Starmark Enterprises Ltd v CPL Enterprises Ltd
| Jurisdiction | England & Wales |
| Judge | LADY JUSTICE ARDEN,LORD JUSTICE KAY |
| Judgment Date | 31 July 2001 |
| Neutral Citation | [2001] EWCA Civ 1252 |
| Docket Number | Case No: A3/2000/2433 |
| Court | Court of Appeal (Civil Division) |
| Date | 31 July 2001 |
[2001] EWCA Civ 1252
Lord Justice Peter Gibson
Lord Justice Kay and
Lady Justice Arden
Case No: A3/2000/2433
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM MR JUSTICE NEUBERGER
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr K Lewison QC and Mr T Grant (instructed by Messrs Beckman & Beckman for the Appellant)
Mr J Male QC and Mr T Morshead (instructed by Messrs Vizard Oldham for the Respondent)
This is an appeal from a decision of Neuberger J. sitting in the Chancery Division given on the 6 th June 2000. The case concerned the validity of a counter-notice given by the Defendant under a rent review clause in a lease of property near Bournemouth. The Judge concluded that the counter-notice was valid and the Claimant appeals against that decision.
The issue in the case was whether the Defendant, the tenant of the premises could validly serve a counter-notice in respect of a rent review notice served by the landlord notwithstanding the fact that the time provided for such a counter-notice in the lease had elapsed and the lease contained a clause deeming the rent sought by the landlord to be the new rent if no such counter-notice was served in time.
This issue has been addressed on a number of occasions and one would be forgiven for hoping that after so much judicial consideration, landlords, tenants and those who advise them would be clear as to the answer in any case. Sadly, this is far from the case and as was observed in a commentary on the decision of Neuberger J in (2000) 4 L & T Rev Issue No 5.
"It is unfortunate that over 15 years after these cases were decided, the legal effect of a common provision in a rent review clause is still unknown. This is the common law at its least impressive".
The cases to which reference is made are two decisions of the Court of Appeal Henry Smith's Charity Trustees v AWADA Trading & Promotion Services Limited (1984) 47 P&CR 607 ("AWADA") and Mecca Leisure Limited v Renown Investments (Holdings) Limited (1984) 49 P&CR 12 ("Mecca Leisure"). These cases followed on and involved consideration of the decision of the House of Lords in United Scientific Holdings Limited v Burnley Borough Council [1978] AC 904 ("United Scientific"). It will be necessary to examine in detail each of these three cases to see how the present undesirable state of affairs has come to pass and to decide whether this Court is in a position to seek to remedy the situation.
Before turning to consider the law, it is necessary to set out briefly the facts of this case which were not the subject of dispute.
By a lease dated the 21 st February 1984, the predecessors in title of the Claimant granted to the predecessors in title of the Defendant a lease of a piece of land in Boscombe, near Bournemouth, Dorset for a term of 21 years beginning on the 1 st August 1992 at an initial rent of £18,000 per annum. It is convenient to refer to the Claimant as "the landlord" and the Defendant as "the tenant".
The lease contained provision for a rent review and the relevant clause provided:
"At any time during the period of six months next before the expiration of the 5 th, 9 th, 13 th and 17 th years of the term hereby granted [the landlord] may serve on the Lessees a notice in writing, (hereinafter called a "Rent Notice"), providing for the increase of the rent payable hereunder as from the expiration of the relevant year of the term as aforesaid to an amount specified in the Rent Notice and thereupon the following provisions shall have effect:
(1) The Lessees within one month after receipt of the Rent Notice may serve on [the landlord] a counter-notice calling upon [the landlord] to negotiate with the Lessees the amount of the rent to be paid hereunder as from the expiration of the said year.
(2) If the Lessees shall fail to serve a counter-notice within the period aforesaid they shall be deemed to have agreed to pay the increased rent specified in the Rent Notice.
(3) If the Lessees shall serve on [the landlord] a counter-notice calling upon [the landlord] to negotiate with them as aforesaid, then the parties hereto shall forthwith consult together and use their best endeavours to reach agreement as to the amount of the rent to be paid hereunder as from the expiration of the said year but failing agreement within one month after service of such counter-notice (within such extended period as the parties hereto such mutually agree) the question whether any and if so what increase ought to be made in the rent payable hereunder as from the expiration of the said year shall be referred to the arbitration of a single arbitrator…
….
(5). The Lessees hereby covenant with the Board that if the rent shall be increased by agreement (actual or deemed) or arbitration in pursuance of this clause the Lessees as from the expiration of the relevant year pay the increased rent at the times and in the manner aforesaid and the rent as so increased shall remain payable until the same shall be further increased pursuant to the provision of this clause or until the expiration of the term hereby granted whichever shall first occur."
The rent reviews in 1987, 1991 and 1995 were implemented in accordance with this clause. The landlord's surveyors served a notice on the 30 th March 1999 giving notice that, with effect from the 1 st August 1999, the rent payable would be increased to £84,800 per annum.
The period of one month provided in the rent review clause elapsed without any counter-notice being served. However, on the 16 th June 1999, surveyors acting for the tenants served a counter-notice stating that in their opinion "the appropriate rent for the review period commencing on the 1 st August 1999 should be £52,725 exclusive of VAT".
The landlord's surveyors responded by pointing out that the counter-notice was served outside the time provided by the rent review clause. They asserted that because of sub-clause 2, the tenant was deemed to have agreed to pay the rent of £84,800 p.a. from the 1 st August 1999 until the lease expired. This contention was not accepted and the landlord started these proceedings seeking declarations that the position was as indicated by its surveyors.
The arguments before Neuberger J. which were repeated before this Court were as follows. The landlord submitted that the decision of the majority in MeccaLeisure was unsupportable and the Court should not follow it preferring the approach in AWADA. Alternatively it was submitted that since the Court was construing a different contract from that in Mecca Leisure the Court was not bound by that decision. The landlord's fallback position was that in any event Mecca Leisure was distinguishable from this case.
The tenant's argument is that contrary to the argument advanced by the landlord there is no conflict between the decisions of Mecca Leisure and AWADA and that Mecca Leisure is entirely consistent with the approach of the House of Lords in United Scientific. There is no proper basis for distinguishing the facts of this case from Mecca Leisure and accordingly MeccaLeisure had to be followed in the Court below and must be followed in this Court.
If contrary to its argument the Court was to conclude that the two decisions of the Court of Appeal conflict with one another, the tenant submits that applying the normal rules as to precedent, the Court is bound to follow the more recent decision (i.e. Mecca Leisure) which it is submitted is indistinguishable from the present case.
Neuberger J. concluded that the decision of the Court of Appeal in Mecca Leisure is not inconsistent with that in AWADA. He made clear that if the Mecca Leisure case had been a first instance decision he might very well have been persuaded not to follow it. He found no ground to distinguish the present case from Mecca Leisure and accordingly found for the tenant.
Against the background that I have set out, I turn to consider the three cases to which reference has been made and the other cases in which consideration has been given to these decisions in both this and other jurisdictions.
In United Scientific, the House of Lords was concerned with two separate appeals in the first case the landlord had not served a rent review notice until after the period provided for the service of such a notice in the lease had elapsed. In the second case provision was made for the landlord to apply for the appointment of a valuer to determine the market rent, which was the final step in the provisions for a rent review. The landlord had failed to make the necessary application within the timetable provided by the rent review clause. The two appeals were heard together so that the House of Lords could rule whether time was or was not of the essence in rent review clauses.
Lord Diplock answered that question in the following terms (at page 930H) :
"So upon the question of principle which these two appeals were brought to settle, I would hold that in the absence of any contra-indications in the express words of the lease or in the inter-relation 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".
Mr Lewison QC, on behalf of the landlord, emphasises that in that passage Lord Diplock referred to " any contra-indications" (emphasis added) and that the contraindications may...
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