Landlord and tenant — Rent review clause in lease — Questions as to whether ‘trigger notice’ was valid; as to whether, if valid, it could be served once only; whether notice requiring reference to surveyor in default of agreement on rent had been served within the time-limit; and whether time was of the essence in regard to the latter notice — Lease was for a term of 21 years with provision for a trigger notice to be served ‘at any one time’ after commencement of 14th year of term — If no agreement was reached within three months from date of trigger notice, the landlords could require reference to surveyor acting as expert by giving notice within three months thereafter — Landlords served a notice which, although its purport was one of the subjects of dispute, was held to be a trigger notice, but the subsequent notice requiring reference to an expert was not served within the time-limit, time being of the essence for this purpose — Landlords later purported to serve a second trigger notice followed by a notice requiring reference to an expert which was served within the time-limit — The question then was whether the review clause permitted the service of a second trigger notice — Landlords argued that, despite the words ‘at any one time’, it was in accordance with commercial sense to allow a second notice to be served; the words meant merely that the landlords could not have a full and complete rent review more than once — Held, rejecting this submission, that there was no justification for departing from the strict literal meaning of the words — Hence landlords had not established their right to have the rent reviewed — Declarations accordingly in favour of tenants
The following cases are referred to in this report.
Amalgamated Estates Ltd v Joystretch Manufacturing Ltd [1981] EGD 84; (1980) 257 EG 489, [1981] 1 EGLR 96, CA
Drebbond Ltd v Horsham District Council (1978) 37 P&CR 237; [1978] EGD 316; 246 EG 1013, [1978] 1 EGLR 96
Keith Bayley Rogers & Co v Cubes Ltd (1975) 31 P&CR 412
Norwich Union Life Insurance Society v Tony Waller Ltd (1984) 270 EG 42, [1984] 1 EGLR 126
Nunes v Davies Laing & Dick Ltd (1985) 51 P&CR 310; [1986] 1 EGLR 106; 277 EG 416
Rose (Frederick E) (London) Ltd v William H Pim Junior & Co Ltd [1953] 2 QB 450; [1953] 3 WLR 497; [1953] 2 All ER 739; [1953] 2 Lloyd’s Rep 238, CA
Shirlcar Properties Ltd v Heinitz (1983) 268 EG 362, [1983] 2 EGLR 120, CA
United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904; [1977] 2 WLR 806; [1977] 2 All ER 62; (1977) 33 P&CR 220; [1977] EGD 195; (1977) 243 EG 43 & 127, HL, [1977] 2 EGLR 61
This was an originating summons by which the plaintiff landlords, Norwich Union Life Insurance Society, sought declarations in favour of their claim to proceed with the rent review under a lease of 18 Fawkon Walk, Hoddesdon, for a term of 21 years from September 29 1968. The defendants, who counterclaimed for declarations in the opposite sense, were tenants by assignment under the lease.
Derek Wood QC and Paul Morgan (instructed by Reynolds Porter Chamberlain) appeared on behalf of the plaintiffs; A Boyle (instructed by Harvey Ingram & Co, of Leicester) represented the defendants.
Giving judgment, SCOTT J said: This is a case concerning a rent review clause in a lease. The plaintiff is the landlord, Norwich Union Life Insurance Society. The defendant is the tenant, Sketchley plc. The demised property is 18 Fawkon Walk, a shop in a parade of shops. The parade is owned, as I understand it, by the plaintiff, and the shops are subject to leases in more or less the same form.
The lease of 18 Fawkon Walk is dated May 21 1970. The property was demised to one Ernest Michael Loe for a term of 21 years from September 29 1968. The term was subsequently assigned to the defendant.
The lease reserved a rent of £1,650 per annum payable quarterly but subject after the first 14 years of the term to upward revision in accordance with a rent review clause. It is the rent review clause that has given rise to the problems that have led to this litigation. The clause is clause 2 in the lease. I must read most of it in full. It provides as follows:
The initial market rent payable by the tenant shall be subject to increase in manner following namely:–
(a) The Landlord shall be entitled by notice in writing given to the Tenant at any one time after the commencement of the fourteenth year of the term hereby granted to call for review of the initial market rent payable under this Lease and if upon any such review it shall be found that the then current market rent (as hereinafter defined) of the premises at the end of such fourteenth year or at the date of the Landlord’s notice (if later) is greater than the initial market rent then as from the end of such fourteenth year or as from the quarter day next following the giving of such notice whichever shall be the later the initial market rent shall be increased to the then current market rent provided that in no circumstances shall the rent payable hereunder following any such review be less than the rent payable by the Tenant at the date of the Landlord’s notice calling for review.
Para (b) describes what is meant by ‘the then current market rent’.
Nothing turns on that for the purposes of the present case and I need not read it.
(c) Such revision as aforesaid shall in the first instance be made by the Landlord and the Tenant or their respective surveyors in collaboration but if no agreement as to the amount of the then current market rent at the review date shall have been reached between the parties hereto or their surveyors within three months after the date of the Landlord’s notice calling for such review the question as to the then current market rent of the premises at the appropriate date and as to whether there shall be any increase in the rent payable hereunder and if so what the amount of the increased yearly rent shall be shall if the Landlord shall so require by notice in writing given to the Tenant within three months thereafter but not otherwise be referred to the decision of a surveyor to be appointed in default of agreement between the parties by the President for the time being of the Royal Institution of Chartered Surveyors and the surveyor so appointed shall in so acting be deemed to act as an expert and not as an arbitrator and his determination shall be final and binding on the parties
There is a para (d) that I need not read.
The 14th year of the term commenced on September 29 1981. From that date onwards the notice referred to in clause 2(a) of the rent review clause could be served.
On August 4 1982 a letter was sent to the defendant by Edward Erdman & Co acting for the plaintiff. The letter was taken by the defendant to be an attempt by the plaintiff to give notice under clause 2(a) of the lease. But the property specified in the letter of August 4 1982 was 16 Fawkon Walk and not 18 Fawkon Walk. So the defendant, by letter dated August 13 1982, replied as follows:
18 Fawkon Walk, Hoddesdon.
We are in receipt of your letter of August 4 purporting to be a Notice in respect of a rent review. We note, however, that your letter specifically refers to number 16 and we of course occupy premises at number 18. In the circumstances, we naturally wonder if your letter has been misdirected.
That reply elicited from Edward Erdman & Co a second letter in virtually identical terms to that of August 4 1982 but referring to 18 Fawkon Walk instead of to 16 Fawkon Walk. This second letter was dated August 27 1982 and was in these terms:
18 Fawkon Walk, Hoddesdon.
We have been instructed by your landlords, Norwich Union Insurance Group, to negotiate with you in connection with the rent review contained in your lease which becomes effective as at September 29 1982.
It is our client’s proposal to increase the rental to £11,500 per annum exclusive with effect from this date.
We look forward to hearing from you at your earliest convenience that this increase is acceptable to you.
The defendant replied by a letter of September 7 1982 expressing the view that the proposed rent of £11,500 was greater than the current market rent and in effect inviting negotiations as to the level of rent. Negotiations then took place in correspondence which was marked ‘without prejudice’ and which I have not seen. The negotiations failed to produce agreement between the parties on the level of the current market rent.
No notice was served by the plaintiff under clause 2(c) of the lease within the period therein specified, that is to say within six months of the letter of August 27 1982, assuming such letter to have represented|page:127| a valid notice under clause 2(a).
It was then claimed by the defendant that the rent review procedure under clause 2(c) was spent. This claim proceeded on the premise that the letter of August 27 1982 represented a notice given by the plaintiff under clause 2(a) calling for a rent review.
By a letter dated June 20 1983, solicitors for the plaintiff wrote to the defendant. The letter said this:
I write on behalf of The Norwich Union Life Insurance Society, the Landlord of the above property held by you under the terms of a Lease dated May 21 1970.
Acting on the Society’s instructions, its agents, Edward Erdman, took steps to have your rent reviewed with effect from September 29 1982. Clause 2 of your Lease provides that the rent may be reviewed with effect from that date or, alternatively, any subsequent quarter day, following a notice given to you by the Landlord.
I understand that there is now some disagreement between some tenants at Fawkon Walk and the Society as to the validity and effect of the steps taken so far by its agents in having the rent review carried out.
To avoid any doubt, and without prejudice to the validity of the documents sent to you and the action taken by the Society’s agents to date, I enclose a formal notice under Clause 2 of your Lease which will in any event result in an increase in your rent from the next quarter day.
Will you please let me know whether you dispute that the rent may be increased from September 29 1982, and in any case would you kindly acknowledge receipt of this letter and its enclosure.
Having regard to one of the points taken in argument before me, the second paragraph of this letter is, in my view, of some importance. It makes clear that the letter of August 27 1982 had been intended by Edward Erdman & Co to be a clause 2(a) notice.
The document enclosed with the letter of June 20 1983 gave:
Notice under clause 2 of the Lease that the Landlord requires the initial market rent payable under the Lease to be reviewed, such review to take effect from the quarter day next following the giving to you of this Notice.
Solicitors acting for the defendant disputed the validity of the notice of June 20 1983. By a letter dated July 14 1983 they asserted that the letter of August 27 1982 was a clause 2(a) notice, that the plaintiff was out of time in serving a clause 2(c) notice, that clause 2(a) by its terms did not allow the service of a second clause 2(a) notice and that accordingly the plaintiff had lost its chance to have the rent increased under the rent review provisions of the lease.
By a letter of November 8 1983, the plaintiff purported to give a clause 2(c) notice based upon the premise that the August 27 1982 letter had been a clause 2(a) notice. If that premise were right, the clause 2(c) notice, given as it was on November 8 1983, was out of time. More than six months had expired since August 27 1982. The letter could constitute a valid clause 2(c) notice only if the time-limits imposed by clause 2(c) did not require to be strictly observed.
By a letter dated December 6 1983, the plaintiff purported to give a clause 2(c) notice based upon the premise that the notice of June 20 1983 was a valid clause 2(a) notice: December 6 1983 was within six months from June 20 1983. The efficacy of the December 6 1983 clause 2(c) notice depends on one of two alternative propositions being correct. Either the letter of August 27 1982 was not a clause 2(a) notice or, alternatively, more than one clause 2(a) notice could properly be given. If neither alternative can be made good, the December 6 1983 notice cannot have been an effective clause 2(c) notice.
Thus the battle lines of this litigation were drawn.
The action was commenced by an originating summons issued on November 19 1984. Declarations are sought by the plaintiff. The defendant has counterclaimed for declarations in the opposite sense. The question is simply whether, pursuant either to its letter of November 8 1983 or to its letter of December 6 1983, the plaintiff is entitled to have the current market rent of the demised property assessed and the rent payable under the lease raised to the level of the assessed rent.
There are four issues in the case:
1 Was the letter of August 27 1982 an effective clause 2(a) notice?
2 If it was not, is the plaintiff estopped from so contending?
3 If the letter of August 27 1982 was an effective clause 2(a) notice, was the letter of November 8 1983 an effective clause 2(c) notice, notwithstanding that it was given out of time? In other words, was time of the essence of clause 2(c)?
4 If the letter of August 27 1982 was an effective clause 2(a) notice and if the letter of November 8 1983 was ineffective as a clause 2(c) notice, was it open to the plaintiff to serve a second clause 2(a) notice? In short, was the notice of June 20 1983 an effective clause 2(a) notice?
The plaintiff’s dispute with the defendant is not an isolated dispute. It has or has had a similar dispute or disputes with at least some of the tenants of the other shop premises in the parade of which 18 Fawkon Walk forms part. These tenants hold under leases in much the same form as the defendant’s lease. Edward Erdman & Co wrote letters to these tenants in much the same form as the letter of August 27 1982. Negotiations followed much the same course as in the present case and led to much the same difficulties as have arisen in the present case. There was litigation between the plaintiff and the tenant of 19 Fawkon Walk. The case, Norwich Union Life Insurance Society v Tony Waller Ltd, was heard by Harman J. His judgment, given on February 7 1984, is reported in (1984) 270 EG 42, [1984] 1 EGLR 126. Harman J held that a letter headed ‘without prejudice’ but otherwise in virtually the same form as the letter of August 27 1982 was not an effective clause 2(a) notice. His reason was that the letter was equivocal and obscure in its meaning and accordingly was not a notice apt to trigger the rent review procedures of clause 2. Second, Harman J held, following Drebbond Ltd v Horsham District Council (1978) 37 P&CR 237,* that time was of the essence of clause 2(c). Third, he held, obiter, since he had already held that the relevant letter was not an effective clause 2(c) notice, that where the clause 2(c) rent review procedure had not been completed in that no valid clause 2(c) notice had been served, it was open to the plaintiff to serve a second clause 2(a) notice.
*Editor’s note: Also reported at [1978] EGD 316; (1978) 246 1013.
Mr Wood, who appeared for the plaintiff before Harman J and who has appeared for it before me, has relied heavily on that decision.
I turn to the four questions that I have mentioned.
1 Was the letter of August 27 1982 a valid clause 2(a) notice? Had it not been for the judgment of Harman J, I would have had no hesitation whatever in holding that it was. The first question is what on its true construction the letter of August 27 must be taken to mean. It refers to ‘the rent review contained in your lease which becomes effective as at September 29 1982’. It is a letter written by a landlord’s agent to a tenant. The letter ought not, in my view, to be read in isolation. It must be read in the context of the lease and, in particular, the rent review provisions of the lease, namely clause 2. So read, what doubt can there be but that the letter was calling for the rent review to which clause 2(a) entitled the landlord?
Mr Wood emphasised the reference in the letter to negotiation. The letter, he said, was inviting the tenant to negotiate a new rent. It was not, he said, invoking, in terms at least, the rent review procedures of the lease. However, the first part of the clause 2(c) rent review procedures requires the parties to negotiate. The relevant part of the text reads:
Such revision as aforesaid shall in the first instance be made by the Landlord and the Tenant or their respective surveyors in collaboration . . .
The reference in the letter both to negotiation and to a rent review is not, in my view, in the least inconsistent. It is what one would expect. If the reader of the letter were in any doubt as to its intent, he would turn to clause 2 of the lease, read it in order to refresh his memory, notice that the rent review provisions contained therein required negotiation between the parties and would not then, in my opinion, find any inconsistency whatever in the letter.
Harman J, in his judgment, referred to a number of items to which no reference was made in the letter. He said this:
In my view, the document contains no reference whatever to clause 2(a), contains no reference to the procedures which would normally be followed under a trigger notice referring to the definition of ‘current market rent’ in the lease and going on to deal with the way in which it should be dealt with under clause 2(c). It does not ask for the names of surveyors to be appointed by the tenant as is envisaged by the third line of clause 2(c), and indeed the letter is really that written by a muddle-headed person not truly appreciating what they were doing at all.
On the same page, a little further on in his judgment, the learned judge stated the test appropriate to be applied to the question whether the letter was or was not an effective notice under clause 2(a). He said this:
But, it being common ground that no special form of words is necessary — no magic formula is involved — the question is: trying to read it as a whole, looking at its confused terminology, its meaningless heading ‘Without prejudice’ and its general ineptitude, is this a document which a tenant looking at it would think was a trigger notice?
I would respectfully accept, as I think both counsel before me accepted, that the appropriate test would be whether a tenant reading the letter would think it was a ‘trigger notice’. It is not necessary for|page:128| the letter, if it is to be an effective trigger notice, to contain any particular reference to any of the specific matters referred to by Harman J. It is simply necessary that the letter, fairly read, should bring to the mind of the reader that it was intended to set in motion the rent review procedures set out in clause 2 of the lease.
That that is the right approach appears also from a short dictum of the Vice-Chancellor, Sir Nicolas Browne-Wilkinson, in Nunes v Davies Laing & Dick Ltd (1985) 51 P&CR 310*. At p 313, the Vice-Chancellor says:
But the authorities disclose two possible tests. The first is that the alleged counternotice must constitute ‘a clear indication’ to the landlord as to the tenant’s intention, or must make it ‘clear to the landlord that he proposes to go to arbitration’. See per Lawton LJ and Templeman LJ in Amalgamated Estates Ltd v Joystretch Manufacturing Ltd.
*Editor’s note: Also reported at [1986] 1 EGLR 106; (1985) 277 EG 416.
The learned Vice-Chancellor then went on to say:
However, in two later cases the test has been expressed to be that the letter alleged to constitute the counternotice must be ‘unequivocal’.
He then referred to the two authorities he had in mind and continued:
It may be that in those two cases the judges were not meaning to apply any more stringent test than that of clarity laid down by the Court of Appeal in Amalgamated Estates Ltd v Joystretch Manufacturing Ltd.
Then, a few lines further on, he said:
In my judgment, the test is that applied by the Court of Appeal in Amalgamated Estates Ltd v Joystretch Manufacturing Ltd, namely that the counternotice should be in terms which are sufficiently clear to bring home to the ordinary landlord that the tenant is purporting to exercise his right under para (c), and that is the test which I propose to apply.
A little further on, he underlined the point. He said:
In my judgment, it must have been clear to anyone receiving the letter of December 6 that the tenant’s agent was giving a formal notice and, knowing the terms of the lease, must have known that the only provision for a formal notice under proviso (iii) was a counternotice under paragraph (c).
I would observe that in that case the court was concerned with the effect of the notice on the recipient who, if it was a valid counternotice, had to take certain action in order to protect his position.
One of the features of the letter that Harman J was considering which led him to conclude that the letter as a whole was too equivocal to constitute an effective clause 2(a) notice was that the letter had been expressed to be without prejudice. The letter with which I am concerned in this case lacks that feature. The extra equivocation introduced by those words into the letter before Harman J is here absent. I would repeat that I do not think that any sensible reader of the August 27 1982 letter, reading the letter in conjunction with clause 2 of the lease, would do otherwise than take it to be a notice that the landlord was calling for a review of the rent under clause 2 of the lease.
I have been referred by Mr Wood to a Court of Appeal decision, Shirlcar Properties Ltd v Heinitz, reported in (1983) 268 EG 362, [1983] 2 EGLR 120, a case relied on also by Harman J. That, too, was a rent review case. The prescribed procedure required first that a notice be served by the landlord on the tenant specifying the new rent which the landlord thought should be paid. The tenant was then given a certain limited time within which to object to the amount of the proposed new rent. If the tenant did not object to the proposed new rent within that limited time, he became bound by it. The notice specifying the proposed new rent that was served in the Shirlcar case was expressed to be ‘subject to contract’. The question for the court was whether the ‘subject to contract’ qualification appended to the notice made it so equivocal that it could not be relied on as an effective notice by the landlord. The Court of Appeal concluded that it did. Lawton LJ in the final paragraph of his judgment said:
Since there is an argument both ways about this matter and as, in my judgment, it is an argument which is reasonable on both sides, it seems to me that it cannot be said that the tenants, on receiving this letter, would necessarily and reasonably have inferred that it was an effective trigger notice for the purpose of the lease. There is doubt about its meaning and as there is doubt it seems to me that the letter was ineffective for the purposes of the rent review clause in the lease. I would dismiss the appeal.
I would respectfully accept that where a notice from one party will require action from the other party, the recipient of the notice, in order that the latter may protect his position, the document which is said to constitute the notice must be sufficiently clear in its terms as to avoid the recipient being led into an error as to its intended effect. Kerr LJ in the Shirlcar case cited a dictum of Templeman J, as he then was, in Keith Bayley Rogers & Co v Cubes Ltd (1975) 31 P&CR 412. Templeman J said at p 415 that:
each of the recipients could be in no doubt as to what the landlord was up to and what the notice and the letter meant as far as he was concerned
A lesser test would, in a case like the Shirlcar case, allow the recipient of the notice to be led into a trap by an equivocation not of his own making. But I do not see why as strict an approach is necessary where it is the author of the notice, not the recipient, who is going to have to take action consequent upon the notice to protect his rights. If the letter of August 27 1982 on a fair and objective reading would be taken to be a notice under clause 2(a) then, in my judgment, it should be treated as such a notice. In my view, the letter of August 27 1982 read in conjunction with clause 2 of the lease satisfies that test. Whether, if it had been a notice requiring action to be taken by the recipient tenant to protect his rights, it would have been sufficiently clear in its terms to constitute an effective notice is another matter and would raise different considerations. I do not therefore find any inconsistency between the test I have applied in the present case and the dicta in the Shirlcar case.
Accordingly, on the first question I hold that the August 27 1982 letter was an effective clause 2(a) notice.
I would, however, rest my decision on the first question on another ground as well. There is evidence in this case, namely, the letters of June 20 1983 and November 8 1983 to which I have referred, which make it clear that it was the intention of the plaintiff’s agent in sending the letter of August 27 1982 that the letter should be notice to the tenant under clause 2(a) of the lease. There is also evidence, namely, the form of the letter of August 13 1982 from the defendant, that the defendant read the letter as a notice under clause 2(a) of the lease.
The requirement of clause 2(a) is that a notice in writing be given whereunder the landlord calls for a review of the rent. A notice is intended to pass information. It is intended to be a communication. If the terms of a written document are capable, fairly read, of communicating the requisite information, are intended to communicate the requisite information and do in fact communicate the requisite information, it seems to me an extraordinary proposition that an equivocation in the language in which the notice is couched can entitle either party to deny the efficacy of the notice.
Mr Wood submitted very forcefully that the validity of the letter of August 27 1982 as a clause 2(a) notice had to be tested on a strictly objective basis. If the terms of the notice were insufficiently unequivocal, the validity of the notice could not, he submitted, be assisted by evidence of the sense in which the author intended the document and in which the recipient understood it.
I am not prepared to accept that that is the law. It is well established that where a contract is concerned, the terms of the contract are to be ascertained by an objective assessment of the meaning of the language, oral or written, used by the parties. The unexpressed and uncommunicated intentions of the parties cannot, even where by chance they coincide, alter the terms, objectively ascertained, of the contract they have made (see Rose v Pim* [1953] 2 QB 450). But this well-established principle does not, in my view, apply to a notice. A notice is intended to give information. If a document has succeeded in imparting the requisite information to the recipient and was intended by its author to do so, it seems to me that it can properly be described as a notice in writing giving that information. That is the position in this case.
*Editor’s note: F E Rose (London) Ltd v W H Pim Jnr & Co Ltd.
On this ground also I hold that the letter of August 27 1982 represented an effective notice under clause 2(a) of the lease.
2 The defendant’s estoppel point does not, in the event, arise. The point was based on the content of the letters to which I have in passing referred whereby the negotiations between the parties over the period September 1982 to June 1983 were conducted. These letters were all marked ‘without prejudice’. Mr Boyle argued that they were admissible in evidence for the purpose of establishing that the parties had negotiated on the conventional footing that the letter of August 27 1982 was a valid clause 2(a) notice. I disallowed their admission. In my view, the ‘without prejudice’ protection prevents their admission into evidence for that purpose.
In view, however, of my decision on the first point in the case, nothing turns on the inadmissibility of evidence of those letters.
3 Time of the essence. Clause 2(c) of the lease specifies as the period|page:129| during which the parties are to attempt to agree the new current market rent the period of three months after the date of the landlord’s notice calling for the review. The paragraph then proceeds to provide that if the parties should fail to reach agreement:
the question as to the then current market rent of the premises shall if the Landlord shall so require by notice in writing given to the Tenant within three months thereafter but not otherwise be referred to the decision of a surveyor . . .
On the footing that the letter of August 27 1982 was a valid clause 2(a) notice, the plaintiff gave notice under clause 2(c) on November 8 1983. This was well out of time, well outside the three months specified in clause 2(c). A virtually identical rent review clause was considered by Sir Robert Megarry V-C in the Drebbond Ltd v Horsham District Council case, to which I have already referred. He held that the words ‘but not otherwise’ required the conclusion that time was of the essence of the contract between the parties. Harman J in the Tony Waller Ltd case followed the Vice-Chancellor and held, both on the authority of the Vice-Chancellor’s decision and, as he put it, ‘as a decision to which he would anyway have come’, that the words ‘but not otherwise’ made time of the essence of clause 2(c).
Mr Wood, if I may say so very realistically, has indicated that he does not feel able to invite me to come to a different conclusion from that to which Sir Robert Megarry and Harman J both came. He expressly reserved, however, his right in a higher court to argue that time ought not to be regarded as of the essence of clause 2(c). But he does not invite me to do other than follow the learned Vice-Chancellor and my learned brother on this point.
I therefore hold that time was of the essence of clause 2(c) and that by November 8 1983 it was no longer open to the plaintiff to serve a clause 2(c) notice. The notice of November 8 1983 is accordingly invalid.
4 That leaves the final point, namely, whether on the footing that the August 27 1982 letter was a valid clause 2(a) notice, it was open to the plaintiff to serve a second clause 2(a) notice, as it purported to do by the notice dated June 20 1983.
Mr Wood relied very heavily on what he described as the commercial sense of clause 2. Under clause 2, the landlord is entitled to a rent review. The provision of a once-only rent review was part of the bargain between the parties, part of the consideration flowing to the landlord for the grant of the lease to the tenant. He prayed in aid the reasoning of Lord Diplock in United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904. Lord Diplock, at p 930, referred to the service of a notice requiring a rent review as:
an event upon the occurrence of which the tenant has in his existing contract already accepted an obligation to pay to the landlord the rent so determined for the period to which the rent review relates. The tenant’s acceptance of that obligation was an inseparable part of the whole consideration of the landlord’s grant of a term of years of the length agreed. Without it, in a period during which inflation was anticipated, the landlord would either have been unwilling to grant a lease for a longer period than up to the first review date or would have demanded a higher rent to be paid throughout the term than that payable before the first review date. By the time of each review of rent the tenant will have already received a substantial part of the whole benefit which it was intended that he should obtain in return for his acceptance of the obligation to pay the higher rent for the succeeding period.
Lord Diplock in that passage was dealing, and indeed the case as a whole was dealing, with the question whether the time-limits expressed in a rent review clause were or were not of the essence of the contract between the parties. That is not the question with which I am faced under this part of the present case. The extent to which a court of construction is entitled to alter the language used by the parties in order to achieve a commercial result which it may be thought the parties must have intended but which is not justified by the language they have actually used is, in my view, very limited.
I would start, however, with the language used in the clause and read again the first four lines:
The Landlord shall be entitled by notice in writing given to the Tenant at any one time after the commencement of the fourteenth year of the term hereby granted to call for review of the initial market rent . . .
This provision read literally entitles the plaintiff to call for a rent review once and once only. The literal construction is fatal to the contentions of the plaintiff. The plaintiff did call for a rent review by the letter of August 27 1982. If it is right that it is entitled only once to call for a rent review, then it was not entitled to call again for a rent review.
Mr Wood, however, invited me to construe the clause as entitling the plaintiff to have once only a full and complete rent review. That might be the correct construction if, instead of the words ‘to call for review of the initial market rent’ there were substituted the words ‘to have a review of the initial market rent’.
In the present case, although the plaintiff has called for a rent review, it has not as yet had one. There was no agreement between the parties in their negotiations following the letter of August 27 1982 as to the level of the current market rent. Since a clause 2(c) notice was not served in time, there has been no reference to a surveyor of the question what the current market rent should be taken to be. So there was not, in the event, a rent review.
Mr Wood argues that, that being so, it ought to be open to the plaintiff to serve another clause 2(a) notice setting in train again the clause 2(c) rent review procedure. Indeed, if his submission were correct, the plaintiff would be entitled to repeat this process as often as it wished with this limitation only, that if, following the service of a clause 2(a) notice, either the parties were to agree the level of the current market rent or a surveyor were to determine on a reference under clause 2(c) the level of the current market rent, the process could not then be repeated. But Mr Wood’s submissions hold out for the plaintiff the right as often as it should wish to serve a clause 2(a) notice and then, by simply not serving a clause 2(c) notice, to abort the rent review procedure. The plaintiff could serve a clause 2(a) notice and test the temperature of the water by entering into negotiations with the tenant. If it then did not like the heat or the cold that it experienced, if it did not think that there had been a sufficiently steep rise in the rent level, if it anticipated that a much steeper rise might subsequently take place, it could simply abort the procedure by not serving a clause 2(c) notice and thereby hold it open to itself to start the process over again at a more opportune moment.
I do not find that result any more sensible, from a commercial point of view, than the result achieved by giving the clause its strict literal meaning. It is true that if a strict literal meaning is given to the clause so that there can be one and only one occasion on which the landlord is entitled to call for a rent review, the result may be that the landlord, by inadvertence or accident or other unforeseen circumstance, may omit to serve a clause 2(c) notice and thereby lose the rent review to which he was entitled when he served his clause 2(a) notice. But if that result comes about, it does so because time is of the essence of clause 2(c). Mr Wood is reserving the right to argue the contrary in a higher court. But if time is of the essence of clause 2(c), then that is the bargain that the parties have chosen to make. And if the bargain that the parties have chosen to make has the effect of depriving the landlord by its inadvertence of the right to a rent review, then so be it. It does not seem to me to be right to distort and rewrite the language of clause 2(a) in order to avoid the damaging effects to the landlord of time being of the essence under clause 2(c). But that, in my view, is what Mr Wood’s submissions in the end come to.
In the result, I do not find any sufficient reason to give clause 2(a) any meaning other than that which the words literally read require, that is to say, the landlord has one opportunity, and one opportunity only, of calling for a rent review. Once the landlord has done so, the procedures under clause 2(c) apply. There is to be negotiation between the parties. If they do not reach agreement within three months the landlord has a further period of three months within which to serve a notice referring to a surveyor the determination of the current market rent.
If it be right that time is of the essence of clause 2(c), it must follow that if the landlord lets the three months elapse, it loses its right to have a rent review. If time is not of the essence of clause 2(c), then it does not lose that right and its position is not prejudiced by its failure timeously to serve the clause 2(c) notice.
But that, in the end, is the point on which the ability of the landlord to obtain a review of the rent payable under this lease now depends. Mr Wood, quite rightly, has not argued that point before me, there being too much first instance authority to make it sensible to invite a different conclusion from another first instance judge. He will have to succeed in the Court of Appeal if his clients are to obtain the result that they want.
The question whether a second clause 2(a) notice could be served was considered by Harman J in the Tony Waller Ltd case. He came to the conclusion that it could. He was brought to this conclusion by the argument that otherwise a ridiculous position would be reached if the surveyor appointed pursuant to clause 2(c) to assess the current market rent should fail to do so, whether by reason of death, illness, inertia or any other reason. Unless a second clause 2(a) notice could|page:130| be served, then, the argument proceeded, the landlord would, for no fault of his own and in circumstances beyond his control, lose the rent review to which he was entitled. There would obviously be every reason to try to avoid construing clause 2 in a manner that might lead to the rent review procedure being frustrated by the failure of an appointed surveyor to carry out his appointed task. But Mr Boyle has satisfied me that the argument is unsound. The failure of an appointed surveyor to perform his task does not, in my judgment, require the service of a second clause 2(a) notice in order to enable the landlord to have its rent review. It would simply lead to the appointment of another surveyor. There is nothing in clause 2(c) to prevent this. The ridiculous position contemplated by the argument adduced before Harman J would not, in my view, be reached. I therefore respectfully disagree with the conclusion of my learned brother.
For those reasons, in my view, the plaintiff is not entitled to the declaration it seeks in its originating summons.
Judgment was given in favour of the defendants with costs.
