International Drilling Fluids Ltd v Louisville Investments (Uxbridge) Ltd

This decision states the tests for when a landlord may reasonably withhold consent to assignment where the lease requires consent "not to be unreasonably withheld".

• A landlord may refuse consent to protect the subject-matter of the lease or his legitimate proprietary interests.
• A landlord may not refuse consent for collateral purposes unrelated to the lease.
• The court will assess reasonableness by reference to all circumstances, including whether the harm to the tenant is disproportionate to the landlord's likely loss.
• Where only a single specific user is permitted by the lease, refusing consent to an assignee proposing that permitted use may be unreasonable if the landlord's loss is minimal and the tenant's detriment is extreme.

The tenant held a long lease of office premises. The tenant sought the landlord's licence to assign the lease to a company proposing to operate "serviced offices". The landlord refused, chiefly alleging potential diminution in the value of the reversion. The deputy High Court judge declared the refusal unreasonable and ordered the licence. The landlord appealed to the Court of Appeal. The central issue was whether the landlord's refusal to grant consent to assignment was reasonable in all the circumstances, including the comparative detriment to tenant and landlord and the fact that the proposed user was within the sole user permitted by the lease.

1. Outcome: The appeal was dismissed. The Court of Appeal upheld the deputy High Court judge's declaration that the landlord had unreasonably refused consent to assignment.
2. The court restated legal propositions drawn from authority: the covenant protects the landlord against undesirable uses or assignees; a landlord may not refuse consent for collateral purposes unconnected with the lease; the tenant bears the onus of proof; and a landlord's decision need only be one a reasonable man might make.
3. The court reconciled divergent authorities on whether a landlord may consider the tenant's detriment. It held that, while a landlord normally need only consider his own relevant interests, refusal may be unreasonable where there is a marked disproportion between the landlord's benefit and the tenant's detriment.
4. Where the lease permits only a single specific user, the court treated that fact as significant. It held that refusing consent to an assignee proposing the permitted user can be unreasonable, particularly where the landlord is well secured for rent and the premises are likely to remain vacant otherwise.
5. Applying the facts, the court accepted the judge's findings that the landlord's experts' views about diminution of reversion were views reasonable professional men might hold, but that in the circumstances they did not amount to a reasonable apprehension of damage to the landlord's interests. The disproportion between minimal landlord prejudice and severe tenant detriment weighed for the tenant.
6. Practical guidance: the reasonableness inquiry is fact-sensitive. Relevant matters include the nature of the user clause, prospects of realisation of the reversion, security for rent, and the scale of detriment to the tenant compared with landlord loss. Collateral motives remain improper.
7. The Court of Appeal found no error of law by the deputy judge and would not interfere with his factual conclusions. Costs were awarded against the appellant and leave to appeal to the House of Lords was refused.

• Court of Appeal (Civil Division): Appeal from the order of Mr Edward Nugee QC (sitting as a deputy High Court judge) dated 18 June 1985. The Court of Appeal dismissed the landlord's appeal and refused leave to appeal to the House of Lords.
• High Court (Chancery List): Declaration granted by Mr Edward Nugee QC that the landlord's refusal to grant a licence to assign was unreasonable (order dated 18 June 1985).