Ropemaker Properties Ltd v Bella Italia Restaurants Ltd [2018] EWHC 1002 (Ch) concerned a conditional agreement for lease between a developer/landlord on the one hand and an incoming tenant and its guarantor on the other. The agreement was expressed to be subject to conditions and was terminable if the conditions were not satisfied in time. In that case, either the landlord or the tenant were to “give written notice to the other and the guarantor to determine this agreement”.
The agreement prohibited the service of notices by e-mail or fax and specified exactly how hard copies of notices were to be served. It also stated that notices served on the tenant and its guarantor were to be served “c/o the property director” of the tenant company and were to be copied to the tenant’s conveyancer.
The tenant’s parent company held a board meeting, in the presence of directors of both the tenant and its guarantor, at which it was agreed that the tenant would terminate the agreement for failure to satisfy one of the conditions. Following that meeting, the tenant served a notice to that effect on the landlord, without serving an equivalent notice on its guarantor.
The landlord claimed that the notice was invalid because the guarantor should have been served as well. Initially, the tenant argued that the requirement to serve the guarantor applied only where the landlord was exercising the right to terminate. But, eventually, it accepted that the notices clause required a notice given by the tenant to be given to the guarantor as well. And, unfortunately, the right to determine the agreement required compliance with the notices clause – failing which, a notice would be invalid.
The tenant’s conveyancer had sent a soft copy of the termination notice to the property director of the tenant company by e-mail. But the tenant was forced to accept that this was not good enough. The e-mail/notice was addressed to the landlord – and not to the guarantor. And e-mail was not a valid form of service under the agreement.
Would the minutes of the board meeting at which the parent company resolved to terminate the agreement (which were made available at the next board meeting) suffice instead? The tenant and guarantor did not hold board meetings themselves. The parent company board took decisions for them instead. Even so, the judge rejected the notion that the minutes satisfied the requirements in the agreement. A written notice to the guarantor should have been prepared and served on the “property director” of the tenant company using one of the methods of service prescribed by the agreement. It should have made it clear on its face that it was a notice to the guarantor and should have been copied to the tenant’s conveyancer.
The judge was conscious that non-service of a hard copy of a separate notice on a sister company (when the property director had a soft copy of the notice served on the landlord) was a very technical and unattractive basis on which to invalidate the tenant’s notice. However, Siemens Hearing Instruments Ltd v Friends Life Ltd [2014] EWCA Civ 382; [2014] PLSCS 108 confirmed that it makes no difference that requirements are substantially complied with or have no apparent purpose or benefit.
Allyson Colby, property law consultant
