Monthly Archives: September 2014

Council misapplied material considerations to out of town retail scheme

In the Court of Appeal case of Midcounties Co-Operative Ltd, R (On the Application Of) v Forest of Dean District Council [2014] the Claimant (“the Co-op”) had a supermarket in Cinderford town centre.

The developer (“Trilogy”) had agreed to contribute £471,000 under section 106 of the Town and Country Planning Act 1990 (“section 106”) towards town centre enhancements in line with the adopted Cinderford Town Centre Regeneration Scheme.

The Co-op challenged the Defendant Council’s (“the Council”) grant of outline planning permission to Trilogy for an out-of-town retail store (“the Site”) to be operated by Asda Stores Limited (“Asda”) on the main grounds that:

i) The Committee failed to have regard to a material consideration i.e. how the contributions to be made under section 106 would encourage trips to a town centre left “crippled” by the new out-of-town store and in any event had failed to give proper reasons.

The court found the Council’s reports provided no evidence on which they could have based an analysis of how the harm created to the town centre by the development would or might be mitigated by the section 106 contributions.

ii) The planning permission breached of regulation 122(2) of the Community Infrastructure Levy Regulations 2010 (“the CIL Regulations”), because the section 106 obligations imposed on the developer weren’t “necessary to make the development acceptable in planning terms”.

The findings under ground i) meant it was inevitable there had been a breach of regulation 122(2)(a) of the CIL Regulations . The Council’s failure to provide an adequate explanation for how the section 106 contributions would increase trips to the town centre meant that they could not be considered enough to make the development acceptable in planning terms.

iii) The Committee hadn’t provided a rational and adequately reasoned basis for departing from an earlier 1999 decision of the Secretary of State to refuse planning permission for a similar development at the Site where similar section 106 contributions/obligations had been on the table.

The Court found that the Council’s the Planning Committee had failed to distinguish this Scheme from the crucial findings of the Inspector and Secretary of State in 1998-9 that enhancements such as those incorporated into the section 106 obligations would not, of themselves, encourage people to visit a town centre seriously harmed by the planned out-of-town development. Nor were any analysis or reasons given for departing from it. In fact that earlier decision was indistinguishable.

iv) The Committee materially misconstrued paragraph 14 of the National Planning Policy Framework (“the NPPF”).

The court said paragraph 14 of the NPPF only applied where there is a policy lacuna so this ground was based on the wrong paragraph. Where (as here) there was an out-of-town retail development that would have a significant adverse impact on the vitality and viability of a town centre, and no such lacuna, paragraph 27 of NPPF applied. That created a presumption in favour of refusal of planning permission. The planning committee had been misdirected on this by a report which had indicated that the NPPF somehow supported the planning application.

This blog has been posted out of general interest. It does not remove the need to get bespoke legal advice in individual cases.

Pre Planning Application Consultation documents needed specific justification to avoid public disclosure

To what extent can information supplied by a developer to a planning authority for the purpose of obtaining pre – application advice be confidential and immune from “freedom of information” requests under Freedom of Information Act 2000 (“FOIA”) or Environmental Information Regulations, 2004 (“EIR”)?

If genuinely commercial information were to freely available, developers would think twice about the useful step of seeking pre – application advice.

There may well be cases, where the pre -application process involves the provision of commercially sensitive material which needs protecting, even after the actual application has been made.

In a case involving environmental information within regulation 2 of EIR, EIR 12(5) sets out the exceptions to the duty imposed on public authorities to provide environmental information:

“a public authority may refuse to disclose information to the extent that its disclosure would adversely affect:-

(e) the confidentiality of commercial or industrial information where such confidentiality is provided by law to protect a legitimate economic interest;

(f) the interests of the person who provided the information” [to the public authority] where that person was not obliged to supply it to any public authority, where the authority was not entitled to disclose it other than under the EIR and where the person does not consent to disclosure.

In other cases it may be that a request has been made after application when the time for confidentiality no longer applies.

To keep information from disclosure, it is not enough to quote some mythical general rule that “all information passing between a developer and a planning authority in pre – application stages is inherently confidential and that its disclosure would, without more, threaten economic interests”, as the following case illustrates.

In the First Tier Tribunal Case of St. Albans City and District Council v The Information Commissioner (“the ICO”) [2014] Oaklands College and Taylor Wimpey, (“the developers”) had, early in 2012, applied to St.Albans City and District Council (“SACDC”) for paid for pre-application advice for their intended planning application for a large housing estate on green belt land, plus the redevelopment of Smallford College. That redevelopment was to be partly funded by the residential development.

Marshalswick North Residents Association (“MNRA”) strongly opposed the plans for development.

MNRA requested SACDC to email them copies of all minutes/notes of meetings, formal or informal and correspondence between Taylor Wimpey and SADC’s planning department, regarding proposals to build 350 homes on Oaklands College land on Sandpit Lane.

SACDC refused to supply the information. Its refusal was based on EIR 12(5)(e)’s exception where disclosure would have an adverse effect on commercial confidentiality, and on EIR 12(5)(f).

SACDC felt threatened with the loss of future fee revenue from pre – application services if the material withheld here had to be disclosed.

In this case the Tribunal found that both of the conditions in EIR 12(5)(e) and (f) might be satisfied and that if they were the only live issue would be whether there was the “adverse effect” referred to in EIR’s preamble to those subclauses.

There was no general rule that all pre – application information supplied by a developer to a planning authority benefited from those exceptions.

Nor was it likely that the exceptions would apply to all the material covered by a request.

The ICO and the Tribunal here had to examine the specific information withheld in the relevant case and decide whether the exceptions applied to it.

The sensitivity of material disclosed pre – application by a developer to a planning authority would vary considerably from one application to another.

Here SACDC had indiscriminately withheld whatever had been created pre – application (and even a few documents which post – dated it) without any attempt to identify to the Tribunal any particular information in specific documents, within the mass withheld, whose disclosure would by June 2013 have damaged the interests of either the developers or of SACDC.

Indeed the Tribunal was unable to find anything which had been expressly required to be kept confidential or which, by June 2013 at any rate, appeared too sensitive to disclose. Indeed much of the information was already public.

As neither of the exceptions provided by EIR 12(5)(e) or (f) had been properly engaged by establishing to the Tribunal’s satisfaction the sensitivity of the specific documents withheld, SACDC’s attempt to avoid their disclosure under those exceptions fell at the first hurdle.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Circumstances of unlawful killing did not displace Forfeiture Rule’s application to Joint Property

Where a person is a beneficial joint tenant of a property, or the beneficiary to that property under the owner’s will, it will normally pass to them by “survivorship” or under that will on the death of the other joint tenant or of the owner.

However under the common law “Forfeiture Rule” a person who has unlawfully killed another is barred out from acquiring a benefit as a result of the killing. This is subject to the Court’s power under the Forfeiture Act 1982 to modify the application of the Rule in individual cases.

In the recent High Court case of Chadwick v Collinson & Ors [2014] the Claimant and the Deceased had been beneficial joint tenants of a house at Bolton-le-Sands, Lancashire (“the Property”).

The Deceased had made a will in which the Claimant was the residuary beneficiary. The net value of her estate was £79,098.87. £60,000 of this had been referable to the Deceased’s interest in the Property.

The Claimant had been referred for a mental health assessment after describing feelings of paranoia and hearing voices. In the early morning just prior to the scheduled assessment, the Claimant stabbed the Deceased and their six year old son repeatedly killing them both. The Claimant was arrested and charged with murder. His guilty plea to manslaughter on grounds of diminished responsibility was accepted and he was detained under a Hospital Order under Section 37 of the Mental Health Act 1983.

But for the Deceased’s killing, the Deceased’s interest in the Property would normally have passed to the Claimant on the Deceased’s death under the beneficial joint tenancy.

The issues here were:

i) Did the Forfeiture Rule apply in the circumstances of this case; and

ii) If it did, did the justice of this case require the effect of the Rule to be modified?

On point i) the Claimant said the Forfeiture Rule did not apply to some cases of manslaughter and that it ought not to apply here because of the mental health of the Claimant.

The Court said the Rule might be disapplied where the crime involved such a low degree of culpability or such a high degree of mitigation that the sanction of forfeiture would have been contrary to the public interest. But here whilst the mental disorder might have significantly reduced the degree of culpability it had not been eliminated or reduced to such a low level that to give effect to the Forfeiture Rule would be contrary to the public interest.

Under the partial defence of diminished responsibility the “abnormality of mind” merely impacted on the Claimant’s capacity to form a rational judgment and, reduced, but did not eliminate, his ability to control his behaviour. These did not derogate from the fact that the Claimant had decided to kill his partner and son, knew that it was wrong and had some residual self control.

Apart from the question of culpability, which was sufficient to justify the application of the Forfeiture Rule, the nature and gravity of the offence also weighed, with the Judge, against disapplying of the Forfeiture Rule. Included were (a) the number of fatal and non fatal wounds inflicted by the Claimant and (b) the number of times he returned to attack each victim.

The evidence also lacked anything that could begin to explain what occurred.

The conduct of the victim might have militated against the rule applying had they subjected the assailant to years of intolerable physical or mental abuse. In fact the couple’s relationship seemed entirely stable, loving and long lasting. The deceased’s will had been consistent with this since she left him the entirety of her estate and only to her children if he did not survive her more than 28 days.

Another factor substantially against disapplying the Forfeiture Rule was that most if not all her interest (and the Claimant’s interest) in the Property had been funded by inheritance from the Deceased’s late mother.

On the Claimant’s attempt to modify the application of the rule mentioned at ii) above:

The financial position of the Claimant was also relevant. He would still have his share of the Property but it may be difficult for him to again earn his living as a self employed gardener whenever he was released. This factor favoured modifying the effect of the Forfeiture Rule but was outweighed by the other factors militating against such modification.

Another factor to be borne in mind was that those who would benefit under the Forfeiture Rule were largely aunts and cousins of the Deceased who she did not intend to benefit in the event of her death. That weighed against applying the Forfeiture Rule but not heavily. That factor, whether alone, or in combination with the Claimant’s future financial position, was outweighted by the other factors referred to above. So the application of the Forfeiture Rule should not be modified in the circumstances of this case.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Third Party Rights Beneficiary of Appointment could not call for Adjudication

To what extent can an express term contained within the agreement between the original contracting parties make the rights of a third party, enforceable under the Contracts (Rights of Third Parties) Act 1999 (“the 1999 Act”), determinable by an adjudication under Housing Grants, Construction and Regeneration Act 1996 (“the 1996 Act”)?

It has recently been determined that a collateral warranty can be a “construction contract” covered by the Adjudication regime of the 1996 Act. What would be the position where a beneficiary was given third party rights under the 1999 Act rather than a collateral warranty?

In Hurley Palmer Flatt Ltd v Barclays Bank Plc [2014] Clauses 2.3 and 14.2 of the claimant’s Appointment said respectively:

“Unless expressly stated otherwise in this Agreement, nothing in this Agreement confers or is intended to confer any rights on any third party pursuant to the Contracts (Rights of Third Parties) Act 1999.”

“Save as expressly provided in Clause 14.3 and Clause 10 (Collateral Warranties) nothing in this Agreement shall confer or purport to confer on any third party any benefit or right to enforce any terms of this Agreement.”

Clauses 27.1 and 27.3 of the Appointment included provision for Adjudication and said respectively:

“The adjudication provisions contained in Part 1 of the Scheme for Construction Contracts (England and Wales) Regulations 1998 (S.I. 1998/649) (the Scheme) shall apply to this Agreement.”

“The decision of the adjudicator shall be binding on the parties unless and until the dispute is determined by legal proceedings or by agreement.”

The claimant sought a declaration that as, now, third party to the Appointment Barclays was not entitled to commence adjudication proceedings against the claimant.

The High Court said the Appointment contained 31 Clauses some being substantive terms exposing the claimant to liability as the Consulting Engineer. Other provisions contained “procedural rights” including the ability of the Client to suspend the performance of the claimant’s Services or to terminate the claimant’s appointment as Consulting Engineer.

Clause 14.3, of the Appointment, when read with Clauses 2.3 and 14.2 contained the full scope of Barclays’ right to enforce any term of the Appointment.

Clause 2.3, meant that apart from Clause 14.3, no rights were given to a third party which could be enforced under the 1999 Act.

Clause 14.3 actually said:

“Any Affiliate [Barclays were included within this term] with a direct interest in the Project shall be entitled to enforce the terms of this Agreement as “Client” always provided that the Consulting Engineer shall be entitled [to] rely on the equivalent defences in respect of such liability which it has against the Client.”

The court latched onto the reference to “such liability” as “strongly” indicating an intention that the only rights the third party (i.e. Barclays) could enforce, under Clause 14.3, against the claimant were the rights giving rise to liability not the procedural rights such as those in Clause 27 (adjudication). It followed that Barclays had not been given any right to enforce the terms of the Appointment by adjudication under Clause 27.

We may doubt whether the draftsmen, or the parties, intended the word “such” to have such a restrictive effect.

In any case, the adjudication clause in Clause 27.1 was not applicable to the relationship between Barclays as a third party and the claimant

The Adjudication system under the 1996 Act had no equivalent to Arbitration in terms of Section 8(1) of the 1999 Act which enabled a third party to be treated also as a party to the arbitration agreement.

The Scheme for Construction Contracts (England and Wales) Regulations 1998 (“the Scheme”) which was incorporated in Clause 27, referred, in paragraph 1(1) of Part I, to a party to a construction contract being able to give written notice to refer disputes to adjudication. Also paragraph 1(2) stated that the notice of adjudication should be given to every other party to the contract. Barclays, the third party was not a party to a construction contract.

It was clear from those provisions of the Scheme and from the provisions of the Appointment (Clause 27.3, for example) that Clause 27 was inapplicable to the relationship between Barclays, as third party and the claimant. It was for that reason that the provisions of section 8 of the 1999 Act had been included in the case of Arbitration.

The 1999 Act had given no consideration to Adjudication or other means of Alternative Dispute Resolution.

This case highlights an anomaly in the 1999 Act whereby, for Adjudication purposes, Third Party Rights construction documents are prima facie outside Adjudication but Collateral Warranties are within Adjudication.

In the meantime precedent provisions, similar to Clause 14.3, could be redrafted to make it clear that procedural rights like the right to refer a case to Adjudication are also enforceable by a third party under the 1999 Act on the same basis as if they had been a party to the original contract.

This blog has been posted out of general interest. It does not remove the need to get bespoke legal advice in individual cases.

Court draws line under property solicitor’s liability

In deciding whether a law firm has been negligent towards a property client the court must decide what was the scope of the law firm’s engagement?

Secondly if the engagement covered the relevant service was the law firm negligent in its performance of that service?

Thirdly, if the law firm was in negligent breach was that breach the cause of the claimant’s loss?

Fourthly even if the law firm is on the hook for the above the claimant must not rack up unnecessary additional losses by acting unreasonably in the mistaken belief that the solicitor or his insurers will simply foot the bill.

In the High Court case of Rentokil Initial 1927 Plc v Goodman Derrick Llp [2014] Taylor Wimpey had taken a strong line over the terms of a planning condition when negotiating a conditional purchase agreement for the claimant’s property.

The claimant said the respondent’s negotiation of that clause had left Taylor Wimpey too much latitude to reject the planning permission obtained on the grounds of excessive infrastructure agreement costs when the claimant had been led to believe that the only infrastructure agreement costs to be taken into account were those under the Section 106 Agreement.

The court accepted that the reference to Section 106 Agreement costs was fairly standard short hand embracing all the infrastructure agreement costs associated with the planning stage.

The court also accepted that the respondent’s engagement was limited to advising on the legal issues that did or might arise from the terms of the contract, and not on the planning or commercial issues that did or might arise from it.

Here the planning issues had been devolved to a firm of planning consultants retained by the claimant and the claimant was itself commercially very experienced and sophisticated. Indeed one of the main contacts there was himself a solicitor. Both the planning consultant and the claimant had been kept copied in and informed during the negotiation stage.

The court found the respondent solicitors’ draftsmanship and advice adequate.

The court also accepted that the draftsmanship and advice had not caused any loss because it was generally known that Taylor Wimpey would not have agreed to any different terms and the claimant exchanged contracts with them with that knowledge.

In fact the conditions, imposed by the planning permission, that Taylor Wimpey were using the contract to rail against were to be expected in the circumstances and not such as to prevent the sale from proceeding. Indeed the claimant would have won its case had the issue gone to arbitration under the contract as it should have done.

Given the state of the property market in 2008 and Taylor Wimpey’s financial position it had been inevitable that Taylor Wimpey would have sought to “chip” the original contract price.

In any event the amount of the reduction the claimant had agreed to induce Taylor Wimpey to complete the purchase was too great and reflected an excessive anxiety to get the property off its hands to Taylor Wimpey.

So the claim was not surprisingly dismissed.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Commercial sense of land contract frustrated completion and return of deposit

Under Section 49(2) of the Law of Property Act 1925 (“the 1925 Act”) the court has a wide discretion to order the return of a buyer’s deposit if a land purchase falls through and that discretion generally overrides any contrary provision in the contract.

In the High Court case of Cohen v Tesco Properties Ltd and others (2014) the defendant developer agreed to buy a site in London from the claimant, conditional on obtaining satisfactory planning permission for residential development.

The contract covered the various factors which might arise during the planning application which would affect the date of completion.

The contract laid down a “long stop date”, which fell in early January 2014.

However, the agreement entitled the defendant to extensions of time on giving written notice for each period and making the claimant a prescribed monthly payment

The defendant failed to get satisfactory planning permission by the long stop date.

A week later, the defendant emailed the claimant, indicating that it wanted to extend the contract and offering to commence the agreed monthly payments.

However, the claimant refused the extension and said he regarded the contract as terminated effective from the long stop date.

In February 2014, the planning permission was granted for residential development of the site. That permission ran with the land and was not personal to the defendant.

In the procedings the claimant sought a declaration that he was no longer bound by the contract. The defendant counterclaimed for the sale of the property to itself OR relief from forfeiture of its deposit under section 49(2) of the 1925 Act.

The court said the contract was badly drafted and open to more than one interpretation so they should go with the interpretation that best fitted business common sense.

The poorer the drafting, the more reluctant the court should be to attribute the parties an improbable and unbusinesslike intention, if the language used was reasonably consistent with the parties intending to make sensible provision for the sort of contingencies that might well occur during the work covered by contract.

If the drafting of an agreement was generally poor, it would be objectively more difficult to conclude that the parties really meant the literal meaning of the words they used, to override clear business common sense.

The court said here, the parties’ commercial objective had been that they should know where they stood if they came to the end of the long stop date without any request for an extension.

No term could be implied that the first defendant was entitled to call for completion within a reasonable time after the termination date. That would radically undermine the parties’ commercial bargain by leaving the claimant subject to the basic obligation to sell the property within an open ended and uncertain “reasonable time” limit. In contrast the contract had indicated an intention on the part of the parties to impose a certain and precisely defined “end point” for that obligation.

So, the claimant had no obligation to sell the property to the defendant, whose claim for specific performance was rejected.

Secondly, the contract had made clear express provision for what should happen to the deposit if the contract failed to be completed due to a failure to obtain planning permission by the long stop date, if the defendant did not give notice within the required time to call for completion. So it was not appropriate for the court to exercise its discretion under section 49(2) of the 1925 Act to relieve the defendant from forfeiture of the deposit and order the claimant to repay it.

This blog has been posted as a matter of general interest. It does not remove the need to get bespoke legal advice in individual cases.

Salaried partner not liable to property clients

Section 14 of the Partnership Act 1890 provides for a person to be liable as a partner where:

First, the person in question has been held out as a partner in a firm; and,

Secondly, two further sub-elements have been complied with:

A the claimant must have “given credit” to the firm; and,

B such “credit” must have been “given” in reliance upon (“upon the faith of”) the representation that the defendant was a partner.

In Nationwide Building Society v Lewis [1998] the Court of Appeal said ‘given credit’ was not to be construed restrictively and could apply to ‘any transaction of the firm’.

There is no presumption of reliance in favour of a claimant. The claimant must prove, in every case, that in entering into the contract for legal services with the relevant firm, they had, in some way, relied upon the fact that the headed paper, or other representation, held the employee out as a partner of the firm.

As the High Court said in Sangster v Biddulph [2005] the claimant must satisfy the court that, on the balance of probabilities, the holding out or representation had a material influence on the claimant’s decision to proceed with the proposed transaction through those solicitors.

The holding out or reliance does not need to have had a decisive effect but it must have been a contributing causative factor in the claimant’s decision to use the firm.

In Walsh & Ors v Needleman Treon (A Firm) & Ors [2014] the claimants claimed against Mr N and Mr T, the equity partners of the firm, under an agreement whereby the firm was to act for the claimants in short term bridging finance transactions protected by legal charges over properties.

Thc claimants sought to establish liability, also, against a Mr Prior who resisted this on the basis that, as a “salaried partner”, he was an employee of the firm, albeit also the head of the firm’s property department and held out a “partner” on the firm’s letterhead.

The High Court said the claim did not begin to make out a case of material reliance by the claimants on any holding out of Mr Prior as a partner.

There had been nothing to suggest that any of the claimants would, or might, have done anything differently had Mr Prior not been held out as a partner.

Even when one of the claimants began to become concerned about the prospects of repayment, the most that could be said was that that claimant had felt reassured because of Mr Prior’s specialist skills and seniority- nothing necessarily to do with his status, or otherwise, as a partner.

This blog has been posted out of general interest. It does not remove the need to get bespoke legal advice in individual cases.

Tenants couldn’t just blue pencil what did not suit them

Section 25(1)(a) of the Landlord & Tenant (Covenants) Act (“the 1995 Act”) invalidates any agreement relating to a tenancy which would have the effect “to exclude, modify or otherwise frustrate the operation of the provisions of the Act” (“section 25(1)(a) consequences”).

The operation of the 1995 Act is, of course, to release former tenants and guarantors from future tenant and guarantor liabilities under most post 31 December 1995 leases when the relevant lease is lawfully assigned i.e. normally with the landlord’s prior written consent.

Section 25(2) of the 1995 Act says that s.25(1) can apply to a covenant in a lease against assignments insofar as it regulates the giving of consent for the assignment.

The Court of Appeal case of Tindall Cobham 1 Ltd & Ors v Adda Hotels & Ors [2014] concerned various Hilton Hotel leases.

Clause 3.14 of the hotel leases contained two covenants against assignment of the whole of the property.

The first was clause 3.14.3 which was general and enabled the landlords to take advantage of s.19(1A) of the Landlord and Tenant Act 1927 by:

– withholding consent in any one of four circumstances specified in clause 3.14.4 and

– by imposing any one or more of the conditions set out in clause 3.14.5 as a condition of giving consent.

The effect of those provisions was to entitle the landlords:

1. to limit any assignments to a company of sufficient financial standing and business competence; and,

2. to the benefit of a substantial new guarantee and/or an Authorised Guarantee Agreement by the outgoing tenant.

In contrast, Clause 3.14.6, was limited in its application to an assignment to an Group Company of the tenant.

Where that was proposed the landlord had limited itself to the right to impose only two possible conditions:

1. the obligation to give notice to the landlord of the completed assignment (“condition (a)”) and

2. the requirement in clause 3.14.6 (b) that the tenant “should procure that the guarantor and any other guarantor of the tenant” should enter into a deed of covenant in the terms of the Sixth Schedule (“condition (b)“).

If those conditions (if and whenever imposed) were complied with the landlords had to give consent to the assignment (“the consent override” applied).

This regime for Group Companies was very different to clause 3.14.3 where the landlord could theoretically refuse consent even if the proposed assignment otherwise complied with the circumstances and conditions mentioned in clauses 3.14.4 and 3.14.5, so long as the landlord would be acting reasonably in so doing.

The landlord did not have this option under clause 3.14.6. Clause 3.14.6 was designed to provide a more simple and streamlined process for the tenants to obtain consent for an assignment to other companies in the Group on the basis that the parent company would continue to guarantee their obligations under the lease.

If consent could not be obtained under clause 3.14.6 then, if the landlords chose to rely upon all of the circumstances set out in clause 3.14.4, it could not be obtained under clause 3.14.3 because a Group Company like the present assignees would not satisfy any of the criteria in clause 3.14.4. That would be unfortunate for the tenant because any future assignments were likely to be to a Group Company.

The lead appeal judge said the reference to “the Guarantor and any other guarantor of the Tenant” in clause 3.14.6 denoted the persons who were the guarantors of the tenant’s obligations under the lease at the time of the assignment.

The condition imposed on the tenant was no more than that it should procure a new guarantee from those persons.

The lead appeal judge said the condition in clause 3.14.6 which required the tenant to procure a continuing guarantee from an existing guarantor did have the effect identified in s.25(1)(a) of the 1995 Act i.e. “the section 25(1)(a) consequences”.

Section 25(1) is concerned to invalidate agreements which would have “the section 25(1)(a) consequences“. It was not limited to safeguarding the actual exercise of the tenant’s/guarantors’ rights which such agreements contain. That’s to say it was NOT only engaged if the tenant tried to assign its lease to a Group Company.

The words “void to the extent that” indicated that Parliament did not intend to invalidate more of the relevant agreement than was necessary to safeguard the objectives of the 1995 Act in the context of the particular assignment under consideration. And, those words did not preclude the Court from taking a balanced approach to invalidation which neutralised the agreement’s offending parts but did not leave the agreement emasculated and unworkable.

If it was necessary only to remove condition (b) of the proviso as the tenant contended this would treat “conditions (a) and (b)” as independent and self-sufficient rather than as parts of a composite, interdependent proviso under which “the consent override” would apply, and the landlords must consent to the assignment, only if both the conditions are fulfilled.

The Court of Appeal said that the proviso of “condition (b)” was clearly the most important condition from the landlords’ point of view both logically and as a matter of drafting. Its removal called also for the removal of the concluding two lines of the proviso i.e. “the consent override” which could apply ONLY if BOTHconditions (a) and (b)” were complied with.

This blog has been posted out of general interest. It does not remove the need to get bespoke legal advice in individual cases.