Rent review clause in lease of a farm for a fixed term — Review clause provided that time should be of the essence of the contract for the first step, namely, agreement between the parties as to the revised rent, but did not provide that time should be of the essence for the second step, which was the appointment of an independent surveyor by agreement or, failing agreement, by the president of the RICS — In the event an application to the president for the appointment of an independent surveyor was not made until after the expiration of the relevant review period of three years — The judge found that this delay was unreasonable, but that it did not give rise to an inference that the landlords had abandoned their rights and that no prejudice resulted to the landlords from the delay — In these circumstances the question was whether, in the light of the authorities, the landlords’ rights remained exercisable or had been lost — Various authorities considered — Distinction drawn between ‘express clauses’ (where a time-limit is laid down but without making time of the essence) and ‘silent clauses’ (where no type of time-limit is expressed) — Held, rejecting a submission that there should be implied in the review clause a condition that the delay should not exceed a reasonable time, that the landlords had not lost their rights to a review — Although the delay here was unreasonable, it did not give rise to an inference of abandonment and there was no prejudice to the tenants
In these
proceedings, the tenants, Million Pigs Ltd, sought a declaration that, having
regard to the terms of the rent review clause, and in the events which had
happened, the landlords, Mr and Mrs Hilton Royle Parry, were out of time for
the purpose of seeking a rent review. The dispute concerned the lease of a farm
called Venus Bank Farm, near Minsterley, Shropshire. The lease, dated November
25 1972, was for 21 years from March 25 1972 and contained provisions for
review of the rent every three years.
R Moxon-Browne
(instructed by Bower Cotton & Bower, agents for Evershed & Tomkinson,
of Birmingham) appeared on behalf of the plaintiff tenants; M Blackett-Ord
(instructed by Harry W Hughes & Son, of Shrewsbury) represented the
defendant landlords.
Giving
judgment, GOULDING J said: This is a case relating to the effect in the events
which have happened of a rent review clause contained in a lease. The plaintiff
is the tenant, Million Pigs Ltd, a company which during the material time has
been controlled by a receiver and manager appointed by a debenture holder (but
nothing turns on that circumstance). The defendants are Mr and Mrs Hilton Royle
Parry, the landlords. It will be convenient to refer to the parties as tenant
and landlords, respectively.
The lease
comprised a property called Venus Bank Farm, near Minsterley in Shropshire. It
is dated November 25 1972 and contains demise of the farm by the landlords to
the tenant for 21 years from March 25 1972. The provisions as to rent are
contained in clause 2 of the lease, which is divided into a number of
subdivisions. The primary subdivisions are three, numbered (a), (b), and (c).
2(a) provides for a yearly rent of £15 per acre, which is qualified by the
words ‘subject as hereinafter mentioned’ and is to be payable on quarter days
mentioned in that paragraph 2(a) 2(b) provides for the payment of outgoings by
the tenant. 2(c) is the rent review clause. I had better read it in full:
The yearly
rent payable by the Tenant shall be reviewed after every third year of the
tenancy and shall be the sum of Fifteen pounds per acre aforesaid or such sum
whichever be the higher as shall be assessed as a reasonable rent for the
demised premises for the appropriate period such assessment to be made in the
following manner that is to say: Either
(i) Such
assessment as shall be agreed between the parties hereto in writing before the
twenty-fifth day of March in respect of each such successive three yearly
period or
(ii) In the
event of the parties hereto failing to reach such agreement as aforesaid on or
before the appointed date (in respect of which time is deemed to be of the
essence of the Contract) then the reasonable rent for the successive three
yearly periods shall be fixed or assessed by an independent Surveyor appointed
for that purpose by the parties hereto or failing agreement to such an
appointment in respect of any successive period then by an independent Surveyor
appointed for that purpose by the President for the time being of the Royal
Institute (sic) of Chartered Surveyors and such assessment shall be communicated
to the parties hereto in writing, and immediately upon such communication the
rents are assessed as a reasonable rent for the respective periods or the
original rent of Fifteen pounds per acre, whichever shall be the higher shall
be the respective rents payable for the successive three yearly periods under
the terms hereof.
(iii) The fees
payable to the independent Surveyor hereinbefore mentioned in respect of the
assessment to be made herein shall be borne by the parties hereto in equal
shares.
(iv) The
right of re-entry hereby reserved shall be exercised by the Landlords as well
in the case of nonpayment of the said rent of Fifteen pounds per acre as in the
case of nonpayment of rent so agreed or assessed and also in the event of the
Tenant refusing to refer the question of the rent payable hereunder in
accordance with this clause . . .
And then there
are certain words that I need not read purporting to charge the premises with
the payment of rent.
I should
mention that it is agreed between counsel, and I do not propose to differ from
them, that on the true construction of this clause the reference to March 25 in
subdivision (c)(i) is a reference to the March 25 immediately before the
commencement of the three-yearly period to be governed by rent review. That, it
is suggested and I agree, is the sensible way to read it, although it fits
rather oddly with the direction at the beginning of subdivision (c) that the
rent shall be reviewed after every third year of the tenancy.
Now the first
three-year period ran from March 25 1972 to March 25 1975 and then followed a
similar period of 1975 to 1978, and no attempt has ever been made to effect a
rent review in respect of that second three-year period. The history with which
I am concerned is that of rent review in relation to the three-year period
beginning on March 26 1978.
The landlords’
agent wrote a letter to the tenant’s agent dated June 23 1976 enclosing a
notice purporting to be given under the Agricultural Holdings Act 1948. It has
been suggested here by Mr Blackett-Ord on behalf of the landlords that that has
something to do with the matter. I am bound to say that I do not think that
that letter with its enclosure can fairly be regarded as an attempt to begin
consideration of rent review under the lease, although it certainly does
indicate that the landlords’ agents had in mind that a rent of £25 per acre
would be fair as from March 25 1978. That, however, is in a context which I
cannot recognise as that of the rent review clause.
Now shortly
before the beginning of the third three-year period in 1978 the landlords
purported to forfeit the term under the proviso for re-entry contained in the
lease for numerous breaches of covenant, some important and some trivial, but
set out in a notice under section 146 of the Law of Property Act 1925, which
had been previously served and had given a period of six months for compliance.
The notice was served on or about August 19 1977, so that the six months had,
in fact, expired a little before February 24 when, as I said, the landlords
purported to forfeit the lease and indicated their intention to take
proceedings for possession. A writ claiming possession was shortly thereafter
issued.
Then on March
8 1978 the landlords’ solicitors wrote to the tenant’s solicitors and said
this:
Without
prejudice to the position which has arisen giving rise to forfeiture of the
Lease, but in case the ultimate outcome of the proceedings is the grant of
relief therefrom, our Clients are instructing their Agricultural Agents to take
steps pursuant to Clause 2(c) of the Lease for the review of the rent which
would in such circumstances become payable.
On March 13
the landlords’ land agents wrote to the receiver and manager who was managing
the business of the tenant, as I have mentioned. They referred to the rent
review clause and suggested a revised rental of £25 an acre, making £7,500 in
all. They put forward the name of a gentleman to act as an independent surveyor
under the clause if the rent should not be agreed. There was, I think, no
definite answer to that communication. It was acknowledged on March 16 but
unless, indeed, there was some without prejudice correspondence that I have not
seen, nothing further seems to have been said on the tenant’s side.
However,
notwithstanding some negotiation for compromise of the possession action, it
went to trial, and judgment was given by Ewbank J on June 24 1980.* He dismissed the landlords’ action, primarily
on a ground that was only, I am told, pleaded by amendment at the trial itself,
holding the proviso for re-entry to be void as offending the statutory
legislation regarding agricultural holdings. As an alternative he said he would
have held the notice under section 146 of the Act of 1925 to be bad, as he
thought that six months in the circumstances was not a sufficient time to be
allowed the tenant to rectify the breaches of covenant alleged by the
landlords. The learned judge also said that had those grounds not been fatal to
the landlords’ claim for possession, he would have been disposed to give relief
on the grounds that the notice (except as to a barn) had been substantially
complied with, that the tenant had a considerable investment in the demised
property and the lease was a valuable one. That judgment, as I have said, was
on June 24 1980.
*Editor’s
note: reported at (1980) 260 EG 281, [1981] 2 EGLR 1.
Not very many
weeks later the landlords raised the rent review question again. In a letter of
August 12 1980, the landlords’ solicitors said to the tenant’s solicitors:
The effect of
Clause 2(c) of the Lease is that if the rent for the three year period
commencing on March 25 1978 has not been agreed before that date, it is to be
fixed or assessed by an independent Surveyor appointed in the manner therein
provided.
The Surveyors
for our respective Clients, in fact, agreed the rent for the three year period
from March 25 1978 at £7,500 per annum, which would seem to make the
appointment of an independent surveyor superfluous.
And then, after
showing what figures would be involved up to date on that footing, the
landlords’ solicitors alternatively proposed two persons whom they thought
suitable to act as independent surveyor under the rent review clause.
The response
to that by the tenant’s solicitors was first that the agreement on the figure
of £7,500 — £25 an acre — was simply part of the discussions without prejudice
to compromise the possession action, and there was therefore no relevant
agreement between surveyors. And then they said:
In your letter
of August 12 you seek payment for an increased amount of rent which was not
reviewed and which in any event is retrospective. In our opinion the rent
review clause in the Lease means that if the three year review does not take
place the rent remains the same and the matter comes up for
review in 1978 and it would appear that March 1981 is the occasion for the next
review, if any.
Incidentally,
prior to trial in June 1980 Counsel advised the Receiver that the rent review
clause in the Lease was badly drafted and that in his view was bad and unenforceable.
The
correspondence is then silent on the question of rent review, although there
seems to be no doubt that there was some discussion between the parties and
their advisers in the autumn of 1980. But nothing more was done about it until
May 14 1981, when the landlords’ solicitors made an application to the
president of the Royal Institution of Chartered Surveyors to appoint an
independent surveyor, on the footing that there had been no agreement who the
surveyor was to be. When that was communicated to the tenant’s advisers, an
action was at once threatened and it duly came along in the form of the action
in which I am now giving judgment. The writ was issued on July 7 1981, whereby
the tenant seeks a declaration that the landlords are out of time for the
purpose of seeking a review of the rent payable to them by the tenant for the
period 1978-81. And the way the matter is pleaded in the statement of claim is
this:
Upon its
proper construction clause 2(c)(ii) of the Lease does not permit either party
to invoke the machinery for the appointment of an independent Surveyor after
the expiry of the three year period in respect of which this determination is
sought. In the alternative it is implied in clause 2(c)(i) and (ii) of the
lease that in the absence of an agreed assessment in accordance with clause
2(c)(i) the parties should proceed to invoke the machinery for the appointment
of an independent Surveyor with all due expedition and/or within a reasonable
time and/or in any event within three years.
As argued by
Mr Moxon-Browne on behalf of the tenant, the case is substantially put on
implication, and what is sought to be implied consists of the words ‘within a
reasonable time’. I think, although this was not expressly said by Mr
Moxon-Browne, that he would read clause 2(c)(ii) of the lease, in the relevant
part, thus:
The reasonable
rent for the successive three-yearly periods shall be fixed or assessed by an
independent surveyor appointed within a reasonable time for that purpose by the
parties hereto, or, failing agreement as to such appointment in respect of any
successive period, then by an independent surveyor appointed within a
reasonable time for that purpose by the president for the time being of the
Royal Institution of Chartered Surveyors.
He would say
the whole thing is subject to reasonable timing once one gets beyond the
initial stage of failing to reach agreement on rent in respect of which time is
expressly said to be of the essence.
Mr
Moxon-Browne said this was really a case where you have to add something to the
lease to get in a time-limit. It could not be meant that there was no
time-limit at all for applying to the president of the institution to appoint
an independent surveyor if the parties had not been able to agree either on the
rent or on the independent person to decide it. And he said it was all the
easier to imply something there, because you have to imply something in clause
2(c)(i) to see which March 25 was referred to, an argument which does not seem
to me to have persuasive force. He said that it is in the interests of both
parties that a rent review should operate expeditiously and the fact that time
is made of the essence as to the initial attempt to agree rent is some
indication that expedition is important throughout. That again does not
persuade me, because it seems to me that where one step is subject to a
provision that time is to be of the essence and other steps are not, the
contrast rather gives the impression that there is no particular hurry about
the latter.
However, Mr
Moxon-Browne emphasises the difficulties of retrospective valuation if such a
clause is not operated promptly and the importance to both parties of knowing
their position, and, he says, the only fair construction of this clause is to
put in the words ‘within a reasonable time’. What is reasonable, he suggests,
has to be interpreted in relation to the fact that one is dealing with
successive three-year periods. It must be something that is reasonable in
relation to that time-scale. Mr Moxon-Browne says it cannot be intended that
the machinery can operate when the relevant three-year period is finished and,
indeed, he would say that in principle, looking at the other provisions of the
lease, in particular the length of the term and the periods at which the rent
is reviewed, it must be much shorter. He says also in principle one can at the
date of the lease say what is reasonable. It does not depend on supervening
circumstances. So here, where the application for an independent surveyor is
not made until after the relevant triennium is over, it is submitted that the
landlord is clearly out of time.
Alternatively,
if Mr Moxon-Browne’s argument is not accepted in that form, he would submit as
an alternative that the possession action brought by the landlords was
unreasonable and vexatious, because it was perfectly clear, so he says, that
even if it had not failed on other, more technical, grounds, the court must
have granted relief. And therefore the whole action was unreasonable and cannot
operate to extend what would be a reasonable time for the conclusion of the
rent review proceedings.
Now that in
brief outline is the way the case is put on behalf of the tenant. Before I come
to examine the law, I will make certain findings of fact on the agreed
documents.
First of all I
must reject the submission that if and so far as the reasonableness of the
landlords’ delay is material, that has to be judged against a fixed maximum
reasonable time that could be ascertained from the terms of the lease and no
more. In my view, where the concept of a reasonable time arises in this sort of
context, it must depend on the circumstances. I think it was not unreasonable
of the landlords to delay application for an independent surveyor until after
the action for possession was disposed of. I do not regard the action as having
been frivolous or vexatious, even though it failed in the end on a number of
grounds. It is quite clear, I think, that there were breaches of covenant. How
serious they really were is another matter, but there certainly were some. Once
the action was on foot, if it was likely to be determined by relief from
forfeiture being given, it would be open to the landlords to argue that that
should only be done on certain terms. And in any negotiations for compromise it
would be natural to deal with the rent to be paid in future. Thus, I do not
think that it was at all unreasonable to defer application for an independent
surveyor until the action was out of the way.
In my opinion,
however, the further delay from September 1980 until May 1981, which takes us
right out of the three-year period in which the review was to operate, is
unexplained by anything in the correspondence, and remaining unexplained, it is
in my judgment unreasonable.
Secondly, I
find that the delay was not so gross that the tenant could, by summer 1981,
properly assume that the landlords had abandoned their right to have a rent
review for the period 1978-81, looking at the delay against the previous
history.
Thirdly, no
prejudice resulting to the tenant from the delay is pleaded or is demonstrated
by the documents.
Now, in order
to see the result of those three findings, namely, to repeat them concisely —
that the landlords’ delay was unreasonable, that it did not entitle the tenant
to assume the landlords had abandoned their right to rent review, and that no
prejudice to the tenant from delay is established — to see the result of those,
I shall have to look at a number of judicial authorities which do not, to my
mind, yield any clear answer binding on me. But they have been well argued on
both sides, and I shall have to review them, and that will take a little
further time.
The hearing
was then adjourned for a short time. On resumption, the judge continued:
In examining
reported authority on the effect of delay in taking steps under rent review
clauses, it is necessary in my view to distinguish between two classes of case.
One is the case in which the provisions of the lease lay down a time-limit, but
without any context that makes time of the essence. In that case, there is an
obligation at law to take the step if at all within the prescribed time, but
equity, as in other cases of contractual time-limits, will allow a party to
take advantage of an act even after some delay. Clauses of that type I will
shortly characterise as express clauses. Then there is another type of clause
where no type of time-limit is expressed. And there, I conceive, the effect of
the clause would be the same both at law and in equity and it will have to be
determined by the court as a matter of the true construction of the instrument
what, if any, time-limit is imposed by implication. Clauses of that type I will
call silent clauses to distinguish them from the express clauses where a time
is mentioned though not of the essence.
In the present
case we have a silent clause, because no time is expressly laid down for either
landlords or tenant to make application to the president of the Royal
Institution of Chartered Surveyors for the appointment of a valuer. I think (in
the absence of authority to lead to a different conclusion) that decisions on
express clauses should be applied with some caution to a silent clause.
The authority
on which Mr Moxon-Browne principally relied in the tenant’s interest was one of
an express clause. It is a decision of Goff J (that is, Sir Reginald Goff) in
the case of Accuba Ltd v Allied Shoe Repairs Ltd [1975] 1 WLR
1559. Towards the end of his
held that time was not of the essence in respect of the giving of a certain
notice under a rent review clause by the landlord. There was an indication of
the time within which it must be given, but that, the learned judge said, was
not to be taken as of the essence. He continued:
Then I have to
consider whether even so the notice was too late. As Lord Denning MR observed
in Bailey’s case . . . delay may give rise to a defence by way of
equitable estoppel. For that purpose however the tenant must prove that he has
altered his position: see In re Essoldo (Bingo) Ltd’s Underlease . . .
The tenants have filed no evidence on that point, and it has been agreed
between counsel that if I allow the landlords’ notice to take effect I shall
order that in applying it retrospectively the rent freeze shall apply as if the
rent had been fixed from the start and subject thereto no case of equitable
estoppel is put forward. I accept that agreement and pass to the next question,
which is how long may a landlord wait even when time is not of the essence?
The
submission for the tenants is that the landlords have a reasonable time and no
more and that was exceeded. Counsel for the landlords contends that notice
could be given at any time before the tenants gave notice making time of the
essence which they never did. I think the latter contention is too narrow . . .
And then his
lordship cited certain judicial and textbook authority for that proposition
that the contention was too narrow, and he continued:
Was then the
delay so long as to be unreasonable? In Kenilworth
. . . the notice was given a reasonable time before the expiration of the first
term of years, and Megarry J said . . . ‘I do not have to decide what would
have been the effect of a notice not given a reasonable time before then’ and a
fortiori after. In Bailey . . . however, the landlords left it for a
whole year and that was wholly within the second period, and in In re
Essoldo . . . neither party took any steps until over seven months into the
second period when, as Pennycuick V-C expressed it, ‘the landlord apparently
woke up to the position’. On the other hand, clause 5 did provide a time
schedule which if operated allowed liberal time for ascertaining the rent
before the start of the review period, and the difficulty of valuation, if it
be long deferred, must be remembered.
I think this
is a borderline case but I have come to the conclusion that the landlords are
not too late in the context of a seven-year term.
Now Mr Moxon-Browne
seeks to extract from that passage support for the proposition that in the
present case, that of a silent clause, the test to be applied is simply whether
the landlords’ delay exceeds a reasonable time irrespective of whether or not
there was any prejudice to the tenant. Then he relied also on another case of
an express clause decided by Foster J (that is, Telegraph Properties
(Securities) Ltd v Courtaulds (1981) 257 ESTATES GAZETTE 1153). The
passage cited is at p 1154, where the learned judge said, speaking of long
delay in giving a notice under a rent review clause:
Counsel for
the plaintiff went so far as to say that any such delay would be valid not only
after the expiration of the lease but at any time in the future, a submission
which I find fanciful. In a case such as the present, where the delay is over
six years before the notice itself is given, I do not think that the doctrine
of promissory estoppel has to be considered at all. In my judgment the
plaintiff has been guilty of such a delay as to make it unreasonable for it to
call on the defendant for a rent review and to do so would be of necessity
unfair for the defendant.
Reference has
also been made to the case in the House of Lords on rent review clauses in
leases, United Scientific Holdings Ltd v Burnley Borough Council
[1978] AC 904. The main decision in that case, which is expressed in the speech
of Lord Diplock at p 930, was that:
. . . in the
absence of any contra-indications in the express words of the lease or in the
interrelation of the rent review clause itself and other clauses or in the
surrounding circumstances the presumption is that the time-table specified in a
rent review clause for completion of the various steps for determining the rent
payable in respect of the period following the review date is not of the
essence of the contract.
That, while a
landmark in the history of the interpretation of rent review clauses by the
court, has of itself no bearing at all on the question of delay under a silent
clause. Nor do I get help from the reference by Lord Diplock at p 936 to the
Accuba case having been ‘correctly decided, although the actual reasoning
should not be considered as correct’. There is, however, a passage of somewhat
more relevance in the speech of Lord Salmon at p 956 where the noble and
learned lord said:
I certainly
agree that if the lessors had been guilty of unreasonable delay which had
caused prejudice or hardship to the lessees they would have forfeited their
rights to be paid the market rent from . . . 1975 to . . . 1982. But there is
not a spark of evidence that the lessees have suffered any prejudice or
hardship on account of the lessors not applying to the President of the RICS to
appoint a valuer until June 25 1975.
That looks as
though Lord Salmon thought that if unreasonable delay were to be fatal to the
landlord in that case, it would have been necessary to show also some prejudice
to the tenant. But there again it must be remembered that the United
Scientific case was one not of a silent but of an express clause.
A silent
clause is found in what is known as Bailey’s case, that is an earlier case of C
H Bailey Ltd v Memorial Enterprises Ltd [1974] 1 WLR 728, where a
dictum by Lord Denning MR is relied on by Mr Blackett-Ord. Lord Denning said at
p 732:
It was said:
suppose the landlords did not apply for the rent revision for months or years
after the date when they became entitled to it. Would not this operate unfairly
on the tenant? In most cases it would
not do so. The tenant has benefited because he has not had to pay the increased
rent, and meanwhile he has had the use of the money, or, if he would have had
to borrow it, he has not had to pay interest on it. But, if there was a case
where the delay of the landlord did prejudice the tenant, then I should think
the tenant might well pray in aid the principle of equitable estoppel to hold
up the increase. It is to be remembered, too, that it is always open to the
tenant himself to take steps to ascertain the increased rent. However that may
be, I am quite clear that the case depends on the true construction of this
rent review clause.
Thus Mr
Blackett-Ord says, in this case which was one of a silent clause, that Lord
Denning MR suggests that some sort of prejudice to the tenant must be shown in
order to say that the landlord is too late. But Mr Moxon-Browne emphasises that
it was very much obiter dictum on the part of the learned judge.
The case of Amherst
v James Walker Goldsmith & Silversmith Ltd (1980) 254 ESTATES
GAZETTE 123 contains a passage in the judgment of Sir David Cairns in the Court
of Appeal. I think, although the clause there considered looks at first glance
like an express clause, Sir David was really treating it as a silent clause.
And he said this at p 125:
It seems to
me that the true meaning of this lease is that, if the notice is not given by
December 25, it can still be given at a later date. It may well be that the
later date would have to be within a reasonable time, but as to that I express
no more than a tentative opinion. But if notice is given thereafter and if it
is not given so late that it can be said it was not given within a reasonable
time and that that makes it invalid, then the position would be that, indeed,
in effect, the second and third stages are concertinaed and we come straight on
to the position where either party can go straight to the president of the RICS
and ask for the appointment of an independent surveyor.
That strikes me
as the language of a judge who, in dealing with a particular case, is being
careful not unnecessarily to lay down any general proposition and I do not find
it helpful in deciding the present case.
And so I come
to the last and, to my mind, the most enlightening on the present points of the
cases that have been cited, although, again, it is far from decisive authority.
It is a case decided last year by the Court of Appeal, London &
Manchester Assurance Co v G A Dunn & Co*. There was a dissenting
judgment by Lawton LJ which I do not think I need refer to, and then there were
judgments by Oliver LJ and Slade LJ who, while they agreed in the result,
approached the problem of the construction of the clause in a rather different
way. Without explaining in detail the problem before them, I can say this: that
Oliver LJ approached it as one of a silent clause, except that there was a long
stop provided by a context in a particular provision later in the lease. And he
said on that approach that:
But delay
can, as I see it, be relevant only where there can be deduced from the contract
some obligation to act earlier. Where the contract itself, on its true
construction, envisages that the landlord may exercise his right at any time,
early or late in the period, he cannot be said to be guilty of unreasonable
delay if he simply does what the contract entitles him to do.
*Editor’s
note: reported at 265 EG 39 and 131, [1983] 1 EGLR 111.
The words ‘in
the period’ are explained by what I referred to as the long stop, where Oliver
LJ found from a different paragraph that the right must be exercised within the
relevant term whose rent was to be affected.
Now Slade LJ
read the clause in question rather differently, and I think he really
considered it as what I have called an express clause. But in approaching his
decision he did make some illuminating observations, if I may respectfully say
so, on the general law of contract in relation to delay. He said this at p 135:
In the absence
of binding authority compelling a different conclusion, I am satisfied that
delay on its own, even if unreasonable, will not in general
has not been made of the essence of the contract. There is, I think, no general
principle of the law of contract that mere delay in the enforcement of a
contractual right, or in the performance of a contractual duty, by one party to
a contract (‘A’) will entitle the other party (‘B’) to regard himself as
discharged from the obligation to recognise such right or from the contract as
a whole (as the case may be). If in such circumstances A has been guilty of
unreasonable delay, then, ordinarily, the prudent and proper course for B to
adopt, if he wishes to bring matters to a head, will be to serve a notice on A
fixing a reasonable period within which A must exercise his right (if at all)
or must perform his part of the contract (as the case may be). In some
circumstances, of course, the delay on the part of A may be so gross and
inexplicable as to make it so clear that he does not intend to exercise his
right or to perform his part of the contract that any such notice is
unnecessary. But, ordinarily, it will be necessary for B to serve a notice on A
or at least to have some communication with him before he can properly and
safely regard himself as being absolved.
Subject to
the position that may arise where the tenant can demonstrate that the
landlord’s delay in serving a ‘trigger’ notice has caused him prejudice or
hardship, I can see no reason why similar principles should not apply in
relation to a rent review clause, where the original lease has not made time of
the essence for the relevant purpose. Subject as aforesaid, therefore, I would
for my own part be prepared to hold that in such a case mere delay, even of unreasonable
length, in serving this ‘trigger’ notice will not disentitle a landlord from
relying on a rent review clause unless the delay is so long and inexplicable as
to amount to sufficient evidence that he has abandoned his right to a review.
However, some
of the decisions to which I have referred, or dicta in those decisions, suggest
that, even in the absence of evidence of final abandonment by the landlord of
the relevant right and of any communication by the tenant with the landlord
designed to clarify the situation, a landlord may forfeit the right if his
unreasonable delay has caused prejudice or hardship to the tenant: see the United
Scientific case at p 956 per Lord Salmon; the Telegraph
Properties case and the Amherst case. I am bound to say that, with
the greatest respect to all those concerned, I find rather more difficulty in
accepting this suggestion.
In some cases
the delay of a landlord in applying for a rent review might entitle the tenant
to rely on the doctrine of equitable estoppel, if the delay had been coupled
with an express or implicit representation by the landlord that he did not
intend to invoke his rights and the tenant had relied on this representation to
his detriment. In the absence of such representation, however, it is not entirely
clear to me what principle of law or equity would debar the landlord from still
relying on the contractual right conferred on him by the lease.
Well, now, I
have held in this case that the delay by the landlords, even though in its last
months unreasonable, did not entitle the tenant to infer that the landlords had
abandoned their right to a rent review, and, as I have said, there is no
allegation or proof of prejudice to the tenant. Nor did the tenant serve such a
notice as was in Slade LJ’s mind in the last passage I read. It seems to me
that whether I adopted the expressions of Oliver LJ or those of Slade LJ in
this latest case where the earlier cases were before them, I should be bound to
hold that the landlords have not lost their right to a review for the period
beginning on March 26 1978. I can find no support in the authorities for
reading in the words about a reasonable time that Mr Moxon-Browne would have me
supply and without such reading in the clause here under scrutiny does not
impose any limit. Therefore, as I say, mere unreasonable delay without
prejudice to the tenant or some express or implied indication of abandonment is
not enough finally to bar the landlords.
In my judgment
I must refuse the declaration which the tenant seeks and dismiss this action.
