Landlord and tenant — Break clause — Notice — Break notice specifying incorrect party as tenant — Whether notice valid — Whether notice given by general agent of tenant — Whether notice validated by Mannai — Whether landlord estopped by representation — Whether lease determined
By two leases
dated October 18 1990 the defendant, then known as LAS Direct Ltd (Direct),
held two separate premises from F, each lease containing a break clause
enabling the lessee to determine the respective term on September 28 1995 upon
giving six months’ written notice. In 1992 solicitors acting for Direct
informed the lessors’ solicitors that they acted for the Life Association of
Scotland (Life) and that employees of Life would also use the respective
properties; it was also explained that Life and Direct were wholly owned
subsidiaries of LAS Holdings Ltd. No request for consent to an assignment was
made and no assignment took place. On October 7 1994 purported break notices were
sent on behalf of ‘The Life Association of Scotland Ltd, successors in title to
… Direct …’ determining each respective lease on September 28 1995. In the
court below Rattee J decided that from July 1991 Life had acted as a general
agent for the defendant and the break notices were valid. The plaintiffs
appealed.
it could be inferred that Life was the general agent of Direct with authority
from Direct to give the break notices. The defects in the notices could not be
cured by the application of Mannai Investment Co Ltd v Eagle Star
Life Assurance Co Ltd [1997] 1 EGLR 57; the notices did not contain a mere
slip that was obvious to the reader when read in context. The reasonable
recipient of the notices could not know, in the absence of proof of an
assignment, whether Life was the lessee as stated in the notices. Because it
was not obvious that there was an error in the name of the lessee in the
notices nor who the actual lessees were nor whether the sender of the notices
was authorised, it was impossible, as a matter of construction, to cure the
defect. There was no estoppel arising out of the failure of the plaintiffs to
reply to a request to say whether they found anything wrong with the notices.
The following
cases are referred to in this report.
Divall v Harrison [1992] 2 EGLR 64; [1992] 38 EG 147, CA
Dun &
Bradstreet Sofware Services (England) Ltd v Provident
Mutual Life Assurance Association [1997] EGCS 89, CA
Hankey v Clavering [1942] 2 KB 326; [1942] 2 All ER 311, CA
Harmond
Properties Ltd v Gajdzis [1968] 1 WLR 1858;
[1968] 3 All ER 263, CA
Jones v Phipps (1868) LR 3 QB 567; 9 B&S 761; 37 LJQB 198: 18
LT 813; 33 JP 229; 16 WR 1044
Lemon v Lardeur [1946] KB 613
Mannai
Investment Co Ltd v Eagle Star Life Assurance Co
Ltd [1997] AC 749; [1997] 2 WLR 945; [1997] 3 All ER 352; [1997] 1 EGLR 57;
[1997] 24 EG 122; 25 EG 138, HL
Mannai
Investment Co Ltd v Eagle Star Life Assurance Co
Ltd [1995] 1 WLR 1508; [1996] 1 EGLR 69; [1996] 06 EG 140
Townsends
Carriers Ltd v Pfizer Ltd (1977) 33 P&CR
361; [1977] 1 EGLR 37; 242 EG 813
This was an
appeal by the plaintiffs, Lemmerbell Ltd and Matthew Fraser Ltd, from a
decision of Rattee J, who had refused the relief sought by the plaintiffs in
proceedings against the defendant, Britannia LAS Direct Ltd.
Jonathan Gaunt
QC (instructed by Sebastians) appeared for the appellants; David Hodge QC
(instructed by Travers Smith Braithwaite) represented the respondent.
Giving the
judgment of the court, PETER GIBSON
LJ said: The plaintiffs, Lemmerbell Ltd (Lemmerbell) and Matthew
Fraser Ltd (Fraser), appeal from the order dated May 22 1997 of Rattee J, by
which he dismissed the proceedings brought by the plaintiffs against the
defendant, Britannia LAS Direct Ltd (Direct). By those proceedings the
plaintiffs claimed that break notices served on them as landlords under two
leases were ineffective to determine the leases.
By a lease
(the unit 6 lease) made on October 18 1990 between David Lines (therein called
‘the Lessor’, which term was defined to include the person for the time being
entitled to the reversion to the lease) and Direct (then called LAS Direct Ltd
and therein called ‘the Lessee’, which term was defined to include the
successors in title to the lessee) unit 6 Scirocco Close, Northampton (therein
called ‘the Demised Premises’), was demised for a term of 15 years from
September 29 1990. By clause 7(x):
If the Lessee
shall desire to determine this Lease on 28th September 1995 and shall give to
the Lessor not less than six months nor more than twelve months previous
written notice of such desire then the Lessee shall upon that date deliver to
the Lessor vacant possession of the whole of the Demised Premises and on such
date the present demise shall cease and be void…
Thus, the
conditions for the operation of this break clause are that the lessee must have
the desire to determine the lease and must give the break notice within the
specified period. By clause 5(xxi)(d) the assignment of the demised premises
without the lessor’s consent was prohibited. But it is not in dispute that an
assignment without consent would be effective to pass the lessee’s interest to
the assignee.
By another
lease (the unit 7 lease) also made on October 18 1990 between Fraser (then
called Matthew Fraser Estates Ltd), as lessor, and Direct, as lessee, unit 7
Scirocco Close was demised on similar terms, including a similar break
provision in clause 7(x) of that lease.
On July 3 1991
Mr Lines, as a director of Fraser, wrote to ‘The Life Association of Scotland’
at the Edinburgh address given in the unit 6 lease for Direct, saying that unit
6 had been sold to Lemmerbell but that the rent was being collected by its
parent company, Fraser. On August 12 1992 the solicitors Amery-Parkes, expressing
themselves as acting for the Life Association of Scotland Ltd (Life) and
Direct, wrote to Sebastian Coleman & Co (Sebastians), the solicitors for
the plaintiffs, giving notice that units 6 and 7 would also be used by
employees of Life. Amery-Parkes explained that Life and Direct were wholly
owned subsidiaries of LAS Holdings Ltd, and asked for confirmation that the
plaintiffs had no objection to that use. No response was received. Both leases
remained vested in Direct, there being no request for consent to an assignment
and no assignment. On September 1 1993 Mr Binnie of ‘The Life Association of
Scotland’ advised Mr Lines by letter that ‘Chesterton’ had been appointed
managing agents to ‘The Life Association of Scotland’. In fact, as we now know from
evidence put in by Direct for this appeal, Life appointed Chesterton
International Ltd (Chesterton) to provide advice and assistance to Life in
relation to its property management activities, the principal object being to
assist Life in the disposal of what were called Life’s leasehold interests in
respect of closed branches. The list appended to Life’s agreement with
Chesterton of such branches included units 6 and 7. The agreement was expressed
to come into force on September 29 1993.
On January 19
1994 Mr Binnie wrote to Fraser, notifying it that Britannia Life had purchased
‘The Life Association of Scotland’. Fraser was told that the new invoice
address was ‘Britannia Life/Life Association of Scotland c/o Chesterton’.
Life’s name was changed on January 1 1994 to Britannia Life Association of
Scotland Ltd.
On October 7
1994 Amery-Parkes sent purported break notices, in the form of letters, in
respect of units 6 and 7 respectively to Mr Lines, but the letter in respect of
unit 7 was addressed to ‘David Lines Esq Matthew Frazer Limited’. Each of the
two letters said:
We act on
behalf of [Life], successors in title to… Direct…
We therefore
give notice of our Clients intention within clause 7(x) of the lease dated 18th
October 1990 between David Harry Lines and… Direct… to determine this lease on
28th September 1995.
Mr Lines was
asked to acknowledge receipt to confirm his acceptance by returning a copy duly
signed. Apart from the misspelling of Fraser, the notices contained two errors.
One was that Life was not the successor in title to Direct. The second was that
to the unit 7 lease Fraser, not Mr Lines, was a party. No copy notice was
signed or returned by Mr Lines or by Fraser.
Also on
October 7 1994 Amery-Parkes wrote letters to Sebastians in respect of unit 6
and unit 7 respectively. In each they said that they enclosed, out of
professional courtesy, a notice sent to Mr Lines, as Sebastians had been acting
for him on the grant of the lease, and they asked for receipt to be
acknowledged. A chasing letter was sent on October 25. On October 27 Sebastians
wrote thanking Amery-Parkes for their letters of October 7 and 25 and saying:
This letter
is not intended nor should it be taken as signifying anything other than the
fact that we have received your letters.
On November 14
1994 Amery-Parkes wrote again in respect of unit 6 and unit 7 respectively.
They enclosed notices under section 27(1) Landlord and Tenant Act 1954,
purporting to terminate the tenancies on September 29 1995. Such notices were
unnecessary if the earlier notices were valid (section 24(2) ibid). Each
notice was addressed to Mr Lines of ‘Matthew Frazer Limited’, expressed to be
given by Life as ‘the tenant of the above premises holding under a tenancy
granted by a lease dated the 18th day of October 1990 and made between DH Lines
of the one part and [Direct] of the other part’, was signed by Amery-Parkes, as
solicitors and agents for ‘the Tenant’, and gave as the name of the tenant Life
‘as successor in title to [Direct]’. Thus, those section 27 notices contained
the same errors in respect of the lessee as the break notices. Also on November
14 1994 Amery-Parkes wrote to Sebastians, enclosing the section 27 notices and
asking for an acknowledgment. They added a postscript:
In view of
your letter of 27th October 1994 we must press you to let us know if you find
anything wrong with the contracted [sic] notice to determine referred to
in that letter. If we do not hear from you on this we shall assume the notice
to determine is valid.
No
acknowledgment was sent by Sebastians, and on March 15 1995 Amery-Parkes sent a
reminder. Sebastians replied on March 22 thanking Amery-Parkes for their
letters of November 14 and March 15 and saying:
As for your
earlier letters, this letter is not intended nor should be taken as signifying
anything other than the fact that we have received your letters.
On March 23
Amery-Parkes faxed their response, saying:
In view of
the terms of your letter on 27th October and 22nd March if you have any queries
in not accepting what has been served as due notice could you please let us
know within the next two working days otherwise we shall take your letter as
meaning that the notices are duly accepted and our Client can therefore vacate
on 29th September 1995.
This provoked
a faxed reply from Sebastians on March 24:
Whilst we
thank you for your fax of late yesterday, we must say that we are getting a
little tired of this correspondence.
We have no
standing whatsoever in this matter and we would remind you that when you
initially wrote to us it was ‘out of professional courtesy’… ‘as you had been
acting for (David Lines) on the grant of this Lease’.
On March 27
Amery-Parkes wrote back pointing out that it was the failure of Sebastians to
reply to earlier letters that had necessitated their letter, and asking for
confirmation as to whether or not they acted for the landlords. Sebastians
replied on April 3 1995 that they were not instructed in the matter. In the
meantime, on March 28 the time for giving any further notices under clause 7(x)
expired.
On April 14 Mr
Lines, as a director of the second plaintiff, wrote to Chesterton, saying that
the break clause had not been operated by Chesterton’s clients. Chesterton
replied on May 4 1995 that its clients had exercised their option to break the
leases at the September quarter day. Sebastians, on June 6 1995, wrote on
behalf of the plaintiffs, saying that the break notices were ineffective
because they were not served on Lemmerbell in respect of unit 6 or on Fraser in
respect of unit 7. Only on July 25 1996 did the plaintiffs take the point that
the notices had not been served by the tenant of each lease, Direct.
On November 28
1996 the plaintiffs commenced these proceedings, seeking declarations that the
term of the unit 6 lease and the term of the unit 7 lease continue and remain
vested in Direct. Direct counterclaimed for the repayment of £16,000, two
quarters’ rent, paid, it said, by mistake on September 29 and December 25 1995.
The case was heard by Rattee J on affidavit evidence from both sides. In the
affidavit of a solicitor for the plaintiffs, Mr Tomlinson, he stated the
plaintiffs’ position on four points, only one of which remains relevant, viz
that in the absence of any assignment by Direct to Life, the notices given by
Life were defective. Mr Shooter, a solicitor for Direct, gave evidence by
affidavit expressed to be in answer to Mr Tomlinson’s affidavit, but did not
answer Mr Tomlinson’s point that the notices had been given by the wrong person
and did not suggest that they had been given by Life as Direct’s agent. The
plaintiffs accepted that their original objection to the validity of the
notices, namely that they were not served on the right landlords, was unsound.
The main issues at the trial were whether the break notices were served on
behalf of Direct as tenant or, if not, whether the plaintiffs were estopped
from denying that the break clauses were validly operated.
On May 22 1997
the judge gave judgment in favour of Direct. He found as a matter of inference
from the evidence that Life had acted, at least from and after July 3 1991, as
general agent for the defendant in dealing with units 6 and 7. The judge
inferred the general agency from the following matters in particular:
(1) As early
as July 1991 Mr Lines, at the request of Life, addressed correspondence
relating to the payment of rent to Life, rather than to [Direct the] lessee.
(2)
Thereafter demands for rent and insurance premiums in respect of both Units 6
and 7 were addressed by [Fraser], not to [Direct], but to Life.
(3) In
November and December 1994, when Fraser wrote letters to [Chesterton] in
relation to insurance of units 6 and 7, it headed those letters with the name,
not of [Direct], but of Life.
(4) On 3rd
January 1995 [Chesterton], who were instructed on behalf of both Life and
[Direct], wrote to Mr Lines on behalf of [Fraser] asking him to address
invoices in respect of work to be done on the demised premises for the purpose
of making them secure to Life, not [Direct].
(5) There is
no evidence of any dealing by either of the plaintiffs, by Mr Lines or
otherwise, with [Direct] itself in relation to the leases or the demised
premises at any time after 3rd July 1991.
(6) Mr Lines
evinced no surprise when, on behalf of [Fraser], he received the notices given
in the name of Life as lessee. Although various other objections to the notices
were originally raised on behalf of the plaintiffs, the objection that the
notice was not given by the lessee was not raised until 25 July 1996.
In that
passage, as well as elsewhere in his judgment, the judge was treating
references in the correspondence to ‘The Life Association of Scotland’ or, from
the beginning of 1994, to ‘Britannia Life Association of Scotland’ as meaning
Life. The judge also inferred that Mr Lines, as a director of Fraser, which
acted as agent for Lemmerbell in relation to unit 6, at all times from July 3
1991 onwards dealt with Life as the lessee under the two leases, although he
knew that in fact the lessee was not Life but Direct. The judge therefore held
that the break notices were effective to terminate the two leases with effect
from September 28 1995 and granted a declaration to that effect. He found it
unnecessary to consider Direct’s alternative argument on estoppel.
The plaintiffs
now appeal. Mr Jonathan Gaunt QC, for the plaintiffs, applied to be allowed to
adduce further evidence, in the form of a second affidavit of Mr Tomlinson,
relating to the general agency point. I have already remarked on the fact that
this was not heralded in Direct’s evidence. Mr David Hodge QC, for Direct, did
not oppose that application provided that Direct was allowed to answer the
plaintiffs’ evidence by an affidavit by a solicitor for Direct, Miss Whitley.
Mr Gaunt did not oppose Direct’s request. Accordingly, the further evidence
from each side was allowed. This case demonstrates the disadvantages of the
originating summons procedure, by which there are no pleadings and no
discovery. The judge did not have as much material as we have had placed before
us, and this led him to make inferences that I doubt he would have made if the
evidence now before us had been before him.
I turn now to
the substantive issues on the appeal. They are three in number:
1. Was Life
the general agent of Direct and did Life, in that capacity, serve valid break
notices?
2. On the true
construction of the notices, in the light of the decision of the House of Lords
in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd
[1997] AC 749*, were they notices by the defendant?
*Editor’s
note: Also reported at [1997] 1 EGLR 57
3. Were the
plaintiffs estopped from relying on the fact that the break notices were
expressed to be given by Life rather than Direct?
1. General agency
The judge
accepted the submission of Mr Hodge that a notice to be given by a tenant under
a lease can be given effectively in the name of a person other than the tenant,
if that person has general authority from the tenant in relation to dealings in
respect of the tenancy, and that such notice will be no less effective because
the agent giving it describes himself as the tenant, which he is not.
The judge
referred to three authorities. The first was Jones v Phipps
(1868) LR 3 QB 567. In that case the landlords, who were trustees of the
marriage settlement of Sir Maxwell Graves, left to him, the life tenant under
the settlement, the entire management of a farm. The court of Queen’s Bench
inferred that it was with the sanction of the landlords that Sir Maxwell had
dealt with the farm on his own and negotiated with the tenant as to the terms
and continuance of the holding. It was held that it was incidental to his
authority as agent for the landlords that he should determine the tenancy by
notice to quit at such time as he should think proper. The tenant had always
considered Sir Maxwell to be the legal owner of the farm. The court also held
that Sir Maxwell, being a general agent and not one holding a special or
limited authority, was able to serve a valid notice to quit in his own name
without referring to his agency. Lush J, at the end of the judgment of the
court, said at p573:
It is clear
that the notice must be such as the tenant may act upon with safety, that is,
one which is in fact, and which the tenant has reason to believe to be,
binding, on the landlord.
In the second
case, Harmond Properties Ltd v Gajdzis [1968] 1 WLR 1858, a
notice to quit was served on a tenant by solicitors stating that they were
acting ‘on behalf of your landlord Mr RP Harvey’. Mr Harvey was in fact not the
landlord but the general agent of the landlord company of which he was a
director. He had carried out the letting and acted as if he were the landlord
in every way. This court upheld the decision of the county court that the
notice was valid, the
through its director, Mr Harvey, that they were employed by him to give notices
to quit. The notice was held not to be misleading.
In the third
case, Townsends Carriers Ltd v Pfizer Ltd (1977) 33 P&CR
361*, a break notice had been served not by the tenant company but by an
associated company, not on the landlord company but on an associated company.
The tenant and the landlord had consigned the whole conduct and management of
the tenancy and of the tenancy itself to agents on their behalf, allowing their
respective associated companies to deal with the property as if they were
landlord and tenant respectively in respect of matters such as an increase in
rent and variations of the lease. Sir Robert Megarry V-C therefore held that
the break notice had been validly served.
*Editor’s
note: Also reported at [1977] 1 EGLR 37
The judge
accepted that in the light of the authorities, where a notice terminating a
tenancy under a break clause is given on behalf of a tenant by an agent having
only special or limited authority, it would not be effective unless it states
the fact that the giver of the notice is acting as agent for the tenant and identifies
the tenant. But he held that, on the facts, Life was to be inferred to be the
general agent of Direct.
None of the
authorities seems to me to be close on its facts to the present case, and it is
a truism that each case falls to be decided in the light of its own facts. A
general agency is an unusual commercial relationship, particularly where a
tenant is the principal, the agent having authority to do anything in relation
to the subject-matter of the agency, even to the extent of destroying that subject-matter,
without reference to the principal. The inference of such an agency, in the
absence of express authority creating the agency, requires clear evidence to
support it. The mere payment of rent coupled with occupation does not
necessarily indicate that the payer has the tenant’s authority to terminate the
estate: see Dun & Bradstreet Software Services (England) Ltd v Provident
Mutual Life Assurance Association, June 9 1997*.
*Editor’s
note: Reported at [1997] EGCS 89
Mr Gaunt
helpfully set out certain propositions, which he said were to be derived from
the cases, on notices given by agents to terminate a tenancy. The more
important of those propositions were the following:
1. Generally
the notice must be given by the lessee/lessor. A notice given by someone who is
not the lessee or lessor is invalid: see Lemon v Lardeur [1946]
KB 613; Divall v Harrison [1992] 2 EGLR 64.
2. A notice
may be validly given by an agent acting on behalf of the lessee/lessor. If it
states that it is being given by X on behalf of Y and X is duly authorised, it
is valid: see Lemon v Lardeur; Divall v Harrison.
3. If the
notice is given by somebody other than the lessee/lessor without stating that
that person is acting as an agent, it will be valid if:
(a) the giver
was in fact duly authorised to give it; and
(b) the
circumstances are such that the recipient can act upon the notice safely in the
knowledge that it will be binding on the principal of the giver: see Jones
v Phipps.
4. Those
circumstances include cases where:
(a) the
recipient knows that the giver was authorised to give the notice;
(b) the
principal has held out the giver of the notice as authorised to give the
notice;
(c) the
recipient has been led to believe that the giver of the notice is the
principal: see Jones v Phipps; Harmond Properties Ltd v Gajdzis.
5. Otherwise,
a notice given by a person who is not the lessee/lessor is bad.
Proposition
(3) is the crucial proposition in the present case. The court can draw the
inference in appropriate circumstances that the giver of the notice had due
authority to give it as a general agent, but the circumstances must be such
that the recipient can act on that notice safely, knowing that the principal
will be bound.
I have already
referred to the six facts from which the judge inferred that Life was the
general agent of Direct and that Mr Lines dealt with Life as the lessee,
although he knew Direct was the lessee. In my judgment, in the light of the
fuller evidence now before the court, those inferences are unsound.
The judge,
encouraged, it has to be said, by Mr Gaunt as well as by Mr Hodge, assumed that
the reference to ‘The Life Association of Scotland’ in the letter of July 3
1991 from Mr Lines was a reference to Life rather than Direct. He made the same
assumption in respect of other like references in the limited correspondence
and other documents put in evidence at the trial. The new evidence shows that
‘The Life Association of Scotland’ was a blanket designation for the companies
in the group headed by LAS Holding Ltd, that designation appearing on notepaper
used by companies in the group, including Direct and Life. It was used on a
letter of November 12 1990 bearing the address of units 6 and 7. As this was at
a time well before the letter of August 12 1992 by which Amery-Parkes gave
notice that the premises would also be used by the employees of Life, the
obvious inference is that this was a letter from Direct. It was also used on a
letter of January 5 1991 with a typed heading bearing the name of Direct. Rent
invoices (not seen by the judge) prior to the takeover by Britannia Life Ltd
were also addressed to ‘The Life Association of Scotland’. When Mr Binnie wrote
to Fraser on April 14 1993, saying ‘As you are aware, the Association is your
tenant’ in respect of units 6 and 7, the plaintiffs would have had no reason to
think that he meant Life rather than Direct, and it is not apparent that he did
mean Life.
After the
takeover, there is a single rent invoice (to which the judge referred) dated
March 1 1994 and addressed to ‘Britannia Life Association of Scotland’, which
appears to have replaced ‘The Life Association of Scotland’ as the new
designation, and there are several letters (also referred to by the judge) to
and from the plaintiffs containing references to that designation. But, on
their face, they do not show that Life was thereby intended. There are also
three invoices to which the judge refers and which are addressed to Life, but
they are explained by the express request by Chesterton in the letter of March
17 1994 (not shown to the judge) that all future rent demands should be so
addressed. Chesterton did not explain the reason for that request.
The only
letter in all the correspondence that would have revealed to the reader, if
highly observant, that it came from Life rather than Direct is a single letter
written on notepaper bearing at its head, as usual in prominent print, ‘The
Life Association of Scotland’, but containing in tiny print at the foot of the
letter the name and details of Life. That letter was addressed to Fraser, but
commenced with the words ‘Dear Supplier’ and gave the new head-office address
following ‘the Company’s takeover’ by Britannia Life Ltd. The letter is undated
and not personally signed, but its date appears to be about the beginning of
January 1994.
Mr Hodge
argued that that letter was significant when read with a letter of April 11
1994 from Chesterton to Mr Lines. This said:
As you are
aware, our clients, Britannia Life Association of Scotland, have now vacated
the units, due to internal restructuring of their Company. Under the leases,
the tenant has the ability to break the lease with effect from 28th September
1995.
It is my
client’s intention to action the break clause at the appropriate time, however,
I write to enquire as to whether or not an earlier surrender of their leases
could be achieved.
Mr Hodge
submitted that all doubt was removed by the letter of May 17 1994 from
Chesterton, requiring invoices to be addressed to Life. This, he said, showed
that Direct had allowed Life to have the entire management of units 6 and 7.
I am not able
to accept Mr Hodge’s submission. The undated letter from Life was plainly only
a circular and little significance can reasonably be attached to the small
print at the foot of such a letter, isolated as that letter is. The letter of
April 11 1994 from Chesterton, referring as it did to ‘Britannia Life
Association of Scotland’ as the tenant, was not, on its face, suggesting that
Life was the tenant, and could reasonably be taken by Fraser as a letter from
Chesterton on
recipient that Direct was allowing Life to control units 6 and 7. The mere fact
that Chesterton, in its letter of May 17 1994, required future invoices to be
addressed to Life would not indicate to the objective reader of that letter
that Life had become the general agent of Direct. That invoices should be sent
to Life might have been no more than an administratively convenient arrangement
for Direct, giving Life no powers of management. We do not even know if Life
paid the rent.
The further
evidence now reveals that Direct, on October 8 1993, transferred its business
to another company in the group and ceased to trade. We also now know that Life
entered into the agreement with Chesterton in 1993, so that references by
Chesterton to ‘Britannia Life Association of Scotland’ as its client can now be
seen to have been to Life. But it is not suggested that this was known to the
plaintiffs other than by the process of inference, which I have rejected.
It is
noticeable that Direct has put in no evidence of its actual administrative
arrangements agreed with Life. It is not said that it ever actually appointed
Life as its agent. Not a single board minute has been produced. An agency may,
however, be implied from the course of conduct by the principal and the agent.
Mr Hodge
submitted that the present case was on all fours with the Townsends Carriers
case. I do not agree. In that case the tenant’s agent had used and operated the
demised premises; from early days of the term of the lease the landlord had
corresponded with that agent about the premises, and for more than a year
before the break notice all demands for rent were addressed to that agent. That
agent dealt with the payment of rent, increases in the rent and variations in
the terms of the tenancy. Similarly, the landlord’s agent had been allowed to
act as though that agent was the landlord. Neither principal was a dormant
company. There is little similarity between the facts of that case and the
present case. It has not been shown that Direct consciously allowed Life to
manage units 6 and 7. Direct was dormant since October 1993 and it is not
suggested that it was sent copies of any of the communications by Life relating
to units 6 and 7. It is clear that Life considered itself to be the tenant,
possibly because of its occupation of those premises. In the agreement with
Chesterton, units 6 and 7 were referred to as the leasehold interests of Life.
No doubt that is why Chesterton, in its letter of April 11 1994, referred to
its client as the tenant intending to operate the break clauses and why Life
caused the break notices to be prepared and served. It is not apparent why
Amery-Parkes did not disabuse Life or Chesterton of the error. No explanation
has been provided why Life was described in the break notices and the section
27 notices as the successor in title to Direct. That description and the
evident belief of Life since September 1993 that it was the tenant of units 6
and 7 are wholly inconsistent with the notion that Life was acting as the agent
of Direct in serving the break notices.
Moreover, I
cannot see how the plaintiffs could act upon the notices safely as being
notices that were in fact, or that they had reason to believe were, binding on
Direct. They would have been aware that no consent had been given to any
assignment by Direct, but that was not inconsistent with there having been an
effective assignment. Without the production to them of an assignment, they
could not know if Life was the right person to be giving the notices. If Life
was not, they could not know from the notices that Direct desired to give and
gave (if it did) the break notices. True it is that the plaintiffs were very
slow to take the point, but the fact that the point was for a long time not
taken does not show that there was no point to be taken, given that only the
actual lessee could operate each break clause.
I would
therefore hold that there was insufficient material from which it could
properly be inferred that Life was the general agent of Direct with authority
from Direct to give the break notices. Nor for that matter do I think that
there is evidence to support the inference that Mr Lines knowingly dealt with
Life as the tenant. On the contrary, the plaintiffs could not act on the break
notices safely in the knowledge that they were binding on Direct. It follows
that the break notices served on Life’s behalf were not valid.
2. Construction
Before the
judge the plaintiffs relied on the decisions of this court in Hankey v Clavering
[1942] 2 KB 326 and Mannai Investment Co Ltd v Eagle Star Life
Assurance Co Ltd [1995] 1 WLR 1508* as indicating that defects in break
notices could not be cured if their wording was clear. Now that the House of
Lords in its decision in Mannai has reversed both those cases, Mr Hodge
submits that by a process of construction the defects in the present notices
can be cured. In Mannai the break notices had specified the wrong dates,
being dates that did not comply with the break clauses. It was held that when
construed against their contextual setting, the break notices informed the
reasonable recipient of the termination of the leases on the correct dates in
accordance with the break clauses.
*Editor’s
note: Also reported at [1996] 1 EGLR 69
The present
case seems to me to bear little resemblance to the type of error addressed in Mannai.
There, words containing a mere slip, obvious to the reader of the notice when
read in context, were construed as meaning what they were plainly intended to
mean. In the present case there is no equivalent error: the break notice is not
merely given on behalf of Life rather than Direct but it contains the
explanation as to why it was so given, viz Life was the successor in
title to Direct. I find it impossible to see how, in these circumstances, it is
permissible to construe the break notice as given on behalf of Direct.
Mr Hodge,
however, argued that the reasonable recipient would be left in no doubt that
the correct lessee was giving the break notices. He reasoned as follows:
1. The letter
of October 7 from Amery-Parkes purported to give notice under clause 7(x).
2. That clause
gave the lessee the option to determine the lease.
3.
Amery-Parkes expressed themselves as acting on behalf of Life as successor in
title to Direct.
4. The
plaintiff lessors knew that they had received no application for consent to an
assignment.
5. They also
knew that, on August 12 1992, Amery-Parkes had said that they were acting for
Life and Direct and that they were associated companies.
6. The
reasonable recipient would have appreciated that something had gone wrong and
that either: (a) an unlawful assignment had occurred; or (b) Amery-Parkes were
in error in stating that Life was the successor in title to Direct. Therefore,
the notice should be construed as having been given on behalf of the current
lessee.
The first five
steps and the first sentence of the sixth step are uncontroversial. It is the
second sentence of the sixth step that seems to me not to follow from the
premises. On the face of each notice, Life was said to be the tenant as
successor in title to Direct, and that, if true, could only have come about as
a result of an assignment without consent. But such an assignment would be
effective to make the assignee the lessee for the purposes of clause 7(x). The
reasonable recipient could not know, in the absence of proof of the assignment,
whether Life was the lessee: it might have been. If Life was not in fact the
lessee but Direct was, the reasonable recipient could not know whether
Amery-Parkes were authorised by Direct to act for it and to serve the break
notice, contrary to the express terms of the notice. To my mind, because it is
not obvious from each notice that there was an error in the name of the lessee
nor is it obvious who the actual current lessee was nor whether Amery-Parkes
were duly authorised by anyone other than Life, it is impossible as a matter of
construction to cure what we now know to be the defect by substituting Direct
for Life as the person on whose behalf Amery-Parkes were giving each notice.
3. Estoppel
Mr Hodge
submits that all relevant parties had proceeded on the basis of the underlying
assumption that Life was to be treated as the lessee of both units, or had the
general authority of Direct to deal with the tenancies on its behalf, and that
no relevant distinction was to be drawn between Life and the defendant and they
conducted their dealings in relation to the tenancies accordingly. He relies,
therefore,
requisite basis of fact is not made out.
Mr Hodge
further submits that the plaintiffs, by failing to instruct their solicitors to
reply to the postscript to Amery-Parkes’ letter to Sebastians of November 14
1994, had impliedly represented that they would raise no objection to the
validity of the contractual break notices, in reliance on which Direct
refrained from serving any further break notices within the period prescribed
by clause 7(x) of each lease.
Again, I have
difficulty with this submission. It appears to imply that the plaintiffs were
under a duty to tell Amery-Parkes what was wrong with their notice. Plainly,
they were under no such duty, particularly when the notices were professionally
drawn and the errors should have been noticed by Amery-Parkes and those for
whom they acted. It is not as though the plaintiffs were withholding
information not available to Amery-Parkes and their clients. Further, the very
fact that Sebastians by their letters of October 27 1994 and March 22 1995
responded so cagily should surely have put Amery-Parkes on notice that there
was or might be something wrong with their notices. In my judgment, it is
impossible to found an estoppel in these circumstances.
Conclusion
The judge,
understandably, was impressed by the plaintiffs’ lack of merits and fashioned
for Direct a means of escape from the consequences of the mistakes of Life and
those acting for Life. In the light of the further evidence, that means of
escape does not seem to me available. For the reasons that I have given and in
acceptance of Mr Gaunt’s submissions, I would allow this appeal, set aside the
declaration made by the judge and grant the declarations sought in paras (1)
and (2) of the originating summons.
HUTCHISON and BUTLER-SLOSS LJJ agreed and did not
add anything.
Appeal
allowed.
