Landlord and tenant — Rent review clause in lease of hotel — Lease for 21 years with provisions for review at 7 and 14 years — Agreement on variation of rent, or application for appointment of arbitrator, to be made before a date mentioned in review clause — No agreement reached or application made before date in question — Decision of House of Lords in United Scientific Holdings Ltd v Burnley Borough Council subsequently drawn to the attention of the lessors, nearly two years after the first review date — Lessors claimed declaration that review provisions could be operated and any increase of rent recovered retrospectively — No evidence in present case that time was of the essence of the rent review machinery — Declaration in favour of lessors granted — Defence based on estoppel rejected
In these
proceedings Edmund David Vince and Maria Vince, freehold owners of the Malvern
Hotel, 3 and 5 Petersham Road, Richmond, West London, sought a declaration as
plaintiffs against Alps Hotel Ltd, the lessees of the Malvern Hotel, and
Krishan Chand Chhabra, a director of Alps Hotel Ltd and a guarantor of the
lessees’ liabilities under the lease. The declaration sought was that the
plaintiffs were entitled to operate the provisions of the rent review clause
and that a variation of rent thereunder would be valid retrospectively to
December 10 1975, the first of the review dates under the clause.
P J Martin
(instructed by Stone Rowe Brewer & Devane) appeared on behalf of the plaintiffs;
N Patterson (instructed by Duke-Cohan & Co) represented the defendants.
Giving
judgment, MR VIVIAN PRICE QC said: Edmund David Vince and Maria Vince are and
have been at all relevant material times the freehold owners of a property
known as The Malvern Hotel, 3 and 5 Petersham Road, Richmond, in West London.
Their predecessor in title to the property was a company called Muncip
Developments Ltd, who by a lease dated December 10 1968 let the property to a
person named Brian Middler for a term of 21 years from December 10 1968 at an
initial rent of £4,000 per annum. In 1973 by a deed of licence made on June 20
1973 between Edmund David Vince and Maria Vince of the first part, Brian
Middler of the second part, Alps Hotel Ltd of the third part and Krishan Chand
Chhabra of the fourth part, Edmund David Vince and Maria Vince granted a
licence to Brian Middler to assign the lease to Alps Hotel Ltd in consideration
of which Alps Hotel Ltd and Mr Chhabra covenanted with the Vinces to perform
and observe the several covenants and conditions contained in the lease.
Thereafter, by an assignment dated June 22 1973, Brian Middler assigned the
lease to Alps Hotel Ltd so that at all relevant times the Vinces have been the
freehold owners of the property; Alps Hotel Ltd has been the leaseholder of the
property; and Mr Chhabra (a director of Alps Hotel Ltd) has been in effect the
guarantor that Alps Hotel Ltd will perform and observe the covenants and
conditions contained in the lease.
The lease
dated December 10 1968 includes provision for the review of rent at seven-year
intervals. Clause 1 of the lease is in the following terms:
In
consideration of the rents and covenants by and on the part of the lessee
hereinafter reserved and contained the landlord hereby demises and releases
unto the lessee all that premises known as The Malvern Hotel, 3 and 5 Petersham
Road, Richmond in the London Borough of Richmond-upon-Thames to hold the
demised premises unto the lessee from the 10th day of December 1968 for a term
of 21 years paying therefor yearly during the first seven years of the said
term the rent of £4,000 and during the residue of the said term a yearly rent
of £4,000 or such amount whichever be the greater as may be agreed between the
landlord and the lessee before the 10th day of December 1975 and 1982 or in the
absence of such agreement as may be determined by an arbitrator to be nominated
by the President for the time being of the Royal Institution of Chartered
Surveyors on the application of the landlord made before but not more than two
quarters before the said 10th day of December 1975 and 1982 and so that in the
case of such arbitration the amount to be determined by the arbitrator shall be
the amount which shall in his opinion represent a fair yearly rent for the
demised premises having regard to rental values then current for property let
without a premium with vacant possession and to the provisions of this lease
other than the rent hereby reserved all such respective rents to be paid
without any deduction except for the landlord’s property tax by equal quarterly
payments in advance on the four usual quarter days in each year the first of
such quarterly payments to be made on the execution hereof.
It will be
seen that in order for there to be a change of the rent amount chargeable
during the second seven-year period the lease provides that there must either
be agreement between the parties before the expiry of the first seven-year
period, ie December 10 1975 or the landlord has to make an application to the
president for the time being of the Royal Institution of Chartered Surveyors
before December 10 1975 but not more than two quarters before. In fact in this
case no agreement was reached between the Vinces and Alps Hotel Ltd before
December 10 1975 about the rent to be paid during the second seven-year period
of the lease, even though there had been some desultory negotiations which came
to no conclusion; nor had the Vinces by that date (that is December 10 1975)
made any application to the president for the time being of the Royal
Institution of Chartered Surveyors for the appointment of an arbitrator to
decide the rent payable.
The
correspondence has been exhibited to various affidavits that have been read
before me and has all been put together in a convenient bundle. I do not think
it is necessary for me to go through that correspondence in detail, since there
can be no doubt, and it is agreed between the parties, that the conditions laid
down in terms in clause 1 of the lease for the agreement of the new rent or
application for the appointment of an arbitrator were not complied with within
the times specified.
It will be
seen from the correspondence, and I do not again need refer to the details,
that Alps Hotel Ltd and Mr Chhabra, its director and guarantor, maintained the
position from an early stage that since no agreement between the parties as to
an increased rent had been reached prior to December 10 1975 and the landlords
had failed to apply by that date to the president of the Royal Institution of
Chartered Surveyors for the appointment of an arbitrator then the rent payable
for the property must remain at £4,000 per annum until the next review date, ie
December 10 1982. In other words, time was of the essence of the rent review
provisions of the lease. The landlords never explicitly acknowledged that they
were out of time, they never explicitly acknowledged that their rights had been
lost for a review of the rents, but I think it is true to say that quite apart
from the advice that they had received later on as to the apparent failure of
their then solicitors to advise them properly, they seem to have accepted, so
far as can be seen, that there was little that they could do at that stage to
secure an increased rent. Correspondence between the parties on the subject of
an increased rent seems to have ceased.
In 1977,
however, the position changed. In United Scientific Holdings Ltd v Burnley
Borough Council and Cheapside Land Developments Co Ltd v Messels
Service Co Ltd [1978] AC 904, both cases being heard together by the House
of Lords, it was decided that in relation to the rent review clauses in those
cases there was nothing in either of the leases in question to displace the
presumption that strict adherence to the timetables specified in their
respective rent review clauses was not of the essence of the contract and that
therefore the new rents should be determined in accordance with the procedures
specified in the respective leases. It was also decided that the rents fixed by
the valuations would be payable retrospectively from the respective review
dates.
Although the
House of Lords gave their decisions in March 1977, it was not until October
1977 that their decisions in these cases were drawn to the attention of the
Vinces. Mr Vince was advised that the effect of the change in the law (and it
was quite clearly a change in the law as then understood both so far as the
textbooks are concerned and as far as the courts up to the Court of Appeal were
concerned) was that it was possible that time was not of the essence of the
rent review provisions in the lease held by Alps Hotel Ltd and that, despite
the failure to invoke the procedure under clause 1 of that lease by applying
before December 10 1975 for the appointment of an arbitrator under that clause,
it might still be possible to apply for such an appointment and to obtain a
rent increase retrospective to December 10 1975. Accordingly, on January 19
1978 application was made to the president of the Royal Institution of
Chartered Surveyors to appoint an arbitrator and at the same time Alps Hotel
Ltd and Mr Chhabra were informed through their solicitors. Further
correspondence ensued, but the president of the Royal Institution seemed
reluctant to act in the absence of agreement between the contending parties, even
though the lease itself did not require agreement between the parties either to
go to arbitration or upon the appointment of an arbitrator. Ultimately the
present originating summons was issued between Edmund David Vince and Maria
Vince as plaintiffs, Alps Hotel Ltd as the first defendant and Mr Chhabra as
the second defendant. At one stage Mr Middler was added as the third defendant,
but he has played no part in the proceedings before me.
The relief
claimed by the plaintiffs by the summons against the defendants is for a
declaration that on the true construction of the above-mentioned lease, that is
the lease dated December 10 1968 and made between Muncip Developments Ltd and
Brian Middler, the valuation of the rent by an arbitrator appointed by the president
of the Royal Institution of Chartered Surveyors pursuant to clause 1 of the
said lease and the plaintiffs’ application made to the said president in a
letter dated January 19 1978 would be valid and binding on the defendants if
higher than the figure of £4,000 per year and recoverable retrospectively to
December 10 1975.
The defendants
do not accept that time is not of the essence of the rent review provisions,
although they accept that the burden of displacing the presumption is upon
them. The defendants further assert that by reason of the plaintiffs’ conduct
in allowing them to incur substantial expenditure in the belief that the rent
would remain at £4,000 per annum the plaintiffs should be estopped from being
allowed to assert that time is not of the essence of the rent
the lease, and the submissions of counsel in relation thereto which necessarily
rely by example on other cases. In construing the words of this clause I can
see no indication anywhere that the timetable there set out is other than
procedural. I can see no indication, still less firm evidence, that time was
ever intended to be the essence of the bargain between the parties. To take an
extreme case which was discussed by counsel before me, suppose that
negotiations between the parties took up the whole two quarters before December
10 1975 and yet no agreement was reached upon a new rent, and the landlord then
made his application to the president of the Royal Institution of Chartered
Surveyors on December 11 1975 (or even on December 10 1975 itself, since it is
to be observed that the timetable set out in clause 1 itself is that the
application should be made before December 10), can it really be said that an application
on such a date was too late and that the landlord must wait another seven years
for a rent review? I cannot accept that
there is any indication in the clause whatsoever that such was the intention of
the parties, and in my judgment there is nothing in clause 1 to displace the
presumption that time in relation to the rent review provisions was not of the
essence of the bargain.
I then turn to
the other side of the defendants’ case, namely that in some way the plaintiffs
are estopped by their conduct from asserting that time is not of the essence.
Essentially it falls into two heads, which I shall deal with together. First of
all the plaintiffs’ delay in applying by their letter dated January 19 1978 for
the appointment of an arbitrator, upon which they rely in these proceedings,
and secondly that by that delay they caused the defendants to act to their
prejudice by incurring expense at a time when they thought the rent was going
to remain at £4,000 for the next seven years, that is until the next rent
review moment in December 1982. I think it is important that I should read at
this stage the evidence upon which the defendants rely and which is also
answered by Mr Vince on behalf of the plaintiffs.
I first of all
turn to Mr Chhabra’s affidavit dated May 25 1979, and I pick it up at paragraph
8:
The
Plaintiffs did not make any application to the President of the Royal
Institution of Chartered Surveyors before December 10 1975 asking him to
appoint an independent arbitrator to assess the rent payable under clause 1 of
the lease of The Malvern Hotel.
That of course
is accepted. Then we pick up the delay that is relied upon in support of the
plea of estoppel.
The
Plaintiffs have delayed in applying to the President of the Royal Institution
of Chartered Surveyors until January 19
and it should
be 1978, not 1976 as it is expressed in the affidavit,
as appears
from the letter marked EDV3 and exhibited to the affidavit of Edmund David
Vince sworn on June 19 1978. Since December 1975 I have paid rent to the
Plaintiffs at the rate of £4,000 per annum. Since December 1975 I have been
able to execute works of improvement to The Malvern Hotel which I would not
have been able to execute if the rent payable under the terms of clause I had
been more than £4,000 per annum. In particular, central heating has been
installed to the value of £3,800, an extension at the rear of the hotel has
been built at a cost of £1,360, additional rooms have been created by
partitioning at a cost of £385, and new toilets, baths and showers have been
installed at the hotel at a cost of £660.
I have also
been able to execute the works of repairs required by clause 2.4 and 2.5 of the
lease to a higher standard than I would have been able to if the rent payable
under clause 1 of the lease had been more than £4,000 per annum. In particular
£650 has been spent on the decoration of the hallway and £350 on the decoration
of the lounge of The Malvern Hotel. All the rooms of The Malvern Hotel have
been newly painted, which has cost £845.
I am informed
by my solicitors that the Plaintiffs have been guilty of unreasonable delay
which has caused prejudice and hardship to the Defendants in that the several
sums set out at paragraphs 9 and 10 above would not have been spent if the rent
review provisions had been implemented by the Plaintiffs in accordance with the
timetable provided in the lease.
In reply to
that Mr Vince, by his third affidavit of March 10 1980, in paragraph 7 says:
In relation
to paragraphs 9 and 10 of Mr Chhabra’s affidavit and the executed works of
improvement: under clause 2.16 of the said lease the First Defendants were
prohibited from executing such works without my consent. This consent was never
granted and copies of the correspondence
and he sets
them out in EDV28.
Clauses 2.3,
2.4 and 2.5 of the said lease require the First Defendants to observe the
therein set out repairing covenants. Since 1975 their schedules of
dilapidations and notices have been served on the First and Second Defendants
requiring them to remedy the dilapidations set out. Since 1975 these
dilapidations have not been repaired within the said clause 2 and on June 11
1979 this Honourable Court granted the Plaintiffs leave as required by the
Leasehold Property Repairs Act 1938 to bring forfeiture proceedings in relation
to such dilapidations and failures to repair, and trial in relation to this
matter is still pending, the action having been commenced on July 31 1979 by writ
of summons for dilapidations and failure to repair in 1975, 1976, 1977, 1978
and 1979,
and then he
refers to further letters. Again I need not refer to them, and nor do I need
refer to the copies of the schedules of dilapidations and notices requiring repairs.
The schedule
of dilapidations and notice dated June 27 1978 being relied upon by the
Plaintiffs in the said pending action relates to the state of the said
premises.
Then he refers
to arrears of rent.
I therefore
contest the First and Second Defendants’ claim in paragraph 11 of Chhabra’s
affidavit that the sums referred to in paragraphs 9 and 10 therein would not
have been spent if the rent review provisions had been implemented by the
Plaintiffs. The installation of the central heating, rear extension and
additional rooms, toilets, baths and showers increased the value to the First
and Second Defendants of the said premises at 3 and 5 Petersham Road as an
hotel. Secondly, the decoration referred to increased again the value to the
First and Second Defendants of the premises of the said hotel and/or was
required by the various schedules of dilapidations and notices herein variously
referred to. Thirdly, the First and Second Defendants prefer this type of
expenditure to the expenditure required of them under the lease.
Then finally
Mr Chhabra in his affidavit of May 9 1980 says at paragraph 3 when dealing with
delay:
In paragraph
5 of Mr Vince’s affidavit he purports to show that in the circumstances set out
therein he was not guilty of unreasonable delay. He does not say when he first
instructed Messrs Perry & Company but in any event whatever his discussions
and rights may have been as against his former solicitors I know nothing of any
claim as against them. So far as I was concerned nothing further was written or
discussed as between the Plaintiffs and the Defendants between September 1976
and January 1978. In any event, in April 1976 I had been advised by my
solicitors and verily believed that no rent increase was payable to the
Plaintiffs under the terms of the lease. Further, the judgment of the House of
Lords in the cases of United Scientific Holdings and Cheapside Land
Development Company was pronounced on March 23 1977, almost nine months
before the Plaintiffs’ solicitors wrote to the Royal Institution of Chartered
Surveyors and then to my solicitors. On the question of delay I further mention
that the Plaintiffs’ affidavit under reply is dated March 10 1980 and purports
to reply to my affidavit of some nine months earlier.
Then he
produces the letter from Mr Vince’s present solicitors of January 19 1978,
together with a copy of his solicitors’ reply of January 24 1978, which I do
not need to read. Then paragraph 5:
As to
paragraph 7 of Mr Vince’s affidavit he has purported to deal with a number of
matters and I will try and deal with these individually as follows. As to
exhibit EDV28
that is the
correspondence between June 8 1977 and August 17 1977 between solicitors acting
on behalf of the defendants, the then solicitors acting on behalf of the plaintiffs
and the present solicitors acting on behalf of the plaintiffs.
which relates
to the failure by the Plaintiffs to give consent for the construction of the
extension to the rear of the hotel I am informed by my solicitors and verily
believe that no reply was ever received to the letter of August 17 1977 in
which they informed the Plaintiffs’ solicitors that they considered the
Plaintiffs were unreasonable in withholding consent for those works and
alterations which were in my view an improvement to the property and which
enured to the benefit of both the Plaintiffs and the Defendants. (b), the
Plaintiffs have exhibited certain letters under EDV29 and the schedule of
dilapidations under EDV30 which in my humble opinion give an incom-
plete picture of the situation. Now produced and shown to me marked KCC8 true
copies of the originating application which was issued by the Plaintiffs herein
for leave to take proceedings for damages for breach of covenant together with
true copies of the affidavits sworn in those proceedings but I have not
included the exhibits. It is correct that leave to issue proceedings as against
the Defendants was granted by Master Chamberlain on June 11 1979 but in so
doing he stated, according to the note made by my solicitors, as follows: ‘I
think that this is a close one and may very well be that the Plaintiffs will go
no further. I find that at the date of the summons the Plaintiff has brought
himself within the Act and is therefore entitled to leave as asked under
direction in paragraph 4.’ The point
which the learned Master was making I am informed and verily believe is that
the works to the roof and the rear elevation had not been completed at the time
of issuing of the summons so that in law the Plaintiffs were therefore entitled
to the order which was therefore requested. There is now produced and shown to
me
and he then
produces the pleadings.
(c) As to the payment of rent so far as I am
aware at all times the rent was paid within 21 days of the due date.
(d) As to the suggestion that the Defendants
would in any event have executed the works set out in paragraphs 9 and 10 of my
affidavit of May 25 1979 the position is that if the Defendants had known that
there was likely to be an increase in rent of any substantial nature as from
December 25 1975 they would not have executed the improvements such as the
provision of central heating and the extension at the rear of the hotel. I
cannot at this stage state whether they would have executed the works in
relation to the toilets, baths and showers, but they would not have spent more
than was necessary in order to comply with the repairing obligations under the
provisions of the lease.
The essential
factors giving rise to an estoppel in pais or estoppel by conduct were defined
by Lord Tomlin in Greenwood v Martins Bank Ltd [1933] AC 51. I do
not need to deal with the facts of that case, which are of course very remote
from the facts here. The factors defined by Lord Tomlin are set out at p 57,
where he says:
The essential
factors giving rise to an estoppel are, I think, (1) a representation or
conduct amounting to a representation intended to induce a course of conduct on
the part of the person to whom the representation is made. (2) An act or
omission resulting from the representation, whether actual or by conduct, by
the person to whom their representation is made. (3) Detriment to such person
as a consequence of the act or omission. Mere silence cannot amount to a
representation, but when there is a duty to disclose deliberate silence may
become significant and amount to a representation.
Have the
defendants in the proceedings before me adduced evidence before me to satisfy
all those factors there set out? I think
that the defendants’ essential difficulty in establishing an estoppel by
conduct in the present case is to show by their evidence that at any time they
relied upon the plaintiffs’ representations, either express or implied, in any
way to their detriment or prejudice or otherwise. It was submitted to me that
the defendants acted to their prejudice by reason of the plaintiffs’ failure to
do anything from 1976 onwards. The plaintiffs, so it is asserted, seem to have
pursued the matter as far as they could and then apparently cried off. But the
answer to that assertion is firstly that the plaintiffs could not pursue their
right until they knew of it, and that the date when they knew of their rights
cannot on the evidence before me be earlier than October 1977 when they were
advised of the decision in United Scientific Holdings case and the
possibility that they could go to court if necessary and get a declaration of
the sort that is sought before me.
Secondly,
there is no evidence that the defendants relied in any way upon the plaintiffs’
silence rather than upon their solicitors’ advice, and indeed the evidence that
I have read establishes that.
Thirdly, there
is no real evidence before me as to when the works were done or what exactly
they amounted to.
In those
circumstances on the evidence before me it does not seem to me that the
defendants have established any prejudice or hardship to themselves, still less
that it was caused by any representation, express or implied, by conduct or
absence of action, silence or otherwise by the plaintiffs. In my judgment,
therefore, the plaintiffs are entitled to the declaration that they seek.
