Notice – Whether time of the essence – Landlord serving notice specifying amount of increased rent – Clause providing that tenant bound to pay such amount on failing to serve counternotice within prescribed time – Counternotice served out of time – Court reviewing conflicting authorities
The claimant and defendant were respectively landlord and tenant under a 21-year lease of land situated near Bournemouth. The lease, which was granted in 1982 at an initial rent of £18,000 pa, provided for four rent reviews, the last to take effect from 1 August 1999. The rent review clause entitled the landlord to serve, during the last six months of a current period, a “rent notice” specifying the amount of rent payable in respect of the following period. The clause went on to provide (the deeming provision) that, if the tenant failed to serve a counternotice within one month of receipt of the rent notice, the tenant would be “deemed to have agreed to pay the increased rent specified in that notice”.
On 30 March 1999 the landlord’s surveyors served a notice stating that, with effect from 1 August 1999, the rent would be increased to £84,000. The tenant, which intimated that an appropriate rent would be £52,725, did not serve a counternotice until 16 June 1999. The landlord claimed that the deeming provision bound the tenant to pay the rent specified in the rent notice.
In High Court proceedings instituted by the landlord, it was common ground that, on the authority of United Scientific Holdings Ltd v Burnley Borough Council [1977] 2 EGLR 61, time was not to be regarded as of the essence in the absence of a strong indication to the contrary. The landlord cited various authorities, notably Henry Smith’s Charity Trustees v AWADA Trading & Promotion Services Ltd [1984] 1 EGLR 116, for the proposition that a provision that actually spelled out the consequences of failure to meet a time-limit did not so much rebut the United Scientific presumption, as displace it altogether. The tenant relied above all upon the decision of a majority of the Court of Appeal in Mecca Leisure Ltd v Renown Investments (Holdings) Ltd [1984] 2 EGLR 137, where it was held that a provision in almost identical terms to the deeming provision before the court did not suffice to rebut the presumption, as it merely provided machinery for the rent review process.
Held: Judgment was given for the tenant.
The court was bound to follow the ruling in Mecca because, as a matter of judicial precedent, that case could not be said to be inconsistent with Henry Smith, where both the notice and the counternotice were subject to deeming provisions. That said, it was most desirable that the House of Lords should have the opportunity of clarifying the situation, after giving full consideration to the very persuasive authorities cited by the landlord, notably the powerful dissenting judgment of Brown-Wilkinson LJ in Mecca, as approved and followed by courts in Scotland, Australia and New Zealand: see Vision Hire Ltd v Britel Fund Trustees [1992] 1 EGLR 128; GR Mailman & Associates Pty Ltd v Wormald (Australia) Pty Ltd(1991) 24 NSWLR 80; and Mobil Oil NZ Ltd v Mandeno [1995] 3 NZLR 114.
Thomas Grant (instructed by Beckman & Beckman) appeared for the claimant; John Male QC (instructed by Hartfields) appeared for the defendant.
Alan Cooklin, barrister
