Metrolands Investments Ltd v J. H. Dewhurst Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE SLADE |
| Judgment Date | 21 February 1986 |
| Judgment citation (vLex) | [1986] EWCA Civ J0221-2 |
| Court | Court of Appeal (Civil Division) |
| Date | 21 February 1986 |
| Docket Number | 86/0179 |
[1986] EWCA Civ J0221-2
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Lord Justice Slade
Lord Justice Nicholls
Mr Justice Sheldon
86/0179
MR MICHAEL MARK, instructed by Messrs Willey Hargrave (Harrogate), appeared for the Appellants (Plaintiffs).
MR J. A. F. THOM, instructed by Messrs R. A. Roberts, appeared for the Respondent (Defendant).
This is the judgment of the court on an appeal by the plaintiff in certain landlord and tenant proceedings from an order of Mr Justice Peter Gibson made on 17th December 1984 on the trial of a preliminary issue in the action. The appellant landlord is Metrolands Investments Limited ("Metrolands"). The respondent tenant is J. H. Dewhurst Limited ("Dewhurst"). The dispute between the parties concerns a rent review clause.
The decision of Mr Justice Peter Gibson contains a very clear statement of the relevant facts and is reported at (1985) 3 A.E.R. 206. The action related to a butcher's shop which was let by Metrolands to Dewhurst by a lease dated 30th January 1968 for a term of 21 years from 19th February 1968. The reddendum was in this form: "YIELDING AND PAYING therefor during the first three years of the said term the yearly rent of [£1.500] during the next eleven years of the said term the yearly rent of [£1,800] and during the remaining seven years of the said term the yearly rent at which the demised premises might on [19th February 1982] reasonably be expected to let without premium in the open market between willing landlord and willing tenant on terms similar to those contained in this present Lease and assuming that the Lessee has observed and performed all the covenants and conditions to be observed and performed hereunder but disregarding any goodwill attaching to the demised premises by reason of the carrying on thereat of the Lessees business such yearly rent to be agreed between the Landlord and the Lessee and failing agreement to be determined by arbitration as hereinafter provided Provided always that the decision of such arbitrator shall be obtained before the expiration of the first half of the Fourteenth year of the term hereby created BUT such yearly rent shall not in any event be less than [£1,800]…"
The learned judge found it convenient to divide the relevant part of the reddendum relating to the last seven years of the term into four limbs: limb 1 commencing with "during the remaining seven years" and ending with "the Lessee's business"; limb 2 commencing with "such yearly rent" and ending with "as hereinafter provided"; limb 3 commencing with "provided always" and ending with "term hereby created"; and limb 4 commencing with "but such yearly rent" and ending with "£1,800". I will adopt the same convenient division.
There are two other material provisions of the lease. Clause 4(4) provides: "If any dispute question difference or controversy shall arise which under the terms of this Lease is to be referred to arbitration the same shall be referred to a single arbitrator to be agreed between the parties or failing agreement to two arbitrators (one to be appointed by each party to the reference) or their umpire pursuant to and so as with regard to the mode and consequences of any such reference and in all other respects to be in conformity with the provisions of the Arbitration Act 1950 or any statutory modification or re-enactment thereof."
Clause 5 ("the break clause") provides: "PROVIDED LASTLY AND IT IS HEREBY AGREED AND DECLARED that if the Lessee shall be desirous of determining this present lease at the end of the fourteenth year of the term hereby granted and of such its desire shall deliver to the Landlord or leave for the Landlord or send by registered post to the Landlord at its registered office within the six months previous to the end of the said fourteenth year of the said term not less than three months notice in writing and shall pay all rent and perform and observe all the covenants and conditions hereinbefore contained and on the part of the Lessee to be performed and observed up to such determination then and in such case immediately after the expiration of the said period of fourteen years this present Lease shall cease and be void without prejudice to any claim by the Landlord against the Lessee in respect of any antecedent breach of any covenant or condition herein contained."
The timetable envisaged by the express provisions of the reddendum and the break clause was thus as follows: (1) The date by reference to which the open market yearly rent payable by Dewhurst for the last seven years of the term was to be calculated was to be 19th February 1982 (being the first day of that seven year period).
(2) The open market yearly rent payable by Dewhurst for this seven year period was to be fixed according to the formula set out in the reddendum, either by agreement between the two parties or in default of agreement by arbitration. If arbitration was necessary the decision of the arbitrator was to be obtained before 19th August 1981.
(3) Dewhurst would be free to operate the break clause by serving written notice on Metrolands at any time between 19th August 1981 and 18th November 1981 with the effect of determining the Lease on 18th February 1982.
Neither Metrolands nor Dewhurst made any attempt to agree a rent or to go to arbitration before 19th August 1981. Dewhurst did not attempt to operate the break clause before 19th November 1981. On 2nd December 1981, for the first time, Metrolands by its surveyors wrote to Dewhurst indicating that it wanted the rent to be reviewed, although no figure was then suggested. On 17th December 1981, Dewhurst replied to the effect that the rent review notice was invalid as being too late and pointed out that it was by then also too late for it to serve a notice under the break clause. Dewhurst, however, does not suggest that Metrolands deliberately delayed serving notice of its intention to have the rent reviewed.
On 24th October 1983 Metrolands issued proceedings against Dewhurst. By paragraph 1 of the prayer for relief in its statement of claim it claimed a declaration, in effect, that the rent payable in the last seven years of the term is that set out in the formula embodied in limb 1 of the reddendum.
The Master made a consent order that the question raised by this paragraph, and the question whether the amount of the yearly rent was to be determined by the court or by arbitration or in some other way, should be tried as a preliminary issue, on the basis of an agreed statement of facts. The learned judge declined to grant any of the relief sought. He upheld Dewhurst's contention that time was of the essence of the rent review procedure embodied in the lease and that Metrolands' attempt to initiate that procedure in December 1981 onwards was accordingly too late.
As the learned judge said, the starting point for any consideration of the question whether time is of the essence of rent review provisions is the decision of the House of Lords in United Scientific Holdings Ltd. v. Burnley Borough Council (1978) A.C. 904, where Lord Diplock (at page 930) stated the principle that: "in the absence of any contra-indications in the express words of the lease or in the interrelation of the rent review clause itself and other clauses or in the surrounding circumstances, the presumption is that the timetable 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."
Neither side in argument has placed any reliance on surrounding circumstances as an aid to the construction of this lease. Mr Thom, however, on behalf of Dewhurst, has submitted to us, as he submitted to Mr Justice Peter Gibson, that this particular lease contains two contra-indications sufficient to rebut the normal presumption that the timetable specified in a rent review clause is not of the essence of the contract. The first suggested contra-indication is the express terms of limb 4 of the reddendum. The learned judge (at page 210C-210E) rejected this submission and Dewhurst challenges this rejection in a respondent's notice. However, he accepted the sufficiency and full force of the second contra-indication relied on by Dewhurst, which was the interrelation between the time limit in limb 3 of the reddendum and the break clause. This is the part of his decision (set out at pages 210C to 214J of the report) which Metrolands seeks to challenge on this appeal. It has not sought to pursue certain alternative submissions which were advanced in the court below and are referred to at pages 215A to 215G of the report. The effect of the learned judge's decision (see pages 215H to 216A) was that the lease had made no express provision for the amount of the rent to be payable for the last seven years of the term if it was not ascertained by agreement or arbitration within the specified time limits that the court itself had no power to determine a rent if those time limits were not complied with and that, in the event of non-compliance, the annual rent payable for the last seven years must continue to be the same as that payable for the preceding period, namely £1,800 (see Weller v Akehurst (1981) 3 A.E.R. 411).
It will be convenient to begin by dealing with the first of the suggested contra-indications relied on by Dewhurst, since it raises a short, albeit not entirely easy, question of construction arising on the reddendum, when read in isolation.
Mr Thom, on behalf...
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