Mount Eden Land Ltd v Prudential Assurance Co Ltd

Words such as subject to licence do not automatically prevent a landlord’s written consent from taking effect. The document must be construed in its legal and factual context.

The subject to contract principle primarily operates in bilateral negotiations, where it prevents premature contractual relations. It does not automatically extend to a unilateral consent required under an existing lease. Consent may be temporary, revocable or qualified. A reference to a formal licence may impose a condition as to formality, but cannot contradict an otherwise clear expression of consent unless the lease or document requires that result.

The appellant landlord appealed from a preliminary-issue decision of His Honour Judge Rich in the Chancery Division. The judge had declared that the appellant’s predecessor in title gave the tenant written consent to reclad buildings let under four long leases.

The landlord’s agents wrote that the freeholder gave consent, subject to entry into a formal licence, payment of costs and procurement of statutory approvals. The tenant accepted those conditions, but the formal licence was not completed. The central issue was whether the heading subject to licence prevented the letter from constituting the previous written consent required by the leases.

1. Appeal dismissed. The letter of 18 May 1993 constituted the previous written consent required by the leases.
2. Per Lord Justice Morritt, the subject to contract cases concerned bilateral negotiations. Their purpose was to prevent one party from prematurely concluding a contract by accepting an offer and thereby creating unintended legal consequences. That principle could not legitimately be extended to a unilateral act, where the question was whether the required act of consent had occurred.
3. The correct approach was to construe the letter in the light of all the surrounding circumstances. The leases expressly contemplated consent which might be temporary, revocable or qualified. The letter used an unambiguous formula: the freeholder gave consent for the works, subject to specified conditions.
4. The condition requiring a formal licence qualified the consent but did not negate it. The heading subject to licence added little to the condition stated in the body of the letter. At most, it emphasised that the agreed formality was a formal licence rather than informal correspondence. The leases themselves did not require such a document before consent could be effective.
5. The court approved the distinction drawn by Harman J in Venetian Glass Gallery v Next Properties Ltd (1989) 2 EGLR 42 between an existing landlord-and-tenant relationship, in which consent is sought within existing legal obligations, and negotiations between strangers for a future transaction. Lord Justice Beldam and Sir John Balcombe agreed with Lord Justice Morritt’s reasoning. The appeal was dismissed with costs.

• Court of Appeal (Civil Division): [1996] EWCA Civ 933 unanimously dismissed the landlord’s appeal and upheld the preliminary-issue declaration.
• Chancery Division: His Honour Judge Rich, on 14 July 1995, held that the letter of 18 May 1993 constituted the required written consent. No citation for that decision was stated.