Lancecrest Ltd v Dr Ganiyu Asiwaju
| Jurisdiction | England & Wales |
| Judge | Lord Justice Neuberger,Lord Justice Clarke,Lord Justice Brooke |
| Judgment Date | 11 February 2005 |
| Neutral Citation | [2005] EWCA Civ 117 |
| Date | 11 February 2005 |
| Docket Number | Case No: B2/2004/1412/CCRTF |
| Court | Court of Appeal (Civil Division) |
[2005] EWCA Civ 117
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM BOW COUNTY COURT
(Mr Recorder Hooper QC)
BO 301447
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Brooke
(Vice-President of the Court of Appeal, Civil Division)
Lord Justice Clarke and
Lord Justice Neuberger
Case No: B2/2004/1412/CCRTF
David Giles Esq (instructed by Suriya & Co, London E1) for the Appellant
Tom Weekes Esq (instructed by Messrs Mishcon de Reya) for the Respondent
This is an appeal from a decision of Mr Recorder Hooper QC given at Bow County Court on 25 th February 2004, in connection with a rent review clause.
The issues before the judge were:
i) whether a notice served by a landlord (a "trigger notice") purportedly implementing a rent review was valid, notwithstanding the fact that it was served late;
ii) if the landlord's trigger notice was valid, whether the tenant had served a valid counter-notice challenging the rent specified in the trigger notice.
The facts
By a lease ("the lease") dated 5 th February 1997, Renhall Limited (therein "the Landlords") let 239/243 Grantham Road, London E8 ("the property") to Dr Ganiyu Asiwaju (therein "the Tenant"). The lease was for a term of 12 years from 5 th February 1997 at a rent of £6,500 per annum, which was defined as "the basic rent", plus an "insurance rent", being the cost of insuring the property against loss or damage by fire or other specified risks.
The lease contained various covenants by the Tenant with the Landlords, which were of a fairly standard nature for a lease of retail premises. By clause 3.35 of the lease, the Tenant was permitted to sublet each of the four units comprised in the property, albeit subject to the consent of the Landlords.
Clause 5.1 of the lease contained provisions for rent review. Clause 5.1(a) to (d) provided as follows:
"5.1(a) If the Landlords so require the basic rent shall be reviewed with effect from the end of every fourth year of the lease period (in each case 'review date')
(b) To exercise the option to review the basic rent the Landlord shall give notice ('review notice') to the Tenant no more than 12 months before the review date stating what annual amount the Landlords propose as the basis rent from the review date ('new basic rent')
(c) If the Tenant [does] not give Notice (Counter-Notice) to the Landlords within two months after the review notice is given (in respect of which counter-notice time is of the essence) informing the Landlords that the Tenant [does] not accept the annual amount proposed by the Landlords the new basic rent shall apply from the review date and the remaining sub clauses of this clause 5.1 shall not apply in respect of that review date.
(d) If the amount of the basis rent payable from the review date ('new basic rent') is not agreed within three months after the review notice was given it may be referred to arbitration by either the Landlords or the Tenant …"
Clause 5.1(d) and (e) went on to provide that, despite reference to "arbitration", the person who should determine the rent was to be an "independent expert", who "shall … not be an arbitrator". Clause 5.1(e) required the independent expert to take into account submissions which the parties may make to him, and to notify the parties in writing "of the sum he shall fix as the new basic rent from the review date".
The remainder of Clause 5.1 was in these terms, so far as relevant:
"(f) The new basic rent is the higher of either the basic rent payable immediately before the review date or the market rent.
(g) In this clause 'the market rent' means the rent likely to be paid for the Property … let in its entirety … by a willing tenant to a willing landlord on the assumption … that … the Property is let on the review date for a period equal to the lease period ….
(h) Until the new basic rent is agreed or decided the Tenants must continue to pay the basic rent at the rate applicable immediately before the review date ('former basic rent')
(i) Any balance of the new basic rent over the former basic rent for the period from the review date must be paid with interest at [2% above Barclays Bank plc base rate] on the first day for payment of rent after the new basic rent is agreed or decided."
The reversion to the lease was acquired in early August 2001 by Lancecrest Limited ("Lancecrest"). This was, of course, some six months after the first review date, 5 th February 2001, but, at the time Lancecrest acquired the reversion, no trigger notice had been served. On 19 th February 2002, some 54 weeks after the first review date, Lancecrest's agents wrote to Dr Asiwaju, informing him that Lancecrest had acquired the reversion to the lease, referring to the fact that the lease reserved a rent of £6,500 subject to the provisions of Clause 5, and stating:
"We now write to give you notice that the annual amount the landlord proposes as the basic rent from the review date of 5 th February 2001 is £30,000 per annum."
Dr Asiwaju replied on 5 th March 2002 in a letter headed "Rent Increase!". He referred to the letter of 19 th February "which demanded and or notify [sic] of the rent increase from 05–02–2001 at £30,000 per annum". Dr Asiwaju's letter ("the Letter") continued:
"Your notice or demand is invalid. The terms of the lease is very clear. It requires one year notice of any rent review. Until you serve me with a valid one-year notice about future rent review. I will not enter into any arbitration …"
Lancecrest's agents answered stating that the rent review provisions in the lease had been properly implemented because, in effect, clause 5.1(b) contained no time limit by which a trigger notice had to be served. Dr Asiwaju maintained his position in a reply dated 30 th April 2002. Lancecrest's agents adhered to their stance in a letter dated 23 rd April 2002, but nonetheless asked for Dr Asiwaju's confirmation that he was "willing to open discussions for the rent review and that you will not be persisting with your complete disregard of the terms of the lease in this regard".
Dr Asiwaju maintained his refusal to accept that Lancecrest were entitled to implement the rent review on 5 th February 2001, and Lancecrest accordingly applied for the appointment of an independent surveyor at the end of June 2002. Mr A G D Mason FRICS was appointed to act as independent surveyor on 1 st August 2002. He wrote to Lancecrest and Dr Asiwaju seeking their written submissions as to the rental value of the property as at 5 th February 2001. Having received submissions only from Lancecrest, he pressed Dr Asiwaju for his submissions on 15 th November 2002. Despite this, Dr Asiwaju made no submissions. Accordingly, on 6 th December 2002, Mr Mason issued a "rent review determination", under which he determined "the New Basic Rent as defined in the Lease with effect from 5 th February 2001 to be £28,000 … per annum".
In these circumstances, two questions fell to be considered by the judge, and now fall to be considered by this court. The first question is whether the Landlords have lost the right to review the rent as a consequence of failing to serve a trigger notice on or before 5 th February 2001. In this connection, contrary to their stated position in correspondence, Lancecrest now accept that, on a true construction of clause 5.1(b), the trigger notice should have been served on or before 5 th February 2001 (a concession which follows from the reasoning of this court in First Growth Property Partnership LP v Royal & Sun Alliance Property Services Limited [2003] 1 EGLR 39). Accordingly, the question is whether the service of a trigger notice some 54 weeks later than the cut-off date envisaged by clause 5.1(b) can nonetheless be effective. If Dr Asiwaju establishes that no such trigger notice can be served, then the rent remains at £6,500 per annum.
If Dr Asiwaju fails on this first issue, as he did before the judge, then it is necessary to consider the second issue. That issue is whether the Letter operated as a valid counter-notice under clause 5.1(c). If it did not so operate, as the judge found, then Dr Asiwaju is effectively fixed with the rent specified in the trigger notice, namely £30,000 per annum. On the other hand, if the Letter is a valid counter-notice, then the rent is that fixed by the independent surveyor, namely £28,000.
Is time of the essence for service of the trigger notice?
The argument accepted by the judge was that it was open to Lancecrest to serve a trigger notice after, indeed well after, the final date specified in clause 5.1(b), namely the rent review date itself, because time was not of the essence of that date. In reaching that conclusion, he was following and applying the reasoning of the House of Lords in United Scientific Holdings Limited v Burnley Borough Council [1978] AC 904. The kernel of that decision is to be found at 930F-G in the speech of Lord Diplock where he said:
"So upon the question of principle which these two appeals were brought to settle, I would hold that in the absence of any contra-indications in the express words of the lease or in the inter-relation of the rent review clause itself and other clauses or in the surrounding circumstances the presumption is that the time-table specified in a rent review clause for completion of the various steps for determining the rent payable in respect of the period following the review date is not of the essence of the contract."
The reasoning which led Lord Diplock to this conclusion appears, at...
To continue reading
Request your trial
-
Tech 21 UK Ltd v Logitech Europe S.A.
...his view in Best Buy. 61 Whether the reaction of the recipient of a notice is admissible in construing the notice was considered in Lancecrest v Asiwaju [2005] EWCA Civ 117, [2005] L. & T.R. 22. One issue in that case was whether a tenant's rent review counternotice was valid. The test wa......
-
Arrow Generics Ltd v Akzo NV
...v MFI Furniture Centres LtdUNKUNK [2004] UKHL 45; [2005] RPC 209; (2004) 148 SJLB 1217 Saint-Gobain Pam SA v Fusion Provida LtdUNK [2005] EWCA Civ 117; (2005) 28 (6) IPD 28043 SmithKline Beecham plc v Apotex Europe LtdUNKUNK [2004] EWCA Civ 1568; [2005] FSR 524; (2005) 28 (2) IPD 28003 Soci......
- Lactos Fresh Pty Ltd v Finishing Services Pty Ltd
- R (on the application of Royal Brompton & Harefield NHS Foundation Trust) v Joint Committee of Primary Care Trusts and another