Lankester & Son Ltd v Rennie

A lease transfer is ineffective as a deed until delivery, which depends on the maker’s intention that the document be binding. A deed held by solicitors pending outstanding conditions may therefore remain undelivered. Estoppel by representation is personal to the parties and requires a representation that induces detrimental reliance. Estoppel by convention requires proof of a shared understanding on which all relevant parties proceeded. Dealings between a landlord and a purported assignee do not, without more, alter the original lessees’ liability. A settlement with the purported assignee can surrender only the estate that assignee possessed; it cannot release the original lessees where they remain tenants under the lease.

Lankester let commercial premises to Mr and Mrs Rennie. They later allowed The Car Agency Ltd to occupy the premises while proposed assignment arrangements remained incomplete. The company paid rent and dealt directly with Lankester, but the required guarantees and other formalities were not completed.

Lankester claimed rent arrears and other sums from Mr and Mrs Rennie. They counterclaimed for a declaration that the lease had been assigned, surrendered, or otherwise ceased to bind them. The Southampton County Court rejected those arguments and gave judgment for Lankester. The appeal concerned the effectiveness of the transfer deed, estoppel by representation, estoppel by convention, and alleged surrender by operation of law.

1. Appeal dismissed. The Recorder was entitled to find that the lease had not been assigned and that Mr and Mrs Rennie remained liable under its covenants.

2. Delivery is the final formality required for a deed to become effective. It depends on whether the maker intended the document to operate as a deed and to be binding. The transfer deed was held by solicitors acting for both transferors and transferee while important matters remained unresolved, including registration difficulties, the required directors’ guarantees, and the proposed assignee’s insistence on retaining the break clause. In those circumstances, the Recorder was entitled to find that the execution formalities had not been completed, and that finding should not be disturbed.

3. The court expressed considerable doubt whether a properly executed and delivered deed could affect the lessor’s rights against the lessees, since the rights between transferor and transferee must be distinguished from those between lessor and lessee. However, having heard no full argument on that issue, the court declined to express a final view. The distinction was noted by reference to Brown & Root Ltd v Sun Alliance Ltd [2001] Ch 733 at 742.

4. Estoppel by representation is personal to the parties. The alleged representation must be made to the representee and must induce an alteration of position to that person’s detriment. Lankester’s dealings with The Car Agency Ltd did not amount to a representation to Mr and Mrs Rennie that the company had become the assignee. In any event, the Recorder found no detrimental reliance.

5. Estoppel by convention requires all relevant parties to proceed on a shared understanding or convention as the basis of their relationship. No such common understanding existed here.

6. The settlement between Lankester and The Car Agency Ltd could at most surrender any estate possessed by that company. It could not surrender the lease as against Mr and Mrs Rennie, who remained the tenants. The judgment for Lankester and dismissal of the counterclaim therefore stood.

• Court of Appeal (Civil Division): On 2 December 2014, the court dismissed the appeal and upheld the judgment below: [2014] EWCA Civ 1515.
• Southampton County Court: Recorder N J Murphy, on 4 June 2013, gave judgment for Lankester for rent arrears and other sums and dismissed the counterclaim.