Notice to quit — Tenants’ break clause — Whether notice valid as to content and form — Whether valid as addressed to and served on landlords’ agents
dated January 7 1987 the defendant tenants held premises from the plaintiff
landlords under a term of 25 1/4 years from June 24 1986 expiring on September
29 2011 — Clause 5(9)(i) of the lease provided that ‘If the lessee shall be
desirous of determining this present lease at the end of the fifth year of the
term and of such its desire shall deliver to the lessor not less than nine
months’ prior notice in writing to expire on 28th September 1991 . . .’ — The
defendants addressed a letter dated December 20 1990 to a company called Peel
(South East) Ltd stating ‘Herewith notice of determination . . .’ and referring
to their desire and intention to determine the lease at the end of the fifth
year of the term — The plaintiffs contended that the notice was invalid in
stating the wrong date and in being addressed to and sent to an associated
company, Peel (South East) Ltd, which was not the landlord — At all material
times the demised premises were managed by Peel (South East) Ltd
their desire and intention of determining the lease: that was precisely what
the notice had done — The notice did not have to specify September 28 1991 — No
clause in the lease required that the notice should be addressed to the
landlords — The recipient of the notice, being the managing agents, had a
general agency in relation to the premises and sufficient authority to receive
the notice by virtue of the general authority to manage — Declarations
accordingly
The following
cases are referred to in this report.
Carradine
Properties Ltd v Aslam [1976] 1 WLR 442;
[1976] 1 All ER 573; (1975) 32 P&CR 12
Hankey v Clavering [1942] 2 KB 326; [1942] 2 All ER 311, CA
Townsends
Carriers Ltd v Pfizer Ltd (1977) 33 P&CR
361; 242 EG 813, [1977] 1 EGLR 37
This was an
application by the plaintiffs, Peel Developments (South) Ltd, by way of
originating summons to have determined questions relating to the validity of a
notice to determine a lease held by the defendants, Siemens plc.
Kirk Reynolds
(instructed by Wedlake Bell) appeared for the plaintiffs; Michael Driscoll QC
(instructed by Nabarro Nathanson) represented the defendants.
Giving
judgment, JUDGE BAKER said: I have before me an originating summons for
the determination of the true construction of a tenant’s break clause in a lease.
The lease was a lease of some offices made on January 7 1987 between Langford
Property Co Ltd, who were the predecessors in title to the plaintiffs, Peel
Developments (South) Ltd, as landlords and Siemens Ltd, as tenants, although
their style is now Siemens plc. It is the same company under a different
classification.
The lease was
for 25 1/4 years from June 24 1986, thus expiring on September 29 2011. It is
the additional quarter which has given rise to the problems in this case.
Under the
reddendum, the initial rent was to be paid as from January 1 1987 to September
29 1991. That was the first review date. But the first period by computation
was five and a quarter years until one arrived at the first review date.
Thereafter there were three review dates at five-yearly intervals.
In the lease,
there are a number of clauses in which the landlord or his managing agent are
specifically referred to. In others, agents simply, or other specific agents
like the surveyor, are mentioned. Some seven or eight references have been
called to my attention. One of them, for example, is on p 13 of the lease,
dealing with the service charge. It provides that:
The amount of
the service charge shall be ascertained or certified by a certificate
(hereinafter called ‘the certificate’) signed by the lessor or his agents.
Then there is
a reference on p 14 in defining expenses:
That all
proper fees, salaries, charges and expenses whatsoever payable to any managing
agents’ staff . . .
I mention that
for a point that will become clear later.
The important
clause for the purpose of this lease is, as I have already mentioned, the
tenants’ break-clause. That is to be found on p 35, which I will read out in
extenso. It is clause 5(9)(i) and it starts as follows:
If the lessee
shall be desirous of determining this present lease at the end of the fifth
year of the term and of such its desire shall deliver to the lessor not less
than nine months’ prior notice in writing to expire on 28th September 1991 . .
.
— and then
follow a number of conditions —
. . . and
shall pay a sum equivalent to six months’ rent by two instalments and all rent
and perform and observe all covenants . . .
The conclusion
follows:
In such case,
immediately after the expiration of the notice this present lease shall cease
and be void but without prejudice to any claims by the lessor against the
lessee in respect of any antecedent breach of any covenant or condition herein
contained.
It is not
challenged that the tenant paid the necessary sums and performed the covenants
of the lease. The question is whether sufficient notice was served in
accordance with that clause. I will come to the evidence in a moment.
Before leaving
the lease I should mention clause 8:
Provided
lastly that if the lessee shall desire to serve any notice on the lessor
hereunder then such notice shall only be validly served if served by recorded
delivery or registered post.
Going back to
clause 5, one notices at once that there is an ambiguity in that clause:
If the lessee
shall be desirous to determine this present lease at the end of the fifth year
of the term and of such its desire shall deliver a notice to expire on 28th
September 1991.
By computation,
as we have just seen, the fifth year of the term ends on June 24 1991, whereas
if it is to expire on September 28 1991 then that will be at the end of the
first quarter and the fifth year of the term. In fact, it seems that the term
did not start until January 1987, although not much stress has been laid in
argument on that point.
What has
happened in this case is that the tenants, Siemens, addressed a letter dated
December 20 1990 to a company called Peel (South East) Ltd, 17 Albemarle
Street, and headed it with the address of the property. Peel (South East) Ltd
is not the company owning the property, though it is in the same group. The
notice begins:
Herewith
notice of determination in respect of the above . . .
It continues:
Siemens PLC
(formerly Siemens Ltd) of Siemens House, Windmill Road, Sunbury-on-Thames . . .
in accordance with clause 5(9)(i) of the lease hereby gives notice of its
desire and intention to determine the lease at the end of the fifth year of the
term created thereby.
That notice
was in fact received on December 24 at the registered office both of Peel
(South East) Ltd and the plaintiffs, Peel Developments (South) Ltd. Although
there was some dispute about this earlier, it is accepted that it was received
on that date, addressed as I have said. As regards the nine months to expire on
September 28 1991, it was in fact in time, because it would have until December
28 to arrive to be in time. But, in common with many business offices over the
Christmas period, the landlords’ office was in fact closed on Christmas Eve,
and did not reopen until some date in early January.
Whatever may
be the business practices disclosed in some of the earlier cases to which I
have been referred, there is no doubt that an extended closure over Christmas
is a very common business practice in these days; and it has not been suggested
that the landlords should have kept their offices open over the period in
question or to suffer prejudice by not keeping them open.
The points
that are taken and which it is said on behalf of the landlords that that is not
a valid notice are two. It is said that it states the wrong date: that it
indicates that it is notice of their desire to determine the lease at the end
of the fifth year of the term created thereby, that is say, towards the end of
June; and that is contrary to what is stated in the clause: they have to
determine on September 28.
The other
question is whether it is sufficiently served by being addressed to and served
on a company which were not the landlords, but an associated company. It
appears from the evidence that that company is the managing agent; so that
question breaks down into two, as to whether the notice should have been
properly addressed to the landlords, Peel Developments (South) Ltd (and it is
patent that it was not so addressed); and the other question is whether, if it
could be addressed to an agent, the agent had sufficient authority to receive
it.
The first main
question, and the first subsidiary question under the second question, go to
the form of the notice. The second subsidiary question goes to matters which
are outside the scope of the form of the notice. I go back to the first
question, whether the notice specified the wrong date in such a way that it is
incurable. On that question, I was referred by Mr Reynolds, for the landlords,
to the well-known decision of the Court of Appeal in Hankey v Clavering
[1942] 2 KB 326. That has a brief headnote which reads:
Under the
terms of a lease of twenty-one years from December 25, 1934, either party could
determine the tenancy at the end of seven years on giving six months’ notice.
The landlord gave the tenant’s solicitors a notice as from June 21, 1941, which
purported to determine the lease on December 21, 1941. The solicitors
subsequently acknowledged the receipt of this notice, saying it was properly served
on them.
The Court of
Appeal held that, although the mistake in the notice was obviously due to a
slip on the part of the landlord, the notice was invalid and that the
acceptance of its service by the solicitor did not cure that defect.
In the
judgment of Lord Greene (the then Master of the Rolls), there is on this point
— there were two points in the case — the following passage at the top of p
330:
It is
perfectly true that in construing such a document, as in construing all
documents, the court in a case of ambiguity will lean in favour of reading the
document in such a way as to give it validity, but I dissent entirely from the
proposition that, where a document is clear and specific, but inaccurate on
some matter, such as that of date, it is possible to ignore the inaccuracy and
substitute the correct date or other particulars because it appears that the
error was inserted by a slip.
So there one
had a self-contained notice which, on the face of it, specified the date it was
to determine, but that date was not the date on which the tenant could
determine the lease.
The present
case is not so straightforward as that because one notices at once that it is
not a self-contained notice in that sense. The most important matter is that it
refers expressly to clause 5(9)(i) of the lease. It simply says that, in
accordance with clause 5(9)(i), the tenants give notice of their desire and
intention to determine the lease at the end of the fifth year of the term
created thereby. As the clause is incorporated in that way, one is required to
go to it to see what it does actually say. It is:
If the lessee
shall be desirous of determining this present lease at the end of the fifth
year of the term and of such its desire shall deliver to the lessor not less
than nine months’ prior notice in writing to expire on September 28.
What the
clause requires is simply for the lessees to give a notice of their desire of
determining the lease at the end of the fifth year of the term. That is
precisely what this notice has done. It adds the phrase ‘and intentions’ to
desire. In my judgment, this does not affect the question. It merely signifies
not only that the tenants have the desire to bring about a certain result but
also the power to bring it about. The difficulties have arisen not because of
any mistake in the notice but because of the ambiguity in the clause in the
lease. One phrase talks about determining the lease at the end of the fifth
year of the term and in another phrase ‘to expire on 28th September 1991’.
I do not
accept the submission that has been made by Mr Reynolds that the clause
requires the lessees to specify September 28 1991. I would read this clause as
stating that expiry on September 28 1992 is simply a consequence of the lessees
expressing their desire to determine at the end of the fifth year of the term.
Accordingly,
the decision of the Court of Appeal in Hankey v Clavering is
readily distinguishable. Indeed, the way one should approach the question in
this case is in fact spelt out by Lord Greene in Hankey v Clavering,
when he said:
It is
perfectly true that in construing such a document, as in construing all
documents, the court in a case of ambiguity will lean in favour of reading the
document in such a way as to give it validity . . .
That is a
well-known doctrine reiterated by Goulding J in Carradine Properties Ltd v
Aslam [1976] 1 WLR 442. In that case the date specified was an
impossible date in that it had already occurred, but the test that Goulding J
applied there, where the ambiguity was manifest on the face of the notice, was
at p444H:
I would put
the test generally . . . Is the notice quite clear to a reasonable tenant
reading it? Is it plain that he cannot
be misled by it?
Despite the
submissions of Mr Reynolds, it seems to me that when one looks at the notice
and then reads the clause, coupled with the fact that it was served in December
(which was nine months before the date specified in the clause), the result is
clear. It seems to me that the notice was a notice to take effect under the
clause and to expire on September 28. The difficulties of the notice have been
brought about by the poor wording of the clause itself and not by mistakes
which have been made by the tenants. Therefore, I resolve the first point in
favour of the tenant.
Turning to the
second main question, I should refer to some of the evidence in the case. In
his affidavit the landlords’ solicitor says:
The lessor
was at all material times Peel Developments (South East) Ltd, which name was
changed on 31st January 1991 to Peel Developments (South) Ltd. The management
of the premises demised by the lease was at all material times carried out by
the lessor’s agent Peel (South East) Ltd.
The tenants
have done some investigations into the structure of the landlords’ companies by
way of supplementing that rather slender evidence on behalf of the landlords.
Mr Clark, their solicitor, says:
According to
the records of the Company Registration office, the previous name of the
Plaintiff was Peel Developments (SE) Ltd and the name was changed to the
Plaintiffs’ present name on 17th January 1991.
They produce a
copy of the certificate of change of name. So it would appear that the
landlords’ evidence is not correct in two particulars: that the true former
name of the landlords was Peel Developments (SE), not (South East), Ltd; and
the name was changed not on January 31 but on January 17.
Going back to
Mr Clark’s affidavit, he goes on to identify that:
In the period
between 3rd and 30th December 1990, the following persons were directors both
of the Plaintiff and of Peel (South East) Ltd.
And he sets
out the names of five gentlemen. He also notices that a further gentleman was
secretary both of the plaintiff and of Peel (South East) Ltd. He finally
discovered that:
At all
material times (a) the Plaintiff was a wholly owned subsidiary of Peel (South
East) Ltd and the registered office of the Plaintiff and of Peel (South East)
Ltd were both situate at 17 Albemarle Street.
A further affidavit
filed on behalf of the tenants produces some letters which are designed to show
the involvement of Peel (South East) Ltd. The first one is in October 1989,
before these events, from a firm called Knight & Co to the lessees, saying:
We are
writing to advise you that with effect from 1st October 1989 management of the
above property is being dealt with by Peel (South East) Ltd, another company
within the group. There are no changes in procedure other than the name.
Then following
that, in the same month, a letter comes fron Peel (South East) Ltd which takes
up the question of the service charge. It refers to the lease and the amount
owing on the service charges:
You have been
invoiced. I should be pleased therefore if you would let me know the reasons
why you are withholding payment of this amount, which has been legitimately
billed. If no response is received within seven days, I shall instruct bailiffs
in respect of the recovery of the arrears.
It is
suggested that that letter shows that they are agents having a wider authority
than merely collecting the rents. It is manifest that they have authority to
take legal steps to recover rents.
Then a further
letter of January 8 1989 from Peel (South East) Ltd is produced. It says:
We have
instructed agents to market Woodley House [that is, the property] for a
freehold disposal and access is required to inspect your accommodation.
That again
shows that the authority of Peel (South East) is rather wider than just mere
rent collectors. And, indeed, it underlines what was discovered by Mr Clark:
that the plaintiff is a wholly-owned subsidiary of the managing agents.
That is the
evidence which has been drawn to my attention in relation to the second main
question. As I have said, there are two points which are taken. The first is
that it was incorrectly addressed to Peel (South East) Ltd, the managing
agents, rather than being addressed to the landlords, Peel Developments (South)
Ltd. Authorities have been shown to me, the most recent being the decision of
Sir Robert Megarry in Townsends Carriers Ltd v Pfizer Ltd (1977)
33 P&CR 361*.
*Editor’s
note: Also reported at (1977) 242 EG 813, [1977] 1 EGLR 37.
There on both
sides it would seem (that is, the landlords and the tenants) the handling of
matters relating to the lease was in the hands of agents, in the form of
associated companies. There was a clause in the lease 4(c) under which:
If either the
landlord or tenant shall desire to determine the term hereby granted at any
time . . . and shall give the other party 12 months previous notice . . . and
if the tenant shall give such notice . . .
So there is an
either-way determination clause expressed as exercisable by notices given by
landlord or tenant as the case may be. The notice was sent by the tenants’
agents, Unicliffe Ltd, not the tenants themselves, who were Pfizer Ltd. It was
sent to Wilkinson Transport Ltd. Wilkinson Transport was a wholly-owned subsidiary
of the holding company, of which the actual landlord, Townsends Carriers Ltd,
was another subsidiary. Therefore, notice was sent to the agents. What the
learned Vice-Chancellor held was that:
Since the
plaintiff and defendant stood by and let WT Ltd and U Ltd respectively deal
with the premises as if WT Ltd and U Ltd were respectively the landlord and
tenant there was general agency both as to the landlord and as to the tenant;
that where the general control of the property was left by the landlord with an
agent a notice to quit given by the agent would be valid even though it was
given by the agent in his own name, and an agent who had power to give an
effective notice would also have power to receive a notice.
In the course
of his judgment, the learned Vice-Chancellor differentiates the case of an
agent that merely had authority to collect rents from one that had general
authority. This authority seems to cover both the points that I have here:
whether the notice can be given to the managing agent by name rather than to
the landlord by name and whether the managing agent had authority to receive
it.
Mr Reynolds
conceded that there was no authority or stipulation in the clause itself that
it had to be given to the lessors, although he stressed that clause 8 of the
lease did say:
If the lessee
shall desire to serve any notice on the lessor hereunder then such notice shall
only be validly served if served by recorded delivery or registered post.
He submitted
that that clause did contemplate that the notice should be addressed to the
lessors.
In my
judgment, that is putting too much on to that clause. The purpose of this
clause is to provide for the mode of service. I cannot collect from this clause
that there is a specific requirement that the notice shall be directed to the
lessors. Of course, if the lessees do not direct it to the lessors, they run
the risk that the person to whom they do direct it may have no authority to
receive it, but that is a different matter to whether the notice in proper form
has to be directed to the lessors. I would not accept that point.
There remains
the question of whether the managing agents had authority to receive the
notice. An agent can receive a notice of this sort if he has sufficient
authority or if he is held out as having that authority, even though in that
particular instance his authority has been restricted. The former would be a
case of express authority; the latter would be a case of ostensible authority.
Then if he did
not have authority, a further question may arise in the particular case. A
notice served on an agent who had not got authority to receive might still be
good if it could be shown that the agent was likely to pass it on to the
landlord. In the present case, the tenants could not rely on that last point
simply because there was not time enough for the notice to have got to the
hands of the agents and then be handed on to the landlords, having regard to
the fact that the offices of the landlords and their agent were closed on the
dates I have already mentioned.
So the
question comes to this, whether the company to which this notice was directed
did have authority to receive it. The way it is put on behalf of the tenant is
that these were general agents. The landlords have expressly said in their
evidence that the management of the premises demised by the lease was at all
material times carried out by the lessors’ agent, Peel (South East) Ltd.
Letters have been produced which are consistent with that position and not with
some more limited authority of the agents. And also the company structure would
seem to underline the control of Peel (South East) Ltd over the plaintiffs’
affairs. The plaintiffs have not challenged that in any way. They have put
forward Peel (South East) Ltd as managing agents. They have not sought to show
that their authority is restricted; and it would seem to me that a managing
agent, among other things, would have general authority to receive notices
relating to the property and receive them in their own name. That accords with
the decision of Sir Robert Megarry V-C in Townsends Carriers Ltd v Pfizer
Ltd.
It was sought
to distinguish this case on the basis that there the plaintiff and defendant
had stood by and let the two other companies deal with the premises as if they
were respectively landlord and tenant. That, however, was only the mode in
which the learned judge there could draw the inference that there was a general
agency as to landlord and tenant. He did not suggest that that was the only
material from which the inference could be drawn. It all depends on the
evidence in the particular case. In this case, Peel (South East) are held out
as charged with the management of a property and therefore it seems to me that
there is a general agency in relation to this property; and it is really on
that short ground, without going further into the authorities, I think that
Peel (South East) Ltd did have authority to receive this notice by virtue of
the general authority to manage the property conferred on them.
I should
finally mention that it was stressed that in the lease there were a number of
occasions when the agents were specifically referred to. I could not read that
as in some way limiting the general authority that Peel (South East) Ltd had in
relation to the management of the property.
Some clauses
obviously deal with cases where even a general agent might not have authority
to deal with a particular matter and the reference is put in to widen it. An
example of this is a certificate signed by the lessors’ agents as to the amount
of the service charge. There might be a question as to authority on an
important matter like that, determining an element in the rent, if the
certificate was simply signed by some agent.
In the result,
I propose to return affirmative answer to the questions which have been raised
by the originating summons. That is to say, whether upon a true construction of
clause 5(9)(i) and the events which have happened the notice dated December 20
1990 addressed to Peel (South East) Ltd was valid and effective to determine
the term created by the lease at the end of the fifth year of the term. I shall
answer affirmatively that it determined it on September 28.
Declarations
accordingly with costs for the defendant.
