Landlord and tenant — Rent review clause in underlease — Construction — Appeal from decision of Mr Michael Wheeler QC, sitting as a deputy judge of the Chancery Division — Whether reference in underlease to the ‘said term’ was a reference to a term of the underlease or of the headlease — If the latter, a trigger notice served by the underlessors was out of time, time being of the essence in this case — In support of the view that the notice was out of time the underlessees submitted that it was the intention of the parties that the provisions of the underlease should follow those of the headlease, so that the reviews of the rent should take place in the same years — The Court of Appeal agreed with the decision of Mr Michael Wheeler QC that there was no justification for this construction
appellants were underlessees holding a term of 21 years from March 1 1974 for
the residue of the term of 21 years (less the last three days) from August 31
1972, ie until August 28 1993 — The respondents held the headlease of the
premises for a term of 21 years from August 31 1972 — The underlease did not
extend to the whole of the premises comprised in the headlease — The underlease
contained provisions for rent review at the expiration of the 7th and 14th
years of ‘the said term’ — The review notice had to be given before the
beginning of a clear period of two quarters commencing on one of the usual
quarter days immediately preceding the relevant review date — The underlessors
served a review notice on May 18 1987 to operate the rent review machinery of
the underlease as from March 1 1988 — The appellant underlessees argued that,
on their true construction, the words ‘the said term’ in the underlease were
intended to refer to the headlease, the object being to follow the review
provisions in the headlease — On that construction the underlessors’ review
notice was out of time and, because time was of the essence, invalid — Mr
Michael Wheeler QC, sitting as a deputy High Court judge, rejected this
argument — The wording of the underlease did not support it — The ‘said term’
in the underlease plainly referred to the underlease itself, not the headlease
— It would have been possible to draft the underlease so as to dovetail in the
way suggested with the headlease, but this had not been done.
Appeal went through the relevant clauses of the underlease in detail and
reached the same conclusion — The review notice had been given by the
underlessors in time and was effective — Appeal dismissed
No cases are
referred to in this report.
This was an
appeal by Ganton House Investments Ltd from the decision of Mr Michael Wheeler
QC granting F L C Management Ltd (formerly Finger Lickin’ Chicken Ltd) a
declaration that a trigger notice served by them on the defendants (present
respondents) to initiate a rent review of premises at 91/93 Gloucester Road,
Bristol, was valid and effective.
Miss Claire
Andrews (instructed by Millikin & Co) appeared on behalf of the appellants;
Martin Farber (instructed by Jeffrey Green Russell) represented the
respondents.
Giving
judgment, DILLON LJ said: This is an appeal by the defendant, Ganton
House Investments Ltd, against a decision of June 28 1989 given by Mr Michael
Wheeler QC, sitting as a deputy High Court judge in the Chancery Division. The
question is as to the meaning of the words ‘the said term’ in an underlease
and, in particular, in the rent review provisions of the underlease. On this
depends whether a review notice given by the plaintiff landlords on May 18 1987
was valid.
The review
notice has to be given before the beginning of a clear period of two quarters
commencing on one of the usual quarter days immediately preceding the relevant
review date. Time is of the essence, so that if the notice is given too late
the landlord loses his review. The review date is the expiration of the seventh
or 14th year of the said term as the context requires.
On the facts
we are concerned with the expiration of the 14th year. To find the date of
expiration of the seventh or 14th year you have to know when the said term
began. Was it August 31 1972, the date of the headlease and of the commencement
of the term under the headlease granted by the head landlord to the mesne
landlord (the landlord by the underlease, the plaintiffs in these proceedings),
which is what the defendants contend for, or was it, as the judge found and the
plaintiffs contend, March 1 1974, the commencement of the term of the
underlease between these parties which was an underlease of a part only of the
premises comprised in the headlease?
That is a question which fortunately has not required, as most cases on
rent review clauses apparently are thought to by the Bar, a citation of endless
other cases on general principles of rent review clauses or decisions of other
judges on particular clauses.
It is
sufficient, in my view, to go to this particular underlease, which is dated May
1 1974. It is made between the plaintiff — or at least it is the plaintiff by a
previous name; there has been a change of name — as lessor, and the definition
of ‘the lessor’ is to include ‘the reversioner for the time being immediately
expectant on the term hereby created of the one part’, and the defendants, who
are called ‘the Tenant’ of the other part. The term ‘the Tenant’ is to include
‘successors in title and assigns of the Tenant’. There is then a demise with
exceptions and reservations, which do not matter. The habendum is as follows:
To hold the
demised premises unto the Tenant from the First day of March [1974] for the
residue of the term of twenty one years (less the last three days thereof) from
the thirty first day of August [1972] that is to say until the twenty-eighth
day of August [1993] subject nevertheless to the proviso for determination
hereinafter contained Paying Therefor during the said term yearly and
proportionately for any fraction of a year the rent hereunder set out:
(a) For the first seven years of the said term
the yearly rent of One thousand four hundred pounds:
(b) For the next seven years of the said term
either the rent reserved in Sub-Clause (a) hereof or the open market rental
value of the demised premises at the review date whichever is the higher and in
any case the same shall remain constant during the whole period referred to in
this sub-clause:
(c) For the remainder of the said term either
the yearly rent or the market rental value of the demised premises at the
review date whichever is the higher and in any case the same remain constant
during the whole period referred to in this sub-clause:
There is then
a provision that —
the said rents
shall in all cases be paid by equal quarterly payments in advance on the usual
quarter days in every year without any deduction whatsoever except as
authorised notwithstanding any agreement between the parties by any statutory
enactment relating to income tax for the time being in force the
[1974] to the quarter day next hereafter to be paid on the execution hereof:
That, of
course, was necessary on any view, because the term granted or, as it was put
in the definition of ‘the Lessor’, ‘the term hereby created’ was to run from a
date prior to the date of the underlease and as the rent was to be paid by
quarterly payments in advance on the usual quarter days there had to be a
payment for the broken period on the execution of the lease.
There is then
the definition of ‘open market rental’ and of ‘review date’ — I need not go
through those — and a provision for the giving by the landlord of a review
notice, which I have already summarised.
There were
provisions in the review mechanism for reference to an independent surveyor.
Those have not so far been implemented because of the defendants’ contention
that the review notice given by reference to the commencement of the term of
the underlease was out of time because it should have been given by reference
to the commencement of the term of the headlease which, as I have mentioned,
started from a considerably earlier date. For that reason there has been little
point in the independent surveyor proceeding to calculate what the rent ought
to be for this period until it has been established that the review notice was
valid.
After the
review provisions there is a provision for an insurance rent to be paid from
time to time throughout the said term. There are then in clause 2 ‘Tenants
covenants’. The opening words are as follows:
The Tenant
hereby covenants with the Lessor to the intent that the obligations may
continue throughout the said term as follows:
(1) To pay during the said term the said reserved
rents at the times and in manner aforesaid without any deduction except as
aforesaid:
In (3) the
covenant is:
To pay to the
suppliers thereof all charges for gas and electricity (including meter rents if
any) consumed in the demised premises during the said term:
In (5) the
covenant is:
In the fourth
ninth and fourteenth years of the said term and also in the last year thereof
(howsoever determined) to paint in a proper and workmanlike manner all the
inside wood iron and other parts heretofore or usually painted of the demised
premises [with all the details that follow in a lengthy painting clause.]
In (7) there
is a covenant:
At all times
during the said term to do and execute or cause to be done and executed all
such works and to do all such things as under or by virtue of any Act or Acts
of Parliament now or hereafter to be passed and byelaws rules and regulations
thereunder are or shall be directed or necessary to be done or executed upon or
in respect of the Tenant’s user thereof by the owner lessee Tenant or occupier
thereof . . .
There are
other references. For instance, in clause (18)(a) there is a covenant:
Not to assign
demise underlet or otherwise part with possession of the whole of the demised
premises for all or any part of the said term without the licence in writing of
the Lessor and the Superior Lessor which shall not be unreasonably withheld . .
.
One can then
pass on to subclause (20), which is a covenant:
At all times
during the said term to comply in all respects with the provisions and
requirements of the Town and Country Planning Act 1962 and all regulations or
orders made thereunder . . .
After clause 2
there is clause 3 containing the lessor’s covenants and these include the usual
covenant for quiet enjoyment:
That the
Tenant paying the rent hereby reserved and observing and performing the several
covenants and stipulations herein on the part of the Tenant contained shall
peaceably hold and enjoy the demised premises throughout the said term without
any interruption by the Lessor or any person rightfully claiming under or in
trust for the Lessor:
There is then
the proviso for re-entry — if and whenever during the said term the rents fall
into arrear or there is breach or non-observance of the covenants, or the tenant
becomes bankrupt or goes into liquidation, and so forth. There are other
references to using the words ‘the said term’.
It is argued
in particular by Miss Andrews, for the appellants (defendants), that the
parties both knew that this was an underlease. They knew that the headlease
contained review provisions to operate at the expiration of the 7th and 14th
years of the term granted by the headlease, that is to say the term from August
31 1972, and so they must have intended that the provisions of the underlease
should follow those of the headlease and the review should take place in the
same years as the review of the rent in the headlease. The calculation, of
course, is not the same because the premises, the rent for which is to be
reviewed, are only a part of the premises in the headlease. It could be that
the underlease could have been drawn to achieve that result, but it seems to me
quite plain that the ‘said term’, as copiously used throughout this document
and in particular in clauses 2 and 3, must mean the term ‘created by the
underlease’ and not the term created by the headlease.
Miss Andrews
referred to a decision of the Court of Session on the construction of a
Scottish trust-disposition and settlement* (that is to say a will) where the
question was whether the said John Shepherd in a particular disposition meant
John Shepherd the brother of the testatrix who had been appointed an executor
or John Shepherd the nephew of the testatrix, the son of another brother, who
was a legatee. The court, holding that it was the nephew, referred to the aid
to construction that a word is to be referred back to the proximate antecedent;
so, says Miss Andrews, the proximate antecedent to the use of the words ‘pay
during the said term’ in the reddendum is a reference to the residue of the
term of 21 years from August 31 1972. But I think the crux of the matter is
that this was a demise from March 1 1974, and the important term for all these
references is the term created by the underlease and granted thereby to the tenant
during which all the obligations on each side were to apply. Therefore I have
no hesitation in reaching the conclusion which the judge reached that the
review notice given by the landlords was given in time and was valid and
effective. Accordingly, I would dismiss this appeal.
*Editor’s
note: Shepherd’s Trustees v Shepherd [1974] SC 60.
RALPH
GIBSON and LEGGATT LJJ agreed and did not
add anything.
The appeal
was dismissed with costs.
