Lease of commercial premises — Landlord having right of pre-emption in event of proposal to assign — Contract to assign to claimant terminable in event of landlord exercising right — Whether right to terminate arising — Whether service requirements complied with — Claim dismissed
The defendant was the lessee of a shop in Covent Garden. The claimant wished to take an assignment of the lease, the terms of which gave a right of pre-emption to the landlord in the event of such an assignment being proposed. The mechanism for giving effect to that right was set out in clause 3.22.2. The defendant was required to give written notice to the landlord of the terms agreed with the prospective assignee, together with an offer to surrender the lease. The landlord could then, within 15 working days, “either reject or accept the said offer by endorsing such rejection or acceptance on the Surrender Notice… and returning the Surrender Notice to the Tenant”. If it failed to do so, the offer would be deemed to have been rejected. The lease contained a separate provision requiring any notice to the defendant to be served at its registered office and its management office.
The defendant contracted to assign the lease to the claimant on terms that the contract would terminate if the landlord accepted the offer to surrender “by endorsing the Surrender Notice as set out in clause 3.22.2 the lease”. The defendant then served a surrender notice on the landlord. The landlord enquired whether the defendant would be prepared to accept service of its notice in response by fax to a given fax number. The defendant agreed to this. The landlord subsequently faxed an endorsed copy of the surrender notice to the defendant.
The defendant accordingly sought to rescind the contract with the claimant. The claimant brought proceedings, arguing that the right to terminate the contract had not arisen since the landlord had not complied with the service requirements under the lease and the defendant had breached its duty to the claimant by agreeing to relax those requirements. The defendant contended that it was sufficient that there had been an endorsed surrender notice in the form prescribed by clause 3.22.2. The claimant’s application for summary judgment was refused, and judgment was instead given for the defendant. The claimant appealed.
Held: The claim was dismissed.
(1) The relevant clause of the contract to assign was poorly worded because it suggested that the offer of surrender could be accepted merely by endorsement of the surrender notice. That was not so, since the lease required service in the manner specified, and the general law required some communication of the acceptance. The word “accept” in the contract accordingly had to be treated as an additional requirement to endorsement of the surrender notice, so that both endorsement and acceptance were required.
(2) However, the right to terminate the contract did not arise only where such acceptance was made strictly in accordance with the service provision in the lease. The wording of the contract did not support that construction; it referred only to the requirements for the surrender notice, and said nothing about the means of acceptance. It was sufficient for acceptance to be communicated to the defendant. Although the defendant was, pending sale, under a duty not to do anything to prejudice the claimant, that duty did not preclude it from agreeing to alter the service requirements of the lease in a commercially sensible way. The landlord had fully appreciated the requirements and had asked for a dispensation well in advance. The claimant had not been prejudiced.
Mark Wonnacott (instructed by Davenport Lyons) appeared for the claimant; John Male QC (instructed by Manches) appeared for the defendant.
Sally Dobson, barrister
