Tindall Cobham 1 Ltd v Adda Hotels [2014] EWCA Civ 1215

The landlord in this case had granted leases of 10 hotels, each to a subsidiary company in the Hilton Group. The Hilton parent company was a party  to each lease, as guarantor.

Each lease contained the usual provision that the tenant could assign the lease with the landlord's consent. However, each lease also said that the tenant was free to assign to an associated company without landlord's consent, provided that the existing guarantor (i.e. the parent company) entered into a fresh guarantee of the assignee.

Unfortunately, the leases were entered into before the Good Harvest/House of Fraser series  of cases, which held that such repeat guarantees are void because they offend the anti-avoidance provisions of section 25 of the Landlord and Tenant (Covenants) Act 1995. (Contrast a guarantee of the outgoing tenant’s obligations under an authorised guarantee agreement, which was held to be valid.)

The question for the Court of Appeal in Tindall was, given that the guarantees would be void, could (as was argued by the tenant) an assignment to an associated company still take place without landlord's consent and without any kind of guarantee?

Fortunately for the landlord, the Court of Appeal recognised that such an outcome would have a disastrous effect on the value of the landlord's reversion. It therefore decided that there remained a conventional requirement not to assign to an associated company without the landlord’s consent (such consent not to be unreasonably withheld).

The Court of Appeal also made the point that an assignment of any of the leases to an associated company without landlord’s consent (which did in fact occur in this case) would be unlawful.

So in UK Leasing Brighton (and others including Hilton) v Topland the parties went back to court to establish the best way of unravelling the unlawful assignment that had taken place. The Judge said that there would be no infringement of the Landlord and Tenant (Covenants) Act 1995 if the associated company were to assign the lease back to the original tenant and the original guarantor were to give a fresh guarantee of the original tenant's new obligations as assignee.

Despite the Judge arriving at a solution that was pleasing to both parties, this is nevertheless a controversial judgement because it appears to contradict much of the Court’s analysis (in the court of appeal) in the earlier cases.