United Scientific Holdings Ltd v Burnley Borough Council

JurisdictionEngland & Wales
JudgeLORD JUSTICE BUCKLEY,LORD JUSTICE ROSKILL,LORD JUSTICE BROWNE
Judgment Date01 March 1976
Judgment citation (vLex)[1976] EWCA Civ J0301-4
Date01 March 1976
CourtCourt of Appeal (Civil Division)
Between:
United Scientific Holdings Limited
Plaintiffs
-and-
The Mayor, Aldermen and Burgesses of the County Borough of Burnley (now the Council of the Borough of Burnley)
Defendants

[1976] EWCA Civ J0301-4

Before:

Lord Justice Buckley,

Lord Justice Roskill and

Lord Justice Browne

In The Supreme Court of Judicature

Court of Appeal

Civil Division

On appeal from Order of Vice-chancellor Pennycuick.

Mr H.E. FRANCIS, Q.C. and Mr B.C. MADDOCKS (instructed by Messrs Turner Peacock, Agents for Messrs Smith & Smith, Burnley, Lancashire) appeared on behalf of the Appellants (Defendants).

Mr A.J. BALCOMBE. Q.C. and Mr B.K. LEVY (instructed by Messrs Fremont & Co.) appeared on behalf of the Respondents (Plaintiffs).

LORD JUSTICE BUCKLEY
1

This is an appeal from a decision of Vice-Chancellor Pennycuick on the 13th May, 1974, on a rent review clause in a lease. The lease was dated the 31st August, 1962. It was a building lease for 99 years of some land in Burnley in Lancashire. The lessors were the Corporation – the Mayor, Aldermen and Burgesses of the County Borough of Burnley – and the lessee was the Plaintiff company, under it then name of E. Cookson (Properties) Limited.

2

The habendum and reddendum of the lease are in the following terms: "To hold the property (except and reserved as aforesaid) unto the Lessee from the date hereof for the term of ninety nine years yielding and paying therefore the rents mentioned and referred to in the next succeeding clause in the manner and at the times therein stated. The Lessee shall pay to the Corporation during the period from the commencement of this lease until the first day of January one thousand nine hundred and sixty three a peppercorn (if demanded) and thereafter until the expiration of a period of ten years from the commencement of this lease the yearly rent of nine hundred pounds and thereafter during the residue of the said term the yearly rent of one thousand pounds plus any additional rent payable under the provisions contained in the Schedule hereto without any deduction whatsoever other than landlord's property tax on the said rents each and all of such rents to be paid by equal half yearly instalments on the thirty first day of March and the thirtieth day of September in each year during the said term the first payment of the said rents or a proportionate part thereof as the case may be to be made on the rent day next succeeding the date whereon the said rents shall first commence to be payable".

3

The Schedule there referred to is in the following terms: "During the year immediately preceding the period of the second tea years of the said term and during the year immediately preceding each subsequent ten year period of the said term and during the year immediately preceding the last nine year period of the said term (each of such periods being hereinafter referred to as a 'relevant period') the Corporation and the Lessee shall agree or failing agreement shall determine by arbitration the sum total of the then current rack rent (which expression 'rack rent' shall for the purposes of this Schedule be deemed to mean the full annual value of the property and of all buildings and erections thereon and appurtenances thereto and including all improvements carried out to the same calculated on the basis of all rates taxes repairs and other outgoings being borne wholly by the occupier thereof) reasonably to be expected on the open market for leases of the property and all buildings and erections thereon and one quarter of the sum total so ascertained or One thousand pounds (whichever is the greater) shall be the rate of rent reserved by this lease in respect of the then next succeeding relevant period. All arbitrations under or by virtue of this Schedule shall be referred to the decision of a single arbitrator to be agreed by the parties hereto or failing their agreement thereon shall be referred to the decision of a person to be nominated by the President for the time being of the Royal institute of Chartered Surveyors and such reference shall be desired to be a submission to arbitration within the meaning of the Arbitration Act 1950 or any statutory modification or re-enactment thereof for the time being in force".

4

On the 29th September, 1967, a supplemental lease was entered into between the parties relating to some adjoining land, and the land comprised in the supplemental lease was demised for the same term as the land In the main lease. The rent was to be, from the 1st April 1966 until the buildings should be erected on the plot of land comprised in the supplemental lease a peppercorn, and from the date upon which the peppercorn rent should cease the rent was to be £1,000, until the expiration of ten years from the commencement of the lease, and thereafter and during the residue of the term the yearly rent of £1,000 plus any additional rent payable in accordance with the provisions for rent review contained in the Schedule to the lease – that is the original lease – which provisions should equally apply to the rents reserved by the supplemental lease. So the machinery of the lease of the 31st August 1962 was made to apply to the supplemental lease and the basic rent, as one might say, in the case of the supplemental lease was £1,000 a year in the same way in which the £1,000 a year is referred to in the lease of the 31st August 1962.

5

It will be convenient to deal with the matter with reference to the lease of the 31st August 1962, because no separate point arises on the supplemental lease, but it will be appreciated that the total rent payable under the two documents in respect of the period after the first ten years of the term was £2,000, or £2,000 and such additional rent as might be ascertained, by applying the machinery provided in the Schedule to the lease.

6

On the 10th May, 1972, estate agents acting for the Plaintiff company wrote to the Borough Council a lettersaying that they had been instructed by the Plaintiff company to enter into negotiations to agree the new lease rent for the land comprised in the two leases. Following that letter, a telephone conversation took place on the 31st July between a member of the firm of estate agents and a representative of the Borough Council, in which it was arranged that the agents would supply particulars of the rents reserved by the underleases of the property. There were in fact nine underleases of this property subsisting at that time for a total rental, I think, of £2,515; but particulars of those underleases were never in fact supplied to the Borough Council.

7

On the 21st August, 1972, the Plaintiff company's Solicitors wrote a letter to the Town Clerk of the Borough Council, in the course of which they said: "Wo have carefully considered the provisions of the lease and supplemental lease and we are entirely satisfied that the provisions are not susceptible of any legally enforceable meaning and are void accordingly. In our view therefore the rent as from the 1st September 1972 is the sum of £2,000 being the yearly rent of £1,000 payable under the provisions of Clause 3 of the lease and the yearly rent of £1,000 payable under the provisions of the supplemental lease". The Town Clerk did not acknowledge that letter until after the 31st August 1972, which was the end of the first ten years of the term limited by the two leases. He effectively answered the letter of the 21st August 1972 on the 12th October 1972 in a letter in which he said that the Corporation had taken Counsel's opinion on the question of the enforceability or otherwise of the rent review provisions and in the light of that opinion he was unable to agree that the position was as the Plaintiff companyhad stated it in their letter and that the Corporation must insist upon the rent revision provisions being implemented. That resulted in the Plaintiff company saying that they proposed to take proceedings. The Originating Summons was issued on the 4th December, 1972, by the tenants as Plaintiffs, joining the Mayor, Aldermen and Burgesses of the County Borough of Burnley as Defendants. There was some subsequent correspondence; but, for the purposes of this appeal, I do not think it is necessary for me to say anything about that. As I say, for the purposes of this Judgment, I propose to ignore the supplemental lease and deal with the matter in relation to the original lease.

8

The Appellants (the Plaintiff tenants) assert that time is of the essence of a rent review clause only where it is in the nature of an option or confers a unilateral right on one party to secure an alteration of the rent to that party's advantage. They say that this is not a lease for 99 years at £1,000 a year, with a power for the landlord to call for an upward review. They contend that this is a lease at specified rents during the first ten years and thereafter at a rent to be ascertained according to a formula, which cannot be less but may be more than £1,000 a year, with machinery provided for ascertaining the amount according to the formula set out in the Schedule. To such a provision they say time is not essential.

9

Mr Francis, appearing for the Appellant company, has contrasted what has been described in some of the authorities as an "option" clause with clauses of a kind which have also been described in the authorities as "obligation" clauses; that is to say, clauses in which the parties either arecontractually obliged to carry out a review or where by the terms of the lease the review is an automatic operation. Mr Francis draws attention to the mandatory language in the Schedule, which twice uses the verb "shall", and he contends that the provisions of the Schedule are equally binding upon both parties, and that this is not a case in which it could be said that either party has any right in the nature of an option. It is true that an agreement to agree something cannot create a legally binding obligation...

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