Standard Life Assurance v Unipath Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE ALDOUS,LORD JUSTICE STUART-SMITH,LORD JUSTICE PETER GIBSON |
| Judgment Date | 01 May 1997 |
| Judgment citation (vLex) | [1997] EWCA Civ J0501-13 |
| Court | Court of Appeal (Civil Division) |
| Date | 01 May 1997 |
| Docket Number | CHANF 96/0492/B |
[1997] EWCA Civ J0501-13
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(HIS HONOUR JUDGE COOKE)
Sitting as a High Court Judge
Royal Courts of Justice
Strand
London W2A 2LL
Lord Justice Stuart-Smith
Lord Justice Peter Gibson
Lord Justice Aldous
CHANF 96/0492/B
MR PAUL MORGAN QC and MR DAVID HODGE QC (instructed by Messrs Alsop Wilkinson) appeared on behalf of the Appellant (Defendant).
MR JONATHAN GAUNT QC (instructed by Messrs Herbert Smith, London EC2A 2HS) appeared on behalf of the Respondent (Plaintiff).
The Standard Life Assurance Co are the purchasers of the reversion of a lease dated 4 November 1974 which demised premises known as Unit ll, Kingsland Industrial Estate, Wade Road, Basingstoke, for the term of 35 years from 29 September 1974. Unipath Ltd are the assignees of the term of that lease.
The lease contained provision for a five yearly rent review. Pursuant to that provision the initial rent of £95,300 pa was reviewed and increased to £263,000 pa with effect from 29 September 1979 and to £539,200 pa with effect from 29 September 1989.
On 19 April 1994 Standard Life, the landlord, sent to Unipath a notice requiring a review of the rent. The parties could not agree what should be paid and the matter was referred to arbitration as required under the lease. The arbitrator concluded that, what was called in the lease, "the review standard rent" was £2.82 per square foot which meant that the rent would decrease to £412,071–40p pa. Standard Life contended that the lease was a "ratchet clause" in that it did not provide for a decrease in rent upon a review and therefore the old rent of £539,200 pa continued to be payable. Unipath took the contrary view and only paid rent at the lower rate. The result was litigation. On l0 August 1995 Standard Life issued a writ claiming arrears of rent. That was defended by Unipath which sought a declaration that upon a review the rent payable could go both up and down and that the sum payable by them from 29 September 1994 was £412,071–40p pa not £539,200 pa.
No issue of fact arises. The dispute between the parties concerns the proper construction of these parts of the lease:
"1. The Landlord in consideration of the rent and covenants hereinafter reserved and contained hereby grants and demises unto the Tenant ALL THAT the property….
To HOLD the same except and reserved as aforesaid unto the Tenant from the 29th day of September One thousand nine hundred and seventy-four for the term of thirty-five years…PAYING for the same during the first five years of the said term yearly and proportionately for any fraction of a year the rent of NINETY FIVE THOUSAND THREE HUNDRED POUNDS (£95,300) and during the remainder of the said term the yearly rent of £95,300 or such increased sum as may be substituted under the provisions of clause 4 by equal quarterly instalments in advance….
4. PROVIDED ALWAYS AND IT IS AGREED AND DECLARED:
(i) for the purposes of this clause the following expressions shall have the following meanings:-
'"initial standard rent" means the fair annual rack rent calculated on a per square foot basis at which a standard single storey industrial building in the same locality as the demised premises and of like age (hereinafter called "standard accommodation") if vacant could now be let in the open market by a willing lessor to a willing lessee on the same terms and conditions including period of demise as are contained in this Lease which the parties hereby agree is at the rate of £0.65 per square foot "review standard rent" means the fair annual rack rent calculated on a per square foot basis at which standard accommodation if vacant at the rent review referred to in paragraph (ii) of this clause could be let at that time in the open market by a willing lessor to a willing lessee on the same terms and conditions including period of demise as are contained in this Lease "Lease rent" means the rent reserved by this Lease in respect of the demised premises and "initial Lease rent" means the Lease rent at the date hereof which the parties hereby agree at the rate of £0.95 per square foot and "review Lease rent" means the Lease rent which shall be payable following each relevant review of the Lease rent hereinafter provided.'
(ii) at any time after six months prior to the expiration of the fifth and every subsequent fifth year of the term hereby granted the Landlord may by notice in writing served on the Tenant require a review of the Lease rent and if upon any such review the review standard rent shall be found to exceed the initial standard rent the Lease rent shall be increased so that the review Lease rent bears the same proportion to the review standard rent as the initial Lease rent bears to the initial standard rent and such increased rent shall be paid on and after the expiration of the fifth and every subsequent fifth year in lieu of the rent previously applicable until the Lease rent is further increased in accordance with the terms of this clause."
Clause 4 continues with provisions for working out the review standard rent which are not relevant to this appeal.
The action came before HH Judge Roger Cooke sitting as a Judge of the Chancery Division. In his judgment of l6 February 1996, he upheld the submissions of Standard Life and gave appropriate relief including a declaration that the annual rent payable continued to be £539,200 pa.
Having reviewed the submissions of Mr Neuberger, who appeared for Standard Life, and of Mr Driscoll, who appeared for Unipath, the Judge gave these reasons for concluding that the review clause only provided for an increase from the previously fixed rent:
"(a) The definition of the Lease Rent is as in effect the passing rent at any material time. That passing rent has been created by the previous review and it goes on being paid until (see the second material passage) it is increased by the next rent review, whatever, for the moment, "increased" may mean, so that, at the date of the review the Lease Rate is in fact the 1989 rent.
(b) A downward review in 1994 of the 1989 rent cannot simply as a matter of ordinary language be an increase of the Lease Rent. "Increase" of the Lease Rent cannot, to my mind, mean "decrease" of the Lease Rent.
(c) The mandatory provision that the Review Lease Rent is an increase over the Initial Lease Rent, while it produces a rent and a rent which in that sense is an increase, is incapable of increasing the Lease Rent unless the figures justify that.
(d) It is, I think, of significance that this is not the sort of review clause that might be said to produce a potential vacuum unless something is fixed. In other words, contrary to, I think, the way Mr Driscoll was seeking to put it, one cannot really chop this term up into five year periods, each with their own rent, because the scheme of it is that, whatever was fixed last time goes on being the Lease Rent unless and until it is altered, and there may, of course, simply be no review at all.
(e) It is, I think, not so much a question of Mr Neuberger's construction 'aborting' the review, though I thought in argument that might be a way of describing it, as making it impossible for the review to achieve that which in my judgment is its primary object, and that is "the Lease Rent shall be increased". It cannot, on the day and on the figures, achieve that.
(f) As Mr Neuberger says, this is not a strange or capricious result because it is in fact a result which must in fact happen every time you do have an upward only review, and it may be that only by testing the figures can you see whether there is a review at all in such a case.
(g) The careful use of the definitions in clause 4(1) leads me to think that a special meaning of "increase" as meaning increased over the initial rent only ought to have been and would have been defined if that is what the intention of the parties was. To my mind, as I have already indicated, the considerations separately, but particularly cumulatively, serve to defeat Mr Driscoll's otherwise high persuasive argument.
I therefore hold, in short summary, that the clause works this way. (1) The lease rent, however initially fixed, is and remains the rent unless and until the review fixes a higher one and (2) unless and until the formula in the first material passage produces a figure that increases the lease rent. It follows, therefore, that I take the view that this is an upward only review and I would accordingly give judgment for the plaintiff."
Leases like other documents have to be construed as a whole as of the date on which they were entered into. As Nicholls LJ said giving the judgment of the Court in Basingstoke & Dean Borough Council v Host Group Ltd [1988] 1 W.L.R. 348 at 353D:
"The question raised on this appeal is one of construction of a rent review clause in a lease. In answering that question it is axiomatic that what the court is seeking to identify and declare is the intention of the parties to the lease expressed in that clause. Thus,like all points of construction, the meaning of this rent review clause depends on the particular language used interpreted having regard to the context provided by the whole document and the matrix of the material surrounding circumstances. We recognise, therefore, that the particular language used will always be of paramount importance. Nonetheless it is proper and only sensible, when construing a rent review clause, to have in mind what normally is the commercial purpose of such a clause."
That purpose has been referred to in several recent cases, and is...
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