The Court Stands Firm On Implied Terms.

In the recent case of Co-operative Bank Plc v Hayes Freehold Ltd (In Liquidation) [2017] EWHC 1820 (Ch), the High Court refused to imply into a deed of surrender a condition precedent that the landlord had obtained its lender's consent. Accordingly, it held that a purported surrender of a lease without the lender's consent was, on the facts, deemed ineffective.

The Facts

In June 2001, Deutsche Bank AG (Deutsche) was granted a 20 year lease (the lease) over a data centre (the Property) in Hayes, Middlesex. In February 2010, Deutsche granted an underlease of the property to Sentrum Hayes Ltd (Sentrum Hayes). Sentrum Holdings Ltd (Sentrum Holdings) acted as a guarantor of the underlease.

In December 2012, the freehold interest in the property was transferred to Hayes Freehold Ltd (Hayes Freehold). Hayes Freehold thereafter charged the freehold interest in the property and the lease to Co-operative Bank Plc (Co-op) and Sentrum Hayes charged its interest as tenant under the underlease to Co-op (the two companies being part of the same group at that stage). The terms of the charges provided that Co-op's prior written consent was required to any surrender of the lease and for any dealings with the underlease.

In August 2015, Hayes Freehold, Deutsche, Sentrum Hayes and Sentrum Holdings entered into a deed of surrender which purported to effect a surrender of both the lease and the underlease and an unconditional release of Sentrum Holdings as guarantor. Co-op's consent was not obtained before the purported surrenders took place with the result that Deutsche's liabilities under the lease continued.

Deutsche issued a claim, contending that if the surrender of the lease was ineffective, then so too was the surrender of the underlease and the release of the guarantor. Deutsche argued (amongst other things) that there was to be implied into the deed of surrender a condition precedent to the release of the guarantee that the surrender of the lease would be effective.

Claim dismissed

Mr Justice Henry Carr concluded that it was not an implied condition precedent to the release of Sentrum Holdings' guarantee that the surrender of the lease should be effective.

The surrender of the lease and the surrender of the underlease were not dependent on each other. The latter could take effect in circumstances where the former could not. Hayes Freehold did not have the power to accept a surrender of the lease without the Co-op's consent because it had given up the...