Duval v 11-13 Randolph Crescent Ltd [2020] UKSC 18

A landlord of a block of flats sought to licence structural works by one lessee that would otherwise breach an absolute covenant. The Supreme Court held this would breach the landlord's covenant to other lessees requiring enforcement of such covenants on request.

Facts

11-13 Randolph Crescent in Maida Vale comprises nine flats held under long leases of 125 years from 24 June 1981. The appellant landlord is also the management company, owned by the leaseholders. Each lease is in substantially the same form. Clause 2.6 contains a qualified covenant requiring the landlord’s consent (not to be unreasonably withheld) for alterations and improvements. Clause 2.7 is an absolute covenant prohibiting waste, spoil or destruction, and cutting, maiming or injuring any roof, wall, ceiling, pipes, wires or cables. Clause 3.19 requires the landlord, at the request and cost of any lessee (with security provided), to enforce covenants of a similar nature to those in clause 2 entered into by other lessees.

In spring 2015, Mrs Winfield (lessee of flat 13RC) sought a licence to carry out works including removing a substantial part of a load bearing wall at basement level. It was common ground this would breach clause 2.7 absent authorisation. Dr Duval, who holds leases of two other flats, objected and commenced proceedings seeking a declaration that the landlord could not permit Mrs Winfield to act in breach of clause 2.7.

Issues

Whether the landlord of a block of flats is entitled, without breach of covenant, to grant a licence to a lessee to carry out works which, absent the licence, would breach an absolute covenant in the lease, where the leases of other flats require the landlord to enforce such covenants at the request and cost of any other lessee.

Judgment

Lower Courts

Deputy District Judge Chambers held the landlord had no power to waive clause 2 covenants without consent of all lessees. Judge Parfitt allowed the landlord’s appeal. The Court of Appeal (Lewison LJ, with Newey LJ and Sir Stephen Richards agreeing) allowed Dr Duval’s further appeal, holding that granting such a licence would breach clause 3.19.

Supreme Court

Lord Kitchin (with whom Lady Hale, Lord Carnwath, Lady Black and Lord Sales agreed) dismissed the landlord’s appeal.

Interpretation of Clauses 2.6 and 2.7

Lord Kitchin rejected the parties’ common approach that clause 2.7 sets the boundaries of clause 2.6. The two clauses address different activities: clause 2.6 concerns routine improvements and alterations subject to landlord approval, while clause 2.7 is directed at activities in the nature of waste, spoil or destruction which go beyond routine alterations and are intrinsically damaging or destructive. Support was found in F W Woolworth and Co Ltd v Lambert [1937] Ch 37.

Implied Term

The Court considered established authority that a party undertaking a contingent obligation must not put it out of his power to perform when the contingency arises, citing Ogdens v Nelson [1903] 2 KB 287, Stirling v Maitland (1864), Southern Foundries (1926) Ltd v Shirlaw [1940] AC 701, and applying the implied term approach from Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72.

The Court held it was necessarily implicit that the landlord will not put it out of its power to enforce clause 2.7 by licensing the activity that would otherwise be a breach. The absolute covenant is intended to operate as such, and clause 3.19 would lack practical content if the landlord could authorise what would otherwise be a breach.

Additional Protections

Lord Kitchin noted the landlord is subject to further restrictions: the covenant for quiet enjoyment, the obligation not to derogate from grant (citing Southwark London Borough Council v Mills [2001] 1 AC 1), and protection from authorised nuisance.

Implications

The decision has significant consequences for multi-tenanted residential buildings where mutual enforcement covenants are common. Landlords cannot grant licences permitting works that would breach absolute covenants without risking breach of collateral obligations owed to other lessees. However, this is confined to fundamental works intrinsically damaging to the building; routine improvements falling within qualified covenants remain subject to landlord consent alone. The case confirms the protective function of mutual enforcement covenants in leasehold schemes.

Verdict: Appeal dismissed. The grant by the landlord of a licence to a lessee to carry out works that would otherwise breach the absolute covenant in clause 2.7 amounts to a breach of clause 3.19 of the leases held by the other lessees.

Source: Duval v 11-13 Randolph Crescent Ltd [2020] UKSC 18