Brown & Root Technology Ltd & Anor v Sun Alliance & London Assurance Company Ltd

Where a lease makes a break right personal and provides that it ceases on an assignment, “assignment” ordinarily means an assignment of the legal estate, unless the lease shows a wider intention. The relevant question is whether the legal relationship between lessor and lessee has changed, not whether an equitable or beneficial interest has passed between assignor and assignee. Registration rules may leave the transferor as registered proprietor while an equitable interest has passed, but that does not constitute an assignment of the legal estate for the purpose of the break clause. A representation or common assumption that an assignment occurred will not create an estoppel without detrimental reliance making it inequitable to depart from it.

The appellants were lessees of office premises under a 25-year lease. Clause 8.1 gave the first appellant a right to terminate at the end of the seventh year. Clause 8.4 made that right personal and provided that it ceased on an assignment of the lease.

The first appellant transferred its business and the lease to the second appellant. The transfer documents were completed and the landlord treated the second appellant as tenant, but the transfer was not registered. The first appellant later served a break notice. The High Court held that an assignment had occurred on completion and rejected the landlord’s alternative estoppel argument; its decision was reported at [1996] 1 Ch 51. The appeal concerned the meaning of assignment in clause 8.4 and, alternatively, whether the appellants were estopped from denying an assignment.

The appeal was allowed unanimously. Mummery LJ gave the reasons, with Sir Ralph Gibson and Butler-Sloss LJ agreeing.

1. Clause 8.4 had two purposes: to prevent the break right being assigned and to provide that the right ceased if the lease itself was assigned. The issue was therefore to identify the event which caused the right to cease.
2. An equitable or beneficial interest in the lease could pass between the appellants under a specifically enforceable contract, even though the legal title had not been registered. The decisions in Re Rose, [1949] Ch 78, and Re Rose, [1952] Ch 449, illustrated that distinction in the context of shares. They did not determine the legal relationship between the parties and a third-party lessor.
3. As between lessor and lessee, the binding authority of Gentle v Faulkner, [1900] 2 QB 267, established that, absent a contrary context, assignment meant assignment of the legal estate rather than transfer of a beneficial interest. The relevant event was not completion of the transaction or an intention to assign, but transfer of the legal title so as to create the legal relationship of lessor and lessee between the landlord and assignee.
4. Under the Land Registration Act 1925, the absence of registration meant that the legal title had not passed. The first appellant therefore remained entitled to exercise the break right.
5. The alternative estoppel argument also failed. Although there may have been a representation or shared assumption that an assignment had occurred, changing records, invoicing rent and accepting rent from the second appellant did not amount to detrimental reliance making it inequitable to assert the true legal position.

The declarations below were set aside. The court declared that the first appellant was entitled to serve the break notice. The respondent was ordered to pay the appellants’ costs here and below, and leave to appeal to the House of Lords was refused.

• Court of Appeal (Civil Division): the appeal was allowed. The declarations below were set aside, and the first appellant was declared entitled to serve the notice of determination. [1996] EWCA Civ 1261.
• High Court of Justice, Chancery Division: His Honour Judge Paul Baker QC held that the lease had been assigned on completion and that the break notice was ineffective. The decision was reported at [1996] 1 Ch 51.