Littman and Youngv Aspen Oil (Broking) Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Longmore,Lord Justice May |
| Judgment Date | 19 December 2005 |
| Neutral Citation | [2005] EWCA Civ 1579 |
| Docket Number | Case No: A3/2005/1495 |
| Court | Court of Appeal (Civil Division) |
| Date | 19 December 2005 |
[2005] EWCA Civ 1579
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHANCERY DIVISION
THE HON MR JUSTICE HART
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice May
Lord Justice Longmore and
Lord Justice Jacob
Case No: A3/2005/1495
HC 04 C02929
Christopher Pymont QC and Andrew Ayres (instructed by DLA Piper Rudnick Gray Cary) for the Claimants/Respondents
Timothy Fancourt QC and Andrew Bruce (instructed by Messrs Boodle Hatfield) for the Defendant/Appellant
Lord Justice Jacob (giving the first judgment at the invitation of Lord Justice May) :
This is an appeal from a determination of a preliminary issue by Hart J on 1 st July 2005 ( [2005] EWHC 1369 (Ch)) . He described what he had to decide succinctly as follows:
"1. This is the trial of a preliminary issue in relation to a landlord and tenant matter pursuant to an order of Master Moncaster dated 2 nd December 2004. The claimants are the landlords of premises at Colette House, Piccadilly, London. By a lease dated 12 th April 2001 the premises known as the Second Floor, Colette House were let to the defendant for a term of 5 years commencing on 24 th June 2001 at an annual rent of £66,024 (excluding VAT) .
2. The lease contained a clause ("clause 10") in the following terms:
"Either party shall be entitled by giving not less than six months' notice in writing to the other to terminate this lease at the end of the third year of the Term ( "Termination Date") and provided that up to the Termination Date in the case of a notice given by the Landlord the Tenant shall have paid the rents hereby reserved and shall have duly observed and performed the covenants on the part of the Tenant and the conditions herein contained this lease shall absolutely cease and determine on the Termination Date but without prejudice to any right or remedy of either party in respect of any antecedent breach by the other of the provisions of this lease"
3. By a notice given by a letter dated 10 th December 2003 the defendant purported to bring the lease to an end pursuant to that clause. In the action the claimants have disputed the effectiveness of that notice on the grounds that the defendant was in breach of its obligations under the lease as at the termination date. The defendant's primary case is that it is irrelevant whether or not it was in breach of the terms of the lease as at the termination date because its right to break was unconditional. Its alternative case is that any breach had been cured by the termination date as the result of a tender of a sum of money in respect of dilapidations. This preliminary issue is not concerned with that secondary question.
4. The question with which I am concerned is whether the defendant's right to terminate the lease was conditional on it having duly observed and performed its covenants at the termination date. It is common ground that such conditionality exists, if it exists at all, solely because of the express wording contained in clause 10. The difficulty for the claimants is that the express wording in clause 10 applies only "in the case of a notice given by the landlord". The claimants contend that on their true construction these words should be read as if they said "in the case of a notice given by the tenant" or, which amounts to the same thing, "in the case of a notice given to the landlord". Alternatively, the claimants contend that clause 10 should be rectified so to provide."
Hart J determined the question of construction in favour of the landlord claimants. The word "Landlord" in the proviso should be read as "Tenant". Alternatively he held, if that were wrong, that clause 10 should be rectified so as to substitute the word "Tenant" for the word "Landlord" in the proviso.
Construction
It is common ground that the inter-parties negotiations are irrelevant to this issue (see ICS v West Bromwich BS [1998] 1 WLR 896 at 913A per Lord Hoffmann) . So at this stage I do not propose to go into what happened in the negotiations, though this is of course relevant when one comes to the question of rectification.
The task is to ascertain the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract (ibid. at 912G) .
Until shortly before this appeal was opened, the parties were in dispute as to whether clause 10, read as it stands, was a commercial nonsense. The Judge held that it was, saying:
"11. It is quite plain that clause 10 as it stands is an absurdity. There can be no rhyme or reason in making the exercise by the landlord of its right to terminate conditional on the performance by the tenant of its obligations under the lease. No commercial purpose in such a provision can be imagined. Moreover the inclusion of such a provision would put it in the power of the tenant, by its own breach of covenant, to defeat the right conferred on the landlord. Although there is nothing grammatically or syntactically wrong with the formulation, it is in my judgment obvious that something has gone wrong with the clause. A landlord needs a condition of this kind in relation to its right to break in the same way that a fish needs a bicycle."
Mr Timothy Fancourt QC, who now represents the tenant, concedes that the Judge was right to so hold. So it is now also common ground that the clause cannot have been intended to convey a nonsensical meaning.
Moving on from that conclusion, the Judge reasoned thus:
"15. An alternative way of putting the case, suggested by the court, was that it was not obvious what the error was since it might have been the case that Miss Gowman [who had acted for the landlord in the negotiations] had deliberately introduced some qualification in relation to a notice given by the landlord but had then accidentally included an entirely inapposite condition which was relevant only to a notice given by the tenant. The weakness of that approach however is that it is difficult (and I have found it impossible) to hypothesise any corresponding condition which either party could sensibly have wished to introduce in relation to a notice given by the landlord."
16. In my judgment, looking at the clause it is obvious not only that a mistake has been made in its formulation but also obvious what that mistake is. I would accordingly construe the words "in the case of a notice given by the landlord" as "in the case of a notice given by the tenant".
Mr Fancourt attacks that. He referred to what was said by Brightman LJ in East v Pantiles (Plant Hire) [1982] 2 EGLR 111 at p.112:
"It is clear on the authorities that a mistake in a written instrument can, in certain limited circumstances, be corrected as a matter of construction without obtaining a decree in an action for rectification. Two conditions must be satisfied: first, there must be a clear mistake on the face of the instrument; secondly, it must be clear what correction ought to be made in order to cure the mistake. If those conditions are satisfied, then the correction is made as a matter of construction. If they are not satisfied then either the claimant must pursue an action for rectification or he must leave it to a court of construction to reach what answer it can on the basis that the uncorrected wording represents the manner in which the parties decided to express their intention. In Snell's Principles of Equity 27 th ed p 611 the principle of rectification by construction is said to apply only to obvious clerical blunders or grammatical mistakes. I agree with that approach. Perhaps it might be summarised by saying that the principle applies where a reader with sufficient experience of the sort of document in issue would inevitably say to himself, "Of course X is a mistake for Y"."
Here, he submitted, although it is clear that a drafting error had been made, it was not possible to say with certainty what it was. As a consequence, absent any rectification, either the clause must be read as it stands, i.e. as a nonsense, or must be regarded as void for uncertainty.
To support his contention he advanced a hypothesis that the clause in its intended form may have been intended to cope with the fact that the lease is one to which the Landlord and Tenant Act 1954 applied. This would form part of the matrix of fact known to the reasonable reader. Under this Act a landlord cannot bring a tenant's right of occupation to an end by simply exercising a break clause in a lease. For the Act gives the tenant the right to apply for a new tenancy, unless one of a number of matters (most commonly that the landlord desires to demolish or reconstruct the building or that he intends to occupy the building for his own business purposes) are proved (see ss.24–30) . If none of those matters are proved the court will grant a new tenancy at the prevailing commercial rent: in effect there will be a rent review. So it is not uncommon for a landlord's break clause to spell out as a condition for its exercise the matters which would prevent the court from granting a new tenancy – in that way a rent review is avoided.
Thus here, he hypothesised that the drafting error could have been to omit certain words and include others thus:
"Either party shall be entitled by giving not less than six months' notice in writing to the other to terminate the lease at the end of the third year of the Term (" Termination Date") and provided that up to the Termination date...
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