The defendant was the landlord and the claimant was the tenant of premises under a lease for a 25-year term, which was later varied by deed to 40 years. Clause 2(3) of the lease required the claimant to carry out “the works”, which were defined in clause 2(3)(a) as the erection or reconstruction of a petrol filling station and service station. Clause 2(3)(b) permitted the claimant to vary the works in such a manner as might be required by a competent authority or as the claimant reasonably required. By clause 2(8), the demised premises were to be used “only for the purposes permitted under the Town and Country Planning Act”. The lease also referred to a contemporaneous planning agreement that had been entered into with the local planning authority regarding the grant of planning permission for a petrol filling station on the site.
A rent review clause provided for review to the open market rental value “on the assumption that the demised land has the benefit of the planning permission for the erection and use of the works as defined in clause 2(3)(a) hereof”, but disregarding various matters, including all buildings, structures, fixtures and fittings on the land. That clause gave rise to a dispute between the parties as to the correct basis for valuing the premises.
The claimant brought proceedings, seeking a declaration that, on the true construction of the rent review clause and clause 2(3), the premises had to be valued on the basis that they would be used by the hypothetical tenant as a petrol filling station, that being the purpose permitted under the Act. It argued that such a construction accorded with the commercial purposes of the lease, which was intended as a building lease under which the claimant was obliged to build a petrol station at its own expense, maintain it and deliver it up at the end of the lease. The defendant contended for a wider construction, submitting that clause 2(3)(b) permitted the works to be varied to something other than a petrol filling station provided that the proposed use was permitted under the Act.
Held: The claim was allowed.
The lease could not be construed in the wide manner contended for by the defendant. Clause 2(3)(a) gave a clear definition of the works, namely the erection of a petrol filling and service station. In the light of that, and in the context of the contemporaneous planning agreement and application for a petrol filling station, the wording of section 2(3)(b) could not sensibly be taken as permitting the substitution of some entirely different works. Likewise, when section 2(8) was construed against the other provisions of the lease, and in the light of what the demised premises were actually required to comprise, the only sensible construction was that it restrained use of the premises other than as a petrol filling station. The commercial purpose of the rent review provisions was to allow the landlord to recover a rent that took account of increased value and inflation, but on the hypothesis that the premises were let on the same terms as those actually granted. Accordingly, for the purposes of the rent review, the premises were to be valued on the basis that they were demised as a petrol filling station to be used for the purposes for which planning permission existed at that date. The presumption of reality, requiring that hypotheses should not be taken further than was absolutely required by the terms of the rent review clause, did not assist the defendant on the facts of the instant case.
Janet Bignell (instructed by Boodle Hatfield) appeared for the claimant; William Hanbury (instructed by Langleys, of Lincoln) appeared for the defendant.
Sally Dobson, barrister
