Landlord and tenant — Rent review — Whether rent review notice served in time — Notice had to be posted two quarters in advance of review date, which was August 1 1979 — Notice posted on January 26 1979 — Contention by tenants that notice was not posted in time to be effective — Argument based on clause in lease providing that quarterly payments due in August should be paid on August 14, but also providing for the first payment to be made on August 1 — Tenants argued that the quarter beginning on May 1 straddled the review date and ended on August 13 — Landlord argued that August 14 was an obvious clerical error for August 1 — Nourse J accepted this argument — Court of Appeal, while dismissing the appeal and holding that the rent review notice was properly served by the landlord, saw no reason to alter August 14 to August 1 — August 14 was not indicative of the date when a quarter commenced, but of the date when, for some reason, the rent had to be paid in respect of the quarter August 1 to October 31 — Provision eccentric but not ambiguous or a mistake
This was an
appeal by tenants, Pantiles (Plant Hire) Ltd, from a decision of Nourse J in
favour of the landlord, Mary Elizabeth East, on the construction of rent review
provisions in a lease, the particular issue being the provisions for the timing
of a rent review notice.
P Sheridan QC
and D L Croft (instructed by Wilkinson & Durham, of Leatherhead, Surrey)
appeared on behalf of the appellants; A L Price QC and T O Seymour (instructed
by Rowe & Maw) represented the respondent.
Giving the
first judgment at the invitation of Lawton LJ, BRIGHTMAN LJ said: The facts in
this appeal are fully set out in the judgment of Nourse J from whom this appeal
lies. I intend only to repeat the facts so far as necessary to make my judgment
intelligible.
The question
at issue is whether the landlord served a rent review notice in time. The
notice had to be posted two quarters in advance of the review date. The review
date was August 1 1979. August 1 was also the commencement date of each year of
the tenancy. If August 1 1979 was also the commencement date of the first
quarter of the 1979-80 year of the tenancy no problem arises. The two quarters
immediately prior to the review date would be the quarters running from
February 1 to April 30 1979 and May 1 to July 31 1979, as I see it. The notice
was posted on January 26 1979; but, if, on the wording of the lease, it has to
be said that the quarter starting on May 1 ran to August 13 and so straddled
the review date, then the two complete quarters prior to the review date would
be the quarters running from November 1 1978 to January 31 1979 and February 1
to April 30 1979. The notice would then be out of time.
With that
brief introduction to the sort of problem that we have, I turn to the
documents. There are, in fact, two leases separated by four years. The second
lease, which is of an adjoining property, is worded in the same manner as the
first lease mutatis mutandis and the same point arises. It is, at this
stage, only necessary to refer to the first lease. That was executed on October
2 1972. It demised the premises from August 1 1972 for the term of 21 years.
Clause 1(1) specified the amount of the rent and the manner of payment. I must
read it:
For the first
seven years of the said Lease the sum of £4,500 per annum by equal quarterly
payments in advance on the 14th day of August the 1st day of November the first
day of February and the first day of May in each year the first payment to be made
on the 1st day of August 1972.
As it stands,
that subclause seems to me to be unambiguous, although somewhat eccentric. The
rent is £4,500. It is to be paid by equal quarterly payments, so each quarterly
payment is to be £1,125. Each payment is to be made in advance. The first
£1,125 is expressed to be payable on August 1 1972. That was then a past date,
but it does not seem to me that anything turns on it. Thereafter, the sum of
£1,125 is to be paid on the first day of every November, February and May but,
in the case of every August, on the 14th of that month instead of the first.
The rent
review clause is clause 5. I need not read the whole of it. The introductory
words said that the rent shall be reviewed at the end of the 7th and 14th year
of the term. That means that the reviewed rent is to be operative as from the
end of those years, that is to say, as from August 1 1979 and August 1 1986.
The reviewed rent thereafter payable is to be either the rent reserved by
clause 1, subclause 1, of the lease, or the open market rental value of the
demised premises at the review date, whichever shall be the greater. The open
market rental value is defined by subclause 1, which I need not read. The
review date is defined by subclause 2 and means the expiration of the 7th or
14th year of the term, either August 1 1979 or August 1 1986. There is not
dispute about that.
Subclause 3
provides how the open market rental value is to be determined. It is to be:
such annual
sum as shall be (a) specified in a notice in writing signed by or on behalf of
the lessor and posted by recorded delivery post in a prepaid envelope addressed
to the tenant at the demised premises at any time before the beginning of a
clear period of two quarters of a year (commencing on one of the usual quarter
days hereinbefore mentioned) immediately preceding the review date (and such
notice shall be conclusively deemed to have been received by the tenant in due
course of post) or (b) agreed between the parties before the expiration of
three months immediately after the date of posting of such notice as aforesaid
in substitution for the said sum or (c) determined at the election of the
tenant (to be made by counternotice in writing served by the tenant upon the
lessor not later than the expiration of the said three months) by an
independent surveyor appointed for that purpose by the parties . . .
The only other
provision that I need refer to is clause 6, which says that time in relation to
clause 3 shall be of the essence of the contract.
It follows that
the landlord cannot get her increased rent unless she serves notice under
subclause 3(a) in time and that means posting it ‘before the beginning of a
clear period of two quarters of a year (commencing on one of the usual quarter
days hereinbefore mentioned) immediately preceding’ August 1 1979.
Now, as I have
already indicated, the landlord’s letter was posted on January 26 1979, that is
to say, five days before the beginning of the quarter commencing February 1.
The next quarter day commenced on May 1. The question that arises is whether
the two quarters so commencing were a clear period of two quarters of a year
preceding August 1 1979; or is the second of such quarters disqualified, as it
were, from counting because it did not precede August 1 1979 since it straddled
that date? The landlord argues that
August 14 in clause 1 subclause 1 is an obvious clerical error for
August 1. She so argues not because she is concerned about being out of her
money for 14 days once a year but because it will set at rest the argument by
the tenant that the quarter beginning on May 1 straddled the review date and
ended on August 13.
It is clear on
the authorities that a mistake in a written instrument can, in certain limited
circumstances, be corrected as a matter of construction without obtaining a
decree in an action for rectification. Two conditions must be satisfied: first,
there must be a clear mistake on the face of the instrument; secondly, it must
be clear what correction ought to be made in order to cure the mistake. If
those conditions are satisfied, then the correction is made as a matter of
construction. If they are not satisfied then either the claimant must pursue an
action for rectification or he must leave it to a court of construction to
reach what answer it can on the basis that the uncorrected wording represents
the manner in which the parties decided to express their intention. In Snell’s
Principles of Equity 27th ed p 611 the principle of rectification by
construction is said to apply only to obvious clerical blunders or grammatical
mistakes. I agree with that approach. Perhaps it might be summarised by saying
that the principle applies where a reader with sufficient experience of the
sort of document in issue would inevitably say to himself, ‘Of course X is a
mistake for Y’.
I need refer
to only one authority, which was decided in 1854. It was Wilson v Wilson
(1854) 5 HLC 40. That was a case where articles of agreement for a separation
had been signed as the prelude to a deed of separation. The articles contained
a non-molestation clause by the husband. They also contained a stipulation
that, if the husband performed the obligations binding on him under the
articles, he should be indemnified against all the present debts and
liabilities of the husband by the joint and several covenant of the wife’s
trustees. Of course, as drawn the stipulation did not make sense. Clearly the
debts and the existing liabilities of the wife were to be the subject-matter of
the indemnity afforded to the husband, not his own indebtedness. So, when the
separation deed came to be settled by the master, he approved a draft which
contained a covenant by the wife’s trustees to indemnify the husband not
against his own debts but against the debts of the wife. The husband appeared
in person when the matter came before the House of Lords and sought to have the
deed framed in the precise terms of the articles. His claim was rejected and
Lord St Leonards said this:
If you find a
clear mistake, and it admits of no other construction, a Court of Law, as well
as a Court of Equity, without impugning any doctrine about correcting those
things which can only be shown by parol evidence to be mistakes — without, I
say, going into those cases at all, both Courts of Law and of Equity may
correct an obvious mistake on the face of an instrument without the slightest
difficulty.
In the instant
case the learned judge accepted the argument on behalf of the landlord and he
expressed himself as satisfied that there had been an obvious clerical blunder
in the framing of subclause 1 of clause 1, and he said he was certain that the
real intention of the parties was to insert August 1 throughout the subclause.
He expressed himself as reaching that conclusion because he saw an inherent
conflict between the provision that instalments generally should be paid on
August 14 and the provision that the first payment of all should be made on
August 1. In addition, he could see no reason and none had been suggested to
him why August 14 should ever have been chosen. The argument before us on
behalf of the landlord has ranged a little wider and three points have been
suggested for seeing an ambiguity in subclause 1 so obvious and so clear as to
the nature of the mistake that we ought to strike out August 14 as a matter of
construction and substitute August 1.
Point 1 is
this. If August 14 remains in subclause 1 then it is not accurate to express
all the quarterly payments as made in advance. The August payment will, so it
is said, to the extent of 14 days be made in arrear, treating the quarter
itself as running from August 1. To my mind, that is a criticism of the wording
of subclause 1 of very small dimensions and hardly enough to conjure up any
appreciable ambiguity.
Point 2 is
this. The two quarters’ advance notice of rent review is to be the period of
two quarters immediately preceding the review date. If the two quarters have to
be those commencing on November 1 1978 and ending April 30 1979 then they will
not represent a period immediately preceding the review date, but a period
separated from it by three months. This interval, inconsistent with the words
‘immediately preceding’, would be avoided if one changed August 14 to August 1
in subclause 1 of clause 1.
Point 3
concerns subclause 4 of clause 3 of the lease. It is possible that the
arbitrator would make his determination between August 1 and 4. In those
circumstances it is said that problems will arise on the construction of the
clause. I agree that, if one leaves August 14 as the rent payment date in
subclause 1 of clause 1, then subclause 4 of the rent review clause does not
fit very easily with subclause 1.
Although I
take these points, I do not think that they amount to very much and they
certainly do not persuade me of the existence of a clear mistake in subclause 1
of clause 1 of the lease. In my view, there is no sufficient reason to alter
August 14 to August 1 in subclause 1. I have no idea why the landlord was
apparently content to receive the August instalment of rent 14 days later than
she was entitled to receive the other instalments of rent, but I cannot see any
justification for making a change. I can see two positive objections to a
change. In the first place, the wording of the lease is identical with the
wording of the counterpart lease, but the counterpart lease is not a facsimile
of the lease itself. The lease and the counterpart are different productions in
different formats, so that anything like a copying mistake is ruled out.
Secondly, clause 4, subclause 1, of the lease is a forfeiture clause which
takes effect if the rent is unpaid for 21 days after becoming payable. In my view,
the tenant ought to be able to rely on the integrity of the dates for the
payment of rent which the landlord has seen fit to specify in subclause 1 of
clause 1, and not be at risk of incurring an inadvertent forfeiture as might
otherwise have happened if August 14 in subclause 1 really meant August 1. In
the light of the forfeiture clause I would be very hesitant to change as a
matter of construction the specified rental dates.
With all
respect to the learned judge I cannot find any sufficient justification for
changing August 14 to August 1.
Having reached
that conclusion I must now seek to solve how the rent review clause operates
against the uncorrected wording of the rent payment clause. At the risk of
prolixity I think I must refer once more to the precise wording of subclause 3
of the rent review clause. The annual sum is to be such as may be specified in
a notice which is to be posted ‘at any time before the beginning of a clear
period of two quarters of a year (commencing on one of the usual quarter days
hereinbefore mentioned) immediately preceding the review date’. I start by
rejecting the word ‘usual’. It adds nothing to the subclause and I think is in
fact meaningless. What one therefore has to identify are the ‘two quarters
immediately preceding the review date’.
There are two
arguments which have been addressed to us by the tenant’s counsel on this
aspect. The first argument, as I have already indicated, is that there is a
quarter current on the review date which, therefore, has to be left out of
account because it had not then ended, namely, a quarter beginning on May 1 and
ending on August 13. I feel no difficulty in rejecting that argument. In order
to identify the two quarters of the year to which the rent review clause
refers, one has to divide the year of the lease into quarters. The term of the
lease started on August 1 1972. It therefore follows that the first quarter of
the lease started on that day. It could not possibly start on any other day in
the absence of some express provision in the lease. The next quarter,
therefore, started on November 1 1972, the third quarter on February 1 1973 and
the final quarter of the first year on May 1 1973. And so it went on. Each
quarter of each subsequent year must have started on the first day of each of
these months. August 14 is not indicative of the date upon which a quarter
commences. It is indicative of the date upon which rent has to be paid for the
quarter commencing on August 1 and ending on October 31. In the result the rent
review notice was properly served because it was posted before the beginning of
a clear period of two quarters of a year immediately preceding the review date.
There is,
however, a second argument with which Mr Sheridan has entertained us. It is
this. Dating apparently from a decision in the 16th century, a quarter of a
year in certain unspecified contexts has been read as meaning 91 days. That was
so decided in an anonymous case in the 16th century to which I shall not
trouble to refer and has been picked up in legal dictionaries. If one applied
that computation to this lease, Mr Sheridan has ingeniously worked out that the
rent
originality of the argument I am unpersuaded by it. I fully accept that, on the
wording of a particular instrument, a quarter of a year could well mean 91
days, but it seems to me extravagant to argue that it means 91 days on the true
interpretation of this lease. Mr Sheridan himself was constrained to concede
that it would lead to a very odd result, because he accepted that the first
year of the lease started on August 1 1972 and, therefore, the first quarter of
the lease started on that day; and he conceded that the eighth year of the
lease started on August 1 1979 and, therefore, that the first quarter of that
year must have started on August 1. So, if one takes a quarter of a year as 91
days, one can have an odd situation under which the end of the preceding
quarter of a year does not coincide with the first day of the next quarter. I
find myself completely lost by this submission. I do not think that one can
conceivably read this lease as intending that the rent review notice is to be
served at least two periods of 91 days before the review date.
In the result,
the rent review notice was, in my judgment, properly served because it was
posted before the beginning of a clear period of two quarters of a year
immediately preceding the review date.
The position
in relation to the second lease is exactly the same as that in relation to the
first lease and does not need to be separately dealt with in this judgment.
I would,
therefore, dismiss the appeal. I propose that the order made by the learned
judge should be slightly altered. It must, I think, be varied by striking out
the first two declarations which corrected the date August 14 to August 1 and I
think that the third declaration needs to be changed, so as to read:
This Court
doth declare upon the true construction of the said Lease and Supplemental
Lease respectively that the words ‘a clear period of two quarters of a year
(commencing on one of the usual quarter days hereinbefore mentioned)
immediately preceding the review date . . .’ contained in clause 5(3)(a) of the
Lease and Supplemental Lease respectively refer to the quarters commencing on
February 1 and May 1 1979 and ending on April 30 and July 31 1979.
OLIVER LJ
said: I agree with what has fallen from my Lord, Brightman LJ, on both points.
There was a point in the course of the argument where I felt, though I was, of
course, much too polite to voice it, that Mr Sheridan’s submissions, if
correct, seemed to be calculated to demonstrate the truth of that well-known
aphorism of Mr Bumble regarding the animal nature and unmarried state of the
law. But, like my Lord, I have felt unable to accept those submissions and for
the reasons which he has given. I agree that the appeal should be dismissed but
that the order should be varied in the way that he has suggested.
Also agreeing,
LAWTON LJ said: Eccentricity in the use of language in leases or in fixing the
days on which rent is to be paid is by itself no reason why this court should
try to rewrite them so as to produce documents likely to be approved in
Lincoln’s Inn.
The appeal was dismissed, the respondent being
awarded three-quarters of the costs of the appeal. The order was varied as
stated in the judgment of Brightman LJ.
