Landlord and tenant–Rent review under lease of business premises–‘Open market rental value’ to be sum specified in a notice given by landlords unless either the parties agreed of a valid counternotice was served by the tenant–Counternotice had to be served by a certain date requiring determination of value by an independent surveyor (time to be of the essence thereof)–Question whether a letter from the tenant’s solicitors constituted a valid counternotice–Held that letter was at best ambiguous and did not constitute a valid counternotice–Held also that words and conduct by the landlords did not constitute a waiver of defects in the counternotice or estop the landlords from disputing its validity–Rent for the review period accordingly to be sum specified in landlords’ notice
This was an
originating summons brought by landlords, Asher Oldschool and Ian Bertram
Lewis, to determine questions on rent review procedure under a lease of
premises at 116-118 Islington High Street, London N1. The defendant was the
tenant, Stuart Johns. The lease related to a basement wine bar called ‘The
Grapes.’ The relevant clauses are set
out in the judgment.
J E Rayner
James (instructed by A Oldschool & Co) appeared on behalf of the
plaintiffs; A C Geddes (instructed by Boyce, Evans & Sheppard) represented
the defendant.
Giving
judgment, MICHAEL WHEELER QC said: This is an originating summons raising
questions relating to the rent review procedure in a lease of premises at
116-118 Islington High Street, N1. The plaintiffs are the landlords and the
defendant is the tenant.
The lease,
dated April 2 1976, is a 10-year lease of basement premises where there is a
wine bar called ‘The Grapes.’ I need
refer only to few parts of the lease itself. As to the rent it provides as
follows:
(A) For the first Three years of the said term
the rent of TWO THOUSAND THREE HUNDRED AND FORTY POUNDS (hereinafter when
specifically referred to called ‘the first reserved rent’).
(B) For the next Three years of the said term
(hereinafter called ‘the first review period’) a rent to be determined in
accordance with the provision in that behalf contained in Clause 5 hereof
(hereinafter when specifically referred to called ‘the first reviewed rent’). .
. .
I need not
deal with the second period because it is the rent for the first review period,
that is the second three years of the term of the lease, with which I am
concerned. It will have been observed that the rent for the second three years
is to be determined in accordance with the provisions in clause 5, and it is to
that that I now turn. Here again I need not read the whole of the clause. The
relevant part reads as follows:
5. THE
reviewed rent (payable by the Tenant during the review periods as hereinbefore
provided) shall be determined in manner following that is to say it shall be
whichever shall be the higher of the first reserved rent or the first reviewed
rent as the case may be and the open market rental value of the demised
premises for the review period. . . .
and then it
provides a definition of what is meant by ‘open market rental value,’ which I
need not bother with. What I am concerned with is proviso (2), which reads as
follows:
The said open
market rental value shall be determined as follows:
(a) It shall be such sum as shall be specified in
a notice in writing by the Lessor to the Tenant in respect of the first review
period not more than six months before the expiration of the period of three
years after the commencement of the term hereby granted. . . .
That is all I
need read of (a) because it then goes on to deal with the second review period,
with which I am not concerned.
(b) As shall within three months after such
notice be agreed between the parties in writing in substitution for the said
sum or
(c) It shall be determined at the election of the
Tenant by counternotice in writing to the Lessor not later than three months
after the Lessor’s said notice (time to be of the essence hereof) by an
independent surveyor appointed for that purpose. . . .
and it then
proceeds to lay down machinery for agreeing or ascertaining the independent
surveyor.
Now it will be
convenient if in that extract from paragraph 2(c), at least mentally, one puts
a comma after the first four words ‘It shall be determined’ and after the
bracket ‘(time to be of the essence hereof)’ and I will just read that again
with that emphasis, because this is the third method of ascertaining the open
market rental value. First of all, under (a) you have the sum specified in the
lessor’s notice. Then you have ‘or whatever the parties agree within three
months after that notice, or’ and this is how it will now read:
It shall be
determined, at the election of the Tenant by counternotice in writing to the
Lessor not later than three months after the Lessor’s said notice (time to be
of the essence hereof), by an independent surveyor.
I emphasise
that punctuation because it goes to one of the arguments which Mr Geddes put
before me on a question of construction.
Now the first
question I have to decide is whether a letter written by the tenant’s
solicitors, dated April 27 1979, constituted a valid counternotice for the
purposes of clause 5(2)(c) of the tenancy. It is not in dispute that the
landlords had previously given an effective notice under clause 5(2)(a), so that
if nothing else effective happened, if there were no agreement and no effective
counternotice, then a rent specified in the landlords’ notice would be the rent
for the second three years of the lease and that rent was £3,600 per annum.
This, then, was the letter which was written by the tenant’s solicitor, on
April 27 1979. I should here pause to say that the original landlords’ notice
was sent to the tenant and the tenant merely acknowledged it and said he was
sending it on to his solicitors, and it is his solicitors who wrote this letter
and it is addressed to the solicitors to the landlords:
Your letter
of the 21st March last
that was the
letter under 2(a)
has been
passed to us by our client. As you know our client is at present paying £2340
per annum and he contends that the open market rental value of the premises is
at this time less than the present rental value. To support our client’s
opinion, we should
premises in Upper Street, London N1 as a Restaurant/Wine Bar. These premises
provide far superior services to the above premises and the rent payable is
calculated at £4 a square foot. In view of the above we would ask you to let us
have any evidence supporting your contention that a figure of £3600 per annum
for the premises is the open market rental value.
and they
enclose a cheque for some rent. This is the letter which the tenant says
constituted an effective counternotice under clause 5(2)(c) of the lease.
It will be
convenient at this stage if I deal briefly with the remaining correspondence
which was put in evidence, so that the historical pattern, as revealed by that
correspondence, can be seen before I consider the effect of it, particularly in
relation to later intentions.
The letter
which I have just read, of April 27 1979, was replied to by the landlords’
solicitors in the following form. I omit from this references to extraneous
matters which are not relevant to the purposes of the questions I have to deal
with.
Dear Sirs,
We thank you
for your letter dated April 27 . . . We would mention that there are other
then there are
references to some other sums, again not relevant. This is the important part
So far as the
rent review is concerned, we note your comments. Our Clients have been advised
by Messrs De Groot Collis the well-known firm of Estate Agents and Valuers that
the market rent of these premises is £3,600 per annum and we have no doubt that
they will be able to support this. We suggest that your Client should instruct
Valuers who can then communicate with Messrs De Groot Collis in the usual way
in an effort to reach agreement. Failing this,
and this is a
sentence on which Mr Geddes relies particularly in a later part of this summons
the matter
will have to be referred to the Royal Institution of Chartered Surveyors in
accordance with the provisions of the Lease.
Yours
faithfully.
On May 4 that
letter was acknowledged by the tenant’s solicitors, who say among other things:
With regard
to the rent review we have advised our client to instruct Valuers and he will
now proceed accordingly.
On May 10, a
further letter from the landlords’ solicitors, on which particular weight is
placed by Mr Geddes, for the tenant, was sent to the tenant’s solicitors, as
follows:
Dear Sir,
We thank you
for your letter dated the 4th instant. Will you kindly arrange for your
Client’s Valuer to contact Messrs De Groot Collis. . . .
and it then
gives details.
Failing that,
or in the event of non-agreement between the respective Valuers, then the issue
will have to go to arbitration.
On May 21 that
letter was acknowledged as follows:
Thank you for
your letter dated May 10 upon which we have taken our client’s instructions.
Our client has instructed Messrs Shaw Associates. . . .
and it gives
the address
We have
requested these Surveyors to contact Messrs De Groot Collis.
Then on June
11 Shaw Associates, who have been referred to in the letter that I have just
read, wrote to Messrs De Groot Collis as follows:
We would
inform you that we are instructed on behalf of Mr S Johns
that is the
tenant
concerning
the above property to act in the matter of the rent review. In this matter,
therefore, we will shortly be in contact with you and would be grateful if you
could please clarify the current position in respect of rent asked and other
continued terms.
On June 15 De
Groot Collis wrote to Shaw Associates:
Thank you for
your letter of June 11.
Your client’s
lease is for 10 years from March 25 1976, subject to rent reviews after 3 and 6
years. The landlords have specified the revised rent payable from March 25 1979
as £3,600 per annum. The other lease terms are not affected.
Then there is
a gap in the correspondence until a letter of October 9 1979 from the
landlords’ solicitors to the tenant’s solicitors, in the following terms.
We have heard
from Messrs De Groot Collis that they had reached an agreement with your
Client’s Valuers as to the increased rent but that your Client then withdrew
his instructions to his Valuers.
We beg to
draw your attention to the circumstance that under the terms of the Lease the
open market rental value for the reviewed period shall be such sum as is
specified in a notice in writing by the Lessor to the Tenant. This was given by
our letter to your Client dated March 21 indicating that the open market rental
value was to be £3,600 per year.
Your Client
failed to serve a counternotice in writing within the time stated under the
terms of the Lease in which case time was to be of the essence thereof.
Accordingly, in the above mentioned circumstances it is our view that the rent
for the period under review namely March 25 1979 until March 25 1982 shall be
£3,600 per annum.
Will you
therefore please let us have your agreement in writing confirming this position
and arrange for your Client to remit the arrears of rent which have become due
since March 25 last.
The response
to that letter from the tenant’s solicitors was a letter of October 16 as
follows:
We thank you
for your letter of the 9th instant.
The position
is that our client has now instructed Messrs Reiff Diner & Co, Valuers of
179 New Bond Street, London W1 and we understand that this firm will be
contacting your Valuers at the earliest possible moment.
With regard
to the contents of your letter, we should inform you that on April 27 last we
wrote to you clearly indicating that the figure quoted in your letter of March
21 was not agreed. In our view this letter clearly amounts to a counternotice.
Further, you clearly accept our letter as a counternotice, and in this respect,
we would refer you to your letters to us of May 1 last and May 10 last.
Clearly, if agreement cannot be reached, then an independent Surveyor appointed
by the President of the Royal Institution of Chartered Surveyors will have to
arbitrate.
It is hoped
that agreement can be reached and no doubt the Valuers for our respective
clients will keep us fully informed.
And then on
October 19 there is a reply to that letter:
We thank you
for your letter dated October 16 in which you inform us that your Client has
instructed Messrs Reiff Diner & Co. In your letter dated May 21 you stated
that your Client had instructed Messrs Shaw Associates. We are advised by our
Clients’ Valuers, Messrs De Groot Collis that they reached agreement with
Messrs Shaw Associates and we therefore cannot understand why there should be
another Firm brought into the picture.
We are
sending a copy of this letter to Messrs De Groot Collis. If Messrs Reiff Diner
& Co will confirm the figures already agreed by Messrs Shaw Associates then
well and good. Otherwise, we propose to reserve our Clients’ rights as
indicated in our letter of the 9th instant.
Well, that is
the picture as revealed by that correspondence: and it is perhaps convenient,
since it is quite succinctly set out, to take the summary of the rival
contentions from the affidavits that have been sworn by both sides on this
summons.
First of all
the plaintiffs’, the landlords’, contentions as set out by Mr Oldschool, who in
fact is a solicitor. I am of course merely reading this as a convenient summary
and not because it necessarily carries any particular weight merely because the
deponent is a solicitor. In paragraph 6 of his affidavit he says:
In my
submission the issues between the parties are clear from this correspondence.
The position of the landlords is that the notice of March 21 1979 was a valid
notice for the purposes of Clause 5(2)(a) of the lease specifying that the rent
for the three years under Clause 1(B) of the lease would be £3,600. While the
landlords were prepared to instruct their valuers for the purpose of discussing
such figure with the Defendant and valuers instructed on his behalf, with a
view to agreeing the rental figure for such period, in accordance with Clause
5(2)(b) of the said lease, no such
subclause. It was therefore for the Defendant, if he wished to dispute the
correctness of the figure proposed by the landlords at £3,600 per annum, to
serve the necessary counternotice in writing giving notice of his election to
have the matter determined by an independent surveyor appointed for that
purpose. The time within which such notice has to be served on behalf of the
Defendant is stipulated in the said subclause as three months after the notice
given by the landlords under Clause 5(2)(a), and time is expressly made of the
essence of this provision. It is contended by the Defendant that the letter of
April 27 1979
that is the
letter which I have already read
was a valid
counternotice for the purposes of Clause 5(2)(c) of the lease, and moreover he
contends was accepted as such by the letters from my firm of May 1 and 10 1979,
also included in such exhibit. The Defendant accordingly contends, as I
understand him . . . , that the matter of the open market rental value for the
purposes of the first review period is one which he is entitled to have
determined by a jointly appointed independent surveyor or by arbitration as
provided for by that subclause. It is the landlords’ contention that the said
letter of April 27 1979 is not a sufficient counternotice for the purpose of
Clause 5(2)(c) and that it was not accepted as such by the said letters of May
1 and 10 1979, or otherwise, and that therefore the Defendant has failed to
serve the appropriate counternotice under Clause 5(2)(c) in the time provided
for by such subclause, so that the open market rental for the purpose of Clause
1(B) of the said lease is the sum of £3,600 per annum, as specified in the
landlords’ said notice of March 21 1979. In support of their contention, the
landlords rely on the case of Bellinger v South London Stationers Ltd
the reference
to which he then gives.
The tenant’s
case is put shortly but effectively by a Mr Englefield, also a solicitor, in
paragraphs 4 and 5 of his affidavit. He says:
It is the
Defendant’s contention that the said letter of April 27 1979 on the true
construction of clause 5(2)(c) of the said lease amounted to a valid
counternotice under the said clause 5(2)(c).
5. In the
alternative the Defendant contends that by their conduct and in particular by
their letters of May 1 1979 and May 10 1979 . . . the Plaintiffs waived any
defect in the said counternotice alternatively that they are estopped from
denying the validity of the same.
It will be
seen therefore that three questions arise for decision. First, was the letter
of April 27 a valid counternotice?
Secondly, if not, can the plaintiffs waive any defect? Thirdly, and in the alternative, are they
estopped from denying the validity of the letter as a notice.
Now as to the
first of these questions, ‘Was the letter a valid counternotice?’, it will be
seen from clause 5, and in particular clause 5 with the punctuation put in
which I indicated earlier, that there is no specific requirement as to the
contents of a counternotice. What happens is that the tenant is given a right
of election and he exercises that right of election by counternotice, and if he
elects in that way then the event is to be determined by an independent
surveyor. Now what is the purpose of the notice? It is I think relevant to bear in mind that
there are three stages of clause 5(2)(a), (b) and (c). First of all the
landlord gives his notice specifying what he says is the rent for the next
period. That of course may be a complete guess. It may be a good, bad or
indifferent figure, but he triggers the procedure off by saying what he wants
and, if nothing else happens, at the end of the relevant period that is the
rent. But there is of course a second alternative; that the parties agree some
other figure, higher or lower; that is clause 5(2)(b). Again, there is the
third alternative that the rent is to be fixed by an independent arbitrator,
and that is triggered off by an election by means of a counternotice.
It seems to me
in principle, and apart from authority, that if some communication is coming
from the tenant to the landlord in response to a landlord’s notice under clause
5(2)(a), it is important that the landlord should know precisely what the
tenant has in mind. Is he on the one hand merely saying ‘I do not agree your
rent; let us see if we can agree’? In
other words it is an opening shot under clause 5(2)(b). Or is he saying, ‘Regardless
of whether we negotiate or not, I wish to have the rent fixed by
arbitration’? And if he gives a valid
counternotice under clause 5(2)(c), then the landlords know perfectly well that
they can of course go on negotiating but if they do not get anywhere or if they
decide that it is not worth negotiating, then there will be, but it is purely
at the tenant’s option, an independent hearing to fix the rent.
Mr Geddes, I
think, was inclined to say that, because of the construction which he put on
clause 5(2)(c), all that the tenant had to do to give an effective
counternotice under clause 5(2)(c), since no contents were specified, was
simply to say ‘I do not agree your figure’ and that is enough. That does not
seem to me to be a fair way of looking at the machinery at all, because it must
be one of two things as I have already indicated. It might be a deliberate
attempt (although perhaps ineptly expressed) to trigger off clause 5(2)(c) or
it might be just the opening shot in negotiations under clause 5(2)(b). I think
that the notice must either be in a form which clearly says it is a
counternotice under clause 5(2)(c) or it must clearly indicate to the landlord
that the tenant is exercising his election to have the rent fixed
independently.
Fortunately in
this respect I am not without assistance and I was very helpfully referred to a
report in ESTATES GAZETTE of a case called Bellinger v South London
Stationers Ltd which came before Goulding J in April of last year. The
precise reference is (1979) 252 EG 699, [1979] 2 EGLR 88. I do not propose to
read large parts of this. It is sufficient to say that it is primarily in point
on this first question as to whether or not this is a valid counternotice,
because the machinery in the case before Goulding J for rent review was in all
essentials, though not in identical language, the same as the one I have here.
Nor, I think, need I refer in detail to the facts, because it is true that
there were not, as here, subsequent negotiations or any such thing which might
have been relied on as waiver or estoppel or anything like that. It was simply
that when the landlord sent his (what I might call) 5(2)(a) notice the formal
acknowledgement said:
We formally
acknowledge receipt of your notice of rent review for the above property, and
we would hardly need to add that we cannot accept your revised figure.
And the
question was whether that was sufficient to constitute a counternotice.
It is
interesting to see how Mr Hague, who appeared in that case for the landlord,
put his point, because his argument is summarised by Goulding J in the
following words:
So, says Mr
Hague, I must ask myself whether anyone receiving the letter of March 31 must
have realised at once that the tenant was requiring arbitration; or, putting it
another way in the judge’s later words, that the recipient could be in no doubt
as to what the tenant was up to.
I do not
propose to quote extensively from the judgment of Goulding J, but he says
towards the end of his judgment:
I return to
the present short question after that excursion into authority, and it is
indeed a short question. Here, time is of the essence
and I pause to
say so it is with us.
There is
nothing to say that any particular precision in a notice or a counternotice is
of the essence
so it is for
us.
It is a pure
question of construction whether or not the words ‘we would hardly need to add
that we do not accept your revised figure,’ fairly read, tell the landlord that
the tenant requires the open market rental value to be determined by an
independent surveyor.
And having said
that, the learned judge concluded that they did not, and accordingly that the
letter was not an effective counternotice. For my part, having read and re-read
the
It seems to me that the clear construction which a normal person would have put
on it was that here was an opening shot in some negotiations.
I now turn to
the second and third questions with which I have to deal, which I think I can
conveniently take together, because (at all events in a case such as the
present) there is not all that material difference between waiver and estoppel;
the questions are founded again, of course, on the two letters from the
landlords’ solicitors, which I have already read, of May 1 and 10; and if I may
just quote the relevant extracts, at the end of the letter of May 1, the
landlords’ solicitors, having suggested that the tenant should instruct the
valuers to communicate with De Groot Collis, say: ‘Failing this the matter will
have to be refered to the Royal Institution of Chartered Surveyors in
accordance with the provisions of the Lease,’ and in the letter of May 10 after
suggesting that the two surveyors contact each other to try to get agreement
‘Failing that’ (failing in their contact that is), ‘or in the event of
non-agreement between the respective Valuers, then the issue will have to go to
arbitration.’ And those are the basic
submissions. But, of course, Mr Geddes also relies on the acts of the parties
and the fact that the landlords and the tenant quite clearly, through their
respective valuers, continued to negotiate after the expiration of the three
months’ time-limit laid down in clause 5(2)(b) and (c). That is to say, after
either June 21 or 22 1979.
I will return
to Mr Geddes’ submissions in a moment, but first of all I think I ought just
briefly to refer to the law on the subject, and for that purpose I just propose
to refer very briefly to one or two extracts from Halsbury’s Laws of England,
4th ed, vol 9, on the discharge of contractual promises, under the headings of
‘waiver’ and ‘promissory estoppel,’ at paragraphs 571 to 577. On ‘waiver’ Halsbury
says this:
571. General.
‘Waiver’ is a vague term used in many senses. It is sometimes used in the sense
of an election, as where a person decides between two mutually exclusive
rights. . . . It is also used to describe a situation where a party prevents
performance or announces that he will refuse performance . . .
I need not
read the rest of that.
The validity
of a waiver has been considered in two main contexts and the second of them is
as follows
. . . whether
a party who has waived a particular term of, or claim under, the contract may
go back on his concession and insist on performance in accordance with the
exact terms of the contract.
As to the form
of waiver, in paragraph 574:
Waiver may be
express or implied from conduct, but in either case it must amount to an
unambiguous representation arising as a result of a positive and intentional
act done by the party granting the concession with knowledge of all the
material circumstances. Furthermore, it seems that for a waiver to operate
effectively the party to whom the concession is granted must act in reliance of
the concession.
On promissory
estoppel in paragraph 575, Halsbury says:
General.
Similar to waiver is the doctrine of promissory or equitable estoppel, whereby
a party who has represented that he will not insist upon his strict rights
under the contract will not be allowed to resile from that position, or will be
allowed to do so only upon giving reasonable notice.
And in
paragraph 577, under the heading ‘Unambiguous representation of intention’:
The basis of
promissory estoppel is that one party has been led by the conduct of the other
to believe that that other’s strict rights under the contract will not be
enforced. Whatever the position with regard to other types of estoppel may be,
a promissory estoppel can only be founded upon a clear and unambiguous promise
of future action. Thus, where the party being offered a concession in respect
of the terms of the contract reasonably understands the concession in one way
and the party granting the concession reasonably understands it in another way
there is no foundation for promissory estoppel. Where, however, the representee
understands the concession in the only reasonable manner but the representor
intended it in a different and possible, though unlikely, sense, there may be a
promissory estoppel.
I will also
refer briefly to a passage from the judgment of the Master of the Rolls (he was
then Denning LJ) in Sidney Bolsom Investment Trust Ltd v E Karmios
& Co (London) Ltd [1956] 1 QB 529, and the short passage I wish to
refer to comes at the bottom of p 540 where the learned Lord Justice said this:
Now I quite
agree that a representation about the legal position–about the legal effect of
a document, for instance–can give rise to an estoppel
He then refers
to two cases.
But in order
to work as an estoppel, the representation must be clear and unequivocal, it
must be intended to be acted on, and in fact acted on. And when I say it must
be ‘intended to be acted upon’, I would add that a man must be taken to intend
what a reasonable person would understand him to intend. In short, the
representation must be made in such circumstances as to convey an invitation to
act on it.
And then he
says that the representation in the case in point conveyed no such suggestion.
That is, I
think, a sufficient introduction to the law on the subject and contains
sufficient red lights, or signposts, for me in my consideration of the letters
and conduct of the parties in the present case. I note in particular that the
representation must be clear and unambiguous; must be intended to be acted on;
and must have been acted on.
Mr Geddes, in
a powerful argument for the tenant, made the following points: He said that the
letter of May 1 necessarily accepted that the so-called counternotice, that is
the letter of April 27, was valid; and was a valid counternotice because, he
says, it is only on that basis that the matter could have been referred to
arbitration at all. It will be remembered that it is the tenant and not the
landlord who has the right to refer to arbitration. Mr Geddes says, with some
force, that that last sentence, ‘Failing this, the matter will have to be
referred to the Royal Institution of Chartered Surveyors in accordance with the
provisions of the Lease,’ and in the letter of May 10, ‘The issue will have to
go to arbitration,’ is tantamount to recognition by the landlords’ solicitors,
and therefore by the landlords, that the letter of April 27 did all that was
required of it under clause 5(2)(c) to operate as a counternotice. It was in
effect, says Mr Geddes, a representation that the tenant need take no further
steps, and the tenant acted on it, he says, because he was lulled into a false
sense of security and did nothing during the remainder of the three months’
period to put in any effective counternotice; and it lulled the tenant into
thinking that the letter which his solicitors had written was treated as a
valid counternotice; and, says Mr Geddes, it was acted on by both parties
because of the continued negotiations by their surveyors after the expiration
on June 21-22 or so, of the three months’ period. Because, and here again there
is considerable force in his submission, if it was not a valid counternotice
then, come June 22 at the latest, the landlords would have been entitled to
turn round and say, ‘The three months are up; our 2(a) notice is good; pay up
your £3,600 per annum.’ Mr Geddes points
to the fact that not only was that not said, but that discussions and
negotiations of some kind or the other, which in fact, as far as Shaw
Associates and De Groot Collis were concerned, had reached some form of
agreement, went on for some considerable period after June 22.
Mr Rayner
James, for the landlords, counters that by saying that if it is clearly looked
at, the letter of April 27, the so-called counternotice is not ambiguous. He
says that all that the letter of May 1 does is to say that if there is no
agreement, the matter, it is true, will have to be referred to the Royal
Institution of Chartered Surveyors in accordance with the provisions of the
lease. That, says Mr Rayner James,
prepared, after various discussions, to accept the landlords’ estimate of
£3,600 then he must take the necessary steps within the necessary time to
invoke clause 5(2)(c).
Apart from the
matter to which I have already referred, there is no evidence before me that
the tenant was lulled into any sense of security by the landlords’ solicitors’
letters of May 1 and 10, nor is there any evidence before me as to the reason
why negotiations continued after June 22, and it is, I think, important that I
should be careful, in the absence of any such evidence, in drawing inferences
as to the motives and intentions of the parties unless those inferences are
irresistibly justified by evidence which is in fact before me.
Now the
starting point of my problem undoubtedly is the defect, as I have held, in the
letter of April 27. I have held that it was not an effective counternotice,
principally because it did not contain the sort of information which, I feel,
and I think Goulding J felt, is necessary to alert the landlords to precisely
what the tenant is proposing to do. Now is it clear that the letters of May 1
and 10 are unambiguous? I do not think
that in the context they are. I think that if you are answering a letter like
the letter of April 27 which, ex hypothesi, as I have held, is an
inadequate counternotice because of its lack of information as to the tenant’s
proposed course of action, it will require something very much more positive
than these last sentences of the letters of May 1 and May 10 before they could
clearly be held to be an unambiguous representation. Moreover, is it clear that
if they were a representation they were intended to be acted upon; and is it
clear that they were in fact acted upon?
Now I agree that if a reasonable man receiving the May 1 letter, and
that is the more crucial of the two, could, and would, fairly have assumed that
the landlords intended by that letter to waive any requirement for
counternotice, that would be good enough, whether or not the tenant did in fact
make that assumption.
I am anxious
not to approach the solution of this problem on a narrow or technical basis.
The fact is, however, that under the machinery agreed by the parties in clause
5 of the lease the landlords’ new rent is conclusive unless either the parties
agree otherwise or a valid counternotice is served; and therefore the onus is
on the tenant from the outset, if he wants to keep the position open, to serve
the counternotice within the three months’ period. As I have already said, I do
not think he did so. That being so, for waiver or estoppel to arise it seems to
me that the representation relied on must be particularly clear and
unambiguous, and I am not satisfied that anything in the letters of May 1 and
10 satisfies that test. The onus of establishing the waiver or estoppel in
these circumstances is, of course, on the tenant. For my part I am not
satisfied that the alleged representation was sufficiently clear and
unambiguous; and whether or not it was intended to be and was acted upon is
largely a question of inference on very scant evidence. In the circumstances it
seems to me that I am bound to uphold the landlords’ contention that as a
result of a clause 5(2)(a) notice the rent for the second three years of this
lease is £3,600 per annum.
Declarations
were made in favour of the plaintiffs with costs.
