England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(His Honour Judge Levy QC
(sitting as a Deputy high Court Judge))

		Royal Courts of Justice Strand London WC2 Friday 19th April, 2002

1. LORD JUSTICE ALDOUS: Barclays Bank Plc appeal with permission of this court against the order of His Honour Judge Levy QC of 9th November 2001 which dismissed their appeal against the order of Master Bragge of 2nd July 2001 which had dismissed the proceedings that Barclays Bank had instituted.
2. The respondents, Savile Estates Ltd, are the landlord of premises at 13-14 Faircross Parade, Barking, Essex. Those premises were let to Barclays Bank under a lease dated 18th August 1969 for a term of 42 years from 25th December 1968. For the purposes of this appeal, the relevant part of clause 1 of the lease is in these terms:

"TO HOLD the demised premises unto the tenant for the term of FORTY TWO YEARS from the Twenty fifth day of December One thousand nine hundred and sixty eight (hereinafter called `the term') YIELDING AND PAYING therefore yearly and proportionately for any fraction of a year for the first SEVEN YEARS of the term the clear rent of one thousand two hundred and fifty pounds and for the second and each following period of SEVEN YEARS of the term such yearly rents respectively as shall be agreed between the Landlord and the Tenant on or before the Twenty ninth September One thousand nine hundred and seventy five and each quarter day thereafter immediately preceding the expiry of every seventh year of the term respectively but not less than ONE THOUSAND TWO HUNDRED AND FIFTY POUNDS per annum and in default of agreement between the landlord and the tenant as to the amount of the said yearly rents for the second and each following period of seven years of the term respectively the yearly rent of not less than ONE THOUSAND TWO HUNDRED AND FIFTY POUNDS to be assessed by a surveyor to be appointed on the application of the Landlord by the President of the Royal Institution of Chartered Surveyors ..."

3. That clause provides for rent reviews at seven-yearly intervals. Thus it was possible to review the rent in 1975, 1982, 1989 and 1996.
4. By 1996 the rent was £11,500 per annum, but there was no agreement to increase it and no application had been made by Savile Estates to the President of the Royal Institution of Chartered Surveyors. In fact nothing of consequence seems to have happened until 2000. According to the evidence of Mr Darwin, a partner in the firm of solicitors who had the conduct of these proceedings on behalf of Savile Estates, there were desultory attempts by both parties from 13th January 1997 onwards to try and agree terms of a reviewed rent for the premises for the seven-year period beginning at the end of 1996. Between October 1997 and November 1999 it seems that nothing of materiality happened. The first notable event was a letter dated 10th November 1999 from agents acting for Barclays Bank to the agents who were then acting for Savile Estates, telling them that they had recently received instructions with regard to the outstanding rent reviews at the premises. The letter stated that they had researched the correspondence and made investigations with regard to comparables and had decided that a nil increase was appropriate. To that letter the agents for Savile Estates replied. They sought disclosure of the evidence upon which the nil estimate was made so that they could take their clients' instructions. Although letters passed between the parties, nothing of substance happened until on 18th May 2000 when Barclays Bank's agents gave some indication of the evidence and comparables that they relied upon. The correspondence does not show any further action until 1st September 2000. By a letter of that date, Barclays Bank's agents stated:

"We refer to earlier correspondence in respect of the above in which we have sought your agreement to document the rent review due on the above premises with effect from 25th December 1996 at the current rent passing of £11,500 per annum.

On behalf of your tenant of the above mentioned property, Barclays Bank Plc, we hereby give you notice that we require you to apply within 28 days of the date of this letter to the President of the RICS, for the nomination of an Independent Expert to determine the revised rent, pursuant to the rent review provisions in the above mentioned lease.

Time is to be of the essence with regard to the time limit referred to above and, if no application is submitted to the RICS within 28 days the matter will effectively be documented at the current passing rent."

5. By letter dated 2nd October 2000 the agents then acting for Savile Estates wrote stating that the letter had not been received in their office until 8th September, with the result that the time limit referred to did not expire until Friday 6th October. The letter went on to state that in any event there was no requirement on their clients to make an application within any time limit, and in those circumstances the notice that had been given was ineffective.
6. By a claim form dated 19th February 2001, Barclays Bank started proceedings seeking a declaration:

"The Claimant seeks a declaration that, on the true construction of the lease dated 18 August 1969 and made between the Defendant of the one part and the Claimant of the other part and by reason of the Defendant's failure to apply to the President of the Royal Institution of Chartered Surveyors for the appointment of an expert to determine the rent payable under the aforementioned lease pursuant to review within the time limit stipulated in a notice dated 1 September 2000, the time limit therein being of the essence, the rent payable under the lease from the review date of 29 September 1996 is £11,500 pa."

7. Barclays Bank then applied for summary judgment. Their application came before Master Bragge. He concluded that the application should fail and that the claim should be dismissed.
8. Before the Master the defendants argued that the purported notice of 1st September was not valid. They submitted that upon the true construction of the lease there was no time limit within which the landlord had to apply to the President for the appointment of a surveyor to settle the rent. If there was no time limit, then there was nothing in respect of which it was possible to make time of the essence.
9. The Master concluded that the relevant clause of the lease did not contain any time limit in respect of which it was possible to make time of the essence. He concluded that in such circumstances it was not possible to make time of the essence, and in those circumstances the letter of 1st September had no effect. On that conclusion he was right to dismiss the application for summary judgment and dismiss the proceedings.
10. In essence the same submission found favour with the judge. He concluded that the clause did not contain a time limit and in those circumstances it was not within the power of Barclays Bank to make time of the essence. Thus the Master had come to the correct conclusion for the correct reasons.
11. The parties accept that the first task of this court to construe the relevant part of the lease. It defined the term as 42 years from 25th December 1968. The rent for the first seven years of the term was set at £1,250. It contained a provision for a rent review every seven years. The rent for the third, fourth and fifth periods - that is periods falling due at the end of 1982, 1989 and 1996 - was to be that agreed or upon an application by the landlord that set by the surveyor appointed by the President of the RICS. Thus, as I have said, the seven-year periods ran from 1968 to Christmas 1975, to Christmas 1982, to Christmas 1989 and to Christmas 1996. The rent set for those seven-year had to be that agreed on or before 29th September 1975 which was a date that was about three months before the next seven-year term began. The option to seek a rent review in default of agreement was given to the landlord and only to the landlord, and there was no stated time within which that option had to be exercised.
12. The judge held that this was a clause in which the rent could only be upwardly reviewed. In my view that was not the position. Once it had come to 1982, any application to the President by the landlord enabled the surveyor appointed to move the rent upwards or downwards. However, I do not believe the point is of any materiality when coming to consider the issue between the parties.
13. The essential issue between the parties is whether there should be implied into the lease some term which would impose a time by which the landlord would have to apply to the President. Mr Martin QC, who appeared for Savile Estates, submitted before us that the lease contained no time limit which would restrict the landlord's right to seek assessment of a revised rent by the appointee of the President of the RICS. He submitted therefore the judge had come to the right conclusion. He made an alternative submission, to which I will come, that if there was to be an implied term, it was not an implied term which placed a time limit upon the landlord.
14. In my view those submissions cannot be accepted. An implied term will be read into the lease if it is necessary for business efficacy or was obvious. This is a case where, if Mr Martin's submissions are accepted, a rent review could take place anything up to six years after the appropriate date. That would not, in my view, make business sense. It is true, as Mr Martin pointed out, that there is no stated time by which the landlord has to make up his mind and apply to the President of the RICS, but to give business efficacy to this lease it is necessary to imply some obligation upon the landlord to make the application. There appears to me to be two alternatives: an obligation to make it by the end of December or within a reasonable time. In the present case I do not believe it is necessary to decide which of those is correct. However, I do believe that the most appropriate is that it should be made within a reasonable time. What is reasonable is probably indicated by the lease itself, namely the three-month period provided for between the end of September and the end of December.
15. I return to deal with Mr Martin's other submissions. He referred us to the judgment of Lawton LJ in Amherst v James Walker Goldsmith & Silversmith Ltd [1983] 1 Ch 305, at 309. That was a case decided after the House of Lords had given judgment in 1978 in United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904, which decided that time in a lease of this type would not normally be of the essence unless expressly stated so, but it could be made of the essence by an appropriate notice. In Amherst Lawton LJ said this:

"The question whether the plaintiff landlord's rent assessment notice given on May 10, 1979, operated to start the rent review procedure provided for in the lease made on August 29, 1961, can only be answered by construing it. Neither the landlord nor the tenants had any rights or obligations towards one another save those which were given or imposed by the lease itself. What these rights and obligations were depended upon the terms of the lease when construed in accordance with the ordinary canons of construction and the provisions of section 41 of the Law of Property Act 1925. In my judgment there is no justification for reading into the lease an implied term that if the landlord did not serve a rent assessment notice on or before December 25, 1974, he had to do so within a reasonable time thereafter. Such an implied term would not have been necessary to give business efficacy to the lease. The landlord would not have wanted it and the tenants benefitted by not having it. Any delay on the landlord's part would mean the tenants went on paying the original rent until such time as the landlord did serve a notice. If for any reasons of their own, such as a general fall in rental values, they had wanted the landlord to come to a decision about the service of a rent assessment notice they themselves could have served what has come to be known, inaccurately, as a notice `making time of the essence of the contract': see Stickney v Keeble [1915] AC 386 and United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904."

16. Mr Martin submitted that the same reasoning applied. Neither the landlord nor the tenant wished to have such an implied term when the matter was considered objectively. That is not correct. There is a clear difference between the Amherst case and this case. As Lawton LJ pointed out, it was open to the tenant to make time of the essence. In the present case it was not open to Barclays Bank to do the same unless a term as to time was implied.
17. Mr Martin also submitted that the fact that the first review was upwards only coloured the clause with the result that the clause was in fact an upwards only clause. If so, he submitted, it was wrong to imply a term that the notice to the President should be made within a reasonable time. That submission cannot be accepted. He is right that the first review was upwards only, but it is equally clear that the other reviews are not necessarily so. In any case, the position of the tenant being kept in doubt for up to six years makes the matter such that business efficacy requires the term to be implied.
18. Mr Martin went on to submit that if a term was to be implied there were three alternatives. First, that the term should be that the requisite notice to the President should be before the end of December; second, that it should be given within a reasonable time; and third, that the tenant might apply if the landlord did not. Mr Martin submitted that the third alternative was the appropriate one in this case. That submission cannot be accepted. There is no suggestion that the tenant should ever have the option to apply. If he could apply then the rent could be put down, contrary to the interests of the landlord at his request. In practice the clause is an upwards only clause, as the option is given to the landlord to apply. In those circumstances, the term that should be implied is one that the landlord should make the application within a reasonable time.
19. That being the conclusion, it was open to Barclays Bank to make time of the essence. That they did by their letter of 1st September. There remains the dispute as to whether the notice period was sufficient. The letter of 1st September gave 28 days' notice from the date of the letter. Mr Martin submitted that that was some indication of what the appropriate notice would be. He drew attention to the fact that the actual notice period that had been given was only 20 days. In those circumstances, he submitted that, taking into account that the landlords were a substantial organisation and that there would inevitably be delay in deciding matters, and of course it was necessary to take into account that difficulties might arise, the notice period of 20 days was not sufficient.
20. In my view, following the statement of Lord Diplock in United Scientific Holdings at page 934, where he pointed out that in certain circumstances a very short period would suffice to make time become of the essence, the period in this case was quite sufficient. The matter had been dragging on since 1996. It had been specifically raised by letter dated 10th November 1999. There had been correspondence between the parties, admittedly at irregular intervals. The evidence of comparables had been supplied on 18th May 2000. The step that the landlords had to take was a simple step of writing a letter, no doubt including a cheque, but 20 days was ample to carry it out.
21. In those circumstances, for my part, I conclude that the letter of 1st September did make time of the essence and this appeal should therefore be allowed.
22. LORD JUSTICE TUCKEY: I agree.
23. The clause in the lease to which my Lord has referred required the rent for the forthcoming seven-year period starting on 25th December 1996 to be agreed by the previous September quarter day, and in default of such agreement to be fixed by a surveyor on the application of the landlord. Although no time for making such an application is specified by the lease, I think business efficacy required the implication of such a term. Absent such a time, the tenant would have no effective means of knowing what his rent was to be. The parties could not have contemplated this. The tenant might wish to assign or assess the viability of the business he was carrying on from the premises in question. Knowledge of what rent he was liable to pay would be essential for these purposes.
24. I agree also with my Lord that the notice given by the tenant did afford a reasonable time for the landlord to take the simple step of making the application to the President of the Royal Institution of Chartered Surveyors.
ORDER: Appeal allowed with cost assessed in the sum of £15,000 including VAT; orders of the judge and Master set aside; declaration made as set out on page 35 of the appeal bundle. (Order not part of approved judgment)