Bailey (C. H.) Ltd v Memorial Enterprises Ltd
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,Lord Justice Megaw,Sir ERIC SACHS |
| Judgment Date | 16 November 1973 |
| Judgment citation (vLex) | [1973] EWCA Civ J1116-1 |
| Court | Court of Appeal (Civil Division) |
| Date | 16 November 1973 |
[1973] EWCA Civ J1116-1
In The Supreme Court of Judicature
Court of Appeal
Appeal by plaintiffs from judgment of Mr. Justice Eveleigh on 2nd February, 1973.
Revised.
The Master of the Rolls (Lord Denning),
Lord Justice Megaw and
Sir Eric Sachs.
Mr. RONALD BERNSTEIN, Q.C., and Mr. MICHAEL HARRISON (instructed by Messrs. Le Brasseur and Oakley, agents for Messrs. Le Brasseur Davis & Sons, Newport, Mon.) appeared on behalf of the Appellant Plaintiffs.
Mr. LEONARD BROMLEY, Q. C., and Mr. JOHN LINDSAY (instructed by The Simkins Partnership) appeared on behalf of the Respondent Defendants.
In this case we have to construe a rent review clause. The lease was made on 16th March, 1967. The lessors were C. H. BAILEY Ltd. The tenants were Memorial Enterprises Ltd. The letting was of the fourth floor of an office building known as Sackville House, 40 Piccadilly. The rent was from 25th March, 1967, until 21st September, 1983. The rent was to be £2,375 to be paid by equal quarterly payments in advance on the usual quarter days. There was the usual covenant to pay rents. There was a covenant by the tenant not to use otherwise than as offices. There was the usual covenant not to assign without consent, such consent not to be unreasonably refused. Then there was the rent review clause in paragraph 4(6) (11). It provides for the rent to be reviewed as at September 1969:
"(ii) If on the twenty-first day of September, One thousand nine hundred and sixty-nine the Market Rental Value (as defined by paragraph (iii) of this sub-clause) shall be found to exceed the rent of Two thousand three hundred and seventy-five pounds hereby reserved; there shall be substituted from such date for the yearly rent hereby reserved an increased yearly rent equal to the market value rental so ascertained.
(iii) For the purposes of this sub-clause the expression 'Market Rental Value' means the fair annual rack rent at which the demised premises if vacant at the relevant date could be let at the time as offices by a willing Lessor to a willing Lessee taking a lease otherwise on the terms and conditions of this Lease and shall be such a figure as is agreed upon in writing between the Landlord and the Tenants or in default of agreement as shall be determined by the arbitration or decision of one Surveyor Arbitrator to be mutually appointed and in the event of the parties being unable to agree upon one to be appointed on the application of either party by the President of the Royal Institution of Chartered Surveyors and these presents shall be deemed to be a submission to arbitration within the Arbitration Act 1950 or any statutory modification or re-eoactment there of for the time being in force."
Before going further, I wish to say that since the Judge's decision in this case and pending the appeal to this Court, Mr. Hatcher, one of the partners in Knight Frank and Rutley, has been appointed arbitrator. On 23rd March, 1973, he made anaward, saying: "I hereby determine that the fair annual rank rent as at 21st September, 1969, to be the clear net yearly rent of £5,350."
So, if the rent review clause operates according to its terms, it means that instead of the previous rental of £2,375, it is now £5,350 a year from 21st September, 1969, for the rest of the term, that is, until 21st September 1983. But the tenants say that the clause does not operate according to its terms. The reason is because the landlord left it too late. The landlord did not apply for a review in September 1969. He left it for a whole year. Then on 15th September, 1970, for the first time, the landlord wrote to the tenants drawing their attention to that clause and asking that an increased rent should be paid on account of it. The tenants say first that, unless the new rent is ascertained on 21st September, 1969, or at any rate by 29th September, 1969, the landlord is out. He cannot ever increase the rent under this clause.
Alternatively the tenants say that, if the new rent is not ascertained until some time later — in this case 23rd March 1973 — the new rent of £5,350 cannot be back-dated to September 1969: but it can only operate from the first quarter after it is ascertained, that is, from 25th March, 1973.
The Judge held that the new rent (ascertained as at 21st September, 1969) could be charged by the landlord but only from 25th March, 1973 (the first quarter after it was ascertained). The landlords appeal to this Court. They claim that the increased rent should run from 21st September, 1969. The tenant cross-appeals and says that the landlord has lost his right to increase the rent at all because it was not ascertained on 21st September, 1969.
I will take first the cross appeal. Mr. Bromley argues that the new rent has got to be fixed on 21st September, 1969. He says that it could be done in this way: The parties might agree beforehand as to the rent on that day: or, alternatively, an arbitration could be held beforehand to fix it as on that day. His submission was that the new rent has to be ascertained, by agreement or by an award of an arbitrator, on that very day, 21st September, 1969. Unless it is made on that day, he says, the increased rent cannot be recovered.
I reject that argument entirely. It is impossible to ascertain the new rent before the date arrives, 21st September, 1969. There may be fluctuations in rental values in the last few months or few weeks, or even the last few days before the final date — 21st September, 1969. No one can say beforehand with any certainty what it will be. As it happens, the 21st September, 1969, was in that year a Sunday, which makes it even more impossible. It would be impossible, too, if the arbitrator was ill on that day and could not sign or publish his sward. Mr. Bromley suggested that these difficulties could be resolved by resorting to section 13(2) of the Arbitration Act, 1950, which says:-
"The time, if any, limited for making an award, whether under this Act or otherwise, may from time to time be enlarged by order of the High Court or a Judge thereof, whether that time has expired or not."
That relates to entirely different circumstances. It has no application to a case such as the present. So I reject the suggestion that the new rent has to be fixed by 21st September, 1969. I agree entirely with the Judge on that point.
So I turn to the appeal itself. It is plain that the new rent cannot be ascertained on the very day itself — 21st September, 1969. There is bound to be some delay. Even if the landlord asks promptly for an increase and there is a speedyarbitration, it will be weeks or months before the new rent is ascertained: and it has then to be ascertained as at the 21st September, 1969. When it is ascertained, the rent review clause says: "…. there shall be substituted from such date" — that is, from 21st September, 1969 — "for the previous yearly rent a new yearly rent equal to the market value rental so ascertained".
The words of that clause seem to me clear. They mean that, as from 21st September, 1969, the increased rent shall be paid. But Mr. Bromley says that the words, clear as they are, are not to be given effect because of the nature of "rent". He says that "rent" has a special quality in English law. It issues out of the land. It can be distrained for. In particular, it must be certain at the time when it becomes payable. It cannot ever be assessed so as to operate retrospectively. Accordingly, he says the increased rent in this case (which was assessed on 23rd March, 1973) is payable only from 25th March, 1973: and cannot be backdated to 21st September, 1969.
In support Mr. Bromley referred to Greater London Council v. Connolly (1970) 2 Q. B. 100, where both Lord Pearson and I said that rent has to be certain. But that was said in an entirely different context. It has no application whatever to the present case.
More to the point is the case of Essoldo Ltd. v. Elcresta Ltd. (1971) 23 P. and C. R. 1. decided by the Vice Chancellor, Sir John Pennycuick, in 1971. There was a rent revision clause which was somewhat similar to the one here. It provided for a fixed rent of £6,000 a year during the first three years of the term; and then secondly "during the remainder of the term" an increased sum to be ascertained in the manner there provided.The Vice Chancellor said that the nature of rent was such that it had to be certain: and that it could not be determined retrospectively. Accordingly he held that the revised rent only operated in the future, that is, after the date on which the increased rent was ascertained. The words in that case were just as strong as those in this case: "during the remainder of the said term" the greater rent should be paid. Yet the Vice Chancellor did not give effect to those words because of the nature of "rent".
I think that case...
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