England and Wales High Court (Chancery Division) Decisions

Chancery Division

		12 December 1980

1. Giving judgment, NOURSE J said: This is an originating summons in which the primary relief sought is a declaration that upon the true construction of a lease it is not a perpetually renewable lease but can be renewed twice only.
2. The matter arises in this way. The lease is dated August 3 1971. It was made between the plaintiff in these proceedings, a company called Marjorie Burnett Ltd, as landlord of the first part, another company as tenant of the second part and certain individuals as sureties of the third part. At some time between the date of the lease and 1975 it appears that it was assigned to the defendant in these proceedings, William Barclay. The property comprised in the lease is a dwelling-house, shop and outbuildings known as 179 Ashley Road, Boscombe, Bournemouth. It appears that those are shop premises with residential accommodation above or beside them. The lease was expressed to be for a term of seven years from June 24 1971 at the yearly rent of £ 650. It was mainly in common form and I do not need to refer to any of its other provisions until I reach clause 6. That is the clause which has given rise to the question which I now have to decide. It reads as follows:

If the tenant shall be desirous of taking a new lease of the demised premises after the expiration of the term hereby granted . . .

There are then provisions which are in a not very elegant form, but the effect of them is clear enough. It is that the tenant can give the landlord notice of the desire to take a new lease. Then clause 6 goes on as follows:

then the landlord will at or before the expiration of the term hereby granted, if there shall then be no subsisting breach of any of the tenant's obligations under this present lease - and now I come to some important words - grant to the tenant a new lease of the premises hereby demised for a further term of seven years, to commence from and after the expiration of the term hereby granted at a rent to be agreed between the parties.

There are then provisions for the rent to be fixed in default of agreement. Then come the final words of the clause, which are also important. They read as follows:

And such lease shall also contain a like covenant for renewal for a further term of seven years on the expiration of the term thereby granted.

3. What happened was that in June 1975, some three years before the term granted by the lease expired, a firm of solicitors acting for the defendant wrote to the solicitors acting for the plaintiff, suggesting that the lease was a perpetually renewable lease for the purposes of paragraph 5 of the 15th Schedule to the Law of Property Act 1922 and that it had therefore taken effect as a lease for a term of 2,000 years. Mr Henty, who appears for the plaintiff, says, and this must be right, that that contention could only have been based on clause 6 of the lease.
4. That suggestion was refuted by the plaintiff's solicitors, who said that in their view clause 6 gave the tenant options to renew for two periods of seven years and no more. At that stage the area of the dispute which I have to resolve was defined.
5. There were two further letters from the defendant's solicitors, the second in October 1975, which indicated that the defendant did not resile from the suggestion which had previously been made on his behalf. It appears that on December 15 1977 the defendant exercised the option for a new lease, pursuant to the provisions of clause 6.
6. On June 24 1978 the term of seven years granted by the lease expired. On November 13 1978 the plaintiff company issued the originating summons which is now before me. That led to a letter from another firm of solicitors acting on the defendant's behalf. The letter was dated January 26 1979. It made an offer to the plaintiff that the defendant would be content to have these proceedings heard without argument on his part, provided that the plaintiff was prepared to abandon its claim for costs. That offer was accepted by the plaintiff by a letter of March 2 1979, and that is how the matter has now come before the court. Mr Henty, as I have said, is here to represent the plaintiff company, but the defendant does not appear and is not represented. The position nevertheless is that Mr Henty has to make out a case for the declaration which the plaintiff seeks.
7. The way in which he has sought to do that is this. First he has referred me to Woodfall on Landlord and Tenant, 28th ed, vol 1, para 2071, where I find this passage:

The leaning of the courts has been against perpetual renewals, so that in order to establish this construction the intention has to be unequivocally expressed, and a proviso in general terms that the lease to be granted shall contain the same covenants and agreements as the lease containing the covenant or option has been repeatedly held not to extend to the covenant or option for renewal.

There is then a reference to three old cases, the most recent of which, Moore v Foley, was decided in 1801 and is in 6 Ves 232. At the beginning of the next paragraph, 2072, there is this sentence:

But although, prima facie, a lessor was taken not to have intended to give such a covenant the court will give effect thereto if there is in the lease evidence of such intention.

8. Then Mr Henty referred me to two more recent decisions of the Court of Appeal, in each of which it was held that the provisions of the lease in question were sufficient to make it a perpetually renewable lease and thus to secure its conversion into a 2,000-year term under the provisions of the 1922 Act. The first was Parkus v Greenwood [1950] Ch 33 reported at first instance before Harman J. Harman J was of the view that there was not in the case of the lease there before him a covenant or obligation for perpetual renewal. His decision was reversed by the Court of Appeal, but I would like to refer to a passage in his judgment at p 37. Before I do that I should state that the words of the material provision in that case were these. The landlord agreed that he would grant a tenancy of the demised premises 'for a further term of three years from the expiration of the said term at the same rent and containing the like agreements and provisions as are herein contained, including the present covenant for renewal'. At p 37 Harman J said this:

Mr Albery . . . pointed out that in the old conveyancing precedents these words were used to create a perpetual right to renew and that a careful conveyancer if he wished to avoid trouble and did not wish to have it said that there might be such a perpetual right, would use the opposite words, namely 'excluding this present covenant'. All that I accept; none the less, in my judgment, this part of the Act only operates to create a term of 2,000 years where the lease is on the face of it perpetually renewable. You have to find expressly in the lease or agreement a covenant or obligation for perpetual renewal. I do not find any such covenant here. All I find is a covenant for renewal once.

9. Although, as I have said, Harman J's decision was reversed by the Court of Appeal [1950] Ch 644, that reversal proceeded on the footing that there was in fact a covenant or obligation for perpetual renewal. There is nothing in the Court of Appeal's decision to displace the learned judge's statement that you have to find expressly in the lease or agreement a covenant or obligation for perpetual renewal.
10. The second case in the Court of Appeal was Caerphilly Concrete Products Ltd v Owen [1972] 1 WLR 372. In that case it was again held that there was a covenant or obligation for perpetual renewal. Again I will read the material words. There was an agreement by the landlord to grant a lease for a further term of five years 'at the same rent and containing the like covenants and provisos as are herein contained (including an option to renew such lease for the term of five years at the expiration thereof)'. I find in the leading judgment of Russell LJ in that case at p 375 this passage:

In the present case the brackets make it abundantly plain that the parties are explaining that 'containing the like covenants and provisos' is a phrase intended to embrace an option. That is to say that the covenants and provisos contained in the first lease, which the first lease requires the second lease to contain, are not to be construed as a reference to those covenants and provisos other than an option to renew, but as a reference to all those covenants including an option to renew.

And then a little later on he said this in reference to the material words:

If the words . . . are repeated in the second lease without the words in parenthesis the second lease will not be carrying out the requirement of the first lease: it will not be granting an option for a further lease containing 'the like covenants' as defined.

11. In construing clause 6 of the lease in the present case I must therefore approach the matter in this way. I must bear in mind that the leaning of the court s has been against perpetual renewals. I have to find expressly in the lease a covenant or obligation for perpetual renewal. And I have to look ahead to see what the second lease will contain when the requirements of the covenant for renewal in the first have been duly observed.
12. I now return to clause 6 of the lease. What the landlord has to do, if the tenant gives it notice of his desire to take a new lease, is to grant to the tenant a new lease of the demised premises for a further term of seven years at a rent to be agreed, and if not agreed to be fixed in the manner specified. Then it is provided that such lease shall also contain a like covenant for renewal for a further term of seven years on the expiration of the term thereby granted.
13. Mr Henty really puts his case on this primary question in two ways. First, he takes the simple course of asking me to see what provisions the second lease would contain if it were to be granted pursuant to clause 6. He says that it would inevitably be at a different rent from the £ 650 reserved by the first lease. Then he says that the second lease would contain a like covenant for renewal for a further term of seven years as that contained in clause 6 of the first lease. But that convenant ends with the part of clause 6 which deals with the provisions for fixing the rent in default of agreement. It does not seem to me that the second lease could possibly contain the words 'and such lease shall also contain a like covenant for renewal for a further term of seven years on the expiration of the term thereby granted', because those words are not part of the covenant for renewal and to include them would be to go further than clause 6 requires. And so I agree with Mr Henty that the second lease would be at a new rent and that it would contain the whole of clause 6, except for the last three lines or so which I have just quoted. On that footing it is clear that there is no express covenant or obligation for perpetual renewal. Indeed the contrary is the case. There is an express provision in the lease to the effect that it can be renewed twice only.
14. That would in itself be enough to dispose of the primary question in these proceedings. But Mr Henty goes on to take a second point, which appears to me to be one of equal force, and that is this. He says that even supposing his first argument were wrong I must bear in mind that what will happen if this is a perpetually renewable lease is that it will be converted by the 1922 Act into a lease for a term of 2,000 years. He says, and I can see no answer to this, that the notion of a 2,000-year term is completely inimical to a lease which contains provisions for rent review every seven years. And so again he says that as a matter of construction clause 6 could not possibly have the effect for which the defendant has contended. I agree with that contention also.
15. In the circumstances it seems clear to me that the plaintiff company is entitled to the primary declaration which it seeks. On that footing it is not necessary for me to consider the second possible alternative raised by the originating summons.

The electronic text of this judgment was provided by Estates Gazette, whose assistance is gratefully acknowledged.