avalondale Ltd. applied to wind up the first named plaintiff on the basis of a debt of €105,857.07. The debt arose on foot of goods supplied and delivered by Comans Wholesale (“Comans”). On the 22nd December, 2014 Comans had sent a simple demand for payment within twenty-one days. The Petition alleged that a “Debt Transfer Agreement” was entered into on the 13th January, 2015 whereby Comans transferred the debt to Avalondale Ltd., and notice of such transfer was giving to the first named plaintiff on 14th January, 2015. The Petition was signed by Hugh J. Ward & Co. solicitors, and Hugh J. Ward, as a Director of Avalondale Ltd., swore the affidavit verifying the Petition and a further affidavit in support of it.
95. Affidavits were sworn by and on behalf of the Receiver in opposition to the Petition. Objection was taking on various grounds including that there was no reference to consideration in respect of the assignment of the debt; that Avalondale had never issued a separate letter threatening proceedings to wind up prior to issuing the Petition; that at least part of the alleged debt was disputed or the Receiver was willing to discharge part; that the Petitioner was an unsecured creditor and there was no prospect of any dividend to unsecured creditors; that “the only rational explanation for the Petition – and indeed the apparent sale of debt that proceeded it – is that it has the very real potential to stymie the sale of the Leases, and to effectively short circuit the [consent] Proceedings, and was indeed, designed for that purpose”; and that there was a very real prospect, if the company was wound up, of rendering the secured creditor unable to realise some €5 million in value of its security (see the affidavit of the Receiver dated 18th February, 2015). In an affidavit sworn on 13th February, 2015 in opposition to the Petition by Mr. Eamonn Fleming, the purchasing manager of Café en Seine, he deposed to a meeting he attended with Comans representative Mr. Costello from which it emerged that the debt in question was an old debt that had arisen from the examinership period which predated the receivership of the plaintiff company. At para. 8 of that affidavit Mr. Fleming averred that:-
“Mr. Costello contributed most to the discussion and while he was unaware of the connection of Splash Hospitality to the purchase he freely indicated that he was aware of the purpose of the acquisition of the Comans debt by Avalondale and of the intention to use the enforcement of that debt via a winding up petition to collapse the Leases of the Company in receivership for the benefit of the landlords.”
96. On 2nd March, 2015 Mr. Fitzgerald swore an affidavit in support of the Petition proceedings. In para. 1 he stated that he was a Director of Feldway Ltd., and that company held a minority shareholding in Avalondale Ltd., the Petitioner. At para. 2 he stated:-
“2. I am a Director of a shareholder in the Petitioner herein and I say that the acquisition by the Petitioner of the debts owed to Comans Wholesale by Perfect Pies Ltd. (in Receivership) … was done for sound commercial reasoning. I confirm that one of the reasons for making the petition herein is that there may also be a commercial benefit to the landlord of the Company, which I am a Director, in addition to benefits to the Petitioner.” [Emphasis added].
97. At para. 17 he referred to the consideration for the acquisition of Coman’s debt and confirmed “… that the consideration as agreed between the parties pursuant to the Agreement aforementioned was paid by Avalondale Ltd. (the Assignee and therein) to Comans (the Assignor) on the 13th January, 2015.”
Pointedly nowhere in this affidavit or in the Petition papers is the amount of the consideration mentioned. At para. 34 of that affidavit Mr. Fitzgerald stated:-
“34. I say that the presentation of the Petition now properly before the Court was motivated by the interests of the shareholders in Avalondale having taken a commercial view on the potential to recover a long outstanding debt offered to the Company by way of assignment in full from a creditor who had received no assurances that it would ever recover monies owed to it. Further to same, the shareholder of whom I am a Director, was motivated by a connection to the Landlord of the property, whose rights and entitlements were being ignored. This is not, as is suggested, an ulterior motive, this was a motivation behind the involvement of Feldway Limited in Avalondale. This is never been hidden.”
98. This led to a further round of affidavits, and in his affidavit sworn on 6th March, 2015 the Receiver alleged that Mr. Fitzgerald was acting “… not for objectively legitimate commercial purposes, but only in the light of the disappointed bid of Starpin”, and that this was “… his attempt to set up the right to forfeit … evoking the jurisdiction of this Honourable Court, and undermining the jurisdiction of the Commercial Court – it is quite simply an abuse of process on two fronts” (para. 10). He alleged that the Petition “… only serves to advance the commercial ambitions of Mr. Fitzgerald and Starpin, the disappointed bidder”.
99. The Petition was in due course heard on affidavit by Ms. Justice Kennedy and on 12th June, 2015 she ordered – (1) that the said Petition be refused and (2) “that the Petition herein do stand adjourned with liberty to re-enter same on seven days notice with the stay on the proceedings herein pending the determination of the hearing before the Commercial Court on the 6th day of October, 2015”.
100. The reference to the latter hearing is to these proceedings. I was informed that the costs of the Petition were also not dealt with by Ms. Justice Kennedy.
101. In his witness statement before this Court Mr. Fitzgerald at para. 5.1 rejected the suggestion that the defendant had an ulterior motive in not providing consent to the proposed assignment, and rejected the inference that the plaintiffs sought to draw that the objections raised by the defendant were other than bona fide. He was cross-examined in relation to the Petition proceedings at some length, and additional facts emerged. He admitted (Day 3, p. 37) that “… basically we were a bit disgruntled …” at losing the tender. He accepted that he used a different set of legal advisors in pursuing the Petition, and that Arthur Cox’s were kept in ignorance of that proceeding.
102. Mr. Fitzgerald in his oral evidence indicated that the idea for bringing a Petition originated with a telephone call to his office from a person unknown to him, but known to his manager Mr. Pat Walsh. Initially Mr. Fitzgerald stated that this call came in December, 2014 “… from a legal person, Cormac, his second name is Brogan”. Mr. Fitzgerald said that “this person rang out of the blue” (Day 2, p. 120), and that he didn’t know why he had made contact. In his evidence which continued on the following day Mr. Fitzgerald revised his evidence stating:-
“I looked in my diary last night and Cormac Gordon is his name. He is a solicitor and a property person. He operates around Baggott Street I am told. He contacted our office in relation to a possible legal avenue we could take and that was pursued. And that is how that came to pass. … I thought it was very early December, or late November – early December” (Day 3, p. 34).
103. Mr. Fitzgerald also agreed under cross-examination that he did not inform Arthur Cox solicitors of the Petition proceedings, and that he also did not inform his accountants Farrell Grant Sparks, notwithstanding that these were the professionals upon whose advice he was “very dependent” (Day 2, p. 114).
104. Mr. Fitzgerald told the Court that Mr. Pat Walsh took up the running of the Petition proceedings, along with Mr. Cormac Gordon, but that he was kept informed of what was going on (Day 3, p. 47). In response to questions from the Court Mr. Fitzgerald said that after the initial telephone call from Mr. Gordon the Fitzgerald Group were looking for a debtor of the first named plaintiff company and they approached Mr. Geoff Coman, a director/owner of Comans with whom Mr. Fitzgerald was acquainted, to enquire as to whether he would be interested in selling Comans debt to the Fitzgerald Group. Mr. Fitzgerald had known Mr. Coman over some 20 years, and had regarded him as a casual friend. In relation to the purchase of the debt of approximately €105,000 the deal verbally agreed was that if the Fitzgerald Group succeeded in the Petition proceedings brought by Avalondale Ltd Comans would be paid in full, regardless of whether there were assets in the first named plaintiff available to discharge that indebtedness. Furthermore, it was verbally agreed that there was to be an initial consideration of €10,000, which was to be a credit against €105,000 in the event that the petition was successful (Day 3, pp. 54-55). Mr. Fitzgerald confirmed that this deal with Comans was concluded before the letter of demand dated 22nd December, 2014 was served on the first named plaintiff.
105. In that the contract between the Fitzgerald Group/Avalondale Ltd. and Comans Wholesale was partly oral and partly in writing, the orally agreed terms were not put before the High Court in the affidavits sworn by or on behalf of Avalondale in the Petition proceedings. The only information provided to the Court was in the form of a written “debt transfer agreement” dated 13th January, 2013 which did not state the amount of the consideration, but stated at clause 1.B:-
“Provided that the consideration (as agreed between the parties) for the Debt has been paid by the Assignee to the Assignor, immediately upon the execution of this Agreement, the Assignor assigns to the Assignee as legal and beneficial owner and free from any encumbrance, the Debt and all rights and obligations arising from same.”
106. This expressed provision in the written agreement was contradicted by the evidence of verbal agreement given by Mr. Fitzgerald in his oral evidence to this court, and as outlined above – and from which it is apparent that all of the consideration had not been paid prior to the written agreement of 13th January, 2015 because, if the Petition was successful, a balance of approximately €95,000 fell to be paid to Comans Wholesale. It is therefore the case that Avalondale Ltd./the Fitzgerald Group and the deponents of affidavits on there behalf, including Mr. Fitzgerald, failed to make full disclosure of all relevant facts to the High Court in the Petition proceedings.
107. Under cross-examination Mr. Fitzgerald was also pressed in relation to his reasons for commencing the Petition proceedings. It was put to him that he commenced the petition to procure the liquidation of the first named plaintiff, and he appeared to agree (Day 2, pp. 116- 117). This question was put again by the Court at p. 118:-
“Q. … [Counsel] asked you was the reason that you went down the forfeiture route, forfeiture, not to collect the debt, was solely to ultimately try and get procession of the property and your response to that was “yes”?
A. My response to that was yes, I did go down that route for that reason.”
108. The oral evidence given by Mr. Fitzgerald at the trial of this action in relation to the Petition proceedings leads me to the following conclusions:-
1. As the entire contract between Avalondale Ltd./the Fitzgerald Group and Comans Wholesale for the acquisition of the Colman debt envisaged, if the Petition was successful, repayment of the full amount of that debt by Avalondale Ltd. to Comans Wholesale (regardless of what might be recovered in the liquidation), there was in fact no commercial benefit to Avalondale Ltd., Feldway Ltd., the Fitzgerald Group, or the defendant in these proceedings, in bringing the Petition.
2. It follows that Mr. Fitzgerald attempted to mislead the High Court hearing in the Petition when he averred, in his affidavit sworn for those proceedings on 2nd March, 2015:-
“34. I say that the presentation of the Petition now properly before the Court was motivated by the interests of the shareholders in Avalondale having taken a commercial view on the potential to recover a long outstanding debt offered to the Company by way of assignment in full from a creditor who had received no assurances that it would ever recover monies owed to it.”
3. This is confirmed by Mr. Fitzgerald’s admission in evidence before this Court that forfeiture of the Leases on liquidation of the first named plaintiff was the sole motive for the Petition.
4. It also follows that Mr. Fitzgerald’s averment in para. 2 of his affidavit that “one of the reasons for making the Petition herein is that there may also be a commercial benefit to the landlord of the Company, of which I am a director, in addition to benefits to the Petitioner”, was deliberately false and misleading: in fact the benefit to the landlord was the only reason for the Petition.
5. The manner in which the defendant through its solicitors Arthur Cox responded to the request for consent to assignment between 15th September and 18th November, 2014 must now be assessed in the light of these findings. They corroborate the plaintiffs’ contention that the defendant never intended to give due or proper consideration to the request for consent, and that its responses through Arthur Cox reflected the ulterior motive of trying to obtain possession of the Premises.
6. These findings also raise serious doubts over Mr. Fitzgerald’s credibility when, in his evidence, he stated that his real concern in the context of consenting to an assignment was the strength of the financial covenant on offer. Quite apart from the fact that this was not raised at any point on the defendant’s behalf in Arthur Cox’s correspondence with the plaintiffs’ solicitors, I reject as untrue Mr. Fitzgerald’s evidence that he considered or entertained any real concerns over the strength of the financial covenant offered prior to the issue of these proceedings.
Conclusions
109. I therefore conclude that the defendant unreasonably withheld its consent to the assignment to Sequana on the basis of ulterior motive, namely the desire to obtain possession of the Premises. Regrettably, in order to achieve this ulterior motive the Fitzgerald Group/Mr. Fitzgerald were prepared to take extraordinary measures in bringing the Petition proceedings which, in the light of the oral evidence adduced before this Court (but not available to the Court hearing the Petition) were, in the opinion of this Court, an abuse of the process. This abuse was seriously exacerbated by the fact that Mr. Fitzgerald made positive averments on affidavit before that Court that he contradicted in admissions and credible evidence of the verbal terms of the agreement with Comans in his evidence before me. The seriousness of this abuse will be readily appreciated: had the Court been misled by those averments into ordering winding up of the first named plaintiff, and the Leases had thereby become forfeit, the Fitzgerald Group would have obtained possession of the Premises at little or no cost (at worst €10,000 and some legal costs) notwithstanding that some months earlier Mr. Fitzgerald on behalf of Starpin Ltd., a company controlled by his son, had offered in excess of €5 million to buy the leasehold interests.
110. I find that this ulterior motive prompted the defendant to rely on spurious reasons, namely non-repair and lack of consent to licensees, to decline to consider the plaintiff’s application for consent to assignment. If there was any material want of repair, this was easily remediable, and was satisfactorily addressed (as the defendant appeared to accept) by the undertakings from Sequana and Ardan to be responsible for any outstanding works. With regard to licenses the defendant was aware of the licensees and the nature of their occupation at least since July, 2013, and raised no objection, and was aware of the up to date position following access to the Receiver’s Data Room during the tender process, and was furnished copies of the licenses in good time to review them prior to initiation of these proceedings. These were all short-term and no suggestion was ever made that any licensee could acquire landlord and tenant rights or that the licenses could otherwise prejudice the landlord’s interest in the Premises. It is clear from this and the timing of the raising of this issue that it was not raised as a bona fide objection to consent to assignment.
111. Insofar as the defendant might now be adjudged to have had good reason to withhold or refuse consent based on the adequacy or otherwise of the sureties offered and the financial references provided for the assignee and the proposed sureties, a subject that I address shortly, I find that the defendant deliberately elected not to consider these issues at the relevant time because of its ulterior motive. The defendant in this case cannot now retrospectively in this Court rely on such issues to suggest that it acted reasonably in withholding consent prior to the issue of proceedings in the light of my findings. It patently did not act reasonably. The defendant cannot rely on authorities such as Rice, Irish Bottle Glass and Boland v. Dublin Corporation to give new reasons for refusing consent to this Court when during the relevant period (15th September, 2014 up to the issue of proceedings) the defendant withheld consent for improper motive. If it were permitted to do so landlords could with impunity refuse or decline consent for improper motives and then later seek to rely upon some good reason. Furthermore, how could it be said, on an objective basis, that the landlord can now rely on a ‘good’ reason when my finding is that objectively and subjectively it never had any intention of addressing the request for consent on any bona fide basis and was intent on preventing the assignment proceeding; this would seem to be contradiction in terms. It seems to me that a practice of refusing or declining consent for an improper motive, and then later attempting to rely on a ‘good’ reason, is something that the courts should not encourage or permit, particularly in a case such as the present where the defendant’s desire is still to recover possession, and Mr. Fitzgerald persists in the notion that Avalondale Ltd.’s Petition might be re-activated after these proceedings are determined. Mr. Fitzgerald in his own evidence said that he and his son’s real objection to giving consent at the time was the inadequacy of the ‘financial covenant’, yet they never raised this and chose to rely instead on spurious grounds of objection. I do not accept Mr. Fitzgerald’s evidence on this point, but even if I did, a landlord surely cannot be permitted to deliberately keep secret from the tenant what it claims to be the real reason for declining consent and later produce it like a rabbit out of the hat and rely on it in court.
112. I find that up to the date of issue of these proceedings the refusal to consider the application amounted to an unreasonable withholding of consent such that the plaintiffs were justified in applying to this Court for a declaration under s. 66. Accordingly, I will grant a declaration that the defendant, in delaying and failing to consent to the plaintiffs’ request for consent to assignment dated the 15th September, 2014, acted unreasonably within the meaning of the Leases and s. 66 of the Landlord and Tenant (Amendment) Act, 1980.
113. I do not consider that this is an appropriate case in which to dispense with the defendant’s consent to assignment however, assuming that the court has the power to make such an order (an issue that I do not decide). The reason for this is that, had the defendant given due and proper consideration to the application for consent to assignment, it would have been reasonable to refuse consent on a number of grounds related to shortcomings in the sureties offered and the financial references provided prior to the commencement of these proceedings. I propose to address these shortcomings given the likelihood that there will be a renewed application for consent.
The Financial Covenant
114. Both in the correspondence post the issue of these proceedings and in argument before this Court the parties addressed at some length the adequacy or otherwise of the security offered by the plaintiffs, and the financial strength of the proposed assignee/its parent company and the proposed guarantors. Insofar as the plaintiffs choose to maintain or renew their request for consent following this judgment, and in deference to the parties’ arguments, it is appropriate to comment on the reasonableness or otherwise of sureties and financial information proffered and the respective positions taken by the parties on these issues since the commencement of these proceedings.
115. This is particularly so having regard to the recently expressed willingness of the proposed assignee to provide reasonable additional security requirements. Of course the landlord cannot take unfair advantage of such a commitment, and it must be viewed in the light of the jurisprudence to which I have referred earlier in this judgment. In particular what is reasonable or unreasonable from the landlord’s perspective is an objective test, and one that takes into account the existing level of security over the payment of rent under the Leases. It also takes into account that what was originally prescribed by the Leases by way of guarantee may no longer be relevant or may not be objectively reasonable, but some replacement surety may be reasonable and appropriate.
116. The following comments are made obiter and seek to address only those issues that were disputed in these proceedings (many of the other elements of financial comfort tendered in respect of the assignee and offered sureties were not controversial):-
(1) Sequana – there will be many instances in which a shelf or start-up company, or ‘special purpose vehicle’, without a financial track record, will take on a tenancy. This of itself is not a reasonable ground for rejecting the proposed tenant, but is a good reason for requiring one or more guarantors with sound financial credentials. Projected EBITDA for Sequana reviewed by reputable chartered accountants is a not unreasonable offering to demonstrate likely financial standing once trading commences.
(2) Splash Hotels Ltd. – the fact that the assignee may wish to operate the business through a management agreement may be unusual but is not of itself, and without more, a good reason for withholding consent. Many tenants will engage managers to operate all or part of their business on the premises, and it seems to me that a landlord refusing consent on this basis would have to identify some further factor capable of prejudicing the recovery of rent before this could objectively amount to a good reason.
(3) Ardan – while some landlords might well accept as adequate the financial information furnished in respect of this proposed surety, closer scrutiny raises questions. It is also a new company, incorporated in 2012, that only commenced trading last year, and it is a holding company whose interests are intended to encompass Sequana (the Premises) as well as three other licensed premises acquired from the plaintiffs. The PWC letters relating to Ardan’s net assets and projected EBITDA are based not on any audit or even full accounts, but rather on “assumptions” prepared and furnished by the directors, and not surprisingly the letters and PWC terms of engagement are replete with reservations and disclaimers. Clearly PWC carried out an examination of limited scope. Although PWC confirm Ardan’s bank balance at 11th September, 2014 as €10 million, and the Balance Sheet (prepared by the directors) shows net assets of €10 million, the information furnished raises questions as to how it has been funded, and how it will continue to be funded, particularly in light of the fact that the overall cost of acquiring the four premises is €15 million (before any repairs or renovations are considered). Moreover, it appears from Appendix 2 to PWC’s letter of 4th September, 2014 that Ardan planned to acquire the freehold in two of the licensed premises; and it is implicit from the “Consolidated EBITDA Projections”, which project a €873,000 reduction in rental payments by Ardan between 2014 and 2015 and a commensurate increase in EBITDA, that Ardan planned to buy out these freeholds, but no information is provided as to how these buy outs would by funded. Evidence was given by Mr. Potter that a buy out could cost ten times the rent i.e. some €8.7 million, thus depleting Ardan’s assets. Further and of some significance, Ardan’s property interests are already covered by a Debenture issued in favour of Ulster Bank Ireland Ltd. registered on 25th May, 2015, and further property interests acquired by it would be similarly encumbered.
Of course it may be that with the passage of time audited accounts for Ardan have or will become available and these may give a more accurate picture of its financial strength, and enable the presentation of firmer projections.
(4) Accordingly, it was not unreasonable for the defendant to seek one or more additional sureties, particularly having regard to the amount of the rent and the commitment of the incoming tenant to address repairs. If one or more sureties with reasonably vouched and satisfactory financial status were offered, it would not be reasonable for the landlord to insist that these sureties be directors, or even shareholders, in Sequana. This is because the essence of the surety is that it should be a person or body to whom the landlord will be able to have practicable recourse to ensure that rent or other dues are paid.
(5) Apart from Ardan three other sureties are offered. I note that two of these, DP International Ltd. and J.T. Magen & Co. Inc., are in fact shareholders in Sequana, and one is a bank on a limited basis. I will address each of these, but I should first comment on the request in Arthur Cox’s letter of 18th November, 2014, repeated in their letters of 5th December, 2014, and 30th September, 2015, for directors to be guarantors i.e. for personal guarantors, based on the content of clause 3.21.3 of the Leases. This was supported by the evidence of Mr. David Potter to the effect that personal guarantees would “…not be flavour of the month with tenants at the moment for obvious reasons. Nobody likes giving them. Under normal circumstances with a trading entity they may not be required.” (Day 3, p. 94).
I do not accept it as reasonable for the landlord to insist on this requirement provided that corporate or banking sureties that are reasonably financially sound are offered. The case law cited earlier demonstrates that while the defendant has a legitimate interest in protecting himself from a tenant who may be unable to pay the rent or comply with the covenants, this interest may be just as well protected by a replacement guarantor (see Millett L.J. in Kened Ltd.), and there is no authority to suggest that this cannot be a corporate or banking guarantor or a third party who is not a director or personal shareholder.. Mr. Potter effectively accepted that since the recession it has been problematic obtaining personal guarantees for trading entities; given the extent to which personal guarantors have faced serious financial consequences in recent years, of which this Court is all too aware, that is not surprising.
(6) DP International Ltd. – although this company appears from the PWC report to have very substantial net assets, the difficulty is that three year’s audited accounts were requested to vouch this company’s financial status, but these were not available. The reason, which was not disputed, is that the company is based in Malta and is not required to file such accounts under domestic legislation. The PWC report of 5th September, 2014 is not based on a full audit and has reservations that limit its value in providing comfort. It also lists the values of some unlisted investments at cost, while other assets are valued using a fair value model. The evidence of Mr. Melia, an expert Chartered Accountant called by the defendant, was that this approach to valuation is inconsistent with the guidance in s. 9.26 of the F.R.S. 102 , an accounting standard/guidance that applies in Ireland. That is only a guideline, and if that were the only objection to the PWC report it might well be unreasonable to decline to accept DP International Ltd. as a surety on that basis alone.
However, it seems to me that a prudent landlord would insist on seeing audited accounts for at least the last accounting year of this company before accepting it as a surety. Moreover, its financial strength is based on its 100% ownership of Danu Investment Partners Ltd., which in turn owns various percentages of nine further companies six of whom are registered in Ireland, including a shareholding in Ardan. Within ‘the Ardan Group’ there is clearly quite a complex company structure, and this in itself might give rise to some legitimate concerns. It also begs the question why a guarantee is not offered by a more proximate company within the group e.g. Danu Investment Partners Ltd., or why the PWC report does not focus on that company.
(7) The mere fact that DP International Ltd. is registered abroad in Malta is said to be a reason why a reasonable landlord would not accept it as a surety. The reason suggested for this by Mr. Potter is the potential for difficulty in enforcing the security, or the perception of landlords that enforcement may be difficult. Where the surety offered is registered and has its centre of business or administration within the territory of an EU member state (such as Malta), I tend to the view (while not deciding this issue) that this would no longer be a valid objection because of the facility with which enforcement of judgments of the courts in one member state can now take place in another member state under EU law. This is particularly so where the proposed surety agrees to submit to the jurisdiction of the Irish courts and that their guarantee will be governed by Irish law, and where they nominate Irish solicitors to accept service of proceedings/notices. It would be wrong in a time of free market within the EU for potential sureties based in other member states to be effectively discounted as potential guarantors simply because they are based abroad. I do not regard the general perception of landlords that it may be difficult to enforce against foreign guarantors to be reasonable, at least in its application to this case.
(8) J.T. Magen & Co. Inc. – a guarantee from this company was offered by A.C. Forde & Co. in their letter to Arthur Cox of 24th November, 2014 on the basis that audited accounts would be furnished if the defendant executed a confidentiality agreement (“NDA”), and copy of which was enclosed. The defendant argued that the requirement that it sign an NDA was unreasonable as it would need to be able to disclose such financial information as it held on any guarantor in the event that the defendant was disposing of its interest in the Premises.
In my view this point was well made. It might be otherwise if the NDA was framed to allow the landlord to make limited and similarly protected disclosure to any potential purchaser of its interest in the Premises. In such circumstances it is hard to see how the landlord could refuse to enter into the NDA.
In any event, I note that the requirement of the plaintiffs that the defendant enter into an NDA has now been dropped so that there is currently no impediment to the defendant considering Magen’s accounts and assessing its financial suitability as a guarantor.
(9) Assuming that Magen is financially suitable to be a guarantor, insofar as jurisdictional certainty is concerned I am again of the view that if Magen agrees that Irish law is to apply, that Irish courts have jurisdiction, and nominates Irish solicitors to accept service of proceedings it would prima facie be unreasonable for the landlord to withhold consent on the basis that Magen is incorporated and based in the U.S.A.
(10) The fact that Ardan is contractually obliged in the Tender Document to provide a guarantee from Magen, and that this was not offered initially in the letter of 15th September, 2014, does not seem to me to be a relevant consideration. It is to be expected that in many, if not most, instances concerning commercial premises there will be some negotiation over the terms of a consent to assignment, and the tenant would not in normal circumstances have an obligation to put all their cards on the table at the outset. Moreover, that Agreement at clause 10.3 specifically envisaged consent being sought in the first instance without the offer of this further guarantee, on the basis that if the sureties first offered were inadequate or unacceptable it would then be offered.
(11) HSBC – a draft Letter of Credit from HSBC was furnished by A.C. Forde & Co to Arthur Cox with their letter of 24th November, 2014. It would not be unreasonable for a landlord to withhold consent based on this draft for a number of reasons. It is from HSBC Bank USA, and governed by New York State law, even though there is an HSBC bank operating and based in the UK. The offer of this guarantee was not accompanied by any offer to agree to submit to Irish law and jurisdiction or appoint Irish solicitors to accept service of proceedings. I note that although the draft says it is limited to $125,000 A.C. Forde & Co. clarified that this should have been redacted.
(12) Also it will be recalled that in their letter of 15th September, 2014 A.C. Forde & Co. had offered:-
“…a Guarantee in favour of your client from HSBC Bank for an amount equal to the aggregate rent currently payable pursuant to the Leases for a period of 5 years or until such time as the consolidated EBITDA for Ardan Advisory Limited (as certified by a chartered accountant) exceeds 3 times the aggregate annual rent payable in respect of the Leases, whichever date shall be the earlier.”
One point made on the defendant’s behalf is that such a guarantee is subject to the frailty that the consolidated EBITDA for Ardan might exceed three times the rent for the Premises in the first year. Based on the projected EBITDA furnished this was a distinct possibility. The guarantee might therefore have a very limited life (or no life at all) and would not give much comfort to the landlord.
I regard this as a reasonable apprehension, and it follows that a better guarantee should be offered that is not constrained by Ardan’s EBITDA. The consensus seemed to be that it need not be for more than 5 years. While an Irish bank might be the defendant’s preference, I would be slow to regard as reasonable a refusal of a suitable guarantee from a UK bank. I would add however that in considering whatever may be offered, the landlord is not entitled to a gold-plated guarantee. As Charlton J. observed in Cregan, the landlord’s entitlement is only to the “same benefit in terms of financial reward and care of the premises” as enjoyed with the current tenant. It must be born in mind that the original guarantee in respect of the 1993 Lease was for three years only, that there has been no guarantor in place for the 1997 Leases since the defendant acquired its interest in October, 2010 (the original guarantee Break for the Border Group Plc., later Capital Bars Plc., was delisted in 2002 and went into examinership in 2009), and none of the guarantors were banks. In my view, it was also unreasonable of the defendant to require that in lieu of an Irish bank guarantee it should receive a security deposit equivalent to 18 months rent and rates. This is clearly something that was never envisaged under the Leases and is to seek an advantage from the granting of consent to which the landlord is clearly not entitled.
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1 S.1(6) of the UK Landlord and Tenant Act, 1988 has reversed the onus of proof in that jurisdiction. S. 1(3) also imposes duties on the landlord to decide “within a reasonable time” and to serve notice of its decision and reasons if consent is withheld
2 28th Edition, looseleaf, Sweet & Maxwell, 2015
3 It is well established in this jurisdiction that in considering an application for consent a landlord must not act arbitrarily or capriciously: White v. Carlisle [1976] ILRM 311.
4 This is established in this jurisdiction: see Cahill v. Drogheda Corporation 58 ILTR 26 and OHS Ltd. V. Green Property Co. [1986] I.R. 39.
5 Irish authorities for the proposition that the landlord is entitled to consider its own interest in deciding whether or not to give consent include: W&L Crowe Ltd v. Dublin Port & Docks Board [1962] I.R. 294, and Irish Glass Bottle Co. v. Dublin Port Co. [2005] IEHC 89.
6 Landlord and Tenant (Ireland) Act, 1861
Moynehan v Hickey and Others
Court of Queen’s Bench.
1 June 1876
[1876] 10 I.L.T.R 98
Whiteside C.J. O’Brien Fitzgerald JJ.
Whiteside, C.J
This was an action of ejectment on the title, brought to recover the possession of that part of the lands of Meenshesrobbins, lately in the occupation of John Moynehan, described as a moiety of the lands demised by an indenture of lease of 19th March, 1857. John Hickey, the defendant, took defence for all the lands in the plaint mentioned. It appeared that, by indenture of lease of 19th March, 1857, Lord Lisle demised to the plaintiff “all that and those that part of the lands of Meenshesrobbins, consisting of 28 acres, for 21 years, at the rent of £14 per annum.” A stringent covenant against alienation or sub-letting without the consent of the landlord, was inserted in this lease. The plaintiff entered into possession under the demise, and so continued till 1869, when the plaintiff assigned a moiety of the land so demised to him, to his son, John Moynehan, it sufficiently appeared, for full valuable pecuniary consideration. John, who had married, entered into possession of the moiety demised to him, and so continued undisturbed till 1874, although the consent of the landlord or his agent to the assignment of the moiety of the lands was not obtained as prescribed by section 10 of the 23rd and 24th Vict., chap. 154. Lord Lisle or his agents did not object, if they knew of the assignment of the moiety of the lands by the plaintiff to his son John. By indenture of mortgage of 9th March, 1874, John Moynehan conveyed his interest in said lands, by way of mortgage, to the defendant, Hickey, who entered into possession, his money lent on the execution of the mortgage being wholly unpaid, and was in possession at the time of the ejectment being brought. John Moynehan then left Ireland, and settled in America, whereupon the father of John, the plaintiff (Patk. Moynehan), who had sold the lands, the subject of the ejectment, to his son John, and executed the assignment of 1869 for valuable consideration (the fortune of the wife of John, paid over to plaintiff), brings his ejectment—against his own deed, and non obstante, the receipt by him of the pecuniary consideration mentioned—to recover from the defendant the lands he honestly obtained from John, as already stated. This the plaintiff was advised he could do, because the consent of the landlord was not testified, as prescribed by the 10th section of the statute, upon the assignment by the loving father to the credulous son. The father, Pat, had manifestly read and considered the case of Gillman v. Murphy, 6 Ir. R. C. L. 35, and found it to be in point. Under these circumstances, the defendant (Hickey), when served with the ejectment, I have no doubt, consulted legal experts to know the why and the wherefore he should lose his lands, honestly obtained, he being innocent of all collusion in the matter. His advisers referred Hickey to the authorities, that for want of the endorsement of ratification by the landlord, on the assignment to John, Pat could recover back the lands while he kept the consideration. Hickey, I have no doubt, was dull in comprehending the reasonableness of the law, or the fairness of this transaction on the part; but his lawyers told Hickey that there was “balm in Gilead,” and that they had found out that John, the absentee, was really Hickey’s landlord (if there really was, in rerum natura, as affecting these lands, any landlord, or any tenant), and that if Hickey were to find a trusty friend who would, in America, discover John Moynehan, and get him to execute a consent to his assignment to Hickey in 1869, of which, no doubt, he entirely approved, and have the assignment, with John’s assent thereto duly endorsed thereon, at the assizes, and proved in the trial of the ejectment, the result would be that the plaintiff would not be able to defeat his own deed, or clutch the land. Hickey, we cannot doubt, was surprised and delighted at this advice, and got the friend in America, who found John, who signed freely, on the 9th of February, 1876, his consent to the assignment to himself, made in 1869. John, I dare say, inquired through curiosity how his assent in 1876 made good what the lawyers said was inoperative in 1869, and until his ratification was given; but all his scruples were removed, and the apprehensions of Hickey were allayed by mentioning the case of Davis v. Davis, 4 I. L. R. 353, with the reasoning of Burton, J., in which case they were thoroughly satisfied; and grateful they were to hear that his virtuous law was adopted by the Court of Common Pleas, in a resolute judgment by Chief Justice Monahan, in the case of Tobyn v. Cleary, 7 I. R. C. L. 32. It remains to be told how John, in America, grew to be his own landlord, and could give assent to the assignment to himself; but at the trial, when the ratification by John was produced and proved, Hickey, who, no doubt, was present, must have been confounded when he heard the plaintiff’s lawyers insist, before the judge, that even supposing, which they did not admit, that the ratification by John satisfied the exigencies of the inexorable 10th section of the statute, and that though Pat could not clutch the land, yet that Hickey must pay the costs. At this statement, if Hickey heard it, he must have turned pale. What appeared to him to be a mystery, and which even to this hour I fear he will not understand, was, that after all his trouble and expense, his proving his title, and defeating Patrick’s iniquitous attempt to cheat him out of his land, he should pay to Patrick his costs of a most unrighteous proceeding, as well as pay his own costs. Here, as usual, cases were cited to satisfy the judge and soothe Hickey’s irritable feelings. The state of the title at the time of action brought, said the plaintiff’s counsel, must be inquired into as it, in fact, stood when the summons and plaint was served, and at that time, said these trained advocates, our esteemed client had the right to recover, which had only been displiced by a ratification obtained from John in America, after plaint served; and therefore, it was insisted at the trial, and has been insisted here, that, whatever now Hickey may think of the hardship of his case, upon the authority of Ryan v. Landers, 9 I. C. L. 487, followed by Tobyn v. Cleary, 7 I. R. C. L. 32, (which were pressed upon the judge, and have been pressed upon us), if a party, having a title to the possession of land, bring an ejectment and lose his title by some occurrence subsequent to the bringing of the action, he is entitled to judgment and costs, and not to an habere. The parties had now arrived at a crisis in the case—the payment of a small bill of costs. Hickey cast an imploring glance upon his indefatigable counsel, and they were found equal to the emergency, for when the pinch was felt, and Patrick’s counsel contended they should get the verdict, because, even assuming it to be sufficient to ward off the evidence, the ratification was late to ward off costs, the ingenious counsel for the distracted Hickey gravely argued that all the plaintiff’s assertions about the ratification being late, were futile, for the defendant’s counsel did not care a pin about the ratification of John, as they would show there was neither landlord nor tenant, under the 10th section, when the ejectment was brought. This they showed as well as they could, and in the end, after a variety of fortune in the legal conflict, they got the verdict; and the interesting question now is, can they keep it? asserting an order after the precedent in Tobyn and Cleary, and securing, by their acquaintance with the niceties of this part of the law, not only the land, but the costs for the affrighted Hickey. Under the 23rd and 24th Vict., chap. 154, the interest of the landlord is secured, whilst the policy of the Act, against indiscriminate and forbidden assignments, is maintained. Leases, the immediate subject of section 10, are these in which the landlord, for his own protection, has imposed special fetters on the alienation of the lease, and has provided for a potential voice in the selection of his tenants, the bargain for a voice in the selection of an assignee, and he has the means of protecting himself against improvident transfers (Earl of Donoughmore v. Forrest, 5 I. R. C. L. 443). When applied to for his assent and ratification to an assignment by his immediate lessee, he may ratify or refuse at his pleasure. But surely, he may take *99 another course and say, “I will not accept you, the proposed assignee, as my tenant, but, in my circumstances, I will sell you my reversion,” and thus put an end to all trouble, as landlord and tenant, by uniting in his person both. By the ancient law, “If a man make a lease for life, and after granteth his reversion to the tenant for life, the reversion is, by act of law, vested in the tenant for life.” Having regard to the purpose and structure of the statute, and to the 10th section in particular, would it be possible to contend that section 10 applies to such a state of facts? The reason of the case and the policy of the statute would equally answer “No,” because the act done must be considered beneficial for the landlord, as it is done by himself and with his consent, and no third person is imposed upon the landlord against his will, and the legal effect of the act done by the landlord is to unite the particular estate and the reversion in one individual, the former tenant, who could not be absurdly asked to consent to any assignment again to himself. Nemo potest esse tenens et dominus. But, the case I have put differs in principle from the one before us. How? Because in 1873, long prior to the bringing of the ejectment, Lord Lisle’s reversion over this lease to P. Moynehan was sold in the Landed Estates Court, and vested in John Moynehan and others, it would appear, as joint tenants in legal construction, but manifestly (and it is admitted it would be so in equity), to secure the rights of each according to the truth, that is the property of each. The real question for us is whether the 10th section of the statute applies to the peculiar facts of this case; and the objection that John Moynehan is joint tenant with others of the reversion over this and other lands, plainly and substantially each for his own part, cannot exclude the effect of the reasoning upon the sense, words, and policy of the statute, and on the facts of the case. In the note to the case of Murray v. Hall, 7 C. B. 455, the writer collects and analyses the old authorities as to the nature of the estate of joint tenants. It is Lord Coke who explains best the force of the expression, Seised per my et per tout, by describing the party so seised as one qui nihil habet et totum habet In Cruise’s Digest, p. 437, the nature of this title is very succinctly put before us—for example, “With respect to unity of possession, joint tenants are said to be seised per my et per tout, that is, each of them has the entire possession, as well of every part as of the whole. They have not one of them a seisure of one half, and the other of the remaining half, neither can one be exclusively seised of one acre, and his companion of another, but each has an undoubted moiety of the whole, but the whole of an undoubted moiety, from which it follows that the possession and seisure of one joint tenant is the possession and seisure of the other.” An illustration of the principle will be found in the case of Raper v. Lonsdale, 12 East. 39, and in the expressions which fell from Lord Mansfield in the case of Denn v. Burges, 1 Bur. 330:— “This (says Lord Mansfield) is an exceedingly plain case. The rule is undoubtedly right that the plaintiff must recover according to the title. Here she has demanded half, and she appears entitled to a third, and so much she ought to recover.” Having regard, therefore, to the technical objections, we have arrived at the conclusion that on the day the ejectment was served, the defendant had the reversion and the particular estate in himself, and that the 10th section did not, and could not, in reason or law, apply to such a case. We are not sorry to be able to arrive at the conclusion so accurately contended for by Hickey’s counsel, under varying fortunes, and that the verdict for Hickey, so properly directed by my brother Fitzgerald, should stand, and that the unjust attempt of the plaintiff to defeat his claim must fail. We do not question any of the cases cited; we would act on them, or such of them as might be applicable, but we do not think that any of them do apply to the very peculiar and unprecedented facts of the present case.
O’Brien and Fitzgerald, JJ., concurred.
Cregan v Taviri Ltd
[2008] I.E.H.C. 159
Neutral Citation Number: [2008] IEHC 159
THE HIGH COURT
CIRCUIT APPEAL
2007 187CA
BETWEEN
GERARD CREGAN AND JOSEPH GRAY
PLAINTIFFS
AND
TAVIRI LIMITED
DEFENDANT
Judgment of Mr. Justice Charleton delivered on the 30th day of May, 2008.
1. The plaintiffs, who had a plan of running a restaurant, wished to buy the leasehold of a premises at 22 Castle Street, Dalkey from the defendant. The purchase has fallen through, but now the plaintiffs, as purchasers, seek the return from the defendant company, as vendor, of their deposit in the sum of €25,000.
Facts
2. The contract was negotiated as far back as November, 2005. An issue in relation to whether there was retention permission concerning the use of the premises, and an architect’s certificate in that regard, delayed the signing of contracts until the 24th August, 2006. The contract records the purchase price as being €245,000 and described the premises as being held under an indenture of lease made on 1st March, 2005 between Michelle Kavanagh, the landlord, and Taviri Limited, the defendant in these proceedings, as tenant. The contract indicates that the closing date of the sale was to be 7th December, 2005, which was well before the problems in relation to planning had been sorted out. In consequence, it is argued that a completion notice could not have been served by the defendant as vendor on the plaintiffs as purchasers. As a matter of law, if a contract does not specify a closing date, a reasonable date will be implied into the contract. The time fixed for completing a contract is the closing date in law, and in equity a reasonable time may be allowed thereafter; Farrell – Irish Law of Specific Performance (Dublin, 1994) at para. 3.28.
3. Because the plaintiffs were buying a leasehold from the defendant, this transaction was subject to the consent of the landlord.
4. The original indenture of lease provided that the tenant, the defendant in this case, had covenanted with the landlord in the following terms:-
“Not to assign sub-let part-with or share the possession of the entirety of the demised premises without the prior written consent of the landlord and if requested by the landlord without supplying a guarantor acceptable to the landlord which consent shall not be unreasonably withheld”.
The special conditions of sale in respect of this lease therefore provided at Clause 6:-
“The sale is subject to the consent of the landlord to the assignment herein and the purchasers hereby irrevocably agree and undertake to furnish as expeditiously as possible all reasonable particulars as maybe required by the lessor to enable her consider the application for consent to assignment to herein. In the event of the consent of assignment not being forthcoming on or before [the date of closing] then this contact shall be at an end and the deposit paid on foot thereof shall be returned to the purchasers without deduction and without any claim for interest and/or compensation.”
5. Another clause in the special conditions indicates that the closing date is to be seven days after the date of the consent to assignment by the landlord.
6. Under the original lease, the two directors of the defendant company had covenanted with the landlord, by way of an indemnity, to ensure the due observance of all the covenants in the lease on behalf of the defendant and to make good all losses howsoever arising by reason of any default.
7. In this case I have heard evidence from two solicitors acting on behalf of the plaintiffs and from the solicitor acting on behalf of the defendant company. All of that evidence was honest and was, in my view, genuinely helpful in assisting the court, and intended to be such. The evidence, however, added little to the correspondence to which I now turn.
8. As of July, 2006 the plaintiffs’ solicitors were expressing frustration with the delay in relation to the planning documentation difficulty. That was resolved soon after and, in due course, on 3rd August, 2006 the correspondence turned to the issue of the guarantee that would have to be forthcoming in favour of the landlord under the lease if the assignment between the defendant and the plaintiffs was to be successful. To satisfy the landlord, the following documentation was requested from the plaintiffs and from their company Karan Foods Limited:-
1. Net statement of affairs certified by the accountants for the proposed assignees;
2. Details of the proposed use of the premises by the proposed assignees;
3. Bank and trade references.
8. On the 18th August, 2006 the plaintiff sought information with regard to the landlord’s consent to the assignment of the lease. Shortly thereafter, on 28th August, 2006, a handwritten note of a telephone conversation with the solicitor for the defendant company was noted on a letter on the file of the plaintiffs’ solicitor seeking an “up-date … on the issue of the landlord’s consent”. This note reads:- “31st [August] Sean Sexton, landlord will agree if his client (Louis) guarantee stays in place – reluctantly going with it if our client signs [covenant] and indemnity”.
9. According to Deirdre Farrell, the solicitor dealing with the matter, this meant that the landlord of the premises would only consent to the assignment to the plaintiffs if one of the guarantors on the lease to the defendant company, namely its director Ray Murray, would stay in place and guarantee the performance of the covenants and obligations under the lease by the new lessees, namely the plaintiffs and their nominee company.
10. It would be fair to say that matters then stagnated for a fortnight. On the 19th September, 2006, the solicitors on behalf of the plaintiffs wrote to the defendant:-
“We would also be obliged to receive an up-date on the landlord’s consent and the proposed guarantee from your client, and covenant and indemnity of our client. Please furnish confirmation of the landlord’s position. We note you are awaiting results of inquiries on the V.A.T. situation, and we would also be obliged to hear from you regarding our letters of 18th August, with regard to the planning documents requested and evidence of health board registration.”
11. On 21st September, the defendant company’s solicitors wrote to the plaintiffs seeking a closing date. The landlord’s consent would, of course, have to be furnished as of the date of the closing. On the 26th September, 2006 the letter which caused the rift between the parties was written by the plaintiffs’ solicitor in the following form:-
“We have been instructed by our clients to inform you that due to the onerous covenants sought by the landlord, our clients no longer wish to proceed with this transaction. In light of the failure to obtain the landlord’s consent in the normal way we are instructed that our clients consider the contract to be at an end and we would therefore be grateful if you would arrange to return the contract together with our client’s deposit cheque.”
12. The solicitors for the defendant company wrote back on 28th September in the following form:-
“With great respect this is the first indication either from your clients or yourselves of ‘onerous covenants’ sought by the landlord. The simple fact of the matter is that the landlord has, as is the normal way, insisted on a personal guarantee when the premises are being taken in the name of a limited liability company. The only difference in this case is that she has requested one of our clients’ directors to personally guarantee the due performance and observation of the covenants and conditions and in turn your clients will indemnify Mr. Murray for this matter. The landlord’s consent has issued subject to the guarantees being put in place which is standard practice. In addition we would point out that by letter dated 22nd inst. you indicated ‘we will revert with an up-date on closing shortly’. In relation to the alleged outstanding matters we confirm as follows:-
(1) You have been aware for some time now of confirmation of the landlord’s consent and the conditions attaching thereto;
(2) There are no V.A.T. implications arising on this transaction;
(3) We previously informed your Mr. Turner by telephone that we had received the final grant of permission, together with the architect’s opinions on compliance in the standard form; and
(4) The contents have been valued at €75,000”.
As a result, a notice making time of the essence was served pursuant to the contract, and when the closing did not take place, the deposit was forfeited.
13. I accept the evidence of Deirdre Farrell and Andrew Turner, both experienced solicitors, in their account of this transaction. Whereas they have come across, as a standard clause, the notion of directors guaranteeing the performance by a company of its obligations under a lease, they have not come across an assignment of a lease whereby the landlord insists that the new lessee should have its performance guaranteed both by its directors and by the previous lessee. Sean Sexton, solicitor on behalf of the defendant company indicated, and again I accept, that he regarded this condition as unusual but that he had seen it once before in the course of his career.
14. Nobody has told me, but I assume, as I feel I am entitled to, that in making a contract for the assignment of the lease, the plaintiffs had sight of, and received advice on the obligations thereunder that they were hoping to assume.
15. It is a standard clause that protects the position of a landlord that a lessee should not assign the premises without the consent of the landlord. The phrase limiting that discretion, which “consent shall not be unreasonably withheld” is taken from s. 66(2)(a) of the Landlord and Tenant (Amendment) Act, 1980. The case law in that regard, is multifaceted and goes back to the 1930s. In essence, however, the decisions of the courts come down to the same thing; that it is unreasonable for a landlord to withhold consent where the use of the premises is to be the same or similar to that employed by the current tenant and where the investment of the landlord in property will be shown to yield the same economic return, without damage to the premises, that is proposed to be demised by assignment.
15. Consent to assignment of a lease would be unreasonably withheld where the landlord will be receiving from the new assignees the same benefit, in terms financial reward and care of the premises, as from his or her current tenants. Clause 4.15.4 of this lease provides:-
“In granting consent to any such proposed alienation the landlord may impose such conditions as are reasonable in all the circumstances.”
16. The landlord of 22 Castle Street, Dalkey found herself in August, 2006 in a position where she had a sitting tenant, namely the defendant company, which was performing all of the obligations of the lessee under the lease. That performance was guaranteed by two businessmen of standing. In order to agree to come to an assignment of the lessee’s interest under the lease, the landlord insisted on one of those businessmen remaining on as guarantor of the performance by the new lessee of the obligations under the lease, as well as insisting on guarantees from the plaintiffs in respect of their nominated company. I note the evidence of Sean Sexton that he had advised his client Louis Murray not to enter into a guarantee in respect of the performance of the obligations under the lease by the new lessee. I accept that evidence.
17. The landlord however, made the request for one of the existing guarantors to the performance of the obligations under the lease to remain in place to ensure that the new lessee would continue to perform the obligations that had been fulfilled up to that point. I do not regard that as being unreasonable. I note the evidence of Andrew Turner that his clients, the plaintiffs, told him that if the business turned into a “rip roaring success”, they might find difficulty in selling it on to another party after a year or so should a similar condition be imposed by the landlord on any further alienation. I accept all of this evidence from Ms. Farrell, from Mr. Turner and from Mr. Sexton as being accurate as well as honest.
Forfeiture of a Deposit
18. Condition 41(a) of the General Conditions of sale applying to the sale of this leasehold provides:
“If the Purchaser shall fail in any material respect to comply with any of the Conditions, The Vendor (without prejudice to any rights or remedies available to him at law or in equity) shall be entitled to forfeit the deposit and to such purpose unilaterally to direct his solicitors to release same to him.”
19. Even in the absence of such a condition, the law implies into any contract for the purchase of a real property interest, that where a deposit is paid to secure performance of the contract it is to be forfeited where the purchaser is unable to complete and, returned where the vendor does not complete. A deposit is paid in order to show that the purchaser is serious in entering into such a contract and to secure the performance of the bargain. The general rule is that the deposit is to be forfeited on the purchaser backing out of the contract, subject to a vendor being able to fulfil the bargain. If the purchaser is in default then the deposit is forfeit: Soper v Arnold [1886] A.C. 429. If a contract is subject to a condition as to fulfilment by a purchaser, then the purchaser must do everything that is reasonable and practicable to meet that condition; Draisey v FitzPatrick [1981] I.L.R.M. 219. If a condition requires a vendor to accomplish something prior to completion, then the vendor is subject to the same stricture, save that it can happen that if a contract provides that a condition must be fulfilled prior to conveyance, it can operate under the contract as a condition precedent without which no sale can be completed; Crean v Drinan [1983] I.L.R.M. 82.
20. In England, the law on the forfeiture of deposits was changed by s. 49(2) of the Law of Property Act 1925 which provides:
“Where the court refuses to grant specific performance of a contract, or in any action for the return of a deposit, the court may, if it thinks fit, order the repayment of any deposit.”
21. In applying that provision, the courts in England consider whether it would be fair to order that a deposit be forfeited; O’Neill v Phillips [1999] 1W.L.R. 1092. This brings into issue the context and background of a contract; Omar v El-Wakil [2001] EWCA Civ 1090. An equitable element was thus introduced into the issue which is entirely absent from the law in Ireland.
22. I am not entitled to apply the notion of fairness to the issue as to whether the deposit should be forfeited. The parties are free in whatever bargain that they choose to make and it is for the court to uphold it. The only issue for the court is whether the contract condition as to forfeiture applies in the circumstances as they have unfolded, whereby the contract has not been completed. To some extent, the background of the agreement can be material. In looking at this issue, however, I am not entitled to renegotiate the agreement of the parties. Rather, where, as here, something that is said to be unexpected has occurred, I am only entitled to apply to the contract that construction which parties in the position of the vendor and purchaser would have accepted had the issue arisen at the time of the formation of the bargain; in other words, a reasonable and objective construction. The law of contract presumes that the parties to a contract are reasonable people and that they will accept what is reasonable with a view to fulfilling the object for which the contract was entered into. So, I ask myself, was the requirement, that a sitting tenant who wished to assign a leasehold be obliged by the landlord to stay on and guarantee the performance of the lease by the proposed assignee tenant, one that could reasonably have been expected when the parties entered into the contract, or was it outside the reasonable expectation of the parties?
Decision
23. My decision on this matter is that had the parties been confronted at the time of signing the contract with an assignment of the lease whereby the vendor was willing to guarantee to the landlord the performance by the purchaser of its conditions under the lease, subject only to an indemnity in favour of that guarantor by the new lessee, or its directors, that this issue would not have inhibited the bargain being made. Nor was the position of the landlord outside that which might reasonably have been contemplated under the contract. The reality of the position in which the landlord found herself was that she had a guaranteed economic return in respect of her premises for a period of 35 years from March, 2005. She was happy, no doubt for good reason, with the standing of the guarantors under that lease and wished one of them to remain in place when it was planned, after a period of only a number of months from the date of signing the lease, for him to step out of the position of lessee and to alienate the premises to another lessee. In those circumstances the consent of the landlord being subject to the condition mentioned, namely that one of the directors of the existing lessee should stay on as guarantor of the performance of the new obligations should the lease be transferred, was entirely reasonable. It was also a condition that might reasonably have been anticipated by the plaintiffs on their reading of the lease. In accepting the assignment of the lease subject to that condition, the proposed lessee would, in reality, be losing nothing from the terms of the bargain that they had entered into. In purchasing an assignment of a lease for 35 years, it is reasonable to objectively conclude that the plaintiffs were looking at a longer term of business than creating a success and then selling on the leasehold about a year later.
24. In the circumstances there is no basis upon which I can interfere with the contract of the parties whereby the deposit is forfeited.
Schlegel v. Corcoran and Gross.
Gavan Duffy J. [1942 IR 22
The late Henry Schlegel died on 11th October, 1928, after carrying on his practice as a dentist for many years at No. 7 Harrington Street, Dublin, and the plaintiff, as executrix, by deed of 18th April, 1929, assigned the goodwill of the practice to the late John Corcoran, after he had made a trial of it.
By tenancy agreementa separate document of the same dateMrs. Schlegel let to Mr. Corcoran three rooms, furnished, on the hall floor of the same house, a surgery, a waiting-room and a workshop, for three years, giving him the use, with the other occupants of the dwelling-house, of the water-closet on the half-landing above him, and she entered into a rather indefinite obligation to provide him with hot water facilities and a maid to open the door and clean his rooms. The tenant bound himself to use the rooms solely for dental practice and not to assign
After three years the tenancy was to become a yearly tenancy, terminable in any month by six months’ notice on either side.
Now, by s. 56, sub-s. 2, of the Landlord and Tenant Act, 1931 (No. 55 of 1931), the agreement is to be read subject to a proviso that the landlord’s consent to an assignment “shall not be unreasonably withheld.”
The plaintiff sues to establish her right to refuse to recognise an assignment by the defendant, Kevin Corcoran, administrator of John Corcoran, to the defendant, Nathaniel Gross, who has bought the dental practice. Mr. Gross is a Jew.
The original intentions of the parties may still give some guidance on the reasonableness of a refusal by the lessor, and it is noteworthy that the plaintiff, in admitting to her house a professional man, with whom she had some acquaintance, conceded to him just such privileges as a lady may allow to her tenant in her own house and took care to remain the mistress of the situation, retaining control over the introduction of a new tenant and the right after a short time to turn out the purchaser of the practice so long identified with her address; it is, I think, a fair inference that, had she stipulated against any assignment to a Jew, the complacent tenant would have acquiesced. Her protective measures were justified because the rooms to be let were in her own residence.
Mrs. Schlegel owns the house, which has two storeys; she has lived there since 1914; it was her husband’s home; after his death in 1928 she let the second floor as a flat; then she let the hall-floor rooms to Mr. John Corcoran; and she and her only son continued to use the remainder of the house, a first floor and a basement, until he joined a religious order, and she let the basement; when the present dispute arose, in April, 1941, the top floor, since vacated, was let, as well as Mr. Corcoran’s three rooms.
Mr. John Corcoran died on 13th September, 1940, after nearly 12 years’ occupation, and in March, 1941, his administrator proposed Mr. Gross, the purchaser of the practice, as assignee of the tenancy. The plaintiff refused her consent, but Mr. Kevin Corcoran on 7th April, 1941, sold the practice to Mr. Gross and, treating the plaintiff’s refusal as unreasonable, executed on the same day, under hand and without consideration expressed, an assignment, as administrator, to Mr. Gross of “whatever interest I may have” in the tenancy agreement; Mr. Gross thereupon put up his plate, and he has been in practice at No. 7 Harrington Street since that time.
The question is whether the plaintiff has unreasonably refused her consent to the assignment of the tenancy. Like her husband, she is Irish and a Catholic. On ascertaining from Mr. Corcoranit was her first question that Mr. Gross was a Jew, she at once refused her consent, because, as she explains, “their principles are not ours and they are anti-Christian, and I could not have an anti-Christian living in the house where I live,” and again,”because he is a Jew and all that entails”; she made her point of view quite clear to Mr. Corcoran in conversation and told him that she would have to leave the house if Mr. Gross came in. It is admitted that the plaintiff wishes to continue living in the house and, though there was some suggestion of a sale, that that has been her intention throughout. It appears that Mrs. Schlegel had refused two Jews as purchasers of her husband’s practice and it is not seriously disputed that she really entertains the objection which she has expressed. Though the correspondence which ensued is unsatisfactory, this action has been fought on all sides upon the issue whether that objection constituted an unreasonable refusal. For the past ten months Mr. Gross and his assistant have had latch-keys; the dental work goes on until 7 or 7.30 p.m.; the surgery and waiting-room doors open into the hall passage, which the plaintiff has to use on her way in and out of the house, and any tenant of the three rooms and occasionally his patients will use her lavatory. The practice has, of course, had a Christian clientele under Mr. Schlegel and Mr. Corcoran, but the plaintiff may well think that it may, under Mr. Gross, develop a Jewish complexion, and such an anticipation is not groundless in a locality with numbers of Jewish residents.
Mrs. Schlegel’s objection was no afterthought; it sprang from no indirect motive; and it represented, as I find, a genuine and deep-rooted feeling. Nor can it be called irrelevant, since it concerns the person and personality of the tenant; I need not, therefore, examine the argument advanced for a narrow construction of s. 56, sub-s. 2, nor contrast its generality of language with the particularity chosen in s. 21, sub-s. 2, of the Act of 1931 upon the cognate topic of the right to renewal of a tenancy. But Mrs. Schlegel, however sincere, will be condemned off-hand as utterly unreasonable by those broad-minded censors who do not hesitate to judge her from the latitude of their own catholic philosophy of life, as if theirs must necessarily be accepted as the universal norm, detached from the actual facts bearing upon the particular refusal; moreover,they may easily overlook the fact that the question whether an objection was reasonable and the question whether consent was withheld unreasonably within the meaning of the section may not, as a matter of course and in all circumstances, receive the same answer.
When the Act of 1931 interfered with contracts, for the purpose of redressing a long-standing grievance, dating back to an age when a tenancy carrying certain inchoate rights was viewed as the pardonable mistake of an absent-minded landlord in an island destined for a landlords’ paradise, the Act exacted from a lessor, asked to sanction the assignment of a lease, a reasonable standard of conduct, that is, the standard of good citizenship, but its language implied at the same time a stipulation for the reasonable protection of the good citizen against an obnoxious newcomer; and the undesirability of a particular newcomer as a ground of refusal may not emerge until the critic is seised of all the circumstances relevant in the particular case to the lessor’s decision.
The plaintiff’s objection has been characterised as a caprice and as mere prejudice; but caprice is not the right word for an anti-Semitism, which, far from being a peculiar crotchet, is notoriously shared by a number of other citizens; and, if prejudice be the right word, the antagonism between Christian and Jew has its roots in nearly 2,000 years of history and is too prevalent as a habit of mind to be dismissed off-hand, in a country where religion matters, as the eccentric extravagance of a bigot, without regard to the actual conditions under which consent was withheld. I fail, by the way, to see the supposed connection between the problem before Mrs. Schlegel and the constitutional veto (Art. 44, clause 2, sub-clause 3) upon any discrimination by the State on the ground of religious belief (1).
Is the plaintiff, then, playing the part of a bad citizen, when from anti-Semitic bias she refuses her consent to the assignment? The answer cannot disregard the paramount consideration in this particular case, the fact that in giving her consent the lady would be taking order, as the expressive old phrase has it, for the occupation of her own dwelling-house, for the tenancy of three furnished rooms in the residence where she has had her home for 27 years and still has her home to-day. Her relations with the new tenant will be far from intimate, but he will be installed on her hall floor and the contacts, already outlined, may be quite close enough materially to affect her amenities, if he is from her standpoint a most undesirable participator in the narrow shelter of her roof. Amenities are the salt of life, and, though they defy definition, they may fairly be taken to comprise all the factors that go to make one’s home a happy and pleasant refuge, and to any woman who cares for her home the amenities are of real importance.
It is not unreasonable for a lady to protect the amenities of her residence and, in my opinion, Mrs. Schlegel may fairly claim a reasonable latitude in so very personal a matter; for this purpose even her idiosyncracies (and how many of our idiosyncracies are entirely reasonable?) may come into play, within limits which I may illustrate, without attempting to define. If the deceased tenant had left a dentist brother, who wished to continue the practice at the same address, she would need stronger grounds to justify a refusal, because in such a case her previous acceptance of Mr. John Corcoran, against whom there appears to have been no complaint, would have gone a long way towards narrowing the possible field of objections reasonably open to her; or, take an otherwise satisfactory assignee, whom she sought to reject because she really entertained a violent dislike or superstition against his red hair, or his stutter, or his squint; there any Court would be disposed to overrule her objection as nonsense, although in fact she happened to be so peculiarly constituted that her amenities would in some degree suffer in consequence. Turn now to objections of a type which, though not always meritorious, are of a more fundamental and more intelligible character: no one, I suppose, will deny that she might safely reject a Hottentot, for the sake of her domestic amenities, though he happened to be a civilised specimen, but I want to put the case of some not obviously repulsive assignee; suppose that her own cherished convictions inspired in her a strong aversion to a particular candidate, on account of his race, or colour, or religion, or of the general principles and practices of his kind, or even on account of his political record and affiliations, and that the Court found as a fact that the man was, for the reason given, intensely repugnant to her; prejudiced she might be, but would the Court be compelled under the statute to label her a bad citizen and insist that she must harbour her particular bête noire under her own roof? I cannot construe an enactment reasonably designed in general terms to undo a recognised injustice as operating incidentally to invent a novel and peculiar hardship by sanctioning and prescribing a wanton invasion of the reasonable amenities of a lady’s home. The Court in any such case would, I think, have to ask itself (and the contiguity anticipated and other factors may make the question one of degree) whether the thrusting of the newcomer upon her would, on the facts, amount to a denial of the reasonable autonomy which a citizen may naturally claim in and over her own residence, even after letting some of its rooms; and on an affirmative answer she would prevail, even though the Judge were not himself personally impressed by her particular bogey; such would be the case where the owner withheld her consent from a reasonable apprehension, founded on the profound and enduring nature of an incompatibility well understood, even when deplored, that the probable contacts and annoyances and irritation ensuing upon the intrusion would blight the serenity of her daily life, one of the most precious amenities of a happy home; and such, in my judgment, is the case with the plaintiff’s objection to admitting Mr. Gross, whether put on racial or religious grounds or on both; and I hold that Mrs. Schlegel, in her honest effort to defend the amenities of her residence, is entitled to the protection of this Court.
The fact that the plaintiff happened to have some acquaintance with the professional restriction to a period of six months after death on the sale of a dentist’s practice cannot operate to make unreasonable her otherwise reasonable refusal of consent, where the practice and the tenancy were the subjects of quite distinct agreements.
There will accordingly be judgment for the plaintiff in the terms of paragraph 4, sub-paragraphs (c) and (d), of the indorsement of claim.
In re THE CONGESTED DISTRICTS BOARD
In re an Owner of Land
[1919]
1 I.R. 146
(Folios 353/10581, 440/10919, and 1255, Co. Kerry.)
ROSS J. :
14 Feb.
The matter I have to deal with arises on a case stated by the Registrar of Titles, pursuant to sect. 14, sub-s. 2, of the Local Registration of Title (Ireland) Act, 1891. The question of law is whether the restrictive covenant contained in certain deeds of conveyance and charge should be entered on the register as burdens affecting the lands.
[His Lordship having stated the facts, proceeded as follows:]
If the covenants are legal and binding, it is plain that they ought to be registered as burdens under sect. 45 (par. k). The only question that arises is whether these covenants are inoperative and bad because they are repugnant to the estate in fee simple conveyed. This introduces us into a field of controversy in which the opinions of eminent judges and text-writers have been acutely opposed. The general rule of law is that conditions or restraints inconsistent with and repugnant to any estate to which they are annexed are absolutely void. For instance, conditions that property should not be charged, or that the rents should not be raised, or prohibiting curtesy or dower, or in the case of an estate tail prohibiting the power to bar it, would be repugnant to the nature of the estate conveyed and void.
Are there any exceptions to this rule of law? I think it must be admitted that there are.
We find in Littleton (1), after the section stating the rule, the following:”But if the condition be such that the feoffee shall not alien to such a one . ., which condition do not take away all power of alienation from the feoffee, then such a condition is good.” Nobody knows how this exception arose. The same is stated in old books of the highest authority, like Sheppard’s Touchstone. Mr. Joshua Williams in his work on Settlements of Real Estate says:”There is nothing contrary to the policy of the law in a condition which imposes merely a partial restraint on the power of alienation.” Mr. Preston holds that the restraint is good if limited to a particular period of time, provided that period does not trench on the law against perpetuities.
In one of the oldest cases, Daniel v. Ubley (1), the majority of the Court held that the devisee might have given hera fee simple, conditional to convey it to any of the sons of the devisor. That means that it was limited, and she could not convey it to anybody else. Then we have in the case of Doe v. Pearson (2) a condition only permitting alienation to a particular class of persons”sisters or their children,” and Lord Ellenborough and the judges of the Queen’s Bench held this a valid condition in the year 1805. In 1853 the matter came before Sir John Romilly: Attwater v. Attwater (3). There the devisee was prohibited from selling his estate out of the family, but if sold at all, it must be to one of his brothers. It seems hard to distinguish between these two cases; but Sir John Romilly says that, notwithstanding Doe v. Pearson (2), the condition is repugnant to the estate given, and therefore bad.
In the year 1875 Sir George Jessel, In re Macleay (4), decided that the condition was good in a case where there was a devise to a brother on condition that he never sells out of the family. Sir George Jessel says:”You may restrict alienation in many ways. You may restrict alienation by prohibiting a particular class of alienation, or you may restrict alienation by prohibiting it to a particular class of individual, or you may restrict alienation by restricting it to a particular time.” Then we come to the case of Rosher v. Rosher (5), decided in 1884, in which a testator devised his estate to his son in fee, provided that if he desired to sell it in the lifetime of the testator’s wife she should have the option to purchase it for £3000, the real selling value at the date of the will being £15,000. Mr. Justice Pearson held that the proviso amounted to an absolute restraint on alienation during the life of the widow, and that it was void at law. There cannot be much doubt about the correctness of the decision; but the importance of the case is that the learned Judge proceeded to criticize the earlier decisions, and in particular the observations of Sir George Jessel. He went on to question the possibility of applying the principle of the exception to future cases, and deplored the judicial departure from the original plain and intelligible rule. There the matter rests, and
the outcome of it all is that conditions imposing a partial restraint on alienation are not per se contrary to the policy of the law; but the limits of the validity of such conditions are not defined by the existing authorities either in this country or in the United States, where the question has been discussed. I doubt if they can be defined. What, then, is the duty of the Court? I know that it is not always a question of pure law.
If there be a condition that if you alienate you must alienate to a certain person or a class, and it turns out that either the person or the class is practically unable to purchase the property, the Court may then infer that the object of the testator or settlor is to render the property inalienable, and the condition may be treated as wholly void. If the condition gives an option to somebody to purchase at a wholly inadequate price, as in Rosher v.Rosher (1), the Court may draw a like inference, and treat the condition as void and repugnant. It then comes to this, that the condition is bad if in all the circumstances of the case it is unreasonable and intended to prohibit alienation. Applying this to the present case, we find that the purchase price is not to be paid in cash at once. It is to be paid within a certain period of sixty-eight and a half years in instalments sufficient to keep down the interest and pay off the principal within the period. The money is public money administered by the Congested Districts Board. The Board is responsible to the State for the due payment of the purchase-money and interest. The land is the security during the period. If unrestricted subdivision, subletting, or alienation is permitted, the security may become valueless, and the money be lost.
In the circumstances of this case I think the conditions in no way unreasonable, and therefore not repugnant to the nature of the estate conveyed. It would certainly be a strange anomaly if in a sale by the Land Commission the same conditions for the protection of the public money should be held binding; but when the sale takes place under the Congested Districts Board, these conditions should be held void. I therefore answer the question in the affirmative.
Egan Film Service Ltd. v MacNamara
High Court.
23 October 1952
[1952] 86 I.L.T.R 189
Dixon J.
Dixon, J.:
This is an application for a declaration that the consent of the landlord has been unreasonably withheld. It is a double-barrelled application because the proposal involves sub-division and an alteration in user because the proposed sub-tenant will make an additional user of these premises. Both are forbidden by the lease, and the tenants cannot carry out their proposal without the consent of the landlord. Such consent cannot be unreasonably withheld.
The onus of proving that the landlord’s consent is unreasonably withheld lies, as Mr. Creswell has said, upon the plaintiffs. The plaintiffs have shown that their proposal is reasonable. The portion of the premises sought to be sub-let is suitable. There is no personal objection to the proposed sub-tenant. The proposal would be of considerable financial assistance to the plaintiffs.
I have got to decide if the consent of the landlord is unreasonably withheld. My criterion is, that it is not whether her reasons appeal to me, but whether she is acting reasonably in refusing her consent. As Lawrence, J., says in Mills v. Cannon Brewery Co. [1920] 2 Ch. at page 46“…. the question which I have to decide is not whether the grounds of refusal do or do not commend themselves to my mind as reasonable, but whether in refusing the licence the defendant company acted as a reasonable man might have done in the circumstances, or whether, on the contrary, it acted wholly unreasonably?”
I cannot hold that the defendant in this case acted arbitrarily or capriciously. She has fully considered the matter and she discussed it with her legal adviser. It is argued that she has expressed an arbitrary objection to a bookmaker and that this is a capricious attitude. This has to be taken in its context. If it were merely a capricious attitude to bookmakers it might be unreasonable. But she had reasons and showed them in the correspondence which passed between her solicitor and the plaintiffs, and in her evidence before the Court.
She objects to sub-division. I quote from the letter of 27th May, 1952, from defendant’s solicitors to plaintiffs: “We recently had an interview with Mr. Hardiman Jnr., at which we informed him that our client had no desire to prevent Messrs. Egan Film Service Ltd. making arrangements for their own temporary convenience, but any sub-letting to which consent might be given must be for temporary convenience only, and our client would insist on the premises being returned to her as one take in the manner in which they were originally let.” That is so much for the sub-division.
Then it goes on: “Mr. Hardiman mentioned a proposal to sub-let portion of the premises to a bookmaker, and we made our client’s views quite clear to him. Miss MacNamara would not contemplate giving her consent to any letting for this purpose whether temporary or otherwise. A bettingshop inevitably attracts a large and undesirable crowd of people, and depreciates the property in its immediate vicinity.”
That last sentence qualifies what might otherwise be an arbitrary objection to a bookmaker, and gives two reasons which she considers reasonable, first attracting a large crowd, second, depreciation of the property. It is clear that she had not and has not an arbitrary objection, or an objection based on moral grounds, but an objection based on business reasons.
She also says that the character of the proposed business is unsuited to the premises and the other tenants. She thinks there is some danger of people loitering and a possible depreciation of the premises due to this. Her opinion is confirmed by the evidence given by one of her tenants and by the evidence given by one of the adjoining owners and occupiers. These two witnesses combine in one type of objection—they fear congestion. And Mr. Kerr, the Secretary of the Church of Ireland Printing Co., who occupies the adjoining premises, further objects that the main class of his customers might be deterred from resorting to his premises by the proximity of a bookmaker’s office. This might not be reasonable on the part of his customers, but they might have this attitude.
I am concerned that that is the attitude of these witnesses; and I cannot leave it out of consideration, and Miss MacNamara was entitled to consider their attitude. It is a matter which affects her relations with her own tenants and her neighbours. They took the *190 initiative when they saw this application for a bookmaker’s licence.
I do not think that Miss MacNamara was unreasonable when she suggested that the opening of another bookmaker’s office might have the effect of depreciating her property. She holds this view. She may not be correct but she is reasonable in doing so.
Her second objection is that it would entail sub-division. She had considered this question of sub-letting when leasing this portion of her premises in 1949, and she decided then that she would have one tenant and one user. Is she now to be forced to alter her view and to have two tenants and two users where she only wanted one? Her decision was reasonable and I cannot say she is unreasonable in now refusing to sub-divide.
I conclude that her refusal of consent has not been shown to be unreasonable, and, holding the view that I do, I must refuse this application and the relief sought.
I should add that Mr. McCarthy’s suggestion that objection should be confined to the personality of the proposed sub-tenant or to the proposed user, is too narrow. I do not think that Gavan-Duffy, J., in Schlegel v. Corcoran & Gross [1942] I. R. 19, or any other case has confined the possible objections to those two matters. The question can be approached on a broader basis. The position of the landlord and the possible effects on the property can be considered. The objections of Miss MacNamara fall within this wider scope.
Hemani -v- Ulster Bank (Ireland) Ltd
[2015] IEHC 292
JUDGMENT delivered by Mr. Justice Michael White on the 14th day of May, 2015
1. This is an Appeal from an Order of the Circuit Court of the 15th March, 2013, at Sligo Circuit Court, when the terms of the Plaintiff’s tenancy at 52 O’Connell Street, Sligo being part of the building on the 2nd Floor at the corner of O’Connell and Grattan Street were fixed at the rent of €6,100 per year, together with a direction on covenants to repair. The Plaintiff was granted 50% of his costs.
2. The Plaintiff’s Grounds of Appeal of the 25th March, 2013, take issue with
(1) The valuation of the open market rental upon the tenancy of the subject premises.
(2) The terms and conditions regarding the repair and maintenance covenants referable to the aforesaid Lease of the subject premises.
(3) The issue of costs as between the Plaintiff and the Defendant.
3. On the 14th of November, 2014, the action was transferred to the High Court in Dublin.
4. The Plaintiff while represented by solicitor and counsel in the Circuit Court represents himself on appeal.
5. The Plaintiff was granted an oral tenancy of the 2nd Floor of the premises in May 1978. There are no written terms, or any documentation to assist the Court in it’s interpretation. The Plaintiff has always maintained that both external and internal repairs were the responsibility of the Landlord. The original Landlady was Peggy Fitzgerald. In or around 1982/1983 Ms. Fitzgerald sold the property to First Active plc. The building was refurbished in 1983. The rent at the date of service of the Notice To Quit was €220 per month. The present Defendant took over First Active plc in or around 1990. The first Notice to Quit was served in 2003. From 2003 there has been a difficult relationship between the Plaintiff and Defendant. The Plaintiff alleges a failure by the Defendant to carry out essential repairs to the property. The Defendant alleges that the Plaintiff has acted unreasonably in preventing access to the property, frustrated repairs, and delayed the legal proceedings.
6. There has been a difficult history to these proceedings.
7. The Notice to Quit was served on the 28th March, 2006. An Ejectment Civil Bill for Overholding was issued on the 1st August, 2006.
8. The Plaintiff then served a Notice of Intention to Claim Relief on the 27th November, 2006, and issued a Landlord and Tenant Civil Bill on the 5th December, 2006.
9. The action was not heard in the Circuit Court in Sligo for 6 years, when it was ultimately decided on the 15th March, 2013.
10. Subsequent to the Plaintiff’s Notice of Appeal of the 25th March, 2013, a Fire Safety Notice was served on the Defendant on the 4th July, 2013, directing the owners of the property to carry out essential repairs.
11. There was further difficulty between the Plaintiff and the Defendant about the execution of these repairs.
12. The matter came before the High Court in Sligo on the 9th May, 2014, when Mr. Justice Barry White gave the following directions:-
“It would seem to me that if there is to be an adjournment of this matter until the July sessions there would be in the first instance a Direction from me that the matter be marked peremptory in capital red letters as against Mr. Hemani but it would seem to me that also if it is to be adjourned, where there are obviously works that are required and there are requirements of the Fire Officer from the point of view of health and safety, that some form of undertaking should be given by the Landlord in relation to the carrying out of the works, that they … were to be commenced by a particular date and that the estimated duration of the work is x number of weeks, obviously if matters unfold in the course of that work that require the works to be continued on, then that would obviously have to be provided for, and there should be an undertaking by Mr. Hemani to move out of the premises while the works are carried out, that there would be an undertaking from the Landlord that Mr. Hemani would be permitted to return to the premises when the works have been carried out and there would be an undertaking from the Landlord that his moving out would not in any way prejudice his rights in relation to a tenancy and that there would be an undertaking on the part of the Landlord to discharge his reasonable costs of moving out of the premises for the period in question and something along those lines, Mr. Fogarty I think would meet the equity of the situation. ”
13. An undertaking was provided to the Court by the Defendant.
14. The essence of the undertaking was that the Defendant would carry out essential structural repairs, that the Plaintiff would move out of the premises but certain pieces of large equipment would be stored safely in the premises during the construction phase of the work and that any rental due during the construction phase would be suspended. The Plaintiff was to be paid compensation during his time out of the premises and certain other removal and advertising costs.
15. The Plaintiff moved out and substantial works have been carried out to the premises. There is now a dispute between the parties as to when they were ready for occupation and a dispute about damage to equipment stored in the premises during the refurbishment work.
16. The Plaintiff has claimed €86,999 for reimbursement of cost of replacement of damaged equipment and loss of income from customers due to a poor working environment.
17. The Plaintiff issued a Notice of Motion alleging that the Defendant has been in contempt of Court as a result of non compliance with the undertakings given by the Defendant on the 9th May, 2014, to the Honourable Mr. Justice Barry White at the High Court on Circuit hearing in Sligo and seeking all necessary and consequential Orders and providing for the costs of the Motion.
18. This Court does not have jurisdiction to consider the loss of income claim for a period of three years by the Plaintiff totalling the sum of €61,128.
19. The Court has jurisdiction to consider the claim for the damage to the equipment which was supposed to be stored safely.
20. The matters the Court has to address are:-
(1) The appropriate rent.
(2) The commencement of the Lease.
(3) The terms of the Lease.
(4) The date when the premises were ready for occupation after the refurbishment work.
(5) Does the Landlord have a responsibility to put in heating, and ancillary matters
(6) The Costs Order in the Circuit Court.
21. It is unfortunate that this matter has taken so long to resolve now 9 years since the date of service of the Notice to Quit.
22. Both parties have responsibility for this state of affairs.
23. The fact that substantial repairs had to be undertaken subsequent to the service of the Fire Safety Notice, indicates the Defendant did not properly observe implied covenants to repair under the Lease. There was a failure of the Defendants to address these issues over a period of years in a timely manner. The Defendant had acquired a sitting tenant with an oral tenancy and should have been more proactive to ensure that the fabric of the building was secured and that the building complied with relevant Fire Safety Regulations. The Defendant was confronted by a lot of unreasonable behaviour on the part of the Plaintiff, who was in occupation at a very reasonable rent, and was not proactive about addressing repairs. He may well be right that the original oral tenancy between himself and Ms. Fitzgerald developed the convention that the Landlady did all repairs which is not the normal covenant in a Commercial Lease whereby the tenant usually assumes responsibility for maintaining the premises internally. Those issues are now historical although they have some bearing on the Court’s decision in that after the service of the Fire Safety Notice, this Court is satisfied that the Defendants embarked on a programme of refurbishment, which in many ways went beyond their remit, and the Court is quite satisfied that the present condition of the premises is satisfactory.
24. There is no requirement on the Defendant to install any form of heating system, that is a matter for the Plaintiff. Likewise the issue of the phones, carpets and security meshes for windows are a matter for the Plaintiff.
25. The Court considers the e mail of 14th November 2014 from Conor McShane, Assistant Chief Fire Officer of Sligo Fire Service as sufficient indication that the premises were ready for occupation.
26. The Plaintiff although rightly concerned about the damage to his equipment had a duty to minimise his loss and take up possession as soon as he could. It is reasonable to give him some time to get reorganised and to decide what to do in respect of the equipment. I consider it appropriate to fix the 7th January, 2015, as a date for the Plaintiff to take up possession of the premises again and when the Defendant would no longer be liable for any compensatory payments to the Plaintiff.
27. The appropriate term is 17 years commencing on and including the 16th May, 2006.
28. It is appropriate that the Landlord be responsible for the repair and maintenance of the exterior of the building including the roof and the windows. The Plaintiff should be responsible for the internal repairs and maintenance of the demise. Due to the difficult history of this landlord and tenant relationship the clauses in the Draft Lease at 4.5 and 5.2 should be more strictly defined. I agree with the Order made by the Learned Circuit Court Judge on the 15th March, 2013, on repairing covenants.
29. The issue of costs in the Circuit Court was at the discretion of the Trial Judge and I will not interfere with that Order.
30. Due to the substantial delay in this matter being finalised the Court will deem that the rent review due in 2011 has taken place and that the next review will occur on the 16th May, 2016.
31. The Court in considering the evidence in respect of the rental of the property finds that an appropriate annual rent from the commencement of the Lease on the 16th May, 2006, up to the review on the 16th May, 2016, is the sum of €5,200 per year.
32. The only matters outstanding for the Court to consider are any outstanding terms in the Lease and to resolve any outstanding issues in respect of the damaged equipment, and any other matters outstanding in respect of the undertaking given to Mr. Justice Barry White on the 9th May, 2014. The court also has to deal with costs in this court.
Kavanagh v Crowley
Queen’s Bench Division.
22 November 1897
[1899] 33 I.L.T.R 30
Murphy, Gibson, Madden JJ.
Murphy, J.
The original lease contained a clause against alienation, but if they had drawn out a settlement in pursuance of these articles I do not see how the landlord could refuse to give his consent. That, however, was not done. Crowley, being looked on as substantially the owner, gets a fair rent fixed, and we may take it for granted that he had the tenancy converted into a yearly tenancy; but was it freed from all the terms of the marriage settlement, whereby the interest in the lands was not to be sold for any debt due by Eugene Crowley? In my opinion it was not. He never got rid of his obligations under the settlement, and the other parties to that settlement could have resisted a sale of the lands, and had their rights established. The Bank proceeds to sell out Crowley’s interest, and it is bought by a trustee for the Bank, who brings this ejectment, and it is significant to notice that the wife and one of the sisters are also made defendants. Now, in his report, Holmes, J., says—“Mr. Bourke relied on the fair rent order as converting the freehold into a chattel real, and thus rendering it capable of seizure. His answer to the marriage settlement was the covenant against alienation. He did not dispute the validity of the proviso of cesser if the settlement was otherwise good, and as this question was not raised I did not consider it. As the only right of Eugene Crowley to have a fair rent fixed was under the marriage settlement, I could not see how he could rely on the fair rent order to defeat the provisions of the settlement, on the one hand, and the rights of the co-heiresses of John Kiely in the lands if the settlement was inoperative, on the other.” I adopt that, and it is quite evident that if Crowley could not do so, the Bank cannot. Then it is contended that Crowley having got into possession contrary to the clause in the lease against alienation, he was assisted by the Statute of Limitations, and the estate was transferred to him. I am satisfied that it was not—the persons in joint possession were there preserving their rights. The execution was void as against the settlement, and the verdict was rightly entered for the defendant.
Gibson, J.
The authorities cited on invalid deeds only relate to the original parties. It is contended that as between parties who have got possession on the faith of a deed there may not be an estoppel. I have the greatest difficulty in seeing why there should not be an estoppel. The possession of all is attributable to the settlement, and such was the meaning of the parties. I do not think it is possible to establish that Eugene Crowley’s possession upsets the settlement and his wife’s right under it. It is clear that under the Land Act, 1888, the fair rent order did not transfer the tenancy to Eugene Crowley. By that statute, being in possession as apparent tenant, he was enabled to apply, but he was not made the owner of the tenancy.
Madden, J.
The proviso against alienation in the original lease is that they “will not at any time or times during the demise set, sell, alien, sub-let, demise, or assign the said demised lands or any part thereof.” Now, on his marriage, Eugene Crowley was put into possession under marriage articles, by the terms of which the tenant, John Kiely, was bound when called upon to assign over all his interest in the lease, and I am not prepared to decide that this is an assignment within the meaning of Deasy’s Act. However, it is contended that a person entering under a contract invalid by Deasy’s Act is not bound by a personal equity which would prevent him from relying on the Statute of Limitations as *31 against others taking rights under that contract. It would be carrying the authorities very far to say that a man who goes into possession under a settlement can set up its illegality. Crowley, having entered under the settlement, is bound by it.1
M’Naul’s Estate
Court of Appeal.
5 February 1902
[1902] 36 I.L.T.R 45
FitzGibbon, Walker, Holmes L.JJ.
FitzGibbon, L.J.
In this case Cecilia E. M’Naul is proceeding before the Land Commission under the Land Purchase Acts to sell in fee-simple, discharged from all superior interests, except a liberty to fish, certain lands of Drumcrottagh, held under a fee-farm grant, dated June 7, 1852, made under the Renewable Leasehold Conversion Act. The grantor’s interest is now vested in Dr. Traill. The grantee’s interest is vested in the vendor. In ordinary course, an order dated April 2, 1901, was made that the perpetual yearly rent of £6 8s. reserved by the grant should be redeemed. This order contained the following additional declaration:—
The Court, being of opinion that the covenant of the grantee, her heirs and assigns, in the said grant for payment of the additional rent of £5 10s. 9d. in the event of alienation or demise of all or any part of the premises to any person or persons whatsoever other than a child or grandchild of the person so aliening or demising with *45 out the consent of the grantor, his heirs and assigns, as therein provided, is void, doth order that no value be placed thereon in fixing the redemption price of the said rent.
Dr. Traill had appealed against this declaration, contending that the covenant was a good and valid covenant as between the grantor and grantee, and that he is entitled to have the £5 10s. 9d. in addition to the £6 8s. redeemed, and to be paid the redemption value of both said rents and his costs. The fee-farm grant was founded on a lease of Oct. 13, 1763, which was last renewed on Feb. 20, 1851. Renewal fines were reserved by the lease, and were duly included in the fee-farm rent of £6 8s. But the grant contained the proviso and further covenant that if the grantee, her heirs and assigns, should at any time thereafter alien or demise all or any part of the premises to any person or persons whatsoever, other than a child or grandchild of the person, or of some or one of the persons so aliening or demising, without the previous consent of the grantor, his heirs or assigns, in writing under hand and seal, then and in such case the grantee, her heirs and assigns, from and after the time of such alienation or demise, should pay, over and above the said yearly rent, the further yearly rent of £5 10s. 9d. during the continuance of the demise and grant, the same to be paid half-yearly upon every May 1 and Nov. 1, the first payment to be made on such of the said days as should first happen after the alienation or demise; and that the grantor, his heirs and assigns, should have the like remedy by distress and otherwise for recovery of the said yearly rent of £5 10s. 9d. as they might have by virtue of the grant for the recovery of the yearly rent first reserved. The appeal was opened with the statement that the Court would be called upon to consider whether the decision of the Queen’s Bench in Billing v. Welch, in 1871 could be reconciled with the provisions of the Renewable Leasehold Conversion Act. That decision bound the Land Commission in the present case, but it does not bind this Court. We agree that Billing v. Welch cannot be distinguished from the present case, though probably the other cases cited might be. We are reduced to the alternative of overruling Billing v. Welch, or of disobeying the statute. Where a statute is concerned and we are clear as to its construction, it must prevail against any previous practice or decision of the Courts below, because we have no jurisdiction to disregard it. Upon the words of the Renewable Leasehold Conversion Act we hold that when this fee-farm grant came to be executed the grantor was entitled to require that the covenant in question should be inserted in it, and that when it was so inserted it became, and it still is, a valid obligation binding the grantee and the lands. The doctrine of repugnancy applicable at common law to cases of an estate in fee is modified in the case of fee-farm grants founded on renewable leases by whatever obligations are lawfully inserted in the grants. The object of the Act was to give a perpetual estate, which is not a common law estate in fee, but is an estate created under the statute, which is to remain subject to all covenants and conditions which had bound the previous leasehold estate, save so far as they are got rid of in the manner provided by the Act. Where not so got rid of, they are to be retained in the grant, and the decision of Billing v. Welch cannot be sustained in so far as it avoided such obligations upon the ground of repugnancy to a common law estate in fee. The preamble mentions as the mischief, against which the Act was directed, the great expense constantly incurred in procuring renewals under covenants for perpetual renewal, and the litigation and inconvenience arising from tenures under leases with such covenants; and it declares it to be expedient that such tenures should be converted, in manner thereinafter provided, into tenures in fee. This preamble has been repealed by the Statute Law Revision Act, 1892, but with the proviso that such repeal “shall not affect the construction of the statute, whether as respects the past or the future.” This makes the revised edition a trap for any adviser or court which has to determine the effect of the Act, if the repealed preamble had any effect in indicating the scope or purpose of the statute. Here it defines and limits the operation of the Act to the manner thereinafter mentioned, and thereby distinguishes the tenure to be created under it from an ordinary tenure in fee-simple at common law. S. 1 provides that the grant shall be subject to the like covenants and conditions for the payment of the perpetual yearly fee-farm rent as are contained in the converted lease with respect to the rent thereby reserved, and with and subject to such other covenants, conditions, exceptions, and reservations (save covenants for renewal of such lease, and such covenants, conditions, exceptions, and reservations as may be commuted as thereinafter mentioned) as are contained in such lease, and then subsisting. It has not been disputed that the covenant here restraining alienation, without the lessor’s consent, to other than descendants of the grantee, by providing for the payment of an additional rent of £5 10s. 9d., was a valid and subsisting provision in the lease. It was not a covenant prohibiting alienation. On the contrary, it permitted alienation on the terms of paying the additional rent. It could not be omitted from the grant save on commutation or by consent. S. 3 provides for the commutation of any subsisting exception or reservation contained in the lease, or any right under covenant *46 or otherwise annexed to the reversion which interferes with the proper cultivation of the land. The provision, therefore, does not apply to the covenant in question here. But it is, at best, optional. It empowers the grantee (if he think fit) to require that such exception, reservation, or right should cease wholly or partially; and in such case it enacts that the grant shall be modified accordingly, and that the fee-farm rent shall be increased by an amount equivalent to the value of such exception, reservation, or right, in so far as it is made to cease as aforesaid, such amount to be ascertained in manner mentioned in the Act in case the parties differ about the same. If the lessee does not “think fit” to commute it, even a covenant which interferes with proper cultivation must, under this section, remain in the fee-farm grant. S. 4 provides for a similar commutation of any right to timber, bogs, minerals, quarries, or royalties; but it does not make it lawful for the owner of the lease to require that such rights should cease, either wholly or partially, unless the owner of the reversion and the owner of the lease agreed, and in such case the grant is to be modified accordingly. S. 5 provides compensation for the owner of the reversion where the estate into which the reversion would be converted upon a grant under the previous provisions would not afford full compensation for the loss of such reversion, or of any power, benefit, or advantage incident thereto or enjoyed by the owner thereof, under any Act of Parliament, charter, settlement, or otherwise. It enables the owner of the reversion to require such loss to be compensated, either by an addition to the fee-farm rent, or at his option by the payment of such a gross sum of money (the amount in either case to be ascertained as mentioned in the Act in case the parties differ about the same) as would afford a full compensation for such loss, to be estimated according to the difference in marketable value. One observation applies alike to ss. 3, 4, & 5, viz., it is in no case compulsory upon the parties to modify the terms of the lease. They may if they wish, but if not modified, the same terms must be contained in the grant, and wherever they are modified, the equivalent or compensation must be provided in manner directed by the Act. In no case can an operative condition or covenant in the lease be omitted from the grant, unless by consent, or upon giving the statutory equivalent or compensation. S. 7 provides that, where the grant is made, the reversion shall be converted into an estate of inheritance in fee-simple in the fee-farm rent made payable by the grant, and the conditions, exceptions, and reservations therein contained, and all rights annexed or belonging to such reversion saved by and not commuted under the Act; and such estate in fee-simple as aforesaid shall be transmissible and descendible in like manner as if the same were an estate of inheritance in fee-simple in reversion in the lands on which the fee-farm rent is charged by the grant creating the same, having incident thereto the conditions, exceptions, and reservations contained in the same grant, and such rights respectively as aforesaid, and the estate of inheritance created under every such grant as aforesaid in the lands comprised therein, and the estate of inheritance so created as aforesaid in the fee-farm rent made payable by such grant shall, from and after the execution of such grant, be respectively vested in the same persons for the same estates and interests, and be respectively subject to the same uses, trusts, provisoes, agreements, and declarations as the estate held under the lease, and the reversion or estate by the owner of which the grant was made, were respectively vested in, subject to, and charged with immediately before their conversion, or as near thereto as the different natures of the estates and the circumstances of each case will admit. This section, if it stood alone, might lend some colour to the contention that the statutory estate was “an estate of inheritance in fee-simple,” and thus warrant the decision in Billing v. Welch. But s. 10 provides [reads], and the owner or assignee for the time being of such estate in fee-simple shall be chargeable upon such covenants, in the same manner and to the same extent as if he were an owner or assignee of the term or interest created by the lease, and such term or interest and the estate out of which such lease was derived were still subsisting. It is absolutely impossible, having regard to that section, to apply the doctrine of repugnancy as affecting estates in fee at common law to an estate which is to be deemed to be a term created by a lease still subsisting. The sections I have quoted appear to enact as plainly as words can provide (1) that the limited covenant restricting alienation by making additional rent payable thereon was rightly retained in the grant; (2) that being so retained it must have the same effect as if the lease were still subsisting. It follows that it cannot be void for repugnancy to a common law estate in fee, and that the appeal must be allowed. But it does not follow that the grantor is now necessarily entitled to the full redemption price of the additional rent of £5 10s. 9d., because that rent is not yet payable; and it was not proved that there has, as yet, been any alienation upon which the additional rent would begin to run. We must discharge the order appealed from in so far as it declares the covenant to be void. The Land Commission has jurisdiction to redeem the whole interest of the grantor under the grant, and the only relief to which the appellant is entitled is a declaration that in fixing the amount of the redemption price regard is to *47 be had to the existence in the grant of the covenant referred to. The price would be enhanced by whatever might be justly ascertained to be the difference in “marketable value,” which the existence in the grant of the condition and covenant respecting the additional rent gave to the grantor—in other words, he is entitled to the price of the chance or prospect, that, if the redemption does not take place, the £5 10s. 9d. would have become payable on some future alienation to some person other than a descendant of the grantee for the time being. It is not for this Court to indicate, and we have no means of estimating, what the amount of such an enhancement might be. The case will be remitted to the Land Commission with the foregoing declaration, to proceed therein as to justice may appertain. The appellant will be entitled to his taxed costs before the Land Commission and upon the appeal, as costs of the redemption, to be added to the redemption price.
Walker and Holmes, L.JJ., gave judgment to the same effect.
Earl of Meath, Tenant v Magan, Landlord
Supreme Court of Judicature.
Court of Appeal.
4 February 1897
[1897] 31 I.L.T.R 93
FitzGibbon Barry Walker L.JJ.
FitzGibbon, L.J.
In order to ascertain whether Lord Meath is tenant or not, we must ascertain his title to see whether it is a derivative *93 tenancy or his own immediate tenancy. It is admittedly a derivative tenancy, and unless he could show that the tenancy which William, Lord Meath, had in the lands is now vested in him he fails. The first Lord Meath’s tenancy was, as to a portion, a tenancy for 18 years. It has been argued by Mr. Matheson that the clause against alienation (apart from statute) was not carried forward by the rule of law which makes a continuing tenancy from year to year subject to all the terms of the contract of tenancy which had expired, so far as they are applicable. It is always open to the parties to show that some of the terms do not continue, such as conditions to build, which conditions had not been complied with during the lease, and were held not to have been revived long after the time at which they ought have been performed. It is important here to bear in mind that this is a case of presumption as to the terms of the agreement, because we have the notice served by Lord Meath on the landlord when he gave notice of the transaction that had taken place between him and the Countess, and there it is stated not only that what was assigned to him was the original tenancy, with all the covenants and conditions in the original document, but, furthermore, that he had covenanted to indemnify the Countess against any breach of them, and hence it is clear, apart from the statute, that the continuing tenancy was subject to the conditions against alienation. As regards the effect of such an agreement, it is quite settled, and it is too late to disturb the law as settled, that whether the form is covenant or condition, penalty or additional rent, it is equally an indication that in the mind of the parties alienation was restrained, if not prevented. Therefore, irrespective of statute, the derivative title which Lord Meath throws down is through a deed which is void. S. 1 of the Act of 1881 says, “the tenant for the time being” may sell his tenancy. The only tenants and the only holdings to which the Act can apply are the tenants for the purposes of the Act and the holdings within the Act. That being so, what was the position of the Countess of Meath when she assigned to Lord Meath? Was she tenant of this holding? Was she in fact in occupation. Certainly, personally, she was not in occupation. It is contended that Lord Meath was in as agent or trustee, or as servant or bailiff to his mother. Reading the recitals in the deed executed by Lady Meath on 26th Oct., 1895, I have come to the conclusion that there was never any occupation in fact by the Countess at all till the mistake was discovered that Lord Meath believed the lands to be his own. The assignment was by a person not within s. 1 of the Act of 1881, to a person who had not got the necessary consent. Reference has been made to s. 19 of the Act of 1896. But that section strengthens the view we take on the main contention, because if the words “tenant for the time being” are to be confined to cases to which the Act applies we have only to do the same when we come to s. 19 of the recent Act. Unless a tenant is entitled to have a fair rent fixed, he is not entitled to have a sale under s. 1 of the Act of 1881. I am of opinion that Lord Meath had no title to a tenancy in these lands, and never became a person entitled to serve an originating notice. The appeal must be dismissed.
Barry, L.J.
I concur. I was deeply impressed by the evidence that, beyond doubt, the present Lord Meath was potentially the tenant in occupation of those lands, he was occupier paying rent, and was accepted by Mrs. Magan, as tenant. But that occupation in fact arose out of a mistake of supposing that the lands were included in the denominations which he was to take over on paying a sum of money. It turns out they were not so included, and hence, as a mode of getting rid of the difficulty, the assignment was adopted. Lord Meath had not a legal title, and we then have to consider the effect of the deed in that state of affairs. Lord Meath’s counsel argue that once the Act of 1881 passed there was an end to the clause against alienation, so far as the right of sale was concerned, and they also say that the clause applies only to tenants in occupation of holdings. I cannot get over the language of the section. It is also contended that the lease having expired, the tenancy was one from year to year, and the clause against alienation did not apply. But why should such a clause not apply to a tenancy from year to year? As to the alleged occupation by Lord Meath as bailiff, the deed puts an end to that allegation.
Walker, L.J.
It is idle to say that there was not a covenant against alienation attached to the implied tenancy, after the determination of the lease. The deed shows that Lord Meath was not in occupation as bailiff; it proceeds on a totally different assumption. The whole of s. 1 of the Act of 1881 deals with sales by a person in occupation of a holding, and the words “for the time being” relate to the act of sale. All this Act is simply for occupying tenants. It is a perfectly plain case, and a plain section, having a plain policy.
Royal Exchange Assurance Corporation v Burke
House of Lords.
8 December 1899
[1900] 34 I.L.T.R 3
Lord Chancellor (Earl of Halsbury) Lords Macnaghten, Ludlow, Robertson
Lord Halsbury, C., after saying that this was a plain case, said—It appears to me that the lessor by this instrument intended to prevent any building whatsoever being erected on this place unless it was “slated and substantially built of good and suitable materials.” That is a covenant in the plainest possible form. What appears to have given rise to the suggestion, which has been very ingeniously put by the learned counsel who has just addressed your Lordships, is a provision which was intended apparently to be in relief of the covenantor, that in calculating the amount of £150 you are not only to take the exact building to which the other covenants apply, but that anything which would be properly described as an outhouse “appurtenant thereto” should be included in that cost. It appears to me that that was a very intelligible proposition. Of course the language used is not absolutely technical, but still, when one considers what was the nature of the transaction in which the parties were engaged, it is intelligible enough that they should use words which might *3 be paraphrased by saying that the £150 is not to be confined to the exact four corners of the building itself, but should include anything which can properly be said to belong to it—“appurtenant thereto” (which, as I have said, is not technical), and that in calculating that you should include “outhouse.”
Now that the building in question may be an “outhouse” within the meaning of the Statute of George IV., which provides that anybody shall be guilty of felony who (amongst other things) sets fire to an “outhouse,” is true enough, though what relation that has to this particular covenant I am not at present prepared to say, but the nature of the transaction between the parties being such as I have described, what possible ground is there for anybody introducing words which would exclude from the other parts of the covenant the building in question—for undoubtedly it is a building? And if you apply the language of the covenant in the way I have suggested it appears to me to be manifest that it must be substantially built of good and proper materials, and must be slated. It is not denied that the building now in question does not comply with those conditions. The only mode in which it could be got out of the covenant is by the ingenious suggestion of the learned counsel that you must introduce by construction such words as “other than an outhouse.” What right have you to alter the language for that purpose? When there are doubtful words the nature of the covenant or instrument which has to be construed and the nature of the transaction may to some extent throw light upon the ambiguous words, but, to my mind, here there are no ambiguous words whatever. The language is absolute. Lord Justice FitzGibbon says (and, to my mind, says very truly)—“In fact we are asked to hold that upon the construction of this covenant ‘out-offices’ are not buildings at all, and we have to do that in face of the word ‘whatsoever’ qualifying ‘any buildings.’” I am of opinion that the judgment of Lord Justice FitzGibbon was absolutely right.
Lord Macnaghten concurred, and, in the course of his judgment, said—Every building must be substantially built and slated, and every building must be of the cost of £150, with this qualification—that in reckoning the cost you may aggregate the outhouses, if any, with the principal building, though they may not be under one and the same roof, and so might give rise to the question whether there were two buildings or only one building.
The other noble and learned lords present concurring, the order of the Court of Appeal was reversed, and the judgment of the Vice-Chancellor was restored with costs.
McEvoy v Gilbeys of Ireland
[1964] IR 30
CIRCUIT APPEAL.
The plaintiff, James Alphonsus McEvoy, was tenant, under indenture of lease, dated the 30th March, 1961, of the premises, no. 42, Ranelagh, Dublin, of which the defendants, Messrs. Gilbeys of Ireland Ltd., were the landlords. The said premises comprised both shop and dwelling accommodation. The plaintiff was in occupation of the shop, while the dwelling accommodation had been sub-let. The said lease contained a covenant against assignment of the premises or any part thereof without the previous consent in writing of the landlords. The plaintiff applied to the defendants for their consent to an assignment of the entire premises comprised in the lease. The defendants refused their consent and the plaintiff thereupon applied to the Circuit Court (His Honour Judge Binchy) for a declaration that such consent was being unreasonably withheld. The Circuit Court Judge having refused this application, the plaintiff appealed to the High Court, where the defendants contended that the entire premises did not constitute a tenement within the meaning of s. 2 of the Landlord and Tenant Act, 1931, and that therefore the covenant against assignment without the previous consent in writing of the landlords was not subject to the proviso contained in s. 56, sub-s. 2 (a), of the Landlord and Tenant Act, 1931.
DAVITT P. :
I must affirm the decree of the Circuit Court. It is clear that the premises in question are not a “tenement” within the meaning of s. 2 of the Landlord and Tenant Act, 1931.
M’Kay v M’Nally
Court of Appeal.
27 March 1879
[1879] 13 I.L.T.R 130
Ball C., Palles C.B., Deasy L.J.
O’Brien, J.—This an was action of ejectment for non-payment of rent tried before Chief Justice Morris at the last Spring Assizes, Trim, in which two questions are presented for our decision. The first question is whether the defendant is liable to pay the larger rent mentioned in the lease, by reason of his not having paid the smaller rent reserved regularly in May and November. [His lordship stated the facts as mentioned in the judge’s report.] The Chief Jus *132 tice directed a verdict for the defendant, leaving it to either party to move for judgment. It was contended upon this by Mr. Dames that the verdict directed for the defendant ought to be changed into a verdict for the plaintiff. We are of opinion that the verdict ought to be changed. The rent reserved by the lease is £556 2s. 6d., and the covenants contained in the lease are of the most stringent kind, and there was a proviso that if the lessee should from time to time during the lease perform and keep the several clauses, covenants, and conditions contained in the lease the landlord would accept every year the half of the rent of £556 2s. 6d. in lieu of the larger rent. There was also a covenant against alienation in very strict terms—that the lessees should not during the continuance of the lease, without the consent of the landlord, his heirs, or assigns, first had, mortgage, sell, assign, or otherwise part with the indenture of lease, or the premises thereby demised, or any part or parcel thereof, except such conveyance or transfer of the whole of the said lands as the lessees might by deed or will make to a brother, or child, or children, not being more than two in number, or by will to or for the benefit of the wives of the lessees, or as the survivor of them might make by will to any one person, nor sublet, nor make any underlease of the same, or any part theaeof, nor permit nor suffer the same, or any part thereof, to be used or occupied in tillage conacre. The breach of this covenant which was alleged was that, in December, 1864, the lease was deposited by way of equitable mortgage by the then tenant with one Daniel O’Brien, and by a letter dated the 5th December the defendant, Thomas M’Nally, agreed that O’Brien should hold the lease by way of equitable mortgage to secure to O’Brien the sum of £1,500 with interest thereon, or such sum as might on settling accounts appear to be due not exceeding £2,000, and such interest to be 6 per cent., and that O’Brien was to have a lien on the said lease by way of equitable mortgage for the sum due to him by the defendant and interest, and such higher interest as might be charged by the bank. This letter was registered on the 4th January, 1865. It was contended on the part of the plaintiff that this breach of the covenant against alienation in 1864 disentitled the defendant to relief or to succeed in the action.
The first question to be considered is whether the plaintiff is entitled to the larger rent, and it was urged on behalf of the defendant that the rent of £556 2s. 6d. must be considered a penal rent, and, therefore, that ejectment would not lie. In my opinion Ashtown v. White (11 Ir. L. R. 400) is decisive on this point, and shows that the rent is not a penal rent, and that the plaintiff was entitled to the larger sum as rent. The words of the proviso are somewhat peculiar, but the larger rent is mentioned first, and then it is agreed to accept a small one upon certain terms, just as a proviso for the reduction of interest in a mortgage deed. Upon that authority that first point must be decided in favour of the plaintiff.
It was next contended on behalf of the defendant that the words of this covenant and proviso were of so peculiar a nature that it would be actually necessary for the defendant to tender payment upon each gale day of the larger rent in order to avail himself of the proviso for reduction. We do not put so stringent a construction as this upon the words of the covenant, and we consider that it would be sufficient for the terms of the covenant if the lesser rent were tendered upon each gale day, and that if on each gale day the defendant brought payment of the lesser rent, and at the same time observed and performed all the covenants in the lease, the landlord would have been bound to accept it. But the defendant has not tendered even the smaller rent regularly upon each gale day, and so the landlord is now entitled to recover the larger rent. This would be an answer to the other objection of the defendant, if indeed it is to be considered as having been really pressed upon the court. We were asked to consider the long period of time during which the parties had dealings with each other, and the rent having been regularly paid for a number of years, it was argued that the present proceeding to recover the larger rent is oppressive; but this cannot fairly be contended, because the contract between the parties was clear, and in case of a lease containing such stringent clauses the lessee should take care that the terms of the contract are observed. As we have decided in favour of the plaintiff on this first question, it is not necessary to decide the other question which was argued as to the construction of the covenant against alienation. As a general rule those contracts are to be construed strictly. It was held in Crusoe v. Bugley (2 Wm. Bl. 766) that a covenant not to assign, set over, or otherwise do or put away the lease or premises does not extend to an underlease for part of the term. In Doe v. Beavan (3 M. & S. 353), the next case cited, there was a covenant by the lessee not to assign the indenture or his interest, or assign the premises without the consent in writing of the landlord, with a proviso for re-entry if he did so. The lessee deposited the lease as a security for money borrowed, and this was held not to be a breach of the covenant. So, in the case of In re Domvile (14 Ir. Ch. R. 19) a lease containing a covenant not to alien, assign, or sublet the premises without consent had been deposited by way of equitable mortgage, and it was held that the Landed Estates Court had power to sell the interest so created. Lord Chancellor Brady, in giving judgment, said:—“The lease does not preclude the giving of an equitable mortgage; the words are confined to assignment, and an equitable mortgage by deposit has been held not to be prohibited by such expressions, nor even by much more comprehensive words in the case of Doe v. Beavan. A deposit of title deeds must, therefore, not being prohibited, be considered to be allowed by the lease, and allowed with all its equitable and legal consequences—that is to say, with a power of having the sale effected through the medium of this or any other court possessing equitable jurisdiction; and therefore, when it is objected that the equitable mortgage may lead to a sale, the answer is that the lessor has omitted by his contract to provide against a sale being thus accomplished.” In this decision Lord Justice Blackburn concurred. The words in the covenant in the lease in that case did not contain the term “mortgage,” and the plaintiff relies upon its being included here. The words are that he should not “mortgage, sell, alien, or otherwise part with.” On the other hand, the defendant contends that this ought to be confined to a legal mortgage, and that it was no breach of the covenant to deposit the lease by way of equitable mortgage. In my opinion, the equitable mortgage was no breach of the covenant, and the word “mortgage” being used must be confined to a legal mortgage. But, upon the other grounds we think the verdict ought to be changed into a verdict for the plaintiff.
Fitzgerald, J.—I agree in the judgment which has just been pronounced. There were two gales of rent in arrear, and a third falling due, and if the defendant sought to avail himself of the proviso for reduction of the rent, he ought to have brought himself within that proviso by tendering payment of the rent punctually. This is an answer to the contention of the defendant that it would be inequitable for the plaintiff now to enforce payment of the higher rent in consequence of the long course of dealing between the parties. As we have decided that the plaintiff is entitled to recover the higher rent, and that the verdict ought to be entered for him, it is not necessary to decide the other question which was argued before us; but if it were necessary, I am of opinion that the equitable mortgage did constitute a breach of the covenant.
Judgment was, accordingly, ordered to be entered for the plaintiff for recovery of the lands and rent claimed in the summons and plaint, and from this order the defendant appealed.
Macdonogh, Q.C., and Byrne, Q.C. (with them, Nicolls ), for the appellant. The covenant against mortgaging should be strictly construed: Church v. Brown, 15 Ves. 265; and an equitable mortgage by deposit of title deeds does not constitute a breach of the covenant forbidding to mortgage or assign: Doe d. Pitt v. Hogg, 1 C. & P. 160, 4 D. & R. 226, 1 Ry. & M. 36; Crusoe d. Blen *133 cowe v. Bugby, 1 W. Bl. 766; Doe d. Goodbehere v. Bevan, 3 M. & S. 353; Kennard v. Futvoye, 2 Giff. 81; Ex p. Domvile, in re Fowler, 14 Ir. Ch. R. 21; Doe d. Maslin v. Roe, 5 Esp. 105. An equitable mortgage is “a mortgage which, for want of the legal estate, operates only in equity. When it amounts to a contract for a legal mortgage, the creditor may demand the same rights which are conferred by that security, subject to the rights of prior creditors, otherwise it is doubtful if the right against the estate is more than a right of judicial sale:” Fisher, Mort., Introd. LXXIII. (2nd Ed.2). Here there is no contract for a legal mortgage. The property in the lease was not parted with, but only temporary possession, and the right to the title deeds goes with the legal estate: Malone v. Minoughan, 14 Ir. C. L. R. 540, 568; Lord Buckhurst’s case, 1 Rep. 1; Harrington v. Price, 3 B. & Ad. 170; Goode v. Burton, 1 Ex. 193; Smith v. Chichester, 2 Dr. & W. 393, 401; Philips v. Robinson, 4 Taunt. 106; Sugd V. & P. 433 (Ed. 1862); 2 Dart, V. & P. (Ed. 1876) 731. A deposit of deeds is wanting in several of the characteristics of a legal mortgage: Russell v. Russell, 1 Bro. C. C. 269; 5 Bac. Abr. 615, 616; 2 Com. Dig. 727, tit. “mortgage” (4 A. 3). Unlike a legal mortgage, it creates no tenancy, and the depositor cannot be evicted by the depositee without notice; and it is not a parting with any estate, or with the property in the lease itself. The effect of the lessee’s covenant is only to restrain the alienation of the legal interest to the prejudice of the lessor. Its meaning is to be gathered from the whole instrument; and the word “mortgage” being here associated with the words “assign” and “part with the premises,” taken in connexion with the other provisions of the deed, it is apparent that what was contemplated was to prohibit only such a transaction as would create a tenancy in another person. In like manner, as regards the abatement of the rent, the covenant should be construed in connexion with the general purview of the deed, from which the intention should be gathered; and so considered, it would here appear that the tender of the rent primarily reserved ad diem was not necessary, as a condition precedent, to entitle the lessee to the benefit of the proviso for the acceptance of the abated rent, and its omission was not a breach of the covenant for payment of rent. The words by which it is sought to work a forfeiture must be express, and such as to be capable of no other meaning: Doe d. Spencer v. Godwin, 4 M. & S. 265. In Westmeath v. Hogg (3 Ir. L. R. 27), where a lease reserved a rent of £170 5s. 2d., with a proviso that so long as the lessee should continue to occupy without letting, setting, alienating or otherwise disposing of the premises, he should pay only half that sum, it was held that the rent reserved was substantially a penal rent so as to induce the court to construe any ambiguity in the proviso against the lessor. In Lord Ashtown v. White (11 Ir. L. R. 400) it was held indeed, that a larger rent reserved in the first instance was not a penal rent, but this only because the court come to the conclusion that the substance of the contract was the full sum; while in the present case it is obvious that the substance of the contract is the smaller sum. The words reserving the rent are peculiar, but it is evident that the whole transaction contemplates the smaller sum, £278 1s. 3d., as the amount to be paid for rent, which was the full value of the lands, and the evidence given at the trial shows that rent at this rate was, until these proceedings, accepted by the landlord, and that this payment was customarily preceded by a notice specifying when and where the rent would be received.
Walker, Q.C., and Dames, Q.C. ( Bewley with them) for the respondent, contra. The equitable mortgage was a breach of the covenant against mortgaging. A mortgage is “where things movable or immovable, as goods or land, are pledged as a security for repayment of money:” 2 Dav. Prec. Conv. 549 (ed. 1869); 4 Com. Dig. tit. “Mortgage,” A. A deposit of deeds as a security is a mortgage and constitutes an alienation: Bac. Abr. tit. “Mortgage,” A., 612 (ed. 1832); 1 Fish. Mort. 2; Malone v. Minoughan, ubi supra. An equitable mortgagee may present a petition to the Land Judges for sale; he has a right to foreclosure: Pryce v. Bury, 2 Drew. 42, L. R. 16 Eq. 153, n.; Parker v. Housefield, 7 M. & K. 421, 4 L. J. Ch. 57; Bur. & Gress, Ir. Eq. Pl. 121; he may have an account against the Crown of rents and profits reserved under an extent: Casberd v. Ward, Dan. 238, 6 Pr. 411; and a judgment creditor has no priority as against him: Whitworth v. Gaugain, 1 Phill. 728, 3 Hare, 427, Cr. & Ph. 325. The word “mortgage” in this covenant must mean something different from “assign;” and “when words contained in a deed go to several senses and purposes, the deed shall be taken according to the sense of the words, without taking or expounding any word to be vain or confounding the sense of it:” 1 Shep. Touchst. 253, n. (ed. 1826); Earl of Pembroke v. Barkly, 2 And. 20. And, so construed, “mortgage” must here mean more than a mere legal mortgage with an equity of redemption, the transaction rather showing a pledging so as to involve a sale. The rent reserved is a rent-service: Lord Ashtown v. White, ubi supra; and it does not signify that the smaller sum has been previously accepted: Fitzgerald v. Lord Portarlington, 1 Jones, 431, 1 L. Rec. O. S. 503. The non-payment of it, or the omission to tender it ad diem constitutes a breach of the covenant.
At the close of the arguments, Palles, C.B., having directed attention to the nature of the evidence as to the existence of the equitable mortgage—
Macdonogh, Q.C., contended that there was no legal proof of the mortgage: Sadlier v. Biggs, 4 H. L. C. 434; Padwick v. Wittcomb, id. 425.
Walker, Q.C., contra, submitted that, if the point was tenable, it should have been taken at the trial as an objection to the evidence, and could not now be raised.
Cur. adv. vult.
Ball, C.
This is an action of ejectment for non-payment of rent, founded upon a lease dated 11th August, 1853, containing some peculiar provisions which give rise to the question to be decided. By that lease certain premises were demised for a term of lives and years still subsisting, and it reserved a rent of £556 2s. 6d. per annum, payable in two equal half-yearly instalments, on every 1st of May and 1st of November, over and above all taxes (quit rent and Crown rent, and the landlord’s proportion of the poor-rate only being excepted). There was the usual clause of distress for that rent; and there was a covenant by the lessees (there were two), for themselves and their representatives, to pay that rent upon the days appointed for the payment thereof, without any deduction except what I have already mentioned. The lease excepts and reserves to the lessor, among other matters, mines, minerals, fishings, waters, turf, mosses, and timber, with liberty for the lessor and his servants to enter and raise and take away the same, and also excepts and reserves the right to hunt, hawk, fowl, and destroy the wild-fowl and game, and dispose of the same. There are covenants by the lessees, for themselves and their representatives, to do suit and service at the courts of the manor; to manage the lands in a husband-like manner; to keep the dwelling-house and out-offices well slated and in *134 repair; against cutting or defacing timber; against taking more than two grain crops in succession; and otherwise regulating the tillage of the farm. There is a power on the part of the landlord to resume, to the extent of three acres, portion of the land demised; but the reservations, exceptions, powers, provisoes, covenants, and agreements are to continue the same notwithstanding, the rent to be proportionally abated. There is afterwards a covenant, in respect of which an important question arises—that the lessees shall not, without licence, “mortgage, sell, assign, or otherwise part with this present indenture of lease or the premises hereby demised, or any part or parcel thereof,” except in certain specified events; and there is also a covenant against subletting, or making an under-lease of any part of the demised premises. The performance of the covenants is enforced by a provision for re-entry, in case the yearly rent of £556 2s. 6d. should be in arrear for 31 days after any of the days appointed for payment, or in case the lessees should not faithfully perform and keep all the conditions, covenants, and agreements on their part to be performed and kept. Lastly, there is a proviso which forms the source of the controversy in this appeal, that if the lessees and their representatives “do and shall from time to time, and at all times hereafter, during the continuance of this demise, well and truly perform, fulfil, and keep the several covenants, clauses, conditions, reservations, and agreements hereinbefore contained, and on his and their part to be performed … the said W. M’Kay shall every year accept the yearly sum of £278 1s. 3d. in full satisfaction of the aforesaid yearly rent of £556 2s. 6d. hereinbefore reserved.”
The conclusion I have come to with respect to this last clause I have arrived at upon consideration not of the clause only, but of the entire lease, which accordingly I have referred to somewhat in detail. The defendant is the survivor of the two original lessees. At the trial he lodged in court the smaller sum mentioned in the last-mentioned clause, which, if he could avail himself of the right to abatement contained in that clause, would have been enough. The plaintiff insisted that there had been various violations on the part of the defendant of the covenants, reservations, and agreements in the lease, and, therefore, that the full rent primarily reserved—an amount exactly double the sum lodged in court—was payable. On this question the parties went to trial. Various breaches of the covenants in the lease had been alleged by a notice from the plaintiff previous to the trial; but at the trial evidence was given only of two—namely (1) breach of the covenant against mortgaging or assigning; (2) breach of the covenant or agreement to pay the rent on the half-yearly days appointed. Of the second alleged breach there was no doubt, for the defendant himself admitted that he did not pay or tender the rent on the appointed days. The other breach was sought to be supported by evidence of the following facts:—In the year 1864 a deposit was made by the lessee of the lease in question with a salesmaster together with a letter in the following terms:—“I herewith deposit with you my two leases” [one of these being the lease in question], “and I hereby agree that you shall hold the said several leases by way of equitable mortgage to secure to you the sum of £1,500 with interest thereon … and that you shall have a lien on the said leases by way of equitable mortgage for the sum due to you by me and interest.” On these facts the trial of the case took place. Chief Justice Morris, who presided, directed (in favour of possession) a verdict for the defendant, leaving the questions of law in controversy to be decided by the Queen’s Bench Division. That court (which, however, at the decision consisted of but two judges) thought the failure to pay on the days appointed was such a breach of covenant as disentitled the tenant to have the rent abated; but upon the other point, as to whether the equitable mortgage was a breach of the covenant against assignment or mortgaging, there was a difference of opinion between the learned judges. There are, accordingly, now for our decision these two questions—(1) is the equitable mortgage of the lease by the lessee a breach of the covenant forbidding the tenant to mortgage, sell, assign, or otherwise part with the lease or premises? and (2) does the failure on the part of the tenant to pay the rent on the appointed days prevent him from having the advantage of the proviso abating it by one-half, in the event of fulfilment of the covenants and agreements of the lease?
With respect to the first of these questions we must observe that covenants and conditions restraining assigning and subletting have been always construed strictly against the lessor. This is laid down by Lord Eldon in Church v. Brown (15 Ves. at p. 265), where he says, “These covenants ( i. e., to restrain the tenant from parting with a portion of the demised premises) have been always construed by courts of law with the utmost jealousy to prevent the restraint from going beyond the express stipulation.” Accordingly, in Doe d. Pitt v. Hogg (4 D. & R. 226), it has been held that a deposit of a lease as a security for money advanced is not to be deemed a breach of a covenant not to assign, transfer, set over or otherwise part with the demised premises, or the indenture of lease by which they were demised. Without overruling that case, which has always been followed, it cannot be suggested that there is in the covenant here any word within which the transaction with the salesmaster could be brought, unless it be the word “mortgage.” Then, is the word “mortgage” in this covenant used in a sense that includes an equitable mortgage by deposit of title-deeds? In order to answer this question, we must ascertain the nature and character of such a mortgage.3 I do not know that this is anywhere better stated than by Lord Cottenham, in Parker v. Housefield, 2 Myl. & K. 420, 4 L. J. Ch. 57. Speaking of the analogy between legal mortgages and mortgages by deposit, he says, “To determine this it is material, in the first place, to consider in what light courts of equity view such equitable mortgages; and it appears that a deposit of title-deeds has always been considered as an imperfect mortgage, which the mortgagee is entitled to have perfected, or rather as a contract for a mortgage, which, according to the well-known doctrine of Courts of Equity, would give to the party claiming the benefit of such contract all such rights as he would be entitled to if the contract had been completed.” Adopting this statement, which is supported by an examination of the authorities referred to by that most accurate judge, it appears to me that the deposit of the lease and the accompanying letter amount to, and in my opinion cannot be placed higher than, a specific agreement to execute a mortgage. But an agreement for a mortgage, although it may, so far as sale for non-payment of the money secured, bring all the consequences of a mortgage, is yet no more a mortgage than an agreement for the assignment of a lease is an assignment. Would an agreement to assign be a breach of a covenant against alienation? I think not; and so, according to my judgment, did Sir William Grant, when, in Weatherall v. Geering (12 Ves. 511), refusing to enforce an agreement for assignment of a lease with such a clause attended by forfeiture, he gives as a reason that, if done, it would extinguish the substance of the contract, not that already the agreement to do the forbidden act had extinguished it. In addition, if we look to the context, the associated words “assign” and “part with the premises” indicate that what was forbidden and sought to be prevented was imposing upon the landlord a new tenant or tenants; and accordingly, in furtherance of this object, sub-letting is also prohibited. Mortgage by deposit of title-deeds, not producing this result, does not, as it appears to me, come within the mischief to be averted. There was, therefore, in my opinion, no breach of the covenant against mortgaging or assigning.
With respect to the second matter relied upon by the plaintiff—namely, the failure to pay the rent on the days appointed, our decision must turn upon the meaning we attribute to the covenant providing for abatement of the rent primarily reserved. It is now settled that the construction of covenants depends upon intention. In many instances this may be ascertained without looking beyond *135 the language of the particular clause; but frequently that will not suffice, as if it is couched in language which admits of more than one meaning, and especially if there be in its language or subject-matter reference to other parts of the instrument in which it occurs. In a case often cited in reference to the construction of covenants, Nind v. Marshall (1 Brod. & Bing. 345, 3 Moore, 735), Dallas, C.J., states it to be a rule “that if to give to words what might seem to be their meaning, if taken by themselves, would be inconsistent with the general purview of the deed, as to be extracted from all the covenants, or, to express it differently, as the evidence of intention may appear upon the whole, so each particular covenant must be construed with regard to the deed in question.” In Howell v. Richards (2 East, 643) Lord Ellenborough, quoting the words of Hobart, C.J., says “every deed is to be construed according to the intention of the parties, and the intents ought to be adjudged of the several parts of the deed, as a general issue out of the evidence; and intent ought to be picked out of every part, and not out of one word only.” In like manner, the same learned judge, in Iggulden v. May (7 East, 240), referring to the authority of Plowden, says, “that every covenant is to be expounded with regard to its context; that such exposition must be upon the instrument, ex antecedentibus et consequentibus, and according to the reasonable sense and construction of the words;” and he then points out that, in conformity with these rules, and in support of the apparent intent of the parties, covenants in large and general terms have been frequently narrowed and restricted. The case in which these latter observations were made will illustrate their effect, and in my judgment much aid in determining the question with which we are now concerned. There a lease contained a clause contracting for a renewal (as it was expressed, “for a new lease”), “with all covenants, grants, and articles” in the first lease contained. Was the renewal to have inserted in it the covenant for renewal? Primâ facie, all the covenants, and therefore that particular covenant which stipulated for renewal, were to be repeated—but the reason of the case prevailed, and the apparent universality of the expression “all the covenants” was limited, in order to meet the intention which the nature of the case and of the instrument, and the reasonable inferences thence to be drawn, suggested. The covenant, it was held, was satisfied by a new lease with all the covenants of the old, except that for renewal. In Nind v. Marshall (ubi supra) a lease contained a covenant for quiet enjoyment without the lawful let or interruption of the assignor, his executors, administrators, or assigns, or any of them, “or any other person or persons whomsoever; then followed a covenant for further assurance by the assignor, his executors and administrators,” and all persons whomsoever claiming under him. It was held that the general words in the covenant for quiet enjoyment were restrained by the restrictive words in the covenants for title and further assurance which preceded and followed it, and therefore that such covenant was confined to the acts of the covenanter and those claiming under him.
Adopting those principles of construction, we now come to the covenant with which, upon this part of the case, we have to deal. It provides for an abatement of the rent primarily reserved, upon certain conditions—if the lessee do and shall from time to time, and at all times, “well and truly perform, fulfil, and keep the several covenants, clauses, conditions, reservations, and agreements contained in this lease.” These words, literally taken, would include the covenant for payment of the rent primarily reserved, and the reservation of that rent. Nevertheless, if the result of this construction would be an unreasonable or impracticable sense, legitimately leading to the inference that such could not have been intended, the literal meaning of the words must give way to the intention. Consider, then, what is the reservation, and what the covenant in respect of payment of rent contained in this lease. The reservation of rent runs—“paying therefor and thereout yearly, and every year, during the continuance of this demise … the yearly rent or sum of £556 2s. 6d. sterling … the said yearly rent to be paid and payable by two equal and half-yearly payments, on every 1st day of May and 1st day November”—and the covenant “shall and will from time to time, during the continuance of this demise, pay or cause to be paid … the said yearly rent of £556 2s. 6d., hereby reserved, upon the days appointed for the payment thereof.” Neither in the reservation nor in the covenant are there words accommodating the obligation to the subsequent provision for the abatement—such as “or such other rent, as may, under the provisions hereinafter contained, become from time to time payable.” On the contrary, the rent is fixed in moneys numbered, and neither reservation nor covenant can be held fulfilled except by paying on each half-yearly gale day the exact moiety of this precise sum of £556 2s. 6d., less only by quit and Crown rent and landlord’s deduction for poor-rate.
If, then, this reservation and covenant are within the words of the condition upon which the abatement depends, such a payment as I have described must, on each half-yearly gale-day, be offered and tendered. Observe, there is no doubt that the proper and proposed tender from the tenant to the landlord, the true and letting value of the land, was not the rent of £556 2s. 6d., primarily reserved, but the substituted rent of £278 1s. 3d. Is it reasonable to attribute to the parties the design of obliging, in order to acceptance of the true rent, tender of twice its amount? Similar observations arise when we reflect that not only must this large amount be tendered, but it must be tendered on the exact prescribed day, and this although no place of payment is specified, and without regard to the numberless casualties which might unavoidably hinder its being accomplished. It is, also, to be noted that there are no words confining the effect of failure to fulfil the condition to the particular half-year’s gale due. The words are that, if the covenants, agreements, and reservations be fulfilled by the lessee, the landlord shall accept, yearly and every year, the yearly sum of £278 1s. 3d. in satisfaction of the larger rent. So that, as it seems to me, once there was a failure to tender the rent in the manner prescribed, the condition would be no longer capable of fulfilment, and thenceforth the larger rent would be the only one which the landlord was legally bound to accept. These consequences, all in my opinion unreasonable, some impracticable, lead me to the conclusion that the intent of the parties did not include the reservation of the rent and the covenant for its payment among those reservations and covenants, the performance of which thus constituted a condition-precedent to the acceptance of the abated rent; that what was aimed at by reserving the larger rent was enforcing the performance and assertion of other agreements, and rights conferred upon the landlord by the instrument. I have, in stating the lease, referred to some of these agreements, and also to other matters than the rent described as being excepted and reserved, and afterwards referred to as “reservations;” and if the nature and character of these be examined, they will, I think, be found to afford ample and legitimate subject-matter for the words of the condition to operate upon, without importing into it a tender of what I cannot view as being other than a penal rent.
To these arguments I would add that, in another part of the lease, even so strong an expression as “all and singular the conditions, covenants, and agreements in the lease” is by the context clearly shown not to include the covenant for rent. I allude to the proviso for re-entry, which is in case the rent shall be thirty-one days in arrear, or in case the lessee shall not perform all and singular the covenants, &c. Here the covenant for rent cannot be included, since, if it were, the right to re-enter would be for failure to pay upon the day, instead of, as expressed, for being in arrear thirty-one days after. I regard this as of importance, not merely in reference to the particular words in this covenant, but also as showing that the frame and language of the lease were not prepared with strict accuracy of expression, and that, in order to give effect to intention in its interpretation, rigid adherence to the primary meaning of words cannot be maintained.
Its intent being, in my opinion, what I have stated, I think that the decision of the Queen’s Bench Division *136 ought to be reversed, and the judgment entered for the defendant at the trial by Chief Justice Morris maintained, and that the successful party should have his costs.
Palles, C.B.
I am of the same opinion. The question is whether the plaintiff is entitled to the increased rent. He contends that he is, for two reasons—first, because he alleges that there has been a mortgage of the lease contrary to the covenant; second, because the reduced rent was not paid ad diem. Has there, then, been a mortgage of the lease contrary to the covenant? This involves two questions—first, one of fact, is there evidence of the equitable mortgage by deposit relied upon as the breach? second, one of law, is such an equitable mortgage a breach of the covenant?
The only evidence of the equitable mortgage given at the trial was an office copy of the memorial under the Registry Acts executed by Daniel O’Brien, the alleged equitable mortgagee. This office copy was admitted in evidence without objection, and I use it as if it were the original memorial itself. Such a memorial is no doubt secondary evidence of the contents of the instrument of which it is a memorial, when the possession of the lands has been in accordance with the instrument: Sadlier v. Biggs (4 H. L. Cas. 434); but it is impossible to contend that it is primary evidence against the defendant, as it would have been were it executed by him. No evidence was given of the loss, or (independently of the memorial) of the execution of the original instrument. The evidence offered was, therefore, insufficient to prove the equitable mortgage: Padwick v. Wittcomb (4 H. L. Cas. 425)
The only answer which I have heard to this objection is that the point was not made at the trial. Now, I agree that an express and formal admission at the trial that the memorial should be treated as the original instrument, or should be deemed to be sufficient evidence thereof, was not necessary—that, as stated by Lord Blackburn in The Dublin, Wicklow, and Wexford Ry. Co. v. Slattery (3 App. Cases, 1201), “such a conduct of the cause as is equivalent to such an admission is sufficient.”4 But, I fail to find any such conduct in the present case. The reservation to enter the verdict for the plaintiff is not “if the court should be of opinion that the equitable mortgage amounted to a breach of the covenant,” or in any words which assume the existence of such equitable mortgage. On the form of the reservation the plaintiff cannot succeed, unless we are of opinion that on the whole case he was entitled to a direction.
It is true, no doubt, that the evidence might have been objected to upon the ground that no sufficient foundation had been laid for secondary evidence of the mortgage. The objection not having been taken, and the evidence having been admitted, no question as to its admissibility is now open. There remains, however, the distinct question of its effect. We cannot take it for more than it is worth. It is but secondary evidence. No foundation has been laid sufficient to enable the plaintiff to prove the equitable mortgage by secondary evidence. Therefore, the only evidence we have, whatever else may be its value, is insufficient proof of that mortgage. For this reason alone it appears to me to be clear that the verdict was rightly directed for the defendant.
Assuming, however, that the equitable mortgage was legally proved, I am further of opinion that it was not a breach of the covenant. Doe d. Pitt v. Hogg (1 C. & P. 160, 4 D. & R. 226) establishes that the deposit of a lease is not a “parting with” the lease, or the premises, contrary to the covenant. The real question, therefore, upon this branch of the case is, whether that deposit, and the accompanying letter, constituted a “mortgage” within the meaning of the covenant. What is the effect of that transaction? It passed no legal estate in the demised premises. It was nothing but an agreement, to which effect would have been given in a court of equity, that the mortgagee should have a lien upon the lease for certain advances, and, possibly, an agreement that the lessees would, when required, execute a legal mortgage. I think it unnecessary to consider what would have been the exact equitable relief afforded—whether it should necessarily have been confined to a sale, or whether, if the mortgagee preferred, he could have had a decree for the execution of a legal mortgage.5 What I deem material is, that the whole matter rests in contract—that the action of the Court of Equity would have been founded upon the contract. I take the case most against the defendant when I assume that there was an agreement for a legal mortgage, not merely an agreement for a lien. The question then is, is an agreement to execute a legal mortgage “a mortgage” within the meaning of the covenant? I am of opinion that it is not. It is beyond controversy that an agreement to assign a lease is not a breach of a covenant against assignment. A mortgage of a lease is, in my opinion, nothing more than an assignment, subject to a condition for redemption; and if an agreement for an absolute assignment is not an assignment within the meaning of such a covenant, so neither can an agreement for a conditional assignment be a conditional assignment, within the meaning of the same covenant.
It is said that if we adopt this construction we give no effect to the word “mortgage.” I do not concur in that argument. I think the true meaning of the words “shall not mortgage or assign” is, “shall not assign either absolutely or by way of mortgage.” I, therefore, concur with my Lord Chancellor in thinking that the plaintiff is not entitled to recover by reason of any breach of the covenant against alienation.
The remaining question is, whether the increased rent is payable by reason of the reduced amount not having been paid ad diem. This is a question of construction, and one which, in my mind, is not free from difficulty.
The proviso to be construed is in the following words: “Provided always, and it is hereby further declared and agreed, between and by the said parties to these presents, that if the said Thomas M’Nally and Mathew M’Nally, their heirs, executors, administrators, and assigns, do and shall from time to time, and at all times during the continuance of this demise, well and truly perform, fulfil, and keep the several covenants, clauses, conditions, reservations, and agreements hereinbefore contained, on his and their part to be performed and kept, then and in such case the said William M’Kay, his heirs and assigns, shall and will yearly and every year, accept the yearly sum of £278 1s. 3d. in full satisfaction of the aforesaid yearly rent of £556 2s. 6d. hereinbefore reserved, anything hereinbefore to the contrary thereof notwithstanding.”
There are two things described in this proviso—first, the event upon the happening of which the act covenanted by the lessor is to be done; second, the act thus covenanted to be done.
The event upon which this act is to be done by the lessor is, performance by the lessee “of the several covenants, clauses, conditions, reservations, and agreements on his part to be performed and kept.” These words are large enough to embrace—and, in my opinion, but for some controlling context, should be held to embrace—the reservation of the larger rent, and the covenant to pay such larger rent ad diem, but they do not include, or refer to, any covenant to pay the smaller rent ad diem or otherwise. There is no such covenant in the lease. The plaintiff’s case must, therefore, rest upon the performance of the covenant to pay the larger rent ad diem being a condition precedent to effect being given to this provision. Well, upon the lessee paying the larger rent ad diem, what does the lessor covenant to do? To accept a lesser rent in full satisfaction of the larger rent. It would, on this construction, be a covenant to accept an abated sum of money in lieu of a debt, which must have theretofore ceased to exist as a debt, by reason of full and complete payment. I venture to say that such a construction would not only be unreasonable, *137 but nonsensical. I have met with no clearer case of repugnancy, and we do not require authority to instruct us that in such a case the grammatical and ordinary sense of the words cannot be adhered to, but must be modified so as to avoid that repugnancy and inconsistency. I admit that the modification can extend no further.
Now, no more than two modes can be suggested by which such a clause can be modified: firstly, by excluding from the words “the several covenants, clauses, conditions, reservations, and agreements hereinbefore contained,” the provisions which are repugnant to the subsequent portions of the clause—in this case the reservation of the rent and the covenant to pay it; or, secondly, by qualifying the sense of the words “well and truly perform, fulfil, and keep,” and reading them as providing, not for a complete performance, but for a performance sub modo —a performance so far as is possible, having regard to the modification of that performance contemplated by the subsequent portion of the clause. The first is the construction suggested by the defendant, and there is no doubt that it must prevail, unless we adopt the second, which we are asked to do by the plaintiff.
Now, what is this modification which the plaintiff asks us to introduce? He asks us so to modify the words “perform, fulfil, and keep,” that, although applied to a covenant to pay the entire reserved rent, it shall be performed by payment of half that sum. The only subject-matter of the covenant is (as I have already observed) the larger rent. Whatever be the effect of the word “perform,” it must be applied to this one subject-matter; and it appears to me that no qualification of the word “perform” can effectuate the object required. That end could be attained only by altering the subject-matter of the covenant to pay, from the, entire, into the smaller rent.
Upon the whole, I am satisfied that no consistent construction can be given to the clause, otherwise than by excluding from its subject-matter the reservation of the rent, and the covenant to pay it; and that, therefore, the non-payment of the reduced rent ad diem does not entitle the plaintiff to recover.
Deasy, L.J.
In this case I was at first disposed to consider that the deposit of the lease by the tenant with his salesmaster as a security for the latter’s advances to him, was a breach of the covenant on his part not to mortgage the lease, which disentitled him to the benefit of the proviso for the reduction of the rent contained in the lease. But, on further consideration, I have come to the contrary conclusion. The principle of construction always applied to clauses restricting alienation is that they are to be strictly construed; that is, that the tenant having at common law full powers to alien the land demised to him, for the whole or part of the term of the lease, he is not to be deprived of that power except by words clearly apprising him of the act which is to cause a forfeiture of his interest. Now, applying that principle to the word “mortgage” contained in this lease, was it so clear that ordinary persons would consider that it applied to a transaction such as is relied on here, which, in fact, amounts only to an agreement to execute a mortgage, that could only be enforced by a court of equity? It leaves the legal relation of landlord and tenant still subsisting between the lessor and the lessee, which it was the object of the covenant to continue during the subsistence of the lease. The words of the covenant seem to point to a legal mortgage. They are that the lessee shall not “mortgage, sell, assign, or otherwise part with this present indenture of lease, or the premises hereby demised, or any part or parcel thereof”—as if the parties contemplated only a transaction which would occasion a change in their possession of the premises.6
The other question in this case is of far more importance, for, if the construction of the proviso for reduction of the rent, or performance of the covenants in the lease adopted by the Queen’s Bench Division—viz., that it includes the covenant for payment of the rent—were to prevail, it would be scarcely possible for any tenant to entitle himself to the benefit of that proviso. The two judges who decided the case there held that the tenant, in order to entitle himself to the reduction provided for, is bound on each gale day to pay or tender to the landlord the moiety of the full rent reserved by the lease. According to Furlong, 2nd vol., ed. 1869, p. 848, where no place of payment is specified in the lease, the tenant must attend on the land a reasonable time before sunset on the gale-day, and in the presence of a person competent to prove the fact, produce the money and offer to pay it, and continue on the land until after sunset. A failure to comply with those conditions on any gale-day would deprive him of the benefit of the provision for the reduction of the rent, and subject him during the remainder of his term to liability to pay the full rent reserved by the lease. If the tenant were at any distance from the land demised, he might be prevented from reaching it before sunset of the gale-day by accident. He might lose a train, or the train by which he travelled might be late, and, even if he arrived in time, he must prove compliance with all the technicalities which render a plea of tender so difficult to sustain. That construction would impose almost insuperable difficulties in the way of a tenant claiming the benefit of this proviso for the reduction of his rent. But, even upon that construction, there must be a departure from the words of the covenant for payment of the rent; for that covenant is to pay the full rent at the days and times specified, and a tender of half the rent would not be a compliance with that covenant. If the words are taken literally, they amount to this absurdity—that to enable the tenant to avail himself of the benefit of the reduced rent, he must be ready to pay—if, indeed, he must not actually pay—on each gale day the entire rent, one-half of which only is, under those circumstances, to be received by the landlord. It is better, I think, to adopt the construction of excluding this covenant for payment of rent from the covenants the performance of which is to entitle the tenant to the benefit of the proviso for reduction, and thus give a substantial and practical effect to that proviso which it wotld not otherwise have. The distinction taken in the proviso for re-entry between the covenant for the payment of the rent and the other covenants I think strengthens that construction, for, while a breach of any of the other covenants entitles the landlord immediately to re-enter, a period of thirty days must elapse in the case of a breach of the covenant for the payment of the rent before the landlord can re-enter.
Anderson v Anderson
County Court.
1 January 1887
[1887] 21 I.L.T.R 35
The Judge.—It seems to me perfectly plain that if I were to give a decree in this case establishing the transaction of the 28th May, 1881, set forth in the civil bill as a valid mortgage of the farm, and to hold that by it a transfer of the legal interest in the tenancy from the defendant to the plaintiff was effected, I should be entirely nullifying the provisions of the Statute of Frauds as to the transfer of an interest in lands, and I am not prepared to do so. It has been contended that the judgment of Chief Justice May in the case of M’Cracken v. Ross must rule this case, and would entitle the plaintiff to a decree; but this arises from a total misconception of the Chief Justice’s judgment, and of the grounds of the decision in that case. I regret that I have not had the benefit of counsel’s assistance on the part of the defendants upon the very important question involved in this case, but I can understand why it may be a matter of comparative indifference to the defendant whether a decree or dismiss is given, for, admittedly, the sum claimed is due to the plaintiff, and can be recovered by means of the promissory notes given to him by the defendant on the same day as this alleged mortgage is said to have taken place. This Court has, however, a very important duty to discharge independent of the admission or denial of the defendant as to the validity of the mortgage, because, before this farm is set up for sale, it is the duty of the Court to see that the purchaser can get a good title to that for which he gives his money, and if the title be defective, the Court is sanctioning proceedings which must be abortive, and involve the parties in useless expense. Let us now examine the statements in this civil bill, and see whether it is possible that a good title to the farm could be made. First, it is averred that previous to the 28th February, 1881, the day on which the alleged mortgage took place, the defendant was in possession of the farm in question as yearly tenant; 2nd, that on the day of filing the civil bill the defendant still held possession of that farm; and, 3rd, that it was verbally agreed between the plaintiff and defendant that the plaintiff’s name should be entered on the landlord’s book as tenant of the farm, and that the cashier in the rent office at their request made that change. Such were the averments in the equity civil bill when filed on which I was asked to declare that a valid mortgage of this farm was created. However, plaintiff’s counsel, at the hearing, candidly admitted that unless I allowed the civil bill to be amended the case could not be sustained, and I said I would allow any amendment to be made which could be supported by evidence. Amendments were accordingly made, but as no evidence was given to support them I will only notice one in which it was averred that the defendant surrendered his interest in the farm to the landlord, and that the landlord relet the farm to the plaintiff with the consent of the defendant. Now, it is admitted that a surrender of a yearly tenancy can only be either by a note in writing, which confessedly does not exist in the present case, or by what is called a surrender by operation of law; and I assert, without fear of contradiction, that to effectuate a transfer of a yearly tenancy from A. to B. through the medium of a surrender by operation of law there must be an actual change of possession. The whole train of authorities establish this proposition from the earliest case in which this question has been discussed down to the case of M’Cracken v. Ross, on which I shall presently have to observe, Thomas v. Cooke is the leading case on the doctrine of surrender by operation of law, and the two examples there given by the judge are—first, the acceptance by the tenant in possession of a new lease, or secondly, his giving up the possession of the land to another tenant with the landlord’s assent. Much stress has been laid in the present case on the entry of the plaintiff’s name in the landlord’s book by the cashier in the rent-office, as if in itself this had the magic effect of transferring the tenancy from the defendant to the plaintiff. But as Judge O’Brien justly says in his able judgment in M’Cracken v. Ross, the entry in the landlord’s book is only a statement, signifying and recording the assent of the landlord to the person being the tenant. It is the authentication of the landlord’s consent, but still he has to be made the tenant, by some legal mode. Obviously, such an entry could not make a tenancy originally. A landlord cannot let lands by merely saying, without writing, “I let you the land of so-and-so,” *35 without the physical possession. The statement would merely amount to an agreement which, to be valid, would require to be in writing. And if he could not make a tenant without possession, on principle he could not make a new tenant. It must not be forgotten, that a yearly tenant could always assign or transfer his tenancy to another, without the consent of the landlord, or any entry of the transferee’s name in the landlord’s book. But to make such transfer effectual, it was essential that there should be an agreement in writing, and an entry into possession by the transferee. It may, perhaps, be asked how then did the custom become so prevalent of always getting the name entered in the landlord’s book? I answer, simply because without this—up to the passing of the Land Act of 1870—the landlord could, by a notice to quit, render the transfer of the yearly tenant’s interest worthless by putting an end to the tenancy; but when the landlord’s assent to the transfer of the possession was obtained then it was held, on the principle laid down in Thomas v. Cooke, that the agreement of the old tenant to transfer the possession to the new, and the acceptance of the new, operated by implication of law as a surrender of the old tenancy, even without any writing. But in every case in the books from the time when Thomas v. Cooke was decided to the present time the actual change of possession has been regarded as an essential element to give validity to a surrender by operation of law. Thus we find, in Lyons v. Reed, 13 M. &. W., Baron Parke states distinctly that the rule laid down in Thomas v. Cooke as to the validity of a surrender by operation of law without writing “applies only to cases where there is an open and notorious shifting of the actual possession.” Again, in Johnstone v. Huddlestone, 4 B. & Cr. Holroyd, J., says:—“I am of opinion that there was not any surrender by operation of law in this case, because the tenant never yielded up the possession of the premises to the landlord.” I now come to the case of M’Cracken v. Ross, lately decided on appeal, in which it is contended that a different principle from that laid down in all previous cases has been established, and that to transfer a tenancy from A. to B. even if there be no writing to satisfy the provisions of the Statute of Frauds, it is sufficient to show that in consideration of a loan of money there was a parol agreement between A. and B. that B.’s name should be entered on the landlord’s book as tenant. It seems to me that it is only necessary to quote the opening sentence in Chief Justice May’s judgment in M’Cracken v. Ross in order to show that there was no intention by that decision to ignore or subvert the principle laid down in previous cases as to the necessity of an actual change of possession to make a valid surrender by operation of law, for Chief Justice May says:—“It is well established that a surrender or transfer by operation of law is not constituted by a parol agreement between the outgoing tenant and the incoming with the assent of the landlord; there must be an actual change of the possession of the tenant.” How, then, it may be asked, did Chief Justice May arrive at the conclusion that though M’Cracken was not put in possession when his name was entered on the landlord’s book, he was yet entitled to be considered as tenant? The very next sentence in the judgment explains this, for Chief Justice May says after having stated the necessity for an actual change of possession:—“The question is, do the findings of the jury show that there was such a change of possession. Henry Stewart had been tenant in possession, and the actual change which had taken place was from Henry to Samuel Stewart, but the jury found that with the consent of Henry Stewart, MCracken became tenant in possession, and that Samuel Stewart, after the transaction of 1871, was in occupation of the farm on behalf of M’Cracken,” i.e., in other words, the Chief Justice considered that the actual change from Henry to Samuel Stewart had the operation of a change from Henry Stewart to Hugh M’Cracken. Accordingly the Chief Justice goes on to say: “It appears to me that it was not necessary that Hugh M’Cracken should actually occupy and till the lands himself, it would be sufficient if another should do so as his agent or manager. M’Cracken, I think, virtually occupied by the agency of Samuel Stewart. I think, therefore, that there was a change of possession from that of Henry Stewart to that of the plaintiff. In the face of this judgment how can it be alleged that Chief Justice May intended to subvert the law laid down in all previous cases as to change of possession being an essential element to constitute a valid surrender by operation of law. And now I ask where is that element to be found in the present case? The averment in the equity civil bill being that, at the time of the negotiation for the loan from the plaintiff in 1881, the defendant was in possession of the farm, and that, up to the time of filing the civil bill, he continued in possession. It is not alleged that there was any note in writing of the parol agreement to transfer the farm, and yet I am asked to hold that there was a valid transfer, and that this transfer was subject to the various trusts and conditions which are set forth in the additional averments introduced into the amended bill, but as no evidence whatever in support of these averments to satisfy the Statute of Frauds has been given, I fail to see how I should be justified in giving effect to them. I must, however, add that, independent altogether of the objection founded on the Statute of Frauds, I would be very slow indeed to open the door to the frauds which might be perpetrated on the honest and bona fide creditors of Andrew Anderson were I to grant a decree in the present case. Let us imagine how many honest traders, seeing Andrew Anderson in the actual and ostensible possession of this farm, may have justly given him credit since May, 1881, on the faith of his being the tenant, and are they now to be turned round when seeking to recover payment for their goods and to be told that Robert, and not Andrew, Anderson, was the owner of the farm, because his name had been entered in the landlord’s book on the occasion of this secret loan? Suppose one of these traders had got a statutory mortgage against Andrew Anderson, is that security to be rendered worthless by this magic process between a clerk in the rent office and the plaintiff and the defendant, who are facetiously styled the outgoing and incoming tenants, although the possession of the farm was never changed? I emphatically refuse to sanction such a proceeding, and, therefore I dismiss the bill with costs.1
James Joseph Walsh v Patrick McMahon
[1926] 60 I.L.T.R 121
O’Byrne J.
May 3, 1926
Action for rent due. The plaintiff, James Joseph Walsh, claimed £190, being one year’s rent payable in advance on Nov. 15, 1925, out of the shop, ground floor and basement, situated at No. 1a Lower Ormond Quay, Dublin, alleged to be held by the defendant as tenant to the plaintiff under a lease dated May 8, 1923, whereby the plaintiff demised the said premises to Catherine McMahon (who was mother of the defendant Patrick McMahon, and who died on Sept. 2, 1924) for a term of twenty-one years at a yearly rent of £190, payable in advance by equal half-yearly instalments on May 15 and Nov. 15 in each year. It was further pleaded by the plaintiff that the defendant was in possession as assignee of the said lease, and that he had paid the rent up to May 15, 1923, but had failed to pay the rent, or any part thereof, payable on May 15 or Nov. 15, 1925. The defendant relied on the facts that he was sued as assignee and not as executor de son tort, and that the lease referred to contained a covenant against assignment without the consent in writing of the landlord, and that as such consent had not been given the alleged assignment was void under s. 10 of the Landlord and Tenant (Ireland) Act, 1860. Catherine McMahon, deceased, had died a married woman and intestate, and letters of administration had not been extracted. Her husband was, through illness, not in a position to have any dealings with the assets, and the defendant, one of the sons of the deceased, though not living on the premises, had helped two of his sisters in carrying on a drapery business in the deceased’s shop and premises, and had paid the rent to cover a period up to May 15, 1925.
Leonard (with him Newett ) for the plaintiff.—The defendant is properly sued as assignee. He is an executor de son tort in possession of land held by the deceased owner for an unexpired term of years, and is therefore suable for rent: Fielding v. Cronin, 16 L. R. I. 379. Naish, C., says in his judgment in that case on page 380: “If you have a personal representative in possession he is clearly liable as assignee. In my opinion the defendant who is in possession is executor de son tort, and being executor de son tort he is as much liable as if he were the legal personal representative. If a legal personal representative were in existence and in possession what would be his position? I apprehend it would be open to the landlord to sue him in either of two ways. He could either sue him as executor, or treat him as assignee, and sue him as such, in which case he would recover judgment against him de bonis propries. ” The decision in Williams v. Heales, L. R. 9 C. P. 177, was relied upon by the plaintiff in that case, and words used by Keating, J., reported in his judgment on page 184, are to the same effect. Being an executor de son tort the covenant against assignment contained in the lease does not apply and cannot be relied upon by the defendant in this case. Though liable as an assignee the defendant is such only because he is an executor de son tort, and accordingly the plaintiff is not seeking for a finding that there was any assignment. The existence of a covenant against assignment in the lease does not affect plaintiff’s case.
Shannon, K.C. (with him Reddy ), for the defendant.—The defendant is not sued as executor de son tort but as assignee of the lease. The lease contains a covenant against assignment without the consent in writing of the landlord. Although the defendant may possibly be an assignee by estoppel for the period for which he had paid rent, he cannot as a purported assignee be made liable for future rent. The alleged assignment is void under the Landlord and Tenant (Ireland) Act, 1860, s. 10: Earl of Donoghmore v. Forrest, I. R. 5 C. L. 443, so that the landlord cannot recover against the defendant, although he had verbally assented to the assignment and had given, and the defendant had taken, receipts for rent which accrued due subsequently to the assignment. That case has been followed down to modern times: Smith v. Whitmore, [1896] 1 I. R. 520.
O’Byrne, J.
In this case I have evidence before me which I must accept. The defendant went into possession of the assets of the *121 deceased, that being so I must treat him as though he were an executor de son tort. He admits that a year’s rent is due. I must give the plaintiff judgment for £190.
Hayes v Fitzgibbon
HAYES V. FITZGIBBON
(1870) I.R. 4 C.L. 500; 5 I.L.T.R. 7 (Exchequer)
Fitzgerald B.:
In this case, which was an ejectment tried before Mr. Justice O’Brien at the last Assizes for the county of Cork the material facts are these: A lease, for three lives or thirty-one years, was made in the year 1801, by the then Lady Kingston, to Edmund Hayes, of thirty-six acres of land, for three acres of which the present ejectment was brought. In the year 1862 the interest in this demise came, by assignment, to the plaintiff and his then intended wife. I think it must be assumed, from the learned Judge’s report, from the finding of the jury, which I shall presently mention, and from what was admitted to have been the course of the trial, that, previously to the month of February, 1867, the interest in the lease had vested in the plaintiff only. The last liver of the cestui que vies named in the lease died on the 14th of September, 1868. Previously to that event, and while the lease of 1801 was still subsisting, and in the month of February, 1867, a new lease of the same thirty-six acres of land was made by Lord Kingston to the plainiff for three lives, which are still in being.
At the trial the jury found that, at the time of the execution of the lease of the 20th February, 1867, the defendant held the three acres of land in question, as tenant from year to year, of the plaintiff. In point of fact, it was proved at the trial, by the plaintiff himself, that the defendant had paid him a rent of 21s. yearly, from 1862 up to March, 1868, being more than a year after the execution of the lease of 1867. Possession of the three acres was demanded by the plaintiff on the 15th September, 1868, being the day after the death of the last living cestui que vie in the
lease of 1801; and such possession having been refused, the present ejectment was brought.
For the defendant, it was insisted that the ejectment could not be maintained without proof of service of the usual notice to quit on the defendant. Each party insisted that a verdict should be directed for him, without leaving any question to the jury. The learned Judge left to the jµry the single question on which they found, as already mentioned, and on such finding directed a verdict for the defendant. It appears that the lease of February, 1867, contains a covenant by the plaintiff against subletting; there was, I understand, none such in the lease of 1801.
On the part of the plaintiff it was, in:the first place, insisted that the estate of the defendant was, at the time of the execution of the new lease of February, 1867, at best a tenancy from year to year, determinable, at all events, by the determination of the lease of 1801, according to the original limitation of estate in such lease; and that, therefore, though it might not have been put an end to by the surrender of that lease, it could not endure beyond the life of the last living cestui que vie therein named. On this head we were, in the argument before us, referred to the cases establishing that when a parol lease has been made for a term exceeding three years, and which, under the Statute of Frauds, can only operate as a lease at will, and then a tenancy from year to year has arisen from payment of rent, the tenancy so arising determines, at all events, and without notice to quit, on the expiration of the term mentioned in the parol demise. It was further insisted, on the authority in the case of Gandy v. lubber (5 B. & S. 78, 485) and the cases therein referred to, that a tenancy from year to year is to be considered as an estate recommencing every year as on a new letting, and that, therefore, so far as any tenancy from year to year in the defendant depended on the acts of the plaintiff in receiving rent after the lease of February, 1867, such letting would be a violation of the covenant against subletting in that lease, and, according to the decisions in this country on
the Subletting Acts and the Landlord and Tenant Act of 1860, wholly void, even against the plaintiff.
With respect to the first contention of the plaintiff, the eighth section of the Landlord and Tenant Act, which has been substituted for the repealed fourth section of the Irish Act, 5 Geo. 2, c. 4, provides for the continuance of a lessee’s rights and remedies against his subtenants, upon a surrender of his lease and the flaking of a new lease, as if there had been no surrender, – in other words, makes the new lease a continuance of such lessee’s reversion, which it was not at Common Law; and I cannot doubt that the intention of the Legislature was to preserve the subtenants’ interests exactly as the repealed section of the Act of Geo. 2 did in terms preserve them, viz.: ‘as the original lease out of which the respective under leases are derived had been still kept of foot and continued.’
The section of the Landlord and Tenant Act does not in terms contain a provision for the preservation of the subtenants’ interests; but surely a provision for such preservation, coextensive with the rights and remedies given to the lessee against such tenants by making his new lease a continuance of his reversion, must be necessarily implied. It is, no doubt, true, that the tenancy from year to year of the defendant was, prior to the new lease of 1867, dependant for its existence on the duration of the lease of 1801, and determinable with it; but this occurs, not from any express contract, – for none such is found by the jury, – but was the necessary legal consequence of the limited interest of the plaintiff. If no new lease had been taken out by the plaintiff, then if, after the expiration of the lease of 1801, the defendant had continued in possession of the lands, the plaintiff could have had no right to evict him and disturb that possession: – he would then have had no estate in the land himself. A tenant is not estopped from showing that his landlord’s estate has ceased.
The plaintiffs right to bring an ejectment against the defendant after the death of the last cestui que vie in the lease of 1801, arises solely from the new lease of 1867, which the Statute has for his benefit made a continuance of his reversion, so as to preserve the relation of landlord and tenant between him and the tenant. It would, of course, be otherwise if the tenancy from year to year had originally, by the express contract of the parties, been made determinable on the death of the cestui que vie in the lease of 1801, and such liability and determination had not solely arisen from the limited nature of the plaintiff’s own estate. This distinguished the present case from the cases on the Statute of Frauds. The Statute of Frauds leaves to the parol demise the effect only of an estate at will, but the express terms of that demise in all other respects, are applied, so far as the nature of the estate will admit, to such estate at will. I think, therefore, that the tenancy from year to year of the defendant became, by the lease of 1867, a tenancy from year to year, determinable with the continued estate of the landlord, but not without notice to quit during the continuance of that estate.
With respect to the further contention of the plaintiff I shall not say much. The case of Gandy v. lubber, having regard to the result in the Exchequer Chamber, is at best not a very satisfactory one; but even if it be law, all that it establishes is, that,for the purpose of an action of nuisance against the landlord of a tenant from year to year, the landlord’s unexercised power of determining the tenancy at the end of each year is to be considered as, in favour of the complainant, equivalent to a new setting at the commencement of each year. Be that as it may, I am of opinion that the estate of a tenant from year to year is a continuing estate; and the point appears to me to have been expressly decided on demurrer in a case to which I was referred by my Lord Chief Baron, – that is to say, the case of Mackay v. Macreth (4 Doug. 213). The estate of tenant from year to year was held to be a continuing estate, and to leave in the tenant for years a reversion after a demise by deed for twenty-one years, on which an action of covenant could be maintained. The same point was, I think, an effect decided in Oxley v. James (13 M & W. 209). What is said by Mr. Justice Patteson in Tomkins v. Lawrence (8 C. & P. 909), is explained by Vice-Chancellor Wood, in Cutty v. Arnold (l J. & H. 651), and whether satisfactorily explained or not, that learned judge also decided that a tenancy from year to year was a continuing estate; and Pike v. Eyre (9 B. & C. 909) is another authority for the same position.
I think, therefore, that the second contention of the plaintiff also fails.
I say nothing of what was urged in argument with respect to the effect of a conversation between the plaintiff, the defendant, anp the agent of the head landlord. The effect of that conversation was wholly for the jury; but in the present case, each party insisted that no question ought to have been left to the jury at all. Isee no reason for considering that the judge’s decision to admit a lease of 1826, which expired in 1846, made by the plaintiff’s father to a party, from whom the defendant alleged the possession was originally derived to him, was wrong, on the ground that it did not come out of the proper custody; and it was really of no value in the case. On the whole, I think the case shown ought to be allowed.
Deasy, B. concurred.
O’Reilly v Gleeson
[1975] LR. 258 (Supreme Court)
HenchyJ.:
In 1971 the Irish sisters of Charity put up for sale the complex of buildings constituting St. Vincent’s Hospital, St. Stephen’s Green, Dublin. Those buildings had become vacant when the hospital moved to new premises. It was decided that the sale would be by tender. A brochure was printed and circulated and it gave particulars of the property and set out the general conditions of sale. Amongst the people to whom the brochure was sent was the plaintiff. It was sent to him as a matter of courtesy because he owns the fee simple estate in No. 60 St. Stephen’s Green, one of the buildings being sold, and it was thought that he might be interested in tendering for the leasehold estate which was being sold.
The defendant’s interest in No. 60 arises under a lease of the 29th August, 1946. By that lease the plaintiff demised the property known as No. 60 St. Stehpen’s Green (as more particularly delineated on a map endorsed on the lease to six lessees for the term of 30 years from the 15th July, 1945, at the yearly rent of £295. The lessees were apparently trustees of the Irish Sisters of Charity and the defendant, as the sole survivor of them, has become entitled to the lessees’ interest.
When the plaintiff got the brochure, he noticed that it was intended that the purchaser would be bound to accept that the map endorsed on the lease of 1946 was wrong. The brochure said, in effect, that a piece of ground, measuring some 30′ by 50′ and situated at the back of No. 60 St. Stephen’s Green, was erroneously included in the lease of 1946, and that the vendors held that piece of ground under a lease of the 12th July, 1933, from the Earl of Pembroke for the term of 10,000 years at the yearly rent of one peppercorn. The plaintiff’s solicitor took the matter up forthwith; he claimed that his client’s title as lessor was being disclaimed and he threatened proceedings unless the vendors dropped their claim to hold the questioned piece of ground under the lease from the Earl of Pembroke. An acrimonious and unyielding correspondence followed, resulting in the present proceedings in which the plaintiff claims, primarily, possession of the whole of the property demised by the lease of 1946 and, alternatively, possession of the piece of ground which the defendant says was erroneously included in the map endorsed on the lease of 1946 and, alternatively, possession of the piece of ground which the defendant says was erroneously included in the map endorsed on the lease of 1946. The basis of the claim is that the defendant has worked a forfeiture by disclaiming her lessor’s title. The claim succeeded in the High Court, for Mr. Justice Butler held that there had been such a disclaimer and that it had effected a forfeiture; but he limited the forfeiture to the disputed piece of ground. From that order the defendant now appeals to this Court.
It goes without question that the defendant, through her agents, has clearly and repeatedly asserted in writing, and has sought to bind a purchaser to the same conclusion, that the plaintiff erroneously included the disputed area in the lease of 1946. While that conduct may possibly not damnify the plaintiff during the currency of the lease, it iscalculated to put part of the property demised outside the reach of the plaintiff’s reversion. It is an unequivocal denial of the plaintiff’s title to part of the property demised. Furthermore, although made bona fide, it would seem to be an unjustified denial; but it would be wrong to express a concluded opinion to that effect in the absence of the Earl of Pembroke who may possibly wish to claim, under the lease of 1933, a reversion in the disputed area.
Where a lessee for a term of years asserts in writing that the lessor erroneously
included a particular area in the property demised, does such denial of the lessor’s title work a forfeiture of the lease? That is the central question in this case.
The legal rules governing forfeiture of a lease by disclaimer of the lessor’s title derive from the feudal law of medieval England. It is said that forfeiture of this kind may be occasioned by act in pais (i.e. an act done without legal proceedings) or by matter of record. The legal history of forfeiture by matter of record is summarised in the judgment of Lord Denning M.R. in Warner v. Sampson ([1959] 1 Q.B. 297). Forfeiture by the record does not arise in this case, so there is no need to consider which version of the law on that kind of forfeiture should now be accepted as correct by this Court in the light of the conflicting judgments in both Warner v. Sampson ([1959] 1 Q.B. 297) and Wallace v. Daly & Co. Ltd. ([1949] LR. 352).
The law of forfeiture by act in pais does not always appear clear or coherent in either the text-books or the cases. This is largely due to a failure to appreciate that the law has distinguished tenancies for fixed terms from periodic tenancies for the purpose of this kind of disclaimer. In the case of a periodic tenancy, if the tenant impugns the landlord’s title he runs the risk that the landlord may proceed to have him ejected without notice to quit, on the ground that the tenant’s disclaimer of title is to be treated as a determination of the tenancy, per Lord Denman C.J. in Doe d. Graves
v. Wells ((1839) 10 Ad. & E. 427) and per Sir Raymond Evershed in Wisbech St. Mary Parish council v. Lilley ([1956] 1 W.L.R. 121). But as to leases for a term certain, whatever the law of forfeiture by act in pais may have been in its feudal origins, the only reported case in modem times of forfeiture of a term of yearsby act in pais is Doe
d. Ellerbrock v. Flynn ((1834) 1 Cr. M. & R. 137) which turned on the fraud of the tenant in delivering up the possession of the premises and of the lease to a person claiming under a hostile title: see Doe d. Graves v. Wells ((1839) 10 Ad. & E. 427); per BlackJ. atp. 374ofthereportof Wallacev. Daly & Co. Ltd. ([1949] LR. 352); and De Moleyns’ Landowner’s and Agent’s Practical Guide (8th ed., vol. I, p. 460). Indeed,
LordDenningM.R. went so far as to say in Warnerv. Sampson ([1959] 1 Q.B. 297) at
p. 316 of the report that ‘there is no room for any implied condition that (the tenant) is not to dispute the landlord’s title, either on the record or off it’. Leaving aside forfeiture by the record (because it does not arise in this case), I agree that there is no room in the modem law of landlord and tenant for forfeiture of a lease by act in pais. No example of it is to be found in the reports since at least 1834 when Doe d. Ellerbrockv. Flynn ((1834) 1 Cr. M. & R. 137) was decided. In that case a forfeiture was held to have been effected, but the case can be justified in its result as one where the lessee, by his fraudulent conduct in passing possession of the property and of the lease to a person who was asserting a title adverse to the lessor, was held to have thereby determined the term.
In Doe d. Graves v. Wells ((1839) 10 Ad. & E. 427) at p. 435 of the report Lord Denman C.J. said of Doe d. Ellerbrock v. Flynn ((1834) 1 Cr. M. & R. 137):
‘There it was thought that the tenant had betrayed his landlord’s interest by an act that might place him in a worse condition: if the case went farther than that, I should not think it maintainable. The other instances are cases either of disclaimer upon record, which admit of no doubt as to the nature of what is done, or ofleases from year to year, in speaking of which the nature of the tenancy has been sometimes lost sight of, and ‘words “forfeiture” and “disclaimer” have been improperly applied. It may be fairly said, when a landlord brings an action to recover the possession from defendant who has been his tenant from year to year, that evidence of a disclaimer of the landlord’s title by the tenant is evidence of the determination of the will of both parties, by which the duration of the tenancy, from its particular nature, was limited. But no case, I think, goes so far as the present: and I feel the danger of allowing an interest in law to be put an end to by mere words.’
Furthermore, it was stated in Doe d. Graves v. Wells ((1839) 10 Ad. & E. 427) by Patteson J. at p. 436 of the report that ‘No case has been cited where a lease for a definite term has been forfeited by mere.words.’ The reason for the absence of such cases would seem to be that even in the heyday of feudal tenures, mere words, whether spoken or written, would not have produced a forfeiture of a lease for a term certain. The only example of forfeiture by act in pais given in Bacon’s Abridgment (7th ed., vol. 4 p. 884) is where the tenant alienates the fee; and he says that even then forfeiture will not result if the conveyance is for any reason ineffective to convey the fee. This means that even if a repudiation of the lessor’s title appeared from the recitals or the habendum of the ineffective conveyance, a forfeiture would not be caused. Elsewhere (7th ed., vol. 3, p. 196) Bacon makes the position clear when he says: ‘In our law these acts which plainly amount to a denial must be done in a court of record, to make them a forfeiture … and all other denials, that might be used by great lords for trepanning [i.e. ensnaring] their tenants, and for a pretence to seize their estates, by our law were rejected, for such convictions might be made by such great lords where there was no just cause.’ That is to say, forfeiture by mere words could arise only by matter of record, and the only recognized forfeiture by act in pais was by a tortious feoffment, whereby the tenant for years could convey the fee. With the abolition of the tortious feoffments by s. 4 of the Real Property Act, 1845, there has been no place in the modem law of leaseholds for the operation of forfeiture by acts in pais.
Whatever may be the result of a disclaimer of the lessor’s title in pleadings (as to which I express no opinion), leases are now held by the courts to be terminated at the instance of a lessor on the ground of forfeiture only when the forfeiture arises from a provision expressly incorporated in the lease: per Lord Russell of Killowen (with whom Lord Goddard agreed) in Cricklewood Property & Investment Trust Ltd. v.
Leighton’s Investment Trust Ltd. ([1945] A.C. 221,234).
Therefore, I would hold that the defendant’s conduct, even if it amounted toa disclaimer of the lessor’s title, would not have worked a forfeiture of the lease for there is no provision in the lease which could be relied on to support a forfeiture on that ground.
Even if a lease could be forfeited by mere disclaimer of the lessor’s title by the lessee, the question would arise whether what the defendant did in this case amounted to a disclaimer.
It is fundamental to the relationship of landlord and tenant that the tenant is estopped from denying (i.e. disclaiming) his landlord’s title. That is to say, he cannot assert the rights of a tenant and at the same time say, in effect, that there is no tenancy because the landlord had no title to grant the tenancy, or because the title is in himself or in someone else. He cannot have it both ways. If what he does is a repudiation of the relationship of landlord and tenant, then in the case of a periodic tenancy terminable by notice to quit, he is debarred from insisting on the necessity for a notice to quit if the landlord chooses to eject him without serving one. The reason is thata notice to quit is necessary only when there is an admitted tenancy, so when the tenant repudiates the existence of a tenancy he thereby admits that there is nothing to terminate and that a notice to quit is unnecessary. However, as I have pointed out, in the case of a lease for a fixed term not terminable by notice to quit, the estate of the Jessee in the land is not defeasible by mere disclaimer of title on his part.
But even if a lease for a fixed term could be forfeited by disclaimer – or if a notice to quit, in the case of a periodic tenancy, is rendered unnecessary because ofa disclaimer – the disclaimer must not be of some particular aspect of the landlord’s title but of the landlord’s whole title as landlord. If it were otherwise, the tenant could question, only at the peril of forfeiture orejectment, any error, large or small, in the extent of the land leased or Jet, or in the terms of the lease or tenancy, orin theextent of the rights or duties (such as the use of furniture, or trading restrictions) incorpor ated in the lease or tenancy. The landlord could question such mistakes with impunity and have them rectified, whereas the Jessee or tenant would imperil his leasehold or tenancy if he raised them. If that were the Jaw, it would be unequal and oppressive.
In my opinion, the Jaw is correctly stated in Woodfall on Landlord and Tenant (27th ed., para. 2058) as follows: ‘In order to make either a verbal or written disclaimer sufficient, it must amount to a direct repudiation of the relation of landlord and tenant, or to a distinct claim to hold possession of the estate upon a ground wholly inconsistent with that relation, which by necessary implication is a repudiation of it.A disclaimer, as the word imports, must be a renunciation by the party of his character of tenant, either by setting up a title in another or by claiming title in himself.’ What the Jessee in the present case did was much less than that. What she wrote, through her agents, amounted to this: ‘I acknowledge the plaintiff as my lessor under the lease of 1946 but I say that the lease erroneously included a piece of ground in the area intended to be demised; and I shall require the purchaser of my leasehold interest to accept that the lease is erroneous in that respect.’ That was far from beinga repudiation of the relationship of landlord and tenant. It was in fact an affirmation of that relationship coupled with a proviso as to an error in the area demised.
It does not follow from this conclusion that a lessor is without remedy if the Jessee
groundlessly questions or repudiates some aspect of the lease. He may have the true position asserted and protected by bringing proceedings for a declaration or for an injunction or, in an appropriate case, for damages. However, in the present case this aspect need not be looked at further since the plaintiff does not claim to have suffered any Joss and since the defendant has given an undertaking to this Court not to repeat, during the currency of the lease of 1946, the allegation of error in that lease.
Two further points need to be made.
First, the authorities show that if the defendant’s conduct had produced a forfeiture it would have been a forfeiture of the lease in toto. The only case cited in which there was a forfeiture of the part of the property held by the lessee was Doe d. Phipps v. Gowen, but in that case the piece of ground held to have been forfeited was not demised by the lease but was acquired by the lessee by adverse possession. There cannot be a forfeiture of part of the property demised; this follows as a matter of principle as well as of practicalities. The theory behind recovery of possession on the ground of forfeiture is that the lessor has elected to treat as void the lease which became voidable as a result of the lessee’s conduct. Once the court treats that election as legally effective, it treats the lease as being void in every respect. A partial avoidance of the lease is not possible. In practice it would involve a re-writing of the lease in terms of the area demised and, therefore, in terms of rent, covenants, conditions, ets. – thus producing a contractual relationship and a leasehold estate different from that envisaged by the parties and expressed in the lease.
Secondly, I think it is right to point out that, unfortunately, some of the authorities on which this judgment is based were not opened by counselin the High Court; if they had been, the judgment given in that court might well have been different.
I would allow the defendant’s appe’al against the order for possession made in the High Court.
GrifflnJ.:
I agree.
Landlord and Tenant (Ground Rents) (No. 2) Act, 1978:
27. – (1) Where a person is entitled to acquire the fee simple in a dwellinghouse by virtue of Part II a covenant giving the lessor a right to re-enter and take possession of the premises where rent is in arrear shall not be enforceable against him but this shall not affect any other civil remedy of the lessor.
(2) Section 52 of the Landlord and Tenant Law Amendment Act, Ireland, 1860 (which provides for proceedings for ejectment for non-payment of a year’s rent) shall not apply to a dwellinghouse to which subsection (1) relates.
MCB (Galway) Lts v IDA
[1981] IL.RM. 58 (Supreme court)
O’Higgins C.J. .. The lease to the plaintiff contained a covenant restricting the use of the premises to the manufacture of copper cylinders and calorifiers as this was the type of industry approved for these premises. The lease contained the following provision:
33.1 If the lessee being a company shall go into liquidation (other than a voluntary liquidation for the purpose of amalgamation or reconstruction) or
being an individual shall be adjudicated a bankrupt or take the benefit of any Act for the relief of debtors or if an order is made or an effective resolution passed for the winding-up of the lessee’s business or if a receiver is appointed over the property of the lessee then and in any of the cases it shall be lawful for An Foras Tionscal to terminate this lease by serving a Notice of Termination on the lessee. On the service of such notice this lease shall absolutely cease and determine without prejudice to any claim of An Foras Tionscal against the lessee arising out of any antecedent breach or of any condition of this lease.
… I turn now to a consideration of the relevant statutory provisions. S. 14 of the Conveyancing Act, 1881 which gave relief against re-entry or forfeiture under any proviso or stipulation in a lease, on the observance of the statutory conditions, did not apply to ‘a condition for forfeiture on the bankruptcy of the lessee’ [subsection 6(1)). By s. 2 of the Act ‘Bankruptcy includes liquidation by arrange ment’. By the combined effect of s. 2 (2) and (3)(e) of the Conveyancing Act, 1892 it is provided that the exclusion the relief provided bys. 14 of the 1881 Act in the event of bankruptcy is only to apply ‘after the expiration of one year from the date of the bankruptcy’ except in the case of the lease of ‘any property with respect to which the personal qualifications of the tenant are of importance for the preserv ation of the property, or on the ground of neighbourhood to the lessor, or to any
person holding under him’.
The question, therefore, is whether on the facts and circumstances of this case
the lease made by the defendant’s predecessor can be regarded as one in which the personal qualifications of the tenant were of importance for any of the reasons mentioned. In the first place it is to be noted that this lease was made to a company.
I find it difficult to associate the words ‘personal qualifications’ with a company. It is, of course, necessary that the company has the power to accept the lease and to engage in the industrial activity envisaged. It seems to me to be straining language, however, to suggest that the possession of such powers relates to personal qualilica tions. Even if it could properly be done, however, would the possession by the company of the necessary powers be ‘of importance for the preservation of the value or character of the property’? I cannot see that it would. Nor canI see how the suitability or power of the company to take the lease and to engage in the selected activity could be regarded as important ‘on the ground of neighbourhood
to the lessor’.
In the second place it seems to me that this lease and others made by an An Foras
Tionscal and the defendant as its successors are made purely for commercial purposes and are concerned solely with the suitability of the selected lessee in the promotion of industrial activity and the provision of employment. The character of the property is that of a factory and the lease provides that it can only be used as such. The neighbourhood is an industrial estate. In relation to neither the value or character of the premises nor the neighbourhood can the personal qualifications of the selected tenant be regarded as of importance. Finally, it would appear to me that if the defendant’s contention were correct the relief provided by the 1892 Act could never apply to leases made either by the defendant or An Foras Tionscal. It would, in my view, require very express words in a statute to bring about sucha
result.
I have, accordingly, come to the conclusion that McWilliam J. was correct in the
view which he formed and the decision which he came to. I would, accordingly, dismiss this appeal.
Griffin J. delivered his judgment on 21 May 1981 saying: … Subject to the reservation hereinafter referred to, I agree with the judgment of the Chief Justice.
For the purpose of this appeal it is not necssary to decide whether the words ‘the presonal qualifications of the tenant’ contained in s. 2, s.s. 3 (e) of the Conveyanc ing Act, 1892, are capable of applying where the tenant is a limited company. As the Chief Justice has stated, whether these words are applicable to a company or not, in this case such qualifications are not ‘of importance for the preservation of the value or character of the property, or on the ground of neighbourhood to the lessor’ so as to exclude the provisions of s. 2, s.s. 2 of the 1892 Act. I would expressly reserve my opinion on the question as to whether these words do apply where the tenant is a company until it arises for decision in an appropriate case.
O’Connor v. Mooney & Co. Ltd.,
[1982] I.L.R.M. 373 (High Court)
Doyle J. delivered fiis judgment on 5 October, 1981, saying: This is an appeal by both defendants against a judgment of the Circuit Court ordering that the plaintiff should recover possession of the premises the subject matter of these proceedings against both defendants and further relief ordered by the court. The proceedings were commenced by ejectment civil bill on the title and were for the recovery of possession of the office, store and toilet situated on the ground floor of premises known as No. 8 Cope Street in the City of Dublin and all the basement of the said premises except the small portion thereof in the occupation of the plaintiff, together with the right in common with the plaintiff and the other occupiers of the building to the use of the hall and stairs leading to the said premises; the endorse ment of claim went on to allege that the said premises were the property of the plaintiff and that possession of them was wrongfully withheld by the defendants. The plaintiff also claimed mesne rates and the cost of the proceedings. To this civil bill an appearance was entered by solicitors acting on behalf of the first-named defendant Messrs. J.G. Mooney and Co Ltd for brevity hereinafter referred to as ‘Mooneys’ but no defence was delivered on their behalf. The second-named de fendants, International Trading Group Ltd, were not represented by a solicitor on the record but an appearance and defence purported to have been entered on their behalf by Mr Hugh Charlton in person, who, it transpired, was a director of that company.
The first document which I have described as purporting to be a defence bears date 7 July 1975 and is apparently signed by Mr. Charlton. It denies the plaintiff’s right to recover the premises sought in the civil bill; claims that the defendants are in possession and, further, that the proceedings ‘do not properly belong to the jurisdiction of the Circuit Court. The proceedings properly belong to the jurisdic tion of the High Court and are accordingly invalid’. At another paragraph these defendants deny that they wrongfully uphold possession and aver that they hold possession of the premises rightfully and in accordance with law. They also refer to a counter-claim by those defendants for an injunction to restrain the plaintiff from interfering with those defendants’ lawful rights and they claim £5,000 damages for
interference with such rights and for breach of contract. At paragraph 8 of this document it is claimed ‘the plaintiffs statement of claim is invalid because (a) of vagueness (b) it is not in accordance with the rules of court’. Later, that is to say, by a document dated 31 October 1975, these defendants, namely the International Trading Group Ltd, delivered a further defence and counterclaim and prefaced it bya preliminary objection claiming that the suit is not maintainable since the plaintiff claims an unliquidated amount of mesne rates in excess of the jurisdiction of the Circuit Court, and then goes on to plead a defence extending to several pages. This latter document appears in form to be in language to which the courts
are more accustomed in documents of this sort and one is led to believe that some assistance by a person used to drawing pleadings may have been obtained. How ever, it is not stated to have been delivered by a solicitor and does not bear counsel’s name. In summary it claims that these defendants are entitled toa declaration that they are lawfully in possession and an order directing the plaintiff to consent to a sub-lease of the premises by Mooneys the other defendant, to these defendants, the International Trading Group. They claim in the alternative that they should have a lease directly from the plaintiffs and they would look for an order if necessary staying the proceedings until the matter of the sub-lease should
be determined.
The plaintiff, Sheila O’Connor, moved the court for judgment in default of defence against the first named defendant, ‘Mooneys’ and sought an order for possession against them of the premises the subject of the action. Next she sought summary judgment against the second-named defendant notwithstanding the deliv ery of the defence and also an order for possession of the premises against those
defendants.
The motion for judgment was grounded inter alia upon an affidavit of the plaintiff, Sheila O’Connor, in the course of which she stated that she was the owner of the premises No. 8 Cope Street, Dublin including that part of the premises described in the indorsement of claim on the civil bill and of which possession is sought in these proceedings. She exhibited her documents of title and her title to the premises has not been in dispute. Mrs O’Connor, the plaintiff, went on to aver that by an indenture of lease dated 18 August 1969 she demised the office, store and toilet on the ground floor together with the basement of the premises at No.8 Cope Street described in the lease to Cardall Ltd for a term of 21 years from 1 January 1969 subject to the yearly rent of £950 and she exhibited this lease to
Messrs Cardall.
She went on to say that Cardall Ltd went into occupation and possession of the
premises under the lease and that they remained in occupation as lessee until the month of October of 1973 when Cardall Ltd requested Mrs O’Connor’s consent to an assignment of the leasehold interest in the property to the first-named defend ants ‘Mooneys’. Mrs O’Connor gave her consent to the proposed assignment and believed that the lessee’s interest was subsequently assigned to the defendants Mooneys who thereupon went into occupation of the premises as lessee and
commenced to pay rent to the plaintiff.
Mrs O’Connor further deposed that in the month of January 1975 she discovered
that the first-named defendant, Mooneys appeared to have vacated all or part of the property demised to them under the lease and to have allowed the second named defendant company, International Trading Group Ltd into occupation of all or part of the property. Mrs O’Connor stated that no consent had ever been sought from her by Mooneys to any assignment or sub-letting of their interest in the premises to the second-named defendant. She states in this affidavit that the apparent assignment or sub-letting came to her notice only when she observed employees of the second-named defendant coming in and out of the premises and when she saw large quantities of electrical goods and cartons belonging to the second-named defendant being stored in the premises. These she believed to a very serious fire hazard and it appears that the plaintiffs insurers were of the same mind. Furthermore, the large quantities of goods and cartons created an obstruc tion and an inconvenience and annoyance to the plaintiff and other users of the premises. She believes that such storage of goods and cartons was an alteration of the use of the premises and different from that for which she had let them. Her insurance company has indicated their concern because of the fire hazard caused by this new user of the premises. She also states that the second-named defendant refused to allow an inspector from her insurance company to have access to the property to assess the situation.
She went on to say that having instructed her solicitors and requested them to ask the defendants to rectify the position ‘fithout success that she was obliged to take steps to forfeit the lease and she served a notice of forfeiture upon 16 April 1975 pursuant to the provisions of s. 14 of the Conveyancing Act, 1881, upon Mooneys, the first-named defendant who held the leasehold interest as herein described from the plaintiff. In that she set out in th,e ‘customary manner the breaches of covenant upon which she relied and required them to be remedied before 21 May 1975 and required also payment by way of compensation for the breaches. She states that she received in reply a letter dated 22 April 1975 from the second-named defendants in the course of which those defendants stated ‘we will clear the premises altogether before 21 May 1975. However, I think we should go to court and ask the court to interpret the lease so that we can know what rights we have. We assume this is agreeable to your client as it will remove any possibility for disagreement or discord if we have a precise ruling from the court.’ This was signed on behalf of Inter national Trading Group Ltd by H. Charlton. The plaintiff did not consider that the second-named defendants had any lawful right or title to be upon the premises at all. She claimed in her affidavit that the breaches of covenant continued up to the time of the notice of motion and that instalments of rent had accrued since 9 October 1974. These instalments amounted to a substantial sum, since increases were payable under the terms of the lease. Moreover the plaintiff complained that she had received no sum by way of rent or mesne rates from either defendant since the proceedings were commenced. A replying affidavit was filed on behalf of Mooneys, the first-named defendants, by Mr Noel S. Cooke, Chartered Accoun tant, who stated that he was a director of the first-named defendants and authorised by them to make his affidavit. At paragraph two he deposed ‘I say to my knowledge the first named defendant has at no time since or including the 20 June 1975 had any use or occupation of the premises described in the civil bill issued herein on behalf of plaintiff nor has the first named defendant received any rents or profits from the said premises during the said period.’
The matter came before the learned Circuit Court judge on 3 November 1975 when having recited that evidence had been adduced, and Mr Cooke counsel for the plaintiff, Mr McCann counsel for the first named defendant appearing and Mr Charlton director of the second named defendant company appearing in person and that it appeared to the court that the plaintiff was entitled to possession of the premises the learned Circuit Court judge ordered that the plaintiff should recover possession of the office, store and toilet situate on the ground floor of the premises known as No.8 Cope Street in the City of Dublin and all the basement of the said premises except the small portion thereof in the occupation of the plaintiff and the learned Circuit Court judge further ordered that the plaintiff should recover from the defendants and each of them the costs of the proceedings and gave liberty to the plaintiff to apply in respect of arrears of rent and mesne rates. From that decision the present appeal has been taken. Notice of appeal was served by solicitors acting for the first named defendants Mooneys on 12 November 1975. The second named defendants International Trading Group Ltd decided, somewhat belatedly, to instruct solicitors on their behalf and a notice of appeal dated 7 November 1975 against the whole of the judgment of the Circuit Court was delivered on behalf of
International Trading Group.
In this Court the matter proceeded to plenary hearing. Mr Cooke for the
plaintiffs set out the history of the proceedings in the Circuit Court and the circumstances in which the appeal now came before this Court, stressing the breaches of covenant upon which his client Mrs O’Connor relied. He related the circumstances in which it was found necessary to serve the forfeiture notice thatI have already referred to and stated that it had become operative on 20 June 1975 when the ejectment civil bill was served. Mr McCann, for Mooneys, opening his clients’ case informed me that both defendants were closely associated and that Mr Charlton to whom I have made reference earlier was a member of the boards of both companies. He dwelt upon the subsequent troubled commercial history of Mooneys and the fact that Mr Charlton was no longer on the boards of both companies. He conceded that there had been breaches of covenant. Mr Callan for the second defendant, International Trading Co, stated that they had been carrying on business for a number of years; that they had obtained a controlling interest in Mooneys and that they arranged to take an assignment from Mooneys of their interest in the premises who had agreed to sub-lease the entire interest to the
International Trading Group Ltd.
It was further intimated to me that the International Trading Group would now
rely upon a defence that they were in possession of the premises under the agreement for the sub-lease from Mooneys. Mr Callan also referred to the fact that negotiations had taken place between both defendants in relation to the lessee’s interest and stated that early in 1975 his clients the International Trading Co had re-leased back the portion of the premises to Mooneys and that this double use asI understood him to submit was one of the circumstances which led for some period to an increased and perhaps excessive user of the premises. He stated that such nuisance or obstruction as was caused thereby had ceased at the date of expiration of the forfeiture notice. He also added that the forfeiture notice had not been served on his client but that they had been sent a copy of it.
I mention these matters because I enquired at this stage from Mr Callen whether
his clients were relying upon the allegation in the amended or second defence delivered by Mr Charlton that the sub-lease was valid and subsisting and that his clients sought to look for relief as under lessees. Mr Callan informed me that that was the case and upon this basis the matter proceeded. Mr Callan agreed that Mooneys ought to have sought the consent of the plaintiff to the grant of the
sub-lease to his clients.
Liberty having been given to proceed to oral evidence Mr Hugh Charlton was
called on behalf of the second named defendants International Trading Group. He deposed that he was joint managing director of these defendants and the only other shareholder was a Mr Gerard Sheehy. They carried on the business of Wholesale Radio and Television Dealers and had been in business for upwards of twenty years. His company had been in touch with a Mr Finucane, the managing director
of Messrs Cardall, some six months before the assignment was made by Cardall to Mooneys, who, Mr Charlton claimed, were obtaining the assignment in trust for the International Trading Group. Mr Charlton further alleged that this arrangment was known to the plaintiff Mrs O’Connor and that she consented to this assignment upon those terms. He stated that her husband Mr O’Connor, a stockbroker, had discussed the transaction with him (Mr Charlton) as the premises at Cope Street and enquired what use the International Trading Group proposed for the premises. Mr Charlton assured him that the existing business would be continued there.
Mr Charlton next referred to what appears to have been an incomplete transac tion or else one which was subsequently revoked by mutual consent and this related to an assignment by Messrs Cardall Ltd to Messrs Sheehy and Charlton, which purported to be assigned to Messrs Sheehy and Charlton. The feature of this document to which my attention was particularly drawn was what purported to be an assent by the plaintiff Mrs Sheila O’Connor to the transaction and the assign ment of the lessee’s interest to Messrs Charlton and Sheehy but so as that the consent should not be taken or construed as a general waiver of the covenants against alienation contained in the lease; and this apparently had been duly executed not only by the parties t9 the assignment but also by Mrs O’Connor the plaintiff in these proceedings. The’ document was produced to me but it had been torn into two pieces and some pe_ncil marks appear on the face of the document which are consistent with an indication that its provisions were not, or no longer, to
be effective. I withhold for the.present my view as to the effect of this partially destroyed or damaged assurance.
It is stated however that another arrangement was substituted for the provisions contained in this document and that it was decided to assign the property to the first-named defendants Mooneys. Mr Charlton stated that there was a lease back
arrangment which he was privy to because he was a memeber of the board of both companies.
He stated furthermore that there was an agreement that the International Trad ing Group should sell to Mooneys on 9 May 1973. This transaction was approved he states, at a meeting of Mooneys on 22 June 1973 at which the purchase by Mooneys of the properties of the International Trading Group was approved. At that time he states that Messrs Reddy, Charlton and McKnight were solicitors for the Inter national Trading Group and Messrs Fottrills solicitors for Mooneys. The lease back arrangment, he said, was effected by an indenture between Mooneys of the one part and the International Trading Group Ltd of the other part whereby Mooney’s interest in the portion of the premises at No. 8 Cope Street was assigned to the International Trading Group. The assignment is undated but bears the common seal of Mooneys and the signatures of two directors and the secretary and is executed on behalf of the International Trading Groups by Mr Charlton, where upon, it is stated, the key of the premises was handed by Mr Hickey acting on behalf of Mooneys to the representative of International Trading Group Ltd on 20 November 1973. Mr Charlton went on to say that his company had put some furniture into the premises but he stated that the premises were not necessary and indeed not used for the purposed of his company’s business.
Mr Charlton next referred to an arrangement which he described as a comprom ise agreement made on 12 or 13 January 1975 at the time when he left Mooneys. He stated that ‘we paid rent for all the premises including 8 Cope Street to Mooneys up to the date of this compromise agreement’. He continued ‘we then started trans ferring our goods into 8 Cope Street, that is to say, wireless sets, televisions and goods of that character. This commenced on Sunday 12 January 1975.’ He denied that any obstruction was caused. ‘We didn’t store our boxes on the stairs’ although he conceded that a carrier employed by his firm might have done so. He said that when he received word of any complaint he gave instructions to see that the matter should be put right and consulted Mrs O’Connor to see that this had been done. This interview with Mrs O’Connor was carried out by a Miss or Mrs Francis who was Mr Charlton’s secretary. He states that no other occupants of the buildings or of the adjoining premises made complaints about the nature of his firm’s user of the premises. Mr O’Connor however had objected to the carrier at the manner in which the goods were being disposed of in the premises.
Mr Charlton denied that the goods were of a highly inflammable character and in fact he stated that they had had them insured at normal rates. The previous occupants Messrs Cardall had been in the business of dealing in paper and photo graphic materials which were of a more inflammable character. He agreed that Mrs O’Connor had also objected to the use of the two front offices as stores and Mr Charlton stated that he had the goods removed out of these offices to another alternative room suitable for storage. At some later unspecified date, according to Mr Charlton, Mr O’Connor came to the presises and sought to make arrangements for an insurance inspection to be carried out. Mr Charlton stated that he was busy at the time and said he would have to have notice of any such arrangement.
When cross-examined by Mr Cooke, Mr Charlton alleged that his firm held a lease from Mooneys but also he stated that they were relying upon the circumst ances and were making the case that they also held a lease from the O’Connors. He was aware however that the O’Connors had never consented to Mooneys giving a sub-lease to his firm. He assumed that Mooneys had paid the rent all through the year 1974 and he could not say that his company had paid any rent direct to Mr or Mrs O’Connor. He stated that at the date of the compromise agreement on 12 January, 1975, to which he had earlier referred, his company paid rent in respect of all the leases and he produced a paid cheque for £45,000 dated 12 January 1975 drawn by the International Trading Group Ltd in favour of Mooneys. Mr Charlton stated that he was aware that the written consent of the lessor was necessary to effectively give a sub-lease to his company but he could not say if any such consent had ever been given. He was likewise unable to say how much rent had been paid by his company or in respect of what particular period it had been paid. He did say however that they did pay rent and further added that they continually requested from Mooneys a statement of account of outstanding balances including rent.
There was extensive examination as to what the cheque for £45,000 payable to
Mooneys was intended to cover and no agreement appears to have been established between Mooneys and the International Trading Group Ltd as to what precisely this figure was intended to discharge. Mr Charlton said there was a claim for
£60,000 for outstanding rent and that £45,000 represented a compromise which also incorporated the surrender of certain leases. He then said the £45,000 was to cover all rent outstanding on the remaining leases including the lease of 8 Cope Street, incorporating arrears due to Mooneys in respect of the rent of the premises. Mr Charlton further stated that the £45,000 included some payments of rent in advance in respect of the Cope Street premises. Mr Charlton further stated that his firm was in dispute with Mooneys as to how far in advance rent had been paid and was incorporated into the payment of the £45,000 already referred to and it does not appear that this dispute between those parties has yet been resolved.
It became apparent in the course of further testimony under cross-examination of Mr Charlton that he was aware of the danger of fire which the boxes and containers presented, because vandals had apparently set fire to boxes of that character on the street outside his own premises adjoining. He did not make the appointment sought to enable an inspection to be carried out by the insurance company. He agreed that he had told Mr O’Connor who had sought to make arrangement for such an inspection that he, Mr Charlton, was busy at the time and asked for notice before such an arrangement could be made. He said that Mr O’Connor did not come back to seek again to make such an arrangement. Upon re-examination by Mr Callan the witness stated that the original of the compromise agreement to which he had referred was retained by the Northern Bank Finance Co and the calculations which gave rise to the compromise were also, he said, in the custody of the Northern Bank Finance Corporation.
Mr Gerard Sheehy, who was joint managing director with Mr Charlton of the International Trading Group Ltd, next gave evidence. He mentioned some nego tiations he had had with Mr O’Connor regarding payment of the rent of Cope Street which was due and this took place in his Mr Sheehy’s house in the autumn of 1974. Mr Sheehy disclaimed any concern with the property end of his company’s business and advised Mr O’Connor that he should contact Mr Charlton. He apparently was a party to the negotiations which led up to the so called compromise agreement. He stated that the £45,000 related to certain properties including Cope Street and that the agreement had been drawn up by Mooneys. Mr Sheehy stated that his company had arranged insurance through Messrs Armstrong and Taylor, insurance brokers, and that this cover included the interests of Mrs O’Connor as landlord. Apparently he was also aware that the O’Connors’ insurance company, namely, the Irish National Co, had ·indicated that on account of the nature of the stock they would discontinue their liability under their policy and in consequence the International Trading Group arranged the insurance through Messrs Arm strong and Taylor to which I have referred. Mr Sheehy could not be of great assistance of the main transaction in relation to the tenure of the premises since his business was not concerned with property and he was managing public houses for Mooneys at the material times. Other witnesses to give evidence for the Inter national Trading Co were Miss Eileen Francis who was Mr Charlton’s secretary and Mr Rory O’Connor who was the manager of the musical department. The latter witness identified certain photographs of the premises which seemed to me, at any rate to indicate that the user of the premises at the time that these photographs were taken would not be such as to recommend itself to any fire insurance company. Another witness, Mr Brian Warren, who is an electronic service techni cian in the service of the International Trading Group for a number of years, agreed that a number of the goods which were stored in No. 8 were inflammable in character but he claimed that they were packed in polyester board which reduced any risk of fire to the articles contained in them. Other musical instruments and tape recorders and microphones were sometimes contained in cardboard boxes. He agreed on cross-examination that these would be more of a risk of fire than the articles contained in the polyester containers. Mr Richard Budds the secretary of Mooneys was examined by Mr Callan. He produced the undated indenture of assignment between Mooneys and the International Trading Group Ltd and proved his execution of the documents as secretary of Mooneys and identified his com pany’s seal and the signatures of the other signatories for Mooneys. He stated that this indenture was executed on 9 May 1975 and he fixed this date by reference to a record in the seal book of Mooneys. Minutes of 24 July confirm the signing on behalf of Mooneys of a number of documents which included this indenture. In answer to Mr Cooke who cross-examined him this witness stated that Mooneys had executed this lease in May 1975 although they had notice of forfeiture in April 1975. The witness stated that he was not personally aware of the fact that the forfeiture notice had been served. There was no record in his company’s books but he assumed that it would have been known about by the company’s solicitors. At that stage the witness stated Mooneys were already in arrears in respect of the rent of the premises which they were now puporting to sub-lease. One copy of the undated demise of the premises by Mooneys to the International Trading Group Ltd bears the words in pencil and I quote ‘hold until we receive counsel’s advice’. The witness stated that these words were not on the indenture when it was received by Mooneys.
The evidence dealt in a number of respects with the actions of the two defendants
but much of it seemed to me not to bear directly on the issue as between either defendant and the plaintiff who was seeking possession for forfeiture. Mr Brian O’Connor,a stockbroker, the husband of the plaintiff who himself has offices in Cope Street gave evidence on behalf of the plaintiff.
He dealt with the transfers by way of lease and sub-lease with various transac
tions involving the property in dispute. It appears that at one stage, Mr O’Connor and his wife were anxious to obtain back the leasehold interest from Mooneys since they were concerned about the payment of the rent and also about the user of the premises. Goods were arriving ‘by the lorry load’ Mr O’Connor said, and were being stored in the premises and they were mostly contained in large cardboard boxes except guitars and musical instruments which were in paper wrappings. Mr O’Connor expressed objections to the carriers because of the nature of the goods and because also, as he said, they were blocking the hallway and part of the basement. The whole ground floor including the two offices were stacked with goods. There were empty cartons in the hallway and in the street. Goods were there from time to time in the manner objected to by Mr O’Connor and so as to obstruct normal user of and access to the premises up the Friday before the hearing before me commenced. Mr O’Connor considered that the goods dealt with in this way constituted a fire hazard and also an obstruction and an objectionable feature of the use of the premises. Rent was last received on 1 January 1975. It was requested from Mooneys subsequently but no payment was made. Mr O’Connor described the abortive attempt made by him and the officer of the Irish National Insurance Co to inspect the premises on 18 March. He stated that Mr Charlton refused to give him the key and said it was in another premises. It was never found possible to carry out the inspection required by the insurance company. Mr O’Con nor summarised the final situation as being that there was a substantial change in the user of the premises, that there was a subletting made without the consent of Mr O’Connor or of his wife, that the insurance on the premises was in jeopardy and that the rent was unpaid. It seems to me that no substantial answer to these
complaints has been established in court.
To sum up the situation: no evidence has been adduced before me which would
entitle the first-named defendants to relief from forfeiture and in my opinion the plaintiff is entitled to judgment against them. The second defendants if they are to obtain relief must rely upon the provisions in aid of under-lessees contained ins.4 of the Conveyancing Act, 1892. That enactment provides:
4. Where a lessor is proceeding by action or otherwise to enforcea right of re-entry or forfeiture under any covenant, proviso or stipulation ina lease, the court may, on application by any person claiming as under-lessee any estate or interest in the property comprised in the lease or any part thereof, either in the lessor’s action (if any) or in any action brought by such person for that purpose, make an order vesting for the whole term of the lease or any less term the property comprised in the lease or any part thereof in any person entitled as under-lessee to any estate or interest in such property upon such conditions as to execution of any deed or other document, payment of rent, costs, expenses,damages, compensation, giving security, or otherwise as the Court in the cir cumstances of each case shall think fit, but in no case shall any such under-Jessee be entitled to require a lease to be granted to him for any longer term than he had under his original sub-lease.
No doubt the grant of relief of the type sought is a matter within the discretion of the court, but when one examines the present circumstances it appears that the court would have difficulty in finding grounds such as would induce it to exercise this discretion. The sub-lease relied upon is no strong support for the second defendant’s claim. Prima facie it was granted in breach of the terms of the head lease, which required that the consent in writing of the lessor should first be obtained. Of course such consent ought not reasonably to have been witheld.
Furthermore I am satisfied that there was substance in the plaintiff’s complaints relating to the user of the premises. The storing in the offices demised (and from time to time the depositing upon the street outside) of the cartons and packing cases used for the purposes of the business carried on by Mr Callan’s clients, the second defendants International Trading Group, was such as to constitute a nui sance and obstruction not only to persons occupying or resorting to the premises, but properly also to foot passengers upon the street, as demonstrated in the photographs which were put in evi<.lence. Perhaps a graver aspect of this misuse of the premises is the fact that it jeop rdized the possibility of obtaining fire insurance cover for the premises No. 8 Cope Street.
Mr Callan sought also to found.his client’s claim for relief against forfeiture on the provisions of the Conveyancing Act, 1881. He claimed that his clients the International Trading Group Ltd were entitled to a new lease on foot of a docu ment which had been executed ‘but not delivered and which he said was an agreement to grant a lease. He referred I think to the undated indenture made by Mooneys by way of sub-lease to the International Trading Group Ltd and also I think relied upon the document purporting to be an assignment from Cardall Ltd to Messrs Gerard Sheehy and Hugh Charlton executed but not dated and, as pre viously referred to, apparently intended nbt to take effect, for which purpose it had been partially destroyed. Mr Callan referred to one or other of these documents, and I quote, ‘as an escrow of some sort’.
In the course of a comprehensive argument Mr Callan referred to various English authorities notably Peebles v. Crosthwaite (13 T.L.R. 198) and in particular to the judgment of Romer J therein reported. Mr Callan also referred to the decision in Treloar v. Bigge (L.R. 9 Ex. Ch. 151) and the observations of Kelly, Chief Baron to the effect that an arbitary refusal of consent to a sub-lease should not be regarded as effectual.
English authorities upon the relationship of landlord and tenant and their mutual rights to forfeiture or relief from forfeiture must be approached cautiously since the relationship in Ireland for many years has been founded upon contract. However the circumstances in the present case are such that it would be inequitable to force the plaintiff into privity of contract with, and to compel her to grant a lease to, the second-named defendants having regard to all the circumstances to which I have referred. The positions of the Conveyancing and Law of Property Act, 1881 require the court when exercising its discretion to grant or refuse relief to have regard to the proceedings and the conduct of the parties. As I have stated, when I have regard to the circumstances here as I have already recited them, I consider that it would not be reasonable to saddle the plaintiff with a tenancy the circumstances of which raise such substantial grounds of objection. The lease to Mooneys prohibited sub-letting of the premises or any part thereof without the consent in writing of the
landlords. In my opinion the landlord in this case would have been within his reasonable rights to refuse such consent.
Accordingly there will be an order that the plaintiff do recover possession of the
office, store and toilet situate on the ground floor of the premises known as No.8 Cope Street in the City of Dublin and all the basement of the said premises except the small portion thereof in the occupation of the plaintiff. The plaintiff is also entitled to an award in respect of arrears and rent and mesne rates, but this I leave to be determined if it cannot be agreed between the parties. There is not at present sufficient evidence before me to ascertain the amount of such arreas of rent and/or
mesne rates.
In deference to the exhaustive argument of Mr Callan, I feel that I should point
out that in the second of two documents in the nature of the defences delivered in the Circuit Court and dated 31 October, 1975, the second defendants International Trade Group Ltd allege facts and circumstances which, if proved, might entitle them to damage or other relief against their co-defendants Mooneys, but this issue does not arise in the present proceedings.