Landlord and tenant –– Rent review –– Date of review –– Rent reviewable in certain specified years “of the said term” –– Meaning of “the said term” –– Whether date of grant or date from which term expressed to run –– Arbitration –– Appeal –– Whether arbitrator deciding correct date for rent review
By the rent review clause of the sublease between the parties, the lessor was entitled to give notice seeking a review during the first six months of certain specified years “of the said term”. The habendum provided that the subtenant was to hold “from the date hereof for the residue of a term of 125 years from 21st December 1960”. The reddendum provided for the rents payable during the first and second 40 years of “the said term”. The sublease was in fact granted on 30 March 1962. The appointed arbitrator decided that “the said term” commenced on 21 December 1960. The lessor appealed, contending that the “said term”, for the purposes of the rent review, meant the term commencing on the execution of the lease and the first rent payment.
Held: The appeal was allowed. The “said term” meant the term granted from the date of the grant of the sublease, that is, 30 March 1962. It did not mean a term from 21 December 1960. The parties at the time must have intended that the rent review was to run 40 years from the date of the first payment of rent, and then 40 years thereafter.
The following cases are referred to in this report.
Beaumont Property Trust v Tai [1983] 1 EGLR 122; (1982) 265 EG 872
Earl of Cadogan v Guinness [1936] Ch 515; [1936] 2 All ER 29
This was an appeal by the tenant, Bass Holdings Ltd, under section 69 of the Arbitration Act 1996, from a decision of an arbitrator in rent review proceedings with the landlord, Bisichi Mining Ltd.
John Furber QC (instructed by Ford & Warren, of Leeds) appeared for the tenant; Jonathan Brock QC (instructed by Brooke North, of Leeds) represented the landlord.
Giving the judgment of the court, JACOB J said:
This is an appeal on a point of law against an interim award of an arbitrator given on 12 July 2001. Appeal lies pursuant to section 69 of the Arbitration Act 1996 only if the court is satisfied that the decision of the tribunal on the question is obviously wrong, or at least appeal in this case only lies on that basis. Permission to appeal was given on that basis by Lloyd J.
The dispute is about the date upon which the rent review provision in an underlease is to operate. There was a headlease, which was a building lease, and the date of which was 21 December 1960. The term was 125 years and a ground rent was payable. It is common ground that neither side can get any other assistance from the headlease; in particular, there were no rent review provisions in that lease, so there
Clause 4 of the sublease reads as follows:
Provided always it is hereby agreed and declared as follows:
(a) that the lessor shall be entitled by notice in writing given to the lessees during the first six months of the 40th and 80th years respectively of the said term as regards the premises coloured pink in the said plan and as regards the premises coloured pink and hatched green on the said plan, during the first six months of the 21st, 42nd, 83rd and 104th years respectively of the said term, to call for review at the expense of the lessor of the yearly rents payable under this under lease.
It is common ground that this clause operates from whenever the beginning of the “said term” is, and it does, in itself, throw no light upon that phrase.
It is also common ground that whichever of the two dates that are in contention [is referred to], one cannot get any mathematical neatness from the periods provided for its subsequent rent reviews, so, again, there is no help in that direction. What then does “said term” mean in clause 4(a)?
The rival dates run from 21 December 1960 and 30 March 1962 (the date upon which the underlease was signed). The habendum, a technical term that has no English equivalent, demises in the following language:
To hold, except and reserved as aforesaid, unto the lessee from the date hereof for the residue of a term of 125 years from the 21st day of December 1960, less the last 20 days thereof.
The reddendum goes on:
Paying therefore as to the said property coloured pink on the said plan during the first 40 years of the said term, a yearly rent of £6,650 and therefore during the next successive period of 40 years and the remainder of the term respectively, the rent hereinbefore reserved or such increased yearly rent as may from time to time be payable in accordance with the provisions of clause 4 hereof (whichever shall be the greater) and as to the property coloured pink and hatched green on the said plan, a yearly rent of £450 during the first 21 years of the said term and thereafter during the next successive periods of 21 years, 21 years, 21 years and the remainder of the term respectively, the rent hereinbefore reserved or such increased yearly rent as may from time to time be payable in accordance with the provisions of the said clause hereof (whichever shall be the greater) the said yearly rents to be payable by equal quarterly payments in advance on the usual quarter days clear of all deductions whatsoever (except for income tax at the standard rate for the time being in force) the first proportionate payment being a proportion of the current quarter from the date hereof to be made on the execution hereof.
The lease then goes on, in clause 2, with the tenant’s covenants. I need not go into these in detail, but it is worth mentioning the first:
The lessee hereby covenants with the lessor as follows:
1. During the said term to pay the said yearly rents at the times and in the manner aforesaid free from all deductions, except landlord’s property tax on the said rents.
The expression “the said term” appears in other places in the tenant’s covenants. It is common ground that, so far as this clause is concerned, “said term” must mean the period commencing with the date of signing of the document, the date upon which the interest in land of the tenant was created.
The issue between the parties is whether the calculation begins with the date in 1960, or the date in 1962 when the lease was signed. Mr Jonathan Brock QC, defending the arbitrator’s decision, did not feel able to defend the actual reasoning and language adopted by the arbitrator. He said that I should bear in mind that one cannot retrospectively create a legal interest of a tenant. So much is well established: Earl of Cadogan v Guinness [1936] Ch 515 is what might be called a granddaddy authority on the point. It follows, he says, that if one looks at the habendum and asks what the words “from the date hereof” are doing, the answer is: merely reminding you of that rule, and no more. Therefore, it follows that “from the date hereof for the residue of a term of 125 years” means no more than that that is the period for which the tenancy would exist in law. “Said term”, he says, must be a reference back to the residue of a term of 125 years less the 20 days.
His difficulty is that the lease is simply not consistent with that meaning. Mr Brock has to concede that “said term” in the tenant’s covenants cannot take that meaning. It would follow from his submission that the draftsman intended the expression to have different meanings in different clauses. One seldom so concludes unless one is driven to it. Moreover, I think Mr Brock is forced to say that even in the reddendum, “said term” must mean something different from what it means, according to him, in clause 4. The rent is undoubtedly going to run pursuant to this document only from the date of its signing. The concluding words that “the first proportionate payment being a proportion of the current quarter from the date hereof be made on the execution hereof” makes that abundantly clear. That is coupled, of course, with the tenant’s covenant to pay during the said term.
If one stands back a little and considers which is the more likely, that the rent review was to run from 40 years from the date of first payment of rent or for some rather more obscure period, for the first period and then 40 years thereafter, one cannot think of any rational reason why one would so provide. To my mind, commercially speaking, landlord and tenant negotiating this document would say: Right, 40 years we review it from the time when it is first paid and then 40 years thereafter and so on.
Mr Brock’s best point, I thought, was his challenge as to what on earth the reference to 21 December 1960 was in this document for at all. After all, what really mattered was no more than the term of this sublease. I think the answer is that the draftsman, somewhat inelegantly, was trying to make sure that this sublease was for a shorter period than the headlease, so he chose to take the period of the headlease as a way of doing that, merely knocking off 20 days. But all that he was doing in the habendum by reference to that date was ensuring that position.
I was taken to a number of other authorities. Mr Brock particularly relied upon Beaumont Property Trust v Tai [1983] 1 EGLR 122, where Deputy Judge Vivian Price QC construed a rather different clause. In the end, I get no help from this case. I note, however, that in that case, the rent review clauses were consistent with a mathematical division of the period of the lease, a term of 25 years, the rent review being every five years. There was nothing in that case of the same expression (ie “term” or “said term”) having different meanings in different parts of a document as would have to be the case if Mr Brock were right here. Accordingly, I allow the appeal on this point.
Appeal allowed.
