Julia Duval v 11-13 Randolph Crescent Ltd (2018)
Where several leases covering a block of flats contained an absolute covenant requiring the lessees not to carry out certain actions, and a separate covenant requiring the landlord to enforce the absolute covenant at the request of any other lessee, the landlord would be in breach of the latter if they granted to a lessee a licence to carry out the prohibited action.
The court was required to construe two clauses in the individual leases governing a block of nine flats.
One of the lessees (W) wanted to carry out works to her flat, including the removal of a portion of a wall. Clause 2.7 of the leases contained an absolute covenant requiring each lessee not to cut any of the walls or ceilings. At cl.3.19, the landlord covenanted to enforce any covenants entered into between him and a lessee at the request of any of the other lessees upon the provision of security. The landlord was willing to grant W a licence to carry out the works to avoid her being in breach of cl.2.7. The appellant brought successful proceedings, arguing that granting a licence would be a breach of cl.3.19. That decision was subsequently reversed.
The wording of the leases - In cl.3.19, the landlord had made two express promises. First, that each lease would contain similar legally binding obligations on each lessee. That promise was designed to have practical effect, namely that each lessee would be bound to observe similar legal obligations. Each lessee would have known that the landlord had covenanted, or would covenant, with every other lessee to enforce the obligations contained in the lease. Second, the landlord would enforce the covenants at the lessee's request and expense. That was a contingent obligation. The combination of those two promises meant that the lessee could be sure that, upon request and provision of security, the landlord would enforce the covenants by which each lessee had agreed to be bound. As the leases of the various flats did not amount to a letting scheme, the power of enforcement was vested in the landlord. However, each lessee had been given the right to compel the landlord to enforce the covenants in the lease regardless of whether he wanted to or not (see paras 13-16 of judgment).
Would the landlord be in breach of cl.3.19 if he granted a licence permitting W to carry out actions that would otherwise be a breach of the absolute covenant? Clause 3.19 did not in terms say a breach would be committed in those circumstances. The issue was therefore whether it was necessarily implied in the way the obligation had been drafted. There was a long line of authority in which the courts had consistently held that where an obligor undertook a contingent or conditional obligation, they were under an obligation not to prevent the contingency from occurring or from putting it out of their power to comply with the obligation if and when the contingency arose, Mary Short v Stone 115 E.R. 911, Caines v Smith 153 E.R. 816, Ogdens Ltd v Nelson  2 K.B. 287, Southern Foundries (1926) Ltd v Shirlaw  A.C. 701 and Berkeley Community Villages Ltd v Pullen  EWHC 1330 (Ch)considered. Once a lessee had made a request for enforcement and provided the necessary security, it would be a plain breach of covenant for the landlord to license the breach of which the lessee had complained. To hold otherwise would defeat the whole purpose of the covenant. If a lessee was entitled to require the landlord to enforce cl.2.7 in the face of a threatened breach, it seemed to follow that the landlord could not put it out of his power to do so by licensing what would otherwise be a breach of covenant. It would not give practical or commercial coherence to the lease if the landlord had carte blanche to vary or modify the covenants, or to authorise what would otherwise be a breach of them. Whilst that interpretation might cause inconvenience to lessees, such as those who wanted to install recessed lights in the ceiling of the flat, the vice lay in the fact that cl.2.7 had been drafted as an absolute covenant. Had it been a qualified covenant, the landlord would not commit a breach of cl.3.19 by granting consent (paras 19-31).
Provision of security - The court had proceeded on the assumption that the appellant had not provided the security required under cl.3.19. However, that did not affect its analysis because the previous authorities had held that there was a breach of contract where an obligee had disabled themselves from performance if and when the contingency arose, Stone and Smith considered (para.32).
Outcome - In principle, the landlord would be in breach of cl.3.19 if he granted to W a licence to do an act that would otherwise be in breach of the lease (para.32).
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18 Oct 2018
Court of Appeal (Civ Div)
Lewison LJ, Newey LJ, Sir Stephen Richards
LTL 18/10/2018 :  10 WL
Edwin Johnson QC