Landlord and tenant — Rent review clause in lease of property in trading estate — Whether a letter to the president of the RICS on behalf of the landlords constituted an effective application for the appointment of an expert surveyor in accordance with the clause — In the events which had happened an application for such an appointment had to be
This was an
originating summons by the plaintiff tenant, Staines Warehousing Co Ltd,
seeking a declaration as to the true effect of a letter which the defendant
landlord, Montagu Executor & Trustee Co Ltd, claimed to be an application
to the president of the Royal Institution of Chartered Surveyors to appoint an
expert surveyor under the rent review clause of a lease of a property known as
18 Central Trading Estate, Staines, Middlesex.
Kenneth
Bagnall QC and Kim Lewison (instructed by Berrymans) appeared on behalf of the
plaintiff; Kirk Reynolds (instructed by Nabarro Nathanson) represented the
first defendant, Montagu Executor & Trustee Co Ltd; the second defendant,
Mr J E Cullis FRICS FSVA, the surveyor appointed by the president, was not
represented and took no part in the proceedings.
Giving
judgment, KNOX J said: This is an originating summons in which the plaintiff,
Staines Warehousing Co Ltd, is the tenant under a lease and the first
defendant, Montagu Executor & Trustee Co Ltd, is the landlord under that
lease. The second defendant is a surveyor, who was not represented before me.
The question,
which is a short one, arises under the terms of an underlease, dated July 21
1971, and made by different parties, under which the rent was reserved in the
following terms: ‘YIELDING AND PAYING therefor during the first Seven years of
the said term yearly and proportionately for any fraction of a year the rent of
TWENTY-FIVE THOUSAND POUNDS’ — and then there are the usual provisions in
relation to the payment on quarter days. Later on the clause proceeds: ‘and any
increase thereof payable under and by virtue of the provisions of the Second
Schedule such last mentioned rent also to be due and payable’, in the same
manner. The term was for 125 years from September 29 1970. The second schedule
provides for a rent review clause in these terms. It defines the rent review
dates as September 29 1977 and September 29 ‘in each succeeding seventh year
therefrom through the said term’. It is common ground that one of the rent
review dates was therefore September 29 1984, although the periodicity has
subsequently been altered to one of five years rather than seven, but that does
not affect the present decision.
There is then
a definition of the open market rent in some detail, but nothing, I think,
turns on those terms. The clause then proceeds, in clause 2:
If at any
time not more than twelve nor less than nine months before that one of the rent
review dates then next ensuing (hereinafter called ‘the relevant rent review
date’) the Landlord shall give notice in writing to the Tenant of its desire to
vary the yearly rent payable hereunder as from the relevant rent review date
such yearly rent shall from and after the relevant rent review date be
whichever is the highest of —
and then there
are set out effectively the rent then currently payable, and 70% of the market
rent which for the future has equally, I understand, been altered, but again
nothing turns on that.
Then clause 3
provides:
If the
Landlord and the Tenant shall not have agreed the open market rent six months
before the relevant review date the open market rent shall be determined by a
Surveyor
defined as
‘the Appointed Surveyor’
to be agreed
upon in writing by the Landlord and the Tenant not later than four months
before the relevant rent review date and in default of such agreement to be
nominated by the President for the time being of the Royal Institution of
Chartered Surveyors upon the application of the Landlord to be made not later
than three months before the relevant rent review date.
Then there is
a clause which deals with the effect of the appointed surveyor’s decision. Then
in clause 5 there is a provision that the yearly rent is to take effect
retrospectively once it is determined by the appointed surveyor.
Then we come
to the important clause for the purpose of this application, clause 6, which
reads as follows:
If the
Landlord and the Tenant shall not have agreed the open market rent six months
before the relevant rent review date and the Landlord shall neglect to make an
application referred to in paragraph 3 hereof then (unless the parties hereto
shall in writing agree otherwise) any notice already given by the Landlord to
the Tenant under the provisions of paragraph 2 hereof shall be void and of no
effect.
Certain
matters are not in dispute. First, it is agreed that that provision which I
have just read, clause 6 in the second schedule, does provide for a time-limit
in respect of which time is of the essence, there being sufficient expression
of an intention in that paragraph to exclude the prima facie rule laid
down by the House of Lords in United Scientific Holdings Ltd v Burnley
Borough Council [1978] AC 904. Second, as I mentioned, there is no dispute
as to the various time-limits in relation to this particular rent review
procedure. The timetable has been helpfully set out in the plaintiff’s
affidavit in support of the originating summons as follows: that the first
notice by the landlord was required to be served not later than December 29
1983. In fact, by a letter dated November 15 1983, the landlord’s solicitors
wrote a letter to the secretary of the tenant, in which they said:
In accordance
with Clause 2 of the Second Schedule to your Underlease of the premises dated
June 21 1971 we should be obliged if you would take this letter as notice of
our client’s intention to review the annual rent payable under the Underlease
as from September 29 1984.
There is no
dispute but that that is an effective notice to set in motion the rent review
procedure. Reverting to the timetable, if no agreement was reached between the
landlord and the tenant by March 29 1984, the rent was to be determined by a
surveyor, and no such agreement, it is agreed, between the parties was reached.
Third, if the
plaintiff and the defendant had not agreed the identity of the surveyor by May
29 1984, he was to be appointed by the president for the time being of the Royal
Institution of Chartered Surveyors. There again, it is common ground that there
was no such agreement on the identity of a surveyor.
Finally, and
critically, the first defendant was required to make an application to the
president for the appointment of such a surveyor by June 29 1984. What in fact
happened was that there were some negotiations. While those negotiations were
still on foot and on May 30 1984, the surveyors to the landlord wrote a letter
to the president of the Royal Institution of Chartered Surveyors. That is, of
course, just short of a month before the last date for the landlord to comply
with the obligation to make an application. As the issue in this action depends
entirely on this letter, I propose to read it in full:
We act for
the freeholder of the above factory, warehouse and office premises, Montagu
Executor and Trustee Co Ltd, which are held on lease by Staines Warehousing Co
Ltd
and their
registered offices are set out
The lease is
for a term expiring on September 29 2095, at a current rent of £43,400 per
annum, with provision for a rent review at September 29 1984.
The second
schedule to the lease requires that application be made to the President of the
RICS for the appointment of an Expert Surveyor to determine a revised rent
failing agreement between the parties six months prior to the review date. The
application to the President is to be made not later than three months prior to
the review date.
Whilst no
rent has yet been agreed in this case, negotiations are continuing between
ourselves and the tenants, and we are, therefore, writing in accordance with
the terms of the second schedule to the lease to make an in time only
application for the appointment by the President of an Expert
1984.
We should be
grateful for your acknowledgement of this letter.
The question
before me is: was that, or was it not, an application within the meaning of the
second schedule to the lease?
No notice was
in fact given to the tenant by the landlord or its agents of that letter having
been written to the president of the Royal Institution of Chartered Surveyors,
and it remained in ignorance of that fact until very much later in the year
1984, when the landlord filled in a form which is issued by the Royal
Institution of Chartered Surveyors for use on applications for the appointment
of either an arbitrator or an independent expert. That form was in fact signed
by, again, the landlord’s agents on December 4 1984. It is a form with two
alternative initial paragraphs. One alternative is for an actual application to
be made on the form: ‘We (blank) hereby request the President . . . to appoint
an Arbitrator or Independent Expert.’
The other alternative is in relation to an application having been made
in the past, and reads as follows: ‘The application for the appointment of an
Arbitrator/Independent Expert to which the following details refer was made in
a letter from’ — and then there is in this particular form a blank — ‘dated’ —
and then in this form there is filled in — ’29th May 1984′ — and that is a
clear reference to the letter from the landlord’s agents which I have just
read. Then there are various details set out, as one would expect, in relation
to where the premises are and what the rent is and the names of the parties,
and so on and so forth.
There is
provision at the end of the form for the fee to be paid to the president of the
RICS. Before I read that, I should refer to Guidance Notes which the
RICS has issued to persons who are applying to it for the appointment of
arbitrators or experts. The particular paras which are relevant to this case
are contained at paras 2-1, where it is said: ‘Application to the President for
appointment. Application to the President for the appointment of an Arbitrator
or Independent Expert should be in writing and preferably made on the form
obtainable on application to the RICS.’
Second, ‘Document(s) and fee on application. The application will not be
processed until the appropriate non-refundable fee, currently £40 plus VAT, has
been received together with a copy of the lease or other document conferring on
the President power to make the appointment’. Then there are various provisions
which set out what the president will do in selecting an arbitrator or an
expert as the case may be, and when those things have been done it is stated in
the notes that the appointment takes effect from the date on which the
president signs the appointment, which he will not do until he has satisfied himself
that the person he proposes to appoint is suitable and not in any way
disqualified.
So far as the
fee was concerned, the facts are that no fee was paid when the letter of May 30
1984 was sent, but a fee appears to have accompanied the document that was
signed on December 4 1984.
On those
facts, argument has been addressed to me as to the validity of that letter of
May 30 1984. Mr Bagnall, for the tenant, has taken the following points. First
of all, he says that this has to be construed in a commercial way. That is not,
I think, seriously controverted. Second, he says that there are essentially
three defects in this letter as an application. The first is that it was not
accompanied by the fee. That does not seem to me to be a valid objection. It is
of course plain that the lease itself says nothing more than that the landlord
must make an application, and there is no description or further elaboration of
what is involved in the making of an application.
Second, it is
clear that so far as the RICS’s Notes have relevance — and they were relied on
by Mr Bagnall — they do recognise that the application exists and has an
objective existence by the way in which they describe the effect of the payment
of a fee. The particular turn of phrase is ‘the application will not be
processed until the appropriate non-returnable fee has been received’. That
seems to me to recognise the existence of the application. In a sense this is
not directly relevant to the decision I have to take, in that the views of the
Royal Institution of Chartered Surveyors, though no doubt worthy of serious
consideration, cannot be binding upon me, but they do seem to me to accord with
the reality of the matter, in that the application is actually made when the
president is approached and told that an application is being made. No doubt it
may be that the president will not take steps to process (as the expression is)
that application until he receives the proper fee, but nevertheless the
application is there and, so to say, on the table.
Third, Mr
Bagnall relied on the fact that no notice had been given. Here again I feel
that this is not a point of any substance, because there is no requirement for
notice to be given in the lease. The provisions of the lease are, of course,
detailed, and where a party is required to do something the lease says so. Mr
Bagnall argued that there could be difficulties if no notice was given, and a
tenant might be prejudiced if he took steps which he would not have taken had
he realised that a notice had been given. Those are arguments in terrorem
as it seems to me. There is a theoretical answer to them, in that the tenant
could perfectly safely inquire whether a notice had been given, since, time
being of the essence, there would be no risk in his doing so. But equally, of
course, there is no obligation in the lease on the tenant, as Mr Bagnall
forcefully pointed out, to make any such inquiry. The matter is left entirely
neutral.
Next — and as
it seems to me by far and away the most serious point — is the way in which the
letter was actually phrased. It will be recalled that the critical expression
was ‘We are . . . writing in accordance with the terms of the second schedule
to the lease to make an in time only application for the appointment by the
President of an Expert Surveyor’, etc. The three words ‘in time only’ have been
the subject of argument before me. It was submitted by Mr Reynolds that they
are capable of having two meanings: (1) that the agents were asking the
president effectively not to take any further steps on the application because
it was only a nominal application. The second meaning relied on by Mr Reynolds
is that they were making an application now because, as was in fact stated in
terms earlier in the letter, there were negotiations on foot. Mr Bagnall, on
the other hand, submits that this is really not a genuine application at all
and that it was not calculated to or indeed intended to put the machinery into
effective operation. In support of that, he relied on the decision in Aly
v Aly, reported I think only in The Times newspaper on December
27 1983, where, in relation to the provisions of Order 12, rule 8 of the Rules
of the Supreme Court, there was a requirement that a defendant should apply to
the court within a specified time-limit and an application had been made in
that case, in the sense that a letter was sent by the litigant to the
appropriate court authority, but the summons on that letter was not issued
until the time-limit had expired. In those circumstances, the Court of Appeal
held that the time-limit had been complied with, and they applied the following
test:
One had to
interpret the rule in question in a way that made sense of the whole procedure
laid down. It did not make sense to penalise a party who had done everything
required of him by the rule, on the basis of something not done in time by the
court. Therefore, one could only say that ‘apply to the court’ meant ‘do all
that it is in your power to do to set in motion the procedure necessary for the
relief sought’.
Mr Bagnall
says that in this case the landlord’s agents have not done all that it was in
their power to do to set in motion the procedure necessary for the relief
sought, in that they had written a letter which indicated, perhaps not in very
clear terms, that they did not want any action to be taken on the letter and
that it was merely a piece of paper which would preserve their rights. This is
a very short point. In my judgment, the true construction of this is that the
landlord’s agents were taking the step that they understood to be necessary to
comply with the time-limit and that it was in that context that they used the
words in the phrase ‘an in time only application’. In my judgment, having set
out the framework of the clause and made it clear within what limits they were
operating, the landlord’s agents indicated that they were making an
application, but that it was an application on which they hoped it would not be
necessary for the president to appoint an expert surveyor who would then
determine the rent, simply because there were negotiations on foot. It really
comes down to this, in my judgment: whether or not this was a genuine
application. In my judgment, it just passes the test.
In those
circumstances I will hear argument on the actual order I should make, but as at
present advised it seems to me that I should merely dismiss the originating
summons.
The summons
was dismissed, the plaintiffs to pay the first defendants’ costs.
