Landlord and tenant — Rent review — Time of the essence — Construction of clause providing for appointment of expert
By a lease,
restaurant premises in Great Yarmouth were demised to the appellant tenant for
a term commencing on November 15 1979 and ending on March 31 2006. The lease
provided for a rent review on April 1 1981 and every fifth anniversary of that
date. The rent review clause provided that, if the parties could not agree the
rent by not later than three months prior to the rent review date, such rent
was to be determined by an expert to be appointed by the President of the Royal
Institution of Chartered Surveyors on the application of either party ‘made at
any time before the said next review date or the expiration of the term as the
case may be (time being of the essence) . . . ‘. In respect of the rent review
due on April 1 1991 the respondent landlord did not attempt to agree the rent
or apply for the appointment of an expert until after that date, claiming that
it had until March 31 1996 to apply. The appellant appealed from the decision
of Judge Weeks (sitting as a judge of the High Court), who had decided that the
respondent was entitled to have the rent review.
expiration of whatever turns out to be the last rent review period; then it
follows that in that period the landlord has until its end to apply for the
appointment of the expert. By parity of reasoning, the landlord must have been
intended to have until the end of each earlier rent review period, ie until the
date of the next one. The ‘next’ rent review means the date immediately
following the end of each rent review period other than the last. The word
‘said’ has to be rejected as meaningless.
No cases are
referred to in this report.
This is an
appeal from the decision of Judge Weeks, sitting as a judge of the High Court,
who had made a determination on the construction of a rent review clause on the
application of the appellant, Holicater Ltd, to which the respondent was
Grandred Ltd.
Anthony de
Freitas (instructed by Dunne & Crome, of Lowestoft) appeared for the
appellant; John Furber (instructed by Davis Hanson) represented the respondent.
Giving the
first judgment at the invitation of Ralph Gibson LJ, HOFFMANN LJ said:
This appeal raises a short point of construction on a rent review clause in the
lease of a restaurant in Great Yarmouth. The demise is said in clause 3 to be
for a term commencing on November 15 1979 and ending on March 31 2006. The
initial yearly rent was £15,000 subject to review in accordance with clause
4(2) of which the material part reads as follows:
The rent
shall be reviewed as at the First day of April One thousand nine hundred and
eighty one and on every fifth anniversary of that date each of which dates and
anniversaries are hereinafter called ‘the review date’ and after such review
date the rent shall be the greater of
(a) the rent hereinbefore reserved
(b) the rent payable following any previous rent
review
(c) . . .
Unless the
Landlord and Tenant shall agree by not later than three months prior to the
review date the market rent payable from a review date such market rent shall
be determined . . . by a person acting as an expert and not as an Arbitrator
nominated in default of agreement between the Landlord and the Tenant by the
President for the time being of the Royal Institution of Chartered Surveyors on
the application of either the Landlord or the Tenant made at any time before
the said next review date or the expiration of the term as the case may be
(time being of the essence) . . . and in the meantime the Tenant shall continue
to pay rent at the same rate as before the review date and any increase in rent
following the review date together with interest thereon from the review date
shall be paid in one sum on the quarter day next following its determination in
respect of the period from the review date until such quarter day . . .
The dispute is
over the meaning of the words ‘the said next review date or the expiration of
the term’. The tenant says that it means the commencement of the period for
which the review rent is to operate. The landlord says it means the end of that
period. The issue arises because the landlord did not attempt to apply for the
appointment of a surveyor or even to agree the new rent until after April 1
1991. The tenant says he is too late. The landlord says he has until March 31
1996.
The term
‘review date’ is defined to mean each of the series of dates on which the rent
is reviewed, being the fifth anniversary of April 1 1979. In the timetable for
determining the new rent the term ‘review date’ standing by itself is used to
mean the date in respect of which the rent is to be determined. Thus the right
to appoint a surveyor arises unless the rent has been agreed ‘not later than
three months prior to the review date’. But the application to appoint a
surveyor can be made ‘at any time before the said next review date’. The
difficulty arises from the combined use of the words ‘said’ and ‘next’. If the
draftsman meant the date in respect of which the rent had to be determined, ie
the same review date as he had mentioned in connection with the three-month
deadline, he could simply have said ‘the said review date’ or even ‘the review
date’. On the other hand, if he meant the review date next following that in
respect of which the rent had to be determined, the word ‘said’ is out of
place, because nothing has previously been said about that date. The landlord
therefore says that, to make sense of the language, it is necessary to discard
either ‘said’ or ‘next’.
The judge
chose to discard ‘said’ and what most influenced him in adopting that
construction were the words ‘or the expiration of the term as the case may be’.
It seemed to him that those words were used to allow for the fact that in the
last rent review period of the term there would be no ‘next review date’. The
reference to the expiration of the term showed that the landlord was intended
to be able to apply for the appointment of a surveyor at any time during the
period in which the reviewed rent would apply.
Mr de Freitas,
for the tenant, submits that one does not need to discard either ‘said’ or
‘next’. The said review date was the next review date because the application
for the surveyor had to precede it. On the same reasoning, however, the term
‘next review date’ would also have been appropriate in relation to the
three-month deadline. To call the one ‘the review date’ and the other ‘the next
review date’ would, if not for the use of the word ‘said’, suggest that some
distinction was intended.
Mr de Freitas
then has to explain the reference to the expiration of the term. He says that
the expiration of the term could itself be a review date because, despite the
terms of clause 3, the lease would not necessarily expire on March 31 2006.
Clause 1(11) defines ‘the term’ as meaning ‘the term of years hereby granted
and any statutory continuation thereof’. As this was a business tenancy, the
provisions for statutory continuation which the parties are most likely to have
had in mind are those of the Landlord and Tenant Act 1954. Section 24(1) of
that Act provides that a business tenancy shall not come to an end unless it is
terminated in accordance with the provisions of the Act. These require the
service of a notice to terminate in statutory form by the landlord or the
tenant, following which the tenant may apply for a new tenancy. If such an
application is made, the tenancy cannot terminate until three months after the
application has been finally disposed of. The term as defined may therefore
continue for an indefinite period after March 31 2006.
The expression
‘review date’ is defined in clause 4(2) to mean, without limitation of time,
every fifth anniversary of April 1 1981. It is not expressly confined to
anniversaries occurring before March 31 2006. Since clause 4(2) determines the
rent reserved by the lease, there is no reason why the term ‘review date’
should not include anniversaries which occur after the contractual period has
expired and while the lease is being continued by statute. The judge thought
not, but I am inclined to agree with Mr de Freitas that April 1 2006 could be a
review date and so, for that matter, could April 1 2011. But this means that,
if Mr de Freitas is right on the meaning of ‘said next review date’, there was
no need to add the words ‘or the expiration of the term’ in clause 4(2). The
term ‘review date’ would have included all the review dates during the
statutory period of extension. In fact, on Mr de Freitas’ explanation, the
reference to the expiration of the term is not quite accurate, because the
contractual term would expire on March 31 2006 and the review date would be the
next day.
Furthermore,
if one has regard to the definition in clause 1(11), the ‘expiration of the
term’ in clause 4(2) does not necessarily mean the contractual expiry date. It
means that date or any subsequent date on which the term as statutorily
extended comes to an end. On no view could that be a rent review date. The
judge thought that Mr de Freitas’ argument for having rent review dates after
the end of the contractual term placed too great a weight on the definition of
the term in clause 1(11). I think, on the contrary, that it gives that
definition too little effect. The argument assumes that ‘the expiration of the
term’ in clause 4(2) means March 31 2006, whereas, in my judgment, it must mean
the expiration of the term as defined.
It must,
therefore, follow that, even if one rejects the judge’s view that there could
be no rent reviews after the end of the contractual term, his reasoning remains
in essence correct. If ‘the expiration of the term’ means the expiration of
whatever turns out to be the last rent review period, then it follows that in
that period the landlord has until its end to apply for the appointment of a
surveyor. By parity of reasoning, the landlord must have been intended to have
until the end of each earlier rent review period, ie until the date of the
commencement of the next one. Mr de Freitas was driven in the end to submit
that perhaps the draftsman had intended to distinguish between the earlier rent
review periods and the last one of all, but, in my judgment, this would be
completely irrational. The ‘next’ rent review date must therefore mean the date
immediately following the end of each rent review period other than the last.
It follows that the word ‘said’ has to be rejected as meaningless. This is
perhaps a lesson for everyone because the word seldom serves any purpose and
this case shows that its indiscriminate use can confuse what would otherwise be
clear.
In my
judgment, the judge was right and the appeal should be dismissed.
LEGGATT and RALPH GIBSON LJJ agreed and did not add anything.
Appeal
dismissed with costs.
