Commercial premises – Business tenancy – Break notice – Claimant granting lease of business premises to defendant companies — Solicitor serving notice of intention to exercise break clause in name of first defendant only – Whether valid break notice – Whether claimant estopped from denying validity of notice – Judgment in favour of claimant
By a lease dated July 2002, the claimant landlord granted the two defendant companies, which were part of the same group, the tenancy of a warehouse commencing in April 2002 and expiring in April 2012. The rent was subject to review in March 2007. The second defendant was a dormant company and a wholly-owned subsidiary of the first defendant.
By clause 7.2 of the lease, the defendants were entitled to determine it in March 2007 by giving the claimant not less than nine months’ written notice and provided that: (i) they had paid the rents reserved up to the date of the expiry of the notice; and (ii) on such expiry, they delivered up the premises with vacant possession. Once the notice expired, the term would end but without affecting the rights of either party against the other in respect of any previous breach of covenant.
In June 2006, a solicitor purporting to act under the break clause on behalf of the defendants sent the claimant a break notice that referred only to the first defendant. The claimant therefore took the view that the notice was invalid since it had been served without the authority of both defendants, as tenants.
The court had to decide whether: (i) the solicitor had been authorised to serve the notice on behalf of either defendanth defendant (the authority issue); (ii) the notice was effective under the break clause (the construction issue); and (iii) the claimant was estopped from denying the validity of the notice (the estoppel issue).
Held: Judgment was given in favour of the claimant.
(1) The solicitor had the authority to serve the break notice on behalf of both defendants. That authority was not affected by the fact that the solicitor had not inserted both the names of both defendants. It had been properly instructed by the group’s property department, which in turn was expressly authorised to act for the defendants; alternatively, an agency relationship had been agreed. The arrangements between the defendants and the giving of instructions to a solicitor resembled a collective decision that decisions to serve notices and other decisions relating to property, and those as to the serving of break notices, would be dealt with by a group organisation established to handle matters of that kind: Procter & Gamble Technical Centres Ltd v Brixton Estates plc [2002] EWHC 2835 (Ch); [2003] 2 EGLR 24; [2003] 32 EG 69 followed.
(2) In order to be effective, a break notice served by or on behalf of a tenant had to communicate clearly and unambiguously to the landlord that the party entitled to exercise the break provision was determining the lease on the permitted date. If a party other than the tenant gave the notice without stating that it acted as an agent, the notice would be valid provided that the giver of such notice was authorised to do so, and the landlord could act on the notice safely in the knowledge that it would be binding upon the tenant: Procter & Gamble, Lemmerbell Ltd v Britannia LAS Direct Ltd [1998] 3 EGLR 67; [1998] 48 EG 188 and Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] 1 EGLR 57; [1997] 24 EG 122; [1997] 25 EG 138 followed.
An objective approach was to be taken when construing a break notice. What had to be considered was how a reasonable person, in the light of the fact that could reasonably have been expected to be available to the parties, would have understood the notice. A mistake in the notice, even as to the identity of the party giving it, would not necessarily invalidate it, provided that its meaning was clear, the mistake was obvious and the recipient could safely rely on it: Lemmerbell, Procter & Gamble, Mannai and Havant International Holdings Ltd v Lionsgate (H) Investment Ltd [2000] L&TR 297 considered
The court should beware of relying on another case because in each case the question was whether a particular document would have been unambiguously understood to be an effective notice by a reasonable recipient. That question turned on the terms of the particular break clause, the terms of the particular notice and the particular contextual factors. It would be wrong to rely on the outcome of another case, as opposed to the approach or principles to be extracted from another case: Procter & Gamble considered.
In the instant case, the notice was not a valid exercise of the break clause since it would not clearly and unambiguously have been understood to be an effective notice by a reasonable recipient. Its terms would generate doubt as to whether it had been served on behalf of the second defendant because they suggested that although the second defendant was known to have been a lessee, the notice was not being served on its behalf. Material both in the notice and extraneous to it suggested that the omission of a reference to the second defendant in the notice was not accidental: Havant distinguished.
(3) Furthermore, the claimant was not estopped from disputing the validity of the notice. There was no evidence of any common or underlying assumption between the parties or their respective solicitors that only the first defendant was the tenant and could exercise the break provision. The correspondence did not demonstrate an assurance or willingness on the part of the solicitor on behalf of its client to forgo its right to receive a valid break notice and it was highly improbable that any such estoppel would arise. Accordingly, the correspondence could not found an estoppel: HIH Casualty & General Insurance Ltd v Axa Corporate Solutions (formerly Axa Reassurance SA) [2002] EWCA Civ 1253; [2003] Lloyd’s Rep IR 1 applied.
Andrew PD Walker (instructed by CMS Cameron McKenna LLP) appeared for the claimant; Michael Driscoll QC (instructed by Kimbells LLP, of Milton Keynes) appeared for the defendants.
Eileen O’Grady, barrister
