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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Singh v Dhanji & Anor [2014] EWCA Civ 414 (13 March 2014) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2014/414.html Cite as: [2014] EWCA Civ 414

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IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM NOTTINGHAM COUNTY COURT
(HIS HONOUR JUDGE BARRIE)

		Royal Courts of Justice Strand, London, WC2A 2LL
		13 March 2014

1. LORD JUSTICE FLOYD: This is an appeal from His Honour Judge Barrie in a claim against an appellant landlord for damages for breach of statutory duty arising out of his refusal to consent to the assignment of a lease on dental premises at Talbot Street, Nottingham. After a three-day trial in the Nottingham County Court, His Honour Judge Barrie granted a declaration that the landlord's conditions for permitting the tenant to assign the lease were unreasonable and awarded damages, which he assessed at £183,000 plus interest of £31,000, giving a total judgment of some £214,000. He appeals from that judgment by permission of Rix LJ, granted at an oral hearing in October 2012 both in relation to the declaration and the damages award.
2. The appellant landlord, Mr Mark Buddha Singh, was referred to by the judge as "Mr Buddha" and I will continue to do so. Mr Buddha is a dentist and the owner of adjoining properties at 1A and 3 Talbot Street. Until March 2000 he practised there as a dentist, but in March of that year he sold the practice and let the building at number 3 Talbot Street to another dentist, Miss Hassanally (now Mrs Dhanji, and I will so refer to her), granting her a 15-year term from 10 March 2000. Her husband, Mr Iqbal Dhanji, is the practice director at the Talbot Street practice.
3. The relationship between Mr Buddha on the one hand and the Dhanjis on the other was not a congenial one almost from the outset. A number of disputes ensued. Firstly, Mrs Dhanji brought a claim for damages and breach of warranty in relation to the sale which was settled on terms which the judge described as favourable to Mrs Dhanji. Secondly, the rent due from Mrs Dhanji was, due to an error, not paid to Mr Buddha for a period of more than one year. This was because, again as the judge found, Mr Buddha had closed the account into which the rent was to be paid. Mr Dhanji was the first to notice the problem and raised it with Mr Buddha. This led Mr Buddha to reenter the premises on the evening of 16 December 2006 by way of an opening from number 1A into number 3 at attic level, to change the locks and disconnect the electricity supply. The judge characterised this conduct as unreasonable and unjustified, and noted that it had led to severe disruption to patients and to staff. Mr Buddha had had no reason to doubt that the tenants intended to pay the arrears which had arisen primarily through his own decision to close the account. His reentry into the premises led to the granting of an injunction by Briggs J, as he then was, on 19 December 2006 to restore Mrs Dhanji to possession and led some months later to a successful application by Mrs Dhanji for relief from forfeiture concluded at a hearing on 13 July 2007.
4. On the occasion of his evening visit, Mr Buddha noticed to his surprise that the premises had been extensively refurbished by Mrs Dhanji. This refurbishment had been carried out in 2004. The work involved moving two stud partition walls, replacing all the dental chairs and associated plumbing, replacing the sinks, cupboards and other equipment, removing suspended ceilings and replacing flooring. The cost of the works had been some £140,000. Mrs Dhanji did not tell Mr Buddha about it at the time.
5. The judge had before him two further disputes. The first of these concerned whether the lease was to be treated as forfeit because of Mrs Dhanji's alleged breaches of covenant identified in a number of notices served under section 146 of the Law of Property Act 1925. The second dispute concerned whether Mr Buddha had unreasonably refused his consent to an assignment of the lease proposed in July 2007. It is this last dispute alone which is the subject of this appeal.
6. On 26 July 2007 Mrs Dhanji's solicitors wrote to Mr Buddha to apply for consent to an assignment of the lease to a proposed purchaser, Dr Pradhan, who was a cousin of the tenants. Mr Buddha responded on 7 August 2007 to say, amongst other things, that he was preparing notices in relation to breaches of the lease. He added that until the breaches were resolved no assignment would be agreed to. He reiterated this point in a further letter of 9 August.
7. On 23 August and 9 September 2007, Mr Buddha served a number of section 146 notices. The judge found that Mr Buddha's definitive decision on the request for consent to assign was given in a letter of 17 September 2007. This contained a consent to assignment conditional on, firstly, all breaches of the lease specified in section 146 notices being complied with; secondly, that the tenant notify him of that so that an inspection could be carried out; and thirdly, that the tenant had, as he put it, stopped trespassing in the adjoining building. The letter also asked for confirmation that the proposed assignee was aware that Mr Buddha did not propose to renew the lease at the end of its term, but the judge held that that was not a condition of the assent to assign.
8. The tenants' response was to assert that even if the breaches complained of were genuine claims they were of such a minor nature that they would not adversely affect the value of the landlord's reversion. She denied that the breaches had taken place. Thus, as the judge said, the battle lines were drawn. On 24 September 2007 Mr Buddha brought a claim for possession based on the section 146 notices. Shortly thereafter, Mrs Dhanji brought her claim for a declaration that she was entitled to damages for unreasonable refusal of the consent to assign.
9. The lease contained the usual restriction on assignment without the landlord's consent, such consent not to be unreasonably withheld. As such, it imposed the duties on the landlord provided for in section 1 of the Landlord and Tenant Act 1988, which are as follows:

"1 Qualified duty to consent to assigning, underletting etc of premises.

(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

(ii) underletting

(iii) charging, or

(iv) parting with the possession of,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 and section 2 of this Act—

(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,and, if the question arises whether he served notice under that subsection within a reasonable time, to show that he did."

Thus the burden of showing that the conditions of the assent were reasonable fell on Mr Buddha.

10. Mr Patterson, who appears for Mr Buddha, took us through a number of authorities. In particular, he stressed that 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 commonsense meaning in this context as in others. For that he relied on Ashworth Frazer Limited v Gloucester City Council [2001] UKHL 59; [2001] 1 WLR 2180 at [5]. I accept that that is the right approach.
11. Mr Patterson also accepts that the mere fact that the landlord is able to identify a breach of covenant does not mean that he is reasonable in refusing consent. The question is whether the breach of covenant is of such a nature as to justify the refusal of consent to assignment. That will involve a consideration of the nature and gravity of the breach.
12. In order to support the case which Mr Buddha says the judge should have accepted, it would be necessary for him to satisfy the court of two matters. The first was that in the light of the circumstances known to Mr Buddha on 17 September 2007, did he have reasonable grounds to suppose that the tenants were in breach of the covenants identified in the section 146 notice? The second was in respect of those breaches which Mr Buddha supposed existed, were they in fact so serious or so grave that a reasonable landlord could refuse consent to the assignment on the basis of them?
13. It is not necessary to refer in detail to the allegations in the section 146 notices. They included breaches of fire precautions, steps taken to prejudice insurance cover, breach of decorating covenants, restrictions on signage and last of all the modifications which Mr Buddha had discovered on his visit.
14. Having found that none of the allegations of breach were proved, the judge obviously declined to make the order for possession. We are not concerned with that aspect of his decision. He then turned to the question which arises on this appeal: whether the conditions imposed by Mr Buddha on his consent to the assignment, namely the remedy of the breaches and the cessation of trespass, were reasonable. The judge first directed himself by reference to a summary of the law in Woodfall: Landlord and Tenant volume 1, paragraph 11.146, which said this:

"If the only ground on which consent is refused is breach of covenant by the assignor, the reasonableness or unreasonableness of refusal depends upon the degree of seriousness of the breach and on whether the landlord's position is prejudiced by the assignment. Where a lease contains a covenant by the tenant to repair, the mere fact that the tenant is committing a continuing breach of the covenant to repair does not necessarily entitle the landlord to refuse his consent to an assignment, at all events where the amount of disrepair is not serious. Where consent was refused on ground of breaches of covenant (not to make alterations in the premises) and breaches were easily remediable at the end of the term, consent was held to have been unreasonably refused in Cosh v Fraser 1964. So also it has been held to be unreasonable to refuse consent merely because the landlord was in dispute with the tenant over the alterations to the heating system."

15. The judge summarily rejected the condition based on trespass in paragraph 77 of his judgment, and again we are not concerned with that allegation on this appeal.
16. So far as the alleged breaches of covenant were concerned, the judge said this at paragraph 78:

"Approaching the matter as Woodfall suggests, I conclude that the breaches alleged by Mr Buddha were not serious enough to have provided a reasonable ground for imposing a condition of consent that they be remedied, even if the breaches had been proved."

The judge then went on to say:

"Since Mr Buddha has completely failed to prove the breaches on which he relied and has failed to demonstrate to me a real problem of trespass I conclude that the conditions attached to the consent to assignment in the letter of 17 September were not reasonable conditions and therefore there was a breach by Mr Buddha of the statutory duty to give consent under the 1988 Act."

17. This paragraph is attacked by Mr Patterson on Mr Buddha's behalf in his first ground of appeal. He says that the judge relied on the fact that the breaches had not been proved when instead he should have looked at the matter from the point of view of a reasonable landlord, knowing what Mr Buddha knew, at the date of the decision to refuse consent. In his submissions, Mr Patterson relies heavily on the modifications, some of which he says appear to be structural, and the fact that some of them may have breached fire regulations or required building control approval. He says that the judge should have found that Mr Buddha had justifiable concerns about these breaches at the relevant date. Thus he submits, to take the example of the structural modifications, these were very substantial involving some £140,000 of work. The relevant terms of the lease allowed non-structural alterations but not structural ones. Mr Buddha pressed for details about what had been done but was not provided with them. If the judge had approached the matter from the perspective of Mr Buddha at the relevant date he might have been able to conclude that Mr Buddha reasonably believed that there had been structural alterations. He invites us to send the matter back for a retrial in the County Court as he recognises that he cannot ask the court to make findings in his favour on these points on appeal.
18. Mr Patterson was not able to point us to any evidence that Mr Buddha had in fact invited the judge to approach the case in that way or provided any evidence of the basis on which he thought in September 2007 there had been structural modification to the premises. The section 146 notice did not so allege. Mr Buddha's two witness statements, dated February 2009 and January 2011, said he had discovered that the tenant had made a number of modifications to the property; he did not say that he believed them to be modifications of a character which fell within the restriction of the lease.
19. I do not think there is anything in this ground of appeal. Whatever might have been the position if Mr Buddha had presented his case in the way he now wishes to, the judge made a clear, and in my view fatal, finding against him as to the second of the two requirements I have outlined above. Thus the judge in the first sentence of paragraph 78 holds that the breaches, even if proved, were not serious enough to have provided Mr Buddha with a reasonable ground for imposing a condition. That had always been the contention of the tenant and is a finding of fact with which this court will not readily interfere. That was a sufficient basis on its own for holding that the refusal of consent was unreasonable. On a fair reading of his judgment, the judge was holding that, to the extent that Mr Buddha had any evidence of breaches at the time he refused consent, the breaches were of a minor nature and were of a kind which would not prejudice the landlord if not remedied until the end of the term. In that connection, the judge was well aware that Mr Buddha had raised no objection to the identity of the proposed assignee. Most of the alleged breaches were ones which, even if they were proved, a landlord could take up with the new tenant if concerned to do so. Other breaches were of a trivial and minor nature. There is nothing in the finding of the judge with which this court could or should interfere.
20. I turn then to the remaining grounds of appeal. These concern the judge's assessment of damages. Ground 3 criticises the judge's computation of damages. Rix LJ at the oral hearing in October 2012 had considered a ground of appeal in relation to damages based on whether the judge had properly taken into account the length of the remaining term of the lease in arriving at his figure for damages to be properly arguable. An amended set of grounds was obviously required. It is possible that ground 3 in the current reamended grounds of appeal was supposed to be that ground. However, it is far from clear that it is in fact the same as the ground for which Rix LJ gave permission. When the formal application to amend the grounds of appeal came before Aikens LJ in December 2013, he asked for further explanation before giving permission. He asked for that explanation to be provided within seven days. No such explanation was forthcoming within the time allowed. In the result, Mr Patterson did not press ground 3 and we need say no more about it.
21. Before Rix LJ, Mr Buddha argued two further grounds of appeal which have subsequently become numbered grounds 3(a) and 3(b). Ground 3(a) concerns the fact that the offer on which the judge based his valuation of the practice in 2007 was subject to a condition that the profit derivable from the practice was verifiable at £140,000 a year. The ground alleged the judge had failed to take this consideration into account. Ground 3(b) was based on the allegation, said to be contained in further evidence, that the tenant had relocated the practice elsewhere and was at least planning to do so at the time of the trial. Rix LJ granted permission for ground 3(a). However, although ground 3(b) was ventilated orally before Rix LJ, he did not grant permission for it. At paragraphs 8 and 9 of the transcript of the judgment he gave on that occasion, he said this:

"Mr Buddha and I have discussed his grounds and submissions to some extent in court this afternoon and Mr Buddha is prepared to take his stand upon the two major points, if I may address them in that way, which counsel have elevated to prominence, indeed the only points which he has elevated to prominence, in his skeleton argument.

In brief, it seems to me that those two points, but none of the other points, are fit for appeal. It seems to me that there is no real prospect of appeal from the judge's findings following a witness action at which at least one expert was heard orally. It seems to me that the judge's careful findings as to the validity of notices and the particular breaches or non-breaches concerned are very unlikely to be revisited successfully on appeal. However, the two major points addressed by counsel are in a different position and are essentially as follows."

He then goes on to describe the two major points which are the ground I have already dealt with and the point which has become ground 3(a).

22. At paragraph 18, Rix LJ says this:

"On those two grounds I would give permission to appeal, but on all the other grounds of appeal I would refuse permission."

23. Following an oral hearing at which permission to appeal is refused, it is not open to an appellant to seek permission to appeal for that ground. Thus, although Aikens LJ in December 2013 purported to give permission for ground 3(b), his decision to do so has, in my judgment, to be regarded as a nullity. This is on the same basis that permission for a second appeal, for example, to the Court of Appeal granted other than by the Court of Appeal, is so regarded: see White Book 2013, paragraph 52.13.5.
24. Further, as Mr Patterson accepts, ground 3(b) depended for its success on further evidence being admitted on appeal. It would appear that Aikens LJ refused an application for permission to adduce further evidence in December 2013. If that decision was to be challenged, it would need to be challenged within 7 days (see CPR 52.16(6) and (6)(a)) by requesting a hearing. Mr Patterson invited us to grant him an extension of time. In the light of my conclusion about the ground of appeal, there would be no purpose in doing so.
25. There was in any event no valid ground for extending time. The original application to adduce further evidence was made very long after Rix LJ had refused permission. Even if we were entitled to do so, I would not have considered it right to allow this ground to be argued. It is another ground which would require a retrial if there was substance in it. It is by no means clear to me that the matters alleged in fact undermine the judge's assessment of damages, and Mr Diggle, for the respondents, submitted that they did not. It does not appear to have been made clear to Rix LJ, from a reading of the transcript of argument, why the judge's assessment was so undermined. I would add only that the further evidence which we were invited to have regard to was, to put it at its lowest, in a state of preparation which made it very difficult to understand. It consisted of a draft, unsigned witness statement of Mr Buddha and a bundle of assorted documents, not all of which were identifiable as having been referred to in the draft.
26. That leaves ground 3(a). The judge commenced his assessment of damages by pointing out that he had very little material on which to do so, an observation which was plainly correct. He had before him the report of the single jointly instructed valuation expert, Mr Newsom. Mr Newsom was not posed any written questions by Mr Buddha. Mr Buddha did not request his attendance for cross-examination. In addition to Mr Newsom's evidence, the judge had evidence of two offers made for the property firstly by Oasis Dental Care and secondly by Dr Pradhan. Oasis' offer was made firstly on 20 June 2007 on the basis of what were described as the conditions of the lease being standard with the ability to renew. Other points were also made. The sum offered was £380,000 at completion. Subsequently, on 3 August 2007, Oasis offered £550,000, including £125,000 for taking over leases of dental equipment, leading to an effective payment of £425,000 payable on completion. No mention is made in this offer of the ability to renew, but it is now said, importantly, that it was based on a verifiable practice profit of £140,000 to be checked through due diligence. It is this offer which Dr Pradhan matched by his of £430,000.
27. Mrs Dhanji claimed damages on the basis of the difference between the price she would have received on a sale of the practice and assignment of lease in 2007 and the price she could realise at the date of assessment in December 2011. The judge started from the agreed sale price to Dr Pradhan of £430,000 as the 2007 sale price. He referred to the other offers, the offer made by Oasis, as well. From that he deducted sums for capital gains tax. He next recognised that a countervailing benefit in the delayed sale was that Mrs Dhanji had continued to earn a profit from the practice which she has continued to own. Mrs Dhanji did not put in evidence of her actual profits in the period. The judge assessed them using a broad brush at £18,500 a year, which was a deduction of 20 per cent from the figure of £23,500 odd earned in 2005/2006. This led to a further deduction from the starting figure of £78,000 odd.
28. On the evidence, the judge concluded that there were good prospects that the sale would have gone through at the agreed price. However, he pointed out that nothing was guaranteed and he allowed a further deduction of 5 per cent from the gross sales price of £21,500 to allow for that. The judge then turned to the value at the date of judgment in December 2011. He referred to Mr Newsom's view that it was nil because so short a period of the lease remained. However, he did not accept that view. Having considered various factors, he assessed the remaining value as £100,000. The end result was a net loss of £179,000.
29. In support of ground 3(b), Mr Patterson argues that the condition in the Oasis offer of verifiable profits of £140,000 a year is inconsistent with the judge's allowance of much smaller sums as countervailing benefits. Accordingly the judge should either have rejected that offer as unrealistic and unlikely to have led to a concluded sale or deducted figures of £140,000 a year. Had he done the latter, the loss would have been eradicated.
30. When granting permission to appeal, Rix LJ warned Mr Buddha of the difficulty of running such a factual point on appeal when it was not run below, particularly when it would involve further evidence, disclosure and the need for a new trial, or at the very least a new trial of the issue of damages. It does not appear that any of the witnesses on the tenants' side were asked about the discrepancy between the figures given in the evidence by Mrs Dhanji and the figure in the Oasis offer. Mr Buddha had not asked for disclosure of Mrs Dhanji's actual profits made at the practice. If the point had been raised there may well have been answers to it. Dr Pradhan did not give evidence, but it by no means follows that his offer was subject to an equivalent condition.
31. In my judgment, it is too late now to launch an attack on the judge's careful attempt to assess damages under these difficult conditions. As the cases cited at paragraph 52.8.2 of the White Book show, this court does not readily allow points to be run which were not run properly below. This point seems to me to be a good example of that and I do not consider that the judge's assessment of damages is vitiated by it.
32. I would accordingly dismiss this appeal.
33. LORD JUSTICE UNDERHILL: I agree.
34. LORD JUSTICE RICHARDS: And I agree.