Notice – Whether time of the essence – Landlord serving notice specifying amount of increased rent – Clause providing that tenant bound to pay such amount on failing to serve counternotice within prescribed time – Counternotice served out of time – Court reviewing conflicting authorities – Landlord’s appeal allowed – Implications for consumer tenants
The appellant and respondent were respectively landlord and tenant under a 21-year lease of land situated near Bournemouth. The lease was granted in 1982 at an initial rent of £18,000 pa, and provided for four rent reviews, the last to take effect from 1 August 1999. The rent review clause entitled the landlord to serve a rent notice, during the last six months of a current period, specifying the amount of rent payable in respect of the following period. The clause went on to provide (the deeming provision) that if the tenant failed to serve a counternotice within one month of receipt of the rent notice, the tenant would be “deemed to have agreed to pay the increased rent specified in that notice”.
On 30 March 1999 the landlord’s surveyors served a notice stating that, with effect from 1 August 1999, the rent would be increased to £84,000 pa. The tenant, which intimated that an appropriate rent would be £52,725 pa, did not serve a counternotice until 16 June 1999. The landlord claimed that the deeming provision bound the tenant to pay the rent specified in the rent notice.
In High Court proceedings instituted by the landlord (see [2000] 3 EGLR 37), it was common ground that, on the authority of United Scientific Holdings Ltd v Burnley Borough Council [1977] 2 EGLR 61, time was not to be regarded as of the essence in the absence of a strong indication to the contrary. The landlord cited various authorities, notably Henry Smith’s Charity Trustees v AWADA Trading & Promotion Services Ltd [1984] 1 EGLR 116, for the proposition that the United Scientific presumption was displaced by a provision that spelled out the consequences of a failure to meet a time limit. The tenant relied above all upon the majority decision of the Court of Appeal in Mecca Leisure Ltd v Renown Investments (Holdings) Ltd [1984] 2 EGLR 137, where it was held that a provision in almost identical terms to the deeming provision did not suffice to rebut the presumption, as it merely provided machinery for the rent review process.
The judge criticised the decision in Mecca, but felt bound by rules of judicial precedent to rule in favour of the tenant. The landlord appealed.
Held: The appeal was allowed.
The Mecca case was wrongly decided, the majority having fallen into error by seizing upon fine distinctions between that case and the earlier decision in AWADA, which the present court was bound to follow. The ratio of AWADA was that provisions for a default rent, like the deeming provision in the instant case, were a decisive, or virtually decisive, contra-indication displacing the presumption that time is not of the essence. That decision was quite consistent with the principles laid down by the House of Lords in United Scientific: see the dissenting judgment of Brown-Wilkinson LJ in Mecca, as considered by Simon Brown LJ in Bickenhall Engineering Co Ltd v Grandmet Restaurants Ltd [1995] 1 EGLR 110 at p116, and as approved and followed in Visionhire Ltd v Britel Fund Trustees [1992] 1 EGLR 128; GR Mailman & Associates Pty Ltd v Wormald (Australia) Pty Ltd (1991) 24 NSWLR 80; and Mobil Oil NZ Ltd v Mandeno [1995] 3 NZLR 114.
Per Arden LJ: While the deeming provision could be draconian, it was noteworthy that the lease was made between commercial parties. If the tenant had been a consumer and the review provisions had not been individually negotiated (and no other enactment applied), it would have been open to the tenant to argue for the benefit of the Unfair Terms in Consumer Contracts Regulations 1999 (SI 1999 No 2083).
Kim Lewison QC and Thomas Grant (instructed by Beckman & Beckman) appeared for the appellant landlord; John Male QC and Timothy Morshead (instructed by Vizard Oldham) appeared for the respondent tenant.
Alan Cooklin, barrister
