Mannai Investment Company Ltd v Eagle Star Life Assurance Company Ltd

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLORD GOFF OF CHIEVELEY,LORD JAUNCEY OF TULLICHETTLE,LORD STEYN,LORD CLYDE
Judgment Date21 May 1997
Judgment citation (vLex)[1997] UKHL J0521-3

[1997] UKHL J0521-3

HOUSE OF LORDS

Lord Goff of Chieveley

Lord Jauncey of Tullichettle

Lord Steyn

Lord Hoffmann

Lord Clyde

Mannai Investment Company Limited
(Appellants)
and
Eagle Star Life Assurance Company Limited
(Respondents)
LORD GOFF OF CHIEVELEY

My Lords,

1

This appeal is concerned with the question whether a notice given by a tenant pursuant to a break clause in a lease was an effective notice. In fact, there were two leases with identical break clauses, and two identical notices were given. For convenience, however, I will assume that there was only one.

2

The premises were in Jermyn Street in London. The lease was dated 11 March 1992, and was for a term of 10 years from 13 January 1992. The respondent company was the landlord, and the appellant company was the tenant. The relevant clause was clause 7(13), which provided as follows:

"The Tenant may by serving not less than six months notice in writing on the Landlord or its Solicitors such notice to expire on the third anniversary of the term commencement date determine this Lease and upon expiry of such notice this Lease shall cease and determine and have no further effect…."

3

So the clause gave the tenant a single opportunity to bring the lease to an end. It so happened that the market for rents in this area had fallen, and the tenant decided to take advantage of this opportunity. It served the following notice on the landlord:

"Pursuant to Clause 7(13) of the Lease we as Tenant hereby give notice to you to determine the lease on 12 January 1995…"

4

Unfortunately, however, the tenant made a mistake. The third anniversary of the term commencement date was not 12 January 1995 but 13 January 1995. The landlord has claimed that in the result the notice was ineffective. The Court of Appeal, reversing the decision of Judge Rich Q.C. (sitting as an additional judge of the Chancery Division), upheld the landlord's contention. It is from that decision that the tenant now appeals to your Lordships' House.

5

I should record at once that the judge held that the tenant was entitled to succeed on the basis that, because 12 and 13 January were contiguous dates, there was a moment of time at which they coincided; and from this it followed that a notice expressed to determine the lease on 12 January was effective to do so on 13 January as required by the clause. In so holding, he invoked the authority of Sidebotham v. Holland [1895] 1 Q.B. 378. But, as Nourse L.J. pointed out in the Court of Appeal in the present case [1995] 1 W.L.R. 1508, 1514-1515, that case provided no authority for the judge's conclusion. It was concerned with a notice to quit and deliver up possession by midnight. It related therefore to a notice to quit at a point of time which was held to be common to both dates, and not, as in the present case, a notice to take effect on a certain date. Here, a notice taking effect on a different, though contiguous date, could not be rendered effective on the basis of Sidebotham v. Holland. With that reasoning, I find myself in complete agreement. It follows that the central question in the appeal before your Lordships' House is whether the Court of Appeal was right to hold that the notice was in any event not an effective notice under the clause. To that question I now turn.

6

At first sight it seems unreasonable that the notice should not have been effective. It was obvious that the tenant was trying to give an effective notice under the clause, and that it had mistakenly assumed that the anniversary of the term commencement date was not 13 January but 12 January 1995. As Hobhouse L.J. pointed out (see [1995] 1 W.L.R. 1508, 1516F), the tenant had mistakenly read the clause as if it said "to expire at the end of the third year of the term," when it did not do so. It is tempting therefore to assist the tenant who has made a mistake of this kind, when it must have been obvious to the landlord that the tenant intended to give an effective notice under the clause. But the difficulty in the way of adopting this approach is that, on the authorities, it is inconsistent with the agreement of the parties as expressed in the clause.

7

An early authority in this line is Cadby v. Martinez (1840) 11 Ad. & EI. 720. In that case a tenant was entitled under a clause in his lease to determine it by notice expiring on Michaelmas day 1837. The tenant mistakenly gave notice to quit and deliver up the premises on 24 June 1837. The notice was expressed to be "agreeably to the covenants of the lease." It was held that notice was not effective to determine the lease. Lord Denman C.J. said, at p. 726:

"We have heard the case argued, and are of opinion that the covenant to pay rent during the whole term cannot be got rid of by any notice to quit which is not in accordance with the proviso introduced into the lease for the purpose.

"The cases that seemed to point the other way merely shew that, where there is no covenant, a notice describing the premises, so as to be perfectly understood between the parties, will be sufficient: but in none has a proviso or covenant in a deed been held to be satisfied by a notice inconsistent with the terms of it."

8

The reasoning in this brief judgment is clear and compelling. You start with the position that, under the lease, the tenant has covenanted to pay rent for the full term; but under a proviso in the lease the tenant may, by notice, rid himself of the obligation under that covenant. However, to be effective for that purpose, the notice must conform to the terms of the proviso. If on its true construction the notice does not do so, it will not be effective for its purpose, because the parties have agreed that only a notice conforming to the terms of the proviso will be effective. The fact that the landlord realises that the tenant intended to take advantage of his rights under the proviso, but has only failed through some mistake to give the required notice, is irrelevant. The simple fact is that the tenant has failed to use the right key which alone is capable of turning the lock.

9

Nowadays, the leading case is Hankey v. Clavering [1942] 2 K.B. 326. The lease in question was for a term of 21 years from 25 December 1934. The break clause conferred on either party the right to determine the lease at the expiration of the first seven years, by six calendar months' notice. The landlord gave notice to the tenant's solicitors in the following terms:

"As I may have to be away for some time in the near future, I will be obliged if you would accept the six months' notice to terminate your client's lease which I am allowed to give on June 21, 1941. This would mean that he would have to give up the cottage on December 21, 1941."

10

This was obviously a mistake on the part of the landlord, because the six months' notice should have expired on 25, not 21, December. At first instance, Asquith J. held that the notice could be saved on the basis that it had been accepted as a good notice by the tenant's solicitors; but that solution was rejected by the Court of Appeal on the facts. The Court of Appeal, which consisted of two distinguished and very experienced Chancery lawyers, Lord Greene M.R. and Lord Clauson, held that the notice was ineffective. They regarded the point as so clear that they gave judgment ex tempore. Indeed, Lord Clauson concluded his brief judgment as follows, at p. 331:

"I should have thought that, as a matter of construction, an argument other than that which leads to the result the Master of the Rolls has announced was quite untenable."

11

Lord Greene M.R. introduced his judgment with the following passage, at p. 328:

"This appeal raises a short point in connection with a break clause in a lease wherein the plaintiff was the lessor and the defendant was the lessee. By his letter of January 15, 1940, the plaintiff, on the face of it, was purporting to determine the lease by notice on December 21, 1941. The whole thing was obviously a slip on his part, and there is a natural temptation to put a strained construction on language in aid of people who have been unfortunate enough to make slips. That, however, is a temptation which must be resisted, because documents are not to be strained and principles of construction are not to be outraged in order to do what may appear to be fair in an individual case."

12

He expressed his reasoning and conclusion as follows, at pp. 329-330:

"Notices of this kind are documents of a technical nature, technical because they are not consensual documents, but, if they are in proper form, they have of their own force without any assent by the recipient the effect of bringing the demise to an end. They must on their face and on a fair and reasonable construction do what the lease provides that they are to do. It is perfectly true that in construing such a document, as in construing all documents, the court in a case of ambiguity will lean in favour of reading the document in such a way as to give it validity, but I dissent entirely from the proposition that, where a document is clear and specific, but inaccurate on some matter, such as that of date, it is possible to ignore the inaccuracy and substitute the correct date or other particular because it appears that the error was inserted by a slip. By the clear wording of this notice the plaintiff purported to bring the lease to an end on December 21, 1941. In so doing he was attempting to do something which he had no power to do, and, however much the recipient might guess, or however certain he might be, that it was a mere slip, that would not cure the defect because the document was never capable on its face of producing the necessary legal consequence."

13

The essential point made by Lord Greene M.R. therefore was that notices of this kind are documents of a...

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