Mount Eden Land Ltd (Part 20 Defendants) v Towerstone Ltd (Part 20 Claimants) (2002)


It was reasonable for a landlord to require that an intending guarantor of a proposed assignee should provide references that spoke of his ability to meet all his contingent liabilities and not merely those liabilities that would arise under the lease; and that three guarantors should be provided.


Action by the claimant landlord ('L') to forfeit the lease of business premises at 146/148 Oxford Street, London and for possession thereof on the ground that the defendant ('D') was unlawfully in occupation of the premises in breach of a qualified covenant against assignment. The husband ('M') and wife directors of the original tenant of the premises ('T') separated and it was agreed that the business would be taken over by D, which was another company controlled by M. D in fact took up possession of the premises in 1997. In 2001 T applied for L's licence to assign the residue of the term granted by the lease to D. The lease provided that, in the event of a proposed assignment to a limited company, L might require two or more of its directors to stand as sureties. L invoked that provision and asked that references be provided for three of D's directors. In the event, references were only provided for two guarantors. M's references spoke of his ability to meet the current rent, but also disclosed that he had other contingent liabilities, notably to D's bank. L refused to give its consent unless references were provided that spoke of M's ability to satisfy all his contingent liabilities, including the guarantee liability that he was proposing to take on towards L. No such references were provided and L's consent was not forthcoming. T nevertheless completed the assignment of the lease to D. By its defence D contended that L had unreasonably withheld its consent to the proposed assignment.


(1) The insuperable difficulty for D was that it had only provided references for two of the three sureties required by L. Whilst the court would accept that a term was to be implied into the lease that L could not require so large a number of sureties as to make the assignment provisions unworkable, a request for three sureties was not unreasonable. It followed that the assignment was in breach of the lease. (2) If it had been necessary to decide the point, the court would have held that it was not unreasonable for L to require that M should provide references that spoke as to his ability to meet all his contingent liabilities and not merely those liabilities that would arise under the lease. (3) In all the circumstances of the case, the court refused to grant relief from forfeiture.

Judgment accordingly.