Indexation — Reference to RPI — Provision for rebased RPI — Formula used RPI at date of lease for denominator — Whether re-based equivalent of denominator at rent review — Appeal by tenants allowed
By clause 2 of an underlease granted by a predecessor in title to the plaintiff landlords in August 1967 provision was made for periodic rent reviews in respect of premises at Craggs Street, Middlesbrough held by the defendant tenants. The reviewed rent was to be the sum of the initial rent (“the basic rent”) and an additional rent equal to the amount by which the basic rent multiplied by the variable factor applicable to the rental period exceeded the basic rent. The variable factor was a numerical fraction having a denominator of 114.3 and a numerator the average monthly RPI for the preceding year. The clause provided that where the RPI was re-based to a date other than January 16 1962 (a date to which the denominator of 114.3 was based) “then any new Index figure which shall be published as at that date for the purposes of the said Index shall … be substituted for the figure of 114.3 … and the expression “basic rent” shall… be construed as meaning the total of [the initial rent] and the additional rent payable … immediately before that date”. The underlease provided that if the indexation of the rent became impossible to implement then the additional rent was to be determined by arbitration.
In the Mayors & City of London County Court His Honour Judge Roger Cooke held (August 20 1990) that when the RPI was re-based in 1974 the figure to be substituted for 114.3 was the re-based equivalent of 114.3, 114.3 being the correct RPI figure at the date of the lease. The defendants appealed, contending that the underlease did not specify what figure should be substituted for 114.3 and therefore the rent should be determined by an arbitrator.
Held The appeal was allowed.
There was no reason to use the original base date under the RPI current at the date of the lease. The words in the review clause “immediately before that date” must mean the commencement date of the new RPI. Although the decision in the court below protected the landlord, the fraction could not be applied to a second re-basing of the RPI. Accordingly, the formula could not be implemented and the arbitration provision should apply.
British Gas Corporation v Universities Superannuation Scheme Ltd
[1986] 1 EGLR 120 applied.
Alan Steinfeld QC and Stephen Moverley Smith (instructed by Oswald Hickson Collier & Co, agents for Anthony Collins & Co, of Birmingham) appeared for the appellants; and Nicholas Dowding (instructed by Ashurst Morris Crisp) appeared for the respondents.
