Sequent Nominees Ltd v Hautford Ltd [2019] UKSC 47

[Music] hello and welcome to another edition of the UK law which you podcast with me your host Marcus cleaver this week we're going to be looking in the case of sequent nominees limited and Hartford Limited the citation for this case is 2019 UK SC 47 in a case that we are looking at examines how and when a landlord is considered to be acting and reasonably the property in question is a narrow six storey Terrace building in Soho with an iron mongers occupying the basement and ground-floor but the upper floors were used for various of the

purposes for in 2013 the subtenant ironmongers looked to convert those upper floors into self-contained flats but problems arose when the existing planning permission for the 1st and 2nd floor which had been office and storage space did not allow for residential use of the area at this point it is useful to step in and examine what the lease that was agreed between the landlord and tenant said in relation to this matter firstly clause 3:11 says that a tenant can actually use the building for retail office all residential purposes although there is the caveat that the landlord

does not give a warranty that this usage will necessarily comply with planning rules secondly clause 319 states that a tenant can only apply for planning permission when they have the consent of the landlord although importantly there is another caveat here which says that the consent of the landlord must not be quote unreasonably withheld end quote so where does that leave the current planning application to use the two floors for residential purposes well the tenant did seek the consent of the landlord at that time but the landlord refused their consent the question then was whether this

was an unreasonable withholding of consent the reason that the landlord gave was that if the planning permission were to be granted then this would mean that the majority of the building would become residential in nature this was important because it opened up the possibility of enfranchisement which is a legal term for the process whereby the lease holder can compulsorily acquire the freehold via the leasehold format 1967 it followed that the landlord therefore refused consent because such a change in circumstances would be damaging to their own financial interests on the other hand the tenant argued that

this was unreasonable and they were successful in both the county court and the Court of Appeal before the landlord made one final appeal to the Supreme Court which is where we pick it up to begin with the justices who gave the majority judgment focused on the time at which the landlord made that decision after all there is a big difference between what might be considered reasonable at the start of the lease agreement and what is reasonable when the request was actually made by the tenant in the end it was decided that when a promised by

the landlord is limited or qualified in this way then it becomes dependent on the context at the time that the decision is made as things may have changed a great deal since the agreement was initially signed to come to a conclusion about the reasonableness or otherwise of the decision made by the landlord it is important to scrutinize the arguments that have been put forward by the tenants suggesting that the determination by the landlord was unreasonable in the end there were three such arguments and the first of these was that the refusal to consent was inconsistent

with clause 3:11 of the agreement which as a reminder states that the tenant can use any part of the building for residential purposes the problem is that while this might be true in isolation is not true when read alongside Clause 319 which makes it clear that the ability to use the building in such a way has to also be consistent with planning legislation the second argument suggesting that the landlord's decision was unreasonable was that this self saying Clause 319 which gives the landlord the ability to refuse consent was actually only designed to protect the landlord

from any legal liability in relation to subsequent changes to planning laws the problem that the majority of Justices had with this approach that was adopted in the High Court is that there isn't any compelling evidence to demonstrate that this was the only reason why the clause was included in the agreement instead the correct approach to analyzing the scope of the refusal is much broader it must simply be related to the established landlord-tenant relationship finally the third argument is the one that was used by the course of appeal which held that there was no good reason

for the landlord to refuse consent on the grounds of potential enfranchisement under the leasehold Reform Act 1967 because in theory any third party could independently apply for the exact same planning permission without any of the same restraints faced by the tenant in this case the majority in the Supreme Court accepted that this was true in theory but in practice no third party had actually applied for such planning permission and so the refusal by the landlord in this context did still represent a legitimate attempt to protect their interests taking all of this into account the Supreme

Court came to the conclusion that the landlord had indeed acted reasonably by refusing consent and protecting their property against the possibility of enfranchisement before we move on to our full analysis of this case it is worth examining the dissenting judgments because as you will have already heard me say this was a majority judgment of three to two while law breaks gave the majority judgment which Lord can Worth and Hodge have greed with there were dissenting judgments from both lady Arden and Lord Wilson the main problem for both of these justices was that the majority judgment

effectively ignored clause 311 which should have allowed the building to be used for residential purposes in an approach that almost aligned with that taken by the Court of Appeal lady Arden looked back toward the original intention in the lease agreement and came to the conclusion that it was surely not the intention that the landlord should be able to use these clauses in order to stave off a small added risk of enfranchisement in relation to the property but Wilson only very slightly and held that where the question of reasonableness was dependent on the facts of the

case then supreme court would need good reason to depart from the findings of the original trial judge and that was simply not present here so this de leaves us with the question of which side is right the merger Teesside with the landlord and seemed to take a view that aligns most closely with the actual wording in the lease agreement meanwhile the minority end up siding with the tenant and have a view that is more steeped in the practical reality of the situation both make valid points but overall the way that the argument of the majority

strings together is just a bit too clunky for my liking by challenging the issues raised by counsel and from previous judgments it feels like Lord Briggs is trying to convince himself that the refusal was not unreasonable instead of making a positive argument that the final decision was in fact reasonable for them that might be enough to sway the case after all the wording of the agreement seems to give the landlord the right to refuse consent and so it is only fair that the burden of proof is with the other side that is fine but it

does come off as pretty weak compared to the reality of the situation remember that the idea is that the landlord should not unreasonably withhold consent and for me at least that reads as if the default position is that the landlord should give their consent unless there is a good reason not to do so in these proceedings the only reason is presented is the risk of enfranchisement that we have already discussed now that is indeed a real and legitimate concern but the actual risk itself is so relatively small that it doesn't seem to match up against

the comparatively drastic action of withholding consent on a planning application furthermore as the Court of Appeal has already noted it is not as if the refusal would completely eliminate the risk of enfranchisement anyhow this approach by the Court of Appeal would allow you to continue respecting the wording that is in the original agreement but also apply it to the present day and furthermore take account of more of the practical realities that affect the situation such as planning law and the likelihood of enfranchisement in the end it is only by paying attention to the way that

decisions line up with the way that business is done and the way that we actually live our lives that the application of the law can make sense well thank you very much for tuning in to this episode of the UK law weekly podcast and thanks as ever been sangkum who provide the theme music this is the last episode of 2019 so I hope that you've enjoyed all of the podcast episodes of this year and we'll be back with many more in 2020 so I look forward to that happy New Year to every one of you

and for now [Music]