The Gazette 1978

GAZETTE

SEPTEMBER 1978,

exonerate him therefore from paying any rent for the residue of the term (which could not be accepted as a realistic interpretation) but it was put forward that failure to comply with the time limits should limit the Lessee to paying only the original rent reserved for the first portion of the term i.e. £2,980 per annum. Megarry J. rejected this argument however on the basis that this was not what the Lease said and stated that the Lessee was having to rely for this contention on such a term being implied in the Lease. Such a term however would be quite contrary to the mechanism laid down in Clause 5 and would have to be a term implied if and only if the Landlord failed to operate the Clause according to its tenor, which he did albeit three months after the date fixed. Further, the Court confirmed that a Clause of this type is not framed in the terms of an option but rather as an obligation, (the Landlord "shall" serve uon the Tenant . . . ) and as such is a mandatory provision designed to fill a void that will It is now necessary to turn to a case decided a year later namely Accuba Limited v. Allied Shoe Repairs Limited (1975) 3 A.E.R. 782 in which a similar type of review Clause was contained in an under-Lease for a term of fourteen years from the 25th March 1967. It provided that for the first seven years the rent was to be £5,000 per annum and for the rest of the term a rent was to be determined under Clause 5 of the under-Lease. Clause 5 provided how the reviewed rent was to be calculated and Clause 5 (2) stated that it would operate only (a) provided the open market rental value of the premises be specified by notice in writing by the Landlord to the Tenant at any time before the expiration of six years after the commencement of the term hereby granted or (b) as shall within three months after such notice to be agreed between the parties in writing in substitution for the said sum or (c) it shall be determined at the election of the tenant by counter notice in writing to the Landlord not later than three months after the Landlord's said Notice (time to be of the essence hereof) by an independent surveyor in default of agreement. The period of six years after the commencement of the term expired on the 24th of March 1973 and owing to an oversight the Landlord failed to serve notice until September 1974 when by letter they specified a rent of £1,500 per annum. The tenant considered this notice ineffective and on coming before the Chancery Division it was held by Goff J. that the provisions of the Lease did not consitiute an agreement by the Tenant to pay the original rental figure of £5,000 throughout the fourteen year term in its entirety subject to the Landlord's option to review but rather was an agreement to pay a specific rent fot the first seven years and thereafter a rent to be decided in accordance with Clause 5. Therefore the provisions in Clause 5 were mere "machinery" and time limits therein were not of the essence. Although unreasonable delay on the part of the Landlord in putting the machinery of Clause 5 into operation might have precluded him from seeking a rent for the second half of the term that was higher than the first reserved rent, in the context of a seven year period the delay was not unreasonable and the Landlord's notice therefore was effective and valid. The Court referred to certain dicta in the earlier case of C. H. Bailey Limited v. Memorial Enterprises Limited (1974) 1 A.E.R. 1003 in which a otherwise occur. The Accuba Case

Clause with a similar effect as that in the present case was inserted in the Lease under which the Landlord failed to serve the requisite notice to review within the stipulated time. Sir Eric Sach's judgment was referred to in which the following passage was cited by Goff J. with approval: "the objective of the Courts in cases relating to office leases is naturally to determine the intended commercial effect of the particular agreement reached between the parties. In this respect a Lease is no less a contract relating to the use of premises than an agreement in relation to the supply of furniture for those premises. It follows that in this class of case the Courts should if possible avoid resort to any of the highly technical points that stem from the intricacies of the ancient law of Landlord and Tenant". Goff J. in the Accuba case said that what that case really concerned was a pure question of construction of the under-Lease and like Sir Eric Sachs preferred to deal with the case on this basis where possible. Goff J. further referred to Denning M.R. who in the Bailey case had stated that delay might give rise to a defence by way of equitable estoppel but to succeed a Tenant would have to show that he has altered his position. This can involve a heavy burden of proof on a Tanant as he will generally not be prejudiced owing to the fact that he has had the use of the money in the intervening period between the date the rent ought to have been increased and when such increase was actually made effective and although it can be fixed retrospectively not only has he had the use of the money but also has had the benefits of interest thereon. In neither the Bailey case or the Accuba case was there any evidence submitted on this point as the Tenants had not been prejudiced in any way by the delav. The Mount Charlotte Case The final authority to be reviewed before turning to the recent House of Lords decision is that of Mount Charlotte Investments Limited v. Leek and Westbourne Building Society Limited (1976) 1 A.E.R. 890 in which the relevant Clause did not refer to the time in which a notice was to be served to review the rent but rather to the time within which application was to be made to an arbitrator for the purpose of fixing a rent. This case highlighted the necessity for the use of mandatory language such as the parties "shall" do such and such instead of a technical discretionary "may" adopt a certain course, as the use of the latter term can. and did in this case influence the Court towards the view that what might have been an obligation on the Landlord to fix a new rent, as in the Kennilworth case, was more in the nature of an option owing to the discretionary type of language used, to the obvious detriment of the Landlord who was then bound strictly to the time clauses as in all option cases. This case has since been overruled by the House of Lords but is of importance to practitioners in this country as we have no indication as of yet which side of the fence the Irish Courts will take in interpreting such Clauses. The facts of the case were that the Landlords had granted a Lease to the Tenant for a term of twenty one years from the 25th March, 1967. Clause 1 (a) provided for a rent of £2,750 per annum for the first eight years and Clause 1 (b) provided that "during the next six years of the said term i.e. from 25th March 1975 to 25th March 1981, the rent was to be whichever of the two following yearly rents is the greater that is to say (1) the rent of £2,750 per annum or (2) such amount as may be agreed between the Landlord and

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