Duval v 11-13 Randolph Crescent Ltd

Where leases require a landlord, on a lessee’s request and provision of security, to enforce similar covenants in other leases, the landlord is subject to an implied obligation not to put enforcement beyond its power. It therefore cannot license conduct prohibited by an absolute covenant before an enforcement request is made.

An absolute covenant against waste or destructive cutting must be read with a qualified alterations covenant. Routine alterations fall within the qualified covenant. The absolute covenant governs more fundamental work intrinsically capable of damaging or destroying the building.

The leases of nine flats contained a qualified covenant concerning alterations, an absolute covenant against waste and destructive cutting, and a landlord’s covenant to enforce similar lessee covenants at another lessee’s request and expense. A flat owner proposed removing a substantial part of a load-bearing wall. The landlord wished to license the work, but another lessee sought a declaration that doing so would breach the enforcement covenant.

The trial judge ruled for the objecting lessee. The Central London County Court allowed the landlord’s appeal. The Court of Appeal reversed that decision in [2018] EWCA Civ 2298; [2019] Ch 357.

The central issue was whether the landlord could license conduct otherwise prohibited by the absolute covenant before another lessee had requested enforcement and provided security for its costs.

1. Appeal dismissed unanimously. Lord Kitchin delivered the judgment, with which Lady Hale, Lord Carnwath, Lady Black and Lord Sales agreed.

2. The qualified alterations covenant and the absolute covenant against waste had to be construed together and in the context of the leasehold scheme. Routine repairs, renovations and improvements fell within the qualified covenant. The absolute covenant concerned waste, spoil, destruction and more fundamental cutting or injury intrinsically capable of damaging or destroying the building. Its references to cutting, maiming and injury were qualified by that destructive character. This construction avoided treating almost every ordinary alteration as an absolute breach and was supported by F W Woolworth and Co Ltd v Lambert [1937] Ch 37.

3. The enforcement clause contained two promises. Future leases granted at a premium would contain similar lessee and landlord covenants. The landlord would also enforce another lessee’s similar covenants when requested to do so and provided with security for its costs. These promises protected every lessee by preserving materially similar obligations and making them enforceable through the landlord.

4. A party undertaking a contingent obligation may be subject to an implied term that it will neither prevent the contingency nor put performance beyond its power. Such a term depends on the contract’s proper construction and circumstances; it is not an inflexible rule of law. The express terms must first be construed. Any implication must then be necessary for business efficacy or so obvious that it goes without saying, and capable of clear expression, following Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72; [2016] AC 742.

5. The leases necessarily implied that the landlord would not put enforcement of the absolute covenant beyond its power by licensing conduct which would otherwise breach it. Without that implication, the valuable protective right could be defeated merely because the landlord granted consent before another lessee requested enforcement and provided security. That result would lack commercial and practical coherence.

6. The implication did not unreasonably prevent ordinary works. Those works fell within the qualified covenant and could be licensed. Removing a substantial part of a load-bearing wall was more fundamental work within the absolute covenant and appropriately required the consent of the other lessees.

1. United Kingdom Supreme Court: Dismissed the landlord’s appeal and affirmed the Court of Appeal’s conclusion.

2. Court of Appeal: Allowed the lessee’s appeal in [2018] EWCA Civ 2298; [2019] Ch 357. It declared that licensing or waiving conduct otherwise breaching the absolute covenant would breach the enforcement covenants in the other leases.

3. Central London County Court: Judge Parfitt allowed the landlord’s appeal. He held that licensed works would not breach the absolute covenant and could not be enforced under the enforcement clause.

4. County Court: Deputy District Judge Chambers held that the landlord could not waive the relevant covenants without every lessee’s prior consent.