Siemens Hearing Instruments Ltd v Friends Life Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lewison,Sir Timothy Lloyd,Lady Justice Black |
| Judgment Date | 03 April 2014 |
| Neutral Citation | [2014] EWCA Civ 382 |
| Docket Number | Case No: A3/2013/2162 |
| Court | Court of Appeal (Civil Division) |
| Date | 03 April 2014 |
[2014] EWCA Civ 382
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT, CHANCERY DIVISION
Mr Strauss QC (sitting as a Deputy High Court Judge)
HC13B01751
Royal Courts of Justice
Strand, London, WC2A 2LL
Lady Justice Black
Lord Justice Lewison
and
Sir Timothy Lloyd
Case No: A3/2013/2162
Mr Mark Wonnacott QC (instructed by King and Wood Mallesons LLP) for the Appellant
Mr Timothy Fancourt QC & Mr Tom Weekes (instructed by Penningtons Manches) for the Respondent
Hearing date : 26 March 2014
The issue
The issue on this appeal is this. A lease contained a tenant's break clause. The break clause said that any notice given by the tenant exercising the right to break "must be expressed to be given under section 24(2) of the Landlord and Tenant Act 1954". The notice that the tenant gave did not contain those words, although it complied with the clause in all other respects. Was the notice valid?
The judge (Mr Nicholas Strauss QC) held that it was. His judgment is at [2013] EWHC B15 (Ch). The landlords, represented by Mr Mark Wonnacott QC, appeal against that decision. The tenants, represented by Mr Timothy Fancourt QC and Mr Tom Weekes, seek to uphold the judge's decision. For the reasons which follow I would allow the appeal.
Background
In a foreword to Warwick and Trompeter on Break Clauses I wrote:
"If the tenant tries to exercise the break, the chances are that he does so because the market has changed. He is paying more than the rental value of the leased property and wants cheaper accommodation elsewhere. The consequence of failure will be expensive. But the change in economic conditions will be precisely the reason why the landlord will fiercely resist the tenant's attempt to break the lease. He will pick over the tenant's notice exercising the break looking for any possible error; and he will examine minutely whether the tenant has fulfilled any conditions on which the validity of the break notice depends. Does it specify the right date? Was it served by the right person? Was it given to the right person? Was it given in accordance with any stipulated timetable? Did the tenant comply sufficiently with his obligations under the lease? Has the tenant given vacant possession? If any one of these questions elicits even a plausible negative answer the stage is set for a full scale battle."
This case exemplifies that approach. But the question in our case is slightly different: was the notice in the right form?
The lease
The lease was granted on 27 January 1999 pursuant to an agreement for a lease dated 14 August 1997. The term was 25 years from and including 24 August 1998. Clause 19 of the lease contained a break clause in the following terms:
"19.1 In this clause the Termination Date means 23 August 2013.
19.2 Subject to the pre-conditions in clause 19.3 being satisfied on the Termination Date, and subject to clause 19.4 the Tenant may determine the Term on the Termination Date by giving the Landlord not more than 12 month's and not less than six month's written notice, which notice must be expressed to be given under section 24(2) of the Landlord and Tenant Act 1954. The term will then determine on the Termination Date, but without prejudice to any rights of either party against the other for any antecedent breach of its obligations under this Lease.
19.3 The pre-conditions are that:
19.3.1 vacant possession of the whole of the Premises is given to the Landlord; and
19.3.2 all Rent and other sums due under this Lease up to the Termination Date have been paid in full; and
19.3.3 the Tenant has paid to the Landlord on or prior to the Termination Date (in addition to the Rent and other sums due under this Lease) a sum equal to one-half of the annual Rent payable by the Tenant under this Lease as at the date of service of the Tenant's notice pursuant to clause 19.2
19.4 The Landlord may waive any of the pre-conditions set out in clause 19.3 at any time before the Termination Date by written notice to the Tenant.
19.5 The Tenant will cancel any registration it has made in connection with this clause within 5 Working Days of the Termination Date.
19.6 Time will be of the essence for the purposes of this clause…"
On about 28 September 2012 the tenant's solicitors wrote to the landlords in the following terms:
" Site 1, Vector 2, Manor Royal, Crawley (the "Premises")
We act for Siemens Hearing Instruments Limited (Company No.00203774) (the "Tenant") whose registered office is Alexandria House, Newton Road, Manor Royal, Crawley, West Sussex, RH10 9TT.
We write regarding the lease of the Premises between Sun Life Assurance Plc and A&M Hearing Limited, dated 17 January 1999 (the "Lease").
We, Manches LLP, Solicitors and Agents for the Tenant, of 9400 Garsington Road, Oxford Business Park, Oxford, OX4 2HN, HEREBY GIVE YOU NOTICE, for and on behalf of the Tenant, that the Tenant intends to terminate the Lease 23 August 2013 in accordance with clause 19 of the Lease so that the Lease will determine on that date.
We have served this notice on you at your registered office in accordance with clause 17 of the Lease.
…. We should be grateful if you would acknowledge receipt by signing and returning the enclosed duplicate of this letter in the enclosed pre-paid envelope."
As we can see, the notice did not say that it was given under section 24 (2) of the Landlord and Tenant Act 1954. It did not refer to that Act at all.
Why did clause 19.2 take the form that it did?
The answer to this question lies in the Landlord and Tenant Act 1954, and a debate that was raging at about the time that the agreement for lease was made. Part II of the Landlord and Tenant Act 1954 gives security of tenure to business tenants. Where Part II of the Act applies to a tenancy, it does not come to an end by effluxion of time. Instead it continues under section 24 (1) of the Act unless and until determined in accordance with Part II of the Act. However, section 24 (2) provides:
"The last foregoing subsection shall not prevent the coming to an end of a tenancy by notice to quit given by the tenant, by surrender or forfeiture, or by the forfeiture of a superior tenancy, unless —
(a) in the case of a notice to quit, the notice was given before the tenant had been in occupation in right of the tenancy for one month; or
(b) in the case of an instrument or surrender, the instrument was executed before, or was executed in pursuance of an agreement made before, the tenant had been in occupation in right of the tenancy for one month."
The expression "notice to quit", which features both in section 26 (4) and section 24 (2) is defined by section 69 of the Act as follows:
""notice to quit" means a notice to terminate a tenancy (whether a periodical tenancy or a tenancy for a term of years certain) given in accordance with the provisions (whether express or implied) of that tenancy"
The fact that the statutory definition of "notice to quit" includes a notice to terminate a tenancy for a term of years certain means that a break notice is a "notice to quit" as defined: Scholl Mfg Co Ltd v Clifton (Slim-Line) Ltd [1967] 1 Ch 41.
There are two principal statutory methods of termination. The first is by notice given by the landlord under section 25 of the Act. Such a notice must be given not more than twelve nor less than six months before the date of the termination specified in it. However, section 25 (3) provides that in the case of a tenancy which apart from the Act could have been brought to an end by notice to quit given by the landlord:
"… the date of termination specified in a notice under this section shall not be earlier than the date on which apart from this Part of this Act the tenancy could have been brought to an end by notice to quit given by the landlord on the date of the giving of the notice under this section."
The second principal statutory method of termination is by the tenant making a request for a new tenancy under section 26 of the Act. The latter section provides, so far as material:
"(1) A tenant's request for a new tenancy may be made where the tenancy under which he holds for the time being (hereinafter referred to as "the current tenancy") is a tenancy granted for a term of years certain exceeding one year, whether or not continued by section twenty-four of this Act, or granted for a term of years certain and thereafter from year to year.
(2) A tenant's request for a new tenancy shall be for a tenancy beginning with such date, not more than twelve nor less than six months after the making of the request, as may be specified therein:
Provided that the said date shall not be earlier than the date on which apart from this Act the current tenancy would come to an end by effluxion of time or could be brought to an end by notice to quit given by the tenant.
(3) A tenant's request for a new tenancy shall not have effect unless it is made by notice in the prescribed form given to the landlord and sets out the tenant's proposals as to the property to be comprised in the new tenancy (being either the whole or part of the property comprised in the current tenancy), as to the rent to be payable under the new tenancy and as to the other terms of the new tenancy.
(4) A tenant's request for a new tenancy shall not be made if the landlord has already given notice under the last foregoing section to terminate the current tenancy, or if the tenant has already given notice to quit or notice under the next following section; and no such notice shall...
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