England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION (MR JUSTICE RIMER)

		Royal Courts of Justice Strand, London, WC2A 2LL
		27th November 2002

Lord Justice Mummery :

1. This is an appeal, with the permission of the judge, from an order of Rimer J dated 8 March 2002. He granted a declaration on a short point of construction of the rent review provision in a lease as to the time for the giving of a rent review notice by the landlord. The appellant is the landlord of premises at 27 Mount Pleasant, Tunbridge Wells (the Property). On 25 April 2001 it acquired the freehold reversion of the Property, subject to a lease dated 7 May 1975 (the Lease) for a term of 35 years from that date. I shall refer to the appellant as "the Lessor".
2. In 1993 the respondent acquired the residue of the term of the Lease. It trades from the Property as an estate agent, valuer and auctioneer under the name of Fox & Sons Limited. I shall refer to the respondent as "the Lessee".

The Lease

3. The dispute between the parties turns on the construction of the rent review provisions in clause 4 of the Lease.

"4. (a) The Lessor may from time to time give notice in writing to the Lessee in accordance with the provisions of this clause requiring the rent payable hereunder to be reviewed

(b) Such notice may be given at any time not more than twelve months before the expiration of each or any of the following years of the said term that is to say every fifth year thereof but not at any other time and from and after the giving of any such notice the following provisions of this clause shall take effect for the purpose of reviewing the rent payable hereunder in accordance with such notice and in such provisions the expression "the material date" shall be construed as meaning the end of the year of the said term during which such notice is given."

4. There follow provisions establishing the mechanics for ascertainment of the amount of increased rent either by agreement or, in default of agreement, by the appointment of an expert valuer. The Lease continues-

"(f) If the full yearly rack rent so agreed or certified by the said valuer shall be greater than the rent hereinbefore reserved and payable immediately before the material date then as from the material date this Lease shall have effect as if the yearly rent so agreed or certified were the rent reserved by clause 1 hereof but if the full yearly rack rent so agreed or certified is the same as or less than the yearly rent hereby reserved and payable immediately before the material date the yearly rent hereby reserved shall be unchanged

…..

(h) If at any of the review dates the Landlord shall be obliged to comply with any enactment (which expression shall include any Act of Parliament now or hereafter in force and any instrument regulation or order made thereunder or deriving validity therefrom) dealing with the control of rent and which shall restrict or modify the Landlords right to revise the rent in accordance with the terms of this Lease then the Landlord shall on each occasion that any such enactment is removed relaxed or modified be entitled on giving not less than two Months' notice in writing to the tenant expiring after the date of such removal relaxation or modification to introduce an intermediate review date which shall be the date of expiration of such notice and the rent payable hereunder from any such intermediate review date to the next ensuing review date or intermediate review date as the case may be (whichever shall first occur) shall be calculated and agreed or settled in accordance with the provisions of sub clauses (c)(d)(e)(f) and (g) of this clause."

5. The Lessor gave notice of a rent review on 25 April 2001, by which time the relevant 5 year period, expiring by 7 May 2000, had already passed.

The Proceedings

6. On 8 August 2001 the Lessor began proceedings against the Lessee for the determination of the following question –

"Whether on the true construction of the Lease a notice under clause 4 is required to be given, if at all, by a set date and, if so, what date."

7. In the order of 8 March 2002 Rimer J made the following declaration-

"That on a true construction of the lease dated 7 May 1975 to which the original parties were Mount Sion Properties Limited as landlord and Dudley Cecil Quirk and others as tenant a notice given under clause 4(b) may be given at any time during but not more than twelve months before the expiration of each or any of the following years of the term that is to say every fifth year thereof but not at any other time and time is of the essence for the service of the notice."

8. Rimer J accepted the Lessee's submission that (a) the rent review notice had to be given before the end of the relevant 5 year period expiring by 7 May 2000 and (b) time was of the essence, with the result that a notice given late would be invalid on that ground and the rent set at the 1995 figure could not be reviewed until the end of the next relevant 5 year period expiring on 7 May 2005.
9. As Mr Kim Lewison QC (counsel for the Lessor) made clear at the opening of the appeal, the Lessor accepts that, if Rimer J's decision on the time limit point is upheld, then time is of the essence for the giving of the rent review notice. As in the court below, Mr Jonathan Brock QC appeared for the Lessee. He contended that the judgment of Rimer J on the time limit point should be upheld for the reasons given by him.

The Judgment

10. Having correctly directed himself that clause 4(b) fell to be construed " in the context of the relevant parts of the lease as a whole" the judge described the general setting of the rent review provisions-

"12. As to the general picture, the term of the lease is 35 years and clause 1 reserved a specified rent only for the first five years. Thereafter the rent was to be as determined by clause 4, and clause 4(b) shows that the activity towards determining the rent for subsequent periods of the term was to commence no earlier than the beginning of every fifth year of the term. Five divides neatly into 35 so that it is arithmetically obvious that the parties' intention was that in each fifth year a procedure could or would be activated directed at fixing the rent for the five-year period commencing at the beginning of the sixth year. Further, as the only rent which the lease expressly reserves after the first five years is that determined by clause 4, I approach the construction of clause 4 with the instinctive feeling that it is unlikely that the parties intended its machinery to do other than enable the landlord to determine a rent payable as from the beginning, and for the whole, of a particular five-year period."

11. In the next three paragraphs of his careful judgment the judge focused on the language of clause 4(b) and commented on the rival submissions of Mr Lewison and Mr Brock.

"13. Turning more closely to clause 4(b), it provides that the notice maybe given " at any time not more than twelve months before the expiration of each or any of the following years of the said term that is to say every fifth year thereof but not at any other time...."Now there is no escaping the recognition that Mr Lewison's interpretation of these words accurately reflects what might be described as their literal meaning: he is quite right that, according to that meaning, the words only identified the start date from which a notice may be given, but they do not also identify the end date by which it must be given. But the modern approach to questions of construction requires that " we no longer confuse the meaning of words with the question of what meaning the words were intended to convey" (Mannai Investment Co Ltd –v- Eagle Star Life Assurance Co Ltd) 1997 AC 749 at 779H, Lord Hoffmann). There are two features of the quoted words which encourage me away from the construction urged by Mr Lewison."

12. The judge then dealt with Mr Lewison's submission, on behalf of the Lessor, that, although a rent review notice could not be given earlier than 12 months before the end of the fifth year, clause 4 did not impose an end date for the giving of as review notice, so that it did not matter that it was given after the fifth year. His argument was that once the fourth year had expired, the Lessor could choose any of the following sixth to tenth years as being the year for effecting a review, though he could only affect one review in respect of each 5-year period. If a notice were given after the fifth year, the review rent would only be payable prospectively from the later date rather than from the beginning of the sixth year. Mr Lewison relied on the definition of "the material date" at the end of clause 4(b) as indicating that a valid rent review notice could be given after the end of the fifth year. The expression "the material date" was to be construed as meaning "the end of the year of the said term during which such notice is given." That definition was capable of applying to a rent review notice given after the expiration of the relevant 5- year period.
13. In the course of explaining his preference for Mr Brock's construction of clause 4(b), the judge identified as the first feature (paragraph 14) the emphasis of the opening words of clause 4(b) in fixing

"… the starting point from which a notice may be give(or, which is the same thing, before which it may not be given) by reference to the twelve-month period expiring after the end of the fifth year, that is immediately before the commencement of the next five-year period."

14. The second feature identified by the judge was the effect of the phrase "but not at any other time" as impliedly referring back

"…to a defined period of time which has already been identified as the period within which any notice must be given, and their function is to underline that that is the only period available for that purpose."( paragraph 15)

15. The judge concluded

"What is that period ? In my view, all the indications are that it is the period of twelve months expiring at the end of the fifth year. I consider, therefore, that the true sense of clause 4(b) is that it means that the notice may be given "at any time during but not more than twelve months before the expiration of, each or any of the following years of the said term that is to say every fifth year thereof but not at any other time. This does involve supplying two words two commas, and I accept also that the end result is the use of more words than are needed in order to convey the same message. But, reading clause 1 and 4 as a whole, I regard this as correct sense of clause 4(b). If so, there is nothing in the definition of "the material date" pointing in a different direction."(paragraph 16).

Discussion and Conclusion

16. Despite the skill with which Mr Lewison QC has argued the question of construction along the same lines as he did below, I agree with Rimer J that the Lessee's construction of the Lease is to be preferred.
17. Mr Lewison QC focused on paragraph 16 of Rimer J's judgment. He criticised the judge for re-writing clause 4(b) by inserting two words ("during, but"), and two commas. He submitted that on the Lessor's construction, which relies heavily on the definition of ""the material date" at the end of clause 4(b), it was unnecessary to insert or supply any additional words or punctuation. The clause only sets a start date. It does not contain any end date for the giving of a rent review notice. The rent, as reviewed, is not payable retrospectively. It is the Lessor, not the Lessee, who is prejudiced by the giving of a rent review notice after the expiration of the relevant 5-year period. He challenged Mr Brock's contention that the Lessor's construction involved unfairness to the Lessee in that he was put at the mercy of the Lessor without knowing whether or when the rent review was to occur, bearing in mind that it was the Lessor alone who could initiate a review and that this was a result which the parties were unlikely to have intended. Mr Lewison contended that it was unlikely that the parties would have intended to produce a situation in which the Lessor would, as a result of the failure to serve a notice before the end of a relevant 5-year period, lose the right to a review of the rent over the next 5 -year period. Mr Lewison cited passages from the speeches in United Scientific Holdings Ltd –v- Burnley Borough Council [1978] AC 904 at 933F-934B, 947F-948F and 958H-959D, explaining the serious prejudice likely to be suffered by a lessor (loss of market rent for a period) if time tables in rent review provisions are construed strictly, as compared with the position of a tenant, who can take steps to protect his position, if he thinks that the advantage of knowing the new rent before the review date will outweigh the economic benefits of having, until the reviewed rent has been ascertained, the use of money representing any rent increase.
18. I have all those points in mind as I state briefly in my own words the reasons for my conclusion that the Lessee's construction of clause 4 (b) is to be preferred. I am able to reach that conclusion without reading into the clause any additional words or punctuation.
19. I do not accept Mr Lewison's basic contention, which evidently found favour with the judge, that, on its literal meaning, the opening part of clause 4 (b) only sets a start date for the giving of a rent review notice. That construction involves giving the word " before" an unduly narrow meaning, so that it would apply only to the period of "not more than 12 months." In my judgment, on the ordinary and natural meaning of the language, the word "before" serves a dual temporal function: first, in governing the calculation of the relevant period of 12 months, so that the notice must not be given more than 12 months before the expiration of relevant 5-year period; and, secondly, in governing the period within which the notice is to be given, (that is in the period before the expiration of the relevant fifth year.) I see nothing strained or surprising in reading "before" as having this dual effect. So, taking the dates in the present case, the relevant 5-year period expired by 7 May 2000. If the Lessor decided to invoke the rent review machinery, he had to give notice not before 7 May 1999 and not after 7 May 2000. The notice in this case was not given until 25 April 2001. Although it complies with the requirement that it was given not more than 12 months before the expiration of the fifth year, it does not comply with the requirement that it should be given before the expiration of the relevant 5-year period.
20. There is no other provision in clause 4(b), or elsewhere in the Lease, that allows the notice in respect of relevant 5-year period to be given after that period has expired. I do not accept Mr Lewison's argument that the definition of the expression "the material date" assists his construction of the opening words of clause 4(b). As I read the clause, the words "the end of the year of the said term during which such notice is given" also fit the construction of the opening words as imposing both the start date and the end date. The most that Mr Lewison can derive from that definition is that, if the opening words only specify a start date, then that definition is consistent with it and is capable of referring to any year in the next 5-year period during which a rent review notice is given.
21. Further, the expression "but not at any other time" is an indication which firmly reinforces the probable intention of the parties to fix both a start time and an end time for the giving of the rent review notice.
22. The Lessee's construction is supported by clause 4(h) of the Lease, which, on Mr Lewison's construction, would be unnecessary, since it would always be possible to deal with the situation envisaged by that clause by means of notices given subsequent to the expiration of the relevant 5-year period. I agree with Mr Lewison that this provision bears the hallmarks of a standard clause lifted from another precedent and carelessly tacked onto the rent review provisions in this Lease. But it has been inserted in the Lease and, on its ordinary meaning, clause 4(h) clearly assumes that the review dates are at the expiration of the relevant 5-year period and that special provision is needed, as supplied by that sub-clause, to deal with the right to revise the rent at times other than the expiration of 5-year periods.
23. So, in my view, the Lessee's construction of the Lease is more consistent with the scheme of the rent review provisions as described by Rimer J and with the language of clause 4 (b). On balance, it also makes more practical sense than the Lessor's construction, although I would not ground my decision on that point. Some uncertainty and unfairness could result from the Lessor's construction. It would allow the Lessor, if it suited his own interests to do so, to give notice at any time expiring at the end of any year of the next five years of the term, not just at the quinquennial intervals within the 35 year term envisaged by the Lease. There is nothing that the Lessee could do, if he wished to establish certainty as to the amount of future rent over the next five year period, to initiate the rent review process. It is unlikely that the scheme of the Lease was intended to produce a situation in which the Lessee might not know, for some years after the commencement of a new 5-year period of the term, whether the Lessor would invoke the rent review provisions. Even though, as Mr Lewison rightly emphasised, the reviewed rent would not be backdated to the start of the review period and the Lessee might even stand to gain from the Lessor's deferment of giving the rent review notice, the Lessor would be at liberty to delay, for his own possible advantage, the giving of a rent review notice until such time as the market conditions might appear to be more favourable to him. If this was in fact the intention of the parties, which is doubtful, it was not clearly expressed in clause 4.

Result

24. I would dismiss this appeal.

Lord Justice May

25. I agree that this appeal should be dismissed for the reasons given by Mummery LJ. In particular, I agree with him in rejecting even the literal meaning of the opening words of clause 4(b) of the Lease which Mr Lewison persuaded Rimer J to accept. I consider that the words "not more than twelve months before the expiration of …" not only stipulate the beginning of the times within which the notice has to be given, but also their end. That is, in my view, the natural import of the word "before" in its context. The words "but not at any other time" make time of the essence, so that a notice given outside the stipulated period is not validly given.

Lord Justice Judge

26. I agree with both judgments.