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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Mount Eden Land Ltd v Prudential Assurance Co Ltd [1996] EWCA Civ 933 (12 November 1996) URL: https://www.bailii.org/ew/cases/EWCA/Civ/1996/933.html Cite as: (1997) 74 P and CR 37, 74 P and CR 37, [1996] EWCA Civ 933, [1997] 1 EGLR 37 |
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COURT
OF JUDICATURE
IN THE
COURT
OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
(His Honour Judge Rich)
Courts of JusticeStrand London WC2 |
||
B e f o r e :
LORD JUSTICE MORRITT
SIR JOHN BALCOMBE
____________________
MOUNT EDEN LAND LTD | Appellant |
|
- v- | ||
( PRUDENTIAL ASSURANCE CO LTD | Respondent |
____________________
Computer
Aided Transcript of the Palantype Notes of
Smith Bernal Reporting Limited, 180 Fleet Street,
London EC4A 2HD
Tel: 0171 831 3183
Official Shorthand Writers to the
Court)
MR D WOOD QC (Instructed by Lovell White Durrant EC1A 2DY) appeared on behalf of the Respondent
____________________
VERSION
OF JUDGMENT (AS APPROVED BY THE
COURT)
LORD JUSTICE MORRITT: This is an appeal of
Mount
Eden
Ltd,
the
landlord,
from the order of His Honour Judge Rich, sitting as additional judge of the Chancery Division, made on 14th July 1995. By that order he declared in answer to a preliminary issue that the appellant's predecessor in title to the reversion, Grovewood (LE)
Ltd,
had granted
consent
to the tenants, The
Prudential
Assurance
Co
Ltd,
for the execution of works to properties in Oxford Street and Wells Street London, which in the absence of such
consent
would have
constituted
breaches of
covenants
contained
in the relevant leases.
The leases in question are four in number, three were dated 17th January 1917 and the fourth 24th June 1924. They were leases of 134/140 Oxford Street and 80/83 Wells Street for terms which amounted in total, that is to say under each lease, to the equivalent of 999 years from 6th April 1915. The four leases were so far as relevant in the same terms. The term which is relevant is the expression "previous written
consent"
contained
in Cl.II(9) and II(8) in these terms:
"That (without the previous writtenconsent
which may be temporary or permanent revocable or irrevocable or otherwise howsoever framed or qualified of the Lessor)"
The other material provision is the
covenant
in question, which is against the making of alterations. That is
contained
in Cl.II(11) and II(10) in the respective leases. That provides: "That without such previous written
consent
as aforesaid and except in accordance with plans previously approved by the Lessor and to his satisfaction no building or erection shall at any time be built or placed on the said demised premises and no addition or alteration affecting the elevation external structure or stability of the said premises or any parts thereof shall at any time be made to any building or erection for the time being on the said demised premises and that no machinery shall at any time be erected upon or affixed to the said demised premises except under the supervision and to the satisfaction of the Lessor and that the said Lessees will pay to the Lessor on demand and indemnify the Lessor against all reasonable Surveyors Fees and other charges and expenses which the Lessor may incur in
connection
with any matter or thing under this present sub-clause."
By October 1992 Grovewood (LE)
Ltd,
then in administrative receivership, held the reversions to each of the four leases, the terms were
vested
in The
Prudential
Assurance.
The
Prudential
had ascertained that outer cladding of the building needed to be replaced and that that would give rise to an alteration of the appearance of the outside. On 5th October 1992 The
Prudential
wrote to the agents for the
Landlords
notifying them of their proposals to carry out such works.
On 5th January 1993 The
Prudential
sent to the agents for the
Landlords,
"the latest plans being
considered
by the Planners." On the 1st March 1993 The
Prudential
wrote to the agents of the
Landlord
seeking, "written
confirmation
of your client's agreement" for the works due to
commence
in April of that year. On the 24th March 1993 the agents for the
landlord
wrote to The
Prudential
in these terms:
"Please note that I have not yet receivedconfirmation
from my clients that
consent
will be given for these works.
I will endeavour to keep you fully informed of any progress in this matter."
On 29th March 1993 The
Prudential
expressed
concern
at the delay in obtaining an answer, and on 1st April 1993 the agents for the
Landlord
again replied that they had still not received:
"authority to grantconsent
for your alteration to the elevations."
On the planning front, on 6th April 1993 the City of Westminster, as the planning authority, gave
consent,
but subject to certain specified
conditions,
to the proposed works of recladding. Then, on 18th May 1993 the agents for the
Landlord
wrote the crucial letter. It is in these terms:
" Subject to License
Dear Mr Pritchard,
WELLS HOUSE, 134/140 OXFORD STREET, LONDON W1
I refer to your request toconsent
to alter the external appearance of the above building during the
course
of maintenance to the defective cladding.
I canconfirm
that the Freeholder, Grovewood (LE) Limited (In Administrative Receivership), gives
consent
for the works subject to the following
conditions:
![]()
1. A formal licence is entered into by your client, ThePrudential
![]()
Assurance
![]()
Company
![]()
Ltd.
![]()
2. ThePrudential
will pay my client's
costs
in this matter, including any additional insurance premium levied as a result of the works.
3. ThePrudential
are to obtain necessary
consents
and statutory approvals.
If you canconfirm
acceptance of the above terms, I will arrange for my client's solicitor to prepare the necessary licence. When replying, I should be grateful if you would
confirm
the name of the solicitor who will be representing your client and the appropriate drawing numbers to be incorporated in the licence."
On 30th June and then again on 5th August 1993 the City of Westminster, as the planning authority, approved the reserved matters.
On 7th September 1993 The
Prudential
wrote
confirming
their agreement to the
conditions
set out in the letter of 18th May 1993. That letter reads as follows:
"Reference your letter dated 18th May. Iconfirm
my client's agreement to items 1-3 inclusive.
I have forwarded drawings and details of the licence to my client's solicitors:- [the name and address of Lovell White Durrant is there set out]
I should be grateful if you would inform your client's solicitors of the position."
Subsequently, on 6th September 1994 s.146 notices were served on The
Prudential,
by the then
Landlord,
claiming amongst other things that the replacement of the cladding had been carried out without the
Landlord's
consent.
This prompted The
Prudential
to issue an Originating Summons on 23rd November 1995 claiming, amongst other things, that previous written
consent
had been given by the then
landlord's
predecessor in title.
In March 1995 Master Dyson ordered that that issue be tried as a preliminary issue. Then, on 14th July 1995 the matter came before His Honour Judge Rich.
The Judge
concluded
that the letter of 18th May 1993 did
constitute
such
consent
as the leases required. After referring to the facts and the terms of the letter he posed the issue for his decision in these terms:
"The issue therefore, it appears to me, between the parties is whether or not the expression 'subject to licence' has a similar magic to the expression 'subject tocontract'
such that it may
contradict
the effect which would otherwise arise from the words of the letter.
I put it that way,conscious
that the letter has got to be
construed
as a whole and of
course,
even if those words lack magic, they may so reinforce the implications of other words in the letter as to
contradict
the expression 'I can
confirm
that the freeholder gives
consent',
if that expression may, within the body of the letter, be said to give with one hand what is withdrawn with another.
I think that Mr Neuberger has wished, at the same time as he relies upon the magic of 'subject to licence', also to put the totality of the effect of the letter as being other than the granting of a licence because of, in effect, the withdrawal of what is said in 'I giveconsent'
by the
conditions
and requirements identified subsequently in the letter."
The Judge then
considered
the four reported cases to which he was referred. The fourth was the decision of Harman J in
Venetian
Glass Gallery
v
Next Properties
Ltd
(1989) 2 EGLR 42. At page 12 of his judgment Judge Rich
continued:
"If the importation of the words 'subject to licence' in any letter automatically had the effect that noconsent
is to be granted until the execution of a formal licence, then of
course
the letter upon which the plaintiffs here rely would be nullified in its effect, but Mr Justice Harman at page 44H, in my judgment
completely
destroys Mr Neuberger's
concept
that those words are of themselves magic words. He referred to the three cases to which I have also referred and he said:
'All three go to show that there is a distinction recognised by the law between relationships such as those betweenlandlord
and tenant, where there is a existing set of legal obligations between the parties and there is sought within those obligations a
consent,
and relations between strangers in law as between prospective purchaser and prospective
vendor
where there is no present tie and the parties are in mere negotiation. I accept that there is such a distinction and I agree that one does not regard the need for a formal licence, probably under seal, as being the essential step without which there can be no effective licence.'
Hecontrasted
to that the situation in relation to
vendor
and purchaser transactions where there is no pre-existing relationship between the parties.
In other words, Mr Justice Harman accepted, as I think it is necessary to accept in the light of many decisions to which I do not need to refer, that the words 'subject tocontract'
do have what Mr Neuberger I think
very
reasonably describes as a magic, but that magic arises from the particular incantation in the particular
context
of particular transaction. Because the words 'subject to
contract'
create magic it does not mean that similar magic is created by different words in different
contexts.
![]()
Mr Justice Harman has rejected thatconcept.
I entirely agree with him in rejecting it. Without magic, this letter granted
consent.
There is no magic. It is a
consent
and I so declare."
From that decision the
Landlords
now appeal.
They
contend
that the judge was wrong. Their case is that the heading 'Subject to License' prevented the letter having any legal
consequence.
They submit that there is a general principle that:
"where partiescontemplate
![]()
completion
of a formal document in due
course
their negotiations are subject to the
completion
of that document and preclude any legal
consequences
from anything that precedes the execution of that document."
It is submitted that such a proposition is a general application and makes for certainty in a transaction such as this.
In support of that proposition we have been referred to cases dealing with phrases such as 'subject to lease' and 'subject to details' in the field of carriage of goods by sea. In those cases the same effect was given to those phrases as to the familiar phrase 'subject to
contract'
in the field of sales of
land.
Thus in Longman
v
Chelsea [1989] 58 P&CR 189 Nourse LJ said at page 193/4:
"Wherever parties intend to enter into the relationship oflandlord
and tenant without a preliminary
contract
for the grant and acceptance of a lease, and their negotiations are expressed to be 'subject to the
completion
of a lease,' 'subject to lease,' 'subject to
contract'
or the like, then, so long as the qualification remains in force, the relationship does not become binding on them unless and until there is an exchange of lease and
counterpart,
before which either party can withdraw. The parties intend to be bound at one ascertainable point of time,
conventionally
at a
completion
meeting where, if there is to be a mortgage, the mortgagee will also be represented and where all necessary formalities and exchanges will take place. With advances in modern technology it may increasingly be possible to dispense with a physical encounter between the parties. But in the absence of evidence to the
contrary
it is not possible to dispense with the
common
intention that the parties shall become bound at one ascertainable point in time."
The judgment of Nourse LJ was quoted and adopted by Dillon LJ in Akiens
v
Saloman [1993] 65 P&CR 364. At page 369 he said:
"The parties were negotiating throughout on the basis that neither would be bound until the terms of lease had been embodied in formal lease andcounterpart
and these had been exchanged in the usual way. They had been negotiating on a basis that accepted, as each of the solicitors must have known, that either
could
withdraw from the negotiations at any point before the exchange had taken place."
In The CPC Gallia [1994] 1 Ll L R, 68 Potter J adopted a similar approach to the phrase 'subject to details' when used in negotiations for the carriage of goods by sea. At page 73 he quoted with approval the dictum of Steyn J in Junior K [1988] 2 Lloyd's Rep, 574 where he said:
"I would respectfully suggest that it is in the interests of the chartering business that theCourts
should recognise the efficacy of the maritime
variant
of the well-known 'subject to
contract'.
The expression 'subject to details' enables owners and charterers to know where they are in negotiations and regulate their business accordingly. It is a device which tends to avoid disputes and the assumption of those in the shipping trade that it is effective to make clear that there is no binding agreement at that stage ought to be respected."
I do not accept that it is legitimate to extend the principle illustrated by those cases from the field of bilateral negotiations to that of a unilateral act. There can be no doubt that the distinction drawn by Harman J in the
Venetian
Glass case, to which the judge referred is a
valid
one. The purpose of the suspensory
condition
'subject to
contract'
in the
context
of negotiations is to avoid the other side seeking prematurely to
conclude
a
contract
by the acceptance of an offer so as to give rise to unintended legal
consequences.
In cases requiring a unilateral act the only question is whether that act has occurred. So in this case the only question is whether the letter of 18th May 1993 was a
consent
as required by the leases. That is a question of the
construction
of the letter in the light of all the surrounding circumstances.
So regarded I have no doubt that the letter does express the
consent
required by the leases. It will be remembered that such
consent
may be temporary or revocable or qualified. This letter expresses
consent
in the clearest terms. The
consent
was qualified by the stipulation for a formal licence as stated in the body of the letter. For that document it would be necessary to have the drawing numbers referred to in the
concluding
passage. In truth the heading 'subject to licence' added little to the
condition
expressed in the body of the letter and
could
not qualify the unambiguous expression of
consent
it
contained.
If it be necessary to attribute some meaning to the heading then it might serve to emphasise the degree of formality required so that the express
condition
for a formal licence should not be satisfied in
correspondence
or by some less formal method than a licence strictly so-called. But no such document was required by the terms of the leases. In my
view
it was right for the reasons he gave and I would dismiss this appeal.
SIR JOHN BALCOMBE: I agree.
LORD JUSTICE BELDAM: I also agree.
ORDER: Appeal dismissed with
costs.
---------oOo---------