Lease – Break option – Termination notice – Break clause expressly requiring notice of intention to terminate to be given under section 24(2) of Landlord and Tenant Act 1954 – Defendant landlord rejecting letter purporting to terminate lease, but not expressed to be given under section 24(2) – Claimant seeking declaration that valid notice to terminate given – Whether letter constituting effective notice where non-compliance with express terms of lease – Claim allowed
By a lease dated 27 January 1999, the defendant let to the claimant business premises in Crawley for a term of 25 years from and including 24 August 1998 at an initial rent of £224,000 per annum. Clause 19 of the lease provided the tenant with a break option with a termination date of 23 August 2013.
On about 28 September 2012, within the notice period provided for by clause 19, the claimant’s solicitors served a notice on the defendant purporting to exercise the break clause. The court was asked to determine whether the notice was valid, taking effect, subject to the due fulfilment of the pre-conditions, so as to terminate the lease on 23 August 2013. The issue was whether the notice was effective even though it was not, as the lease required, expressed to be given under section 24(2) of the Landlord and Tenant Act 1954.
The claimant submitted that the notice was effective despite the absence of the required formula since there was no such thing as a notice under section 24(2) and the required formula was meaningless. Therefore, all that was required on the proper construction of clause 19 was a straightforward notice, such that the one that had been given, which did not claim a tenancy under the 1954 Act. Even if clause 19 did require the stipulated words to be stated, on its proper construction, the failure to state meaningless words did not render the notice invalid. In any event the stipulation was rendered void by section 38 of the 1954 Act.
Held: The claim was allowed.
(1) There was no doubt about the meaning of the words “must be expressed to be given under section 24(2)”. Even if they were meaningless, in the sense that there was no such thing as a notice under section 24(2), that was what clause 19 required. Accordingly the notice did not comply with clause 19: Mannai Investments Co Ltd v Eagle Star Life Assurance Co Ltd [1997] 1 EGLR 57; [1997] 24 EG 122 and 25 EG 138 applied.
(2) The principles to be applied in determining the effect of a non-compliant notice applied equally to statutory and contractual notices. Where a statute or contractual term provided that a non-compliance notice would be invalid or ineffective, that was the end of the matter. However, where it did not, the court had to assess the statutory or contractual intention by the usual objective criteria, including the background and purpose of the provision and the effect, if any, of non-compliance. Where the notice was provided for by a statute, or by a professionally drafted contract, and the draftsman had not provided either way for the consequence of non-compliance, one might reasonably assume that that was deliberate and that it had been left to the court to decide; while it might go too far to say that there was presumption, it was natural to conclude that it had been intended that the notice should, at least in some circumstances, not necessarily in all, survive non-compliance. The use of “must”, “shall” etc was not decisive. The court would look to the substance, not the form of the notice: Yates Building Co Ltd v Pulleyn (RJ) & Sons (York) Ltd [1975] 237 EG 183, York v Casey [1998] 2 EGLR 25, Burman v Mount Cook Land Ltd [2002] Ch 256 and Newbold v The Coal Board [2013] EWCA Civ 584; [2013] PLSCS 115 and Cusack v Harrow London Borough Council [2013] 1 WLR 2022; [2013] PLSCS 137 considered.
(3) What was often decisive in practice was the effect of the non-compliance and notice provisions might be hybrids, sometimes mandatory and sometimes not, depending on the nature and extent of the error and its effect. Although provisions relating to the exercise of an option were usually mandatory, any such rule was the court’s servant, not its master, and was not inflexible. While non-fulfilment in any respect of the conditions for the exercise of an option would be fatal, the same might not be true as to the form of an advance notice of the exercise of an option, which in the present case was explicitly required to be timely, but not explicitly required to be in due form, to be effective: R v Soneji [2006] 1 AC 340 considered.
(4) In the present case, the notice was not invalidated by the failure to state that it had been given under section 24(2) of the 1954 Act. Clause 19 was part of a well-drafted lease and did not so provide. Although everything else in the option process, in particular the timeliness of the notice and the fulfilment of the pre-conditions, was almost certainly mandatory, to hold that the use of required words in clause 19 was mandatory would be to adhere slavishly to a supposed rule of construction that made everything about the process of exercising an option mandatory. One could not realistically attribute to the parties an intention to make the tenant’s exercise of an important right dependent on compliance with a meaningless formula.
Timothy Fancourt QC and Tom Weekes (instructed by Manches LLP) appeared for the claimant; Mark Wonnacott QC (instructed by SJ Berwin) appeared for the defendant.
Eileen O’Grady, barrister
