Termination of lease – Break clause – Tenant not notified of change of landlord – Tenant notifying wrong company of intention to exercise break option – Whether break clause validly exercised – Whether landlord barred from denying validity of notice – Appeal allowed
The appellant’s lease contained a break clause that entitled it to terminate on one year’s notice. The clause contained a number of conditions or requirements, in particular that in order to terminate the lease on 2 February 2006, the appellant had to give a written notice to the claimant landlord prior to 2 February 2005. Notice could be given by various means, including by way of first-class recorded delivery to the registered office of the recipient.
In 2001, a company (B) was established as a joint venture to invest funds in commercial properties, either by acquiring properties directly or through subsidiaries. One such subsidiary was the respondent, which acquired the premises in issue on 14 October 2002. The respondent subsequently changed its name. However, the appellant was not informed and invoices for rent were sent by managers stated to be “acting as agents for B”.
The appellant served a notice of intention to terminate, which was addressed to B. The notice reached the respondent within the time limit. However, the respondent argued that the notice was invalid since it had not been served on it as landlord, which was an essential condition of the operation of the break clause. It applied to the court for a declaration that the appellant’s termination of the lease was invalid and therefore the lease continued in full force and effect.
The Lord Ordinary granted the declarations sought holding that the break notice had not been validly exercised and that the appellant had failed to make out its case that the respondent was barred from disputing the effectiveness of the notice: [2006] CSOH 35; [2006] PLSCS 57. The appellant appealed.
Held: The appeal was allowed.
The break notice sent to B at its registered office was not given to the landlord of the premises and was therefore ineffective. The lease provided that, for a break notice to be effective, the tenant had to give to the landlord at least one year’s written notice of termination. A notice addressed to a party other than the landlord and sent to the registered office of that other party could not be regarded as a notice given to the landlord: Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] 1 EGLR 57; [1997] 24 EG 122; [1997] 25 EG 138 considered.
The approach that a break notice delivered by hand to a landlord who was a natural person would be valid, even if it bore no name and was addressed to “Dear Landlord”, could not operate where the notice was sent by recorded delivery to the registered office of the limited company. Recorded delivery required a named addressee and, since there might be more than one company with its registered office at a given address, a communication could not necessarily be identified as sent to a particular company at its registered office unless the name of the company was included in the address. Accordingly, the break notice sent to B was not given to the landlord under the lease but to a third party so that it was ineffective to terminate the lease.
However, in the light of representations made in the rent invoices, the respondent was personally barred from denying that the break clause had been validly exercised. To find a plea of personal bar, the representation had to be such that a reasonable man would regard it as intended to be believed and relied upon. If that was the case, it did not matter that the party making the representation might not in fact have intended that it be relied upon, either generally or for a particular purpose: Pickard v Sears (1837) 6 A & E 469; Freeman v Cook (1848) 2 Exch 654; Gatty v Maclaine 1921 SC (HL) 1; and Sidney Bolsom Investment Trust Ltd v E Karmios & Co (London) Ltd [1956] 1 QB 529 considered.
Where the unqualified representation was that a particular party was the present landlord under a lease, the tenant was justified in believing that representation and was entitled to rely upon it for the purpose of the lease.
Mark Martin QC, dean of the faculty, and Rhoderick McIlvride (instructed by Anderson Fyfe, of Glasgow) appeared for the appellant; Craig Connal QC, solicitor advocate, and Mark Easton, solicitor (instructed by McGrigors, of Glasgow) appeared for the respondent.
Eileen O’Grady, barrister
