Various assignments of lease between companies in same group — Notice purporting to activate tenant’s right to break served on behalf of former tenant — Landlord challenging validity of notice — Challenge upheld
The claimant company (PGTC) belonged to a world-wide group of companies (the group) that was controlled by a Cincinnati-based company (the holding company). The group included, inter alia: Procter & Gamble Health and Care (PGHC); Procter & Gamble Health & Beauty Care Europe Ltd (PGE); Procter & Gamble L&CP Ltd (PGL&CP); and EMEA Real Estate (EMEA), a team responsible for all real estate transactions affecting members of the group.
In December 1995, a property in Surrey was demised by the defendant, then called Brixton Estate plc (Brixton), to PGHC for a term of 20 years. By clause 7 of the lease (the break clause), the tenant was entitled, subject to certain conditions, to terminate the lease on 24 December 2002 by giving to the lessor not less than six months’ notice. During the period October 1998 to February 1999, pursuant to corporate restructuring decided upon by the holding company, the following dispositions took place with the consent of Brixton: PGHC assigned the lease to PGE; PGE assigned the lease to PGTC; and PGTC granted an underlease to PGL&CP and PGE. In August 2000, Brixton and PGHC executed a memorandum recording the rents payable to Brixton, which inaccurately noted that the tenant was PGHC.
In June 2002, a solicitor, instructed by an employee of PGTC, wrote to Brixton. Acting on the information contained in the memorandum, the solictor, having announced that it was representing PGHC, “your tenant of the above premises”, asked Brixton to accept the letter as “our client’s notice to determine the lease on 24 December 2002” in accordance with the break clause. In the present proceedings, Brixton raised three objections to the validity of the notice: (i) PGTC did not have the necessary desire to determine the lease; (ii) the notice was not served by PGTC; and (iii) the notice was, in any event, invalid.
Held: The third objection was upheld.
The first two objections were addressed to the formal requirements laid down by the clause. These had to be strictly complied with: see, for example, West Country Cleaners (Falmouth) Ltd v Saly [1966] 1 WLR 1485 and Hare v Nicoll [1966] 2 QB 130. The first objection failed. It was unrealistic to deny the necessary desire on the part of PGTC. There was no reason why a tenant company could not delegate a commercial desire of the kind under consideration to another member of the same group. For similar reasons, turning to the second objection, it could not be said that the solicitor did not have PGTC’s authority to serve the notice.
The third objection went to the contents of the notice, the issue being whether the notice “clearly and unambiguously communicated the required message”: see per Lord Hoffmann in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] 1 EGLR 57 at p65K. However, the various observations in Mannai did not give the green light to inaccurate and sloppily drafted notices. The test remained relatively strict. Although the question in every case was whether it was plain that a reasonable recipient could not be misled, there was a potential difference between mistakes as to the date (as in Mannai) and mistakes as to persons identified in the notice: see Lemmerbell Ltd v Britannia LAS Direct Ltd [1998] 3 EGLR 67. Having regard to the previous complex transactions in the present case, and the terms of the notice, Brixton had rightly argued that it was served on behalf of somebody of whom the recipient of the notice could reasonably have assumed was the person in whom the lease was vested: Havant International Holdings Ltd v Lionsgate (H) Investment Ltd [2000] L&TR 297 distinguished. Notices of this sort, particularly if served close to the last minute, had to be clear and unambiguous because the recipient might need to make dispositions on the basis that the notice could be confidently relied upon. If this sometimes created problems for two companies in the same group, the short answer was that those who lived by the sword of choosing, for various reasons, to set up corporate structures, sometimes died by the sword.
Jonathan Brock QC (instructed by CMS Cameron McKenna) appeared for the claimant; Kim Lewison QC (instructed by SJ Berwin) appeared for the defendant.
Alan Cooklin, barrister
