The court has upheld a break notice, even though it was in the wrong form because it did not include words prescribed by the lease
Practitioners will be familiar with Lord Hoffman’s pronouncement that, where a break clause requires break notices to be given on blue paper, a notice on pink paper will not be effective to terminate the lease: Mannai Investments v Eagle Star [1997] AC 249; [1997] 1 EGLR 57.
What then are we to make of the High Court decision in Siemens Hearing Instruments Ltd v Friends Life Ltd [2013] PLSCS 164 that a notice, which failed to comply with a requirement that it “must be expressed to be given under section 24(2) of the Landlord and Tenant Act 1954”, was nonetheless effective to terminate the tenant’s lease? The provision certainly appeared to be mandatory, but the court rejected the landlord’s argument that the omission of the magic words had invalidated the tenant’s notice.
The requirement to use these words in the break notice was included to safeguard the landlord against the risk that the tenant might exercise its break right in a falling market and request a new business tenancy in the expectation of better terms. Garston v Scottish Widows Fund [1996] 1 EGLR 113 has since confirmed that this is not possible.
The court accepted that this did not mean that the tenant could simply disregard the requirement, but turned to Newbold v The Coal Board [2013] EWCA Civ 584; [2013] PLSCS 115 for confirmation of the flexibility of the approach of English law to the interpretation of statutes and contracts. There, the court ruled that it must consider the words of the statute or contract in the light of its subject matter, background and the purpose of the requirement, and of the effect, if any, of non-compliance on the parties, on the assumption that Parliament in the case of legislation, and the parties in the case of a contractual requirement, would have intended a sensible, and in the case of a contract, commercial result.
The judge distinguished between statutes and contracts that state that a non–compliant notice will be invalid, and statutes and contracts that say nothing about the consequences of non-compliance. He ruled that, where a statute or professionally drafted contract is silent about the consequence of non-compliance, the court may reasonably assume that this was deliberate and that the draftsman intended that the notice should survive non-compliance in some cases.
It seems that the words “must” or “shall” are not necessarily decisive. The court will look to the substance, and not the form. The break clause at the centre of the dispute in this case said nothing about the consequences of serving a non-compliant form of notice and the judge took the view that it would be unrealistic to attribute to the parties an intention to make the tenant’s exercise of an important right dependent on compliance with a meaningless formula.
The judge asked whether the information was essential and whether its omission had prejudiced the recipient – and decided that this was not the case here. Consequently, the break notice was valid and would be effective to terminate the lease on the break date, subject to the fulfilment of the various preconditions set out in the break clause.
Allyson Colby is a property law consultant
