Aubergine Enterprises Ltd v Lakewood International Ltd

Under a contractual condition allowing rescission where a landlord’s consent to assignment has not been given three working days before the contractual completion date, “consent” means the written consent required by the lease. It may be conditional and need not take the form of a formal licence or deed, provided the conditions are reasonable and the consent is clear and unequivocal. A landlord’s communicated decision in principle may therefore suffice. The statutory duties imposed on landlords by the Landlord and Tenant Act 1988 do not remove the contractual requirement for consent as between seller and buyer. The contractual time limit is fixed by the stipulated completion date, not by a later date which the parties expect to be necessary. Conduct directed towards completion does not, without a clear representation and reliance, waive the right to rescind.

The buyer agreed to purchase a leasehold property from the seller. The contract incorporated the Standard Conditions of Sale, including a provision permitting either party to rescind if the landlord’s consent to assignment had not been given three working days before completion, unless the buyer was in breach of its information obligations.

The landlord’s solicitors repeatedly stated that consent had been given in principle and subject to a licence, but the formal licence was not executed by the contractual completion date. The buyer gave notice of rescission on 30 September 1999 and sought repayment of its deposit. The Deputy Judge dismissed the claim and gave judgment for the seller on its counterclaim. The central issues were whether written consent had been given in time, whether the parties could proceed without formal consent, and whether the buyer was prevented from rescinding by breach, waiver or estoppel.

1. Appeal dismissed by a majority. Auld LJ and Robert Walker LJ held that the landlord’s letter of 21 September 1999 constituted written consent for the purposes of Standard Condition 8.3.4. Ward LJ dissented and would have allowed the appeal.
2. The consent required by Standard Condition 8.3 was the prior written consent required by the lease. It did not have to be embodied in a formal licence by deed, nor did it have to be accompanied by the prior fulfilment of every reasonable condition imposed by the landlord. Consent could be conditional, provided the conditions were reasonable, and it had to be clear and unequivocal.
3. On the majority view, the expressions “subject to licence” and “in principle”, read in their commercial and statutory context, did not make the landlord’s consent equivocal. The letter of 21 September clearly communicated consent subject to reasonable conditions. The Landlord and Tenant Act 1988 formed part of the context, but its duties did not dispense with the contractual requirement for consent between seller and buyer.
4. Auld LJ held that the three-working-day period ran backwards from the contractual completion date, 30 September, so consent first given on 27 September would have been too late. The buyer’s alleged failure to provide confirmation concerning execution under British Virgin Islands law could not deprive it of the right to rescind: the request was first made after the relevant period and, in any event, consent had already been given.
5. If written consent had not been given, Auld LJ would have rejected the Deputy Judge’s alternative finding that the parties agreed to complete without it. The correspondence did not establish a sufficiently clear agreement, representation, waiver, estoppel or affirmation. Working towards completion was more consistent with an understanding that effective consent existed than with an unambiguous abandonment of the contractual right to rescind.
6. Ward LJ considered that the letter of 21 September withheld consent until the licence and other conditions had been completed. He regarded the formalities as reasonable and unfulfilled within time. On that analysis there was no effective consent and the buyer was entitled to rescind.

• Court of Appeal: Appeal from the order of the Chancery Division dismissed by Auld LJ and Robert Walker LJ, with Ward LJ dissenting.
• High Court, Chancery Division: Mr David Vaughan QC, sitting as Deputy Judge, dismissed the buyer’s claim for a declaration that it had rescinded validly and entered judgment for the seller on its counterclaim.