Landlord and tenant –– Rent review –– Construction –– Time of the essence –– Specified period for service of trigger notice –– Expert to determine rent review before review date –– Late service of trigger notice –– Whether time of the essence –– Whether contra-indications
The claimant tenant held a lease from the defendant landlord of business premises, at a rent subject to review. The review date in issue was 24 June 1998. The lease provided that the proposed rent was to be specified in a written notice served not more than 12 nor less than six months prior to the review date. It also provided a timetable for the determination of the rent in which the independent expert was to make his decision not less than 14 days before the review date. The landlord did not give notice to trigger the rent review until 9 August 1999. The tenant contended that time was of the essence for service of the rent review notice, and as the landlord’s notice was late, the notice had no contractual effect. In particular, there were two contra-indications: (i) a timetable was specifically laid down to ensure that the rent was ascertained before the rent review date; and (ii) delay could result in substantial detriment to the tenant, as the rent could be determined at a higher figure because of the delay. Following the issue of the tenant’s Part 8 claim, the landlord issued an application to strike out the claim. The chief master dismissed that application, but he ordered the tenant to pay the costs of that application. The court heard the substantive claim, and the tenant’s appeal against the order of the chief master.
Held: The claim and the appeal were dismissed. Time was not of the essence for the triggering of the rent review. The rent review clause was practically identical to that considered by the House of Lords in Cheapside Land Development Co Ltd v Messels Service Co [1977] 2 EGLR 61, where it was said that time was not of the essence. There were no compelling contra-indications. The costs order made by the chief master was within his discretion.
The following cases are referred to in this report.
Glofield Properties Ltd v Morley (No 2) (1990) 59 P&CR 14; [1989] 2 EGLR 118; [1989] 32 EG 49, CA
Greenhaven Securities Ltd v Compton [1985] 2 EGLR 117; (1985) 275 EG 628
London & Manchester Assurance Co Ltd v GA Dunn & Co [1983] 1 EGLR 111; (1982) 265 EG 39 and 131, CA
Metrolands Investments Ltd v JH Dewhurst Ltd [1986] 3 All ER 659; (1986) 52 P&CR 232; [1986] 1 EGLR 125; 277 EG 1343, CA
Phipps-Faire Ltd v Malbern Construction Ltd [1987] 1 EGLR 129; (1987) 282 EG 460
Tanfern Ltd v Cameron-MacDonald [2000] 1 WLR 1311; [2000] 2 All ER 801Taylor v Midland Bank Trust Co Ltd unreported 21 July 1999
United Scientific Holdings Ltd v Burnley Borough Council; Cheapside Land Development Co Ltd v Messels Service Co [1978] AC 904; [1977] 2 WLR 806; [1977] 2 All ER 62; (1977) 75 LGR 407; 33 P&CR 220; [1977] 2 EGLR 61; 243 EG 43 and 127, HL
This was the hearing of a Part 8 claim for the construction of the terms of a lease by the tenant, McDonald’s Property Co Ltd, against the landlord, HSBC Bank plc, and the hearing of an appeal by the tenant against the decision of Chief Master Winegarten on costs of an application by the landlord to strike out the claim.
Timothy Fancourt (instructed by Forsters) appeared for the claimant; Christopher Stoner (instructed by Denton Wilde Sapte, of Milton Keynes) represented the defendant.
Giving judgment, MR PETER LEAVER QC said:
Introduction
1. There is before the court a Part 8 claim by the claimant, seeking a declaration in respect of the rent payable under a lease dated 30 November 1970 (the lease). I shall refer to this claim as “the construction summons”. The issue on the construction summons is whether time is of the essence of the provision in the lease for service of a notice by the landlord to review the rent payable for the seven-year period commencing 24 June 1998.
2. There is also before the court an appeal, with the permission of Chief Master Winegarten, from his order dated 30 January 2001, in which, upon the defendant’s application to strike out the claim or for summary judgment against the claimant, the chief master dismissed the application, but ordered the claimant to pay costs in the summarily assessed sum of £4,487.32. The claimant appeals against that part of the order that relates to costs.
Facts
3. There is no dispute about the facts, which I can, therefore, state shortly. On 30 November 1970 Midland Bank Ltd (the defendant’s predecessor) granted a lease to Danish Centre Ltd of the ground floor and mezzanine floor of Exchange Buildings, New Street, Birmingham, for a term of 24 years, expiring on 23 June 1991. On the same day, the same parties entered into a reversionary lease for a further term of 21 years from 24 June 1991.
4. The rent under the reversionary lease was to be determined in accordance with the provisions of the schedule to that lease. That schedule is in the following terms:1. The rent payable during the said term of 21 years shall be as follows:- In respect of the periods of the said term commencing on the said 24th day of June 1991 and ending on the 23rd day of June 1998 (hereinafter called “the first period”) and commencing on the 24th day of June 1998 and ending on the 23rd day of June 2005 (hereinafter called “the second period”) and commencing on the 24th day of June 2005 and ending on the 23rd day of June 2012 (hereinafter called “the third period”) the respective rents to be determined in accordance with the provisions hereinafter contained.
2. In this Schedule
(a) the “market rent” means the current market rental per year for a new letting with vacant possession of the said premises as a whole for the term of 21 years in respect of the first period and in respect of the second and third periods for a term of years equivalent to the residue then remaining unexpired of the said term upon the conditions of this Lease (save as regards rent but subject to the rent reviews hereinafter referred to) there being disregarded:
(i) any effect on rent by reason of the Lessees having been in occupation of the said premises
(ii) any goodwill attached to the said premises by reason of the carrying on thereat of the business of the Lessees and
(iii) any works or improvement carried out by the Lessees whether or not the same were carried out pursuant to an obligation under this Lease
(b) the “review date” in respect of the first period means the 24th day of June 1991 and “the review date” in respect of the second period means the 24th day of June 1998 and “the review date” in respect of the third period means the 24th day of June 2005
3.(a) In respect of the first period the yearly rent shall be such sum as shall be payable by way of rent at the termination of the term granted by the First Lease or a sum equal to the market rent (if duly determined in the manner hereinafter set out) whichever shall be the higher
(b) In respect of the second period the yearly rent shall be such sum as shall be payable by way of rent at the end of the first period or a sum equal to the market rent (if duly determined in the manner hereinafter set out) whichever shall be the higher
(c) In respect of the third period the yearly rent shall be such sum as shall be payable by way of rent at the end of the second period or a sum equal to the market rent (if duly determined in the manner hereinafter set out) whichever shall be the higher
4. The market rent may be determined and notified to the Lessees in the manner following:
(a) the proposed rent shall be specified in a notice in writing (“the Lessors’ notice”) served by the Lessors or their Surveyor on the Lessees not more than twelve nor less than six months prior to the review date
(b) the Lessees may within one month after service of the Lessors’ notice of the proposed rent serve on the Lessors a counter-notice (“the Lessees’ notice”) either agreeing the proposed rent or specifying the amount of rent which the Lessees consider to be the market rent for the period in question
(c) in default of service of the Lessees’ notice or in default of agreement as to the market rent to be payable the rent for the said period rent shall be valued by a Fellow of the Royal Institution of Chartered Surveyors agreed between the Lessors and the Lessees or in default of agreement to be appointed not earlier than two months after service of the Lessors’ notice on the application of the Lessors by the President for the time being of the said Institution whose valuation shall be made as an expert and not as an arbitrator and shall be final and binding upon the Lessors and the Lessees not less than fourteen days before the review date for the period in question.
5. The rent review period with which the construction summons is concerned is the second period, which commenced on 24 June 1998. Midland Bank plc did not give notice to trigger the rent review until 9 August 1999. In the notice then served, Midland Bank stated that its opinion of the market rent for the second period was £465,000 pa. The claimant’s solicitor responded by letter dated 5 September 1999. It contended that the notice was too late, and was non-contractual. The defendant contends that, although the notice was late, the time for serving it was not of the essence of the relevant provisions of the lease, and that the notice was therefore a contractual notice.
Law
6. In March 1977 the House of Lords gave judgment in United Scientific Holdings Ltd v Burnley Borough Council and in the conjoined appeal Cheapside Land Development Co Ltd v Messels Service Co [1978] AC 904*. It is common ground that the rent review clause in Cheapside was in terms practically identical to the rent review clause in the present case. The House of Lords held that there was a rebuttable presumption that time was not of the essence of rent review clauses. The issue in the present case is whether there are contra-indications in the terms of the rent review clause that go to rebut that presumption. Before I consider the submissions made to me, I shall make some observations about the issues that, as I understand it, were decided by the House of Lords in United Scientific and Cheapside.
* Editor’s note: Also reported at [1977] 2 EGLR 61
7. In United Scientific, the landlord appealed from a judgment of the Court of Appeal, dismissing its appeal from a decision of Sir John Pennycuick V-C, who had held that time was of the essence of the rent review clause in that case. In Cheapside, the landlord appealed from a judgment of the Court of Appeal, allowing the tenant’s appeal from a decision of Graham J, who had held that time was of the essence of the service of the lessor’s notice, but was not of the essence of the lessor’s right to apply for the appointment of a valuer. Mr Timothy Fancourt, counsel for the claimant, submitted to me that different issues arose for decision in each of those cases. In particular, Mr Fancourt submitted that, as in Cheapside, the landlord had given a trigger notice within the period specified in the lease, the issue in that case was only whether time was of the essence of the lessor’s right to apply for the appointment of a valuer. The Court of Appeal had held that Graham J was wrong to have decided that time was not of the essence of that right, and the House of Lords agreed with the Court of Appeal. The House of Lord also held that Graham J had been wrong to decide that time was of the essence of the landlord’s trigger notice, even though the landlord had in fact served the notice within the specified period: see p934D-G. Thus, Mr Fancourt submitted, anything said by the House of Lords in relation to the issue of whether, in Cheapside, time was of the essence for the service of the trigger notice was obiter. While I see the force of that submission, I do not think, for reasons that I shall endeavour to explain, that it would be right to read the speeches in the House of Lords in such a narrow and restrictive way.
8. It is to be observed that Lord Diplock said at p923A:
The question in both of these appeals, which have been heard together, is whether a failure to keep strictly to the time-table laid down in the review clause deprives the landlord of his right to have the rent reviewed and consequently of his right to receive an increased rent during the period that will elapse until the next review date.
He continued at pp923F-924B:
It is not disputed that the parties to a lease may provide expressly that time is or time is not of the essence of the contract in respect of all or any of the steps required to be taken by the landlord to obtain the determination of an increased rent, and that if they do so the court will give effect to their expressed intention. But many rent review cases that are now maturing do not contain express provision in these terms. What the Court of Appeal have decided is that the commercial nature of the contract and/or the legal nature of the right granted to the landlord by a rent review clause raises a presumption that time specified in such a clause for anything that needs to be done by him is of the essence; and that this presumption will prevail unless there are strong contra-indications in the actual wording of the clause. They found no sufficient contra-indications in the rent review clauses which are in question in the instant appeals.
My Lords, the reason why these two appeals have been heard together in the House although the two rent review clauses that are in question differ widely in their wording, is to obtain a ruling whether the presumption as to the construction and effect of rent review clauses is as the Court of Appeal held it to be, or whether it is the contrary presumption, viz that time is not of the essence.
Lord Diplock concluded his review of the principle to be applied to rent review clauses in the following terms, at p930F-H:
So upon the question of principle which these two appeals were brought to settle, I would hold that in the absence of any contra-indications in the express words of the lease or in the interrelation of the rent review clause itself and other clauses or in the surrounding circumstances the presumption is that the time-table specified in a rent review clause for completion of the various steps for determining the rent payable in respect of the period following the review date is not of the essence of the contract.
9. In relation to the Cheapside appeal, Lord Diplock said, after setting out of the terms of the schedule that contained the rent review clause (which, as I have said, is accepted as practically identical with the schedule in the present case), at pp933B-934C:
These provisions contain an elaborate time-table as to what is to be done in various eventualities, not only by the landlord and tenant but also by persons over whom neither have any control –– the President of the Royal Institution of Chartered Surveyors and whatever fellow of the Institution may be appointed as valuer.
The procedure for determining the market rent has to be initiated by the landlord: by a “lessor’s notice” specifying the rent which he proposes. This must be served between 12 and six months before the review date and constitutes an offer, irrevocable for one month during which the tenant may accept the landlord’s proposal or to make a counter-offer. At least two months are to be allowed after service of the lessor’s notice for negotiating an agreement as to the rent or upon a FRICS to be appointed to determine the rent
In two respects under the terms of the review clause the progress of the procedure for determining the new rent is, or may become, within the exclusive control of the landlord. He alone can initiate the procedure; and he alone can apply to the President of the RICS if negotiations with the tenant do not result in agreement as to the rent or upon the person who is to value it.
The tenant’s position under this clause thus differs from that of the tenant under the rent review clause that is the subject of the first appeal inasmuch as he has no right under his contract to initiate the procedure or to apply for the appointment of a valuer if the landlord himself fails to do so within the stipulated times. But this difference has not in my view any significant practical consequences so far as concerns any detriment to the tenant from the landlord’s failure to do either of these things within the stipulated times. If the tenant reckons that the advantage of knowing before the review date exactly how much higher his new rent will be outweighs the economic benefit of having the use of the money representing the difference until the new rent has been determined, he has the remedy in his own hands. Quite apart from the fact that he can get a pretty good idea of what the market rent is from his own surveyor or can himself offer to enter into negotiations with the landlord before the stipulated time for serving a lessor’s notice has expired, so soon as that time has elapsed he can give to the landlord notice specifying a period within which he requires the landlord to serve a lessor’s notice if he intends the market rent to be determined and payable instead of the former rent for the ensuing seven years. The period so specified, provided that it is reasonable, will become of the essence of the contract. The fact that the tenant had previously pressed the landlord to start negotiations before the end of the period specified in the rent review clause for service of a lessor’s notice or that the determination of the rent before the review date was specially important to him, would be relevant facts in determining whether the period specified by the tenant was reasonable (Stickney v Keeble [1915] AC 386 per Lord Parker of Waddington at pp418-419); and in view of the ease with which the landlord could comply with the requirement a notice fixing a very short period would no doubt suffice to make time become of the essence.
So here again I find nothing to displace the presumption that strict adherence to the time-table specified in the rent review clause is not of the essence of the contract.
10. In my judgment, the passage in which Lord Diplock speaks of the tenant giving notice to make time of the essence, after the period stated in the contract, for the lessor to serve the trigger notice has passed, is of significance in relation to Mr Fancourt’s submission in the present case. Clearly, if that period had not passed, there would be no purpose in the tenant serving such a notice, for if such a notice were served, the lessor could simply respond by pointing out that there was still part of the period that had not passed in which he could serve a notice. Thus, Lord Diplock is plainly saying that, in Cheapside, time was not of the essence of the service of the lessor’s notice, but could be made of the essence after the stipulated period for service of that notice had elapsed. Furthermore, it is also to be noted that Lord Diplock stated that, in his view, the “difference” between the “tenant’s position” in Cheapside and that of the tenant in United Scientific (that the tenant in Cheapside did not have the right to initiate the procedure) does not have “any significant practical consequences so far as concerns any detriment to the tenant from the landlord’s failure”, either to serve the trigger notice (“initiate the procedure”) or to apply for the appointment of a valuer. In my judgment, this passage in Lord Diplock’s speech demonstrates that he had well in mind the timetable provisions of the rent review clause in Cheapside, including the provision relating to the service of the trigger notice, when concluding that time was not of the essence of the rent review clause in that case.
11. Viscount Dilhorne dissented on the issue of principle, but not on the result of the appeals. When dealing with the Cheapside appeal he said at p939G:
While, as I have said, the question whether time was of the essence in relation to the lessors’ notice does not have to be decided in this appeal, I differ from my colleagues in that I think that where a rent review has to be initiated by a lessor and is not automatic, then time is of the essence when it is provided that the notice initiating the review has to be given by a certain date.
Lord Simon of Glaisdale agreed with Lord Diplock and said at p940E:
I agree with [Lord Diplock’s] arguments culminating in the proposition that, in general, in modem English law time is prima facie not of the essence of a contract, and that there is nothing in the two leases the subject of the instant appeals which rebuts that presumption so as to make stipulations as to time is central to the operation of their rent review clauses.
That passage from Lord Simon’s speech demonstrates that, in his judgment, despite the timetable laid down in the rent review clause in the Cheapside appeal, time was not of the essence of that timetable.
When dealing with the Cheapside appeal, Lord Salmon said at pp955E-956C:
The words “if duly determined in the manner hereinafter set out” in my view do no more than indicate the procedure to be followed in determining the market rent. I cannot accept that if the time limits set out in the procedural directions are not strictly adhered to, the lessors are automatically deprived of their right to be paid the market rent. There is certainly no express condition that unless the time scale is strictly observed the lessors shall lose these rights. Nor is there anything from which such a condition could be implied. Indeed all the implications are to the contrary. We know that the lessors’ notice was served seven months before the review date and therefore complied with the provision that it should be served not more than 12 months nor less than six months before that date. Suppose it had been served a week or so longer than the maximum or less than the minimum period, it is, to my mind, incredible that the parties could have intended that this should deprive the lessors of the market rent for the next seven year period. The same is true about the provisions that in default of agreement between the parties as to the market rent or as to which Fellow of the Royal Institution of Chartered Surveyors should value it, a Fellow should be appointed by the President of the Institution not earlier than two months after service of the lessees’ notice. Suppose the Fellow had been appointed seven weeks after service of the lessors’ notice, could this vitiate his valuation and deprive the lessors of the market rent? Again, if the valuation was made and given in writing to the lessors and lessees 12 days before the review date when what I regard as the procedural directions in the lease say that it should be given not less than 14 days before the review date, could this deprive the lessors of the market rent for the next seven years? The answer to these last two questions is obviously no. To hold that time is of the essence of any of the provisions in the second schedule would, in my respectable view, make complete nonsense of it.
I certainly agree that if the lessors had been guilty of unreasonable delay which had caused prejudice or hardship to the lessees they would have forfeited their rights to be paid the market rent from April 8, 1975, to April 8, 1982.
That last passage in the speech of Lord Salmon raises the possibility of an argument in relation to rent review clauses that was not part of the claimant’s case before me. It might be that, upon different facts, a tenant could contend that the landlord’s delay amounted to a waiver of the right to rely upon the rent review clause, or that the landlord was estopped from relying upon it. However, I do not have to decide any such issue.
Finally, Lord Fraser of Tullybelton said at p959D:
As the substance of the review clause is, in my opinion, to provide machinery for ascertaining the market rent from time to time, at the intervals agreed in the interests of both parties, rather than to confer a benefit on the landlord, it seems to me that stipulations as to time ought not to be strictly enforced unless there is something in a particular clause to indicate that time is of the essence in that case.
Lord Fraser held that there was no such indication in Cheapside.
12. In my judgment, therefore, despite the fact that the speeches in Cheapside may strictly be obiter as a matter of fact, they are authoritative for the purpose of the decision on this construction summons. Mr Fancourt submitted to me that the speeches in Cheapside should be regarded only as persuasive. In this regard, he referred me to a passage in the judgment of Nourse LJ in Glofield Properties Ltd v Morley (No 2) [1989] 2 EGLR 118 at p120H:
I do not think that the views which were expressed either by Peter Gibson J or by the members of this court can be decisive of the question which we must now decide. It never comes amiss to remind ourselves that views, even of the most eminent judges, which are formed without argument on questions which do not
The passages to which I have referred from the speeches in Cheapside seem to me to demonstrate that the House of Lords decided that case having heard full argument, both in that case and in the conjoined appeal of United Scientific, and stated a general principle applicable to all rent review clauses.
13. I therefore turn to consider the submissions by the claimant in the present case, that there are sufficient contra-indications in the rent review clause that I have to consider to persuade me to decide the construction summons in the claimant’s favour.
Contra-indications relied upon
14. It was urged on me that there were two contra-indications in the rent review clause in the present case that demonstrate that time was of the essence of the machinery in that clause. It was submitted, first, that this was not just a case of a time limit for the service of a trigger notice, but that it was a case in which a timetable was specifically laid down for service in order to ensure that the rent was ascertained before the review date arrived. There was no provision for payment either of “catch-up” rent or of interest. Second, it was submitted that any delay in the operation of the machinery may result in a substantial detriment to the claimant as the rent may be valued at a considerably higher figure because of the delay. I shall consider those submissions in turn.
15. I can deal with the first submission quite shortly. It will be recalled that the rent review clause in the present case is practically identical with that in Cheapside. I quite accept that it is a distinguishing feature of that case that the landlord had served the trigger notice in time, and that it was not strictly a matter for decision by the House of Lords to consider whether time was of the essence of the service of that notice. However, as I have pointed out, the House of Lords treated the issue as one of principle. I do not accept that if it had been the view of the members of the Appellate Committee that time was of the essence of the service of the trigger notice in a case in which the timetable was specifically laid down, as in Cheapside, they would not have said so. In my judgment, the answer to the submission is to be found in the passage that I have already quoted from the speech of Lord Diplock in para 9 above, in particular where Lord Diplock indicates the steps that the tenant can itself take if it thinks that it is important to ascertain the new rent before the new rent period commences.
16. That same passage is also relevant in relation to the second suggested contra-indication. Mr Fancourt submitted that because the expert was required to make his determination before the review date, no expert could now, in default of agreement between the parties, make the valuation contemplated in the rent review clause. In support of this submission, Mr Fancourt referred me to a number of authorities. I shall consider them in chronological order.
17. In London & Manchester Assurance Co Ltd v GA Dunn & Co [1983] 1 EGLR 111, the relevant provision was in the following terms:
The expression the open market rental value as aforesaid means a sum in relation to the review period or second review period or third review period as the case may be determined in manner hereinafter provided as being at the time of such determination the annual rental value of the demised premises in the open market on a lease for a term of years certain equivalent to the number of years then unexpired of the term granted by this Lease…
(Emphasis added.)
In his dissenting judgment, Lawton LJ said that the parties:
must, in my judgment, have intended that the rent review procedure should be set in motion before the end of the first seven years and that, in the absence of agreement, the new rent would be determined either before the rent review period started or soon after under the provision of clause 5(3). It follows that it was the lessors’ duty to keep strictly to the rent review timetable.
Oliver LJ held that the relevant clause did not fix a time limit within which the machinery for ascertaining the open market rent applicable to the review period had to be operated. Slade LJ was “strongly attracted to the view that time is of the essence for the relevant purpose in the present case”, but held that the presumption that time was not of the essence had not been rebutted.
Mr Fancourt submitted that the requirement that the expert’s valuation should be given in writing “not less than 14 days before the review date for the period in question” in the lease that I am considering was a stronger contra-indication than the phrase “at the time of such determination” in London & Manchester Assurance. I do not agree. In my judgment, if the words used in that case do not amount to a sufficient contra-indication, the words used in the present case do not do so. Finally, in regard to this submission, it must be remembered that the very same words are used in the rent review clause in the present case as were used in the rent review clause in Cheapside, and were not held in that case to be a sufficient contra-indication.
18. In Greenhaven Securities Ltd v Compton [1985] 2 EGLR 117, Goulding J had to decide whether there was a contra-indication in the relevant lease that rebutted the presumption that time was not the essence of the rent review clause. He held that, in that case, there was such a contra-indication because it was expressly provided that if, within the reserved period, the parties had not agreed upon the identity of an arbitrator, and neither had applied to the president of the Royal Institution of Chartered Surveyors for the appointment of an arbitrator, then the rent payable in the review period was “a sum equal to the rent payable immediately before the review date”. Goulding J said, in respect of that provision at p119B:
To my mind they have therefore clearly indicated that time is to be of the essence in respect of that period and the court would indeed be making a bargain for the parties they never made for themselves –– and writing into subpara (3) qualifying words that are not there if the court were to accede to the landlord’s application
19. In Metrolands Investments Ltd v JH Dewhurst Ltd [1986] 3 All ER 659*, Slade LJ said, in giving the judgment of the court at pp668J-669D:
Throughout this debate, we think it must be borne in mind that the ultimate object of the court in construing a rent review clause, like any other contractual provision, must be to ascertain the parties’ intentions from the particular words which they have used to express those intentions, read, of course, in the light of any admissible evidence as to surrounding circumstances; albeit with the assistance of the guidelines as to construction afforded by earlier authorities. In many, perhaps most, cases, of which the present is one, the rent review (if any) can result only in an increase, and thus is only for the landlord’s benefit. Essentially, therefore, the question to which the court has to direct its mind is this: is the proper intention to impute to the parties, from the words which they have used, the intention that the landlord shall lose his right to the review if the stipulated timetable is not strictly adhered to in the relevant respects?
In practice it is ordinarily likely that “the detriment to the landlord of losing his review altogether by failure to adhere strictly” to the stipulated time limit will be wholly disproportionate to the disadvantage to the tenant of a delay in the assessment of the rent. his, as Dillon LJ pointed out in Touche Ross & Co v Secretary of State for the Environment (1982) 46 P&CR 187 at 190, appears to have been the reason why the House of Lords in the United Scientific case concluded that prima facie, and in the absence of sufficient contra-indications, it is not right to impute to the parties to a lease the intention that time is to be of the essence for the purpose of a rent review clause. This, we think, should be the initial starting point on the consideration of any such clause.
However, as their Lordships recognised, in a case where a lease contains a break clause as well as a rent review clause and the timetables of the two clauses are closely interlocked, the inter relation of the two clauses is likely to suffice as a contra-indication sufficient to rebut the ordinary presumption; though everything must depend on the wording of the particular lease.
* Editor’s note: Also reported at [1986] 1 EGLR 125
In Phipps-Faire Ltd v Malbern Construction Ltd [1987] 1 EGLR 129, Warner J held, at p131F that:
[t]he authorities seem to me to show that the presumption that time is not of the essence of a provision in a rent review clause is strong and that it will not be rebutted by any contra-indication in the express terms of the lease unless it is a compelling one.
21. Finally, in Glofield Properties (to which I have referred earlier in this judgment), the relevant provision defined “the open market rental value” as meaning:
a sum in relation to the review period or the second review period as the case may be determined in manner hereinafter provided as being at the time of such determination the annual rental value of the Demised Premises in the open market
(Emphasis added.)
The parties’ contentions are set out in the judgment of Nourse LJ at p119G-H. Nourse LJ, with whose judgment Stocker and Taylor LJJ agreed, concluded at p120F:
I come, then, to the crucial words “determined… as being at the time of such determination the annual rental value” etc. Mr Reynolds, for the defendants, has pointed to the contrast between the word “time” and the word “date” where the latter appears in clause 5(3). He has argued that the words “at the time of”, when contrasted with “at the date of”, mean “on the occasion of”. I would not put it quite in that way. The words used are “at the time of such determination”. I would accept that those words are fully capable of meaning “at the time at which such determination is made”. Indeed, I would go further and say that that is their natural meaning. But they are also capable of meaning “at the time for such determination” or, if you prefer, “at the time to which such determination relates”. The time for the determination of a reviewed rent is the start of the review period to which it relates and I do not think that there is any offence in that construction if, as has been shown, some purpose and effect can thereby be given to the words “in relation to the review period or the second review period as the case may be”.
In that case, the landlords contended that the rent payable during each review period was to be determined by reference to the open market rental value at the date upon which the surveyor actually made his determination. The tenants contended that the rent payable was to be ascertained by reference to the open market rental value at the date of the commencement of the relevant rental period. The Court of Appeal made a declaration in the terms sought by the tenants.
22. In my judgment, despite Mr Fancourt’s persuasive submissions, there are no “compelling” contra-indications in the present case such as to lead me to conclude that time was of the essence of the machinery for rent review. If time was not of the essence in relation to provisions such as were to be found in London & Manchester Assurance or Glofield Properties, it was not of the essence in the present case.
Appeal
23. The facts relevant to the appeal can be shortly stated. The defendant’s notice was dated 9 August 1999. There then ensued correspondence between the parties’ solicitors. I do not intend to say anything about that correspondence other than that, in my view, its tone was unnecessarily aggressive: I do not propose to attribute blame for that aggression to either firm. The claim form was issued on 13 July 2000. It was supported by a witness statement of Ms Amanda MeNeil. On 9 August 2000 the defendant’s application notice to strike out the claim or for summary judgment was issued. The application notice was supported by a witness statement of Ms Carole Pect. On 10 August 2000 Deputy Master Bartlett ordered “On the Court’s own initiative” that there should be a hearing to consider whether summary judgment should be given against the claimant.
24. The application came on before Chief Master Winegarten on 31 January 2001. As I have said, he dismissed the application, but ordered the claimant to pay the costs in the assessed sum. Mr Fancourt submitted that the chief master went “badly wrong in principle” in making that order. In particular, he submitted that the chief master was wrong to hold that the application to strike out was properly brought: the Part 8 claim was a construction summons in the ordinary way, and no application could be brought in respect of it under Part 3.4 (2). The chief master was wrong not to have applied the general costs rule in Part 44.3.
25. Mr Stoner submitted that there is a considerable overlap between Part 24 (summary judgment) and Part 3.4. He referred in that context to the notes on Part 3.4.6 to be found in Civil Procedure, where there is a reference to a decision of the Court of Appeal in Taylor v Midland Bank Trust Co Ltd unreported 21 July 1999, in which it was said that an application under Part 3.4(2)(a) should be treated in the same way as an application for summary judgment under Part 24. In answer to the submission that the chief master should have applied the general costs rule set out in Part 44.3, Mr Stoner referred to the Court of Appeal judgment in Tanfern Ltd v Cameron-MacDonald [2000] 1 WLR 1311 at p1317, where, between paras 30 and 32, Brooke LJ, with whom Lord Woolf MR and Peter Gibson LJ agreed, said:
30… The appeal court will only allow an appeal where the decision of the lower court was wrong, or where it was unjust because of a serious procedural or other irregularity in the proceedings in the lower court: CPR, r 52.11 (3).
31. This marks a significant change in practice, in relation to what used to be called “interlocutory appeals” from district judges or masters. Under the old practice, the appeal to a judge was a rehearing in the fullest sense of the word, and a judge exercised his/her discretion afresh, while giving appropriate weight to the way the lower court had exercised its discretion in the matter. Under the new practice, the decision of the lower court will attract much greater significance. The appeal court’s duty is now limited to the review of that decision, and it may only interfere in the quite limited circumstances set out in CPR, r 52.11 (3).
32. The first ground for interference speaks for itself. The epithet “wrong” is to be applied to the substance of the decision made by the lower court. If the appeal is against the exercise of a discretion by the lower court, the decision of the House of Lords in G v G (Minors: Custody Appeal) [1985] 1 WLR 647 warrants attention. In that case Lord Fraser of Tullybelton said, at p652:
“Certainly it would not be useful to inquire whether different shades of meaning are intended to be conveyed by words such as ‘blatant error’ used by the President in the present case, and words such as ‘clearly wrong’, ‘plainly wrong’, or simply ‘wrong’ used by other judges in other cases. All these various expressions were used in order to emphasise the point that the appellate court should only interfere when they consider that the judge of first instance has not merely preferred an imperfect solution which is different from an alternative imperfect solution which the Court of Appeal might all would have adopted, but has exceeded the generous ambit within which a reasonable disagreement is possible.”
26. In my judgment, it is not possible to say that Chief Master Winegarten “exceeded the generous ambit within which a reasonable disagreement is possible”, when he exercised his discretion to make the costs order that he made. I have had the advantage of a full note of the chief master’s judgment, in which he sets out, in some detail, the history of the matter, and while I might not have made the order that he made, it was an order that was within his discretion, and that he was entitled to make.
27. The appeal will, therefore, be dismissed.
28. I shall hear submissions from counsel as to the order that I should make as a result of this judgment.
Appeal dismissed.
