England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE CHANF 96/1034/3

Royal Courts of Justice

Strand, London WC2

Thursday, 25th June 1998

B e f o r e :

LORD JUSTICE NOURSE

LORD JUSTICE MUMMERY and

SIR JOHN VINELOTT

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(1) ERIC MICHAEL GARSTON

(2) ALAN KILSHA TOULSON

(3) PAUL DENZIL NICHOLAS

(4) CHARLES EDWARD CAMERON GARDNER

Plaintiffs/Appellants

-v-

SCOTTISH WIDOWS FUND AND LIFE ASSURANCE SOCIETY

Defendant/Respondent

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Handed Down Judgment

Smith Bernal Reporting Limited

180 Fleet Street London EC4A 2HD

Tel: 0171 421 4040 Fax: 0171 831 8838

(Official Shorthand Writers to the Court)

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MR D HODGE QC and MR P MORGAN QC (instructed by Messrs Reynolds Porter Chamberlain, London WC1) appeared on behalf of the Appellant Plaintiffs.

MR K LEWISON QC (instructed by Messrs Freshfields, London EC4) appeared on behalf of the Respondent Defendant.

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J U D G M E N T

(As Approved by the Court)

Crown Copyright

Thursday, 25th June 1998

LORD JUSTICE NOURSE:

The primary question on this appeal is whether a notice which before the decision of the House of Lords in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 would have been ineffective to determine a lease must now, by virtue of that decision, be held to have been effective. In the company of the man on the Clapham omnibus, the officious bystander and the man skilled in the art there has now been established the reasonable recipient, a formidable addition to the imagery of our law. There is a further question as to the true construction of the proviso to section 26(2) of the Landlord and Tenant Act 1954.

By a lease dated 10th July 1985 and made between Merchant Navy Officers Pension Fund Trustees Ltd as landlord of the one part and Manufacturers Hanover Finance Ltd as tenant of the other part office premises comprising the seventh floor of Lincoln House, 296/302 High Holborn, London WC1 were demised to the tenant "from the 24th day of June 1985 for a term of twenty years" at a yearly rent of £47,000 subject to upwards only rent reviews at the end of every five years of the term. Clause 7 of the lease provides:

"IF the Tenant shall desire to determine the term hereby granted at the expiration of the tenth year of the term and shall give to the Landlord at least six months' previous notice in writing of such his desire then immediately on the expiration of the tenth year of the term hereby granted the demise and everything herein contained shall cease and determine but without prejudice to the rights and remedies of either party against the other in respect of any antecedent claim or breach of covenant."

On 29th September 1988 the lease was assigned by Manufacturers Hanover Finance Ltd to the plaintiffs, the first being a former partner and the other three partners in the solicitors' firm of Reynolds Porter Chamberlain, who have occupied the demised premises as an annexe to their principal offices nearby. At all material times the reversion expectant on the determination of the lease has been vested in the defendant.

By the late summer of 1994 Reynolds Porter Chamberlain had resolved to exercise their power to determine the lease at the expiration of the tenth year thereof. That being a power to determine it at the expiration of the tenth year of a term which ran from 24th June 1985, the date on which it had to be determined was 23rd June 1995. On 14th September 1994 Reynolds Porter Chamberlain wrote a letter to the defendant, stating that they did so on behalf of the firm and referring to the lease and the assignment. The letter continued:

"Pursuant to clause 7 of the Lease the Lessee hereby serves Notice on the Lessor to determine the Lease and this Notice shall expire on the 9 July 1995.

The Lease is governed by the provisions of the Landlord & Tenant Act 1954. Accordingly on behalf of the tenant we enclose the tenant's request for a new tenancy of business premises under section 26 of the Landlord & Tenant Act 1954."

Enclosed with the letter was a request under section 26 of the 1954 Act requesting the defendant to grant a new tenancy beginning on 10th July 1995, the day following the date specified in the letter for the expiry of the notice. The request stated the name of the tenant as Reynolds Porter Chamberlain.

The notice contained in the letter of 14th September and the enclosed request having been served on behalf of Reynolds Porter Chamberlain, on 4th October 1994 they wrote a further letter to the defendant in terms identical to those of the letter of 14th September, except that it was expressed to be written on behalf of the plaintiffs. Enclosed with the letter was an identical request for a new tenancy under section 26, except that the name of the tenant was stated to be those of the plaintiffs.

It is clear and accepted on both sides that the writer of the letters of 14th September and 4th October 1994 made the mistake of thinking that the time for determining the lease under clause 7 was the expiration of the tenth year from the date of the lease (9th July 1995) instead of the expiration of the tenth year of the term (23rd June 1995). Subject to that point, both letters having been received by the defendant more than six months before 23rd June 1995, it is agreed that that of 4th October, if not that of 14th September, was a valid notice under clause 7 of the lease.

The defendant having maintained that the lease had not been validly determined, on 29th June 1995 the plaintiffs issued an originating summons in the Chancery Division claiming a declaration that the lease had been validly determined by one or other of the letters of 14th September and 4th October 1994, alternatively by one or other of the requests for a new tenancy under section 26. The summons came before Mr Justice Rattee who, on 21st March 1996, dismissed it; see [1996] 1 WLR 834.

At that time the effect of the notices given in the letters of 14th September and 4th October was governed by the decisions of this court in Hankey v Clavering [1942] 2 KB 326 and Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1995] 1 WLR 1508. In the latter case I summarised the effect of the previous authorities at p. 1513F:

"If a notice clearly and specifically purports to determine a demise for a fixed term on a date not authorised by the lease, the date cannot be corrected simply because it is clear, first, what the correct date ought to be, secondly, that the wrong date was inserted by a slip and, thirdly, that the recipient might guess or even be certain that that was what happened. An exception can only be made where the date specified is an impossibility, either because it has passed or because it is on some other ground inconceivable that it was the date intended."

On that state of the law the plaintiffs accepted, correctly, that Mr Justice Rattee was bound to hold that the notices were ineffective to determine the lease pursuant to clause 7. However, leave to appeal to the House of Lords in the Mannai Investment case having by then been granted, the question was kept open for argument in a higher court; see [1996] 1 WLR, at p. 837C.

The question argued before Mr Justice Rattee was whether the requests for a new tenancy under section 26 were themselves effective to bring the lease to an end. He held that they were not. On 16th July 1996 the plaintiffs entered a notice of appeal against the judge's decision, which also stated that they might seek leave to amend in the light of the decision of the House of Lords in the Mannai Investment case. Their Lordships' decision [1997] AC 749 having been given on 21st May 1997, the plaintiffs were granted the necessary leave at the start of the hearing in this court. Argument was heard first on the question raised by the amendment and then on the question decided by the judge. I will deal with them in the same order.

What the majority of the House of Lords decided, as applied to this case, was that if a reasonable recipient in the position of the defendant and with knowledge of the terms of the lease would, on reading the letters of 14th September and 4th October 1994, have been left in no doubt that the plaintiffs wished to determine the lease on 23rd June 1995 but had wrongly described the date for determination as 9th July 1995, then the lease was validly determined on the earlier of those dates. While it seems likely that there will be cases in which the application of that test will be a matter of difficulty, of greater difficulty than in the application of the test formerly thought to be correct, there is no such difficulty here.

Had it not been for the requests for a new tenancy enclosed with the letters of 14th September and 4th October, the position would have been straightforward. The notices were expressed to be served pursuant to clause 7 of the lease, which empowered the plaintiffs to determine the term thereby granted at the expiration of the tenth year, that is to say on 23rd June 1995. A reasonable recipient of the letters with knowledge of the terms of the lease would have known that that was the date, and the only date, on which it could be determined. He would also have known that the date of the lease was 10th July 1985 and that the dates specified for the expiration of the notices, 9th July 1995, was the expiration of the tenth year from that date. In that state of knowledge, the reasonable recipient would have been left in no doubt that the plaintiffs wished to determine the lease on 23rd June but had wrongly described the date for determination as 9th July.

It is said, however, that this straightforward view of the matter cannot stand with the plaintiffs' simultaneous service of the requests for a new tenancy under section 26. It is said that, from a reading of the letter and the request together, the reasonable recipient would, or at least could, reasonably have concluded that the plaintiffs intended to remain in possession until the new tenancy began on 10th July, and that because they could not reasonably be taken to have intended to be trespassers between 24th June and that date they did indeed intend to determine the lease on 9th July. Coupled with that basic submission are submissions to the effect that if the reasonable recipient had read the small print on the back of the section 26 requests, or if he had considered the implications of Commercial Properties Ltd v Wood [1968] 1QB 15, or if he had looked at section 26(4) of the 1954 Act, his mind would, at the least, have been afflicted with reasonable doubts as to the plaintiffs' true intentions.

These submissions are unrealistic. While I gladly credit the reasonable recipient, this paragon of the law, with the eyesight, omniscience and diligence that they demand of him, in the end he could only reasonably have concluded that the plaintiffs, in specifying 10th July, had intended to specify the day following the day on which they wished to determine the lease by the notices under clause 7. In other words, the reasonable recipient would have been left in no doubt that the plaintiffs wished to specify 24th June as the date for the commencement of the new tenancy but had wrongly described it as 10th July.

For these reasons, I would hold that the notices contained in the letters of 14th September and 4th October 1994 were effective to determine the lease on 23rd June 1995 pursuant to the power in clause 7 thereof. On that footing the plaintiffs are entitled to succeed on this appeal and it is not strictly necessary for us to consider the question decided by the judge. However, since it is one of general application on which we have heard full argument, it is appropriate that we also should consider it. Since I am in complete agreement with the decision of the judge, I can state my reasons relatively briefly.

So far as material, subsections (1) and (2) of section 26 of the 1954 Act provide:

"(1) A tenant's request for a new tenancy may be made where the tenancy under which he holds for the time being (hereinafter referred to as "the current tenancy") is a tenancy granted for a term of years certain exceeding one year, whether or not continued by section 24 of this Act, or granted for a term of years certain and thereafter from year to year.

(2) A tenant's request for a new tenancy shall be for a tenancy beginning with such date, not more than twelve nor less than six months after the making of the request, as may be specified therein: Provided that the said date shall not be earlier than the date on which apart from this Act the current tenancy would come to an end by effluxion of time or could be brought to an end by notice to quit given by the tenant . . ."

It will be seen that subsection (1) includes two types of tenancy in the expression "the current tenancy": first, a tenancy granted for a term of years certain exceeding one year; second, a tenancy granted for a term of years certain and thereafter from year to year. Subsection (2) then provides for the date on which the new tenancy is to begin, subject to a proviso that it shall not be earlier than the date on which apart from the Act the current tenancy (a) would come to an end by effluxion of time or (b) could be brought to an end by notice to quit given by the tenant.

If the question fell to be decided on the wording of section 26(1) and (2) alone, there could be no doubt that the commencement date specified in the request could not be earlier than 23rd June 2005, that being the date on which, apart from the 1954 Act, the lease would come to an end by effluxion of time. That is because in normal legal parlance the expression "notice to quit" is not a correct description of a notice determining a lease pursuant to a power such as that contained in clause 7 of the lease in this case. It could only have referred to the determination of a tenancy granted for a term of years certain and thereafter from year to year. However, by section 69(1) of the 1954 Act "notice to quit" is defined to mean:

"A notice to terminate a tenancy (whether a periodical tenancy or a tenancy for a term of years certain) given in accordance with the provisions (whether express or implied) of that tenancy."

It follows that the proviso to section 26(2) must be construed on the footing that "notice to quit" includes a notice such as that which is required to be given pursuant to clause 7; cf. Scholl MFG Co Ltd v Clifton (Slim-Line) [1967] Ch. 41. On that footing, it is the plaintiffs' case that the requests here did not infringe the proviso, in that the commencement date of the new tenancy requested was not earlier than the date on which the existing tenancy could be brought to an end by such a notice.

In rejecting that argument, Mr Justice Rattee said at [1996] 1 WLR 839H:

"In my judgment the actual words of the proviso on their natural construction contemplate one relevant date only in respect of a given tenancy, and the two alternative definitions of that date are to take account of the fact that the relevant tenancy may be (a) one granted simply for a term of years, in which case the relevant date under the proviso will be the date on which it will come to an end by effluxion of time or (b) one granted for a term of years certain and thereafter from year to year, in which case, as Mr Lewison pointed out, the tenancy will never come to an end by effluxion of time, and the only possible relevant date specified in the proviso to section 26(2) is the date on which, as at the date of the request under section 26(1), the existing tenancy could be brought to an end by notice to quit given by the tenant. Thus, in the case of a tenancy granted for a term of years exceeding one year, the date for the commencement of a new tenancy cannot be earlier than the date on which the current tenancy would, apart from the Act of 1954, come to an end by effluxion of time."

I respectfully agree. Moreover, any doubt there may be is resolved by some later observations of the judge at p. 840D:

"I do not find it surprising that the Act does not, as would Mr Hodge's construction of it, mean that the inclusion in a lease for a term of years of a power for the tenant to break the lease has the effect that the tenant can not only terminate his enjoyment of the benefit and suffering of the burdens of the lease on the terms agreed on its grant, but at the same time obtain the benefit of a new tenancy on, in times of recession, terms much more favourable to him than those of the lease into which he entered or which he took by way of assignment."

That is eminent good sense. One of the main purposes of Part II of the 1954 Act is to enable business tenants, where there is no good reason for their eviction, to continue in occupation after the expiration of their contractual tenancies. It is not a purpose of the Act to enable a business tenant who has chosen to determine his contractual tenancy to continue in occupation on terms different from those of that tenancy.

I would allow this appeal.

LORD JUSTICE MUMMERY:

I agree.

SIR JOHN VINELOTT:

I also agree.

Order: appeal allowed with costs; judge's order for costs to stand; order made in the form of draft minute prepared by counsel; leave to appeal to the House of Lords refused. [Not part of approved judgment]