Landlord and tenant — Break clause — Notices determining fixed term lease one day earlier than date specified in break clause — Whether notices valid
By two leases
dated March 11 1992 the appellant tenant held a 10-year term of premises from
the respondent landlord. Clause 7(13) of each lease provided that the tenant
might determine the lease by serving a notice of not less than six months
expiring on the third anniversary of the term commencement date. The tenant
served notices expiring on January 12 1995. The landlord’s contentions, that as
the term commencement date was January 13 1992 and the third anniversary of the
term under each lease was therefore January 13 1995, the notices were
ineffective, were accepted by the Court of Appeal: [1996] 1 EGLR 69. The tenant
appealed.
indispensable condition for its effective service that the notice must contain
specific information. The construction of the notices must be approached
objectively taking into account the relevant objective contextual scene. The
purpose of a notice under a break clause must not be lost sight of. There is no
justification for placing such notices in a unique category; such notices
belong to the general class of unilateral notices. It was obvious to a
reasonable recipient with knowledge of the leases and the third anniversary
date that the tenant wished to determine the leases on that date. The
reasonable recipient would not have been perplexed by the minor error in the
notices. One must substitute for the rigid rule in Hankey v Clavering
[1942] 2 KB 326 the standard of commercial construction. The correct test for
the validity of a notice is that in Carradine Properties Ltd v Aslam
[1976] 1 WLR 442. The meaning of words, as they would appear in a dictionary,
and the effect of their syntactical arrangement, as it would appear in grammar,
is part of the material used to understand a speaker’s utterance. Another part
is knowledge of the background against which the utterance was made. Hankey
v Clavering and the earlier authorities should no longer be followed.
of Chieveley and Lord Jauncey of Tullichettle dissenting.
The following
cases are referred to in this report.
Antaios
Compania Naviera SA v Salen Rederierna AB
[1985] AC 191; [1984] 3 WLR 592; [1984] 3 All ER 229; [1984] 2 Lloyd’s Rep 235,
HL
Cadby v Martinez (1840) 11 A&E 720
Carradine
Properties Ltd v Aslam [1976] 1 WLR 442;
[1976] 1 All ER 573; (1975) 32 P&CR 12
Delta
Vale Properties Ltd v Mills [1990] 1 WLR
445; [1990] 2 All ER 176
Doe d Cox
v Roe (1802) 4 Esp 185
Doe d
Spicer v Lea (1809) 11 East 312
Fish, In
re [1894] 2 Ch 83
Gardner v Ingram (1889) 61 LT 729; [1886–90] All ER Rep 258; 54 JP
311; 6 TLR 75
Garston v Scottish Widows’ Fund & Life Assurance Society [1996] 1
WLR 834; [1996] 1 EGLR 113; [1996] 23 EG 131
Germax
Securities Ltd v Spiegal (1978) 37 P&CR
204; [1979] 1 EGLR 84; 250 EG 449, CA
Hankey v Clavering [1942] 2 KB 326; [1942] 2 All ER 311, CA
Mannai
Investment Co Ltd v Eagle Star Life Assurance Co
Ltd [1995] 1 WLR 1508; [1996] 1 EGLR 69; [1996] 06 EG 140
Micrografix
v Woking 8 Ltd [1995] 2 EGLR 32; [1995] 37
EG 179
National
Society for the Prevention of Cruelty to Children v
Scottish National Society for the Prevention of Cruelty to Children [1915]
AC 207
Norwegian
American Cruises A/S v Paul Mundy Ltd; The
Vistafjord [1988] 2 Lloyd’s Rep 343, CA
Peel
(RR), In the Goods of (1870) LR 2 P&D 46
Phipps
(P) & Co Ltd v Rogers [1925] 1 KB 14
Prenn v Simmonds [1971] 1 WLR 1381; [1971] 3 All ER 237, HL
Price v Mann [1942] 1 All ER 453, CA
Reardon
Smith Line Ltd v Yngvar Hansen-Tanger [1976]
1 WLR 989; [1976] 3 All ER 570; [1976] 2 Lloyd’s Rep 621, HL
Sidebotham
v Holland [1895] 1 QB 378
Sudbrook
Trading Estate Ltd v Eggleton [1983] 1 AC
444; [1982] 3 WLR 315; [1982] 3 All ER 1; (1982) 44 P&CR 153; [1983] 1 EGLR
47; [1983] EGD 392; 265 EG 215, HL
Sunrose
Ltd v Gould [1962] 1 WLR 20; [1961] 3 All ER
1142, CA
This was an
appeal by the tenant, Mannai Investment Co Ltd, from a decision of the Court of
Appeal ([1996] 1 EGLR 69), which had allowed an appeal by the landlord, Eagle
Star Life Assurance Co Ltd, from a decision of Judge Rich QC, sitting as a
judge of the High Court, who determined the validity of notices served by the
tenant.
John Cherryman
QC and Kenneth Munro (instructed by Manches & Co) appeared for the tenant;
Nicholas Patten QC and Thomas Leech (instructed by Nabarro Nathanson) appeared
for the landlord.
Giving a
dissenting opinion, Lord Goff of Chieveley said: This appeal is concerned with the question
whether a notice given by a tenant pursuant to a break clause in a lease was an
effective notice. In fact, there were two leases with identical break clauses,
and two identical notices were given. For convenience, however, I will assume
that there was only one.
The premises
were in Jermyn Street, in London SW1. The lease was dated March 11 1992, and
was for a term of 10 years from January 13 1992. The respondent company was the
landlord, and the appellant company was the tenant. The relevant clause was
clause 7(13), which provided as follows:
The Tenant
may by serving not less than six months notice in writing on the Landlord or
its Solicitors such notice to expire on the third anniversary of the term
commencement date determine this Lease and upon expiry of such notice this
Lease shall cease and determine and have no further effect …
So the clause
gave the tenant a single opportunity to bring the lease to an end. It so
happened that the market for rents in this area had fallen, and the tenant
decided to take advantage of this opportunity. It served the following notice
on the landlord:
Pursuant to
Clause 7(13) of the Lease we as Tenant hereby give notice to you to determine
the lease on 12 January 1995 …
Unfortunately,
however, the tenant made a mistake. The third anniversary of the term
commencement date was not January 12 1995 but January 13 1995. The landlord has
claimed that in the result the notice was ineffective. The Court of Appeal*,
reversing the decision of Judge Rich QC (sitting as an additional judge of the
Chancery Division), upheld the landlord’s contention. It is from that decision
that the tenant now appeals to your lordships’ House.
*Editor’s
note: Also reported at [1996] 1 EGLR 69
I should
record at once that the judge held that the tenant was entitled to succeed on
the basis that, because January 12 and 13 were contiguous dates, there was a
moment of time at which they coincided; and from this it followed that a notice
expressed to determine the lease on January 12 was effective to do so on
January 13 as required by the clause. In so holding, he invoked the authority
of Sidebotham v Holland [1895] 1 QB 378. But, as Nourse LJ
pointed out in the Court of Appeal in the present case [1995] 1 WLR 1508, at
pp1514–1515, that case provided no authority for the judge’s conclusion. It was
concerned with a notice to quit and deliver up possession by midnight. It
related therefore to a notice to quit at a point of time which was held to be
common to both dates, and not, as in the present case, a notice to take effect
on a certain date. Here, a notice taking effect on a different, though
contiguous date, could not be rendered effective on the basis of
complete agreement. It follows that the central question in the appeal before
your lordships’ House is whether the Court of Appeal was right to hold that the
notice was in any event not an effective notice under the clause. To that
question I now turn.
At first sight
it seems unreasonable that the notice should not have been effective. It was
obvious that the tenant was trying to give an effective notice under the
clause, and that it had mistakenly assumed that the anniversary of the term
commencement date was not January 13 but January 12 1995. As Hobhouse LJ
pointed out (see [1995] 1 WLR 1508, at p1516F), the tenant had mistakenly read
the clause as if it said ‘to expire at the end of the third year of the term’
when it did not do so. It is tempting therefore to assist the tenant who has
made a mistake of this kind, when it must have been obvious to the landlord
that the tenant intended to give an effective notice under the clause. But the
difficulty in the way of adopting this approach is that, on the authorities, it
is inconsistent with the agreement of the parties as expressed in the clause.
An early
authority in this line is Cadby v Martinez (1840) 11 A&E 720.
In that case a tenant was entitled under a clause in his lease to determine it
by notice expiring on Michaelmas Day 1837. The tenant mistakenly gave notice to
quit and deliver up the premises on June 24 1837. The notice was expressed to
be ‘agreeably to the covenants of the lease’. It was held that notice was not
effective to determine the lease. Lord Denman CJ said, at p726:
We have heard
the case argued, and are of opinion that the covenant to pay rent during the
whole term cannot be got rid of by any notice to quit which is not in
accordance with the proviso introduced into the lease for the purpose.
The cases
that seemed to point the other way merely shew that, where there is no
covenant, a notice describing the premises, so as to be perfectly understood
between the parties, will be sufficient: but in none has a proviso or covenant
in a deed been held to be satisfied by a notice inconsistent with the terms of
it.
The reasoning
in this brief judgment is clear and compelling. You start with the position
that, under the lease, the tenant has covenanted to pay rent for the full term;
but under a proviso in the lease the tenant may, by notice, rid himself of the
obligation under that covenant. However, to be effective for that purpose, the
notice must conform to the terms of the proviso. If on its true construction
the notice does not do so, it will not be effective for its purpose, because
the parties have agreed that only a notice conforming to the terms of the
proviso will be effective. The fact that the landlord realises that the tenant
intended to take advantage of his rights under the proviso, but has only failed
through some mistake to give the required notice, is irrelevant. The simple
fact is that the tenant has failed to use the right key which alone is capable
of turning the lock.
Nowadays, the
leading case is Hankey v Clavering [1942] 2 KB 326. The lease in
question was for a term of 21 years from December 25 1934. The break clause
conferred on either party the right to determine the lease at the expiration of
the first seven years, by six calendar months’ notice. The landlord gave notice
to the tenant’s solicitors in the following terms:
As I may have
to be away for some time in the near future, I will be obliged if you would
accept the six months’ notice to terminate your client’s lease which I am
allowed to give on June 21, 1941. This would mean that he would have to give up
the cottage on December 21, 1941.
This was
obviously a mistake on the part of the landlord, because the six months’ notice
should have expired on December 25 not 21. At first instance, Asquith J held
that the notice could be saved on the basis that it had been accepted as a good
notice by the tenant’s solicitors; but that solution was rejected by the Court
of Appeal on the facts. The Court of Appeal, which consisted of two
distinguished and very experienced Chancery lawyers, Lord Greene MR and Lord
Clauson, held that the notice was ineffective. They regarded the point as so
clear that they gave judgment ex tempore. Indeed, Lord Clauson concluded
his brief judgment as follows, at p331:
I should have
thought that, as a matter of construction, an argument other than that which
leads to the result the Master of the Rolls has announced was quite untenable.
Lord Greene MR
introduced his judgment with the following passage, at p328:
This appeal
raises a short point in connection with a break clause in a lease wherein the
plaintiff was the lessor and the defendant was the lessee. By his letter of
January 15, 1940, the plaintiff, on the face of it, was purporting to determine
the lease by notice on December 21, 1941. The whole thing was obviously a slip
on his part, and there is a natural temptation to put a strained construction
on language in aid of people who have been unfortunate enough to make slips.
That, however, is a temptation which must be resisted, because documents are
not to be strained and principles of construction are not to be outraged in
order to do what may appear to be fair in an individual case.
He expressed
his reasoning and conclusion as follows, at pp329–330:
Notices of
this kind are documents of a technical nature, technical because they are not
consensual documents, but, if they are in proper form, they have of their own
force without any assent by the recipient the effect of bringing the demise to
an end. They must on their face and on a fair and reasonable construction do
what the lease provides that they are to do. It is perfectly true that in
construing such a document, as in construing all documents, the court in a case
of ambiguity will lean in favour of reading the document in such a way as to
give it validity, but I dissent entirely from the proposition that, where a
document is clear and specific, but inaccurate on some matter, such as that of
date, it is possible to ignore the inaccuracy and substitute the correct date
or other particular because it appears that the error was inserted by a slip.
By the clear wording of this notice the plaintiff purported to bring the lease
to an end on December 21, 1941. In so doing he was attempting to do something
which he had no power to do, and, however much the recipient might guess, or
however certain he might be, that it was a mere slip, that would not cure the
defect because the document was never capable on its face of producing the
necessary legal consequence.
The essential
point made by Lord Greene MR therefore was that notices of this kind are
documents of a technical nature because they are not consensual documents; but,
if they are in proper form, ie if they comply with the specification in the
clause, they have of their own force the effect of bringing the demise to an
end. It is necessary, therefore, to turn to the lease to ascertain what is
required. Here the landlord had to give six months’ notice of his desire to
determine the demise at the expiration of the first seven years, which in fact
expired on December 25 1941. This he failed to do; and accordingly the notice
was not effective. The facts that he had obviously meant to give an effective
notice at the end of the first seven years, that he had simply made a mistake
about the date, and that this may have been obvious to the other party, made no
difference. The simple position was that the notice he gave did not conform to
the agreed specification in the clause which gave the right to determine the
lease, and so was not effective for that purpose.
It is, in my
opinion, correct in principle that a notice under such a clause will only be
effective if it conforms to the specification in the clause. The specification
in the clause is contained in a document which has been agreed between the
parties, and so prescribes the requirements with which the notice must comply if
it is to achieve the desired effect. In the case before your lordships, the
notice must: (1) be not less than six months’ notice, (2) be in writing, (3) be
served on the landlord or its solicitors, and (4) expire on the third
anniversary of the term commencement date. It is plain that fulfilment of all
four of these requirements is essential. It is with the fourth requirement that
we are here concerned; and it is well established that this required that the
notice should be so expressed as to expire on the relevant date. The
position was made clear by another distinguished lawyer, Atkin LJ, in P
Phipps & Co Ltd v Rogers [1925] 1 KB 14, at p27. He there cited
Lord Coleridge CJ as saying in Gardner v Ingram (1889) 61 LT 729,
at p730, that: ‘Although no particular form need be followed, there must be
plain unambiguous words claiming to determine the existing tenancy at a certain
time’. Atkin LJ continued: ‘The date of determination must be the right date’.
The principle
is therefore clear. The agreement between the parties provides what notice has
to be given to be effective to achieve the relevant result. The question in
each case is: does the notice which was given, properly construed, comply with
the agreed specification? If it does, it is effective for its purpose. If it
does not, it is not so effective; and the mere fact that the person serving the
notice plainly intended, and was trying, to give an effective notice under the
clause, and that the recipient of the notice realised that he was doing so, makes
no difference. This is because the notice, properly construed, did not comply
with the agreement between the parties. The key does not fit the lock, and so
the door will not open.
I have been
careful to use the expression ‘properly construed’. This is because, although
at first sight the notice given may not appear to comply with the agreed
specification in the clause, nevertheless on examination it may transpire that,
properly construed, it does in fact do so. This may occur where there is a
latent ambiguity in the notice. A striking example is to be found in Doe d
Cox v Roe (1802) 4 Esp 185 (which was cited in argument in Cadby
v Martinez). There the landlord of a public house in Limehouse gave
notice to quit ‘the premises which you hold of me … commonly called or known by
the name of the Waterman’s Arms’. On the evidence, the only property let by the
landlord to the tenant was a public house called the Bricklayer’s Arms;
moreover there was no public house in Limehouse called the Waterman’s Arms. The
notice was held effective in respect of the tenancy of the Bricklayer’s Arms,
the case being treated as one of latent ambiguity. Another example occurs when
a date is specified in the notice which, as is plain from the face of the
notice, was obviously stated in error for the true date which the giver of the
notice must have intended to specify. This will usually occur nowadays through
a simple typing error. In such a case, the date so given can properly be
construed as a reference to the true date. An example of the application of
this principle is to be found in Carradine Properties Ltd v Aslam
[1976] 1 WLR 442. In that case, which was (like the present) concerned with a
break clause in a lease, the relevant date upon which a notice given by either
party under the clause might take effect was a date in September 1975, but a
notice given by the landlord in September 1974 specified a date in September
1973. It was plain from the face of the notice that a date in 1973, which had
already passed, could not conceivably have been intended by him. It must have
been a clerical error, and could properly be read as intended to refer to 1975.
In these circumstances Goulding J, applying ordinary principles of
construction, held the notice to be an effective notice to determine the lease
on September 27 1975. He said, at p446C:
In an option
clause the requirement is that a party must strictly comply with the condition
for its exercise. If the condition includes the giving of a particular notice,
it seems to me that the logical first approach is to interpret the notice,
looking at the words and applying legal principles to their construction, and
then ask whether it complies with the strict requirements as to the exercise of
the option. If that is right, I think that a benevolent approach could be
applied in this case, as in the Duke of Bedford’s Case (1796) 7 Term Rep
63, because reasonably read by a reasonable tenant the mistake is obvious on
the face of it, and there is no doubt what the mistake was. Therefore one
interprets the notice as asserting an intention to determine in 1975. It is
true that if whoever made the mistake had typed 1976 instead of 1973, the error
would probably have been incurable because although the tenant might suspect
there was a slip, it might be that the landlord did intend 1976, not knowing or
understanding his rights under the lease. In such a case the tenant would be
entitled to disregard the notice but because a past date was given in the
notice it is insensible and therefore an authority such as the Duke of
Bedford’s Case is in point.
[Emphasis
supplied.]
The decision
of Goulding J in that case was therefore made in accordance with the principles
I have stated. I should however mention that, in the report of the case in
[1976] 1 WLR 442, at p443G, it is stated that, although the date upon which a
notice given by either party under the clause might take effect was September
27 1975, the notice given by the landlord specified the date as September 17
1973. Your lordships were however informed that comparison of this report with
other reports of the case reveals that the date of determination specified in
the landlord’s notice was, in fact, September 27, not September 17, so that the
only error in the landlord’s notice consisted of specifying 1973 instead of
1975. I am satisfied that this must have been the case. If not, Goulding J
would certainly have addressed the question of the effect of the error as to
the day of the month; and, if he had done so, he would, consistently with the
reasoning in his judgment, have held that on that ground the notice was
ineffective.
It is however
well settled that, under a clause such as the present which does not require
that the date of expiry should be specified as such in the notice but merely
that the notice should be expressed to expire on the relevant date, it is
enough that the notice should be so expressed to expire in accordance with the
terms of the clause. This was made clear by Lord Coleridge CJ in Gardner
v Ingram (1889) 61 LT 729, at p730, in the passage I have already
quoted. So if the tenant in the present case had given a notice expressed to
determine the lease on the third anniversary of the commencement date, that
would have been a sufficient compliance with the specification in the clause.
Furthermore it is also well settled that, if the person giving the notice
specifies the actual date but out of caution also specifies, in the
alternative, the end of the period at which the notice is required under the
clause to take effect, the alternative so given will be effective to save the
notice if the actual date so given should prove to have been mistaken. For
obvious reasons, therefore, it is a commonplace for notices to quit to take
this form, which avoids the trap into which the tenant fell in the present case.
The position was stated clearly by AL Smith LJ in Sidebotham v Holland
[1895] 1 QB 378, at p389, a case to which I have already referred, when he
said:
I would point
out that the plaintiff has only himself to blame for the difficulties he is in
in this case. Had he added the words which are very ordinarily inserted in a
notice to quit, ‘or at the expiration of the year of your tenancy, which shall
expire next after the end of one half-year from the service of this notice’,
and which are inserted to avoid such a point as that now taken, all would have
been in order; but the words are not there. If the notice to quit in this case
had been for May 20 or 21 or any later day I should have had no doubt but that
it was a bad notice; and I own that the inclination of my opinion is that the
present notice is bad because it does not expire upon the last day of some year
of the tenancy; but, as Lord Halsbury and Lindley LJ are of opinion that,
inasmuch as this was a full six months’ notice given to quit upon the anniversary
of the day upon which the tenancy commenced, it is good, though the tenancy
expired at midnight the day before, I yield to what they say, and will not
differ from them, and hold that this unmeritorious technicality must prevail;
and I content myself with expressing what I have said.
That what I
have said sets out the long established law on this subject appears clearly
from the judgments of Lindley LJ (with whom Lord Halsbury agreed) and AL Smith
LJ in that case. This was the established law which was applied by the Court of
Appeal in Hankey v Clavering [1942] 2 KB 326, and by the Court of
Appeal in the present case. I wish to stress however that these principles have
been evolved in the case of clauses in leases, such as notices under a break
clause, options to purchase, and notices to quit, in which provision is
regularly made as to the conditions to be fulfilled in respect of the relevant
notice and, in particular, that the notice must be expressed so as to take
effect on a certain date.
Before your
lordships Mr John Cherryman QC, for the tenant, faced with the relevant
authorities, sought in the present case to distinguish Hankey v Clavering,
which was the authority held by the Court of Appeal to be decisive against his
client. He submitted that the date of determination specified by the tenant in
its notice was not an essential part of the notice and must give way to the
tenant’s obvious intention, having regard to the express invocation by the
tenant of clause 7(13), that the notice should have the effect of expiring on
the third anniversary. But, in my opinion, that submission is contrary to the
judgment of Lord Greene MR in Hankey v Clavering itself. He
treated it as necessary that the person giving the notice should claim to
determine the tenancy at a certain time, and (as Atkin LJ said in Phipps
[1925] 1 KB 14, at p27) that must be the right time. The fact that the tenant
in the present case expressly identified the clause in question as opposed to
implicitly referring to it (as in Hankey v Clavering) cannot,
as I see it, make any difference. If that were so, it would be enough for the
person giving the notice simply to invoke the clause without specifying any
time at which the notice should take effect. That would, however, be contrary
to the construction which has for a long time been placed upon clauses of this
kind.
Mr Cherryman
next relied upon a test stated by Goulding J in Carradine Properties Ltd
v Aslam [1976] 1 WLR 442, at p444G, to be generally applicable, viz:
‘Is the notice quite clear to a reasonable tenant reading it? Is it plain that
he cannot be misled by it?’ These words have been fastened upon to suggest that
a broader test should be applied than is recognised in the authorities, and
have been cited in textbooks as having that effect. Indeed, in Micrografix
v Woking 8 Ltd [1995] 2 EGLR 32 Jacob J referred to Goulding J as having
‘distinguished the celebrated, much distinguished, case of Hankey v Clavering
[1942] 2 KB 326′ and stated, at p33, that ‘Carradine … is the modern approach
…’. I have to say, however, that this interpretation reveals a complete
misunderstanding of Goulding J’s judgment in Carradine which, read as a
whole, demonstrates that he had no intention of departing from the law as
established in the previous authorities, including Hankey v Clavering,
by which he was bound. In his judgment, Goulding J quoted at length from the
judgment of Lord Greene MR in that case, and said correctly, at p446:
In an option
clause the requirement is that a party must strictly comply with the condition
for its exercise. If the condition includes the giving of a particular notice,
it seems to me that the logical first approach is to interpret the notice,
looking at the words and applying legal principles to their construction, and
then ask whether it complies with the strict requirements as to exercise of the
option.
Applying those
principles, he was able to distinguish Hankey v Clavering on the
basis that, if the notice was reasonably read by a reasonable tenant, the
mistake (viz, specifying 1973) was obvious on the face of it and there
was no doubt what that mistake was, ie that the date 1973 must have been typed
instead of 1975 which the landlord had intended to specify. It is in this sense
that the test stated by Goulding J earlier in his judgment must be understood,
as was made plain when he went on to say that if, instead of the earlier date
of 1973, the later date of 1976 had been typed for 1975, such a mistake would
probably have been incurable, because ‘although the tenant might suspect there
was a slip, it might be that the landlord did intend 1976, not knowing or
understanding his rights under the lease’ (p446E). Having regard to the
reasoning of Goulding J in his judgment, the suggestion that the test earlier
stated by him constituted a departure by him from the well-established
authorities by which he was bound is, frankly, untenable. Moreover, it is also
plain from his judgment that, in considering the question whether the notice,
on its true construction, complied with the clause in the lease, he was
entitled to have regard to the terms of the lease; indeed, it is difficult to
see how he could otherwise have considered that question. In this respect, the
decision is well summarised in the headnote to the report.
In Micrografix
the tenants gave a notice determining the lease on March 23 1995 when under the
relevant clause they could only have done so on June 23 1995. Jacob J held
that, as the landlords knew that the date of determination could only be June
23 1995, they would not have been misled, and the notice should therefore be
treated as an effective notice to determine the lease on the correct date, viz
June 23 1995. In my opinion that decision was contrary to the long
established line of authority, including Hankey v Clavering
[1942] 2 KB 326, by which Jacob J was bound. It failed to give effect to the
underlying principle that the notice must, on its true construction, conform to
the agreed specification in the applicable clause, failing which it will not
under the contract be effective for its purpose. On its true construction it
could not be read as a notice taking effect on June 23 1995, because there was
no reason to believe that the landlords must have intended to give a notice on
that date; on the contrary, in all probability they gave the wrong date as a
result of a mistaken view of their rights. I wish to add that the invocation of
Goulding J’s test by the Court of Appeal in Germax Securities Ltd v Spiegal
(1978) 37 P&CR 204* reveals no such error, because (as Buckley LJ pointed
out at p206) the mistaken date in that case was not in the operative part of
the notice.
*Editor’s
note: Also reported at [1979] 1 EGLR 84
Mr Cherryman
also relied upon the decision of the Court of Appeal in Delta Vale
Properties Ltd v Mills [1990] 1 WLR 445, in which the test
propounded by Goulding J in Carradine was referred to in the judgment of
Slade LJ, at p454. That case was concerned with the meaning and effect of
notices to complete served by a vendor on a purchaser of land. Under the
contract it was provided that, upon service of such a notice, the transaction
should ‘be completed within 15 working days of service and in respect of such
period time shall be of the essence’. The notices however substituted a period
of 28 days for the period of 15 days. The purchaser, lacking the necessary
funds, failed to complete within the period of 28 days; then, having obtained
the necessary funds a few days later, sought specific performance of the
contract. The vendor claimed that he had rescinded the contract on the
purchaser’s failure to comply with the notice to complete. The question at
issue was whether that notice was effective. The Court of Appeal held that it
was. Slade LJ said, at p455, that there was only one sense in which any
reasonable recipient would have read it, viz that the vendor would not
exercise the rights conferred by the contract (to rescind if the purchaser did
not complete within 15 days), provided that the purchaser completed within 28
days. Bingham LJ, who reached the same conclusion, said, at p457E:
The
authorities show that a notice will be invalid and ineffective unless it gives
the precise notice which the contract requires and leaves the recipient in no
reasonable doubt as to the effect of the notice.
I can see
nothing in the judgments in this case which detracts from the principles which
I have already stated.
In the end Mr
Cherryman was forced to submit in his reply that Hankey v Clavering
should be overruled. In doing so, he was faced with the dual handicap, first,
that no such argument had been foreshadowed in his printed case, and, second,
that he was in truth inviting your lordships to overrule not merely Hankey
v Clavering itself but the long line of authority which had preceded it.
Even so, I have considered with some care whether your lordships should accept
this submission. In doing so I have, as previously stated, recognised that, on
occasion, the recipient of a notice under, for example, a break clause in a
lease may, as here, treat it as ineffective because it does not comply with the
contractual specification, even though he must have been aware that the giver
of the notice intended to comply with the clause and only failed to do so
through a mistake on his part. I am, however, driven to state that there are
formidable obstacles in the way of Mr Cherryman’s submission.
The suggestion
is that a more relaxed approach be adopted to the construction of notices of this
kind, so that, if it is clear that the giver of the notice intended to comply
with the provisions of the clause, he should be held to have done so, despite
an erroneous choice of the date on which the notice is to take effect. It was
submitted that, provided that this test is expressed in sufficiently strict
terms, so that the recipient is left in no reasonable doubt that the giver of
the notice intended to comply with the clause, this approach should not lead to
any undue uncertainty in its application. This latter argument I do not find
persuasive. There is a wide range of possible errors, and there are bound to be
cases on the borderline in which there is doubt whether the intention is
sufficiently clear. More fundamentally, however, it seems to me that the
adoption of such a test in truth requires that a new meaning should be given to
clauses of this kind, so that they are read as requiring no more than that the
giver of the notice should express a clear intention to exercise his rights
under the clause, instead of requiring that the date on which it is to take
effect must be expressly identified, either as such or with reference to the
terms of the clause.
I have no
doubt that this may indeed be the meaning properly to be attributed to many
contractual provisions conferring a right exercisable upon notice. But the
difficulty in the way of so holding in the case of
well over a century a different construction has been placed upon them.
Innumerable leases, many of them still in force, must have been drafted on the
understanding that they bear the well-known meaning established in the
authorities. It follows that, quite apart from the element of uncertainty to
which I have referred, the step which your lordships are being invited to take
would have a retrospective effect. In these circumstances I am most reluctant
to depart from the established meaning unless I am persuaded that there is very
good reason to do so.
In considering
this question, I start from the position not only that the established meaning
is clear and well-known, but also that the trap which the tenant fell into in
the present case is easily avoided by adopting the familiar stratagem of
invoking, as an alternative to the specified date, a date identifiable by
reference to the terms of the clause itself. In these circumstances I am driven
to wonder how often it occurs that, among the numerous notices of this kind
which are given each year, mistakes of this kind are made. I simply do not
know; though I cannot help suspecting that such cases are very few. If they
were more frequent than I suspect, it would be surprising if there was not a
greater move for such clauses to be drafted in different terms, or even for the
legislature to require that such clauses should be read as having a different
effect. In these circumstances I find myself responding to the submission made
by Mr Nicholas Patten QC, in his admirable argument on behalf of the respondent
landlords, that it is inadvisable for the judges to disturb this well-settled
branch of the law. After all, the number of notices given each year under
leases must be very great. Their effect, if challenged, will ordinarily fall to
be considered in the county court. At present, the applicable law is clear and
well-settled, and Mr Patten informed your lordships that disputes were rare. In
these circumstances the change in the law now proposed would not, in my
opinion, be justified.
For these
reasons, I would dismiss the appeal.
Also
dissenting, Lord Jauncey of Tullichettle said: Clause 7(13) of each lease empowered
the appellant as tenant to terminate the lease by serving not less than six
months notice ‘to expire on the third anniversary of the term commencement date
[to] determine this lease and upon expiry of such notice this notice
shall cease and determine … ‘. The words emphasised (by me) refer to the expiry
of the period of not less than six months which must be contemporaneous with
the termination of the lease. It is agreed that the third anniversary expired
on January 13 1995. However the notices, although stated to be pursuant to
clause 7(13) bore to determine the leases on January 12 the day before a notice
given in accordance with that provision could expire. The question is whether
the reference to January 12 instead of 13 is fatal to the validity of the
notices. The Court of Appeal, reversing the decision of the judge, held that it
was.
Notices
terminating a tenancy are technical documents because they are effective without
the consent of the receiver. It is therefore essential that they conform to the
statutory or contractual provisions under which they are given. In Cadby
v Martinez (1840) 11 A&E 720, Lord Denman CJ, at p726, observed that
a covenant in a lease ‘cannot be got rid of by any notice to quit which is not
in accordance with the proviso introduced into the lease for the purpose’. This
proposition was expressly approved more than a hundred years later in Hankey
v Clavering [1942] 2 KB 326, at p330 by Lord Greene MR. Mr Cherryman QC
for the tenants in his opening speech accepted this proposition but argued that
properly construed the notices did accord with clause 7(13) of the lease
inasmuch as the specific reference thereto predominated over the subordinate and
unnecessary reference to the date January 12. The notices would have been
perfectly good if the words ’12 January 1995′ had been omitted. My lords, I
reject this contention. Clause 7(13) required that the notice be expressed to
expire in accordance with the provisions thereof. This could be achieved either
by reference to the correct date or by repeating the formula ‘to expire on …’
in the clause. This was the form of notice which the tenants had agreed to
serve but which in the event they did not. The notice contains within itself a
specific date upon which the tenancy is to determine. Is that date to be
construed as another date because of the reference to the empowering provisions
of clause 7(13) or are those provisions to be construed as authorising notices
which do not strictly conform to what has been agreed? In Hankey v Clavering
the Court of Appeal had to determine the validity of a landlord’s notice to
quit which purported to terminate a tenancy some four days before the break
clause in the lease permitted this to be done. In terms of the lease
termination thereof could properly take place on December 25 1941 whereas the
notice was in, inter alia, the following terms (p327):
As I may have
to be away for some time in the near future, I will be obliged if you would
accept the six months’ notice to terminate your client’s lease which I am
allowed to give on June 21, 1941. This would mean that he would have to give up
the cottage on December 21, 1941 …
In accepting
that the date in the notice was obviously a slip Lord Greene MR rejected the
temptation to put a strained construction on the document in order to aid
someone who had made an unfortunate slip. At pp329–330 he said:
Notices of
this kind are documents of a technical nature, technical because they are not
consensual documents, but, if they are in proper form, they have of their own
force without any assent by the recipient the effect of bringing the demise to
an end. They must on their face and on a fair and reasonable construction do
what the lease provides that they are to do. It is perfectly true that in
construing such a document, as in construing all documents, the court in a case
of ambiguity will lean in favour of reading the document in such a way as to
give it validity, but I dissent entirely from the proposition that, where a
document is clear and specific, but inaccurate on some matter, such as that of
date, it is possible to ignore the inaccuracy and substitute the correct date,
or other particular because it appears that the error was inserted by a slip.
By the clear wording of this notice the plaintiff purported to bring the lease
to an end on December 21, 1941. In so doing he was attempting to do something
which he had no power to do, and, however much the recipient might guess, or however
certain he might be, that it was a mere slip, that would not cure the defect
because the document was never capable on its face of producing the necessary
legal consequence. The authority for that proposition is Cadby v Martinez,
11 A&E 720 …
I take from
these observations the proposition that if a notice to quit is ex facie
clear and specific as to a matter such as the subjects to which it relates or
the date upon which it is to operate it matters not that consideration of the
empowering provision demonstrates a discrepancy between it and the notice. The
case of ambiguity to which Lord Greene MR referred was one appearing on the
face of the notice and not one which was only apparent from a consideration of
the lease. Indeed it was implicit in the notice in that case that it was given
in pursuance of the landlord’s contractual powers with which it did not accord.
However, the conflicting terms of the lease did not save it. Furthermore I can
see no reason for construing clause 7(13) as permitting non-conforming notices.
It was argued
that the specific reference to clause 7(13) distinguished this case from Hankey
v Clavering. I disagree. If it were appropriate to read into an
otherwise clear and specific notice a contractual power for the purpose of
substituting a correct for an incorrect date Lord Greene MR would no doubt have
done so, given his observation as to the court endeavouring to give validity to
a document. I see no difference in principle between an implied reference to a
contractual provision and an express one. If Hankey v Clavering
is still good law then the notice given by this tenant was ineffective.
I turn to
consider whether the law has, as Mr Cherryman submitted, during the last 50
years developed a more flexible attitude to notices to quit which contained
inaccuracies. In Carradine Properties Ltd v Aslam [1976] 1 WLR
442 Goulding J held that a notice by landlords correctly dated September 6
1974, to determine a lease on September 27 1973 would be interpreted as a
notice to determine on September 27 1975, a date which accorded with the
provisions of the break clause. The judge after referring to the need for a
party to comply strictly with the requirement for the exercise of an option or
break clause continued, at p446C:
If the
condition includes the giving of a particular notice, it seems to me that the
logical first approach is to interpret the notice, looking at the words and
applying legal principles to their construction, and then ask whether it
complies with the strict requirements as to exercise of the option. If that is
right, I think a benevolent approach could be applied in this case, as in the [Duke
of Bedford’s Case (1796) 7 Term Rep 63], because reasonably read by a
reasonable tenant the mistake is obvious on the face of it, and there is no
doubt what the mistake was. Therefore one interprets the notice as asserting an
intention to determine in 1975. It is true that if whoever made the mistake had
typed 1976 instead of 1973, the error would probably have been incurable
because although the tenant might suspect there was a slip, it might be that
the landlord did intend 1976, not knowing or understanding his rights under the
lease.
In this
passage the judge was contrasting the situation where it was apparent from the
face of the notice that the date of determination must be mistaken because it
had already passed with one where the date of determination had yet to come and
where it could not therefore be seen from the notice itself that the date was
inserted in error. Mr Cherryman argued that the judge was correct in relation
to the first situation but wrong in relation to the second. In my view, the
distinction drawn by Goulding J was entirely logical. In the first situation,
which was the case before him, it only required a glance at the notice to see
that the date of determination must be a mistake. This was not the position in Hankey
v Clavering [1942] 2 KB 326. In the second situation there was nothing
within the four corners of the notice which showed that 1976 was a mistake.
This was the position in Hankey v Clavering.
In Delta
Vale Properties Ltd v Mills [1990] 1 WLR 445 a contract for sale of
property provided, inter alia, for service of a completion notice
requiring the transaction to be completed within 15 days. The seller served
such a notice requiring completion within 28 days and the buyers challenged its
validity. The Court of Appeal held that the notice was valid since a reasonable
reader thereof could only have concluded that the notice was intended to be one
conforming to the empowering provision and that the sellers were giving him 28
days instead of 15 to complete. This was not a case of a party serving a notice
which he was not empowered to serve but rather of a party exercising
forbearance in the strict compliance with a contractual term in his favour by
giving, as he was entitled, to do, a longer period of notice than was required.
The case is no support for the tenant’s argument that January 13 should be
substituted for January 12. In Micrografix v Woking 8 Ltd [1995]
2 EGLR 32 the provisions of a lease entitled tenants to give not less than 12
months’ notice of their intention to determine the lease on June 23 1995. In
January 1994 they sent a letter stating that they were enclosing a notice
determining the lease on March 23 1995, which notice stated the date of
determination as March 23 1994. Jacob J in holding that the notice was valid
because the landlords would not have been misled by the pair of wrong dates and
would have seen exactly what the tenants intended, observed that Carradine
Properties Ltd v Aslam [1976] 1 WLR 442 was the modern approach to
construction of documents which was more in favour of making them work than in
the past. After referring to Goulding J’s second situation, he stated, at p33:
That was an obiter
observation at a point in time up to which the rather stricter view of Lord
Greene had prevailed. In 1995 I rather think that a court faced with an obvious
slip would construe the document without the slip.
My lords I
consider that Jacob J was in error in placing so much reliance on the
understanding of the landlord. Lord Greene MR in the passage from Hankey
v Clavering [1942] 2 KB 326, at pp329–330, to which I have already
referred emphasised that even certainty by a recipient that a date was a slip
would not cure the defect and this view was echoed in the Court of Appeal in
this case by Nourse LJ [1995] 1 WLR 1508, at p1513F–G. In Delta Vale
Properties Ltd v Mills [1990] 1 WLR 445, at p455F, Slade LJ accepted
at p455F that the absence of confusion or prejudice on the part of the
recipient was irrelevant. Their lordships were referred to no other case in
which this approach had been questioned nor the stricter approach of Lord
Greene MR in Hankey v Clavering [1942] 2 KB 326, at pp329–330,
doubted. Micrografix [1995] 2 EGLR 32 was the only case cited in
argument in which the court had construed a specific date as other than that
stated and in which the error did not, as in Carradine, proclaim itself
from the face of the notice. I consider that it was wrongly decided.
Hankey v Clavering is a case of considerable authority, which has
stood unchallenged and been applied for more than 50 years. Mr Cherryman only
sought to challenge it with no great enthusiasm in the last speech. I am not
persuaded that there is any good reason for departing from the principles
enunciated by Lord Greene MR. It would be tempting to say that where a notice
is disconform to that stipulated in the relevant empowering provision due to a
slip which was obvious to any reasonable receiver thereof it may be construed
so as to conform. However I can see considerable difficulties arising out of the
application of such a principle. On one view it could be said that the giver of
a notice empowered by a contractual provision always intends to comply with
that provision thus however far such notice departed from what was
contractually required it could be construed to conform with such requirements.
On another view it could be argued that a notice which departed substantially
from what was required cannot have been intended to conform but was intended to
depart from contractual requirements or given in ignorance thereof. Where is
the line to be drawn between defective notices which can and those which cannot
be construed so as to conform: such possibilities would create inevitable
uncertainties which as Mr Patten QC for the landlord submitted would be likely
to lead to increased litigation. There will, of course, be cases where an
unintended slip in the drafting of a notice will result in hardship to the
giver thereof but he will only have himself to blame for not complying with the
terms of the empowering provision. Against this, however, must be measured the
advantage to the recipient of certainty inasmuch as a date in a notice is to be
read as stated unless it is obvious from the face of the notice that it must be
mistaken.
Applying Lord
Greene MR’s principles to this case, the tenant had no power under clause 7(13)
to determine the lease on January 12 from which it follows that their notice
was ineffective.
My lords, I
have had the advantage of reading in draft the speech of my noble and learned
friend, Lord Goff of Chieveley with whose reasoning I am in entire agreement. I
would therefore dismiss the appeal.
Giving his
opinion, Lord Steyn said: The short but not
uncomplicated question is whether notices given by a tenant to a landlord
purportedly under a right to determine reserved in terms of leases for fixed
terms were effective to determine the leases.
The landlord
is Eagle Star Life Assurance Co Ltd. The tenant is Mannai Investment Co Ltd.
There are two leases both dated March 11 1992. The demised property consists of
office premises and car parking space in London SW1. The two leases demised the
office premises and the car parking space in each case ‘For the term of 10
years subject to the provisions of clause 7(13) hereof from and including 13
January 1992 …’. Clause 7 (13) of each lease provided as follows:
The Tenant
may by serving not less than six months notice in writing on the Landlord or
its solicitors such notice to expire on the third anniversary of the term
commencement date determine this Lease and upon expiry of such notice this
Lease shall cease and determine and have no further effect …
Under each
lease the term granted included January 13 as the first day of the term. The
‘term commencement date’ in clause 7(13) was not defined in either lease. But
it is common ground that by reason of the words ‘from and including 13 January
1992’ it was that date. Accordingly, it was agreed that the third anniversary
of the ‘term commencement date’ was January 13 1995.
By two letters
dated June 24 1994 and served on the landlord more than six months before
January 13 1995 the tenant gave notice to the landlord in respect of each lease
as follows:
Pursuant to
Clause 7(13) of the Lease we as Tenant hereby give notice to you to determine
the Lease on 12 January 1995.
The tenant
contended that the leases were determined by the notices. The landlord claimed
that the notices did not comply with the right reserved under clause 7(13) and
that the notices were ineffective in law.
By an
originating summons the tenant sought a declaration that the notices
effectively determined the leases. The matter came before Judge Rich QC,
sitting as a judge of the High Court in the Chancery Division. Relying on Sidebotham
v Holland [1895] 1 QB 378 Judge Rich held that the notices were good
inasmuch as they did not take effect until that moment of time which was both
the last moment of January 12 and the first of January 13, so that they did
determine the leases on January 13. The landlord appealed to the Court of
Appeal.
Two issues
were debated in the Court of Appeal. The first was whether, despite the
erroneous reference in the notices to January 12 rather than 13, the notices
were nevertheless as a matter of construction sufficiently clear to be
effective: this was described as the construction point. The second issue was
whether the notices were saved by what was called the special rule in Sidebotham
v Holland. The Court of Appeal decided both issues against the tenant: Mannai
Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1995] 1 WLR
1508. The Court of Appeal held that the notices did not determine the leases.
On the appeal
to your lordship’s House counsel for the tenant again advanced both arguments.
The point of construction is one of substance. Despite a lucid argument by
junior counsel for the tenant your lordships were of the view, which I shared,
that the argument based on Sidebotham v Holland [1895] 1 QB 378
was plainly wrong and did not find it necessary to call on counsel for the
landlord to reply on this issue. As Nourse LJ [1995] 1 WLR 1508, at p1515F
trenchantly explained in the Court of Appeal Sidebotham v Holland
is no authority for the proposition that in respect of a lease for a fixed term
a notice served on one day can be treated as a notice served on the next. That
disposed of this point. I turn therefore to the construction of the notices.
On reflection
I have come to the conclusion that the question of the construction of the
notices should be answered by holding that the notices were effective to
determine the leases. I will first summarise my analysis of the problem before
I explain why I feel unable to accept the attractively presented arguments of
counsel for the landlord.
The reasons
for my conclusion can be stated in the form of numbered propositions:
(1) This is
not a case of a contractual right to determine which prescribes as an
indispensable condition for its effective exercise that the notice must contain
specific information. After providing for the form of the notice (‘in
writing’), its duration (‘not less than six months’) and service (‘on the
landlord or its solicitors’), the only words in clause 7(13) relevant to the
content of the notice are the words ‘notice to expire on the third anniversary
of the term commencement date determine this lease’. Those words do not have
any customary meaning in a technical sense. No terms of art are involved. And
neither side has suggested that anything should be implied into the language.
That is not surprising since the tests governing the implication of terms could
not conceivably be satisfied. The language of clause 7(13) must be given its
ordinary meaning. A notice simply expressed to determine the lease on third
anniversary of the commencement date would therefore have been effective. The
principle is that that is certain which the context renders certain: Sunrose
Ltd v Gould [1962] 1 WLR 20.
(2) The question
is not how the landlord understood the notices. The construction of the notices
must be approached objectively. The issue is how a reasonable recipient would
have understood the notices. And in considering this question the notices must
be construed taking into account the relevant objective contextual scene. The
approach in Reardon Smith Line Ltd v Yngvar Hansen-Tanger [1976]
1 WLR 989, which deals with the construction of commercial contracts, is by
analogy of assistance in respect of unilateral notices such as those under
consideration in the present case. Relying on the reasoning in Lord
Wilberforce’s speech in Reardon Smith, at pp996D to 997D, three
propositions can be formulated. First, in respect of contracts and contractual
notices the contextual scene is always relevant. Second, what is admissible
as a matter of the rules of evidence under this heading is what is arguably
relevant. But admissibility is not the decisive matter. The real question is
what evidence of surrounding circumstances may ultimately be allowed to
influence the question of interpretation. That depends on what meanings the
language read against the objective contextual scene will let in. Third, the
inquiry is objective: the question is what reasonable persons, circumstanced as
the actual parties were, would have had in mind. It follows that one cannot
ignore that a reasonable recipient of the notices would have had in the
forefront of his mind the terms of the leases. Given that the reasonable
recipient must be credited with knowledge of the critical date and the terms of
clause 7(13) the question is simply how the reasonable recipient would have
understood such a notice. This proposition may in other cases require
qualification. Depending on the circumstances a party may be precluded by an
estoppel by convention from raising a contention contrary to a common
assumption of fact or law (which could include the validity of a notice) upon
which they have acted: Norwegian American Cruises A/S v Paul Mundy
Ltd (The ‘Vistafjord’) [1988] 2 Lloyd’s Rep 343. Such an issue may
involve subjective questions. That is, however, a different issue and not one
relevant to this appeal. I proceed therefore to examine the matter objectively.
(3) It is
important not to lose sight of the purpose of a notice under the break clause.
It serves one purpose only: to inform the landlord that the tenant has decided
to determine the lease in accordance with the right reserved. That purpose must
be relevant to the construction and validity of the notice. Prima facie
one would expect that if a notice unambiguously conveys a decision to determine
a court may nowadays ignore immaterial errors which would not have misled a
reasonable recipient.
(4) There is
no justification for placing notices under a break clause in leases in a unique
category. Making due allowance for contextual differences, such notices belong
to the general class of unilateral notices served under contractual rights
reserved, eg notices to quit, notices to determine licences and notices to
complete: Delta Vale Properties Ltd v Mills [1990] 1 WLR 445, at
pp454E-G. To those examples may be added notices under charter parties,
contracts of affreightment, and so forth. Even if such notices under
contractual rights reserved contain errors they may be valid if they are
‘sufficiently clear and unambiguous to leave a reasonable recipient in no
reasonable doubt as to how and when they are intended to operate’: the Delta
case, at p454E-G, per Slade LJ and adopted by Stocker LJ and Bingham LJ:
see also Carradine Properties Ltd v Aslam [1976] 1 WLR 442, at
p444. That test postulates that the reasonable recipient is left in no doubt
that the right reserved is being exercised. It acknowledges the importance of
such notices. The application of that test is principled and cannot cause any
injustice to a recipient of the notice. I would gratefully adopt it.
(5) That
brings me to the application of this test. The facts are simple. Crediting a
reasonable recipient with knowledge of the terms of the lease and third anniversary
date (January 13), I venture to suggest that it is obvious that a reasonable
recipient would have appreciated that the tenant wished to determine the leases
on the third anniversary date of the leases but wrongly described it as the
12th instead of the 13th. The reasonable recipient would not have been
perplexed in any way by the minor error in the notices. The notices would have
achieved their intended purpose.
That brings me
to the contrary reasoning of the Court of Appeal in this case, and the submission
of counsel for the landlord. Central to both was the proposition that Hankey
v Clavering [1942] 2 KB 326 precluded such a conclusion. Given the
importance ascribed to this decision I must embark on what Justice Cardozo once
described as a gruesome autopsy. In Hankey v Clavering there was
a lease for a term of 21 years from December 25 1934. The lease provided, inter
alia, that if either party should desire to determine the lease after seven
or 14 years he could do so by giving to the other party six months’ notice.
The landlord gave notice to the tenant as from June 1941, which purported to
terminate the lease on December 21 1941. On March 8 1940 the landlord’s
solicitors acknowledged the notice as ‘properly served upon us’. The tenant
refused to give up possession of the premises. The landlord brought an action
for possession. Mr Denning KC, submitted that the landlord attempted to
terminate the tenancy on December 21 whereas he was only entitled to terminate
it on December 25. In these circumstance, he said, that the defect could not be
cured by showing that the other party understood what was meant. Mr Blanco
White KC, argued that if a notice can be understood by a reasonable person it
is a good notice. The judge decided in favour of the landlord on the effect of
the correspondence. The matter came before a two judge Court of Appeal. It was
disposed of by ex tempore judgments. Lord Greene MR gave the principal
judgment; Lord Clauson added nothing of substance. The Court of Appeal ruled
that the judge had misinterpreted the correspondence. Turning to the
construction of the notice, Lord Greene MR said (at pp329–330):
Notices of
this kind are documents of a technical nature, technical because they are not
consensual documents, but, if they are in proper form, they have of their own
force without any assent by the recipient the effect of bringing the demise to
an end. They must on their face and on a fair and reasonable construction do
what the lease provides that they are to do. It is perfectly true that in
construing such a document, as in construing all documents, the court in a case
of ambiguity will lean in favour of reading the documents in such a way as to
give it validity, but I dissent entirely from the proposition that, where a
document is clear and specific, but inaccurate on some matter, such as that of
date, it is possible to ignore the inaccuracy and substitute the correct date
or other particular because it appears that the error was inserted by a slip.
By the clear wording of this notice the plaintiff purported to bring the lease
to an end on 21 December 1941. In so doing he was attempting to do something
which he had no power to do, and, however much the recipient might guess, or
however certain he might be, that it was a mere slip, that would not cure the
defect because the document was never capable on its face of producing the
necessary legal consequence.
Lord Greene MR
said that his ruling was based on Cadby v Martinez (1840) 11
A&E 720, which he described of as ‘a case of the highest authority in these
matters’. Lord Denman CJ said in that case (at p726) that ‘the covenant to pay
rent during the whole term cannot be got rid of by any notice to quit which is
not in accordance with the proviso introduced into the lease for the purpose’.
It goes
without saying that any judgment of Lord Greene MR is entitled to great
respect. But one must put the case in context. First, in relying Cadby v
Martinez Lord Greene was founding his proposition on a case which with
the benefit of hindsight seems far from conclusive on the point. Lord Denman
CJ’s judgment contains no reasoning at all; it is purely conclusionary. A
century and a half later it is sometimes necessary to consider the force of
reasoning in decided cases. Cadby v Martinez does not enable one to
do so. In any event, Lord Denman’s conclusion is in such absolute terms as to
be of little value. It is not supported in this case by the judgment in the
Court of Appeal or by the submissions of counsel for the landlord: it is
conceded that some errors in a notice can be ignored. The real question is:
What errors can be overlooked? Taking due account of what Lord Greene thought
of Cadby v Martinez in 1942, I incline to the view that the
persuasive force of this precedent must be regarded as slight. Second, it is
noteworthy that Lord Greene does not expressly pose an objective test. He
dismisses the reaction of the recipient (‘however much the recipient might
guess’). The law has moved on. The test is entirely objective. Third, Lord
Greene did not expressly deal with the position where the notice contains an
error which proves wholly immaterial and incapable of causing any confusion.
The second and third matters detract from the force of reasoning in Hankey
v Clavering. Lord Greene was not considering the issues as they have to
be faced in this case. But there is a fourth point to be taken into account. Hankey
v Clavering was decided more than half a century ago. Since then there
has been a shift from strict construction of commercial instruments to what is sometimes
called purposive construction of such documents. Lord Diplock deprecated the
use of that phrase in regard to the construction of private contracts as
opposed to the construction of statutes: Antaios Compania Naviera SA v Salen
Rederierna AB [1985] AC 191, at p201D. That is understandable. There are
obvious differences between the processes of interpretation in regard to
private contracts and public statutes. For a perceptive exploration of the
differences in the context of United States law, see Robert S Summers,
‘Statutes and Contracts as Founts of Formal Reasoning’, in Essays for
Patrick Atiyah, edited by Peter Cane and Jane Stapleton (1991) at p71 et
seq. It is better to speak of a shift towards commercial interpretation.
About the fact of the change in approach to construction there is no doubt. One
illustration will be sufficient. In Antaios Compania Naviera SA v Salen
Rederierna AB [1985] AC 191, at p201D, Lord Diplock in a speech concurred
in by his fellow Law Lords observed that:
… if detailed
semantic and syntactical analysis of words in a commercial contract is going to
lead to a conclusion that flouts business commonsense, it must be made to yield
to business common sense.
In determining
the meaning of the language of a commercial contract, and unilateral
contractual notices, the law therefore generally favours a commercially
sensible construction. The reason for this approach is that a commercial
construction is more likely to give effect to the intention of the parties.
Words are therefore interpreted in the way in which a reasonable commercial
person would construe them. And the standard of the reasonable commercial
person is hostile to technical interpretations and undue emphasis on niceties
of language. In contradistinction to this modern approach Lord Greene’s
judgment in Hankey v Clavering is rigid and formalistic. Nowadays
one expects a notice to determine under a commercial lease to be interpreted
not as a ‘technical document’ but in accordance with business common sense: see
Micrografix v Woking 8 Ltd [1995] 2 EGLR 32. After all, there is
no reason whatever why such a document must be drafted by a lawyer.
Qualitatively, the notices are of the same type as notices under charter
parties and contracts of affreightment. Such notices, even if they entail the
exercise of important options, are habitually drafted by commercial men rather
than lawyers. It would be a disservice to commercial practice to classify such
notices as technical documents and to require them to be interpreted as such.
Nowadays one must substitute for the rigid rule in Hankey v Clavering
the standard of a commercial construction.
It is,
however, also important to note that the decision in Hankey v Clavering
caused surprise even in 1942. There was a case note on Hankey v Clavering
bearing the initials REM: (1943) 59 LQR 17. The author of the note was a
great authority on the field of landlord and tenant. He later became Sir Robert
Megarry, Vice-Chancellor of the Chancery Division. He was clearly surprised at
the decision. He drew attention to Lord Greene MR’s decision in Price v Mann
[1942] 1 All ER 453. In that case the question was whether under the
Landlord and Tenant (War Damage) Act 1939 a notice to avoid disclaimer given by
the landlord, requiring the tenant to retain the lease on the terms set out in
section 10, was invalid because section 10 was irrelevant and by mistake
inserted for section 11. The Court of Appeal held that the notice was good.
Lord Greene MR said (at p454):
Reading this
document as a whole, it seems to me perfectly manifest that a person who
received it, and who had that familiarity with the provisions of the Act which
a recipient of such a document must be presumed to have, could not possibly be
under any illusion as to what it was intended to be and what its legal
consequences were.
Mr Megarry
observed, at p18:
But for the
line of authority governing notices to quit, it would have occasioned little
surprise to some had the words used by the Master of the Rolls in the two cases
been interchanged. Read literally, both notices purported to do something which
they could not do, yet read as a whole, neither was at all likely to mislead
the recipient … The distinction may be that in Price v Mann the
reference to the precise section of the Act was unnecessary whereas in Hankey
v Clavering the insertion of the date was essential to the validity of a
notice cast in the form employed. If this is not the case, perhaps all that can
be said is that in Price v Mann each member of the Court of
Appeal could use
me to give effect to common-sense and decency’ (Heap v Ind Coope
& Allsopp Ltd [1940] 2 KB 476, at p484), whereas in Hankey v Clavering
the hand of stare decisis was writ large.
Lord Greene’s
observation in Price v Mann is much closer to the modern standard
of commercial construction than Hankey v Clavering.
Counsel for
the tenant invited the House in his case and in his reply to say that Hankey
v Clavering was wrongly decided. I am content to say that it no longer
represents the law. Like Lord Hoffmann I would hold that the correct test for
the validity of a notice is that posed by Goulding J in Carradine Properties
Ltd v Aslam [1976] 1 WLR 442, at p444, viz ‘Is the notice
quite clear to a reasonable tenant reading it? Is it plain that he cannot be
misled by it?’
It is
necessary to turn briefly to other arguments advanced by counsel for the
landlord. He argued that the tenant’s construction argument must fail because
the tenant’s error may have been due to a mistaken legal view. He said that it
may not have been a case of a mistaken insertion of a date but the tenant may
have intended to refer to the 12th. This reveals a contradiction in the
landlord’s argument. Counsel for the landlord accepted that the test is an
objective one: How would a reasonable recipient have understood the notice? But
then he invited your lordships to speculate that the tenant’s error was due to
a mistake of law rather than a typing or clerical error. That argument, if
accepted, would drive a juggernaut through the objective test. Speculation
about the subjective intention of the tenant is irrelevant. The only question
is how a reasonable recipient would have understood the notice.
Counsel also
argued that as a matter of legal logic a process of interpretation can never
permit one to substitute January 13 for January 12. Why should that be so? If a
contract contains a termination date linked to an intended three-year period,
which is variously expressed in the contract as January 12 and January 13, why
should the court not as a matter of interpretation be able to select the date
which best matches the contractual intent? The same reasoning must apply to
unilateral documents such as contractual notices. It is surely permissible in
all cases satisfying the test that no reasonable recipient of the notice could
be misled. Counsel’s argument is based on too formalistic a formulation of the
question to be decided. The question is not whether January 12 can mean January
13: it self-evidently cannot. The real question is a different one: Does the
notice construed against its contextual setting unambiguously inform a
reasonable recipient how and when the notice is to operate under the right
reserved? As Lord Hoffmann has observed we no longer confuse the meaning of
words with the question of what meaning in a particular setting the use of
words was intended to convey.
That brings me
to counsel’s argument that, if the notices are treated as valid, there will be
great deal of confusion and unnecessary litigation. Experience teaches that
‘floodgates’ arguments need to be examined with an initial scepticism. In this
case the predictions of counsel are unrealistic. Those arguments must be judged
on the basis that the test posed above is accepted. That test can only be
satisfied where the reasonable recipient could be left in no doubt whatever. It
is in accord with business commonsense that in cases where that simple and
straightforward test is satisfied the notices should be treated as valid.
That brings me
to my conclusion. I do not accept the extreme argument of counsel for the
tenant that whenever a notice to determine refers to a break clause, and
whatever the other circumstances of the case, the notice must be valid. That
goes too far. One can easily conceive of much weaker cases where the test posed
above could not be satisfied. But in the present case it would have been
obvious to a reasonable recipient that the notices contained a minor
misdescription and that the notices conveyed that the tenant sought to
determine the leases on ‘on third anniversary of the term commencement’, ie
January 13. I end this judgment with the words with which in 1903 Sir Leslie
Stephen concluded a famous series of lectures: ‘I hope I have not said anything
original’.
It follows
that I would allow the appeal.
Agreeing, Lord Hoffman said: The appellant was
tenant under two 10-year leases of offices in Jermyn Street, each of which
contained in clause 7(13) a right to terminate at the end of the third year in
the following terms:
The tenant
may by serving not less than six months’ notice in writing on the Landlord or
its Solicitors such notice to expire on the third anniversary of the term
commencement date determine this Lease and upon the expiry of such notice this
Lease shall cease and determine and have no further effect …
After the
grant of the leases the market rents of offices in the West End fell sharply.
On June 24 1994 the tenant served on the landlord two notices, each of which
read as follows: ‘Pursuant to Clause 7(13) of the Lease we as Tenant hereby
give notice to you to determine the lease on 12 January 1995’. It is agreed
that the third anniversary of the commencement date was actually 13 January
1995. The question is whether notwithstanding this mistake the notices were
effective to terminate the leases.
This might
seem a straightforward question, particularly when it is remembered that such
notices, operating, as they do, unilaterally to alter the rights of the
parties, must comply strictly with the terms of the lease. The Court of Appeal
held that the notice was ineffective on the simple ground that ’12 January’
could not mean ’13 January’. In so doing, they followed (as in my view they
were bound to do) the decision of the Court of Appeal in Hankey v Clavering
[1942] 2 KB 326 which in turn had followed the decision of the Court of Queen’s
Bench in Cadby v Martinez (1840) 11 A&E 720. In that case,
the notice said Midsummer instead of Lady Day. It seemed obvious to Lord Denman
CJ that there was no way in which it could be construed to refer to Lady Day
and he merely observed, at p726, that ‘in [no case] has a proviso or covenant
in a deed been held to be satisfied by a notice inconsistent with the terms of
it’.
And yet, my
lords, the case is by no means straightforward. The clause does not require the
tenant to use any particular form of words. He must use words which
unambiguously convey a particular meaning, namely an intention to terminate the
lease on January 13. In Hankey v Clavering [1942] 2 KB 326, where
the notice to quit said ’21 December’ instead of ’25 December’, Lord Greene MR
said, at pp328, 330, ‘The whole thing was obviously a slip’ on the part of the
landlord but that the notice was invalid ‘however much the recipient might guess,
or however certain he might be’ that it was a mere slip. So even if the
recipient was certain that the landlord actually wanted to terminate his
tenancy on the right date, which was December 25, so that the necessary
intention was unambiguously communicated, the notice was bad. One is bound to
be left with a feeling that something has gone wrong here. Common sense cannot
produce such a result; it must be the result of some rule of law. If so, what
is that rule and is it correct?
I propose to
begin by examining the way we interpret utterances in everyday life. It is a
matter of constant experience that people can convey their meaning
unambiguously although they have used the wrong words. We start with an
assumption that people will use words and grammar in a conventional way but
quite often it becomes obvious that, for one reason or another, they are not
doing so and we adjust our interpretation of what they are saying accordingly.
We do so in order to make sense of their utterance: so that the different parts
of the sentence fit together in a coherent way and also to enable the sentence
to fit the background of facts which plays an indispensable part in the way we
interpret what anyone is saying. No one, for example, has any difficulty in
understanding Mrs Malaprop. When she says: ‘She is as obstinate as an allegory
on the banks of the Nile’, we reject the conventional or literal meaning of
allegory as making nonsense of the sentence and substitute ‘alligator’ by using
our background knowledge of the things likely to be found on the banks of the
Nile and choosing one which sounds rather like ‘allegory’.
Mrs Malaprop’s
problem was an imperfect understanding of the conventional meanings of English
words. But the reason for the
people have made mistakes about names or descriptions or days or times because
they have forgotten or become mixed up. If one meets an acquaintance and he
says ‘And how is Mary?’ it may be obvious that he is referring to one’s wife,
even if she is in fact called Jane. One may even, to avoid embarrassment,
answer ‘Very well, thank you’ without drawing attention to his mistake. The
message has been unambiguously received and understood.
If one applies
that kind of interpretation to the notice in this case, there will also be no
ambiguity. The reasonable recipient will see that in purporting to terminate
pursuant to clause 7(13) but naming January 12 1995 as the day upon which he
will do so, the tenant has made a mistake. He will reject as too improbable the
possibility that the tenant meant that unless he could terminate on January 12,
he did not want to terminate at all. He will therefore understand the notice to
mean that the tenant wants to terminate on the date on which, in accordance
with clause 7(13), he may do so, ie January 13.
Why, then, do
cases like Hankey v Clavering [1942] 2 KB 326 arrive at a
different answer? I want first to deal with two explanations which seem to me
obviously inadequate. First, it is sometimes said that the examples which I
have given from ordinary life are concerned with what the speaker meant to say.
He may subjectively have intended to say something different from what he
actually said and it may be possible, by the kind of reasoning which I have
described, to divine what his subjective intentions were. But the law is not
concerned with subjective intentions. All that matters is the objective meaning
of the words which he has used.
It is of
course true that the law is not concerned with the speaker’s subjective
intentions. But the notion that the law’s concern is therefore with the
‘meaning of his words’ conceals an important ambiguity. The ambiguity lies in a
failure to distinguish between the meanings of words and the question of what
would be understood as the meaning of a person who uses words. The meaning of
words, as they would appear in a dictionary, and the effect of their
syntactical arrangement, as it would appear in a grammar, is part of the
material which we use to understand a speaker’s utterance. But it is only a
part; another part is our knowledge of the background against which the
utterance was made. It is that background which enables us, not only to choose
the intended meaning when a word has more than one dictionary meaning but also,
in the ways I have explained, to understand a speaker’s meaning, often without
ambiguity, when he has used the wrong words.
When,
therefore, lawyers say that they are concerned, not with subjective meaning but
with the meaning of the language which the speaker has used, what they mean is
that they are concerned with what he would objectively have been understood to
mean. This involves examining not only the words and the grammar but the
background as well. So, for example, in Doe d Cox v Roe (1802) 4
Esp 185 the landlord of a public house in Limehouse gave notice to quit ‘the
premises which you hold of me … commonly called … the Waterman’s Arms’. The
evidence showed that the tenant held no premises called the Waterman’s Arms;
indeed, there were no such premises in the parish of Limehouse. But the tenant
did hold premises of the landlord called the Bricklayer’s Arms. By reference to
the background, the notice was construed as referring to the Bricklayer’s Arms.
The meaning was objectively clear to a reasonable recipient, even though the
landlord had used the wrong name. We therefore will in due course have to
answer the question: if, as long ago as 1803, the background could be used to
show that a person who speaks of the Waterman’s Arms means the Bricklayer’s
Arms, why can it not show that a person who speaks of January 12 means January
13?
The immediate
point, however, is that the fact that the law does not have regard to
subjective meaning is no explanation of the way Hankey v Clavering
[1942] 2 KB 326 was decided. There was no need to resort to subjective meaning:
the notice would objectively have been understood to mean that the landlord
wanted to terminate the tenancy on the day on which he was entitled to do so.
I pass on to a
second explanation which also seems to me inadequate. Lord Greene MR said at
pp329–330, that because such notices have unilateral operation, the conditions
under which they may be served must be strictly complied with. I have already
said that this principle is accepted on both sides. But, as an explanation of
the method of construction used in Hankey v Clavering, it begs
the question. If the clause had said that the notice had to be on blue paper,
it would have been no good serving a notice on pink paper, however clear it
might have been that the tenant wanted to terminate the lease. But the
condition in clause 7(13) related solely to the meaning which the notice had to
communicate to the landlord. If compliance had to be judged by applying the
ordinary techniques for interpreting communications, there was strict
compliance. The notice clearly and unambiguously communicated the required
message. To say that compliance must be strict does not explain why some other
technique of interpretation is being used or what it is.
A variation of
this explanation is to say that the language of the notice must be strictly
construed. But what does it mean to say that a document must be ‘strictly’
construed, as opposed to the normal process of ascertaining the intentions of
the author? The expression does not explain itself. If it operates merely by
way of intensification, so that the intention must be clear, unambiguous,
incapable of misleading, then I think that the notice in this case satisfied
the test at that level. Likewise, as Lord Greene MR acknowledged when he said
that the whole thing was obviously a slip, did the notice in Hankey v Clavering.
So the concept of strict construction does not explain the decision.
A more
promising clue to the explanation is Lord Greene’s statement, in two places,
that the notice must ‘on its face’ comply with the terms of the lease. What
does ‘on its face’ mean? Clearly, the face of the document is being contrasted
with the background, in law sometimes called the ‘extrinsic evidence’, against
which the language is ordinarily construed. But Lord Greene cannot have meant
that the document must always be read without any background, because (even if,
which I doubt, it were conceptually possible to interpret the use of language
without the aid of any background) cases like the Cox case, (1802) 4 Esp
185 show that some background, at least, can be used. It appears, therefore,
that Lord Greene is referring to some principle whereby background can be used
to show that a person who speaks of the Waterman’s Arms means the Bricklayer’s
Arms, but not that a person who speaks of January 12 means January 13. What
principle is this?
It is, I
think, to be found in an old rule about the admissibility of extrinsic evidence
to construe legal documents. In its pure form, the rule was said to be that if
the words of the document were capable of referring unambiguously to a person
or thing, no extrinsic evidence was admissible to show that the author was
using them to refer to something or someone else. An extreme example is in In
the Goods of RR Peel (1870) LR 2 P&D 46, in which the testator
appointed ‘Francis Courtnay Thorpe, of Hampton … Middlesex’ to be his executor.
There was a Francis Courtenay Thorpe of Hampton, Middlesex. He was however only
12 years old and his father Francis Corbet Thorpe, of Hampton, Middlesex, was
an old friend of the testator. Lord Penzance said, at p47, that these facts
were inadmissible: ‘The testator makes use of a description which applies in
fact to one person, and not to any other’. A variation on this rule was In
re Fish [1894] 2 Ch 83 in which the testator left his residuary estate to
his ‘niece Eliza’. He had no niece called Eliza but his wife had an
illegitimate grandniece called Eliza, to whom the evidence of their
relationship showed that he must have intended to refer, and also, as it
happened, a legitimate grandniece called Eliza. The Court of Appeal said that
the estate went to the legitimate grandniece and that evidence of the
relationship between the testator and the illegitimate grandniece was
inadmissible. Lindley LJ said, at p85:
… where the
person most nearly answering the description is the legitimate grandniece of
the testator’s wife … no evidence can be admitted to prove that her
illegitimate grandniece was intended.
On the other
hand, if there was no one to whom the description accurately applied, there was
said to be a ‘latent ambiguity’ and
notwithstanding that he had used the wrong words, was admitted.
Let us compare
this rule with ordinary common-sense interpretation of what people say. If
someone has gone to great pains, well in advance, to secure tickets for himself
and a friend for a Beethoven concert at the Royal Festival Hall by a famous visiting
orchestra on January 13 and says to the friend a week earlier: ‘I’ll see you at
the Festival Hall concert on January 12,’ it will be obvious that he is
referring to the concert on January 13. According to the old rules of
construction, the law will agree if there is no concert at the Festival Hall on
January 12. In that case there is a latent ambiguity. But if there is a concert
on that date (Stockhausen, say, played by a different orchestra) he will be
taken to have referred to that concert.
This extraordinary
rule of construction is, as it seems to me, the only explanation for the
decisions in Hankey v Clavering [1942] 2 KB 326 and Cadby
v Martinez (1840) 11 A&E 720. The Cox case, (1802) 4 Esp 185,
was distinguished by counsel in Cadby, at p723 as involving a latent
ambiguity: there was no Waterman’s Arms in Limehouse, so evidence that the
landlord would have been understood by a reasonable tenant as intending to
refer to the Bricklayer’s Arms was admissible. But Midsummer 1837, or December
21 1941 (in Hankey v Clavering) or January 12 1995 (in this case)
are all real dates to which the notices could have referred. Therefore evidence
of background which showed that a reasonable recipient would have understood
the person giving the notice as having intended to refer to a different date
had to be disregarded. The effect is that apart from the exceptional case in
which the date is obviously impossible on the face of the notice (as in Carradine
Properties Ltd v Aslam [1976] 1 WLR 442) the intention which the
notice would convey as to date has to be determined without regard to the terms
of the lease (or anything else) as background. There is an artificial
assumption that the reasonable recipient does not know what would be the
correct date. On this basis, the interpretation of the notices as referring to
the wrong dates and therefore being invalid is, of course, inescapable.
It is clear
that this rule of construction has been applied to the interpretation of
notices for at least 200 years and it is hardly surprising that Lord Greene MR
and Lord Clauson felt obliged to apply it in Hankey v Clavering
and that the Court of Appeal applied it in this case. It is, however, highly
artificial and capable of producing results which offend against common sense.
Lord Penzance began his decision that the testator had appointed a 12-year old
boy as his executor by saying:
If I am at
liberty to look at the facts stated in the affidavits, I may possibly have no
difficulty in deciding that the person meant is the father, but the question
is, whether I am at liberty to do so. (In the Goods of RR Peel (1870) LR
2 P&D 46)
In In re
Fish [1894] 2 Ch 83, at p84, Lindley LJ began his judgment by saying: ‘This
is one of those painful cases in which it is probable that the testator’s intention
will be defeated’ and AL Smith LJ said, at p86, that if he could have admitted
the evidence about the testator’s relationship with his wife’s illegitimate
grandniece he would gladly have done so.
I think that
the rule is not merely capricious but also, for reasons which I need not
develop at length, incoherent. It is based upon an ancient fallacy which
assumes that descriptions and proper names can somehow inherently refer to
people or things. In fact, of course, words do not in themselves refer to
anything; it is people who use words to refer to things. The word
‘allegory’ does not mean a large scaly creature or anything like it, but it is
absurd to conclude, as judges sometimes do, that this is not an ‘available
meaning’ of the word in the interpretation of what someone has said. This is
simply a confusion of two different concepts; as we have seen, a person can use
the word ‘allegory’, successfully and unambiguously, to refer to such a
creature.
Even in its
natural habitat, the construction of wills, the rule has not been (and, I
think, cannot be) applied with any consistency. In National Society for the
Prevention of Cruelty to Children v Scottish National Society for the
Prevention of Cruelty to Children [1915] AC 207 this House refused to
accept that a gift to the ‘National Society for the Prevention of Cruelty to
Children’ should go to the society of that name, which had its head office in
Leicester Square. It relied upon the background facts that, as Earl Loreburn
said, at pp211–214, the testator was ‘a Scotsman living in Scotland’ who had
made a ‘Scotch will’ to construe the will as intended to refer to the Scottish
‘National Society for the Prevention of Cruelty to Children’. Earl Loreburn
refused to accept that there was ‘a rigid rule’ that ‘once a persona is
accurately named in a will’ there is not to be ‘any further inquiry or
consideration in regard to the person who is to take the benefit’. The true
rule, he said, was that ‘the accurate use of a name in a will creates a strong
presumption against any rival who is not the possessor of the name’. This
demotes the rule to the common-sense proposition that in a formal document such
as a will, one does not lightly accept that people have used the wrong words. I
doubt whether anyone would dissent from this principle, which would present no
obstacle to a conclusion that the tenant in this case must have used the wrong
words.
If your
lordships are to follow this path, it will be necessary to say that Hankey
v Clavering and the older cases which it followed are no longer good
law. It would be wrong, I think, to distinguish them on narrow grounds and
leave them as wrecks in the channel, causing uncertainty and litigation in the
future. Furthermore, the old rule of construction has been applied not only to
notices exercising break clauses but also to notices to terminate periodic
tenancies: Doe d Spicer v Lea (1809) 11 East 312. In his
admirable submissions on behalf of the landlord, Mr Patten QC warned that a
departure from the old rule would cause great uncertainty in the daily
construction of notices to quit in county courts throughout the land. I confess
that this prospect has caused me some anxiety and I think that it must be given
serious consideration.
The rule as
applied to wills, which restricts the use of background in aid of construction,
reflects a distrust of the use of oral evidence to prove the background facts.
The people who could give evidence about the background to a will would in most
cases be members of the family interested in the outcome of the case and until
1843, persons with an interest in the litigation were not even competent witnesses.
No doubt the exclusion of background makes, in a somewhat arbitrary way, for
greater certainty in the sense that there is less room for dispute about what
the background was and the effect which it has upon the intention to be
attributed to the testator. But, as the cases mournfully show, this certainty
is bought at the price of interpretations which everyone knows to be contrary
to the meaning which he intended.
There are
documents in which the need for certainty is paramount and which admissible
background is restricted to avoid the possibility that the same document may
have different meanings for different people according to their knowledge of
the background. Documents required by bankers’ commercial credits fall within
this category. Article 13(a) of the Uniform Customs and Practice for
Commercial Credits (1993 revision) says (echoing Lord Greene MR’s phrase in Hankey
v Clavering) that the documents must ‘upon their face’ appear to be in
accordance with the terms and conditions of the credit. But the reasons of
policy which require the restriction of background in this case do not apply to
notices given pursuant to clauses in leases. In practice, the only relevant
background will be, as in this case, the terms of the lease itself, which may
show beyond any reasonable doubt what was the intention of the person who gave
the notice. There will be no question of the parties not being privy to the
same background — both of them will have the lease — and no room for dispute
over what the relevant background is.
In the case of
commercial contracts, the restriction on the use of background has been quietly
dropped. There are certain special kinds of evidence, such as previous
negotiations and express declarations of intent, which for practical reasons
which it is unnecessary to analyse, are inadmissible in aid of construction.
They can be used only in an action for rectification. But apart from these
exceptions, commercial contracts are construed in the light of all the
background which could
ascertain what would objectively have been understood to be their intention: Prenn
v Simmonds [1971] 1 WLR 1381, at p1383. The fact that the words are
capable of a literal application is no obstacle to evidence which demonstrates
what a reasonable person with knowledge of the background would have understood
the parties to mean, even if this compels one to say that they used the wrong
words. In this area, we no longer confuse the meaning of words with the
question of what meaning the use of the words was intended to convey. Why,
therefore, should the rules for the construction of notices be different from
those for the construction of contracts? There seems to me no answer to this
question. All that can be said is that the rules for the construction of
notices, like those for the construction of wills, have not yet caught up with
the move to common sense interpretation of contracts which is marked by the
speeches of Lord Wilberforce in Prenn v Simmonds [1971] 1 WLR
1381 and Reardon Smith Line Ltd v Yngvar Hansen-Tanger [1976] 1
WLR 989. The question is therefore whether there is any reason not to bring the
rules for notices up to date by overruling the old cases.
There can, I
think, be no question of anyone having acted in reliance on the principle of
construction used in Hankey v Clavering [1942] 2 KB 326. The
consequence of such a construction is only to allow one party to take an
unmeritorious advantage of another’s verbal error, an adventitious bonus upon
which no one could have relied. In this respect, the case for rejecting the old
authorities is at least as strong as it was in Sudbrook Trading Estate Ltd
v Eggleton [1983] 1 AC 444, in which this House overruled cases going
back to the early 19th century on the construction of contracts for sale at a
valuation.
Nor do I think
that a decision overruling the old cases will create uncertainty as to what the
law is. In fact I think that the present law is uncertain and that only a
decision of this House, either adopting or rejecting the Hankey v Clavering
rule of construction, will make it certain. So, for example, in Carradine
Properties Ltd v Aslam [1976] 1 WLR 442, at p444G, Goulding J said
that the test for the validity of a notice was: ‘Is the notice quite clear to a
reasonable tenant reading it? Is it plain that he cannot be misled by it?’ and
he went on to say that the reasonable tenant must be taken to know the terms of
the lease. This test was approved by the Court of Appeal in Germax Securities
Ltd v Spiegal (1978) 37 P&CR 204, at p206 and, as will be
apparent from what I have already said, I think that it was the right test to
adopt. It is, however, absolutely impossible to reconcile the application of
such a test with the decision in Hankey v Clavering, in which no
reasonable tenant who knew the terms of the lease could possibly have mistaken
the landlord’s meaning. It is therefore not surprising that in Micrografix
v Woking 8 Ltd [1995] 2 EGLR 32, Jacob J felt free to dismiss Hankey
v Clavering as ‘much distinguished’ and to ignore it, or that Rattee J
in Garston v Scottish Widows’ Fund & Life Assurance Society
[1996] 1 WLR 834* should be puzzled as to why the Court of Appeal in this case
considered, as I think rightly, that they were bound by Hankey v Clavering.
*Editor’s
note: Also reported at [1996] 1 EGLR 113
In my view,
therefore, the House should say unequivocally that the test stated by Goulding
J in Carradine Properties Ltd v Aslam [1976] 1 WLR 442 was right
and that Hankey v Clavering and the earlier cases should no
longer be followed. The notice should be construed against the background of
the terms of the lease. Interpreted in this way, the notice in the present case
was valid and I would therefore allow the appeal.
Agreeing, Lord Clyde
said: The question in this appeal is whether the two letters dated June 24 1994
and sent by the appellant tenant to the respondent landlord qualify as
effective notices to determine the leases to which each letter respectively
referred. Their validity as notices has to be tested against the terms of the
power under which they were served. It is accepted that the two cases are for
present purposes indistinguishable and that the relevant terms of the power
were set out in clause 7(13) and were as follows:
The Tenant
may by serving not less than six months’ notice in writing on the Landlord or
its solicitors such notice to expire on the third anniversary of the term
commencement date determine this Lease and upon expiry of such notice this
Lease shall cease and determine and have no further effect …
The substance
of the power is expressed by the words, ‘The Tenant may … determine this
Lease’. The method of its exercise is specified by the intervening words. The
tenant must give six months’ notice; the notice must be in writing; the notice
must be served on the landlord or its solicitors. The subclause also states
that the notice is to expire on the third anniversary of the term commencement
date. The significance of that statement is that the period of six months is to
terminate on that date. This regulates the time for the giving of the notice.
The third anniversary marks the end of the period prior to which a notice under
clause 7(13) must be given. But it is not required that the notice should
include mention of the date of the intended determination of the lease. That
date is prescribed by clause 7(13) where it states that the lease shall
determine on expiry of the notice.
Where a notice
of termination complies precisely and unambiguously with the provision which
empowers the sending of the notice then its validity should be unquestioned.
Where the terms of the notice do not altogether accord with the provisions of
the contract that may or may not render the notice unenforceable. The problem
then may come to be one of finding a fair and reasonable construction of the
notice. But there can be cases where the validity of the notice cannot be saved
by any construction and will have to be regarded as bad.
In some cases
it may be obvious from the notice by itself that an error has been made. In Carradine
Properties Ltd v Aslam [1976] 1 WLR 442 an expressed intention to
determine the lease at a date in 1973 was obviously incorrect in a notice
served in 1974. In other cases the discrepancy can only be seen from a study of
the terms of the lease. One would need to be aware of the provisions of the
lease in such a case to appreciate that the permitted date was inaccurately
stated. I see no reason in principle why in each of these kinds of case,
provided of course that the wording is not absolutely clear and unambiguous, a
notice should not be equally open to construction with a view to its possible
validation.
In the present
case the two letters, in my view, satisfy the formal and technical requirements
of clause 7(13). But they go further and call for a determination of each lease
one day before the day which the subclause identified as the date for the
determination of the notice and for the determination of the lease. As I have
mentioned that was not a formal requisite of the notice. Each notice proclaims
at the outset that it is given ‘Pursuant to Clause 7(13)’. This was a precise
reference to the particular provision under which the notices were each being
sent, as distinct from some general reference to the agreement between the
parties. But it is evident from a consideration of that clause that there is a
discrepancy between the date there indicated for the termination of the lease
and the date stated in the notice. Whether that inaccuracy in the notice is
fatal or not depends on the proper construction of the notices. The formulation
propounded by Goulding J in Carradine (p444) was ‘Is the notice quite
clear to a reasonable tenant reading it? Is it plain that he cannot be misled
by it?’ Delta Vale Properties Ltd v Mills [1990] 1 WLR 445
concerned a vendor’s notice to complete which was in condition 23 of the
conditions of sale, but I see no reason why any different principle of
construction should apply. Slade LJ (at p454G) observed:
In my
judgment, notices to complete served under condition 23, if they are to be
valid, must be sufficiently clear and unambiguous to leave a reasonable
recipient in no reasonable doubt as to how and when they are intended to operate.
The standard
of reference is that of the reasonable man exercising his commonsense in the
context and in the circumstances of the particular case. It is not an absolute
clarity or an absolute absence of any possible ambiguity which is desiderated.
To demand a perfect precision in matters which are not within the formal
requirements of the relevant power would, in my view, impose an unduly high
standard in the framing of notices such as those in issue here. While careless
drafting is certainly to be discouraged the evident intention of a notice
should not in matters of this kind be rejected in preference for a technical
precision.
The test is an
objective one. In circumstances where an estoppel might arise the actual
understanding of the recipient may be relevant, but in general the actual
understanding of the parties is beside the point. That the test is an objective
one was recognised in Micrografix v Woking 8 Ltd [1995] 2 EGLR
32. It was held there that the landlords would not have been misled by the references
to a wrong date both in the notice to terminate the lease and in the covering
letter. Each document was expressly written pursuant to the particular break
clause in the lease. The recipients would have observed the errors because they
would be familiar with the terms of the lease and would have known that the
only date of determination had to be June 23 1995. They would know that there
was no requirement to specify any date in the notice. They would see that the
tenant wanted to leave. It was held that the notice was valid.
In my opinion,
a like view should be taken in the circumstances of the present case. The
notices were expressed to be ‘Pursuant to Clause 7(13)’. It is plain from that
that the tenant intended to invoke that clause. It is also plain that the
tenant wished to determine the tenancy and that clause is the only clause under
which the tenant could achieve that result. The landlord would be expected to
know the terms of the lease and the date on which the lease fell to be
determined under that clause. He would also be expected to know that there was
no formal requirement for the tenant to specify in the notice the date of
termination of the lease. There was no evident reason why the tenant should
specify January 12 rather than January 13. The close proximity of the 13th
makes it the more evident that it was erroneous and that the date intended was
the date which the parties had agreed for a determination of the tenancy under
clause 7(13). While there is a discrepancy evident in the notices between the
reference to the clause and the statement of the date it seems to me that the
notices were sufficiently clear and unambiguous. No reasonable landlord would,
in my view, be misled by the statement of a date which in the context of a
clear intention to invoke clause 7(13) was inaccurate. The landlord would, in
my view, recognise that in each case the reference to January 12 was to be read
as a reference to January 13 and I would so construe the notices.
In Hankey
v Clavering [1942] 2 KB 326 the court refused to disregard a slip even
although the intention of the notice was sufficiently clear from its terms and
the recipient could not reasonably misunderstand it. In my view, that was too
strict and too technical an approach. Counsel for the tenant sought to restrict
the decision in Hankey to circumstances where the insertion of the date
of termination is an essential requirement of a notice. I am, however, not
persuaded that the decision in Hankey rested on the understanding that
the specification of the date was an essential. I note that the corresponding
provisions in Carradine and in Micrografix were not dissimilar
and indeed in the latter case one element in the decision was the consideration
that there was no requirement to specify a date. While to a considerable extent
the cases in this field may turn upon their own circumstances I do not consider
that the decision reached in Hankey was sound and in my opinion it
should be overruled. In the circumstances of the present case I take the view
that the notices were valid and effective. I agree with your lordships that the
argument based on Sidebotham v Holland [1895] 1 QB 378 is without
merit. But for the reasons which I have explained I would allow the appeal.
