Tindall Cobham 1 Limited & Others v Adda Hotels (An Unlimited Company) and others [2014] EWCA Civ 1215
Tindall Cobham 1 Limited & Others v Adda Hotels (An Unlimited Company) and others [2014] EWCA Civ 1215
Kirk Reynolds QC appeared for the successful Respondents in the Court of Appeal in Tindall Cobham. The appeal took place on 27th and 28th August 2014, having been determined by Peter Smith J at first instance on a summary judgment application on 29th July. A summary of the decision of Peter Smith J is available here. The Court of Appeal considered the effect of the anti-avoidance provisions in the Landlord and Tenant (Covenants) Act 1995, K/S Victoria and the extent of the principle of construction that contracts should be construed as far as possible to ensure that they are valid and effective. The Court’s consideration of the first question is most significant.
The assigning tenants had purported to assign hotel leases to valueless shell companies. Their leases contained an alienation provision in the following terms:
3.14.6 The Tenant shall not assign this Lease to any Associated Company of the Tenant without the prior consent of the Landlord Provided Always that for the purposes of Section 19(1A) of the Landlord and Tenant Covenants Act 1995, the Landlord shall be entitled to impose any or all of the following conditions set out in sub clauses (a) and (b) below: (a) that the Tenant shall provide the Landlord with notice of any such assignment within 10 Working Days of completion of the same; (b) that on any such assignment, the Tenant shall procure that the Guarantor and any other guarantor of the Tenant shall covenant by deed with the Landlord in the terms set out in the Sixth Schedule at the Tenant's sole cost and subject to the Tenant's compliance with such conditions the Landlords consent shall be given
The tenant submitted that section 25 should only be operated to render void parts of clauses that actually offended the scheme of the 1995 Act. On that basis, they submitted that only sub-clause (b) was void (and therefore had to be deleted). The trouble with that submission, from the landlords’ point of view, was that the only remaining restriction on the tenants’ rights of alienation was therefore sub-clause (a). This could be satisfied by the simple giving of a notice under (a) within the requisite time limit, following which consent was to be given by the landlord in accordance with the final part of the covenant. That rendered the covenant almost entirely unqualified. The landlords’ submission was therefore that the tenants’ construction fundamentally altered the deal done in Clause 3.14.6. It was more sensible to treat (a) and (b) as interdependent, and to regard (b) as unseverable from the rest of the proviso. Viewed in that way, what section 25 actually required was the deletion of the entire proviso so that the Clause simply read “The Tenant shall not assign this Lease to any Associated Company of the Tenant without the prior consent of the Landlord”. This is an important decision on the effect of section 25, and demonstrates that, when considering whether to render void part or parts of a lease which offends the 1995 Act, a mechanical approach should not be applied and consideration should be given to the intended effect of the provisions of the lease. The judgment is available here.
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