Duval v 11-13 Randolph Crescent Ltd

A landlord’s covenant to enforce substantially similar leasehold covenants at a lessee’s request has practical effect. Where the relevant covenant is absolute, the landlord commits a breach of that enforcement covenant by licensing or waiving conduct which would otherwise breach it. That is so even before a lessee has made a request or provided security. A contracting party must not disable itself from performing a contingent obligation when the contingency arises.

The licence remains effective between landlord and licensee. It does not, however, prevent a lessee with the benefit of the enforcement covenant from claiming against the landlord for breach. A covenant which permits an act with the landlord’s consent stands differently.

The respondent was the landlord of a building divided into long-leasehold flats. The appellant held two flats and another lessee wished to remove part of a load-bearing wall in her flat. The proposed works would breach an absolute covenant in that lease prohibiting the cutting or injury of walls.

Every lease required the landlord, at a lessee’s request and subject to security for costs, to enforce similar lessees’ covenants in the other leases. A deputy district judge held that the landlord could not license the proposed works. On an appeal within the county court, His Honour Judge Parfitt held that it could.

The central issue was whether granting a licence for conduct otherwise prohibited by an absolute covenant would itself breach the landlord’s covenant to enforce the covenants of other lessees.

1. Appeal allowed unanimously. The court declared that the landlord’s waiver of a lessee’s breach, or grant of a licence for conduct which would otherwise breach a leasehold covenant, would breach clause 3.19. Further questions of remedy were remitted to the county court.

2. The landlord had the property-law power to license conduct which would otherwise breach the covenant. Such a licence would prevent the landlord from suing the licensee for that breach. The deputy district judge was therefore wrong to say that the landlord lacked power to waive covenants or grant licences. The distinct question was whether exercising that power breached the landlord’s collateral contractual obligation to the other lessees.

3. On its proper construction, clause 3.19 promised more than the repetition of words in each lease. It promised that each lessee would be subject to substantially similar, legally binding obligations and that, on request and security, the landlord would enforce them. The covenant had to be given practical and commercial effect.

4. The applicable contractual principle was that a party undertaking a contingent obligation must not, by its own act, prevent the contingency from being effective or put itself out of a position to perform. The court applied the requirement of necessity for commercial or practical coherence stated in [2015] UKSC 72. A landlord which licensed an anticipated breach of an absolute covenant would make an enforcement request ineffective. The landlord would then be unable to perform its promised enforcement obligation, and the request requirement was dispensed with.

5. The result was not an unrestricted veto for every lessee. A licence already acted upon could not be enforced against the licensee, leaving the aggrieved lessee’s claim against the landlord in damages. Before a licence was granted or acted upon, injunctive relief might be available, but the court would consider the reasons for the lessee’s objection. The analysis did not apply where the underlying covenant was qualified so as to permit the act with the landlord’s consent.

• Court of Appeal (Civil Division): Allowed the appeal in [2018] EWCA Civ 2298, granted declaratory relief and remitted further questions of remedy to the county court.
• Central London County Court, Chancery Business: His Honour Judge Parfitt held that the landlord could grant the licence without breaching its covenant; that decision was reversed.
• Central London County Court: The judgment records that Deputy District Judge Chambers had reached the opposite conclusion to His Honour Judge Parfitt.