Peter Robinson examines the recent Supreme Court judgment in the case of Duval v 11-13 Randolph Crescent Limited

  • June 16, 2020
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In the abstract, it is difficult to see an immediate connection between nineteenth century cases concerning breaches of a breach of promise to marry and a dispute between two neighbours in a block of flats. However, one of the endearing facets of legal study is occasionally being reminded how case law from another century is used to resolve very modern legal disputes. The recent Supreme Court judgement in the case of Duval v 11-13 Randolph Crescent Limited [2020] UKSC 18 is such a reminder.

The case concerned leases in a block of flats of which 11-13 Randolph Crescent Limited (“RCL”) was the landlord. A Dr Duval (“D”) held two of these leases. D became aware that a tenant of a lease neighbouring one of the flats owned by her was proposing to carry out major structural works to a flat and that RCL, as landlord, was minded to licence the carrying out of those works. D took proceedings to challenge RCL and to prevent it granting the required licence.

The three relevant clauses in the three leases were:

Clause 2.6

A covenant by the tenant not to carry routine or relatively minor alterations to the demised flat without the written consent of RCL as landlord.

Clause 2.7

A covenant by the tenant prohibiting the tenant absolutely from carrying out structural alterations to the demised flat.

Clause 3.19

A covenant by the landlord not to grant leases in the block other than on terms which included identified covenants on the part of the tenant (including clauses in the forms of clauses 2.6 and 2.7) and a further covenant to enforce such covenants in other leases granted in the block containing the required covenants.

The works that the neighbouring tenant wished to carry out were agreed to be prohibited in that tenant’s lease by clause 2.7. RCL, however, proposed to enter into a deed permitting that tenant to carry out the works notwithstanding that prohibition. The issue in the ensuing litigation was whether RCL could, without being in breach of covenant grant a licence to carry out an activity falling within Clause 2.7.

The Court of Appeal had decided that the grant of such a licence would be a breach. The tenant appealed that decision to the Supreme Court. Lord Kitchin gave the leading judgement.

The starting point was to ascertain the meaning that clauses 2.6 and 2.7 of the leases would convey to a reasonable person having all the background knowledge which would have been reasonably available to the parties to each lease when the terms of the leases had been agreed. This is best described as the ‘interpretation issue’.

Having decided the interpretation issue it was then necessary to decide, what might be termed the ‘implication issue’, which was whether a term preventing RCL from licensing a breach of clause 2.7 could be implied into the leases by reference to the principles previously established by the Supreme Court.

In deciding the interpretation issue, the following aspects were highly relevant:

  • Long leases each acquired at a substantial premium. The parties would have been well aware that each would have been acquired at a substantial premium and that each lease would be a readily marketable and valuable asset
  • The parties would have appreciated that over the lifetime of the flat, inevitably necessary for works to be carried out;
  • Routine improvements like 2) were unlikely to impinge on other lessees or adversely affect the structure or fabric of the building; and
  • The parties would have appreciated the desirability of the landlord in retaining the common parts the important and active role the landlord would play in managing the observance and performance on its part.

From these, it could be established that Clauses 2.6 and 2.7 were to be read together in the context of the leasehold scheme of the building as a whole. They were directed at different types of activity.

Clause 2.6 restricted routine improvements and alterations with a commensurate degree of control enabling RCL to allow such works to be undertaken.

Clause 2.7 prohibited waste [i], spoil and destruction such acts being prohibited.

The interpretation issue was decided as meaning that the works concerned were clearly prohibited by the leases. However, it was also clear that clause 3.19 did not say that the landlord could not grant a licence which would authorise what would otherwise be a breach of Clause 2.7.  That could only be established by deciding the implication issue on the basis that such a term was implied.

The basis of such an implied term was that:

where two people have entered into a contract, the performance of which on one or both sides is to extend over a period of time, each contracting party is bound to abstain from doing anything which will prevent him from fulfilling those obligations which he has undertaken to discharge further…he must not by his own act or default disable and incapacitate himself from carrying out such business [ii]

To illustrate the application of that principle, Lord Kitchin cited two nineteenth century cases involving breaches of covenant to marry [iii]. In both decisions, the gentleman concerned had made a promise to marry the claimant in each case if and when the claimant made a proposal, only subsequently to disappoint each claimant by marrying someone else. The defence offered in each case was that neither claimant had asked the defendant to marry at the point at which the defendant had married someone else. Both claims were upheld on the principle cited above.

This proposition was later put as:

a positive rule of the law of contract that conduct of either promisor or promise which can be said to amount to himself “of his own motion” bringing about the impossibility of performance is in breach. If A promises to marry B and before performance of that contract marries C, A is not sued for breach of an implied contract not to marry someone else, but for breach of his contract to marry B [iv]

The proposition thus sought to be implied in this case was that where two persons have entered into a contract the performance of which is to extend over a period of years, each party is bound to abstain from doing anything which will prevent the contingency occurring, or putting it out of his power to comply with the obligation when it arises.

Applying the principles formulated in an earlier Supreme Court decision [v] the correct approach had been identified in the Court of Appeal in this case. A term preventing RCL from putting itself out of its power to enforce clause 2.7 by licensing what would clearly be in breach of it was correctly to be implied into D’s leases. If that were not the case, it would be incoherent and uncommercial as clause 3.19 could be deprived of practical effect if the landlord could give a licence to carry out work covered by clause 2.7 before a tenant could make an enforcement request pursuant to clause 3.19.

RCL’s appeal was, therefore dismissed effectively upholding the entitlement of D to prevent her neighbours planned works from going ahead.

That Dr Duval was prepared to go to the extent, and consequent expense, of taking her case to the Supreme Court will be of assistance to tenants of long leases in the future. Clauses similar to clause 3.19 have long been recognised as pre-requisite of a mortgageable lease. However, landlords have also utilised clauses similar to clause 2.7 as a means of requiring payment of capital sums by tenants to authorise works that would, otherwise, be in breach of a lease.

Legislation has made it easier for tenants to acquire the freehold of their block and otherwise to control the management of a block by a landlord. The decision in Duval adds a useful further measure of control as to what landlords may do in seeking to add value to their interest and preventing potentially damaging works being carried out.

[i]  An ancient legal term signifying an act which causes damage to a structure

[ii] Lord Alverstone in Ogdens v Nelson [1903]2 KB 287,296

[iii] Short v Stone (1846) 8 QB 358 and Caines v Smith (1847) 15 M&W 189

[iv] Lord Atkin in Southern Foundries (1926) limited v Shirlaw [1940] AC 701,707

[v] Marks and Spencer plc v BNP Paribas Securities Services Trust Co. (Jersey) Limited [2015] UKSC 72

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