Summary

A covenant in a lease by which the lessee agreed to erect a building development fit for uses within certain specified classes of the Town and Country (Use Classes) Order 1963 did not mean that the demised land could only be used for those purposes. A landlord would rarely be acting unreasonably in refusing consent to a proposed assignment on the ground that the assignee proposed to commit a breach of the user covenant in the lease.

Facts

Appeal by the landlord council and cross-appeal by the tenant company from the decision of the Court of Appeal allowing the company's appeal from the decision of David Donaldson QC. This appeal raised two questions, namely: (i) whether a covenant by the company in cl.2(iii)(a) of the lease to erect a building development "for uses within Use Classes III, IV or X of the Town and Country (Use Classes) Order 1963" imposed on it an obligation to use the demised land only for those uses or was merely descriptive of the building development that had to be completed; and (ii) whether the council had the right to withhold consent to an assignment by the company of the unexpired term of the lease in circumstances where the proposed assignee intended to use the demised premises for a use other than those set out in cl.2(iii)(a). The judge answered both questions in favour of the council. The Court of Appeal upheld the judge's decision on (i) but, considering itself bound by its decision in Killick v Second Covent Garden Property Co Ltd (1973) 1 WLR 658, held that the fact that the council believed that the proposed use would be in breach of the user restriction was not a sufficient reason for refusing consent.

Held

(1) As to the council's appeal, Killick (supra) was wrongly decided and should be regarded as overruled; it had introduced too rigid an approach. In each case, it was a question of fact, not law, whether a landlord's withholding of consent was reasonable or unreasonable, and it was inappropriate to abstract overriding principles from decisions of fact. See Bickel v Duke of Westminster (1977) QB 517. Since the lease was the contract by which the parties to it defined what each could and could not do, it would rarely be right to hold that a landlord was unreasonable in withholding consent to an assignment that, in his reasonable judgment, would or might well lead to a breach of covenant. (2) (Lords Bingham and Rodger dissenting) It was impossible to construe cl.2(iii)(a) as having any application to the use which the company might make of the demised premises. Its clear purpose was to describe what the company had positively covenanted to do by way of the buildings that were to be erected.

Appeal and cross-appeal allowed. Declarations below set aside. Matter remitted to the Chancery Division for determination on the question of the reasonableness of the council's refusal of consent to assign.