Construction of lease — Inconsistent wording — Exception from grant — No need to apply “last ditch” doctrine of “contra proferentem” — Landlord’s appeal dismissed
This was an appeal by Balgray Investments, Ltd, of Haymarket, London, SW, from a decision of Widgery, J, on July 19, 1962, holding that an ambiguity in a clause of a lease should be resolved in favour of the lessee, Mr Ernest Philip Gruhn, of Cavendish Drive, Canons Park, Edgware, Middlesex, who was thus entitled to remain a tenant of a garage and factory premises in Stanhope Street, Euston Road, London, NW, under a lease dated December 24, 1947, for the residue of a 21-year term, despite notices dated September 28, 1961, purporting to determine the lease on September 29, 1962.
Mr Michael Albery, QC, and Mr G Avgherinos (instructed by Messrs Titmuss, Sainer & Webb) appeared for the appellants, and Mr H Heathcote-Williams, QC, and Mr Michael Thomas (instructed by Messrs Butt & Bowyer) represented the respondents.
Giving the first judgment, Harman, LJ, said: This is an appeal in an application which might have been brought on an originating summons for the construction of a lease. There is no question of fact in dispute, and the answer turns on some words negotiated no doubt in a lease which went backwards and forwards between the parties, and one may strongly suspect that some words have been left in which ought not to have been left in. Of course that is a speculation which, though amusing enough, is not a legitimate one. Now the action took the form of a writ in the Queen’s Bench Division by the tenant under this lease asking for a declaration that he was still the tenant of a bakery (now apparently a garage) in Stanhope Street, off the Euston Road, the lease being one of December 24, 1947, for the residue of a 21-year term created by that lease notwithstanding a notice served on the tenant by the defendants as landlords in 1961. In other words, the tenant was claiming that the landlords had no right to serve him with a notice to determine. The landlords are not the original party to the lease, which therefore does not operate by way of privity of contract between the parties but purely by privity of estate.
The particular terms of the lease are not of any very great importance. They are for a term of 21 years from Christmas, 1947, at a rent of £800 a year. We know that at the time when this lease was entered into there had been a great deal of bomb damage in that part of the world. We know also that licences to rebuild were not to be had in 1947. The landlord, therefore, who was (and this we know also, and are entitled to know) the freeholder of a considerable block of property which included this building (which I may say is not the whole of the building on the site but only the first, second and third floors of it), no doubt would want sooner or later if he could to develop the whole site in a way advantageous to himself. The tenant, on the other hand, would want as much security of tenure as he could get. So that when you get to the portion of the lease in question you get these words:
If at any time during the term hereby granted after the expiration of the sixth year thereof the landlord shall require possession of the demised premises for the purpose of giving effect to an agreement involving the rebuilding and reconstruction of the building of which the demised premises form part and of such his intention shall give to the tenant twelve months previous notice in writing expiring at the end of the seventh year and production of such a building agreement then at the expiration of such notice and production of the said agreement the present demise and everything herein contained shall cease and be void…
That is a proviso giving the landlord, or purporting to give the landlord, in certain events, the right to determine the 21-year term created by the demise, which (as is usual) was for “21 years (determinable as hereinafter mentioned).” This is one of the ways in which the 21 years is determinable. If it is determinable, as the clause at one point clearly says, by notice “expiring at the end of the seventh year,” that time has long since passed, and the clause can no longer be operative. But if you look at the beginning of the clause you find the words “If at any time during the term hereby granted,” which looks as if the landlord could give his notice or have his intention to rebuild at any time during the 21 years’ term.
Of course those two parts of that clause clearly conflict. Whether it was that one or the other of them was not intended to be there, or whether it was that when the clause was originally drawn neither of them was there and the landlord wanted to have the right at any time but was countered by the tenant who wanted at least seven years’ security, one does not know. But the argument on the part of the landlord has been that it is absurd to suppose that there was only one moment of time at which he could give a notice determining the term; even more (says Mr Albery), if you look at it carefully, as he had to have his intention to rebuild after the end of the sixth year and as he had to give notice in writing ending at the end of the seventh year, he never could give the 12 months’ notice necessary and the clause would be inoperative altogether. Therefore (says Mr Albery), ut res magis valeat quam pereat you must read “at” as “after.” That, in my judgment, is to do the utmost violence to the language, because in leases “at” means exactly the opposite to “after.” “At” marks a precise point of time, whereas “after” merely indicates a period. On the other hand, Mr Heathcote-Williams says, there is no reason why you should not have your intention and give your notice before the end of the sixth year: the only limitation is that it cannot expire till the end of that year until seven years are up. But if you do that you give no meaning to the earlier part of the clause. Therefore you have got more or less to ignore some words. What are you to do?
In my opinion, the true way of construing this is to look first at the nature of the document. This is a lease. It gives a term of 21 years to the lessee. That term can only be cut down, I think, by words equally as clear as the words of grant, and nobody can say, in my judgment, that the words cutting down the 21-year term are as clear as the grant which creates them. That, I think, is enough to determine this case. Either the two parts of the clause are inconsistent (as the judge seemed to hold), or the time has now passed and the right can never be operated, or there is an ambiguity. Whichever way you look at it, it seems to me that the lessee must succeed. There is one case which has a good deal of bearing on it, I think, and that is Savill Brothers, Ltd v Bethell [1902] 2 Ch 523, a decision of the Court of Appeal, where one finds in the headnote these words:
Where there is a grant by deed with an exception out of it, the exception is to be taken as inserted for the benefit of the grantor and to be construed in favour of the grantee.
The grantor is the landlord, the grantee the tenant. The exception is the right to cut off the term before it has run its full length. It is to be construed, therefore, in favour of the tenant and against the landlord; and it is simply stated by Stirling, LJ (giving the judgment of the Court at page 537), in these words:
It is a settled rule of construction that, where there is a grant and an exception out of it, the exception is to be taken as inserted for the benefit of the grantor, and to be construed in favour of the grantee.
He then cites three cases, including Bullen v Denning, a common law case in 5 B&C, 842. “If, then, the grant be clear” (he goes on) “but the exception be so framed as to be bad for uncertainty, it appears to us that, on this principle, the grant is operative and the exception fails.” That is, if you cannot make anything of this clause at all. If, on the other hand, it is ambiguous, it seems to me again that you must favour the lessee, whose rights are being cut down by a document which is the thing put forward by the landlord. I do not care for the doctrine of contra proferentem, and I do not think it is necessary to have resort to it here. I recently described it as the “last ditch” argument, and that I think it remains. I think this case rests on a much sounder basis, namely, that the exception must be at least as clear at the grant, and here nobody can say it is. Therefore the tenant succeeds and his action is right; and the learned judge was right, though perhaps not quite for the reason which he gave.
Pearson, LJ: I agree, and have nothing to add.
Sellers, LJ: I agree that this appeal should be dismissed. I would only add that before the learned judge there was an issue as to whether the building contract on which the landlord was relying so as to enable him to give effect to this clause was in fact sufficient and adequate for that purpose. That was an issue of fact decided in favour of the appellant. As the matter came before us it was (as Harman, LJ, has said) only a question of the construction of this clause in the lease. For myself, I find no ambiguity in the only words which provide for a notice, in these terms, that the landlord “shall give to the tenant 12 months previous notice in writing expiring at the end of the seventh year.” If those words do not mean what they say, I have been unable to understand what they do mean. If they are inconsistent with the other parts of this clause (and I am inclined to think that they are not wholly or completely inconsistent, as the learned judge held them to be), then the required notice in its context has no clear meaning and application.
Mr Heathcote-Williams: The appeal will be dismissed with costs, my Lord?
Sellers, LJ: So be it.
Mr Albery: My Lord, I am instructed to ask your Lordships for leave to appeal to their Lordships’ House. Perhaps I may just say this on that. This is a matter of considerable substance. Perhaps I might say what it is not proper I should have said before –
Harman, LJ: How much did the lessee ask you, to go out?
Mr Albery: Sixty thousand pounds, my Lord.
Harm, LJ: I thought that was about what was involved.
Mr Albery :For the fag end of five years of a small property.
(Their Lordships conferred)
Sellers, LJ: I think you will have to go to the Committee. It is a very short point; they will probably take a view on it very much more quickly than we did!
