Rent review clause — Construction — Jurisdiction — Appointment of independent expert — Lease referring to “retail purposes” — Clause specifying particular retail trade involved — Expert paying heed to limitation — Determination of final rent still to be made — Whether ouster of court’s jurisdiction — Whether letting to be under same terms other than quantum of rent — Whether general retail user overriding clause specifying retail trade — Defendant tenants’ argument on ouster of jurisdiction rejected — Court finding for landlords on issue of construction
In March 1986, the defendant tenants took an underlease for 25 years on unit 76, 27 Avon Walk, Milton Keynes, from the Milton Keynes Development Corporation, the reversion of which was vested in the plaintiffs. The first rent review was due on January 1 1991 and thereafter at five-year intervals. Clause 2 of Schedule 5 provide that in default of agreement on the new rent, the decision of an independent surveyor acting as expert and not as arbitrator was to be final. In the event there was no agreement and an independent surveyor was appointed who intended to make his award by the end of July 1992.
On March 13 1992 the originating summons was issued by the plaintiffs, who sought a declaration that, on the true construction of the lease, the current rental value for the purposes of the fifth schedule, should be determined onthe basis that the premises were to be let for retail purposes without further restriction; in particular, that the restriction in the lease that the use of the premises should be confined to the retail sale of high-quality chinaware should be disregarded. The defendants sought to have the originating motion struck out on the ground, inter alia, that if the surveyor asked the right question, the parties were bound, even if the answer was wrong. On that basis there was ouster of jurisdiction. The defendants cited Basingstoke and Deane Borough Council v Host Group Ltd [1987] 2 EGLR 147, where it was held that, in general, parties to a rent review provision were to be taken as having intended the letting to be on the same terms — other than quantum of rent — as those subsisting under the actual lease (see also Pontsarn Investments Ltd v Kansallis-Osake-Pankki [1992] 22 EG 103; Nikko Hotels (UK) Ltd v MEPC plc [1991] 2 EGLR 103; and Jones v Sherwood Computer Services plc [1992] 1 WLR 277). The plaintiffs raised the case, inter alia, of Sheerness Steel Co plc v Medway Ports Authority [1992] 2 EGLR 133, where it was held that a notional lease incorporated a user provision modified for such other purposes as might from time to time be approved by the landlord.
Held The striking-out application was refused.
1. At issue there was a real question of construction. Therefore it was not open to the defendants to say as a preliminary point that the court had to decline jurisdiction. The court could not refuse to consider a decision where an expert, appointed to determine the rent review, might have incorrectly construed the terms of a lease.
2. In the cases cited by the defendants, the rents had been determined by the appointed experts. In the present case, the final determination of the rent had yet to be made.
3. On the construction point itself, the issue was whether the terms of the hypothetical lease carried the same restrictions on user as the existing lease or whether it contemplated retail purposes generally. Submissions on the commercial background to the issue did not alter the conclusion of the court that the words in a lease “for retail purposes” were not consistent with having regard to the terms of specific user of a particular retail trade.
4. The words for “retail purposes” prevailed and the rent review was to be conducted on the basis of a hypothetical lease for general retail user.
David Neuberger QC (instructed by Herbert Smith) appeared for the plaintiffs; Michael Hart QC (instructed by Charles Lucas & Marshall, of Newbury) appeared for the defendants.
