Mr Justice Munby (giving the first judgment at the invitation of Lord Justice Pill) :
- This is an appeal in a landlord and tenant dispute from a judgment and order of His Honour Judge Hornby sitting in the Central London County Court on 19 December 2001.
- The appeal raises a novel point on the Landlord and Tenant Act 1988 ("the 1988 Act"), made no easier to resolve by the fact that it arises in circumstances which it appears that the draftsman of the legislation never had in mind.
The Landlord and Tenant Act 1988
- It is convenient to set out the relevant parts of the 1988 Act before I go any further. Section 1 of the Act provides as follows:
"(1) This section applies in any case where –
(a) a tenancy includes a covenant on the part of the tenant not to enter into one or more of the following transactions, that is –
(iii) charging, or
(iv) parting with the possession of,
the premises comprised in the tenancy or any part of the premises without the consent of the landlord or some other person, but
(b) the covenant is subject to the qualification that the consent is not to be unreasonably withheld (whether or not it is also subject to any other qualification).
(2) In this section and section 2 of this Act –
(a) references to a proposed transaction are to any assignment, underletting, charging or parting with possession to which the covenant relates, and
(b) references to the person who may consent to such a transaction are to the person who under the covenant may consent to the tenant entering into the proposed transaction.
(3) Where there is served on the person who may consent to a proposed transaction a written application by the tenant for consent to the transaction, he owes a duty to the tenant within a reasonable time –
(a) to give consent, except in a case where it is reasonable not to give consent,
(b) to serve on the tenant written notice of his decision whether or not to give consent specifying in addition –
(i) if the consent is given subject to conditions, the conditions,
(ii) if the consent is withheld, the reasons for withholding it.
(4) Giving consent subject to any condition that is not a reasonable condition does not satisfy the duty under subsection (3)(a) above.
(5) For the purposes of this Act it is reasonable for a person not to give consent to a proposed transaction only in a case where, if he withheld consent and the tenant completed the transaction, the tenant would be in breach of a covenant.
(6) It is for the person who owed any duty under subsection (3) above –
(a) if he gave consent and the question arises whether he gave it within a reasonable time, to show that he did,
(b) if he gave consent subject to any condition and the question arises whether the condition was a reasonable condition, to show that it was,
(c) if he did not give consent and the question arises whether it was reasonable for him not to do so, to show that it was reasonable,
and, if the question arises whether he served notice under that subsection within a reasonable time, to show that he did."
- Section 2 of the 1988 Act imposes on the recipient of any written application by the tenant a duty to pass a copy of the application to any other person who may consent to the transaction. Section 4 provides that:
"A claim that a person has broken any duty under this Act may be made the subject of civil proceedings in like manner as any other claim in tort for breach of statutory duty."
- The bare facts are shortly stated. The claimant is the tenant and the defendants are the landlords of premises in Camden High Street. The basement and ground floor are comprised in a lease made on 13 October 1992 for the term of twelve years from 29 September 1992. The first floor maisonette is comprised in a lease made on 15 March 1993 but for the same term. Nothing turns on the fact that there are two leases. Each lease contains a covenant:
"Not at any time during the said term to assign the whole of the demised premises without having obtained within three months prior thereto the consent in writing of the Landlord which shall not be unreasonably withheld or delayed."
- It is common ground between Mr Edward Cole, who appeared before us on behalf of the tenant, and Mr Timothy C Dutton, who appeared on behalf of the landlords, that these are covenants falling within section 1 of the 1988 Act.
- On 13 March 2001 the tenant's solicitors, Messrs Richard Freeman & Co ("RF"), wrote to the landlords seeking licence to assign both leases to Fleetmill Limited. Correspondence ensued. The landlords instructed solicitors, Messrs Berwin Leighton Paisner ("BLP"), to act for them. On 30 May 2001 BLP wrote to RF refusing consent to assign the leases. Further correspondence followed. On 10 July 2001 the tenant commenced proceedings in the Central London County Court seeking a declaration that the landlords had unreasonably withheld their consent to the proposed assignment. The trial came on before His Honour Judge Hornby who on 19 December 2001 gave judgment for the landlords.
- The learned judge's decision is to be found in the following passages in his judgment. The first (Transcript p 31F) is this:
"I … hold that on 30th May 2001 the [landlords] served upon the [tenant] written notice of their decision to withhold consent and that upon that date it was not reasonable for the defendants to withhold such consent for the reasons given in their written notice and to that extent they were in breach of their duty under section 1 of the Landlord and Tenant Act 1988.
That is not, however, an end of the matter at all, as in my judgment it is clear from the correspondence … which passed between the parties after 30th May that it shows that the parties effectively treated the letter of 30th May as having no real effect, because both sides treated the [tenant's] request for consent to be given as continuing."
- Having then considered the correspondence and analysed events from 30 May 2001 to 10 July 2001, the judge asked himself this question (Transcript p 45G):
"Was this consent still being unreasonably withheld on 10th July? The burden is on the landlord to show that he is moving with due diligence and properly, having regard to the exigencies of time, to a proper conclusion."
- He continued (Transcript p 46F):
"How can one say that as at 10th July they were acting unreasonably without regard to the exigencies of time. My view of the correspondence … is that there would be no breach of duty by the [landlords] as at 10th July."
- He concluded (Transcript p 48E):
"I am not persuaded that there has been a breach as at 10th July."
- It is to be noted – and this is an important point which gives rise to the first issue we have to decide – that the learned judge did not hold that the reasonable time referred to in section 1(3) of the 1988 Act had expired by 30 May 2001. On the contrary, the judge's decision was in effect that the landlords had 'jumped the gun' by refusing consent by the letter dated 30 May 2001 without giving the tenant adequate time to respond to a letter dated 21 May 2001 in which BLP had, as the judge found, properly been seeking further information from the tenant. That letter had ended by saying "We look forward to hearing from you with the outstanding references as a matter of urgency so that we may progress this matter." The letter of 30 May 2001 was sent without waiting for the tenant's response and, as the judge pointed out, without the landlords even sending a 'chaser'. Essentially, the landlords' refusal of consent was unreasonable because it was premature.
- It appears that the letter of 30 May 2001 may have been sent by mistake, that mistake arising out of some misunderstanding between the landlords and BLP. But Mr Dutton properly accepts that that fact, if fact it be, cannot affect the position as between his clients and the tenant.
- I need not further describe the correspondence down to 30 May 2001. But to put counsel's submissions in context it is necessary to consider the correspondence between 30 May 2001 and 10 July 2001 with some care. I start with the landlords' refusal of consent.
i) On 30 May 2001 BLP wrote to RF refusing consent, the stated reasons being, in essence, that the tenant had failed to propose acceptable sureties.
ii) On 31 May 2001 RF wrote to BLP challenging these reasons. The letter added:
"In the circumstances your client may on reflection wish to withdraw the refusal … for the obvious reason that if we apply to the Court for a Declaration our client will succeed in obtaining one … Unless … we have your confirmation that the refusal is withdrawn by close of business on 4th June we shall issue proceedings without further notice."
iii) BLP replied on 1 June 2001 asserting that RF's analysis was flawed. The letter went on:
"Should you issue proceedings they will be strenuously defended. Our client will reconsider the position on receipt of further references. However, we consider it unlikely that consent will be given".
iv) RF responded on 7 June 2001 saying that, although it was inappropriate for the landlords to require further references, they were nevertheless enclosing them. The letter concluded:
"We must now ask you to let us know your client's final decision without delay … our client is anticipating completing the assignment … on 18th June … In the event that it is necessary to take proceedings for a declaration we will also be seeking damages … and we therefore look forward to hearing from you as a matter of urgency."
v) RF wrote again on 11 June 2001 referring to a telephone discussion earlier that day "when you confirmed that your clients were maintaining their refusal to grant a Licence to Assign … because … the sureties being put forward were of insufficient financial standing". The letter went on to dispute that proposition before concluding:
"We consider that all the necessary information has been provided to you and we must ask you to let us know by close of business on 12th June whether your clients are still maintaining their objections … we will be instructing Counsel to settle proceedings straightaway."
vi) BLP's substantive response followed on 13 June 2001 in a letter that sought further information in relation to the references which had been supplied. The letter then raised, for the first time since before 30 May 2001, questions in relation to the tenant's allegedly unauthorised alterations to the premises.
vii) RF responded on 4 July 2001 by a letter which sought to deal in detail with all the points raised in BLP's letter of 13 June 2001, including those relating to the alterations. The letter concluded:
"We now consider that our client has done as much as your clients can reasonably require to furnish information in relation to the proposed assignee and the guarantors and we must ask that your clients now reconsider the position as quickly as possible … if possible … by the end of this week. If matters are not now resolved our client will have no alternative other than to issue proceedings."
viii) BLP replied the same day, serving a schedule of works of repair and reinstatement and saying "We anticipate that we shall be instructed to refuse consent on the basis of the dilapidations." The letter concluded:
"Whilst we shall endeavour to revert to you as soon as possible, once again you have set us an unreasonably short deadline, particularly given that any delay in relation to your client's most recent application for consent is yours alone."
ix) RF responded by a letter dated 10 July 2001 which dealt at some length with the issue of the alterations. It continued:
"We note that you anticipated your clients will now seek to refuse consent on the basis of the alleged dilapidations. We have not heard further from you on this. We have now issued proceedings … and enclose a copy of the Claim Form for your information."
x) BLP responded in a letter dated 12 July 2001. I need mention only the passage in which BLP said:
"We wish to point out that our client has not refused consent other than on 30 May 2001 and the references provided on 7 June 2001 and 4 July 2001 are irrelevant to that refusal."
- Both the tenant and the landlords have appealed against the learned judge's decision. As the arguments were refined during the exchange of skeleton arguments and supplemental skeleton arguments and subsequently during the course of oral argument, two major issues emerged:
i) First, whether, as Mr Cole asserts, the effect of the letter of 30 May 2001 was to bring to an end the reasonable time allowed to the landlords by section 1(3) of the 1988 Act.
ii) Second, whether, as Mr Dutton asserts, the parties were in any event proceeding after 30 May 2001 on the basis that there was either a continuing application or a renewed application (or applications) for licence to assign.
- I shall deal with these issues in turn. First, however, it is convenient to consider the more important of the authorities to which counsel directed our attention.
Authorities on the Landlord and Tenant Act 1988
- For present purposes the two leading authorities on the 1988 Act are the decisions, both at first instance, of Sir Richard Scott V-C in Norwich Union Life Insurance Society v Shopmoor Ltd  1 WLR 531 and of Neuberger J in Footwear Corporation Ltd v Amplight Properties Ltd  1 WLR 551. Both refer to the earlier decision of this court, pre-dating the 1988 Act, in Bromley Park Garden Estates Ltd v Moss  1 WLR 1019.
- Neither of the more recent authorities deals with the problems which have arisen in the present case. Nonetheless they throw important light on the way in which the 1988 Act ought properly to be approached. Correctly, neither Mr Dutton nor Mr Cole sought to suggest that either Norwich Union or Footwear Corporation was wrongly decided. Both in my judgment were rightly decided.
- In Norwich Union the Vice-Chancellor said this at p 545E:
"The landlord has a statutory duty to the tenant within a reasonable time to give consent, except in a case where it is reasonable not to give consent. In judging whether it is reasonable not to give consent, the position must, in my view, be tested by reference to the state of affairs at the expiry of the reasonable time. If, at that time, the landlord has raised no point and there is no point outstanding which could constitute a reasonable ground for refusal of consent, then it seems to me that the landlord's duty is positively, as expressed by section 1(3), to give consent. The question whether the case is one "Where it is reasonable not to give consent" ought, in my judgment, to be tested by reference to the point at which the reasonable time for dealing with the application has expired. If at that point it cannot be shown that it is reasonable for the landlord not to give consent, then the statutory duty of the landlord is to give consent, the court can so declare and the tenant can, in my judgment, proceed on the footing that the assignment in question would not constitute breach of a covenant not to assign without consent."
- Consequently, as the Vice-Chancellor held, it is not open to the landlord to seek to justify a refusal of consent by reference to matters not raised with the tenant prior to the expiry of the reasonable period.
- In Footwear Corporation Neuberger J, after a careful analysis of the authorities, came to precisely the same conclusion as the Vice-Chancellor. At p 559G he said:
"In other words, if the landlord does not within a reasonable time give his reasons for refusing consent in writing, then it is not open to him to rely on those reasons in court for justifying his withholding of consent.
If Sir Richard Scott V-C is correct, then a landlord, who has given reasons in writing for refusing his consent, cannot, when subsequently seeking to justify his refusal of consent, rely on reasons which he has not given. If that is right, then in a case where a landlord gives no reasons for refusing consent, it would seem very odd if he could subsequently rely on reasons which he had in his mind but had not specified. Therefore it seems to me to follow that the policy of the Act of 1988 is that a landlord who has not given his reasons for refusing consent within a reasonable time cannot thereafter justify his refusal of consent by putting forward any reasons even though he had them in his mind.
Given that the Act specifically requires consent or refusal of consent in writing, I find it hard to see how one can resist the conclusion that, if I am right so far, reasons given orally are not sufficient. To put it more succinctly, the logic of Sir Richard Scott V-C's observations and decision in the Norwich Union case is that, construing the covenant together with the Act of 1988, it is not now open to a landlord to put forward reasons justifying the withholding of consent if those are reasons which were not put forward in accordance with section 1(3)(b), that is they were not reasons which were put forward in writing within a reasonable time."
- I agree entirely with the Vice-Chancellor and Neuberger J. In my judgment the law was correctly stated by Neuberger J when he said:
"it is not … open to a landlord to put forward reasons justifying the withholding of consent if those are reasons which were not put forward … in writing within a reasonable time."
- And if, as the Vice-Chancellor understandably thought, this view of the law is different from that articulated in this court by Slade LJ in Moss at p 1034D, then I also agree with the Vice-Chancellor when he said (see at pp 544E, 545E) that the law has since "moved on" and that "the Act of 1988 has altered the law in this respect".
- Before parting from the authorities I should like also to draw attention to what the Vice-Chancellor had to say about the purpose of the 1988 Act. At p 544F he said this:
"The Act was intended to remedy the state of affairs in which a landlord, by his dilatory failure to respond to an application for consent to an assignment or to subletting, could cause substantial financial damage to the tenant without the tenant having any remedy for that damage. A tenant might lose a valuable property transaction because of the landlord's failure to deal expeditiously with the application for consent. It is clear that it was an intention of the Act to remedy that state of affairs. The Act creates a statutory duty requiring landlords to attend promptly to applications for consent to assignments, or underletting or parting with possession of premises comprised in a tenancy where there is a covenant not to do those things without consent."
- Having then expressed his conclusions in the passage at p 545E which I have already set out, the Vice-Chancellor continued at p 545H:
"There seems to me to be every reason of common sense why that should be so. It would enable there to be fair and sensible dealing between landlords and tenants. It would enable a state of certainty to be achieved at the earliest sensible moment. There seems to me to be no reason of convenience why the ability of the landlord to still keep in doubt the entitlement of the tenant to assign should survive any longer than the reasonable time which the landlord may need for considering the tenant's application for consent."
- I respectfully agree with the Vice-Chancellor and wish to endorse everything he said.
- I return to the first issue.
The first issue
- The first issue raises a point of law of some practical importance. The point can perhaps best be illustrated by means of an example.
- Assume that the tenant has made his application on day A; the landlord responds with a proper request for information on day B; the tenant provides a partially satisfactory response on day C; the landlord refuses consent on day D; the tenant issues proceedings for a declaration on day E and on the same day the landlord (in ignorance of the proceedings) writes to the tenant purporting to withdraw his earlier refusal and to substitute a consent subject to conditions. Assume further that, if the landlord had not refused consent on day D, (i) a reasonable time would not have elapsed prior to day E and (ii) he would have been justified in making his consent subject to the conditions he identified on day E.
- Is the landlord, as Mr Cole would have us say, bound by his refusal on day D, with the consequence that the tenant succeeds in his action? Or is it open to the landlord to assert, as Mr Dutton would have it, that the reasonable time allowed by the 1988 Act did not expire on day D, that time was accordingly still running on day E, and that he is thus able to rely on his later conditional consent, with the consequence that the tenant, if he wishes to proceed, has to meet the landlord's conditions?
- The problem arises because, as the 1988 Act has been drafted, it is not of itself, on the expressed words of the Act, a breach of statutory duty for a landlord to refuse consent unreasonably. As Mr Dutton points out – and this is what gives his argument some initial plausibility – the only statutory duties imposed on a landlord by section 1(3) of the Act are:
i) under section 1(3)(a) the "duty … within a reasonable time … to give consent, except in a case where it is reasonable not to give consent", and
ii) under section 1(3)(b) the "duty … within a reasonable time … to serve on the tenant written notice of his decision whether or not to give consent".
- So it follows, says Mr Dutton, that the only possible breaches of statutory duty are failures within a reasonable time either to "give consent" (assuming, that is, that it is not reasonable to refuse consent) or to "serve … written notice of his decision" in the proper form; that it is not, of itself, a breach of statutory duty to refuse consent; that it is not, in particular, a breach of statutory duty to refuse consent before a reasonable time has elapsed; that a refusal of consent amounts to a breach of statutory duty only once a reasonable time has elapsed; and that in consequence the judge erred in law in holding that the landlords on 30 May 2001 "were in breach of their duty" under the 1988 Act.
- However plausible this argument may appear at first blush, in my judgment it is simply wrong.
- In the first place it is based on a fallacy, namely that there is some objectively ascertainable "reasonable time" which exists independently of and is not affected by the landlord's refusal of consent.
- If one asks what is the reference point by which one answers the question posed in section 1(3) – Has the landlord done "within a reasonable time" what he should have done? – the answer can only be that the reference point is the date when the tenant made his written application. Section 1(3) invites a question – "Within a reasonable time" of what? – to which there can be only one answer: within a reasonable time after the service by the tenant of his written application. But this does not mean that what is a "reasonable time" thereafter is something that can be determined a priori as at the date when the application is made. Nor does it mean that only the circumstances at that date can be taken into account in determining what is "a reasonable time". That has to be assessed, in my judgment, having regard to all the circumstances of the particular case. Those circumstances will obviously include, but will not be confined to, the circumstances known to the landlord and the tenant at the date when the tenant makes his application. I entirely agree with Mr Dutton that subsequent events also have to be taken into account. This, after all, accords with the Vice-Chancellor's view in Norwich Union – a view with which I entirely agree, though the point was a slightly different one – that the position must be tested by reference to the state of affairs at the expiry of the reasonable time.
- Let me take a further example. Assume that the tenant makes his application on day J; the landlord responds with a proper request for information on day K; the tenant could and should have responded by day L but delays until day M. In such circumstances the tenant may not be able to say that the reasonable time has expired on day N, as it would if he had responded on day L. The landlord, depending on the circumstances (for example the volume of material supplied by the tenant which he and his advisers have to assimilate), may be able to demonstrate that he needs more time, say until day O.
- Now that is an example of a situation in which what might have been thought to be a reasonable time at the outset when the tenant made his written application has turned out to be extended as a result of subsequent events – in the example given, the tenant's failure to respond timeously to the landlord's proper request for information. But in principle the point must cut both ways: subsequent events may serve to abbreviate what might at the outset have been thought to be a reasonable period.
- So I agree entirely with Mr Dutton when he suggested in argument that what is a reasonable time cannot necessarily be determined when the tenant makes his application: one has to assess the question of what was a reasonable time as at the end of the period starting with the tenant's application. But that, with all respect to Mr Dutton, merely demonstrates the essential flaw in his submissions. If in the one case the reasonable time is lengthened because of the tenant's behaviour, why should it not be reduced in another case because of the landlord's behaviour?
- This leads on to the second point. In one important sense the "reasonable time" requirement in section 1(3) is there to protect the tenant: the landlord must perform his duty "within a reasonable time". But in another and equally important sense it is there to protect the landlord: the landlord is given a reasonable time within which to do what the 1988 Act requires of him. Moreover, the "reasonable time" referred to in section 1(3) is the time within which the landlord has to do something, not the time within which the tenant has to do anything. In other words, and as section 1(3) makes clear, the "reasonable time" is the time reasonably required by the landlord to do the things which the Act requires of him.
- But once the landlord has done what the 1988 Act requires of him – in particular, once the landlord has served written notice in accordance with section 1(3)(b) of the Act – there is nothing left for him to do. He therefore does not require any further time. So, in my judgment, he cannot assert that the reasonable time he requires has not yet elapsed. By taking the final step that has to be taken within the reasonable time allowed by the Act the landlord himself necessarily brings that time to an end. If the landlord is able to, and does, serve the written notice required by the Act further time cannot reasonably be required: by sending the notice the landlord shows that he does not need any more time, so any further time would be unreasonable. By the very act of serving the written notice required by section 1(3)(b) the landlord is, in effect, saying "I have had enough time" – what the 1988 Act calls a reasonable time – "to do what I have to do, I do not need any more time, so here is my notice". By his act the landlord shortens what might otherwise be a reasonable time. As Lord Justice Potter put it during argument, the landlord elects not to rely on any further time as constituting part of the reasonable time that the 1988 Act allows him. In my judgment he cannot subsequently be heard to say that it is open to him to reconsider the tenant's application during the remainder of what might otherwise have been a reasonable period.
- As the Vice-Chancellor pertinently commented in Norwich Union, and his words bear repeating,
"There seems to me to be no reason of convenience why the ability of the landlord to still keep in doubt the entitlement of the tenant to assign should survive any longer than the reasonable time which the landlord may need for considering the tenant's application for consent."
- Quite so.
- There is a third point. Just as the 1988 Act contemplates the service by the tenant of a single written application – see the reference in section 1(3) to "a written application" – so the Act, in my judgment, contemplates the service by the landlord of a single written notice: see the reference in section 1(3)(b) to the landlord serving "written notice of his decision" which, as it seems to me, presupposes that there will be only one decision to be communicated by a single notice.
- Mr Dutton sought to derive assistance from Eve J's decision in Ideal Film Renting Co Ltd v Nielsen  1 Ch 575. In that case consent to assignment was sought on 22 May 1920 and refused. Subsequently on 1 June 1920 and again on 10 June 1920 the tenant supplied further information. On 11 June 1920 the landlord wrote "to re-affirm my refusal". The tenant issued a writ on 23 June 1920. Eve J held (pp 581, 582) that "the request was a continuing one down to the commencement of the action" and said "I must … pay regard to the circumstances subsisting at the latter date. Was the defendant on that date acting reasonably in still withholding his consent?" Mr Dutton points out that the case was referred to without criticism by Sir Godfray Le Quesne QC (sitting as a deputy judge of the High Court) in CIN Properties Ltd v Gill  2 EGLR 97, a case turning on the 1988 Act.
- These authorities, in my judgment, do not help Mr Dutton at all. Whatever may have been the position at common law, the 1988 Act simply does not contemplate a "continuing application" in the sense in which Eve J was speaking when he referred to a "continuing" request. His decision cannot stand with the Act. Section 1(3)(b) contemplates that there will be "a written application by the tenant" and that "within a reasonable time" – that is, within a reasonable time of that written application – the landlord will have served written notice of his decision. That statutory scheme necessarily presupposes, as it seems to me, that there will be a date – one date – from which the reasonable time will run. How else is the reasonable time to be assessed? How, in particular, is the reasonable time to be assessed if the application is to be treated as continuing from day to day, presumably for as long as the correspondence between the parties continues?
- Accordingly on this issue I agree with Mr Cole. The landlords were in breach of statutory duty on 30 May 2001, not just in the limited way in which the judge put it but, more fundamentally, because they had failed within a reasonable time – that is, within the time which necessarily expired when they sent the letter of 30 May 2001 – to give the consent which, as the judge correctly found, they unreasonably withheld when writing that letter.
- In my judgment Mr Cole's submissions not merely accord with the true meaning of the 1988 Act: they also serve to further the important interests of practical convenience and certainty. Were we to be beguiled by Mr Dutton's attractively formulated submissions we would be frustrating one of the important purposes of the 1988 Act and denying to tenants the "state of certainty" which the Vice-Chancellor rightly said should be "achieved at the earliest sensible moment". Happily the 1988 Act, despite the possible imperfections in its drafting, does not in my judgment compel so unattractive a conclusion.
- Lest it be thought that I have overlooked a further submission that Mr Dutton made, I emphasise that this conclusion does not turn in any way on questions of fact in relation to which oral evidence could be relevant. The issue, as I have said, raises a matter of law: its outcome turns on the fact that on 30 May 2001 the landlords wrote, without any qualification or reservation, a letter which on its face appeared to be, and in my judgment was, a refusal of consent to the proposed assignment.
The second issue
- Mr Dutton relies upon a variety of indications which he says can be gleaned from the correspondence as demonstrating that both parties were treating the matter as still very much alive after 30 May 2001, that there was thereafter a continuing or a renewed application by the tenant and that as late as 10 July 2001 the tenant was still awaiting a final decision by the landlords
- On the footing that the application is properly regarded as a continuing one, or as having been renewed, then, says Mr Dutton, the relevant reasons upon which a landlord may rely are those operating at the date by which the continuing or renewed application was (or should have been) dealt with. Norwich Union and Footwear Corporation, he says, are quite consistent with this approach.
- In terms of legal analysis a case such as this can in principle be put on a number of different grounds: those mentioned in argument were variation, waiver, estoppel and release. But however the case may be put, Mr Dutton accepts, as he must, that the correspondence is to be read objectively: a letter is to be read through the eyes of a reasonable person in the position of the recipient knowing what is common to both parties.
- Mr Dutton relies in particular on five matters:
i) In the letter of 31 May 2001 RF invited the landlords to "withdraw the refusal". Significantly, says Mr Dutton, RF did not invite the landlords to give consent. A mere withdrawal of the refusal, he says, would have left the matter open for further consideration by the landlords who, having reconsidered, might nonetheless decide again to refuse consent.
ii) In any event, RF's invitation to the landlords in the letter of 31 May 2001 to "withdraw the refusal" has, says Mr Dutton, to be read in conjunction with BLP's reference in the letter of 1 June 2001 to the landlords being prepared to "reconsider the position" and RF's indication in the letter of 7 June 2001 that the tenant was awaiting the landlords' "final decision". So, he says, RF plainly understood as late as 7 June 2001 that the landlords had still not arrived at a decision.
iii) In the letter of 11 June 2001 RF were treating the tenant's application as still pending and were still seeking licence to assign – something, says Mr Dutton, there was no need for if the landlords had already refused consent.
iv) In the letter of 13 June 2001 BLP raised matters relating to the unauthorised alterations which as a matter of law, in the light of Norwich Union and Footwear Corporation, it was no longer open to the landlords to rely upon if the letter of 30 May 2001 remained operative. But far from taking the point that these were new, and thus legally irrelevant, matters, RF chose in the letters of 4 and 10 July 2001 to respond to these points on the merits.
v) In the letter of 4 July 2001 BLP referred to the tenant's "most recent application for consent".
- Section 1(3), as I have said, contemplates the service by the tenant of a single written application. Mr Dutton had some difficulty in identifying clearly just which "written application" by the tenant it was that, as he would have it, was still being considered by the landlords on 10 July 2001.
- On the one hand he suggested that it was the application – a continuing application – made by the tenant in its original letter dated 13 March 2001. This had the advantage from his point of view of enabling the landlords to continue to rely on the complaints in relation to alterations and dilapidations that had been ventilated in the correspondence prior to 30 May 2001, even though they had not been mentioned in the letter of 30 May 2001. But it exposed him to certain difficulties in attempting to justify the inevitable corollary that a reasonable time had still not elapsed almost four months later by 10 July 2001.
- To meet that difficulty he was drawn into suggesting that the correspondence following 30 May 2001 amounted to the making by the tenant of a further written application – a renewed application – so that, as it were, time started running again. This finally, albeit only in response to questions from the Bench, led him in turn into the incautious assertion that each of RF's letters of 31 May, 7 June, 11 June and 4 July 2001 (though not, of course, the telephone conversation on 11 June 2001) was itself a further or renewed written application. So, as I understood this part of his argument, by 10 July 2001 the landlords were considering either the written application contained in RF's letter of 4 July 2001 or perhaps (I was left somewhat unsure as to whether Mr Dutton was asserting that there can there be concurrent applications or whether he was assuming that each new application necessarily involved a withdrawal of the previous application) a number of concurrent applications contained in RF's letters of 31 May, 7 June, 11 June and 4 July 2001. Mr Dutton may have been driven to this position by the internal logic of his own argument but it seems to me to demonstrate, if I may say so, that the argument has entirely lost touch, if not with reality, then certainly with the scheme of the 1988 Act. (How, for example, would section 2 of the Act work in such a situation?)
- Mr Cole's riposte was to characterise Mr Dutton's approach as savouring of semantic quibbling and logic-chopping. He also pointed out:
i) that in the letter of 4 July 2001 RF treated the issue to which the tenant had to respond as being confined to the suitability of the proposed assignee and the sureties and not as extending to the matter of the alterations and dilapidations;
ii) that notwithstanding what was said by BLP about the letter of 30 May 2001 in the letter of 12 July 2001 there was no assertion that the letter of 30 May 2001 had been waived by the tenant; and
iii) that notwithstanding what was now being said by Mr Dutton as to there having been successive written applications by the tenant, the landlords in the letter of 12 July 2001 were asserting that there had been only one refusal of consent.
- More to the point, perhaps, Mr Cole observed that from beginning to end, indeed in every letter, RF was threatening to commence proceedings. So indeed it was. From that fundamental position the tenant never resiled: its only movement was to defer the issue of proceedings, first beyond the original deadline of 4 June 2001 and then beyond the later deadline of 12 June 2001. But that slight movement avails the landlords not at all. For if one asks the obvious question – proceedings in relation to what? – there can be only one answer: proceedings in relation to the landlords' refusal in the letter of 30 May 2001.
- I accept that, in principle, there can be, though I think the court should not be astute to find that there has in fact been, a variation agreed between the parties and which is binding on them if there has been consideration. But the simple fact is that, on any sensible reading of the correspondence, there was quite plainly no such agreement here.
- Nor, in my judgment, can Mr Dutton establish any case of waiver, estoppel or release. Again, the simple fact is that there was never an unequivocal withdrawal either by the landlords of the refusal in the letter of 30 May 2001 or by the tenant of its assertion that it was entitled to rely upon the fact that the refusal was unreasonable. It is impossible to extract from the correspondence factual support for any waiver, estoppel or release.
- It is trite law that any release must be clear and unequivocal. Similarly, if there is to be either waiver or estoppel it is necessary for there to have been a clear and unequivocal communication, by words or conduct, of the tenant's intention no longer to treat the letter of 30 May 2001 as a refusal of consent by the landlord: see for a recent statement of the principles Flacker Shipping Ltd v Glencore Grain Ltd  EWCA Civ 1068.
- That was a case of alleged waiver by the charterer of a vessel of any reliance on the invalidity of a notice of readiness given by the Master on behalf of the owner of the vessel; but the principles referred to by Potter LJ (with whom Arden LJ and Sir Denis Henry both agreed) are equally applicable in a context such as this. I need quote only briefly from his judgment at paras  and :
" Broadly speaking, there are two types of waiver strictly so-called: unilateral waiver and waiver by election. Unilateral waiver arises where X alone has the benefit of a particular clause in a contract and decides unilaterally not to exercise the right or to forego the benefit conferred by that particular clause. … Waiver by election on the other hand is concerned with the reaction of X when faced with conduct by Y, or a particular factual situation which has arisen, which entitles X to exercise or refrain from exercising a particular right to the prejudice of Y. Both types of waiver may be distinguished from estoppel. The former looks principally to the position and conduct of the person who is said to have waived his rights. The latter looks chiefly at the position of the person relying on the estoppel. In waiver by election, unlike estoppel, it is not necessary to demonstrate that Y has acted in reliance upon X's representation: see per Lord Goff of Chieveley in The Kanchenjunga  1 Lloyd's Rep 391 at 399.
 Waiver is closely associated with the law of estoppel in that, in the case of estoppel (and at this point I leave aside estoppel by convention), it is necessary for there to have been an unequivocal representation of fact by words or conduct and, in waiver, there must similarly have been an unequivocal communication of X's intention, whether by words or conduct."
- Previously, at para , he had observed that whether or not there has been a waiver:
"will depend upon the effect of the communications or conduct of the parties, the intention of the party alleged to have waived his rights being judged by objective standards."
- He added at para  that:
"The court will examine any act or conduct alleged to be unequivocal in its context, in order to ascertain whether or not it is sufficiently clear and unequivocal to give rise to a waiver."
- Mr Cole says that what happened here was merely that the tenant sought to avoid the risk, expense and delay involved in litigation by attempting to persuade the landlords to change their minds before resorting to litigation; that by acting in this way the tenant did not release the landlords from their breach of statutory duty on 30 May 2001; that the landlords remained in breach of statutory duty after 30 May 2001; that nothing that happened after that date expunged the breach or absolved the landlords from its consequences; that the tenant had asserted and maintained the position that the landlords' refusal on 30 May 2001 was unreasonable and that it was contemplating proceedings; and that when the attempt to persuade the landlords to change their minds was unsuccessful, the tenant was entitled to commence proceedings based on the breach of statutory duty on 30 May 2001. I agree entirely with Mr Cole's analysis.
- Pointing to what Neuberger J said in Footwear Corporation at p 554F – "Any refusal of consent can be said to be provisional, in the sense that the person refusing consent may thereafter be provided with information which causes him to change his mind" – Mr Cole submitted that once the statutory tort has been committed by the landlord, as it was in the present case on 30 May 2001, the breach of duty is not negated by a conditional willingness on the part of the landlord to reconsider his decision. I agree. So, says Mr Cole, the learned judge was wrong to find that the correspondence after 30 May 2001 showed that the parties effectively treated the letter of 30 May as "having no real effect". With all respect to him, I agree with Mr Cole that the judge here fell into error. The fact is, as Mr Cole correctly submitted, that what happened after that date was irrelevant.
- Mr Dutton accepts, as he must, that the correspondence is to be read objectively: a letter is to be read through the eyes of a reasonable person in the position of the recipient knowing what is common to both parties. But he seeks to turn this to his advantage, asserting that a reasonable tenant would have realised when he received the landlords' letter of 30 May 2001 that it had been sent prematurely and by mistake. So, he says, a reasonable tenant must have realised that a reasonable time had not yet elapsed. He seeks to bolster his argument by referring to the judge's observation (Transcript p 47B) that one could well understand the surprise expressed by RF in the letter of 31 May 2001 "given the state of the correspondence up to that moment in time". No doubt RF were surprised, but that surprise, even if coupled with a recognition that the landlords were acting prematurely, is in my judgment as equally explicable by a belief that the landlords were acting unreasonably as by any perception that the letter of 30 May 2001 was a mistake. I cannot read the tenant's letter of 31 May 2001 as Mr Dutton would have me read it. In any event, I simply cannot see how it can be said that a reasonable person in the tenant's position would have treated the letter of 30 May 2001 as a mistake or as carrying with it any implication that the reasonable time was still running.
- Accordingly on this issue also I agree with Mr Cole. The landlords were in breach of statutory duty on 30 May 2001. Nothing that happened after that date expunged the breach or absolved the landlords from its consequences. The learned judge fell into error in reading the correspondence after 30 May 2001 as showing that the parties effectively treated the letter of 30 May 2001 as "having no real effect". With all respect to him it did not.
- In my judgment the tenant succeeds on both of the main issues.
- It follows, in my judgment, that the judge ought to have granted the tenant the declaration that it sought and ought to have gone on to assess damages on the footing (i) that the landlords were in breach of their statutory duty on 30 May 2001 by having failed within a reasonable time to give consent and (ii) that the measure of damage is not affected either by the fact that the refusal of consent on 30 May 2001 may have been a mistake or by the subsequent course of the correspondence between the parties. The tenant's appeal must accordingly be allowed.
- It also follows that it is not open to Mr Dutton to argue, as he does on his cross-appeal that, had the matter proceeded as it should have done, it would have proceeded as in fact it did; nor to argue that the tenant has for that reason suffered no loss by reason of the landlords' breach of statutory duty on 30 May 2001. Accordingly, although I would give Mr Dutton, as he requires, permission to raise these matters, I would for my part dismiss his cross-appeal.
- In the circumstances there is no need for me to consider in detail two further issues that were touched on in the course of argument.
- Mr Dutton sought to justify the judge's conclusion that, a reasonable time still not having then expired, there had been no unreasonable refusal of consent by 10 July 2001. His argument proceeded in part on the basis of the assertion that, for the purposes of this argument, it had to be assumed that a reasonable time had not expired by 30 May 2001 and in part on the basis of a careful analysis of the correspondence from 30 May to 10 July 2001 which, he said, showed that the landlords were responsible for only five of the further forty days' delay during that period, the remaining thirty-five days being, according to him, the responsibility of the tenant.
- As to this I observe only that the matter has to be assessed having regard to the entire period from 13 March to 10 July 2001, that I am doubtful of the utility in this context of the kind of precise calculations performed by Mr Dutton (though plainly the court has to have regard to the extent to which, if at all, the landlord has been hindered by his tenant's failure to respond promptly to proper requests for information) and that I find it hard to imagine that a period anything like as long as that which elapsed from 13 March to 10 July 2001 – a period of almost four months – could ever be acceptable, save perhaps in the most unusual and complex situations. I repeat, and for my own part would wish to emphasise, the Vice-Chancellor's references in Norwich Union to the landlord dealing with his tenant's application "expeditiously" and "at the earliest sensible moment". It may be that the reasonable time referred to in section 1(3) will sometimes have to be measured in weeks rather days; but, even in complicated cases, it should in my view be measured in weeks rather than months. The point does not arise for decision but I cannot help thinking that, even if all the other points had been resolved in his favour, Mr Dutton would not have been able to persuade me that the judge was correct to conclude as he did. The tenant, as it seems to me, had a powerful case for arguing, particularly in the light of RF's letters of 7 and 11 June 2001, that on any footing a reasonable time had expired by close of business on 12 June 2001.
- Mr Cole for his part sought in the alternative to make good two propositions, either of which would have sufficed for his purposes. The first was that in any event a reasonable time had elapsed before 10 July 2001. This was the mirror of the argument by Mr Dutton which I have already considered. The other was that none of the objections being taken by BLP in any of their letters (whether those objections went to the financial standing of the sureties or to the alleged alterations and dilapidations) were sufficient, either on their own or taken together, to justify the landlords refusing consent. The objections were, says Mr Cole, trivial and obstructive and, in the case of the alleged alterations and dilapidations, advanced at an unreasonably late stage: consent could, and he says should, have been given by 10 July 2001. The judge, he submits, was wrong in coming to a different conclusion. This was all strongly disputed by Mr Dutton. The resolution of these issues would have involved the investigation of matters of fact which in the event we found it unnecessary to explore. Accordingly I say no more about them.
Lord Justice Potter :
- I agree with the judgment of Mr Justice Munby. I gratefully adopt his statement of the law as to the effect of the landlords' notice contained in the letter of 30 May 2001. I also agree with his analysis of the subsequent correspondence and his conclusion that it did not give rise either to a renewed application or any form of waiver or estoppel on the part of the tenant.
Lord Justice Pill :
- Mr Justice Munby has set out the essential facts and findings at paragraphs 5 to 10 of his judgment. The claim was brought because the tenant had on 27 February 2001 entered into an agreement with a third party to assign the lease, subject to consent to assign being granted by the landlords. A substantial sum was to be paid by the third party under the agreement. The agreement provided that if no licence was granted by 27 August, the third party could rescind. By reason of the consent being withheld, the assignment did not proceed and the tenant suffered loss.
- In his brief reasoning, His Honour Judge Hornby held that when, on 10 July 2001, the tenant commenced proceedings seeking a declaration that the landlords had unreasonably withheld consent to the assignment, the landlords were not in breach of duty. The duty, under section 1(3) of the 1988 Act is, within a reasonable time, to give consent, except in a case where it is reasonable not to give consent. The section places on the landlord a duty to respond to a written application for consent.
- The following is common ground:
i) The tenant made a written application for consent under section 1(3) of the 1988 Act on 13 March 2001.
ii) A written notice of a decision to withhold consent was given by the landlords on 30 May 2001. The stated reason was that the tenant had failed to propose suitable sureties.
iii) Other potential reasons were raised in subsequent correspondence.
iv) The refusal of consent in the letter of 30 May was unreasonable, as the judge held.
v) It is not open to the landlords to seek to justify a refusal of consent by reference to matters not raised with the tenant prior to the expiry of the reasonable period mentioned in the section (Norwich Union Life Insurance Society v Shopmoor Ltd  1 WLR 531 and Footwear Corporation Ltd v Amplight Properties Ltd  1 WLR 551).
- The judge concluded that the parties treated the notice of 30 May as having no effect and that, in the circumstances, the withholding of consent which persisted at 10 July was reasonable. The action was premature. Mr Dutton, for the landlords, seeks to uphold that reasoning. The landlords were asked to, and did, reconsider the matter and may rely on reasons expressed at the date by which the continuing application was, or should have been, dealt with. Mr Dutton also adopted the point, put to him by Mr Justice Munby in the course of argument, that, since the duty under section 1(3)(b) was to serve written notice "within a reasonable time", and a reasonable time had not elapsed by 30 May, the section did not restrict the landlords to reasons given in the letter of 30 May.
- The issues in the case are in my judgment susceptible to quite brief analysis and resolution:
i) As a matter of statutory construction, the notice of 30 May was a notice withholding consent within the meaning of section 1(3)(b) of the 1988 Act. The expression "within a reasonable time" may have entitled the landlords to a longer period in which to serve the notice than in fact they chose to take. Having chosen to serve a notice, however, they cannot subsequently be allowed to say, because they could have taken more time, that their refusal was ineffective as a refusal under the section. The purpose of written statutory notices such as those required by section 1(3) is to ensure that each party knows where the other stands and the refusal must be treated as such.
ii) It follows from the reasoning of Sir Richard Scott V-C in Norwich Union and Neuberger J in Footwear Corporation, with which I respectfully agree, that a landlord cannot rely on reasons not stated in a section 1(3)(b) notice. At issue in those cases were reasons disclosed after a reasonable time had elapsed. The same principle applies to reasons stated after a valid notice under the section has been served. Neuberger J stated, at p 559, "that a landlord, who has given reasons in writing for refusing his consent, cannot, in subsequently seeking to justify his refusal of consent, rely on reasons which he had not given." I agree.
iii) A refusal of consent having been served under section 1(3)(b), the tenant was by virtue of section 4 of the Act entitled to commence proceedings against the landlords for breach of statutory duty.
iv) There was a continuing application by the tenant after 30 May in the sense that, as the judge held, the tenant was still seeking consent. It might, after that date, have been open to the landlords to give consent to the transaction. A consent can by definition only be given to an application. No consent having been given in this case, the effect of a consent given on, say 1 June, does not need to be considered. Had it been given on that date, the tenant would not in this case have suffered significant loss.
v) It does not follow from the fact that the tenant continued, in open correspondence, to seek consent that, as a matter of law, he waived his right to commence proceedings under section 4. That statutory right accrued by reason of the landlords' breach of duty and is not in law defeated by the possibility that a consent may still be given.
vi) I do not exclude the possibility that the accrued right may be defeated by the conduct of the parties after the right has accrued. The right was not, however, defeated on the facts of this case. Mr Justice Munby has set out the relevant correspondence and I agree with his conclusion that the right to commence proceedings on the basis of the 30 May letter continued to exist on 10 July. In each of the letters written on behalf of the tenant between those dates, the threat of proceedings was maintained even though, in a commendable attempt to resolve the dispute, matters other than the adequacy of sureties were considered. Letters on behalf of the landlords during that period did not in terms even take the point now taken that the 30 May refusal had been waived by the tenant.
- It follows that there is no justification for the judge's finding that the notice of 30 May had no real effect by 10 July. Attempts were made on behalf of the tenant to negotiate permission to assign. The judge described the correspondence as "conscientious, careful and sensible". The Court should in my view be slow to construe such attempts at agreement between landlord and tenant as involving a termination, to use a neutral word, of the right to sue under section 4 of the 1988 Act. On the present facts, the landlords' attempt to establish such termination falls far short of what would be required.
- I agree that the appeal should be allowed and the cross-appeal dismissed.
Order: Appeal allowed with costs to be assessed; cross-appeal dismissed; appellant to have one-half of his costs below.
(Order does not form part of the approved judgment)