Brennan v Kettell and others

Respondent bank leasing premises to appellants — Lease containing extended covenant for quiet enjoyment amounting to covenant for title — Both parties aware of potential boundary dispute on leased premises — Claimant succeeding in claim for trespass against appellants — Appellants commencing Part 20 proceedings against respondent — Whether terms of lease amended by correspondence — Whether appellants agreeing to take lease subject to prior rights of claimant — Appeal allowed In 1991, the claimant leased premises on a site being developed by a third party, over which the respondent bank had a charge. The plan lodged at the Land Registry contained an error, which created a discrepancy between the boundary as agreed and that shown on the plan. In 1995, the respondent, having taken possession of the unsold portions of the site, granted to the appellants a lease of premises adjoining the claimant’s land, which was occupied by a subtenant. Although the appellants and the respondent were aware of the discrepancy in the boundary, and had discussed it between themselves in correspondence, they made no attempt to verify the situation with the claimant and proceeded on the basis that the claimant had illegally enclosed the disputed area. They redrew the plan to the lease to reflect their understanding of the boundary position and submitted it to the Land Registry in 1996, in effect re-executing the 1995 lease. In 1998, the appellants demolished part of the boundary wall and entered into occupation of a substantial area of the claimant’s premises, including, but not limited to, the disputed area as shown on the erroneous map. The claimant successfully proceeded against the appellants and the respondent, and obtained an order for damages and rectification of the register. The appellants commenced Part 20 proceedings against the respondent on the ground that they had suffered loss and damage because the respondent had breached its covenant for quiet enjoyment. At first instance, the judge dismissed the Part 20 claim. He found that the lease, as re-executed in 1996, had been amended by an agreement reached in the correspondence between the parties at that time, so that it took effect subject to rights of occupation by the claimant and her subtenant. On that basis, there had been no breach of any covenant for quiet enjoyment; there had been no covenant for title to be breached. The appellants appealed. Held: The appeal was allowed. The question was whether the correspondence between the appellants and the respondent had operated so as to amend the lease and qualify the terms of the covenant for quiet enjoyment. The judge at first instance had been in error to find that it had. The queries and discussions found in the correspondence could not have constituted a concluded agreement that the appellants would take the risk that the bank had no title to the disputed area, which it was, on the face of the lease, demising to the appellants. Even if the appellants had agreed in correspondence to take the lease subject to, and with the benefit of, the tenancy of the claimant’s subtenants, no evidence existed to suggest that it was willing to take the lease subject to the rights of the claimant. The appellants had made it clear in their correspondence that they regarded the subtenant’s occupation of the disputed property as trespass. They never indicated that they would be content for the claimant to assert her rights to title of the disputed area. The judge had also erred in finding that no covenant for title existed. The form of the covenant contained in para 1 of schedule 3 to the lease extended the appellants’ rights beyond those of quiet enjoyment and covenanted against interruption “by title paramount”, which wording made it akin to a covenant for title. The fact that the appellants were aware of the subtenant’s occupation of the disputed area at the time the lease was re-executed could not detract from the enforceability of their covenant for title in respect of the disputed area: see Page v Midland Railway Co [1894] 1 Ch 11. Nicholas Riddle (instructed by Bullivant Jones, of Liverpool) appeared for the appellants; Sandra Bristoll (instructed by DLA, of Manchester) appeared for the respondent. Vivienne Lane, barrister