Landlord and tenant — Rent review clause — Confusion caused by two inconsistent notices both purporting to be trigger notices emanating from different agents of the landlords on the same day — Effect on timetable for landlords’ application to president of the RICS to appoint a surveyor to determine market rent in the absence of agreement — Difficulties arose from assignment of landlords’ reversion — Shortly after the assignment solicitors acting for the new landlords sent tenants a trigger notice stating a rent of £30,000 per annum — On the same day agents who had acted for the old landlords before the assignment, but who did not now make it clear for whom they were acting, sent tenants a trigger notice stating a rent of £45,000 per annum — In response to the notice from the new landlords, tenants gave a counternotice suggesting a rent of £16,000 — In response to the notice from the old landlords’ agents, tenants disputed its validity but also, in case the agents should prove to have authority to act for the new landlords, purported to give the
No cases are
referred to in this report.
This was an
originating summons by which the plaintiff tenants, Cordon Bleu Freezer Food
Centres Ltd, sought declarations to the effect that the rent payable by them in
accordance with the rent review clause of an underlease of commercial premises
in Sheffield was £16,000 per annum and that the defendant landlords, Marbleace
Ltd, were not entitled to apply to the president of the RICS to appoint a
surveyor to determine the rent.
Timothy Bowles
(instructed by Ashurst Morris Crisp) appeared on behalf of the plaintiffs;
David Neuberger QC (instructed by John Wood & Co) represented the
defendants.
Giving
judgment, JUDGE PAUL BAKER QC said: In this originating summons the plaintiff
is seeking a declaration that the annual rent payable under a certain
underlease between Railway Pension Nominees Ltd and the plaintiff tenant, Cordon
Blue Freezer Food Centres Ltd, is the sum of £16,000 and a declaration that the
defendant is not entitled to have the market rent determined by a surveyor
appointed by the president of the Royal Institution of Chartered Surveyors.
The request
for those declarations disguises a rather troublesome little point about the
timetable of certain notices which have been served under the lease, and I had
better begin by referring to the lease itself and the relevant provisions. The
premises comprise some accommodation in a substantial block of shops and
offices in Sheffield. The term was for 21 years from September 29 1972 and
there were, as is common in these days, rent review provisions. In this case
they were seven-yearly reviews. I am concerned with the second of those
reviews, which was in respect of the period commencing on September 29 1986.
The review
provisions are in the fourth schedule, which starts at p 22 of the lease
document. I do not think I need refer to clause 1, but go straight over to the
timetable. Perhaps I should say that Mr Neuberger for the landlords accepts
that, having regard to recent persuasive authority, he could not really argue
before me that the provisions of this lease have the effect of doing other than
make time of the essence. This is not a case in which one can relax the
timetable in any way. But I must make clear that he has reserved the right to
argue the point in the Court of Appeal if the matter should go there. I have
approached this, and I was invited to approach it, on the basis that these
time-limits are of the essence and must be strictly adhered to.
Now the
relevant review provisions start at para 2 of the fourth schedule. It states
there:
The Landlord
may once at any time during a review period serve on the Tenant a notice in
writing stating the amount which in the opinion of the Landlord is the market
rent.
I need not
read the proviso. So that is what has been called the triggering notice. Then
para 3:
Within the
period of two months from the date of service of the relevant review notice
that is again
a reference to the triggering notice
the Tenant
may serve on the Landlord a counternotice in writing stating the amount which
in the opinion of the Tenant is the market rent.
I can pass
over para 4 because that deals with the position where the tenant does not
serve a counternotice. The tenant indubitably served a counternotice here.
Going on to para 5:
If within one
month from the date of service of such counternotice the Landlord and the
Tenant shall have agreed in writing an amount which shall be treated as the
market rent the same shall be deemed to be the market rent.
That has not
happened in this case, so we go on to para 6.
If on the
expiration of one month from the date of service of such counternotice the
Landlord and the Tenant shall not have agreed in writing an amount which shall
be treated as the market rent the Landlord may apply to the President . . . for
the appointment of a surveyor to determine the market rent. The determination
of the market rent by the Surveyor appointed pursuant to such application shall
be made by him as an expert.
Then para 7:
If on the
expiration of two months from the date of service of such counternotice the
Landlord and the Tenant shall not have agreed in writing an amount to be
treated as the market rent and the Landlord shall not have applied for the
appointment of a surveyor in accordance with paragraph 6 of this Schedule the
amount or amounts stated in such counternotice shall be deemed to be the market
rent.
I think that is
all I need read out of the schedule.
Just simply
reading that will give some clue as to the declarations which are sought, but
now I must deal with the timetable of events which have happened in this case.
The lease, as
I have said, was granted by Railway Pension Nominees Ltd. On March 14 1986 the
reversion to the lease was assigned to the defendant, Marbleace Ltd, who
thereupon became the landlords of the premises. On March 21 the solicitors to
the landlord, John Wood & Co, sent the following letter by recorded
delivery to the tenant:
We act for
Marbleace Ltd
and it sets
out their address and the fact that they took a transfer of the reversion on
March 14.
This letter
is notice given by Marbleace Ltd in accordance with Paragraph 2 of the 4th Schedule
to the said Underlease that in the opinion of Marbleace Ltd as your Landlord
the market rent of the premises comprised in the Underlease is £30,000.
Please
acknowledge receipt of this notice by returning the duplicate of it to us with
a suitable endorsement.
Now, to that
notice the following was sent on April 15 by Stewart Newiss, acting through Mr
Smith, one of the partners or associates of that firm, a firm of surveyors.
They were instructed by the tenants. They say:
We act on
behalf of Argyll Stores (Properties) Ltd who are the Parent Company of Cordon
Bleu Freezer Food Centres Ltd. We have been passed your letter of March 21 1986
addressed to our client company regarding a review of rent under the terms of
the Underlease dated March 20 1974 between Railway Pension Nominees Ltd and
Cordon Bleu.
This letter
is a counternotice by Cordon Bleu Freezer Food Centres Ltd in accordance with
paragraph 3 of the 4th Schedule of the said Underlease that in the opinion of
Cordon Bleu Freezer Food Centres Ltd as your Tenant, the market rent of the
premises in the Underlease is £16,000 per annum.
Please
acknowledge receipt of this notice.
That notice was
acknowledged as of April 18, three days later, by the solicitors John Wood
& Co.
No one has
suggested that in point of form either that notice or the counternotice is not
a good valid notice.
No agreement
was reached on the rent, and on that line the next material matter is that on
June 24, and not before, the surveyors acting for the landlord, Eadon Lockwood
& Riddle, applied to the president for the appointment of a surveyor. Now,
if those notices were valid, and are the governing notices under the schedule,
then that application for the surveyor is too late by four days from a period
of months as worked out in the programme which I read from the fourth schedule.
Consequently, so it is said, by para 7 the counternotice figure, £16,000, would
be deemed to be the market rent and it would be too late to apply for the
appointment of a surveyor. Hence the declarations which are sought by the
plaintiff.
However, if
that was all there was to it, this case would not have arisen before me, and I
must go back now to March 21, which by coincidence was the date that the
solicitors were sending the letter to the tenants, as I mentioned. I must
explain that at that time Eadon Lockwood & Riddle, a firm of surveyors
practising in Sheffield, had been for some time the managing agents of the
property on behalf of the then landlords, the Railway Pension Fund. They were
aware that the review period was coming on, as good managing agents, of course,
should be, and on the morning of March 21 Mr Newton, who
sent to trigger off the review. He sent one to the parent company of the tenant
and another to where he thought the tenant was — nothing turns on that aspect
of the matter. A copy of his notice, as sent to the parent company and dated
March 21 1986, is to be found in the papers, addressed to the company
secretary, Argyll Stores in Hayes. After referring to the property it
continues:
In accordance
with the Underlease of March 20 1974 between Railway Pension Nominees Ltd, the
Landlord, and Cordon Bleu Freezer Food Centres Ltd, the Tenant, we hereby serve
notice that the Landlord requires the rent to be reviewed to £45,000 (FORTY
FIVE THOUSAND POUNDS) per annum, exclusive of rates, in accordance with the
Fourth Schedule of the Underlease to take effect from September 29 1986.
That made no
mention of Marbleace and gave quite a different figure £45,000, to the figure
specified by the solicitors in their notice, which is £30,000.
That in due
course was delivered, as I find, to the plaintiff company on March 24, the
following Monday, and eventually came into the hands of Mr Smith of Stewart
Newiss, who was somewhat mystified by it. It came to Mr Smith after he had, as
I have said, on April 15 written to John Wood sending a counternotice there. On
April 17 Mr Smith responded to that notice, the one from Eadon Lockwood & Riddle,
saying:
We are in
receipt of a letter dated March 21 to our clients, . . . with regard to the
above unit. . . . It is our understanding that your clients, Railway Pension
Nominees Ltd, the landlords, have now sold their lease to another party and we
have indeed received a formal notice under the terms of the lease from that
other party. We therefore regard the notice that you have served in accordance
with the Fourth Schedule of the Underlease to be null and void. We would be
obliged if you could kindly confirm that this is also your view.
Mr Smith,
having got no response from that letter, wrote again on April 28 and his reason
for writing I can take — he is not challenged on this part of his evidence —
from p 6, para 7 of his affidavit. He said:
On April 17
1986 I wrote to Eadon Lockwood & Riddle indicating that in my view their
letter of March 21 1986 did not constitute a valid notice as it was not served
by the current landlord. However, I was still concerned lest it should
subsequently emerge that Eadon Lockwood & Riddle had been acting for the
Defendant in respect of their notice of March 21 1986 and lest for any reason
it should emerge that the Defendant’s solicitors’ letter of March 21 1986 did
not constitute a valid notice.
Accordingly
on April 28 1986 I wrote again to Eadon Lockwood & Riddle
and I will
come to the letter in a moment.
It was my
hope and intention that if for any reason John Wood & Co’s notice and my
counternotice in respect thereof did not stand and if it transpired that Eadon
Lockwood & Riddle had had authority to serve their notice of March 21 1986
then this ‘duplicate notice’ would itself constitute a sufficient tenant’s
counternotice for purposes of the rent review provisions of the Underlease.
Going back to
the letter of April 28, and this is perhaps the central letter in this case, Mr
Smith from Stewart Newiss writes as follows:
We act on
behalf of Argyll Stores (Properties) Ltd, who are the Parent Company of Cordon
Bleu Freezer Food Centres Ltd. We have been passed a copy of your letter of
March 21 1986 addressed to our client company regarding a review of rent under
the terms of the Underlease dated March 20 1974 between Railway Pension
Nominees Ltd and Cordon Bleu. We are also in receipt of a letter dated March 21
from John Wood & Co, solicitors, . . . (copy enclosed) — serving notice on
behalf of their clients, Marbleace Ltd in accordance with Paragraph 2 of the
4th Schedule of the said underlease that in their opinion Marbleace Ltd, as
landlords regard the market rent of the premises comprised in the underlease to
be £30,000. We have responded to their notice by stating on behalf of our
clients, Cordon Bleu Freezer Food Centres Ltd, as tenants, that in their
opinion the market rent of the premises in the underlease is £16,000 per annum.
We hereby give you, as agents for the lessor, a duplicate notice that our
clients are of opinion that the open market rent or the premises in the
underlease is £16,000 per annum.
Please
acknowledge receipt of this notice by returning the duplicate to us with a
suitable endorsement. Please also confirm that you hold instructions to act.
Apart from the
copy letter that I mentioned (of March 21), no other letter as such was sent
with that letter; there was no duplicate on which to write any suitable
endorsement; but that was the letter that was sent, and one can see at once
that if that is the governing letter and is, as has been claimed here, the governing
counternotice, then the application to the president on June 24 was in time
within four days.
The two
letters, that is to say the one of April 17 and the one of April 28, addressed
to Eadon Lockwood & Riddle, were acknowledged on May 6 in these terms,
having referred to them. Mr Newton said:
As I
explained in our telephone conversation, we are now awaiting instructions from
the new owners, Marbleace Ltd, and we will contact you again as soon as we
receive those instructions.
So, from that
response to the last sentence of Mr Smith’s letter of April 28, it would appear
that Mr Newton had no instructions from Marbleace at that stage. The inference
is that when they sent the letters their principals were still the Railway
Pension Fund, as they had been in the past.
The next
letter is perhaps the other important letter in the case. It is from Eadon
Lockwood & Riddle, June 2 1986, dictated May 29. He refers to the letter of
April 17 — that is the one that challenged the validity of the notice — and
said:
. . . and
confirm that the Railway Pension Nominees Ltd for whom we acted have now sold
their interest to Marbleace Ltd, thus Railway Pension Nominees no longer have
any interest in the property.
Our client’s
solicitor, Messrs John Wood & Co, have served notice upon your client on
March 21, and I understand that your letter of April 28 is a counternotice to
that letter.
I confirm
that I would be very glad to meet you to discuss matters and should be grateful
if you would arrange with my secretary for a mutually convenient time and date.
I shall be away from the office,
and so on.
Those are the
letters, and then, as I say, there was no meeting, or no fruitful meeting,
between the parties. As I have already said, the next thing that happened was
on June 24, being the application to the president on behalf of Marbleace.
Now, the first
of the issues that have arisen that I have to deal with is whether, despite
what is said in those letters, and the indications in those letters, Eadon
Lockwood & Riddle had the authority to serve a triggering notice on behalf
of Marbleace on March 21, whether they had such authority to serve the notice
addressed to the parent company quoted above.
The principal
evidence relied on for that is an affidavit of Mr Newton, a partner in Eadon
Lockwood & Riddle, his second affidavit, para 4:
I stated in
my previous affidavit that I had had a meeting with Ron Maxted of Marbleace.
This meeting was on March 21 1986 from 12 noon and lasted for approximately 2
1/2 hours including a working lunch.
He produces
his diary, but it is not in dispute that the meeting occurred.
In this
meeting Mr Maxted gave me instructions to reply to Mr Smith on behalf of
Marbleace with regard to their request to surrender the lease. We also
discussed the question of the Rent Review generally, and I am informed by Mr
Maxted, although I cannot now recall this myself, that I mentioned to him that
I had put in motion the serving of a Rent Review Notice and that Mr Maxted
confirmed on behalf of Marbleace that I should do so. Having made further
enquiries on this matter I am informed by my secretary that I had previously
that morning dictated the letters enclosing the Rent Review Notices and the
Notices themselves prior to my meeting with Mr Maxted. I am also informed by
her and it is indeed evident from their face that they were later signed on
behalf of myself and my firm by my assistant Mr Robert Neale who had also been
dealing with the matter, and to whom I note that Mr Smith addressed his letter
of March 3. However with regard to the Notices as these were to be sent by
Recorded Delivery and required personal attendance at the Post Office, I am now
informed by my secretary that they were not in fact posted by her until the
following day March 22,
and then he
produces the appropriate receipts.
It will be
noticed that the evidence in that paragraph as regards the notices is simply
hearsay, and in the witness box Mr Newton was not really able to supplement
this in any way. He seemed to have no recollection and had no note of the meeting
in question and no real recollection of these matters and was really relying in
relation to the notices on what his secretary and Mr Maxted had told him as
stated in that paragraph.
Turning to
what Mr Maxted has to say about the matter, I can look at the papers, where he
says:
I confirm
what Mr Newton says at paragraph 4 of his affidavit concerning our meeting and
in particular we discussed the rent review. However, I can recall very clearly
Mr Newton specifically informing me that he was sending Rent Review Notices,
and that the time-limit for doing so was approaching. I immediately told him to
go ahead and serve the Notices on behalf of Marbleace Ltd. I understand that
Messrs Eadon Lockwood & Riddle proceeded to do so. I confirm that I gave
those instructions or authorisations as part of my general duties and
responsibilities.
In his
evidence to me Mr Maxted said:
He had the
notices ready to go at the meeting. It was a working lunch. Newton mentioned to
me that the rent review was imminent, and he had the notices ready to go. There
was not much time, and I said to send them.
Now, all that,
if it stood alone, would be fairly cogent. These were respectable professional
gentlemen and I would normally accept that evidence and certainly do not in any
way question their integrity or honesty, but there are certain matters to which
I must now refer, which cast some doubt on its accuracy.
In the first
place, this was an exploratory meeting only. Marbleace had just taken over the
property. They are a property company operating out of London. Mr Maxted, who
is an assistant to the managing director, Mr Fleming, went to Sheffield to view
the managing agents to see whether their retainer should be continued, and
indeed the managing agents for their part wanted to look at the new principals.
So it was an exploratory meeting, and that of itself explains why the parties
did not take any note of it. And it was, I think, as one of the witnesses told
me — I think it was Mr Newton — a preliminary meeting on both sides.
Then I note
that it was not until Mr Newton’s second affidavit that this evidence emerges.
In his first affidavit (para 4), which was on December 30, and that was long after
the point was being taken, and well into the proceedings, that something had
gone wrong over these notices and they were out of time, Mr Newton puts it this
way:
On March 21
1986, on behalf of the Landlords, my firm (through me) served Notice implementing
the Rent Review provisions in the Lease with effect from September 29 1986 and
seeking a rent of £45,000 per annum from that date. I was acting on earlier
telephone instructions received by me from the previous landlords Railway
Pensions Nominees Ltd. I was aware that a sale of the property was to take
place although I had not been informed when such sale would be completed. I was
awaiting written instructions to this effect from RPN but by March 21 1986 had
not received such instructions, and I therefore served the Notice on that date
as I was aware that the deadline of March 25 1986 was approaching.
Then he says
his firm were responsible for serving the previous notice. There is no mention
in there that he, on the very same day, was having a meeting with a
representative of the new owners and that he had received specific authority to
continue with the preparation and service of the notices. Mr Maxted’s
recollections of the matter come over a year after the events in question. His
affidavit was sworn only just the other day.
Furthermore, I
am bound to observe that, going back to the letter of April 17, when their
notice was actually challenged as being null and void, and asked to confirm
their view, no response was made. It was not made although this was only a
short while afterwards, when they said that Railway Pension Nominees had now
sold their lease to another party: Mr Newton or his assistant did not write
back and say ‘Oh yes, that’s so, but we are in touch with Marbleace and they
have told us to go ahead and serve this notice on you, and we have their
authority to do so’. There was no response at all.
Furthermore,
Marbleace had instructed solicitors to act for them in the matter in relation
to these notices. Mr Maxted explained to me that there was some lack of
communication between him and the managing director, Mr Fleming. He (Mr Maxted)
had given the goahead quite unaware that Mr Fleming had authorised the
solicitors, and instructed them to send a notice with £30,000. It is quite
plain that the solicitors would not have put that figure in of their own
motion, unlike the surveyors. It seems strange to me that Mr Maxted should have
been quite unaware of what was going on or, if he was not aware, as a colleague
of Mr Fleming should have taken it on himself to authorise the service of the
notices and should not have advised Mr Fleming of what he had done. Also if
instructions had been given I would have expected at the very least Mr Newton
either to have himself revised, or, as he was about to go on holiday, to have
given instructions to his staff to revise, the notices suitably, having learnt
that in fact Marbleace had now become the owners. It was not a very difficult
job to do.
Therefore, I
have to reject the evidence of Mr Newton and Mr Maxted and find that Eadon
Lockwood & Riddle did not have authority on March 21 from Marbleace to
serve the notice that they did. That finding is supported by a closer look at
the letters. I go back to the letter of April 28 1986. I have already indicated
why, in Mr Smith’s view, he sent the letter. The letter was sent on the basis
that John Wood & Co may have been without authority. He assumed they had
authority but, as he said in his affidavit, having been confronted with two
differing notices, both purporting to come from the landlord, he was concerned
that it should subsequently emerge that Eadon Lockwood were acting and it
should emerge that the solicitor’s letter did not constitute a valid notice.
That, I am bound to say, seems a very reasonable position to take, confronted
as he was by the two competing notices emanating from different agents of the
landlords on the same day. It is for that reason that the second letter
describes itself as a duplicate. It was not, as I would read it, a fresh
notice, but a duplicate notice, because it clearly states that the original
counternotice had been sent to the solicitors.
Furthermore,
it asks for confirmation that Eadon Lockwood & Riddle had instructions to
act. He would not have needed to ask that question if their notice had clearly
stated that it was served on behalf of Marbleace, as the solicitors’ notice
was, but the notice from the surveyors with which he was confronted was
ambiguous as to which landlord it was being served on behalf of; on the face of
it it would seem to be on behalf of the original one, Railway Pension Nominees.
His doubts were no doubt confirmed when he received the letter saying that they
were still awaiting instructions from the new owner. When he got it, the letter
said:
Our client’s
solicitors, Messrs John Wood & Co, have served notice upon your client on
March 21.
Therefore,
Eadon Lockwood & Riddle were confirming that the solicitors had authority,
so that that disposed of Mr Smith’s initial doubts as to whether John Wood
& Co had authority to serve the notice. It then goes on:
and I
understand that your letter of April 28 is a counternotice to that letter.
That, to my
mind, is a complete misapprehension of the letter of April 28. The letter, as I
have indicated already, refers initially to the notice served by Eadon Lockwood
& Riddle, ‘we have been passed a copy of your letter of March 21’, and then
refers to the letter from the solicitors and the fact that a counternotice to
that letter had already been sent, and then it goes on: ‘We hereby give you . .
. a duplicate notice . . . that the open market rent . . . is £16,000 per
annum’.
The only fair
reading of that letter is that if the notice served by Eadon Lockwood is the
triggering notice, then this is the counternotice to it. If the notice served
by John Wood is the triggering notice, then the letter referred to in that, not
this one, but the original, not the duplicate, is the counternotice. The letter
cannot fairly be read, in my judgment, in any other way, and it was a complete
misapprehension to take the letter of April 28 as a counternotice to the
solicitors’ letter. Thus it was not a valid counternotice, having regard to my
findings as to the status of the letter of March 21 from Eadon Lockwood &
Riddle.
Then a point
about estoppel is taken. Mr Smith in evidence, and in answer to questions,
having received that letter confirming the solicitors’ authority says:
It is fair to
say that I ducked the issue because they might have made a mistake. That would
be a fair comment. My intention was to keep my head down until the 28th. That
is why I did not take them up on the letter.
That is a very
fair admission of his feelings at the time. It was a situation which was not of
his making at all, or the plaintiff’s making, that the landlords had got themselves
into a muddle over this matter. In those circumstances Mr Smith can be forgiven
for thinking that the authority of the solicitors having been confirmed by the
surveyors, as that letter shows, the solicitors therefore had the legal steps
in hand, and it was not his job to correct the surveyors in relation to the
notice. His job, if required, was to negotiate with the surveyors in relation
to the quantum of the rent.
Mr Neuberger,
who, as always, put his points attractively, put it this way in regard to these
two notices: it does not matter which of the two notices was valid. If the
party serving the notice, the tenant in this case, serves two notices, having
served the second one you cannot go back to them with the first one unless the
second one is served without prejudice to the others, and the second
counternotice refers to the two, and so one cannot then withdraw it.
In the
ordinary way I would accede to that. That perhaps would raise an estoppel. The
notice itself is some sort of representation that the landlord is entitled to
act on it. But when one reads them in their context, and especially having
regard to the letter of April 17, when the actual validity of the landlord’s
notice served by Eadon Lockwood & Riddle was challenged, then I think the
tenant cannot properly be said to be serving a notice to supersede the other.
The notices of April 15 and April 28 are alternative notices, not cumulative
notices, in the particular circumstances of this case.
Those
findings, I think, relieve me from going into the interesting question of how
the postal system works in the offices of the tenants and to analyse that
evidence and make findings in relation to that matter.
Therefore I
propose to make the declarations which the tenants seek.
The
declarations sought by the plaintiffs were granted, with costs.
