No.1 West India Quay (Residential) Ltd v East Tower Apartments Ltd [2016] EWHC 2438 (Ch)

Appeal Ref: CH-2016-000066[2016] EWHC 2438 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Case No B10CL598
ON APPEAL FROM THE COUNTY COURT AT CENTRAL LONDON
Her Honour Judge Walden-Smith
Venue Rolls Building,, Royal Courts of Justice, Fetter Lane, London, EC4A 1NLDate 06/10/2016
Before
THE HONOURABLE MR JUSTICE HENDERSON
Between
NO.1 WEST INDIA QUAY (RESIDENTIAL) LTDAppellantEAST TOWER APARTMENTS LTDRespondentNO.1 WEST INDIA QUAY (RESIDENTIAL) LTD Appellant/Cross-Respondent- and -EAST TOWER APARTMENTS LTD Respondent/Cross-Appellant
Mr Jonathan Wills (instructed by Trowers & Hamlins LLP) for AppellantMs Lina Mattsson (instructed by Penningtons Manches LLP) for RespondentHearing Hearing date: 29 June 2016
Judgment

Introduction

[1]Long leases of residential property commonly contain a covenant by the lessee not to assign or underlet the whole of the demised premises without the prior written consent of the lessor, such consent not to be unreasonably withheld. The present appeal and cross-appeal concern a qualified covenant of this nature contained in three materially identical long underleases (“the Underleases”) of residential apartments in the tower at No.1 West India Quay, 26 Hertsmere Road, London E14. The head lessor, No.1 West India Quay (Residential) Ltd (“West India Quay”), is the defendant, and the lessee, East Tower Apartments Ltd (“ETAL”), is the claimant, in proceedings under Part 8 of the CPR brought by ETAL in the County Court at Central London seeking declarations that consent had either been unreasonably refused by West India Quay, or had not been granted within a reasonable time, in respect of proposed assignments of the Underleases to external purchasers.[2]More specifically, ETAL sought declarations that West India Quay had unreasonably delayed consent in relation to apartment 28.08, and had unreasonably withheld consent in relation to apartments 27.02 and 27.09.[3]The case was heard by Her Honour Judge Karen Walden-Smith over two days, on 27 July and 4 December 2015. In her written judgment dated 16 December 2015 (“the Judgment”), the judge held for the landlord, West India Quay, in respect of apartment 28.08. She held that no formal request had been served in accordance with the provisions of the Landlord and Tenant Act 1988 (“the 1988 Act”) until 29 April 2015, and consent to assign was granted within a reasonable time thereafter, on 13 May 2015.[4]In respect of apartments 27.02 and 27.09, West India Quay had refused consent to assign for three reasons set out in its letter of 26 May 2015 to ETAL’s solicitors, Penningtons Manches LLP. First, ETAL would not agree to give an undertaking in respect of West India Quay’s fees of £1,600 plus VAT, comprising legal fees of £1,250 plus VAT and surveyor’s fees of £350 plus VAT. ETAL asserted that the legal fees were unreasonably high, and that no surveyor’s fee should be paid because it was unreasonable for West India Quay to require inspection of the apartment by a surveyor. Secondly, following on from this last point, West India Quay wished to carry out an inspection before reaching a conclusion on consent to assign, in order to check whether there had been any breaches of the terms of the Underleases. ETAL challenged the need for any such inspection as a prerequisite of permission to assign, and therefore refused to pay the fee requested. Thirdly, West India Quay had asked to be provided with a bank reference for the prospective assignees, in order to assess and consider their covenant strength. Again, ETAL challenged the reasonable need for such references, and therefore refused to provide them.[5]The judge decided each of these issues in favour of the lessee, ETAL. She also found that a reasonable fee for the assignments would have been £350 plus VAT. Accordingly, by paragraph 1 of her Order dated 15 February 2016 (as amended under the slip rule, CPR rule 40.12) (“the Order”), she declared that the following conditions imposed by West India Quay for consent to assign were not reasonable:
“(1) an undertaking for fees in the sum of £1,250 plus VAT and/or £1,600 plus VAT; (2) that an inspection of the premises must take place before consent for assignment is given; (3) that an undertaking for the fees of the inspection must be given before any inspection is arranged; and (4) that a current UK bank reference be provided for any prospective assignee.”
[6]Paragraph 2 of the Order declared that West India Quay had been in breach of its statutory duty under s.3 of the 1988 Act in relation to the assignment of the Underleases of apartments 27.02 and 27.09 by imposing one or more of the above conditions. West India Quay was also ordered to pay ETAL’s costs of the action, to be assessed if not agreed, and to make a payment on account of £28,000 by 29 February 2016. West India Quay’s application for permission to appeal was refused.[7]West India Quay was subsequently granted permission to appeal by Nugee J on 12 April 2016, together with a stay of the Order pending determination of the appeal. The grounds of appeal are set out at considerable length in West India Quay’s appellant’s notice, but shortly stated they are as follows: i) the judge erred in finding that it was not reasonable for West India Quay to seek a bank reference from ETAL in respect of the proposed assignee; ii) the judge erred in finding that it was not reasonable for West India Quay to require an undertaking from ETAL in the sum of £350 plus VAT in respect of the attendance of a surveyor to inspect the demised premises as part of the consideration of each application for permission to assign, and to require that such an inspection take place as part of its consideration of each application; iii) the judge erred in finding that it was not reasonable to charge more than £350 plus VAT by way of legal fees in respect of West India Quay’s consideration of each application for consent to assign; and iv) the judge erred in relation to costs by not awarding West India Quay its costs of a preliminary hearing before His Honour Judge Collender QC on 3 July 2015.[8]By a respondent’s notice dated 6 May 2016, ETAL in effect seeks permission to cross-appeal on three grounds: i) the judge erred in finding that West India Quay had not been in breach of the 1988 Act in relation to the assignment of apartment 28.08; ii) having found that £350 plus VAT would have been a reasonable sum to require in respect of legal fees, the judge was wrong to allow West India Quay to retain that amount; and iii) the judge also erred in relation to costs, by refusing to order West India Quay to pay ETAL’s costs on the indemnity basis. Subject to these points, ETAL seeks to uphold the remainder of the Order for the reasons given by the judge in the Judgment.[9]No application for permission to cross-appeal was made by ETAL to the judge, nor has the application been considered by any judge of the High Court. Accordingly, in considering the cross-appeal I will need to decide whether permission should be granted for each of the three grounds, although counsel sensibly argued the cross-appeal on the assumption that permission might be granted, effectively treating the hearing before me as a rolled-up hearing.[10]There are two further procedural points which I should mention.[11]First, although the case was initially brought by ETAL as one of considerable urgency, and included a claim for exemplary damages if the proposed sales of apartments 27.02 and 27.09 were lost, arrangements were then made whereby ETAL agreed to comply with all of West India Quay’s requirements in order to allow the sales to proceed, but without prejudice to ETAL’s case that the conditions were unreasonable. On this footing, West India Quay gave an undertaking to refund the sums paid if the claim succeeded, and the Order therefore includes a provision requiring West India Quay to pay ETAL £3,400 plus VAT by 29 February 2016. It follows from this that the claim for damages was not pursued at the hearing before the judge. The terms of the agreement made between the parties are relevant, however, to the second ground of the cross-appeal.[12]Secondly, the evidence before the judge was all in the form of witness statements, and there was no cross-examination or oral evidence (despite an erroneous reference by the judge in paragraph 34 of the Judgment to an explanation given by West India Quay which “did not withstand the scrutiny of cross-examination”). This slip was no doubt caused by the fact that the parties made their closing submissions over four months after the first day of the hearing on 27 July 2015. This is therefore a case where the appeal court is in as good a position as the trial judge to assess and draw inferences from the evidence. Nevertheless, the parties rightly accepted that the hearing before me should proceed in the usual way as an appeal limited to a review of the decision of the judge, and not by way of a re-hearing: see CPR rule 52.11(1), and the commentary in the White Book at paragraph 52.11.1. In order to allow the appeal on any ground, I must therefore be satisfied that the judge’s decision was wrong: see rule 52.11(3)(a). There is no suggestion that any “serious procedural or other irregularity” took place which might have rendered her decision unjust within sub-paragraph (3)(b).[13]The principal witness for ETAL was its solicitor, Mr John James Morrison of Penningtons Manches LLP. The only evidence for West India Quay was given by a director of the company, Mr Lambros Hadjiioannou. Each of them filed two witness statements, the second in response to the other’s first statement.

The Underleases

[14]As I have said, each of the Underleases is in materially identical form. I will take the Underlease of apartment 27.02 as an example. It is dated 17 August 2004, and made between West India Quay as lessor and ETAL as lessee. In consideration of a premium of £352,800, West India Quay demised the premises to ETAL for a term of 999 years (less three days) from 24 June 2004, at a yearly ground rent of £175 (subject to increase after 25 years), and also reserving as rent a quarterly service charge and an apartment energy charge payable on written demand.[15]By clause 3.4, the lessee covenanted to keep the demised premises clean and in good repair and condition. The following covenants relating to the state and condition of the demised premises are also relevant:
“3.6.1 To permit the Lessor and its duly authorised agents with or without workmen and others at all reasonable times upon reasonable notice (and at any time in case of emergency) to enter the Demised Premises or any part for the purpose of viewing and examining their state and condition and of carrying out any works which the Lessor is obliged to or may carry out pursuant to the provisions of this Underlease … 3.7.1 Not without the consent in writing of the Lessor (which consent shall not be unreasonably withheld or delayed…) to alter the layout alter cut injure add to or remove any of the walls or timbers forming part of the Demised Premises or replace the front door or the glass in it 3.7.2 Not in any event to alter injure cut add to or remove any of the walls beams or timbers or cladding of the Building 3.7.3 Any works done must comply with all the requisite statutory consents and no work shall be commenced without the consent and plans having been approved of in writing by the Lessor”
[16]By clause 3.10, the lessee covenanted:
“To pay to the Lessor on demand all proper costs charges and expenses (including legal costs and surveyors’ fees) which may be incurred by the Lessor:- … 3.10.4 as a result of the Lessee applying for the Lessor’s consent or approval under the provisions of this Underlease whether or not that consent or approval is given; and 3.10.5 as a result of any default by the Lessee in performing or observing the Lessee’s obligations in this Underlease”
[17]Clause 3.12 contains covenants against alienation, of which the following parts are material:
“3.12.2 Not to assign or underlet the whole of the Demised Premises without the prior written consent of the Lessor (such consent not to be unreasonably withheld) PROVIDED THAT the Lessee shall be entitled to underlet the Demised Premises to a respectable and responsible tenant for a term not exceeding three years without the need to obtain the Lessor’s consent 3.12.3 Not to assign or underlet the whole of the Demised Premises unless the rents hereby reserved are at that time fully paid up 3.12.4 Not to assign or underlet for a term exceeding three years the Demised Premises to a corporate body or an individual not resident in the United Kingdom without first obtaining from the assignee or underlessee and delivering to the Lessor a guarantee in the terms contained in Schedule 5 … for the performance by the assignee or underlessee of all the covenants and conditions herein contained from a corporate body or an individual resident in the United Kingdom first approved by the Lessor whose approval shall not be unreasonably withheld … 3.12.6 Not to assign the Demised Premises unless the Lessee shall at the same time obtain and forthwith deliver to the Lessor a deed of covenant in its favour by which the assignee covenants to observe and perform during the remainder of the Term the covenants and obligations on the part of the Lessee herein contained”
[18]Clause 5.1 deals with the service of notices, and provides that:
“Any notice required to be given to the Lessor shall be well and sufficiently given if left or sent through the first-class post by pre-paid letter addressed to the Lessor at its registered office Any demand or notice sent by post shall be conclusively treated as having been made given or served 48 hours after posting”

The facts in outline

[19]No.1 West India Quay is a 33 storey building comprising a hotel and 158 residential apartments let on long leases by West India Quay. On 17 August 2004, ETAL took 999-year underleases from West India Quay of 42 apartments (together in some cases with car parking spaces), including the Underleases. ETAL is a company registered in the British Virgin Islands, and it does not itself occupy any of the 42 apartments of which it is underlessee. The apartments are managed for it by Premview Properties Ltd, which is a company based in north London. Premview grants short-term assured short-hold tenancies of the apartments, typically of six to 12 months’ duration, and there is therefore a regular turnover of tenants in occupation. Pursuant to clause 3.12.2 of each Underlease, these sub-lettings do not require the consent of West India Quay.[20]In his evidence in reply, Mr Morrison comments that in a building such as this prospective tenants would plainly expect to find the apartments in a good state of repair and condition. If they were left in a poor condition, or had been altered by an outgoing tenant, Premview would take appropriate action.[21]Unfortunately, a long standing dispute about service charges developed between West India Quay and ETAL. This eventually led to ETAL making an application to the First-tier Tribunal (Property Chamber) in June 2014 under s.27A of the Landlord and Tenant Act 1985, for a determination of the sums payable by ETAL for utilities supplied to its apartments in the period from May 2008 to October 2014. In those proceedings West India Quay’s expert acknowledged that it had significantly overcharged ETAL and its other lessees. A hearing took place in July 2015, following which the First-tier Tribunal made certain further findings which West India Quay has challenged in an appeal to the Upper Tribunal. This appeal was due to be heard in early September 2016.[22]Against this background of disagreement over service charges, and a deteriorating relationship between the parties, ETAL decided to sell its 42 apartments. Between February 2014 and April 2015, ETAL obtained West India Quay’s consent for the assignment of eight apartments. No requirement for inspections or bank references was made by West India Quay, and the parties approached the obtaining of consent in a relatively informal manner through e-mail correspondence. The only conditions imposed by West India Quay for these assignments were payment of all service charges demanded (although these were in dispute and are the subject of the Tribunal proceedings) and a fee of £1,250 plus VAT. This fee was paid, without apparent objection, by ETAL. According to Mr Morrison, ETAL had always considered the fee excessive, but did not wish to risk losing the purchaser by challenging it, and also felt it would not be cost-effective to do so.[23]Details of the eight assignments are set out in a schedule exhibited to the evidence of Mr Hadjiioannou. The assignees include individuals and a company, Canary Wharf Lettings Ltd. The premiums paid by the purchasers range from £499,999 to £1.165 million.[24]In relation to apartment 28.08, ETAL first sought West India Quay’s consent by a letter dated 27 March 2015. The letter was not sent to West India Quay’s registered office, but to an address which West India Quay had specified for the purpose of making applications for its written consent for an assignment in a letter dated 25 July 2014. ETAL’s letter confirmed its undertaking to pay West India Quay’s costs in connection with the licence to assign in the sum of £1,250 plus VAT, whether or not the matter proceeded to completion. Receipt of the letter was acknowledged by West India Quay on 30 March 2015. No point was taken about the address to which the letter had been sent, but ETAL was asked to bring the service charge account up to date. This was duly done, albeit under protest, and on 14 April 2015 ETAL informed West India Quay that completion was due to take place on Friday 17 April 2015, so the licence to assign was urgently required. In response, Emma Catterall for West India Quay said that she would “arrange for signature [of the licence to assign] here too”.[25]Despite this, no licence was signed and returned to ETAL. Instead, on 20 April 2015 West India Quay, for the first time, sought to impose conditions of an inspection and an undertaking to pay £350 plus VAT for a surveyor to inspect the property. These conditions were then repeated in letters dated 22 and 28 April 2015. This was challenged in correspondence by ETAL’s solicitors, on the grounds that consent to assign had already been given, and the requirement was in any event unreasonable. Eventually, ETAL agreed on 29 April 2015 to pay the sum requested, but only if the inspection took place on the following day and the licence to assign were executed by 4pm on 1 May 2015. This proposal was not acceptable to West India Quay, but after ETAL threatened to bring proceedings, and further correspondence, West India Quay agreed on this occasion not to insist on the inspection as a condition for granting permission to assign. Their letter added:
“Going forward, each application must be considered on its own facts.”
The consent was finally granted on 13 May 2015, 47 days after the original request on 27 March 2015.[26]Less than a week later, on 19 May 2015, West India Quay through its in-house solicitor, Chris Christou, sought to impose the same condition in respect of inspection for apartments 27.02 and 27.09, together with an undertaking to pay £1,600 plus VAT as a fee (i.e. the £1,250 previously charged, plus £350 for the surveyor). In addition, a requirement of a bank reference was imposed for the first time:
“My client also requires a current UK bank reference for the prospective assignee, confirming that the prospective assignee is good for the minimum sum of £5,250.00 [or, for apartment 27.09, £6,250.00] per annum.”
ETAL replied agreeing to an inspection in principle, but not to payment of a fee for it. After further correspondence, on 26 May 2015 West India Quay wrote refusing to grant consent for the assignments in the terms which I have already recorded at [4] above. There was a dispute before the judge whether this letter constituted a refusal of consent, but she decided in paragraph 21 of the Judgment that it did, and there is no appeal against her conclusion on that point.

The Law

[27]There is no disagreement between the parties about the principles of law which have to be applied in deciding whether a refusal of consent to an assignment was unreasonable.[28]Section 1 of the 1988 Act provides, so far as material, as follows:
“1(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— (i) assigning, … 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… — (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, …” (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— (i) assigning, … 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). (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. (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. (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, …”
[29]It is common ground that s.1 of the 1988 Act applies in the present case. Accordingly, West India Quay owed the duty set out in subsection (3) to give consent within a reasonable time, unless it was reasonable not to give consent, and to serve a written notice of its decision on ETAL in the specified form. By virtue of subsection (6), the burden of proof lies on West India Quay to show that (in the case of apartment 28.08) its consent was given within a reasonable time, and (in relation to apartments 27.02 and 27.09) that its refusal of consent for the reasons given in the letter of 26 May 2015 was reasonable.[30]The leading authority on what amounts to an unreasonable withholding of consent to an assignment remains the decision of the Court of Appeal in International Drilling Fluids Ltd v Louisville Investments (Uxbridge) Ltd [1986] Ch 513. In his judgment, with which the other two members of the court agreed, Balcombe LJ set out a list of seven propositions of law which he deduced from the authorities, at 519G to 521D. For present purposes, the relevant numbered propositions are these:
“(1) The purpose of a covenant against assignment without the consent of the landlord, such consent not to be unreasonably withheld, is to protect the lessor from having his premises used or occupied in an undesirable way, or by an undesirable tenant or assignee: per A.L. Smith LJ in Bates v Donaldson [1896] 2 QB 241, 247, approved by all the members of the Court of Appeal in Houlder Brothers & Co. Ltd v Gibbs [1925] Ch. 575. (2) As a corollary to the first proposition, a landlord is not entitled to refuse his consent to an assignment on grounds which have nothing whatsoever to do with the relationship of landlord and tenant in regard to the subject matter of the lease: see Houlder Brothers & Co. Ltd v Gibbs, a decision which (despite some criticism) is binding on this court… (3) The onus of proving that consent has been unreasonably withheld is on the tenant [this has now been reversed by s.1(6) of the 1988 Act]. (4) It is not necessary for the landlord to prove that the conclusions which led him to refuse consent were justified, if they were conclusions which might be reached by a reasonable man in the circumstances: Pimms Ltd v Tallow Chandlers Company [1964] 2 QB 547, 564. … (7) Subject to the propositions set out above, it is in each case a question of fact, depending upon all the circumstances, whether the landlord’s consent to an assignment is being unreasonably withheld: see Bickel v Duke of Westminster [1977] QB 517, 524, and West Layton Ltd v Ford [1979] QB 593, 604, 606-607.”
[31]Two further propositions are added to this list in Woodfall: Landlord and Tenant, Vol.1, at paragraph 11.140:
“(8) It will normally be reasonable for a landlord to refuse consent or impose a condition if this is necessary to prevent his contractual rights under the lease from being prejudiced by the proposed assignment or sublease; (9) It will not normally be reasonable for a landlord to seek to impose a condition which is designed to increase or enhance the rights that he enjoys under the lease.”
Proposition (9) is often called the rule against an uncovenanted advantage. The principal authority for propositions (8) and (9) is the decision of the Court of Appeal in Mount Eden Land Ltd v Straudley Investments Ltd (1997) 74 P&CR 306 at 310, per Phillips LJ.[32]On behalf of West India Quay, Mr Wills places particular emphasis on proposition (4). He referred me to the way in which the relevant test was formulated by Lord Cozens-Hardy MR in Shanly v Ward (1913) 29 TLR 714:
“It was not enough to show that other lessors might have accepted the proposed assignees; the lessors were not to be held to have withheld the licence unreasonably if in the actions they took they acted as a reasonable man might have done in the circumstances.”
This test was then endorsed by the Court of Appeal in Pimms Ltd v Tallow Chandlers Company [1964] 2 QB 547 at 564, and in Balcombe LJ’s fourth proposition in the International Drilling case.

West India Quay’s Appeal

[33]I now turn to West India Quay’s grounds of appeal, beginning with the question whether it was reasonable for West India Quay to require a bank reference for the assignee in respect of apartments 27.02 and 27.09. (1). The request for a bank reference[34]The stated purpose of the request for a bank reference was to enable West India Quay to assess and consider the covenant strength of the proposed assignee. West India Quay therefore wished to be satisfied that the assignee would be able to perform the covenants in the Underlease which involved the expenditure of money, including in particular payment of the quarterly service charge. This was, in principle, a matter about which West India Quay was in my view clearly entitled to seek reasonable reassurance, and a bank reference would be a standard way of providing it. According to Crabb and Seitler, Leases: Covenants and Consents, 2nd Edition (2008), at paragraph 6B.62:
“There is no doubt that the financial status of an assignee can affect the covenanted rights of the landlord. It has a bearing upon the landlord’s interest in the receipt of future rent and therefore the landlord is entitled to withhold consent or impose conditions in order to protect that right to rent.”
The authors add, at paragraph 6B.65:
“The tenant will invariably have to supply references relating to the proposed assignee: bank references, trade references, accounts etc.”
[35]The judge referred to these extracts from Crabb and Seitler in paragraph 39 of the Judgment, saying that the former was “true” and the latter “uncontroversial”. She nevertheless found that the requirement for a bank reference in the present case was unreasonable, essentially for three reasons given in paragraph 38 of the Judgment: i) the proposed assignees “were both paying substantial premiums for the long leases and, by that fact alone, [had] shown themselves to be people of financial substance”; ii) if the assignee did not pay the service charge, the landlord could take steps to forfeit the lease, and if relief from forfeiture were not granted, would enjoy a valuable windfall; and iii) if the apartment were being bought with mortgage finance, the mortgagee would exercise “its rights under the mortgage to pay off any outstanding service charge or ground rent so as to ensure that their security is not lost or lessened”. For these reasons,

the judge said in paragraph 39 that:

“The bank reference would not assist in deciding this application as it is not necessary and the application should not have been left outstanding pending receipt of such a reference.”
She said that the financial status of the assignee was “already known”, and West India Quay’s concerns about the assignee’s covenant strength “should not be great given their relatively modest amount compared to the premiums being paid for the long lease”.[36]With every respect to the judge, I consider that her reasoning on this question is open to a number of criticisms. In the first place, the relevant test is not whether a bank reference was “necessary”, but merely whether a reasonable landlord in the position of West India Quay might have required one before deciding whether to grant permission to assign. Given the “invariable” practice referred to by Crabb and Seitler, it is very difficult to see how the requirement could be stigmatised as unreasonable, even if many landlords might have dispensed with it (as indeed West India Quay had done with the previous assignments by ETAL).[37]Secondly, although relevant, the fact that the assignee was in each case paying a substantial premium did not necessarily demonstrate that the assignee was a person of financial substance. The money might have been provided by way of gift, for example in a family context, and if the assignee had to borrow in order to pay the premium, he would then have to make regular payments to service the debt. I agree with the submission of Mr Wills that a landlord cannot be expected to speculate about the financial position of a tenant on the mere basis that he has the funds to acquire the apartment.[38]Thirdly, the reassurance which the landlord is entitled to seek is that the relevant covenants will be complied with. The fact that the landlord has certain remedies if the covenants are not complied with is therefore irrelevant. It is important not to confuse the covenanted advantage which a landlord is entitled to protect with the remedies available to the landlord if a covenant is breached. Likewise, a landlord should not have to speculate about the steps that a mortgagee might take to protect its security in the event of an unremedied breach of covenant by the tenant. Finally, a bank reference of the type requested would have been simple and inexpensive to provide, and cannot be regarded as an onerous requirement.[39]In my view Ms Mattson had no real answer to these criticisms on behalf of ETAL. She argued that in the context of assignments of residential dwellings, for high premiums and at a nominal rent, it is unusual and unreasonable for a landlord to demand financial information relating to a proposed assignee who is an individual resident in the United Kingdom. I do not agree. It seems to me entirely reasonable for a landlord to seek reassurance about the ability of the assignee to meet the service charge, and to ask for a simple bank reference stating that the assignee is good for the estimated amount. Ms Mattson also argued that it was relevant for West India Quay to consider the position on a breach of the relevant covenants, but again I do not agree for the reasons I have given.[40]A further argument advanced by Ms Mattson was that by making the request West India Quay was attempting to improve its position under the Underlease, and thus to obtain an uncovenanted advantage, because the detailed conditions for assignments contained in the Underlease include provisions for guarantees in relation to assignments to a corporate body or an individual not resident in the United Kingdom. There is no condition, however, requiring a guarantee for an assignee resident in the United Kingdom, or to the need for references to be supplied by a proposed assignee. I am unable to accept this submission. The only advantage which West India Quay is seeking to protect is the advantage conferred by the covenants in the Underlease, and its right to do so flows from the qualified nature of the tenant’s right to assign the lease.[41]Finally, Ms Mattson sought to challenge the good faith of West India Quay in introducing the requirement for bank references for the first time on 19 May 2015. The explanation given for this change of stance by Mr Hadjiioannou is that West India Quay took on a new assistant solicitor in March 2015, and he was asked to review the procedure followed by West India Quay in relation to applications for consent to assign. The new requirement was “in line with that review”. The judge seems to have found that this reason did not withstand scrutiny, at least in the context of the new requirement for an inspection; but in the absence of the non-existent cross-examination to which she referred, I do not think it was open to her to disbelieve the clear evidence of Mr Hadjiioannou on this point.[42]To conclude, therefore, I respectfully consider that the judge erred in principle in her reasoning on this question, and in all the circumstances the requirement of a bank reference was a reasonable one for West India Quay to impose. (2). Inspection and payment of a surveyor’s fee of £350[43]This issue needs to be considered in the light of certain provisions in the Underlease. The Underlease contains covenants of a usual nature to repair (in clause 3.4) and not to make alterations to the demised premises without consent (clause 3.7). Under clause 3.6, the landlord has a right of entry for the purpose of viewing and examining the state and condition of the demised premises, exercisable at any reasonable time upon reasonable notice, or at any time in an emergency. The landlord’s costs of such an entry are not recoverable, however, unless the tenant is found to be in default, in which case they may be recoverable as part of the landlord’s costs of remedying the default. Under clause 3.10.4, the landlord is entitled to recover all proper costs, charges and expenses which it may incur as a result of an application for consent to an assignment, whether or not consent is given.[44]It is well established that serious and unremedied breaches of repairing covenants may justify a refusal of consent to assign, although the position is different if the breaches are minor and easily remediable: see Crabb and Seitlerat paragraphs 6B 146-147. Accordingly, submits Mr Wills, it was reasonable for West India Quay to require an inspection of each apartment before deciding whether to consent to the assignments. Only by an inspection could it be ascertained whether any breaches had occurred, and if so whether they were serious. Furthermore, although a continuing breach of covenant (such as a breach of the covenant to keep the demised premises in good repair) would in principle be enforceable against an assignee, that is not true of a once-and-for-all breach, such as an alteration made without the landlord’s consent. And even in the case of continuing breaches, the assignee may not have the same covenant strength as the assignor when it comes to making good the breach. Thus it was reasonable for West India Quay to require an inspection by a surveyor, as part of the exercise of gathering relevant information before deciding whether to consent to the assignment. On that footing, the costs of the inspection, if reasonable, are recoverable under clause 3.10.4, whether or not consent is eventually given, and it is irrelevant that no costs would have been recoverable, unless a breach was discovered, had the inspection taken place in reliance on clause 3.6.[45]These arguments were rejected by the judge, for three main reasons. First, she thought it was unreasonable for West India Quay to require an inspection as part of the assignment process, when no such right is provided for in clause 3.12, and West India Quay was always free to inspect the premises in accordance with clause 3.6. Secondly, there was no evidence to indicate that any relevant breaches of covenant might have taken place, so if West India Quay wished to satisfy itself about the position it should do so by using the machinery of clause 3.6. Thirdly, even if an inspection was necessary before deciding whether to consent to the assignment, it did not require the instruction of an external surveyor at a cost of £350 each time. Any such inspection should be undertaken by West India Quay’s own officers or managing agents, who would be well capable of detecting any obvious and substantial breach which might justify a refusal of consent to the assignment.[46]At first sight, these reasons may appear to have considerable force, quite apart from the respect due to the views of an experienced judge in this area. Nevertheless, I have to say that I find them less than convincing. The first two reasons largely turn on the express terms of the Underleases, and the availability of a right to inspect under clause 3.6. But clause 3.6 is a general provision which applies throughout the term, whether or not an assignment happens to be in prospect. When the question of inspection arises in the context of a request by the tenant for permission to assign, the position is governed by Clause 3.12 and the law applicable to such requests. Provided West India Quay can show that it is reasonable to require an inspection in the context of the proposed assignment, there can be no breach of its duty under s.1(3) of the 1988 Act so long as the inspection is reasonable in its scope and cost. The cost of the inspection is then recoverable from ETAL under clause 3.10.4, whether or not consent to the assignment is granted.[47]As to the judge’s third reason, I do not think it can be said to be unreasonable for West India Quay to instruct a surveyor, when the issue is whether there has been compliance with the repairing and alterations covenants in the Underlease. Not all breaches, even serious ones, are obvious on a cursory or inexpert inspection, and it is hardly excessive to employ a surveyor at a cost of £350 in the context of an assignment of a long lease of prime residential property in London. It is also material to bear in mind that neither apartment had been occupied by ETAL, but had been let to a succession of short-term tenants without any involvement of West India Quay. In principle, therefore, I consider that the requirement for inspection by a surveyor was reasonable in all the circumstances. If that point is reached, there is no dispute that the fee charged was a reasonable one.[48]Apart from arguments which I have already dealt with, Ms Mattson submitted that it is unreasonable in principle for ETAL to be required to pay for an inspection, when no breach of covenant is suspected to have occurred. Any speculative enquiry of this nature by a landlord, she says, should be pursued at its own expense. If the question did not arise in the context of a proposed assignment, I would agree with these sentiments, which are reflected in clause 3.6 of the Underlease and the inability of the landlord to charge for the inspection unless a breach is discovered. But, as I have sought to explain, the proposed assignment makes all the difference. It engages different provisions in the Underlease, and before deciding whether to grant consent to the assignment the landlord is in my judgment entitled to find out whether the relevant covenants have been complied with, and (if not) whether the breaches are minor and easily remediable.[49]For these reasons, I respectfully consider that the judge also came to the wrong conclusion on this issue. (3). The fee of £1250 plus VAT[50]Since I have held that West India Quay’s charge of £350 plus VAT for an inspection by a surveyor was reasonable, the issue under this heading relates to the basic administrative charge of £1,250 plus VAT which West India Quay sought to recover. It is common ground that the sum charged is an “administration charge” within paragraph 1(1) of Schedule 11 to the Commonhold and Leasehold Reform Act 2002, and as such is only payable to the extent that it is reasonable.[51]In his evidence, Mr Hadjiioannou lists the procedures which are followed by West India Quay on each application for consent to an assignment. The list consists of 26 items, mostly of a routine and purely administrative nature. The more substantial items include : i) checking with West India Quay’s managing agents, Marathon Estates Ltd, whether there are any arrears of rent, whether they are aware of any breaches of the Underlease, and whether they have any record of alterations to the apartment; ii) West India Quay’s in-house solicitor writing to the assignor’s solicitors, confirming that he is instructed, outlining any requirements and requesting an undertaking for fees; iii) arranging an inspection of the premises as necessary, and considering the result of any such inspection; iv) preparation of a draft licence to assign by the in-house solicitor, and sending it to the assignor’s solicitors; v) considering any amendments to the draft; and vi) arranging for the licence to be engrossed once it has been approved.[52]According to Mr Hadjiioannou, the work is all handled either by the in-house solicitor, Mr Christou, who has over 27 years’ conveyancing experience and whose charge-out rate is £400 plus VAT per hour, or by a property manager who is suitably qualified. Mr Hadjiioannou exhibits to his second statement quotations obtained from two other firms of solicitors for dealing with a licence to assign for apartment 27.02, in the sum of £1,350 and £1,500 plus VAT respectively. It appears, however, that these quotations included preparation of a draft licence to assign, whereas West India Quay had a standard form document which it used on each occasion.[53]In a case in the Upper Tribunal (Lands Chamber), Holding & Management (Solitaire) Ltd v Norton [2012] UKUT 1 (LC), [2012] L&TR 15, the President, George Bartlett QC, held in the context of a fee charged for consent to an underletting of a short-hold tenancy that a reasonable fee should be assessed by reference to the things that would need to be done in a typical case, or that were in fact done in the case under consideration, rather than by reference to a list of all the things that could conceivably be done in connection with the grant of consent: see his decision at [17]. That approach appears to me to be apposite in the present case, where Mr Hadjiioannou’s list of items is comprehensive in nature, and there is no breakdown of the work actually required in relation to the two assignments.[54]In another decision of the Upper Tribunal, Proxima GR Properties Ltd v Dr Thomas D McGhee [2014] UKUT 0059 (LC), the Deputy President, Martin Rodger QC, made the point at [39] that the purpose of charges for consent to an underletting or assignment is to reimburse the landlord’s reasonable expenses of considering whether to grant consent, including administrative expenses. The covenant requiring consent “may not be used as a source of profit for landlords or their managing agents”, and:
“it is not reasonable to treat the requirement to obtain consent as an opportunity to charge a fee unrelated to the costs of the routine enquires or administrative tasks which are appropriate in most cases.”
I respectfully agree.[55]In the light of these principles, the judge was unpersuaded that Mr Hadjiioannou’s evidence could justify a charge of anything approaching £1,250. In paragraph 26 of the Judgment she referred to other cases in the Upper Tribunal where a fee of £165 had been considered reasonable, albeit in different factual situations. She thought those cases gave “a good indication” of what a reasonable fee might be. Given the very different factual circumstances of those cases, I am not sure that I agree with this comment. In my view every case has to be considered on its own facts, and it must not be forgotten that the present case concerns assignments of high value residential apartments in a prime London location. With regard to Mr Hadjiioannou’s list, the judge then said in paragraph 27:
“Every conceivable step has been set out but I am not satisfied that these are anything more than standard, administrative steps including emails and letters. The charge-out rate of £400 per hour appears excessive, and while the solicitor may be charged at that rate it is not necessary for someone of his standing to do this work. The amount of work carried out does not, in my judgement, justify the fee contested for.”
She added that the evidence obtained from other solicitors did not help, because the quotations were given for dealing with a “one-off” contract to assign, “whereas in this case the licence to assign is repetitive”.

The judge then stated her conclusion in paragraph 28:

“What is being carried out is, in my judgement, no more than an administrative task and I would not be willing to suggest that (save for any inspection) the cost to the landlord is more than £350. I am not satisfied on the evidence that West India Quay have provided that their costs for the assignment are any greater than that £350.”
[57]In my judgment, this is an assessment that the judge was entitled to reach on the evidence before her, and it cannot be said that she was wrong to conclude as she did. In the absence of any specific evidence directed to the work actually done on each assignment, her robust and sceptical approach was in my view amply justified. This ground of appeal therefore fails.

West India Quay’s Appeal: Overall Conclusion

[58]I have decided that West India Quay was reasonably entitled to require current UK bank references for the prospective assignees, and an inspection of each apartment by a surveyor at a cost of £350 plus VAT, but that West India Quay’s insistence on payment of its own costs in the sum of £1,250 plus VAT was unreasonable. What, then, is the effect of these conclusions on the overall question whether West India Quay’s refusal of consent to the assignments in its letter of 26 May 2015 was unreasonable?[59]The parties are agreed on the principle by reference to which this question has to be answered. It is set out in Woodfall at paragraph 11.139:
“If the landlord has a good and a bad reason for withholding consent, consent may nevertheless have been reasonably withheld if the good reason is a sufficient reason and is not otherwise vitiated by the bad reason. However, there may be cases where the real reason for refusal is a bad one, and the good reasons are no more than makeweights, or where the bad reason vitiates the good one. In the absence of such factors, the landlord is entitled to rely on his good reason.”
These propositions are supported by the judgments of Peter Gibson J in British Bakeries (Midlands) Ltd v Michael Testler & Co Ltd [1986] 1 EGLR 64 and of Neuberger J in BRS Northern Ltd v Templeheights Ltd [1998] 2 EGLR 182.[60]Mr Wills submits that West India Quay is entitled to rely on its good reasons, and that they are not vitiated by the bad reason. He submits, in particular, that the request for the bank references was conceptually distinct from the other two reasons, and until a reference was provided the landlord could not even properly consider whether to agree to the proposed assignment.[61]The difficulty with this submission, however, is that it does not fully reflect the contemporary correspondence. In the refusal letter of 26 May 2015, Mr Christou on behalf of West India Quay said this:
“My client is not prepared to proceed with the Licences for the following reasons:- 1. Costs Clause 3.10.4 of the Underleases clearly entitles my client to recover my client’s costs. The amount requested is not unreasonable and it includes the additional fee which you state for the inspection. My client is not prepared to proceed until I receive the undertaking requested in my letter of 19 May 2015.”
[62]The undertaking requested in West India Quay’s previous letter of 19 May 2015, also written by Mr Christou, was in the following terms:
“The fee regarding the Landlord’s Licence to Assign is estimated at £1,600.00 plus VAT. This is on the basis that the matter does not become unduly complicated or delayed. Should this be the case, I reserve the right to vary this figure. My client requires the Apartment to be inspected by a surveyor. Arrangements are being made in this respect but I will require your firm’s undertaking to pay the proposed fees, such undertaking to apply whether or not the matter proceeds to completion, before the appointment can be finalised.”
[63]In the light of these letters, it seems clear to me that West India Quay was saying it would not proceed with the licences to assign unless and until it received an undertaking from ETAL’s solicitors to pay the estimated fees of £1,600 plus VAT. This figure included the disputed £1,250 plus VAT in respect of West India Quay’s own costs. There is no indication that West India Quay would have modified its position in this respect, even if ETAL had agreed to provide bank references and to pay for inspection by a surveyor. I therefore think Ms Mattson is right to submit that in this case the bad reason vitiated the two good ones, with the consequence that West India Quay’s success on those two matters is not enough to render the refusal of consent reasonable.[64]Accordingly, my overall conclusion is that West India Quay’s appeal against the declarations contained in sub-paragraphs 1(2), (3) and (4) of the Order succeeds, but that the appeal against the declarations in paragraphs 1(1) and 2 of the Order will be dismissed.[65]I now turn to consider ETAL’s cross-appeal, and the appeal and cross-appeal on costs which it is convenient to consider together.

Ground 1 of the cross-appeal: the assignment of apartment 28.08

[66]I have already set out the outline facts relating to the assignment of apartment 28.08. Since consent to the assignment was eventually given by West India Quay, the critical issue is whether the consent was given “within a reasonable time” as required by section 1(3) of the 1988 Act. The question mainly turns on whether ETAL’s application for consent to the assignment was validly made on 27 March 2015, when the first application by letter was made, or on 29 April 2015, when a further request was served on West India Quay’s registered office. If the first request was validly made in accordance with the 1988 Act, the judge found in paragraph 19 of the Judgment that the consent to assign would have been unreasonably delayed, because 47 days had passed between the application and the consent finally granted on 13 May 2015. That conclusion is not challenged by West India Quay. If, on the other hand, the notice was only validly served on 29 April 2015, the judge found in paragraph 15 that there was no unreasonable delay. As the judge said:
“The ‘reasonable’ time must be judged according to the facts of each individual case and there is nothing in this case which would make me consider it appropriate to measure that time in mere days rather than weeks. The landlord does not have to respond immediately and, even if there was an earlier notice (not complying with the provisions of the Act but putting the landlord on notice of the intention to seek consent to assign) that does not take away from the landlord’s right to a reasonable time to consider the application and make a decision whether to agree to the assignment or not.”
[67]Section 5(2) of the 1988 Act provides that:
“An application or notice is to be treated as served for the purposes of this Act if— (a) served in any manner provided in the tenancy, …”
The relevant provision in the Underlease of apartment 28.08 is clause 5.1, which so far as relevant states that:
“Any notice required to be given to the Lessor shall be well and sufficiently given if left or sent through the first-class post by pre-paid letter addressed to the Lessor at its registered office.”
[68]ETAL’s letter of 27 March 2015 was not sent to West India Quay’s registered office, but to the address specified in a “sales pack” which had been sent by West India Quay to the solicitors then acting for ETAL on 25 July 2014. That letter included the following statement:
“7. Licence/Transfer/Assignment/Underletting 7.1 An application for the Landlord’s written consent for a transfer/assignment should be sent to:- West India Quay (Residential) Limited G6A Belgrave Court 36 Westferry Circus Canary Riverside London E14 8RL F.A.O. Mr Chris Christou Neither this pack nor any further correspondence from ourselves, the Landlord or any body acting on the Landlord’s behalf may be construed as the Landlord’s consent to the proposed transfer/assignment. Consent, if granted, will be in the form of an executed and completed Licence to Assign.”
West India Quay (Residential) Limited G6A Belgrave Court Canary Riverside London E14 8RL

F.A.O. Mr Chris Christou

[69]ETAL argued before the judge, and again before me, that this letter made a clear and unequivocal representation that West India Quay required any application for its written consent to an assignment to be sent to the address specified. There was no indication that West India Quay would insist on service of the application at its registered office pursuant to clause 5.1 of the Underlease. In the circumstances, ETAL argued that West India Quay is estopped from denying that the application was invalid for failure to deliver or send it by post to the registered office, because ETAL had acted to its detriment by sending the application to the address expressly specified by West India Quay. It was submitted by ETAL that to allow an estoppel to operate in this way would not undermine the purpose and policy of the 1988 Act, and was therefore not precluded by the terms of s.5(2)(a): see Shah v Shah [2001] EWCA Civ 527, [2002] QB 35, and Wilken and Ghaly, The Law of Waiver, Variation, and Estoppel, 3rd Ed (2011), at paragraph 9.131.[70]These submissions were rejected by the judge, who considered herself bound by, and in any event agreed with, the decision of Arnold J on a similar point in E.ON UK Plc v Gilesports Ltd [2012] EWHC 2172 (Ch), [2013] 1 P&CR 4. In that case, the relevant issue was whether Gilesports had “served” within the meaning of s.5(2)(a) of the 1988 Act a written application for consent to assignment of a sublease, the relevant provision of which incorporated the provisions on service of notices contained in s.196 of the Law of Property Act 1925. Under section 196, such a notice would be sufficiently served if it was either left at the last-known place of abode or business in the United Kingdom of the lessor, or if it were sent by post in a registered letter addressed to the lessor at that place. Gilesports’ written application for consent was sent by email, and was accepted as such, but neither method of service stipulated by s.196 was used. The judge held that s.196 required service by one of the two methods, and that since neither method was used the application was not validly “served” on the lessor. He also rejected an alternative argument that the parties were bound by an estoppel by convention, holding that there was no agreement, mutual understanding or mutual assumption that section 1 of the 1988 Act was engaged: see [54].[71]In my view the facts in the E.ON case are distinguishable from those of the present case, because there was no express representation made by the lessor that it would accept service of an application by email. Nevertheless,

the judge went on to explain why she thought that Arnold J’s analysis was in any event correct:

“20. The LTA 1988 creates a structured approach for the service of notices and the manner in which the landlord is to treat applications for consent to assign. Section 5(1) expressly provides that service is in accordance with the terms of the lease. By putting forward an alternative address West India Quay have undoubtedly added to confusion but E-ON makes clear that acknowledgement of an application that has not been validly served will not make the notice valid. The actions of West India Quay in this matter, in putting forward an alternative address, does not undermine the terms of the Act or the provisions set out in the lease.”
[72]I have not found this an easy point, but on balance I consider that the judge came to the right conclusion. I think it would be going too far to regard paragraph 7.1 of West India Quay’s “sales pack” letter of 25 July 2014 as, in effect, an offer to waive the formal requirement for service at its registered office contained in the Underlease. The paragraph may reasonably be read as specifying the address to which the application should be sent in the first instance, no doubt in the hope and expectation that it could then be resolved by agreement. The requirement for determination of an application within a reasonable time, as interpreted in the authorities, means that once a formal application has been made the landlord has only a limited time within which to deal with it, usually measured in weeks rather than months. That is a salutary principle, but it may also assist the parties to have a prior opportunity to discuss the matter informally.[73]The force of this point, in general terms, was accepted by Carnwath LJ in NCR Ltd v Riverland Portfolio (No.1) Ltd (No.2) [2005] EWCA Civ 312, [2005] L&TR 25, where he said at [19]:
“On the first issue, I do not share the judge’s view of the significance of the delay between August 11, and August 20. I would make four points. First, a clear distinction needs to be drawn between informal exchanges, both internally and between the parties, and the formal process of application and decision contemplated by the Act. On the one hand, it is in all parties’ interests that there should be such free exchanges with a view to reaching an agreed solution without prejudicing their respective positions under the Act. On the other hand, the serious legal consequences resulting from the statutory scheme require that the process of application and decision should be subject to a reasonable degree of formality.”
[74]The significance of the two dates mentioned by Carnwarth LJ was that, following a period of discussion and negotiation about the proposed assignment, on August 11 2003 the landlord’s solicitors informed the tenant’s solicitors that, in addition to the concerns already expressed, the landlord was seriously concerned about the covenant strength of the proposed undertenant, and on 20 August they formally confirmed the refusal of consent both on that ground and on the grounds previously canvassed. The other two members of the court, Lord Slynn of Hadley and Ward LJ, agreed with Carnwath LJ.[75]If the conclusion which I have reached is correct, no question of estoppel arises. The letter of 25 July 2014 was no more than an invitation to send the application for consent, in the first instance, to the address specified. If I am wrong about that, however, I would accept the submission for ETAL that the alleged estoppel would not undermine or otherwise be inconsistent with the legislative purpose of the 1988 Act. I would identify the policy of the 1988 Act as being to prevent landlords from unreasonably withholding or delaying the grant of consent, or seeking to impose unreasonable conditions for such consent. That purpose would be furthered, not thwarted, by holding the landlord to a clear and unequivocal representation, upon which the tenant had acted to its detriment, that it would accept formal service of the application at an address other than that required by the Underlease.[76]Finally, I need to deal with ETAL’s alternative submission that, if no valid application was made until 29 April 2015, the delay of 14 days until the application was determined on 13 May 2015 was itself unreasonable. In my view this argument is untenable, for the reasons given by the judge in paragraph 15 of the Judgment, with which I respectfully agree.[77]In conclusion, therefore, while I would grant ETAL permission to appeal on this ground, I would dismiss the appeal on it.[78]The short issue here is whether, having held that the fees of £1,250 plus VAT required by West India Quay for dealing with the proposed assignments of these two properties were unreasonably high, the judge erred in permitting West India Quay to retain the £350 plus VAT which she considered reasonable. ETAL argues that the judge should have ordered the entire sum paid by it to be repaid, because the effect of an unreasonable refusal of consent is to release the lessee from the obligation to obtain consent: see Woodfall at paragraph 11.128. As a matter of the general law of landlord and tenant, this proposition is not disputed by West India Quay. If consent is unreasonably withheld, there is no breach of covenant by the tenant in assigning without consent.[79]ETAL also relies on the terms agreed between the parties to prevent the sales of the two properties from falling through. On 16 July 2015 ETAL offered to comply with all of the conditions imposed by West India Quay, including payment of the fee of £1,250 plus VAT, on condition that:
“if the Court finds upon final disposal of this claim that your client unreasonably withheld or refused to grant consent in breach of the Underlease and/or the Landlord and Tenant Act 1988 and that our client was therefore entitled to proceed with the assignments without your client’s consent, your client will return all of the sums paid pursuant to this firm’s undertakings without our client having to bring separate proceedings in restitution.”
[80]In response to this offer, on 22 July 2015 West India Quay said:
“In the event that the Court finds … that our client had unreasonably withheld or refused consent to the applications for consent to assign the leases of apartments 27.02 and 27.09 … then, on that finding: (i) in the event that the sums pursuant to the undertaking have been paid to our client those sums will be returned to you; or (ii) in the event that such sums have not by that point been paid over by you your firm will be released from the undertakings that you will by then have provided to pay fees of £1,600 plus VAT per apartment.”
[81]West India Quay’s answer to these submissions is that they overlook the express contractual indemnity in clause 3.10.4 of each Underlease, pursuant to which West India Quay is entitled to recover all its proper costs, charges and expenses referable to each application for consent, even though consent was refused. That contractual entitlement remains, even though ETAL was in the event entitled to assign without the landlord’s consent, it having been unreasonably withheld. Mr Wills further submits that, on a reasonable construction of the exchange of correspondence set out above, the common intention of the parties was that West India Quay should repay the fees charged to the extent that they were held to be unreasonable, but no further. That is the most ETAL could have expected to recover in an action for restitution, and to go further would be inconsistent with clause 3.10.4 of the Underleases.[82]I prefer the submissions of West India Quay on this issue. The effect of clause 3.10.4 is that West India Quay has a good contractual claim for £350 plus VAT in respect of each assignment, and I do not think the correspondence, properly construed, was intended to detract from this. The intention was to put in place sensible arrangements to restore the parties’ position to what it would have been had the unreasonable condition not been imposed. In that situation, ETAL would have been entitled to assign without consent, but West India Quay would likewise have been entitled to its contractual indemnity for £350 plus VAT.[83]Accordingly, on this issue too, I would grant ETAL permission to appeal, but dismiss the appeal.

Costs

[84]It remains for me to consider the points on costs which the parties have raised by way of appeal and cross-appeal. Apart from those issues, the court will of course in any event have to reconsider the question of costs, both at first instance and on the appeal, when this judgment is handed down.[85]I will begin with West India Quay’s fourth ground of appeal, for which permission was granted by Nugee J. The argument is that the judge erred in principle in awarding ETAL its costs of the preliminary hearing before Judge Collender QC at the Mayor’s and City of London Court on 3 July 2015, and should instead have awarded West India Quay its costs of that hearing. The hearing was listed, at the insistence of ETAL’s solicitors that the claim was urgent, on a date before West India Quay’s acknowledgement of service was even due. There was no application by ETAL for summary judgment or for any form of interim relief, but merely a Part 8 claim for a final order.[86]In those circumstances, submits Mr Wills, it was an abuse of process to seek what was, in effect, a premature final hearing. Had West India Quay not attended the hearing, the court could not have granted the final order sought, and the most it could have done (as indeed it did) was to make suitable directions for the filing of evidence and trial of the claim.[87]The costs of the hearing on 3July 2015 were reserved by Judge Collender, so they had to be dealt with at the hearing before Judge Walden-Smith. In her judgment on the terms of the order dated 14 February 2016, she said she did not consider that ETAL had fallen into error “in the way that it ensured this case was brought on as quickly as possible”. ETAL had brought the claim, and was successful. In the judge’s view, there was no reason to depart from the usual principle that costs should be awarded to the successful party. In effect, therefore, the judge treated the costs of the hearing on 3 July 2015 as costs in the case.[88]This is an approach which the judge was in my view entitled to adopt. The case was inherently an urgent one, before the parties had agreed the terms which enabled the disputed assignments to proceed, and although the hearing on 3 July was technically premature, in the absence of any application for interim relief, it provided a convenient opportunity for case management directions to be given. In those circumstances, I think it was within the judge’s wide discretion to treat the costs of the hearing as costs in the case. This ground of appeal will therefore be dismissed.[89]I come finally to ETAL’s third ground of appeal, which although not properly formulated in the respondent’s notice is implicit in the order which ETAL asked the appeal court to substitute for that made by the judge. The contention is that the judge should have ordered West India Quay to pay ETAL’s costs on the indemnity basis. I propose to deal with this contention very briefly. Whatever merit it might conceivably have had if I had dismissed all of West India Quay’s grounds of appeal, it seems to me an impossible argument to run now that I have upheld two of those grounds. Further, even if I had upheld the judge in full, I would still have seen no reason to dissent from her view (in paragraph 5 of her further judgment of 14 February 2016) that there was nothing to take this case “out of the ordinary” so as to justify an award of indemnity costs.[90]I therefore refuse ETAL permission to cross-appeal on this issue.[91]The overall result, therefore, is that ETAL’s cross-appeal will be dismissed.

Cited in 1 later judgment