Christopher Alan Benjamin James and Another (Plaintiffs (Appellants) Heim Gallery (London) Ltd (Defendants (Respondents)
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE BUCKLEY,LORD JUSTICE SHAW,LORD JUSTICE OLIVER |
| Judgment Date | 07 October 1980 |
| Judgment citation (vLex) | [1980] EWCA Civ J1007-4 |
| Court | Court of Appeal (Civil Division) |
| Date | 07 October 1980 |
| Docket Number | 1978 J No. 1255 |
[1980] EWCA Civ J1007-4
In The Supreme Court of Judicature
Court of Appeal
(Civil Division)
On Appeal From the High Court of Justice
Chancery Division
(His Honour Judge Thomas, Sitting as a Deputy High Court Judge)
Lord Justice Buckley
Lord Justice Shaw
and
Lord Justice Oliver
MR. JOHN MILLS Q. C. and MR. P. BATTERBURY (instructed by Messrs. Thomas Eggar & Son, Solicitors, Chichester, PO19 1TS) appeared on behalf of the Plaintiffs (Appellants).
MR. GAVIN LIGHTMAN Q. C. and MR. PATRICE TALBOT (instructed by Messrs. Herbert Oppenheimer, Nathan & Vandyk, Solicitors, London EC2R 7JH) appeared on behalf of the Defendants (Respondents).
This is an appeal from a judgment of His Honour Judge David Thomas, sitting as an additional judge of the Chancery Division, delivered on 29th June 1979. The dispute arises out of a notice served by the plaintiffs under a rent review clause contained in a lease of business premises in Jermyn Street granted by the plaintiffs' predecessors in title to the defendant company. The term of that lease was 18 years from 9th June 1965, and it contained a provision enabling the landlords to procure reviews of the rent payable under the lease at midsummer 1972 and midsummer 1979. The initial rent, after a short period at a peppercorn, was £5,500 per annum payable quarterly in advance.
The rent review provision is contained in clause 5 of the lease and is in the following terms: "(a) That if at the expiration of the first seven and fourteen years of the said term namely on the Twenty fourth day of June One thousand nine hundred and seventy two and the Twenty fourth day of June One thousand nine hundred and seventy nine the Lessors shall desire to increase the rent hereby reserved on the grounds that such rent is less than the open market rental value of the premises the Lessors shall at any time being not less than six months before such expiration give to the Lessee notice in writing to that effect and shall in such notice state the Lessors assessment of the open market rental value (b) Unless the Lessee shall within thirty days of the service of such notice give a counter notice in writing to the Lessors objecting to the amount of the Lessors assessment of the open market rental value then the rent payable hereunder shall be increased to the amount of the Lessors assessment (c) In case the Lessee shall object to the Lessors assessmentof the open market rental value the parties shall forthwith endeavour to agree the calculation thereof between themselves and failing agreement thereon the amount shall be determined by an independent surveyor to be appointed in the event of the parties failing to agree upon one by the President of the Royal Institution of Chartered Surveyors (d) Any increase in rent being the difference in the said rent hereby reserved or the rent accruing on the Twenty fourth day of June One thousand nine hundred and seventy two and the open market rental value as so required agreed or determined (as the case may be) shall take effect immediately after the expiration of the first seven or fourteen years of the said term namely on the twenty fourth day of June One thousand nine hundred and seventy two and the twenty fourth day of June One thousand nine hundred and seventy nine and shall be substituted for the rent hereby reserved (e) It is hereby agreed and declared that in calculating an open market rental value there shall be disregarded those factors set out in Section 34(a) (b) and (c) of the Landlord & Tenant Act 1954.(f) It is hereby agreed and declared that the rent payable hereunder shall in no circumstances be less than the said yearly rent of FIVE THOUSAND FIVE HUNDRED POUNDS hereby reserved".
The plaintiffs, who by this time had become the landlords, failed to give a notice under clause 5(a) upwards of six months before 24th June 1972, but on 5th June 1972 the first plaintiff, writing no doubt on behalf of the second plaintiff and himself, addressed a letter in the following terms to Mr. Pomian, a director of the defendant company: "I confirm that your rent review operates from June 24th this year and I gather from your Office that you are away until July 1st and will deal with thismatter. I have recently carried out an inspection of your premises and your Ground Floor in my opinion, has a current rental value of £17,000 per annum exclusive. Perhaps you can contact me on your return from your holidays so that we can finalise the matter".
On 19th June 1972 Mr. Pomian replied as follows: "Returning from my holiday, I found today your letter of the 5th June, with the suggestion that our rent should be increased up to the frightening sum. of £17,000 per annum, which would be a severe blow to our business. It seems to me, however, that there is a misunderstanding somewhere as, according to the terms of our Lease, the next deadline for a rent review is the 24th December, 1978".
Mr. Lightman, for the defendants, has contended that, assuming the letter of 5th June was an effective notice under clause 5(a) of the lease, the letter of 19th June 1972 can be read and take effect as a counter-notice under clause 5(b). This, in my opinion, it clearly cannot be. The subclause requires a counter-notice objecting to the amount of the lessors' assessment of the open market rental value of the property. The letter contains no suggestion that the sum of £17,000 exceeded the open market rental value of the property at that time. It merely describes it as "frightening". The substance of the letter was to make the point, albeit obliquely, that the notice contained in the letter of 5th June was ineffective because it was out of time. The plaintiffs' solicitors, who do not seem to have appreciated the point, wrote to the defendant on 27th June 1972 in these terms: "We act for Messrs. James and Jacobs who have passed to us your letter to them of the 19th instant. We cannot understand yourcomment that your rent is not due for revision until the 24th December 1978. It is due for revision now, and we must ask you to be so good as to let us hear from you either agreeing the rent put Forward by our clients or with a suggestion as to what you consider the present day market rental to be".
The point was put explicitly in a letter from the defendants' solicitors to the plaintiffs' solicitors dated 3rd July 1972, in which they wrote: "Our Clients comment is quite a simple one that a rental revision cannot now be made until any time being not less than 6 months before the 9th June 1979. May we please refer you to Clause 5(a) of the original Underlease of 28th October 1965 made between the above parties which provides that the Landlord shall at any time being not less than 6 months before the 9th of June 1972 give notice stating the Lessors assessment of the open market rental value. This the Lessors failed to do and therefore are not in a position to revise the rent until the date referred to above".
There the correspondence rested. On 21st September 1972 the plaintiffs demanded a quarter's rent at the sum of £1,575 that is, on the basis of an annual rent of £5,500. They marked the demand "Without Prejudice". They continued to demand quarterly payments at the same rate down to and including the quarterly payment in advance for the quarter commencing 29th September 1977, but no demand other than the first was marked "Without Prejudice".
At some date towards the end of 1972 the first plaintiff and Mr. Pomian had a brief and casual conversation on an occasion when they met fortuitously at the property. I will say more of this later.
In the year 1972 the view generally held in the legalprofession in the light of the decision of this court in July of that year in Samuel Properties Ltd. v. Hayak, (1972) 1 Weekly Law Reports, 1303) affirming a decision of Mr. Justice Whitford in January of that year, (1972) 1 Weekly Law Reports, 1064, was "that time provisions in a clause of this nature were mandatory. However, in March 1977 the House of Lords, in United Scientific Holdings Ltd. v. Burnley Borough Council, held otherwise, deciding that prima facie strict adherence to the timetable laid down in such a clause is not of the essence of the contract.
On 31st October 1977, solicitors on the plaintiffs' behalf wrote to the defendants' solicitors asserting that in the light of the House of Lords decision the letter of 5th June 1972 was a good notice and effective to operate the rent review clause, and enquiring whether the defendants intended to continue to dispute its validity, in which event proceedings were threatened.
On 22nd December 1977, after taking counsel's advice, the" defendants' solicitors wrote as follows: "in view of the fact that after your Client's claim to revise the rent was refuted by them and ourselves, and of the fact that all supplemental demands for rent were received and paid on the basis that it was accepted that the rent review could not then take place, our Clients proceeded on the basis that no claim to revise the rent would be made by your Clients. A sudden change now to require a rent review would in our Client's view be an injustice. In particular there would be an injustice in any claim up to the date of your letter to us of the 31st October, 1977. However, on the basis that any claim of a rent review in respect of rent to the 31st October, 1977 is waived or conceded not to be payable our Clients are prepared to pay a revised rental from the 31stOctober, 1977". They went on to raise the question what the revised rent should he and asked that their letter should be accepted as a counter-notice under clause 5(b) of the lease, objecting to the plaintiffs' assessment of the open market rental value,
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