The Court of Appeal today dismissed an appeal brought by a leaseholder who argued that a misapplied index-linked rent review overcompensated the landlord for changes in the value of money.
The case is the result of a 2015 rent review of an office building in Bromley, south London, in which the landlord estimated the rent to be around £1.6m per year while the leaseholder contended it should be closer to £1.3m.
Lawyers for the leaseholder contented that ambiguities in the lease suggest that the rent increase should be based on the rent when the agreement was put in place in 2005: £965,000. The rent was, instead calculated on the figure of £1.2m, which was the agreed rent for the five-year period preceding the 2015 review.
In today’s ruling, a two-judge panel at the Court of Appeal disagreed and dismissed the appeal.
“The fact that a contract term was an imprudent one for a part to have agreed, or that it has worked out badly, or even disastrously, is no warrant for departing from the clear wording of the contract,” Lord Justice Lewison wrote in the judgment.
The ruling confirms a consistent approach by the courts in recent years, according to Julie Gattegno, a partner at law firm CMS Cameron McKenna Nabarro Olswang LLP.
“This judgment joins the growing line of cases since Arnold v Britton in which the courts have repeatedly confirmed that, absent ambiguity, contracts will be given their literal meaning and the court will not step in to save a party from the consequences of a bad bargain. The fact that the dispute related to interpretation of an index-linked rent review did not alter this approach,” she said.
“The consistent approach of the courts should help give parties certainty that where the contract is clearly drafted its literal meaning will apply, and this should help to avoid unnecessary disputes,” she said.
Trillium (Prime) Property GP Limited v Elmfield Road Limited, Court of Appeal (Lewison LJ, Leggatt LJ) 4 July 2018
