Long lease — Shopping center — Arbitration pending — Letter written by agreement to avoid arbitration — Rent specified in letter — Supplemental deed to be executed embodying two points of construction — Landlord seeking order for specific performance — Order granted
The plaintiff landlord let a shopping centre, the Royal Exchange, Manchester, to a headlessee (the tenant) for a term of 99 years. The rent review provisions stipulated that in the event that the rent was not agreed, an arbitrator was to specify a fair rent. Just before the arbitration was due to begin the parties entered into negotiations in an endeavour to reach an agreement so that the arbitration could be adjourned or avoided. The landlords’ expert made submissions concerning what parts of the demised premises were to be regarded as capable of producing income and what parts were to be taken as vacant for the purposes of computing the new rent. The landlord was immovable on these points.
The consultations culminated in a letter which was sent by the tenants’ solicitors to the plaintiffs’ solicitors on October 9 1992 (“the material letter”) which was at the heart of the dispute. The letter stated, inter alia, that: (1) The rent “for the five years beginning December 25 1991 after applying the formula contained in the lease, is: £575,000 for the first year …; (2) The parties will enter into a supplemental deed acknowledging that the true position is as set out in [the expert’s] submissions …: (a) the relevant parts capable of producing income: (b) the alleged assumption that, when valuing a given part, the remainder of the centre is taken to be vacant”. The balance of the rent was to be payable on November 6, and the letter went on: “The rental figures … are conditional upon the execution of the supplemental deed reflecting point 2 of the letter and the rent review memorandum required by the lease will not be signed until the supplemental deed is executed”.
By November 4 the landlord was ready to complete, but the supplemental deed was not returned by the tenant and the rent was paid at the former and not the revised rate. The landlord sought proceedings under Ord 14. In their draft defence, the tenant asserted, inter alia, that it had been the common intention and understanding of the parties that there had been no binding compromise unless and until the proposed supplemental deed had been executed.
Held The landlord’s application was granted.
1. On the evidence of the correspondence, attendance notes and solicitors’ minutes, there had been an a written contract in the form of the material letter to which both parties had orally signified their respective agreements or there had been an oral agreement evidenced by the material letter as to its every word. The court could not see there being any room on the facts for any argument that the contract failed to embody some provision or that it omitted or mis-stated some agreed term at the moment it was agreed.
2. With regard to the tenant’s contention that the material letter should be headed “subject to the execution of the supplemental deed”, it was difficult to grasp the effect of such words. If those words were there, one would have a contract, inter alia, to enter into a supplemental deed which was conditional on the execution of that deed. That term of the contract would be conditional on its own performance, ie that obligations would not exist until they had been performed — a proposal which was logically puzzling, as well as being unacceptable as a proposal conveying a common understanding.
Simon Berry QC and Edwin Johnson (instructed by Lovell White Durrant) appeared for the plaintiff landlord; Vivian Chapman (instructed by Jacques & Lewis) appeared for the defendant tenant.
