Arundel Corporation v Khokher

For service of a contractual counter-notice, knowledge acquired by a tenant’s solicitor in the course of the retainer, and which the solicitor must communicate, is imputed to the tenant. A notice served at a former address is ineffective where the tenant thereby knew of the landlord’s new last-known place of business. A proviso concerning delay in appointing a surveyor does not cure failure to serve the counter-notice. A landlord’s duty to consent to subletting is assessed by all the circumstances, the reasons advanced before the reasonable period expires, and the state of affairs at expiry. An unusual rent structure may justify inquiry, but does not justify withholding consent where the transaction and relevant financial information are disclosed and the real concern is not clearly raised.

Arundel, the freehold owner and landlord, appealed against findings made by HHJ Roger Cooke in the Central London County Court on 29 May 2002. The first issue was whether Mr Khokher had validly served a rent-review counter-notice at Arundel’s former registered office after Arundel had moved its place of business. The second was whether Arundel had unreasonably withheld consent to a proposed subletting, giving rise to damages under the Landlord & Tenant Act 1988.

After an earlier Court of Appeal decision granting permission to adduce fresh evidence, the appeal proceeded on the legal issues. The Court had to determine the effect of the solicitor’s knowledge, the lease’s surveyor proviso, and the appropriate assessment of reasonable time and reasonable withholding of consent.

The judgment was delivered by Lord Justice Mummery on behalf of the Court.

1. Rent review and service. Clause 9 of the lease incorporated the service rules in the Law of Property Act 1925. Under section 196(3), the relevant address was the last-known place of business. Mr Khokher’s solicitor had learned, while acting for him in relation to the lease, that Arundel had moved from 200 Brent Street. That knowledge was not lost through later forgetfulness. It was imputed to Mr Khokher because the solicitor had a duty to communicate it. The principle was applied in Metropolitan Properties v Cordery (1980) 39 P & CR 10 at 15.
2. The counter-notice was therefore invalid because it was not served at Arundel’s new last-known place of business. The rent specified in Arundel’s notice was deemed agreed. The proviso in paragraph 13 of the Third Schedule concerned delay in appointing a surveyor after the requisite notices had been served. It did not apply to failure to serve a counter-notice within the specified period.
3. Subletting. Under sections 1(3)(a), 1(4) and 1(6)(c) of the Landlord & Tenant Act 1988, consent had to be given within a reasonable time unless withholding consent was reasonable, an unreasonable condition was insufficient, and the landlord bore the burden of justification. The assessment depended on all the circumstances, the reasons advanced before expiry of the reasonable time, and the state of affairs at expiry. Go West Ltd v Spigarolo [2003] 2 WLR 986 was followed in that approach.
4. Arundel was entitled to ask about the unusual rent structure and to be told the true and precise nature of the transaction, consistently with Fuller’s Theatre & Vaudeville Co Ltd v Rofe [1923] AC 435 at 440–442. However, the relevant financial and contractual information had been disclosed, and Arundel had not clearly put its real suspicion about the honesty of the arrangement. The trial judge was entitled to conclude that a reasonable time had expired by 21 August 2000 and that consent had been unreasonably withheld. The damages finding on the subletting issue was not disturbed.
5. The Court of Appeal should be slow to interfere with a trial judge’s application of a relative standard of reasonableness, absent an error of principle or a conclusion no reasonable judge could reach. The appeal was allowed on the rent issue, with a declaration that the annual rent from 25 December 2000 was £30,000. No retrial of the service facts was required. Allegations concerning possible false evidence and documents were referred to the Law Society and the DPP.

• Court of Appeal (Civil Division) — On 9 December 2003, allowed the appeal on the rent-review issue, declared the annual rent to be £30,000 from 25 December 2000, and upheld the finding concerning unreasonable withholding of consent to sublet.
• Court of Appeal (Civil Division) — On 9 April 2003, granted Arundel permission to adduce fresh evidence, allowed amendment of the grounds, and made consequential directions in the same litigation: [2003] EWCA Civ 491.
• Central London County Court — On 29 May 2002, HHJ Roger Cooke found that the counter-notice had been validly served and that consent to the proposed subletting had been unreasonably withheld. Damages of £12,521.57 were awarded on the latter issue.