Landlord and tenant — Rent review provisions in lease — Construction — Whether landlords’ trigger notice effective — Whether nullified by inclusion of words ‘subject to contract’ and ‘without prejudice’ — Review of authorities at first sight conflicting — Test of reaction to document of a reasonably minded recipient legitimate but reaction of actual tenant will not turn an invalid notice into a valid one — Held that in the present case the notice was an effective trigger notice
question was for a term of 20 years from December 25 1976, the rent after the
first five years at £12,000 a year being subject to five-yearly rent reviews —
The rent reviews were upwards only, the rent being capable of increase to the
open market rental value or remaining at its already established level — In
December 1981 the rent was increased from £12,000 to £16,000 — The machinery
for the determination of the open market rental value was the familiar one of
specification in the landlords’ trigger notice, or agreement between the
parties, or determination, following a counternotice by the tenant, by an
independent surveyor appointed by the president of the Royal Institution of
Chartered Surveyors — The problem which gave rise to the present litigation was
the nature and status of the document which was claimed by the landlords to be
an effective trigger notice
letter from the landlords’ agents, directed to the review date at December 25
1986, notified the tenant of an increase in her rent to £39,000 ‘in accordance
with the terms of the lease’ — In the top right-hand corner of the letter
appeared the words ‘subject to contract’ and, beneath them, ‘without prejudice’
— Was this an effective trigger notice or merely a negotiating document? — The landlords argued that it was an effective
notice, the words ‘subject to contract’ and ‘without prejudice’ being, in this
context, ‘meaningless estate agents’ verbiage’ — The tenant submitted, on the
other hand, that the words in question showed that the letter was not intended
to have any legal consequences
referred to four authorities where somewhat similar problems had arisen,
Shirlcar Properties Ltd v Heinitz, British Rail Pension Trustee Co Ltd v Cardshops Ltd, Sheridan v Blaircourt
Investments Ltd and Norwich Union Life Insurance Society v Sketchley plc —
He also quoted the strict doctrine on the construction of documents stated by
Lord Greene MR in Hankey v Clavering
that the point was by no means easy, Nolan J decided that the notice was an
effective trigger notice — He reached this conclusion having regard in
particular to the time at which the document was sent to the tenant (only four
clear days before the time ran out for service) and to the precise terms in
which the body of the document was phrased — The terms of the letter outweighed
the prima facie effect of ‘subject to contract’ and ‘without prejudice’ — A
reasonably minded recipient of the letter would appreciate that it was a notice
activating a rent review — This was not to endorse a subjective view that the
reaction of a particular tenant could turn an invalid notice into a valid
notice — Judgment accordingly for plaintiff landlords
The following
cases are referred to in this report.
British
Rail Pension Trustee Company Ltd v Cardshops Ltd
[1987] 1 EGLR 127; (1987) 282 EG 331
Hankey v Clavering [1942] 2 KB 326
Norwich
Union Life Insurance Society v Sketchley plc
[1986] 2 EGLR 126; (1986) 280 EG 773
Sheridan v Blaircourt Investments Ltd [1984] EGD 176; (1984) 270 EG
1290, [1984] 1 EGLR 139
Shirlcar
Properties Ltd v Heinitz (1983) 268 EG 362,
[1983] 2 EGLR 120, CA
The plaintiffs
in this case were the landlords, Royal Life Insurance. The defendant was the
tenant, Mrs Mavis Avril Phillips. The subject premises were shop premises known
as 16 Bargate, Southampton. The dispute was as to the effectiveness of a notice
of June 20 1986 served by the landlords on the tenant in purported pursuance of
the rent review provisions in the lease.
David
Neuberger QC (instructed by Linklaters & Paines) appeared on behalf of the
plaintiffs; Kim Lewison (instructed by Warner & Richardson, of Winchester)
represented the defendant.
Giving
judgment, NOLAN J said: By a lease dated January 27 1977, Bargate
(Southampton) Property Investments Ltd demised shop premises known as 16
Bargate to Associated Book Publishers Ltd for a term of 20 years running from
December 25 1976. The plaintiff landlords before me are the successors in title
to Bargate (Southampton) Property Investments Ltd. The defendant tenant is the
successor in title to Associated Book Publishers Ltd.
The lease, by
clause 1, stipulated that apart from the first three months after the execution
thereof, the rent for the first five years should be in the sum of £12,000. The
clause went on to specify a five-yearly rent review, the effect of which was
that subject to the proper operation of the provisions to which I shall refer,
the rent could either be increased after each five-year period to the open
market rental value or remain at its already established level. The rent review
provisions were operated in December 1981 with the effect that from the 25th
day of that month the rent rose from £12,000 to £16,000.
The provisions
which governed the rent review are contained in proviso 3 to clause 1 of the
lease. That states the manner in which the open market rental value is to be
determined and reads as follows:
3. The open
market rental value shall be determined in manner following, that is to say it
shall be such annual sum as shall be
(a) specified in a notice in writing signed by or
on behalf of the landlord and posted by recorded delivery post in a prepaid
envelope addressed to the tenant at the demised premises at any time before the
beginning of a clear period of two quarters a year commencing on one of the
usual quarter days hereinbefore mentioned immediately preceding the review date
and such notice shall be conclusively deemed to have been received by the
tenant in due course of post, or
(b) agreed between the parties before the
expiration of three months immediately after the date of posting of such notice
as aforesaid in substitution for the said sum, or
(c) determined at the election of the tenant to
be made by counter notice in writing served by the tenant upon the landlord not
later than the expiration of the said three months by an independent surveyor
appointed for that purpose by the parties jointly in writing or upon their
failure to agree upon such appointment within one month immediately after the
date of service of the said counter notice given by an independent surveyor
appointed for that purpose on the application of either party alone by the
President for the time being of the Royal Institution of Chartered Surveyors
and in either case in accordance with the provisions of the Arbitration Act
1950.
On June 20
1986, surveyors acting for the landlords wrote to the tenant in these terms:
We are
writing to inform you that your rent is to be reviewed as at December 25 1986.
In accordance with the terms of the lease we hereby notify you that the rent
from the review date will be £39,000 per annum exclusive. This notice is served
by us as agents for and on behalf of the landlords, Bargate (Southampton)
Property Investments Ltd.
That letter,
as is common ground, would have been a perfectly effective notice for the
purposes of the rent review provisions and indeed is an effective notice,
submits Mr Neuberger for the plaintiffs, despite the appearance in the top
right-hand corner of the words in capital letters, ‘subject to contract’ and
beneath those ‘without prejudice’. This case turns solely upon whether the
existence of those words in the letter deprives it of being an effective notice
for the purposes of the lease. If not, then the rent from 1986 until 1991 will
remain at the £16,000 level, subject to the possibility of its being adjusted
by the independent surveyor under the provisions of subclause (c) of proviso 3
to clause 1 of the lease.
The tenant
replied on June 25 1986, saying:
I acknowledge
receipt of your letter dated June 20 1986 informing me of the rent review due
in December 1986. In accordance with the terms of the lease I hereby inform you
that the proposed rent increase from £16,000 per annum to £39,000 per annum is
too great an increase and therefore not accepted. I would like to point out
that the last rent review in 1981 showed a 33.3 per cent increase and that your
proposed sum would increase the rent by 143 per cent. I trust that you will
contact me in the near future with a more acceptable proposal.
Two months
later, surveyors acting for the defendant wrote to the surveyors for the
landlords to say:
We have been
passed a copy of your letter dated June 20 1986. We consider the terms of our
client’s lease in the light of the case of Shirlcar Properties Ltd v Heinitz
and Anr and we do not believe that your letter constitutes a valid notice.
The reasons are clear from the details of that case.
And so was
joined the issue which now comes before me.
Mr Neuberger,
for the plaintiffs, submits in summary that the question is whether the letter
sent by the landlords’ surveyors on June 20 1986 is properly regarded as a
notice complying with the terms of the lease or as a negotiating document. He
submits that it is quite plain from its terms that it was intended to be a notice
and not a negotiating document and that any reasonably minded tenant would
appreciate that this was such a notice activating the rent review machinery. He
draws to my attention in particular the facts that the letter was sent by
recorded delivery as required by the relevant clause in the lease, that it was
sent only four clear days before the time ran out for the service of the notice
and that in terms it is stated to be written in accordance with the terms of
the lease and on behalf of the landlords. The opening sentence makes clear its
character as a trigger to operate the rent review clause as from December 25
1986. That being so, submits Mr Neuberger, it is perfectly plain that the added
words ‘subject to contract’ and ‘without prejudice’ are meaningless estate
agents’ verbiage that has no legal effect and that they would be accepted as
meaningless by the tenant. He adds that they plainly were so accepted by the
tenant in this case in her reply of June 25 1986. It was only when the matter
was referred to her surveyors that they took the legal point based on the Shirlcar
decision, to which I shall return.
Mr Lewison,
for the tenant, submits that a notice under subclause (c) is designed to have
specific legal consequences in that its purpose is to start the rent review
machinery running and in doing so to postulate the amount of the specified
rent. This document, he submits, by way of contrast begins by making it clear
that it is not intended to have any legal consequences. That is the inevitable
result of the insertion of the words ‘subject to contract’, which mean that
nothing done in response to the letter is intended by its author to produce a
legally binding result, coupled with the words ‘without prejudice’, which mean
that unless the binding result is achieved the letter is not to be referred to.
He therefore submits in effect that the letter describes a vicious circle and
remains, as it started, a legally wholly ineffective document.
In so far as
the reaction of the tenant to it is concerned, he submits that this is
ambivalent, but that in any event the proper approach to the legal nature and
effect of the document must be objective. Either on its face it was a good
notice or it was not. The reaction of the tenant to it one way or another
cannot be conclusive.
I have been
referred to four authorities and I must cite each of them, at least in part.
The first, which I shall cite fully, is the decision of the Court of Appeal in Shirlcar
Properties Ltd v Heinitz (1983) 268 EG 362, [1983] 2 EGLR 120. That
case was also concerned with a document argued by the landlords to be an
effective trigger notice for the purposes of a rent review clause whose
material terms were identical to those of the lease in the present case. It
ended under the signature of the writer with the words ‘subject to contract’. I
must quote fairly fully from the three judgments given by the members of the
Court of Appeal. Lawton LJ at p 363 said:
In my
judgment, on the proper construction of subclause (iii) the position was as
follows. The plaintiffs had to serve a notice in writing which conformed to
subclause (iii) paragraph (A). Having served that notice the tenant then had
three options. He could enter into negotiations with the landlords, the
plaintiffs, to get a lower rate than that specified in the notice and if the
negotiations were successful the agreed new rent was the rent payable, but if
they were not successful or he did not want to enter into negotiation with the
plaintiffs, he could by counternotice served within the specified period ask
for arbitration or he could do nothing. It followed therefore that the first
stage in the rent review was the serving of the landlords’ notice. The tenant
could agree to pay the rent specified and, if he did so agree, there was no
need for him to do anything at all. He could remain silent and at the end of
the period of three months the rent specified in the notice would be the rent
binding upon him or he could take one of the other two courses to which I have
already referred. What happened in this case was this. Two months before the
appropriate review date, namely, on January 20 1981, the plaintiffs’ agent, a
well-known
tenant in Moscow Road in these terms: ‘Dear Sirs’ and the letter in this
particular case was headed ’35 Moscow Road, London W2′. The body of the letter
read as follows —
‘We act on
behalf of your landlords, Shirlcar Properties Ltd, and have been instructed to
deal with the rent review on the above premises due as at the 29th September
1981. The rent required as from the review date is £6,000 pa exclusive, and we
look forward to receiving your agreement. Yours faithfully,’
and then the
agent signed the letter.
I stop there
and call attention to various matters which Mr Reynolds on behalf of the
plaintiffs relied upon. That letter was a notice in writing. It was signed on
behalf of the plaintiffs. It was sent by recorded delivery. It was addressed to
the defendants as tenants at the leased premises. It was sent before the
appropriate review date, which was March 25 1981. It expressly referred to a
new rent and it specified a figure. Mr Reynolds submitted that in those
circumstances that letter complied strictly with every one of the provisions of
subclause (iii) paragraph (A) of the lease. It does; but a difficulty has
arisen because the letter did not end with the signature of the estate agents:
under that signature in capital letters which were underlined came the words
‘subject to contract’. Immediately below that, also in capital letters, there
were the words ‘recorded delivery’.
The argument
which Mr Reynolds put before the court is that, as the body of the letter
complied strictly with the provisions of the lease, it purported to require the
payment of a new increased rent. The tenants, on receiving it, would, indeed
must, have appreciated that they were being asked to pay the rent in accordance
with the rent review provisions of the lease. He submitted, and Mr Kirk on
behalf of the tenants accepted, that the test of an effective notice for the
purposes of a rent review clause such as the one in this lease is whether, on
receipt of such notice, a reasonable tenant would infer that what he was
receiving was a notice in accordance with the rent review terms of his lease.
Mr Kirk, on the other hand, says that, although it may well be that the body of
the letter accomplishes that particular object, the whole letter is vitiated as
an effective letter for the purposes of the rent review clause by the words ‘subject
to contract’ which appear at the end of the letter.
Mr Reynolds’
argument in answer to that was put in two ways. He pointed out that the tenants
on receiving this letter, had they looked at their lease, would have
appreciated that there was a second stage to the rent review provision. That
second stage envisaged the possibility that the tenants might want to negotiate
with the landlords. The common-sense reading of the letter would have been that
the words ‘subject to contract’ tied up with the words ‘We look forward to
receiving your agreement’ and therefore could apply only to the second stage of
the rent review and in no way affected the first stage, which required the
landlords to send what is popularly known as a trigger notice. Secondly, it was
submitted that the words ‘subject to contract’ were wholly inappropriate to the
rent review provisions of this lease. The structure of the lease, submitted Mr
Reynolds, was such that the rent review started with the landlord doing
something, namely, sending a notice specifying a new rental figure. In those
circumstances the tenant could not reasonably infer that the words ‘subject to
contract’ had anything to do with the first stage.
Mr Kirk on
behalf of the defendants, however, submitted that it cannot be the right
construction of this letter to tie up the words ‘subject to contract’ with the
words ‘We look forward to receiving your agreement’, because the words ‘subject
to contract’ apply to the whole letter and not to a particular part of it. Had
the landlords intended the words to apply to the phrase ‘We look forward to
receiving your agreement’, they would have tacked on some such words as
‘subject to contract’ in that part of the letter — not at the end — so as to
apply to the whole of the letter.
Mr Kirk went
on to submit that the tenant could reasonably have inferred that the letter was
intended by the landlords to be the beginning of negotiations for a new rent;
it was sent two months before the rent review date and because it refers to the
whole letter Mr Kirk submitted that anyone reading this letter could have
reasonably understood it, not as the beginning of the rent review machinery but
as a preliminary step before the rent review machinery was put in motion. It is
only, said Mr Kirk, on that basis that the letter made sense, because it is
otherwise inappropriate to the rent review machinery.
Since there
is an argument both ways about this matter and as, in my judgment, it is an
argument which is reasonable on both sides, it seems to me that it cannot be
said that the tenants, on receiving this letter, would necessarily and
reasonably have inferred that it was an effective trigger notice for the
purpose of the lease. There is doubt about its meaning and as there is doubt it
seems to me that the letter was ineffective for the purposes of the rent review
clause in the lease.
Kerr LJ,
agreeing, said:
It is
perfectly clear that this letter was written in the context of the rent review
clause, and to that extent, to use the words of Templeman J (as he then was) to
which I come in a moment, but only to that extent, the tenant who received it
would understand what the landlord was up to. The question, however, is whether
it is a sufficiently clear notice within the terms of clause (iii)(A), the
first stage of the rent review machinery. As to that I have no doubt, in the
same way as my lord, that the words ‘subject to contract’, which are in capital
letters and underlined and after the signature, must govern the whole of this
letter.
In those
circumstances it seems to me that the passage from the judgment of Templeman J
in Keith Bayley Rogers & Co v Cubes Ltd (1975) 31 P&CR
412 is apposite, and the learned judge in fact cited it in his judgment.
Templeman J there said at p415, and I leave out immaterial words:
‘If it is
clear . . . that each of the recipients could be in no doubt as to what the
landlord was up to and what the notice and the letter meant as far as he was
concerned, it does not seem to me that the court is entitled or bound to be
perverse and invent imaginary difficulties which might have arisen in other
cases.’
I therefore
ask myself whether the recipient of this letter, governed as it is by the words
‘subject to contract’, could be in no doubt. To my mind the answer to that is
in the negative. I think any recipient might ask himself whether the words
‘subject to contract’ have the effect that the landlord is indeed bound by the
figure of £6,000 put forward in the letter. Similarly, if the tenant is minded
to accept that figure, and is therefore minded to write back and agree to it,
he would be left in doubt, and that doubt would remain if he consulted his
solicitor, as to whether any such agreement would be binding. In my view,
therefore, this is not a sufficiently clear specification of the required rent
under the rent review clause to fulfil the requirements of it, and I would
dismiss this appeal.
Also agreeing,
Dillon LJ said:
The issue that
arises on this appeal is a very short one, but I have not found it a very easy
one and my mind has fluctuated as the admirably concise arguments have
proceeded. There is no doubt about the law to be applied. If the meaning of the
landlords’ notice given by their surveyors on January 20 1981 is so plain that
the recipient cannot reasonably mistake what is meant, then effect should be
given to the notice. Apart from the words ‘subject to contract’, I would have
no doubt that the notice was a valid notice specifying a rent under the review
clause in accordance with subhead (A) of that clause. I read the words at the
end of the notice — ‘And we look forward to receiving your agreement’ — as
inviting agreement to the rent figure of £6,000 a year which was put forward in
the notice and not as inviting general negotiation. So reading those words I
regard them as possibly optimistic, but in no way inconsistent with the giving
of a valid notice under subhead (A).
The question
is, then, as to the effect of the words ‘subject to contract’. They are wholly
inapposite to a trigger notice given by landlords under this particular rent
review clause. My initial inclination, therefore, was that they should be
disregarded and that a reasonable tenant would take the view that they were
merely meaningless. On consideration, however, I think that these time-hallowed
words ‘subject to contract’ would leave the tenant in doubt as to whether the
figure of £6,000 a year was being put forward as a firm figure specified by the
landlord under the rent review clause or was merely being put forward as a
provisional figure which, if not agreed by a binding contract such as is
envisaged by the words ‘subject to contract’, the landlord might reserve the
right to revise. If it is merely a provisional figure, then it is not enough to
trigger the rent review clause.
On the whole
I feel that a reasonable tenant might regard this as merely a provisional
figure. Therefore the meaning of the notice is not so plain that the notice can
be taken as a valid stipulation of a rent which sets the review provisions in
operation. I, too, would therefore dismiss the appeal.
Mr Lewison
submits that it is plain, especially from the judgments of Kerr LJ and Dillon
LJ, that the ratio of that case was that the effect of the words ‘subject to
contract’ was to turn what would otherwise be a wholly effective notice into
one which had no effect for the purposes of the rent review provisions. That
reasoning, he submits, applies with equal force to the present case. Mr
Neuberger argues that all of these cases depend upon the particular wording of
the document in question and the circumstances in which it is sent. In the Shirlcar
case, he points out, apart from the letter being in writing, signed by the
plaintiffs and sent by recorded delivery, it could not specifically be
identified as being sent in compliance with the rent review provision, whereas
here, he submits, the terms of the letter make it perfectly plain that that is
the role which it is intended by the author to play. He also points to the
significance attached to the dates expressed by Lawton LJ and perhaps, by
inference, by the other members of the Court of Appeal when considering the
particular document before them. As Lawton LJ points out, it was sent two
months before the rent review date and that was the basis of the argument put
forward by the tenant, that anyone reasonable reading the letter would have
understood it as a preliminary step before the rent review machinery was put
into motion. In the present case, Mr Neuberger points out, the timing of the
document left no room for any sensible negotiation to take place.
The next case
to which I was referred was a decision of Vinelott J in a case called British
Rail Pension Trustee Co Ltd v Cardshops Ltd. It was decided on
October 24 1986 and is reported in [1987] 1 EGLR 127. In that case Vinelott J
was concerned with a counternotice which had been headed ‘subject to contract’.
The effect of his decision, to put it shortly, was that these words did not
deprive the document of the character of an effective counternotice. He said at
p 128:
It is trite
law that a lease must be construed in the same way as any other commercial
document; that is, it must be given the meaning in which ordinary businessmen
would understand it. The rent review provisions in turn are intended to be
operated by the parties and not always by their lawyers.
On p 129, in
rejecting the submission for the landlords, he says:
I have no
hesitation in rejecting this submission. In my judgment, looking at the
sequence of letters from the date when the letter of April 9 was written (it
was written six or seven days before the expiry of the period of eight weeks
specified in para 3), it would be only a most unreasonable landlord who would
read it as an offer to which the tenant required an answer before deciding
whether to specify what in his opinion was a market rent, thereby exposing
himself to a possible risk as to the costs if the market rent had to be determined
by an expert.
The only
question to my mind is whether the words ‘subject to contract’ in effect
converted what any sensible businessman would otherwise read as a counternotice
into something else — a step in a negotiation and intended to avoid the
necessity of serving a counternotice.
Vinelott J
also referred to a decision of Nicholls J (as he then was) in a case called Sheridan
v Blaircourt Investments Ltd (1984) 270 EG 1290, [1984] 1 EGLR 139 in
which, as in the present case, the document in question was headed ‘without
prejudice and subject to contract’. Nicholls J had held that the letter was
wholly insufficient to alert the landlords to the fact that the tenant wished
to exercise his right of election. He held that apart from the heading it would
have been quite inadequate for that purpose, but that if it had been otherwise
adequate, it would have been made inadequate by the heading. Having referred to
that, however, Vinelott J continued:
However there
is nothing in these cases which binds me to hold that the letter of April 9
cannot be a valid counternotice. I have to consider the effect of that letter
in the context of a rent review clause, in which the document so headed does
not trigger a rent review clause, as it did in the Shirlcar case, and
which does not exercise a right to elect to have a rent determined by
arbitration or by an expert, as it did in the Sheridan case, but which
starts a period during which the parties are required to enter into
negotiations in good faith and which results in a reference to an expert if,
and only if, they fail so to agree.
He continued:
I think it is
unreal in this context to regard the words ‘subject to contract’ as stamping
this letter as unequivocally an offer in a round of negotiations antecedent to
the commencement of, as it were, mandatory negotiations and necessarily
antecedent to a step which might, in the event of there being a reference to an
expert, expose the tenant to a risk as to costs. The words would be taken, I
think, by a sensible businessman as either a mistake (by no means an unfamiliar
mistake — the words ‘subject to contract’ are frequently used in quite
inappropriate circumstances) or, as a suggestion put forward by Mr Patten, as
designed to ensure that the letter was not taken by the landlord as an offer
capable of acceptance — a construction which is wholly consistent with the
operation of the letter as a counternotice.
It will be
seen there that there is some comfort for the plaintiffs in that Vinelott J
urges the approach to the meaning of the document of the reasonable ordinary
businessman or businesswoman rather than necessarily by a lawyer and that he
also accepts that words such as ‘subject to contract’ are frequently inserted
inappropriately and by mistake. He did, however, distinguish Sheridan v Blaircourt
on the ground that that case was concerned with the trigger notice and might
therefore give rise to different considerations so far as the words ‘subject to
contract’ are concerned.
In Norwich
Union Life Insurance Society v Sketchley plc [1986] 2 EGLR 126 Scott
J considered a trigger notice whose terms were equivocal. Scott J decided that
none the less the letter was an effective notice for the purposes of the lease
before him but added that he would rest his decision on another ground as well.
He continued on p 128H:
There is
evidence in this case, namely, the letters of June 20 1983 and November 8 1983
to which I have referred, which make it clear that it was the intention of the
plaintiff’s agent in sending the letter of August 27 1982 that the letter
should be notice to the tenant under clause 2(a) of the lease. There is also
evidence, namely, the form of the letter of August 13 1982 from the defendant,
that the defendant read the letter as a notice under clause 2(a) of the lease.
The
requirement of clause 2(a) is that a notice in writing be given whereunder the
landlord calls for a review of the rent. A notice is intended to pass
information. It is intended to be a communication. If the terms of a written
document are capable, fairly read, of communicating the requisite information,
are intended to communicate the requisite information and do in fact
communicate the requisite information, it seems to me an extraordinary
proposition that an equivocation in the language in which the notice is couched
can entitle either party to deny the efficacy of the notice. Mr Wood submitted
very forcefully that the validity of the letter of August 27 1982 as a clause
2(a) notice had to be tested on a strictly objective basis. If the terms of the
notice were insufficiently unequivocal, the validity of the notice could not,
he submitted, be assisted by evidence of the sense in which the author intended
the document and in which the recipient understood it.
I am not
prepared to accept that that is the law. It is well established that where a
contract is concerned, the terms of the contract are to be ascertained by an
objective assessment of the meaning of the language, oral or written, used by
the parties. The unexpressed and uncommunicated intentions of the parties
cannot, even where by chance they coincide, alter the terms, objectively
ascertained, of the contract they have made (see Rose v Pim
[1953] 2 QB 450).* But his
well-established principle does not, in my view, apply to a notice. A notice is
intended to give information. If a document has succeeded in imparting the
requisite information to the recipient and was intended by its author to do so,
it seems to me that it can properly be described as a notice in writing giving
that information. That is the position in this case.
*Editor’s
note: Rose (Frederick E) (London) Ltd v William H Pim Junior & Co
Ltd.
A little
earlier in his judgment Scott J had said at p 127M:
I would
respectfully accept, as I think both counsel before me accepted, that the
appropriate test would be whether a tenant reading the letter would think it
was a ‘trigger notice’. It is not necessary for the letter, if it is to be an
effective trigger notice, to contain any particular reference to any of the
specific matters referred to by Harman J† . It is simply necessary that the
letter, fairly read, should bring to the mind of the reader that it was
intended to set in motion the rent review procedures set out in clause 2 of the
lease.
† Editor’s
note: This reference is to an earlier case, decided by Harman J, involving the
same plaintiffs, Norwich Union Life Insurance Society v Tony Waller
Ltd (1984) 270 EG 42, [1984] 1 EGLR 126.
Mr Lewison
submits that in so far as the learned judge was postulating a subjective
approach to the construction of the notice he was in error and that his remarks
were in conflict with those of Lord Greene MR in Hankey v Clavering
[1942] 2 KB 326. The simple facts of that case were that under the terms of a
lease for 21 years from December 25 1934 either party could determine the
tenancy at the end of seven years upon giving six months’ notice. The landlord
gave to the tenants’ solicitors a notice as from June 21 1941 which purported
to determine the lease on December 21 1941. It was held that the notice,
although the mistake as to date was obviously due to a slip on the part of the
landlord, was invalid and it was also held that the acceptance of its service
by the solicitors for the recipient did not cure the defect.
Lord Greene at
p 329 said that the real point was whether the notice was good in the sense
that it had the effect of terminating the lease on December 25 1941, and
continued:
Notices of
this kind are documents of a technical character, technical because they are
not consensual documents, but, if they are in proper form, they have of their
own force without any assent by the recipient the effect of bringing the demise
to an end. They must on their face and on a fair and reasonable construction do
what the lease provides that they are to do. It is perfectly true that in
construing such a document, in construing all documents, the court in a case of
ambiguity will lean in favour of reading the document in such a way as to give
it validity, but I dissent entirely from the proposition that where a document
is clear and specific, but inaccurate on some matter such as that of date, it
is possible to ignore the inaccuracy and substitute the correct date or other
particular because it appears that the error was inserted by a slip. By the
clear wording of this notice the plaintiff purported to bring the lease to an
end on December 21 1941. In so doing he was attempting to do something which he
had no power to do, and however much the recipient might guess, or however
certain he might be, that it was a mere slip, that would not cure the defect
because the document was never capable on its face of producing the necessary
legal consequence.
In this case
the arguments on both sides have been put forward with exemplary clarity and
conciseness by Mr Neuberger and Mr Lewison and I have found the point, though
narrow, by no means easy. At the end of the day, having regard to the circumstances
and, in particular, the time at which this document was sent to the tenant and
to the precise terms in which the body of the document was phrased, I consider
that it did serve as an effective notice to bring into operation the rent
review provisions.
In saying this
I accept the submission of Mr Lewison that the combination of the words
‘subject to contract’ and ‘without prejudice’ would normally reflect an
intention that the document could produce no legal effect. But if that had been
the meaning which they were intended to convey, they would make no sense
whatever in the context of the letter of June 20 1986. That letter, as I read
it, clearly was intended to have a legal effect. It is, as I have mentioned,
expressly written in accordance with the terms of the lease and it does, in the
terms of the lease, notify the tenant of the rent from the review date.
I am also
minded to accept Mr Lewison’s submission that it was either a good notice or it
was not, on its face, and that if it was bad on
tenant. But adopting, as the cases all have as the test, the question whether a
reasonably minded recipient of the letter would appreciate that it was a notice
activating the rent review, it seems to me that the reaction of the tenant here
is material as an indication of what at any rate this businesswoman did regard
it as saying. I have of course no evidence as to the tenant’s business
experience, but it is plain from the content of her letter of June 25 that she
is an articulate and intelligent woman who well knew what it was that she was
responding to. It is of some significance, as well, that the suggestion that
the words ‘subject to contract’ and ‘without prejudice’ so to speak invalidated
the notice first came from her surveyors when she referred the matter to them
and was put forward not by reference to the terms of the letter itself but by
reference to the decision in Shirlcar.
Finally, so
far as the decision in Hankey v Clavering is concerned, I have,
as I have said, gone some way towards Mr Lewison’s position by agreeing that
the reaction of the tenant to an invalid notice would not turn it into a valid
notice, but I would go further and say that in my judgment there is no conflict
between what Lord Greene said in Hankey v Clavering and what
Scott J said in the Norwich Union case. The question before the court in
Hankey v Clavering was not what was the true nature of the
document. It was undoubtedly intended to be a notice of termination. The only
question was whether the contents of the letter being inappropriate in the
matter of date rendered it ineffective and the answer was ‘Yes’. Thus, the
critical question in the present case, namely was this a notice in its inherent
character operating the rent review clause or was it simply a negotiating
letter, was not one which came before the court. On this latter question, which
is the critical question in the present case, it seems to me that the view
which would be taken by a reasonable businessman and the reaction of the tenant
in so far as that throws light on that view are material, whereas in a case
such as Hankey v Clavering the test was purely one of legal
construction of the particular document.
For these
reasons I consider that the landlords did by their agent’s letter of June 20
bring the rent review provisions into operation with effect from December 25
1986 in accordance with proviso 3(a) of the lease.
