It might seem inconceivable that a tenant could serve a break notice in the wrong name. None the less, in several cases involving group companies, the break notice has included the wrong company name.
Hexstone Holdings Ltd v AHC Westlink Ltd [2010] EWHC 1280 (Ch); [2010] PLSCS 179 concerned a notice that was served following the tenant’s merger with the Eddie Stobart group of companies. The tenant expected to change its name to Eddie Stobart Ltd (ES). It notified its landlord of its intentions, but the change was not made, although the landlord sent rent invoices to, and was paid by, ES.
The tenant subsequently served a break notice “for and on behalf of” ES on notepaper that bore the name and number of that company, not those of the tenant. The landlord claimed that the notice was invalid. The judge agreed. He decided that: (i) the break notice was given by ES as principal; (ii) a break notice given by the wrong entity is invalid; (iii) mere payment of rent coupled with occupation by a third party does not necessarily indicate that the rent payer is authorised to terminate a lease; (iv) subsequent ratification by the tenant will not make a bad notice good.
There was no evidence to suggest that the tenant had decided to terminate its lease or that it had authorised ES to do so; nor was there evidence that it had held out ES as authorised to serve the break notice on its behalf. In addition, even if the sender had been so authorised, the break notice would have remained invalid because it did not state that it had been given by ES as agent for the tenant. It was therefore impossible to see how the landlord could safely have acted on the notice in the knowledge that it would bind the tenant.
Was there any scope to apply the Mannai test (see Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] 1 EGLR 57; [1997] 24 EG 122; [1997] 25 EG 138) and argue that a reasonable recipient would have read the notice as having been given by the correct person? The judge ruled that it was not a question of what a reasonable recipient might think.
In his opinion, there is a fundamental distinction between the formal requirements that a notice must satisfy in order to be valid and the separate question of whether the notice, as given, is effective to convey its meaning to the landlord. The Mannai principle deals with only the meaning of the notice. Consequently, it was correct to ask whether the notice had been given by the tenant or by another party.
The decision highlights the importance of checking the registers of title (or, where title is unregistered, the title deeds) and the information held by the Registrar of Companies to establish in whose name break notices should be served – because notices served in the wrong name are invalid.
Allyson Colby is a property law consultant
