Ansa Logistics Ltd v Towerbeg Ltd & Ors [2012] EWHC 3651 (Ch)

[2012] EWHC 3651 (Ch)Case No HC12C00594
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Royal Courts of Justice, Rolls Building, London, EC4A 1NLDate 18/12/2012
Before
THE HON MR JUSTICE FLOYD
Between
ANSA LOGISTICS LIMITEDClaimantTOWERBEG LIMITEDDefendantFORD MOTOR COMPANY LIMITEDThird Party
Nicholas Dowding QC and Alan Johns (instructed by Clarke Willmott LLP) for ClaimantMark Warwick and Henry Webb (instructed by Addleshaw Goddard LLP) for DefendantMartin Hutchings QC and Simon Atkinson (instructed by Weightmans LLP) for Third PartyHearing Hearing dates: November 14 th, 15 th and 19 th 2012
Judgment
[1]There is a large area of land at Speke in Liverpool which is used for the storage and marshalling of motor vehicles. The claimant Ansa Logistics Limited (“Ansa”) is the lessee of this land under two long leases. Ansa wishes to sub-let the land to the third party, Ford Motor Company Limited (“Ford”). For this sub-letting, Ansa needs the consent of its landlord, Towerbeg Limited (“Towerbeg”). Towerbeg has refused its consent. So Ansa has commenced this action for declarations that Towerbeg’s refusal to grant consent to the sub-letting was unreasonable. Towerbeg denies unreasonableness, and makes its own additional claim for possession against both Ansa and Ford based on what it alleges is an earlier breach of covenant by Ansa in allowing Ford into possession without the consent of Towerbeg. Ansa and Ford deny the breach of covenant. If it is found that there was a breach of covenant by allowing Ford into possession, Ansa and Ford maintain that the breach has been waived by Towerbeg’s acceptance of rent with knowledge of the breach. If they are wrong about that, they claim that the court can and should grant them relief against forfeiture.[2]Towerbeg’s parent company was called Benmore, and Ansa’s was Autologic. I will use the terms Towerbeg and Ansa to cover each parent and subsidiary, rather than distinguishing between them as no points were made about their separate legal personality. Towerbeg’s guiding minds are, and were, Cathal Maneely and Kevin Mackay.[3]The leases in question were granted by Towerbeg’s predecessor in title (British Transport Docks Board) to Ansa’s predecessor in title (Silcock & Colling Limited). The terms of the leases were 99 years from 1st January 1970. The first was dated 6th May 1971 (“the Principal Lease”) and the second was dated 8th December 1971 (“the Additional Lease”). Thus the leases run until 2069, but they contain a term allowing the landlord to break the lease in 2043. Even taking that into account, the leases are valuable property in the hands of Ansa. The two leases relate to different areas, but nothing turns on the details of that. Together, the demised premises, which I will refer to as “the Speke site” consist of an area (approximately 42 acres) of primarily open and surfaced land with some buildings and a railway siding.[4]The leases included (in the case of the Principal Lease expressly and in the case of the Additional Lease by cross-reference) a covenant against alienation by the tenant in the following, familiar terms: “Not to assign, underlet or part with the possession of the demised premises or any part thereof without the previous consent in writing of the [landlord] which consent shall not unreasonably be withheld”.[5]The Speke site was developed in the 1960s for use by Ford for the storage and transportation of motor vehicles. Silcock and Colling, the original tenant, held the contract for transport and storage of vehicles from Ford (“the Ford logistics contract”). Clause 2(6) of the Principal Lease reflected this use by obliging the tenant to use the demised premises only:
“.... for the purpose of marshalling and storage of motor vehicles the operation of motor vehicle transporters warehousing of containers and loose goods (including open storage) garaging and operation of equipment to handle such items together with facilities to maintain such equipment and administrative offices ancillary thereto (such being an approximate description of the Lessees’ business of Car Delivery Agents and Road Transport Undertakers).”
[6]In May 1999 Ansa took over the Ford logistics contract. At some point in 2000 the leases were assigned to Ansa. Ansa was registered as proprietor of the leases on 23rd February 2000. The Speke site continued to be used by Ansa in connection with the Ford logistics contract.[7]Towerbeg acquired the Speke site, subject to the leases, in April 2006. In August 2007 Ford gave notice to Ansa that it would be terminating the Ford logistics contract and taking over the conduct of the logistics with effect from November of that year. This represented a serious financial blow for Ansa. Thereafter, Ford operated its own logistics from the Speke site.[8]On 3rd November 2007, Ansa and Ford agreed heads of terms (“the 2007 HoTs”) which allowed Ford to remain on the site, whilst allowing for “an orderly transition of the Ansa business to Ford on 3 November 2007”. Ansa’s employees were to be transferred to Ford under the TUPE Regulations. Ford subsequently took over the pension liabilities of the staff.[9]Under the heading “Property” in the 2007 HoTs, Ansa was to allow Ford to occupy the Speke site “under the licence agreements to be agreed”. The parties were:
“in good faith [to] seek to agree on or before 14 November 2007 a process and form of words that will give Ford the right to occupy [the Speke site] whilst protecting the interests of [Ansa].”
In the absence of agreement about the licences, the terms of a Schedule were to apply. These terms gave Ford the right to call for an underlease for a term of five years from the date of the 2007 HoTs. The grant of the underlease was subject to all necessary licences to underlet being obtained. By clause 4 of the Schedule, if the landlord refused to grant a licence to underlet by 4th February 2008, Ansa was obliged to make an application to the Court for a declaration that such consent had been unreasonably refused.[10]Clause 5.1 of the Schedule allowed Ford to “go into occupation” of the Speke site. It was to pay or otherwise indemnify Ansa against all rents, outgoings and expenses which would be the responsibility of Ford if underleases were granted. Ford was not to make any alterations to the site. Ford was to reimburse all reasonable costs that Ansa incurred in providing occupation. In addition Ford was to pay an “Infrastructure Facility Fee” as set out in a further Schedule 3. That fee amounted to a sum of £57,000 a month or £680,000 a year. Ford was also to purchase from Ansa the assets and stocks held by Ansa in connection with the business.[11]The 2007 HoTs also provided for Ford to continue to hire from Ansa a number of vehicle transporters. Ansa and Ford were also to co-operate in establishing a joint working party to investigate and develop cost saving opportunities. The evidence showed that there was some investigation of this, involving storing General Motors vehicles at the site, but the idea was subsequently thwarted by the unions.[12]The terms of the 2007 HoTs were to be confidential as between Ford and Ansa.[13]A rent review under the leases was initiated in 2008. In July 2008 Ansa’s solicitors were in communication with Ford’s solicitors over the terms of the underlease provided for in the Schedule to the 2007 HoTs, and were awaiting Ford’s instructions. Ansa accordingly took the lead in the rent review negotiations, but agreed to keep Ford fully informed. In practice Ansa sought approval and comments from Ford of submissions which were made to the appointed expert in connection with the rent review.[14]In April 2008 a Mr David Bass, who had previously been advising Ansa as a surveyor, and who clearly had detailed knowledge of the Speke site gained in that capacity, approached Towerbeg to offer his assistance with the rent review process for the Speke site. In a very detailed email dated 3rd April 2008 to Towerbeg, he said:
“Ford has to all intents and purposes acquired Ansa, albeit that the company remains in Autologic hands in pretty much name only. The staff and trucks have been transferred across. The rent is paid by Ansa/Autologic but there may be a request shortly for a sublease to be put in place for the Ford Company, or indeed the Ansa property interest could be transferred to Ford.”
[15]In a subsequent email dated March 2009 Mr Bass suggested to Francis Murphy of Towerbeg that Mr Murphy should look at Ansa’s published results for 2008. He drew attention to a note which said that the Ansa site at Southampton had been novated to Ford, and that there was no such statement in respect of Speke. Ansa subsequently realised that Mr Bass was now helping Towerbeg. Mr Light of Ansa wrote an email saying that it appeared that Mr Bass had not “blown the gaff on our Ford arrangements”. Mr Light explained that this was a reference to the Infrastructure Facility Fee payable under the 2007 HoTs. I accept that his concern was with the Fee. The fact of the additional payment of £680,000 a year would plainly have provided ammunition for Towerbeg in the rent review. I do not think it shows that Ansa thought that the Ford arrangements were a breach of any term in the leases.[16]An internal meeting note of Towerbeg sometime before April 2009 shows that Towerbeg had, by then, become aware of the fact that the Ford logistics contract had not been renewed and made an action note to investigate. Towerbeg’s submission for the rent review dated 24th April 2009 noted that Ansa kept “a close guard over the occupational details of the sites”. In fact Towerbeg had recently acquired a fairly detailed knowledge, through Mr Bass, of much of that detail, including the fact that the staff and transporters had been transferred across to Ford.[17]In April 2009 Ford appointed Mr Cole as depot manager at the Speke site. On arrival at the site to take up his duties, Mr Cole found that various aspects of the site required attention. He instigated a programme of repairs and improvements, at quite substantial cost. A figure given by Ford in a letter to the planning authority in November 2011 revealed that Ford had spent some £625,000 in investments at the site in 2011 alone. In October 2009 Mr Cole showed the rent review arbitrator around the Speke site, drawing his attention to all the improvements and repairs carried out by Ford at its own cost, and emphasising the poor state the site was in when Ford “took over”. Ford introduced their own processes and procedures at the site, including an access log kept at the gate to record the entry of visitors, and other procedures related to health and safety of employees and visitors.[18]By November 2009 all the remaining long term leases of transporters had been novated to Ford. The last Ansa employee, a Mr Bowden, ceased to work at the site in November 2009. Access to the site by visitors was controlled by Ford. Ford improved the security at the premises, for example by making the fencing opaque, so that would-be wrongdoers were not able to target particularly valuable vehicles.[19]From January 2010 to November 2011 an Ansa employee, a Mr Yetton, made five visits to the site. Mr Light’s witness statement said that Mr Yetton “manages the site on a day to day basis”. It is clear from the context that Mr Light was using the term “manage” in the sense of dealing with Ansa’s residual responsibilities in relation to the site, rather than managing all the operations on the site on a day to day basis. Mr Banham’s evidence reflects this:
“Ansa has always been actively involved at the Site and retained overall control of the Site. Ford did not regard itself as having obtained control of the Site. Since 2009, John Yetton has been responsible for the day to day running of the site for Ansa. It was also in 2009 (April) that St John Cole was appointed to manage the Site operations on behalf of Ford. St John’s role is to manage the Ford operations which take place at the Site on a daily basis whereas John will carry out either pre-arranged and ad hoc Site Visits or inspections from time to time on behalf of Ansa.”
[20]Mr Cole, who was a transparently straightforward witness, made it clear that Ansa continued to have access to the site, and continued to be involved in activity at the site. He said this in his witness statement about Mr Yetton, and Ansa’s access to the site:
“13. Ansa continues to be actively involved at the Site. So my understanding is that, if Ansa require access, they can come on to the Site as they wish, but they usually give me prior notice. 20. John Yetton is also well known to some of the security guards based at the gate, (who are former Ansa employees) and I believe they would let him in, if he arrived unannounced. 21. Whilst we have not discussed it in so many words, there is an understanding to the effect that John can come on Site as and when he requires and, so far as I am aware, John Yetton is the only Ansa representative who would come on Site. He manages the Site for Ansa as I do for Ford.”
[21]In November 2009 a letter from the Valuation Office Agency arrived at the Site addressed to Ansa. Mr Banham, Ford’s real estate manager, referred the letter to Mr Light of Ansa in the following terms:
“As we are not named directly as tenants I think this will need your lead as landlords and named tenants of the superior landlord. I would be happy if you wanted us to extend our instruction to our own rating advisors on this, but I’m not sure how this fits in with regard to our respective agreements on the site?”
[22]Mr Banham went on to suggest a meeting as he regarded the “residual property agreements for this site [as] less than satisfactory from my perspective”. This is significant as it certainly does not reflect any changed understanding from the 2007 HoTs. Mr Light’s response was that Ford “might prefer” to have its own rating advisers deal with the matter, as they would probably have more confidence in them.[23]In December 2009 the rent review determination resulted in an increased rent. This was set at a disappointing level for Towerbeg.[24]In 2010 discussions took place between Ansa and Towerbeg in connection with a possible surrender of the leases to enable Towerbeg to develop the site. Heads of terms, subject to contract and Board approval, were entered into on 9th December 2010 proposing a surrender by 31st December 2012 for a consideration payable to Ansa of £2.5 million.[25]Mr Banham, Ford’s property manager, wrote a number of emails in the course of 2010 in which he used the expression that Ford’s occupation of the site, and the terms on which it did so, were not “recognised” by the superior landlords. Mr Warwick, who appeared on behalf of Towerbeg, submitted that these emails showed that Ford was conscious of a need to conceal the true nature of its occupation from Ford. Whilst it is true that the precise terms on which Ford occupied the site, and the 2007 HoTs themselves, were not known to Towerbeg, my understanding of what Mr Banham was seeking to convey, both from reading the emails and hearing him in the witness box, was that Ford did not have a direct relationship with Towerbeg, and that Towerbeg was not party to the agreement Ford had with Ansa.[26]In December 2010 Towerbeg, through Mr Burrows, asked Ansa, through Mr Yetton, to allow a survey company to have access to the Speke site for a period of four days. Ansa agreed and said it would let Mr Cole know. When the surveyors were present on the site, a Ford employee told them they could not work there, despite the agreement of Ford’s management. This was, however, quickly resolved and the survey was permitted to be completed.[27]In February 2011 Mr Cole wanted to allow the site to be used for a young persons’ driving initiative working with Merseyside Traffic Police and the local authority. Mr Cole notified Mr Banham, who said that, from a property perspective, publicity around Ford’s occupation of the site might aggravate the superior landlords. He suggested that Ansa should be notified.[28]In April 2011 details of a planning application by Towerbeg became available. The proposal was to redevelop part of the Speke site for a leisure park. Later in the year, on 8th June 2011, planning advisers instructed by Ford wrote to the local authority’s planning department to object, saying that Ford had an “interest” in the site “from which they operate logistics, storage and distribution facilities”. The letter stressed the importance of Ford’s logistics operations at the site and the impact on Ford if it were to be lost. The letter came to the attention of Towerbeg shortly after it was sent to the planners.[29]Ansa was throughout the insured party in respect of the Speke site and did not pass on the cost of insuring it to Ford. Ansa continued to pay the rates. It also continued to hold the contract with Network Rail Infrastructure Limited governing rail access to the Speke site, having entered into a new contract in 2008, after the 2007 HoTs. Other utilities were transferred into Ford’s name.[30]It is clear that in this period Ansa was weighing up the relative advantages and disadvantages of pursuing Towerbeg’s consent for the underlease to Ford and surrendering the lease to Towerbeg. Revised heads of terms were agreed by Ford and Ansa in May 2011 (“the 2011 HoTs”). Ford confirmed it required the premises until January 2018. By a notice dated 30th September 2011 Ford called for an underlease pursuant to the 2007 HoTs as varied by the 2011 HoTs.[31]On 25th November 2011 Ford’s planning advisers wrote to the local authority planning department to say that operational issues on the site were “a matter for Ansa to deal with in conjunction with Ford”, and that Ansa was “in no position to comment without prior consultation with Ford”. The letter went on to say that:
“The nature of the commercial agreements in place between ANSA and Ford require that all operational activities on the site must be carried out in accordance with Ford’s requirements” and that “Ford has made substantial investments in this site to ensure it is a safe, secure and environmentally acceptable operational area. These investments in 2011 alone amount to more than £625,000.”
[32]On 25th November 2011 Ansa and Ford agreed on the grant of underleases, subject to Towerbeg’s consent (“the November 2011 Agreement”). By clause 7.1, Ansa was to give Ford vacant possession on completion of the grant of the underleases. By clause 7.2 the agreement was not to operate as a demise, but Ford was to be entitled to occupy the premises from the date of the agreement as licensee.[33]By a letter dated 28th November 2011 (“the first application”) Ansa sought the consent of Towerbeg to the grant of underleases to Ford for a term expiring in December 2017. Towerbeg’s solicitors wrote asking for information and documents about Ford’s occupation. On 12th December Ansa’s solicitors wrote saying that Ford was “in occupation pursuant to a commercial arrangement, the terms of which are commercially sensitive and are not relevant to your client’s consideration of the merits of our client’s application.” Towerbeg’s solicitors responded on 14th December saying that their clients had good reason to believe that Ansa had parted with possession, and hence required the disclosure they had asked for. They made it clear in a further letter dated 16th December 2011 that, for this purpose they relied on the contents of the 25th November letter from Ford’s planning advisers to the local authority planning department (quoted from above), on Ansa’s latest filed accounts, which contained specific mention of the transfer of Ansa’s employees to Ford, and on the fact that Ansa no longer appeared to have any employees excluding directors.[34]Towerbeg responded to the first application by refusing consent on four grounds contained in its solicitors’ letter dated 21st December 2011: i) that Towerbeg had good reason to believe that Ansa was in breach of the leases by parting with possession of the Speke site to Ford, and that Ansa had refused to provide details of the basis on which Ford occupied the premises; ii) that Ford was insolvent, based on its Directors’ Report and Financial Statements for the year ended 31st December 2010, as it had fewer assets than liabilities to the extent of £127 million, causing Ansa concern about “granting consent to a proposed tenant with such a poor financial position”; iii) that there would be a diminution in the value of the reversionary interest in the site caused by Ford's occupation pursuant to the proposed sublease. In particular it perceived that its prospects of securing planning permission for the proposed redevelopment of the site would be diminished by Ford's occupation; iv) that there would be an adverse effect on the use and value of adjoining land owned by Towerbeg. In particular, if planning permission is refused for the redevelopment of the site, the prospect of securing planning permission for the additional parcel of land will also be diminished.[35]Under cover of a letter of the same date, Towerbeg served a notice on Ansa under section 146 of the Law of Property Act 1925 forfeiting the lease, based on parting with possession to Ford.[36]By letter dated 18th January 2012 (“the second application”) Ansa again sought consent to the proposed underletting. A further letter of the same date sought to address the stated grounds on which Towerbeg had refused the first application. It explained the basis on which Ford occupied the premises, but with legal possession remaining with Ansa. Ansa’s letter further stated that it was prepared to guarantee Ford’s obligation under the proposed underlease.[37]Towerbeg repeated its refusal to consent to the underleases by letter dated 30th January 2012. It repeated the reasons given in relation to the first application.

The issues

[38]Based on these facts, the following issues need to be resolved: i) Did Ansa part with possession to Ford? ii) If Ansa did part with possession to Ford, did Towerbeg waive the breach? iii) If Ansa did part with possession to Ford, and Towerbeg did not waive the breach, are Ansa entitled to relief against forfeiture? iv) If there has been no breach (either because there was no parting with possession, or because the breach was waived) or because Ansa is entitled to relief against forfeiture, then has Towerbeg shown (see Landlord & Tenant Act 1988 section 1(6)) that its consent was reasonably withheld?

First issue: did Ansa part with possession to Ford?

[39]The courts have consistently given a strict, narrow meaning to covenants against parting with possession. In Lam Kee Ying Sdn Bhd v Lam Shes Tong [1975] AC 247, the Privy Council approved the statement of Farwell J in Stening v Abrahams [1931] 1 Ch. 470 at 473-4 that: “unless his agreement with his licensee wholly ousts him from the legal possession … nothing short of a complete exclusion of the grantor or licensor from the legal possession for all purposes amounts to a parting with possession." The Privy Council said it regarded the cases cited as having settled the law and proceeded on correct principles.[40]The Privy Council went on to say at 256 B-C: “A covenant which forbids a parting with possession is not broken by a lessee who in law retains the possession even though he allows another to use and occupy the premises. It may be that the covenant, on this construction, will be of little value to a lessor in many cases and will admit of easy evasion by a lessee who is competently advised, but the words of the covenant must be strictly construed, since if the covenant is broken a forfeiture may result".[41]Thus possession and occupation are separate legal concepts, although the distinction is “even to those experienced in property law, often rather elusive and hard to grasp”: per Neuberger LJ, as he then was, in Akici v L.R. Butlin Ltd. [2005] EWCA Civ 1296; [2006] 1 WLR 292. It is clear, however, that for the purposes of a covenant such as that in the present case, the parting with possession must be complete. The acid test for possession, as contrasted with mere occupation, lies in the right of the person in occupation to exclude others, including the tenant, from the premises. In Clarence House Limited v National Westminster Bank plc [2010] 1 WLR 1216 at 1230, Ward LJ, with whom Jacob LJ and Warren J agreed said:
“The hallmark of the right to possession is the right to exclude all others from the property in question. That is the ordinary and normal sense of the word and that is the meaning which it should be given in this covenant.”
[42]Later, having referred to a number of cases including Lam Kee Ying and Akici, Ward LJ said:
“This stream of cases is consistent with the notion that a leasehold covenant against parting with or sharing possession is concerned with the question of whether the tenant has allowed another into physical occupation with the intention of relinquishing his own exclusive possession of the premises to that other.”
[43]In some of the decided cases, the legal basis on which a third party has been allowed into occupation or possession, as the case may be, will have to be spelled out from all the material circumstances, including the factual circumstances on the ground. By contrast, in cases where the third party’s presence on the site is regulated by an agreement in writing, then the agreement must be at least the starting point (and may indeed be the end point) for determining the nature of that legal relationship.[44]In the present case, Mr Warwick does not suggest that the 2007 HoTs amounted to a parting with possession to Ford. Indeed he expressly submits that this is not a case where there was a parting with possession by a single event. He suggests instead that Ansa allowed Ford to enjoy gradually increased control until the point was reached where Ansa had parted with possession. He does not identify any particular act or event which amounted to a parting with possession. He submits that by the date of the forfeiture notice Ford were in possession of the site.[45]Mr Dowding QC, who appeared for Ansa, and Mr Hutchings QC, who appeared for Ford, submit that there was no parting with possession at any relevant stage. They submit that the 2007 HoTs simply allowed Ford to occupy the site without granting Ford possession. Thereafter, nothing which occurred had the effect of altering that underlying relationship. The position remained the same under the November 2011 Agreement.[46]I have no doubt that Mr Warwick is right to accept that the 2007 HoTs did not confer a right to possession on Ford. The right conferred was a right to occupy the premises as Ansa’s licensee. The right to call for underleases makes it clear, by juxtaposition, that no right of legal possession was intended to be granted until such underleases were granted. Quite apart from that, the terms make it very clear that it was neither side’s understanding that Ansa was to be excluded from the site. Thus, the existence of clause 7, under which Ford agreed to establish a joint working party to explore other uses of the site, indicated that it was not intended that the site would be used only for Ford.[47]It is correct, as Mr Warwick points out, that Ford exercised an increasing degree of control over the site in the period from the signing of the 2007 HoTs to November 2011. However, it is important to distinguish for these purposes between Ford’s control over its business conducted at the site, and its ability to control the access of Ansa to the site. Much of the evidence relied upon by Towerbeg goes to the former and not to the latter type of control. It is thus entirely understandable that Ford would wish to fence the site securely, and opaquely, in order to prevent theft of its cars from the site. It is understandable that, for the purposes of its business, it would wish to log access to the site in the normal way, and ensure that proper health and safety procedures were observed. For my part, in the circumstances of the present case, those matters do not support the notion that Ford was now in a different position from that provided for by the 2007 HoTs so far as concerned the exclusion of Ansa from the site. Indeed it was clear from all the evidence that they were not.[48]In my judgment, at the date of the forfeiture notice Ansa continued to have responsibilities on the site, and had not wholly ousted itself from possession. Both Ansa and Ford continued to recognise that its relationship had not changed from the 2007 HoTs so far as concerned Ansa’s possession of the site. There was accordingly no breach of the covenant against parting with possession in the leases.

Second issue: did Towerbeg waive any breach?

[49]In the light of my findings in the previous section of this judgment, this issue does not arise. However, in case the case goes further, I will briefly state my reasons for concluding that, if there had been a breach, it would not have been waived by Towerbeg’s continued acceptance of rent.[50]There was no dispute that a landlord may waive the right to forfeit if, with the requisite degree of knowledge, he commits an act in relation to the lease which, objectively viewed, recognises the continued existence of the lease. Mr Dowding submitted that a landlord has sufficient knowledge for these purposes if he has notice of circumstances putting him on inquiry as to the breach of covenant, and fails to make any inquiries in consequence. He founded that submission on Van Haarlam v Kasner (1992) 64 P&CR 214 at 225-226. I am prepared to assume in Ansa’s and Ford’s favour, without deciding, that constructive knowledge of that kind would be sufficient for the purposes of waiving a breach of a covenant against alienation.[51]The argument advanced by Ansa and Ford that there had been a waiver took as its starting point the statements made on behalf of Towerbeg in its solicitors’ letter dated 14th and 16th December 2011 that it had good reason to believe that Ansa had parted with possession, based on the statements made to the planning department and Ansa’s accounts. Then it is said that Towerbeg must have had exactly that knowledge at an earlier date, and certainly no later than the last date on which it accepted rent, which was on or about 29th September 2011. Based on the material supplied to Towerbeg by Mr Bass, the pre-April 2009 Towerbeg internal meeting note and the contents of the 8th June 2011 letter from Ford’s advisors to the planning department, all of which had come to Towerbeg’s attention by September 2011, it is clear that Towerbeg’s state of knowledge about Ford’s occupation of the site was the same in September 2011 as it was later in the year. Mr Burrows, who was the only witness called on behalf of Towerbeg, did not really dispute that that was the case.[52]Accordingly, Ansa and Ford submit that by accepting rent in September 2011, having good reason to believe that Ansa had parted with possession, Towerbeg waived the breach.[53]I think the answer to this argument is that, objectively viewed, Towerbeg did not have good reason to believe that Ansa had parted with possession to Ford. The material available to Towerbeg merely showed that Ford had operational control of its business on the site. Towerberg had no reason to suppose that Ansa had ousted itself altogether from possession of the site. On this ground, therefore, I would have rejected the argument about waiver.

Third issue: would Ansa be entitled to relief against forfeiture?

[54]In the light of my finding that there has been no breach, this issue does not arise either. Again, I will state my conclusions briefly in relation to the arguments raised.[55]A number of factors were debated in argument which relate to whether the present case is one for the exercise of the broad equitable discretion to grant relief. I consider these in turn.[56]The nature and gravity of the breach. If there was a parting with possession, it was to a well established company which had been associated with the site since its inception and which was carrying on the same business as was permitted under the lease. There was no evidence that what had been done on the site had harmed Towerbeg or its interests in any way.[57]Towerbeg’s real grievance, as Mr Warwick explained, is that it was not told that Ansa was receiving the infrastructure facility fee. This, it seems to me, is a collateral complaint, not affecting the nature and gravity of the breach.[58]Wilful breach? Towerbeg submitted that the breach was wilful and was concealed from Towerbeg. I do not accept that this was so. Any breach, on Towerbeg’s case, occurred by a gradual relinquishment of control by Ansa. This appears to me to be a paradigm case of inadvertent breach. Again, the fact that Ansa was receiving the infrastructure facility fee, and was thereby profiting from the arrangements with Ford, does not turn an inadvertent breach into a deliberate one.[59]Concealment of breach? It was not suggested to any relevant witness that they knew that there had been a breach of the lease, and had concealed it from Towerbeg. It is true that the 2007 HoTs were not disclosed to Towerbeg. But the 2007 HoTs did not, even on Towerbeg’s case, demonstrate a breach of covenant. It is also true that Ansa did not wish Towerbeg to know about the infrastructure facility fee incorporated in the 2007 HoTs. But none of this amounts to a deliberate concealment of a breach of the terms of the covenant against alienation.[60]Breach not proposed to be remedied. Towerbeg submits that Ansa does not propose remedying the breach by ending the parting with possession. Rather it asks the court to ratify the breach by allowing Ford to remain in possession. I do not accept that this would be a ground for refusing relief in the present case. The breach in question, on the hypothesis that it has occurred, is allowing Ford into possession without Towerbeg’s (not to be unreasonably withheld) consent. Although one way of remedying this breach would be to remove Ford from possession, another is to obtain Towerbeg’s consent, either directly from Towerbeg, or in default by application to the Court. As will be seen, this is a case in which I consider that consent has been unreasonably refused. So the breach will be remedied by the grant of the proposed underlease.[61]Loss to Ansa if relief is refused. There is no doubt that if relief is refused Ansa will lose an asset of considerable value. If relief is refused, Towerbeg will acquire for no consideration property for which it was prepared to pay £2.5 million. This is a factor which supports the grant of relief, as it did for example in Scala House District Property Co. Ltd. v Forbes [1974] QB 575 at 589G.[62]Ansa an unsatisfactory tenant. Towerbeg submit that the non-disclosure of the infrastructure fee and other matters show that Ansa is an unsatisfactory tenant, and that it is therefore wrong for the court to impose a continued relationship between these parties. I accept that, from Towerbeg’s perspective, knowledge of the arrangements between Ansa and Ford would be likely to have assisted it in the rent review proceedings. But I was not shown any material to suggest that Ansa was under any duty to provide Towerbeg or the rent review arbitrator with information harmful to its case. I do not think that the fact that Ansa chose to play “hardball” in the rent review proceedings is a basis for claiming a breakdown in landlord and tenant relations. Towerbeg’s conduct in employing a former Ansa adviser, Mr Bass, to assist it behind the scenes in the rent review shows that it too was, to put it at its lowest, prepared to play hardball as well.[63]Similar considerations apply to the fact that Ansa has participated in opposition to Towerbeg’s planning application. In any event, the planning application was granted.[64]I believe I have said enough to explain why, if there was a breach, it would be one for which I would have been prepared to grant relief from forfeiture.

The fourth issue: was consent reasonably withheld?

[65]The principles applicable to this branch of the case are; i) The burden is on Towerbeg to show that the refusal was reasonable: Landlord & Tenant Act 1988, section 1(6)(c). ii) Consent cannot be refused on grounds which have nothing to do with the relationship of landlord and tenant in regard to the subject matter of the lease. The grounds must not be wholly extraneous and completely dissociated from the subject matter of the contract: Ashworth Frazer Ltd v Gloucester CC [2001] UKHL 59; [2001] 1 WLR 2180 at [3]. iii) The landlord’s obligation to show that his conclusions were reasonable does not mean that he must show that they were right or justifiable. What must be shown is that they were conclusions which might be reached by a reasonable person in the circumstances. “Reasonable” should be given a “broad, common sense meaning in this context as in others”: Ashworth at [5]. iv) Consent cannot normally be refused simply because the landlord is able to identify a breach of covenant. The question is whether the breach of covenant is of such a nature as to justify the refusal of consent. That will involve a consideration of the nature, gravity and remediability of the breach: see Hill & Redman’s Law of Landlord and Tenant at paragraph A 1421 and cases there cited. v) The landlord is restricted to reliance on those reasons which he puts forward in writing within a reasonable time: see e.g. Go West Limited v Spigarolo [2003] EWCA Civ 17; [2003] QB 1140 at [22].[66]I have set out Towerbeg’s reasons for refusing permission above. The first is that Towerbeg had reason to believe that Ansa had parted with possession. I have held above that Towerbeg did not have good reason for believing that Ansa had parted with possession. It is true that the terms of Ansa’s solicitors’ letter of 12th December 2011 may, by refusing to give any detail of the legal basis of Ford’s occupation, have given some fuel to Towerbeg’s suspicions. To the extent that that is true, those suspicions ought to have been dispelled by the letter of 18th January 2012 which accompanied the second request.[67]However, even if Towerbeg did have good reason to believe that Ansa had parted with possession to Ford, I do not accept that that circumstance would have amounted to a reasonable basis for refusing to give consent. For reasons I have given elsewhere, the breach would not have been a serious one, given that it was not seriously prejudicial to Towerbeg and was both capable of and proposed to be remedied by the very transaction the subject of the request for consent.[68]Towerbeg’s second reason concerned Ford’s financial standing. I do not think that this provided a reasonable basis for refusal of consent. It is true, as one witness observed, that there is no such thing as a bullet-proof company, but a landlord is not justified in refusing consent to an underlease just because the sub-tenant is not bullet-proof. Ford had operated in the United Kingdom for over 100 years, had always received an unqualified audit report as a going concern. In 2011 only 11% of companies had a lower risk of failure. The deficiency to which Towerbeg referred was due to long term provision for pension liabilities. What is more, pursuant to an underlease, the landlord can continue to look to its tenant for the rent. The financial position of Ford is only marginally relevant.[69]Towerbeg’s remaining reasons related to Ford’s potential ability to object to its planning application. These reasons were not put at the forefront of Towerbeg’s submissions. They suffer from a number of formidable difficulties, not least the fact that Ford has the ability to object to the planning application whether or not consent to an underlease is given. Indeed Ford did object, albeit unsuccessfully, to the grant of the planning application from its position as licensee. These reasons cannot therefore justify the refusal of consent to the underlease. Further, the evidence showed that the planning application was only of any real value to Towerbeg if Towerbeg obtained possession. In practice this is only likely to happen if Ansa surrenders the leases. So the loss to Towerbeg is conditional on a further event which is now unlikely to occur, given Ansa’s agreement with Ford to the grant of the underleases.[70]Ansa and Ford submitted that the real reason underlying the refusal of consent was Towerbeg’s desire to develop the site in accordance with its planning application. I have no doubt that this was the commercial rationale for refusing consent. That reason was neither advanced in writing, nor, as it seems to me, was it one which has anything to do with the relationship of landlord and tenant under these leases. It is, however, sufficient for the purposes of this case to say that none of the reasons actually advanced in writing was a reasonable one.

Conclusion

[71]I have reached the conclusion that Ansa was not in breach of the covenants against alienation in the leases. If I had not so concluded, I would have been prepared to grant Ansa relief against forfeiture. Towerbeg’s consent to the underleases to Ford was unreasonably withheld.

Cited in 1 later judgment