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This was a case before HHJ Luba QC at Central London County Court. As he sets out in the introduction to the judgment, the key question was “[w]here a lease provides that a tenant is not to sublet without the landlord's prior consent, what measure of damages, if any, is the landlord entitled to recover from the tenant and/or any sub-tenants if the property subject to the lease is sublet without its consent” The Claimant, who is the owner of the Centre Point development in Central London, became aware that the Defendant had sub let a flat within the building to another company, who had in turn further sub let the flat. It had finally been sub let to individuals who used the property for a number of activities prohibited in the lease, such as advertising sexual services, and having short term lets on Air B’n’B. While liability was not in issue, since it was accepted that the unlawful sub-lettings took place, the issue of remedy was hotly contested. The Claimant sought damages based on the notional profits that the Defendant had received through the unlawful sub-letting. They used the rental figures from the disclosed sub-leases as a basis for calculation, and sought to recover the whole sums received in rent by the First Defendant. Alternatively, they sought negotiating damages based on what the First Defendant might otherwise have paid for a release of the covenant against sub-letting without consent. Aaron Walder successfully argued for the First Defendant thar damages based on profits obtained, or “disgorgement” damages, were not available in breach of contract cases except in exceptional cases. The very context of a landlord and tenant relationship meant that this case (or indeed any case based on breach of a covenant in a lease) could not be such an exceptional case. In a considered judgment of some 172 paragraphs, HHJ Luba accepted those submissions. Further, given that consent to sub-letting could not be unreasonably withheld, Aaron argued that any negotiating damages would be minimal, since there was no absolute right of the landlord to refuse permission. That fact, coupled with the fact that there was no evidence that negotiating damages would apply, meant Aaron succeeded on both points. As a result, the First Defendant did not have to pay any damages to the Claimant. The judgment is available here.
