Ballard (Kent) Ltd v Oliver Ashworth (Holdings) Ltd

These are two appeals, both with the leave of the Judge, from orders made on 8 May 1998 and 16 September 1998 by His Honour Judge Rich QC, sitting as a judge of the High Court of Justice, Chancery Division. The appeals raise issues of some general interest concerning double rent under the Distress for Rent Act 1737 ("the 1737 Act"), election, waiver, and the rule against double recovery.

Both of the Judge's orders were made under RSC O.14A and the Judge did not have to decide (and did not decide) any issues of fact. The basic primary facts of the matter are quite straightforward and are not in dispute. There are other matters of fact (which might affect the apparent meritoriousness or unmeritoriousness of the respective parties' positions) on which the court has no evidence and must resist any temptation to speculate. But since these proceedings were started on 1 November 1996 the litigation has followed a tortuous path and it is very doubtful whether the two summonses under O. 14A have achieved what is intended to be achieved by such summonses, that is the saving of time and costs. It would probably have been better to have had a speedy trial of the whole matter. However the two summonses have resulted in two rather elaborately worded declarations and two appeals to this court, which has to deal with the appeals as it finds them.

By a lease dated 25 March 1986 and made between E W Ballard Ltd and Rediffusion Simulation Ltd commercial premises at the Ballard Business Park, Strood, Kent, were demised for a term of 20 years from 25 March 1986 at an initial yearly rent of £43,000 payable by equal quarterly payments in advance on the usual quarter days. There was a provision for an upwards-only rent review every five years, under which the yearly rent was increased to £92,000 from 25 March 1991. The landlord is now Ballard (Kent)Ltd (the plaintiff below and the respondent in this court) and the tenant is Oliver Ashworth (Holdings) Ltd (the defendant below and the appellant in this court).

Clause 3(10) of the lease contained a tenant's covenant, in standard form, to yield up the demised premises at the expiration or sooner determination of the term.Clause 12 of the lease contained two provisions of particular importance in this case.Clause 12(i) contained an option for the tenant to determine the lease at the expiration of the first ten years and six months of the term by giving "at least six months previous notice in writing prior to the determination date" (which was defined as the expiration of the period of ten years and six months). The following subclauses of clause 12 provided for the tenant to continue to be liable for rent and service charge for a period of up to a year, if after the term had been brought to an end under clause 12(i) the landlord could not re-let on satisfactory terms. The precise terms of cl. 12(ii) were as follows,

"That in the event that the term hereby granted shall be determined by the Tenant in the manner aforesaid and if (having used its best endeavours which the Landlord hereby undertakes so to do) the Landlord shall be unable to re-let the whole of the demised premises at a commencing rent of not less than the rent first hereby reserved and otherwise upon terms no less advantageous to the Landlord than those in this present demise contained the Tenant shall continue to pay to the Landlord quarterly in advance on the usual quarter days the rents hereby reserved and the service charges on the dates when they shall respectively become payable from the determination date until the date when the lessee under a new Lease of the demised premises granted by the Landlord shall commence payment of rent or until the date twelve months from the determination date whichever shall be earlier."

This was followed by some provisos and two further associated subclauses which do not call for detailed summary.

By a letter dated 5 March 1996 the tenant's solicitors gave notice of the tenant's intention to determine the lease "as at 25 September 1996". The notice should have specified 24 September 1996. It also seems to have erred in specifying the wrong company in the Ballard group as the landlord to whom it was addressed, but that point has disappeared from the case and I need say no more about it. The error of one day has however had momentous consequences.

On 23 September 1996 —that is, only the day before the true determination date —the landlord's solicitors wrote to the tenant's solicitors drawing attention to the errors and contending that the notice was invalid. In connection with the date the letter cited the decision of this court in Mannai Investment Co v Eagle Star Life Assurance [1995] 1 WLR 352. That decision (which was made on 5 July 1995 and, as it happens, reversed a decision of Judge Rich) followed earlier Court of Appeal authority ( Hankey v Clavering [1942] 2 KB 326) but itself was reversed by a bare majority of the House of Lords on 21 May 1997 (see [1997] AC 749). In legal theory the House of Lords was saying "the law was always thus" (see the discussion in Kleinwort Benson v Lincoln City Council [1998] 3 WLR 1095) but the position is rather different in terms of the practicalities of advising clients, and the uncertainty as to the validity of the tenant's notice under clause 12(i) lies at the heart of these appeals.

I return to the landlord's solicitors' letter of 23 September 1996. It expressed the view that the tenant remained bound for the full duration of the lease. It continued,

"Alternatively, and strictly without prejudice to our client's contention that the break notice is defective, if your client seeks to maintain that the break notice is valid, but fails to vacate the premises, our client will be entitled to collect double rent from your client for such period as your client remains in occupation. This arises pursuant to the Landlord and Tenant Act 1737, section 18. Collection of double rent will be without prejudice to our client's contentions that the break notice is defective and also without prejudice to our client's contractual right to collect a sum equivalent to a year's rent and service charges, pursuant to Clause 12(ii) of the Lease."

The reference to the Landlord and Tenant Act 1737 should have been to the Distress for Rent Act 1737 which is here referred to as the 1737 Act. There is also a Landlord and Tenant Act 1730 ("the 1730 Act") of which it will be necessary to make some mention.

The matter was now in the hands of the landlord's solicitors' litigation partner who on 26 September wrote,

"The lease dated 25 March 1986 is continuing and your client is required to pay the September's quarter rent payable on 29 September 1996. In the event that your client's rental payment is late, interest will be payable under cl. 6(ii)".

On 18 October 1996 she wrote,

"We are instructed to sue your client for the September quarter's rent payable under the lease dated 25 March 1986."

The letter demanded £23,000 together with interest and legal fees of over £2000. It made no mention of any alternative claim either under the 1737 Act or under cl. 12(ii) of the lease.

Although the tenant's position was that it had validly exercised the option to determine the lease, it remained in occupation of the demised premises (in fact through the medium of a subsidiary company, but nothing turns on that). The landlord's counsel (Mr Paul Morgan QC and Mr Nicholas Taggart) say in their skeleton argument that the tenant does not suggest that its decision to remain in occupation was based on the landlord's stance as to the validity of the notice, but there is no admission to that effect in the tenant's pleadings. It would not be surprising if there was a causal connection, but, again, none is asserted in the tenant's pleadings. For the purpose of the O. 14A summonses those matters are behind the veil.

On 1 November 1996 the landlord issued a writ and statement of claim in the Chancery Division of the High Court. In its original form it was simple claim for arrears of rent, interest and costs. There was no reference to the tenant's notice under cl 12(i), or to any sum claimed under cl 12(ii), or to the 1737 Act. However the landlord's claims, and the issues between the parties, have since become a good deal more complex, and it will save time in the long run to set out the course of the litigation in a little detail, noting also relevant events outside the course of the litigation.

On 9 December 1996 the tenant put in a defence and counterclaim pleading the notice under cl 12(i) and seeking a declaration that the lease terminated on 24 September 1996. The original defence pleaded an estoppel but that was in relation to the point on the landlord's name, which is no longer a live issue.

On 20 December 1996 the landlord put in a reply and defence to counterclaim challenging the validity of the cl 12(i) notice on the ground of the incorrect date and on 10 January 1997, having...