PCE Investors Ltd v Cancer Research UK
| Jurisdiction | England & Wales |
| Judge | THE HONOURABLE MR JUSTICE PETER SMITH,Peter Smith J |
| Judgment Date | 04 April 2012 |
| Neutral Citation | [2012] EWHC 884 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC11C01978 |
| Date | 04 April 2012 |
[2012] EWHC 884 (Ch)
The Honourable Mr Justice Peter Smith
Case No: HC11C01978
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Stephen Jourdan QC (instructed by Macrae & Co LLP) for the Claimant
Katharine Holland QC (instructed by Squire Sanders (UK) LLP) for the Defendant
Hearing dates: 16 and 23 February 2012
INTRODUCTION
This judgment arises out of a hearing that took place and relates to the premises ("the Premises") known as 4 th Floor Charles House Lower Regent Street London SW1Y 4LR.
The Premises were demised by the Defendant Cancer Research UK ("the Landlord") to STA Holdings Ltd by an underlease ("the Underlease") dated 9 th December 2005.
The residue of the term of years granted by the Underlease was assigned to the Claimant PCE Investors Ltd ("the Tenant") by an assignment dated 2 nd October 2008. The Tenant was the registered proprietor of the Underlease on 13 th November 2008.
The rent reserved by the Underlease was £190,000 per annum payable by equal quarterly payments in advance on the usual quarter days in every year.
The term granted by the Underlease was for a term commencing on the Possession Date (defined as 12 th October 2005) and expiring on 27 th September 2014.
THE ISSUES
A number of issues arise. However they all revolve around a break option ("the Break Option") granted to the Tenant under clause 11 of the Underlease.
The Break Option provides as follows:-
" The Tenant may determine this Underlease on the expiration of the fifth year of the term ("the Termination Date") by satisfying the following conditions:
The Tenant must have served not less than 6 months prior written notice to determine on the Landlord; and
The Tenant must have paid the rents reserved and demanded by this Lease up to the Termination Date; and
The Tenant must have given to the Landlord full vacant possession of the Premises
AND provided such conditions are satisfied the Underlease shall cease and come to an end at 12 noon on the Termination Date but that termination shall not affect any claim by either party against the other for breaches of obligations under this Underlease".
APPLICATIONS
The operation of the Break Clause in the Underlease (or its non operation) has attracted three applications before me:-
1) The Tenant's application by an Application Notice dated 26 th September 2011 for summary judgment under CPR Part 24 against the Landlord for a declaration that the Underlease was determined on 11 th October 2010.
2) The Landlord's application by an Application Notice dated 2 nd November 2011 for summary judgment under CPR Part 24 against the Tenant on the whole of the claim and for summary judgment against the Tenant for the amount set out in the Counterclaim and interest.
3) The Tenant's application by an Application Notice dated 31 st January 2012 that if its summary judgment application is unsuccessful (1) that it might be granted permission to amend the Defence to Counterclaim in the form set out and (2) an order that the Landlord do give further information as set out in a request dated 20 th January 2012 within 14 days.
FACTUAL BACKGROUND
The Tenant contends that it served a notice on 25 th September 2009 under clause 11 of the Underlease giving notice to determine it on the Termination Date stated in the notice to be 11 th October 2010.
Following the notice email correspondence took place between Ms Mirena Valcheva of the Tenant and Martin Elliott of Colliers International the Landlord's managing agents.
On 24 th September 2010 Ms Valcheva sent an email to Martin Elliott. In that email she informed him that a payment had been made for the outstanding rent for the premises totalling £8,563.01. As the email said this reflects rent due from 29 th September 2010 to 12 th October 2010. The email also asked "please confirm that this is the correct basis for calculating the liability for the short period".
The Landlord did not respond to that although it is fair to say that it was not addressed to it. The amount of rent tendered was based on a daily basis from 29 th September 2010 to the break clause date totalling £7,287.67 plus 17.5% VAT totalling £8,563.01.
Hammonds the Landlord's solicitors wrote formally to the Tenant's Company Secretary on 2 nd November 2010. In that letter they set out the break clause and the fact that clause 11.2 required the Tenant to pay the rent reserved and demanded by the lease up to the termination date by the termination date. They referred to the fact that the agents had sent Ms Valcheva an invoice in relation to the September quarter's rent and service charge in the normal course of business but she had asked for a further copy which was provided on 21 st September 2010. That invoice totalling £66,711.80 of which £55,812.50 related to the September quarter's rent and the balance related to service charges.
The letter then went on to contend that for the break clause to be operative those sums as claimed had to be paid by the Termination Date.
The letter also raised the issue of service charges and contended that the Tenant had an obligation to pay service charges and had failed so to do. Finally the letter contended that the Tenant had failed to return the keys of the premises to the Landlord or anyone acting on its behalf and therefore had accordingly failed to give vacant possession.
If any of Hammonds' contentions is right the Tenant will have failed to terminate the lease properly and it will continue until 27 th September 2014 at an annual rent of £190,000 per annum.
SEPARATE PROCEEDINGS
There are other proceedings (No HC10C02978) in relation to the Premises. They are brought by the Landlord against the original Tenant and the Tenant. These relate to the claim concerning Service Charges. The difficulty arises because there is no express provision in the Underlease that obligates the Tenant to pay service charges. There is an obligation in the Headlease dated 29 th November 1989 ("the Headlease") between Nextdeal Ltd (the "Head Landlord") and the Landlord. In the Headlease the Landlord as Tenant under that lease covenanted by clause 28.2 to pay to the Head Landlord quarterly instalments of an annual service charge payment. In addition it covenanted that it would pay sums due for insurance (clause 24.1).
By clause 4.2 of the Underlease STA and thus the Tenant covenanted to observe and perform the covenants and conditions on the part of the [Landlord] contained in the Headlease as if the same were set out in full in the Underlease.
Accordingly in the other proceedings the Landlord claims that the Tenant is obliged to pay service charges. It will be recalled that a claim for those was set out in the demand referred to above. In the alternative the Landlord contends in the other proceedings that if upon the true construction of the Underlease it does not actually contain an obligation on the part of the Tenant to pay service charges as under lessee the Underlease ought to be rectified to give effect to that supposed common intention.
Those other proceedings have never been coupled with the present proceedings for reasons which did not appear clear. In my view such uncoupling is unsatisfactory because of the plain overlap in the present proceedings. I am being required by the Landlord to determine that service charges were due under the Underlease and that the Tenant having failed to pay the same has not complied with the requirements of the break clause. If on the other hand I determine there is an issue over that construction or alternatively the Underlease does not admit of that possibility then the question of rectification under the alternative proceedings arises. This is unsatisfactory in my view. I do not believe that the question of service charges should be dealt with in a piecemeal way like this. Accordingly I have decided that the question of whether or not service charges were due under the Underlease and consequently not paid should be determined solely in the alternative proceedings. For reasons that will appear later in this judgment that is not significant as regards these proceedings because I am satisfied that the Tenant upon the true construction of the Underlease was obligated to pay the full quarter's rent that fell due on 29 th September 2010 as a condition precedent to the valid exercise of the notice to terminate the Underlease. Equally for reasons which I shall set out below I do not accept that the Tenant has raised any serious issue as to whether or not the Landlord is estopped from asserting that proposition to justify granting the Tenant permission to amend its Defence and Counterclaim in these proceedings. Thus my conclusion in these proceedings is that the Tenant has in any event failed to terminate the lease in accordance with the provisions of clause 11 by reason of the shortfall of rent that it tended.
Equally I do not think it is possible at this stage summarily to determine whether or not the Tenant has delivered vacant possession of the premises as required. There are in my view factual issues which cannot be determined for reasons which I shall further set out in this Judgment.
THE ISSUES
There are 4 issues for determination:-
1) Did clause 11.2 require the Tenant to pay a full quarter's rent?
2) Were the rents as required by clause 11.2 extended to include service charges?
3) Can the court determine on a summary judgment application...
To continue reading
Request your trial
-
Marks and Spencer Plc v 1) Bnp Paribas Securities Services Trust Company (Jersey) Ltd and Another
...recovery of any moneys attributable to the period after 18 th December 2010. The decision in Ocelota was not cited. 24 In PCE Investors Ltd v Cancer Research UK [2012] 2 P&CR 71 the lease was for a term from 12 th October 2005 to 27 th September 2014 subject to a tenant's right to break on ......
-
Jervis v Pillar Denton Ltd
...in advance that falls due before the break date even if the period covered by that payment extends beyond the break date: PCE Investors Ltd v Cancer Research UK [2012] EWHC 884 (Ch); [2012] 2 P & CR 5. By the same token if a landlord forfeits for non-payment of rent he is entitled to recove......
-
Bristol & West Plc v Revenue and Customs Commissioners
...facts. The position is analogous to a notice served to terminate a lease. See for example PCE Investors Ltd v Cancer Research UKUNK [2012] EWHC 884 (Ch). [76]I accept that the surrounding circumstances must also be considered in the light of the decision in Mannai Investment Co Ltd v Eagle ......
-
J.w. Spear & Sons Ltd and Others v Zynga Inc.
...cost and delay, the case for permitting the amendment is even stronger." 71 I followed that decision in the case of PCE Investors Ltd v Cancer Research UK [2012] EWHC 884 (Ch) at paragraph 63. 72 My conclusion is that insofar as it is contended that there is some extra requirement in the ca......
-
Court Reforms And Arbitration: Courting Disaster
...provide that rent must be paid in full to effect the break. Following recent authorities (see PCE Investors Ltd v Cancer Research UK [2012] EWHC 884 (Ch); [2012] PLSCS 84 and Canonical UK Ltd v TST Millbank LLC [2012] EWHC 3710 (Ch); [2013] 02 EGLR 193), it was widely considered that a tena......
-
Break Clauses - Apportionment Of Rent
...situations will invalidate the operation of their break. This has recently been confirmed in PCE Investors Ltd v Cancer Research UK [2012] EWHC 884. The Apportionment Act 1870 will not be of assistance in these circumstances as it only applies where rent is paid in The upshot of this is tha......
-
Landlord and tenant update – hard times, strict compliance
...obligation to pay all rents due up to and including the date on which the breaktakes effect.In PCE Investors v. Cancer Research UK [2012] EWHC 884 (Ch) the tenant lost theright to break where it failed to pay enough rent. Reaching that conclusion, the judgereiterated the rule that where ren......