Bates (Thomas) and Son Ltd v Wyndham's (Lingerie) Ltd

JurisdictionEngland & Wales
Judgment Date21 November 1980
Judgment citation (vLex)[1980] EWCA Civ J1121-1
Docket Number1977 T. No.2541
CourtCourt of Appeal (Civil Division)
Date21 November 1980
Between:
Thomas Bates & Son Ltd.
and
Wyndham's (Lingerie) Ltd.

[1980] EWCA Civ J1121-1

Before:

Lord Justice Buckley

Lord Justice Eveleigh

Lord Justice Brightman

1977 T. No.2541

In The Supreme Court of Judicature

Court of Appeal

On Appeal from The High Court of Justice

Chancery Division (Group A)

Mr. Michael Wheeler, Q. C. (Sitting as a Deputy Judge of the High Court).

MR. E. G. NUGEE, Q. C., and MR HARPER (instructed by Messrs Chethams) appeared on behalf of the appellant (defendant).

MR. R. WAKEFIELD (instructed by Messrs Tolhurst & Fisher) appeared on behalf of the respondent (plaintiff).

LORD JUSTICE BUCKLEY
1

This is an appeal from a decision of Mr Michael Wheeler, Q. C., sitting as a Deputy Judge in the Chancery Division on the 6th June, 1979.

2

The issues in the case relate to a rent review clause contained in a lease dated the 17th December, 1970, and made between the plaintiffs, Thomas Bates & Son Ltd., as lessors and the defendants, Wyndham's (Lingerie) Ltd., as lessees. The subject-matter was some factory premises at Hornchurch in Essex. In order to understand the issues it is necessary to go back in history a little while.

3

In the year 1956, by a lease dated 20th August, 1956, the plaintiffs (whom I will call "the landlords") let to predecessors of the defendants (and I will call the defendants "the tenants") the factory premises in question for a term of seven years from the 1st September, 1956, at a yearly rent of £650, That lease contained, in clause 5 an option provision in the following terms: "That the lessor will on the written request of the lessee made six months before the end of the term hereby created and if at the time of such request there shall not be any existing breach or non-observance of any of the covenants on the part of the lessee hereinbefore contained at the expense of the lessee grant to the lessee a lease of the demised premises for a further term of seven or fourteen years from the expiration of the said term at a rent to be agreed between the lessor and the lessee but in default of such agreement at a rent to be fixed by a single arbitrator appointed by the President for the time being of the Royal Institution of Chartered Surveyors and containing the like covenants and provisoes as are herein contained".

4

The term under that lease was in due course assigned to the tenants, and when the time for the exercise of the option drew near Mr. Bates, the managing director of the landlords, wrote a letter to the tenants, for the attention of a Mr. Avon, who was the director of the tenants who at all times has handled matters relating to this leasehold property on behalf of the tenants, a letter drawing attention to the fact that the time had come to consider a renewal of the lease, and Mr. Bates said in that letterthat the landlords would require an addition of £125 per annum, bringing the rent up to £775 per annum for the seven years from the expiration of the then current lease.

5

Stimulated by that communication, Mr. Avon, on behalf of the tenants, gave a formal notice exercising the option on the 19th February, 1963, requesting the landlords to grant to the tenants a renewed lease of the premises for the further term of fourteen years from the expiration of the current term, "at a rent to be agreed between us" - quoting from the notice - "but in default of such an agreement, at a rent to be fixed by a single arbitrator appointed by the President of the Royal Institution".

6

In response to that Mr. Bates wrote in reply saying that in fact the landlords would require rather more rent than he had stated in his earlier letter, £850 a year; in consequence of which there were some oral communications, and on the 11th March, 1963, Mr Bates wrote to Mr. Avon confirming offers which he had made orally for a further seven year term at £800 a year, and proposing that the landlords should construct certain additional buildings on the property, in consideration of which there would be a further rent of another £800 a year during the ensuing seven year period.

7

Those terms were accepted by the tenants, and on the 29th November, 1963, the parties entered into a new lease (which is document 2 in our bundle of leases) for a term of seven years from the 15th November, 1963, at a yearly rental of £1,600; and that lease contained an option clause in precisely the same terms as the option clause in the 1956 lease, save that it only granted an option for a further seven years and not for seven or fourteen years as had been the case in the 1956 lease.

8

Time went by and the year 1970 arrived when the time was approaching for the exercise of the option in the 1963 lease, and we find that on the 14th April, 1970, the landlords wrote a letter to the tenants drawing their attention to this fact, in consequence of which Mr Avon, on the 14th May, signed and sent to the landlords a formal notice exercising the option contained in the 1963 lease, and by that notice he requested the landlords to grant a renewed lease of the premises for a further term of seven years from the expiration of the then current term "at a rent to be agreed between us, but in default of such agreement at a rentto "be fixed by a single arbitrator appointed by the President for the time being of the Royal Institution", and so on. The language of that notice followed the language of the option clause contained in the 1963 lease.

9

As has been pointed out in argument, the effect of that notice was to change the legal relationship between the parties and to bring into existence a contract for the grant of a further term of seven years at a rent to be agreed or, in default of agreement, to be fixed by an arbitrator.

10

The landlords wrote back to the tenants on the 7th May indicating that the rent they would require would be £2,600 per annum for the first three years of the new term of seven years, the rental thereafter to be reviewed and agreed for the remainder of the term. Those words are taken from the letter of the 7th May, 1970. So being then under a contractual obligation to grant a new lease for seven years at a rent to be agreed or in default of agreement to be fixed by an arbitrator, they proposed agreeing the rent for part of that term only, leaving the remainder of the term the subject of a further review and agreement at a later date.

11

On the 3rd August - that is to say, rather later than the letter I have just referred to of the 7th May - there having been some oral communications in the mean-time and Mr Avon having paid a visit to the landlords' offices to discuss the matter, the landlords wrote saying that they were prepared to grant a lease for a further period of fourteen years from the expiration of the then current term, with a clause for rent reviews at the end of the fifth and tenth years of the term, the rental for the first period of five years to be £2,350 per annum exclusive of rates.

12

To that letter Mr Avon replied on the 17th August, 1970, that the tenants were reluctantly prepared to accept the figure of £2,350, but he said that they were not in agreement with rent reviews after five and ten years but were willing to accept a clause for a rent review at the end of the seventh year. That was, in effect, a counter offer to the offer which had been put forward in the letter of the 3rd August, 1970.

13

The landlords replied on the 18th August insisting uponrent reviews after five and ten year intervals, and on the 20th August, following some telephonic communication, they again wrote insisting upon the rent reviews, and that letter has a postscript: "Whilst your present lease provides for a further seven years' renewal, the question of the rent review period is something quite separate and distinct".

14

It seems to me that the landlords there are saying: we recognise your right under the exercise of the option; you are entitled to a term of seven years at a rent to be agreed or in default of agreement to be fixed by an arbitrator, but we are not at the moment prepared to agree any rent beyond the first five years.

15

On the 22nd September the tenants' solicitors, Messrs Nabarro Nathan son, wrote indicating that the tenants, subject to formal exchange of the lease, accepted the offer of a new lease for a term of fourteen years from the 15th November, 1970, at the exclusive rent of £2,350 per annum, subject to review at the expiration of the fifth and tenth years of the new term.

16

It seems to me that it is implicit in that that the rent, at any rate in respect of the two years next following the initial five years of the term under the new lease, would be fixed by agreement or, in default of agreement by an arbitrator appointed under the provisions to that effect in the option clause.

17

The lease and counterpart were then executed and exchanged The lease had not been prepared by the landlords' legal advisers; it was prepared under the instructions of Mr Sates and was typed by Mr Bates' secretary, Mrs Cannon. The lease so prepared and executed (which is document 8 in our bundle of leases) demised the property to the tenants for a term of fourteen years from the 15th November, 1970, and now I quote from the document itself: "Yielding and paying there for during the first five years of the said term unto the lessor the yearly rent of two thousand three hundred and fifty pounds and for the next period of five years of the said term and the final period of four years of the said term such. rents as shall have been agreed between the lessor and the lessee such rents to be paid clear of all deductions by equal monthly payments on the First day of each month in advance", and then there is a provision that the tenants should also pay thecosts of insurance but we are not concerned with that.

18

The lease contains an option clause in, I think, the same terms as the option clause which was contained in the 1963 lease except that any further lease to...

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