United Scientific Holdings Ltd v Mayor, Aldermen and Burgesses of the County Borough of Burnley now The Council of the Borough of Burnley

JurisdictionUK Non-devolved
CourtHouse of Lords
JudgeLord Diplock,Viscount Dilhorne,Lord Simon of Glaisdale,Lord Salmon,Lord Fraser of Tullybelton
Judgment Date23 March 1977
Judgment citation (vLex)[1977] UKHL J0323-2
Date23 March 1977

[1977] UKHL J0323-2

House of Lords

Lord Diplock

Viscount Dilhorne

Lord Simon of Glaisdale

Lord Salmon

Lord Fraser of Tullybelton

United Scientific Holdings Limited
(Respondents)
and
Mayor, Aldermen and Burgesses of the County Borough of Burnley Now the Council of the Borough of Burnley
(Appellants)
Cheapside Land Development Co. Limited and Others
(Appellants)
and
Messels Service Company (an Unlimited Company)
(Respondents)

Upon Report from the Appellate Committee to whom was referred the Cause United Scientific Holdings Limited against Mayor, Aldermen and Burgesses of the County Borough of Burnley now The Council of the Borough of Burnley, That the Committee had heard Counsel, as well on Monday the 24th, Tuesday the 25th, Wednesday the 26th, Thursday the 27th and Monday the 31st, days of January last, as on Tuesday the 1st day of February last, upon the Petition and Appeal of the Council of the Borough of Burnley of Town Hall, Burnley, praying, That the matter of the Order set forth in the Schedule thereto, namely, an Order of Her Majesty's Court of Appeal of the 1st of March 1976, might be reviewed before Her Majesty the Queen, in Her Court of Parliament, and that the said Order might be reversed, varied or altered, and that the Petitioners might have the relief prayed for in the Appeal or such other relief in the premises as to Her Majesty the Queen in Her Court of Parliament, might seem meet; as also upon the Case of United Scientific Holdings Limited, lodged in answer to the said Appeal; and due consideration had this day of what was offered on either side in this Cause:

It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of Her Majesty the Queen assembled, That the said Order of Her Majesty's Court of Appeal, of the 1st day of March 1976, complained of in the said Appeal, be, and the same is hereby, Reversed, and that the Cause be, and the same is hereby, remitted back, to the Chancery Division of Her Majesty's High Court of Justice with a Declaration that upon the true construction of the Leases and in the events which have happened the annual rent reserved by each of the Leases during the 10 years of the respective terms immediately prior to the 31st August 1982 should be a rent determined in accordance with the provisions of the Schedule of the first of the Leases notwithstanding that the period during which such determination ought to have taken place expired on the 31st August 1972: And it is further Ordered, That the Respondents do pay, or cause to be paid, to the said Appellants the Costs incurred by them in the Courts below, and also the Costs incurred by them in respect of the said Appeal to this House, the amount of such last-mentioned Costs to be certified by the Clerk of the Parliaments: And it is also further Ordered, That the Cause be, and the same is hereby, remitted back to the Chancery Division of the High Court of Justice, to do therein as shall be just and consistent with this Judgment.

Lord Diplock

My Lords,

1

During the last two decades since inflation, particularly in the property market, has been rife, it has been usual to include in leases for a term of years, except when the term is very short, a clause providing for the annual rent to be reviewed at fixed intervals during the term and for the market rent current at each review date, if it be higher, to be substituted for the rent previously payable. The wording of such clauses varies; there are several different ones now included in the books of precedents; but a feature common to nearly all of them is that not only do they specify a procedure for the determination of the revised rent by agreement between the parties or, failing that, by an independent valuer or arbitrator, but they also set out a time table for taking some or all of the steps in that procedure which, if followed, would enable the revised rent to be settled not later than the review date.

2

The question in both of these appeals, which have been heard together, is whether a failure to keep strictly to the time table laid down in the review clause deprives the landlord of his right to have the rent reviewed and consequently of his right to receive an increased rent during the period that will elapse until the next review date.

3

On a number of occasions during the last five years the question whether time was of the essence in a whole variety of rent review clauses has come before the High Court and the Court of Appeal. Until the judgments of the Court of Appeal in the instant cases the answers given seem to turn upon fine distinctions between the wording of particular clauses so as to classify them, either on the one hand as conferring upon the landlord a unilateral "option" for the exercise of which time was of the essence, or on the other as merely laying down the machinery for the performance of mutual "obligations" by the tenant as well as by the landlord, in which case time was not of the essence.

4

The suggested dichotomy between the so-called "option" clauses and "obligation" or "machinery" clauses was discarded in each of the instant appeals by Courts of Appeal of different composition. In the first appeal United Scientific Holdings v. Burnley B.C. [1976] 1 Ch. 128, Buckley, Roskill and Browne L.JJ. in separate judgments held that the commercial character of the contract contained in a lease incorporating a rent review clause raised the presumption that the parties intended time to be of the essence of the contract in respect of each step required to be taken by the landlord in order to obtain a determination of any increased rent under a rent review clause. In the second appeal, Stamp, Scarman and Goff L.JJ. joined in a single judgment in which they also held that prima facie time was of the essence in a rent review clause, but they preferred to do so not upon the ground of the presumed intentions of the parties, but upon the ground that in its legal nature a rent review clause is a grant of a unilateral right to the landlord and that equity would not have granted relief to the grantee of such a right for failure to perform any of the conditions of the grant timeously.

5

It is not disputed that the parties to a lease may provide expressly that time is or time is not of the essence of the contract in respect of all or any of the steps required to be taken by the landlord to obtain the determination of an increased rent, and that if they do so the court will give effect to their expressed intention. But many rent review cases that are now maturing do not contain express provision in these terms. What the Court of Appeal have decided is that the commercial nature of the contract and/or the legal nature of the right granted to the landlord by a rent review clause raises a presumption that time specified in such a clause for anything that needs to be done by him is of the essence; and that this presumption will prevail unless there are strong contra-indications in the actual wording of the clause. They found no sufficient contra-indications in the rent review clauses which are in question in the instant appeals.

6

My Lords, the reason why these two appeals have been heard together in the House although the two rent review clauses that are in question differ widely in their wording, is to obtain a ruling whether the presumption as to the construction and effect of rent review clauses is as the Court of Appeal held it to be, or whether it is the contrary presumption, viz. that time is not of the essence. I propose accordingly to deal first with that question as a matter of legal principle before turning to the precise terms of the rent review clauses involved in the two appeals.

7

I shall have to examine rather more closely what are the legal consequences of "time being of the essence" and time not being of the essence; but I do not think that the question of principle involved in these appeals can be solved by classifying the contract of tenancy as being of a commercial character. In some stipulations in commercial contracts as to the time when something must be done by one of the parties or some event must occur, time is of the essence; in others it is not. In commercial contracts for the sale of goods prima facie a stipulated time of delivery is of the essence, but prima facie a stipulated time of payment is not (Sale of Goods Act 1893 Section 10(1)); in a charter-party a stipulated time of payment of hire is of the essence. Moreover a contract of tenancy of business premises would not appear to be more of a commercial character than a contract for sale of those premises. Nevertheless, the latter provides a classic example of a contract in which stipulations as to the time when the various steps to complete the purchase are to be taken are not regarded as of the essence of the contract.

8

In the arguments developed before this House the commercial character of the contract of tenancy has played a relatively minor role. Counsel for all the parties have sought to concentrate your Lordships' attention upon the "rules of equity" and, in particular, upon the auxiliary jurisdiction formerly exercised by the court of chancery to grant relief against the strict enforcement in a court of law of a contractual stipulation as to time.

9

My Lords, if by "rules of equity" is meant that body of substantive and adjectival law that, prior to 1875, was administered by the court of chancery but not by courts of common law, to speak of the rules of equity as being part of the law of England in 1977 is about as meaningful as to speak similarly of the Statutes of Uses or of Quia Emptores. Historically all three have in their time played an important part in the development of the corpus juris into what it is to-day; but to perpetuate a dichotomy between rules of equity and rules of common law which it was a major purpose of the Judicature Act 1873 to do...

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